Home Bancshares, Inc. (Conway, AR) Price & Performance (HOMB)

You will find this note on page three of their Form 10 k filed with the SEC in February 2025. At this time, all participants are in a listen only mode and this conference is being recorded. If you need operator assistance during the conference, It is now my pleasure to turn the call over to Donna Townsend, Director of Investor Relations. Please go ahead. Thank you. Good afternoon. 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 John Marshall, President of Shore Premier Finance. Opening remarks today will be from our Chairman, John Good afternoon. First, I wanna pay tribute to a special friend of Home Bancshares family and a director of our company. We've lost a good friend and a strong leader with the loss of Pat Hickman. Hickman was a wonderful asset to the Home Board of Directors And from a personal perspective, he was a man who'd walked in the same shoes that I've walked in while he was building happy as I've been building Homebunches.

He was a cop of that, Pat lit up a room with his outgoing personality. And was a good man of God and always wanted to for all of us on the board, and we probably needed it. Someone briefly said, I bet Pat, as he goes through the permanent gangs, is telling God about his bank's new CD That's kinda hit me than I remember. We will miss you, my friend, and may God be with your wife, Nancy, and your wonderful family. Good day, everyone, and thank you for joining the start of 2025 with us. First quarter earnings are in and as I said in the headline, [indiscernible] Is no accident. Couple our strength with pure leading performance metrics and you get the results you get. It might be the best first quarter in the entire bank space. Our continued conservative philosophy of maintaining strong capital excessive loan loss reserves, excellent liquidity good asset quality, and strong operating efficiencies have led to an almost perfect quarter for the company. The good news is we delivered a near perfect quarter while setting six new performance records. The bad news is it was delivered during uncertain economic times. Hopefully, this top tier quarter does not get lost in the shuffle.

We continue to maintain the passion, the drive, and the discipline allows our performance to separate us from the pack. By being one of the most profitable institutions in the world. It is our goal to reward our owners make them proud to be shareholders of Home Bancshares. It's really nice to have the large Texas cleanup behind us. [indiscernible] Pretty much done. Plus, it appears we've reached a tentative resolution to the Texas lawsuit we filed a couple years ago. So that might go away along with millions of dollars of expenses that are incurred on a quarterly basis that could disappear in the second quarter. Couple that with strong loan growth, stable margins, and it feels like Home may have finally broken out on the earning side. Management has to ride herd every day during these volatile times. We That requires constant watching with a laser focus both internally and externally. Be prepared to shift either. To direct the company in an offensively or defensively direction. The bottom line is, as my wife said, regardless, protect the chuckwagon. That's certainly the most conservative approach And as I said last quarter, these banks don't run themselves. I'll talk a little bit about the highlights and why they're important to our company.

But most of the numbers speak for themselves. Steven will make a few comments about margin, and Kevin will make a few comments about loan. And Chris Poulton will talk about CCFG. Let's go to the numbers. Earnings was a big. Earnings showed a hundred and 15,200,000.0. A record 58¢ per share. That represents a significant breakout in quarterly earnings. That has been fixed around 100 over the past several quarters. Reported core earnings of that was 111.9. That's 56¢ a share. I wanna bring to your attention that the expense of the Texas lawsuit was in its quarter, and that was $2,000,000 after tax. And, hopefully, that will be nonrecurring in the second quarter. Without the expense, the core would have been a hundred 14000057¢ a share. Our gain from our equity investment was back out of the income for core purposes because it's not guaranteed reoccurring. However, management believes our equity investments have certainly been profitable and put us in a position to reap the benefits that otherwise would have been a missed opportunity. That's the businessman and me always reaching for a little extra. Revenue, Home was beat on revenue. Were able to grow revenue faster than interest expense.

Hundred and 60,100,000.0 in revenue. We edged out the fourth quarter of twenty four thousand by $700,000 and the first quarter of twenty four thirteen point one million, which writes down we are pleased to continue our plan to top our billion dollar run rate that we did in '24. Margin, strong improvement on the linked quarter, up to $4.44 from $4.39 in the fourth quarter, [indiscernible] 4.13 in the first quarter. Net interest spread improved 11 basis points from December 24 at 3.58% to 3.69% for the first quarter of twenty twenty five. Nice improvement while yield on loans expectedly dropped on a linked quarter basis to 7.38 from seven point four nine. [indiscernible] With our community footprint increasing $291,500,000 while CCFG declined a hundred and three for net loan growth for the quarter of 187.6. At March 31, we were at a record level on loans at 14,950,000,000. We're 14,960,000,000 at 12/31/2024. And if I'm not mistaken, we've gone over tipped over. I don't know if they will hold. We've ticked over $15,000,000,000 so far this month. Departed strong deposits with an increase of over $395,000,000 for Q1. The increase took us to $17,500,000,000 17,100,000,000.0 at the end of the year, which led to a decrease in loan deposit ratio to 85.24%, and that's in spite of the strong loan growth.

