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 sets a strong tone for 2026.

Results demonstrate sound expense control, consistent operating performance, and attractive returns, including record-setting metrics of book value per share of $22.15, tangible book value per share of $14.87, which is a $1.72 per share increase year over year, for a 13% increase, by the way, CET1 at 16.7%, leverage of 14.3%, and tier 1 capital of 16.7%. 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 earning 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 BancShares shareholders, but are interested in a better understanding of Home, I think it's important that you look at the strength of the balance sheet.

Couple that with the monthly and quarterly consistent level of performance over the last several years, as primarily showcased by the last 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'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.

Home is proud of our reputation, always known as one of the strongest, safest, most conservative, and best-performing banks in the world. We'll continue to try to make our shareholders proud and happy to be part of this outstanding company.

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

We had a $110 million Texas credit that we decided to nonperform this quarter. This is the same credit we've been talking about for a year and a half or two years.

The credit remained current until this quarter. It has been one we've been monitoring intensely for about eight months.

We've entered into a short-term forbearance agreement with multiple deadlines and requirements. We are advised by legal counsel not to discuss in depth.

I can say we're either going to get paid off or we'll liquidate the existing collateral. We do not anticipate any additional loss, but if things were to result in some loss, Home's strength puts us in a position to deal with whatever comes.

Because of conservative balance sheet, we're carrying right at $300 million in loan loss reserves, one of the highest reserve percentages in the world. Couple the strong reserves with a consistent quarterly pretax, pre-provision net revenue of a hundred to $150 to $160 million, and we're confident of our ability with whatever happens and do not expect this loan to have any major impact on earnings, if any at all.

It is our belief that there is more 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 we had two if we'd had the two extra days in a normal quarter plus just a little touch of wind. I think I said last year we had the wind to our back two or three times.

We had no wind this time. This quarter got zero wind.

Brian, you always come up with wind. You didn't come up with any juice this time.

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

Okay. We had a write-off to balance that off, so.

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 with a war, that makes it uncertain, has provided opportunities for us to purchase more recently, that is before we were in a blackout period.

However, we did file our normal 10b5-1 for this time. If the volatility continues, we will be very active on the repurchase side.

I think we have essentially bought back if not all of the shares issued in the Happy Bank transaction and will endeavor to do the same for Mountain Commerce Banc 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 uncertainty of the war, the consumers, business, asset class, and what this cycle may ultimately evolve into. The talking heads have all said rates are coming down, but we have cautioned that possibly they will go back up before they come down.

Inflation is not dead. Let me say that again, inflation is not dead, 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 Poulton, who runs our New York office, has a great saying. 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 Poulton 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 delusion, 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, dilutionary, it may have been delusionary actually, the trade was so silly.

He did a trade some time back, came up to me at a bank conference and said, "I'm here to get my butt chewed out," and I proceeded to do just that. 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 dilutive transactions are getting, maybe the publicity and management embarrassment has slowed the shareholder damage.

At least I certainly hope so. I hope it's finally the start of a sea change that forces management to do the right thing for the shareholders.

Donna, great quarter. I'm pleased with the strong continuation of Home's earnings.

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

Sounds good. Thank you, Johnny.

Up next we have a report on CCFG from Chris Poulton.

All right, thank you, Donna. Today I'll provide a brief update on CCFG's first quarter, and then, as Johnny said, we'll share some perspectives on the private credit market.

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

Loan production has remained steady, and it's 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 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. 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 peaked at 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. Why did we make the choice to reduce our private credit exposure?

Beginning in 2023, we observed several trends that influenced this decision. First, we saw new bank entrants.

As some banks looked to reduce their reliance on commercial real estate, many chose to lend into the growing private credit space through participations and 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 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 periods. 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 point's 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're remaining cautious, and at present are biased towards further reductions while continuing to monitor this closely. With that, Donna, I'll turn it back to you.

That was a great call, Chris.

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 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%. 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 $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. 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%, 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 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 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 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 five years of average charge-offs as a base, and that base includes the large 4Q '24 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 expect you're right, Kevin. Thank you for that report.

Before we go to Q&A, does anyone have any additional comments?

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

That's right.

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

That's right.

