Home Bancshares (HOMB) Q1 2026 earnings call transcript

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 and Chief Lending Officer, I will now turn the call over to management for the HOME BANCSHARES. Our first quarter sets a strong tone for 2026. Results demonstrate sound expense control, consistent operating performance, and attractive returns, including record-setting metrics of book value per share of $22.15, 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 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.

John Allison Thank you and welcome to HOME BANC SHARES' first quarter 26th Earning Report to shareholders. Thank you for joining us today. I think the headline and the quotes pretty much summarize the first quarter. I want to thank our team for getting us off to a great start in 26. For those of you who are not already HOME BANCSHARES shareholders, but are interested in a better understanding of a 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, primarily showcased by the last five quarters. The prior years reminded us of the highest interest rate cycle in the early 80s, where then almost all banks struggled because of poor balance sheet management.

And the same story has been even more visible today, i. e. , lack of liquidity, by investing into long-term securities trying to stretch for yield. I'm proud to say HOME didn't suffer those problems during that time and was reporting record earnings while others were struggling. S&P Global just ranked HOME's performance for 2025 as number two 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 for the number one position last year. Maybe we'll get it this year. We are happy to have completed the merger with our acquisition of Mountain Commerce and look forward to a successful combination.

Due to the back office computer upgrade that was already in progress before Mountain Commerce, we will not be able to start converting Mountain Commerce until November. As a result, the maximum anticipated savings will not be realized until probably the end of 26th. 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. HOME is proud of our reputation, always known as one of the strongest, safest, most conservative, and best-performing banks in the world. We will 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 have a $110 million Texas credit that we decided to non-perform this quarter. This is the same credit we have been talking about for a year and a half or two years. The credit remained current until this quarter. It has been one we've been monitoring intentionally for about eight months. We've entered into a short-term forbearance agreement with multiple deadlines and requirements. We are advised by legal counsel not to discuss in depth. I can say we're either going to get paid off or we'll liquidate the existing collateral. We do not anticipate any additional loss, but if things were to result in some loss, home strength puts us in a position to deal with whatever comes.

Because of the conservative balance sheet, we're carrying right at $300 million in loan loss reserves, one of the highest reserve percentages in the world. Couple that with the strong reserves with a consistent quarterly pre-tax, pre-provisioned net revenue of $150 to $160 million, and we're confident of our ability with whatever happens and do not expect this loan to have any major impact on earnings, if any at all. It is our belief that there is more sufficient assets and personal guarantees to properly resolve this issue.

I'm pleased with results comparing Q1 to Q1 last year. The first quarter only had 90 days, and if we'd had the two extra days in the normal quarter, plus just a little touch of win. I think I said last year we had the win there back two or three times. We had no win this time. This quarter got zero win, Brian. You always come up with win. 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 ballot. That's evident in the non-interest income category being the lowest since December of 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 approval may possibly give time for another deal this year. We're certainly in the market and looking for another good fit. We continue to repurchase stock as the volatility of uncertain world, as the war, Canada makes it uncertain, had provided opportunities for us to purchase more recently. That is, before we were in a 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 HEPI bank transaction and will endeavor to do the same for Mountain Commerce bank transaction, particularly if volatility continues to create opportunities.

The repurchases will take some time, but once MCB is converted on our system, the additional share reduction should have a positive impact on earnings. We're being very careful on the long side because of the uncertainty of the lower consumers, business, asset class, and what this cycle may ultimately evolve into. The talking heads have all said rates are coming down, but we have cautioned that 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 as 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 aggressive the Fed is going to be with the escalating interest rates to try to get a handle on inflation.

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

His call on private credit was outstanding. The good news, market pricing on acquisition deals are more in line with the correct value and slowed the insane dilution at least for a while. One of the CEOs that did a fairly flagrant, I use the term here, maybe it's a Johnny word, delusionary. It may have been delusionary, 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 butt chewed out, and I proceeded to do just that. Then I gave him a hug, and we discussed the pros and cons and the impact and the damage done to long-term loyal shareholders. and agreed that dilution is not the friend of a shareholder. Enough said. With all the attention that 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. Donna, great quarter. I'm pleased with the strong continuation of HOME's earnings.

And again, I'm going to hand it back to you. And let's go, since I teed up Chris, if you don't mind, let's go to Chris first and let him comment and carry forward. And then we'll go to Steven and Kevin and Brian and back to you to wrap up.

