Greetings, ladies and gentlemen. Welcome to the Home Bancshares Incorporated Third Quarter 2020 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. The company has asked me to remind everyone to refer to their cautionary note regarding forward looking statements.
You will find this note on Page 3 of their Form 10 ks filed with the SEC in February 2020. 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 Townsheil, Director of Investor Relations. Please go ahead.
Thank you, Gary. I'm Donna Townsheil, Director of Investor Relations. Our management team would like to thank you for joining our Q3 conference call. Reporting today will be Tracy Krench, our President and CEO of Centennial Bank Brian Davis, our Chief Financial Officer Kevin Hester, our Chief Lending Officer Chris Fulton, President of CCFG John Marshall, President of Shore Premier Finance Stephen Titson, Chief Operating Officer and our Chairman, John Allison. First up today to share with you will be Tracy French with the Centennial Bank report.
Good afternoon and thank you, Donna. A great quarter to report for us today. Steady as it goes for Centennial Bank as we navigate through 2020. The water may have been a little choppy along with a hurricane for 4, all while our company continues to produce very solid results. And in some cases, we'll have the best results ever.
Compliments to our experienced Board of Directors, our outstanding Centennial Bank and Home Bank Management staff. Our Chairman has been known to say the word experience and 2020 has been exactly that. The past 20 years for this company has proven time and time again that working together we can accomplish anything no matter how high the water gets. We announced our quarterly results this morning and they represent that Home Bancshares are weathering well in all areas and that's quite impressive. We have used the P letter a lot over this past year, powerful, profitable, PPP, and I have a strong feeling you're going to hear a little more Ps this afternoon from our Chairman.
Others will report details of the quarter year. It will be clear our company is focused on profitability, asset quality, margin, while maintaining the safe and sound company we are. Let me just share a few things. EPS $0.42 total revenue $176,000,000 over Home Bank shares. Switching over to Centennial Bank.
Assets as adjusted is over 2% year to date. Our non GAAP efficiency ratio 37% year to date. 336 percent coverage of our ACL to non performing loans, Double digit increase in our non interest income mortgage leading the way. Operating expense, the same as last year, not included our unfunded commitment charge that was done. Always the one I like to hear is the total revenue of 5 $33,000,000 year to date.
Again, pretty darn good 1st 9 months. Kevin is going to give us an update since our fireside chats that Donna organized throughout this past quarter on loans. Chris and John will join in with the specialty groups of their areas. I would like to share that our group of lenders are doing a great job in managing their portfolios. They're in constant communication with our borrowers and customers.
This company has done forever. We will call it as we see it. I go back to the word experience. Some customer needs assistance, we'll work with them while protecting the bank. We have the experience in difficult times if we will work out several challenged institution over the 20 plus year.
Our team is ready to assist in any needs. Our allowance for credit losses is 2.29% when you add back our PP loans and our allowance for credit losses to non performing coverage is 3 36%. While we may have some losses, our teams feel very good about these numbers and the balance sheet of our very healthy company. Ryan and Steven will give a little discussion on the margin as it still remains stock focused for the company. Just for an example, Johnny calls me and he does a lot.
In the morning, I say, good morning, Johnny. He says, what's the margin? I say, good morning, Johnny. So that's how top of the line focused it is. Brian and Steven will also give a little color on the deposit, our liquidity situation and the strength of capital that the company has.
There's one thing for certain, we will continue to manage a safe and sound company, manage in all areas, income and expenses, be in touch with our customers and provide the best returns to our shareholders. Donna?
Thank you, Tracy. Those are impressive numbers. Now Brian Davis has some detail on how COVID-nineteen has impacted our margin. Brian?
Thank you, Donna. Today, I'd like to give you some color as to how the uncertain times related to COVID-nineteen has negatively impacted the margin. First, the COVID-nineteen uncertainty and the resulting governmental response has created a tremendous amount of excess liquidity in the market. As a result of excess liquidity, we had $713,000,000 of additional interest bearing cash in Q3 compared to normal times. This excess liquidity is 20 basis points dilutive to the margin.
2nd, as of September 30, 2020, we had $848,000,000 of PPP loans. These loans are at 1% plus the accretion of the origination fee. While these loans are a valuable assistance to our customers and carry no credit risk to our company, they are dilutive to the margin. The PPP loans were 6 basis points dilutive to the margin. As you can see from these two items, the uncertainty of COVID-nineteen pandemic has caused a 26 basis point decline in our net interest margin.
This would pro form a our Q3 2020 margin at 4.18% compared to 4.32% for Q3 last year or 14 basis point decline. Considering there was an 8 basis point drop related to the $3,000,000 decline in interest income events from Q3 2019 to Q3 2020, I think the company is doing an outstanding job of managing the margin. I will conclude with a few remarks on capital. Our goal at Home Bancshares is to be extremely well capitalized. I'm pleased to report the following strong capital information.
The leverage ratio was 10.4%, which is 108% above the well capitalized benchmark of 5%. Tier 1 capital was 13.2%, which is 65% above the well capitalized benchmark of 8%. The total risk based capital was 16.9%, which is 69% above the well capitalized benchmark of 10%. With that said, I will turn the call back over to Donna.
Thank you, Brian. When you take out all the noise, it is nice to see that our margin is holding pretty steady and that's a good report on capital. Now for a highly anticipated update to our loan loan portfolio is Kevin Hester.
Thanks Donna. Well, we're finally 3 quarters of the way through 2020. What a long and crazy year it's been. When we talked 90 days ago, I mentioned that both PPP and loan deferments would be entering a different phase in the Q3. That in fact did occur.
PPP forgiveness has begun albeit slowly. We had submitted about 2% of our number of loans or about 6% of our dollar balance. Due to anticipated submission relief on smaller loans, we began with the larger loans in the portfolio. Once all parties are ready to submit using the 3508S form that was released by the SBA last week, we will begin submission on smaller loans as well. Regarding loan deferments, as of September 30, we have about 330 loans remaining on deferral totaling about $930,000,000 Within that number are loans totaling $347,000,000 that are only deferred principal, so they are currently paying their interest.
This leaves about $583,000,000 in loans that are on full principal and interest deferment which is about 5% of the loan portfolio. Geographically, Arkansas regions make up 51% of the deferment balance followed by Florida at 39% with CCFG, Shore and Alabama at 6%, 2% and 1% respectively. As a percentage of their portfolios, the community bank regions between 5% 13% deferred while CCFG and Shore were much lower at 3% and 2% respectively. Based on industry, the only concentrations would be in hospitality with about half of the deferred balances at this time. The September 30 deferral number is down by 70% from the June deferral number of $3,180,000,000 This decrease is even better than was anticipated when we spoke 90 days ago.
