Home BancShares, Inc. Stock

Greetings, ladies and gentlemen. Welcome to the Home BancShares, Inc. Second Quarter 2026 Earnings Call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday. The company presenters will begin with prepared remarks, then entertain questions. [Operator Instructions]

The company has asked me to remind everyone to refer to their cautionary note regarding forward-looking statements. You will find this note on Page 3 of their Form 10-K filed with the SEC in February 2026. [Operator Instructions] And this conference is being recorded. [Operator Instructions]

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

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

Home BancShares reported another solid quarter, generating a record net income as adjusted of $128 million, while significantly expanding our balance sheet and maintaining strong profitability. Loan growth, stable margins and improving book value, underscoring the strength of our franchise. Most importantly, we accomplished all of this while maintaining strong credit discipline, and preserving the profitability that has long differentiated our company.

Our team is prepared to provide you with more details about the quarter with our opening remarks today coming from our Chairman, John Allison.

Well, thanks, Donna. It's been another quarter come and go. The second quarter of '26 was sure full of records for the record book -- sure lots of records for the record book, excuse me. There were a couple of items that I think we should talk about. Number one is our merger with our friends with Mountain Commerce. It's evident that some of our merger earnings came through a little earlier and a little stronger than we anticipated as we felt some of the earnings impact in the first quarter. We got to like that. Because this trade was non-dilutive and therein lies the benefit of a non-dilutive trade.

A successful merger is where the 2 companies should be creating more value together than either company can achieve separately. In our view, the meaning of that is 1 plus 1 should equal 3, not 1.75. With our deal being a 3, both groups immediately start sharing the benefits of their union. In this merger, Mountain Commerce and Home BancShares shareholders will equally enjoy the ride together. Perhaps the biggest surprise in the quarter, though, was the surprising loan growth for the legacy footprint. We were forecasting a negative $600 million in loans and actually had a plus $26 million. That's a $626 million swing on the loan side.

As a result, we will no longer forecast next quarter's loan growth. Obviously, we don't do a very good job of that. The problem is that our customers are really a group of outstanding loyal entrepreneurs that are constantly looking for opportunities that we only learn about most of the time when you need a funding request. Many of them do a deal on the spot, commit to do a deal on Monday and say we'll close on Thursday with cash. The good news is we know their limits and they know our limits. The second quarter performance speaks for itself.

During the quarter, we incurred approximately $12.7 million of merger-related expenses. Excluding these expenses, the earnings were -- and you're going to get to hear it again, EPS of $0.64 and earnings of $128.1 million after tax. That's an 8.4% increase from quarter last quarter and almost 12% from 6/30/25. In addition, revenue, $295 million, up 10.6% from the prior quarter from $266.7 million. Adjusted pretax pre-provision net revenue reached a Company-record of $171 million.

When you adjust for the efficiency ratio, it came at 40.46%. Good job by both teams, Mountain Commerce and Home BancShares, on the expense side. And an adjusted ROA of 2.09%. Stable margin of 4.51%, same as last quarter, up 6 basis points from 6/30/25. And I said good job for MCB and Home on the expense side. On an adjusted basis, these performance numbers are some of the best our company has ever run. I want to thank all our associates for an amazing quarter, and that includes our new partners, Bill Edwards, and his outstanding Tennessee team. We have completed the conversion of our legacy company in June, and I think it went as smooth and as good as it could be expected.

Now on to the Mountain Commerce. We stepped up stock repurchases during the quarter. From first quarter, we repurchased 500,000 shares. And this quarter, we repurchased 1.5 million. I said our goal was to repurchase over a short period of time, the shares that we issued in the Mountain Commerce transaction, and we are already approaching the halfway mark.

On M&A, we're looking at some other opportunities. But with the nonperforming loan that we told you about last quarter, our stock took a drop even though it was a 2% plus ROA and again, repeating as one of the top most profitable banks in America in the top 10. We bid on a group -- we bid on a good opportunity, but because our stock was temporarily depressed and we hold our standards high because we do not dilute our shareholders, our bid was not acceptable to that opportunity. We will hope to revisit that company soon as our stock has recovered.

As to the large nonperformer, there has been significant movement from last quarter's report, but we stand by our comments that we expect no further loss. The loan was nonperformed and no income was recognized in this quarter for the loan, or this would have even been a stronger quarter. While work remains, we're encouraged by the progress that has been done this quarter. I have to say here that Kevin Hester, Davy Carter and Mike Cook, I want to thank -- a special thanks for them. They spent a lot of time on this nonperformer. They took the bull by the horns and protected the shareholders of Home BancShares, and thank you guys for a great job. That's a solid testament to the quality, commitment and standards of our people.

Mike Cook now taking over the leadership -- a while back took over the leadership of the Dallas region. That region now reflects the credit culture of Home's operating and underwriting standards. It's certainly nice to have those loan problems for the most part behind us now, but there is some work to be done. However, we think we see the light at the end of the tunnel. In an environment where industry loan growth remains challenging, exceptional loan growth should always be examined carefully. Growth generally comes from a combination of pricing structure, terms or credit standards.

And when there is robust standout extraordinary loan growth in an environment that does not support that kind of loan growth, one should look closely at the rate structure and terms. It's extremely important that your team from the top down to the junior lender must have lending experience, and not only lending experience, but quality lending experience with skin in the game. At Home, that starts with me at the top as an asset quality hawk who's spending my sixth decade in the lending process. We believe in quality lending. I have been involved in over 50 M&A deals. Happy was certainly the most difficult.

But even with all the problems associated with the acquisition, we have worked our way through those problems with a good partnership of Happy and Home employees together. We opened a new branch in Rockwall, Texas, led by Kayne Pierce. We're excited about that. Glad to be in Rockwall, and this is a new branch, not a replacement. New events included hiring our first in-house counsel, Mr. Jeff Campbell, who will fill the role of Corporate Counsel. We want to welcome Jeff to the family and look forward to working with him.

Donna, I just want to make a quick recap of the quarter, if you'll allow me to do that. And I want to leave this with the investment community. Record adjusted income, record revenue, loan growth from a negative $600 million and a $626 million swing, stepped up repurchases from 500,000 to 1.5 million, PPNR, a record $171 million, an adjusted efficiency ratio of 40.46%, stable margin of 4.51% and Mountain Commerce already being a contributor sooner than expected. That has gone well. Continued confidence in Home's credit culture. So when you look at the adjusted earnings, the profitability metrics, the efficiency ratio, the stable margin, elevated share repurchase and strong balance sheet growth, I believe Home's second quarter once again produced one of the strongest banking performances in America.

You know you're on, I'll rest my case. Back to you, Ms. Donna.

Okay. Well, thank you, Johnny. It was another amazing quarter, and our next report will come from Stephen Tipton.

Thanks, Donna. As Johnny mentioned, the second quarter of 2026 was a strong showing with the inclusion of Mountain Commerce Bank in Tennessee and a little organic loan growth from legacy Centennial Bank. Adjusted earnings, particularly excluding merger expenses, were $128.1 million, producing a 2.09% return on assets, the same as last quarter and a 16.82% return on tangible common equity, which is on a TCE ratio of 13.22%. The reported net interest margin was 4.51%, in line with Q1, all while adding $1.5 billion in loans and deposits from Tennessee.

The core margin, excluding event income, was 4.47% and in line with where we guided to on the call in April. The overall loan yield, excluding event income, averaged 6.96% and exited the quarter at 6.99%, while interest-bearing deposit costs averaged 2.38% and exited the quarter the same at 2.38% Total deposit costs were 1.85% in Q2 and exited the quarter at 1.84%. Strong noninterest income was a highlight for the quarter at over $53 million. Higher loan recovery income, fee income at CCFG and increases from our SBIC investments were the primary drivers and got us back to levels we saw in quarters 2, 3 and 4 of 2025.

Switching to the balance sheet. Legacy deposit balances declined in Q2 by $179 million as a result of tax payments and seasonal outflow in April. Worth noting, deposit balances increased by $86 million in May and over $200 million in June to end the quarter at $19.1 billion. Loan production rebounded in the second quarter to just over $1.4 billion, with nearly $1 billion of that production coming from the Community Bank footprint.

Switching to capital. We repurchased 1.5 million shares of stock during the quarter for a total of $40.4 million. As of June 30, we have over 15 million shares remaining available for repurchase under our current authorization and nearly $450 million in cash at the parent company. Tangible book value per share grew $0.45 to $15.32 or an annualized increase of 12.1%. Capital levels remain extremely strong with common equity Tier 1 capital ending at 16.4% and total risk-based capital at 19% and reserve to total loans of 1.92%. We're proud of the second quarter results here at Home, particularly with the inclusion of our partners at Mountain Commerce and look forward to the second half of 2026.

With that said, I'll turn it back over to you, Donna.

Thank you, Stephen. And to close out our prepared remarks, Kevin Hester has the lending report.

Thanks, Donna. As Johnny noted, we found a way to post marginal organic growth in loans in the second quarter, which looked very difficult when we talked 90 days ago. This included flipping what was an anticipated large payoff early in the quarter into a hold with even a slight increase, which put us on a good path for the rest of the quarter. In last quarter's remarks, I mentioned that Q3 payoffs appeared high as well, and that is still the case. In fact, the gap is higher now than it was 90 days ago. Johnny joked about us not being very good at forecasting, and we discussed on the last call some of the reasons why early projections can be skewed toward declines. That said, we have work to do in order to post loan growth in this quarter.

Regarding Johnny's comments about loan growth in general, we are seeing loan rates from the competitors creep lower and lower, while probabilities for the next Fed interest rate move are up rather than down. We will continue to maximize loan opportunities while trying to protect our strong NIM so that we can continue to post best-in-class profitability. Asset quality remains solid with an 8 basis point drop in nonperforming loans and a 4 basis point drop in nonperforming assets. Early-stage past dues remained under 50 basis points. And loan loss reserve coverage of nonperforming loans improved to 177%.

As others have said, we began the quarter with the Mountain Commerce Bank acquisition. And from a lending perspective, the combination has gone very smoothly; the similarity of their markets and their lending philosophy to ours will result in a shorter learning curve and earlier meaningful contribution. On that note, Donna, I'll send it back to you.

Thank you, Kevin. Johnny, unless you have additional comments, I think we're ready for Q&A.

Well, I do want to talk about loans a little bit. On Wednesday's loan committee, we approved about $350 million worth of loans. So that's our -- primarily the hits coming from our South Florida group that really have a lot of things going on. JC and David and their teams are doing an outstanding job in Florida. So there's $350 million worth of just -- you think -- I knew those were coming. I didn't know they were coming this quarter. So one of them we've been working on for several years, and it's going to be the best and most fabulous project ever built in Miami, Florida.

So we're excited about being in that loop with that team of people, and it's fantastic facility that's being constructed, and it is one of our customers. So we just have more -- they have lots -- probably the second -- they said the second half, they're going to bring even more. So that's pretty exciting from that aspect. Some of this is construction. So they put their money in first, but it is loan growth that's coming down the pipe for us before long.

So anyway, you never know from one day or the other, as I said, our FBO guy bought another FBO thing, we didn't know it was on that transaction. Kevin just visited with another one. And so anyway, we're working on it. It's hard to -- as I said, it's like catching a greased pig in a ditch. You think he got him and he gets away from you. So maybe we'll catch him this quarter.

So that's all I got to say, Donna, I'm ready for Q&A if the rest of...

Okay. Operator, we'll turn it back over to you.

[Operator Instructions] Your first question comes from the line of Jon Arfstrom with RBC Capital Markets.

You guys just gave us a bunch of information on loan growth or not loan growth. So I'm a little bit confused on it. But what does your gut tell you today on it? Kevin, you talked about maybe more paydowns expected in Q3 than you expected in Q2. So maybe the indication is down, but then Johnny, you're talking about a bigger pipeline. So I know you said it's hard to predict, but what does your gut tell you for loan balances in the near term?

Well, we have probably more going on in the Florida market right now than we've ever had going on in that market. It is quite explosive. We have been working on some of the projects. We had basically billions of dollars' worth of opportunities that are going to come our way. It may be the next 60 days, it may be 6 months, but they're coming. Those projects are coming from our long-term customers in that market. So it's just hard to tell when they pull the trigger. But overall, I'm pretty optimistic. We were down -- going to be down $600 million. We ended up moving up $26 million. And that happened just all of a sudden. It just -- it came in and it -- it's kind of surprising.

So we're not very good at projecting future loan growth. It seems like when I say we're going to have it, we don't. When we say we're not going to have it, we do. So I'm pretty much -- I think it's going to be to keep it at where it is. I think we're going to work hard, but I don't think it's a problem with that. We had our lenders conference in Florida recently, and I told the group, I said we're down -- projected to be down X number of dollars, I need you all to step up.

So I don't know if they just reached in their pocket and brought some stuff that they were going to bring next quarter in, but it all came in pretty fast, pretty quick, including the $100 million piece of credit, another $40 million piece of credit, some really good customer credit. We didn't sacrifice -- we don't sacrifice quality and margin for loan growth. So we're not going to do that, and we didn't in this cycle.

Kevin, do you got any comment?

No, it's all fair. I mean payoffs are where they are, and we outran them this quarter, and we'll continue to try to do that. Will that happen every quarter? We don't know until it happens.

So the answer is you're...

You're confused.

Still confused.

Yes. You're still confused.

Still confused, right? So that's -- we did our job.

Yes. I'll probably hold it flat in the model. That's my guess. Chris Poulton, I think last quarter, you also talked about maybe some paydowns in Q2 and Q3. Those balances are a little bit lower. But any help on what you're seeing in the pipeline there and kind of expectations for activity in your business?

Sure, Jon. It's Chris. Well, we did get the paydowns this quarter that we had anticipated, and yet we were still kind of flat, which means we had good production. I think we've originated $800 million, $900 million so far this year. I think that still looks pretty good for us as we continue. That's a pretty good number run rate for us. So I think like Johnny said, things -- we work on some things, they go away. Sometimes we let them go away and sometimes they come back.

We're seeing a number of things come back our way. As we say, if you love somebody set them free. We let them go and test out the market and come back and sometimes we can work a transaction out.

I'll be making a West Coast swing, I think, next week and have a whole bunch of things lined up that were things we probably worked on several months ago that now they want to sit down and talk. So I feel good about there being opportunities out there. Like Johnny said, will they come in, in the next couple of weeks or the next couple of months? I think we'll see. I don't see anything different now than I did before about our opportunity to be able to get transactions that are on our terms if we're patient. I just think it's always about being patient here. It's hard to predict loan growth when your goal isn't loan growth.

Your next question comes from the line of Brett Rabatin with StoneX Group.

I wanted to start on the margin. And just it sounds like you're being able to -- everyone is concerned about competition and funding costs moving higher. But it sounds like you're being able to grow core deposits. So I wanted to see if all those were sticky. And then just if you can hold the loan yields and not see too much matriculation on the deposit side, would seem like the margin, at least on a core basis, could hold up pretty well, but I wanted to get some additional color on how you guys see things playing out? And then obviously, you've typically been a little bit asset sensitive. If we get a rate hike, what does that mean for you?

Brett, this is Stephen. I can take the last first. Yes, we -- I guess our ALCO model shows almost a 6% increase in an up 100 basis point environment. So the Fed did move quarter or half. I think it's a net positive for us. On the deposit side, our folks have done a great job in negotiating rates on money markets and CDs. We're seeing competition in the 4-plus percent range. And I think most recently, half of our CD maturities automatically renew at our lower rates and the other half, they've negotiated in about the 3.5% range. So -- they've done a good job there working relationships to keep what we have and then through loan committees and our presidents have folks out pushing opportunities for deposit growth to supplement the loan side. I mean at 4.51% reported and 4.47% without event income, I think we keep it in that range, we would be pleased.

Okay. That's helpful. And then just around the -- you had really strong growth in fees, particularly service fees, trust and mortgage. Were any of those, do you think, impacted by any seasonal factors? Or can those levels be sustained? And any thoughts on just if the outlook there is for growth or if maybe those numbers were a little bit high for 2Q?

Brett, this is Stephen again. Yes, as I mentioned in my comments, there were a handful of items that were up in Q2 from Q1. I think on the call last quarter, we talked about noninterest income was about as low as it could be at $44 million adjusted for the marketable securities. We were about $52.5 million, $53 million adjusted for that this quarter. Some of that's wealth management, like you said, trust, financial services are alignment with Ameriprise, and they're kind of hitting their stride and both of those areas are doing well. So some of that should continue.

The loan recoveries, some of Chris' fee income at CCFG that comes when payoffs are a little higher. Some of that's going to bounce around. I think our view is if you look at the last 5 quarters, it averages about $50 million over the past 5 quarters, and that's kind of where we would expect things to be over the long term.

Yes. Last quarter was kind of -- first quarter was kind of an anomaly. We normally have much more income there. We just didn't -- we didn't get it. We didn't get the kick that we normally get. And that happens maybe 1 quarter out of 4 annually. So -- and sometimes not, but that was just revenue was down as a result of that, we didn't get -- we got no kick, just nothing. So -- but $50 million is a good number, somewhere in that number, give or take, $50 million.

Your next question comes from the line of Michael Rose with Raymond James.

Johnny, just as it relates to Mountain Commerce, you said that -- I think in the press release, too, that it's contributing earlier and stronger than what you expected. Can you just give some greater color there on what you mean, maybe just in terms of expense savings, revenue synergies or just any other color broadly you have on what would qualify that statement from your view?

As we're going through the quarter, first month, second month and third month together, I could see that I could feel the income by looking at the income statement that we're getting extra income from somewhere, and it had to be coming from there basically. So some of it was improvement at Home, but a lot of it was coming from them. I really didn't expect that. I guess I was shocked by the fact I didn't expect that kick that quick.

We convert in November, and that's about $5.5 million, $6 million of savings to the company that we'll pick up at that point in time. So I just wouldn't -- I think I wasn't prepared for it that quick, and I saw the numbers and the revenue numbers and all of it coming together and just was extremely pleased with what I was seeing on the daily reports. I mean, if you remember, we run a -- we get a daily P&L statement here and you begin to see it and you think where did that come from, and how did that happen? And it was just all positive. That's basically it, Michael. just so I felt it over the quarter day by day as we operate.

No, certainly appreciate that color. It's obviously a good deal for you guys. Maybe just going back to loan growth. I know we've already kind of talked about it a fair amount, but you do have pretty good momentum here, as you mentioned, $350 million recently approved loans. I guess, do you think with Mountain Commerce in the fold and maybe some bridging into some higher growth economies now that Dallas is back in a bigger way and what's going on in Texas, I mean, could we think about structurally better loan growth from Home than we've seen in recent years? Or is this the competitive environment, particularly given that some of those markets are more competition, just going to be harder?

I can agree with that we could have better loan growth. I don't want to talk about other -- what other people are doing because it sounds like I'm throwing stones, but you're seeing some ridiculous stuff being done by some people in the marketplace. And it's just really frustrating. We're not going to do that. We got all the capital -- we got tons of capital. We got -- it's a powerful earnings machine, and we're going to continue to do what's right, and we're not going to get off into chasing rainbows. So we've never done that. We're not going to start doing it now. But I mean, we're seeing structure and terms that -- I mean they're just ridiculous. We're seeing that.

So we're not going to do that. We're going to continue to, as I said, keep the quality, the margin and stability, we're going to price that over loan growth. So could we get loan -- anybody can get loan growth. Hell, it's nothing to loan growth. You can get all you want, give it away, change the terms of the structure and you can load the wagon. You can just absolutely load the wagon. And that doesn't mean that it's going to long term be good. You can look at the asset quality of Home over the past -- since we've been public basically and look at the quality of what we produce, and we'll continue to do that. We're not going to change. We're not going to run off in the sun.

I got people pushing me to lower our standards and go do that, and they can do that after I'm gone. After I retire, I go to the house, they can do that. They're not going to do it while I'm here. And I don't plan on going anytime soon. What was it we had? What was the drink we had here before with Michael?

It was Slurpees.

Slurpees. The quarter was so good. I told them before, I said, "We should have Slurpees this quarter with Michael." He should have bought us Slurpees. But anyway...

I'll line it up for you next quarter. How about that?

That'd make for a great quarter for us. Go ahead.

Just one follow-up on that. Just in the absence of loan growth, just assuming that the competition does remain intense here in the near term, how should we think about the pace of buybacks? Is kind of what you did this quarter, what we should kind of contemplate? Or is there room to maybe even move that higher just given what's out there and how profitable you guys are?

We do what we say we're going to do, and we said we're going to buy back the number of shares that we issued in Mountain Commerce. So you probably -- we will look for opportunities. They gave us a great opportunity last quarter. That's when we stepped up and bought $1, because it took us down and gave us I think our average $25 or something, Stephen, $25?

$26.

$26. So that was a great opportunity for us. So if, in fact, we get an opportunity, we'll be extremely aggressive. But it is our intention to buy that back because it is our intention to do another M&A deal on the heels of Mountain Commerce.

Your next call comes from the line of Stephen Scouten with Piper Sandler.