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

All right, thank you, Donna. Today I'll provide a brief update on CCFG's first quarter, and then as Johnny said, we'll share some perspectives on the private credit market. During Q1, we grew the portfolio to approximately $2.1 billion. This represents a roughly $60 million increase, supported by $370 million in new loan production. Loan productions remain steady, and this number's in line with prior year levels. Payoffs for the quarter total just under $200 million, which is also consistent with historical averages.

We do expect slightly higher payoffs in Q2, though I do think our pipeline should allow us to replace those balances either this quarter or the next. Over the past several years, I've discussed declining balances in our corporate lending portfolio. This is an appropriate time maybe to provide some additional context and particularly in light of recent news around private credit. C-C-F-G has long participated in the private corporate credit market. Our exposure has varied over time, but we've maintained a consistent presence and have long-term experience in the space.

Our private credit balances 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 three years. So why do we make the choice to reduce our private credit exposure? Well, beginning in 2023, we observed several trends that influenced this decision.

First, we saw a new bank entrance. As some banks looked to reduce their reliance on commercial real estate, many chose to lend into the growing private credit space through participations in structured facilities. This led to broad yield compression across the private credit market and, as often happens, some loosening of credit structures and underwriting standards. At the same time, we saw significant equity inflows from individual investors or retail investors into these sponsored vehicles. We've seen this movie a few times before, and we haven't always enjoyed the ending.

We have historically maintained an intentional focus on the shorter duration positions, typically under three years. And as a result, we were able to actively exit credit facilities as they reached the end of their reinvestment period. In total, we exited eight corporate lending facilities through repayment during this time. Our remaining exposure is limited to a few facilities, primarily within 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. As a result, we are remaining cautious and at present are biased towards further reductions while continuing to monitor this closely.

With that, Donna, I will turn it back to you.

Thank you. That's a great call, Chris. Yeah, 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 two 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, as there was zero event income in Q1, and up seven basis points from the same period a year ago. So, 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%. Total deposit costs were 1.83% in Q1 and exited the quarter at 1.82%. Deposit balances increased $258 million, driven by all of our Florida regions. I would expect some headwinds in Q2 from tax payments, but we're pleased to start the year strong. A highlight from the quarter was that non-interest-bearing balances grew by $126 million to almost $4 billion and now account for 22.5% of total deposits. As we typically see in Q1, loan production softened coming off of a very strong 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 can be easy to look at this quarter as boring. I think that shows the high bar that we've set for ourselves, because any quarter that posts a return on assets of 2.09% maintains solid asset quality and is an earnings beat over the same quarter a year ago is not an easy task and should be inspiring. As I anticipated last quarter, ending loan balances dropped by a little over $50 million, but it happened very late in the quarter, which resulted in average loan balances actually being up $174 million on a linked quarter basis.

I see this downward trend continuing in the legacy bank into 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 accreted 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. 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 two. 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 4Q24, but maximizing the exit sometimes takes more time and effort than you would like. It 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 late quarter basis and early stage past dues were below 50 basis points Even with the large increase the reserve coverage of non loans is still over 160 As a point of reference our loan loss reserve would cover 15 years of our historical charge if you use the last five years of average charge as a base And that base includes the large 4Q24 Texas cleanup quarter.

There's nothing wrong with a workmanlike 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.

I suspect you're right, Kevin. Thank you for that report. Before we go to Q&A, does anyone have any additional comments? Well, I thought, you know, we think about deposits. We have a good deposit growth, and then tax time comes up.

I think I said the same thing 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 good and 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, do you agree with that?

I agree 100%.

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

I agree with you. I'm pleased with the quarter, and there's not really any noise to it, so it's just kind of good core earnings. That's really it. We just kind of rolled on from what we've been doing. I think we've said in the past we need more assets, and that's what Mountain Commerce has done for us. We've been consistent, earnings have 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 will 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 Donna, I'm going to let you have it.

By the way, you all need to know that Donna takes a pen away from me and gives me a rubber ball to speak with. So that way I don't make any noise. So she stole my pen and gave me a rubber ball. So thanks Donna for looking out for me.

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

Well, I think we hold pretty tight to our philosophy around here. My fear is, my fear is, they'll say, well, he lied. You know, he lied. I can hear the market say, oh, he lied. He broke it. He 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 when we do. You know my philosophy on that. We stretch as much as we can on a trade, but people have joined this company because we don't dilute. And if I diluted now, I think it would be As I'm getting older in my career, I think people say, well, he got weak and gave up.

