Q3 2026 Home BancShares Inc Earnings Call

October 15, 2026

Speaker #1: The company presenters will begin with prepared remarks, then entertain questions. Please note that if you would like to ask a question during the Q&A session, please press star, then 1 on a touchtone phone.

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

Speaker #1: You will find this note on page 3 of their Form 10-K filed with the SEC in February 2026. At this time, all participants are in listen-only mode, and this conference is being recorded.

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

Operator 2: It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations. Donna, please go ahead.

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

Speaker #2: Thank you. Good afternoon, and welcome to our third quarter conference call. With me for today's discussion is our Chairman, John Allison. Stephen Tipton, Chief Executive Officer of Centennial Bank.

Donna Townsell: Thank you. Good afternoon, and welcome to our Q3 conference call. With me for today's discussion is our chairman, John Allison, Stephen Tipton, Chief Executive Officer of Centennial Bank, Kevin Hester, President and Chief Lending Officer, Brian Davis, our Chief Financial Officer, Chris Poulton, President of CCFG, and Scott Walter of Shore Premier Finance. The story of the quarter was stability, strength, and shareholder value creation. All banks are not created equal in management, profitability, margin, and among many other categories, and we certainly work hard at HOME to set ourselves apart. We are proud to announce another record-setting quarter here at HOME, and our team is prepared to provide more details about our performance. Our first speaker today will be our chairman, John Allison.

Speaker #2: Kevin Hester, President and Chief Lending Officer. Brian Davis, our Chief Financial Officer. Chris Poulton, President of CCFG. And Scott Walter of Shore Premier Finance.

Speaker #2: The story of the quarter was stability, strength, and shareholder value creation. All banks are not created equal, and management profitability, margin, and among many other categories.

Speaker #2: And we certainly work hard at HOME to set ourselves apart. We are proud to announce another record-setting quarter here at HOME, and our team is prepared to provide more details about our performance.

Speaker #2: Our first speaker today will be our Chairman, John Allison.

Speaker #3: Welcome, everyone. It's another strong quarter for HOME Bank shares. Led by record earnings of 129.1 million, or 65 cents a share. For the first nine months of '26, we remain on a strong path towards my goal, our goal of 500 million dollars, or as it sounds better to say, a half a billion.

John Allison: Welcome, everyone. It's another strong quarter for Home BancShares, led by record earnings of $129.1 million, or $0.65 a share. For the first nine months of 2026, we remain on a strong path towards my goal, our goal, of $500 million. Or does it sound better to say a half a billion? I never thought I'd be saying that, but we're on the path for that. For the first nine months of 2026, we produced $380 million in adjusted earnings, keeping us on a strong path towards our goal of $500 million. Really, the real difference between the earnings and the adjusted earnings is primarily Mountain Commerce, the merger expense of $12 million to $13 million. During the quarter, we paid our new dividend of $0.23 a share. I know y'all are all happy with that.

Speaker #3: I never thought I'd be saying that. But we're on a path for that. For the first nine months of '26, we've produced 380 million in adjusted earnings, keeping us on a strong path towards our goal of 500 million.

Speaker #3: Really, the real difference between the earnings and the adjusted earnings is primarily Mount Commerce, the merger expense of 12 or 13 million dollars. During the quarter, we paid our new dividend of 23 cents a share.

Speaker #3: I know y'all are all happy with that. I would think that's a 9.5% increase in my wife is extremely happy, as y'all remember, she's a dividend hawk for everyone.

John Allison: I would think that's a 9.5% increase, and my wife is extremely happy. As y'all remember, she's a dividend hawk for everyone. Increase from the last quarter, we repurchased 1,300,000 shares for approximately $39.3 million, created a shareholder buyback yield of 0.69 in Q3. Q2, we created a shareholder buyback yield of 0.77, and Q1 of 0.25. So total through three quarters, additional shareholder return of 1.71%. For the three quarters, we've repurchased 3.3 million shares, approximately $94.4 million, with plans to continue stock repurchases during Q4. Couple that with the new dividend yield of approximately 3%. It is our goal to return as much capital to our shareholders as prudent to do so. I understand the importance of shareholders because they are the ones who we work for.

Speaker #3: Increased from the last quarter, we repurchased 1,300,000 shares for approximately 39.3 million, creating a shareholder buyback yield of 0.69 in the third quarter. Second quarter, we created a shareholder buyback yield of 0.77.

Speaker #3: And the first quarter of 0.25. So total through three quarters, additional shareholder return of 1.71%. For the three quarters, we've repurchased 3.3 million shares, approximately 94.4 million, with plans to continue stock repurchases during the fourth quarter.

Speaker #3: Couple that with the new dividend yield of approximately 3%. It is our goal to return as much capital to our shareholders as prudent to do so.

Speaker #3: I understand the importance of shareholders because they are the ones who we work for. Being a founder, chairman, owner, operator, and largest individual shareholder, I understand the alignment firsthand.

John Allison: Being a founder, chairman, owner-operator, and largest individual shareholder, I understand the alignment firsthand. Management is invested in alongside our shareholders, and we remain committed to sharing the rewards of the company performance with them. That more than confirms the passion and drive to share the rewards with all our shareholders. HOME's earnings power and balance sheet flexibility was shining brightly in the Q3, with record profitability, strong stock repurchases, margin expansion, increased dividend, consistent ROA, strong PPNR, tangible book per share growth, low efficiency ratio. It will be interesting to see as time goes on in this quarter, how we compare to the rest of the industry. We are proud of the fact that we have been named by many companies for outstanding peer leading performance awards year in and year out, and as we forge forward on our goal of $500 million in profit.

Speaker #3: Management is invested in alongside our shareholders. And we remain committed to sharing the rewards of the company performance with them. That more than confirms the passion and drive to share the rewards with all our shareholders.

Speaker #3: HOME's earnings power and balance sheet flexibility was a shining brightly in the third quarter. With record profitability, strong stock repurchases, margin expansion, increased dividend, consistent ROI, strong P/P in R, tangible book per share growth, low efficiency ratio.

Speaker #3: It'll be interesting to see once we as time goes on in this quarter how we compare to the rest of the industry. We're proud of the fact that we've been named by many companies for outstanding peer leading performance awards year in and year out.

Speaker #3: And as we forge forward on our goal of a half a billion dollars in profit. As I said in the second quarter, Mountain Commerce transaction is performing very well and making a continued contribution to the total company.

John Allison: As I said in the Q2, Mountain Commerce transaction is performing very well and making a continued contribution to the total company. Based on what I have seen, I would do that transaction again. We expect additional benefits as we complete the back-office integration during the Q4. Congratulations on a good job to our new Tennessee partners. I am proud of the work you are doing. Again, the big surprise, like the Q2, was the Q3 average loan growth balance is outstanding. What appeared to be a large down quarter, like last quarter, turned out to be only down $28 million on average balances from last quarter. That is a result of keeping many of the loans and payoffs coming late in the quarter. Our funding strategy also continued to benefit earnings. Borrowing expenses during the quarter declined by $2.3 million.

Speaker #3: Based on what I've seen, I do that transaction again, we expect additional benefits as we complete the back office integration during the fourth quarter.

Speaker #3: Congratulations on a good job to our new Tennessee partners, are proud to work proud of the work you're doing. Again, a big surprise, like the second quarter, was the third quarter average loan growth balance is outstanding.

Speaker #3: What appeared to be a large down quarter, like the last quarter, turned out to be only down 28 million on average balances from last quarter.

Speaker #3: That's a result of keeping many of the loans at payoff coming late in the quarter. Our funding strategy also continued to benefit earnings. Barn expenses during the quarter declined by 2.3 million, decrease in interest expense on deposits was 1.2 million of that, and decrease of 1.1 million in interest expense on federal home loan bonds and other borrowings as we reduced total borrowings by 200 million during the quarter.

John Allison: Decrease in interest expense on deposits was $1.2 million of that, and decrease of $1.1 million in interest expense on Federal Home Loan Bank borrowings and other borrowings, as we reduced total borrowings by $200 million during the quarter. Many banks may think their AOCI pain is over because they restructured their balance sheet. It took hundreds of millions of dollars, in some cases, billions of dollars of losses, attempting to repair the damage inflicted by their decisions. The story appears to be repeating itself again as rates continue to climb. HOME avoided taking excessive duration risks, maintained balance sheet flexibility, and protected shareholder capital. Our disciplined decision not to build a large, long-duration securities portfolio has proven to be the right one. Higher rates still affected our AOCI during the quarter, but impact remained manageable relative to our size.

Speaker #3: Many banks may think their AOCI pain is over because they restructured the balance sheet and took hundreds of millions of dollars in some case billions of dollars of losses.

Speaker #3: Attempting to repair the damage inflicted by their decisions. The story appears to be repeating itself again as rates continue to climb. HOME avoided taking excessive duration risk, maintained balance sheet flexibility, and protected shareholder capital.

Speaker #3: Our disciplined decision not to build a large long duration securities portfolio has proven to be the right one. Higher rates still affected our AOCI during the quarter, but impact remained manageable relative to our size.

Speaker #3: If you remember, we've not bought securities in years to speak of. A key point that differentiates HOME from most banks, as evidenced by the increase in margin for the quarter, is the balance sheet is structured to increase the margin as rates increase.

John Allison: If you remember, we have not bought securities in years to speak of. A key point that differentiates Home from most banks, as evidenced by the increase in margin for the quarter, is the balance sheet is structured to increase the margin as rates increase. Donna Townsell said all banks are not created equally, and they are not created equally. But when rates go up, bank stocks usually go down when it is actually positive for Home BancShares, as you can see for the quarter. We built this balance sheet to perform through different economic and interest rate environments, and that discipline continues to benefit our shareholders through today. Those pushing public banks to buy low rate long-term securities several years ago are now the ones pushing for growth. Grow, grow. Growth at any expense.

Speaker #3: Donna said all banks are not created equally and they're not created equally. But when rates go up, stocks bank stocks usually go down. When it's actually positive for home banks as you can see for the quarter.

Speaker #3: We built this balance sheet to perform through different economic and interest rate environments. And that discipline continues to benefit our shareholders through the day.

Speaker #3: Those pushing public banks to buy low rate long-term securities several years ago are now the ones pushing for growth. Grow, grow, grow. Growth at any expense.

Speaker #3: They say, "Johnny, open up that loan machine." I really bet that few, if any, of them have ever run a bank. Being one of the most profitable and safest banks in the country year in and year out has worked for our shareholders.

John Allison: They say, "Johnny, open up that loan machine." I really bet that few, if any of them, have ever run a bank. Being one of the most profitable and safest banks in the country year in and year out has worked for our shareholders. We will stay the course as we have in the past. I'd rather be known as one of the safest and most profitable banks in the United States than one with problems losing millions of hard-earned money of the shareholders. We will grow when opportunities meet our standards for credit quality, pricing, and shareholder returns. We will stay the course, and you can bank on that. Regarding our large non-performing loan we have been discussing for several quarters, our longstanding guidance has been, we have no additional loss in the large Texas C&I relationship, and in fact, we expect recoveries over time.

