Q1 2024 Home Bancshares Inc Conway AR Earnings Call

Operator: Ladies and gentlemen, the Home BancShares first quarter earnings call will begin shortly. If you would like to submit a question at any time, please press star one on your telephone keypad. Thank you for your patience.

Ladies and gentlemen, thank you for standing by the Army Bancshares first quarter earnings call will begin shortly if you would like to register a question at any time. Please press star one on your telephone keypad. Thank you for your patience.

Operator: Greetings, ladies and gentlemen, welcome to the Home Bancshares Incorporated first quarter 2024 earnings call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued this morning. Company presenters will begin with their prepared remarks and then introduce 10 questions. Please note that if you would like to ask a question during the question and answer session, please press star then one on your touchtone phone. If you decide you want to withdraw your question, please press star then two to remove yourself from the list.

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Speaker Change: Greetings, ladies and gentlemen, welcome to the home Bancshares incorporated first quarter 2024 earnings call.

Speaker Change: This call is to discuss the information and data provided in the quarterly earnings release issued this morning.

Speaker Change: Company presenters will begin with prepared remarks, then entertain questions.

Speaker Change: Note that if you would like to ask a question during the question and answer session. Please press Star then one on you touched on fine. If you decide you want to withdraw your question. Please press Star then two to remove yourself from the list.

Operator: The company has asked me to remind everyone to refer to the cautionary notes regarding forward-looking statements. You'll find this note on page three of the Form 10-K filed with the SEC in February 2024. At this time, all participants are in listening mode, and this conference call is being recorded. If you need operator assistance during the conference, please press star then zero. It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations.

Speaker Change: He has asked to remind everyone.

Speaker Change: The cautionary notes regarding forward looking statements you will find this note on page three of the Form 10-K filed with the SEC in February 2024.

Speaker Change: At this time all participants are in listen only mode. On this conference call is being recorded.

Speaker Change: You need to operator assistance during the conference. Please press Star then zero.

Speaker Change: It is now my pleasure to turn the call over to Donna Townsell director of Investor Relations.

Donna J. Townsell: Thank you. Good afternoon, and welcome to our first quarterly conference call. With me for today's discussion is our Chairman, John Allison, Tracy French, President and CEO of Centennial Bank, Stephen Tipton, Chief Operating Officer, Kevin Hester, Chief Lending Officer, Brian Davis, our Chief Financial Officer, Chris Poulton, President of CCFG, and John Marshall, President of Shore Premier Finance. To open our discussion on the quarter today, we will begin with some remarks from our Chairman, John Allison.

Donna J. Townsell: Thank you good afternoon, and welcome to our first quarter Conference call with me for today's discussion as our chairman John Allison Tracy French President and CEO of Centennial Bank, Stephen Tipton, Chief Operating Officer, Kevin Hester, Chief Lending Officer, Brian Davis, Our Chief Financial Officer, Chris Poulton.

Donna J. Townsell: President of CCF G and John Marshall President of Shore Premier Finance.

Donna J. Townsell: Open our discussion on the quarter today, we will begin with some remarks from our chairman John Allison.

John W. Allison: Thank you, Donna, and welcome everyone to Home BancShare's first quarter earnings release and conference call. We released our results this morning prior to the market opening, and overall, it was a good start to a volatile year. Any time you look at the trends with positive results across the board on net interest income, revenue, EPS, margin, increases in both loans and deposits while maintaining our strong liquidity position and reducing expenses by over $3 million below the first quarter of last year, 23, is a big win.

John W. Allison: Thank you Donna and welcome everyone welcome to home Bancshares first quarter earnings release and conference call. We released our results. This morning, Brian in the market opening and overall it was a good start to a volatile year anytime you conduct the trends with positive results across the board on net interest income revenue.

John W. Allison: Margin increases in both loans and deposits, while maintaining our strong liquidity position and reducing expenses by over $3 million below the first quarter of last year 23 is a big win home with our fortress balance sheet is one of the strongest banks in America, and having the ability to pay.

John W. Allison: Home, with our Fortress balance sheet, is one of the strongest banks in America, and having the ability to pay out all uninsured deposits should provide comfort for all our customers and shareholders. As I've said in the past, we will not be the highest when it comes to paying interest on your money, but you will not have to worry about getting your money anytime you need it. During this crisis, we have never run a CDA paying these outrageous, unprofitable prices for deposits, and many troubled banks are doing just that. This did not happen by luck.

John W. Allison: Oh uninsured deposits or ship provider for all of our customers and shareholders.

As I have said in the past, we will not be the highest one in terms of time right. So in your mind, but you will not have to worry about getting your money anytime.

John W. Allison: During this process, we have we have never run a CVA.

John W. Allison: That rate just unprofitable flashes where deposits many troubled bonds are doing tonight.

John W. Allison: This did not happen by luck.

John W. Allison: Your management team has maintained, as she has remained, very conservative during what appears to be a mirror image of the inflationary Volcker times of the late 70s and early 80s. We have been active in recognizing the danger of the Volcker years and have managed accordingly. This one is not over yet and will not be over this year.

John W. Allison: Your management team is mindset.

John W. Allison: <unk> remained very conservative during what appears to be a mirror image of the inflationary both of times in the late seventies in the early days would have been active and recognizing the danger of volcker years and is managed accordingly.

John W. Allison: This one is not over yet and will not be over this year inflation is and we will continue to be with us for the foreseeable future.

John W. Allison: Inflation is with us for the foreseeable future. Our government is totally responsible for this situation. Irresponsible spending is the direct cause of all our inflation in this country. Both Republicans and Democrats, and especially the Democrats, are spending like drunken sailors and even trying to relieve student debt in an attempt to buy votes with our money. They caused it, and now, and the Fed is desperately trying to stop it by avoiding a recession. Really?

Government is totally responsiveness situations irresponsible spending is a direct cause of all our inflation. This country, both Republicans and Democrats and more so Democrats are spending like drunken sailors and even trying to release student data and intent to buy.

John W. Allison: <unk> with our money.

John W. Allison: They caused it and now panel and the thing that is desperately trying to stop by avoiding the recession really they should all be punished for their action their stupidity as a reason for inflationary problem. The problem is that most of them couldn't run a washing machine the Buck stops with me.

John W. Allison: They should all be punished for their actions. Their stupidity is the reason for an inflationary problem. The problem is that most of them couldn't run a washing machine. The buck stops with them. We have not felt the full impact of the increase in oil prices rolling into our economy. Coming from the manufacturing business, the impact of oil is not just at the service station, as we learned through experience with past oil spikes, but multitudes of products derived from oil or byproducts thereof. Earlier this year, the market was signaling six cuts. Let me say this again.

John W. Allison: We have not felt the full impact of the inquiries are all for US is rolling into our economy coming from the manufacturing business. The impact of all is not just at the service station as we learned through experience has passed all sparks.

John W. Allison: But multitudes of products derived from all our byproducts thereof. Early this year the market was suddenly six Scott Let me say this if we had to have six cuts Donna this country would've been in lots of trouble I made that statement earlier in front of her and she said we wouldn't have been a troubled asset I didn't say.

John W. Allison: If we had to have six cuts, Donna, this country would have been in lots of trouble. I made that statement earlier in front of her, and she said, "We wouldn't have been in trouble." And I said, I didn't say us. She said, well, make clear that we say the country would have been in trouble. We called for higher interest rates for longer before that was popular. We forecasted one and not more than two rate cuts, and we are beginning to believe that may be high. The only caveat coming is politics.

Donna J. Townsell: She said, Mike clearly, if we say the country would've been in trouble with.

Donna J. Townsell: We call for higher for longer before that was popular we forecasted one and not more than two rate cuts and beginning to believe that maybe they don't.

Speaker Change: Only caveat Kevin is politics.

John W. Allison: I think instead of cutting rates because it's not the right time, the Fed needs to consider raising rates again. President Clinton. When inflation was sticking its ugly head up during his term, he surprised everyone with a 50 basis point jump in rates when no one expected it. Within a short period of time, he dropped back 25 basis points, but he did stop inflation. They say the president has no control over the Fed or the chairman, but that was not the case during the Reagan administration. When Volcker was called to the White House to meet with President Reagan by Chief of Staff Jim Buckard, the meeting took place in the library. And according to Volcker, the President never said a word.

Speaker Change: Instead of cutting rates, because it's not the right time, the fed needs to consider raising rates again.

Speaker Change: Clinton.

Speaker Change: When inflation was sticking its ugly head up during his term surprised everyone with a 50 basis point jump in right. When no one expected within a short period of time, he dropped back 25 basis points, but he did stop inflation.

Speaker Change: The President has no control over the fed or the chairman, but it did during the Reagan administration. When Volcker was kind of the white house to meet with President Reagan by Chief of staff, Jim Butler. The meeting took place in the library.

Speaker Change: And not to hold office and according to the <unk>.

Speaker Change: It never set were merger as volcker to sit down and then we looked at it and said the president of the United States is order or do you not to raise rates during the last year and debating. It is finished the book in that little Jewel was and I thought I'd share. It with you because it does maybe politics do involve themselves.

John W. Allison: Baker asked Volcker to sit down, and then he looked at him and said, The President of the United States is ordering you not to raise rates during an election year. In the meeting. I just finished the book, and that little jill was in it. I thought I'd share it with you, because maybe politics do involve themselves.

John W. Allison: By the way, Volcker thinks the reason for the library meeting was not because there was no recording device in that room. And as Richard Nixon found out later in the year, there was one in the Hoagland office that paved the way for the Watergate fiasco. The profitability of our bank is simply based on earnings, revenue, and expenses. I understand that's a simple approach to looking at our company, but how much revenue was generated over the quarter, and how much did it cost us to generate that revenue? Therein lies the efficiency ratio. How much does it cost to make a dollar?

Speaker Change: <unk>. Thanks for the reason for the Library meeting was not was because theres no recording device in that room and as Richard Nixon found out in the later years plus one in the home office that paved the way for that.

Speaker Change: Watergate fiasco.

The profitability of our bank is simply based on earnings revenue and expenses I understand that's a simple approach to looking at Arca, but how much revenue was generated over the quarter and how much did it cost us to generate that revenue therein lies the efficiency ratio how much does it cost to make a dollar we have to give credit where credit.

John W. Allison: We have to give credit where credit's due, and that belongs to the revenue side and the retail side of our company. Our loan teams have continued to write loans in a way that is a credit to our overall yield. As a result, it has been pleasing to watch the overall yield of the entire book continue to hit a new high of 7.34%, and that is without any event income, I believe, Stephen. Is that correct? While maintaining strong asset quality, congratulations to our entire lending team. It is because of you and your strong relationship that you've developed one-on-one with our customers.

Speaker Change: It's data that belongs to the revenue side and the retail side of our company.

Speaker Change: Our teams have continued to write loans in a way that is accretive to our overall yield as a result, it has been pleasing to watch the overall yield of the entire book continue to.

Speaker Change: To hit a new high of 734% and that is without any event income I believe Stephen is that correct correct.

Speaker Change: Maintaining strong asset quality congratulations to our entire lending team. It is because of you and your strong relationships that you've developed one on one with our customers you continue to answer the call to do the best for our owners shareholders and provide opportunities for home to remind one of America's best and most profitable.

John W. Allison: You continue to answer the call to do the best for our owner-shareholders and provide opportunities for HOME to remain one of America's best and most profitable companies. During the quarter, our lenders originated $954 million in loans at a record rate of 9.28%. Only about 40% of that was funded, I think. Less than half. Yes.

Speaker Change: Companies during the quarter, our lenders originate $954 million in loans at a record rate of 92, 8%.

Speaker Change: Only about 40% of that funded I think.

Speaker Change: Less than half yesterday.

John W. Allison: We appreciate the support of our customers and our shareholders as we protect the strength of our fortress balance sheet during some of the most volatile times in HOME's 25-year history. However, if we did not have deposits, which I call a raw material, I come from the manufacturing business, so I look at deposits as raw material, I would simply not be able to lend any money. There comes the value of the retail areas of our bank. During these volatile times, the Ponshaws can go about anywhere they want to go and get any rate in turn.

