Q4 2023 Home Bancorp Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the home Bancorp's fourth quarter 2023 earnings Conference call.
Good morning, ladies and gentlemen.
of the Home Bank.
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and Alyssa
Kevin Fitzsimmons
Lee Cigna-Lacombe
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after today's
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will be an opportunity to ask questions.
wrote this event.
Speaker Change: I would now like to turn the conference over to Home Bank Corp.
Now I'd like to turn the conference over to home Bancorp's, Chairman, President and CEO, John Board alone and Chief Financial Officer, David correctly. Mr. Correctly. Please go ahead.
Speaker Change: President
Speaker Change: John
John: and Steve Finan.
John: Kirkland.
John: Thank you, Ross. Good morning and welcome to HomeBank's fourth quarter 2023 earnings call.
David Correctly: Thank you Ross good morning, and welcome to home Bancshares fourth quarter 2023 earnings call.
John: Our earnings release and investor presentation are available on our website.
David Correctly: Our earnings release and Investor presentation are available on our website I would ask that everyone. Please refer to the disclaimer regarding forward looking statements and the investor presentation, and our SEC filings.
John: I'd ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation and our SEC filing.
John: Now I'll hand it over to John to make a few comments about the quarter.
David Correctly: Now I'll hand, it over to John to make a few comments about the quarter.
John: John
David Correctly: John.
John Board: Thank you David Good morning, and thank you for joining <unk> Bancorp's earnings call today.
John: Thank you, David. Good morning and thank you for joining HomeBank Corp's earnings call today. I hope your morning has started off well. We appreciate your interest in HomeBank Corp as we discuss our results and describe our approach to creating long-term shareholder value.
Speaker Change: You started off well.
Speaker Change: We appreciate your interest in whole Bank Corp, as we discuss our results and describe our approach to creating long term shareholder value.
John: HomeBank's strong performance in 2023 demonstrated our ability to successfully navigate volatile markets.
Speaker Change: Owned by a strong performance in 2023, the strength demonstrated our ability to successfully navigate volatile markets.
John: During the fourth quarter we grew both loans and deposits, improved credit and reported strong profitability.
Speaker Change: The fourth quarter, we grew both loans and deposits improved credit and reported strong profitability.
John: For the quarter, loans increased $12 million after increasing $137 million in the first
Speaker Change: For the quarter loans increased $12 million after increasing $137 million in the first three quarters, our six 2% loan growth in 2023 was in line with expectation and we saw contributions from all regions, including our newest Houston market, which grew 19%.
John: Our 6.2% loan growth in 2023 was in line with expectation, and we saw contributions from all regions, including our newest, Houston market, which grew 19%.
John: We are pleased with the performance in Houston, which we entered into two years ago with the acquisition of Texan Bank. We continue to invest in Houston as it has outperformed expectations and we believe there are still good opportunities for growth. We added a commercial banking team in the fourth quarter and plan to relocate branches in the first half of 2024.
Speaker Change: We are pleased with performance in Houston, which we entered into two years ago with the <unk>.
Speaker Change: Position of taxes.
Speaker Change: We continue to invest in Houston as it has outperformed expectations. We believe there are still good opportunities for growth. We added the commercial banking team in the fourth quarter and plan to relocate branches in the first half of 2024.
John: Fourth quarter deposits increased $73 million, following a $46 million increase in the third quarter. The strong second half deposit generation replaced outflows we saw in the first half, resulting in a year-over-year increase of 1.4%.
Speaker Change: Fourth quarter deposits increased 73 million following a $46 million increase in the third quarter.
Speaker Change: During the second half deposit generation replace outflows, we saw in the first half.
Speaker Change: Resulting in a year over year increase of one 4%.
John: This resulted in an end of year loan to deposit ratio of 96.7, which is slightly above the upper end of our target range.
Speaker Change: This resulted in the end of year loan to deposit ratio of $96, seven which is slightly above the upper end of our target range.
John: Now that interest margin, which decreased slightly to 3.69, appears to be stabilizing as asset yields continue to steadily increase and the pace of deposit cost increases slows.
Speaker Change: Net interest margin, which decreased slightly to $3 6 million appears to be stabilizing as asset yields continue to steadily increase in the pace of deposit cost increases slows.
Speaker Change: With that, I'll turn it over to David, our Chief Financial Officer.
Speaker Change: With that I'll turn it over to David our Chief Financial Officer.
Speaker Change: Sure.
David: Thanks, John.
Thanks, John.
David: Fourth quarter net income of $9.4 million, or $1.17 per share, declined by $369,000, or $0.05 per share from the third quarter. Return on assets was 1.13%, and return on average tangible common equity was 14.5%.
David Correctly: Fourth quarter net income of $9 4 million or $1 17 per share declined by 369000 or <unk> <unk> per share from the third quarter return on assets was 113% and return on average tangible common equity was 14, 5%.
David: Net interest income declined by $228,000 as increasing interest income was offset by the increasing deposit cost that John referenced.
David Correctly: Net interest income declined by 228000 as increasing interest income was offset by the increasing deposit costs that John referenced.
David: As expected, non-interest income decreased from the third quarter due to the decline in gains on SBA loan sales.
David Correctly: As expected noninterest income decreased from the third quarter due to the decline in gains on SBA loan sales, we still expect the SBA business to generate approximately 600000 feet per year and the current rate environment, but it's difficult now to project the timing of those fees.
David: We still expect the SBA business to generate approximately 600,000 in fees per year in the current rate environment, but it's difficult now to project the timing of those fees.
David: As John mentioned, NIM declined by six basis points in the fourth quarter.
David Correctly: As John mentioned NIM declined by six basis points from the fourth quarter as you can see on slide 18, the margin bounced around a little bit during the quarter and the December monthly NIM benefited two basis points from the recognition of loan fees from early payoffs.
David: As you can see on slide 18, the margin bounced around a little bit during the quarter, and the December monthly NIM benefited two basis points from the recognition of loan fees from early payoffs.
David: We expect some additional pressure on them, but we're cautiously optimistic that we're close to stabilize.
David Correctly: We expect some additional pressure on NIM, but we're cautiously optimistic that we are close to stabilizing.
David: Slide 19 has our current and historic deposit beta statistics and shows that our deposit beta this cycle is 39% compared to 38% over the last two rates.
David Correctly: Slide 19 is our current and historic deposit beta statistics and shows that our deposit beta this cycle is 39% compared to 38% over the last two rate cycles.
David: At 2.24%, our cost of interest-bearing deposits is about 41% of the upper limit of the Fed Fund's target range of 5.5%.
David Correctly: At $2, two 4% our cost of interest bearing deposits is about 41% of the upper limit of the fed funds target range of five 5%.
David: Although there is still some migration to higher yielding deposits, non-interest EDAs still represent 28% of deposits and our total cost of deposits in the Q4 was 1.58%.
David Correctly: Although although there are still some migration to higher yielding deposits noninterest DDA still represent 28% of deposits and our total cost of deposits in the Q4 was 158%.
David: As anticipated, loan growth slowed in the fourth quarter to 12 million, or less than 1%, resulting in an annual growth of 6.2%, which was in line with our expectations.
