Q1 2026 Home BancShares Inc Earnings Call

April 16, 2026

Speaker #1: Greetings, ladies and gentlemen. Welcome to the HOME BANCSHARES INC first quarter 2026 earnings call. The purpose of this call is to discuss the information and data provided.

Operator: Greetings, ladies and gentlemen. Welcome to the Home BancShares, Inc. Q1 2026 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, 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 your touch-tone phone. If you decide you want to withdraw your question, please press star then two to remove yourself from the list. Company has asked me to remind everyone to refer to the cautionary notes regarding the forward-looking statements. You will find this note on page three of their Form 10-K filed with the SEC in February 2026. At this time, all participants are in listen-only mode, and this conference is being recorded.

Speaker #1: Quarterly earnings release issued after the market closed yesterday. The company presented will begin with prepared remarks, 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 your touchtone phone.

Speaker #1: 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 notes regarding the forward-looking statements. You'll find this note on page three of their Form 10-K filed with the SEC in February 2026.

Speaker #1: At this time, all participants are in listen-only mode, and this conference is being recorded. If you need operator assistance during the conference, please press star then zero.

Operator: It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations.

Speaker #1: It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations.

Operator: It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations.

Donna Townsell: Thank you. Good afternoon, and welcome to our Q1 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, Christopher Poulton, President of CCFG, and Scott Walter of Shore Premier Finance. Our Q1 sets a strong tone for 2026. Results demonstrate sound expense control, consistent operating performance, and attractive returns, including record-setting metrics of book value per share of $22.15, tangible book value per share of $14.87, which is a $1.72 per share increase year over year for a 13% increase, by the way. CET1 at 16.7%, leverage of 14.3%, and Tier 1 capital of 16.7%.

Speaker #2: Thank you. Good afternoon, and welcome to our first quarter conference call. With me for today's discussion are 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.

Speaker #2: Our first quarter sets a strong tone for 2026. Results demonstrate sound expense control, consistent operating performance, and attractive returns. Including record-setting metrics of book value per share of $22.15, and tangible book value per share of $14.87, which is a $1.72 per share increase year over year for a 13% increase, by the way.

Speaker #2: CET1 at 16.7%, leverage of 14.3%, and Tier 1 capital of 16.7%. In today's economic environment, that is a meaningful accomplishment. And our team is pleased to walk through the quarter's results with you.

Donna Townsell: In today's economic environment, that is a meaningful accomplishment, and our team is pleased to walk through the quarter's results with you. Our opening remarks today will be from our Chairman, John Allison.

Speaker #2: Our opening remarks today will be from our chairman, John Allison.

Speaker #3: Thank you and welcome to Home BancShares' first quarter 2026 earnings report to shareholders. Thank you for joining us today, and I think the headline and the quotes pretty much summarize the first quarter.

John Allison: Thank you, and welcome to Home BancShares' Q1 2026 earnings report to shareholders. Thank you for joining us today. I think the headline and the quotes pretty much summarize the first quarter. I want to thank our team for getting us off to a great start in 2026. For those of you who are not already Home BancShares shareholders, but are interested in a better understanding of Home, I think it's important that you look at the strength of the balance sheet. Couple that with the monthly, and quarterly consistent level of performance over the last several years, as primarily showcased by the last 9 quarters. The prior years reminded us of the highest interest rate cycle in the early 1980s, where then, almost all banks struggled because of poor balance sheet management.

Speaker #3: I want to thank our team for getting us off to a great start in '26. For those of you who are not already Home BancShares shareholders but are interested in a better understanding of Home, I think it's important that you look at the strength of the balance sheet.

Speaker #3: Couple that with the monthly and quarterly consistent level of performance over the last several years, as primarily showcased by the last five quarters. The prior years reminded us of the highest interest rate cycle in the early '80s, where then almost all banks struggled because of poor balance sheet management.

Speaker #3: And the same story has been even more visible today, i.e., a lack of liquidity by investing into long-term securities, trying to stretch for yield. I'm proud to say HOME didn't suffer those problems during that time and was reporting record earnings while others were struggling.

John Allison: The same story has been even more visible today, i.e., lack of liquidity by investing into long-term securities trying to stretch for yield. I'm proud to say Home didn't suffer those problems during that time and was reporting record earnings while others were struggling. S&P Global just ranked Home's performance for 2025 as number 2 of all banks in the US over $10 billion. We're honored by this elite ranking by one of the world's best and most respected experts. We were barely edged out for the number 1 position last year. Maybe we'll get it this year. We're happy to have completed the merger with our acquisition of Mountain Commerce and look forward to a successful combination. Due to the back-office computer upgrade that was already in progress before Mountain Commerce, we will not be able to start converting Mountain Commerce until November.

Speaker #3: S&P Global just ranked HOME's performance for 2025 as number two of all banks in the US over $10 billion. We're honored by this elite ranking by one of the world's best and most respected experts.

Speaker #3: We were barely edged out for the number one position last year; maybe we'll get it this year. We're happy to have completed the merger with our acquisition of Mountain Commerce and look forward to a successful combination.

Speaker #3: Due to the back office computer upgrade that was already in progress before Mountain Commerce, we will not be able to start converting Mountain Commerce until November.

Speaker #3: As a result, the maximum anticipated savings will not be realized until probably the end of '26. Once accomplished, we believe our new partners can soon begin helping us to continue the outstanding performance of Home BancShares that is known in the U.S. and worldwide.

John Allison: As a result, the maximum anticipated savings will not be realized until probably the end of 2026. Once accomplished, we believe our new partners can soon begin helping us to continue the outstanding performance of Home BancShares that is known in the US and worldwide. Home is proud of our reputation, always known as one of the strongest, safest, most conservative, and best performing banks in the world. We'll continue to try to make our shareholders proud and happy to be part of this outstanding company. We know who we work for, and that is our shareholders. If you loan money, we all know problems can and will arise from time to time that has to be worked through. We had a $110 million Texas credit that we decided to nonperform this quarter.

Speaker #3: HOME is proud of our reputation, always known as one of the strongest, safest, most conservative, and best-performing banks in the world. We'll continue to, and are happy to be part of, this outstanding company.

Speaker #3: We know who we work for, and that is our shareholders. If you loan money, we all know problems can and will arise from time to time that have to be worked through.

Speaker #3: We have a $110 million Texas credit that we decided to non-perform this quarter. This is the same credit we've been talking about for a year and a half, for two years.

John Allison: This is the same credit we've been talking about for a year and a half or two years. The credit remained current until this quarter. It has been one we've been monitoring intensely for about eight months. We've entered into a short-term forbearance agreement with multiple deadlines and requirements. We are advised by legal counsel not to discuss in depth. I can say we're either going to get paid off or we'll liquidate the existing collateral. We do not anticipate any additional loss, but if things were to result in some loss, Home's strength puts us in a position to deal with whatever comes. Because of the conservative balance sheet, we're carrying right at $300 million in loan loss reserves, one of the highest reserve percentages in the world.

Speaker #3: The credit remained current until this quarter. It has been one we've been monitoring intensely for about eight months. We've entered into a short-term forbearance agreement with multiple deadlines and requirements.

Speaker #3: We are advised by legal counsel not to discuss in depth. I can say we're either going to get paid off, or we'll liquidate the existing collateral.

Speaker #3: We do not anticipate any additional loss, but if things were to result in some loss, HOME's strength puts us in a position to deal with whatever comes.

Speaker #3: Because of the conservative balance sheet, we're carrying right at $300 million in loan loss reserves, one of the highest reserve percentages in the world.

Speaker #3: Couple that with the stronger couple of the strong reserves, with a consistent quarterly pre-tax, pre-provision net revenue of $100 to $150 to $160 million, and we're confident of our ability with whatever happens and do not expect this loan to have any major impact on earnings, if any at all.

John Allison: Couple the strong reserves with a consistent quarterly pre-tax, pre-provision net revenue of $100 to 150 to 160 million, and we're confident of our ability with whatever happens and do not expect this loan to have any major impact on earnings, if any, at all. It is our belief that there is more than sufficient assets and personal guarantees to properly resolve this issue. I'm pleased with the results comparing Q1 to Q1 last year. The first quarter only had 90 days. If we'd had the 2 extra days in the normal quarter, plus just a little touch of wind, I think I said last year we had the wind at our back 2 or 3 times. We had no wind this time. This quarter, we got zero wind, Brian. You always come up with wind. You didn't come up with any juice this time.

Speaker #3: It is our belief that there are more than sufficient assets and personal guarantees to properly resolve this issue. I'm pleased with the results comparing Q1 to Q1 last year.

Speaker #3: The first quarter only had 90 days, and we had two—if we'd had the two extra days in the normal quarter, plus just a little touch of wind—I think I said last year we had the wind at our back two or three times.

Speaker #3: We had no wind this time. This quarter, we got zero wind. Brian, you didn't—you always come up with wind. You didn't come up with any juice this time.

Speaker #4: Well, we did have that FDIC assessment, but we got a reduction.

Christopher Poulton: Well, we did have that FDIC assessment, but we got a reduction.

Brian Davis: Well, we did have that FDIC assessment, but we got a reduction.

Speaker #3: Okay. Well, we had to write off the balance to offset that, so that's evident in the non-interest income category being the lowest since December of '24.

John Allison: Okay. Well, we had to write off the balance then.

Christopher Poulton: Yeah.

Brian Davis: Yeah.

John Allison: That's evident in the non-interest income category being the lowest since December 2024. Maybe next quarter will be the best. On M&A, I want to congratulate the Trump administration and the Fed, along with the Arkansas State Bank Department, for the fast approval process. The speed of approval may possibly give time for another deal this year. We're certainly in the market and looking for another good fit. We continue to repurchase stock as the volatility of uncertain world, as with a war, kind of, that makes it uncertain, has provided opportunity for us to purchase more recently. That is, before we were in a blackout period. However, we did file our normal 10b5-1 for this time. If the volatility continues, we will be very active on the repurchase side.

Speaker #3: Maybe next quarter will be the best. On M&A, I want to congratulate the Trump administration and the Fed, along with the Arkansas State Bank Department, for the fast approval process.

Speaker #3: The speed of the approval may possibly give time for another deal this year. We're certainly in the market and looking for another good fit.

Speaker #3: We continue to repurchase stock as the volatility of an uncertain world, as with a war, kind of makes it uncertain. It provided opportunities for us to purchase more recently.

Speaker #3: That is before we were in a blackout period. However, we did file our normal 10(b)(5) for this time. If the volatility continues, we will be very active on the repurchase side.

Speaker #3: I think we have essentially bought back, if not all, of the shares issued in the Happy Bank transaction, and will endeavor to do the same for the Mountain Commerce Bank transaction.

John Allison: I think we have essentially bought back, if not all of the shares issued in the Happy State Bank transaction, and will endeavor to do the same for Mountain Commerce Bank transaction, particularly if volatility continues to create opportunities. The repurchases will take some time, but once MCB is converted on our system, the additional share reduction should have a positive impact on earnings. We're being very careful on the loan side because the uncertainty of the war, the consumers, business, asset class, and what this cycle may ultimately evolve into. The talking heads have all said rates are coming down, but we have cautioned that possibly they will go back up before they come down. Inflation is not dead. Let me say that again, inflation is not dead. As Jamie Dimon would say, that's the major cockroach in the mix.

Speaker #3: Particularly if volatility continues to create opportunities. The repurchases will take some time, but once MCB is converted on our system, the additional share reduction should have a positive impact on earnings.

Speaker #3: We're being very careful on the loan side because of the uncertainty of the war, the consumers, business, asset class, and what this cycle may ultimately evolve into.

Speaker #3: The talking heads have all said rates are coming down, but we have cautioned that it’s possible they will go back up before they come down.

Speaker #3: Inflation is not dead. We say that again: inflation is not dead. And as Jamie Dimon would say, that's the major cockroach in the mix.

Speaker #3: The question is, how high and how long do they remain high? It depends on how aggressive the Fed is going to be with the escalating interest rates to try to get a handle on inflation.

John Allison: The question is, how high and how long do they remain high? It depends on how aggressive the Fed is going to be with the escalating interest rates to try to get a handle on inflation. Remember the late 1970s and the early 1980s, 21%. It's not going to be that high, but it has to be corralled. Chris Polson, who runs our New York office, has a great sign. He said the year of the lender is followed by the year of the collector. I think our early Texas experience confirms some of Chris's statements. I think it's a time to be very careful. The normal structure of some asset classes that worked in the past may not work today. It is our job to watch and hopefully recognize in advance these loans that we think may be infected with, as Jamie Dimon would say, cockroaches.

Speaker #3: Remember the late '70s and the early '80s? 21%. It's not going to be that high, but it has to be correct. Chris Poulton, who runs our New York office, has a great saying.

Speaker #3: He said the year of the lender is followed by the year of the collector. I think our early Texas experience confirms some of Chris's statements.

Speaker #3: I think it's a time to be very careful. The normal structure of some asset classes that worked in the past may not work today.

Speaker #3: It is our job to watch and hopefully recognize in advance these loans that we think may be infected with,

Speaker #1: Jeremy Diamond would say cockroaches. You will hear from Chris Poulton today about his attitude on private credit and the changes made because of it.

John Allison: You will hear from Chris Polson today about his attitude on private credit and the changes made because of it. His call on private credit was outstanding. The good news, market pricing on acquisition deals are more in line with the correct value and slowed the insane dilution, at least for a while. One of the CEOs that did a fairly flagrant delusionary, I use the term here, maybe it's a Johnny word, actually, the trade was so silly. He did a trade some time back, came up to me at a bank conference and said, "I'm here to get my butt chewed out," and I proceeded to do just that.

Speaker #1: His call on private credit was outstanding. The good news is market pricing on acquisition deals is more in line with the correct value and has slowed the insane dilution, at least for a while.

Speaker #1: One of the CEOs that did a fairly flagrant . I use the term here . Maybe it's a Johnny word delusionary . It may have been delusionary Actually , the trade was so silly to .

Speaker #1: He did a trade sometime back . Came up to me at a at a bank conference and said , I To long term loyal shareholders and agreed that dilution is not the friend of a shareholder .

John Allison: I gave him a hug, and we discussed the pros and cons, and the impact, and the damage done to long-term loyal shareholders, and agreed that dilution is not the friend of a shareholder. Enough said. With all the attention that dilutive transactions are getting, maybe the publicity and management embarrassment has slowed the shareholder damage. At least I certainly hope so. I hope it's finally the start of a sea change that forces management to do the right thing for the shareholders. Donna, great quarter. I'm pleased with the strong continuation of Home's earnings. Again, I'm going to hand it back to you. Let's go, since I teed up Chris, if you don't mind, let's go to Chris first, let him comment and carry forward. We'll go to Steven, Kevin, and Brian, and back to you to wrap up.

