Home BancShares, Inc.

gentlemen welcome to the home bank shares incorporated first quarter 2025 earnings call the purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday the company presenters will begin with prepared remarks and then entertain questions please note that if you would like to ask a question during the question and answer session please press star then one on your touch phone. If you decide you want to withdraw your question, please press star then two to remove yourself from the list. The company has asked me to remind everyone to refer to their cautionary notes regarding forward-looking statements. 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, please press star then zero. It is now my pleasure to turn the call over to Donna Townsend, Director of Investor Relations. Please go ahead.

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 John Marshall, President of Shore Premier Finance. Opening remarks today will be from our chairman, John Allison.

Good afternoon. First today, I want to pay tribute to a special friend of HomeBankShare's 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 that walked in the same shoes that I walked in while he was building, happy as I've been building home bank shoes. He was a confidant. Pat lit up a room with his outgoing personality and was a good man of God and always wanted to pray for all of us on the board, and we probably needed it. Someone briefly said, I bet Pat, as he goes through the pearly gates, is telling God about his bank's new CD special. That's Pat Hickman that 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, home strength is no accident. couple our strength with peer leading performance methods, and you get the results you get that may 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 that 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 and make them proud to be shareholders of HomeBank shares. It's really nice to have the large Texas cleanup behind us, or basically in the rearview mirror. Pretty much done. Plus, it appears we've reached a 10th resolution to the Texas lawsuit we filed a couple years ago. So that may 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. That requires constant watching with a laser focus, both internally and externally, and 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 chuck wagon. And 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 beat. Earnings showed $115.2 million, a record $0.58 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 $0.56 a share. I want to bring to your attention that the expense of the Texas lawsuit was in this quarter, and that was $2 million after tax, and hopefully that will be non-reoccurring in the second quarter. Without the expense, the core would have been $114 million and 57 cents a share. Our gain from our equity investment was backed 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 business man in me, always reaching for a little extra. Revenue, home was a beat on revenue. We were able to grow revenue faster than interest expense, $260.1 million in revenue. We edged out the fourth quarter of 24 by $700,000 and the first quarter of 24 by $13.1 million. With rates down, we are pleased to continue our plan to top our billion-dollar run rate that we did in 24. Margin, strong improvement on late quarter, up 444 from 439 in the fourth quarter and 413 in the first quarter. Net interest spread improved 11 basis points from December 24. at 358 to 369 for the first quarter of 25. Nice improvement while yield on loans expectedly dropped on the linked quarter basis to 7.38 from 7.49. Loans, strong loan quarter with our community footprint increasing $291.5 million while CCFG declined 103 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. And we're $14,960,000,000 at December 31, 2024. And if I'm not mistaken, we've gone over, ticked over, I don't know if it'll hold, but we've ticked over $15,000,000,000 so far this month. Deposits, strong deposits with an increase of over $395 million for Q1. The increase took us to $17.5 billion from $17.1 billion 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 2.80 at year end, I said last quarter, I 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 deposits in the flight to safety. There is no place like home. Pre-tax net income for the quarter was 56.58%. I don't know how you fuss with those numbers when you bring 56.58% of your revenue to the pre-tax bottom line. Asset quality non-performing loans improved to .60 from 6.7, while non-performing assets improved to .56 and .63. Reserve coverage grew to 312% from at the end of the year, 278%, and non-performing dropped 13 million. As of March 31, 25 non-performing loans were $89.6 million and non-performing assets were $129.4 versus December 31 where non-performing was $98.9 and non-performing assets was $142.4. Capital ratios continue to build. CET1 at 15.4, leverage at 13.3, and total risk base at 19.1. Tangible book value increased to $13.15 from $11.79 a year ago, up $1.86. Book value hit a new record, surpassing the $4 billion 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 10B55 during our quiet period. but had no idea of the opportunity to buy back stock at these prices, and the purchases had been limited by our filing. We purchased over a million shares, right at a million shares, I think in the nose for the quarter, and will 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, Holmes' powerful balance sheet, coupled with repetitive strong arms, that's now showing a possible breakout, but causes strong margins, conservative growth, good loan quality, massive capital, hands-on management, expense control, and don't forget our discipline, drive, and determination that has led us to pure leading performances. It feels good to be one of the best, and we love to win. We picked this up on, somebody wrote something about it, says that home strength is not an accident. We've kind of picked that up, and we're gonna use that in some ad campaigns. It was quite a quarter, Donna, and I want to thank all the team at Home Buy Shares for a great effort and what I consider a perfect quarter. Donna, I know you're proud yourself of the numbers as well, and I'm going to 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. When we talked last quarter, we mentioned that we would be pleased if 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. We are excited about the deposit growth we saw in the quarter at nearly $400 million, 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, Stephen. 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 are in process with nearly $7 million recovered from the fourth quarter charges. 90 days ago, I indicated that I expected total recoveries on the cleanup to exceed $30 million over time and I still believe that is the case. As expected, MPAs were reduced in the first quarter, and I anticipate further reduction in Q2. All of that and solid loan growth driven by the community bank markets. As Johnny said, an 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 10th anniversary at Home Bank Shares. For those that may be looking to mark the anniversary, I'll tell you that the traditional gift is aluminum or tin. I'll be honest with you, I was a little disappointed when I discovered that. Over the past 10 years, CCFG has funded over $15 billion of loans and has grown the portfolio to over $1.7 billion, representing a cumulative average growth rate of over 10%. We think of that as a pretty good start. I'll talk today specifically about our commercial and industrial loan book. It was noted earlier that the CCFG portfolio declined approximately $100 million in the first quarter. as well as last quarter's decline, occurred exclusively in the C&I portfolio. Historically, we've had two types of credits in our commercial portfolio. The first, single credit, broadly syndicated and middle market loan. And the second, structured facilities 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 million, and today it stands at less than $10 million, 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 CNI bloc, We expect to add back to the structured portfolio. Historically, CNI has represented approximately 20% of the total portfolio. Today, it stands at less than 10%. Over this prior year, we've created capacity to selectively add back to this book. Meanwhile, our commercial real estate book, which represents the core of our loan book, was stable to up over the quarter and up about 5% over the past year. The new loan pipeline remains active. Over the past 12 months, we originated just over a billion in new loans, and I would expect to meet or exceed that total in 2025. These past 10 years have been the most rewarding of my career, and I wanted just to take a moment to thank everyone that 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 congratulations on your 10-year anniversary. It's been a pleasure. Thank you. Johnny, before we go to Q&A, do you have any additional comments?

