Home Bancshares Inc Q4 FY2023 Earnings Call

Greetings, ladies and gentlemen. Welcome to the Home Bancshares, Inc. Fourth 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 will begin with prepared remarks, then entertain questions. Please refer to their cautionary note regarding forward-looking statements. You will find this note on Page 3 of their Form 10-K filed with the SEC in February 2023. This conference is being recorded.

Thank you. Good afternoon, and welcome to our fourth quarter conference call. With me for today's discussion is our Chairman, John Allison; Tracy French, President and CEO of Centennial Bank; Stephen Tipton, Chief Operating Officer; Kevin Hester, Chief Lending Officer; Brian Davis, our Chief Financial Officer; Chris Poulton, President of CCFG; and John Marshall, President of Shore Premier Finance. Our team is assembled today to review the fourth quarter results with you, and we will begin with some remarks from our Chairman, John Allison.

Good afternoon. Welcome, everyone, to the fourth quarter and year-end 2023 earnings release and conference call. I firstly want to thank you all for your many years of support for this company. I believe Donna told me the other day how quickly time passes. This is our 25th year. Donna, is that correct? Yes, that's correct. It's hard to believe that Home Bancshares has been around for that length of time. I remember 1999, it was our first year in business. We were cash flow positive and would have been profitable had we not started building reserves at that time. But you know our belief on reserves, and we continue to build them over the years, and they paid dividends for us. Year two, the company was profitable and has been every year since the first year. We ended 2023 with total assets of $22.7 billion and earnings of almost $400 million. Actually, we would have earned over $402 million without the surprise FDIC $13 million special assessment that we had to book for our part of the failed banks that occurred during 2023 because of poor management of some of those respective banks. I've heard Washington complain for years about taxpayers bailing out banks that went broke. In 2008, 2009, and 2010, it was the TARP (Troubled Asset Relief Program), and the Fed was heavily criticized for that program. We borrowed $50 million from the Fed at a little over 5% interest. At that time, we were getting about 0.4%. And we paid 5%. The Fed did our math; they made money. We did that totally as an insurance policy and never spent a dime of the money. If you remember what I said when someone asked me what did you do with the money? I said I took it home, put it in my fella and waited with a .357 Magnum right beside me. It seems like it was yesterday when that happened. We kept the money for several years while becoming one of the largest buyers of failed banks in the United States. We were building out our Florida franchise, which has become a very profitable part of this corporation. What a great run that's been. I don't know about other banks paying their fair share, but we certainly did, and we are now. We are having to pay $13 million because of the stupidity of other management teams. I don't like that, but it is the best way for banks to repay the Fed. After all, the Fed did front the money to save many banks. I think the prior years would have been enormously impacted without that support. I felt the system was on the edge of collapse, and the Fed stepped in with their new BTFP (Bank Term Lending Program). Under this program, the Fed allows banks to borrow 100% of the face value of any security regardless of the market value. If they had a municipal bond that they paid $100 for and the market value was $50, I think if I'm correct, I can borrow $100, right? That's correct. So those that had the major ALCO issues kind of wiped that out for a lot of them. Probably that saved 80% of the banks in the U.S. Bank management teams plowed all that funny money, fiat currency into long-term low-rate securities while in a rising rate environment. It's almost funny if it wasn't so serious, and you can't make this stuff up. That's why I say most bankers are not very smart. The small percentage of banks that did not make that mistake have weathered the storm well. Home was prepared for failed bank days in 2008, 2009, 2010, and 2011 and reaped the dividends of the war chest of capital in huge reserves and a strong management team. Likewise, this time, Home was totally prepared for this bank crisis. We didn't know when it was coming, but we were just getting prepared with more capital, larger reserves, a more experienced management team and a fortress balance sheet. But the monsters were just too big, and many banks would have failed. If the Fed had not provided easy access to cash, the regulators moved to provide free money. Once again, probably was the best thing that the Fed could have done to save the weak