Speaker #3: We will stay the course, as we have in the past. I'd rather be known as one of the safest and most profitable banks in the United States than one with problems losing millions of hard-earned money of the shareholders.

Speaker #3: We will grow when opportunities meet our standards for credit quality, pricing, and shareholder returns. We will stay the course, and you can bank on that.

Speaker #3: Regarding our large non-performing loan we've been discussing for several quarters, or our longstanding guidance has been we have no additional loss in the large Texas CNI relationship.

Speaker #3: And in fact, we expect recoveries over time. There's been a lot of positive movement in this credit over the last 90 days. 80% of the assets of the company are under a signed asset purchase agreement that we expect to close tomorrow, next week, three weeks from now, but soon.

John Allison: There has been a lot of positive movement in this credit over the last 90 days. 80% of the assets of the company are under a signed asset purchase agreement that we expect to close tomorrow, next week, three weeks from now, but soon. The remaining 20% have a preliminary agreement with only one contingency that will be resolved once the first part is sold and completed. When the 80% sold, we understand the other 20% will come right after that. We expect these transactions to close this quarter. The scheduled proceeds from these two sale transactions would result in a recovery over the current carrying balance. Remaining balance is owed, and the proceeds would be between the personal guarantors and Home BancShares. Profitability, as I said already of our company, we had a 166 PPNR, and I think Stephen is going to cover most of those.

Speaker #3: And the remaining 20% of a preliminary agreement with only one contingency that will be resolved once the first part is sold and completed. So when the 80% sold, we understand the other 20% will come right after that.

Speaker #3: We expect these transactions to close this quarter. The scheduled proceeds from these two sale transactions would result in a recovery over the current carrying balance.

Speaker #3: Remaining balances owed and the proceeds would be between the personal guarantors and home bank shares. Profitability, as I said earlier, of our company, we had a 166 PP&R, and I think Steven's going to cover most of those.

Speaker #3: We came out with a pretty good efficiency ratio of 40.84 for the quarter and a 211 ROI, and that's without the Mountain Commerce conversion.

John Allison: We came out with a pretty good efficiency ratio of 40.84% for the quarter and a 2.11% ROA, and that is without the Mountain Commerce conversion. Our non-performing ticked up a little bit, but that is not concerning to us at that. I think Chris had a little one that popped up, 11 or 12 million, and he is around to discuss it if anybody wants to ask a question. I would like to say a special thanks to our team for continuing to produce better numbers almost every quarter in our 26-year life. We are honored to be a continuing top performer year in and year out. Donna, I think that is all the news I have because all the news I have was good, and I have no bad news.

Speaker #3: Our non-performing picked up a little bit, but that's not concerning to us at that. I think Chris had a little one that popped up, 11 or 12 million, and he's around to discuss it if anybody wants to ask a question.

Speaker #3: I'd like to say a special thanks to our team for continuing to produce better numbers almost every quarter on our 26-year life. We're honored to be a continuing top performer year in and year out.

Speaker #3: Donna, I think that's all the news I have because all the news I have was good, and I have no bad news.

Speaker #1: Okay. Well, no bad news is good news. So thank you, Johnny. Our next report comes from Steven Tipton.

Donna Townsell: Well, no bad news is good news. Thank you, Johnny. Our next report comes from Stephen Tipton.

Speaker #2: Thanks, Donna. As Johnny mentioned, the third quarter of 2026 was another strong performance for HOME and Centennial Bank. Adjusted earnings were 129.1 million dollars, an increase of 1 million dollars from last quarter.

Stephen Tipton: Thanks, Donna. As Johnny mentioned, the third quarter of 2026 was another strong performance for Home BancShares and Centennial Bank. Adjusted earnings were $129.1 million, an increase of $1 million from last quarter. Performance metrics are again top tier with a 2.11% return on assets and a 16.54% return on tangible common equity, which is on a TCE ratio of 13.48%. The reported net interest margin was 4.53%, an increase of 2 basis points from Q2. The core margin, excluding event income, was 4.50%, up 3 basis points from the prior quarter and up 4 basis points year over year. The overall loan yield, excluding event income, averaged 6.91% and exited the quarter at 6.90%, while interest-bearing deposit costs averaged 2.37%. Total deposit costs were 1.83% in Q3 and exited the quarter at 1.81%.

Speaker #2: Performance metrics are again top tier with a 2.11% return on assets and a 16.54% return on tangible common equity, y, which is on a TCE ratio of 13.48%.

Speaker #2: The reported net interest margin was 4.53%, an increase of two basis points from Q2. The core margin excluding event income was 4.50%, up three basis points from the prior quarter, and up four basis points year over year.

Speaker #2: The overall loan yield, excluding event income, averaged 6.91%, an exit of the quarter at 6.90%. While interest bearing deposit costs averaged 2.37%. Total deposit costs were 1.83% in Q3 and exited the quarter at 1.81%.

Speaker #2: Switching to the balance sheet, legacy deposit balances declined in Q3 by 358 million dollars as a result of a decline in municipal deposit balances quarterly tax payments in September, and the reduction of wholesale deposits from the MCB acquisition.

Stephen Tipton: Switching to the balance sheet, legacy deposit balances declined in Q3 by $358 million as a result of a decline in municipal deposit balances, quarterly tax payments in September, and the reduction of wholesale deposits from the MCB acquisition. We continue to focus on core deposit relationships in this extremely competitive rate environment. Non-interest-bearing balances now stand at $4.21 billion and account for over 22% of total deposits. Loan production softened slightly in the third quarter to $850 million, reflective of our conservative approach to underwriting and discipline in pricing. Tennessee contributed nicely this quarter with almost $70 million in production. Payoff volume that we have discussed in the past materialized in Q3 with payoffs at $1.01 billion. Our pipeline for unfunded commitments remains strong at over $3.8 billion.

Speaker #2: We continue to focus on core deposit relationships and it's extremely competitive rate environment. Non-interest bearing balances now stand at 4.21 billion and account for over 22% of total deposits.

Speaker #2: Loan production softened slightly in the third quarter to 850 million dollars, reflective of our conservative approach to underwriting and discipline in pricing. Tennessee contributed nicely this quarter with almost 70 million dollars in production.

Speaker #2: Payoff volume that we've discussed in the past materialized in Q3 with payoffs at 1.01 billion. Our pipeline for unfunded commitments remains strong at over 3.8 billion.

Speaker #2: As Johnny mentioned, tangible book value. Per share grew 3 cents to $15.35 despite a 65 million dollar increase in AOCI and the share repurchases.

Stephen Tipton: As Johnny mentioned, tangible book value per share grew 3 cents to $15.35, despite a $65 million increase in AOCI and the share repurchases. A testament to the earnings power and stability of our company.

Speaker #2: A testament to the earnings power and stability of our company. Capital levels remain extremely strong with common equity tier one capital ending at 16.7% and total risk based capital at 19.4% and reserve to total loans of 1.93%.

Stephen Tipton: Capital levels remain extremely strong with common equity Tier 1 capital ending at 16.7% and total risk-based capital at 19.4%, and reserve to total loans of 1.93%. We believe our balance sheet is well-positioned to benefit from the recent move in rates and from what looks to be additional rate hikes in the future. We have approximately $1.2 billion in fixed rate loans maturing over the next 12 months at a weighted average rate of 5.72%, along with $7 billion in variable rate loans. Asset liability modeling shows a nearly 6% increase in net interest income in an up 100 basis point scenario. We are proud of the third quarter results here at HOME and look forward to another record year as we round out in 2026. With that said, I will turn it back to you, Donna.

Speaker #2: We believe our balance sheet is well positioned to benefit from the recent move in rates and from what looks to be additional rate hikes in the future.

Speaker #2: We have approximately 1.2 billion dollars in fixed rate loans maturing over the next 12 months at a weighted average rate of 5.72% along with 7 billion dollars in variable rate loans.

Speaker #2: Asset liability modeling shows a nearly 6% increase in net interest income and an up 100 basis points scenario. We're proud of the third quarter results here at HOME and look forward to another record year as we ground out the 2026.

Speaker #2: With that said, I'll turn it back to you, Donna.

Speaker #1: Thank you, Steven. Kevin Hester will wrap up our prepared remarks with an update on lending.

Donna Townsell: Thank you, Stephen. Kevin Hester will wrap up our prepared remarks with an update on lending.

Speaker #3: Thanks, Donna. Loan balances ended the quarter much better than we anticipated when we visited 90 days ago. We had some payoffs late in the quarter, but also held onto a few that we expected to pay off.

Kevin Hester: Thanks, Donna. Loan balances ended the quarter much better than we anticipated when we visited 90 days ago. We had some payoffs late in the quarter, but also held onto a few that we expected to pay off. Johnny says I am not very good at forecasting loan balances, so I have got that going for me. I am not sure if it is correct or not, but for what it is worth, this quarter looks better than the last. We continue to see sizable loan opportunities throughout our footprint, and we are encouraged by the effort that is given by our lenders. Johnny commented on the large non-accrual, and while we had hoped it would be a Q3 resolution, we are very encouraged by the progress made recently, and we believe that the proposed asset sales validate our underwriting and management of the credit.

Speaker #3: Johnny says I'm not very good at forecasting loan balances, so I've got that going for me. I'm not sure if it's correct or not, but for what it's worth, this quarter looks better than the last.

Speaker #3: We continue to see sizable loan opportunities throughout our footprint, and we're encouraged by the effort that's given by our lenders. Johnny commented on the large non-accrual, and while we'd hoped it would be a third quarter resolution, we're very encouraged by the progress made recently, and we believe that the proposed asset sales validate our underwriting and management of the credit.

Speaker #3: Overall asset quality remains solid, and while non-performing loans increased 11 basis points quarter over quarter, that increase is due to one CCFG loan that we expect to be resolved in this quarter, and Chris is on the call to provide more color on that.

Kevin Hester: Overall asset quality remains solid, and while non-performing loans increased 11 basis points quarter-over-quarter, that increase is due to one CCFG loan that we expect to be resolved in this quarter, and Chris is on the call to provide more color on that. We remain focused on asset quality, profitability, and growth in that order. One thing I can confidently tell you from my 65 quarters leading the lending function of this company is that this is the only formula for long-term success in this industry. Donna, I will give it back to you.

Speaker #3: We remain focused on asset quality, profitability, and growth in that order. One thing I can confidently tell you from my 65 quarters. Leading the lending function of this company is that this is the only formula for long-term success in this industry.

Speaker #3: Donna, I'll give it back to you.

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

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

Speaker #4: Well, I think Steven kind of hit that. Think about the quarter. We've got an AOCI mark of 65 million dollars. We paid our new dividend increased dividend, and we bought back 1.3 million shares, and we still grew tangible book value slightly.

