John Allison - Chairman Randy Sims - President & CEO Home BancShares Tracy French - President & CEO Centennial Bank Brian Davis - CFO Jennifer Floyd - CAO Kevin Hester - CLO Stephen Tipton - COO

Brady Gaily - KBW Michael Rose - Raymond James Stephen Scouten - Sandler O'Neill & Partners Matt Olney - Stephens Incorporated Brian Martin - FIG Partners

Greetings, ladies and gentlemen. Welcome to the Home BancShares Incorporated First Quarter 2017 Earnings Call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued this morning. The Company presenters will begin with prepared remarks and then entertain questions. [Operator Instructions] The Company participants in this call are John Allison, Chairman; Randy Sims, President and CEO Home BancShares; Tracy French, President and CEO, Centennial Bank; Brian Davis, Chief Financial Officer; Jennifer Floyd, Chief Accounting Officer; Kevin Hester, Chief Lending Officer; and Stephen Tipton, Chief Operating Officer. 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 2017. At this time, all participants will be in a listen-only mode. This conference is being recorded. [Operator Instructions] It is now my pleasure to turn the call over to our first presenter, Mr. Allison.

Thank you, Jamie, and good afternoon to everyone. Welcome to the Home BancShares first quarter 2017 earnings release and conference call. As you heard the team is here and you'll hear from all them today. Well, another one in the history book and another good one, I'm not going to steal any Sim's thunder today. I'll let him talk about the moment, but it was a busy quarter and actually is the busiest, most stressful quarter of my entire business career. Bank of Commerce landmarked Stonegate crossing the 10 billion mark and meeting the $10 billion examiners, conversion sub-debt offering bank conferences plus meeting to both customers and the Stonegate management team, and somewhere in there, we threw a chip into go to Q1. And while all that was going on, we still produced another record quarter for our shareholders. I say I'll save the thunder for Randy on the numbers. I’d like to welcome the new Stonegate shareholders to the Home BancShares family. And to the employees, I wanted to say, because of the quality of the organization you built, Stonegate has many options. They could have stayed where they were. They could have sold to someone else. They had options that most brands don't have. We're honored that you've chose Home BancShares to be your partner. With common culture and operating philosophy, this partnership could be for the employees as well as the shareholders the best trade that we’ve ever done. Overall in the business side, business is good. Asset quality continues to improve. Accretion was down a little bit for the month about a $1 million. Net margin was up a tick. Gross margin was down a tick as we brought in landmark in BoC. Revenue seem to be grown at a pretty good pace with a good record, good revenues for the quarter, and April -- we'll take a quick look at April, it looked strong. Loans were up just a tick specially CFG and New York operation had a good quarter. I think they are at 30% free cash pre-provision while their loans drop flatly. So far so good Randy, it certainly appears the 2017 is shaping up to be another record year for Home BancShares and I'll let you have it now.

