Q2 2022 Home BancShares Inc Earnings Call
Cause distractions didn't hinder our operating performance and to get more into the details of that I will turn the call over to our chairman John Allison.
Thank you Donna and welcome everyone to the home Bancshares.
<unk> 2022 second quarter earnings release and conference call.
Yes, the only thing we know for certain is uncertainty.
These times require a steady hand disciplined team of managers that provides strong leadership and are willing to go against the grain of always said there is no substitute for experience.
We have for two years been banging the table about the danger of inflation and now suddenly everyone's like enough talking about inflation.
Wake up.
If they ban how long has been planning and taken action for the last year and a half.
So I think we called it right when we talk about inflation.
We do not believe that the fed is likely to back off of their hawkish desire to stop in places and they should not because it is killing our seniors that our own fixed income.
The reason I think that a lot back up there is in the late seventies as inflation Rolling Volcker made the mistake of backing off rate increases too soon and had to come back in the eighties and take rates to 20 plus percent to correct. The problem that he probably could effect the first time.
We have to get rates in parity with inflation to even began to take control of this out of control monster last quarter asset. It is conceivable that fed funds could hit 6% and I'm sticking with that call.
Third member Board is now calling for a 4% number.
The way to stop this monster is through the fab to get out the Bucks and tightened the SaaS action actually 100 basis points shot would be a good thing now and if they had stopped the puppet show I think that would be good for us. When you look at the tenure of this below the two year why does that how does that come about.
<unk>.
With consumer prices running from 8% to 20% in PPI run it from 11% to whatever it appears the by the administration is still trying to raise taxes.
Americans are already paying an inflation to exit the 29% to 20%. This group of Keystone cops don't have a clue and just don't get it.
Still appears that the bond administration ably.
Virtually no one with business experience and their entire cabinet has anyone ever heard of supply and demand as anyone ever heard that there is no substitute for experience.
Knight chicken salad out of chicken waste.
And it was said during the Clinton administration, it's the economy stupid, but rod Lache says you can't that stupid I don't know if he is right around <unk>.
Company has broad some excess funds during this quarter as we plan.
And then even it had some loan growth.
I think we ended up with a little over $200 million worth of loan growth.
Growth, primarily led by Texas, and New York Good job by all.
The strong quarter is a result of planning and patience that your company has been exhibiting over the past because of our strong belief that inflation with raising its ugly hit.
The fed has been very late to the table, which may result in higher rates longer correction time, and a more complicated problems to bring it under control.
Interesting fact that younger individuals out there what do you think the average fed funds rate for the last 50 years.
I'm, saying the average fed funds for the last five years a lot of you have never seen a four or five you think it was two or three it was actually 544 that illustrates the fact that the world can exist at higher rates as we've done in the past however, as our U S national debt has climbed through the roof.
The situation required lower rates to allow Congress to continue to spend like a drunken sailor. In addition, one of the differences differences today from.
From the Bulker terms as the world is awash in an additional $203 million in debt, so raising interest rates could affect lots of these small countries here's the problem.
All addicted to the sugar have Cleveland that we get from zero or low interest rates.
So you're going to dance you got to pay the Piper eventually.
Well the payday is now I guess, we can pay our we can kick the can down the road and continue this craziness. In addition to the seven trillion dollars of fed balance sheet created out of nowhere.
By the way Im told that the fed has not kept back on the purchase as of yet so the public show continues week after week.
Now what happens when the fed cuts back or stopped buying our U S treasuries and mortgage backs, who will buy our bonds.
Maybe are good firms the Russians, maybe bottoms muddies, the Chinese are trucks, but it Kim John .
North Korea.
This is one of the biggest challenges are always manipulation, because we've been buying our own craft with Fiat money created out of the acre.
I am very concerned about the ability to have a soft landing aspira crash could be in the market with this boat and Crazy experiment.
The key for banks is to be very premeditated and cautious with their moves.
It does not hurt to play a little defense mindset three money at their securities portfolio in the last 12 months. Many have allowed the tangible common equity to fall in the sixes that has a number of the investment community does not lie.
And they may be they may be forced or could be forced to raise substantial high priced capital as you know happy may have had to do.
Some banks have and others will be forced to do the same in the future raise capital.
Add to that how much slow mark they need for those trying to sell or companies that roque longer low any loan with a two three or four in front of it today is certainly good news.
Your home company has a war chest of capital, we do not need to raise capital. We have plenty, we did not write longer low because I've said, we've been preparing for two years and how are you.
To be out there trying to raise capital in this environment very expensive, we just support $25 million of our capital into one of the top banks in the country and we will be receiving 775% Onliest bond if they had the sale to fix a tangible book problems.
While almost all have blindly plowing money into low rate securities loans, almost a contrary and then patiently.
Paying off almost $400 million in debt and collateral building award chest of cash and capital. Your company also refinanced our sub debt at much lower rates that resulted in over $37 million in signings over the next five years. The conservative moves your company has made it should pay dividends for our shareholders.
In the future because we did not sell our future.
We're already seeing the benefits of the work with happy happy deal that was closed on April one your home team is playing the long and not short Gary we did not receive a very warm welcome.
Somebody even calling it a mini me in a couple of the markets we.
I'd just say good people go but that may turn out to be a blessing in the skies with a select group of individuals, leaving in a very unprofessional manner without any notice the way it was.
Executed could've done damage the happiest local shareholders that are now new homes shareholders I would hope that was not the intent because they'd be hurting their own customers and their own shareholders. In hindsight. The move appeared that it was in the works for some time most employees once or some small, Texas spike because I've never heard of.
Nor would I don't know what I'm talking about the management or the bond. The good news is that even with the hardship temporary hardship that created it also created many opportunities, but those that study and many new has stepped up and took over with lots of enthusiasm and excitement.
This will cost a little money over the next couple of years as we use the strength of homes powerful balance sheet to compete very competitively in that market. It's a long Road road. It does turn how this should be a lot of phone everybody stay tuned the impact on smaller competitors balance sheet can be much more severe than the impact on homes.
Consider this an unfortunate situation that is pretty much in the rearview mirror, except for the competition levels I want to personally thank.
Texas shareholders on behalf of our entire home team that travel to meet all of you. Thanks for your time your canvas and your hospitality you showed Ms sales and every member of our team.
Partially could not be more impressed about the very cordial and heartfelt welcome you gave us after all we share a common goal as partners in home and happy proudly we own this outstanding company.
For the second quarter, we had the FERC one time merger expenses of 107 million 316 pounds.
These are non reoccurring expenses that would not have happened without the happy acquisition and.
I am referencing numbers today that excludes the $107 million in expenses that allows everyone to see the earnings power of the combination on a go forward basis. Let's go the numbers net revenue was 243.339 million for Q2 that is a beat over to anyone's expectation and a corporate record.
Right.
Net operating profit was $97 million also a beat and a corporate record we thought we might hit $100 million on a run rate on a quarterly basis in the third second or third quarter of 2003. So we're very pleased with the early performance of the $97 million.