David Correctly: As anticipated loan growth slowed in the fourth quarter to $12 million or less than 1%.
David Correctly: <unk>, an annual growth of six 2%, which was in line with our expectations.
David: Our loan pipeline remains strong, and we expect 4% to 6% growth in 2024, but recognize that Fed activity could impact both growth and yield.
David Correctly: Our loan pipeline remains strong and we expect 4% to 6% growth in 2024, but recognized that fed activity could impact both growth and yields.
David: Page 13 and 14 of our slide deck provide some additional detail and credit, which remains very strong.
David Correctly: Page 13, and 14 of our slide deck provides some additional detail on credit which remains very strong.
David: We recorded a provision expense of $665,000 in the fourth quarter due primarily to loan growth, slower loan prepayment estimates, and net charge-offs of about $250,000.
David Correctly: We recorded a provision expense of 665000 in the fourth quarter due primarily to loan growth slower loan prepayment estimates and net charge offs of about $250000.
David: Fourth quarter non-performing loans declined to 34 basis points of total loans from 47 basis points in the prior quarter as we foreclosed on a $1.4 million loan and moved it into OREO.
Fourth quarter nonperforming loans declined to 34 basis points of total loans from 47 basis points from the prior quarter as we foreclosed on a $1 4 million dollar loan and moved it into Oreo.
David: Based on a recent appraisal, the loan is adequately collateralized and we have not and do not expect to recognize any losses.
Based on a recent appraisal the loan is adequately collateralized and we have not and do not expect to recognize any losses.
Okay.
David: criticized loans decreased by $4 million from the third quarter and are now 1.4% of total loans.
David Correctly: Criticized loans decreased by $4 million from the third quarter and are now one 4% of total loans and the decrease was due to the loan that we moved into Oreo loan pay downs and improved performance.
David: The decrease was due to the loan that we moved into Oreo, loan pay downs, and improved performance.
David: total non-performing assets declined $1.9 million during the quarter to 10.4 million or only 31 basis points of total assets.
David Correctly: Total nonperforming assets declined $1 9 million during the quarter to $10 4 million or only 31 basis points of total assets.
David: net charge offs for $250,000 for the quarter or about four basis points of loans annual
David Correctly: Net charge offs were 250000 for the quarter, our board or about four basis points of loans annualized.
David: Total net charge-offs for 2023 were less than one basis points of loan.
David Correctly: Total net charge offs for 2023 were less than one basis points of loans.
David: Non-interest expense decreased $734,000 from the last quarter due to comp and benefits declining $1.1 million from the last quarter.
David Correctly: Noninterest expense decreased 734000 from the last quarter due to comp and benefits declining $1 1 million from the last quarter.
David: This decline was mostly related to lower health care insurance costs during the year.
David Correctly: This decline was mostly related to lower health care insurance costs during the year.
David: Shares tax expense also came in lower than expected with a reduction of about $410,000 from the prior quote.
David Correctly: Shares tax expense also came in lower than expected with a reduction of about 410000 from the prior quarter.
David: We expect non-interest expense to be between 21.5 and 22.5 million dollars in the first and second quarter.
David Correctly: We expect noninterest expense to be between 21, and a half in 'twenty, two and a half million dollars in the first and second quarters.
David: Slide 21 summarizes our capital management strategy and the impact it's had on home banks.
David Correctly: Slide 21 summarizes our capital management strategy and the impact it's had on home bank.
David: Since 2018, adjusted tangible book value per share has grown 8.6% annually, which includes the impact of a cash acquisition in 2022.
David Correctly: Since 2018, adjusted tangible book value per share has grown eight 6% annually, which includes the impact of a cash acquisition in 2022.
David: During that time, we've increased our dividend from $0.15 per share to $0.25 per share on a quarterly basis and generally try to target a dividend payout ratio of 20%.
David Correctly: During that time, we've increased our dividend from <unk> 15 per share to 25% <unk> per share on a quarterly basis, and generally try to target a dividend payout ratio of 20%.
David: We've repurchased about 13% of our shares outstanding since 2017 and the fourth quarter approved a 5% share repurchase plan, all while maintaining a consolidated CET1 capital ratio of 11.5%.
David Correctly: We've repurchased about 13% of our shares outstanding since 2017, and the fourth quarter approved a 5% share repurchase plan, all while maintaining us consolidated CET, one capital ratio of 11, 5%.
David: We'd like to think that these actions demonstrate our commitment to creating long-term shareholder value.
David Correctly: We'd like to think that these actions demonstrate our commitment to creating long term shareholder value.
Speaker Change: With that, Ross, can you please open the line for Q&A?
Speaker Change: With that Ross can you. Please open the line for Q&A.
Ross: We will now begin the question and answer session.
Speaker Change: We will now begin the question and answer session to.
Ross: To ask a question, you may press star, then 1.
Speaker Change: To ask a question you May Press Star then one on your telephone on your Touchtone phone now.
Ross: touching
Ross: if you are using a speaker
Speaker Change: Using a speakerphone please pick up your handset before pressing the keys to withdraw the question. Please press the pound and one at this time, we will pause momentarily to assemble a roster and as a reminder, please press star one if you'd like to ask the questions.
Ross: draw the
Ross: and Will Potter.
Ross: Ross
Speaker Change: And our first question comes from Graham <expletive> from Piper Sandler. Please go ahead Graham.
Ross: Graham
Ross: Go ahead, Grant.
Ross: Hey, good morning, guys.
Graham: Hey, good morning, guys.
Ross: Good morning.
Good morning, good morning Graham.
Ross: So I just wanted to start on the margin.
Graham: So I just wanted to start on the margin and looking at Slide 18, David I know you mentioned it just now that you did you say that at December margin of three 7% benefited a little bit from some prepayment fees that were in there.
Speaker Change: and I'm looking at slide 18. David, I know you mentioned it just now, but did you say that at December, March,
Speaker Change: 7% benefited a little bit
Speaker Change: payment fees that were in there.
Speaker Change: Yeah, Graham.
Yes Graham.
Graham: Yeah.
Speaker Change: you know
David Correctly: We like showing the monthly trend in NIM, but there was definitely some are some unexpected prepayments on some loans that generated a little bit over $50000 of additional fee income that we werent expecting and so while it's not that big on a quarterly or annual basis on a monthly NIM calculation. It does it does.
Speaker Change: We like showing the monthly trend in NIM, but there was definitely some unexpected prepayments on some loans that generated a little bit over $50,000 of additional fee income that we weren't expecting. And so while it's not that big on a quarterly or annual basis, on a monthly NIM calculation, it does impact, and that's why we wanted to point it out. So it would have been about $368,000 in December without that fee recognition.
David Correctly: And Thats why we wanted to point it out so it would have been about $3 68 in December without that fee recognition.
Speaker Change: Okay, that's great. So.
Speaker Change: That's great. And so...
Speaker Change: including that the margin I guess definitely showing some signs of stabilization
Speaker Change: <unk> that the margin I guess definitely showing some signs of stabilization.
