2019 ANNUAL REPORT

• M I S S I O N S T A T E M E N T •

Work hard, have fun, make money,while providing outstanding customer service

and honoring the Golden Rule.

To Our STOCKHOLDERS and CUSTOMERS

2019 was a great year at Happy State Bank – in fact, the best overall year in our history. Measuring earnings, growth, acquisition activity, and stock value - alongside customer and employee satisfaction – I’ll let these highlights tell the story: O Happy Bancshares, Inc. stock value increased to $48.25, up 11.6% for the year…and a 10-year annualized return of 11.7% O HBI earnings were $42 million, up over 32.0%, topping 2018 by $10.2 million. O Another successful capital raise of $64.9 million.

O Four branches were added in Matador, Memphis, Turkey and White Deer – and Wheeler and Mobeetie will be added in January 2020 solidifying our footprint in the Panhandle. O We entered into a definitive agreement to merge with Lubbock-based Centennial Bank, which in addition to their branches in the Texas Panhandle and South Plains, also operates branches in the fast-growing Texas Hill Country. O We continued to stay on the forefront of technology and, among other advances, we were the first community bank in Texas to launch a product that allows customers to open accounts online from any electronic device in less than five minutes. O We began construction on two new branches in northeast Amarillo, strengthening our service commitment to the whole community. O We were one of only two banks in Texas to receive the highest “Outstanding” Community Reinvestment Act rating from the Federal Reserve Bank of Dallas. O American Banker named us one of the “Best Banks to Work For” - that’s six years in a row.

On January 2, 2020, as I celebrated my 30th Anniversary of getting to be CEO of this great company, I let my employees and stockholders know that I will be handing that CEO title over to Mikel Williamson (he’s going to do such a good job!) at our 2020 Stockholder’s Meeting in April. I will continue in my role as Chairman of the Board for both the Bank and the Holding Company.

I am not retiring. You might not see me in the office quite as much, but I’ll still represent our Happy State Bank in several ways. I hope to be even more personally involved with our stockholders and employees, continuing to work on Happy culture and expansions, and as a main spokesman for our new stock offerings. I love this bank far too much than to just retire and walk away.

On top of all of that, this is an incredible time to be a Happy Banker in Texas. We have set the groundwork through our capital strength, our financial performance, our acquisition expertise and, above all, that renowned Happy culture to further extend our Happy brand and still perform strongly for our stockholders. This will enable us to offer the Happy Experience to more Happy customers, and perform stronger still for our Happy stockholders.

God has rained His blessings on this bank. I’ve been blessed to be in the middle of those blessings. I’ve been inspired and amazed by the people who work here, the directors who guide us, the stockholders who support us and the customers who trust us. I thank God and you for allowing me to lead this company for these past 30 years. I pray you give Mikel the same suppor. I am eagerly looking forward to serving you for many, many more years as your Happy Chairman.

Sincerely.

J. Pat HickmanChairman and CEO

Dividend Adjusted Share Price

HBI HISTORIC EARNINGS & EARNINGS PER SHARE

HBI HISTORIC GROWTH

Loans

Deposits

Assets

Total Earningsin Millions

Earnings per Share

3rd Party Valuation

Book Value

Tangible Book Value

*Compound Annual Growth Rate

2012 2013 2014 2015 2016 2017 2018 2019

$55.00

$50.00

$45.00

$40.00

$35.00

$30.00

$25.00

$20.00

$15.00

$10.00

$5.00

$0

$50.00

$45.00

$40.00

$35.00

$30.00

$25.00

$20.00

$15.00

$10.00

$5.00

$0 2012 2013 2014 2015 2016 2017 2018 2019

2012 2013 2014 2015 2016 2017 2018 2019

$24.625

$31.814

$1.56 $1.89

$42.010

$2.38

$28.004

$1.86 $1.74

$24.660

$1.39 $1.36

$18.788

$16.213

$11.984

$1.11

$4Billion

$3Billion

$2Billion

$1Billion

$0

CAGR* 7 Years

Loans 10.13%Deposits 7.10%Assets 8.64%

HBI STOCK VALUES

$48.257 Year Annualized Return16.07%2019 Increase11.56%

Statement of ConditionHAPPY BANCSHARES, INC.