John Allison: Well, I think Stephen kind of hit that. Think about the quarter. We have got an AOCI mark of $65 million. We paid our new dividend, increased dividend, and we bought back 1.3 million shares, and we still grew tangible book value slightly. We did not lose. The tangible book did not go down. Banks sell on tangible book, and we still increased tangible book value per share. I am very proud of that, and what that says is that HOME has amazing earnings power. That is what 211 ROA will do for you. I really just want to thank the entire team for continuing to deliver outstanding results nearly every year for our 26-year history. HOME BANCSHARES has built a consistent record of top performing banks, and the performance reflects the discipline and dedication of our employees across the company. This was another strong quarter for HOME BANCSHARES.

Speaker #4: We didn't lose the tangible book didn't go down. Bank sale on tangible book, and we still increased tangible book value per share. I'm very proud of that, and that what that says is that HOME has amazing earnings power.

Speaker #4: That's what 211 ROA will do for you. I really just want to thank the entire team, man, for continuing to deliver outstanding results. Nearly every year, for our 26-year history, HOME Bank shares has built a consistent record of top performing banks and the performance reflects the discipline and dedication of our employees across the company.

Speaker #4: This was another strong quarter for HOME Bank shares. We produced record earnings, meaningful capital to shareholders, maintained our balance sheet discipline, made encouraging progress on the large credit we've discussed, we remained focused on finishing the year out strong, and delivering long-term value for our shareholders.

John Allison: We produced record earnings, meaningful capital to shareholders, maintained our balance sheet discipline, made encouraging progress on the large credit we have discussed. We remain focused on finishing the year out strong and delivering long-term value for our shareholders. Past that, I think that is enough from me, Donna.

Speaker #4: Past that, I think that's enough for me, Donna.

Speaker #1: Okay. That sounds good. We will turn it over to Q&A.

Donna Townsell: Okay. That sounds good. We will turn it over to Q&A.

Speaker #5: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand.

Operator 2: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Steve Scouten from Piper Sandler. Your line is now open. Please go ahead.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Steve Scouten from Piper Sandler. Your line is now open. Please go ahead.

Speaker #5: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality.

Speaker #5: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Steve Skouken from Piper Sandler.

Speaker #5: Your line is now open. Please go ahead.

Speaker #6: Are you on, Steven?

John Allison: Are you on, Stephen?

Speaker #5: As a reminder, please unmute your device.

Operator 2: As a reminder, please unmute your device.

Operator: As a reminder, please unmute your device.

Speaker #6: He was going to be in kind of a rural area today. He may not be making connections. Let's move on. If he gets comes back, we'll we'll handle it.

John Allison: He was going to be in kind of a rural area today. He may not be making connections. Let's move on. If he comes back, we'll handle it, how about that. Let's move on.

Speaker #6: How about that? Let's move on.

Speaker #5: Your next question is from the line of Woody Lay from KBW. Your line is now open. Please go ahead.

Operator 2: Your next question is from the line of Woody Lay from KBW. Your line is now open. Please go ahead.

Operator: Your next question is from the line of Woody Lay from KBW. Your line is now open. Please go ahead.

Speaker #7: Hey, good afternoon.

Woody Lay: Hey, good afternoon.

Speaker #6: Hey, welcome. Nice to have you.

John Allison: Hey, welcome. Nice to have you, Woody.

Speaker #7: Hi. I appreciate I appreciate y'all have. Yeah, I appreciate y'all having me. I wanted to start on the net interest margin and, you know, higher rates would seem to be a benefit for y'all.

Woody Lay: I appreciate you all having me. I wanted to start on the net interest margin and higher rates would seem to be a benefit for you all. Was just curious with the hike in September, how you've seen the NIM progress from there and what incremental rate hikes could mean for the NIM going forward.

Speaker #7: Was just curious with the with the hike in September, how you've seen the NIM progress from there. And what incremental rate hikes could mean for the NIM going forwards?

Speaker #6: Hey, Woody, this is Steven. Yeah, I guess first part of your question, you know, the core NIM, excluding event income, average four and a half for the quarter.

Stephen Tipton: Hey, Woody, this is Stephen. Yeah, I guess first part of your question, the core NIM, excluding event income, averaged 4.5% for the quarter. It was 4.55% in September. Obviously, the rate hike came halfway through the month there. So I think there may be a little bit of incremental benefit for us. Then just based on our ALCO model, and like I said in the comments, we show, I think it's 5.6% increase to NII and up 100 basis point scenario. So that's kind of the way we think about it today. We're certainly in a competitive environment on loans and deposits. But if we're able to control that on the deposit side and get some lift out of these maturing loans over the next 12 months, I think there's a chance that it could potentially move a little higher from here.

Speaker #6: It was 455 in September. Obviously, the rate the rate hike came halfway through the month there. So I think there may be, you know, a little bit of incremental benefit for us.

Speaker #6: And then just, you know, based on our alcohol modeling, like I said in the comments, I mean, we show I think it's 5.6% increase to NI and up 100 basis points scenario.

Speaker #6: So that's that's kind of what, you know, we're the way we think about it today. I mean, we're certainly in a competitive environment on on loans and deposits, but, you know, if we're able to, you know, if we're able to control that on the deposit side and and get some lift.

Speaker #6: Out of these maturing loans, over the next 12 months, you know, I think there's a chance that it could potentially move a little higher from here.

Speaker #7: Got it. That's helpful. And then, you know, I was curious on the growth front, you know, based on your on your opening comments, it seems like you're a little bit more optimistic on the on growth in the fourth quarter.

Woody Lay: Got it. That is helpful. I was curious on the growth front based on your opening comments, it seems like you are a little bit more optimistic on growth in Q4, and was curious, is that a reflection of competition slowing down? Is pricing becoming more rational? I guess, just curious on your thoughts on maybe what is driving that on a clear path to growth.

Speaker #7: And was curious, you know, is that a reflection of, you know, competition slowing down? Is pricing becoming more rational? I guess just curious on your thoughts on maybe what's driving that clear path to growth.

Speaker #6: Is this Johnny? I'll take a little that and give it to Kevin. After that, we had some we had we lost about 400 about 500 half a billion dollars were loans due to some unusual circumstances that we have that hit the company over the past 18 months.

John Allison: This is Johnny. I will take a little of that and give it to Kevin after that. We lost about half a million dollars of loans due to some unusual circumstances that hit the company over the past 18 months. They are gone now. Those unusual circumstances are gone, but we are back on the loan wagon today. We have lots of good stuff working, and I think you will be pleased to see the loan growth out of Home BancShares. I will let Kevin speak to that. He was referring. Then we will let Chris comment on it also.

Speaker #6: They're gone now. Those unusual circumstances are gone, but we we're back on the loan. We're back on the loan wagon today. We've got lots of good stuff working.

Speaker #6: And I think you'll see you'll be pleased to see the loan growth out of home bank shares. I let Kevin speak to that. He was referring and I then we'll let Chris comment on it also.

Speaker #3: Yeah, Woody, I don't I don't know that it it may be saying that people are are you know, coming back to their senses with the the 25 basis points that already occurred going up and the the you know, the thought that there's probably 75 more coming.

Kevin Hester: Yeah. Woody, it may be saying that people are coming back to their senses with the 25 basis points that already occurred going up and the thought that there is probably 75 more coming. That may be playing into where we are at. We are not 100% sure of that at this point, but there is certainly some good opportunities that we are looking at for this quarter, good sizable opportunities, and it is across the footprint. It is not all in one place. So we may look back in 90 days and say that, "Yeah, that is part of it," but I am not 100% sure that is the case yet.

Speaker #3: That may have that may be playing into where we're at. We're not 100% sure of that at this point, but there's certainly there there's certainly some good opportunities that we're looking at for this quarter, good sizable opportunities.

Speaker #3: And it's across the footprint. It's not all in in one place. So that we may look back in 90 days and say that, yeah, that that is part of it.

Speaker #3: But I'm not 100% sure that's the case yet.

Speaker #7: Got it. All right. Well, that's that's all for me. Thanks for taking my questions.

Woody Lay: Got it. All right. Well, that is all from me. Thanks for taking my questions.

Speaker #6: Well, one more comment from me. We're we're we're our we're seeing a lot of opportunities out there right now that really look good. I think you'll you'll see a couple of jurisdictions.

John Allison: One more comment from me. We are seeing a lot of opportunities out there right now that really look good. I think you will see coming through this. Chris, you want to comment on CCFG about what you are seeing?

Speaker #6: Chris, you want to comment on CCFG, but what you're seeing?

Speaker #4: Sure. Thanks. Well, it's a little slow new origination wise for us in in the third quarter. I mean, I think we closed the towards the end of the quarter other than two loans hadn't closed and we probably had zero in the pipeline.

Chris Poulton: Well, it was a little slow, new origination-wise for us in Q3. I think we closed towards the end of the quarter, other than two loans that had not closed, and we probably had zero in the pipeline. No soft quotes, no term sheets. But I view that as a good thing. Ultimately, the market was in transition, and market has got to catch up with us sometimes a little bit on feeling sour about things. But really since the start of this quarter, I think people are starting to accept the way things are going to look going forward, rate-wise and such. So we have seen a lot of pickup in the last couple of weeks. A lot of our existing clients, a lot of deals coming back our way that maybe went away for a little while, et cetera.

Speaker #4: You know, no soft quotes, no term sheet. But I view that as a good thing ultimately. The market was in transition and, you know, market's got to catch up with us sometimes a little bit on on feeling sour about things.

Speaker #4: But really, since. Part of this quarter, I think people are starting to accept that, you know, the way things are going to look going forward rate wise and and such.

Speaker #4: And so we've seen a lot of a lot of pickup in the last couple of weeks, a lot of our existing clients, a lot of deals coming back our way.

Speaker #4: That maybe went away for a little while, etc. But I think what we're hearing in general is it's it's pretty uncertain out there. And and uncertain times, you know, are certainty is a virtue.

Chris Poulton: I think what we are hearing in general is, it is pretty uncertain out there, and in uncertain times, our certainty is a virtue. So I like what we are seeing. Pipeline is filling back up, and hopefully it will continue that way, but feel good about things. It was a little bleak in Q3.

Speaker #4: So I like what we're seeing. Pipeline's filling back up and hopefully it'll continue that way. But feel good about things. It was a little bleak in the in the third quarter.

Speaker #7: And then I guess actually just one quick follow up. I mean, it sounds like pricing and spreads are a little bit incrementally positive. Just any any sense on structurally, you know, I think last quarter you called out you're seeing some irrational structure in the in the marketplace, which was causing you to pull back.

Woody Lay: I guess actually just one quick follow-up. It sounds like pricing and spreads are a little bit incrementally positive. Just any sense on structurally, I think last quarter you called out you are seeing some irrational structure in the marketplace, which was causing you to pull back. Are you still seeing any of that over the past quarter?

Speaker #7: Are you still seeing any of that over the past quarter?