Speaker #1: Nuff said. With all the attention that diluted transactions are getting, maybe the publicity and management embarrassment has slowed the shareholder damage. At least, I certainly hope so.

Speaker #1: I hope it's finally the start of a sea change that forces management to do the right thing for the shareholders, Donna. Great quarter—I'm pleased with the strong continuation of Home's earnings.

Speaker #1: And again , I'm going to hand it back to you . And let's go . Since I teed up Chris , if you don't mind .

Speaker #1: Let's go to Chris first and let him comment and carry forward. And then we'll go to Steven and Kevin and Brian, and back to you to wrap up.

Speaker #2: Okay. Sounds good. Thank you, Johnny. So up next, we have a report on CSFG from Chris Fulton.

Donna Townsell: Okay, sounds good. Thank you, Johnny. Up next, we have a report on CCFG from Chris Polson.

Speaker #3: All right. Thank you. Donna, today I'll provide a brief update on PCFG's first quarter, and then As we'll share some perspectives on the credit market.

Christopher Poulton: All right. Thank you, Donna. Today, I'll provide a brief update on CCFG's first quarter, and then as Johnny said, we'll share some perspectives on the private credit market. During Q1, we grew the portfolio to approximately $2.1 billion. This represents a roughly $60 million increase, supported by $370 million in new loan production. Loan production remains steady, and this number's in line with prior year levels. Payoffs for the quarter total just under $200 million, which is also consistent with historical averages. We do expect slightly higher payoffs in Q2, though I do think our pipeline should allow us to replace those balances either this quarter or the next. Over the past several years, I've discussed declining balances in our corporate lending portfolio. This is an appropriate time maybe to provide some additional context, and particularly in light of recent news around private credit.

Speaker #3: During Q1, we grew the portfolio to approximately $2.1 billion. This represents roughly a $60 million increase, supported by $370 million in new loan production.

Speaker #3: Loan productions remain steady, and this number is in line with prior year levels. Payoffs for the quarter totaled just under $200 million, which is also consistent with historical averages.

Speaker #3: We do expect slightly higher payoffs in Q2, though I do think our pipeline should allow us to replace those balances either this quarter or the next. Over the past several years, I've discussed declining balances in our corporate lending portfolio.

Speaker #3: This is an appropriate time, maybe, to provide some additional context, and particularly in light of recent news around private credit. CFG has long participated in the private corporate credit market.

Christopher Poulton: CCFG has long participated in the private corporate credit market. Our exposure has varied over time, but we've maintained a consistent presence and have long-term experience in the space. Our private credit balances peaked at just under $500 million at the end of 2022, and today outstanding of $87 million. That's a reduction of over 80% in the past three years. Why do we make the choice to reduce our private credit exposure? Well, beginning in 2023, we observed several trends that influenced this decision. First, we saw new bank entrants. As some banks looked to reduce their reliance on commercial real estate, many chose to lend into the growing private credit space through participations in structured facilities. This led to broad yield compression across the private credit markets, and as often happens, some loosening of credit structures and underwriting standards.

Speaker #3: Our exposure has varied over time , but we've maintained a consistent presence and have long term experience in this space . Our private credit balances peaked at just under $500 million at the end of 2022 , and today , Outstandings are $87 million .

Speaker #3: That's a reduction of over 80% in the past three years. So, why did we make the choice to reduce our private credit exposure?

Speaker #3: Well, beginning in 2023, we saw several trends that influenced this decision. First, we saw new bank entrance as some banks look to reduce their reliance on commercial real estate. Many chose to lend into the growing private credit space through participation in structured facilities.

Speaker #3: This led to broad yield compression across the private credit markets and , as often happens , some loosening of credit structures and underwriting standards At the same time , we saw significant equity inflows from individual investors or retail investors into these sponsored vehicles .

Christopher Poulton: At the same time, we saw significant equity inflows from individual investors or retail investors into these sponsored vehicles. We've seen this movie a few times before, and we haven't always enjoyed the ending. We have historically maintained an intentional focus on the shorter duration positions, typically under three years, and as a result, we were able to actively exit credit facilities as they reached the end of their reinvestment period. In total, we exited eight corporate lending facilities through repayment during this time. Our remaining exposure is limited to a few facilities, primarily within double-A-rated structures. Our attachment points, approximately 58% of par value of the underlying loans, which provides 40% sponsor equity support beneath our senior position.

Speaker #3: We've seen this movie a few times before , and we haven't always enjoyed the ending . We've maintained a we have historically maintained an intentional focus on the shorter duration positions .

Speaker #3: Typically under three years. And as a result, we were able to actively exit credit facilities as they reached the end of their reinvestment period.

Speaker #3: In total , we exited eight corporate lending facilities through repayment . During this time . Our remaining exposure is limited to a few facilities , primarily within double A rated structures .

Speaker #3: Our attachment point is approximately 58% of par value of the underlying loans, which provides 40% sponsor equity support beneath our senior position. While market dislocation often creates opportunity.

Christopher Poulton: While market dislocation often creates opportunity, we believe it's still early in the cycle, and as a result, we are remaining cautious and at present are biased towards further reductions while continuing to monitor this closely. With that, Donna, I'll turn it back to you.

Speaker #3: We believe it's still early in the cycle, and as a result, we're remaining cautious. At present, we are biased towards further reductions while continuing to monitor this closely.

Speaker #3: With that, I'll turn it back to you.

Speaker #1: Thank you. Great call, Chris.

Donna Townsell: Thank you.

Kevin Hester: That was a great call, Chris.

Speaker #2: Yeah. Thank you for keeping your eye on the ball with private credit, Chris. Next, we will hear a few words from Steven Tipton.

Donna Townsell: Yeah, thank you for keeping your eye on the ball with private credit, Chris. Next, we will hear a few words from Stephen Tipton.

Speaker #1: Thanks , Donna . Chris . We appreciate your approach and discipline over the last 11 years with us . As Jonny mentioned , the first quarter of 2026 was a good start to the year with 118.2 million in net income , a 2.09% return on assets and 16.56% return on tangible common equity Q1 earnings were in line with the prior quarter , despite two fewer days , and were up $3 million , or 2.6% , from the first quarter of 2025 .

Stephen Tipton: Thanks, Donna. Chris, we appreciate your approach and discipline over the last 11 years with us. As Johnny mentioned, Q1 2026 was a good start to the year with $118.2 million in net income, a 2.09% return on assets, and 16.56% return on tangible common equity. Q1 earnings were in line with the prior quarter, despite two fewer days, and were up $3 million or 2.6% from Q1 2025. The reported net interest margin was 4.51%, down 10 basis points from Q4, as there was zero event income in Q1, and up seven basis points from the same period a year ago. The core margin, having no event income, was 4.51% versus 4.56% in Q4. The overall loan yield declined by 15 basis points to 7.08%, while interest-bearing deposit costs declined by 12 basis points to 2.35%.

Speaker #1: The reported net interest margin was 4.51%, down ten basis points from Q4, as there was zero event income in Q1, and up seven basis points from the same period a year ago.

Speaker #1: The core margin having no event income , was 4.51% versus 4.56% in Q4 . The overall loan yield declined by 15 basis points to 7.08% , while the while interest bearing deposit costs declined by 12 basis points to 2.35% .

Speaker #1: Total deposit costs were 1.83% in Q1 and exited the quarter at 1.82%. Deposit balances increased $258 million, driven by all of our Florida regions. I would expect some headwinds in Q2 from tax payments, but we're pleased to start the year strong.

Stephen Tipton: Total deposit costs were 1.83% in Q1 and exited the quarter at 1.82%. Deposit balances increased to $258 million, driven by all of our Florida regions. I would expect some headwinds in Q2 from tax payments, but we're pleased to start the year strong. A highlight from the quarter was that non-interest-bearing balances grew by $126 million to almost $4 billion, and now account for 22.5% of total deposits. As we typically see in Q1, loan production softened coming off of a very strong Q4. We had total loan production of $917 million, with over half of that coming from the community bank footprint. Switching to capital, we repurchased 507,000 shares of stock during the quarter for a total of $13.9 million. As Johnny said, we will continue to be active with our share repurchase plan.

Speaker #1: A highlight from the quarter was that non-interest bearing balances grew by $126 million to almost $4 billion and now account for 22.5% of total deposits.

Speaker #1: As we typically see in Q1 . Loan production . Loan production softened coming off of a very strong fourth quarter . We had total loan production of $917 million with over half of that coming from the community bank footprint Switching to capital , we repurchased 507,000 shares of stock during the quarter for a total of $13.9 million .

Speaker #1: And as Johnny said, we will continue to be active with our share repurchase plan. Capital levels continue to build with common equity tier one capital ending at 16.7%, and total risk-based capital at 19.5%.

Stephen Tipton: Capital levels continue to build with Common Equity Tier 1 capital ending at 16.7% and total risk-based capital at 19.5%. Lastly, we're thrilled to have the Mountain Commerce employees, customers, and shareholders on board and look forward to growing the Tennessee franchise for Home. With that said, I'll turn it back over to you, Donna.

Speaker #1: Lastly, we're thrilled to have the Mountain Commerce employees, customers, and shareholders on board and look forward to growing the Tennessee franchise for Home.

Speaker #1: With that said, I'll turn it back over to you, Donna.

Speaker #2: Thank you, Steven. And to close out our prepared remarks, Kevin Hester has a lending report.

Donna Townsell: Thank you, Stephen. To close out our prepared remarks, Kevin Hester has the lending report.

Speaker #1: Thanks, Donna. Given our strong showing in 2025, it can be easy to look at this as boring. I think that shows the high bar that we've set for ourselves, because any quarter that posts a return on assets of 2.09%, maintains solid asset quality, and is an earnings beat over the same quarter a year ago is not an easy task and should be inspiring.

Kevin Hester: Thanks, Donna. Given our strong showing in 2025, it can be easy to look at this quarter as boring. I think that shows the high bar that we've set for ourselves because any quarter that posts a return on assets of 2.09%, maintains solid asset quality, and is an earnings beat over the same quarter a year ago is not an easy task and should be inspiring. As I anticipated last quarter, ending loan balances dropped by a little over $50 million, but it happened very late in the quarter, which resulted in average loan balances actually being up $174 million on a linked quarter basis. I see this downward trend continuing in the legacy bank into Q2 because Q2 and Q3 projected payoffs are very high. The MCB acquisition will, however, add over $1.4 billion in loans to the balance sheet.

Speaker #1: As I anticipated last quarter ending ending loan balances dropped by a little over $50 million . But it happened very late in the quarter , which resulted in average loan balances actually being up $174 million on a linked quarter basis I see this downward trend continuing in the legacy bank into the second quarter , because Q2 and Q3 projected payoffs are very high .

Speaker #1: The MCB acquisition will , however , add over 1.4 billion in loans to the balance sheet Based on my meetings with their lenders , I expect them to settle into our credit culture quickly and be accretive to loan production in short order Johnny mentioned the non-accrual of the Texas C , and I credit that we've been wrestling with since 2024 , and this increased nonaccrual balance is significantly , but we have made recent progress with the executed forbearance agreement , which leads us to a couple of ways to exit this credit .

Kevin Hester: Based on my meetings with their lenders, I expect them to settle into our credit culture quickly and be accretive to loan production in short order. Johnny mentioned the non-accrual of the Texas C&I credit that we've been wrestling with since 2024, and this increased non-accrual balances significantly. We have made recent progress with the executed forbearance agreement, which leaves us to a couple of ways to exit this credit during the next quarter or two. We are continuing to work with a small same set of issues that we've been dealing with for a while now. We took our medicine in Q4 2024, but maximizing the exit sometimes takes more time and effort than you would like. It's wonderful to have the level of capital and reserves that we have, which allows you to work to maximize recovery on this limited set of problems.

Speaker #1: During the next quarter or two, we are continuing to work with the same small set of issues that we've been dealing with for a while now.

Speaker #1: We took our medicine in four Q 24 , but maximizing the exit sometimes takes more time and effort than you would like It's wonderful to have the level of capital and reserves that we have , which allows you to work to maximize the recovery on this limited set of problems To that end , criticized assets were flat on a linked quarter basis and early stage past dues were below 50 basis points .

Kevin Hester: To that end, criticized assets were flat on a linked-quarter basis, and early-stage past dues were below 50 basis points. Even with the large increase, the reserve coverage of non-performing loans is still over 160%. As a point of reference, our loan loss reserve would cover 15 years of our historical charge-offs if you use the last five years of average charge-offs as a base. That base includes the large Q4 2024 Texas cleanup quarter. There's nothing wrong with a workman-like quarter where you meet expectations. I expect that a majority of banks would trade results with us. On that note, Donna, I'll send it back to you.

Speaker #1: Even with the large increase , the reserve coverage of nonperforming loans is still over 160% . As a point of reference , our loan loss reserve would cover 15 years of our historical charge offs .

Speaker #1: If you use the last five years of average charge-offs as a base, and that base includes the large Q4 '24 Texas Cleanup quarter, there's nothing wrong with the workmanlike quarter where you meet expectations.

Speaker #1: I expect that a majority of banks would trade results with us. On that note, Donna, I'll send it back to you.

Speaker #2: I think you're right, Kevin. Thank you for that report. Before we go to Q&A, does anyone have any additional comments?

Donna Townsell: I think you're right, Kevin. Thank you for that report. Before we go to Q&A, does anyone have any additional comments?

Speaker #1: I thought , you know , we we think about deposits . We had a good deposit growth . And then tax time comes up and I think I said the same thing last year .

John Allison: I thought we think about deposits. We had good deposit growth, and then tax time coming up, and I think I said the same thing last year. It's good to have real customers.

Speaker #1: It's good to have real customers . That's right . And we do have real customers , as evidenced by the tax checks . We're single out right now .

Kevin Hester: That's right.

John Allison: We do have real customers, as evidenced by the tax checks we're seeing go out right now.

Speaker #1: That's right . But I mean that's good and bad right . But they are our customers . They're not transactions . They are relationships .

Kevin Hester: That's right.

John Allison: That's good and bad, right? They are our customers. They're not transacting. They are relationships. I'm proud of that. We'll take a little up and down during this, Kevin. Stephen, you agree with that?

