Q1 2021 Home BancShares Inc Earnings Call
In America every year since 2015.
One aspect of this is a performance metric and the other aspect is driven by customer service and because of that that makes us very proud that we continue to excel in both of these categories now for a first report on the quarter. We will hear from our chairman. John Allison.
Thank you. Donna Ward. We continue to stack them up over a period of time. Welcome to the home bancshares first quarter earnings release and conference call. My name is John Allison. I have the honor to serve as your executive chairman President Chief Executive Officer, and I'm also a co-founder of the company. We're here to discuss the results of our first quarter 2018 performance not to mention the first release as you probably see it first quarter from a pure net profit and revenue perspective was the most powerful quarter in a Japanese almost twenty-two years history resulting in a record that income with 91.6 Mi that's another world record as our company for our company is one of our former teammates outside on bancshares is known for being one of the top-performing banking corporations in America for the last ten to fifteen years and this quarter was no different.
Sales revenue was off the charts with total revenue of 207927000 dollars.
Best ever that's total revenue, but what's more important is how much the total revenue we bring down to the bottom line after tax for our shareholders. I want to know that other gross 207 million we brought 44.05% to the after-tax bottom line or ninety one point six million dollars that is available to our shareholders. In addition the total revenue our net revenue was also the highest in it ever been at 193.4. I think that's a beat on the street. But with our company also brought 47.36% of the net revenue after tax to the bottom line these numbers reflect the earnings power of your company through the long run strong Hills and best-in-class efficiency. It resulted in another high-water Mark for our shareholders of $0.55 earnings per share for the quarter. Yep.
CRM also, hit a new record high 125 representing a p v NR of 62.32. That means that we brought 62.2% of the net revenue to the pre-tax pre-provision shoebox as a long-time director. Alex blatantly blonde has limited is some additional highlights wage tax free provision. Our way was 2.9 to I think that's a record. I think that's the best after tax r o a 2.2 to return a tangible common Equity 22.90. That's one of the best ever. I think we've had one better than
earnings per share
$0.55 back is a mess and on the nem interestingly enough. We we increased on them by 2 basis points to 4:02 from 4 basis points Reserve Bank loans without the TPP loans Remains the 2.40 stable asset quality overall yield seven main strong at 5.56 know that includes accretion wage income and pay prepaid. And without those the yield was $5.41.
Mortgage produced another strong quarter with 8167000 versus last year at two point six million dollars efficiency ratio of 36.7% That's got to be best in class or right at it. Are you happy with that. You have Thirty 6% you're the efficiency lady considering the size of the bank and the regulatory hurdles leave overcoming the last few years. I'm I'm happy to be below 40% but I know that we will probably be challenged to continue to push that downward. I agree with that. That's it sure is bound to talk about when you get it. First quarter loan. Origination was 671650000 dollars at 5.10.
We only funding 250 kind of came late in the quarter March origination was the highest by the way of the quarter. It was right at three hundred and twenty million dollars off 75% of the origination came from the community footprint, but you know 671 we need a little more than that, but it happened mostly in in March.
That appears as that appears to be continued in April also.
Last quarter I said I thought loan growth would come in the second half of the year, but it might be coming a little sooner than I expected negative side with payoffs of about eight hundred million in q1. That's pretty much in line with what we had in 2404. That'll slow down at some point time. It will be able to match on the origination side.
We have a two million dollar charge off. I just wanted don't remember reporting on this to me and I'll charge was made the statement to y'all when we did our first fireside chat app. Did I don't see any losses as a result of coding and I'm still saying that this was a problem credit before the COVID-19 and I'm optimistic. We're going to come back here. But to conserve your nature of our group is that we charge it off and that was two million of the 2.6 mat or something two and half and half and half dead teams. Also done a really good job Foundation numbers and I wouldn't have been tracking them in the past how many attractive but not like you're over here. This is your only year.
Cost of your liabilities versus your assets are total interest income for the year-over-year was down 9524000 dollars doesn't seem very good. But interest expense was down 17887000 dollars which resulted in positive net interest income of 8363000 dollars. That is nice job by our presidents and Stephen tipping Hawks that goes Tracy Hawks it every day. So good Josh guys. That's pretty pretty impressive numbers that have like eight point three million dollars to the earnings. So good job.
I want to hear.
We we have tried to position home to win. We made several investment both long-term and short-term and we're continuing to do that again this year with all this excess cash last year. We purchased some underpriced good dividend-paying bank stocks that are performed performed very nice for us. We're also in for four or five different Ventures that likewise have performed nicely for us. This score. We picked up several million dollars in income for the company now past performance is no guarantee of future performance, but home is still in these Investments with our investments produce income of 9.5 billion dollars in 2020. And so far this year. They produce 13.8 million dollars home is continue to work on Em. I'm personally have actually discussed discussions going on. So stay tuned.
Already purchased we spent about eight point eight million dollars in the first quarter repurchased 330,000 shows that a weighted average price of $26.55 off will continue to be active through our can be five one even today and will remain active the rest of the year. It's certainly looks like home is off to a great start off business is picking up and I think we're in for a powerful recovery my concern surrounding placing.
Which may already be out of control couple existing play inflation with the new 2.73 and Fiat Fiat money frame coming down the road and we could be back in March eighty during the Carter Administration. They also thought they could control in place but had rates close to 20% I wrote this and then I'm watching TV yesterday Tracy and the Talking Dead comes on and he said we're not careful. We'll be back where we were in the Carter Administration. So I may not be the only one seen it that way. Have you bought any gasoline lately? It's a $0.50 gallon food is straight up Lumber went from $300 a thousand board feet to $1,000 and fifty that's a 350% increase in the cost of life.
I would hope that the by Administration was shutting down their discussions of a huge tax increase as we're just starting to recover from a COVID-19 Chrysler. I don't say this as a Democrat or Republican Republican. I only say this as an American businessman that has the privilege of leading one of the best companies in America. The tax increase makes absolutely no sense to me. We're currently trying to climb out of one instead of trying to suppress American Business. The President should be offering ideals to help all businesses. Think about it. This is not the time for tax increase the talking heads on business Channel say 2.25 the two point five zero on the tenure by June is going to happen and 3% by the end if true if that happens to be the case and it may be personally kind of believe that
those bank's routing
Fitch ratings and the twos and threes will pay the price and those investing all of this excess recorded. Did they have in the long yielding long-term Securities will also pay the price.
