HOMB - NYSE

Greetings, ladies and gentlemen. Welcome to the Home BancShares, Inc. 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. [Operator Instructions] The company has asked me to remind everyone to refer to their cautionary note regarding forward-looking statements. You will find this note on Page 3 of their Form 10-K filed with the SEC in February 2025. At this time, all participants are in a listen-only mode and this conference is being recorded. [Operator Instructions] It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations. 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 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 that walked in the same shoes that I walked in when he was building Happy, as I've been building Home BancShares. He was a [confidant] (ph). Pat lit up a room with his outgoing personality, and was a good man of God and always want to pray for all of us on the Board when we probably needed it. Someone briefly said, I bet Pat as he goes through the perfect gates is telling God about his bank's new CD special. That's Pat Hickman that I remember. We'll 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’s strength is no accident. Couple our strength with peer-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 record. 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 Home BancShares. 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 tenth resolution to the Texas lawsuit we filed a couple of years ago. So, that may go away along with millions of dollars of inspections 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 hard 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 a defensively direction. The bottom line is, as my wife said regardless protect the chuckwagon and that's certainly the most conservative approach. And as I said last quarter, these banks don't run in sales. I'll talk a little bit about the highlights and why they are important to our company, but most of the numbers speak for themselves. Stephen 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 had been fixed around $100 million over the past several quarters. Reported core earnings of that was $111.9 million. That's $0.56 a share. I want to bring 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 $0.57 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 the man in me, always reaching for a little extra. Revenue. Home was on 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 $1 billion run rate that we did in '24. Margin, strong improvement on a linked quarter, up to 4.44% from 4.39% in the fourth quarter and 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 '25, nice improvement, while yield on loans expectedly dropped on a 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 million for net loan growth for the quarter of $187.6 million. At March 31, we were at a record level of loans at $14.950 billion, and were $14.960 billion at December 31, '24. If I'm not mistaken, we've gone over -- tipped over, I don’t know if it will hold, we've tipped over $15 billion 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-to-deposit ratio to 85.24%, and that's in spite of the strong loan growth. The rise 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 depositors in the flight to safety. There is no place like Home. Pretax net income for the quarter was 56.58%. I don't know how you [puzzle] (ph) those numbers when you bring 56.58% of your revenue to the pretax bottom line. Asset quality, nonperforming loans improved to 0.60% from 0.67%, while nonperforming assets improved to 0.56% and 0.63%. Reserve coverage grew to 312% from at the end of the year 278% and nonperforming dropped $13 million. As of March 31, '25, nonperforming loans were $89.6 million and nonperforming assets were $129.4 million, versus December 31, where nonperforming was 98.9% and nonperforming assets was $142.4 million. 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 10b-5filed during our quiet period, but had no idea of the opportunity to buy back stock at these prices and the purchases have been limited by our filing. We purchased over 1 million shares or right at 1 million shares, I think, on the nose 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 to 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 us, it says that Home’s strength is not an accident. We've kind of picked that up, and we're going to use that in some ad campaigns. It was quite a quarter gone. I want to thank all of the team at Home BancShares for a great effort in what I consider a perfect quarter. I know you pride yourself of the numbers as well, and I'm going to turn it back to you to let you have it.

Thank you, Johnny. Congratulations on a fantastic quarter. Our next report today will come from Stephen Tipton.

Thanks, Donna. When we talked last quarter, we mentioned that 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 6 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 noninterest-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. The anticipated recoveries from the fourth quarter cleanup were 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, the NPAs were reduced in the first quarter, and I anticipate further reduction in Q2. All of that and solid loan growth driven by the community banking markets. As Johnny said, an almost perfect quarter. Donna, back to you.

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

Thank you, Donna. This quarter, we celebrated our 10th 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. 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 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. This decline as well as last quarter's decline occurred exclusively in the C&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 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 debt 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 C&I book, we expect to add back to the structured portfolio. Historically, C&I 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 $1 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 in my career, and I wanted to 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. Donna, I'll hand the call back to you.

Thank you, Chris, and congratulations on your 10-year anniversary. It's been a pleasure. 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 tin foil or something? [indiscernible] We'll get a big roll.

Yeah, I appreciate that.

I didn't realize it was tin. So anyway -- thank you. I don't have anything. The numbers speak for themselves. We're going to go straight to Q&A. Everybody ask what they want to ask. And great quarter though, great job for everyone, by everyone. Thanks.

