Greetings ladies and gentlemen, welcome to the Home Bank Shares Incorporated fourth quarter 2024 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 1 on the touch tone 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 their cautionary note regarding forward-looking statements. You will find this note on page 3 of their Form 10-K filed with the SEC in February 2024. At this time, all participants are in a listen-only mode, and this conference is being recorded. If you need operator assistance during the conference, please press star, then zero. It is now my pleasure to turn the call over to Donna Townsall, Director of Investor Relations.

Thank you. Good afternoon, and welcome to our fourth 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, Tracy French, Chairman of Centennial Bank, Chris Poulton, President of CCFG, and John Marshall, President of Shore Premier Finance.

To open our discussion on the quarter we will begin with some remarks from our chairman john allison okay thank you donna welcome to home bank shares fourth quarter and year-end earnings release and conference call the final quarter 24 did not disappoint with strong performance of another hundred million dollar profit quarter and that is after taking a hurricane reserve of 16 million seven hundred thousand dollars as an abundance of costing we had as the second hurricane hit home still completed our first 400 million dollar profit year actually we earned 402 million 241 thousand dollars plus home's first year to exceed 1 billion in revenue the best performance in our 26 years think about the number your company brought 40% of the revenue to the after-tax bottom line. Simply 40% of a billion is 400 million and that's what we earned. I am sure there there's not many banks in this country with the ability to accomplish that feat. I'm very proud of our team for this great accomplishment. Additional Harker Reserve deemed EPS by six cents per share for the quarter and ROA by 23 basis points. We're not crying over spilled milk because we think it's prudent to maintain strong capital but EPS would have been 57 cents and ROI would have been exactly two percent for the quarter. I want to congratulate our team with Stephen and Kevin's leadership in managing the net interest margin. I'll let them talk more about it in a few minutes but if you remember our models and a lot of your models show a decrease in income as rates come down. But as Tracy says, that is only a snapshot in time that does not properly give management credit for strong expense reduction in interest expense and strong loan yields. As I've said in the past, strong loan yields by Kevin's group and low interest expense by Stephen's group makes for peer-leading margin. The question is, can home improve in 24? I know it's early, it's early in the year, but we're running slightly ahead of what we did last year. With interest rates possibly going up or holding steady, I don't believe they're going down, I see it today they may have gone down a little bit. I think we'll continue our strong run rate into 2025. The only exception will be the actual increase in expenses for 2025. We have broadcasted for a couple years that we're going to do what we call the Texas Cleanup, which we did. And while we were doing Texas Cleanup, we just continued to do a clean sweep of all asset quality with a total charge-off of $53,394,000, of which $47.6 million was loans in Texas, or 89.1%. That left a balance of about $5.8 million from Arkansas, New York, Shore, Premier, Florida, and even Alabama we charged off $8,000, plus any specific reserves that we thought were appropriate. I really feel good about the asset quality cleanup, and I'm certain that I've overkilled again, as you know my history of doing that, but I wanted to put home into a position for a great 25. Expect recoveries in the $30 million range over time, and probably you'll start seeing some of the recoveries this quarter. Let's go to the numbers. That income of $100.6 million for the quarter, or 51 cents. Record income of $402,241,000. You remember last year we got hit with the Fed for the failed banks, and that took us down below that, and we didn't quite make our $400 million but we hit it this year we had record revenue for the quarter of 258.4 million and catch this we had record revenue for the year of 1 billion and 17 million dollars that's quite a mark i didn't realize we'd hit a billion but that's i'm glad that we did strong net interest margin remains at 4.39 return on assets for the quarter was 177 i think it was for the year too Brian, I think we're 177 for the month.

That's exactly right.

Record CET1 of 15.1%, record risk-based capital of 18.7% and record book value per share of 1992 and tangible book value per share of 1268. P5NR pre-tax pre-provision net profit percentage to total revenue was 56.57%. Efficiency ratio for the fourth quarter of 42.24 mass improvement over 23 that was 46.21. I believe that being an owner operator with my family being the single largest individual shareholder and home being my largest asset should provide comfort for all shareholders because every move made by this company that affects you also affects the Allison family and my executive team. Home is one of America's best run banks and financially strong and has been for the last 26 years and I want to thank all of you for your support. 24 is really a strong year for home and 25 should be even stronger. Outside of that I just wanted to comment we got tenant improvements on our 60,000 square feet out in Amarillo, Texas for our new tenant. Hopefully that'll be finished and marks so we should see some of that happening some revenue maybe steven coming in next year yeah early springs what we're targeting now early spring i want to comment on the texas lawsuit it's continuing on on nicely with fruitful depositions going on at this time in conclusion as i said 24 was a very strong year for home we produced record revenues record profits we weathered two hurricanes so far high interest rates crazy inflation bank failures and administration love regulations and in addition the Texas cleanup to mention a few I think home is prepared and has a

clear path for 25 Donna you got it girl thank you Johnny and congratulations on a record-breaking year that was amazing our next report today comes from Steven in Tipton.

