Home Bancshares, Inc. (Conway, AR) Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 20, 2023

There are 16 speakers on the call.

Operator

Greetings, ladies and gentlemen. Welcome to the Home Bancshares Incorporated First Quarter 2023 Earnings Call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued this morning. The company presenters We'll begin with prepared remarks then entertain questions. The company has asked me to remind everyone to refer to their cautionary note regarding forward looking statements.

Operator

You will find this note on Page 3 of their Form 10 ks filed with the SEC in February 2023. At this time, all participants are in a listen only mode And this conference is being recorded. It is now my pleasure to turn the call over to Donna Townsville, Director of Investor Relations.

Speaker 1

Thank you. Good afternoon, and welcome to our Q1 conference call. Today's discussion will include prepared remarks from our Chairman, John Allison Stephen Tipton, Chief Operating Officer and Kevin Hester, Chief Lending Officer. The rest of our team is present and available for questions: Tracy French, President and CEO of Centennial Bank Brian Davis, our Chief Financial Officer Chris Poulton, President of CCFG and John Marshall, President of Short Premier Finance. It's been an interesting 90 days in the banking sector.

Speaker 1

However, Home is still standing strong. And to provide you with more color on this is our 1st speaker, Chairman, John Allison.

Speaker 2

Good afternoon. Thank you, Donna. We usually open with profitability is the first thing, but during these times, we thought it was probably be more appropriate to talk about The strength of the company and the strength of Home Bancshares, our strategy and patience has paid off for our customers, our employees, our depositors and our shareholders. The strength of Holmes' liquidity and availability provides more than 100% coverage for all uninsured and uncollateralized Depositors as of March 31, 23, and that carries through today. So I want to say that again, Home has the ability and the liquidity to cover all uninsured and uncollateralized deposits for any customer that we have in the company.

Speaker 2

We're very proud of that. The strong liquidity of Home have allowed Home to pay all collateralized depositors with deposits in excess of FDIC limits of $250,000 and still have $1,700,000,000 remaining, that really equates to the fact that Home has the ability to cover 133% of all uncollateralized deposits. We're very proud of the Fortress balance sheet we have built. HomeBanc's is Happy Bank, Centennial Bank is one of the strongest banks in America. There are only a handful of banks in the country that can be trusted to make this statement.

Speaker 2

And I think if there was any concern about from our depositors, I think this will comfort them. In the press release, there's also a table Showing how the availability is available. I said last quarter that all banks are not created equal. Our goal was not just to say we were better, but prove after years of excellent performance that home should be separated from the pack As a very safe, strong and well managed financial institution, I hope you all agree that we have proven the strength of home balance sheet and the performance of a company that has stood the test of time again during a new and different bank crisis. What can possibly go wrong?

Speaker 2

I think we've seen about everything that could happen. One of the key factors that have not only contributed to the strength of our buying, that allows top tier results quarter after quarter as well as year after year. Liquidity, Capital, asset quality, loan reserves, profitability and management experience. Liquidity was not important until it was. Banks get liquidity mainly from deposit, all forms of deposits, borrowings, Security Portfolios as well as Selling Assets.

Speaker 2

During 2021 2022, the U. S. Government was spending, as some people would say, Like a drunken sailor, during that time, we grew liquidity deposits basically to over $3,000,000,000 in excess liquidity. The great majority of these funds, homes simply put into Fed funds, Because we assume many of these excess deposits would run off as interest rates continue to increase and as consumers spent their free money. If you watch the Wall Street guys, they said cash is trash.

Speaker 2

How many times did we hear that during the years? Actually, cash was king then and certainly now more than ever. Banks with this new found liquidity during that time decided to invest And low rate securities and what I call a race to the bottom of loan rates after we were in basically a low or zero rate environment That lasted several years until the drop in solar spending created something called inflation. It raised its ugly head, Calls from the Fed to increase interest rates at the fastest rate in the history of our country in an attempt to quell the monster. With banks hungry for yield, they blindly piled into low rate securities and competed with each other, what I call Creating a race to the bottom on loan rates.

Speaker 2

This was a critical decision that the leaders of the respective banks made that create this crisis. I've said for years that bikers who do not have any business experience are not the guys you won't have in your money. Nearly all banks acting like a pack animal. They took their employees, shareholders and deposits straight to the slaughter Because they built their houses that are strong. Pull a list of bikes over 100% deposit coupled with a capital ratio of 8:0:1 And you'll find those bikers that hope the big bad wolf doesn't show up and blow their houses down.

Speaker 2

Many banks would fail, actually only a few would survive. Home built their house with bricks and steel. The truth is many would have negative capital ratios if they had to mark to market their securities portfolio. Good stuff. If Home were to take the marks to mark to market, we would remain one of the best capitalized banks in America, different from many banks.

Speaker 2

100% or greater loan to deposit with 8% capital less is a recipe for disaster. When cash rolls out, the bunch and bunch deplete their bonds, they have no choice but to go to broker deposits and high rate CDs. Whether it kills their margin and profitability or not, they turn it into the survival mode. Watch the CD ad. You've seen all these CD ads hitting the paper.

Speaker 2

That will tell you who is in dire need for money. You've not seen one CD ad from Homebuy, Homebuy shares Centennial Bank or Happy Bank. That should comfort all our deposits. Home has the cash liquidity and availability, As I said to pay all deposits, assuming Home was forced tomorrow to do that and had no liquidity and had to borrow $5,000,000,000 At an interest rate of 5%, creating an additional $250,000,000 in interest expense, Home would still run a 1.20 ROI and that's better than 90% of the banks in the country run today. We have provided a chart to show you our availability of bonds.

Speaker 2

If a bank can pay out all uninsured deposits And still make a 1% ROI, one of the top bank analysts in the country said, banks that can do that are in the catbird seat. Welcome to Home Bancshares. Home Bancshares capital ratios are in the top tier of all banks. The conservative management team will always maintain strong capital Because you can't get capital when you have to have it. Prime example is Silicon Valley Bank, SVB, not said about that.

Speaker 2

As your largest individual shareholder in home and with this company being my largest personal asset, I certainly have a vested interest in protecting what my wife Call is the chuckwagon. And home is the chuckwagon that feeds all of us. Most of you know, she's very protective of her dividend. When I told her about the bank process, she said protect the chuck wagon at all costs. Circle wagon with our strong employees, our partners, Our shareholders, our customers and depositors, that is exactly what we've done.

Speaker 2

Good liquidity, strong capital, huge loan loss reserves, Strong asset quality coupled with peer leading profitability. By the way, it's also the largest asset of our Executive Committee and some of our directors. So we're all focused on the same goal, asset quality, while maintaining one of the highest loan loss reserves in the country. Rather than play Jack in the Box, raising and lowering quarter after quarter because of all the factors we faced over the last 23 years, We know what has worked for the last 40 years and that is a 2% reserve balance. The company's reserve is $287,200,000 or 2% compared to December 31 when it was 2.01.

