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Operator: Greetings, ladies and gentlemen. Welcome to the Home Bancshares, Inc. First 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. Company presenters will begin with prepared remarks and then entertain questions. Please note that if you would like to ask a question during the question and answer session, please press star then 1 on your touchtone phone. If you decide you want to withdraw your question, please press star then 2 to remove yourself from the list. The Company has asked me to remind everyone to refer to the cautionary notes regarding forward-looking statements. You will find this note on Page 3 of their Form 10-K filed with the SEC in February 2026.

At this time, all participants are in listen-only mode. This conference is being recorded. If you need operator assistance during the conference, please press 0. It is now my pleasure to turn the call over to Donna J. Townsell, Director of Investor Relations. Thank you. Good afternoon, and welcome to our first quarter conference call.

Donna J. Townsell: With me for today’s discussion is our Chairman, John W. Allison; John Stephen Tipton, chief executive officer of Centennial Bank; Kevin D. Hester, president and chief lending officer; Brian S. Davis, our chief financial officer; Christopher C. Poulton, president of CCFG; and Scott Walter of Shore Premier Finance. Our first quarter sets a strong tone for 2026. Results demonstrate sound expense control, consistent operating performance, and attractive returns, including record-setting metrics of book value per share of $22.15 and tangible book value per share of $14.87, which is a $1.72 per share increase year over year for a 13% increase. CET1 at 16.7%, leverage of 14.3%, and Tier 1 capital of 16.7%. In today’s economic environment, that is a meaningful accomplishment, and our team is pleased to walk through the quarter’s results with you. Our opening remarks today will be from our Chairman, John W. Allison.

John W. Allison: Thank you, and welcome to Home Bancshares, Inc. for the first quarter 2026 earnings report to shareholders. Thank you for joining us today, and I think the headline and the quotes pretty much summarize the first quarter. I want to thank our team for getting us off to a great start in 2026. For those of you who are not already Home shareholders that are interested in a better understanding of Home, I think it is important that you look at the strength of the balance sheet, couple that with the monthly and quarterly consistent level of performance over the last several years as primarily showcased by the last five quarters. The prior year has reminded us of the highest interest rate cycle in the early eighties, where almost all banks struggled because of poor balance sheet management, and the same story has been even more visible today, i.e., lack of liquidity by investing in long-term securities trying to stretch for yield.

I am proud of Home. We did not suffer those problems during that time and were reporting record earnings while others were struggling. S&P Global just ranked Home’s performance for 2025 as number two of all banks in the U.S. over $10 billion. We are honored by this elite ranking by one of the world’s best and most respected experts. We were barely edged out of the number one position last year. Maybe we will get it this year. We are happy to have completed the merger with our acquisition of Mountain Commerce and look forward to a successful combination. Due to the back-office computer upgrade that was already in progress before Mountain Commerce, we will not be able to start converting Mountain Commerce until November. As a result, the MCB anticipated savings will not be realized until probably late 2026.

Once accomplished, we believe our new partners can soon begin helping us to continue the outstanding performance that Home Bancshares, Inc. is known for in the U.S. and worldwide. Home is proud of our reputation—one of the strongest, safest, most conservative, and best performing banks in the world. We will continue to try to make our shareholders proud and happy to be part of this outstanding company. We know who we work for, and that is our shareholders. If you loan money, we all know problems can and will arise from time to time that have to be worked through. We have a $110 million Texas credit that we decided to place on nonperforming status this quarter. This is the same credit we have been talking about for a year and a half or two years.

The credit remained current until this quarter. It has been one we have been monitoring intensely for about eight months. We entered into a short-term forbearance agreement with multiple deadlines and requirements. We are advised by legal counsel not to discuss in depth. I can say we are either going to get paid off or we will liquidate the existing collateral. We do not anticipate any additional loss, but if things were to result in some loss, Home’s story puts us in a position to deal with whatever comes. Because of the conservative balance sheet, we are running right at $300 million in loan loss reserves—one of the highest reserve percentages in the world. Couple the strong reserves with a consistent quarterly pretax, pre-provision net revenue of $150 million to $160 million, and we are confident in our ability with whatever happens and do not expect this loan to have any major impact on earnings, if any at all.

It is our belief that there are more than sufficient assets and personal guarantees to properly resolve this issue. I am pleased with the results comparing Q1 to Q1 last year. The first quarter only had 90 days, and if we had the two extra days in a normal quarter, plus just a little touch of wind, we would have been even stronger. We had no wind this time. This quarter, we got zero wind, Brian. You always come up with wind. You did not come up with any juice this time. Well, we did have that FDIC assessment, but we got a reduction. Okay. Well, we had to write off the balance now, so that is evident in the noninterest income category being the lowest since December 2024. Maybe next quarter will be the best. On M&A, I want to congratulate the administration and the Fed along with the Arkansas State Bank Department for the fast approval process.

The speed of approval may possibly give time for another deal this year. We are certainly in the market and looking for another good fit. We continue to repurchase stock as the volatility of an uncertain world—with a war count that makes it uncertain—has provided opportunities for us to purchase more recently. That is before we were in a blackout period. However, we did file our normal 10b5-1 for this time. If the volatility continues, we will be very active on the repurchase side. I think we have essentially bought back, if not all, of the shares issued in the Happy Bank transaction, and I will endeavor to do the same for the Mountain Commerce Bank transaction, particularly if volatility continues to create opportunities. The repurchases will take some time, but once MCB is converted on our system, the additional share reduction should have a positive impact on earnings.