Speaker #3: Yeah, I don't I don't think that that's necessarily changed any. I could I could believe that maybe pricing discipline is coming back a little bit more than I do.

Kevin Hester: Yeah, I don't think that that's necessarily changed any. I could believe that maybe pricing discipline is coming back a little bit more than I do structure discipline at this point.

Speaker #3: Structure discipline at this point.

Speaker #7: Got it. All right. Well, thanks for taking my questions.

Woody Lay: Got it. All right. Well, thanks for taking my questions.

Speaker #6: You bet, Woody. Thanks.

John Allison: You bet, Woody. Thanks.

Speaker #1: Your next question is from the line of John Armstrom from RBC Capital Markets. Your line is now open. Please go ahead.

Operator 2: Your next question is from the line of Jon Arfstrom from RBC Capital Markets. Your line is now open, please go ahead.

Operator: Your next question is from the line of Jon Arfstrom from RBC Capital Markets. Your line is now open, please go ahead.

Speaker #5: Hey, thanks. Good afternoon.

Jon Arfstrom: Hey, thanks. Good afternoon.

Speaker #6: Good afternoon, Mr. Armstrom. Nice to have you here.

John Allison: Good afternoon, Mr. Arfstrom. Nice to have you with us.

Jon Arfstrom: Hey. Thank you. Kevin, just one quick one on loan growth. You talked a little bit about late payoffs in the quarter. Can you help us kind of understand the size of that?

Speaker #5: Hey, hey. Thank you. Thank you. Kevin, just one quick one on loan growth. You talked a little bit about late payoffs in the quarter.

Speaker #5: Can you help us kind of understand the size of that?

Kevin Hester: I would say the latter part of the quarter was $300 million or $400 million, and other than one that Johnny was talking about, the majority of that was just projects. We do a lot of construction, and projects reach the time where they either sell or they move to permanent financing, and that's what we were seeing in Q3. There was a lot of projects that needed to move on because it was time.

Speaker #3: It was I would say the latter part of the quarter was 3 or 400 million. And it it it's other than one that Johnny was talking about, the majority of that was just projects.

Speaker #3: You know, we do a lot of construction and projects reach the time where it's where they're either either sell or they move to permanent financing.

Speaker #3: And that's that's what we were seeing in the third quarter. There was a lot of a lot of projects that needed to, you know, needed to move on because it was time.

Speaker #6: One of those was one of them that had unusual circumstances was 100 great credit, 170 million dollar credit that we lost over unusual circumstances.

John Allison: One of them that had unusual circumstances was a great credit, $170 million credit that we lost over unusual circumstances. Hopefully, that is not repeatable.

Speaker #6: We're not hopefully that's not repeatable.

Speaker #5: Yeah. Okay. I know we tease you guys on the loan growth projections, but it it it sounds sounds pretty good. I from my point of view.

Jon Arfstrom: Yeah. Okay. I know we tease you guys on the loan growth projections, but it sounds pretty good from my point of view.

Speaker #6: It's better. It's much better. It's much better. I'm I'm telling you, we're looking at some good opportunities.

John Allison: It is better. It is much better. I am telling you, we are looking at some good opportunities.

Speaker #5: Yep. Okay. Just two quick ones on credit. Chris, anything to note on the CFG nonperformance? Sounds like that's going to be resolved, but anything on that?

Jon Arfstrom: Yep. Okay. Just two quick ones on credit. Chris Poulton, anything to note on the CCFG non-performance? Sounds like that is going to be resolved, but anything on that? Can you guys remind us of the size of the Texas resolutions and what kind of a step down we could see in the Texas non-accruals? Thanks.

Speaker #5: And then can you guys remind us of the size of the the Texas resolutions and what kind of a step done we could see in the Texas non-accruals?

Speaker #5: Thanks.

Speaker #6: Sure. Chris, go ahead and take the first part and I'll take the second.

John Allison: Chris, go ahead and take the first part, and I'll take the second.

Speaker #4: Okay. Yeah, the the one loan that popped up is a it's a little less than $15 million a pre-development loan to a it was a the previous customer and they had developed and and done fine on that.

Chris Poulton: Okay. The one loan that popped up is a little less than $15 million. A pre-development loan to a previous customer, and they had developed and done fine on that. So we did a pre-development loan for them a couple of years ago. It's an LA loan. It's entitled for residential, which LA needs. It was adjacent to the Eaton fire area, so kind of Northeast LA. They had asked for some accommodation on that right after the fires. We gave them that, gave them a little extension for that. But we've kind of gotten to the end of that, and we really needed to exercise our rights under the loan agreement to try to get resolution there. So we started a foreclosure action at that maturity. Since that time, we've signed an LOI for the loan sale. We've put that a little bit on hold right now.

Speaker #4: So we did a pre-development loan for them a couple of years ago. It's an LA loan. It's entitled for residential, which LA needs. It was adjacent to the Eaton Fire area.

Speaker #4: So kind of northeast LA. So they had asked for some accommodation on that right after the fires. We gave them that, gave them a little extension for that.

Speaker #4: But we've kind of gotten to the end of that. And we really needed to we really needed to exercise our rights under the loan agreement to try to get resolution there.

Speaker #4: So we started a foreclosure action at that maturity. Since that time, we've we've signed an LOI for the loan sale. We put that a little bit on hold right now.

Speaker #4: We are continuing to work work that, but our borrower has been in contact with us throughout. They've approached us in the last again, in the last week or so with what they would need to do to reinstate that loan.

Chris Poulton: We are continuing to work that, but our borrower's been in contact with us throughout. They've approached us again in the last week or so with what they would need to do to reinstate that loan. So we're going to give them another five days or so here to come to us. We gave them a plan for reinstatement, and the first stage of that's over the next few days, and then there's about a 45-day period after that for them to fully do that. That's our preference. Our preference is to work with our borrowers when they can come to the table. So we're going to give them an opportunity. We're going to try to give them an opportunity to do that. Hopefully, that's the way that works. If it doesn't, we'll go forward with the LOI, or we'll go forward with foreclosure and sell the property.

Speaker #4: And so we're going to give them kind of another five days or so here to come to us. We gave them a plan for reinstatement in the first stage of that over the next over the next few days.

Speaker #4: And then there's about a 45-day period after that for them to fully do that. You know, that's our preference. Our preference is to work with our borrowers when when they can when they can come to the table.

Speaker #4: So we're going to give them an opportunity. We're going to try to give them an opportunity to do that. Hopefully, that's the way that works.

Speaker #4: If it doesn't, we'll go forward with the we'll go forward with the LOI or or we'll go forward with foreclosure and sell the property.

Speaker #4: But our hope right now is the the borrower will be able to to do what they've said they can do.

Chris Poulton: Our hope right now is the borrower will be able to do what they've said they can do.

Speaker #5: Sure. Good. Thank you.

Jon Arfstrom: Okay. Good. Thank you.

Speaker #6: And on the large C&I credit, you got any more questions on that one, John, or are you?

John Allison: On the large C&I credit, you got any more questions on that one, John, or you-

Speaker #5: Nope. Nope.

Jon Arfstrom: Nope

Speaker #6: Good with. Okay. On the large C&I credit, it's a two-piece sale. A sale number one is the Marine equipment and floating stock. That brought 92% of appraisal that's the bid.

John Allison: good with-

Jon Arfstrom: Just the Texas piece.

John Allison: Okay. On the large C&I credit, it's a two-piece sale. Sale number one is the marine equipment and floating stock. That brought 92% of appraisal. That's the bid. It's being purchased by a New York Stock Exchange company. The purchase agreement is signed. We're waiting on approval from the Coast Guard.

Speaker #6: It's been purchased by New York Stock Exchange Company. The purchase agreement is signed. The we're waiting on approval from the. Huh?

Speaker #3: I'm sorry. I'm sorry.

Operator 2: Coast Guard.

Chris Poulton: Coast Guard.

Speaker #6: Coast Guard. On that the the employees have transferred over and the the equipment will transfer over. And we're waiting on approval from the Coast Guard.

John Allison: Coast Guard. The employees have transferred over, and the equipment will transfer over, and we're waiting on approval from the Coast Guard. That should bring in in the $85 million range for us. The second part of that is basically the fuel tanks, and there is a $17.5 million bid on those. We should net about $16.5 out of that. That brings us in $101, $102 million once that closes. The book balance, not the actual balance, but the book balance we have is $91 million. So you'll see about a $10 million recovery or the loan loss reserve or whatever when that closes. And the balance has been default interest that we have not recognized a penny of. So it will be between the personal guarantors and Home BancShares is how we resolve whatever balance is out. But you should see recoveries there.

Speaker #6: That should bring in in the 85 million dollar range for us. The second part of that is the basically the fuel tanks and there is a 17.5 million dollar bid on those.

Speaker #6: We should net about 16.5 out of that. So that brings us in 101, 102 million dollars once that closes. The the book balance, not the actual balance, but the book balance that we have is 91 million.

Speaker #6: So you'll see about a 10 million dollar recovery or to loan loss reserve or whatever when that closes. And the balance is what has been default interest that we have not recognized a penny of.

Speaker #6: So it will be a between the personal guarantors and home bank shares is how we resolve whatever balance is out. But you should see should see recoveries es there.

Speaker #6: Once we got a hold of the credit, we re underwrote the credit and I have to congratulate our people on an outstanding job to get 92% of of their appraisal.

John Allison: Once we got a hold of the credit, we underwrote the credit, and I have to congratulate our people on an outstanding job to get 92% of the appraisal. I would have told you it'd be gone by now, but sometime in the next couple of weeks, I would expect it to happen. We'll issue an 8-K when it happens. And Stephen Tipton's buying a bottle of 25-year-old WhistlePig, and Donna's having a tent party in our parking lot. So we're going to be drinking WhistlePig and having a tent party out front here when we get final resolution, and I think it's close. Close enough I can smell the whiskey, John.

Speaker #6: So it's it I would have told you it'd be gone by now, but it sometime in the next couple of weeks, I would expect it to happen.

Speaker #6: We'll issue an 8K when that happens. And we we're buying a bottle Stephen's buying a bottle of 25-year-old whistle pig. And Donna's having a tent party in our parking lot.

Speaker #6: So we're going to be drinking whistle pig and having a tent party out out front here at when when when we get final resolution.

Speaker #6: And I think it's close, close enough I can smell the whiskey, John.

Speaker #5: Man, I wish I could get an invitation, but it's great.

Jon Arfstrom: Man, I wish I could get an invitation, but it is great.

Speaker #3: John, did you want?

Brian Davis: John-

Brian Davis: You missed one.

Donna Townsell: You missed one.

Speaker #7: John, it's expenses might be up a little bit in Q4 for me.

Brian Davis: John, expenses might be up a little bit in Q4 from here.

Speaker #5: All right. All right. All right. Well, can congratulations on that. That's a long time coming, but that that'll be a nice step down. So thank you very much for the answers on that.

Jon Arfstrom: Well, congratulations on that. A long time coming, but that will be a nice step down. So thank you very much for the answers on that.