But I have it as of yet, and I think it's known, we tell it when we're talking to another prospective seller, we say, we don't lose. You need to understand we're not going to be your highest prize. But if you're going to sell the stock tomorrow, it doesn't matter. You do a deal and the buyer dilutes the hell out of himself. If you sell the stock tomorrow, it doesn't matter. Just get out and get gone. But if you're going to ride with him for a while, it makes lots of sense not to do a diluted deal. So if you want to hold the stock and keep it for a period of time, I think our buyers appreciate the fact over the years that we haven't diluted.

So I know there's another deal out there right now that they're bidding up on, but I'm not going to bid up on it. We'll bid it to the maximum we can bid it, and then if we don't get it, we don't get it. A lot of it depends on the seller, what the seller wants to do. They want to stay, they want to be part of it, or they want to go to the house. So I think that if they want to go to the house, get the best price and sell the stock tomorrow, get gone. Otherwise, I think if you want to be in it for a period of time, you need to have a good partner that's not going to dilute you.

I know I rambled a little bit, Stephen, but anyway.

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 I said, well, we're not ready right now. Let's get Mountain Congress, kind of get our arms around it, and then we'll be ready to go. We're having conversations. I mean, at a bank conference recently, we ran into a couple of people and I said, we ought to talk sometime. And they've followed up since then, you know, just a conversation in a bar. I said, we ought to visit. Don and I are sitting at one deal and I said, we ought to visit sometime.

And that brought about a banker into the deal to talk to us about these two possible options. So, I think the conversation is going on, I actually think that people are embarrassed to dilute the hell out of the shareholders right now. I think they're embarrassed because they've all been called down for the dilution, and we see what's happened to the market prices of these bank stocks. I mean, we went from 22 and a half times projected earnings to 11 times earnings, right? Or 10 and a half times earnings. So, you know, where'd the money go on the backstop? We just, we ran out, my contention is we ran all the good investors out, but we just beat them up and dilute, dilute, dilute.

So, I want to get back to the old days where we're 21 and a half times earnings and everybody was happy, got on a white horse, everybody made lots of money. So, anyway, it's just a different world now, and I think it's It's directly a result of the dilution.

Hey, Steven. This is Steven. Yeah, so first on the impact from the non-accrual, we don't have any of that in our margin for the quarter. Had we had it on the books, the impact was about five basis points to the loan yield, and it was about four basis points to them. The 451 that we reported, had it been on the books and on non-accrual, we would have been 455 versus 456. So a little color there. Some of the other decline in loan yields really just a function of variable rate resets from the Fed moves last year that occurred January 1 and other certain frequencies. So, you know, we would have been, if you normalize for the non-accrual, we would have been down 10 or 11 basis points and kind of matched what occurred on the deposit side.

Production yields, I think we averaged 7.25 for the first quarter of this year. I think we're at 699 or 7% in the community bank footprint. So, you know, north of prime and getting our fair share.

Thanks, Steve. Thanks, Steven. Appreciate you.

Hey, Dave, this is Kevin. I'll answer that. It's going to be a little bit of a long answer because I'm going to give you some color on how we do the pipeline process. So 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, you know, a two to three 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 four to six month lead time on a payoff where we might have 30 to 45 days to put it on a pipeline for a new credit because we don't put new credits on the pipeline until they're fully approved.

And for Chris's group, CCFG, they may close it in 15, no longer than 30 days. And in the community bank footprint might take 45, but it's probably closer to 30. So, 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 the last couple of quarters. Will we have some production that will offset that? It's possible, but it's going to come in in the next 45 to 90 days, and it's not on our pipeline yet because it hasn't been in the next quarter. Second piece of that is that NCB 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 two 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, great. Appreciate all the detail there. Oh, yeah, go ahead. Sorry.

Johnny, it seems like when we forecast big payoffs, we have long growth, and when we forecast long growth, we have big payoffs. So you've heard my comment about catching a pretty pit in a ditch. You think you got him and it's just getting flu. So as Kevin said, we never know what our customers are doing out there. I mean, we never know. We 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, let alone I've talked to one of our big customers, FBO business. He said, I bought another FBO, and that's a good. That's about a $15 million loan. So you just never know.