I'm curious, just following up on those M&A comments, Johnny, kind of what you guys are -- what you're seeing in the market right now kind of with bank stocks up kind of across the board, if that's making it the conversations more palatable or if sellers' expectations just continue to go higher because the group trades up. So just kind of wondering how those dynamics are playing out in the conversations you're having?

Well, they said rising tide raises all ships or whatever they say, rising tide raises all ships. Well, we're seeing that in the marketplace right now it's pretty good space -- bank space is a pretty good place to be. If we -- the last deal when our stock was down and we bid on, and I understand they wanted a better trade, had they taken that, they'd be up 25% today. So it's almost basically the same. It's how many of their shares for our shares and what that trade means.

And we're not seeing a lot of M&A out there right now. People are being -- they're looking at their balance sheet and are thinking about, is this a dilutive, dilutive, dilutive transaction. So we're not seeing a lot of that, and we're not -- certainly not going to do that. I'm having people say, "Well, Johnny, with your currency right now, you could go buy this and that, and this and that." If you just take a little dilution. Well, we don't dilute. That's what the world would like for us to do. And then they could say, "Wow, hell, they diluted that last deal." So anyway, we don't do that. We'll continue to do what we're doing. I think there's opportunities out there in the marketplace.

But the deals either work or they don't work, as I've said in the past. They're either accretive, accretive, accretive or they either -- our stock is back up close to 2x tangible book now. So that gives us the ability to move up and make somebody happy if they want a better price. It could be -- you trade with somebody last month and they get the stock and it's up, I don't know, 30% since then. So it just depends -- timing means so much, as you know. Timing is the key to where their stock is, where our stock is and if it works or it doesn't work. And we'll just hold tight.

We hold tight on -- it's worked for this company for the last 25 years to hold tight on underwriting and hold tight on acquisitions and do the right thing. So I think we could see a stock market turnaround here before too long. We got -- things are not as strong as they have been, but I don't think it will be bank stocks. I don't think it will be Home. I kind of went around the horn there, but I don't know if I answered anything that you asked or not.

Yes. No, that's -- yes, that's helpful context for sure. I appreciate that. And kind of maybe thinking about expenses for a minute. I feel like last year into the beginning of this year, you were kind of pinging around a $113 million, $114 million a quarter kind of range that you were hoping to hold everyone to. What's kind of the number in your mind today, Johnny, where you'd like expenses to stabilize and what you guys think you can achieve there?

Well, I think somewhere in that range is fair. We got -- what do we have $12 million, what do we come out of that?

$12.7 million. If you take the $12.7 million out, it's about $122 million -- $127 million, which I think is kind of last quarter where we said with Mountain Commerce, their current expense run rate where we would land. And then once we get converted in November, we'll begin -- or we will get a good portion of those cost savings out at that time. So we'll see a little benefit from that in Q4 and then obviously, all the next year.

I mean think about how efficient Home operated and then you add Mountain Commerce, how efficient Bill operated his group, and then we're going to get some additional savings. We're getting some income and we should get some additional savings coming up here pretty quick. So I'm optimistic we can hang in that range in the $120 million.

That's fair.

Got it. That's great. And then maybe just one last clarifying question back on the previous conversation around loan growth and payoffs and whatnot. I think on last quarter's call, you guys have talked about thinking there could be maybe $1 billion in payoffs. Kind of curious where you actually ended up seeing that number come in if it was -- it sounds like maybe it was slightly better than what you're projecting there. And then just as you think about third quarter and beyond, if it's north of that $1.2 billion number or just kind of framing that payoff dynamic conversation up a little bit?

This is Kevin. Last quarter's number was $1 billion, a little bit over $1 billion. This quarter could be there. It's a little early, but it's -- it could be scheduled for that.

Okay. So that magnitude is kind of the same. And then if you're doing $1.4 billion of production, it just kind of depends on how it all funds up and the timing of everything of when and if you can see loan growth. Is that the right way to think about it, Kevin?

I think that's exactly the way. This is the toughest time in the bank space as rates are going down or going up. They were -- it's better for us to go up. But when they start down, when the rates start down, then people try to jump ahead of a loan rate and go in and cut the rate 1.5 or so and cut a deal with somebody and tie it up. And that's -- this is the toughest -- going up is a lot easier than going down. So this is a battle to take one customer at a time and you fight the battle. And this is in our history, third or fourth time we've fought that battle, and we'll continue to fight the battle this time.

But you got -- it's not necessarily all rate. I mean the structure of some of these deals and the loan to cost or loan-to-value ratios have kind of gone out of whack. It reminds me of around late 2004, '25 -- '04, '05 when people are doing stupid stuff. So we're seeing some of that in the marketplace. And that will come home to haunt people, I believe. We're just not going to play the game. We don't have to -- we've got a good machine that's generating really good solid income. And the difference between a record month and not a record month is what -- how much risk we want to take. And we're not big risk takers.

Yes, congrats on another great quarter.

Your next call comes from the line of Matthew Olney with Stephens.

I guess going back to the discussion around the competition for loans. Kevin, I think you mentioned pricing is getting tighter. Any more numbers you can put behind this in the market? And then for Home BancShares, any color on just the production yields you guys have seen more recently?

I'll let Stephen cover the yields he had those in -- we were talking about those before the meeting. I think he's got those written down. I'll let him cover those. But I mean, we are seeing some things in the 5s, the high 5s, the mid-5s -- and as Johnny said, it's not just rate. It is rate and structure in the same deals. I mean you can kind of get by with given rate or you can give a little structure, you get your rate and get your risk covered. We're seeing it both ways. And that's the challenge is that you -- when you give rate and structure away, like Johnny said, it's easy to grow if you're willing to do that. That's simple. Anybody can do that.

Matt, this is Stephen. We were at about 6.75%, 6.75%, 6.76% on production in the second quarter.

Okay. Great. And then I guess maybe a similar question, Chris Poulton, I know your borrowing base is very unique and differs a lot from what Kevin was talking about. But curious what you're seeing on the competitive side as far as pricing and structure as well.

We don't see much on structure because I think the deals tend to be a little bit more bespoke. And so we do see -- we see price. Over the last couple of years, we've seen price probably come down 50 basis points or so overall, I think, in the market. Sometimes it comes down a little more. We see price, I would say, a lot more in 2 areas. One, construction. Every once in a while, you get some folks step in and just get really aggressive on construction. Again, not necessarily on a lot higher leverage than nonrecourse side, but you do see every once in a while, somebody will step up and get pretty aggressive on price for a few months.

And they generally do that and then they fill up and they go away for a little while. And then on the facilities side as well, I think that's where we probably see most of the structure piece where I think folks that are getting into that facility space might underestimate how much structure they're going to need. But otherwise, I think it's just the normal kind of thing where every once in a while, somebody has got to put some money out and burn a hole in their pocket and they get aggressive.

Your next call comes from the line of Brian Martin with Brean Capital.

Maybe just one last one on the expenses, Stephen. I think you talked about the conversion in November and kind of the pace kind of holding where it's at today. I mean if we think about '27 and you get the savings post conversion, I mean, is it best to look at that run rate where you're ending the year similar to what it will look like going into '27 or given that you've got inflation, obviously, but you're going to get the savings coming out in the fourth quarter. So maybe not much change in the run rate from 4Q heading into 1Q. Is that a fair way to think about it? Or is that not the right way?

No, I think that's fine. Again, we're a bit, call it, $0.5 million a month, give or take, post conversion with MCB. And Bill has done a great job. Bill and Kevin both have seen some cost savings opportunities along the way already. But the bulk of that comes out November, December, and then we'll have our typical kind of beginning of the year merit raises and those kinds of things, that will help offset.

Got you. Okay. Just remind me the savings you expect from the transaction in terms of, I guess, what dollars or -- I guess, how do you frame up the savings you're anticipating coming from the Mountain Commerce?

We modeled 20%, which was about $5.5 million annually.

Okay. And the bulk of that comes in the fourth quarter or post fourth quarter?

Correct.

Correct. Okay. Got you. And then maybe, Johnny, just on the M&A. I mean, it sounded like there was a trade you guys were on, now you're off it, maybe come back to it. But just in terms of -- in the kind of your comments about the conversations maybe being a little bit less today, I mean, it sounds like not putting words in your mouth, maybe there's nothing imminent, but your discussions are ongoing. And maybe if that's accurate, you can confirm that. And then just in terms of sizing or geography, kind of where you're any change in terms of what the interest is?

I'm not going to do that. I'm not going to do sizing or geography. But I like the people and I like the company, and I like their geography. So I'm going to go back and revisit that. I've sent them the information for the call. And actually, I called them afterwards. I said, "I couldn't get there because I would have diluted myself because they had my stock down to" what? 170 or something, Stephen, some?

Some number.

So I said, "It wouldn't work for me." So he said, "Well, that didn't work for us", and I said, "I understand." But we're going to go back and revisit that if they're interested and see if we can put something together that makes some sense. So it's another nice trade appears to me, a good little bank and similar to Mountain Commerce to me in lots of respects, not the same geographic area, but way they operate their business. So they're good operators. They run a good number.

Yes. Okay. That's helpful. And then maybe just one on nonperforming or just credit quality. I know you mentioned some improvement there, all the hard work that Kevin and team have done. So can you just frame up kind of the outlook or how you're thinking about the pace of NPAs and charge-offs as you look in the coming -- maybe just the pace of NPAs or just how you see some of the improvement unfolding here in the next 12 months or 6 to 12 months? However you want to frame it up, just to see a path of improvement.

I don't see any difference. We stand by what we said before. There's no longer -- no more on the larger one, there's no loss coming. We're not going to take any loss. So we stand by that. And outside of that, we cleaned up a little stuff this quarter, and we just tend to peck at a little bit. There's 1 or 2 that sticks their head up, but we're mostly through that. I'm not looking for anything any different on the charge-offs, maybe better from here on than what it has been. But where it is or a little better is what I think. There's nothing coming that anybody is concerned about. It's good. It's -- it's actually good right now.

Okay. And just in terms of how much improvement in nonperforming, given kind of what -- the lifting you've already done, I mean, what could we see over the next 6 to 12 months? I mean, could we see a significant decline in nonperforming? Or is it more of a slow grind? I guess, however you frame it up?

That's really up to the other side of the fence sometimes. It's not -- we can see that, but we're not walking away. So we expect to collect everything that we have out there. So -- and we're not going to accept anything different.

Okay. And just remind me...

I really don't see any changes. It may get better from here, quite honestly, the charge-offs. We had, I don't know, $5 million this quarter. Kevin, how much would it?

Yes, it's closer to $6 million, but we had almost $3 million of that was specific reserves on loans that we charged off. We had matched up to specifics. So if you take that out, then it was really just a normal quarter.

We're actually -- it's really a marked improvement in asset quality here. There's no -- you should have no concerns about asset quality.

Okay. Yes. And remind me the size of the largest credit that you talked about last quarter, where does that stand today? Or what level is that at?

It's where it was. It's a little less than $100 million. It's still where it was, but that's one that we're -- we have seen some movement on. And if reasonable heads stay together, we'll wrap that up. And if they don't, then we'll fight the battle. So there you go.

Got you. Okay. And last one for me, sorry, was the -- just on the margin, Stephen, can you just frame up, like, I know you said that your hope is to see the margin maintain its kind of current core level, if you will. But just the puts and takes, what could take that better or worse? And then just maybe the opportunities you have on the Mountain Commerce book in terms of loans and deposit, where there's opportunities to pick up there?

Yes. There's certainly opportunity on the deposit side with Tennessee. They've got about $300 million in CDs that mature in the second half of the year that we should get some improvement on yield there or potentially let some roll off. Yes. As we've always said, I would say competition is probably the biggest threat to particularly on the deposit side. We've got $1.25 billion in CDs that mature in the second half of this year that's in the mid-3s. Like I said earlier, that's -- we've done a good job and then kind of in or below that range on where we renew. But competition forces that higher, that's probably a risk. But our folks have done a great job and expect that to continue.

Okay. So not a whole -- I mean not much pressure on the asset side. I guess -- I mean I know you've talked about the loan yields and kind of what you're seeing in the market. So maybe it's just you're not going to push forward with some of those loans at those rates, it sounds like.

That's right.

Your next question comes from the line of Catherine Mealor with KBW.

Two last questions, just nitty-gritty model questions. Maybe first on fees. Fees were a big beat relative to our expectations. And I think you mentioned there was a BOLI gain and higher SBIC investment income. Can you quantify maybe how much that increase was in SBIC and how we should think about a normalized run rate going into next quarter?

Yes, that increase was about $2.4 million for those equity investments that we have.

Okay. Great. And then anything else in the fee line that you felt like was artificially elevated?

Well, we did have our purchase accounting accretion go up $2.5 million and $1.5 million of that was just related to Mountain Commerce. The rest of it would have been from older stuff paying off.

Got it. Okay. So do you think that PAA comes down from the $3.6 million?

The payoffs stop, I don't know Mountain Commerce will be the same next quarter, I guess, as we were this quarter. The other -- if we get to payoffs, that's the key. About $900,000 of that was payoffs -- early payoffs on loans that we generated income. So...

It does happen periodically, and that may happen next quarter, too.

Yes. You never know. usually, there's always something paying off.

Yes. No, but that's helpful. Just about $900,000 of it was from early payoffs, not just your scheduled PAA accretion?

That's correct.

Thank you very much. Appreciate it. It was a great quarter for us. Thank you.

We have reached the end of the Q&A session. I will now turn the call back to Mr. Allison for closing remarks.

Thanks, everyone, for your participation today. Thanks for your support in Home BancShares. We work at it, we're a little -- even though we had a 2% ROA in one of the top 10 in the nation in the first quarter, we felt like we didn't do a very good job. So we work hard at it, and we'll continue to work hard at it, as you know, hopefully, things will settle down in the marketplace, and we'll have more loans and generate more income. And that's our game, is to continue to grow the company over a period of time through both growth -- organic growth and M&A. And we hope to be able to tell you about another deal before long. So thanks, everyone. We look forward to visit with you in the future.

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

Greetings, ladies and gentlemen. Welcome to the Home BancShares Inc. First Quarter 2026 Earnings Call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday.

The company presenters will begin with prepared remarks, then entertain questions. [Operator Instructions]. The company has asked me to remind everyone to refer to their cautionary note regarding the forward-looking statements. You'll find this note on Page 3 of their Form 10-K filed with the SEC in February 2026.

[Operator Instructions], and this conference is being recorded. [Operator Instructions]. It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations.

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

Our first quarter set a strong tone for 2026. And Results demonstrate sound expense control, consistent operating performance and attractive returns, including record-setting metrics of book value per share of $22.15, tangible book value per share of $14.87, which is $1.72 per share increase year-over-year for a 13% increase, by the way, CET1 at 16.7%, leverage of 14.3% and and Tier 1 capital of 16.7%. In today's economic environment, that is a meaningful accomplishment and our team is pleased to walk through the quarter's results with you.

Our opening remarks today will be from our Chairman, John Allison.

Thank you, and welcome to Home BancShares First Quarter '26 Earnings Report to shareholders. Thank you for joining us today and I think the headline and the quotes pretty much summarize the first quarter. I want to thank our team for getting us off to a great start in '26. For those of you who are not already home banks or shareholders that are interested in a better understanding of home, I think it's important that you look at the strength of the balance sheet. Couple that with the monthly and quarterly consistent level of performance over the last several years is primarily showcased by the last 9 quarters.

The prior year has reminded us of the highest interest rate cycle in the early age. We're then almost all banks struggle because of poor balance sheet management. and the same story has been even more visible today, i.e., lack of liquidity by investing in the long-term securities trying to stretch for yield. I'm proud at [indiscernible] didn't suffer those problems during that time and was reporting record earnings while others were struggling.

S&P Global just ranked Home's performance for 2025 as #2 of all banks in the U.S. over $10 billion. We're honored by this elite ranking by one of the world's best and most respected experts. We were barely edged out to the #1 position last year. Maybe we'll get it soon. We're happy to have completed the merger with our acquisition of Mountain Commerce and look forward to a successful combination due to a back-office computer upgrade that was already in progress before Mountain Commerce, we will not be able to start converting Mountain Commerce until November.

As a result, the maximum anticipated savings will not be realized until probably the end of '26. Once accomplished, we believe our new partners can soon begin helping us to continue the outstanding performance of Home BancShares that is known in the U.S. and worldwide. Always proud of our reputation, always known as one of the strongest, safest, most conservative and best performing banks in the world. We'll continue to try to make our shareholders proud and happy to be part of this outstanding company. We know who we work for, and that is our shareholders. If you loan money, we all know problems can and will arise from time to time that has to be worked through. We had a $110 million Texas credit that we decided to not perform this quarter.

This is the same credit we've been talking about for 1.5 years or 2 years. The credit remain current until this quarter. It has been one we've been monitoring intensely for about 8 months. We've entered into a short term for BC agreement with multiple deadlines and requirements. We are advised by legal counsel not to discuss in that. I can say we're either going to get paid off or will liquidate the existing canal. We do not anticipate any additional loss, but it plans were to result in some wells home strength puts us in a position to deal with whatever comes.

Because of the conservative balance sheet, we're turning right at $300 million in loan loss reserves, one of the highest reserve percentages in the world. Couple that with the strong -- couple the strong reserves with a consistent quarterly pretax pre-provision net revenue of $100 million to $150 million to $160 million and we're confident of our ability with whatever happens and do not expect this loan to have any major impact on earnings, if any, at all. It is our belief that there is more sufficient assets and personal guarantees property resolved issue. I'm pleased with the results comparing Q1 to Q1 last year. The first quarter only had 90 days. And we had -- if we had the two [indiscernible] dates in the normal quarter, plus just a little touch of win. I think I said last year, we had the window back 2x or 3x. We had no win this time. This quarter got 0 win, Brian, you didn't -- you always come up with wind, you didn't come up with any juice this time.

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

Well, we had to write off the balance [indiscernible]. That's evident in the noninterest income category being the lowest since December '24. Maybe next quarter will be the best. On M&A, I want to congratulate the Trump administration and the Fed along with the Arkansas State Bank Department for the fast approval process. The speed of the approval may possibly get time for another deal this year. we're certainly in the market and looking for another good fit. We continue to repurchase stock as the volatility of uncertain levels with a war Canada, it makes it uncertain it provided the opportunity for us to purchase more recently. That is before we were in the blackout period.

However, we did file our normal 10b5 for this time. If the volatility continues, we will be very active on the repurchase side. I think we have essentially bought back, if not all, of the shares issued in the Happy Bank transaction, I will endeavor to do the same for Mountain Commerce Bank transaction. particularly if volatility continues to create opportunities. The repurchases will take some time, but once MCB is converted on our system, the additional share reduction should have a positive impact on earnings.

We're being very careful on the loan side because of the uncertainty of the law, the consumers, business, asset class and what this cycle may ultimately evolve into. Talking ahead at all said rates are coming down, but we have cautioned that there is possibly -- that possibly they will go back up before they come down. inflation is not dead. Let me say that again, inflation is not dead. And Jamie Dimon would say that's a major cockroach in the mix. The question is how high and how long do they remain high. It depends on how the rest of the Fed is going to be with the escalating interest rates to try to get a handle on inflation.

Remember the late '70s in the early '80s, 21%. It's not going to be that high, but it has to be correct. Chris Poulton, who runs our New York office has a great sign. He said the year of the lender is followed by the year of the collector. I think our early Texas experience confirms some of Chris' statements. I think it's a time to be very terrible. The normal structure of some asset classes that worked in the past may not work today. It is our job to watch and hopefully recognize in advance these loans that we think may be infected with [indiscernible] cockroaches. You will hear from Chris Poulton today about his attitude on private credit and the changes made because of it is call on private credit was outstanding.

The good news, market pricing on acquisition deals are more in line with the correct value and slowed the ensign dilution at least for a while. One of the CEOs that did fairly [indiscernible] I use the term here, maybe it's a Johnny word, dilutionary. It may have been dilutionary, actually, the trade was so silly. He did a trade sometime back, came up to me at a bank conference and said, I'm here to get my b*** shoot out, and I proceeded to do just that. Then I gave you a hug and we discussed the pros and cons and the impact of the damage done to long-term loyal shareholders and ag that dilution is not the friend of a shareholder. Enough said. With all the attention that diluted transactions are getting maybe the publicity and management embarrassment has slowed the shareholder damage, at least I certainly hope so.

I hope it's finally the start of a sea change that forces management to do the right thing for the shareholders. Done a great quarter. I'm pleased with the strong continuation of homes earnings. And again, I'm going to hand it back to you, and let's go [indiscernible], Chris, you don't mind, let's go to Chris first, let him comment and [indiscernible] forward and then we'll go to Stephen and Kevin and Brian, and back to you to wrap up.

Okay. Sounds good. Thank you, Johnny. So up next, we have a report on CCFG from Chris Poulton.

All right. Thank you, Donna. Today, I'll provide a brief update on TCF's first quarter. And then as Johnny said, we'll share some perspectives on the private credit market. During Q1, we grew the portfolio to approximately $2.1 billion. This represents a roughly $60 million increase, supported by $370 million in new loan production. Loan productions remain steady and its numbers in line with prior year levels. Payoffs for the quarter totaled just under $200 million, which is also consistent with historical averages. We do expect slightly higher payoffs. So I do think our pipeline should allow us to replace those balances either this quarter or the next.