Speaker #1: So I'm proud of that . We'll take a little up and down during this Kevin . I mean , Steven , do you agree with that ?

Speaker #1: I agree 100% . I'm pretty pleased overall . Brian , you got any comments on the quarter ? I agree with you . I'm pleased with the quarter .

Stephen Tipton: I agree 100%.

John Allison: I'm pretty pleased, overall. Brian, you got any comments on the quarter?

Brian Davis: I agree with you. I'm pleased with the quarter, and there's not really any noise to it, so it's just kind of good core earnings.

Speaker #1: And there's not really any noise to it . So it's just kind of good core earnings . That's really it . We just kind of rolled on from from what we've been doing .

John Allison: That's really it. We just kind of rolled on from what we've been doing. I think we've said in the past, we need more assets, and that's what Mountain Commerce has done for us, and we've been consistent. Our earnings have been consistent quarter after quarter through this process. We do need more assets, right? We'll get this under wraps, and Steven and Bill will get the savings out of Mountain Commerce, and we'll see that come to the bottom line, and maybe we'll have another deal before then. Donna, I'm going to let you have it. By the way, y'all need to know that Donna takes the pen away from me and gives me a rubber ball to speak with, so that way I don't make any noise. She stole my pen and gave me a rubber ball.

Speaker #1: I think we've said in the past we need more assets. And that's what Mountain Commerce has done for us. And we've been consistent.

Speaker #1: Our earnings been consistent quarter after quarter through this process . And and we do need more assets . Right . So we'll get get this under wraps and Steven and Bill will get the savings out of mountain commerce .

Speaker #1: And we'll see that come to the bottom line . And maybe we'll have another deal before then . So Donna , I , I want to let you have it .

Speaker #1: I didn’t, by the way. Y’all need to know, Donna takes a pen away from me and gives me a rubber ball to speak with.

Speaker #1: So that way I don't make any noise. So she stole my pen and gave me a rubber ball. So thanks, Donna, for looking out for me.

John Allison: Thanks, Donna, for looking out for me.

Speaker #2: My pleasure . And with that , I think we'll go to live . Q and A

Donna Townsell: My pleasure. With that, I think we'll go to live Q&A.

Kevin Hester: Bye.

Speaker #4: Thank you . If you would like to ask a question , please press star followed by one on your telephone keypad . If you would like to withdraw your question , please press star followed by two .

Operator: First question comes from Stephen Scouten with Piper Sandler. Your line is open. Please go ahead.

Speaker #4: When preparing to ask your question, please ensure your device is unmuted locally. First question comes from Stephen Scouten with Piper Sandler.

Operator: First question comes from Stephen Scouten with Piper Sandler. Your line is open. Please go ahead.

Speaker #4: Your line is open. Please go ahead.

Speaker #5: Hey , good afternoon everyone . Appreciate the time . I guess Johnny , maybe if you can talk a little bit more about how how the progress is going to acquire even more assets on top of mountain commerce .

Stephen Scouten: Hey, good afternoon, everyone. Appreciate the time. I guess, John, maybe, if you can talk a little bit more about how the process is going to acquire even more assets on top of Mountain Commerce. Like you said, your returns are phenomenal, so it just feels like you need to be able to multiply that on a larger balance sheet. What have conversations been like and how aggressive would you be? Kind of within that, would you ever think about loosening, and this might be a crazy question for you, loosening the triple accretive mantra to get a deal done?

Speaker #5: I mean , like you said , that your returns are phenomenal . So it just feels like you need to be able to multiply that on a larger balance sheet .

Speaker #5: So, what have conversations been like and how aggressive would you be? And, kind of within that, would you ever think about loosening—this might be a crazy question for you.

Speaker #5: Loosening the triple accretive mantra to get a deal done.

Speaker #1: Well , I , I think thanks . We we hold pretty tight to our philosophy around here . You know , that my fear is my fear is they'll say , well , he lied , you know , he lied .

John Allison: Well, I think we hold pretty tight to our philosophy around here. My fear is, they'll say, "Well, he lied. He lied." I can hear the market saying, "Oh, he lied. He broke it. He diluted a deal." I just don't believe it. I'm the largest individual shareholder, and I'm not interested in diluting myself. I think I hurt our shareholders when we do. You know my philosophy on that. We stretch as much as we can on a trade, but people have joined this company because we don't dilute, and if I diluted now, I think it would be kind of in. As I'm getting older in my career, I think people say, "Well, he got weak, gave up." I haven't as of yet, and I think it's known when we tell it, when we're talking to another prospective seller, we say, "We don't dilute.

Speaker #1: I can hear , I can hear the the market saying , oh , he lied now he he broke , he broke it .

Speaker #1: He, he, he diluted the deal. So I just don't believe it. You know, I'm the largest individual shareholder, and I'm not interested in diluting myself.

Speaker #1: So I , I , I think I hurt our shareholders when we do , you know , my philosophy on that . You know , we , we stretch as much as we can on a trade .

Speaker #1: But , you know , people have joined this company because we don't dilute . And if I dilute it now , I , I think it would be kind of in , in as I'm getting older in my career , I think people say , well , you got weeks .

Speaker #1: He got week and gave up . You know , so but I , I , I haven't as of yet and I think it's known when we tell it , when we're talking to another perspective seller , we say we don't dilute , we need , you need to understand we're not going to be your highest price .

John Allison: You need to understand, we're not going to be your highest price." If you're going to sell the stock tomorrow, it doesn't matter. Just you do a deal, and the buyer dilutes the hell out of himself. If you sell the stock tomorrow, it doesn't matter. Just get out and get going. If you're going to ride with him for a while, it makes lots of sense not to dilute the deal. If you want to hold the stock and keep it for a period of time, I think our buyers appreciate the fact over the years that we haven't diluted. I know there's another deal out there right now they're bidding up on, but I'm not going to bid up on it. We'll bid it to the maximum we can bid it, and then if we don't get it, we don't get it.

Speaker #1: But if you're going to sell a stock tomorrow, it doesn't matter. You just do a deal, and the buyer dilutes the hell out of himself.

Speaker #1: If you sell a stock tomorrow , it doesn't matter . Just get out and get going . But if you're going to be , you're going to ride with him for a while .

Speaker #1: It makes a lot of sense not to do it until the deal. So do you want to hold the stock and keep it for a period of time?

Speaker #1: I think I think I think our buyers appreciate the fact over the years that we haven't diluted . So I know there's another deal out there right now that they're they're bidding up on .

Speaker #1: And and but I'm not going to bid up on it . You know , we'll bid it to the maximum we can bid it and then we'll , if we don't get it , we don't get it , you know , depends on a lot of them .

John Allison: A lot of it depends on the seller, what the seller wants to do. They want to stay, they want to be part of it, or they want to go to the house. I think that if they want to go to the house, just get the biggest, best price and sell the stock tomorrow and get going. Otherwise, I think if you want to be in it for a period of time, you need to have a good partner that's not going to dilute you. I know I rambled a little bit, Stephen, but anyway.

Speaker #1: It depends on the , the seller . What the seller wants to do . They want to stay and they want to be part of it , or they want to go to the house .

Speaker #1: So I think that that that they want to go to the House just to get the biggest , best price and sell the stock tomorrow , get going .

Speaker #1: Otherwise, I think you want to be in it for a period of time. You need to have a good partner that's not going to dilute you.

Speaker #1: I know I rambled a little bit, Stephen, but anyway.

Speaker #5: No , that's helpful . That's helpful . And just in terms of the pipeline , it does , it does . And in terms of the pipeline of conversations , what does that mean ?

Stephen Scouten: No, that's helpful.

John Allison: That answers it.

Stephen Scouten: That's helpful. It does. In terms of the pipeline of conversations, what is that? We haven't seen as many deals here in the first part of the year get announced. Are sellers just kind of not interested because the environment's pretty good, or is it just in the volatility in the stocks? What are you kind of seeing in terms of conversations?

Speaker #5: We haven't seen as many deals here in the first part of the deal get announced. I mean, are sellers just kind of not interested because the environment is pretty good?

Speaker #5: Or has it just been the volatility in the stocks? What are you seeing in terms of conversations?

Speaker #1: Well there's conversations going on . I mean , not only with us , but there's other conversations going on . And and bankers have have called us and said , hey , what about this ?

John Allison: Well, there's conversations going on. Not only with us, but there's other conversations going on, and bankers have called us and said, "Hey, what about this and what about that?" I said, "Well, we're not ready right now.

Speaker #1: And what about that? And I said, well, we're not ready right now. Let us get Mountain Commerce, kind of get our arms around it.

John Allison: Let's get Mountain Commerce, kind of get our arms around it, and then we'll be ready to go. We're having conversations. At a bank conference recently, we ran into a couple people, and I said, "We ought to talk sometime," and they followed up since then. Just a conversation in a bar. I said, "Yeah." Don and I were sitting at one of them. I said, "We ought to visit sometime." That brought about a banker into the deal to talk to us about these two possible options. I think the conversation is going on. I actually think that the people are embarrassed to dilute the hell out of the shareholders right now. I think they're embarrassed because they've all been called down for the dilution, and we see what's happened to the market prices of these bank stocks.

Speaker #1: And , and then we'll be ready to go . But we're having conversations . I mean , the bank conference recently , we ran into a couple people and I said , we ought to talk sometime .

Speaker #1: And they followed up . Since then , you know , just the conversation in a bar . I see we have a visit down our sitting at one deal .

Speaker #1: And I said , well , visit sometime . And that that brought about a banker into the deal to talk to us about these two , two possible options .

Speaker #1: So, I think the conversation is going on. I actually think that people are embarrassed to dilute the hell out of the shareholders right now.

Speaker #1: I think they're embarrassed because they they've all been called down for for the dilution . And we see what's happened to the market prices of this these bank stocks .

Speaker #1: I mean, we went from 22.5 times projected earnings to 11 times earnings. Right. Or ten and a half times earnings.

John Allison: We went from 22.5x projected earnings to 11x earnings. 10.5x earnings. Where'd the money go in the bank stock? My contention is we ran all the good investors out, because we just beat them up, dilute. I want to get back to the old days where we're 21.5x earnings, and everybody was happy, got on a white horse, and everybody made lots of money. Anyway, it's just a different world now, and I think it's directly a result of the dilution.

Speaker #1: So, you know, where did the money go in the bank stock? We just—we ran out. My contention is, we ran all the good investors out.

Speaker #1: But we just beat them up and dilute the loop-de-loop. So I want to get back to the old days where we're 21.5 times earnings.

Speaker #1: And everybody was happy. Got on the white horse and everybody made lots of money. So anyway, it's just a different world now.

Speaker #1: And I think it's a direct result of the dilution.

Speaker #5: Yeah . Thanks . No . Yeah . Valuations are crazy . We got to start calling you home . Bank . AI or something like that .

Stephen Scouten: Yeah, makes sense. No. Yeah, valuations are crazy. We got to start calling you homebankai.com or something like that. One other question I have is around loan yields. There was a pretty big move in the loan yields this quarter. I don't know if you could give some color on how much of that was kind of core decline in loan yields or where the new loan yields are coming on at versus maybe how much of the NPA affected those reported loan yields quarter over quarter.

Speaker #5: I guess one other question . I have is around is around loan yields . There was like a pretty big move in the loan yields this quarter .

Speaker #5: I don't know if you could give some color on how much of that was kind of core decline in loan yields or where the new loan yields are coming on at versus maybe how much of the NBA affected those reported loan yields quarter over quarter.

Speaker #6: Hey , Stephen , this is Steven . Yeah . So first on the impact from the Non-accrual , we don't have any of that in our in our margin for the quarter .

Stephen Tipton: Hey, Stephen, this is Stephen. Yeah. First, on the impact from the non-accrual, we don't have any of that in our margin for the quarter. Had we had it on the books, the impact was about 5 basis points to the loan yield, and it was about 4 basis points to NIM. The 451 that we reported, had it been on the books and on accrual, we would've been 455 versus 456. A little color there. Some of the other decline in loan yield's really just a function of variable rate resets from the Fed moves last year that occurred January 1 and other certain frequencies. If you normalize for the non-accrual, we would've been down 10 or 11 basis points and kind of matched what occurred on the deposit side.

Speaker #6: Had we had it on the books, the impact was about five basis points to the loan yield. And it was about four basis points to NIM.

Speaker #6: So yeah , the 451 that we reported , you know , had it been on the books and on on non-accrual or on accrual , it would have been we would have been 455 versus 456 .

Speaker #6: So a little color there , you know , some some of the other decline in loan yields really just the function of , you know , variable rate resets from from the fed moves last year that that occurred , you know , January 1st .

Speaker #6: And other certain frequencies . So , you know , we would have been if you normalize for the for the non-accrual , we would have been down 10 or 11 basis points and kind of matched what , what occurred on the deposit side , production yields , I think we averaged seven and a quarter , seven , 25 for for the first quarter of this year .

Stephen Tipton: Production yields, I think we averaged 7.25, 7.25% for Q1 of this year. I think we're right at 6.99% or 7% in the community bank footprint. North of prime and getting our fair share.

Speaker #6: I think we were right at 6.99 or 7% in the community bank footprint . So , you know , north of Prime and , and getting our fair share

Speaker #5: Great. Appreciate all the color, everyone. Thanks for the time.

Stephen Scouten: Great. Appreciate all the color, everyone. Thanks for the time.

Speaker #6: Thanks , Steve .

Stephen Tipton: Thanks, Steve.

Speaker #1: Thanks, Stephen. Appreciate you.

Stephen Tipton: Thanks, Stephen. Appreciate you.

Speaker #4: We now turn to Dave Rochester with Compass Point. Your line is open. Please go ahead.

Operator: We now turn to Dave Rochester with Cantor Fitzgerald. Your line is open. Please go ahead.

Speaker #7: Hey . Good afternoon guys . I just wanted to talk about the loan trend real quick . It sounded like you mentioned pay activity being a little bit elevated , possibly in two .

Dave Rochester: Hey, good afternoon, guys.

Kevin Hester: Good afternoon.

Dave Rochester: I just wanted to talk about the loan trend real quick. It sounded like you mentioned paydown activity being a little bit elevated, possibly in Q2 and Q3. Was just wondering how you guys are thinking about the organic loan trend. I know you got the deal closed this quarter, so that'll bump things up a bit. I'm just trying to understand the underlying organic trend there. What part of the book are you seeing those paydowns in? Is it kind of more of the same? Is it anything new? Is there any difference across the different geographic regions that you have? Thanks.

