Home BancShares, Inc. 3rd Quarter Earnings Call - HOME BANCSHARES INC

Greetings ladies and gentlemen. Welcome to the Home Bank Share Incorporated third quarter 2026 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, then entertain questions. Please note that if you would like to ask a question during the question and answer session, please press star then one on a touch tone phone. If you decide you want to withdraw your question, press star then one 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 three of their form 10k filed with the SEC in 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 Townsall, Director of Investor Relations. Donna, please go ahead. Thank you. Good afternoon and welcome to our third quarter conference call. With me for today's discussion is our chairman, John Allison, Stephen Tipton, Chief Executive Officer of Centennial Bank, Kevin Hester, President and Chief Lending Officer, Brian Davis, our Chief Financial Officer, Chris Poulton, President of CCFG, and Scott Walter of Shore Premier Finance. 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 Allison. uh welcome everyone it's another strong quarter for home bank shares led by record earnings of 129.1 million or 65 cents a share for the first nine months of 26 we remain on the strong path towards my goal our goal of 500 million dollars or does it sound better to say a half a billion i never thought i'd be saying that but we're on the path for that for the the first 9 months of 26 we produced 380 million adjusted earnings keeping us on a strong path towards our goal of 500 million really the real difference between the earnings and the adjusted earnings is primarily mountain commerce the merger expense of 12 or 13 million dollars during the quarter we paid our new dividend of 23 cents a share i know y'all are all happy with that i would think that's a nine and a half percent 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 1 300 000 shares for approximately 39.3 million created a shareholder buyback yield of 0.69 in the third quarter second quarter we created a shareholders buyback yellow 0.77 and the first quarter of 0 .25 so total through three quarters additional shareholder return of 1.71%. For the three quarters, we've repurchased 3.3 million shares, approximately 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 in alongside our shareholders and we remain 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 homes earnings power and balance sheet flexibility was shining brightly in the third quarter with record profitability strong stock repurchases margin expansion increased dividend consistent roi strong pp nr tangible book for share growth low efficiency ratio it'll be interesting to see once we as time goes on in this quarter how we compare to the rest of the industry We're proud of the fact that we've 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 a half a billion dollars 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've seen, I'd 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 tenancy partners. I'm proud of the work you're doing. Again, the big surprise, like the second quarter, was the third quarter average loan growth balance is outstanding. What appeared to be a large down quarter, like last quarter, turned out to be only down $28 million on average balances from last quarter. That's a result of keeping many of the loans at payoff coming late in the quarter. Our funding strategy also continued to benefit earnings. Bar expenses during the quarter declined by $2.3 million. Decrease in interest expense on deposits was $1.2 million of that, and decrease of $1,100,000 in interest expenses on federal home loan borrowings and other borrowings as we reduced total borrowings by $200 million during the court. Many banks may think their AOCI pain is over because they restructured the balance sheet. It took hundreds of millions of dollars, in some cases billions of dollars of losses, attempting to repair the damage inflicted by their decisions. The story appears to be repeating itself again as rates continue to climb. Home aborted, taking excessive duration risk, maintained 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 one. Higher rates still affected our AOCI during the quarter, but impact remained manageable relative to our size. If you remember, we've not bought securities in years to speak of. A key point that differentiates home from most banks, as 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're not created equal, but when rates go up, bank stocks usually go down, when it's actually positive for home bank shares, as you can see from 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 are now the ones pushing for growth. Grow, grow, grow. Growth at any expense. They say, Johnny, open up that loan machine. I really bet that few, if any of them, have ever run a bank. Being one 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'd rather be known as one of safest and most profitable banks in United States than one with 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. who will stay the course and you can back on that regarding a large non-performing loan we've been discussing for several quarters or our long-standing