Q3 2025 Home BancShares Inc Earnings Call

Speaker #1: Thank you all for standing by for the Home BancShares, Inc. third quarter 2025 earnings call. Today's call is going to be starting momentarily. Greetings, ladies and gentlemen.

Operator: Thank you all for standing by for the Home BancShares Inc. third quarter 2025 earnings call. Today's call is going to be starting momentarily. Greetings, ladies and gentlemen. Welcome to the Home BancShares Inc. third quarter 2025 earnings call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday. The company presenters will begin with prepared remarks and then entertain questions. Please note that if you would like to ask a question during the question and answer session, please press star, then one on a touch phone. If you decide you want to withdraw your question, please press star, then two to remove yourself from the list. The company has asked me to remind everyone to refer to their cautionary note regarding forward-looking statements.

Speaker #1: Welcome to the Home BancShares Inc. third quarter 2025 earnings call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday.

Speaker #1: The company presenters will begin with prepared remarks and then entertain questions. Please note that if you would like to ask a question during the question-and-answer session, please press * then 1 on the touchphone.

Speaker #1: If you decide you want to withdraw your question, please press * then 2 to remove yourself from the list. The company has asked me to remind everyone to refer to their cautionary note regarding forward-looking statements.

Speaker #1: You will find this note on page 3 of their Form 10-K, filed with the SEC in February 2025. At this time, all participants are in a listen-only mode, and this conference is being recorded.

Operator: You will find this note on page three of their Form 10-K filed with the SEC in February 2025. At this time, all participants are in a listen-only mode, and this conference 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 #1: If you need operator assistance during the conference, please press * then 0. It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations.

Speaker #2: Thank you. Good afternoon and welcome to our third quarter conference call. With me for today's discussion is our Chairman, John Allison; Stephen Tipton, Chief Executive Officer of Centennial Bank; Kevin Hester, President and Chief Lending Officer; Brian Davis, our Chief Financial Officer; Chris Poulton, President of CCFG; and Scott Walter, Assured Premier Finance.

Donna Townsell: Thank you. Good afternoon and welcome to our third quarter conference call. With me for today's discussion is our Chairman, John Allison, Stephen Tipton, Chief Executive Officer of Home BancShares Inc., Kevin Hester, President and Chief Lending Officer, Brian Davis, our Chief Financial Officer, Chris Poulton, President of CCFG, and Scott Walter, Shore Premier Finance. The third quarter was another record-breaking quarter for Home BancShares Inc., and our team is excited to share the results with you. Opening remarks today will be from our Chairman, John Allison.

Speaker #2: The third quarter was another record-breaking quarter for Home BancShares, and our team is excited to share the results with you. Opening remarks today will be from our Chairman, John Allison.

Speaker #3: Thanks, Donna. Welcome to the Q3 2025 Home BancShares earnings release and conference call. It's really hard to believe it's already mid-October and Home has had another great quarter.

John Allison: Thanks, Donna. Welcome to the third quarter 2025 Home BancShares Inc. Earnings Release and Conference Call. It's really hard to believe it's already mid-October, and Home has had another great quarter. I think that's three in a row. We've added some graphs this time, Donna, to our presentation that you're welcome to look at that run from 9/30/2024 to 9/30/2025, and I think you'll see in those graphs what we're seeing here at the company. Just talk about some highlights for the third quarter. We had record net income of $123.6 million, record EPS of $0.63, revenue of $277.7 million, pre-tax, pre-provision net revenue of $162.8 million, P5 NR profit percentage of 58.64%. That's the best in the last 12 months. That's not 60%, Stephen, but it's pretty close to 60%. Pretty proud of that.

Speaker #3: I think that's three in a row. We've added some graphs this time, Donna, that you're welcome to look at. They run from 9:30 to 24 to 9:30 to 25, and I think you'll see in those graphs what we're seeing here at the company.

Speaker #3: Just talk about some highlights for the third quarter. We had record net income of $123.6, record EPS of $63. Revenue of $277.7, pre-tax, pre-provision net revenue of $162.8, P5 NR profit percentage of 58.64.

Speaker #3: That's the best in the last 12 months. That's not 60%, Stephen, but it's pretty close to 60%. I'm pretty proud of that. The efficiency ratio, some naysayers said it was going up, was down, and the efficiency ratio was the best in 12 months.

John Allison: Efficiency ratio, some naysayers said it was going up, was down, and the efficiency ratio was the best in 12 months at 40.21%. Margin kicked up a little bit. Some said our margin would go down. Our margin kicked up 12 basis points to 4.56%, and that's the best it's been in 12 months. Our OTCE continues to remain in the high teens at 18.28%. Just some balance sheet strength highlights. Common equity assets is 18.56%. We continue to grow that. Tangible equity to tangible assets, 13.08%. That continues to grow. And loans hit a record level of $15.18 billion for the quarter. Total stockholders' equity is $4.09 billion. More good news. The Texas lawsuit has been settled, and we've received our first partial payment of the settlement. We expect most of the balance during the fourth quarter. Hopefully, we'll get it all in this year.

Speaker #3: It's 40.21. Margin kicked up a little bit. Some said our margin will go down. Our margin kicked up 12 basis points to 456, and that's the best it's been in 12 months.

Speaker #3: ROTCE continues to remain in the high teens at 18.28%. Just some balance sheet strength highlights: common equity assets are at 18.56%. We continue to grow that.

Speaker #3: Tangible equity, the tangible assets, is at 13.08%. That continues to grow. Loans hit a record level of $15.18 billion for the quarter. Total stockholders' equity is $4.09 billion.

Speaker #3: More good news: the Texas lawsuit has been settled, and we've received our first partial payment of the settlement. We expect most of the balance during the fourth quarter.

Speaker #3: Hopefully, we'll get it all in this year. We'll be lucky if the proceeds match up with the expensive litigation costs, and that does not include the loss of growth and profits we've suffered over the last couple of years.

John Allison: We'll be lucky if the proceeds will match up with the expensive litigation costs, and that does not include the loss of growth and profits we've suffered over the last couple of years. However, we had no intention of just mildly standing by while damage was being done to our company. Management has a fiduciary responsibility to protect the assets of the shareholder, especially when we didn't do anything to any of those people that participated in this fiasco. I believe because of our conservative nature, we've been criticized by some. I think that Home BancShares Inc. is not growing fast enough. We don't really argue at that point, but I have to disagree with that discussion point because timing and discipline matter. Moving too fast or scaling too fast can be fatal. I believe in fixing your existing problems before you make a new move.

Speaker #3: However, we had no intention of just mildly standing by while damage was being done to our company. Management has a fiduciary responsibility to protect the assets of the shareholder, especially when we didn't do anything to any of those people that participated in this fiasco.

Speaker #3: I believe that because of our conservative nature, we've been criticized by some. I think that Home BancShares is not growing fast enough. We don't really argue at that point, but I have to disagree with that discussion point because timing and discipline matter.

Speaker #3: Moving too fast or scaling too fast can be fatal. I believe in fixing your existing problems before you make a new move. That's exactly what Home has been doing for the past three years.

John Allison: That's exactly what Home has been doing for the past three years, dealing with multiple, distinct, unusual problems that arose in the HAPPI acquisition that led us to filing a 91-page lawsuit, coupled with HAPPI's asset quality problems. By the way, it's still a work in progress. AOCI, loss of HAPPI private information, defection, and loss of personnel. Don't get me wrong. We have some great people at HAPPI, and HAPPI's performance has rebounded. I have been involved in over 45 deals in my banking career, but never anything of this magnitude. Enough of that. Forget the bad guys. The saddest part is what happened to some HAPPI employee shareholders who, during the merger with Home, in a tax-free exchange, HAPPI shareholders exchanged their private, non-liquid HAPPI stock for Home stock. That is a New York Stock Exchange publicly traded dividend-paying with strong liquidity and a strong balance sheet.

Speaker #3: Dealing with multiple distinct, unusual problems that arose in the happy acquisition led us to filing a 91-page lawsuit, coupled with happy asset quality problems. By the way, it's still a work in progress.

Speaker #3: ALCI, loss of happy private information, defection, and loss of personnel. Don't get me wrong; we have some great people in Happy and Happy Performance as rebounded.

Speaker #3: I've been involved in over 45 deals in my banking career, but never anything of this magnitude. Enough of that. Forget the bad guys. The saddest part is what happened to some happy employee shareholders who, during the merger with Home, in a tax-free exchange, exchanged their private non-liquid happy stock for Home stock that is a New York Stock Exchange publicly traded, dividend-paying stock with strong liquidity and a strong balance sheet.

Speaker #3: And after getting the Home stock, they listened to some snake oil salesman who talked them into selling their home and investing the proceeds into another privately held, stupid, non-liquid investment.

John Allison: After getting the Home stock, they listened to some snake oil salesman who talked them into selling their home and investing the proceeds into another privately held stupid non-liquid investment. There may be where the biggest lawsuit is, misleading or unsophisticated individuals. It may be too late. Excuse me. It may not be too late. If my information is correct, every one of the investors has lost money in Home, and we were even forced to use the legal system to protect the assets of our shareholders. As bad as it was, the rest of the company stepped up to help us while we fought the Texas lawsuit and were resolving the issues in front of us before moving to another opportunity. In other words, we waited until we had our arms around the multiple problems before we moved again.

Speaker #3: There may be where the biggest lawsuit is: misleading or unsophisticated individuals. It may be too late. Excuse me, it may not be too late.

Speaker #3: If my information is correct, every one of the investors has lost money in Home, and we were even forced to use the legal system to protect the assets of our shareholders.

Speaker #3: As bad as it was, the rest of the company stepped up to help us while we fought the Texas lawsuit and resolved the issues in front of us before moving to another opportunity.

Speaker #3: In other words, we waited until we had our arms around the multiple problems before we moved again. During that time, I feel confident we missed several growth opportunities, but we needed to fix what was in front of us first.

John Allison: During that time, I feel confident we missed several growth opportunities, but we needed to fix what was in front of us first. You can see from the charts we're back producing top two, best-in-class numbers once again. We would have been there a couple of years ago had the annoyances of these unusual situations not come up. More good news. During the first quarter of 2025, for all banks over $10 billion, Home ranked number two in the nation in return on assets. During the second quarter of 2025, for all banks over $10 billion, Home ranked number one in the nation in return on assets. During the third quarter of 2025, Home outperformed both our first and second quarter ROI.

Speaker #3: Well, you can see from the charts we're back producing top-tier, best-in-class numbers once again. We would have been there a couple of years ago had the annoyances of these unusual situations not come up.

Speaker #3: More good news: during the first quarter of 2025, for all banks over $10 billion, Home ranked number two in the nation in return on assets.

Speaker #3: During the second quarter of 2025, for all banks over $10 billion, Home ranked number one in the nation in return on assets. During the third quarter of 2025, Home outperformed both our first and second quarter ROA.

Speaker #3: It's early to be able to tell, but we're expecting to be once again one of the best, if not the best, in the market of all banks over $10 billion.

John Allison: It's early to be able to tell, but we're expecting to be once again one of the best, if not the best, in the market of all banks over $10 billion. With the performance of the company back producing current leading numbers, we're ready to move forward and do a large transaction or a couple of smaller transactions. Those of you pushing for growth, the time is right, and we agree with you. I said last quarter I was looking for $500 million in income in 2026. I'm holding that number. So far this year, through three quarters, Home has earned $357.2 million with one quarter left to go. Add a couple of acquisitions and a little growth, and I think the number is achievable and maybe a little better. Last year at this time, we'd earned $302 million.

Speaker #3: With the performance of the company, back producing true leading numbers, we're ready to move forward and do a large transaction or a couple of smaller transactions.

Speaker #3: So those of you pushing for growth, the time is right, and we agree with you. I said last quarter I was looking for $500 million in income in 2026.

Speaker #3: I'm holding that number. So far this year, through three quarters, Home has earned $357.2 million, with one quarter left to go. Add a couple of acquisitions and a little growth, and I think the number is achievable and maybe a little better.

Speaker #3: Last year at this time, we had earned $382 million. So far, we're up about $55 million this year, or 18.21% from last year.

John Allison: So far, we're up about $55 million this year, or 18.21% from last year, with the third quarter showing even stronger earning growth, up 23.6% for Q3 2025, with $123.6 million in income versus Q3 2024 of $100 million. During the fourth quarter, a bank was selling bonds, including a $20 million piece of Home BancShares Inc.'s sub debt at a discount and repositioning. They were paying the piper, I guess I say, that they incurred on AOCI losses, and Home was given the opportunity to buy. We did buy that. We bought that $20 million worth of piece, a $20 million piece of our sub debt, and picked up $1.9 million gain. Nice trade. Being as profitable as Home is allows us to move quickly on opportunities.