That equated to operating EPS of <unk> 47, a share and that would've been the huge according exact suite rates us by now.
They had is at 38 cents and our own analyst had us at 34 and all of that was all across the board. So.
One <unk> as of March strong sign in the first quarter of 2002, we ended up with a margin of 321 and at the end of this quarter. We were 364, Thats, a 43 basis points improvement I've been watching the numbers come out.
But I haven't seen anybody with that kind of improvement maybe I missed that one.
But we're watching that on a monthly basis and we could see the number gets stronger just follow me here with March. It was 318 340, <unk> hundred 65, and June $3 87, <unk> had a little juice in it because it had all the quarterly accretion of the loan marks for April and May roll into June so that was a little inflated.
PNR pre tax pre provision net revenue was 50% higher in the second quarter than it was in the first quarter.
<unk> in our pre tax pre provision net profit was 50 216 tangible common equity came at almost right at 9%.
And we maintain our path of loan loss reserves of $2. One one of loans or $294 3 million that is one of the highest of all banks in the country, coupled that with our top tier asset quality.
If there is a recession, which wall street is calling for we might not have to add as many dollars to reserve as other peoples do some people have used it more like a piggy bank bullet input and Apple in it but we have we didnt do is left.
<unk>, we like two 5% reserve.
We just believe we are with two questions are better off doing that.
Significant early improvement in our efficiency ratio as adjusted from $47 43 in the first quarter.
So the second quarter at 46, one to think about that just a minute.
Before the merger happy was over 62% in home was at 47, So that's really nice execution, so far more to come.
But it will be harder to get and take longer to achieve.
Take longer to achieve the 40 or better Donahue lack of 40 or better we're still sitting on about $2 $5 billion in cash deployed when we see the opportunities we're picking our spots to pull other case will continue to repurchase stock when the market puts it on sale.
And during the quarter, we bought back over 1 million shares.
Having a desire to meet our Texas shareholders, we have four shareholder rallies, one in <unk>, Texas Amarillo Lubbock in Plainview, Texas. The meetings were very well attended and we estimate approximately 700 shareholders in total attendance.
They were good meeting and covered the whole story and the difference between own stock in a private bank and a public bond and the value of being able to convert that to real train riding money or cash.
We also talked about the dangers in these volatile times that the banking sector was experiencing and reassured our shareholders and the fortress balance sheet of home to get us through almost anything they can throw at us.
We found our Texas shareholders to be wonderful hard working.
Got very patriotic Americans.
We're looking forward to going back as soon as possible.
But in the meantime, we're probably going to go into Central Texas, Dallas Fort worth somewhere and have won.
I Wanna Marine book, John had a pretty good quarter with one of its best quarters ever at Shaw familiar.
He has hit the wall since then.
Applications are off about.
25%, 30%.
I don't know if that will pick up or not pick up but the dollar volume is going up the value of what we're financing. It has gone up with applications to advance. This time of the year. They usually have shelves and that can be have an impact on it plus people wait to buy at those shows plus higher interest rates.
In conclusion, it was a busy quarter.
But one of happy at home's best not too bad for the first quarter together I'm very pleased with the successful start and expect more to come in the future Citicorp's earnings.
I lifted nearly all bank stocks Friday.
But regardless of trend that.
That we all fall in the bank space I'm hopeful for us to separate ourselves from the pack because home continues to outperform most of the risk while remaining very defensive in these volatile economic times. The good news is we saw this covenant certainly attempted to make preparations to protect all our shareholders.
Our capital and our future together, we together we will continue to March forward and enhance the success that home is known for throughout the entire us as one of the best Thank.
Thank you for your support because it takes all of us pulling together to keep the company growing in the dividends come into each one of the more money, we make more money we pay in dividends I hope to see you. All soon it's an honor and privilege to serve as your chairman.
Donna I'll, let you have it back.
Thank you for those remarks, and congratulations on such a great quarter.
Now, we will turn to Chris and he will share data.
Thank you Keith.
Thank you Don and good afternoon to everyone.
The FDA continues to see demand for our products during the second quarter of this year, our portfolio grew by $274 million to just over $2 4 billion on about $450 million of new originations.
This growth is part of our portfolio rotation that began in Q3 of last year in preparation for anticipated pay downs during the second half of 2022.
Quarter I spoke about these expected payoffs and Paydowns for Q2, we received the $190 million in payoff Paydown. However, we expect that number to increase significantly in the coming three to four months.
Especially as pre pandemic projects are completed sold or refinanced for context, we have already received approximately $200 million of pay off in July alone I expect an equal amount or more in the coming month to months.
This level of pay downs as a feature of our portfolio as it allows us to continually rebalance our product mix for changing market conditions.
Over the course of the last six to nine months, we've slowly reduced our level of active construction loans, while increasing our originations and multi asset loans and facilities.
Of the $450 million of new commitments in the second quarter, almost 90% were in multi asset loans and facility and 65% were with repeat customers.
Historically periods of market volatility have afforded us opportunities to support our existing roster of clients as well as add new institutional asset acquirers to our client mix.
One of the strengths of the <unk> platform is our willingness in fact, our desire to realized repayments, which allows us to position our portfolio for what lies ahead. This is especially true during times of market disruption.
Thank you and I appreciate the opportunity to share our results this quarter Dana back to you.
Thank you Chris.
Now from our operating results and the quarter is Stephen Kim.
Thanks Donna.
Pleasure to get to report on our company today.
First I would like to recognize our bankers on the ground in Texas for their tremendous effort over the past several months.
Happy closing and conversion has been a monumental task for all of our teammates and thanks to you all.
Johnny mentioned it has certainly been a busy three months at home, but our patience and persistence is beginning to pay off.
The net interest margin improved nicely to 364% for Q2.
The addition of the happy balance sheet variable rate adjustments across the loan portfolio.
At higher earning cash balances all contributed to the increase and we would expect to see additional improvements as rates continue to rise.
We are keeping a close watch on deposit balances and customer activity in this dynamic rate environment, and our new markets in Texas.
We took the opportunity Q2 to make improvements to our funding mix.
Specifically, a subset of broker deposits along with several fully indexed or 100% beta municipal relationships. We will continue to refine the deposit base and navigate this rapidly rising interest rate environment.
After peaking at a little over $20 billion early in April total deposits ended the second quarter at $19 6 billion as.
As it makes us refined we believe the result is a more granular core deposit base highlighted by over $6 billion in noninterest bearing deposits.
Or 31% of the total base.
Switching to allowance production was strong at $1 6 billion for the quarter was $1 1 billion coming from the community banking markets in Texas, Arkansas, Alabama and Florida.
Kevin can provide additional color on what he is seeing in the pipeline during Q&A, but the activity in our committees in the past few months has been really good.
Switching to capital and a few key ratios.
Total risk based capital of 16, 6%.