Speaker #6: Thank you. Appreciate it. Appreciate it. But.

John Allison: Appreciate it.

Speaker #1: Your next question comes from the line of Brent Rabbiton from StoneX Group. Your line is now open. Please go ahead.

Operator 2: Your next question comes from the line of Brett Rabatin from StoneX Group. Your line is now open. Go ahead.

Operator: Your next question comes from the line of Brett Rabatin from StoneX Group. Your line is now open. Go ahead.

Speaker #8: Hey, good afternoon, everyone. Johnny, I wanted to ask I know you were good afternoon. I wanted to ask I know you were looking at a potential few transactions and, you know, I kind of heard that a lot of folks are saying, well, the the AOCI marks have have risen so much that that's kind of changed changed the math for the short term.

Brett Rabatin: Hey, good afternoon, everyone. Johnny, I wanted to ask, I know you were. Good afternoon. I wanted to ask, I know you were looking at a potential few transactions, and I kind of heard that a lot of folks are saying, well, the AOCI marks have risen so much that that's kind of changed the math for the short term, and so M&A is tougher right now. But just wanted to hear if any of those three were looking like they might still be possible and just what you're seeing out there. Then, I get a lot of feedback from people saying, "Hey, Johnny, if Johnny wants a really good bank that's going to add some good assets, he might need to bend his triple accretion laws just a little bit." So was just hoping to get some color on those things.

Speaker #8: And so maybe maybe M&A is tougher right now. But just wanted to hear if if any of those if any of those three were looking like they might still be possible and just what you're seeing out there.

Speaker #8: And then you know, I get I get a lot of feedback from people saying, hey, Johnny, if Johnny wants a really good bank that's going to add some good assets, he might need to to bend his his.

Speaker #8: Triple accretion laws just a little bit. So it's just hoping to get some color on those things.

Speaker #6: Well, we hadn't broken yet, right? One of these deals would just was about two months dilutive, you know, 30 minutes or a cup of coffee dilutive, you know.

John Allison: Well, we hadn't broken yet, right? One of these deals was about too much dilutive, 30 minutes or a couple calls dilutive. They've gone radio silent on me. I do not know what happened. I do not know what happened with that deal. I do not know. It was something that had a high level of interest to us, and it's just gone quiet. So I do not know where the banker is coming. I assume the banker will be back to us at some point in time, but that one just went quiet. The other one of them we pulled out on. Was two deals. One of them we pulled out on, and the banker's gone quiet on me on this other one. So it's something that I think would be good for them and good for us.

Speaker #6: I they've gone radio silent on me. I don't know what happened. I don't know what happened with that deal. I I I don't know.

Speaker #6: I it was something that that had a high level of interest to us. And it's just gone quiet. So I I I don't know where the the bankers coming I assume the banker will be back to us at some point in time, but that one just went quiet.

Speaker #6: The other one of them we pulled out on was two deals. One of them we pulled out on and the bankers gone quiet on me on this other one.

Speaker #6: So I it's something that that that that I think would be good for them and good for us. I think it would be a nice transaction for for home to do.

John Allison: I think it would be a nice transaction for Home to do, and we spent a lot of time modeling it and playing with it, and we are willing to bend up for it. So, as it turned out, I called the banker yesterday and told him to call me, and I had not heard anything from him, so it is kind of disappointing. I do not know if they used me as a stalking horse or what they did, but anyway. We would like to put a transaction together, and we are ready to do that. We are always working on it. There is a lot of them out there right now, opportunities to do those transactions, and our currency still is holding up fairly well. We got knocked down a little bit here, because all the banks got knocked down recently.

Speaker #6: And we spent a lot of time modeling it and playing with it. And we're willing to bid up for it. So as it turned out, I I called the banker yesterday or and and told him to call me.

Speaker #6: And I hadn't heard anything from him. So it's kind of disappointing. I don't know if they used me as a stalking horse or what they did.

Speaker #6: But anyway, we're we'd like to have we'd like to put a transact together and we're ready to do that. So there we'll we'll be working on we're always working on it's there's a lot of mouth there right now opportunities to do those transactions.

Speaker #6: And and our currency still is holding up fairly well. We got knocked down a little bit here. It was all the banks got knocked down recently, but I think we'll be back and and and we'll be able to do trades here before long.

John Allison: But I think we will be back, and we will be able to do trades here before long. A little disappointing. That is a little disappointing that we had not brought that one closer to fruition. But if it does not work, it does not work. There is more out there, so we will move on.

Speaker #6: A little disappointing. I don't I I that's a little disappointing that we didn't we we hadn't brought those that one closer to fruition. But if it doesn't work, it doesn't work.

Speaker #6: There's more out there. So we'll move on.

Speaker #8: Okay. That's helpful.

Brett Rabatin: Okay. That is helpful.

Speaker #6: I wish I'd told you how good these deals one of them one of them we did do diligence on and we got inside the loan book, we decided that wasn't for us.

John Allison: I wish I had due diligence support. I wish I had told you I had due diligence.

Brett Rabatin: That's okay.

John Allison: One of them we did due diligence on, when we got inside the loan book, we decided that wasn't for us. It was a tough deal to do anyway, once we got in the loan book, we came out of it.

Speaker #6: So it was a tough deal to do anyway. And and once we got in the loan book, we came out of it.

Speaker #8: Okay. And second question is, what I'm what I'm gathering from the call is it sounds like there's somebody in optimism for loan growth and production but I didn't I didn't quite get it sounds like you also think that maybe the the the payoff challenge that you've had the past two quarters, is that is that dwindling down?

Brett Rabatin: Okay. Second question is, what I'm gathering from the call is it sounds like there's some budding optimism for loan growth and production, but I didn't quite get. It sounds like you also think that maybe the payoff challenge that you've had the past two quarters, is that dwindling down? I was just also kind of curious as it relates to that, if Shore Premier was still seeing demand or how that business was going with higher diesel prices and whatnot.

Speaker #8: And then I was just also kind of curious as it relates to that if if short premier would still seeing demand or or how that business would go and with with higher diesel prices and whatnot.

Speaker #6: Hey, Brent. This is Kevin. I'll take the payoff. There's still it could be close to last quarter as far as the payoff number goes.

Kevin Hester: Hey, Brett, this is Kevin. I'll take the payoff. It could be close to last quarter as far as the payoff number goes. We'll see how that plays out. You had some rollover into this quarter that we thought were going to happen last quarter. That always happens when you're looking at folks that are selling properties or going and getting permanent financing. It's hard to pinpoint exactly when that's going to happen. There's still a little bit of

Speaker #6: We'll we'll see how that plays out. I mean, you had some rollover into this quarter that we thought we're going to have in last quarter.

Speaker #6: So that that always happens when when you're looking at folks that are selling properties or or going and getting permanent financing, you know, it's hard to pinpoint exactly when that's going to happen.

Speaker #6: So but but there's still a little bit of.

Speaker #8: However, from my aspect, I'm seeing better opportunities than I've seen in a while. So I think we can overcome those those payoffs and I'm not sure they have to they have to have come down substantially because we've taken so many so far this year.

John Allison: However, from my aspect, I am seeing better opportunities than I have seen in a while. I think we can overcome those payoffs. I am not sure. They have to come down substantially because we have taken so many so far this year. Hopefully, we will not continue to see the big bites in the payoffs. Chris Poulton, you got anything big payoffs coming?

Speaker #8: So hopefully we'll we won't continue to see the big bites in in the payoffs. Chris, you got anything big payoffs coming? I wouldn't say we have elevated.

Chris Poulton: I would not say we have elevated. We always have payoffs. If I do not get payoffs, I get nervous.

Speaker #8: I mean, we we always have we always have payoffs. If I don't get payoffs, I get nervous. Okay. Great. Appreciate all the color, guys.

Brett Rabatin: Okay. Great. Appreciate all the color, guys. Or go ahead. I am sorry, Johnny.

Speaker #8: Or go ahead. I'm sorry, Johnny.

Speaker #6: I said I'm ready for positive loan growth is what I'm ready for.

John Allison: I said I am ready for positive loan growth is what I am ready for.

Speaker #8: Sounds good to me. Thanks, guys.

Brett Rabatin: Sounds good to me. Thanks, guys.

John Allison: Thank you.

Speaker #1: Your next question comes from the line of Matt Olney from Stevens. Your line is now open. Please go ahead.

Operator 2: Your next question comes from the line of Matt Olney from Stephens. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Matt Olney from Stephens. Your line is now open. Please go ahead.

Speaker #8: Hey, thanks, guys. Just a few follow-ups here on the margin. Deposit competition, great to see deposit costs move lower in the third quarter. Especially with some of your peers moving moving higher.

Matt Olney: Hey, thanks, guys. Just a few follow-ups here on the margin. Deposit competition, great to see deposit costs move lower in Q3, especially with some of your peers moving higher. Curious just about depositor behavior following the Fed hike a few weeks ago, what you are seeing more recently, and if the Fed continues to hike, what your expectations are on depositor behavior.

Speaker #8: Curious just about depositor behavior following the Fed hike a few weeks ago. Kind of what you're seeing more recently and if the Fed continues to hike, kind of what your expectations are on depositor behavior.

Speaker #6: Hey, Matt. This is Steven. You know, first part, competition is is fierce. You know, in in all of our markets, Texas, Arkansas, Alabama, Florida.

Stephen Tipton: Hey, Matt, this is Stephen. First part, competition is fierce in all of our markets, Texas, Arkansas, Alabama, Florida. You've got different competitors in a lot of those markets, but you're seeing. I got a text earlier this week in one of our markets, somebody was advertising 4.5% on a 12-month CD. So, you're seeing some of that stuff advertised. We've taken the same approach that we always have, and negotiating one-off, and selling the strength and stability of the company. We'll get our shots along the way there.

Speaker #6: You know, you've got different competitors and and and a lot of those markets. But you're seeing, you know, I've got a text earlier this week in one of our markets, some of those advertising four and a half on a, you know, 12-month CD.

Speaker #6: So you're seeing some of that stuff advertised. We've taken the same approach that we always have and, you know, negotiating one off and and selling the strength and and stability of the company.

Speaker #6: And we'll get our, you know, shots along the way there. On depositor behavior from an interest rate standpoint, I I don't know if I maybe a little more aggressive on on this last rate hike in terms of of expectations of what we pass along.

Stephen Tipton: On depositor behavior from an interest rate standpoint, I don't know if maybe a little more aggressive on this last rate hike in terms of expectations of what we pass along. We model, I think, 40% beta on checking and savings accounts and 100% on CDs. That's what we're working with our group on trying to achieve overall. Some of the improvement in deposit rates for the quarter was some of the outflows that we had on the municipal side. Most of those are tied to T-bills and index, so that's some of our higher cost funding that drew down some in the quarter.

Speaker #6: You know, we model I think 40% beta on checking and savings accounts and 100 on CDs. And yeah, that's what we're working with our group on on, you know, trying to kind of achieve overall.

