Bankers coming off rough year with higher expectations for '22

Bankers remain optimistic as they move past a year rattled with loan declines, excess liquidity fueled by increasing deposits and flat interest rates.

Stephens Inc. hosted more than a dozen of the nation’s largest public banks — including the three in Arkan- sas — to probe for insight into their coming economic expectations and outlook and the influence on balance sheets going forward. The annual conference in Nashville was held Dec. 1-3.

For the most part, lenders indicate they feel good about where things are headed, with the Stephens banking team noting loan growth looks to pick up. Overall, Stephens found “the banks remained overall optimistic about growth prospects within core markets from a new origination standpoint” though other issues like payoff pressure and line utilization rates also could come into play.

Another hot topic at the conference centered on interest rate sensitivity amid consistent predictions rates will rise — to the benefit of banks — if inflation continues to take hold.

Increases in bank deposits sparked the liquidity challenges lenders faced throughout 2021 and Stephens noted the institutions continue to see strong deposit growth. Some lenders feel the deposits may not be transitory and could remain in vaults, giving bankers more confidence about increasing portfolio investments, which could boost earnings.

Executive management teams from Bank OZK of Little Rock, Home BancShares Inc. of Conway and Simmons First National Corp. of Pine Bluff met with the Stephens analysts during the conference.

Here are key findings from the discussions:

Bank OZK: Loans increased above market expectations in the third quarter and management predicts positive loan growth in the current quarter ending Dec. 31 and into next year in its community banking division. The more recreational RV and marine portfolio is expected to see net growth next year.

In July, the bank announced its first share repurchase program in company history with a $300 million authorization and increased

the program to $650 million in October and issued $350 million in preferred stock. The report predicts OZK will begin buying back shares before the authorization expires in November 2022.

Home BancShares: The lender purchased Happy Bancshares of Texas in a $919 million transaction that is projected to close in the first quarter. Once that happens, the Stephens team predicts Home “to be an active acquirer in the Texas market” very quickly.

Regardless, earnings will be boosted next year since the Happy deal is expected to be immediately accretive. Nevertheless, the bank continues to struggle to boost loan demand though it did have a strong month in September of net loan growth.

Home BancShares repurchased 400,000 shares in the third quarter and still has 22 million shares available. The Stephens report projects buyback efforts will remain active next year.

Simmons First: The Pine Bluff bank also stirred the mergers-and-acquisitions pot, buying and closing on two community banks in Tennessee to bolster its presence in Memphis and Nashville and then jumped into robust growth markets in Texas with the purchase of Spirit of Texas Bancshares Inc. The $581 million purchase is scheduled to close in the second quarter and will open the Austin, Dallas-Fort Worth, Houston and San Antonio markets to Simmons, which also has been in a loan-growth slump.

Stephens is predicting flat loan growth this quarter before lending picks up next year. Simmons could see an earnings lift by continuing to deploy excess liquidity into its investment securities portfolio, which would benefit if interest rates rise.

GRANT WORKSHOP

Community and economic development leaders across Arkansas can learn more about grants and other resources available to foster growth in a workshop planned for 10 a.m. Tuesday.

The event will offer tips and insights to apply for grants administered by the Arkansas Economic Development Commission. These workshops will also serve as initial public notice of funding availability through the competitive cycle of the General Assistance set-aside, a program that provides cities and counties with the opportunity to apply for grant assistance for public infrastructure and public facility projects.

Funds originate from the U.S. Department of Housing and Urban Development.

Funding is available for community programs that benefit at least 51% of low- to moderate-income residents, eliminate conditions of slum or blight or address other urgent economic needs such as residential water and sewer, drainage, streets and roads, senior centers, child care centers, public health clinics, battered spouse shelters, children’s advocacy centers and facilities for severely disabled adults.

Grant requests can range from $75,000 to a maximum of $300,000, and up to $1 million for new water and sewer connections. More information is available at arkansasedc.com/grants.

HARPS COMES TO ENGLAND

Harps Food Stores Inc. opened its newest store Wednesday with a location in England.

The store is now operating at 301 Pine Bluff Highway in a location that Kroger vacated

over the summer. Harps is providing fresh produce and goods to England’s nearly 2,800 residents.

Harps, based in Springdale, operates more than 115 local supermarkets and grocery stores in Arkansas, Oklahoma, Missouri and Kansas. The company also operates grocery stores under the Food4Less and Cost-Plus brands, among others.

LEARN ABOUT THE FUTURE

The Arkansas Bankers Association and the Arkansas State Chamber of Commerce are teaming up to host an event to give a peek at predictions for the 2022 economy. The event will be from 10-11 a.m. on Jan. 23.

Forecasts will provide more insight related to industry production, the growth of cities and downtowns, consumer spending and projections for overall growth for the state and the region, including economic trends and patterns.

Presenters include Michael Pakko, chief economist for the Arkansas Economic Development Institute, and Tyler Mondres, economist with the American Bankers Association.

Cost is $50 for members and $100 for non-members. Registrants will receive a link to join the Zoom events.