2024
Annual Report
At Bank OZK, we’re reshaping skylines in some of America’s largest cities, while investing
in local businesses and economies in the states we serve. With our rich history of cultivating
relationships, we strive to provide excellent services and support that help our customers,
large and small, to grow and thrive.
Bank OZK is a nationally recognized
leader in the financial services
industry, known for its focus on
relationships, expertise and excellence
in execution. We aspire to provide
exceptional service by delivering
smart solutions tailored to meet our
clients’ multifaceted needs.
California
Texas
Arkansas
75 Branches
1 LPO
25 Branches & 1 LPO
3 LPOs
1 LPO
1 Branch
Mississippi
New York
Tennessee
Florida
42 Branches & 2 LPOs
North Carolina
24 Branches & 2 LPOs
Georgia
67 Branches & 2 LPOs
Bank OZK is a high-performing regional bank with deep expertise
in specialized lending businesses nationwide.
This report contains forward-looking statements and reflects management’s current views of future economic circumstances, industry conditions, company
performance and financial results. Actual future performance, outcomes and results may differ materially from those expressed in these forward-looking
statements due to certain risks, uncertainties and assumptions. A description of certain factors that may affect future results can be found in this annual
report under “Forward-Looking Information” and under “Part I—Item 1A. Risk Factors.”
Bank OZK operates through
In addition to the branches and LPOs identified above, we have our corporate headquarters located in Little
Rock, AR; our Real Estate Specialties Group headquarters located in Dallas, TX; our Corporate and Institutional
Banking Group headquarters located in Houston, TX; and our Indirect Lending headquarters located in
Alpharetta, GA (each including a branch or LPO counted above); as well as an operations campus located in
Ozark, AR; our OZK Labs located in St. Petersburg, FL; and a solar power plant located in Stuttgart, AR.
* As of March 1, 2025
A N N U A L R E P O R T
2 0 2 4
retail
branches
234
12
loan production
offices (“LPOs”)*.
and
01
George Gleason
Chairman and Chief Executive Officer
02
Our mission at Bank OZK is
simple – to be the best
banking organization for our
shareholders, customers
and teammates, all while
positively contributing to the
communities we serve.
FELLOW SHAREHOLDERS,
Bank OZK delivered outstanding
results in 2024, highlighted by
numerous record financial metrics
and significant progress in our
“growth, growth and diversification”
strategy. We achieved these
successes while maintaining an
unwavering commitment to
excellence on behalf of the
customers and communities we
serve. Our talented team — now
3,000+ strong — again focused on
disciplined growth, prudent risk
management, exceptional
customer service and meaningful
innovation, which are all Bank OZK
hallmarks. I want to congratulate
each of our teammates on their
hard work and commitment to The
OZK Way, which are the guiding
principles that unite our company
and drive our ongoing success.
We achieved record profitability
during 2024, with four consecutive
quarters of record net income and
earnings per share. Growth in loans
and deposits continued to drive our
successful performance, as both
increased 13.3% year over year to
record levels. Our consistent
achievement of record earnings,
while maintaining sound asset
quality, has allowed us to grow
capital, increase dividends and
significantly expand and grow
our business.
Our customers are at the heart
of everything we do, and we
continued to invest in enhancing
their banking experience and
delivering best-in-class financial
products and services. In 2024,
we launched more robust business
online banking capabilities,
introduced new and enhanced
home equity line of credit (HELOC)
and residential mortgage
products and streamlined
processes to make banking easier
and more convenient.
Our mission at Bank OZK is
simple — to be the best banking
organization for our shareholders,
customers and teammates, all
while positively contributing to
the communities we serve. In
2024, a leading industry source
recognized Bank OZK as one of
the Top 25 Banks in the country
based on capital, credit quality
and profitability. We were also
pleased to be named one of
America’s Best Companies, ranking
in the Top 10% of approximately
2,000 companies surveyed.
I am optimistic about the future.
While economic uncertainties
persist, our talented,
entrepreneurial and veteran
management team is well suited
for the very noisy and complicated
environment in which we operate
today. As seen in 2024, our team
has proactively and effectively
managed the various challenges
of this environment while
capitalizing on numerous
opportunities. We continue to be
laser-focused on improving our
performance every day.
I would like to extend my gratitude
to our valued customers for their
trust, our dedicated Bank OZK
employees for their relentless
pursuit of excellence and our
shareholders for their continued
support. I would also like to
acknowledge our esteemed
directors for their strategic vision
and expert counsel.
Thank you for reading our report.
We look forward to 2025 and all
the opportunities it will bring.
Sincerely,
GEORGE GLEASON
Chairman and
Chief Executive Officer
03
A N N U A L R E P O R T
2 0 2 4
A LONG-TERM PERSPECTIVE
We remain focused on asset quality, profitability and growth.
The record results we achieved in 2024 reflect our continued
commitment to excellence and our focus on long-term
performance. Our constant pursuit of building relationships,
improving performance and enhancing efficiency has consistently
produced superior results.
Earnings
Per Common
Share
(Diluted)
Net Income
Available
To Common
Stockholders
($ Millions)
2023
2024
2022
2020
2014
2015
2016
2017
2018
2019
2021
2023
2024
2022
2020
2014
2015
2016
2017
2018
2019
2021
$425.9
$417.1
$421.9
$579.0
$547.5
$674.6
$118.6
$182.3
$270.0
$291.9
$4.54
$3.24
$4.47
$5.87
$1.52
$2.09
$2.58
$3.35
$3.30
$2.26
04
19.4%
15.0%
Compound annual growth rate in
net income available to common
stockholders over the past ten years.
$700.3M
$6.14
Compound annual growth rate in
diluted earnings per common share
over the past ten years.
We achieved
record net
income available
to common
stockholders
in 2024.
We achieved
record earnings
per common share
in 2024.
Over the past ten years, our
total loans have grown at a
compound annual rate of 19.4%.
Over the past ten years, our
deposits have grown at a
compound annual rate of 18.9%.
Net interest income has grown
over the last ten years at a
compound annual rate of 18.9%.
We have worked relentlessly to
become one of the most
efficient banks in the nation. Our
efficiency ratio has ranked in the
top decile of the industry for the
past 22 years.
Over the past ten years, we have
increased dividends paid to our
common stockholders at a compound
annual rate of 12.9%, and we have
increased our cash dividend in each
of the last 58 quarters and every year
since going public in 1997.
Total
Loans
($ Billions)
Deposits
($ Billions)
2023
2024
2022
2020
2014
2015
2016
2017
2018
2019
2021
2023
2024
2022
2020
2014
2015
2016
2017
2018
2019
2021
$5.1
$26.5
$18.3
$8.3
$14.6
$17.5
$17.1
$20.8
$16.0
$19.2
$5.5
$27.4
$20.2
$8.0
$15.6
$17.9
$18.5
$21.5
$17.2
$21.5
Net
Interest
Income
($ Billions)
2023
2024
2022
2020
2014
2015
2016
2017
2018
2019
2021
$0.27
$1.44
$0.99
$0.38
$0.60
$1.14
$0.82
$0.88
$0.89
$0.89
Efficiency
Ratio
2023
2024
2022
2020
2014
2015
2016
2017
2018
2019
2021
45.3%
33.7%
38.8%
35.8%
40.3%
37.9%
38.4%
35.8%
34.9%
41.4%
Dividends
per
Common
Share
2023
2024
2022
2020
2014
2015
2016
2017
2018
2019
2021
$0.47
$1.42
$1.1325
$0.55
$0.71
$0.63
$0.94
$0.795
$1.26
$1.0775
05
$30.0B
$31.0B
33.0%
$1.58
$1.53B
A N N U A L R E P O R T
2 0 2 4
* Data for all FDIC insured institutions from the FDIC Quarterly Banking Profile, last updated fourth quarter 2024.
06
FDIC Insured Institutions*
Net Charge-Off Ratio Percent
Bank OZK
Net Charge-Off Ratio Percent
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
NET CHARGE-OFF RATIO
CONSISTENTLY BETTER THAN THE INDUSTRY AVERAGE
Since going public in 1997, our net charge-off ratio has
outperformed the industry in every year, and it has averaged
approximately one-third of the industry’s net charge-off ratio.
Source: Data obtained from Bloomberg
Over our 27+ years as a publicly traded company, we have
delivered a total shareholder return of 6,691%, compared to
the S&P 500 at 942%.
07
AN EVEN LONGER TERM
PERSPECTIVE
S&P 500
Total Shareholder Return
Bank OZK
Total Shareholder Return
December 2024
July 1997
0
1,000%
2,000%
3,000%
4,000%
5,000%
6,000%
7,000%
8,000%
6,691%
Total Shareholder Return
A N N U A L R E P O R T
2 0 2 4
Bank OZK Board of Directors as of December 31, 2024.
Back row (left to right):
Nicholas Brown (Vice-Chairman and Presiding Independent Director), Paula Cholmondeley,
Christopher Orndorff, Peter Kenny, George Gleason (Chairman and CEO), Ross Whipple, Jeffrey Gearhart,
Robert East, Kathleen Franklin, Steven Sadoff.
Front row (left to right):
William Koefoed, Elizabeth Musico, Beverly Cole.
EXCELLENCE OF OUR BOARD
CONTRIBUTES TO
08
Our Success
DIVERSE BLEND OF
EXPERIENCES AND
Technology and
Information Security
Leadership Experience
Finance, Audit
and Accounting
Compliance
Experience
Human Capital
Strategic Planning
Public Company
Experience
Community Affairs
Relevant Industry
Experience
A N N U A L R E P O R T
2 0 2 4
09
Qualifications
Experience in information security, data privacy,
cybersecurity or use of technology for operations.
Experience as CEO, CFO, COO or similar
executive role with major organization.
CFO, large accounting firm or other relevant experience
in accounting, auditing or financial reporting.
Significant roles in risk management, legal or as part
of a highly regulated industry such as financial services.
Human resources or similar leadership role in
management and development of human capital.
Experience defining and driving strategic direction
and growth and managing business operations.
Experience as a board member or executive
of a publicly-traded company.
Experience in community affairs and managing community
relations or community organization relationships.
Including banking, financial services, investment
management and real estate experience.
As of February 28, 2025.
Chairman of the
Board and Chief
Executive Officer
46 years with OZK
Chief Credit
Officer
13 years with OZK
John Carter
President
17 years with OZK
Brannon Hamblen
George Gleason
Chief Lending
Officer
Chief Accounting
Officer
Chief Information
Officer
17 years with OZK
14 years with OZK
9 years with OZK
Alan Jessup
Stan Thomas
Jason Cathey
Chief Operating
Officer
27 years with OZK
Cindy Wolfe
General Counsel
and Corporate
Secretary
11 years with OZK
Helen Brown
Chief Financial
Officer
16 years with OZK
Tim Hicks
Chief Risk
Officer
Chief
Administrative
Officer
8 years with OZK
9 years with OZK
Arindam Majumdar
Tamara Gotham
Managing
Director—Corporate
Finance Data and
Technology
3 years with OZK
Patrick Carr
10
DEEP AND TALENTED
EXECUTIVE MANAGEMENT TEAM
16
Average years
16 Average years
with OZK
2024
Form 10-K
UNITED STATES
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
FDIC Certificate No. 110
BANK OZK
(Exact name of registrant as specified in its charter)
ARKANSAS
71-0130170
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
18000 CANTRELL ROAD, LITTLE ROCK, ARKANSAS
72223
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (501) 978-2265
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
OZK
Nasdaq Global Select Market
4.625% Series A Non-Cumulative Perpetual Preferred
Stock, $0.01 par value per share
OZKAP
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☐ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Emerging growth company ☐
Smaller reporting company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked prices of such common equity as of the last business day of the registrant’s most recently
completed second fiscal quarter: $4.4 billion.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date.
Class
Outstanding at February 28, 2025
Common Stock, $0.01 par value per share
113,603,501
Documents incorporated by reference: Portions of the Registrant’s Proxy Statement for the 2025 Annual Meeting of Shareholders, scheduled to be
held on May 5, 2025 are incorporated by reference into Part III of this Annual Report on Form 10-K.
BANK OZK
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 2024
INDEX
Page
PART I.
Forward-Looking Information
1
Item 1.
Business
2
Item 1A.
Risk Factors
16
Item 1B.
Unresolved Staff Comments
34
Item 1C.
Cybersecurity
34
Item 2.
Properties
35
Item 3.
Legal Proceedings
36
Item 4.
Mine Safety Disclosures
36
PART II.
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
36
Item 6.
[Reserved]
37
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
38
Item 7A.
Quantitative and Qualitative Disclosure About Market Risk
75
Item 8.
Financial Statements and Supplementary Data
76
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
116
Item 9A.
Controls and Procedures
116
Item 9B.
Other Information
117
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
117
PART III.
Item 10.
Directors, Executive Officers and Corporate Governance
117
Item 11.
Executive Compensation
117
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
117
Item 13.
Certain Relationships and Related Transactions, and Director Independence
118
Item 14.
Principal Accountant Fees and Services
118
Part IV.
Item 15.
Exhibits and Financial Statement Schedules
118
Item 16.
Form 10-K Summary
118
Exhibit Index
119
Signatures
121
PART I
Unless the context otherwise requires, references in this Annual Report on Form 10-K to terms such as “Bank,” “we,” “us,” and
“our” refer to Bank OZK and its consolidated subsidiaries.
FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of
Operations, other public filings made by us and other oral and written statements or reports by us and our management include certain
forward-looking statements within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as
such may involve risks and uncertainties. These forward-looking statements are intended to be subject to the safe harbor provided by
Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and
information available to, management at the time. Those statements are not guarantees of future results or performance and are subject
to certain known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those
expressed in, or implied by, such forward-looking statements. Forward-looking statements include, without limitation, statements and
discussions about economic, real estate market, competitive, employment, credit market and interest rate conditions, including
expectations for further changes in monetary and interest rate policy by the Federal Reserve System; our plans, goals, beliefs,
expectations, thoughts, estimates and outlook for the future with respect to our revenue growth; net income and earnings per common
share; net interest margin; net interest income; non-interest income, including deposit-related fees, trust income, bank owned life
insurance income, loan-related fees, and gains (losses) on investment securities and sales of other assets; non-interest expense;
efficiency ratio; future federal, state and local effective income tax rates; anticipated future operating results and financial
performance; expectations regarding future loan originations or loan repayments; asset quality and asset quality ratios, including the
effects of current economic and real estate market conditions; nonperforming loans; nonperforming assets; net charge-offs and net
charge-off ratios; provision and allowance for credit losses; past due loans; current or future litigation; interest rate sensitivity,
including the effects of possible interest rate changes; future growth and expansion opportunities, including plans for making
additional acquisitions; problems with obtaining regulatory approval of or integrating or managing acquisitions; plans for opening new
offices or relocating, selling or closing existing offices; opportunities and goals for future market share growth; expected capital
expenditures; loan and deposit growth, including growth from unfunded closed loans; changes in the volume, yield and value of our
investment securities portfolio; availability of unused borrowings; descriptions of plans or other expectations for future operations,
products, services and/or new business lines; any issuance of debt or equity securities and other similar forecasts and statements of
expectation. Words such as “anticipate,” “assume,” “believe,” “could,” “designed,” “estimate,” “expect,” “forecast,” “goal,” “hope,”
“intend,” “likely,” “look,” “may,” “plan,” “project,” “seek,” “target,” “trend,” “will,” “would,” and similar words and expressions,
identify forward-looking statements.
Actual future performance, outcomes and results may differ materially from those expressed in, or implied by, forward-looking
statements made by us and our management due to certain risks, uncertainties and other assumptions. Certain factors that may affect
our future results include, but are not limited to, potential delays or other problems in implementing our growth, expansion and
acquisition strategies, including hiring or retaining qualified personnel, obtaining regulatory or other approvals, delays in acquiring
satisfactory sites, obtaining permits and designing, constructing and opening new offices or relocating, selling or closing existing
offices, or integrating any acquisitions; the availability of and access to capital; possible downgrades in our credit ratings or outlook
which could increase the costs of or decrease the availability of funding from capital markets; the ability to attract new or retain
existing deposits or to retain or grow loans, including growth from unfunded closed loans; the ability to generate future revenue
growth or to control future growth in non-interest expense; interest rate fluctuations, including changes in the yield curve between
short-term and long-term interest rates or changes in the relative relationships of various interest rate indices; competitive factors and
pricing pressures, including their effect on our net interest margin or core spread; general economic, unemployment, credit market and
real estate market conditions, and the effect of such conditions on the creditworthiness of borrowers, collateral values, the value of
investment securities and asset recovery values; conditions within the banking industry; recently enacted and potential new laws and
regulatory requirements or changes to existing laws and regulatory requirements, including changes affecting oversight of the financial
services industry; changes intended to manage or mitigate climate and related environmental risks, or changes in the interpretation and
enforcement of such laws and requirements; changes as a result of the recent U.S. presidential and congressional elections; impacts of
potential changes in U.S. tax, tariff and immigration laws, regulations and policies; the costs and expenses to comply with new and/or
existing legislation and regulatory requirements; uncertainty regarding changes in U.S. government monetary and fiscal policy; the
impact of any U.S. federal government shutdown or budgetary crisis; Federal Deposit Insurance Corporation (“FDIC”) special
assessments or changes to regular assessments; the ability to keep pace with technological changes, including changes regarding
artificial intelligence and maintaining cybersecurity; the impact of failure in, or breach of, our operational or security systems or
infrastructure, or those of third parties with whom we do business or others, including as a result of cyber-attacks or an increase in the
incidence or severity of fraud, illegal payments, security breaches or other illegal acts impacting us or our customers or others; natural
disasters, acts of war or terrorism; the potential impact of continuing inflationary pressures; the potential impact of supply chain
1
disruptions; national or international political instability or military conflicts; the competition for and costs of recruiting and retaining
qualified personnel; impairment of our goodwill; adoption of new accounting standards, or changes in existing standards; and adverse
results (including costs, fines, reputational harm and/or other negative effects) from current or future litigation, regulatory
examinations or other legal and/or regulatory actions or rulings as well as other factors identified in this Annual Report on Form 10-K
or as detailed from time to time in our public filings. See also Part I, Item 1A. Risk Factors in this Annual Report on Form 10-K.
Should one or more of the foregoing risks materialize, or should underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those described in, or implied by, such forward-looking statements. We disclaim any obligation to
update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise.
Item 1.
BUSINESS
The disclosures set forth in this item are qualified by “Item 1A. Risk Factors,” the section captioned “Forward-Looking
Information” and other cautionary statements set forth elsewhere in this Annual Report on Form 10-K.
General
Bank OZK, chartered in 1903, is a full-service Arkansas state-chartered bank, headquartered in Little Rock, Arkansas with
deposits insured by the FDIC. We provide a wide range of retail and commercial banking services through more than 240 offices (as
of December 31, 2024) in Arkansas, Georgia, Florida, North Carolina, Texas, Tennessee, New York, California and Mississippi. We
offer deposit services including checking, savings, money market, time deposit and individual retirement accounts. We offer loan
services including various types of real estate, consumer, commercial and industrial loans. We also provide, among other products and
services, treasury management services for businesses, non-profits and governmental entities; trust and wealth services for individuals,
businesses, and non-profit and governmental entities (including financial planning, money management, custodial services and
corporate trust services, among other services); ATMs; online and mobile banking services (including electronic bill pay and mobile
deposits); telephone banking; debit cards and safe deposit boxes. Through third-party providers, we offer credit cards for consumers
and businesses and processing of merchant debit and credit card transactions. We currently operate in one business segment and do not
have foreign operations. At December 31, 2024, we had total assets of $38.26 billion, total loans of $29.97 billion, total deposits of
$31.04 billion and total common stockholders’ equity of $5.37 billion. For 2024, net interest income was a record $1.53 billion, net
income available to common stockholders was a record $700 million and diluted earnings per common share were a record $6.14.
Our Mission
Our mission is to (i) maximize long-term shareholder returns by compounding short-term growth and achievements, (ii) provide
exceptional customer experiences and (iii) prioritize culture, continuous improvement and efficiencies.
Business Strategy
We believe that stable long-term growth and profitability are the result of developing comprehensive, strong banking
relationships with our customers by offering a wide range of products and services and delivering excellent customer service while
maintaining disciplined underwriting standards. We are focused on originating high-quality loans and growing a stable deposit base
through our emphasis on relationship-based banking and believe that the following strategies will assist us in growing our loan
portfolio responsibly, managing our deposit sources to appropriately fund growth in our earning assets, maintaining favorable asset
quality compared to industry averages and sustaining our strong profitability.
•
We are focused on growing and diversifying our loan portfolio while remaining committed to our conservative credit culture.
Historically, a significant portion of our loan portfolio growth has been attributable to our Real Estate Specialties Group
(“RESG”), which focuses primarily on acquisition, development and construction lending of commercial real estate (“CRE”).
We expect to continue to pursue meaningful loan growth, including growth within RESG, while diversifying our growth to
achieve more balance between CRE lending and other types of loan originations through our Corporate and Institutional
Banking (“CIB”), Community Banking and Indirect Lending groups. Our CIB group includes asset-based lending, corporate
banking and sponsor finance, fund finance, equipment finance and capital solutions, and loan syndications and corporate
services. Our Community Banking group includes consumer finance, small business, government guaranteed, business
aviation, affordable housing, middle market CRE and homebuilder finance. Our indirect lending business primarily focuses
on recreational vehicle (“RV”) and marine lending nation-wide. We believe this “growth, growth and diversification”
strategy will allow us to achieve greater portfolio diversification through growth in CIB, Indirect Lending and Community
Banking, while continuing to capitalize on RESG’s unique strengths and expertise to grow longer term.
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•
As we continue to grow and diversify our loan portfolio, we intend to employ, and enhance as appropriate, the same
disciplined underwriting standards and credit risk management processes that have contributed to our consistently favorable
asset quality compared to industry averages.
•
Our reputation, expertise and banking model enable us to build and expand our banking relationships. We remain committed
to growing our business in a disciplined manner. We intend to focus on expanding our business by offering an array of
financial products and services, which we believe will allow us to continue to achieve long-term and profitable growth in a
safe and sound manner.
•
We are focused on generating primary deposit relationships with our personal, business and public funds clients throughout
our footprint. We strive to offer competitive deposit products, services and rates that provide value to our customers, while
generating a fair return for the Bank. One of our priorities is developing and promoting deposit products and tools that
encourage positive savings habits and help our customers improve their financial security.
•
We continue to focus on the evolving role and importance of technology in our business. This focus is critical in today’s
rapidly evolving banking environment where technology is becoming increasingly important in driving efficiency, speed and
quality of service.
•
Our focus on long-term operational efficiency is a key factor in achieving our profitability and future growth goals and
objectives. We believe that pursuing a business model that generates strong revenue allows us to be highly efficient while
also constantly improving our products and technology for our customers and providing competitive pay and benefits for our
teammates. We believe that our expanded and enhanced infrastructure, including our focus on technology and risk
management, will allow us to maintain good operational efficiencies over the long term as we grow our business.
•
Our historically strong earnings and earnings retention rate, among other factors, have contributed to our building capital
ratios well above the minimum to be considered “well capitalized.” We are focused on strategies to utilize our capital that are
in the best long-term interest of our shareholders. Options for deploying our capital may include, among others, organic loan
growth, adding additional new business lines, continuing to increase our cash dividend, stock repurchases, and if appropriate,
acquisitions.
Lending Activities
We offer a variety of commercial and consumer lending products to our customers, including most types of real estate loans,
consumer and small business loans, indirect lending primarily for RV and marine loans, asset-based commercial lending, equipment
financing, lender and structured finance, enterprise value lending, net asset value (“NAV”) lending, subscription financing, sponsor
and fund financing, loan syndications, commercial and industrial loans, government guaranteed loans, agricultural loans, business
aviation financing, homebuilder loans and affordable housing loans, among others. Interest rates charged by us vary with degree of
risk, type, size, complexity, repricing frequency and other relevant factors associated with the loan or financing arrangement.
Competition from other lending providers also affects the interest rates we charge.
Real Estate Loans. Real estate loans are a significant portion of our loan portfolio and include loans secured by residential 1-4
family, non-farm/non-residential, agricultural, construction/land development, multifamily properties and other land loans. Non-farm/
non-residential loans include those secured by real estate mortgages on commercial buildings of various types, including office,
industrial, life science, hotels, mixed use and other properties. Agricultural real estate loans include loans secured by farmland and
related improvements, including some loans guaranteed by the Farm Service Agency (“FSA”) and the Small Business Administration
(“SBA”). Real estate construction/land development loans include loans secured by unimproved land, loans to finance land
acquisition, development or construction of residential, multifamily, industrial, commercial, mixed use, manufacturing, life science, or
office buildings or additions or alterations to existing structures. Included in our residential 1-4 family loans are home equity lines of
credit. Our real estate loan products are generally payable in monthly or other periodic installments of principal and/or interest, and
due and payable in full (unless renewed) at a balloon maturity generally within one to seven years. A significant portion of our real
estate loans are structured as term loans with adjustable interest rates (adjustable daily, monthly, quarterly, semi-annually, annually, or
at other regular adjustment intervals), and the vast majority of such adjustable rate loans have established “floor” interest rates.
Commercial and Industrial Loans. Our commercial and industrial loan portfolio consists of loans for commercial, industrial and
professional purposes including loans to fund working capital requirements (such as inventory, floor plan and receivables financing),
purchases of machinery and equipment and other purposes. Also included in commercial and industrial loans are our enterprise value
lending, NAV lending, subscription credit facilities and asset-backed facilities, our business aviation financing, and our equipment
finance, lender finance and structured finance solutions. We offer a variety of commercial and industrial loan and financing
arrangements, including term loans, balloon loans, lines of credit, and lease structures, including some loans guaranteed by the SBA,
with the purpose and collateral supporting a particular loan determining its structure. These arrangements are offered to businesses and
professionals for short and medium terms. As a general practice, we obtain as loan collateral a lien on furniture, fixtures, equipment,
inventory, receivables, unfunded capital commitments or other assets.
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Indirect Consumer Loans. Our portfolio of indirect consumer loans includes loans to individuals primarily for the purchase of
RVs and marine vessels, generated largely through relationships with dealers and correspondent lenders. These loans are generally
collateralized by the purchased asset and have terms ranging up to 240 months. These loans are underwritten based on a combination
of borrower credit score, documented debt service coverage, previous asset ownership, experience and borrower liquidity, among
other factors.
Consumer Loans. In addition to our indirect consumer loans, our portfolio of consumer loans includes loans to fund the purchase
of automobiles, equipment (including agricultural equipment), ATVs, mobile homes and other similar purposes for consumer needs.
These loans are generally collateralized and have terms ranging up to 120 months, depending upon the nature of the collateral, size of
the loan, and other relevant factors.
Government Guaranteed Loans. Our portfolio of government guaranteed loans is comprised mainly of SBA, FSA and U.S.
Department of Agriculture guaranteed loans. These loans are commercial in nature and are typically for the refinance or origination of
credit facilities secured by, but not limited to, commercial real estate, agricultural real estate, equipment and various other assets.
Small Business Loans. Our portfolio of small business loans includes loans to businesses with less than $1 million in annual
revenues. Such loans generally include loans for the purchase (or refinance) of commercial or residential real estate, equipment
(including agricultural equipment), lines of credit and various other business purposes. These loans are centrally underwritten and are
based on the borrower’s ability to make repayment from the cash flow of its business with collateral or guarantor support being a
secondary source of repayment.
Mortgage Lending. We offer a broad array of residential mortgage products. We recently launched a secondary market
residential mortgage team to serve our customers’ residential mortgage banking needs, which is now operational across our branch
footprint and originates long-term residential mortgage loans to be sold on a servicing-released basis in the secondary mortgage
market. In addition to these long-term secondary market loans, we offer a small number of fixed rate loan products which balloon
periodically, typically eight to nine years, which we retain in our loan portfolio.
Lending Approvals and Process
Our Board of Directors (“Board”) and Portfolio Oversight Committee (“POC”), which is chaired by our Chief Executive Officer
(“CEO”), oversee and provide policy direction for our lending operations, which are primarily administered by our Loan Committee,
which is comprised of our CEO, President, Chief Credit Officer (“CCO”) and Chief Lending Officer (“CLO”). We maintain a tiered
loan limit authorization system that grants lending authority commensurate with the lending officer’s skill level and knowledge. Our
lending policies contain various measures to limit concentration exposures, including customer and CRE exposures for both funded
balances and total commitment (comprised of both funded and unfunded balance), as well as by property type and geography.
We have detailed, comprehensive standards for evaluating credit risk, both at the point of origination and thereafter, as well as a
comprehensive internal grading system that is used to identify credit risk at the individual loan level. Oversight of credit risk is
provided through loan policy, and various other credit-related policies, clearly defined processes and detailed procedures. These
policies, processes and procedures emphasize strong underwriting standards and early detection of potential credit problems in order to
develop and implement any necessary action plan(s) on a timely basis to mitigate potential losses and are carried out on a daily basis
by our lenders and lending support personnel, our credit administration group, our underwriters and various other officers and
personnel that have credit management responsibilities.
Deposits
We offer an array of deposit products consisting of non-interest bearing checking accounts, interest bearing transaction accounts,
business sweep accounts, savings accounts, money market accounts, time deposits, including individual retirement accounts, among
others. We also make available, through various deposit placement networks, reciprocal deposits to our consumer, commercial and
public funds deposit customers who want to make large deposit balances eligible for FDIC insurance beyond the traditional $250,000
per insured bank, per depositor. Rates paid on deposits vary by banking market and deposit category due to different terms and
conditions, individual deposit size, services rendered and rates paid by competitors on similar deposit products. Our customers include
state and local governments and government agencies or instrumentalities, and such public funds deposits are often subject to
competitive bidding and generally must be secured by pledging a portion of our investment securities or a letter of credit.
Deposit balances are generally influenced by national, regional and local economic conditions, changes in prevailing interest
rates, internal pricing decisions, perceived stability of financial institutions and competition, among other factors. Our deposits come
primarily from within our trade area, except that brokered deposits, listing service deposits, certain of our public funds deposits and
deposits from our RESG and CIB customers, and certain deposit accounts opened online are from outside our primary trade area and
may vary from time to time depending on competitive interest rate conditions, funding needs and other factors.
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In addition to our deposit base, we have access to other sources of funding, including Federal Home Loan Bank of Dallas
(“FHLB”) advances, borrowings from the Federal Reserve Bank (“FRB”), repurchase agreements and secured and unsecured federal
funds lines of credit from correspondent banks. In recent years, we have also accessed the capital markets through subordinated debt
and common and preferred stock offerings. For additional information concerning the Bank’s deposits and other funding sources, see
Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Elements – Liquidity
Risk Management to this Annual Report on Form 10-K.
Other Banking Services
Trust and Wealth Services. We offer a broad array of trust and wealth services from our headquarters in Little Rock, Arkansas,
and elsewhere in Arkansas, Texas, North Carolina, Georgia, Florida and Mississippi. These services include personal trusts, custodial
accounts, investment management accounts, retirement accounts, corporate trust services including trustee, paying agent and
registered transfer agent services, and other incidental services. At December 31, 2024, total trust and wealth assets were
approximately $2.68 billion compared to approximately $2.55 billion at December 31, 2023 and approximately $2.38 billion at
December 31, 2022.
Treasury Management Services. We offer treasury management services designed to provide a high level of customized
solutions to business, non-profit and governmental customers. Our treasury management services include automated clearing house, or
ACH, services (e.g., direct deposit, direct payment and electronic cash concentration and disbursement), wire transfer, zero balance
accounts, current and prior day transaction reporting, wholesale lockbox services, remote deposit capture services, automated credit
line transfer, investment sweep accounts, reconciliation services, positive pay services, and commercial card, among other services.
Market Areas and Competition
At December 31, 2024, we conducted operations through more than 240 offices in Arkansas, Georgia, Florida, North Carolina,
Texas, Tennessee, New York, California and Mississippi. Our business is impacted by the trends of the regional and local economies
in the market areas we serve.
The banking industry in our market areas is highly competitive. In addition to competing with other financial institutions, we
compete with finance companies, leasing companies, mortgage companies, fintech companies, insurance companies, brokerage and
investment banking firms, private equity funds (including asset-based non-bank lenders) and many other financial service firms and
intermediaries. Competition is based on interest rates offered on deposit accounts, interest rates charged on loans, fees and service
charges, the quality and scope of products offered and services rendered, including technology-driven solutions and the convenience
of banking facilities, among other factors.
A number of competitors in our market areas are part of larger regional or national banking companies and as a result may have
greater resources and lower costs of funds than we have, may have greater access to capital markets, and may offer a broader range of
financial services than we currently provide. Additionally, we face competition from a large number of smaller community banks in
the markets we serve. Some of our competitors may have more liberal lending policies and processes. Competition among providers of
financial products and services continues to increase as technology advances have lowered the barriers to entry for financial
technology companies, with consumers having the opportunity to select from a growing variety of traditional and nontraditional
alternatives. The ability of non-banking financial institutions to provide services previously limited to commercial banks has
intensified competition. Because non-banking financial institutions are not subject to many of the same regulatory restrictions as
banks, they can often operate with greater flexibility and lower cost structures. Despite the highly competitive environment, we
believe we will continue to be competitive because of our expertise in real estate lending and various other types of lending, strong
commitment to quality customer service, active community involvement and competitive products and pricing.
Information Technology
The ability to access and use technology is an increasingly competitive factor in the financial services industry. Technology is
not only important with respect to delivering financial services and protection of the security of customer information but also in
processing information. We must continually make technology investments to remain competitive in the financial services
industry. The performance of our technology partners is managed and monitored in accordance with our internal policies, processes
and procedures. Additionally, we have various technology applications developed or under development within our technology group
to address the needs of our customers, our lending groups and our employees, among others, by using technology to provide solutions,
create additional operational efficiencies and provide greater privacy and security protection for our and our customers’ data.
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Business Resilience
We have developed and implemented a business resilience program to provide employees, customers, and stakeholders with
reasonable assurance of resilience and recovery capabilities prior to, during and following a disruption. This program aligns with
industry standards and leading practices, complies with regulatory requirements, including those of the Federal Financial Institutions
Examination Council, and is subject to periodic review by the FDIC and Arkansas State Bank Department (“ASBD”), as well as
internal audits.
The key elements of the program are business continuity, disaster recovery and crisis management. These include planning,
monitoring for new or adapting threats, adjustments to meet the needs of a dynamic and growing organization, verification of recovery
capabilities through tests and exercises, and continuous process improvement. The program is actively managed, includes various
plans and teams trained and available around-the-clock to respond to disruptions and is designed to provide appropriate response
during a disruption affecting our employees, customers, assets, business operations, technology infrastructure, brand and/or third-party
relationships. The plans and program are supported by a governance framework and are reviewed no less than annually to ensure
strategies are effective, scalable, and current.
Employees and Human Capital Resources
At December 31, 2024, we had 3,028 full-time equivalent employees. None of our employees is represented by a union,
collective bargaining agreement or similar arrangement, and we have not experienced any labor disputes or strikes arising from any
organized labor groups.
Our Culture. We believe culture is critical to our success. The “OZK Way” reflects our guiding principles for driving success.
These are the standards we expect every Bank team member to strive to achieve:
•
Better Character. We conduct ourselves and our business with the highest standards of honesty, ethics, integrity and fair
dealing.
•
Better Experiences. We provide exceptional service, develop meaningful products and leverage technology to serve our
clients effectively while fostering relationships rooted in trust.
•
BetterX. We relentlessly pursue excellence through continuous innovation and improvement, realizing that many small
incremental enhancements can compound mightily over time.
•
Better Together. We champion teamwork and collaboration, and appreciate that our collective accomplishments lead to
exponentially greater results.
Compensation and Benefits. We provide and continually review competitive compensation and benefits programs to help meet
the needs of our employees and their families. In addition to base wages, these programs include a 401(k) plan, healthcare and
insurance benefits, health savings and flexible spending accounts, paid time off, family and paid parental leave, family care resources,
and employee assistance programs, among many others. All employees are compensated based on their individual merit and
performance without regard to race, color, national origin, religion, sex (including gender, pregnancy, sexual orientation or gender
identity), age, disability, genetic information, veteran status or any other protected status under federal, state or local law.
Employee Health, Wellness and Safety. The success of our business is fundamentally connected to the well-being of our people.
Accordingly, we are committed to the health, safety and wellness of our employees. We provide our employees and their families with
access to a variety of innovative, flexible and convenient health and wellness programs, including benefits that support their physical
and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in
healthy behaviors.
Training, Talent Development and Employee Engagement. We aim to help each member of our corporate family grow, develop
and achieve their career objectives and potential. In return, we expect all employees to advance our interests through their hard work,
loyalty, positive attitudes and performance. Because continuous learning is essential to our success and the success of our employees,
we invest significantly in employee education and development, not only to ensure our employees are knowledgeable about regulatory
requirements and corporate policies, but also to build the skills and capabilities necessary for employees to advance professionally
over the long-term. We continue to assess and enhance our programs and offerings to enable our employees to improve competencies
through online and micro-learning and guided discussion sessions.
We believe strengthening the connection employees feel to the work they do, their teams and the overall organization is at the
core of employee well being, customer satisfaction and organizational success. We periodically conduct formal employee engagement
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surveys, with our most recent survey completed in the fall of 2024. In addition, we actively promote and support a dedicated internal
portal referred to as “BetterX” for employees to provide suggestions on how we can improve our processes, procedures, policies and
practices. Providing our employees with platforms to voice their ideas and concerns enables us to develop and implement action plans
to enhance employee satisfaction and to ensure alignment with our overall human capital strategy.
Talent Acquisition. We believe team performance can be significantly enhanced if our team members have a diverse and
complimentary range of skills, experiences, and perspectives. This ultimately can better address the varied needs of our customers and
the communities in which we serve. We seek diverse talent at all levels by casting a wide net for prospective employees, which
includes working with a diverse cross-section of educational institutions, community organizations, and other recruiting sources. Our
talent acquisition practices are designed to attract top talent in the financial services industry and foster an inclusive, respectful and
rewarding workplace. Our talent acquisition professionals guide supervisors in the proper recruitment and selection of talent, and our
employee referral programs serve to reward current employees for identifying top talent who choose to apply and accept employment
with us.
Information about our Executive Officers
The following is a list of our executive officers.
George Gleason, age 71, Chairman and Chief Executive Officer. Mr. Gleason has served the Bank as Chairman, Chief Executive
Officer and/or President since 1979. He holds a B.A. in Business and Economics from Hendrix College and a J.D. from the University
of Arkansas.
Brannon Hamblen, age 59, President. Mr. Hamblen joined the Bank in 2008. Prior to assuming the role of President in 2021, he
served as President and Chief Operating Officer – Real Estate Specialties Group (“RESG”) from 2018 to 2021, Chief Operating
Officer – RESG from 2017 to 2018, Director of Asset Management – RESG from 2012 to 2017, and Senior Vice President,
Originations from 2008 to 2012. Earlier in his career, Mr. Hamblen worked in the real estate consulting practices of Ernst & Young/
Kenneth Leventhal and KPMG, and in acquisitions, development, asset management, and capital markets with R.M. Crowe Company,
a large Dallas-based, privately owned real estate owner/operator. Mr. Hamblen holds a B.S. in Agricultural Economics and a M.S. in
Land Economics & Real Estate from Texas A&M University.
Tim Hicks, age 52, Chief Financial Officer. Mr. Hicks joined the Bank in 2009. Prior to assuming the role of Chief Financial
Officer in 2022, he served as Chief Credit and Administrative Officer from 2020 to 2022, Chief Administrative Officer and Executive
Director of Investor Relations from 2017 to 2020, Executive Vice President and Chief of Staff from 2016 to 2017, Executive Vice
President, Corporate Finance from 2012 to 2016, and Senior Vice President, Corporate Finance from 2009 to 2012. Earlier in his
career, Mr. Hicks served as director of investor relations and assistant treasurer of a publicly traded telecommunications company and
held various positions with a big-four public accounting firm, leaving as a senior audit manager. Mr. Hicks is a C.P.A. (inactive) and
holds a B.A. in Business and Economics from Hendrix College.
Cindy Wolfe, age 59, Chief Operating Officer. Ms. Wolfe joined the Bank in 1997. Prior to assuming the role of Chief Operating
Officer in 2022, she served as Chief Banking Officer from 2018 to 2022, Deputy Director of Community Banking from 2015 to 2018,
Carolinas Division President from 2014 to 2018, Charlotte Market President from 2012 to 2014, Executive Vice President – Lending
from 2005 to 2012, Senior Vice President – Lending from 2001 to 2005, and opened the Bank’s Charlotte loan production office in
2001. Earlier in her career, Ms. Wolfe held various leadership positions with national banks in commercial lending, operations, project
management and internal audit. Ms. Wolfe holds a B.A. in Business Administration from Queens University of Charlotte and is a
Certified Commercial Investment Member.
Alan Jessup, age 52, Chief Lending Officer. Mr. Jessup joined the Bank in 2008. Prior to assuming the role of Chief Lending
Officer in 2018, he served as Deputy Director of Community Banking from 2015 to 2020, South Arkansas President from 2011 to
2015 and Saline County President from 2008 to 2011. Earlier in his career, Mr. Jessup held various leadership positions with other
financial institutions in commercial lending, retail banking and marketing. Mr. Jessup holds a B.S. in Finance from Arkansas State
University.
John Carter, age 44, Chief Credit Officer. Mr. Carter rejoined the Bank in 2023 after serving as the Chief Investment Officer and
then Chief Executive Officer for Huffman & Co., a real estate development company, from 2020 to 2023. From 2009 to 2020, he
worked for the Bank in a variety of roles, including as Chief Credit Officer, Director of Community Banking, Deputy Director of
Community Bank Lending, Little Rock Market President and Senior Vice President. Mr. Carter holds a B.S. in Economics and
Finance from Arkansas Tech University and a Master of Business Administration from the University of Arkansas at Little Rock.
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Jason Cathey, age 44, Chief Information Officer. Mr. Cathey joined the Bank in 2015. Prior to assuming the role of Chief
Information Officer in 2022, he served as Chief Information Security Officer from 2018 to 2022, Information Systems Security
Officer from 2016 to 2018 and Cybersecurity Intelligence Analyst from 2015 to 2016. Mr. Cathey has over twenty years of
professional technology experience with various leadership positions in information technology, information security, and banking
operations. He is actively involved in the financial and technology communities, serving on multiple advisory and executive boards,
including as past president for the Infragard Arkansas Members Alliance. Mr. Cathey holds a B.S. in Management Information
Systems from Arkansas State University.
Arindam Majumdar, age 46, Chief Risk Officer. Mr. Majumdar joined the Bank in 2016. Prior to assuming the role of Chief Risk
Officer in 2025, he served as Deputy Chief Risk Officer from 2023 to 2025, Managing Director – Enterprise Risk Analytics from 2019
to 2023, Director – ERM Analytics and Reporting from 2018 to 2019, and Enterprise Risk Management Officer from 2016 to 2018.
Earlier in his career, Mr. Majumdar held senior risk management roles with other financial institutions including Discover Financial
Services and JPMorgan Chase and worked as an investment analyst, portfolio manager and consultant. Mr. Majumdar holds an
M.B.A. from the University of Iowa and a Bachelor of Engineering from Jadavpur University, a Masters in Banking and Leadership
from the ABA Stonier School of Banking and the Wharton School of Business and a Risk Management Certification from Harvard
Business School.
Stan Thomas, age 53, Chief Accounting Officer. Mr. Thomas joined the Bank in 2011. Prior to assuming the role of Chief
Accounting Officer in 2020, he served as Executive Vice President/Director of Financial Reporting from 2015 to 2019 and Senior
Vice President/Director of Financial Reporting from 2011 to 2015. Earlier in his career, Mr. Thomas was a senior audit manager with
a regional and big-four accounting firms. Mr. Thomas is a C.P.A and holds a B.S. in Accounting and an M.B.A from Louisiana Tech
University.
Helen W. Brown, age 47, General Counsel and Corporate Secretary. Ms. Brown joined the Bank in 2013. Prior to assuming the
role of General Counsel in 2020, she served as the General Counsel Corporate Governance and Corporate Secretary from 2018 to
2020 and General Counsel Corporate Finance from 2013 to 2018. Earlier in her career, Ms. Brown was a Partner at Bass, Berry &
Sims PLC in the firm’s Corporate and Securities practice group, where she focused on capital markets transactions, mergers and
acquisitions and strategic investments, as well as advising companies on a variety of corporate governance and securities law matters.
Ms. Brown received her Juris Doctor degree from the University of Arkansas School of Law and her Bachelor of Arts degree from the
University of Arkansas.
Tamara Gotham, age 41, Chief Administrative Officer. Ms. Gotham joined the Bank in 2016. Prior to assuming the role of Chief
Administrative Officer in 2022, Ms. Gotham served as Managing Director, Resilience and Learning and Development from 2021 to
2022, Director of Corporate Security and Resilience from 2019 to 2021 and Director of Business Resilience from 2016 to 2019.
Earlier in her career, Ms. Gotham held various leadership positions in business continuity and disaster recovery with other financial
institutions. She holds a B.S. in Finance from John Carroll University.
Patrick Carr, age 53, Managing Director – Corporate Finance Data and Technology. Prior to joining the Bank in 2021, Mr. Carr
served as Senior Vice President and Chief Accounting Officer of Hanmi Financial Corporation (Nasdaq: HAFC) and its wholly owned
subsidiary, Hanmi Bank, from 2020 to 2021. He previously held several roles in finance, accounting and risk management at
JPMorgan Chase, most recently serving as Managing Director, Consumer Risk Analytics and Forecasting. Mr. Carr is a certified
public accountant and spent the first nine years of his career at big-four accounting firms. Mr. Carr earned his B.S. degree in business
administration in accountancy from John Carroll University.
SUPERVISION AND REGULATION
We are subject to extensive regulation under federal and state laws that establish a comprehensive framework for our operations.
This regulatory framework may materially impact our growth and financial performance and is intended primarily for the protection of
depositors, customers, the deposit insurance fund (“DIF”) and the U.S. banking system as a whole, not for the protection of our
shareholders or creditors. Material elements of certain statutes, regulations and policies applicable to us are described below, but the
following discussion is a summary and does not purport to be complete. This description is qualified in its entirety by reference to the
full text of the statutes, regulations and policies described herein.
Overview
We are examined, supervised and regulated by the ASBD and the FDIC, which is our primary federal regulator. The laws
enforced by, and regulations and policies of, these agencies affect almost every aspect of our business. We are also subject to the laws
and regulations of the states in which we do business, certain regulations of the Federal Reserve, the examination and enforcement
authority of the Consumer Financial Protection Bureau (“CFPB”) with respect to consumer financial laws, and various other
regulatory authorities, as well as the information reporting requirements under the Exchange Act and the FDIC rules relating thereto,
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as administered and enforced by the FDIC. We file periodic and current reports and other materials required to be filed under the
Exchange Act with the FDIC and are subject to the rules of the Nasdaq Global Select Market (“Nasdaq”) for listed companies.
With few exceptions, state and federal banking laws have as their principal objective either the maintenance of the safety and
soundness of the DIF or the protection of customers, depositors, other classes of consumers and the banking system as a whole, rather
than the specific protection of our non-deposit creditors or shareholders. Banks that fail to conduct their operations in a safe and sound
manner or in compliance with applicable laws can be compelled by the regulators to change the way they do business and may be
subject to regulatory enforcement actions, including civil monetary penalties and restrictions imposed on their operations, including in
extraordinary circumstances, closure of the banks.
Permissible Activities
Our business is generally limited to activities permitted by Arkansas law and any applicable federal laws. Under the Arkansas
Banking Code of 1997 (the “Arkansas Banking Code”), we may generally engage in all usual banking activities, including, among
other activities, taking deposits, lending money, issuing letters of credit, buying, discounting and negotiating promissory notes, bonds,
drafts and other forms of indebtedness, and buying and selling certain investment securities. Subject to the authorization of the
Arkansas State Bank Commissioner (the “Bank Commissioner”), we may also engage in any activity permissible for national banks.
In addition, under the Gramm-Leach-Bliley Act of 1999 (the “GLBA”), state banks like ours may invest in financial subsidiaries
that engage as the principal in activities that would only be permissible for a national bank to conduct in a financial subsidiary. This
authority is generally subject to the same conditions that apply to national bank investments in financial subsidiaries.
Dodd-Frank Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), as modified by the
Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (the “EGRRCPA”), fundamentally restructured federal
banking regulation by shifting from prudential regulation of individual institutions to a systemic view of regulations, resulting in
significant regulatory change. Aspects of the Dodd-Frank Act that have had or may have a material effect on our business include,
among others: changing the assessment base for federal deposit insurance; making permanent the $250,000 limit for federal deposit
insurance; eliminating the requirement that the FDIC pay dividends from the DIF in certain cases; repealing the federal prohibitions on
the payment of interest on demand deposits; heightening corporate governance requirements for all public companies (including “say-
on-pay” shareholder votes, compensation clawback policy requirements, expanded executive compensation disclosures and enhanced
director independence requirements); creation of the CFPB; imposing additional underwriting standards and other requirements for
mortgage lending; permitting the establishment of de novo interstate branches; limiting debit card interchange fee charges for banks
with $10 billion or more in assets; and incentivizing and protecting whistleblowers who report violations of the federal securities laws.
Because our total assets exceed $10 billion, we are subject to certain additional requirements created by the Dodd-Frank Act,
including enhanced prudential oversight requirements and a more frequent and enhanced regulatory examination regime. Failure to
comply with these requirements could result in regulatory enforcement actions, could negatively impact our business, financial
condition or results of operations and could limit our growth or expansion activities. The changes resulting from the Dodd-Frank Act
have had and may continue to have an adverse effect on the profitability of our business activities, require further changes to certain of
our business practices, impose upon us more stringent capital, liquidity and leverage requirements or otherwise adversely affect our
business. These changes have required and may continue to require us to invest significant management attention and resources to
evaluate and take any actions necessary to comply with new statutory and regulatory requirements.
Capital Stress Testing. As a result of the EGRRCPA, we are no longer required to prepare annual capital stress tests pursuant to
the Dodd-Frank Act. However, we continue to utilize internal stress testing as part of our capital planning and risk management
processes and monitor our capital consistent with the safety and soundness expectations of the federal regulators.
The Volcker Rule. Section 619 of the Dodd-Frank Act, also known as the Volcker Rule, prohibits banks and their affiliates from
engaging in proprietary trading or acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with a
hedge fund or private equity fund. We may incur costs if we are required to adopt additional policies and systems to ensure
compliance with the Volcker Rule, although any such costs are not expected to be material. Unanticipated effects of the Volcker
Rule’s provisions or future regulatory or court interpretations may have an adverse effect on our business.
Deposit Premiums and Assessments
Our deposits are insured by the FDIC’s DIF to the fullest extent permissible by law, and we are subject to deposit insurance
assessments to maintain the DIF. Our assessments are based on our average consolidated total assets minus our average tangible
equity. The FDIC determines our initial assessment rate using a performance score and a loss-severity score, and in calculating these
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scores the FDIC uses our capital level, supervisory ratings and certain financial measures to assess our ability to withstand asset-
related and funding-related stress. The FDIC has the ability to make discretionary adjustments to the total score based upon its
determination of the existence of significant risk factors that are not adequately captured in the calculations.