Speaker 2

The allowance on credit losses on loans represents 383% of non performing loans. What that means is, if we have $100 worth of non performing loans, we have $3.88 worth reserve to cover that $100 worth of loan. Stockholders' equity grew for the quarter $104,000,000 that was a combination of retained earnings at 66.3 Plus $49,200,000 reduction in AOCI as interest rates softened somewhat. Let's go talk about the earnings. Earnings for the quarter were $103,000,000 or $0.51 per share and adjusted earnings of $0.54 per share.

Speaker 2

Return on assets was $1,84, adjusted at $1,950,000 Return on tangible common equity was 19.75 or adjusted to $20,900,000 tangible book value of $10.71 that's $10.71 that's an increase of 5 point 4% from the Q1. Tangible common equity as a percent of tangible total equity was 10.33@3.1 versus 966 at twelvethirty onetwenty 2. And if we took the held maturity loss of $86,000,000 after tax, We would still remain almost 10%. We actually would be 9.97%. Pretty damn strong stuff.

Speaker 2

P5NR is $53,900,000 Total interest income was $284,939,000 I think that's a record, Brian. I don't think we've ever hit that number on total interest income. No, I think that is a record, you're right. Net interest income was $214,595,000 versus the Q4 of last year at 215 $66,000,000 That was we're basically flat. Total revenue was $248,759,000 The difference there is the fair market adjustment on our We didn't sell them, so we didn't lost that money we And we see I'm seeing a recovery in those coming back today.

Speaker 2

So that's good. We'll keep them. We bought them for the dividends and we'll hold. Margin improved again to 4.37% from 4.21%. But I've listened to this from a year ago.

Speaker 2

A year ago this time we were at 3.21 and now we're at 4.30. That's 116 basis points. That's pretty impressive. Non interest expense, Great job guys. The $114,000,000 versus $118,000,000 we're down about $4,000,000 over last quarter.

Speaker 2

Efficiency ratio of 44.80 adjusted to 43.42. Tangible common equity as a percent of total equity was 10.33 Versus 9.66. Common Equity Tier 1, I've got I don't know if you can I have Brian run this Show me our capital ratios and then take the entire loss Of the AOCI and HTM, both HTM and AFS, add those together And tell me where we would rank? So when you hear you'll hear common equity Tier 1, you're going to hear 2 numbers. One of them is before and one of them is after.

Speaker 2

So it's 13.2%, and I'll talk a little more about that in a minute, but 13.2% now and 11 point 4% if we take all the losses, which we have no reason to do. Leverage ratio from 11.4% to 9.8%, Tier 1 capital from 13.2% to 11.4%, risk based capital from 16.8% to 15%, that's pretty amazing numbers. That puts us Those second numbers of each one of those categories puts us in top class in the country. The yield on our securities book, I'm very proud of is 3 point 3.0, good job by our guys there. That's probably about what most banks' loan yields are.

Speaker 2

Yellow on our book is 6.64, Our loan book, that's 6.64 versus 6.23, that's a pretty nice increase. But from this time last year, it was 5.29, that's 135 basis point increase. We bought back 590,000 shares during the Q1 And we've repurchased over 250,000 shares so far this quarter, mostly through our 10b5 filing. It's been on sale, so we thought it was a good time. I've not seen another bank present their ability to pay out all our uninsured deposits, including the big money center bank that everyone is raving about.

Speaker 2

This does not mean they can't, but why would a bank not disclose their ability to pay out all insured deposits If they can, I would imagine the differences buried in the security book? If we were forced to liquidate our securities book today, which we're not, That equates to 8.42 percent pre tax or after tax 6.34 percent. Many banks have 30%, 40% 50% haircuts to And I assume that's why they won't be wanting to disclose that. As I showed earlier, Home would still remain one of the best capitalized banks in America. Homes customers can take their money out of the mattress and put it back in the bank.

Speaker 2

Talk a little bit about the lawsuit. We did we had some West headwinds, that is situation has improved some. We filed a lawsuit against 17 individuals, March 3, 'twenty three that we derived through our forensic investigators had improperly transferred Happy's data. We're not going to say anything else about that. Some of those offices have been closed.

Speaker 2

There have been some changes out there. But until we're fully compensated in this We'll continue against all those parties. Conclusion, everyone says they're worried about regional banks, but you don't need to worry about home. I think Home is in the best position of any bank in the country. So I hope that eases all of you.

Speaker 2

In addition to that, we had a great quarter. I really don't have much to say negative about the quarter other than deposits went down some as we expected. But Outside of that, we're hanging in really good. I think I've said, I want to run $100,000,000 continue $100,000,000 run rate Per quarter, I think we can do that. If we can do that, we're going to earn $400,000,000 plus.

Speaker 2

And in the middle of a crisis like this, I think that's pretty Darn good. And I'm Tracy French, our CEO, who's had his head down and been pretty darn busy lately. I thought I'd just See if he

Speaker 3

had a comment. Well, Johnny, you made me feel comfortable just listening to your numbers and rattle off how safe and sound we are, which we've always known that. And I'll compliment you and the Board on that. It's pretty simple to state a basic blanket. And I heard Donna say the last quarter has been crazy.

Speaker 3

I've been working for you for 84 quarters. It's been entertaining every day in the quarter. It really is coming back to just the basics of banking and us staying the course as we've done through Several curveballs has been thrown at us, but it's a compliment to our team. I know Stephen and Kevin are going to give a little color on loans and deposits. We talk about the loan deposit ratio.

Speaker 3

I've been doing deposit to loan ratio over the last 2 years and turns out to be We'd be in pretty good shape. Our deposits, as you mentioned, Steve, to give a color on, in the past since the 1st of this month, we've seen a nice increase. Now Uncle Sam is going to get his fair share over the next few weeks that we anticipate. And I'm proud to say in the banking part, we've got Another line item that's coming to be in our trust company. We've got Kevin Orr and Joby Mills and Jeff Kelly with the Gold Star.

Speaker 3

They're going to become a line item for us and that's a positive for our company as we see other areas that can step up and pick the ball up for us along the way. Performance metrics you gave, Johnny, and I just want to mention some and this is on the regional bank and the bank ROA when you say it's a 209, It's pretty damn good and it's been a constant improvement and I can tell you you got 3 regions that did over 3% and You got one region, Catit, that's did over 4% the past quarter. That's a complement to our regional managers, Our retail leaders, our loan officers, everything that deals with that because they've been working this all the time. It's not just been the last month, it's not been the last quarter, it's not been the last half a year. It's been constantly working and proofs in the numbers On that and finalize that comment, Johnny, I heard you know we focus a lot on our margins.

