Q3 2024 Home Bancorp Inc Earnings Call
Speaker Change: Good morning, ladies and gentlemen and welcome to the Home Bank Corpse 3rd Quarter 2024, earning confidence call. Our participants will be in the next room.
Operator: Bancorp's third quarter, 2024, earning a conference call. All participants will be in Mr. Ruhner. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero.
Speaker Change: So do you need assistance? Please send more conference specialists by pressing the start key followed by zero. After today's present isam, there will be an opportunity to ask questions.
Operator: After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.
Operator: I would now like to turn the conference over to Home Bancorp's Chairman, President and CEO, John Bordelon, and Chief Financial Officer, David Kirkley.
Speaker Change: Please note this event is being recorded.
Speaker Change: I'd now like to turn the conference over to whom Bank Corpse Chairman, President and CEO, John Bordelon
David Kirkley: Mr. Kirkley, please go ahead. Thank you, Eric. Good morning and welcome to Home Banc's third quarter, 2024, earnings call. Our earnings release and investor presentation are available on our website.
John Bordelon: and Chief Finance Officer David Kirkley.
Speaker Change: Mr. Kirkley, please go ahead.
David Kirkley: Thank you, Eric. Good morning and welcome to Home Bank's third quarter 2020-24 earnings call. Our earnings release and investor presentation are available on our website.
David Kirkley: I'd ask that everyone please refer to the disclaimer regarding forward-looking statements and investor presentation and our SEC filings.
David Kirkley: I'd ask that everyone please refer to the disclaimer regarding forward-looking statements and investor presentation and our SEC filings.
John Bordelon: Now I'll hand it over to John to make a few comments about the third quarter.
John Bordelon: John, thank you, David. Good morning, and thank you for joining our earnings call today. We appreciate your interest in Home Banc as we discuss our results, expectations for the future, and our approach to creating long-term shareholder value. We reported third quarter net income of 9.4 million, or $1.18 per share, which was a nice improvement from last quarter's strong results. Net interest margin continued to expand, increasing five basis points to 3.71 percent. We are optimistic that the trend will continue as the Fed rate cuts reduce pressure on our cost of funds. Return on assets also increased and was 1.1 percent in the third quarter, up 13 basis points from the second quarter.
David Kirkley: Now I'll hand it over to John to make a few comments about the third quarter. John?
John Bordelon: Thank you, David. Good morning and thank you for joining our earnings call today. We appreciate your interest in home bank as we discuss our results, expectations for the future and our approach to creating a long-term shareholder value.
John Bordelon: We reported 3rd quarter net income of 9.4 million, or $1.18 per share, which was a nice improvement from last quarter's strong results. Net interest margin continued to expand, increasing five basis points to 3.7 per cent.
John Bordelon: We're optimistic that the trend will continue as the Fed rate cuts reduce pressure on our cost of funds.
John Bordelon: Return on assets also increased and was 1.1% in the third quarter of 13 basis points from the second quarter.
John Bordelon: Long growth slowed in the third quarter and was impacted by the paydown of a 19 million dollar medical CNI loan. As we said last quarter, two plus years of sustained higher rates has had a material impact on loan demand in our markets. We're optimistic that rate cuts and some clarity in November could lead to a pickup in loan demand and originations. Based on the soft demand we saw in the third quarter and we're seeing in the fourth, we're expecting 2024 loan growth to finish at the lower end of our four to 6 percent guidance. Even in the current low-demand environment, which we don't expect to last, we think we have an opportunity to drive asset yields higher as our fixed rate book and that naturally reprices.
John Bordelon: Long Road, slowed in the third quarter and was impacted by the paydown of a $19 million medical C&I loan.
John Bordelon: As we said last quarter, two plus years of sustained higher rates has had a material impact.
John Bordelon: on loan demand in our markets. We're optimistic that rate cuts and some clarity in November could lead to a pickup in loan demand and originations.
John Bordelon: Based on the soft demand we saw in the third quarter and we're seeing in the fourth we're expecting 2024 along with to finish at the lower end of our four to six percent guidance.