The Dodd-Frank Act increased the minimum target DIF reserve ratio from 1.15% to 1.35% of estimated insured deposits. The
reserve ratio fell below 1.35% as of June 30, 2020. On October 18, 2022, the FDIC finalized a rule increasing initial base deposit
insurance assessment rates uniformly by two basis points, beginning with the first quarterly assessment period of 2023, in order to
restore the DIF to the 1.35% minimum ratio by the September 30, 2028 statutory deadline.
In addition to ordinary assessments, the FDIC has the ability to impose special assessments in certain instances to recover any
losses to the DIF as a result of protecting uninsured depositors. In November 2023, the FDIC finalized a special assessment to recover
the loss to the DIF arising from the bank failures that occurred in 2023, which we fully accrued and expensed in the fourth quarter of
2023 and in February 2024, the FDIC finalized a second special assessment, which we fully accrued and expensed in the first quarter
of 2024. The FDIC retains the ability with respect to this special assessment to cease collection early, extend the collection period and
impose a final shortfall special assessment on a one-time basis.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or
condition imposed by the FDIC.
Capital Requirements
We are subject to various regulatory capital requirements administered by federal and state banking agencies, including the risk-
based capital requirements established by the FDIC and other federal banking regulators consistent with agreements reached by the
Basel Committee on Banking Supervision (“Basel III”) and certain provisions of the Dodd-Frank Act (the “Basel III Rules”). See
“Capital Management – Regulatory Capital” under Part III, Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations of this Annual Report on Form 10-K for a discussion of the Basel III Rules.
Information Security, Cybersecurity, and Privacy
Information security and cybersecurity are high-priority items for legislators and regulators at the federal and state levels, as well
as internationally. State and federal banking regulators have issued various policy statements and, in some cases, regulations
emphasizing the importance of technology risk management and supervision. Such policy statements and regulations require that we
design multiple layers of security controls to establish lines of defense and ensure that our risk management processes address the risk
posed by compromised customer credentials, including security measures to reliably authenticate customers accessing our internet-
based services. We are expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption
and maintenance of our operations after a cyber-attack involving destructive malware. We are also expected to develop appropriate
processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if we or
our critical service providers fall victim to this type of cyber-attack. These requirements may cause us to incur significant additional
compliance costs and, in some cases, may impact our growth prospects. Additionally, if we fail to observe federal or state regulatory
guidance, we could be subject to various regulatory sanctions, including financial penalties which could be substantial.
Federal statutes and regulations, including the GLBA and the Right to Financial Privacy Act of 1978, limit our ability to disclose
non-public information about consumers, customers and employees to nonaffiliated third parties. Specifically, the GLBA requires us
to disclose our privacy policies and practices relating to sharing non-public information and enables retail customers to opt out of the
sharing of information with unaffiliated third parties under certain circumstances. The GLBA also requires us to implement a
comprehensive information security program that includes administrative, technical and physical safeguards to ensure the security and
confidentiality of customer records and information and, if applicable state law is more protective of customer privacy than the GLBA,
we are required to comply with such state law. Other laws and regulations similarly impact our ability to share certain information
with affiliates and non-affiliates for marketing and/or non-marketing purposes. These regulations affect how consumer information is
transmitted through diversified financial companies and conveyed to outside vendors. In connection with the regulations governing the
privacy of consumer financial information, the federal banking agencies, including the FDIC, have adopted guidelines for establishing
information security standards and programs to protect such information.
At the state level, we are subject to laws and regulations such as the California Consumer Privacy Act (as amended by the
California Privacy Rights Act, collectively, the “CCPA”), which broadly defines personal information and gives California residents
expanded privacy rights and protections, such as affording them the right to access and request deletion of their information and to opt
out of certain sharing and sales of personal information. Numerous other states also have enacted, or are in the process of enacting or
considering, comprehensive state-level data privacy and cybersecurity laws and regulations that share similarities with the CCPA.
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Moreover, laws in all 50 U.S. states require businesses to provide notice under certain circumstances to consumers whose personal
information has been disclosed as a result of a data breach.
There has been an increase in legislative and regulatory efforts to protect the privacy of consumer data, and we must constantly
monitor legal and regulatory requirements that apply to existing and future subsets of our customer base for protection against legal,
reputational, and financial risk due to compliance failures. There are several proposals that have either recently been adopted or are
currently pending before federal, state, and foreign legislative and regulatory bodies. In October 2024, the CFPB issued a final rule to
implement Section 1033 of the Dodd-Frank Act, sometimes referred to as the Dodd Frank Act’s “open banking” provision, which
requires certain entities, including us, to comply with an established framework to govern consumer access to electronic financial data.
We are monitoring ongoing litigation related to this rule while continuing to evaluate the impact it could have on our business. These
laws, along with those either recently passed or currently pending in other states, impose additional obligations on companies
regarding the handling of personal data while also providing enhanced individual privacy rights to persons whose data is stored.
Proposed or new legislation or regulations related to data privacy may limit how we use customer data, limit our ability to develop
new products or grow into specific markets, and result in significant compliance costs and the costs of litigation, regulatory fines and
enforcement actions.
In the event of a data breach, there are mandatory reporting requirements that may hamper our ability to fully assess an incident
prior to external reporting; for example, in 2021 the federal banking agencies approved a final rule requiring financial institutions to
notify their primary federal regulator of any significant computer-security incident as soon as possible and no later than 36 hours after
the institution determines that a cyber incident has occurred. Risks and exposures related to cybersecurity attacks, including litigation
and enforcement risks, are expected to be elevated for the foreseeable future due to the rapidly evolving nature and sophistication of
these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and
services. See Item 1A. Risk Factors and Item 1C. Cybersecurity of this Annual Report on Form 10-K for further discussion of this
topic.
Community Reinvestment Act and Fair Lending
The Community Reinvestment Act of 1977 (“CRA”) requires that federal banking regulators, in connection with their
examinations of financial institutions, evaluate the record of financial institutions in meeting the credit needs of their local
communities, including low and moderate-income individuals and neighborhoods, consistent with the safe and sound operations of the
banks. Failure to adequately meet these criteria could impose additional requirements and limitations on us. Regulations under the
CRA also provide for regulatory assessment of a bank’s record in meeting the needs of its service areas, and this record is taken into
account by the regulators when considering applications to, among other things, establish branches or merge with or acquire another
bank or its assets or liabilities. An unsatisfactory performance record can substantially delay or block the transactions contemplated by
such applications. In October 2023, the FDIC and other federal banking regulators issued a joint final rule extensively amending the
regulations implementing the CRA. These amendments include the delineation of assessment areas, overall evaluation framework and
performance standards and metrics, the definition of community development activities and data collection and reporting, and require
significant new lending by banks to low- and moderate-income communities. The rule generally becomes effective on January 1,
2026, with its additional data collection and reporting requirements taking effect January 1, 2027. We are monitoring ongoing
litigation related to this rule while continuing to evaluate the impact it could have on our business. If the rule becomes effective as
promulgated, compliance with the final rule may lead to increased compliance costs.
We are also subject to certain fair lending laws and regulations, including the Equal Credit Opportunity Act of 1974 and the Fair
Housing Act of 1968, which (among other things) prohibit discrimination in credit and residential real estate transactions, including
discrimination on the basis of, among other factors, race or color, national origin, gender, marital or familial status, age, handicap or
disability, and religion. We are required to have a fair lending program of sufficient depth and breadth to monitor fair lending risks and
appropriately remediate identified risks. Bank regulators have increasingly focused on the enforcement of these laws, and fair lending
weaknesses can result in significant supervision and/or enforcement actions, along with fines, penalties, or financial remediation;
reputational damage; CRA rating downgrade; investigation and enforcement actions by the U.S. Department of Justice (“DOJ”); or
restrictions on our growth, revenue or expansion opportunities. Private parties may also have the ability to challenge an institution’s
performance under fair lending laws in private class action litigation.
Anti-Money Laundering, the USA PATRIOT Act and the Office of Foreign Assets Control Regulation
A major focus of governmental policy on financial institutions is aimed at combatting money laundering and terrorist financing.
Under the Bank Secrecy Act (“BSA”), we are required, among other things, to establish and maintain a risk-based anti-money
laundering (“AML”) program reasonably designed to prevent and detect money laundering and terrorist financing and comply with the
recordkeeping and reporting requirements of the BSA, including the requirement to report suspicious activity. The USA PATRIOT
Act of 2001 (the “Patriot Act”) substantially broadened the scope of AML laws and regulations by imposing significant new
compliance and due diligence obligations on financial institutions, creating new crimes and penalties and expanding the extra-
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territorial jurisdiction of the United States. Financial institutions, including banks, are required under final rules implementing Section
326 of the Patriot Act to establish procedures for collecting standard information from customers opening new accounts and verifying
the identity of these new account holders within a reasonable period of time. Financial institutions are also prohibited from entering
into specified financial transactions and account relationships and must take certain steps to assist government agencies in detecting
and preventing money laundering and to report certain types of suspicious transactions.
We are subject to the customer due diligence rules issued by the U.S. Department of the Treasury’s (the “Treasury”) Financial
Crimes Enforcement Network (“FinCEN”) under the BSA, which require financial institutions to identify the beneficial owners who
own or control certain legal entity customers at the time an account is opened and to update their AML compliance programs to
include risk-based policies and procedures for conducting ongoing customer due diligence, including policies and procedures that are
reasonably designed to (i) identify and verify the identity of customers; (ii) identify and verify the identity of the beneficial owners of
companies opening accounts; (iii) understand the nature and purpose of customer relationships to develop customer risk profiles; and
(iv) conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer
information. As part of the requirement to obtain beneficial ownership information, we must identify and verify the identity of any
individuals who own 25% or more of a legal entity, and an individual who controls the legal entity.
The Anti-Money Laundering Act of 2020 (the “AMLA”) significantly amends the BSA to, among other things, increase the
duties and powers of FinCEN and require certain companies to report beneficial ownership information to FinCEN that will be made
available to financial institutions to conduct customer due diligence. Among other things, AMLA’s provisions clarify that
cryptocurrency and other digital assets are within the scope of the regulatory requirements of the BSA and codify existing guidance
from FinCEN to resolve any doubts raised by some industry participants regarding Congress’ delegation of authority intended to
regulate this sector. AMLA also updates and expands whistleblower rewards and anti-retaliation protections contained in the BSA and
imposes enhanced applicable penalties for BSA violators and persons convicted of repeat violations or committing an “egregious
violation” of the BSA.
FinCEN and the federal banking agencies continue to issue regulations and guidance with respect to the application and
requirements of the BSA and their expectations for effective AML programs. Any failure by us to maintain and implement adequate
programs to combat money laundering and terrorist financing, to comply with United States sanctions that affect transactions with
designated foreign countries, nationals and others, or to comply with any other relevant laws or regulations, could have serious legal,
economic and reputational consequences, including causing bank regulators not to approve any applications, including branch
openings and mergers or acquisitions, where regulatory approval is required or to prohibit such transactions even if approval is not
required.
Safety and Soundness
The federal banking agencies have adopted a set of guidelines prescribing general safety and soundness standards related to,
among other things, internal controls, information systems and information security, internal audit systems, loan underwriting and
documentation, compensation, interest rate exposure, and asset growth. For example, these standards limit the interest rates paid on
deposits by undercapitalized institutions, restrict the use of brokered deposits, and limit the aggregate extensions of credit by a
depository institution to an executive officer, director, principal shareholder or related interest. If the FDIC determines that we fail to
meet these standards, the FDIC may require us to submit an acceptable compliance plan or, alternatively, pursue other courses of
action depending on the specific circumstances and severity of the noncompliance.
Oversight and Enforcement
Financial regulators have broad, discretionary prudential and supervisory authority over insured state banks, and they have
assumed an active oversight, examination and enforcement role at both the federal and state levels. Insured banks are subject to
potential enforcement actions of varying levels of severity by the financial regulators for unsafe or unsound practices or violations of
laws, rules, regulations or conditions imposed in writing by applicable federal banking agencies.
Informal actions may include board resolutions approved by the applicable regulators, supervisory letters or memoranda of
understanding. Formal actions may include consent orders, cease-and-desist orders, requiring an increase in capital, termination of
deposit insurance and civil money penalties. Informal actions are generally a confidential part of the regulators’ examination and
supervisory process and may not be disclosed without the permission of the regulators. Formal actions, however, are publicly
disclosed.
The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) requires federal banking regulators to take “prompt
corrective action” for undercapitalized depository institutions. Under this system, the federal banking regulators have established
capital measures (including both a leverage measure and a risk-based capital measure) and specified for each capital measure the
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levels at which depository institutions will be considered well-capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized or critically undercapitalized. At each successive lower capital category, an insured depository institution is subject to
more restrictions and prohibitions, including restrictions limiting or suspending the institution’s ability to effect actions such as capital
distributions, certain deposit gathering activities, acquisitions of assets, establishing new branches, entering into new lines of business,
or using brokered deposits.
Examination. Consistent with their supervision practices for banks of our size, the FDIC and ASBD utilize a joint examination
team. The examination team conducts regular examinations of us throughout the year, reviewing such matters as the overall safety and
soundness of our institution, the adequacy of our allowance for credit losses, the quality of our loans and investments, the
appropriateness of management practices, risk management, interest rate exposure, internal controls, internal audit, compliance with
laws and regulations, and other aspects of our operations. These examinations are designed for the protection of our depositors, rather
than our shareholders. The Dodd-Frank Act gives the CFPB the authority to include its examiners, on a sampling basis, in
examinations performed by primary federal regulators such as the FDIC, in order to assess compliance with consumer financial
protection laws.
Mergers and Acquisitions. Under the Bank Merger Act and the Arkansas Banking Code, the prior approval of the FDIC and the
ASBD is required for us to merge with another depository institution or purchase all or substantially all of the assets or assume any of
the deposits of another FDIC-insured depository institution. In reviewing applications for merger and acquisition transactions, bank
regulators consider, among other things, the competitive effect and public benefits of the transactions, the capital position and
managerial resources of the combined organization, the risks to the stability of the U.S. banking or financial system, the applicant’s
CRA performance record, the applicant’s compliance with fair housing and other consumer protection laws and the effectiveness of all
organizations involved in combatting money laundering activities. Failure to implement or maintain adequate compliance programs
could cause bank regulators not to approve an acquisition where regulatory approval is required or to prohibit an acquisition even if
approval is not required. The adoption of more expansive or prescriptive standards may have an impact on our future acquisition
activities. See Item 1A. Risk Factors of this Annual Report on Form 10-K for a more extensive discussion of this topic.
Change in Bank Control. Federal law restricts the amount of voting stock of a bank that a person may acquire without the prior
approval of banking regulators. Under the Change in Bank Control Act of 1978 and the regulations promulgated thereunder, a person
or group must give advance notice to the FDIC before acquiring control of the Bank. Upon receipt of such notice, the FDIC may
approve or disapprove the acquisition. The Change in Bank Control Act of 1978 creates a rebuttable presumption of control if a person
or group acquires the power to vote 10% or more of our outstanding common stock. The overall effect of such laws is to make it more
difficult to acquire a bank by tender offer or similar means than it might be to acquire control of another type of corporation. Under the
Bank Holding Company Act of 1956, as amended (the “BHCA”), any company that is not an existing bank holding company would
be required to obtain prior approval from the Federal Reserve before it could obtain “control” of us (and thereby become a bank
holding company) within the meaning of the BHCA. An existing bank holding company would be required to obtain the Federal
Reserve’s prior approval under the BHCA before acquiring more than 5% of any class of our voting securities.
CRE Lending Concentrations. The federal banking agencies, including the FDIC, have promulgated guidance governing
financial institutions with concentrations in CRE lending. The guidance indicates that a bank has a concentration in CRE lending if (i)
total reported loans for construction, land development and other land represent 100% or more of the bank’s total capital or (ii) total
reported loans secured by multifamily and non-owner occupied non-farm/non-residential properties and loans for construction, land
development and other land represent 300% or more of the bank’s total capital and the bank’s CRE loan portfolio has increased 50%
or more during the prior 36 months. If a concentration is present, management must employ heightened risk management practices
that address key elements, including board and management oversight and strategic planning, portfolio management, development of
underwriting standards, risk assessment and monitoring through market analysis and stress testing, and maintenance of increased
capital levels as needed to support the level of CRE lending. We have determined that we have a concentration in CRE lending, and
while we believe we have implemented policies and procedures with respect to our CRE lending consistent with the regulatory
guidance, bank regulators could require us to implement additional policies and procedures consistent with their interpretation of the
guidance that may result in additional costs to us.
Consumer Financial Protection
We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our
customers. These laws include, among others, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Equal Credit
Opportunity Act, the Fair Credit Reporting Act, the Home Ownership and Equity Protection Act, the Electronic Fund Transfer Act, the
Fair and Accurate Credit Transactions Act, the Fair Debt Collection Practices Act, the Fair Housing Act, the Real Estate Settlement
Procedures Act, the Truth in Savings Act, the Expedited Funds Availability Act, the Check Clearing for the 21st Century Act, the
Servicemembers’ Civil Relief Act, the Telephone Consumer Protection Act, the CAN-SPAM Act, and similar state laws, as well as
state usury laws and other state consumer protection laws. These and other laws, among other things, require disclosures of the cost of
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credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the
use of credit report information, provide financial privacy protections, prohibit unfair, deceptive and abusive acts and practices, restrict
our ability to raise interest rates and subject us to significant regulatory oversight. Failure to comply with these and other consumer
protection requirements may result in significant liability in private civil actions or enforcement actions by federal and state bank
regulators or consumer protection agencies or state attorney generals, and may prevent us from engaging in merger or acquisition
transactions or other activities requiring regulatory approval or that regulators may prohibit even if approval is not required.
The CFPB is responsible for implementing, enforcing, and examining compliance with federal consumer financial protection
laws. As an insured depository institution with more than $10 billion in total assets, the CFPB has direct supervision and enforcement
authority over us, including the authority to investigate possible violations of federal consumer financial laws, commence civil
litigation, and establish applicable examination, enforcement and reporting requirements.
The CFPB may issue regulations that impact the products and services we offer. The regulations could reduce the fees that we
receive, require that we provide additional consumer disclosures, alter the way we provide our products and services, impair our
ability to compete with other providers of financial products or services, or expose us to greater risk of private litigation or regulatory
enforcement action. The CFPB has engaged in rulemakings that affect, among other things, consumer remittance transfers and the
qualified mortgage definition under the Truth in Lending Act, the Home Mortgage Disclosure Act and the Fair Debt Collection
Practices Act, and may establish, or modify, rules governing other aspects of consumer financial products or services in the future. For
example, in December 2024, the CFPB issued a final rule eliminating the overdraft exemption from the Truth in Lending Act and
other lending laws and restricting overdraft fees charged by banks like us with more than $10 billion in assets. The review of products
and practices to prevent unfair, deceptive or abusive acts and practices is a continuing focus of the CFPB, and of banking regulators
more broadly. This heightened scrutiny, as well as any adoption by our regulators of new rules or more aggressive examination and
enforcement policies in respect of banks’ service charges on accounts could result in changes to our pricing, practices, products and
procedures in ways that may have a negative impact on our revenue and earnings. It could also result in increased costs related to
regulatory oversight, supervision and examination, additional remediation efforts and possible penalties.
Arkansas Law
We are subject to examination and regulation by the ASBD. Under the Arkansas Banking Code, the acquisition of more than
25% of any class of the outstanding capital stock of any bank requires approval of the Bank Commissioner. The Bank Commissioner’s
approval is required in order for us to make acquisitions, amend our articles of incorporation, repurchase shares of our capital stock
(other than payments to dissenting shareholders in a transaction), issue debt, increase, reduce or retire any part of our capital stock,
retire debt instruments, or conduct certain types of activities that are incidental or closely related to banking.
Other Regulations and Restrictions
We are subject to a wide range of other requirements and restrictions contained in both federal and state laws. These regulations
include, but are not limited to, the following:
•
Limitations on our ability to pay dividends on our common and preferred stock, which are subject to regulatory
restrictions and certain covenants contained in the indentures governing our trust preferred securities, subordinated
debentures, and subordinated notes. See Note 18 of the consolidated financial statements under Part II, Item 8, Financial
Statements and Supplementary Data of this Annual Report on Form 10-K for a discussion of dividend restrictions.
•
Limits on interchange fees for debit card transactions.
•
Limitations on the dollar amount of loans made to a borrower and its affiliates.
•
Limitations on transactions with affiliates.
•
Requirements regarding the time, manner, and form of compensation given to key executives and other personnel
receiving incentive compensation, including requirements related to the SEC’s 2022 rule on clawback policies and the
Nasdaq’s responsive listing standard.
Any deficiencies in compensation practices may be incorporated into supervisory ratings, which can affect our ability to make
acquisitions or engage in certain other activities, or could result in regulatory enforcement actions.
Effect of Governmental Monetary Policies
Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the U.S. government and its
agencies. The monetary policies of the Federal Reserve have had, and are likely to continue to have, an important impact on the
operating results of commercial banks through the Federal Reserve’s statutory power to implement national monetary policy in order,
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among other things, to curb inflation or combat a recession. The Federal Reserve, through its monetary and fiscal policies, affects the
levels of bank loans, investments and deposits through its control over the issuance of U.S. government securities, its regulation of the
discount rate applicable to member banks and its influence over reserve requirements to which member banks are subject. We cannot
predict the nature or impact of future changes in the Federal Reserve’s monetary and fiscal policies.
Future Legislation and Regulation
Banking regulators, federal and state governments and other bodies routinely consider and enact new laws, regulations and
policies, and may have differing interpretations regarding certain laws, regulations and policies, regulating the banking industry and
public companies generally. Regulatory, supervisory and investigatory activity has increased in recent years, and the recent U.S.
federal elections could result in changes to the regulatory environment, although we cannot predict the exact changes or quantify their
potential impacts. Changes in key personnel at the federal agencies that regulate us, including the federal banking regulators and the
CFPB, may result in differing interpretations of existing rules and guidelines and potentially more stringent enforcement and more
severe penalties than previously in place, along with new areas of supervisory and regulatory focus. The Trump administration may
seek to implement a regulatory reform agenda that is significantly different than that of the Biden administration, which would impact
the rulemaking, supervision, examination and enforcement priorities of the federal banking regulators.
We cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which our business
may be affected by any new regulation (or regulatory interpretation) or statute. However, given our growth and the extensive and
comprehensive regulation of our industry, we expect that our regulatory compliance costs will continue to increase over time. While
changes in applicable laws or regulations, and in their interpretation and application by regulatory agencies and other governmental
authorities, cannot be predicted, any of such changes may have an adverse effect on our business, financial condition or results of
operations.
AVAILABLE INFORMATION
We file annual, periodic and current reports, proxy statements and other information required by the Exchange Act with the
FDIC, copies of which are available electronically at the FDIC’s website at http://www.fdic.gov. In addition, we make available, free
of charge, through the Investor Relations section of our Internet website at http://ir.ozk.com under “Filings,” our annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such reports with or furnish
them to the FDIC. You may also inspect and copy any document we file with the FDIC at the public reference facilities maintained at
the FDIC, Accounting and Securities Disclosure Section, Division of Risk Management Supervision, 550 17th Street, NW,
Washington, DC 20429.
Our Corporate Governance Guidelines, Board committee charters and other corporate governance related documents are also
posted on our website, and available in print upon request from any shareholder to our Investor Relations Department.
Information contained on or accessible through our website or any other website referenced in this report is not incorporated
into, or otherwise made a part of, this report. References to websites in this report are intended to be inactive textual references only.
Shareholders may obtain a copy of any of the above-referenced corporate governance documents by writing to our Investor
Relations Department at Investor Relations, Bank OZK, P. O. Box 8811, Little Rock, Arkansas 72231-8811 or by calling (501)
978-2265. Pursuant to Section 350.3 of the FDIC rules and regulations, each bank is required to make available on request an annual
disclosure statement. Our Annual Report on Form 10-K serves as our annual disclosure statement.
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Item 1A.
RISK FACTORS
An investment in shares of our common or preferred stock involves a variety of risks, some of which are specific to us and some
of which are inherent to the financial services industry. The following risks and other information in this report or incorporated in this
report by reference, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” should be carefully considered before investing in our securities. These risks may
adversely affect our financial condition, results of operations or liquidity. Many of these risks are out of our direct control, though
efforts are made to manage those risks while optimizing financial results. These risks are not the only ones we face. Additional risks
and uncertainties that we are not aware of or focused on or that we currently deem immaterial may also adversely affect our business
and operation. This Annual Report on Form 10-K is qualified in its entirety by all these risk factors.
SUMMARY
The following is a summary of the principal risks that could adversely affect our business, financial condition and results of
operations.
Economic and Credit Risks
•
Our business has been, and may continue to be, adversely affected by conditions in the financial markets and economic
conditions generally and in our markets in particular.
•
If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings could decrease.
•
Credit risk and concentrations of risk, including our concentration in CRE lending, can increase the potential for us to incur
significant losses and may subject us to additional scrutiny.
•
Our business may suffer if there are significant declines in the value of real estate.
•
The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property may not
accurately describe the fair value of the collateral that we can realize.
•
Inflation could negatively impact our business and our profitability.
•
We face strong competition in our markets.
Operational Risks
•
We depend on key personnel for our success.
•
We rely on certain third-party vendors.
•
We need to stay current on technological changes in order to compete and meet customer demands.
•
Failures or interruptions in or breaches to our computer systems, or other cyber threats or information security incidents,
could materially and adversely affect our business and operations.
•
We may incur losses as a result of unforeseen or catastrophic events, extreme weather events, or other natural disasters and
other unexpected events due to climate change.
•
Climate change-related legislative and regulatory initiatives may result in operational changes or reputational damage that
could significantly impact our business.
•
New lines of business, products, product enhancements or services may subject us to additional risks.
•
Ineffective techniques for managing risk, maintaining data quality, or failures or circumvention of our internal controls, may
expose us to material unanticipated losses.
•
The use of new technologies, including artificial intelligence (“AI”) and machine learning, may result in reputational harm,
increased regulatory scrutiny and increased liability.
•
Our accounting estimates and risk management processes rely on accurate data and various analytical and forecasting models
and tools. Errors or inaccuracies in our data or models may expose us to material unanticipated losses.
•
Our selection of accounting policies and methods may affect our reported financial results.
•
We depend on the accuracy and completeness of information about customers.
•
We are subject to environmental liability risks.
Legal, Compliance and Regulatory Risks
•
We are subject to extensive and evolving government regulation and supervision, which could increase our cost of doing
business, limit or restrict our activities and adversely affect our operations.
•
Existing and proposed legislation and regulations and any new laws and regulations may affect our operations and growth.
•
We are involved in legal proceedings and may be the subject of additional litigation and/or investigations in the future.
•
We may be subject to claims and litigation pertaining to fiduciary responsibility.
•
We are subject to litigation risk pertaining to intellectual property.
•
Changes in accounting standards could materially impact how we report our financial results.
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•
We are subject to changes in federal, state and local tax laws, interpretation of existing laws and examinations and challenges
by taxing authorities.
Liquidity and Market Risks
•
Our operations are significantly affected by interest rate levels.
•
We may not be able to meet the cash flow requirements of our depositors, borrowers, or creditors, or the cash needs for
expansion or other corporate activities.
•
If we lose a significant portion of our core deposits or our cost of funding deposits increases significantly, our liquidity and/or
profitability could be adversely impacted.
•
We use brokered deposits which may be an unstable and/or expensive deposit source to fund earning asset growth.
•
We may need to raise additional capital in the future to continue to grow, but that capital may not be available when needed.
•
We cannot guarantee that we will pay dividends on our common or preferred stock in the future.
•
The performance of our investment securities portfolio is subject to fluctuation due to changes in interest rates and market
conditions, including credit deterioration of the issuers of individual securities.
•
We currently invest in bank owned life insurance and may continue to do so in the future.
•
Our investments and/or financings in certain tax-advantaged projects may not generate returns as anticipated and may have
an adverse impact on our financial results.
•
We and/or the holders of certain classes of our securities could be adversely affected by unfavorable ratings from rating
agencies.
•
The holders of our subordinated debentures, subordinated notes and preferred stock have rights that are senior to those of our
common shareholders.
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The price of our common stock and preferred stock is affected by a variety of factors, many of which are outside our control.
•
Our common stock and preferred stock trading volume may not provide adequate liquidity for investors.
•
Future issuances of additional equity securities could result in dilution of existing shareholders’ equity ownership and may
adversely affect the market price of our stock.
•
Our capital stock is not an insured deposit.
Strategic, Reputational and Other Risks
•
Our recent results may not be indicative of our future results.
•
If we do not manage our growth effectively, our business, future prospects, financial condition, results of operations and
liquidity could be adversely affected.
•
We may be adversely affected by risks associated with any potential future acquisition.
•
Reputational risk and social factors may impact our results.
•
The soundness of other financial institutions could adversely affect us.
•
If our goodwill becomes impaired, we could be required to record impairment charges.
ECONOMIC AND CREDIT RISKS
Our business has been, and may continue to be, adversely affected by conditions in the financial markets and economic
conditions generally and in our markets in particular.
We provide traditional commercial, retail and mortgage banking services, as well as other financial services including trust and
wealth services. All of our products and services are materially affected by conditions in the financial markets and economic
conditions in the principal markets in the United States in which we conduct business. A large number of our banking offices are
located in south central and southeastern portions of the United States. In addition, at December 31, 2024, we had a significant amount
of loans secured by real estate in the Miami–Fort Lauderdale–West Palm Beach, FL Metropolitan Statistical Area (“MSA”) and New
York–Newark–Jersey City, NY–NJ–PA MSA. As a result, our financial condition and results of operations may be significantly
impacted by changes in the economies of the states where we currently have most of our banking offices, or the markets in which our
assets are geographically located. Slowdown in economic activity in any of these markets, including deterioration in housing or real
estate markets or increases in unemployment and under-employment, may have a significant and disproportionate effect on consumer
and business confidence and the demand for our products and services, result in an increase in problem assets, foreclosures, charge-
offs, delinquencies or non-payment of loans and a decrease in collateral value (especially real estate) and significantly affect our
deposit funding sources. Any of these events could have an adverse effect on our financial position, results of operations and liquidity.
Global economic and geopolitical conditions, including the impact of trade negotiations, trade policies and tariffs (including
retaliatory tariffs), and the current or anticipated impact of global wars/military conflicts could affect our operating results because
these conditions influence the U.S. economic conditions. Additionally, there is uncertainty regarding the impact of changes in the U.S.
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presidential administration and Congress on fiscal, monetary and regulatory policy. Concern regarding the ability of Congress and the
President collectively to reach agreement on federal budgetary matters (including the debt ceiling), or prolonged stalemates leading to
total or partial governmental shutdowns, also can have adverse economic consequences and create the risk of economic instability or
market volatility, with potential adverse consequences to our business and financial performance. The specific impact on us of
unfavorable or uncertain economic or market conditions is difficult to predict, could be long or short term, and may be direct or
indirect. A worsening of business and economic conditions generally or specifically in the principal markets in which we conduct
business could have adverse effects, including, but not limited to, the following:
•
a decrease in the demand for, or the availability of, loans and other products and services offered by us;
•
a decrease in deposit balances, including low-cost and non-interest-bearing deposits, and changes in our interest rate mix
toward higher-cost deposits;
•
an increase in the number of borrowers who become delinquent, file for protection under bankruptcy laws or default on their
loans or other obligations to us, which could lead to higher levels of past due loans, nonperforming assets, net charge-offs and
provisions for credit losses;
•
a decrease in the value of loans and other assets secured by consumer or commercial real estate;
•
a decrease in net interest income from our lending and deposit gathering activities;
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an increase in borrowing costs in excess of changes in the rate at which we reinvest funds;
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an impairment of goodwill; and
•
an increase in competition resulting from increasing consolidation within the financial services industry.
If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings could decrease.
As a lender, we are exposed to the risk that our customers will be unable to repay their loans according to their terms and that
any collateral securing the payment of their loans may not be sufficient to assure repayment. Credit losses are inherent in the business
of making loans and could have a material adverse effect on our operating results. Because we must use assumptions to establish our
allowance for credit losses, the current allowance for credit losses may not be sufficient to cover actual credit losses, and increases in
the allowance, which may be significant, may be necessary. Although we believe that we maintain our ACL at a level adequate to
absorb lifetime expected losses in our loan portfolio, estimates of credit losses are subjective and their accuracy may depend on the
outcome of future events that are difficult to predict. Our experience in the banking industry indicates that some portion of our loans
may only be partially repaid or may never be repaid at all. Credit losses occur for many reasons beyond our control. Accordingly, we
may incur charge-offs or otherwise be required to make significant and unanticipated increases in our ACL during future periods
which could materially affect our financial position and results of operations. Additionally, bank regulatory authorities, as an integral
part of their supervisory functions, periodically review our ACL and our methodologies for calculating the ACL. These regulatory
authorities may require adjustments to the ACL or ACL methodology or may require recognition of additional credit losses or charge-
offs based upon their judgment. Any increase in the ACL, credit losses or charge-offs required by bank regulatory authorities could
have a material adverse effect on our financial condition, results of operations and liquidity.
Credit risk and concentrations of risk, including our concentration in CRE lending, can increase the potential for us to incur
significant losses and may subject us to additional scrutiny.
Our loan portfolio is comprised of a significant amount of real estate loans, including a large number of construction/land
development and non-farm/non-residential loans. Our real estate loans comprised 74.3% of our total loans at December 31, 2024
(76.5% at December 31, 2023). In addition, our construction/land development and non-farm/non-residential loans, which are
components of our real estate loans, comprised 31.8% and 26.2%, respectively, of our total loan portfolio at December 31, 2024
(44.0% and 20.1%, respectively, at December 31, 2023).
Real estate construction, acquisition and land development loans have certain risks not present in other types of loans, including,
among others, risks associated with uncertainty of total construction costs, including the potential for construction cost overruns in
excess of original estimates (as a result of, for instance, shortages in labor and raw materials and supplies), market deterioration during
construction, project completion risk, general contractor credit risk, lack of permanent take-out financing, and risks associated with the
ultimate sale, lease or use of the completed construction. These loans often involve the disbursement of funds with repayment
substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain
permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest. If our appraisal of the
value of a completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion
of construction of the project and may incur a loss. Increases in market rates of interest may have an effect on construction loans by
increasing the end-purchaser’s borrowing costs, thereby possibly reducing the overall demand for the project. Properties under
construction are often difficult to sell and typically must be completed in order to be successfully sold which also complicates the
process of working out problem construction loans. This may require us to advance additional funds and/or contract with another
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builder to complete construction and assume the market risk of selling the project at a future market price, which may or may not
enable us to fully recover unpaid loan funds and associated construction and liquidation costs. Land development loans can also pose
additional risk because of the lack of income being produced by the property and potential illiquid nature of the collateral. These risks
can be significantly impacted by supply and demand conditions.
In addition, many of our real estate construction, acquisition and development loans typically involve large balances and may be
to single borrowers or groups of related borrowers. If a decline in economic conditions or other issues cause difficulties for our
borrowers of these types of loans, if we fail to accurately evaluate the credit risk of these loans when we underwrite them or if we do
not continue to adequately monitor the performance of these loans, the underlying construction projects that collateralize our loans
may have material adverse deviations from projected construction plans and budgets, resulting in the potential that our loan portfolio
could experience delinquencies, defaults and credit losses that could have a material adverse effect on our business, financial condition
or results of operations.
Our non-farm/non-residential real estate loan portfolio includes commercial real estate loans, which are secured by office,
industrial, life science, hotels and other types of commercial properties. Our non-farm/non-residential real estate loan portfolio and
multifamily portfolio may carry more risk as compared to other types of lending, because they typically involve larger loan balances
and may be to single borrowers or groups of related borrowers. This may result in larger charge-offs on commercial real estate loans
on a per loan basis than those incurred with our consumer loan portfolio. The payment experience on commercial real estate loans that
are secured by income producing properties are typically dependent on the successful operation of the related real estate project and
thus, may subject us to adverse conditions in the real estate market or to the general economy. In addition, certain commercial real
estate sectors, particularly office and life science, remain at risk as a result of shifts in demand and tighter financial and credit
conditions. Any unexpected deterioration in the credit quality of our commercial real estate loan portfolio would require us to increase
our provision for credit losses, which would reduce our profitability and could materially adversely affect our business, financial
condition, results of operations and prospects. In addition, the collateral securing these loans typically cannot be liquidated as easily as
residential real estate. If we foreclose on these loans, our holding period for the collateral typically is longer than residential properties
because there are fewer potential purchasers of the collateral.
We believe we have established appropriate underwriting and ongoing monitoring policies and procedures for our real estate
loans, including construction/land development, multifamily and non-farm/non-residential loans, and have established appropriate
ACL levels for such loans. However, there can be no assurance that such underwriting and ongoing monitoring policies and
procedures are, or will continue to be, appropriate or that losses on real estate loans, including construction/land development,
multifamily and non-farm/non-residential loans, will not require additions to our ACL, which could have an adverse effect on our
financial position and results of operations.
In addition, the federal banking agencies, including the FDIC, have promulgated guidance on sound risk management practices
for financial institutions with concentrations in construction/land development and/or CRE lending. The guidance states that if a
concentration is present, management must employ heightened risk management practices that address key elements, including board
and management oversight and strategic planning, portfolio management, development of underwriting standards, risk assessment and
monitoring through market analysis and stress testing, and maintenance of increased capital levels as needed to support the level of
CRE lending. While we believe we have implemented policies, procedures and appropriate risk management practices with respect to
our construction/land development and CRE loan portfolio consistent with this guidance, bank regulators could require us to
implement additional policies, procedures or risk management practices, or require us to maintain increased capital levels, consistent
with their interpretation of the guidance that may result in additional costs to us.
Our business may suffer if there are significant declines in the value of real estate.
The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the
geographic area in which the real estate is located, whether locally, regionally or nationally, and numerous other factors. If the value of
the real estate serving as collateral for our loan portfolio were to decline materially, a significant part of our loan portfolio could
become under-collateralized. If the loans that are collateralized by real estate become troubled during a time when market conditions
are declining or have declined, we may not be able to realize the value of the security anticipated when we originated the loan, which
in turn could have an adverse effect on our net charge-offs, our allowance and provision for credit losses and our financial condition,
results of operations and liquidity.
The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property may not
accurately describe the fair value of the collateral that we can realize.
Our underwriting and ongoing monitoring policies and processes for real estate loans generally utilize appraisals of the real
property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and, as real estate
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values may change significantly in relatively short periods of time (especially in periods of heightened economic uncertainty), this
estimate may not accurately describe the fair value of the real property collateral after the loan is made. As a result, we may obtain
subsequent appraisals that differ materially from prior appraisals regarding the value of the property, which could have an adverse
effect on the loan’s credit quality or risk rating, and we may not be able to realize the full amount of any remaining indebtedness when
we foreclose on and sell the relevant property. This could have a material adverse effect on our business, financial condition or results
of operations.
Inflation could negatively impact our business and our profitability.
Prolonged periods of inflation may impact our profitability by negatively impacting our non-interest expenses, including
increasing expense related to hiring and retaining qualified team members. Additionally, inflation may lead to a decrease in consumer
and client purchasing power and negatively affect the need or demand for our products and services. If significant inflation continues,
our business could be negatively affected by, among other things, increased default rates leading to credit losses which could decrease
our appetite for new credit extensions. These inflationary pressures could adversely affect our results of operations or financial
condition.
We face strong competition in our markets.
Competition in many of our banking markets is intense. In addition to competing with other financial institutions, we compete
with consumer finance companies, securities brokerage and investment banking firms, insurance companies, mortgage companies,
fintech companies, money market mutual funds, private equity funds (including asset-based non-bank lenders) and other financial
service firms and intermediaries, as well as non-financial institutions offering payroll, debit card and other services. Some of these
competitors have an advantage over us through greater financial resources, lending limits and larger distribution networks, and may be
able to offer a broader range of products and services. Other competitors may be either privately held or non-banks that are not subject
to the same extensive regulations that govern our activities and thus benefit from greater flexibility than we have in adopting or
modifying growth or operational strategies. Some of our competitors may have more liberal lending policies and processes. If we fail
to compete effectively for deposits, loans and other banking customers in our markets, we could lose substantial market share, suffer a
slower growth rate or no growth and our financial condition, results of operations and liquidity could be adversely affected.
In addition, technology and other changes are allowing parties to compete, through alternative methods and delivery channels,
for financial transactions that historically have involved banks. For example, consumers can now maintain funds that would have
historically been held as bank deposits in brokerage accounts, with an Internet-only bank, or with virtually any other bank in the
country through online or mobile banking. Consumers can also complete transactions such as purchasing goods and services, paying
bills and/or transferring funds directly without the assistance of banks by transacting through non-bank enterprises or through the use
of emerging payment technologies. The process of eliminating banks as intermediaries could result in the loss of fee income, as well
as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the
lower-cost deposits as a source of funds could have an adverse effect on our financial condition, results of operations and liquidity.
OPERATIONAL RISKS
We depend on key personnel for our success.
Our operating results and ability to execute our strategic plans and minimize credit losses are highly dependent on the services,
managerial abilities and performance of our current executive officers and other key personnel. We have an experienced management
team that our Board believes is capable of managing and growing our business and executing those strategic plans. Losses of or
changes in our current executive officers or other key personnel and their responsibilities may disrupt our business and could
adversely affect our financial condition and results of operations. Competition for the most qualified people in many activities engaged
in by us is intense, including with respect to compensation, emerging workplace practices, accommodations and remote work options,
and we may not be able to hire sufficiently skilled people or to retain them. Additionally, our ability to retain our current executive
officers and other key personnel may be further impacted by existing or new legislation and regulations regarding incentive
compensation that is affecting or may affect the financial services industry. There can be no assurance that we will be successful in
retaining our current executive officers or other key personnel or hiring additional key personnel to assist in executing our business
strategies. Our ability to execute our business strategy will suffer if we unexpectedly lose one or more of our key personnel, as will our
ability to provide high quality service if we are unable to recruit or retain a sufficient number of qualified personnel or the costs of
employee compensation or benefits increase substantially.
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We rely on certain third-party vendors.
We rely on certain third-party vendors to provide products and services necessary to maintain our day-to-day operations. These
third-party vendors provide certain key operational components, such as cloud-based computing, storage services, payment and card
processing services and internet connections and network access, data processing, recording and monitoring services, and online
banking, among others, but the Bank does not control their actions. Our third-party vendors are sources of operational, cybersecurity,
and informational security risk for us, including risks associated with operational and coding errors, information system failures,
interruptions or breaches and unauthorized disclosures of sensitive or confidential client or customer information. Any complications
caused by these third parties, including those resulting from disruptions in communication services provided by a vendor, failure of a
vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor, failure of a vendor to provide services for
any reason or poor performance of services, could adversely affect our ability to deliver products and services to our customers and
otherwise conduct our business. Financial or operational difficulties of a third-party vendor could also hurt our operations if those
difficulties interfere with the vendor’s ability to provide services. Replacing these third-party vendors could also create significant
delay and expense. These failures could also expose us to significant litigation or regulatory action that could limit our activities or
impose significant fines or other financial losses. While we maintain a system of policies and procedures designed to monitor vendor
risks, the failure of an external vendor to perform in accordance with applicable contractual or the service level agreements could be
disruptive to our operations, which could have a material adverse effect on our business and our financial condition and results of
operations.
We need to stay current on technological changes in order to compete and meet customer demands.
The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven
solutions, and as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it
possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic
payment systems. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology
to provide solutions through various delivery channels that will satisfy customer demands for product functionality and convenience,
including our ability to fully deploy and leverage the technology applications under development from our technology groups, and to
create additional operational efficiencies and greater privacy and security protection for customers and their personal information.
Some of our competitors have substantially greater resources to invest in technological improvements. We may not be able to
effectively implement new technology-driven solutions or be successful in marketing these products and services to our customers.
Failure to successfully keep pace with technological change affecting the financial services industry could impair our ability to retain
or acquire new customers and could have an adverse effect on our business, financial position, results of operations and liquidity.
Failures or interruptions in or breaches to our computer systems, or other cyber threats or information security incidents,
could materially and adversely affect our business and operations.
We are dependent upon information technologies, computer systems and networks, including those maintained by us and those
maintained and provided to us by third parties (e.g., cloud solutions and “software-as-a-service”), to conduct operations and are reliant
on technology to help increase efficiency in our business. These systems could become unavailable or impaired from a variety of
causes, including, among others, storms and other natural disasters, terrorist attacks, fires, utility outages, internal or external theft or
fraud, design defects, human error or complications encountered as existing systems are maintained, replaced or upgraded. We
maintain a system of internal controls and security for many systems we maintain, including redundancy and/or back-up technologies,
to mitigate the risks of these occurrences, and we maintain insurance coverage for certain risks. However, should an event occur that is
not prevented or detected by our internal controls, causes an interruption in service where we do not have an effective redundant or
back-up system, or is uninsured against or in excess of applicable insurance limits, such occurrence could have an adverse effect on
our business and our reputation, which, in turn, could have a material adverse effect on our financial condition, results of operations
and liquidity.
In addition, our operations require us to protect our information systems, technology infrastructure and data. Cybersecurity
incidents and other disruptions could jeopardize the security of information stored in and transmitted through our information systems
and networks and result in the transmission, theft, unauthorized disclosure and/or destruction of our confidential information,
including customer information, corporate information or other assets. We proactively monitor our network and deploy security
personnel, processes and technologies to identify, protect, detect, respond and recover from damage or unauthorized access to our
information systems and network; however, there can be no assurance that these security measures or procedures will be completely
successful against every threat, every time, or that we will discover a breach in a timely fashion, especially as the methods used
become increasingly complex and sophisticated and change frequently. We have experienced security breaches and cyber attacks in
the past, and it is inevitable that additional breaches and attacks will occur in the future. While such breaches and attacks have not
materially impacted us to date, future security breaches and cyber attacks could result in serious and harmful consequences for us or
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our clients and customers. Our risk and exposure to cyber threats and other information security breaches is heightened as we expand
our use of cloud technology and internet and mobile banking delivery channels for our products and services.
We also face the risk of operational disruption, failure, termination, or capacity constraints of any of the third parties that
facilitate our business activities, including vendors, exchanges, and other financial intermediaries. Such parties could also be the
source or cause of an attack on, or breach of, our operational systems, data or infrastructure, and could disclose such an attack or
breach to us in a delayed manner or not at all. Our risk and exposure to these matters remains heightened because of, among other
things, the evolving nature of these threats and the continued uncertain global economic environment.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or
enhance our protective measures, investigate and remediate any information security vulnerabilities, or respond to any changes to state
or federal regulations, policy statements or laws concerning information systems or security. Any failure to maintain adequate security
over our information systems, our technology-driven products and services or our customers’ personal and transactional information
could negatively affect our business and our reputation and result in fines, penalties, or other costs, including litigation expense and/or
additional compliance costs, all of which could have a material adverse effect on our financial condition, results of operations and
liquidity. See Item 1C. Cybersecurity of this Annual Report on Form 10-K for further discussion of our process for assessing,
identifying and managing material risks from cybersecurity threats.
We may incur losses as a result of unforeseen or catastrophic events, extreme weather events, or other natural disasters and
other unexpected events due to climate change.
The occurrence of unforeseen or catastrophic events, extreme weather events or other natural disasters, could create economic
and financial disruptions, and could lead to operational difficulties (including travel limitations) that could impair our ability to
manage our business. Our operations and customer base are located in markets where natural disasters, including tornadoes, severe
storms, fires, floods, hurricanes, earthquakes and other extreme weather conditions often occur. Such natural disasters could
significantly impact the local population and economies and our business and could pose physical risks to our properties and/or
employees and could increase the risk that many of our borrowers may experience losses or sustained job interruption, which may
materially impair their ability to satisfy their loan obligations. A significant natural disaster in or near one or more of our markets
could have a material adverse effect on our business, financial condition or results of operations.
There is an increasing concern over the risks of climate change and related environmental sustainability matters. The physical
risks of climate change include discrete events, such as flooding and wildfires, and long-term shifts in climate patterns, such as
extreme heat, sea level rise, and more frequent and prolonged drought. Such events could disrupt our operations or those of our
customers or third parties on which we rely, including through direct damage to assets and indirect impacts from supply chain
disruption and market volatility. Our markets could experience symptomatic effects which over time, could result in declining demand
for certain types of business that we finance, including commercial real estate projects, or decrease the value of our loans and other
assets secured by real estate that might be impacted. Climate change may also have indirect effects on our business by increasing the
cost of (or making unavailable) property insurance on terms we find acceptable. Additionally, transitioning to a low carbon economy
may entail extensive policy, legal, technology, and market initiatives. Transition risks, including changes in consumer preferences and
additional regulatory requirements or taxes, could increase our expenses and undermine our strategies. In addition, our reputation and
client relationships may be damaged as a result of our practices related to climate change, including our involvement, or our clients’
involvement, in certain industries or projects associated with causing or exacerbating climate change, as well as any decisions we
make to continue to conduct or change our activities in response to considerations relating to climate change.
We have incorporated a climate related macroeconomic shock scenario in our internal stress testing activities. However, because
the timing and impact of climate change has limited predictability, our risk management strategies may not be effective in mitigating
climate risk exposure.
Climate change-related legislative and regulatory initiatives may result in operational changes or reputational damage that
could significantly impact our business.
The current and anticipated effects of climate change are creating an increasing level of concern for the state of the global
environment. As a result, political and social attention to the issue of climate change has increased. In recent years, governments
across the world have entered into international agreements to attempt to reduce global temperatures, in part by limiting GHG
emissions. The U.S. Congress, state legislatures and federal and state regulatory agencies have continued to propose and advance
numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change, including mandatory disclosure and/
or substantive requirements regarding climate change. These measures may result in the imposition of taxes and fees, the required
purchase of emission credits, and the implementation of significant operational changes. Changes in federal and state legislation and
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regulation on climate change could result in increased capital expenditures to, among other things, improve the energy efficiency of
properties we own in order to comply with such regulations. In addition, the federal banking agencies may address climate-related
issues in their agendas in various ways, including by increasing supervisory expectations with respect to banks’ risk management
practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations
for credit portfolio concentrations based on climate-related factors, and encouraging investment by banks in climate-related initiatives
and lending to communities disproportionately impacted by the effects of climate change. Each of the above-described initiatives, as
well as other similar initiatives, may require us to expend significant capital and incur compliance, operating, maintenance and
remediation costs.
Increasing governmental, investor and societal attention to environmental, social and governance matters, including expanding
mandatory and/or voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk
oversight, among others, could expand the nature, scope, and complexity of matters that we are required to control, assess and report.
For example, certain federal and state laws and regulations related to environmental, social and governance issues may include
provisions that conflict with other laws and regulations, which may increase our costs or limit our ability to conduct business in certain
jurisdictions. These factors may alter the environment in which we do business and may increase the ongoing costs of compliance and
adversely impact our results of operations, reputation and cash flows. In addition, as a publicly traded financial institution, we have
multiple constituencies, including our shareholders, customers, employees, federal and state regulators, and other interested parties, all
of which have diverse and often conflicting views, priorities and expectations regarding environmental, social and governance issues.