We are being very careful on the loan side because of the uncertainty of the war, the consumers, business, asset classes, and what this cycle may ultimately evolve into. Talking heads have all said rates are coming down, but we have cautioned that possibly they will go back up before they come down. Inflation is not dead. Let me say that again. Inflation is not dead. And as Jamie Dimon would say, that is a major cockroach in the mix. The question is how high and how long do they remain high? It depends on how aggressive the Fed is going to be with escalating interest rates to try to get a handle on inflation. Remember the late seventies and the early eighties? 21%. It is not going to be that high, but it has to be corralled. Christopher C. Poulton, who runs our New York office, has a great saying: the year of the lender is followed by the year of the collector.

I think our early Texas experience confirms some of Chris’ statements. I think it is a time to be very careful. The normal structure of some asset classes that worked in the past may not work today. It is our job to watch and hopefully recognize in advance these loans that we think may be infected with what Jamie Dimon would say are cockroaches. You will hear from Christopher C. Poulton today about his attitude on private credit and the changes made because of it. His call on private credit was outstanding. The good news—market pricing on acquisition deals is more in line with the correct value and slows the shareholder dilution at least for a while. One of the CEOs that did a fairly flagrant—delusionary may be the word—trade sometime back came up to me at a bank conference and said, “I am here to get my butt chewed out.” And I proceeded to do just that.

Then I gave him a hug, and we discussed the pros and cons and the impact of the damage done to long-term loyal shareholders, and agreed that dilution is not the friend of the shareholder. Enough said. With all the attention that dilutive transactions are getting, maybe the publicity and management embarrassment has slowed the shareholder damage. At least, I certainly hope so. I hope it is finally the start of a sea change that forces management to do the right thing for the shareholders. Donna, great quarter. I am pleased with the strong continuation of Home’s earnings. I will hand it back to you, and since I have teed up Chris, let us go to Chris first. Let him comment and turn it forward, and then we will go to Steven and Kevin and Brian, and back to you to wrap up.

By the way, you all need to know Donna takes a pen away from me and gives me a rubber ball to speak with so that way I do not make any noise. So she stole my pen and gave me a rubber ball. So thanks, Donna, for looking out for me.

Donna J. Townsell: My pleasure. Okay. Sounds good. Thank you, Johnny. Up next, we have a report on CCFG from Christopher C. Poulton.

Christopher C. Poulton: Thank you, Donna. Today, I will provide a brief update on CCFG’s first quarter, and then, as Johnny said, I will share some perspectives on the private credit market. During Q1, we grew the portfolio to approximately $2.1 billion. This represents roughly a $60 million increase supported by $370 million in new loan production. Loan production remains steady, and this number is in line with prior year levels. Payoffs for the quarter totaled just under $200 million, which is also consistent with historical averages. We do expect slightly higher payoffs in Q2, though I think our pipeline should allow us to replace those balances either this quarter or the next. Over the past several years, I have discussed declining balances in our corporate lending portfolio.

This is an appropriate time to provide some additional context, particularly in light of recent news around private credit. CCFG has long participated in the private corporate credit market. Our exposure has varied over time, but we have maintained a consistent presence and have long-term experience in the space. Our private credit balances peaked at just under $500 million in 2022, and today outstandings are $87 million. That is a reduction of over 80% in the past three years. Why did we make the choice to reduce our private credit exposure? Beginning in 2023, we observed several trends that influenced this decision. First, we saw new bank entrants. As some banks looked to reduce their reliance on commercial real estate, many chose to lend into the growing private credit space through participations in structured facilities.

This led to broad yield compression across the private credit market and, as often happens, some loosening of credit structures and underwriting standards. At the same time, we saw significant equity inflows from individual investors or retail investors into these sponsored vehicles. We have seen this movie a few times before, and we have not always enjoyed the ending. We have historically maintained an intentional focus on the shorter-duration position—typically under three years—and as a result, we were able to actively exit credit facilities as they reached the end of their reinvestment period. In total, we exited eight corporate lending facilities through repayment during this time. Our remaining exposure is limited to a few facilities, primarily within AA-rated structures.

Our attachment point is approximately 58% of par value of the underlying loan, which provides 40% sponsor equity support beneath our senior position. While market dislocation often creates opportunity, we believe it is still early in the cycle. As a result, we are remaining cautious, and at present, our bias is toward further reduction while continuing to monitor this closely. With that, Donna, I will turn it back to you.

Donna J. Townsell: Thank you. Great call, Chris. Thank you for keeping your eye on the ball with private credit, Chris. Next, we will hear a few words from John Stephen Tipton.

John Stephen Tipton: Thanks, Donna. Chris, we appreciate your approach and discipline over the last eleven years with us. As Johnny mentioned, 2026 was a good start to the year: $118.2 million in net income, a 2.09% return on assets, and a 16.56% return on tangible common equity. Q1 earnings were in line with the prior quarter despite two fewer days, and were up $3 million or 2.6% from 2025. The reported net interest margin was 4.51%, down 10 basis points from Q4, as there was zero event income in Q1, and up seven basis points from the same period a year ago. The core margin, having no event income, was 4.51% versus 4.56% in Q4. The overall loan yield declined by 15 basis points to 7.08%, while interest-bearing deposit costs declined by 12 basis points to 2.35%.