That's good and bad, right? They are our customers.

They're not transactions. They are relationships, I'm proud of that.

We'll take a little up and down during this. Stephen, 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, 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, and consistent earnings have been consistent quarter after quarter through this process. We do need more assets, right?

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.

Donna, I'm going to let you have it. By the way, y'all need to know that Donna takes the pen away from me and gives me a rubber ball to speak with, so that way I don't make any noise.

She stole my pen and gave me a rubber ball. Thanks, Donna, for looking out for me.

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

Hey, 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. Like you said, your returns are phenomenal, it just feels like you need to be able to multiply that on a larger balance sheet.

What have conversations been like and how aggressive would you be? Kind of within that, would you ever think about loosening, and this might be a crazy question for you, loosening the triple-accretive mantra to get a deal done?

Thanks. We hold pretty tight to our philosophy around here.

My fear is they'll say, "Well, he lied." "He lied."

I can hear the market say, "Oh, he lied, and he broke it. He diluted a deal."

I'm the largest individual shareholder and I'm not interested in diluting myself, I think I hurt our shareholders when we do. My philosophy on that.

We stretch as much as we can on a trade, but people have joined this company because we don't dilute, and if I diluted now, I think it would be kind of as I'm getting older in my career, I think people would say, "Well, he got weak. He got weak and gave up," so.

I haven't as of yet, and I think it's known when we're talking to another prospective seller, we say, "We don't dilute." You need to understand we're not going to be your highest price.

If you're going to sell a stock tomorrow, it doesn't matter. Just you do a deal and the buyer dilutes the hell out of himself.

If you sell the stock tomorrow, it doesn't matter. Just get out and get gone.

If you're going to ride with him for a while, it makes lots of sense not to do a dilutive deal. If you want to hold the stock and keep it for a period of time, I think our buyers appreciate the fact over the years that we haven't diluted, 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?

I think that attitude, they want to go to the house, just get the biggest best price and sell the stock tomorrow, get gone. Otherwise, I think you want to be in it for a period of time, you need to have a good partner that's not going to dilute you.

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

No, that's helpful. It does.

In terms of the pipeline of conversations, what is that? We haven't seen as many deals here in the first part of the deal get announced.

Are sellers just kind of not interested because the environment's pretty good, or is it just in the volatility in the stocks? What are you kind of seeing in terms of conversations?

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

Let's get Mountain Commerce, kind of get our arms around it, and then we'll be ready to go." We're having conversations.

At a bank conference recently, we ran into a couple of people and I said, "We ought to talk sometime," and they followed up since then, just a conversation in a bar. I said, "Look, Donna and I were sitting at one deal, and I said, "We ought to visit sometime."

That brought about a banker into the deal to talk to us about these two two possible options, so. I think the conversations are going on.

I actually think that people are embarrassed to dilute the hell out of their 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.

We went from 22.5 times projected earnings to 11 times earnings, right, or 10.5 times earnings. Where'd the money go in the bank stocks?

My contention is we ran all the good investors out, cuz we just beat them up and dilute, dilute, dilute. I want to get back to the old days where we're 21.5 times earnings and everybody was happy, got on a white horse, and everybody made lots of money.

Anyway, it's just a different world now, and I think it's directly a result of the dilution.

Makes sense. No, yeah, valuations are crazy.

We got to start calling you homebankai.com or something like that. I guess one other question I have is around loan yields.

There was a pretty big move in the loan yields this quarter, and I don't know if you could give some color on how much of that was kind of core decline in loan yields and where the new loan yields are coming on at versus maybe how much of the NPA affected those reported loan yields quarter over quarter?

Hey, Stephen, this is Stephen. First on the impact from the nonaccrual, if we don't have any of that in our margin for the quarter, had we had it on the books, the impact was about 5 basis points to the loan yield and it was about 4 basis points to NIM.

The 4.51 that we reported, had it been on the books and on accrual, we would have been 4.55 versus 4.56, 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 frequency.

If you normalize for the nonaccrual, 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 and a quarter, 7.25% for the first quarter of this year.

I think we're right at 6.99% or 7% in the community bank footprint. North of prime and getting our fair share.

Great. Appreciate all the color, everyone.

