Greetings, ladies and gentlemen, and welcome to the Home BancShares, Inc. first quarter 2022 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 note that if you would like to ask a question during the question and answer session, please press star then one on a touch- tone phone. If you decide you want to withdraw your question, please press star then two to remove yourself from the list. The company has asked me to remind everyone to refer to the cautionary note regarding forward-looking statements. You will find this note on page t hree of their Form 10-K filed with the SEC in April 2022.
At this time, all participants are in a listen-only mode, and this conference is being recorded. If you need operator assistance during the conference, please press star then zero. It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations.
Good afternoon. This is Donna Townsell. I am Director of Investor Relations. Welcome to our first- quarter conference call. Reporting today will be our Chairman, John Allison, Tracy French, President and CEO of Centennial Bank, Brian Davis, our Chief Financial Officer, Kevin Hester, our Chief Lending Officer, Chris Poulton, President of CCFG, John Marshall, President of Shore Premier Finance, and Stephen Tipton, Chief Operating Officer. At this time, I would like to turn the call over to our Chairman, John Allison.
Good afternoon. Thank you, Donna. Welcome to Home BancShares' first quarter 2022 earnings release and conference call. Actually, in spite of all that's going on in the world with global unrest, inflation resulting in record wholesale prices, an increase in CPI index coupled with spiking interest rates, closing our largest acquisition ever, it really was a pretty solid quarter. Pretty plain vanilla, $0.40 EPS, but I think that exceeded a little bit, if I'm not mistaken. With a fortress balance sheet and massive liquidity of $3.8 billion, plus or minus a little more, it changes every day, Brian, doesn't it?
Yes, sir.
We decided to use $300 million of our liquidity to totally retire our 5.625% floating- rate subordinated notes on April 15, 2022, and that has been completed. Correct, Brian?
That's correct. We sent the money out on Friday.
Sent the money out on Friday. You know, if you remember, we had issued a new $300 million sub-debt in January at 3.125% floating- to- fixed subordinated note to either enhance our existing capital or retire the sub-debt. The move will result in a savings of about $1.875 million per quarter or $7.5 million per year. That is for the next five years for a total of $37.5 million in savings over the five years. A nice trade. Piper Sandler did the entire transaction. They did it in one week. Nice job, you guys. This resulted in carrying an extra interest expense of the original $300 million for almost the entire first quarter.
However, we got out in front of most of the spiking interest rates and believe we made the right call. In addition, Home has received Fed approval to retire approximately $71 million in trust preferred of Home's and $23 million of trust preferred to Happy. All of this switches at a variable rate. This will be a second- quarter event. When did that stretch into the third quarter? Did you say, Stephen, it go to Q1 might be July?
Yeah, most June. I think it's July 24.
July 24. Okay. Some might run into the third quarter a little bit.
Most of it's June 15th.
Most of it's June 15th. The realized savings on this will be approximately $3 million per year, and that's before rates started going up. As I told you, these are variable. I want to congratulate our team members for receiving Forbes No. 1 bank in America for the outstanding performance for 2021. Of all banks, big or small, this marks the third time in five years Home enjoyed this huge honor of best bank in America. Additionally, last week, Home was named one of the best banks in the world for the third time by Forbes. We're happy to announce the closing of our acquisition of Happy Bancshares, Inc. on April 1st. We welcome the Happy team members to Centennial Bank and look forward to our future successes together.
This transaction was part of a strategic focus to shift into high-growth Texas markets in a meaningful way, and we're already seeing the benefits of this Texas franchise with strong loan demand and attractive loan yield. This should create real value to put cash to work in a rising- rate environment. We have had the opportunity to spend some quality time with their team over the last month, and we have certainly enjoyed it. We have some downside, and we have some upside as it relates to higher rates. The unforeseen, unfortunate impact of closing has been the rapid rate movement that has occurred recently and its impact on purchase accounting. As I've said multiple times, we structure transactions to be triple-A credit, and that's exactly what we did in this transaction.
That being said, what we could not control was the timing of the closing or the fact that inflation has been so significant that Fed funds target for the year has been changed from 25 basis points at announcement of the Happy deal to 2.5%-3% today. However, with all that said, the $101 million loss is a no- risk earn back over the securities life. We have basically always held our bonds to maturity, so we expect to get every penny of our securities portfolio back over time. Primarily due to the change in after-tax unrealized position of the securities portfolio, which moved from, catch this, an estimated $27 million gain in announcement to a $101 million loss. But also the anticipated change to fair- value marks on the balance sheet.
We estimate the tangible book value impact to be $0.43 diluted. We simply had to pick a point in time to mark the balance sheet, and that resulted in a loss of value. This includes CECL double count, which we have not assumed any changes to as of yet, and all transaction costs, even if they occur on a later date. This change was an unavoidable instance, which, in our mind, is solely a timing issue and consistent with the changes in the AOCI we have seen across the country. If interest rates had that impact on the securities book, what do you think they had the impact on the value of the loan book for those competitors of ours with loans that are long and low? I can tell you it's huge. Thank goodness, Happy had a good loan yield.
Many of our competitors have no sense of how much damage they have done to the value of their companies, and the Street have been rewarding them for just doing that. Rates are going up. It's been a race to the bottom. That's the downside. The upside is, as you know, Home did not fall prey to building securities portfolio and sat on the sidelines building a cash chest of money while rocketing interest rates have taken our reinvestment rates up 125-150 basis points in a relatively short three-month period. While treasuries were up 110-120 basis points already this year, and looks like they're just warming up with multiple 50 basis point rate hikes forecasted in the immediate future.
At the announcement, 2023 EPS accretion was expected to be 9.2% or $0.16. Today, as a result of the mark-to-the-book, estimated 2023 accretion is approximately $0.16 or $0.28 per share, 16% or $0.28 per share. We look forward to providing a complete view of the financial position of the combined companies in our second- quarter release. To the future, newsflash, rates are headed higher and much higher. Anything with a four in front of it is probably a loser. We are facing 100-200 basis points in the remainder of the year, which includes 50 in May and 50 in June. We believe the Fed will be forced to continue raising rates at a faster pace in the near future.
As a result, we could be poised to start deploying some of our cash in the third and fourth quarters in the securities book. One of the keys to the economy the Fed has used in the past was the ability to reduce interest rates. With 40 basis points Fed funds, there is no room. As a result, they have no powder to use to employ that important tool. They will raise rates to allow them to build some powder and have the ability to stimulate the economy. President Bullard of St. Louis certainly is part of the inflation-fighting regime and is a hawk for quicker and larger increases. I think his research has led him to the conclusion that we are way behind the curve, and his leadership is dearly needed because he is right.
