Home BancShares Q4 2024 Earnings Report

Home BancShares EPS Results

• Actual EPS: $0.50
• Consensus EPS: $0.52
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $0.43

Home BancShares Revenue Results

• Actual Revenue: $258.40 million
• Expected Revenue: $256.67 million
• Beat/Miss: Beat by +$1.73 million
• YoY Revenue Growth: +5.20%

Home BancShares Announcement Details

• Quarter: Q4 2024
• Date: 1/15/2025
• Time: After Market Closes
• Conference Call Date: Thursday, January 16, 2025
• Conference Call Time: 2:00PM ET

Home BancShares (NYSE:HOMB) is a bank holding company headquartered in Conway, Arkansas. Its principal subsidiary, Centennial Bank, provides community banking services to individuals, businesses and institutional customers.

Centennial Bank offers a range of deposit products, including checking, savings, money market and certificate of deposit accounts, as well as commercial, residential mortgage, real estate, agricultural and consumer loans. The bank also provides treasury management, online and mobile banking, cash management and other financial services designed for business and retail customers.

Home BancShares was founded in 1998 and has grown through a combination of organic expansion and acquisitions. Through Centennial Bank, it serves customers across Arkansas, Alabama, Florida and Texas, with a network of community banking locations and digital banking capabilities. The company is led by an experienced management team focused on relationship-based banking and long-term growth.

Home BancShares Q4 2024 Earnings Call Transcript

Key Takeaways

• Record annual revenue surpassing $1 billion and net income of $402 million, including Q4 profit of $100.6 million.
• Net interest margin expanded 11 bps in Q4 to 4.39% and exited December at 4.42%, driven by strong loan yields and lower deposit costs.
• Total deposits grew by $441 million in Q4, with noninterest-bearing balances rising to 23.4% of total deposits and funding costs falling to 2.80%.
• Charged off $53.4 million of primarily Texas loans as part of an asset-quality cleanup, while maintaining a robust allowance that covers 278% of nonperforming loans and expecting over $30 million in recoveries.
• Maintained record capital strength with a CET1 ratio of 15.1%, risk-based capital of 18.7%, and tangible book value per share of $12.68.

Presentation

[Operator]

Greetings, ladies and gentlemen. Welcome to the Home Bancshares, Inc.'s 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 one on the touch-tone phone. If you decide you want to withdraw your question, please press star then two to remove yourself from the list. The company has asked me to remind everyone to refer to their cautionary note regarding forward-looking statements. You will find this note on page three of their Form 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.

[Operator]

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 Townsell, Director of Investor Relations.

[Donna Townsell, Head of Investor Relations at Home Bancshares Inc.]

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.

[John Allison, Chairman at Home Bancshares Inc.]

Okay, thank you, Donna. Welcome to Home Bancshares' fourth quarter and year-end earnings release and conference call. The final quarter of 2024 did not disappoint with strong performance of another $100 million profit quarter. And that is after taking a hurricane reserve of $16,700,000 as an abundance of caution we had as the second hurricane hit. We completed our first $400 million profit year. Actually, we earned $402,241,000, 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 are not many banks in this country with the ability to accomplish that feat. I'm very proud of our team for this great accomplishment.

[John Allison, Chairman at Home Bancshares Inc.]

Additional hurricane reserve dinged EPS by $0.06 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 $0.57, and ROA would have been exactly 2% 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 and does not properly give management credit for strong expense reduction in interest expense and strong loan yields.

[John Allison, Chairman at Home Bancshares Inc.]

As I've said in the past, strong loan yields by Kevin's group and low interest expense by Stephen's group makes the peer-leading margin. The question is, can Home improve in 2024? 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, but 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 difference, the only exception will be the actual increase in expenses for 2025. We have broadcasted for a couple of years that we're going to clean up, do what we call the Texas cleanup, which we did.

[John Allison, Chairman at Home Bancshares Inc.]

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 2025. 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. Net income of $100.6 million for the quarter or $0.51. Record income of $402,241,000.

[John Allison, Chairman at Home Bancshares Inc.]

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 Kevin says, "We had record revenue for the year of $1 billion and $17 million." That's quite a bar. I didn't realize we'd hit a billion, but I'm glad that we did. Strong net interest margin remains at 4.39%. Return on assets for the quarter was 1.77%. I think it was for the year too, Brian. I think it was 1.77% for the month.

[Brian Davis, CFO at Home Bancshares Inc.]