The rate on interest bearing deposits decreased to 2.67 from 2.8 at year end. I said last quarter, think the strength of our company being able to pay out all uninsured deposits has served us well. There's always a flight to safety in uncertain times, Home is enjoying the deserving reputation of being able to pay out all the posters. In the flat to safety. There is no place like home. Pretax net income for the quarter was 56.58. I don't know how you fuss with those numbers when you bring 5658% of your revenue to the pretax bottom line. Asset quality non performing loans improved to 0.6% from 6.7 while non performing assets improved to zero point five six and zero point six three. Reserve coverage grew to 312% from the end of the year 278% non performing dropped 13,000,000 As of March $31.20 25 nonperforming loans were $89,600,000 and nonperforming assets 129.4 versus December 31 where nonperforming was 98.9% and nonperforming assets was 142.4 Capture ratios continue to build. CET one at 15.4, leverage at 13.3, and total risk based at 19.1. Tangible book value increased to $13.15 from 11.79¢ a year ago, up a dollar 86. Book value hit a new record surpassing the $4,000,000,000 mark for the first time in our company history.

Return on tangible common equity for the quarter was a strong 18.39 We continue to buy back stock We have a 10 b five file during our quiet period. Have no idea of the opportunity to buy back stock at these prices. And the purchases have been limited by our filing. We purchased over a million shares or right at a million shares I think, in the notes for the quarter, and we'll remain active in the second quarter. This too shall pass, and I think we'll be proud of having been active. At these levels. In conclusion, Home's powerful balance sheet coupled with repetitive strong earnings that's now showing a possible breakout because of strong margins, conservative growth, good loan quality, massive capital, hands on management, expense control, and don't forget our disciplined drive and determination that has led us. Peer leading performances. It feels good to be one of the best, and we love to win. We picked this up on the somebody wrote something about it. It says that home strength is not an accident. We've got picked that up, and we're gonna use that in some ad campaigns. It was quite a quarter down. I wanna thank all the team at Home Bancshares for a great effort and what I consider a perfect order.

I know you're proud yourself of the numbers as well, and I'm going turn it back to you and let you have it.

Thank you, Johnny, and congratulations on a fantastic quarter. Our next report today will come from Steven Tipton.

Thanks, Donna. Talked last quarter, we mentioned we would be pleased that the margin could remain fairly stable. I'm very proud to report that the core margin continued to expand in Q1. For the quarter, excluding event income, the net interest margin was 4.42% versus 4.36% in Q4. Or an increase of six basis points. March ended slightly lower than the quarterly average primarily due to the continued build of liquidity from the increase in deposits. This liquidity will allow us to continue to work on negotiated deposit pricing in an effort to bring those costs down. Are excited about the deposit growth we saw in the quarter nearly $400,000,000 highlighted by strong growth from all of the Florida regions and an increase in overall core non interest bearing balances. Congrats to all of our bankers as 2025 looks to be off to a great start. I'll turn it back over to you, Donna. Thank you, Steven. Next, we will hear from Kevin Hester on the lending portfolio.

Thanks, Donna. As Johnny mentioned, all asset quality metrics improved in the first quarter with no new material concerns noted. Anticipated recoveries from the fourth quarter cleanup were in process nearly $7,000,000 recovered from the fourth quarter charges. Ninety days ago, I indicated that I expected total recoveries on the cleanup to exceed $30,000,000 over time I still believe that is the case. Expected, NPAs are reduced in the first quarter, and I anticipate further reduction in q two. All of that and solid loan growth driven by the community bank markets. As Johnny said, it almost perfect quarter. Donna, back to you.

Thank you, Kevin. And now Chris Fulton will provide an update on CCFG.

Thank you, Donna. This quarter, we celebrate our tenth anniversary at Home Bancshares. For those that may be looking to mark the anniversary, I'll tell you that the traditional gift is aluminum or tin. Be honest with you. I was a little disappointed when I discovered that.

Over the past ten years, CCFG has funded over $15,000,000,000 of loans and has grown the portfolio to over $1,700,000,000 representing a cumulative average growth rate of over 10%. Think that that is a pretty good start. I'll talk today specifically about our commercial and industrial loan book. It was noted earlier that the CCMG portfolio declined approximately $100,000,000 in the first This decline as well as last quarter's decline occurred exclusively in the C and I portfolio. Historically, we had two types of credits in our commercial portfolio. The first single credit broadly syndicated and middle market loan and the second, structured facility secured by portfolios of middle market corporate loans. As of this quarter, we've effectively exited the single credit broadly syndicated and middle market loans, At its peak, this portfolio was over $200,000,000 and today it stands at less than $10,000,000 with just four credits remaining. In addition, over the past year, we exited at maturity or refinance several structured facilities as we rotated out of prior facilities and chose to take a pause on new commitments pending the election and potential rate volatility and tariff impacts. Going forward, as we search for an equilibrium point in the C and I book, we expect to add back to the structured portfolio.