The risk is absolutely too dangerous for us. This is most of our largest personal asset and I refused myself in our our executive team does
Put any other long-term fish right Securities in selling the future of our company.
Those that remain disciplined like home will win the race. So when you get to the Winner's Circle just left for home standing in the middle of the circle. I want to thank our team mates for the bulb in stock the 21 and the investment Community for your trust that you committed many years of that Donna. I think it's a pretty good quarter and I won't let you have that. Well, thank you very much for that report. And that is the fabulous revenue and EPS results. So congratulations to all now, we will go to Tracy French for a report on Centennial. Thank you Donna and good afternoon to all the first quarter for Centennial Bank at home bancshares is out without question authority to report. In fact, we might be the safest Choice institution in the nation along with being one of the best or top performers in the country. The results of our group will share today are phenomenal and not only show what hard work delivers.
But also managing each detail that turns out to be financially rewarding our Banking Company continues to work hard and remain discipline and all areas of the bank of putting our customers first month for the shareholders. The report today is very rewarding. All of our regions had a great quarter. You will hear from Christopher and John in a moment for Centennial Bank Arnett, excuse me aren't Centennial Bank. Our total net revenue was $192 billion for the quarter making our old fashioned Roa Johnny 2.25% off. I return on average tangible common Equity non-gaap was 21.03% on our efficiency ratio is 35.36 with the last two quarters with the low thirty bucks gave me last two months and the low 34 great job training. Thank you. And now what we know as the Alison T V in our was at 63.5
6 for the first quarter, these numbers are what they are because all the efforts from every single person that works in our bank Brian will share with you our Capital position, which is very something wrong with our risk-based capital of the 18.76% Steven will give the details on the loans and deposits as our excess cash is gone from over 1 billion in the year ago over two billion a day with our liquidity ratio at 27.21 percent. Kevin will share the latest on our loan portfolio with a reported .66 non-performing to Total loans while while our allowance for loan loss excluding the PPP loans. Is that 2.4 at the end of the quarter that makes up to be 380 3.47% allowance on our loans to non-performing loans.
these reports represent
Very profitable and Safe Company as always we're standing touch with our customers. I'm glad to report all are doing better and some have not missed a beat our markets and customers investigated through this past year and we believe the economy is doing fine. Although the cost of operating to Johnny mentioned earlier is certainly a regional leaders reported that both of our branches are open to full service. We were with the few that are not should be open by next week. Our customer activity is increasing in both loans and deposits production is showing good signs of growth along with our pipelines. Our deposit growth has been great and our managers are working hard on the cost of these deposits. The lungs of them granted deferrals are showing much improvement while some are back full speed. Even our hotel loans, excuse me, our airport hotel loans are feeling very good.
Donna I've always used to work better as in getting better every day every week every month and so on and our company will continue those efforts for our shareholders. Thank you. No doubt that. That's pretty Tracy. Thank you for that report. Now. We will turn to Brian Davis for a finance report.
Thanks, Donna. I'm pleased to report a hundred forty eight point 1 million of net interest income and a 4.02% net interest. Margin for q1 2012. Our first-quarter net interest margin increased two basis points from Q4 today. I would like to give you some color on the q1 men first serve during the first quarter. We had 314 million of PPP loans forgiven this forgiveness because the acceleration of deferred income for the loans forgiven the Deferred income increased 3.5 million from 242 q1.
Acceleration was 9 basis points of creative to the Nim.
Second the Kobe prices and resulting governmental response has created a tremendous amount of excess liquidity in the market as a result of the excess liquidity. We have $581 worth of additional interest-bearing cash in q1 compared to Q4.
The excess liquidity was 16 basis points diluted to the Nim.
Bird Fork you want to be recognized 1.1 billion of event interest primarily from large payoffs.
The one point 1 million of an interest was 3 basis points for Creative to the Nim.
In conclusion the nine basis point increase for PPP loans plus the three basis points prevent interest income plus the 16 basis points to climb excess liquidity result in a net four basis points of noise when comparing link orders that said our net interest margin is actually up 6 basis points on an apples-to-apples comparison.
Conclude with a few remarks on Capitol our goal at home bancshares is to be extremely well capitalized and please report the following strong capital information.
4121 our Tier 1 Capital was 1.7 billion total risk-based Capital was 2.2 billion and risk-weighted assets were 11.7 billion as a result. The leverage ratio was 11.1% which is 122% above the well-capitalized Benchmark of 5%
Common Equity tier one was 14.3% which is 120% above the well-capitalized Benchmark of 6.5%
tier one Castle was 14.9% which is 86% above the well-capitalized Benchmark 8% and the total risk-based Capital was 18.8 per month, which is 88% above the well capitalized Benchmark of 10% with that said, I'll turn the call back over to Donna Donna. Thank you Brian. Those are amazing. Wow. I'm going to sleep with it underneath my pillow if that's okay. Mr. Allison sleep. Well Brian off and now Kevin Hester will update us on our loan portfolio.
Thanks, Donna the the accomplishments on the lending side. This quarter are very impressive. I'll begin with p p p around 3 approval and funding continues with the recent extension of the program through May 31st applications that certainly slowed down but we have crossed the 4,000 loan approved Mark those approved loans total about $350 and we have closed and funded just over three hundred million of that amount.
Rounds one and two forgiveness continue with over $550 million requested from SBA and over 450 million paid. We have initiated around 3 forgiveness as well and we can push to focus on these two efforts during the next two quarters.
Covid modified loans showed little change during the first quarter. This was not unexpected because a large majority of the 330 million dollar modification balance was placed on an 18 to 24 months, but interest only modification just three months ago to provide the runway to whether the remainder of the pandemic with the majority of these loans being hotels and just coming through the seasonally slow phone number or the year. I didn't expect much movement in these balances to positive developments did occur though first anecdotally virtually all of our hotel operators have experienced a significant boost up an occupancy in March and in the Florida Market, especially we expect this pick-up to continue throughout the year.