It was. Exactly right.

[John Allison, Chairman at Home Bancshares Inc.]

Record CET1 of 15.1%, record risk-based capital of 18.7%, and record book value per share of $19.92 and tangible book value per share of $1,268. PPNR, pre-tax, pre-provision net profit percentage to total revenue was 56.57%. Efficiency ratio for the fourth quarter of 42.24%. Nice improvement over 2023. 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; 2024 was really a strong year for Home, and 2025 should be even stronger.

[John Allison, Chairman at Home Bancshares Inc.]

Outside of that, I just wanted to comment, we got tenant improvements on our 60,000 sq ft out in Amarillo, Texas, for our new tenant. Hopefully, that'll be finished in March, so we should see some of that happening. Some revenue, maybe Stephen coming in next year?

[Stephen Tipton, CEO at Centennial Bank]

Yeah, early spring is what we're targeting now.

[John Allison, Chairman at Home Bancshares Inc.]

Early spring. I wanted to comment on the Texas lawsuit. It's continuing on nicely with fruitful depositions going on at this time. In conclusion, as I said, 2024 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 of regulations. And in addition, the Texas cleanup to mention a few. I think Home is prepared and has a clear path for 2025. Donna, you got it, girl.

[Donna Townsell, Head of Investor Relations at Home Bancshares Inc.]

Thank you, Johnny. Congratulations on a record-breaking year. That was amazing. Our next report today comes from Stephen Tipton.

[Stephen Tipton, CEO at Centennial Bank]

Thanks, Donna. The numbers for Home Bancshares and 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 4.39%. We continued 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.

[Stephen Tipton, CEO at Centennial Bank]

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.

[Stephen Tipton, CEO at Centennial Bank]

Alternative funding sources remain extremely strong, with broker 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, end-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 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.

[Donna Townsell, Head of Investor Relations at Home Bancshares Inc.]

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

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

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 C&I 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.

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

Once that decision was made, it made sense to right-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 in 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 C&I 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 an excess of $30 million of this $53 million balance.

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

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 NPAs by $9.5 million or 7% and expect to see a $4.5 million recovery.

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

In addition, through assets that are very close to being under contract, I expect to reduce NPAs in the first quarter by another $28 million or 19% and provide an additional $3 million recovery. At that point, NPAs would be at approximately $105 million or 0.47%. 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.

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

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, while CCFG contracted by 13% 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 that 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.

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

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 loan 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.

[Donna Townsell, Head of Investor Relations at Home Bancshares Inc.]

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

[John Allison, Chairman at Home Bancshares Inc.]

I want to see if Brian, do you have any comment, Brian, on the quarter?

[Brian Davis, CFO at Home Bancshares Inc.]

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

[John Allison, Chairman at Home Bancshares Inc.]

Tracy?

[Tracy French, Chairman at Centennial Bank]

Good report for you, Mr. Allison. Good leadership. Thank you. And Stephen, Kevin, good reports on all that. But also just like to thank the Centennial Bank, the Happy Bank, and the Home Bancshares staff for making improvements in loans, deposits, non-interest income, non-interest expense. But I also would like to remind them they got to get a little better.

[John Allison, Chairman at Home Bancshares Inc.]

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. We're still in that position today, but I think we were pleasantly surprised by the amount of deposits we've got.

[Stephen Tipton, CEO at Centennial Bank]

Yeah, particularly on the core deposit balances with non-interest-bearing balances being up. Very pleased to see that and look forward to continued growth this year.

[John Allison, Chairman at Home Bancshares Inc.]

That's good liquidity, sir. I like the fact that we said we told you last quarter we wouldn't get ourselves in 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 Fed program, right?

[Brian Davis, CFO at Home Bancshares Inc.]

Yeah, we paid off all $700 million of that, and we still have about $500 million at the Fed today.

[John Allison, Chairman at Home Bancshares Inc.]

That speaks well for the company. So anyway, I think, Donna, we'll go to Q&A if you're ready.

[Donna Townsell, Head of Investor Relations at Home Bancshares Inc.]

We are ready. Thank you.

[Operator]

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 Mealor with KBW. Please go ahead.

[Catherine Mealor, Managing Director at KBW]

Thanks. Good afternoon.

[John Allison, Chairman at Home Bancshares Inc.]

Good afternoon.

[Catherine Mealor, Managing Director at KBW]

I wanted to start on growth and see growth was 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 2025. 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?