Total deposit costs were 1.83% in Q1 and exited the quarter at 1.82%. Deposit balances increased $258 million driven by all of our Florida regions. I would expect some headwinds in Q2 from tax payments, but we are pleased to start the year strong. A highlight from the quarter was that noninterest-bearing balances grew by $126 million to almost $4 billion and now account for 22.5% of total deposits. As we typically see in Q1, loan production softened coming off of a very strong fourth quarter. We had total loan production of $917 million with over half of that coming from the Community Bank footprint. Switching to capital, we repurchased 507 thousand shares of stock during the quarter for a total of $1.314 billion, and as Johnny said, we will continue to be active with our share repurchase plan.

Capital levels continue to build with common equity tier 1 capital ending at 16.7% and total risk-based capital at 19.5%. Lastly, we are thrilled to have the Mountain Commerce employees, customers, and shareholders on board and look forward to growing the Tennessee franchise for Home. With that said, I will turn it back over to you, Donna.

Donna J. Townsell: Thank you, Steven. And to close out our prepared remarks, Kevin D. Hester has a lending report.

Kevin D. Hester: Thanks, Donna. Given our strong showing in 2025, it could be easy to look at this quarter as boring. I think that shows the high bar that we have set for ourselves, because any quarter that posts a return on assets of 2.09%, maintains solid asset quality, and is an earnings beat over the same quarter a year ago is not an easy task and should be inspiring. As I anticipated last quarter, ending loan balances dropped by a little over $50 million, but it happened very late in the quarter, which resulted in average loan balances actually being up $174 million on a linked-quarter basis. I see this downward trend continuing in the legacy bank into the second quarter because Q2 and Q3 projected payoffs are very high.

The MCB acquisition will, however, add over $1.4 billion in loans to the balance sheet. Based on my meetings with their lenders, I expect them to settle into our credit culture quickly and be accretive to loan production in short order. Johnny mentioned the nonaccrual of the Texas C&I credit that we have been wrestling with since 2024, and this increased nonaccrual balances significantly. But we have made recent progress with the executed forbearance agreement, which leads us to a couple of ways to exit this credit during the next quarter or two. We are continuing to work with the same small set of issues that we have been dealing with for a while now. We took our medicine in 04/2024, but maximizing the exit sometimes takes more time and effort than you would like.

It is wonderful to have the level of capital and reserves that we have, which allows you to maximize recovery on this limited set of problems. To that end, criticized assets were flat on a linked-quarter basis and early-stage past dues were below 50 basis points. Even with the large increase, the reserve coverage of nonperforming loans is still over 160%. As a point of reference, our loan loss reserve would cover 15 years of our historical charge-offs if you use the last five years of average charge-offs as a base—and that base includes the large 04/2024 Texas cleanup quarter. There is nothing wrong with a workmanlike quarter where you meet expectations. I expect that a majority of banks would trade results with us. On that note, Donna, I will send it back to you.

That is accurate.

Donna J. Townsell: Kevin, thank you for that report. Before we go to Q&A, does anyone have any additional comments?

John W. Allison: Well, I thought about deposits. We had good deposit growth, and then tax time comes up. I think I said the same thing last year. It is good to have real customers. That is right. And we do have real customers, as evidenced by the tax checks we are seeing go out right now. That is good and bad, but they are our customers. They are not transactional. They are relationships. So I am proud of that. We will take a little up and down business, Kevin. I mean, Steven, you grew up.

John Stephen Tipton: I agree 100%.

John W. Allison: I am pretty pleased overall. Brian, you got any comments on the quarter?

Brian S. Davis: I agree with you. I am pleased with the quarter. There is not really any noise to it, so it is just kind of good core earnings.

John W. Allison: That is really it. We just kind of rolled on from what we have been doing. I think we have said in the past, we need more assets, and that is what Mountain Commerce has done for us. We have been consistent. Our earnings have been consistent quarter after quarter through this process, and we do need more assets. Right? So we will get this under wraps and Steven and Bill will get the savings out of Mountain Commerce. We will see that come to the bottom line, and maybe we will have another deal before then. So, Donna, I will let you have it. By the way, you all need to know Donna takes a pen away from me and gives me a rubber ball to speak with so that way I do not make any noise. So she stole my pen and gave me a rubber ball. So thanks, Donna, for looking out for me.

Donna J. Townsell: My pleasure. We will now open the call for questions.

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Operator: Thank you. If you would like to ask a question, please press star then 1. When prepared to ask your question, please ensure your device is unmuted locally. Our first question comes from Stephen Kendall Scouten with Piper Sandler. Your line is open. Please go ahead.

Stephen Kendall Scouten: Good afternoon, everyone. Appreciate the time. I guess, Johnny, maybe if you can talk a little bit more about how the progress is going to acquire even more assets on top of Mountain Commerce. I mean, like you said, your returns are phenomenal, so it just feels like you need to be able to multiply that on a larger balance sheet. What have conversations been like and how aggressive would you be? And within that, would you ever think about loosening—the triple accretive mantra—to get a deal done?