Thanks for the time.

Thanks, Steve.

Thanks, Stephen. Appreciate you.

Hey, good afternoon, guys. Just wanted to talk about the loan trend real quick.

It sounded like you mentioned pay-down activity being a little bit elevated possibly in 2Q and 3Q. Was just wondering how you guys are thinking about the organic loan 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.

Then what part of the book are you seeing those pay-downs in? Is it kind of more of the same?

Is it anything new? Is there any difference across the different geographic regions that you have?

Thanks.

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 get pipeline processes. 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 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. 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.

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 days, probably closer to 30. 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 hadn't gotten fully approved. Second piece of that is that MCB is not yet in our pipeline process, 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. 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.

Great. Appreciate all the detail there.

Oh, yeah, go ahead. Sorry.

This is John. It seemed 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 about catching a greased pig in a ditch. You think you got him and it just gets loose, so.

As Kevin said, we never know what our customers are doing out there. We never know.

We got a lot of big projects coming on stream that they'll fund up over a period of time, but you just never know. I talked to one of our big customers, FBO business, he said, "I bought another FBO."

I said, "Good." That's about a $15 million loan, you just never know.

I didn't know he was working on them, and so that's good and bad. Hopefully big payoffs

I can tell you that deal's not on the pipeline. I'm looking at it.

That deal's not on the pipeline,

so. That deal's not on the pipeline, so.

That's the point. We don't have as good a visibility into the new loans as the runway's not as long as it is for payoffs.

Yeah. Yep, 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?

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?

Hey, Dave, this is Stephen. We're still in the process of finalizing the purchase accounting marks.

I do expect a little pressure on the margin. Obviously, it's additive to NII and EPS, but expect a little pressure at least initially on the margin.

I talked earlier about where we landed for the quarter at 4.51 and how you think about the nonaccrual. We were at 4.49 for March, so, still kind of fairly in line with where we were for the quarter.

Maybe it ticks down slightly with MCB, and then we hope to build on it from there. Talked to Bill today and their story over the last year or so has been the ability to reprice deposits at maturity as they come through here, and 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.

Okay. Appreciate that.

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

Is there any specific focus in any particular markets?

Always Florida and now Tennessee, we would entertain those markets.

Sounds good. Thanks again.

Appreciate it.

Thank you.

Hey, good afternoon, everyone.

Thank you.

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

Hey, 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, $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'll be some cost saves along the way throughout the year, but the majority will come, middle of fourth quarter.

Okay. Then, John, just thematically, I know you're interested in M&A, and you got a term for people that hire lenders from other banks.

Wanted to see in Tennessee, there are markets in the Southeast where everyone's talking more about disruption, due to a big deal or two, and just wanted to see if you might let Bill hire some folks on the lender side in Tennessee, or if that was still just not a part of the equation in terms of how you think about it?

That's not the way I think about it, but Bill may think differently about it, and we really haven't discussed it. We're headed over next week, Donna, right?

Head over next week to meet their customers and shareholders and have a little talk about Home BancShares and Mountain Commerce and the partnership together. I'll catch up with you a little later, I think, to see what Bill's thoughts are.

I don't know if he's had anybody run at him. Kevin, you know if he's had anybody looking for him?

Don't know?

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. 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.

Okay. 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. Just wanted to see if any of the pipeline, if you want to call it trepidation, is just around any competitive pressures?

It seems like some banks are being fairly more competitive here recently on rate. I know you guys are pretty strict on rate.

Is the competitive landscape having any impact on what you guys are looking to do in the back half of the year?

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. That's always a challenge.

We always have to fight that, because we're pretty consistent in what we do.

Okay. Fair enough.

Appreciate all the color, guys.

Thank you.

Thanks. I want to follow up on just deposit cost.

I know you mentioned the 1.82 exit deposit rate, which was kind of similar to where you were for the average in the quarter. Just curious, as you think forward for the rest of the year, if we don't have any more rate cuts, do you feel like deposit costs will start to increase as we move through the year, especially maybe once we get past second quarter and growth improves?

Or how are you thinking about kind of incremental deposit cost coming on? Thanks.