John Bordelon: Even in the current low demand environment, which we don't expect to last, we think we have an opportunity to drive asset yields higher as our fixed-rate book that naturally reprises.
John Bordelon: Deposit has increased 55 million or 8 percent annualized, with most of the growth coming from money market and interest bearing checking accounts. Money market CD rates were quick to adjust lower after the rate cut in September, and we're optimistic that future rate cuts will have a similar impact. David will provide some more details on our asset and liability reprisings to give everyone a sense of the potential to drive our asset yields higher and reduce our funding cost over the next few quarters. It has been frustrating over the last three years that Home Bank continues to perform well, and the market hasn't responded accordingly.
Speaker Change: The positives increase 55 million or 8% annualized with most of the growth coming from money market and interest bearing check in accounts.
Speaker Change: The money mortgage CD rates were quick to adjust lower after the rate cut in September. We're optimistic that future rate cuts will have a similar impact.
Speaker Change: will provide some more details on our asset and liability repricents to give everyone a sense of the potential to drive our asset yields higher and reduce our funding costs over the next few quarters.
Speaker Change: has been frustrating over the last three years that Home Bank continues to perform well and the market hasn't responded accordingly. This frustration exists because we continue to feel very good about Home Bank's outlook and have demonstrated strong performance in a variety of economic cycles.
John Bordelon: This frustration exists because we continue to feel very good about Home Bank's outlook and have demonstrated strong performance in a variety of economic cycles. But we can't control the market, so we'll focus on the things that we can control, such as providing exceptional customer service, expanding relationships with new and existing customers, and maintaining our conservative credit culture.
Speaker Change: But we can't control the market, so we'll focus on the things that we can control, such as providing exceptional customer service, expanding relationships with new and existing customers.
John Bordelon: In the long term, we are confident that our approach will continue to build shareholder value at Home Bank.
Speaker Change: and maintaining our conservative credit culture. In the long term, we are confident that our approach will continue to build shareholder value at home bank.
David Kirkley: With that, I'll turn it back over to David, our Chief Financial Officer.
Speaker Change: with that I'll turn it back over to David, our chief finance officer.
David Kirkley: Thanks, John. We continue to see increases in asset yields outpace increases in funding costs in the third quarter. The yield on average interest earning assets increased by 12 basis points to 5.82%, while the yield on average interest bearing liabilities increased by 9 basis points to 3.02. This dynamic continued to benefit net interest income, which increased to 30.4 million, up 989,000 from the previous quarter. As John mentioned, loan growth slowed during the quarter to 7 million, or about 1% annualized, and that contributed to a lower loan loss provision of 140,000. The slower loan growth combined with the $55 million increase in deposits reduced our loaned deposit ratio to 96.1%.
David Kirkley: Thanks John.
David Kirkley: We continue to see increases in asset yields outpaste increases in funding costs in the third quarter.
David Kirkley: The yield on average interest earning assets increased by 12 basis points to 5.82 percent, while the yield on average interest bearing liabilities increased by 9 basis points to 3.02 percent.
David Kirkley: This dynamic continues a benefit net interest income which increased to 30.4 million up 989,000 from the previous quarter.
Speaker Change: As John mentioned, Lone Growth slowed during the quarter to 7 million or about 1% annualized, and that contributed to a lower low loss provision of 140,000.
Speaker Change: The slower loan growth combined with the $55 million increase in deposits reduced our loan to deposit ratio to 96.1%.
David Kirkley: Despite the slower loan growth, we believe we have near-term opportunities to pick up some spread as loans reprised. The origination market is competitive and the rate environment is volatile, but we're continually originating loans with yields above 7.5%, which compares favorably to our fixed-rate loan portfolio. 62% of our loan portfolio is fixed rate and yields a weighted average rate of 5.27%. So, while our mix of fixed-to-floating rate loans slowed asset yield increases when rates were climbing, we think it should provide some downward protection on yields in them, now that we appear to be in a decreasing rate environment.
Speaker Change: Despite this lower loan growth, we believe we have near-term opportunities to pick up some spread as loans reprised.