Common equity tier one capital of 12, 8%.
And tangible common equity to assets or a TCE ratio of nine 1% as of June 30, all of these well in excess of our internal targets.
John you mentioned the strength of homes balance sheet in his remarks.
Given the capital ratios, we just mentioned.
Top tier reserve coverage on loans.
And the flexibility of having well over $2 billion in cash to invest or to <unk>.
Put into loans.
We're extremely well positioned to weather any storm or opportunity that comes our way.
Donna with that I'll turn it back over to you. Thank you Steven.
Before we get into Q&A do you have any additional questions.
This is Tracy.
Thank you will.
This morning in them.
Before we go to Q&A you got anything you want to say thank you all covered most of it.
<unk> has been <unk>.
Extraordinary quarter for Centennial Bank staff members.
For shareholder.
I've been proud of with the effort that's gone out to do that and as John mentioned.
Able to go down and meet the <unk>.
Texas shareholder.
That was just meeting people and meet in our brands and our new shareholders. We're looking forward to working for them the committed.
All of US here at this company work for the shareholders. We look forward to the next quarter results.
Okay. Thank you.
It was a great trip.
Six or seven of Us Atlanta, Miami and.
And we will.
It's really heart valves that we started to do is we didn't know what to expect and it was wonderful shareholders.
They got to hear the home stores so.
Anyway, I hope hope, we sent out information I hope they're on the phone call today, hopefully you can listen to the to the report learned as proud as we are.
So Dana I think I think we'll go into Q&A.
Okay. Thank you very much operator, we will turn it back to you.
Before we go on this.
And to summarize.
Okay.
I thought it was one of the best quarters in the company's history.
I just want to summarize you've got margin at 43 basis points, you've got revenue of $243 million, you got $95 million operating profit with 47 EPS good solid loan growth.
This lady peer leading asset quality strong liquidity.
We're doing lots of work on our debt and paying off our advancement, which have increased profitability and we've activated our buyback plan. So I don't know if this is the best quarter in the company's history refund of the divestiture of the top three or four in the Companys history. So we're very proud of the performance of this company. During this time hopefully.
We will have we won't have these onetime expenses next quarter, we'll still have some bragging around for a while but not a lot of them. So anyway I'm ready to go. Thank you.
Thank you we will now begin the Q&A session.
If you would like to ask a question. Please press star followed by one on your telephone keypad.
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A reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question, we will pause here briefly ask questions registered.
Our first question comes from Brett.
Brad Barton with.
Avi Group Bret Your line is now open.
Hey, good afternoon, everyone.
Hi, Brett.
Wanted to I guess first just talk about the loan pipeline from here John .
Johnny you indicated that you still think that interest rates.
It should be 6% and the market obviously.
Taking that in and it would seem like.
Given your thoughts on rates, maybe you would want to continue to be conservative and not open the spigot, so to speak, particularly with fixed rate lending, but im curious how youre going to treat it.
Current environment until it becomes more what youre expecting from an interest rate perspective.
Comment a little bit Kevin talk about that.
Yes.
From our side, we're going to continue to do.
We always do which is be conservative and make good credits.
Yes, I think we're going to see an opportunity, possibly if it's if things do get volatile that will have an opportunity to do that.
Keep doing what we do and you may see some loan growth you may not it will just be as Johnny always says.
We'll take what's give it to us and we'll we'll make that work and rates will be a part of that we're not going to.
We're not going to go out here do anything.
Out of our norm. So we will continue to work with what we got pipeline looks solid Texas had good.
Good growth in a quarter win.
Brand new to us.
And so I think that looks good too Chris I think.
Probably.
Yes.
Won't show the same numbers you showed last quarter, so will probably.
Contract a little bit and then he'll go from there so.
We're just going to keep doing what we do.
Interestingly I saw more six is that the loan committee. This week and I have seen I havent seen sectors of loans in a while and probably 60% of loans at a six in front of us. So.
Yes.
Sure.
We asked for this.
The market recognize and that's what we're doing the same similar level.
Or is it.
We can we're out of the Lubbock blindly.
All right.
The market, probably not we will do that.
Right.
Who knows what's going to happen just be careful that the thing gets speeds just to be careful I don't know if we're going into <unk> I don't know if were going into a recession I don't know what we're going to do.
It just cautious times I'm glad that we've done what we've done to protect our shareholders because it could get.
It really Rob I'll remember the last time. This happened is when all of the Texas <unk>.
Well failures for the late eighties.
Thank you have a bike and perhaps an outlook where open maybe ever.
Sharon with somebody a while back we bought it.
And in Texas that Weibo has many failed banks in Texas.
It was down in Florida.
Hope new steakhouses to be smart.
Good good.
Loans.
That's what we're going to do.
Okay. That's great color and then wanted to ask you about the expense savings of $53 million on the happy transaction and it sounds like you had some.
Things happen there, but it sounds like it's actually working out maybe as good or better than expected can you talk about the pace of those expense savings.
What we should expect from an expense run rate going forward.
But it's all really have.
The exact number for the month, but it's obviously when we're running 47 in the first quarter and happy is running north of 60.
And we combined this quarter around 46, it is pretty amazing.
Turnaround and expense reductions so some of that some people that were probably helped.
Helped us is less so.
Brian I think we modeled right I think we modeled 75% of that number to occur.
Over the course of this year.
Obviously some of the departures help from them.
From a personnel expense standpoint, and then.
Working through contract renegotiations right now it'll Johnny Tracy yesterday on on on insurance I think we're going to pick up about.
600000, or so an improvement there so.
Yes, I think we'll continue to work on it over the course of course of this year and at some point take a look at it.
Facilities and some of those type things too.
Yes, I think in insurance I think we said we would pay about Megan for now and have been paid.
Less than happy paid 800, combined rooms by EMEA, but whether thats in that $600000 savings.
Mark will take that each clipping along at those savings, but it is kind of clicking along at those size one after the other the other as we go through this so Brian you have an economy.
I thought your analysis of.
Got an improved efficiency ratio kind of sums it up but we're well down the road on it.
Our efficiency ratio will go down from a linked quarter basis, that's pretty remarkable when you add in happy at that 60 plus efficiency ratio.
That may be that may be certainly one of the highlights of the quarter with a combination delivery has done so.
Thank you for that question.
Yes.
Really strong results this quarter, maybe just one last quick one.
You mentioned marine sales were down 25%.
<unk>.
Our applications I'm, sorry, we're down 25%.
I think it's kind of interesting that you used RV prices are actually up 5% year over year in June .
Are you seeing anything that would tell you that the economy is actually slowing it there are some pressure points out there or are you just not seeing anything yet.
Well on the residential side certainly on the residential side so.
Subdivisions in housing so slow down that just don't want to tell you when I think about 550 now.
30 year mortgages ethical slumps compete with us.
As for our housing people. So that's been one of the strengths of.
All of US all banks have had good broad in housing finance and housing.
