HOMB - Home Bancshares Inc. (Conway AR) (HOMB) Q2 2023 Earnings Call Transcript
2023-07-20 22:37:08 ET
Home Bancshares, Inc. (Conway, AR) (HOMB)
Q2 2023 Earnings Conference Call
July 20, 2023 14:00 ET
Company Participants
Donna Townsell - Director, Investor Relations
John Allison - Chairman
Tracy French - President and Chief Executive Officer, Centennial Bank
Stephen Tipton - Chief Operating Officer
Kevin Hester - Chief Lending Officer
Brian Davis - Chief Financial Officer
Chris Poulton - President, CCFG
John Marshall - President, Shore Premier Finance
Conference Call Participants
Jon Arfstrom - RBC
Matt Olney - Stephens Inc
Brett Rabatin - Hovde Group
Stephen Scouten - Piper Sandler
Michael Rose - Raymond James
Brady Gailey - Keefe Bruyette & Woods Inc.
Brian Martin - Janney
Presentation
Operator
Greetings, ladies and gentlemen. Welcome to the Home Bancshares, Inc. Second Quarter 2023 Earnings Call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued this morning. The company presenters will begin with prepared remarks, then entertain questions. [Operator Instructions] 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-K filed with the SEC in February 2023. [Operator Instructions] And this conference is being recorded. [Operator Instructions] It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations.
Donna Townsell
Thank you. Good afternoon and welcome to our second quarter conference call. With me for today’s discussion is our Chairman, John Allison; Tracy French, President and CEO of Centennial Bank; Stephen Tipton, Chief Operating Officer; Kevin Hester, Chief Lending Officer; Brian Davis, our Chief Financial Officer; Chris Poulton, President of CCFG; and John Marshall, President of Shore Premier Finance.
While Home Bancshares actually continues to stand tall in this shaky banking environment with a strong second quarter results and our first speaker, Chairman, John Allison will illustrate those details for us with some prepared remarks.
John Allison
Thank you, Donna and welcome, everyone for attending the second quarter of 2023 earnings release and conference call. I hope you found it interesting and informative and maybe a little comparable. Some people set themselves up for an easy target and sometimes can’t pass it. Well, here we are in July ‘23 and just wrapped up a very interesting and unusual towards the side the least, we have seen that the worst financial crisis since Great Depression in 2005 to 2010 and ‘17 pandemic like we have never seen, while inflation, not seen since the late ‘70s and early ‘80s as a result of both the past and present administration spending money without strength. All clients on their own was trying to do its best to control inflation with this out of control spending. I call that swimming upstream with hand cash.
So we got that in mind that’s a new term I just heard. So how is it working? Suicide rate has jumped; homelessness has exploded; the highest number of bankruptcies in 12 years. We are starting to replace the U.S. dollar with a digital one, not sure what that means. Bank failures, we’ve had several bank failures this year that we’ll have many more will occur. Interest rates were at the highest level. Crimes running ramped in cities. The war in Ukraine continues on and Putin’s own hired army saved the term on him. The economy is slower. The deficit is exploding. The administration is trying to get us to believe that the economy is strong, while 31% of the Americans have tapped a loan from their retirement fund 401(k) or higher. Record level of credit card debt amounts continue to kill thousands of Americans; thousands crossing the border, almost unabated. Inflation continues to march forward. However, it is improving. The last time I checked again we are still busy buying nonstop to our Chinese counterpart. China appears to be a threat to the U.S. because U.S. looks weak. China is trying to bully us a little bit around the world. China had sent in weather balloons over the U.S. Russian aircraft playing cat and mouse with U.S. aircraft and ships. And Hunter Biden has finally agreed to sentence punishment from the U.S. attorney. I think they have stopped him from having smoke zones on Tuesdays and Thursdays. So that’s his punishment. And they did prohibit him from paying any more income taxes by the way, no state, federal city or county. I think that’s just because they want us to pay our fair share. We can’t figure out who left the cocaine in the White House, but other than that, things are really, really good. So what can possibly go wrong?
The second quarter was a stressful 91 days with several bank barriers in the prior quarter and maybe more to come. This was the scariest 91 days of my banking career. As I said last quarter, liquidity was not important until it is. And this was my first experience up close. What a liquidity crisis can do and how quick it can end the life of the bank. I was very nervous, but also proud to be one of the very few banks that have the balance sheet with the liquidity to pay out all uninsured deposits, keeping Home’s balance sheet strong with the ability to pay out all insured deposits has cost us some income, but the peace of mind that we positioned Home into one of America’s strongest and focused financial institution more overrides the short-term earning issues.
Not only can we pay out, but we can pay out if we borrowed all the money and let the balance outstanding for the full quarter. At today’s interest rates, we would still be in the top 25% to 30% of profitability for the top 200 best publicly traded company banks in the U.S. and that includes all the money centers. However, in spite of the crisis, the second quarter was a pretty good one anyway. Really, the only weakness in the second quarter went loud was interest expense to outrun interest income by about $6.9 million from last quarter.
Interest income was a company of record, but so was interest expense. That was very disappointing to me, but we are addressing that issue. We have about $760 million to reprice between now and the end of the year at a little over 5% and we possibly could see a 300 basis point increase in those yields. If so, that adds about $5.7 million to the quarterly interest income. Not all we need, but close. We also have about the same dollar number of scheduled payoffs and we will evaluate the rate and customer and hopefully retain some of those customers at higher rate.
We will continue to originate new business as long as we feel safe and secure. We are not aggressive on the loan side and that philosophy will continue forward. It’s certainly not time to be taking any risk. Our goal was to make about $400 million for the year and we are on target to do that with a $208 million first half of the year. I thank our investors and shareholders would be happy with those numbers, having the best year in our corporate history while in the middle of a banking crisis, coupled with a very unprofessional treatment and possible behavior we experienced in the West Texas. I think all our people should be proud. Our performance speaks for itself. My wife said, protect the chuckwagon and that’s exactly what we are doing. This is the time to move slow and careful, don’t take any risk and for sure, do not buy someone else’s problems by refinancing their bad loans and trying to get them off the books. This is the time when problem loans flow to the top and many bankers are trying desperately to get them off the balance sheet.