Thank you, Johnny. As he said, it was a good quarter and a really good start to 2017 and as Johnny went through everything that went on in the first quarter, I think we would all have to agree that it was a very, very busy quarter, might have been the busiest quarter than in the history of our bank. We close John Holdings Incorporated and we also close The Bank of Commerce and of course as who can forget on March 27th, we had a really great announcement and signing of the definitive agreement with Stonegate Bank that when completed will be the largest acquisition in the history of our company. So quite a quarter, but it doesn’t end there. The first quarter of 2017 was the most profitable quarter in the history of our company. Again, now that is 24 consecutive quarters of record income and by my calculation, I got one of my grandkids to help me. That is six years. Six solid years, now we will admit the last couple of quarters have been very noisy with merger expenses and other non-fundamental items that's all detailed in our statements that had to be considerably; however, six years of record income is quite an accomplishment that all shareholders can be proud off and I congratulate our employees and their hard work to accomplish this milestone. I know you can't hear it over the phone but there is fireworks that are going off all around the bank, just like in the stadiums, so at any rate, there is only one thing I'd say, let's go for seven years, and that's what we are going to try today. Now to some of the numbers, for the first quarter of 2017, the Company reported a 13.1% increase in quarterly profit to 46.9 compared to 41.4 million for the same period in 2016. Diluted earnings per share for the first quarter of 2017 was $0.33 per share compared to $0.29 per share split adjusted for 2016, representing an increase of $0.04 per share or 13.8%, when compared to the same quarter in the prior year. Excluding the $6.7 million charge of merger expenses associated with the recently completed acquisitions of John Holdings, Incorporated and The Bank of Commerce offset by $3.8 million of their onetime non-taxable gain on the acquisition associated with commerce, diluted earnings per share for the first quarter of 2017 remained at $0.33 per share. Our return on average assets for the first quarter was 1.86% as compared to 1.79% in the first quarter of last year and 1.98% in the last quarter of 2016. As our new banks improve with efficiency and profitability, I think we can get back very close to that 2%, if not make it that our Chairman would like to see. Our core return on average assets excluding intangible amortization, provision for loan losses, merger expenses, gain on acquisitions, reduced provisions for loan losses as the result of the significant loan recovery, loss on FDIC loss share buyout and income taxes and I think better that record for the number of exclusions that I've ever said in our report was 3.31% for the quarter as compared to 3.27% for the same period in 2016. Our return on average TCE excluding intangible amortization for quarter was 20.08%. So as of March 31st, the corporation is sitting at little over $10.7 billion. Deposits ended at 7.57 billion as compared to 6.94 billion at 12-31-16. We have a great management team on hand to talk more about for results for the first quarter. So, I would like to start and turn it over to Centennial CEO, Tracy French to give us additional color in his comment on the performance of the first quarter.

Thank you, Randy. First of all I’ll like to congratulate our Home BancShares and Centennial Bank staff for reaching $10 billion mark in assets during the first quarter and also look forward to working these bankers as we start on the next team. As you've heard or you will hear from other today, Home BancShares started the year with solid first quarter financial results. All regions continue to perform high levels within our performance metrics. In fact, they are doing so well. Johnny may have to raise the bar again. As Randy and Jonny mentioned, the first quarter was very active that’s said the least. Our operations department efforts during the first quarter was the most active I believe in our company's history. This group is and has been the key of our company's success and our compliments to all of them that they shined again this quarter. We would like to also welcome Stonegate to our family. We look forward to working with Dave and their entire outstanding bankers in their bank. Thanks Randy. And now let's hear about the solid results in the first quarter.

Thanks, Tracy. So the total number of active Centennial branches is a 151, up 9 through our two acquisitions, 76 in Arkansas, 68 in Florida and six alone in Alabama Coast Line and of course one in New York. So I would like to turn it over to Stephen Tipton, our Chief Operating Officer who will fill you in on some of our income efforts, efficiency and other operational. Thanks.

Thanks Randy. As you all had mentioned the first quarter of 2017 was a busy one even by Home BancShares standards. I want to thank all of our project teams and operation teams that have been involved in these efforts. Our shareholders and customers benefit from your hard work and attention to detail. I am pleased to report solid core efficiency ratio of 36.96% for Q1, up slightly from the prior quarter given the two acquisitions and normal items associated with the first quarter inquires. We're encouraged by the continued expense control and focus on revenue in the legacy regions. As you will hear our core net interest margin increased 1 basis point for the quarter to 4.32%, we did see slight compression on the core NIM in March with the inclusion of the Landmark Bank and Bank of Commerce acquisitions and our president in those regions have already gone to work to identify opportunities for improvement. Switching to funding, core deposit relationships continue to be at daily focus for our region and we are pleased to see nice growth in the low cost and low cost deposits for the quarter. With that said, I’ll turn it back over to Randy.

