HOMB Earnings

Operator: Entertain questions. Please note that if you would like to ask a question during question-and-answer session, please press *1 on a touch tone phone. If you decide you want to withdraw your question, press *1 again to remove yourself from the list. 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 February 2026. At this time, all participants are in listen-only mode, and this conference is being recorded. It is now my pleasure to turn the call over to Donna J. Townsell, Director of Investor Relations. Donna, please go ahead. Donna J. Townsell: Thank you. Good afternoon, and welcome to our third quarter conference call. With me for today's discussion is our Chairman, John W. Allison Stephen Tipton, Chief Executive Officer of Centennial Bank Kevin D. Hester, president and chief lending officer Brian S. Davis, our chief financial officer Christopher Poulton, president of CCF and Scott Walter of Shore Premier Finance. The story of the quarter was stability, strength, and shareholder value creation. All banks are not created equal, in management, profitability, margin, and among many other categories. And we certainly work hard at home to set ourselves apart. We are proud to announce another record setting quarter here at home and our team is prepared to provide more details about our performance. Our first speaker today will be our Chairman, John W. Allison. John W. Allison: Welcome, everyone. it is another strong quarter for Home Bancshares. Led by record earnings of $129.1 million or $0.65 a share. For the first 9 months of 2026, we had remain on the strong path towards my goal, our goal, $500 million. Or does it sound better to $500 million? Never thought I would be saying that, but we are on a path for that. The first 9 months of 2026, we $380 million in adjusted earnings keeping us on a strong path towards our $500 million. Really, the real difference between the earnings and the adjusted earnings is primarily MAP Commerce, the merger expense of $12 million to $13 million. During the quarter, we paid our new dividend of $0.23 a share. I know y'all with that. I would think that is a 9.5% increase and my wife is extremely happy. As y'all remember, she's a dividend hawk for everyone. Increase in the last quarter, we repurchased 1.3 million shares for $39.3 million, created a shareholder buyback yield of 0.69% in the third quarter. Second quarter, we created a shareholder buyback yield of 0.7, and the first quarter of 0.25. So total through 3 quarters additional shareholder return of 1.71% For the 3 quarters, we have repurchased 3.3 million shares $94.4 million, with plans to continue stock repurchases during the fourth quarter. Couple that with a new dividend yield of approximately 3%. It is our goal to return as much capital to our shareholders as prudent to do so. I understand the importance of shareholders because they are the ones who we work for. Being a founder, chairman, owner operator, and largest individual shareholder, I understand the alignment firsthand Management is invested alongside our shareholders. And we remain committed to sharing the rewards of the company performance with them. That more than confirms the passion and drive to share the rewards. with all our shareholders. Home's earnings power and balance sheet flexibility was shining brightly in the third quarter, With record profitability, strong stock repurchase, margin expansion, increased dividend, consistent ROI, strong PPNR, tangible book per share growth, low efficiency ratio. It will be interesting to see once we as time goes on in this quarter, how we compare to the rest of the industry. We are proud of the fact that we have been named by many companies for outstanding peer leading performance awards year in and year out. And as we forge forward on our goal of $500 million in profit. As I said in the second quarter, Mountain Commerce transaction is performing very well and making a continued contribution to the total company. Based on what I have seen, I do that transaction again. We expect additional benefits as we complete the back office integration. during the fourth quarter. Congratulations on a good job to our new Tennessee partners I am proud of the work you are doing. Again, the big surprise, like the second quarter, was the third quarter average loan growth balances outstanding. What appeared to be a large down quarter like the like last quarter turned out to be only $28 million on average balances from last quarter. that is result of keeping many of the loans at payoffs coming late in the quarter. Our funding strategy also continued to benefit earnings Bond expenses during the quarter declined $2.3 million. Decrease in interest expense on deposits $1.2 million of that, and $1.1 million in interest expense on federal home loan borrowings and other borrowings, as we reduced total borrowings $200 million during the quarter. Many banks might think their ALCI pain is over because they restructured the balance sheet, taking hundreds of millions of dollars, in some cases, billions of dollars in losses, attempting to repair the damage inflicted by their decisions. The story appears to be repeating itself again as rates continue to climb. Home avoided taking excessive duration risk maintain balance sheet flexibility, and protected shareholder capital. Our disciplined decision not to build a large, long duration securities portfolio has proven to be the right 1. Higher rates still affected our ALCI during the quarter, but the impact remained manageable relative to our size. If you remember, we have not bought securities in years to speak of. A key point that differentiates home from most banks is evidenced by the increase in margin for the quarter is the balance sheet is structured to increase the margin as rates increase. Donna said all banks are not created equally, and they are not created equally. But when rates go up, bank stocks usually go down. When it is actually positive for Home Bancshares as you can see for the quarter. We built this balance sheet to perform through different economic and interest rate environments, and that discipline continues to benefit our shareholders through the day. Those pushing public banks to buy low rate long term securities several years ago now the ones pushing for