Speaker 3

Our margin in the bank It's gone from $374,000,000 to $413,000,000 to $429,000,000 to this quarter $446,000,000 16 basis point increase in the quarter.

Speaker 2

You can probably come give me a pat on the back on that. I think it's okay.

Speaker 3

It's okay. Hey, Johnny said it's okay for all the regional and retail folks, but Outstanding job. So thank you for all the support that our team has given us, every single one of them.

Speaker 1

Well, there's some very powerful statements in both of those messages. Thank you very much. And I would say I'm for 1 proud to be on the chuck wagon. So thank you for those comments. Our next update now will be from Stephen Tipton.

Speaker 4

Thanks, Donna. I'll start with the topics of liquidity and funding. As we have mentioned over each of the past three quarters, we've seen a shift to deposit balances going to investment firms, Money Market Mutual Funds and some banks with an obvious need for funding. The Q1 of 2023 was no different. Total deposits declined slightly less than $500,000,000 in the quarter and was spread fairly evenly across each of the past 3 months.

Speaker 4

The quarterly decline in total deposits was the lowest since the Happy acquisition 1 year ago. So absent outflows this month related to tax filings, as Tracy mentioned, maybe we'll begin to see that level out. Johnny mentioned the analysis we recently completed on uninsured balances relative to our borrowing capacity. Adjusting for collateralized deposits, which are generally the municipalities, local school districts and higher ed relationships we've long banked, The calculated uninsured balances are 29.9 percent of our total deposits. While our company's size and strength today allows us to expand and take on larger relationships both on the loan and deposit side, we still believe in the franchise value of having core relationships in a granular deposit base.

Speaker 4

Currently, broker deposits comprise 2.6 percent of total liabilities and Our top ten list of depositors accounts for only 6% of our total deposits and only 2 of those customers considered uninsured or uncollateralized. An updated review of our deposit base shows nearly 500,000 deposit accounts with over 70% of those having been open and active for at least 3 years and over 25% of those active over a decade. The mix in balances stands at approximately 2 thirds commercial or business and 1 third retail today, while the number of deposit accounts is approximately 80% retail. New account opening activity continues to be strong with over 14,000 new accounts opened in Q1 and March actually was a bit more active than we've seen in the past. Switching to capital, as Johnny mentioned, the parent company total risk based capital ratio ended at a very strong 16.8% and a TCE or tangible common equity to total assets ratio of 10.33%.

Speaker 4

As Yves mentioned, we repurchased 590,000 shares of stock during the Q1 and continue to be active under our 10b5-1 plan that's in place now. On the asset side, coming off a very strong 4th quarter, loan origination volume softened to 1,090,000,000 with over 75% of the volume coming from the community bank regions and that was split fairly evenly between Arkansas, Florida and Texas production. Finally, the net interest margin improved 16 basis points in Q1 to 4.37% as our bankers continue to do a great job managing this interest rate environment. Interest bearing deposits averaged 1.90% in Q1, which was up 45 basis points from Q4 and exited the quarter in March at 2.01%. The core loan yield excluding accretion and event income averaged 6.49% and was up 39 basis points from Q4 and exited the quarter in March at 6.54%.

Speaker 4

With that, Donna, I'll turn

Speaker 2

it back over to you.

Speaker 1

Thank you, Stephen. And now Kevin Hester will provide us with a lending report.

Speaker 5

Thanks, Donna, and good afternoon, everyone. As Johnny appropriately stated earlier, One of the key factors that has contributed to the strength of Home Bancshares has been our compelling asset quality. I believe that the following color on the activities of the first This continues to be a strength of our company. Non performing loans and non performing assets remain at very low levels of 0.51% and 0.33%, respectively. A detailed review of the increase in non accruals of $13,000,000 this quarter reveals 2 CCFG C and I credits totaling about $6,000,000 Our internal analysis of the entirety of CCFG's C and I portfolio indicates a potential loss of only $5,000,000 which is all within its Shared National Credit portfolio.

Speaker 5

We shifted away from SNCs some time ago and this part of their C and I portfolio has been winding down accordingly. The remaining $7,000,000 is spread across a few credits in the Community Bank footprint And based on payments that have been made to date or renewals that are in process, at least the same amount will be returned to accrual in the 2nd quarter. For those of you that may not remember, Arkansas State Banking Law requires automatic non accrual at 105 days past due regardless of whether it is in the process of collection. The timing of these payments and renewals will allow the reversal of most of these new additions. As Johnny stated, the allowance for credit losses remains at 2% of loans and provides 388 percent coverage of non performing loans, both stellar measures.

Speaker 5

Past dues totaled only 0.62 percent of loans, even with a total of $30,000,000 in ALF and memory care loans added to the total this quarter. We have discussed these loans previously and I'll give you an update on that portfolio momentarily.

Speaker 2

At this time, I would like

Speaker 5

to turn it over to John Marshall, who will provide you some information on the asset quality for Shore Premier Finance. John?

Speaker 6

Yes. Kevin, thank you. I think Centennial Bank enjoys very high asset quality. The division Shore Premier Finance in the marine finance space also enjoys very good asset quality because of our underwriting standards And we haven't through this cycle seen any deterioration. In fact, our delinquency, which normally runs, this is for 30 plus days delinquent, Around 11 to 14 basis points, Kevin, at the end of the first quarter, we saw improvement.

Speaker 6

So that it was under $800,000 and about 8 basis points on a $1,000,000,000 book. So very pleased with

Speaker 5

As I mentioned, we've been working through a portfolio of about $100,000,000 in ALF and memory care loans in Florida for some time. And in January, the equity partner disclosed that they were wanting to exit some of these properties. We have been negotiating a soft landing for these assets and I'm pleased to report There are multiple buyers for this equity position. We have always contended that we underwrote these assets conservatively with a low leverage position. Based on the ongoing negotiations, which are nearing finality, we do not expect any loss in this portfolio and All to be resolved by the time that we report again in 90 days.

Speaker 5

Finally, I wanted to mention that due to the concerns of some regarding certain asset classes, We chose to refresh the deep dive into the office portfolio that we performed back in 2020. This analysis was completed during the Q1 using balances of the portfolio at twelvethirty onetwenty 2 and the results were included in this quarter's press release. I would like to point out that rolling forward to threethirty onetwenty 3, there is no change in the asset quality of this portfolio, which continues to exhibit low problem loan totals and less than 1% past due. Notably, nearly 60% of the portfolio is located within our Community Bank footprint with most of that in Texas and Florida, which are states that should be less impacted by changes in how office space is utilized post COVID. Even within these states, the majority of these balances are in the very strong geographies of DFW and Miami, which continue to experience high levels of population and company headquarter inflow.

