Q4 2023 Home Bancshares Inc (Conway AR) Earnings Call
[music].
Greetings, ladies and gentlemen, welcome to the home Bancshares incorporated fourth quarter 2023 earnings call.
The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued this morning.
The company presenters will begin with prepared remarks, then entertain questions.
Please note that if you would like to ask a question during the question and answer session. Please press Star then one on a touchtone phone.
You decide you want to withdraw your question. Please press Star then two to remove yourself from the list.
The company has asked me to remind everyone to refer to their cautionary note regarding forward looking statements.
You will find this note on page three of their Form 10-K filed with the SEC in February 2023.
At this time all participants are in a listen only mode and this conference is being recorded.
If you need operator assistance during the conference. Please press Star then zero.
It is now my pleasure to turn the call over to Dr. Donna Townsell director of Investor Relations.
Donna Townsell: Thank you good afternoon, and welcome to our fourth quarter Conference call with me for today's discussion as our chairman John Allison Tracy French President and CEO of Centennial Bank, Stephen Tipton, Chief Operating Officer, Kevin Hester, Chief Lending Officer, Brian Davis, our Chief financial.
Donna Townsell: Officer, Chris Poulton, President of <unk>, and John Marshall President of Shore Premier Finance, our team has assembled today to review the fourth quarter results with you and we will begin with remarks from our chairman John Allison.
John W. Allison: Good afternoon good afternoon.
John W. Allison: Welcome everyone to the fourth quarter and year end 2023 earnings release and conference call for today. Thank.
Speaker Change: Thank you guys for many years of support that you've given this company I believe Donald told me all of the day, how quick passes versus our 20 <unk> year at all of that correct.
Speaker Change: 45th year.
Speaker Change: Hard to believe at home Bancshares had been around for that length of time.
Speaker Change: Finally remember 1999.
Speaker Change: First year in business and we were cash flow policies and would have been possible had we not started building reserves at that time, but you know our belief reserves and we've continued to build over the years.
Speaker Change: Dividends for us.
Speaker Change: We're up to the company was profitable and has been every year since the first year. We ended 2023 with total assets of $22 7 billion and earnings of almost $400 million.
Speaker Change: Actually we would have earned over 410 million without the surprise FDI say $13 million special assessment that we had to book for a part of the plan or a box that occurred during 2023 because of poor management of some of those respective box I've heard for years.
Speaker Change: Washington, complaining about taxpayers bailing out banks that went broke.
Not in 10, it was talk trouble asset relief program and the fed was heavily criticized for that program, we borrowed $50 million from the pad.
Speaker Change: Little over 5% interest I'd like during that time, we were getting lack of 0.4 I don't remember how much Brian where we get no money, but maybe a point we haven't we're paying 5% yes.
Speaker Change: Aren't getting much on it we're getting much otherwise I'd like to fed data are out on rent.
Speaker Change: Made money, we did that totally as an insurance policy of never spent a dime in the money. If you remember what I said when someone asked me what did you do with a mining asset took at home put it fell on way to 357 Magnum Rambus.
Speaker Change: So it seemed like it was yesterday when that happened we kept the money for several years, while becoming the largest buyer failed banks in the U S or at least one of the largest buyers of failed banks in the U S. We were building out our Florida franchise that has become a very profitable part of this corporation and water Greg.
Greg: Ron that's been.
Greg: I don't know about other banks paying their fair share, but we certainly did that and we are now.
Greg: We are having to pay $13 million because of the stupidity of other management teams I don't like that but it is the best way for banks to repay the fed after all the fed did drop the money.
Greg: Many many many banks I think the prior years would've been enormous felt the system was on the edge of collapse and the fed had stepped in with their new BT FP Bank term lending program.
Greg: Under this program the fed allows banks to borrow 100% of the face value of any security regardless of the market value.
Greg: They had a.
Greg: This fall that they paid $100 four in the market value was 50.
Speaker Change: If I'm correct, Brian <unk> bar 100, <unk> that's correct.
Speaker Change: So that those that had the major alcs problems.
Speaker Change: Lap that out for a lot of them.
Speaker Change: Probably that say, 90% of the banks in the U S Bank management teams plowed, all that funny money Fiat currency and a long term low rates.
Speaker Change: Wow in a rising rate environment, it's almost funny if it wasn't so serious and you cant Mike just step up.
Speaker Change: That's why I say, most buyers are not very smart.
Speaker Change: The small percentage of banks that did not make that mistake and weathered the storm well hull was prepared for final buying base.
Speaker Change: <unk> 910, and 11 and reap the dividends.
Speaker Change: The war chest of capital and huge reserves and strong management team.
Speaker Change: Wow. This time hold was totally prepared for this bank process. We didn't know when it was coming but we were just getting prepared with more capital larger reserves more experienced management team and a fortress balance sheet, but the monster well just too big and many many banks if.
Speaker Change: If the fed did not provide the easy access to cash the regulators moved to provide free money. Once again, probably was the best thing to fed could've done side the waste bags.
Speaker Change: I was hoping for another bite at the Apple and again was one of the few in the country that properly prepared for whatever Wisconsin.
Speaker Change: Our regulators have continually told us to keep our powder dry because theyre going to need us to help clean up some of these messages.
Speaker Change: There are simply too many weight mines cluttering up the bank space with limited capital Crazy growth plans, coupled with <unk> leadership Kemmons Wilson, the founder of Holiday Inn said good judgment comes from experience and experience comes from bad judgment and I think there is no substitute for experience. These banks are at 8% or less capital 75%.
Speaker Change: 80% efficiency ratio and loan to deposits of 105% threaten the entire safety of the homebuilding space. The regulators are stretched to the hill I think it's just too big a job to regulate that many different financial institutions. If my numbers are right. There are nearly 5700 bank and another 5400 credit Union.
Speaker Change: And with credit unions bond banks, all over the country by the way as you know credit Union pay no state income tax and no federal income tax.
Speaker Change: So every time you see a credit union bound by the federal deficit goes up.
Speaker Change: That needs to be corrected.
Speaker Change: Talk about the results of the quarter and the year they were pretty good.
Speaker Change: We'll take the blind for poor results.
Speaker Change: We can't control, but the fed assess what was almost $10 million after tax totally beyond our control. So I want to present you today, both like how we reported the earnings under GAAP Bryan correct, Brian how they look had we not had the assessment.
Speaker Change: Different from the past we would have if the fed were just tell us to pay so much a quarter, we had actually booked a liability. This time right Bryan that's correct book the whole 13 million, we booked the whole 13 million, which ended up at about $9 6 million after taxes, if I recall.
Speaker Change: It is our belief that a matching amount of.
Speaker Change: We're not going to get into the lawsuit deal today, because that's in court and I think that probably cost us some money for the quarter as we continue to dealing with that over a period of time, but I have to say you can how much money that is will be determined by a court of law at some point in time and it was $9 million 739000 after tax.
C assessment.
Speaker Change: We reported earnings of $86 2 million without the deferred charge. We would have had 95 million man almost $96 million. So for the year that put us at 392.929 million or without that we would've been at 402.698 million. So we hit.
Speaker Change: EPS was <unk> 43 cents.
Speaker Change: Without.