banks. Home was hoping for another financial downturn, and again, was one of the few in the country that properly prepared for whatever was coming. Our regulators have continually told us to keep our powder dry because they need us to help clean up some of these messes. There are simply too many weak banks cluttering the banking space with limited capital, crazy growth plans, coupled with very weak leadership. Kemmons Wilson, the Founder of Holiday Inn, said good judgment comes from experience, and experience comes from bad judgment. I think there is no substitute for experience. These banks with 8% or less capital, 75% to 80% efficiency ratios, and loan-to-deposit ratios of 105% threaten the entire safety of the whole banking industry. The regulators were stretched to the limit. I think it's just too big a job to regulate that many different financial institutions. If my numbers are right, there are nearly 5,700 banks and another 5,400 credit unions, with credit unions buying banks all over the country. As you know, credit unions pay no state income tax and no federal income tax. So every time you see a credit union buying a bank, the federal deficit goes up. That needs to be corrected. Let's talk about the results of the quarter and the year. They were pretty good. We'll take the blame for poor results that we can't control. But the Fed assessment was almost $10 million after tax, totally beyond our control. So I want to present with you today both why and how we reported the earnings under GAAP and how they look had we not had the assessment. Different from the past, we had to actually book the liability this time, right? That's correct. We booked the whole $13 million. That ended up being about $9.6 million after taxes, if I recall. It is our belief a matching amount of—we're not going to get into the lawsuit situation today because that's in court. And I think that probably cost us some money for the quarter as we continue dealing with that over a period of time, but that decision is pending in a court of law. The assessment was $9,739,000 after tax. So we reported earnings of $86.2 million. Without the Fed charge, we would have had $95.9 million, almost $96 million. So for the year, that puts us at $392,929,000, or without that, we would have been at $402,698,000. The EPS was $0.43, and without the Fed charge, it would have been $0.48, which is a beat. The return on assets were $1.55 with the Fed cost and $1.73 without. Year-to-date, we're around $1.81 without the assessment. Return on tangible common equity was 15.8% with the Fed assessment and 17.54% without. P5NR was 48.22%. We haven't been that low in a while. That's with the assessment, and 53.51% without. Steve is going to talk more about this shortly regarding the margin. The margin was 4.17% versus 4.19%, and a little of that we created ourselves, I think, Brian. With our borrowing, didn’t we, that 1 basis point for the month? So actually, we're pretty much flat. Non-performing assets remained stable at 0.42%, both in the third and fourth quarters, and we continue to maintain our reserve of 2%. Tangible book value saw a nice increase from $10.90 in the third quarter to $11.63 in the fourth quarter. Our CET1 continues to grow. We were at 14% last quarter, and this quarter, we're at 14.4%. We're making good money and we continue to grow those capital ratios. Leverage was 12.4%, and risk-backed assets was 18.1%. Revenue was a beat. Fourth quarter revenue was $245.6 million. I thought that was pretty good. It's interesting to see that we were up pretty strong on interest income, but we're also up almost likewise on interest expense. I like the spread. We were up $11 million plus on interest income and $11 million plus on interest expense. Hopefully, that will stop or slow down at some point in the future. Loans grew by $152 million in the fourth quarter. CCFG was down $61.5 million for the quarter, but legacy grew a total of $214.4 million—our best quarters we've had in a while. Deposits also grew by $270 million. In Q4, we repurchased 815,000 shares at an average price of $21 for $17.3 million. For the full year of '23, we bought back 2,225,849 shares at an average price of $21.69 for a total buyback of $48.3 million. We have 16.7 million shares left available for repurchase. It was not a great quarter, but it was not a terrible quarter. I'm sure a lot of people have bigger problems than Home has. It was a tough quarter, very frustrating and difficult. We embarked on a—I told you last quarter—a cost-cutting measure. I don't know where we are there yet. I haven't seen any of it, but I think we should start seeing it. The effects should show up first this month, next month, and the month after that. So if we didn't get enough, we'll go back and get some more, but it's a tough environment. Outside of that, Donna, I don't really have anything. You can have it back and do what you want to do with it.