Lastly, the current numbers as of October 13 show a further decline in the full principal and interest deferral balance of $64,000,000 since month end to a total of $519,000,000 or 4.4 percent of the loan portfolio. As I mentioned previously, about half of our deferred balances or $475,000,000 are in hospitality. About 30% of those balances are on principal deferment only. Comparing loans on deferment versus not on deferment, average occupancy over the summer was similar but RevPAR was about 15% lower on average. September, which in all of our Florida markets would expect to begin the off season, shows a RevPAR decrease of only about 5% across the portfolio.
This is a segment of our loan portfolio that I will continue to watch closely and provide additional color as is warranted. Asset quality is still very strong. Past due loans were at 63 basis points which is below the last 12 month average of 69 basis points. Non performing assets increased 8 basis points off the low all time low of 39 basis points to 47 basis points which is an increase of about $14,000,000 This consisted of 2 broadly syndicated C and I credits from the Shared National credit review totaling about $6,000,000 a $6,000,000 COVID affected cinema credit and an Arkansas manufacturing credit of about $2,000,000 Any exposure that we feel is embedded in these credits is reflected in the individual impairment segment of CECL. As we continue to evaluate the loan portfolio through the pandemic, particularly the loans still on deferment, we are mindful of the regulatory relief provided under the CARES Act as it relates to credit modifications.
This relief allows us the flexibility to provide prudent loan modifications tailored to each borrower that benefit all parties. Given that we see this pandemic overall as more of a timing event than a permanent demand shift, time is often the most important factor in these modifications. We are being creative in how we approach each situation. However, as we always do, we will continue to apply appropriate credit classification
and
In other words, we'll continue to call it as we see it, irrespective of the relief provided by the regulators. Mortgage continues to be a shining star for us with back to back record quarters in both loan closings and profitability. Loan closings were up 56% year over year and September locks were higher than any month prior to 2020. Thanks to Keith Little and his group for their strong production and profitability. The remainder of 2020 will largely consist of executing PPP forgiveness and developing prudent loan modifications with evaluations and new opportunities in a post COVID world sprinkled in.
We like where we are from an asset quality perspective at this point in the pandemic and believe that 2021 will be a year to move forward. That concludes my remarks and I'll turn it back over to you, Donna.
Thank you, Kevin. Having only 5% of the loan portfolio on full P and I deferral as it stage of the game is remarkable. Up next, we have Chris Polchin with our CCFG division. Chris?
Thank you, Donna. During the quarter, we progressed through the initial stages of COVID response and began to see how the market in our portfolio will address recovery. Overall, the portfolio was down slightly at $72,000,000 for the quarter with ending balances of just under 1,700,000,000 Specifically, we saw C and I balances fall by approximately $130,000,000 as corporate borrowers who had previously drawn on facilities for liquidity purposes repaid some of those borrowings during the quarter. Balances fell from a high of $515,000,000 to $386,000,000 at the end of the quarter. Conversely, we saw CRE balances rise by $56,000,000 due to a combination of continued draws, an increase in production and moderated payoffs.
Going forward, we'd expect these trends to continue with C and I balances declining and CRE balances potentially continuing to expand. During the Q3, we saw loan production and demand increase. We originate $140,000,000 in new loans, which was up about $30,000,000 from Q2. As important, our pipeline of new opportunities continues to grow. We're seeing borrowers adjust their business plans to a new post COVID reality, and as a result, borrowers are once again looking to move projects and opportunities forward.
As I mentioned last quarter, the timelines on new loans have expanded and we continue to observe that loans generally take longer to complete and require a bit more work in structuring. However, we hope to see the benefits of this come through during Q4 and into next year. As a reminder, we initially built our platform to be flexible in response to changes in market conditions. We've always focused first on risk management with the philosophy that markets can pivot at any time and for any reason. And responding to these changes requires prudent initial credit underwriting combined with agile approach to portfolio management and composition.
The benefits of product, asset class and regional diversity portfolio continue to allow us to manage risk and seek new opportunities as they emerge. While each individual market is experiencing different current and long term risks, we will continue to balance confidence with cautiousness as we build our portfolio now and for the future. Dawn, I'll turn the call back to you.
Well, it's good to hear that your pipeline continues to grow, Chris. And luckily, your underwriting standards have always been strong and that diligence pays off during times like these. So that's good to hear. Now we'll turn to John Marshall for an update on the boating world.
Thank you, Donna, and good afternoon. For the Shore Premier Marine Finance Unit, the Q3 was punctuated by significantly elevated retail loan closings, exacerbating already depleted commercial dealer inventories. To the numbers, we funded $91,000,000 in retail loans in the quarter compared to $93,000,000 in the full first half of twenty twenty and $145,000,000 in full year 2019. In the turbulent cross current COVID environment, the record retail production was necessary to absorb portfolio contraction due to repayments, prepayments and shrinking commercial inventories. So the net result was to end the quarter about where we started at $920,000,000 in loans.
Good news in the feverish buying frenzy, as you would expect, retail buyers have been less sensitive to financing rates and we've observed a steady expansion in our spreads over the benchmark 5 year treasury. Solid 3.69 percent, 3.69 percent spread in the 1st quarter, 4.25% in the 2nd quarter, 4.47 in the just concluded 3rd quarter and a respectable 4.73 spread for the month of September. Further good news is the asset quality of the marine book. Origination FICO's grew from 7.76 to 7.78 in the quarter and any COVID related deferrals resumed payments in July at the start of the quarter. Each month in the quarter, we've seen a steady improvement in delinquencies from 74 basis points to 67 basis points and all the way down to 24 basis points in September.
Non performing loans similarly improved each month from 49 bps to 48 bps to 43 bps. There is some evidence of rationality returning in the 4th quarter as retail sales abate and are replaced by dealer inventories as European factories resume shipments to North America. Our opportunity as credit line utilizations recover to industry norms, jumping from the current 30% up to the normal 62% is net growth close to $80,000,000 in the next 6 to 9 months. So with that update, I conclude my remarks, Donna, and return the conversation to you.
Thank you, John. And now, Stephen Tipton will discuss liquidity and its effects to the net interest margin along with funding costs.
Stephen? Thank you, Donna. I'll give color on deposit activity, repricing efforts and trends, and a few additional details on the balance sheet today. On the heels of tremendous deposit growth in Q2, we carried much of the liquidity build through the quarter which I'll discuss later in our comments related to the net interest margin. We saw in period deposit outflows of $240,000,000 in the 3rd quarter particularly related to liquidity management and corporate deposits along with a few seasonal items we have touched on in the past such as tax payments, school funding and general spend.
After the flourish of activity in Q2, account opening volume is back to a more normal level allowing our bankers to focus on supporting our customers both in branch, in person and virtually. Our presidents and their teams continue to analyze the deposit base for opportunities to improve granularity, mix and costs as we operate in this near zero rate environment. Switching to funding costs, interest bearing deposits averaged 54 basis points in Q3, down 10 basis points on a linked quarter basis and we continue to see improvement in costs on a monthly basis. As I mentioned last quarter, we have a nice opportunity for repricing in our time deposit portfolio. We have $595,000,000 maturing in the Q4 of 2020 at an average rate of 1 point 5 6 percent and another $200,000,000 in January that is over 1.5%.
