I really was – I was excited about the opportunity in these markets, but they don’t work. Then, we looked at – we were really involved in three transactions at the time, and we were so focused on the bigger one that when it reached a point of no return, so to speak, we let those others run off and we might should have moved on one of those. So I haven’t heard if either one of those other two sold yet or not.
Brady Gailey: And then moving on, it feels like you’ll have a shot at hitting your $400 million in earnings for ‘23 goal, which is great. Any idea what that goal will look like next year? It feels like another $400 million would probably be tough to hit. But any idea about your goal or the way you’re thinking about next year?
John Allison: We don’t normally go backwards. I’m not a guy that looks at going backwards. I look at going forward. So I would expect something better. We expect something better. It has been frustrating here for the last three quarters, watching the interest expense, keep nipping, even though we’re getting – I mean, we’re in record revenue. It’s just interest expense nipping it. And I think that has slowed, that interest expense has slowed, and I don’t think the Fed is going to raise. I don’t think they’re going to raise rates. So, I think we may be stabilizing in here somewhere. And we’ve got some – as we continue to reprice our book and the new loans coming on stream are all in the 10%s range, 9.5%, 10% range, plus fees.
So I’m optimistic that we can do that. And Tracy is committed to decreasing the expenses here at this company. So we’re going to work on that. We have not done that in years, and it’s not – we just – not that we don’t pay attention to it. We just let it creep up on us over a period of time, and it’s time to reevaluate every segment of this company and determine if we want to continue to keep it or get rid of it or what we want to do. It’s just that kind of time. I see where everybody’s doing that, not only us, but I see it being done everywhere. I saw where FBK cut $20 million out. They redid some nice – Chris did a nice job there, redid some 70-something-million dollars’ worth of bonds or securities, and he cut $20 million in expenses out of his $12 billion asset company.
So, hopefully, we can find some room in there to cut some out and pick up some expense saving. We haven’t looked at that in a long time, and we’re going to – we’re diving into it.
Brady Gailey: So, expenses are an opportunity, you just mentioned a bond restructuring. Is that something that potentially would be on the table as well for Home?
John Allison: Well, it’s interesting, we have an executive call every day at 10:10. And a couple of days ago, Tracy mentioned that. And he said, we looked at that a while back. And I said, yes, we didn’t get too serious about it. And after watching what FBK did, they did a pretty nice job with that, we’re looking at some – if you replace a 2% bond with a 10% loan, that’s a pretty – they’ve got my attention. So I’ve asked our securities department to look at that and bring it to the executive committee and let’s see what makes sense and what doesn’t make sense. So the answer to that is, yes, we may look at that. I mean if we got some 10% loans out here, we can take some 2% securities and sell them. I don’t know how much the loss will be on, but – and if they’re short, maybe it’s not a lot of loss, but put them back into 10% yield in securities, that’d be – you get an earn back pretty quick. We’re looking at it, already.
Operator: Our next question comes from Jon G Arfstrom with RBC.
Jon Arfstrom: Just want to understand the – just so I fully get the change in non-performers. So the California building and the Miami property are the two that went into non-performing loans, is that right, that drove the $30 million increase, those 2?
John Allison: Plus the marina. Yes, the marina…
Jon Arfstrom: Plus, the marina? Okay.
Stephen Tipton: Yes, the three credits that I talked about earlier, the three that are the new additions of any size.
John Allison: It is the office building – it’s office building that we have that we got 22s five or seven something in. it’s the marina that just popped up out of Dallas. I can’t imagine – I’m a boat freak, so I can’t imagine losing money on a marina. And it’s indicated to us that the guy had other problems that caused this problem. So, I don’t know about that. We’ll look at that. And the other one was we’ve been messing around with this property down in Florida for some time, and it’s about $7 million, and we have an offer on that that is above our carrying value of $7 million. So hopefully that might be gone here before too long. That’s the three pieces of property. So I haven’t seen the marina, but I’m going to go see it.
I know the Florida property and I went to look at the California property. I just wanted to see, it’s the first office building we’ve ever had. I just want to go see it, touch it and feel it. And you can tell by the address, it’s 1733 Ocean Avenue. So it’s on the ocean, I mean it’s Class A office space.
Jon Arfstrom: Yes. And you’re moving there, I like it.
John Allison: I don’t think we’re going to have a loss in that property.
Jon Arfstrom: Okay. So next quarter’s $30 million rolls out of NPL into OREO around that level. Is that the right way to think about it?
Brian Davis: At least 20, not sure about the marina at this point. It’s still early. The other two are further along than that.
Jon Arfstrom: Okay. Anything else in credit you’re worried about? And I know you’re prepped for it, and I’ve been through Florida with you guys when it was really dire, but anything else that you’re concerned about? And when you look out in the future, Johnny or Kevin or Tracy, what do you think credit looks like in 2024 for you and the industry?
Kevin Hester: Jon, I want to make sure I had the right number on the NPAs. It’s two of the three credits, the 23 and the seven will move in the fourth quarter. The 9, the marina, I’m not sure about. As far as the rest of portfolio, past dues are – they’ve been up a little bit a couple of quarters, a quarter ago. They were back down this quarter. The only thing I see is that our portfolio mortgage product has a little higher past dues in the middle of the quarter. It’s – some of it is the foreign national portfolio product that we’ve done in Florida for a decade. Those are at lower loan to values than the rest of our portfolio. And they’re in Florida, so I’m not concerned about them, but they have ticked up past due wise a little bit the last couple of quarters. Other than that, it’s just the three credits that we’ve talked about for the last couple of months.