Thanks, Donna. The numbers for home bank shares at Centennial Bank this quarter clearly display the balance sheet strength and earnings power of the company. I want to congratulate all of our team on our first $400 million year and achieving over a billion dollars in revenue in 2024. I'll start my comments with the net interest margin, which continued to improve in Q4. The reported NIM expanded by 11 basis points in Q4 to 439. We continue to maintain healthy excess cash balances despite retiring the BTFP advance earlier in the quarter. Excluding the event income noted in the press release, the net interest margin was 4.36% for the quarter, an increase of 9 basis points from Q3, and exited the quarter in December at 4.42. As a result of the recent rate cuts, the yield on loans excluding event income declined by 14 basis points to 7.45 in Q4. Our bankers did a fantastic job on the deposit side, reducing interest-bearing deposit costs by 22 basis points, 2.80% for the fourth quarter, and exited the quarter in December at 2.75. We continue to negotiate deposit rates on a case-by-case basis and are proud to have been able to offset the reduction in rates on the asset side. The excess cash we continue to hold gives us flexibility to work deposit rates down further and be aggressive if needed on the asset side. Switching to liquidity and funding, total deposits increased $441 million for the quarter, highlighted by growth of $69 million in non-interest-bearing balances, which now account for 23.4% of total deposits. Nearly all of the community bank regions posted deposit growth for the quarter, And from a geographical perspective, we saw growth of $232 million from Florida, $92 million from Texas, and $77 million from Arkansas. Alternative funding sources remain extremely strong, with brokered deposits still only comprising 2.4% of liabilities. With the deposit growth, the loan-to-deposit ratio trended back down to 86.1%. On the asset side, in-period loan balances declined $59 million, largely driven by lower balances at CCFG, and were offset by growth from the Arkansas, Florida, and Shore Premier Finance regions. On loan originations, we saw a volume of a little over $1 billion in Q4 at a coupon of 8%, with the community bank regions making up 80% of the production for the quarter. Payoff volume increased, as we mentioned, might happen in Q3 to just shy of $900 million in Q4. And in closing, with the cleanup behind us, we're excited about the prospects for growth and look forward to a great year in 2025. With that, Donna, I'll turn it back over to you.

Thank you, Stephen. And our final report is from Kevin Hester on the lending portfolio.

Thanks, Donna, and good afternoon, everyone. In the 26 years that we have existed, and in the 14 years that I've been in this position, there have been only a handful of quarters that are similar to this one. In the previous ones, we tried to ensure that we addressed any concern, and sometimes it felt like Johnny was being too aggressive. This quarter feels similar to those in some ways. I'm very happy to say, though, that it feels really good to be able to take this kind of quarter in stride and not have any concerns about moving forward. during the fourth quarter we had an extended conversation with our regulators about the accrual status of a large texas cni credit we've agreed to disagree and as a result we chose to charge off a portion of the credit to keep the rest on accrual once that decision was made it made sense to write size a few other credits that we've been working through over the past couple of quarters as johnny has mentioned it is primarily a texas cleanup with 48 million of the 53 million and charged off loans coming from that state virtually all of these happy credits were initiated either right before or right after the happy acquisition roughly half of the charge-offs are related to the disputed texas cni credit we expect recoveries to begin to be received immediately on this credit as payments remain current on the entire relationship as for the other credits we fully expect to dispose of these credits and have some recoveries we could experience a couple of those in the coming quarter as well. In fact, I fully expect that over time we will recover in excess of $30 million of this $53 million balance. To the numbers, NPLs and NPAs are basically flat quarter over quarter and are at very manageable levels. Even after this challenging quarter, our allowance for credit losses still provides a 278% coverage of NPLs. Early stage past dues inched up 12 basis points to 1.08%, but included one large matured memory care credit that has been extended since year end and has been placed under contract to sell. We expect it to pay off during the first quarter, and the removal of that credit would bring the past due number in line with that of previous quarters. Earlier I mentioned dispositions, and with assets that are under contract to sell this quarter, we expect to reduce MPAs by $9.5 million or 7% and expect to see a $4.5 million recovery. In addition, through assets that are very close to being under contract, I expect to reduce MPAs in the first quarter by another 28 million or 19% and provide an additional $3 million recovery. At that point, MPAs would be at approximately 105 million dollars or 0.47 percent roughly half of that remaining balance would be the california office building that's in oreo and the florida memory care credits that we have discussed before the office building has reached a point that it makes sense to talk about marketing the property but its proximity to the ongoing fires will likely delay any real opportunity to move that asset the florida memory care credits have exhibited strong occupancy improvements over the second half of 2024 due to a management change but we are waiting to see that translate to an improvement in profitability. The good news is that ownership is still motivated and are continuing to cover any operating shortfalls and the occupancy improvement is promising. I mentioned last quarter that the loan pipeline felt a little soft and that translated into a small loan decline in the fourth quarter. A positive takeaway from that though is that for the second quarter in a row the community bank footprint produced an increase of over 120 million dollars while CCFG contracted by 13 percent over the last half of 2024. We know that CCFG's loan balances will come back and we still see solid production out of the community bank markets. As for the hurricanes we experienced in Florida in September and October we've placed approximately $33 million in reserve for potential losses. As of year end, we had approximately $110 million in loans in those areas that are in some form of payment deferral. It's still too early to tell what losses we might experience here, but as these deferrals mature, the picture will become more clear. We may be able to shed some more light on that next quarter. As you can see, it was a challenging quarter, but there are very few companies, maybe none, that can make the moves that we made while continuing to maintain strong profitability and a low loss reserve that is still higher than almost anyone. This is why we built the Fortress Balance Sheet and more than ever I'm very proud that we did. Donna, that's all I got.