growth. Grow, grow, grow. Growth at any expense. They say, John, open up that loan machine. I really bet that few, if any of them, have ever run a bank. Being 1 of the most profitable and safest banks in the country year in and year out, has worked for our shareholders. We will stay the course as we have in the past. I would rather be known as 1 of the safest and most profitable banks in The United States than 1 of the problems losing millions of hard earned money of the shareholders. We will grow when opportunities meet our standards for credit quality, pricing, and shareholder returns. We will stay the course and you can bet on that. Regarding a large nonperforming loan we have been discussing for several quarters, or our long standing guidance has been we have no additional loss in the large Texas C&I relationship. And in fact, we expect recoveries over time. there is been a lot of positive movement in this credit over the last 90 days. 80% of the assets of the company are under a signed asset purchase agreement that we expect to close tomorrow, next week, 3 weeks from now, but soon. And the remaining 20% have a preliminary agreement with only 1 contingency that will be resolved once the first part is sold and completed. So when the 80% is sold, understand the other 20% will come right after that. We expect these transactions to close this quarter. The scheduled proceeds from these 2 sale transactions would result in a recovery over the current carrying balance. Remaining balances owed and the proceeds would be between the personal guarantors and Home Bancshares. Profitability, as I said already, of our company, we had a 1.66 PPNR, and I think Stephen is going to cover most of those. We came out with a pretty good efficiency ratio of 40.84 for the quarter and a 2.11 ROI, and that is without the Mountain Commerce conversion. And nonperforming ticked up a little bit, but that is not concerning to us. At that, I think Christopher had a little 1 that popped up. $11 million or $12 million, and he is around to discuss it. If you all want to ask a question. I would like to say a special thanks to our team for continuing to produce better numbers almost every quarter on our 26 year life. We are honored to be a continuing top performer year in and year out. Donna, I think that is all the news I have because all the news I have was good. And I have no bad news. Donna J. Townsell: Okay. Well, no bad news is good news. So thank you, John. Our next report comes from Stephen Tipton. John Stephen Tipton: Thanks, Donna. As John mentioned, the third quarter of 2026 was another strong performance for Home and Centennial Bank. Adjusted earnings were $129.1 million, an increase of $1 million from last quarter. Performance metrics are again top tier: a 2.11% return on assets, and a 16.54% return on tangible common equity, which is on a TCE ratio of 13.48%. The reported net interest margin was 4.53% an increase of 2 basis points from Q2. The core margin, excluding event income, was 4.50%, up 3 basis points from the prior quarter and up 4 basis points year over year. The overall loan yield excluding event income averaged 6.91% and exited the quarter at 6.90%. While interest bearing deposit costs averaged 2.37%. Total deposit costs were 1.83% in and exited the quarter at 1.81%. Switching to the balance sheet. Legacy deposit balances declined in Q3 by $358 million as a result of a decline in municipal deposit balances quarterly tax payments in September, and the reduction of wholesale deposits from the MCB acquisition. We continue to focus on core deposit relationships in this extremely competitive rate environment. Non-interest-bearing balances now stand at $4.21 billion and account for over 22% of total deposits. Loan production softened slightly in the third quarter to $850 million reflective of our conservative approach to underwriting and disciplined pricing. Tennessee contributed nicely this quarter with almost $70 million in production. Payoff volume that we have discussed in the past materialized in Q3, with payoffs at $1.01 billion Our pipeline for unfunded commitments remained strong at over $3.8 billion As Johnny mentioned, tangible book value per share grew $0.03 to $15.35 despite a $65 million increase in AOCI and the share repurchases, a testament to the earnings power and stability of our company. Capital levels remain extremely strong, with common equity Tier 1 capital ending at 16.7%, total risk based capital at 19.4%. And reserve to total loans of 1.93%. We believe our balance sheet is well positioned to benefit from the recent move in rate and for what looks to be additional rate hikes in the future. We have approximately $1.2 billion in fixed rate loans maturing over the next 12 months at a weighted average rate of 5.72%. Along with $7 billion in variable rate loans. Asset liability modeling shows a nearly a 6% increase in net interest income and an up 100-basis-point scenario. We are proud of the third quarter results here at Home and look forward to another record year as we round out 2026. With that said, I will turn it back to you, Dawn. Donna J. Townsell: Thank you, Stephen. Kevin D. Hester will wrap up our prepared remarks with an update on lending. Kevin D. Hester: Thanks, Donna. Loan balances ended the quarter much better than we anticipated when we visited 90 days ago. Had some pay offs late in the quarter, but also held on to a few that we expected to pay off. John says I am not very good at forecasting loan balances, so I have got that going for me. I am not sure if it is correct or not, but for what it is worth, this quarter looks better than the last. Continue to see sizable loan opportunities throughout our footprint. We are encouraged by the effort that. that is given by our lenders. John commented on the large nonaccrual. And while we would hoped there to be a third quarter resolution, resolution, we are very encouraged by the progress made recently. And we believe that the proposed asset sales validate our underwriting and management of the credit. Overall asset quality remains solid. And while nonperforming loans increased 11 basis points quarter over quarter, That increase is due to 1 CCFG loan that we expect to be resolved in this quarter and Christopher is on the call to provide more color on that. We remain