Speaker Change: We appreciate the support of our customers and our shareholders as we protect the strength of our fortress balance sheet. During some of the most volatile times in homes 25 year history.

Ivor if we did not have deposits, which I call. Our raw materials are coming from the manufacturing business. So I'll look at deposits as raw materials simply would not be able to earn any money. There comes the values of the retail areas.

Speaker Change: During these volatile times departures can you tell about anywhere they want to go and get any REIT in terms. It just depends on how much risk. They wanted time because many of the banks that are running hot for a CD ads might not be able to pass.

John W. Allison: It just depends on how much risk they want to take because many of the banks that are running high-priced CDAs may not be able to pay out all insured deposits. I was headed to my grandson's game at Greenbrier the other night, and there's a sign hanging outside of one of these banks that says 6.1%. No way they can be properly 6.1%. So anybody that's got signs out over 5.4, you can borrow. What's the rate of borrowing money today? 5.4, 5.4?

Speaker Change: Pay out all insured deposits I was headed my grandson's game Greenbrier or the other in that and there is a sign hanging outside and one of these mindset six 1%.

Speaker Change: They can be profitable at six 1%. So it is anybody's guess.

Speaker Change: Got signs out over five or you can mark what's Wright's borrowing money at five below.

John W. Allison: That's Fed funds, yes. Fed funds at 5.4. So if you're paying more than that, to me, that says, I have borrowed all the money I can borrow, and I've got to get some money from the customers, whether it's safe or not. Our retail staff, who deal directly one-on-one with our customers, has built relationships with them and has been able to hold deposits at some lower cost because our customers trust us to protect their personal deposits by having the ability, again, to pay In this cycle, deposits have been king.

Speaker Change: Fed funds, yes fed funds at five four so if youre paying more than that to me that says.

Speaker Change: Bart <unk> bar and I got to get some money from from their customers, whether it's safety or not.

Speaker Change: Our retail staffing jails directly one on one of our customer has built relationships with Liam relationships lithium and it's been able to hold deposit at some lower cost because our customers trust us to protect their personal deposits by having the ability again to pay out all uninsured deposits and this dip.

Speaker Change: Deposits have been keen lack of available Dupont.

John W. Allison: The lack of available deposits is what took down SBB, Signature, and Republic. Early in the pandemic, we were flushed with excess deposits, but we were afraid that the excess deposits would eventually run off by our customers spending that money. That's pretty much exactly what happened.

Speaker Change: FCB signature in Republic.

Speaker Change: Early in the pandemic would reflect with excess deposits, but we were afraid that the excess deposits would eventually run off by our customer spending that money.

Speaker Change: It's pretty much exactly what happened and we were suddenly scrambling to have enough deposits.

John W. Allison: And we were suddenly scrambling to have enough deposits for our loans plus being able to pay out uninsured deposits. I thought of the days when we did not even begin to recognize the importance of deposits as I watched SVB and signature banks being taken apart in a matter of days. I remember us trying to move some deposits out of our bank. How wrong and misinformed can one be?

Speaker Change: For our loans plus being able to pay out of uninsured deposits are part of the days when we did not even begin to recognize the importance of deposits as I watched SBB and signature banks being taken apart in a matter of days I'll remember us trying to move some deposits out of our bonds at wrong misinformed can one be protected and hold.

John W. Allison: Protecting and holding our deposits and not putting depositors' money into long-term securities are the main reasons Home BancShares is in the great financial position that it is today. There would be no need for the expense side if there were no revenue. The lifeblood of this company is revenue. Nothing happens until something is sold. There is nothing to account for. There is nothing to regulate.

Speaker Change: Our deposits and not putting depositors' money into long term securities are the main reasons home Bancshares is in a great financial organization that it is today there would be no need for the expense side. If there were no revenue. The lifeblood of this company is revenue nothing happens until something is so there is nothing to it.

Speaker Change: <unk> there is nothing to regulate theres no need to hire people. They expense side. So reason for existence is to account for and accommodate the retail and revenue side of this by way of work together as efficiently as possible and not against each other we have to support our retail in revenue horses.

John W. Allison: There's no need to hire people. The expense side's sole reason for existence is to account for and accommodate the retail and revenue sides of this bank. We have worked together as efficiently as possible and not against each other. They are the ones that make it happen.

John W. Allison: They are the lawmakers. They don't deal from a desk in the back office. They're on the firing lines one-on-one with the customers. I have some concerns about where we are today in this cycle, not home, particularly, but I'm concerned about what happens to the hundreds and thousands of zombie banks that can no longer access the federal lending program, the BPFP. Will the cost of funds continue to escalate? Will senior rates go to 7, 8, and 9?

Speaker Change: Are the ones that make it happen.

Speaker Change: They don't deal from a depth in the back office there on the firing lines one on one with the customers.

Speaker Change: I have some concerns about where we are today and in fact, we're not home, particularly but I'm concerned about what happens.

Speaker Change: So the hundreds and thousands of zombie buys that can no longer access to federal lending program that BP will Costa farms continue to escalate with CD rates go to 789, well this blended about bank failures that would've probably we would've probably experienced if the fed hadn't backed up the truck with her.

John W. Allison: Will this bring about bank failures that we would probably have experienced if the Fed hadn't backed up the truck with their program before? Have these banks recovered to a point where they'll be able to pay some or all of their under-insured depositors? As scary as it has been, it could get worse. I think the Fed will be forced to extend the program or face many bank failures.

Speaker Change: Program before and these banks recovered to a point that they'll be able to pay some or all of their 100 sure deposits as scary as it has been it could get worse I think the fed will be forced to extend the program. Our face many bank failures I can assure you home will be one of the good banks have been.

John W. Allison: I can assure you that Home will be one of the good banks helping the regulators to clean up the mess. These banks with 8% or less capital and 110% loan deposits may wish they had found a partner before it was too late. When you look at the margins of some banks, you see some with a two-handle, and believe it or not, there's some in Arkansas with a one-handle. What were they thinking? I guess, better said, they weren't thinking at all.

Speaker Change: Helping to regulators to clean up the mess.

Speaker Change: These bonds with 8% or less capital and 110% loan to deposit may wish they had found a partner before as to like when.

Speaker Change: When you look at margins of some buys you see some of the two handle and believe it or not there is some in Arkansas with the warm.

Speaker Change: What were they thinking I guess better said they werent thinking at all they are entirely too many banks run around in the market doing stupid things appear to not have a clue what youre doing don't shoot me.

John W. Allison: There are entirely too many banks running around in the market doing stupid things to appear to not have a clue what they're doing. Don't shoot me. But I'm strongly in favor of capital requirements being raised into the team. I call them "clutterbikes" because they don't have a clue in most instances, and they just get in everybody's way and continue to do silly and stupid things.

Speaker Change: But I am strongly inside of a capital requirements being raised into the teens.

Speaker Change: Our colleagues letter box because they don't have a clearly mode.

Speaker Change: And then just getting everybody's way and continue to do silly and stupid things.

Speaker Change: As soon as things are trends at home policies and appear headed in the right direction with deposits loans margin efficiency net interest income expenses asset quality.

John W. Allison: Sue as things are, trends at home are positive and appear headed in the right direction with deposits, loans, margin efficiency, net interest income, expenses, and asset quality. We're going to have a little bop coming out of Texas. We've got a few things you've got to clean up in the state of Texas. It is very manageable, but some things, early on, they just weren't dealt with, and they need to be dealt with

Speaker Change: We're going to have a little bump we've got coming out of Texas. We've got a few times, you've got to clean up in the state of Texas.

Speaker Change: It is it's very manageable, but some things early.

Speaker Change: They just werent dealt with them they need to be dealt with so we've made some loans it shouldn't have been made and.

John W. Allison: So we've made some loans that shouldn't have been made, and we'll have to deal with those. And I think Kevin's going to talk about that a little bit, or some of it. Let's scale the numbers. Earnings were a little over $100 million. I think we even budgeted for that, Brian. We budgeted down, didn't we? No, that is correct.

Speaker Change: And we will have we will have to deal with those and I think Kevin is going to talk about that in a little bit some of them.

Speaker Change: Leslie Elder numbers earnings were a little over 100 million I think leave and budgeted Brian we budgeted down literally no that is correct within data everybody everybody went along said Johnny I didn't think we were going to do that thought we'd beat that I'm. Brad We did revenue was $246 four it was abate.

John W. Allison: We didn't do that. Everybody went along and said, Johnny, I didn't think we were going to do that. I thought we'd beat that, and I'm proud we did. Revenue was $246.4. It was a beat.

John W. Allison: Net interest income of $205.5 million, and that trend appears to be continuing only in April. Reserve loan, 2% or $290 million, and we had $3.63 for every $1 of non-performing loans. We did have loan growth, and deposit growth was about $80 million each for the quarter. A good balance.

Speaker Change: Net interest income of $205 5 million and that trend continued.

Speaker Change: Only in reserve for loans, 2% or $290 million and we had $3.63 for every $1 of nonperforming loans, we did a loan growth and deposit growth was about $80 million each for the quarter then balance loans originated for the quarter were as I said earlier, where 954 million.

John W. Allison: Loans originated for the quarter, as I said earlier, were $954 million at 9.28%. Great job, Kevin and your team. Return on Assets was 178, and Efficiency Ratio was better at 44.22. That's much better than where we were. We're up in the 46s and 47s, and we were headed in the wrong direction. But we've stemmed that off.

Speaker Change: At 928% great job, Kevin year team.

Speaker Change: Return on assets of $1 78, and efficiency ratio better at $44 22, that's much better than where we were up in the 40, such as 40, Seven's and where we're headed in the wrong direction, but which stemmed at all.

John W. Allison: EPS at $0.50 per share. Margin, apples-to-apples, Stephen, was 4.21, and I'm not going to get into the math how we got there, but I think it was 4.13 last time, and you had two bases of event income, which was 4.11. And y'all remember we did the ARB that was 10 basis points. So apples to apples is 421, which I think is what it was, tangible book value of $1

Speaker Change: As a <unk> 50 per share.

Speaker Change: Margin apples to apples, Steven It was 421 and I'm not going to get into the math, how we get there, but I think it was 413 last time and you had two basis.

Speaker Change: Our net income which was <unk> 11.

Speaker Change: And if you all remember we did an arm that was 10 basis points, so apples to apples.

Speaker Change: For 'twenty, one and FY 'twenty was.

Tangible book value of $11.79.

John W. Allison: Return on Council Common Equity at $17.22, and capital of 14.3%. That's a little improvement from last quarter. The tangible book value is $11.79, and we closed four branches in March.

Speaker Change: One on tangible common equity of $17, two two and capital of 14, 3%.

Speaker Change: <unk>, that's a little improvement from last quarter tanks.

Speaker Change: Tangible book value of $11.79 and we closed four branches in March and they were close towards the middle of the month and maybe even see some more savings coming out of that.

John W. Allison: And they were closed towards the middle of the month, and maybe we'll see some more savings coming out. We'll take the blame for a lot of expenses getting out of control, and worse than that, we'll take responsibility for not taking action earlier. Sometimes we don't see the forest for the trees.

Speaker Change: We'll take the blame for align expenses to get out of control and worse and that will take.

Speaker Change: Sponsored ability or not taken actions earlier, sometimes we don't see the forest for the trees, even though we started like noninterest expense for the first quarter of 'twenty four was less than the first quarter of 'twenty three by over $3 million keeping.

John W. Allison: Even though we started late, non-interest expense for the first quarter of 24 was less than the first quarter of 23 by over $3 million. Keeping expenses under control will be an ongoing project here. Because of our earnings being off, and expenses continuing unabated last year, the board decided it's best to hold any dividend increase until later this year. As you know, and would expect, my wife was not happy with that decision at all. No dividend increase. We'll ask the board of directors to address that again in the future. Donna wasn't quite as good as I wanted, but I'll take it.