Hey, Catherine, this is Stephen. 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 short-term T-bill, 91-day T-bill, which trickled up a little bit in the first quarter and kind of puts pressure on the other changes that we're able to do. CDs will continue to mature that we'll try to reprice down, I'm still optimistic that we can inch out a basis point or two as we go throughout the year.

I'll couch all that with competition, like Kevin talked about on the loan side. You're still seeing banks offer 4% for CDs and 3.75 to 4.05 on money market.

We'll defend our customer base up here and in Tennessee, so.

I'm beginning to think that 4% might be cheap if rates do what I think they're going to do, so. Looks silly when you see people doing after and we're still seeing some sixes, too.

You think about that, how ridiculous that looked. We obviously haven't stopped inflation.

Depends on what Trump does and how aggressive the Fed is. If they have to be as aggressive to slow inflation, it may take 200 basis points to stop it.

If they lower significantly, I think that would be a huge mistake.

Johnny, you've been right on the rate trade. Yeah.

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

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.

I ran into a friend, and 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." He said, "I did it because what you said."

I said, "Well, I didn't bet it, and I should have." That is a good thought maybe to take a look at stretching out there a little bit.

This is almost, Kevin, it's almost a ditto of the '70s and the '80s. We got this war now and we got oil, and we know what that does.

We saw producer price index, what, at 4%? Is what they annualized 4%?

We hadn't seen those numbers in a while. It could get a little crazy here in a little bit.

I don't have the answer. I don't have that answer yet, so.

Hopefully it'll come to us. Then in

my follow-up, is anything on the credit side that you're seeing? 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, what are you seeing in the other trends or any kind of weakness across the book to be aware of?

No. I said, criticized assets, which includes all of our OLEM and below, those were flat quarter over quarter, and early-stage past dues were as low as they've been at below 50 basis points.

As I said in the remarks, we're working with the same set of issues that we've been working with for the last few quarters. I think I 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 nonaccrual and start working it out.

We've already taken what we believe is our maximum loss, and we would expect to recover some to all of that depending on the way it resolves and which path of resolution it goes through. Talking about the larger credit now, at least have a good visibility into how that happens, and it could happen as early as this quarter or next.

We at least feel good about that. It is the same set of problems.

I'm not seeing anything of any materiality that we're that concerned about, so.

I don't believe we'll lose any money on this deal. I like the guarantors.

I like the assets, the assets in this are in-demand assets. They're not scrap assets.

They're real value assets, and actually the assets are being leased as we speak. I think that we had sold some of these assets in the past.

On a 70/30 basis, we got 70% and the customer got 30%, and we sold those assets and they paid down just perfectly. Assuming the rest of them bring the same value, we will take 100% of the proceeds from this point forward.

If we get the sales schedule, I think I'm pretty happy with that deal. I don't think we're going to have problems, if there's any hole left in this deal, these people have honored everything they've ever said to us that they would do, and it's a very wealthy family.

I think we'll be fine. I think they're honorable people, and I don't know, maybe they're just $10 million left, they'll put them on a $10 million 10-year note or something.

Whatever takes, I think they'll honor. One of the Has

the price in oil had any impact? Sorry, go ahead, Johnny.

No.

No.

No.

Okay. All right, great.

That's all my questions. Thank you very much.

Might help. If anything, it might help, quite honestly.

That's what I was thinking actually, but I know you have to value the assets. That's great.

Thank you so much for the color. Appreciate it.

Thank you. Appreciate it.

Hey, good afternoon, guys. Just two follow-ups.

First, just on the large Texas loan, was there any interest reversal this quarter, and if so, do you have the math as to kind of what the impact on the margin might have been this quarter? Thanks.

Hey, Michael, this is Stephen. The 4.51 margin doesn't have any of accrual in that number.

It was about a million six impact for the quarter, which is about 5 basis points to the loan yield and about 4 basis points to NIM. If we had had it on accrual for the whole quarter, the 4.51 would have been 4.55 compared to 4.56 last quarter, so that's kind of the math around it.

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

They look to me like the second quarter looks like close to $1 billion, and third quarter could approach that. That includes kind of abnormal pay-downs and principal pay-downs, too.

That's what you'd have to do to stay even in each of those quarters.