Thanks Stephen. Net interest income margin, non-interest expense another highlights will be covered by our CFO Brian Davis. After that, Brian will pass to Jennifer Floyd, our Chief Accounting Officer to give us information on our capital numbers.

Thanks Randy. First quarter was a great quarter for our company. We recorded both GAAP and non-GAAP earnings of $0.33. The quarter included a bargain purchase gain of 3.8 million on a Bank of Commerce transaction and a 6.7 million of merger expenses on our two acquisitions. This bargain purchase gain was a non-taxable gain with negative impact on earnings for these two items was only 538,000 after tax. Net interest income increased 1.6 million to 104.8 million in Q1 versus 103.2 million in Q4. This increase is primarily the results of acquiring John Bank Holdings on February 23rd, and Bank of Commerce on February 28th, offset by two less count per days for net interest income for Q1, 2017. Also during the first quarter, we had a five basis points decline in that GAAP net interest margin, as a result of the declining accretion income for the fair value adjustments recorded in purchasing accounting. During Q1, total accretion income was 7.6 million compared to 8.7 million in Q4 or decline of 1.1 million. The decline was primarily the result of normal and payout accretion. Excluding the accretion income and associated long discounts, the Company's net interest margin for Q1 2017 was 4.32% on a non-GAAP basis compared to 4.31% in Q4 2016. Excluding the gain on acquisition of Bank of Commerce, non interest income was down 1.2 million in Q1 2017 compared to Q4 2016. There are several items worth noting. First, our mortgage lending income was lower by 1.3 million from Q4 to Q1. Secondly, other income was down as in Q4, we had 561,000 of additional income for an item which was previously charged off. Thirdly, we had 716,000 lower in gains in Q1 versus Q4 for SBA, OREO and investment securities. Excluding merger expenses, non interest expense was up 1.4 million in Q1 2017 versus Q4 2016. The primary increase was related to the increase in cost associated with the two acquisitions completed in February 2017, plus experience $567,000 increase in an noninterest expense and our CFG operation from Q4 to Q1 this was primarily related to incentive compensation from collected fees or loan payoffs and new originations. With that said, I'll turn the call over to Jennifer.

Thank you, Brian. Let's take a look at our first quarter capital results. As of March 31, 2017, we ended the quarter with 1.4 billion of capital and 42 million of cash at the parent company. During the first quarter at 2017, we paid out shareholder dividends of $12.7 million while growing retained earnings by 34.2 million. For the first quarter of 2017, our common equity Tier 1 capital was 1 billion, total Tier 1 capital was 1.06 billion, total risk based capital was 1.14 billion and risk weighted assets were approximately 8.8 billion. As a result, our common equity Tier 1 capital was 11.4% compared to 11.3% at December 31. Our leverage ratio was 10.9% compared to 10.6% at December 31. Tier 1 capital was 12.1% compared to 12% at December 31, and total risk based capital was 13% which remains consistent from December 31. On April 3, 2017, we completed our underwritten public offering of 300 million of our 5.625% fixed to floating rate subordinated notes due in 2027. The notes were issued at 99.997% par resulting in net proceeds after underwriting discounts of approximately 297.2 million which will be classified as Tier 2 capital. As a result, our pro forma common equity Tier 1 ratio, leverage ratio and Tier 1 capital ratio remained flat when compared to March 31st. And our pro forma total risk based capital ratio increased to 16.2% from 13% of March 31st. Additional first quarter capital ratios include book value for common shares which was $10.05 compared to $9.45 at December 31st. Our tangible book value for common share was $6.96 compared to $6.63 at December 31st which represents an annualized increase of 20.2% on a linked quarter basis. And finally, our tangible common equity ratio was 9.7% compared to 9.9% at December 31st. Randy?

Thank you, Jennifer, good numbers. Let's turn to loan. I understand we had some pretty good asset quarter numbers, so I’ll turn it over to our Chief Lender, Kevin Hester.