Speaker Change: The origination market is competitive in the right environment as volatile, but we're continually originating loans with yields above 7.5% which compares favorably to our fixed-rate loan portfolio.
Speaker Change: 62% of our loan portfolio is fixed rate and yields a weighted average rate of 5.27%. So while our mix of fixed-to-floating rate loans, slow-dasset yield increases when rates are climbing, we think it should provide some downward protection on yields and them now that we appear to be in a decreasing rate environment.
David Kirkley: We also think we have an opportunity to stabilize or reduce our liability cost in the next few quarters, depending, of course, what happens with market rates. We have approximately $500 million, or 70% of CDs maturing in the next six months with a weighted average rate of about 4.75%. New CD origination rates from October at least 35 basis points lower. We also have $135 million, a 4.76% BTFP borrowings maturing in January.
Speaker Change: We also think we have an opportunity to stabilize or reduce our liability cost in the next few quarters, depending of course, what happens with market rates.
Speaker Change: We have approximately $500 million or 70% of CDs maturing in the next six months with a weighted average rate of about 4.75%.
Speaker Change: New City Origination rates from October at least 35 basis points lower.
Speaker Change: We also have $135 million, a 4.76% BTFP borrowing, maturing in January.
David Kirkley: Slide 8 breaks down our loan portfolio composition, and you may notice some changes. The increase in the percentage of 1 to 4 family mortgages and the decrease in CRE was due to updates to our loan coding systems as opposed to actual shifts in collateral or origination activity. Slides 9 through 12 are new and provide additional details on our CRE and CNI portfolios. Slides 14 and 15 of our investor presentation provide some additional detail on credit. Non-performing loans increased by 1.3 million in the third quarter to 18.1 million, or only 0.68% of total loans. Our allowance for loan loss ratio was stable from the second quarter at 1.21%.
Speaker Change: Slide 8 breaks down our learn portfolio composition and you may notice some changes.
Speaker Change: The increase in the percentage of one to four family mortgages and the decrease in CRE was due to updates and twirlone coding systems as opposed to actual shifts in collateral or origination activity.
Speaker Change: slides 9 through 12 are new and provide additional details on our CRA and CNI portfolios.
Speaker Change: Slide 14 and 15 of our investor presentation provides some additional detail on credit.
Speaker Change: Not forming loans increased by 1.3 million in a third quarter to 18.1 million or only 0.68% of total loans.
Speaker Change: Our allowance for loan loss ratio was stable from the second quarter at 1.21%.
David Kirkley: Slide 21 of the presentation has some additional details on non-interest income and expenses. Third quarter non-interest income decreased slightly to 3.7 million and should be between 3.6 and 3.8 million over the next two quarters. Sorry, was there another question in that one as well?
Speaker Change: So, I 21 of the presentation has some additional details on non-interest income expenses. Third quarter, non-interest income decreased slightly to 3.7 million and should be between 3.6 and 3.8 million over the next two quarters.
Speaker Change: 9 interest expense increased by a 450,000 to 22.3 million, which was in line with expectations.
Speaker Change: We expect cordon interest expenses to be between 22 and 22 and a half million dollars during the next two quarters.
Speaker Change: We repurchased 24,000 shares and averaged price of $38.50 in a third quarter, which equates to 94% of tangible book value excluding AOCI.
Speaker Change: We also increased our dividend by a penny to 26 cents per share, which gets us close to the midpoint of our target dividend payout ratio of 20 to 25 and a half percent of earnings.
Speaker Change: Thanks for watching!
Speaker Change: So I 22 summarized the impact our capital management strategy has had on home bank over the last few years.
Speaker Change: Over the last five years, we grew adjusted tangible book value for share at a 9.1% annualized growth rate.
Speaker Change: and over the same period, we've also increased EPS at a 7.9% annualized growth rate.
Speaker Change: We've increased our dividends per share by 20% and repurchase 14% of our shares during the same time period.
Speaker Change: And we've done this while maintaining robust capital ratios, which positions us to be successful in a very economic environment and to take advantage of any opportunities as they arise.