Speaker Change: Sensors under control will be an ongoing project here.

Speaker Change: Because of our earnings being off and expenses continued unabated last year. The board decided it is best to hold any dividend increase until later this year as you know and would expect my wife was not happy with that decision at all no dividend inquiries, we will ask the board of directors to address out again in the <unk>.

Speaker Change: <unk>.

Speaker Change: Donnelley wasn't quite as good as I wanted but I'll take it I am sure there might be a few banks that might outperformance this quarter, but it is so it will be a very small group and those that beta congratulations to them in a tough environment. It has been a tough couple of years attempting to overcome the damage done to our company by our group.

John W. Allison: I'm sure there may be a few banks that might outperform us this quarter, but if so, it will be a very small group, and those that beat us, congratulations to them in a tough environment. It has been a tough couple of years attempting to overcome the damage done to our company by a group of West Texas individuals. The lawsuit we filed against the individuals is and will continue going forward until our shareholders receive proper restitution for the acts of others. We have the fiduciary responsibility to protect our shareholders from what appears to be intentional damage, which includes possible criminal charges.

Speaker Change: Less debt, Texas individuals the lawsuit we filed against the individuals is and will continue going forward until our shareholders receive proper restitution for acts of others. We have a fiduciary responsibility to protect our shareholders, but what appears to be intentional damage which includes past.

Speaker Change: Criminal charge.

John W. Allison: This is a matter for the court, the law, and juries to decide, and we'll leave it to them to resolve, with this top performing team of revenue horses deposit gathering. Coupled with their strong relationships with their customer base, I would expect similar positive results in this quarter. Trends are continuing to look pretty good and showing improvement in the revenue area in April. I hope that will hold throughout the quarter. If that holds, we'll have another great quarter, and we could be off to a really good year.

Speaker Change: This is a matter for the court at law in journeys to subside and we'll able to bring them to resolve.

With this with this top performing team of revenue horses deposit gathers coupled with their strong relationships with their customer base I would expect similar policy results in this quarter trends are continuing to look pretty good and shown improvement.

Speaker Change: In the revenue area.

Speaker Change: I hope that will hold throughout the quarter. If that holds we'll have another great quarter and we could be off a really good year I want to thank everyone.

John W. Allison: I want to thank everyone. One change from next year, Ms. Donna, is that we're going to report our earnings the night before. We did it the same way this time as we did in the past, but we're going to change that next quarter. And I'll give it back to you. Okay. Well, thank you for the colorful commentary, as usual, and I actually think it's a great start to the year. The trends continue, so I expect that from this team. Now, Stephen Tipton will share operational duties. Thanks, Donna.

Speaker Change: One change from next year Ms. Donna is we're going to report.

Donna J. Townsell: Core earnings, but not before we've done it the same way. This time was we had in the past that we're gonna change next quarter Okay.

Speaker Change: And I'll give it back to you okay well. Thank you for the colorful commentary as usual I actually think it's a great start to the year if trends continue so.

Speaker Change: I think that from this team.

Speaker Change: Now Stephen Tipton will share operational results. Thanks.

Stephen Tipton: Thanks Donna. I'll start with the net interest margin that Johnny referenced in his comment. As we discussed on the January earnings call, we added approximately $500 million in cash through borrowings late in Q4. That cash, that excess cash, affected the Q4 net interest margin by one basis point and the Q1 2024 net interest margin by 10 basis points, as we had the cash for a full quarter. Additionally, we had event income in Q1 2024 that accounted for a two basis point increase to the margin. Normalizing for those items, we would have seen a nice three basis point improvement in the margin on a link quarter basis.

Stephen Tipton: Thanks, Dana I'll start with the net interest margin that jonny referenced in his comments.

Stephen Tipton: As we discussed on the January earnings call, we added approximately $500 million in cash and borrowings late in Q4.

Stephen Tipton: That cash that excess cash affected the Q4 net interest margin by one basis point in the Q1 2024 net interest margin by 10 basis points as we had the cash for a full quarter.

Stephen Tipton: Additionally, we had event income in Q1 2024 that accounted for two basis point increase to the margin.

Stephen Tipton: Normalizing for those items, we would've seen a 93 basis point improvement in the margin on a linked quarter basis.

Stephen Tipton: We continue to closely monitor asset repricing against the increasing cost on the funding side. The yield on loans excluding event income improved to 7.34% in Q1 and outpaced the increase in total deposit cost by a couple of basis points. During the quarter, total deposit costs increased 13 basis points to 2.22%, while the yield on loans excluding event income increased 15 basis points to 7.34%. We will continue to negotiate pricing with core customers as we have been, but we're encouraged to see the pace of increases on the deposit side begin to moderate.

Stephen Tipton: We continue to closely monitor asset repricing against the increasing cost on the funding side.

Stephen Tipton: The yield on loans, excluding the event income improved to 734% in Q1.

Stephen Tipton: It outpaced the increase in total deposits total deposit cost by a couple of basis points.

Stephen Tipton: During the quarter total deposit costs increased 13 basis points to 222%, while the yield on loans, excluding income increased 15 basis points to 734%.

Stephen Tipton: We will continue to negotiate pricing with core customers as we have been.

Stephen Tipton: We're encouraged to see that to see the pace of increases on the deposit side began to moderate.

Stephen Tipton: Switching to liquidity and funding, it was great to see an increase in deposits again in Q1, with solid growth from several of the Florida, Texas, and Arkansas regions. Total deposits increased $78 million for the quarter. The deposit mix movement was similar to prior quarters as CDs continued to be in focus for the consumer. Non-interest-bearing balances grew by $30 million in Q1 and accounted for 24.4% of total deposits. Alternative funding sources remain extremely strong, with broker deposits still only comprising 2.2% of liabilities.

Stephen Tipton: Switching to liquidity and funding it was great to see an increase in deposits again in Q1 with solid growth from several of the Florida, Texas and Arkansas regions.

Stephen Tipton: Total deposits increased $78 million for the quarter. The deposit mix movement was similar to prior quarters as Cds continued to be in focus for the consumer.

Stephen Tipton: Noninterest bearing balances grew by $30 million in Q1 and account for 24, 4% of total deposits.

Stephen Tipton: Alternative funding sources remain extremely strong with broker deposits still only comprising two 2% of liabilities.

Stephen Tipton: The loan-to-deposit ratio is in line with the prior quarter, standing at 86% as of March 31. On the asset side, end-period loan balances increased $89 million, led by growth from CCFG Shore, along with several individual regions within the community bank market. On loan originations, as Johnny mentioned, we saw a volume of $954 million in Q1, with approximately two-thirds of the closing volume coming from the community bank reserve. Yields on those originations continue to improve, an average coupon of 9.28% in Q1. Payoff volume, declining from Q4, was a total of $549 million, which appears to be the lowest level we've seen in nearly five years.

Stephen Tipton: Loan to deposit ratio was in line with the prior quarter standing at 86% as of March 31.

Stephen Tipton: On the asset side in period loan balances increased $89 million led by growth from <unk> sure along with several individual regions within the community Bank markets.

Stephen Tipton: On loan originations as Johnny mentioned, we saw a volume of $954 million in Q1 with approximately two thirds of the closing volume coming from the community Bank regions.

Stephen Tipton: Yields on those originations continued to improve with an average coupon of $9 two 8% in Q1.

Stephen Tipton: Payoff volume declining from Q4 was a total of $549 million, which is.

Stephen Tipton: Appears to be the lowest level, we've seen in nearly five years.

Stephen Tipton: Closing. As previously mentioned, all capital ratios remain extremely strong with a tangible common equity ratio of 11.06%, a leverage ratio of 12.3%, and a total risk-based capital ratio of 17.9%. We repurchased 1,026,000 shares in Q1 under our repurchase plan, and we've repurchased about 400,000 or so so far this month through our 10B51 plan. So we continue to be active there. With that said, Donna, I will turn it back.

Stephen Tipton: Closing.

Stephen Tipton: With the previously mentioned strength of our company all capital ratios remain extremely strong with a tangible common equity ratio of 11, 6%.

Stephen Tipton: Leverage ratio of 12, 3% and a total risk based capital ratio of 17, 9%.

Stephen Tipton: We repurchased.

Stephen Tipton: $1 million and 26000 shares in.

Stephen Tipton: In Q1 under our repurchase plan.

Stephen Tipton: Repurchased about 400000 or so so far this month or it can be five one plan.

Stephen Tipton: So we continue to be active there with that Don I'll turn it back over to you. Thank you Steven now.

Donna J. Townsell: Thank you, Stephen. We had 13 baseballs to increase the cost of funds, but Kevin's team got us, and Chris's team got us 15 basis points on the hillside. So that's what I call outrunning the cost. Sorry, I didn't mean to interrupt. Kevin, go ahead. Oh, go ahead. All right. Thanks, Donna. Good afternoon, everyone. As Johnny said, it is pretty simple.

Stephen Tipton: Sure.

Speaker Change: We had 13 basis increase in cost of funds.

Kevin D. Hester: But Kevin staying.

Kevin D. Hester: Chris take down 15 basis points on the yield side. So that's what I call out run in the cost of funds.

Speaker Change: Sorry, I didn't mean to Arab Kevin go ahead, Ken Alright, Thanks, Don and good afternoon, everyone. As Johnny said it is pretty simple at the end of the day, it's just revenue and expense.

Kevin D. Hester: At the end of the day, it's just revenue and expense. On the expense side, our producers continue to get the job done. We continue to see improvement in loan yield and in net interest margin when adjusted for the Fed Arbiter. Volume was impactful as well, resulting in a third consecutive quarter of loan growth.

Ken: The expense side, our producers continue to get the job done.

Ken: We continue to see improvement in loan yield and net interest margin when adjusted for the fed arbitrage.

Ken: Volume was impactful as well, resulting in a third consecutive quarter of loan growth I'm encouraged that we're continuing to see very good opportunities in our high growth markets Leverages. The question, but Fortunately there is plenty of equity available to get deals done today.

Kevin D. Hester: I'm encouraged that we're continuing to see very good opportunities in our high-growth market. Leverage is the question, but fortunately, there is plenty of equity available to get deals done. The synergies that we've seen in our legacy footprint are becoming evident, and post-acquisition happy. It took us a little longer to get there due to the orchestrated exodus, but when you continue to focus on the right things, it's just a matter of time before it clicks, and you see the benefits.

Ken: The synergies that we've seen in our legacy footprint are becoming evident in post acquisition happy It took us a little longer to get there due to the orchestrated exited but when you continue to focus on the right things. It's just a matter of time before it clicks and you see the benefit.

Kevin D. Hester: On the expense side, in the fourth quarter, we took the opportunity in what I would consider to be a challenging M&A market to make some overhead adjustments. Those changes really bore fruit this quarter. The effects of improvement on both sides of the ledger are being impacted.

Ken: On the expense side in the fourth quarter, we took the opportunity in what I would consider to be a challenging M&A market.

Ken: And make some overhead adjustments.

Ken: Those changes really bore fruit in this quarter.

Ken: The effects of improvement on both sides of the ledger are impactful.

Ken: We will continue to look for opportunities to be more efficient as that has been our hallmark, but there are definitely opportunities to bring on producers who fit our culture and we're not hesitant to do so.

Kevin D. Hester: We will continue to look for opportunities to be more efficient as that has been our hallmark. But there are definitely opportunities to bring on producers who fit our culture, and we're not hesitant to do so. While asset quality remains solid overall, we saw a marginal increase in non-performing loans up 11 basis points to 0.55%. This increase was centered in a few smaller happy credits. Interestingly, as a reminder, we noted early in the acquisition that while they may have had a higher level, relative level of problem credits compared to home, it did not correlate exactly with loss, as a significant level of problems were resolved between due diligence and closing.

Ken: While asset quality remained solid overall, we saw a marginal increase in nonperforming loans.