Without the fed there would have been on the nickel five cents a share. So it would have taken us to 48 and that is a beat.
Speaker Change: Our return on assets were $1 55, with the fed cost and 173 without and year to date, we ran a 181% of that return on tangible common equity was 15 four.
Speaker Change: With the fed.
Speaker Change: Assessment in 2017.
After <unk> was 48% to tell you when that low in awhile.
Speaker Change: That's what the assessment and $53 51 rollout. So that moves is Steve is going to talk more about it a little bit some margin. The margin was 417 versus four not painting, a little that we created ourselves like Brian with our borrowing.
Steve: One basis point.
Steve: So actually it was pretty much flat nonperforming assets remained stable at four two both in the third to the fourth quarter and will continue to maintain a reserve of 2% tangible book value because of the ALC and orange kicked up pretty good from $10.90 in the third quarter to $11 63 in the fourth quarter.
Steve: So <unk> continues to grow with 14% last quarter and this quarter. We're at 14 going forward, we are making good money and we continue to grow those capital ratios.
Steve: Average was $12 four.
Steve: With respect to assets was $18. One revenue was abate fourth quarter revenue was $245 $6 million a laptop that was pretty good.
Steve: Interesting watching that were up pretty strong.
Steve: Income.
But we're up almost likewise on interest expense I would like to spread we were up $11 million plus on interest income and were up $11 million plus non interest expense. So hopefully that's going to stop or slow down at some point in time in the future.
Steve: Loans grew by $152 million in the fourth quarter Cc FTE.
Steve: They were down $61 million 61 for the quarter, but legacy room total of $214 4 million in one of the best quarters. We've had in a while deposits also grew by $270 million.
Steve: Q4, we repurchased 815000 shares at 21 average price of $21 $417 3 million and for the full year of 'twenty three we bought back $2 million and 225849 shares at an average price of $21 69 for a total.
Steve: Buyback of $48 3 million.
We have $16 7 million shares left available for repurchases.
Steve: No it was not a great quarter, but it was not a terrible quarter I'm sure a lot of people got bigger problems than homes got it just was a tough quarter very frustrating and difficult quarter, we embarked on a.
Steve: As I told you last quarter, a cost cutting measure I don't know, where we are there yet, but I think we will see it should start seeing it from its scheduled first quarter should be in this month next month and a month after that so.
Steve: We didn't get enough, we'll go back and get smaller.
Steve: It's just it's a tough environment.
Steve: Outside of that Ghana.
Steve: Really have anything you can.
Steve: You have it back.
Speaker Change: You won't do it okay. Thank you Jonathan next.
Speaker Change: Next we will hear from Stephen kitchen, with some operational detail.
Donna I'll start with the net interest margin as Jonny referenced in his comments.
Speaker Change: The reported NIM was down two basis points to 417% in Q4, but as mentioned we carried some additional cash on the balance sheet late in the quarter, which improved but negatively impacted the NIM by one basis point for the quarter.
Speaker Change: We continue to closely monitor asset repricing against the increase in cost on the funding side.
Speaker Change: When adjusting for the excess cash in December the monthly net interest margin would have calculated it for 107% nearly matching the quarterly average.
Speaker Change: During the quarter total deposit costs increased 22 basis points to two 9% while the yield on loans, excluding event income increased 20 basis points to 719%.
Speaker Change: On a monthly basis total deposit cost increased six basis points in December to end the year at two 6% while the yield on loans, excluding event income increased four basis points to seven 5%.
Speaker Change: Switching to liquidity and funding it was great to see an increase in deposits in Q4, particularly as the rate backdrop continues to be extremely competitive.
Speaker Change: Total deposits increased $269 million in the quarter with the majority coming from the Texas and Arkansas regions.
And the deposit mix movement was similar to prior quarters as interest bearing balances increased and Cds continued to be in focus for the consumer.
Speaker Change: We still remain just under 10% of total deposit balances in that CD category.
Noninterest bearing balances.
Speaker Change: For 24, 3% of total deposits down from 26% in Q3.
Speaker Change: Alternative funding sources remain extremely strong with broker deposits still only comprising two 3% of total liabilities.
Speaker Change: And our loan deposit ratio was in line with prior quarter standing at 85, 9% at year end.
Speaker Change: The focus on loan committees and discussions amongst all of our presidents continues to be on deposit gathering core customer growth and retention.
Speaker Change: On the asset side, Johnny mentioned in period loan balances increased to $153 million with the Texas region, increasing $160 million in Florida.
Speaker Change: Increasing $31 million offset by a decline in the balances with.
Speaker Change: With CCG.
Speaker Change: On loan originations the volume picked up in Q4 with approximately $1 7 billion in commitments.
Speaker Change: <unk> finished the year strong with nearly half of their full year production coming in Q4.
Speaker Change: The community Bank groups accounted for two thirds of the loan production in Q4 with the Texas regions closing nearly $400 million in volume.
Speaker Change: Overall yield on origination continues to improve with an average coupon of $9 one 8% in Q4.
Speaker Change: Closing with the previously mentioned strength of our company all capital ratios improved in the quarter, notably with the tangible common equity ratio of 11, 5% a leverage ratio of 12, 4% and a total risk based capital ratio of 17, 8%.
Speaker Change: With that Don I'll turn it back.
Don: Thank you Steven and now Kevin Hester, who will provide us with their lending.
Kevin D. Hester: Thanks, Don and good afternoon, everyone I'm happy to be able to tie a bow on the very challenging year of 2023 and begin to look forward to a new year.
Kevin D. Hester: Even with the unprecedented challenges that we faced as an industry in 2023, we at home or in a very good position to take advantage of whatever this year brings.
Kevin D. Hester: Our asset quality remained solid with low past dues and nonperforming loans combined with a very strong capital position, which includes the 2% loan loss reserve.
Kevin D. Hester: <unk> details on that in a moment.
Speaker Change: First I would like to give you an update on the three credits that we discussed in detail last quarter.
Speaker Change: We have agreed in principle on the sale of the Oklahoma Marina note at par and hope to have it closed very soon we are finalizing the note sale documents at this time and would anticipate pay off to occur shortly afterwards.
Speaker Change: We also have assigned offer with a short due diligence period on the Miami property at a number that would result in a full payoff of the Oreo balance with a small recovery.
Speaker Change: This buyer is familiar with the property in the area. So we think it is a good buyer for this asset.
Speaker Change: Regarding the third asset, which is the office property in California, I will pass it to Chris Bolton for an update.
Christopher C. Poulton: So the subject property is 95000 square foot office building subject to a ground lease located at.
Christopher C. Poulton: 733 Ocean Avenue in Santa Monica, California during the quarter, we completed the move foreclosure in October.
Christopher C. Poulton: For the fourth quarter, we expense just over 300000 in transaction costs to bring the property into Oreo.
Christopher C. Poulton: That transaction, we received just over $5 million from our borrower and this was reduced used to reduce our basis in the property to just under $23 million.
Christopher C. Poulton: The current appraised value is just over $32 million, putting our carrying value of approximately 70% LTV building is currently 50% occupied operates just above breakeven.
Christopher C. Poulton: Where the lease income.