guidance has been we have no additional loss in the large texas cni relationship and in fact we expect recoveries over time there's 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 three weeks from now but soon and the remaining 20 percent have a preliminary agreement with only one contingency that will be resolved once the first part is sold and completed so when the 80 sold we understand the other 20 percent will come right after that We expect these transactions to close this quarter. The scheduled proceeds from these two sale transactions would result in a recovery over the current carrying balance. Remaining balance is owed, and the proceeds would be between the personal guarantors and home bank shares. Profitability, as I said earlier, of our company, we had a 166 PPNR, and I think Stephen's 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 ROA, and that's without the mountain commerce conversion. Our non-performing ticked up a little bit, but that's not concerning to us at that. I think Chris had a little one that popped up, 11 or 12 million, and he's around to discuss it if anybody wants to ask a question. I'd like to say a special thanks to our team for continuing to produce better numbers almost every quarter in our 26-year life. We're honored to be a continuing top performer year in and year out. Donna, I think that's all the news I have because all the news I had was good, and I have no bad news. Okay. Well, no bad new is good news. So thank you, Johnny. Our next report comes from Stephen Simpson. Thanks, Donna. As Johnny 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 with 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 two basis points from Q2. The core margin, excluding event income, was 4.50%, up three basis points from the prior quarter, up four basis points year over year. The overall loan yield, excluding even 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 Q3 and exited the quarter at 1.81%. Switching to the balance sheet, legacy deposit balances declined in Q2 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 discipline in pricing. Tennessee contributed nicely this quarter with almost $70 million in production. Payoff volume that we've discussed in the past materialized in Q3 with payoffs at $1.01 billion. Our pipeline for unfunded commitments remains 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% and 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 moving rates and from 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 6% increase in net interest income in an up 100 basis points scenario. We're 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'll turn it back to you, Dawn. Thank you, Stephen. Kevin Hester will wrap up our prepared remarks with an update on lending. Thanks, Donna. Loan balances ended the quarter much better than we anticipated when we visited 90 days ago. We had some payoffs late in the quarter, but also held on to a few that we expected to pay off. Johnny says I'm not very good at forecasting loan balances, so I've got that going for me. I'm Not Sure If It's Correct or Not, but for what it's worth, this quarter looks better than the last. We continue to see sizable loan opportunities throughout our footprint, and we're encouraged by the effort that's given by our lenders. Johnny commented on the large non-accrual, and while we'd hoped it would be a third-quarter resolution, we're very encouraged by that. We're very impressed 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 non-performing loans increase 11 basis points quarter over quarter, that increase is due to one CCFG loan that we expect to be resolved in this quarter, and Chris is on the call to provide more color on that. We remain focused on asset quality, profitability, and growth in that order. One 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'll give it back to you. Thank you, Kevin. Well, Johnny, before we go to Q&A, do you have any additional comments? Well, I think Stephen kind of hit that. Think about the quarter. We've got an ALCI mark of $65 million. We paid our new dividend, increased dividend, and we bought back 1.3 million shares, and we still grew tangible book value slightly. We didn't lose. The tangible book didn't go down. Banks sell on tangible book, and we still increase tangible book value per share. I'm very proud of that. And what that says is that home has amazing earnings power. That's what 211ROA will do for you. I really just want to thank the entire team for continuing to deliver outstanding results nearly every year for our 26-year history. HomeBank Shares has built a consistent record of top-performing banks, and the performance reflects the discipline and dedication of our employees across the company. This was another strong quarter for HomeBack Shares. We produced record-earning, meaningful capital to shareholders, maintained our balance sheet discipline, made encouraging progress on the large credit we've discussed. us, we remain focused on finishing the year out strong and delivering long-term value for our shareholders. Past that, I think that's enough for me, Donna. Donna Walsh, Okay. That sounds good. We will turn it over to Q&A. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question 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 Steve Skouken from Piper Sandler. Your line is now open. Please go ahead. Are you on Steven? As a reminder, please unmute your device. He was going to be in kind of a rural area today. He may not be making connections. Let's move on. If he comes back, we'll handle it. How about that? Let's go on. Your next question is from the line of Woody Lay from KBW. Your line is now open. Please go ahead. Hey, good afternoon. Hey, welcome. Nice to have you, Woody. I appreciate you all having me. Um, I wanted to start on the net interest margin and, and, you know, higher rates would seem to be a benefit for y'all was just curious with the, with the hike in September, how you've seen the NEM, um, progress from there and what incremental rate height could mean for the NIM going forward. Hey, Woody, this is Steven. Um, yeah, I guess first part of your question, you have the core NEM excluding event income average four and a half for the quarter it was 455 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 alcohol and like I said in the comments we show I think it's five point six percent increased in a 100 basis point scenario so that's that's kind of what you know we're the way we think about it today i mean we're certainly in a competitive environment on loans and deposits but if we're able to um you know if we were 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's a chance that it could potentially move a little higher from here got it that's helpful and then you know i was curious on the growth front um you know based on your on your opening comments it seems like you're a little bit more optimistic on the on growth in the fourth quarter and was curious as you know is that a reflection of um you know competition slowing down is pricing becoming more rational i i guess just curious on your thoughts on maybe what's driving that um uh clear path to growth this johnny i'll take a little let give it to kevin after that we had some uh we had we lost about 400 about 500 half a billion dollars for loans due to some unusual circumstances that we have that hit the company over the past 18 months they're gone now those unusual circumstances are gone but uh we we're back on the loan we're back on the loan wagon today we've got lots of good stuff working and and i think you'll see you'll be pleased to see the loan growth out of home bank shares i let kevin speak to that he was referring to and i then we'll let chris comment on it also yeah woody i don't i don t know that it it may be saying that people are are you know coming back to their senses with the the 25 basis points that already occurred going up and the you know the thought that there's probably 75 more coming that may have that may be playing into where we're at we're not 100 sure that at this point but there's certainly um there's certain good opportunities that we're looking at for this quarter good sizable opportunities and it's across the footprint it's not all in in one place so that we may look back in 90 days and say that yeah that that is part of it but i'm not 100 percent sure that's the case yet. Got it. All right. Well, that's all for me. Thanks for taking my questions. One more comment from me. We're seeing a lot of opportunities out there right now that really look good. I think you'll see coming through. Chris, you want to comment on CCFG about what you're saying uh sure thanks um well it's a little slow new origination wise for us in in the third quarter i mean i think we closed the towards the end of the quarter other than two loans i hadn't closed and we probably had zero in the pipeline uh you know no soft quotes no term sheets uh but i view that as a good thing ultimately the market was in transition and uh market's got to catch up with us sometimes a little bit on on feeling sour about things but uh really since the start of this quarter, I think people are starting to accept that, you know, way things are going to look going forward rate wise and, and such. And so we've seen a lot of, a lot of pickup in the last couple of weeks, a whole lot of our existing clients, a lot of deals coming back our way that maybe went away for a little while, et cetera. But I think what we're hearing in general is it's, it's pretty uncertain out there and in uncertain times, you You know, our certainty is a virtue. So I like what we're seeing. Pipeline's filling back up, and hopefully it'll continue that way. But I feel good about things. It was a little bleak in the third quarter. And then I guess actually just one quick follow-up. I mean, it sounds like pricing and spreads are a little bit incrementally positive. Just any sense on structurally? You know, I think last quarter you called out you're 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? Yeah, I don't think that that's 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. Got it. All right. Well, thanks for taking my question. You're welcome. Thanks. Your next question is from the line of John Arfstrom from RBC Capital Markets. Your line is now open. Please go ahead. Hey, thanks. Good afternoon. Good afternoon, Mr. Arfrom. Nice to have you with us. Hey, hey. Thank you. Thank you, Kevin, just