Okay. Thank you, Johnny. Next, we will hear from Stephen Tipton with some operational details.

Thanks, Donna. I'll start with the net interest margin, as Johnny referenced in his comments. The reported NIM was down 2 basis points to 4.17% in Q4. But as mentioned, we carried some additional cash on the balance sheet late in the quarter, which improved NII but negatively impacted the NIM by 1 basis point for the quarter. We continue to closely monitor asset repricing against the increase in costs on the funding side. When adjusting for the excess cash in December, the monthly net interest margin would have calculated at 4.17%, nearly matching the quarterly average. During the quarter, total deposit costs increased 22 basis points to 2.09%, while the yield on loans, excluding event income, increased 20 basis points to 7.19%. On a monthly basis, total deposit costs increased 6 basis points in December to end the year at 2.16%, while the yield on loans, excluding event income, increased 4 basis points to 7.25%. Switching to liquidity and funding, it was great to see an increase in deposits in Q4, particularly as the rate backdrop continues to be extremely competitive. Total deposits increased $269 million in the quarter, with the majority coming from the Texas and Arkansas regions. The deposit mix movement was similar to prior quarters as interest-bearing balances increased, and CDs continue to be in focus for consumers. We still remain just under 10% of total deposit balances in that CD category. Noninterest-bearing balances account for 24.3% of total deposits, down to 26% in Q3. Alternative funding sources remain extremely strong with broker deposits only comprising 2.3% of total liabilities. The loan deposit ratio was in line with the prior quarter, standing at 85.9% at year-end. The focus on loan committees and discussions amongst all of our presidents continues to be on deposit gathering, core customer growth, and retention. On the asset side, as Johnny mentioned, in-period loan balances increased by $153 million, with the Texas region increasing by $160 million and Florida increasing by $31 million, offset by a decline in the balances with CCFG. On loan originations, the volume picked up in Q4 with approximately $1.17 billion in commitments. CCFG finished the year strong with nearly half of their full-year production coming in Q4. The community bank groups accounted for two-thirds of the loan production in Q4, with the Texas regions closing nearly $400 million in volume. Overall, the yield on originations continues to improve with an average coupon of 9.18% in Q4. Closing with the previously mentioned strength of our company, all capital ratios improved in the quarter, notably with a tangible common equity ratio of 11.05%, a leverage ratio of 12.4%, and a total risk-based capital ratio of 17.8%. With that, Donna, I'll turn it back to you.

Thank you, Stephen. And now Kevin Hester will provide us with the lending update.

Thanks, Donna, and good afternoon, everyone. I'm happy to be able to tie a bow on the very challenging year of 2023 and begin to look forward to the new year. Even with the unprecedented challenges we faced as an industry in 2023, we at Home were in a very good position to take advantage of whatever this year brings. Our asset quality remains solid with low past dues and nonperforming loans, combined with a very strong capital position, which includes the 2% loan loss reserve. I will provide details on that in a moment. First, I would like to give you an update on the three credits that we discussed in detail last quarter. We have agreed in principle on the sale of the Oklahoma Marina note at par and hope to have it closed very soon. We are finalizing the note sale documents at this time and anticipate payoff to occur shortly after. We also have a signed offer with a short due diligence period on the Miami property at a number that would result in a full payoff of the OREO balance with a small recovery. This buyer is familiar with the property and the area, so we think it's a good buyer for this asset. Regarding the third asset, which is the office property in California, I will pass it to Chris Poulton for an update.