Speaker 5

Positive attributes such as low leverage, High occupancy and predominantly low rise come to mind as a result of this analysis. Outside of a couple of instances within the Community Bank footprint, Most of our recent additions to this asset class have come through CCFG as a part of a multi asset facility. For most of these additions, office is not the highest and best use nor is it what the valuation is based on. We continue to be very positive about our exposure in this potentially fragile asset class. Donna, that's all I got and I'll turn it back over to you.

Speaker 1

Thank you, Kevin. Johnny, before we go to Q and A, do you have any additional comments?

Speaker 2

I think it was a great quarter overall. I said what could possibly go wrong. You think about the worst financial crash Since the Great Depression in 'eight, 'nine, 'ten and 'eleven and we weather that, we really didn't see this liquidity crisis coming. We called the shots to maintain lots of liquidity and we certainly called the right shots. So I'm sure there's a lot of envious banks on home bank shares today because they spent their money and put it in different asset classes, Well, we didn't.

Speaker 2

And when it ran off, we had the cash to let it go. So anyway, it was I hope everybody thinks it's as good as I think it was. Based on what we saw, what happened in the marketplace, I also think there may be some opportunities on the buy side to maybe to pick up some assets Over a period of time, we'll be looking we bid on both Signature and pieces of Signature as well as pieces of SVB, we were not successful, but there's still some stuff left. So we'll see about that, see if there's something there that makes sense for us. Outside of that, John, good report on asset quality on the Marine book.

Speaker 2

I'm proud of you guys and what you've done. And Kevin said it's your Underwriting and that has certainly paid off for this corporation and congrats on that. Seems to be the world out there scared to death of marine stuff I keep asking that we're missing something, but you keep producing the great numbers. So thank you for that and good report everybody. Donna, I'm ready to go to Q and A, if you're ready.

Speaker 1

We're all ready. We'll turn it back to the operator and open it up for questions.

Operator

Thank The first question is from the line of Jon Arfstrom with RBC. You may proceed.

Speaker 7

Hey, good afternoon, everyone.

Speaker 2

Hi, John.

Speaker 7

Hear me all right? Okay, good. Good quarter, I agree. Good numbers. In terms of the liquidity that you lay out, you clearly have a lot of it And you're prepared for, I think, any level of deposit outflows.

Speaker 7

But I'm just curious if things are settled down from your point of view. And are you starting to see some of these deposits that may have left flow back into the bank?

Speaker 2

Yes, some of that. We were prepared for that. I think some people got I never got asked. I never got one question from many And Tracy got a few and I think Steven got some, but overall, we didn't I didn't feel it. I saw we're losing a little bit, but I think that's natural.

Speaker 2

You see these people offering 5 plus percent For CDs, that says we borrowed all the money. We need to borrow from the Fed in the 4s that tells you something. If they're offering 5, they're asked $85,000,000 So that means we borrowed it that means we spent all our money, we borrowed up and now we're trying to it doesn't matter whether we're profitable or not. But I think we're good. I actually think we're good.

Speaker 2

We'll go through this tax time. If we get through the tax time, I think we'll be fine. From the loan perspective, we're not aggressive on loans. So you remember back in 'eight, 'nine and 'eight, 'nine, I think you asked me a question, what do we think about loans? And I said, I don't Thank much about them.

Speaker 2

I don't care right now. The key is to say to make sure the company is strong. That's the most important thing that we've done. So and that's what we're going to So we're not aggressive on loans. We've gotten a little tougher on the loan side.

Speaker 2

We're seeing pretty good loan demand. We're seeing some Quarterly loans that are running around out there. So we're I don't know that we got the lines to pull up if we need it, as Brian says, but I don't know. We need it, we'll use it. We haven't borrowed a penny this year.

Speaker 2

I mean, we haven't borrowed 1 decal. So we got ourselves set up for it, but we haven't had to use it. And that's a blessing for us Well, it's higher price money, but I'm pretty optimistic we may slide on, but it depends on how bad tax season is. I think that's really the point. Any comment on that?

Speaker 2

Okay.

Speaker 7

Stephen, you had a comment about how there was deposit outflows, but it was the lowest that you've seen in a while. Did I hear that correctly?

Speaker 4

That's right. Yes, I think deposits were down about $4.90 for the quarter. They were those were higher levels in Q3 and Q4 last year just kind of on the heels of the acquisition. Yes, and Tracy mentioned Through this point in April, we've bounced around in a positive position so far. So Yes, we saw a little bit of inflow in March.

Speaker 4

We actually had a couple of surprise deposits from customers of ours that had money, Maybe out west that wired money in and we were told by our treasurer to park it at Centennial Bank. So We saw a few of those instances, but I think overall maybe just maybe focus more on strength and quality instead of so where the highest rate may be.

Speaker 2

We're not going to solicit the big deposits. We've managed this thing properly where we've had the ability to cover Our uninsured deposits and un collateralized deposits. So I think we're not out. We'll control those as they come in. I'm sure a lot of people would like to put their money here.

Speaker 2

We'd like to have some money from everybody maybe, but we don't it's not our goal to End up like SVB with a lot of lumpy, lumpy deposits in the bank.

Speaker 7

Yes, okay. Yes, this is refreshing the difference

Speaker 2

in the positives. Not going to be in the half right, but we're damn sure the safest.

Speaker 7

Yes. Well, it gets to my next question, but this is I guess a good discussion because it doesn't feel like you're That concerned about deposit outflows, which is good. And I guess that's the next question where you're saying you're not going to be the highest rate And you're being a little bit more cautious on lending, but seeing some opportunities. How do you guys feel about the margin from here? Can this can you keep pushing this margin higher?

Speaker 3

John, I mean, that's our goal, right? I mean, that's the fun part, not just over the past year, but wherever in this company, we always want to get a little better if we can. We have to adjust and go with where the market steers us, but we're just making good business decisions. And right now, the It's worked in our favor and we haven't had we weren't in the position where we had to go out there and pay high interest rates on deposits. We've got Great core customers and that's what's as we watch the deposits every day and not just me, it's every region out there in the market.

Speaker 3

It's It's cool how a lot of you pay attention to that. So we've been able to bring some stuff in. But to answer your question I'd probably say, I'm always nervous about the market, but Johnny wants me to make sure we get it better. And the great part about our company is Everybody out there in the region want to do the same thing. So just go with the flow.

Speaker 3

Loan rates are this today and deposit rates are this and That holds good move, we'll swing. We didn't bet on the future. Thank gosh, we didn't lock in a lot of the Assets at 3.5 percent for 10 years, and because I didn't have anybody doing a 0% CD for 10 years.