[John Allison, Chairman at Home Bancshares Inc.]

I think that plays to us well, higher for longer. I think that you can see the run rate that the company has maintained through this higher-rate environment. Stephen and Kevin have done an excellent job, Kevin holding up the yields and Stephen working on the cost-of-fund side. You can see the margin came out. I think he said we exited at four what?

[Stephen Tipton, CEO at Centennial Bank]

Four fourty-two.

[John Allison, Chairman at Home Bancshares Inc.]

So I think that plays really well to Home. I think that, so it looks like we're running about where we ran a little better than what we ran 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 seemed to have a lot of stuff. Kevin, you got a comment on that?

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

Yeah, I mean, I think the higher for longer is going to be a plus and a minus. I mean, it'll be interesting to see how that plays out with what we're seeing. When rates dropped 100 basis points, we saw a lot of folks coming back with some of the sixes and other stuff that's hard to compete with. This may slow them down a little bit if their belief is that rates are going to stay where they're at. So that'll play to us. Rates staying up doesn't help underwriting, so that may work against us a little bit. So it'll 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.

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

They've held up well, and each region has grown over that period of time, so I'm encouraged by that for sure.

[Catherine Mealor, Managing Director at KBW]

Would you expect, I mean, the 4.42% exit margin is really high? Do you see expansion from there, or is it more about just keeping it stable?

[Stephen Tipton, CEO at Centennial Bank]

Hey, Catherine, this is Stephen. I think the message is the same as last quarter. I mean, I think with where we're at with rates today, if we can keep in line with where we're at and be pleased, we'll continue to be able to reprice the CD book, which is small relative to the overall deposit base, but that should continue to come down a little bit. And then still trying to work some of the fixed-rate maturities this year that potentially can reprice a little higher. But I would be pleased if we can hold in that range where we exited the quarter.

[John Allison, Chairman at Home Bancshares Inc.]

The toughest time for us is 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 pretty tough times. And as rates 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. Somebody drops a point below you, and you got a fixed rate, if you don't have a prepayment penalty, they're gone." And then they just end up 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 at Home Bancshares, but it gets frustrating. That's really frustrating times.

[Catherine Mealor, Managing Director at KBW]

Got it. Okay. Thank you.

[John Allison, Chairman at Home Bancshares Inc.]

Thank you, Catherine.

[Operator]

Our next question will be from the line of Brett Rabatin with Hovde Group. Please go ahead. Your line is open.

[Brett Rabatin, Director of Research at Hovde Group]

Hey, thanks. Good afternoon, everyone.

[John Allison, Chairman at Home Bancshares Inc.]

Hi, Brett.

[Brett Rabatin, Director of Research at Hovde Group]

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

[John Allison, Chairman at Home Bancshares Inc.]

I can't answer that. I was concerned about deposits, and when Brian paid off the Fed $700 million, I thought, "Well, we may end up being a barred position," but it didn't. It just flowed. I mean, the deposits flowed into 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 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.

[John Allison, Chairman at Home Bancshares Inc.]

I think that paid off for Home Bancshares that we have the ability to pay out. We committed to our depositors that we wouldn't get ourselves in a position that we couldn't do that. We haven't done it. We're extremely pleased. Brian, you got any comment on the deposit side?

[Brian Davis, CFO at Home Bancshares Inc.]

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

[John Allison, Chairman at Home Bancshares Inc.]

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

[Stephen Tipton, CEO at Centennial Bank]

Yeah. No, I don't have anything to add. I mean, competition's still rampant today. You have to deal with that, but that's nothing new. But no, very pleased with the quarter and see where the year goes.

[Brett Rabatin, Director of Research at Hovde Group]

Okay. That's helpful. And then one, I'm sorry, what was that, Johnny?

[John Allison, Chairman at Home Bancshares Inc.]

I said that's the best we can do. That's the best we got.

[Brett Rabatin, Director of Research at Hovde Group]

Okay. Yeah. All right. Great. The other thing I wanted to ask about was just capital and the outlook for M&A. And your capital ratios are the highest they've been the past decade. And I know you've been thinking that maybe the BTFP program winding down would create some opportunities. But wanted just to hear your thoughts on usage of capital and just how you see the M&A environment and if it looks good for you and any color on any conversations you might be having, how those things are going.

[John Allison, Chairman at Home Bancshares Inc.]