Speaker #3: With the third quarter showing even stronger earnings growth, up 23.6% for Q3 '25, we reported $123.6 million in income versus Q3 '24 of $100 million.

Speaker #3: During the fourth quarter, a bank was selling bonds, including a $20 million piece of Home Bank's subordinated debt and a discount and repositioning. They were paying the paper, I guess I say.

Speaker #3: But they incurred on ALCI losses. And Home was given the opportunity to buy. And we did buy that. We bought that $20 million worth of piece at $20 million piece of our sub debt and picked up $1.9 million gain.

Speaker #3: Nice trade. Being as profitable as Home is allows us to move quickly on opportunities. During the third quarter, we opened up an exciting new branch in San Antonio, and we met several of the local business people.

John Allison: During the third quarter, we opened up an exciting new branch in San Antonio, and we met several of the local business people. Great market. We're wishing Michael Rodriguez, our team leader, and his team in San Antonio market much success. Strength is no accident. That's our slogan. Another reason Home has been hesitant on acquisitions is the hesitancy to take on banks' AOCI problems. We're expecting many more bank failures than what happened. We were told to keep our powder dry. We missed on that call on bank failures, but the big one, the one that most banks got in trouble, we got that one right, the interest rate call.

Speaker #3: Great market. We're wishing Michael Rodriguez, our team leader, and his team in the San Antonio market much success. Strength is no accident. That's our slogan.

Speaker #3: Another reason Home has been hesitant on acquisitions is the hesitancy to take on banks' ALCI problems. We're expecting many more bank failures than what happened.

Speaker #3: We were told to keep our powder dry. We missed on that call on bank failures, but the big one—the one that most banks got in trouble with.

Speaker #3: We got that one right: the interest rate call. Many banks and their shareholders are, and will continue to suffer from an earnings perspective because their management made huge mistakes of investing their liquidity into long-term securities and loans.

John Allison: Many banks and their shareholders are and will continue to suffer from an earnings perspective because their management made huge mistakes of investing their liquidity into long-term securities and loans during the low-rate environment that we all experienced, and now they must pay the piper. The problem is, how long does it take to fix it? It relates to how long a bank's duration is on both its loans and security, whether fixed or variable. Five years, ten years, some shorter, some longer. Making the decision at Home not to invest in long-term securities and loans is the single best decision we have ever made, or I have ever made in my 50 years of running companies.

Speaker #3: During the low rate environment that we all experienced, and now they must pay the paper. The problem is, how long does it take to fix it?

Speaker #3: It relates to how long a bank's duration is on both its loans and securities, whether fixed or variable. Five years, ten years, some shorter, some longer.

Speaker #3: Making a decision at Home not to invest in long-term securities and loans is the single best decision we have ever made, or I have ever made, in my 50 years of running companies.

Speaker #3: As I said, when a bank gets in that dilemma, their options are to do nothing and ride out the duration until the bonds and loans mature, praying all the time that interest rates come down.

John Allison: As I said, when a bank gets in that dilemma, their options are do nothing and ride out the duration until the bonds and loans mature, praying all the time that interest rates come down. If they have enough capital, they can sell the bonds and/or loans at the market and reinvest the proceeds and recognize the loss. This can create a capital problem, forcing banks to raise capital by selling more stock. Since banks trade on a multiple of tangible book value, the losses incurred will reduce tangible book value, thus resulting in a lower stock price. The recovery period can be long and painful and sometimes a death sentence, as we saw with Signature Bank, Silicon Valley, and Republic. Regardless of the decision that is made, at this point, there is commensurate damage to the balance sheet based on interest rates, duration, and quality.

Speaker #3: Or, if they have enough capital, they can sell the bonds and/or loans at the market and reinvest the proceeds while recognizing the loss. This can create a capital problem, forcing banks to raise capital by selling more stock.

Speaker #3: Since banks trade on the multiple of tangible book value, the losses incurred will reduce tangible book value thus resulting in a lower stock price.

Speaker #3: The recovery period can be long and painful, and sometimes a death sentence, as we saw with Signature Bank, Silicon Valley Bank, and Republic Bank. Regardless of the decision that is made at this point, there is commensurate damage to the balance sheet based on interest rates, duration, and quality.

Speaker #3: Regardless of why the bank—excuse me—regardless of why the bank is trying to recuperate by whatever methods, they are losing years of earnings power. Either way, if they decide to ride it out or recognize an unrecoverable loss in income and tangible book value, the loss is a loss regardless of how it's presented.

John Allison: Regardless of why the bank is trying to recuperate by whatever methods, they are losing years of earnings power. Either way, if they decide to ride it out or recognize an unrecoverable loss in income and tangible book, the loss is a loss regardless of how it's presented. It reminds me of the Fram oil filter guy quote, "You can pay me now or pay me later." Another analogy is, it reminds me of losing Park Place while playing Monopoly. You never get it back. The whole time watching others that did not make the same mistake, busy stacking up capital as their ship leaves you at the port.

Speaker #3: It reminds me of the Fram oil filter guy's quote: "You can pay me now or pay me later." Another analogy is that it reminds me of losing Park Place while playing Monopoly.

Speaker #3: You never get it back. The whole time, you’re watching others who did not make the same mistake, busy sacking up capital as their shift leaves you at the door.

Speaker #3: The last option is to find a partner that you like, who likes your operation, understands your dilemma, has lots of capital, and is willing to use their capital to mark the balance sheet, to take the hit immediately. This allows the company to accrete the mark into income over the duration of the paper.

John Allison: Last option is to find a partner that you like, that likes your operation, understands your dilemma, and has lots of capital and is willing to use their capital to mark the balance sheet to take the hit immediately, which allows the company to accrete the mark into income over the duration of the paper. A huge example of this is the latest deal that was just done, CMA-Core America, who was acquired. The stock shot up $11.77 in one day. That was extremely positive for both the buyer and the seller shareholder. There is no easy answer to resolve these mistakes that were made, but if your shareholders will ride with you, maybe you live to find another day. Regardless, it's not an easy fix.

Speaker #3: A huge example of this is the latest deal that was just done: CMA, Coal America, which was acquired. The stock shot up $11.77 in one day.

Speaker #3: That was extremely positive for both the buyer and the seller's shareholders. There is no easy answer to resolve these mistakes that were made, but if your shareholders will ride with you, maybe you live to find another day.

Speaker #3: But regardless, it's not an easy fix. If they don't want to ride, they sell their stock and invest in companies that are already out there, which didn't have the problem stacking up equity.

John Allison: If they don't want to ride, they sell their stock and invest in companies that are already out there that didn't have the problem stacking up equity. Donna, I think that's pretty much it. Company's humming along pretty good. I told you last quarter that I hoped that we'd have a deal done this quarter. We probably don't have one yet, but we're getting close. Thank you.

Speaker #3: Donna, I think that's pretty much it. Companies are humming along pretty well, and I told you last quarter that I hope we'd have a deal done this quarter.

Speaker #3: We probably don't have one yet, but we're getting close. Thank you.

Speaker #1: Okay, thank you, Donna. I'm sure when you get a deal, it'll be the right deal, so patience is a virtue, right? Our next report today comes from Stephen Tipton.

Donna Townsell: Okay. Thank you, John. I'm sure when you get a deal, it'll be the right deal. Patience is a virtue, right? Our next report today comes from Stephen Tipton.

Speaker #4: Thanks, Donna. As Johnny mentioned, the third quarter was another strong performance for Home and Centennial Bank and produced records in several areas. Highlighted by strong revenue and continued net interest margin expansion, we were able to produce an adjusted return on assets of 2.10% and adjusted operating earnings per share of $0.61.

Stephen Tipton: Thanks, Donna. As Johnny mentioned, the third quarter was another strong performance for Home BancShares Inc. and Centennial Bank and produced records in several areas. Highlighted by strong revenue and continued net interest margin expansion, we were able to produce an adjusted return on assets of 2.10% and adjusted operating earnings per share of $0.61. The reported net interest margin improved to 4.56%, up 12 basis points from Q2, and up 28 basis points from the same period a year ago. The core margin, excluding event income, was 4.53% versus 4.43% in Q2, driven by an increase of two basis points in the overall loan yield and a decline in interest-bearing deposit costs of two basis points. Deposits ended slightly lower in Q3, down $161 million, driven largely by customer tax payments made in July.

Speaker #4: The reported net interest margin improved to 4.56%, up 12 basis points from Q2, and up 28 basis points from the same period a year ago.

Speaker #4: The core margin excluding event income was 4.53%, compared to 4.43% in Q2. This was driven by an increase of two basis points in the overall loan yield and a decline in interest-bearing deposit costs of two basis points.

Speaker #4: Deposits ended slightly lower in Q3, down $161 million, driven largely by customer tax payments made in July. We continue to focus our regions on growing core deposits and relationships, evidenced by wholesale deposits only comprising 2.3% of total liabilities.

Stephen Tipton: We continue to focus our regions on growing core deposits and relationships, evidenced by wholesale deposits only comprising 2.3% of total liabilities. Although the adjusted efficiency ratio improved to 40.95%, our Presidents and leadership group are closely monitoring core expense trends and controlling those in a tight range. Loan production was strong this quarter at nearly $1.3 billion, highlighted by $800 million from the community bank footprint, with more than half coming from our Florida regions. Congratulations to our regional and division Presidents and all of our bankers on another great quarter. With that, I'll turn it back over to you, Donna.

Speaker #4: Although the adjusted efficiency ratio improved to 40.95%, our presidents and leadership group are closely monitoring core expense trends and controlling those in a tight range.

Speaker #4: Loan production was strong this quarter at nearly $1.3 billion, highlighted by $800 million from the community bank footprint, with more than half coming from our Florida regions.

Speaker #4: Congratulations to our regional and division presidents and all of our bankers on another great quarter. With that, I'll turn it back over to you, Donna.

Speaker #1: Thank you, Stephen. Next, we will hear from Kevin Hester on the lending portfolio.

Donna Townsell: Thank you, Stephen. Next, we will hear from Kevin Hester on the lending portfolio.

Speaker #5: Thanks, Donna. Asset quality improved overall again in the third quarter, with improvements in NPLs, NPAs, past dues, and total criticized loans. As you know, there's always good and bad as you work through problem loans.

Kevin Hester: Thanks, Donna. Asset quality improved overall again in the third quarter with improvements in NPLs, NPAs, past dues, and total criticized loans. As you know, there's always good and bad as you work through problem loans. On the good side, I'm pleased to announce that we have the DFW apartment non-accrual loan under an agreement for sale with a hard deposit of over 10% of the purchase price and a closing date in the fourth quarter. However, on the large Texas C&I credit that we charge down at year-end, they continue to struggle to recover, and it is entirely possible that it moves to non-accrual before it gets to a resolution. At this time, we still do not believe that there is any additional loss in this relationship.

Speaker #5: On the good side, I'm pleased to announce that we have the DFW apartment non-accrual loan under an agreement for sale with a hard deposit of over 10% of the purchase price, and a closing date in the fourth quarter.

Speaker #5: However, on the large Texas C&I credit that we charged down a year in, they continue to struggle to recover, and it is entirely possible that it moves to non-accrual before it gets to a resolution.

Speaker #5: At this time, we still do not believe that there is any additional loss in this relationship. Despite the headwinds resulting from heavy payoffs in September, we were still able to post loan growth of $105 million for the third quarter, continuing our recent history of linked quarter loan growth.

Kevin Hester: Despite the headwinds resulting from heavy payoffs in September, we were still able to post loan growth of $105 million for the third quarter, continuing our recent history of linked quarter loan growth. The third quarter of 2025 marks eight times in the last nine quarters in which we have posted organic loan growth. From time to time, we've been questioned by analysts and investors about our level of loan growth being less than others that they cover or follow, and we always state that we will take what the market allows. Frothiness in the overall market generally leads to aggressive pricing and leverage by our competitors, and we will not participate in those situations. On the other hand, periods of volatility lead to banks exiting asset classes or markets and generally result in improved pricing and leverage, and we usually fare well during those times.

Speaker #5: The third quarter of 2025 marks eight times in the last nine quarters in which we have posted organic loan growth. From time to time, we've been questioned by analysts and investors about our level of loan growth being less than others that they cover or follow, and we always state that we will take what the market allows.