I would hope that the politics are not part of this equation because this is not a Republican or a Democratic issue. If I'm correct, Mr. Powell is the only Republican appointed by the Biden administration. The President needs rates to remain low for the November election. That is 180 degrees from what this country needs. We cannot add this new spending plan that he says will remedy inflation. That's like the guy that said, "I need to lose some weight, so I'm going to eat more food." Loans were flat for the quarter, but up slightly in the last three quarters. We've held in there pretty good. If there's any reasonable way for a competitor to come in, and we'll try to keep our loans if we can keep them. Sometimes they get really stupid, though. Give you a quick example.
We just had one this quarter that was 6% fixed on a 10-year loan with recourse from a good customer with good equity. Our competitor came in, cashed out more money to the customer than he originally had in the loan with non-recourse financing, 4% fixed. I mean, you got to let that crazy stuff go. It was our decision to let it go, but that's the kind of structure we get in banks in trouble. Leverage is certainly the key. Efficiency ratio has ticked up recently and should be starting to decline as we begin our consolidation process over the remainder of the year. Asset quality has remained and even improved a little bit, if you can believe that, as good as it is, over the last quarter.
In conclusion, I think we're probably in the best position for our company's future with a fortress balance sheet, disciplined strategy, peer-leading asset quality, sitting in America's best markets for [townhouse], billions in liquidity, and an interest- rate environment that fits our situation perfectly. Now, remember, the cost of funds are going to go up at some point in time. These low rates will have to go away, and the margins will get squeezed. The next several years will separate the long- game players from the short-term players, and I expect Home to remain one of the top banks in America. If you're going to write low loans, you better make them variable. The Street has applauded and rewarded large loan growth, but as you can see, the impact of higher rates have had on the securities book at Happy, the exact impact is happening to the loan book.
You only see the reality if it's mark to market, as we had to do. With all of that said, I'll turn it back to you, Donna.
That was a very insightful report. Thank you very much. Now, let's turn to Tracy French to hear what's next for Centennial Bank.
Thank you, Donna, and good afternoon to all.
Centennial Bank closed out a good first quarter with the sights looking very good for the future with our patience on not investing our excess funds and our addition to Happy State Bank. Centennial Bank finished the quarter with $18.6 billion in assets, up from $18 billion or 3% for this quarter. Loans finished the quarter at $10 billion, up from $9.8 billion or 2% for the quarter. Deposits continued good core solid growth, ending the quarter at $15.2 billion, up from $14.5 billion or 4.5% for the quarter. Our group here today will have more color on that in a bit. The bank's return on average assets, excluding our excess liquidity that Johnny's mentioned, ended the quarter at 1.88%.
Our efficiency ratio ended at 43% for the quarter, and our risk-based capital finished March at 16.35%. While most banks would like these performance numbers, we expect better. We believe we are in great position to improve on all these performance metrics that has made us the best bank in America. Asset quality remains strong with our allowance for loan losses to total loans at 2.35%, with our non-performing loans at the lowest I can remember, 0.44, making our non-performing loans equate to 526% coverage for loan losses to non-performing loans. That's a nice feeling with inflation and the unknown circumstances that Johnny has mentioned.
By the way, I'm looking at a plaque on the wall that says, "Johnny said." If you look back at his comments last year, it's pretty darn scary how close he was predicting the status of our economy today. Total net revenue for the bank this quarter was $166 million for March, leading over the last five months. As always, we continue to focus on our non-interest income and non-interest expense. A nice move occurred in our service charge and fees, which was up 10% this quarter compared to the same quarter last year. Our team of bankers had a good start this past quarter, and we'll give it our all in focusing on working through and meeting our expectations over the next quarter or two. Our bank began planning over 18 months ago what is happening today with interest rates and inflation.
While we knew we may not be right, we knew we would not be wrong for what is best for our company. It was tough holding our cash over all this time, sacrificing short-term gains, but we are happy to be in the position we are today. Speaking of Happy, we are pleased to welcome our Happy partners, shareholders, customers to Home BancShares and Centennial Bank as of April 1, 2022. The team of bankers led by Mikel Williamson have been phenomenal to work with, and the future looks mighty good with our Centennial bankers joining forces with our friends from Texas. Donna, I've got my cowboy boots shined and ready to go.
They look good. Thank you very much for that. Now Brian Davis will give us the financial report.
Thanks, Donna. Today, we reported $131.1 million of net interest income and a 3.21% net interest margin for Q1 2022. Our first quarter net interest margin decreased 21 basis points from Q4. Today, I'd like to go over a few NIM items. First, during the first quarter, we had $53 million of PPP loans forgiven. This forgiveness caused the acceleration of deferred fee income for the loans forgiven. Our PPP deferred fee income decreased $3.4 million from Q4 to Q1. The change was 6 basis points dilutive to the NIM. Second, as a result of excess liquidity, we had $236 million of additional interest-bearing cash in Q1 compared to Q4. The excess liquidity was 5 basis points dilutive to the Q1 NIM compared to Q4.
Third, there was event income in the margin for Q1 of $1.4 million compared to $1.2 million for Q4. This had a negative impact to the Q1 NIM of about 0.5 basis point. Fourth, accretion income for Q1 was $3.1 million compared to $4 million for Q4. This had a negative impact to the NIM of 2 basis points. From my point of historical reference, the Q1 excess cash versus the historical normal cash balance has a negative impact to the Q1 NIM of 77 basis points. It's a lot of basis points. I'll conclude with a few remarks on capital. Our goal at Home BancShares, Inc. is to be extremely well capitalized. I'm pleased to report the following strong capital information.
For Q1 in 2022, our Tier One capital is $1.9 billion, total risk-based capital was $2.6 billion, and risk-weighted assets were $12.2 billion. As a result, the leverage ratio was 10.8%, which is 116% above the well-capitalized benchmark of 5%. Common equity, Tier One, was 14.9%, which is 129% above the well-capitalized benchmark of 6.5%. Tier One capital was 15.4%, which is 93% above the well-capitalized benchmark of 8%. Finally, the total risk-based capital was 21.6%, which is 116% above the well-capitalized benchmark of 10%. With that said, I'll turn the call back over to Donna.
Thank you, Brian. Now Kevin Hester will provide a lending update.
Thanks, Donna. Good afternoon, everyone.
Loans grew by $217 million in the first quarter, led by a $242 million acquisition of yacht loans from LendingClub Bank as they exited the business line that they had recently acquired in their acquisition of Radius Bank. The portfolio is very similar in underwriting characteristics compared to our previous two marine acquisitions due to the fact that we had actively competed with them regularly, especially in the over $1 million loan size. The combination of $53 million in PPP forgiveness and organic loan growth of $26 million rounded out the changes in the loan portfolio in the first quarter. Loan production remained strong for the second quarter, but payoffs continue to be high, with project stabilization improving as we move past the pandemic.
The addition of the vibrant Texas markets from the Happy acquisition should provide even more opportunities to post organic loan growth in future quarters. The prospect of significant interest- rate increases is something that we have projected will happen for some time. Now that we're here, the possibility for unprecedented change in a short period of time creates a daunting task. Remaining disciplined as it relates to loan pricing and underwriting may be more important than ever and is not something that we're seeing across the industry. The $53 million reduction in PPP loans in the first quarter leaves us with a balance of $60 million, which is about 5% of the original funded amounts. COVID modified loan balances continued a slow decline in the first quarter, reducing $15 million to $176 million in total.