So the subject property is a 95,000-square-foot office building, subject to a ground lease, located at 1733 Ocean Avenue in Santa Monica, California. During the quarter, we completed a deed in lieu of foreclosure in October. During the fourth quarter, we expensed just over $300,000 in transaction costs to bring the property into OREO. As part of that transaction, we received just over $5 million from our borrower, and this was used to reduce our basis in the property to just under $23 million. The current as-is appraised value is just over $32 million, putting our carrying value at approximately 70% LTV. The building is currently 50% occupied, operating just above breakeven, where our lease income is at or just above our building expenses, which includes the ground lease insurance and other operating costs. We're planning to occupy space in the building. We started moving our West Coast office into the building this week. Our prior lease in L.A. expires this month. Our media focus on the building is in three areas: first, stabilizing the rental income through extensions and new leases; second, there's some cleanup remaining on the existing ground lease; and then third, we're preparing to market the property for sale. The bad news is that this is an office building. The good news is that it's very well located. We have been paid down by 50% against our original loan. We have an immediate use for a portion of the space, and the current building income is sufficient to operate at breakeven today. With that, I'll turn it back to you, Kevin.

Thanks, Chris. Going back to the asset quality numbers. Nonperforming assets remain unchanged on a linked-quarter basis at 42 basis points. Early-stage past dues at 12/31/23 were 61 basis points, which is down 23 basis points on a linked-quarter basis and flat when compared to a year ago. Net charge-offs for the year of 2023 were 9 basis points of average total loans. As a further note, we have completed a detailed review of all 2024 maturing loans over $3 million with an interest rate below 7%, and we have noted very few loans for which an increase in current interest rates would create any significant default concerns. This is due to a combination of strong borrower guarantor support, low overall leverage, and the majority of our lending taking place in growing Southern U.S. geographies. We will continue to monitor this subset of loans but are encouraged by what we see at this time. In conclusion, I'd like to thank our lending staff across the footprint for doing the hard things, asking to be paid for the risks that we take, and pushing for the equity and structure needed to ensure that the borrowers' interests are aligned with ours. It's not easy work, but it's the difference between an average-performing bank and a best-in-class financial institution. Donna, that's all I have, and I'll turn it back to you.

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

Tracy, any comments today?

Well, first of all, congratulations on the 25 years. I could have sworn it's been 40. Congratulations on that, Mr. Allison, and what a story you've created. Good reports. It's nice to see '23 close the books on it. It was an interesting year. Last quarter seemed to show a turn in the loans and deposits. As you've indicated, our noninterest income, noninterest expense, I think there's certainly room for improvement there, and we'll continue to do that. But I just also want to compliment the entire management team of the bank, all across this company, for all the things they've done to get us through this year, and I look forward to 2024.

The margins, being able to maintain that margin, to me, is pretty important right now. It looks like they asked Donna just on the road when we were out for the last, I'm sure next time, do you think you can maintain that margin? I told them I thought we could. We certainly intend to try to. So what do you think?

Yes, I think certainly on a monthly basis over the last quarter or two, I mean, we've operated in a pretty tight range. We still have the maturing loans that we've previously talked about that will continue to come through over the course of 2024. If we can continue to reprice those upwards, I think the prospects for that are good. It's certainly what we're working for.

So Kevin, are you seeing the pipeline remaining fairly strong here or are you seeing it easing up a little bit?

No, I think it depends on the geography, but we certainly have some folks that have some good opportunities in some good areas. So it looks like the first quarter is holding in there, and I feel pretty good about '24.

Brian, have you completed your budget for '24?

Well, yes, we're going to have it presented for the Board meeting this week.

And how much did you raise? Did you lower or raise? What did you do?

Well, it's down a little bit.

Better than expectations?

Yes.

We've challenged it to be better than what expectations are out there. They asked Donna and me, they said, we got you forecasted to be down next year. I said, I don't think that. I think we've got a shot. There might be some opportunities out there. You saw where Home Street sold today or yesterday. We see some activity out there, maybe opportunities for us at some point in time that we can pick up. We haven't really addressed much M&A in the last couple of months. We got on the deal out in Texas at one point in time, and we really haven't looked at anything lately, have we? Donna had her head down, running her own business and trying to end the year. Anyway, I'm going to turn it back to you, Donna, and I'm ready. If everybody is ready for Q&A, we'll go to Q&A.

We're ready for questions.

Our first question comes from the line of Brett Rabatin with Hovde Group.

Congrats, Johnny, on 25 years. It's been a run.

Yes. That's correct. I didn't realize it's been 25.