If we take action inconsistent with the expectations of one or another of these parties, we could experience an increase in client
complaints, a loss of business, or reputational harm. We could also face negative publicity or reputational harm based on the identity
of those with whom we choose to do business. If we are unable to adequately address such environmental, social and governance
matters, receive adverse publicity in connection with such matters, or we or our borrowers fail or are perceived to fail to comply with
applicable laws, regulations, policies and related interpretations, it could negatively impact our reputation, our ability to attract and
retain customers and employees, compete effectively and grow our business, and our business results.
New lines of business, products, product enhancements or services may subject us to additional risks.
We have, and expect to continue to, implement or acquire new lines of business or offer new products and product enhancements
as well as new services within our existing lines of business. There are substantial risks and uncertainties associated with these efforts.
In acquiring, developing or marketing new lines of business, products, product enhancements or services, we may invest significant
time and resources, although there is no guarantee that these new lines of business, products, product enhancements or services will be
successful or that we will realize their expected benefits. Further, initial timetables for the introduction, development and delivery of
new lines of business, products, product enhancements or services may not be achieved, and price and profitability targets may not
prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may
also impact the ultimate implementation and success of new lines of business or offerings of new products, product enhancements or
services. Furthermore, any new line of business, product, product enhancement or service could have a significant impact on the
effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of
new lines of business or offerings of new products, product enhancements or services could have a material adverse effect on our
business, financial condition or results of operations.
Ineffective techniques for managing risk, maintaining data quality, or failures or circumvention of our internal controls, may
expose us to material unanticipated losses.
In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems
that enable us to identify, monitor and control our exposure to material risks, such as credit, market, operational, legal and reputational
risks, among other risks. Additionally, data is key to the decision-making processes used throughout our Bank. We maintain data
management standards, frameworks and processes to help ensure that data and data elements are accurately identified, securely stored,
accessed appropriately and utilized in compliance with internal policies and procedures. Our risk management methods and data
standards may prove to be ineffective due to their design, their implementation or the degree to which we adhere to them, the lack of
adequate, accurate or timely information, inappropriate use of data or various other factors. If our risk management or data
management efforts are ineffective, we could suffer losses that could have a material adverse effect on our financial condition, results
of operations and liquidity, and we could be subject to litigation from customers or sanctions or fines from regulators. Our techniques
for managing the risks we face may not fully mitigate the risk exposure in all economic or market environments, including exposure to
risks that we might fail to identify or anticipate.
Our internal controls, disclosure controls, processes and procedures, and corporate governance policies and procedures are based
in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any
failure or circumvention of our controls, processes and procedures or failure to comply with regulations related to controls, processes
and procedures could necessitate changes in those controls, processes and procedures, which may increase our compliance costs,
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divert management attention from our business or subject us to regulatory actions and increased regulatory scrutiny. Any of these
could have an adverse effect on our financial condition, results of operations and liquidity.
The use of new technologies, including AI and machine learning, may result in reputational harm, increased regulatory
scrutiny and increased liability.
The banking industry is subject to rapid and significant technological change. To compete effectively, we or our third-party
vendors, clients or counterparties may incorporate new and evolving technologies, including AI and machine learning, to help improve
our customer service and products and to automate certain business decisions or risk management practices. The development and use
of AI presents a number of risks and challenges to our business. The legal and regulatory environment relating to AI is uncertain and
rapidly evolving, both in the U.S. and internationally, and includes regulatory scrutiny targeted specifically at AI as well as provisions
in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI. Evolving laws and
regulations may necessitate changes in our AI technology implementation, leading to increased compliance costs and additional risk of
non-compliance. Limited transparency increases the challenges associated with assessing the proper operation of AI models,
understanding and monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with
regulations that require documentation or explanation of the basis on which decisions are made. Further, we may rely on AI models
developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train
their models, including risks arising from the inclusion of any unauthorized material in the training data for their models. Any of these
risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our
business or the effectiveness of our security measures or other consequences that we may not be able to predict, any of which could
negatively affect our financial condition and results of operations.
Our accounting estimates and risk management processes rely on accurate data and various analytical and forecasting models
and tools. Errors or inaccuracies in our data or models may expose us to material unanticipated losses.
The processes we use to estimate our ACL, to measure the fair value of financial instruments, and to measure and monitor risk
throughout the Bank, as well as the processes used to estimate the effects of changing interest rates and other measures of our financial
condition and results of operations, depend upon the use of analytical and forecasting models and tools. These models and tools reflect
assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these
assumptions are accurate, the models and tools may prove to be inadequate or inaccurate because of other flaws in their design or their
implementation. Any such failure in our analytical or forecasting models and tools could have a material adverse effect on our
business, financial condition and results of operations.
Our selection of accounting policies and methods may affect our reported financial results.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of
operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods so they
comply with accounting principles generally accepted in the U.S. (“GAAP”) and reflect management’s judgment of the most
appropriate manner to report our financial condition and results of operations. In some cases, management must select the accounting
policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet which may
result in our reporting materially different results than would have been reported under a different alternative.
Certain accounting estimates have been determined by management to be critical to presenting our financial condition and results
of operations. They require management to make difficult, subjective or complex judgments about matters that are uncertain.
Materially different amounts could be reported under different conditions or using different assumptions or estimates. Because of the
uncertainty of estimates involved in these matters, we may be required to do one or more of the following: significantly increase the
ACL or sustain credit losses that are significantly higher than the ACL allocation provided; recognize an ACL on our portfolio of
investment securities; or significantly increase our accrued tax liability. Any of these could have a material adverse effect on our
business, financial condition, or results of operations. For a discussion of our critical accounting estimates, see Part II, Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates included in
this Annual Report on Form 10-K.
We depend on the accuracy and completeness of information about customers.
In deciding whether to extend credit or enter into certain transactions, we rely on information furnished by or on behalf of
customers, including financial statements, credit reports, tax returns and other financial information. We may also rely on
representations of those customers or other third parties, such as independent auditors, as to the accuracy and completeness of that
information. Reliance on inaccurate or misleading information, financial statements, credit reports, tax returns or other financial
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information, including information falsely provided as a result of identity theft, could have an adverse effect on our business, financial
condition and results of operations.
We are subject to environmental liability risks.
A significant portion of our loan portfolio is secured by real property. In the ordinary course of business, we may foreclose on
and take title to real properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on
these properties. Additionally, we have acquired a number of retail banking facilities and other real properties, any of which may
contain hazardous or toxic substances. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as
for personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce
the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent
interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. We have
policies and procedures that require either formal or informal evaluation of environmental risks and liabilities on real property (i)
before originating any loan or foreclosure action, except for certain loans where the real estate collateral is second lien collateral or (ii)
prior to the completion of any acquisition of retail banking facilities, real property for future development of retail banking facilities or
any other real property, including any real property to be acquired in a merger and acquisition transaction. These policies, procedures
and evaluations may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial
liabilities associated with an environmental hazard, including any fines or penalties levied for noncompliance with environmental
laws, could have an adverse effect on our financial condition, results of operations and liquidity.
LEGAL, COMPLIANCE AND REGULATORY RISKS
We are subject to extensive and evolving government regulation and supervision, which could increase our cost of doing
business, limit or restrict our activities and adversely affect our operations.
We are subject to extensive state and federal regulation, supervision and examination governing almost all aspects of our
operations, which limits the businesses in which we may permissibly engage. The Bank, and other larger financial institutions, have
become subject to increased scrutiny and more intense supervision and regulation, which creates a higher risk of supervisory findings
and enforcement actions. We expect that our business will remain subject to extensive regulation and supervision. The financial
services industry also continues to face a stricter and more aggressive enforcement of laws at federal, state, and local levels—
particularly in connection with business and other practices that may harm or appear to harm consumers or affect the financial system
more broadly. Financial institutions often are less inclined to litigate with governmental authorities because of the regulatory and
supervisory framework. We expect that our business will remain subject to extensive regulation and supervision. Any potential new
regulations or modifications to existing regulations would likely necessitate changes to our existing regulatory compliance and risk
management infrastructure.
A failure to comply with regulatory requirements and expectations could expose us to fines, regulatory penalties, other costs,
reputational damage and regulatory or enforcement actions, such as limitations on engaging in new activities or expanding
geographically. In some cases, governmental authorities have required criminal pleas or other extraordinary terms as part of such
settlements, which could have significant consequences for a financial institution, including loss of clients, restrictions on the ability to
access the capital markets and the inability to operate certain businesses or offer certain products for a period of time. Violations of
laws and regulations or deemed deficiencies in risk management practices also may be incorporated into our confidential supervisory
ratings. A downgrade in these ratings or these or other regulatory actions and settlements, could limit our ability to conduct
expansionary activities for a period of time and require new or additional regulatory approvals before engaging in certain other
business activities. Any future enforcement action could have a material adverse impact. See Item 1. Business – Supervision and
Regulation of this Annual Report on Form 10-K for additional discussion of the extensive regulation and supervision to which we are
subject.
Existing and proposed legislation and regulations and any new laws and regulations may affect our operations and growth.
Proposals to change the laws and regulations governing the operations of banks and other financial institutions are frequently
raised in the U.S. Congress, state legislatures and before bank regulatory authorities. The election of a new President together with
changes in the membership of Congress, including change in control of the Senate, will likely lead to changes in the laws or policies
applicable to us and the agencies that regulate us, including their interpretations of rules and guidelines. These changes may subject
financial institutions like us to changes in regulation, supervision and enforcement that are difficult to predict and uncertain for a
period of time and may create the possibility of significant impacts on business activity in the U.S. and globally, including impacts
relating to the trade policies (including tariffs) of the U.S. or other countries. Further, some of the laws and regulations finalized in the
prior administration that are applicable to financial institutions are subject to ongoing litigation creating further uncertainty. New laws
and regulations, modifications and changes to existing regulations or regulatory policies, or their interpretation or implementation,
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may significantly affect the markets in which we do business and the markets for and value of our loans and securities, limit the types
of financial services and products we may offer, alter the investments we make, affect the manner in which we operate our businesses,
increase our litigation and regulatory costs should we fail to appropriately comply with new or modified laws and regulatory
requirements and increase the ability of non-banks to offer competing financial services and products.
We are involved in legal proceedings and may be the subject of additional litigation and/or investigations in the future.
In the normal course of business, from time to time, we are or have been subject to claims and proceedings related to our
operations, business activities and acquisitions. These claims and legal actions could include supervisory or enforcement actions by
our regulators, criminal proceedings by prosecutorial authorities, arbitrations, or civil claims by our customers, former customers,
contractual counterparties, and current and former employees. We have in the past and may in the future face class action lawsuits for
alleged violations of employment, state wage and hour and consumer protection laws. Certain legal actions may include claims for
substantial compensatory or punitive damages or indeterminate amounts of damages. A number of judicial decisions have upheld the
right of borrowers to sue lending institutions on the basis of various evolving legal theories, collectively termed “lender liability.”
Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good
faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a
fiduciary duty owed to the borrower or its other creditors or shareholders. We have been and, in the future, could become subject to
claims based on this or other evolving legal theories.
We cannot predict with certainty the cost of defense, the cost of prosecution or the ultimate outcome of litigation and other
proceedings filed by or against us, our directors, management or employees, including remedies or damage awards. On a quarterly
basis, we assess our liabilities and contingencies in connection with outstanding legal proceedings as well as certain threatened claims
(which are not considered incidental to the ordinary conduct of our business) utilizing the latest and most reliable information
available. The actual cost of any outstanding legal proceedings or threatened claims, however, may turn out to be substantially higher
than the amount accrued. Further, our insurance may not cover all litigation, other proceedings or claims, or the costs of defense.
Future developments could result in an unfavorable outcome for any existing or new lawsuits or investigations in which we are, or
may become, involved, which may have a material adverse effect on our business and our results of operations.
We may be subject to claims and litigation pertaining to fiduciary responsibility.
From time to time as part of our normal course of business, customers may make claims and take legal action against us based on
actions or inactions related to the fiduciary responsibilities of our Trust and Wealth Division. If such claims and legal actions are not
resolved in a manner favorable to us, they may result in financial liability and/or adversely affect our reputation or our products and
services. Any financial liability or reputational damage could have a material adverse effect on our business, which, in turn, could
have a material adverse effect on our financial condition and results of operations.
We are subject to litigation risk pertaining to intellectual property.
We rely on third-party companies to provide information technology products and services that support our day-to-day
operations. These third parties frequently enter into litigation based on allegations of patent infringement or other violations of
intellectual property rights. In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained.
Competitors of our vendors, or other individuals or companies, have from time to time claimed to hold intellectual property sold to us
by our vendors or in use by us and we are, and may in the future be, named as defendants in various related legal claims. Such claims
may increase in the future as the financial services industry becomes more reliant on information technology vendors. The plaintiffs in
these actions frequently seek injunctions and substantial damages and may also seek to enter into licensing agreements with us to
obtain ongoing fees. Any such litigation or claims brought against us or our vendors, whether with or without merit, could result in
substantial costs to us, require us to seek licenses and pay royalties which may only be available on unfavorable terms, if at all, and
ultimately harm our business and results of operations.
Changes in accounting standards could materially impact how we report our financial results.
The Financial Accounting Standards Board, the SEC and other bodies that establish and/or interpret accounting standards
periodically change the financial accounting and reporting standards that govern the preparation of our consolidated financial
statements or may change prior interpretations or positions on how these standards should be applied. These changes may be difficult
to predict and may materially affect how we record and report our financial condition and results of operations. In some cases, we
could be required to apply a new or revised standard retroactively, which would result in changes to previously reported financial
results.
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We are subject to changes in federal, state and local tax laws, interpretation of existing laws and examinations and challenges
by taxing authorities.
Our financial performance is impacted by federal, state and local tax laws. Given the current economic and political
environment, and ongoing budgetary pressures, the enactment of additional new federal or state tax legislation may occur or
interpretations of existing tax laws could change. The enactment of such legislation or changes in the interpretation of existing law
may have a material adverse effect on our financial condition, results of operations and liquidity.
In the normal course of business, we are routinely subjected to examinations and audits from federal, state and local taxing
authorities regarding tax positions taken by us and the determination of the amount of tax due. These examinations may relate to
income, franchise, gross receipts, payroll, property, sales and use, unclaimed property or other tax returns filed, or not filed, by us. The
challenges made by taxing authorities may result in adjustments to the amount of taxes due, and may result in the imposition of
penalties and interest. If any such challenges are not resolved in our favor, they could have a material adverse effect on our financial
condition, results of operations and liquidity.
LIQUIDITY AND MARKET RISKS
Our operations are significantly affected by interest rate levels.
Our profitability is dependent to a large extent on net interest income, which is the difference between interest income earned on
loans and investment securities and interest expense paid on deposits, other borrowings, subordinated debentures and subordinated
notes. Because of the differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing
liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest
paid on interest-bearing liabilities. Accordingly, fluctuations in interest rates could adversely affect our interest rate spread, and, in
turn, our profitability. If the Federal Reserve were to lower the target federal funds rate rapidly, these actions could constrain our
interest rate spread and may adversely affect our results of operation. All else being equal, if the interest rates on our interest-earning
assets decrease at a faster pace than the interest rates on our interest-bearing liabilities, the result could be a reduction in net interest
income and with it, a reduction in net income. On the other hand, increases in interest rates, to combat inflation or otherwise, may
result in interest rates on our interest-earning assets increasing at a faster pace than the interest rates on our interest-bearing liabilities,
the result could be an increase in net interest income. However, the increased interest rates could also adversely affect the ability of
our floating-rate borrowers to meet their higher payment obligations. If this occurred, it could cause an increase in nonperforming
assets and charge offs, which could adversely affect our business.
We are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation,
deflation, recession, unemployment, money supply and other changes in financial markets. We rely primarily on an earnings
simulation model and economic value of equity (“EVE”) to analyze our interest rate risk and our sensitivity to interest rate changes.
This earnings simulation model projects a baseline net interest income and estimated changes to such baseline from changes in interest
rates and incorporates a number of assumptions. The assumptions and inputs used in our interest simulation model and EVE are
difficult to accurately predict. Should these assumptions prove to be inaccurate, our interest simulation model and EVE results may
not accurately project our interest rate risk and our sensitivity to interest rate changes. As a result, we may incur increased or
unexpected losses due to changes in interest rates which could materially and adversely affect our net interest income, net interest
margin and results of operations.
We may not be able to meet the cash flow requirements of our depositors, borrowers, or creditors, or the cash needs for
expansion or other corporate activities.
Liquidity represents our ability to provide funds to satisfy demands from depositors, borrowers and other creditors by either
converting assets into cash or accessing new or existing sources of incremental funds. Liquidity risk is the potential that we will be
unable to meet our obligations as they become due because of an inability to liquidate assets or obtain adequate funding (referred to as
“funding liquidity risk”) or that we cannot easily unwind or offset specific expenses without significantly lowering market prices
because of inadequate market depth or market disruptions (referred to as “market liquidity risk”). The objective of managing liquidity
risk is to ensure that our cash flow requirements resulting from depositor, borrower (including our ability to fund our significant
balance of closed but unfunded loan commitments), and other creditor demands are met, as well as our operating cash needs, and that
our cost of funding such requirements and needs is reasonable. We maintain an asset/liability and interest rate risk policy and a
liquidity and funds management policy, including a contingency funding plan that, among other things, include policies and
procedures for managing and monitoring liquidity risk. Generally, we rely on deposits, repayments of loans and cash flows from our
investment securities as our primary sources of funds. Our principal deposit sources include consumer and commercial customers in
our markets. We have used these funds, together with deposits for public funds customers, brokered deposits, FHLB advances, federal
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funds purchased and other sources of short-term borrowings to make loans, acquire investment securities and other assets and to fund
continuing operations.
Deposit levels may be affected by a number of factors, including rates paid by competitors, general interest rate levels, returns
available to customers on alternative investments, general economic and market conditions and other factors. Loan repayments are
generally a relatively stable source of funds but are subject to the borrowers’ ability to repay loans, which can be adversely affected by
a number of factors including changes in general economic conditions, adverse trends or events affecting business industry groups or
specific businesses, declines in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters and
other factors. Furthermore, loans may not be readily convertible to cash.
We anticipate we will continue to rely primarily on deposits, loan repayments, and cash flows from our investment securities, as
well as other funding sources as appropriate, to provide liquidity. Additionally, where necessary, the secondary sources of borrowed
funds described above will be used to augment our primary funding sources. If we are unable to access any of these secondary funding
sources when needed, or if we otherwise experience an increase in funding liquidity risk or an increase in market liquidity risk, we
might be unable to meet our depositors’, borrowers’ or creditors’ needs, which would adversely affect our financial condition, results
of operations and liquidity.
If we lose a significant portion of our core deposits or our cost of funding deposits increases significantly, our liquidity and/or
profitability could be adversely impacted.
Our profitability depends in part on successfully attracting and retaining a stable base of relatively low-cost deposits, as deposits
have traditionally served as our largest, least costly source of funding. The competition for these deposits in our markets is strong, and
deposit trends can shift with economic conditions. Our deposit levels might fall if an improving economy, rising market rates, or
increased competition causes depositors to become more comfortable with risk and to demand higher interest rates on their deposits or
seek other investments or vehicles offering higher rates of return. If customers move money out of bank deposits, we would lose a
relatively low-cost source of funds, which could have an adverse effect on our financial position, results of operations and liquidity.
We sometimes offer credit enhancements to depositors, such as FHLB letters of credit and, for certain deposits of public monies,
pledges of collateral in the form of readily marketable securities. Any event or circumstance that interferes with or limits our ability to
offer these products to customers that require greater security for their deposits, such as a significant regulatory enforcement action or
a significant decline in our capital levels, could negatively impact our ability to attract and retain deposits. If we were to lose a
significant portion of our low-cost deposits, we would be required to borrow from other sources at higher rates and our liquidity and
profitability could be adversely impacted.
We use brokered deposits which may be an unstable and/or expensive deposit source to fund earning asset growth.
We use brokered deposits, subject to certain limitations and requirements, as a source of funding to augment deposits generated
from our branch network. Our Board has established policies and procedures with respect to the use of brokered deposits. Such
policies and procedures require, among other things, that (i) we limit the amount of brokered deposits as a percentage of total deposits
and (ii) our ALCO monitors our use of brokered deposits on a regular basis, including interest rates and the total volume of such
deposits in relation to our total deposits. At December 31, 2024 we had $2.6 billion in brokered deposits compared to $2.7 billion at
December 31, 2023. In the event that our funding strategies call for the increased use of brokered deposits, there can be no assurance
that such sources will be available, or will remain available, or that the cost of such funding sources will be reasonable. Additionally,
should we no longer be considered well-capitalized, our ability to access new brokered deposits or retain existing brokered deposits
could be adversely affected by market conditions, regulatory requirements or a combination thereof, which could result in most, if not
all, brokered deposit sources being unavailable. The inability to utilize brokered deposits as a source of funding could have an adverse
effect on our financial position, results of operations and liquidity.
We may need to raise additional capital in the future to continue to grow, but that capital may not be available when needed.
Federal and state bank regulators require us to maintain adequate levels of capital to support operations. At December 31, 2024,
our regulatory capital ratios were above the minimum to be considered “well-capitalized” under regulatory guidelines. However, our
business strategy calls for continued growth in our existing lending verticals and banking markets and to expand into new lines of
business and new markets as appropriate opportunities arise. Growth in assets at rates in excess of the rate at which our capital is
increased through retained earnings will reduce our capital ratios unless we continue to increase capital through other means. If our
capital ratios were to fall below “well-capitalized” levels, the FDIC insurance assessment rate would increase until capital is restored
and maintained at a “well-capitalized” level. Additionally, should our capital ratios fall below “well-capitalized” levels, certain
funding sources could become more costly or could cease to be available to us until such time as capital is restored and maintained at a
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“well-capitalized” level. A higher assessment rate resulting in an increase in FDIC insurance premiums, increased cost of funding or
loss of funding sources could have an adverse effect on our financial condition, results of operations and liquidity.
We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our
commitments and business needs. As a publicly traded company, a likely source of additional funds is the capital markets,
accomplished generally through the issuance of equity, including common stock, preferred stock, warrants, depository shares, stock
purchase contracts or stock purchase units, and the issuance of senior or subordinated debt. Our ability to raise additional capital,
including senior or subordinated debt, if needed, will depend, among other things, on conditions in the equity and/or debt markets at
that time, which are outside of our control, and our financial performance. In addition, any issuance of preferred stock or debt by us
may be accompanied by time delays associated with obtaining any required regulatory approvals. If market conditions change during
any time delays associated with obtaining regulatory approval, we may not be able to issue equity or debt on as favorable terms as
were contemplated at the time of commencement of the process, or at all.
We cannot be assured that access to additional capital will be available to us on acceptable terms or at all. Any occurrence that
may limit our access to the capital markets, such as a decline in the confidence of debt purchasers, our depositors or counterparties
participating in the capital markets, may materially and adversely affect our capital costs and our ability to raise capital and/or debt
and, in turn, our liquidity. If we cannot raise additional capital when needed, our ability to continue to grow in our existing lending
verticals and banking markets and to expand into new business lines and new markets could be impaired.
We cannot guarantee that we will pay dividends on our common or preferred stock in the future.
Our shareholders are only entitled to receive dividends on our common or preferred stock as our Board may declare out of funds
legally available for such payments. Although we have historically declared such dividends, we are not required to do so and may
reduce or eliminate our common and/or preferred stock dividends in the future. Our ability to pay dividends on our capital stock is
subject to the restrictions set forth in Arkansas law, by the FDIC, and by certain covenants contained in the indentures governing our
trust preferred securities, our subordinated debentures, our subordinated notes and the terms and conditions of our 4.625% Series A
Non-Cumulative Perpetual Preferred Stock (“preferred stock”). For example, in the event we become subject to an enforcement action
or depending upon our regulatory status, our regulators may prevent us from paying dividends to our shareholders. Further, we cannot
declare or pay dividends on our common stock or redeem or repurchase our common stock for any period for which we have not
declared and paid in full dividends on our preferred stock. Our capital planning and risk management is subject to supervisory review,
and, as a result of that review, our discretion to pay dividends or determine the amount of any dividend could be limited. Accordingly,
there can be no assurance that we will continue to pay dividends on our common or preferred stock in the future. Our Board will
continue to evaluate the payment of dividends based on our results of operations, financial condition, capital requirements, regulatory
and contractual restrictions, our business strategy and other factors our Board deems relevant. See Note 18 of the consolidated
financial statements under Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a
discussion of dividend restrictions.
The performance of our investment securities portfolio is subject to fluctuation due to changes in interest rates and market
conditions, including credit deterioration of the issuers of individual securities.
Changes in interest rates can negatively affect the performance of most of our investment securities. Interest rate volatility can
reduce unrealized gains or increase unrealized losses in our portfolio. Interest rates are highly sensitive to many factors including
monetary policies, domestic and international economic and political issues, and other factors beyond our control. Fluctuations in
interest rates can materially affect both the returns on and market value of our investment securities. Additionally, actual investment
income and cash flows from investment securities that carry prepayment risk, such as mortgage-backed securities and callable
securities, may materially differ from those anticipated at the time of investment or subsequently as a result of changes in interest rates
and market conditions.
Our investment securities portfolio consists of several securities whose trading markets are “not active.” As a result, we utilize
alternative methodologies for pricing these securities that include various estimates and assumptions. There can be no assurance that
we can sell these investment securities at the price derived by these methodologies, or that we can sell these investment securities at
all, which could have an adverse effect on our financial position, results of operations and liquidity.
We have had in the past, and may in the future, have securities in our investment portfolio that are designated as “trading.” These
securities are typically bought and sold over a relatively short period with the intent of generating gains on such transactions.
However, there can be no assurance that we will be able to generate such gains in future periods. Additionally, any trading securities
that are not sold as of the end of any reporting period must be marked to market with such unrealized gains and losses recorded in
current period earnings. Mark-to-market adjustments on these investments may reduce our profitability or cause our net income to
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vary from period to period. We may be unable to generate gains from trading securities activity in future periods or have unrealized
losses that are recorded in earnings, which could have an adverse effect on our financial position and our results of operations.
We monitor the financial position of the various issues of investment securities in our portfolio, including each of the state and
local governments and other political subdivisions where we have exposure. To the extent we have securities in our portfolio from
issuers that have experienced a deterioration of financial condition, or that may experience future deterioration of financial condition,
the value of such securities may decline and could result in the need to establish an ACL recorded as a provision for credit loss, which
could have an adverse effect on our financial condition, results of operations and liquidity.
We currently invest in bank owned life insurance (“BOLI”) and may continue to do so in the future.
We have general, hybrid and separate account BOLI contracts, which had a book value of $829.4 million at December 31, 2024.
BOLI is an illiquid long-term asset that provides tax savings because cash value growth and life insurance proceeds are not taxable.
However, if we needed additional liquidity and converted the BOLI to cash, such transaction would be subject to ordinary income tax
and applicable penalties. We are also exposed to the credit risk of the underlying securities in the investment portfolio and to the
insurance carrier’s credit risk (in a general account contract). If BOLI was exchanged to another carrier, additional fees would be
incurred and a tax-free exchange could only be done for insureds that were still actively employed by us at that time. There is also
interest rate risk relating to the market value of the underlying investment securities associated with the BOLI in that there is no
assurance that the market value of these securities will not decline. Investing in BOLI exposes us to liquidity, credit and interest rate
risk, among other risks, which could adversely affect our financial condition, results of operation and liquidity.
Our investments and/or financings in certain tax-advantaged projects may not generate returns as anticipated and may have
an adverse impact on our financial results.
We invest in and/or finance certain tax-advantaged projects promoting affordable housing and renewable energy sources. Our
investments in these projects are designed to generate a return primarily through the realization of federal and state income tax credits,
and other tax benefits, over specified time periods. We are subject to the risk that previously recorded tax credits, which remain
subject to recapture by taxing authorities based on compliance features required to be met at the project level, will fail to meet certain
government compliance requirements and will not be able to be fully realized. The possible inability to realize these tax credits and
other tax benefits can have a negative impact on our financial results. The risk of not being able to realize the tax credits and other tax
benefits depends on many factors outside of our control, including changes in the applicable provisions of the tax code and the ability
of the projects to be completed and properly managed.
We and/or the holders of certain classes of our securities could be adversely affected by unfavorable ratings from rating
agencies.
The ratings agencies regularly evaluate us, and their ratings of our long-term debt are based on a number of factors, including our
financial strength, as well as factors not entirely within our control, including conditions affecting the financial services industry in
general. There can be no assurance that we will not receive adverse changes in our ratings in the future, which could adversely affect
the cost and other terms upon which we are able to obtain funding, and the way in which we are perceived in the capital markets.
Actual or anticipated changes, or downgrades in our credit ratings, including any announcement that our ratings are under review for a
downgrade, could adversely affect the market value and liquidity of our securities, increase our borrowing costs and negatively impact
our profitability. Additionally, a downgrade of the credit rating of any particular security issued by us could negatively affect the
ability of the holders of that security to sell the securities and the prices at which any such securities may be sold.
The holders of our subordinated debentures, subordinated notes and preferred stock have rights that are senior to those of our
common shareholders.
At December 31, 2024, we had an aggregate principal amount of $350 million of outstanding subordinated notes and $110
million of outstanding subordinated debentures that are held by statutory trusts which issued trust preferred securities to investors. We
guarantee payment of the principal and interest on the trust preferred securities, and our subordinated notes and subordinated
debentures are senior to our common stock and preferred stock in right of payment of dividends and other distributions. In the event of
our bankruptcy, dissolution or liquidation, the holders of our subordinated notes and subordinated debentures would receive
distributions from our available assets before any distributions could be made to the holders of common stock and preferred stock. We
have the right to defer distributions on our subordinated debentures and the related trust preferred securities for up to five years, during
which time no dividends may be paid to holders of our common stock and preferred stock, and under the terms of our preferred stock,
in the event that we do not declare and pay dividends on the preferred stock for the most recent dividend period, we may not, with
certain exceptions, declare or pay dividends on, or purchase, redeem or otherwise acquire, shares of our common stock or any of our
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securities that rank junior to the preferred stock. In addition, in the event of our bankruptcy, dissolution or liquidation, the holders of
our preferred stock would receive a distribution from our available assets before any distribution could be made to the holders of
common stock.
The price of our common stock and preferred stock is affected by a variety of factors, many of which are outside our
control.
Stock price volatility may make it more difficult for investors to sell shares of our common stock and preferred stock at times
and prices they find attractive. Our common stock and preferred stock prices can fluctuate significantly, over a short period of time, in
response to a variety of factors, including, among other things:
•
actual or anticipated variations in quarterly results of operations;
•
recommendations or changes in recommendations by securities analysts regarding our securities;
•
operating and stock price performance of other companies that investors deem comparable to us;
•
news reports relating to trends, concerns and other issues in the financial services industry;
•
perceptions in the marketplace about us and/or our competitors, including failures of other financial institutions;
•
new technology used, or products and services offered, by competitors;
•
changes in the political climate, including any changes as a result of the recent U.S. presidential and congressional elections;
•
changes in global financial markets and global economies and general market conditions, such as interest or foreign exchange
rates, stock, commodity or real estate valuations or volatility and other geopolitical, regulatory or judicial events, including
current or anticipated military conflicts or other geopolitical events;
•
significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or
involving us or our competitors; and
•
changes in, or proposed changes to, governmental regulations.
General market fluctuations, industry factors and general economic and political conditions and events such as economic
slowdowns, expected or incurred interest rate changes, credit loss trends, and various other factors and events could adversely affect
the price of our common stock and preferred stock.
Our common stock and preferred stock trading volume may not provide adequate liquidity for investors.
Although shares of our common stock and preferred stock are listed on the Nasdaq Global Select Market, the average daily
trading volume in the common stock or preferred stock may be less than that of larger financial services companies. A public trading
market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of a sufficient
number of willing buyers and sellers of our capital stock at any given time. This presence depends on the individual decisions of
investors and general economic and market conditions over which we have no control. Significant sales of our capital stock in a brief
period of time, or the expectation of these sales, could cause a decline in the price of our capital stock.
Future issuances of additional equity securities could result in dilution of existing shareholders’ equity ownership and may
adversely affect the market price of our stock.
We have issued, and may issue in the future, shares of our capital stock in connection with our acquisition of other financial
institutions or to support expected growth. We may determine from time to time to issue additional equity securities to raise additional
capital, support growth, or to make acquisitions. Further, we have, and may continue to, issue stock options, grant restricted stock
awards or other stock grants, awards or units in order to retain, compensate and/or motivate our employees and directors. These
issuances of our securities could dilute the voting and economic interests of existing shareholders. In addition, resales of substantial
amounts of capital stock in the public market and the potential of such sales could adversely affect the prevailing market price of our
capital stock and impair our ability to raise additional capital through the sale of equity securities.
Our capital stock is not an insured deposit.
Shares of our common stock and preferred stock are not bank deposits and, therefore, losses in value are not insured by the
FDIC, any other deposit insurance fund or by any other public or private entity. Investment in shares of our capital stock is inherently
risky for the reasons described in this “Risk Factors” section of this Annual Report on Form 10-K, and is subject to the same market
forces and investment risks that affect the price of capital stock in any other company, including the possible loss of some or all
principal invested.
31
STRATEGIC, REPUTATIONAL AND OTHER RISKS
Our recent results may not be indicative of our future results.
We may not be able to grow our business at the same rate of growth achieved in recent years or even grow our business at all.
Additionally, in the future we may not have the benefit of several factors that have been favorable to our business in past years, such
as an interest rate environment where changes in rates occur at a relatively orderly and modest pace, the ability to find suitable
expansion opportunities, or otherwise to capitalize on opportunities presented by economic turbulence, or other factors and conditions.
Numerous factors, such as weakening or deteriorating economic conditions, regulatory restrictions or actions, legislative
considerations, and competition may impede or restrict our ability to expand our market presence and could adversely affect our future
operating results.
If we do not manage our growth effectively, our business, future prospects, financial condition, results of operations and
liquidity could be adversely affected.
Our reputation, expertise and banking model enable us to build and expand our banking relationships with customers in the
markets we serve. We remain committed to growing our business in a disciplined manner. Our growth prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by banking companies pursuing such strategies. In order to
successfully expand our banking relationships in our current or new markets, we must, among other things:
•
attract and retain qualified bank management and staff;
•
build and retain a substantial customer base;
•
expand our loan portfolio while maintaining favorable asset quality;
•
attract sufficient deposits and capital to fund anticipated loan growth;
•
identify and expand into suitable markets;
•
identify and acquire suitable sites for new banking offices;
•
obtain regulatory and other approvals;
•
maintain adequate common equity and regulatory capital;
•
sustain employee productivity while pursuing various organizational initiatives; and
•
maintain sufficient qualified staffing, infrastructure and organizational capacity to support growth and compliance with
increasing regulatory requirements.
In addition to the foregoing factors, there are considerable costs involved in opening banking offices, and such new offices
generally do not generate sufficient revenues to offset their costs until they have been in operation for some time. Therefore, any new
banking offices we open can be expected to negatively affect our operating results until those offices reach a size at which they
become profitable. We could also experience an increase in expenses if we encounter delays in opening any new banking offices.
Moreover, we cannot give any assurances that any new banking offices we open will be successful, even after they have become
established, or that we can hire and retain qualified bank management and staff to achieve our growth and profitability goals. If we do
not manage our growth effectively, our business, future prospects, financial condition, results of operations and liquidity could be
adversely affected.
We may be adversely affected by risks associated with any potential future acquisition.
We plan to continue to grow our business organically. However, we have pursued and may continue to pursue additional
acquisition opportunities in the future that we believe support our business strategy and may enhance our profitability. Acquisitions
involve numerous risks, including, among others:
•
incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential
transactions, resulting in our attention being diverted from the operation of our existing business;
•
using inaccurate estimates, assumptions and judgments to evaluate credit, operations, management and market risks with
respect to the target institution or assets;
•
the risk that the acquired business will not perform to our expectations;
•
difficulties, inefficiencies or cost overruns in integrating and assimilating the organizational cultures, operations,
technologies, products and services of the acquired business with ours;
•
the risk of key vendors not fulfilling our expectations or not accurately converting data or operating systems;
•
entering geographic and product markets in which we have limited or no direct prior experience;
•
the potential loss of key employees, vendors, customers and depositors of the acquired business;
32
•
the potential for liabilities, claims and/or other contingencies arising out of the acquired business; and
•
the risk of not receiving required regulatory approvals or such approvals being restrictively conditional.
Acquisitions of financial institutions also involve operational risks and uncertainties, and acquired companies may have
unknown or contingent liabilities with no corresponding accounting reserve or allowance, exposure to unexpected asset quality
problems that require write downs or write-offs (as well as restructuring and impairment or other charges), difficulty retaining key
employees and customers and other issues that could negatively affect our business. We may not be able to realize the expected level
of, or any, projected cost savings, synergies or other benefits associated with any such acquisition we complete. Any acquisition may
involve the payment of a premium over book and/or market value and, therefore, some dilution of our tangible book value and diluted
earnings per common share may occur in connection with any such future acquisition. Failure to successfully integrate any entities that
we may acquire into our existing operations could significantly increase our operating costs and have a material adverse effect on our
business, financial condition and results of operations.
We must generally satisfy a number of meaningful conditions prior to completing any acquisition, including, in certain cases,
federal and state regulatory approval. Bank regulators consider a number of factors when determining whether to approve a proposed
transaction, including the effect of the transaction on financial stability and the ratings and compliance history of all institutions
involved, including the CRA examination results and BSA/AML compliance records of all institutions involved. The process for
obtaining required regulatory approvals may be difficult. We may fail to pursue, evaluate or complete strategic acquisition
opportunities as a result of our inability, or our perceived inability, to obtain any required regulatory approvals in a timely manner or at
all.
In addition, we face significant competition from numerous other financial services institutions, some of which have greater
financial resources than we do, when considering acquisition opportunities. Accordingly, attractive acquisition opportunities may not
be available to us. There can be no assurance that we will be successful in identifying or completing any potential future acquisitions.
Reputational risk and social factors may impact our results.
Our ability to originate and maintain accounts is highly dependent upon consumer and other external perceptions of our business
practices and/or our financial health. Adverse perceptions or developments regarding our business, practices and/or financial health,
our competitors, or the banking industry as a whole, could damage our reputation and business prospects, leading to difficulties in
originating and retaining loans and deposits, particularly uninsured deposits. These perceptions could stem from a variety of sources,
including negative posts or communications on social media, non-mainstream news services or other parts of the Internet, or the
disclosure of non-public information or negative comments regarding us or our business from employees or others on social media or
other websites. This risk is magnified by the speed and pervasiveness with which information is disseminated through those channels.
Adverse reputational effects on third parties with whom we have important relationships may also adversely affect our reputation.
Adverse effects on our reputation, or the reputation of the industry, may also result in greater regulatory and/or legislative scrutiny,
which may lead to laws or regulations that may change or constrain the manner in which we engage with our customers and the
products and services we offer and can also increase litigation risk. Any of these factors could have an adverse effect on our ability to
achieve our business objectives, which could have an adverse effect on our financial conditions, results of operations and liquidity.
The soundness of other financial institutions could adversely affect us.
Our ability to engage in routine funding transactions could be adversely affected by the actions, or inactions, and financial
stability of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or
other relationships. We have exposure to various counterparties, including brokers and dealers, commercial and correspondent banks,
and others. As a result, defaults by, or rumors or questions about, one or more other financial services institutions, or the financial
services industry generally, may result in market and customer perception of the risk of similar problems at other institutions, which
could lead to market-wide liquidity problems and losses or defaults by such other institutions. Such occurrences could expose us to
credit risk in the event of default of one or more counterparties and could have a material adverse effect on our financial position,
results of operations and liquidity. Furthermore, as we and other regional banks experienced in 2023, the failure of other financial
institutions may cause deposit outflows as customers spread deposits among several different banks to maximize their amount of FDIC
insurance, move deposits to larger banks, or remove deposits from the banking system entirely.
If our goodwill becomes impaired, we could be required to record impairment charges.
Goodwill represents the amount by which the acquisition cost exceeds the fair value of net assets we acquire in an acquisition.
We review goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate the carrying
value might be impaired. At December 31, 2024, our goodwill totaled $661 million. While our previous evaluations of goodwill have
33
not resulted in any impairment charges or write downs of our goodwill, there can be no assurance that future evaluations of goodwill
will not result in findings of impairment and related write downs, which could have a material adverse effect on our financial
condition and results of operations.
Item 1B.
UNRESOLVED STAFF COMMENTS
None.
Item 1C.
CYBERSECURITY
Risk Management and Strategy
We face significant cybersecurity threats and risks due to the breadth, complexity and widespread use of our systems, products
and processes, our use of third-party products and services, and the substantial level of harm that could occur to us and our customers
were we to suffer a material cybersecurity incident. Our processes for assessing, identifying, and managing material cybersecurity
risks are integrated into our enterprise risk management.
Our risk management program is designed to identify, assess, and mitigate risks across various aspects of our Bank, including
strategic, credit, market, liquidity, operational (including cybersecurity, information technology and third-party vendor risks),
reputational and compliance and regulatory (including BSA/AML) risks. Cybersecurity is a critical component of this program, given
the increasing reliance on technology and potential of cyber threats. Our Chief Information Security Officer (“CISO”) is primarily
responsible for managing this cybersecurity component and is a key member of the risk management organization, reporting directly
to our Chief Risk Officer (“CRO”) and, as discussed below, periodically to our management Executive Risk Council (“ERC”), Board
Risk Committee (“BRC”) and the full Board. For a discussion of our overall risk management program, see Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Risk Elements of this Annual Report on Form 10-K.
Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to
penetrate, disrupt or misuse our systems or information. The structure of our information security program aligns with industry
standards and leading practices, complies with regulatory requirements, and is designed around various frameworks of the National
Institute of Standards and Technology and the Center for Internet Security. In addition, we leverage certain industry and government
associations, third-party benchmarking, audits, and threat intelligence feeds to facilitate and promote program effectiveness. Our CISO
and our Chief Information Officer (“CIO”), who report directly to our CEO, along with key members of their teams, regularly
collaborate with peer banks, industry groups, and policymakers to discuss cybersecurity trends and issues and identify best practices.
The information security program is periodically reviewed by such personnel with the goal of addressing changing threats and
conditions, and we closely monitor information security and cybersecurity trends and new threats, including cyber risks, in an effort to
continuously improve the security and privacy of our systems and data.
We employ an in-depth, layered, defensive approach that leverages people, processes, and technology as part of our efforts to
manage and maintain cybersecurity controls. We also employ a variety of preventative and detective tools designed to monitor, block,
and provide alerts regarding suspicious activity and report on suspected, advanced and persistent threats. We have established
processes and systems designed to mitigate cyber risk, including regular and on-going education and training for employees,
preparedness simulations and tabletop exercises, phishing campaigns, and recovery and resilience tests. We engage in regular
assessments of our infrastructure, software systems, and network architecture, using internal cybersecurity experts and third-party
specialists. We also maintain a third-party risk management program designed to identify, assess, and manage risks, including
cybersecurity risks, associated with external service providers and our supply chain. We also actively monitor our email gateways for
malicious phishing email campaigns and monitor remote connections. We leverage internal and external auditors and independent
external partners to periodically review our processes, systems, and controls, including with respect to our information security
program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management program.
We maintain a Cyber Incident Response Plan that provides a documented framework for responding to actual or potential
cybersecurity incidents, including timely notification and escalation of the incident to the appropriate persons or groups. The Cyber
Incident Response Plan is coordinated through the CISO and key members of management are embedded into the plan by its design.
Security events and data incidents are identified, ranked by severity and prioritized for response and remediation, and evaluated to
determine materiality as well as operational, business, privacy and regulatory impact. The Cyber Incident Response Plan facilitates
coordination across multiple parts of our organization and is evaluated at least annually.
Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is severe. Our internal systems,
processes, and controls are designed to mitigate loss from cyber-attacks and, while we have experienced cybersecurity incidents in the
34
past, to date, risks from cybersecurity threats have not materially affected our Bank. For further discussion of risks from cybersecurity
threats, see Item 1A. Risk Factors of this Annual Report on Form 10-K.
Governance
Our CISO is accountable for managing our enterprise information security department and delivering our information security
program. The responsibilities of this department include cybersecurity risk assessment, defense operations, incident response,
vulnerability assessment, threat intelligence, identity access governance, and third-party risk management. The foregoing
responsibilities are covered on a day-to-day basis by a first line of defense function, and our second line of defense function, including
the CISO, provides guidance, oversight, monitoring and challenge of the first line’s activities. The second line of defense function is
separated from the first line of defense function through organizational structure and ultimately reports directly to the CRO. The
department, as a whole, consists of information security professionals with varying degrees of education and experience. In particular,
our CISO has substantial formal training and relevant experience in the military and private sectors in the areas of information security
and cybersecurity risk management, as well as multiple degrees in cybersecurity and numerous industry certifications.
Our Board has approved management groups including the Information Systems Steering Committee, which focuses on
technology impact and the alignment of technology and information security, and the Information Security Advisory Council, which
reports to the Information Systems Steering Committee on information security and cybersecurity matters. These groups provide
governance of the technology program and the information security program and are chaired by and comprised of managers within the
enterprise information security and technology departments, including the CIO and CISO as well as their direct reports and other key
departmental managers from throughout the Bank. These groups meet no less than quarterly to monitor and review the risk
management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks.
More frequent meetings occur from time to time in accordance with the Cyber Incident Response Plan in order to facilitate timely
informing and monitoring efforts.
The BRC is responsible for overseeing our information security program, including management’s actions to identify, assess,
mitigate, and remediate or prevent material cybersecurity issues and risks. Our CISO provides quarterly reports to the ERC, the BRC
and the full Board regarding the information security program, key enterprise cybersecurity initiatives, and other matters relating to
cybersecurity processes. The BRC and the full Board review and approve our operational risk appetite, including cybersecurity,
technology and third-party vendor management, at least annually. Additionally, the BRC and the full Board review our cybersecurity
risk profile on a quarterly basis.
Item 2.
PROPERTIES
Our principal executive office is located in Little Rock, Arkansas. At December 31, 2024, we conducted banking operations in
244 offices in nine states, including 232 banking offices and 12 loan production offices (“LPO”). Such offices include both owned and
leased facilities.
The following table sets forth specific information about our banking facilities, by state, at December 31, 2024.
Retail Branches
LPO
Total
State
Owned
Leased
Owned
Leased
Owned
Leased
Arkansas
71 (1)
4
—
—
71
4
Georgia
59
8
1
1
60
9
Florida
34
7
—
2
34
9
North Carolina
24
—
—
2
24
2
Texas
19
5
—
1
19
6
California
—
—
—
3
—
3
New York
—
—
—
1
—
1
Tennessee
1
—
—
—
1
—
Mississippi
—
—
—
1
—
1
Total
208
24
1
11
209
35
(1) Includes our corporate headquarters in Little Rock.
35
Item 3.
LEGAL PROCEEDINGS
In the ordinary course of business, we are or may be involved in various legal or regulatory proceedings and/or claims, including
claims related to employment, wage-hour and labor law claims, consumer and privacy claims, lender liability claims, breach of
contract, and other similar lending-related claims encountered on a routine basis, some of which may be styled as “class action” or
representative cases. While the ultimate resolution of these claims and proceedings cannot be determined at this time, management
believes that such claims and proceedings, individually or in the aggregate, will not have a material adverse effect on the Bank’s
financial condition or results of operations.
Item 4.
MINE SAFETY DISCLOSURES
Not Applicable.
PART II
Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information
The Bank’s common stock is listed on the Nasdaq Global Select Market under the symbol “OZK” and at December 31, 2024, the
Bank had approximately 1,068 shareholders of record. On December 31, 2024, the closing price of our common stock was $44.53 per
share.
Recent Sales of Unregistered Securities
During the fourth quarter of 2024, the Bank issued 10,549 shares of common stock in connection with the exercise of stock
options issued to certain participants under the Bank’s equity compensation plans. The shares were issued in reliance on the exemption
provided by Section 3(a)(2) of the Securities Act of 1933, as amended (“Securities Act”) because the sales involved securities issued
by a bank.
During the fourth quarter of 2024, the Bank issued an aggregate of 741 shares of restricted common stock to certain officers
pursuant to the Bank’s 2019 Omnibus Equity Incentive Plan. The Bank did not receive any cash consideration in connection with
these grants. These grants were exempt from registration pursuant to Section (3)(a)(2) of the Securities Act because the grants
involved securities issued by a bank.
Repurchase of Equity Securities by Issuer
On July 17, 2024, we announced that our Board approved a stock repurchase program authorizing the repurchase of up to $200
million of our outstanding shares of common stock (the “2024 Stock Repurchase Program”). The 2024 Stock Repurchase Program
will expire on July 1, 2025, unless extended or shortened by the Board, and may be suspended by the Bank at any time. Under this
program, repurchases may be made from time to time in open market transactions, through privately negotiated transactions or
otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of
the Exchange Act. The timing and amount of repurchases will be determined by management based on a variety of factors including
the Bank’s stock price, expected growth, capital position, alternative uses of capital, liquidity, financial performance, current and
expected macroeconomic environment, regulatory requirements and other factors. No shares of common stock were purchased during
the fourth quarter of 2024 under the 2024 Stock Repurchase Program.
Dividends
The determination of future cash dividends on our capital stock will depend on conditions existing at that time and approval of
our Board. Our Board will continue to evaluate the payment of cash dividends based on our results of operations, financial condition,
capital requirements, regulatory and contractual restrictions, our business strategy and other factors our Board deems relevant. See
“Common Stock Dividend Policy” and “Preferred Stock Dividend Policy” under “Item 7 – Management’s Discussion and Analysis of
the Financial Condition and Results of Operations – Capital Management” and Note 18 of the consolidated financial statements under
“Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for restrictions on our present or future
ability to pay dividends, particularly those restrictions arising under federal and state banking laws.
36
Stock Performance Graph
The graph below shows a comparison for the period commencing December 31, 2019 through December 31, 2024 of the
cumulative total stockholder returns (assuming reinvestment of dividends) for our common stock, the S&P Midcap 400 Index and the
KBW Regional Banking Index, assuming a $100 investment on December 31, 2019. The comparisons in this graph are required by the
SEC and are not intended to forecast or be indicative of possible future performance of our common stock.
12/31/2019
12/31/2020
12/31/2021
12/31/2022
12/31/2023
12/31/2024
OZK (Bank OZK)
$
100 $
107 $
164 $
146 $
188 $
174
MID (S&P Midcap 400 Index)
$
100 $
114 $
142 $
123 $
143 $
163
KRX (KBW Regional Banking Index)
$
100 $
91 $
125 $
116 $
116 $
131
The information included under the heading “Stock Performance Graph” shall not be deemed to be “soliciting material” or to be
“filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section, and shall not be
incorporated by reference into any of our filings under the Securities Act or the Exchange Act, whether made before or after the date
of this Annual Report on Form 10-K, except to the extent that we specifically incorporate such information by reference.
Item 6.
[RESERVED]
37
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
The following is a discussion of our financial condition at December 31, 2024 and 2023 and our results of operations for each of
the years in the three-year period ended December 31, 2024. The purpose of this management’s discussion and analysis of financial
condition and results of operations (“MD&A”) is to focus on the most relevant information about our financial condition and results of
operations that is not otherwise apparent from the consolidated financial statements and footnotes. This discussion should be read in
conjunction with the disclosure regarding “Forward-Looking Information” in Part I as well as the risks discussed under Part I, Item
1A. Risk Factors, and our consolidated financial statements and notes thereto included under Item 8. Financial Statements and
Supplementary Data of this Annual Report on Form 10-K.