We're excited. We had this big charge-off week you've seen. We did clean up, had our taxes clean up. We were on a trade. We'd signed a Letter of Intent on a trade, and we paused that transaction because we didn't want to. Number one, we want to be 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 obviously looking at M&A, and you look at it, the company did a 177 ROI, and without the HERC reserves, it did a 2%. So I can't ask for any more than that, as you've heard me say in the past. We need more assets.

[John Allison, Chairman at Home Bancshares Inc.]

We need to bring in more assets, and we need to find something that—and the other transaction we're on was a good transaction, and I think it would have worked out well for us. And it was in a market where we already have business. But 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 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 told them what we told them. So the answer is yes, we're looking for the next trade.

[Brett Rabatin, Director of Research at Hovde Group]

Okay. Great. Appreciate all the color. Congrats on a great 2024.

[John Allison, Chairman at Home Bancshares Inc.]

Thank you very much. I appreciate it.

[Operator]

Our next question today will be from the line of Jon Arfstrom with RBC. Please go ahead. Your line is open.

[Jon Arfstrom, Managing Director at RBC]

Hey, thanks. Good afternoon.

[John Allison, Chairman at Home Bancshares Inc.]

Afternoon, Jon.

[Jon Arfstrom, Managing Director at RBC]

Hey. Kevin, 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?

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

A couple of the deals that were on the charge-off list were not in NPAs yet, and that's primarily due to the fact that we've been working with these clients for a couple of quarters. Johnny's been telling you guys that we had this coming. We worked through a couple of these credits. These were larger credits that we were working with customers trying to figure out a way 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 when you take that charge and you move it to non-accrual, that's why those went up during the fourth quarter.

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

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 million and $40 million that will reduce those NPAs back down even below where we were at 930. And so I mean, that's the timing of how this will work.

[John Allison, Chairman at Home Bancshares Inc.]

The big charge-off of the group is current.

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

Yeah. Half of it's not even in NPA.

[John Allison, Chairman at Home Bancshares Inc.]

Half of it, that's a credit we argued about. It's current, and it never hit non-performing. It's a current credit. They're current today. They were current yesterday, last week, last month, six months ago. So anyway, that's a credit that we disagreed about, but that's the reason that didn't come out of non-performing because it never went on non-performing.

[Jon Arfstrom, Managing Director at RBC]

Right. Okay. Okay. 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?

[John Allison, Chairman at Home Bancshares Inc.]

We've scrubbed as hard as we could, including when you get down to writing Alabama off $8,000 and Florida off $444,000. When you scrub that hard, I don't know that we're probably going to leave provision in the realm that it is right now. I like a 2% 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, what can possibly go wrong next, right? We just were prepared with a 2%, and it worked for us. And 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 comfortable with that.

[John Allison, Chairman at Home Bancshares Inc.]

We'll go back to that at some point in time, but we're not in any hurry, particularly after this scrubbing. I mean, you got to dig to find something. So if there is something, I don't know 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 2025. So I wouldn't expect us to be making any big allocations. If we have an opportunity to have a windfall that we can put it in reserve, we'll try to do that.

[Jon Arfstrom, Managing Director at RBC]

Yep. Okay, 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. I know you guys are wringing your hands over the cleanup, but how do you feel about the run rate?

[John Allison, Chairman at Home Bancshares Inc.]

Yeah. The run rate's good. The run rate's good, and I feel good about the run rate. We just increased salaries, and insurance went up. I heard we did a good job on insurance. Insurance went up 1%, but we've had about $1.5 million a quarter in increase in salaries. So that's coming in. Outside of that, I don't know if you got the inflationary feel of it, and we went over the $111 million 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 and look at it, and if we're going to get fat, we'll cut it back.

[John Allison, Chairman at Home Bancshares Inc.]

I'm not going to let it run away, if that's your question. 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. We had the little Texas blow-up that we cleaned up. But outside of that, the company is actually, it's hitting on our lane.

[Jon Arfstrom, Managing Director at RBC]

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

[John Allison, Chairman at Home Bancshares Inc.]

Thanks, Jon. Appreciate you.

[Operator]

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

[Operator]

Hey, good afternoon, guys. Hope everyone's doing well.

[John Allison, Chairman at Home Bancshares Inc.]

Hi, Mike.

[Michael Rose, Managing Director at Raymond James]

Just wanted to discuss—I mean, if Chris Poulton's there, the decline in CCFG loans this quarter, what the outlook could be, and then at least on the West Coast portion of the franchise, any impacts from the wildfires. Thanks.