Speaker #5: Frothiness in the overall market generally leads to aggressive pricing and leverage by our competitors, and we will not participate in those situations. On the other hand, periods of volatility lead to banks exiting asset classes or markets and generally result in improved pricing and leverage, and we usually fare well during those times.

Speaker #5: That said, I would like to take a moment to point out that regardless of which situation we are in, I believe that we are not given enough credit for whatever level of loan growth we post.

Kevin Hester: That said, I would like to take a moment to point out that regardless of which situation that we are in, I believe that we are not given enough credit for whatever level of loan growth that we post. Keep in mind that because we are best-in-class in both net interest margin and efficiency ratio, our loan growth produces greater results than our peers. We have posted year-to-date loan growth of $522 million, which results in an annualized growth rate of 4.71%. Not a bad number and certainly more than the percentage increase in GDP over that period. However, we operate at a net interest margin of 4.48% and an efficiency ratio of 40% compared to a net interest margin of 3.59% and an efficiency ratio of 55% for all banks from $10 billion to $50 billion.

Speaker #5: Keep in mind that, because we are best in class in both net interest margin and efficiency ratio, our loan growth produces greater results than our peers.

Speaker #5: We have posted year-to-date loan growth of $522 million, with results in an annualized growth rate of 4.71%. Not a bad number, and certainly more than the percentage increase in GDP over that period.

Speaker #5: However, we operate at a net interest margin of 4.48% and an efficiency ratio of 40%, compared to a net interest margin of 3.59% and an efficiency ratio of 55% for all banks with assets from $10 billion to $50 billion.

Speaker #5: When you add the effect of our best-in-class NIM to that nominal loan growth number, the impact feels like loan growth of $653 million, or 5.89% annualized, in terms of our peers.

Kevin Hester: When you add the effect of our best-in-class NIM to that nominal loan growth number, the impact feels like loan growth of $653 million or 5.89% annualized in terms of our peers. Layer in the effect of our better-than-peer non-interest expense, and that impact grows even further to 6.73%. The point of this analysis is to highlight that lower-performing peers must post much higher nominal loan growth results just to provide the same profitability impact as the 4.71% that we've posted year to date. This focus on high performance in all areas, when combined with even reasonable loan growth, is the formula for a best-in-class ROI. Donna, that's all I have. I'll give it back to you.

Speaker #5: Layer in the effect of our better-than-peer non-interest expense, and that impact grows even further to 6.73%. The point of this analysis is to highlight that lower-performing peers must post much higher nominal loan growth results just to provide the same profitability impact as the 4.71% that we've posted year to date.

Speaker #5: This focus on high performance in all areas, when combined with even reasonable loan growth, is the formula for a best-in-class ROA. Donna, that’s all I have.

Speaker #5: I’ll give it back to you.

Speaker #1: Thank you, Kevin. I appreciate the color on that important analysis on loan growth. Now, Chris Poulton will provide an update on CCFG.

Donna Townsell: Thank you, Kevin. Appreciate the color on that important analysis on loan growth. Now, Chris Poulton will provide an update on CCFG.

Speaker #6: Thank you, Donna. Good afternoon. Q3 was quite busy for CCFG, but you might not know it from our asset number. We ended the quarter down about $60 million from Q2, as payoffs slightly outpaced new funding.

Chris Poulton: Thank you, Donna. Good afternoon. Q3 was quite busy for CCFG, but you might not know it from our asset number. We ended the quarter down about $60 million from Q2 as payoffs slightly outpaced new funding. That masks what was an active quarter for originations with just under $400 million of new loan commitments. There were a couple of loans closed at the end of the quarter that funded post-quarter, and a few loans that we had anticipated to close by quarter end that pushed into Q4. All of that to say, we've already seen our loan balances bounce back in the first two weeks of October, and based on what we see in the pipeline, I do expect growth from here.

Speaker #6: That masks what was an active quarter for originations, with just under 400 million dollars of new loan commitments. There were a couple of loans close at the end of the quarter that funded post-quarter, and a few loans that we had anticipated to close by quarter end that pushed into Q4.

Speaker #6: All of that to say, we've already seen our loan balances bounce back in the first few weeks of October, and based on what we see in the pipeline, I do expect growth from here.

Speaker #6: We did, and do, continue to see positive rotation out of the portfolio, and we have generally been able to replace the loans that pay off with new loans.

Chris Poulton: We did and do continue to see positive rotation out of the portfolio, and we have generally been able to replace the loans that pay off with new loans. Through Q3, we originated over $1 billion in new loans, which is a bit ahead of pace for us as we generally do not hit that mark until Q4. I look forward to sharing our Q4 results with you all in the new year. Until then, I'll hand it back over to you, Donna.

Speaker #6: Through Q3, we originated over $1 billion in new loans, which is a bit ahead of pace for us as we generally do not hit that mark until Q4.

Speaker #6: Look forward to sharing our Q4 results with you all in the new year. Until then, I'll hand it back over to you, Donna.

Speaker #1: Thank you, Chris. And Johnny, before we go to Q&A, do you have any additional comments?

Donna Townsell: Thank you, Chris. Johnny, before we go to Q&A, do you have any additional comments?

Speaker #7: No, I don't. Thank you. I hope everybody listens to the charts. I think you'll see what we're seeing or what we're feeling here at the company.

John Allison: No, I don't. Thank you. I hope everybody looks at the charts. I think you'll see what we're seeing or what we're feeling here at the company. I think the charts speak for themselves, Donna.

Speaker #7: I think the charts speak for themselves, Donna, so.

Speaker #1: Okay. We will turn it over to the operator for questions.

Donna Townsell: Okay, we will turn it over to the operator for questions.

Speaker #8: Thank you, Donna. If you would like to ask a question, you can do so by pressing * followed by 1 on your telephone keypad.

Operator: Thank you, Donna. If you would like to ask a question, you can do so by pressing star followed by one on your telephone keypad. If you decide you would like to withdraw your question, please press star then two to remove yourself from the list. When speaking, please remember to pick up your handset before asking a question. We'll pause here briefly whilst questions are registered. The first question we have on the phone line comes from Dave Usher with Cantor Fitzgerald. You may proceed.

Speaker #8: If you decide you would like to withdraw your question, please press * then 2 to remove yourself from the list. And when speaking, please remember to pick up your handset before asking a question.

Speaker #8: We'll pause here briefly while questions are registered. The first question we have on the phone line comes from Dave Rocha with Cantor Fitzgerald. You may proceed.

Speaker #9: Guys, hey, Johnny, you highlighted that you guys—hey, how are you? You had highlighted earlier that you had some nice NIM expansion this quarter. That looked good.

[Analyst]: Hey, Johnny, you highlighted that you guys had a, how are you? You had highlighted earlier you had some nice NIM expansion this quarter. That looked good. How are you thinking about that trend and the NII trend going forward, just given the September cut we just had and the potential for getting another couple of cuts by year end? Are you expecting that lower rates could put some pressure on that, or do you think that you see more expansion going forward? What's the NIM sensitivity on that next cut? Thanks.

Speaker #9: How are you thinking about that trend and the NII trend going forward? Just given the September cut we just had and the potential for getting another couple of cuts by year-end.

Speaker #9: Are you expecting that lower rates could put some pressure on that, or do you think that you see more expansion going forward? And what's the NIM sensitivity on that next cut?

Speaker #9: Thanks.

Speaker #7: Well, the world says, as rates come down, we’re going to reduce our net interest income. But I have to give credit to Stephen Tipton, who deals with that every day, and Kevin Hester, who deals with it every day also, as he writes the loans.

John Allison: The world says as rates come down, we're going to reduce our net interest income. I have to give credit to Stephen Tipton, who deals with that every day, and Kevin Hester, who deals with it every day also as he writes the loans. I think they're on top of that. We react in a hurry when there's a rate cut. Stephen, we were at a conference, and he left the conference and lowered rates immediately in our company. We react in a hurry. I think you can go back over history and see that Home BancShares Inc. has been able to maintain a margin where a lot of people have not because of reaction and how management looks at it. We have about 13, 15, about 15 regions that report upstream, and they move immediately. Those guys know what it is. You don't have to hold their hand.

Speaker #7: So, I think they're on top of that. We react in a hurry when there's a rate cut. Stephen, we were at a conference, and he left the conference, and Lord writes immediately in our company.

Speaker #7: So, we react in a hurry, and I think you can go back over history and see that Home has been able to maintain a margin where a lot of people have not, because of the reaction and how management looks at it. We have about 13 or 15—about 15 regions—that report upstream, and they move immediately. Those guys know what it is.

Speaker #7: You don't have to hold their hand. You don't have to rock them in a rocking chair. They know what's going on, and they react.

John Allison: You don't have to rock them in a rocking chair. They know what's going on, and they react. That team reacts. They already know which moves they're going to make immediately. It's already pre-programmed. I probably stole a little Stephen's thunder here, but I'll let him take it from here. I'm proud of how we react to those situations.

Speaker #7: That team reacts. They already know which moves are going to be made immediately. It's already pre-programmed, and I probably stole a little of Stephen's thunder here, but I'll let him take it from here. I'm proud of how we react to those situations.

Speaker #9: No, hey, Dave and Stephen, I appreciate what Johnny said and agree. I mean, credit goes to the presidents. They're out in the field.

[Analyst]: No, I thank you, Dave and Stephen. I appreciate what Johnny said and agree. I mean, that credit goes to the presidents that are out in the field. They're dealing with the customers. We're able to very quickly go through our negotiated accounts and lower those where we can. We've got rate sheets in all the regions that they go through. We've got some indexed municipal accounts that are moving as variable rates move. We screen a little asset-sensitive, but as Johnny and the group have always said, that kind of goes off the bottle assumptions, and our job is to react to that and try to get rates down to offset the loan side.

Speaker #9: They're dealing with the customers, and you know we're able to very quickly go through our negotiated accounts and lower those where we can. We've got rate sheets in all the regions that they go through, and then we've got some indexed municipal accounts that are moving as variable rates move.

Speaker #9: So, you know we screen a little asset sensitive, but, you know, as Johnny and the group have always said, that kind of goes off the bottle assumptions. Our job's to react to that and try to get rates down to offset the loan side.

Speaker #6: Appreciate that color. Hey, maybe just on the deposit side, how are you guys thinking about growth going forward in a lower rate environment?

Chris Poulton: Appreciate that color. Maybe just on the deposit side, how are you guys thinking about growth going forward there in a lower-rate environment?

Speaker #7: Well, we’ve never seen a CD ad out of Home BancShares. We don’t run them; we just run strength ads. We have the ability to pay out all uninsured depositors.

John Allison: You've never seen a CD ad on Home BancShares Inc. We don't run them. We just run strength ads. We have the ability to pay out all uninsured depositors, and we like that position to be in, and we'll continue to do that. This quarter, we paid off sub debt, it was $140 million.

Speaker #7: And we like that position to be in, and we'll continue to do that. This quarter, we paid off subordinated debt of $140 million.

Speaker #7: We had tax time that came up, so deposits are down a little bit. Plus, we had a little loan growth, about $100 million. So some of those factors impacted, Brian.

[Analyst]: 140 million.

John Allison: $140 million. We had tax times that came up, so deposits are down a little bit. Plus, we had a little loan growth, about $100 million. Some of those factors impacted. Brian, you got a comment?

Speaker #7: You got a comment?

Speaker #6: No, I was just going to say we did the $140 million, and then we did another $20 million too.

[Analyst]: No, I was just going to say we did the $140 million and then we did another $20 million too.

Speaker #7: Yeah, we bought that NIM opportunity by repurchasing a piece of our subordinated debt, and we bought that back at a discount. We like that move.

John Allison: Yeah, we bought that. We had an opportunity to buy a piece of our sub debt back, and we bought that back at a discount. We liked that move. We're probably not going to be the high, we're not going to be the high guy bidding on money. That's not our game, but there's plenty of money out there if you want it, you can get it at a reasonable price. We're not too concerned about it at that point. Stephen, you got any comment on that?

Speaker #7: So we're probably we're not going to be the high we're not going to be the high guy bidding on money. That's not our game, but there's plenty of money out there if you want it, you can get at a reasonable price.

Speaker #7: So we're not too concerned about it at that point. Stephen, do you have a comment on that?

Speaker #6: Appreciate that.

Speaker #9: I think just folks who do the markets that we're in. Johnny mentioned we just opened the branch in San Antonio a month ago. We've got another location east of Dallas that will be open sometime in the first quarter.