focused on asset quality, profitability, and growth in that order. Thing I can confidently tell you from my 65 quarters leading the lending function of this company is that this is the only formula for long term success in this industry. Donna, I will give it back to you. Donna J. Townsell: Thank you, Kevin. Well, John, before we go to Q&A, do you have any additional comments? John W. Allison: Well, I think Stephen kinda hit that. Think about the quarter. We got a ALCI mark of $65 million. We paid our in. New dividend, increased dividend. And we bought back 1.3 million shares. We still grew tangible book value slightly. We did not lose. The tangible book did not go down. Bank sell on tangible book, and we still increase tangible book value per share. I am I am very proud of that. And that. What that says is that Home has amazing earnings power. that is what 2.11 ROA will do for you. I really just wanna thank the entire team for continuing to deliver outstanding results nearly every year for our 26 year history. Home Bancshares has built a consistent of top performing banks. And the performance reflects the discipline and dedication of our employees across the company. This was another strong quarter for Home Bancshares. We produced record earning meaningful capital to shareholders maintain our balance sheet discipline, made encouraging progress on the large credit we have discussed, remain focused on finishing the year out strong and delivering long term value for our shareholders. Past that, I think that is enough for me, Emma. Donna J. Townsell: Okay. That sounds good. We will turn it over to Q&A. Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Stephen Scouten from Piper Sandler. Your line is now open. Please go ahead. John W. Allison: Are you on, Stephen? Operator: As a reminder, please unmute your device. John W. Allison: He was going to be in kind of a rural area today. He may not be making connect Let's move on. If he gets. He comes back, we will we will handle it. How about that? Let's move on. Operator: Your next question is from the line of Catherine Mealor from KBW. Your line is now open. Please go ahead. Woody Lay: Hey. Good afternoon. John W. Allison: Hey. Welcome. Donna J. Townsell: Nice to have you Hi. Catherine. Woody Lay: I appreciate y'all having me. I appreciate y'all having me. I wanted to start on the net interest margin and, you know, higher rates would seem to be a benefit for y'all. Was just curious with the hike in September, how you have seen the NIM progress from there, and what incremental rate hikes could mean for the NIM going forward? John Stephen Tipton: Hey, Catherine. This is Steven. Yeah. I guess first part of your question, you know, the core NIM, excluding event income, averaged 4.5% for the quarter. It was 4.55% in September. Obviously, the rate the rate hike came halfway through the month there. So I think there may be, you know, a little bit of incremental benefit for us. And then just, you know, based on our outcome modeling, like I said in the comments, I mean, we show I think, it is a 5.6% increase to NII and up 100-basis-points scenario. So that is that is kind of what way we think about it today. I mean, we are certainly in a competitive environment on loans and deposits, but you know, if we are able to you know, if we are able to control that on the deposit side and get some lift, out of these maturing loans over the next 12 months, you know, I think there is a chance that it could potentially move a little higher from here. Woody Lay: Got it. that is helpful. And then I was curious on the growth front, based on your opening comments, seems like you are a little bit more optimistic on growth in the fourth quarter. And was curious, is that a reflection of you know, competition slowing down? Is pricing becoming more rational? I guess just curious on your thoughts on maybe what is driving that clear path to growth. John W. Allison: This is John. I will take a little of that and then give it to Kevin. After that. We had some-- we had-- we lost about 400. About $500 million of loans due to some unusual circumstances that we have that hit the company over the past 18 months. They are gone now. Those unusual circumstances are gone, but, we. We are back on the loan-- we are back on the loan wagon today. We have got lots of good stuff working. And I think you will see. You will be pleased to see the loan growth out of Home Bancshares. I will let Kevin speak to that. Kevin D. Hester: He was referring, and I have been-- we will let Christopher comment on it also. Yeah. Woody, I do not I do not know that it may be saying that people are, you know, coming back to their senses with the 25 basis points that already occurred going up in the and the thought that there is probably 75 basis points more coming, that may have. That may be playing into where we are at. We are not 100% sure of that at this point, but there is certainly there is certainly some good opportunities that we are looking at for this quarter, good sizable opportunities. And it is across the footprint. it is not all in 1 place. So we may look back in 90 days and say that, yeah, that is part of it. But I am not 100% sure that is the case yet. Woody Lay: Got it. Alright. Well, that is that is all for me. Thanks for taking my questions. John W. Allison: I have got 1 more comment from me. We are seeing a lot of opportunities out there right now that really look good. I think you will see-- Christopher, you wanna comment on CCFG about what you are seeing? Christopher C. Poulton: Sure. Thanks. Well, it is a little slow new origination wise for us in the third quarter. I mean, I think we closed the towards the end of the quarter, other than 2 loans had not closed, and we probably had zero in the pipeline you know, those soft quotes, no term sheet. But I view that as a good thing. Ultimately, the market was in transition and you know, market's gotta catch up with us sometimes a little bit on feeling sour about things. But really since the start of this quarter, I think people are starting to accept that things are going to look going forward rate wise and such. And so we have seen a lot of pickup in the last couple of weeks. A lot of our existing clients, a lot of deals coming back our way that maybe went away for a little