[Operator Instructions] The first question we have comes from Michael Rose with Raymond James. Please go ahead.

Hey, good afternoon, guys. Thanks for taking my questions. Really solid quarter kind of all around. But I wanted to get a sense from you guys. Obviously, this quarter's growth was strong. But just in general, what you're hearing from your customers, I think, an increasing number of banks are just citing some tepidness from borrowers. And I specifically wanted to ask about the boat lending and if there's been any drop-off in demand there and maybe just where pipelines are. 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 [indiscernible] and I'll talk in general.

Yeah. No, just because Michael had mentioned the boat loans specifically. Michael, what we've seen, I guess, in the first quarter is elevated volume compared to 1Q of '24 and been 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 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, I'm hopeful that, that will be short term, but still a lot of activity and a lot of good things happening.

Very helpful. And then maybe if I could just get to the kind of the puts and takes on the margin for Stephen. How much pull forward or repricing opportunity is there on the on the deposit or liability side? And it's good to see loan yields still holding in there above -- 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 think about the margin here in the near-term? Obviously, if the growth continues to come through, that would be a helper. Thanks.

Sure. Hey, Michael. Yeah. So, several questions there. I guess production in Q1 was a little over $800 million. Weighted average coupon was 7.75%. So still hanging in there fine, north of prime. On the deposit side, just here recently over the last couple of weeks have kind of tried to reignite a little effort on negotiated checking, savings, those kinds of things. A lot of that is going to obviously depend on competition. You had a call earlier this week with our presidents and you're still hearing banks offering 4.5%. 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 $1.8 billion 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 10, 15, 20 basis points potentially come down as those come through. So yeah, I think margin overall, I think same message 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 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 industries or verticals that you're putting a little bit more eyes on at this point, just given the tariff uncertainty?

Hey, Michael, this is Kevin again. Not from a general sense. I mean, we asked that question in every presentation, we're asking our lenders about that individually, because, it affects even within an industry, people differently. So I mean we're just dealing with that from a one-off individual perspective, but certainly talk about that in every size of the legal.

Okay. Great.

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 ahead of the discussions, but there's no definitive answers.

That's pretty well put. Thank you, Michael. Appreciate the support.

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 Mealor with KBW. Please go ahead when you’re ready.

Thanks, good afternoon.

Good afternoon, Catherine.

Johnny, you mentioned about expenses, and 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 of quarters?

$111 million is our number and you pull the $2 million out of expenses this quarter, you'll be at $110 million, $109 million. So you're right at $111 million. So our management team is working hard to keep that. And I'm not going to -- I didn't fuss that in this quarter because we had elevated legal expenses. We're in the middle of depositions on that lawsuit, they went on all month long. Anyway, that -- maybe that it appears that there's a resolution that's come to that, and maybe everybody will continue. We have -- everybody hasn't signed off, but we're working towards that. So -- the $111 million 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 on the expense side. Don't count any coming down any farther than that.

Yeah. No, it's been a 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 kind of curious how we should think about the pace of loan yields over the next couple of quarters?

Hey, Catherine, this is Stephen. I'll make the comment there, and, Kevin, add anything if you want to. Just in general, I think I mentioned earlier, coupon in Q1 production was at 7.75%. That's 7.60% or so kind of from the community bank group, so a little north of prime and then mid 8s for Chris' portfolio. We're hearing from our lenders, competition is quoting some things in the 6s, and we may have to deal with that at some point. But as you all know, we're disciplined in our approach and think we can kind of hold the line where we're at. Kevin?

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

Okay. Great. And then -- and maybe just one -- just on the margin. If we are in an environment where we start to see rate cuts and maybe, John, I'd love your view and if you think we're going to get them or not. But just as we get into an environment, potentially 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 and 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 4.40%-ish range where we're at today would be pleased.

Great. Thank you. Great quarter.

Thank you, Catherine.

Thank you. We have Jon Arfstrom with RBC now.

Thanks, good afternoon.

Hi, Jon.

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

If we found the right deal, we’d do one. We've got -- we have a payoff coming up, looks like, Brian, do you want to talk about what we are coming at?

Sure. We probably will pay off some sub debt. Sub debt that we acquired from Happy. It will be about $140 million. 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 will lower our risk-based capital ratio is about 76 basis points once we do that.

Yeah, it [Technical Difficulty] about 9.5%. So we're not going to pay that. So we'll pay it off. We got the cash to pay if off. We’ll just pay it off.