Switching to loans, we saw total production of $550,000,000 in Q3 with approximately 410 dollars coming from the Community Bank and Shore Premier footprints. Payoff volume at $711,000,000 was in line with prior quarters and is highlighted by a larger contribution from our Florida and Short Premier regions as John mentioned than in prior quarters. In Brian Davis' remarks, he discussed a great comparison on the NIM to more normal times. I would like to also touch on the linked quarter comparison in our operating highlights we released this morning. The net interest margin pressure in Q3 was primarily related to continued excess liquidity, lack of event income and the impact from premium amortization and lower reinvestment rates in the investment portfolio.
With a few additional small items as reported, we have reconciled 14 of the 19 basis points decline on a linked quarter comparison. On a core basis and excluding event income, the loan yield declined 8 basis points while the total deposit cost declined 7 basis points. As Tracy mentioned, monitoring and managing the net interest margin at home is a daily conversation amongst our team. Discipline around loan pricing, capital allocation and a constant review on funding has and will continue to be our focus. With that, I'll turn it back over to you, Donna.
Thank you, Stephen. Well, now let's turn the mic over to Chairman, John Allison, who will share among other things, I think a new metric that he's begun tracking and we hope to hear more information about that, Mr. Chairman.
Thanks. We'll talk more about that in a little bit. Tracy kind of broke a little bit there talking about the multiple fees. But thanks for joining us and thank you for your continued support. As you've heard from our team, I really don't have a lot to say today.
We're in a middle of this pandemic. We've been concerned about certain asset classes and their performance. CECL, CECL may be the it's not asset class, but that may be the most uncertain. But in spite of all that, the company produced another record quarter. Once you adjust for CECL, home earned $0.47 this quarter and earned $0.47 last quarter.
I mean, you think about the consistency of earnings of this corporation, if you go back a year, it was 44 and then the next quarter was 40 excuse me, go back a year is 43 and then the next quarter is 44. Last quarter was 47x CECL and this quarter was 47x CECL. These are 2 of the best back to back quarters in our company's 21 year history. As I said in the press release, I'm tracking a new metric. I recognize it's not GAAP.
It will be flustered by the accountants, Donna, or the attorneys, but it's almost the reverse of the efficiency ratio in some respects. And I call it P5 and R that's where Tracy got all the piece. He gets I didn't know if he spits it out. Sometimes I think he stuttered, but it's and that stands for pre tax, pre provision, profit percentage. And that kind of came from just looking at the numbers in our chart and I thought I wonder how much money we're actually bringing to the shoe box.
1 of our directors coined it to shoe box and it's the money you put in the Shoe Box and all you have to do with it is pay taxes and make loan loss allocation if that's the case. So to make it simple, it is net total revenue divided into pre tax pre provision income. And this quarter to give you an example this quarter the PPNR was a record as you've heard 104,400,000 dollars and the net total revenue for the Q3 was another record at $176,100,000 You simply divide the 104 by the 176 and that came out to 59.28 percent. And I think last quarter is 59.13, Don, is that about right? So we're running pretty consistent.
What that means is that HomeBankshares is bringing down almost 60% of its net total revenue to the shoe box. And all we have to do with that is to pay taxes. I challenge you, I challenge you to run that number on other corporations. I think it gives you, it tells you the importance. The ratio gives a strong emphasis to the margin and non interest income, plus it shows the earnings power of a corporation and you can see the earnings power that it has given on Bancshares.
Bringing down 59.28 percent of your total net revenue, I think is pretty amazing. There's some other great numbers
for the quarter and we'll
just touch upon a few of those. Ex CECL, the company made $79,661,000 almost $80,000,000 and EPS as I said was $0.47 Loan reserve, strong loan reserve at $2,290,000 We built it a little bit this quarter. We had a I think we put $14,000,000 in charged off $10,000,000 built about $10,000,000 We'll probably do the same next quarter unless we see something out there. I think there's becoming a little more transparency in the asset quality. We have return on tangible common equity of 18.29 and return on asset adjusted of 1.91.
We are building new branch in Marathon, Florida. I don't know if we ever raised that building down there.
We've taken that down our facility yet. We haven't paid
it down yet. And we did not purchase any stock. You've heard the numbers. I was asked someone how do you all keep doing it? How do you do it quarter after quarter after quarter?
How do you keep producing those results? And you all never heard me say this before and all you're chuckling around here, there is no substitute for experience. And I just want to give you an example of our bank board, Centennial Bank Board at HBI Bank Board. Our directors have €374 of director experience or operating experience. I mean that's a pretty good number.
They keep us out of the ditch and I thank them very much for their contribution that they give to this corporation. In addition to that, they own 13,911,009 outstanding stock. We had one director, we didn't get his numbers in there. So it's a little higher than that. And that doesn't include our affiliates.
That doesn't include our other Cabot in Little Rock in those branches. So I think it would be well over 16,000,000 shares of stock and almost 10% of the company is owned by our directors and you can see their interest in this company. So they keep us out of the ditch in lots of instances. I want to talk again about experience about our President Group. Our President Group has over 150 years of experience in the banking space.
That's pretty impressive. And then you take Donna, Steven, Tracy, myself, Kevin and Brian Davis, which are the executive crew in Conway and that adds up to 102 years of experience. When you combine those together, that's 626 years of total banking experience and I think that's a pretty amazing number. So that's how we keep doing it with that team, that great team of people and others supporting and helping that team, but it's pretty amazing. This just kind of was a one off.
I called Donna, Donna run this up for me and look at this and look at that. And when you think about putting these numbers together, that's I was actually taken back a little bit by the amount of experience. But I've always been a believer. You can get it out of a book, and that's fine, but there is no substitute for real life experience in doing it. I think we had another good quarter.
Looks like we're seeing a little more transparency. We had a little kicked up our non performing a little bit this time, basically movie theaters, Kevin, when that basically put it tied down to. We had one loan in Jonesboro was a matter of fact, dollars 2,000,000 manufacturing credit that I think they died. I think that was probably over. So is that about the question?
Yes. Other than that, loans were a little soft. We're holding tight. I looked at I read yesterday that inflation was up 2 tenths in September, that it was up 6 tenths in August and 4 tenths in July. So it's time to be careful.
I know the Fed is doing a great job and working hard at trying to keep rates down. I'm not sure they're going to be able to keep the handle on that or the lid on it. I think we you start doing these 2% and 3% loans in the marketplace today, I think you could pay the piper for that down the road. We're holding tight. We're holding our rates up.