We are seeing some of them, but New York – our New York office they are seeing a lot more of them. But interestingly, nobody has really taken the body. If these 5.5% and 6% newspaper ads continue to be run by these bankers that have already run their balance sheet – excuse me, have already run their balance sheet in the ground because of mistakes they have already made, I suspect the cost of deposits will continue to move up. For them, that means through the margin, they cannot borrow anymore money from the bank, they borrowed all they can borrow and they spent all of their liquidity that are forced to have cash to satisfy the regulators.
Regardless of cost of margin, if they are forced to sell the securities, the loans could hit them so hard, they could get a run on the bank, aka, Silicon Valley Bank, that’s exactly what happened, and it happened quickly. A few days later, the bank has closed over forever. They thought they were totally bulletproof. I spent 23 years building this company and the thought that it could be gone in the blink of an eye is absolutely frapping. Those bankers have allowed their balance sheets to go over 105% loan to deposit and weak capital of 8% or less have a good chance for the same 5%. If the Big Bad Wolf shows up at the door, it starts hopping and fucking [ph], get bad forever. That’s not one to happen at Home. Strength and safety has been our priority for the last 23 years and that will never change as long as I am here and this management team is in charge.
Let’s go with the results. Pretty good results of $105.3 million in earnings for the quarter, it’s $0.52. I think it’s right in line, we got a little extra penny in there somewhere. I think the analysts were at $0.51. Revenue, $257.5 million that was right on target, efficiency at 44%. Net interest margin remained strong. However, it dropped 9 basis points during the quarter. We tried hard to keep that up and we are working on that now.
On the asset quality side, reserves remained strong at 2.01. Non-performing loans and non-performing assets both improved for the quarter, loans from 0.51 to 0.43 and non-performing assets from 0.33 to 0.28, good numbers. Announcement on our member carriers, $30 million loans that we’ve talked about for a couple of years have been sold refinanced with multiple buyers bidding on the properties. This is a perfect example of conservative underwriting practices that your company follows. These loans were underwritten properly on the front end and provide an avenue for banks to get out if and when problems come up. Great job.
Asset quality has remained good. The only thing worth mentioning is I found out today or like yesterday afternoon, we have one office building in the $25 million to $30 million range. We will keep you informed on that. It’s early, but we do not anticipate a loss. The tenants have moved out, spent over $10 million on tenant improvements and I haven’t looked at the office and I don’t know if Kevin has, but I understand that. Other than that, I don’t see a thing that matters. I must say it’s a good feeling to have almost $300 million in loan loss reserve in these uncertain times. I will certainly sleep better with those kind reserves and our employees, investors, shareholders, customers and postures should too. Return on tangible common equity was 19.39%, nice number, and here is the capital ratio, just top-tier capital ratio, CET1, at 13.63%, leverage at 11.92%, total risk-based capital at 17.28%.
Tangible common equity and tangible assets at 10.65% and tangible book value is $10.87 and book value is $18.04. During the quarter, we repurchased 560,849 shares for approximately $11.8 million. And year-to-date, we bought back 1.15 million shares for $25.3 million. Average loan yield was up 20 basis points to 6.84 from the first quarter of 6.64 from – yes, the first quarter, 6.64, excuse me. Interest-bearing deposits increased from 1.90 to 2.27. That’s a pretty good jump, a jump more than our 20 basis points. I am expecting the second half of the year to be much tougher than the first half. The good news is Home can handle whatever comes our way. We didn’t get into this great position by luck. We have controlled and directed the entire operation of the company on the most conservative path we could follow, [indiscernible] along the way, some are controversial and tough to see, but they had to be made, but they have certainly paid off for Home.
Home continues to be recognized in the top tier of all banks in the U.S. and even 15th in the world. That’s a great place to see it. It will be interesting to see the rankings after all bank reports during the quarter. I would imagine that Home will remain in the top excellent group of all banks and it has been for most of its entire business being ranked by Forbes, Best Bank in America 3 out of the last 6 years was not luck. Running a business in normal time, if we had – no more normal is anymore, it’s fairly easy because we all pull from our past experiences we’ve had.
But in the last 18 years, it’s been a new surprise after new surprise experience. We had witnessed many Home Bancshares employees working from daylight to dark, getting very little risk in their offices, sometimes some of them even selecting their office. And I described that feet in one word that is remarkable. I’ll never forget how blessed we are to have such a remarkable team that does whatever it takes to win it. The entire group has participated in this process, thank you so much for what you did, not only now, but throughout the entire footprint. The efforts you made changed the course of lots of things. I want to thank the investment community for their amazing support. Being in the bank space has not been the most popular asset class to the loan over the last 15 or 20 years. So many of us have committed our lives to the space and so have many of you, but you could always sell and change your asset class as much easier than those of us that are huge owner operators of our bank assets. Home is my largest asset and the largest asset of the members of my Executive Committee and the largest asset of many of our regional presidents. So there is a powerful commitment to the success of this company.
I don’t think there is a management team in the country that is more aligned with their shareholders in the entire bank space of Home. We will protect this company with whatever it takes. We have taken attack on Home in any way as an attack on all of our individual families’ futures, because all of us an attack on Home can change the value they have that we have committed our lives to for nearly a quarter of the century. This is not a job, this is the future. I hope all of your prior performance over here. There is only a handful of banks that sell 2x tangible book or more. Most of them sell in the 1x or lower.
As we have seen, the multiples decreased over the years. We do not apologize for our multiple. As a matter of fact, we are very proud. If I have heard it once, I’ve heard it a thousand times and the love to own your stock, but gee, our low pricey, really, why do you think that is? We are blessed with the best and smartest institutional investors in the entire bank space and we have met nearly all of them over the years, plus strong insider ownership with about 7% of the bank and the Allison family stake is around $200 million. Well, we are here in the space, committed to our shareholders, and we’ll continue to try to make you proud by remaining in that small group of elite top performing banks in the country year-after-year. You have my personal commitment.
Thank you for listening, Donna. I will come back to you.