Speaker 2

We had a payoff This week, dollars 80,000,000 payoff, the loan rate was 9845 And the prepayment penalty is $420,000 So I've told them we got to get something going To replace that $80,000,000 something at roughly 10% with the prepay. So anyway, we didn't cry about the prepay. That was They asked for different things and we weren't going to do that. We're not going to stretch. So we don't stretch.

Speaker 2

So we didn't stretch and they were able to refinance and paid us off. But I thought it was fixed. I've forgotten it was floating and I thought it's fixed like 6 or 7. I said, what was the rate on that got paid off and they sent it to me. Wow, you got to replace that, Tracy.

Speaker 2

$4.46

Speaker 7

All right. Well, thanks everybody. It's a good message on that. Thank you.

Speaker 2

Thank you.

Operator

Thank you, Mr. Arfstrom. The next question is from the line of Matt Olney with Stephens. You may proceed.

Speaker 8

Hey, thanks guys. Good afternoon.

Speaker 2

Thank you, Matt. I

Speaker 8

want to start on the M and A side. You mentioned being opportunistic. Any color on what's in the marketplace today that you're looking at? I mean, perhaps it's Too soon, but just curious about this. And then specifically within the Signature and Sify commentary that you mentioned.

Speaker 8

Any more color on the types of businesses from them that you were attracted to?

Speaker 2

Well, we're looking at some of their assets that they have. I don't want to get specific here, but we're looking at some of those assets From an M and A perspective, the problem is that most banks are owned up. And they're I mean they're in the 100 percent, the majority of them in the 100 percent, ones that won't sell, particularly more, let me say that, they are 100%, they're tired, worn out and they're running lower capital ratios. And if you mark AOCI, it's even much worse. And I don't think we're in the mood.

Speaker 2

I don't think home is in the mood in this cycle to stretch. Don and I were the 1 we were in Dallas a while back. The bank wasn't in Dallas, but the bank was somewhere else. And met with the owners and they're 108% loan to deposit And their margins going straight in the tank because they're out of money and they had to pay high prices for money and They're getting killed. And the point is, so I said, let me get this straight.

Speaker 2

You won't be paying you a premium for that. And I said, I'm struggling why I want to do that and why I want to take your mess that you've created and put on my balance sheet And put my balance sheet that is not stressed under any conditions and put my balance sheet under stress. So in joking, I said, if you pay me $100,000,000 I'll take it. But that didn't go very well. But That's kind of my attitude right now.

Speaker 2

I've never seen this kind of crisis before and it's pretty damn serious and you see how Fragile banks are. Banks are very fragile and there's not 20 banks in the country to take a run. I don't believe, maybe 50, maybe 100 that could take a run tomorrow. Some bank shares can take 1, but there's not Many banks that could take a run. So I don't know, I don't want to buy some pay somebody a premium to buy their problem.

Speaker 2

It is that's kind of where my stance is right now. We're doing fine. We're going to be fine. Home bank shares will be open. Home bank shares will be operating and Home bank shares will be profitable.

Speaker 2

So you've never heard that quite that talk out of me before like that, but I think it's Time to be protect the chuck wagon. I don't think you stretch. I don't think it's time to stretch. I don't think this is over. And I think it could be a while before it's over.

Speaker 2

So I think we're just going to sit here and protect the chuck wagon for a while. We'll take care of our customers. Our customers have no fear. We have the ability to continue to finance our customers. New customers will be difficult to get in the door, but We'll take care of our existing customers.

Speaker 2

They've been good to us. We'll be good to them. We'll be here to take care of their needs. So I think that's the same way to play it right now, John.

Speaker 8

Okay. That makes sense. Appreciate the commentary there. Yes, no problem.

Speaker 2

That doesn't sound like the regular Johnny, does it?

Speaker 8

On the office front, you guys gave some great details there in the press release as far as geographies and amounts and LTVs. And I I think you did disclose about $45,000,000 was criticized, which I guess is what 4% relatively small amount. Anything more notable in that smaller that $45,000,000 Kevin, to speak of as far as A trend or anything more notable there?

Speaker 5

Yes. Probably the most notable thing is that the majority of that It's in the Texas market and it is stuff that we marked criticized in due diligence And not classified, but an OLEM. And as we get that happens a fair amount when we do due diligence on stuff that It could be 4 or 5 or 6 and we usually are pretty conservative and then take the next year or 2 To look at it closer and so I wouldn't be surprised if the majority of that when we do an annual review looks better than we thought it did a due diligence. So That is the vast majority of that $45,000,000 is in what I would call that bucket.

Speaker 9

Okay. Got it. That's good news.

Speaker 5

About 65% loan to deposit about 65% loan to value and Most of it matures in 2023 and 2024, so we'll get to look at it this year or next year. And I'm not particularly concerned about any of that.

Speaker 8

And I guess, Kevin, just taking a step back and thinking about this office deep dive that you guys did over the last Few months. I'm curious about how what you think about loss potential at Home Bank on this portfolio As it compares to a few years ago when you guys did a similar deep dive on the hospitality book back in 2020, You guys carried some larger hospitality loans few years ago, came out with no losses. How would you compare this office deep dive and potential losses to what you saw back then?

Speaker 5

Yes, we actually looked at this portfolio around that same time. We did the same deep dive and it looks very similar to what Looked like then, I would say and I think I said it in my remarks that the majority of what we've put on the last year, year and a half It's really not been traditional office. Even though it is coated office, it's not what you would expect The ultimate disposition to be of that asset and most of that's in the New York portfolio in a multi asset facility. So You would look at that completely differently than you would an operating office building that's going to be an office building down forever. So I feel really good about the deep dive.

Speaker 5

I like the fact that the majority of our balances are in our footprint And even within that footprint in 2 of the strongest geographies, particularly for office. So I think that bodes well. I feel really good about the exposure and any potential loss for that group loans.

Speaker 8

Okay. All right, guys. That's all for me. Great report. Thanks.

Speaker 9

Thanks, Matt.

Operator

Thank you, Mr. Oney. The next question is from the line of Brady Gailey with KBW. You may proceed.

Speaker 10

Hey, thank you. Good afternoon, guys. I wanted to start on loan growth. Johnny, you mentioned a lot of your peers don't have money to lend, they're loaned up. That's not the case at home.

Speaker 10

You guys have money to lend and Relatively low loan to deposit ratio. Is now or is today's backdrop a time where you could see loan growth pick up For

Speaker 2

whom? Well, I said earlier, we're going to service our customers. We're going to take care of our customers. Kevin is seeing some credits that from the outside that we don't feel He doesn't feel comfortable in doing at this point in time. And I think that's probably a good time.

Speaker 2

The key is we've got Great customers who've been with us for many years, enabled us to grow this company. And the point is take care of them. To say we won't do somebody that comes from the outside, We probably will under our terms and conditions if we can build a long term relationship with those people. If that's available, But there's we're not interested in one timers and we're not interested in anybody who can't bring deposits. We're just we're interested in relationships and Long term relation.