Thank you Kevin. Johnny before we go to Q&A, do you have any additional comments?

Well, let's see if Brian, do you have any comment on the report?

No, it's been a good year, a record year for the 400 million, so.

Tracy? Good report by you Mr. Allison good leadership thank you Steven Kevin good reports on all that but also just like to thank the Centennial Bank the Happy Bank and the home bank share staff for making improvements and loans deposits non-interest income non-interest expense they also would like to remind them they gotta get a little better.

Exactly right well I think lots of highlights, but I think deposits were, Stephen, surprising. Brian, they were really strong. Our deposits were really strong. I think the strength of our company being able to pay out all insured deposits has probably served us very well, and we're still in that position today. But I was, I think we were pleasantly surprised by the amount of deposits we've got. Yeah, particularly you know on the core uh deposit balances with non-interest fairing balances being up very pleased to see that continued growth this year that's good liquidity i like the fact that we said we told you last quarter we we wouldn't get ourselves into a position where we couldn't pay out all insured deposits and we have not done that this actually strengthens that and brian you paid off the the fed program right no we paid off cost $700,000,000 of that and we still had today. That speaks well for the company. So, anyway, I think, Donald, we'll go to Q&A if you're ready.

We're ready, thank you.

Thank you, we will now open the call for your questions. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind and would like to exit the queue, please press star followed by two. And finally, when preparing to ask your question, please ensure that your device is unmuted locally.

Our first question will be from the line of Catherine Miele with KBW. you please go ahead thanks good afternoon afternoon start on growth and see you growth is a little bit slow this quarter as you predicted that it would be on the last quarter's call but just curious what you're thinking about for for 25 and and Johnny if we're right if we are going to be in a higher for longer rate environment how do you think that impacts growth for this year I think that plays to us well higher for longer I think that that you can see the run rate that the company has maintained through this higher higher rate environment and and Stephen and Kevin have

done an excellent job Kevin holding up the yields and and Stephen working on the cost of fund side you can see the margin came out I think he said we exited it for what 442 442 so I think that plays really well to home I like it so I it looks like we're running about where we ran a little better than what we ran the first month the first month of the fourth quarter so I'm pretty optimistic I think loans are going to be a little slow this quarter but I think they'll come on in the second quarter we'll start seeing that particularly Florida seem to have a lot of stuff Kevin you got a comment on that yeah I mean I think the higher for longer is going to it's going to be a

plus and a minus i mean it'd be interesting to see how that plays out with you know we're seeing when rates dropped 100 basis points we saw a lot of folks coming back with some of the sixes and you know other stuff that's that's hard to compete with this may slow them down a little bit now if their belief is that rates are going to stay where they're at so that'll play to us um rates staying up don't help it doesn't help underwriting so that may work against us a little bit. So just be interesting to see how that plays out. I will say that we've had good, as you can see from the comments we had, we've had really good couple of quarters in the community bank markets. They've held up well, and each region has grown over that period of time. So I'm encouraged by that for sure.

I mean, this 442 exit margin is really high.

Do you see expansion from there, or is it more about just keeping us keeping it stable hey catherine this is steven you know i think can say messages as last quarter i mean i think with where we're at with rates today if we can if we can keep in line with where we're at to be pleased um we'll continue to be able to reprice the cd book which is small you know relative to the overall deposit base but that should continue to come down a little bit and then you know still trying to work some of the fixed rate maturities this year that potentially can uh can reprice a little higher so but i would be pleased if if we can hold in that range uh

where we exited the quarter the toughest time for us is when when when rates start coming down and the rest of the market jumps and things are going to lock people in at six and then that becomes a that becomes pretty tough times and as rate come down someone said well you got a lot of fixed rate and I said well what is a fixed rate? I said fixed rate's about a point that's what it is you know somebody drop a point below you and you got a fixed rate if you don't have a prepayment penalty they're gone so and then they just end up the it becomes a race to the bottom again like we had in the last cycle so I hope that that's the toughest time in the space and hopefully so far so good here and home bank shares but it it gets it's frustrating uh that's really frustrating times got it okay thank you thank you katherine our next question will be from the line of brett rabbiton with of the group please go ahead your line is open hey thanks good afternoon

everyone hi brett wanted wanted to start on the on deposits and and johnny you said you were a surprised at the deposit strength this quarter um was was there anything that you would call out as maybe unusual in the deposits this quarter of you know um and just as you think about the outlook for the year you know assuming deposit or assuming rates don't change much you know do you have a pipeline of deposits you think will continue from from the strength in the fourth quarter or any thoughts on where you see the deposit outlook from here?