Donna Townsell
Okay. Well, thank you for a very insightful report as always. Next, we have Stephen Tipton here to provide us with some more operating details.
Stephen Tipton
Thanks, Donna. I’ll start with the topics of liquidity and funding. We mentioned last quarter the shift of deposit balances to investment firms, money market mutual funds and a highly competitive interest rate environment in the bank space. That theme continued in the second quarter of 2023. Total deposits declined $449 million in the quarter, with the vast majority of that occurring in the back half of April as tax payments cleared. Across our footprint, the Arkansas regions were fairly stable over the quarter, with Texas and Florida attributing the majority of the decline. Although non-interest-bearing balances declined slightly less than $350 million, they still account for a strong 27% of total deposit balances. Johnny mentioned the uninsured balances relative to our borrowing capacity.
Adjusting for collateralized deposits, which are generally the municipalities, local school districts and higher ed relationships, the calculated uninsured balances improved slightly from Q1 to 29% of total deposits. Alternative funding sources remained extremely strong with broker deposits only comprising 2.2% of overall liabilities and our internal limits would allow us to grow that by over $1.4 billion if the opportunities on the asset side represented.
As we mentioned last quarter, our top 10 list of depositors accounts for less than 6% of total deposits, with only one of those customers being uninsured or uncollateralized. As a reminder, our deposit base shows nearly 500,000 deposit accounts with over 70% of those having been open and active for at least 3 years and over 25% of those over a decade. The mix and balances today stands at approximately two-thirds commercial and one-third retail, while the number of deposit accounts is approximately 80% retail.
The focus on loan committees and discussions amongst all of our regional presidents today is certainly on deposit gathering, core customer growth and retention. On the asset side, loan origination volume picked up slightly from Q2 with $1.34 billion in commitments. Notably, over 80% of the volume coming from the community bank regions with over $400 million each coming from Texas and Florida. The yields on originations continue to improve with an average coupon of 8.64% in Q2.
Finally, as Johnny mentioned, the net interest margin compressed 9 basis points in Q2 to 4.28%. Lower event income in the quarter contributed approximately 3 basis points to the decline, with the remainder attributable to deposit rate increases outpacing the rise in earning asset yields. Interest-bearing deposits averaged 2.27% in Q2, up 37 basis points from Q1 and exited the quarter at 2.39%. The core loan yield, excluding accretion and event income, averaged 6.72%, which was up 23 basis points from Q1 and exited the quarter at 6.79%.
With that, Johnny, I’ll turn it back over to you.
Donna Townsell
Well, Johnny, before we go to Q&A, do you have any additional questions or comments?
John Allison
Yes, we have all been watching this bank crisis live from the frontlines and watching the impacts on interest rate aware of the impact of the interest the effect they have had on our banks. I remember the late ‘70s or ‘80s when the same thing happened and when the same, the home crisis was happening. You can say what you want to create a cycle of excuses, but the financial position of any company is good or bad, be it good or bad is based on the past decisions your management team has made. And as they have total responsibility, them and the Board, that is where the buck starts, we can say we are blindsided, but we are watching it happen and always should have been preparing for something, I don’t know that we knew what to prepare for.
One of the big differences between the present bank prices and the SNL days was the speed of the collect. SNL was a slow debt. With today’s technology, it is no longer slow debt. It is light speed. There are several differences, but lots of similarities. CD rates then were higher than loan rates, we are seeing that now. You got a 3.5% loan rate and you are paying $5.40 per money, what’s the efficiency ratio? SNLs like today, we’re forced to buy money at higher and higher rates, driving this stake deeper to the heart of the bank. Exactly like today, they just need a bigger truck. That didn’t work. The speed of the collapse was amazing. They moved billions of dollars at SVB by ways of today, it’s just normal technology. With the computer or with their iPhones, they move very fast. I think it was shocking for SVB as we understand. Early on, I was not aware if we could pay out all insured deposits or not. When I say that, I mean, early on in the first quarter. And that’s when I thought, can we pay out? And I thought if any bank can pay out, Home should be able to. Immediately, I asked Brian Davis and Stephen Tipton to give us a report and the very comforting information arrived and the stress levels of all of us dropped immediately. The decision not to invest excess funds into securities was one of the toughest and long list of my banking career, because the impact was huge.
The impact was on thousands of people, employee and employers, shareholders, customers, employees. The call turned out to be the red – the correct and looking in hindsight, the call looks like a no-brainer, deploying short-term money into long-term securities in a raising rate environment. Well, you have to be stupid to do that. Well, that’s what 99% of the banks did. And we could have been in the same shape as all the other reasonable banks that did that that most of them didn’t with that one simple decision. That’s why I say regional banks are not all made the same. We have tried to separate ourselves from the pack. The call turned out to be absolutely correct by taking the $3 billion in excess funds and just putting it in Fed loans. Even we made a mistake though we invested our cash flow from our securities back into the securities book. Millions of dollars were reinvested back into because we felt the pressure.
In hindsight, that was not a very smart move. It probably cost us $200 million to $500 million of additional liquidity today and some additional earnings today. However, if it was $500 million, we put $300 million in Fed funds. So I guess that was 6x better off. So I’d rather be part right or mostly right, Donna? Did not write it at all. I should have never fold into that pressure. We all make mistakes, but driving mistake into the heart of the bank that was not good. Management is totally responsible for the safety and soundness of their bank. There are many different silos and responsibilities on the bank and everyone thinks that they know what is best and they may know in their own individual arenas, but management takes all inputs and has to make a balanced decision that is the best and safest for the entire corporation.
In other words, the buck stops here. No one to blame, there is no substitute for experience, and I am the only one old enough around here and I am very proud of that the remember the day or late ‘70s and ‘80s, don’t tell me history don’t repeat itself. As it turned out, I guess it’s better to be mostly right than most of it all. We together have built one of the best and safest financial institutions in America. It may not be totally bulletproof, but it’s darn close.
Donna, how about Q&A? Tracy, anything you want to say?