Speaker 2

We built Tracy built

Speaker 3

a bunch and Kevin built

Speaker 2

a bunch in 2008, 2009 2010 when we were in that process. So that worked Well, for us during that period of time. And there's an opportunity, I mean, we'll look at about anything, but if It's not the time. It is not the time. I don't think, Brady, to be aggressive.

Speaker 2

I think it's to be Real conservative and take your time because I don't know here think about this, there's going to be opportunities come out of this, right? And where do you spend your money? You have some real opportunities to spend some money in different areas and that could make a lot more money. So We think those opportunities, we have the opportunity to build on some stuff now. We think those opportunities are out there.

Speaker 2

We've chosen to take a shot at some of those And hopefully can increase profitability with those. So we're just being real careful, very, very careful. I'm just afraid this is not over. I'm just afraid this cycle is not over. And those who survive this cycle may have real opportunities.

Speaker 2

I remember 8, 9, 10, 11 how well Home did became one of the biggest buyers in the country of felt like opportunities. Those opportunities could happen again. So we're just going to remain conservative. Say we won't do a new loan, we will. We'll just look at it, but We're not looking at M and A right now.

Speaker 2

We're not interested in M and A. I mean, I think banks are trading. I think average multiple on banks Now they're trading about $120 a book. I think that's about where they're trading. That sounds pretty enticing to me with us at 2 plus times book, but I just don't want to buy somebody else's headaches and problems at this point in time.

Speaker 2

It sounds like the don't know Johnny Hamilton you've already dealt with. That's just the conservative side right now.

Speaker 7

That makes sense. And then

Speaker 10

you look at credit quality, it's still pristine at Home Bank. The reserve is still 2%, which is pretty high relative to where your metrics So running, do you think the reserve percentage continues to go lower here or do you kind of draw A line in the sand and say, hey, considering the backdrop, we need to keep this reserve at 2%.

Speaker 3

I'm a 2% guy.

Speaker 2

I'm a 2% loan guy. I don't care what they say. I'm a 2% loan guy. It's Always work. 2% loan has always worked.

Speaker 2

And then quick, I understand we go through all the calculations, we do all that stuff. I understand the importance of all that. And I compare, I watch that and look at that, but I know 2% works. So it doesn't matter to me, I know 2% works.

Speaker 10

And then lastly, for the year, you guys are sorry, what did you say, Johnny?

Speaker 2

I didn't hear that. What did you say?

Speaker 10

My last question is just on the buyback. You guys have been active On the buyback, is there any reason why that would stop? Or do you think stocks at a good value, you still buy it back here?

Speaker 2

Well, we bought back 250,000 shares on our 10b5 so far because they've been hammering the stock. So one of their I mean, they're killing all the banks, but We just think it's time to buy. So when we Steven put in the 10b5 and we're pleased with what we're doing As we buy the stock, so and we bought 590,000 shares before. So we've got the ability to buy more. I say we get out for a little bit, but then the stock gets cheap and we just buy.

Speaker 10

Great. Thanks guys.

Speaker 2

Thanks, Brady.

Operator

Thank you, Mr. Gailey. The next question is from Michael Rose with Raymond James. You may proceed.

Speaker 9

Hey guys, good afternoon. Just wanted to touch on Chris Poulton's business. I would expect that in this environment a lot of the competitors In the space are going to pull back. Do you guys kind of see that as an opportunity for you to grow that business? I Yes, you have some capacity there.

Speaker 9

I think the threshold is around 10% of loans. If we could just get an update there and kind of how you holistically Would view this environment because I would think that pricing power would kind of play in your hands as other people pull back. Thanks.

Speaker 2

We don't put a call on Chris. I'm going to let Chris take that and answer for himself.

Speaker 11

Yes, Michael, and thanks, Johnny. I think in theory, that's true. I'm a little in Johnny's camp right now, which is I think the loan we make tomorrow is better than the loan we can make today, certainly better than the loan we can make yesterday. And so, the phone is ringing a lot And we're talking to people. We're taking care of our customers too.

Speaker 11

And that I asked my team to create a list of different ways you can say no I was getting tired of the ways we were saying no to things. So we're up to about 27 different ways to say no and that will probably grow. But we'll start saying yes at some point. And we are, I mean, we did $200 and something 1,000,000 in the Q1. We'll probably do about the same this quarter.

Speaker 11

And We continue to get payoffs and paydowns. I like to see that right now too. One of the things I've been concerned about is what's exit look like and we just got paid off on one In the last week or so, that was a CMBS takeout that I kind of wanted to see how that was going to go before we Kind of think about some other things because if the CMBS market is there to take that out, it's a great loan and in such That's good. And if it's not, well, that was a really good loan. If we can't take that one out of CMBS, there might not be much.

Speaker 11

But that went off well. It's good for our customer. They executed well and we'll do more with that customer. What we're probably a little more focused on, to be honest, right now is getting ready for what comes next. And for us, that's Facilities Business.

Speaker 11

That's institutional buyers and institutional lenders that are getting ready. They've raised money. They're getting ready to go buy assets, buy loans, make loans, etcetera. And so that's really where our focus Has really probably been over the last couple of months. We've been gearing up.

Speaker 11

We're putting facilities in place with those folks, etcetera, because when they see opportunities, it's opportunities for them, it's opportunities for us. And so That's how we built this business and we'll stay focused on that. So I think that's probably where I'd see a little more opportunity than just going out and finding that. We're starting to get the phone calls from people saying, I had a deal, but my bank is not there. That's an Interesting discussion sometimes, but I think the facilities and backing folks that are going to put new fresh capital in is a little more interesting.

Speaker 9

That's great color. I appreciate it, Chris. And then maybe one for Stephen Tipton. The DDA mix is at about 28%. Any thoughts around where that could potentially bottom?

Speaker 9

Or do you think we've kind of seen the worst of it?

Speaker 4

I think if we go back pre pandemic levels, We were in the 20 I think mid-20s or so range. I think in our Yes, just looking back over the last several quarters, it's drifted down kind of in step with some of the other categories on the interest bearing side. It's certainly our focus. I think as it goes, as we mentioned, tax payments and some of those things may pull it down near term. But That's our focus and conversation with all of our bankers and presidents is on those operating balances and those Real core customers that are out there, so it's certainly the focus.

Speaker 9

All right. Thanks guys. And if you guys are Johnny, if you're taking applications for that chuck wagon, let me know where to sign up. Thanks guys.

Speaker 2

Okay. I want to be one of your darks. Did you hear me?

Speaker 9

I do. I hear you. I hear you. Well, if you get cheaper, we'll see. Hope not though.

Speaker 9

Hope not. Thanks guys. Appreciate it.