I wanted to first talk about the margin a little more. You talked about being able to maintain it. Can you talk maybe about the dynamic with NII and the margin? And it would seem like you might manage the balance sheet fairly flat or have an opportunity to. While you're growing loans, which could mean the margin is better later this year, I just wanted to get an outlook for the margin. If the Fed does cut rates, how do you feel about that? Could the margin trend up later this year?

Brett, this is Stephen. I think our view today is that while we continue in this rate environment, we can tread where we are. We've traded in a pretty tight range over the last couple of quarters. We do have the opportunity from a loan repricing standpoint. We talked last year; we had $1 billion over the next five quarters. I show we have about $780 million that is under 6% that will mature this year and give us the opportunity to reprice. We have a little over $1 billion that's at or below kind of our spot rate at the end of December, which was 7.25% on the loan book. We still have some upward pressure on the deposit side; that seems to have slowed a little bit. We had a lesser increase in December than we've seen on a monthly basis in the back half of the year. Our view is that the ability to reprice loans can offset what we continue to have to do to manage on the deposit side in this rate environment. If we do see cuts at some point in 2024, that gives us the opportunity to pare back on the deposit side as those come through.

We watch it every day, and we look at it every day. We look at what the revenue is generated for that day and what the margin is for that day. I mean, we live it 24/7 around here. I actually don't think there's as much room—I don't think interest expense is going to go up as much as interest revenue is going to go up. So as you heard from Stephen, we've got some repricing opportunities coming about $1 billion for us. So I think we'll continue to do that. We'll monitor it daily as we have been doing. As you can see, we basically won a little bit in the fourth quarter. The third quarter, we were getting beat. The interest expense was outpacing the revenue and was disappointing, and we made some adjustments there. I said in my last call, there are only two ways to increase profitability, and that's to cut expenses or increase revenue. We did both, but you haven't seen the cost cut effects of the company yet to my knowledge. I appreciate the compliments about good expense control, but it's not where we wanted it to be. We just got a little fat over the years; it happens, it's natural to do that, and we went back in and went to work on it. If we didn't get enough, we'll revisit it.

If we have the $500 million for the whole quarter, we'll be profitable to the bank, but it will dilute the margin about 10 basis points.

Yes, if we keep it all next quarter, it will be dilutive to the margin by 10%, but it will increase profitability by about $1 million for the quarter.

That's helpful. I was going to ask about that. It looked like that was what that increase in borrowing was. And back to my other question, my follow-up question was just around loan growth. It sounds like the pipeline suggests you could continue to have some growth. Last year, you kind of managed a flattish growth. If we were to pencil it in mid-single digits for the year, would that seem fair to you guys, or would a different number be more appropriate?

Brett, this is Kevin. We gained some traction last quarter in production. I feel good that that's continuing at least in some of our markets. The question is going to be really about payoffs, and that's going to be more significant as we get into the middle of the year. I think probably low single digits is something that I can get on a little bit more than mid, but a lot of that will depend on payoffs.

We're seeing payoffs slow somewhat in different markets because they can't get financed. We're blessed with the fact that we didn't make the mistakes that 95% of other banks did. We have money to loan. As a result, that's where you saw the loan growth come in the quarter; it's because we had money to loan, and not many banks in the country have money available to lend. The founders came to us, and we formed good relationships, hopefully, relationship loans that will be with us for a long time.

The next question comes from the line of Jon Arfstrom with RBC.

Congrats on the 25 years, Jon.

Yes, I've only covered you for 16 years. So, I still have training wheels on. Can you talk a little bit more about the expense expectations? You keep hinting at it a little bit, but it didn't show up in the first quarter or the fourth quarter. What can we expect? I know Brian Davis, you touched on it a little bit as well, but what's coming?

Jon, there were some reductions in staff done in the fourth quarter; most of that happened in November and December. Some of that will show up starting now. In every market, we've talked to every region and every manager about support office type stuff, and it's just about fine-tuning everything. There is still room to improve. We always want to do that and always have been able to do that. I think there will be more, but you should see more of the first quarter showing this effect.