while, etcetera. But what we are hearing in general is that it is pretty uncertain out there in uncertain times. You know, our certainty is a virtue. So, I like what we are seeing. Pipeline's filling back up, and hopefully, it will continue that way, but feel good about things. It was a little bleak in the third quarter. Woody Lay: And then I guess actually just 1 quick follow-up. I mean, it sounds like pricing and spreads are a little bit incrementally positive. Just any sense on structurally? I think last quarter, you called out you are seeing some irrational structure in the marketplace, which was causing you to pull back. Are you still seeing any of that over the past quarter? Kevin D. Hester: Yeah. I do not think that is necessarily changed any. I could believe that maybe pricing discipline is coming back a little bit more than I do. Structure discipline at this point. Woody Lay: Got it. Alright. Well, thanks for taking my questions. Kevin D. Hester: You bet, Blake. Thanks. Operator: Next question is from the line of Jon Arfstrom from RBC Capital Markets. Your line is now open. Please go ahead. Jon Arfstrom: Hey, thanks. Good afternoon. John W. Allison: Good afternoon, mister Arfstrom. Nice to have you with me. Jon Arfstrom: Hey. Thank you. Thank you. Kevin, just 1 quick 1 on loan growth. You talked a little bit about late payoffs in the quarter. Can you help us kind of understand the size of that? It was, I would say the latter part of the quarter was $300 million or $400 million. Kevin D. Hester: And it is other than 1 that John was talking about, the majority of that was just projects. You know, we do a lot of construction and projects reach the time where it is where they are either sell or they move to permanent financing, and that is that is what we were seeing in the third quarter. There was a lot of projects that needed to needed to move on because it was time. John W. Allison: 1 of those was-- 1 of them had unusual circumstances was a 100% great credit, $170 million credit that we lost over unusual circumstances. They are not. Hopefully, that is not repeatable. Jon Arfstrom: Yeah. Okay. I know we tease you guys on the loan growth projections, but it sounds pretty good, right, from my point of view. John W. Allison: it is much better. it is much better. I am telling you, we are looking at some good opportunities. Yep. Okay. Jon Arfstrom: Just 2 quick ones on credit. Christopher, anything to note on the CFG nonperformance? Sounds like that is gonna be resolved. But anything on that? And then can you guys remind us of the size of the Texas resolution and what kind of a step down we could see in the Texas non accruals. Kevin D. Hester: Thanks. Christopher, go ahead and take the first part, I will take the second. Okay. Christopher C. Poulton: Yeah. The 1 loan that popped up is a. it is a little less than $15 million, a predevelopment loan to a you know, the previous customer, and they had developed and done fine on that. So we did a predevelopment loan for them a couple years ago. it is an LA loan. Entitled for residential, which LA needs. It was adjacent to the Eaton Fire Area, so kinda Northeast LA. They had asked for some accommodation on that, right after the fires. We gave them a little extension for that, but we have kind of gotten to the end of that, and we really needed to-- we really needed to exercise our rights under the loan agreement to try to get resolution there. So we started a foreclosure action at that maturity. Since that time, we have signed an LOI for the loan sale, We have put that a little bit on hold right now. We are continuing to work that, but our borrower's been in contact with us throughout. They have approached us in the last again, in the last week or so with what they would need to do to reinstate that loan. And so we are going to give them kind of another 5 days or so here to come to us. We gave them a plan for reinstatement, and the first stage of that is over the next over the next few days, and then there is about a 45-day period after that to fully do that. You know, that is our preference. Our preference is to work with our borrowers when they can they can come to the table. So we are gonna give them an opportunity. We are gonna try to give them an opportunity to do that. Hopefully, that is the way that works. If it does not, we will go forward with the we will go forward with the LOI or we will go forward with foreclosure and sell the property. But our hope right now is the borrower will be able to do what they have said they can do. Jon Arfstrom: Okay. Good. Thank you. The large C&I credit, got any more questions on that 1, John, or you Nope. Go. Just the tax. John W. Allison: Okay. On the large C&I credit, it is a 2 piece sale. Sale number 1, is the marine equipment. And floating stock that brought 92% of appraisal. that is the bid. it is been purchased by, New York Stock Exchange company. The purchase agreement is signed. We are waiting on approval from the. I am sorry. Coast Guard. The employees have transferred over, and the equipment will transfer over, and we will wait on approval from the Coast Guard. That should bring in the $85 million range for us. The second part of that is the basically, the fuel tanks. And there is a $17.5 million bid on those. We should net about $16.5 million out of that. So that brings us in $101 million to $102 million once that closes. The book balance not the actual balance, but the book balance we have is $91 million. So you will see about a $10 million recovery to the loan loss reserve or whatever when that closes. And the balance is what has been default interest that we have not recognized a penny of. So it will be between the personal guarantors and Home Bancshares is how we resolve whatever balance is out. But you should see recoveries there. Once we got ahold of the credit, we re underwrote the credit. And I have to congratulate our people on an outstanding job. To get 92% of their prices. So, it is. It I would have told you it would be gone by now, but sometime in the next couple of weeks, I would expect it to happen We will issue an 8-K when that happens. And we. Steven's buying a bottle of 25-year-old whistle pig, and Donna's having a tent party in our parking lot. So we are gonna be drinking whistle pig and having a tent party