[Analyst]: Yeah, I think just function of the markets that we're in. John Allison mentioned we just opened the branch in San Antonio, Texas a month ago. We've got another location east of Dallas that will be open sometime in the first quarter. I saw the market share data came out a couple of weeks ago, and there's $1.1 trillion in deposits in Texas and $900 billion in deposits in Florida. We've got a meaningful presence in both, so.

Speaker #9: You guys saw the market share data that came out a couple of weeks ago. There’s $1.1 trillion in deposits in Texas and $900 billion in deposits in Florida.

Speaker #9: And we've got a meaningful president in both. So great.

Speaker #6: Appreciate that. Maybe just one last one. How are you guys thinking about the government shutdown? Are you concerned at all about it from a credit perspective?

Chris Poulton: Great. Appreciate that. Maybe just one last one. How are you guys thinking about the government shutdown? Are you concerned at all about it from a credit perspective? If not, how long would this have to drag on before you guys get more concerned about it? Thanks.

Speaker #6: And if not, how long would this have to drag on before you guys get more concerned about it? Thanks. You know.

John Allison: You got us playing new turf here. I don't know what to think about that. I've seen no impact as of yet. I don't think we've seen or felt anything. Maybe it's good to be in the South, be away from Washington, D.C., and you have all those unemployed. I'm sure we got unemployed people in Arkansas as a result of it. I'll tell you more later. You'll probably figure it out. We'll probably all figure it out. It'll be good or bad, right? I don't know the answer to that, Dave, but we just keep plugging. Kevin, you got any comments? You see anything on your end?

Speaker #7: You got us playing on new turf here. I don't know what to think about that. I've seen no impact as of yet. I don't think we've seen or felt anything.

Speaker #7: So maybe it's good to be in the South, be away from Washington, D.C. Have all those unemployed. I'm sure we got unemployed people in Arkansas as a result of it, but you know I'll tell you more later.

Speaker #7: You'll probably figure it out. We'll probably all figure it out. It'll be good or bad, right? So I don't know the answer to that, Dave, but we just we'll keep plugging and but I don't Kevin, you got any comments?

Speaker #7: You see anything on your end?

Speaker #6: No, I mean, I haven't seen anything. We've talked about, you know, being able to offer deferments to individuals that are hurt by it.

Kevin Hester: No, I mean, I haven't seen anything. We've talked about, you know, being able to offer deferments to individuals that are hurt by it. We certainly can and will do that where it's necessary. Other than that, I'm not seeing anything. I've not felt any issues from the government being shut down for 20-something days.

Speaker #6: We certainly can and will do that where it's necessary. Other than that, I mean, I'm not seeing anything. I've not felt any issues from the government being shut down for 20-some days.

Speaker #7: We see things. We'll call you, Dave. Is that fair?

John Allison: We see things, we'll call you Dave. Is that fair?

Speaker #6: Sounds good. I appreciate it, guys. Thanks again.

Chris Poulton: Sounds good. Appreciate it, guys. Thanks again.

Speaker #7: Great.

John Allison: Great.

Speaker #8: Your next question comes from John Armstrong with RBC. You may proceed with your question.

Operator: Your next question comes from Jon Arfstrom with RBC. You may proceed with your question.

Speaker #6: Okay. Thanks. Good afternoon.

Chris Poulton: Hey, thanks. Good afternoon.

Speaker #9: Hi, Don.

[Analyst]: Hi, Don.

Speaker #6: Hey there. It's probably a topical question. I'm not as concerned about it for you guys, but it's a bloodbath out there in the bank stocks on credit fears.

Chris Poulton: Hey there. It's probably a topical question. I'm not as concerned about it for you guys, but it's a bloodbath out there in the bank stocks on credit fears. You know, obviously, you put up a great quarter, but your stock's off. How are you feeling about credit right now? Maybe what you're seeing on your own credit trends, and then, you know, I know that you guys kick the tires on a lot of other banks, but what you're seeing broadly in some of the other banks you look at?

Speaker #6: And you know obviously, you put up a great quarter, but your stock's off. How are you feeling about credit right now? And maybe what you're seeing on your own credit trends and then you know I know that you guys kicked the tires on a lot of other banks, but what you're seeing you know broadly in some of the other banks you look at?

Speaker #7: Well, interestingly enough, we have an asset quality meeting monthly. In that asset quality meeting, we cover every past due or problem loan in the entire company.

John Allison: Interestingly enough, we have an asset quality meeting monthly. In that asset quality meeting, we cover every past due or problem loan in the entire company. As you can imagine, more has been focused on the Texas book than it has been the Florida book or the Arkansas book. We go down every loan, and we talk about it and where we are and what's happening with it. It's really pretty interesting. I wrote down, and I write down, John, what I think the loss is on that loan. If I think it's $1 million, I put down $1 million or $5 million or $10 million, whatever it is, I put it down. The rest of the group does it accordingly too. Stephen does it and Kevin does it. At the end, we look at each other, what did you put down?

Speaker #7: As you can imagine, more have been focused on the Texas book than it has been on the Florida book or the Arkansas book. But we go down every loan.

Speaker #7: And we talk about it and where we are and what's happening with it. And it's really pretty interesting. We had the I wrote down the and I write down, John, what I think the loss is on that loan.

Speaker #7: If I think it's a million dollars and put down a million, or $5 million, or $10 million—whatever it is, I put it down.

Speaker #7: And the rest of the group does it accordingly too. Stephen does it, and Kevin does it. And then at the end, we look at each other, "What'd you put down?"

Speaker #7: And I had the lowest amount of dollars in that asset quality meeting that I've had since I started that process, and that's been years ago.

John Allison: I had the lowest amount of dollars in that asset quality meeting that I've had since I started that process, and that's been years ago. From that aspect, I'm pretty proud we got that one Texas credit that we got our eye on. Outside of that, everything's holding together pretty good. Getting that, having a deal on that piece of property in Texas that Kevin reported earlier, I'm glad to have that. Hopefully, that deal gets closed. We got a 10% deposit, so hopefully that gets done and gets out of the bank. Overall, I could be on that one deal in Texas. I'm a pretty happy camper. I can't say we're the exception. I can't say we're the exception. I think Jamie Dimon said there's cockroaches out there, and there always is cockroaches, but you know, there may be. I'm sure there are some cockroaches that we hadn't seen.

Speaker #7: So from that aspect, I'm pretty proud. We got that one Texas credit that we have our eye on. But outside of that, everything's holding together pretty well.

Speaker #7: Getting the deal on that piece of property in Texas that Kevin reported earlier, I'm glad to have that. Hopefully, that deal gets closed.

Speaker #7: We got a 10% deposit, so hopefully that gets done and gets out of the bank. Overall, I could be that one deal in Texas; I'm a pretty happy camper.

Speaker #7: So I can't say where the exception I can't say where the exception. I think Jamie Dimon said there's cockroaches out there and it always is cockroaches, but you know it may be.

Speaker #7: I'm sure there are some cockroaches that we hadn't seen, but I was amazed at the last asset quality meeting how many dollars I wrote down.

John Allison: I was amazed at the last asset quality meeting how many dollars I wrote down. I usually write from $15 million to $30 million. It's possibly, and don't get me wrong, I exaggerate a little bit, but I just put the maximum amount I think it could be. We usually always beat that if one of those credits happens. Last time, I think I was less than $5 million, John. Kevin, you got any comment?

Speaker #7: I used to write from 15 to 30 million. It's possible, don't get me wrong. I exaggerate a little bit, but I just put the maximum amount I think it could be.

Speaker #7: And we usually always beat that if one of those credits happen. But last time, I think I was less than $5 million, John.

Speaker #7: Kevin, you got a comment?

Speaker #6: Okay, no, I mean, I can't. That's the best color I can get. And then we go through them at a detailed level and each come up with our own number.

John Allison: Okay. I can't, that's the best color I can give. We go through them at a detailed level and each come up with our own number. I feel like you do. I think we have addressed, we watch all these closely, and things come out of left field at times, but we feel pretty good about where we're at at this point. Low leverage helps that a lot.

Speaker #6: And you know, I feel like you do. I think we have addressed, we watch all these closely, and you know things come out of left field at times. But we feel pretty good about where we're at at this point.

Speaker #6: Low leverage helps that a lot.

Speaker #7: Yeah. I remember I remember back, John, when we didn't we had high leverage and they pitched us the key. So it's it being in a position with low leverage is it's pretty sweet.

John Allison: Yeah. I remember back, John, when we had high leverage and they pitched us the keys. Being in a position with low leverage is pretty sweet.

Speaker #6: Got it. Okay. I'm sure others will ask about M&A, but I'll go to growth quickly. And I hear you guys. I'm probably guilty of pushing you on growth at times.

Chris Poulton: Yeah. Okay. I'm sure others will ask about M&A, but I'll go to growth quickly. I hear you guys. I'm probably guilty of pushing you on growth at times. It sounds like you're more willing to grow. I'm just curious if the pipeline supported and you're seeing the kind of loan demand that could push your growth rate a little bit higher. Here I go again, pushing you on growth. Are you seeing the pipelines improve? It sounds like you're more willing to grow the balance sheet. Is that right?

Speaker #6: But it sounds like you're more willing to grow. I'm just curious if the pipeline supports it and you're seeing the kind of loan demand that could push your growth rate a little bit higher.

Speaker #6: Here I go again, pushing you on growth. Are you seeing the pipelines improve? It sounds like you're more willing to grow the balance sheet.

Speaker #6: Is that is that right?

Speaker #9: I don't know that it's that we're more willing. I think the pipeline is supporting it, particularly right now. I don't know that it's necessarily a willingness more than, you know, we're finding the right deals.

Kevin Hester: I don't know that it's that we're more willing. I think the pipeline is supporting it, particularly right now. I don't know that it's necessarily a willingness more than, you know, we're finding the right deals. We've got people in the right places, in good markets that have kind of hit their niche. The hard thing to project is that we do a lot of construction. That means there's a lot of churn in our community bank construction book. Chris's book is meant to churn, you know, over a three to four-year period anyway. There is a lot of turnover on a quarterly basis, and that's the hard thing to project. The pipeline has been really pretty strong for several quarters and continues to look that way.

Speaker #9: We've got people in in the right places in good markets that have kind of hit their niche. The hard thing to to project is that we have a lot of we do a lot of construction.

Speaker #9: And so that means there's a lot of churn in our community bank construction book. And Chris's book is meant to churn, you know, over a 3 to 4-year period anyway.

Speaker #9: So there is a lot of turnover on a quarterly basis, and that's the hard thing to project. The pipeline has been really pretty strong for several quarters.

Speaker #9: And continues to look that way.

Speaker #7: Yeah. It looks like we just missed. We let the Greens pig get away from us in the second quarter. Chris did on a big loan.

John Allison: Yeah, it looks like we dismissed, we let the grease pig get away from us in the second quarter. Chris did on a big loan. It looks like that loan's probably going to close. Chris, you want to comment on when you think that might close?

Speaker #7: Looks like that loan's probably going to close. So, Chris, do you want to comment on when you think that might close?

Speaker #6: Certainly. Yeah, we had one that was scheduled to close at the end of the quarter, and our borrower just needed to delay their purchase a couple of weeks.

Chris Poulton: Certainly. We had one that was scheduled to close at the end of the quarter, and our borrower just needed to delay their purchase a couple of weeks. I think we're scheduled for Monday right now. That may move around a little bit, but again, that's more just sort of timing issues. We continue to see good demand. I think that one will probably get done.

Speaker #6: Well, I think we're scheduled for Monday right now. That may, you know, that may move around a little bit. But, you know, again, that's more just sort of timing issues.

Speaker #6: We continue to see good demand, so I think that one will probably get done.

Speaker #7: So anyway, we were prepared. We thought we were going to be much stronger than we were, but Chris didn't get that one closed.

John Allison: Anyway, we were prepared. We thought we were going to be up much stronger than we were, but Chris didn't get that one closed. I think it's going to get closed. We're starting out. We usually start out in the hole. We're starting out ahead. I don't know if that means we'll be behind at the end. Usually, when we start out strong, we get behind at the end. We start out slow, we get strong at the end. We'll just have to wait and see. You never know what your customer's thinking. He may be buying, he may be selling, right? You don't know. He may be working on something for months, and then bang, he just hits it. Hey, we got to do this trade. That happens. That happens a lot. We could be, we could have a good run here this quarter.