Speaker Change: and I guess month over month there.
Speaker Change: Even improvement I guess month over month there.
Speaker Change:
Speaker Change: What's sort of your outlook for the NIM over the next couple of quarters? I guess kind of when you factor in any saves that might have been made on that BTFB transaction you all did, and then what looks to be
Speaker Change: What's sort of your outlook for the NIM over the next couple of quarters.
I guess kind of when you factor in any saves that might've been made on that Bts P transaction you all did and then what looks to be some continued creep up in deposit costs just as you.
Speaker Change: keep up in deposit costs.
Speaker Change: Um,
Speaker Change: I guess, Greg I was a little bit faster than loans.
Speaker Change: I guess grow those a little bit faster.
Speaker Change: I think the biggest difference in 2024, we got a little bit more of our security portfolio maturing. So we'll be turning that over a little bit, which will help us, we think, in the NIM. Also, a slowdown in the CD side. We had a lot of growth on CDs in 2023. We still think we'll see some growth there, but not to the pace that we did last year.
Speaker Change: Currently.
Speaker Change: The biggest difference in 2024, we got a little bit more of our security portfolio maturing. So we'll be turning that over a little bit which will help help us we think in the NIM also.
Speaker Change: The slowdown in the CD side, we had a lot of global GDP in 2023, and we still think we will see some growth there, but not to the pace that we did last year. So.
Speaker Change: with that and the loan was repricing at much higher rates, in a lot of cases more than double what they were two, three, five years ago. So yeah, all told, we hope to have probably a slight decline in the first quarter and then hopefully stabilization, if not growth, in the latter part of the year.
Speaker Change: With that in the loans repricing much.
Speaker Change: Much higher rates and a lot of cases more than double what they were.
Speaker Change: 235 years ago. So.
Speaker Change: All told we hope to have a probably a slight decline in first quarter.
Speaker Change: Hopefully the stabilization if not growth in the latter part of the year.
Speaker Change: Yeah, Graham, I think John, I agree 100% with what John said. I think about a quarter or two ago, the expectation was that a lot of NIMs were going to start bottoming out and then starting to increase. With the kind of recent change in rate expectations, definitely are optimistic that it will bottom out, but instead of increasing right away, kind of flatline for a little bit for a couple of quarters, then increasing towards the end of 2024 or into 2025.
Speaker Change: Yes, Graham I think.
Graham: Thanks, John.
Graham: John.
Graham: I agree with 100% with what John said.
I think about a quarter or two ago. The expectation was that a lot of nims are going to start.
Graham: Bottoming out and then starting to increase.
Graham: With the recent change in rate expectations definitely are optimistic that it will bottom out, but instead of increasing right away kind of flat line for a little bit for a couple of quarters and increasing towards the end of 2024 or into 'twenty five.
Speaker Change: okay so that and that kind of goes into my next question and when it comes to rate cuts so are you saying that
Graham: Okay.
Speaker Change: And it goes into my next question.
Speaker Change: When it comes to rate cuts so are you, saying that.
Speaker Change: The increase in rate cut expectations into the curve
Speaker Change: The increase in rate cut expectations into the curve is actually not as beneficial to you as it would be in a higher for longer environment I guess.
Speaker Change: actually not as beneficial to you as it would be in a higher for longer environment, I guess?
Speaker Change: I think the difference is
Speaker Change: I think I think the difference is.
Speaker Change: There's still a big spread between the Fed funds rate and the treasury curve or any yield curve that you want to pick. And so with the recent decline and the longer term rates, it kind of lowers your loan spreads a little bit or your loan yields that you're going to be originating. And customers are still kind of thirsty for that five, five and a half, five and a quarter rates on CDs. So we're still going to have to fend that off for a little bit. So that will add some pressure. Until the Fed starts cutting, it's really hard to see a NIM that's going to change or increase rapidly or meaningfully in the next couple quarters.
Speaker Change: There is still a big spread between the fed funds rate.
Speaker Change: The treasury curve.
Speaker Change: Yield curve that you want to pick and so with the recent decline in the longer term rates and kind of lowers your loan spreads a little bit are your loan yields.
Speaker Change: You are going to be originating and customers are still kind of thirsty for that five.
Speaker Change: 555 million a quarter rates on Cds, So we're still going to have to fend that off for a little bit so that will add some pressure.
Speaker Change: Until rates the fed starts cutting its really hard to see a.
Speaker Change: Our NIM, that's going to change our increase rapidly.
Speaker Change: Meaningfully in the next couple of quarters.
Speaker Change: Okay.
Speaker Change: Okay. And I guess just to put a bow on it. So in the event the Fed does cut rates, that should benefit you guys, right? You're pretty liability sensitive, I guess, per se, given how much of the book on the asset side is.
Speaker Change: Yes, just to put a bow on it so in the event the fed does cut rates.
Speaker Change: That should benefit you guys right you are pretty liability sensitive I guess per se given how much of the book.
Speaker Change: On the asset side is fixed rate correct.
Speaker Change: Correct.
Speaker Change: I would think so, yes.
Speaker Change: I would think so yes.
Speaker Change: Okay, Great and then if I could just sneak one more and I just had a question around credit.
Speaker Change: and if I could just sneak one more in I just had a question around credit um
Speaker Change: John, I know you tend to be pretty cautious on this front, but it looks like a lot of the metrics have improved pretty substantially this quarter.
John I know you tend to be pretty cautious on this front, but it looks like a lot of the metrics have improved pretty substantially this quarter.
Speaker Change: some to Oreo, but generally everything else
Speaker Change: Maybe some of the Oreo, but generally everything else looks pretty good what are you seeing on that front from your borrowers in terms of their financial health and just the markets that you're operating in.
John: What are you seeing on that front from your borrowers in terms of their financial health?
John: and the markets for your operations.
John: You know, checking annual financial statements and such, we're not seeing a significant decline, even though borrowing costs have been high for all of 2023. So I'm not seeing a negative impact, anything that would prevent them from being successful in making their payments and continuing in business. So not to say the longevity of a higher interest rate environment might cause that, but we're not paying it in the financial statements we're looking at. And even the new customers that we're bringing on are still very, very strong, so no signs of deterioration as of yet.
Speaker Change: Checking.
Speaker Change: Finally, I would say we're not seeing.
Significant declines, even though borrowing costs have been high for all of 2023.
Speaker Change: So I'm not seeing a negative impact anything that would prevent them from being successful and making the payments.
Speaker Change: So.
Speaker Change: Notwithstanding the longevity of a higher interest rate environment caused that but we're not we're not paying and finding these days we're looking at.
Speaker Change: The new customers that we're bringing on are still very very small so.
Speaker Change: No signs of deterioration.
Yes.
Speaker Change: Okay, Yes.
Speaker Change: All right, thank you guys.
Speaker Change: Alright, Thank you guys.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: And our next question comes from Brett Rabatin from Huvday Group. Please go ahead, Brett.
Speaker Change: And our next question comes from Brett Robinson from Poverty Group. Please go ahead Brett.
Speaker Change: and
Brett D. Rabatin: Hey guys, good morning.