out front here when we get final resolution. I think it is close enough I can smell the whiskey, John. Jon Arfstrom: Man, I wish I could get an invitation, but that is great. John W. Allison: John did you want? Kevin D. Hester: John, it will be up a little bit in Q4 from here. Jon Arfstrom: Alright. Alright. Well, congratulations on that. that is a long time coming, but that will be a nice step down. So thank you much for the answers on that. Operator: Your next question comes from the line of Brett Rabatin from Stonex Group. Your line is now open. Please go ahead. Brett Rabatin: Hey. Good afternoon, everyone. John W. Allison: Afternoon. Brett Rabatin: Wanted to ask. I know you were good afternoon. I wanted to ask. I know you were looking at a potential few transactions and I kind of heard that a lot of folks are saying, well, the AOCI marks have risen so much that is kind of changed the math for the short term, and so maybe M&A is tougher right now. But just wanted to hear if any of those any of those 3 were looking like they might still be possible and just what you are seeing out there. And then you know, I get a lot of feedback from people saying, hey, John. John wants a really good bank that is gonna add some good assets, he might need to defend his triple accretion laws just a little bit. So it was just hoping to get some color on those things. John W. Allison: Well, we has broken yet. Right? Willie's bills were just. Was about 2 months dilutive. You know? 30 minutes or a cup of coffee diluted. You know? I. They have gone radio silent on me. I do not know what I do not know what happened with that deal. I do not know. It was something that had high level of interest to us, and it just went quiet. So I do not know where the banker is coming. I assume the banker will be back to us at some point in time, but that 1 just went quiet. The other-- 1 of them we pulled out on. It was 2 deals. 1 we pulled out on, and the banker's gone quiet on me on this other 1. So it is something that I think would be good for them and good for us. Think it would be a nice transaction for home to do, and we spent a lot of time modeling it and playing with it, and we are willing to bid up for it. So, as it turned out, I called the banker yesterday or. And told him to call me, and I had not heard anything from him. So it is kinda disappointing. I do not know if they used me as a stalking horse or what they did. But, anyway, we are we would like to have. We would like to put a transact together, and we are ready to do that. So they are will we will be working on we are always working on it. there is a there is a lot of them out there right now opportunities to do those transactions. And our currency still is holding up fairly well. We got knocked down a little bit here. All banks got knocked down recently, but I think we will be back in and we will be able to do trades here for a while. A little disappointing. I do not. I that is a little disappointing that we did not. We had not brought those that 1 closer to fruition. But if it does not work, it does not work. there is more out there. We will move on. Brett Rabatin: Okay. that is helpful. John W. Allison: I wish I told you we are Yeah. that is okay. 1 of them we did do is its own, and we got inside the loan book. We decided that was not for us. So it was a tough deal to do anyway. And once we got in the loan book, we came out of. Brett Rabatin: Okay. And second question is what I am what I am gathering from the call, it just sounds like there is some budding optimism for loan growth and production. But I did not I did not quite get. It sounds like you also think that maybe the payoff challenge that you have had for the past 2 quarters, is that dwindling down? And then I was just also kind of curious, as it relates to that if Shore Premier was still seeing demand or how that business would go in with higher diesel prices and whatnot? Kevin D. Hester: Hey, Brett. This is Kevin. I will take the payoff. there is still it could be close to last quarter as far as the payoff number goes. We will We will see how that plays out. I mean, you had some rollover into this quarter that we thought were gonna happen last quarter. So that always happens when you are looking at folks that are selling the properties or going and getting permanent financing you know, it is hard to pinpoint exactly when that is gonna happen. So there is still a little bit However, from my aspect, I am seeing better opportunities than I have seen in a while. So I think we can overcome those payoffs and I am not sure. They have to they have to come down substantially because we have taken so many so far this year. So hopefully, we will not continue to see the big bats in the payoffs. Christopher C. Poulton: So Christopher, you got anything big payoffs coming? I would not say we have elevated. I mean, we always have. We always have payoffs. If I do not get payoffs, I get nervous. Brett Rabatin: Okay. Okay, Brett. Appreciate all the color, guys. Operator: Go ahead. John W. Allison: I am sorry, John. I said I am ready for positive loan growth is what I am ready for. Brett Rabatin: Sounds good to me. Thanks, guys. Operator: Your next question comes from the line of Matt Olney from Stephens. Your line is now open. Please go ahead. Matt Olney: Hi. Thanks, guys. Just a few follow ups here on the margin. Deposit competition. great to see deposit costs move lower in the third quarter. Especially with some of your peers moving higher. Curious just about depositor behavior following the Fed hike a few weeks ago. What you are seeing more recently, and if the Fed continues to hike, what are your expectations are on depositor behavior? John Stephen Tipton: Hey, Matt. it is Stephen. You know, first part, competition is fierce, you know, in all of our markets, Texas, Arkansas. Alabama, Florida. You know, you have got different competitors in a lot of those markets, but you are seeing, you know, I got a text earlier this week in 1 of our markets of those advertising 4.5% on a 12-month CD. So you are seeing some of that stuff advertised We have taken the same approach that we always have. Negotiating 1-off and selling the strength and stability of the company. And we will get our, you know, shots along the way there. On depositor behavior from