Bank OZK (the “Bank”) is subject to regulation by the Arkansas State Bank Department (“ASBD”) and because the Bank is an
insured depository institution that is not a member bank of the Federal Reserve System (the “Federal Reserve”), our primary federal
regulator is the Federal Deposit Insurance Corporation (“FDIC”). We are not subject to the Federal Reserve’s regulation and
supervision (except such regulations as are made applicable to the Bank by law and regulation of the FDIC). Shares of the Bank’s
common stock are listed in the Nasdaq Global Select Market under the symbol “OZK.” Shares of the Bank’s preferred stock are listed
in the Nasdaq Global Select Market under the symbol “OZKAP.”
Our primary business is commercial banking conducted by the Bank and various subsidiaries of the Bank. The Bank operates in
only one segment. Our results of operations depend primarily on net interest income, which is the difference between the interest
income from earning assets, such as loans and investments, and the interest expense incurred on interest bearing liabilities, such as
deposits, borrowings, subordinated debentures and subordinated notes. We also generate non-interest income, including, among
others, deposit-related fees; loan-related fees; trust income; bank owned life insurance (“BOLI”) income; and gains (losses) from sales
of investment securities and other assets.
Our non-interest expense consists primarily of employee compensation and benefits, net occupancy and equipment and other
operating expenses. Our results of operations are significantly affected by our provision for credit losses and our provision for income
taxes.
Critical Accounting Estimates
Our consolidated financial statements and related notes presented in Item 8. Financial Statements and Supplementary Data in this
Annual Report on Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States
(“GAAP”). Our significant accounting policies and methods are discussed in Note 1 to the consolidated financial statements. Certain
accounting estimates involve a significant level of estimation uncertainty and require management to make difficult, subjective or
complex judgments about matters that are uncertain and have had, or are reasonably likely to have, a material impact on our financial
condition or results of operations. Because of the uncertainty involved in these estimates, materially different amounts could be
reported under different assumptions or estimates. Our determination of (i) the provisions to and the adequacy of the allowance for
credit losses (“ACL”), (ii) the fair value of our investment securities portfolio, and (iii) accounting for our income taxes all involve a
higher degree of judgment and complexity than our other significant accounting policies. Accordingly, we consider each of these to be
critical accounting estimates.
Provisions to and adequacy of the ACL. Our ACL estimate is established through a provision for credit losses charged against
income. Our ACL estimate is subject to uncertainty due to various assumptions and judgments utilized in forming our ACL estimate.
In estimating our ACL, we utilize various score cards which use quantitative models and for commercial risk ratings, incorporate
qualitative factors in determining our estimated ACL. In addition, various qualitative adjustments are applied to our ACL estimate to
capture items not included in the modeled results or other assumptions.
The ACL is maintained at a level that we believe will be adequate to absorb expected credit losses in future periods associated
with our loan portfolio and unfunded loan commitments. Provisions to and the adequacy of the ACL are based on evaluations of the
loan portfolio utilizing objective and subjective criteria. The objective criteria primarily includes estimated losses that are modeled
from the respective score cards and the outputs from our CECL platform that considers various economic forecasts and scenarios, a
reasonable and supportable forecast of two years followed by a systematic reversion to our historical losses, and other factors. In
addition to these objective criteria, we subjectively assess the adequacy of the ACL and the need for changes thereto, with
consideration given to the nature and mix of the portfolio, national, regional and local business and economic conditions that may
affect borrowers’ ability to pay, concentrations of credit, changes in the experience, ability and depth of lending management and
other relevant staff, changes in the nature and volume of the portfolio and in the terms of the loans, overall portfolio quality, historical
loss experience and other relevant factors. In addition, for loans that do not share risk characteristics similar to those contained within
38
their respective loan segments, we may perform an individual assessment of the ACL utilizing expected cash flows, collateral values
or a combination thereof. On an ongoing basis, we evaluate the underlying collateral on certain collateral dependent loans and, if
needed, due to changes in market or property conditions, the underlying collateral is reassessed, and the estimated collateral value is
revised. The determination of collateral value includes any adjustments considered necessary related to estimated holding periods,
estimated liquidation discounts and estimated selling costs. While an individual assessment and related ACL has been calculated for
certain loans, no portion of our ACL is restricted to any individual loan or group of loans, and the entire ACL is available to absorb
losses from any and all loans, including unfunded loan commitments.
Changes in the criteria used or the availability of new information could cause the ACL to be increased or decreased in future
periods. To the extent that our reasonable and supportable forecast varies from actual economic conditions and/or our actual losses
vary from our historical losses, we could experience significant fluctuation in our provision for credit losses and our ACL. In
addition, our qualitative factors, including our estimate of qualitative adjustments, may change or vary considering the change in our
assumptions or expectations for future loan losses. Also, bank regulatory agencies, as part of their examination process, may require
adjustments to the ACL based on their judgment and estimates.
Fair value of the investment securities portfolio. We determine the appropriate classification of investment securities at the time
of purchase and reevaluate such designation as of each balance sheet date. At December 31, 2024 and December 31, 2023 all of our
investment securities were classified as available for sale (“AFS”).
Investment securities are reported at estimated fair value, with the unrealized gains and losses determined on a specific
identification basis. We utilize independent third parties as our principal pricing sources for determining fair value of investment
securities which are measured on a recurring basis. For investment securities traded in an active market, fair values are based on
quoted market prices if available. If quoted market prices are not available, fair values are based on quoted market prices of
comparable securities, broker quotes or comprehensive interest rate tables, pricing matrices or a combination thereof. For investment
securities that are not traded or that are traded in a market that is not active, fair value is determined using unobservable inputs.
The fair values of our investment securities traded in both active and inactive markets can be volatile and may be influenced by a
number of factors including market interest rates, prepayment speeds, discount rates, credit quality of the issuer, general market
conditions including market liquidity conditions and other factors.
Changes in fair value of our investment securities are recorded in accumulated other comprehensive income. Fair values could be
subject to material variations that may significantly affect our financial condition, results of operations and liquidity.
Accounting for income taxes. We are subject to federal, state and local tax laws. We utilize the asset and liability method in
accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based upon the difference between
the values of the assets and liabilities as reflected in the financial statements and their related tax basis using enacted tax rates in effect
for the year or years in which the differences are expected to be recovered or settled. As changes in tax laws or rates are enacted,
deferred tax assets and liabilities are adjusted through the provision for income taxes.
Tax laws are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. In
the normal course of business, we are routinely subjected to examinations and audits from federal, state and local taxing authorities
regarding tax positions taken by us and the determination of the amount of tax due. Challenges made by taxing authorities may result
in adjustments to the amount of taxes due and may result in the imposition of penalties and interest. If any such challenges are not
resolved in our favor, they could have a material adverse effect on our financial condition, results of operations and liquidity.
39
Analysis of Results of Operations
Financial Highlights
The following selected financial highlights are derived from our audited financial statements as of and for each of the years
indicated and should be read in conjunction with this MD&A and Item 8. Financial Statements and Supplementary Data of this Annual
Report on Form 10-K. The calculations of non-GAAP measures pre-tax pre-provision net revenue (“PPNR”), and the reconciliations
to GAAP are included in this MD&A under “Analysis of Results of Operations” and the calculations of tangible book value per
common share, returns on average common stockholders’ equity and returns on average tangible common stockholders’ equity, total
tangible common stockholders’ equity to total tangible assets and the reconciliations to GAAP are included in this MD&A under
“Capital Management.”
Year Ended December 31,
2024
2023
2022
(Dollars in thousands, except per share amounts)
Income statement data:
Net interest income
$
1,533,724
$
1,439,485
$
1,142,242
Provision for credit losses
175,552
165,470
83,494
Non-interest income
124,413
122,549
114,503
Non-interest expense
551,293
529,561
451,721
Net income
716,503
690,839
564,090
Preferred stock dividends
16,187
16,187
16,621
Net income available to common stockholders
700,269
674,596
547,520
PPNR
1,106,844
1,032,473
805,024
Common share and per common share data:
Diluted earnings per common share
$
6.14
$
5.87
$
4.54
Book value per common share
47.30
42.42
37.13
Tangible book value per common share
41.48
36.58
31.47
Common stock dividends per share
1.58
1.42
1.26
Weighted-average diluted shares outstanding (thousands)
114,015
114,833
120,700
End of period shares outstanding (thousands)
113,458
113,149
117,177
Balance sheet data at period end:
Total assets
$
38,258,852
$
34,237,457
$
27,656,568
Loans
29,968,867
26,459,075
20,778,791
Allowance for loan losses
465,547
339,394
208,858
Foreclosed assets
69,381
61,720
6,616
Investment securities – AFS
2,836,150
3,244,371
3,491,613
Deposits
31,043,072
27,405,143
21,500,143
Other borrowings
420,813
805,318
606,666
Unfunded loan commitments
19,078,633
20,561,029
21,062,733
Reserve for losses on unfunded loan commitments
153,813
161,834
156,419
Total common stockholders’ equity
5,366,643
4,800,021
4,350,599
Total tangible common stockholders’ equity
4,705,854
4,139,232
3,687,056
Loan to deposit ratio
96.54%
96.55%
96.64%
Average balance sheet data:
Total average assets
$
36,615,788
$
30,643,932
$
26,328,362
Total average common stockholders’ equity
5,086,678
4,516,996
4,323,487
Performance ratios:
Return on average assets
1.91%
2.20%
2.08%
Return on average common stockholders’ equity
13.77
14.93
12.66
Return on average tangible common stockholders’ equity
15.82
17.50
14.97
Total tangible common stockholders’ equity to total tangible assets
12.52
12.33
13.66
Net interest margin - FTE
4.56
5.16
4.82
Efficiency ratio
33.00
33.67
35.75
Asset Quality ratios:
Net charge-offs to average loans
0.20%
0.13%
0.04%
Nonperforming loans to loans
0.44
0.25
0.25
Nonperforming assets to total assets
0.53
0.38
0.21
Allowance for loan losses to loans (1)
1.55
1.28
1.01
Allowance for credit losses to loans and unfunded loan commitments
1.26
1.07
0.87
Capital ratios at period end:
Common equity tier 1
11.34%
10.79%
11.54%
Tier 1 risk based capital
12.15
11.66
12.55
Total risk based capital
14.49
14.10
14.97
Tier 1 leverage
13.73
13.91
15.90
(1) Excludes reserves for losses on unfunded loan commitments.
40
Highlights from 2024 include the following:
• Total assets increased 11.7% to $38.26 billion at December 31, 2024;
• Loans increased 13.3% to $29.97 billion at December 31, 2024;
• Investment securities AFS decreased 12.6% to $2.84 billion at December 31, 2024;
• Deposits increased 13.3% to $31.04 billion at December 31, 2024;
• ACL increased $118.1 million during 2024 to $619.4 million at December 31, 2024;
• Provision for credit losses of $175.6 million for 2024 compared to $165.5 million for 2023;
• Net income available to common stockholders of $700.3 million for 2024, a 3.8% increase compared to 2023;
• PPNR of $1.11 billion for 2024, a 7.2% increase compared to 2023 (the calculations of PPNR are included in this MD&A
under the section “Analysis of Results of Operations – Pre-Tax Pre-Provision Net Revenue”);
• Diluted EPS of $6.14 for 2024 compared to $5.87 in 2023;
• Return on average assets of 1.91% for 2024;
• Returns on average common stockholders’ equity and average tangible common stockholders’ equity of 13.77% and
15.82%, respectively, for 2024 (the calculations of our return on average common stockholders’ equity and average
tangible common stockholders’ equity and the reconciliation to GAAP are included in this MD&A under the section
“Capital Management”);
• Net interest income of $1.53 billion for 2024;
• Net interest margin, on a fully taxable equivalent (“FTE”) basis, of 4.56% for 2024;
• An efficiency ratio (non-interest expense divided by the sum of net interest income, on an FTE basis, and non-interest
income) of 33.00% for 2024;
• Net charge-offs to average loans of 0.20% for 2024; and
• At December 31, 2024, our ratio of nonperforming loans to total loans was 0.44%, and our ratio of nonperforming assets to
total assets was 0.53%.
Net Interest Income
Net interest income is our largest source of revenue and represents the amount by which interest income from interest earning
assets exceeds the interest expense incurred on interest bearing liabilities. Net interest income is affected by many factors, including
our volume and mix of average earning assets; our volume and mix of deposits and other interest bearing liabilities; our net interest
margin; our core spread, which is how we describe the difference between the yield on our loans and our cost of interest bearing
deposits (“COIBD”); and other factors.
Net interest income and net interest margin are analyzed in this discussion on an FTE basis. The adjustment to convert net
interest income to an FTE basis consists of dividing tax-exempt interest income by one minus the statutory federal income tax rate of
21%. The FTE adjustments to net interest income were $12.5 million in 2024, $10.8 million in 2023 and $6.9 million in 2022. No
adjustments have been made in this analysis for income exempt from state income taxes or for interest expense deductions disallowed
under the provisions of the Internal Revenue Code (“IRC”) as a result of investments in certain tax-exempt securities.
2024 compared to 2023
Net interest income for 2024 increased 6.62% to $1.55 billion compared to $1.45 billion for 2023. The increase in our net
interest income for 2024 compared to 2023 was primarily due to an increase in average earning assets, which increased 20.64% to
$33.89 billion, partially offset by a decrease in our net interest margin, which decreased 60 basis points (“bps”) to 4.56% for 2024
compared to 5.16% for 2023. The decrease in net interest margin was primarily due to an increase of 92 bps in the rates paid on our
total interest bearing liabilities, partially offset by an increase of 24 bps in the rates earned on our total interest bearing assets.
Yields on average earning assets were 7.85% for 2024 compared to 7.61% for 2023. The increase in the yields on average
earning assets for 2024 compared to 2023 was driven by the increases in yields on loans, interest-earning deposits and investment
securities.
The yield on our interest earning deposits increased 15 bps to 5.15% for 2024 compared to 5.00% for 2023. The yield on our
aggregate investment securities portfolio increased 41 bps to 3.06% for 2024 compared to 2.65% for 2023.
The yield on our loan portfolio increased 11 bps to 8.56% for 2024 compared to 8.45% for 2023. At December 31, 2024,
approximately 80% of our funded balance of loans were variable interest rate loans and generally reprice with movements in the 1-
month term Secured Overnight Funding Rate (“SOFR”), the Wall Street Journal Prime Rate (“WSJ Prime”) and other indexes. At
December 31, 2024, approximately 98% of our total commitment of variable rates had floor rates, and the vast majority of such total
loan commitments were above their floor rates. If the Federal Reserve cuts the federal funds rate in 2025, the impact of declining rates
on our net interest margin should be somewhat mitigated by a combination of (1) floor rates on variable loans (2) repayments of lower
yielding investment securities and (3) the relatively short duration of our time deposits.
41
The overall increase in rates on average interest bearing liabilities, which increased 92 bps to 4.20% for 2024 compared to 3.28%
for 2023, was primarily due to increases in rates on interest bearing deposits, the largest component of our interest bearing liabilities,
which increased 101 bps to 4.19% for 2024 compared to 3.18% for 2023. The increase in rates on our interest bearing deposits was
primarily due to increases in the rates paid on time deposits and, to a lesser extent, savings and interest bearing transaction deposits.
Like many in the industry, we have seen a shift in the mix of deposits away from non-interest bearing and lower cost deposits to more
time deposits as many customers have been taking advantage of time deposit rates. Changes in expected deposit levels necessary to
fund future potential growth in our earning assets, changes in our level of on-balance sheet liquidity, or changes in competitive
conditions, among other factors, could significantly affect our deposit composition and COIBD in future periods.
Our other borrowing sources include (i) other borrowings comprised primarily of FHLB advances and federal funds purchased,
(ii) subordinated notes and (iii) subordinated debentures. The rates on other borrowings decreased 97 bps to 4.21% in 2024 compared
to 5.18% for 2023 primarily due to decreases in the federal funds rate and capitalized interest related to the construction of new
branches during 2024. The rates paid on our subordinated debentures increased 18 bps to 8.01% for 2024 compared to 7.83% for 2023
primarily due to higher average 3-month term SOFR rates in 2024 compared to the applicable rates in 2023.
The increase in average earning assets for 2024 compared to 2023 was primarily due to increases in the average balance of loans,
and interest earning deposits partially offset by a decrease in the average balance of investment securities. Average loans increased
$5.13 billion, or 21.8% to $28.71 billion for 2024 compared to 2023 primarily due to growth in our various lending groups. Average
interest earning deposits increased $0.97 billion, or 83.6% to $2.14 billion for 2024 compared to 2023. Average investment securities
decreased $0.31 billion, or 9.1% to $3.04 billion for 2024 compared to 2023.
The increase in average interest bearing liabilities for 2024 compared to 2023 was due to an increase in the average balance of
interest bearing deposits partially offset by a decline in other borrowings. Average interest bearing deposits increased $6.17 billion or
31.3% to $25.87 billion for 2024 compared to $19.70 billion for 2023 primarily due to an increase in the average balance of time
deposits.
2023 compared to 2022
Net interest income for 2023 increased 26.2% to $1.45 billion compared to $1.15 billion for 2022. The increase in our net
interest income for 2023 compared to 2022 was primarily due to an increase in average earning assets, which increased 17.8%, and an
increase in our net interest margin, which increased 34 bps to 5.16% for 2023 compared to 4.82% for 2022. The increase in net interest
margin was primarily due to a change in the mix of interest earning assets and interest bearing liabilities as well as a 227 bps increase
in the yields on our total earning assets partially offset by a 253 bps increase in the rate on our total interest bearing liabilities.
Yields on average earning assets were 7.61% for 2023 compared to 5.34% for 2022. The increase in the yields on average
earning assets for 2023 compared to 2022 was primarily driven by the increases in yields on loans, interest-earning deposits and
investment securities.
The yield on our interest earning deposits increased 371 bps to 5.00% for 2023 compared to 1.29% for 2022. The yield on our
aggregate investment securities portfolio for 2023 increased 77 bps to 2.65% compared to 1.88% for 2022.
The yield on our loan portfolio increased 224 bps to 8.45% for 2023 compared to 6.20% for 2022. At December 31, 2023,
approximately 81% of our funded balance of total loans were variable interest rate loans and generally repriced with movements in the
1-month term SOFR, WSJ Prime and other indexes.
The overall increase in rates on average interest bearing liabilities, which increased 253 bps to 3.28% for 2023 compared to
0.75% for 2022, was primarily due to increases in rates on interest bearing deposits, which increased 256 bps to 3.18% for 2023
compared to 0.62% for 2022. The increase in rates on our interest bearing deposits, the largest component of our interest bearing
liabilities, was primarily due to increases in the rates paid on time deposits and, to a lesser extent, savings and interest bearing
transaction deposits.
Our other borrowing sources include (i) other borrowings comprised primarily of FHLB advances, (ii) subordinated notes
and(iii) subordinated debentures. The rates on other borrowings increased 325 bps to 5.18% in 2023 compared to 1.93% for 2022
primarily due to increases in the federal funds rate that began in March 2022. Beginning July 1, 2023, the rates paid on our
subordinated debentures were tied to spreads over the 3-month term SOFR. Prior to July 1, 2023, the rates paid on our subordinated
debentures were tied to spreads over the 90-day LIBOR. The rates paid on our subordinated debentures increased 307 bps to 7.83% for
2023 compared to 4.76% for 2022 primarily due to increases in 90-day LIBOR and 3-month term SOFR, compared to 2022.
The increase in average earning assets for 2023 compared to 2022 was primarily due to increases in the average balance of loans,
partially offset by a decrease in the average balance of investment securities. Average loans increased $4.39 billion, or 22.9% to
42
$23.58 billion for 2023 compared to 2022 primarily due to growth in our various lending groups. Average investment securities
decreased $0.38 billion, or 10.1% to $3.35 billion for 2023 compared to 2022.
The increase in average interest bearing liabilities for 2023 compared to 2022 was primarily due to an increase in the average
balance of interest bearing deposits. Average interest bearing deposits increased $4.43 billion or 29.0% to $19.70 billion for 2023
compared to $15.27 billion for 2022 primarily due to an increase in the average balance of time deposits.
The following table sets forth certain information relating to our average balances of assets and liabilities and our net interest
income for the years indicated.
Average Consolidated Balance Sheets and Net Interest Analysis – FTE
Year Ended December 31,
2024
2023
2022
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
(Dollars in thousands)
ASSETS
Interest earning assets:
Interest earning deposits
$ 2,138,560
$ 110,223
5.15% $ 1,164,595
$ 58,241
5.00% $
940,116
$ 12,116
1.29%
Investment securities:
Taxable
1,846,639
34,736
1.88
2,299,254
39,429
1.71
2,950,929
41,526
1.41
Tax-exempt – FTE
1,195,851
58,312
4.88
1,049,642
49,313
4.70
774,038
28,675
3.70
Total loans – FTE
28,711,132
2,458,847
8.56
23,580,165
1,991,953
8.45
19,190,607
1,190,602
6.20
Total earning assets – FTE
33,892,182
2,662,118
7.85
28,093,656
2,138,936
7.61
23,855,690
1,272,919
5.34
Non-interest earning assets
2,723,606
2,550,276
2,472,672
Total assets
$ 36,615,788
$ 30,643,932
$ 26,328,362
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Savings and interest bearing
transaction
$ 9,247,175
$ 269,072
2.91% $ 9,152,060
$ 211,498
2.31% $ 9,588,372
$ 48,344
0.50%
Time deposits
16,622,440
815,783
4.91
10,543,800
415,552
3.94
5,680,395
46,229
0.81
Total interest bearing deposits
25,869,615
1,084,855
4.19
19,695,860
627,050
3.18
15,268,767
94,573
0.62
Other borrowings (1)
257,055
10,819
4.21
803,797
41,669
5.18
673,932
13,034
1.93
Subordinated notes
348,170
10,439
3.00
347,356
10,439
3.01
346,538
10,439
3.01
Subordinated debentures
121,630
9,740
8.01
121,648
9,530
7.83
121,310
5,780
4.76
Total interest bearing liabilities
26,596,470
1,115,853
4.20
20,968,661
688,688
3.28
16,410,547
123,826
0.75
Non-interest bearing liabilities:
Non-interest bearing deposits
3,917,887
4,315,200
4,873,842
Other non-interest bearing liabilities
674,873
502,732
378,471
Total liabilities
31,189,230
25,786,593
21,662,860
Total stockholders’ equity before
noncontrolling interest
5,425,658
4,855,976
4,662,467
Noncontrolling interest
900
1,363
3,035
Total liabilities and stockholders’
equity
$ 36,615,788
$ 30,643,932
$ 26,328,362
Net interest income – FTE
$ 1,546,265
$ 1,450,248
$ 1,149,093
Net interest margin – FTE
4.56%
5.16%
4.82%
(1) The interest expense and the rates paid related to “other borrowings” include capitalized interest which totaled $2.3 million for 2024.
Excluding capitalized interest from the “other borrowings” expense calculation for 2024 would result in an “other borrowings” rate of
5.12%. Capitalized interest was not material for 2023 and 2022.
43
Average balances in the previous table are derived from daily average balances for such assets and liabilities. The yields and
rates are derived by dividing interest income or interest expense by the average balance of the related assets or liabilities, respectively.
The average balances of investment securities are computed based on amortized cost adjusted for unrealized gains and losses on
investment securities. The yields on investment securities include amortization of premiums and accretion of discounts. The average
balance of loans includes loans on which we have discontinued accruing interest. The yields on loans include late fees, any
prepayment penalties, yield maintenance or minimum interest provisions on loan repayments and amortization or accretion of certain
deferred fees, origination costs, and dealer fees. Interest expense and rates on our other borrowing sources, our subordinated
debentures and our subordinated notes are presented net of interest capitalized, if any, on construction projects and include the
amortization of debt issuance costs, if any. The interest expense on the subordinated debentures assumed through an acquisition
includes the amortization of any purchase accounting adjustments.
The following table reflects how changes in the volume of interest earning assets and interest bearing liabilities and changes in
interest rates have affected our interest income – FTE, interest expense and net interest income – FTE for the years indicated.
Information is provided in each category with respect to changes attributable to (1) changes in volume (changes in volume multiplied
by prior yield/rate); (2) changes in yield/rate (changes in yield/rate multiplied by prior volume); and (3) changes in both yield/rate and
volume (changes in yield/rate multiplied by changes in volume). The changes attributable to the combined impact of yield/rate and
volume have all been allocated to the changes due to volume.
Analysis of Changes in Net Interest Income – FTE
2024 Over 2023
2023 over 2022
Volume
Yield/Rate
Net Change
Volume
Yield/Rate
Net Change
(Dollars in thousands)
Increase (decrease) in:
Interest income – FTE:
Interest earning deposits
$ 50,198 $
1,784 $ 51,982 $ 11,226 $ 34,899 $ 46,125
Investment securities:
Taxable
(8,515)
3,822
(4,693) (11,175)
9,078
(2,097)
Tax-exempt – FTE
7,129
1,870
8,999
12,948
7,690
20,638
Loans – FTE
439,421
27,473 466,894 373,081 428,270 801,351
Total interest income – FTE
488,233
34,949 523,182 386,080 479,937 866,017
Interest expense:
Savings and interest bearing transaction
2,767
54,807
57,574 (10,084) 173,238 163,154
Time deposits
298,324 101,907 400,231 191,677 177,646 369,323
Other borrowings
(23,012)
(7,838) (30,850)
6,706
21,929
28,635
Subordinated notes
24
(24)
—
25
(25)
—
Subordinated debentures
(2)
212
210
26
3,724
3,750
Total interest expense
278,101 149,064 427,165 188,350 376,512 564,862
Increase (decrease) in net interest income – FTE
$ 210,132 $ (114,115) $ 96,017 $ 197,730 $ 103,425 $ 301,155
Non-Interest Income
Our non-interest income consists primarily of, among others, deposit-related fees, loan-related fees, BOLI income, trust income
and net gains on sales of investment securities and on sales of other assets.
2024 compared to 2023
Non-interest income for 2024 increased 1.5% to $124.4 million compared to $122.5 million for 2023.
Deposit-related fees, the largest component of non-interest income, decreased 5.9% to $43.3 million in 2024 compared to $46.1
million in 2023. Consistent with the industry trend, the Bank eliminated non-sufficient funds (“NSF”) fees effective January 1, 2024,
which totaled approximately $4.2 million in 2023.
Loan-related fees, which includes fees that are not considered yield adjustments, increased 48.8% to $28.1 million in 2024
compared to $18.9 million in 2023. The increase in loan-related fees for 2024 was primarily due to the increase in unused line fees,
letter of credit fees, the increase in our loan portfolio, and our continued focus on generating loan-related fee income.
44
BOLI income from the increase in cash surrender value increased 9.6% to $22.7 million in 2024 compared to $20.7 million in
2023. BOLI income from death benefits was $1.3 million in 2024 compared to $3.0 million in 2023. BOLI income in the form of
increases in cash surrender value and death benefits helps to offset a portion of employee benefit costs.
Trust income increased 12.2% to $9.6 million in 2024 compared to $8.5 million in 2023.
Gains on sales of other assets were $3.4 million in 2024 compared to $9.0 million in 2023. Gains on sale of other assets may
vary significantly from period to period.
We had net gains on investment securities of $0.6 million in 2024 compared to $3.2 million in 2023. Gains or losses on sales of
investment securities may vary significantly from period to period.
2023 compared to 2022
Non-interest income for 2023 increased 7.0% to $122.5 million compared to $114.5 million for 2022.
Deposit-related fees, which includes both NSF and overdraft fees and all other service charges, is the largest component of our
non-interest income and increased 0.5% to $46.1 million in 2023 compared to $45.8 million in 2022. This increase was primarily due
to an increase in customer activity and transaction volumes, partially offset by the elimination of certain fees charged on deposit
accounts. Included within service charges on deposit accounts are NSF fees that totaled approximately $4.2 million and $4.3 million
for 2023 and 2022, respectively.
Trust income increased 6.7% to $8.5 million in 2023 compared to $8.0 million in 2022.
BOLI income from the increase in cash surrender value increased 6.0% to $20.7 million in 2023 compared to $19.5 million in
2022. BOLI income from death benefits was $3.0 million in 2023 compared to $0.8 million in 2022. BOLI income in the form of
increases in cash surrender value and death benefits helps to offset a portion of employee benefit costs.
Loan-related fees, which includes fees that are not considered yield adjustments, increased 36.9% to $18.9 million in 2023
compared to $13.8 million in 2022. Income from these items may vary significantly from period to period.
We had net gains on investment securities of $3.2 million in 2023 compared to $2.0 million in 2022.
Gains on sales of other assets were $9.0 million in 2023 compared to $11.5 million in 2022. Gains on sale of other assets may
vary significantly from period to period.
45
The following table presents non-interest income for the years indicated.
Non-Interest Income
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Deposit-related fees:
NSF fees
$
— $
4,228 $
4,337
Overdraft fees
13,842
13,831
13,387
All other service charges
29,495
27,995
28,102
Loan-related fees
28,144
18,920
13,819
BOLI income:
Increase in cash surrender value
22,677
20,696
19,532
Death benefits
1,344
2,966
807
Trust income
9,567
8,524
7,990
Gains on sales of other assets
3,417
9,029
11,467
Net gains (losses) on investment securities
560
3,243
2,019
Other
15,367
13,117
13,043
Total non-interest income
$
124,413 $
122,549 $
114,503
Non-Interest Expense
Our non-interest expense consists of salaries and employee benefits, net occupancy and equipment and other operating expenses.
2024 compared to 2023
Non-interest expense increased 4.1% to $551.3 million in 2024 compared to $529.6 million in 2023.
Salaries and employee benefits, the largest component of non-interest expense, increased 14.4% to $296.0 million in 2024
compared to $258.8 million in 2023 and was the primary reason for the increase in total non-interest expense. The increase in salaries
and benefits expense was due to competitive labor market conditions and our expanding staff which increased by 284 FTEs to 3,028
FTEs at December 31, 2024. We expect further growth in headcount to support our anticipated growth in deposits, loans and other
aspects of our business, including the continued expansion of our CIB team, an increased focus on consumer and small business
lending, our recently launched secondary market mortgage lending business and staff to support our planned new branches.
Net occupancy and equipment expense decreased 1.3% to $71.7 million in 2024 compared to $72.6 million in 2023. In 2025, we
expect to increase our current branch count of 232 by approximately 10% primarily in the states in which we currently have branches.
We expect this will result in an increase in our net occupancy and equipment expense in future periods.
Other operating expenses decreased 7.3% to $183.6 million in 2024 compared to $198.1 million in 2023. The decrease in other
operating expense in 2024 compared to 2023 was primarily due to the impact of the change in accounting method described in the
paragraph below and the smaller FDIC special assessment in 2024 compared to 2023, offset by increases in software and data
processing, professional and outside services and advertising and public relations expenses.
Effective January 1, 2024, we made an election to account for our tax credit investments using the proportional amortization
method under Accounting Standards Update 2023-02 (“ASU 2023-02”), Investments-Equity Method and Joint Ventures (Topic 323):
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. We adopted this new standard on a
modified retrospective basis for all of our tax credit investments. Prior to the adoption of this standard, we accounted for the
amortization of our tax credit investments in non-interest expenses and the impact of the associated income tax credits were accounted
for as a component of income tax expense. Under the newly-adopted proportional amortization method, both the amortization and
income tax benefits received are included as components of income tax expense. As seen in our results for the year, this change in
accounting method resulted in a reduction of non-interest expenses and an increase in income tax expense compared to our previous
method.
Our efficiency ratio (non-interest expense divided by the sum of net interest income–FTE and non-interest income) was 33.0%
for 2024 compared to 33.7% for 2023.
46
2023 compared to 2022
Non-interest expense increased 17.2% to $529.6 million in 2023 compared to $451.7 million in 2022.
Salaries and employee benefits, our largest component of non-interest expense, increased 14.3% to $258.8 million in 2023
compared to $226.4 million in 2022 and represented the most significant contribution to increased non-interest expense. Our
escalation in salaries and benefits expense was driven by competitive labor market conditions and our expanding staff.
Net occupancy and equipment expense increased 3.6% to $72.6 million in 2023 compared to $70.1 million in 2022.
Other operating expenses increased 27.6% to $198.1 million in 2023 compared to $155.3 million in 2022. The increase in other
operating expense in 2023 compared to 2022 was primarily due to increases in our deposit insurance and assessments, which included
the FDIC special assessment of $9.9 million, increases in our advertising and public relations expenses and amortization of CRA and
tax credit investments.
Our efficiency ratio (non-interest expense divided by the sum of net interest income–FTE and non-interest income) was 33.7%
for 2023 compared to 35.8% for 2022.
The following table presents non-interest expense for the years indicated.
Non-Interest Expense
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Salaries and employee benefits
$
296,016 $
258,846 $
226,373
Net occupancy and equipment
71,676
72,591
70,058
Other operating expenses:
Software and data processing
46,980
39,212
35,373
Deposit insurance and assessments
25,584
30,351
9,610
Professional and outside services
24,872
21,423
21,581
Advertising and public relations
20,576
16,150
8,797
Amortization of CRA and tax credit investments(1)
—
27,768
20,293
Other
65,589
63,220
59,636
Total non-interest expense
$
551,293 $
529,561 $
451,721
(1) Effective January 1, 2024, the Bank adopted ASU 2023-02, Investments Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit
Structures Using the Proportional Amortization Method, which resulted in the amortization of the Bank's CRA and tax credit investments being included in income tax
expense instead of non-interest expense.
Pre-Tax Pre-Provision Net Revenue (“PPNR”)
PPNR is a measure of earnings before provision for credit losses and income tax expense. We use PPNR, which is a non-GAAP
financial measure, to measure our core earnings and trends thereof. The increase in PPNR in 2024 compared to 2023 and in 2023
compared to 2022 was primarily due to the increase in net interest income previously discussed in this MD&A. This non-GAAP
financial measure should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor is it
necessarily comparable to similar non-GAAP financial measures that may be presented by other companies.
47
The reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure is included in
the following table for the years indicated.
Calculation of Pre-Tax Pre-Provision Net Revenue
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Net income available to common stockholders
$
700,269 $
674,596 $
547,520
Preferred stock dividends
16,187
16,187
16,621
Earnings attributable to noncontrolling interest
47
56
(51)
Provision for income taxes
214,789
176,164
157,440
Provision for credit losses
175,552
165,470
83,494
Pre-tax pre-provision net revenue
$
1,106,844 $
1,032,473 $
805,024
Income Taxes
Our provision for income taxes was $214.8 million in 2024 compared to $176.2 million in 2023 and $157.4 million in 2022. Our
effective income tax rates were 23.1% for 2024, 20.3% for 2023 and 21.8% for 2022. The increase in our effective income tax rate for
2024 compared to 2023 was primarily due to the adoption of ASU 2023-02 effective January 1, 2024 as previously disclosed in the
MD&A under the caption “Non-Interest Expense.” The decrease in our effective income tax rate for 2023 compared to 2022 was
primarily due to increases in federal income tax credits and changes in non-taxable income and non-deductible expenses.
Accounting for our income taxes utilizes the criteria discussed in the Critical Accounting Estimates section of this MD&A. A
reconciliation between the statutory federal income tax rates and our effective income tax rates for 2024, 2023 and 2022 is included in
Note 13 to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual
Report on Form 10-K.
RISK ELEMENTS
Risk is inherent in substantially all of the Bank’s operations, and our business exposes us to strategic, credit, market (including
interest rate), liquidity, operational, reputational, compliance and regulatory (including BSA/AML) risks. We use an enterprise-wide
risk management framework to identify, measure, monitor, manage and report risks that affect or could affect the achievement of our
strategic, financial and other goals and objectives. Accordingly, risk management is an essential element in managing our operations
and is a key determinant of our overall performance. Our Board of Directors (the “Board”) is responsible for approving our overall
risk management framework, including our risk appetite for the aforementioned risk categories and risk tolerances for each of our key
risks. The Board Risk Committee (“BRC”), which is a board-level committee, has been assigned oversight responsibility for our risk
management processes. The BRC meets at least quarterly to monitor and review our various enterprise risk management policies and
activities, review and approve our overall risk posture, and perform such other actions as detailed in its charter document. The BRC
has appointed the Executive Risk Council (“ERC”), which is comprised of senior executives of the Bank and is chaired by our Chief
Risk Officer (“CRO”), to assist BRC in the oversight of our enterprise risk management activities. The ERC, pursuant to its charter,
has responsibility for reviewing and approving detailed risk management processes and procedures, monitoring the Bank’s risk profile
through each of our key performance and key risk indicators against our Board-approved risk thresholds and overall risk appetite,
assessing current and emerging risks, monitoring our risk culture, overseeing compliance with regulatory expectations and
requirements, and various other risk management functions and activities.
Our most significant risk exposure has traditionally been, and continues to be, credit risk from the extension of credit to our
customers. In addition to credit risk, we are also exposed to risk from various other areas including liquidity risk, market and interest
rate risks, strategic risk, compliance risk (including regulatory and BSA/AML risk), reputational risk and operational risk (including,
among others, information technology risk, business resilience risk, model and data risk, third party vendor risk, fraud risk, legal risk
and cybersecurity risk). Our BRC and/or our ERC review the framework, policies, procedures and processes employed by us to
manage and monitor each of these risks, including strategies for reducing such risks to appropriate levels consistent with Board-
approved risk appetite. Additionally, we use various other committees and management councils to monitor these risk categories.
Clearly defined roles and responsibilities are critical to the effective management of risk. We utilize the three lines of defense
concept to clearly designate risk management activities throughout the Bank.
48
•
First line of defense activities provide for the identification, acceptance and ownership of risks. These defense activities are
typically executed by various lines of business personnel and owners.
•
Second line of defense activities provide for objective oversight of our risk-taking activities and assessment of our aggregate
risk levels. These defense activities are executed under the leadership and guidance of our Corporate Risk Management
Group (“CRMG”) and our CRO, who reports directly to our BRC.
•
Third line of defense activities provide for independent reviews and assessments of first and second line of defense processes
across the Bank, including those activities of our CRMG. These defense activities are executed by our Internal Audit
department, which is led by our Chief Audit Executive, who reports directly to our Audit Committee.
While these various risk management activities help us to identify, measure, monitor, manage and report risks, such activities are
not intended to, nor can they, eliminate all risk. Additionally, there is no assurance that such activities will identify or have identified
all risks to which we are or might be exposed.
Credit Risk Management
Overview. Credit risk is defined as the risk that arises from the potential that a borrower or counterparty will fail to perform its
financial or contractual obligations. Credit risk arises primarily from our lending activities, including our unfunded loan commitments
comprised primarily of the unfunded balance of construction loans that have closed but have not yet funded. The Board is responsible
for approving overall credit policies relating to the management of credit risk and the Bank’s overall credit risk appetite, along with
overseeing and monitoring credit risk. Our lending policies also contain various measures to limit concentration exposures, including
customer and commercial real estate (“CRE”) exposures for both funded balances and total commitment balances, as well as by
property type and geography.
Our Loan Committee (“LC”) has primary responsibility for monitoring our credit approval process. The LC consists of our
Chairman & Chief Executive Officer (“CEO”), President, Chief Credit Officer (“CCO”) and Chief Lending Officer (“CLO”). Loans
and aggregate loan relationships exceeding $20 million up to the limits established by our Board must be approved by the LC. The
Portfolio Oversight Committee (“POC”) oversees the performance and overall quality of our loan portfolio. The POC is comprised of
three directors and is chaired by our CEO. At least quarterly, our Board and/or POC review various reports regarding our credit
management activities including, but not limited to, summary reports of past due loans, internally classified and criticized loans,
lending concentration reports, and various other loan and credit management reports.
Credit Management. The daily administration of our lending function is the responsibility of our LC. We maintain a tiered loan
limit authorization system that grants lending authority commensurate with the officer’s skill level and knowledge.
Oversight of credit risk is provided through loan policy and various other credit-related policies, clearly defined processes and
detailed procedures in conjunction with our credit risk appetite. These policies, processes and procedures place emphasis on strong
underwriting standards and detection of potential credit problems in order to develop and implement any necessary action plan(s) on a
timely basis to mitigate potential losses and are carried out by our lenders and lending support personnel, our credit administration
group, our underwriters and various other officers and personnel in the Bank that have credit management responsibilities.
Additionally, our policies, processes and procedures are subject to review by our Credit Risk Management (“CRM”) group (second
line oversight), our BRC and periodic audits by our Internal Audit group (third line oversight). Our Board approved credit risk appetite
is monitored at least on a quarterly basis through our credit risk profile which is further categorized into default risk (risk of loss
arising from a debtor being unlikely to pay its loan obligations in full) and concentration risk (risk associated with any single exposure
or group of exposures with the potential to produce large enough losses to threaten the Bank’s core operations).
Our CRM function is separate from our lending function and provides second line oversight. CRM is responsible for providing
an independent evaluation of credit risk in new lending products and for our loan portfolio. This responsibility includes detailed credit
reviews performed for the purpose of reviewing the adequacy of documentation, compliance with loan policy and other credit policies,
reviewing individual loan grading, evaluating asset quality, performing and reporting to ERC and BRC credit risk analytics (which
includes assessing the trend of credit risk metrics which inform our credit risk profile, assessing any trends or material transitions or
migrations of our internal risk ratings or credit grading of individual loan portfolios, and various other risk analytics), and reviewing
the effectiveness of credit administration, among other items. CRM prepares reports that document their credit risk oversight activities,
including identification of underwriting or other deficiencies in the loan approval or credit monitoring process, establishing
recommendations for improvement and outlining management’s proposed action plan(s) and timeline(s) for curing any identified
deficiencies, among other findings and recommendations. Internal oversight of the CRM function is provided by the Credit Risk
Management Council (“CRMC”), which is comprised of senior officers of the Bank and chaired by the Managing Director of CRM.
The reports provided by CRM are provided to and reviewed by CRMC. Additionally, key trends or significant issues identified in such
reports that might impact credit risk are reported to ERC, BRC and the Board.
49
As part of our underwriting and ongoing monitoring policies and processes for real estate loans, the Bank requires a valuation of
real estate collateral, which may include third-party appraisals, be performed at the time of origination and renewal in accordance with
regulatory requirements and the Bank’s loan policy and on an as-needed basis when market conditions justify. The Bank maintains an
Appraisal Services team within the CRM function, which is independent of the loan origination function. The Appraisal Services team
is responsible for ordering appraisals from qualified independent, external appraisers, and, reviewing and approving such appraisals to
ensure compliance with Bank policy, regulatory standards and the Uniform Standards of Professional Appraisal Practice.
Our Internal Audit group performs periodic audits of various lending and credit-related activities, including underwriting, closing
and funding procedures, credit and asset administration and CRM activities, among others. Internal Audit prepares reports
documenting such audits, including recommendations for improvement and management’s proposed action plan(s) and timeline(s) for
remediating such recommendations. These reports are provided to and reviewed by our Audit Committee.
Loan Portfolio. At December 31, 2024, our total loan portfolio was $29.97 billion, an increase of 13.3% from $26.46 billion at
December 31, 2023. At December 31, 2024, our total loan portfolio consisted of 74.3% real estate loans, 5.8% commercial and
industrial loans, 12.2% consumer loans and 7.7% other loans. Real estate loans, the largest category of loans, include loans secured by
real estate as evidenced by mortgages or other liens, including loans made to finance the development of real property construction
projects.
The amount and type of loans outstanding, as of the dates indicated, are reflected in the following table.
Loan Portfolio
December 31,
2024
2023
(Dollars in thousands)
Real estate:
Residential 1-4 family
$
1,323,435
4.4% $
961,338
3.6%
Non-farm/non-residential
7,842,692
26.2
5,309,239
20.1
Construction/land development
9,522,676
31.8
11,653,487
44.0
Agricultural
296,898
1.0
256,423
1.0
Multifamily residential
3,272,635
10.9
2,064,106
7.8
Total real estate
22,258,336
74.3
20,244,593
76.5
Commercial and industrial
1,728,801
5.8
1,269,610
4.8
Consumer
3,659,713
12.2
2,965,042
11.2
Other
2,322,017
7.7
1,979,830
7.5
Total loans
$
29,968,867
100.0% $
26,459,075
100.0%
Included in “other” loans at December 31, 2024 and 2023 are loans originated by our Real Estate Specialties Group (“RESG”)
with a funded balance totaling approximately $1.06 billion and $1.24 billion, respectively, that were made to non-depository financial
institutions and typically collateralized by an assignment of a promissory note and all related note documents including mortgages,
deeds of trust, or other documents (“debt-on-debt” loans). While such loans are considered “other” loans in accordance with FDIC
instructions for the Federal Financial Institutions Examination Council 041 Consolidated Reports of Condition and Income (“Call
Report”), we underwrite these lending transactions based on the fundamentals of the underlying collateral, repayment sources and
guarantors, among other factors, consistent with other similar lending transactions.
Our credit risk management strategies include efforts to avoid risk of undue concentrations of credit in a particular collateral
type, geography or with an individual customer. While we do have concentrations in CRE lending, our CRE loan portfolio is
diversified by geography and collateral type. Our Board has adopted and we adhere to various concentration limits on CRE lending,
including limits on CRE lending in particular collateral types and in various geographies and Metropolitan Statistical Areas (“MSAs”).
All of these limits are monitored and revised as necessary based on the results of our stress testing activities and other factors.
50
The amount of both the funded and unfunded balances of our top ten largest geographies and MSAs for real estate loans, as of
the dates indicated, are included in the following table.
Top Ten Geographies and MSAs for Real Estate Loans
Geography or MSA
Funded Balance
Unfunded Balance
Total Commitment
(Dollars in thousands)
December 31, 2024:
Miami–Fort Lauderdale–West Palm Beach, FL MSA
$
1,575,417 $
2,425,355 $
4,000,772
New York–Newark–Jersey City, NY–NJ–PA MSA
2,162,659
1,086,146
3,248,805
Atlanta–Sandy Springs–Roswell, GA MSA
1,624,524
454,878
2,079,402
San Diego–Chula Vista–Carlsbad, CA MSA
1,072,692
866,616
1,939,308
Dallas–Fort Worth–Arlington, TX MSA
1,199,316
449,938
1,649,254
Los Angeles–Long Beach–Anaheim, CA MSA
1,205,645
223,764
1,429,409
San Francisco–Oakland–Fremont, CA MSA
818,408
526,216
1,344,624
Tampa–St. Petersburg–Clearwater, FL MSA
752,493
530,880
1,283,373
Boston–Cambridge–Newton, MA MSA
642,218
598,449
1,240,667
Phoenix–Mesa–Chandler, AZ MSA
544,496
634,261
1,178,757
All other geographies
10,660,468
6,508,590
17,169,058
Total real estate loans
$
22,258,336 $
14,305,093 $
36,563,429
December 31, 2023:
New York–Newark–Jersey City, NY–NJ–PA MSA
$
2,422,053 $
1,801,635 $
4,223,688
Miami–Fort Lauderdale–Pompano Beach, FL MSA
1,511,970
2,009,347
3,521,317
San Diego–Chula Vista–Carlsbad, CA MSA
862,634
1,133,910
1,996,544
Atlanta–Sandy Springs–Alpharetta, GA MSA
1,271,596
669,262
1,940,858
Los Angeles–Long Beach–Anaheim, CA MSA
1,426,251
418,205
1,844,456
Dallas–Fort Worth–Arlington, TX MSA
1,060,705
717,813
1,778,518
San Francisco–Oakland–Berkeley, CA MSA
780,616
760,914
1,541,530
Chicago–Naperville–Elgin, IL–IN–WI MSA
1,010,023
485,375
1,495,398
Phoenix–Mesa–Chandler, AZ MSA
341,898
1,014,478
1,356,376
Washington–Arlington–Alexandria, DC–VA–MD–WV MSA
563,014
706,173
1,269,187
All other geographies
8,993,833
7,482,624
16,476,457
Total real estate loans
$
20,244,593 $
17,199,736 $
37,444,329
“Debt-on-debt” loans are reported as “other” loans in accordance with Call Report instructions and are excluded from the above
table.
In addition to the top ten geographies and MSAs shown above, as of December 31, 2024, we had 92 additional geographies and
MSAs that contain total committed balances (both funded and unfunded) of $10 million or more, compared to 81 additional
geographies and MSAs at December 31, 2023.
Given that we have substantial balances of certain categories of CRE lending (i.e., non-farm/non-residential and construction/
land development lending), we have provided further detail on these two categories of loans.
51
The funded amount and type of total non-farm/non-residential loans, as of the dates indicated, and their respective percentage of
the total non-farm/non-residential loan portfolio are reflected in the following table.
Total Non-Farm/Non-Residential Loans
December 31,
2024
2023
Amount
%
Amount
%
(Dollars in thousands)
Office, including medical offices
$
3,395,263
43.3% $
2,215,736
41.7%
Industrial and warehouse facilities
1,800,075
23.0
691,124
13.0
Life science
996,519
12.7
164,326
3.1
Hotels
603,760
7.7
894,055
16.8
Retail, including shopping centers and strip centers
234,803
3.0
313,794
5.9
Churches and schools
212,015
2.7
220,907
4.2
Mini storage
118,918
1.5
124,576
2.3
Restaurants and bars
107,128
1.4
115,458
2.2
Gasoline stations and convenience stores
100,510
1.3
90,226
1.7
Mixed use properties
40,537
0.5
223,809
4.2
Other non-farm/non-residential
233,164
2.9
255,228
4.9
Total
$
7,842,692
100.0% $
5,309,239
100.0%
The funded amount and type of total construction/land development loans, as of the dates indicated, and their respective
percentage of the total construction/land development loan portfolio are reflected in the following table.
Total Construction/Land Development Loans
December 31,
2024
2023
Amount
%
Amount
%
(Dollars in thousands)
Unimproved land
$
654,562
6.9% $
814,301
7.0%
Land development and lots:
1-4 family residential and multifamily
617,797
6.5
573,696
4.9
Non-residential
325,400
3.4
381,906
3.3
Construction:
1-4 family residential:
Owner occupied
5,997
0.1
7,397
0.1
Non-owner occupied
1,439,838
15.1
1,713,754
14.7
Multifamily
2,566,417
27.0
3,040,681
26.1
Industrial, commercial and other:
Mixed use properties
1,423,301
14.9
1,946,036
16.7
Industrial and warehouse facilities
979,423
10.3
976,884
8.4
Life science
851,104
8.9
1,093,159
9.4
Office, including medical offices
480,798
5.0
852,966
7.3
Other
178,039
1.9
252,707
2.1
Total
$
9,522,676
100.0% $ 11,653,487
100.0%
Many of our construction and development loans provide for the use of interest reserves. When we underwrite construction and
development loans, we consider the expected total project costs, including hard costs such as land, site work and construction costs
and soft costs such as architectural and engineering fees, closing costs, leasing commissions and construction period interest, among
others. For any construction and development loan with interest reserves, we also consider the construction period interest in our
underwriting process (otherwise, our underwriting of such loans with and without interest reserves is virtually identical). Based on the
total project costs and other factors, we determine the required borrower cash equity contribution and the maximum amount we are
willing to lend. In the majority of cases, we require that all of the borrower’s equity and all other required subordinated elements of the
capital structure be fully funded prior to any significant loan advance. As a result of this practice, the borrower’s cash equity typically
52
goes toward the purchase of the land and early stage hard costs and soft costs. This results in our funding the loan later as the project
progresses, and accordingly, we typically fund the majority of the construction period interest through loan advances.