I had told Tracy, I said, can you get the cost down? He said, yes, I'm going to get them down. I said, well, get them down because I got someone warming up on the sidelines. And she was the efficiency girl. If you can't get it down, I'm sending her in the game.

In Texas, there were some things that were missed, and Scott Lewis and the team out there picked the ball up and ran extremely well. I think you'll see some of that effect in the first quarter, and some of that will actually close a branch or four. That happened in the first quarter, so we may not see some of that till the second quarter. But he's fine-tuning everything. All the managers out there are picking the ball up and doing their jobs.

We didn't get the savings out of certain initiatives that we expected. We just didn't. Now this management team is working on getting those expense cuts. We'll see that. We'll feel that, I think, in the second quarter. There will be some in the first quarter, but some of the branches we're closing will be second-quarter events. The number is $25 million to $50 million. That's the number. I didn't say that.

You've got expenses going up. Our group insurance went up a couple of million dollars. Everything is going up.

To say that you're going to reduce expenses in 2024, if you can hold the expenses in 2024 with all of these things that are beyond our control, that would be great.

Okay. Fair enough. I just wanted to ask a question on credit. You kind of dominated the call last quarter, and you were pretty quiet on it this time around. Anything new on credit? Any new or emerging concerns we should be aware of? And then for Chris, just any updates on the potential timeline for resolving the California office property?

Jon, it's Kevin. Nothing of any significance at this point. We're working through those three we talked about. As I said, we've looked at what's maturing at low rates, and we don't really see any significant issues there. Past dues are flat from last year and below where they were a quarter ago. So I think that’s why you saw that there was less emphasis on it this quarter; there was more focus last quarter.

Chris, you can take that now.

Hey, Jon. I would say we're going to be pretty patient on this one. It's an office building, and it's a tough market for offices. I could liquidate it, but I don't think that's the best result for our shareholders here. It's breakeven. I can use it; I have a need for it. I think we can enhance its value. I believe this was not well managed by the previous borrower once they realized they weren't going to be able to recoup their money, and it took us a while to get control of it. Now that we have, I think we should do some work on leasing and such. Let's get that done and put it in a good position for a buyer. We're not the right long-term owner of it, but I think we might be the right short-term owner.

Jon, I've been quiet because we've sold two of the three properties that concerned me. So hopefully, they close without any issues. We were losing money on them. It speaks to the good job Brian and the team did on underwriting.

Our next question comes from the line of Brady Gailey with KBW.

I wanted to start with your sensitivity to interest rates. The forward curve suggests a decent number of rate cuts this year. If that plays out, will there be much of an impact to your net interest margin? I feel like you guys tend to be somewhat rate neutral, but what's the impact to the margin if we do see rate cuts?

Brady, this is Stephen. We're evaluating our ALCO model assumptions now. As I said to Brett at the outset of the call, I think our view today is that if we see short-term rates come down this year, we can look to improve the interest-bearing checking side of things. I think our budget—if I remember right—has four rate cuts potentially built in next year and shows some margin improvement throughout the year.

Brady, if we have six rate cuts this year, we're going to be in a lot of trouble. I hope that's not correct because it would mean the country is in trouble.

I agree with you. KBW only has, I think, two cuts in our economic baseline.

M&A activity has been quiet, and we talk about it around here. It's just the expectations of the sellers and the cost of the deals and the marks. We saw HomeStreet got bought; that's a pretty good trade. There may be some trades like that out there that make sense. I just fear that M&A activity will be difficult to execute. We haven't been involved in M&A lately because we've been trying to wrap our year up. I'm just afraid we can't get them done. I'm afraid they won't work.

Johnny, you mentioned the market expectations for Home Bancshares were for net income to be down in '24 versus '23. It sounds like you don't agree with this. So I'm just curious if you want to give your targets for '24.