I didn't know he was working on the loan, so that's good and bad. And I can tell you that deal's not on the pipeline. I'm looking at it. That deal's not on the pipeline. Yeah, that deal's not on the pipeline. That's the point. We don't have as good a visibility into the new loans. The runway's not as long as it is for now.

Hey Dave, this is Steven. So we are still in the process of finalizing the purchase accounting marks. I do expect a little pressure on the margin. Obviously it is added to NII and EPS, but expect a little pressure at least initially on the margin. I talked earlier about where we landed for the quarter at 451 and how you think about the non-accrual. We were at 449 for March, so still kind of fairly in line with where we were for the quarter. Maybe it ticks down slightly with NCB, and then we hope to build on it from there. So he talked to Bill today, and their story over the last year or so has been the ability to reprice deposits at maturity as they come through here.

That appears to be what's taking place over the next 45 days and really over the course of the year as we're able to – some of the wholesale deposits either reprice or go away.

Always Florida and always Florida and always and now Tennessee.

Yeah, thank you.

Hey, Brett. This is Steven. 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. We will be able to get some of the things that we have in the end of the year. Mountain Commerce probably adds 7, 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 safes. There will be some cost safes along the way throughout the year, but the majority will come in the middle of the fourth quarter.

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

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

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

Yeah, I mean, I think some markets are harder than others for that, and I think it's not the same players in every market. I will admit 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.

Hi Kathryn, this is Steven. I mean certainly with NCB, 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, the 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 T-bill. 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 two 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, yeah, you're still seeing banks offer 4% for CDs and, you know, 375 to 405 on money markets. So we'll defend our customer base both here and in Tennessee.

I'm beginning to think that 4% might be cheap if ranks do what I think they're going to do. So it looks silly when you see people doing it out there. I mean, we're still seeing some fixes, too. So I mean, you think about that, how ridiculous that was. It might turn out to be. We obviously hadn't stopped inflation. Depends on what Trump does and how aggressive the Fed is. If they're too aggressive, I mean, if they have to be as aggressive to slow inflation, it may take 200 basis points to stop it. And if they lower significantly, I think that would be a huge mistake.

Not really. We're just careful with our pricing. That's all. We're just careful with our pricing. You know, I was mad at myself last cycle. I said what was going to happen, and then I didn't bet it. You know, and I was, I ran into a friend that he said, 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. I said, good for you. And I said, he said, I did it because what you said. And I said, well, I didn't bet it, and I should have.

And that is a good thought maybe to take a look at stretching out there a little bit. We, I mean this is almost, it's almost a dead toe of the 70s and the 80s and you know we've got this war now and we've got oil and we know what that does and we saw producer price index but at 4%, it's what they annualized 4%. We haven't seen those numbers in a while. It could get a little crazy here in a little bit. I just don't have the answer. I don't have that answer yet. So hopefully it will come to us.

No, I mean, I said, you know, criticized assets, which includes all of our OLEM and below, those were flat quarter over quarter, and early stage pass dues are as low as they've been at below 50 basis points. So, you know, 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 said a couple quarters ago that that small group might get worse before it gets better, and that's what happens when you have to put it on non-accrual 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 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, you know, of any materiality that we're that concerned about.

I don't think we're going to lose any money on this deal. I like the guarantors. I like the assets in this in demand assets. They're not scrap assets. They're 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 sale schedule. So I think I'm pretty happy with that deal.

I don't think we'll have, I don't think we're going to have problems or if there's any hole left in this deal, these people are, have honored everything they've ever said to us that they would do. And they're a very wealthy family. So I think we'll be, I think we'll be fine. I think they're honorable people and we'll maybe just $10 million left to put them on a $10 million 10 year note or something, you know, so whatever it takes, I think they'll honor.

Sorry, go ahead, Johnny. No. No. No. Okay, great.

Yeah, thank you. Appreciate it.

Hey Michael, this is Steven. Yeah, so the 451 margin doesn't have any accrual in that number. So it was about a million six impact for the quarter, which is about five basis points to the loan yield and about four basis points to NEM. So, you know, if we had had it on accrual for the whole quarter, you know, 451 would have been 455 compared to 456 last quarter. So, that's kind of the math around it.