Speaker Change: With that operator, please open the line for Q&A.
Speaker Change: Start the one on a touchstone form.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: to withdraw your question for the best start of the two. At this time we will pause momentarily to assemble our roster.
Speaker Change: Thank you.
Speaker Change: Your first question comes from...
Speaker Change: Fred, Fred, Eddie Strickland, Fred.
Speaker Change: Please go ahead.
Eddie Strickland: Hey, good morning guys. Morning, buddy.
Eddie Strickland: I just wanted to start with Long Grove. John, I think you touched it on this a little bit. You wrote me comments. But I mean, if we start to get a series of re-cut, it's fed on sutras of showing, I mean, we see long growth maybe return to something more like a mid to high single digit annualized rate as we get into 25, if we see a series of 25 basis point cuts throughout the year.
Eddie Strickland: Absolutely, I think the most obvious one is the wonderful portfolio that we're going to shrink as new reginations have slowed significantly.
Eddie Strickland: with the 10-year going up.
Eddie Strickland: Mortgage rate has clung into the higher sections, and so I think that's had a negative impact with the builders not wanting to put too much product out there, so I know that will with the...
Eddie Strickland: with the rate cuts on the long end that would definitely help help the mortgage industry.
Eddie Strickland: As far as, you know, just other commercial loans, I do believe that many of our customers have paused momentarily just to see where rates are going, where they're going to stop, what's going on economically and throughout the United States. So I think it's prudent that they do kind of hesitate shortly, but I'm anticipating, you know, first, second quarter that they should pick that back up, assuming that we've dropped at least a hundred base point and rate.
Speaker Change: Got it. That's helpful. And then just geographically, I mean, do you expect New Orleans and Houston still drive a good bit of the commercial growth going forward or is there some opportunities, maybe another part of the footprint that you haven't touched yet?
Speaker Change: There's surely this strongest markets are Houston, New Orleans, and Lafayette.
Speaker Change: and other markets periodically come in with some improvement, but the strength of the company is in those three markets. No question.
Speaker Change: and just shifting the credit for a second was wondering if you could talk a little bit more about the relationships that we put on the on the scroll this quarter and one of that is the same one that seemed to my brain into substandard in the construction category.
Speaker Change: Yeah, so we have one credit in the little area where it is, I think, 15 different rental properties and this stems from a disagreement with the partners.
Speaker Change: and the properties are still being rented, it's all the same Charles Avenue around Tulane University. And so there's no problems with the property, it's just a disagreement with the owners. We are heading for Sheriff's Day. I think there are five different Sheriff's Day dates.
Speaker Change: For all these properties and I think the first ones are at the end of this month and then November and January. So we should be completely free of that. There's about $2 million of equity in all the properties.
Speaker Change: So we anticipate being taken out at Sheriff's Salon all those.
Speaker Change: John Bordelon, that's it for me. I'll step back in the queue.
Speaker Change: Thank you very much.
Speaker Change: and a few minutes later.
Speaker Change: Thanks for watching!
Speaker Change: Hello.
Speaker Change: The next guest with Mr. Nine of Joe Yan Knif, please go ahead.
Speaker Change: Good morning.
Speaker Change: Moiled up.
Speaker Change: Yes, so I went to circle back on loans for a minute and I appreciate the color on the reclassification of the loan categories. I'm sure you know what was gross loan production in the quarter and just trying to get an idea of kind of pay off CR and if you know kind of CRE pay off, start to accelerate, you know, that the headwind alone growth but you know it would also be the better lending opportunities of rates for.
Speaker Change: just kind of trying to get a little more color on that.
Speaker Change: We're working that up.
Speaker Change: We were about $80 million in newer rich nations in Q3 which is...
Speaker Change: about equal or a little bit less than prior quarter, a way that I would rate coming in around 785 on those new originations. We did have higher levels of principal pay downs and
Speaker Change: A.S. during the quarter probably the highest since Q1 at 23 so higher paid down so we've experienced which is time in some of our growth this past quarter.