Well, I just want to say that I think we're going to do something, send Chris a roll of tinfoil or something. Now, don't spoil the surprise. We'll get a big roll, Chris, that your wife will appreciate.

Yeah, I appreciate that.

I didn't realize it was 10. So anyway, thank you. I don't have anything else. The numbers speak for themselves. We're going to go straight to Q&A. Let everybody ask what they want to ask. Great quarter, though. Great job for everyone. Bye, everyone. Thanks.

Thank you. If you would like to ask a question, you can do so by pressing star followed by one on your touch screen keypad. If you change your mind and would like to remove yourself from the list, you can do so by pressing star then two. We will pause here 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, uh, thanks for taking my questions. Um, really solid quarter, you know, kind of all around, but I w I wanted to get a sense from, from you guys. Um, you know, obviously this quarter's growth was, was strong, but just in general, what you're hearing, you know, from your customers, you know, I think an increasing number of banks are just citing, you know, some, some, uh, you know, tepidness from, from borrowers. And, you know, I specifically wanted to ask about, uh, 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 would you hear and see it from your borrowers just given some of the uncertainty out there, thanks.

hey Michael this Kevin Michael this is john. Go ahead john talk about i'm sure i'll talk in general.

Yeah, no, just because Michael had mentioned the boat loan specifically. Michael, what we have seen, I guess, in the first quarter is elevated volume compared to 1Q of 24. But a large part of that, because one of our European manufacturers, a significant relationship of ours, has been offering to subsidize the pricing, and so that has tended to elevate the production volume, and 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 community bank footprint, I think what you stated is what we're hearing from a lot of people, too. I mean, there's some uncertainty, obviously, over what's happened in the last month, and that may keep some projects that maybe are kind of in the development stage and the planning stage, it may slow some of those down. I mean, still a lot of good things happening. in our core markets. So, you 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 Stephen. How much, you know, pull forward or repricing opportunity is there on the deposit or liability side? And, you know, it's good to see Michael Leclerc- You know loan yields still you know, holding in there, above you know well above 7% obviously down Q amp Q, but can you just give us an update on kind of where new production. Michael Leclerc- 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.