Even our hotels that were dependent upon airport traffic or showing signs of Life given that this is the March Trend we do not have hard numbers on these but we do expect the April reports from hoteliers to look much more favorable.
Addition since month and the single largest deferred loan of $58 went back to full payment showing good occupancy cash flow this brings our overall modified loan balance to just took $270 or two and half percent of the loan portfolio. We are very encouraged by the improvements. We're seeing around this segment of loans.
Is Johnny said mortgage continues their strong showing from last year first quarter closings were up 50% on a quarter-over-quarter basis. It was secondary Market loans consisting of over eighty percent of those Balance million dollars in each of the three months of the quarter indicating a strong second-quarter be expected.
Lastly the accomplishments the asset-quality area are certainly worth discussing non-performing loans or 59 basis points. Only six basis points free COVID-19 and down seven points on a linked quarter basis non-performing assets or even better at 38 basis points down six basis points pre-coated and down ten basis points of the linked quarter basis with the allowance coverage of non-performing loans at 384% 52% on a linked quarter basis.
Early-stage pasties remain very low at 46 basis points, which is below where we were pre coping combined with the encouraging reporting around modified loans. I feel very good about the asset-quality this company.
We are seeing new lending opportunities in our markets and despite the low pricing and high leverage. We're seeing I'm optimistic at the second half of the year will result in some organic loan growth Dona water bath. I'll turn it back over to you. I agreed Kevin and that's good information on the hotel occupancy. Next. We have Chris poulton with our ccfg division. Thank you. And good afternoon. The New Year brought increased activity during the first quarter overall loan balances were roughly flat a new fundings were offset by increased payoff to pay down loans that would have generally paid off in 20 20 were able to finally execute refinancings in sales during this time. We've been able to maintain margins and returns while ensuring our asset quality remains High
New loan commitments total close to three hundred million and we ended the quarter with over three hundred million dollars of loans that were loans that are approved awaiting closing or an act of underwriting by comparison rejected seven hundred million dollars in rigid Nations during all of twenty-twenty real estate values in our key New York and California markets appear to have stabilized with Sales and Leasing activity up significantly in Manhattan and Brooklyn during the quarter thus far that trend has continued and took you to as well with that said we remain our usual cautious selves and continue to focus on Leverage and structure that reflects a pandemic environment while many of our while many of our Southern and Southwestern markets have thrived over the past few months. We expect a recovery in New York in particular to take a bit longer to mature off.
During this time. We remain focused on our core purpose of building a portfolio delivery.
with above-average returns for below average risk
That'll turn it up to you, Donna.
Thank you, Chris. And now John Marshall will update us on Shore premier.
Thank you, Donna and good afternoon. I'm pleased to offer an update on continual green finance division. First quarter continued to reflect elevated activity as the 2020 consumer COVID-19 buying frenzy spilled over into the new year tempered only by limited new boat inventories. We've seen our retail applications shift from 80% new 20% pre-owned to 865 35 split. It's just because of the lack of new new inventory. The quality of our applicants remain strong with declination rates dropping from 39% in for a 20 to 32% in one two, Twenty-One funded retail loans were fifty million dollars in the quarter with average psychos of 780 compared to 776 for full-year took $20.
Commercial Business was essentially flat in the quarter a shipment of new boats from European factories have been pre-sold prior to arrival utilization rates on inventory lines 30% down from a customary 62% it maybe mid twenty $22 before dealer stocks are restored historical levels. We're witnessing some pressure on March Marine. Mom inventory lenders hungry for assets are unsatisfied dealer Financial Health is very strong as a result of this conversion of that's the help of the consumer and Commercial portfolio. She has been favorable was reflected in our asset quality metrics achieving the lowest levels of delinquency and default Central was acquired by Centennial a profit contribution continues to grow and our own know in the quarter was 2.76%
Cash has emerged as a formidable competitor in the Marine lending space coffers bulging with stimulus might have continued to accelerate our prepayment speeds offsetting some organic grown that look for Marinas good factories are returning to sustainable production dealers are placing optimistic orders and Retail buyers are placing larger deposits on the next boat, experts believe that the Tobin has pushed more consumers onto the water and with a long-term profound impact on pleasure of the pleasure yachting industry on that positive note. I returned the discussion to age. Thank you, John and our final report today comes from Steven Tipton. Thank you Donna deposit activity off a few additional details on the balance sheet today on the deposit side the wave of liquidity continued in the first quarter of 2021 has total deposit increased $787 Million Dead.
Shore. So just over thirteen and half billion dollars that marks the nearly two billion dollar increase or 17% year-over-year most importantly our non-interest bank account balance has increased nearly $600 million on a linked quarter basis and over 1.4 billion year-over-year and today non-interest-bearing balances stand at 29% of the total deposits. We have mentioned over the past several quarters how fortunate we are to operate in states that did not shutdown states that have seen an increase in tourism and steady population growth and the increase in the overall deposit base in q1 542 million or 69% of the increase came from our for Florida Regions all of which had nine months or increases in total deposits.
well, the increase is
Middle to the government's response to the pandemic. We believe the growth is also result of the business development efforts the customer service our Bankers provide and the resiliency of our country and Geographic footprint pushing the funding costs interest-bearing deposit average 33 basis points in q1 down 11 basis points on a linked quarter basis and exited the quarter in March at thirty basis points. Total deposit costs were twenty four basis points in q1 and we're down to twenty two basis points in the month of March we continue to wage rates down as liquidity levels persist.
In addition to certain negotiated demand account rates. We have 745 million dollars in time deposits maturing over the remainder of the year at an average rate of just under 1% switching to loans. We saw total production of a little over $670 in the first quarter with $400 million coming from the Community Bank footprint name is Johnny mention only slightly more than one third of the origination volume q1 was funded at quarter-end. Although loan balances declined this along with robust. The robust original volume in March gives us optimism going forward.
They are volume was in line with Q4 that 844 million as we saw a number of borrowers monetized large assets or go to the permanent Market.