Speaker Change: I'm sorry, was there another question in that one as well.
John Bordelon: Well, I'm just kind of wondering how you see kind of payoffs kind of behaving as we kind of move into a rate-cutting environment. Yeah, I think that incremental lending opportunities will offset that headwind. But the $19 million payoff, and you know, came about basically it's a major hospital that opened up a new line of manufacturing gloves and other PPE. And that has not really performed as well as they wanted, so they had the access cash; they just paid us off. Instead of paying us, you know, 7% rate percent.
Speaker Change: Well, I was just kind of wondering how you see kind of payoffs kind of behaving as we...
Speaker Change: you know kind of move into a great cutting environment.
Speaker Change: And I think that night, incremental lending opportunities will, you know.
Speaker Change: Offset, you know, that headwind.
Speaker Change: The $19 million pay off, and you know, came about, basically it's a major hospital that opened up a new line of...
Speaker Change: Manufacturing gloves
Speaker Change: and other PPE, and that has not really performed as well as they wanted, so they had the excess cash, they just paid us off.
John Bordelon: So that's kind of a one-all that we don't expect anymore. But we're seeing; in fact, I'm betting two new opportunities this afternoon. So I do think that with lower rates, there's going to be more projects done. The two we're looking at in one is construction and the other is existing facility. So it's hard to really predict that I do think heavy none had that $19 million payoff probably, you know, looked very similar to the first and second quarter. But it has slowed; as no question, our construction book is slower than where it was in the first and second quarter.
Speaker Change: instead of paying us, you know, seven or eight percent. So that's kind of a one-off that we don't expect anymore. But we're seeing, in fact, I'm betting two new opportunities this afternoon. So I do think that with lower rates there's going to be more projects done. The two we're looking at this afternoon, one is construction and the other is an existing facility. So it's hard to really predict. I do think have we not had that 19 million dollar payout probably, you know, look very similar to
Speaker Change: 1st and 2nd quarter, but...
Speaker Change: It has slowed, there's no question, our construction book is slower than where it was in the first and second quarter, and we anticipate, as rates go down, as...
John Bordelon: And we anticipate as rates go down as the new presidency takes over, things will settle down probably in second quarter and take off again.
Speaker Change: As the new presidency takes over, that things will settle down probably in second quarter and take off again.
John Bordelon: Got it. And just kind of flip it over to deposits.
Speaker Change: got it and just kind of flip it over to deposits, do you need to talk about it?
John Bordelon: Can you talk about, you know, deposit price for any, what is competition with like in your markets and kind of how do you believe Vedas will behave on the way down and kind of piggybacking off that, you know, with loan demand remains relatively muted in the near term as you've alluded to. And you do continue to see kind of pressure around deposit pricing, you know, how should we think about the NIH trajectory, you know, moving forward.
Speaker Change: You know, just a positive price thing. What is competition like in your markets and kind of how do you believe betas will behave on the way down and kind of piggybacking off that? You know, if loan demand remains relatively muted in the near term as you've alluded to, and you do continue to see kind of pressure around a positive pricing, you know, how should we think about the NII trajectory? You know, move.
John Bordelon: I'm going to comment that let David follow up on that. I do believe that most all the banks in our markets have followed suit and drop their rates. We are seeing some people pull out a little bit of their CD and search for other rates. But those may be with broker trousers or whatever, but not necessarily banks were not seeing that. So most of the players are doing as we're doing and trying to lower their deposit costs. So I think with additional cuts by the Fed, we should see the ability to continue to bring down our costs. Our highest rate today is at 475 for 3 months, and we would anticipate that coming down significantly.
Speaker Change: Bordelon.
John Bordelon: I'm going to come in the last David's follow up on that. I do believe that.
John Bordelon: Most of all the banks in our markets have followed suit and dropped their rates. We are seeing some people pull out a little bit of their thing in.
John Bordelon: and searched for all the right.