Generally, capital sources other than our loans, total an amount sufficient to cover all soft costs, including construction period
interest and portion of the hard costs. While we advance interest reserves as part of the funding process, this has been considered in
determining the borrower’s initial equity contribution. During the years ended December 31, 2024, 2023 and 2022 there were no
situations where interest reserves were advanced outside of the terms of the contractual loan agreement to avoid such loan from
becoming nonperforming.
During the years ended December 31, 2024, 2023 and 2022, we recognized approximately $504 million, $411 million and $340
million, respectively, of interest income on construction and development loans from the advance of interest reserves. We advanced
construction period interest on construction and development loans totaling approximately $524 million, $391 million and $332
million, respectively, during the years ended December 31, 2024, 2023 and 2022.
The maximum committed balance of all construction and development loans which provide for the use of interest reserves at
December 31, 2024 was approximately $19.8 billion, of which $8.6 billion was outstanding at December 31, 2024 and $11.2 billion
remained to be advanced. The weighted-average loan-to-cost (“LTC”) on such loans, assuming such loans are ultimately fully
advanced, was approximately 50%, which means that the weighted-average cash equity contributed on such loans, assuming such
loans are ultimately fully advanced, was approximately 50%. The weighted-average LTV ratio on such loans, based on the most recent
appraisals and assuming such loans are ultimately fully advanced, was approximately 43%.
Nonperforming Assets
Nonperforming Assets. Our nonperforming assets consist of (1) nonaccrual loans, (2) accruing loans 90 days or more past due
and (3) real estate or other assets that have been acquired in partial or full satisfaction of loan obligations or upon foreclosure or
former branches which are no longer being utilized for banking purposes.
The accrual of interest on loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments
as they become due. We generally place a loan on nonaccrual status when such loan is (i) deemed nonperforming or (ii) 90 days or
more past due, or earlier when doubt exists as to the ultimate collection of payments. We may continue to accrue interest on certain
loans contractually past due 90 days or more if such loans are both well secured and in the process of collection. At the time a loan is
placed on nonaccrual status, interest previously accrued but uncollected is reversed and charged against interest income. Nonaccrual
loans are generally returned to accrual status when payments are no longer past due, the loan has performed in accordance with its
contractual terms for a reasonable period of time (generally at least six months) and is expected to continue to perform in accordance
with its contractual terms. If a loan is determined to be uncollectible, the portion of the principal determined to be uncollectible is
charged against the ACL.
The following table presents information concerning nonperforming assets as of the dates indicated.
Nonperforming Assets
December 31,
2024
2023
(Dollars in thousands)
Nonaccrual loans
$
131,494
$
66,677
Accruing loans 90 days or more past due
—
—
Total nonperforming loans
131,494
66,677
Foreclosed assets
69,381
61,720
Total nonperforming assets
$
200,875
$
128,397
Nonaccrual loans to total loans
0.44%
0.25%
Nonperforming assets to total assets
0.53%
0.38%
ALL to nonaccrual loans (1)
354%
509%
ACL to nonaccrual loans
471%
752%
(1) Excludes reserve for losses on unfunded loan commitments.
53
For loans that are individually evaluated and for which we utilize the loan’s collateral in determining the ACL, we seek to
establish an appropriate value for the collateral. This assessment may include (i) obtaining an updated appraisal, (ii) obtaining one or
more broker price opinions or comprehensive market analyses, (iii) internal evaluations or (iv) other methods deemed appropriate
considering the size and complexity of the loan and the underlying collateral. On an ongoing basis, we evaluate the underlying
collateral on all individually evaluated collateral dependent nonperforming loans and, if needed, due to changes in market or property
conditions, the underlying collateral is reassessed and the estimated fair value is revised. The determination of collateral value includes
any adjustments considered necessary related to estimated holding period and estimated selling costs.
The following table presents information concerning the geographic location of nonperforming assets at December 31, 2024.
Nonperforming loans are reported in the physical location of the principal collateral. Foreclosed assets are reported in the physical
location of the asset. Repossessions are reported at the physical location where the borrower resided or had its principal place of
business at the time of repossession.
Geographic Distribution of Nonperforming Assets
Total
Nonperforming
Loans
Foreclosed Assets
and Repossessions
Total
Nonperforming
Assets
(Dollars in thousands)
Illinois
$
88,545 $
— $
88,545
California
1,302
60,010
61,312
Arkansas
13,917
—
13,917
Georgia
9,338
39
9,377
Washington
74
7,840
7,914
Texas
6,945
135
7,080
Florida
4,153
834
4,987
North Carolina
2,581
46
2,627
All other
4,639
477
5,116
Total
$
131,494 $
69,381 $
200,875
Allowance for Credit Losses
Our provision for credit losses for 2024 was $175.6 million, including $183.6 million related to our allowance for loan losses
(“ALL”) for funded loans and a negative $8.0 million related to our reserve for losses on unfunded loan commitments. Our total
provision for credit losses for 2023 was $165.5 million, including $160.1 million related to our ALL for funded loans and $5.4 million
related to our reserve for losses on unfunded loan commitments. During 2024, our ALL on funded loans increased to $465.5 million,
or 1.55% of total loans, and our reserve for losses on unfunded loan commitments decreased to $153.8 million, or 0.81% of unfunded
loan commitments, bringing our total ACL to $619.4 million at December 31, 2024. At December 31, 2023, our ALL for funded loans
was $339.4 million, or 1.28% of total loans, and our reserve on unfunded loan commitments was $161.8 million, or 0.79% of
unfunded loan commitments, bringing our total ACL to $501.2 million at December 31, 2023.
The calculations of our provision for credit losses during 2024 and our total ACL at December 31, 2024 were based on a number
of key estimates, assumptions and economic forecasts. The Bank utilized recent economic forecasts provided by Moody’s, including
their updates released in December 2024. In selecting the weightings for the various economic scenarios for purposes of determining
the ACL at December 31, 2024, our combined weightings assigned to Moody’s S4 (Alternative Adverse Downside) and S6
(Stagflation) scenarios exceeded that of the Moody’s Baseline scenario. Our selection and weightings of these scenarios reflected our
assessment of conditions in the U.S. economy, and acknowledged the uncertainty regarding future U.S. economic conditions,
including risks from: U.S. fiscal policy actions; impacts of potential changes in U.S. tax, tariff and immigration laws, regulations and
policies; changes in the federal funds target rate; quantitative tightening; a possible recession; inflationary pressures; the conflict in the
Middle East; the ongoing war in Ukraine; global trade and geopolitical matters; supply chain disruptions; labor disputes and strikes;
and various other factors. For purposes of the forecasts used in the calculation of our ACL, management utilized a reasonable and
supportable forecast period of two years, followed by a reversion, on a systematic basis, of estimated losses back to our historical
mean. Management also utilized certain qualitative adjustments to our ACL estimates to capture items not included in our modeled
results or other assumptions.
54
The following table is a summary of activity within our ACL for the periods indicated.
Allowance for Credit Losses
Allowance for Loan
Losses
Reserve for Losses on
Unfunded Loan
Commitments
Total Allowance for
Credit Losses
(Dollars in thousands)
Year Ended December 31, 2024:
Balances – December 31, 2023
$
339,394 $
161,834 $
501,228
Net charge-offs
(57,420)
—
(57,420)
Provision for credit losses
183,573
(8,021)
175,552
Balances – December 31, 2024
$
465,547 $
153,813 $
619,360
Year Ended December 31, 2023:
Balances – December 31, 2022
$
208,858 $
156,419 $
365,277
Net charge-offs
(29,519)
—
(29,519)
Provision for credit losses
160,055
5,415
165,470
Balances – December 31, 2023
$
339,394 $
161,834 $
501,228
Year Ended December 31, 2022:
Balances – December 31, 2021
$
217,380 $
71,609 $
288,989
Net charge-offs
(7,206)
—
(7,206)
Provision for credit losses
(1,316)
84,810
83,494
Balances – December 31, 2022
$
208,858 $
156,419 $
365,277
The amount of and provision to the ACL is based on our analysis of the adequacy of the ACL utilizing the criteria discussed in
the Critical Accounting Estimates section of this MD&A.
55
Additional information regarding net charge-offs (recoveries) for the years indicated is presented in the table below.
Net Charge-Offs
(Recoveries)
Net Charge-Off
(Recovery) Ratio
(Dollars in thousands)
December 31, 2024:
Real estate:
Residential 1-4 family
$
534
0.05%
Non-farm/non-residential
4,099
0.06
Construction/land development
38,419
0.36
Agricultural
(28)
(0.01)
Multifamily residential
—
0.01
Commercial and industrial
112
0.01
Consumer
10,998
0.33
Other
3,286
0.15
Total
$
57,420
0.20%
December 31, 2023:
Real estate:
Residential 1-4 family
$
(911)
(0.09) %
Non-farm/non-residential
20,316
0.38
Construction/land development
(234)
(0.01)
Agricultural
—
—
Multifamily residential
4
0.01
Commercial and industrial
(635)
(0.05)
Consumer
7,593
0.26
Other
3,386
0.17
Total
$
29,519
0.13%
December 31, 2022:
Real estate:
Residential 1-4 family
$
(593)
(0.06) %
Non-farm/non-residential
452
0.01
Construction/land development
(122)
(0.01)
Agricultural
22
0.01
Multifamily residential
(89)
(0.01)
Commercial and industrial
730
0.08
Consumer
3,632
0.15
Other
3,174
0.17
Total
$
7,206
0.04%
The following is a summary of our net charge-off and various ALL and ACL ratios as of and for the years indicated.
Net Charge-Off, and ACL/ALL Ratios
For the Year Ended December 31,
2024
2023
2022
Net charge-offs to average total loans
0.20%
0.13%
0.04%
ALL to total loans (1)
1.55
1.28
1.01
Reserve for losses on unfunded loan commitments
0.81
0.79
0.74
ACL to total loans
2.07
1.89
1.76
ACL to total loans and unfunded loan commitments
1.26
1.07
0.87
(1) Excludes reserve for losses on unfunded loan commitments.
56
The following table sets forth the sum of the amounts of the ALL and the percentage of loans to total loans as of the dates
indicated. The amounts shown in the following table are not necessarily indicative of the actual future losses that may occur within
particular categories or in the aggregate.
Allocation of the ALL
December 31,
2024
2023
ALL
% of ALL
to Loans
Total Loans
% of Loans
to Total
Loans
ALL
% of ALL
to Loans
Total Loans
% of Loans
to Total
Loans
(Dollars in thousands)
ALL for loans:
Real estate:
Residential 1-4 family
$ 31,107
2.35% $ 1,323,435
4.4% $ 23,151
2.40% $ 961,338
3.6%
Non-farm/non-residential
124,339
1.59
7,842,692
26.2
44,250
0.80
5,309,239
20.1
Construction/land development 85,183
0.89
9,522,676
31.8
127,320
1.10
11,653,487
44.0
Agricultural
6,860
2.31
296,898
1.0
4,732
1.80
256,423
1.0
Multifamily residential
58,262
1.78
3,272,635
10.9
15,469
0.70
2,064,106
7.8
Commercial and industrial
7,157
0.41
1,728,801
5.8
7,626
0.60
1,269,610
4.8
Consumer
119,551
3.27
3,659,713
12.2
98,974
3.30
2,965,042
11.2
Other
33,088
1.42
2,322,017
7.7
17,872
0.90
1,979,830
7.5
Total ALL
$ 465,547
1.55% $ 29,968,867
100.0% $ 339,394
1.28% $ 26,459,075
100.0%
The following table sets forth the sum of the amounts of the ACL as of the dates indicated. The amounts shown in this table are
not necessarily indicative of the actual future losses that may occur within particular categories or in the aggregate.
Allocation of ACL
ALL
Reserve for Losses on
Unfunded Loan
Commitments
Total ACL
(Dollars in thousands)
December 31, 2024:
Real estate:
Residential 1-4 family
$
31,107 $
7,553 $
38,660
Non-farm/non-residential
124,339
20,244
144,583
Construction/land development
85,183
54,300
139,483
Agricultural
6,860
19
6,879
Multifamily residential
58,262
4,681
62,943
Commercial and industrial
7,157
43,039
50,196
Consumer
119,551
147
119,698
Other
33,088
23,830
56,918
Total
$
465,547 $
153,813 $
619,360
December 31, 2023:
Real estate:
Residential 1-4 family
$
23,151 $
5,252 $
28,403
Non-farm/non-residential
44,250
3,605
47,855
Construction/land development
127,320
108,525
235,845
Agricultural
4,732
66
4,798
Multifamily residential
15,469
1,021
16,490
Commercial and industrial
7,626
16,680
24,306
Consumer
98,974
134
99,108
Other
17,872
26,551
44,423
Total
$
339,394 $
161,834 $
501,228
57
Liquidity Risk Management
Overview. Liquidity risk is the potential that we will be unable to meet our obligations as they come due because of an inability
to obtain adequate funding or liquidate assets (referred to as “funding liquidity risk”) or that we cannot easily unwind or offset specific
exposures without significantly lowering market prices because of inadequate market depth or market disruptions (referred to as
“market liquidity risk”). Our Board-approved liquidity risk appetite, which is monitored through our liquidity risk profile, is further
categorized into the following risks: liquid asset management risk (risk of acute funding stress related to insufficient levels of liquid
assets), funding diversity and stability risk (risk of loss of a single large funding source that may lead to an inability to fund our
business strategy and require us to sell assets or curtail growth) and funding capacity/contingency planning risk (risk of unanticipated
growth from lending businesses or unexpected customer activity may lead to unexpected increases in demands on liquidity). Our
Assets and Liability Committee (“ALCO”) has primary responsibility for oversight of, among other responsibilities, our liquidity,
funds management, asset/liability (interest rate risk) position, capital and our investment portfolio functions.
The objective of managing liquidity risk is to ensure the cash flow requirements resulting from depositor, borrower (including
our ability to fund our significant balance of closed but unfunded loans) and other creditor demands are met, as well as our operating
cash needs, and the cost of funding such requirements and needs is reasonable. We maintain a liquidity and funds management policy,
including a contingency funding plan that, among other things, includes policies and procedures for managing and monitoring
liquidity risk. On a quarterly basis, we perform a comprehensive liquidity stress test. This stress test is intended to identify and
quantify sources of potential liquidity strain and vulnerabilities related to liquidity and to analyze possible impacts on the Bank for a
variety of institution-specific and market-wide events across multiple time horizons. Also, pursuant to our liquidity and funds
management policy, we maintain a buffer of highly liquid assets to protect against cash outflows in the event of a liquidity crisis.
Liquidity Management. Generally, we rely on deposits, repayments of loans, and cash flows from our investment securities as
our primary sources of funds. Our principal deposit sources include consumer and commercial customers in our markets. We have
used these funds, together with public funds customers, brokered deposits, FHLB advances, federal funds purchased and other sources
of short-term borrowings to make loans, acquire investment securities and other assets and to fund continuing operations.
Deposits. In recent years, we have worked to improve the mix and quality of our deposit base by focusing significant efforts on
growing our core relationships. Like many in the industry, we have seen a shift in the mix of deposits away from non-interest bearing
and lower cost deposits to more time deposits as many customers have been taking advantage of time deposit rates. Most of our
deposits are generated through our network of 232 retail branches in Arkansas, Georgia, Florida, North Carolina, Texas and Tennessee
and are primarily used to fund our growth in loans. Our total deposits increased $3.63 billion, or 13.3%, to $31.04 billion at December
31, 2024 compared to $27.41 billion at December 31, 2023. Our loan-to-deposit ratio was 96.5% at December 31, 2024 and 2023.
The amount of deposits by account type as of the dates indicated and their respective percentage of total deposits are reflected in
the following table.
Deposits – By Account Type
December 31,
2024
2023
(Dollars in thousands)
Non-interest bearing
$ 3,769,543
12.1% $ 4,095,874
14.9%
Interest bearing:
Transaction (NOW)
4,955,895
16.0
4,486,372
16.4
Savings and money market
4,998,828
16.1
4,587,924
16.7
Time deposits
17,318,806
55.8
14,234,973
52.0
Total deposits
$ 31,043,072
100.0% $ 27,405,143
100.0%
58
The amount of deposits by customer type, as of the dates indicated, and their respective percentage of total deposits are reflected
in the following table.
Deposits – By Customer Type
December 31,
2024
2023
(Dollars in thousands)
Non-interest bearing
$ 3,769,543
12.1% $ 4,095,874
14.9%
Interest bearing:
Consumer and commercial:
Consumer – non-time
2,983,401
9.6
2,792,199
10.2
Consumer – time
13,446,545
43.3
10,216,217
37.3
Commercial – non-time
2,728,307
8.8
2,439,175
8.9
Commercial – time
970,320
3.1
767,566
2.8
Public funds
3,964,350
12.8
3,725,766
13.6
Brokered
2,611,464
8.4
2,655,317
9.7
Reciprocal
569,142
1.9
713,029
2.6
Total deposits
$ 31,043,072
100.0% $ 27,405,143
100.0%
At December 31, 2024, brokered deposits totaled $2.61 billion, or approximately 8.4% of total deposits, compared to $2.66
billion, or 9.7% of total deposits, at December 31, 2023. We use brokered deposits, subject to certain limitations and requirements, as
a source of funding to augment deposits generated from our branch network, which are our primary source of funding. Our Board has
established policies and procedures with respect to the use of brokered deposits. Such policies and procedures require, among other
things, that (i) we limit the amount of brokered deposits as a percentage of total deposits and (ii) ALCO monitor our use of brokered
deposits on a regular basis, including interest rates and the volume of such deposits in relation to our total deposits.
The amount and percentage of our deposits by state, as of the dates indicated, are reflected in the following table.
Deposits by State
December 31,
2024
2023
Deposits Attributable to Offices In
Amount
%
Amount
%
(Dollars in thousands)
Arkansas
$ 10,886,498
35.1% $ 10,315,992
37.6%
Georgia
8,848,945
28.5
7,739,622
28.2
Florida
5,295,410
17.1
4,471,030
16.3
Texas
3,871,021
12.5
3,020,420
11.0
North Carolina
2,135,478
6.8
1,858,079
6.9
Tennessee
5,720
—
—
—
Total
$ 31,043,072
100.0% $ 27,405,143
100.0%
Deposit levels may be affected by a number of factors including rates paid by competitors, general interest rate levels, returns
available to customers on alternative investments, general economic and market conditions and other factors.
59
The following table reflects the average balance and average rate paid for each deposit category shown for the periods indicated.
Average Deposit Balances and Rates
Year Ended December 31,
2024
2023
2022
Average
Balance
Average
Rate Paid
Average
Balance
Average
Rate Paid
Average
Balance
Average
Rate Paid
(Dollars in thousands)
Interest bearing:
Transaction (NOW)
$
4,575,336
3.10% $
4,197,394
2.70% $
3,487,423
0.58%
Savings and money market
4,671,839
2.72
4,954,666
1.98
6,100,949
0.46
Time deposits
16,622,440
4.91
10,543,800
3.94
5,680,395
0.81
Total interest bearing deposits
25,869,615
4.19
19,695,860
3.18
15,268,767
0.62
Non-interest bearing
3,917,887
—
4,315,200
—
4,873,842
—
Total deposits
$ 29,787,502
3.64% $ 24,011,060
2.61% $ 20,142,609
0.47%
The calculation of the average rate paid on total interest bearing deposits of 4.19% for 2024, 3.18% for 2023 and 0.62% for 2022
includes interest paid and average balances of all categories of interest bearing deposits. The average rate paid for all deposits,
including both interest bearing and non-interest bearing deposits, was 3.64% for 2024, 2.61% for 2023 and 0.47% for 2022. In 2025,
we expect our average rate paid on interest-bearing deposits to decrease, as our time deposits mature and renew or are replaced with
new time deposits at lower rates. Future increases or decreases in the rates paid on our interest bearing deposits will depend on funding
needs to support growth in our earning assets, changes in the federal funds rate and other interest rates, the level of on-balance sheet
liquidity, competitive conditions and other factors.
We maintain substantial and diverse sources of available primary and secondary liquidity as disclosed in the table below.
Available Primary and Secondary Liquidity Sources
December 31, 2024
Total Capacity
Outstanding
Available Liquidity
(Dollars in thousands)
Cash & cash equivalents
$
2,781,101 $
— $
2,781,101
Unpledged investment securities
1,956,968
—
1,956,968
FHLB (1)
11,961,145
4,125,410
7,835,735
Unsecured lines of credit
1,150,000
120,000
1,030,000
Fed discount window
401,635
—
401,635
Total
$
18,250,849 $
4,245,410 $
14,005,439
(1) FHLB borrowings outstanding included $0.3 billion of borrowings outstanding and $3.8 billion of outstanding letters of credit at December 31, 2024.
As of December 31, 2024, approximately 81% of our deposits are either insured (66% at December 31, 2024) or, in the case of
public funds and certain other deposits, collateralized (15% at December 31, 2024). As of December 31, 2024, our average deposit
account balance was approximately $49,000. The diversity of our deposit base is an important factor in the demonstrated stability of
our deposits. The estimated amount of uninsured deposits at December 31, 2024 was $10.62 billion. Estimated uninsured deposits
exclude intercompany deposits that are eliminated in financial consolidation. Estimated uninsured deposits do not necessarily reflect
an evaluation of all scenarios that potentially would determine the availability of deposit insurance to individual accounts or customers
based on FDIC regulations.
60
The following table presents the aggregate amount of time deposits by year of maturity as of the dates indicated.
December 31,
2024
2023
(Dollars in thousands)
2025
$
16,702,130 $
13,090,697
2026
591,734
1,095,652
2027
9,890
30,472
2028
8,300
8,729
2029
6,651
9,242
Thereafter
101
181
Total time deposits
$
17,318,806 $
14,234,973
The following table presents the maturity distribution of time deposits greater than $250,000 as of December 31, 2024.
Maturity Distribution of Time Deposits Greater Than $250,000
(Dollars in thousands)
December 31, 2024:
3 months or less
$
2,053,633
Over 3 to 6 months
1,388,478
Over 6 to 12 months
1,273,339
Over 12 months
141,947
Total
$
4,857,397
Loan Portfolio. In addition to customer deposits, cash flows from our loan portfolio provide us with a significant source of
liquidity. The following table reflects total loans grouped by remaining maturities at December 31, 2024 by type and by fixed or
floating interest rates. This table is based on actual maturities and does not reflect amortizations, projected paydowns or the earliest
repricing for floating rate loans. Many loans have principal paydowns scheduled in periods prior to the period in which they mature. In
addition, many floating rate loans are subject to repricing in periods prior to the period in which they mature.
Loan Maturities
1 Year or
Less
Over 1
Through
5 Years
Over
5 Through 15
Years
Over 15 Years
Total
(Dollars in thousands)
Real estate
$ 9,453,939 $ 11,142,489 $
676,127 $
985,781 $ 22,258,336
Commercial and industrial
1,096,693
550,902
68,254
12,952
1,728,801
Consumer
15,852
24,496
737,746
2,881,619
3,659,713
Other
977,413
1,337,304
2,642
4,658
2,322,017
Total
$ 11,543,897 $ 13,055,191 $ 1,484,769 $ 3,885,010 $ 29,968,867
Fixed rate
$
298,032 $ 1,437,973 $
814,667 $ 3,353,141 $ 5,903,813
Floating rate (not at a floor or ceiling rate) (1)
10,328,628
9,715,109
218,272
284,894 20,546,903
Floating rate (at floor rate) (1)
878,200
1,880,231
436,991
243,284
3,438,706
Floating rate (at ceiling rate)
39,037
21,878
14,839
3,691
79,445
Total
$ 11,543,897 $ 13,055,191 $ 1,484,769 $ 3,885,010 $ 29,968,867
(1)
We have included a floor rate in 98% of our floating rate loans. At December 31, 2024, the majority of our floating rate loans were above their
floor rate. In a declining rate environment, such loans will reprice at their next reset date until they reach their floor rate.
61
The following table reflects loans by fixed or floating interest rates with maturities after one year.
Loans Maturing After One Year
Fixed Interest Rate
Floating Interest Rate
Total
(Dollars in thousands)
Real estate
$
1,709,443
$
11,094,954
$
12,804,397
Commercial and industrial
241,653
390,455
632,108
Consumer
3,638,427
5,434
3,643,861
Other
16,258
1,328,346
1,344,604
Total
$
5,605,781
$
12,819,189
$
18,424,970
Loan repayments are generally a relatively stable source of funds but are subject to the borrowers’ ability to repay the loans,
which can be adversely affected by a number of factors including changes in general economic and market conditions, adverse trends
or events affecting business industry groups or specific businesses, declines in real estate values or markets, business closings or lay-
offs, inclement weather, natural disasters and other factors. Furthermore, loans generally are not readily convertible to cash.
At December 31, 2024, we had $19.08 billion in unfunded balances on loans already closed, the vast majority of which are
attributable to construction and development loans. In most cases the borrower’s equity and all or most other required subordinated
elements of the capital structure must be fully funded before we advance funds. In many cases we do not advance funds on
construction and development loans for many months after closing because the borrower’s equity and a majority of other funding
sources must fund first. This conservative practice for handling construction loans has led to the large unfunded balance of closed
loans. As a result, we maintain a detailed 36-month forward funding forecast projecting loan fundings and loan repayments. Our
ability to project periodic net portfolio growth with a reasonable degree of accuracy is an important part of our liquidity management
process.
Investment Securities AFS. We classify all of our securities as available for sale; thus, we have no securities classified as held-to-
maturity. Cash flows from our investment securities portfolio also provide us with an additional source of liquidity. The following
table reflects the expected maturity distribution of our investment securities AFS, at estimated fair value, at December 31, 2024 and
weighted-average yields (for tax-exempt obligations on an FTE basis) of such securities.
Expected Maturity Distribution of Investment Securities AFS
1 Year Or
Less
Weighted
Average
Yield-
FTE
Over 1
Through 5
Years
Weighted
Average
Yield-
FTE
Over 5
Through
10 Years
Weighted
Average
Yield-
FTE
Over 10
Years
Weighted
Average
Yield-
FTE
Total
Weighted
Average
Yield-
FTE
(Dollars in thousands)
Obligations of state and
political subdivisions
$
99,328
2.75%
$
80,307
5.69%
$ 237,487
4.46%
$ 1,008,574
5.46%
$ 1,425,696
5.11%
U.S. Government agency
mortgage-backed securities
336,458
1.96
701,197
2.08
178,974
3.68
39,842
4.68
1,256,471
2.35
Other U.S. Government
agency securities
129,718
1.30
—
—
—
—
—
—
129,718
1.30
Corporate obligations
—
—
15,326
4.51
2,290
3.62
6,649
4.93
24,265
4.55
Total
$ 565,504
1.95%
$ 796,830
2.47%
$ 418,751
4.12%
$ 1,055,065
5.42%
$ 2,836,150
3.69%
Percentage of total
19.9%
28.1%
14.9%
37.1%
100.0%
Cumulative percentage
of total
19.9%
48.0%
62.9%
100.0%
The maturity for all investment securities is shown based on each security’s contractual maturity date, except (1) mortgage-
backed securities, which are allocated among various maturities based on an estimated repayment schedule utilizing third-party
median prepayment speeds or other estimates of prepayment speeds and interest rate levels at December 31, 2024 and (2) callable
investment securities for which we have received notification of call, which are included in the maturity category in which the call
occurs or is expected to occur. Actual maturities will differ from contractual maturities because issuers may have the right to call or
prepay obligations with or without call or prepayment penalties. The weighted-average yields – FTE are calculated based on the
coupon rate and amortized cost for such securities and includes any projected discount accretion or premium amortization.
62
Other Interest Bearing Liabilities. Given that deposit levels, loan repayments and cash flow from our investment securities
portfolio may be affected by a number of factors, we may be required from time to time to rely on other sources of liquidity to meet
growth in loans and deposit withdrawal demands or otherwise fund operations. Such other sources include, FHLB advances, federal
funds purchased, secured and unsecured federal funds lines of credit from correspondent banks, FRB borrowings, subordinated notes,
subordinated debentures and/or accessing the capital markets.
The following table reflects the average balance and average rate paid for each category of other interest bearing liabilities for
the years indicated.
Average Balances and Rates of Other Interest Bearing Liabilities
Year Ended December 31,
2024
2023
2022
Average
Balance
Average
Rate Paid
Average
Balance
Average
Rate Paid
Average
Balance
Average
Rate Paid
(Dollars in thousands)
Other borrowings
$
257,055
4.21% $
803,797
5.18% $
673,932
1.93%
Subordinated notes
348,170
3.00
347,356
3.01
346,538
3.01
Subordinated debentures
121,630
8.01
121,648
7.83
121,310
4.76
Total other interest bearing liabilities
$
726,855
4.26% $
1,272,801
4.84% $
1,141,780
2.56%
We utilize FHLB advances and federal funds purchased to support our funding sources and provide additional on-balance sheet
liquidity. Details of those outstanding FHLB advances and federal funds purchased, at December 31, 2024, are shown in the following
table.
FHLB Advances and Federal Funds Purchased
Borrowing Type
Balance
Interest Rate
Maturity Date
(Dollars in thousands)
FHLB advances
$
300,000
4.38%
1/2/2025
Federal funds purchased
$
120,000
4.42%
1/2/2025
At December 31, 2024, we had substantial unused borrowing availability. This availability was primarily comprised of the
following four options: (1) $7.84 billion of available blanket borrowing capacity with the FHLB, (2) $1.96 billion of investment
securities available to pledge for federal funds or other borrowings, (3) $1.03 billion of available unsecured federal funds borrowing
lines and (4) up to $0.40 billion of available borrowing capacity from borrowing programs of the FRB.
We anticipate we will continue to rely primarily on deposits, repayments of loans and cash flows from our investment securities
to provide liquidity, as well as other funding sources as appropriate. Additionally, where necessary, the other funding sources
described above, including the use of FHLB advances, will be used to augment our primary funding sources.
Sources and Uses of Funds. Operating activities provided net cash of $0.83 billion in 2024, $0.88 billion in 2023 and $0.76
billion in 2022. Net cash provided by operating activities is comprised primarily of net income, adjusted for certain non-cash items and
for changes in various operating assets and liabilities.
Investing activities used net cash of $3.25 billion in 2024, $5.53 billion in 2023 and $2.43 billion in 2022. The decrease in net
cash used by investing activities in 2024 compared to 2023 was primarily the result of a smaller increase in our loan portfolio in 2024,
which used $3.58 billion in 2024 compared to $5.78 billion in 2023. The increase in net cash used by investing activities in 2023
compared to the net cash provided by investing activities in 2022 was primarily the result of an increase in our loan portfolio which
used $5.78 billion in 2023 compared to $2.48 billion in 2022, and decreased proceeds from maturities, calls and paydowns of
investment securities AFS which provided $0.57 billion in 2023 compared to $1.09 billion in 2022, offset by purchases of investment
securities AFS which used $0.24 billion in 2023 compared to $0.96 billion in 2022.
Financing activities provided net cash of $3.05 billion in 2024, $5.77 billion in 2023 and $0.64 billion in 2022. The decrease in
the net cash provided by financing activity in 2024 compared to 2023 was primarily the result of a smaller increase in our deposits in
2024, which provided $3.64 billion in 2024 compared to $5.91 billion in 2023. The increase in the net cash provided by financing
activity in 2023 compared to the net cash used by financing activities in 2022 was primarily the result of changes in our deposits,
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which provided $5.91 billion during 2023 compared to $1.32 billion in 2022, partially offset by repurchase and cancellation of shares
of our common stock under our share repurchase program which used $0.15 billion in 2023 compared to $0.35 billion in 2022.
Material Cash Requirements, Contractual Obligations, Commitments and Off-Balance Sheet Arrangements. Our material cash
requirements include commitments for contractual obligations (both short-term and long-term), commitments to extend credit, and off-
balance sheet arrangements. Our material cash requirements for the next 12 months are primarily to fund loan growth. Additionally,
we will utilize cash to fund deposit maturities and withdrawals that may occur in the next 12 months. Other contractual obligations,
purchase commitments, lease obligations, and unfunded commitments may require cash payments by us within the next 12 months,
and these, along with longer-term obligations, are discussed below.
The following table presents, as of December 31, 2024, significant fixed and determinable contractual obligations to third parties
by contractual date with no consideration given to earlier call or prepayment features. Other obligations consist primarily of
contractual obligations for capital expenditures, software contracts, employee benefits and various other contractual obligations.
Contractual Obligations
1 Year Or Less
Over 1 Through
3 Years
Over 3 Through
5 Years
Over 5 Years
Total
(Dollars in thousands)
Time deposits (1)
$ 16,913,743
$
606,911
$
15,352
$
354
$ 17,536,360
Deposits without a stated maturity (2)
13,727,081
—
—
—
13,727,081
Other borrowings (1)
420,886
—
—
—
420,886
Subordinated notes (1)
9,759
36,534
46,764
416,585
509,642
Subordinated debentures (1)
8,109
16,218
16,240
161,655
202,222
Lease obligations
7,814
12,465
11,452
61,246
92,977
Other obligations
277,910
33,798
456
13,469
325,633
Total contractual obligations
$ 31,365,302
$
705,926
$
90,264
$
653,309
$ 32,814,801
(1) Includes unpaid interest through the contractual maturity on both fixed and variable rate obligations. The interest included on variable rate
obligations is based upon interest rates in effect at December 31, 2024. The contractual amounts to be paid on variable rate obligations are
affected by changes in interest rates. Future changes in interest rates could materially affect the contractual amounts to be paid.
(2) Includes interest accrued and unpaid through December 31, 2024.
In the normal course of business, various commitments and contingent liabilities arise that are not required to be recorded on the
balance sheet. The most significant of these are loan commitments that are primarily comprised of closed but unfunded loans totaling
$19.08 billion at December 31, 2024. These loan commitments are agreements to lend to a customer as long as there is no violation of
any condition established in the contract and, for unfunded construction loans, based on the achievement of certain construction
milestones. We evaluate each customer’s creditworthiness on a case-by-case basis and the amount of collateral obtained is based on
management’s credit evaluation of the customer and underlying property, among other factors. Loan commitments generally have
fixed expiration dates and may or may not be drawn upon in whole or in part prior to their maturity, depending on a number of factors
including economic conditions, real estate market conditions and competitive factors, among others. Management does not anticipate
any material losses from these loan commitments and standby letters of credit that have not been previously considered in establishing
our ACL and believes there are no material commitments to extend credit that represent risks of an unusual nature.
The following table details the amounts and expected maturities of our outstanding loan commitments as of December 31, 2024.
Outstanding Loan Commitments
1 Year Or Less
Over 1 Through
3 Years
Over 3 Through
5 Years
Over 5 Years
Total
(Dollars in thousands)
Commitments to extend credit
$
3,972,368
$ 11,351,627
$
3,512,690
$
241,948
$ 19,078,633
We have investments in certain tax credits and partnerships generally within the areas we serve. The majority of these
investments provide funds for the construction and development of affordable housing, which provide low income housing tax credits
(“LIHTC”) that are normally recognized over approximately ten years and are an important part in the anticipated yield from these
investments. We are a limited partner or non-managing member in each LIHTC limited partnership or limited liability company. Each
of these entities is managed by an unrelated third-party general partner or managing member who exercises significant control over the
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operations and finances of the entity. The general partner or managing member has all the rights, powers and authority granted or
permitted to be granted to a general partner of a limited partnership or managing member of a limited liability company. We also have
investments in renewable energy and other tax credits. As of December 31, 2024, the carrying value of tax credit investments and
renewable energy partnerships was approximately $460.3 million and is included in other assets on our consolidated balance sheet.
The portion of the tax credit investments that are unfunded and included in other liabilities totaled approximately $210.3 million at
December 31, 2024 and are expected to be funded over the terms of the agreements ranging from 2025 to 2041.
We also have investments in Small Business Investment Companies (“SBIC”) that provide funds to qualifying small businesses,
and Community Development Companies (“CDC”) that provide funding for the purpose of community development through
investments, lending, and credit assistance. As of December 31, 2024, the carrying value of our investments in SBICs and CDCs was
approximately $71.3 million and is included in other assets on our consolidated balance sheet. The portion of our investments in
SBICs and CDCs that are unfunded totaled approximately $112.5 million at December 31, 2024 and are expected to be funded over
the terms of the agreements ranging from 2025 to 2030.
The following table shows the expected payments for unfunded tax credit investments, SBICs and CDCs as of December 31,
2024.
Expected Payments at December 31, 2024
Amount
(Dollars in thousands)
2025
$
153,244
2026
87,085
2027
57,723
2028
14,291
2029
6,267
Thereafter
4,207
Total
$
322,817
In addition, we pay cash dividends on our preferred stock when, as, and if declared by our Board, which on an annual basis, is
expected to result in approximately $16.2 million in cash dividends paid on our preferred stock.
Market and Interest Rate Risk Management
Overview. Market risk is the risk to a financial institution’s condition resulting from adverse movements in market rates or
prices, including, but not limited to, interest rates, foreign exchange rates, commodity prices, or security prices. We are exposed to
both interest rate risk and price risk. Interest rate risk is the risk that arises from increased volatility in net interest income due to a
change of interest rates. There are different types of risk exposures that can arise when there is a change of interest rates, such as basis
risk, options risk, term structure and repricing risk. Price risk is the risk that arises from security price volatility – the risk of a decline
in the value of a security or a portfolio. Price risk can be either systemic or non-systemic risk. Non-systemic risk can be mitigated
through diversification, whereas systemic risk cannot. In a global economic crisis, price risk is systemic because it affects multiple
asset classes.
Interest Rate Risk Management. Our Board is responsible for approving the overall policies related to the management of market
risks, including interest rate risk and price risk. The Board has delegated to ALCO, which is chaired by our Chief Financial Officer,
the responsibility of managing interest rate and price risk consistent with Board-approved policies and limits.
ALCO regularly reviews our exposure to changes in interest rates. Among the factors considered are changes in the mix of
interest earning assets and interest bearing liabilities, interest rate spreads and repricing periods. ALCO uses an earnings simulation
model, which analyzes the expected change in near term (one year) net interest income in response to changes in interest rates, and
economic value of equity (“EVE”), which measures the expected change in the fair value of equity in response to changes in interest
rates, to analyze our interest rate risk and interest rate sensitivity.
Earnings Simulation Model. Our earnings simulation modeling process projects a baseline net interest income, which uses a
dynamic balance sheet and assumes no changes in interest rate levels. We estimate changes to that baseline net interest income
resulting from changes in interest rate levels. We rely primarily on the results of this model in evaluating our interest rate risk.
This model incorporates a number of additional factors including: (1) the expected growth in various interest earning assets and
interest bearing liabilities and the expected interest rates on new assets and liabilities, (2) the expected rates at which various rate
sensitive assets and rate sensitive liabilities will reprice, (3) the expected exercise of call features on various assets and liabilities, (4)
65
the expected relative movements in different interest rate indices which are used as the basis for pricing or repricing various assets and
liabilities, (5) existing and expected contractual ceiling and floor rates on various assets and liabilities, (6) expected changes in
administered rates on interest bearing transaction, savings, money market and time deposit accounts and the expected impact of
competition on the pricing or repricing of such accounts, (7) the timing and amount of cash flows expected to be received on
investment securities, (8) the timing and amount of repayments that are anticipated from our loan portfolio, (9) the need, if any, for
additional capital and/or debt to support continued growth and (10) other relevant factors. Inclusion of these factors in the model is
intended to more accurately project our expected changes in net interest income resulting from interest rate changes.
We model our change in net interest income in various interest rate scenarios, including scenarios where interest rates go up 100
bps, up 200 bps, up 300 bps, down 100 bps, down 200 bps, and down 300 bps. For purposes of these scenarios, we have assumed that
the change in interest rates phases in over a 12-month period. While we believe this model provides a reasonably accurate projection
of our interest rate risk, the model includes a number of assumptions and predictions which may or may not be correct and may impact
the model results. These assumptions and predictions include inputs to compute baseline net interest income, growth rates, prepayment
assumptions, expected changes in rates on interest bearing deposit accounts, competition and a variety of other factors that are difficult
to accurately predict. Accordingly, there can be no assurance the earnings simulation model will accurately reflect future results. Our
earnings simulation model is governed by our model risk framework.
The following table presents the earnings simulation model’s projected impact of a change in interest rates on the projected
baseline net interest income for the 12-month period commencing January 1, 2025. This change in interest rates is assumed to occur
ratably over that 12-month period. This change in interest rates also assumes parallel shifts in the yield curve and does not take into
account changes in the slope of the yield curve.
Earnings Simulation Model Results
Change in
Interest Rates
(in bps)
% Change in
Projected Baseline
Net Interest Income
+300
15.8%
+200
10.4
+100
5.1
-100
(3.9)
-200
(5.9)
-300
(7.3)
In the event of a shift in interest rates, we may take certain actions intended to mitigate the negative impact to net interest income
or to maximize the positive impact to net interest income. These actions may include, but are not limited to, restructuring of interest
earning assets and interest bearing liabilities, seeking alternative funding sources or investment opportunities and modifying the
pricing, or terms of loans and deposits.
The consolidated financial statements and related notes presented in Item 8. Financial Statements and Supplementary Data in this
Annual Report on Form 10-K have been prepared in accordance with GAAP. This requires the measurement of financial position and
operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time
due to inflation. Unlike industrial companies, the vast majority of our assets and liabilities are monetary in nature. As a result, interest
rates have a greater impact on our performance than do the effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or to the same extent as the prices of goods and services.
EVE Model. EVE is calculated as the fair value of all assets minus the fair value of liabilities and incorporates a number of
assumptions including (1) the timing and amount of cash flows expected to be received or paid on various assets and liabilities, (2) the
expected exercise of call features on various assets and liabilities, (3) estimated discount rates and (4) other relevant factors. We
measure changes in the dollar amount of EVE for parallel shifts in interest rates. Due to embedded optionality and asymmetric rate
risk, changes in EVE can be useful in quantifying risks not apparent for small rate changes.
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The following table presents our EVE results as of December 31, 2024.
EVE Model Results
Change in
Interest Rates
(in bps)
% Change in
Projected Baseline EVE
+200
(3.4%)
+100
(1.6)
-100
1.5
-200
2.6
Variable Rate Loans and Loan Repricing. At December 31, 2024, approximately 80% of our funded balance of total loans had
variable rates and generally reprice with movements in the 1-month term SOFR, WSJ Prime and other indexes. Additionally,
approximately 98% of our variable rate total loans had floor rates, and the vast majority of such loans were above their floor rates.
The following table reflects total loans as of December 31, 2024 grouped by expected amortizations, expected paydowns or the
earliest repricing opportunity for floating rate loans. This cash flow or repricing schedule approximates our ability to reprice the
outstanding principal of loans either by adjusting rates on existing loans or reinvesting principal cash flow into new loans.
Loan Cash Flows or Repricing
1 Year Or
Less
Over 1
Through 2
Years
Over 2
Through 3
Years
Over 3
Through 5
Years
Over 5 Years
Total
(Dollars in thousands)
Fixed rate
$ 521,619
$ 604,082
$ 657,171
$ 763,522
$ 3,357,419 $ 5,903,813
Floating rate (not at a floor or ceiling rate) (1)
20,297,859
82,720
76,715
89,049
560 20,546,903
Floating rate (at floor rate) (1)
2,783,661
216,106
223,739
198,391
16,809
3,438,706
Floating rate (at ceiling rate)
69,947
1,143
306
8,049
—
79,445
Total
$ 23,673,086 $ 904,051
$ 957,931
$ 1,059,011
$ 3,374,788
$ 29,968,867
Percentage of total
79.0%
3.0%
3.2%
3.5%
11.3%
100.0%
Cumulative percentage of total
79.0%
82.0%
85.2%
88.7%
100.0%
(1) We have included a floor rate in 98% of our floating rate loans. At December 31, 2024, the majority of our floating rate loans were above their
floor rate. In a declining rate environment, such loans will reprice at their next reset date until they reach their floor rate.
The following table is a summary of our floating rate loan portfolio and contractual interest rate indices at December 31, 2024.
Contractual Indices of Floating Rate Loans
Contractual Interest Rate Index
Floating Rate
(at floor rate)
Floating Rate
(not at a floor
or ceiling rate)
Floating Rate
(at ceiling rate)
Total Floating
Rate
(Dollars in thousands)
1-month term SOFR
$
1,670,603 $ 18,894,790 $
— $ 20,565,393
Wall Street Journal Prime
1,709,609
1,013,333
79,445
2,802,387
Other contractual interest rate indices
58,494
638,780
—
697,274
Total
$
3,438,706 $ 20,546,903 $
79,445 $ 24,065,054
While changes in these contractual interest rate indices are typically affected by changes in the federal funds target rate, in a
declining rate environment, such loans will reprice at their next reset date until they reach their floor rate.
Market Risk Management. We are exposed to market risk primarily through changes in fair value of our fixed income investment
securities portfolio. Investment portfolio strategies are set by senior management and are subject to the oversight and direction of
ALCO. At December 31, 2024 and 2023, we classified all of our investment securities portfolio as AFS. Our investment securities
AFS are reported at estimated fair value with the unrealized gains and losses, net of related income tax, reported as a separate
component of stockholders’ equity and included in other comprehensive income. At December 31, 2024, we had $99.4 million of net
unrealized losses in our investment securities AFS portfolio that was reported, net of applicable income taxes, in AOCI.
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The following table presents the amortized cost and estimated fair value of investment securities – AFS as of the dates indicated.
Investment Securities – AFS
December 31,
2024
2023
Amortized Cost
Fair Value
Amortized Cost
Fair Value
(Dollars in thousands)
U.S. Government agency mortgage-backed securities
$ 1,327,396 $ 1,256,471 $ 1,272,015 $ 1,174,429
Obligations of state and political subdivisions
1,451,430
1,425,696
1,406,617
1,400,888
Other U.S. Government agency securities
130,000
129,718
658,851
638,272
Corporate obligations
26,718
24,265
34,341
30,782
Total
$ 2,935,544 $ 2,836,150 $ 3,371,824 $ 3,244,371
Our investment securities AFS are reported at estimated fair value, which included gross unrealized gains of $8.8 million and
gross unrealized losses of $108.2 million at December 31, 2024 and gross unrealized gains of $22.7 million and gross unrealized
losses of $150.2 million at December 31, 2023. We believe that the vast majority of the unrealized losses on individual investment
securities at December 31, 2024 and 2023 are the result of fluctuations in interest rates.
If we intend to sell an AFS security in an unrealized loss position, or if it is more likely than not that we will be required to sell
an AFS security in an unrealized loss position before recovery of its amortized cost basis, the security’s amortized cost basis is written
down to fair value through current period expense. If we do not intend to sell an AFS security in an unrealized loss position or if it is
more likely than not that we will not sell an AFS security that is in an unrealized loss position, we are required to assess whether the
decline in fair value has resulted from credit losses or non-credit factors. If our assessment determines a credit loss exists, the present
value of cash flows expected to be collected from the AFS security is compared to the amortized cost basis of the security and if the
present value cash flows expected to be collected is less than amortized cost, an allowance for credit losses and a provision for credit
loss expense is recorded. If our assessment determines that a credit loss does not exist, we record the decline in fair value through
other comprehensive income, net of related tax effects, with such decline included in accumulated other comprehensive income.
The following table presents the unaccreted discount and unamortized premium of our investment securities AFS as of the dates
indicated.
Unaccreted Discount and Unamortized Premium
Amortized Cost
Unaccreted
Discount
Unamortized
Premium
Par Value
(Dollars in thousands)
December 31, 2024:
U.S. Government agency mortgage-backed securities
$
1,327,396 $
1,090 $
(20,127) $
1,308,359
Obligations of state and political subdivisions
1,451,430
26,974
(17,272)
1,461,132
Other U.S. Government agency securities
130,000
—
—
130,000
Corporate obligations
26,718
162
(1,230)
25,650
Total
$
2,935,544 $
28,226 $
(38,629) $
2,925,141
December 31, 2023:
U.S. Government agency mortgage-backed securities
$
1,272,015 $
31 $
(30,528) $
1,241,518
Obligations of state and political subdivisions
1,406,617
28,595
(23,263)
1,411,949
Other U.S. Government agency securities
658,851
9
—
658,860
Corporate obligations
34,341
191
(1,617)
32,915
Total
$
3,371,824 $
28,826 $
(55,408) $
3,345,242
We recognized premium amortization, net of discount accretion, of $15.0 million during 2024, $20.2 million during 2023 and
$32.2 million during 2022. Any premium amortization or discount accretion is considered an adjustment to the yield of our investment
securities.
Investment securities AFS totaling $1.0 billion in 2024, $0.57 billion in 2023 and $1.09 billion in 2022 matured, were called or
were otherwise paid down by the issuer. We purchased approximately $0.58 billion of investment securities AFS in 2024, compared to
$0.24 billion in 2023 and $0.96 billion in 2022.
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We invest in securities we believe offer good relative value at the time of purchase, and we will, from time to time, reposition
our investment securities portfolio. In making decisions to sell or purchase securities, we consider credit quality, call features, maturity
dates, relative yields, corporate tax rates, current market factors, interest rate risk and interest rate environment, current and projected
liquidity needs and other relevant factors.
At December 31, 2024, approximately 94% of our investment securities had an investment grade credit rating and approximately
6% of our investment securities were not rated. For those securities that were not rated, we have performed our own evaluation of the
security and/or the underlying issuer and believe that such security or its issuer has credit characteristics equivalent to those which
would warrant an investment grade credit rating.
Capital Management
Overview. The primary function of capital is to support our operations, including growth expectations, and act as a cushion to
absorb unanticipated losses. Accordingly, our management has developed and our Board has approved a detailed capital policy that
addresses, among other things, capital adequacy, considers capital planning strategies for expected future growth, provides plans and
actions for capital contingency needs, provides a capital distribution strategy and includes provisions and procedures for developing,
reviewing and modifying our capital strategy and our internal capital guidelines and limits based on the results of budgeting and
forecasting activities, capital stress testing results and other factors. Oversight of our capital management plan and capital monitoring
activities has been delegated to our ALCO.
Capital Management. We primarily rely on our stockholders’ equity, comprised of preferred and common stock, additional paid-
in capital, retained earnings and accumulated other comprehensive income (loss) to support our operations and act as a cushion to
absorb unanticipated losses. Our common stockholders’ equity totaled $5.37 billion at December 31, 2024, compared to $4.80 billion
at December 31, 2023. Included below in this Capital Management section of our MD&A is the calculation and reconciliation of our
common stockholders’ equity to the most directly comparable GAAP measure. Additionally, our common stockholders’ equity is
augmented by our preferred stock, our subordinated notes, our subordinated debentures, and our ACL.
Common Stock Repurchase Program. In July 2024, our Board authorized a stock repurchase program for up to $200 million of
our outstanding common stock, with an expiration on July 1, 2025, unless extended, shortened or suspended by the Board. During
2024, we purchased 11,903 shares of common stock for $0.46 million. In evaluating stock repurchases including the parameters for
price and share value, management will consider a variety of factors including stock price, expected growth, capital position,
alternative uses of capital, liquidity, financial performance, the current and expected macroeconomic environment, regulatory
requirements and other factors.