Over the past several years, I've discussed declining balances in our corporate lending portfolio. This is an appropriate time maybe to provide some additional context and particularly in light of recent news around private credit. CCFG's long participated in the private corporate credit market. Our exposure has varied over time but we've maintained a consistent presence and have long-term experience in this space. Our private credit balances peak to just under $500 million at the end of 2022.

And today, outstandings are $87 million. That's a reduction of over 80% in the past 3 years. So why do we make the choice to reduce our private credit exposure? While beginning in 2023, we observed several trends that influenced this decision. First, we saw a new bank entrants as some banks look to reduce their reliance on commercial real estate, many chose to lend into the growing private credit space through participations in structured facilities. This led to broad yield compression across the private credit markets and as often happens, some loosening of credit structures and underwriting standards. At the same time, we saw significant equity inflows from individual investors or retail investors into the enter vehicles.

We've seen this movie a few times before, and we haven't always enjoyed the ending. We've maintained we have historically maintained an intentional focus on the shorter duration position typically under 3 years. And as a result, we were able to actively exit credit facilities as they reach the end of their reinvestment period. In total, we exited 8 corporate lending facilities through repayment during this time. Our remaining exposure is limited to a few facilities, primarily within AA-rated structures. Our attachment points approximately 58% of par value of the underlying loans, which provides 40% sponsor equity support beneath our senior position.

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

A great call, Chris.

Yes, thank you for keeping your eye on the ball with Private Credit, Chris. Next, we will hear a few words from Stephen Tipton.

Thanks, Donna. Chris, we appreciate your approach and discipline over the last 11 years with us. As Johnny mentioned, the first quarter of 2026 was a good start to the year with $118.2 million in net income a 2.09% return on assets and 16.56% return on tangible common equity. Q1 earnings were in line with the prior quarter despite 2 fewer days and were up $3 million or 2.6% from the first quarter of 2025. The reported net interest margin was 4.51%, down 10 basis points from Q4 and as there was 0 event income in Q1 and up 7 basis points from the same period a year ago.

The core margin, having no event income was 4.51% versus 4.56% in Q4. The overall loan yield declined by 15 basis points to 7.08% while interest-bearing deposit costs declined by 12 basis points to 2.35%. The Total deposit costs were 1.83% in Q1 and exited the quarter at 1.82%. Deposit balances increased $258 million, driven by all of our Florida regions. I would expect some headwinds in Q2 from tax payments, but we are pleased to start the year strong. A highlight from the quarter was that noninterest-bearing balances grew by $126 million to almost $4 billion and now account for 22.5% of total deposits.

As we typically see in Q1, loan production softened coming off of a very strong fourth quarter. We had total loan production of $917 million, with over half of that coming from the community bank footprint. Switching to capital. We repurchased 507,000 shares of stock during the quarter for a total of $13.9 million. And as Johnny said, we will continue to be active with our share repurchase plan. Capital levels continue to build with common equity Tier 1 capital ending at 16.7% and total risk-based capital at 19.5%.

Lastly, we're thrilled to have the Mountain Commerce employees, customers and shareholders on board and look forward to growing the Tennessee franchise for Home. With that said, I'll turn it back over to you, Donna.

Thank you, Stephen. And to close out our prepared remarks, Kevin Hester has a lending report.

Thanks, Donna. Given our strong showing in 2025, it could be easy to look at this quarter as boring. I think that shows the high bar that we've set for ourselves because any quarter that posts a return on assets of 2.09%, maintain solid asset quality and as an earnings beat over the same quarter a year ago is not an easy task and should be inspiring. As I anticipated last quarter, ending loan balances dropped by a little over $50 million, but it happened very late in the quarter, which resulted in average loan balances actually being up $174 million on a linked-quarter basis.

I see this downward trend continuing in the legacy bank into the second quarter because Q2 and Q3 projected payoffs are very high. The MCB acquisition will, however, add over $1.4 billion in loans to the balance sheet. Based on my meetings with their lenders, I expect them to settle into our credit culture quickly and be accretive to loan production in short order. Johnny mentioned the nonaccrual of the Texas C&I credit that we've been wrestling with since 2024. And this increased nonaccrual balances significantly, but we have made recent progress with the executed forbearance agreement which leads us to a couple of ways to exit this credit during the next quarter or 2.

We are continuing to work with the small same set of issues that we've been dealing with for a while now. we took our medicine in 4Q '24, but maximizing the exit sometimes takes more time and effort than you would like. It's wonderful to have the level of capital and reserves that we have, which allows you to work to maximize the recovery on this limited set of problems. To that end, criticized assets were flat on a linked quarter basis and early stage past dues were below 50 basis points. Even with the large increase, the reserve coverage of nonperforming loans is still over 160%. As a point of reference, our loan loss reserve would cover 15 years of our historical charge-offs if you use the last 5 years of average charge-offs as a base and that base includes the large 4Q 24 Texas cleanup quarter. There's nothing wrong with the workman-like quarter where you meet expectations. I expect that a majority of banks would trade results with us. On that note, Donna, I'll send it back to you.

Thank you, Ken. Thank you for that report. Before we go to Q&A, does anyone have any additional comments?

We think about deposits, we had a good deposit growth and then tax time come up I think I said the same plan last year. It's good to have real customers.

That's right. And we do have real customers.

As evidenced by the tax checks we're seeing go out right now. That's right. I mean that's going bad, right? But they are our customers. They're not transactions. They are relationships. So I'm proud of that. We'll take a little up and down during this Kevin. I mean, Stephen, you agree with that?

I agree 100%.

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

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

That's really it. We just kind of rolled on from what we've been doing. I think we've said in the past, we -- we need more assets, and that's what Mountain commerce has done for us, and we consistent -- our earnings has been consistent quarter after quarter through this process. And we do need more assets, right? So we'll get this under wraps and Stephen and Bill to get the savings out of Mountain Commerce. We'll see that come to the bottom line, and maybe we'll have another deal before then. So I'm going to let you have it. I didn't -- by the way, I need to know what Donna takes a pen away from me, gives me a rubber ball to speak with. So that way, I don't make any noise. So she stole my pen and he gave me a rubber ball. So thanks, Donna for looking out for me.

My pleasure. And with that, I think we'll go to Q&A.

[Operator Instructions]. First question comes from Stephen Scouten with Piper Sandler.

Good afternoon, everyone. Appreciate the time. I guess, Johnny, maybe if you can talk a little bit more about how the progress is going to acquire even more assets on top of Mountain Commerce. I mean, Mike, you said that your returns are phenomenal. So it just feels like you need to be able to multiply that on a larger balance sheet. So what have conversations been like? And how aggressive would you be? And not within that, would you ever think about loosening -- this might be a crazy question for you, loosening the triple accretive mantra to get a deal done?

As we hold pretty tight to our philosophy around here. My fear is they'll say, well, he lied. like I hear the market said, he lied, he broke the diluted a deal. So I just don't believe it. I'm the largest individual shareholder, and I'm not interested in diluting myself. So I think I hurt our shareholders and we do you know my philosophy on that. we stretch as much as we can on the trade. But people have joined this company because we don't dilute.

And if I diluted now, I think it would be kind of in -- as I'm getting older in my career, I think people say, we got week wages but I haven't as of yet and I think it's known we tell it when we're talking to another perspective seller, we say we don't love. We need -- you need to understand we're not going to be your highest price. But if you're going to sell a stock tomorrow, it doesn't matter. You do a deal and the buyer dilutes the halo himself. If you sell the stock tomorrow, it doesn't matter, just get out and get gone. But if you're going to be if you're going to ride with them for a while, it makes lots of sense not to do to do the deal.

So if you want to hold the stock and keep it for a period of time, I think I think our buyers appreciate the fact over the years that we haven't diluted. So I know there's another deal out there right now, they're biting at one and -- but I'm not going to bid up on it. We'll bid it to the maximum. We can bid it. And then we'll -- if we don't get it, we don't -- a lot of it depends on the seller, what the seller wants to do.

Don't want to stay, and they want to be part of it. and then when we go to the house. So I think that has -- they don't go the house at the biggest best price to sell the stock tomorrow, get gone. Otherwise, I think you want to be in it for a period of time, then you have a good partner that's not going to lose you. I know I ran it a little bit, Stephen, but anyway.

No. That's helpful. And just in terms of the pipeline convert, it does. In terms of the pipeline of competitions, what does that mean we haven't seen as many deals here in the first part of the deal and get announced. I mean are sellers just kind of not interesting because the environment is pretty good? Or is it just been the volatility in the stocks? What are you kind of seeing in terms of conversations?

Well, there's conversations going on. I mean not only with us, but there's other conversations going on. And bankers have called us and said, hey, what about this and what about that. And a well, we're not ready right now. Doesn't get Mountain Commerce kind of get our arms around it, and then we'll be ready to go. But we're having convicted I mean at my conference recently, we ran into a couple of people, I said, we have to talk some time and they followed up since then just the conversation in a bar. I said, [indiscernible] it sometime. And that brought about a banker end of the deal to talk to us about these two possible options. So I think the conversations are going on.

I actually think that people are embarrassed to delist the and shareholders right now. I think they're embarrassed because they've all been called down for the dilution, and we see what's happened to the market prices of this -- the bank stocks. I mean, we went from 22.5x projected earnings to 11x earnings, right, or 1.5x earnings. So where the money going to bank stock. We ran out my contention is we ran all the good investors out, we just beat them up and look to lose. So I want to get back to the old days where we're 21.5x earnings and everybody was happy to everybody made lots of money. So Anyway, it's just a different world now, and I think it's directly a result of the dilution.

Yes. Makes sense. No. Yes, valuations are crazy. We got to start calling you Home Bank, ai.com or something like that. I guess one other question I have is around is around loan yields. There was like a pretty big move in the loan yields this quarter. I don't know if you could give some color on how much of that was kind of core decline in loan yields or where the new loan yields are coming on at versus maybe how much of the NPA affected those reported loan yields quarter-over-quarter?

Stephen, this is Stephen. Yes. So first, on the impact from the nonaccrual, we don't have any of that in our margin for the quarter had we had it on the books. The impact was about 5 basis points to the loan yield, and it was about 4 basis points to NIM. So the $451 million that we reported had it been on the books and on nonaccrual on accrual it would be -- we would have been 4.55% versus 4.56%. So a little color there.

Some of the other decline in loan yield is really just a function of variable rate resets from the Fed moves last year that occurred January 1 and other certain frequencies. So we would have been -- if you normalize for the for the nonaccrual, we would have been down 10 or 11 basis points and we've kind of asked what occurred on the deposit side. Production yields I think we averaged 7.2, 7.25% for the first quarter of this year. I think we're right at 6.99% or 7% the UniBank footprint. So north of prime and getting our fair share.

We now turn to Dave Rochester with Cantor Fitzgerald.

I just wanted to talk about the loan trend real quick. It sounded like you mentioned paydown activity being a little bit elevated possibly in 2Q and 3Q. I was just wondering how you guys are thinking about the organic load trend? I know you got the deal closed this quarter, so that will bump things up a bit. Just trying to understand the underlying organic trend there. And then what part of the book are you seeing those pay downs? And is it kind of more of the same -- is there anything new? And is there any difference across the different geographic regions that you have?

Dave, this is Kevin. I'll answer that. It's going to be a little bit of a long answer because I'm going to give you some color on how we see the pipeline process. Our pipeline process is probably more -- we have more visibility into the payoffs than we do the new loans that are coming on. We know because of CCFG's portfolio being a 2- to 3-year turn. And a lot of what we're doing on the large side is construction deals, and we know when those are finishing.

So we probably have a 4- to 6-month lead time on a payoff where we might have 30 to 45 days to put it on a pipeline for a new credit because we don't put new credits on the pipeline until they're fully approved. And for Chris' group, CCFG, they may close it in 15 -- no longer than 30 days. And in the Community Bank footprint might take 4, 5 is probably closer to 30.

So our -- I would say our pipeline process is more highly skewed towards knowing our payoffs. That said, we do see second and third quarter payoffs being higher than they have been in the last couple of quarters. Will we have some production that will offset that? It's possible. but it's going to come in, in the next 45 to 90 days, and it's not on our pipeline yet because it hadn't gotten fully approved. Second piece of that is that MCB is not yet in our pipeline process. So I really don't have a good feel for what they might contribute in second and third quarter.

I'll know that probably in the next week to 2 weeks, I'll have a good handle on that. So the short answer is -- it feels a little soft second quarter. And could we outrun it, we could, but we're going to have to get the production in here and get it on the books.

Okay. Appreciate all the detail there. Yes, go ahead, sorry.

John, it seems like when we forecast big payoffs, we have loan growth and when we forecast loan growth, we have big payoffs. So you've heard my comment teeth think he got him and get flu. So as Kevin said, we never know what our customers are doing we never know. We've got a lot of big projects coming on stream that will find up over a period of time. But you just never know I mean I've talked to one of our big customers, FPL business. He said, I bought another FPL and that's again. So that's about a $50 million loan. So you just never know. I didn't know he's working on the memo. So that's good and bad.

I can tell you that deal is done on the pipeline. I'm looking at it. That deal is done on the pipeline. That's the point. We don't have as good a visibility into the new loans as the runway is not as long as it is for.

Yes. Yes. Makes sense. Appreciate that. Maybe just switching to the margin. What do you guys think is going to be the rough margin impact from the close of the deal? And then if we don't get any more rate cuts or rate hikes or whatever, if we have a stable Fed funds going through the end of the year, how do you think that margin kind of trends from there after this 2Q change from the deal?

Dave, this is Steve. So we're still in the process of finalizing the purchase accounting marks. I do expect a little pressure on the margin. We obviously added it to NII and EPS, but expect a little pressure at least initially on the margin. talked earlier about where we landed for the quarter at 451 and how you think about the nonaccrual, we were at $49 for March. So still kind of fairly in line with where we were for the quarter and maybe it ticks down slightly within CB and then we hope to build on it from there.

So he's talked to Bill today, and they -- their story over the last year or so has been the ability to reprice deposits at maturity as they come through here, and that appears to be what's taking place over the next days and really over the course of the year as we're able to -- some of the wholesale deposits either reprice or go away.

Appreciate that. Maybe 1 last one, just back on M&A. I know you're open to deals in all your markets, but I was just curious if you're prioritizing any of those markets now with Tennessee in the mix? Is there any focus, specific focus in any particular markets?

[indiscernible] Florida and always Florida and always -- and now Tennessee. So we would -- you're going [indiscernible] those markets.

We now turn to Brett Rebatin with [indiscernible]. Your line is open. Please go ahead.

Hey, good afternoon, everyone. Wanted to start on expenses, and you guys managed to keep expense growth pretty limited last year, like 3% growth. And I know Mountain Commerce will create a little bit of noise. But I was just wondering if there's anything that you've got grant spend money on, either as a result of that deal or just as you're getting bigger, and then just any thoughts on maybe core growth this year relative to '25?

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

Okay. And then, John, just thematically, I know you're interested in M&A, and you've historically, you got a term for people that hire lenders from other banks. But wanted to see in Tennessee, there are markets in the Southeast where everyone is talking more about disruption due to a big deal or 2. And just wanted to see if you might let Bill hire some folks on the lender side in Tennessee? Or if that was still just not a part of the equation in terms of how you think about it?

Well, that's not the way I think about it, but they may think differently about it, and we really haven't discussed it. But we're headed over next week. There enough ways to lead their customers and shareholders and have a little talk about Home BancShares and Mountain Commerce and the partnership together. So I'll visit I'll catch up with you a little later to see what Bill's thoughts are on -- I don't know if he's had anything [indiscernible].

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

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

Yes. I mean I think some markets are harder than others for that. And I think it is not the same players in every market. It's different players in different markets. But there is some rate pressure. There's even some underwriting and structure pressure that people have given into a little bit over the course of '25 and early '26. So that's always a challenge. We always have to fight that because we're pretty consistent in what we do.

We now turn to Catherine Mealor with KBW.

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

Catherine, this is Steve. I mean it certainly with MCB, I mentioned what they have coming through the maturity pipeline and certainly expect theirs to come down on the legacy home portfolio. We have some deposits that are tied to the T-Bill that -- or short-term T-bill, 91-day T-Bill which trickled up a little bit in the first quarter and kind of put some pressure on the other changes that we're able to do. CDs will continue to mature that we'll try to reprice down. So I'm still optimistic that we can inch out a basis point or as we go throughout the year. But I'll couch all that with competition, like Kevin talked about on the loan side, I mean, we're seeing -- yes, you're still seeing banks offer 4% for CDs and 37 to 40 money market. So we'll defend our customer base both here and in Tennessee.

On the end to 4% might be cheaper if Frank do what I think they're going to do. So I look silly when you see people going out the -- we're seeing -- I mean, we're still seeing some [indiscernible] so I mean if you think about that, a ridiculous that look it might turn out to be we obviously hadn't stopped inflation. It depends on what Trump does and how [indiscernible] the Fed is, if they're too aggressive, I mean, they have to be as aggressive low inflation, it may take 200 basis points to stop it. And they quarter lower significantly, I think that would be a huge start.

Mean John, you've been buying on the rate trade. Yes. And you've been right, I feel like on your -- the way you've been looking at rates for the past couple of years. So is there anything that you're doing in your balance sheet just to prepare for the risk of higher rates?

Not really. We're just careful with our pricing. That's all. We're just careful with our pricing I was mad at myself last cycle. I said what was going to happen, and then I didn't bet it. And I was I ran into a friend I heard you, Johnny, and I bet it. I went out and bought $4 million worth of money cheap, and he said I still got it. It's good for you. He said, I did it because what you said. And I said, well, I didn't bet so have -- that is a good thought maybe to take a look at stretching out there a little bit. We -- I mean, this is almost Kevin, it's almost a detail of the 70s and the 80s, and we got this war out, and we've got all and we know what that does. And we saw producer price index by a 4%, what they annualized 4%. We haven't seen those numbers in a while. It could get could get a little crazy here a little bit. I don't have an answer. I don't have that answer yet. So hopefully, it will come to us.

And then my follow-up is, anything on the credit side that you're seeing? I know -- I appreciate that you don't want to talk about the credit, the $92 million credit that moved to NPA this quarter until you get it resolved. But maybe just outside of that, are you seeing any other trends or any kind of weakness across the book to be aware of?

No. I mean I said criticized assets, which includes all of our [indiscernible] and below. Those were flat quarter-over-quarter and early-stage past dues are as low as they've been 50 basis points. So we're -- as I said in the remarks, we're working with the same set of issues that we've been working with for the last few quarters. And I think I've said a couple of quarters ago that small group may get worse before it gets better, and that's what happens when you have to put it on nonaccrual and start working it out.

So we've already taken what we believe is our maximum loss, and we would expect to recover some to all of that depending on the way it resolves and which path of resolution it goes through. But we at least have some talking about the larger credit now, we at least have a good visibility into how that happens, and it could happen as early as this quarter or next. So we at least feel good about that. And it is the same set of problems. I'm not seeing anything of any materiality that we're that concerned about. So

It's -- I don't think we'll lose any money on this deal. I like the guarantors. I like the assets, the assets in this in-demand assets, not scrap assets for real value assets and actually the assets are being leased as we speak. So there's I think we had sold some of these assets in the past. On a 70-30 basis, we got 70% and the customer got 30, and we sold those assets, and they paid down just perfectly. So assuming the rest of them bring the same value, we're going to take 100% of the proceeds from this point forward.

So -- but you'll -- if we get the -- get the sales schedule. So I think I'm pretty happy with that to. I don't think we'll have -- I don't think we're going to have problems or if there's any whole left in this deal. These people are have honored everything they've ever said to us that they would do, and they're some very wealthy families. So I think we'll be fine. I think they're honorable people and will maybe just $10 million left, they put them on a $10 million 10-year note or something. So whatever time I think fell on the one of the...

And is the price in oil as the price and oil had any impact? Sorry, go ahead, John.

If anything, it might help, quite honestly.

Yes. Well, that's what I was thinking actually. So I was -- yes, I know you have to value the assets. That's great.

We now turn to Michael Rose with Raymond James. Please go ahead.

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

Michael, this is Stephen. Yes. So the 451 margin doesn't have any -- doesn't have any accrual in that number. So it was about $1.6 million impact for the quarter, which is about 5 basis points to the loan yield and about 4 basis points to NIM. So if we had, had it on accrual for the whole quarter, $451 million would have been 4.55% compared to $456 last quarter. So that's kind of the math around it.

Okay, really helpful. And then just as it relates to the scheduled payoffs that you guys have talked about. Can you kind of quantify what the -- at least with the scheduled payoffs and paydowns are kind of expected to be over the next quarter or 2?

They look to me like the second quarter looks like close to $1 billion and third quarter could approach that, and those are both that includes kind of abnormal paydowns and principal paydowns too. So that's what you'd have to do to stay to stay even in each of those quarters.