Speaker #7: Q and three . Q was just wondering how you guys are thinking about the the organic loan trend . I know you got the the deal closed this quarter , so that'll bump things up a bit .

Speaker #7: I'm just trying to understand the the underlying organic trend there . And , and then what part of the book are you seeing those those paydowns in ?

Speaker #7: Is it kind of more of the same? Is there anything new, and is there any difference across the different geographic regions, regions that you have?

Speaker #7: Thanks .

Speaker #6: Hey , Dave , it's Kevin . I'll I'll answer that . It's going to be a little bit of a long answer because I'm going to give you some color on how we did the pipeline process .

Kevin Hester: Hey, Dave, this is Kevin. I'll answer that. It's going to be a little bit of a long answer because I'm going to give you some color on how we do-

Dave Rochester: That's great.

Kevin Hester: the pipeline process. Our pipeline process is probably we have more visibility into the payoffs than we do the new loans that are coming on. We know because of CCFG's portfolio being a 2- to 3-year turn, and a lot of what we're doing on the large side is construction deals, and we know when those are finishing. We probably have a 4- to 6-month lead time on a payoff, where we might have 30 to 45 days to put it on a pipeline for a new credit, because we don't put new credits on the pipeline until they're fully approved. For Chris' group, CCFG, they may close it in 15, no longer than 30 days. In the community bank footprint, might take 45, but it's probably closer to 30. I would say our pipeline process is more highly skewed towards knowing our payoffs.

Speaker #6: Our pipeline process is probably more we have more visibility into the payoffs than we do the new loans that are coming on . We know because of Cfg's portfolio being , you know , a 2 to 3 year turn and a lot of what we're doing on the large side is construction deals .

Speaker #6: And we know when those are finishing. So we probably have a four to six month lead time on a payoff, where we might have 30 to 45 days to put it on a pipeline for a new credit, because we don't put new credits on the pipeline until they're fully approved.

Speaker #6: And for Chris's Group CFG , they may close it in 15 , no longer than 30 days . And in the community bank footprint might take 45 , it's probably closer to 30 .

Speaker #6: So our I would say our pipeline process is more highly skewed toward towards knowing our payoffs . That said , we we do see second and third quarter payoffs being higher than they have been the last couple of quarters .

Kevin Hester: That said, we do see Q2 and Q3 payoffs being higher than they have been the last couple of quarters. Will we have some production that will offset that? It's possible, but it's going to come in in the next 45 to 90 days, and it's not on our pipeline yet because it hasn't gotten fully approved. Second piece of that is that MCB is not yet in our pipeline process, so I really don't have a good feel for what they might contribute in Q2 and Q3. I'll know that probably in the next week to 2 weeks. I'll have a good handle on that. So the short answer is it feels a little soft Q2, and could we outrun it? We could, but we're going to have to get the production in here and get it on the books.

Speaker #6: Will we have some production that will offset that? It's possible. But it's going to come in in the next 45 to 90 days.

Speaker #6: And it's not on our pipeline yet because it hasn't gotten fully approved. Second piece of that is that MCB is not yet in our pipeline process.

Speaker #6: So, I really don't have a good feel for what they might contribute in the second and third quarter. I'll know that probably in the next week to two weeks; I'll have a good handle on that.

Speaker #6: So the short answer is it feels a little soft . Second quarter . And could we outrun it ? We could , but we're going to have to get the production in here and get it get it on the books .

Speaker #7: Okay , great . Appreciate all the detail . There . Yeah . Go ahead . Sorry , John .

Dave Rochester: Okay, great. Appreciate all the detail there. Oh, yeah, go ahead. Sorry.

Speaker #1: It seemed like when when we forecast big payoffs , we have loan growth . And when we forecast loan growth , we have big payoffs .

John Allison: Johnny, it seems like when we forecast big payoffs, we have loan growth, and when we forecast loan growth, we have big payoffs. You've heard my comment about catching a pig in the ditch. You think you got him, and then gets loose. As Kevin said, we never know what our customers are doing out there. We never know. We've got a lot of big projects coming on stream that will fund up over a period of time, but you just never know. Another loan, I've talked to one of our big customers, FBL Business. He said, I bought another FBL, and I said, Good. That's about a $15 million loan. You just never know. I didn't know he was working on a loan, so that's good and bad. Hopefully-

Speaker #1: So , you know , you've heard my comments like catching . You think you got him and gets loose . So it's the if Kevin said we never know what our customers are doing out there .

Speaker #1: I mean , we never know . We got we got a lot of big projects coming on stream , but that that will fund up over a period of time .

Speaker #1: You just never know . I mean , another loan I've talked to one of our big customers , have b o business . He said .

Speaker #1: I bought another FPL and I said , good , that's about a $15 million loan . So you just never know . I didn't know he was working on an engine .

Speaker #1: So that's good and bad, but I can tell.

Kevin Hester: I can tell you, that deal's not on the pipeline. I'm looking at it. That deal's not on the pipeline.

Speaker #6: You, that deals dot on the pipeline. I'm looking at it, that deals down the pipeline.

Kevin Hester: I can tell you, that deal's not on the pipeline. I'm looking at it. That deal's not on the pipeline.

Speaker #1: So, yeah, not on the line.

John Allison: Yeah, that deal's not on the pipeline.

Speaker #6: That's the .

Kevin Hester: That's the point.

Speaker #1: Point . Yeah .

Kevin Hester: That's the point.

John Allison: Yeah.

Speaker #6: We don't have as good a visibility into the to the new loans as the , the runway is not as long as it is for sale .

Kevin Hester: We don't have as good of visibility into the new loans. The runway's not as long as it is to pay off.

Speaker #7: Yeah . Yep . Makes sense . Appreciate that . Maybe just switching to the margin . What do you guys think is going to be the , the rough margin impact from the close of the deal ?

Dave Rochester: Yeah. Makes sense. Appreciate that. Maybe just switching to the margin, what do you guys think is going to be the rough margin impact from the close of the deal? If we don't get any more rate cuts or rate hikes or whatever, if we have a stable Fed funds going through the end of the year, how do you think that margin kind of trends from there after this Q2 change from the deal?

Speaker #7: And then, if we don't get any more rate cuts or rate hikes or whatever, if we have a stable Fed funds going through the end of the year, how do you think that margin kind of trends from there after this, this two?

Speaker #7: Q change from the deal.

Speaker #6: Hey , Dave .

Speaker #1: This is Steven .

Stephen Tipton: Hey, Dave, it's Stephen. We're still in the process of finalizing the purchase accounting marks. I do expect a little pressure on the margin. Obviously, it's additive to NII and EPS, but expect a little pressure, at least initially, on the margin. I talked earlier about where we landed for the quarter at 451, and how you think about the non-accrual.

Speaker #6: So, we're still in the process of finalizing the purchase. Accounting marks—I do. Expect,

Speaker #1: You know , a little pressure on on the margin . Obviously it's added it to , to n I , I and EPS .

Speaker #1: But expect a little pressure at least initially on , on the margin , you know , I talked earlier about where we landed for the , for the quarter at 451 and how you think about the nonaccrual we were in .

Dave Rochester: Mm-hmm

Stephen Tipton: pressure, at least initially, on the margin. I talked earlier about where we landed for the quarter at 451, and how you think about the non-accrual. We were at 449 for March, so still kind of fairly in line with where we were for the quarter, and

Stephen Tipton: We were at 449 for March, so still kind of fairly in line with where we were for the quarter, and maybe it ticks down slightly with MCB, and then we hope to build on it from there. Talked to Bill today, and their story over the last year or so has been the ability to reprice deposits at maturity as they come through here, and that appears to be what's taking place over the next 45 days and really over the course of the year as we're able to, some of the wholesale deposits are either repriced or go away.

Speaker #1: 449 for March . So , you know , still kind of fairly in line with with where we were for the quarter . And , you know , maybe it maybe it ticks down slightly with NCB and then we hope to build on it from there .

Dave Rochester: Mm-hmm

Stephen Tipton: ... maybe it ticks down slightly with MCB, and then we hope to build on it from there. Talked to Bill today, and their story over the last year or so has been the ability to reprice deposits at maturity as they come through here, and that appears to be what's taking place over the next 45 days and really over the course of the year as we're able to, some of the wholesale deposits are either repriced or go away.

Speaker #1: So he's , you know , talked to Bill today and they , they , you know , their story over over the last year or so has been the ability to , to reprice deposits .

Speaker #1: You know , at maturity as they come through here . And that's , you know , appears to be , you know , what's taking place over the next 45 days and really over , over the course of the year as we're able to some of the wholesale deposits either reprice or go away .

Speaker #7: Yeah . Okay . Appreciate that . Maybe one last one , just back on M&A . I know you're open to deals in all your markets , but was just curious if your prioritizing any of those markets now with Tennessee in the mix , is there any focus specific focus in any particular markets

Dave Rochester: Yeah. Okay. Appreciate that. Maybe one last one, just back on M&A. I know you're open to deals in all your markets, but was just curious if you're prioritizing any of those markets now with Tennessee in the mix. Is there any specific focus in any particular markets?

John Allison: Also Florida and now Tennessee.

Speaker #8: Always . Florida and and always Florida . And always . And now Tennessee . So okay , we would entertain those markets

Dave Rochester: Okay

John Allison: We would entertain those markets.

Speaker #7: Sounds good. Thanks again. Appreciate it.

Dave Rochester: Sounds good. Thanks again. Appreciate it.

Speaker #8: Yeah . Thank you

John Allison: Yeah, thank you.

Speaker #4: And Britt Robertson with StoneX, your line is open. Please go ahead.

Operator: We now turn to Brett Rabatin with StoneX. Your line is open. Please go ahead.

Speaker #9: Hey . Good afternoon everyone

Brett Rabatin: Hey, good afternoon, everyone.

Speaker #8: Thank you .

Speaker #9: Wanted to start . I wanted to start on expenses . And you guys managed to keep expense growth pretty limited last year . Like 3% growth .

John Allison: Thank you.

Brett Rabatin: wanted to start on expenses, and you guys managed to keep expense growth pretty limited last year, like 3% growth. I know Mountain Commerce will create a little bit of noise, but was just wondering if there's anything that you guys plan to spend money on, either as a result of that deal or just as you're getting bigger. Just any thoughts on maybe core growth this year relative to 2025?

Speaker #9: And I know mountain commerce will create a little bit of noise . But , you know , I was just wondering if there's anything that you guys spend money on either as a result of that deal or just as you're getting bigger , you know , and just any , any thoughts on maybe core growth this year ?

Speaker #9: Relative to 25 ?

Speaker #1: Hey , Brett . Steven , you know , core expenses were about 115 for the quarter . We'll have some normal , you know , raises throughout the year .

Stephen Tipton: Hey, Brett. It's Stephen. Core expenses were about $115 million for the quarter. We'll have some normal raises throughout the year just with merit increases, contracts here and there. That's a decent base today. Mountain Commerce probably adds $7 to $7.5 million a quarter to that number right now until we get to the latter part of the year and get their conversion in and begin to recognize the majority of those cost savings. There'll be some cost savings along the way throughout the year, but the majority will come middle of Q4.

Speaker #1: Just with merit increases , you know , contracts here and there . But that's a decent base today . You know , mountain commerce probably adds seven 7.5 million a quarter to that number right now .

Speaker #1: And until we get to the latter part of the year and get their conversion in and begin to recognize the majority of those cost savings, there'll be some cost savings along the way throughout the year, but the majority will come.

Speaker #1: You know, middle of the fourth quarter.

Speaker #9: Okay . And then , Jonny , just thematically , you know , I know you're interested in M&A and you've historically you've got a term for , for people that hire lenders from , from other banks , but wanted to see in Tennessee , you know , there are markets in the southeast where everyone's talking more about disruption , you know , due to a big deal or two .

Brett Rabatin: Okay. Johnny, just thematically, I know you're interested in M&A, and historically, you got a term for people that hire lenders from other banks. Wanted to see in Tennessee, there are markets in the southeast where everyone's talking more about disruption due to a big deal or two, and just wanted to see if you might let Bill hire some folks on the lender side in Tennessee, or if that was still just not a part of the equation in terms of how you think about it.

Speaker #9: And just wanted to see if you might let Bill hire some folks on the lender side in Tennessee, or if that was still just not a part of the equation in terms of how you think about it.

John Allison: Well, that's not the way I think about it, but Bill may think differently about it, and we really haven't discussed it. We're headed over next week? Is that about right? Head over next week to meet their customers and shareholders and have a little talk about Home BancShares and Mountain Commerce and the partnership together. I'll visit, and I'll catch up with you a little later, I think, to see what Bill's thoughts are on the, I don't know if he's had anybody run at him. Kevin, do you know if he's had anybody looking for. You don't know?

Speaker #8: Well , that's not not the way I think about it . But Bill may think differently about it . And , and we really haven't really haven't discussed it , but we're , we're headed over next week .

Speaker #8: Donna: Right. And over the next week, to meet their customers and shareholders and have a little, little talk about Home BancShares Inc. and Mountain Commerce and the partnership together.

Speaker #8: So I , I , I'll visit , I'll catch up with you a little later , I think , and see what Bill's thoughts are on .

Speaker #8: I don't know if he's had any anybody run at him . Kevin , do you know if he's had anybody looking for you know , I'm not aware .

Kevin Hester: I'm not aware of any teams that he's talking to. Not saying it wouldn't be out of the realm of possibility in that Nashville or Knoxville market. To Johnny's point, it's not been the way that we generally try to do that. If it's due to disruption, that's a little different premise than just going in and taking away folks that are at a place that they've been happy at for some period of time. I get the disruption concept, and there could be something there, but we'll see.

Speaker #1: Of any

Speaker #8: Teams that that he's talking to . I'm not saying it wouldn't be out of , you know , out of the the realm of possibility .

Speaker #8: And in that Nashville or Knoxville market . But you know , to John's point , it's not been not been the the way that we generally try to , to do that .

Speaker #8: But if it's due to disruption , that's a little different . A little different premise than just going in and , and taking away folks that are at a , at a place that they've been happy at , you know , for some period of time .

Speaker #8: I get the disruption concept, and there could be something there, but we'll see.

Speaker #9: Okay . And then if I could sneak in one last one , just around the pipeline , you know , I , I , I understand that it's easier to see the , the payoff activity coming versus , you , the pipeline building , but just wanted to see if any of the pipeline , if you want to call it trepidation , is just around any competitive pressures .