Brett D. Rabatin: Hey, guys good morning.
Brett D. Rabatin: Let me just start on a
Brett D. Rabatin: Good morning, everyone just wanted to Onyx.
Brett D. Rabatin: wanted to start on expenses and just if I heard you correct 21 and a half to 22 and a half
Speaker Change: Hi wanted to start on expenses.
Speaker Change: If I heard you correct 'twenty, one 'twenty two and a half was the first quarter guide I assume some of that is.
Brett D. Rabatin: first quarter guide I assume some of that is
Brett D. Rabatin: you know FICA and what have you merit increases in the first quarter can you talk maybe about that increase length quarter and then an outlook for the full year could that be a little mid single-digit in terms of
Speaker Change: And what have you have merit increases in the first quarter can you talk maybe about that increase linked quarter and then an outlook for the full year could that be a low to mid single digit in terms of expense growth.
Speaker Change: There's been a little bit of pressure on compensation the last couple of years with inflation and such. We will be right-sizing some of our areas where we've had a little bit higher turnover. So we're trying to remain competitive in those areas. So that's going to create a little bit more on the comp side than normal. But yes, that's probably the biggest number in 2024 as far as the increase is concerned, is increase in comp. Not significant additions. We did add a team in Houston, five people. We've added three other relationship managers in other markets. So those came on late in the year. So a part of the comp expense is the four-year effect of inflation. The people that we've added.
Speaker Change: There's been a little bit of pressure on compensation.
Speaker Change: A couple of years with inflation.
Speaker Change: We will be right sizing some of our areas, where we've had a little bit higher turnover. So we're trying to.
Speaker Change: Remain competitive in those areas. So that's going to create a little bit more on the comp side the normal but yes, that's probably the biggest number.
Speaker Change: In 2024 as far as the increase in Conservatives is increasing comp not significant.
Speaker Change: Additions, we did add a team in Houston.
Speaker Change: Five people we've added three other relationship managers in other markets. So those came on late in the year. So a part of the comp expenses the full year effect.
Speaker Change: The people that we've had.
Speaker Change: We have some positions that are empty right now and I'll be meeting with those team leaders to make sure that we have to fill those positions in 2024.
Speaker Change: We have some other people that we have.
Speaker Change: <unk> that are empty right now I'll be meeting with those team leaders.
Speaker Change: Sure. So we have to fill those positions in 2024.
Speaker Change: So Brett, we also had some moving parts in
So Brian we also had we also had some moving parts.
Speaker Change: Q4, which lowered the non-interest expense a little bit. As we mentioned, comp and benefits was down about $1.1 million, I believe. A big chunk of that was group health insurance came in much lower than anticipated this year. Our HR director, we switched health care plans and pharmaceutical plans, and our health insurance expense for the bank came in about $500,000 less than last year, and about flat with 2021.
Speaker Change: Q4, <unk>, which lowered the noninterest expense a little bit.
As we mentioned comp and benefits was down about 1.1 million I believe a big chunk of that was group health insurance came in much lower than anticipated this year.
Speaker Change: Our HR director, we switched health care plans and pharmaceutical plans and our health insurance expense for the band came in about $500000 less than last year.
Speaker Change: And about flat with 2021.
Speaker Change: So we were taken a little bit back by some rebates in Q4, so that lowered Q4 expenses a good bit. Also, shares tax expense came in about $400,000 less as that tax expense comes in for Louisiana-based banks into Q3 and into Q4, and so that was a little bit lower than we anticipated for the year. So that kind of lowered our non-interest expense run rate in Q4. We are expecting about $21.5 to $22 million in Q1, and then raises go into effect April 1st for our employees, and so you'll see an uptick in that, so that'll increase that range to that $21.5 million range in Q2.
Speaker Change: So we.
Speaker Change: We were taken a little bit back by some rebates in Q4 set lowered Q4 expenses a good bit also shares tax expense came in at about $400000 less.
Speaker Change: As those as that.
Speaker Change: Tax expense comes in for Louisiana based banks.
Speaker Change: The end of Q3 and into Q4, and so that was a little bit lower than we anticipated for the year, so that kind of lowered our noninterest expense run rate in Q4.
Speaker Change: We are expecting about 21, 5% to $22 million in Q1, and then raises go into effect April 1st for our employees and so you'll see a uptick in that so that will.
Speaker Change: Up.
Speaker Change: Increase that range to that 21, 5% 21 5 million range in Q2.
Thanks for watching!
Good morning, ladies and gentlemen, of the Home Bank.
Speaker Change: Okay.
Speaker Change: I'm sorry, 21 and a half to 22 million in Q1, and then 22 to 22 and a half in Q2. Sorry.
Speaker Change: I'm, sorry, I was wondering.
Speaker Change: Wondering if sorry, Tony I wanted to have the $22 million in Q1, and then 'twenty two to 'twenty, two and a half in Q2 sorry.
All parts, and Alyssa Kevin Fitzsimmons, Lee Cigna-Lacombe Starkey, followed by, after today's event, there will be an opportunity to ask questions, wrote this event.
Speaker Change: Okay, perfect.
Speaker Change: Okay perfect.
Speaker Change: Yes, no worries.
Speaker Change: No worries. And then you mentioned the 5% share buyback and your capital ratios are a little higher. You know, what's the right, and I assume we're going to target CET1, but what's the right level for capital relative to the buyback plan? And then any thoughts on...
Speaker Change: And then you mentioned, the 5% share buyback and your capital ratios are a little higher.
Speaker Change: What's the right.
I would now like to turn the conference over to Home Bank Corp. President John and Steve Finan.
Speaker Change: We're going to target CET, one, but what's the right.
Speaker Change: Level for capital relative to the buyback plan and then any thoughts on <unk>.
Kirkland.
Thank you, Ross. Good morning, and welcome to HomeBank's fourth quarter 2023 earnings call.
Speaker Change: Possible M&A sounds like some people are getting a little more optimistic, you know, it seems like there's there's
Speaker Change: Possible M&A sounds like some people are getting a little more optimistic it seems like there's there's.
Speaker Change: Possibilities, if we get the marks figured out, any thoughts on capital?
Speaker Change: Possibilities, if we get to March figured out any thoughts on capital.
Our earnings release and investor presentation are available on our website. I'd ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation and our SEC filing.
Speaker Change: Yeah, let me take the first part of that question. We really significantly
Speaker Change: Yes, let me let me take the first part of that question.
Speaker Change: We really significantly.
Speaker Change: pared down the buyback in Q4, I think only buying back 10,000 to 15,000 shares, and that was at a weighted average cost of $33. With the run-up in the share price, we backed off of the buyback program during the year and feel comfortable with growing capital in this environment. If share prices do decline, we are poised to take advantage of it and will take advantage of it if the pricing comes down a little bit.
Pared down the buyback in Q4, I think buying back 10, 15000 shares and that was at a weighted average cost of $33.
Now I'll hand it over to John to make a few comments about the quarter.
John: John, Thank you, David.