Hotels make up 83% of this balance, and significant improvement has occurred across the board, as only 8% of this $76 million balance is classified. As you may remember, we offered a longer-term, interest-only modification across the board to ensure that we could see these borrowers through the end of the pandemic. Virtually all of these will expire late in 2022 and will automatically go back to principal and interest payments. I'm not aware of anyone at this point that we do not expect to go back to principal and interest when their interest-only period ends. Significant improvement in credit metrics occurred in the first quarter, especially given the strong numbers that we posted at year-end 2021. Non-performing loans and assets dropped seven basis points and four basis points respectively, which was an improvement of 14% in each metric quarter-over-quarter.
As Tracy mentioned, the allowance for credit losses coverage improved to 526% of non-performing loans. The early stage past due number of 36 basis points is the lowest number that I could find historically, even on a monthly basis for us. Overall, the first quarter was a solid one in the face of many headwinds, and I appreciate all of our frontline lending and operations folks for their continued hard work. Donna, I will turn it back over to you.
Thank you, Kevin. Now from New York, we have Christopher C. Poulton.
Thank you, Donna, and good afternoon. This month marks CCFG's seventh anniversary. Seventh anniversary is the copper anniversary for those like me that are keeping track. Over these seven years, we've consistently grown the portfolio and earnings by maintaining both margins and credit quality through a range of conditions that have included prolonged economic expansion, a rapid contraction, and now high inflation and a rising- rate environment. Starting with just over $300 million in assets, we're in our eighth year at Centennial, reporting loans outstanding of just over $2.1 billion on $3.4 billion of commitments. This is the first quarter we've closed above the $2 billion in asset mark. During the quarter, CCFG originated 11 loans for a total commitment of $459 million.
You may recall that over the past few earnings calls, I've commented on a growing pipeline of deals in underwriting and closing. This quarter cleared a good portion of these waiting loans. Looking ahead, we expect to have another solid origination quarter in Q2, though I do expect that this will level out a bit, especially in the later half of the quarter and into the third quarter. I also anticipate that Q2 and Q3 may deliver more pay downs and payoffs than we've experienced over the past few quarters, as borrowers are most likely to move to more permanent financing given the expected continued rise in interest rates. Over the past year, we've grown the portfolio from $1.6 billion to $2.1 billion, a $500 million or 30% increase.
This, coupled with the continued positive outlook on originations, gives us significant room to absorb and at times encourage loan payoffs as we further rotate the portfolio for the post-pandemic, post-rate rise market. Donna, before I hand the call back to you, I do want to point out that the eighth anniversary gift is bronze, just in case y'all need a little bit of a head start on my statue. Maybe you could see how the rest of the year goes.
I appreciate the lead time you offered us there, Chris. Thank you.
Chris, we'll wait and see how the rest of the year goes.
Good luck, Chris. That's right. Order early. Well, I appreciate that report. Now let's hear from John Marshall on the boating room.
Good afternoon, and thank you. Summer of 2022 will mark an important milestone, not seven years, not eight years, but four years for Shore Premier Finance and Centennial Bank. We joined Centennial July 1, 2018 with $386 million in interest- earning assets. Four years later, we're $1.1 billion in assets with core net income of $6 million in the quarter, exceeding budget by about $1 million. Our national platform provides a complementary overlap with the bank, particularly in Florida, our largest concentration of loans at 24%. Now, moving into Texas, our sixth-largest concentration is $50 million or 4%. As we established the guardrails for the new normal, first quarter 2022 originations of $87 million. Let me break that down. That's $55 million in retail originations coupled with $32 million of commercial advances.
Still at $87 million, they were down slightly from first quarter of 2021 of $93 million and only half of 4Q 2021 at $161 million. This reflects a seasonality of the business as buyers scrambled to buy their boats before the end of the year, after the fall shows, and new buyers are shopping this season this year in the first half of 2022. The slight softening of sales year-over-year is more a function of supply- chain disruption and lack of inventory rather than softening demand. Pre-sales of boats for delivery year-end 2022 and first half of 2023 are up substantially. Regional bank consolidation and an accommodating Centennial Bank executive management team have enabled us to opportunistically pick up an additional retail portfolio of luxury yacht loans in the first quarter that Kevin Hester mentioned.
This pool, of course, supplemented softer originations and elevated level of prepays. Cash continues to be a formidable competitor for us. Market outlook uncertainties motivated some buyers to just pay cash for their yacht purchases or pay off their 5% mortgage. Prepays in the quarter erased $50 million of organic growth. Asset quality remains strong as it has across the bank. Origination FICOs remain prime levels of 774. Delinquent loans in the quarter were 18 basis points, and nonaccrual loans were 13 basis points. Further evidence of origination quality, we witnessed declined applications drop from 30% in Q4 2021, down to 27% in Q1 of 2022. The boat show season is open, with back-to-back shows coming up in the next couple of weeks in Annapolis in Maryland's Eastern Shore.
Limited stock boats are pushing more buyers into custom purchases and are increasing the pre-order logs for our dealers. Our team is optimistic about the continued opportunity for growth. With that, Donna, let me return the conversation to you.
Thanks, John. Now for our final report today, it's Stephen Tipton.
Thanks, Donna. I'll update you today on deposit activity, repricing efforts and trends, and a few additional details on the balance sheet. Total deposits continued to climb in the first quarter, with growth of $320 million or 9% on an annualized basis at over $1 billion in growth year over year, or approximately 8% on an annualized basis. The growth in the first quarter was primarily from the Florida and Alabama regions, again demonstrating the strong economy along the Gulf Coast and throughout the state of Florida. One particular highlight on the growth, core non-interest- bearing balances grew $180 million in the quarter. Switching to funding costs, interest-bearing deposits averaged 19 basis points in Q1, down 2 basis points on a linked quarter basis.
With the recent rise in short-term rates, we saw an uptick on a subset of our interest-bearing deposits and exited the quarter in March at 21 basis points. Total deposit costs were 14 basis points for the quarter and 15 basis points for March. With over 30% of our deposit base now in core non-interest- bearing balances, we believe this to be a great starting point for our funding base as we enter this rising- rate environment. As Tracy and Johnny have mentioned, our patience in deploying liquidity over the past two years has placed us in a great position of strength and flexibility. Switching to lending, the groups are off to a strong start in 2022 with just over $1 billion in origination volume, much improved from the same quarter one year ago.
A little more than half of this origination volume was funded at March 31. Of note, our unfunded commitments now stand at a little over $3 billion, the highest number that we've seen. Despite a few large development projects being completed and accessing the permanent markets, payoff volumes slowed to approximately $650 million in Q1, down to a level that we have not seen in several years. With much discussion on rising rates, I would like to update you on where we stand today from an asset- and- liability perspective. Variable- rate loans with repricing dates this year totaled around $3.3 billion, or approximately 1/3 of the loan portfolio at quarter end.