John W. Allison: I think we hold pretty tight to our philosophy around here. My fear is they will say, “Well, he lied.” I can hear the market saying, “Oh, he lied. He broke it. He diluted the deal.” So I just do not believe in doing that. I am the largest individual shareholder, and I am not interested in diluting myself. I think it hurts our shareholders. You know my philosophy on that. We stretch as much as we can on the trade, but people have joined this company because we do not dilute, and if I diluted now, I think it would be kind of—as I am getting older in my career—people would say, “He got weak and gave up.” I have not as of yet, and I think it is known when we are talking to a prospective seller: we say, we do not dilute.

We need you to understand we are not going to be your highest price. But if you are going to sell the stock tomorrow, it does not matter—just do a deal and the buyer dilutes the hell out of himself. If you sell stock tomorrow, it does not matter, just get out and get going. But if you are going to ride with them for a while, it makes lots of sense not to do a dilutive deal. So if you want to hold the stock and keep it for a period of time, I think our sellers appreciate the fact over the years that we have not diluted. I know there is another deal out there right now they are getting bid up on, but I am not going to bid up on it. We will bid it to the maximum we can bid it, and if we do not get it, we do not get it. A lot depends on the seller—what the seller wants to do.

Do they want to stay and be part of it, or do they want to go to the house? If they want to go to the house, just get the biggest best price and sell the stock tomorrow. Otherwise, if you want to be in it for a period of time, you need to have a good partner that is not going to dilute you. I know I rambled a little bit, Steven, but anyway.

Stephen Kendall Scouten: That is helpful. And in terms of the pipeline of conversations, what is that like? We have not seen as many deals here in the first part of the year get announced. Are sellers just kind of not interested because the environment is pretty good? Or is it just the volatility in the stocks? What are you seeing in terms of conversations?

John W. Allison: There are conversations going on—not only with us, but elsewhere. Bankers have called us and said, “Hey, what about this and what about that?” I said, we are not ready right now. Let us get Mountain Commerce, get our arms around it, and then we will be ready to go. But we are having conversations. At a bank conference recently, we ran into a couple of people, and I said we ought to talk sometime, and they followed up since then. Just a conversation in a bar. I said, “Yeah.” They were sitting at one table and said, “We will visit sometime.” That brought a banker out of the woodwork to talk to us about these two possible options. I actually think people are embarrassed to dilute the hell out of the shareholders right now.

They have been called out for the dilution, and we see what has happened to the market prices of bank stocks. We went from 22.5x projected earnings to 11x earnings, or 10.5x. Where did the money go in bank stocks? My contention is we ran all the good investors out by beating them up—dilute, dilute, dilute. I want to get back to the old days where we were 21.5x earnings, and everybody was happy. Everybody made lots of money. It is a different world now, and I think it is directly a result of the dilution.

Stephen Kendall Scouten: Valuations are crazy. We have to start calling you homebankai.com or something like that. One other question is around loan yields. There was a pretty big move in the loan yields this quarter. Can you give some color on how much of that was core decline versus where new loan yields are coming on, and how much the NPA affected reported loan yields quarter over quarter?

John Stephen Tipton: Hey, Steven. This is Steven. First, on the impact from the nonaccrual—we do not have any of that in our margin for the quarter. Had we had it on the books, the impact was about 5 basis points to the loan yield and about 4 basis points to NIM. So the 4.51% that we reported—had it been on accrual for the full quarter—it would have been 4.55% versus 4.56%. A little color there. Some of the other decline in loan yields was really just a function of variable rate resets from the Fed moves last year that occurred January 1 and at other frequencies. If you normalize for the nonaccrual, we would have been down 10 or 11 basis points and matched what occurred on the deposit side. Production yields—I think we averaged 7.25% to 7.25% for the first quarter. We were at 6.99% or 7% in the Community Bank footprint—so, north of prime and getting our fair share.

Stephen Kendall Scouten: Great. Appreciate all the color. Everyone, thanks for the time.

John W. Allison: Thanks, Steven. Appreciate you.

Operator: We now turn to David Rochester with Cantor Fitzgerald. Your line is open. Please go ahead.

David Rochester: Hey. Good afternoon, guys. I just wanted to talk about the loan trend real quick. It sounded like you mentioned paydown activity being a little bit elevated in 2Q and 3Q. How are you thinking about the organic loan trend? I know you got the deal closed this quarter, so that will bump things up a bit. Just trying to understand the underlying organic trend, and what part of the book are you seeing those paydowns in? Is it more of the same? Anything new? Any difference across the different geographic regions?

Kevin D. Hester: Hey, Dave. This is Kevin. I will answer that. It is going to be a little bit of a long answer because I am going to give you some color on the pipeline process. Our pipeline process likely has more visibility into the payoffs than the new loans that are coming on. We know because of CCFG’s portfolio being a two-to-three-year turn, and a lot of what we are doing on the large side is construction deals, and we know when those are finishing. So we probably have a four-to-six-month lead time on a payoff, whereas we might have 30 to 45 days to put something on the pipeline for a new credit because we do not put new credits on the pipeline until they are fully approved. For Chris’ group, CCFG, they may close it in 15 to no longer than 30 days, and in the Community Bank footprint, it might take 45, but it is probably closer to 30.

