Q4 2024 Home Bancshares Inc (Conway AR) Earnings Call
Yesterday the company presenters will begin with prepared remarks, then entertain questions. Please note that if you would like to ask a question. During the question and answer session. Please press Star then one on the Touchtone phone. If you decide you want to withdraw your question. Please press Star then two to remove yourself from the list.
The company has asked me to remind everyone to refer to their cautionary note regarding forward looking statements you will find this note on page three of their Form 10-K filed with the SEC in February 2024.
Speaker Change: At this time all participants are in a listen only mode and this conference is being recorded if you would operator assistance during the conference. Please press Star then zero. It is now my pleasure to turn the call over to Donna Townsell director of Investor Relations.
Speaker Change: Thank you good afternoon, and welcome to our fourth quarter Conference call with me for today's discussion is our chairman John Allison, Stephen Tipton, Chief Executive Officer of Centennial Bank, Kevin Hester, President and Chief lending Officer.
John Allison: Brian Davis, our Chief Financial Officer, Tracy, French Chairman and Centennial Bank, Chris Poulton President of CFT, and John Marshall President of Shore Premier Finance to open our discussion on the quarter, we will begin with some remarks from our chairman John Allison.
Speaker Change: Okay. Thank you Donna welcome to home Bancshares fourth quarter and year end earnings release and conference call. The final quarter 24 did not disappoint with strong performance of another $100 million profit quarter and that is after taking a hurricane reserve of $16.700 million as an abundance of caution.
John Allison: We had as the second hurricane hit.
John Allison: Home sale completed our first $400 million profit year actually we are at $402 million $241000 plus homes first year to exceed 1 billion in revenue the best performance in our 26 years think about the number of your company brought 40 person.
Speaker Change: Greetings, ladies and gentlemen, welcome to the Home Bank Shares Incorporated fourth quarter 2024 earnings call.
Speaker Change: The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday. The company presenters will begin with prepared remarks, then entertain questions. Please note that if you would like to ask a question during the question and answer session, please press star then one on the touchtone phone. If you decide you want to withdraw your question, please press star then two to remove yourself from the list.
John Allison: <unk> of the revenue to the after tax bottom line simply $417 million 400 million and that's what we earn.
John Allison: I am sure there theyre not many banks in this country with the ability to accomplish that feat I'm.
John Allison: I'm very proud of our team for this great accomplishment additional hurricane reserve gain EPS by <unk> <unk> per share for the quarter and ROI by 23 basis points, we're not crying over spilt milk, because we think it's prudent to maintain strong capital with EPS would've been 57.
Speaker Change: Since an ROI and would have been exactly 2% for the quarter I want to congratulate our team with Stephen and Kevin's leaderships in leadership in managing the net interest margin.
Speaker Change: Let them talk more about it in a few minutes, but if you remember our models and a lot of your models show a decrease in income as rates come down, but it is Tracy says.
Speaker Change: That is only a snapshot in time and does not properly give management credit for strong expense reduction in interest expense and strong loan yields.
Speaker Change: I've said in the past strong loan yields by Kevin's group and lower interest expense by Stephens group makes for peer leading margin.
Speaker Change: The question is can it home improve in 'twenty four.
Speaker Change: It's early it's early in the year, but we are running slightly ahead of what we did last year with interest rates, possibly going up or holding steady I don't believe they're going down I see it today. They may have gone down a little bit I think we will continue our strong run rate into 2025.
Speaker Change: Only difference only exception will be the actual increase in expenses for 25.
Speaker Change: We are broadcasting for a couple of years and we're going to clean up do what we can tell on the Texas cleanup, which way to it and while we were doing taxes cleanup. We just continued to do a clean sweep of all asset quality with a total charge offs of 53.394 million of which 47 six.
Speaker Change: Those loans in Texas are 89, 1% I left a balance of about $548 million from Arkansas New York.
Speaker Change: Sure Premier, Florida, and even Alabama, we charged off $8000 plus any specific reserves that we thought were appropriate I really feel good about the asset quality cleanup and I'm certain that Ive Overkill again as you know my history of doing that but I wanted to put home into a position for a great 25.
Speaker Change: Expect recoveries in the $30 million range over time, and probably you'll start seeing some of the recoveries this quarter.
Speaker Change: Let's go into the numbers net income of $100 million $106 million for the quarter were 51 cents.
Speaker Change: Record income on a 402.241 million you remember last year, we got hit with the fed for the final bikes and that took us down below that and we didn't quite make our $400 million, but we hit it. This year, we had record revenue for the quarter, a $258 4 million in catch says we had record.
Speaker Change: Revenue for the year of $1 billion and $17 million, that's quite a bar I didn't realize we'd hit a bad but that's I'm glad it with strong net interest margin remains at $4 three 9% return on assets for the quarter was 177 I think it was for the year to Brian I think 177 for the month for us.
Speaker Change: Alright.
Speaker Change: Record <unk>.
One of 15, 1% record risk based capital of 18, 7% and record book value per share of 1992, and tangible book value per share of <unk> 68.
Speaker Change: <unk> in our pre tax pre provision net profit percentage to total revenue was $56 five 7%.
Speaker Change: Patiency ratio for the fourth quarter of 42, 424 mass improvement over 23 that was $46. Two one I believe that being an owner operator with my family being the single largest individual shareholder and homebuilding in my largest assay should provide comfort for all shareholders because every move.
Made by this company that affects you also affects the Allison family and exact.
Speaker Change: Executive team home as one of America's Best run bikes and financially strong and has been for the last 26 years and I want to thank all of you for your support 24 was really strong year for home and 25 should be even stronger.
Speaker Change: Outside of that I, just wanted to comment we got tenant improvements.
Speaker Change: On our 60000 square feet out in Amarillo, Texas for our Moon.
Speaker Change: Tenant hopefully that'll be finished in March so we should see some of that happening should wherever you may be Steven coming in next year. Yeah. Early spring. So we're targeting now early spring.
Speaker Change: I wanted to comment on the Texas law suit is contingent on nationally with fruitful depositions go on at this time.
Speaker Change: In conclusion as I said 24 was a very strong year for home, we produced record revenues record profits with.
Speaker Change: Whether to Hurricanes.
Speaker Change: So far.
High interest rates pricing utilizing bank failures and administration Love regulations and in addition, the Texas cleanup to mention a few.
Speaker Change: Home was prepared and has a clarify after 25 Donna.
jonnie: Got it thank you jonnie and congratulations on a record breaking year and it was amazing.
Speaker Change: Our next report today comes from Stephen Tipton. Thanks.
Stephen Tipton: Thanks Donna.
Speaker Change: Numbers for home Bancshares, and Centennial Bank this quarter clearly display the balance sheet strength and earnings power of the company.
Speaker Change: I want to congratulate all of our team on our first $400 million, a year and achieving over $1 billion in revenue in 2024.
Speaker Change: I'll start my comments with the net interest margin, which continued to improve in Q4. The reported NIM expanded by 11 basis points in Q4 to $4 39, we continued to maintain healthy excess cash balances. Despite retiring the bts P advance earlier in the quarter.
Speaker Change: Excluding the event income noted in our press release, the net interest margin was 436% for the quarter, an increase of nine basis points from Q3.
Speaker Change: And exited the quarter in December at $4 42.
Speaker Change: As a result of the recent rate cuts the yield on loans, excluding event income declined by 14 basis points.
Speaker Change: 745 in Q4.
Speaker Change: Our bankers did a fantastic job on the deposit side, reducing interest bearing deposit costs by 22 basis points to eight zero percent for the fourth quarter and exited the quarter in December at 275, we continue to negotiate deposit rates on a case by case basis and are proud to have been able to offset the reduction.
Speaker Change: And rates on the asset side.
The excess cash we continue to hold gives us flexibility to work deposit rates down further.
Speaker Change: Be aggressive if needed on the asset side switching to liquidity and funding total deposits increased $441 million for the quarter highlighted by growth of $69 million and not in noninterest bearing balances, which now account for 23, 4% total deposit.
Nearly all of the community bank regions posted deposit growth for the quarter.
Speaker Change: From a geographical perspective, we saw growth of $232 million from Florida, $92 million from Texas and $77 million from Arkansas.
Speaker Change: Alternative funding sources remain extremely strong with broker deposits still only comprising two 4% of liabilities.
Speaker Change: With the deposit growth the loan to deposit ratio trended back down to 86, 1%.
Speaker Change: On the asset side in period loan balances declined $59 million, largely driven by lower balances at Tcf G and were offset by growth from the Arkansas, Florida and shore Premier Finance regions.
Speaker Change: Our loan originations, we saw volume of a little over $1 billion in Q4 at a coupon of 8%.
Speaker Change: With the community bank regions, making up 80% of the production for the quarter payoff volume increased as we mentioned might happen in Q3 to just shy of $900 million in Q4.
Speaker Change: In closing with the clean up behind US we're excited about the prospects for growth and look forward to a great year in 2025 with that Don I'll turn it back over to you.
Don: Thank you Steve and.
Speaker Change: And our final report is from Kevin Hester on the lending portfolio. Thanks, Donna and good afternoon, everyone and the 26 years that we've existed in the 14 years that I've been in this position.
Speaker Change: There are only a handful of quarters that are similar to this one and the previous ones. We tried to ensure that we address any concern.
Speaker Change: And sometimes it felt like Johnny was being too aggressive.