Speaker #7: But I think it's going to get closed. So we're starting out. We usually start out in the hole; we're starting out ahead. I don't know if that means we'll be behind at the end, but usually when we start out strong, we get behind at the end.

Speaker #7: We start out slow, and we get strong at the end. So we'll just have to wait and see. You never know what your customer's thinking.

Speaker #7: He may be buying. He may be selling, right? You don't know. And he may be working on something for months and then buying. He just hits it, "Hey, we got to do this trade." So, that happens. That happens a lot.

Speaker #7: But we're we could be we could have a good run here this this quarter. It could be it could be a nice quarter. And a good the well-priced loans and it could give us a little give us a little revenue boost.

John Allison: It could be a nice quarter. They're good, they're well-priced loans, and it could give us a little, give us a little revenue boost.

Speaker #6: Okay, all right. Thanks for the help. I appreciate it.

Chris Poulton: Okay. All right. Thanks for the help. I appreciate it.

Speaker #7: You You bet.

John Allison: You bet.

Speaker #8: Thank you. We now have Brett Ravitan with Hofty Group. Please go ahead.

Operator: Thank you. We now have Brett Rabatin with Home BancShares Inc. Please go ahead.

Speaker #10: Hey, good afternoon, everyone. Johnny, I wanted to start; you know M&A hasn't really been addressed fully. And I think everybody knows you're out looking for assets.

Chris Poulton: Hey, good afternoon, everyone. John, he wanted to start, you know, M&A hasn't really been addressed fully. I think everybody knows you're out looking for assets. Can you maybe just talk about, you know, your experience here the past quarter? What's been the impediment? Is it pricing? Is it culture of a seller? Just the pure math. What's been the impediment? How do you think about the outlook with these stocks a little lower? Obviously, seller expectations are not as variable as the market.

Speaker #10: Can you maybe just talk about, you know, your experience here the past quarter? What's been the impediment? Is it the pricing, is it the culture of a seller, or just the pure math?

Speaker #10: What's been the impediment? And then just how do you think about the outlook with these stocks a little lower? Obviously, seller expectations are not as variable as the market.

Speaker #7: Well, you know I'm conservative we are. We had we had to find the right target. to say that we are not in the M&A business, we are we have signed the LOI.

John Allison: You know how conservative we are. We have to find the right target. To say that we are not in the M&A business, we are. We have signed the letter of intent. We'll be moving forward on that. It's someone that we like and runs a good business. It's got a good business, and we're excited about that opportunity. I'll tell you where it is. It's in the United States, and it's several billion dollars. That's your bill to narrow that down. Your bill to narrow that down. We have signed the letter of intent, and we have his permission today to say that we've done that. That's about all. You're not going to get anything else out of me other than that.

Speaker #7: We'll be moving forward on that. It's something that we like, and it runs a good business. It's got a good business, and we're excited about that opportunity.

Speaker #7: And I'll tell you where it is. It's in the United States, and it's several billion dollars. So, you'll be able to narrow that down.

Speaker #7: You'll be able to narrow that down. So, we have signed the LOI, and we have his permission today to say that we've done that.

Speaker #7: So that's about all. You're not going to get anything else out of me other than that. So, no, that's.

Chris Poulton: No, that's helpful, John. It sounds like we got something in the upper. That's good to hear.

Speaker #6: That's helpful, Johnny. So it sounds like we got something in the offer, so that's good to hear.

Speaker #7: Well, and then.

Speaker #6: And then just wanted to hear.

John Allison: We got.

Chris Poulton: I just wanted to hear.

Speaker #7: We got, we got—I mean, we had the happy mess to deal with. And we got that behind us pretty well. And we just don't move until we—I mean, it just creates. If you got a fire out there, put it out.

John Allison: We had the Happy Mess to deal with, and we got that behind us pretty well. We just don't move until we, I mean, you just create, if you got a fire out there, put it out. We had all those multiple problems in the Happy transaction. It just didn't, we got that under wraps right now. It's time for us to move forward. I agree we have not moved forward, and I admit that, but we are moving forward.

Speaker #7: So we had all those multiple problems in the happy transaction. It just didn't go how we had hoped, but we got that under wraps right now. So it's time for us to move forward.

Speaker #7: And I I agree. We have not moved forward. And and I I admit that, but we we are we are moving forward.

Speaker #6: Okay. And then the other question I have was just around profitability. You know, in the past two quarters, I think it felt like your profitability had topped out in this quarter.

Chris Poulton: Okay. The other question I have is just around profitability. In the past two quarters, I think it felt like your profitability had topped out. In this quarter, it moved up again. Are we at the peak, do you think, in terms of ROA, ROE, ROTE, just given the efficiency ratio? Any thoughts on profitability and how you see it maybe going into 2026?

Speaker #6: It moved up again. Are we at the peak, do you think, in terms of ROA, ROE, ROTE? Just given, you know, the efficiency ratio or any thoughts on profitability and how you see it maybe going into ’26?

Speaker #7: Well, our expenses were up a little bit this quarter. So I've already commented to Stephen and Brian Davis, and they're going to work on that.

John Allison: Our expenses were up a little bit this quarter. I've already commented to Stephen and Brian Davis, and they're going to work on that. Our expenses were up. We still had some expenses out there that we didn't need to have. We got to work on that. I don't think we're done. No, I don't think we're done. You get the expenses back to $111 million, you see what happens, right? That's more money for us. We've kind of had the window back. We're pretty tough on, if we charge off a loan, we're pretty tough on staying after them until we get our money. We've had the windfall and the window back. We've had some income. We got some this month too. This quarter, haven't we, Brian? Some.

Speaker #7: So our expenses were up. We still had some expenses out there that we didn't need to have. So we got to work on that.

Speaker #7: And I don't think we're done. No, I don't think we're done. You get the expenses back to $111, you see what happens, right? So that’s more money for us.

Speaker #7: We've kind of had to wind our back. We're pretty tough on if we charge off a loan; we're pretty tough on staying after them until we get our money.

Speaker #7: So, it is, we've had to windfall and wind our back. We've had some income. We got some this month too, this quarter, haven't we, Brian, some?

Speaker #6: Yeah. I mean, we had several things, but we had a $2 million recovery. We had a $1.75 million gain on our lawsuit, and we had a $1.9 million gain on our subordinated debt paydown.

Chris Poulton: Yeah, I mean, we had several things. We had a $2 million recovery, a $1.75 million gain on our lawsuit, and we had a $1.9 million gain on our sub debt pay down.

Speaker #7: Yeah. We'll probably have some more recoveries on that lawsuit. I'll probably put it in reserve, just to be on our reserve. We built it a little bit this time.

John Allison: Yeah, we'll probably have some more recoveries on that lawsuit. I'll probably put it in reserve just to be on our reserve. We built it a little bit this time. Went from $186 million to $187 million. We'll probably take that extra money. We don't have anything that pops its head up to be charged off. We'll probably put that in reserve.

Speaker #7: We went from 186 to 187. We'll probably take that extra money. We don't have anything that pops its head up to be charged off.

Speaker #7: Well, we'll probably put that in reserve.

Speaker #6: Okay. Appreciate all the color.

Chris Poulton: Okay. Appreciate all the color.

Speaker #7: Thank you.

John Allison: Thank you.

Speaker #8: Thank you. We now have Stephen Scooter with Hyperstand on the line.

Operator: Thank you. We now have Stephen Scouten with Home BancShares Inc. on the line.

Speaker #9: Hey, good afternoon. So, Johnny, I kind of want to challenge you that maybe you can't get expenses down to $111 just so you get an added personal loan and get them back there.

[Analyst]: Hey, good afternoon. Johnny, I kind of want to challenge you that maybe you can't get expenses down to $111 million just so you get an added proof of wrong and get them back there. Do you think there really is $2 million, $3 million to cut if you continue to go to the bank?

Speaker #9: But do you think they're really...? It's $2 million to $3 million to cut you if you continue with the bank?

Speaker #7: Do I think there's two or three million that we could gather? Is that what you're saying?

John Allison: Do I think there's $2 million or $3 million more that we could gather if we, is that what you said?

Speaker #9: Expenses that you could cut.

[Analyst]: Expenses that you could cut.

Speaker #7: Yeah. And.

John Allison: I think you were at, you know, it was $13 million, which is phenomenal still.

Speaker #9: Because I think you were at, you know, 13. It was 14 million. 14% is phenomenal still.

Speaker #7: Hey, Stephen, this is Stephen. Yeah, there’s a handful of kind of one-time items in this quarter from an expense standpoint. And then I know we talked a little last quarter around incentives being up in Q2, and they were basically at the same level in Q3 as they were in Q2.

[Analyst]: Hey, Stephen. This is Stephen. Yeah, there's a handful of kind of one-time items in this quarter from an expense standpoint. I know we talked a little last quarter around incentives being up in Q2, and they were basically at the same level in Q3 as they were in Q2. There's obviously some revenue that comes along with that to pay those. Like Johnny said, we've got our presidents had a good conversation last week and everybody kind of reviewing their numbers and what opportunities we have to trim where we can.

Speaker #7: So there's obviously some revenue that comes along with that to pay those. But, you know, like Johnny said, we've got our presidents, had a good conversation last week, and everybody kind of reviewing their numbers and what opportunities we have to trim where we can.

Speaker #9: Hard to beat a 41.7% efficiency ratio, but it's impressive to hear you might be able to get it a little better. So that's encouraging. Maybe on loan growth around CCFG in particular, I'm wondering if Chris could comment on, you know, obviously we've seen a few rate cuts here and, perspectively, we're going to get a few more.

Chris Poulton: Hard to beat 41.7% efficiency ratio, but impressive to hear you might be able to give it a little better. That's encouraging. Maybe on loan growth around CCFG in particular, I'm wondering if Chris could comment on just, you know, obviously, we've seen a few rate cuts here, and prospectively, we're going to get a few more of what he would think that could do to loan demand within CCFG. I mean, I think that book is down maybe $400 million or so from its peak when we were in a lower rate environment. Just kind of curious what we think could kind of transpire there.

Speaker #9: What would he say could do to loan demand within CCFG? I mean, I think that book is down maybe $400 million or so from its peak when we were in a lower rate environment.

Speaker #9: So, I'm just kind of curious what we think could transpire there.

Speaker #7: Chris, that's yours.

John Allison: Chris, that's yours.

Speaker #6: I was curious what you might say. Yeah. No, I look, I think lower rate environments generally will be beneficial to us because I think people have sat on the sidelines on some transactions or some projects that just don't make sense at a higher rate environment.

Chris Poulton: I was curious what you might say. No, I look, I think lower rate environments generally will be beneficial to us because I think people have sat on the sidelines on some transactions or some projects that just don't make sense at a higher rate environment. You'd like to think that there stimulates a little bit of demand on some things that maybe don't pencil out so well in a higher rate environment. I assume we get our fair share of those. In general, I think demand for us has been good. We don't really chase growth, but if it comes our way, we'll take it. I do think in general, you see a 100-point decline from where we were. You ought to see a few more deals pencil out a little better.

Speaker #6: So you'd like to think that they're stimulating a little bit of demand on some things that maybe don't pencil out so well in a higher rate environment.

Speaker #6: And I assume we get our fair share of those. Yeah. In general, I mean, I think demand for us has been good.

Speaker #6: You know, we don't really chase growth, but if it comes our way, we'll take it. And I do think, in general, you know, you see a 100-point decline from where we were.

Speaker #6: You ought to see a few more deals pencil out a little better.

Speaker #9: Got it. Yep. That makes sense. And maybe just the last thing for me, I mean, I know I think Armstrong said it earlier, but it's been kind of a bloodbath out here today. But y'all's stock is outperforming by, I don't know, 200 basis points, which probably doesn't feel that way, but it's great relative to everyone else.

[Analyst]: Got it. Yep, that makes sense. Maybe just last thing for me. I know I think Arfstrom said it earlier, but it's been kind of a bloodbath out here today. Y'all's stock is outperforming by, I don't know, 200 basis points, which probably doesn't feel that way, but it's great relative to everyone else. How do you think about using that stock in an M&A transaction versus using all this excess capital that you have to buy back your own stock? Is it both/and, or do you have a preference on using that currency to buy new assets or just repurchasing your own stock more aggressively?

Speaker #9: How do you think about using that stock in an M&A transaction versus, you know, using all this excess capital that you have to buy back your own stock?

Speaker #9: Is it both, or do you have a preference on using that currency to buy new assets, or just repurchasing your own stock more aggressively?