11 basis points to 0.55%.

Ken: This increase was centered in a few smaller happy credits Interestingly as a reminder, we noted early in the acquisition that while they may have had a higher level relative level.

Ken: Credits compared to home did not correlate exactly with losses as a significant level of problems were resolved in between due diligence and closing.

Ken: We will see if that phenomenon continues as we move forward.

Ken: We recognize that are higher for longer scenario puts more pressure on many projects.

Kevin D. Hester: We will see if that phenomenon continues as we move forward. We recognize that a hire for longer scenario puts more pressure on many projects. We fully expect that we'll see an occasional problem arise from time to time, but we're confident in our underwriting and in our geography. And, in addition, we have a fortress balance sheet with plenty of capital and a 2% allowance for credit.

Ken: We fully expect that we will see an occasional problem arise from time to time, but we're confident in our underwriting and in our geographies and in addition, we have a fortress balance sheet with plenty of capital and a 2% allowance for credit losses.

Ken: Lastly, an update on the three credits that we discussed last quarter.

Ken: Subsequent to quarter end, the Oklahoma Marina note sale has closed and as we anticipated it cleared out the balance that existed at quarter end.

Kevin D. Hester: Lastly, an update on the three credits that we discussed last quarter. Subsequent to Quarter End, the Oklahoma Marina note sale closed, and as we anticipated, it cleared out the balance that existed at Quarter End. The Miami property is still under contract, and there's no change in the timing of the approvals needed to close. I would anticipate that's probably a second half of the year item. I will turn it over to Chris Poulton to give an update on the California property and then a general update on CCFG.

Ken: The Miami property is still under contract and there is no change in the timing of the approvals needed to close.

Ken: I would anticipate that's probably a second half of the year item.

Ken: I will turn it over to Chris Poulton to give an update on the California property and then a general update on CCF G. Chris.

Christopher C. Poulton: Thank you Kevin happy to provide an update the reported during last quarters call. During the fourth quarter of last year, we transferred into Oreo lease.

Christopher C. Poulton: Lease hold interest in approximately 50% of occupied office building located on Ocean Avenue.

Christopher C. Poulton: Thank you, Kevin. I'm happy to provide an update. As I reported during last quarter's call, during the fourth quarter last year, we transferred into REO the leasehold interest in an approximately 50% occupied office building located on Ocean Avenue in Santa Monica, California. At that time, we identified three immediate priorities for the property. The first was to resolve some outstanding legacy litigation between the fee owner and our prior borrower. The second was that we were going to move our L.A.-based West Coast Regional Office to the facility.

Christopher C. Poulton: Monica, California at that time, we identified three immediate prior priorities for the property. The first was to resolve some outstanding legacy litigation between the fee owner in our prior a borrower.

Christopher C. Poulton: Was that we were going to move our la based West Coast Regional office to the facility and the third was we wanted to engage with the existing tenant to determine their potential needs and stabilize the existing tenant.

Christopher C. Poulton: During the quarter, we made progress on all three of these areas.

Christopher C. Poulton: First the outstanding legacy litigation was resolved with the landlord withdrawing their claim against the bank.

Christopher C. Poulton: The second is we did complete our office relocation in February upon the termination of our prior office safely.

Christopher C. Poulton: And the third was that we wanted to engage with the existing tenants to determine their potential needs and stabilize existing tenancy. During the quarter, we made progress on all three of these areas. First, the outstanding legacy litigation was resolved with the landlord withdrawing their claim against the bank.

And the third is that in discussions with the existing office tenants.

Christopher C. Poulton: They expressed their desire to remain in the building longer term and potentially expand their existing space.

Christopher C. Poulton: In the coming months, we'll shift our focus to finalizing lease extensions and expansions for existing tenants.

Christopher C. Poulton: The second is that we did complete our office relocation in February upon the termination of our prior office space lease. And the third is that, in discussions with the existing office tenants, they expressed a desire to remain in the building longer term and potentially expand their existing space. In the coming months, we'll shift our focus to finalizing lease extensions and expansion for existing tenants as appropriate and determining the remaining available space for lease.

Christopher C. Poulton: As appropriate and determined the remaining available space for lease we anticipate at least one floor being available for lease and began marketing this space in the past few weeks, we've had hosted a number of showings.

Christopher C. Poulton: Showings don't necessarily equal leases.

Christopher C. Poulton: And we do expect it may take some time to lease the available space. It's encouraging that there appears to be increasing interest in our well located office space in Santa Monica Submarket.

Christopher C. Poulton: We anticipate at least one floor being available for lease and have begun marketing this space in the past few weeks. We've hosted a number of showings, and while showings don't necessarily equal leases, and we do expect it may take some time to lease the available spaces, it's encouraging that there appears to be an increasing interest in our well-located office space in the Santa Monica sub-market. We'll continue to provide some updates on this, building as we go forward, but I think we're at least encouraged that we were able to accomplish what we wanted to in a fairly short period of time.

We will continue to provide some updates on that.

Christopher C. Poulton: Building as we go forward, but I think we're at least encouraged that we were able to accomplish what we wanted to in a fairly short period of time.

Christopher C. Poulton: Overall for <unk>, we continue to see.

Christopher C. Poulton: Good pipeline and good demand for.

Christopher C. Poulton: For our product I think as many of you know from prior conversations during these types of times are when we get to see some interesting.

Christopher C. Poulton: Transaction, So I think we've done well in the first quarter, we'll see that continue on into the second quarter, though I do expect that.

Christopher C. Poulton: Overall, for CCFG, we continue to see a good pipeline and good demand for our product. I think, as many of you know from prior conversations, these types of times are when we get to see some interesting transactions. And so I think we've done well. In the first quarter, we'll see that continue into the second quarter, though I do expect that, you know, eventually it slows down a little bit, but we continue to be encouraged by the quality of the product that we see. And we continue to see some nice payoffs and pay downs in the portfolio, especially in some credits that we were probably happy to see go. With that, Donna, I think I'm passing it back to you.

Christopher C. Poulton: It slows down a little bit, but we continue to be encouraged with the quality of product that we see and we've continued to see some nice payoffs and paydowns in the portfolio, especially in some credits that we were probably happy to go.

Christopher C. Poulton: With that Donna I think I'm passing it back to you.

Donna J. Townsell: Thank you Chris Congratulations on the progress on the office building Thats great.

Donna J. Townsell: Johnny before we go to Q&A do you have any additional comments.

Johnny: Well I just want to say anytime that you can.

Johnny: <unk> comprehensive measure so to speak or revenue side of it we had every button every one of them.

Johnny: It was eight or nine buttons, we hit them, all and we had loan growth and we had we had loan growth and we had deposit growth. So that was positive asset quality remained strong.

Donna J. Townsell: Thank you, Chris. Congratulations on the progress on the office building. That's great. Johnny, before we go to Q&A, do you have any additional comments?

Johnny: We worked on our expense side, we've made a big impact on the expense side. So I don't really have much to fuss about for the quarter.

John W. Allison: Well, I just want to say whenever you can, on all offensive measures, so to speak, or on the revenue side of it, we hit every button, every one of them. There are eight or nine buttons.

Speaker Change: I think I said.

Speaker Change: Oh, my other remarks, while ago any questions.

Speaker Change: You can ask about anything you want to add because I think we got good answers for all of them.

John W. Allison: We hit them all. And we had loan growth, and we had deposit growth. So that was positive. Asset quality remained strong. We had worked on our expense side, and we made a big impact on the expense side.

Through their dollar and euro.

Speaker Change: Alright, Thank you were ready to go.

Speaker Change: Thank you.

Speaker Change: Ask a question. Please press star followed by one on your telephone keypad.

Speaker Change: We'd like to withdraw your question. Please press star followed by two.

John W. Allison: So I don't really have much to fuss about for the quarter. I think I said in my other remarks a while ago, any questions? You can ask about anything you want to ask, because I think we've got good answers for all of them. And I'm through there, Donna.

Speaker Change: When preparing to ask a question taking joy devices unmentioned licensing.

Speaker Change: Our first question comes from Catherine Mealor with <unk>. Your line is open. Please go ahead.

Catherine Mealor: Thanks, Good afternoon.

Catherine Mealor: Good afternoon Catherine welcome.

Donna J. Townsell: Okay, I think we're ready for the Q&A.

Catherine Mealor: Thanks, Brady always that this was his favorite conference, calling now I understand I'm sorry go ahead.

Operator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask a question, please ensure your device is unmuted locally. Our first question comes from Catherine Miller with KBW. Your line is open, please go ahead.

Speaker Change: Part of it.

Catherine Mealor: Really appreciated your comment Jonny.

Catherine Mealor: I wanted to start maybe with credit and think has appreciate the update on the three credits and then.

Catherine Mealor: Commentary on the small increase in employees I was curious if you could just give us an update I know mid quarter. There is an increase in classified assets.

Unknown Executive: Thanks. Good afternoon.

Donna J. Townsell: Good afternoon, Catherine. Welcome.

Unknown Executive: Thanks. Brady always said this was his favorite conference call. And now I understand. I'm so glad I get to be a part of this now. Really appreciate your comments, Johnny. I wanted to start, maybe, with credit.

Catherine Mealor: You highlighted in your 10-K and I think it was nothing related to one credit I just wanted to see if you could give us an update on that and then also if there was any change in classified into this quarter.

Catherine Mealor: Hey, Catherine this is Kevin Hester.

Unknown Executive: I think I appreciate the update on those three credits and then the commentary on the small increase in NPAs. I was curious if you could just give us an update. I know that in the mid-quarter there was an increase in classified assets that you highlighted in your 10-K, and I think it was mostly related to one credit, but I just wanted to see if you could give us an update on that, and then also if there was any change in classified into this.

Kevin D. Hester: Overall I'll handle the overall question first.

Kevin D. Hester: Overall.

Kevin D. Hester: Classifieds down probably close to $25 million in total.

Kevin D. Hester: Specifically, the one credit that we that we talked about in the fourth quarter that was the large increase.

Kevin D. Hester: We're continuing to work through that from them.

Kevin D. Hester: Just from an overall perspective, it's a daily process of managing there.

Kevin D. Hester: Their cash flows and we're continuing I think we saw a 10 million dollar or so drop in them.

Kevin D. Hester: Hey, Catherine, this is Kevin Hester. Overall, I'll handle the overall question first. Overall, classifieds are probably down probably close to $25 million in total. Specifically, the one credit that we talked about in the fourth quarter, that was a large increase. We're continuing to work through that from an overall perspective. It's a daily process of managing their cash flows, and we're going on. I think we saw a $10 million or so drop in the operating line, and we're continuing to work to get additional collateral and shore that up. So we feel like it's going just like we expected it to.

Kevin D. Hester: The operating line and we're continuing to work to get additional collateral and shore that up so we.

Kevin D. Hester: We feel like it's going.

Kevin D. Hester: Just like we expect it to we knew it would take a couple three quarters to work through.

Kevin D. Hester: The issues that were were evident there we think we're on on track and on progress.

Kevin D. Hester: So there's two pieces that credit one of them is.

Kevin D. Hester: Tug boats and barges.

Kevin D. Hester: We're well collateralized, so and the other is a line of credit.

Kevin D. Hester: Semi collateralized on that piece, but.

Kevin D. Hester: We knew it would take a couple, three quarters to work through the issues that were evident there, and we think we're on track and making progress. There are two pieces to that credit. One of them is tugboats and barges. They were well collateralized on the other line of credit, semi-collateralized on that piece, but Kevin has them, and we've built a policy: if you classify one piece of credit, you classify it all. So, really, we have great equity in the barges and the tugs, so that's the biggest, that's the lion's share. The balance of it is $47-$50 million; it's a line of credit. I wouldn't classify it, but we do everything now. I wouldn't classify the other assets because I think...

Kevin D. Hester: Kevin has been weak.

Kevin D. Hester: The policy classified one piece of credits you classify it on so really we have a great equity in the barges in the time. So that's the biggest that's the lion's share of the balance of it was 47.