Tracy French
Well, it’s kind of hard to follow that comments. But just a little – I can give a little heads up on the community bank aspects, because you identified the first 6 months and last quarter has certainly not been dull. But it’s never been that way for this company and working for a leader like Johnny Allison. While playing with the cards that we have been dealt, Centennial Bank continues to perform extremely well. Each month, as we manage our company, I simply see our regional leaders, our support office directors continue to perform skills taking care of our shareholders.
To give a few examples of what I mean, our ROA for the first half of the year was 2.04. Our return on equity was 12.73. Non-GAAP equity was 21.74%. Our efficiency ratio was 41.37%. Our Famous Johnny whatever finished the first half of the year at 57.43%. Our net revenue was over $522 million, and our net interest margin was 4.41, which is up 81 basis points from this time a year ago.
As you heard from Johnny Allison earlier, our asset quality remained strong. Our 13 regions, all continued to perform well, managing our cost of funds, managing our loan yields and managing our non-interest income and non-interest expense year-to-date. Today, we had eight regions over 2% ROA, and that stood out with two of them over 3%, that be in our region and our Northwest Arkansas region. Our lowest was 1.93, which is not too bad whenever you look at the rest of the country and how banks perform. Johnny, we will continue to focus daily on our strength and given it or all for the best return for our shareholders.
John Allison
Thank you, Georgie.
Tracy French
No, I’m good. You said it all. You won’t go to Q&A.
Donna Townsell
Thank you very much for these comments. And I think now we are ready to go to Q&A.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] The first question comes from the line of Jon Arfstrom with RBC. Your line is now open.
Jon Arfstrom
Thanks. Good afternoon, everyone.
John Allison
Good afternoon, Jon.
Jon Arfstrom
Do you hear me all right? Okay, good. Question for you, maybe Tracy or Kevin, what are the loan pipelines look like? I’m curious if you’re seeing quality opportunities and you had some decent community bank growth? Just talk a little bit about the drivers there.
Kevin Hester
Hey, Jon, this is Kevin. So I’ll let Chris talk about CCFG when that comes time. But in the community bank footprint, we’re still seeing good opportunities. It’s hard to make some of the deals work. I mean, you got to get – you got to be looking at 45%, 50%, 55% equity in a lot of these deals to make them work. And there is people willing, in some cases, to do that. So we’re still seeing good opportunities. We actually had growth at the community bank level last quarter. So good pipeline, good opportunities. it’s like Johnny always says, we will take what the market gives us. And if you see growth, it’s because the market is there for us, and we’re going to continue to do what we always do. Chris?
Chris Poulton
Thank you. For CCFG, I think it’s – we’re seeing opportunities there, but you work in the market you’re in, like Kevin said. And if you look at the CMBS market, for instance, I think it’s down 70% this year for the first half of the year. There just haven’t been a lot of transactions getting done. I think we’re seeing them, those that are getting done. I think we’re seeing a lot of ideas. I just don’t know that all of them work. And I think it takes the pace right now to be a little bit patient. The – there are some transactions that we think will probably come our way here, but we got to be a little patient with the sponsors and they got to be a little patient with us while we work through some things. And so the first half was a little bit slow, which is fine. I think second half will pick up a little bit more. I’m not too worried about it. We haven’t forgotten how to grow.
And I think the good news through all that was we continue to get pay downs. I think I’ve said this before on calls. I only get worried when we’re not getting paid off on things that should get paid off. When transactions have slowed down, if your payoffs slow down too, that starts to get me a little bit nervous. So we were down a little bit this quarter or a lot this quarter, but that was really due to mostly we were getting paid off on things that I think it was time to get paid off on.
Jon Arfstrom
Okay. And Chris, what are the pain points in your business? And I’m just curious how your competitors are behaving? Is it just – is the volume just dried up? And I’m just curious, we all worry about central business district office and big geographies, and I’m sure you get to see that in your deal flow. But where are the pain points and what – how are your competitors behaving?
Chris Poulton
Yes. I think it’s – the pain points for our borrowers, right, out to be honest with you, there is a lot of – not a lot of transactions are built for 11% coupon, right? And so I think it’s just tough to make the equity senior loan numbers were can get a decent return for the sponsors in a lot of cases. So in some cases, they have sort of slowed down or pulled back on a transaction to wait and see if things get better. I think you’re looking at a higher or longer now. And so at some point, you’ve bought the property or you need to develop, and those things will get developed because they’ll just put – they’ll put more equity or accept the lower return. Competitive-wise, we have not seen – I mean, for the folks that are pretty active in there, I haven’t seen anybody do anything that they shouldn’t be doing. We’re not seeing people get aggressive on rates. We’re not seeing people get aggressive on leverage. I think we continue to see non-bank players as a deal the other day we were looking at, I kind of liked the transaction, but we were going to be at sub-50%, and they were going to bring in mezz and the nonbank lender came in and took the whole thing.
I think we see that happen a little bit more, but I think that’s okay. I think that’s healthy in the market and such. So I think some of the non-bank actors are probably being still pretty aggressive, but not overly so. Just not a lot of transactions actually happening in the market. I think we’re getting our fair share. I just think it’s been, as I said, not a lot happening. That will break. You can only hold on to things so long and builders build and sponsor, sponsor, so...
Jon Arfstrom
Okay. Fair enough. Stephen, a question for you. Johnny kind of alluded to – I don’t want to call it a mismatch just on interest expense and interest income because being down 6 basis points on a core – is a victory on your core margin is a victory right now, but how do you guys feel about the relatively near-term outlook on the margin? Do you feel like this is really maybe the trough on it?
Stephen Tipton
Hi, John, this is Stephen. I think we’re going to continue to see deposit costs rise. We’ve continued to take a measured approach and have our bankers work going off with customers as opposed to advertisements and mailers and things like that, that we’re seeing out in the place today. Johnny mentioned the opportunity on the loan side in terms of repricing renewals. And I think that’s really the goal that we set out is to try to even that up and match that up in terms of where deposit costs go and where loan yields go. Yes, I think you may have some slight decline to it as we continue to go. But to your point, I think we’re talking basis points as opposed to 10s, 20s and 30s like we’ve seen from some other banks that are
Operator
Thank you. The next question comes from the line of Matt Olney with Stephens Inc. Your line is now open.