Speaker #7: Well, I think it depends on the stock price, but I, you know, we'll be in the market. Let me say this.

John Allison: I think that depends on the stock price, but you know we'll be in the market. Let me say this. Home will be in the market come tomorrow when we're cleared, right? We'll be in the market buying stock. When there's opportunities, when you look at Home, we were second in the nation in ROA in the first quarter, first in the second quarter, and we outperformed the first in the second quarter, and they take us down 3%. If they're going to take us through the rest of the market, I'll be down 10%. We'll come back. Home will come back. Home will bounce back. This is, and all the banks will bounce back at some point in time. Right now, we're all trading.

Speaker #7: Home will be in the market come tomorrow when we're cleared, right? So we'll be in the market buying stock. So, you know, when there's opportunities, you know when you look at Home, we were second in the nation in ROA in the first quarter and first in the second quarter.

Speaker #7: And we outperformed the first and second quarters. And they take us down 3%. You know, if they're going to take us through the rest of the market, it ought to be down 10.

Speaker #7: So you know it, we'll come back. Home will come back. Home will bounce back. This is, and all the banks will bounce back at some point in time.

Speaker #7: But right now, we're all trading; they're throwing the baby out with the bathwater. And we just have to—it's painful, as it is. When you come off of a, you know, you see the performance of the company for the quarter, and you come off of that and you get your ass kicked like this.

John Allison: They're throwing the baby out with the bathwater, and we just have to, as painful as it is, when you come off of a, you see the performance of the company for the quarter, and you come off of that, and you get your ass kicked like this. It's a little frustrating, but it is what it is. There's a lot of people that are in a lot worse shape than Home BancShares Inc. is today. It's just a little frustrating, but we'll be fine. You know we'll be fine. We'll continue to use our stock for acquisitions, and we'll continue to buy our stock back. The good news is when you run a 2.12, 2.17 ROA, you can increase your dividend. You can buy your stock back.

Speaker #7: It's a little frustrating, but it is what it is. And there are a lot of people that are in a lot worse shape than Home BancShares is today.

Speaker #7: So, it's just a little frustrating. But we'll be fine. You know, we'll be fine. We'll continue to use our stock for acquisitions, and we'll continue to buy our stock back.

Speaker #7: And the good news is, when you run a 212, 217 ROI, you can increase your dividend. You can buy your stock back.

Speaker #7: You can do pull every capital handle that's out there. And still, as you see Home has done, grow your tangible common equity up pretty strong.

John Allison: You can pull every capital handle that's out there and still, as you see, Home has done, grow your tangible common equity up pretty strong. These people running a 0.7 or a 1% ROA, they don't have the ability to do what Home's doing. Home has the ability, running a 2% ROA, to pull every capital handle out there. We can make the decision of which one we want to pull, or we can pull them all. Don't you agree with that, Stephen?

Speaker #7: So, these people running a 0.7% or a 1% ROI, they don't have the ability to do what Home is doing. Home has the ability, running a 2% ROI, to pull every capital handle out there.

Speaker #7: So we can make the decision of which one we want to pull, or we can pull them all. Don't you agree with that, Stephen?

Speaker #9: Absolutely. You had a chance to buy at a lower price. So, to your point, congrats on a great quarter. And I like the new chart too.

[Analyst]: Absolutely. You didn't have a chance to buy it worse or cheaper. To your point, congrats on a great quarter, and I like the new chart too. I like seeing those nice up into the right lines. Keep up the good work.

Speaker #9: I like seeing those nice up and to the right lines. Keep up the good work.

Speaker #7: Thank you. Appreciate it.

John Allison: Thank you. Appreciate it.

Speaker #8: We now have Matt Olney with Stephen's Inc. You may proceed with your question.

Operator: We now have Matt Olney with Stephens Inc. You may proceed with your question.

Speaker #10: Hey, great. Thanks for taking the question. I was encouraged to hear about the lawsuit settlement. I know that's something you've been looking for for a few years now.

[Analyst]: Hey, great. Thanks for taking the question. I was encouraged to hear about the lawsuit settlement. I know that's something you've been looking for for a few years now. As far as the impact that had on expenses, were the legal bills still coming through in the third quarter? Was this one of the headwinds that you mentioned in the third quarter? I'm just trying to appreciate if that $111 million goal could be something we could see in the fourth quarter, or could we need a few quarters to get there?

Speaker #10: As far as the impact that had on expenses, were the legal bills still coming through in the third quarter? Was this one of the headwinds that you mentioned in the third quarter?

Speaker #10: I'm just trying to appreciate if that $111 million goal could be something we could see in the fourth quarter, or could we need a few quarters to get there?

Speaker #7: I mean, let Stephen answer that.

John Allison: I'll let Stephen answer that.

Speaker #9: Yeah, this is Stephen, Matt. There wasn't much, I'm going to say, $100,000 or so in legal expense related to that suit in the quarter.

[Analyst]: Yeah, this is Stephen, Matt. There wasn't much, I'm going to say $100,000 or so in legal expense related to that suit in the quarter. We had a handful of other kind of one-time items, some donations. We did a nice donation to the city of Kerrville from the flood damage earlier this year. That was in the quarter and a handful of other things. We're working through all that now. Like Johnny said, a portion of the settlement proceeds were in revenue this quarter, and the rest will be in Q4.

Speaker #9: We had a handful of other kinds of one-time items, some donations. We made a nice donation to the City of Kerrville for the flood damage earlier this year.

Speaker #9: So that was in the quarter and a handful of other things. So we're working through all that now. And like Johnny said, a portion of the settlement proceeds were in revenue this quarter, and the rest will be in Q4.

Speaker #7: Okay.

Speaker #10: Okay.

John Allison: Okay. Our bank in Kerrville raised $250,000 for the tragic flood that killed those little baby girls, and we matched it. We had about a $500,000 donation. We feel good about that.

Speaker #7: Our bank in Kerrville released a $250,000 donation for the tragic flood that killed those little baby girls, and we matched it. So we had about a $500,000 donation.

Speaker #7: We feel good about that.

Speaker #10: Yep. Yeah. Nice to see. And then on the M&A strategy, just help us appreciate the size thresholds of those targets. I think Johnny, you mentioned there could be a larger deal.

[Analyst]: Yeah, nice to see. On the M&A strategy, just help us appreciate the size thresholds of those targets. I think, Johnny, you mentioned there could be a larger deal. There could be a few smaller deals. Just help size up for us what a larger deal would be for Home BancShares Inc. versus what a series of small deals would look like.

Speaker #10: There could be a few smaller deals. Just help size up for us what a larger deal would be for Home BancShares versus what a series of small deals would look like.

Speaker #7: If by anything from $25 billion down, and anything from $1 billion up. So I can't tell you. The attorneys are already fussing at me.

John Allison: You'd buy anything from $25 million down and anything from $1 billion up. I can tell you, the attorney's already fussing at me. I knew this question was coming. I said, "I can handle it." It's somewhere between $0 and $25 million, I think. That makes you feel good. I'm not going to go there. We're going to buy stock. As soon as we can get open, we're going to buy stock. They said, "You got to be careful." I said, "I'm going to be careful, but I can tell you what we're going to do." Wall Street knows we're going to, we always tell them what's happening. We're fair with that. We like this operator. I can tell you that. We like the guy. We like this guy. We think he's done a good job, and we think he'll be a great partner.

Speaker #7: So, then I knew this question was coming. I said, "Well, I can handle it." So, if somewhere between $0 and $25 billion, I think.

Speaker #7: So that makes you feel good. I'm not going to go there. And we're going to buy stock as soon as we can get open; we're going to buy stock.

Speaker #7: So they said you've got to be careful. And I said, "Well, I'm going to be careful, but I'm going to tell you what we're going to do." So Wall Street knows we're going to—we always tell them what's happening.

Speaker #7: So we're fair with that. I don't think we like this operator; I can tell you that. We like the guy. We like this guy.

Speaker #7: So we think he's done a good job and we think he'll be a great partner. And with having the strength of Home. Strength of having Home BankShares balance sheet backing him, I think he'll I think he'll do what he needs to do.

John Allison: With the strength of having Home BancShares Inc. balance sheet backing him, I think he'll do what he needs to do. That's probably more than a good attorney that can make a note to this right now. Everybody's got drawing their finger across his throat like shutting down something.

Speaker #7: That's probably more than I should. The attorneys are making notes of this right now. Everybody's drawing their finger across their throat like that.

Speaker #7: I didn't have that.

Speaker #10: Well, we'll keep an eye on the Home Bank news in the next few weeks. Hopefully, we'll see something good. Thanks for all the comments, guys.

Chris Poulton: We'll keep an eye on the Home BancShares Inc. news in the next few weeks. Hopefully, we'll see something good. Thanks for all the comments, guys. Great quarter.

Speaker #10: Great quarter.

Speaker #7: Thanks.

John Allison: Thanks.

Speaker #8: We now have Katherine Mallou with KBW.

Operator: We now have Catherine Mealor with KBW.

Speaker #1: Hey, good od afternoon.

Donna Townsell: Hey, good afternoon.

Speaker #7: Good afternoon. How are you?

John Allison: Good afternoon. How are you?

Speaker #1: I'm great. All right. My last question is just circling back to the margin, and I just wanted to see if you could remind us of the percentage of loans that are floating rate that are repriced immediately.

Donna Townsell: I'm great. All right. My last question is just circling back to the margin. I just wanted to see if you could remind us the % of loans that are floating rate that are repriced immediately. My kind of follow-up on the deposit side, I know, Stephen, you talked about $1.1 billion of CDs repricing in the second half of the year. If you could give us a little bit of data around where that's coming off and coming back on or where you think that'll happen. I know rates are moving all around.

Speaker #1: And then my kind of follow-up on the deposit side. I know, Stephen, you talked about $1.1 billion of CDs repricing in the second half of the year.

Speaker #1: Just if you could give us a little bit of data around where that's coming off and coming back on, or where you think that'll happen under rates are moving all around.

Speaker #7: Sure. So, on the variable rate side, it's about $6.3 billion. There's about $3.5 billion that's tied to the Wall Street Journal Prime.

[Analyst]: Sure. On the variable rate side, it's about $6.3 billion or so. There's about $3.5 billion that's tied to Wall Street General Prime, and the rest is tied to SOFR between Chris's book and the community bank portfolio. That's what's moving this quarter or next that we would consider truly variable. On the CD side, we've got—let me find my notes here. We've got about—let's tell them fixed rate side. Give me just a second. We've got, over the next three quarters, our CD book, which is relatively small, is also relatively short, so $1.8 billion or so in total size. We've got about $1.35 billion that matures over the next three quarters, and it's at an average rate of 3.67%. It starts a little bit higher and tails off over the next three quarters. We still have to negotiate, deal with competition.

Speaker #7: And the rest is tied to SOFR between Chris's book and the community bank portfolio. So that's what's moving, you know, this quarter in acts that we would consider truly variable.

Speaker #7: And then on the CD side, we've got, if I my notes here, we've got about what that's on the fixed rate side. Give me just a second.

Speaker #7: We've got, over the next three quarters, our CD book, which is relatively small, is also relatively short, so about $1.8 billion or so.

Speaker #7: In total size, we've got about $1 billion 350 that matures over the next three quarters. It's at an average rate of 367, so it starts a little bit higher and tails off over the next three quarters.

Speaker #7: But you know, we still have to negotiate and deal with competition. We've got peers in the market around our markets that are still north of 4, which is frustrating.

[Analyst]: We've got peers in market and around our markets that are still north of 4%, which is frustrating. Our group's done a fantastic job in negotiating those with customers that want to negotiate and able to retain the vast majority of what we have. Whether we can pick up some yield on what's coming off over the next three quarters, we'll see just kind of relative to what competition is doing. I would say broadly, our folks are negotiating down in the mid threes and lower today.

Speaker #7: But our group's done a fantastic job in negotiating those with customers that want to negotiate and have been able to retain the vast majority of what we have.

Speaker #7: And you know whether we can pick up some yield on what's coming off over the next three quarters, we'll see. Just kind of relative to what the competition's doing.

Speaker #7: But you know, I would say broadly, our folks are negotiating down in the mid-threes and lower today.

Speaker #1: Okay, great. That's perfect. And then this is a really nitty question, but the sub-debt that you paid off this quarter, was when in the quarter was that?

Donna Townsell: Okay, great. That's perfect. This is a really nitty question, but the sub debt that you paid off this quarter was, when in the quarter was that? Is some of that reflected in this quarter's margin, or will that be more fully reflected next quarter?