Michael Leclerc- Sure hey Michael so several questions there I guess production. in Q1 was a little over $800 million. Weighted average coupon was $775. So still hanging in there fine north of prime. On the deposit side, just here recently over the last couple weeks have 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 hearing banks 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 600 million maturing this quarter. We've got about 400 million next quarter. out of a billion eight that we have, I think 85% or more matures within 12 months. So we're pretty short on the CD portfolio and we should see, you know, 10, 15, 20 basis points potentially come down as those come through. So, yeah, I think margin overall, you know, I think same messages as we have for quite some time now would be pleased to see it kind of hold in the 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 lately just with tax payments going out over the last couple of weeks.

Very helpful. Maybe just finally, last one for me. Johnny, I think you mentioned this in the outset, the credit cleanup around Happy being just about done. You had 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, you know, industries or verticals that 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 from a general sense. I mean, we ask that question in every presentation. We're asking our lenders about that individually. Because it affects, even within an industry, people differently. So we're just dealing with that from a one-off individual perspective. But certainly talk about that in every size of legal. OK, great. And really early yet to know. I mean, you haven't really seen where they're going to land and what's going to get hit and what's not. So it's a little early. We're having the discussions, but there's no definitive answers. That's pretty well put.

Thank you, Michael.

Yeah, it's difficult. Yeah, thanks, guys. And Chris, congrats on 10 years. I got a Slurpee coupon coming your way. Thanks, guys. Appreciate that.

Thank you. We have the next question from Catherine Miller 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 million in elevated legal expenses that had to do with the Texas lawsuit, and 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 quarters?

111 is our number, and you pull the $2 million out of expenses, this quarter and you'll be at 110.9. You're right at 111. Our management team is working hard to keep that. I didn't fuss at them this quarter because we had the elevated legal expenses. We were in the middle of depositions on that lawsuit that went on all month long. Anyway, maybe it appears that there's a resolution that's come to that and maybe everybody will continue. Everybody hasn't signed off, but we're working towards that. You know, the 111 is a good number. 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 Stephen's management of the expense side.

Don't count it coming down any further than that. Yeah, it's been really good expense control. And then maybe my follow up on the margin was just on low yields. Can you just kind of give us a sense as to where new wind production is coming on? We talked a lot this kind of quarter about competition being a little bit more intense this quarter. Just kind of curious how we should think about the pace of low yields over the next couple of quarters.

Hey, Catherine, this is Stephen. I'll make the comment there and let Kevin add anything he wants to. Just in general, I think I mentioned earlier, coupon in Q1 production was at $7.75. That's seven 60 or so kind of from the community bank group. Uh, so, you know, a little north of prime and then, you know, mid eights for, for Chris's portfolio. Um, 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, you know, as y'all know, we're disciplined in our approach and, um, you know, think we can kind of hold the line where we're at, Kevin.

No, that's good. I would agree to that.

Okay, great. And then maybe just one on the margin. If we are in an environment where we start to see rate cuts and maybe, Johnny, I love your view and if you think we're going to get them or not, 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? with those cuts.

Thanks. Yeah, 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. We had three, I think we had three rate cuts built into our 2025 budget and actually showed a little expansion throughout the year, you know, and what our budget produced. So, you know, again, I think a lot of that factors on competition and, you know, what we have to do to protect the franchise. But overall, I think in this, you know, 440-ish range, you know, where we're at today would be pleased.

Okay, great. Thank you. Great quarter.

Thank you. Thanks, Catherine.

Thank you. We have John Ostrom with RBC now.

Thanks. Good afternoon.

Hi, John.

Hear me all right? Hey, there. Johnny, what are you thinking on the buyback and capital preferences from here? You still prefer kind of looking around for M&A, or do you think at this point you'd rather be buying back stock?

Oh, if we found the right deal, we'd do one. We have a payoff coming up, looks like. Brian, you want to 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 $140 million. It's currently about 5.5%, but unfortunately, it pops to 9.7% on July 1st, so Our plan is to try to get board approval later this afternoon to pay that off on the July 31st. That'll lower our risk-based capital ratios about 76 basic points once we do that.

Yeah, it adjusts to about nine and a half, so we're not going to pay that. So we'll pay it off. We got the cash paid off, we'll just pay it off.

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

The capital count is getting large. I think Jamie Diamond said it best. There's nothing wrong with having good liquidity and lots of capital in these uncertain times. I like our position. I like the fact we can pay out all our insured depositors. I like having a war chest of capital. We don't know what's going to happen. 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 going to all be in this for a little bit until it gets resolved one way or the other. I just want to be in good shape when we come out the other side ready to play.