Yes. And just for some context, payoffs in Q1 were about $650 million, but they were $950 million $750 million to $800 million in the quarter prior to that. So that's -- it's a big -- it sounds like a big number, but that's what we run in that range. quarter in and out just depending on seasonality.

And that doesn't include none of that even what I'm quoting doesn't include MCB because they're not in my pipeline, yes.

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

No, I'm not aware of anything. I looked at every loan that we looked at in due diligence, I don't remember anything necessarily that I would say that I would run off. I think we have a credit culture the way we look at things, and theirs is pretty close to ours. They're maybe a little bit higher leverage in some areas. We'll work on that over time as we can. And they're going to have opportunities that with us that they haven't had because they've not been willing to do much construction. So any decisions we make to go a different direction than what they've been doing, I think, will be more than offset by the opportunities that they have to do things they haven't done before. So I look at them as being a positive, as I said in my comments, pretty early. I would expect them to hit the ground running pretty early on. We've already had a couple of pipeline discussions over 3 or 4 credits, so as of last week.

I told Bill, I said, Bill, nobody cares what you [indiscernible] this quarter. I said just you just get ready for the future. If you say you need to write down, run it down, get rid of it, get it going and get it out here. So I think we're coming in with a pretty clean chip coming in is not door.

We now turn to Jon Arfstrom with RBC.

Just a couple of things to follow up on. Johnny, did you say in your prepared comments that you think deal pricing has moderated somewhat. Did I hear you correctly? That said pricing Deal pricing, acquisition deal pricing.

Yes. I think it's lightened up a little bit. I think it's -- I don't see the urgency out there that I did see. However, people are talking they're continuing to talk and they're continuing to want to do something. And some of them want to do to do it with home. So I think -- it's out there. It's just a matter if we're ready to do that, right? It's just a matter of we're ready to make the move yet. And we're probably getting to ready to look at something else.

But we're not going to be able to convert it about the same time we convert the Mountain Commerce in November. So the answer to that is yes and no. I haven't pushed hard, but we've been pushed a little bit ourselves. We've had people calling us outside of bankers calling us directly outside investment bankers and so we met you your company 2 or 3 years ago and we were thinking about doing something we wanted to talk to you all.

That happened with a couple of couple of one Florida and on Tennessee came at. So will we do that? We'll have opportunity. We're going over to [indiscernible] and his team over our food talk to bill when we get over. So we get open to Tennessee and see where we where we're going, where we like -- there's a [indiscernible] outdoor there are out there. So we'll see how they work at.

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

I don't know if we spend it as fast as we're making that's a pretty good position to be in. But we're -- I mean we made $118 million, pretty nice, right, pretty sweet then I don't -- we got so much capital right now that we really like our position and -- but I'm ready to buy stock. I mean I'm looking at it today. We can't buy the day Tomorrow, we can't today. So it gives us an opportunity, and it's about -- I want to buy back all of my on commerce. It's about 5.5 million shares. I want to buy that back. I think we bought essentially all the [indiscernible] so I want to buy all the mine in the commerce back and just kind of go out there. We can do it pretty quick with the capital position we're in and wouldn't take us long to get that done. I'll have to buy it. I know it's a little dilutive to us, but I like to buy the stock.

So it's not an either or in your mind, you can do both. Yes. Yes, that's good. not either or you can do both, I guess, is what you're saying, right?

That's correct. That's correct.

Appreciate it.

We now turn to Matt Olney with Stephens.

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

Well, there's no comparison to me, there's a for deal out there that we can do -- we can -- we have management from West Florida in Pensacola. We have management all over the state of Florida. We can just add it to someone. You've heard me talk about porting Will's guys buckets. I mean they're great managers. I mean the performance of our Florida operations out well, our operations are outstanding. But those guys know what to do and how to do it.

And it just makes it simpler and easier. We go -- we made the big move to Tennessee because we like Male and his team, and we made that move. So I think we need to grow there. We need to build a muscle up Tennessee because I think there's opportunities in a little disruption over there. And I think it will give us an opportunity to pick up and build some muscle in that state as we've done in Florida. I think it's an opportunity for us. So the reason being you just get more consolidation savings. That's really the key. If you think about closing branches and doing a deal where you can close some branches, those are big savings. So we'll continue to focus more on where we are than outside of that.

When we look outside of that 1 of those deals that I'm talking about your banker is calling me about is outside of that. And I really like the operator and we like the guy. We like this company. We like what he does. They don't have the growth that Florida has got, but he runs a good clean operation. So somewhat said, why would you go there? And because it's simple and it's clean and they do a good job running their company. So it kind of bills mass. So that's outside of where we prepay operate today. the EBITDA it runs it and you don't have to hold his hand. So that's really what you're looking for. We look for somebody if you're going outside the market, you better get somebody like fail that knows what they're doing, it's how to run on.

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

Yes. Thanks, Matt. Yes, probably two things there. One, right now, the uncertainty here is what's the underlying -- what do these underlying loans look like and where do they go? It feels early because I think you're going to see a little bit of a false bottom where there's a little bit of maybe some price expansion or there's a little bit of some markdowns in these notes everybody goes, oh, okay, that's it. And then there's always say the third shoe to drop, right? So right now, we're not seeing a lot of capitulation on the price side, and there should be, but we're also not seeing any activity. Nobody is pricing a new facility today if they don't have to.

So I think we'd want to see -- one of the things we look at a lot in ours is we'll have these loans been marked appropriately, right? What's happening to the underlying credit? Have you had an EBITDA expansion or not, has the loan been marked, et cetera. We'd like to see a little more of that before I think we get comfortable. I mean we've certainly had people come to us and say, I'd like to get out of some of our positions, my risk guys are getting on to me, what would the price be? And I think right now our answer is price doesn't fix credit, and so an extra 50 basis points isn't going to save me when I need the credit support. So I think right now, we're just biased towards that's big of this crediting out.

This may turn into nothing, right? I mean they turn out all these things are fine. AI doesn't destroy the world and all these software companies are fine. I just don't think you should take that risk today. So we'd want to see a little bit more capitulation I think, before we before we would do that. But we -- as I said, we've been in this market for 10-plus years. So I think people that came into the market, quite frankly, need to take some losses before I feel comfortable, right? It seems like that's how you get disciplined. Is you get new entrants in and they thought they were getting something very risk-free and they priced it that way, and then it turned out not to be and then everybody gets religion again.

So we'll look for that. And when we see signs for that, we might consider expansion again. We're still set up that we have facilities that will roll off. And right now, it's facility rolls off, we probably just wouldn't replace it. We wouldn't go into the next one or we just take the payoff and move on. That's on the C&I side. Real estate, we're we continue to see good pipeline growth. We are going to have elevated payoffs, but one of those is just a credit we've had that I've been saying, we've been 2 weeks from payoff for 6 months, and I think it's paying off today, we'll find out, not a worry for us on the credit. They've just been in the sale process, and it just dragged on a little bit.

But we like the credit. I'd like it to stay longer, but I get nervous when things stay a little too long, right? Steps supposed to move. We're in the moving business. And so -- but we continue to see great opportunities. I think our pipeline is pretty strong. It might take me more than a quarter to replace what comes off, but it won't take a lot more than that, I don't think.

We will now turn to Brian Martin with Brian Capital. Please go ahead.

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

I think that's right. That's what I'd like to see. I think if we don't have that, I'd be a little disappointed. We really look at it on more like a rolling basis, right? So which I know it's harder for you because you look at it on a calendar basis. But I'd say from here over the next rolling 12 months, will we grow, I think so based on what we see, we booked quite a bit last year. We had really good production last year, not all of that's funded. So we would expect some of that to roll through.

And I do like where we are right now on pipeline. I'd say there are Kevin talked about a little bit, we're in constant contact with our customers. Most of our business is repeat business, whether it's somebody barred from me 3 years ago or some of the board from me last year. So we're really always kind of early on in discussions with our customers about what they're buying, what they're planning, what they're doing. Some of that moves around and then I was talking to somebody last week, they called me up, they said, "I've got this thing. We may be buying it, we'd want to move quick, et cetera, would you be -- where would you be? We told them he said that sounds great and they called me yesterday and said I think we're going to pass on that.

And so I would have told you last week, there might be a pretty interesting deal there, and today, there isn't, but they may call me back on Monday and say it's back on. So we're flexible. And because we're flexible, we get a lot of looks at things. And so generally speaking, on a rolling kind of 3, 4 quarters basis, I can usually say, yes, I think we're probably going to expand.

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

Well, somewhere in the size or larger than maybe motors will be nice. But we would probably do a smaller deal. If it fits bill, if it's in a market where Bill is not see, we'd probably step down and do a small return. [indiscernible] pretty good so we're in 4 or 5 locations. So we got ready to grow in that state.

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

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

Got you. Okay. And just maybe in terms of -- you gave the -- I think someone gave the payoffs, and it was, I guess, but in terms of the production, I think you said it was around $900 million this quarter. I guess what -- just the recent quarter, has production been similar at that level? Or is that moved around a little bit.

It's a little light for yes, the $917 for this quarter, we were to a little over $2 billion in Q4, but seasonally, usually are at the end of the year. But prior quarters in that, we've been a little north of $1 billion.

Okay. So this.

Not funding day so that's a good fair portion of that is construction, and that's not going to fund until 6 months from now when it start funding generally. So that's a little hard to pencil out on time.

Okay. I hear you. And maybe just the last couple for me. I think just in terms of the credit quality, I mean, I guess the one credit, the Texas one you've talked about, but the other couple of credits that are out there, I think the Dallas-Fort Worth one, the Boat 1, I guess, I guess is there -- those are still just being worked through and no real update in terms of how the timing may proceed there? Just trying to get a read on when you see some of the improvement that you expect here kind of flowing through the numbers as we go through the remainder of the year?

[indiscernible] battle loans credits every day down both. We're going to a jury I mean.

For trial in June. We have not.

It's been a year. We've had. We have the vote. We have the vote. We have the most -- it's not a question of where it is. We actually have the vote.

We can I mean absolutely, they're just -- it keeps going to judge then they got a new gene, now got a new judge, third judge we're going before the judge in a trial now. I mean it's $5 million both old on the boat. It's a $7 million, $8 million, $9 million, maybe $3 million to we get it sold, maybe stem I've never said anything like that deal at all. It's just been frustrating. So the apartments in Dallas that we're as on the west, we keep -- we'll get it sold eventually at some point in time. We've had 5 or 6, 7 buyers on it. We'll get it sold at some point in time. But it's -- I mean, we have [indiscernible].

Yes, it's got a -- there's no loss in that for us. I mean, we -- and Kevin like a couple of million dollars on it a while back. So there's no loss on that. So just a matter of getting it out of there versus the destruction problems and why you can't.

Yes. We got to get -- it's in a receiver and the receivers got to correct some safety issues before we may find somebody to take it where it's at. We're working and we talk to people all the time and work through all the leads we got. But realistically, we may me to work through the issues that need to be completed before you find somebody that really -- there's an opportunity there if somebody wants to jump in and do it if you find the right person, then we'll get it sold and moved. But -- and like I said, some of the challenges just have to work through.

But there's no loss at all. We've written that down, down, down.

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

I would agree with that.

Maybe the last one for Brian. Go ahead, John. I'm sorry. any more.

I don't anticipate any more losses on the bid credit or the apartment credit. That's really the ones we're working through. So I don't anticipate they're marked and written down and if there was -- I mean, it's $100 million credit, if there was some loss in it, I'd be shocked. But -- and I've been fooling before, but I think we're fine. It'd just be a bump in a row for us because -- I mean, [indiscernible]. I don't know maybe it's nothing. I don't -- if I thought there was a loss in my if I thought the loss I take it. I would have immediately written it down, but we haven't -- no need to write it down at this point in time.

Years of charge-offs in our we've got 15 years' worth of charge-offs in -- did you hear us.

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

In that [indiscernible] level.

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

Yes. I mean you're right because over the last 4 quarters, we've had somewhere between $4 million and $5 million every quarter that's dropped down in this other income line item. And it's a whole variety of different events ranging from $5.7 million in the third quarter of last year to $3.9 million in the first quarter of last year. But this quarter, we didn't have any of that.

Okay. So it's a good baseline to work off and then expectation is hopefully that you see it trend upwards. So Okay. Perfect. Congrats on the quarter.

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

Yes. Thanks for a long day, a lot of questions, a lot of interest. Thank you for your support. We'll continue to do our part. And hopefully, we'll continue to run the 2% ROAs and see they beat us up a little bit on the shop today. They've kind of hammered us on they kind of have us on the stock. So I don't think we deserve to be off 3%. But it's an opportunity [indiscernible] So you bet. It's a great opportunity to buy. So timing would be good for us. And that's it, unless anybody has anything else. Everybody else got anything? Thank you very much. Talk to you in 90 days.

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

Greetings, ladies and gentlemen. Welcome to the Home Bancshares, Inc. Fourth Quarter 2025 Earnings Call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday. Company presenters will begin with prepared remarks, then entertain questions. [Operator Instructions] The company has asked me to remind everyone to refer to their cautionary note regarding forward-looking statements. You will find this note on Page 3 of their Form 10-K filed with the SEC in February 2025. [Operator Instructions] This conference call is being recorded. [Operator Instructions] It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations.

Good afternoon, and welcome to our fourth quarter conference call. With me for today's discussion is our Chairman, John Allison; Stephen Tipton, Chief Executive Officer of Centennial Bank; Kevin Hester, President and Chief Lending Officer; Brian Davis, our Chief Financial Officer; Chris Poulton, President of CCFG; and Scott Walter of Shore Premier Finance. The fourth quarter capped off a bell ringer of the year for Home, and our team is excited today to share some of those details with you. Our opening remarks today will be from our Chairman, John Allison.

Thanks, and thank you all for joining Home Bancshares fourth quarter earnings report and our 2025 year-end conference call. I want to thank all of our team members for leading Home to one of the most successful years in our 26-year history. The numbers really speak for themselves. They are the best numbers we've ever produced. Thank you for all you do and continuing to make Home one of the top-performing banks in America. If we're not the best, we're certainly one of the most consistently profitable performers year in and year out. We're certainly a contender.

For the full year of 2025, the company earned a little over $475 million in net profit. That's an 18.2% increase over '24. And we ran a 2.05% ROA and a 41.29% efficiency ratio with record revenue of $1.9 billion. We had earnings of $2.41 EPS. That's a 20% increase over 2024. We purchased for the year 2,890,706 shares for $81.3 million. And so far this year, we bought back about 96,000. For the fourth quarter of '25, we reported $118 million in profit. That's an 18% increase over 2024. It was about $100 million, as I recall. PPNR was $167,723,000, good numbers and a 2.06% ROA. And for the first time in a while, an efficiency ratio of sub-40% at 39.5%. Net interest margin of 4.61%, and we built reserves to about 1.90. Revenue was $282.1 million and ROTCE of 16.65%. We repurchased 540,706 shares for $14.7 million for the fourth quarter.

As I said, the numbers speak for themselves. We're excited about our announced LOI with Mountain Commerce and our entry into the great state of Tennessee. Having been a founder, I know what it takes to build a good financial institution with all the ups and downs, and I look forward to working with Mountain Commerce's founder, Bill Edwards, and his outstanding team. I walked in the same shoes as Bill in building our company. Our transaction is triple accretive, and both sets of shareholders will be accreting the benefits of the merger on day 1, not some BS earn back, but from day 1.

I just want to talk a little bit about the past and what's happened to bank values and bank stocks. In 1998, we sold our bank for 22.5x projected earnings and 4.11x book. It was a really good bank, doing an ROA of 150 plus, but not as strong as Home runs today, but really a good bank. What's happened to the value of bank stocks? I understand that was the days of pooling and now we're on tangible book, but it trades at about 10x earnings. Where did the money go? Bank stocks have been about cut in half. We have allowed people to self-inflict the damage to ourselves and our industry, not just once, but over and over again by dilution, dilution, dilution.

We have already run nearly all of the generalists completely out of the bank space. Don and I were recently at a major bank conference and a young sharp female analyst from a well-known national company said, I can't get a single PM portfolio managers is what she was referring to of my company to even look at a bank. She said, including your bank, Johnny, as good as you are, they say no banks period. So what has created that? What has led to the fact that generalists want nothing to do with the bank space. I think it's an attitude. I think it's because banks have done bad deals that management and Boards of Directors allow, both in the purchase of long-term low-rate securities that cost shareholders hundreds of millions and billions of dollars, plus in management teams paying too much on acquisitions and diluting their shareholders into oblivion.

We are forcing the good long-term investors completely out of the space. We were told that a 3- or 4-year earn back to tangible book was acceptable to the investors. That could not be farther from the truth. It should never have been done and it should never be done again. When does the poor shareholder ever get back to at least even? Add that to poor operating performances of many of the companies, coupled with a 3- to 4-year dilutive deals and hedge funds that will trade you over 2 bits. We have inflicted the pain into the entire industry. Look at what bank stocks have done over the past decade. Some dividends are the same and some are at the same price that they were 10 years ago. That's pretty sad. Look at bank stocks when you look at one, if you think about selling, look at the bank stocks and see what their history is for the last 5 or 10 years. I know you don't want to hear the facts, but it is what it is. All while the larger banks are performing much better than the small caps and mid-cap banks.

Banks wanting to grow through acquisitions whose bank stock multiple trades below the multiple they are paying for the bank, they are acquiring are almost always setting themselves up for dilution. Instead of buying, they need to improve their performance and buy back their own stock. Why would you a bank trading at 1.3 a book, pay 2x book. Again, they would be better in most instances to buy back their own stock and improve their performance rather than diluting themselves with a deal that obviously does not work from the start. The math is not complicated. They either work or they don't work and most don't. Home has never intentionally done a dilutive deal. Our Happy Bank transaction did not perform as well early as we expected, but it was certainly not because the math in the deal did not work. It was circumstances beyond our control. But it's much better today and the bad is mostly behind us.

The industry's poor performance opened the door to invite HoldCo into our world. If you think that's a bad deal, we have no one to blame except ourselves. It is a good wake-up call for every one of us to recognize the insanity of what we are doing to our shareholders, our industry and our future. The shareholder is who we work for. They are our owners. I've watched banks dilute them into infinity because they did not know what they were doing. They will never give you an earn-back report. When's the last time someone sent you an earn-back report on the M&A deals over the years? They don't because they can't, simply because they don't work as intended. The CEO gets a bigger salary because he now runs a much bigger bank. So his salary goes up and the shareholder gets screwed one more time. I've labeled this shareholder abuse. We have to clean up our act or we will continue to lose the investment community, and they will leave the bank space. It took us a while to screw it up, and it will take a while to turn it back around. But we need to start today and save our future and realize who our bosses are and who we work for. No more dilution from this point.

I know I've made a lot of poor performers unhappy and a lot of serial diluters very unhappy by telling the truth. But remember, it's not your money or you would not dilute your shareholder because you'd be diluting yourself. That's why I like founders and owner operators. They are the best partners in the bank space. The CEO of the bank should only make more money when he's responsible for increasing the EPS of the bank and make the shareholders a higher solid EPS increase. Including dividends, Home is up 68% over the last 5 years, maybe not the best, but certainly a contender. It appears the stars are lining up in this Trump-led economy, and we don't need to miss this opportunity. The banks had a foot on the throat by the past administration, and that foot has been removed by President Trump's administration. I'm speaking out as a large shareholder today and an owner operator with the majority of my net worth tied up in this company. We care about performance, and we know who we work for. And my entire executive team is vested in the stock, the same as I am. This is not our job. It's our future.

We try to distinguish ourselves from the pack by being one of the 10 or 12 best performing banks in the country. But at the end of the day, the investors see us as a bank. They paint us with the same brush during all 4 quarters of 2025. After removing the credit card companies, the auto finance companies, Home was first, second or third of all banks over $10 billion in ROA, supporting a 2.05% for the entire year. In spite of all the craziness in the bank space, Home has had a record year because we did not make those ridiculous stupid mistakes because it's our money and our future. Donna, I think I have probably said enough and made enough people mad today, but it is what it is. Back to you.

Well, thank you, Johnny. Congratulations on a great year, and thank you for the insightful industry update. Our next report now will come from Stephen Tipton.

Thanks, Donna. As Johnny mentioned, the fourth quarter was another strong performance for Home and Centennial Bank. And by all accounts, 2025 was a great success. Continued strong earnings, asset quality metrics and capital generation, all capped off by our announcement of the Mountain Commerce Bank acquisition in December. Highlighted by strong revenue and continued net interest margin expansion, we were able to produce an adjusted return on assets of 2.05% and adjusted diluted earnings per share of $0.60. The reported net interest margin improved to 4.61%, up 5 basis points from Q3 and up 22 basis points from the same period a year ago. The core margin, excluding event income, was 4.56% versus 4.53% in Q3. The loan yield declined by 13 basis points to 7.23%, but was offset by a 15 basis point decline in interest-bearing deposit costs to 2.47%. Total deposit costs were 1.91% in Q4 and exited the quarter at 1.86%.