Just for some context, payoffs in Q1 were about $650 million, but they were $950 million in Q4. $750 to $800 million in the quarters prior to that.

Sounds like a big number, but that's what we run in that range, quarter in and out, just depending on seasonality.

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

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

I appreciate all the color. Thanks.

No, I'm not aware of anything, and I've 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 and 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 with us that they haven't had because they've not been willing to do much construction. Any decisions we make to go a different direction than what they've been doing, I think will be more than offset by the opportunities that they have to do things they haven't done before.

I look at them as being a positive. As I said in my comments, pretty early, 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 quarter." I said, "Just get ready for the future.

You got anything you need to write down, write it down, get rid of it. Get it gone, get it out of here."

I think we're coming in with a pretty clean ship coming in the front door.

All right. Appreciate all the color, guys.

Thanks.

Thanks.

Hey, thanks. Good afternoon.

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?

Deal pricing.

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. I think it's out there.

It's just a matter if we're ready to do that, right? It's just a matter we're ready to make the move yet.

We're probably getting close to ready to look at something else, but we convert 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 your company two or three years ago, and we're thinking about doing something.

We want to talk to y'all." That happened with a couple of one Florida and one Tennessee that came at us.

Will we do that? We have opportunity.

We're going over to see Bill and his team. We'll have an opportunity to talk to Bill when we get over.

We'll get over to Tennessee and see where we're going and what we're thinking. There's a Tennessee deal out there, there's a Florida deal out there, we'll see how they work out.

Yep, okay. I guess it's somewhat related, but how do you feel about being more aggressive on the repurchase plan?

Do you have an optimal capital level in your mind, or are you just kind of warehousing this capital for future acquisitions? Because obviously 13% TCE and CET1 of 17, those are high levels.

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

Pretty sweet.

Yep.

We got so much capital right now that we really like our position, but I'm ready to buy stock. I'm looking at it today.

We can't buy today, damn it.

Tomorrow.

Tomorrow we can. We can't today, it gives us an opportunity.

I want to buy back all of Mountain Commerce. That's about 5.5 million shares.

I want to buy that back. I think we bought essentially all of Happy back.

I want to buy all of Mountain Commerce back and just kind of the goal out there. We can do it pretty quick with the capital position we're at, and wouldn't take us long to get that done.

I like to buy. I know it's a little dilutive to us, but I like to buy the stock,

so. Yeah.

Okay. See, it's not an either/or in your mind.

You can do both. 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.

Yep, okay. Thanks.

Yep, thanks for the help. Appreciate it.

We just keep stacking up capital.

Thanks for taking the question, guys. Just sticking with M&A, you mentioned some potential bank targets in Florida and Tennessee.

Can you just speak to the appetite of doing M&A in 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 in existing footprint versus something outside the existing footprint.

There's no comparison to me. If there's a Florida deal out there that we can do, we got management from Key West, Florida to Pensacola.

We got management all over the state of Florida, and we can just add it to You've heard me talk about putting in one of those guys' buckets. They're great managers.

The performance our Florida operations, well, all operations are outstanding, but those guys know what to do and how to do it, and it just makes it simpler and easier. We made the big move to Tennessee because we like Bill and his team, and we made that move, I think we need to grow there.

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

The reason being you just get more consolidation savings. That's really the key.

If you think about closing branches and doing a deal where you can close some branches, those are big savings. We'll continue to focus more on where we are than outside of that.

Would we look outside of that? One of those deals that I'm talking about that your bankers called me about is outside of that.

I really like the operator, and we like the guy. We like his company.

We like what he does. They don't have the growth that Florida's got, but he runs a good, clean operation.

Someone said, "Why would you go there?" I said, "Because it's simple and it's clean and they do a good job running their company."

It kind of builds mass. Now, that's outside where we currently operate today.

He's the guy that runs it, and you don't have to hold his hand. That's really what you're looking for.

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. Then just as a follow-up, if Chris is still on the line, I've got a question about private credit.

Chris, you had some good, insightful comments about private credit and kind of what you had there a few years ago versus what you have today. I want to dig more into the views you have today and kind of your outlook here.

I think you said that the current bias was for further reduction of the remaining private credit exposure that you have. I was hoping you could expand on this, and how do you see the private credit market playing out the next few years?