I looked at every loan that we looked at in due diligence. I do not remember anything necessarily that I would say I would run off. I think we have a credit culture in the way we look at things. Theirs is pretty close to ours. There may be 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 with us that they haven't had because they've not been willing to do much construction. So, you know, any decisions we make to go a different direction than what they've been doing, I think, will be more than offset by the opportunities that they have to do things they haven't done before.

I look at them as being a positive, as I said in my comments, pretty early. I would expect them to hit the ground running pretty early on. We've already had a couple of pipeline discussions over three or four credits as of last week. So I told Bill, I said, Bill, nobody cares what you make this for. I said, just you just get ready for the future. You got anything you need to write down, write it down, get it out of here. So I think we're coming in with a pretty clean check coming in the front door.

All right. I appreciate all the other guys. Thanks.

I said that yield, deal pricing, acquisition, deal pricing. Oh yeah, I think it's lightened up a little bit. I don't see the urgency out there that I did see. However people are talking, they're continuing to talk and they're continuing to want to do something. And some of them want 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 if we're ready to make the move yet. And we're probably getting close to ready to look at something else. But we're not going to be able to convert it about the same time we convert 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 saying, we met you, your company two or three years ago, and we wanted, we're thinking about doing something, we wanted to talk to y'all. That happened with a couple of, one Florida and one Tennessee that came at us. So when we do that, we'll have the opportunity. We're going over to see Bill and his team. We'll have an opportunity to talk to Bill when we get over. So we get over to Tennessee and see where we're going, where we're thinking. There's a Tennessee Dale out there. There's a Florida Dale out there. So we'll see how they work out.

We got so much capital right now that we really like our position. But I'm ready to buy stock. I mean, I'm looking at it today. We can't buy today, damn it. Tomorrow we can't. We can't today. So, you know, it gives us an opportunity and it's about, I want to buy back all the Mountain Commerce. It's about five and a half million shares. I want to buy that back. I think we bought essentially all the Happy back. So I want to buy all the Mountain Commerce back and just kind of go around there. We can do it. We can do it pretty quick with the capital position we're in and wouldn't take us long to get that done.

I like to buy it. You know, I know it's a little diluted to us, but I like to buy it. I will stop.

Yep. Yep. That's good. Not either or. You can do both, I guess is what you're saying, right? That's correct. That's correct. Okay. Thanks. Yep. Thanks for the help. Appreciate it. We just keep stacking up capital.

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

There's no disruption over there, and I think it'll give us an opportunity to pick up and build some muscle in that state as we've done in Florida, and I think it's an opportunity for us. So the reason being you just get more consolidation savings. You know, that's really the key. You know, 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, one of those deals that I'm talking about that your bankers call me about is outside of that. And I really like the operator and we like the guy.

We like his company. We like what he does. They don't have the growth that a Florida's got, but he runs a good clean operation. So someone said, why would you go there? And I said, because it's simple and it's clean and they do a good job running their company. So it kind of builds mass. Now that's outside of where we're producing the operating today. He's a guy that runs it and you don't have to hold his hand. So that's really what you're looking for. You're looking for somebody, if you're going outside the market, you better get somebody like Bill that knows what they're doing and knows how to run one.

Yeah. Okay. Appreciate the commentary.

Yeah, thanks, Matt. Yeah, probably two things there. One, right now, the uncertainty here is what's the underlying, what are these underlying loans look like and where do they go?

It feels early because I think you're going to see a little bit of a false bottom where there's a little bit of maybe some price expansion or there's a little bit of some markdowns in these notes. Everybody goes, okay, that's it. And then, you know, there's always, as they 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. You know, nobody's pricing a new facility today if they don't have to. So I think we'd want to see, you know, one of the things we look at a lot in ours is, well, have these loans been marked appropriately, right?

You know, what's happened to the other line credit? Have you had EBITDA expansion or not? Has the loan been marked, et cetera? We like to see a little more of that before I think we get comfortable. I mean, we've certainly had people, you know, come to us and say, you know, I'd like to get out of some of our positions. My risk eyes are getting on to me. What would the price be? And I think right now our answer is, you know, price doesn't fix credit. And so, you know, an extra 50 basis points isn't going to save me when, you know, when I need the credit support. So I think right now we're just biased towards let's figure this credit thing out.

This may turn into nothing, right? I mean, it may turn out all these things are fine. AI doesn't destroy the world, and all these software companies are fine. I just don't think you should take that risk today.