one quick one 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? Um, it was, I would say the latter part of the quarter was three or 400 million and it's other than one that Johnny 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's, whether they either sell or they move to permanent financing. And that's, that's what we were seeing in the third quarter. was a lot of a lot projects that needed to you know need to move on because it was time one of those was uh one of them that had unusual circumstances 100 great credit 170 million dollar credit that we lost over unusual circumstances we're not hopefully that's not repeatable yeah okay i know we tease you guys on the loan growth projections but it sounds sounds pretty good from my point of view um it's better it's much better it much better i'm i'm telling you we're looking at some good opportunities yep okay um just two quick ones on credit um chris anything to note on the cfg non-performance sounds like that's going to be resolved but But anything on that, and then can you guys remind us of the size of the Texas resolutions and what kind of a step-down we could see in the Texas non-accruals? Thanks. Chris, go ahead and take the first part, and I'll take the second. Okay. Yeah, the one loan that popped up is a little less than $15 million, a pre-development loan to a it was a previous customer and they had developed and and done fine on that so we did a pre-development loan form a couple years ago it's an la loan uh it's entitled for residential which la needs it was adjacent to the eaton fire area um so kind of northeast la um so they had asked for some accommodation on that uh right after the fires we gave them that gave a little extension for that but we've kind of gotten to the end of that and 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've signed an LOI for the loan sale. We've 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've approached us again in the last week or so with what they would need to do to reinstate that loan. And so we're going to give them kind of another five days or so here to come to us. We gave them a plan for reinstatement in the first stage of that over the next few days. And then there's about a 45-day period after that to fully do that. You know, that's our preference. Our preferences work with our borrowers when they can come to the table. So we're gonna give them an opportunity. We're gonna try to give an opportunity to do that, hopefully that's the way that works. If it doesn't, we'll go forward with the LOI or we'll go forward foreclosure and sell the property. But our hope right now is the borrower will be able to do what they've said they can do. And on the large C&I credit, you got any more questions on that one, John? Or are you? No, no. Just a Texas question. OK, on the C&A credit, it's a two-piece sale. sale number one is the marine equipment and floating stock that brought ninety two percent of appraisal that's the bid it's being purchased by New York Stock Exchange Company the purchase agreement is signed the we're waiting on approval from the Coast Guard on that the employees have transferred over and the equipment will transfer over and wait on approval from the coast guard. That should bring in 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 $16,500 out of that. So that brings us in $101, $102 million once that closes. The book balance, not the actual balance, but the book balance we have is $91 million. So you'll see about a $10 million recovery or low 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 a between the personal guarantors and home bank shares as how we resolve whatever balance is out but you should see should see recoveries there once we got a hold of the credit we really underwrote the credit and I have to congratulate our people on an outstanding job to get 92 percent of their prices so it's it I would have told you to be gone by now but it sometime the next couple of weeks I would expect it to happen we'll issue an 8k when that happens and we're buying a bottle Stevens buying a bottle of 25 year old whistle pig and Donna's having a tent party in our parking lot so we're going to be drinking whistle pig and having a tent party out out front here at uh when when we get final resolution i think it's close close enough i can smell the whiskey john man i wish i could get an invitation but john john expenses might be up a little bit in q4 all right all right all right well congratulations on that that's a long time coming but that'll be a nice step down So thank you very much for the answers on that. Your next question comes from the line of Brent Rabitin from Stonex Group. Your line is now open. Please go ahead. Hey, good afternoon, everyone. Johnny, I wanted to ask, I know you were, good afternoon. I wanted to ask I know you were looking at a potential few transactions and, you And I kind of heard that a lot of folks are saying, well, the AOCI marks have risen so much that that's kind of changed the math for the short term. And so maybe ABM&A is tougher right now. But just wanted to hear if any of those three were looking like they might still be possible and just what you're seeing out there. And then, you know, I get a lot OF