With the most recent increase in Fed funds, along with LIBOR, we now have approximately $1.5 billion at or above their floors, and we expect to see that gap close significantly with the anticipated rate increases in May and June and thereafter. Additionally, the Happy loan portfolio will add $1.2 billion to the balances I mentioned above, which similarly is about 1/3 of their portfolio. Today, approximately $1 billion of their $1.2 billion is already at or exceeding those floors. With $3.5 billion-$4 billion in cash to deploy, the variable- rate loans in the portfolio, as I mentioned above, along with cash flow from the investment portfolio, we feel the company is very well positioned to benefit from continued increases in interest rates.
Now importantly, I'd like to recognize the significant efforts ongoing by our teammates here at home and Happy as everyone serves the customer base while also working towards a successful systems conversion in June. With that, I'll turn it back over to you, Donna.
That's a good report. Thank you, Stephen. Well, Johnny, before we go to Q&A, do you have any additional comments?
No, I really don't. Somebody else might have some. I just think we're well positioned for rate rise based on what Stephen had to say and what we see happening, plus the excess cash that we're sitting on. I'm pretty optimistic. We're seeing these reinvestment rates jump the way they jumped in the last 90 days, and I expect them to continue that. It looks like we're looking straight down the barrel of 250 basis point increases here pretty quick. We could be in the 2.5%-3% Fed funds range by the end of the year. If we are, you know, we may have deployed money too quick. That's the key, is when do we start deploying. Hopefully we'll be deploying this year some and more into next year, both in loans and in securities.
I'm done. If you want to go to the operator, we can go back to the operator.
Thank you very much. Turn it back over to you for last Q&A.
The first question comes from Jon Arfstrom with RBC Capital Markets. Please proceed.
Thanks. Good afternoon.
Hi, Jon. How are you doing?
Can you guys hear me? Hey, I'm good.
You good?
Let's talk about the $3.5 billion. I guess, Johnny, that's not train riding money, is it? I mean, it's a, that's a big number.
It's loads of train down.
Exactly. The question is, what do you need to see to put it to work? I mean, we've seen examples this quarter of companies that put it to work too soon and, you know, stocks are getting beat up. I guess the question is, what will make you guys comfortable to put that money to work?
We need to see something with a 4 in front of it on yields. We need to see something there. We're seeing 3.30s now, 3.40s with no risk at all, which bodes pretty well for us. We recorded some of this yesterday, and the rates are even up again today. I think you can see us in the 4s starting to roll some of it out. We're probably gonna sit on $1 billion anyway to see where this thing goes to. We probably will deploy over a period, over the next 18 months to 24 months, probably $2 billion, $2.5 billion, maybe $3 billion. Then we're gonna sit on, we're gonna keep some train riding money, as you call it.
We're gonna keep some train riding money in the event that it goes on higher, which it is, it's my call that we're gonna see unbelievably high rates. That's my call. I've been beating the drum, as you know, for about a year and a half on this, and I thought I was right, and I thought I was wrong. You know, we're watching a puppet show with this Fed funds deal. I mean, with the treasuries, because we don't know what's behind the box, right? It's just a puppet show. The rates run up. They're trying to run up, and they're buying back down, and they run up, and they buy them back down. At some point in time, they're going to have to let that go. I'm not sure where that goes.
I don't know if it goes to where it went to in 1980, 1981 and 1982. I'm hearing nobody was talking about Jimmy Carter's administration before, but I'm hearing lots of talk about that today. That's what I remember and see. I have a fear that we could get there. Sitting on $1 billion, if I'm wrong and it starts coming down, we deployed it at much, much, I mean, pretty close to that, maybe $1.5 billion less. I think that's important. Loan demand is pretty good. We got to keep some money for loans. When you sit with $4 billion, maybe you keep $1 billion set aside for something, you put $1 billion in loans, and you put $2 billion in securities.
That's kinda what I'm thinking out loud right now, Jon. It has been. You're right. We have remained disciplined, and we have so far made the right call. When you see reinvestment rates up 150 basis points since January 1, I think we did the right thing. I think time will tell how well we did. The key is when we deploy. I think that's the best I can tell you right now. If we start seeing some 4s on that, we start putting some money in there. I think you can see 4s, 5s, and 6s in the next 18 months.
Okay, that makes sense. John, for you or Kevin or Tracy. Kevin, you used the term unprecedented change when you were describing the lending environment. I know you want to make loans and the demand is there, but how are you approaching it? How are you protecting yourself? You know, what's attractive at this point from a lending point of view?
Well, it is tough. I mean, we're just sitting right in front of this, you know, what we expect to be at least 100 basis point move in rates. That's a challenge. You have asset prices as high as they are. I mean, those two things create a lot of challenges, you know, both on the pricing side and the leverage side. We're just trying to stay disciplined and do what we have always done and, you know, continue to make good loans at a fair rate that we get charged for the risk and if it's there, it's there. If it's not, it's not, and we just keep doing what we're doing.
Jon, it's as though some people didn't see the 25 basis point increase and don't see the 100 basis points coming in the next around 60 days. It's like they don't see that. I was on the phone with a guy a while ago, a credit union loaned them their money at 2.65 fixed for 10. I mean, I remember I kind of relate them to a savings and loan. I remember the last one I was in was about 20 years ago, and their yield was 7.5% on their loans, and their cost of funds was 13%. You know, of course, they went broke and went out of business, and I think the same thing will happen with some of those people. It's just, you can't fix stupid.
I mean, it's in front of us. Reality is here. Rates are going up, stupid, you know. Rates are going up, and then they're still doing 3.5% and 3.75% and 3.99%, and all this silly stuff. It really is frustrating for someone who, for a company that runs the way we run our company and maintain the quality that we run and see the stupidity in the marketplace. It's very frustrating.
Yeah. Okay. Yeah, I could go on with questions, but I'll step back in the queue, but I appreciate your answers.
Hey, thanks, Jon. I appreciate your support.
Thank you, Jon. The next question comes from Matt Olney with Stephens. Please proceed.
Hey, thanks, guys. Good afternoon.
Thanks, Matt.
I wanna go back to this discussion about liquidity and deploying this. I'm curious what the appetite is to deploy liquidity into another portfolio acquisition similar to the deal you announced in February. I guess first off, is there a pipeline of those that you see out there? Second of all, what's the appetite for something like that?
Kevin, I'll let Kevin talk about it, and we'll tell you what it is, but it's a book he looked at a while back and what they were offering then, and it seemed like that was yesterday, but it's a couple of months ago, and now what we can get on that book of business.
Yeah, I mean, yields have gone up. The rates on the loans are still the same, but the expected yield has gone up, so the price has gone down. You know, maybe there's something out there. You know, what we did in February with the LendingClub deal was opportunistic because we got to take a competitor out of the market. You know, we'll continue to look for opportunities like that. We're always looking for different angles and portfolios that make sense with what we do. If we find those, you know, we'll certainly look at it.