Speaker Change: This quarter feels similar to those in some ways a.
Speaker Change: I'm very happy to say, though that it feels really good to be able to take this kind of quarter in stride and not have any concerns about moving forward.
Speaker Change: During the fourth quarter, we had an extended conversation with our regulators about the accrual status of a large Texas C&I credit.
Speaker Change: We've agreed to disagree and as a result, we chose to charge off a portion of the credit to keep the rest are on accrual.
Speaker Change: Once that decision was made it made sense to right size a few other credits that we've been working through over the past couple of quarters.
Speaker Change: As Johnny has mentioned it is primarily a texas cleanup with $48 million of the $53 million of charged off loans coming from that state.
Speaker Change: Virtually all of these happy credits were initiated either right before or right. After the happy acquisition.
Speaker Change: Roughly half of the charge offs are related to the disputed, Texas C&I credit we expect recoveries to began to be received immediately on this credit as payments remained current on the entire relationship.
Speaker Change: The other credits we fully expect to dispose of these credits and have some recoveries, we could experience a couple of those in the coming quarter as well.
Speaker Change: In fact, I fully expect that over time, we will recover in excess of $30 million of this 53 million dollar balance.
Speaker Change: Two the numbers <unk>.
Speaker Change: <unk> and <unk> are basically flat quarter over quarter and are at very manageable levels.
Speaker Change: Even after this challenging quarter, our allowance for credit losses still provides a 278% coverage of npls.
Speaker Change: Early stage past dues, and stir up 12 basis points to 1.08%, but included one large matured memory care credit that has been extended since year end and has been placed under contract to sell we expected to pay off during the first quarter and the removal of that credit would bring the passenger number in line with that of previous quarter.
Speaker Change: Yeah.
Speaker Change: Earlier, I mentioned dispositions and with assets that are under contract to sell this quarter, we expect to reduce the MPA is by $95 million or 7%.
Speaker Change: I would expect to see a $4 $5 million recovery.
Speaker Change: In addition through assets that are very close to being under contract I expect to reduce NPA as in the first quarter by another $28 million or 19% and provided an additional $3 million recovery.
Speaker Change: At that point NPA is we'd be at approximately $105 million or <unk>, 47%.
Speaker Change: Roughly half of that remaining balance would be the California office building Thats in Oreo and the Florida memory care credits that we have discussed before the <unk>.
Speaker Change: Office building has reached a point that it makes sense to talk about marketing the property, but its proximity to the ongoing fires will likely delay any real opportunity to move that asset.
Speaker Change: The Florida memory care credits have exhibited strong occupancy improvements over the second half of 2024 due to a management change but.
Speaker Change: But we are waiting to see that translate to an improvement in profitability.
Speaker Change: The good news is that ownership is still motivated and are continuing to cover any operating shortfalls.
Speaker Change: The occupancy improvement is promising.
Speaker Change: I mentioned last quarter that the loan pipeline felt a little soft and that translated into a small loan decline in the fourth quarter.
Speaker Change: A positive takeaway from that though is that for the <unk>.
Speaker Change: Second quarter in a row the community bank footprint produced an increase of over $120 million, while <unk> contracted by 13% over the last half of 2024.
Speaker Change: We know that <unk> loan balances, we'll come back and we still see solid production out of the community Bank markets.
Speaker Change: As for the Hurricanes that we experienced in Florida in September and October.
Speaker Change: We placed approximately $33 million in reserve for potential losses.
Speaker Change: As of year end, we had approximately $110 million in loans in those areas that are in some form of payment deferral.
Speaker Change: Too early to tell what losses, we might experience here, but as these deferrals matured the picture will become more clear.
Speaker Change: We may be able to shed some more light on that next quarter.
As you can see it was a challenging quarter, but there are very few companies maybe none they can make the moves that we made while continuing to maintain strong profitability and our loan loss reserve, but its still higher than almost anyone.
Speaker Change: This is why we built a fortress balance sheet and more than ever I'm very proud that we did.
Speaker Change: That's all I got.
Kevin Hester: Thank you Kevin.
Speaker Change: Tony before we go to Q&A.
Speaker Change: Well, let's see if Brian do you have any comment Brian.
Brian: No I'm good year, a record year for the 400 million so.
Speaker Change: Pricing.
Speaker Change: Good report for you Mr. Allison Good leadership, Thank you, Steve and Kevin Good reports on all of that but also just like to thank the Centennial Bank Happy Bank and home Bancshares staff for making improvements in loans deposits and noninterest income noninterest expense I also would like to remind them again get a little better.
Speaker Change: Uh huh.
Speaker Change: Exactly right well.
Speaker Change: Thanks.
Speaker Change: Lots of highlights, but I think deposits will Stephens surprising Brian.
Speaker Change: Really strong our deposits are really strong I think the strength of our company being able to pay out all insured deposits is probably.
Speaker Change: Following served us very well, we still have an acquisition today, but I think we were pleasantly surprised by.
Speaker Change: The amount of deposits, we've got yes, particularly on the core.
Speaker Change: Deposit balances with noninterest bearing balances being up very pleased to see that and look forward to continued growth this year.
Speaker Change: That's good liquidity.
Speaker Change: I like the fact that we said we told in the last told you last quarter, we wanted to get ourselves in a position, where we couldn't pay out all insured deposits and we have not done that this actually strengthens that.
Speaker Change: Brian you've paid off the federal Tomorrow, and then we pay it off also $100 million of that and we still have about a half a billion dollars of deferred today.
Speaker Change: Speaks well for the kind of thing so.
Speaker Change: Anyway, I think Donald will go to Q&A. If you are ready we are ready. Thank you.
Speaker Change: Thank you we will now open the call for your questions if you'd like to ask a question. Please press star followed by one on your side.
Speaker Change: And keep that now.
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Speaker Change: Our first question will be from the line of Catherine Mealor with <unk>. Please go ahead.
Catherine Mealor: Thanks, Good afternoon.
Speaker Change: Good afternoon.
Catherine Mealor: Oh Wow.
Catherine Mealor: Chart on Gorilla.
Catherine Mealor: Growth is a little bit slow this quarter as you predicted that it would be on the last quarter's call, but just curious what youre thinking now for 25 and <unk>.
Catherine Mealor: Johnny if we're right if we are going to be in.
Catherine Mealor: Higher for longer rate environment, how do you think that impacts growth for this year.
Catherine Mealor: Well I think that plays to us well powered for longer I think that that you can see the run rate at the company.
Catherine Mealor: Maintained through this higher rate environment, and Steve and Kevin have done excellent job.
Catherine Mealor: Kevin holding up the yields and Steven working on the cost of fund side you can see.
Catherine Mealor: The margin came out I think you said we exited it.
Catherine Mealor: $4 40 to 442, so I think that plays really well to home.
Catherine Mealor: So it looks like we're running about where we ran a little better than what we ran the first month.
Catherine Mealor: First month of the fourth quarter so.
Catherine Mealor: The optimistic I think loans, a it'll be a little slower this quarter, but I think they will come on in the second quarter, we will start seeing that.
Catherine Mealor: Particularly Florida seem to have lost the activity you've got to come in and.
I think the higher for longer is going to it's going to be a plus and a modest I mean, it would be it.
Catherine Mealor: Interesting to see how that plays out.
Catherine Mealor: See when rates dropped 100 basis points, we saw a lot of folks coming back with some of the sixes in.
Catherine Mealor: The other stuff Thats hard to compete with this may slow them down a little bit if their belief is that rates are going to stay where they are at so that will play to us.
Catherine Mealor: Rates staying up don't help but it doesn't help underwriting so that may work against us a little bit.
Just be interesting to see how that plays out I will say that we've had good.
Catherine Mealor: You can see from the comments, we had we've had really good.
Catherine Mealor: A couple of quarters in the community bank markets, they've held up well in each region has grown over that period of time.
Catherine Mealor: Im encouraged by that for sure.
Catherine Mealor: 442 exit margins, it's really high.
Catherine Mealor: Do you see expansion from there or is it more about just keeping us.
Catherine Mealor: It's stable.
Steven: Hey, Catherine this Steven.
Speaker Change: Can't say messages as last quarter, I mean, I think with where we're at with rates today. If we can if we can keep in line with where we're at and be pleased.
Speaker Change: We will continue to be able to reprice, the CD book, which is small relative to the overall deposit base, but that should continue to come down a little bit and then still trying to work some of the fixed rate maturities this year that potentially can.
Speaker Change: Can reprice, a little higher so, but I would be pleased if we.
Speaker Change: We can hold in that range, where we exited the quarter.
Speaker Change: The toughest time.
Speaker Change: This win.
Speaker Change: When.
Speaker Change: <unk> start coming down in the rest of the market jumps and thanks, everyone. A lot of people in it and then that becomes a.
Speaker Change: It becomes pretty tough times and as rates come down similar to where you've got a lot of fixed right now.
What is it fixed right.
Speaker Change: <unk> writes about point, that's what it is we saw a drop a low year.
Speaker Change: Got it fixed rate if you don't have a prepayment penalty the wrong. So and then they just ended up.
Speaker Change: Becomes a race to the bottom again like we had in the last cycle. So I hope that's the toughest time in the space and hopefully so far so good here at home Bancshares, but it gets it's frustrating.
Speaker Change: Really frustrating times.
Speaker Change: Got it okay. Thank you.