Brett Rabatin: Okay. If I could sneak in one last one just around the pipeline. I understand that it's easier to see the payoff activity coming versus the pipeline building. Just wanted to see if any of the pipeline, if you want to call it trepidation, is just around any competitive pressures. It seems like some banks are being fairly more competitive here recently on rate. I know you guys are pretty strict on rate. Is the competitive landscape having any impact on what you guys are looking to do in the H2 of the year?

Speaker #9: It seems like some banks are being really more competitive here, recently, on rate. I know you guys are pretty strict on rate.

Speaker #9: You know, is that—or is the competitive landscape having any impact on what you guys are looking to do in the back half of the year?

Speaker #8: Yeah . I mean , I think some markets are are different , you know , are harder than others for that . And I think it is it's not the same players in every market .

Kevin Hester: Yeah, I think some markets are harder than others for that, and I think it is not the same players in every market. It's different players in different markets. There is some rate pressure. There's even some underwriting and structure pressure that people have given into a little bit over the course of 2025 and early 2026. That's always a challenge. We always have to fight that because we're pretty consistent in what we do.

Speaker #8: It's different players in different markets. But there is, you know, there is some rate pressure. There's even some underwriting and structure pressure that people have given into a little bit over the course of '25 and early '26.

Speaker #8: So that's always a challenge. We always have to fight that, because we're pretty consistent in what we do.

Speaker #9: Okay. Fair enough. Appreciate all the color, guys.

Brett Rabatin: Okay. Fair enough. Appreciate the color, guys.

Speaker #8: Thank you

Kevin Hester: Thank you.

Speaker #4: We now see Catherine Miller with KBW. Your line is open. Please go ahead.

Operator: We now turn to Catherine Mealor with KBW. Your line is open. Please go ahead.

Speaker #10: Take that . A follow up on on just deposit costs . I know you mentioned the 182 deposit rate , which was a kind of similar to where you were for , for the average in the quarter , just curious , as you think forward for the rest of the year , if we don't have any more rate cuts , do you feel like deposit costs will start to increase as we move through the year , especially maybe once we get past second quarter and growth improves ?

Catherine Mealor: Thanks. I had a follow-up on just deposit costs. I know you mentioned the 182 exit deposit rate, which was kind of similar to where you were for the average in the quarter. Just curious, as you think forward for the rest of the year, if we don't have any more rate cuts, do you feel like deposit costs will start to increase as we move through the year, especially, maybe once we get past Q2 and growth improves? Or how are you thinking about kind of incremental deposit costs coming on? Thanks.

Speaker #10: Or how are you thinking about kind of incremental deposit costs coming on? Thanks.

Speaker #1: Hi , Catherine . This is Stephen . I mean , it , you know , with MCB mentioned what they have coming , coming .

Stephen Tipton: Hi, Catherine. It's Steve. Certainly, with MCB, if you mentioned what they have coming through the maturity pipeline and certainly expect theirs to come down on the legacy Home portfolio. We have some deposits that are tied to the T-bill, or short-term T-bill, 91-day T-bill, which trickled up a little bit in Q1 and kind of put some pressure on the other changes that we're able to do. CDs will continue to mature that we'll try to reprice down. I'm still optimistic that we can inch out a basis point or two as we go throughout the year. I'll couch all that with competition, like Kevin talked about on the loan side. You're still seeing banks offer 4% for CDs and 3.75% to 4.05% on money market. We'll defend our customer base both here and in Tennessee.

Speaker #1: Up through the maturity pipeline and , you know , certainly expect theirs to come down , you know , on the legacy home portfolio .

Speaker #1: You know , we have some deposits that are tied to the t-bill that are short term T-bill 91 day t-bill , which trickled up a little bit in the first quarter and kind of puts the pressure on the other changes that we're we're able to do .

Speaker #1: CDs will continue to mature , that we'll try to reprice down . So I'm still optimistic that we can , you know , inch out a basis point or two as we go throughout the year .

Speaker #1: But , you know , I'll couch all that with , you know , competition like Kevin talked about on the loan side . I mean , we're seeing , you know , you're still seeing banks offer 4% for CDs and , you know , 3.75 to 4.05 on money market .

Speaker #1: So, we'll defend our customer base both here and in Tennessee. So,

John Allison: In the end, I think the 4% might be cheap if rates do what I think they're going to do. It looks silly when you see people doing out there. We're still seeing some sixes too, so when you think about that, how ridiculous that looks. It might turn out to be. We obviously haven't stopped inflation. Depends on what Trump does and how aggressive the Fed is. If they're too aggressive, if they have to be as aggressive to slow inflation, it may take 200 basis points to stop it. If they lower, if they were to lower significantly, I think that would be a huge mistake.

Speaker #11: I'm beginning to think that 4% might be cheap if rates do what I think they're going to do. So it might not be—it looks silly when you see what people are doing out there.

Speaker #11: We're seeing I mean , we're still seeing some sixes too . So I mean , you think about that . I ridiculous . That looks .

Speaker #11: It might turn out to be. We obviously haven't stopped inflation. Depends on what Trump does, and how aggressive the Fed is.

Speaker #11: If they're too aggressive—I mean, if they have to be as aggressive to slow inflation, it may take 200 basis points to stop it.

Speaker #11: And if they were to lower significantly, I think that would be a huge mistake.

Catherine Mealor: Johnny, you've been right on the rate trade. Yeah. You've been right, I feel like, on the way you've been looking at rates for the past couple of years. Is there anything that you're doing in your balance sheet just to prepare for the risk of higher rates?

Speaker #10: You you've been right on the rate trade . Yeah . And and but you've been right . I feel like on your the way you've been looking at rates for the past couple of years .

Speaker #10: So is there anything that you're doing in your balance sheet just to prepare for the risk of higher rates?

John Allison: Not really. We're just careful with our pricing, that's all. I was mad at myself last cycle. I said what was going to happen, and then I didn't bet it.

John Allison: Not really. We're just careful with our pricing, that's all. I was mad at myself last cycle. I said what was going to happen, and then I didn't bet it.I ran into a friend, he said, "I heard you, Johnny, and I bet it. I went out and bought $4 million worth of money cheap." He said, "I still got it." I said, "Good for you." He said, "I did it because what you said." I said, "Well, I didn't bet it, and I should have." That is a good thought, maybe to take a look at stretching out there a little bit. This is almost, Kevin, it's almost a déjà vu of the '70s and the '80s. We got this war now, and we got oil, and we know what that does, and we saw Producer Price Index is what, at 4%? Is what they annualized, 4%? We haven't seen those numbers in a while. It could get a little crazy here in a little bit. I don't have the answer.

Speaker #11: Not really . We're just careful with our pricing . That's all . We're just careful with our pricing . You know , I , I was mad at myself last cycle .

Speaker #11: I said what was going to happen . And then I didn't bet it . You know , and , and I was , I ran into a friend and he said , I heard you , Johnny .

John Allison: Mm-hmm.

John Allison: I ran into a friend, he said, "I heard you, Johnny, and I bet it. I went out and bought $4 million worth of money cheap." He said, "I still got it." I said, "Good for you." He said, "I did it because what you said." I said, "Well, I didn't bet it, and I should have." That is a good thought, maybe to take a look at stretching out there a little bit. This is almost, Kevin, it's almost a déjà vu of the '70s and the '80s. We got this war now, and we got oil, and we know what that does, and we saw Producer Price Index is what, at 4%? Is what they annualized, 4%? We haven't seen those numbers in a while. It could get a little crazy here in a little bit. I don't have the answer.

Speaker #11: And I bet it, I went out and bought $4 million worth of money cheap. And he said, I still got it.

Speaker #11: I said , good for you . And I said , he said , you . I did it because what you said . And I said , well , I bet it .

Speaker #11: And I should have. And, and that is a good thought, maybe to take a look at stretching out there a little bit.

Speaker #11: We I mean , this is almost it's almost a ditto of the 70s and 80s . And , you know , we got this worn out and we got all .

Speaker #11: And we know what that does. And we saw Producer Price Index at 4%. That's what they annualized, 4%. And we haven't seen those numbers in a while.

Speaker #11: It could get, it could get, could get a little crazy here, a little bit. I just don't, I don't have the answer.

Kevin Hester: I don't have that answer yet. Hopefully, it'll come to us.

Speaker #11: I don't have that answer yet, so hopefully it'll come to us.

Catherine Mealor: Michael, anything on the credit side that you're seeing? I know. I appreciate that you don't want to talk about the credit, the $92 million credit that moved to NPA this quarter until you get it resolved. Maybe just outside of that, are you seeing any other trends or any kind of weakness across the book to be aware of?

Speaker #10: And then my follow up is anything on the credit side that you're seeing ? I know , I appreciate that you don't want to talk about the the credit , the $92 million credit that that moved to m p a this quarter until you get it resolved .

Speaker #10: But maybe just outside of that, what are you seeing? Any other trends or any kind of weakness across the book to be aware of?

Kevin Hester: No. I said criticized assets, which includes all of our OLM and below; those were flat quarter-over-quarter. Early stage past dues are as low as they've been at below 50 basis points. As I said in the remarks, we're working with the same set of issues that we've been working with for the last few quarters. I think I've said a couple of quarters ago that that small group might get worse before it gets better, and that's what happens when you have to clear it on non-accrual and start working it out. We've already taken what we believe is our maximum loss, and we would expect to recover some to all of that, depending on the way it resolves and which path of resolution it goes through. We at least have some-

Speaker #8: No , I mean , I said , you know , criticized assets , which includes all of our our Olam and below those were flat quarter over quarter .

Speaker #8: And early stage past dues or as low as they've been at below 50 basis points . So , you know , we're , as I said in , in the remarks , we're working with the same set of issues that we've been working with for the last few quarters .

Speaker #8: And I think I said a couple of quarters ago that the that that small group might get worse before it gets better . And that's that's what happens when you have to put it on non-accrual and start working it out .

Speaker #8: So that we've already taken what we believe is our , our , our maximum loss . And we , we would expect to recover some to all of that depending on the way it resolves .

Speaker #8: And which path of resolution it goes through. But we at least have some talking about the larger credit now—at least have a good visibility into how that happens.

Catherine Mealor: Mm-hmm.

Kevin Hester: Talking about the larger credit now, we at least have a good visibility into how that happens, and it could happen as early as this quarter or next. We at least feel good about that. It is the same set of problems. I'm not seeing anything of any materiality that we're that concerned about.

Speaker #8: And it could happen as early as this quarter or next. So we at least feel good about that. And it is the same set of problems.

Speaker #8: I'm not seeing anything, you know, of any materiality that we're that concerned about. So

John Allison: I don't think we're going to lose any money on this deal. I like the guarantors. I like the assets. The assets in this are in-demand assets. They're not scrap assets. They're real value assets. Actually, the assets are being leased as we speak. I think we had sold some of these assets in the past on a 70-30 basis. We got 70% and the customer got 30%, and we sold those assets, and they paid down just perfectly. Assuming the rest of them bring the same value, we're going to take 100% of the proceeds from this point forward. If we get the sale schedule, I think I'm pretty happy with that deal. I don't think we're going to have problems.

Speaker #11: It's I , I don't I don't lose any money on this deal . I , I like the guarantors . I like the assets , the assets in this are in demand assets .

Speaker #11: They're not , not scrap assets to really real value assets . And actually the , the assets are being leased as we speak .

Speaker #11: So there's I think we , we had sold some of these assets in the past on a 70 , 30 basis . We got 70% in the customer got 30 , and we sold those assets and they paid down just perfectly .

Speaker #11: So assuming the rest of them bring the same value, we're going to take 100% of the proceeds from this point forward. So, but if we get to the sale schedule...

Speaker #11: So, I think I'm pretty happy with that deal. I don't think we'll have—I don't think we're going to have problems or any.

John Allison: If there's any hole left in this deal, these people have honored everything they've ever said to us that they would do, and they're a very wealthy family. I think we'll be fine. I think they're honorable people, and maybe there's just $10 million left. They put them on a $10 million, 10-year note or something. Whatever it takes, I think they'll honor the ownership of the shiniest assets.

Speaker #11: If there's any, if there's any hole left in this deal, these people have honored everything they've ever said to us that they would do.

Speaker #11: And it's a very wealthy family. So I think, I think we'll be—I think we'll be fine. I think they're honorable people, and we'll maybe just $10 million left.

Speaker #11: They put them on a $10 million , ten year note or something , you know , so whatever it takes , I think they'll , I think they'll honor that .

Speaker #11: The one of the, does the, does.

Catherine Mealor: Has the price in oil had any impact? Sorry. Go ahead, Johnny.

Speaker #10: The price in oil has the price in oil had any impact . I'm sorry . Go ahead . Jenny

John Allison: No.

Kevin Hester: No.

Speaker #11: No . no no .

Kevin Hester: No.

Catherine Mealor: All right. Okay. All right, great. That's all my questions. Thank you very much.

Speaker #10: Okay . All right . Great . That's all my questions . Thank you very much .

John Allison: It might help. If anything, it might help, quite honestly.

Speaker #11: If anything , if anything , it might help quite honestly .

Catherine Mealor: Yeah. Well, that's what I was thinking, actually. Yeah. I know you have to value the assets.

Speaker #10: Yeah . Well , that's that's what I was thinking actually . So I was , but yeah , but I , I know you have to value the assets .

John Allison: Yeah.

Catherine Mealor: Okay. That's great. Thank you so much for the call.

Speaker #10: Yeah . Okay . That's great . Thank you so much for the call . Appreciate it .

John Allison: That's all right.

Catherine Mealor: Appreciate it.

John Allison: Yeah, thank you. Appreciate it.

Speaker #11: Thank you . Appreciate it

Operator: We now turn to Michael Rose with Raymond James. Your line is open. Please go ahead.

Speaker #4: We now turn to Michael Rose with Raymond James. Your line is open. Please go ahead.

Michael Rose: Hey, good afternoon, guys. Just two follow-ups. First, just on the large Texas loan. Was there any interest reversal this quarter? And if so, do you have the math as to kind of what the impact on the margin might have been this quarter? Thanks.

Speaker #3: Hey .

Speaker #5: Good afternoon guys . Just just two follow ups first , just on the on the large Texas loan , was there any interest reversal this quarter ?

Speaker #5: And if so, like, do you have the math as to kind of what the impact on the margin might have been this quarter?