In their mortgage book, So that's really good to see that go away, but it's Scott I mean it.
It's still not going.
It won't happen.
Any doubt about it Kevin you got any comment on that.
No I would just say from our perspective remember we are in and some pretty good states from a from a housing perspective, and we may feel less.
There are some others, we keep particularly in our Texas market because they do they've historically been.
Stronger in the builder market.
We were across our footprint even in.
They they are watching closely not only what we have on the ground, but what what other banks have on the ground with our borrowers also so they are watching it closely looking at specs and how well they are moving in and if it's slowing down and so that's what we.
That's what we're going to do the rest of the way through it's just trying to be real close to our borrowers and make sure that we know what's going on.
It's a good have been operating in Florida, and Texas, two best States in the nation for business.
As such a plus because.
The copper our shareholders or their loved one having an off having those strong operations in those states I can absolutely be countercyclical to each other and with one of them is down the other one can pick it up when we got Volvo horses.
Our horses pulling together below the lagging as you see what happens as you can see what this month turned out for us. So that's what happens when you get together.
It is Florida slowed down Texas continues on thank you Vijay.
Second with each other and that provides some comfort to me and I'm sure our shareholders out there in the world.
We will continue to try to grow in those sites worldwide.
Thanks, Brad that's that's great color that's great color appreciate it guys.
Thank you.
Yes.
Thank you.
Our next question comes from.
Brady Gailey with K E W.
Your line is now open.
Hey, Thank you good afternoon guys.
Alright, great. Thank you for joining us.
So.
Johnny you are active in the quarter, putting some cash to use in the bond portfolio.
Youre still sitting on a pile of cash maybe thoughts on kind of how that.
Bresser's from here, you're still slowly trip that cash in the bonds do you wait and pause here for a second whats the outlook on continued cash the board deployment.
Well, we're sitting on about $2 5 billion now.
And then also deposits.
We will probably put will probably start putting some of it in here to work a little bit I think it's probably we're going to widen after the next inquiries.
And then.
Which is fifth 70, 75 to 100 basis points soon probably 75 will start to pull out a little more.
We've been picking our spots as you as you probably know we picked the <unk>.
Some of these companies are raising capital and we know what the companies that we've been picking our spots.
Getting great yields.
I don't know where.
Alright, I just wanted to touch on is predicting 6% I think you can sleep well, we could see 6%. So I'll ask it in a 6% loans and securities were getting back on some of the share that we're getting better and that as you well know so I think we'll start we'll watch we'll watch what happens in the next two weeks and I think we will probably start putting some more money.
Sure Eric.
In the third quarter.
Got.
And then after you.
You guys put so much reserves.
Through the pandemic.
Vision has been kind of the core provision has been close to zero for a while now how do you think about that as well.
We potentially headed to a recession do you start to have to provision or do you guys have so much on the reserve side do you think you could have a zero provision for a while here I'll now even if we do see some more economic weakness.
Well I can tell you one thing we won't have as much to put in as other people will so.
We've maintained.
A lot of reserve builds we've laid a lot of people use their reserves is a piggyback they pull it out and put it into income and we did we have set disciplined and patient as we always are and let the money in reserve. So everybody can sleep at night well now then we got maybe a recession coming out maybe.
And if it is it going to be Mark was are we seeing some of the big banks go in and put in reserve big amounts of reserves.
Yes home has decided to put some reserves in I don't think anybody substantial so if we're going into a recession.
We're prepared but if we get to <unk>.
<unk> reserves, if we get a onetime free shot at putting $230 million reserve will certainly take it so.
That's always been our attitude.
That will air with too much reserves. These paper easy lack a piggy bank.
What good does it do it.
And the income is just a one time deal and based on what we're seeing.
Looks like it might be going the other way.
Count me in a moment as you deal with that every day no I think you said it well we didn't take it out as we came through the end of Covid. So.
We are I think higher than most folks and if we do have some in it won't be at the levels that some others would have to.
Thats correct.
Yep.
Finally from Asia.
Was there something else.
No no I'm sorry.
So finally for me just solid M&A.
Interesting time to think about M&A for you guys happy is closing in the books.
You guys have a ton of capital and you're confident in your balance sheet.
Same time.
Headed towards economic weakness, so although a lot of times you all like to.
Buy when things are cheap.
Doctor cheap right now so how do you think about the dynamics of participating in M&A.
In the near term.
We added more Kathy's book April of borrowers that policy was $128 million on a reported it last time and I am just shocked when I think about that when I think about somebody doing an M&A transaction does that not only are they got mark.
The bond book again moderate the darn loan book I mean.
And these people eroded two to three to three 5% I mean think about the value of that loan book, but that's still to do.
Handheld can they pay for anybody today in the marketplace is going and I would like it to a lower average price is $1 50 of tangible book right now, we're still trying to overturn that.
There is only a few of Australia now, we're two times tangible book and the entire site.
Nobody has it.
It's kind of I guess, it's along the road doesn't turn but it's pretty interesting to me semi try to sell their bank in this environment based on what they are going to have to do with the ILC.
Was it related to turnaround and deal with the loan Mark the earn back to tangible book that day 42.
Ears.
Yes.
Shelley, maybe Amit <unk>.
Neither market loan book any right now and Thats really going to be.
Pretty disastrous I haven't I don't know what that.
But I don't know what impact it might on the bond book, So it might be a similar impact on the loan book.
No. The M&A can be done and then just taking look at M&A going on and they haven't gotten to the Mark Daiichi yet Brian I don't know what happened at all.
Yes.
Brian .
So I understand it right.
Right.
Okay. Thanks, but we locked 127 million and we Mark the loan book, We ended March at landmark alone book to Die.
Interest rates I mean, I guess, it could be as much or more than one person.
<unk> had pretty good right.
Good Brian .
Please stand by.
We get a good job over the long rates all the time I did a good job as if you remember we will have some countries where higher than us. So let's just take these people that wrote low long rates.
I mean, it could be.
<unk>.
It could be.
400 million 500 million I don't know what is made in todays market.
Pretty sure.
Okay.
I hate to be raising capital today I would tell you that.
So we got.
Our next question comes from.
Matt Olney with Stephens.
Matt Your line is now open.
Hey, good afternoon, guys. Thanks for taking the question.
I wanted to go back to Chris Poulton, Chris mentioned that some of his growth that <unk> seen has been in that multi asset facility lending I know those facilities can have.
Lots of different assets in different direction. So just curious if <unk> seen any any theme.
From your clients within that within that facility.
Hey, Matt its Chris.
Yes, no I don't.
As you say there is no.
There's different things that facilities do sometimes thats.
Loans right, so folks that have some loans they want a package together and we'll back lever.
Others are acquirers of assets and.
<unk>.
And they put those together they bought some things and they want to put those together. So I'd say, it's been probably about half and half realized.
Mortgage assets versus.
Commercial real estate loans, but one of the things we are seeing is that.