He's got a book right now we look at. It's about, I don't know, $500 million-$800 million. I don't know how big it is. That yields about 3%. What?
The loans are in the 3s, but the yield in the mid-90s would be 4.5%, somewhere like that.
4.5. That gets a little bit of attention to you. However, if you can put it in a no-risk security at 3.60, you got to look at that, too. We got to kind of weigh those differences, or we'll see what happens with the next 100 basis points increase, what that does to the yields. I mean, basically today I looked at the two-year, the five-year, the seven-year, and the 10-year was about the same. It's kind of interesting watching this process. That's the puppet show I was talking about earlier.
Yeah. Okay. I guess switching gears, curious what you're seeing more in footprint. I mean, you've talked about getting a little bit more aggressive on pricing, just playing some defense for some higher- quality credits. I'm curious kind of what the competitors are doing more recently, especially with higher rates expectations in the footprint. Thanks.
Well, we're busy. Texas has brought a new. They're very busy. They're busier than we were. They're bringing lots. We meet two or three times a week with them, and they're bringing lots of stuff to us that we're looking at. I'm pretty excited about that. Legacy is starting to bring lots of stuff to us, so that's good. I think a lot of people are trying to refinance right now, trying to get out and refinance to get ahead of this interest rate deal. Other people are trying to get locked in on their projects and get ahead of the interest rate increases. I mean, some people recognize what's coming, and some people don't. I think overall, loan demand's pretty good.
We'll keep dry powder for loan demand because that's what we do. We'll do the difference. We looked at a hotel loan the other day, and it just was marginal as hell. Kevin said, "Guys, we can get all the hotel loans we want." He said, "Just pick. You want to do 30 of them this year, just pick the 30 best out of the entire pack." You know, he said, "Hotel loans are a dime a dozen." You know, that's kind of what we're doing. We're trying to pick based on the asset classes where we need to be and get the rate and the terms that we need.
We did, I don't know, we had a good $35 million loan pop up the other day, just jumped up on us, and we did that transaction pretty quick. We got quite a bit going on. We looked at a big one yesterday with Texas, $80 million. We didn't do that transaction, but we did look at it. We spent quite a bit of time on it. It just had a few red flags that made us nervous, and we did not pull the trigger on that. Somebody will pull the trigger on it, but we didn't pull it off. Overall, Matt, it's pretty good. I mean, I'm pretty optimistic.
Actually, I'm excited because the rates are going our way, and they're going to continue to go our way, be it on the loan side or be it on the security side. You see what's happened with AOCI. You see what's going on there, and Happy's performance cost us $100 million. They did or did not, maybe. You know, we'll get our money back, but time, value, money. But overall, things at home are really pretty. I'm pretty happy. Actually, I'm real happy where we're sitting right now. How about you, Tracy?
No, I think you hit it on the head there. Matt Olney, the things that we see is like the Texas opportunity. We've only been with them now for 20 days, gotten to know them well over the last nine months. It's pretty exciting to see what avenues they're going to open up. I mean, we're still looking down several avenues that they can do. I really do think once that time will take care of some of that with our existing customer base. The communication's going well there. Kinda relate it back to some of the Florida markets, how they have done well at times. You know, the South and even Jim's area up in the North has had a pretty nice pickup the first 20 days of this quarter.
I think it's just over time, steering and staying disciplined in what we do and the customer relationships, and actually picked up some new opportunities along the way. It's you know, whether how happy it is yet, well, time will tell, John, on that part. The staff and groups are really off to a great start in our opinion.
Good. Okay. Well, you guys have been patient, and that's been the right move so far, so looking forward to see how it all plays out this year. Thanks again.
Us too. Thanks, Matt.
Thank you, Matt. The next question comes from Brady Gailey with KBW. Please proceed.
Hey, thanks. Good afternoon, guys.
Hey, Brady. Good afternoon.
I wanted to start just on the deposit side. You guys saw another pretty good deposit growth quarter. I think they grew about 10% annualized. Your deposit growth has just been great for y'all over the last couple of years. You know, I know we're kind of headed into a different interest rate environment, but how do you think deposit growth trends here? Do you think you still see some modest growth, or could deposit balances reverse course a little bit here?
Brady, this is Stephen. You know, I guess I think we've said every quarter for the last two years that we thought the next quarter we might see some outflows and it go down, and it continued to go up just about every single quarter. You know, I think we still obviously see tremendous value in the core deposit base, trying to continue to grow it. It'll be interesting to see in this tight environment, you know, how we and all the banks that are liquid are able to kinda control costs there. You know, I think as long as our focus continues to be on the core low- cost or no- cost checking account, we'll take all we can get.
You know, we are in this quarter with tax payments going out. We generally expect to see a little decline there. You know, so far so good.
What he doesn't know is I wrote my check to IRS, Brady, so I can assure you deposits are going down.
We appreciate your contribution.
Yeah.
America appreciates it.
America appreciates it. Biden appreciates it.
Brady Gailey, the only thing I gotta add with Stephen Tipton is what he said. It's just every day we kinda say, oh, wow, and then you know the areas that we are. You have the Texas new market that people are moving in when you talk to the team down there and you know use the Gulf Coast region of our bank. I mean, they're still picking up opportunities and accounts. A lot of individuals are moving in from out of state to those areas, and we're getting our fair share of new checking accounts and that type of business. We feel pretty confident. We know we have some municipal monies along the way, but you know the. As I said in my comments, it's just good core relationships that we have.
We're very fortunate for that, and we still like deposits too even though we're growing as fast as we have. We know it's still what drives a bank.
Stephen reported to me today, analyzing the credit we had. They had $145 million in the bank and forecasted their next year this time to have $245 million in the bank after talking to them. You know, it looks like deposit's gonna continue to grow here. I mean, all banks have enjoyed this, but real banks that have real customers and do real business are the ones that have done really well. It's we built this base on one customer at a time instead of just mass hitting the audience out there, not having any relationships. I think that pays off today. There are many banks out there that operate like we do, that have those relationships, and they'll continue to grow through this cycle. Looks like they're
I don't think they're going down, I mean, until it depends on how many taxes we gotta pay, but I don't think they're going down. They'll either hold their own or go up. What are you hearing? Are you hearing good or bad there? You hear they're going down or?
No. I think as rates head higher, you know, there could be some pressure on deposit balances. You know, if you're in a good market like Texas and you guys maybe you can offset that with growth. I wanted to ask this second question. I know the marks kinda went against you on Happy. You know, you'll get it back from higher EPS accretion. I just wonder what's the update on expected levels of accretable yield, you know, with Happy now in the mix and with a higher mark than expected when you guys actually close that deal?
Well, we just don't really have a number at this point in time. We had originally projected that the mark was gonna be a premium on the loans, because they had higher rates. As rates have moved up, we're kind of anticipating, maybe a discount on those. I think we had about $29 million as a premium on the loans when from a rate standpoint, and we're probably looking at zero to a discount on that at this point in time.