[John Allison, Chairman at Home Bancshares Inc.]

Chris, I think Chris took off. I think they took off the last six months, maybe it's the last three months. I'm not sure, Chris. Go ahead, Chris.

[Christopher Poulton, President of Centennial Commercial Finance Group at Centennial Bank]

It was nice while it lasted. Yeah. The, quite frankly, largely is in our C&I book. Our commercial real estate book is still kind of at or above where it's been. And we had increased our C&I book over the kind of 2021, 2022 time frame because we saw some good opportunities in 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.

[Christopher Poulton, President of Centennial Commercial Finance Group at Centennial Bank]

We're seeing some opportunities to come back into some of those now at different pricing, and we'll probably do that. On the real estate side, I think we continue to see good deal flow. We see all the transactions for the most part. It's a matter of the types of things we're looking to do or not to do. 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 $1 billion, $2 billion, $3 billion in total last year. So it was a big year for us.

[Christopher Poulton, President of Centennial Commercial Finance Group at Centennial Bank]

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 will grow back. We like the portfolio around $2 billion, and we've come down a little bit from that. So we'll probably get back to that. Your question on the West Coast and regarding the fires, fortunately, we have no direct exposure to any property that's in a fire zone, etc. So fortunately for that, we'll sort of see how LA transitions over the next few months and 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.

[Christopher Poulton, President of Centennial Commercial Finance Group at Centennial Bank]

So we'll have to wait and see in terms of the next couple of weeks whether there's anything more tertiary. But again, nothing that we see right now.

[Michael Rose, Managing Director at Raymond James]

Great color. Very, very helpful. Maybe just a follow-up outside of CCFG, just on the ability to grow this year. I think what we're hearing from the larger banks is 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? You guys have historically been very firm on pricing. I think we call it Johnny Prime, right? If I got that correct. And does the higher-for-longer environment actually help you in your ability to lock in kind of higher yields or Johnny Prime, or is the competitive aspect just going to have more loans go away from you?

[Michael Rose, Managing Director at Raymond James]

I'm just trying to balance the puts and takes as we think about loan growth moving forward. Thanks.

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

Michael, I think it's both. I think you hit on both of them. It could, by hanging in here and maybe some of our competition not going to the crazy numbers down low, that very well could help us hang in here with some of the better yields. But it also doesn't help underwriting when your stuff has sevens and eights in front of it. So those are going to offset each other. And to the degree one is better than the other will tell how growth is going to look. I know we do have, particularly you see in the last two quarters in the community bank markets, each of the markets have grown, and there's a lot of good things happening out in the community bank side. Will it translate to growth?

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

It very well could, but there are definitely some competitive pressures out there that could make that more difficult.

[Michael Rose, Managing Director at Raymond James]

Got it. Thanks, Kevin. Very helpful. Maybe just finally for me, Johnny, 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 urge to do something if competitors around you are going to start doing deals? We've seen a few already. Does that kind of push the ball forward in your mind, the need to get something done, or you're just going to continue to be opportunistic as you move forward despite your very high capital levels?

[John Allison, Chairman at Home Bancshares Inc.]

Yeah, not really. We're going to be opportunistic. We're looking for opportunities. And this other one, we stepped up on the price on this other deal we were on, and it's still accretive to our company. But we're not chasing anything. We're not chasing anything. We're going to 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 put themselves 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 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 to take their foot off our throat.

[John Allison, Chairman at Home Bancshares Inc.]

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, I think you'll see bank M&A really pick up. And I think it'll 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.

[Michael Rose, Managing Director at Raymond James]

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

[John Allison, Chairman at Home Bancshares Inc.]

Thank you. Appreciate you.

[Operator]

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

[John Allison, Chairman at Home Bancshares Inc.]

Hi, Matt.

[Matt Olney, Managing Director at Stephens]

Yeah. Thanks for taking the question, guys. Hey, good afternoon. Good afternoon. I want to go back to the credit discussion. 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 balances at December 31st as compared to the previous quarter?

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

Yeah. Criticized/special mention was flat from quarter-to-quarter, and classified loans were down about $22 million compared to $930 million.

[Matt Olney, Managing Director at Stephens]

Okay. Perfect. Thank you for that, Kevin. And then switching gears, going back to the deposit discussion, appreciate that the sources of those deposit growth was kind of all over from various markets. Any just color about the competitive levels by state? Any just color on the overall kind of incremental pricing that you're seeing on some of those deposit balances?