Is Brian Davis mentioned in his remarks when normalizing for the impact from PPP lending event income and excess liquidity? The name would have shown a solid increase linked quarter off. We're extremely pleased with how the GM has held up over the past year. The word discipline has been mentioned a number of times today and over the past year that discipline is put home in a great position wage capitalize on the continued economic recovery and is Johnny mentioned the prospects of rising interest rates in the future with that. I'll turn it back over to you. Thank you Stephen moss Good reports today Johnny before we go to Q&A. Do you have any additional comments you like to make this a great quarter, you know.
Bonjour. We'll get our fair share of that Tracy and Kevin are rude to go out and take that two and half day of dollars and a half percent. That's another 125 million dollars pre-tax. So that's what I see in front of us. I see I see and if we wrote it at 4, which we could do that's a hundred million dollars. So I think that I think that life is pretty exciting as this economy picks up with the company hitting on all eight in every area except for that and not doing too bad there in the middle of the it's interesting even though long time has gone down. You're not performing percentages. Kevin have even gone down with it. So I remember banging away at 9 and 10 cuz it kind of got a snapshot of our loans. You really got to look at the Book of Life for calling from solid book and didn't move too much up or down and that's the same thing that's going on right now to see our non-performing numbers coming down on percentage-wise on Thursday.
That's impressive. So.
I think I don't have anything else to say. I think we need to hear from Q&A and and I'll let you have it and go to thank you. I guess the Lisa we took to turn to you now and go to Q&A. Thank you. We will now begin the question-and-answer session to ask a question. You may die than one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the TV to withdraw your question, please press * then two years time. We will pause momentarily to assemble our roster.
The first question is from Michael rose with Raymond James, please go ahead.
Hey, good morning. Everyone. How are you?
Good Michael, how are you doing? We got afternoon. How are you? Yeah, good afternoon. Yes. Sorry. Maybe we could just start on on credit quality, you know going to see uh, you know, not not a crew come down seems like everything's moving the right direction. Is there any reason to think that you guys would would have a provision expense anytime soon? You know, I'm understanding that, you know, you don't expect any losses from COVID-19 and the charge off you have this quarter was previously identified credit just seems like all the pieces are there you reserve levels really high that you guys wouldn't need to provision kind of anytime soon. That is Kevin. I would say no this I'd say the same crazy. Yes the same. All right.
Back when we had it was really kind of tired. I I asked Chris. I said Chris Tobin first hit and he had some snakes over there. He said he's off today. We sell at today we sell it today, I think press correct me if I'm wrong Chris. I think you said 15 million and ask for today before I call and he said maybe a million am I saying that correct Chris? Yes, sir. I can get that. All right.
Okay, and then just curious this on the expenses looks like we're expenses were down. You know sequentially expense control is always been a Hallmark of the company, um any sort of color there on on a run-rate perspective and what you know any considerations for the year and in terms of bonus accruals or incentive compensation, then we should be thinking about thanks. Take that one. Mr. Allison. Okay, like on the salary employee benefit, we accrue those salaries on a day-by-day basis. So we had ninety two days in Q4 vs 91 days in q1. So I mean so at nine days in q1, so they're down a little bit there. We did have a little bit of incentive reversal from the end of the year, but primarily I'll set is always have faith in the FICA taxes that we have in q1. We did have some p p e expense in queue for the fog and buildings and do a job.
Kind of stuff and they were several hundred thousand dollars.
Well, it is down a little bit most of us really due to the number of days on our salary employee benefit accrual plus we didn't have really a whole lot of the PPE expenses are FDIC assessment was down just a little bit that was mostly do I grew up on the accrual. So there's really not any noise other than the p p p e from last quarter in the numbers.
Okay, and then maybe finally for me so there's a big increase in the share repurchase authorization. I guess given where your stock is and how much Capital you have. I mean how active would you expect to be as we move forward? Thanks.
Bryan that question that you guys me that question we're active we're going to continue to remain active and I think our average price for the 2016 that we we brought back about 330,000 shares the first quarter or a team with the the earnings and hit the home $2. So that's going to create a few more shares that that will be in the float and which is a good good thing life is a good thing, but we will will probably buy those shares back so we don't impact the we don't dilute our general. So we're active and we you know, we really I looked at stepping in and buy and we increased our authorization by Twenty million shares and we looked at stepping in there we decided that probably was time for us to look at doing some in today so we can we we're we're buying a little bit. We're probably buy enough to where we don't dilute or shareholders on the on the home $2 program.
Great. Thanks for taking my questions. You bet. Thank you.
Question is from John arfstrom like RBC Capital markets, please go ahead. Good afternoon everyone. I'm good. I'm good. Good. Mm. You're going to report you just touch a little bit more on the pipelines. It seems like it's better. It seems like it's materially better, but maybe Kevin or Tracy if you want to touch on it, and then Chris. Can you expand a little bit more on that the commitment numbers and why you think it's jumped so much. Thanks.
Yes. Yeah, this is Kevin. So yes, pop line looking right now compared to this time last quarter is definitely stronger than it was. We're we're suggesting some some good projects across the footprint some construction projects that are you know back on the table. So I do think we've been talking for a couple of quarters that we think second second half of the year is where it looked like things would get better and I think we still feel that way. It may be that that this quarter is even better than we expected but it is stronger right now for sure Chris.
Yeah, this is.
Yeah with regard to our pipeline, you know, I think what you see and I think we saw in the first quarter and and we're seeing now into the second quarter is the vast majority of probably what we're looking at closing now or deals that we worked on for the better part of last year, you know, we worked through the summer and the fall and and and such with the number of our bars on on transactions that I think we talked during the second half of last year things are just taking longer close take longer to get the equity together et cetera. And you know part of that is is really starting to get to a point. We felt like there was a recovery coming and that you could start to see some postcode the trades Etc. So I think we're seeing that majority of what's you know in the pipeline to close for the second quarter are those types of deals that have been long time coming we have one closing tomorrow that we worked on all summer with wage with the borrower. It's just finally gotten to the point where they can they can get their deal together and close. So, I think we're seeing in our pipeline what the what the economy seeing which is things starting to open up and therefore transaction wage.