feedback from people saying, hey, Johnny, if Johnny wants a really good bank that's going to add some good assets, He might need to bend his triple accretion laws just a little bit. So, I was just hoping to get some color on those things. Well, we haven't broken yet, right? One of these deals was just about too much diluted, you know, 30 minutes or a cup of coffee diluted. They've gone radio silent on me. I don't know what happened. I don't know what happened with that deal. I don' t know. It was something that had a high level of interest to us, and it's just gone quiet. So I don''t know where the bankers are coming. I assume the bank will be back to us at some point in time, but that one just went quiet. The one of them we pulled out on was two deals, one of the ones we pulledout on, and the bank has gone quiet on this other one. So it's something that I think would be good for them and good for us. I 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're willing to bid up for it. So as it turned out, I called the banker yesterday and told him to call me, and I hadn't heard anything from him. So it's kind of disappointing. I don't know if they used me as a stalking horse or what they did. But anyway, we'd like to put a transact together, and we'RE ready to do that. So we'll be working on it. We're always working on it. There's 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 the banks got knocked out recently. But I think we'll be back and we'll be able to do trades here before long. A little disappointing. That's a little disappointing that we hadn't brought that one closer to fruition. But if it doesn't work, it doesn'T work. there's more out there so we'll move on okay that's helpful um i wish i told you one of them we did due diligence zone and we got inside the loan book we decided that wasn't for us so it was a tough deal to do anyway and and once we got in the loanbook we came out of it Okay. And second question is, what I'm gathering from the call, it just sounds like there's some budding optimism for loan growth and production, but I didn't quite get, it sounds like you also think that maybe the payoff challenge that you've had the past two quarters, is that dwindling down? And then I was just also kind of curious as it relates to that, if short premier was still seeing demand or how that business would go on with higher diesel prices and whatnot. Hey, Brent, this is Kevin. I'll take the payoff. There's still – it could be close to last quarter as far as the payoff number goes. We'll see how that plays out. I mean, you had some rollover into this quarter that we thought were going to happen last quarter. So that always happens when you're looking at folks that are selling properties or going and getting permanent financing. You know, it's hard to pinpoint exactly when that's going to happen. So there's still a little bit of. However, from my aspect, I'm seeing better opportunities than I've seen in a while. So I think we can overcome those those payoffs. And I'm not sure – they have to have come down substantially because we've taken so many so far this year. So hopefully we won't continue to see the big bites in the payoffs. Chris, you got anything big payoffs coming? I wouldn't say we have elevated. I mean, we always have. We always have payoffs, but I don't get payoffs if I get nervous. Okay. Great. Appreciate all the color, guys. Go ahead. I'm sorry, Johnny. I said I'm ready for positive loan growth. That's what I'm ready for. Sounds good to me. Thanks, guys Your next question comes from the line of Matt Olney from Stevens. Your line is now open. Please go ahead hey thanks guys uh just a few follow-ups here on the margin uh deposit competition great to see deposit costs move lower in the third quarter especially with some of your peers moving moving higher uh curious just about depositor behavior following the fed hike a few weeks ago kind of what you're seeing more recently and if the fed continues to hike and what your expectations are on depositor behavior. Hey, Matt. This is Stephen. First part, competition is fierce in all of our markets. Texas, Arkansas, Alabama, Florida. You've got different competitors in a lot of those markets, but you're seeing I got a text earlier this week in one of our markets. Somebody was advertising four and a half on a 12-month CD. So you see it, some of that stuff advertised, we've taken the same approach that we always have and, you know, negotiating one-off and selling the strength and stability of the company. And we'll get our, you Know, shots along the way there. On depositor behavior from an interest rate standpoint, I don't know if I, maybe a little more aggressive on this last rate hike in terms of expectations of what we pass along. We model, I think, 40% beta on checking and savings accounts and $150,000. That's what we're working with our group on, trying to achieve overall. Some of the improvement in deposit rates for the quarter was some of the outflows that we had on the municipal side. Most of those are tied to T-bills and index, so that's some of our higher-cost funding that drew down some in the quarter. Okay, appreciate that, Tipton. And then I guess another follow-up, Stephen, you mentioned the