Kevin D. Hester: $1 million in Atlanta credit exposure.

Kevin D. Hester: <unk> really.

Speaker Change: I mean, I wouldn't classify them, but we do everything that I would classify the asset.

Speaker Change: Because I think we're fine there.

Speaker Change: If you tried to buy large today two years or so the value of those things are pretty strong.

Speaker Change: Anyway, that's our customer have a kind of a bump there.

Speaker Change: Bump there had gone through the process.

Speaker Change: Ship, a lot of material out of the country and the bridge, it's a ship.

John W. Allison: I mean, if you tried to buy a barge today, it'd take you two years, or a tugboat. So the value of those things is pretty high. So anyway, that's our customer. They kind of bumped their heads going through the process. And they ship a lot of material out of the country.

Speaker Change: They used to transport got close for some reason.

Speaker Change: Throw them into a loop so we pulled the line of credit.

Speaker Change: They were able to get other lines of credit to continue to operate in.

Speaker Change: Should we are told we're going to see Paydowns.

John W. Allison: And the bridge that they shipped through, they used to transport, got closed for some reason, and that threw them into a loop. So we pulled the line of credit, and they were able to get other lines of credit to continue to operate. We're told we're going to see paydowns and the 20 plus million dollar mark this month. We'll see, and we'll let you know when that happens. But if there's any exposure there, I think it's limited. I'd say, uncollateralized, it might be $30 million total.

Speaker Change: The 20 plus million dollar Mark this month so.

Speaker Change: You'll see that we'll let you know when that happens, but if there is any exposure there I think it's limited.

Speaker Change: I would say uncollateralized might be $30 million total.

But by and it's worked and so so far so good that that was a test.

Speaker Change: That's the status of it.

Great.

Speaker Change: That and then a question on the margin.

Speaker Change: Margins relatively stable, if you kind of back out into the excess liquidity.

Kevin D. Hester: But they're paying, and it's working. So, so far, so good. That was it. That was it. That's the status.

Speaker Change: As you think about deposit cost going into the next couple of quarters. It feels like many of your peers have talked about this quarter still seeing pressure on deposit costs were.

Unknown Executive: Great, I appreciate that. And then a question on the margin. Margin's relatively stable if you kind of back out some of the excess liquidity. As you think about deposit costs going into the next couple of quarters, it feels like many of your peers have talked about this quarter still seeing pressure on deposit costs, but we're a quarter or two away from that stabilizing. Can you talk a little bit about where you think you are in that process?

Speaker Change: A quarter or two away from that stabilizing can you can you talk a little bit about where you think you are in that process. Assuming lets just say lets just say rates are stable for the rest of your tenants outside of any increases that you were missing and Johnny or even cut.

If rates are stable for the rest of the year.

Speaker Change: Or do you think your deposit costs.

Unknown Executive: Assuming, let's just say rates are stable for the rest of the year, kind of outside of any increases that you were mentioning, John, or even cuts. But if rates are just stable for the rest of the year, where do you think your deposit costs will be?

Speaker Change: Finally kind of peak.

Speaker Change: Hey, Catherine Stephen Tipton.

Speaker Change: I think it's the same same same sentiment that youre hearing from others.

Speaker Change: Certainly in this past quarter.

Unknown Executive: The final kind of

Stephen Tipton: Hey Catherine, this is Stephen Tipton. You know, I think it's the same sentiment. Hey, same sentiment that you're hearing from others. You know, certainly in this past quarter, the pace of the increases was less. I think we were up four basis points in January and four in February, and we're really pretty flat in March, and those are down from, you know, high single digit, low double digit increases throughout the year last year.

Speaker Change: The increases was less I think we were.

Speaker Change: We were up four basis points in January and four in February and were really pretty flat in March.

Speaker Change: Those are down from high single digit low double digit increases.

Speaker Change: Throughout the year last year, so it slowed some.

Speaker Change: We still have CD portfolio although.

Speaker Change: Fairly small relative to the overall that is maturing each month and we're having to work those and we talked about that earlier on at <unk>.

Stephen Tipton: So it's slowed some, you know, we still have, you know, the CD portfolio, although, you know, fairly small, relatively overall, that is maturing each month, and we're having to work those, and we talked about that earlier on. You know, on a selected negotiated basis. So there's some, you know, lift there. But we're also able to, as liquidity kind of holds in well here, we're able to, Just overall, like Johnny mentioned in our opening comments, just outrunning, on the asset side, outrunning anything that happens on the funding side.

Speaker Change: Selected negotiated basis, so theres some lift there.

Speaker Change: But we're able to also as liquidity kind of holds in well here, we're able to.

Speaker Change: Kind of rationalize some of the top end of money markets and those kinds of things that we've had over the years and I think thats. What we saw in March we're able to we're actually able to go in and lower fee rates here and there.

It helped to offset some of the continued increase so.

Speaker Change: <unk>.

Speaker Change: Low single digits I think.

Speaker Change: What would be what we would target for gear and then.

Speaker Change: Overall like Johnny mentioned in her opening comments just outrunning the on the asset side outrunning anything that happens on the on the funding side.

John W. Allison: That outrunning is continuing into April, too. Catherine, it is the first daily report we compare.

Speaker Change: Alright, running is continuing into April too.

Speaker Change: Kathryn It is the first comparable data report so we're looking at diverse 10 or 15 days 17 days whatever it is of April compared to the first 17 days of January where we.

John W. Allison: So we're looking at the first 10 or 15 days, 17 days, whatever it is, of April compared to the first 17 days of January. And where were we? And we're up, we're up nicely. In the first 17 days, we had some large credits repriced. This quarter, and right now, matter of fact, that should be significant, significant repricing, some four and a half going to nine, four and a half going to eight and a half.

Speaker Change: And we're up we're.

Speaker Change: Were up nicely in the first 17 days, we have some large credits repricing.

Speaker Change: This quarter right now matter of fact that should be significantly significant re pricing. Some four 5 million to 945 going to hate to happen. So we're seeing some significant repricing there that should give us a boost.

John W. Allison: So we're seeing some significant repricing there that should give us a boost. Another plus I didn't talk about that I meant to talk about is that we've been working on our office building in Amarillo, Texas. And it looks like we have a large tenant. We have 240,000 square feet. Looks like we have a large tenant. Cross your fingers; we might get that leased up. So that could be a real plus for us in the Texas market, too. That's just another asset.

Speaker Change: Plus I didn't talk about are meant to talk about is that we've been working on.

Speaker Change: Our office building in Amarillo, Texas, and it looks like we have a large tenant that we have 240000 square foot. It looks like we have a large tenant and cross your fingers.

Speaker Change: Might get that leased up so that could be a real plus for us in the in the Texas market to this just to another site.

Unknown Executive: helpful. All right. Thank you very much.

Speaker Change: Okay helpful. All right. Thank you very much.

Speaker Change: Thank you.

Operator: We now turn to Brett Rabatin with Hopes Group. Your line is open, please go ahead.

Speaker Change: We now turn to Brett Robinson with hub group. Your line is open. Please go ahead.

Brett D. Rabatin: Hey, good afternoon, everyone. I wanted to start with expenses. Hey guys, I wanted to start with expenses. You talked about closing four branches, and Johnny, I was expecting you to be pretty tight on expenses this year. Not that you're not always, but you know, just kind of given the revenue headwinds the industry is facing, is the level of expenses in 1Q, is that a good run rate to think about for the remainder of the year, or are there things either plus or minus that might affect that going forward?

Brett Robinson: Hey, good afternoon, everyone.

Brett Robinson: I wanted to start with expenses.

Brett Robinson: Hey, guys I wanted to start with expenses and you talked about closing four branches and Johnny.

Brett Robinson: Expecting you to be pretty tight on expenses this year not that you're not always but just kind of given the.

Brett Robinson: Revenue headwinds the industry is facing.

Brett Robinson: Is the level of expenses in <unk> is that a good run rate to think about for the remainder of the year or other things, either plus or minus that might affect that going forward.

Brett D. Rabatin: I think it's a fair number. We will not hire anybody else right now.

Speaker Change: I don't think it's a fair number.

Speaker Change: We're not hiring anybody else right now and we're going to continue to work on expenses. So it's an ongoing effort here you don't have an ongoing effort against wiper and we like it that got away from us so.

John W. Allison: And we're going to continue to work on expenses. So it's an ongoing effort here. You don't have an ongoing effort; it gets away from you like it did, it got away from us.

John W. Allison: So, you know, we that's, I think that's a reasonable number. Actually, the forecast was a bigger number than that given to me. And and But I saw the three. It's real money. There are hundreds and hundreds of, I don't know, 50, 60, 70 people reduction in force, so that'll continue on. So, I mean, the real problem is for all banks and is after us.

I think thats, a reasonable number actually the forecast was a bigger number than that given to me and so on.

Speaker Change: I saw the three it's real money so.

Speaker Change: 100 <unk>.

Speaker Change: 50, 60 70 people.

Speaker Change: <unk> four so that will continue home. So I mean, the real problem is for all bonds.

Speaker Change: Is in place and his efforts in insurance Everything's up everything is all expenses are up.

John W. Allison: And insurance, everything's up. Everything is, all expenses are up. So we were able to cut $3 million out of the quarter. And hopefully, that's $3 million below the first quarter last year. So I think that's quite an achievement. Hopefully, or the fourth quarter. Hopefully, and last year, too. I'm sorry. So it'll be good to see if we can continue that. We plan on continuing it. I don't plan on letting it get away from me again. That's my point. Okay, it was a battle, it was a battle to get it down, but we got it down, so.

Speaker Change: So we were able to cut 3 million out in the quarter and hopefully.

Speaker Change: That's 3 million below the first quarter of last year, So it's quite a cheap hopefully.

Speaker Change: Hopefully and last year, two I'm sorry, so.

Speaker Change: It will be good to see.

Speaker Change: If we can continue that we plan on continuing that.

Speaker Change: I don't plan I'd like to get away from Okay again.

Speaker Change: That's my point.

Speaker Change: Okay.

Speaker Change: And it was abandoned.

Speaker Change: It was a battle to get it down, but we got it down so.

Brett D. Rabatin: Okay, that's helpful, Johnny. And then I've had a few folks asking, you know, early in earnings season, one of the Northeast banks indicated that they were seeing some weakness in marine dealers and, you know, your portfolio, I think, and what you guys do is obviously much different than maybe some folks realize. Can you just talk about what you guys are seeing, you know, on the marine side and any activity and just, I know at one point, inventory was hard to get, and maybe that's changed somewhat for the industry, but just any thoughts around the marine portfolio and what you guys are seeing there?

Speaker Change: Okay. That's helpful. Johnny and then I've had a few folks asking early in earnings season, one of the northeast banks indicated seeing some weakness in <unk>.

Speaker Change: Marine dealers and your portfolio I think and what you guys do is obviously much different than maybe what some folks realize can you just talk about what you guys are seeing on the marine side and just any any.

Any activity in this.

I know at one point you know the <unk>.

Speaker Change: Inventory was hard to get maybe that's changed somewhat for the industry, but just any thoughts around the marine portfolio and what you guys are seeing there.

Kevin D. Hester: Hey Brett, this is Kevin. So yeah, what we do is a lot different than what you might have seen on the news that there was an issue with, particularly in that, if you remember, our stuff is primarily Coast Guard registered, 26 and a half feet and up. I mean, we're talking an average loan size of 750. All of our dealer advances are supported by the original MSO, as well as, in almost every case, by the manufacturers repurchase agreement.

Speaker Change: Hey, Brett this is Kevin.

Kevin D. Hester: So yes, what we do is.

Kevin D. Hester: Is a lot different than what you might've seen in the news.

Kevin D. Hester: There was an issue.

Kevin D. Hester: Particularly in the if you remember our stuff is primarily coast guard registered 26, and a half feet. It up I mean, we're talking an average loan size of $7 50.

All of our dealer advances are supported by the original NSO.