Starting to be completed. Most of our first quarter volume was facilities, which was nice to see we liked that part of our business and and seeing a couple of facilities closed where folks have got money together and they're they're looking to put that money out over the rest of the year. So I think we we feel good about where we're at. Now, you know last year was only seven hundred million. That was probably down 30% from from what we normally do. I think that was the anomaly
I think the not not to go ahead go ahead John. I was just going to say it seems like some of this is ketchup and I guess you know, we're lingering project is the new called the new new pipeline the new activities that increasing as well for us.
I believe so. Yes. I mean we're seeing you know, now what starts to come in is, you know new new transactions et cetera, but I think you're still you know, the market overall was down last year and a lot of projects that were on hold are starting to come through. So it's going to take I think it'll take some time to get through that backlog.
Maybe one for you Johnny on inflation. Are your are the borrowers telling you the same thing that you're feeling or is that not part of the narrative yet?
Inflation you say asking Johnny? Yep. Yep, exactly.
Oh, yeah. Yeah, I mean Kevin's son is a home-built kind of track a little bit of that and I mean, he just had a special order home for a customer when you got through adding up what it cost. The guy said I can't afford it. I can't I can't do that. So, you know, I don't think there's any doubt about it in place from being out there and I bet is to sit tight on Thursday two point four billion dollars as tight as we can set on it traces about the Rope all the hair off the front of his head because he can't stand it. But he knows it's a smart thing to do is take that and remain disciplined and that's what we're doing and we'll we'll have our opportunity to deploy this money at some point in time and we have not done low rates. If we need to do that we can do it. I'm not done that. We have not entered into those markets. So it really wasn't a lot of business after the pandemic. Chris is right. He said he worked on those projects All Summer Long
That's because uncertainty that was in the market and we're seeing that now we're seeing it change. We're seeing that.
Turn over where there's optimism and there's excitement about new projects. And I mean some of the projects one of our good customers bring us. We can't have brought us. We can't do them all we don't have the Thursday. We could we just don't go to that level alone the One customer. But yeah, he's great customer done. Well, you know, I just think we're off and running it. I mean, I think inflation's got to hit up some point in time, but you know think about it we the job is team did over the last year by reducing cost tonnes by more than than the long year and increasing profitability, you know, it should be like a roller coaster on a track and it auto track exactly doesn't always do that. I know it's better for banks in raising a virus and I think we're going to get that. So I think the FED has done a hell of a job and I think they're trying to do that, but I don't know what they're seeing. It says inflation's only one and half.
One and three quarters percent cuz I see it everywhere. I look all the time. Our customers are talking about it. It was a piece of was it plywood or OBS or what? It was the other day and went from 7 to 21 month. It's just those guys and Supply going to getting appliances a problem. I think some of that might impact the economy, but the the if they keep building houses, he's raced a long they're going to keep selling.
And and so the message is you just your being patient. You're going to wait it out. And that's that's the way to kind of take advantage of some of your views on inflation is let other people make the mistakes and see what happens longer exactly. That's exactly that's exactly now. It's common a little faster.
Our comment was it will be the second half the year, but Chris is Chris is coming pretty strong. And Kevin is Pete with his his his report looks much better than I mean normally we look at a report like this four down two or three hundred million at this time. We're not now so I'm not real forecast loan growth. Cuz last time I did it we went down but it is not much better. I'd say that it is much better and it's good customers and it's good equity in The Dales is not much of funny money stuff. It's the real deal like we underwrite so there was some deals that went by us because I would say eighty 85% we're not going to do that. So we we don't operate that way.
All right. Thanks for taking my questions. Thank you, John.
The next question is from Brady Gailey with KBW, please go ahead.
Heather thank you.
So I wanted to just hit on one breath from a slightly different angle. And if you if you listen to a lot of the other Florida Banks, you know, everybody's talking about Florida. I'm in on fire right now. They've seen a lot of population in flow. They've seen a lot of business relocations down there. I know you guys I think Florida is now your biggest Market even bigger than Arkansas, but I will Florida specifically play a big piece into the loan growth returning and just maybe any commentary about what you guys are seeing in that state.
Yeah. Hey, this is Kevin. I believe it will I mean obviously it is over half of you know of our footprint and it has to to play it always has because it's obviously a lot more economic activity going on in order than the roofs will be in Arkansas and they know they really never shut down. So and you're you are coming into for most of them off the you know, the busy time of the year. So yeah, I fully expect that. It will play a large role in that.
All right, then just looking at when when gretz returns to home. You know, what what should we expect like excluding any sort of noise with a PPP forgiveness? But you know, should we expect loan home to be you know, growing and kind of the the low single-digit range or or could it be a higher than that long as we come out of this long, but it it that way it might be I'll be wrong saying oh, but it looks it looks pretty good right now.
All right, you know I don't I think it's sustainable. I think this I think this is sustainable these crazy thoughts of our customers all the time. We're certainly getting opportunities for better than we've had in in in the past year the I guess the question that comes to my mind when you ask a question Brady's really more the payoff tight as we are hearing some customers are getting some good opportunities to cash in on what they've done over the past few years. So that's always the question for us is the is the payoff amounts that that the triple in on the page what we've seen on the larger past we've seen lately as they have sold their souls their opportunity and that's it's a good thing for them and they'll be back and they'll continue to come back if it's a construction type projects takes us a little time put that on the books compared to if it's got a full balance gets paid off today, but we actually feel pretty thank you God.
Selamat, it's all feels pretty good and all our markets for the rat.
And then finally, I just wanted to ask about him and Johnny. I know you you said earlier that you were you know, active having some conversations, but I know you you know, sometimes also give us a little additional color. I think the last time we connected you were chasing two or three Deals, but maybe just an update a little more detailed update on m&a and if you feel like you're getting a closer on anything.