Also curious, when do you expect to see some opportunity here for growth for CCFG? Thanks.

Thanks, Matt. Probably two things there.

One, right now the uncertainty here is 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, and everybody goes, "Okay, that's it."

Then there's always as they say, the third shoe to drop, right? Right now we're not seeing a lot of capitulation on the price side, and there should be, but we're also not seeing any activity.

Nobody's pricing a new facility today if they don't have to. I think we'd want to see, one of the things we look at a lot in ours is, well, have these loans been marked appropriately, right?

What's happened to the underlying credit? Have you had EBITDA expansion or not?

Have the loan been marked, etc.? We like to see a little more of that before I think we get comfortable.

We've certainly had people come to us and say, "I'd like to get out of some of our positions. My risk guys are getting on to me.

What would the price be?" I think right now our answer is, a price doesn't fix credit, and so an extra 50 basis points isn't going to save me when I need the credit support.

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

It may turn out all these things are fine, AI doesn't destroy the world, and all these software companies are fine. I just don't think you should take that risk today.

We'd want to see a little bit more capitulation, I think, before we would do that. We've, as I said, we've been in this market for 10-plus years, I think some people that came into the market quite frankly need to take some losses before I'd feel comfortable, right?

It seems like that's how you get discipline is you get new entrants in, and they thought they were getting something very risk-free and they priced it that way, and then it turned out not to be, and then everybody gets religion again. We'll look for that, 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 if a 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 continue to see good pipeline growth.

We are going to have elevated payoffs, but one of those is just a credit we've had that I've been saying we've been two weeks from payoff for six months, and I think it's paying off today. We'll find out.

Not a worry for us on the credit. They've just been in a sales process, and it's just dragged on a little bit.

We like the credit. I'd like it to stay longer, but I get nervous when things stay a little too long, right?

Stuff's supposed to move. We're in the moving business.

We continue to see great opportunities. I think our pipeline's pretty strong.

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.

Okay. That's helpful, Chris.

Always appreciate your insight. That's all for me, guys.

Thank you.

Thank you.

Hey, guys. Just maybe one follow-up, Chris, since you're still there.

Just on your outlook for the year, I know you talked about a payoff last quarter. It sounds like that maybe got pushed back a little bit.

This year, 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?

Which I know is harder for you, because you look at it on a calendar basis. I'd say from here over the next rolling 12 months, will we grow?

I think so. Based on what we see, we booked quite a bit last year.

We had really good production last year, and not all that's funded, we would expect some of that to roll through. I do like where we are right now on pipeline.

I'd say Kevin talked about a little bit. We're in constant contact with our customers.

Most of our business is repeat business, whether it's somebody that borrowed from me three years ago or somebody that borrowed from me last year. 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, etc. Where would you be?"

We told them. They said, "That sounds great."

Then they called me yesterday and said, "I think we're going to pass on that." I would have told you last week there might be a pretty interesting deal there, and today there isn't.

They may call me back on Monday and say it's back on. 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.

Got. Okay.

Perfectly. That's helpful.

Thanks, Chris. Maybe just a couple follow-ups for me.

Johnny, I think you talked about M&A, just not to beat a dead horse, but just any change now that you've gotten Mountain Commerce in terms of sizing? A lot of people are asking, do you look at something smaller, bigger?

If it's just what's available, just any context on kind of what your preference would be in terms of moving forward with M&A?

Somewhere in the size or larger than maybe Mountain Commerce would be nice. We would probably do a smaller deal if it fits Bill.

If it's in a market to where Bill's not, if it fits him, we'd probably would step down and do a smaller trade. Tennessee's a pretty good sized state, and we're in what, four or five locations?

Seven? Eight?

We got room to grow in that state.

Gotcha. Okay.

That's helpful. Maybe just Stephen, just on the margin, I think you talked about the opportunity on the cost of deposits that Mountain Commerce has still got some room, maybe not as much room on legacy.

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's at, is essentially trying to kind of blend them with overall where it's maturing from to keep it on the books.

The benefit that I think maybe banks thought was there a year ago, certainly with what we're seeing loan pricing competition and other areas, I think it's kind of hold on to what you got.