Speaker Change: The acute channel.
Speaker Change: Our next question will be from the line of Brett Robinson with all of the group. Please go ahead. Your line is open.
Brett Robinson: Hey, Thanks, good afternoon, everyone.
Speaker Change: However, one wanted to start on the on deposits and Johnny You said you were a little surprised that the deposit strength this quarter.
Speaker Change: Was there anything that you would call out as maybe unusual and the deposits this quarter.
Speaker Change: And just as you think about the outlook for the year.
Speaker Change: Assuming deposit or assuming rates don't change much.
Speaker Change: Do you have a pipeline of deposits do you think will continue from.
Speaker Change: From the strength in the fourth quarter or any thoughts on where you see the deposit outlook from here.
Speaker Change: I can't answer that I was concerned about the policy when Brian paid out $700 million of where we may end up being a bond position, but it didn't just blow it with I mean, the deposits flowed in the home and we haven't done anything I'm characteristic as you can see by the cost of fund.
Speaker Change: <unk>.
Speaker Change: They've just rolled in.
Speaker Change: I like the fact that we.
Speaker Change: We can pay out all of insured uninsured deposits.
Speaker Change: <unk> and <unk>.
Speaker Change: Separated us from the pack.
Speaker Change: There's lots of several banks that can do that but most banks can't do I like that has helped US we are promoting we never ran a CD and not one during the entire time cycle that we went through we never ran a CDN, we ran strength ads and I like that paid off for home Bancshares that we got the ability we have the ability.
Speaker Change: Payout and we committed to our to our depositors and we wouldn't get ourselves in a position and we couldn't do that and we haven't done. It. So we're extremely pleased Brian you got to come in on the deposit side and I was just kind of from all over the board and so it wasn't one big smoking gun. They brought it up which is good I mean, it's coming from different areas its not somebody in Wilkins look forward.
Speaker Change: <unk> million dollars to bonds. So that's policy that's very positive.
Speaker Change: Continue I suspect, that's where our business bank, we have actually customers were not transaction bank were a real business back and maintain those relationships and I guess, that's paying I guess thats paying dividends David here.
Speaker Change: I don't have anything to add.
Appetition still ramp it today.
Speaker Change: You have to deal with that but that's nothing new but are now very very.
Speaker Change: We're pleased with the quarter.
Speaker Change: Let's see where the year guys.
Speaker Change: Okay.
Speaker Change: That's helpful.
Speaker Change: And then wanted.
Speaker Change: I'm, sorry, what was that total.
Speaker Change: So that's the best we can do.
Okay.
Speaker Change: Alright, great.
Speaker Change: I wanted to ask about was just cash.
Speaker Change: Capital in.
Speaker Change: The outlook for M&A in your capital ratios are the highest they've been.
Speaker Change: For the past decade, and I know you've been thinking that maybe the Bts program winding down.
Speaker Change: Create some opportunities but wanted to just hear your thoughts on usage of capital and just how you see.
Speaker Change: The M&A environment, and if it looks well.
Speaker Change: It looks good for you and any color on any conversations you might be having all those things are going.
Speaker Change: Well, we're excited and we had this big charge and hopefully you've seen we've been cleaned up and our Texas cleanup wherever owner tried we've signed a letter of intent on Etrade and we paused that transaction because we didn't want to do.
Speaker Change: One we will be totally transparent where the other side. So we just pass the transactions will it come back maybe it will maybe it wont I can't answer that but we're we're obviously looking at M&A and we.
Speaker Change: You look at it the company did a 177 ROI and without the hurricane reserves that did a 2% so I can't answer anymore.
Speaker Change: <unk> heard me say in the bag, we need more assets.
Speaker Change: We need to bring in more assets, we need to find something and the other transaction were one was a good transaction and I think it would have worked out well for us and it was in a market, where we already have have business and but we wanted to come back I don't know I.
Speaker Change: So do you move on and do what you need to do we want to be fair with you.
Speaker Change: We got this loss you don't understand it so we'll explain it to you and we're going to charge it off.
Speaker Change: We cleaned it up and if you won't come back after some point in time come back and if you don't that's fine too. So we're totally transparent and they were very interested in the fact that we that we told them what we told them. So.
Speaker Change: The answer is yes, we're looking for the next trial.
Speaker Change: Okay.
Speaker Change: Great I appreciate all the color and congrats on a great 2024.
Speaker Change: Thank you very much I appreciate it.
Speaker Change: Our next question today will be from the line of John <unk> with RBC. Please go ahead. Your line is open.
Speaker Change: Hey, Thanks, good afternoon.
Speaker Change: Afternoon John.
Speaker Change: Hey, Ken.
Speaker Change: Kevin can you.
Speaker Change: Can you walk through what went into NPA. This quarter and then review again, what was coming out I was writing kind of fast, but I just wanted to make sure I understand what went in and what do you think is coming out in Q1.
Speaker Change: So a couple of the deals that that we're on.
Speaker Change: On the charge off list were not an NPA as yet and that's primarily due to the fact that we were we've been working with these.
Speaker Change: These clients for a couple of quarters Johnny's been telling you guys that we had this this coming we worked through a couple of these credits. These were larger credits that we were working with customers trying to figure out a way to.
Speaker Change: To make it work and keep them limping along and.
Speaker Change: I think.
Speaker Change: We reached that point, where we decided this is not the best exit so.
Speaker Change: When you when you take that charge and you move it to nonaccrual. That's that's why those went up during the during the fourth quarter.
Speaker Change: You will see as I talked about in the comments youre going to have some dispositions.
Speaker Change: In this quarter that I think could total.
Speaker Change: Between 30% to $40 million that will reduce those NPA is back down even below where we were.
Speaker Change: At 930.
Speaker Change: And so that's I mean, that's the timing of how this will work the big charge off of the group the big charge off of the group is currently half of it is not even half of that.
Speaker Change: Thats a credit we argued about its current and it never hit it never hit nonperforming.
It's a current credit and their current today. They were current yesterday last week last month or six months ago. So anyway, that's the credit that we disagreed about but that's.
Speaker Change: That's the reason that didn't come out of non Formula was it never went on nonperforming.
Speaker Change: Right Okay. Okay.
Speaker Change: It's helpful. And then it seems like you guys scrub things pretty hard but.
Speaker Change: Do you want us to think about our provision.
Speaker Change: From here.
Speaker Change: Well.
Speaker Change: Scrubbed as hard as we could include rather than when you get down to right now by about $5000.
Speaker Change: In Florida 444000, when you get when you scrubbed that hard.
Speaker Change: I don't know that.
Speaker Change: We're probably going to leave provision in the round that it is right now I like a 2% reserve.
Speaker Change: Because it's always worked for them and it's always work day in and day out and when you think about all we've been through with the pandemic and the worst financial process in the history of this country.
Speaker Change: Inflation.
What I can possibly go wrong next raft.
Speaker Change: Just we're prepared with a 2% and it worked for us and that I don't know about all the analytics and Kevin and his team works on that but I don't know, 2% works. So I am comfortable with that we'll go back to that at some point in time, but we're not maybe hurry, particularly after the scrapping.
Speaker Change: You got to dig to find something.
Speaker Change: If there is something I don't know what it is I can tell you that so I'm pretty pleased with where we sit we're really teed up really well for 425.
Speaker Change: So I wouldn't expect us to be making any big allocations. If we have an opportunity to have a windfall. If we put it in reserve, we'll try to do that.
Speaker Change: Okay.
Speaker Change: Asked you this last quarter I'll ask it again, how do you feel about the run rate.
Speaker Change: You take out the hurricane provision it's.
I know you guys are wringing your hands over the cleanup, but how do you feel about the run rate.
Speaker Change: Yeah. The run rate is good run rate is good and I feel good about the run rate.
Speaker Change: We just increased salaries.
Speaker Change: Got it insurance I've.
Speaker Change: I've heard you did a good job on is interest went up 1%, but we've done a.
Speaker Change: We had we've had about.
Speaker Change: So about a may in a half a quarter and increase in salaries. So that's coming in.
Side of that I don't know you got the inflationary feel of it.
Speaker Change: We went over the 111 and last quarter I think we did a 100.
Speaker Change: Third 12 million three or something like that.
Speaker Change: Keeping it at $111 million with the salary increases is going to be difficult, so, but I'm going to let it run for a little bit here look at it.
Speaker Change: Pat will cut it back so.
Speaker Change: I'm not going to let it run away.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Our current run rate, we're at now I like what I'm seeing in our run rate. The good news is its been consistent you just watch look at over the past 12 18 months 24 months you see it's like it's helman and his lack the machine is doing what it's supposed to be doing we had the little.
Speaker Change: Texas, well up that we cleaned up but outside of that the company is actually.
Speaker Change: It's hitting on all right.
Speaker Change: Yep Yep.
Speaker Change: It seems that way okay. Thanks, a lot I appreciate it.
Speaker Change: That's the strategy.
Speaker Change: Our next question today will be from the line of Michael Rose with Raymond James. Please go ahead. Your line is open.
Michael Rose: Hey, good afternoon, guys, everyone is doing well.
Speaker Change: Just wanted to.
Speaker Change: Discuss the decline and if Chris pulp and third the decline in <unk> loans.
Speaker Change: This quarter, what the outlook could be and then at least on the west coast ports of the franchise any.
Any impact from the wildfires.