Speaker #5: Thanks

Stephen Tipton: Hey, Michael, this is Stephen. Yeah, the 4.51 margin doesn't have any accrual in that number. It was about $1.6 million impact for the quarter, which is about 5 basis points to the loan yield and about 4 basis points to NIM. If we had had it on accrual for the whole quarter, 4.51 would've been 4.55 compared to 4.56 last quarter. That's kind of the math around it.

Speaker #1: Hey , Michael , this is Steven . Yeah . So the 451 margin doesn't have any doesn't have any accrual in in that number .

Speaker #1: So it was about $1,000,006 impact for the quarter, which is about five basis points to the loan yield and about four basis points to them.

Speaker #1: So , you know , if we had had it on accrual for the whole quarter , you know . 451 would have been 455 compared to 456 last quarter .

Speaker #1: So that's kind of the math around it.

Michael Rose: Okay. Really helpful. Just as it relates to the scheduled payoffs that you guys have talked about, can you kind of quantify at least what the scheduled payoffs and pay downs are kind of expected to be over the next quarter or two?

Speaker #5: Okay . Really , really helpful . And then just as it relates to the scheduled payoffs that you guys have talked about , can you kind of quantify what the at least what the scheduled payoffs and pay downs are kind of expected to be over the next quarter or two ?

Kevin Hester: They look to me like the Q2 looks like close to $1 billion, and Q3 could approach that, and that includes kind of abnormal pay downs and principal pay downs, too. That's what you'd have to do to stay even in each of those quarters.

Speaker #8: They look to me like the second quarter looks like close to $1 billion. And third quarter could approach that. And those are both.

Speaker #8: That includes kind of abnormal pay downs and principal paydowns too . So that's that's what you'd have to do to , to stay to stay even in each of those quarters .

Stephen Tipton: Yeah, and just for some context, payoffs in Q1 were about $650 million, but they were $950 million in Q4. $750 to 800 million in the quarters prior to that. That sounds like a big number, but that's what we run in that range.

Speaker #1: Yeah . And just , just for some context payoffs in Q1 were about 650 million , but they were 950 million in Q4 .

Speaker #1: You know , 750 to 100 million in the quarter . Prior to that . So that's that's a big it sounds like a big number , but that's that's what we run , you know , in that range .

Kevin Hester: A quarter in and out, just depending on seasonality. None of that, even what I'm quoting, doesn't include MCB because they're not in my pipeline yet.

Speaker #1: So, quarter in and out, just depending on seasonality.

Speaker #8: And that doesn't include any—none of that, even what I'm quoting, doesn't include NCB because they're not in my pipeline. Yeah.

Michael Rose: Got it. Then do you have a sense for, are there any loans with MCB that you've identified that maybe don't fit your standards that you may kind of plan to run off over a period of time? Just trying to kind of appreciate the puts and takes on loan growth as we move forward. I appreciate all the color. Thanks.

Speaker #5: Got it . And then do you have a sense for are there any loans with NCB that you've identified that maybe don't fit your standards , that you may kind of try plan to run off over a period of time , just trying to , you know , kind of appreciate the puts and takes on on loan growth as we move forward .

Speaker #5: So, I appreciate all the color. Thanks.

Kevin Hester: No, I'm not aware of anything. I looked at every loan that we looked at in due diligence. I don't remember anything necessarily that I would say that I would run off. I think we have a credit culture, the way we look at things, and theirs is pretty close to ours. They're maybe a little bit higher leverage in some areas. We'll work on that over time as we can. They're going to have opportunities with us that they haven't had because they've not been willing to do much construction. Any decisions we make to go a different direction than what they've been doing, I think will be more than offset by the opportunities that they have to do things they haven't done before. I look at them as being a positive, as I said in my comments, pretty early.

Speaker #8: No , I don't I'm not aware of anything . I , I looked at every loan that we looked at in due diligence .

Speaker #8: I don't remember anything necessarily that I , that I would say that I would run off . I think , you know , we have a credit culture .

Speaker #8: The way we look at things and theirs is pretty close to ours. There may be a little bit higher leverage in some areas.

Speaker #8: Well, we'll work on that over time as we can. And they're going to have opportunities with us that they haven't had because they've not been willing to do much construction.

Speaker #8: So , you know , any any decisions we make to go a different direction than what they've been doing , I think will be more than offset by the opportunities that they have to do things they haven't done before .

Speaker #8: So I look at them as being a positive . As I said in my comments , pretty , pretty early , I would expect them to hit the ground running pretty , pretty early on .

Kevin Hester: I would expect them to hit the ground running pretty early on. We've already had a couple of pipeline.

Speaker #8: We've already had a couple of pipeline discussions over three or four credits. So, as of last week, so—

Michael Rose: All right.

Kevin Hester: ... discussions over three or four credits, as of last week.

John Allison: I told Bill, I said, "Bill, nobody cares what you made this quarter." I said, "You just get ready for the future. If you got anything you need to write down, write it down, get rid of it. Get it gone, get it out of here." I think we're coming in with a pretty clean check coming in the front door.

Speaker #11: I told Bill , I said , Bill , nobody cares what you make this quarter . I said , just you just get ready for the future .

Speaker #11: Have you got anything you need to write down ? Write it down , get rid of it , get it going , get it out of here .

Speaker #11: So, I think we're coming in with a pretty clean check coming in the front door.

Michael Rose: All right. I appreciate all the color, guys. Thanks.

Speaker #5: All right. I appreciate all the color, guys. Thanks.

Kevin Hester: Thanks.

Speaker #12: Thanks

Operator: We now turn to Jon Arfstrom with RBC. Your line is open. Please go ahead.

Speaker #4: Wait. Now, turn to John Ostrom with RBC. Your line is open. Please go ahead.

Jon Arfstrom: Okay, thanks. Good afternoon.

Speaker #13: Hey , thanks . Good afternoon Just a couple things to follow up on . Hey , Johnny , did you say in your prepared comments that you think deal pricing has moderated somewhat ?

John Allison: Hi, John.

John Allison: Hi, Jon.

Jon Arfstrom: Just a couple things to follow up on. Johnny, did you say in your prepared comments that you think deal pricing has moderated somewhat? Did I hear you correctly?

Speaker #13: Did I hear you correctly

John Allison: That I said that yields.

Speaker #11: Did I say that yields.

Kevin Hester: Deal pricing.

Speaker #1: Eel pricing .

Jon Arfstrom: Deal pricing, acquisition deal pricing.

Speaker #11: Deal .

Speaker #13: Deal pricing, acquisition deal pricing?

John Allison: Oh, yeah. I think it's flattened up a little bit. I don't see the urgency out there that I did see. However, people are talking. They're continuing to talk, and they're continuing to want to do something. Some of them want to do it with Home. I think it's out there. It's just a matter if we're ready to do that, right? It's just a matter of we're ready to make the move yet. We're probably getting close to ready to look at something else, but we're not going to be able to convert it about the same time we convert Mountain Commerce in November. The answer to that is yes and no. I haven't pushed hard, but we've been pushed a little bit ourselves.

John Allison: Yeah. I think it's flattened up a little bit. I don't see the urgency out there that I did see. However, people are talking. They're continuing to talk, and they're continuing to want to do something. Some of them want to do it with Home. I think it's out there. It's just a matter if we're ready to do that, right? It's just a matter of we're ready to make the move yet. We're probably getting close to ready to look at something else, but we're not going to be able to convert it about the same time we convert Mountain Commerce in November. The answer to that is yes and no. I haven't pushed hard, but we've been pushed a little bit ourselves.

Speaker #11: Oh yeah . I think it's I think it's lightened up a little bit . I , I don't think it's I , I don't , I don't see the urgency out there that I did see , however , people are talking .

Speaker #11: They're continuing to talk and , and they're continuing to want to do something and some of them want to do with do it with home .

Speaker #11: So I think it's it , it's out there . It's just a matter if we're ready to do that , right . It's just a matter of we're , we're ready to make the move yet .

Speaker #11: And we're probably getting close to ready to look at something else. But we're not going to be able to convert it about the same time.

Speaker #11: We convert the mountain commerce in November . So The answer to that is , is , is , is yes and no . I haven't pushed hard , but we've been pushed a little bit ourselves .

John Allison: We've had people calling us outside of bankers, calling us directly outside investment bankers and saying, "We met you, your company, two or three years ago, and we're thinking about doing something, and we wanted to talk to y'all." That happened with a couple of one Florida and one Tennessee that came at us. Will we do that? We'll have opportunity. We're going over to see Bill and his team. We'll have an opportunity to talk to Bill when we get over. We'll get over to Tennessee and see where we're going and where we're thinking. There's a Tennessee deal out there's a Florida deal out there. We'll see how they work out.

Speaker #11: We've had people calling us outside of bankers , calling us directly outside investment bankers and saying , we met , you , your company , 2 or 3 years ago , and we want we're thinking about doing something .

Speaker #11: And we want to talk to you. All that happened with a couple of—couple of, one Florida and one Tennessee, that came at us.

Speaker #11: So Will we do that ? And we're we'll have opportunity . We're going over to see Bill and his team . We'll have an opportunity to talk to Bill when we get over .

Speaker #11: So we get over to Tennessee and see where we're . Where we're going and where we're thinking . We looked at . We're looking at Tennessee deal out there .

Speaker #11: There's a party out there, so we'll see how they work out.

Jon Arfstrom: Yeah. Okay. I guess this is somewhat related, but how do you feel about being more aggressive on the repurchase plan? Do you have an optimal capital level in your mind, or are you just kind of warehousing this capital for future acquisitions? Because it's obviously 13% TCE and CET1 is 17%. Those are high levels.

Speaker #13: Yep . Okay . I guess it's somewhat related , but how do you feel about being more aggressive on the repurchase plan ? You know , do you have like an optimal capital level in your mind or are you just kind of , you know , warehousing this capital for , for future acquisitions ?

Speaker #13: Because it's , you know , obviously 13% TCE and C ET one is 17 that's that's it are high levels

John Allison: I don't know if we can spend it as fast as we're making it. That's a pretty good position to be in. We made $118 million. Pretty nice, right? Pretty sweet.

Speaker #12: I .

Speaker #11: Don't—I don't know if we can spend it as fast as we're making it. So it's a pretty good position to be in.

Speaker #11: But we're , we're , I mean we made $118 million . Pretty nice right ? Pretty sweet . Yeah . Yeah . I , I don't know , you know , we got so much capital right now that we , we really like our position and , but I'm ready to buy a stock .

Jon Arfstrom: Yep.

John Allison: I don't know. We got so much capital right now that we really like our position, but I'm ready to buy stock. I'm looking at it today. We can't buy today, damn it.

Speaker #11: I mean , I'm , I'm looking at it today . We can't buy today . Damn it . Tomorrow . We can't , we can't today .

Kevin Hester: Tomorrow.

Kevin Hester: Tomorrow we can. We can't today.

Jon Arfstrom: Yeah

Speaker #11: So you know , but it gives us an opportunity and it's , it's my , I'm I want to buy back all the mountain commerce .

John Allison: It gives us an opportunity, and I want to buy back all of Mountain Commerce. That's about 5.5 million shares. I want to buy that back. I think we've bought essentially all of Happy back. I want to buy all of Mountain Commerce back and just kind of go out there. We could do it pretty quick with the capital position we're in, and it wouldn't take us long to get that done. I like to buy.

Speaker #11: It's about 5.5 million shares. I want to buy that back. I think we bought essentially all the Happy back, so I want to buy all the Mountain Commerce back.

Speaker #11: Just kind of go out there. We could do it. We could do it pretty quick with the capital position we're in. And it wouldn't take us long to get that done.

Speaker #11: I , I like to buy it , you know , I little dilutive to us , but I like to buy the stock .

Jon Arfstrom: Yeah.

John Allison: I know it's a little diluted to us, but I like to buy the stock.

Speaker #11: So

Jon Arfstrom: Yep. Okay. Yeah, it's not an either/or in your mind. You can do both. Yep, that's good. Not either/or, you can do both, I guess, is what you're saying, right?

Speaker #13: Yeah . Okay . It's not an either or in your , in your mind , you can do , you can do both .

Speaker #13: Yep , yep . That's good . Not not either or you can do both , I guess is what you're saying right ?

John Allison: That's correct.

Speaker #11: That's correct. That's correct.

Jon Arfstrom: Yep. Okay. Thanks.

John Allison: We just keep stacking.

Speaker #13: Okay. Thanks. Thanks for the help. Appreciate it.

Jon Arfstrom: Yep, thanks for the help. Appreciate it.

John Allison: We just keep stacking up capital.

Speaker #11: We just keep stacking up capital.

Operator: We now turn to Matt Olney with Stephens. Your line is open. Please go ahead.

Speaker #4: We need to not only work with Stevens. Your line is open. Please go ahead.

Matt Olney: Thanks for taking the question, guys. Just sticking with M&A, you mentioned some potential bank targets in Florida and Tennessee. Can you just speak to the appetite of doing M&A in footprint in existing markets versus expanding into new markets? Is the bar set higher if you were to expand a franchise into new markets? Just trying to appreciate how you think about doing M&A in existing footprint versus something outside the existing footprint.

Speaker #14: Thanks for taking the question , guys . Just sticking with M&A . You mentioned some potential bank targets and Florida and Tennessee . Can you just speak to the appetite of doing M&A in footprint in existing markets versus expanding into new markets ?

Speaker #14: Is the bar set higher if you were to expand their franchise into new markets? Just trying to appreciate how you think about doing M&A in existing footprint versus something outside the existing footprint.

John Allison: Well, there's no comparison to me. If there's a Florida deal out there that we can do, we got management from Key West, Florida to Pensacola. We got management all over the state of Florida, and we can just add it to someone. You've heard me talk about Florida, one of those guys, Buckets, I mean, they're great managers. The performance of our Florida operations, well, all operations are outstanding, but those guys know what to do and how to do it, and it just makes it simpler and easier. We made the big move to Tennessee because we like Bill and his team, and we made that move. I think we need to grow there. We need to build there and muscle up Tennessee, because I think there's opportunity in Tennessee.

Speaker #11: Well , there's no comparison to me . I mean , if there's a Florida deal out there that we can do You know , we can .

Speaker #11: We got we got management from Key West , Florida , Pensacola . We got management all over the state of Florida . And we can just add it to someone .

Speaker #11: You've heard me talk about porting one of those guys buckets . I mean , they're great managers . I mean , the performance for our Florida operations outstanding .

Speaker #11: Well, all operations are outstanding. But those guys know what to do and how to do it, and it just makes it simpler and easier.

Speaker #11: We go, we made the big move to Tennessee because we like Bill and his team, and we made that move. So we need to—I think we need to grow there.