[Stephen Tipton, CEO at Centennial Bank]

Hey, Matt. This is Stephen. No, not really any differentiation by state. There's a couple of regional banks that operate in all of the areas or most of the areas that we do. You're seeing CD ads in the 420+ range. You've got some small competitors that will come out even higher than that today. In fact, one of our presidents at 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 fours. When I look at what we did in December on CD volume, we were, I think, about 368 or so all in on new and renewed CDs. So we got them coming off at 4.

[Stephen Tipton, CEO at Centennial Bank]

We're able to reprice them 30 or 40 basis points lower. I think there's an opportunity to continue to lower costs there. But we're mindful of our core customer base, and we'll defend it if we need to against competition, but.

[Matt Olney, Managing Director at Stephens]

Okay. Yeah. Makes sense. All right. Thanks for the color, guys. Appreciate it.

[John Allison, Chairman at Home Bancshares Inc.]

Thanks, Matt. Hey, Matt, you asked about the non-performing. Somebody mentioned non-performing earlier. The reason non-performing didn't go down anymore was because that big loan that we charged off never was on non-performing. It was a performing credit, and it still is today, by the way. So I guess you heard that, right? You got that?

[Matt Olney, Managing Director at Stephens]

Yeah. I heard that in a previous response, but appreciate the follow-up.

[John Allison, Chairman at Home Bancshares Inc.]

Okay. Okay. Thanks.

[Operator]

Our next question today will be from the line of Stephen Scouten of Piper Sandler. Please go ahead. Your line is now open.

[Stephen Scouten, Managing Director at Piper Sandler]

Yeah. Thanks. Good afternoon, everyone. Hey, if I could just kind of go back to M&A briefly. I'm curious kind of the last two deals you guys have done were, I think, north of $3 billion in assets, north of $6 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? And 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 trepidation given that experience with the Happy deal?

[John Allison, Chairman at Home Bancshares Inc.]

A little bit. I mean, you have to say it makes you look under the covers. It makes you look everywhere at every angle of a transaction. Not that we didn't. Not that we haven't. I mean, we've done 25, 30 deals here. But we'll look at it differently. Culture is certainly a key point. Maybe I didn't give as much credit to culture in the Happy deal as we probably should have, but it makes you a little cautious. However, the one we signed an LOI with, we were moving forward with, and it's about a $2.5 billion bank. You're talking about size. It was about a $2.5 billion bank and a nice bank, and it was in an area where we operate. So that was probably something in that realm.

[John Allison, Chairman at Home Bancshares Inc.]

However, we have a bid out on something less than $1 billion right now for selected reasons we're there. We like the bank, and we like the people there. We'd probably—I mean, we'd do—depends on the market where it is and depends on what the culture of it is. We'd prefer to do something in the $1 billion-plus range. We're looking at one less than—it's about $750 million. We're going to get active. You'll see us active again out there. Hopefully, somebody will bring us something that we'll like, and we'll do it.

[Stephen Scouten, Managing Director at Piper Sandler]

Got it. Makes sense. Makes sense. And you spoke to the prospect of regulatory relief. And obviously, I think we all believe we'll get some of that in some way, shape, or form. And just saw a sizable M&A deal approved in less than three months, which is really encouraging. But are there any kind of specifics around regulatory relief or maybe compliance or anything that you think could be particularly beneficial to Home BancShares that you see coming down the pipe or that could allow you to run more efficiently? Anything that you're targeting or looking to specifically?

[John Allison, Chairman at Home Bancshares Inc.]

Not really. Other than this one disagreement with the regulator, we haven't had a disagreement with the regulators in 15 years. So that was over a credit issue. And I still think we're right, but they think they're right. So that's why there's a difference of opinion. So anyway, outside of that, Stephen, you got any comment?

[Stephen Tipton, CEO at Centennial Bank]

No, you mentioned timeline on M&A. I mean, that's—

[John Allison, Chairman at Home Bancshares Inc.]

Yeah. If we can get the time—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 think that'd excite 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. If someone just—a guy in New York protested everything. He protested an example was our Happy deal, and he just—what'd you call it?

[Donna Townsell, Head of Investor Relations at Home Bancshares Inc.]

Copied and pasted.

[John Allison, Chairman at Home Bancshares Inc.]