Speaker Change: Sorry, yes, our lease income is at or just above our buildings the expenses, which includes ground lease tax insurance and other operating costs.
Speaker Change: We're planning to occupy space in the building, we started moving our west Coast office into the building. This week our prior lease in law expires this month.
Speaker Change: Media focus on the building is in three areas first stabilizing the rental income through extensions and new leases second theres some clean up.
Speaker Change: Remaining on the existing ground lease and then third we're preparing to market. The property for sale Bad News is that this is an office building. The good news that it's very well located we've been paid down by 50% against our original alone. We have an immediate use for a portion of the space and the current building income are sufficient to operate at a breakeven.
Speaker Change: Even today with that I'll turn it back to you Kevin.
Kevin D. Hester: Thanks, Chris.
Kevin D. Hester: Going back to the asset quality numbers.
Kevin D. Hester: Nonperforming assets remain unchanged on a linked quarter basis at 42 basis points early stage past dues. At 12, 31, 23 were 61 basis points, which is down 23 basis points on a linked quarter basis and flat when compared to a year ago net charge offs for the year of 2023 were nine basis points of <unk>.
Kevin D. Hester: Average total loans.
Kevin D. Hester: As a further note we've completed a detailed review of all 2024 maturing loans over $3 million with an interest rate below 7% and have noted very few loans for which an increase to current interest rates would create any significant default concerns. This is due to a combination of strong borrower guarantor support.
Kevin D. Hester: Low overall leverage and the majority of our lending taking place and growing southern U S geographies.
Kevin D. Hester: We will continue to monitor this subset of loans, but are encouraged in what we see at this time.
Kevin D. Hester: In conclusion I'd like to thank our lending staff across the footprint for doing the hard things asking to be paid for the risk that we take and pushing for the equity and structure needed to make sure that the borrowers interest are aligned with ours.
Kevin D. Hester: Not easy work, but it's the difference between an average performing bank and our best in class financial institution.
Speaker Change: Now that that's all I have and I'll turn it back to you. Thank you Kevin Johnny before we go to Q&A do you have any additional currency getting comments today well first of all congratulations on the 25 years.
Speaker Change: Storage longer but not all of that work for you from 40 and so forth.
All that work.
Speaker Change: Gratulation dump that Johnny Mr. Allison in Palo Alto story.
Speaker Change: Created.
Speaker Change: Good reports, it's nice to see 'twenty three closed the books on it it was an interesting year last quarter seemed to show the turn in the loans and deposits as you've indicated are.
Speaker Change: Noninterest income noninterest expense I think Theres certainly room for improvement there and we'll continue to do that.
Speaker Change: There's also complement the entire management team of the bank.
Across the company of all the things that they've done to get us through this year and look forward to 2024 I think.
Speaker Change: John.
Speaker Change: The margin being able to maintain that margin to me Stephen is pretty important right now and it looks like you think.
Speaker Change: With that I ask Domino additional global reviews without relapses I'm sure. The next time that you think you can maintain that margin.
Speaker Change: We could we certainly intended to try to so what are your thought yes, I think certainly the.
On a monthly basis over the last quarter or two I mean, we've operated in a pretty tight range, we still have.
Speaker Change: We have the maturing loans that we previously talked about that will continue to come through over the course of 'twenty four and if we continue to be.
Speaker Change: Be able to reprice those upwards I think the prospects are that are good that's certainly what we're working for them.
Speaker Change: So Kevin are you seeing the pipeline remain fairly strong through here or are you seeing it.
Kevin D. Hester: Sure <unk>.
Speaker Change: <unk> a little better.
Kevin D. Hester: I think it depends on the geography, but we certainly have some folks that have some good opportunities.
Kevin D. Hester: In some good areas so.
Kevin D. Hester: But it looks like first quarters holding in there.
Kevin D. Hester: I feel pretty good about 'twenty four.
Speaker Change: Brian have you completed your budget for 'twenty four.
Well, yeah, we're going to have it presented for the board meeting this week so.
Speaker Change: And how much did you right did you lower rise once you do well.
Speaker Change: Well.
Speaker Change: It's down a little bit.
Speaker Change: Better than expectation.
Speaker Change: We've challenged it to be better than what the expectations are out there they ask Don and as I said, we got gel forecasted to be down next year.
Speaker Change: And as I said, what do you think about that asset I don't think about that.
Speaker Change: I think I don't think that we're going to be down I think we got a shot there might be some opportunities out there you saw were up.
Speaker Change: Home straight sell today or yesterday.
Speaker Change: We see some activity out there.
Speaker Change: Maybe some opportunities for us out there at some point in time, we can pick up but we haven't really addressed much M&A in the last couple.
Speaker Change: A couple of months right, we got on the deal out in Texas at one point in time in that count.
Speaker Change: For us we really hadn't.
I think we had looked at anything like the headwind.
Speaker Change: Callahan head down running their own business and trying to get to year end, so anyway I think.
Speaker Change: I'll turn it back to you and I guess, where I'm ready if everybody's read the Q&A with G&A I think we are ready for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: Once again, if you would like to ask a question. It is star one on your Touchtone keypad can.
Speaker Change: Can we move your question it is star Kim.
Speaker Change: We do ask if you are using a speakerphone. Please pick up your handset before asking your question.
Speaker Change: Our first question comes from the line of Brett Robinson with Husky Group. Your line is now open.
Brett Robinson: Hey, good afternoon, everyone and congrats John on 25 years.
Brett Robinson: It's been a run rate.
Speaker Change: Yeah, that's great.
Speaker Change: I didn't realize it.
Speaker Change: I wanted to.
Speaker Change: Wanted to first just talk about the margin a little more you talked about being able to maintain it can you talk maybe about the dynamic with NII and the margin in.
Speaker Change: It would seem like you might manage the balance sheet.
Speaker Change: Fairly flat or have an opportunity to and while youre growing loans, which could mean the margin is.
Better later this year and so I just wanted to get an outlook for the margin.
Speaker Change: Fed does cut rates, how you feel about that with the margin trend up later this year.
Speaker Change: Hey, Brent Steven Good afternoon, I think our view today is while we continue in this rate environment that we're in.
Speaker Change: So that we're able to kind of trend, where we are like we said we traded in a pretty tight range here.
Speaker Change: Over the last couple of quarters.
Speaker Change: We do have the opportunity from a loan repricing standpoint, I think we talked last year, we had $1 billion over the over the next five quarters show we have.
Speaker Change: About 780 million that is under 6% that will mature this year and give us the opportunity to reprice, we've got a little over $1 billion.
Speaker Change: Yes.
At or below kind of our spot rate at the end of December which was.
Seven in the quarter on the loan book, So we still have some.
Speaker Change: Some upward pressure on the deposit side that seems to maybe have slowed a little bit.
Speaker Change: A lesser increase in December than we'd seen on a monthly basis in the back half of the year.
Speaker Change: And so I think our view is that yes.
Speaker Change: The ability to reprice loans can offset what we continue to have to do on the deposit side in this rate environment that we're in.
Speaker Change: Yes, I think our view is if we do see some cuts.
Speaker Change: At some point in 'twenty four.
Speaker Change: Gives us the opportunity to.