Deposit balances improved by a little over $150 million in Q4 and showed growth of $334 million for the full year of 2025. Noninterest-bearing balances remained stable in Q4 and comprised 22% of total deposits. A top-tier efficiency ratio continues to be a focus and priority for us. And while we had some tailwinds in revenue for the quarter, I'm proud to report an adjusted efficiency ratio of 39.53% for Q4 and 41.29% for the full year 2025. Loan production was one of the highlights for the quarter at over $2.1 billion, highlighted by nearly $1.2 billion from the Community Bank footprint with half of that origination volume coming from Florida. Capital levels continue to grow throughout the year with common equity Tier 1 capital ending at 16.3% and total risk-based capital at 19.1%.

As we've mentioned previously, we're thrilled to be partnering with Bill Edwards and Mountain Commerce Bank in the vibrant Middle and East Tennessee markets. Our conversations have gone extremely well so far. We filed the regulatory applications that is for earlier this week and anticipate a quick process there. We're excited to welcome the MCB employees, customers and shareholders to the Home family soon. With that said, I'd like to thank our regional and division presidents and all of our bankers on another quarter and a great '25. And I'll turn it back over to you, Donna.

Thank you, Stephen. Next is a lending update from Kevin Hester.

Thanks, Donna. Another year is in the books here at Home Bancshares and from a lending perspective, it was one of the best ever. When you combine the fourth quarter loan growth of $400 million with the loan growth we posted through the first 3 quarters of the year, total loan growth for the year was $922 million or 6.24%. Both CCFG and the Community Bank footprint contributed to the fourth quarter loan growth, and this marks 9 out of the last 10 quarters in which we posted organic loan growth. I do want to point out that the fourth quarter loan growth number was higher than we anticipated because of $150 million in payoffs that did not occur as scheduled. Even though the origination pipelines remain strong, the migration of these payoffs into 2026 may dampen early loan growth expectations.

Asset quality remains strong with a sequential decline in criticized assets and no material change in the NPA and NPL ratios. We continue to work through the small group of problems that we've discussed previously and have both good and bad news on the DFW apartment loan that we discussed last quarter. The loan sale agreement that we were trying to get closed fell through, but we have applied the significant hard deposit to the balance and our carrying value is at a materially lower number. We continue to work with other parties to move this credit out of the bank. The Texas C&I credit continues to be a work in process. As I mentioned last quarter, it could end up going to nonaccrual before we get it out of here, and that looks like that could be the case. So stay tuned on that.

We entered the new year with a seasoned lending staff that is focused and understands our credit culture. I expect very good things from them. And while it will be tough to compete with 2025, we believe that 2026 will be equally as successful. With that, Donna, I'll send it back to you.

Thank you, Kevin. And now Chris Poulton has an update on CCFG.

Thank you, Donna. Fourth quarter was a busy one for CCFG. We originated over $800 million in loan commitments, resulting in $236 million in net loan growth. This pulled outstanding loans into positive territory for the year with just under $200 million or 10% growth for the year. You may recall that during the year, loan balances dipped to approximately $1.7 billion before rebounding and closing the year at over $2 billion in total outstanding. For the year, we originated just under $2 billion in loans and received just over $1 billion in paydowns, payoffs. Both of these figures are a bit higher than average.

Similar to Kevin's comments, I would say that as we turn attention to 2026, I do expect paydowns to moderate growth in the near to midterm, but much like this past year, future funding and new volume may largely offset expected paydowns over the course of the year. Donna, I'll now hand the call back to you.

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

It was a great quarter and a great year overall. We hung in there pretty good. We didn't make the mistakes and hopefully, our investment community will appreciate our efforts. So -- anybody else have anything? Brian, you got any comments to that?

It was a really good year. We blew it out and did quite a bit better than we even had budgeted.

If you remember, I didn't vote for your budget last year. I 427 or something...

425...

45 I turned I knew we could do better. I thought you were landing behind a maybe. So anyway, I guess we're ready to go to Q&A, Don.

okay. Operator, we'll turn it back over to you.

First question comes from John Armstrong with...

Just -- maybe it's a question for Kevin or for you, John, but what do you attribute the growth to for the quarter? I know you flagged the payoff that didn't happen, but you still had a strong growth quarter relative to what you've had historically. Are the pipelines changing? Or is there anything else that you feel is driving the stronger growth?

John, this is Kevin. So I mean the size and the geography of the loans is similar. It's the same. Most of our loans -- larger loans tend to be construction loans. Those fund over, let's say, 18 months. This quarter, we had a couple of larger loans that were fully funded because they weren't construction. That helped. And we see that from time to time. If they're big loans, they make a difference. Pipelines are strong. I think it was helpful the last quarter that there wasn't a lot of rate movement. I think that -- when rates start dropping, and we see people doing crazy stuff, and that's -- we're seeing that, that's happening. But if we're higher for longer, then I think that slows down a little bit, and that always helps us. So it's a mixture of 2 or 3 different things. It just happened to all come together and make it a little bit higher than what we thought it was going to be.

Okay. Okay. But pipelines are pretty consistent. They haven't really changed that much?

Not really, no.

I was pleased -- John, this is John. I was pleased with the loan growth. And we had -- I think Chris might comment, I think you had a large payoff that didn't happen. Chris, do you want to comment?

Yes. I think that's fair. I think 2 things for us in the quarter. One was we had a loan that closed at the beginning of the quarter that we had originally scheduled to close in the third quarter. I think we had talked about that before as well that it slipped into the fourth quarter. And then we had a payoff that we expect in the fourth quarter that slipped to the first quarter. So if you look at things on like a rolling 4 quarters, rolling 3 quarters basis, it all kind of evens out. But sometimes you get both those things happen in a quarter and your number pops a little bit. But I just view it as a little bit of timing.

I think S had a pretty good month to December. Scott, do you want to comment? I lost you, Scott? Are you on mute? I don't know where Scott is maybe we lost him, but he had a good December. He was telling we were skepting earlier. He had one of the best months in December. So that gave us a little.

Yes. He probably gave us the most eloquent answer on mute, but I noticed that was good. Johnny, just one more thing, just overall reserve level goals. I know you've expressed the desire to keep the reserve levels high and maybe grow them a little bit. But is 190 enough considering what you've seen with pretty stable and good quality credit?

Yes. I've always run a 2% reserve and I always run with a 2% reserve. And we had some -- we had a little settlement this time. You don't normally run at a 3% pretax pre-provision ROA like we did this quarter. So we had a little extra money, and I thought it's a good time. I think I said in the past, if we get an opportunity, we'll build reserves. And I just like a 2% reserve. When we get some -- we get an opportunity, we'll probably continue to take that up. So if we don't get an opportunity, we won't take it up. Yes, it's plenty. The reserve is plenty. But I just -- we don't know what's going to happen next, right? We just don't know what's going to happen. Something is going to happen. We don't know what's going to happen. However, it looks pretty good for us for the future. I mean it looks like countrywide, it looks like we may have a -- '26 may be a good year for all of us and '27 maybe even a better year. So I'm pretty excited about what the future yields. Thanks for your support, John. You've been a supporter since 2006, I appreciate it.

We now turn to Stephen Scouten with Piper Sandler.

I guess maybe going back to loan growth for a second. I think, Kevin, you said like no major changes, nothing different. But I did see one larger loan kind of get flagged a potential larger energy loan get flagged in some publications. I'm just curious if that's a sector that you guys are lending to any more significantly now at this point in time? And if there's any kind of larger or chunkier loans that were within the quarter's results?

Stephen, this is Kevin. So that particular loan is a loan we've had for some time. I think we upsized it a little bit, but maybe why it got flagged, but it's a customer we've had for a while. I don't know that it's indicative that we're really diving into that market anymore. It's just a really good opportunity that we liked very well and felt like we could size up and got very comfortable with. So will we do that again? We might if we see things we like, but that's one we've had for a while. It's not a brand-new relationship.

Stephen, that was a part. Happy was in that credit, syndicated credit for -- I think it was 5 or 6 banks in it at one time. And the lead bank, if you remember, got in trouble, and we took everybody out. So it is from an oil credit perspective, it may be the best oil credit in the country. And it's not -- that's not something -- we're a little nervous about some of those markets. But we like this credit a lot. We like this operator a lot. He's done extremely well. By the way, that's a $350 million credit, and it's at about $280 million now. So it -- that's not the credit that popped the loans up for the quarter.

Got it. Got it. Super helpful. And then maybe thinking about deposit growth for a minute. I mean, do you feel like you can drive enough deposit growth to fund the opportunities you guys have on the loan side? And kind of how do you think about the loan-to-deposit ratio from here? I know you used to be willing to run it pretty hot, but I think lately, you've said maybe keeping it between 90% to 95% would be the goal. Just wondering how you're thinking about that.

Stephen, this is Stephen. Yes, I guess last part first. I mean mid-90s is probably where we would target. We ended the quarter at 89%. Mountain Commerce will increase that very slightly. They're running a little hotter than we are, but something in the mid-90s. I mean I think our approach is we've long said we don't run CD ads. We run -- we advertise the company's strength. There's certainly opportunities to be a little more aggressive at times from an interest rate perspective if we have to. And the markets that we're in are certainly potential deposit providers for us down the road, particularly in parts of Florida. So we're optimistic, and I think optimistic in Tennessee as well that the company's strength and our size and branding that Bill and his team will be able to capitalize on that from a deposit growth standpoint, too.

Yes, that's great. Appreciate that, Stephen. And then just maybe last thing for me. I did notice, obviously, I mean, the reserve at 190, I'm not particularly concerned about anything on the credit side with you guys, a ton of capital, a ton of reserves. But I noticed the 90-day delinquencies on the Shore Premier book did increase a little bit. And I know you said they had a good month in December. So maybe that's just episodic. But just wondering if there's any kind of change in your view about that line of business and kind of how it's performing or how trends are going there?

Stephen, this is Kevin. So we've got 3 or 4 single loans that are kind of one-off in nature that it's just taking longer to get through the process to get them back and get them sold than we would like. And it's a function of just going through your repossession process. Nothing major.

One boat that we've talked about for 6 months now was arrested. We're in 50% on the dollar, a $10 million boat, we got less than $5 million or maybe probably got $5 million in it now. We can't get it out of the court system, but this keeps -- the attorney had a cardiac problem. I mean every kind of excuse in the world, they keep doing, but we're in good shape on that boat.

We've had the boat for 9 months. I mean...

We've had it for 9 months. We got to rest it for 9 months. We're paying the ticket on it. It's eating, by the way. So it's just getting it out of the court system is a hell of a problem. And you'll see $5 million of that pop go away pretty quick when that happens. And we -- he says he's going to pay for it and he says he's going to refinance it and he begs the court and the judge gives him another 30 days. I don't know, it's frustrating. The boat will be 20 years old for get it back, I guess. I hope not. So they had a good -- I've talked to him this morning about exactly what you said about we see anything. And one of them was the guys shot himself. I mean it's a lot of scattered stuff and probably -- we got 4 or 5 others that probably -- I think about the fact that what you loaned on it and what we're going to get out of it and how much losses in there and maybe you need to improve our loan-to-value a little bit on the origination. As it turned out, only half of these were -- we had originated the other half we bought in pool. So I feel better about that.

Got it. That's great color. Congrats on a great 2025. Look forward to watching another great year here in '26.

Thank you and thanks for your support. You've been a great supporter, and we all thank you for that. We know you wrote the best report on this time. So thanks.

We now turn to Matt Olney with Stephens.

Appreciate all the details on the loan pipelines. I was looking for more color on loan pricing. Some of your peers are talking about incremental data points around loan pricing getting a little bit tighter more recently. I'm curious what you're seeing and hearing with respect to competitive pressures in various markets from CCFG to the Community Bank.

Well, I'll cover -- this is Scott. I'll cover the Community Bank. I mean we're seeing some really silly stuff. I mean it's one-off here and there, it's different groups in different locales. So it's not one group. But I mean, we saw a deal of floating at prime minus 75 with no floor, a ceiling of 6 and you can fix it at any point during the next 10 years. I don't know how you compete with that. So I mean there is crazy stuff out there. I think it does slow down a little bit when you don't have rate drops. If we stay here for a little while, maybe that gets a little better, but it's silly.

When yesterday they asked for 60 or 70 reduction in rate I told them I've never done that before, 160 or 170 in rate. So anyway, it's just -- they're starting -- I mean it's starting. It's the kids got the money and running with it. So this is the toughest part. This is the toughest part of the cycle that we're going through as rates come down is watching these people yesterday, Kevin said it has no floor. And you can set it any time within 5 or 10 years, whatever it's sallarious. But I mean, that's what you got to deal with. And you got to live with it. It's just part of banking. It's a silly, silly part of banking, but that's what it is.

I'd say our groups navigated through all of this competitive environment really well. I mean I think the community bank originations in Q4 were about 690. And I think in December, reflective of the last 2 drops, we're in the 6.75% range on a coupon plus fee. So our folks are still doing a great job and getting the yield should.

Yes. Good. Well, I appreciate that color. And then just, I guess, following up on the margin overall. I mean, the core margin continues to move higher. I think we're at 35 or 4.53% this past quarter. Curious kind of what you see the puts and takes on the margin as you move into 2026.

Matt, we've said for a year now, we just hope to keep it flat and it continued to go up a little bit. So I guess, I'll say we hope to keep it flat, maybe it will go up a little bit. We -- a couple of things there. I mean -- and I guess it ties into your question on competition, but I show we've got about $1.2 billion in fixed rate loans that mature over the course of this year that are in the aggregate about 540. So there should be some room to bring those up if competition allows, if everybody doesn't trade all this away. So there's some room there. Our CD portfolio is pretty short. There may be a little bit of room there as those mature and are able to work rates down. But again, kind of same thing, competition. Yes, I mean, we -- if you exclude event income, we were at 4.56% for the quarter. We actually ended December at 459. So we've kind of got a good jumping up spot for Q1 here. But I think overall, if we can keep it -- if we can hold in this range, we'd be pleased.

Yes. Okay. Well, I appreciate the color and congrats on the year and looking forward to see what you guys can do in 2026.

We now turn to Dave Rochester with Cantor Fitzgerald.

I wanted to start back on the great loan growth you guys had. It looked like there was some pretty serious multifamily growth in there with some of that coming through CCFG. I was just curious what got you guys to take a big swipe at multifamily this quarter? What did you like about the loans? Were they larger, more granular? And should we expect to see more of a focus on that in '26?

Dave, I'm going to let -- you mentioned Chris. I'll let Chris answer for him, and then I can give a little bit of a color on the Community Bank side.

Yes, Dave. Yes, we had a couple of loans this quarter where we had some clients that purchased the multifamily, either purchased multifamily loans or purchased multifamily assets, and we were levering those. So I don't know that we necessarily step back a few months ago and said, let's do a lot of multifamily. A lot of what we do is we have a kind of a roster of clients who we've done business with for a long time, and they talk to us about the things they're doing, and then we decide if we're going to do those. It happen to be a lot of multifamily right now. What we are seeing in multifamily is there's a particularly bad vintage of multifamily from like 2021-ish range, plus or minus months, where those -- that vintage hasn't done that well. And so some of those are now trading hands and a lot of our a lot of my clients buy either distressed or semi-distressed or expiring loans and things like that. So I think that's really what drove that this quarter.

Got you. So I mean, if that's a particular vintage, and I would imagine those came up on resets and whatnot. Is this something that maybe we could see over the next couple of quarters at least as a nice driver for growth?

I like the trade. We'll see how many more there are, right? These happen to come along right now. I think there's a few more potentially coming through. So again, I think it depends a little bit, I would say, but we like that trade. We think there's probably more to go there, but how much of that we'll end up doing, we'll just have to see. It's a little bit about whether our clients are full up on that now or not as well.

And earlier, you guys had talked about a lot of your production, your loan production was in Florida. Was a lot of this in Florida?

For CCFG, no. A lot of Sunbelt and some New York, but we generally don't do a lot of Florida because I think the bank has a great team down in Florida that's got giving the bank pretty good exposure to Florida. I have a little bit in Florida, but we don't really concentrate on Florida.

Yes.

I was going to say a segue to the community side. some of our growth will be, as we said before, construction stuff, that will be things that we've already closed that are now funding. So that's part of the third quarter. We still got a really good -- there are some really good places in Texas and Florida to put new projects. And so that's what the Community Bank is mostly focused on. And I think you'll continue to see that as long as there are good markets for us.

Great. Appreciate that color. Maybe just one last one on expenses. Those were down a little bit this quarter on a core basis, and you guys have done a really great job keeping a lid on the run rate all year. How are you thinking about that run rate heading into '26?

I'll take it. Yes, I mean, if you look at where Q4 was, we had about $0.5 million in merger expense. You take that out, we were just shy of $114 million. We're going through the budget process now. It looks like 1%-ish in terms of growth. On a stand-alone basis, obviously, we're targeting the MCB acquisition early in the -- early this year. That will add some to the run rate before we get to the end of the year and get the integration happening there. But I think fairly well controlled and aside from merit increases and things this time of the year, we should be in good shape.

We now turn to Catherine Mealor with KBW.

I want to follow up on the margin.

When you turn those kind of numbers out, I'm pretty happy, as I said, pretty happy camper.

Okay. I'm glad you can hear me. So my question is just circling back to Mountain Commerce. And just thinking about when we fold that acquisition in on day 1, they've got a 250 margin. I know you're going to be able to mark that balance sheet and then probably lower their funding costs over time. But kind of curious how we should think about any initial changes that you'll make to their balance sheet, either in wholesale CDs or their borrowings or if that will be more of kind of a gradual thing to model in over time?

Catherine, this is Stephen. I think from a funding standpoint, I think that's something we'll model over time. Like I said earlier, I mean, we're optimistic that Bill and Kevin and the team with the larger balance sheet and the strength of the company can expand relationships and grow deposits in that market that would enable us to maybe work out of some of the wholesale funding that they have, but I think that will happen over time. I think when you -- like you said, when you mark the balance sheet, our initial indications are little to no impact on where our net interest margin has run here over the last couple of quarters.

We've had some good opportunities already in Tennessee with some -- one of them was an Arkansas customer who's buying something in Tennessee and picked up the phone and called us and said, "Hey, I see you're going to Tennessee. And I said we are and they said, "Well, I just bought something $4 million, $5 million, whatever it was. So I hope to work with Bill and his team and they're moving on that loan. And then yesterday, day before yesterday, David Carter, a recent President out of Jonesburg Coins, small world. Somebody who went to school with is one of the largest customers for Mountain Commerce, and they -- Mountain Commerce had topped out with him and he said, I'd sure like to do a lot more business with you guys. And as it turned out, he's a big customer of Mountain Commerce, and we can help him with his growth in the future. So 2 good leads. That could be multi, multimillion dollar credits there. So good stuff from the start just from announcement. So we'll be able to -- they'll be able to do bigger deals with our balance sheet behind them.

Great. Great. Glad to hear that. And maybe on that theme, just with M&A, it feels like you're on track to close that still early. You said early in the first half of the year, kind of think in beginning of second quarter, but let me know if you have a different opinion of that. And so if that's the case, how quickly do you think you'd be interested in looking at further M&A as you move through the year?

Well, I think we're open. Hopefully, we close this April or May, and we're certainly looking for opportunities from there to do another -- we think we could do another one this year. We're open. We're open for the right opportunity.

Is that what you were looking for?

We now turn to Brett Rabatin with Hovde Group.

I wanted to go on the M&A topic, I certainly hear all the stuff that you said, Johnny, about buyers in the past, maybe not having done great deals. One of the other things that investors complain about is, hey, do you -- should you own buyer stocks? And I think there's some pessimism that maybe you shouldn't own buyer stocks. How does that factor into your thoughts on M&A and just what that does to your stock price?

How does it factor in the fact of whether we buy our stock or don't buy our stock? Is that what the question was? I don't get the question.

Yes. Well, just there's market sentiment from investors that maybe you shouldn't own the buyer stocks because they don't perform very well. And you guys have been acquisitive. I just I'm curious if hearing that from investors makes you more or less apt to maybe do M&A versus looking to do other stuff organically.

No. We'll continue to do M&A and our first entree into Tennessee with Bill and his team, we'll let them guide us in Tennessee, and we're certainly open to something in that market, but we're not closing the rest of the markets either. I mean if we found something in Texas or we found something in Florida that fits our bill, we'd certainly move on it and wouldn't hesitate. There's not a lot left in Florida to speak of. There's quite a bit in Texas to do, but we're certainly open to M&A. And we'll -- and so far as us continue to buy stock back, that's just one of the things we do. When you run -- if you heard me say this, when you run a 2.10% ROA, you can buy back stock and you can increase your dividend and you can grow tangible common equity all the same way. I think we grew tangible common equity 16% or something last year, almost $2 a share in growth in tangible common equity and a couple of hundred million shares. So that kind of puts it in perspective. If you don't make that kind of money, you can't do that. When you make those kind of returns, it gives you -- you can pull, as I say, every capital handle that's out there and take care of your shareholders with a reward and grow the bank, too.

Okay. I appreciate that color, John. And then the other thing was there's been a lot of comments about Florida. You just mentioned there was still stuff to do possibly in Texas. Where is the Texas franchise at this point relative to -- you obviously had the gain in 4Q. Is all of the noise around all that stuff died down and you're in a net growth perspective for Texas from here? Any thoughts on how the Texas piece is performing and what you might expect from that part of?