We're working on our margin hard. I think you heard Steven report on the margin and Brian report on it. I think we've done a good job. I'm really pretty pleased with the operation of the company. It looks like 2021 is going to be a good year for everybody in the bank space.
I've seen reports of the banks that have reported so far and they've done pretty good. And Donna, I don't anybody else got even the trace you gave, you don't have another P or 2 there? I think you covered them.
Well said, Tracy. With that, Gary, I think we'll go to Q and A.
We will now begin the question and answer session.
Hi, Gary. Before we go forward, I have one comment to make, if I could.
Absolutely, sir.
I made a Joe Biden a while ago, I pulled Joe Biden. I said we put 14,000,000 in reserve and we charged off 10. That's not correct. We put 14,000,000 reserve and charged off 4. And so I just got it upside down and backwards like my friend Joe.
Our first question is from Brady Gailey with KBW. Please go ahead.
Hey, thanks. Good afternoon, guys.
Hi, Brady.
Why don't we start with loan growth? And if you look at it ex PPP, loans have been down in that 9% to 10% range, annualized for the last couple of quarters. And Johnny, it sounds like you're being pretty conservative here. I mean, should we continue to expect some more loan shrinkage going forward?
Probably some. Until it clears up, I'm kind of like Chris, some of those projects that you could get done in 4 months now take 6 or 8 months to get done and may not get done. So I think pretty well, Kevin, you got to comment on there. It looks like we're seeing we did what $25,000,000 yesterday in loan committee meeting. But it's probably a good time.
It's probably there's nothing wrong getting paid off, Brady. There's nothing wrong getting your money back. So I'm really not until we get a vaccine and things turn around, I'm really pretty comfortable doing what we're doing.
Kevin? I would agree with that. I mean, I think there's going to be some opportunities next year with repositioning of assets when we start seeing things shake out. We're not quite there yet because people are still in deferment in a lot of cases. So I think we're just kind of in this odd space where you're still in the pandemic and you hadn't come out and there's not a lot of great opportunities and we're focusing on margin and trying to be profitable.
We've been extremely conservative over the last 3 or 4 years as you know and that certainly has paid off for asset quality. We've just really we hadn't lost a penny yet. We probably will as I've said in the past. But as so far this pandemic with the $2,000,000 manufacturing loan in Northeast Arkansas didn't have anything to do with the pandemic. It was one that just they just blew up.
And but outside of that, we our movie theaters probably going to take a loss on our movie theaters at some point in time in the future. But I have to say that what we've done in the past is paying dividends for us in the future. And you know we got nearly 2 $40,000,000 $50,000,000 worth of reserves and you can see what we're generating on the income side. So it's probably not a time to be real aggressive in the market and I'm seeing a lot of 2s and 3s. And I'm also looking at the other side of the balance sheet where I see all this possible inflation coming down the line.
I mean, you know as well as I do, what is the Fed doing? They're working hard to try to liquefy the market. I'm not criticizing the Fed. I think they're doing the right thing. But at some point in time, we got to pay the piper, right?
And when you got that, what do you see lumber up or average cost of a half single family homes up $17,000 this year. I mean that's going to take its toll at some point in time. And when it does, the Fed is going to be
forced to raise rates and home is not going to
be caught up in that.
Yes. That makes sense. So, I mean, you mentioned holding the margin. I know if you kind of look through the noise, it looks like kind of the core, core margin was down only 5 basis points on a linked quarter. Do you think going forward you're going to be able to hold the core margin or do you think we should expect to see some modest shrinkage in the core margin going forward?
Hey Brady, this is Steven. Yes, I think the last comment I had about what we're able to do in terms of deposit costs related to loan yields and those matching fairly well. We do have still a pretty good opportunity to push on deposit rates both via the CDs that are maturing and then we've we still got over $1,000,000,000 that's over 50 basis points on the checking and savings side that is either on contract or that working through on a negotiated basis. So there's still opportunity there to bring some of that down. I think to some degree the wild card will be the impact from the investment portfolio and kind of where reinvestment rates and those cash flows come in over the next you know over the next 6 months or a year if we continue in this rate environment that we're in.
The investment portfolio is the problem. We're writing at about 150. So we're putting it on the books at 150. Tracy, every time he meets with his presidents, he talks about rates and anything we write below our average yield right now is 5.14x PPP. So anything we write below 5.14 is dilutive.
So I mean he continues to preach that to our group and our group is doing a good job on that. The investment side, the investment portfolio is the struggle. That is the struggle and there's not a lot that we can do with that. It just is what it is. We'll have to just weather through it.
We were sitting on all that cash that made $100,000,000,000 to $1,000,000,000 We put a little of it
to work. How much would you
Brian, how much that we put to work?
Well, we did increase our investment portfolio about $100,000,000 from the quarter. What we really did is we invested more in the municipals. We increased our municipal balances by about $200,000,000 And what you'll see when the investment numbers come out in the 10 Q is that our government sponsored enterprises was down about $30,000,000 and our residential mortgage backed was down about 30,000,000 and our CMOs was down around about $30,000,000 And so the $200,000,000 increase we put in on municipals. As Mr. Allison said, we got about a 1.5 yield, which sounds pretty good today because what we'll be reinvesting in that probably in Q4 is probably more like 1%.
So there becomes part of the struggle on the margin.
Thank you, Brian. We bought a lot of banks are raising money right now and we bought a few of those pieces of paper. I don't know what we got, dollars 20,000,000 Yes. $20,000,000 We may buy some more of that. We're buying banks that we know and we're familiar with.
But as we've seen a lot of banks raise money, we have not done that. We don't need look at our capital ratios, we don't need that. So Tracey, any comment? I think you all covered it pretty well. The loans are if you go back over the last 3 months, if you look at a month to month, it's been holding really good, little bit of downtick, but deposit cost has also got some opportunity to go.
So it's just time will tell. It's hard battle to work, but we feel confident we're going to sure try to maintain it.
All right. And then lastly for me, you got Biden leading the polls. He's talking about increase in the corporate tax rate to 28% from 21%. If that happens, any idea what the tax rate impact would be for home?
Brian?
I will take that. What you would want to do is take we'll take the full 7% that would really increase it by 7%. We would actually probably have a interesting twist, you may remember when we had the Donald Trump tax cut, we had a big write off of DTA. We'd probably recoup about half of that DTA write off because we'd end up writing up our DTAs. But for us, it would be most of that 7% increase in the tax rate.
Okay. Well, hopefully that
doesn't happen. Thanks for the color, guys.
That's not going to happen, Brady. Thank you.
The next question is from Matt Olney with Stephens. Please go ahead.
Hey, guys. How are you?
Hi, Matt.
Hey, I want to circle back on the credit discussion. And I'm curious about the overall balances for special mention loans and classified loans as of ninethirty. Just trying to see if there's any negative migration during the quarter?