Speaker Change: You have to pair back on the deposit side, what we've done we've got.
Speaker Change: 11 billion in interest bearing checking in.
Speaker Change: Short CD book looking here are our total CD book is about $1 six and I think 80 80 plus percent of that matures in 2024, so even if some of these come through we may be able to fine tune some of that if we see some rate cuts actually materialize.
Speaker Change: We watch it every day.
Speaker Change: We'd look at it every day and we look at what the revenues generated for that day and basically what the margins for that so we I mean, we love it.
Speaker Change: Four seven around here so.
Speaker Change: I don't think theres not as much room.
Speaker Change: I don't think interest expense will go up as much as interest revenues will go up so we got as you heard from Steve and we've got some repricing opportunities coming out about 1 million Bucks or so I think we will continue to do that we'll monitor it on a daily basis as we have been doing.
Speaker Change: As you can see we basically won a little bit in the fourth quarter.
Third quarter, we were getting beat.
Speaker Change: Interest expense was out run in the revenue and was disappointing and we.
Speaker Change: We made some adjustments there so in my last call I said only two wisely.
Speaker Change: <unk> profitability and Thats to cut expenses or increase revenue.
Speaker Change: And we did about what you haven't seen the cost cut effects of the company yet to my knowledge I appreciate the compliments about good expense control.
Speaker Change: It's not we're not where we wanted it debate.
Speaker Change: We just got a little fat over the years and it happens, it's just natural to do that.
Speaker Change: Went back in and we went to work on it and if we didn't get enough, we'll go back and get some more so.
Speaker Change: We're committed to the cost save side at this point in time, and we're committed to the revenue side. So we will continue to monitor.
Speaker Change: On a daily basis, but deposit costs I think.
Speaker Change: I don't know they trough, but they certainly gotten.
Speaker Change: We've gotten to a point there.
Speaker Change: We're still seeing these 5%, 6% CDI and run by these banks that are out of money completely out of the money.
Speaker Change: A person would certainly we will be careful about putting money in one of those banks really was kind of hands because what that essentially says as we BARDA automotive. We can bark was you can borrow from the fed a lot less than that and we're just to help with profitability, we're going to we're going to <unk>.
Speaker Change: Now to say, we got to save the company somehow so.
Speaker Change: Youll see us I suspect that would have really thought that our margin would have been up we did have lower borrowing we borrowed about $500 million from the <unk> program with BARDA, an extra $500 million BARDA, an extra 500, and we're getting a spread on it of about 45 basis points and it's actually up to 64 basis points today 64.
Speaker Change: Basis points, so anyway.
Speaker Change: Don't know how feel about doing that we bought it and put the money there with the fed.
Speaker Change: I don't know, how I feel about that but that wasn't what the intention of the program was for the intention of the program whats. Aside these bikes that are broke and they didn't work and it saved them well we didn't we weren't in that deals I thought we ought to get something out of this deal. So we're getting a little spread on that so that lowered our margin.
For the month, a basis point for the quarter for the quarter by a basis point or we would've been within one basis point.
Speaker Change: In the third quarter had a little juice in it that the fourth quarter didn't so actually margin was flat and I am pretty proud that during the quarter. So we will continue to monitor that no thats a long winded answer but there is a lot entailed in this company to managing the margin if we have the $500 million for the whole quarter it will be.
Speaker Change: Itself will be profitable to the buying but it will be dilutive to the margin about 10 basis points, but yes, we keep it all next quarter it'll be diluted to the margin by 10, but they will increase profitability by about $1 million for the quarter. So.
Speaker Change: That's right.
Speaker Change: Thanks.
That's helpful. I was going to ask about that it looked like that was what does that increase in borrowing laws.
Speaker Change: In fact, just on my other question My follow up question was just around loan growth and it sounds like the pipeline suggests you could continue to have some growth last year, you kind of manage to flattish growth. If we were penciling in mid single digit for the year would that seem fair to you guys or a different number.
Be more appropriate.
Speaker Change: Hey, Brad this is Kevin.
Speaker Change: So.
Speaker Change: I think we gained some traction last quarter in production I think.
Speaker Change: I feel good that that's that's.
Speaker Change: Still continuing in and at least some of our markets. I think the question is going to be really payoffs and that's even more as we get into the middle of the year. So.
Speaker Change: Yeah.
Speaker Change: I think probably low single digits as more than I can.
Speaker Change: Get on a little bit more than mid but.
Speaker Change: A lot of that will depend on I think pay offs.
Speaker Change: We're seeing slow somewhat in different markets, because we can't get it financed.
Speaker Change: We're blessed with the fact that we didn't make the mistakes.
Speaker Change: The 95% of the mindset, we have money to alone. So we are in a position to loan money as a result of that that's where you saw the loan growth come in in the quarter was because of the fact, we had money to alone and not many banks in the country had money alone. So they came became that found us came.
Speaker Change: To us and we made some.
Speaker Change: Good relationships hopefully relationship loans that will be with us for a long time so.
Speaker Change: Okay.
Speaker Change: That's really helpful. Thanks for all the color there is lots of loan business out there because there is not many people own. It I mean, we could roll into a recession pretty quick here because these banks that are 100, 580% loan to deposit can't loan any money that just shut down.
Speaker Change: Great. Thanks, so much guys.
Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of John Armstrong with RBC. Your line is now open.
John W. Allison: Thanks, Good afternoon.
John: Thanks, and Greg Congrats on the 25 years John.
John: Yeah.
Yes, I'm only covered you for 16 years, so im still a training.
John: He said he just catch us up event with a 16 year ice.
Three years ago.
Got it.
John: Can you talk a little bit more about the expense expectations, you keep hinting at it a little bit that it didn't show up in the first quarter.
Speaker Change: Or it didn't show up in the fourth quarter, what can we expect I know, Brian Davis, you touched on a little bit as well, but what's coming.
Speaker Change: John.
John: There were some reduction with staff done third fourth quarter and most of that.
John: Happened in November December so some of that will show up and start now.
John: Every market.
John: Every.
John: Region.
John: Every manager support office type stuff.
John: It's just making sure we fine tune it and everything so theres still room to improve we always wanted to do that and always have been able to do that.
John: So.
Speaker Change: Uh huh.
Speaker Change: I think there'll be more.
Speaker Change: But we're off to the first quarter should kick in a little bit.
Speaker Change: I had.
Speaker Change: Tracy assay can you get the cost down and Tcs will get them down that's willing to get them down because I got towns with dawn of Titans are warming up on the sidelines.
Speaker Change: He was efficiency <unk> growth, if you can't get it down and said in her in the game.
Speaker Change: Okay.
Speaker Change: Right.
Speaker Change: He didn't think theres plenty of that.
Speaker Change: Right right.
Speaker Change: Okay.
Speaker Change: In Texas.
Speaker Change: There are some things that were.
Speaker Change: Drug out Scott Lewis and the team out there has picked them all up and running extremely well so.
Speaker Change: <unk>.
Speaker Change: I think you certainly see some of that effect in the first quarter and some of that will come as well.
Speaker Change: Well actually.
Speaker Change: A branch or or or.
Speaker Change: So that happened in the first quarter, so it might not see some of that till the second quarter.