Kevin D. Hester: As well as in almost every case manufacturers repurchase agreement so a little.

Kevin D. Hester: So a little different than, you know, the smaller space where you're dealing with tidal boats and trade liberal stuff. So that, I think, is the big difference from that perspective. Certainly, I think, the inventory has been easier for our folks to get, which has been, to them, a good thing, because they hadn't been able to, in a lot of cases, they didn't have anything to sell. I've not seen, in any of the annual reviews that I've seen, I've not seen any weakness from that perspective.

Kevin D. Hester: Different than the smaller space, where you're dealing with titled Moats and trailer real stuff.

So that I think is the big difference from that perspective.

Kevin D. Hester: Certainly I think the <unk>.

Kevin D. Hester: Inventory has been easier for our folks to get which has been.

Good thing because they haven't been able to and a lot of cases, they didn't have anything to sell so I think.

I've not seen in any of the annual reviews that ive seen ive not seen any any weakness from that perspective.

Brett D. Rabatin: Okay, that's helpful. And if I could sneak in one last one, Johnny, your comments around capital were a little confusing to me because you put off the dividend, a dividend increase, but it also seems like you're less optimistic about M&A in the near term. And you know, your capital ratios are really, really strong at 14.3 BT1. Just curious how you think about you've done a little buyback here continued in the second quarter, but how you think about capital levels and what you might do to stop that.

Speaker Change: Okay. That's helpful and if I could sneak in one last one John your comments around capital, we're a little confusing to me because you.

John: You put off the dividend a dividend increase.

John: Also it seems like Youre less optimistic on M&A in the near term and your capital ratios are really really strong at $14 three.

Speaker Change: One just curious how you think about you've done a little buyback here continued in the second quarter, but.

Speaker Change: How do you think about capital levels, and what you might do to stop that those ratios from continuing to move higher.

Brett D. Rabatin: And because we make a lot of money, we have the ability to buy back $22 million worth of stock for the quarter, pay $36 million in dividends, and what's the other button? ALCI.

Well.

Carlos we might get a lot of money.

Speaker Change: Peter buyback $42 million worth of stock for the quarter.

Speaker Change: $36 million in dividends.

Speaker Change: What's the other but <unk> iOS.

John W. Allison: Yeah, ALCI hit us for about $25 million and still grew capital. So I think... We're going to sit with our strong capital buys for a period of time here. I think it's the right thing to do.

Speaker Change: ALC I hit us for about $25 million and steel group capital. So I think.

Speaker Change: We're going to sit with our strong capital base for a period of time here.

I think it's the right thing to do.

John W. Allison: There wasn't any opportunity to speak up for us when the Fed backed up the truck and came in with a lending program. But if they, if they, in fact, next March, everybody has to pay off those people that they're not going to get, You're not going to put that $0.50 security up and get a dollar for it. They're going to get $0.45 for it or something.

Speaker Change: There wasn't any opportunity to speak up for us when the fed backed up the truck payment with the lending program.

Speaker Change: But if they.

Speaker Change: In fact next March everybody has to pay off.

Speaker Change: But with people that they are not going to get.

Speaker Change: Now I will put that 50 cent security you have to get a dollar board they're going to be.

Speaker Change: 45 cents or something so they got.

John W. Allison: So they got, I think that the world will change. So I think we sit and continue to build capital, and we continue to sit where we are, and look for opportunities for our company, because I think there's got to be some. I think there has to be some opportunities for Home BancShares. I mean, we were all dressed up and ready to ply when all the banks started having their problems. And we had the capital and the ability and the expertise to go to acquisitions. But we didn't get to play because the feds backed up the truck. But, in fact, they pulled the truck out.

Speaker Change: I think that we're over change so I think we continue to build capital and we continue to sit where we are.

Speaker Change: And look for opportunities for our company because I think there's got to be so I think there has to be some opportunities for.

Speaker Change: Home Bancshares I mean, we're all dressed up and ready to apply when the bank started having their problems and we have the capital and the ability and the expertise to go to acquisitions. So.

Speaker Change: We didn't get to apply because the fed backed up the truck lift in fact fill the truck it out.

John W. Allison: Next Mark, I think you can see lots of bank players on the horizon. So we're just, we're hanging out for that. We're just continuing to do what we do. We're making damn good money, as you can see. The company's running really well.

Speaker Change: Next March.

Speaker Change: Thank you could see lots of bank players one of <unk>.

Speaker Change: Got it.

Speaker Change: So we're just we're hanging app for that we're just continuing to do what we do we're making damn good money as you can see the company is running really well someone said what happens if rates stay where they are and so we'll just continue doing what we're doing.

John W. Allison: Someone said, "What happens if rates stay where they are? I said, we just continue doing what we're doing. So I think we're really sitting in a good position. You see, in the quarter, you have to admit, we hit every button in the quarter. So I think we'll continue to hit every button going forward here and have a really, really good year for Home Banc... So if we found the right trade to do it, we'd trade today.

Speaker Change: So I don't think we're really sitting in a good position.

Speaker Change: You can see the quarter you have to you have to admit we hit on every every quarter. So.

Speaker Change: We will continue to hit on every button going forward here.

Speaker Change: And have a really really good year for home Bancshares.

Speaker Change: If we found the Rep tried to do it we've tried today, but its awfully difficult to do a transaction in this market unless you find somebody it's really in trouble and you pick that pace up so I think we're going to see some of that though particularly if the fed stops that program.

Brett D. Rabatin: But it's awfully difficult to do a transaction in this market unless you find somebody that's really in trouble and you pick that piece up. So I think we're going to see some of that, though, particularly if the Fed stops that program. So that's going to change the world for thousands of banks. I think there'll be more bank failures if that happens. So my prediction is the Fed will extend it. I don't know if that answers your question, Brent, but that's the way I'm seeing the world right now. Yeah, no, that's...

Speaker Change: So that's going to change the world.

Speaker Change: Thousands of banks.

Speaker Change: There'll be more bank failures that happen. So my prediction is dependent extended.

Speaker Change: I hope that answered your question Brent.

Speaker Change: That's the way I'm seeing the world.

Speaker Change: Yes.

Speaker Change: That's helpful. When you are only real issue is capital is piling up that's a good problem to have congrats on all the metrics this quarter. Thanks guys.

John W. Allison: That's helpful. When your only real issue is capital piling up, that's a good problem to have. Congratulations on all the metrics this quarter. Thanks, guys.

John W. Allison: Well, you've got capital king, deposits are king, and loan rights are king, so that's kind of how we've looked at it. Thank you for such support.

Speaker Change: You bet.

Speaker Change: Got capital's king deposits or King and lung rectal case, so that's kind of how we've looked at it.

Speaker Change: Thank you for such as Ford.

Operator: Our next question comes from Jon Arfstrom with RBC. Your line is open. Please go ahead.

Speaker Change: Our next question comes from John Armstrong with RBC. Your line is open. Please go ahead.

Jon Glenn Arfstrom: Hey, thanks. Good afternoon.

John Armstrong: Hey, Thanks, good afternoon.

John Armstrong: Hi.

Jon Glenn Arfstrom: Question for maybe Johnny or Stephen: if the Fed doesn't do anything on rates, can the margin just grind higher over time, and I'm thinking more medium term? Seems like the ingredients are all there with the slowing deposit cost pressures and the higher loan yields, but what do you think about it?

John Armstrong: For my.

John Armstrong: Question for maybe.

John Armstrong: Johnny you Steven.

John Armstrong: It doesn't do anything on rates.

John Armstrong: On the margin just grind higher over time, but I'm thinking more medium term.

Speaker Change: It seems like the ingredients are all there with the slowing deposit cost pressures on the higher loan yields but.

Speaker Change: How do you think about that.

John W. Allison: Well, I'll speak to it, let Stephen speak to it, but we've got major price adjustments coming on our loans right now, they're going to add millions of dollars of income between now and the end of the year on rate adjustments, on some stuff that was written, fixed rate, five-year fixed, and the four and three-quarters range is going up significantly. So I suspect as Stephen is working on the deposit side, and Kevin's working on the loan side, they just continue to, in my opinion, do a great job of improving the margin.

Speaker Change: Well.

Speaker Change: I'll speak to let Steven speak to but we've got.

Speaker Change: Major price adjustments coming on our loans right now, but im going to add millions of dollars of income to between now and the end of the year.

Speaker Change: Alright adjustments on some stuff that was written fixed rate five year fixed.

Speaker Change: Three quarters range as Cigna.

Speaker Change: Significantly so.

Speaker Change: I suspect.

Speaker Change: Steven is working on the on the deposit side and Kevin is working on the loan side. They just continue to.

Speaker Change: In my opinion do a great job.

John W. Allison: So I'm going to predict that the margin is going to be where it is or higher. And I think I think we're working towards that goal and like everybody's pushing that way. I don't want it to go backwards. It's not going backwards right now. So I don't want it to go backwards.

Speaker Change: Proven improvement in the margins.

Speaker Change: I'm going to predict the margin is going to be where it is or higher.

Speaker Change: And I think we're working towards that goal and I think everybody is pushing that way I don't want it to go backwards, it's not going backwards right now so I would always go backwards with outlets David heat deals with it every day and I'm just kind of generally deal with it.

John W. Allison: But let's say that he deals with it every day, and I just kind of generally deal with it. No, I think that's fair.

Stephen Tipton: I mean, we've got, I think we talked about it last year; we had a billion dollars or so over about a five-quarter period of loans that were repricing. We've got, 700, well less than 700 million, for the rest of the year, which is below six, you know, blended in Johnny mentioned. We've got some bigger credits that are in the fours that are coming up, but there's, you know, Yeah, that we should be able to. Some pretty big improvement from a spread standpoint there. And then, again, without material moves and index. I feel like we can all chat on the loan side. What happens to the deposit?

That's fair I mean, we've got.

Speaker Change: I think we talked about it last year, we had $1 billion or so over about a five quarter period in loans that were re pricing, we've got about 700 less than $700 million.

Speaker Change: For the rest of the year that's below six.

Speaker Change: That's blended as Johnny mentioned, we've got some bigger credits that are that are in the floors that are coming up but there's low six there's 700 million that provided that.

Speaker Change: That we keep the credit.

Speaker Change: We should be able to get some.

Speaker Change: Some pretty big improvement from the from a spread standpoint there.

Speaker Change: And then again absent no material moves in index.

Speaker Change: Deposits that we have thanks for that and the people that funds. If we just kind of hang out here, where we're at.

Feel like the loan side can offset.

Speaker Change: What happens on the deposit side.

Okay fair enough.

And Kevin.

Jon Glenn Arfstrom: Fair enough. And Kevin, what's the reaction like to the new pricing when these loans renew? Curious about the kind of competitive environment and then also what you're seeing for non-CFG pipelines.

Speaker Change: What's the reaction to the to the new pricing when these loans renew.

Kevin D. Hester: Curious about kind of the competitive environment and then also what youre seeing for.

Kevin D. Hester: Non CFT pipelines.

I mean the.

Kevin D. Hester: I mean, as you would expect, I mean, nobody likes to write going from force to, you know, something in the sevens, eights, or nines. But I mean, it is the reality, and everybody's It's going to happen wherever they go, so. It's just part of the timing, pipelines are good. I won't I won't speak for Chris.

Speaker Change: As you would expect I mean, nobody likes the rate going from forest.

Speaker Change: Something in the Sevens eights or nines, but I mean, it is the reality and everybody's.

Speaker Change: It's going to happen wherever they go so.

Speaker Change: Just part of the timing.

Speaker Change: Pipelines are good I won't I won't speak for Chris I'll, let him speak for his but from the community Bank standpoint.

Kevin D. Hester: I'll let him speak for himself, but from the community bank standpoint, we're in really good markets in the southeast. So I mean, we're still seeing really good activity, and we're able to We're able to structure things the way we need to for the most part. I mean, you see some crazy things every now and then, but we're able to structure things the way we should and get the pricing that we're looking for, as evidenced by what we did this quarter. I'm encouraged that this is going to be a

Speaker Change: We're in.