Historically, C and I has represented approximately 20% of the total portfolio. Today, it stands at less than 10%. Over this prior year, we've created a capacity to selectively add back to this book. Meanwhile, our commercial real estate book, which represents the core of our loan book, the stable to up over the quarter and up about 5% over the past year. The new loan pipeline remains active. Over the past twelve months, we originated just over $1,000,000,000 in new loans and I would expect to meet or exceed that total. In 2025. These past ten years have been the most rewarding of my career, I wanted just to take a moment to thank everyone has supported the growth of this business over the years. I'm pleased we've been able to build a foundation for continued growth and success hopefully in the years ahead. Don, I'll hand the call back to you.

Thank you, Chris, and congrats on your two year anniversary. Been a pleasure.

Thank you.

Johnny, before we go to q and a, do you have any additional comments?

Well, I I just wanna say that I think we're gonna do some send Chris a roll with tenfold or something.

No. Go. Don't spoil the surprise. Depends what they we'll a big roll of bricks future wife. I appreciate it. So Good day. I appreciate that. I I didn't realize it was 10. So anyway, thank you. I don't have anything else. The numbers speak for themselves.

We're gonna go straight to q and a. Let everybody ask what they wanna ask and [indiscernible] Job for everyone. So by everyone.

Thanks. Thank you. If you would like to ask a question, you can do so by pressing star, followed by one on your touchscreen keypad. If you change your mind and would like to remove yourself from the list, can do so by pressing star then two. We will pause it briefly whilst questions are registered. The first question we have comes from Michael Rose with Raymond James. Please go ahead.

Hey. Good afternoon, guys. Thanks for thanks for taking my questions. Really solid quarter. You know, kind of all around. But I I wanted to get a sense from from you guys, you know, Obviously, this quarter's growth was strong, but just in general, what you're hearing from your customers, and I think an increasing number of banks are just citing you know, some some, you know, tepidness from from borrowers. And I specifically wanted to ask about you know, about the the boat lending, and if there's been any drop off in demand there and maybe just where where pipelines are. Just just a general color on what your borrowers, what you're hearing and seeing from your borrowers, just given some of the uncertainty out there. Thanks.

Hey, Michael. This is Kevin. Michael, this is John.

Go ahead, John. Talk about it before, and I'll talk in general. Yeah. No. Just because Michael had mentioned the the the boat loans specifically. Michael, what we have seen, I I guess, in the first quarter is, elevated volume compared to one q of '24 And but a large a large part of that because one of our European manufacturers a significant relationship of ours, has been offering to subsidize the the pricing And so that has tended to elevate the the production volume, and that that has largely masked, I guess, some of the uncertainty around the tariffs. But Kevin, do you want to speak in general? Yeah. Michael, from a know, from a community bank footprint, I think what you what you stated is what we're hearing from a lot of people too. I mean, there's there's some uncertainty obviously over the what's happened in the last month and that that may that may keep some projects that maybe are kinda in the development stage and then the planning stage. It may slow some of those down. I mean, still a lot of good things happening in in our core markets. So know, I'm hopeful that that will be short term.

But you know, still a lot of activity and a lot of good things happening.

Very helpful. And then maybe if I could just take it to the kind of the puts and takes on the margin for for Steven. How much, you know, pull forward or repricing opportunity is there on the the deposit or liability side? And it's good to see loan yields still holding in there well above 7%. Obviously down Q on Q. But can you just give us an update on kind of where new production yields are and then maybe how we should we should think about the margin here in the near term. Obviously, if the growth continues to come through, that would be a helper.

Thanks. Sure. Hi, Michael. So several questions there. I guess production in Q1 was a little over 800,000,000 weighted average coupon was $775,000,000 So still hanging in there fine. North of prime. On the deposit side, just here recently over the last couple of weeks, if kind of tried to reignite a little effort on negotiated checking savings those kinds of things. A lot of that's going to obviously depend on competition. I had a call earlier this week with our Presidents and you're still here and you know, banks you know, offering four and a half percent. So we have to compete there. And protect the franchise and we'll do that. But there's probably some opportunity on checking and savings to try to clip a little off here and there depending on what happens with the Fed. And then on the CD portfolio, we've got we've got $600,000,000 maturing this quarter. We've got about $400,000,000 next Out of $1,000,000,000 that we have, I think 85% or more matures within twelve months. So we're pretty sure on the CD portfolio and we should see 10, 15, 20 basis points potentially come down as those come through. So yeah, I think margin overall know, I think same messages as we have for quite some time now would be you know, pleased to to see it kinda hold in range that it's in.

Cash in March was up with the deposit build and that weighs on the metric itself. But that's come back in a little bit here slightly just with with tax payments going out over the last couple of weeks.

Very helpful. May maybe just finally, last one for me. Know, Johnny, think you mentioned this in the outset. [indiscernible] the credit cleanup around Happy being just about done. You know, you had a a net recovery this quarter. Anything that you're seeing out there both in your core markets and also in Texas that gives you any sort of pause? And are there any know, industries or or or verticals that, you're you're putting a little bit more eyes on at this point just given the tariff uncertainty? Thanks.

Hey, Michael. This is Kevin again. Not yet from a general sense. I mean, we ask that question in every presentation. We're asking our lenders about that individually.