variable rate loans around $7 billion. Just want to make sure that's 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. Sure, yeah. So that does include CCFG. That's what is set to or can adjust in Q3 or Q4. So, you know, the longer-term stuff I'll call adjustable rate that we have out there. But what we consider variable, you now, inside of, you kno, call it six months or less. And some of that's daily. Some of it's monthly. some of it's quarterly uh three and a half about half of the seven three and a half billion is tied to wall street journal prime and then 3.3 billion or so is tied uh soper and then we've got some other indices for the for the balance of it got it okay guys thanks for your help it's all for me your next question is from the line of michael rose from raymond james Your line is now open. Please go ahead. 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 any changes to cost savings expectations or any of the deal related math, Steven? No, no. We're set for November the sixth of the weekend of We've already probably achieved a little of the cost savings along the way since 4-1, but come November the 6th or the week after, we'll begin to see the realization of some of those from what be it staffing or DP and other types of opportunities there. So no change and still estimate was I think a little over $5 million on an annualized basis is what we had targeted uh perfect uh appreciate that um maybe separately johnny you i think previously talked about repurchasing all the shares uh that you issued related to mountain commerce is that kind of still the plan and you definitely sounded a little bit more optimistic on on buybacks you know particularly given the the sell-off we generally had in bank stocks since uh the middle of august thanks yep that's the plan you know we we're in about what 3.3 million so far and we put about just short of six i think in that about 400 uh thousand shares quarter to date so far yeah quarter that we bought 400 so that's 3.7 so yeah we're still we're still in there and hopefully we pick up a million or so this quarter so uh we'll just keep on we'll we'll maybe we'll quite get it all done maybe by the end of the year but maybe the first by the first half of next year we'll have it all bought back you know all right that's helpful and then yeah do you think the shareholder deal is important michael do i yeah i mean i i think you guys have a lot of capital and deploying that capital uh through different buybacks and opportunistic M&A, I think, is what we all want to hear and see you guys do, what you've done historically. So keep it up. Thank you. Maybe one last, just one for me, just on the environment. Any areas in credit that, you know, are kind of piquing your interest at this point? You know, we've heard some scuttle around you know some of the uh restaurant groups and and maybe some leisure and hospitality um just anything you're watching a little bit more closely here thanks i don't we don't not really we don t i don t see any if you're looking for a segment or a problem somewhere out there i don' t i Don't know if there's any widespread spread problems some of of the Texas credits created that we've been spent the last, they will fuss at us about growth. We've been busy cleaning up that Texas stuff for three years, and all we got left maybe is a few hotels that give us a little problem, but overall, asset quality, other than we don't have any problems, we have these asset quality meetings, and Texas takes two hours, and Florida takes 10 minutes and Arkansas takes 10 minutes and you just don't have any problems in those markets. Anyway, we're continuing to work on those, but I don't see any segments anywhere. We resolved this, our big credit in Texas, which we think will resolve soon, and our non-performing, reserve non- or jump over 300 percent so i think you can expect that coming pretty quick so asset quality overall pretty good all right that's uh great to hear i'll step back and um thinking of tracy today um sorry for you guys thank you i think we're all in the cinema today so thanks again guys your next question is from the line of dave rochester from canter your line is now open please go ahead hey good afternoon guys um back on the deposit discussion uh given that you know the incremental aggressiveness you guys had mentioned on the depositor 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're expecting with deposit growth next quarter hey davis steven certainly be the goal you know we're talked about the competitive environment you know some seasonality and you know in the last quarter we would expect to see some of the municipal boundaries return there you know or talking at loan committees constantly about opportunities to get deposits with loan opportunities that come across and in order to help fund that yeah separate And apart from that, I mean, you know, we've got $4.9 billion in capacity with the Federal Home Loan Bank. You know, We've got, you Know, a good cash position today. We've Got securities portfolio that comes off about $30 million a month. So, you're not concerned from a liquidity standpoint. I think, you know, historically, 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. Yeah. Appreciate