Speaker Change: Really good markets.

Speaker Change: In the southeast so I mean, we're still seeing really good activity and we're able to.

Speaker Change: We're able to structure things the way we need to for the most part I mean, you see some.

Speaker Change: A crazy thing every now and then but.

Speaker Change: We're able to structure things the way, we should and get the pricing that we're looking for as evidenced by what we did this quarter. So.

Speaker Change: I'm encouraged.

Speaker Change: This is going to be.

Jon Glenn Arfstrom: Good. And Chris, if I heard you correctly, it's a couple...

Being able to keep doing that for a while.

Speaker Change: Okay. Good.

Speaker Change: If I heard you correctly, it's a cup.

John W. Allison: I didn't mean to interrupt you, Jon. I was going to ask you that too. We're going to try to get it up, get the margin up if we can.

Go ahead Johnny.

Speaker Change: I mean to interrupt you John.

Speaker Change: That said, we are going to try to get it up get the margins up.

Yeah.

Speaker Change: Yeah.

Johnny: Johnny Prime today are you satisfied.

Johnny: Wherever we can.

Johnny: Yes.

Jon Glenn Arfstrom: All right. All right. It was a nice quarter. Thank you. I appreciate it.

Johnny: Johnny Prime where they've said that exactly.

Johnny: That's probably I'd forgotten Johnny Brown.

Operator: Our next question comes from Stephen Scouten with Piper Sandler. Your line is open, please go ahead.

Johnny: Still on the books at Johnny Prime.

[laughter] alright.

Speaker Change: Alright, Thats, a nice quarter. Thank you I appreciate it.

Speaker Change: Thank you very much.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Stephen Scouten with Piper Sandler. Your line is open. Please go ahead.

Stephen Kendall Scouten: Hey, good afternoon, everyone. I guess I might have missed it, and I had some technology issues during some of Kevin's statements, but did you guys talk further about the bumps that you referenced, Johnny, out of the state of Texas and what that looks like?

Stephen Kendall Scouten: Hey, good afternoon, everyone.

Stephen Kendall Scouten: I guess I might've missed it might had some technology issues.

Stephen Kendall Scouten: Kevin statements, but did you guys talk further about the.

Stephen Kendall Scouten: Bumps that you referenced Johnny on the state of Texas, and what was that.

Stephen Kendall Scouten: Hey, not really. No, I'll give you a little bit of color.

Speaker Change: It looks like.

Speaker Change: Not really no.

Speaker Change: I'll give you a little bit of color, but there's probably half a dozen credits this quarter.

Kevin D. Hester: I mean, there were probably half a dozen credits this quarter that went non-performing that were, were not last quarter. They were all 3 million or less. And almost all of them were outside of the Texas market. Some of them we've been talking about for a while. A couple of them not so much, but nothing that I'm overly concerned about.

Nonperforming that where we are.

Speaker Change: Not last quarter, they were all 3 million or less than <unk>.

Speaker Change: Almost all of them are out of the Texas market and some of them we've been talking about for a while.

Speaker Change: Couple or not but.

Speaker Change: Nothing that I'm overly concerned.

Concerned about but still it's stuff you have to work through so.

Kevin D. Hester: But still, it's stuff you have to work through. So we will just continue to do that. Some of that, Stephen, from the time we closed, happy, it's kind of been on and off, and we've, https://www.homebancashres.com, cleaned it up, but it's not. I mean, if we lost all of them, it might be eight and a half, nine million dollars. We lost it all, so it's not huge to us.

We will just continue to do that.

Speaker Change: Steven and discount from the time, we close Cathy it's kind of an on and off and we.

Speaker Change: I am not saying as well and so with Canada.

Speaker Change: With our Texas loan officers to get them straightened up or get them out and clean.

Speaker Change: Cleaned up but it's not clean.

Speaker Change: I mean, if we lost all of them it might be $859 million, we lost at all so it's not it's not huge to us but.

Speaker Change: Just wanted to get cleaned up.

Speaker Change: We're doing that.

Speaker Change: I had a long and kind of milk in the deal timing, it's time to get them fixed.

Stephen Kendall Scouten: And so are these kind of legacy credits, or was it something you identified in terms of how those lenders were operating in those Texas markets that you wanted to change moving forward?

Speaker Change: Yes.

Speaker Change: Okay, and so are these kind of legacy credits or was it something you identified in terms of.

Speaker Change: Now how those lenders were operating in those Texas markets that you wanted to change moving forward.

Kevin D. Hester: Both. Yeah, and you gotta remember they had acquisitions on their books as well. So they had just finished an acquisition of a Centennial Bank, oddly enough, but they were working through it. So some of those are acquisitions to them as well.

Speaker Change: Yeah, and you got to remember they have they had acquisitions.

Speaker Change: Their books as well so they were.

Speaker Change: I had just finished an acquisition of Centennial bank oddly enough but.

Speaker Change: They were working through it so some of those are acquisitions to them as well.

Speaker Change: That's correct.

John W. Allison: And two of these loans that bother me, in fact, one of them was made about the time we closed. Two of them were made about the time we closed the transaction. So, there are loans that we would not have made today. One of them is the marina, and it's sold, it's gone.

That is correct in two of the two of these loans that bothered me in Texas. One of them was made about the time, we closed two of them were made about the time, we close the transaction so.

Speaker Change: They are loans that we would not have made today one of them is the marina and its subtle let's go we've got that Leo Kevin got that deal closed at ultimate bottleneck.

John W. Allison: Got that deal, Kevin, got that deal, closed that. I owe him a bottle of Whistle Pee. So I told him if he got that sold and done before the end of the quarter, I'd give him some whips and pennies. So anyway, I owe him some. You can send me some so I can pay him. I don't know if it's going to be alright or not, but it's not the end of the world.

Speaker Change: <unk>.

Speaker Change: Don't forget that some of them done before the end of the quarter and getting to what's the pace so anyway.

Speaker Change: You can send me some pain.

Speaker Change: And out of it.

Speaker Change: The other one was it.

Speaker Change: Million dollars apartment complex that just didn't.

Speaker Change: I don't know if it'll be iron or not so, but it's not in the world.

Kevin D. Hester: All senators might not be, but if there is, I mean, it's a million or plus a million or minus a million. It's just getting it cleaned up, that's really all it is. It's just gone on like this, you remember I read every line of every classified asset that Happy had before we bought the bank, and some of them are that old stuff that just hadn't been cleaned up and needs to be cleaned He read the due diligence carefully.

Speaker Change: There might be a law says there might not be but if there is I mean, it's a.

Speaker Change: EMEA, either plus or minus $1 million. So it's just getting it cleaned up actuarially and it just drug along you'll remember I read ever line of Eric classified asset happy had before we bought the bank and some of them are <unk>.

Speaker Change: Stuff that just hadn't been cleaned up between debt.

Speaker Change: Nothing.

Speaker Change: He ran his due diligence he read all of the due diligence.

Kevin D. Hester: He read all the due diligence and problem loans that we had, and by the time we got to the first asset quality meeting after acquisition, a lot of those had cleaned up. And so that's the comment that I made a few minutes ago, that's their history relative to us; they had more problem loans than we had, But a lot of it didn't necessarily translate to losses. They've cleaned a lot of stuff up through the time.

Speaker Change: Problem loans that we had and by the time, we got to do the first asset quality meeting after acquisition a lot of those had cleaned up and so that's the comment that I made a few minutes ago.

Speaker Change: Is that that's been their history, they had relative to us they had more problem loans than we had but a lot of it doesn't necessarily translate to the losses, they've cleaned a lot of step up through the time and part of that's.

Kevin D. Hester: Part of that is because they're in a good market just like we are in Arkansas and Florida. So we'll see if that continues. [inaudible] today because of interest rates at high levels, they are, but there are not big losses that are happening.

Speaker Change: And a good market just like we are in Arizona, Florida.

We'll see if that continues and.

I expect that it will but.

Speaker Change: You are right when you suddenly move into 789%, 10% interest rate. So you don't see some cracks come the difference is.

Speaker Change: The difference now between four and five nobody had any money in the deal no foreign Fi and they've got money in these deals pretty we've got money in these days it might be 20% probably there is no equity in some of those did.

John W. Allison: So, I mean, in 3, 4, and 5, nobody put any money in the deal, and when you had loan problems, they just threw you the keys. So that doesn't happen anymore.

Speaker Change: Today because of interest rates at high levels. They are but there's not big losses that were meeting. So I mean, three four and five I don't nobody putting money in the deal and when the.

John W. Allison: And we haven't had anybody throw us a key to the marina. They threw us the keys to the marina. But we're at it. We're gone. We're done. So Kevin worked that well. And we all got our hands into that one, but Kevin led us. He's got us there. He's got buyers. Anyway, so far, so good.

Loan problems.

Speaker Change: So that doesn't happen anymore.

Speaker Change: Anybody throw us a key marine or they told us the keys on the Marina So but were having were gone we're done so Kevin worked out well and we have got our hands into that one.

Speaker Change: Kevin Lettuce.

Speaker Change: That he got virus stuff so anyway.

Speaker Change: So far so good.

Speaker Change: Got it.

Stephen Kendall Scouten: And then I guess my only other question is really thinking about growth moving forward. I mean, Chris and the CCFG team had a nice little quarter, and organic growth. I mean, the legacy markets grew a little bit. So, I mean, is that growth a function of you guys not being patient and having liquidity put to work when others don't, or is it more you guys getting a little more constructive on the overall environment, or maybe a little bit of both? I'll let you know how it goes.

Speaker Change: And then I guess my only other question is really thinking about growth moving forward I mean, Chris.

Speaker Change: Chris and his <unk> team had a nice quarter.

Speaker Change: <unk>.

Speaker Change: Organic growth in the legacy markets grew a little bit I mean is that growth a function of.

Speaker Change: You guys haven't been patient and having liquidity to put to work when others don't or is it more you guys getting a little more constructive on the overall environment or maybe a little bit of both.

Speaker Change: I'll, let Chris speak to his dynamic but from the community Bank standpoint, It's I think it's the former.

Kevin D. Hester: I'll let Chris speak to his dynamic. But from the community bank standpoint, it's I think it's the former. I mean, we hear a lot of folks not in the market on certain things, and we're, you know, as we always do. We're in the market. We've always got money to lend. So we're going to do it our way. We're going to make it right. But I think it's the first part that we've got money to lend and other folks have stepped on the sidelines for a while.

Christopher C. Poulton: I mean, we hear a lot of folks not in the market on certain things and we are.

Christopher C. Poulton: As we always do.

Christopher C. Poulton: We're in the market, we've always got money alone. So we're going to do it our way and we're going to make it right but.

I think it's the first part that we've got money and a lot of other folks have stepped on the sidelines for a while.

Christopher C. Poulton: Yeah, Kevin, I couldn't have said it better. I mean, last year, I think we did $750 million in volume last year, which is down kind of from what we normally do. But part of that was because we just didn't like some of the things, and there were some people doing some things, etc., and we felt like at some point, the mark would come back our way. And so, having not lent the money last year, we have the money available to lend this year.

Christopher C. Poulton: Chris.

Christopher C. Poulton: I'll jump in there.

Christopher C. Poulton: Yes, Kevin I Couldnt have said it better I mean last year I think we did $750 million in volume last year, which is down from what we normally do but part of that was because we just didn't like some of the things and there were some people doing some things et cetera, and we felt like at some point the mark would come back our way and so having not lent the money last year.

Christopher C. Poulton: The money available to lend this year I can't say that's true for everybody.

Christopher C. Poulton: I can't say that's true for everybody. Will it change as the year goes on? Yeah, I think people will come back into the market. If they start to feel better about it, we have the benefit of never feeling good about the market.

Christopher C. Poulton: Will it change as the year goes on yes, I think people come back into the market.