(Dollars in thousands) 2018 Change from2018 to 2019

$ 181,478 21% 580,870 19% 2,352,080 11%

111,265 4% 220,688 -14% 3,446,381 11%

2,813,600 8%171,458 48%

2,985,058 10%

18,086 3% 241,217 8% 208,102 20%

(6,082) -206%

461,323 16%

$ 3,446,381

2017

$ 187,475 604,857 2,339,046

107,326 174,389 3,413,093

2,663,641369,259

3,032,900

16,494 185,302 176,662 1,735

380,193

$ 3,413,093 11%

Loans

BALANCE SHEET

ASSETSCash & Due from BanksInvestments

Retained Earnings

Fixed AssetsOther Assets

TOTAL ASSETS

LIABILITIESDepositsOther Liabilities

TOTAL LIABILITIESCAPITAL

Common StockCapital Surplus

Accumulated other Comprehensive Income

TOTAL CAPITALTOTAL LIABILITIES & EQUITY CAPITAL

(Dollars in thousands) 2018 Change from2018 to 2019

NET INTEREST INCOME $ 147,387 11%

27,592 26%119,795 8%

6,300 37%NON INTEREST INCOME

17,482 8%15,974 54%33,456 30%

66,076 3%12,850 11%6,939 13%

25,864 -7%111,792 3%

35,222 41%3,408 129%

$ 31,814

2019

$ 219,746 692,467 2,612,576

115,662 188,837 3,829,288

3,040,314253,426

3,293,740

18,593 260,467 250,030 6,458 535,548

$ 3,829,288

2019

$ 164,220 34,718

129,502 8,650

18,81624,661 43,477

68,385 14,2217,871

24,048114,525

49,804 7,794

$ 42,010

2017

$ 125,606 17,335

108,271 6,200

15,84417,596 33,440

59,683 12,2959,468

21,094102,540

32,971 8,346

$ 24,625 32%

Other Non Interest Income

INCOME STATEMENT

Interest IncomeInterest Expense

Provision for Loan Losses

Service Charges

Net Income before TaxIncome Tax

NET INCOME

NON INTEREST EXPENSESalaries and Employee BenefitsOccupancy and Equipment Expense, NetData ProcessingOther

DIRECTORS & OFFICERS

Board of Directors

Happy Bancshares, Inc.Happy State BankMatthew BumsteadJ. Pat HickmanBill JenningsNancy Gaitan-KernellMike H. KuhlmanFrank O. MarrsDrayton McLane Jr.Drayton McLane IIIGinger NelsonGeorge Bailey Peyton, IVJ. Brian Sims, M.D.Trent SisemoreBrian L. VincentVictor “Vic” A. Weir, IIMikel WilliamsonJohn Zwiacher

Happy State Bank ADMINISTRATIONJ. Pat HickmanChairman & CEOMikel WilliamsonPresidentKayla CarpenterChief of StaffTracy HobbsExecutive AssistantKim MullaneExecutive Assistant

LegalDavid JonesGeneral CounselBrandon WingVP & Assistant General CounselWhitney CardwellVice PresidentMari DanielExecutive Assistant

MarketingBill HollandExecutive Vice PresidentCindy BrownAssistant Vice President Support Services

AccountingEric AlexanderEVP & CFOJeff PeatrowskySenior Vice PresidentNathan TerryVice President Brooke AlvisAssistant Vice PresidentKelsea HeimanAssistant Vice President

Lisa MartinezAssistant Vice PresidentAnn LoweryBank Officer Risk & ComplianceConnie RatliffEVP & ERM OfficerEric VigilSVP & Sr Compliance OfficerLinda CrankSVP & CRA OfficerJo HindsSVP & BSA OfficerKim TimmonsSVP Loan ReviewJennifer LangSenior Vice PresidentLauren MaclaskeySenior Vice PresidentIan CurrieVP & ERM OfficerDenise FarmerVP & AuditorBobby GreggVice PresidentRichard JohnsonVice PresidentCharlotte MullicanVice PresidentBryan ReavesVice PresidentGary SeftonVice PresidentMary Beth da SilvaAssistant Vice PresidentKira KunkelAssistant Vice PresidentRomy ShortzAssistant Vice PresidentJared SmithAssistant Vice PresidentJohnny TerraAssistant Vice PresidentLindsey CorbinBank Officer

Bank OperationsAlberto RiosEVP & COOGreg HouletteSenior Vice PresidentKelly LindleySenior Vice PresidentErin ViermannSenior Vice PresidentKraig KnoxVice PresidentMark MurrayVice PresidentStacie SmithVice PresidentSherry StatesVice President Kim FulghamBank Officer

FacilitiesPhil McConnellVice PresidentPaul GilbertAssistant Vice President

Human ResourcesRenee McNeelyExecutive Vice PresidentCheryl DukeAssistant Vice PresidentMary FuentesAssistant Vice President