John: Good morning, and thank you for joining HomeBank Corp.'s earnings call today. I hope your morning has started off well. We appreciate your interest in HomeBank Corp as we discuss our results and describe our approach to creating long-term shareholder value. HomeBank's strong performance in 2023 demonstrated our ability to successfully navigate volatile markets. During the fourth quarter, we grew both loans and deposits, improved credit, and reported strong profitability. For the quarter, loans increased by $12 million after increasing $137 million in the first. Our 6.2% loan growth in 2023 was in line with expectation, and we saw contributions from all regions, including our newest, Houston market, which grew 19%. We are pleased with the performance in Houston, which we entered into two years ago with the acquisition of Texan Bank.
Speaker Change: With the run up in the share price, we backed off on the buyback program during the year.
And feel comfortable with growing capital in this environment.
Speaker Change: If share prices do decline, we are poised to take advantage of it and we will take advantage of it.
Speaker Change: If the pricing comes down a little bit.
Speaker Change: Charlie, we would look forward to getting back in potential M&A. I'm not sure the first half of the year is going to be very heavy in that realm. We're hoping if Fed does make some moves that that will spur on some discussions. But we're definitely ready, prepared to look at some opportunities that are out there. We have a target list of people that we would like to team up with. It's just a matter of making sure that...
Speaker Change: Surely we would.
Speaker Change: Look forward to getting back.
And potentially M&A not sure first half of the year is going to be very heavy.
Speaker Change: Well, we're hoping if fed does make some moves that will spur some discussions but.
Speaker Change: We are definitely ready prepared to look at some opportunities that are out there. We have a target list of people that we would like to team up with that just a matter of.
Speaker Change: Making sure of that.
Speaker Change: they like us as much as we like them so yeah I think end of 24 and 25 should be pretty pretty heavy M&A.
Speaker Change: They like us as much as we like them so.
Yes.
John: We continue to invest in Houston as it has outperformed expectations, and we believe there are still good opportunities for growth. We added a commercial banking team in the fourth quarter and plan to relocate branches in the first half of 2024. Fourth quarter deposits increased $73 million, following a $46 million increase in the third quarter.
Speaker Change: End of 'twenty, four 'twenty, five should be pretty pretty heavy M&A.
Speaker Change: Yeah.
Speaker Change: Okay, great. Appreciate all the comments.
Speaker Change: Okay, Great appreciate all the color.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: are next.
Speaker Change: And our next question comes from Joe <unk> from Raymond James. Please go ahead Joe.
Speaker Change: go ahead.
Speaker Change: Good morning. Good morning, Joe.
Joe: Good morning, Thank you for taking my question.
Speaker Change: Yeah.
John: The strong second half deposit generation replaced outflows we saw in the first half, resulting in a year-over-year increase of 1.4%.
Joe: Yes.
Speaker Change: So circling back to the margins,
So circling back to the margin the forward curve is a decent amount of rate cuts coming up over the next couple of years.
Speaker Change: The Ford curve has a decent amount of rate cuts coming up over the next couple of years.
John: This resulted in an end-of-year loan to deposit ratio of 96.7, which is slightly above the upper end of our target range. Now, the interest margin, which decreased slightly to 3.69, appears to be stabilizing as asset yields continue to steadily increase and the pace of deposit cost increases slows.
Speaker Change: How many cuts have you baked into your model
Joe: Many cuts have you baked into your model and kind of put a finer point on it how should we think.
Speaker Change: kind of put a finer point on it. How should we think?
Speaker Change: how the margin will behave with the
Joe: The margin will behave with each rate cut.
Joe: So we budgeted for was.
Speaker Change: So what we budgeted for was three rate cuts throughout 2024. I'm not saying I necessarily believe that's going to happen.
Joe: Three rate cuts throughout 2024.
Joe: I'm, not saying that necessarily I believe that's going to happen.
John: With that, I'll turn it over to David, our Chief Financial Officer. Thanks, John. Fourth quarter net income of $9.4 million, or $1.17 per share, declined by $369,000, or $0.05 per share from the third quarter. Return on assets was 1.13%, and return on average tangible common equity was 14.5%. Net interest income declined by $228,000 as increasing interest income was offset by the increasing deposit cost that John referenced. As expected, non-interest income decreased from the third quarter due to the decline in gains on SBA loan sales. We still expect the SBA business to generate approximately 600,000 in fees per year in the current rate environment, but it's difficult now to project the timing of those fees. As John mentioned, NIM declined by six basis points in the fourth quarter.
Speaker Change: But that's what I guess general consensus is from economists that pay a lot more attention to that than I do. So we went with the general consensus. We generally think that
Joe: But that's.
General consensus is from economics.
Joe: Economists I pay a lot more attention to that and I do so we went with the <unk>.
Joe: The general consensus we generally think that.
Speaker Change: The Forward Curve will provide ability to
Joe: <unk>.
Joe: The forward curve will provide.
Joe: The ability to.
Speaker Change: Um,
Speaker Change: keep our margin flat for the
Joe: Keep our.
Joe: <unk> flat for there.
Speaker Change: first half of 2024 with a start increasing with deposit cost starting to decline in the
Joe: First half of 2024, and with us start increasing with deposit pressure deposit cost starting to decline.
Speaker Change: Q3 and Q4. So we think NIMH can be positive ending up into 2024.
Joe: Q3, and Q4, so we think NIM has can be positive.
Joe: Ending up in the 2024.
Speaker Change: I think an important factor with that is it seems based upon the behavior of other banks in our regions that they are short of deposits also. So I don't think we're going to see any outliers that keep their rates really high. I think once Fed moves, that's going to be a good indication for banks to lower their CD rates and bring that cost down. So I do anticipate once Fed does move, or even if they don't move, we may see a slight decline in CD costs in anticipation of a move perhaps sometime during the year.
Joe: I think an important factor was that is.
Joe: It seems based upon the behavior of other banks in our regions.
Joe: They are.
Joe: Short of deposits also.
David: As you can see on slide 18, the margin bounced around a little bit during the quarter, and the December monthly NIM benefited two basis points from the recognition of loan fees from early payoffs. We expect some additional pressure on them, but we're cautiously optimistic that we're close to stabilizing. Slide 19 has our current and historic deposit beta statistics and shows that our deposit beta this cycle is 39% compared to 38% over the last two rates. At 2.24%, our cost of interest-bearing deposits is about 41% of the upper limit of the Fed Fund's target range of 5.5%. Although there is still some migration to higher-yielding deposits, non-interest EDAs still represent 28% of deposits, and our total cost of deposits in Q4 was 1.58%.
Joe: No I don't think were going to see any outliers that Keith generates really high once fed moves.
Joe: Going to be a good indication for banks to lower their Ceos and bring the cost down so I do anticipate one.
Joe: Now, let's move or even if they don't move we may see a slight decline in CD costs in anticipation of a move perhaps in sometime during the year.
Speaker Change: got it. Then just kind of piggyback off that comment. It looks like 85% of your CDs are set to mature in 2024.
Speaker Change: Got it and then just kind of piggyback off of that comment it looks like 85% of your Cds are set to mature in 2024 is there any color you can.
Speaker Change: Is there any color you can provide on the maturity schedule in terms of balances and what rate they're kind of running off at?