John Bordelon: Those may be with brokerage houses or whatever, but not necessarily banks, we're not seeing that. So most of the players are doing as we're doing and trying to lower their audit costs. So I think with additional cuts by the Fed, we should see the ability to continue to bring down our costs. Our highest rate today is at 475 for three months and we would anticipate that coming down significantly. If not throughout the remainder of this year, surely in first quarter.
John Bordelon: If not throughout the remainder of this year, surely in 1st quarter.
David Kirkley: Yeah, Joe, if you look at our cost of funds and slide 18, you'll notice cost of CDs were flat quarter over quarter. If you look at the spot rate from June compared to the spot rate of September, we're actually down about 25 basis points on CD yield. So you'll see that play out.
Speaker Change: Yeah Joe, if you look at our cost of funds and slide 18 you'll notice cost of CDs were flat quarter over quarter.
Speaker Change: If you look at the spot rate from June compared to the spot rate of September, we're actually down about 25 basis points on CD yields so you'll see that play out.
David Kirkley: and Q3, and if you look at our NIM slide on slide 19, you'll see an uptick in yields in September. So, we are seeing the ability to lower our CD pricing a good bit, and as John pointed out, our competitors have mostly been aggressive in CD rate cuts and money market rate cuts after the Fed announcement.
Speaker Change: in Q3 and if you look at our NM slide on...
Speaker Change: So we are seeing the ability to lower our CD pricing a good bit and as John pointed out our competitors have mostly been aggressive in and CD rate cuts and money market rate cuts after the Fed announcement.
David Kirkley: As I talked about in the earlier, our loan rates, we have less variable rate loan in our portfolio than some of our competitors, so our loan yield should not be as negatively impacted as some of our other competitors, as rate cuts continue down the next couple of quarters. Give a little bit more context on that; spot rate on loans from June to September was actually up to six basis points, despite the 50 basis point rate cut in September. So, we have a lot of fixed rate loan opportunities coming due, and they are coming due at lower rates, so being able to reprise some of those loans a bit higher, which should offset some of the rate cuts in the future.
Speaker Change: As I talked about in the...
Speaker Change: and the earlier.
Speaker Change: our loan rates, but we have less variable rate loan in our portfolio than some of our competitors. So our loan yield should...
Speaker Change: Not be as negatively impacted as some of our other competitors, as rate cuts continue down the next couple of quarters. Give it a little bit more context on that, spot rate on loans.
Speaker Change: from June to September was actually up six basis points despite the 50 basis point rate cut in September. So we have a lot of fixed rate loan opportunities coming due and they're coming due at lower rate. So being able to reprise some of those loans a bit higher, which should offset some of the rate cuts in the future.
David Kirkley: I appreciate that, and just kind of sticking with slide 19 here. You know, you have the BTFP funding that's going to mature in January.
Speaker Change: I appreciate that and it was kind of fickening with slide 19 here.
David Kirkley: Do you have a plan to kind of tobacco that? We're looking into options. I think given two rate cuts, we're going to be kind of in the money on that with really no impact if we have to go out and borrow overnight. We're looking at some options to divvy that up between maybe some overnight advances as well as some term funding. And we've been carrying a little bit of excess cash over the quarter, just not knowing exactly what's going to happen with the positive flow.
Speaker Change: You know, you have the BTFP funding that's going to mature in January. Do you have a plan to kind of?
Speaker Change: and Tobacco.
Speaker Change: We're looking into options. I think given two rate cuts, we're going to be kind of in the money on that with really no impact. If we have to go out and borrow overnight, we're looking at some options to give you that up between maybe some overnight advances as well as some term funding.
Speaker Change: and again we've been carrying a little bit of exercise cash.
Speaker Change: Over the quarter, just not knowing exactly what's going to happen with the positive flow.
John Bordelon: Okay, if I could just slip in one more here. I know it's early for 2025, but some banks over the past week have talked about generating positive operating leverage next year. Is that something you believe will occur? Yeah, look, Joe, we think there's the opportunity. I think we're in a good spot with our loan book and our deposit book that you should see, at the very least, stabilization in him. We expect based off of the deposit behavior and the ability for us to reprise some loans that we're going to be able to to tick up on him over the next couple of quarters as well.