I can't answer that. I was concerned about the policy and when Brian paid off the Fed 700 million dollars I thought well we may end up having to be in a barred position but it just it didn't it just flowed. I mean the deposits flowed in in the home and we haven't done anything uncharacteristic as you can see by the cost of funds and they've just rolled in. I think the fact that we can pay out all uninsured deposits has separated us from the pack and there's lots of several banks that can do that but most banks can't do it. I think that has helped us. We have promoted it. We never ran a CD ad, not one during the entire time cycle that we went through. We never ran a CD ad. We ran strength ads And I think that paid off for home bank shares that we have the ability to pay out. And we committed to our depositors that we wouldn't get ourselves in a position that we couldn't do that. And we haven't done it. So we're extremely pleased. Brian, you got any comment on the deposit side?

No, it was just kind of from all over the board. And so it wasn't one big smoking gun that brought it up.

Which is good. I mean, it's coming from different areas. Somebody didn't walk in and put $400 million to mine. So that's positive. That's very positive. you know will it continue I suspect we're a business bank we have actually customers we're not transaction bank we're a real business bank and maintain those relationships and and I guess that's paying I guess that's paying dividends. Stephen you agree?

Yeah no I don't have anything to add I mean I you know competition's still rampant today um you have to deal with that that's nothing new but uh no very very pleased with the quarter and um see where the year goes okay that's helpful um and then one i'm sorry what was that johnny i said that's the best we can do okay yeah all right great um the other thing i wanted to ask about was just you know capital and and the outlook for for m a and your capital ratios are the the highest they've been the past decade and you know i know you've been thinking that maybe the

btfg program winding down would create some opportunities but wanted just to hear your thoughts on usage of capital and just how you see um the mna environment and if it looks looks good for you and you know any color on any conversations you might be having how those things are going well we're excited we have this big charge off we've seen we didn't cleaned up to had our texas cleanup we were on a trade we'd signed the letter of intent on the trade and we paused that transaction because we didn't want to number one we were totally transparent with the other side so we just paused the transaction will it come back maybe it will maybe it won't I can't answer that but we're we're obviously looking at M&A and and we we you know you look at it the company did a 177 ROA and without the the hurricane reserves it did a two percent so I can't ask for any more than that as you've heard me say in the past we need more assets we need to bring in more assets we need to find something and the other transaction we're own was a good transaction and I think it would have worked out well for us it was in a market where we already have have business and but we wanted to will that come back I don't know I said you move on do what you need to do we want to be fair with you we got this loss and you don't understand it so we'll explain it to you and we're going to charge it off and clean clean it up and if you want to come back after some point in time come back and if you don't that's fine too so we're totally transparent and they were very appreciative of the fact that we that we told them what we told them so the answer is yes we're looking for the next train okay great um appreciate all the color congrats on a great 2024. thank you very much i appreciate it our next question today will be from the line of john astrum with rbc please go ahead your line is hey thanks good afternoon afternoon john hey um kevin can you um can you walk through what

went into npas this quarter and then review again what was coming out i was writing kind of fast but i just want to make sure i understand what went in and what do you think is coming out in q1 uh so a couple of the deals that that were on the charge off list were not in npas yet and that's primarily due to the fact that we were you know we've been working with these clients for a couple of quarters Johnny's you know been telling you guys that we had this this coming we we worked through a couple of these credits these were larger credits that you know we were working with customers trying to figure out a way to to make it work and keep them limping along and I think we reached that point where we decided this is not the best exit so So when you take that charge and you move it to non-accrual, that's why those went up during the fourth quarter. Now, what you will see, as I talked about in the comments, you're going to have some dispositions in this quarter that I think could total between $30 and $40 million that will reduce those MPAs back down even below where we were at 930.

And so that's the timing of how this will work. the the big charge off of the group the big charge off of the group is current yeah half of it's not even any half of it we that's a credit we argued about it's current and and it never hit it never hit non-performing it it's a current credit they're current today they were current yesterday last week last month six months ago so anyway that's the credit that that we we disagreed about, but that's the reason. That didn't come out of non-performing because it never went on non-performing.

That's helpful. And then it seems like you guys scrubbed things pretty hard, but how do you want us to think about a provision from here?