Speaker #1: Is some of that reflected in this quarter's margin, or will that be more fully reflected next quarter?

Speaker #7: We paid it off in July. It was the happy subordinated debt that we got which was $140 million. Then we bought back $20 million of our subordinated debt in September.

[Analyst]: We paid it off in July. It was the happy sub debt that we got that was $140 million, and then we bought back $20 million of our sub debt in September.

Speaker #7: So $140 million went out at the end of the year.

John Allison: The $140 million went out at the end of the quarter.

Speaker #1: Got it. So that's mostly been in this margin. Got it. Okay. Thanks so much. Great quarter.

Donna Townsell: Got it. That's mostly in this margin. Got it. Okay. Thanks so much. Great quarter.

Speaker #7: All right. Stephen had some comments for you.

John Allison: Stephen had some comment for you.

Speaker #9: No, I was just going to clarify that. On the $140 million, we paid off at the very end of July, first of August. So there's, you know, two-thirds benefit this quarter.

[Analyst]: No, I was just going to clarify that.

Donna Townsell: Yeah, go ahead.

[Analyst]: On the $140 million, we paid off at the very end of July, 1st of August. There's two-thirds benefit this quarter.

Speaker #1: Okay, that's great. Thank you.

Donna Townsell: Okay, that's great. Thank you.

Speaker #7: Thanks. Appreciate it.

[Analyst]: Thanks. Appreciate it.

Speaker #1: Thank you. We now have Brian Martin with Johnny. You may proceed with your question.

Operator: Thank you. We now have Brian Martin with John. You may proceed with your question.

Speaker #10: Hey, good afternoon, guys.

[Analyst]: Hey, good afternoon, guys. Hey, Brian. Hey, Stephen, maybe just one, just on the margin. It sounded like earlier when you talked about the question about rates being down, it didn't sound like there was a big concern that the margin was going to fall significantly despite being, as Johnny said, maybe asset-sensitive. I guess, is in general, your expectation if we do see the rate declines that the margin is still relatively stable, kind of where it's been, absent the movement within that event income line? I know that moves around a little bit in the quarters, but just kind of the core exit event income, if we do get a couple of cuts, it sounds like it's relatively stable, plus or minus a few basis points is still the way to think about the outlook?

Speaker #11: Hey, Brian. Hey, Stephen, maybe just one on the margin. Just it sounded like earlier when you talked about the question about rates being down, it didn't sound like there was a big concern that the margin was going to fall significantly, despite being, you know, as Johnny said, maybe asset sensitive.

Speaker #11: I guess it is, in general, your expectation that we do see the rate declines at, you know, the margin is still relatively stable, kind of where it's been?

Speaker #11: You know Absent kind of the the the movement within that event income line, I know that's a little bit moves around a little bit in the quarters.

Speaker #11: But just kind of the core X that event income, if we do get a couple of cuts, it sounds like it's, you know, relatively stable, plus or minus a few basis points.

Speaker #11: Is this still the way to think about the outlook?

Speaker #7: Yeah. I mean, that's been our message over the last year or so. You've seen rates come down a little bit. I mean, you know, we screen in an outgo model that our, that our in and out goes down 5% or whatever.

Kevin Hester: Yeah, I mean, that's been our message over the last year or so, as you've seen rates come down a little bit. I mean, you know, we screen in an outgo model that our NII goes down 5% or whatever, but you know, that assumes a 40% beta on deposits. Like I said, Johnny's always said that then give management credit for what our team does. Like I said earlier, the presidents have done a great job thus far addressing deposit rates. The daily run rate that we monitor has held in pretty good over the last month since the Fed cut rates.

Speaker #7: But you know that assumes a 40% beta on deposits, and you know, like I said, Johnny's always said it doesn't give management credit for what our team does.

Speaker #7: So like I said earlier, the presidents have done a great job thus far, addressing deposit rates and you know the the daily run rate that we monitor is held in as held in pretty good over the last over the last month since the Fed cut rates.

Speaker #7: So okay.

Speaker #10: And just in reminding, Stephen, I guess or maybe you said earlier, what what's left on on the and kind of in terms of fixed asset repricing, you know in the in the next couple of quarters or the next 12 months, I guess what maybe what you haven't hit your hands in terms of what what opportunities?

[Analyst]: Okay. Just in reminding, Stephen, I guess, or maybe you said earlier, what's left on the, in terms of fixed asset repricing, in the next couple of quarters or the next 12 months, what you have at your hands in terms of what opportunities?

Speaker #7: Yeah. We've got, so Q4, we have $478 million in fixed-rate loans that mature at an average rate of 6.17%. So there should be some lift potentially on those.

Kevin Hester: Yeah, we've got Q4, we have $478 million in loans, in fixed-rate loans that mature at an average rate of 6.17%. There should be some lift potentially on those. It kind of depends on what competition does. I think we've said before, we'll defend our balance sheet with competition. There's about $1.25 billion next year in 2026 that matures at an average rate of 5.5%, basically.

Speaker #7: Again, it kind of depends on what competition does. And I think what you said before, we'll defend our balance sheet with competition.

Speaker #7: And then there's about $1.25 billion next year in 2026 that matures at an average rate of 5.5, basically.

Speaker #10: Okay. So, still a little bit of room out there on that one.

[Analyst]: Okay, a little bit of room on that rate environment.

Speaker #7: Depending on what happens, the rate environment—yeah, some of that could come up potentially.

Kevin Hester: Yeah, some of that could come up potentially.

Speaker #10: Gotcha. Okay. And then just the last couple. It sounds like the that near-term there's still it sounds like there's opportunity in the expense side that you know we're we're we're we're going lower, not not higher than at this point, you know all else equal.

[Analyst]: Gotcha. Okay. Just the last couple, it sounds like near-term, there's still, it sounds like there's opportunity on the expense side that, you know, we're going lower, not higher than at this point. You know, LLC goal, that sounds fair. On the fee income side, Brian, I guess, is there, it sounds like there's an extra $2 million in the fees this quarter that I guess after next quarter, fourth quarter, it's not sustainable. I don't know the amount of the settlement that you expect in fourth quarter versus this quarter. It sounds like there's a bit more in fourth quarter that is coming. Do the fees kind of back off the run rate they're at now given, you know, that gain is kind of a Q3 and Q4 event?

Speaker #10: That that sounds fair. And then on the fee income side, Brian, I guess, is is there it sounds like there's an extra 2 million dollars in in the in the fees this quarter that I guess after next quarter, fourth quarter, it's not sustainable.

Speaker #10: Like I don't know. The amount of the settlement that you expect in Q4 versus this quarter, it sounds like there's a bit more in the fourth quarter that is coming.

Speaker #10: And then do the fees kind of back off the run rate they're at now, given that the gain is kind of a Q3 and Q4 event?

Speaker #7: Well, another income, there's about $5.7 million of what I'll call event income. And $1.75 million of that is from the lawsuit.

John Allison: There is about $5.7 million of kind of what I'll call event income. $1.75 million of that is from the lawsuit, and we'll have another round of gain from the lawsuit on that for next quarter.

Speaker #7: And so, we'll have another round of gain from the lawsuit on that for next quarter.

Speaker #10: Right. So for all else equal, the 1.75 doesn't recur after you know a beginning Q1 next year. You're going to have something more in the fourth quarter. It sounds like it's more than the amount this quarter.

[Analyst]: Right. All else equal, the $1.75 million doesn't recur after, you know, I'll say beginning Q1 next year. You're going to have something more in the fourth quarter. It sounds like it's more than the amount this quarter. After that, that line item specifically normalizes to zero?

Speaker #10: But after that, that kind of norm, that line item specifically, normalizes to zero.

Speaker #7: It could carry into the, you could have, you know, like, okay. Think we're going to get it all this time. Think we'll get it all.

John Allison: It could carry into that. You could have, you know, like.

[Analyst]: Got it.

John Allison: Okay. I think we're going to get it all this time.

Speaker #7: Okay. I didn't know if some of my layover in the first quarter, sir. That's

[Analyst]: I think you'll get it all. Okay. I didn't know if some of it might lead over into the first quarter.

Speaker #10: Okay.

Speaker #7: it.

Speaker #10: All right. Yeah. That's that And and and and Stephen, the the margin still has a little bit of a tailwind on you know from the from the sub debt.

John Allison: That's it.

[Analyst]: All right. That's that. Stephen, the margin still has a little bit of a tailwind from the sub debt, the full quarter benefit of the sub debt as you go into fourth quarter to just kind of start. Is that still correct?

Speaker #10: The full-quarter benefit of the sub debt as you go into the fourth quarter, you know, this kind of start. Is that still correct?

Speaker #7: Yeah, that's fair. Like I said, the timing of when we paid the happy $140 off was, you know, a third of the way to the quarter already.

Kevin Hester: Yeah, that's fair. Like I said, the timing of when we paid the Happy 140 off was, you know, a third of the way into the quarter already. Q4 will obviously be a full quarter's.

Speaker #7: So Q4 will obviously be a full quarter's.

Speaker #10: Yeah. So gotcha. Okay. Yeah. I think and maybe just the the only other the only other item was in terms of just the loan Kevin maybe talked about this.

[Analyst]: Yeah. Gotcha. Okay. I think, and maybe just the only other item was in terms of just the loan, Kevin maybe talked about this, just the loan pipeline. Maybe one for you, Stephen, just on the, it sounds like you talked about the origination activity in the quarter. I assume payoffs were pretty significant in the quarter. Maybe just comment where the payoffs were this quarter. It sounds like, just to confirm, Kevin, that the loan pipelines are still pretty healthy and primarily, I'm guessing, in Florida and Texas, but maybe if you just comment a little bit on that.

Speaker #10: Just the loan pipeline and maybe one for you, Stephen, just on the it sounds like you talked about the origination activity in the quarter.

Speaker #10: I assume payoffs were pretty significant in the quarter. Maybe just comment where the where the payoffs are where this quarter and then just it sounds like just to confirm, Kevin, that the loan pipelines are you know are still pretty healthy and primarily, I'm guessing in in in Florida and in Texas, but maybe if you just comment a little bit on that.

Speaker #11: Hey, Brian. This is Steven. I'll give you the numbers real quick and then let Kevin give you a color there. So, payoffs were between $750 million and $800 million for the quarter.

Kevin Hester: Hey, Brian, Steve, I'll give you the numbers real quick and then let Kevin give you the color there. Payoffs were between $750 million and $800 million for the quarter. Nothing necessarily out of line with where we've been running. The $1.3 billion that I mentioned on production was our origination volume, which, you know, generally about half of that or so is funded at quarter end because of some of the construction-type projects that we do. That's covered there on the payoffs, Kevin.

Speaker #11: So, nothing necessarily out of line with where we've been running. The $1.3 billion that I mentioned on production was our origination volume, which you know generally about half of that or so is funded at quarter-end because of some of the construction-type projects that we do.

Speaker #11: So that's covered there on the payoffs with Kevin.

Speaker #9: Yeah. Those payoffs were more heavily weighted towards the end of the quarter, so we had a little higher quarter that we were looking at than it actually ended up because of some stuff that, as Johnny said, moved into the fourth quarter and the payoffs that hit in the third quarter.

[Analyst]: Yeah, those payoffs were more heavily weighted towards the end of the quarter. We had a little higher quarter that we were looking at than it actually ended up because of some stuff that, as Johnny said, moved into fourth quarter and then the payoffs that hit in the third quarter. You'll see with us each quarter, it's a little bit different. You heard Chris's comments. His third quarter, their book was a little bit down. We got the growth from the community bank market. This quarter, it may, it probably will shape up the opposite. If the deal that he has closes next week, it's probably going to be flipped the other direction. The good news is we have different levers that get pulled at different times. Certainly, Florida and Texas are the markets where there's a lot more activity.

Speaker #9: You know, you'll see with us each quarter, it's a little bit different. You heard Chris's comments. His Q3, their book was a little bit down.

Speaker #9: We got the growth from the community bank market. This quarter, it may it probably will shape up the opposite. If his if the deal that he has closes next week, it's probably going to be you know flip the other direction.

Speaker #9: So the good news is we have different levers that get pulled at different times. Certainly, Florida and Texas are the markets where there's a lot more activity.

Speaker #9: And and we're plugged into some some good areas that that tend to see that. And and I think that's showing in the pipeline. So we'll we'll continue to play into that.