Okay, fair enough. So pay 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 that. We've always filed 10B-5. We've picked up about 480,000 shares in this 10b5. Bought a million last quarter on this quarter, so we've picked up about 450,000, 480,000 shares. I assume we'll probably buy another. If they stay down here, we'll continue to buy. We'll just continue to sack it up. I didn't think we'd get another bite at the apple here, but we're getting a pretty nice bite at the apple, so I think we'll just keep buying for a while.

Okay, good. Chris, on your comments, are you essentially calling the bottom? Are you saying that you mentioned a couple of runoff categories that it feels like you've exhausted that? Are you essentially saying your portfolio could be at a bottom in terms of size?

I think that's pretty fair. I'd like it to be. As I said, 100% of the decline in our portfolio has been on the CNI side. We control that. TAB, Mark McIntyre:" 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 kind of felt like. TAB, Mark McIntyre:" weren't great opportunities in the second half of last year on the commercial side without there probably be more we just made a our first commitment. TAB, Mark McIntyre:" This month, this year, so we waited until now, we made a new commitment on a facility so. TAB, Mark McIntyre:" yeah i'd like to believe that will have some payoffs in the. You know, in the theory book, but I think the pipeline 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 117 or so I you know we continue to think to 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.

yeah okay okay good. And then.

kevin just on core growth uh core loan growth in the community bank footprint is there anything you'd call out that's particularly strong at this point um well certainly our our southeast florida group our metro groups there's you know 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, so that's going to 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 doesn't show some stuff that I'm sure will come through, but payoffs definitely are a little bit higher.

Yeah. Okay. Okay. Fair enough. just one comment on tin and aluminum i i see john marshall does not have any foreclosed assets but about five million in non-performers so johnny maybe there's an alumicraft in there for uh for polton thanks john that's helpful all right that's that's all i had I've just been waiting. I've been waiting.

Oh, that's funny. Thank you.

Thank you. We now have Brett Robertson with .

Hey, good afternoon, everyone. I wanted to start back on the recoveries. And I think, Johnny, you mentioned you still expect the cleanup to have 30 million 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? And 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 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. for as 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, 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, all of it has happened other than the monthly payments.

Okay. Okay. Um, and, and any thoughts, Johnny, I know it's, you've, you've had a 2% reserve in the past and you're still way above almost everyone else. Do you want to 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, you know, I like 2% and I don't have to reiterate, but I'm going to. It has always worked. Good times, bad times, recession, financial crisis, interest rates, 2% always worked. I didn't expect loan growth to be this powerful the first quarter, and it was really good. Or you would have seen it go back up. The recoveries would have taken it back up. But it just matched out pretty easy with the rate. loans. And so I think we're at 186. We're still at 186. So 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 a conservative way to run this company is to err with too much reserves and too much capital. So you know how we do it. And if we get a chance to do it, if we don't, we'll leave it probably not going to let it drop. I'm trying not to let it drop any from where it is. So hopefully we continue to, we know we're continuing 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 seven million last month. We charged off a couple million and ended up with four and a half or five. So which was the $190 million loan growth is what it was.

That's about what it took.

Yeah. Okay. And then just back on the M&A topic, you know, I assume you're going to 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 going to 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 a you know i know it's hard to hard to gauge with the uncertainty well we just saw cadence get that deal done in 60 days how long has it been since we saw a deal get done in 60 days it's been the last trump administration so you know it it is a positive for banks it certainly is a positive for banks and french hill head of the financial services committee first banker in 100 years to head that, that's a plus for the banking industry. You got a real banker running financial services. So I think that's a plus. I think Trump is going to 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 tough stuff going on, but we're not on a trade right now, but we're not off a trade. So we're open to... to what makes sense. And we'll do a trade. I mean, I'm excited. I think you can close a deal in 60 days. That really gets pretty exciting. So from that perspective, I'm more inclined to do something. We're not really on something right now. We were on one last quarter and do the Texas cleanup, having to get all that crap out of the bank. We didn't want to go forward with that. So anyway, that one could come back at some point in time. 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 Texas and we spoke there in front of about 120 bikers. So I told them our door was open if any of them were interested in coming to come on and we'll visit. So we're not excluding the M&A deal. When you run a 2% ROA as we did for the quarter, We can't get much better than that, can we? We just can't, you can't get much better than that. So it's time to bring some assets in and 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 Texas recently, this last conference, I 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 0.9. And I said, we're doing a two. So think about that. And you want to sell your bike. What should I pay you for it? You know, I paid 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 going to do, we're going, we're going to do 1.8. That's well, then wait till next year to sell it. Right. If you're going to 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 I'm coming from? Okay.