Hey, Matt, this is Kevin. Yes, of course, grade movement on the second deferrals, you're going to expect some of that. It's definitely case by case. It kind of depends on some things like cash reserves, the borrower, the operating projections that we see going forward, how we see them handling the deferred interest. And so if you look at the 500 or so 1,000,000 that we've still got in a second deferral, Our special mention went up about 150 in the 3rd quarter, substandard up about 50.
So if you think of that compared to the 500 plus in second deferment principal and interest. It's about a 40% migration, that's probably fair. We got a lot of folks that we know are going to come out at the end of the second one and go back on payments and so those kind of folks wouldn't necessarily migrate, but some that we think may need some more help after this second 90 days, those are going to be the ones that migrated further to a special mention or a substandard at this point.
Okay, got it. That's helpful. And then I guess the thinking about the reserve build from here, I think we're almost at 230. Once we exclude some of the PPP stuff, I'm curious if you think we've peaked from here. And if not, how close we are to peaking?
And then I guess, do you have a sense of that as on charge offs? We haven't seen any charge offs yet. I'm curious what you think the timing of charge offs would be for I guess for home banking for the industry?
Well, we'll take them when we see them. When we see a charge off, we're not building the stack of charge offs over here that we're going to hit at some point in time. When we see it, we'll take them. The manufacturing facility in Jonesboro is probably a charge off. You think about your movie theater guy who's got real estate there and nothing happening in that business.
I mean he's been in the business for 50 years. I suspect long term he'll make it, but short term he probably won't. I think we non do you non perform, you non perform too. So I mean you could say we could probably take that next quarter maybe or not take it. Is he going to make it?
I can't answer that. But probably prudent, we may take that. So I'm expecting that's all I see at this point in time. There may be something else that sticks his head up, but that's about the extent of it. And that's not a total loss on that loan because we get real estate attached to it.
So I think there's no build up. There's no pocket here. We're pretty damn transparent, probably the most transparent bank in the country. And when we see it, we call it. So I don't I mean our hotels are going to be fine.
Even our airport hotels going to be fine. How long is it going to be before they're fine? I can't answer that. I don't know how long it'll be, but a year. I mean, if in fact, if everybody got if what the President got the other day when he got COVID-nineteen, you'd think that I think we'd all be in good shape.
We get a vaccine, I think things will turn around, people start traveling again. So do you write off a hotel, it's running 20% and struggling for cash flow that you deferred that you know at some point in time will come back already write off 7% of it if you want to when you're at 57% loan to value and you know you can get $0.50 for it. I mean from the vultures everywhere. So the good news is that as we were selective on our credits when we put them on as we built this company 1 brick at a time and we turn around and look at the building and see if there's any cracks in the brick wall, there's not any cracks in the brick wall. It makes you real proud that you built a strong wall.
If you got to replace a brick here and there, you replace it. So there is the when we see it, we'll call it. Kevin?
Hey, Matt, the encouraging thing we're seeing on these deferrals is that the majority of the cases so far that we're looking at that are coming through to the end of their second and maybe need something going forward longer term that we want to get in under the CARES Act. The vast majority of those are paying their interest up to date before we go into the longer term modification and if they're not paying them completely up to date, they're paying it over a very short time going forward. And so that's very encouraging to me that we have somebody that's got the ability and we're taking that and looking at projections for the next year or 2 years, trying to make sure that they can make it through this with the reserves they have left. And for the vast majority of those so far, we're seeing that work out for us and we're ready to move forward on a longer term modification if it's needed. So that's the encouraging thing to me.
We have one that was on full deferral and he's come back on interest and principal and generates back open. His operations are back open. It's about a $70,000,000 credit and he's off and running. So that happens that the turnaround was pretty good. We deferred him.
He got on his feet, got his businesses back open again. And you know that the worst thing could happen, not talking politics, but the worst thing could happen is a complete shutdown again. That would be there are some people talking about shutting it down again and that would not be good. That would not be good for any of us.
And that one Johnny is talking about has happened since quarter end. So that's
That's $70,000,000 is an improvement. That happened since quarter end. So that's good news.
Got it. Okay. Thank you guys very much.
Thank you.
The next question is from Stephen Scouten with Piper Sandler. Please go ahead.
Hey, good afternoon, everybody. How are you all doing?
I am great. How are you, Steven?
Doing well. Doing well. Things in Georgia aren't bad at all, I don't think. How are things in Arkansas? I'm curious.
I see a lot of negative headlines around COVID numbers and wondering how the state is from a staying open perspective and how businesses are doing there overall?
Well, we're open. The state's open and COVID numbers have been moving up and down and up and down, but we're open at so far so good at Home Bancshares. We've had 30 cases or so prices that were all over company wide out of 2,000 people. So a little more than 40. So but everybody's done well.
We hadn't lost anybody. At Faulkner, I mean, Pulaski is pretty high. Faulkner is where we are is kind of in the middle. But it's not too bad. We're being careful, everybody's being careful.
We're wearing mask and we're wearing gloves and we're social distancing and we're doing those things that we need to do to protect ourselves and our other people.
Yes. But most businesses, small businesses, restaurants, all that stuff is kind of still open where you are today?
That's correct. Yes. I was this and was a customer last night that has a lot of different businesses across the state and actually had some in Florida. And it's the same thing that Kevin just mentioned naturally if you're in a if there's hospitality in your area that it is not the travel coming through, it's not as good as it should be, but the other pieces of this puzzle are making things making the ends meet and just like the customer, Johnny and Kevin just mentioned a while ago, I mean, gentleman has a lot of liquidity when he shut down, as he shut down, actually wanted to pay a lot more back on his loan, but was being safe in case they do shut down again to where we would have the liquidity. And that's what people are a little more cautious on their liquidity side this time they're jumping in and prepay it.
And back to Kevin's point on the call it like it is and Johnny's mentioned it too. I mean, when you look at the deferrals that we have, I took the opportunity to call a significant amount of our lenders and customers that were in, I call over $10,000,000 in debt and some of them are just doing just fine. It's a lot of precautionary in some of that deferments that you see out there in some businesses. There is definitely the few that needed to make this time. But all in all, you continue to feel much better out there.
I certainly do. When you're talking to our lenders and seeing our customer base and what's going on. That's great. Don't forget, we're going to see another stimulus coming for the American public and it'll be bad or Trump, but somebody is going to bring it and it's going to be coming for the end of the year. So we've got more money coming for these businesses and Arkansas stayed open.
We're paying the price forward a little bit with the cases we're having. But if you're not open, there are a lot of small businesses. I can't believe they can't get together in Washington, D. C. And get some money out to these people because a lot of these small businesses are not going to make it if they don't get some money.
And if they do
it right, it's hard towards the ones that really needed particularly hotels, restaurants if they do it right in the card.