[Analyst]: We're plugged into some good areas that tend to see that. I think that's showing in the pipeline. We'll continue to play into that. Gotcha. The community bank pipelines or the markets, Kevin, Texas and Florida is still where there's maybe a bit more activity than elsewhere?

Speaker #10: Gotcha. And the community bank pipelines, or the markets, Kevin, Texas and Florida are still where there's maybe a bit more activity than elsewhere?

Speaker #9: Yeah. It's just where the that's where the activity is. I mean, you know Arkansas does does well, too. And they they're showing growth as well.

Kevin Hester: Yeah, it's just where the activity is. I mean, Arkansas does well too. They're showing growth as well. It's just there's just not as many opportunities as there are in the other two states.

Speaker #9: It's just that there are not as many opportunities as there are in the other two states.

Speaker #10: Yeah. Okay. And last one for me, Johnny, just on M&A is was just in in the past, you've talked about the opportunities that you may consider you know given that maybe they're a little bit you know not not quite the performance that you guys are up to just so you can you know kind of buy something and fix it or get their get the return on it.

[Analyst]: Okay. Last one for me, Johnny, just on M&A, in the past, you've talked about the opportunities that you may consider, given that maybe they're a little bit not quite the performance that you guys are up to, just so you can kind of buy something and fix it or get the return on it. Is that still kind of the opportunities you're looking at in terms of M&A? Kind of a, I don't want to call it a fixer-upper, but something that you can improve the profitability on. Is that relative to your profitability?

Speaker #10: Is that still kind of the opportunities you're looking at in terms of M&A? A kind of, I don't want to call it a fixer-upper, but you know, something that you can improve the profitability on?

Speaker #10: Is that relative to your profitability?

Speaker #7: Well, this AOCI problem is the only thing we have. It's a good management team, a good operation, or a good company.

John Allison: This is from an ALCI problem, is the only thing we have. It's a good management team, a good operation. They're a good company. I just think we give them the opportunity with our balance sheet to do some things they haven't been able to do. I think that's a big plus. It's not a, this one's not a, only from the fact we're sharing our balance sheet with them is to help them with their liquidity and their ALCIs. We'll clean that up. We'll fix that on day one. You'll see them coming out. I think you'll see them coming out pretty strong when we get our arms around it. It's not a broken company, only from the aspect they got in the ALC has 95% of all banks good throughout the country. That's not a, they all got that problem.

Speaker #7: So I think we give them the opportunity with our balance sheet to do some things they haven't been able to do.

Speaker #7: So I think that's a big plus. It's not a it's it's this one's not a a only only from the fact we're sharing our balance sheet with them is is to help them with their liquidity and their their AOCI.

Speaker #7: So we'll clean that up. We'll fix that on day one. You'll see them coming out. I think you'll see them coming out pretty strong when we get our arms around it.

Speaker #7: So it's not a broken company, with the only aspect being that they got in the AOC, as 95% of all banks did throughout the country.

Speaker #7: So that's not a... they all got that problem. So some people, as I said in my opening remarks, some people take their hit and move on down the road.

John Allison: Some people, as I said in my opening remarks, some people take their hit and move on down the road. Some people hope that rates come down. Everybody does different things. I said in my prepared remarks, you can hope with somebody that's got a strong capital like Home, and we got the ability to spread that over them and help them with their problem and fix it overnight. That's what we suspect to do, and that's what we'll probably do.

Speaker #7: Some people hope that rates come down. Everybody does different things. And when I said in my prepared remarks, you can hook with somebody that's got strong capital, like Home.

Speaker #7: And we got the ability to spread that over them and help them with their problem, fix it overnight. So that's what we suspect to do.

Speaker #7: And that's what we'll probably do.

Speaker #10: Gotcha. Okay. I appreciate the color and look forward to hearing from you guys in the future. Thanks.

[Analyst]: Gotcha. Okay. I appreciate the call, and I look forward to hearing from you guys in the future. Thanks.

Speaker #7: Okay. Thanks.

John Allison: Okay, thanks.

Speaker #8: Thank you. Our final question comes from Michael Rose with Raymond James. Please go ahead.

Operator: Thank you. Our final question comes from Michael Rose with Raymond James. Please go ahead.

Speaker #6: Hey, good afternoon, everyone. Thanks for taking my questions. Maybe just going back to to John's comments, and his question. You know As I as I think about you guys and and Johnny, I think you've mentioned this you know over the years.

Chris Poulton: Hey, good afternoon, everyone. Thanks for taking my questions. Maybe just going back to John's comments and his question. You know, as I think about you guys, and Johnny, I think you've mentioned this over the years, you know, you can't push a rope as it relates to loan growth. You have a lot of banks out there. They're actively trying to hire, you know, record numbers of, in some cases, record numbers of loan officers and producers. Maybe now is not the time to grow as spreads are going to be under, you know, kind of increasing pressure. You do see some softening of some of the economic data, at least we, you know, there's this public. Some

Speaker #6: You know, you can't push a rope as it relates to loan growth. You have a lot of banks out there that are actively trying to hire, you know, record numbers of, in some cases, record numbers of loan officers and producers.

Speaker #6: Maybe now is not the time to grow, as you know spreads are going to be under, you know, kind of increasing pressure.

Speaker #6: You do see some some softening of the of some of the economic data, at least we you know there's there's probably some

Speaker #1: Debate there, now you’ve got credit concerns creeping in. You know, is maybe now not the time to chase loan growth? And then, you know, just following up on that, one other thing that I think you guys haven't talked a lot about over the years is just hiring plans.

Operator: Debate there. Now you've got credit concerns creeping in. You know, is maybe now not the time to chase loan growth? One other thing that I think you guys haven't talked a lot about over the years is just hiring plans where a lot of other banks have. Maybe if you can just kind of address that more broadly, not so much from an expectation point of view, but really, is now the right time to actually want to accelerate loan growth here? Thanks.

Speaker #1: Where a lot of other banks have... maybe if you can just kind of address that more broadly, not so much from an expectation point of view, but really is now the right time to actually want to accelerate loan growth here?

Speaker #1: Thanks.

Speaker #2: Hey, Michael, this is Kevin. I'll take the last one first. So, I think Johnny mentioned on the last call that it's, you know, it’s not been our history to go out and look for—it's not been part of our real plan to go out and find teams of people and bring over lots of teams outside of a whole bank. Whole bank has been our M&A strategy for, you know, really our life.

Donna Townsell: Hey, Michael. This is Kevin. I'll take the last one first. I think Johnny mentioned on the last call that it's not been our history to go out and look for it. It's not been part of our real plan to go out and find teams of people and bring over lots of teams outside of a whole bank. Whole bank has been our M&A strategy for, you know, really our life. We've been through two long court cases that had, you know, that were part of that. It's kind of that same mentality. It's just not something that we've done a lot of. Would we do it in certain circumstances? Sure, we would. We'll do it the right way. It has to fit our culture. I think that's probably the bigger thing in all of this is our culture. What does our lending culture look like?

Speaker #2: And then we've been through two long court cases that had, you know, that were part of that same mentality. So it's just not something that we've done a lot of.

Speaker #2: Would we do it in certain circumstances? Sure, we would. We'll do it. We'll do it the right way, and it has to fit our culture.

Speaker #2: And I think that's probably the bigger, the bigger thing in all of this is our culture. What does our lending culture look like?

Speaker #2: And we have one, and we follow it pretty closely. To the degree that a group fits that, we'll bring them in. It's not our main strategy.

Donna Townsell: We have one, and we follow it pretty closely. To the degree that a group fits that, we'll bring them in. It's not our main strategy. Our strategy has been whole bank. It tends to be things that we can go in and fix because we do a pretty good job of that over the course of our lifetime. I think that's why you haven't seen that particular part from us. Is it the time to grow? We're in some pretty good markets that I think will withstand any weakness that comes into the market. I like our Texas and Florida markets for staying above that. We continue to follow our lending strategy and our policy. If it underwrites well and we like it, we like the people that we do business with, and it results in growth, we'll do that.

Speaker #2: Our strategy has been whole bank. It tends to be things that we can go in and fix because we do a pretty good job of that over the course of our lifetime.

Speaker #2: So, I think that's why you haven't seen that particular part from us. Is it the time to grow? We're in some pretty good markets that I think will withstand, you know, any weakness that comes into the market.

Speaker #2: I like our Texas and Florida markets for, you know, staying above that. So, we continue to follow our lending strategy and our policy, and if it underwrites well and we like it, we like the people that we do business with. If it results in growth, we'll do that.

Speaker #1: All right, great. That's all I had. Thanks for taking my questions.

Operator: All right. Great. That's all I had. Thanks for taking my questions.

Speaker #3: Yeah, thank you. Appreciate it.

Donna Townsell: Yeah, thank you. Appreciate it.

Speaker #4: Thank you. I can confirm that this does include the question and answer session. And I'd like to hand it back to Mr. Allison for some final closing comments.

John Allison: Thank you. I can confirm that does conclude the question and answer session. I'd like to hand it back to Mr. Allison for some final closing comments.

Speaker #5: Well, thank you. Thanks, everyone, for joining today. It's hard as this entire bunch worked for the last 90 days. It's not a good day to release earnings.

Donna Townsell: Thank you. Thanks, everyone, for joining today. As hard as this entire bunch worked for the last 90 days, it's not a good day to release earnings, you know, where the world, where people are beating up bank stocks. Home continues to perform, as you've seen, year after year, quarter after quarter, and we'll continue to do that. We'll continue to perform at a high level. Hopefully, with a new acquisition or two, they'll report, they'll come in, and shortly it won't be long, they'll get to that high level themselves and we'll be kicking out some additional income. I couldn't be more pleased. I'm not pleased with the stock price going down today. As I said, they throw the baby out with the bathwater.

Speaker #5: You know, where the world, where people are beating up bank stocks, but home, home continues to perform as you've seen year after year and quarter after quarter, and we'll continue to do that.

Speaker #5: We'll continue to perform at a high level, and hopefully with the new acquisition or two, they'll report. They'll come in and certainly won't be long before they'll get to that high level themselves, and we'll be kicking out some additional income.

Speaker #5: So, I'm, I couldn't be more pleased. I'm not pleased with the stock price going down today. As I said, they throw the baby out with the bathwater.

Speaker #5: When you report the best ROA in the nation, I would suspect we probably got it—one of the best. And your stock's off 3%, but as Stephen Scott has said, you're better than most people.

Donna Townsell: When you report the best ROA in the nation, I would suspect we probably got it, or one of the best, and your stock's off 3%. As Steve Scouten has said, he said you're better than most people. I guess we're one of the best of the worst today. I do appreciate everyone's support. Home will continue to do the right thing, month after month and quarter after quarter. We'll be standing when others may not. Thank you, everyone, for your support. We'll talk to you in 90 days. Donna, you got any comments wrapping up? Stephen, anybody got a? Brian? Kevin, anybody got a? You got a comment on the quarter?

Speaker #5: So, I guess we're, I guess we're one of the best of the worst today. So, anyway, I do appreciate everyone's support, and we will continue to do the right thing.

Speaker #5: Month after month and quarter after quarter, we'll be standing when others may not. So, anyway, thank you, everyone, for your support.

Speaker #5: We'll talk to you in 90 days. Donna, do you have any comments wrapping up? Stephen, does anyone have a comment? Brian? Kevin, do you have a comment on the quarter?

Speaker #6: No, great quarter. I mean, I think we've hit all the highlights, and we'll keep trying to do better. Yep.

Operator: No. Great quarter. I think we've hit all the highlights, and we'll keep trying to do better.

Donna Townsell: Yep. Donna, you got any comments? Brian?

Speaker #3: Donna, do you have any comments? Brian?

Speaker #7: No, I'm good.

Speaker #3: You're good? Kevin, you got anything else? All right, well, we...

Stephen Tipton: No, I'm good.

Donna Townsell: You're good? Nothing. Kevin, you got anything else?

Speaker #8: I'm good.

Speaker #3: Appreciate it. Thank you very much. We have an important meeting on Friday, and then we'll be back to work. Our people can rest all day Saturday and Sunday because on Monday, we have to go back to work.

Kevin Hester: I'm good.

Donna Townsell: All right. We appreciate it. Thank you very much. We've got an important meeting Friday, and then we'll be back to work. Our people can rest all day Saturday and Sunday because Monday we got to go back to work. Thanks.

Speaker #3: Thanks.

John Allison: Thank you all for attending the Home BancShares Inc. third quarter earnings call. Today's call has now concluded. Thank you all for your participation. You may now disconnect.