Speaker Change: But.
Speaker Change: Fine tuning everything all the managers out there picking them all up and doing their jobs.
Speaker Change: We didn't get the savings out of happy that we expected, we just didn't get them in.
Speaker Change: Now this management team is working on getting those expense cuts.
Speaker Change: We'll see that will feel and I think in the second quarter. So first quarter. Some in the first quarter, but some of these branches were closed so there'll be a second quarter events.
Speaker Change: Okay.
Speaker Change: I was going to have a number of Russia.
Speaker Change: $25 million to $50 million, that's a number.
Speaker Change: Okay.
Speaker Change: Full year okay.
Speaker Change: But.
Speaker Change: I hope that.
John You got you got you got expenses going up I mean, our group insurance went up a couple of million dollars. You just got everything going up everything is going up so to say that youre going to reduce expenses.
In 24, if you could if you can hold expenses in 'twenty four with all of these things that are beyond our control would be great.
Speaker Change: Okay.
Speaker Change: Okay fair enough.
Speaker Change: I just.
Speaker Change: Wanted to ask a question on credit.
It kind of dominated the call last quarter.
Speaker Change: Were pretty quiet on it this time around but anything new on credit any newer emerging concerns we should be aware of and then.
Speaker Change: Chris just anything on the potential timeline for resolving the California office property.
Speaker Change: Hey, John This is Kevin I'll take the first one.
Kevin D. Hester: Think of any significance at this at this point, we're working through those.
Kevin D. Hester: Three we talked about and as I've said, we've we've looked at what's maturing thats at low rates.
Kevin D. Hester: Don't really see any significant issues there past dues are.
Kevin D. Hester: They are flat from last year below where they were a quarter ago. So.
Speaker Change: No I think Thats why you saw that there was less.
Speaker Change: Less emphasis on it this quarter and it was more of a more of a focus last quarter.
Speaker Change: Okay fair enough.
Speaker Change: Like that now.
Speaker Change: Yeah, Hey, John.
Speaker Change: I would say, we're going to be pretty patient on this one.
Speaker Change: It's an office building and it's a tough tough market for office I could liquidate it but I don't think that's the best result for our shareholders here.
Speaker Change: It's breakeven I can use it.
Speaker Change: Have a need for it and I think if we put a little elbow grease into this and stabilize that.
Speaker Change: We drive a higher value for it so.
Speaker Change: My point of view is that I think we can enhance the value of this I think that this was not well managed by.
The previous borrower once they realized they weren't going to be able to recoup their money and it took us a little time to get control of it now that we have it I think we should do some work on it.
Speaker Change: Let's get the we're doing some work on leasing et cetera, let's get that done and put in a good position for a buyer or not the right long term owner of it but.
I think it might be the right short term model.
Speaker Change: Okay Alright.
Speaker Change: Alright, thanks for the help I appreciate it.
Speaker Change: John I've been flat because we so two of the three so yes.
Hopefully they close the transaction closed and we lose the money. So we are on a road of ride on the personalized. Thank goodness. The teams, it's Kevin Brown, our team's really done a good job I did a good job of underwriting in times like this a lot a lot of people do 80, 20 lending you put 20% in and they alone and Thats kind of becomes a.
Speaker Change: A rule, but in times like this you get them you got no equity because the values of some of those properties have deteriorated and there is no value in them. So the.
Speaker Change: Good tough underwriting at home has maintained over the years is certainly paying off for us.
Speaker Change: There might be some hiccups in the field. Some people may have some hiccups, but I don't think theyre going to be substantial hiccups, it's not another five or six we made there are seven when we made that tour through the Florida keys, it's not one of those.
Speaker Change: <unk>.
Speaker Change: It feels different now because most of the stuff. We've got we're at a loan to value of 65, 70%. So instead of having no money a little money in the deal. We got 25 30, 40% deal. So I think it will be it.
Speaker Change: You'll have some but not a lot. So thats right now is flat because I'm pretty happy. The fact that we had three pieces of property that concern me and we've sold two of the three zones.
Speaker Change: Yes, that's.
Speaker Change: It's good progress okay. Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Brady Gailey with <unk>. Your line is now open.
Speaker Change: Okay.
Brady Gailey: Hey, Thanks, good afternoon guys.
Brady Gailey: Hi, Brody.
I wanted to start with your sensitivity to interest rates.
Brady Gailey: The forward curve suggests.
Brady Gailey: A decent amount of rate cuts. This year, if that plays out will there be much of an impact to your net interest margin I feel like you guys tend to be somewhat neutral, but whats the impact to the margin if we do see rate cuts.
Brady Gailey: Okay.
Brady Gailey: Hey, Brian This is Stephen.
Stephen: We're looking at our Alco model assumptions now and to your point I think we've been plus or minus 5%.
Stephen: Yeah.
Stephen: On both sides up or down in the past.
As I said.
Stephen: Kind of at the outset of the call I mean, I think our view today is that in a in a down rate environment. If we see short term rates come down this year.
Stephen: We will be able to kind of attack that.
Stephen: The interest bearing checking side of things and see a little margin improvement I think our budget.
Stephen: If I remember right is four rate cuts potentially in it next year and show some margin improvement throughout the year. So.
Stephen: And in terms of I don't know I don't know what the model shows today I think as we worked through our assumptions thats, our belief in terms of being able to improve.
Stephen: In a down rate scenario.
Stephen: We have six rate cuts this year.
Stephen: We're going to be in lots of trouble.
I hope that's not correct.
Stephen: I hope, it's not politically motivated behind it but if we have six rate cuts. It's a sign that we're in trouble.
Stephen: So.
Stephen: The country's withdrawal not all the countries in trouble so.
Stephen: That is that's pretty scary to think that we could have six rate cuts and I understand there perhaps in those six rate cuts in.
Stephen: I am still higher for longer got us believe that we may see 25% or 50 basis points wouldn't hurt us.
Stephen: <unk>.
Stephen: We got big problems and it reminds me of a light suddenly just when when bulker pivoted because the pressure.
And we had to come back at 21% rates in the early eighties to kill a slight so.
Stephen: I have been I think a long.
Stephen: I think it's going to be hopefully.
Stephen: Hopefully we're not in that we don't end up in a recession.
Stephen: Yes.
Stephen: I agree with <unk> I think two cuts in our economic baseline.
Speaker Change: I agree with you. My last question is just on bank M&A, Johnny I know you've been very active in that over the years you see banks like traditional bank M&A Unassisted Bank M&A do you see that Destocking at all anytime near term.
Deep following.
Speaker Change: Yeah.
Deep: Yes, so talking about active.
Deep: Yeah.
Deep: We talk about it around here.
Deep: It's just the expectations of the sellers and the cost of the deals and the marks.
Deep: We solve where home straight got ball.
Deep: Probably a pretty good try there may be some trades like that out there that makes some sense.
Deep: They're really made banks that need to be in stronger hands.
Deep: Okay.
Deep: But outside of that I'm afraid M&A.
Deep: I'd like to do M&A trades, and we've done a lot of them.
Deep: I'm just surprised we can't get them done I'm just Friday.
Deep: They won't work, we haven't been involved in <unk> nobody has been involved in M&A really around here lately because it's just been we've been trying to wrap the year up and do what we're doing.