It's performing today the way it was supposed to have performed 3 years ago. So we had a little bit -- early on, we had a little bit of good performance and then we kind of fell off. And as you know, the trouble we had out there. And now it's back. So it is -- the Texas operation is growing. We had to make lots of changes and lots of cleanups, lots of work to do in that market, but we're getting there. Our Dallas-Fort Worth area is really cleaning up well. Our West Texas area is really cleaning up well. So we're pleased with that. They're bringing good loans to the table, and we're happy with what we see. So it's probably now where we expected it to be 3 years ago. That's probably where it is. I haven't looked at that exactly, but that's my feel. I looked back at the P&L at the end of the quarter and looked at where our Dallas-Fort Worth and our West Texas operations were performing, and it's -- they're getting the numbers now. They're part of our system, and they're operating like the rest of us operate, and it's back in the way it should be.

Okay. Good to hear. And then just lastly on that repurchase comment. Are you implying that maybe the pace of the buyback continues at the levels in 4Q? Or any thoughts on how aggressive you might be with using the repurchase plan?

Probably. That's something Stephen and I talk about all during the quarter. And when we see an opportunity and when we're having a great quarter, then we kind of move on it. And if things slow down a little bit for us, we just kind of -- it's kind of a weekly conversation between he and I. So the answer is probably continue. We like to buy our stock. I'd like to buy back. Mount Commerce is 6-plus million shares. It would probably be my goal to buy all of that back over the next period of time.

We now turn to Michael Rose with Raymond James.

Maybe just tangential to Brett's question. Just as we think about Tennessee and the opportunity set there, clearly, you've had a big deal in that market. I think on a pro forma basis, you guys are like 20th in deposit market share in the state from day 1 once this deal closes. What are the aspirations there? Clearly, as I look at Florida as a case study for you guys, I mean, you guys have made tremendous strides over the years, done a lot of deals. Is the goal to have a similar trajectory? Is it a more targeted strategy? Is it -- just how would you describe the opportunity set as we think about kind of the intermediate to longer term for what Home could be in the state of Tennessee?

I think we'll just continue to grow in that market. That's not a market that we've never been in that market before. We've been in Texas before. We've never been in Tennessee before. So we found a guy that's a founder and who built his own bank and as an owner operator, similar to our operation here, and we like that. We like what we see. He's stubborn a little bit on his securities and low rate loans, but we'll mark that day 1. It's already marked, and we'll let that -- he'll come out gangbusters pretty quick. We get the expenses out of it over the next 12 months. Outside of that, we'll let him lead us into that market. I mean we know people that operate in that market through all the bank conferences. As you know, Michael, we meet all those people. They know us and we know them. So who knows what the opportunities are in that market, but we're certainly open to M&A in the Tennessee market. if we see something there or Bill finds something that he wants to do, we'll be on it the next day. We won't hesitate. We have the capital. We have the ability to mark somebody's balance sheet and fix them overnight, and we'll use that capital. Everybody has always said, what do you want to do with that capital? And I said, well, we'll use it someday. Well, this is someday give us an opportunity to use some of it. I don't know if that answered your question, but that's kind of how I'm looking at it. Stephen, you got any different observation on that?

No, I agree 100%. We like what we see in the market so far. And I think Bill and his team can provide some opportunities. We've already talked to some names here and there, and we'll see what happens over the course of this year.

No, for sure, it's a great market and obviously a good deal. So I appreciate it. Maybe just one follow-up for -- maybe for Chris Poulton. I think as I talked to banks over the past couple of months, one of the big topics has been just paydowns in commercial real estate and construction, just maybe a little bit of a hangover effect from all the activity that we saw come out of the COVID. Are you seeing that at all? And are there opportunities to maybe capitalize as maybe some of those paydowns play out to maybe take some market share? Just trying to get a sense for the business. Obviously, one of your competitors is talking about pretty big paydowns this year. So just wanted to get a sense for the paydown level that we should be thinking about? Is it greater than the past couple of years? And then maybe what's the opportunity set as we go forward?

Sure, sure. I think paydowns are elevated. I mean, as I said in my comments, we had higher-than-average paydowns this past year. I think that will continue. There are lots of opportunities for customers to get financing. I would say what we've seen more than anything is nonbank entrants into commercial real estate. There's sort of refugees from the corporate lending side. Pricing has collapsed in corporate lending. And so some of those funds and private lenders have turned their sights to commercial real estate because from the outside, it looks pretty easy, I think, and higher yield. So we are seeing that. I think we'll continue to see that. I think this is really where the test for us is we've been doing this for going on 10, 15 years, and we've got a good stable of customers who understand who we are and how we can help them make money. And so I think that's the other side of that, which is I think those people will continue to put money out, and we continue to be an interesting choice for them. If our business was tied to doing a significant amount of volume every year as then we need to take share or take a certain amount of share, et cetera, I'd be concerned today because I do think it's getting harder. Our business has always been tied to finding those small opportunities out there that are a little off the run, et cetera, that we can be helpful to people on. Those continue to exist, and I think those will probably continue to probably strengthen. I'm not sure if that answers your question, but I think we are seeing both those things. We see some paydowns on that, then I think we'll also see some pressure in the main thing. If I was trying to do $5 billion, $10 billion a year right now, I'd be concerned.

We now turn to Brian Martin with Janney.

I just had a couple of follow-ups to things already answered or things already asked on the call. So just maybe, Stephen, just on the -- or maybe just back to Chris for a minute. Chris, your thought on kind of just given the puts and takes in the year '26, just kind of how you're thinking about net growth for the year? I guess, is it kind of a mid-single-digit type of growth is how you'd be thinking about it with the origination activity versus kind of the payoffs you're anticipating?

That's what I'm currently estimating, right? So assuming the payoffs that we think and the fundings that we think and where we generally come out on lending, I'd be happy with that. And then you have to throw into it would you get a payoff you weren't expecting or things like that? You might. But again, I think over a long enough period of time, whether that's quarter-to-quarter or month-to-month or over an 18-month period time, et cetera, I can't tell you within the calendar year what that looks like. But I would expect we'll continue to grow. I believe that to be true. We usually find those opportunities. One of the things we talk about here is the universe expands and we grow. I think that will still continue to be true, and that's what we're projecting.

Got you. Okay. And then maybe just 1 or 2 for Stephen. Stephen, just on the margin and expense, I think expenses you were talking about $115 million a quarter, if you use your $114 million number, that's kind of the stand-alone run rate in expenses and then just factor in the acquisition. Is that fair? And then just a second one on the margin, just the biggest pressure point in the margin today, if you do see some potential compression, where you anticipate that could come from?

Yes. That's -- I mean that's fair on the expenses. That's what we're showing from a budget standpoint. We'll certainly strive to do better there, and we're talking with our presidents every day on where we can do. On the margin, our folks have done a fantastic job this year, navigating the rate decreases and being able to certainly hold on to customers and grow relationships while getting rates down. It feels a little bit today that outside pressure from the loan side is kind of the wild card. And you heard Johnny say earlier about a customer that was looking for 150 basis point rate decrease, Kevin's comments about some stuff we're seeing from competition. So whether that stands to tighten things up a little bit, we'll see. But I mean, I still think we get our fair share and protect our franchise and what we have and try to keep it in this 4.5% range would be pleased with.

Got you. Okay. That's helpful. And maybe just one for Johnny on the -- you talked a bit about the M&A. Just kind of the pipeline today on M&A. And I guess, any commentary just on smaller versus larger deals, how you're thinking about the next 18 months or so, where you'd be looking more?

Well, in terms on the geography, we've got enough in Texas right now that we could get some savings there. We certainly have enough in Florida to get some savings, not particularly in Tennessee yet, but one of those markets, the Florida deal would probably be -- make us -- I mean, that would probably make more sense for us right now. However, unless Bill brings a Tennessee deal from some opportunity he thinks would be good for us. So I'm open. I'm just open. I think there's opportunities. And a matter of fact, I know there's opportunities in all 3 states right now. So we'll just have to see which one makes the most sense. We're not going to dilute our shareholders, as you heard. We've never done that. We're not going to do that. Well, we may have diluted them a little bit early on and happy for a couple of years, but that wasn't an intentional dilution. We -- that happened to us. But since then, we never did it before, we won't do it again. So we find the right trade to do that. As long as our currency -- we continue to perform way we are and our currency holds up the way it is, it gives us the ability to do those transactions. So I guess my word to those that are running 3 is get themselves to a 2% before they go out and do something just makes all the sense in the world.

Yes, you're welcome. And maybe just the last one for me was just -- I don't know, maybe for Bryan Davis. Just Brian, is the kind of the noise or the extra income in the quarter relative to the Texas resolution. I mean, is fee income kind of a core number around -- yes, call it, $45 million. Is that kind of a clean type of quarter as you look at some of the noise that was in there this quarter on the fee income side?

Yes. The $4.9 million was really the only noisy thing that we had in noninterest income.

That's a good level. Okay. Just want to make sure that. And then the last one was just for Kevin. Maybe, Kevin, you went through the commentary about nonperforming. Can you just give a little thought or maybe just -- maybe I missed what you said in terms of what the puts and takes were on credit? Like what could be resolved in the next quarter or 2? Or kind of what's the status of those couple of credits?

So the DFW apartment credit, the sale that we were working on, the notes that we were working on fourth quarter fell through, but we had a pretty good sized deposit that was hard that we applied. So we're we're still working with others, and we hope that, that will -- we hope we'll get that moved soon. It may take a little longer than I'd like, but we're still working. Texas C&I credit is -- we're working it through. I think it may get to nonaccrual before it gets resolved. But again, we don't think we're going to have any additional loss there. We took a charge-off a year ago, fourth quarter, and we think that our -- that we're okay there. So we're just continuing to work through. It's the same problems we've been talking about for a couple of quarters. And it just takes -- sometimes it takes a little while to get rid of a problem.

Yes. And how big are those credits, Kevin, ballpark in terms of the apartment in the C&I?

Apartments 10 C&I credit is about 90

This concludes our Q&A. I'll now hand back to John Allison for any final remarks.

Thank you, everyone, for joining the call today. It was a great quarter, great year for Home Bancshares, and we appreciate all your support, and we'll continue to be -- we'll represent your investment properly and do the right thing and hopefully make the right investments for all our shareholders. We are a shareholder -- pro shareholder company, as you know, and we'll continue to do the right thing for the shareholders. So -- that's -- anybody else got a comment before we close out today. Thank you very much for your support. Have a good day, and we'll talk to you next quarter.

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

Hello, everybody, and welcome to the Home BancShares Announces Acquisition of Mountain Commerce Bancorp Inc. My name is Elliot, and I'll be coordinating your call today. [Operator Instructions] I'd now like to hand over to John Allison, Chairman of Home BancShares. Please go ahead.

I guess I'm live here, Brad. Thanks, everyone, for joining with us today. It's an exciting day in the history of Home BancShares and for Mountain Commerce. With me today is, of course, Donna Townsell, David Carter, Stephen Tipton, Kevin Hester and Bill Edwards is with us today, is the founder of the bank. He's the Johnny Allison of this banking. We're pleased to have him join us -- his group join us. We're excited about the opportunities. You read the quote, I think Tennessee, Texas and Florida are the 3 best states in the nation. And now we're in the third one. So this will be our base operation coming out of here.

Bill will be looking for opportunities, and we'll be helping them with our balance sheet, they'll have the Home BancShares balance sheet to go forward with. So I think that would be a plus for him and his team. We had a meeting last night with all the -- several members of the team, it was a great evening. We spent about 3 or 4 hours together. They're very conservative bank. There are a lot like Home BancShares. So I think it -- I think it's good opportunity for Mountain Commerce shareholders as well as Home BancShares shareholders and we're pleased to do the transaction. And we are in Tennessee, as you speak, we're in this beautiful office in Knoxville, Tennessee. What's its address.

6101, Kingston Pike.

It's beautiful, beautiful facility, and we're here in the board room, and we're going to probably open it up for questions. Stephen, any comments, anything you want to say this morning?

No, glad to be here. I mean, I think we've talked before about when we enter a new market, we're going to do it with some scale and do it with the management team. And I think we're pleased to get to know Bill and Kevin and their team and look forward to working together going forward.

Kevin, any comments?

I'll just echo what you guys said. I think it's a great opportunity for both us and for them and looking forward to get started.

Donna, any comments?

Well, glad to be in Tennessee here with Bill. And I would also like to remind us on the phone that there is a slide deck on our Home BancShares website with some additional information, if you like to review that.

Just a few comments. This was a triple accretive transaction on EPS, book value per share and tangible book value per share. Both Mountain Commerce and Home BancShares will start creating income as soon as the deal closes. It won't be dilutive like a lot of these deals have been done in the past. It's a meaningful entrance into high-growth Knoxville, Nashville and Johnson City, and Mountain Commerce has a long history strong performance, and we're going to lend our balance sheet. You'll see we've marked the balance sheet. So we think Mountain Commerce will come out strong out of the gate. So it's financially compelling. It's a low-risk transaction. They're about as conservative as we are, and we like that.

So as I said earlier, this Mountain Commerce will operate as a base for future expansion in these areas. That will be up to Bill. Bill is going to run the operation if he's in charge, and he will find something, we'll take a look at it see we put it together, Bill.

Look forward to that.

I think, Donna, let's just into Q&A, and I kind of get it rolling here, if that's all right.

Definitely, we're ready for questions.

[Operator Instructions]

First question comes from Brett Rabatin with Hovde Group.

Congratulations on the deal.

Yes. Thank you. Thank you. We're excited.

I wanted to ask, Johnny, on this franchise, will you be adding branches? Do they need additional locations to grow -- what do you think in terms of organic growth for the franchise? And how do you get there?

I'll let Bill answer that. This is his baby. He knows this market inside out backwards and forwards, and he's our leader here. So if he finds it's appropriate, that's what we'll do. So it's really -- he's going to be driving the bus and we're excited about him driving. Bill?

Yes, Brett. I would say, first off, we have a very talented team, and we've been constrained with our deposit growth as well as our capital. And so just our team will have tremendous organic growth with the Home balance sheet. I think branches will be one consideration, but I think, obviously, additional hires could be in play with the disruption in Tennessee. But I think out of the gate, we don't need much to really turn up to the growth engine.

Okay. And then my other question was just around the deposit base and your cost of deposits, Bill, I think, was a little over 3%. Johnny, you obviously have a pretty low cost deposit base. Is the cost of deposits and opportunity in Tennessee for you, Bill? Or do you think that it's just more competitive than other places and so it's going to be tough. Just any color on maybe the opportunity to lower the cost of funds from here for the pro forma franchise.

Yes. I think the deposit cost is a little bit misleading in that our customer deposit cost is about [ 250 ]. We have the wholesale funding that takes the cost up to the 3% number you spoke of. Now if you look ahead for maturities over the next 12 to 15 months, many of those reprice lower, obviously lower, some are in the 5s now. Our last NCBI press release calls that out as far as our deposit price and there's a good schedule that you can see, Brett. But customer deposits -- I think we're in line. It's the fact we had to fund the balance sheet with wholesale money, again, speaking to the ability to grow, we just couldn't fund it.

We now turn to Matt Olney with Stephens.

Congrats on the deal. I was just looking for more background or history from Johnny as far as just how well you've gotten to know Bill over the years and the team at Mountain Commerce. And just remind us of any background you have of banking in the Tennessee market.

Well, we've had of eye on Mountain Commerce for a while in Bill's operation. We just -- we didn't move earlier because we had to get our arms around all the Texas stuff that we had. We finally got our arms around the Texas stuff. I told you we're ready to move at that point in time. And this is where we landed right here. So with Bill and I've visited with him, flew over here and had lunch with him, and we had a lot of common interest. And we had -- we would have been here before because we like Tennessee. But as a result of the mess we had in Texas, we had to get that. We had to get -- we had to know what we have and we got our arms around it. Now we are ready to move, and we moved this was the first opportunity that looked like it's made -- I mean he runs this conservative organization as we do. So we have a lot of capital. We fixed this balance sheet. It's already fixed, I guess, once this deal is done. So Stephen, you got a comment?

No. I mean, Matt, you asked about some history in Tennessee. I mean, we -- with our platform, both CTFG and just the Community Bank Group, we've done some stuff in Tennessee over the years. We've got an LPO in Memphis today and have done some projects and in Nashville and the East over time. So it's not unfamiliar to us. And I think Bill may can tell you, but I think he's followed Home and Johnny in the company for years. And I think you can sit next to Donna 10, 15 years ago at an investor meeting. So I think it goes back a good way.

Yes. We obviously had tremendous respect for Johnny and the whole Home team and what they've built. And as I told him, it's kind of most CTV at investor conferences to listen in to read the quarterly transcripts to see if we could adapt anything they may be doing or what their view of the world was. So I mean, it was logical for us when Johnny and I first met that this could be a good partnership. That's how it happened, Matt.

Well, it looks like a great combination, and I appreciate you taking my question.

We now turn to Stephen Scouten with Piper Sandler.

I guess I'm kind of curious just kind of -- maybe Bill can answer a little bit more about Mountain Commerce just not as familiar with the bank, kind of what really the core focus has been in those markets and how that fits kind of with the Home business model at a high level?

Sure. We focus on the professional market. I think doctors, lawyers, accountants, private banking ish, I would say, we try to bank the influencers in the market as well. We're not shy of the real estate piece of the business. All of our bankers have been with us for a long term and some with me prior to Mountain Commerce when we started the bank. So really just banking those that desire relationship, right? We're not trying to compete with the credit unions and some of those type transaction-oriented entities. And it's been successful over the last 18 years.

Great. That's very helpful. And then just kind of from a balance sheet perspective, is there anything from a Home viewpoint that needs to be tweaked or any components that you want to pare back from at all? It doesn't sound like it. It sounds like it might be kind of full speed ahead once you get the benefit of the deposits and the capital in those markets. But just curious if I'm hearing that the right way, and we can expect to see kind of faster loan growth from that Mountain Commerce platform right out of the gate?

Stephen, it's Stephen. Yes, I think that's exactly the way to think about it. As Johnny mentioned, I mean we'll mark the balance sheet and earnings will kind of lift off from here and I think the conversations we had last night with Bill and their team are just excited about the $25 billion balance sheet to be able to grow on from here in these markets.

He's actually been a little constrained due to his AOCI, and he's had to sell some loans every once in a while. Occasionally, and this will give them some additional liquidity to go in. I think we learned last night at dinner with his team that they're all excited about the opportunities going forward and they can do much bigger loans -- much, much bigger loans. So we're -- I mean, Tennessee is a great state. He's got great people. He's got beautiful facilities. He's conservative run. It just fits us. I mean it just -- he's a founder. By the way, as we go through all this, it will help the fact that Home BancShares can pay out all uninsured deposits. Uninsured deposits won't hurt the promotion in this market either. So we continue to bring lots of strength to the team.

Yes, I would just say that the strength is actually going to be helpful on the deposit gathering. As Johnny said, strength is no accident. And as you open up to larger depositors, think municipals or what have you, it's going to be incredibly powerful to have that balance sheet and the core strength of Centennial to solicit deposits. And when times get tough, it's even better, right? They're looking for the strong bank. And our team has just been constrained with again, capital CRE buckets and deposits to fund their growth. So this takes the limitations to off our team.

Glad to see Home BancShares in the [ Tennessee ].

Thank you. Steve, Kevin's got some here to say.

Stephen, I was just going to say talking about CRE, we both have a similar focus on real estate, and we'll give them some room on the construction side and still have a lot of room on the improved property side. So I think we'll have a good fit there and these markets are really good for that asset class. So we're excited to work with them.

We now turn to Dave Rochester with Cantor.

Congrats on the deal. You mentioned earlier that there's an opportunity to take advantage of disruption in the market. And it seems like that can be a pretty meaningful opportunity just given the recent deal activity. Do you think that could be a real needle mover for you guys now that you have the Home BancShares balance sheet coming to bear there now? And what does that disruption mean for you from both maybe a talent perspective and a banking business perspective.

Obviously, I'm very optimistic with that, that there are -- there's a lot of disruption with some of the larger market share players in Tennessee. There are a lot of smaller banks in Tennessee that if you look at fatigue boards and opportunities, and I'm sure our phone will ring about how we thought about this transaction and relationship. But talent, again, when they see the resources that we have from a balance sheet standpoint, I think our phone is going to ring for that as well. And importantly, I think as some of our top producers, their phone will ring, they've all partnered and entered into contracts, which they're excited with the deal. And so I think we've prevented anything leaving the bank.

We were working on this. The Synovus-Pinnacle deal is not the reason we did this transaction. We were moving on this deal. We had this transaction in mind for some time and that just was icing on the cake for us, the disruption that was created in the market. So we think -- we didn't do it because of that, but if there are good things come out of that, then so be it.

And obviously, not having the balance sheet. There's other markets in Tennessee that are really good markets. And to the earlier question as well, if we identify locations that would be suitable for a new branch, we have the balance sheet to do that.