Speaker #6: You know, some of the some of the improvement in in in deposit rates for the quarter was kind of, you know, some of the outflows that we had on the municipal side, most of those are tied to T-bills.

Speaker #6: And and index. So that's some of our higher cost funding that that drew down some in the quarter.

Speaker #8: Okay. Appreciate that, Tipton. And then I guess another follow-up, Steven, you mentioned the the variable rate loans around $7 billion. Just want to make sure that's a all-in number.

Matt Olney: Okay. Appreciate that, Tipton. I guess another follow-up, Steven, you mentioned the variable rate loans around $7 billion. Just want to make sure that's an all-in number. Is that CCFG and the community bank? Just remind me, within that $7 billion, the repricing timing as far as how quickly and how often those reprice.

Speaker #8: Is that CCFG and the community bank? And just remind me, within that $7 billion, kind of the repricing timing as far as how quickly and how often those reprice?

Speaker #6: Sure. Yeah. So that does include CCFG. That's that's what is set to or can adjust in Q3 or Q4. So, you know, the the longer-term stuff, I'll call adjustable rate that we have out there.

Stephen Tipton: Sure, yeah. That does include CCFG. That's what is set to or can adjust in Q3 or Q4. The longer-term stuff I'll call adjustable rate that we have out there, but what we consider variable inside of call it six months or less. Some of that's daily, some of it's monthly, some of it's quarterly. About half of the $7 billion, $3.5 billion is tied to Wall Street Journal Prime, and then $3.3 billion or so is tied to SOFR. Then we've got some other indices for the balance of it.

Speaker #6: But but what we consider variable you know, inside of, you know, call it six months or less. And and some of that's daily. Some of it's monthly.

Speaker #6: Some of it's quarterly. Three and a half about half of the seven, three and a half billion is tied to Wall Street Journal Prime and then 3.3 billion or so is tied to SOFR.

Speaker #6: And then we've got some other indices for the for the balance of it.

Speaker #8: Got it. Okay, guys. Thanks for your help. That's all from me.

Matt Olney: Got it. Okay, guys. Thanks for your help. That's all for me.

Speaker #6: Thanks for that. Thanks, Matt.

Stephen Tipton: Thanks.

John Allison: Thanks, Matt.

Speaker #1: Your next question is from the line of Michael Rose from Raymond James. Your line is now open. Please go ahead.

Operator 2: Your next question is from the line of Michael Rose from Raymond James. Your line is now open. Please go ahead.

Operator: Your next question is from the line of Michael Rose from Raymond James. Your line is now open. Please go ahead.

Speaker #5: Hey, good afternoon, guys. Thanks for taking my questions. Just wanted to go back to Mountain Commerce. I think the conversion systems conversion is coming up here next month.

Michael Rose: Hey, good afternoon, guys. Thanks for taking my questions. Just wanted to go back to Mountain Commerce. I think the systems conversion is coming up here next month. Any changes to cost savings expectations or any of the deal-related math, Stephen?

Speaker #5: Any any changes to cost savings, expectations, or any of the deal-related math, Steven?

Speaker #6: No. No. We're set for November the 6th of the weekend of. We've already probably achieved a little of the cost savings along the way since '41.

Stephen Tipton: No. We are set for 6 November or the weekend of. We have already probably achieved a little of the cost savings along the way since 1 April. But come 6 November or the week after, we will begin to see the realization of some of those from be it staffing or DP and other types of opportunities there. So no change, and still estimate was, I think, a little over $5 million on an annualized basis is what we had targeted.

Speaker #6: But, you know, come come November the 6th or the week after, we'll we'll begin to see you know, the realization of some of those from, you know, what be it staffing or or DP and other types of opportunities there.

Speaker #6: So no no change. And, you know, still estimate was, I think, a little over $5 million on an annualized basis is is what we had targeted.

Speaker #5: Perfect. Appreciate that. Maybe separately, Johnny, you I think previously talked about repurchasing all the shares that you issued related to Mountain Commerce. Is that kind of still the plan?

Michael Rose: Perfect. Appreciate that. Maybe separately, Johnny, I think previously talked about repurchasing all the shares that you issued related to Mountain Commerce. Is that still the plan? You definitely sounded a little bit more optimistic on buybacks, particularly given the sell-off we generally had in bank stocks since the middle of August. Thanks.

Speaker #5: You definitely sounded a little bit more optimistic on on buybacks, you know, particularly given the the sell-off we generally had in bank stocks since the middle of August.

Speaker #5: Thanks.

Speaker #6: Yep. That's the plan, you know. We we we're in about, what, 3.3 million so far. And we put about just short of six, I think, in that.

John Allison: Yep, that is the plan. We are in about what? 3.3 million so far, and we put about just short of 6, I think, in that.

Speaker #7: We bought 400,000

Stephen Tipton: We bought 400,000 shares quarter to date so far.

Speaker #6: shares. Quarter to date. So far. Yeah. Yeah. Quarter to date, we bought 400. So that's 3.7. So it you know, we're still we're still in there and hopefully we pick up a million or so this quarter.

John Allison: Yeah, quarter to date, we bought 400. So that's 3.7. So, we're still in there, and hopefully we pick up 1 million or so this quarter. So, we'll just keep on. We won't quite get it all done maybe by the end of the year, but maybe by the H1 of next year, we'll have it all bought back.

Speaker #6: So we'll just keep on. We'll we'll maybe we'll quite get it all done maybe by the end of the year. But maybe the first by the first half of next year, we'll have it all bought back.

Speaker #8: All right.

Michael Rose: All right. That's helpful.

Speaker #5: That's helpful. And then yeah.

Speaker #6: Do you do you think the shareholder yield is important? Michael?

John Allison: Do you think the shareholder yield is important, Michael?

Speaker #5: Do I? Yeah. I mean, I I I I think you guys have a lot of capital. And deploying that capital through different buybacks and opportunistic M&A I think is what we all want to hear and see.

Michael Rose: Do I? Yeah, I think you guys have a lot of capital, and deploying that capital through dividends, buybacks, and opportunistic M&A, I think is what we all want to hear and see you guys do what you've done historically. So keep it up.

Speaker #5: You guys do what you've done historically. So keep it up.

Speaker #6: Thank you.

John Allison: Thank you.

Speaker #5: Maybe maybe one last just one for me on just on the environment. Any areas in in credit that, you know, are kind of peaking your interest at this point?

Michael Rose: Maybe one last, just one for me on just on the environment. Any areas in credit that are kind of piquing your interest at this point? We have heard some scuttle around some of the restaurant groups and maybe some leisure and hospitality. Just anything you are watching a little bit more closely here. Thanks.

Speaker #5: You know, we've heard some some scuttle around, you know, some of the restaurant groups and and maybe some leisure and hospitality. Just anything you're watching a little bit more closely here.

Speaker #5: Thanks.

Speaker #6: I don't we don't not really. We don't I don't I don't see any if you're looking for a segment or a problem somewhere out there, I don't I don't know if there's any widespread spread problems.

John Allison: Well, not really. I do not see any, if you are looking for a segment or a problem somewhere out there, I do not know if there is any widespread problems. Some of the Texas credits created that we have been spent the last. People fuss at us about growth. We have been busy cleaning up that Texas stuff for 3 years. All we got left maybe is a few hotels that give us a little problem. But overall, asset quality, other than we do not have any problems. We have these asset quality meetings, and Texas takes 2 hours, and Florida takes 10 minutes, and Arkansas takes 10 minutes, and we just do not have any problems in those markets. Anyway, we are continuing to work on those, but I do not see any segments anywhere. We resolved our big credit in Texas, which we think will resolve soon, and our reserve non-performers jump over 300%.

Speaker #6: Some of the Texas credits created that we've we've been spent the last I think we're fussing at us about growth. We've been busy cleaning up at Texas stuff for three years.

Speaker #6: And it you know, all we got left maybe is a few hotels that that give us a little problem. But overall, the asset quality other than, you know, we don't have any problems we have these asset quality meetings in Texas takes two hours.

Speaker #6: And Florida takes 10 minutes. And Arkansas takes 10 minutes. And and, you know, it's just we just don't have any problems in those markets.

Speaker #6: So anyway, we're we're we're we're we're continuing to work on those. And but I don't see any segments anywhere. I don't you know, we resolved this our our big credit in Texas which we think will resolve soon.

Speaker #6: And our nonperforming reserve nonperformer will jump over 300%. So I think you can expect that coming pretty quick. So asset quality overall is pretty good.

John Allison: I think you can expect that coming pretty quick. Asset quality overall is pretty good.

Speaker #5: All right. That's great to hear. I'll step back and thinking of Tracy today. Sorry for you guys' loss. I think we're we're all missing him today.

Michael Rose: All right. That's great to hear. I'll step back and thinking of Tracy today. Sorry for you guys' loss.

John Allison: Thank you.

Michael Rose: I think we're all missing him today.

John Allison: Thank you.

Speaker #5: So. Thanks again, guys. Appreciate it.

Michael Rose: So thanks again, guys. Appreciate it.

Speaker #6: Thank you. You bet. Appreciate it. Thank you.

John Allison: Thank you.

Stephen Tipton: You bet.

John Allison: Appreciate it. Thank you.

Speaker #1: Your next question is from the line of Dave Rochester from Canter. Your line is now open. Please go ahead.

Operator 2: Your next question is from the line of Dave Rochester from Cantor. Your line is now open. Please go ahead.

Operator: Your next question is from the line of Dave Rochester from Cantor. Your line is now open. Please go ahead.

Speaker #8: Hey, good afternoon, guys. Back on the deposit discussion, given that, you know, the incremental aggressiveness you guys had mentioned on the depositor front, how are you guys thinking about a return to deposit growth in four Q?

Dave Rochester: Hey, good afternoon, guys. Back on the deposit discussion, given that the incremental aggressiveness you guys had mentioned on the depositor front, how are you guys thinking about a return to deposit growth in Q4? Are you confident in that, and do you think you can fund the loan growth you are expecting with deposit growth next quarter?

Speaker #8: Are you confident in that? And do you think you can fund the loan growth you're expecting with deposit growth next quarter?

Speaker #6: Hey, Dave. It's Steven. And it's certainly be the goal. You know, we're we're we've talked about the competitive environment. You know, some seasonality and and, you know, in the last quarter, we would expect to see some of the municipal balances return there.

Stephen Tipton: Hey, Dave, it is Stephen. That would certainly be the goal. We talked about the competitive environment. Some seasonality in the last quarter, we would expect to see some of the municipal balances return there. We are talking at loan committees constantly about opportunities to get deposits with loan opportunities that come across in order to help fund that. Separate and apart from that, we have got $4.9 billion in capacity with the Federal Home Loan Bank. We have got a good cash position today. We have got securities portfolio that comes off about $30 million a month. So, not concerned from a liquidity standpoint. I think historically, the approach has been to use some of those avenues and take our time and pick our spots, as opposed to being out here and having to run CD ads to raise funding.