Deep: The year.
Speaker Change: We want our 400 million, Brian Davis told me, we will have to book our exposure to the fed deal, but that's okay. I mean, we would've made we would have done it without it.
Speaker Change: <unk>.
Speaker Change: I don't know if I've answered your question or not but.
Speaker Change: That's about as good as I can do.
Speaker Change: Okay, great. Thanks for the color guys.
Thanks, Brian.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Matt Olney with Stephens. Your line is now open.
Speaker Change: Yeah.
Matt Olney: Hi, Thanks, good afternoon everybody.
Matt Olney: Good afternoon, Matt.
Matt Olney: Yeah.
Matt Olney: Hey, Johnny you mentioned the market expectations for home Bank.
John W. Allison: For net income to be down in 24 versus 23, it sounds like you.
John W. Allison: Don't agree with this so I'm just curious if you want to give you a chance to talk about your your targets for 'twenty for what's the what's the Johnny model for home Bank in 'twenty four.
Well, it's certainly not a down is not a down scenario I've never budgeted the down scenario with mine lives. So they're not if they're going to go onto the board for a pro forma vote against it.
John W. Allison: Yeah.
John W. Allison: When you think about.
John W. Allison: Taking advantage of this opportunity when all these banks a royalty in the country and can't loan any money at all be a great time for US I mean, we had revenue was strong we got growth growth and revenue growth with high interest times led growth and revenue growth in deposit loans margins hanging in really good asset quality is wonderful.
John W. Allison: And we've got lots and lots of capital and more of a few banks in the country. They can pay out all in uninsured depositors, So I like where we're set and I'll ask for home Bancshares is certain.
John W. Allison: We have built this isn't by accident, we built it this way. So it is one of the strongest banks in America will get we'll get our fair share, we'll get our fair share, but im north of two north of $400 million without a settlement on the west Texas deal It bothered us.
John W. Allison: North of 420.
John W. Allison: That's where I want to be.
Speaker Change: That's a johnny number.
Speaker Change: North.
Speaker Change: Okay.
Speaker Change: Okay, well I appreciate that and.
Speaker Change: We wouldn't be surprised if you guys ultimately get there this year.
Speaker Change: What about on the the loan growth front I think you guys mentioned, a while back you were looking at doing.
Speaker Change: In energy loan.
Speaker Change: Didn't know if you got that deal done.
Speaker Change: Don and funded if that's still on the drawing board.
Speaker Change: We did it has done so on the books.
Speaker Change: The order books and going well.
Speaker Change: The order books going well so we are.
Speaker Change: We've got an opportunity on another energy loan, we're not afraid to energy loans.
Speaker Change: Like you've seen the gas <unk> electric cars down the road.
Speaker Change: Something tells me oil and gas, but will be here for a long time.
That's why it hurts and sell in last 25000 electric cars or something taking a beating on to get rid of them I believe <unk> oil and gas will be here for a while.
Speaker Change: So we're not afraid of oil and gas, we would do more oil and gas.
Speaker Change: Yes, okay.
And then just lastly, I think.
Speaker Change: Kevin mentioned in his prepared remarks that you did I think it was a deep dive in some of the CRE properties that will be reset higher the loan pricing I think you mentioned that some prepared remarks, but I missed this was this any specific segment or any region.
Speaker Change: Or just kind of a more abroad ddos.
Speaker Change: Okay.
Speaker Change: Matt This is Kevin so it was it was all loans that are that are.
Kevin D. Hester: Maturing in 'twenty for over $3 million and had.
Kevin D. Hester: And interest rate less than I think it was 7%.
Kevin D. Hester: So just really across the board just trying to get ahead of anything that's going to have a pretty big rate shock and make sure that.
Kevin D. Hester: We understand what that looks like and there's not any issues if theres going to be an issue we want to do it now rather than in the third quarter when it matures. So.
Kevin D. Hester: That review there there was just a handful of things that.
Kevin D. Hester: And none of any.
Or any great size that.
Kevin D. Hester: It looked like it could be even a challenge to the project and the good news is in almost everything we saw.
Kevin D. Hester: Either a really really strong geared towards a lot of liquidity or.
Kevin D. Hester: A lot of very very low leverage.
Kevin D. Hester: Those sorts of things so again, John he's talking about the underwriting that we that we feel like that we've done well over the past several years I think that's where this comes into play is when you're you are looking at several hundred basis point increase in rates and still.
Kevin D. Hester: Everything is looking like it's going to work out.
Speaker Change: Yes, Adam.
Speaker Change: No. It was doing that and you did it now but its gravity call may decide hi, I just went through everything 3 million unless it matures in the next 12 months that is 7% or less.
Speaker Change: In eastern Java out and find hardly anything in which gave me real comfort. So appreciate them doing that.
Speaker Change: Are you doing that makes me feel good it should make you feel good Matt.
Speaker Change: Setting us to investors.
Speaker Change: Yeah.
Matt Olney: Yes, no that's definitely good news glad you guys are doing something like that.
Hi, guys, thanks for helping gratz on the year.
Speaker Change: Thank you appreciate it.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Stephen Scouten with Piper Sandler Your line is now open.
Oh.
Stephen Scouten: Hey, good afternoon, everyone.
Stephen Scouten: Alrighty.
Stephen Scouten: I'm, a little scared to know what a good year. It looks like if this is supposed to be a bad year, Johnny would you put one eight ROA.
John W. Allison: 17% TCE.
John W. Allison: Got scared when I read the first line in the press release, and then I looked at the numbers.
John W. Allison: So having a good result.
John W. Allison: We run.
John W. Allison: The quarter last quarter, and where we are.
John W. Allison: And the top three or four or five of every category.
Speaker Change: And Tracy said.
Speaker Change: This count performance and I said, we don't care, if we don't pay attention to other People's performance.
Speaker Change: We're going to do better than it would be better than everyone. So.
Speaker Change: We're getting we're getting good performance the numbers looks good but I appreciate that comment Youll, Mike and.
Speaker Change: Stephen Tracy and Brian I'll, just take a nap or <unk> vacations.
Speaker Change: And even though.
No.
Speaker Change: Yeah.
Speaker Change: I mean, you don't have that.
Speaker Change: Okay.
Speaker Change: So.
Speaker Change: The area I'm most interested in is really the strong loan growth you guys had.
Speaker Change: So far this quarter, we haven't seen much in the way of loan growth from a lot of peers and a lot of the industry as a whole.
Speaker Change: So four 3% I mean, it may not feel like a lot, but on a relative basis, it looks like a ton and so I'm just wondering.
Speaker Change: If you think thats sustainable and maybe going back to Bretts question earlier on and then if theres any kind of geographic dispersion or any segments or kind of any additional color, Kevin you might be able to land of where that's coming from and how youre doing.
Hey, this is Kevin So geographically certainly you know, you've got Texas, and Florida, who who are.
Speaker Change: Poised to provide that because you've got so many people still move into those two geographies.
Speaker Change: And particularly.
Speaker Change: Southern Florida part so that's always helpful.
Speaker Change: Do I think it can continue it certainly can do I think it's Johnny mentioned it earlier I think you got a lot of banks, who have pulled back and either by choice or.