Speaker Change: Okay.
Speaker Change: Chris.
Speaker Change: Thanks, Chris took off like they took off the last six months in the last three months.
Speaker Change: Sure.
Speaker Change: Well I had.
Speaker Change: Grant.
Speaker Change: Well it was nicely I left it.
Speaker Change: Yes.
Speaker Change: Quite frankly, largely has been our C&I book, our commercial real estate book is still kind of at or above where it's been.
Speaker Change: And we had increased our C&I book over the 'twenty, one 'twenty two time frame because we saw some good opportunities in structured finance and we put money out on that.
Speaker Change: Kind of always intended to allow that to kind of run down and and and we allowed that to happen maybe took it down a little further than I had originally intended but.
Speaker Change: We'll look for some opportunities maybe to put some money back to work in that space I did pricing came down there and I didn't love it and so we.
Speaker Change: We showed discipline in and a lot of those facilities to pay off didn't go into the rollover facility. When the price came down we're seeing some opportunities to come back into some of those now have different pricing and we'll probably do that.
Speaker Change: On the real estate side I think you know.
Speaker Change: We continue to see good good deal flow.
Speaker Change: We see all the transactions for the most part.
Speaker Change: It's a matter of the types of things, we're looking to do or not to do.
Speaker Change: We cleared out the pipeline towards the end of last year, because there were some things in there that it didn't think reflected maybe the current state of the market and so we challenged the team to go and rebuild the pipeline, which which they've done.
Speaker Change: Well have a good year, but.
Speaker Change: You noted about 1 billion 2 billion three in total last year. So it was a big year for US just happened to be more towards the first half of the year, which gave us a little bit of time to be patient.
Speaker Change: In the second half of the year portfolio grow back we like we like the portfolio around 2 billion that we have coming down a little bit from that so we'll probably get we'll get back to that.
Speaker Change: Okay.
Speaker Change: Your question on the West coast and regarding the fires.
Speaker Change: Chris.
Speaker Change: Thanks, Chris took off like they took off the last six months in the last three months.
Speaker Change: Fortunately, we have no direct.
Speaker Change: I'm not sure.
Speaker Change: We have no direct exposure to any property that's in the fire zone et cetera. So.
Speaker Change: Well I had.
Speaker Change: Grant.
Speaker Change: Fortunately for that.
Speaker Change: Well it was <unk>.
Speaker Change: We'll sort of see how.
Speaker Change: Yes.
Speaker Change: L a transition over the next few.
Speaker Change: Quite frankly, largely has been our C&I book, our commercial real estate book is still kind of at or above where.
Speaker Change: A few months in the next few years on what that's going to mean in terms of more or less opportunity for us, but our presence in terms of loan properties in Los Angeles, who is actually fairly small.
Speaker Change: That's been.
Speaker Change: And we had increased our C&I book over the kind of 'twenty, one 'twenty two time frame because we saw some good opportunities in structured finance and we put money out on that.
Speaker Change: And nothing was directly impacted so we'll have to wait and see in terms of over the next couple of weeks, whether theres anything.
Speaker Change: Kind of always intended to allow that to kind of run down and we allowed that to happen maybe took it down a little further than I had originally intended but.
Speaker Change: More tertiary.
Speaker Change: But again nothing nothing that we see right now.
Speaker Change: Great color very very helpful. Maybe just a follow up outside of.
Speaker Change: We will look for some opportunities maybe put some money back to work in that space I did pricing came down there and I didn't love it and so we.
Speaker Change: <unk> just on the.
Speaker Change: The ability to grow this year I think what we're hearing from from the larger banks.
Speaker Change: We showed discipline and allowed those facilities to pay off didn't go into the rollover facility. When the price came down we're seeing some opportunities to come back into some of those now have different pricing and we'll probably do that.
Speaker Change: Upon demand out there, but theres a lot of green shoots, but then there's a competitive aspect right and you guys have historically been very fair.
Speaker Change: On the real estate side I think we.
Speaker Change: Firm on pricing I think we called Johnny Prime right.
Speaker Change: We continue to see good good deal flow.
Speaker Change: I got that correct.
Speaker Change: We see all the transactions for the most part.
Speaker Change: And.
Speaker Change: There is a higher for longer environment actually help you in your ability.
Speaker Change: It's a matter of the types of things, we're looking to do or not to do.
Speaker Change: <unk> got a higher yields or Johnny Prime or is the competitive aspect just going to have more loans go away from us.
Speaker Change: We cleared out the pipeline towards the end of last year, because there were some things in there that just didn't think reflected maybe the current state of the market and so we challenged the team to go and rebuild the pipeline, which which they've done.
Speaker Change: Trying to balance the puts and takes as we think about loan growth moving forward. Thanks.
Michael Rose: Michael I think it's both I think you hit on both of them it could hanging in here and maybe some of our competition not not go into the crazy numbers download that very well could help us hang in here with some of the better.
Speaker Change: Well have a good year, but.
Speaker Change: As you noted about 1 billion 2 billion three in total last year. So it was a big year for US just happened to be more towards the first half of the year, which gave us a little bit of time to be patient.
Speaker Change: In the second half of the year portfolio grow back we like we like the portfolio around 2 billion that we have coming down a little bit from that so we'll probably get we'll get back to that.
Michael Rose: Better yields but.
Michael Rose: It also doesn't help underwriting when you're.
Michael Rose: When youre stuff has sevens and eights in front of it so those are.
Speaker Change: Your question on the West coast and regarding the fires.
Michael Rose: Those are going to offset each other and.
Speaker Change: Fortunately, we have no direct.
Michael Rose: The degree one is better than the other will tell how how growth is going to look.
Speaker Change: We have no direct exposure to any property thats in the fire zone et cetera. So.
I know we do have.
Fortunately for that.
Michael Rose: Particularly when you see the last two quarters in the community bank market each of the markets have grown.
Speaker Change: We'll sort of see how.
Speaker Change: L a transition over the next few.
Michael Rose: And there's a lot of good things happening out in the community Bank side.
Speaker Change: A few months in the next few years on what that's going to mean in terms of more or less opportunity for us, but our presence in terms of loan properties in Los Angeles, who is actually fairly small.
Michael Rose: Will it translate to growth at <unk>.
Michael Rose: Very well could but there are definitely some competitive pressures out there that could.
Michael Rose: Can make that more difficult.
Speaker Change: And nothing was directly impacted so we'll have to wait and see in terms of over the next couple of weeks, whether theres anything.
Michael Rose: Got it.
Speaker Change: Thanks, Kevin very helpful. Maybe just finally for me Johnny.
Speaker Change: More tertiary.
Speaker Change: Youre looking for in a deal change and kind of what is expected to be kind of the deregulatory environment and do you feel kind of a greater.
Speaker Change: But again nothing nothing that we see right now.
Speaker Change: Great color very helpful. Maybe just a follow up outside of <unk>.
Speaker Change: Urge to do something if competitors around you are going to start doing deals and we've seen a few already.
Speaker Change: <unk> just on the.
Speaker Change: The ability to grow this year I think what we're hearing from from the larger banks as you know there's not a ton of demand out there, but theres a lot of green shoots, but then there is the competitive aspect right you guys have historically been very.
Speaker Change: Does that kind of push the ball forward in your mind, the need to get something done or you're just going to continue to be opportunistic as we move forward. Despite your very high capital levels.
Speaker Change: Yes, not really.
Speaker Change: Firm on pricing I think we called Johnny Prime right.
Speaker Change: We're going to be opportunistic were looking for opportunities.
Speaker Change: I got that correct.
Speaker Change: And.
Speaker Change: This other one we stepped up on the price on this other deal we were wrong.
Speaker Change: Does the higher for longer environment actually help you in your ability.
Speaker Change: And it was still accretive to our company but.
Speaker Change: To lock in kind of higher yields or Johnny Prime or is the competitive aspect just going to have more loans go away from you.
Speaker Change: We're not we're not chasing anything.
Speaker Change: Trying to balance the puts and takes as we think about loan growth moving forward. Thanks.
Speaker Change: We're not chasing anything we're just going to were taken into account and there is lots of opportunities out there and a lot of the people as you know smaller banks are ready to go.
Speaker Change: Michael I think it's both I think you hit on both of them it could hanging in here and maybe some of our competition not.
Speaker Change: <unk>.
Speaker Change: Put yourselves in stronger hands with with stronger capital base Bank. So I think we're going to have we're going to have a good run and everybody. When we went up $1 five trains a day Trump got elected I mean, there is excitement out there we're going to see less regulations. It we're going to get more stuff done and we will take them.
Speaker Change: Not go into the crazy numbers download that very well could help us hang in here with some of the better.
Speaker Change: Better yields but.
Speaker Change: It also doesn't help underwriting when you are.
Speaker Change: When youre stuff has sevens and eights in front of it so those are.
Those are going to offset each other and to the.
Speaker Change: I think we will get.
Speaker Change: The degree one is better than the other will tell how how growth is going to look.
Speaker Change: Regulatory take their foot off our throat and hopefully we'll get transactions done in a reasonable time and not dragging them out forever and ever and ever. If you can do that I mean, you get you get kind of tired of fighting the battle every day, when you're trying to do get a transaction completed but if you start getting those deals done in four months or five months.
Speaker Change: I know, we do have it.
Speaker Change: Particularly when you see the last two quarters in the community bank market each of the markets have grown.