Some of the lenders had facilities in place warehouse facilities in place and during the last say six months or so certainly over the last three months.
<unk> seen some of those facilities pullback those facility providers pull back and that creates opportunity for us coming at a lower leverage higher price because they may be forced to look at whether they put.
The equity to work to do that or they take a little bit of leverage as they pull some stuff off off of those warehouse lines. So that's probably been the biggest opportunity is folks that are having to find alternatives.
Mhm.
And Chris I think you also talked a while ago, maybe it was a year plus ago about being patient.
Within New York City, just anticipating a slower recovery.
That's been the right call I think you've pivoted, maybe a year ago to some more deals in the west coast and other parts of the country.
Is that where youre seeing some of that pay downs at this point that you expect in the back half of the year.
On the West coast and other parts of the country.
We had a couple of deals in New York pay off.
As they finished so that probably three of those are New York deals I had.
Yeah, two on the West coast.
One in Florida, So I think it is.
It would be what you'd expect it to be which is pretty representative of where we've learnt before I haven't seen anything really be where it's all west coast are all in New York et cetera, I think thats what.
However, our portfolio look like three years ago, Youre getting that percentage pay off now.
Yeah.
Some of the stuff, we expected to pay off this this past quarter again, I mentioned $200 million paid off in the last couple of weeks since the since.
Since July one some of that we kind of expect it to probably happen and in June we are finding like on our side.
Let's take a little longer to close and sometimes that means payoffs to take a little longer to come to because everybody is still trying to.
Deal with getting third parties done et cetera, that's been the biggest delay probably a lot of these as if somebody's refinancing today getting your third party finished getting that getting the appraisals done and getting the legal work done etcetera, everything just takes longer today.
So.
I don't know that we've seen.
Okay.
More concentrated or not.
Okay.
I appreciate that and.
I guess I wanted to switch gears.
Stephen pivoting on the spot here.
Ask about deposit pricing.
I guess, we're hearing across the board about banks moving up deposit pricing rates over the last few weeks just commented at the higher rates would love to hear.
More about home bank strategy, and how much pressure youre getting to move up rates higher and just trying to appreciate where the deposit betas could be for for home bank. This cycle.
Sure Hey, Matt.
Yes.
We're seeing the same thing.
First.
Rate increase in March we were able to.
It'd be pretty agnostic to we had to pass a little more along in May and a little more along in June .
So certainly that customer's attention today, thank you start seeing.
You start seeing 2% rate gets everybody's attention.
I think our Alco model.
On the checking account side.
Ballpark about 40% when you blend everything together.
<unk> is something that we used to try to to try to manage by.
We've got some balances that are.
There are contractual that are tied to.
Two to treasuries that obviously have moved a tremendous amount over the over the last three or four months, but the negotiated rates and the rate sheets.
That we have in our regions.
Yes, I would say we've been in that.
20% to 40% range of what we what we passed along.
We're taking a customer by customer.
And market by market, we are tracing that they've had that conversation.
Multiple times.
We're on a weekly basis.
Frequently here lately just in terms of being on top of some of the movement I think some of the outflows seen is people spending money.
And having to spend their money.
Yes.
<unk> very closely and we're going to go to keep every core customer that we have.
Regardless of rate.
In terms of deposit growth from here.
Seem to be a pretty unique position with the excess liquidity.
Would you think you would grow deposits in the back half of the year or is this now just a time to be.
Careful and just kind of hold on to what you guys or even even contract are there any higher rates that you.
You can be running off the back half of the year.
So I think it's careful and watch it we got I mean, certainly we're going to we're going to always continue to focus on.
On customer relationships and generating new business, but.
Thank you.
It's something we'll watch closely.
Yes, there is always some seasonal movement around municipalities and school then when money flows in and plays out in some of those kinds of things that that may affect.
Levels.
The upcoming quarters, but.
Just based on what we've seen over the last couple of months I would think things.
I wouldn't expect any any material growth from where we're at today, but like we said we're in a we're in a good position with $2 2 billion in cash that that we can pick our spots.
Yes.
Yes, you guys are in a great spot.
Congrats on the quarter and thanks for taking my questions.
Thank you Matt appreciate it.
Thank you.
Our next question comes from.
Stephen Scouten with Piper Sandler.
Steven Your line is now live.
Yeah.
Hey, good afternoon, everyone.
That statin.
Prior to the calendar.
Yes.
That's right. It's all the same I'll respond to any and all sorts of names.
So guys.
It feels like I mean, I think it's pretty clear that you all are very well positioned you've talked about it.
Our reserves liquidity to put to work been more patient.
How do you think about using the buyback as well at this point in time, you were still relatively active this quarter and so just trying to think about.
How how continue activity might be especially when like a day like today, where the stock is down for.
Purposes, I don't I don't really know be honest with you.
Neither the way.
I figured it'd be up at least $2.
Please equal reserve I don't yet.
Yes.
I don't know what we can do better we done so.
Yes.
Do you think you're going to be as active with the repurchase or yeah. I think we will as long as they keep it down and here it is.
Witness pick it up.
A lot of patient data.
I didn't even realize we bought a million shares we bought a bunch, but when they were.
We're down in here, we got cash about wins, so yes, we've been latest in tax law.
We've got our other securities.
As you can see that <unk> kind of west side analysts last quarter countless EMEA Tonight, but they are back this month they are up so.
We think by stocks really.
Particularly the ones, we invest in a pretty good advice.
Be around they are not going out of business.
This reminds me, yes it was.
Fourth quarter 2018.
And we're making more money and we know what to do with us.
Donna or start to go on strike down Don against your bags packed will go on all of the country.
And we're going to tell everybody, how well home bancshares doing while their livestock.
Remember that I would probably burned $150000 worth yet you we went all over the country.
No about <unk> was passed domestic no nobody believed US no I believe we were doing what we were doing we're swimming in Amazon.
The boogeyman and there was a Russian power laboratory and everybody was scared to death, I mean banks are actually in pretty good shape design answered at least particularly only is in great shape. So.
I don't have that.
To give you bad Apache somewhat follow up not to work or home tell the world how well we're doing he said I won't believe asus.
Got it.
I don't know.
And how things are very good here with home Bancshares.
Yeah.
Sounds good.
I'm curious I'd love to hear a little bit more from Chris around what he's seen in his markets in those larger ticket loans I feel like.
Sorry, Chris kind of hate to everything I feel like it always sounds like he reluctantly does loans in his market. So I'm just kind of curious what he see in finding worries him in any of those markets about you guys back pretty close thank you Chris.
I always thought that was a ray of Sunshine, but.
What I tell our guys.
Yes, hi, guys, Hey, listen.
Every once in a while where we're reluctantly agreed to give some people some money.
But I think that served us well and it's continuing to serve as well because we could have plowed into some things over the last year thinking boy at times times right for US I think we've had a good origination year. So far I think mostly what we're seeing is.
Especially on the bank side.
No.