Because it, you know, affects even within an industry people differently. So we're we're just dealing with that from a one off. Individual perspective. But certainly talk about that in every every size of the deal. Okay. Great. And really early yet to know. I mean, you know, you haven't really seen where they're gonna land [indiscernible] what's gonna get hit and what's not. So it's it's a little early. We're having the discussions, but there's no definitive answers. That's pretty well put.

Thank you, Michael.

Appreciate the support. It's difficult.

Yeah. Thanks, guys. And, Chris, congrats on ten years. I got a [indiscernible] Thanks, guys. Appreciate that.

Thank you. We have the next question from Mealor with KBW. Please go ahead when you're ready. Thanks. Good afternoon. Good afternoon, Catherine.

Johnny, you mentioned about expenses that there were still about 2,000,000 in elevated legal expenses that had to do with the Texas lawsuit. That would hopefully not be recurring next quarter. So do you think excluding now we actually see expenses come down from this level or that just kind of pays for natural growth? Over the next couple of quarters?

One one eleven is one eleven is our number, and you pull the 2,000,000 out of expenses this quarter, you'll be at one ten nine. You're right at one eleven. So our management team is working hard to to keep that, and and and I'm not gonna I didn't fuss out of this quarter because we had the elevated legal expenses. We're in the middle of debt depositions on that lawsuit that went on all month long. Anyway, that maybe that it appears that there's a resolution that's come to that and and maybe everybody will continue. We have everybody has signed off, but we're working up towards that. So you know, the hundred 11 is a good number. I think you know that. I I think you I think that's the number we had last year and we're still operating with it this year. So I'm pretty pleased with the with Steven's management of the expense side. Don't count it coming down any more than Yeah. That it's no. It's it's been really it's been really good expense control. And then maybe my follow-up on the margin was just on loan yields. Can you just kind of give us a sense as to where new loan production is coming on We talked a lot this kind of quarter about competition being a little bit more intense this quarter.

Just curious how we should think about the pace of loan yields over the next couple of quarters?

Hey, Catherine, this is Steven. I'll make the comment there and let Kevin add anything he wants to. Just in general, I think mentioned earlier, coupon in Q1 production was at $7.75. That's $7.60 or so kind of from the community bank. Group. So, you know, a little north of prime and then, you know, mid eights for for Chris's portfolio. You know, we're hearing you know, from our from our lenders, you know, competition is you know, quoting some things in the sixes and and, you know, we may have to deal with that at some point. But as you all know, disciplined in our approach and you know, think we can kinda hold the line where we're at. Kevin? No.

It's good. No. That's I'd agree with that.

Okay. Great. And then and maybe just one just on on the margin. If we are in a in a environment where we start to see rate cuts and maybe, Johnny, I love your view and if you think we're gonna get them or not. But but just as we get into an environment potentially where we see more rate cuts this year, can you just remind us on the sensitivity to the margin and how you think the direction of your margin will go? [indiscernible] Thanks.

Yes. So from an ALCO standpoint, I think we show about 6% decline in a down 100% scenario. I think Johnny and Tracy have said for a long time our view just on the ALCO model and it being a snapshot in time. Yeah. We have three I think we have three rate cuts built into our [indiscernible] actually showed a little expansion throughout the year. You know, in in in what our budget produced. So, again, I think a lot of that factors on competition.

And what we have to do to protect the franchise. But overall, I think in this, you know, four forty ish range, you know, where we're at today would be would be pleased. Okay.

Great.

Thank you. Thanks, Catherine.

Thank you. We have John Armstrong with RBC now.

Good afternoon.

Hi, John.

Hear me alright? Hey there. Johnny, what do you are you thinking on the buyback? And capital preferences from here? You would still you still prefer you know, kind of looking around for m and a, or do you think at this point you'd rather be buying back stock?

Oh, if if we found the right deal, we'd do one. We've got we have a payoff coming up, looks like. Brian, you'll talk about what we have coming up. Sure. We probably will pay off some sub debt. It's sub debt that we acquired from Happy. It'll be about a hundred and 40,000,000. It's currently about 5.5%. But unfortunately, it pops to 9.7% on July 1. So our plan is to try to get board approval later this afternoon to pay that off on the July 31. That'll lower our risk based capital ratios about 76 basis points once we do that.

Yeah. It it [indiscernible] about nine and a half, so we're not gonna we're not gonna pay that. So we'll we'll pay it off. We got cash paid off. We'll just pay it off.

Yeah. And we've got almost 582,000,000 in cash at the holding company, so we're we're good there. And and we're we're strong on capital, so I'm good with paying it down.

It is getting Okay. Capital account is getting large. You know, think Jamie Diamond said it best. There's nothing wrong with having good liquidity and lots of capital. In these kinda uncertain times. So I I like our position. I like the fact we can pay out all the insured depositors. I like having a war chest of capital. We don't know what's gonna happen. You know? We don't know where this is going. I understand what he's trying to do. I don't know if it works. But, anyway, we're gonna all be in this for a little bit till it gets resolved one way or the other. That's when we're being in good shape, we come out the other side and ready to play. So Okay.