So we'd want to see a little bit more capitulation, I think, before we would do that. But 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'd feel comfortable. It seems like that's how you get discipline, is you get new entrants in, and they thought they were getting something very risk-free, and they priced it that way, and then it turned out not to be, and then everybody gets religion again. So we'll look for that, and when we see signs for that, we might consider expansion again. And we're still set up that we have facilities that will roll off.

And right now, if a facility rolls off, we probably just wouldn't replace it. We wouldn't go into the next one, or we'd just take the payoff and move on. That's on the CNI side. But real estate, we continue to see good pipeline growth. We are going to have elevated payoffs, but one of those is just a credit we've had that I've been saying. We've been two weeks from payoff for six months, and I think it's paying off today. We'll find out. Not a worry for us on the credit. They've just been in the sale process, and it's 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?

Stuff's supposed to move. We're in the moving business. And so, but we continue to see great opportunities. I think our pipeline is pretty strong. 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.

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 is harder for you because you're looking at it on a calendar basis. But, you know, I'd say from here over the next, you know, rolling 12 months, will we grow? I think so. Based on what we see, we booked, you know, quite a bit last year. We had really good production last year. Not all that's funded. So we would expect some of that to roll through. And I do like where we are right now on pipeline. I'd say there are – Kevin talked about a little bit, you know, we're in constant contact with our customers.

Most of our businesses repeat business, whether it's, you know, somebody borrowed from me three years ago or somebody borrowed 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. Where would you be? We told them, they said, that sounds great. Then they called me yesterday and said, I think we're going to pass on that.

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 three, four quarters basis, I can usually say, yeah, I think we're probably going to expand.

Well, somewhere in the size or larger than maybe Mountain Commerce would be nice, but we would probably do a smaller deal if it fits Bill. You know, if it's in a market to where Bill's not, if it fits him, we'd probably step down and do a smaller track. I mean, Tennessee is a pretty good size of stuff. We're in about four or five locations, six, seven, eight, and we've got room to grow in that space. Gotcha. Okay. That's helpful.

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

We buy those credits every day. That damn boat, we're going to a jury trial. Except for trial in June. Trial in June. It's been a year. We've had it. We had the boat. We had the boat. Not a question of where it is. We actually have the boat. We just can't. I mean, absolutely. It keeps going to judge, and then they got a new judge. Now we got a new judge, third judge. We're going before the judge in a trial now. It's $5 million owed on the boat. It's a $7, $8, $9 million. It may be $3 million by the time we get it sold. It may be so damn old. I've never seen anything quite like that deal at all.

It's just been frustrating. The apartments in Dallas that we're rousing with, we'll get it sold eventually at some point in time. We've had five or six, seven buyers on it. We'll get it sold at some point in time. I mean, we've marked. There's no loss in that for us. Kevin collected a couple million dollars on it a while back, so there's no loss in that. It's just a matter of getting it out of there. There were some instruction problems. Anyway, you can't.

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

I would agree with that. Yeah. Yeah. Remain in there. Yeah. Okay.

Go ahead, John. I'm sorry. I don't anticipate any more losses on the bid credit or the apartment credit. That's really the ones we're working through. I don't anticipate it. They're marked and written down. If there was, I mean, if the $100 million credit, if there was some loss in it, I'd be shocked. I've been fooled before, but I think we're fine. It'd just be a bump in the road for us because, I mean, we've got the PP&R and you've got the reserves, yeah. I don't know, maybe it's nothing. If I thought there was a loss in it, I'd take it. I would have admittedly written it down, but we have no need to write it down at this point.

15 years of charge-offs. We've got 15 years worth of charge-offs in our reserve. Did you hear him say that? He's got 15 years of charge-offs in reserve right now. So, I mean, we have a pretty good history of not having a lot of charge-offs that we've had for years. We had the Texas cleanup, which was probably the biggest one. And that includes that. That is included in that. He's still got 15 years.

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

Yeah, thanks. It's been a long day. A lot of questions, a lot of answers. Thank you for your support. We'll continue to do our part and hopefully we'll continue to run the 2% ROAs. I see they beat us up a little bit on the shop today. They've kind of hammered us They kind of hammered us on the stock. I don't think we deserve to be off 3%. But it's an opportunity to buy. It's a great opportunity to buy. So timing can be good for us. And that's it. Unless anybody's got anything else. Anybody else got anything? Thank you very much. Talk to you in 90 days.