Operator

Thank you, Mr. Rose. The next question is from Brett Roberson with Hovde Group, you may proceed.

Speaker 12

Hey, good afternoon, everyone. Wanted to start on expenses and I'm not sure if all of the happy expense savings have been pulled out, but Was hoping for some color maybe on where you are on that and if the Q1 run rate is a good level to think about going forward? I

Speaker 13

mean, at this point in time, for our plans on Happy, we're pretty much there on what we're going to be Evan in savings. I think it's a pretty good run rate. We had a little bit of a reversal in Some accruals that we had in the Q1, which is about $1,600,000 But then on the flip side, salaries and stuff could Go up because everybody will start maxing out on FICO and stuff, but it's not far from the regular run rate.

Speaker 12

Okay. That's helpful. And then, Johnny, earlier in the conversation, you said We weren't done with this turmoil that maybe there was more to come. And a quarter ago, you were talking about People find in planes to see you and talk about credit and it sounds like you've pulled the horns in somewhat. Can you talk maybe and I've noticed that the 1 month T bill is back down even lower than where it was with those failures.

Speaker 12

Can you talk maybe about what you're focused on in terms of additional potential turmoil? Is it liquidity oriented or other things? And just It sounds like you're buckled down for a recession. So I was just curious if you had some thoughts on what that might look like for the industry or what you were focused on?

Speaker 2

Well, I think we're going to be higher for longer. The Fed cannot pivot. I don't think they can pivot. If they do, we'll be back in the 70s and with Volcker and they'll have to come back at a later date and fix it. It does look like things are slowing down, which is positive.

Speaker 2

I think that's positive. I think that's good. There is a chance that they can hold interest rates Maybe another quarter and then just pause and not do anything for a while and watch it. And that's probably the smart thing to do. I don't I think another 25 basis points could be cooked in right now.

Speaker 2

It It kind of depends on what the Fed thinks as a result of what they're seeing. They just push rights at the fastest rate till the stick broke. I mean they pushed it and pushed it and pushed it until it broke. And that's really sad as it is, That needed to be done because we got to stop this inflation monster and it's not over yet. So It may be coming back, it may be coming down, certainly appears that way.

Speaker 2

So I think we're going to be higher for longer. And I think we're about in an environment here where we're going to be for a while. So maybe 25 up, maybe flat, Maybe 50 up, but I don't think any more than that. So these people that the banks that were in trouble will remain in trouble for a while. They'll continue to have Pay higher and higher rates for money and they'll struggle through this process.

Speaker 2

So You just got to figure out when it's about to end and when it's going to be over and then maybe at that point in time we could get more aggressive on the acquisition To think about home, maybe the only bank in the country that bet the way we bet on rates the way we bet To go out and buy somebody today that didn't do that, that spent their money and leverage the hell out of their balance sheet and For us to buy them, I mean, of course, we want a premium, right? So they don't sell up much premium. But the point is, I'm not willing to leverage my balance sheet In this crisis right now, I've never seen a liquidity crisis. This is my first time to really see one. So I mean, Bonnie and I talked about earlier, we did see some semblance of it back in the '70s when all S and L went broke.

Speaker 2

I'm surprised the credit unions are hanging in. I don't have those credit unions are hanging in today. They did low rate loans and I guarantee you they're paying higher rates What your loan book is, that's what broke out the same as loan. I wouldn't be surprised, it doesn't break a bunch of credit unions. So I'm not predicting that.

Speaker 2

I'm just saying it certainly appears that when you look the way things are lined up, I mean you see some banks out there, I know some banks out there that are really, really Time right now, really struggling. And it's going to be years before they unwind. I mean, they're not going to solve this deal next week, next month. They've got 2 or 3, 4 years of this, maybe a strong story. It depends on how long I remember the guys walking in doing 3.70 fixed And I told Tracy, now that's a number that worked forever, right?

Speaker 2

And what they told us, when we sell it back to us, I hate to look at his book Because he's paying 4.5%, 5.5% for money. So I think it's cautious times And I think just be smart and be careful because home has an I don't know what that opportunity is yet. I don't know where it is, But I believe it's there and I believe home has the opportunity and the liquidity and the ability to step up and Buy something that makes some sense for be it pieces of assets or be it another financial institution. But How big do you want to buy and how much risk do you take when you do that and what does it do to our liquidity at that point in time? So those would be the questions.

Speaker 2

I can't ask, I really that's about as good as I can do. I don't know where it is, but I'm not going to see it. Does that make sense?

Speaker 4

Yes, I know that's good color. I appreciate

Speaker 5

it, John.

Speaker 2

We've been pretty good at knowing it when we see it. So Thank you for that, Brett.

Operator

Thank you, Mr. Rabatin. The last question is from the line of Brian Martin with Janney. You may proceed.

Speaker 14

Hey guys, good afternoon. Just maybe just a couple of minutes just at the end. Just the on the I guess within the last quarter, I guess in the December quarter, I'm not sure where it stands now, but just kind of level of Substandard loans are kind of classified loans. Can you give any color? It looked like they did they increased a little bit at year end and just kind of wondering where that trend is today and just In conjunction with kind of the dive you did on real estate in the office book.

Speaker 5

Hey, this is Kevin. So, yes, we had a little bit of an increase at year end. There was one pretty large relationship The timing of the review just came at a bad time for them and things have turned back around for them. They're in the energy business and time has turned back around for them. I would expect that either this quarter or next, We'll probably see them come out of the classification.

Speaker 5

So other than that, I've not seen A lot of movement downward.

Speaker 14

Okay. So no real change From that Q4 level to today, not a whole lot on either the criticized or classified levels from that base?

Speaker 5

Not materially, no.

Speaker 8

Yes. Okay.

Speaker 14

All right. And then how about just I know you talked a lot about M and A, just the opportunities, but how about just With some of these banks that are struggling out there, Johnny, I guess, is a lift out a possibility? I guess, is that something I know you're looking at The FDIC are just the banks have failed, but outside of that just lift outs of people as opposed to acquisitions. Is that something that's Realistic to think about it? Probably not.

Speaker 2

I don't like that. I don't like I'm not a lift out guy. I don't like lift outs. I don't like to be lifted out. I don't like that stuff.

Speaker 2

I mean, I think it's chicken. You drink the rest of it, but

Speaker 8

I got you.

Speaker 2

You train somebody, you bring them in, you teach them, you give them lots of business and suddenly they go home inside their hero and they're going to go somebody go $100,000 signing bonus and they're going to walk out on you. So I'm not watching. We had that happen to us, as you know, in West Texas, As you saw what happened to us out there with those guys and that has not worked out for those people. Let me That has not worked out very well. I think I don't know if what I got back is totally correct or not, but I understand Nearly every one of those people that left there that we have found that may have moved some information improperly or unemployed now.