Okay. Fair enough. So so pay pay it.

Down debt and maybe pick away at the buyback is the near term message. Is that fair?

Yeah. We'll continue to buy. I wish we had we've always filed 10 b five. We've picked up about 480,000 shares in this 10 b five. About a million last quarter and this quarter, so we're picked up about $45,490,000 shares and I assume we'll probably buy another if they stay down here, we'll continue to buy. You know, we'll just continue to sack it up. It's you know, we I didn't think we'd get another bite at Apple here, but we're getting a pretty bite at the apple. So I think we'll just keep buying for a while.

Okay.

Okay. Good. Chris, Poulton, on on your comments, are you are you essentially calling the bottom? Are you saying that that know, you'd mentioned a couple of runoff categories that it feels like you've exhausted that. Are you are you essentially saying your portfolio could be at a bottom in terms of size? I think that's pretty fair. I I'd like it to be. You know, we as I said, a % of the decline in our portfolio has been on the C and I side. We control that. Right? We can come in and we can come out of that. Wanted to leave a little dry powder coming into this year on commercial because we kinda felt like weren't great opportunities in this second half of last year on the commercial side. We thought there probably be more. We just made our first commitment. This month, this year. So we waited until now. We made a new commitment on a facility. So yeah, I'd like to believe that. We'll have some payoffs in the you know, in the, CRE book, but I think the pipeline is strong enough to, fill that back up. So I'd like to be a little bigger than we are right now.

We're down about one seven or so. I you know, we we continue to think two is a good number, and I think we'll get I think we'll get back there. It's just not a race to get back there.

Yep.

Okay.

Okay. Good. And then Kevin, just on core growth, core loan growth in the community bank footprint, is there anything you'd call out that's particularly strong at this point?

Well, our Southeast Florida group, our metro groups, there's just a lot of stuff. Good stuff happening in Florida and and even in even in the Dallas Metros. I think you know, I'd probably call those out. You know, 2Q payoffs look pretty high.

That's gonna be a little bit of a headwind as we go through the quarter. Not saying we can't overcome it, It is early in the quarter and the pipeline show some stuff that'll that I'm sure will come through. But payoffs definitely are a little bit higher. [indiscernible] Okay.

Okay. Fair enough. Just one comment on tin and aluminum. I see John Marshall does not have any foreclosed assets, but it's about 5,000,000 in non performers. So Johnny, maybe there's an Alumacraft in there. [indiscernible] Thanks, John. That's helpful. Alright. That's that's all I had.

I have all nine already.

I've been waiting.

Oh, that's funny. Thank you.

Thank you. We now have [indiscernible] Okay. Sorry.

Hey. Good afternoon, everyone. Wanted to start back back on the recoveries. And I think, Johnny, you mentioned you still expect the cleanup to have $30,000,000 of recoveries over time. Can you talk a little bit about that you obviously had some this quarter. Can you talk about the timing of that? Then just thinking about, do you think you can substantiate a 2% reserve if you end up back there? And just any thoughts on your provisioning needs, you know, net of the recoveries you're expecting?

Hey, Brett, this is Kevin. I'll take the first part of that question. I'll let him talk about provision. But a large, large portion of those recoveries are the the monthly payments on the large charge off that we took, and we expect those to continue now. You know, you could have an event somewhere down the road in a sale or something like that could accelerate that. But as of right now, that's a million and a half a quarter, and we expect that to continue you know, for long as they continue to pay it, which we expect to happen. So that's the large part of the 30.

Most of the other stuff is maybe one other piece There's maybe one other piece that hasn't occurred yet. That I'm hoping will happen second quarter. I think it probably can. Other than that, I mean, all of it has happened other than than the monthly payments.

Okay. And and any thoughts, Johnny? I know it's you've you've had a 2% reserve in the past and your reserve is still way above almost everyone else, Do you wanna grow that in this uncertain time, or do you think that that's kind of as high as you can get it just given the dynamics?

I'm not in a hurry. But I'll you know, I like 2%. And I have to reiterate, but I'm going to. It has always worked good times, bad times recession, financial crisis. Interest rates, 2% always work, and it just something you know, we would've didn't expect Long Girl to be this powerful the first quarter, and it was really good. [indiscernible] seeing it go back up, you know, the recoveries would have taken it back up. So but it just matched out pretty [indiscernible] [indiscernible] phones and the and so it I think we're at one eighty six. We're still at one eighty six. So it I'm not in a hurry to do that, but if I get a chance to go back to 2% at some point in time, I like the reserve. I think it's a smart thing to do. And the conservative way to run this company is to to arrow or bear with too much reserves and too much capital. So you know how we do it, and if we get a chance, we'll do it. If we don't, we'll we'll leave it. Probably not gonna let it drop. I'm trying not to let it drop any from where it is. [indiscernible] know we'll continue to get some recovery on a monthly basis.