<unk> on the maturity schedule in terms of balances and what rate, they're kind of running off.
Speaker Change: We have a lot of different specials that we put out there, we've had a 17 month and we've had an 11 month, a 7 month, a 5 month, a 9 month, so we've kind of moved it around a little bit, changing maturities. I would think that the remainder of 24 we would stay relatively short, meaning that
Speaker Change: We have a lot of different specials that we put out there.
David: As anticipated, loan growth slowed in the fourth quarter to 12 million, or less than 1%, resulting in annual growth of 6.2%, which was in line with our expectations. Our loan pipeline remains strong, and we expect 4% to 6% growth in 2024, but recognize that Fed activity could impact both growth and yield. Page 13 and 14 of our slide deck provide some additional detail on credit, which remains very strong.
Speaker Change: <unk>.
Speaker Change: You're going to have 17.
Speaker Change: 17 months, we've had 11 seven five months or nine months. So we've kind of moved it around a little bit changing maturities.
Speaker Change: I would think that remainder of 'twenty four we will stay relatively short.
Speaker Change: Is that.
Speaker Change: probably wouldn't have anything longer than maybe seven or nine months.
Speaker Change: Probably wouldn't have anything longer than than May 709 months.
Speaker Change: So we're not going to put all of our eggs in one basket, so we're trying to spread that out between the 5 and 11 month period.
Speaker Change: So we're not wanted to put all our eggs in one basket. So we're trying to spread that out between the five of the 11 month period.
David: We recorded a provision expense of $665,000 in the fourth quarter due primarily to loan growth, slower loan prepayment estimates, and net charge-offs of about $250,000. Fourth quarter non-performing loans declined to 34 basis points of total loans from 47 basis points in the prior quarter as we foreclosed on a $1.4 million loan and moved it into OREO. Based on a recent appraisal, the loan is adequately collateralized, and we have not and do not expect to recognize any losses. Criticized loans decreased by $4 million from the third quarter and are now 1.4% of total loans. The decrease was due to the loan that we moved into Oreo, loan pay-downs, and improved performance. Total non-performing assets declined $1.9 million during the quarter to 10.4 million or only 31 basis points of total assets. Net charge Non-interest expense decreased $734,000 from the last quarter due to comp and benefits declining $1.1 million from the last quarter. This decline was mostly related to lower health care insurance costs during the year.
Speaker Change: I hope that helps.
Speaker Change: I hope that helps.
Speaker Change: Absolutely. And then kind of the last one for me here.
Speaker Change: Absolutely.
Speaker Change: And then kind of the last one for me here.
Speaker Change: I heard you reiterate your mid single digit loan growth outlook in 24.
Speaker Change: I heard you reiterate your mid single digit loan growth outlook in 'twenty four.
Speaker Change: So over the past week or so, we've heard a number of management teams have talked about a mild recession occurring this year, and if that were to occur, where would you expect that loan growth to come from?
Speaker Change: So over the past week or so we've heard a number of management teams have talked about a mild recession occurring this year and if that would occur.
Speaker Change: Do you expect that loan growth to come from.
Speaker Change: Well, I think you have to look back at 2023 and some of the people that we've hired. The people we've hired in Houston and the ones we've hired here in our main office in Acadiana are all C&I lenders. And we grew C&I about 8% last year. So we do think that that's an area where, even in a declining economy, we may still be able to grow a little bit there.
Speaker Change: Well I think you have to look back at 2023, and some of the people that we've hired the people we hired in Houston and.
Speaker Change: The ones we've hired here in I mean, obviously the caveat.
Speaker Change: Our C&I lenders and we grew C&I and about 8% last year. So we do think that that's an area where.
Speaker Change: Declining economy, we may still be able to grow a little bit there.
Speaker Change: probably, you know, not have a whole lot of CRE, especially at high rates, we think that's where a decline is going to come in in that area, but very optimistic about the growth that we had in 23 in C&I and potentially that growth.
Speaker Change: Probably not have a whole lot of CRE, especially at high rates.
Speaker Change: We think thats, where our declining income coming in that area.
Speaker Change: Very optimistic about the growth that we had in 'twenty three in C&I and potentially.
Speaker Change: That growth.
Speaker Change: Maintaining itself for 24 and 25
Maintaining itself for $24 25.
Speaker Change: Understood. Thank you very much.
Speaker Change: Understood. Thank you very much.
Speaker Change: Thank you.
David: Shares tax expense also came in lower than expected, with a reduction of about $410,000 from the prior quote. We expect non-interest expense to be between 21.5 and 22.5 million dollars in the first and second quarter. Slide 21 summarizes our capital management strategy and the impact it's had on home banks. Since 2018, adjusted tangible book value per share has grown 8.6% annually, which includes the impact of a cash acquisition in 2022. During that time, we've increased our dividend from $0.15 per share to $0.25 per share on a quarterly basis and generally try to target a dividend payout ratio of 20%. We've repurchased about 13% of our shares outstanding since 2017, and in the fourth quarter, we approved a 5% share repurchase plan, all while maintaining a consolidated CET1 capital ratio of 11.5%. We'd like to think that these actions demonstrate our commitment to creating long-term shareholder value.
Speaker Change: Thank you.
Speaker Change: as a reminder, if you would like
Speaker Change: And as a reminder, if you'd like to ask a question. Please press star one on your phone now.
Speaker Change: star one.
Speaker Change: Okay, this concludes our question and answer session.
Speaker Change: Okay. This concludes our question and answer session I would like to turn the call back over to John for closing remarks.
Speaker Change: I'd like to turn the call back
Speaker Change: Thank you. Once again, thank you all for joining us today. We look forward to speaking to many of you in the coming days and weeks and look forward to an outstanding 2024. Have a great day.
John Board: Thank you once again and thank you all for joining US today, we look forward to speaking to many of you in the coming days and weeks and look forward to an outstanding 2024.
John Board: Yes.
Speaker Change: This conference is now concluded. Thank you for attending today's presentation.
John Board: This conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: may now disconnect.
Speaker Change: The host has ended this call. Goodbye.
Speaker Change: The host has ended this call goodbye.
Speaker Change: With that said, Ross, can you please open the line for Q&A?
Ross: We will now begin the question and answer session. To ask a question, you may press star, then 1, touching if you are using a speaker draw the and Will Potter.
Speaker Change: Ross, Graham, Go ahead, Grant.
Grant: Hey, good morning, guys.
Grant: Good morning.
Grant: So I just wanted to start on the margin, and I'm looking at slide 18.
Speaker Change: David, I know you mentioned it just now, but did you say that at December and March, 7% benefited a little bit from the payment fees that were in there?
David: Yeah, Graham, you know. We like showing the monthly trend in NIM, but there were definitely some unexpected prepayments on some loans that generated a little bit over $50,000 of additional fee income that we weren't expecting.
David: And so while it's not that big on a quarterly or annual basis, on a monthly NIM calculation, it does impact it, and that's why we wanted to point it out. So it would have been about $368,000 in December without that fee recognition.