Yes, yes. I agree, Kevin. Curious what you guys are thinking on the capital front here today. Obviously, TC climbing nicely here this quarter, thinking about your pretaxprevision ROA or your new P5 number there, Johnny, it seems like capital is going to continue to build. So how do you think about potential share buybacks or usage of the capital here in the medium term?
We have a 10.10 call every morning and that was the topic of discussion this morning on the 10.10 call. And we've looked at our capital ratios and they're powerful. If you've looked at them, I mean, they're awesome capital ratios. We have not the choice is you want to take care of your shareholder, right? What's in the best interest of the shareholder?
Do we need to go buy $200,000,000 or $300,000,000 worth of stock? Do we need to not buy stock? We need to increase our dividend. If we do an M and A, if we could do an M and A deal, it made sense. We'd probably do that.
If we can't do an M and A deal, then maybe we buy back the stock. But that discussion, that discussion has gone on all morning this morning around here. So I don't want to do something that still fear. The day I heard President Trump say banks shouldn't be buying back their stock, we shut ours down. And we have not bought a share of stock since then.
I don't believe at all. It's a carryover from that, but we have not bought it. And I figured it might be some I thought it could get bad enough that banks needed a program. It's not going to get that bad, but made for some banks, but not for home buying shares. So I thought there might be some kind of program that came out and if you had you're buying back your stock, you couldn't participate.
So that's really been the reason we're out. Some banks, many banks are starting to buy their stock back right now. The bigger banks, I think are prohibited from that. We need to do something for our shareholder. We have not raised the dividend in a long time.
And we did that just to protect the dividend, just to wait and see what the repercussions of this whole pandemic were going to be. And it has not been as bad as I thought it could It's a different situation in 8, 9 and 10, but too many unknowns and the unknowns now when is the vaccine coming out and getting our people back to work. So I feel good enough now that it's I feel comfortable enough now to go in the market and buy stock or I feel comfortable enough to look at discuss with our board raising dividends. I feel comfortable with enough capital to maybe a combination of those. And so that discussion is going on and we're not going to sit here and end up with 50% capital or 25% capital.
It's pretty ridiculous. So I mean we're I think what was the capital ratio when it was 16% and we really have lots of capital. And as you know, not only do we have lots of capital, we got close to $250,000,000 $240,000,000 in reserve and the company just had a record PPNR. So we're kicking out as I said last quarter over $100,000,000 a quarter that we could use for losses if we needed to. On an annualized basis, I said that's $400,000,000 plus $240,000,000 gives us $640,000,000 And if you remember the numbers, this company could still could lose $1,000,000,000 straight out and still hit all the regulatory capital requirements.
So it is a topic discussion. I understand why you ask it and we're in the middle where executive committee is in the middle of discussing that.
Yes. Yes. No, it's good. Okay. Maybe last question for me.
You talked about reserve levels there. I mean, it seems like you got more than enough to me honestly here today. But I'm wondering the effects of CECL 1, where do you think once we get maybe the excess reserve from pandemic and deferred loans, where do you think in a CECL environment that loan officer could normalize over time? And do you think that CECL was a benefit for you guys in the sense that it made you build reserves more than we would have otherwise? Or is it more punitive because there's some maybe double reserving with CECL plus pandemic?
Or kind of how you think about the effects of CECL longer term, even if
you have to maybe extend some loans?
Well, I don't know. I don't know if CECL was right or wrong. I have no idea. Did it make us add more reserves? I'm sure.
But homes always been a big reserve builder anyway. And even when people are running down to 40 basis points and 30 basis points and 50 basis points on loan loss reserves. We always kept trying to stay up around 1. I've always been a believer in a 2% reserve solves about everything and I still believe that's the case. So from a reserve bill aspect, nobody gives we announced record earnings today and stock went down.
So nobody gives a damn bad earnings. So one up bill reserves. I mean, what difference does it make? I mean, we visited with some many of our analysts and said, should we get ahead a record quarter blown it out and made $0.47 I mean, we didn't have to take a put another $14,000,000 reserve in my opinion, but we didn't. We didn't do that.
We went ahead and built it and we'll probably do it again next quarter. And depending on the jury's Adam Cecil. So I'm not expecting strong pressure from the accountants on CECL because who knows if this is the right deal or the wrong deal. So it may be right, it may be wrong, but we managed through 8, 9, 1010 and 11 without CECL. We didn't find, we just continued to build reserves when we needed it.
And I like the reserves as far as I'm concerned, we got all the reserve we ever need and may ever need. So I just like to leave it alone. We've already taken the money out of one side of the balance sheet put it in the other side. So I don't know. I just certainly leave it where it is.
I don't have any rate. There's no reason to move it. We've already done it. Just leave it there. We don't need a yo yo.
I saw where JP Morgan took $500,000,000 out of the reserve and put into income. They got fined 600,000,000 I guess they need 500,000,000 to that's a great bank. Jamie Dimon is a great guy. Don't get me wrong. I just you can't use that like a kitty, like a money kitty.
It is what it is. We've already put we've already taken the back. We've already done it. Let's just leave it alone. Just leave it there.
And we're going to try to do that at home Bancshares. I don't want to come in the Q1 and the counties might be reverse $100,000,000 or $150,000,000 and put into income. That's really ridiculous. So I don't think we'll be playing that game. It's way too early for banks to be playing yo yo with their loan loss reserves and we're not going to do that.
Got it. That makes sense.
That's a
lot of good color. Thanks, Johnny, and congrats on a really good quarter.
Hi. Thank you.
The next question is from Michael Rose with Raymond James. Please go ahead.
Hey, guys. Good afternoon. Hope you're well.
Hey, Michael. Don't forget we got Donnie here. You said guys.
I'm sorry, everyone, people. So I appreciate this new metric that you've created and certainly it's not going to be an issue that's germane to you, but it does seem we're kind of at or very near a near term peak. Just given some of the headwinds that we have on the rate front, some of the mortgage that is probably not going to recur at these levels. How should we think about this new metric that you've kind of created as we move forward? And what levers do you have, probably more on the expense side than anything to offset some of the revenue pressures?
A lot of other banks have talked about digitization trends, branch closures, headcount reduction, etcetera. Just want to see what's in the cards for you guys. Thanks.
Let me say that the expense side, as Donna calls that, she says that's 'eight, 'nine stuff. We've already been through the expense reduction side and we as we went over $10,000,000,000 it's extremely expensive and we've swallowed those expenses thus far and still running about 40% efficiency ratio. So I think the ratio, I was just looking at it just thinking about where it came from is I'm looking at the PPNR versus the total revenue net. And I said, look at that, that's almost 60% that's coming to the bottom line basically before taxes and before loan loss allocation. I just plan with that and mentally I thought that is a really strong number which shows the earnings power of your corporation and shows the income that this company potentially can make.
So I just played with it and I ran it back for a year and I said, Tracy, come here. I got something new. I want to show you. So anyway, he said, what have you done? It isn't it really shows, it shows your margin.