Matt Olney
Hey, thanks, guys. Good afternoon.
John Allison
Good afternoon, Matt.
Matt Olney
On the credit front, great to hear the update on the memory care centers. I know that’s something that you’ve been focused on for a while. So good to see that move off. On the office loan that you highlighted that you’re carefully monitoring, looking for a few more details if you have them, looking for what market that office loan is in, when does that loan mature and any kind of color on the LTV? Thanks.
John Allison
I’ll let Kevin take that. It’s in the West location with the LTV is – Kevin, do you want to
Kevin Hester
Yes. I mean I think we’re having it reappraised now, but I think it’s going to be in the 55% to 60% LTV range, and it – we’re still monitoring that one. John, he wanted to get ahead of it, and he’s always wanted to tell you ahead of time what’s happening and how things are. And I think we’re just kind of getting in front of that when it’s something we’re watching and may or may not be a problem. But if it is, then he wanted to know about it ahead of time.
John Allison
We do attack these things, as you know. And I apologize for not having any more information on it than I have at this point in time. We will have a full dossier I want to give pretty quick. As we did on the memory care centers, we all know where we are and what we’re doing, but we don’t. Early on, where we’re looking at it, we don’t – unless we get a really disappointing price, we think we’re in good shape, we’ve got some additional cash put back for that thing also. So as soon as we hear something of that, we will let you know.
Matt Olney
Okay. And just to clarify, you mentioned you’re gaining the reappraisal right now. Is that reappraisal because there was a tenant loss or maturing soon? Or what’s the reason for the new appraisal on that loan?
Kevin Hester
Yes, there was a tenant loss, and I think that was part of it. I think, as you’re working through some of these things, sometimes it’s just prudent to find out where you’re at. And so I think it was – there were multiple reasons for it. But yes, there was a tenant loss in that particular property.
Matt Olney
Okay. Alright. And I guess just switching gears, I want to ask about capital levels. Capital continues to build. It looks like the pace of the buyback remains still a little bit slower than it did this time last year. I’m guessing that CET1 ratio could be close to 14% by year-end. Any more thoughts on capital deployment? And I guess, Johnny, kind of how do you weigh your various options at this point of the cycle? You’ve got M&A out there, which you’ve done successfully in the past, but it sounds like the timing of that is maybe kind of unknown right now, but I’m also guessing on the security side, if you wanted to, you could look to maybe restructure something on that front. So I’m curious just kind of how you weigh these various options?
John Allison
Matt, I’ll kind of play with that a little bit. It’s not the time to do that when everybody thought a the world is going to pivot came down, we’re probably in a good time maybe to look at selling a few securities and redeploying the money. We just kind of tinkered with that a little bit. That might be something we want to do someday. We have a pretty good yield on our investment book by the way. So I don’t think that – the losses were up. AOCI increased a little bit, Brian, $20 million, $25 million this quarter?
Brian Davis
That’s correct.
John Allison
So it’s an interesting thought. You got to balance. The key is don’t keep too many deposits. Balance – it’s a balance between loans and deposit enough to be able to pay out is the key to me. So [indiscernible] carry – I mean I want to aspect on deposits. I don’t want to $40 for money I don’t need to being around my pocket. Paying 5 40 is something I don’t need. So when you see the balance of this coming in deposits run off, they have – some of that has not run off what’s been asked to leave. So plus we had two tax times here in – we had an April tax time. And if you were in the Tornado area, you have a June tax time. So I didn’t have to pay my taxes till June. So you haven’t seen the results of that yet, but if not that it’s not that bad. Anyway, I hope I answered your question. I kind of run off of here.
Matt Olney
No, that’s helpful. I appreciate that. Okay, guys. Great color. I’ll step back in the queue.
John Allison
Thank you.
Operator
Thank you. The next question comes from the line of Brett Rabatin with Hovde Group. Your line is now open.
Brett Rabatin
Hey, good afternoon, everyone. I wanted to start with the comment that you made about the second half of the year being a little harder than the first half of the year. And just wanted to get some additional clarity around that. Is that due to the margin, a little bit of non-recurring fee income in the second quarter? What are the – what’s the biggest challenge second half versus first half?
John Allison
Well, to me, it’s the right environment. It just continues. These people – I mean, these competitive banks running 5 30, 5 45, 5 60, 5 70 and some 6 ads. I mean, they are continuing to run those. I guess people have put enough money in there that they feel safe under the limit, 240,000 or whatever. But that may – I mean, that just flashes back to the SNL days of the late ‘70s and early ‘80s where you’re paying more for money than your loan balance is. Remember looking at SNL and Conway, Arkansas, and they set our average yield is 7 90 something. I said, that’s good. That’s a good yield. Well, the cost of funds were more than that. So that’s – I just remember that happening and seeing that happen in SNL here and happened all over the country. It just makes me – it just keeps me alert and makes me nervous as to where that’s going to go. Can it go much higher? If somebody has spent all their money, Brad, you know that. They spend all their money they have borrowed all their money, and they are still stretching for liquidity, they got to have liquidity, then they can go into the market and pay whatever for it just exist. Now at that point, it’s the margin and hell everything else. But I think because of the inefficiencies is going to put pressure on us. So does that makes sense?
Brett Rabatin
Yes. No, that’s helpful
John Allison
Yes, they spent their money putting securities and they I mean they borrow like they borrow, we got 2% broker deposits, we’ve got room to put deposits we got room to put $1 billion – almost sort of $2 billion of broker deposits on the books we want. We just got to – we try to balance that’s what we try to do. I think it’s the fact that everybody spends their money before and remember in the SNL day, let me tell you something. If the big shows up in a bunch of these banks, they are gone, they are gone, they are history. I’m not out bankers getting that position. I’m not meet my entire executive the Board and everybody else. We’re proud of the position with It caused us a little income, but that’s okay. Does make sense to you?
