Stephens outlook rosy for regional banks ahead of earnings season

Bank earnings season begins Thursday when Home Bancshares Inc. announces first quarter results. To give us a preview, Stephens Inc. has issued updated projections that increase earningsper-share forecasts for financial institutions in the southwest region, which includes the three public banks in Arkansas.

The Little Rock investment banking firm projects that 2021 EPS will increase by 8% — that’s the median — and that will be about 5% above the consensus forecast issued by financial analysts who cover the banks.

“We continue to believe organic loan growth remains a differentiating factor in 2021 for the banking sector and investors should focus on banks that can benefit from recent investments rather than waiting for improving industry utilization rates,” the report said.

Bottom line: Stephens is expecting regional banks to perform better than previously predicted. The firm says the second round of Paycheck Protection Program loans that began in January are helping to boost earnings.

Beyond this year, Stephens said bank growth should continue.

The median earnings-pershare projections for 2022 are up 3%, Stephens said, noting that its forecast still remains 3% below overall consensus “likely driven by our more conservative view of loan growth, mortgage benefits along with removing benefits of stock repurchase activity due to the improving industry valuations,” the report said.

For Bank OZK, Stephens is projecting earnings per share of 84 cents in the first quarter and $3.41 for the full year. In 2022, Stephens predicts $3.21 for the full year.

Home Bancshares is forecast at 44 cents in the quarter ending March 31 and comes in at $1.71 for the year. Next year, Stephens is predicting earnings per share of $1.54.

Simmons First National Corp. is projected to have EPS of 51 cents in the first quarter and $2.18 in 2021. In 2022, the forecast says EPS will be $2.02 for the full year.

After Home Bancshares’ report this week, Simmons First is scheduled to issue first-quarter results on April 20 and OZK announces on April 22.

Increased projections are driven by moderately higher yields and balances of investment securities, stronger deposit growth, PPP loans and lower set asides for loan loss

provisions.

In 2020, loan loss provisions escalated in the first half of the year as covid-19 scorched the economy and banks, like many sectors, were battered by the pandemic’s impact on lending activity, especially in the hotel and hospitality sectors.

In addition, lenders had to cope with the introduction of a new accounting standard — the current expected credit losses methodology — for estimating allowances for credit losses. Institutions increased their loan loss provisions to meet the new regulation, decimating profits.

Loan growth also was a challenge in 2020, and Stephens is projecting that will improve this year and next for the overall region. The firm’s forecast of median loan growth is 4% and 6%, respectively, in 2021 and 2022.

The firm has OZK and Home Bancshares both seeing another 1% drop in loans in 2021 before increasing to 3% for OZK and 4% for Home Bancshares next year. Simmons is projected to enjoy loan growth of 3% this year and 5% in 2022.

WORK FROM HOME

Broadband has become a necessity for workers who have transitioned to a work-fromhome environment during the pandemic.

But it’s not the only important factor in creating a productive environment — a new study uses 12 metrics, including how large and crowded a home is, to rate work-from-home environments in every state.

Arkansas is not ideal, according to the survey from WalletHub, a personal finance website. The state ranks fifth worst in the nation. It’s dead last in household access to Internet.

As for protecting data transferred while at home, Arkansas is 41st in cyber security. The state is 31st in Internet costs.

By the way, Delaware, North Carolina and Georgia were the top three work-fromhome states. More information is available at wallethub.com.

RESKILL

The Little Rock Venture Center is hosting a lunch and learn at noon Tuesday to help unemployed or underemployed individuals find stable, good-paying careers through IT training programs and apprenticeships.

The hour-long program is part of the “ReSkill Arkansas” initiative run by the Arkansas Office of Skills Development. Officials from the state office will be joined by a team from the Arkansas Center for Data Sciences to explain the initiative. There is no cost to participate in the virtual event and you can register at https://bit.ly/3l9dlFs.

ECONOMIC DEVELOPMENT

A 130-acre site in Mississippi County has been certified as ready for development by Entergy Arkansas in the company’s “Select Site” process.

The Osceola Drive site is bounded by Interstate-55, the Burlington Northern Santa Fe railway and the Mississippi River and is well suited for a manufacturing facility, officials said.

“The timeline for responding to prospects has shortened significantly,” said Clif Chitwood with Mississippi County Economic Development, “and going through the certification process helps to ensure that we have the site information necessary to respond quickly to inquiries.”

The Entergy program helps communities better prepare their sites for high-tech, manufacturing and distribution projects with a thorough audit of the site’s readiness for new or expanding business.

Other certified economic development properties are located in Jefferson County, Little Rock, Magnolia, Maumelle, Newport, Russellville and West Memphis.

PUBLIC COMMENT

Arkansans can weigh in on how they’d like to see the state use $32 million in federal funds for a program year beginning July 1.

The state Consolidated Plan Board is holding a public hearing Thursday from 10:30 a.m.noon to receive input. State agencies are evaluating the best way to use funds from the Community Development Block Grant, HOME Investment Partnerships, Emergency Solutions Grant, Housing Opportunities for Persons with AIDS and National Housing Trust Fund programs.

A draft of the proposed 2021 action plan can be viewed at arkansasedc.com/grants for public comment. More information also is available at the site.

The comment period ends at 4:30 p.m. May 5.