It really it shows your margin. It picks out your interest expense basically and may go further with that and take total revenue, not just net revenue and take total revenue. So it's just new for us and it was just a number that really jumped out at me and I just wanted to share it because I'd like to see that number used by I'd like to compare competitors and see who can run at close to 60%. That answer your question?
Yes. I was just trying to figure out because it does seem like you and others on that metric would obviously be facing some headwinds and look like it would go down next year, particularly as the accretion runs off and the mortgage system repeat and then you just have kind of core margin pressures as you kind of talked about. So yes, it does.
That's a good point. And I see that. How long can mortgage stay as strong as it is, but then you're going to have another PPP program. And if we get a vaccine, if we get a vaccine, we're going to see the market take off again and we're going to say, I think we'll see business kick back up. So I mean that's we get a vaccine and I think you'll see that pretty much resolve it and put it behind us.
So there's always something where the loans were down a little bit this year because we were so damn conservative and that's okay. And then you got a little PPP income and then you got mortgage that kicks in. And then you had our small business investment group and our investments that kicked in 3,000,000 this quarter and that will be kicking in next year. So home has put itself in a position with enough handles to pull on that we think that we can continue to produce these kind of numbers in the future. That's exactly what I was going to add to it.
I mean, you use the mortgages as an example. Yes, it's had a phenomenal time. Our team is gearing itself up to where if it actually a lot of the mortgage groups are tired and have been working so many hours and time along the ride here. But based on with our President, Keith, yesterday, you begin to say, okay, if it slows down, we're getting a lot of opportunities to expand the markets that we're in. So we have you can grow by hiring additional lenders in the process as we have developed out the back room and continue to grow it.
So even though some of that may trickle down some, the opportunities are still there and that's what this company has done forever. I go back to it's really about the strength of capital and where you stand when you put all this money in the shoe boxes. Johnny has said it's just identifying what you have and when you can do that. And Donna started this efficiency program several years ago on the branch part. And we're always looking at those type of opportunities.
And there's no doubt that the there are some expenses that is incurred over the past 9 months with the pandemic. Are these going to be ongoing forward? Probably going to be some of that for a little while, but the numbers are several $100,000 a quarter that we had just for the safety of our staff coming to the buildings that we operate. But there's always some opportunity when you're running a 40% efficiency ratio, it's hard to knock some of that down, but the revenue side is still there. I'm not as negative as you may have indicated there as far as the opportunities that we have coming forward.
Forward. Maybe just one follow-up for me on credit. Some of the larger banks that have reported have talked about reducing a little bit more aggressively some of their at risk exposure. Truist, for instance, this morning discussed disposing of some of their hotel properties. It sounds from your comments, Johnny, like you're more willing to kind of work with your borrowers and see it through.
Can you just walk us through the decision making process there? Because it does seem depending on the next round of stimulus if it happens that there will be some greater loss portfolios. So I guess why not try and get out in front of it? Thanks.
We're going to take care of our customers. We always have. And we're not going to run from them and we're not going to flush them. We'll flush them if they need to be flushed, but it is our responsibility to take care of our customers and they've taken care of us over the years and we're going to be there for them. So I mean even our guy that's movie theater guy that doesn't have any new movies, he's got a gorgeous facility.
We got real estate in that deal. He don't come out of this deal, somebody don't come by that at some point in time. That movie theater is going to operate again. It might be 18 months for it operates, but we're going to stay with him. We're not flat floor close on him.
He's the best op, one of the best operators in the country. He's done everything right. None of this is his fault. We need to be honorable people to him and stay with him and do the right thing to those customers. Kevin?
Well, we're going to look at pricing today. I mean, I'm not sure that if today is the best time to move them or not. There's a lot of money out there. I think there'll be more in 6 months than there is today, be more product 6 months than there is today. So we're going to look at pricing, but I'm with Johnny on his comments.
I think the best thing we put ourselves in a position is the underwriting that we've been doing for several years. And all of the businesses that have been affected by the shutdown are in the position to be able to survive and come back again. And it's not where they're in, they were leveraged up and whatever loss of revenue they're seeing or may not ever get back, they're just making that adjustments and they're doing just fine. I mean, it's I'm as proud to be a banker today as I ever have because when you talk to your customer and you see what they're doing and what they're adjusting to make their livelihood and survival is what America is all about. They're not sitting back here just waiting on somebody to give them something they're getting after.
We have one more tell you that that is about a $70,000,000 credit who's struggling, but he's got $4,200,000 in cash and we could loan him some money. So I mean we could loan him a couple of $1,000,000 and he'd give close to $7,000,000 And according to the forecast that we have, that'll carry him through 24, 30 months. So by that time we'll have a vaccine and things will be better. So I mean that's the way we're looking at it. That's what the good news is the people that criticized us for not growing loans fast like other people did, but not everybody wants to do.
I mean they'll do it. A lot of people did 80% hotel loans. We did 50% hotel loans. So we set ourselves up to win long time ago. We set ourselves up to win with this executive loan committee.
And I guess you heard the 600 years of experience and 370 years experience this directors and most of them have been with me forever. And a lot of those people have been with me to the point they've been involved in every loan that's been made in this corporation. So I feel good about the bricks that we built as we're building the wall and homes in damn good shape. And if we need to take a $50,000,000 charge off, we'll take it. Someone said, what would you do if you had $100,000,000 worth of hotels that went bad?
I said, well, we just charge it off. We got the money to do that. We got the capital to do that. And you work with your customers. I mean that's when I met you Michael years ago down there in Florida, you know the times that was and it's pretty rewarding to meet the customers that were in some challenge situation and the ones that wanted to work and get out and do the thing, they all did it.
You just structure and go from there. Now on a side note, Johnny, you mentioned staffs been with you how many years? Through what? The staff, management staff.
How many years? About 20 years.
102 years. 102 years. Oh, yeah, 102 years or so experience. When he asked me how long I've been with Michael, I said, well, it's been 18 years. He said, well, that's nice.
I said, but it's like 47. He's got a good job. He's got a good job and he complains since they're hard to work for. I do ask him about margin every morning. I do do that.
No, I appreciate the color and thank you to everyone including
The next question is from Jon Arfstrom with RBC Capital Markets. Please go ahead.
Hey, thanks. Good afternoon.
Hi, Jon.
Just a couple of quick ones here. Kevin, PPP forgiveness, you've talked about how it's started. What do you expect for forgiveness and kind of the cadence and timing on that?
I think we're going to get a lot of it submitted this quarter, but I mean from what we're seeing coming back from SBA at this point, it's largely going to be a Q1, I think from a cash coming back in standpoint.
Okay, got it, good. Question for Chris, you talked about the pipeline rebuilding for CFG. Can you just talk a little bit about the magnitude of that and the composition of that?
Yes, happy to. Good afternoon.