Brett Rabatin
Yes. No, that’s helpful. And then I just wanted to follow on the loan pipeline commentary. And one of the things that I thought would happen, you’ve been so conservative and kept your powder dry. I kind of thought when rates went up, it would be – you’d see stronger growth on the balance sheet, but I’m curious to hear if loans just aren’t penciling enough or well enough for you to get interested, maybe you need more too much cash upfront for the deals to work for you? Or just what you’re seeing that’s keeping you from being more aggressive than you have been with bringing customers out were from banks that may not be able to service them?
Kevin Hester
So Brett, this is Kevin. So I mean the community bank footprint on some of the smaller stuff, you still got some local banks that are doing things in the 7s that just don’t make a lot of sense. We’re not going to play in that game. On the larger stuff, to some degree, I think you’re right. I think that’s why you’ve seen some growth in the community bank footprint is because there are some folks that are out of the game. It is still difficult to make some of these things work at – like Chris said, we’re in the 9s now to make things work, right? And it’s difficult to make some of these things pencil out. So when you start talking to people about 50% equity and sometimes more, sometimes they just don’t – either the deal doesn’t get done or they go somewhere that they can get it done a little less than that.
John Allison
It’s just not the time to be stretched – it’s not the time to stretch. It is the time to be careful because, as I said in my remarks, lots of banks got some bad assets on their books, and they are doing everything they can to get rid of those assets. So it is a time – it’s a dangerous time to me. You got to be real careful, real smart, stay with your customers, know your customer, don’t be taking any risk, don’t be taking any chances just sit I think – my sit some while back you said it doesn’t hurt to shrink a little bit. And it doesn’t hurt to shrink a little bit and be lean Tracy, do you to jump on that?
Tracy French
No, I think the pencil part is, the biggest part that we see there we could – this bank could grow if we wanted to open that door, but the numbers just don’t add up when you’re doing 8%, 9% credits
Kevin Hester
Anecdotally, on multifamily, for example, we’re in some really, really strong markets, but we’re not writing to trended rents. We’re looking at historical rents. We’re seeing rents slow down, and in some cases, turn south a little bit. Hotel, we’re seeing some things. Even in our really good markets, we’re seeing some things trend back towards 2019 levels in some of our hospitality. So – and we’ve underwritten that way all the way through the pandemic. We went back to 2019 levels rather than 2021 levels. So yes, you would think this would be the time you would see growth. But as Johnny said, it’s not the time to stretch. So that’s where you are. You end up – you take what the market gives you and you continue to write conservatively. And if you grow, you grow.
John Allison
No need to come in with policy exception, correct? We are only coming with a policy exception on loan to us at this point in time. We’re just not able to do that. We’re not going to – we don’t have to. We’re in a good enough position, we don’t have to – we’ve got a good margin. We will grow – we will do some new loans, and we will renew that $760 million, and we will save some of that other $700 million So we don’t have to do that right now. So there is nothing wrong with keeping your head down. Kind of reminds me a low 5, 6 and 7 right now. Except when I saw that liquidity crisis, kills three banks basically overnight, that really got my attention. I don’t run scared you know that, but I get – that one made me nervous. That has my attention. Plus the fact I will not – we will not get ourselves a position we can’t pay to uninsured deposits. That’s the most important. To me, that is the most important thing right now because if they are having to be bank run start rolling, it wouldn’t be good in the country and Home would survive. So I think that’s the most important. I wasn’t sure where this was going early on. But I think it is extremely dangerous time. And I see people that are 108%, 109%, 110% loan deposits. I wouldn’t be able to sleep in that. I just would not be able to sleep in that. We’ve got 8% capital, 109% loan deposit and the big bad wolf shows up, turn off the light because it’s over.
Tracy French
Brett, just on the positive side, we’re seeing opportunities that we’re making approvals on and working today. So – and that’s with good businesses that other banks may have tightened down a little bit in some areas. But we’re – I don’t ever – we will go to positive in front of Johnny, but I think there is some opportunities out there that’s going to...
John Allison
We’re working on some really good opportunities right now. We don’t have them yet, but I think they are coming and they are price they work. They appear to work at this point in time. The committee hadn’t approved them yet, but we’re working on some pretty good sign of loans. It makes some pretty good sense with some customers that our people know, so...
Tracy French
So that’s in Florida, Arkansas and Texas.
John Allison
Yes, that’s Florida.
Brett Rabatin
Okay. Yes. I’m guessing you guys sleep a lot better at night than – go ahead, I’m sorry.
John Allison
No, go ahead.
Brett Rabatin
I was just going to say I bet you guys sleep other than most bankers at night. Thanks for all the color.
John Allison
We do. Thank you. Yes, we do. We are sleeping. It’s a good time to sleep good. Thank you for that. We lose our operator? We got more people in queue.
Operator
Sorry for the delay. Thank you for your question. The next question comes from the line of Stephen Scouten with Piper Sandler. Your line is now open.
Stephen Scouten
Great. Good afternoon, everyone. Thanks for the time. Johnny, you always have a really good pulse for the environment. You were saying rates were going where they are today long before anyone thought that was possible. But I guess I’m kind of surprised to hear you be what a lot more negative than what I heard kind of so far through the quarter. It feels like the sentiment has improved a bit since early May. But maybe what are you seeing? I mean, I know you’ve talked about competitive pressures. But where are you seeing stress? Is it smaller banks that you’re looking at? Is it – I guess I’m just kind of curious what gives you this level of concern when things seem to be kind of normalized a little bit?