Speaker 2

So I don't know how well that works out really. So it is I think they've closed branches and those people are gone, but all those people are gone. What they did was not right. So I don't want that I don't do that to other people. I don't want them doing it to me.

Speaker 5

So Hey, Johnny, I'll remind you, we actually talked to a group a while a few months ago and really liked them. Great. I think it's been great opportunity and We just put on hold and passed for now because it makes sense that as Johnny said, we're going to take care of our customers and take care Of new opportunities that are going to be significant relationships, that's more important to us right now than They're lifted out to you.

Speaker 2

Kevin is exactly right and I was at a bank conference shortly thereafter and I saw that CEO. And I just thought, here I am talking to his people behind his back and I wouldn't want somebody doing that to me. And I just really felt bad. I don't if I'd hired this guy, I don't know how I would have How I felt about looking him in the eye. Some people have no conscience and they are able to do what they want to do.

Speaker 2

I mean, Service First mistreated us what they did and they paid for it. And that's their style of operation that just happens It's not to be ours. Got you.

Speaker 14

That's helpful. And maybe just one for Steven, I guess. Steven, I guess, where did the I know you gave some Ending points for the rates, where did the margin end in March, kind of end of period and just kind of where what Johnny is kind of Alluding to as far as maybe one more hike in stopping, just kind of wondering, it feels like we're kind of near a peak on the margin. Just wondering if that's Kind of consistent with how you're thinking about it. I understand that the thought you want to take it higher and loan yields are going higher, but just trying to understand where it ended and then just Maybe if we are ending the tightening cycle here.

Speaker 7

Sure.

Speaker 4

So we ended March at $440,000,000 on the NIM. I think there may have been a little bit of event income But it was fairly consistent with where the quarter averaged. Yes, and I'd echo Tracy's comments. I mean, it's Everybody is focused around here every day. If we see rates continue to go up, Our ALCO model shows that we benefit slightly from another I don't know if we get another 100 from here, but as rates go up that we still benefit Slightly.

Speaker 4

I'd like to think that with the events over the last month that the world focuses on strength And flight to quality maybe instead of where the highest interest rate might be. So, that's our focus. We've got The investment portfolio cash flows come in. We've got variable component to that. We've got The loan portfolio that will move as either as rates go up or as loans mature and have the opportunity to reprice.

Speaker 4

So whether or not we see rates go and how far we'll continue to have the opportunity on the asset side to offset what we have to do on deposits.

Speaker 14

Got you. And you said I

Speaker 2

suspect there'll be lots of people looking around for Opportunities with different banks in the future because so many of these banks are loaned up. If they're on a commission scale, they're going to struggle For a period of time, those is some of the lenders have told our lenders, their bank said we're out of the lending business. We're totally out of the lending business. So That hurts some of those lenders, I'm sure, the income of some of those lenders. You may see some of that moving around.

Speaker 14

Yes, that's true. And Stephen, just the deposit beta, kind of the where you think do you have any sense on kind of where you think that may end the year as you kind of get through the couple of quarters, kind of the cumulative beta all in?

Speaker 4

No. I mean, I think we've been in the 50% range each of the Yes, this past quarter and in Q4 and absent something changing on the funding side, I think that's where we would Target that to be.

Speaker 2

The key is can we outrun the deposit costs? Yes. And we've been fairly successful as Running the deposit costs, so that's the daily report shows that we're a little behind shortly, a little behind this month. But overall, the last quarter was fairly we won some and lost some on different days, I guess, but overall, we won. So Hopefully, we can hold that together.

Speaker 14

Yes. Well, thank you for taking the questions and thanks for all of the added disclosure on the office book and the liquidity.

Operator

Thank you, Mr. Martin. We have one additional question from the line of Stephen Scouten with Piper Sandler. You may proceed.

Speaker 15

Hey, good afternoon, everyone. Sorry, I hopped on a little late. But I did want to ask What you're hearing from regulators currently if it hasn't been covered? I just remember when you guys crossed through $10,000,000,000 in assets and Felt like you were required to add people you probably didn't need at the time. And I'm just kind of wondering if you think those sort of Incremental oversights and headcount additions might get pushed down due to all of this that's transpired as well.

Speaker 2

Steven, I think it could get pushed up. I think I worry about new regulations coming down on the banks As a result of SVB and Signature, we didn't that wasn't what we needed. That's It's not what we need. We just need the regulation to be enforced. I can promise you one thing that wouldn't have happened out of St.

Speaker 2

Louis With the St. Louis region, that wouldn't happen with our regulators. That's what happened in California. That would have not happened Our regulators are on top of the game. They do a great job.

Speaker 2

We have a great relationship with them. They keep us aligned and we stay in line. So I think that was I think if you want to throw stones at somewhere, I think that was I think that may have been somebody else's responsibility that It was not properly tenant in the store because I can promise you one thing, as close as St. Louis stays with us So what we're doing that would have never happened here and Arkansas too. I mean the Arkansas State Bank Department, good operator to keep us and We don't get too far out of line ever, but I think that was in stock.

Speaker 2

But I fear they're going to come down with some more relicensing and more and more and more I think that was a lapse in judgment in those liberal communities out there that I mean we've been Some of that stuff didn't look very good. They only have one guy, I think, on the bank board that appeared to have lots of bank expenses. That was a former member of the Fed, I think. So they just didn't pay attention to me, they didn't pay attention. So it was a mismanagement of the balance sheet And it lasted 2 days and it's over, bam, that's how fragile that thing was.

Speaker 2

So that's what that gets your attention as a banker And as a large shareholder in a financial institution, when you see one go bam, it blows up in 48 hours. So Tells you it's time to be conservative.

Speaker 15

Yes, yes, for sure. Well, like we discussed, no bank is really built to withstand the bank That's kind of yes, you got to prevent that in the first place, I suppose. So, congratulations on a great quarter. One of the few green tickers on my screen right now. So the market appears to agree that you're in that catbird seat.

Speaker 15

So well done.

Speaker 2

All right. Well, thank you very much for your support. Great report.

Operator

Mr. Scouten, that concludes the question and answer session. So I will turn Call back over to Mr. Allison for any closing remarks.

Speaker 2

I think we've said it all. I don't don't think we have anything else to say today. I think we've set it out at our shareholders meeting today and Then we move from there to our conference call and we have our we're in line for our Board meeting that starts 10 minutes ago?

Speaker 1

That's right.

Speaker 2

It started 10 minutes ago. So look forward to talking to you all in 90 days and thanks for everybody's support.

Operator

That concludes today's call. Thank you for your participation. You may now disconnect your line.

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Earnings Conference Call
Home Bancshares, Inc. (Conway, AR) Q1 2023
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