You're talking about total increase in the bonds? How much hit did we take on the bonds?
Well, that's probably a little over $100 million dollar swing.
That's probably $100 million just on the bond book there. I don't know what that adds up to. We don't have that yet, but I tell you what we'll do, we'll get it for you.
Okay. Finally, you know, John, with Happy now closed, maybe just an update on how you're thinking about M&A going forward.
Well, we gotta execute first, Brady. We gotta execute. We need to get this one under our belt, get the accretion out of it that we want to get out of it. You know, we've never done a diluted deal. This deal turned out to be $0.40 diluted to us, takes us a little less than a year and a half earn back. I feel for those people out there that had a three-year earn back or a four-year earn back that caught in this trap. They'll be. They'll have an infinity earn back. They'll never earn it back. As close as we play this one to the vest, it's still gonna be 18 months earn back. Stephen, you got a comment on that?
No. I don't have anything to add.
Okay. Tracy?
No, sir.
All right. Thanks for the call, guys.
Thank you.
Thank you, Brady. The next question comes from Brett Rabatin with Hovde Group. Please proceed.
Hey, guys. Good afternoon.
Welcome, Brett. First time you've covered us, isn't it?
I'm back after a sabbatical.
Good to have you back. Do you play baseball too, or?
No, I don't. No, I can't throw a baseball like my predecessor. One of the-
He wasn't that good either.
One of the first asks, John, when I was covering you last time, you know, there was the call where you talked about Wonder Woman and Superman and the boogeyman. You know, I'm curious on your view on the boogeyman and the, you know, the recession fears that the market has with the flatter yield curve. Maybe if you could just give us your thoughts on how you think the economy plays out. If I'm reading it right, it sounds like you're pretty bullish on a soft landing regardless of what the Fed does with interest rates. You know, what's your outlook for the economy? How does that play into, you know, maybe a more defensive underwriting position?
Well, they're in a box. Fed's in a box. I mean, they do 25, 25, and inflation is gonna continue to run at even a faster. They're fueling. It's like fueling a jet. I mean, the rate's gonna run faster and faster. So that's one scenario. What's the other scenario? They raise it too fast and throw it into a recession. Can't do that right now. They got 40 basis points Fed funds. So how much can they lower rates? They can lower rates 25. They can't have two 25s. They'll be negative. So they're in a box. They gotta raise rates high enough to give them some powder to be ready to be able to cut it right down the road. You remember during the Clinton administration, Bill Clinton kicked rates about two or three times. He got a little overheated.
He kicked it up two or three times. I was in a handshake line with him, and he came through and, "What do you think about the economy, Johnny?" I said, "I think you played it just right, Mr. President. I think you could hold here or drop it a little bit, and you'd see the economy take off again." He winked at me, and I know the president's not supposed to have anything to do with the Fed, but two weeks later, they lowered the rates 25 basis points and the economy took off. If he had room to do that, there is no room for the Fed with 40 basis points. They've got to crank it. They gotta get neutrality. I mean, they call it seven or eight or nine % inflation. It's probably closer to 20%.
I'm not sure. I think they gotta crank like hell. You may see, I mean, you could see. It's conceivable that you could see Fed funds at 7%. I mean, it's conceivable that that could happen. I'm not predicting that. I'm just saying that's awfully conceivable. By the way, I was right about the boogeyman. Don and I went all over the country. They were under every desk, behind every tree, and they didn't exist. They were just somebody's imaginary boogeyman. There is a boogeyman out here right now, and it's interest rates, and they're gonna go higher. If people don't think they're gonna go higher, they just need to keep loaning this money at low rates and long term, and they'll be upside down. Their liabilities will be higher than their asset rates are.
We've seen that happen. I'm just gonna protect us, so it doesn't happen. You know, I'm not right about everything, but I believe if it looks like a duck, and quacks like a duck, and walks like a duck, it's probably a duck. May not be a boogeyman, but it's a duck. It just looks, acts, and smells like a Carter administration, the '80s. If I'm right, it's gonna be Home's gonna be a big winner out of this if we make the right plays, and we'll make lots of money.
Okay. Appreciate the call.
Is that more than you wanted to know?
No, that's great. I love hearing you talk about stuff. You guys obviously have gone through a lot of different cycles. I wanted to circle back to the margin and just thinking about obviously there's some moving pieces with the debt repayment this quarter, the closing of Happy. It seems to me like if I just take a static balance sheet snapshot and add 50 basis points and add Happy, it seems like you could have your margin move back up 15 or 20 basis points. I'm curious to hear if you'd be willing to take a stab at pushing me in one direction or another on that.
Yeah, it's I mean, the excess funds is 77 basis points right now, which gets us back to about our 4% where we belong, where we live forever. We'll be back to that. I mean, this company always has run close to a 100% loan deposits. We'll be back at that point sometime in the future. You know, when that happens, we'll get back there. It's really covered up the margin a little bit. I don't know what the impact of the fundraise was in January. Was that...
Well, for every 100 basis points that we have that goes up on the Fed funds rate, that's about $35 million, and that would be, you know, in the range of about a little over 20 basis points to the margin.
I think you'll see. I mean, we get this money deployed, I think you'll see us back over 4%. I think that's about where we're running. You know, it's so complicated. It's complicated for me, too. I know it's complicated for y'all because we're looking at that and Brian said, "Add three for this and add four for that, add seven for this, and add two here, and add 77 and multiply 4x ." You know, so it is difficult. We're really, the way we see it, we're running our loan yield net, loan yield's about a 5.0%.
5:06%.
5:06%. That's about where we're sitting right now.
Okay. I was thinking about the
Does that help at all?
No, that does. I was just thinking about the, you know, the next quarter or two versus the longer term. I definitely see you guys over 4% margin again. Just last one for me. Origination rates relative to the existing book, any color on that?
Yeah. I think we're in the mid-fours in the first quarter. We had a couple of opportunities that Chris and his group had kind of C&I side. But you know the community bank group regions were a little over 5%, which you know calls right in line with what Johnny we talked about earlier on where our core loan rate is.
Okay, great. Appreciate all the color.
Brett, thank you.
Thank you, Brett.
Thanks, Brett.
The next question. I'm sorry, Brett has now disconnected. We can proceed with the next question, if that's fine.
Sure.
The next question comes from Stephen Scouten with Piper Sandler. Please proceed.
Hey, good afternoon, everyone. Appreciate the time.
What'd you know?
Johnny, I didn't know.
How you been?
Arkansas State. I've been good, but I didn't know Arkansas State had a PhD program in economics. Is it named after you or is it named after a duck blind? How much money did you give to that school?
I gave them enough, they gave me a PhD. It just takes money. That's all it takes. They said, "You deserve a PhD, as smart as you are." I wasn't that smart until I gave them the money.