an interest rate standpoint, I do not know if I. Maybe a little more aggressive on this last rate hike in terms of expectations of what we pass along. You know, we model, I think, 40% beta on checking and savings accounts and 100% on time deposits. Yeah. that is what we are working with our group on, you know, trying to kind of achieve overall You know, some of the some of the improvement in deposit rates for the quarter was, you know, some of the outflows that we had on the municipal side. Most of those are tied to t bills and index so that some of our higher cost funding that drew down some in the quarter. Matt Olney: Okay. Appreciate that, Tipton. And then I guess another follow-up, Steven, you mentioned the variable rate loans around $7 billion Just want to make sure that is an all-in number, that CCFG and the Community Bank. And just remind me, within that $7 billion kind of the repricing timing as far as how quickly and how often those reprice? John Stephen Tipton: Sure. Yeah. So that does include CCFG. that is that is what is set to or can adjust in Q3 or Q4. So you know, the longer-term stuff I will call adjustable rate that we have out there. But what we consider variable you know, inside of you know, call it 6 months or less, And some of that is daily, some of it is monthly, some of it is quarterly. 3.5. About $3.5 billion of the $7 billion is tied to The Wall Street Journal Prime, and then $3.3 billion or so is tied to, SOFR. And then we have got some other indices for the for the balance of it. Matt Olney: Got it. Okay, guys. Thanks for your help. All for me. John W. Allison: Thanks for that. Thanks, Matt. Operator: Your next question is from the line of Michael Rose from Raymond James. Your line is now open. Please go ahead. Michael Rose: Hey, good afternoon, guys. Thanks for taking my questions. Just wanted to go back to Mountain Commerce. I think the conversion. Systems conversion is coming up here next month. Any changes to cost savings, expectations, or any of the deal related math, Steven? John Stephen Tipton: No. No. We are set for November 6th or the weekend of We have already probably achieved a little of the cost savings along the way. So 4 to 1. But you know, come November 6th or the week after, we will we will begin to see yeah, the realization of some of those, from, you know, what with it staffing or DP and other types of opportunities there. So no change in yes, still the estimate was, I think, a little over $5 million on an annualized basis. Is what we had targeted. Michael Rose: Perfect. Appreciate that. Maybe separately, John, you would previously talked about repurchasing all the shares that you issued related to Mountain Commerce? Is that kind of still the plan? Definitely sounded a little bit more optimistic on buybacks, particularly given the sell off we generally had in bank stocks since, the middle of August. Thanks. John W. Allison: Yep. that is the plan. You know? We. We are in about, what, 3.3 million so far. And we put about just short of 6 million, I think, in that About 400 thousand shares. Quarter to date so far. Yeah. Quarter to date, we have bought 400 thousand. So that is 3.7. So it. Yeah. We are still we are still in there. And, hopefully, we pick up a million or so this quarter. So we will just keep on. We will we will maybe. We will quite get it all done maybe by the end of the year, but maybe first. By the first half of next year, we will have it all bought back. Michael Rose: No. that is Alright. that is helpful. John W. Allison: And then yeah, Do you do you think the shareholder yield is important? Michael? Michael Rose: Do I? Yeah. I mean, I think you guys have a lot of capital, and the deploying that capital through different buybacks and opportunistic M&A, I think, is what we all wanna hear and see. John W. Allison: You guys do what you have done historically. So keep it up. Thank you. Michael Rose: Maybe 1 last. Just 1 for me on just on the environment. Any areas in credit that, are kind of piquing interest at this point? You know, we have heard some scuttle around, you know, some of the restaurant groups and maybe some leisure and hospitality Just anything you are watching a little bit more closely here. Thanks. John W. Allison: We do not-- Not really. We do not. I do not see any you are looking for a segment or a problem somewhere out there, I do not know if there is any widespread spread problems. Some of the Texas credits created that we have spent the last. They will fuss at us about. We have been busy cleaning up the Texas stuff for 3 years, and, you know, all we got left maybe is a few hotels that give us a little problem. But, overall, asset quality other than, you know, we do not have any problems. We have these asset quality meetings in Texas takes 2 hours, and Florida takes 10 minutes, and Arkansas takes 10 minutes, and then, you know, it is. You just do not have any problems in those markets. So, anyway, we are continuing to work on those, and but I do not see any segments anywhere. and, you know, we resolved this our big credit in Texas, which we think will resolve soon, and our nonperforming reserve nonperforming jump over 300%. So I think you can expect that coming pretty quick. So asset quality overall is pretty good. Michael Rose: Alright. that is, great to hear. I will step back and I am Tracy today. Sorry for you guys lost. Thank you. I think we are all missing her today. So again, guys. Appreciate it. that is for sure. Operator: Like, Your next question is from the line of David Rochester from Cantor. Your line is now open. Please go ahead. David Rochester: Hey. Hey. Good afternoon, guys. Back on the deposit discussion, given that the incremental aggressiveness you guys had mentioned on the deposit front, Are you guys thinking about a return to deposit growth in 4Q? Are you confident in that? And do you think you can fund the loan growth you are expecting with deposit growth next quarter? John Stephen Tipton: Hey, David. it is Stephen. And that would certainly be the goal. Yeah. We have talked about the competitive environment you know, some seasonality in, in the last quarter, we would expect to see some of the municipal balances. Return there. You know, we are talking at loan committees constantly about opportunities to get deposits with loan