Copied and pasted. And he put the wrong name down there, had the wrong name down there. And that delayed our deal for 45-60 days. And that kind of frustration. I don't think the Trump administration will tolerate that kind of stuff. So 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 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 Hill too. So all good stuff coming down the road. And at least there's lots of excitement and enthusiasm.

[Stephen Scouten, Managing Director at Piper Sandler]

Johnny, the thing that I would say is consumer compliance. We spend a lot of time on consumer compliance, a lot of effort, time. 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, making deals, and that certainly would be helpful. Don't know if it'll happen. It would be helpful.

[John Allison, Chairman at Home Bancshares Inc.]

I think that we get the information upstream. I think they'll deal with it. This is an administration that likes banking and likes 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.

[Stephen Scouten, Managing Director at Piper Sandler]

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 2025 could be a better year than 2024, maybe starting to pick up in second quarter. What kind of gives you confidence there? Is it a mix of things? Is it payoff decreasing? Is it, I think, maybe like Chris spoke to, CCFG picking up a little bit? Or is there anything anecdotally or otherwise that makes you feel like growth gives you confidence about that growth pickup in 2025?

[John Allison, Chairman at Home Bancshares Inc.]

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. 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. They just got, I mean, they've just got a war chest of deals right now. I think they're getting pumped up. This was prior to the election, but they were all Trump supporters. I'm sure they're moving forward on their deals. I guess, Kevin, you heard anything recently?

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

No, I was just encouraged. I mean, 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 the economy really picking up and things happening like that, then I think we're in a great spot, being in primarily Texas, Florida. Even Arkansas is on the U-Haul list again, fifth or sixth this year for move-ins. So I think we're in really, really good markets that are going to benefit from whatever happens under the new administration. I think that's the big positive.

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

Got it. Really helpful. Thanks, guys. I appreciate it. Congrats on a great year, and being the only stock in my coverage universe is up on the day. So there you go.

[John Allison, Chairman at Home Bancshares Inc.]

Thank you. Appreciate it.

[Operator]

Our next question today will be from the line of Brian Martin with Janney Montgomery. Please go ahead. Your line is now open.

[John Allison, Chairman at Home Bancshares Inc.]

Hey, Brian. Brian, are you on?

[Brian Martin, Director at Janney Montgomery]

Yep.

[Operator]

Martin? Oh, there we go. Sorry about that.

[Brian Martin, Director at Janney Montgomery]

Yep. Sorry about that. Thanks. Yeah. Good afternoon, guys. See, Johnny, last quarter when we talked, it seemed like you guys were on a couple of trades, and you kind of went through the transparency and maybe holding off a bit. But it sounded like something last quarter, there 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 2025?

[John Allison, Chairman at Home Bancshares Inc.]

Yeah. We just thought because we had this hiccup that we need to be fair with them and pause it. And then I just called them and I said, "I think 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 who said, "Do you mind if we go ahead?" I said, "No, go ahead." He said, "If it doesn't work out and they want to come back to us, that'll be fine. We'll talk to them. We'll see if we can put it together again." But I just thought it was fair to be totally transparent with them. And as it turned out, it was a hiccup, as I said.

[John Allison, Chairman at Home Bancshares Inc.]

And on a bid, it hadn't. We're still the same company that we were the day before yesterday and last month and six months and 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. But we hold pretty tight. We're not going to dilute. 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.

[Brian Martin, Director at Janney Montgomery]

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 kind of the focus in the near term.

[John Allison, Chairman at Home Bancshares Inc.]

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

[Brian Martin, Director at Janney Montgomery]

Yeah. Okay. Perfect. And then maybe just one thing back on the credit side. I think, Johnny, you talked about it, or maybe I misunderstood what you were talking as far as the provision and reserves. But it sounds like the provisioning, given the resolutions you're expecting, is pretty negligible here in the short term. And kind of getting back to 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 near term, given the positive trends and credit quality you expect?

[John Allison, Chairman at Home Bancshares Inc.]

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

[Brian Martin, Director at Janney Montgomery]

Gotcha. And as far as the timing, or at least how you're thinking about that 2% level, that could be a ways off. It could be 12 months out as far as how you think about that.

[John Allison, Chairman at Home Bancshares Inc.]

I'd say 12 to 18 months out is what I'd say.

[Brian Martin, Director at Janney Montgomery]

Yeah.

[John Allison, Chairman at Home Bancshares Inc.]