Speaker Change: There's a lot of good things happening out in the community Bank side.
Speaker Change: Will it translate to growth.
Speaker Change: I think youll see I think you'll see bank M&A really pick up.
Speaker Change: Well could but there are definitely some competitive pressures out there that could.
Speaker Change: I think it would be good for the entire industry and.
Speaker Change: Can make that more difficult.
Speaker Change: I think we will see less regulations.
Got it.
Speaker Change: Thanks, Kevin very helpful. Maybe just finally for me Johnny Whats Youre looking for in a deal change and kind of what is expected to be kind of the deregulatory environment and do you feel kind of a greater.
Speaker Change: Im optimistic excitement is good.
Speaker Change: Guys, you know, but I think sat much good.
Speaker Change: Thanks.
Speaker Change: I think we know what he did last time, we expect them to do about the science on this thing.
Speaker Change: <unk> to do something if competitors around you are going to start doing deals and we've seen a few already.
Speaker Change: Great I'll step back thanks for taking my questions.
Speaker Change: Is that kind of push the ball forward in your mind that need to get something done or you're just going to continue to be opportunistic as we move forward. Despite your very high capital levels.
Speaker Change: Thank you.
Speaker Change: Our next question will be from the line of Matt Olney with Stephens. Please go ahead. Your line is open.
Speaker Change: Yes, not really.
Speaker Change: Yes, thanks for taking the question guys Hey, good afternoon good afternoon.
Speaker Change: We're going to be opportunistic we're looking for opportunities.
Speaker Change: Wanted to go back to the credit discussion and Kevin you provided lots of good details already and perhaps I missed this but.
Either one we stepped up on the price and this other deal we were wrong.
Speaker Change: It was still accretive to our company but.
Speaker Change: Any more color you can provide around the level of criticized and classified loan balances.
Speaker Change: We're not we're not chasing anything.
Speaker Change: December 31, as compared to the previous quarter.
Speaker Change: Not chasing anything we're just going to were taken into account.
Yes criticized special mention was flat.
Speaker Change: And there's lots of opportunities out there and a lot of the people as you know smaller banks are ready to.
Speaker Change: Quarter to quarter and classified loans were down about $22 million.
Speaker Change: Put yourselves in stronger hands with a stronger capital base bank. So.
Compared to 930.
Speaker Change: I think we're going to have we're going to have a good run.
Speaker Change: Okay perfect. Thank you for that Kevin and then.
Everybody when we went up $1 five trillion the day Trump got elected I mean, there is excitement out there we're going to see less regulations. It we're going to get more stuff done.
Speaker Change: Switching gears going back to the deposit discussion.
Speaker Change: Appreciate that the sources of those deposit growth was kind of all over from various markets.
Speaker Change: I think we will get.
Speaker Change: Any any just color about competitive levels by by state any just color on the overall.
Speaker Change: Regulatory take their foot off our throat and hopefully we'll get transactions done in a reasonable time and not dragging them out forever and ever and ever. If you can do that I mean, you get you get kind of tired of fighting the battle every day when you're trying to do a transaction completed but if you start getting those deals done in four months or five months.
Speaker Change: Kind of incremental pricing that youre seeing on some of those deposit balances.
Stephen Tipton: Hi, Matt This is Stephen.
Speaker Change: No.
Speaker Change: Not really any differentiation by state you know Theres a.
Speaker Change: A couple of regional banks that operate in all of us.
Speaker Change: I think youll see I think you'll see bank M&A really pick up.
Speaker Change: And all of the areas for most of the areas that we do you're seeing.
Speaker Change: I think it would be good for the entire industry.
Speaker Change: CD ads in for 'twenty.
Speaker Change: I think we will see less regulations.
Speaker Change: Plus range you got some small competitors that will come out even higher than that to that in fact, one of our presidents in Florida sent me a note. The other day that we were competing against $4 80 for six months, I think which is hard to make a whole lot of sense of that but.
Speaker Change: Im optimistic excitement is good I'm, a trump guy as you know, but I think sat much good.
Speaker Change: I think we.
Speaker Change: No what he did last time, we expect them to do about the same thing.
Speaker Change: Great I'll step back thanks for taking my questions.
Speaker Change: Yes, youre still seeing some some advertisers out there in the force you know when I look at at what we did in December on on CD volume, we were I think about 368 or so all in on new and renewed Cds. So we've got them coming off at four we're able to reprice them.
Speaker Change: Thank you.
Speaker Change: Our next question will be from the line of Matt Olney with Stephens. Please go ahead. Your line is open.
Matt Olney: Yes, thanks for taking the question guys Hey, good afternoon good afternoon.
Matt Olney: I want to go back to the credit discussion and Kevin you provided lots of good details already and perhaps I missed this but.
Speaker Change: <unk> 30, or 40 basis points lower I think there's an opportunity to continue to lower cost there, but we're mindful of.
Matt Olney: Any more color you can provide around the level of criticized and classified loan balances at December 31.
Speaker Change: We're mindful of our core customer base and we'll defend it.
Speaker Change: If we need to get to competition, but.
Matt Olney: Paired to the previous quarter.
Matt Olney: Yes criticized special mention was flat from quarter to quarter and classified loans were down about $22 million.
Speaker Change: Okay, yes, it makes sense.
Speaker Change: Thanks for the color guys I appreciate it.
Speaker Change: Thank you.
Speaker Change: You ask about the mob.
Matt Olney: Compared to 930.
Speaker Change: Somebody mentioned nonperforming earlier.
Speaker Change: Nonperforming to go down anymore.
Speaker Change: Okay perfect. Thank you for that Kevin and then.
Speaker Change: <unk>.
Speaker Change: Meanwhile, we charge off number was there wasn't a nonperforming was.
Matt Olney: Switching gears going back to the deposit discussion.
Matt Olney: Appreciate that the sources of those deposit growth was kind of all over from various markets.
Speaker Change: This is a performance Brent and it still is to that by the way some of them.
Speaker Change: I guess you heard that right.
Matt Olney: Any any just color about competitive levels by by state any just color on the overall.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: And then our previous response, but I appreciate the follow up okay.
Speaker Change: Okay. Okay.
Matt Olney: Kind of incremental pricing that youre seeing on some of those deposit balances.
Speaker Change: [laughter].
Speaker Change: Our next question today will be from the line of Stephen Scouten of Piper Sandler. Please go ahead. Your line is now open.
Stephen: Hi, Matt This is Stephen.
Matt Olney: No.
Matt Olney: Not really any differentiation by state.
Stephen Scouten: Yes, thanks, good afternoon, everyone.
Matt Olney: A couple of regional banks that operate in all of the.
Stephen Scouten: If I can just kind of go back to M&A briefly I'm curious kind of the last two deals you guys have done or north of $3 billion in assets north of $6 billion in assets. So can you give us a feel for kind of the size of a potential deal you'd like to do from here and.
Matt Olney: And all of the areas for most of the areas that we do.
Matt Olney: See in Cds.
Matt Olney: <unk> adds in the 420.
Matt Olney: Plus range you got some small competitors that will come out even higher than that to that one of our presidents in Florida sent me a note. The other day that we were competing against $4 80 for six months, I think which is hard to make a whole lot of sense of that but.
Stephen Scouten: And do does the experience from happy.
Stephen Scouten: Does it change the way you think about M&A at all or changed the way you approach potential deal any any trepidation given that experience with the happy meal.
Matt Olney: Yes, youre still seeing some some advertisers out there in the force you know when I look at at what we did in December on on CD volume we were.
Stephen Scouten: Well, a little bit I mean, you have to say it makes you look it makes you look under the covers it makes you look ever every everywhere in every angle.
Matt Olney: About $3 68, or so all in on new and renewed Cds. So.
Stephen Scouten: That actually is not that we did.
We've got them coming off at four we're able to reprice, some 30 or 40 basis points lower I think there's an opportunity there.
Stephen Scouten: Not that we haven't we've done 25 30 deals here so.
Stephen Scouten: But we'll look at it differently culture is certainly key.
Matt Olney: Continue to lower <unk>.
Matt Olney: Cost there, but we're mindful of.
Key point.
Matt Olney: We're mindful of our core customer base and we'll defend it.
Stephen Scouten: Maybe I didn't get as much credit culture in the happy deal as we probably should have but.
Matt Olney: If we need to get to competition, but.
Stephen Scouten: It makes you a little cautious however, the last the one we signed the LOI and we as we were.
Matt Olney: Okay, yes, it makes sense.
Matt Olney: Thanks for the color guys I appreciate it.
Stephen Scouten: Moving forward with it it was about $2 $5 billion, Mark you're talking about side. It was about a two and a half million dollars bank in the last bike and it was an area where we operate so that was.
Matt Olney: Thank you.
Matt Olney: Ask about them.
Matt Olney: Somebody mentioned nonperforming earlier.
Matt Olney: Nonperforming to go down anymore.
Matt Olney: <unk>.
Matt Olney: Meanwhile, we charge off number was there wasn't a nonperforming was.
Stephen Scouten: Probably something in that ramp would have or we have we haven't been out on something less than a lesson of bay in right now.
Matt Olney: This is a performance Brent and it still is to that by the way some of them.
Stephen Scouten: For selective reasons, where they are and we locked the bank and we like the people here so.
Matt Olney: I guess you heard that right.
Matt Olney: Yeah.