It's certainly not a down scenario. I've never budgeted a down scenario in my life. If they're forecasted to be down for '24, I would vote against it. We need to take advantage of this opportunity now since many banks are broke and can't lend any money. We're in a position of strength. We had revenue growth; we had growth in revenue, deposits, loans, and margins looking good. Asset quality is wonderful, and we have lots of capital. I'm confident we can exceed $400 million without the settlement on the West Texas deal that bothered us, I see it being north of $420 million.

What about on the loan growth front? I think you guys mentioned a while back you were looking at doing an energy loan. I didn't know if you got that deal done or if it's still on the drawing board?

We did it. It's done, and it's on the books now. Moving forward, we have another opportunity on an energy loan. We're not afraid of energy loans. Oil and gas are going to be here for a long time. I've seen businesses trying to turn to electric cars; it's a gamble. I believe oil and gas will still play a significant role.

Just lastly, I think Kevin mentioned that you did a deep dive into some of the CRE properties that will be resetting higher than the loan pricing. Was this any specific segment or region, or just a broad deep dive?

It was all loans maturing in '24, over $3 million and had an interest rate less than 7. We wanted to ensure we were ahead of anything that would create significant rate shock, so we can assess those loans now rather than during the third quarter of maturity. During the review, there were just a handful of items that seemed concerning, but none of significant size would challenge our portfolio. Most have strong liquidity or very low leverage. Our tough underwriting approach certainly pays off in times like these.

I didn't know he was doing that. He called me and said, hey, I just went through everything under $3 million maturing in the next 12 months that is 7% or less. He told me he didn't find hardly anything, which gave me real comfort. I appreciate him doing that; it should make you feel good, Matt.

The next question comes from the line of Stephen Scouten with Piper Sandler.

I'm a little scared to know what a good year looks like if this is supposed to be a bad year, Johnny. Would you put 1.8% ROA and 17% ROTCE? I got scared when I read the first line of the press release, and then I looked at the numbers.

We ranked, Donna just did the quarter last quarter, and I think we ranked in the top 3, 4, or 5 in every category, ROA and ROE. We are getting this kind of performance. I'll say publicly, our performance is better than others. It should make everyone feel proud.

The area I'm most interested in is really the strong loan growth you guys had. I mean, so far this quarter, we haven't seen much in the way of loan growth from a lot of peers and the industry as a whole. It looks like a lot more pressure on the balance sheet. Do you think that strength will remain?

This is Kevin. Certainly, you have Texas and Florida poised to provide that because so many people are still moving to those two geographies, particularly Southern Florida. Do I think it can continue? It certainly can. I think the question will be how much pressure you still have on rate and equity participation. We have an opportunity now that other banks have because they have less liquidity.

We are essentially getting referrals. I've used an example; Johnny has a great customer that he got introduced to while visiting. That led to several good opportunities for us. In Texas, we have made relationships where customers call referring us to help with opportunities, and we're seeing that in Arkansas too.

It's referrals leading to referrals. We just had a customer—his bank is in trouble. Many banks are having this issue. Sometimes, when you see a crisis like we've had, you know you're doing the right thing, and people come across to do transactions with you because you have a good reputation.

You mentioned that 10% yield. What sort of yield on average—do you have that number for the average new loan yields in the quarter? How much pushback is there from customers on those yields?

The coupon on new originations in Q4 was 9.18%. So as Johnny mentioned, there's a mix of some tens and primes. We've been able to improve on that nearly every quarter this year.

There is pushback; it's a challenge every loan. Our teams are always fighting to get the best arrangements possible with our customers. They are working with us every day.

There are no additional questions in the queue at this time. So I would now like to turn the call back over to Mr. Allison for closing remarks.

Thank you for your time and patience with us. It's been a trying year. Last year was extremely stressful; it was the most stressful year of my banking career when you see banks going broke in 24 hours. It was very stressful for all of us, but Home came through it, and you can see how well we performed. You heard Stephen Scouten say what you see as a very good year. We set it up for that to happen, and it did. So I appreciate your support, and hopefully, we'll have a good '24, and maybe we can buy something worth the money to add to what we already have. Thank you very much for your time and your support.

This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.