that. And then can you just give an update on where the spot price for deposits is, the quarter end, and where you guys are seeing new money post the hike? Yeah. so total deposit cost ended it um their average 183 for the quarter uh 181 for september um you know i'd see our our cd and money market negotiations every day you know our folks are doing a good job you know we may have to pay four percent here or there with the customer just because you know the bank down the street's running an ad at 420 um for seven or eight months uh but you know our folks do a good job in negotiating you know down into the low and mid threes so i guess i guess you know mid threeses kind of think about um you know opportunities today okay um and then just switching gears to the the c side of things uh there was a little bit of volatility in trust fees this quarter was just wondering what the driver that was and how should we think about that line you know rebounding going into 4q next year yeah some of it some of its seasonality in terms of when our annual trust fees are are are charged um you know q3 is generally a little bit of a light quarter there for trust uh and then you know mortgage and ccfgp income were a little bit like um you know this quarter as well do you feel pretty good about that bouncing back next quarter yeah i mean i think if you look over the last six quarters you know we've we've averaged about 50 million dollars just shy uh in in non-interest income and and i would expect to see uh let's migrate back closer to that number yeah i think you heard me say that the good news is The good news is we got customers that do real business, not just transaction. The bad news is that they make a lot of money and they pay a lot of tax, so we get hammered on the quarter. But it comes back. It's coming back. Good. All right. Maybe one last one on expenses. Some good expense control this quarter you guys showed is just a good run rate to kind of finish out the year. And what are your thoughts on expense growth next year? We haven't done our budget for next year yet. I guess that's coming pretty quick, isn't it, Brian? You may be working on it now, right? We're kind of waiting for Mountain Commerce to get converted. Okay. Okay. So we don't have next year's ... If I'm running, it'll be less than it is this year, but anyway. Steven's smiling, pal. Yeah. Yeah, I mean, you've got some inflationary pressure, but we've also had some things set up throughout the year where, whether it's physical space leases that we've been able to kind of work space down, we'll begin to see some of that benefit in Q4. You know, some of the lower performing segments that we have, we're taking a look at what opportunities may be there for cost savings. you've got uh the mountain commerce cost savings that will you know we'll get some of in q4 so some of that you know should offset just inflationary pressures uh this quarter and next year okay so maybe a flattish kind of number that making this uh this is the run rate this quarter good for uh maybe next quarter for q4 that's that's probably fair yeah all right appreciate it guys thanks yeah yep sounds good thanks for all the color your next question comes from the line of ed nazarian from hovde group your line is now open please go ahead uh good afternoon guys my questions have mostly been asked and answered um just uh a real quick one how do you think about the sort of the juxtaposition again about around deposit pricing you know on the one hand it's great to keep deposit pricing low creates that wide nym uh you know and great returns and and love that you're giving back tons of capital shareholders and keep buying back stock but do you feel like you're going to have to raise deposit rates kind of along you know some reasonable deposit beta with the with with the increase in the fed funds rate are you going to continue to try to really keep them restrained and 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 was you guys around fed funds raid increases If we're forced to raise rates, if we're forced, we will. I don't know what we ended up I don' t remember what our deposit beta was as rates ran up to the 60s. Do you remember what the cost of funds got up to? Two something? A little over two? 240? Two-something? In the highest rate environment? On total cost, yeah. I mean, we've already passed, you know, when the Fed hiked 25, what, A month ago, we've got a product that is kind of loosely indexed to Fed funds that those customers have that expectation. We passed 25 on to them there. We've got some negotiated products that our folks know who they've got to deal with and pass, whether it's 40% of that on or 100% of the rate increase on, depending on a customer-by-customer basis. So we handle that two days after the Fed raise rates, and things will kind of settle in from there until the next rate hike. Okay. All right. That's helpful. Thanks. Good quarter, guys. Appreciate it. Yeah, thank you. Your next question comes from the line of Brian Martin from Breen Capital. Your line is now open. Please go ahead. Hey, good afternoon, guys. Just maybe a couple follow-ups on some of the items from me. Just on the credit front, outside of the Texas credit