So we'll build it. But there's always, you know, there's always a little charge off here and a little charge off there. I think we recovered 7,000,000 last month. We charged off a couple million and ended up with 4 and a half or 5. So but which was the $290,000,000 with the loan growth is what it was. It's about what it took. Yeah. Okay. And then just back on the the m and a topic, you know, I I assume you're gonna tell me that everyone's just kind of in a wait and see mode. And if no one has to do something, they're just gonna wait and see how the environment plays out before proceeding. But was just curious on your thoughts on the environment and you're hearing from folks and what do you think your outlook might be for M and A you know, I know it's hard to hard to gauge with the uncertainty.

Well, Brett, we just saw Cadence get that deal done in sixty days. How long has it been since we saw a deal get done in sixty days? It's it's been the last Trump administration. So you know, it it it is a positive for banks Certainly, it's a positive for banks. And French Hill, head of the financial services committee, first banker in a hundred years to head that. That's a plus for the banking industry. Got a real banker running financial services. So I think that's a plus. I I think Trump is is gonna deregulate as much as he can. I think it's our opportunity. It's a window I don't know if it's perfect timing with all of the tariff stuff going on.

But we're not on a trade right now. But we're not off a trade. So we're we're we're open to to what makes sense. And and we'll do a trade. I mean, I'm excited thinking close the deal in sixty days. That really gets pretty exciting. From that ad that that perspective, I'm I'm more inclined to do something We're not really on something right now. We're on one last quarter. And do the Texas cleanup, having to get all that crap out of out of the bank. We we didn't wanna go forward with that. So, anyway, that that one could come back at some in time. It it may or may not come back at some point in time. But well, we're open I just spoke at Commerce Capital. They had a big event in in Texas, we spoke there. In front of about a 20 bankers. So I told them our our door was open if any of them were interested in coming to come on and we'll we'll visit. So we're not we're not excluding the m and a deal When you run a 2% ROI as we did, for the quarter, We can't get much better than that, can we?

Just can't I can't you can't get much better than that. So it's time to bring some assets in. [indiscernible] don't we don't need to get stupid with a price. We need to buy it worth the money. You know, I told the guys in in Texas recently, this last conference, said, think about it.

We all work about the same number of hours. I don't think they work as many as we do. But, anyway, I said, and you're doing a 1% or a point nine.

And I said, we're doing a two. So think about that. And you wanna sell your bank, what should I pay you for it? You know, I pay for what it's worth. Right? Think about think through that. You know? You you can't come beating your chest. I want two times book. Because next year, we're gonna do gonna we're gonna do one point a. That's well, then wait till next year to sell it. Right?

You're gonna do that good next year. So just the conversation around was we're open. But it has to work for both parties. And if we found the right trade, we'll certainly do it. Does that make you understand where it's coming from? Okay.

Yeah. Yeah. No. I think that makes great sense. Appreciate the color, and congrats on the quarter.

Thank you. Thank you. We have the next question from Matt Olney with Stephens. Please go ahead when you're ready, Matt.

Yeah. Thanks, guys. Congrats on the quarter.

John, I want to just yes, just want to continue the last discussion you had on the M and A front. And I'm curious if we're if we are seeing faster approvals on deals and you mentioned up to sixty days on some of these deals, Does that allow you to do anything interesting on the M and A side? And some of your peers have talked about it's really more comfortable doing multiple deals in the same year. If that's the case, you know, it could allow the bank to do perhaps some smaller deals that they wouldn't have considered in the past if you can do multiple smaller deals. So to just curious how the change of faster approvals, how that would change your M and A strategy, if at all?

Well, it it excites me to look at m and a. And to be able to get would we would we do two or three deals at one time? Well, if one came, another came, another came, I guess we would. I don't think we'd announce them all the same day. But I wouldn't mind doing a smaller deal. We're not in verse to doing a smaller deal at all.

You know, the last one we did was was the happy deal, And, you know, the the train wreck we ran into there with that deal, but that's that's in the rearview mirror today. As you can see, the earnings has recovered. So I mean, I'd prefer to do maybe a I prefer to maybe do a smaller deal or or a multiple smaller deal. So it's just I'm sure my people would prefer to do one larger larger deal because it's about as much work to do a smaller deal, as you know, is is to do a large deal. So you'd have all your focus on one trade, but I I wouldn't be adverse to doing a couple smaller deals at all. And I'm looking at the I'm I'm ready to find some. I'm absolutely ready to find the trade that makes sense. I said a while ago, ran a two point o five or six for the month. You can't I can't ask for any more than that. This team needs some new assets. They need some assets that somebody who's running a 1% ROI that that wants to be a partner and come in and let us help them get it to a two ROI.

I mean, that's our game. Right? That's what we've done over the years is is is by a bank that doesn't perform near at the level that Home performs and bring it to our level. So that's really our strategy.

And we're looking for that opportunity. But just because I sell it in terms of tangible I'm gonna pay somebody two times tangible book. Not but a handful of us that traded two times tangible book, and we trade there because of the continued quarter after quarter after quarter performance of of of the companies. So that's why we trade there. And people that are not there, they tried there for a reason. So no disrespect. It just is what it is.