Stephen Scouten: We'd probably do.
Matt Olney: Yeah.
Matt Olney: Then our previous response, but I appreciate the follow up okay.
Stephen Scouten: It depends on the market where it is.
Matt Olney: Okay. Okay.
Stephen Scouten: <unk>.
Matt Olney: [laughter].
Stephen Scouten: So what the culture of it is due from prefer to do something in the billion dollar plus range, but we as I said, we are looking at one less.
Speaker Change: Our next question today will be from the line of Stephen Scouten Piper Sandler. Please go ahead. Your line is now open.
Stephen Scouten: It's about $750 million so.
Stephen Scouten: Yes, thanks, good afternoon, everyone.
Stephen Scouten: If I can just kind of go back to M&A briefly I'm curious kind of the last two deals you guys have done or north of $3 billion in assets north of $6 billion in assets. So can you give us a feel for kind of the size of a potential deal you'd like to do from here and.
Stephen Scouten: We're gonna get act Youll see us active again out there and hopefully somebody bring yourself.
Stephen Scouten: And we will do it.
Stephen Scouten: Got it makes sense makes sense.
Speaker Change: You spoke to the.
Speaker Change: The prospect of regulatory relief and obviously I think we all believe we will get some of that in some way shape or form.
Stephen Scouten: And do does the experience from happy.
Stephen Scouten: Does it change the way you think about M&A at all or changed the way you approach potential deal. Thank you.
Speaker Change: I just saw a sizable M&A deal approved in less than three months, which is really encouraging.
Speaker Change: Are there any.
Stephen Scouten: Trepidation given that experience with the happy meal.
Speaker Change: Specifics around regulatory relief for May.
Stephen Scouten: Well, a little bit I mean, you have to say.
Speaker Change: Maybe compliance or anything that you think could be particularly beneficial to.
Stephen Scouten: Nike look it makes you look under the covers it makes you look ever every everywhere in every angle of a transaction not that we did.
Speaker Change: Home Bancshares that you see coming down the pike or that could.
Speaker Change: Allow you to run more efficiently anything that you're targeting or looking to specifically.
Speaker Change: Not really.
Stephen Scouten: Not that we haven't we've done 25 30 deals here so.
Speaker Change: We usually other than this one disagreement with the regulator, we don't disagree with the regulators in 15 years. So.
Stephen Scouten: But we'll look at it differently culture certainly.
Stephen Scouten: Key point.
Speaker Change: That was over a credit issue.
Stephen Scouten: Maybe I didn't get as much credit culture in the happy deal is as we probably should have but.
Speaker Change: Right.
Speaker Change: So that's why there's a difference of opinion.
Speaker Change: Outside of that.
It makes you a little cautious however, the last the one we signed the LOI of where we were.
David: David you got any comment now.
David: You mentioned timeline on on an M&A, yes.
Stephen Scouten: Moving forward with it is about $2 $5 billion Bank you are talking about that it was about $2 $5 billion bank in the last bike and it was in the area, where we operate so that was.
Yes, if we get the time, if we can get that done where you could go do two deals a year.
David: Announced the deal.
David: I don't get the trial done and get to two a year, but I was getting sat and lots of people in the marketplace.
Stephen Scouten: Probably something in that ramp however, we have we ever been out on something less in less than a billion right now.
David: Let us to have that opportunity to do that and I think we're going to see improvement on that side.
Stephen Scouten: <unk> selected regions, where they are and we locked the bank and we like the people here so.
If someone just.
David: New York <unk> tested everything he protested and example is our happy deal and he just.
Stephen Scouten: We'd probably do.
Stephen Scouten: It depends on the market where it is.
David: What did you call it.
Stephen Scouten: And so what the culture of it is we do prefer to do something in the billion dollar plus range, but we as I said, we're looking at one less that's about $750 million. So.
David: They didn't copy and paste and input raw named <unk>.
David: Wrong name out there.
David: That delight <unk> 45 to 60 days and that kind of frustration I don't think I don't think the Trump administration will tolerate that kind of stuff. So.
Stephen Scouten: We're going to get actually Youll see us active again out there and hopefully somebody bringing something.
David: Plus we got to do.
David: I don't.
And we will do it.
David: <unk> is a new Arkansas.
Yes.
Worked with me at first commercial release of the new.
Stephen Scouten: Got it makes sense makes sense.
David: And in the Senate Finance Committee <unk>.
Stephen Scouten: I know you spoke to the.
Speaker Change: The prospect of regulatory relief and obviously I think we all believe we will get some of that in some way shape or form and just saw sizable M&A deal approved in less than three months, which is really encouraging but are there any kind of.
David: Services to me and he's a banker and he knows what he's doing so I think we will get some good help out of France.
David: All good stuff coming down the road.
David: At least there is lots of excitement and enthusiasm.
Speaker Change: The specifics around regulatory relief or.
David: Generally the thing that I would say is in your consumer compliance we spend we spend a lot of time on consumer compliance a lot of effort time.
Speaker Change: Maybe compliance or anything that you think could be particularly beneficial to <unk>.
Speaker Change: Home Bancshares that you see coming down the pike or that could.
Speaker Change: Allow you to run more efficiently anything that you're targeting or looking to specifically.
Anything anything less where we have to spend where we can spend less time doing that kind of stuff and more time out with customers and doing what you know.
Not really.
Speaker Change: Yes.
Speaker Change: Usually other than this one disagreement with the regulator, we disagree with the regulators in 15 years. So.
David: Making deals in.
David: That certainly would be helpful. If it'll happen, yes, it would be helpful.
Speaker Change: Sure.
Speaker Change: That was over a credit issue.
Sure.
David: If you get that information to get the information upstream I think they'll deal with it.
But I think they're at so that's why there's a difference of opinion so anyway.
David: I think they'll deal with.
David: This is administered <unk>.
Some of that.
David: Banking locks business and they don't want to put their.
Speaker Change: So you're going to get any comments you.
Speaker Change: You mentioned timeline on on on M&A I mean, that's yes.
David: One you throw it all the time, so I think we got big pluses coming for the industry.
Speaker Change: Yes, if we can get to time, if we can get that done where you could go do two deals a year.
David: Yeah.
Speaker Change: Announce a deal.
David: Yeah, I think you're right on a French he'll even wants to push for more de Novo banking, which I think will be good for the sector as well so.
Speaker Change: I don't get to try to get to two year does getting sat and lots of people in the marketplace.
David: Maybe last thing for me is just kind of loan growth trends. It sounds like you believe.
Speaker Change: Let us to have that opportunity to do that and I think we're going to see improvement on that side.
David: Five could be a better year than 24, maybe starting to pick up in second quarter, what kind of gives you confidence there or is it.
Speaker Change: If someone just.
Speaker Change: New York <unk> tested everything he protested.
Is it a mix of things is it pay off decreasing as it you know.
Speaker Change: That was our happy deal and aegis.
David: I think maybe like Chris spoke to CCF G picking up a little bit or or is there anything anecdotally or otherwise. It makes you feel like growth gives you confidence about that growth pick up in 'twenty five.
Speaker Change: What did you call it.
Speaker Change: Copy and paste and input raw naved.
Speaker Change: Wrong name out there.
Speaker Change: Delight <unk> 45 to 60 days that kind of frustration I don't think I don't think the Trump administration will tolerate that kind of stuff. So.
David: Well I think I've talked about it last quarter I was down in CNR Miami customers.
David: There's lots of stuff going on in that market.
Speaker Change: Plus we got it.
David: Lots and lots of opportunities to do transactions good good sized medium sized small and large.
Speaker Change: Fred Channel is the new Arkansas.
Speaker Change: Worked with me at first commercial leases.
Speaker Change: And in the Senate Finance Committee I'm enhancements.
David: Transactions in that area. So people are excited about that I came back from down there after meeting with our customers really feeling good about what we can do in that market place and they just got I mean, they've just got a war chest of deals right now so I think they're I think they're getting pumped up.
Speaker Change: Services to me and he's a banker and he knows what he's doing so I think we will get some good help out of France.
Speaker Change: All good stuff coming down the road.
Speaker Change: At least there's lots of excitement and enthusiasm.
Speaker Change: Generally the thing that I would say is in your consumer compliance we spend we spend a lot of time on consumer compliance a lot of effort time.
David: This was prior to the election, but they were all Trump supporters.
Speaker Change: <unk>.
Speaker Change: Anything anything less we have to spend where we can spend less time doing that kind of stuff and more time out.
Speaker Change: I'm sure they're moving moving forward on the deals I guess, Kevin you heard anything recently.
Is to encourage the same thing across a lot of our markets I mean, you've got you've talked about what's happened since the election if that translates.
Speaker Change: With customers and doing what.
Speaker Change: Making deals.
Speaker Change: That certainly would be helpful. If it'll happen, yes, it would.
Speaker Change: Lights too to the economy really picking up and things happen like that that I think we're in a great spot being in <unk>.
Speaker Change: Would be helpful.
Speaker Change: Yes.
Speaker Change: If we can get that information to get their information upstream I think they'll deal with it.
Speaker Change: I'm really Texas, Florida, even Arkansas was on the U haul list again fifth or sixth this year for move in so I think we're in really really good markets, they're going to benefit from whatever happens under under the New administration I think that's a big positive.
Speaker Change: I will deal with.
Speaker Change: This is administered.
Speaker Change: Banking locks business and they don't want to put your photo.