TrainingLeslie LewisSenior Vice PresidentMelissa CurtisVice PresidentBreanna McMahanBank Officer Information TechnologyJeff RademaekersSenior Vice PresidentMatthew SmithVice PresidentJessie CastilloAssistant Vice PresidentBill DavisAssistant Vice PresidentFernando MirandaAssistant Vice PresidentGarrett BoyerIT OfficerJoe CowdenIT OfficerTy O’KellyIT Officer OperationsMandi WillisSenior Vice PresidentLourdes ArandaVice PresidentCassie AshfordVice PresidentTerri FryAssistant Vice PresidentChris PowellAssistant Vice PresidentTravis SotoAssistant Vice PresidentJared BlakeBank OfficerSarah BurlingameBank OfficerLisa MorrisBank OfficerErica ReynaBank Officer Lending & Credit

Benny TeafatillerEVP & Sr. Lending OfficerRoss GlennEVP & Special Assets

Scott LewisEVP & Sr. Credit OfficerDavid SmithExecutive Vice PresidentCathy TateExecutive Assistant Appraisal ReviewAnita RayVice President Credit AnalystsDavid HutsonSenior Vice PresidentMatt BaggsVice PresidentNathan AllisonVice PresidentMary ArthoBank OfficerChad DyslinBank OfficerJosh GarzaBank OfficerParker OgburnBank OfficerRyan SanfordBank OfficerDillon SpradleyBank OfficerScott HendersonBank OfficerJoAnn SchraderBank OfficerJason WestBank OfficerSabrina ShieldsBank Officer Loan AdministrationDianne MonroeSenior Vice PresidentLela NaggarSenior Vice PresidentMarci WillisVice PresidentNicole HouleVice PresidentRachel SarineVice PresidentTonya IngramBank Officer Special AssetsRusty ConwaySenior Vice PresidentSteve MarcumSenior Vice PresidentShane WatsonVice PresidentChristy HeustonAssistant Vice PresidentJD MorrisonAssistant Vice President

AbileneKen BowlesSenior Vice PresidentScott JonesSenior Vice PresidentAnnette AndersVice PresidentLee BeatyBank Officer

Amarillo MarketSteve BowenMarket President DowntownJim BryanSenior Bank OfficerGary WellsSenior Bank OfficerJamie EschSenior Vice PresidentRyan EvansSenior Vice PresidentJeff IrwinSenior Vice PresidentGreg GrahamVice PresidentTucker LeeVice PresidentChris MorrisVice PresidentMason ReinboldAssistant Vice PresidentStaci ScottBank Officer BellCourtney EvansAssistant Vice President CoulterStacy ArmstrongAssistant Vice President

ExpressBill LatimerAssistant Vice President

GeorgiaValerie de la FuenteAssistant Vice President SoncyScott MartinPresidentRyan MonroeSenior Vice PresidentSteve SeabournSenior Vice PresidentMichael BlankenshipVice PresidentGeoff PhemisterVice PresidentShelly KearnsAssistant Vice President TascosaJennifer CurrieAssistant Vice President

DIRECTORS & OFFICERS

TecklaYolanda CastilloAssistant Vice President WesternDebbie LoylessAssistant Vice President BorgerWes HukillPresident CanadianRonda BartlettPresidentJohn HaleyVice PresidentCheryl HohertzVice President CanyonGary HindersPresidentDavid TarverSenior Vice PresidentMike SluderVice PresidentChrisy ThomasonVice President DalhartEli HernandezPresidentApril LindBank Officer DFW MarketRobert GottlichMarket President

AddisonJulie BlakelyPresidentKenneth MaynardSenior Vice PresidentTanya CowgillSenior Vice PresidentMatt FiskVice PresidentCheryl JohnsonVice PresidentMatthew PeakesVice PresidentDarrell ChinneryAssistant Vice PresidentBeth FreemanAssistant Vice PresidentBrian LaingBank OfficerLuke McKeeIT Officer AllenChris CastlePresidentJody HerveyAssistant Vice PresidentJohn YoungBank Officer

BedfordMike MonroePresidentJohn UlmerSenior Vice PresidentDavid WeinerSenior Vice PresidentMatthew BlackmonBank Officer

Fort WorthDaniel HerronSenior Vice PresidentCarol LangfordVice PresidentStephanie MartinVice PresidentJeanine WerberigVice PresidentBenton WoodrumVice PresidentTravis KennedyAssistant Vice PresidentMax PriceBank Officer DumasKris CartritePresidentTeresa ChastainSenior Vice PresidentDonna NelsonBank Officer FloydadaDiane AlvarezBank Officer HappyErica ReyesBank Officer HerefordChristina LucioAssistant Vice President HigginsTrish BakerAssistant Vice President LockneyMonty TeeterPresidentYara PooleBank Officer