And, Johnny, on the topic of just smaller banks, can you put any numbers behind that in terms of how small would you go versus how small It's just too small, I guess, to consider. [indiscernible] Is too small. Know, however, if it was sitting next door to Palm Beach or sitting next door to to Miami and it was the end market merger. You know, we might we might look at something smaller than that. It just depends on where it is. If it's out there by itself, then I'm we we probably would be we wouldn't be as aggressive on it If it's if it's in some place where we operate today, then we could be we could be a little more aggressive on it. I mean, if the CEO you've heard my story, the CEO wants to stay. We'd love to have the CEO. If he doesn't, strictly in Florida, we can just pour somebody's bucket those guys understand us. They know what we're doing. Been with us for years. You don't have to hold those guys in Florida's hands. They just go get it. But and that's what's happening in Texas too. Our our team Arkansas is that way.

Texas is that way. Chris runs his own deal in New York, as you know. So if if I don't have to hold these guys' hands. And if we get an opportunity in a market, it's a hundred and 50,000,000, it's next door. It might make a lot of sense if it's accretive. If it's could be somewhat accretive to it. I mean, in the billion dollar deal and not it adds 2¢ share or you can do a hundred and $50,000,000 deal next door and it may add 2¢ a share. So depends on how much it adds to to EPS. We're in the business of making money for our shareholders at and we're gonna make money for our shareholders at at most of these people sitting around this table right now are big shareholders of this company. So they're they're as aggressive as as I am about looking for the next deal.

Alright guys. Thanks for the commentary. Congrats on the quarter.

Thanks, Matt. Appreciate it.

Thank you. We have Steven Scootin with Piper Sandler. Please go ahead.

Good afternoon, guys. I I don't know if you let Tracy hang around for one last quarter, but I hope you guys are chewing some nasty cigars in his honor, maybe.

If he's if he's not there. But got one He's missed He's sitting at the other table, one in his mouth right now.

There you go. See, you guys all should have one just to to honor him on his on his what I think is maybe his last name on his call. So been a been a great round.

I guess maybe one last question on the m and a front.

What what do you think we need to kinda get the ball rolling on on a deal flow perspective? I mean, do we still need lower lower rates? Is it you know, marks on on or interest rate marks that are keeping deals from getting done? Do we need higher stock prices? I mean, I think most of us thought we'd have seen a lot more deals in this administration by now. I'm just wondering what you think we we need to see to to kinda get the ball rolling a little bit more. You know, I I [indiscernible] when he said lower. That'll improve some people. That'll make them wanna come out You know, it's about as broad as it is long when you think about it. We're just a tech below two times tangible book. We're right at two times tangible book. And we were at two five. You know? So or two six. It's all relative. You know? Somebody said, well, I'm gonna wait if I can get one six or one seven. Well, when I get one six, I'm probably back to two five or two six. So it kinda floats back and forth. Just educating the sellers to me more than anything else.

Is what we need to do. As you heard me say, these people that got themselves in trouble with their security's book, it's hard to make a deal with those people because the mark is so deep into their book. But, you know, it's all relative. Right? It's it's based on what we paid for them today and how long it takes for them to heal up. And and maybe they don't heal up for a couple of years. So they maybe they don't sell for a couple of years. But it's all about it all floats about the same. I mean, the the when Trump went in, we got the Trump bump and and huge raise of all back raise the level of all backstop.

Well, the tariffs come in and they're going back down. So, you know, it we're back where we were prior to the the Trump bump.

So I think it's just a matter of educating the seller because if the seller of this is willing to make a deal at a point nine, then he benefits from that and it's accretive to the company And he gets to ride our stock. You know, he used to ride a really good quality stock. It pays a dividend every quarter. It's just an education process to me.

Yeah.

Yeah. That math you just talked about on the exchange ratio seems to be lost a lot of the times. There seems to be some maybe some pride in just the absolute number at announcement, which to your point, doesn't doesn't really make any sense.

But that's helpful, Johnny. I guess, you said that mentioning, obviously, even in your press release, right? Banking boils down to revenue and expenses, right? And y'all expenses are about as low as it seems like you can get them. And you're talking about needing more assets, to to build revenues. But apart from m and a, are there any other levers you feel like you can pull to [indiscernible] you know, pick up revenue levels more so than they are? Are there any other lines of business or anything else, that's on the radar to to grow revenues this disproportionately?

I wish I wish I could tell you the answer to that was yes. But, you know, we're going to keep on keeping on until we find somebody that wants to do a trade with us. So we're just gonna keep on doing what we're doing. And I expect the next quarter to look a lot like this quarter. So, actually, the run rate as of today was a million three higher through the same day last quarter. We're a million three higher this quarter than we were same day last quarter already. So I expect us to look a lot like we did last quarter. We We had a sale Happy had an investment that they sold. And I didn't even know we had it.