Yeah. Yeah. And I think that makes great sense. I appreciate the color and congrats on the quarter.

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

yeah thanks guys um congrats on the quarter uh johnny wanna just yeah just want to continue that last discussion you had on the m a front and i'm i'm curious if we're if we are seeing faster approvals on on deals and and you mentioned you know up to 60 days on some of these deals does that allow you to do anything interesting on the m a side and and some of your peers have talked about it's really more comfortable doing multiple deals in the same year, uh, if that's the case, you know, it could allow the bank to do, you know, perhaps some smaller deals that they wouldn't have considered in the past if you can do multiple smaller deals. So just curious how the change of faster approvals, how that would change your M&A strategy if, if at all.

Well, it, it excites me to look at M&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 adverse to doing a smaller deal at all. You know, the last one we did was the happy deal. And, you know, the train wreck we ran into there with that deal. But 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'd prefer to maybe do a smaller deal or a multiple smaller deal. I'm sure my people would prefer to do one larger deal because it's about as much work to do a smaller deal as you know is to do a large deal. You'd have all your focus on one trade, but I wouldn't be adverse to doing a couple of smaller deals at all. I'm looking. I'm ready to find something. I'm absolutely ready to find a trade that makes sense. around a 2.05 or six for the month, I can't ask for any more than that. This team needs some new assets. They need some assets of somebody who's running a 1% ROA that wants to be a partner and come in and let us help them get it to a 2% ROA. I mean, that's our game, right? That's what we've done over the years is buy a bank that doesn't perform there 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 two times tangible, I'm not going to pay somebody two times tangible. There's not but a handful of us that trade it two times tangible, and we trade there because of the continued quarter after quarter after quarter performance.

of the companies so that's why we trade there and people that are not there they trade there for a reason so no disrespect this is what it is and johnny on the topic of just smaller banks can you put any numbers behind that in terms of how how small would you go uh versus you know how how small is just too small i guess to consider

below 300 probably is too small. However, if it was sitting next door to Palm Beach or sitting next door to Miami and it was the in-market merger, we might look at something smaller than that. It just depends on where it is. If it's out there by itself, then we probably wouldn't be as aggressive on it. If it's in some place where we operate today, then we could be a little more aggressive on it. I mean, you've heard my story. The CEO wants to stay. We'd love to have the CEO. If he doesn't, particularly in Florida, we can just pour it in somebody's bucket because those guys understand us. They know what we're doing. They've been with us for years. You don't have to hold those guys in Florida's hands. They just go get it. And that's what's happening in Texas, too. Our team in Arkansas is that way. Texas is that way. Chris runs his own deal in New York, as you know. So I don't have to hold these guys' hands. And if we get an opportunity in a market, even if it's $150 million, it's next door. It might make a lot of sense if it's accretive, if it could be somewhat accretive to us. I mean, you can do it. billion dollar deal and it adds two cents a share, or you can do a $150 million deal next door and it may add two cents a share. So it depends on how much it adds to the EPS. We're in the business of making money for our shareholders and we're going to make money for our shareholders. Most of these people sitting around this table right now are big shareholders of this company. So they're as aggressive as I am about looking for the next deal.

All right, guys. Thanks for the commentary. Congrats on the quarter.

Hey, thanks, man. Appreciate it.

Thank you. We have Steven Scudin with . Please go ahead.

Good afternoon, guys. 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 not there, but he's missed.

He's sitting at the end of the table wanting his mouth right now.

There you go. You guys all should have one just to honor him on what I think is maybe his last time he's called. It's been a great run. I guess maybe one last question on the M&A front. What do you think we need to kind of get the ball rolling on a deal flow perspective? I mean, Do we still need lower rates? Is it marks on our interest rate marks that are keeping deals from getting done? Do we just need higher stock prices? I mean, I think most of us thought we have seen a lot more deals in this administration by now. I'm just wondering what you think we need to see to kind of get the ball rolling a little bit more.