Thanks Randy. As this previously mentioned, organic loan growth was basically flat in the first quarter. Community bank footprint actually produced about $43 million of loan growth in Q1, but accelerated payoffs reduced CFG outstanding balances by 27 million. Within the community bank group, Florida provided all the growth this quarter. I think everyone is aware of the subordinated debt issue that took place recently from a lending perspective the $250 million in capital that was pushed down to the just after quarter end, will have a positive effect on our CRE concentrations. It will initially push both ratios below the 100, 300 guidelines and with enhanced risk management procedures in place, we will provide room for significant CRE growth in the future. Our asset quality ratios continue to be strong with solid improvement on a linked quarter basis. Non-performing loan and non-performing asset ratios were 0.75% and 0.71% respectively, both improving back end basis points. As I have indicated for the last couple of quarters, our non-performing balances are still elevated due to a couple large problem loans acquired in the Bay Cities Bank acquisition. Progress towards resolution of those loans is good and one of them has actually been brought a very positive resolution this quarter end. The ALLL coverage of non-performing loans improved 9% to 136%. Past dues decreased 18 basis points to 0.95% and these numbers have been very consistent for the past few quarters. Lastly, the allowance for loan losses as a percentage of non-covered loans decreased 6 basis points to 1.02% of total loans due the $462 million increase in loans this quarter. Average mentioned above 97%, this increase is purchase loans which have a purchase discount associated to. Mortgage continues to improve on a quarter-over-quarter basis with closings of 17% and locks up 15% in the most profitable first quarter ever. The commercial pipelines improved over last quarter have a payoff so it still bit elevated, overall the second quarter shaping up nicely. On that note, Randy, I’ll turn it back over to you.

Thanks Kevin. Well, another good quarter and another great start on the New Year. To recap just a little bit, I can't go without saying it again record earnings for the 24 consecutive quarter, six years book it, six years, record net interest income, quarterly ROI of 1.86, a strong quarterly core efficiency ratio of 36.96%, still a very powerful margin, very good non-interest income and great asset quality metrics. Consistent and continued improvement in our major components and metrics plus growth from acquisitions, and we look forward to even more assets coming with Stonegate. That is what we are all about and we look forward to continue improvement as we strive to break more records throughout 2017. And with that, I will turn it back over to our Chairman Mr. Allison.

Thank you everyone. Jamie, we are ready for questions.

And ladies and gentlemen at this time we will begin the question-and-answer session. [Operator Instructions] And our first question today comes from Brady Gailey from KBW. Please go ahead with your question.

So, the CFG loan growth slowed. I know longer term you guys want to grow that up to a 1.5 billion and then just kind of assess it from there. But how are you thinking about CFG loan growth for the balance of the year?

I'll take forward grant and might for the pricing Steve can jump in and Kevin there. I think it's still continued to grow. We had about $70 million pay off a little lower than we anticipated in all the hotel in New York and that was really the difference so in the quarter, but as far as then we've -- I think we've proved, last year which you proved one loan for New York last each, the last two weeks. So, we are expecting and discounted, I mean New York, generally what New York City is known to. These loans will be 24 to 36 month loans and they're doing just exactly what it said to do. Steve you got a comment or Tracy.

I agree with that. Production for the first quarter was still very good because they had the pay-offs come in, which is the cycle that they are in, they are running for two years now. And so the team and unit there did exactly as forecasted in the past. They did have the West Coast operation kicking or set up a little bit today. I won't see much activity on that second quarter but maybe in the third, but the production there should be much now for couple of 100 million.

All right and then, in fee income if you look at others service charges and fees, it was up pretty noted on linked quarter. I know you all, you all close to two bank deals in February which might have had a little impact, but was there anything notable that pushed out line item higher?

This is Brian. There is with CFG you get payoff fees, and so for the quarter, they are up about $400,000 in loan pay off base from Q4, also annually on our MasterCards, we get an annual incentive and we collected that in Q1 in terms of once in a year 615,000.