So our pipeline process is more highly skewed toward knowing our payoffs. That said, we do see second- and third-quarter payoffs being higher than they have been the last couple of quarters. Will we have some production that will offset that? It is possible, but it is going to come in over the next 45 to 90 days. It is not on our pipeline yet because it has not gotten fully approved. Second piece is MCB is not yet in our pipeline process. So I really do not have a good feel for what they might contribute in the second and third quarter. I will know that probably in the next week to two weeks. So the short answer is: it feels a little soft in the second quarter. Could we outrun it? We could, but we are going to have to get the production in here and get it on the books.

David Rochester: Okay. Great. Appreciate all the detail there. Maybe switching to the margin. What do you think is going to be the rough margin impact from the close of the deal, and if we have a stable Fed funds rate through the end of the year, how does the margin trend after the 2Q change from the deal?

John Stephen Tipton: Hey, Dave. This is Steve. We are still finalizing the purchase accounting. I do expect a little pressure on the margin—obviously, it is additive to NII and EPS—but expect a little pressure at least initially on the margin. We landed for the quarter at 4.51% and, thinking about the nonaccrual, we were 4.49% for March—still fairly in line with where we were. Maybe it ticks down slightly with MCB, and then we hope to build on it from there. I talked to Bill today, and their story over the last year or so has been the ability to reprice deposits at maturity as they come through, and that appears to be what is taking place over the next 45 days and over the course of the year as some of the wholesale deposits either reprice or go away.

David Rochester: Appreciate that. One last on M&A. I know you are open to deals in all your markets, but with Tennessee in the mix, are you prioritizing any markets now?

John Stephen Tipton: Always Florida and now Tennessee.

Kevin D. Hester: We could entertain those markets.

David Rochester: Sounds good. Thanks again. Appreciate it.

Operator: We now turn to Brett D. Rabatin with Stonex. Your line is open. Please go ahead.

Brett D. Rabatin: Hey, good afternoon, everyone. Wanted to start on expenses. You kept expense growth pretty limited last year—like 3% growth—and I know Mountain Commerce will create a little noise, but is there anything you are going to spend money on either as a result of that deal or as you get bigger? And any thoughts on maybe core growth this year relative to 2025?

John Stephen Tipton: Hey, Brett. This is Steven. Core expenses were about $115 million for the quarter. We will have some normal raises throughout the year with merit increases and contracts here and there, but that is a decent base today. Mountain Commerce probably adds $7 million to $7.5 million a quarter to that number right now, until we get to the latter part of the year and get their conversion in and begin to recognize the majority of those cost saves. There will be some cost saves along the way throughout the year, but the majority will come in the middle of the fourth quarter.

Brett D. Rabatin: And then, Johnny, thematically, I know you are interested in M&A, and you have historically had a term for people that hire lenders from other banks. In Tennessee, with disruption due to big deals, would you let Bill hire some folks on the lender side in Tennessee, or is that still not part of the equation?

John W. Allison: That is not the way I think about it, but Bill may think differently about it. We really have not discussed it. We are headed over next week to meet their customers and shareholders and talk about Home Bancshares, Inc. and Mountain Commerce and the partnership together. I will visit and catch up with you later on Bill’s thoughts. I am not aware of any teams that he is talking to. Not saying it would not be out of the realm of possibility in the Nashville or Knoxville market. If it is due to disruption, that is a little different premise than just going in and taking away folks that are happy where they are. I get the disruption concept, and there could be something there. But we will see.

Brett D. Rabatin: Lastly, on the pipeline—any of the pipeline trepidation related to competitive pressures? It seems some banks are being more competitive on rate. Is the competitive landscape impacting what you want to do in the back half?

Kevin D. Hester: Some markets are harder than others. It is not the same players in every market. There is some rate pressure. There is even some underwriting and structure pressure that people have given into a little bit over the course of 2025 and early 2026. That is always a challenge. We fight that because we are pretty consistent in what we do.

Brett D. Rabatin: Fair enough. Appreciate all the color.

Operator: We now turn to Catherine Mealor with KBW. Your line is open. Please go ahead.

Catherine Mealor: I have a follow-up on deposit costs. You mentioned the 1.82% exit deposit rate, which is similar to where you were for the average in the quarter. As you think about the rest of the year—if we do not have any more rate cuts—do you feel like deposit costs will start to increase as we move through the year, especially maybe once we get past second quarter and growth improves? How are you thinking about incremental deposit costs?

John Stephen Tipton: Hi, Catherine. This is Steven. With MCB, we mentioned what they have coming through the maturity pipeline and certainly expect theirs to come down. On the legacy Home portfolio, we have some deposits tied to the short-term T-bill—91-day T-bill—which trickled up a little bit in the first quarter and put some pressure on other changes we were able to do. CDs will continue to mature that we will try to reprice down. I am still optimistic that we can inch out a basis point or two as we go throughout the year, but I will caveat that with competition. We are still seeing banks offer 4% for CDs and 3.75% to 4.05% on money market. We will defend our customer base both here and in Tennessee.