opportunities that come across in order to help fund that. Yeah. Separate and apart from that, I mean, I. You know, we have got $4.9 billion in capacity with the Federal Home Loan Bank. You know, we have got you know, a cash position today. We have got securities portfolio that comes off about $30 million a month. So, you know, the not concerned from a liquidity standpoint. I think, you know, the approach has been to use some of those avenues and take our time and pick our spots as opposed to you know, being out here and having to run CD ads to raise funding. So Yep. David Rochester: Appreciate that. And then can you just give an update on where the spot price for deposits is at quarter end and where you guys are seeing new money post the hike? John Stephen Tipton: Yeah. So total deposit cost ended at an average of $1.83 for the quarter, $1.81 for September, You know, I. I would see our CD and money market negotiations every day. You know, our folks are doing a good job. You know, we may have to pay 4% here or there with the customer just because the bank down the street's running an ad at 4.20% for 7- or 8-months. But you know, our folks do a good job in negotiating, you know, down into the low and mid threes. So, yeah, So, I guess, you know, mid-threes is kind of where we think about. You know, opportunities today. David Rochester: Okay. And then just switching gears to the fee side of things. There was a little bit of volatility in trust fees this quarter. I was just wondering what the driver of that was and how should we think about that line rebounding going into 4Q next year? John Stephen Tipton: Yeah. Some of it is some of it is seasonality in terms of when our annual trust fees are, are charged. The Q3 is generally a little bit of a light quarter there for trust. Then, you know, mortgage and CCFG fee income were a little bit light. You know, this quarter as well. David Rochester: So you feel pretty good about that bouncing back next quarter? John Stephen Tipton: Yeah. I mean, I think if you look over the last 6 quarters, you know, we have we have averaged about $15 million just shy in noninterest income and I would expect to see us migrate back close to that number. John W. Allison: Yeah. Okay. Heard me say that. And the good news is the good news is we got customers that do real business on this transaction. The bad news is they are making a lot of money, and they pay a lot of tax. So we get hammered on the quarter. So but they. It comes back. Yeah. I think it is coming back. Good. Alright. David Rochester: Maybe 1 last 1 on expenses. You have some good expense control this quarter. You guys showed as just a good run rate to kind of finish out the year? And what are your thoughts on expense growth next year? John W. Allison: We have not done our budget for next year yet. I guess that is coming pretty quick, is not it, Brian. Brian S. Davis: You may be working on it now. Right? John W. Allison: We are kind of waiting for Mountain Commerce to get converted. Okay. Okay. So we do not have next year's If you got. If I am running, it will be less than it is this year. But, anyway, Steven's smiling, though. Yeah. John Stephen Tipton: I mean, you have got some inflationary pressure, but, you know, we have also had some things set up throughout the year where, you know, whether it is physical space leases that we have been able to you know, kind of work the space down, we will begin to see some of that benefit in Q4. You know, some of the lower performing segments that we have were taking a look at what opportunities may be there for cost savings. You have got the amount of commerce cost savings that will you know, we will get some of in Q4. So some of that, should offset just inflationary pressures, this quarter and next year. David Rochester: Okay. So maybe a flattish kind of number, making this the run rate this quarter good for maybe the next quarter? John Stephen Tipton: For Q4, that is that is probably fair. Yeah. John W. Allison: Alright. David Rochester: $121 million. Appreciate it, guys. Thanks. John W. Allison: Yeah. Yep. Sounds good. David Rochester: Thanks for all the color. Operator: Your next question comes from the line of Matt Olney from Hovde Group. Your line is now open. Please go ahead. Analyst: Good afternoon, guys. My questions have mostly been asked and answered. Just a real quick 1. How do you think about the sort of the juxtaposition again around deposit pricing. You know, on the 1 hand, it is great to keep deposit pricing low, creates that wide NIM. And great returns and love that you are giving back tons of capital to shareholders and keep buying back stock. But you feel like you are going to have to raise deposit rates kind of along with, you know, some reasonable deposit beta with the with the increase in the Fed funds rate, or are you going to continue to try to really keep them restrained and not raise them much as we continue to get rate increases here? I guess I guess the real question is, how should we think about deposit beta with you guys around Fed funds rate increases? John W. Allison: We are forced to raise rates. If we are forced, we will. And I do not know what we ended up-- no, I do not remember what our deposit beta was as rates went up to the sixties. Do you remember what our cost of funds got up to 2-something percent? A little over 2%? 2.40%, 2-something. Yeah. In a high rate environment. On total cost. Yeah. John Stephen Tipton: Mean, we. We have already passed. You know, when they. When the Fed hiked 25 basis points, what, a month ago, we have got a product that is kind of loosely indexed to fed funds that you know, those customers have that have that expectation. We passed 25 basis points, you know, onto them there. We have got some negotiated products that our folks know that they have got to deal with and pass You know, whether it is 40% of that on or you know, 100% of the rate increase on depending on a customer by customer basis. So yeah, we handle that, you know, 2 days after the after the Fed raised rates and things will kind of settle in from there until the next great height. Analyst: Okay. Alright. that is that is helpful. Thanks. Good quarter, guys. Appreciate it. John W. Allison: Yeah. Thank you. Operator: Your next question comes from the line of Brian Martin