Speaker Change: When you throw it all the time, so I think we got big pluses coming for the industry.
Speaker Change: Yeah.
Speaker Change: Yeah, I think you're right on a French he'll even wants to push for more de Novo banking, which I think will be good for the sector as well so.
Speaker Change: Got it really helpful. Thanks, guys I appreciate it Tom Congrats on a great year, and thanks and being the only stock in my coverage universe, it's up on the day and there you go.
Speaker Change: Maybe last thing for me is just kind of loan growth trends. It sounds like you believe Tony.
Speaker Change: Thank you.
Speaker Change: 25 could be a better year than 24, maybe starting to pick up in second quarter, what kind of gives you confidence there or is it is.
Speaker Change: <unk>.
Speaker Change: Our next question today will be from the line of Brian Martin with Janney Montgomery. Please go ahead your line is nowhere.
Speaker Change: Is it a mix of things is it pay off decreasing as it.
I think maybe like Chris spoke to CCF G picking up a little bit or or is there anything anecdotally or otherwise. It makes you feel like growth gives you confidence about that growth pick up in 'twenty five.
Yeah.
Speaker Change: Hey, Brian.
Speaker Change: Brian.
Speaker Change: Yeah.
Speaker Change: Yes, Brian Thank you.
Speaker Change: Brian My Boston, Oh, sorry about that.
Speaker Change: We have talked about it last quarter I was down in CNR Miami customers.
Speaker Change: Yes, sorry about that thanks, Yeah. Good afternoon, guys, Hey, Johnny last time last quarter. When we talk it seemed like you guys are on a couple of trades and you kind of went through the transparency and maybe holding off a bit but.
Speaker Change: There's lots of stuff going on in that market.
Speaker Change: Lots and lots of opportunities to do transactions good good sized medium sized small and large.
Speaker Change: It sounds it sounded like last quarter, there was maybe something more imminent than there was so it sounds like you're off the trade from last quarter and Youre still aggressively are certainly looking but maybe nothing is eminent.
Speaker Change: Transactions in that area. So people are excited about that I came back from down there after meeting with our customers really feeling good about what we can do in that marketplace.
Speaker Change: But that's the way to think about it right now and just kind of take it as it comes here isn't going to 25.
Speaker Change: They just got I mean, they've just got a war chest of deals right now so I think they're I think they're getting pumped up and this was prior to the election, but they were all Trump supporters.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Because we had this hiccup.
Speaker Change: What we need to be fair with them and policy and Theyre not as Scala Cowen and I said I think what is what is pull out we'll just move on and I think they will get a deal with somebody I got a call from a bank or so do you mind. If we go ahead asset now go ahead.
Speaker Change: I'm sure they're moving moving forward on the deal I guess, Kevin you heard anything recently no I would just encourage the same thing across a lot of our markets I mean, you've got you've talked about what's happened since the election, if that translates to two the economy really picking up and things happen like that that I think we're in a great spot.
Speaker Change: It doesn't work out and they will come back to us that'd be fine we'll talk to you see if we can put it together game so.
Speaker Change: But I just thought it's fair to be totally transparent with them.
Speaker Change: Primarily Texas, Florida, even Arkansas was on the U haul list again fifth or sixth.
Speaker Change: And as it turned out it was.
Speaker Change: It was a hiccup as I sat in on a band aid.
Speaker Change: This year for move in so I think.
Speaker Change: We're in really really good markets, they're going to benefit from whatever happens under under the New administration I think thats a big positive.
Speaker Change: Still we are still the same company than we were before we went on a day before yesterday and last month six months a year ago two years ago. So we're still mostly China money. We've made in the past and we'll continue to do that in the future, but we need more assays. So we need to we need to find the next trade in and we need to buy something.
Speaker Change: Got it really helpful. Thanks, guys I appreciate it Tom Congrats on a great year, and thanks and being the only stock in my coverage universe, it's up on the day.
Speaker Change: Yes.
Speaker Change: But whenever we talked about.
Speaker Change: Yeah.
Thank you.
Speaker Change: First Jay.
Speaker Change: Yeah.
Speaker Change: We hope.
Speaker Change: Our next question today will be from the line of Brian Martin with Janney Montgomery. Please go ahead. Your line is now open.
Speaker Change: We're not we're not floaters you know so we don't delude ourselves we're not we will do that we'll see we'll see what happens and we're certainly open to us.
Brian Martin: Hey, Brian.
Speaker Change: Any discussion.
Brian.
Speaker Change: Gotcha, Okay, and it sounded like the markets were no change in the markets I mean, obviously in Florida, and Texas and the Carolinas seem to be the kind of the focus.
Brian Martin: Thank you, Brian that Matson, Oh, sorry about that.
Brian Martin: Yes, sorry about that thanks, yeah. Good afternoon guys.
Speaker Change: In the near term.
Brian Martin: Johnny last time last quarter, when we talk it seemed like you guys were on a couple of trades and you kind of went through the transparency and maybe holding off a bit but.
Speaker Change: I would say, Florida, Texas, and the Carolinas, Yes, yes.
Speaker Change: Okay.
Speaker Change: Perfect and then maybe just one thing back on the credit side I think Johnny you talked about maybe I misunderstood what you were talking as far as the provision and reserves, but it sounded like the provisioning given the resolutions youre expecting pretty.
Brian Martin: It sounds it sounded like last quarter, there was maybe something more imminent than there was so it sounds like you're off the trade from last quarter and Youre still aggressively are certainly looking but maybe nothing is eminent.
Speaker Change: Pretty negligible here in the short term and kind of getting back to the timing of kind of getting back to that 10% level can you give us some time.
Brian Martin: But that's the way to think about it right now and just kind of take it as it comes here isn't going to 25.
Brian Martin: Yes.
Speaker Change: How are you thinking about that.
Brian Martin: Yes.
I have that right as far as kind of a negligible provisioning here near term given the.
Brian Martin: Because we had this hiccup.
Speaker Change: What we need to be fair with them and policy and then on his call that Colin and I said I think we'll just pull out we'll just move on and I think they will get a deal with somebody I got a call from a bank or so do you mind. If we go ahead no go ahead.
Speaker Change: Positive trends in credit quality, we expect.
Speaker Change: I think it's probably probably good I mean, when you when you scrubbed each.
Speaker Change: You charged off.
Speaker Change: On the Alabama.
Got it.
Speaker Change: Good about our reserve amount still hurricanes still up in there and we're not sure of what's going to happen with lapsed at about $100 million deferral. There, we will see where that goes over the years, we've lost some money.
Speaker Change: Doesn't work out and they will come back to us and we find that we will talk to you see if we can put it together again so.
Speaker Change: But I just thought it's fair to be totally transparent with them.
Speaker Change: As it turned out it was it.
Speaker Change: Some years, we didn't lose it and so time will tell and with two hurricanes, it probably longer and with all what's happening in California, I would imagine.
Speaker Change: It was a hiccup as I sat in on a band it and still we are still the same company that we were doing before we want our day before yesterday and last month six months a year ago two years ago. So we're still mostly China money, we might in the past and we'll continue to do that in the future, but we need more assays, we need we need to find the next trade.
These adjustments are extremely busy right now so it may slow that process down.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Or is it timing or at least how you're thinking about that 2% level that could be a ways off it could be 12 months out as far as how you think about that.
Speaker Change: And we need to buy something.
Speaker Change: But whenever we talked about.
Speaker Change: I would say 12 to 18 months out so what I'd say, yes, we're not in any hurry.
Speaker Change: We hope we're.
Speaker Change: We're not we're not the leaders so we don't delude ourselves, we're not we will do that and we'll see we'll see what happens and we're certainly open to it.
Speaker Change: Say something that we like.
Speaker Change: Like in addition to reserves.
Speaker Change: That.
Speaker Change: We'll just keep moving down the road.
Speaker Change: Any discussion.
Speaker Change: Gotcha.
Speaker Change: Gotcha, Okay, and it sounded like the markets were no change in the markets I mean, obviously, Florida, and Texas and the Carolinas seem to be the kind of the focus.
Speaker Change: Why do you need 2% reserve you need 2% reserve because.
Speaker Change: What else happened to us the last 10 15 20 years.
Speaker Change: In the near term.
Speaker Change: That's why you carry that kind of reserve nobody can anticipate these these nobody anticipated maybe some people anticipate the California fiasco.
Speaker Change: I would say, Florida, Texas, and the Carolinas, yes.
Speaker Change: Okay.
Speaker Change: And then maybe just one thing back on the credit side I think Johnny you talked about maybe I misunderstood what you were talking as far as the provision and reserves, but it sounded like the provisioning given the resolutions youre expecting.
Speaker Change: Nobody anticipated pandemic nobody anticipated inflation do wanted then nobody interest tried the great financial crisis.
Speaker Change: You never know that's three major events in 20 years.
Speaker Change: Pretty negligible here in the short term and kind of getting back to the timing of kind of getting back to that 2% level can you give us some time.
Speaker Change: So why wouldn't you wouldn't you are 19 years or how would you protect yourself to new shareholders with extra reserves.
Speaker Change: How are you thinking about that.
Speaker Change: I have that right as far as kind of a negligible provisioning here near term given that.
Speaker Change: Any reason not to do that.
Speaker Change: Regarding to the time, when we get when we get an opportunity to Peel back a little bit.