John W. Allison: I am getting excited—4% might be cheaper if they do what I think they are going to do. It looks silly when you see people doing that, and we are still seeing some 6% too. When you think about that, how ridiculous that might turn out to be—we obviously have not stopped inflation. It depends on how aggressive the Fed is. If they have to be aggressive to slow inflation, it may take 200 basis points to stop it. If they lower significantly, I think that would be a huge mistake.

Catherine Mealor: Johnny, you have been right on the rate trade the past couple of years. Is there anything you are doing in your balance sheet to prepare for the risk of higher rates?

John W. Allison: Not really. We are just careful with our pricing. I was mad at myself last night when I said what was going to happen and then I did not bet it. I ran into a friend who said, “I heard you, Johnny. I went out and bought $4 million worth of money cheap, and I still have it.” I said, “Good for you.” He said he did it because of what I said. I did not do it, and that is a good thought—maybe to take a look at stretching out there a little bit. This is almost a ditto of the seventies and the eighties. We have this war now. We have oil, and we know what that does. We saw PPI at 4% annualized—we have not seen those numbers in a while. It could get a little crazy. I just do not have the answer yet. Hopefully, it will come to us.

Catherine Mealor: And then on the credit side, anything you are seeing? I appreciate that you do not want to talk about the $92 million credit that moved to NPA this quarter until you get it resolved, but outside of that, any other trends or weakness across the book?

Kevin D. Hester: Criticized assets—which includes all of our OLEM and below—were flat quarter over quarter, and early-stage past dues are as low as they have been, at below 50 basis points. We are working with the same set of issues that we have been working with for the last few quarters. I said a couple of quarters ago that the small group might get worse before it gets better, and that is what happens when you have to put it on nonaccrual and start working it out. We have already taken what we believe is our maximum loss, and we would expect to recover some to all of that depending on the way it resolves and which path it goes through. Talking about the larger credit now, we at least have good visibility into how that happens, and it could happen as early as this quarter or next. We feel good about that. It is the same set of problems. I am not seeing anything of materiality that we are concerned about.

John W. Allison: I do not think we are going to lose any money on this deal. I like the guarantors. I like the assets—these are in-demand assets. They are not scrap assets. The assets are being leased as we speak. We sold some of these assets in the past on a 70/30 basis—we got 70% and the customer got 30%—and they paid down perfectly. Assuming the rest bring the same value, we are going to take 100% of the proceeds from this point forward. If we get the sales schedule, I think we will be fine. If there is any hole left, these people have honored everything they have ever said to us. It is a very wealthy family. Maybe if there is $10 million left, we put them on a $10 million ten-year note or something. I think they will honor it.

Catherine Mealor: Has the price in oil had any impact?

John W. Allison: If anything, it might help, quite honestly.

Catherine Mealor: That is what I was thinking. Thank you so much for the color. Appreciate it.

John W. Allison: Thank you. Appreciate it.

Operator: We now turn to Michael Edward Rose with Raymond James. Your line is open. Please go ahead.

Michael Edward Rose: Hey. Good afternoon, guys. Two follow-ups. First, on the large Texas loan—was there any interest reversal this quarter, and what was the impact on the margin?

John Stephen Tipton: Hey, Michael. It is Steven. The 4.51% margin does not have any accrual in that number. The impact was about $1.6 million for the quarter, which is about 5 basis points to the loan yield and about 4 basis points to NIM. If we had had it on accrual for the whole quarter, 4.51% would have been 4.55% compared to 4.56% last quarter.

Michael Edward Rose: Really helpful. And on scheduled payoffs, can you quantify what the expected payoffs and paydowns are over the next quarter or two?

Kevin D. Hester: It looks to me like the second quarter is close to $1 billion, and third quarter could approach that. Those include abnormal paydowns and principal paydowns too. That is what you would have to do to stay even in each of those quarters.

John Stephen Tipton: For some context, payoffs in Q1 were about $650 million, but they were $950 million in Q4—$750 million to $800 million in quarters prior to that. It sounds big, but that is the range we run, depending on seasonality.

Kevin D. Hester: And that does not include MCB—none of what I am quoting includes MCB because they are not in my pipeline yet.

Michael Edward Rose: Got it. Any loans with MCB identified that maybe do not fit your standards that you plan to run off?

Kevin D. Hester: I am not aware of anything. We looked at every loan in due diligence. I do not remember anything I would say to run off. Their credit culture is pretty close to ours. They may be a little higher leverage in some areas—we will work on that over time. They have opportunities with us that they have not had, as they have not been willing to do much construction. Any decisions we make to go a different direction than what they have done, I think, will be more than offset by opportunities to do things they have not done before. I look at them as a positive. As I said, I would expect them to hit the ground running pretty early. We have already had pipeline discussions over three or four credits as of last week. I told Bill: nobody cares what you make this quarter—get ready for the future.

If you have anything you need to write down, write it down. Get rid of it. Get it going. Get it out of here. I think we are coming in with a pretty clean check coming in the front door.

Michael Edward Rose: Appreciate all the color. Thanks.

Operator: We now turn to Analyst with RBC. Your line is open. Please go ahead.

Analyst: Just a couple of things to follow up on. Johnny, did you say in your prepared comments that you think deal pricing has moderated somewhat?