I think the pipeline that we see now is similar to the pipeline we've seen before. What we're seeing is just takes longer to get a transaction done now. So deals stay on the pipeline longer. And they do tend not to go back and forth a little bit where traditionally what would happen is we talk about a deal, we soft quote it, we get to terms, we get a term sheet signed, we do the underwriting and then we work towards close. I think what we're finding now is in the underwriting process, going through that process, we are tending to find more things that need to be addressed.
And that results in potentially the borrower need come up more equity or restructuring the capital stack and that's really what we're seeing. And the time it takes to do that and then restructure the deal, etcetera, just takes a little bit longer. We think most of the deals are still going to get done, but we think that they just take a little bit longer. So I would say we're having a little bit more of a backlog where stuff stays on the pipeline a little longer, where normally it might go our starts with screening and then soft sheets and then deals approved ready for close. We probably have more deals in the underwriting ready for close than we usually would, and they tend to take a little bit longer.
I think most of them will come on through, but they're a little bit hard to get And I think that's okay. We could certainly resolve that by just closing the deal. But we think it's a lot better to be safe and to be a little bit cautious as we go through with these. So if it's a couple of months delay to get that done, I think that's okay. And most of these, what we're continuing to see on the pipeline, it's all still pre COVID ideas that are dressed up in a post COVID loan.
And so it's good reason why some of these would need to be structured and restructured, etcetera. It's still way too early for somebody to have identified an opportunity piece of property and put it together and now for financing in sort of a post COVID environment. But what we do as a platform is not that different than what we've been talking about from the community bank side, which is you sit down, you work with your customer and you find a way to get it done, as long as they're willing to work with you, you can probably get that done.
Okay. Thanks for that. And then just back on the shoebox concept or how to get rid of some of your capital or spend some of your capital. Have you guys seen anything
on M and A?
Is there anything floating around in terms of potential or is this still too early?
We've just been careful. We were engaged in M and A, somebody looking at acquiring us at one point in time. And we've just been before we moved as the discussion ran today and it continues to run around here and I'm sure it will continue on is what's the best use of our capital right now. My fear is that as difficult as it has been to get your arms around your asset quality When we knew we put it on the books properly and to go back and evaluate it and we took deep dives into our asset classes. And we even learned something, John, that I'd never learned before.
We now have airport hotels and extended stays and we call them water hotels and interstate hotels. And the way they function in a situation like this is all different. So it's been a learning process for all of us. And you never know. I think Home Bancshares probably has the best handle on their asset quality of any company in the country.
And to do due diligence on a sizable company today, I'm not sure many CEOs have their arms around and executive groups have their arms around. I just bet they don't have their arms around their asset quality the way Home Bancshares does. So to go do a $10,000,000,000 or $5,000,000,000 or $12,000,000,000 trade today would the due diligence would certainly be extended. It wouldn't be a 90 day and announce a deal. You'd certainly want to ride through a quarter with somebody.
It would be a much it'd be kind of like Chris was talking about the loans. It'd be extended. It would just extend out, extend out and if it were public, they were public, we'd probably want to write them through a quarter. So I'd say any M and A for home would be 6 months down the road. So as a result of that, we're thinking about what we do for our shareholders such as dividend.
And we might go buy something small. We might find something small out there and go if we're in the market, we might step up and buy something. Just if got a car in the garage, you don't ever drive it, the batteries run down. Sometimes it's good to get it to start it up and run it a little bit. And our team, as you know, was damn good at putting together up banks and consolidating them and integrating them into our company.
We hadn't done one in a while because we've been focused on other things, but it probably wouldn't hurt to go out and find a $400,000,000 $500,000,000 $600,000,000 bank and just to go through the exercise and kind of warm yourself back up and run the engine a little bit. All right.
Few at some point, I think.
Bigger shoe box. Shoe box, yes.
Bigger shoe box, yes, bigger pair of boots. So all right. Thanks for everything. Appreciate it.
Thank you.
The next question is from Brian Martin with Janney Montgomery. Please go ahead.
Hey, guys. Good afternoon. Just a couple of easy ones for me. Just Kevin, back to the PPP for just one minute. Is your expectation that it's still probably 80% plus on the forgiveness side as you maybe most of that being in the Q1, it sounds like that 80% or above is greater, is it even higher now or less lower now?
I don't think it's even lower than 80%. It could be higher.
Okay. All right. And then how about just on the deferrals, I think you guys called out that about half of them are hospitality or hotels. Any other concentrations in the remaining 50%? I mean, is there just any bigger pieces in there?
Not really. It is outside of hotels it's spread out across asset classes and across our footprint. I can't really little bit of healthcare, little bit of just real estate type deals that are not owner occupied. I mean hotel is the big concentration.
Got you. Okay. And then maybe just one last one on the margin and just the loans. I think last quarter you guys talked about the loans at their floor and it sounds like with some pressure on the margin from the investment portfolio. I mean, I guess, can you remind us percent of the loans are at their floor today?
I think there was about you guys Stephen gave some numbers last quarter, but just the percentage of loans that are at their floor today?
Sure. This is Stephen. Hi, Brian. Functionally, all of Chris' for the CCFG portfolio is at its floor today and then we've got about a little over $800,000,000 of the 1 point $3,000,000,000 or so in the near term Community Bank and Shore portfolios that are at its floor. Okay.
I kind of look at it really just from terms of what is in the Community Bank footprint where we're doing 5 year and less balloons, what's maturing in the coming months and how we kind of compare that to what we're able to do on the deposit side. I would say over the next 6 months or so, we've got $1,000,000,000 maybe just shy of that in maturing loans that will come up for repricing that are in the $4.90 range. So when we think about where we're re pricing, where we're originating today, I think our group prospects are good to be able to hold in that range.
Got you. Okay. I think that's it. Just maybe lastly on the expenses, it sounded as though there's not a whole lot to do there. That seems like you get pretty consistent with what
you guys have said last couple
of quarters. So that's am I hearing that right on you did most of that in the last downturn?
Pretty well. That's right.
Yes. Okay. All right. That's all for me, guys. I appreciate it.
Thanks and nice quarter.
Thanks. I appreciate it. Just finally wrapping up here, I guess, I'm going to wrap up if you don't mind. We're going to continue doing what we're doing. We've done in the past and that's continuing to produce top peer results.
I appreciate our shareholders. I see that our large shareholders are continuing to accumulate the stock and I'm very appreciative of that. Thanks for your support. Bank prices are at basically all time lows. Many, many banks are selling below tangible book and I guess the market's given us some credit and we're trading at about 1 6 times tangible book.
I think this too shall pass and I think smart money will continue to accumulate bank stocks. This pandemic will pass too. So I look forward to talking to you in 90 days with this same group of people. And we may be instead of having the group instead of having 102 years experience maybe we'll have 103, Tracy. We'll have 6 months experience in 90 days.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.