Speaker Change: Okay, if I could just slip in one more here, I know it's early for 2025, but...
Speaker Change: Some banks over the past week have talked about generating positive operating leverage next year. Is that something you believe will occur?
Speaker Change: Yeah, look, Joe, we think there's the opportunity.
Speaker Change: I think we're in a good spot with our loan book and our deposit book that
Speaker Change: He should.
Speaker Change: We should see at the very least stabilization in him, we expect based off of the deposit behavior and the ability for us to reprise some loans that we're going to be able to.
Speaker Change: to tick up on them over the next couple of quarters as well.
John Bordelon: This severity of the cuts, or the speed of the cuts, I think, is what would cause us the most damage to our name. If they methodically drop 2025 reduced rates, then I think our loan can yield to build up. to exceed the deposit cost. If they drop 50 basis points in November and 15th December, then it may take today its points a couple of quarters for them to start back up again.
Speaker Change: This severity of the cuts or the speed of the cuts I think is what would cause the most.
Speaker Change: Gavin's who are new.
Speaker Change: is a methodically throughout 2025 reduced rates and I think our loan yields will be able to.
Speaker Change: I've seen the part of the car, so...
Speaker Change: I'm going to say, if they drop, you know, 50 basis points in November and 15 December, then it made take today with points a couple of orders for our name to start back up again.
John Bordelon: Well, perfect. I appreciate you taking my questions. Thanks, Joe. Great. Thank you, Joe.
Speaker Change: will perfect that appreciate you today my questions.
Speaker Change: Thanks, Joe.
Operator: Again, if you have a question, please press start, then one. The next question comes from Feddy Strickland with Home Group. Please go ahead.
Speaker Change: Again, if you have a question, please press star then one.
Speaker Change: The next question comes from Freddie Strickland with Howard Cooper.
Feddy Strickland: Hey, John, just a quick follow-up after your last question or that last comment on the margin. It sounds like the difference between your rate sensitivity disclosure is saying that if we have down 100, NIR goes down. It's basically all of that happening at once in that shock scenario versus what appears to be the current reality, which is potentially having that gradually happen over time.
Speaker Change: Please go ahead.
Freddie Strickland: Hey, John, just a quick follow-up after last question, or that last comment on the margin.
Freddie Strickland: It sounds like the difference between your race sensitivity disclosure saying that if we have down 100 and I go down is basically all of that happening at once in that shock scenario versus
Freddie Strickland: What appears to be the current reality, which is potentially having that gradually happen over time, and it is kind of the puts and takes there that you're able to react, you've got some deposits repricing loans, repricing, and you can actually manage it versus all that getting it once, and it just hitting some of your floating great loans. Is that sort of the puts and takes between what the great sensitivity disclosures are and what we could actually happen over the course of 25?
Feddy Strickland: And it is kind of the puts and takes there that you're able to react. You've got some deposits repricing, loans repricing, and you can actually manage it versus all that getting at once and it just hitting some of your floating great loans. Is that sort of the puts and takes between what the rate sensitivity disclosures are and what we could actually happen over the course of 25?
John Bordelon: Yeah, you know the big problem right now that I think we're having as home bank as well as other banks is figuring out deposit behavior with rate cuts. I think this past rate cut when they announced 50 basis points to market expected basically another 100 basis points of rate cuts by the end of 24 and continued into 25. I think a lot of people reacted and were able to lower their CD rates with that expectation, and since then rate cut expectations have moderated a little bit. And so finding that right balance where we're able to retain our CD customers and grow our deposits.
Speaker Change: Yeah, you know, the...
Speaker Change: The Big.
Speaker Change: Problem right now that I think we're having as split.
Speaker Change: Home Bank as well as other banks is figuring out the positive behavior with rate cuts. I think this past rate cut when they announced 50 basis points to market expected basically another 100 basis points of
Speaker Change: Rate cut expectations have moderated a little bit, and so finding that right balance where we're able to retain our CD customers and grow our deposits, it's really dependent on...