from Brean Capital. Your line is now open. Please go ahead. Brian Martin: Hey. Good afternoon, guys. Just, maybe a couple follow ups on some of the items for me. Just on the credit front, outside of the Texas credit you have talked about, any other expectations in terms of, kind of notable progress on other credits as you kind of go into fourth quarter or into next year? Just in general? Big picture? Kevin D. Hester: Hey, Brian. This is Kevin. there is. I mean, there is always some movement. it is you know, kind of like with this 1. You hope it happens quicker than it did, but these things just take some time when they are when they are where they are. So that is by far, the largest 1 we have, and we will cut it in half. So when you get back to there, we were at a pretty low number when you take half of that out. We are at a pretty low number, and it is just things that you have to kind of work through. Brian Martin: So Gotcha. Okay. Incremental progress, but nothing imminent. No. Yeah. I gotcha. Okay. that is helpful. Thanks, Kevin. And then just on with the improvement with the tech credit, just I know the provision this quarter obviously was zero just in terms of how to think about kind of near term provisioning or given the recoveries in the Texas cleanup, I guess any sense as we go into fourth quarter and first quarter how to think about provisioning line. Yeah. John Stephen Tipton: I mean, Steven and I look at each other. I think we have. Both have the same answer, which based on what John said earlier, I think we would expect not to have any provision this quarter. Yeah. Brian Martin: Okay. Yeah. John W. Allison: And that could carry have rather see that. Brian Martin: Sorry. Go ahead. Kevin D. Hester: We actually already got we got a decent recovery the first week of this month from a from a charge off that we had in the in the first quarter of this year. So we are sitting in a recovery position. Nicely right now. It should get assuming. You know, we get some of the recoveries we would expect, I think you would see reserve coverage you know, grow nicely and not need to provision anything. Brian Martin: Gotcha. Okay. And that could bleed into early next year based on the trends we are seeing, it sounds like, I mean, at least lower to zero, whatever the level is that big picture to think about the next couple quarters. John Stephen Tipton: that is fair. Yeah. Brian Martin: Okay. And just the last couple, Steven, I think your comments on the margin, just it sounds. You know, given the deposit cost outlook, and I know what the new loan yields are coming on today. But the margin is more relatively stable than, you know, rising given a couple rate hikes? Is that how to think about it at this point? John Stephen Tipton: Yeah. I think so. I mean, it. You know, it is. Like I said, we exited the quarter at 55 on a you know, non event in event income basis. And you know, I think if we can run in that 4.5 range, maybe a little higher, we would be certainly pleased. Brian Martin: Got you. Okay. And the and the new loan yields today are comparable to where they have been? John Stephen Tipton: Yeah. We. The $8.50 in production this quarter was at, I think it is, 6.95%. So, you know, at the time. You know, for most of the quarter, you know, a little above prime. So Yeah. Brian Martin: Gotcha. Okay. In the last couple, on the M&A side, John, it sounds like certainly looking, but it does not feel like anything's imminent near term in terms of M&A. Just kind of plot along here and look at the opportunities. John W. Allison: I think it is. I think that is fair. Okay. And then I am looking for 1. I am ready to do 1. We are ready to do 1. We are ready to. You know, if it makes sense, we are ready to do 1. So you know, we have got some opportunities out there. The ones. Apple kinda hanging on this 1 because I really wanted to do that trade, and I guess it just went away. The banker did-- had never called me back to tell me where it was. So I know he lost his phone or what. You know? Something happened. But, anyway, we are. there is another 1 out there we will go to work on. So see if we can put it together. Brian Martin: Yeah. Okay. And then I think you mentioned, John, that the buybacks, I mean, obviously getting back to Mountain Commerce. But sounded like your commentary was more that it continues in the fourth quarter. Suggesting it may not be as interesting, I guess, or likely to continue into next year. I guess, did I hear that wrong, or it is just, you know, kinda wait and see how they get it done? John W. Allison: Yep. Okay. You heard it wrong. We So we have been buying stock for years, and we will continue buying stock. Yeah. Yep. Brian Martin: that is what we wanted to clarify. John W. Allison: But, you know, either Steven or I, we will get out of the market somehow take our stock down a dollar. And I said, Steven, he said, I am already buying. I am already in there. I am already in there this morning. I said, okay. Just keep buying. Do not take it down this fast. Alright. Brian Martin: I am just making sure you were not tagged leaning towards your wife and raising the dividend more. So I appreciate all the color. John W. Allison: She texted me a while ago. She's just thanking me for mentioning her on the call and letting everybody know that she supported. She wants another 1 tomorrow, but we are going to have to wait a little bit. Alright. Brian Martin: Well, thank you, for all the color, guys. I appreciate the update. John W. Allison: Alright. All right. Thanks, man. Appreciate it. Operator: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Mr. Allison for closing remarks. John W. Allison: Thank you. Hopefully, we keep rolling the way we are rolling, we will hit the $500 million. Or are y'all going to call me sometime. It does not sound better to say half of billion. What does it take, buddy, $500 million. $500 million. You know? Half a We started this bank. We could not spell billions. So now we are halfway there. Anyway, thank you all for your support. I think things have been we have really had a good strong year this year, and I think we are gonna wrap the year up fairly strong too. So thanks to everyone. Talk to you in 90 days. Operator: This concludes today's call. Thank you for attending. You may now disconnect.