Because aren't that creative generally to begin with and that the most creative people to begin with I think and when things look like they might be disruptive. They just go home right. So.
As far as I can tell.
Once memorial day hit.
Pretty much every large bank in the country, just went home and they will come back after labor day, and see if they feel like doing something so we're seeing opportunities over the summer and through the second and third quarter, where people, just saying Hey, listen I got this project I want to move it forward.
Or them buying these things and I want to do that and we got to get it I'm going to have to get this done over here.
Some of the people like normally go to for higher leverage and lower costs aren't going to be there for US right now and would you look at it.
And we do right I just think we always do what we do which is we look at a deal and we find.
Well, what we think about it we found four or five ways out of it.
And then we say all right I, probably do it like year, and sometimes that's disappointing to folks and sometimes they say you know I can make that math work. We're finding more people now, saying I think I can make that math work because that might be my best option.
But it's taken a little while though I mean, I would say last couple of months, it's been borrowers readjusting their expectations because there.
Well, you know I used to get.
70% at L plus 275.
When you say what you should go do that that's a good deal it sounds like a pretty good deal I do I do that.
Were you and they say well you haven't I don't have that right now Oh, okay, well, we could talk about what we would do and by the way what we would do is what we've always done.
In the fifties on leverage.
We're gonna be five over and we're happy to keep talking to you about that and so I think our product is as useful to people right now.
And so we'll continue.
We will continue to be there and Thats why I think we get the phone calls because people know we will be there and if we say we're going to do it we'll close.
Which is important today, because things are a little disrupted.
Yes.
Yeah, Okay. That's super helpful. Chris Thank you.
And then maybe the last thing from me I'm just curious.
Simmons I think was talking about overdraft NSF charges. Maybe this is more of a Stephen Tipton are Brian question, but.
I'm wondering what the what the level is of overdraft NSF fees that you guys had and if you think or have you started doing that work on potential pressure on those given kind of regulatory.
Focus on those charges in general.
Hi, Steven Steven.
Yes, it's top of mind.
<unk>.
With our regulators on a consistent basis I mean, we operate our system.
And I would call it that.
Most compliant least risk way today.
We are seeing a lot of banks.
And now they're doing away with with NSF fees or overdraft fees or are creating caps from Cushing.
Things like that around their program.
And.
Yes, we're in conversation on that no decisions, yet, but evaluating data and may look at something like that in the future, but we're.
We're in discussions as you know I am sure there aren't any there's not any any guidance out there from.
From the regulators.
So.
And a lot of cases banks are.
Kind of shooting from the hip on what changes to make but.
It is something that we're looking at.
Yes.
May evaluate later this year.
Yeah.
Got it.
Great sounds good guys I appreciate it and Johnny I think if you go around the country again, you should do it in the RV and do just a bunch of big campaign type events I think I.
I think that would be highly entertaining.
You can do a little dance like President Trump did at the beginning to everybody all of it.
[laughter] saving.
David.
So we feel good.
I'll say yoga road.
Yeah.
Yes.
Thank you.
Our next question comes from.
Michael Rose with.
Raymond James.
Your line is now open.
Hey, good afternoon, thanks for taking my questions.
Just a warning.
How are you.
I'm doing well surviving.
A teenager.
Sunday so.
Thanks again to all of those households, let me tell you.
Really bad.
I don't remember one year, Germany need over <unk>.
Okay.
I'm glad you are about right.
Yeah.
Just kidding.
Just going back to the.
The comment on marine it.
It sounds like growth kind of slowed.
Was that more kind of self inflicted just kind of given where we are in the market or is that just kind of like.
Both both sales season, it's kind of over were drifting towards a late summer fall or is it more seasonality or is there anything more purposeful to read in there to that thanks.
Well there is a little seasonality I'll, let John talk more about that but it is this is a team that has the boat show was a lot of activity happens in.
The factories will still also Lal you remember our <unk> model.
August .
I get it for.
For a test run.
September Toyota that's a year, it's 13 months after all the factories I think John confirm is there still booked up Johnny.
<unk> talked about that.
Yes. Thank you Mr Allison and Michael Thank you for the Marine question.
I think remember we had a record quarter. That's now in the rearview, we funded $88 million.
And in retail loans that brought our balance sheet up to just north of $1 1 billion.
Yeah.
In fluids of headwinds rising rates depleted inventory, Michael that you spoke to and Mr. Al just spoke to and the seasonal summer lull.
People are enjoying boats that they've already recently purchased this is all in advance of the fall season.
Typically we've seen a seasonal pickup.
But as Mr. Allison said, we've seen a substantial drop off in the month of July and I don't know thats great related to those.
Any one of those factors that I mentioned, the headwinds or a combination of all of them.
But pre sales boats are pre sold all the way out two years from now.
Quick as the factory send them instead of these things maintaining the commercial side of our business with funding on inventory lines, they're going straight to our retail clothing.
So I still think we're probably a two year period out before we start seeing a commercial build business build back up.
Again.
Order was it was a record for us on the retail side and good news.
And I don't think we spoke to this today, but is that asset quality remains very very positive.
Okay, Michael Thank you for the question.
Yes.
Yeah, absolutely and a way for Johnny <unk> when that bother us.
You have to do that.
You'll have to come.
I'm down.
I think at the beginning of the comments you made.
Beginning to enter a comment you made some comments around Dallas.
Maybe Houston is that something that you know.
Over time would be kind of interest to you.
Either on the M&A front or would you actually would maybe look to maybe hire some team just to bolster what you got from happy. Thanks.
Well.
Yes.
We look at both.
We looked at both sides of that opportunity.
Really hasnt been one.
That loan teams in the past we are looking at that something that we think it is.
Possibility.
Right.
I don't know that I mentioned, Houston, I mean, I don't think you mentioned Houston.
So we will continue to grow in Texas and Florida.
But theres not a lot left in Amin does not lead, Florida, and you've got to take smaller stuff, but.
There are some opportunities in Texas.
We're just kind of.
The main thing I think Matt is and we're getting there with it obviously as you can see by the efficiency ratios of the company is execution.
One in Florida, you know this company has always executed we've done.
Been with us over 25 deals we've all we've executed on 25 or so.
Our emphasis around here is execution.
<unk> execution in its way down the road, perhaps transaction and then once we get that done.
<unk> will go up because there are.
Using number of banks, particularly in Texas and represented here. So I think there'll be good opportunities there.
We're getting realistic on price.
The problem is the problem is not going to hear my earlier comments about marketing the bond book and Mark and loan growth.
And trying to get a deal is.
Olivia.
Adam I'm not sure of that can be done in this market right now I'm not sure if thats possible, Brian we thought you might need to be done.
Their focus is on the no dilution of tangible book now.
Yeah I mean.
Now you would take such a large interest rate mark on the loan book that would be pretty painful.
I'll point out.
But I really wasn't paying attention that Michael I was thinking about the bond book.