John Bordelon: It's really dependent on how much cuts that we're going to be expecting, when they're going to occur, and how our competitors react to those cuts. I feel like there may be some upward pressure on deposit prices over the next couple of months with regards to maybe there was too much rate reductions on deposit rates across the market. We're going to get with the expectations of rapid rate cuts, so I think there may be some stabilization or the beta is not being as high when further rate cuts are announced. That drove pretty much our decision on how we're pricing in our CDs right now.
Speaker Change: How much?
Speaker Change: cuts that we're going to be expecting when they're going to occur and how our competitors react to those cuts. I feel like there may be some...
Speaker Change: upward pressure on deposit prices over the next couple of months with regards to maybe there was too much rate reductions on deposits rates across the market with the expectations of rapid rate cuts, so I think there may be some stabilization or the beta is not being as high when further rate cuts are announced.
Speaker Change: That drove pretty much our pricing in our CDs right now.
John Bordelon: We have a rate on a three month that is one of the higher in all of our markets. So we wanted to stay a little bit high because of David's comments here that we're not sure exactly what's going to happen in November. Do we do 50? Do we do 25? Do we not do anything? So we do anticipate the ability to be able to move that rate down. We're just going to measure the market and see how far we can go.
Speaker Change: We have a rate on a three month, that is one of the higher in all of our markets. So we wanted to stay a little bit high because of David's comments here that we're not sure exactly what's going to happen in November. Do we do 50, do we do 25, do we not do anything? So we do anticipate the ability to be able to move that rate down.
Scott: Scott, that's helpful. Thanks, guys.
Scott: Just one last follow-up for me, too, on expenses.
Speaker Change: got a best helpful thanks guys and just one last follow-up for me too on it's sent as appreciating your term guidance there.
Scott: I appreciate the near-term guidance there.
David Kirkley: Just curious if there's anything on the horizon down the road that maybe in later 25, they could cause in sort of acceleration, whether it's merit increases or investment in new technology or new core system or something. Just curious if there's anything on the horizon that could cause expenses to materially take out a little bit in the back half of 25. Yeah, we generally have annual raises that take effect April 1, so you'll see an uptick in top and benefit expense during that time period. We are going through the budget process right now and evaluating those things.
Speaker Change: just curious if there's anything on the horizon down the road that maybe in later 25 that could cause in sort of acceleration.
Speaker Change: Whether it's married, creases, or investment, and, you know, new technology or new core system or something. Just curious if there's anything on the horizon we could call the expenses to materially take out the little bit in the back cap for 25.
Speaker Change: Yeah, we generally have annual raises that take effect April 1, so you'll see an uptick in comp and benefit expense during that time period. We are going through the budget process right now, and evaluating those things. There are no...
David Kirkley: There are no material objects that are jumping out there out of the course of the ordinary right now for a capital expenditure standpoint, but I am looking for cost saves, so those merit raises are as impactful as they would be normally.
Speaker Change: Material objects that are jumping out there out of the course of the ordinary right now for our capital expenditure standpoint.
Speaker Change: But I am looking for cross-saves so as not to be so those marries as ordered in pack-all as they would be normally.
Scott: God, thanks. That's helpful.
Scott: That's it for me.
John Bordelon: Thank you very much.
Speaker Change: God, thank you so much. That's it for me.
Operator: This concludes our question and answer session.
Speaker Change: This concludes our question in answer session.
John Bordelon: I would like to turn the conference back over to John for any closing remarks. Once again, thank you all for joining us today. We look forward to speaking to many of you in the coming days, and hope you have a wonderful weekend. Thank you.
Speaker Change: I would like to turn the conference back over to John for any closing remarks.
John Bordelon: Once again, thank you all for joining us today. We look forward to speaking to many of you in the coming days and hope you have a wonderful weekend.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Operator: You may now disconnect.
David Kirkley: Brett Rabatin, Graham Dick, Joseph Yanchunis, David Kirkley, Brett Rabatin, Graham Dick, Joseph Yanchunis, David Kirkley, John Bordelon.