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

It is getting -- capital count is getting large. I think Jamie Dimon said it best. There's nothing wrong with having good liquidity and lots of capital in these kind of uncertain times. So, I like our position. I like the fact that we can pay out all the insured depositors. I like having Worchester 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. This be in good shape, we come out the other side and ready to deploy.

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've always filed the 10b-5. We picked up about 480,000 shares this 10b-5. About 1 million last quarter and this quarter. So we picked up about 454,000 shares. And I assume we'll probably buy another -- if they stay down here, we'll continue to buy. We'll just continue to stack it up. We -- I didn't think we 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 Poulton, 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. We -- as I said, 100% of the decline in our portfolio has been on the C&I side. We control that, right? We can come in and we can come out of that. I wanted to leave a little dry powder coming into this year, on commercial because we kind of felt like weren't great opportunities in the second half of last year on the commercial side. We thought they'd probably be more. We just made our first commitment this month this year. So we waited until now, we made a new commitment on the facility. So yes, I'd like to believe that we'll have some payoffs 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 1.7% or so. We continue to think 2% is a good number, and I think we'll get back there. It's just not a race to get back there.

Yeah. 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, certainly, our Southeast Florida group, our metro groups. There's just a lot of stuff, good stuff happening in Florida and even in the Dallas metros. I think I'd probably call those out. 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 will -- that I'm sure will come through. But payoffs definitely are a little bit higher.

Okay. Fair enough. Just one comment on tin and aluminum. I see John Marshall does not have any foreclosed assets, but about $5 million in nonperformers. So, Johnny, maybe there's an alumacraft in there for Poulton?

Thanks, Jon. That's helpful.

All right. That’s all I have.

That’s funny. Thank you.

Thank you. We now have Brett Rabatin with Hovde Group.

Hey, good afternoon, everyone. I wanted to start back on the recoveries. And I think, Johnny, you mentioned you still expect clean-up 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 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 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 $1.5 million 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 million. Most of the other stuff is maybe one other piece, there's may be one other piece that hasn't occurred yet that I'm hoping will happen in second quarter. I think it probably can. Other than that, I mean, all of it has happened other than the monthly payments.

Okay. And any thoughts, Johnny? I know it's you've had a 2% reserve in the past and you're reserve is still way above almost everyone else. Do you want to grow that in some certain 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 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 work, and it just something we -- I didn't expect loan growth to be this powerful the first quarter, I think it was really good. Or you were seeing it go back up, the recoveries would have taken it back up. So -- but it just matched out pretty even with the loans. And so I think we're at 1.86%, we're still 1.86%. 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 [indiscernible] too much reserves and too much capital. So you know how we do it. And we get a chance, we’ll do it. If we don't, we'll leave it. Probably not going to let it drop. I'm not going 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 -- but there's always a little charge-off here, little charge-off there. I think we recovered $7 million last month. We charged off a couple million and ended up with $4.5 million or $5 million. So, which was $190 million of loan growth, what it was, about what it took.

Yeah. Okay. And then just back on the M&A topic. I assume you're going to tell me that everyone is 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 I was just curious on your thoughts on the environment and what you're hearing from folks and what do you think your outlook might be for M&A? I know it's 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 it is a positive for banks, 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 of 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 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 due to 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 and it may or may not come back at some point in time. But 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 bankers. 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. I told the guys in Texas recently at 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 0.9%. And I said, we're doing a 2%. So think about that. And you want to sell your bank, what should I pay you for it? I'll pay you for what it's worth, right? Think about it, think through that. You can't come beating your chest, I want two times book because next year we're going to do 1.8%. I said, well, then wait until 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 we're coming from?

Yeah, yeah, I think that makes great sense. Appreciate the color. 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. Johnny, I want to just, yeah, just want to continue the last discussion you had on the M&A front. And I'm curious if we're -- if we are seeing faster approvals on deals and you mentioned, the 60 days on some of these deals. Does that allow you to do anything interesting on the M&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, 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 just curious how the change of faster approvals, how that would change your M&A strategy, if at all.