Speaker Change: Because they don't have any any liquidity and ability to loans.
Speaker Change: That bodes well, we're still going to.
Speaker Change: We're still having to fight the rate issue because some deals just don't work at these rates are they that you have to have so much <unk>.
Speaker Change: Equity that it is a challenge to get people to to put that much and so that that's still a challenge but there's.
Speaker Change: From a competitive standpoint, we have a little bit of a break here it feels like and the ability to do that so to the degree that we can still get what we want to get from a yield standpoint and get the leverage points. We want there are opportunities and that's what we're.
Speaker Change: That's what we're working into.
Speaker Change: Steve if I could add a lot of it is the referrals that we're getting.
Speaker Change: For example, Johnny has a customer that Greg customer that he got introduced to someone when it was down or visiting with its customer and that's turned into <unk>.
Speaker Change: Several opportunities for us.
Speaker Change: In Texas, we've made some relationships that getting customers call in.
Speaker Change: Referring us to help them on opportunities and we're seeing that in Arkansas.
Speaker Change: Some of the banks that had changed or done something different.
Speaker Change:
Speaker Change: Northeast, Arkansas, you'll get an opportunity to look at what we do them. All we don't know, but we're just coming back to just good old fashion.
Speaker Change: Okay.
Speaker Change: So far we're getting from other.
Speaker Change: Keeping a handshake that say on how long that's exactly right. It's counted referral to referral to referral.
Speaker Change: We just had that came in and.
Speaker Change: Aces straights and flushes as banks in trouble.
Speaker Change: 95% of them are signed some trouble in.
Speaker Change: Sometimes you wanted to doing the right thing and you just keep building your company that yes.
Speaker Change: Crossing your T's and when you see a crisis like we've seen you know youre doing the right thing and people are coming across the country to come say to do transactions with you because you have good reputation because you've got the money and look to make some what's it cost us is 10% plus a point.
And he said I figured that's what she's going to site and that's what it was that's what's possible to deal with 10% plus a point so.
Speaker Change: <unk>.
We have that opportunity right now hopefully, we'll be able to continue to do everything at 10% plus.
Speaker Change: Yes.
We have the opportunity to do some of those transactions I think.
Speaker Change: Some reasonable write the future so.
Speaker Change: One of our big customers in.
Speaker Change: Company wide was in Florida as a resource.
Speaker Change: It may come down and meet this guy and I opened with Kevin and his referral deal and it was the right credit right.
Speaker Change: $50 million credit.
Speaker Change: Did it just one led to another and another he said, yes, and Im probably getting this done he said he talked to my banker.
Speaker Change: Anyway, because we got the availability of money because we got the strength to do it. It has it is.
Speaker Change: Why are you seeing the loan growth.
Speaker Change: Yeah.
Speaker Change: Yes, yes, that's great and you mentioned that 10% plus a point I mean, what sort of yield on average I don't know if you.
Speaker Change: That number but average new young yields in the quarter, what's kind of what youre seeing and how much pushback is there from.
Speaker Change: From customers on those yields whether it's renewals or new customers.
Speaker Change: Hey, Stephen Stephen.
Speaker Change: New.
Speaker Change: Coupon on new originations in Q4 was nine 2014.
Speaker Change: I believe so as Johnny mentioned with theirs.
Speaker Change: A mix of some of some tans and subprime drive.
Speaker Change: Largely.
Speaker Change: <unk> been able to improve on that I think every quarter this year Kevin.
Speaker Change: I have some color in terms of just pushing back well yeah. I mean, there's obviously there's pushback.
Speaker Change: Part of why I made the comment in.
Speaker Change: In the earlier remarks, as I mean, our guys fought that every day every loan.
Speaker Change: Every situation.
Speaker Change: And try to get all I can out of it.
Speaker Change: It's it's.
Speaker Change: One of the things that we do and.
Speaker Change: Just part of working here at home I mean, you got to do that.
Speaker Change: It's very important.
Speaker Change: And there's obviously pushed back yes.
Speaker Change: It makes sense all right guys I appreciate the time congrats on a great year. Thank you.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Michael Rose with Raymond James Your line is now open.
Speaker Change: Yeah.
Michael Rose: Please ensure you're on mute.
Michael Rose: We lose macro and must be too excited.
Michael Rose: Operator lets just move on if there is another question and we will come back to Michael.
Michael Rose: <unk> background there.
Speaker Change: Certainly our next question will come from the line of Brian Martin with Janney. Your line is now open.
Speaker Change: Okay.
Brian Martin: Hey, good afternoon, guys and congrats John and 25, great years.
Speaker Change: Thank you very much appreciated.
Speaker Change: Hey, just a couple for me just on the on the fee income side. It looks like the last two quarters have been a little bit lower than I think Tracey maybe mentioned that there was somebody mentioned earlier I think there's some opportunity for upside just kind of wondering where there's some opportunity there or kind of at current levels.
Tracey: Yes, Kevin.
Tracey: Run rate to think about as you go into next year, and just kind of where our where the puts and takes could be there.
Yes, we do we think theres certainly opportunity of improvement in the mortgage business operation has been.
Interesting with the interest rate increases over the year.
Tracey: That's.
Tracey: Fine tuning, making sure we've got the right people in the right place and keep little runs that doesn't really good job of handling that so we think that can probably pick back up and smooth out a little better.
Tracey: We are also trying to trying to figure out we ran last dollar accounts.
Tracey: A lot of things to see there's not a whole lot of room that we can improve on some of the account fee type stuff.
Tracey: Today.
Tracey: I thought there would be on that but we're again, we're just taking a look at every noninterest income noninterest expense category and.
Tracey: On what.
Tracey: Could be out there but.
Tracey: Just the way the year was in some of our service industries I think that you know that.
Tracey: Hopefully that opportunity comes back.
Tracey: <unk>.
Tracey: We've been very very fortunate with the trust business, Kevin or and his team have done a really really good job.
Tracey: Joining me on with our Texas opportunity and we have the Goldstar trust out there.
Tracey: It's been a nice pickup and I think that has opportunity to continue to go and grow with the staff.
Tracey: We've got together there so that's always been a little player in our field in the past.
Tracey: It is a line item today.
Tracey: Yeah.
Tracey: Okay now, we don't see equity investment.
Speaker Change: Oh go ahead sorry.
Speaker Change: I'm pretty pretty pleased with touch and go start for us.
Speaker Change: How they progressed, that's pretty sweet little organization that we.
Speaker Change: I gave it no value when we did the transaction goes I didn't understand it but it is they do a really good job.
Speaker Change: Pretty pleased that we may have him one of these conference calls sometimes tell you what all he does I think it would be good having him join and explain to them what he does sometimes.
Speaker Change: Yes, maybe just the.
Speaker Change: The equity investments have been down a little bit. So that's another area I guess I would presume thats more volatile.
Speaker Change: As far as when that lumpy when that would come in.
Speaker Change: Yeah I mean.
Speaker Change: To be honest with you for this particular quarter.
Speaker Change: Equity investment income is down about $2 2 million and when I say that we booked about 858000 in income for Q3.