Yes. Well, how about it from just an inorganic perspective, would you say this, Johnny, would this be your highest priority market for future M&A at this point as you try to get more scale in Tennessee and maybe enter some of those other new markets?

Well, of course, we're always looking for opportunities. You know what, we're an opportunistic company. And I'm going to -- I'm not going to press that is we don't press our regions. I'm not going to press Bill to go buy another bank tomorrow. But if he finds one of them, by the way, somebody already said us one this morning. So I think we announced deal and 30 minutes later, she gets the lead on the bank. So it will be up to Bill. We're not -- we don't foresight -- I don't know Tennessee as well as Bill does. We'll let him call that shot. If he finds something, we'll be there right beside to help him do it. So that's our game plan. When you got guys experience...

I know you're going to -- no, go ahead. Sorry, didn't mean to interrupt.

If you got to manage his experience as he has in Tennessee and knows the market and further east from here, then I think that he's the guy that needs to look at it and call it shot. So that's kind of how we run our deal. We got 16 regions and they all report up stream and those guys run their regions. They know the regions and they run it. So that's a plus for us. And having a man of his experience come in, we're blessed to have it. So we look forward to working with him and follow his guidance.

Yes. Sounds good, maybe just one last one. I know you're going to take the normal care with closing and integrating the transaction, but I was just curious if you'd be open to announcing others before you actually close the deal earlier next year.

Well, yes, the answer to that is yes. We have -- if it's something Bill likes and brings to us, we'd be open to that. If it's in another market where we already are located, we'd be open to that. So I mean we've got a couple right now that are out there. I think you can do another one -- this mature will close in 90 days or so. And while that's happening, we'll be working on somewhere else, maybe unless Bill brings us something from his Tennessee or East here. So we're open to that. We got -- we have a war chest of capital, as you know, a fortress balance sheet. So this was a perfect.

We use some of our capital here to help mark his balance sheet and get it cleaned up, ready to grow. And that's what we plan to do. That's one of the reasons we carry so much capital. As you know, we'll err with too much capital and too much reserves. But when you need it, you need it. And when you need it and a lot of times, you can't get it. When you're forced to go for it, you can't get it. So we sit pretty nice. You've seen our balance sheet. It has -- we have lots of capital. So we pride ourselves with that, Dave.

[Operator Instructions] We now turn to Catherine Mealor with KBW.

Congrats. Just one follow-up on the capital conversation. You've got a ton of capital, and obviously, deals have been a piece of this of the story there, but you've also been actively repurchasing shares. And so I guess my question is, even with the deal pending, do you think you can -- you'll still plan to be actively repurchasing stock? Or is kind of M&A going to shift to more of a use of capital proceeds over the next few quarters?

Well, wherever they put it on sale, we'll buy. So we haven't changed from that stance at all. And I don't know -- Stephen, you got how much -- I don't know we bought...

I agree. We've been active this quarter, kind of similar amount to where we were in Q3. But to Johnny's point, I mean we watch it every day and are active when it's on sale.

When you -- the good news is when you run a 2% ROA, you buy back stock and you can grow tangible common equity and even increase your dividend. So if you're running 1%, you don't do half of what we do. When you run at 2%, you can double up on that. So that having a company that generates those kind of return on assets gives us the ability to pull every capital handle out there and pull it as hard as you want to pull it too, Catherine, you know that.

That's great. All right. Good. Yes, well we buy back from the [indiscernible] then. Great. And congrats on the deal. Glad to see it.

We now turn to Brian Martin with Itau BBA.

Congratulations on the transaction. Just wanted to ask one follow-up, and that is just in terms of the -- your outlook and just in terms of organic growth and how to scale the Tennessee markets. With Mountain being in 3 different markets in Tennessee, can you just talk about the opportunity to scale over time? Where do you think the market -- how much scale you can get in each market and just how you're thinking about the priorities there as we move forward?

Well, I mean, that's -- it's all about timing, right, Brian, how fast can you do what? Obviously, the Nashville, South Nashville market in Williamson County is extremely large, one of the best counties in MSAs in the U.S. But I think the point that a lot of folks don't appreciate is Knoxville is a very good market as far as moving into this area. It really depends on whether we go after from organic growth or from talent acquisition or we're able to find another franchise that fits the culture and parameters that Johnny and Stephen would have.

Brian, in the world of 3-, 4-, 5-, 6-, 7-, 10-year dilution, we -- all we got to do is keep our nose clean and be above ground and do what we need to do in this market. So we think we found the right partner to do it with. And that's -- they chose us and we chose them. So it's -- we have a common goal here to build the company. Bill will be a large shareholder and -- which is a plus for us. He's an owner operator like I've been, and we've been in this company for years, and it's a perfect fit, and we just hit it off.

I mean, it's just -- we see things a lot like. You can say what you want to about the founder, but the founder is just different how he looks at it. And having somebody that reels his numbers off, he doesn't have to have a notepad. He just -- he tells it like it is and he knows his numbers. He's got them like we know our numbers. That's extremely impressive to me from my side to see somebody a founder number one, knows is actively involved in the bank and leading the bank and he's got really good people. So I didn't know if please come to us, it's not one more time.

Well, it sounds like there's a lot of runway for future growth, and it sounds like a great combination guys. Congratulations again.

We now turn to Jon Arfstrom with RBC.

We have no further questions. I'll now hand back to the management team for any final remarks.

Well, again, I said it earlier, we're excited to be in Tennessee with Bill and his team today, and we look forward to working with them and their guidance. We will go back to Arkansas today. He's got work to do, and we got work to do, we'll get back to Arkansas. So first, we want to thank everybody for joining us today, tell you how much we appreciate it. And any final remarks? Stephen, you good.

Yes. No, I'm good. I'm good. Glad to be here. Looking forward to getting this thing closed as quickly as possible and getting work.

Likewise.

We are excited, but we're still going to wear red.

Yes.

Yes. We're going, have to get...

We will wear some orange as well.

We'll have to get orange shirt somewhere maybe we can get Bill, we have one with his name somewhere in...

That's a must have.

Rocky Top?

Yes, Rocky Top. But from the MCV side, look, it couldn't be a better partnership with shared principles and cultures we've had a chance to meet many of the executive management team, and it's just a good fit culturally, too. And that's what makes these deals work -- willingness to work together. And I think we all know that Tennessee is a great market, and they're hitting the ground with a very talented team that's fairly excited.

Donna, wrap it up for final comments?

I think that's all we have, Elliot.

Thank you for doing. We're done, Elliot.

Thank you, ladies and gentlemen. Today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.

Greetings, ladies and gentlemen. Welcome to the Home BancShares, Inc. Third Quarter 2025 Earnings Call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday.

The company presenters will begin with prepared remarks and then entertain questions. [Operator Instructions]. The company has asked me to remind everyone to refer to their cautionary note regarding forward-looking statements. You will find this note on Page 3 of their Form 10-K filed with the SEC in February 2025, and this conference is being recorded. [Operator Instructions].

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

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

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

Thanks, Donna. Welcome to Third Quarter 2025 Home Bancshares earnings release and conference call. It's really hard to believe it's already mid October and Home has had another great quarter. I think that's 3 in a row. We've added some graphs this time dollar to our presentation at you're welcome to look at that run from 9/30, '24 to 9/30 '25, and I think you'll see in those graphs what we're seeing here at the company. Just talk about some highlights for the third quarter. We had record net income of $123.6 million, record EPS of $0.63. Revenue of $277.7 million, pretax pre-provision net revenue of $162.8 million [indiscernible] profit percentage of 58.64%. That's the best in the last 12 months. That's not 60%, Stephen, but it's pretty close to 60%.

I'm pretty proud of that. Efficiency ratio at some nice or said was going up, was down and efficiency ratio was invested 12 months at 40.2%. Margin ticked up a little bit. Some set of our margin going down and margin kicked up 12 basis points to 4.56, and that's the best it's been in 12 months. Our TCE continues to remain 18 to high teens at 18.28%.

Just some balance sheet strength highlights, cut equity assets is 18.5%. We continue to grow that. tangible equity, tangible assets, 13.08%. That continues to grow. And loans had a record level of $15.8 billion for the quarter. Total stockholders' equity is $4.09 billion. More good news, the Texas lawsuit has been settled, and we received our first partial payment of the settlement. We expect most of the balance during the fourth quarter. Hopefully, we'll get it all in this year. We'll be lucky if the proceeds will match up with the expensive litigation costs and that does not include the loss of growth and profits we suffered over the last couple of years. However, we had no intention of just mildly spinning back, while damage was being done to our company. Management has a fiduciary responsibility to protect the assets of the shareholder, especially when we didn't do anything to any of those people that participated in its fiasco.

I believe because our conservative nature, we've been criticized by some, I think that Home Bancshares is not growing [indiscernible]. We don't really argue at that point, but I have to disagree with that discussion point because timing and discipline matter. Moving too fast or scaling too fast can be fatal. I believe in fixing your existing problems before you make a new move. That's exactly what Home has been doing for the past 3 years, dealing with multiple distinct unusual problems that rose in the Happy acquisition that led us to filing a 91 pace lawsuit coupled with happy asset quality problems, by the way, is still a work in progress. AOCI, loss of happy private information defection and loss of personnel. Don't get me wrong. We have some great people and happy performance has rebounded.

I have been involved in over 45 deals in my banking career, but never anything of this magnitude, enough of that, forget the bad guys, the status part is what happened to some happy employee shareholders who during the major with home tax roughage happy shareholders exchanged their private nonliquid happy stock for home stock that is the New York Stock intend publicly traded dividend paying with strong liquidity and a strong balance sheet. And after getting the home stock, they listen to some [indiscernible] salesman who talk to them into selling at home and investing the proceeds into another privately held stupid nonliquid investment. There may be where that -- the biggest lawsuit is misleading or unsophisticated individuals. It may be too late -- excuse me, it may not be too late, if my information is correct, every one of the investors have lost money in home and we were even forced to use the legal system to protect the assets of our shareholders. As bad as it was, the rest of the company stepped up to help us while we fought Texas lawsuit, and was resolving the issues in front of us before moving to another opportunity.

In other words, we waited until we had our arms around and multiple problems before we move again. During that time, I feel confident we missed several growth opportunities, but we needed to fix what was in front of us first. What you can see from the charts, we're back producing top 2 best-in-class numbers once again. We would have been there a couple of years ago, we had the analysis of these unusual situations not come up.

More good news during the first quarter 2025, for all banks over $10 billion home ranked #2 in the nation and return on assets. During the second quarter of 2025 for all banks over $10 billion, Home ranked #1 in the nation in return on assets. During the third quarter of 2025, Home outperformed both our first and second quarter ROA. It's early to be able to tell but we're expecting to be, once again, one of the best, if not the best, in the market of all banks over $10 billion. With the performance of the company, back producing trading numbers, we're ready to move forward and do a large transaction or a couple of smaller translates.

So those of you pushing for growth if the time is right and we are with you. I said last quarter, I was looking for $500 million in income in 2026. I'm holding that number so far this year through 3 quarters, Home is earned $357.2 million 1 quarter left to go, add a couple of acquisitions and a little growth, and I think the number is achievable and maybe a little better. Last year, at this time, we'd earned $302 million, were up about $55 million this year, or [ 182% ] from 21% from last year. But the third quarter showing a strong earnings growth up 23.6% for Q3 '25 with $123.6 million in income versus Q3 '24 of $100 million. During the fourth quarter, a bank was selling mines, including a $20 million piece of Home Bank's sub debt at an account and repositioning. They were paying the piper, I guess, I say that the hurdle AOCI losses and Home was given the opportunity to buy.

And we did buy -- we bought $20 million worth of piece of our sub debt and picked up $1.9 million gain nice trade being as [indiscernible] allows us to move quickly on opportunities. During the third quarter, we hope to an exciting new branch in Southern Toni, and we met several of the local business people, great market. We're wishing Michael abriguus, our team leader and his team in San Antonio market but success. Strength is no accident. That's our slug in.

Another reason Home has been hosted on acquisitions is the hesitancy to take on bank's ALC arms. We're expecting many more bank failures than what happened. We were told to keep our power dry. We missed on that call with bank players. But the [indiscernible], the one that most space got in trouble, we got that right, the interest rate call. Many banks and their shareholders are and will continue to suffer from an earnings perspective because the management made huge respect of investing the liquidity into long-term securities and loans during the low rate environment that we all experienced and now they must pay piper. The problem is how long does it take to fix it. It relates to how long a bank's duration is on both its loans and security, whether fixed 5 years, 10 years, some short, some long, making a decision at home, not to invest in long-term securities and loans is the single best decision we have ever made or [indiscernible] everybody in my 50 years of running companies. As I said, wanted a gets in that doing it their options are, do nothing and write out the duration until the bonds and loans mature praying all the time that interest rates come down, or if they have enough capital, they can sell the bonds and our loans at the market and reinvest the proceeds and recognized loss. This can create a capital problem, forcing banks to raise capital by selling more stock. Since banks trade on the multiple of tangible book value, the losses incurred will reduce tangible book value, thus resulting in a lower stock price.

The recovery period can be long and painful and sometimes a descent as we saw with signature by Silicon Valley and Republic, regardless of the decision that is made. At this point, there is commensurate damage to the balance sheet based on interest rates, duration and quality. Regardless of the excuse me, regardless while the bank is trying to recuperate by whatever methods they are losing years of earnings power. Either way, if they decide to ride it out, or recognize, an unrecurrable loss in income and tangible book, the loss is a loss regardless of how it's presented. It reminds me of the frame oil filter guy [indiscernible], you can pay me now or pay me later, or another analogy is it reminds me a loosen [indiscernible] monopoly. You never get it back. Whole time watching others that did not make the same mistake, busy stacking up capital as their ship leaves you at the port. Last time, you to find a partner that you -- that likes your operation understands your dilemma and has lots of capital and is willing to use our capital to mark the balance sheet to take the debt immediately, which allows the company to accrete the mark in income over the duration of the paper. A huge example of this is the latest deal that we've just done, CMA, Core America, who was acquired and the stock shot at $11.77 a 1 day that was extremely positive for both the buyer and the seller shareholder.

There is no easy answer to resolve these [indiscernible] that were made. But if your shareholders will arrive with you, maybe you live to file another day. But regardless, it's not an easy fix. And if they don't want to rise, they sell our stock and invest in companies that are already out there that didn't have the problem, stacking up equity. Don, I think that's pretty much it. The company is coming along pretty good. And I told you last quarter that I hope that we'd have a deal done this quarter. We probably don't have 1 yet when we're getting close. Thank you.

Okay. Thank you, Brian. I'm sure when you did a deal, it will be the right deal. So patience is a virtue, right? Our next report today comes from Stephen Tipton.

Thanks, Don. As Johnny mentioned, the third quarter was another strong performance for Home and Centennial Bank and produced records in several areas, highlighted by strong revenue and continued net interest margin expansion we were able to produce an adjusted return on assets of 2.10% and adjusted operating earnings per share of $0.61. The reported net interest margin improved to 4.56% and up 12 basis points from Q2 and up 28 basis points from the same period a year ago. The core margin, excluding event income was 4.53% and versus 4.43% in Q2, driven by an increase of 2 basis points in the overall loan yield and a decline in interest-bearing deposit costs of 2 basis points. Deposits ended slightly lower in Q3, down $161 million, driven largely by customer tax payments made in July. .

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

Thank you, Stephen. Next we hear from Kevin Hester on the lending portfolio.

Thanks, Donna. Asset quality improved overall again in the third quarter, with improvements in NPLs, NPAs, past dues and total criticized loans. As you know, there's always good and bad to work through problem loans. On the good side, I'm pleased to announce that we have the DFW apartment nonaccrual loan under an agreement for sale with a hard deposit of over 10% of the purchase price, and a closing date in the fourth quarter. However, on the large Texas C&I credit that we charged down at year-end, they continue to struggle to recover and it is entirely possible that it moves to non-rule before it gets to resolution. .

At this time, we still do not believe that there is any additional loss in this relationship. Despite the headwinds resulting from heavy payoffs in September, we were still able to post loan growth of $105 million for the third quarter continuing our recent history of linked quarter loan growth. The third quarter of 2025 marks 8 times in the last 9 quarters in which we have posted organic loan growth. From time to time, we've been questioned by analysts and investors about our level of loan growth being less than others that they cover or follow, and we always state that we will take what the market allows, frothiness in the overall market generally leads to aggressive pricing and leverage by our competitors, and we will not participate in those situations. On the other hand, periods of volatility will lead to banks exiting asset classes or markets and generally results in improved pricing and leverage, and we usually fare well during the time.

That said, I would like to take a moment to point out that regardless of which situation that we are in, I believe that we are not giving enough credit for whatever level of loan growth that we post. Keep in mind that because we are best-in-class in both net interest margin and efficiency ratio, our loan growth produces greater results than our peers. We have posted year-to-date loan growth of $520 million, which results in an annualized growth rate of 4.71%, not a bad number and certainly more than the percentage increase in GP over that period. However, we operate at a net interest margin of 4.48% and an efficiency ratio of 40% and compared to an interest margin of 3.59% and an efficiency ratio of 55% for all banks from $10 billion to $50 billion. When you add the effect of our best-in-class NIM to that nominal loan book number, the impact feels like loan growth of $653 million or 5.89% annualized in terms of our peers. Layering the effect of our better-than-peer noninterest expense, and that impact grows even further to 6.73%. The point of this analysis is to highlight that lower-performing peers must post much higher nominal on a result just to provide the same profitability impact as the 4.71% that we posted year-to-date. This focus on high performance in all areas, when combined with even reasonable loan growth is the formula for a best-in-class ROA. Donna, that's all I have. I'll give it back to you.

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

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

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

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

No, I don't -- it's -- If everybody looks at the charts, I think you'll see what we're seeing or what we're feeling here at the company. I think Charles speak for themselves on [indiscernible]

Okay. We will turn it over to the operator for questions. .

[Operator Instructions] The first question we have on the phone line comes from Dave Rochester with Cantor Fitzgerald.

John, you highlighted that you guys. You had highlighted earlier, you had some nice NIM expansion this quarter. That looked good. How are you thinking about that trend and the NII trend going forward, just given the September cut we just had and potential for getting another couple of cuts by year-end, are you expecting that lower rates could put some pressure on that? Or do you think that you see more expansion going forward? And what's the NIM sensitivity on that next cut?

Well, the world says, as rates come down, we're going to reduce our net interest income, but I have to give credit to Stephen Tipton, who deals with that every day and Kevin Hester, who deals with it every day also as he writes the loan. So I think they're on top of that. We react in a herd when there's a rate cut, Stephen, we were at a conference and he left the conference and lowered rates immediately in our company.

So we react in a hurry. And I think you can go back over history and see that Home has been able to maintain margin where a lot of people have not because of reaction on how management looks at it. And our -- we have about 13, 15 -- about 15 regions of report upstream, they move immediately. These guys know what it is. You don't have to hold their hand. You don't have to work them in a rocking chair. They know what's going on, and they react. That team reacts. They already know which moves we're going to make immediately. It's already preprogrammed I probably sold a little Stephen's thunder here, but I'll let him take it from here. But I'm proud of how we react to those situations.

No, Dave, this is Stephen. I appreciate what just didn't agree. I mean credit goes to the President they're out in the field, they're dealing with the customers, and we're able to very quickly go through our negotiated accounts and lower those where we can. We've got rate sheets in all the regions that they go through, and then we've got some indexed municipal accounts that are moving as viral rates move. So we screen a little asset-sensitive. But as Johnny and Group have always said that, that kind of goes off the bottle assumptions and our jobs to react to that and try to get rates down to offset the loan side.

I appreciate that color. Maybe just on the deposit side, how are you guys thinking about growth going forward there in a lower rate environment?

Well, we've never -- you've never seen a CD ad on home bank sure. We don't run them. We just won strength ads. We have the ability to pay out all the insured deposits. and we like that position to be in, and we'll continue to do that. We paid this quarter, we paid off some debt $40 million. We had tax time that came up. So deposits are down a little bit, plus we had a little loan growth of about $100 million. So some of those factors impacted. Brian, you got to comment...

We did the 140, and then we did another 22.

Yes. We bought that opportunity to buy a piece of our sub debt back, and we locked that back for at a discount. We like that love. We're we're not going to be the high guy bidding on money. That's not our game, but there's plenty of money out there if you want it, you can get at a reasonable price. So we're not too concerned about it at that point. any got comment rate that.

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

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

I don't -- you got us fly on new turf here. I don't know what to think about that. I'm saying no impact as of yet. I don't -- I think we've seen or felt anything. So maybe it's good to be in the Southern Washington, D.C. That model is unemployed. I'm sure we got our important people in Arkansas as a result of it. But I'll tell you more later, you'll probably figure it out. We're probably all figured it would be good or bad, right? So I don't know the answer to that, Dave, but we just -- we'll keep plugging and but I don't -- Kevin, any comments, you see anything on area?

No. I mean I have seen we've talked about the being able to offer deferments to individuals that are hurt by it. We certainly Canon we'll do that where it's necessary. Other than that, I'm not seeing anything. I've not felt any issues on the government be shut down for 20-something days.