Well, I hear you. At this point, we're gonna be taking cues from you about which direction the economy is gonna go. I mean, I guess maybe following up on some of Brett's question, but I mean, you kinda noted, hey, we've got this $4 billion in money to deploy maybe over the next 18 months, 24 months, $2 billion in loans, $2 billion in securities, give or take. I mean, if you think about that outlook in an environment where you could see, in your mind, maybe 5% or 6% rates, do you start to worry about credit?
Do you start to worry about, you know, those recessionary trends and what could happen on the flip side as you know, start to put some of this money to work?
Don't give me that. When we got things going our way, don't give me that, throw that wet blanket on me with that. You know, we always worry about asset quality here.
I know.
You can look at our asset quality and know that it is superb asset quality. We don't have asset quality problems. You know, it's all in leverage. If we can keep the loans leveraged properly, they're gonna work. If you got the proper leverage, and they got skin in the game, as I've said in the past, they're gonna work. But I forgot what the other part of the question was. Was-
I think that's it. We can talk about.
No, that's it. I mean, you know, it just seems like the market is not giving credit, especially to a bank like you that has a lot of, you know, funds to put to work, not giving you any credit for the higher rates, but penalizing you already for credit issues that haven't even begun to materialize. Just kinda wondering what you guys are seeing, if that's even.
Well, we're 500% in non-performing. They wanna penalize us for credit issue. We're 500% non-performing and $250 million in reserves. We're probably in the best shape on the asset quality side of anybody in the country with lots of capital, lots of excess capital. I think we're in good shape. I think you're right.
I don't think the market's recognizing what we're doing. I mean, we have remained patient. You take the $4 billion and you put it out at 4% or 5%. You can see what that does, what that creates for us. That's a couple hundred million, $160 million-$200 million in pre-tax income. That's the play. That's where we're headed. That's it. You know, we may miss it a little bit, but that's our thought at this point in time. I can take that $200 million and I can tax it, and that's almost a dollar a share. Excuse me, pre-tax dollar a share. That's a lot of money. That's a lot of impact, and I think that.
Yeah.
We won't get it all, but we'll get a lot of it.
Yeah. No, that makes sense.
They won't reward it.
$2 billion in-
They won't reward us until we do it. Stephen, the market won't reward us until we do it. You know, they're rewarding right now loans out there that people are doing in the 2.5 and 3 and 3.25 fixed long-term stuff. They're rewarding that. You know, they need to take a look at the bond portfolio and Happy that went from $27 million up to a $101 million loss. I mean, that's exactly what's happening to their loan book. You say what you wanna say, if you mark that loan book today based on what they're doing, they're upside down. We're still at 506, so we're hanging in, and Happy was a little higher than us. We like what we're seeing with our book, which I think puts us in the best position ever.
That's my PhD report.
Yeah, no. I mean, that's kinda what I think is interesting, right? I mean, you talked about $2 billion in potential loans, but frankly, it doesn't seem like you really even need to do that. I mean, you could obviously if they're there, but, I mean, if you could get a 4.5 handle on your bond book with minimal risk that you don't have to provision for, I mean, it seems like you got a long runway in front of you with minimal downside. This is kind of the way I'm seeing it. I'm just wondering what I'm missing because clearly the market-
I don't know. I don't think you're missing anything. I think you're seeing exactly what I'm seeing. I think you're right on with me and this executive team. I think we're right on with that. We were talking about loans today versus the difference in the rate, and one was risk-free. It was the government, basically. Brian said, "Why would we do that loan when we can just stick it right here and we won't have any risk at all?" We'll have to manage that as we go forward, but I think you're right on. I think we're in a catbird seat better than I've been in, maybe my banking career. Because if history repeats itself, we're in a catbird seat.
Yeah. Yeah. Well, that's really helpful. I appreciate it, guys, and congrats on the, on what's ahead.
Thank you.
Thank you, Stephen. The next question comes from Brian Martin with Janney Montgomery Scott. Please proceed.
Hey, guys. Nice quarter.
Hi.
Maybe one question. Stephen, I appreciate the color on the Happy portfolio. Just kinda wondering, the total variable rate loans today, can you give any sense on, I mean, when do those completely get through their floors so they're moving, you know, kind of with rates? Just so we can kinda think about that as we go forward. I think you gave some detail on it or maybe you can cover that.
Sure. Yeah, kind of anecdotally in our prepared remarks. You know, some of it is a little bit dynamic depending on the duration of the loan. I know Chris has about half of his loans that are at or above floors now. You know, another 150 basis points, you'll probably get to all of them, but by the time that happens, some of those loans may be at maturity. I think largely, you know, over the next 100 basis points or so, we pick up the vast majority of what we're going to.
I gotcha. Okay.
Like I said, Happy.
Okay.
You know, Happy's got virtually all of theirs at or moving now, which is great.
Okay. Gotcha. Okay. Then maybe just have you guys, I mean, your thoughts on the deposit betas, and I know, yeah, I guess just as you kinda think about all the liquidity in the market and just kinda, I know, Brian, you gave some color on the, you know, the rate moves and, you know, kind of what's kind of embedded in your forecast. But just what type of deposit betas are you assuming on that? I guess my assumption is they're conservative, but just kinda get a sense for what's in that number on the rate increase benefit.
Sure. This is Stephen. I mean, some of it depends on the you know account type, whether it's checking or savings or other. I mean, I would say it's you know cumulatively averaging you know mid- to high 30s. You know, I tend to think that at least for the first you know this 50 basis point expected hike or maybe even the first 100 that you know there's so much liquidity in the banking system today that you know banks should be a little you know more agnostic to any initial change. Obviously, some of what competition's doing will drive that, but I think it may be you know more around what we do with you know with terms potentially and offerings, as opposed to just how much of the rate increase that we pass along.
I think we're optimistic the first 50-100 is less than the betas that we have modeled in.
Yeah. No, that makes sense. Okay. As far as maybe just one or two others, just payoffs sounded like they were down this quarter. You know, I guess, is that a trend you expect to kinda continue here? Sounded like the production was still pretty nice. Then the unfunded commitments, I'm not sure the timing of those, but sounds like, you know, it was just an, you know, I guess, you know, something we're gonna see maybe a little bit more of on the payoff side being a little bit less you think about today or too early to set a trend?
I'll let Kevin take that too. It's probably a little early to set a trend there. I mean, I think obviously, you know, potentially as rates rise, it may slow some of that potentially if people hold on to assets or whatever. You know, that bounces around a little bit from month to month and quarter to quarter. You know, we've also prior over the last year and a half have had some, you know, $800 million, almost $900 million quarters too. Kevin.
Yeah. Chris made, I think a comment in his remarks about, you know, the second and third quarter would have some payoffs that, he's not seen, you know, recently, and he can answer that if, you know, if he wants to. Certainly I think he's gonna have, in the next six months, some moving around in his portfolio that will be some payoffs. I think the rest of the portfolio, it's hard to tell what rates will do, the rise in rates will do to that. I mean, it could.