Gotcha. Okay.

Just maybe in terms of you gave the, I think someone gave the payoffs, I guess, but in terms of the production, I think you said it was around $900 million this quarter. I guess, what's just in recent quarters, has production been similar at that level or is that moved around a little bit?

It's a little light. The $917 for this quarter.

We were two a little over $2 billion in Q4, but seasonally usually are at the end of the year. Prior quarters and that, we've been a little north of $1 billion.

This quarter

Some of that is not funding day one. Some of that's a good, fair portion of that's construction, and that's not going to fund until six months from now when it'll start funding generally, so that's a little hard to pencil out at one time.

Yeah. I hear you.

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

We battle those credits every day. That damn boat, we're going to a

trial in June, we hope

trial in June. It's been a year.

We've had it

We have the boat.

We have the boat.

Not a question of where it is. We actually have the boat and it's in possess-

Absolutely.

He

keeps going to the judge, and then they got a new judge. Now we got a new judge, third judge, and we're going before the judge in a trial now.

It's $5 million boat. $5 million owed on the boat, and it's a $7, $8, $9 million.

It may be at $3 million by the time we get it sold, it may be so damn old. I've never seen anything quite like that deal at all.

It's just been frustrating. The apartments in Dallas that we're wrestling with, We'll get it sold eventually at some point in time.

We've had five or six solid buyers on it. We'll get it sold at some point in time, but we've marked

It's got a

There's no loss in that for us. Kevin collected a couple million dollars on it a while back, there's no loss in that.

It's just a matter of getting it out of there and There were some construction problems and anyway, you can't

It's in a receiver, and the receiver's got to correct some safety issues. We may find somebody to take it where it's at.

We're working, 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. There's an opportunity there if somebody wants to jump in and do it, and if we find the right person, then we'll get it sold and moved.

But

Okay.

Like I said, some of them are challenges. We just have to work through

them.

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

Gotcha.

Okay. Just the outlook on charge-offs, it sounds like that's a pretty de minimis number, 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. The charge-off outlook, at least near term, is still pretty benign in terms of the portfolio today?

I would agree with that.

Yeah. Remaining.

Yeah. Maybe a last one for Brian.

Go ahead, John. I'm sorry.

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

I don't anticipate, if they're marked, they're marked and written down, and if the $100 million credit, if there was some loss in it, I'd be shocked, but and I've been fooled before, but I think we're fine. It'd just be a bump in the road for us, because we You've

got the PPnR and you've got the reserves, yeah.

Send losses in, maybe, I don't know, maybe it's nothing. Me, if I thought there was a loss in it, I'd take it.

I would have immediately written it down, but we haven't. No need to write it down at this point.

15 years of charge-offs in our We got 15 years' worth of charge-offs in our reserve.

Did you hear him? He's got 15 years of charge-offs in reserve right now.

We have a pretty good history of not having a lot of charge-offs, and we've had for years. We had the Texas cleanup, which was probably the biggest one.

That includes that.

That

is included in that number.

That includes that. So.

Gotcha. Maybe just the last one for me, Brian.

I think you talked about the fee income being just kind of some of the noise the last couple quarters. This quarter seemed pretty clean, around $44 million.

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 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?

You're right, cuz over the last four quarters, we've had somewhere between $4 and $5 million every quarter that's dropped down in this other income line item. It's a whole variety of different events ranging from $5.7 million in 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.

Right. It's a good baseline to work off of, and then expectation there is hoping that we see a trend upward.

Okay. Perfect.

Congrats on the quarter and thanks for taking the questions, guys. I appreciate it.

Appreciate you. Thank you.

Thanks. Been a long day, a lot of questions, a lot of interest.

Thank you for your support. We'll we'll continue to do our part, and hopefully we'll continue to run the 2% ROAs, and see they beat us up a little bit on the stock today.

They kind of kind of hammered us on they kind of hammered us on the stock, I don't I don't think we deserve to be off 3%, hang. It's an opportunity to buy, you bet, it's a great opportunity to buy, time timing be good for us.

That's it. Unless anybody got anything else, anybody else got anything?

Nope.

Thank you very much. Talk to you in 90 days.