Speaker Change: The trends in credit quality, we expect.
Speaker Change: I think it's probably you can probably get out with.
Speaker Change: Gotcha, Okay, and then maybe just Kevin on the on the resolutions you talked about maybe I think you said $30 million or so of <unk>.
Speaker Change: <unk> scrubbed it.
Speaker Change: Charge offs.
Speaker Change: On the Alabama.
Speaker Change: I feel good.
Good about our reserve amount.
Speaker Change: Recoveries, just kind of wondering in terms of the timing of that how youre thinking about it big picture and then just the I think he also talked about a reduction in NPA that maybe I missed what you were.
Speaker Change: Hurricanes still up in there.
Speaker Change: We're not sure of what's gonna have relapsed at about $100 million deferral, there, we will see where that goes over the years. We've lost some money in some years, we didn't lose anything so time will tell and with two hurricanes, it probably longer and with all what's happening in California, I would imagine.
Speaker Change: Talking about there if you could just.
Speaker Change: Run back through quickly the resolution in Npa's, you expect whether it would be over the next couple of quarters or next quarter.
Speaker Change: Whatever you commented on.
Speaker Change: Yeah. So the next couple of quarters, you could see probably between 30 and 40 million reduction in <unk>.
Speaker Change: These adjustments are extremely busy right now so it may slow that process down.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: And that's just resolving credits that we've acknowledged here and charged off some one right.
Speaker Change: As far as the timing or at least how you're thinking about that 2% level that could be a ways off it could be 12 months out as far as how you think about that.
Speaker Change: We'll work through those at the levels, we're at and we'll probably see.
Speaker Change: I would say 12 18 months out just what answer we're.
<unk> 7 million or so recovery on.
Speaker Change: We're not in any hurry.
Speaker Change: That batch and.
Speaker Change: Say something that we like.
Speaker Change: That would put us below 50 basis points MBA NPA is at that point.
Speaker Change: In addition to reserves.
Speaker Change: This will just keep moving down the road.
Speaker Change: So that's the short term.
Speaker Change: Gotcha.
Speaker Change: Got it Okay and then.
Speaker Change: Why do you need 2% reserve you need 2% reserve recalls.
Speaker Change: <unk> of the recoveries at $30 million in general.
Speaker Change: What else happened to us the last 10 15 20 years.
Speaker Change: Putting a fence around and kind of how youre thinking about when those come back.
Speaker Change: Why are you carrying that kind of reserve nobody can anticipate these these nobody anticipated might be some people anticipate the California fiasco, but.
Speaker Change: Would you gauge as far as expectations there.
Speaker Change: Well you got you've got one credit that.
Speaker Change: The recoveries will come in monthly as they may make payments and so that's that.
Speaker Change: Nobody anticipated the pandemic nobody anticipated inflation do wanted then nobody interest tried to guard financial PRASM.
That's going to be ongoing for the next you know.
Speaker Change: 234 years, assuming that they just continue to.
Speaker Change: It just you never know that's three major events in 20 years.
Speaker Change: Operating like they are if they sold the company or.
Speaker Change: So why wouldn't you wouldn't you are 19 years or how would you protect yourself to new shareholders with extra reserves.
Speaker Change: Decided to pay off that note refinanced something like that then you would have it come back in a lot a lot quicker but.
Speaker Change: Any reason not to do that.
Speaker Change: Half of that number.
Speaker Change: And you'll be able to do that.
Speaker Change: Is that credit.
Speaker Change: When we get when we get an opportunity to build back a little bit on that.
Speaker Change: A pain.
Speaker Change: Its performance is performing and paying and we'll take those recoveries monthly.
Speaker Change: Gotcha, Okay, and then maybe just Kevin on the on the resolutions you talked about maybe I think you said $30 million or so of <unk>.
Speaker Change: Gotcha Okay.
Speaker Change: Fair enough and then maybe just last one for Steven just Stephen I think you talked about maybe the margin being relatively stable can you just give some color on how you're thinking about cost of deposits in and kind of loan yield how they are trending here. If we're if that's kind of sitting sitting idle for.
Speaker Change: Recoveries, just kind of wondering in terms of the timing of that how youre thinking about it big picture and then just the I think he also talked about a reduction in NPA that maybe I missed what you.
Speaker Change: Youre talking about there if you could just.
Speaker Change: Going back through quickly the resolution in NPA as you expect whether it would be over the next couple of quarters or next quarter kind of whenever you commented on.
Speaker Change: A bit of time here.
Speaker Change: Yes.
Speaker Change: We're fairly if were fairly flat there may be some.
Speaker Change: Yeah. So the next couple of quarters, you could see probably between 30 and 40 million reduction in MCA.
Speaker Change: Yeah, there may be some additional opportunity checking and savings I mean, we have some portion of our indexed accounts or our contracted accounts are municipalities that we the schools that we bank debt change on a quarterly basis. So we have some set of that that just adjusted on January 1st at that.
Speaker Change:
Speaker Change: And Thats just resolving credits that we've acknowledged here and charged off some one right.
Speaker Change: We'll work through those at the levels, we're at and we'll probably see.
Speaker Change: <unk> 7 million or so recovery.
Speaker Change: Benefit us in Q1, and then we've got the CD book that I've talked about earlier.
Speaker Change: On that batch and.
Speaker Change: That would put us below 50 basis points M B a.
Speaker Change: So there yeah, there may be opportunities to you know.
Speaker Change: At that point.
Speaker Change: To work that down a couple of basis points, a month here or there and hopefully kind of do the same thing to to offset what.
Speaker Change: So thats the short term.
Speaker Change: Got it Okay and then.
Speaker Change: The timing of the recovery is that $30 million just in general kind of putting a fence around and kind of how youre thinking about when those come back what would you gauge as far as expectations there.
Speaker Change: Potentially occurs on the loan side, just as variable rates reset when they did.
Speaker Change: Okay.
Speaker Change: Digitally.
Speaker Change: I think potential mix change.
Speaker Change: Well you got you've got one credit that the recoveries will come in monthly as they make make payments and so that's.
Speaker Change: Over the course of the year to.
Speaker Change: If excess cash comes down goes into loans. If the securities portfolio comes down goes into loans I think in kind of kind of helps with that too.
Speaker Change: That's going to be ongoing for the next.
Speaker Change: 234 years, assuming that they just continue to talk.
Speaker Change: Gotcha Okay.
Speaker Change: I think that's all I had thanks, so thanks for the help and great great clubs in Europe.
Speaker Change: Operating like they are if they sold the company or.
Speaker Change: I decided to pay off that note refinancing thing like that then you'd have it come back in a lot a lot quicker but.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Half of that number.
Speaker Change: Well.
Speaker Change: We have no further questions on the line at this time, so I would like to hand, the call back to Jonathan for some closing remarks.
Speaker Change: Is that credit.
A pain.
Speaker Change: Its performance is performing and paying and we'll take those recoveries monthly.
Jonathan: Thank you very much and thanks, everybody for your support.
Speaker Change: Gotcha Okay.
Speaker Change: For shape.
Speaker Change: Firstly I think.
Speaker Change: Fair enough and then maybe just last one for Steven just Stephen I think you talked about maybe the margin being relatively stable can you just give some color on how you're thinking about cost of deposits and kind of loan yield how they are trending here. If we're if that's kind of sitting sitting idle for.
Speaker Change: We didn't disappoint in 'twenty four we won't disappoint in 'twenty five and we'll talk to you all in 90 days. Thank you.
Speaker Change: Thank you. This concludes the home Bancshares incorporated fourth quarter 2020 full earnings call. Thank you for your participation you may now disconnect.
Speaker Change: A bit of time here.
Speaker Change: Yes.
Speaker Change: <unk> fairly if were fairly flat there may be some.
Speaker Change: Ah, yes, there may be some additional opportunity checking and savings I mean, we have some portion of our indexed accounts or our contracted accounts municipalities that schools that we bank debt change on quarterly.
Speaker Change: Quarterly basis. So we have some set of that to just adjusted on January 1st that will that will benefit us in Q1, and then we've got the CD book that I talked about earlier.
Speaker Change: So there, yes, there might be opportunities.
Speaker Change: To work that down a couple of basis points, a month here or there and hopefully kind of do the same thing to to offset what potentially occurs on the loan side, just as variable rates reset when they do.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Really.
Speaker Change: Yeah.
Speaker Change: I think potential mix change.
Speaker Change: Over the course of the year or two.
Speaker Change: If excess cash comes down goes into loans. If the securities portfolio comes down goes into loans I think in kind of kind of helps with that too.
Speaker Change: Gotcha Okay.
Speaker Change: I think thats all I had thanks, thanks for the help and great great clubs in Europe.
Speaker Change: Okay.
Speaker Change: Well.
Speaker Change: We have no further questions on the line at this time, so I would like to hand, the call back to Jonathan for some closing remarks.
Jonathan: Thank you very much and thanks, everybody for your support and.
Speaker Change: Appreciate the first shot at it I think.
Speaker Change: We didn't disappoint in 'twenty four we won't disappoint in 'twenty five and we'll talk to you all in 90 days. Thank you.
Speaker Change: Thank you. This concludes the home Bancshares incorporated fourth quarter 2020 full earnings call. Thank you for your participation you may now disconnect your lines.
Speaker Change: [music].
Speaker Change: <unk>.
Speaker Change: Sure.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: [music].