Speaker Change: That's great. And so... including that, the margin, I guess, definitely showing some signs of stabilization, and I guess month over month there.
Speaker Change: What's your outlook for NIM over the next couple of quarters?
Speaker Change: I guess kind of when you factor in any saves that might have been made on that BTFB transaction you all did, and then what it looks to be, keep up with deposit costs.
Speaker Change: Um, I guess I should grow those a little bit faster.
Speaker Change: I think the biggest difference in 2024 will be that we got a little bit more of our security portfolio maturing. So we'll be turning that over a little bit, which will help us, we think, in the NIM.
Speaker Change: Also, a slowdown in the CD side. However, we had a lot of growth on CDs in 2023. We still think we'll see some growth there, but not at the pace that we did last year, with that and the loans being repriced at much higher rates, in a lot of cases more than double what they were two, three, five years ago. So yeah, all told, we hope to have probably a slight decline in the first quarter and then hopefully stabilization, if not growth, in the latter part of the year.
Speaker Change: Yeah, Graham, I think John, I agree 100% with what John said. I think about a quarter or two ago, the expectation was that a lot of NIMs were going to start bottoming out and then start to increase.
Speaker Change: With the kind of recent change in rate expectations, definitely are optimistic that it will bottom out, but instead of increasing right away, kind of flatline for a little bit for a couple of quarters, then increasing towards the end of 2024 or into 2025, okay so that and that kind of goes into my next question and when it comes to rate cuts so are you saying that The increase in rate cut expectations into the curve, actually not as beneficial to you as it would be in a higher for longer environment, I guess?
Speaker Change: I think the difference is that there's still a big spread between the Fed funds rate and the treasury curve or any yield curve that you want to pick. And so with the recent decline and the longer-term rates, it kind of lowers your loan spreads a little bit or your loan yields that you're going to be originating. And customers are still kind of thirsty for that five, five and a half, five and a quarter rate on CDs. So we're still going to have to fend that off for a little bit. So that will add some pressure. Until the Fed starts cutting, it's really hard to see a NIM that's going to change or increase rapidly or meaningfully in the next couple of quarters.
Speaker Change: Okay. And I guess just to put a bow on it.
Speaker Change: So in the event that the Fed does cut rates, that should benefit you guys, right?
Speaker Change: You're pretty liability sensitive, I guess, per se, given how much of the book on the asset side is.
Speaker Change: Correct.
Speaker Change: I would think so, yes, and if I could just sneak one more in, I just had a question around credit. John, I know you tend to be pretty cautious on this front, but it looks like a lot of the metrics have improved pretty substantially this quarter, some to Oreo, but generally everything else. What are you seeing on that front from your borrowers in terms of their financial health?
Speaker Change: and the markets for your operations.
Speaker Change: You know, checking annual financial statements and such, we're not seeing a significant decline even though borrowing costs have been high for all of 2023.
Speaker Change: So I'm not seeing a negative impact, anything that would prevent them from being successful in making their payments and continuing in business.
Speaker Change: So not to say the longevity of a higher interest rate environment might cause that, but we're not paying for it in the financial statements we're looking at.
Speaker Change: And even the new customers that we're bringing in are still very, very strong, so there are no signs of deterioration as yet.
Speaker Change: All right, thank you guys.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Brett Rabatin from Huvday Group. Please go ahead, Brett, and, Hey guys, good morning. Let me just start on expenses and just if I heard you correct 21 and a half to 22 and a half first quarter guide. I assume some of that is FICA and what you merit increases in the first quarter. Can you talk maybe about that increase length quarter and then an outlook for the full year? There's been a little bit of pressure on compensation the last couple of years with inflation and such.
Speaker Change: We will be right-sizing some of our areas where we've had a little bit higher turnover.
Speaker Change: So we're trying to remain competitive in those areas, so that's going to create a little bit more on the comp side than normal. But yes, that's probably the biggest number in 2024 as far as the increase is concerned, is concerned with comp. Not significant additions. We did add a team in Houston, five people. We've also added three other relationship managers in other markets. So those came on late in the year. So a part of the comp expense is the four-year effect of inflation. The people that we've added. We have some positions that are empty right now, and I'll be meeting with those team leaders to make sure that we have to fill those positions in 2024. So Brett, we also had some moving parts in Q4, which lowered the non-interest expense a little bit.
Speaker Change: As we mentioned, comp and benefits were down about $1.1 million. I believe a big chunk of that was because group health insurance came in much lower than anticipated this year. Our HR director, we switched health care plans and pharmaceutical plans, and our health insurance expense for the bank came in about $500,000 less than last year and about flat with 2021. So we were taken a little bit back by some rebates in Q4, so that lowered our Q4 expenses a good bit. Also, the share tax expense came in about $400,000 less as that tax expense comes in for Louisiana-based banks into Q3 and into Q4, and so that was a little bit lower than we anticipated for the year. So that kind of lowered our non-interest expense run rate in Q4. We are expecting about $21.5 to $22 million in Q1, and then raises go into effect April 1st for our employees, and so you'll see an uptick in that, so that'll increase that range to that $21.5 million range in Q2. Sorry, 21 and a half to 22 million in Q1, and then 22 to 22 and a half in Q2.
Speaker Change: Sorry
Speaker Change: Okay, perfect. No worries. And then you mentioned the 5% share buyback, and your capital ratios are a little higher. You know, what's the right level, and I assume we're going to target CET1, but what's the right level for capital relative to the buyback plan? And then any thoughts on... Possible M&A sounds like some people are getting a little more optimistic, you know, it seems like there's possibilities if we get the marks figured out. Any thoughts on capital?
Speaker Change: Yeah, let me take the first part of that question.
Speaker Change: We really significantly pared down the buyback in Q4, I think only buying back 10,000 to 15,000 shares, and that was at a weighted average cost of $33. With the run-up in the share price, we backed off the buyback program during the year and feel comfortable with growing capital in this environment.
Speaker Change: If share prices do decline, we are poised to take advantage of it and will take advantage of it if the price comes down a little bit.
Speaker Change: Charlie, we would look forward to getting back together in a potential M&A.
Speaker Change: I'm not sure the first half of the year is going to be very heavy in that realm. We're hoping if the Fed does make some moves that that will spur some discussions.
Speaker Change: But we're definitely ready and prepared to look at some opportunities that are out there. We have a target list of people that we would like to team up with. It's just a matter of making sure that they like us as much as we like them, so yeah, I think the end of 24 and 25 should be pretty, pretty heavy M&A.
Speaker Change: Okay, great. Appreciate all the comments. Thank you. You're next, go ahead.
Speaker Change: Good morning.
Speaker Change: Good morning, Joe.
Speaker Change: Yeah. So circling back to the margins, the Ford curve has a decent amount of rate cuts coming up over the next couple of years. How many cuts have you baked into your model to kind of put a finer point on it? How should we think about how the margin will behave with the. So what we budgeted for was three rate cuts throughout 2024.
Speaker Change: I'm not saying I necessarily believe that it's going to happen.
Speaker Change: But that's what I guess the general consensus is from economists that pay a lot more attention to this than I do.