Okay.

Look the good news is we get payout fees. The bad news is we get paid out.

Exactly, and then finally for me I know you all have been guiding to accretively yield kind of coming down which is exactly what it did in the quarter. Brain, any idea on how you think yeild accretion will run for the rest of the year?

Yes, we try to look at that after quarter end and if you just take the natural flow of it, it should come down about $500,000 a quarter. It may not fall that much in Q2 like it might in Q3, because we only have Landmark and Bank of Commerce into one month. So, it's accreted about $170,000 for the quarter and they will probably have a little over 0.5 million. So we may lose a 0.5 million for Q2 and maybe pick up an extra 340, but that is all starting retching down about 500,000 a quarter.

Okay. Great thanks for the color. And yes, nice another impressive quarter.

You hear Randy saying number 24 without notice.

I do that a couple of times.

I want to show you how it does it's not very problem there.

What number was that?

24, six years.

Our next question comes from Michael Rose from Raymond James. Please go ahead with your question.

Just a question on CFG and the expenses associated with the West Coast office. How much of that is in the run rate already, I mean do you have the pieces in place, just trying to get sense from an expense perspective?

Well, of course the New York operation is in the run rate there, but budget that they had -- we have to pick up some space to lease which is not that big of a challenge and with two to three people over the period of the year. So, it's really the only expenses have become across with additional partner on the West Coast, Michael.

Okay and then can you talk about…

Expense of LA is already in, not much of it.

Okay, so how much you estimate that is just from a run rate perspective?

250,000.

Okay, that’s helpful. And then can you just tell us what the actual pay downs -- the pay down amount in CFG in the quarter was? And then what the production was?

215 million was the production for the quarter. But pay offs is about $145 million. Michael, that’s you are looking for.

Yes, no that’s very helpful. And you have a sense for at least for the schedule pay downs or payoffs will run at over the next couple quarters in that business?

Michael, this is Steve. I’ll take it forward that. I mean as Tracy mentioned I think pay off were about a 145 million, 146 million for the quarter. Jonny mentioned, we had a $60 million or $70 million credit is really scalable surprise on timing. But beyond that that’s probably something to see in the $70 million to $90 million range going forward.

Michael, if you remember part of cycle there with the New York operation was, they had generate good paid off on about third of the balance or start one part of year. So, they are in that cycle math, So they are producing loans which also get in the pay off loans. Maybe the product is in this past quarter the production does also at some of that.

Actually, Michael, first loan we made with CFG, if you aware was a production factory in New York and it just that was…

Probably four months.

It's just paid off. And so what they said, they were only doing, get permitted and take it down and clean it up then get a construction loan and they got a 75%. They leverage that 75%. They did it and moved on down the road. So, they did just exactly what we anticipate. I'm very pleased with the way that outlaid.

Always good when it works out that way, right?

That's it. And here we forward it to really powerful first quarter we've been in the 16 million pre-tax, pre-provision in the first nine months to get 40 million pre-tax pre-provision last year and we give both teams about 1 million pre-tax pre-provision in the first quarter. So loans are off a little bit, but its income was pretty powerful.

Okay, maybe and just one more from me. With this sort of acquisitions that just close. When you expect to have all the cost saves realized?

This is Steve, Michael. We converted Landmark in March. David Druey done a great job integrating thus far so I think we're good ways down the road there. We will convert Bank of Commerce made at 12 and so we're operating a little duplication right now over the next three or four weeks or so will have that integrated and I would expect to get that taken care of that in Q2.

Actually, I was in for longer deal and look back our service plans, and it's no longer there. I saw a tricky moved. I mean David Druey moved really pretty quick that was one he selected, a lot of reasons it was called that when we're -- I think I thought yes I missed it going down the road that turnaround with back it wasn't there. So, good job on his part. So they get assets pretty quick, they plan what to do there beforehand and then they move in herd.