Oh, I don't know the answer to that. You know, I've been disappointed in a couple of deals recently where we made made an offer. That was the highest price offered that a bank had sold for it. And I you ask the past six or eight months and that CEO commented that that if you made that offer to his board, they laugh him out of the room quite know what to say. I was somewhat speechless at that point in time and I said I still watch with lunch and fresh and I left but you know, I just pray she had one yesterday and what they're trying to do the the bankers getting away and scrape up most of the time because what they're doing is they're they know we don't dilute and they know how we operate so they take they back into a price they gave us they take their customer just back into a price and and everybody's going to make more money next year and I've started tracing I tell them how you need to sell it next year. You don't need to sell this year. But anyway, we have a cup.
really good opportunities out there we feel like right now we actually have a total of three and we'll
we're we're working on one as we speak and we'll see that'll resolve itself in the next 2 or 3 weeks and then we'll move to the next one and the next one and we take an taking a couple off the table because they weren't realistic and
The micros were really I don't know if they bumped her head or what they did. So but anyway, they were somewhat unrealistic. But when you what you say Tracy, yes, sir. Wow Price He said let me give you what, they ask for that bank and he brought it to Toyota. I started laughing after that. He said no, it's not a joke. I mean they seriously miss that but I don't know maybe they bumped her head on the way to get in there doing the run. But anyway, that's you know, you got to be realistic. It's got to be a fair trade on both sides and you got a lounge you got allow room for a stock to breathe and but I think we've got two or three dealers out there that could cook off. So we'll just keep me in the market and will continue to be be smart about the deals and you know how this when we are right with this one on everything and you know as I told Ed
One seller I said you'll be proud. You think I'm to discipline now, once you become a home bancshares shareholder, you'll be really proud to be with a discipline company because we protect his stock much as we can. So anyway, if it is it is interesting as Tracy's not been out here working on some of these traits, but I think we got think we got what we can get done and and maybe another great. Thanks for the call guys.
You bet.
The next question is from that only receiver, please go ahead. Hi. Thanks guys. Good afternoon. I'm sticking with the Inman a discussion. We've seen some pretty sizable deals recently. They're more more like would love to hear how home Banks thinking about m&a with respect to the size of pistols. Are you becoming any more open to to larger deals over $10 of assets or you think you're going to stick with the the smaller dealers that we've discussed in the past?
Well, we're primarily sticking with the smaller two or three billion dollar deals to 4 at this point. We're not afraid to do a ten billion dollar deal if we understand their asset classes Matt, you know, one of the larger deals done recently. We just really didn't understand or have the expertise in those some of those asset class primarily when gas we didn't know if we don't know much about that except it's all the gas going up. I know that but we we just stayed pretty conservative their choice you comment on that. It's it's a combination. We've got good good size banks that we would fit well with us and harder Banks probably wouldn't get that Niche today, you know, Kevin Kevin talked about some of the asset classes on one of these larger deals a while back and he was riding. We don't we're not a big sin Islander. We're really construction lender a lot of dead.
We do a lot of construction.
Wheel lock it we've done well in that business and we'll continue doing that. So, you know if somebody's got a big book 25% of books on gas. That's probably not a place for them to be so we're probably be somewhere else.
Okay, got it. That's helpful. And then Switching gears over the loan growth. I appreciate the commentary that the loan pipeline seen a nice and inflection kind of late in the quarter. What about on the other side the payoff still remain elevated during one Q would love to hear more details around those payoffs. And anyway, I think about the payoff with respect to customer named gene or or just exiting lower-quality credits. And was there any change in the pace that payoffs during the quarter? Thanks. Yeah, I think this code I think Tracy both Tracy had Chris mentioned that and and for the larger credits the the two biggest things that I saw this quarter were customers take advantage of selling their project and Andre faiz after a project, you know gets complete as multi-family those sorts of things and customer taking it permanent taking it not recourse things like that. Those were the two biggest things they're dead.
Sprinkled in there a little bit of refi for rates. But those other two were the the main things this quarter just looking at a payoff for the past several quarters. Yeah. They the the last to look pretty much the same that over, you know over 800 million. I would anticipate you probably still going to see something that cuz we've got, you know, I think we got more customers that I know of a few that are that are selling that will materialize, you know in this quarter of next quarter. So I think you're still going to see some of them going to have to outpace that to have loan growth.
Got it. Okay, you know and even Florida who never shut down is those projects that are coming back up streaming in Florida? So I'm optimistic that we're going to see some loan growth may be better this court than I anticipated. I really wasn't looking forward to it, but third and fourth or but it may sneak up a little bit on the phone. It's not I don't get too optimistic those every time I do that it goes the other way. I understood. Thank you.
Next question is from Steven Skelton with Piper Candler, please go ahead.
Hey, good afternoon. Everyone. Even maybe one question just for for Brian first. Do you have the number on the remaining PPP deferred people that could come through over the next few quarters has up 3:31. We had 20.9 million. And as of today, it's up about a million dollars to fifty one point nine million.
Thank you. And then maybe I don't know if it would be Kevin or or or who Tracy maybe but with your lenders do you feel like they have gotten distracted at all by lending or or do you feel like home, you know, you could actually see better core growth as kind of wines down or or if they've been able to kind of manage both effectively. I would say just go but I would say they've absolutely been distracted by both the funding and the Forgiveness aspects of PPP without a doubt.
Okay funding is floating out as I'm sorry funding slowed down a lot. Is that mentioned? We're not doing that many and we're not really actively, you know, looking we respond to requests for funding but we are still we still have a lot of forgiveness to deal with particularly around 3.
Okay, very helpful. Okay, and then maybe one for Steven on the on the deposit cost side? How much lower do you think you could get deposit cost? Cuz you guys have made phenomenal progress but seems like maybe still some room to go with CD costs, you know could could we see deposit costs down, you know in the 10 15 basis-point kind of range in a in a few Quarters off. Hi Steven, you know, I I think the way we looked at it here over the last six months at least is it kind of where we were prior to the last tightening cycle? I think interest-bearing costs were down in the load off which you know, that was obviously a number of years into that low rate environment, you know, interest-bearing cost today or or down in, you know below 30,000 so that we've continued to move down. We have some under contract that will come up over the course of this year, you know mentioned you mentioned that the CD maturities that will will continue to help soldiers.
You know, we'll find the floor somewhere. But you know given the liquidity that is in the system and in the bank today. I mean, I think we will continue to to push on it as we go and you know, whether we can get down below twenty years, but there's still opportunity over the next couple of quarters for sure.