You know, I saw Kevin showing his head when he said lower. That'll improve some people. That'll make them want to come out. It's about as broad as it is long when you think about it. We're just a tick below two times 10 to a book. We're right at two times 10 to a book. And we're at two-fives, you know, or two-sixths. It's all relative, you know. Somebody said, well, I'm going to get one-sixth or one-seventh. Well, when they get one-sixth, I'm probably back to two-fives or two-sixths. So it kind of 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 securities book, it's hard to make a deal with those people because the mark is so deep into their book. But it's all relative, right? It's based on what we pay for them today and how long it takes for them to heal up. maybe they don't heal up for a couple of years. So maybe they don't sell for a couple of years. But it all floats about the same. I mean, when Trump went in, we got the Trump bump and huge raise of all back, raised the level of all back stocks. Well, the tariffs come in and they're going back down. So we're back where we were prior to the Trump bump. I think it's just a matter of educating the seller because if the seller is willing to make a deal at a 0.9, then he benefits from that and it's accretive to the company and he gets to ride our stock. He gets to ride a really good quality stock and 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 and just the absolute number at announcement which to your point doesn't doesn't really make any sense but that's helpful johnny um i guess you know you said something interesting obviously even in your press release right banking boils down to revenue and expenses right and y'all's expenses are about as low as it seems like you can get them You're talking about needing more assets to build revenues, but apart from M&A, are there any other levers you feel like you can pull to kind of, 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 grow revenues disproportionately?

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 going to 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 making 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 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. We had, one other deal was pretty good. Oh, it looks like we may have settled the Texas lawsuit. It 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, I wish we didn't have it, was a life insurance policy for Mr. Hickman Pat. I'd much rather had him than the money, so got that coming in. So we got a good start on next quarter, and the run rate's up a million three through today. So that tells you kind of what I'm thinking, and I'm pretty happy. 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 now that makes a lot of sense i appreciate the color everything else kind of had has already been asked a fantastic quarter yet again appreciate the time hi stephen thank you we appreciate you a lot you're you you're 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 Johnny Montgomery. Please go ahead when you are ready.

Hey, guys. Hi, Brian.

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

Yeah, there's still probably another 12 or so that I'm hopeful to move this quarter. From there, it takes the credits, mpas 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 flowed for two months on p on what would be p i payments and the other one of the other two is is really close but that's a you're probably six months you gotta have six months of that that sort of activity before you move it out so I think at best case, you know, one of those is probably a third quarter, uh, third to fourth quarter activity. And those, you know, from there, from the 12 million, I said early, it takes that to get any, anything else out of any size. Cause 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 can still see a good chunk. Both of those could go in the second half of the year or later in the year, if that's possible?

Possible, yes. Possible if the current trends continue.

Okay. Got you. And then I don't know if you mentioned it, Kevin, if I missed it in your opening remarks, just kind of the loan pipeline is community bank pipeline today. Um, can you, did you give some color on that? It's how you're feeling about that is you're given the uncertainty that's out there and just how you're looking at the world. I think, I know you mentioned some payoffs.

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. I'm not saying we can't get there, but it's going to take some things happening that aren't on the pipeline yet. We're talking about some stuff that could hit there, but we'll just have to see how that plays out.

Gotcha.

Brian, I think this sheriff deal has kind of shook everybody up a little bit. We'll see how that goes. 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 feel better about how the pipeline is feeling or shaping up. And maybe just the last one for Stephen, back to the margin for just a minute. Stephen, I think you said, I 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 the month and just kind of what your starting point is for the margin, you know, as we go into second quarter. And then, and just as it relates to that, Steven, just the pressure point as far as, you know, it sounds like maybe I'm understanding it right, you know, the risk to the margin moving lower is the competition at this point. Is that what you would count as kind of the greatest risk to maintaining the margin?

Yeah. Hey, Brian. Yes, I would agree with that last statement. We'll see how rational everybody is over the next quarter and the second half of the year, but it sounds like it's still pretty aggressive on both sides of the balance sheet. As I mentioned, the margin excluding event income for the quarter was 442. Same number there for March was 438. That had $200 million or $300 million more in average cash balances in March than we had in February. So that's driving that number down some. But like I said, you know, in that 4-4 range, you know, plus or minus a couple is where I feel like we can operate.

Gotcha. Okay. I think that's all from me. So congrats on a great start to 25, and we'll look forward to seeing a similar quarter in 2Q.

Thank you, Brian.

Yeah, thank you. I think kind of wrapping up now, Donna. That's all right. It was a great quarter. I expect this quarter to be as good or better than last quarter. I don't see any reason. Donna and I have run into you at many conferences. You said, what do you want to happen? I said, nothing. We just want to leave it like it is. We got the home bank shares is what we call humming right now. And it's humming about as good as it's ever hummed. So we're pretty pleased on this end. And we'll talk to you in 90 days and hopefully we'll have as good or better news and maybe a deal by then. So thank you very much for your support.

Thank you all for joining the Home Bank Shares, Inc. Conference call, today's call has now concluded. Thank you for your participation and you may now disconnect.