And our next question comes from Stephen Scouten from Sandler O'Neill & Partners. Please go ahead with your question.

So a question just following up on that CFG production, I think you said 215 and than 145 of pay down. What amount the 2015 production was funded versus I guess what's unfunded? Is that kind of half-and-half and what's kind of the normal trend there is that, if you lend any color there?

Yes, being about third of the production funded so about 65 million to 70 million of that 215 as Tracy mentioned funded and we had additional advances on current loans that's paid up the balance. So if you take about for the quarter they were down about 20 or so 145 in pay-offs and 120 in funding, so split half and half between new money and additional funding.

Something large we also have pretty good quarter we generate productions about 450 million, we are about 475 million in pay offs. So, we even have the pay-offs, we will had really good growth so it's continuing and I want Kevin you expect to.

Pay-offs have been increasing over the last several quarters, so I mean with our construction lending that's been happened so and particularly with Chris [ph] having more that now the easiest probably a year-ago. You'll continue to see that.

Yes, and what do you guys think you can get kind of that organic loan growth to here on a quarterly basis obviously this quarter with the policies little lighter but you've been anywhere from a 150 million to 275 million I guess over the last years. So any idea where you think will shake out for the rest of year and especially now as you are below 300% CRE to risk base capital I mean do you think you have a lot of run rate to move that backup to 350% in time or what are your thoughts there?

Yes, overtime. I mean we are going to do what's the market allows us to do. We are not going to push it. So I think it's going to be somewhere in between where we were this quarter, kind of what we saw fourth quarter, I’ll see at fourth quarter run now happen. But we will continue to see things in our markets and Chris [ph] is going to keep doing what he's doing. So, I think the market still looks good and all the markets that we are in.

We don’t take what they give us. As you know, we don’t push loans that one thing we don’t do in time. We don’t push it. We take what they give us. So, I think Stonegate had pretty flat quarter, this quarter and we had a pretty flat quarter. But we had a pay offs, we hedge pretty growth so probably in the $100 million range.

Okay, that’s great. And maybe last one from me. Just on the NIM, what sort of benefits Brian you think we can see from the March rate hike on the core NIM potentially or was the accelerated payoffs and CFG to that kind of inhibit the upside given that that’s where a lot of that sensitivity is or how you are thinking about the NIM for the remainder of year as a result?

Well, there is probably about three moving parts for this. We took down the 3 million of sub debt on April 3rd, and as we cross 10 billion, we are beginning to keep more liquidity on our books. And those -- you know one of those are positive to demand. The combined impact of doing that, I mean we ran a fairly tight liquidity position when we were kind of stand a 10 billion, but now we are over 10 billion, we are going to probably make increase that liquidity position. And the combined impact of that could be 15 basis points on a quarterly basis. I mean Stephen kind of have some numbers that kind of impact from the loan side.

Yes, hi Stephen, let me give me some color and how we are looking at kind of the standalone bank versus the timing of when the two acquisitions came in March. When I go back and compare loan yields and deposit costs kind of where we were added year end, we saw loan yields up about seven basis points, core loan yields ex-accretion of about seven basis points and cost of deposit were up about five. So we saw some impact -- a little impact from the December rate hike, obviously not much from the March rate hike. Our variable rate portfolio grew a little bit with the two acquisitions were just short I think 40% now on the total portfolio in terms of what variable. Yes, you probably still had another one or two rate hikes that need to happen to get the whole portfolio this time to probably moving. So we are seeing probably half of benefit in March. But I think we have been successful thus far and been able to as we have had to increase deposit cost some. We got to count on T-bills and various other indices that have tripled up a little bit. We have been able to outpace that with loan yield so far.

Bank of Commerce and Landmark have had higher cost of funds and more loan range and m ore yield. I think, there was about 380 we end up tick in, tick in one basis point even after putting up $407 million on the book, so we'll be working on those so we should get those rights set and improve that over the period of time. And overall so far so good, it's been -- Stephen, it grew with and lenders have done really, really good job of monitoring this and when you hear that rates are up 8 basis points kind of firms up 6 since November, that's pretty good number running in the right direction.

