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

The Fed cannot pivot, I don’t think they can pivot. If they do, we’ll be back in the ‘70s and with Voker and then we’ll have to come back at a later date and fix it. It does look like things are slowing down, which is positive. I think it’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 think another 25 basis points could be cooked in right now. It kind of depends on what the Fed thinks as a result of what they’re seeing. They just push rates at the fastest rate till the stick broke. I mean they pushed it and pushed it and pushed it till 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.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 are in trouble will remain in trouble for a while. They’ll continue to have to pay higher and higher rates for money and they’ll struggle through this process. So you just got to figure out when it’s about to end and when it’s going to be over and then maybe that point in time we could get more aggressive on the acquisition side 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, they spent their money and leverage the hell out of their balance sheet.And for us to buy them, I mean, of course, they want a premium right.

So they don’t sell up much premium, but 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, Bunny and I talked about it earlier, we did see some similar summit back in the ‘70s when all the asset areas went broke. I’m surprised the credit union are hanging in. I don’t have those credit engines are hanging in today. They did low rate loans and they’re not guarantee they’re paying higher rates than what their loan book is. And that’s what broke all the savings loan and I wouldn’t be surprised. It doesn’t break a bunch of credit unions. So I’m not predicting that and I’m just saying it certainly appears when you look the way things are lined up.

I mean, you see some bikes out there. I know some bikes out there that are really, really tight 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. That they’ve got two or three, four years of this maybe, maybe as strongly as for it. [Indiscernible] I remember the guys walking in doing 370 fixed 10, toll pricing. Now that’s the number that I’ve worked forever, right? And what they told us? I want to sell it back to us. Well, I hate to look at his book today. Because he’s paying 4.5 percent 5 percent 5.5 percent for money. So I think it’s cautious times And I think just be smart and be careful because home hasn’t — 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, it makes some sense for a bit pieces of assets or be it another financial institution. But how big do you want to buy how much risk will you take when you do that? And then what does it do to our liquidity at that point in time? So those would be the questions.I can’t add really that’s about as good as I can do. I don’t know where it is, but I don’t know what going to see it. That makes sense. 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.Brian Martin Hey, guys.

Good afternoon. Just maybe just a couple of things 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 stuff standard loans or kind of classified loans. Can you give any color? It looked like 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?Kevin Hester Hey, this is Kevin. So yes, we had a little bit of an increase year-end, there was one pretty large relationship that 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 expect that either this quarter or next we’ll probably see them come out of the classification.

So other than that, I’ve not seen a lot of movement downward.Brian Martin Okay. So no real change from that fourth quarter level to today, not a whole lot on either the criticized or classified levels from on that base?Kevin Hester Not materially. No.Brian Martin Yes. Okay. All right. And then how about just any a lot about M&A, just the opportunities, but how about just some of these banks that are struggling out there, Johnny, I guess, is a lift outs of possibility I guess that’s something I know you’re looking at the FDIC or just the banks have bailed but outside of that just lift out to people as opposed to acquisitions. Is that something that’s realistic to think about or probably not?John Allison Yes, I don’t like — I’m not a I’m not a lift out guy.

I don’t like to lift out, so I don’t like to be lifted out. I don’t let stuff. I mean, I think it’s chicken, you can drink the rest of it, but…Brian Martin I got you.John Allison Brian, you’re trying 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 — some might go given $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. And she saw what happened to us out there with those guys. And that has not worked out for those people. Let me explain that. That has not worked out very well. I think, I don’t know if what I got back is told correct or not, but I understand nearly every one of those people that left that we have found that may have moved some information improperly or unemployed now.So I don’t know how well that works out really.