John W. Allison: Deal pricing—acquisition deal pricing—yes, I think it has lightened up a little bit. I do not see the urgency out there that I did. However, people are talking and continuing to want to do something, and some of them want to do it with Home. I think it is out there. It is just a matter of whether we are ready to do that. We are probably getting close to ready to look at something else, but we are not going to be able to convert it about the same time we convert Mountain Commerce in November. We have been pushed a little bit ourselves. We have had people calling us outside of investment bankers and saying, “We met your company two or three years ago, and we are thinking about doing something and wanted to talk to you.” That happened with a couple—one Florida and one Tennessee—that came at us.

We are going over to see Bill and his team. We will have an opportunity to talk to Bill when we get to Tennessee and see where we are going and what we are thinking. We are looking at a Tennessee deal—there is some water out there. We will see how they work out.

Analyst: Related to that, how do you feel about being more aggressive on the repurchase plan? Do you have an optimal capital level in mind, or are you warehousing capital for future acquisitions? CET1 of 16.7%—those are high levels.

John W. Allison: I do not know if we can spend it as fast as we are making it. That is a pretty good position to be in. We made $118 million—pretty nice. We have so much capital right now that we like our position, but I am ready to buy stock. I am looking at it today. We cannot buy today. Tomorrow we can. We filed our 10b5-1. I want to buy back all of Mountain Commerce—it is about 5.5 million shares. I think we bought essentially all of Happy back. I want to buy all of Mountain Commerce back and go out there. We can do it pretty quick with the capitalization we have. I like to buy stock.

Analyst: So it is not an either/or—you can do both?

John W. Allison: That is correct.

John Stephen Tipton: Yep.

Analyst: Thanks. Appreciate it.

Operator: We now turn to Matthew Covington Olney with Stephens. Your line is open. Please go ahead.

Matthew Covington Olney: Sticking with M&A, you mentioned some potential bank targets in Florida and Tennessee. Can you speak to the appetite of doing M&A in existing markets versus expanding into new markets? Is the bar set higher if you were to expand the franchise into new markets?

John W. Allison: There is no comparison to me. If there is a Florida deal out there that we can do, we have management from Key West to Pensacola—management all over the state. We can just add it to someone. You have heard me talk about pouring into one of those guys’ buckets. They are great managers. The performance of our Florida operations is outstanding. Those guys know what to do and how to do it. It makes it simpler and easier. We made the big move to Tennessee because we like Bill and his team. We need to grow there and build that and muscle up Tennessee because I think there is opportunity—there is a little disruption over there. I think it will give us an opportunity to pick up and build some muscle in that state as we have done in Florida.

The reason being, you get more consolidation savings. If you can close some branches, that is a big savings. We will continue to focus more on where we are than outside of that. When we look outside, one of those deals I am talking about that your banker was calling me about is outside of that. I really like the operator. We like the guy. We like his company. We like what he does. They do not have the growth that Florida has, but he runs a good, clean operation. Why would we go there? Because it is simple and clean, and they do a good job running their company. It kind of fits Bill’s math. If you are going outside the market, you better get somebody like Bill that knows what to do and knows how to run it.

Matthew Covington Olney: Appreciate it. As a follow-up—Chris is still on the line—question about private credit. You noted the bias for further reduction. Can you expand on your outlook over the next few years, and when do you expect to see opportunities for growth for CCFG?

Christopher C. Poulton: Thanks, Matt. Two things. One, right now the uncertainty is: what do the underlying loans look like and where do they go? It feels early because I think you are going to see a false bottom—some price expansion or markdowns in notes, people say “that is it,” and then there is the third shoe to drop. We are not seeing a lot of capitulation on price, and there should be, and we are also not seeing much activity. Nobody is pricing a new facility today if they do not have to. We look a lot at whether these loans have been marked appropriately—what is happening to the other line of credit, has EBITDA expanded or not, have the loans been marked, etc. We would like to see a little more of that before we get comfortable.

We have had people come to us and say, “I would like to get out of some positions; what would the price be?” Our answer: price does not fix credit. An extra 50 basis points is not going to save me when I need credit support. Right now, we are biased toward “let us figure this credit thing out.” This may turn into nothing—maybe all these things are fine—but I do not think you should take that risk today. We would want to see more capitulation before we would expand again. We have been in this market for ten-plus years. I think people that came into the market need to take some losses before I would feel comfortable—that is how you get discipline. New entrants thought they were getting something risk-free, they priced it that way, and then it turned out not to be, and then everybody gets religion again.

We will look for that, and when we see signs, we might consider expansion again. We also have facilities that will roll off, and right now if a facility rolls off, we probably would not replace it. On the C&I side, that is the posture. Real estate—we continue to see good pipeline growth. We are going to have elevated payoffs, but one is a credit we have had that I have been saying is two weeks from payoff for six months—I think it is paying off today. Not a worry for us on credit—they have been in the sale process and it dragged on. We like the credit, but we get nervous when things stay too long; stuff is supposed to move. We continue to see great opportunities. The pipeline is strong. It might take me more than a quarter to replace what comes off, but not a lot more than that.

Matthew Covington Olney: Helpful, Chris. Thank you.

John W. Allison: Thanks.