Yes, that’s great. And Johnny don’t be too hard on those guys, 189 ROA, I mean we don't see that anywhere outside Arkansas. I know you want 2%, but it's pretty aggressive.

[Multiple Speakers] We would have been up before were we borrowing we urged those two banks in. I don't know what they all way expected, but interesting to see what there was. If you hear Randy Sims said we did 24 quarters in a row.

24. Let me say 23.

23, world record earnings

And our next question comes from Matt Olney from Stephens Incorporated. Please go ahead with your question.

I definitely heard 24 quarters in a row from here, loud and clear. First question is for Brain, you mentioned the liquidity impact now that you're over $10 million assets. Can you specify kind of where you were in and is this is where you want to get to or would you continue to build the liquidity in fact even from here?

Well, I think I mean it's pretty easy to get to where you want to be pretty fast. I mean we were just keeping lot of our excess liquidity off to balance sheet, but as we go over 10 billion we don’t have to keep more of it on our balance sheet. And so, we've been running about cash to total liabilities about 5% and we might double that about the time we get down to June 30th.

Okay, that's helpful. And then as far as the deposit cost you mentioned that was ticked up. It remained pretty low overall, any commentary as far as what markets are seeing more pressure than other markets within your footprint?

Well, Northeast and Northwest Arkansas seeing a little pressure. And other than that most of them are hanging in there pretty good. We're doing a little bidding for money now. We look at but this picked up a large capital about 70 million to 80 million and we are kind of bidding for a little money, trying out kind of a lot of risk of franchise and go out and selectively bid on different pools of money.

This is Stephen. I add on to that I think we saw about a 160 million or so in organic ex-landmark BoC deposit growth for the quarter, about half of that was not interest bearing. So, I think we've talked in the last several quarters, our focus are backed out, asking for deposits and our loan committees are thinking about the deposits as we look at loan opportunities. I think you are starting to see some of that translates into meaningful volume.

Cost of funds ex Bank of Commerce and Landmark was flat

That's right.

Cost of funds were flat ex Bank of Commerce within Landmark so the guys are still doing a good job on management that side of it.

Okay, interesting. Well, I appreciate that. And then Kevin I think you mentioned the CRE and C&D concentrations are now below the thresholds with the sub debt capital coming in all in the fourth quarter. If we would a layer in the Stonegate portfolio and their capital, do you have any idea of what the pro forma capital rations would be with that book of business? Thanks.

Yes, the construction will go down just a little bit. The total CRE will stay pretty close to the same.

Yes, I think he is right and I think it hit 80 year end, it was at 80 and 302 to 304, so pretty good number.

Got it. Thanks guys. Congrats for the quarter.

Thanks. That's probably going to take it back up. I mean, we stress tested it, it's about as hard it could stress test one. And I think we're doing it our way 199 to 0.75 and what was the stress test about 15?

It's generated about 75 million at loss.

It's generated about $75 million in total loss as we move -- still generating cash flow grown at quarter. So we are pretty pleased, we did -- at 360 that was based on 360. And so we are pretty pleased where we are.

And Jonny, one more question, any hesitation of moving that theory backup before the deal closes or would you want to wait until 2018 to do that?

No, I think with our internal integration of retain earning. I don't k now that that's a problem between here and there.

Probably not a problem, but we will take what we can get. I mean we will take it when they give to us. So, if they give to us, we will take it. Now, we have raised a process on construction because it is limited resource in this country and if the regulates we're pushing on that like they're pushing, it's getting discount owned construction loan, when Kevin's large, large customers tend to limit. So, don’t know how much money would you loan to me, and Kevin said, why. And he said almost start like a construction loan. He said everybody, nobody get construction loans. So, I think pretty taxed and if you’ve only got -- there is only apple stand in the town when you've got 25 apples, you don't want to sell them under cost. So whatever market those apples have, just see if we get maximum additional money. We want to do construction, but we'll take the risk, we'll try to make extra money.