Christopher C. Poulton: If they start to feel better about it we have the benefit of never feeling good about the market. So.

Stephen Kendall Scouten: Yep, you're very consistent there, Chris. I appreciate that a lot. So, thank you guys for the cover.

Christopher C. Poulton: Yeah.

Speaker Change: Yes, youre very consistent there Chris.

Speaker Change: Thank you guys for the color.

Stephen Kendall Scouten: I thank you, thank you.

Speaker Change: Hi, Thank you.

Operator: Our next question comes from Brian Martin with Jannie. Your line is open, please go ahead.

Speaker Change: Our next question comes from Brian Martin with Janney. Your line is open. Please go ahead.

Brian Joseph Martin: Hey guys, good afternoon. Hey, Kevin, just on those credits. Hey, Johnny, those credits you talked about in the text are for Kevin, what what's the small, I guess, Johnny mentioned one number, but what's the exposure? Or was he talking? Were you talking more about the lost content? I thought you said around eight or $10 million just trying to get an idea of, you know, how much exposure there is to those credits versus, you know, maybe if you're talking about the lost content, I'm not sure. So I will try.

Brian Joseph Martin: Hey, guys good afternoon.

Brian Joseph Martin: Hey, Brian Kevin just on those credits.

Brian Joseph Martin: Johnny those credits that you talked about in Texas, Kevin Whats see small I guess Jonny mentioned, one number but what's the exposure or was he talking point, Johnny will be talking more about the loss content I bet you.

Brian Joseph Martin: You said about eight or $10 million, just trying to get an idea of.

Brian Joseph Martin: How much exposure there is to those credits versus maybe if you were talking about the loss content I'm not sure.

Brian Joseph Martin: So I was I was talking about the increase in nonperforming loans quarter to quarter. He was talking more about overall exposure.

Kevin D. Hester: So, I was talking about the increase in non-performing loans quarter-to-quarter. But he was talking more about overall exposure, you know, if everything that we see in our asset quality readings just went down the toilet.

Brian Joseph Martin: You know if everything that we see in our asset quality ratings just went in the toilet.

Kevin D. Hester: Okay, so the total, that total exposure of those six, those half dozen credits, what, how big is that exposure as you kind of look at it, and then there's some potential loss on that, but if you set it.

Speaker Change: So we were talking about two different things.

Speaker Change: Okay. So the total is that total exposure of those six of those half dozen credits what how big is that exposure as you kind of look at it and then theres some potential loss on that but.

Speaker Change: Got it.

Brian Joseph Martin: A couple, two, three million dollars, I would think. I mean, at this point, I'm not convinced we're going to lose anything on any of those credits that were the change this quarter. But I believe they're all real estate secured. And, you know, there's going to be some level of even if you foreclose on everyone, there's going to be some level of recovery that you have. So I don't think it's going to be a material number. Just really, I was really referencing the change in balance, quarter to quarter. I got it, okay. [inaudible] Okay, that's helpful.

Speaker Change: Yeah.

Speaker Change: A couple of two $3 million I would think I mean.

Speaker Change: At this point I'm not convinced really lose anything in any of those credits right now.

Speaker Change: There was a change this quarter, but there I believe they are all real estate secured.

Speaker Change: And there's going to be some level of even if you foreclosed on everyone. There's going to be some level of recovery that you have.

Speaker Change: I don't think it's going to be.

Speaker Change: Material number.

Speaker Change: Just really I was really getting the chase.

Speaker Change: The change in balances quarter to quarter.

Speaker Change: Yes.

Speaker Change: Got it okay.

It was the Maxwell.

Kevin D. Hester: Yeah, okay. Thank you. It's helpful. Thank you.

Yeah, Okay. Thank you.

Speaker Change: That's helpful. Thank you and then.

Brian Joseph Martin: And then just on in terms of the Margin with the Bank Term Lending Program. I guess what your outlook is there? I know, Johnny, you said you think it will continue. I think last quarter, it was, you know, would you keep it? So I guess right now, it's in the numbers. Is your expectation that you kind of continue that and that drag that we're seeing on the percentage versus the dollars you're getting, you know, just kind of continue to think about that being status quo for the near term, or not?

In terms of the.

Speaker Change: On the margin with the bank term lending program I guess, what what's kind of your outlook. There I know Johnny you said you think it continues I think last quarter. It was.

Speaker Change: Would you keep it will not continue to use its I guess right now it's in the numbers I guess is your expectation that you kind of continue that net that drag that we're seeing on the percentage versus the dollar as youre getting.

Just kind of continue to think about that being status quo for the near term or.

Brian Joseph Martin: I'd say that it's probably going to be status quo for at least a couple quarters. If there are no drops in the fed funds rate, you know, we might as well hang on to the money. We'll have to pay it back, I believe, on January 16th. We've had positive arbitration on it, so there's no real reason to pay it back unless rights go down, and he learned about... Yeah, we've got a different picture of that. Yeah,

Speaker Change: This is Brian I'd say that it's probably going to be status quo for at least a couple of quarters. If there is no drops in the fed funds rate, we monitor we'll hang onto the money we will have to pay it back I believe on January 16th right.

Speaker Change: Now we've got a positive arbitrage on it so there's no real reason to pay less.

Speaker Change: Rates go down.

Okay. Thanks for that okay.

Stephen Tipton: We got the cash back, so we don't have to borrow it.

Speaker Change: We got the cash to pay it back so we don't have to go bars.

Stephen Tipton: Gotcha. Okay. And Stephen, I think you mentioned the repricing opportunity. I think you said six or 700 million this year that you got a pretty nice pickup on. Does that feed into 25 as well? There's still, will there still be that type of opportunity when you look at what's repricing at 25?

Speaker Change: Yeah.

Speaker Change: Gotcha, Okay, and Stephen I think you mentioned the pricing opportunity I think you said six or 700 million. This year, you've got a pretty nice pickup is there does that feed into 25% is while there still will there still be that type of opportunity. When you look at what's repricing at 25.

Stephen Tipton: You know, it begins to step up and pick up the last couple of years' production at a little higher rate when you get out into 25, so we really just kind of focused on the near term, this quarter, and the next couple of quarters.

Speaker Change: Yeah.

Stephen: It begins to step up and pick up the last couple of years production at a little higher rates.

Stephen: When you get out into 'twenty five so we really just kind of focused on the near term this quarter next couple of quarters.

Speaker Change: Got you okay.

Brian Joseph Martin: Gotcha. Okay. And I think you mentioned the deposit stabilizer. I mean, your thought is back half of the year is kind of that kind of reading between the lines what you're doing.

Speaker Change: I think you mentioned that deposit stabilizing me your thought as back half of the year is kind of is that kind of reading between the lines. What you are suggesting Stephen on what you see there.

Stephen Tipton: From a balance standpoint or from a rate standpoint? Transcripts provided by Transcription Outsourcing, LLC. Yeah, I mean, you know, how much of the top part of the deposit book we can continue to try to kind of shave off and offset some increases we'll see. But, you know, I think we see, you know, something in the low single digits in terms of an increase that we would be pleased with and feel like we can offset on the loan side, like Johnny said, through the first half of Trinity Farms and Farms from Annette.

Speaker Change: From a from a balance standpoint or from a rate standpoint.

Stephen: Just to make sure, but yes from a rate standpoint, yes, yes, just a rate standpoint.

Stephen: Yes.

Stephen: How much of the top part of the deposit book that we can continue to try to kind of shave off and offset some increases we will see but.

Stephen: We see something in.

Stephen: In the low single digits in terms of an increase we'd be pleased with and feel like we can can offset on the loan side like Johnny said through the first half of this month.

Trinity: It's Trinity.

Trinity: Far from it from a net standpoint.

Brian Joseph Martin: Yeah, okay. All right.

Speaker Change: Yes, Okay alright.

Brian Joseph Martin: And the last one, the trend. The trend should continue. It should continue with the big repricings that we have sitting in front of us right now. It ought to be another kick. We're already up and running well. We ought to get another kick here in the next 30 days. Yeah, understood. Okay. And then the last one for me was just on just the expenses and you know, the improvement you saw this quarter and, If there are, you know, the overhead you cut, and I guess, if we think about where there's opportunity, further opportunity, if there is any on the side, I mean, you know what? If it's not overhead, I guess, where else are there potential opportunities as you kind of continue to work on that expense side

Speaker Change: Last one from the trends the trend should continue.

Speaker Change: It should continue with repricing Big bird pricing is that we've got sitting in front of us right now.

Speaker Change: It ought to be another kit, we're already up running well, we only give another can't cure.

Speaker Change: 30 days.

Yeah understood. Okay, and then last one for me was just on.

Speaker Change: The expenses and the improvement you saw this quarter.

Speaker Change: If there are.

Speaker Change: Overhead you cut.

Speaker Change: I guess one.

Think about where there's opportunity.

Speaker Change: Further opportunity if there is any of it.

Speaker Change: I mean, what if that overhead I guess where else other potential opportunities as you kind of continue to work on that expense side.

John W. Allison: Well, we went from 38% efficiency to 46, 47% efficiency. And we had to come back, and we're at 44 for this quarter. We're pleased with $3 million, but if you can pull $3 million out and there may be more, you know, I'm not saying there is more, I'm just saying there may be more, but to operate this quarter for $3 million less than we did last year at this time, I think that speaks pretty well for what we're doing, because, you know, we've had increases, you know, we've had increases, right? Okay.

Speaker Change: We went from <unk>.

Speaker Change: 38% efficiency.

Speaker Change: 46, 47% efficiency and we had to come back and we're at 44. This quarter, we're pleased with $3 million, but if you can pull a $3 million out.

Speaker Change: 90 days.

Speaker Change: There may be more.

Speaker Change: I'm not saying there is more I'm missing there might be more but.

To operate this quarter $3 million less than we did last year at this time, but I think thats.

Speaker Change: That speaks pretty well for what we're doing because you know we've had increases you know we've had increases right. Okay.

John W. Allison: You know, everybody's getting these increases now. That's probably a good run, right? I wouldn't expect it to go up. I think that's probably a good run, right? If it goes up, we'll do something else. We'll figure out something else.

Everybody is getting these increases now so.

Speaker Change: I think that's probably a good run rate I wouldn't expect it to go up I think thats, probably a good run rate. If it goes up we'll do something else, we'll figure out something else to do.

Brian Joseph Martin: Yep. Okay. Perfect. Got it. Thanks for the call. I appreciate it.

Speaker Change: Yep, Okay perfect got it thanks.

Speaker Change: So the color I appreciate it.

John W. Allison: Thank you. I appreciate your support.

Speaker Change: Thank you appreciate your support.

Operator: This concludes our Q&A. I'll now hand it back to Mr. Allison for final remarks. Thank you, everyone.

Speaker Change: This concludes our Q&A I'll now hand back to Mr. Allison for final remarks.

Allison: Thank you everyone for your support.

John W. Allison: I thank everyone for your support. We've been a good quarter. We're pretty happy around Home BancShares right now with what we see. I don't know, this may be the best quarter the corporation's ever had. So When you look at all the ways we hit on all the offensive buttons, bam, bam, bam, bam, and then the decrease in expenses and you look at the impact that's made to the company, maybe our shareholders will get a dividend increase for too long here. My wife would appreciate that.

Allison: <unk> been a good quarter, we're pretty happy around home Bancshares right now.

Allison: What we see.

Allison: This might be the best quarter of the corporations ever had so.

John W. Allison: When you look at all that we hit all of the offensive buttons Bam Bam Bam Bam Bam and then the decrease in expenses and you look at the impact that's made to the company.

John W. Allison: Our shareholders get a dividend inquiries for too long here so.

Speaker Change: My wife would appreciate that I can assure you that.

Speaker Change: <unk> will talk to you in 90 days.

Operator: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.

Speaker Change: Ladies and gentlemen, today's call is now concluded. Thank you for your participation you may now disconnect your lines.

Speaker Change: Anyway first center by Sport will talk to you in 90 days.