Well, you know, we've scrubbed as hard as we could, including, when you get down to right in Alabama off $8,000 and Florida off 444,000 when you get when you scrub that hard you know I don't know that we're probably going to leave provision in the realm that it is right now I like a two percent reserve because it's always worked for me and it's always worked day in and day out and when you think about all we've been through with the pandemics and the worst financial crisis in the history of this country and inflation you know, what can possibly go wrong next, right? We just were prepared with a 2% and it worked for us. And that, you know, I don't know about all the analytics and Kevin and his team works on that, but I do know 2% works. So, I'm just, I'm comfortable with that. We'll go back to that at some point in time, but we're not in a hurry, particularly after this scrubbing. I mean, you got to dig to find something. So, if there is something, I don't what it is i can tell you that so i'm pretty pleased with where we sit we're really teed up really well for for 25. so i wouldn't expect us to be making any big allocations if we have an opportunity to have a windfall if we can put it in reserve we'll we'll try to do that yep okay um and i asked you this last quarter i'll ask it again how do you feel about the run rate i mean if you take out the hurricane provision it's you know it's yeah i know you guys are wringing your hands over the cleanup but how do you feel about the run rate yeah the run right's good the run rate's good and i feel good about the run right now we got you know we just increased salaries and you know you got insurance went up i've heard did a good job when insurance went up one percent but we've done a, we've had about a million and a half, a quarter in increase in salaries. So that's coming in. Outside of that, I don't know, you know, you got the inflationary feel of it. And we went over the 111 last quarter. I think we did 112 million three or something like that. Keeping it at 111 million with these salary increases is going to be difficult. But I'm going to let it run for a little bit here, look at it, and if we're going to get fat, we'll cut it back. So I'm not going to let it run away, if that's your point. So I like our run rate right now. I like what I'm seeing in our run rate. The good news is it's been consistent. You just look at over the past 12, 18 months, 24 months, you see it's like it's humming. It's like the machine is doing what it's supposed to be doing. and we had the little Texas blow up that we cleaned up. But outside of that, the company is actually, it's hitting on our light.

Yep. Yep. It seems that way. Okay. Thanks a lot. I appreciate it.

I appreciate you.

Our next question today will be from the line of Michael Rose with Raymond James. Please go ahead. Your line is open. Hey, good afternoon, guys.

I hope everyone's doing well. I just wanted to discuss the decline in, I mean, if Chris Fulton's there, the decline in CFG loans, you know, this quarter, what the outlook could be, and then, you know, at least on the West Coast portion of the franchise, you know, any impacts from the wildfires. Thanks.

Chris, I think Chris took off, I think they took off the last six months, maybe the last three months.

I'm not sure. go ahead well it was nice while it lasted um the uh yeah quite frankly largely is in our cni book our commercial real estate book is still kind of at or or above where it's where it's been um and uh we we had increased our cni book over the kind of 21 22 time frame because we saw some good opportunities and structured finance, and we put money out on that. We kind of always intended to allow that to kind of run down, and we allowed that to happen. Maybe took it down a little further than I had originally intended, but we'll look for some opportunities, maybe put some money back to work in that space. Pricing came down there, and I didn't love it, and so we showed some discipline and allowed those facilities to pay off. Didn't go into the rollover facility when the price came down we're seeing some opportunities to come back into some of those now a different pricing and we'll probably do that um on the real estate side i i think we you know continue to see good good deal flow uh we you know we see all the transactions for the most part uh um you know it's a matter of the types of things we're looking to do or not to do uh we cleared out the pipeline towards the end of last year because there were some things in there that i just didn't think reflected maybe the current state of the market and so we challenged the team to go and rebuild the pipeline, which they've done. I think we'll have a good year. But we originated about billion, two billion, three in total last year. So it was a big year for us, just happened to be more towards the first half of the year, which gave us a little bit of time to be patient in the second half of the year. Portfolio growback. We like the portfolio around two billion, and we've come down a little bit from that. So we'll probably get back to that. your question on on the west coast and and and regarding the fires um uh you know fortunately we have no direct um you know we have no direct exposure to any property that's in a fire zone etc so uh fortunately for that uh we'll sort of see how you know la transitions over the next uh you know a few months into the next few years on what that's going to mean in terms of more or less opportunity for us. But our presence in terms of loans and properties in Los Angeles is actually fairly small and nothing was directly impacted. So we'll have to wait to see in terms of over the next couple of weeks, whether there's anything more tertiary. But again, nothing that we see right now.

Great caller. Very, very helpful. Maybe just a follow-up outside of CFG, just on the ability to grow this year. I think what we're hearing from the larger banks is, you know, there's not a ton of demand out there, but there's a lot of green shoots. But then there's the competitive aspect, right? And you guys have historically been very, you know, firm on pricing. You know, I think we call it Johnny Prime, right? I got that correct.

And, you know, does the hire for longer environment actually help you in your ability to lock in kind of higher yields or Johnny prime or is the competitive aspect you know just going to have more loans you know go away from you so i'm just trying to balance the puts and takes as we think about long growth moving forward thanks michael i think it's both i think you you hit on both of them it could by hanging in here and you know maybe some of our competition not not going to the crazy numbers down low that very well could help us hang in here with some of the better better yields but you know it also doesn't help underwriting when you're you know when your stuff has sevens and eights in front of it so those are that's those are going to offset each other and to the degree one is better than the other will tell how how growth is going to look I know we do have in particularly if you see the last two quarters in the community bank markets each of the markets have have grown and there's a lot of good things happening out in the community bank side uh will it translate to growth it very well could but there are definitely some competitive pressures out there that could could make that more difficult got it um thanks kevin very helpful maybe just finally for me johnny this is what you're looking for in a deal change and kind of what is expected to be

kind of the deregulatory environment, and do you feel kind of a greater, you know, urge to do something if competitors around you are going to start, you know, doing deals? We've seen a few already. You know, does that, you know, kind of push the ball forward in your mind, the need to get something done, or are you just going to continue to be opportunistic as you move forward despite your very high capital levels?