you've talked about, any other expectations in terms of kind of notable progress on the other credits as you kind of go into the fourth quarter or into next year, just in general, big picture? Hey, Brian, this is Kevin. There's always some movement. It's kind of like with this one, you hope it happens quicker than it did, but these things just take some time when they're where they are. So that's by far the largest one we have, and we'll 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're at a a pretty low number, and it's just things that you have to kind of work through. So incremental progress, but nothing imminent. Yeah, gotcha. Okay, that's helpful. Thanks, Kevin. And then just on with the improvement with the Texas credit, 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 and the Texas cleanup, I guess any sense as we go into fourth quarter and first quarter how to think about that provisioning line yeah Steve and I look at each other I think they both have the same answer which based on what Johnny said earlier I think we would expect not to have any provision this quarter yeah okay and that could carry enough privacy sorry guys we actually we've already got we got a decent recovery the first week of this month from a charge off that we had in the first quarter of this year, so we're sitting in a recovery position nicely right now. Assuming we get some of the recoveries we would expect, I think you'd see reserve coverage grow nicely and not need to provision anything. Gotcha. Okay, and that could bleed into early next year based on kind of the trends we're seeing, it sounds like. I mean, at least lower zero, whatever the level is. That's a big picture to think about the next couple quarters that's fair yeah okay um and just the last couple steven i think your comments on the margin just it sounds you know given the the deposit cost outlook and i don't know what the new new loan yields are coming on today but the margins more relatively stable than you know rising given given a couple rate hikes is that how to think about it at this point yeah i think so i mean that you know like i said we we actually the quarter at 455 on a you know non-event income basis and um you know i think if we can run in that range the four and a half range maybe a little higher we'd be we'd certainly pleased gotcha okay and the and the new loan yields today are comparable to where they have been yeah we the 850 in production this quarter was a i think it's 695. so you know at the time you know for most of the quarter you know a little above prime so yeah gotcha okay in the uh last couple on the m a side johnny it sounds like certainly looking but it doesn't feel like anything's imminent near term in terms of m a just you know kind of plot along here and look at the opportunities i think it's i think that's fair but okay and then i i i'm looking for one i'm ready to do one we're ready to deal with we're ready to you know if it makes sense we're going to do ones so you know we've got some opportunities out there the ones i was kind of hanging on this one because i really wanted to do that trade and I guess I just wonder why the banker never called me back to tell me where it was. So I don't know if he lost his phone or what happened, you know. Something happened. Anyway, there's another one out there we'll go to work on. So see if we can put it together. Yeah. Okay. And then I think you mentioned, Johnny, the buybacks. I mean, obviously getting back to Mountain Commerce, but it sounded like your commentary was more that, you Know, it continues into 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 just, you know, kind of wait and see? No, you heard it wrong. Yeah, okay. You heard it right. We've been buying stock for years, and we'll continue to buy stock. Yep, I think we want to clarify that. Well, you Know, either Steve or I, we'll get out of the market, and somebody will take our stock down a dollar, and I'll say, Stephen, he said, I'm already buying. I'm already in there. I'm ready in there this morning. I said, okay, just keep buying it. They want to take it down, just buy it. All right. I'm just making sure you weren't leaning towards your wife and raising the dividend more. So I appreciate all the color. She texted me a while ago. She's just thanking me for mentioning her on the call and letting everybody know that she's supportive. She wants another one tomorrow, but we're going to have to wait a little bit. All right, well, thank you. Thank you. Thanks for all the color guys. I appreciate, appreciate the update. 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. Thank you, hopefully, we keep rolling the way we're rolling, we'll hit. We'll hit the 500 million, or y'all know call me sometime, it doesn't sound better. say half a billion, wasn't it, buddy? Half a billion. Half a billion. We started, Michael couldn't spell billion, so now we're halfway there. Anyway, thank you all for your support. I think things have been, we've really had a good strong year this year, and I think we're going to wrap the year up fairly strong, too. So, thanks, everyone. Talk to you in 90 days. This concludes today's call. Thank you for attending. You may now disconnect. Thank you.