Preferred Stock. At December 31, 2024, we had 14,000,000 shares of 4.625% Series A Non-Cumulative Perpetual Preferred
Stock, par value $0.01 per share, with a liquidation preference of $25 per share (the “preferred stock”) issued and outstanding. Our
preferred stock offering generated total net proceeds of $339.0 million after deducting the initial purchaser discount and estimated
offering expenses. We pay cash dividends on our preferred stock, when, as, and if declared by our Board. Subject to declaration by our
Board, cash dividends accrue and are payable from the original date of issuance at a rate of 4.625% per annum, payable quarterly, in
arrears, on February 15, May 15, August 15, and November 15 (or the next business day) of each year. Dividends on our preferred
stock are not cumulative or mandatory. The preferred stock is treated as additional Tier 1 regulatory capital.
Subordinated Notes. At December 31, 2024, we had $350 million in aggregate principal amount of our 2.75% Fixed-to-Floating
rate subordinated notes (the “2.75% Notes”) due 2031, which bear interest at a fixed rate of 2.75% per annum until September 30,
2026. On October 1, 2026, the 2.75% Notes will bear interest at a floating rate equal to three-month term SOFR plus 209 basis points.
The 2.75% Notes are unsecured, subordinated debt obligations and mature on October 1, 2031. At December 31, 2024, the 2.75%
Notes had a carrying value of $348.6 million and remaining unamortized debt issuance costs of $1.4 million.
We may, beginning with the interest payment date on October 1, 2026, and on any interest payment date thereafter, redeem the
2.75% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2.75% Notes to be redeemed plus
accrued and unpaid interest to, but excluding, the date of redemption. We may also redeem the 2.75% Notes at any time, including
prior to October 1, 2026, at our option, in whole but not in part, if: (i) a change or prospective change in law occurs that could prevent
us from deducting interest payable on the 2.75% Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that could
preclude the 2.75% Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) we are required to register as
an investment company under the Investment Company Act of 1940, as amended; in each case, at a redemption price equal to 100% of
the principal amount of the 2.75% Notes plus any accrued and unpaid interest to, but excluding, the redemption date. The 2.75% Notes
are treated as Tier 2 regulatory capital.
69
Subordinated Debentures. We own eight 100%-owned finance subsidiary business trusts–Ozark Capital Statutory Trust II
(“Ozark II”), Ozark Capital Statutory Trust III (“Ozark III”), Ozark Capital Statutory Trust IV (“Ozark IV”), Ozark Capital Statutory
Trust V (“Ozark V”), Intervest Statutory Trust II (“Intervest II”), Intervest Statutory Trust III (“Intervest III”), Intervest Statutory
Trust IV (“Intervest IV”) and Intervest Statutory Trust V (“Intervest V”) (collectively, the “Trusts”). At December 31, 2024, we had
the following issues of trust preferred securities and subordinated debentures owed to the Trusts.
Trust Preferred Securities and
Subordinated Debentures
Subordinated
Debentures Owed
to Trusts
Carrying
Value
of Subordinated
Debentures
Trust
Preferred Securities
of the Trusts
Contractual
Interest Rate
Final Maturity Date
(Dollars in thousands)
Ozark II
$
14,433 $
14,433 $
14,000
7.49% September 29, 2033
Ozark III (1)
6,434
6,434
6,000
7.87
September 25, 2033
Ozark IV
15,464
15,464
15,000
7.00
September 28, 2034
Ozark V
20,619
20,619
20,000
6.22
December 15, 2036
Intervest II
15,464
15,464
15,000
7.56
September 17, 2033
Intervest III
15,464
15,464
15,000
7.40
March 17, 2034
Intervest IV
15,464
15,464
15,000
7.02
September 20, 2034
Intervest V
10,310
10,310
10,000
6.27
December 15, 2036
Total
$
113,652 $
113,652 $
110,000
(1) In December 2024, we repurchased $8.0 million of our outstanding Trust Preferred Securities for $7.0 million which resulted in $1.0 million of
pre-tax non-interest income.
Other Sources of Capital. We may need to raise additional capital in the future to provide us with sufficient capital resources and
liquidity to meet our commitments and business needs. As a publicly traded bank, a likely source of additional funds is the capital
markets, which can provide us with funds through the public issuance of equity, both common and preferred stock, and the issuance of
senior debt and/or subordinated debentures. Our ability to raise additional capital, if needed, will depend on, among other things,
conditions in the capital markets at that time, which are outside of our control, and our financial performance. Other than common
stock, any issuance of equity or debt by us will require the prior approval of the ASBD and may be accompanied by time delays
associated with obtaining such approval. If market conditions change during any time delays associated with obtaining regulatory
approval, we may not be able to issue equity or debt on as favorable terms as were contemplated at the time of commencement of the
process, or at all.
Common Stockholders’ Equity and Reconciliation of Non-GAAP Financial Measures. We use non-GAAP financial measures,
specifically total common stockholders’ equity, tangible common stockholders’ equity, ratio of tangible common stockholders’ equity
to total tangible assets, tangible book value per common share, return on average common stockholders’ equity and return on average
tangible common stockholders’ equity as important measures of the strength of our capital and our ability to generate earnings on
tangible common equity invested by our shareholders. We believe presentation of these non-GAAP financial measures provides useful
supplemental information that contributes to a proper understanding of our financial results and capital levels. These non-GAAP
disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily
comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP
financial measures to the most directly comparable GAAP financial measures are included in the following tables.
70
Calculation of Total Common Stockholders Equity, Total Tangible Common Stockholders’ Equity,
Book Value per Common Share and Tangible Book Value per Common Share
December 31,
2024
2023
2022
(Dollars in thousands)
Total stockholders’ equity before noncontrolling interest
$
5,705,623 $
5,139,001 $
4,689,579
Less preferred stock
(338,980)
(338,980)
(338,980)
Total common stockholders’ equity
$
5,366,643 $
4,800,021 $
4,350,599
Less intangible assets:
Goodwill
(660,789)
(660,789)
(660,789)
Core deposit and other intangible assets, net of accumulated amortization
—
—
(2,754)
Total intangibles
(660,789)
(660,789)
(663,543)
Total tangible common stockholders’ equity
$
4,705,854 $
4,139,232 $
3,687,056
Shares of common stock outstanding
113,458
113,149
117,177
Book value per common share
$
47.30 $
42.42 $
37.13
Tangible book value per common share
$
41.48 $
36.58 $
31.47
Calculation of Average Common Stockholders’ Equity, Average Tangible Common Stockholders’ Equity and Returns on
Average Common Stockholders’ Equity and Average Tangible Common Stockholders’ Equity
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Net income available to common stockholders
$
700,269
$
674,596
$
547,520
Average stockholders’ equity before noncontrolling interest
$ 5,425,658
$ 4,855,976
$ 4,662,467
Less average preferred stock
(338,980)
(338,980)
(338,980)
Total average common stockholders’ equity
$ 5,086,678
$ 4,516,996
$ 4,323,487
Less average intangible assets:
Goodwill
(660,789)
(660,789)
(660,789)
Core deposit and other intangible assets, net of accumulated amortization
—
(821)
(5,443)
Total average intangibles
(660,789)
(661,610)
(666,232)
Average tangible common stockholders’ equity
$ 4,425,889
$ 3,855,386
$ 3,657,255
Return on average common stockholders’ equity
13.77%
14.93%
12.66%
Return on average tangible common stockholders’ equity
15.82%
17.50%
14.97%
71
Calculation of Total Common Stockholders’ Equity,
Total Tangible Common Stockholders’ Equity and the Ratios of Total Common and Tangible Common
Stockholders’ Equity to Total Tangible Assets
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Total stockholders’ equity before noncontrolling interest
$ 5,705,623
$ 5,139,001
$ 4,689,579
Less preferred stock
(338,980)
(338,980)
(338,980)
Total common stockholders’ equity
5,366,643
4,800,021
4,350,599
Less intangible assets:
Less goodwill
(660,789)
(660,789)
(660,789)
Core deposit and other intangible assets, net of accumulated amortization
—
—
(2,754)
Total intangibles
(660,789)
(660,789)
(663,543)
Total tangible common stockholders’ equity
$ 4,705,854
$ 4,139,232
$ 3,687,056
Total assets
$ 38,258,852
$ 34,237,457
$ 27,656,568
Less intangible assets:
Less goodwill
(660,789)
(660,789)
(660,789)
Core deposit and other intangible assets, net of accumulated amortization
—
—
(2,754)
Total intangibles
(660,789)
(660,789)
(663,543)
Total tangible assets
$ 37,598,063
$ 33,576,668
$ 26,993,025
Ratio of total common stockholders’ equity to total assets
14.03%
14.02%
15.73%
Ratio of total tangible common stockholders’ equity to total tangible assets
12.52%
12.33%
13.66%
Goodwill. Between 2010 and 2016, we made fifteen acquisitions, including seven FDIC-assisted transactions and eight
traditional merger and acquisition (“M&A”) transactions. In conjunction with several of the traditional M&A transactions, our
purchase price exceeded the fair value of the net assets acquired, resulting in the recording of goodwill. At December 31, 2024 and
2023, we had goodwill totaling $661 million. We review goodwill annually, or more frequently if events or changes in circumstances
indicate the carrying value might be impaired. This impairment analysis compares the estimated fair value of our operations (the
reporting unit) with net book value. We performed our annual impairment test of goodwill as of September 30, 2024 which indicated
no potential impairment of our goodwill.
Common Stock Dividend Policy. During 2024, we paid cash dividends of $1.58 per common share compared to cash dividends
of $1.42 per common share in 2023 and $1.26 per common share in 2022. On January 2, 2025, our Board approved a cash dividend of
$0.42 per common share that was paid on January 21, 2025. The determination of future dividends on our common stock will depend
on conditions existing at that time and approval of our Board. In addition, our ability to pay common stock dividends to our
shareholders is subject to the restrictions set forth in Arkansas law, by our federal regulator, the relative powers, preferences and other
rights of the holders of our preferred stock and by certain covenants contained in the indentures governing the trust preferred
securities, the subordinated debentures and the 2.75% Notes. See Note 18 to the consolidated financial statements included in Item 8.
Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a discussion of dividend restrictions.
Preferred Stock Dividend Policy. As previously disclosed in this Capital Management section of the MD&A, 14,000,000 shares
of our 4.625% non-cumulative perpetual preferred stock are issued and outstanding. We will pay cash dividends on the preferred
stock, when, as, and if declared by our Board. On January 2, 2025, our Board approved a cash dividend of $0.28906 per share that was
paid on February 18, 2025 for the period covering November 15, 2024 through, but excluding, February 15, 2025. Future quarterly
dividends on shares of the preferred stock, if declared, are expected to be approximately $4.0 million per quarter. The determination of
future dividends on the preferred stock will depend on conditions at that time and approval by our Board. In addition, our ability to
pay dividends on our preferred shares is subject to the restrictions set forth in Arkansas law and by our federal regulator.
Regulatory Capital. We are subject to various regulatory capital requirements administered by federal and state banking
agencies. These capital requirements are consistent with agreements reached by the Basel Committee on Banking Supervision (“Basel
III”) and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Basel III Rules”). The Basel III
Rules require the maintenance of minimum amounts and ratios of common equity tier 1 capital, tier 1 capital and total capital to risk-
weighted assets, and of tier 1 capital to adjusted quarterly average assets. Failure to meet minimum capital requirements can initiate
certain mandatory and discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial
condition and results of operations. 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
72
calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments and
adjustments by the regulators about component risk weightings and other factors.
Under the Basel III Rules, common equity tier 1 capital consists of common stock and paid-in capital (net of treasury stock) and
retained earnings. Common equity tier 1 capital is reduced by goodwill, certain intangible assets, net of associated deferred tax
liabilities, deferred tax assets that arise from tax credit and net operating loss carryforwards, net of any valuation allowance, and
certain other items as specified by the Basel III Rules.
Tier 1 capital includes common equity tier 1 capital and certain additional tier 1 items as provided under the Basel III Rules. Our
tier 1 capital at December 31, 2024 and 2023 includes both our common equity tier 1 capital and our preferred stock.
Total capital includes tier 1 capital and tier 2 capital. Tier 2 capital includes, among other things, the allowable portion of the
ACL, the trust preferred securities and the 2.75% Notes.
The common equity tier 1 capital, tier 1 capital and total capital ratios are calculated by dividing the respective capital amounts
by risk-weighted assets. The leverage ratio is calculated by dividing tier 1 capital by adjusted quarterly average total assets.
Basel III Rules allowed for insured depository institutions to make a one-time election not to include most elements of
accumulated other comprehensive income in regulatory capital. We made this opt-out election to avoid significant variations in the
level of capital depending upon the impact of interest rate fluctuations on the fair value of our investments securities portfolio.
The Basel III Rules limit capital distributions and certain discretionary bonus payments if the banking organization does not hold
a “capital conservation buffer” in addition to the amount necessary to meet minimum risk-based capital requirements for common
equity tier 1 capital, tier 1 capital and total capital to risk-weighted assets. At December 31, 2024 and 2023, the Basel III Rules
required us to maintain (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5%
capital conservation buffer, which effectively results in a minimum ratio of 7.0%, (ii) a minimum ratio of tier 1 capital to risk-
weighted assets of at least 6.0%, plus a 2.5% capital conservation buffer, which effectively results in a minimum ratio of 8.5%, (iii) a
minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus a 2.5% capital conservation buffer, which effectively
results in a minimum ratio of 10.5%, and (iv) a minimum leverage ratio of 4.0%. Additionally, in order to be considered well-
capitalized under the Basel III Rules, we must maintain (i) a ratio of common equity tier 1 capital to risk-weighted assets of at least
6.5%, (ii) a ratio of tier 1 capital to risk-weighted assets of at least 8.0%, (iii) a ratio of total capital to risk-weighted assets of at least
10.0% and (iv) a leverage ratio of at least 5.0%.
The following table presents actual and required capital ratios as of the dates indicated under the Basel III Rules. The minimum
required capital amounts presented include the minimum required capital levels, plus the capital conservation buffer. Capital levels
required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes
under the Basel III Rules. At December 31, 2024 and 2023, our capital levels exceeded all minimum capital requirements under the
Basel III Rules. Additionally, our capital levels at December 31, 2024 and 2023 exceeded all capital requirements to be considered
well capitalized based upon prompt corrective action regulations, as amended by the Basel III Rules.
Regulatory Capital Ratios
Actual
Minimum Capital Required
- Basel III
Required to be Considered
Well Capitalized
Capital
Amount
Ratio
Capital
Amount
Ratio
Capital
Amount
Ratio
(Dollars in thousands)
December 31, 2024:
Common equity tier 1 to risk-weighted assets
$ 4,776,712
11.34% $ 2,947,797
7.00% $ 2,737,240
6.50%
Tier 1 capital to risk-weighted assets
5,115,692
12.15
3,579,468
8.50
3,368,911
8.00
Total capital to risk-weighted assets
6,103,224
14.49
4,421,696
10.50
4,211,139
10.00
Tier 1 leverage to average assets
5,115,692
13.73
1,490,141
4.00
1,862,676
5.00
December 31, 2023:
Common equity tier 1 to risk-weighted assets
$ 4,230,243
10.79% $ 2,743,864
7.00% $ 2,547,873
6.50%
Tier 1 capital to risk-weighted assets
4,569,223
11.66
3,331,835
8.50
3,135,844
8.00
Total capital to risk-weighted assets
5,527,326
14.10
4,115,796
10.50
3,919,805
10.00
Tier 1 leverage to average assets
4,569,223
13.91
1,313,917
4.00
1,642,396
5.00
73
Capital Stress Testing. We completed our annual capital stress tests during the third quarter of 2024 utilizing multiple economic
scenarios, including an adverse idiosyncratic scenario unique to our Bank. The results of our stress tests reflected that we would
maintain well-capitalized status for all capital ratios over the stress test time horizon.
Our historically strong earnings and earnings retention rate, among other factors, have contributed to our maintaining capital
ratios well above the minimum to be considered “well capitalized.” Our strong capital position and strong earnings gives us significant
optionality and are expected to support organic loan growth, adding additional new business lines, increases in our quarterly cash
dividend, stock repurchases and, if appropriate, acquisitions.
Growth and Branching. In 2025, we expect to increase our current branch count of 232 by approximately 10% primarily in the
states in which we currently have branches. Additionally, as we have done in recent years, we may relocate offices, sell offices and/or
close certain offices and consolidate the business of such offices into other offices. Opening new offices is subject to local banking
market conditions, availability of satisfactory sites, hiring qualified personnel, obtaining regulatory and other approvals and many
other conditions and contingencies that we cannot predict with certainty. We may increase or decrease our expected number of new
office openings or relocate, sell or close current offices as a result of a variety of factors including our financial results, changes in
economic or competitive conditions, strategic opportunities, individual office profitability metrics or other factors.
Capital Expenditures. During 2024, we spent $98.3 million on capital expenditures for premises and equipment. Our capital
expenditures for 2025 are expected to be in the range of $75 million to $135 million, including progress payments on construction
projects expected to be completed in 2025 or 2026, furniture and equipment costs, network equipment and other information
technology costs and acquisition of sites for future development. Actual expenditures may vary significantly from those expected,
depending on the number and cost of additional branch offices acquired or constructed and sites acquired for future development,
progress or delays encountered on ongoing and new construction projects, delays in obtaining or inability to obtain required approvals,
potential premises and equipment expenditures associated with acquisitions, if any, and other factors.
Operational Risk Management
Operational risk is the risk to current or anticipated earnings or capital arising from inadequate or failed internal processes or
systems, human errors or misconduct, reputational damage or other adverse internal or external events. Operational risk is inherent in
all of our businesses. To assist in our operational risk management, in addition to monitoring our operational risk profile against our
Board-approved risk appetite using key performance and risk metrics, we utilize risk control self-assessments across the Bank to
identify key operational risks and associated key internal controls. We have in place a number of controls that assist in the
management of operational risk including, but not limited to, transactional documentation requirements; systems and procedures to
monitor transactions; systems and procedures to detect and mitigate attempts to commit fraud, penetrate our systems, access customer
data, and/or deny access to our systems by legitimate customers; regulatory compliance reviews; and periodic reviews by various
components of our CRMG and our Internal Audit function. Reconciliation procedures have also been established to ensure that data
processing systems accurately capture data and transactions. Further, we have programs and procedures to maintain contingency and
business continuity plans for operational support in the event of disruptions to our business. We also mitigate certain operational risks
through the purchase of insurance. Our Operational Risk Management group, which reports to our CRO, has responsibilities for
assisting the business units in identifying, managing and monitoring operational risks including risks resulting from the use of
technology, cybersecurity risk, third-party vendor management risk, risks associated with the introduction of new products and
services, and various other operational risks.
Model Risk. Model risk is the risk that the various models utilized throughout the Bank do not provide accurate results,
particularly in times of market stress or other unforeseen circumstances or prove to be inadequate or inaccurate because of flaws in
their design or implementation. We have an internal Model Risk Management group (second line oversight), which reports to our
CRO, that has developed and implemented a model framework, in compliance with Federal Reserve Supervision and Regulation
Letter SR 11-7: Guidance on Model Risk Management, whereby all models used throughout the Bank are inventoried, assessed, and
validated in accordance with this framework. Ownership of our internal models resides with our quantitative modeling team (first line
oversight), who, along with our business units, manages the use of such models in accordance with our model framework.
Data Risk. Data risk is the exposure to loss of value or reputation caused by issues or limitations to an organization’s ability to
acquire, store, transform, move, and use its data assets in an accurate and timely fashion. The Data Risk Management group works
closely with the Bank’s key data stakeholders to monitor and execute on the Bank’s data governance and data quality mandate.
Legal Risk. As part of our operational risk management program, we also actively monitor our legal risk exposure. Legal risk
arises from the potential that unenforceable contracts, lawsuits or adverse judgments can disrupt or otherwise negatively affect our
operations or condition. These risks are inherent in all of our businesses. Legal risk exposures are actively and primarily managed by
our business units in conjunction with our legal department.
74
Strategic Risk Management
Strategic risk is the risk to current or anticipated earnings or capital, or franchise or enterprise value arising from, among other
items, adverse business decisions, poor implementation of business decisions, and adverse competitive business and macroeconomic
environment affecting the Bank’s business model. The assessment of strategic risk includes more than an analysis of our written
strategic plan. It focuses on opportunity costs and how plans, systems, and implementation affect, or could affect, our franchise or
enterprise value. It also incorporates how management analyzes external factors, such as economic, technological, competitive,
regulatory, and other environmental changes that affect our strategic direction. Our strategic risk profile is measured against our
Board-approved strategic risk appetite by our CRMG, which monitors our performance against our strategic objectives in addition to
measuring our financial performance against our peer group. Also, as part of our strategic risk monitoring process, the current and
expected systemic macroeconomic environment is monitored using a combination of metrics, models and various other tools.
Compliance Risk Management
Compliance risk is the risk of legal or regulatory sanctions, financial loss or damage to reputation resulting from failure to
comply with laws, regulations, rules, other regulatory requirements, or codes of conduct and other standards of self-regulatory
organizations applicable to us. Risks related to compliance matters are heightened by the heavily regulated environment in which we
operate. We have designed our processes and systems and provided education of applicable regulatory standards to our employees in
an effort to comply with these requirements. Compliance risk exposures are actively and primarily managed by our business units in
conjunction with our Corporate Compliance group, our legal department and the associated compliance programs operated under our
compliance framework and our compliance management system that govern the management of compliance risk. Our ERC and BRC
oversee our compliance program.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 1 to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data in this
Annual Report on Form 10-K for a discussion of certain recently issued accounting pronouncements.
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this Item is included in “Market and Interest Rate Risk Management” in the MD&A of this Annual
Report on Form 10-K beginning on page 65 and is hereby incorporated by reference.
75
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index
Page
Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, Little Rock, AR, (Auditor Firm ID: 238)
77
Consolidated Balance Sheets – December 31, 2024 and December 31, 2023
79
Consolidated Statements of Income – Years ended December 31, 2024, 2023 and 2022
80
Consolidated Statements of Comprehensive Income – Years ended December 31, 2024, 2023 and 2022
81
Consolidated Statements of Stockholders’ Equity – Years ended December 31, 2024, 2023 and 2022
82
Consolidated Statements of Cash Flows – Years ended December 31, 2024, 2023 and 2022
85
Notes to Consolidated Financial Statements
86
76
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Bank OZK
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Bank OZK and its subsidiaries (the “Company”) as of
December 31, 2024 and 2023, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity
and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred
to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of
December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Report
of Management on the Bank's Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
77
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses
As described in Notes 1 and 4 to the consolidated financial statements, management assesses the adequacy of the allowance for
credit losses ("ACL") based on evaluations of the loan portfolio utilizing objective and subjective criteria. The Company had a total
ACL of $619.4 million on a total loan balance of $30.0 billion as of December 31, 2024. The objective criteria primarily includes
estimated losses that are modeled from the respective score cards and the outputs from the Company's Current Expected Credit Loss
("CECL") platform. The score cards and the Company's CECL platform incorporate varying future economic forecasts in estimating
the Company's ACL. Management selects and weights several economic forecasts provided by an external vendor for purposes of
determining the Company's ACL. For purposes of the forecasts used in the Company's CECL methodology, management utilizes a
reasonable and supportable forecast period of two years, followed by a reversion of estimated losses on a systematic basis back to the
Company's historical mean.
The principal considerations for our determination that performing procedures relating to the allowance for credit losses is a
critical audit matter are (i) the significant judgment by management in determining the allowance for credit losses, which in turn led to
a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the
selection and weightings of economic forecast scenarios; and (ii) the audit effort involved the use of professionals with specialized
skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
Company's process for determining the allowance for credit losses, including controls over the selection and weightings of economic
forecast scenarios. These procedures also included, among others, testing management's process for determining the allowance for
credit losses by (i) evaluating the appropriateness of management's methodology; (ii) testing the data used in the estimate; and (iii)
evaluating the reasonableness of the selection and weightings of the economic forecast scenarios, which also involved the use of
professionals with specialized skill and knowledge to assist in performing these procedures to test management's process.
/s/ PricewaterhouseCoopers LLP
Little Rock, Arkansas
March 3, 2025
We have served as the Company’s auditor since 2016.
78
BANK OZK
CONSOLIDATED BALANCE SHEETS
December 31,
2024
2023
(Dollars in thousands, except per share amounts)
ASSETS
Cash and cash equivalents
$
2,781,101 $
2,149,529
Investment securities – available for sale (“AFS”)
2,836,150
3,244,371
Federal Home Loan Bank of Dallas (“FHLB”) and other bankers’ bank stocks
39,930
50,400
Loans
29,968,867
26,459,075
Allowance for loan losses
(465,547)
(339,394)
Net Loans
29,503,320
26,119,681
Premises and equipment, net
739,111
676,821
Foreclosed assets
69,381
61,720
Accrued interest receivable
174,025
170,110
Bank owned life insurance (“BOLI”)
829,405
808,490
Goodwill
660,789
660,789
Other, net
625,640
295,546
Total assets
$
38,258,852 $
34,237,457
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing
$
3,769,543 $
4,095,874
Savings and interest bearing transaction
9,954,723
9,074,296
Time
17,318,806
14,234,973
Total deposits
31,043,072
27,405,143
Other borrowings
420,813
805,318
Subordinated notes
348,575
347,761
Subordinated debentures
113,652
121,652
Reserve for losses on unfunded loan commitments
153,813
161,834
Accrued interest payable and other liabilities
472,733
255,773
Total liabilities
32,552,658
29,097,481
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 100,000,000 shares authorized; 14,000,000 shares
issued and outstanding at December 31, 2024 and 2023
338,980
338,980
Common stock, $0.01 par value; 300,000,000 shares authorized; 113,457,726 and
113,148,672 shares issued and outstanding, at December 31, 2024 and 2023,
respectively
1,135
1,131
Additional paid-in capital
1,625,506
1,612,446
Retained earnings
3,816,138
3,283,818
Accumulated other comprehensive loss
(76,136)
(97,374)
Total stockholders’ equity before noncontrolling interest
5,705,623
5,139,001
Noncontrolling interest
571
975
Total stockholders’ equity
5,706,194
5,139,976
Total liabilities and stockholders’ equity
$
38,258,852 $
34,237,457
See accompanying notes to the consolidated financial statements.
79
BANK OZK
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2024
2023
2022
(Dollars in thousands, except per share amounts)
Interest income:
Loans
$
2,458,551 $
1,991,546 $
1,189,773
Investment securities:
Taxable
34,736
39,429
41,526
Tax-exempt
46,067
38,957
22,653
Deposits with banks
110,223
58,241
12,116
Total interest income
2,649,577
2,128,173
1,266,068
Interest expense:
Deposits
1,084,855
627,050
94,574
Other borrowings
10,819
41,669
13,033
Subordinated notes
10,439
10,439
10,439
Subordinated debentures
9,740
9,530
5,780
Total interest expense
1,115,853
688,688
123,826
Net interest income
1,533,724
1,439,485
1,142,242
Provision for credit losses
175,552
165,470
83,494
Net interest income after provision for credit losses
1,358,172
1,274,015
1,058,748
Non-interest income:
Deposit-related fees:
NSF fees
—
4,228
4,337
Overdraft fees
13,842
13,831
13,387
All other service charges
29,495
27,995
28,102
Loan-related fees
28,144
18,920
13,819
BOLI income:
Increase in cash surrender value
22,677
20,696
19,532
Death benefits
1,344
2,966
807
Trust income
9,567
8,524
7,990
Gains on sales of other assets
3,417
9,029
11,467
Net gains on investment securities
560
3,243
2,019
Other
15,367
13,117
13,043
Total non-interest income
124,413
122,549
114,503
Non-interest expense:
Salaries and employee benefits
296,016
258,846
226,373
Net occupancy and equipment
71,676
72,591
70,058
Other operating expenses
183,601
198,124
155,290
Total non-interest expense
551,293
529,561
451,721
Income before taxes
931,292
867,003
721,530
Provision for income taxes
214,789
176,164
157,440
Net income
716,503
690,839
564,090
Earnings attributable to noncontrolling interest
(47)
(56)
51
Preferred stock dividends
16,187
16,187
16,621
Net income available to common stockholders
$
700,269 $
674,596 $
547,520
Basic earnings per common share
$
6.16 $
5.89 $
4.55
Diluted earnings per common share
$
6.14 $
5.87 $
4.54
See accompanying notes to the consolidated financial statements.
80
BANK OZK
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Net income
$
716,503 $
690,839 $
564,090
Other comprehensive income (loss):
Unrealized gains and (losses) on investment securities AFS
28,059
106,203
(265,121)
Tax effect of unrealized gains and losses on investment securities AFS
(6,821)
(25,928)
63,631
Total other comprehensive income (loss)
21,238
80,275
(201,490)
Total comprehensive income
$
737,741 $
771,114 $
362,600
See accompanying notes to the consolidated financial statements.
81
BANK OZK
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Non-
Controlling
Interest
Total
(Dollars in thousands, except per share amounts)
Balances – December 31, 2023
$ 338,980 $
1,131 $ 1,612,446 $ 3,283,818 $
(97,374) $
975 $ 5,139,976
Cumulative effect of change in accounting
principle
—
—
—
12,690
—
—
12,690
Balances – January 1, 2024
338,980
1,131 1,612,446 3,296,508
(97,374)
975 5,152,666
Net income
—
—
— 716,503
—
—
716,503
Earnings attributable to noncontrolling
interest
—
—
—
(47)
—
47
—
Total other comprehensive income
—
—
—
—
21,238
—
21,238
Preferred stock dividends, $1.15624 per share
—
—
—
(16,187)
—
—
(16,187)
Common stock dividends, $1.58 per share
—
—
— (180,639)
—
—
(180,639)
Return of capital to non-controlling interest
—
—
—
—
—
(451)
(451)
Issuance of 532,941 shares of common stock
pursuant to stock-based compensation plans
—
6
856
—
—
—
862
Repurchase and cancellation of 11,903 shares
of common stock under share repurchase
program, including excise taxes
—
—
(462)
—
—
—
(462)
Repurchase and cancellation of 184,415
shares of common stock withheld for tax
pursuant to stock-based compensation plans
—
(2)
(8,008)
—
—
—
(8,010)
Stock-based compensation expense
—
—
20,674
—
—
—
20,674
Forfeitures of 27,569 shares of unvested
restricted common stock
—
—
—
—
—
—
—
Balances – December 31, 2024
$ 338,980 $
1,135 $ 1,625,506
$ 3,816,138 $
(76,136) $
571 $ 5,706,194
See accompanying notes to the consolidated financial statements.
82
BANK OZK
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Non-
Controlling
Interest
Total
(Dollars in thousands, except per share amounts)
Balances – December 31, 2022
$ 338,980 $
1,172 $ 1,753,941 $ 2,773,135 $
(177,649) $
1,359 $ 4,690,938
Net income
—
—
— 690,839
—
—
690,839
Earnings attributable to noncontrolling
interest
—
—
—
(56)
—
56
—
Total other comprehensive income
—
—
—
—
80,275
—
80,275
Preferred stock dividends $1.15624 per share
—
—
—
(16,187)
—
—
(16,187)
Common stock dividends, $1.42 per share
—
—
— (163,913)
—
—
(163,913)
Return of capital to noncontrolling interest
—
—
—
—
—
(440)
(440)
Issuance of 522,651 shares of common stock
pursuant to stock-based compensation plans
—
5
1,166
—
—
—
1,171
Repurchase and cancellation of 4,304,239
shares of common stock under share
repurchase program
—
(44)
(151,421)
—
—
—
(151,465)
Repurchase and cancellation of 215,362
shares of common stock withheld for taxes
pursuant to restricted stock vesting
—
(2)
(8,672)
—
—
—
(8,674)
Stock-based compensation expense
—
—
17,432
—
—
—
17,432
Forfeitures of 31,306 shares of unvested
restricted common stock
—
—
—
—
—
—
—
Balances – December 31, 2023
$ 338,980 $
1,131 $ 1,612,446
$ 3,283,818 $
(97,374) $
975 $ 5,139,976
See accompanying notes to the consolidated financial statements.
83
BANK OZK
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Non-
Controlling
Interest
Total
(Dollars in thousands, except per share amounts)
Balances – December 31, 2021
$ 338,980 $
1,254 $ 2,093,702 $ 2,378,466 $
23,841 $
3,117 $ 4,839,360
Net income
—
—
— 564,090
—
—
564,090
Earnings attributable to noncontrolling interest
—
—
—
51
—
(51)
—
Total other comprehensive loss
—
—
—
—
(201,490)
— (201,490)
Preferred stock dividends $1.187 per share
(16,621)
—
—
(16,621)
Common stock dividends, $1.26 per share
—
—
— (152,851)
—
— (152,851)
Return of capital to noncontrolling interest
—
—
—
—
—
(1,707)
(1,707)
Issuance of 305,839 shares of common stock
pursuant to stock-based compensation plans
—
3
2,490
—
—
—
2,493
Repurchase and cancellation of 8,373,398 shares
of common stock under share repurchase
program
—
(83) (349,886)
—
—
— (349,969)
Repurchase and cancellation of 116,864 shares of
common stock withheld for taxes pursuant to
restricted stock vesting
—
(1)
(5,572)
—
—
—
(5,573)
Stock-based compensation expense
—
—
13,206
—
—
—
13,206
Forfeitures of 82,397 shares of unvested restricted
common stock
—
(1)
1
—
—
—
—
Balances – December 31, 2022
$ 338,980 $
1,172 $ 1,753,941
$ 2,773,135 $
(177,649) $
1,359 $ 4,690,938
See accompanying notes to the consolidated financial statements.
84
BANK OZK
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Cash flows from operating activities:
Net income
$
716,503
$
690,839
$
564,090
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
27,250
30,083
30,067
Amortization, net of accretion
55,391
26,406
18,419
Earnings attributable to noncontrolling interest
(47)
(56)
51
Provision for credit losses
175,552
165,470
83,494
Provision for losses on foreclosed and other assets
3,467
1,268
1,055
Originations of mortgage loans held for sale
(28,909)
—
—
Proceeds from sales of mortgage loans held for sale
26,966
—
—
Net amortization of investment securities AFS
15,019
20,189
32,198
Net gains on investment securities
(560)
(3,243)
(2,019)
Amortization of operating lease right-of-use assets
6,601
7,313
7,031
Gains on sales of other assets
(3,417)
(9,029)
(11,467)
Deferred income tax expense (benefit)
56,368
(52,933)
63,825
Increase in cash surrender value of BOLI
(22,677)
(20,696)
(19,532)
BOLI death benefits in excess of cash surrender value
(1,344)
(2,966)
(807)
Stock-based compensation expense
20,674
17,432
13,206
Changes in assets and liabilities:
Accrued interest receivable
(3,957)
(44,980)
(42,240)
Other assets, net
(27,615)
31,222
(19,310)
Accrued interest payable and other liabilities
(180,800)
25,232
46,885
Net cash provided by operating activities
834,465
881,551
764,946
Cash flows from investing activities:
Proceeds from sales of FHLB and other bankers’ bank stock
73,161
14,264
37,211
Purchases of FHLB and other bankers' bank stock
(62,691)
(22,257)
(38,829)
Proceeds from maturities/calls/paydowns of investment securities AFS
996,186
569,596
1,088,141
Proceeds from sales of investment securities AFS
948
5,310
24
Purchases of investment securities AFS
(575,854)
(241,650)
(960,358)
Proceeds from sale of loans
28,370
31,614
71,960
Net increase in loans
(3,613,162)
(5,811,407)
(2,554,547)
Purchases of premises and equipment
(95,617)
(29,139)
(29,852)
Proceeds from BOLI death benefits
3,106
4,947
5,155
Proceeds from sales of other assets
18,317
40,363
25,159
Net cash invested in unconsolidated investments
(25,377)
(92,190)
(52,963)
Net cash paid in branch divestiture transaction
—
—
(21,346)
Net cash (used) provided by investing activities
(3,252,613)
(5,530,549)
(2,430,245)
Cash flows from financing activities:
Net increase in deposits
3,637,929
5,905,000
1,318,191
Net proceeds (repayments) of other borrowings
(384,505)
198,652
(149,655)
Proceeds from issuance of common stock pursuant to stock-based compensation plans
862
1,171
2,493
Return of capital to non-controlling interest
(451)
(440)
(1,707)
Cash dividends paid on common stock
(179,456)
(162,984)
(152,235)
Cash dividends paid on preferred stock
(16,187)
(16,187)
(16,621)
Repurchase and cancellation of shares of common stock – share repurchase program
(462)
(151,465)
(349,969)
Repurchase and cancellation of shares of common stock – withheld for taxes
(8,010)
(8,674)
(5,573)
Net cash provided by financing activities
3,049,720
5,765,073
644,924
Net increase (decrease) in cash and cash equivalents
631,572
1,116,075
(1,020,375)
Cash and cash equivalents – beginning of period
2,149,529
1,033,454
2,053,829
Cash and cash equivalents – end of period
$
2,781,101
$
2,149,529
$
1,033,454
See accompanying notes to the consolidated financial statements.
85
Bank OZK
Notes to Consolidated Financial Statements
December 31, 2024, 2023, and 2022
1. Organization, Regulation and Summary of Significant Accounting Policies
Bank OZK (the “Bank”) is headquartered in Little Rock, Arkansas and provides a wide range of retail and commercial banking
services. At December 31, 2024, the Bank conducted operations through more than 240 offices in nine states, including offices in
Arkansas, Georgia, Florida, North Carolina, Texas, Tennessee, California, New York and Mississippi. The Bank owns 100% of eight
finance subsidiary business trusts - Ozark Capital Statutory Trust II (“Ozark II”), Ozark Capital Statutory Trust III (“Ozark III”),
Ozark Capital Statutory Trust IV (“Ozark IV”), Ozark Capital Statutory Trust V (“Ozark V”), Intervest Statutory Trust II (“Intervest
II”), Intervest Statutory Trust III (“Intervest III”), Intervest Statutory Trust IV (“Intervest IV”) and Intervest Statutory Trust V
(“Intervest V”) (collectively, the “Trusts”). In addition, the Bank owns a subsidiary that holds its investment securities, a subsidiary
engaged in the development of real estate, a subsidiary that holds an ownership interest in a private aircraft, a subsidiary that owns a
renewable energy facility and various other entities that hold foreclosed assets or tax credits or engage in other activities.
The Bank is an Arkansas state banking corporation and is subject to regulation by the Arkansas State Bank Department
(“ASBD”). Because the Bank is an insured depository institution that is not a member bank of the Federal Reserve System, its primary
federal regulator is the Federal Deposit Insurance Corporation (“FDIC”).
Basis of presentation, use of estimates and principles of consolidation – The preparation of financial statements in conformity
with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates, assumptions
and judgments that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results
could materially differ from those estimates.
These consolidated financial statements include the accounts of the Bank, the investment subsidiary, the real estate subsidiary,
the aircraft subsidiary, the renewable energy subsidiary and various other entities in accordance with GAAP. In addition, subsidiaries
in which the Bank has a majority voting interest principally defined as owning a voting or economic interest greater than 50% or
where the Bank exercises control over the operating and financial policies of the subsidiary through an operating agreement or other
means are consolidated. Investments in companies that are not variable interest entity (“VIEs”) and which the Bank does not have a
majority voting interest or the Bank does not exercise control over the operating and financial policies are generally accounted for
utilizing the cost or equity methods of accounting. Significant intercompany transactions and amounts have been eliminated in
consolidation.
The voting interest approach is not applicable for entities that are not controlled through voting interests or in which the equity
investors do not bear the residual economic risk. In such instances, management makes a determination, based on its review of
applicable GAAP, on when the assets, liabilities and activities of the VIE should be included in the Bank’s consolidated financial
statements. GAAP requires a VIE to be consolidated by a company if that company has a controlling financial interest with both (1)
the power to direct the activities of the entity that most significantly affects the entity’s economic performance and (2) the obligation
to absorb losses of the entity that could potentially be significant to the entity or the right to receive benefits from the entity that could
potentially be significant to the entity. The Bank has determined that the 100%-owned finance subsidiary Trusts are VIEs, but that the
Bank is not the primary beneficiary of the Trusts. Accordingly, the Bank does not consolidate the activities of the Trusts into its
financial statements, but instead reports its ownership interests in the Trusts as other assets and reports the subordinated debentures
issued to the Trusts as a liability in its consolidated balance sheets. The distributions on the subordinated debentures are reported as
interest expense in the Bank’s consolidated statements of income.
Cash and cash equivalents – For cash flow purposes, cash and cash equivalents include cash on hand, amounts due from banks,
interest earning deposits with banks, and amounts on deposit with the Federal Reserve.
Investment securities – Management determines the appropriate classification of investment securities at the time of purchase
and reevaluates such designation as of each balance sheet date. At December 31, 2024 and 2023, all of the Bank’s investment
securities were classified as available for sale (“AFS”).
Investment securities AFS are reported at estimated fair value, with the unrealized gains and losses determined on a specific
identification basis. Realized gains or losses on the sale of investment securities AFS are recognized on the specific identification
method at the time of sale and are included in non-interest income. The Bank utilizes independent third parties as its principal pricing
sources for determining fair value of investment securities which are measured on a recurring basis. As a result, the Bank receives
estimates of fair value from at least two independent pricing sources for the majority of its individual securities within its investment
portfolio. For investment securities traded in an active market, fair values are based on quoted market prices if available. If quoted
market prices are not available, fair values are based on quoted market prices of comparable securities, broker quotes or
comprehensive interest rate tables, pricing matrices or a combination thereof. For investment securities traded in a market that is not
86
active, fair value is determined using unobservable inputs. All fair value estimates of the Bank’s investment securities are reviewed on
a quarterly basis.
Investment securities AFS with unrealized gains are reported as a separate component of stockholders’ equity, included in
accumulated other comprehensive income (loss), are adjusted for changes in unrealized gains, net of related income tax, and are
included in accumulated other comprehensive income (loss), on a specific identification basis. Investment securities AFS with
unrealized losses require the Bank to evaluate its intent or likelihood of disposing of such investment securities. If the Bank intends to
sell an investment security AFS in an unrealized loss position, or if it is more likely than not that it will be required to sell an
investment security AFS in an unrealized loss position before recovery of its amortized cost basis, the investment security’s amortized
cost basis is written down to fair value through current period expense. If the Bank does not intend to sell an investment security AFS
in an unrealized loss position, or if it is more likely than not that the Bank will not sell an investment security AFS that is in an
unrealized loss position, the Bank is required to assess whether the decline in fair value has resulted from credit losses or non-credit
factors. Factors considered during such review include the credit quality, finance condition and near term prospects of the issuer, the
nature and cause of the unrealized loss and various other factors. If the Bank’s assessment determines a material credit loss exists, the
present value of cash flows expected to be collected from the investment security AFS is compared to the amortized cost basis of the
investment security and if the present value of cash flows expected to be collected is less than amortized cost, an allowance for credit
losses and a provision for credit loss expense may be recorded. If the Bank’s assessment determines that a credit loss does not exist,
the Bank records the decline in fair value through other comprehensive income (loss), net of related income tax effects with such
decline included in accumulated other comprehensive income (loss).
The fair values of the Bank’s investment securities traded in both active and inactive markets can be volatile and may be
influenced by a number of factors including market interest rates, prepayment speeds, discount rates, credit quality of the issuer,
general market conditions including market liquidity conditions and other factors. Factors and conditions are constantly changing, and
fair values could be subject to material variations that may significantly affect the Bank’s financial condition, results of operations and
liquidity.
At December 31, 2024 and 2023, the Bank owned shares in the FHLB, First National Banker’s Bankshares, Inc. and certain
other bankers’ bank stock, which do not have readily determinable fair values and are carried at cost.
Interest and dividends on investment securities, including the amortization of premiums and accretion of discounts are included
in interest income. Any discount or premium on investment securities is accreted or amortized through maturity, or in the case of
mortgage-backed securities over the estimated life of the security, except for premiums on callable securities are amortized to the
earliest call date. Purchases and sales of investment securities are recorded on a trade-date basis.
Loans – Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are
reported at their outstanding principal balance adjusted for any charge-offs and accretion or amortization of deferred fees or costs.
Interest on loans is recognized on an accrual basis and is calculated using the simple interest method on daily balances of the principal
amount outstanding. Loan origination fees and costs are generally deferred and recognized over the life of the loan as an adjustment to
yield on the related loan. Minimum interest, yield maintenance income and prepayment penalties are recorded as adjustments to yield
on the related loan when such items are earned. Loan-related fees that are not considered yield adjustments are recorded as non-
interest income when such items are earned and collection appears likely.
In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments
to extend credit and letters of credit. Such financial instruments are recorded in the financial statements when they are funded. Related
fees are generally recognized when collected.
Allowance for credit losses (“ACL”) – The Bank utilizes the current expected credit loss (“CECL”) methodology to determine
its ACL, whereby a provision for credit losses is charged against income. The portion of loans that are deemed to be uncollectible are
charged against the ACL when the Bank believes that collectability of all, or some portion of the outstanding amortized cost is
unlikely. Subsequent recoveries, if any, of loans previously charged off are credited to the ACL. For credit risk related to a contractual
obligation to extend credit, the Bank estimates expected credit losses over the contractual period considering the likelihood that
funding will occur. On the Bank’s consolidated balance sheet, the portion of the ACL related to the outstanding balance of the Bank’s
loan portfolio is a contra-asset valuation account that is reported as Allowance for Loan Losses (“ALL”) and the portion of ACL
related to the reserve for losses on unfunded loan commitments is reported as a liability.
The Bank utilizes a dual risk rating system that incorporates credit score cards, which utilize quantitative models and qualitative
factors, in determining the risk rating for its commercial loans. This dual risk rating methodology incorporates an obligor risk rating
(“ORR”) and a facility risk rating (“FRR”) which are combined to create a two-dimensional risk rating for commercial loans. The
ORR is influenced by a loan’s probability of default (“PD”) as determined from the score cards, with such PDs affected by various
financial metrics, such as projected cash flow, loan-to-value (“LTV”), property and/or market characteristics, borrower financial
87
strength and other financial and loan characteristics. Thus, the higher a loan’s PD, the more adverse the loan’s ORR. The FRR is
influenced by a loan’s loss given default (“LGD”) as determined from the score cards. LGDs are affected by the estimated loss when a
borrower cannot or will not repay the loan. Estimated losses take into consideration the Bank’s underwriting standards and protections
including collateral and collateral margin requirements, lien position, compliance with any loan covenants, support required from
guarantors, insurance and other factors. The higher a loan’s LGD, the more adverse the loan’s FRR. The combined dual risk rating
provides an annual expected loss estimate for each commercial loan, and based on such loss estimates, a regulatory risk rating is
assigned. Additionally, the Bank may apply risk rating “overrides” whereby management may further adjust a loan’s risk rating to the
extent it believes there is additional information about a loan or a borrower that is not fully reflected in the ORR and/or FRR. The
Bank utilizes risk ratings from the scorecards in assigning and evaluating the credit quality of its commercial loans. The Bank’s
consumer loans and certain small business loans to individuals are not risk rated in the same manner as its commercial loans. Instead,
these loans are risk rated based on performance and past due status with all such loans that are less than 30 days past due typically
assigned a “pass rating” and all loans that are 30 days or more past due assigned a more adverse risk rating commensurate with each
loan’s perceived risk.
Outputs from the scorecards, including PD and LGD outputs, are utilized in determining the necessary ACL for all loans that
contain similar risk characteristics. In determining the ACL, the Bank separates loans into similar risk characteristics and utilizes score
card estimates of credit loss that categorize loans based on loan type. The loan types segregated by score card are as follows:
•
Construction Real Estate – In assessing estimated credit losses on construction real estate loans, the Bank utilizes various
project and borrower metrics, including, but not limited to, projected cash flow, LTV, property and/or market characteristics,
and borrower financial strength.
•
Commercial and Industrial – In assessing estimated credit losses on commercial and industrial loans, the Bank utilizes
various borrower and loan metrics, including, but not limited to, borrower’s financial position and results from operations,
LTV, and borrower and/or guarantor financial strength.
•
Consumer Mortgages – In assessing estimated credit losses on consumer mortgage loans, the Bank utilizes borrower
information such as borrower’s cash flow, credit score and LTV, among others.
•
Consumer Recreational Vehicle (“RV”) and Marine – In assessing estimated credit losses on RV and marine loans, the Bank
utilizes various borrower information such as payment-to-income, credit score and LTV, among others.
•
Other Consumer – In assessing estimated credit losses on other consumer loans, the Bank utilizes various borrower
origination information such as vintage, credit score and product, among others.
The score cards utilized in determining the ACL use quantitative data related to the Bank’s loans and unfunded loan
commitments. In determining the estimated loss, the quantitative data utilized by the score card models includes, but is not limited to,
estimated debt service coverage ratios, LTV ratios, total assets, total revenue and margin, and for consumer loans, individual credit
scores. In addition, the score cards and the Bank’s CECL platform incorporate varying future economic forecasts in estimating the
Bank’s ACL. While the Bank’s score cards and CECL platform produce an estimated lifetime loss for all loans not individually
evaluated, the score cards and CECL platform may have certain limitations. To address potential limitations, the Bank’s methodology
considers additional qualitative adjustments that are applied to its CECL calculations. In determining the ACL, the Bank utilizes a
reasonable and supportable forecast period of two years followed by a reversion of estimated losses on a systematic basis back to its
historical mean. Expected credit losses are estimated over the contractual term of the loan, adjusted for anticipated or expected
prepayments. The contractual term of the loan excludes expected extensions or modifications.
The ACL is maintained at a level that the Bank believes will be adequate to absorb expected credit losses in future periods
associated with its loan portfolio and unfunded loan commitments. Provisions to and the adequacy of the ACL are based on
evaluations of the loan portfolio utilizing objective and subjective criteria. The objective criteria primarily includes estimated losses
that are modeled from the respective score cards and the outputs from the Bank’s CECL platform. In addition to these objective
criteria, the Bank subjectively assesses the adequacy of the ACL and the need for changes thereto, with consideration given to the
nature and mix of the portfolio, national, regional and local business and economic conditions that may affect borrowers’ ability to
pay, concentrations of credit, changes in the experience, ability and depth of lending management and other relevant staff, changes in
the nature and volume of the portfolio and in the terms of the loans, overall portfolio quality, historical loss experience and other
relevant factors. In addition, for loans that do not share risk characteristics similar to those contained within their respective loan
segments, the Bank may perform an individual assessment of the ACL utilizing expected cash flows, collateral values or a
combination thereof. On an ongoing basis, the Bank evaluates the underlying collateral on certain collateral dependent loans and, if
needed, due to changes in market or property conditions, the underlying collateral is reassessed and the estimated collateral value is
revised. The determination of collateral value includes any adjustments considered necessary related to estimated holding periods,
estimated liquidation discounts and estimated selling costs. While an individual assessment and related ACL has been calculated for
certain loans, no portion of the Bank’s ACL is restricted to any individual loan or group of loans, and the entire ACL is available to
absorb losses from any and all loans, including unfunded loan commitments.
88
Changes in the criteria used in this evaluation or the availability of new information could cause the ACL to be increased or
decreased in future periods. In addition, bank regulatory agencies, as part of their examination process, may require adjustments to the
ACL based on their judgment and estimates.