Yeah, not really. We're going to be opportunistic. We're we're looking for opportunities and and this other one we stepped up on the price on this other day we were on and it's still accretive to to our our company but uh we're not we're not chasing anything we're not chasing anything we're just going we'll take it as they come and there's lots of opportunities out there and a lot of the people as you know smaller banks are ready to to put ourselves in stronger hands with stronger capital based banks. So I think we're going to have a good run and everybody, we went up 1.5 trillion in the day Trump got elected. I mean there's excitement out there. We're going to see less regulations. We're going to get more stuff done. They're going to take their, I think we'll get the regulatory side and take their foot off our throat and hopefully we'll get transactions done in a reasonable time and not drag them out forever and ever and ever. If you can do that, I mean, you get kind of tired of fighting the battle every day when you're trying to get a transaction completed. But if we can start getting those deals done in four months or five months, I think you'll see Bank M&A really pick up. I think it'd be good for the entire industry and I think we'll see less regulations. I'm optimistic. The excitement is good. I'm a Trump guy, as you know, but the excitement's good, and I think that we know what he did last time. We expect him to do about the same thing this time.

Great. I'll step back. Thanks for taking my questions.

Thank you. Appreciate you.

Our next question will be from the line of Matt Colney with Stevens. Please go ahead. Your line is open.

Yeah, thanks for taking the question, guys. Hey, good afternoon. Good afternoon. I want to go back to the credit discussion and and kevin you provided lots of good details already and perhaps i missed this but any more color you can provide around the level of criticized and classified loan uh balances at uh december 31st as as compared to the previous quarter yeah criticized special mention was flat uh from quarter to quarter and uh classified loans were down about 22 million compared to 930 okay perfect thank you for that kevin and then um switching gears going back to the deposit discussion um appreciate that the the sources

of those deposit growth was kind of all over from various markets um any any just color about the competitive levels by by state any just color on the overall um kind of incremental pricing that you're seeing on on some of those uh deposit balances hey matt this is steven um no not really any differentiation by state uh you know there's a couple of regional banks that operate in all of the in all of the areas for most of the areas that we do you know you're seeing you know cd ads in the 420 uh plus range uh you got some small competitors that that will will come out you know even higher than that today. In fact, one of our presidents in Florida sent me a note the other day that we were competing against 480 for six months, I think, which is hard to make a whole lot of sense of that. But yeah, you're still seeing some advertisements out there in the force. You know, when I look at what we did in December on CD volume, we were, I think, about 368 or so all in on on new and and renewed cds so you know we got them coming off at four we're able to reprice them 30 or 40 basis points lower you know i think there's an opportunity to continue to lower uh cost there but we're mindful of we're mindful of our core customer base and we'll defend it uh if we need to against competition but yeah makes sense all right thanks for the call guys appreciate it you get the you asked about the non somebody mentioned not performing earlier

the reason non-performing didn't go down anymore was because that big loan that we charged off never was there was no non-performing it was a there's a performing credit and it still is tonight by the way so you i guess you heard that right you got that yeah i i heard that in a previous response but appreciate the follow-up okay okay okay our next question today will be from the line of steven scout and piper sandler please go ahead your line is now open yeah thanks good afternoon everyone hey um if i could just kind of go back to m a briefly um i'm curious kind

of you know the last two deals you guys have done were i think north of three billion in assets north of six billion in assets so can you give us a feel for kind of the size of a potential deal you'd like to do from here um and and do does the experience from happy does it change the way you think about m&a at all or change the way you approach a potential deal any any trepidation given that experience with with the happy deal well a little bit i mean you have to say it makes you look it makes you look under the covers it makes you look ever every everywhere and every angle of a transaction not that we didn't not that we haven't I mean we've done 25-30 deals here so

but we'll look at it differently you know culture is certainly certainly a key point we probably maybe I didn't give as much credit to culture in the happy deal as we probably should have but it would it makes you a little cautious however the last the one we signed the LOI with we were moving forward with it is about a two and a half billion dollar bank you're talking about size it was about a two and a half billion dollar bank and a nice bank and it was in an area where we operate so that was probably something in that realm however we have we have a bid out on something less than a less than a billion right now for selected reasons were there and we we like the bank and we like the people there so we'd probably I mean we'd do depends on the market where it is and uh depends on what the culture of it is and we'd do from prefer to do something in the billion dollar plus range but we as I said we're we're looking at one less than that it's about 750 million so we're going to get active you'll see us active again out there and hopefully somebody will bring us something that we'll like and we'll do it got it makes sense makes sense and uh you know you spoke to the prospect of regulatory release and obviously i think we all

believe we'll get some of that in some way shape or form and just saw a seismic lemonade deal approved in less than three months which is really encouraging but are there any you know kind of specifics around regulatory relief or maybe compliance or anything that you think could could be particularly beneficial to home bank shares that you see coming down the pipe or that could you know allow you to run more efficiently anything that you're you know targeting or looking to specifically not really uh other than this one disagreeing with the regulator we haven't had disagreed with the regulators in 15 years so uh that uh that was over a credit issue and i still

think they're right but they think they're right so that's why there's a difference of opinion so So anyway, outside of that, Stephen, you got any comments?