Interesting. Okay, well thanks for color and I’ll see you guys tonight in Conway.

[Operator Instruction] Our next question comes from Brian Martin. Please go ahead with your question.

Couple of things for me, just the core loan growth outside of legacy growth, outside of CFG. Were there also heavier payoffs in there as of in addition to what you saw in CFG? is that kind of what you guys are seeing maybe on this side?

Yes, not really the payoff that was not expecting without CFG. And the footprint, it was fairly normal.

Okay, so I guess kind of the lower growth in the foot outside of CFG, I guess anything in particular, I mean is that more a function of rate or competition. I guess what's given the help of the market, I guess what's kind of leading to the on this slower number there?

I don’t know that I can attribute it to anything in particular. I mean we have seen -- we talk about some of the crazy stuffs that we hear. We are having few more those stories last month or so than we have had in the last few months. So maybe that’s part of it. But it used to be first quarter was always a really a slow quarter and I have listen to some of the other calls and it has been for some but generally it has been for us. And I think back to Jonny's comments just now construction, I mean the last 120 days or so, it's certainly been a focus on risk and reward on pricing and we raise rates on loan construction and that by nature plug in potential slowdown little bit.

Okay, and what you are see more guarded today and the growth in kind of the core bank and you were earlier based on somewhat you are see in the market or is that in correct?

Incorrect.

Incorrect, okay.

When we are guarded today, I guess it appears when we're guarded, I don't have much more guarded we are today than what we have been in the past. We have always done pretty good job of underrating and we continue to do that. We just have it from a construction side in fact we are going to paid for it, and we tack that up a little bit. We want more money in those deals and we're going to struck some deal which has more money in them and it doesn't have to be in a underwritten in a way that we lack of beyond written. It's some that little tough because it changes to that company, but after the last goes on, we're up 10 billion. So, we missed the $10 billion regulators and they're a little different and the $9 billion regulators, I'll tell you that. I know who they are [indiscernible].

Okay, that's helpful. And I just need couple for Brian on the accretable -- the accretable and non- accretable yields remain Brian. What was that at first quarter? How much is remaining in each of those buckets?

Sure. We've got a 64.5 million in the accretable and we've got 40 million in the non- accretable.

Okay and then just the last things. Those are the elevated benefit I guess if you will in the service charge line as result of the pay-offs from CFG. I mean now that you guys talked about kind of the cycle maybe more into the cycle because they are two years in now. There was a benefit this quarter that has been there may be in the past, but if pay-offs continue given the cycle. Should that number stay somewhat elevated may be not this level, this quarter's level, but higher than it has been over the past couple of years just given that dynamic now?

Yes, I mean there are CFG increased, if they continue with the [Indiscernible], but keep in mind that we had 615,000 in that line item that's just a Q1 only event that would come around net year this time.

Okay, and then just like you've said on a liquidity side. The impact from that liquidity and sub debt that impact this quarter would be about 15, if you do have any you think you would do as by June 30th that impacts is about 15 basis points through the margin in the second quarter on the core basis?

That's correct.

Okay, and then last one was just to core loan yield this quarter. Did you last think it was 7 basis points that it increased next quarter?

That's right. That's the ex-land market and BoC, so when you add them and it was never impactful, I guess it's about 3 basis points through a negative.

[Operator Instructions] And ladies and gentlemen at this time I'm showing no additional questions. I would like to turn the conference call back over to management for any closing remarks.

Many thank you and thank you for listening and joining our conference call today and we will talk to you again in 90-days and hopefully will have number. Sims, Mr. Sims can say 25.

Or I won't be here.

Ladies and gentlemen that concludes today's conference call. Thank you for attending. You may now disconnect your lines.