John Allison
That’s about – I mean, Tracy pulled list those banks that were 105% loan to deposit or greater with an 8% or less capital ratio, and it was a pretty good list. And that’s where the big bad wolf. If it goes there, they are going to be the serious problems. So I think the – I’m not negative about banking right now. I’m just concerned about liquidity of these people that are 110% loan to deposit. And if they stop their toe and once the dominoes start falling and maybe they are not going to fall, maybe they – I hope they don’t. But if they start falling one after the other after the other, then I will call my shares to be one of the survivors. So I’m not saying that’s going to happen. I hope that doesn’t happen. I did call the Fed Funds rate, I said it’s going to be 6. I think it’s going to be right at 6 before it’s all said and done. But it is – that was just the experience. And I have no experience, let me say that. I may be overreacted. I have no experience with liquidity crisis up until now. This is – it really got my attention liquidity in the financial system really got my attention when they moved all that money from SVB overnight. I mean just boom, and they didn’t know what had them. So I think it’s just time to be safe and careful and smart. I mean, maybe some – we still make – probably will have the best year in this corporation’s history, so that bad. I mean I am talking about that. I mean we – $400 million, I think all our investors will be happy and I think you will be happy with $400 million, Stephen, and we are $208 million in the first six months. And I think we are going to see more pressure on rates going forward. If we can get re-priced and we can get that $760 million up 3 basis points or 4 basis points on those, $300 million to $400 million, I think we are going to be able to have a good third quarter and a good fourth quarter. And with Kevin and Chris and John bring some more business, they will bring business. We have got, I don’t know how many dollars we got probably $1 billion out there working right now. So, we know these people and probably not going to do a lot of stretching and go outside looking for people I don’t know, which we have done in the past. It will have to hit us in the base. We are just – I don’t think it’s time to be careful. When you got the balance sheet, Home has got right you don’t want to mess it up.
Stephen Scouten
Yes. Well, yes, and to your point, I mean the markets rewarded for it, you are outperforming by 25%. So, what’s that $1 billion in market cap, give or take. So, I mean that’s played out in your favor for sure. How do you think this might materialize in the M&A environment? I mean you have always done a great job of capitalizing when there is opportunities, do you think we see a wave of opportunities anytime soon? I mean are you saying it’s more of a ‘24 sort of environment? How are you thinking about that potential?
John Allison
I think we should, I mean a lot of Boards and Directors that were sitting there are looking at their balance sheets today, if they understand the balance sheets, they understand what they are looking at, have to be kind of buffered [ph] up, so to speak, looking at 110%, 120% loan-to-deposit and not making any money and margin going through the – going down, margin going straight down, I mean it is not – if you haven’t made the right moves, it’s not a good place to sit. If you have made the right moves, like Home did, it’s a great place to sit. And we just got – I would rather be lucky than smart, we got lucky and made the right call on what to do with our reserves, our deposits. We made the right call. So, I am not trying to scare the world. I have told somebody – I spoke at a conference while back and I saw one of our investors sitting there and I said, I know this lady, she is going to come and say what are you badgering the banking industry for. I am not badgering the banking industry. I just think some of the bankers got themselves in trouble. They have got themselves in trouble, and they can’t make any loans. I mean they can’t make a loan. They don’t have any liquidity to make a loan. It’s about as time as you there are some which tells you there are some opportunities for people like us, I understand that. And we will take advantage of a few of those. But we are always keeping up money in our pocket to pay out our uninsured deposits.
Stephen Scouten
Yes. No, that’s good. I guess last question I had is just actually around kind of Shore Premier or maybe just in general, kind of the marine and RV space. I mean I am seeing some weakening there in terms of values on those types of products as demand kind of seems to normalize to pre-COVID levels. What do you guys see in there in terms of valuations and demand and so forth in those spaces?
John Allison
I think it’s wholly fine. I am not saying a lot of slippage there. John is on the phone. I don’t think he has got any slippage or couple of past dues he had on boats, but I mean you have those time-to-time, but like we have got one repo boat that’s in the Virgin Islands somewhere. So, we think we got it – I think we are fine with it. So, outside of that, we haven’t seen anything. John, you got any comment?
John Marshall
Stephen, thank you for the question. No, I think valuations, both values are holding up nicely. There is still limited supply of new boat inventory. And so I think that’s all driving up the values just a bit. Our average loan size now has crept up from $600,000 to about $800,000. So – and again, we are still bringing in I think our average loan-to-value is somewhere around 65%, 70%. So, we are still requiring a lot of equity, but the value seems to be holding.
John Allison
I think the inventory is coming up with the RV. Stephen, I think on the RV side, I think that the inventory is catching up there. I am saying a lot because I drive, I see there is lots of huge lots. And I think we had such demand during the pandemic. I think that’s waned a little bit. So, the RV side, we don’t have – I don’t know – we don’t have any dispute of RVs. But I think that side is due for a little slowdown. I think you are probably right, if you are seeing. I mean the key is our – both of those what we do mostly large and are not, yes, we don’t finance – you remember, we don’t finance a 14-foot flat bottom 25 Mercury. We don’t do that. If you come back…
Stephen Scouten
You have probably not been able to do the things that I am seeing. I am not seeing these $800,000. Yes, and that’s out of my wheel, so that’s helpful. I appreciate it.
John Allison
I might try to get just, I am going to put it in the ducks and you come in, we are going in.
Stephen Scouten
There you go. It sounds great. I appreciate you guys. Thanks for all the color.
John Allison
Thank you.
Operator
Thank you. The next question comes from the line of Michael Rose from Raymond James. Your line is now open.
Michael Rose
Hi. Good afternoon guys. I think I am going to have to frame this transcript with – given there is words in this – on this call, I don’t think I will ever hear on a conference call again. So, appreciate the dialogue. I just had…
John Allison
I read your stuff. You said, there is nothing wrong to shrink a little bit. You want to shrink a little bit, get lean and me, that’s not the wrong with that. So, I thought that was a pretty good comment.
Michael Rose
I appreciate you bringing that up, Johnny. I just had just a couple of kind of questions. Maybe just back to kind of M&A. Just Johnny, how do you think this all plays out? And I think some of the rhetoric that’s out there on the hills that they are more open to kind of M&A, but there is clearly some near-term components that make the math pretty challenging. But just given how competitive it is out there and how many banks you still have, it looks like there will be a lot of consolidation at some point. You have been doing this a long time. You have done a lot of deals. Just wondering more broadly, how you see this all playing out over the next 5 years, maybe 10 years? Thanks.