Well, it excites me to look at M&A and to be able to get, 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 would 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. The last one we did was the Happy deal. And the trainwreck 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 maybe do a smaller deal, or a multiple smaller deal. So it's just 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. So, and you'd have all your focus on one trade. But I wouldn't be adverse to doing a couple of smaller deals at all. And I'm looking. I'm ready to find something. I'm absolutely ready to find a trade that makes sense. I said a while ago, around a 2.05% or 6% 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 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 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 two times tangible book, I'm not going to pay somebody two times tangible book. There's 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 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 small would you go versus 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 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, if the CEO -- you've heard my story. If the CEO wants to stay, we'd love to have the CEO. If he doesn't, particularly in Florida, we can just port 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, 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 $1 billion deal and it adds $0.02 a share, or you can do a $150 million deal next door, and it may add $0.02 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 these companies. So they are as aggressive as I am about looking for the next deal.

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

Thanks, Matt. Appreciate it.

Thank you we have Stephen Scouten with Piper Sandler. Please go ahead.

Good afternoon, guys. I don't know if you’d 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 with one in his mouth right now.

There you go. See, you guys all should have one just to honor him on what I think is maybe his last earnings call. 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.

I saw Kevin saying this, and we need, when you said lower, that'll improve some people. That'll make them want to come out. It was about as broad as it is long. When you think about it, we're just a tick below 2 times tangible book. We're right at 2 times tangible book. And we were at 2.5 or 2.6. It's all relative. Somebody said, well, I'm going to wait until I can get 1.6 or 1.7. Well, when they get 1.6, I'm probably back to 2.5 or 2.6. 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 have 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. 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. When Trump went in, we got the Trump bump and huge raise of all bank, raised the level of all bank stocks. Well, the tariffs come in and they're going back down. So we're back where we were prior to the Trump bump. So 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 that 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 maybe some pride in just the absolute number at announcement, which to your point doesn't really make any sense. But that's helpful, Johnny. I guess you said something interesting. Obviously even in your press release, banking boils down to revenue and expenses, right? And you all’s expenses are about as low as it seems like you can get them. And 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 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 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 $1.3 million higher through the same day last quarter. We're a $1.3 higher this quarter than we were the 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. It looks like we may have settled the taxes 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, we have a -- I wish we didn't have it was a life insurance policy for Mr. Hickman Pat. I’d really had him than the money. So got that coming in. So we got a good start on next quarter and the run rate is up $1.3 million 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 past if they want to. We're ready.

Yeah, now that makes a lot of sense. I appreciate the call. Everything else kind of I had has already been asked. So a fantastic quarter yet again. Appreciate the time.

Hey, Stephen, thank you. We appreciate you a lot. You're you have a great reputation as an analyst. 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.

Hi, Brian.

Maybe just one for Kevin. Just, Kevin, one the -- in terms of the NPA resolution, I think last quarter you kind of talked about, directionally, what you thought the NPAs could trend to here as you kind of work through the credits. Can you just kind of remind us where that, where you think the NPAs will kind of shake out here over the next couple 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, the NPAs that we have on the Florida member 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 what would be P&I payments. And one of the other two is really close, but that’s -- you're probably six months. You got to have six months of 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, from there, from the $12 million I said early, it takes that to get 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 big is that one?

The one of the three is about $6 million. The second one that's close is $8 million or $9-ish million somewhere in there.

Okay. So you could 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 your -- the loan pipeline -- community bank pipeline today. Can you -- could you give some color on that on how you're feeling about that is given the uncertainty that’s out there and just how you're looking to through that? I know you mentioned some payoffs.

Yeah. I think the pipeline itself, the production pipeline is pretty good. 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 going to take some things happening that aren't on the pipeline yet. And we're talking about some stuff that could hit there, but it'll just -- we'll just have to see how that plays out.

Got you. And then…

Brian, I think this tariff deals kind of shook eveybody up a little bit. We'll see how that goes. And I think it has got everybody's attention a little bit.

Yeah. I think you get another quarter down the road it maybe a little bit more clarity. You'll feel better about how things have -- how the pipeline is feeling or shaping up? And maybe just the last one for Stephen, just 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 was 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 as we go into second quarter? And then -- and just as it relates to that, Stephen, the pressure point as far as it sounds like maybe I'm understanding it right, 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. So, as mentioned, the margin, excluding event income for the quarter was $442 million, same number there for March was $438 million. 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, in that [4.4%] (ph) range, plus or minus a couple is where we feel like we can operate.

Got you. 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, if 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. Last week, Donna and I have run into you at many conferences, and you said, what do you want to happen? I said nothing. We just want to leave it like it is. We got the Home BancShares 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.