Speaker #6: You know, we're talking at loan committees constantly about opportunities to get deposits with loan opportunities that come across. And in order to help fund that, you know, separate and apart from that, I mean, I you know, we've got 4.9 billion in capacity with with the federal home loan bank.

Speaker #6: You know, we've got you know, a good a good cash position today. We've got securities portfolio that that comes off about $30 million a month.

Speaker #6: So, you know, not concerned from a liquidity standpoint. I think, you know, we we historically, the approach has been to to use some of those avenues and and take our time and pick our spots as opposed to, you know, being out here and having to run CD ads to to raise funding.

Speaker #6: So yeah.

Dave Rochester: Yeah. Appreciate that. Can you just give an update on where the spot price for deposits is at quarter end and where you guys are seeing new money post the hike?

Speaker #8: Appreciate that. And then can you just give an update on where the the spot price for deposits is in quarter end and where you guys are seeing new money post the hike?

Speaker #6: Yeah. So total deposit cost ended it their average 183 for the quarter. 181 for September. You know, I I see our our CD and and money market negotiations every day.

Stephen Tipton: Yeah. Total deposit cost ended at. They averaged 183 for the quarter, 181 for September. I see our CD and money market negotiations every day. Our folks are doing a good job. We may have to pay 4% here or there with a customer just because the bank down the street's running an ad at 420 for seven or eight months. But our folks do a good job in negotiating down into the low and mid 3s. So I guess mid 3s is kind of where to think about opportunities today.

Speaker #6: You know, our folks are doing a good job. You know, we may have to pay 4% here or there with the customer just because you know, the bank down the street's running an ad at at 420 for seven or eight months.

Speaker #6: But, you know, our folks do a good job in negotiating you know, down into the low and mid threes. So I guess I guess, you know, mid threes is kind of where we're thinking about, you know, opportunities today.

Speaker #8: Okay. And then just switching gears to the the fee side, the things, there was a little bit of volatility in trust fees this quarter.

Dave Rochester: Okay. Just switching gears to the fee side of things. There was a little bit of volatility in trust fees this quarter. Was just wondering what the driver of that was, how should we think about that line rebounding going into Q4 next year?

Speaker #8: Was just wondering what the driver of that was and how should we think about that line, you know, rebounding going into four Q next year?

Speaker #6: Yeah. Some of it some of it's seasonality in terms of of when our annual trust fees are are are charged. You know, Q3 is generally a little bit of a a light quarter there for trust.

Stephen Tipton: Yeah, some of it is seasonality in terms of when our annual trust fees are charged. Q3 is generally a little bit of a light quarter there for trust. Mortgage and CCFG income were a little bit light this quarter as well.

Speaker #6: And then, you know, mortgage and and CCFG fee income were a little bit light, you know, this quarter as well.

Speaker #8: Do you feel pretty good about that bouncing back in next quarter?

Dave Rochester: So you feel pretty good about that bouncing back next quarter?

Speaker #6: Yeah. I mean, I think if you look over the last six quarters, you know, we've we've averaged about 50 million dollars just shy. In in non-interest income and and, you know, would expect to see us migrate back closer to that number.

Stephen Tipton: Yeah. I think if you look over the last six quarters, we have averaged about $50 million just shy in non-interest income and would expect to see us migrate back closer to that number.

Speaker #8: Yeah. Okay.

Dave Rochester: Yeah. Okay.

Speaker #6: I think you heard me say this. The good news is the good news is we got customers that do real business, not just transaction.

John Allison: I think you have heard me say this. The good news is we got customers that do real business, not just transaction. The bad news is that they are making a lot of money and they pay a lot of tax, so we get hammered on the quarters. It comes back.

Speaker #6: The bad news is that they make a lot of money and they pay a lot of tax. So we get hammered on the quarters.

Speaker #6: So but they it comes back.

Speaker #8: Yeah. Okay.

Dave Rochester: Yeah. Okay.

Speaker #6: I mean, it's coming.

John Allison: It is coming back.

Speaker #8: Good. All right. Maybe one last one on expenses. You know, some good expense control this quarter. You guys showed is just a good run rate to kind of finish out the year and what are your thoughts on expense growth next year?

Dave Rochester: Good. All right. Maybe one last one on expenses. Some good expense control this quarter you guys showed. Is this a good run rate to kind of finish out the year, and what are your thoughts on expense growth next year?

Speaker #6: Well, we haven't done our budget for next year. Yeah. I guess that's coming pretty quick in it, Brian. You may be working on it now, right?

John Allison: We have not done a budget for next year yet. I guess that is coming pretty quick, is not it, Brian? You may be working on it now, right?

Speaker #8: we're kind of waiting for Mountain Commerce to get converted.

Brian Davis: We are kind of waiting for Mountain Commerce to get converted.

Speaker #6: Okay. Okay. So we don't have next year's if we got if I'm running, it'll be less than it is this year. But anyway, Steven's smiling though.

John Allison: Okay. We don't have next year's. If I'm running, it'll be less than it is this year, but anyway. Steven's smiling though.

Speaker #6: Yeah. I mean, you've got some inflationary pressure. But, you know, we've also we've had some things set up throughout the year where where you know, whether it's physical space leases that we've been able to, you know, kind of work space down.

Stephen Tipton: Yeah. You've got some inflationary pressure, but we've had some things set up throughout the year where, whether it's physical space leases that we've been able to work space down, we'll begin to see some of that benefit in Q4. Some of the lower performing segments that we have, we're taking a look at what opportunities may be there for cost savings. You've got the Mountain Commerce cost savings that we'll get some of in Q4. Some of that should offset just inflationary pressures this quarter and next year.

Speaker #6: We'll begin to see some of that benefit in Q4. You know, some of the lower performing segments that we have, we're taking a look at at what opportunities may be there for for cost savings.

Speaker #6: You've got the Mountain Commerce cost savings that will you know, we'll get some of in Q4. So some of that, you know, should offset just inflationary pressures this quarter and next year.

Speaker #8: Okay. So maybe a flattish kind of number that making this this the run rate this quarter good for maybe next quarter?

Dave Rochester: Okay. Maybe a flattish kind of number that making this run rate this quarter good for maybe next quarter?

Speaker #6: For Q4, that's that's probably fair.

Stephen Tipton: For Q4, that's probably fair.

Speaker #8: Yeah. All right. Appreciate it, guys.

Dave Rochester: Yeah. All right.

John Allison: It was 121.

Dave Rochester: Appreciate it, guys.

Speaker #6: 21, 22. Thanks.

John Allison: 120. Okay. Thanks.

Speaker #8: Yeah. Yep. Sounds good. Thanks for all the color.

Dave Rochester: Yeah. Yep. Sounds good. Thanks for all the color.

Speaker #1: Your next question comes from the line of Ed Najerian from Hovdy Group. Your line is now open. Please go ahead.

Operator 2: Your next question comes from the line of Ed Najarian from Hovde Group. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Ed Najarian from Hovde Group. Your line is now open. Please go ahead.

Speaker #8: good afternoon, guys. My my questions have mostly been asked and answered. Just a real quick one. How do you think about the sort of the juxtaposition against about around deposit pricing, you know?

Ed Najarian: Good afternoon, guys. My questions have mostly been asked and answered. Just a real quick one. How do you think about the sort of the juxtaposition, again, around deposit pricing. On the one hand, it's great to keep deposit pricing low, creates that wide NIM and great returns, and love that you're giving back tons of capital to shareholders and keep buying back stock. Do you feel like you're going to have to raise deposit rates kind of along some reasonable deposit beta with the increase in the Fed funds rate? Are you going to continue to try to really keep them restrained and not raise them much as we continue to get rate increases here? I guess the real question is: how should we think about deposit beta with you guys around Fed funds rate increases?

Speaker #8: On the one hand, it's great to keep deposit pricing low, creates that wide nib. You know, and great returns and and love that you're giving back tons of capital shareholders and and keep buying back stock.

Speaker #8: But do do you feel like you're going to have to raise deposit rates kind of along, you know, some reasonable deposit beta with the with with the increase in the Fed funds rate?

Speaker #8: Are you going to continue to try to really keep them restrained and and not raise them much as as we continue to get rate increases here?

Speaker #8: I guess I guess the real question is, how should we think about deposit beta with you guys around Fed funds rate increases?

Speaker #6: We're forced to raise rates. We're forced. We will. And I don't I don't I don't know what we ended up I don't I don't remember what our deposit beta was as rates ran up to the 60s.

John Allison: If we're forced to raise rates, if we're forced, we will. I don't remember what our deposit beta was as rates ran up to the 60s. Do you remember what our cost of funds got up to 2 something? A little over 2? 240, 2 something?

Speaker #6: Do you remember what our cost of funds got up to 2 something? A little over 2. 240, 2 something. In the highest rate environment.

Stephen Tipton: Yeah.

John Allison: In the highest rate environment.

Speaker #8: On total cost. Yeah. I mean, we we've already passed, you know, when they when the Fed hiked 25, what, a month ago, you know, we've we've got a product that is kind of loose.

Stephen Tipton: On total cost, yeah. We have already passed. When the Fed hiked 25, what, a month ago, we have got a product that is kind of loosely indexed to Fed funds that those customers have that expectation. We passed 25 onto them there. We have got some negotiated products that our folks know who they have got to deal with and pass, whether it is 40% of that on or 100% of the rate increase on, depending on a customer-by-customer basis. We handle that two days after the Fed raise rates, and things will kind of settle in from there until the next rate hike.

Speaker #8: Index to Fed funds that, you know, those customers have a have that expectation. We passed 25, you know, on to them there. We've got some negotiated products that that our folks know who they've got to deal with and and pass, you know, whether it's 40% of that on or or, you know, 100% of the rate increase on depending on a customer by customer basis.

Speaker #8: So you know, we handle that, you know, two days after the after the Fed raised rates. And, you know, things will kind of settle in from there until the until the next rate hike.

Speaker #8: Okay. All right. That's that's helpful. Thanks. Good quarter, guys. Appreciate it.

Ed Najarian: Okay. All right. That is helpful. Thanks. Good quarter, guys. Appreciate it.

Speaker #6: Bet, thank you.

John Allison: Yes, thank you.

Speaker #1: Your next question comes from the line of Brian Martin from Breen Capital. Your line is now open. Please go ahead.

Operator 2: Your next question comes from the line of Brian Martin from Brean Capital. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Brian Martin from Brean Capital. Your line is now open. Please go ahead.

Speaker #7: Hey, good afternoon, guys. Just maybe a couple of follow-ups on some of the items from me. Just on on the credit front, outside of the Texas credit you've talked about, any other expectations in terms of, you know, kind of notable progress on the other credits as you kind of go into fourth quarter or into next year?

Brian Martin: Hey, good afternoon, guys. Just maybe a couple of follow-ups on some of the items from me. Just on the credit front, outside of the Texas credit you talked about, any other expectations in terms of notable progress on the other credits as you go into Q4 or into next year, just in general, big picture?