And it made millions of dollars, so you'll see that coming in. Had one other deal was pretty good. Oh, we looks like we may have settled the Texas lawsuit. Looks like that is settled. I'm not sure when those proceeds will come in, but they possibly could come in next quarter. And as bad as I hate to say it, we have I wish we didn't have it. It was a life insurance policy for mister Hickman Pat. I don't I'd I'd much rather had him than the money. So got that coming in. So we got a good start on on on next quarter and the run rate's up a million 3 through today. So that that tells you kind of what I'm thinking. And I'm pretty happy. I'm I'm We just need to find somebody that wants to partner and stay with us if they want to or go to the house if they want to. We're ready. Yeah. No. That makes a lot of sense. I appreciate the color. Everything else kinda I had [indiscernible] fantastic quarter yet again. Appreciate the time. Hi, Steven. Thank you. We appreciate you a lot. You're you you you have a great reputation as an analyst.

Do a good job.

Thank you. We have another question on the line from Brian Martin with Janney Montgomery. Please go ahead when you are ready.

Hey, guys. [indiscernible] Yeah.

Yeah. Maybe, maybe just one for for Kevin. Just Kevin, on the in terms of the the NPA resolution, I think last quarter you kinda talked about directionally where you thought you know, the NPAs could trend to here as you kinda work through the credits. Can you just kinda remind us where that where you think the NPAs will kinda shake out here over the next couple of quarters as you kinda work through some of these credits?

Yeah. There's still probably another 12 another 12 or so that I'm hopeful to move this quarter. From there, it takes the the credits the the NPAs that we have on the Florida memory care credits It takes those to move and those are improving. One of the three actually is cash flowing. It's now cash flow for two months on what would be P and I payments. And the other one of the other two is is really close, but that's a probably six months. You gotta have six months of that that sort of activity before you move it out. So I think in best case, one of those is probably a third quarter third to fourth quarter activity. And those you know, from there, from the the the 12,000,000 I said early, it takes that to get any anything else out of any size.

Because everything else from their own is pretty small. Okay. And that the memory care one that could go later in the year, third or fourth quarter, how how how big is that one?

The one of the three is about six The second one that's close is eight or nine ish.

Somewhere in there.

Okay. So you could still still see a good chunk. You know, both of those could go in the the second half of the year or later in the year, if that's possible?

Possible. Yes.

Possible if the if the current trends continue.

Okay. Gotcha. And then I don't know if you mentioned it, Kevin, if I missed it in your opening remarks. Kinda your the loan pipeline, your community bank pipeline today Can you did you give some color on that of how you're feeling about that? Is you're given the uncertainty that's out there and just how you're looking at through all that? I think I know you mentioned some payoffs.

Yeah. I I think the pipeline itself, the production pipeline is is pretty good. I don't I wouldn't say that it is as strong as it was the last half of this quarter that just ended.

I think the challenge is going to be the payoffs the elevation of payoffs second quarter if those do come through.

That's a headwind. Not saying we can't get there, but it's gonna take some some things happening that aren't on the pipeline yet. And, you know, we're talking about some stuff that could hit there, but it'll just we'll just have to see how that plays out. [indiscernible] I think this Brian, I think his tariff bills kinda shook everybody up a little bit. We'll see how that goes. But I think I think it's got everybody's attention a little bit.

Yeah. I think you get another quarter down the road with maybe a little bit more clarity. You'll you'll feel better about how things are how the pipeline is feeling or shaping up And maybe just the last one, [indiscernible] for Steven. Just step back to the margin for just a minute.

Steven, I think you said don't know if you said where you exited the quarter. I think there's some liquidity that came in and can you just remind us where you exited exited the month and just kind of what what your starting point is for the margin you know, as we as we go into second quarter. And then and just as you relate that, Steven, just the the pressure point as far as know, it sounds like and maybe I'm understanding it right. The risk to the margin moving lower is the competition at this point. Is that what you count as kind of the greatest risk to maintaining the margin?

Yeah. Hi, Brian. Yeah. Yes. I would agree with that last statement. Yeah. We'll see how how rational everybody is, you know, over the next quarter and the second half of the year. But it's it sounds like it's still pretty aggressive on both sides of the balance sheet. So as mentioned, the the margin excluding event income for the quarter was $4.42, same number there for March was $4.38 That had 200 or 300,000,000 more in average cash balances in March than we had in in February. So that's driving that number down some. But like I said, you know, in that 4.4% range, plus or minus a couple is you know, where we feel like we can operate.

Gotcha. Okay. I think that's that's all for me. So congrats on a great start to '25, and we'll look forward to seeing a similar quarter in 2Q. [indiscernible] Yeah. Thank you.

I think kind of wrapping up now, Don. It's all right. It was a great quarter. I expect this quarter to be as good or better. Than than last quarter. I see any reason Y'all vast we've done it. I've run-in y'all at at many times He said, what do you want to happen? I said, nothing. We just wanna leave it like it is. We're we got the home bank shares is what we call humming right now. It's humming about as good as it's ever hummed. So we're pretty pleased on this end. It's we'll talk to you in ninety days. And, hopefully, we have as good or better news, maybe a deal by then. So you very much for your support.

Thank you all for joining the Home Bancshares Inc. [indiscernible] Today's call has now concluded. Thank you for your participation and you may now disconnect.