Got it. Perfect. Okay, and then Johnny maybe last one kind of for you would be you know jumping back to m&a and then you mentioned maybe two to three billion dollar kind of deals would be the sweet spot. But have you brought in the office in terms of geographies, or would it still largely be kind of Arkansas Florida or you know, you start looking at Georgia or Tennessee or any other states kind of in-between so to speak
Well, I'll just tell you that we've always like North and South Carolina we thought that was we've all drugs a lot like Arkansas over the years and we've always like taxes and his baby suck a pretty prestine, Texas, but I think we're just looking for what comes our way right now and a couple of them have come away and some of them have fallen Fallen by the wayside. So, you know, it's just a misunderstanding recording one day of one guy and when our stock was Twenty-One as 26 or 27 had he tightened ideal. He left about fifty million on the time. So some people don't understand what can happen to to the to the market and based on for starting to move up and it would have been a great opportunity for for them and their God it was a good night was a nice nice Bank nice people, but as usual the bankers kind of getting away or appears to me that could do it may not be correct.
Fair enough fair enough, but we look forward to seeing the next one. We know it'll be a good one in congrats on a good quarter.
You don't count I think Brady County down all our extra income. I think he took it all off. He didn't need to take it all off ready cuz we're still in those Investments. I want you to understand that I know will have that kind of return coming the rest of the year, but we're still in all of those Investments every one of them that we're in we're still in so we didn't get in them just to be there. We got there got in them to make money. And as I say we're making money with them, so we're investing a little bit ourselves Steven.
Next question from will Curtiss with puppy group, please. Go ahead.
Hey, good afternoon, everyone.
You say well, how are you?
Good wanted to kind of piggyback on the the floor to discussion and just in terms of how how well the markets doing. I'm just curious, you know has its kind of this recovery move along. Is there anything that you know, that's a concern or your or you're watching a little closer these days Johnny.
well
From an asset calling perspective. I always keep an eye on our hotels. But the information come in on hotels is much improved from where it was off. So I've got pushed that off the side I do worry about I do worry about inflation. I think in places here we'll and and we're about a devaluation of dollars scared to death that's going to happen. I listen to a guy who who I've done pretty good with on investing and he says it's coming and he said it's going to be quick and severe thought you said you got cash get rid of it. They'll just concerns me the buying power of the dollar goes down and and inflation goes up and we have to fight that battle. I said earlier, I think the page done a good job not like they're trying to balance the guy to do it anybody to do it. I think he can do it, but I just don't believe that I don't believe they're they're not looking for I'm looking. So the thing that bothers me the most
Tuesday is the inflationary excited but that could be good to inflation doesn't hurt us all and then a little little kick up and rates wouldn't hurt us. I mean, you got to think about it you tap your money down if we got two billion dollars. We tied up at 1 and a quarter today or 1:30 1:40 today and and and the 10-year goes to 3% by the end of the year and you look so stupid, you know you think about that do that what happened? So that's
Thank you.
My deal is where the traces don't have any hair left on the front of his head because he is rubbing his head every day. I walk anything. He said I know we're doing the right thing to damage tough guy. He said it's hard it is dead or not invest some of this money. We've talked about everything in the world. I mean we bought some Bank stocks. It did done extremely well for us and paying a good dividend some good advice that we all know know the people that run them and they'll run their companies and those have done well for Star good dividend-paying stocks and we might as well sit with those for a little bit. And other than that, I don't I don't know. I don't have any I think a fear of this if they go to we go to Thirty one or two or what do you say with Brian say want to go Brian what we go through on the app, right? What do you say Brian?
Well, we were talking before the call. You were asking me what the marginal rate might go to and the the marginal rate that we have right now is 2635.
And if we get the 28% tax bracket, it will go to 32.68% would be our marginal tax break rate, which is an increase of 6.545 months. I'm thinking about it you buy something today based on today's tax bracket and then you turn around and get this get hit with this. So it's a dangerous in some respects. It's a dangerous time to be an emanate business trying to do Thursday or because they're all going to price it off of what today's tax rate is and you know, if it goes up 6% and they pull I mean we make three hundred billion dollars a year right hand something like that. Go seven points. That's what twenty one twenty two million a year comes out of our shareholders pocket. I think that delays a dividend probably for our shareholders money instead of doing what every year might be whatever might be three years or two years before we do another one that bothers me a little bit and I know my wife's concerned about that cuz she like if you remember she likes her dividend dead.
Nevermind. She she likes him out. We play she just wants the same amount of months when she said she's going to visit with Tracy Brian Davis about that. But I'd like to have you know, I guess the government would spend it wisely did not spend it. So that concerns me a little bit outside of that.
I mean the company you run a $292 pre-tax Ro and a 2:20 to after that a 36% efficiency ratio and you make the kind of money we make and you got some good Investments taking in for you. I could not be happier. I just I'm ready for a little loan growth and I think we'll get it but you know us we are not going to push it and we're not going to chase. We're not going to improve student loans, but I don't do that. We're not in that business. We're not going to sell our future. I mean, we're looking one bike right now. The problem is that nice young sucks. You know, you got to pay that price, right? If you got if you're going to ride lower price, you can pay me now or pay me later and that's my fear is not my fear. We don't do that. So but in the future, I hope Brakes come up a little bit. I think I think it's time for little kids and Russia. I don't think that hurt things might still mortgage down a little bit.
I probably told you more than you want to hear them know that was great. I appreciate your your thoughts and the nice quarter.
Thank you very much.
Next question is from Brian Martin with Janney Montgomery, please go ahead you guys good afternoon. How are you? It's just the a couple of things for me. Maybe one for Brian or for Kevin just on those ppp's Brian. I think you said they were twenty two million to the the remaining give the breakdown of what remains on on 1 and 2 vs 3 and then just thought it'd be for Kevin just if the Forgiveness that you talked about, you know, just the how to think about that forgiveness particularly for around 3. Just how how are you thinking about that or just you know, how should we big picture of any any thoughts on that?
I'll go first.