Lubbock MarketBud HolmesMarket President 98th & QuakerJay HouseSenior Vice PresidentMike JacksonSenior Vice PresidentClay MercerSenior Vice PresidentPeter SmithSenior Vice PresidentTrey WeaverSenior Vice PresidentJennifer BledsoeVice PresidentCraig WellsVice PresidentAnthony AlmosAssistant Vice PresidentHeather GlennAssistant Vice PresidentJessica TerrellAssistant Vice PresidentLeah CleavingerBank OfficerDerek DollahiteBank OfficerWillie MartinezBank OfficerJames SikesBank Officer 19th & QuakerBrad PettyPresidentSuzie StaffordVice President

MatadorOlivia OsbornBank Officer

MemphisColleen OwensVice President

OltonBrent FalkenbergPresidentGladys HarperAssistant Vice PresidentJimma BradleyBank Officer PampaAlan EubankPresidentJolita SellsVice PresidentKay WestVice PresidentErica GuzmanAssistant Vice PresidentMisty AuwenBank Officer

PanhandleBrady ShadidPresidentTravis Hammer Bank Officer PlainviewWillis McCutcheonPresidentJordan DunlapAssistant Vice PresidentNancy StukeyAssistant Vice President ShamrockKelly LivingstonPresidentAnn BrownBank OfficerSae McAllisterBank Officer SilvertonKyle FustonPresidentBeverly MinyardAssistant Vice President StratfordDoak CrabtreePresidentTrisha KeenerVice PresidentHolly ReinartVice President SunrayMary Jean Jones Branch Operations Manager TexlineGayle KoehnPresident

TurkeyKyle FustonPresident

White DeerDarla PulseAssistant Vice President

Virtual BranchRian ClintonPresident

IT and Other Financial ServicesAlan VanOngevalleExecutive Vice PresidentJennifer ThomasExecutive Assistant

Happy Trust Co.Joby Mills - AmarilloSenior Vice PresidentChris Klemme - DallasSenior Vice PresidentBrooks Smith - DallasSenior Vice PresidentBryan Limmer - LubbockSenior Vice PresidentAlisa Scott - AmarilloSenior Vice PresidentTodd Wetsel - AmarilloSenior Vice PresidentTerry Wright - AmarilloSenior Trust OfficerJason Carter - Fort WorthVice PresidentBuffy Haden - AmarilloVice PresidentKevin Rider - AmarilloVice PresidentTerri Wright - AmarilloVice PresidentScott Richardson - AmarilloTrust OfficerHunter Vagrosky - AmarilloTrust OfficerShannon Van Campen - AddisonTrust Officer Happy InvestmentServicesBrad Griffin - AmarilloSenior Vice PresidentJon Burnett - AmarilloSenior Vice PresidentJohn Bertsch - PlainviewVice PresidentChad Carlile - LubbockVice PresidentCyan Batchelor - LubbockBank OfficerSandi Brandt - AmarilloBank OfficerDan Fowler - PampaBank Officer

Mortgage LendingRussell Pulliam - BedfordSenior Vice PresidentMonica Aragon - CanyonVice PresidentKim Bailey - AmarilloVice PresidentDonna Cooper - AmarilloVice PresidentJeremy Dean - Fort WorthVice PresidentDonna Donnell - AmarilloVice PresidentCindy Hanson - AmarilloVice PresidentKay Kuhn - AmarilloVice PresidentRyan Stewart - BedfordVice PresidentGiff Berryman - AmarilloAssistant Vice PresidentAshton George - BedfordAssistant Vice PresidentHeather Schrader - AmarilloAssistant Vice PresidentErin Budd - AmarilloMortgage OfficerMirna Corral - AmarilloMortgage OfficerJennifer Harkins - AmarilloMortgage OfficerSharla Fife - BedfordMortgage OfficerJimmy Rivero - AmarilloMortgage Officer GoldStar Trust Co.John JohnsonSenior Vice PresidentDavid SchnierleSenior Vice PresidentJeff WorleySenior Vice PresidentAngela ShaferVice PresidentRhonda CoxVice PresidentJeremy SelfAssistant Vice PresidentSarah Ann TrujilloVice PresidentWendy BaxterTrust OfficerLara JohnsTrust OfficerVanessa MataTrust OfficerCarla McCaslinTrust Officer

GoldStar Protective ServicesMarvin DanielsVice President

Happy

Abilene

Addison

Allen

Amarillo - 10

Bedford

Borger

Canadian

Canyon

Dalhart

HAPPY Locations 2019

Dumas

Floydada

Fort Worth Hereford

Higgins

Lockney

Lubbock - 2

Matador

Memphis

Olton

100 E. Main • P.O. Box 68 • Happy, Texas 79042 • (800) 447-BANK • (806) 358-5100 • happybank.com

Member FDIC

HAPPY BANCSHARES, INC.

Pampa

Panhandle

Plainview

Shamrock

Silverton

Stratford

Sunray

Texline

White Deer