The accrual of interest on loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments
as they become due. The Bank generally places a loan on nonaccrual status when such loan is (i) nonperforming or (ii) 90 days or
more past due, or earlier when doubt exists as to the ultimate collection of payments. The Bank may continue to accrue interest on
certain loans contractually past due 90 days or more if such loans are both well secured and in the process of collection. At the time a
loan is placed on nonaccrual status, interest previously accrued but uncollected is reversed and charged against interest income.
Nonaccrual loans are generally returned to accrual status when payments are no longer past due, the loan has performed in accordance
with its contractual terms for a reasonable period of time (generally at least six months) and is expected to continue to perform in
accordance with its contractual terms. If a loan is determined to be uncollectible, the portion of the principal determined to be
uncollectible is charged against the ACL. Income on nonaccrual loans is recognized on a cash basis when and if actually collected.
Foreclosed assets – Repossessed personal properties and real estate acquired through or in lieu of foreclosure are recorded at fair
value less estimated cost to sell at the date of repossession or foreclosure.
Valuations of all foreclosed assets are periodically reviewed by management with the carrying value of such assets adjusted
through non-interest expense to the then estimated fair value, generally based on third-party appraisals, broker price opinions or other
valuations of the property, net of estimated selling costs. Gains and losses from the sale of such repossessions and real estate acquired
through or in lieu of foreclosure are recorded in non-interest income and expenses to maintain the properties are included in non-
interest expense.
Premises and equipment – Premises and equipment are reported at cost less accumulated depreciation and amortization.
Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the related assets. Leasehold
improvements are amortized over the shorter of the asset’s estimated useful life or the term of the lease. Accelerated depreciation
methods are used for income tax purposes. Maintenance and repair charges are expensed as incurred.
Income taxes – The Bank utilizes the asset and liability method in accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based upon the difference between the values of the assets and liabilities as reflected in the
financial statements and their related tax basis using enacted tax rates in effect for the year or years in which the differences are
expected to be recovered or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through
the provision for income taxes.
As a result of recording, at fair value, acquired assets and assumed liabilities pursuant to business combinations, differences in
amounts reported for financial statement purposes and their related basis for federal and state income tax purposes are created. Such
differences are recorded as deferred tax assets and liabilities using enacted tax rates in effect for the year or years in which the
differences are expected to be recovered or settled. To the extent that information becomes available that results in a change in
management’s estimates and assumptions, an increase or decrease of the deferred tax asset or liability is recorded as an adjustment to
deferred income tax expense (benefit).
The Bank recognizes a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a
tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that has
a greater than 50% likelihood of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax
benefit is recorded.
The Bank files consolidated tax returns. The Bank and the other consolidated entities provide for income taxes on a separate
return basis and remit to the Bank amounts determined to be currently payable. The Bank recognizes interest related to income tax
matters as interest income or expense, and penalties related to income tax matters are recognized as non-interest expense. The Bank is
no longer subject to income tax examinations by U.S. federal, state and local tax authorities for years prior to 2019.
Bank owned life insurance (“BOLI”) – BOLI consists of life insurance purchased by the Bank on (i) a qualifying group of
officers with the Bank designated as owner and beneficiary of the policies and (ii) one of the Bank’s executive officers with the Bank
designated as owner and both the Bank and the executive officer designated as beneficiaries of the policies. The increases in the cash
surrender values on BOLI policies help to offset a portion of employee benefit costs or to offset a portion of the costs of a
supplemental executive retirement plan for one of the Bank’s executive officers. BOLI is carried at the policies’ realizable cash
surrender values with changes in cash surrender values and death benefits received in excess of cash surrender values reported in non-
interest income.
89
Goodwill – Goodwill represents the excess purchase price over the fair value of net assets acquired in business acquisitions. The
Bank had goodwill of $660.8 million at both December 31, 2024 and 2023. The Bank reviews goodwill annually, or more frequently if
events or changes in circumstances indicate the carrying value might be impaired. The Bank performed its annual impairment test of
goodwill as of September 30, 2024, which included comparing the estimated fair value of the Bank’s operations (the reporting unit)
with net book value. The September 30, 2024 impairment test did not indicate an impairment of goodwill.
Service charges on deposit accounts – Service charges on deposit accounts typically represent fees for monthly account
maintenance and transaction activity, including overdraft fees. This revenue is generally recognized when the performance obligation
has been achieved, the transaction is completed and/or the fee is incurred and payment is generally received when the performance
obligation has been satisfied or the fee has been incurred.
Stock-based compensation – The Bank has an equity incentive plan for officers and employees and non-employee directors,
which is described more fully in Note 15. The Bank measures the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award and, in the case of certain long-term incentive agreements, based on
the expected performance achievement levels over the term of the agreements. Such cost is recognized over the vesting period of the
award.
Earnings per common share – Earnings per common share (“EPS”) are computed using the two-class method. Basic EPS are
computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding
during the applicable period. Diluted EPS are computed by dividing net income available to common stockholders by the weighted-
average number of common shares outstanding after consideration of the dilutive effect, if any, of the Bank’s common stock options
using the treasury stock method and the Bank’s non-vested performance stock units under its long-term incentive agreements. The
Bank has determined that its outstanding non-vested restricted stock awards that were granted to its employees and non-employee
directors are participating securities. The calculations of basic and diluted EPS are included in Note 23.
Segment disclosures – The Bank operates in only one segment with the Bank’s Chairman of the Board and Chief Executive
Officer being the chief operating decision maker (“CODM”) for the Bank. The Bank’s CODM evaluates the Bank’s consolidated net
income and net interest income, among other consolidated metrics, in managing the Bank’s resources and assessing performance. The
Bank’s consolidated net income and net interest income are disclosed on the face of the Consolidated Statements of Net Income on
page 80. Accordingly, there is no requirement to report segment information in the Bank’s consolidated financial statements. The
Bank operates in only one business segment.
Recent accounting pronouncements – On March 29, 2023, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) 2023-02, Investments-Equity Method and Joint Ventures (Topic 323): Accounting for
Investments in Tax Credit Structures Using the Proportional Amortization Method (“ASU 2023-02”). ASU 2023-02 permits reporting
entities to elect to account for equity investments, regardless of the tax credit program from which the income tax credits are received,
using the proportional amortization method if certain conditions are met. The Bank adopted ASU 2023-02 on January 1, 2024 using
the modified retrospective method and, at adoption, the Bank recorded as a cumulative effect from the change in accounting principle
a $12.7 million increase to the Bank’s retained earnings. At adoption, the Bank increased the carrying value of its tax credit
investments, which are included in other assets, and increased other liabilities by $210 million to account for uncalled capital
commitments that are unconditional and legally binding.
On November 27, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures (“ASU 2023-07”). ASU 2023-07 amends the disclosure requirements related to segment reporting primarily through
enhanced disclosure about significant segment expenses and by requiring disclosure of segment information on an annual and interim
basis. ASU 2023-07 was effective for annual periods beginning after December 15, 2023 and subsequent interim periods beginning
after December 15, 2024. The Bank adopted ASU 2023-07 effective December 31, 2024 with no material impact on the Bank’s
financial statement disclosures. The Bank operates in only one business segment and does not have foreign operations.
On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures
(“ASU 2023-09”). ASU 2023-09 requires public business entities to, on an annual basis, disclose a tabular rate reconciliation using
both percentage and reporting currency amounts with additional qualitative disclosures of individually significant reconciling items, if
needed. ASU 2023-09 also requires all entities on an annual basis to disclose income taxes paid, net of refunds, disaggregated by
jurisdiction (federal, state, and foreign). For public business entities, ASU 2023-09 is effective for annual periods beginning after
December 15, 2024, though early adoption is permitted. The Bank is currently assessing the potential impact of ASU 2023-09 but does
not expect it to have a significant impact on our financial statement disclosures.
On November 4, 2024, the FASB issued ASU 2024-03, Income Statement: Reporting Comprehensive Income-Expense
Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”). ASU 2024-03 will require public business entities to disclose
disaggregated information about certain expense categories in the notes to the financial statements at interim and annual reporting
90
periods. For public business entities, ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and
interim reporting periods beginning after December 15, 2027. The Bank is currently assessing the potential impact of ASU 2024-03
but does not expect it to have a significant impact on our financial statement disclosures.
Reclassifications – Certain reclassifications of prior years’ amounts have been made to conform with the 2024 financial
statements presentation. These reclassifications had no impact on prior years’ net income, as previously reported.
2. Investment Securities
The following table presents the amortized cost and estimated fair value of investment securities AFS as of the dates indicated.
Amortized Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Estimated Fair
Value
(Dollars in thousands)
December 31, 2024:
U.S. Government agency mortgage-backed securities
$
1,327,396 $
3 $
(70,928) $
1,256,471
Obligations of state and political subdivisions
1,451,430
8,825
(34,559)
1,425,696
Other U.S. Government agency securities
130,000
—
(282)
129,718
Corporate obligations
26,718
—
(2,453)
24,265
Total investment securities AFS
$
2,935,544 $
8,828 $
(108,222) $
2,836,150
December 31, 2023:
U.S. Government agency mortgage-backed securities
$
1,272,015 $
1 $
(97,587) $
1,174,429
Obligations of state and political subdivisions
1,406,617
22,727
(28,456)
1,400,888
Other U.S. Government agency securities
658,851
—
(20,579)
638,272
Corporate obligations
34,341
—
(3,559)
30,782
Total investment securities AFS
$
3,371,824 $
22,728 $
(150,181) $
3,244,371
The following table shows the estimated fair value of investment securities AFS having gross unrealized losses and the amount
of such unrealized losses, aggregated by investment category and length of time that individual investment securities have been in a
continuous unrealized loss position, as of the dates indicated.
Less than 12 Months
12 Months or More
Total
Estimated
Fair Value
Unrealized
Losses
Estimated
Fair Value
Unrealized
Losses
Estimated
Fair Value
Unrealized
Losses
(Dollars in thousands)
December 31, 2024:
U.S. Government agency mortgage-backed
securities
$ 398,325 $
1,383 $ 857,891 $
69,545 $ 1,256,216 $
70,928
Obligations of state and political subdivisions
376,957
5,413
411,147
29,146
788,104
34,559
Other U.S. Government agency securities
—
—
129,718
282
129,718
282
Corporate obligations
536
2
23,729
2,451
24,265
2,453
Total investment securities AFS
$ 775,818 $
6,798 $ 1,422,485 $ 101,424 $ 2,198,303 $ 108,222
December 31, 2023:
U.S. Government agency mortgage-backed
securities
$
771 $
8 $ 1,173,593 $
97,579 $ 1,174,364 $
97,587
Obligations of state and political subdivisions
218,365
2,822
455,862
25,634
674,227
28,456
Other U.S. Government agency securities
—
—
638,272
20,579
638,272
20,579
Corporate obligations
—
—
30,782
3,559
30,782
3,559
Total investment securities AFS
$ 219,136 $
2,830 $ 2,298,509 $ 147,351 $ 2,517,645 $ 150,181
91
In evaluating the Bank’s unrealized loss positions for credit losses of its investment securities portfolio, management considers
the credit quality, financial condition and near terms prospects of the issuer, the nature and cause of the unrealized loss and other
factors. While the Bank periodically evaluates its investment strategy relative to current economic and business conditions, at the
present time, the Bank does not have the intent to sell these investment securities with unrealized losses and, more likely than not, will
not sell these investment securities before fair value recovers to amortized cost. In addition, for the vast majority of investment
securities AFS in an unrealized loss position, the Bank does not believe the unrealized losses are the result of issues with credit
quality.
The following table shows the amortized cost and estimated fair value of investment securities AFS by maturity or estimated
date of repayment as of December 31, 2024.
Maturity or Estimated Repayment
Amortized Costs
Estimated Fair Value
(Dollars in thousands)
One year or less
$
584,798 $
565,504
After one year to five years
842,583
796,830
After five years to ten years
436,070
418,751
After ten years
1,072,093
1,055,065
Total
$
2,935,544 $
2,836,150
For purposes of this maturity or estimated repayment distribution, all investment securities AFS are shown based on their
contractual maturity date or estimated date of repayment, except (i) U.S. Government agency mortgage-backed securities are allocated
among various maturities or repayment categories based on an estimated repayment schedule utilizing third-party median prepayment
speeds or other estimates of prepayment speeds and interest rate levels at the measurement date and (ii) callable investment securities
for which the Bank has received notification of call are included in the maturity or repayment category in which the call occurs or is
expected to occur. Expected maturities may differ from contractual maturities because issuers have the right to call or prepay
obligations with or without call or prepayment penalties.
Investment securities with carrying values of $0.79 billion and $0.92 billion at December 31, 2024 and 2023, respectively, were
pledged to secure public funds and trust deposits and for other purposes required or permitted by law.
At December 31, 2024, mortgage-backed securities issued by the Federal National Mortgage Association were the only holdings
of investment securities in an amount greater than 10% of total stockholders’ equity. At December 31, 2023, mortgage-backed
securities issued by the Federal National Mortgage Association and callable debentures issued by the FHLB were the only holdings of
investment securities in an amount greater than 10% of total stockholders’ equity.
3. Loans
The following table is a summary of the Bank’s loan portfolio by principal category as of the dates indicated.
December 31,
2024
2023
(Dollars in thousands)
Real estate:
Residential 1-4 family
$
1,323,435
4.4% $
961,338
3.6%
Non-farm/non-residential
7,842,692
26.2
5,309,239
20.1
Construction/land development
9,522,676
31.8
11,653,487
44.0
Agricultural
296,898
1.0
256,423
1.0
Multifamily residential
3,272,635
10.9
2,064,106
7.8
Total real estate
22,258,336
74.3
20,244,593
76.5
Commercial and industrial
1,728,801
5.8
1,269,610
4.8
Consumer
3,659,713
12.2
2,965,042
11.2
Other
2,322,017
7.7
1,979,830
7.5
Total loans
$ 29,968,867
100.0% $ 26,459,075
100.0%
At December 31, 2024, the Bank’s loan portfolio consisted of 74.3% real estate loans, 5.8% commercial and industrial loans,
12.2% consumer loans and 7.7% other loans. Real estate loans, the largest category of loans, include loans secured by real estate as
evidenced by mortgages or other liens, including loans made to finance the development of real property construction projects.
92
4. Allowance for Credit Losses (“ACL”) and Credit Quality Indicators
Allowance for Credit Losses
The following table is a summary of activity within the ACL for the periods indicated.
Allowance for Loan
Losses
Reserve for Losses on
Unfunded Loan
Commitments
Total Allowance for
Credit Losses
(Dollars in thousands)
Year ended December 31, 2024
Balances – December 31, 2023
$
339,394 $
161,834 $
501,228
Net charge-offs
(57,420)
—
(57,420)
Provision for credit losses
183,573
(8,021)
175,552
Balances – December 31, 2024
$
465,547 $
153,813 $
619,360
Year ended December 31, 2023
Balances – December 31, 2022
$
208,858 $
156,419 $
365,277
Net charge-offs
(29,519)
—
(29,519)
Provision for credit losses
160,055
5,415
165,470
Balances – December 31, 2023
$
339,394 $
161,834 $
501,228
Year ended December 31, 2022
Balances – December 31, 2021
$
217,380 $
71,609 $
288,989
Net charge-offs
(7,206)
—
(7,206)
Provision for credit losses
(1,316)
84,810
83,494
Balances – December 31, 2022
$
208,858 $
156,419 $
365,277
The calculations of the Bank’s provision for credit losses for 2024 and total ACL at December 31, 2024 were based on a number
of key estimates, assumptions and economic forecasts. The Bank utilized recent economic forecasts provided by Moody’s, including
their updates released in December 2024. In selecting the weightings for the various economic scenarios for purposes of determining
the ACL at December 31, 2024, the combined weightings assigned to Moody’s S4 (Alternative Adverse Downside) and S6
(Stagflation) scenarios exceeded that of the Moody’s Baseline scenario. The Bank’s selection and weightings of these scenarios
reflected its assessment of conditions in the U.S. economy, and acknowledged the uncertainty regarding future U.S. economic
conditions, including risks from: U.S. fiscal policy actions; impacts of potential changes in U.S. tax, tariff and immigration laws,
regulations and policies; changes in the federal funds target rate; quantitative tightening; a possible recession; inflationary pressures;
the conflict in the Middle East; the ongoing war in Ukraine; global trade and geopolitical matters; supply chain disruptions; labor
disputes and strikes; and various other factors. For purposes of the forecasts used in the calculation of the ACL, management utilized a
reasonable and supportable forecast period of two years, followed by a reversion, on a systematic basis, of estimated losses back to the
Bank’s historical mean. Management also utilized certain qualitative adjustments to the ACL estimates to capture items not included
in the modeled results or other assumptions.
93
The following table is a summary of the Bank’s ACL for the periods indicated.
Beginning
Balance
Charge-offs
Recoveries
Provision
Ending
Balance
(Dollars in thousands)
Year ended December 31, 2024
Real estate:
Residential 1-4 family
$
23,151 $
(1,121) $
587 $
8,490 $
31,107
Non-farm/non-residential
44,250
(15,693)
11,594
84,188
124,339
Construction/land development
127,320
(38,547)
128
(3,718)
85,183
Agricultural
4,732
—
28
2,100
6,860
Multifamily residential
15,469
—
—
42,793
58,262
Commercial and industrial
7,626
(277)
165
(357)
7,157
Consumer
98,974
(13,233)
2,235
31,575
119,551
Other
17,872
(3,930)
644
18,502
33,088
Total ALL for funded loans
339,394
(72,801)
15,381
183,573
465,547
Reserve for losses on unfunded loan commitments
161,834
—
—
(8,021)
153,813
Total ACL
$ 501,228 $
(72,801) $
15,381 $ 175,552 $ 619,360
Year ended December 31, 2023
Real estate:
Residential 1-4 family
$
19,506 $
(108) $
1,019 $
2,734 $
23,151
Non-farm/non-residential
43,605
(22,633)
2,317
20,961
44,250
Construction/land development
66,467
—
234
60,619
127,320
Agricultural
3,512
(36)
36
1,220
4,732
Multifamily residential
5,345
(4)
—
10,128
15,469
Commercial and industrial
8,728
(340)
975
(1,737)
7,626
Consumer
50,202
(9,387)
1,794
56,365
98,974
Other
11,493
(3,990)
604
9,765
17,872
Total ALL for funded loans
208,858
(36,498)
6,979
160,055
339,394
Reserve for losses on unfunded loan commitments
156,419
—
—
5,415
161,834
Total ACL
$ 365,277 $
(36,498) $
6,979 $ 165,470 $ 501,228
Year ended December 31, 2022
Real estate:
Residential 1-4 family
$
18,675 $
(519) $
1,112 $
238 $
19,506
Non-farm/non-residential
79,524
(7,780)
7,328
(35,467)
43,605
Construction/land development
54,036
(3)
125
12,309
66,467
Agricultural
3,070
(36)
14
464
3,512
Multifamily residential
6,424
—
89
(1,168)
5,345
Commercial and industrial
8,017
(1,156)
426
1,441
8,728
Consumer
37,430
(4,797)
1,165
16,404
50,202
Other
10,204
(3,901)
727
4,463
11,493
Total ALL for funded loans
217,380
(18,192)
10,986
(1,316)
208,858
Reserve for losses on unfunded loan commitments
71,609
—
—
84,810
156,419
Total ACL
$ 288,989 $
(18,192) $
10,986 $
83,494 $ 365,277
94
The following table presents a summary of the Bank’s loans on nonaccrual status with ALL and loans on nonaccrual status with
no ALL as of the dates indicated.
Nonaccrual Loans
with ALL
Nonaccrual Loans
with no ALL
Total Nonaccrual
Loans
(Dollars in thousands)
December 31, 2024:
Real estate:
Residential 1-4 family
$
26,100 $
1,048 $
27,148
Non-farm/non-residential
945
2,387
3,332
Construction/land development
88,672
—
88,672
Agricultural
267
—
267
Multifamily residential
—
3,031
3,031
Commercial and industrial
1,107
—
1,107
Consumer
7,933
4
7,937
Total
$
125,024 $
6,470 $
131,494
December 31, 2023:
Real estate:
Residential 1-4 family
$
26,884 $
1,438 $
28,322
Non-farm/non-residential
21,498
2,335
23,833
Construction/land development
1,798
—
1,798
Agricultural
270
—
270
Multifamily residential
—
3,089
3,089
Commercial and industrial
1,551
—
1,551
Consumer
7,726
—
7,726
Other
88
—
88
Total
$
59,815 $
6,862 $
66,677
Interest income on nonperforming loans is recognized on a cash basis when and if actually collected. Total interest income
recognized on nonperforming loans during 2024, 2023 and 2022 was not material.
95
Credit Quality Indicators
The following table provides the credit quality indicators for the Bank’s total loans by loan segment and period of origination as
of the date indicated. At December 31, 2024, the Bank had no outstanding loans risk rated as doubtful or loss. Loans are presented on
an amortized cost basis which includes unamortized fees and costs but excludes accrued interest.
Period of Origination
Revolving
Loans
Amortized
Cost Basis
Year Ended December 31,
Prior to
January 1,
2020
Total
2024
2023
2022
2021
2020
(Dollars in thousands)
December 31, 2024:
Residential 1-4 family
Pass
$ 348,828 $
88,374 $ 220,384 $ 138,099 $
84,974 $ 212,531 $ 193,027 $ 1,286,217
Special Mention
835
316
1,892
837
1,392
4,036
192
9,500
Substandard (2)
21
813
673
2,346
5,676
18,001
188
27,718
Total residential 1-4 family
349,684
89,503
222,949
141,282
92,042
234,568
193,407 1,323,435
Non-farm/non-residential
Pass
134,909
918,907 2,593,532 1,696,937 1,501,649
674,666
29,007 7,549,607
Special Mention
383
724
133,966
59,681
5,735
67,337
—
267,826
Substandard (2)
—
—
88
23,381
227
1,563
—
25,259
Total non-farm/non-residential
135,292
919,631 2,727,586 1,779,999 1,507,611
743,566
29,007 7,842,692
Construction/land development
Pass
1,030,999 2,527,475 4,027,524
692,484
300,059
481,174
114,411 9,174,126
Special Mention
453
498
6,281
217,545
3,185
149
—
228,111
Substandard (2)
—
—
288
59
—
88,502
31,590
120,439
Total construction/land
development
1,031,452 2,527,973 4,034,093
910,088
303,244
569,825
146,001 9,522,676
Agricultural
Pass
40,312
40,871
57,951
55,282
26,515
74,458
1,126
296,515
Special Mention
—
—
—
116
—
—
—
116
Substandard (2)
—
—
—
—
—
267
—
267
Total agricultural
40,312
40,871
57,951
55,398
26,515
74,725
1,126
296,898
Multifamily residential
Pass
5,631
153,735 1,194,000 1,231,801
395,912
144,824
9,227 3,135,130
Special Mention
—
—
—
120,222
—
—
—
120,222
Substandard (2)
—
—
—
1,516
1,748
14,019
—
17,283
Total multifamily residential
5,631
153,735 1,194,000 1,353,539
397,660
158,843
9,227 3,272,635
Commercial and industrial
Pass
317,768
57,387
62,368
41,429
10,852
22,657 1,205,700 1,718,161
Special Mention
—
141
4,012
482
—
1,227
1,992
7,854
Substandard (2)
—
15
1,377
—
1,236
158
—
2,786
Total commercial and
industrial
317,768
57,543
67,757
41,911
12,088
24,042 1,207,692 1,728,801
Consumer
Pass
1,216,928
791,072
519,315
283,517
92,355
730,973
6,982 3,641,142
Special Mention
966
2,447
2,995
1,425
228
2,572
—
10,633
Substandard (2)
143
891
1,400
441
302
4,761
—
7,938
Total consumer
1,218,037
794,410
523,710
285,383
92,885
738,306
6,982 3,659,713
Other
Pass
72,233
20,629
824,570
2,218
359
126,103 1,210,350 2,256,462
Special Mention
—
—
68
7
—
94
9,424
9,593
Substandard (2)
—
—
55,962
—
—
—
—
55,962
Total other
72,233
20,629
880,600
2,225
359
126,197 1,219,774 2,322,017
Total
$ 3,170,409 $ 4,604,295 $ 9,708,646 $ 4,569,825 $ 2,432,404 $ 2,670,072 $ 2,813,216 $ 29,968,867
Gross charge-offs (1)
$
4,761 $
3,497 $
4,049 $
6,296 $
9,816 $
44,382 $
— $
72,801
(1)
Gross charge-offs for the year ended December 31, 2024.
(2)
Includes both substandard accrual loans and substandard nonaccrual loans.
96
The following table is a summary of credit quality indicators for the Bank’s total loans as of the dates indicated.
Pass
Special Mention
Substandard
Accrual
Substandard
Nonaccrual
Total
(Dollars in thousands)
December 31, 2024:
Real estate:
Residential 1-4 family
$
1,286,217 $
9,500 $
570 $
27,148 $
1,323,435
Non-farm/non-residential
7,549,607
267,826
21,927
3,332
7,842,692
Construction/land development
9,174,126
228,111
31,767
88,672
9,522,676
Agricultural
296,515
116
—
267
296,898
Multifamily residential
3,135,130
120,222
14,252
3,031
3,272,635
Commercial and industrial
1,718,161
7,854
1,679
1,107
1,728,801
Consumer
3,641,142
10,633
1
7,937
3,659,713
Other
2,256,462
9,593
55,962
—
2,322,017
Total
$
29,057,360 $
653,855 $
126,158 $
131,494 $
29,968,867
December 31, 2023:
Real estate:
Residential 1-4 family
$
919,956 $
12,838 $
222 $
28,322 $
961,338
Non-farm/non-residential
5,237,576
37,653
10,177
23,833
5,309,239
Construction/land development
11,461,269
22,895
167,525
1,798
11,653,487
Agricultural
255,885
268
—
270
256,423
Multifamily residential
2,061,001
—
16
3,089
2,064,106
Commercial and industrial
1,263,198
4,422
439
1,551
1,269,610
Consumer
2,951,522
5,794
—
7,726
2,965,042
Other
1,977,986
1,756
—
88
1,979,830
Total
$
26,128,393 $
85,626 $
178,379 $
66,677 $
26,459,075
At December 31, 2024, the Bank’s loans categorized as special mention totaled $653.9 million and primarily consisted of loans
collateralized by life science, multifamily, office and hotel properties.
At December 31, 2024, the Bank had substandard loans totaling $126.2 million that were on accrual status and therefore were
not designated as nonperforming, including three credits originated by the Bank’s Real Estate Specialties Group with a total balance of
$104.6 million which were collateralized by office properties and single family lots and homes.
At December 31, 2024, the Bank had substandard nonaccrual loans totaling $131.5 million, which included a construction/land
development loan collateralized by vacant land in Chicago, Illinois. During 2024, the Bank placed this loan on nonaccrual status and
recognized charge-offs totaling $37.7 million. As of December 31, 2024, this loan had a book balance of $88.4 million, which
represented less than 1% of the Bank’s total construction/land development loans. Subsequent to the initial charge-off, the Bank
executed two short-term maturity extensions which resulted in the Bank receiving $1.9 million in payments that were applied to the
loan balance. At December 31, 2024, the loan was current as a result of such payments, and the Bank had no additional commitments
to advance funds on this loan.
The following categories of credit quality indicators are utilized by the Bank for its internal loan grading purposes.
Pass – Loans in this category exhibit minimal or moderate levels of risk and are not expected to result in loss.
Special Mention – Loans in this category have potential weaknesses that deserve management’s close attention. If left
uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank’s credit
position at some future date.
Substandard – Loans in this category are inadequately protected by the current sound worth and paying capacity of the obligor or
of the collateral pledged, if any. Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if
the deficiencies are not corrected.
97
Doubtful – Loans in this category have all the weaknesses inherent in those classified as substandard with the added
characteristics that weaknesses make collection in full, on the basis of currently known facts, conditions, and values, highly
questionable and improbable.
Loss – Loans in this category are considered uncollectible. Loans classified as loss do not mean the loan has absolutely no
recovery or salvaged value but rather it is not practical or desirable to delay charging off.
The Bank considers its residential 1-4 family loans (including consumer construction loans and 1-4 family properties), consumer
loans, and certain small business loans to be (i) pass – if they are performing and less than 30 days past due, (ii) special mention – if
they are performing and 30 to 89 days past due or (iii) substandard – if they are nonperforming or 90 days or more past due.
The following table is an aging analysis of past due loans as of the dates indicated.
30-59 Days
Past Due (1)
60-89 Days
Past Due (2)
90 Days or
More (3)
Total Past Due
Current (4)
Total
(Dollars in thousands)
December 31, 2024:
Real estate:
Residential 1-4 family
$
11,763 $
6,156 $
6,066 $
23,985 $ 1,299,450 $ 1,323,435
Non-farm/non-residential
1,614
2,387
216
4,217
7,838,475
7,842,692
Construction/land development
286
—
142
428
9,522,248
9,522,676
Agricultural
—
—
202
202
296,696
296,898
Multifamily residential
—
—
3,031
3,031
3,269,604
3,272,635
Commercial and industrial
4,498
639
956
6,093
1,722,708
1,728,801
Consumer
7,482
3,709
353
11,544
3,648,169
3,659,713
Other
—
7
—
7
2,322,010
2,322,017
Total
$
25,643 $
12,898 $
10,966 $
49,507 $ 29,919,360 $ 29,968,867
December 31, 2023:
Real estate:
Residential 1-4 family
$
9,649 $
7,737 $
4,136 $
21,522 $
939,816 $
961,338
Non-farm/non-residential
786
295
19,173
20,254
5,288,985
5,309,239
Construction/land development
—
167
1,588
1,755 11,651,732 11,653,487
Agricultural
—
—
205
205
256,218
256,423
Multifamily residential
—
—
3,089
3,089
2,061,017
2,064,106
Commercial and industrial
187
126
1,034
1,347
1,268,263
1,269,610
Consumer
5,584
980
38
6,602
2,958,440
2,965,042
Other
—
88
—
88
1,979,742
1,979,830
Total
$
16,206 $
9,393 $
29,263 $
54,862 $ 26,404,213 $ 26,459,075
(1)
Includes $6.2 million and $4.8 million of loans on nonaccrual status at December 31, 2024 and 2023, respectively.
(2)
Includes $6.7 million and $4.9 million of loans on nonaccrual status at December 31, 2024 and 2023, respectively.
(3)
All loans greater than 90 days past due were on nonaccrual status at December 31, 2024 and 2023, respectively.
(4)
Includes $107.6 million and $27.7 million of loans on nonaccrual status at December 31, 2024 and 2023, respectively.
98
5.
Foreclosed Assets
The following table is a summary of the amount and type of foreclosed assets as of the dates indicated.
December 31,
2024
2023
(Dollars in thousands)
Real estate:
Non-farm/non-residential
$
8,318 $
515
Construction/land development
59,964
59,975
Agricultural
—
76
Total real estate
68,282
60,566
Consumer
1,099
1,154
Total foreclosed assets
$
69,381 $
61,720
The following table is a summary of activity within foreclosed assets during the years indicated.
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Balance – beginning of period
$
61,720 $
6,616 $
5,744
Loans and other assets transferred into foreclosed assets
29,674
75,299
13,151
Sales of foreclosed assets
(18,546)
(18,927)
(11,224)
Writedowns of foreclosed assets
(3,467)
(1,268)
(1,055)
Balance – end of period
$
69,381 $
61,720 $
6,616
6.
Premises and Equipment
The following table is a summary of premises and equipment as of the dates indicated.
December 31,
2024
2023
(Dollars in thousands)
Land
$
181,538 $
147,992
Buildings and improvements
499,834
474,465
Leasehold improvements
32,544
19,123
Equipment
169,928
168,019
Lease right-of-use assets
102,779
102,633
Gross premises and equipment
986,623
912,232
Accumulated depreciation and amortization
(247,512)
(235,411)
Premises and equipment, net
$
739,111 $
676,821
Interest capitalized by the Bank on construction projects totaled $2.3 million during 2024 and $0.5 million during 2023.
7.
Leases
The Bank’s right-of-use asset (net of accumulated depreciation), which totaled $59.5 million and $66.0 million at December 31,
2024 and 2023, respectively, is included in premises and equipment, and the Bank’s lease liability, which totaled $64.0 million and
$69.9 million at December 31, 2024 and 2023, respectively, is included in accrued interest payable and other liabilities on the Bank’s
consolidated balance sheet. At both December 31, 2024 and 2023, the Bank’s leases were comprised primarily of building and ground
leases associated with certain branch locations or loan production offices. A portion of the Bank’s leases include rent escalations,
some of which are tied to the consumer price index, and are measured on a periodic basis. The majority of the Bank’s lease
agreements do not contain residual value guarantees or restricted covenants. In addition, many of the Bank’s leases contain renewal
options. If the Bank is reasonably certain that such options will be exercised, the Bank has included the effects of extending these
leases in the determination of the lease term.
The Bank incurred $11.3 million, $10.6 million and $10.1 million during 2024, 2023 and 2022, respectively, in lease operating
cost that is included in net occupancy and equipment expense in the Bank’s consolidated statements of income. The Bank’s variable
lease costs were not material for the year ended December 31, 2024, 2023 or 2022. The Bank’s weighted average remaining life for its
99
right-of-use lease assets were 17.3 years, 16.4 years and 17.3 years at December 31, 2024, 2023 and 2022, respectively. The Bank’s
weighted average interest rate for its lease liability was 3.9%, 3.6% and 3.1% at December 31, 2024, 2023 and 2022, respectively.
The following table is a summary, as of the date indicated, of future amounts due under these non-cancelable leases.
December 31, 2024
(Dollars in thousands)
2025
$
7,814
2026
6,299
2027
6,166
2028
6,087
2029
5,365
Thereafter
61,246
Total minimum lease payments
92,977
Less imputed interest
(28,992)
Total operating lease liabilities
$
63,985
8.
Deposits
The following table presents time deposits by maturity and composition as of the dates indicated.
December 31,
2024
2023
(Dollars in thousands)
2025
$
16,702,130 $
13,090,697
2026
591,734
1,095,652
2027
9,890
30,472
2028
8,300
8,729
2029
6,651
9,242
Thereafter
101
181
Total time deposits
$
17,318,806 $
14,234,973
Time deposits $250,000 and less
$
12,461,409 $
10,265,125
Time deposits greater than $250,000
4,857,397
3,969,848
Total time deposits
$
17,318,806 $
14,234,973
9.
Short-Term Borrowings
Short-term borrowings with original maturities less than one year include FHLB advances, federal funds purchased and to a
lesser extent, repurchase agreements with customers. The following table is a summary of information relating to the Bank’s short-
term borrowings as of the dates indicated. The following table excludes repurchase agreements.
December 31,
2024
2023
(Dollars in thousands)
Average annual balance
$
255,165
$
798,727
December 31 balance
420,000
800,000
Maximum month-end balance during year
950,000
1,425,000
Interest rate:
Weighted-average – year
5.06%
5.26%
Weighted-average – December 31
4.39%
5.48%
100
At December 31, 2024, the Bank had FHLB advances and federal funds purchased with original maturities less than one year, as
shown in the following table.
Borrowing Type
Balance
Interest
Rate
Maturity
Date
(Dollars in thousands)
FHLB advances
$
300,000
4.38%
1/2/2025
Federal funds purchased
$
120,000
4.42%
1/2/2025
The Bank’s FHLB advances are collateralized by a blanket lien on a substantial portion of the Bank’s real estate loans. At
December 31, 2024, the Bank had $7.84 billion of unused FHLB borrowing availability.
10.
Subordinated Notes
On September 16, 2021, the Bank issued $350 million in aggregate principal amount of Fixed-to-Floating rate Subordinated
Notes due 2031, which bear interest at a fixed rate of 2.75% per annum until September 30, 2026 (the “2.75% Notes”). On October 1,
2026, the 2.75% Notes will bear interest at a floating rate equal to three-month term SOFR plus 209 basis points. The 2.75% Notes are
unsecured, subordinated debt obligations and mature on October 1, 2031. The underwriting discounts and offering expenses for these
notes totaled $4.1 million and are being amortized over the estimated holding period of five years as an increase to interest expense on
the 2.75% Notes. As of December 31, 2024, the 2.75% Notes had a carrying value of $348.6 million and remaining unamortized debt
issuance cost of $1.4 million.
The Bank may, beginning with the interest payment date of October 1, 2026, and on any interest payment date thereafter, redeem
the 2.75% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2.75% Notes to be redeemed
plus accrued and unpaid interest to, but excluding, the date of redemption. The Bank may also redeem the 2.75% Notes at any time,
including prior to October 1, 2026, at its option, in whole but not in part, if: (i) a change or prospective change in law occurs that could
prevent it from deducting interest payable on the 2.75% Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that
could preclude the 2.75% Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) the Bank is required to
register as an investment company under the Investment Company Act of 1940, as amended; in each case, at a redemption price equal
to 100% of the principal amount of the 2.75% Notes plus any accrued and unpaid interest to, but excluding, the redemption date.
11.
Subordinated Debentures
At December 31, 2024, the Bank had the following issues of trust preferred securities outstanding and subordinated debentures
owed to the Trusts.
Subordinated
Debentures Owed
to Trusts
Carrying Value
of Subordinated
Debentures
Trust
Preferred
Securities
of the
Trusts
Contractual
Interest Rate
Final Maturity Date
(Dollars in thousands)
Ozark II
$
14,433 $
14,433 $
14,000
7.49% September 29, 2033
Ozark III (1)
6,434
6,434
6,000
7.87
September 25, 2033
Ozark IV
15,464
15,464
15,000
7.00
September 28, 2034
Ozark V
20,619
20,619
20,000
6.22
December 15, 2036
Intervest II
15,464
15,464
15,000
7.56
September 17, 2033
Intervest III
15,464
15,464
15,000
7.40
March 17, 2034
Intervest IV
15,464
15,464
15,000
7.02
September 20, 2034
Intervest V
10,310
10,310
10,000
6.27
December 15, 2036
$
113,652 $
113,652 $
110,000
(1) In 2024, the Bank repurchased $8.0 million of the Ozark III outstanding Trust Preferred Securities for $7.0 million which resulted in $1.0
million of pre-tax non-interest income.
On September 25, 2003, Ozark III sold to investors in a private placement offering $14 million of adjustable rate trust preferred
securities, and on September 29, 2003, Ozark II sold to investors in a private placement offering $14 million of adjustable rate trust
preferred securities (collectively, “2003 Securities”). The 2003 Securities bear interest, adjustable quarterly, at, a three-month term
SOFR plus 3.21% for Ozark III and three-month term SOFR plus 3.16% for Ozark II. The aggregate proceeds of $28 million from the
2003 Securities were used to purchase an equal principal amount of adjustable rate subordinated debentures of the Bank that bear
101
interest, adjustable quarterly, at three-month term SOFR plus 3.21% for Ozark III and three-month term SOFR plus 3.16% for Ozark
II (collectively, “2003 Debentures”).
On September 28, 2004, Ozark IV sold to investors in a private placement offering $15 million of adjustable rate trust preferred
securities (“2004 Securities”). The 2004 Securities bear interest, adjustable quarterly, at three-month term SOFR plus 2.48%. The $15
million proceeds from the 2004 Securities were used to purchase an equal principal amount of adjustable rate subordinated debentures
of the Bank that bear interest, adjustable quarterly, at three-month term SOFR plus 2.48% (“2004 Debentures”).
On September 29, 2006, Ozark V sold to investors in a private placement offering $20 million of adjustable rate trust preferred
securities (“2006 Securities”). The 2006 Securities bear interest, adjustable quarterly, at three-month term SOFR plus 1.86%. The $20
million proceeds from the 2006 Securities were used to purchase an equal principal amount of adjustable rate subordinated debentures
of the Bank that bear interest, adjustable quarterly, at three-month term SOFR plus 1.86% (“2006 Debentures”).
In addition to the issuance of these adjustable rate securities, Ozark II and Ozark III collectively sold $0.9 million, Ozark IV sold
$0.4 million and Ozark V sold $0.6 million of trust common equity to the Bank. The proceeds from the sales of the trust common
equity were used, respectively, to purchase $0.9 million of 2003 Debentures, $0.4 million of 2004 Debentures and $0.6 million of
2006 Debentures issued by the Bank.
On February 10, 2015, in conjunction with the acquisition of Intervest Bancshares Corporation (“Intervest”), the Bank acquired
Intervest II, Intervest III, Intervest IV and Intervest V with outstanding subordinated debentures totaling $56.7 million and related trust
preferred securities totaling $55.0 million. In addition to subordinated debentures, the Bank also acquired $1.7 million of trust
common equity.
The trust preferred securities issued by Intervest II and the related subordinated debentures bear interest, adjustable quarterly, at
three-month term SOFR plus 3.21%. The trust preferred securities issued by Intervest III and the related subordinated debentures bear
interest, adjustable quarterly, at three-month term SOFR plus 3.05%. The trust preferred securities issued by Intervest IV and the
related subordinated debentures bear interest, adjustable quarterly, at three-month term SOFR plus 2.66%. The trust preferred
securities issued by Intervest V and the related subordinated debentures bear interest, adjustable quarterly, at three-month term SOFR
plus 1.91%.
At December 31, 2024, the Bank had an aggregate of $113.7 million of subordinated debentures outstanding (with an aggregate
carrying value of $113.7 million) and had an asset of $3.7 million representing its investment in the common equity issued by the
Trusts. The sole assets of the Trusts are the adjustable rate debentures and the liabilities of the Trusts are the trust preferred securities.
At both December 31, 2024 and 2023, the Trusts had aggregate common equity of $3.7 million and did not have any restricted
net assets. The Bank has, through various contractual arrangements or by operation of law, fully and unconditionally guaranteed all
obligations of the Trusts with respect to the trust preferred securities. Additionally, there are no restrictions on the ability of the Trusts
to transfer funds to the Bank in the form of cash dividends, loans or advances. The Bank has the option to defer interest payments on
the subordinated debentures from time to time for a period not to exceed five consecutive years. These trust preferred securities
generally mature at or near the 30th anniversary date of each issuance. However, the trust preferred securities and related subordinated
debentures may be prepaid at par value, subject to regulatory approval.
12.
Preferred Stock
On November 4, 2021 the Bank issued 14,000,000 shares of 4.625% Series A Non-Cumulative Perpetual Preferred Stock (the
“Preferred Stock”), par value $0.01 per share, with a liquidation preference of $25 per share, which represents $350 million in
aggregate liquidation preference. The preferred stock offering generated net proceeds, after deducting the initial purchaser discount
and offering expenses, of $339.0 million. Subject to declaration by the Bank’s Board of Directors, dividends will accrue and be
payable from the original date of issuance at a rate of 4.625% per annum, payable quarterly, in arrears, on February 15, May 15,
August 15, and November 15 (or the next business day) of each year, beginning on February 15, 2022. Dividends on the preferred
stock will not be cumulative or mandatory. During 2024, the Bank paid dividends totaling $16.2 million on the preferred stock.
The Bank may redeem the preferred stock at its option, subject to regulatory approval, at a redemption price equal to $25 per
share, plus any declared and unpaid dividends (without regard to any undeclared dividends), to, but excluding, the redemption date, (i)
in whole or in part, from time to time, on any Dividend Payment Date on or after November 15, 2026, or (ii) in whole, but not in part,
at any time within 90 calendar days following a regulatory capital treatment event (as defined in the Bank’s articles of amendment
regarding the preferred stock).
With respect to payment of dividends and rights upon the Bank’s liquidation, dissolution or winding up, the preferred stock
ranks (i) senior to the Bank’s common stock and any other class or series of preferred stock that, by its terms, ranks junior to the
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preferred stock, (ii) equally with any future class or series of preferred stock that does not by its terms rank junior or senior to the
preferred stock, and (iii) junior to existing and future indebtedness and other liabilities and any class or series of preferred stock that
expressly provides in the articles of amendment creating such class or series of preferred stock that it ranks senior to the preferred
stock (subject to any requisite consents or approvals prior to issuance). The preferred stock will not have voting rights, except in
certain limited circumstances and as otherwise required by applicable law. The preferred stock is included in tier 1 capital. The
preferred stock shares are listed on the Nasdaq Global Select Market under the symbol “OZKAP.”
13.
Income Taxes
The following table is a summary of the components of the provision (benefit) for income taxes for the years indicated.
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Current:
Federal
$
120,203 $
177,334 $
67,568
State
38,218
51,763
26,048
Total current
158,421
229,097
93,616
Deferred:
Federal
45,126
(40,071)
49,024
State
11,242
(12,862)
14,800
Total deferred
56,368
(52,933)
63,824
Provision for income taxes
$
214,789 $
176,164 $
157,440
The following table is a summary of the reconciliation between the statutory federal income tax rate and effective income tax
rate for the years indicated.
Year Ended December 31,
2024
2023
2022
Statutory federal income tax rate
21.0%
21.0%
21.0%
Increase (decrease) in taxes resulting from:
State income taxes, net of federal benefit
4.1
3.7
4.4
Effect of tax-exempt interest income
(1.1)
(0.9)
(0.7)
Effect of BOLI and other tax-exempt income
(0.5)
(0.6)
(0.6)
Federal income tax credits
(6.2)
(3.3)
(2.6)
Proportional amortization expense (1)
6.0
—
—
Passthrough losses, net of tax (1)
(0.9)
—
—
Other, net
0.7
0.4
0.3
Effective income tax rate
23.1%
20.3%
21.8%
(1) Effective January 1, 2024, the Bank adopted ASU 2023-02, Investments Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax
Credit Structures Using the Proportional Amortization Method, which resulted in the amortization and passthrough losses of the Bank’s Community Reinvestment Act
of 1977 (“CRA”) and tax credit investments being included in income tax expense instead of noninterest expense.
At December 31, 2024, current income taxes receivable of $39.3 million was included in other assets. At December 31, 2023
current income taxes payable of $42.5 million was included in other liabilities.
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The following table is a summary, as of the dates indicated, of the types of temporary differences between the tax basis of assets
and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities and their approximate tax
effects.
December 31,
2024
2023
(Dollars in thousands)
Deferred tax assets:
Investment securities AFS
$
22,918 $
29,716
Differences in amounts reflected in the financial statements and income tax basis for loans
—
33,596
Differences in amounts reflected in the financial statements and income tax basis
for research and development costs
4,435
3,500
Operating lease liability
16,070
17,643
Stock-based compensation
11,336
11,109
Net operating loss and tax credit carryforwards
5,785
6,899
Other, net
7,954
2,911
Total gross deferred tax assets
68,498
105,374
Less valuation allowance
(1,390)
(536)
Deferred tax asset, net of valuation allowance
67,108
104,838
Deferred tax liabilities:
Differences in amounts reflected in the financial statements and income tax basis for loans
13,809
—
Accelerated depreciation on premises and equipment
30,108
28,885
Deferred loan costs
52,168
44,652
Operating lease right-of-use asset
14,944
16,656
Other, net
4,194
12,260
Total gross deferred tax liabilities
115,223
102,453
Net deferred tax assets (liabilities)
$
(48,115) $
2,385
Federal net operating loss carryforwards were acquired in certain of the Bank’s acquisitions. Such federal net operating loss
carryforwards acquired totaled $80.9 million, of which $25.4 million remained to be utilized as of December 31, 2024, and will expire
at various dates beginning in 2029 to 2034.
State net operating loss carryforwards were acquired in previous acquisitions. Such state net operating loss carryforwards
acquired totaled $116.2 million, of which $22.8 million remained to be utilized as of December 31, 2024 and will expire at various
dates beginning in 2025 to 2031.
At December 31, 2024 and 2023, the Bank had a deferred tax valuation allowance of $1.4 million and $0.5 million, respectively,
to reflect its assessment that the realization of the benefits from the recovery of certain acquired net operating loss carryforwards are
expected to be subject to the limitations pursuant to Section 382 of the Internal Revenue Code (“IRC”), or the equivalent state statute
and the impact of expiration of vested, unexercised stock options within 30 days of year-end.
14.
Employee Benefit Plans
The Bank maintains a qualified retirement plan (the “401(k) Plan”) with a salary deferral feature designed to qualify under
Section 401 of the IRC. The 401(k) Plan permits employees of the Bank to defer a portion of their compensation in accordance with
the provisions of Section 401(k) of the IRC. The Bank’s 401(k) Plan qualifies as a Safe-Harbor Cost or Deferred Arrangement (“Safe-
Harbor CODA”). As a result, (i) certain key employees are eligible to make salary deferrals into the 401(k) Plan, (ii) the 401(k) Plan is
not subject to any provisions of the average deferral percentage test described in IRC Section 401(k)(3) or the average contribution
percentage test described in IRC Section 401(m)(2), (iii) the basic matching contribution is (a) 100% of the amount of the employee’s
deferrals that do not exceed 3% of the employee’s compensation for the year plus (b) 50% of the amount of the employee’s elective
deferrals that exceed 3% but do not exceed 5% of the employee’s compensation for the year, and (iv) all employer matching
contributions made under the provisions of the Safe-Harbor CODA are non-forfeitable. Certain other statutory limitations with respect
to the Bank’s contribution under the 401(k) Plan also apply.
Contributions to the 401(k) Plan are invested in accordance with participant elections among certain investment options.
Distributions from participant accounts are not permitted before age 65, except in the event of death, permanent disability, or
termination of employment. The Bank made matching cash contributions to the 401(k) Plan during 2024, 2023 and 2022 of $8.0
million, $6.9 million and $6.3 million, respectively. The 401(k) Plan also provides for participant loans, subject to certain provision
and limitations.
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The Bank also maintains the Bank OZK Deferred Compensation Plan (the “Plan”), which is an unfunded deferred compensation
arrangement for the group of employees designated as key employees, including certain of the Bank’s executive officers and is
considered a general obligation of the Bank. Under the terms of the Plan, eligible participants may elect to defer a portion of their
compensation. Such deferred compensation is distributable in lump sum or specified installments upon separation from service with
the Bank or upon other specified events as defined in the Plan. The Bank does not make any contribution to the Plan for the benefit of
each participant or otherwise. Amounts deferred under the Plan are invested in certain approved investments (excluding securities of
the Bank or its affiliates). At December 31, 2024 and 2023, respectively, the Bank had Plan assets, along with an equal amount of
liabilities, totaling $8.3 million and $6.9 million, recorded on the accompanying consolidated balance sheet.
15.
Stock-Based Compensation
On May 6, 2019 (the “Effective Date”), the Bank’s shareholders approved the Bank OZK 2019 Omnibus Equity Incentive Plan
(the “Omnibus Plan”). The Omnibus Plan replaced the Nonqualified Stock Option Plan for officers and employees (“Option Plan”),
the Restricted Stock and Incentive Plan for officers and employees (“2009 Plan”) and the Non-Employee Director Stock Plan
(“Director Plan” and together with the Option Plan and the 2009 Plan, the “Prior Plans”). After the Effective Date of the Omnibus
Plan, no new awards may be granted under the Prior Plans, it being understood that (i) outstanding awards will continue to be
governed by the terms and conditions of the Prior Plan under which they were granted, and (ii) to the extent that any outstanding
award under the Prior Plans is forfeited, terminates, expires or lapses without shares being issued, the shares subject to such award not
delivered as a result thereof will be available for awards under the Omnibus Plan. Directors, executive officers and employees are
eligible to participate in the Omnibus Plan, and the total number of shares available for grant is 3,400,000, subject to adjustment as
described in the Omnibus Plan. Awards granted under the Omnibus Plan may be in the form of stock options, stock appreciation
rights, restricted stock, restricted stock units, or other stock-based awards and must contain a minimum vesting period of at least one
year from the date of grant (provided that awards for up to 5% of the shares of common stock authorized for issuance under the
Omnibus Plan may provide for a shorter vesting period at the time of grant). The Omnibus Plan provides that a non-employee director
may not receive stock awards with a grant date fair market value in excess of $100,000 worth of shares during any calendar year. The
benefits received by or allocated to directors, executive officers or employees under the Omnibus Plan are determined within the
discretion of the Governance and Compensation Committee (“Compensation Committee”) of the Board of Directors.