Speaker #11: We need to build that and muscle up Tennessee because I think there's opportunities in Tennessee . There's a little disruption over there . And I think I think it'll give us an opportunity to pick up and build , build some muscle in that state as we've done in Florida .

John Allison: There's a little disruption over there, and I think it'll give us an opportunity to pick up and build some muscle in that state as we've done in Florida. I think it's an opportunity for us. The reason being, you just get more consolidation savings. That's really the key. If you think about closing branches and doing a deal where you can close some branches, those are big savings. We'll continue to focus more on where we are than outside of that. When we look outside that, one of those deals that I'm talking about that your bankers tell me about is outside of that. I really like the operator, and we like the guy. We like his company. We like what he does. They don't have the growth that Florida's got, but he runs a good, clean operation.

Speaker #11: And I think it's an opportunity for us . So the reason being , you just get more consolidation , savings . You know , that's really the key .

Speaker #11: You know, if you think about closing branches and doing a deal where you can close some branches, those are big savings.

Speaker #11: So we'll continue to focus more on where we are than outside of that . When we look outside of that , one of those deals that I'm talking about , that your bank was calling me about is outside of that , and I really like the operator and we like the guy , we like his , we like his company .

Speaker #11: We like what he does . They don't have the growth that Florida's got . But he runs a good , clean operation . So someone said , why would you go there ?

John Allison: Someone said, "Why would you go there?" And I said, "Because it's simple, and it's clean, and they do a good job running their company." It kind of builds mass. Now, that's outside of where we presently operate today. He's a guy that runs it, and you don't have to hold his hand. That's really what you're looking for. You're looking for somebody. If you're going outside the market, you better get somebody like Bill that knows what they're doing and knows how to run one.

Speaker #11: And I said , because it's simple and it's clean . And they do a good job running their company . So it kind of builds , builds mass .

Speaker #11: So that's outside of where we, where we presently operate today. He's the guy that runs it, and you don't have to hold his hand.

Speaker #11: So that's really what you're looking for. We look for somebody—if you're going outside the market, you better get somebody like Bill that knows what they're doing and knows how to run one.

Matt Olney: Yeah. Okay. Appreciate the commentary. Then just as a follow-up, if Chris is still on the line, I got a question about private credit. Chris, you had some good insightful comments about private credit and kind of what you had there a few years ago versus what you have today. I want to dig more into the views you have today and kind of your outlook here. I think you said that the current bias was for further reduction of the remaining private credit exposure that you have. I was hoping you could expand on this. How do you see the private credit market playing out the next few years? Also curious, when do you expect to see some opportunity here for growth for CCFG? Thanks.

Speaker #14: Yeah . Okay . Appreciate the commentary . And then just as a follow up , if Chris is still on the line , I got a question about private credit .

Speaker #14: And Chris, you had some good, insightful comments about private credit and kind of what you had there a few years ago versus what you have today.

Speaker #14: I want to dig more into the views you have today and kind of your outlook here. I think you said that the current bias was for further reduction of the remaining private credit exposure that you have.

Speaker #14: I was hoping you could expand on this, and how do you see the private credit market playing out in the next few years?

Speaker #14: And also curious , when do you expect to see some opportunity here for for growth , for CFG ? Thanks .

Christopher Poulton: Yeah. Thanks, Matt. Yeah, probably two things there. One, right now, the uncertainty here is what are these underlying loans look like and where do they go? It feels early because I think you're going to see a little bit of a false bottom where there's a little bit of maybe some price expansion or there's a little bit of some markdowns in these notes, and everybody goes, "Oh, okay, that's it." There's always, as they say, the third shoe to drop, right? Right now, we're not seeing a lot of capitulation on the price side. There should be. We're also not seeing any activity. Nobody's pricing a new facility today if they don't have to. I think we'd want to see one of the things we look at a lot in ours is, well, have these loans been marked appropriately, right?

Speaker #3: Yeah. Thanks, Matt.

Speaker #7: Yeah , probably two .

Speaker #3: Things there . One .

Speaker #7: You know, right now, the uncertainty.

Speaker #3: Here is what's the underlying , you know , what are these underlying loans look like ? And where do they go It feels early because I think you're going to see a little bit of a false bottom where , you know , there's a little bit of maybe some price expansion or there's a little bit of some markdowns in these notes .

Speaker #3: Everybody goes , okay , that's it . And then , you know , there's always , as they say , the third shoe to drop , right ?

Speaker #3: So I right now , we're not seeing a lot of capitulation on the price side . And there should be , but we're also not seeing any activity .

Speaker #3: You know , nobody's pricing a new facility today . If they don't have to . So I think we'd want to see , you know , one of the things we look at a lot in ours is we'll have these loans been marked appropriately , right ?

Christopher Poulton: What's happening to the underlying credit? Have you had EBITDA expansion or not? Has the loan been marked, et cetera? We'd like to see a little more of that before I think we get comfortable. We've certainly had people come to us and say, "I'd like to get out of some of our positions. My risk guys are getting on to me. What would the price be?" I think right now our answer is, price doesn't fix credit. An extra 50 basis points isn't going to save me when I need the credit support. I think right now we're just biased towards let's figure this credit thing out. This may turn into nothing, right? It may turn out all these things are fine. AI doesn't destroy the world, and all these software companies are fine. I just don't think you should take that risk today.

Speaker #3: You know , what's happened to the what's happening to the underlying credit ? Have you had EBITDA expansion or not ? Have the loan been marked , etc.

Speaker #3: ? We'd like to see a little more of that before . I think we get comfortable . I mean , we've certainly had people , you know , come to us and say , you know , I'd like to get out of some of our positions .

Speaker #3: My risk guys are getting onto me . What would the price be ? And I think right now , our answer is , you know , price doesn't fix credit .

Speaker #3: And so , you know , an extra 50 basis points isn't going to save me when , you know , when I need when I need the credit support .

Speaker #3: So I think right now we're just biased towards, let's figure this credit thing out. This may turn into nothing, right?

Speaker #3: I mean, it may turn out all these, all these things are fine. AI doesn't destroy the world, and all these software companies are fine.

Speaker #3: I just don't think you should take that risk today . So we'd want to see a little bit more capitulation . I think before , before we would before we would do that .

Christopher Poulton: We'd want to see a little bit more capitulation, I think, before we would do that. As I said, we've been in this market for 10+ years. I think people that came into the market, quite frankly, need to take some losses before I'd feel comfortable, right? It seems like that's how you get discipline, is you get new entrants in, and they thought they were getting something very risk-free, and they priced it that way, and then it turned out not to be, and then everybody gets religion again. We'll look for that. When we see signs for that, we might consider expansion again. We're still set up that we have facilities that will roll off, and right now, if a facility rolls off, we probably just wouldn't replace it.

Speaker #3: But we've as I said , we've been in this market for , you know , ten plus years . So I think some people that came into the market , quite frankly , need to take some losses before I'd feel comfortable .

Speaker #3: Right? It seems like that's how you get disciplined—when you get new entrants in, and they thought they were getting something very risk-free, and they priced it that way.

Speaker #3: And then it turned out not to be . And then everybody gets religion again . So we'll look for that . And when we see signs for that , we might we might consider , you know , expansion .

Speaker #3: Again , we're still set up that we have facilities that will roll off . And right now , if , if a facility rolls off , we probably just wouldn't replace it .

Christopher Poulton: We wouldn't go into the next one, or we just take the payoff and move on. That's on the C&I side. Real estate, we continue to see good pipeline growth. We are going to have elevated payoffs, but one of those is just a credit we've had that I've been saying we've been two weeks from payoff for six months, and I think it's paying off today. We'll find out. Not a worry for us on the credit. They've just been in a sale process and it's just dragged on a little bit. We like the credit. I'd like it to stay longer, but I get nervous when things stay a little too long, right? Stuff's supposed to move. We're in the moving business. We continue to see great opportunities. I think our pipeline's pretty strong.

Speaker #3: We wouldn't go into the next one or we'd just take the pay off and move on . That's on the CNI side . Real estate .

Speaker #3: We're we continue to see good , good pipeline growth . We are going to have elevated payoffs . But you know , one of those is just a credit .

Speaker #3: We've had that—I've been saying we've been two weeks from payoff for six months. And I think it's paying off today. We'll find out.

Speaker #3: Not a worry for us on the credit. They've just been in a sale process and it's just dragged on a little bit.

Speaker #3: But we like the credit. I’d like it to stay longer, but I get nervous when things stay a little too long.

Speaker #3: Right ? It's supposed to move . We're in the moving business . And so but we continue to see great opportunities . I think our pipeline is pretty strong .

Christopher Poulton: It might take me more than a quarter to replace what comes off, but it won't take a lot more than that, I don't think.

Speaker #3: It might take me more than a quarter to replace what comes off, but it won't take a lot more than that. I don't think.

Matt Olney: Okay. That's helpful, Chris. Always appreciate your insight. That's all for me, guys. Thank you.

Speaker #14: Okay . That's helpful . Chris , always appreciate your insight . That's all from me , guys . Thank you .

Christopher Poulton: Thanks.

John Allison: Thank you.

Speaker #2: Thanks .

Speaker #11: Thank you

Operator: We now turn to Brian Martin with Brean Capital. Your line is open. Please go ahead.

Speaker #4: We now turn to Brian Martin with Brian Capital. Your line is open. Please go ahead.

Brian Martin: Hey, guys. Just maybe one follow-up, Chris, if you're still there. Just on your outlook for the year, I know you talked about a payoff last quarter. It sounds like that maybe got pushed back a little bit, but just your kind of outlook for growth is still mid-single digit type of growth this year with the puts and takes of the payoffs and the pipeline you've got?

Speaker #15: Hey , guys . Just maybe one follow up . Chris , you're still there . Just on your outlook for the year . I know you talked about a payoff last quarter .

Speaker #15: It that maybe got pushed back a little bit , but just your kind of outlook for growth is still kind of mid single digit type of growth this year , kind of with the puts and takes of the payoffs and the pipeline .

Speaker #15: You've got .

Christopher Poulton: I think that's right. That's what I'd like to see. I think if we don't have that, I'd be a little disappointed. We really look at it on more like a rolling basis, which I know is harder for you because you look at it on a calendar basis. I'd say from here over the next rolling 12 months, will we grow? I think so. Based on what we see, we booked quite a bit last year. We had really good production last year, not all that's funded, so we would expect some of that to roll through. I do like where we are right now on pipeline. Kevin talked about a little bit, we're in constant contact with our customers. Most of our business is repeat business, whether it's somebody that borrowed from you three years ago or somebody that borrowed from you last year.

Speaker #3: I think that's right . That's what I'd like to see . I think if we don't that I'd be a little disappointed . We really look at it on more like a rolling basis , right .

Speaker #3: So which I know is harder for you because you look at it on a , on a calendar basis , but you know , I'd say from here over the next , you know , rolling 12 months , will we grow ?

Speaker #3: I think so Based on what we see , we , we booked , you know , quite a bit last year . We had really good production last year .

Speaker #3: Not all that's funded . So we would expect some of that to roll through . And I do like where we are right now on , on pipeline .

Speaker #3: I'd say there are Kevin talked about a little bit . You know , we're in constant contact with our customers . Most of our business is repeat business , whether it's , you know , somebody borrowed from me three years ago or somebody that borrowed from me last year .

Christopher Poulton: We're really always kind of early on in discussions with our customers about what they're buying, what they're planning, and what they're doing. Some of that moves around, and then I was talking to somebody last week. They called me up, they said, "I've got this thing. We may be buying it. We'd want to move quick," et cetera. "Where would you be?" We told them, they said, "That sounds great." Then they called me yesterday and said, "I think we're going to pass on that." I would've told you last week there might be pretty interesting deal there, and today there isn't, but they may call me back on Monday and say it's back on.

Speaker #3: So we're really always kind of early on in discussions with our customers about what they're buying , what they're planning , what they're of that moves around and then I was talking to somebody last week , they called me up , they said , I've got this thing , we may be buying it .

Speaker #3: We'd want to move quick , etc. . Would you be where would you be ? We told them , they said , that sounds great .

Speaker #3: And then they called me, you know, yesterday and said, I think we're going to pass on that. And so I would have told you last week there might be a pretty interesting deal there.

Speaker #3: And you know, today there isn't. But they may call me back on Monday and say it's back on. So we're flexible.

Christopher Poulton: We're flexible, and because we're flexible, we get a lot of looks at things, and so, generally speaking, on a rolling kind of 3, 4 quarters basis, I can usually say, yeah, I think we're probably going to expand.

Speaker #3: And because we're flexible , we get a lot of looks at things . And so generally speaking , you know , on a rolling kind of three , four quarters basis , I can usually say , yeah , I think we're probably going to expand .

Brian Martin: Got it. Okay. Perfectly. That's helpful. Thanks, Chris. Maybe just a couple follow-ups for me. John, I think you talked about the M&A, just not to beat a dead horse, but just any change now that you've gotten Mountain Commerce in terms of sizing? A lot of people are asking, do you look at something smaller, bigger? Is it just what's available? Just any context on kind of what your preference would be in terms of moving forward with M&A?

Speaker #15: Okay . Perfectly . That's helpful . Thanks , Chris . And maybe just a couple follow ups . For me . Johnny , I think you talked about the M&A , just not to beat a dead horse , but just any change now that you've gotten mountain commerce in terms of sizing , you know , a lot of people are asking , do you look at something smaller or bigger ?

Speaker #15: Is it just what's available? Just any? Any context on kind of what your preference would be in terms of moving forward with M&A?

John Allison: Well, somewhere in the size or larger than maybe Mountain Commerce would be nice. We would probably do a smaller deal if it fits Bill, if it's in a market to where Bill's not. If it fits him, we'd probably step down and do a smaller deal. To me-

Speaker #11: Well Somewhere in the size or , or larger than maybe mountain commerce would be nice , but we would probably do a smaller deal if it if it fits bill , you know , if it's in a market to where Bill's not if it fits him , we probably would step down and do a smaller trade .

Brian Martin: Got you.

John Allison: ... Tennessee's a pretty good size state. We're in what, four or five locations?

Speaker #11: Gotcha . Since he's pretty good size . And you know , we're in what , 4 or 5 locations . But seven , eight , and we got room to grow in that state .

Christopher Poulton: 6, 7.

John Allison: 8. We got room to grow in that space.