$128 million was happening and then I have to think about the loan books and that that would be loan growth or bigger than the securities books are and taken a hit like that would just dilute dilute dilute so.
As you remember when a store we ended up delivering $120 million by $100 million whatever it was but I came out earn back will happy transaction. However, the revenue came in a little stronger from happy Sad.
And I anticipate so it may not be that long.
Great and maybe one just last quick one securities or about 21% of assets at this point I know you invested some.
How should we think about the size I mean, we did we did grow it much more as a percentage of assets from here right now do you feel.
More or less comparable.
The Securities book.
Yes sure.
Yes, I mean, we go.
As far as I'm sure are we sitting on we've put another $2 billion Mark.
Maybe to look at these rates and what happens.
They shot up.
Okay.
The 10 year down to about 350 and anybody down.
Two widened to four day envelope right now, we'll see what happens <unk> taken back up now a little bit, but we can't tell how much money the vaginal spanned by down the 10 year and older crowd and the good news is we are trying to keep housing going forward, probably proud about the tenure down but at some point in time in Ottawa, we thereby when that is but.
It is it's not really the problem is it's not really that's not a real number.
They need to get back to reality, what a real number.
There is.
I think probably we can span.
500 million variety in the next quarter.
We gave money to our securities.
Sure.
And.
Took them allow us spend it didn't because of the volatility of what was going on in the marketplace.
One thing we also have about a $250 million treasury that mature and reinvested it into quite a lot of <unk>.
Another 200 basis, you may not have prior to the bathroom to ramp that I like August 11th.
So.
Yes, it would probably it's probably a little bit smaller work if I'm right.
My theory is we got you hear the talk to divest license, we got that we paid when paid runaway damn fast.
Going down in early 'twenty four late 'twenty three.
If we do is worse notwithstanding later I mean, it's just one Boe per day in late Saturday and he brought it down.
People start screaming so he backed out and then better than we had to go back and I think it's 21%. So I think that same thing that I would like to repeat itself here if we're not careful.
So probably 500 million maybe this quarter, if we feel good about it we might put 500 million worth the good news is we will get to an increase in our earnings because it's bad we're doing 165 days led to a 100 basis points will get to 65, that's right, yes, we will get better.
We've got our eyes either way.
Think about that Michael this is our bank.
Last quarter increased our income by about $6 million system and interest income.
That came from the FAA, so somebody's rebate check.
I would just add a little box, you're thinking about the rest of the world out there although bikes after doing all the miners have any liquidity, but most spices goodbye to have liquidity and they're getting lots of money and that's cost us.
For us as taxpayers lots of money and <unk> made a little bit.
Okay.
Great. Thanks for taking all my questions guys.
Thanks, Michael.
Thank you.
Our next question comes from.
Brian Martin with Janney Montgomery.
Ryan Your line is now open.
Hey, good afternoon.
Thanks, Brad.
Hey, just most of my stuff's been answered, but just maybe one maybe one on the margin for Steven and just kind of just get a sense for.
Kind of what if you can just talk about what the loan repricing, what's kind of through their floor is kind of what's moving here with rates.
You guys have cover the liquidity part, but just understanding what's what the loans are through their floors and kind of what's moving today on.
On the loan book could be helpful. Steven.
Sure.
I guess numbers are about the same today that we covered back in April we got about $1 billion seven or so on.
The community Bank side, we'll call it that that's tied to Wall Street Journal Prime now happy had a big.
Have you had a 1 billion plus that on their books.
What 125 since that time so we're.
Functionally the vast majority is.
Or beyond their floors, now where if we get 75 next week or 100, depending on.
What do you think.
We'll benefit from that and then same on Christmas portfolio tied to LIBOR or so for ships should be moving now so.
$4 billion or so that that's moving as rates move up here.
Okay.
The overhaul.
Top of the House I mean, we show I think net interest income in an up 100 scenario.
At about 6% increase.
And in an up 200 scenario about a 12% increase and so that kind of takes.
Now, that's obviously going to wrap everything together between loans and cash in investment cash flows.
And then the funding side. So that's that's what we tended to focus on here lately.
Gotcha, Okay, and then just the starting point I think Johnny gave some color on kind of a monthly margin I mean.
The kind of the jumping off point for the core margin or the margin is.
June when you back out some of the.
<unk> and reducing that kind of what was the core margin kind of running in the month of June .
Clean basis or core basis.
So you want me I'll try and take that one.
As Martha Jamie before Gregg.
Seven that included about one point.
One 6 million of additional accretion income that was sort of a whole quarter from the loan book.
You kind of normalize that that's about nine basis points and so you would have about three basis points of that in for the quarter. So three.
<unk> seven problems with normalized about 381.
Okay.
Brian Thanks.
Gotcha and then good news is the good news. The good news is we're seeing it will fall in it every month and were watching it click click click up so that's been that's been very positive Washington revenues.
Coming out with revenue, we're watching video and I'm seeing July build in Virginia, right now so I'd like to see those numbers on the revenue side continue to build.
Yeah, Yeah, it's powerful and.
How about.
Johnny you talked about maybe not adding as much as other banks on the reserve side, if depending on how things play out if we go into recession either stagflation.
I mean, it's kind of a level year add on the reserve.
Percentage kind of a floor today in your mind and then it really kind of holds where it's adding goes higher if we go into a downturn it or is there more room to bring that down a touch from where it's at.
Given current.
Current conditions.
Well I don't know what current conditions are as of right now we're fine.
Yes.
I don't know what current conditions are going to be in 90 days, but.
One thing as I said for sure a while ago is that we won't be putting as much. It is out of the biopsy with amoco.
We maintain strong was or so almost always locked into $418 50. So.
232% somewhere in that Ryan we still haven't it's fine.
We had.
Jim Stagflation or we went into a recession.
We did anything.
I don't know $10 million to $20 million, maybe 30, Max I can't imagine us doing what we do lifetime safety 45, or 50, when we moved it up safely.
More of that more of that come out in the Codell. We did 100, something Dave Yes, we did $100 million of reserves. So.
I think we got I think we're in pretty good shape right now I don't know what Moody's has dora.
<unk> forecast.
What's going to happen with the economy that really I don't know, if Atlanta and I don't know what the Moody's, yes, there've been in Conway, Arkansas.
Yes.
It's a difficult, but we'll pay attention will listen.
I think we're in good shape.
I wouldn't I wouldn't mind going back to $2 52, 5% reserve I wouldn't mind that at all.
I mean fire money our money, it's our shareholders' money, we just got it in the neighborhood account just provides more security and safety in more conservative for for our shareholders.
Right Gotcha.
Okay, and then just Stephen you talked about doing some refining on the on the deposits. This quarter I guess it must be that Don I guess or is there more to be done there as far as how to think about deposits I forget what you said earlier about growth, but just trying to understand if there's more.
More things you're doing there.
It's kind of mostly complete now.
No I think most of its complete we had we had.
$300 million in wholesale deposits that we moved out early April .