The Bank previously had a nonqualified stock option plan for non-employee directors. All options previously granted under this
plan were exercisable immediately and expire ten years after issuance.
All employee options previously granted under the Option Plan and outstanding at December 31, 2024 were issued with a
vesting date three years after issuance and an expiration date seven years after issuance. No stock options were granted under the
Omnibus Plan during the year ended December 31, 2024.
The following table summarizes stock option activity for the year indicated.
Options
Weighted-
Average Exercise
Price/Share
Weighted-
Average
Remaining
Contractual Life
(in years)
Aggregate
Intrinsic Value
(in thousands)
Outstanding – January 1, 2024
658,211 $
48.71
Granted
—
—
Exercised
(25,576)
33.68
Forfeited/Expired
(284,154)
51.84
Outstanding – December 31, 2024
348,481
47.27
0.25 $
878 (1)
Fully vested and exercisable – December 31, 2024
348,481 $
47.27
0.25 $
878 (1)
(1) Based on closing price of $44.53 per share on December 31, 2024.
Intrinsic value for stock options is defined as the amount by which the current market price of the underlying stock exceeds the
exercise price. For those stock options where the exercise price exceeds the current market price of the underlying stock, the intrinsic
value is zero. The total intrinsic value of options exercised during 2024 and 2023 was $0.1 million and $0.7 million, respectively.
During 2024, the Bank issued 267,633 shares of restricted common stock with a weighted-average grant date fair value of $42.64
to employees and non-employee directors under the Omnibus Plan. These grants of restricted stock cliff vest 100% three years after
issuance, assuming continuous employment by the participant during this period. The fair value of the restricted stock awards is
amortized to compensation expense over the vesting period and is based on the market price of the Bank’s common stock at the date
of grant multiplied by the number of shares granted. Stock-based compensation expense for restricted stock included in non-interest
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expense was $9.6 million, $9.3 million and $9.0 million for 2024, 2023 and 2022, respectively. Unrecognized compensation expense
for non-vested restricted stock awards was $11.7 million at December 31, 2024 and is expected to be recognized over a weighted-
average period of 1.7 years.
The following table summarizes restricted stock activity related to the Omnibus Plan for the year indicated.
Omnibus Plan
Outstanding – January 1, 2024
653,314
Granted
267,633
Forfeited
(27,569)
Vested
(257,237)
Outstanding – December 31, 2024
636,141
Weighted-average grant date fair value
$
44.98
In January 2022, 2023 and 2024, pursuant to the Omnibus Plan, the Compensation Committee awarded to its executive officers
an aggregate of 135,625 PSUs, 175,480 PSUs and 209,112 PSUs respectively. All PSU grants are based on target performance, with
each PSU representing the right to receive one share of common stock at a future date. The PSUs granted contain both performance
and market conditions. The PSUs will be earned and vest depending on the Bank’s relative performance with respect to total
shareholder return (“TSR”), return on average common equity (“ROAE”) and return on average assets (“ROAA”), over a three-year
period, compared to the companies that comprise the KBW Regional Banking Index (“KRX”) at January 1 of the respective award
year (for the TSR component) and compared to the Bank’s executive compensation peer group in the fiscal year prior to the award (for
the ROAE and ROAA component) over a three-year period. Measurement is determined on a percentile basis relative to the KRX or
the Bank’s peer group. For each metric, if the Bank’s performance over the performance period is: (i) at or below the 25th percentile
compared to the applicable peer group, no PSUs for that metric would be earned; (ii) at threshold performance (26th percentile), 4% of
the target would be earned; (iii) at target performance (50th percentile), 100% of the target would be earned; (iv) at the 75th percentile,
150% of the target would be earned; and (v) at maximum performance (95th percentile), 200% of the target would be earned.
Achievement of results between levels previously described will result in award payouts determined based on a linear interpolation
between payout levels. In the event the Bank’s TSR over the performance period is negative, no more than 100% of the target PSUs
for the relative TSR component will be earned, and the value of a PSU earned at the end of the performance period for the relative
TSR component cannot exceed six times (6x) the grant date stock price. The PSUs contain a three-year vesting period followed by a
one-year post-vest hold period and are eligible to accrue dividend equivalents that are subject to the same vesting criteria as the
underlying PSUs.
The fair value of the PSUs granted is amortized to compensation expense over the vesting period. In determining PSUs fair
value, since the PSUs granted contain a one-year post-vest hold period, an estimated discount for illiquidity was applied to the market
price of the Bank’s stock. The fair value of each PSU grant is estimated on the date of grant using various valuation and liquidity
models. The following table is a summary of the key assumptions used in those models.
Year Ended December 31,
2024
2023
2022
Risk-free interest rate
4.70%
4.63%
0.70%
Expected dividend yield
3.13%
3.04%
2.52%
Expected stock volatility
42.31%
33.69%
29.85%
Post-vest hold period
1 year
1 year
1 year
The following table summarizes PSU activity at target levels for the year indicated.
PSUs
Outstanding – January 1, 2024
398,783
Granted
209,112
Forfeited
—
Vested
(105,876)
Outstanding – December 31, 2024
502,019
106
The following table is a summary of the valuation date stock price index and the weighted average grant date fair values for
TSR, ROAE and ROAA for the PSUs granted in the years indicated.
Year Ended December 31,
2024
2023
2022
TSR
$
43.89
$
43.65
$
41.78
ROAE
42.92
39.77
42.14
ROAA
42.92
39.77
42.14
Valuation stock price index – TSR
100%
100%
99%
Valuation stock price index – ROAE & ROAA
100%
100%
100%
Estimated discount for illiquidity (1)
11.5%
11.0%
11.5%
(1)
Because of the expected stock price volatility on shares of OZK and the one-year post-vest holding period associated with the PSUs, the
Bank has estimated an illiquidity discount using widely accepted option pricing models.
Compensation expense for PSU awards included in non-interest expense was $11.1 million for 2024, $8.1 million for 2023 and
$4.2 million for 2022. Unrecognized compensation expense for non-vested PSU awards was $13.8 million at December 31, 2024 and
is expected to be recognized over a weighted-average period of 1.8 years.
On January 23, 2025, the Bank’s Compensation Committee awarded its executive officers an aggregate of 217,187 PSUs that
contain both performance and market conditions. The PSUs will be earned and vest depending on the Bank’s relative performance
with respect to TSR, ROAE and ROAA, over a three-year period, compared to the companies that comprise the KRX at January 1,
2025 (for the TSR component) and compared to the Bank’s 2024 executive compensation peer group (for the ROAE and ROAA
component) over the same three-year period. Measurement is determined on a percentile basis relative to the KRX or the Bank’s peer
group. For each metric, if the Bank’s performance over the performance period is: (i) at or below the 25th percentile compared to the
applicable peer group, no PSUs for that metric would be earned; (ii) at threshold performance (26th percentile), 4% of the target would
be earned; (iii) at target performance (50th percentile), 100% of the target would be earned; (iv) at the 75th percentile, 150% of the
target would be earned; and (v) at maximum performance (95th percentile), 200% of the target would be earned. Achievement of
results between levels previously described will result in award payouts determined based on a linear interpolation between payout
levels. In the event the Bank’s TSR over the performance period is negative, no more than 100% of the target PSUs for the relative
TSR component will be earned, and the value of a PSU earned at the end of the performance period for the relative TSR component
cannot exceed six times (6x) the grant date stock price. The PSUs contain a three-year vesting period followed by a one-year post-vest
hold period and are eligible to accrue dividend equivalents that are subject to the same vesting criteria as the underlying PSUs. The
total compensation expense for the PSUs granted is expected to be approximately $13.6 million and is expected to be recognized over
the three-year vesting period.
On February 20, 2025, the Compensation Committee approved the issuance of restricted stock awards for 210,965 shares of
restricted stock that vest on February 20, 2028. Total compensation expense for the restricted stock awards is expected to be
approximately $10.4 million and is expected to be recognized ratably over the three-year vesting period.
16. Commitments and Contingencies
The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments primarily include standby letters of credit and commitments to extend credit.
Outstanding standby letters of credit are contingent commitments issued by the Bank generally to guarantee the performance of a
customer in third-party borrowing arrangements. The maximum amount of future payments the Bank could be required to make under
these guarantees at December 31, 2024 and 2023 is $177.7 million and $24.3 million, respectively. The Bank holds collateral to
support guarantees when deemed necessary. Collateralized commitments at December 31, 2024 and 2023 totaled $177.0 million and
$23.7 million, respectively.
The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for
commitments to extend credit is represented by the contractual amount of those instruments. The Bank has the same credit policies in
making commitments and conditional obligations as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established
in the contract. Commitments generally have fixed expiration dates or other termination clauses, may require payment of a fee and
may expire without being drawn upon. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of
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collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the
counterparty. The type of collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and
other real or personal property.
At December 31, 2024, the Bank had outstanding commitments totaling $19.08 billion to extend credit, consisting primarily of
loans closed but not yet funded. These commitments may or may not fund in whole or part prior to maturity; however, such funding is
subject to a number of factors, including, among others, economic conditions, real estate market conditions and competitive factors.
The following table shows the contractual maturities of such outstanding loan commitments as of the date indicated.
Contractual Maturities at December 31, 2024
Maturity (Dollars in thousands)
Amount
2025
$
3,972,368
2026
6,188,732
2027
5,162,895
2028
2,670,385
2029
842,305
Thereafter
241,948
Total
$
19,078,633
The Bank is a party as both plaintiff and defendant in various legal or regulatory proceedings or claims, including claims related
to employment, wage-hour and labor law claims, consumer and privacy claims, as well as claims of lender liability, breach of contract,
and other similar lending-related claims encountered on a routine basis, some of which may be styled as “class action” or
representative cases. While the ultimate resolution of these ordinary course claims and proceedings cannot be determined at this time,
management believes that such claims and proceedings, individually or in the aggregate, will not have a material adverse effect on the
Bank’s financial condition or results of operations.
17.
Investments in Tax Credits and SBICs
The Bank invests in certain tax credit investments and partnerships generally within the areas we serve. The majority of these
investments provide funds for the construction and development of affordable housing, which provide low income housing tax credits
(“LIHTC”) that are normally recognized over approximately ten years and are an important part in the anticipated yield from these
investments. The Bank is a limited partner or non-managing member in each LIHTC limited partnership or limited liability company.
Each of these entities is managed by an unrelated third-party general partner or managing member who exercises significant control
over the operations and finances of the entity. The general partner or managing member has all the rights, powers and authority
granted or permitted to be granted to a general partner of a limited partnership or managing member of a limited liability company. In
addition to our LIHTC investments, we also have investments in renewable energy and other tax credits. As of December 31, 2024,
the carrying value of tax credit investments and renewable energy partnerships was approximately $460.3 million and is included in
other assets on the consolidated balance sheet. The portion of the tax credit investments that are unfunded and included in other
liabilities totaled approximately $210.3 million at December 31, 2024 and are expected to be funded over the terms of the agreements
ranging from 2025 to 2041.
The Bank also has investments in Small Business Investment Companies (“SBIC”) that provide funds to qualifying small
businesses, and Community Development Companies (“CDC”) that provide funding for the purpose of community development
through investments, lending, and credit assistance. As of December 31, 2024, the carrying value of the Bank’s investments in SBICs
and CDCs was approximately $71.3 million and is included in other assets on the consolidated balance sheet. The portion of the
investments in SBICs and CDCs that are unfunded and included in other liabilities totaled approximately $112.5 million at December
31, 2024 and are expected to be funded over the terms of the agreements ranging from 2025 to 2030.
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The following table shows the expected payments for unfunded tax credit investments, SBICs and CDCs as of December 31,
2024.
Expected Payments at December 31, 2024
(Dollars in thousands)
Amount
2025
$
153,244
2026
87,085
2027
57,723
2028
14,291
2029
6,267
Thereafter
4,207
Total
$
322,817
Effective January 1, 2024, the Bank adopted the provisions of Financial Accounting Standards Board (“FASB”) Accounting
Standards Update (“ASU”) 2023-02, Investments Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax
Credit Structures Using the Proportional Amortization Method, utilizing the modified retrospective method. ASU 2023-02 permits
entities to elect to account for equity investments, regardless of the tax credit program from which the income tax credits are received,
using the proportional amortization method if certain conditions are met. While the adoption of ASU 2023-02 did not have a material
impact on the Bank’s results of operations, the amortization of the Bank’s Community Reinvestment Act (“CRA”) and tax credit
investments are included in income tax expense instead of non-interest expense beginning January 1, 2024. Additionally, the Bank
increased the carrying value of its tax credit investments, which are included in other assets, and increased other liabilities by $210
million to account for uncalled capital commitments that are unconditional and legally binding.
During 2024, the Bank’s provision for income taxes included the recognition of amortization expense on tax credit investments
of $59.2 million and tax credits and other benefits of $70.5 million.
18.
Regulatory Capital and Other Matters
The Bank is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Bank’s financial condition and results of operations. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures
of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital
amounts and classification are also subject to qualitative judgments and adjustments by the regulators about component weightings
and other factors.
The FDIC and other federal banking regulators administer the risk-based capital requirements applicable to insured depository
institutions, including the Bank, to make them consistent with agreements that were reached by the Basel Committee on Banking
Supervision (“Basel III”) and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Basel III
Rules”). The Basel III Rules require the maintenance of minimum amounts and ratios of common equity tier 1 capital, tier 1 capital
and total capital to risk-weighted assets, and of tier 1 capital to adjusted quarterly average assets.
Under the Basel III Rules, common equity tier 1 capital consists of common stock and paid-in capital (net of treasury stock) and
retained earnings. Common equity tier 1 capital is reduced by goodwill, certain intangible assets, net of associated deferred tax
liabilities, deferred tax assets that arise from tax credit and net operating loss carryforwards, net of any valuation allowance, and
certain other items as specified by the Basel III Rules.
Tier 1 capital includes common equity tier 1 capital and certain additional tier 1 items as provided under the Basel III Rules. At
December 31, 2024 and 2023, the Bank’s preferred stock was counted as tier 1 capital, but not as common equity tier 1 capital.
Total capital includes tier 1 capital and tier 2 capital. Tier 2 capital includes, among other things, the allowable portion of the
ACL, the trust preferred securities and the 2.75% Notes.
The common equity tier 1 capital, tier 1 capital and total risk-based capital ratios are calculated by dividing the respective capital
amounts by risk-weighted assets. The leverage ratio is calculated by dividing tier 1 capital by adjusted quarterly average total assets.
The Basel III Rules limit capital distributions and certain discretionary bonus payments if the banking organization does not hold
a “capital conservation buffer” in addition to the amount necessary to meet minimum risk-based capital requirements for common
equity tier 1 capital, tier 1 capital and total capital to risk-weighted assets. At December 31, 2024 and December 31, 2023, the Basel
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III Rules required the Bank to maintain (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%,
plus a 2.5% capital conservation buffer, which effectively results in a minimum ratio of 7.0%, (ii) a minimum ratio of tier 1 capital to
risk-weighted assets of at least 6.0%, plus a 2.5% capital conservation buffer, which effectively results in a minimum ratio of 8.5%,
(iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus a 2.5% capital conservation buffer, which effectively
results in a minimum ratio of 10.5%, and (iv) a minimum leverage ratio of 4.0%. Additionally, in order to be considered well-
capitalized under the Basel III Rules, the Bank must maintain (i) a ratio of common equity tier 1 capital to risk-weighted assets of at
least 6.5%, (ii) a ratio of tier 1 capital to risk-weighted assets of at least 8.0%, (iii) a ratio of total capital to risk-weighted assets of at
least 10.0% and (iv) a leverage ratio of at least 5.0%.
The following table presents actual and required capital ratios as of the dates indicated under the Basel III Rules. The minimum
required capital amounts presented include the minimum required capital levels, plus the capital conservation buffer. Capital levels
required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes
under the Basel III Rules. At December 31, 2024 and 2023, the Bank’s capital levels exceeded all minimum capital requirements
under the Basel III Rules.
Actual
Minimum Capital
Required - Basel III
Required to be Considered
Well Capitalized
Capital
Amount
Ratio
Capital
Amount
Ratio
Capital
Amount
Ratio
(Dollars in thousands)
December 31, 2024:
Common equity tier 1 to risk-weighted assets
$ 4,776,712
11.34% $ 2,947,797
7.00% $ 2,737,240
6.50%
Tier 1 capital to risk-weighted assets
5,115,692
12.15
3,579,468
8.50
3,368,911
8.00
Total capital to risk-weighted assets
6,103,224
14.49
4,421,696
10.50
4,211,139
10.00
Tier 1 leverage to average assets
5,115,692
13.73
1,490,141
4.00
1,862,676
5.00
December 31, 2023:
Common equity tier 1 to risk-weighted assets
$ 4,230,243
10.79% $ 2,743,864
7.00% $ 2,547,873
6.50%
Tier 1 capital to risk-weighted assets
4,569,223
11.66
3,331,835
8.50
3,135,844
8.00
Total capital to risk-weighted assets
5,527,326
14.10
4,115,796
10.50
3,919,805
10.00
Tier 1 leverage to average assets
4,569,223
13.91
1,313,917
4.00
1,642,396
5.00
As of December 31, 2024 and 2023, the most recent notification from the regulators categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that
management believes have changed the Bank’s category.
Regulations of the ASBD and the FDIC limit the Bank’s ability to pay dividends without the prior approval of such agencies.
The ASBD currently limits the amount of dividends the Bank can pay shareholders to 75% of net profits after taxes for the current
year plus 75% of retained net profits after taxes for the immediately preceding year. FDIC regulations prevent insured state banks
from paying any dividends from capital and allow the payment of dividends only from net profits then on hand after deduction for
losses and bad debts. The FDIC also has the authority to prohibit the Bank from engaging in business practices that the FDIC
considers to be unsafe or unsound, which, depending on the Bank’s financial condition, could include the payment of dividends.
Additionally, the Bank’s ability to pay dividends may be restricted by certain covenants in the indentures governing its trust preferred
securities, its subordinated debentures and its subordinated notes, and the relative powers, preferences and other rights of the holders
of the Bank’s preferred stock.
Under federal banking regulation, the Bank is also limited as to the amount it may loan to its affiliates, and such loans must be
collateralized by specific types of collateral. The maximum amount available for loans from the Bank to its affiliates is limited to 10%
of the Bank’s capital and surplus.
19.
Fair Value Measurements
The Bank measures certain of its assets and liabilities on a fair value basis using various valuation techniques and assumptions,
depending on the nature of the asset or liability. Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, fair value is used either
on a periodic basis, typically at least quarterly, or on a non-recurring basis to evaluate certain assets and liabilities for impairment or
for disclosure purposes. At December 31, 2024 and 2023, the Bank had no material liabilities that were accounted for at fair value.
110
The Bank applies the following fair value hierarchy.
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model derived valuations whose inputs are observable.
Level 3 - Instruments whose inputs are unobservable.
The following table sets forth the Bank’s assets that are accounted for at fair value as of the dates indicated.
Level 1
Level 2
Level 3
Total
(Dollars in thousands)
December 31, 2024:
Investment securities:
U.S. Government agency mortgage-backed securities
$
— $
1,256,471 $
— $
1,256,471
Obligations of state and political subdivisions
—
1,419,053
6,643
1,425,696
Other U.S. Government agency securities
—
129,718
—
129,718
Corporate obligations
—
24,265
—
24,265
Total investment securities
—
2,829,507
6,643
2,836,150
Nonaccrual loans
—
—
115,706
115,706
Foreclosed assets
—
—
69,381
69,381
Total
$
— $
2,829,507 $
191,730 $
3,021,237
December 31, 2023:
Investment securities:
U.S. Government agency mortgage-backed securities
$
— $
1,174,429 $
— $
1,174,429
Obligations of state and political subdivisions
—
1,393,568
7,320
1,400,888
Other U.S. Government agency securities
—
638,272
—
638,272
Corporate obligations
—
30,782
—
30,782
Total investment securities
—
3,237,051
7,320
3,244,371
Nonaccrual loans
—
—
51,450
51,450
Foreclosed assets
—
—
61,720
61,720
Total
$
— $
3,237,051 $
120,490 $
3,357,541
The following table presents information on Level 3 non-recurring fair value measurements related to the Level 3 non-accrual
loans above.
Description
Fair Value at
December 31, 2024
Technique
Unobservable Inputs
(Dollars in thousands)
Nonaccrual Loans
$
115,706
Third-party appraisal (1)
or discounted cash
flows
1. Management discount based on
underlying collateral characteristics and
market conditions
2. Life of loan
Foreclosed Assets
$
69,381
Third-party appraisal, (1)
broker price opinions
and/or discounted cash
flows
1. Management discount based on
underlying collateral characteristics and
market conditions
2. Discount rate
3. Holding period
(1) The Bank utilizes valuation techniques consistent with the market, cost, and income approaches, or a combination thereof in determining
fair value.
111
The following methods and assumptions are used to estimate the fair value of the Bank’s assets that are accounted for at fair
value.
Investment securities – The Bank utilizes independent third parties as its principal pricing sources for determining fair value of
investment securities which are measured on a recurring basis. As a result, the Bank considers estimates of fair value from at least two
independent pricing sources for the majority of its individual securities within its investment portfolio. For investment securities traded
in an active market, fair values are based on quoted market prices if available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable securities, broker quotes, comprehensive interest rate tables and pricing matrices or a
combination thereof. For investment securities traded in a market that is not active, fair value is determined using unobservable inputs.
All fair value estimates of the Bank’s investment securities are reviewed on a quarterly basis.
The Bank has determined that certain of its investment securities AFS had a limited to non-existent trading market at December
31, 2024 and 2023. As a result, the Bank considers these investments as Level 3 in the fair value hierarchy. Specifically, the fair values
of certain obligations of state and political subdivisions consisting primarily of certain unrated private placement bonds in the amount
of $6.6 million and $7.3 million at December 31, 2024 and 2023, respectively, were calculated using Level 3 hierarchy inputs and
assumptions as the trading market for such securities was determined to be “not active.”
Nonaccrual loans – Fair values are measured on a non-recurring basis and are based on the underlying collateral value of the
nonaccrual loan, reduced for holding and selling costs, or the estimated discounted cash flows for such loan. At December 31, 2024,
the Bank had reduced the carrying value of its nonaccrual loans to the estimated fair value of $115.7 million. The adjustment to reduce
the carrying value of such nonaccrual loans to the estimated fair value included $15.8 million of ACL allocations.
Foreclosed assets - Repossessed personal properties and real estate acquired through or in lieu of foreclosure are measured on a
non-recurring basis and are initially recorded at fair value less estimated cost to sell at the date of repossession or foreclosure.
Valuations of these assets are periodically reviewed by management with the carrying value of such assets adjusted through non-
interest expense to the then estimated fair value net of estimated selling costs.
20. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of financial instruments.
Cash and cash equivalents – For these short-term instruments, the carrying amount of cash and cash equivalents, including
interest earning deposits and due from banks, is a reasonable estimate of fair value.
Investment securities – The Bank utilizes independent third parties as its principal pricing sources for determining fair value of
investment securities which are measured on a recurring basis. As a result, the Bank receives estimates of fair value from at least two
independent pricing sources for the majority of its individual securities within its investment portfolio. For investment securities traded
in an active market, fair values are based on quoted market prices if available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable securities, broker quotes, comprehensive interest rate tables, pricing matrices or a
combination thereof. For investment securities traded in a market that is not active, fair value is determined using unobservable inputs.
All fair value estimates of the Bank’s investment securities are reviewed on a quarterly basis.
Loans – The fair value of loans is estimated by discounting the expected future cash flows using the current rate at which similar
loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Deposit liabilities – The fair value of demand deposits, savings accounts, money market deposits and other transaction accounts
is the amount payable on demand at the reporting date. The fair value of fixed maturity time deposits is estimated discounting the
expected future cash flows using the current rates available for deposits of similar remaining maturities.
Other borrowed funds – For these short-term instruments, the carrying amount is a reasonable estimate of fair value.
Subordinated notes - The fair values of these instruments are based upon observable market inputs.
Subordinated debentures – The fair values of these instruments are based primarily upon discounted cash flows using rates for
securities with similar terms and remaining maturities.
Off-balance sheet instruments – The fair values of outstanding commitments and letters of credit are based on fees currently
charged to enter into similar agreements, taking into account the remaining terms of the agreements. The fair values of outstanding
commitments and letters of credit were not material at December 31, 2024 or 2023.
112
The fair values of certain of these instruments were calculated by discounting expected cash flows, which contain numerous
uncertainties and involve significant judgments by management. Fair value is the estimated amount at which financial assets or
liabilities could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. Because no
market exists for certain of these financial instruments, the Bank does not know whether these fair values represent values at which the
respective financial instruments could be sold individually or in the aggregate.
The following table presents the carrying amounts, estimated fair values and the fair value hierarchy of the Bank’s financial
instruments, as of the dates indicated.
December 31,
2024
2023
Fair Value
Hierarchy
Carrying
Amount
Estimated Fair
Value
Carrying
Amount
Estimated Fair
Value
(Dollars in thousands)
Financial assets:
Cash and cash equivalents
Level 1
$
2,781,101 $
2,781,101 $
2,149,529 $
2,149,529
Investment securities
Levels 2 and 3
2,836,150
2,836,150
3,244,371
3,244,371
Loans, net of ALL (1)
Level 3
29,503,320
29,295,969
26,119,681
26,085,968
Financial liabilities:
Demand, savings and interest bearing
transaction deposits
Level 1
$ 13,724,266 $ 13,724,266 $ 13,170,170 $ 13,170,170
Time deposits
Level 2
17,318,806
17,314,401
14,234,973
14,219,112
Other borrowings
Level 2
420,813
420,813
805,318
805,318
Subordinated notes
Level 2
348,575
292,809
347,761
284,740
Subordinated debentures
Level 2
113,652
101,637
121,652
112,419
(1) Excludes reserve for losses on unfunded loan commitments.
21. Supplemental Cash Flow Information
The following table provides supplemental cash flow information for the periods indicated.
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Cash paid during the period for:
Interest
$
1,107,384 $
665,209 $
113,573
Income taxes
175,636
213,783
69,989
Supplemental schedule of non-cash activities:
Net change in unrealized gains (losses) on investment securities AFS
28,059
106,203
(265,121)
Loans and other assets transferred to foreclosed assets
29,674
75,299
13,151
Lease liabilities cancelled for right of use assets
(231)
(19,949)
(910)
Increase in tax credit and other investments
128,113
—
—
Retirement of subordinated debentures
(7,000)
—
—
113
22.
Other Operating Expenses
The following table is a summary of other operating expenses for the periods indicated.
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Software and data processing
$
46,980 $
39,212 $
35,373
Deposit insurance and assessments
25,584
30,351
9,610
Professional and outside services
24,872
21,423
21,581
Advertising and public relations
20,576
16,150
8,797
Amortization of CRA and tax credit investments(1)
—
27,768
20,293
Other
65,589
63,220
59,636
Total other operating expenses
$
183,601 $
198,124 $
155,290
(1) Effective January 1, 2024, the Bank adopted ASU 2023-02, Investments Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit
Structures Using the Proportional Amortization Method, which resulted in the amortization of the Bank's CRA and tax credit investments being included in income tax
expense instead of non-interest expense.
23.
Earnings Per Common Share (“EPS”) and Share Repurchase Program
The following table presents the computation of basic and diluted EPS for the periods indicated.
Year Ended December 31,
2024
2023
2022
(Dollars in thousands, except per share amounts)
Numerator:
Net income available to common stockholders
$
700,269 $
674,596 $
547,520
Denominator:
Denominator for basic EPS – weighted-average common shares
113,625
114,460
120,275
Effect of dilutive securities – stock options and PSUs
390
373
425
Denominator for diluted EPS – weighted-average common shares and
assumed conversions
114,015
114,833
120,700
Basic EPS
$
6.16 $
5.89 $
4.55
Diluted EPS
$
6.14 $
5.87 $
4.54
Options to purchase 301,785 shares, 583,152 shares and 904,442 shares, respectively, of the Bank’s common stock at a
weighted-average exercise price of $51.11 per share, $51.52 per share and $51.94 per share, respectively, were outstanding during
2024, 2023 and 2022, but were excluded from the diluted EPS calculations as inclusion of such options would have been anti-dilutive.
There were no anti-dilutive PSUs for any of the periods presented in the previous table.
During 2024, 2023 and 2022, the Bank repurchased 11,903, 4,304,239 and 8,373,398 shares of its common stock at a weighted
average cost of $38.81, $35.19 and $41.80 for a total of $0.5 million, $151.5 million and $350.0 million, respectively, under its stock
repurchase plans. In July 2024, the Bank’s Board authorized a new stock repurchase program for up to $200 million of outstanding
common stock, with an expiration on July 1, 2025, unless extended, shortened or suspended by the Board. In evaluating stock
repurchases, including the parameters for repurchase price and share value, management will consider a variety of factors including
stock price, expected growth, capital position, alternative uses of capital, liquidity, financial performance, the current and expected
macroeconomic environment, regulatory requirements and other factors.
114
24. Changes In and Reclassification From Accumulated Other Comprehensive Income (Loss) (“AOCI”)
The following table presents changes in AOCI for the periods indicated.
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Beginning balance of AOCI – unrealized gains and (losses) on
investment securities AFS
$
(97,374) $
(177,649) $
23,841
Other comprehensive income (loss):
Unrealized gains and (losses) on investment securities AFS
28,059
106,203
(265,121)
Tax effect of unrealized gains and losses on investment securities AFS
(6,821)
(25,928)
63,631
Total other comprehensive income (loss)
21,238
80,275
(201,490)
Ending balance of AOCI – unrealized gains and (losses) on
investment securities AFS
$
(76,136) $
(97,374) $
(177,649)
115
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
Item 9A.
CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the
participation of the Bank’s Chairman and Chief Executive Officer (principal executive officer) and its Chief Financial Officer
(principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures as defined in
SEC Rule 13a-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure
that the information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and
communicated to management, including our principal executive and principal financial officers, as appropriate, to allow for timely
decisions regarding required disclosure. Based on that evaluation, the principal executive officer and principal financial officer
concluded that, as of the end of the period covered by this report, the Bank’s disclosure controls and procedures were effective.
(b) Changes in Internal Control over Financial Reporting.
The Bank’s management, including the Bank’s Chairman and Chief Executive Officer and its Chief Financial Officer, have
evaluated any changes in the Bank’s internal control over financial reporting that occurred during the Bank’s fourth quarter ended
December 31, 2024 and have concluded that there was no change during the Bank’s fourth quarter ended December 31, 2024 that has
materially affected, or is reasonably likely to materially affect, the Bank’s internal control over financial reporting.
(c) Report of Management on the Bank’s Internal Control Over Financial Reporting
March 3, 2025
Management of Bank OZK is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures are made only in accordance with authorizations of management
and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management of Bank OZK, including the Chief Executive Officer and the Chief Financial Officer, has assessed the effectiveness
of the Bank’s internal control over financial reporting as of December 31, 2024, based on criteria for effective internal control over
financial reporting described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Based on this assessment, management has concluded that the Bank’s internal control over
financial reporting was effective as of December 31, 2024, based on the specified criteria.
PricewaterhouseCoopers, LLP, the independent registered public accounting firm that audited the Bank’s consolidated financial
statements included in this Annual Report on Form 10-K, has also audited the effectiveness of the Bank’s internal control over
financial reporting as of December 31, 2024. Their report is included in Item 8 under the heading Report of Independent Registered
Public Accounting Firm.
/s/ George Gleason
/s/ Tim Hicks
George Gleason
Tim Hicks
Chairman and Chief Executive Officer
Chief Financial Officer
(Principal Executive Officer)
(Principal Financial Officer)
116
Item 9B.
OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
During the quarter ended December 31, 2024, no director or Section 16 officer of the Bank adopted or terminated any Rule
10b5-1 trading arrangement (as defined in Item 408(a) of Regulation S-K) or non-Rule 10b5-1 trading arrangement (as defined in Item
408(c) of Regulation S-K).
Item 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Bank has adopted an insider trading policy governing the purchase, sale, and/or other dispositions of the Bank’s securities
by all directors, officers and employees of the Bank, as well as other covered persons, including the Bank itself. The Bank believes
that its insider trading policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, as well as
applicable Nasdaq listing standards. It is the Bank’s policy to comply with all applicable securities and state laws (including
appropriate approvals by the Bank’s board of directors or appropriate committee, if required) when engaging in transactions in the
Bank’s securities. A copy of the Bank’s insider trading policy is filed as Exhibit 19 to this Annual Report on Form 10-K.
The information required by Item 401 of Regulation S-K regarding directors is incorporated herein by this reference to the
caption “2025 Director Nominees” of the Bank’s Proxy Statement to be filed with the FDIC within 120 days of the Bank’s fiscal year-
end.
The information required by Item 405, Item 407(c)(3), Item 407(d)(4) and Item 407(d)(5) of Regulation S-K is incorporated
herein by this reference to the captions “Board Composition and Nomination Process” and “Board and Committees” of the Bank’s
Proxy Statement to be filed with the FDIC within 120 days of the Bank’s fiscal year-end.
The Bank has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to its directors, officers and employees
and is available on the Bank’s Investor Relations website at http://ir.ozk.com under the “Corporate – Governance Documents” section
or, for print copies, by writing to the Bank’s Investor Relations department at Bank OZK, P.O. Box 8811, Little Rock, Arkansas
72231-8811, Attention: Investor Relations. The Bank intends to provide any required disclosure of any amendment to or waiver of the
Code that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons
performing similar functions, in the Governance Documents section of the Investor Relations page of the Bank’s website at http://
ir.ozk.com promptly following the amendment or waiver. The information contained on or connected to the Bank’s website is not
incorporated by reference in this Annual Report on Form 10-K and should not be considered part of this or any other report or
document that we file or furnish to the FDIC pursuant to the Exchange Act.
Item 11.
EXECUTIVE COMPENSATION
The information required by Item 402, Item 407(e)(4) and Item 407(e)(5) of Regulation S-K is incorporated herein by this
reference to the captions “2024 Director Compensation,” “Compensation Discussion and Analysis,” “Executive Compensation
Tables,” “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” of the Bank’s Proxy
Statement to be filed with the FDIC within 120 days of the Bank’s fiscal year-end.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by Item 403 of Regulation S-K is incorporated herein by this reference to the caption “Security
Ownership of Management and Principal Shareholders” of the Bank’s Proxy Statement to be filed with the FDIC within 120 days of
the Bank’s fiscal year-end.
117
The following table gives information about the common stock that may be issued upon the exercise of options, warrants and
rights under all of the Bank’s existing equity compensation plans as of December 31, 2024.
Plan Category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available
for future issuance
under equity
compensation plans
Equity compensation plans approved by stockholders:
2019 Omnibus Equity Incentive Plan
—
—
2,489,234
Stock Option Plan (1)
348,481 $
47.27
—
Equity compensation plans not approved by stockholders
—
—
—
Total
348,481 $
47.27
2,489,234
(1) The 2019 Omnibus Equity Incentive Plan became effective on May 6, 2019. After that date, no new awards may be granted under the
Stock Option Plan.
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 404 and Item 407(a) of Regulation S-K is incorporated herein by this reference to the captions
“Related Person Transactions” and “Board Composition and Nomination Process” of the Bank’s Proxy Statement to be filed with the
FDIC within 120 days of the Bank’s fiscal year-end.
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 9(e) of Schedule 14A regarding audit fees, audit committee pre-approval policies, and related
information is incorporated herein by this reference to the caption “Fees of Independent Registered Public Accounting Firm” of the
Bank’s Proxy Statement to be filed with the FDIC within 120 days of the Bank’s fiscal year-end.
PART IV
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) List the following documents filed as a part of this report:
(1) The Consolidated Financial Statements of the Registrant.
Reference is made to Part II, Item 8 of this Annual Report on Form 10-K.
(2) Financial Statement Schedules.
Financial Statement schedules are omitted either because they are not required or are not applicable, or because the
required information is shown in the Financial Statements or notes thereto.
(3) Exhibits.
The exhibits to this Annual Report on Form 10-K are listed in the Exhibit Index which immediately follows Item 16
below.
(b) Exhibits. The exhibits to this Annual Report on Form 10-K are listed in the Exhibit Index which immediately follows Item
16 below.
(c) Financial Statement Schedules. See Item 15(a)(2) above.
Item 16.
FORM 10-K SUMMARY
None.
118
EXHIBIT INDEX
The following exhibits are filed with this report or are incorporated by reference to previously filed material.
Exhibit
No.
3.1
Amended and Restated Articles of Incorporation of Bank of the Ozarks, effective as of April 10, 2017 (previously filed as Exhibit 3.1 to
the Bank’s Current Report on Form 8-K filed with the FDIC on June 26, 2017, and incorporated herein by reference)
3.2
Articles of Amendment to the Amended and Restated Articles of Incorporation of Bank OZK (previously filed as Exhibit 3.1 to the
Bank’s Current Report on Form 8-K filed with the FDIC on July 16, 2018, and incorporated herein by reference)
3.3
Articles of Amendment to the Amended and Restated Articles of Incorporation of Bank OZK (previously filed as Exhibit 3.3 to the
Bank’s Registration Statement on Form 8-A filed with the FDIC on November 4, 2021, and incorporated herein by reference)
3.4
Second Amended and Restated Bylaws of Bank OZK, effective August 10, 2018 (previously filed as Exhibit 3.1 to the Bank’s Current
Report on Form 8-K filed with the FDIC on August 10, 2018, and incorporated herein by reference)
4.1
Form of Common Stock Certificate (previously filed as Exhibit 4.2 to the Bank’s Current Report on Form 8-K filed with the FDIC on
July 16, 2018, and incorporated herein by reference)
4.2
Form of Certificate Representing Series A Preferred Stock (previously filed as Exhibit 4.1 to the Bank’s Registration Statement on Form
8-A filed with the FDIC on November 4, 2021, and incorporated herein by reference)
4.3
Instruments defining the rights of security holders, including indentures. The Bank hereby agrees to furnish to the FDIC upon request
copies of instruments defining the rights of holders of long-term debt of the Bank and its consolidated subsidiaries; no issuance of debt
exceeds ten percent of the assets of the Bank and its subsidiaries on a consolidated basis
4.4
Description of Bank OZK’s common stock registered under Section 12 of the Securities Exchange Act of 1934 (previously filed as
Exhibit 4.3 to the Bank’s Annual Report on Form 10-K filed with the FDIC on February 28, 2020, and incorporated herein by reference)
4.5
Description of Bank OZK’s Series A Preferred Stock registered under Section 12 of the Securities Exchange Act of 1934 (previously
filed as Exhibit 4.4 to the Bank’s Quarterly Report on Form 10-Q filed with the FDIC on November 9, 2021, and incorporated herein by
reference)
10.1*
Form of Indemnification Agreement for directors and executive officers (previously filed as Exhibit 10.1 to the Bank’s Annual Report
on Form 10-K filed with the FDIC on February 27, 2018, and incorporated herein by reference)
10.2*
Bank OZK Non-Qualified Deferred Compensation Plan, as amended and restated effective January 1, 2021 (previously filed as Exhibit
10.8 to the Bank’s Annual Report on Form 10-K filed with the FDIC on February 25, 2021, and incorporated herein by reference)
10.3*
Split Dollar Insurance Agreement with Bank OZK (previously Bank of the Ozarks) as Trustee of the Linda and George Gleason
Insurance Trust, effective as of May 4, 2010 (previously filed as Exhibit 10.3 to the Bank’s Annual Report on Form 10-K filed with the
FDIC on February 27, 2018, and incorporated herein by reference)
10.4*
Split Dollar Insurance Agreement with George G. Gleason, II, effective as of May 4, 2010 (previously filed as Exhibit 10.4 to the
Bank’s Annual Report on Form 10-K filed with the FDIC on February 27, 2018, and incorporated herein by reference)
10.5*
Split Dollar Designation by Bank OZK (previously Bank of the Ozarks), dated as of May 4, 2010 in respect of George G. Gleason, II as
the insured (previously filed as Exhibit 10.5 to the Bank’s Annual Report on Form 10-K filed with the FDIC on February 27, 2018, and
incorporated herein by reference)
10.6*
Supplemental Executive Retirement Plan (“SERP”) for George G. Gleason, II, effective May 4, 2010 (previously filed as Exhibit 10.6 to
the Bank’s Annual Report on Form 10-K filed with the FDIC on February 27, 2018, and incorporated herein by reference)
10.7*
Amendment to SERP effective November 2, 2020, (previously filed as Exhibit 10.7 to the Bank’s Annual Report on Form 10-K filed
with the FDIC on February 25, 2021, and incorporated herein by reference)
10.8*
Third Amended and Restated Non-Employee Director Stock Option Plan as of April 15, 2013 (previously filed as Exhibit 10.9 to the
Bank’s Annual Report on Form 10-K filed with the FDIC on February 27, 2018, and incorporated herein by reference)
10.9*
Form of Stock Option Agreement for Non-Employee Directors (previously filed as Exhibit 10.10 to the Bank’s Annual Report on Form
10-K filed with the FDIC on February 27, 2018, and incorporated herein by reference)
10.10*
Bank of the Ozarks, Inc. Amended and Restated Stock Option Plan, effective May 18, 2015 (previously filed as Exhibit 10.11 to the
Bank’s Annual Report on Form 10-K filed with the FDIC on February 27, 2018, and incorporated herein by reference)
10.11*
Form of Stock Option Grant Agreement for employees under the Amended and Restated Stock Option Plan, effective May 18, 2015
(previously filed as Exhibit 10.12 to the Bank’s Annual Report on Form 10-K filed with the FDIC on February 27, 2018, and
incorporated herein by reference)
119
10.12*
Bank OZK 2019 Omnibus Equity Incentive Plan dated May 6, 2019 (previously filed as Exhibit 10.1 to the Bank’s Current Report on
Form 8-K filed with the FDIC on May 7, 2019, and incorporated herein by reference)
10.13*
Form of Restricted Stock Award Agreement for Employees under the 2019 Omnibus Equity Incentive Plan (previously filed as Exhibit
10.15 to the Bank’s Annual Report on Form 10-K filed with the FDIC on February 26, 2024, and incorporated herein by reference)
10.14*
Form of Restricted Stock Award Agreement for Non-Employee Directors under the 2019 Omnibus Equity Incentive Plan (previously
filed as Exhibit 10.3 to the Bank’s Current Report on Form 8-K filed with the FDIC on May 7, 2019, and incorporated herein by
reference)
10.15*
Form of Stock Option Award Agreement for Employees under the 2019 Omnibus Equity Incentive Plan (previously filed as Exhibit 10.4
to the Bank’s Current Report on Form 8-K filed with the FDIC on May 7, 2019, and incorporated herein by reference)
10.16*
Form of 2021 Performance Based Restricted Stock Unit Award Agreement for Executive Officers (“2021 LTIP Award”) (previously
filed as Exhibit 10.27 to the Bank’s Annual Report on Form 10-K filed with the FDIC on February 25, 2021, and incorporated herein by
reference)
10.17*
Form of 2022 Performance Based Restricted Stock Unit Award Agreement for Executive Officers (“2022 LTIP Award”) (previously
filed as Exhibit 10.28 to the Bank’s Annual Report on Form 10-K filed with the FDIC on February 28, 2022, and incorporated herein by
reference)
10.18*
Form of 2023 Performance Based Restricted Stock Unit Award Agreement for Executive Officers (“2023 LTIP Award”) (previously
filed as Exhibit 10.27 to the Bank’s Annual Report on Form 10-K filed with the FDIC on February 27, 2023, and incorporated herein by
reference)
10.19*
Bank OZK 2023 Executive Management Cash Incentive Plan (previously filed as Exhibit 10.28 to the Bank’s Annual Report on Form
10-K filed with the FDIC on February 27, 2023, and incorporated herein by reference)
10.20*
Form of 2024 Performance Based Restricted Stock Unit Award Agreement for Executive Officers (“2024 LTIP Award”) (previously
filed as Exhibit 10.25 to the Bank’s Annual Report on Form 10-K filed with the FDIC on February 26, 2024, and incorporated herein by
10.21*
Bank OZK 2024 Executive Officer Cash Incentive Plan (previously filed as Exhibit 10.26 to the Bank’s Annual Report on Form 10-K
filed with the FDIC on February 26, 2024, and incorporated herein by reference)
10.22*
Form of 2025 Performance Based Restricted Stock Unit Award Agreement for Executive Officers (“2025 LTIP Award”), filed herewith
10.23*
Bank OZK 2025 Executive Officer Cash Incentive Plan, filed herewith
19
Bank OZK Insider Trading Policy and Guidelines, filed herewith
21.1
List of Subsidiaries of the Registrant, filed herewith
31.1
Certification of Chairman and Chief Executive Officer, filed herewith
31.2
Certification of Chief Financial Officer, filed herewith
32.1
Certification of Chairman and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, furnished herewith
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, furnished herewith
97
Bank OZK Executive Officer Incentive Compensation Clawback Policy, (previously filed as Exhibit 97 to the Bank’s Annual Report on
Form 10-K filed with the FDIC on February 26, 2024, and incorporated herein by reference)
*Management contract or a compensatory plan or arrangement.
120
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Bank OZK
By:
/s/ Tim Hicks
Chief Financial Officer
(Principal Financial Officer and Authorized Officer)
DATE: March 3, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ George Gleason
Chairman of the Board and Chief Executive Officer
March 3, 2025
George Gleason
(Principal Executive Officer)
/s/ Tim Hicks
Chief Financial Officer
March 3, 2025
Tim Hicks
(Principal Financial Officer)
/s/ Stan Thomas
Chief Accounting Officer
March 3, 2025
Stan Thomas
(Principal Accounting Officer)
/s/ Nicholas Brown
Director
March 3, 2025
Nicholas Brown
/s/ Paula Cholmondeley
Director
March 3, 2025
Paula Cholmondeley
/s/ Beverly Cole
Director
March 3, 2025
Beverly Cole
/s/ Robert East
Director
March 3, 2025
Robert East
/s/ Kathleen Franklin
Director
March 3, 2025
Kathleen Franklin
/s/ Jeff Gearhart
Director
March 3, 2025
Jeff Gearhart
/s/ Peter Kenny
Director
March 3, 2025
Peter Kenny
/s/ William Koefoed
Director
March 3, 2025
William Koefoed
/s/ Elizabeth Musico
Director
March 3, 2025
Elizabeth Musico
/s/ Chris Orndorff
Director
March 3, 2025
Chris Orndorff
/s/ Steven Sadoff
Director
March 3, 2025
Steven Sadoff
/s/ Ross Whipple
Director
March 3, 2025
Ross Whipple
121
Exhibit 21.1
SUBSIDIARIES OF THE BANK
1.
Ozark Capital Statutory Trust II, a Connecticut business trust
2.
Ozark Capital Statutory Trust III, a Delaware business trust
3.
Ozark Capital Statutory Trust IV, a Delaware business trust
4.
Ozark Capital Statutory Trust V, a Delaware business trust
5.
The Highlands Group, Inc., a 100% owned Arkansas subsidiary of Bank OZK
6.
Arlington Park, LLC, a 50% owned Arkansas subsidiary of The Highlands Group, Inc.
7.
BOTO, LLC, a 100% owned Arkansas subsidiary of Bank OZK
8.
BOTO FL Properties LLC, a 100% owned Florida subsidiary of Bank OZK
9.
FCB Properties LLC, a 100% owned Georgia subsidiary of Bank OZK
10. BOTO NC Properties, LLC, a 100% owned North Carolina subsidiary of Bank OZK
11. BOTO GA Properties, LLC, a 100% owned Georgia subsidiary of Bank OZK
12. BOTO-AR Properties, LLC, a 100% owned Arkansas subsidiary of Bank OZK
13. BOTO SC Properties, LLC, a 100% owned South Carolina subsidiary of Bank OZK
14. Omnibank Center Business Condominium Owners Association, Inc., a 75.2% owned Texas subsidiary of Bank OZK
15. Intervest Statutory Trust II, a Connecticut business trust
16. Intervest Statutory Trust III, a Connecticut business trust
17. Intervest Statutory Trust IV, a Delaware business trust
18. Intervest Statutory Trust V, a Delaware business trust
19. BOTO Holdings, Inc., a 100% owned Texas subsidiary of Bank OZK
20. East Atlantic Properties, LLC, a 100% owned North Carolina subsidiary of BOTO NC Properties, LLC
21. Twin Points Road Clubhouse Properties, LLC, a 100% owned Arkansas subsidiary of Bank OZK
22. Highway 7 Properties, LLC, a 100% owned Arkansas subsidiary of Bank OZK
23. Elizabeth Station, LLC, a 33.34% owned Georgia subsidiary of Bank OZK
24. OZK Renewable Energy, LLC, a 100% owned Arkansas subsidiary of Bank OZK
25. NEC Sunset Crescent Owner, LLC, a 100% owned Delaware subsidiary of Bank OZK
26. OZK NMTC I, LLC, a 100% owned Arkansas subsidiary of Bank OZK
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, George Gleason, certify that:
1.
I have reviewed this annual report on Form 10-K of Bank OZK;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 3, 2025
/s/ George Gleason
George Gleason
Chairman and Chief Executive Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Tim Hicks, certify that:
1.
I have reviewed this annual report on Form 10-K of Bank OZK;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 3, 2025
/s/ Tim Hicks
Tim Hicks
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Annual Report of Bank OZK (the Bank) on Form 10-K for the period ended December 31,
2024, as filed with the Federal Deposit Insurance Corporation on the date hereof (the Report), I, George Gleason, Chairman and Chief
Executive Officer of the Bank, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002,
to my knowledge, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Bank.
Date: March 3, 2025
/s/ George Gleason
George Gleason
Chairman and Chief Executive Officer
In accordance with SEC Release No. 34-47986, this Exhibit 32.1 is furnished to the FDIC as an accompanying document and is
not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that
Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Annual Report of Bank OZK (the Bank) on Form 10-K for the period ended December 31,
2024, as filed with the Federal Deposit Insurance Corporation on the date hereof (the Report), I, Tim Hicks, Chief Financial Officer of
the Bank, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to my knowledge,
that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Bank.
Date: March 3, 2025
/s/ Tim Hicks
Tim Hicks
Chief Financial Officer
In accordance with SEC Release No. 34-47986, this Exhibit 32.2 is furnished to the FDIC as an accompanying document and is
not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that
Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933.
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2017
A HISTORY OF EXCELLENCE
2024
Annual Report Design by Curran & Connors, Inc. / www.curran-connors.com
For additional information, contact:
Investor Relations
Bank OZK
18000 Cantrell Road
Little Rock, AR 72223
Transfer Agent:
Trust and Wealth Division
Bank OZK
18000 Cantrell Road
Little Rock, AR 72223
Little Rock, Arkansas
(501) 978-2265
NASDAQ: OZK
ozk.com