No, you mentioned timeline on M&A.

Yeah, if we can get that done where you could go do two deals a year and announce a deal and go get the trade done and get two a year done, I've got to incite lots of people in the marketplace. It would excite us to have that opportunity to do that. And I think we're going to see improvement on that side. You know, if someone just, a guy out of New York protested everything, he protested, an example was our happy deal, and he just, what did you call it?

Copied and pasted.

Copied and pasted, and he put the wrong name down there, had the wrong name down there, you know, and that delayed our deal for 45 to 60 days, and that kind of frustration, I don't think the Trump administration will tolerate that kind of stuff. so uh you know we plus we got a new french hill is the new arkansas he used to work with me at first commercial he's the new head of the senate finance committee i mean house finance financial services committee and he's a banker and he knows what he's doing so i think we'll get some good help out of french too so all good stuff coming down the road and at least there's lots of excitement and enthusiasm johnny the thing that i would say is yeah consumer compliance we spend

we spend a lot of time on consumer compliance a lot of effort time it's anything anything less where we have to spend where we can spend less time doing that kind of stuff and more time out with customers and doing what you know making deals and that certainly would be helpful don't know if it'll happen. Yeah, it would be helpful.

I think that, you know, if you get that information to, we get the information upstream, I think they'll deal with it. I think that, I think they'll deal with this. This is administration, lots of banking and lots of business and they don't want to put their foot on your throat all the time. So I think we got big pluses coming for the industry.

Yeah, I think you're right. I know French Hill even wants to push for more de novo banking, which I think would be good for the sector as well. So maybe last thing for me is just kind of loan growth trends it sounds like you believe 25 could be a better year than 24 maybe starting to pick up in second quarter what kind of gives you confidence there is it is it a mix of things is it payoff decreasing is it you know i think maybe like chris spoke to ccfg picking up a little bit or or is there anything anecdotally or otherwise that makes you feel like growth you know gives you confidence about that growth pickup in 25.

I think I talked about it last quarter. I was down seeing our Miami customers and there is lots of stuff going on in that market. I'm telling you, lots and lots of opportunities to do transactions, good size, medium size, small, large transactions in that area. so our people are excited about that i came back from down there after meeting with our customers really feeling good about what we could do in that marketplace and they just got i mean they've just got a war chest of deals right now so i think that they're i think they're getting pumped up and this was prior to the election but they were all trump supporters and and uh i'm sure they're moving moving forward on the bills. I guess, Kevin, you heard anything recently?

No, I was just encouraged. I mean, it's the same thing across a lot of our markets. I mean, you've talked about what's happened since the election. If that translates to, you know, to the economy really picking up and things happen like that, then I think we're in a great spot being, you know, primarily Texas, Florida, even Arkansas is on the U-Haul list again, fifth or sixth this year for move-in. So I think we're in really, really good markets are going benefit from whatever happens under under the new administration i think that's the big positive got it really helpful thanks guys i appreciate the time congrats on a great year and thanks and being the only stock of my coverage universe that's up on the day so there you go thank you our next question today will be from the line of brian martin with jenny montgomery please go ahead your line is now open hey brian brown are you home

Brian, can you hear me? Brian, can you hear me? Oh, yeah, I got to.

Yep, sorry about that. Yeah, good afternoon, guys. Say, Johnny, last time, last quarter when we talked, it seemed like you guys were on a couple trades, and you kind of went through the transparency and maybe holding off a bit, but it sounded something last quarter that was maybe something more imminent than there was. So it sounds like you're off the trades from last quarter, and you're still aggressively or assertively looking, but maybe nothing is imminent. is the best way to think about it right now and just kind of take it as it comes here as you go in 25?

Yeah we just we just thought because we had this this hiccup that we we need to be fair with them and pause it and then I just call them and I said I think we'll just we'll just pull out we'll just move on and I think they'll get a deal with somebody I got a call from a banker said do you mind if we go ahead I said no go ahead if it doesn't work out and they want to come back to us that'll be fine we'll talk to them see if we can put it together again so but I just thought it's fair to to to be totally transparent with them and as it turned out it was it was a hiccup as I said and not a bit it hadn't still we're still the same company that we were day before we were day before yesterday last month and six months a year ago and two years ago so we're still making the kind of money we've made in the past and we'll continue to do that in the future but we need more assets. We need to find the next trade and we need to buy something.

But we're not going to get stupid to buy it.