<unk> three but unfortunately, we had a couple of those equity investments that had a decline in their capital balance and so we took a loss of $1 3 million, which is sitting in as a reduction in our other income line item on the income statement.
Speaker Change: About a $2 million.
Speaker Change: Q3, Q4, yes, we anticipate.
Speaker Change: Gotcha.
Speaker Change: Q1.
Yeah.
Speaker Change: Okay, and then just on the expenses I think maybe.
Speaker Change: Maybe you said it Johnny but not.
Speaker Change: Sounds like we should expect a reduction per se on an absolute basis and expenses as you look from <unk> given some of the initiatives you've got but maybe better to think about it for now.
Speaker Change: Holding holding the full year to full years.
Speaker Change: Stable level is better way to think about it until.
Speaker Change: Further along.
Speaker Change: Yes.
Speaker Change: We.
Speaker Change: This inflation is not all of our needs continuum. So it is it is.
Speaker Change: We're seeing it.
Speaker Change: Expense go up so if we can tap 'twenty I don't think our expenses have gone up $25 million.
Speaker Change: If we can cut $25 million, we should get some benefit of that and if inflation lowers its head.
Speaker Change: Then I think we'll get some benefits, but if not we'll have to go back to it again, we got to do what we got to do we've got a responsibility to the shareholders of this corporation to be profitable and they are the ones that own us we work for them. So we're going to do what we need to do there whatever it takes whatever it takes we will do so.
Speaker Change: Hopefully right now.
Speaker Change: See what comes out at the end of the quarter and what the expense reduction is and compare that to the.
Speaker Change: You won't see it all because like I said insurance all of these different expenses were up for the year so well.
Speaker Change: But we'll get a little of it.
Speaker Change: Okay, and first quarter should be is typically impacted seasonally a little bit higher anyhow.
Speaker Change: As though it's probably.
Speaker Change: Yes.
Speaker Change: The second third and fourth quarter next year would be a little bit lower than <unk>, given the timing of the savings and some seasonality in <unk> anyhow. So.
Speaker Change: Okay, and then maybe just.
Speaker Change: Maybe just last one was on the timing of the borrowing program.
Speaker Change: Maybe I missed what you said earlier as far as the timing and the impact to <unk>.
Speaker Change: If net interest income and margin, but it was what a basis point in the quarter I mean, I guess timing wise when was the borrowing implemented and just kind of run back through what the timing impact of it was for port cameras about we didn't start until about mid month of December at.
Speaker Change: Let me start about so what youre, saying is about 15 days of the borrowing program about 15 16 days, we didn't start.
Speaker Change: We talked about a three or four times.
We didn't need to we didn't have to have that it's just the opportunity came to the spread we may ask Pat had Brian had the fed not put to bed.
Speaker Change: The fed not put their barn program in you would have had multitude of failed banks.
Speaker Change: And as you know, we're the largest buyer in the country last time, and we would have been this time, even bigger buyers because of the strength of our balance sheet and.
Speaker Change: The equity in this corporation, so we missed that opportunity because the fed came in with free money again, which was probably the right thing to do that was probably the right thing to do and then they come back against us profitable box and we pay our fair share.
No.
Speaker Change: I think that was.
Speaker Change: I liked it was the right thing to do over a period of time, we will save them.
Speaker Change: Okay.
Speaker Change: The total borrowings on that program you are getting the spread on what you said spread 64 basis points, how much of the borrowings.
Speaker Change: 500 million.
Speaker Change: We've got $500 million that we took out in December to count as a special borrowing but we already had $200 million outstanding when we did it.
We were kind of paying our money back and Marie barn, and trying to keep about $150 million in the checkbook.
Speaker Change: And today, we're at $711 million.
Speaker Change: Hum.
Speaker Change: But it's the whole $700 million and at 64 basis points.
Speaker Change: Okay and that impact Brian.
Speaker Change: Okay.
Speaker Change: I mean, the impacts about $10000 a day.
Speaker Change: I don't know if I feel good about us doing our bad about us doing it but we would have been if we didn't have this opportunity to do that now.
Speaker Change: We would have certainly they haven't brunch program, all you might see 150 bites out of business today. So.
Speaker Change: Probably probably would say 150 banks out of business today, They got run xyrem they'd be out of business I would tell you the big Bad Wolf show up a bunch of the banks around the space would be out of business. So.
Speaker Change: We don't get something out of it so our group Executive Committee meeting said less bar, some money and I thought okay, So where bard FERC 37, and 4200 50, and now 64 64. So it's a nice little income base for us It does hurt margins. So when you say our margin.
If we leave it in the entire quarter next quarter, Bryan said, it'll be about 10 basis points, but it'll be more money. So you'll understand you can adjust the margin for 10 basis points and a nice quarter, but I guess the real question is do you want an extra million dollars to have a 10 basis point dilution to your margin.
Speaker Change: It's real money.
Speaker Change: Right.
Speaker Change: You guys right now expect to keep it is that the plan or is it is that kind of debate or the timing on that.
Speaker Change: I guess, it really depends on what happens with fed funds rate right. If they dropped the fed funds rate and all of a sudden we have.
Speaker Change: 14 basis point spread on the margin than it probably doesn't look very attractive because we had some opportunities to do that earlier in the quarter.
Speaker Change: On it.
Speaker Change: Gotcha Okay.
Speaker Change: Just remind me I mean your outlook with just expectations I mean do you expect.
Speaker Change: Benefit to be able to grow the dollars of NII year over year is that kind of baked into the <unk>.
Speaker Change: Outlook here as far as with the SEC.
Speaker Change: Pivoting on the margin.
Speaker Change: The growth outlook.
Speaker Change #100: Yeah, Matt I think Thats certainly the goal when we talked about.
Speaker Change #100: Yes.
On on loan on loan increase and the outlook there and if we're able to even in this environment, we're able to hold the margin and where it's at when CLO balance sheet growth I think in a follow.
Speaker Change #100: Follows.
Speaker Change #100: Okay.
Speaker Change #101: Okay. That's all I had guys. Thanks for taking the questions.
Speaker Change #102: Hi, Thank you appreciate your support.
Speaker Change #103: Let's see if Michael Rose got back.
Speaker Change #103: Operator.
Speaker Change #104: Thank you there are no additional questions in the queue at this time.
Speaker Change #104: I would now like to turn the call back over to Mr. Allison for closing remarks.
Allison: Thank you for your time and patience with US it's been a.
Allison: A trying year last year was extremely stressful places the most stressful year.
Allison: Banking career, when you see banks go and borrow in 24 hours and Aldi electronic transfers.
Allison: Posit is running at high rates.
It was it was actually very stressful for all of us.
Allison: But home came through it you can see how well we came through.
Speaker Change #106: Stephen Scouten say when you say it wasn't a very good year was a great year well it was.
Speaker Change #106: We set it up for that to happen and it has happened that way so.
Speaker Change #106: Appreciate your support and hopefully we'll have a good 24, and maybe will buy something worth the money for to add to the what we already have thank you very much for your time and your support.
Speaker Change #106:
Speaker Change #106: This concludes today's conference call. Thank you for your participation you may now disconnect your lines.
This concludes today's conference call. Thank you for your participation.