We're not in any hurry. 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 why do you need 2% reserve? You need 2% reserve because what all's happened to us the last 10, 15, 20 years? I mean, that's why you carry that kind of reserve. Nobody can anticipate these. Nobody anticipated. Well, maybe some people anticipated the California fiasco, but nobody anticipated the pandemic. Nobody anticipated inflation doing what it did. Nobody anticipated the great financial crisis. So you never know. That's three major events in 20 years. So 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 a period of time. When we get an opportunity to build back, we'll build back.

[Brian Martin, Director at Janney Montgomery]

Gotcha. Okay. And then maybe just, Kevin, on the resolutions, you talked about maybe—I think you said $30 million or so of recoveries. Just kind of wondering in terms of 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. Maybe I missed what you were talking about there. If you could just run back through quickly the resolution and NPAs you expect, whether it'd be over the next couple of quarters or next quarter, kind of whatever you commented on.

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

Yeah. So the next couple of quarters, you could see probably between $30 million and $40 million reduction in NPAs. And that's just resolving the credits that we've acknowledged here and charged off some on, right? We'll work through those at the levels we're at. And we'll probably see $7 million or so recovery on that batch. And that would put us below 50 basis points NPAs at that point. So that's the short term of it.

[Brian Martin, Director at Janney Montgomery]

Gotcha. Okay. And then the timing of the recovery, is that 30 million just in general, kind of putting a fence around kind of how you're thinking about when those come back? What would you gauge as far as expectations there?

[Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.]

You've got one credit that the recoveries will come in monthly as they make payments. And so that's going to be ongoing for the next two, three, four years, assuming that they just continue to operate like they are. If they sold the company or decided to pay off that note, refinance, something like that, then you'd have it come back in a lot quicker. But half of that number is that credit that's on a paying, it's performing and paying. And we'll take those recoveries monthly.

[Brian Martin, Director at Janney Montgomery]

Gotcha. Okay. Fair enough. And then maybe just last one for Stephen. Just Stephen, I think you talked about maybe the margin being relatively stable. Can you just give some color on how you're thinking about cost of deposits and kind of loan yields, how they're trending here if the Fed's kind of sitting idle for a bit of time here?

[Stephen Tipton, CEO at Centennial Bank]

Yeah. I mean, if we're fairly flat, there may be some additional opportunity checking and savings. I mean, we have some portion of our indexed accounts or contracted accounts, municipalities, schools that we bank that change on quarterly basis. So we have some set of that that just adjusted on January 1st that will benefit us in Q1. And then we've got the CD book that I talked about earlier. So there may be opportunity to work that down a couple of basis points a month here or there and hopefully kind of do the same thing to offset what potentially occurs on the loan side, just as variable rates reset when they do.

[Brian Martin, Director at Janney Montgomery]

Okay, so a little bit more.

[Stephen Tipton, CEO at Centennial Bank]

Yeah. I think potentially. I think potential mixed change over the course of the year too, if excess cash comes down, goes into loans. If the securities portfolio comes down, goes into loans, I think can help support that too.

[Brian Martin, Director at Janney Montgomery]

Gotcha. Okay. I think that's all I had. So thanks for the help and a great close to the year.

[John Allison, Chairman at Home Bancshares Inc.]

Okay. Well.

[Operator]

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.

[John Allison, Chairman at Home Bancshares Inc.]

Thank you very much. And thanks, everybody, for your support. And appreciate it. I think we didn't disappoint in 2024, and we won't disappoint in 2025. And we'll talk to you all in 90 days. Thank you.

Participants

Executives

• John Allison, Chairman

Analysts

• Brett Rabatin, Director of Research at Hovde Group
• Stephen Scouten, Managing Director at Piper Sandler
• Stephen Tipton, CEO at Centennial Bank
• Donna Townsell, Head of Investor Relations at Home Bancshares Inc.
• Jon Arfstrom, Managing Director at RBC
• Brian Martin, Director at Janney Montgomery
• Matt Olney, Managing Director at Stephens
• Brian Davis, CFO at Home Bancshares Inc.
• Catherine Mealor, Managing Director at KBW
• Michael Rose, Managing Director at Raymond James
• Tracy French, Chairman at Centennial Bank
• Christopher Poulton, President of Centennial Commercial Finance Group at Centennial Bank
• Kevin Hester, President and Chief Lending Officer at Home Bancshares Inc.