We hold pretty tight. We're not diluters, so we don't dilute ourselves. We're not going to do that. We'll see what happens and we're certainly open to any discussion.

Gotcha. Okay. And it sounded like the markets were, no change in the markets. I mean, obviously Florida and Texas and the Carolinas seem to be the kind of the focus you know in the near term?

I would say Florida, Texas and the Carolinas, yes.

Yeah okay perfect and then maybe just one thing back on the credit side I think Johnny you talked about or maybe I misunderstood what you were talking uh as far as the provision and reserves but it sounds like the provisioning you know given the resolutions you're expecting it is pretty negligible here in the short term and kind of getting back to, you know, the timing of kind of getting back to that 2% level, can you give a sense on how you're thinking about that? And do I have that right as far as kind of the negligible provisioning here, you know, near term, given the positive trends in credit quality you expect?

I think that's probably good. I mean, when you scrubbed it where you charged off $8,000 in Alabama yeah I feel good I feel good about our reserve amount still the hurricane's still up in there and and and we're not sure what's going to happen with that still got about 100 million on deferral there we'll see where that goes over the years we've lost the money we at some years we didn't lose any money so time will tell and with two hurricanes it probably longer and with all of what's happening in California I would imagine these adjusters are extremely busy right now so may slow that process down a little bit.

Gotcha and as far as the timing or at least how you're thinking about that two percent level that could be a ways off it could be 12 months out as far as how you think about that.

I'd say 12 to 18 months out is what I'd say. Yeah we're not in any hurry you know if we see something that we need to do we'll make an additional reserve but without that we'll just keep moving down the road and it you know why do you why do you need two percent reserve you need two percent reserve because what all has happened to us the last 10 15 20 years i mean that that's why you carry that kind of reserve nobody can anticipate these these nobody anticipated well maybe some people anticipate the california fiasco but you know nobody anticipated the pandemic. Nobody anticipated inflation doing what it did. Nobody anticipated the great financial crisis. So it just, you never know, that's three major events in 20 years. So why wouldn't you, why wouldn't you, or 19 years, why wouldn't you protect yourself and your shareholders with extra reserve? There's not any reason not to do that.

But we'll build back over through the time when we get when we get an opportunity to build back we'll build back gotcha okay and then maybe just Kevin on the uh on the resolutions you talked about maybe I think you said 30 million or so of of recoveries uh just kind of wondering in terms of how the timing of that how you're thinking about a big picture and then just the I think you also talked about a reduction in NPAs that maybe I missed what you you know what you're talking about there if you could just run back through quickly the the resolution and NPAs you expect you know whether it be over the next couple quarters or next quarter you know kind of whatever you commented on yeah so the next couple of quarters you could see probably between 30 and 40 million reduction in

MPAs and that's just resolving the credits that we've acknowledged here and charged off some on right um we'll work through those at the levels we're at and we'll probably see uh 7 million or so recovery on on that batch and you know that would put us below uh 50 basis points nba npas at that point um so that's the short term of it gotcha okay and then the the the timing of the recovery is that 30 million just in general kind of you know putting a fence around kind of how you're thinking about when those come back what what would you gauge as far as expectations there well you got you've got one credit that the recoveries will come in monthly as they make make payments and so that's that's going to be ongoing for the next you know two three four years assuming that they just continue to uh to operate like they are if they sold the company or uh decided to pay off that note refinance something like that then you'd have it come back in a lot a lot quicker but uh you know half of that number uh is that credit that's that's on a paying you know it's performing it is performing and paying and we'll we'll take those recoveries monthly gotcha okay um fair enough and then maybe just last one for steven just steven i think you

talked about maybe the margin you know being relatively stable can you just give some color on how you're thinking about cost of deposits and and kind of loan yields how they're trending here if we're if the fed's kind of you know sitting sitting idle for you know you know a bit of time here yeah i mean if you know if we're fairly if we're fairly flat there there may be some uh you there may be some additional opportunity you know checking and savings and we have you know some portion of our indexed accounts or contracted accounts uh municipalities that we that schools that we bank that change on on quarterly basis so we have some set of that that just adjusted on january 1st that will that will benefit us in in q1 and then we've got the you know the cd book that i talked about earlier um so there you know there may be opportunities to you know to work that down a couple basic points a month here or there and and hopefully kind of do this you know the same thing to to offset what potentially occurs on the loan side just as as variable rates reset when they do okay yeah just potentially i think potential mix change you know over the course of the year too is if excess cash comes down goes into loans if the securities portfolio comes down, goes into loans, I think, and kind of helps with that, too.

Gotcha. Okay. I think that's all I had, so thanks for the help, and a great closing year.

Okay.

Well, we have no further questions on the line at this time, so I would like to hand the call back to John Allison for some closing remarks.

Thank you very much, and thanks everybody for your support and uh appreciate uh appreciate it i think we'll uh we didn't disappoint in 24 and we won't disappoint in 25 and we'll talk to you all in 90 days thank you thank you this concludes the home bank shares incorporated fourth quarter 2024 earnings call thank you for your participation you may now disconnect