Approximately 22 million of PPP fees. We have seven million of it left approximately from around 1 and we started at thirty million at that point in time. And so that would be about $15 million from route to
Okay, and okay. Perfect. Thanks. Brian Brian. I think you know we're going to see the rounds one and two slow down. Those have been pretty consistent. The last two quarters are really the two quarters that we that we've been doing it. You're going to see that flow damage. You're going to see three pick up. So I would think that the next quarter or two age should be pretty consistent with the the the last two quarters and then pass that I'm not sure I don't I don't know how round three we'll finish up cuz some of that stuff, you know, we won't be able to
To start on until later in the year somebody that will get to start now, but some folks will wait as long as they can. So I do expect a couple of quarters similar to the last two. Okay, so not much bleeding over into next year to twenty-two. I would hope I hope I mean, I really hope not I hope to get it done this year for my people's sake. Yeah. Gotcha. Okay, and then maybe just one thing I guess. I'm not sure who but just on the liquidity. I guess I understand about sitting tight, but just think you know, I guess your comments, you know about the loan growth funding late in the quarter, but then you have a full quarter impact of the you know, the the quiddity from the deposit growth. Just kind of wondering how to think about, you know, the size of the balance sheet going forward and then maybe just kind of the margin impact, you know, I guess particularly if you get to the Q2 here with with the full quarter of those items.
Ronald Steven, you know to answer the last part first and we had I think on average for for the quarter about 40 basis points impact to the men from the time that we had and think it was about fifty basis points in the month of March. So, you know, we we try to we really try to strip all that out and see you know, where would we be on a court basis? I think we're still in that 4% range on a core basis that we tracked in the past, you know some of the stimulus well the the last round of stimulus came early March. Yeah, that's still off.
See how some of that gets sent over this period of time and certainly seems like people are are saving money, you know of Interest our our debit cards been in March was 15% over what it was a year ago, and it was probably up twenty-five or thirty percent from what it had been the last four or five months in a row. So certainly some of that money getting spent and and put out in the economy, but I'm you know, maybe some of the maybe some of the liquidity gets spent over the next few months and and maybe some of that gets traded into the loan balances for so, you know earning asset size today to me. It's probably took a dish to maybe down a little bit over the next several months.
Okay, perfect. And then Steven just to deposit flows you talked about a strong as they were this quarter I guess is your expectation of those kind of slow down a bit at this point. I guess now that I mean maybe stops dead. I do mean we you know q1 historically, you know, when you have tax refunds and those kind of things is good for us and then you had PPP funding and you had yeah, the latest round is similar that all that all helps that so I would not I wouldn't necessarily expect the deposit increases that we had this past year or two to continue at that level going going from here. We'll continue to watch We're interfering balances are and what we're paying there and try to try to mitigate some of the inflows. They're just sort of an interest rate standpoint got okay. All right, that's that's all for me. I had it. Thanks guys.
Thanks for I appreciate.
Next question is from John help with foia, please. Go ahead. Hey guys. Nice quarter. Thank you. I'm good. I'm living the dream working on my bedroom. Any I dial in a little late? Maybe you discuss but in construction like your crystal ball, what what's sub-sectors? Do you see potential growth or demand, you know, like industrial or medical office, or maybe you don't maybe it's a bad question. Maybe you should focus on one or two areas. So I apologize but
If there's a few areas and are you seeing any green shoots or whatever you want to call it in terms of construction demand. Thanks. Yeah, I think you could hook certain areas. I think at least in the footprint and Chris can can talk for for his group because it may be different for his group. But in the footprint certainly, you know multi-family homes in in part of the footprint Industrial in that Central Florida area. There's there's a lot of that to be had. Although that's generally pretty cheap down. There will actually be probably a little bit of Hotel it comes around and say it's going to be you know, dependent upon you know, which Market we're talking about will determine what kind of what which asset classes. There are Chris you do you see something different than that.
No, I think that's right. It does feels hot everywhere maybe a little too hot. And so we're we're a little cautious to be honest with you and Industrial but anything I'm doing well a little bit of mixed juices. Okay, depending on the market. But yeah, I think it's I think it's the stuff you'd expect for the most part, you know on Industrial just depends a little bit of what you're taking a look at Cold Storage is really really in demand. Um, but uh, uh as a subset of that but you know again, it's, you know, everything from single-family homes to condone need to uh to rentals all all pretty good in in in most markets.
Okay, John. Yeah, he Christmas.
Kitchen sink single family and certainly I I didn't mention that in in my comments, but it definitely the single-family construction side is strong and and really all of our all of our markets. Okay, and then x x that maybe two theoretical like the the the loan to cost the cost is going to be higher so that gives you more Comfort maybe do you underwrite to higher rents as a result or or higher, you know loan-to-value.
Or do you you know, I guess what I'm saying as long to cause one to value or maybe getting separated a little bit. So that would seem to me like put upward pressure on rent. Are you underwriting that and it's not a trick question. I thought maybe it mean I just was curious. Yeah, we're definitely seeing you know, the the relationship between cost and value changing in our appraisals and we are seeing that I'm going up. I mean we're it's not normal for us to to really try to underwrite to higher rents in the market. I mean, that's something we typically will do although a lot of our projects do project that we're we're sensitive with about that and and really try to you know, what we may give them credit for it down inside. We're we're also conservative and look at what happens if they don't get that that premium so that's not something that we typically would would hang. Our underwriting on makes sense good Ed.
So it's a little cushion maybe for the underwriting in the future as well. Okay. Thank you. I appreciate it.
Thank you, John.
Conclude our question-and-answer session. I would like to turn the conference back over to mr. Allison for any closing remarks.
Thank you all for joining today. Thanks for your support. Hopefully next quarter will have another good one off to a good year and things are picking up Countrywide and I think race is going to pick up a little bit life is good for bikes. So I'm pretty optimistic that this could be a another really good year for for home and we certainly are out to a great start. This is we've never met a million dollars a month. And I don't know if we've ever run a 36 60 efficiency ratio. Have we somewhere that we've gotten down the closest huh? Very close Okay wage. Anyway, I don't say something wrong. But anyway, thank you. Thank you very much for your support and we'll talk to you in about 90 days.
Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.