We see anything, we'll call you. Dave, is that fair?

Your next question comes from Jon Arfstrom with RBC.

Okay. There, just -- it's probably a topical question. I'm not as concerned about it for you guys, but it's a bloodbath out there in the bank stocks on credit fears. And obviously, you put up a great quarter, but your stock is off. How are you feeling about credit right now. And maybe what you're seeing on your own credit trends? And then I know that you guys kicked the tires on a lot of other banks, but what you're seeing broadly and some of the other banks you look at?

Well, Interestingly enough, we have that's quality meeting monthly. And in that asset quality meeting, we cover every best due a problem loan in the entire company. as you can imagine, more has been focused on the Texas book than it has in the Florida milk or the Arkansas. But we have -- we go down every loan, and we talk about it, where we are and what's happening with it. And it's really pretty interesting. We had the -- I wrote down the -- and I write down, John, what I think the loss is on that loan. -- if I think it's $1 million a putting or $5 million or $10 million, whatever it is, I put it down. And the rest of the group does it accordingly, too. Steve does it and come to it then. We look at each other on you put down.

And I have the lowest amount of in the asset quality meeting that I've had since I started that process. and that's been years ago. So from that aspect, I'm pretty proud we got that 1 Texas credit that we got our own. But outside of that, everything is holding together pretty good getting that -- having a deal on that piece of property in Texas that Kevin reported earlier, I'm glad to have that hopefully, that deal gets closed. We've got a 10% deposit. So hopefully, that is done and gets out of the bank. So overall, I could be -- that 1 deal in Texas, I'm pretty happy camper. So I can't say we're the exception I can't say we're the exception I think Jamie Dimon said there's cockroaches out there. I mean it always is to work just but -- I'm sure there are some approaches that we had same but I was amazed at the last a quality meeting many dollars I wrote from $15 million, $30 million that's possibly not don't get it wrong. I exaggerate a little bit. But I just put the maximum round. I think it could be. And we usually always need that if those credits happen. But last time, I think I was less than $5 million, John. Kevin, you got any comment?

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

Yes. We didn't -- we have high leverage, and they pitched to take. So it's been in a position with low leverage at 3 site.

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

I don't know that it's that we're more willing. I think the pipeline is supporting it, particularly right now. I don't know that it's necessarily a willingness more than we're finding the right deals. We've got people in the right places, in good markets that have kind of hit their niche. The hard thing to to project is that we have a lot of -- we do a lot of construction. And so that means there's a lot of churn in our Community Bank construction book, and Chris' book is meant to churn over a 3- to 4-year period anyway. So there is a lot of turnover on a quarterly basis, and that's the hard thing to project. The pipeline has been really pretty strong for several quarters and continues to look that way.

Yes. It looks like we just missed -- we let the grease pig in away from us in the second quarter. Chris did on a big loan looks like that loan is probably going to close. So Chris, do you want to comment on the -- when do you think that might close?

Certainly, yes. We had 1 that was scheduled to close at the end of the quarter and the -- our borrowers just need to lay their purchase a week. I think we're scheduled for Monday right now. That may move around a little bit, but again, that's more sort of timing issues. We continue to see good demand. So I think that 1 will probably get done.

So anyway, we thought we're going to be a much stronger than we were Chris didn't get that will close, but I think it's going to get close. So we're starting out. We usually start out in the hole. We're starting out ahead. I don't put me as we'll be behind it and -- but usually, when we start out strong, we get behind it, then we start slow and we get strong at the end. So we'll just get to wait and see. That's you never know what your customer is thinking. He may be buying he may be selling, right? You don't know when he may be working on something for months and then bank he just hit say, hey, we got to do this train. So that happens. That happens a lot. But we're -- it could be -- we could have a good run here this quarter. It could be a nice quarter. And the good -- the well-priced loans and it can give us a little give us a little revenue boost.

We now have at Brett Rabatin with Hovde Group.

John, I wanted to start hasn't really been addressed fully. And I think everybody knows you're looking for assets. Can you maybe just talk about your experience here in the past quarter, what's been the impediment? Is it pricing? Is it a culture of a seller, just a pure math. What's been the impediment? And then just how do you think about the outlook with these stocks a little lower. Obviously, seller expectations are not as variable as the market.

Well, once we have final target to say that we or not in the M&A business. We are -- we have signed LOI. We'll be moving forward on that. It's someone we like and runs a good business. We've got to do business. and we're excited about that opportunity. And I'll tell you where it is. It's in the United States, and it's $7 billion that be that down narrow that down. So we have signed LOI, and we have his permission today to say that we've done that. So that's about -- you're not going to get anything else out of me other than that. So...

No, that's helpful, Johnny. So it sounds like we got something in the hopper. So that's good to hear. And just wanted to hear...

I mean, we had happy math to deal with, and we've got that behind us pretty well off and we just don't move until -- I mean it is [indiscernible] you got a fire out there, put it out. So we had all those martial problems than a happy transaction. It just didn't -- we got that got that under wraps right now. So it's time for us to move forward. And I agree, we have not moved forward and I admit that, but we are moving forward.

Okay. And then the other question I had was just around profitability. In the past 2 quarters, I think it felt like your profitability topped out in this quarter, it moved up again. Are we at the peak, do you think, in terms of ROA, ROE, ROTE just given the efficiency ratio? Or any thoughts on profitability and how you see it maybe going into '26.

Our expenses were up a little bit this quarter. So I've already commented Stephen and Brian Davis and they're going to work on that. So our expenses were up. We still have some expenses out there that we didn't need to have. So we got to work on that. And I don't think we're done. No, I don't think we're done. You get the expense back to 111, you see what happens, right? So that's more money for us. We kind of had to wind or back. We're pretty tough on if we charge off a loan, we're pretty tough on staying after them until we get our money. So we've had the wind call the window back. We've had some income. We got some this month, this quarter hadn't we brought some...

Yes. I mean we had several things. We had a $2 million recovery, we had $1.75 gain on our lawsuit, and we had $1.9 million gain on our sub debt paydown.

Yes. We'll probably have some more recoveries on that lawsuit. I'd probably put it in reserve. So just to be on the reserve. We built it a little bit of time, went from 186, 187 [indiscernible] extra money. We not have anything that pops to set up to be charged off, we'll probably put that reserve.

Now have Stephen Scouten with Piper Sandler.

Johnny, I kind of want to you that maybe you can't get expenses down into 111, just so you're getting a wrong them back there. But do you think there really is $2 million, $3 million to cut [indiscernible] to the bank?

Do I think there's $2 million or $3 million mark that we could gather if we -- you're saying...

Expenses you could cut I think you're [indiscernible] was over [ $20 ] million, [indiscernible] is phenomenal still?

Stephen, this is Steve. Yes, there's a handful of kind of onetime items in this quarter from an expense standpoint. And then I know we talked a little last quarter around incentives being up in Q2, and they were basically at the same level in Q3 as they were in Q2. So there's obviously some revenue that comes along with that to pay those. But like Johnny said, we've got our presidents had a good conversation last week, and everybody kind of reviewing their numbers and what opportunities we have to trim where we can.

Hard to be [indiscernible] efficiency ratio, but impressive to hear you might be able to get a little better. So that's encouraging. Maybe on loan growth around CFG, in particular, I'm wondering if Chris could comment on just Obviously, we've seen a few rate cuts here. prospectively, we're going to get a few more. But what he would think that could do to loan demand within CCFG. I mean I think that book is down maybe $400 million or so from its peak when we ran a lower rate environment. So just kind of curious what we think could kind of transpire there.

Chris, that's your.

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

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

I think it depends on the stock price. But we'll be in the market. Let me say this 1 will be in the market come tomorrow when we're clear.

So we'll be in the market buying stock. So when there's opportunities. When you look at Home, we were second in the nation in ROA in the first quarter, first in the second quarter, and we outperformed the first and second quarter, and that has us down [indiscernible] going to take us through the rest of the market ought to be down 10%. So it will come back. Tom will come back, Tom will bounce back. This is -- and all the banks will bounce back at some point in time. But right now, we're all trading. They're pulling the baby out with the bathwater, and we just have to -- as painful as it is when you come off of a -- you see the performance of the company for the quarter and you come off that and you get your like this, it little frustrating, but it is what it is, and there's a lot of people that a lot more shape than on Bancshares is today. So it's just a little frustrating, but we'll be fine. We'll be fine. We'll continue to use our stock for acquisitions, and we'll continue to buy our stock back.

And the good news is when you run a 212, 217 ROI, you can increase your dividend, you buy your stock back, you can you can do -- pull over capital handle that's out there. And still, as you see, home has done, grow your tangible common equity up pretty strong. So these people running a 0.7% or 1% they don't have the ability to do what homes doing. Home has the ability running at 2% ROA to pull every capital had out there. So we can make the decision of which one we want to pull or we can pull them on.

Don't you agree with that, Stephen?

Absolutely. It's about more cheaper. So congrats on a great quarter.

We now have Matt Plney with Stephens, Inc.

I was encouraged to hear about the lawsuit settlement. I know that's something you've been looking for for a few years now. As far as the impact that had on expenses, were the legal bills still coming through in the third quarter. Was this 1 of the headwinds that you mentioned in the third quarter? I'm just trying to appreciate if that $11 million goal, it could be something we could see in the fourth quarter? Or could we get need a few quarters to get there?

I'll let Stephen answer that.

Yes, this is Steve, Matt. There wasn't much I'm going to say, $100,000 or so in legal expense related to that suit in the quarter. We had a handful of other kind of onetime items nations. We did a nice donation to the city of Curville from the flood damage earlier this year. So that was in the quarter and a handful of other things. So we're working through all that now. And like Johnny said, a portion of the the settlement proceeds were in revenue this quarter and the rest would be in Q4.

[indiscernible] raised $250,000 [indiscernible] [ flood kill those little baby girls ], and we matched it. So we had about a $500,000 donation. We feel good about that.

Yes. Yes, nice to see. And then on the M&A strategy, do you help us appreciate the size thresholds of those targets? I think, Johnny, you mentioned there could be a larger deal, there could be a few smaller deals. Just help size up for us what a larger deal would be for Bancshares versus what a series of small deals would look like.

[indiscernible] anything from $25 billion down. Anything from $1 billion. So I -- okay -- the turns are futile. So I know this question was coming, [indiscernible]. So somewhere between 0 and 25 days, I think might see [indiscernible]. I'm not going to sell there, and we're going to buy stock as soon as we get open [indiscernible] they said, you got to be careful. I'm going to be careful what I can tell you what we're going to do on street knows we always tell them what's happened. So we're far with that. We like this operator. I can tell you that like the guy. We like this guy. So we think you've done a good job, and we think he'll be a great partner with set the Fabric Home Bancshares balance sheet [indiscernible]. I thank you I think you'll do what he needs to do. That's probably more than a neither. Everybody is their finger crossed.

Well, we'll keep an eye on the home banking news in the next few weeks. Hopefully, we'll see something good.

We now have [indiscernible] with KBW.

My last question is just circling back to the margin. And I just wondered if you could remind us the percentage of loans that are floating rate that will reprice immediately. And then to kind of follow up on the deposit side. I know Stephen, you talked about $1.1 billion of CDs repricing in the second half of the year. Just if you could give us a little bit of data around where that's coming off and coming back on where you think that will happen when rates are moving all around.

Sure. So on the variable rate side, it's about $6.3 billion or so, there's about $3.5 billion that's tied to Wall Street General Prime and the rest is tied to SOFR between Chris' book and the Community Bank portfolio. So that's what's moving this quarter or next, that we would consider truly variable. And then on the CD side, we've got notes here. We've got about that's on the fixed rate side.

We've got -- over the next 3 quarters, our CD book, which is relatively small, is also relative to short, so $1.8 billion or so in total size. We've got about $1.35 billion that matures over the next 3 quarters, and it is an average rate of 3.67%.

So it starts a little bit higher and tails off over the next 3 quarters. But we still have to negotiate a deal with competition. We've got peers in market around our markets that are still north of 4, which is frustrating, but our group has done a fantastic job in in negotiating those with customers that want to negotiate and able to retain the vast majority of what we have. And whether we can pick up some some yield on what's coming off over the next 3 quarters, we'll see just kind of relative to what competition is doing. But I would say broadly, our folks are negotiating down in the mid-3s and lower today.

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

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

The $140 million went out at the end of [indiscernible]

Stephen had some comment for you.

[indiscernible] On the $140 million, we paid off at the very end of July, first of August. So there's 2/3 benefit this quarter.

We now have Brian Martin with Janney.

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

Yes. I mean yes, that's been our message over the last year or so as you've seen rates come down a little bit. I mean, we screen in an Auto model that are that are NII goes down 5% or whatever, but that assumes a 40% beta on deposits. And like I said, Johnny has always said, it doesn't give management credit for what marking does. So like I said earlier, the presidents have done a great job thus far addressing deposit rates and the daily run rate that we monitor as in pretty good over the last month since the Fed cut rates.

Okay. And just in remind, Steve, I guess you said earlier, what's left on the -- and kind of in terms of fixed asset repricing in the next couple of quarters or the next 12 months, I guess, what -- maybe what you haven't hit your hands in terms of what [indiscernible].

Yes. We've got -- so Q4, we have $478 million in loans and fixed rate loans that mature that average rate of $6.17 billion. So there should be some lift potentially on those. Again, it kind of depends on what competition does. And I think as we said before, we'll defend our balance sheet with competition. And then there's there's about $1 billion in quarter next year 2026 that matures at an average rate of 5.5%. basically. .

So on that environment. Yes, some of that could come up potentially.

Got you. Okay. And then just the last couple. It sounds like that near term, there's still -- it sounds like there's opportunity on the expense side that we're we're going lower, not higher than at this point, all else equal, that sounds fair. And then on the fee income side, Brian, I guess, is there -- it sounds like there's an extra $2 million in in the fees this quarter that, I guess, after next quarter, fourth quarter, it's not sustainable. Like I don't know the amount of the settlement that you expect in 4Q versus this quarter, it sounds like there's a bit more in the fourth quarter that is coming? And then do the fees kind of back off the run rate they're at now, given that gain is kind of a 3Q and 4Q event?

Well, in other income, there's about $5.7 million of kind of what I'll call event income and 1.9, I mean 1.75 [indiscernible] is from the low state. And so we'll have another round of gain from the lawsuit on that for next quarter.

Right. So all else equal, the $1.75 billion doesn't recur after, I'll say beginning 1Q next year. You're going to have something more in the fourth quarter. It sounds like it's more than the amount this quarter. But after that kind of -- that line item specifically normalizes to 0?

It could carry into the -- you could have -- you take it [indiscernible]

I think we're going to get it all this.

[indiscernible] going to get it all this. I don't know if some of might bleed over in the first quarter.

Yes. And Stephen, the margin still has a little bit of a tailwind on -- from the sub debt the full quarter benefit of the sub debt as you go into fourth quarter, could this kind of start? Is that still correct?

Yes, that's fair. I said the timing of when we paid we paid the happy 140 off was 1/3 of the way to the quarter already. So Q4 will obviously be a full quarter .

Yes. So -- got you. Okay. Yes, I think -- and maybe just the only other -- the only other item was in terms of just the loan Kevin, maybe talked about this just the loan pipeline, and maybe 1 for you, Stephen, just on the -- it sounds like you talked about the origination activity in the quarter. I assume payoffs were pretty significant in the quarter. maybe just comment where the payoffs were this quarter? And then just it sounds like just to confirm, Kevin, that the loan pipelines are still pretty healthy and primarily, I'm guessing, in Florida and Texas, but maybe if you could just comment a little bit on that.

Brian, it's Steve. I'll give you the numbers real quick and then let Kevin give you color there. So payoffs were between $750 million and $800 million for the quarter, so not necessarily out of line with where we've been running. The $1.3 billion that I mentioned on production was our origination volume, which generally about half of that or so is funded at quarter end because of some of the construction-type projects that we do. So that's cover there on payoffs, Kevin.

Yes. Those payoffs were more really weighted towards the end of the quarter. So we had a little higher quarter that we were looking at, and it actually ended up because of some stuff as Johnny said, moved into fourth quarter and the payoffs that hit in the third quarter. You'll see with each quarter, it's a little bit different. You heard Chris's comments, his third quarter, their book was a little bit down. We got the growth from the community bank market this quarter, it probably will shape up the opposite if it's a deal that he has closes next week, it's probably going to be flipped the other direction.

So the good news is we have different levers that get pulled at different times. Certainly, Florida and Texas are the markets where there's a lot more activity and we're plugged into some good areas that tend to see that, and I think that's showing in the pipeline. So we'll continue to play into that.

Got you. And the Community Bank pipelines or the markets kind of Texas and Florida still were that's maybe a bit more activity than elsewhere?

Yes. It's just that's where the activity is. I mean, Arkansas does well, too, and they're showing growth as well. It's just there's just not as many opportunities as there are in the other 2 states. .

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

Well, This is -- from AOCI problem is the only thing it's a good management team, a good good operation. They're good companies. So I just think we give them the opportunity with our balance sheet to do some things they haven't been able to do. So I think that's a big plus. It's not -- this one's not only from the fact that we share our balance sheet with them is to help them there liquidity and their ALCI. So we'll clean that up. We'll fix out the Tayne. You'll see it coming out.

I think you'll see them coming out pretty strong when we get our arms rounded. It's not a broken company with the only from that aspect, they got in the [indiscernible] has 95% of all the banks did throughout the country. So that's not -- they all got that problem. So some people, as I said in my opening remarks, some people take their hint, and move on down the road. Some people hope that rates come down, everybody does different things. And when you I said in my prepared remarks, you could hope somebody has got strong capital at home, and we got the ability to spread that over them and help them with their problem and fix it overnight. So that's what we suspect to do, and that's what we'll probably do.

Our final question comes from Michael Rose with Raymond James.

Maybe just going back to John's comments in his question. as I think about you guys and John, I think you've mentioned this over the years, you can't push a rope as it relates to loan growth. You have a lot of banks out there that are actively trying to hire record numbers of, in some cases, record numbers of loan officers and producers. Maybe now is not the time to grow as spreads are going to be under kind of increasing pressure. You do see some softening of some of the economic data, at least there's probably some debate there, and now you've got credit concerns creeping in. is maybe now not the time to chase loan growth? And then just following up on that, one other thing that I think you guys haven't talked a lot about over the years is just hiring plans where a lot of other banks have -- so maybe if you can just kind of address that more broadly, not so much from an expectation point of view, but really is now the right time to actually want to accelerate loan growth here?

Michael, this is Kevin. I'll take the last one first. So I think Johnny mentioned on the last call that it's not been our history to go out and look for. It's not been a part of our or plan to go out and find teams of people and bring over lots of teams outside of the whole bank. Whole bank has been our M&A strategy for really our life. And then we've been through 2 long court cases that had -- that were part of that. It's kind of that same mentality. So it's just not something that we've done a lot of. Would we do it in certain circumstances, Sure, we would. We'll do it. We'll do it the right way. and it has to fit our culture. And I think that's probably the bigger thing in all of this is our culture. What does our lending culture look like? And we have one and we follow it pretty closely. And so to the degree that a group fits that, we'll bring them in. It's not our main strategy. Our strategy has been whole bank. It tends to be things that you that we can go in and fix because we do a pretty good job of that over the course of our lifetime. So I think that's why you haven't seen that particular part from us. Is it the time to grow? We're in some pretty good markets. that I think will withstand any weakness that comes into the market, I like our Texas and Florida markets for staying above that. So we continue to follow our our lending strategy and our policy and if it underwrites well and we like it, we like the people that we do business with, it results in growth, we'll do that. .

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

Well, thank you. Thanks, everyone, for joining today. As hard as this entire box work for the last 90 days, it's not a good day to release earnings where the world where people are beating up bank stocks. But Home continues to perform as you've seen year after year, quarter after quarter, and we'll continue to do that. We'll continue to perform at a high level and hopefully with new acquisition or 2, they'll report. They'll come in and sort won't be long they'll get to that high level themselves, and we'll be kicking out some additional income. So I couldn't be more -- I'm not pleased with the stock price going down today. As I said, they tell the baby out with the bathwater, when you report the best ROI in the nation that I would suspect we probably got it or one of the best your stock is off 3%. But as Stephen Scouten said, he said you're better than most people. So I guess we're 1 of the best of the works today. So Anyway, I appreciate everyone's support, and home will continue to do the right thing month after month and quarter after quarter, and we'll be standing when others may not. So Anyway, thanks, everyone, for your support. We'll talk to you in 90 days. Donna, you got any comments wrapping up. Stephen, anybody got it, Brian?

Kevin, I got you got a comment on the quarter?

No, great quarter. I mean I think we've held the highlights, and we'll keep trying to do better.

Yes.

Donna, do you have any comments. Brian? .

No, all good.

[indiscernible]All right. Well, we appreciate it. Thank you very much. We've got a board meeting on Friday, and then we'll be back to work. Our people can rest all banks that are being Sunday because we go back to work. Thanks.

Thank you all for attending the Home BancShares Fiscal Third Quarter Earnings Call. Today's call has now concluded. Thank you all for your participation, and you may now disconnect.