Operator: We now turn to Brian Joseph Martin with Bryn Capital. Your line is open. Please go ahead.

Brian Joseph Martin: Hey, guys. Just one follow-up, Chris, if you are still there. On your outlook for the year—you talked about a payoff last quarter; it sounds like that maybe got pushed back a bit. Is your outlook for growth still mid-single-digit this year with the puts and takes?

Christopher C. Poulton: I think that is right. That is what I would like to see. If we do not have that, I would be a little disappointed. We really look at it on a rolling basis—over the next rolling twelve months, will we grow? I think so. We booked quite a bit last year; we had really good production; not all of that is funded, so we expect some of that to roll through. I like where we are on pipeline. We are in constant contact with customers; most of our business is repeat. Some of it moves around—you get a call on something hot, then they pass, then it is back on. We are flexible, and because we are flexible, we get a lot of looks. Generally speaking, on a rolling three to four quarters basis, I can say we are probably going to expand.

Brian Joseph Martin: Perfect. Thanks, Chris. A couple follow-ups from me. Johnny, any change now that you have Mountain Commerce—in terms of sizing—would you look smaller or bigger, or just what is available?

John W. Allison: Somewhere in the size of, or larger than, Mountain Commerce would be nice. But we would probably do a smaller deal if it fits Bill. If it is in a market where Bill is not, and it fits him, we would step down and do a smaller transaction. Tennessee is a pretty good size, and we are in about four or five locations—six, seven, eight—we have room to go in that state.

Brian Joseph Martin: Got it. Steven, on the margin—you talked about opportunity on cost of deposits at MCB and maybe not as much room on legacy. On the asset side, what is the opportunity for what is remaining to be repriced this year for Home, and any impact from MCB?

John Stephen Tipton: I do not think any impact necessarily from Mountain Commerce on the asset side. What we are seeing most recently on what is maturing, given where competition is, is essentially trying to blend with overall where it is maturing from to keep it on the books. The benefit that maybe banks thought was there a year ago—given loan pricing competition and other areas—it is kind of hold on to what you got.

Brian Joseph Martin: Gotcha. On production—you said around $900 million this quarter. In recent quarters, has production been similar?

John Stephen Tipton: It is a little light for Q1. The $917 million this quarter—Q4 was a little over $2 billion. Seasonally, Q4 is higher. Prior quarters have been a little north of $1 billion.

John W. Allison: And some of this is not funding day one. A fair portion is construction that will not fund until six months from now when it starts to fund, so it is hard to pencil all at once.

Brian Joseph Martin: Understood. On credit quality—the Texas one you talked about, and the Dallas/Fort Worth apartments and the boat credit—are those still being worked through with no real update on timing?

John W. Allison: We work those credits every day. The boat—we are going to a trial in June. We have the boat. It just keeps going before the judge; now we have a third judge and are going to trial. It is a $5 million boat. It is $5 million owed. It may be $7 million to $9 million—by the time we get it sold, it may be $3 million if it takes too long. I have never seen anything quite like that—very frustrating. The apartments in Dallas—we will get it sold eventually. We have had five, six, seven buyers. We will get it sold. There is no loss in that for us. Kevin collected a couple million dollars on it a while back. It is just a matter of getting it out. There were some obstruction problems. It is in receivership, and the receiver has to correct some safety issues.

We may find somebody to take it where it is at. We are working leads all the time. Realistically, we may have to work through the issues that need to be completed before you find the right buyer. There is opportunity there. If we find the right person, we will get it sold and moved.

Brian Joseph Martin: And the outlook on charge-offs near term—still pretty benign?

Christopher C. Poulton: I would agree with that.

John W. Allison: I do not anticipate any more losses on the boat credit or the apartment credit. Those are the ones we are working through. They are marked and written down. If the $100 million credit had some loss, I would be shocked. I have been fooled before, but I think we are fine. It would just be a bump in the road for us. We have the PPNR, and we have reserves. We have 15 years’ worth of charge-offs in our reserve—based on our history, including the Texas cleanup.

Brian Joseph Martin: Last one for Brian. Fee income seemed pretty clean around $44 million. Is that a decent level to think about going forward?

Brian S. Davis: You are right. Over the last four quarters, we have had somewhere between $4 million and $5 million every quarter drop down in the other income line item—different events ranging from $5.7 million in the third quarter of last year to $3.9 million in the first quarter of last year. This quarter, we did not have any of that.

Brian Joseph Martin: So a good baseline to work off, with hope to trend upward. Perfect. Congrats on the quarter, and thanks for taking the questions.

John W. Allison: Appreciate you. Thank you.

Operator: We have no further questions. I will hand back to Mr. Allison for any final comments.

John W. Allison: Thanks. It is a long day. A lot of questions. A lot of interest. Thank you for your support. We will continue to do our part, and hopefully we will continue to run the 2% ROAs. They beat us up a little bit on the stock today—kind of hammered us on the stock. I do not think we deserve to be off 3%, but it is an opportunity to buy. It is a great opportunity to buy. Timing would be good for us. That is it. Thank you very much. Talk to you in 90 days.

Operator: Ladies and gentlemen, today’s call has now concluded. We would like to thank you for your participation. You may now disconnect your lines.

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