Speaker #7: Just in general. Big picture.

Speaker #6: Hey, Brian. This is Kevin. There's I mean, there's always some some movement. It's you know, kind of like with this one, you hope it happens quicker than it did.

Kevin Hester: Hey, Brian, this is Kevin. There's always some movement. It's kind of like with this one, you hope it happens quicker than it did, but these things just take some time when they're where they are. So that's by far the largest one we have, and we'll cut it in half. So when you get back to there, we were at a pretty low number. When you take half of that out, we're at a pretty low number, and it's-

Speaker #6: But these things just take some time when they're when they're where they are. So that's the by far the largest one we have. And we'll cut it in half.

Speaker #6: So when you get back to there, we were at a pretty low number when you take half of that out. We're at a pretty low number.

Speaker #6: And it's just things that you have to kind of work through, so.

Brian Martin: Yeah

Kevin Hester: just things that you have to kind of work through, so.

Speaker #7: Gotcha. Okay.

Brian Martin: Got you. Okay.

Speaker #6: Incremental process progress. But but nothing imminent.

Kevin Hester: Incremental progress, but nothing imminent.

Speaker #7: No. Yeah. Gotcha. Okay. That's helpful. Thanks, Kevin. And then just on with the improvement with the Texas credit, just I know this the provision this quarter obviously was zero just in terms of how to think about kind of near-term provisioning or given the recoveries in the Texas cleanup, you know, I guess any any sense as we go into fourth quarter and first quarter, how to think about that provisioning line?

Brian Martin: Nothing. Yeah, got you. Okay. That is helpful. Thanks, Kevin. Then just on with the improvement with the Texas credit, I know the provision this quarter obviously was zero, just in terms of how to think about near-term provisioning or given the recoveries in the Texas cleanup, I guess any sense as we go into Q4 and Q1, how to think about that provisioning line?

Speaker #6: Yeah. I mean, Steven, I don't look at each other. I think we have both have the same answer, which based on what Johnny said earlier, I think we would expect not to have any provision this quarter.

Kevin Hester: Yeah. Stephen and I are looking at each other. I think we both have the same answer, which based on what Johnny said earlier, I think we would expect not to have any provision this quarter.

Speaker #7: Yeah. Okay. And that concurring.

Brian Martin: Yeah. Okay. That could carry-

Speaker #6: Yeah. We already have Brian, sorry. I was going to say we we actually we've already got a we got a decent recovery the first week of this month from a from a charge off that we had in the in the first quarter of this year.

Stephen Tipton: Yeah, we've already have-

Brian Martin: Sorry, guys.

Stephen Tipton: Brian, this is Stephen Tipton. I was going to say, we've already got a decent recovery the first week of this month from a charge-off that we had in Q1 of this year. So we're sitting in a recovery position nicely right now.

Brian Martin: Sorry, guys.

Speaker #6: So we're sitting in a recovery position nicely right now.

Speaker #7: Yeah.

Speaker #6: It's it's assuming, you know, we get some of the recoveries we would expect. I think you'd see reserve coverage you know, grow nicely and and not need that provision anything.

Brian Martin: Yeah.

Stephen Tipton: It is assuming we get some of the recoveries we would expect, I think you would see reserve coverage grow nicely and not need to provision anything.

Speaker #7: Gotcha. Okay. And that could bleed into early next year based on kind of the trends we're seeing. It sounds like I mean, at least lower zero, whatever you know, whatever the level is, that's big picture how to think about the next couple of quarters.

Brian Martin: Got you. Okay. That could bleed into early next year based on the trends we are seeing, it sounds like, at least lower, zero, whatever the level is that big picture how to think about the next couple quarters.

Speaker #6: That's fair.

John Allison: That is fair.

Speaker #7: Yeah. Okay. And just the last couple, Steven, I think your comments on the margin, just it sounds you know, given the the deposit cost outlook and I don't know what the new new loan yields are coming on today, but the margins more relatively stable than, you know, rising given given a couple rate hikes.

Brian Martin: Yeah. Okay. Just the last couple. Stephen Tipton, I think your comments on the margin, it sounds, given the deposit cost outlook, I do not know what the new loan yields are coming on today, but the margin is more relatively stable than rising given a couple rate hikes. Is that how to think about it at this point?

Speaker #7: Is that how to think about it at this point?

Speaker #6: Yeah. I think so. I mean, you know, at at like I said, we we actually the quarter at 455 on a you know, non-event income basis.

Stephen Tipton: Yeah, I think so. Like I said, we exited the quarter at 455 on a non-event income basis, and I think if we can run in that 4.5 range, maybe a little higher, we would be certainly pleased.

Speaker #6: And you know, I think if we can run in that range, the 4 and a half range, maybe a little higher, we'd be we'd be certainly pleased.

Speaker #7: Gotcha. Okay. And the and the new loan yields today are comparable to where they have been? Just.

Brian Martin: Got you. Okay. The new loan yields today are comparable to where they have been?

Speaker #6: Yeah. We the 850 in production this quarter was a I think it's 695. So you know, at the you know, for most of the quarter, you know, a little above prime, so.

Stephen Tipton: Yeah. The 850 in production this quarter was at, I think it is 695. So, for most of the quarter, a little above prime.

Speaker #7: Yeah. Gotcha. Okay. And the last couple on the M&A side, Johnny, it sounds like certainly looking, but it doesn't feel like anything's imminent near-term in terms of M&A.

Brian Martin: Yeah. Got you. Okay. The last couple, on the M&A side, Johnny, it sounds like certainly looking, but it does not feel like anything is imminent near term in terms of M&A, just kind of plod along here and look at the opportunities?

Speaker #7: Just, you know, kind of plot along here and look at the opportunities.

Speaker #6: I think it's I think it's fair. But.

John Allison: I think that is fair.

Speaker #7: Okay. And then.

Brian Martin: Okay.

John Allison: But-

Brian Martin: Then-

Speaker #6: I've I've I've I'm looking for one. I'm ready to do one. We're ready to do one. We're ready to you know, if it makes sense, we're ready to do one.

John Allison: I am looking for one. I am ready to do one. We are ready to do one. If it makes sense, we are ready to do one. We have got some opportunities out there. I was kind of hanging on this one because I really wanted to do that trade, and I guess it just went away. The banker never called me back to tell me where it was. I do not know if he lost his phone or what happened. Something happened, but anyway. There is another one out there we will go to work on. See if we can put it together.

Speaker #6: So you know, we've got some opportunities out there. The ones I was kind of hanging on this one because I really wanted to do that trade.

Speaker #6: And I guess it just went away. The banker did it never called me back to tell me where it was. So I don't know if he lost his phone or what happened, you know.

Speaker #6: Something happened. But anyway, we are there there's another one out there. We'll go we'll go to work on, so. See if we can put it together.

Speaker #7: Yeah. Okay. And then I think you mentioned, Johnny, that the buybacks. I mean, I obviously getting back the Mountain Commerce, but it sounded like your commentary was more that, you know, it continues into fourth quarter.

Brian Martin: Yeah. Okay. Then I think you mentioned, Johnny, the buybacks. Obviously getting back the Mountain Commerce, but it sounded like your commentary was more that it continues into Q4, suggesting it may not be as interesting, I guess, or likely to continue into next year, I guess. Did I hear that wrong? Or just kind of wait and see on the M&A front?

Speaker #7: Suggesting it may not be as as interesting, I guess, or likely to continue into next year. I guess that did I hear that wrong or just, you know, kind of wait and see on the M&A part.

Speaker #6: Oh, you heard it wrong.

John Allison: No, you heard it wrong.

Speaker #7: Yep. Okay.

Brian Martin: Yep, okay.

Speaker #6: You heard you heard it wrong. We've we've been buying stock for years. And we'll continue to buy stock.

John Allison: You heard it wrong. We have been buying stock for years, and we will.

Brian Martin: I know.

John Allison: continue to buy stock.

Speaker #7: I know. Yeah. Yep. As I just wanted to clarify.

Brian Martin: Yep. That is why I clarified. I thought-

Speaker #6: Yep. We'll you know, either Steven or I will we'll get out of the market and somehow take our stock down a dollar. And I'll say, "Steven," he said, "I'm already buying." You know, "I'm already in there.

John Allison: Either Steve or I, we will get out of the market, and somebody will take our stock down $1, and I will say, "Steven." He said, "I am already buying." "I am already in there. I am already in there this morning." I said, "Okay, just keep buying it. If they want to take it down, just buy it.

Speaker #6: I'm already in there this morning." I said, "Okay. Just keep buying it." But he they won't take it down. Just buy it.

Speaker #7: All right. I'm just making sure you weren't tag leaning towards your wife and raising the dividend more. So I I appreciate all the color.

Brian Martin: All right. I am just making sure you were not leaning towards your wife and raising the dividend more. So I appreciate all the color.

Speaker #6: She's happy. Text me while I go. She's just thanking me for mentioning her on the call and letting everybody know that she's supportive. She wants another one tomorrow.

John Allison: She is happy as ever. She texted me a while ago. She is just thanking me for mentioning her on the call and letting everybody know that she is supportive. She wants another one tomorrow, but we are going to have to wait a little bit.

Speaker #6: But we're going to have to wait a little bit.

Speaker #7: All right. Well, thank you. Thanks for all the color, guys. I appreciate appreciate the update. Thanks, Johnny.

Brian Martin: Well, thank you. Thanks for all the color, guys. I appreciate the update.

Speaker #6: All right. Bye. Appreciate it.

John Allison: All right.

Brian Martin: Thanks.

John Allison: Appreciate it.

Speaker #1: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Mr. Allison for closing remarks.

Operator 2: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Mr. Allison for closing remarks.

Operator: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Mr. Allison for closing remarks.

Speaker #6: Thank you. Hopefully, we keep rolling the way we're rolling. We'll hit we'll hit the 500 million. Or y'all can all call me sometime. Does it sound better to say half a billion?

John Allison: Thank you. Hopefully, we keep rolling the way we are rolling, we will hit the $500 million, or you all call me sometime. Does it sound better to say half a billion? What does it think, buddy?

Speaker #6: What does it take, buddy?

Speaker #7: Half a billion.

Brian Martin: Half a billion.

Speaker #6: Half a billion? We started this bank. We couldn't spell billion. So now we're halfway there. Anyway, thank you y'all for your support. I think I think things have been we've really had a good strong year this year.

John Allison: Half a billion? We started, Michael couldn't spell billion, so now we are halfway there. Anyway, thank you all for your support. We have really had a good, strong year this year, and I think we are going to wrap the year up fairly strong, too. Thanks everyone. Talk to you in 90 days.

Speaker #6: And I think we're going to wrap the year up fairly strong too. So thank you everyone. Talk to you in 90 days.

Operator 2: This concludes today's call. Thank you for attending. You may now disconnect.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.