Same thing there I think they were top end of the fed fund range in and kind of always out of the money.
And then we had some others in the footprint that we've talked about over the years.
Certain pockets of Florida.
Sure.
Municipalities and the ability to kind of help plug gaps in the funding base. So a lot of that was addressed.
In Q2, and I think from here will be just working on interest rates.
Maintain the balances we can.
Gotcha.
Okay perfect that takes care of my questions I appreciate it and great quarter guys.
Thank you very much.
Thank you.
Our final question comes from.
Jon <unk> with RBC.
John Your line is now open.
Thanks, Good afternoon.
Hi, John .
Alrighty referendum.
Good I'm good.
Steven O'brien can you help us a little bit on expenses I know you talked about maybe getting a little bit more out of expenses early but what kind of run rate are you thinking about for Q3.
Right.
Give us some parameters well.
Oh no.
If I'm going to give out an exact number but we do have some of our people as well.
Kind of said all along it will be August where we actually say what some of the run rates on base because we have a lot of people that are on the payroll all the way through to margin.
And those people are dropping off.
Now so.
We got a lot of the expenses already just because of some unexpected.
I don't know if you have any.
Specific number Steven but we want to give out or not.
Yeah, probably 20%.
Slide 20% to 25% or so.
Factory in comp and benefits and everything sort of when we get down to this through this next quarter that'll.
That will be a great start.
People.
Held on through the conversion.
Which was part of the juice.
How do you plan to answer your questions John .
Understood.
Not really but I think what I'm trying to get at is if you peel off the charge.
$110 million or below for a run rate.
I can't hear you did you figure one.
If you Peel out the charge, you're at about $110 million or below and it gets better from there just in terms of the core run rate.
Yeah.
You talked about core run rate.
Okay.
Yes going forward.
Please note that it will be great run we ran about 97 hundreds reasonable force I would hope we see a 100 this quarter.
I think you saw that noninterest expense, our noninterest expense you're talking about the noninterest expense you are right now.
Oh God I hope, that's not that just happens to be close to signing up.
It's very tough.
Okay, Yes, I mean, I think goal would be.
Would be somewhere in the.
To trend over time again I think.
Yes.
Goal is to have 75% of the 50 plus million recognized by the end of this year.
Whether we're.
Close to half their or not that may be that may give you some direction in terms of.
Where we would hope to see by by December and into the first part of next year.
Okay. Okay.
And then just back on the margin.
<unk> hundred 81, you talked about.
Core.
I think you guys are saying that's trending up right and if we get another 75 basis points that continues to trend up overtime.
That's correct yes.
That's correct. So it was it was 387% was a little it had a little bit too much and its really probably 381, Brian .
So we've got a 100 basis points, which you then.
Approximately a quarter of our models will be up about 6% and net interest income.
Remember, we used to run on a for all the time, we got around the floor again.
Yes.
Okay.
But I'm just I know, it's late in the call, but I'm just doing my caveman math.
And it seems like estimates are too low based on what you're telling us on expenses.
Assets in the margin outlook.
Yes.
Well it depends.
It depends on.
It depends on.
And so patients.
Patients who will get out.
I don't know what the next cutoff.
<unk> dollars in payroll on the next change deal.
How many people that is.
Through the conversion and I don't have that number.
Well, that's a pretty significant number.
So.
Yes, just and Margaret Alona and accounting quite a few of them all of them are capped through conversion and then they were capped off another 30 days after the margins. So they were on the payroll in July will come off the payroll for August .
Okay.
The third and fourth quarter, John Youll see Youll, probably see most of it now however, we've got lots of real estate there I don't want to keep it mixed use office or not.
Downtown Amarillo.
Sure.
The square foot facilities pretty nice price equal Keith.
I think all of the property there in those markets, we'll evaluate and make sure that we get the biggest bang for our buckets. When you look at how they manage that they get some lease income and lumping cover themselves on that.
Spots around all the markets it could be.
<unk> gotten rid of outcomes in Brazil, looking for future expansion for certain things that probably wouldnt happen.
But.
Asher lack the corporate office is just a little bit.
Corporate office, and 40000 square feet and that one was 200.
[laughter].
John I think the biggest thing there.
It's been a it's been a.
A very busy quarter for us the work has been unbelievable by the Texas group than the Centennial Bank group future conversion is always a challenge. We'll just say everybody is working through that at this time.
Being able to go out and really see some of the things that we could.
Cost saves going forward, we haven't been on our radar screen, but we've been focused on trying to make sure we get the customer taken care of and that's been top priority.
A lot of hard effort work.
On that part.
Most a lot of good that comes along with that and then the other thing that we're seeing with the two banks together is trying to really take the ideas of what they did and how they did it compared to how we may have been doing it for for the last few years and coming up with the best solution. So it's really it's really been a good thing for us.
And work our tail off but it's been out there on a lot of things that I'd like to Colombia.
Huge benefit for us at the bank.
I'll go back.
His comments at the beginning of the meeting I mean look at the <unk> numbers and what we're doing I would have never guessed the numbers that we produced this quarter taken.
Take out all the.
<unk>.
The merger costs that throws in there, but I mean that's.
Thats, a hand off to every region that we have out there, including the Texas market that's come off.
<unk> phenomenal number that I couldnt be more proud of.
With everybody involved in the extra effort that we're spending and thats, probably not driven all revenue and we're just trying to make sure. We get through this conversion process is smoother as quick as possible.
Some of that revenue start some of that revenue will kick back in.
The group in taxes is ready to go.
The lenders had just began to be on <unk> for a long time.
Held back on some of their production activity.
We have the wrong maintenance, Kevin and I participate in they've got a good pipeline going and working through it so.
There is a lot of things are going to happen in the second part of this year. There is going to be I think even better for the company, even though when I look at the banks that are $2 33.
<unk> Johnny phenomenal track.
Yes.
Alright, thanks for all the help I appreciate it.
Thank you John .
Thank you that now concludes the Q&A session I will now pass the conference back over to John Allison for any additional or closing remarks.
Thank you.
Great quarter, Thanks to everyone for your attendance design.
I believe we will have as good or better quarter next quarter.
I think as I said earlier some of the best quarters in this company's history.
Particularly in light of the fact that we combined two great companies together happy on home and have a happy home today. So the earnings power of the two companies is really a pretty significant.
As we continue to deploy our funds into the marketplaces in both loans and securities.
Thank you will see the earnings of the company to continue to improve or at least I hope so and we should see some reduction in expenses. So we got more to come I think John Austin was on the right point asking a question he was asking so.
Anyway, hopefully we will get our hands. It's been so busy we haven't been able to see where we are in or.
When a plant right Brian right.
So, but we've been working towards it.
We're making progress so thank you all.
We appreciate your support and we'll talk to you in 90 day.
Okay.
Yeah.
Thank you.
This concludes the home Bancshares incorporated second quarter 2022 earnings call. Thank you for your participation you may now disconnect your line.