Brian Martin: Got you. Okay. That's helpful. Maybe just Stephen, just on the margin, I think you talked about the opportunity on the cost of deposits, if Mountain Commerce has still got some room, maybe not as much room on legacy. On the asset side, what's remaining to be repriced this year for Home and then, I guess, any impact of consequence from Mountain Commerce in terms of that repricing on the asset side?

Speaker #15: Gotcha . Okay . That's helpful . And maybe just Steven , just on the margin , I think you talked about the opportunity on the on the cost of deposits at Mount Commerce has still got some room , maybe not as much room on legacy , but on the asset side , what what's the opportunity for what's remaining to be repriced this year for home .

Speaker #15: And then, could you guess at any impact or consequence from Mountain Commerce in terms of that, you know, that repricing on the asset side?

Stephen Tipton: No, I don't think any impact necessarily from Mountain Commerce. I would say what we're seeing here most recently on what's maturing as we go, given where competition's at is essentially trying to kind of blend in with overall where it's maturing from to keep it on the books. The benefit that I think maybe banks thought was there a year ago, you're certainly with what we're seeing in loan pricing competition in other areas, I think it's kind of hold onto what you got.

Speaker #1: No I don't I don't think any impact necessarily from from mountain commerce . You know I would say , you know , what we're seeing , you know , here most recently on , on what's maturing as we go .

Speaker #1: Given where competition's at is , you know , essentially trying to , you know , kind of blend in with , with overall where it's been tearing maturing from to , to keep it on the books .

Speaker #1: So , you know , I , I , the benefit that , you know , I think maybe banks thought was there a year ago , you're certainly with , with what we're seeing loan pricing competition in other areas .

Speaker #1: I think it's kind of, hold on to what you got.

Brian Martin: Got you. Okay. Just in, maybe, in terms of, I think someone gave the payoffs, maybe it was, I guess. In terms of the production, I think you said it was around $900 million this quarter. I guess, just in recent quarters, has production been similar at that level, or has that moved around a little bit?

Speaker #15: Gotcha . Okay . And just in maybe in terms of you gave the I think someone gave the payoffs , maybe it was I guess .

Speaker #15: But in terms of the production, I think you said it was around $900 million this quarter. I guess, just in recent quarters, has production been similar at that level, or has that moved around a little bit?

Stephen Tipton: It's a little light. The $917 for this quarter. We were a little over $2 billion in Q4, but seasonally, usually are at the end of the year. Prior quarters than that, we've been a little north of $1 billion.

Speaker #1: It's a little light for for . Yeah . The 917 for this quarter . You know , we were two , a little over 2 billion in Q4 .

Speaker #1: But you know, seasonally, usually are at the end of the year. But your prior quarters in that have been a little north.

Brian Martin: Okay. This quarter.

Speaker #15: Okay .

Stephen Tipton: Yeah, some of that.

Speaker #8: So yeah . is not funding day one . So that's a good , you know , fair portion . That's construction and that's not going to fund until , you know , six months from now when it'll start funding generally .

Brian Martin: Pretty similar.

Stephen Tipton: ... is not funding day one. A fair portion, that's construction, and that's not going to fund until six months from now, is when it'll start funding generally. That's a little hard to pencil out at one time.

Speaker #8: So that's a little hard to pencil out at one time.

Brian Martin: Okay. I hear you. Maybe just the last couple for me. I think, just in terms of the credit quality, I guess the one credit, the Texas one you've talked about, but the other couple credits that are out there, I think the Dallas Fort Worth one, the boat one. I guess, those are still just being worked through and no real update in terms of how the timing may proceed there? Just trying to get a read on when you see some of the improvement that you expect here kind of flowing through the numbers, as we go through the remainder of the year.

Speaker #15: Okay . I hear you . And maybe just the last last couple for me , I think just in terms of the credit quality , I mean , I guess the one credit , the Texas one you've talked about , but the other couple credits that were out there , I think the Dallas Fort Worth one , the boat one , I guess , I guess is there .

Speaker #15: Those are still just being worked through, and, you know, no real update in terms of how the timing may proceed there.

Speaker #15: Just trying to get a read on when you see some of the improvement that you expect here kind of flowing through the numbers as we go through the remainder of the year.

John Allison: We battle those credits every day. That damn boat, we're going to a jury trial. I mean, to a trial.

Speaker #11: We battle those credits every day . That damn boat . We're going to a jury trial . I mean , to a trial .

Kevin Hester: It's set for trial in June, so we hope it's out.

Speaker #8: Set for trial in June, so we hope,

John Allison: Trial in June. It's been a year.

Speaker #11: We have, we have not spent a year. We've had, we've had it.

Kevin Hester: We have the boat.

Speaker #8: We had the boat. We have the boat.

John Allison: We have the boat.

Kevin Hester: Not a question of where it is. We actually have the boat, and it's the best.

Speaker #11: We have the boat .

Speaker #8: It's not a question of where it is. We actually have the boat.

Speaker #11: We we just can't . I mean , absolutely , they're just keep it keeps going to judge . And then they got a new judge .

John Allison: I mean, absolutely. It keeps going to judge, and then they got a new judge. Now we got a new judge, third judge, and we're going before the judge in a trial now. I mean, it's a $5 million boat. There's $5 million owed on the boat. It's a $7, $8, $9 million. It may be a $3 million by the time we get it sold, it may be so damn old. I've never seen anything quite like that deal at all. It's just been frustrating. The apartments in Dallas that we're wrestling with, we'll get it sold eventually at some point in time. We've had five or six, seven buyers on it. We'll get it sold at some point in time. I mean, we've marked-

Speaker #11: Now we got a new judge . Third judge , and we're going before the judge in a in a trial . Now I just I mean , it's $5 million boat .

Speaker #11: It's $5 million owed on the boat . And it's a seven , eight , $9 million , maybe a 3 million by the time we get it sold , it may be old , but I've I've never seen anything quite like that deal at all .

Speaker #11: It's just been frustrating that the apartments in Dallas that we're wrestling with, we keep— we keep— we'll get it sold eventually.

Speaker #11: At some point in time . We've had 5 or 6 , seven buyers on it . We'll get it sold at some point in time , but it's I mean , we've , we've marked .

Kevin Hester: Yeah.

Kevin Hester: There's no loss in that for us. Kevin collected $2 million on it a while back, so there's no loss in that. It's just a matter of getting it out of there. There was some construction problems and anyway, you can't

John Allison: There's no loss in that for us. Kevin collected $2 million on it a while back, so there's no loss in that. It's just a matter of getting it out of there. There was some construction problems and anyway, you can't

Speaker #8: Yeah , it's got .

Speaker #11: A we there's no loss in that for , for us . I mean we and Kevin collected a couple million dollars on it a while back .

Speaker #11: So there's no loss in that . So just a matter of getting it out of there . There was some construction problems . And anyway , you can't .

Kevin Hester: Yeah, it's in a receiver, and the receiver's got to correct some safety issues before we may find somebody to take it where it's at. We're working, and we talk to people all the time and work through all the leads we got. Realistically, we may have to work through the issues that need to be completed before you find somebody that really I mean, there's an opportunity there if somebody wants to jump in and do it, and if we find the right person, then we'll get it sold and moved.

Speaker #8: Yeah, we gotta get it—it's in a receiver, and the receiver's gotta correct some safety issues before we may find somebody to take it where it's at.

Speaker #8: We're working and we talk to people all the time and work through all the leads we got . But realistically , we may have to have to work through the the issues that need to be completed before you find somebody that really there's an opportunity there .

Speaker #8: If somebody wants to jump in and , and do it , if you find the right person , then we'll get it . We'll get it sold and moved .

Speaker #8: But okay. And like I said, some challenges you just have to work through.

Brian Martin: Okay.

Kevin Hester: Like I said, some of those are challenges we just have to work through.

John Allison: Okay.

Brian Martin: Okay.

John Allison: There's no loss in it at all. We've written it down, so.

Speaker #11: But there's no at all . We're running it down . Yeah . Down , down , down . So

Brian Martin: Okay. Just the outlook on charge-offs, I mean, it sounds like that's a pretty de minimis number, a pretty low number here, given what's happened with these credits, are just something you're working through, or you've kind of absorbed the impact. The charge-off outlook, at least near term, is still pretty benign in terms of the portfolio today?

Speaker #15: Okay . And just the outlook on charge offs . I mean , it sounds like that's a pretty de minimis number . Pretty low number here given , you know , what's happened with these credits are just something you're working through .

Speaker #15: You've kind of absorbed the , the impact . So the charge off outlook , at least near term is still pretty benign in terms of the portfolio today .

Kevin Hester: I would agree with that.

Speaker #8: I would agree with that. Yeah, yeah.

John Allison: Yeah.

Brian Martin: Yeah. Okay.

John Allison: Remaining.

Speaker #11: Reminding me .

Brian Martin: Yeah. Okay, and maybe the last one for Brian. Go ahead, Johnny. I'm sorry.

Speaker #8: So yeah .

Speaker #15: Okay. And maybe the last one for Brian. Go ahead, Johnny. I'm sorry.

Speaker #11: I don't anticipate any more losses on the big credit or the apartment credit. That's really the ones we're working through.

John Allison: I don't anticipate any more losses on the bid credit or the apartment credit. That's really the ones we're working through. I don't anticipate that. They're marked and written down, and if there was, I mean, if the $100 million credit, if there was some loss in it, I'd be shocked. I've been fooled before, but I think we're fine. It'd just be a bump in the road for us because, I mean, we.

Speaker #11: So I don't anticipate that they're marked . They're marked and written down . And if there was I mean , if if the $100 million credit , if there was some loss in it , I'd be shocked .

Speaker #11: But and I've been I've been fooled before , but I think we're fine . It'll just be a bump in the road for us because , I mean , we .

Brian Martin: Got the PPNR, and you've got the reserves. Yeah.

Speaker #15: Got the P, p, and R, and you've got the reserves. Yeah.

John Allison: Lost it. Maybe, I don't know. Maybe it's nothing. If I thought there's a loss in it, you know me, if I thought there's a loss in it, I'd take it. I would have immediately written it down. We don't need to write it down at this point in time.

Speaker #11: Maybe , I don't know . Maybe it's nothing . I , I don't think I , if I thought there was lost in it , you know , maybe I thought there's Lawson I , I'd take it .

Speaker #11: I would have immediately written it down, but we haven't—no need to write it down at this point in time.

Kevin Hester: 15 years of charge-offs. We got 15 years worth of charge-offs in our reserve.

Speaker #8: 15 years of charge-offs in our reserve. We got 15 years' worth of charge-offs in our reserve.

John Allison: Did you hear what he said?

Brian Martin: Yes.

Speaker #11: Did you hear . Yeah . You got 15 years to charge offs in reserve right now . So I mean , we have a pretty good history of , of not having a lot of charge offs that we've had for years .

John Allison: We got 15 years of charge-offs in reserve right now. I mean, we have a pretty good history of not having a lot of charge-offs as we've had for years. We had the Texas cleanup, which was probably the biggest one.

Speaker #11: We had the Texas cleanup, which was probably the biggest.

Kevin Hester: That includes that.

Speaker #8: One that includes that. And that is included in that. So.

John Allison: That includes that. We still got 15 years.

Brian Martin: Gotcha. Maybe just the last one for me, Brian. I think you talked about the fee income being just some of the noise the last couple of quarters. This quarter seemed pretty clean, around $44 million. Is that kind of a decent level to think about as we go forward? Then I know you talked about a couple of maybe get some wind at your back, but at least a baseline that seems pretty clean with absent all kind of the noise that's kind of flowed through there in recent quarters.

Speaker #15: Gotcha . And maybe , maybe just the last one for me , Brian , I think you talked about the fee income being , you know , just kind of some of the noise the last couple of quarters this quarter seemed pretty clean , around 44 million .

Speaker #15: Any kind of a decent level to think about as we go forward? And then I know you talked about a couple, maybe get some wind at your back.

Speaker #15: But you know, at least a baseline that seems pretty clean with apps and all kind of the noise. That’s kind of flowed through there in recent quarters.

Brian Davis: Yeah, I mean, you're right. Because over the last four quarters, we've had somewhere between $4 and $5 million every quarter that's dropped down in this other income line item. It's a whole variety of different events, ranging from $5.7 million in Q3 of last year to $3.9 million in Q1 of last year. This quarter, we didn't have any of that.

Speaker #11: Yeah, I mean, you're right, because over the last four quarters we've had somewhere between $4 and $5 million every quarter. That's dropped down in this other income line item.

Speaker #11: And it's a whole variety of different events, ranging from $5.7 million in the third quarter of last year to $3.9 million in the first quarter of last year.

Speaker #11: But this quarter, we didn't have any of that.

Brian Martin: Right. Okay. It's a good baseline to work off of, and then expectation is hopefully that you see a trend upwards. Okay. Perfect. Congrats on the quarter, and thanks for taking the questions, guys. I appreciate it.

Speaker #15: Right. Okay. So that's a good baseline to work off of. And then, expectation is hoping that you see a trend upward.

Speaker #15: So, okay, perfect. Congrats on the quarter, and thanks for taking the question, guys. I appreciate it.

John Allison: Appreciate you. Thank you.

Speaker #11: Appreciate you . Thank you

Operator: We have no further questions. I'll hand back to Mr. Allison for any final comments.

Speaker #4: We have no further questions. I'll hand back to Mr. Allison for any final comments.

John Allison: Yeah. Thanks. It's been a long day. A lot of questions, a lot of interest. Thank you for your support. We'll continue to do our part, and hopefully we'll continue to run the 2% ROAs, and see they beat us up a little bit on the stock today. They kind of hammered us on the stock, so I don't think we deserve to be off 3%, but it's an opportunity to buy, so good bet. It's a great opportunity to buy. Timing will be good for us. That's it, unless anybody's got anything else. Anybody else got anything?

Speaker #11: Yeah , thanks . It's been a long day . A lot of questions , a lot of interest . Thank you for your support .

Speaker #11: We'll continue to do our part, and hopefully we'll continue to run the 2% ROAS and see. They beat us up a little bit on the shop today.

Speaker #11: They've kind of kind of hammered us on . They kind of hammered us on the stock . So I don't I don't think we deserve to be off 3% .

Speaker #11: But it's an opportunity to buy, so good. It's a great opportunity to buy. So, time—timing can be good for us.

Speaker #11: And that's it. Unless anybody's got anything else. Anybody else got anything? Thank you very much. Talk to you in 90 days.

Kevin Hester: No.

Kevin Hester: Thank you very much. Talk to you in 90 days.

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

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