Speaker Change: So we went with the general consensus. We generally think that The Forward Curve will provide the ability to keep our margin flat for the first half of 2024 with a start increasing with deposit cost starting to decline in Q3 and Q4. So we think NIMH can be positive ending in 2024. I think an important factor with that is that, based upon the behavior of other banks in our regions, they are short of deposits also. So I don't think we're going to see any outliers that keep their rates really high. I think once the Fed moves, that's going to be a good indication for banks to lower their CD rates and bring that cost down.
Speaker Change: So I do anticipate once the Fed does move, or even if they don't move, we may see a slight decline in CD costs in anticipation of a move perhaps sometime during the year. Got it. Then just kind of piggyback off that comment. It looks like 85% of your CDs are set to mature in 2024.
Speaker Change: Is there any color you can provide on the maturity schedule in terms of balances and what rate they're kind of running off at? We have a lot of different specials that we put out there. We've had a 17 month, and we've had an 11 month, a 7 month, a 5 month, a 9 month, so we've kind of moved it around a little bit, changing maturities.
Speaker Change: I would think that the remainder of 24 would stay relatively short, meaning that probably wouldn't have anything longer than maybe seven or nine months. So we're not going to put all of our eggs in one basket, so we're trying to spread that out between the 5 and 11 month period.
Speaker Change: I hope that helps. Absolutely. And then, kind of the last one for me here. I heard you reiterate your mid single-digit loan growth outlook in 24. So over the past week or so, we've heard a number of management teams talking about a mild recession occurring this year, and if that were to occur, where would you expect that loan growth to come from?
Speaker Change: Well, I think you have to look back at 2023 and some of the people that we've hired. The people we hired in Houston and the ones we hired here at our main office in Acadiana are all C&I lenders. And we grew C&I about 8% last year. So we do think that that's an area where, even in a declining economy, we may still be able to grow a little bit there. Probably, you know, not have a whole lot of CRE, especially at high rates. We think that's where a decline is going to come in in that area, but very optimistic about the growth that we had in 23 in C&I Maintaining itself for 24 and 25, understood.
Speaker Change: Thank you very much. Thank you, as a reminder, if you would like Star One.
Speaker Change: Okay, this concludes our question and answer session.
Speaker Change: I'd like to turn the call back. Thank you.
Speaker Change: Once again, thank you all for joining us today.
Speaker Change: We look forward to speaking to many of you in the coming days and weeks and look forward to an outstanding 2024. Have a great day!
Speaker Change: This conference is now concluded.
Speaker Change: Thank you for attending today's presentation. You may now disconnect. The host has ended this call.
Speaker Change: Goodbye.
Unnamed Speaker: range in Q2. I'm sorry, sorry, $21.5 to $22 million in Q1 and then $22 to $22.5 in Q2. Ah, okay. Perfect. Yeah, no worries.
Unnamed Speaker: And then you mentioned the 5% share buyback, and your capital ratios are a little higher. You know, what's the right level, and I assume we're gonna target CEP-1, but what's the right level for capital relative to the buyback plan? And then any thoughts on... possible M&A, sounds like some people are getting a little more optimistic, you know, it seems like there are possibilities if we get the marks figured out. Any thoughts on CAP? Yeah, let me take the first part of that question. We really significantly pared down the buyback in Q4, I think only buying back 10,000 to 15,000 shares. And that was at a weighted average cost of $33.
Unnamed Speaker: With the run-up in the share price, we backed off of the buyback program during the year and feel comfortable with growing capital in this environment. If share prices do decline, we are poised to take advantage of it, and we will take advantage of it if the price comes down a little bit. We would look forward to getting back into potential M&A, but I'm not sure the first half of the year is going to be very heavy in that realm.
Unnamed Speaker: We're hoping if Fed does make some moves that that will spur on some discussions. But we're definitely ready and prepared to look at some opportunities that are out there. We have a target list of people that we would like to team up with. It's just a matter of making sure that they like us as much as we like them.
Joe: So, yeah, I think the end of 24 and 25 should be pretty heavy M&A. Okay, great. Appreciate all the comments. Thank you. Go ahead, Joe. Good morning.
Unnamed Speaker: Thank you for taking my question. Yeah. So circling back to the margin, the Ford curve has a decent amount of rate cuts coming up over the next couple of years. How many cuts have you baked into your model?
Unnamed Speaker: How should we think? how the marginal behaves with each. So what we budgeted for was three rate cuts throughout 2024. I'm not saying I necessarily believe that's going to happen.
Unnamed Speaker: But that's what I guess the general consensus is from economists that pay a lot more attention to that than I do. So we went with the general consensus. We generally think that...
Unnamed Speaker: The forward curve will provide the ability to keep our margin flat for the first half of 2024, with an increase with deposit pressure, deposit costs starting to decline in Q3 and Q4. So we think NIM can be positive, ending up in 2024. I think an important factor with that is, based on the behavior of other banks in our regions, that they are short of deposits also. So I don't think we're going to see any outliers that keep their rates really high. I think once the Fed moves, that's going to be a good indication for banks to lower their CD rates and bring that cost down. So I do anticipate that once the Fed does move, or even if they don't move, we may see a slight decline in CD costs in anticipation of a move, perhaps sometime during the year. Got it. Then I just kind of piggyback off that comment.
Unnamed Speaker: It looks like 85% of your CDs are set to mature in 2024. Is there any color you can provide on the maturity schedule in terms of balances and what rate they're kind of running off at? We have a lot of different specials that we put out there. We've had a 17 month, and we've had an 11 month, a 7 month, a 5 month, and a 9 month. So we've kind of moved it around a little bit, changing maturities. I would think that the remainder 24, we would stay relatively short, meaning that any, probably wouldn't have anything longer than maybe seven or nine months. We're not going to put all of our eggs in one basket, so we're trying to spread that out between the 5 and 11 month periods.
Unnamed Speaker: I hope that that helps. Absolutely. And then, kind of the last one for me here, I heard you reiterate your mid-single-digit loan growth outlook for 2024. So over the past week or so, we've heard a number of management teams talk about a mild recession occurring this year, and if that were to occur, where would you expect that loan growth to come from? Well, I think you have to look back at 2023 and some of the people that we hired. The people we've hired in Houston and the ones we've hired here in our main office in Acadiana are all C&I lenders, and we grew C&I by about 8% last year. So we do think that that's an area where, even in a declining economy, we may still be able to grow a little bit there, probably, you know, not have a whole lot of CRE, especially at high rates.
Unnamed Speaker: We think that's where a decline is going to come in in that area, but we are very optimistic about the growth that we had in 2023 in C&I and potentially that growth maintaining itself for 24 and 25. Understood. Thank you very much. Thank you. As a reminder, if you'd like to ask..., star 1.
Operator: Okay, this concludes our question and answer session. I'd like to turn the call back. Thank you. Once again, thank you all for joining us today. We look forward to speaking to many of you in the coming days and weeks and look forward to an outstanding 2024. Have a great day. This conference is now concluded. Thank you for attending today's presentation. You may now disconnect. The host has ended this call. Goodbye.