Let's slow down.
It could slow that down a little bit for the rest of the portfolio, but Chris does have some that we know are coming.
Got you.
Chris, you got a comment on that?
No, I'd probably just say, you know, I always like to remind people, I like payoffs. I like it when people pay me back. It's not the worst thing that can happen when we make a loan. You know, one of the nice things about having a pretty good couple of quarters of originations is it gives me a little more flexibility to encourage some payoffs as well. You know, I'm gonna be a little disappointed if we go three or four months here with not, you know, with depressed payoffs. I've got some loans, I think it's time for them to go.
Gotcha. I appreciate that.
That's Chris.
Well, last two for me was just, you know, with the credit mark on Happy, just any thoughts on how the day two CECL is trending at this point? Or, I don't know if you have anything on that, Brian, or not.
No, I don't have anything to update on this point in time. We're still working on it. Kevin's working on his numbers, and we've only had them 20 days, so.
Got you. Okay. Just the with the closing of the deal, the third quarter looks like a relatively clean quarter with the kind of expenses kind of in the numbers. Does that seem fair, largely?
Well, we'll have all the purchase accounting done. Will we have all the cost savings in? Probably not. I mean, we won't get a lot of the cost savings in until we get converted, which is in June. It'd probably be.
Okay.
Q4, I would think, before we get all that in.
Yeah. Some of that'll bleed through July.
Good point.
Your first clean will probably-
It's been interesting watching that process as Stephen's kept me up to date on each going step by step with the Happy people. There is some significant savings that we're starting to see some of that or we've captured some of it. We hadn't actually put it on the books yet, but it looks pretty good right now. Got you. Okay. Well, cool. Well, nice quarter, guys, and you can look forward to a better future. I appreciate the time.
You bet. Thank you.
Thank you, Brian. The next question comes from Michael Rose with Raymond James. Please proceed.
Hey, everyone. I think I'm probably last in the queue here, so I'll keep it short. Obviously, you know, the stock has you know tread a little bit of water since the deal was announced. Now that it's closed, John, any thoughts on the buyback at this point?
We've bought a little. We filed a 10b5-1 deal. We bought a little bit back. We bought just prior. We were out for a while, and we had two or three days we could buy it. I think Stephen bought, I don't know, 100,000 shares a day or something during that period of time. We'll probably get back in that game at some point. We just got too much to do right now with execution. We're not. I can buy. I mean, I can start buying again pretty quick. I think three or four more days from here, I can get-
Tomorrow, we're back. Opening tomorrow.
I can buy again. I like it where it is right now and I'd like to own it here. I think it's
We've actually bought more back already this quarter than we did all of last quarter.
Oh, we did? Okay. Good. We had a 10b5-1. We hit all those numbers on the 10b5-1.
Pretty much all been from the 10b5-1. Yeah.
Okay. That worked out. We're not out of the market. I, you know, I got to thinking, Michael, maybe we're propping it up a little bit and I thought, well, let's just see where it goes. If they wanna take it down, take it down, and we'll buy a lot. You know, we'll buy $20 million worth. We got $400+ million in the holding company today. We got plenty of money. We got plenty of firepower to go do what we need to do. It, I think I'm just gonna watch it for a little bit, and if the world wants to take it down, I hate that for my shareholders, but we'll be there. I mean, we're not going to house.
We recognize it's cheap where it is right now, and we're not afraid to buy it. As Brian said, we've already bought more this month than we did first quarter, so.
Yeah. From a cash perspective, we've got more dry powder today than we probably ever had.
Yeah. We got more dry powder than we've ever had. How much cash you got in there today? You probably $500 million.
I got $500, but we're gonna pay off approximately $94 million, so your $400 million number's correct.
Okay.
Yeah. That's what I was asking.
So what-
Yeah. Maybe just one for Chris Poulton. You know, given the concerns out there that we might be in for a little bit of a slowdown in the back half of the year into 2023, any thought process on pulling back in any of the verticals that you guys operate in, either by type or geography? Obviously, I know with Happy coming on, it gives you a little bit more capacity. So
Just, you know, how does the interplay work between those dynamics? Thanks.
Yeah, no, it's a fair question. We've been nervous about a lot of the verticals, you know, for a year now. I don't know that getting closer to what we think is already gonna happen makes me any more nervous because I think I've just assumed that. I mean, starting last year, we underwrote a recession in 2023. That was already in our number. You know, if it doesn't happen, that's great, right? You know, we don't get paid to take the upside. You know, we continue to do that. You know, it's sort of like hotels for me, right? I don't like hotels. I don't wanna do hotels, but why don't you talk to me about your hotel, right? There might be a way to do it.
It's just a matter of, you know, it's always leverage and liquidity and duration and those types of things. Volatility is good for us. If we get into the second half of the year and there's volatility, that's generally a good thing for us, right? Because we're a low leverage lender. When everybody can go get high leverage, they tend to go get high leverage. When they can't get leverage, they tend to take the low leverage. I think periods of instability and transition usually are our friend because a lot of our clients start to appreciate the fact that we're there, right? I mean, we don't get out of the markets. We just adjust a little bit.
Others, you know, that lent high just exit when they get nervous. We don't exit when we get nervous. We, you know, we just tell you we were already nervous and therefore our pricing and our leverage reflects that. You know, when times are really good, it's tough for us. When times get tough, I think that's good for us. You know, we continue to see, I think, a lot of interesting things. We had just a lot that needed to close, and so I'd say we focused the first four months of this year or so on getting that pipeline sort of back down to a level that we feel like we can manage. Now we'll start rebuilding that a little bit.
I like, you know, we like instability, and every day there's not a recession is a surprise to me.
That's a really good point.
You gotta love it.
For sure. For sure.
Yeah, you gotta love it. You gotta listen to how he looks. I mean, he looks at things different than we look at them a lot of times, but he's right. One good thing about him, he knows what he's doing. He's got a great team, and he was limited on his growth, but he has the ability to grow nearly another $2 billion if he finds the right loans. That's his call. We don't have a target for him, but he could go up to about $3.8 billion if he finds the quality loans. If he finds that many, I'm sure they'll be good.
That's good. Well, that's it for me, and look forward to hopefully seeing some of you guys out in New Orleans. Thanks.
Yeah, look forward to it. Thanks. Thank you.
Thank you, Michael. That concludes the question- and- answer session. At this time, I would like to pass the conference over to John Allison for closing remarks.
I think we said it all today. Thank you for joining with us today, and we'll talk to you in 90 days. I would assume that our net interest margin will be better than it was now, because I would hope that we may have deployed some money. May or may not, Brian. We'll see, Brian.
I bet we'll probably deploy some. Nothing else will get a kick from the rise in the Fed funds rate.
That's correct. The refinances.
Yeah.
On our bond book. Anyway, thank you very much, and we'll talk to you in three months.
That concludes the Home BancShares, Inc. first quarter 2022 earnings call. Thank you for your participation. You may now disconnect your line.