John Allison
Michael, I think you are going to see Boards of Directors, as I have said earlier, if they recognize the shape that they are in and their investment in those banks, I think you are going to see them coming out. I think management is going to come out with some of them. And I think the Board is going to more come out, I think they are going to want to look let’s turn this into trade right money if we can turn it into trade right money. I think that’s going to happen. The problem is going to be with the buyers. That’s going to be the problem is with people like us that require us. And are we willing to take a chance, are we willing to timely going to turn around enough to where we feel comfortable with it and not be afraid of a liquidity crisis. I mean I think something is going to have to be done with a good premium banks of the country if they won’t consolidation and continue with some kind of Fed line that allows the good banks, the good operators to go clean up some of the other stuff. As you think about today, we are going to buy something. Home, as you know, is in great shape, and we go buy something and the way that gets us and not as good a shape, that’s a scary part. And if the economy rates still stay high and they still stay catchy, I don’t believe you are going to see a lot of M&A. I don’t believe it can be done. I think I have told you – I don’t remember if I told Donna and I looked at a bank in Dallas Area two months ago and their 110% loan-to-deposit and their margins going straight in to tank. And I said, you want me to pay you a premium for that. I mean think about it. I mean I don’t have – I said what you know is your problem to become my problem. And I said, I don’t want your problem. I don’t have your problem. I stayed out of that and I don’t have your problem. So I don’t want to get our bank in there. So, I think you are going to see real – particularly the good banks that run the top 15 banks or 20 banks that are acquired. I think you are going to see them be very conservative, and there’s going to have to be some kind of backup with – there have to be some kind of backup to have the ability in the event that they get – you do a transaction and you get a run on that bank, that could scare, that could take Home down, right. So, where we sit – that’s why we are so damn conservative on doing anything on M&A. We might buy some loans. We are looking at a loan package, we may buy some, we may do that. We may buy some loans. But – and when we do an M&A deal, we would with some people that have the quality of balance sheet that we have, but those are traditionally the acquirers. So, you got these weak sisters out here, they are bidding up for money and run their margin in the ground, that’s not going to get fixed in 45 days or 90 days. It’s going to take a while to fix that. And then you go to the securities book, and it depends on how long the duration is. It may be years before a lot of these things turn around. I am not being a nice sayer, you are usually the most conservative on the Street. I am just being realistic and conservative about what I see.
Michael Rose
Totally, got it. Appreciate the comments. Just two quick ones for me. Just given some of your comments, and I agree with them, just consumer may be a little bit stretched, but you are seeing kind of occupancy levels at hotels being really strong again this summer, maybe more of it’s in Europe. But any sort of fears and are you guys taking a closer look in places that you did during COVID, whether it would be restaurants, hospitality, tourism-type stuff, hotels, etcetera? And are you starting to classify some of those properties at this point? Thanks.
Kevin Hester
Hi Michael, this is Kevin. No, I am not seeing any weakness particularly. My comments were really around just seeing the markets begin to normalize a little bit. We all kind of expected, particularly in Florida with all the hospitality that ‘21 and ‘22 couldn’t be real and long lasting. And we knew that when Europe opened up that there was probably going to be a normalization. So, we have expected that and anticipated it. I am not saying that Florida is going into a recession. That’s not – my comments were really that we just see a little year-over-year softening and kind of heading back towards 2019 kind of scenario more than continuing to move upwards. But not any weak, it’s not created any, it’s in our portfolio that I have seen at this point.
John Allison
Actually, our hotels grew pretty well. When you think about it, you may remember we did that deep dive and we found those water hotels and extended stays were just really, they never missed the staff and it’s been really pretty amazing. And they continue to raise prices on those hotels, and they just keep – people keep going.
Michael Rose
I knew we could get a little optimism at on this call. That’s good. One last question. Just the other income was up – exactly. You just talked about what. Just on the other income was up a couple of million bucks, I think about $4 million. I know it’s bounced around the past couple of quarters, but anything of note should be aware of in there? Thanks.
John Allison
Now our securities, Brian, do you got color?
Brian Davis
Yes. I mean we have some equity investments that are accounted for under the equity method. And during Q1, we had $3.8 million of income on those investments, and we had $7.5 million of income on those investments for Q2. So, probably the $3.8 million, $3.5 million is probably more of a normal run rate. We had a kind of a windfall from one of our investments.
John Allison
We invested in SBICs. We have invested in some SBICs and they really – we have been in them several years now. It may have been really good performers, very, very good performers. So, we bank these people, and we invest with them, and they spend one of the better investments of my lot looking at it over time. So, we expect them to continue. There is no guarantee that will hit that next quarter, but I think Brian is around $3 million, $4 million, $5 million run rate is probably good.
Michael Rose
Great guys. Thanks for taking my questions.
John Allison
You bet. Thank you, Michael.
Operator
Thank you. The next question comes from the line of Brady Gailey from Stifel. Your line is now open.
Brady Gailey
Hi. Thanks. Good afternoon guys. Most of my questions have been answered, but I just had one quick one on the margin. I mean the margin has seen a nice level of expansion for over a year. But this quarter, it kind of leveled off around that 4.3% level. How are you thinking about the margin outlook going forward? I know, John, you are pretty skeptical on the back half of the year with the rate environment, some deposit promos from some of your peers. How are you all thinking about the margin outlook from here?
Stephen Tipton
Hi Brady, this is Stephen. We posted 4.28 for the quarter. I think our June margin was 4.29, but had about 4 basis points or 5 basis points of event income in it. So, it was off 4 basis points or 5 basis points. I think I told John on the outset of the call, I think something in those single-digit decline going forward is what is likely. We have got the opportunity on the loans side in terms of re-pricing. And on the deposits side, we were pretty aggressive in April and May on the heels of everything in March in terms of passing on rate adjustments and those kinds of things. So, we make can fine-tune some of that. But yes, I think we will fare better than most on the back half of the year.
John Allison
We are going to have double-digit increase in margin and fight around this I watch them follow table is going down. We are all hands on deck. Let me tell you, we are all hands on deck, and I am going to be disappointed if we don’t maintain a strong margin, I mean the 3, 4 $750 million of re-pricing, we had – those are our customers. We are going to be able to get 300 basis points or more on those deals. We have talked to our regional presidents, and regional presidents somewhere, and they have talked to their people. We won’t be able to continue to do that. And we have about $750 million schedule of payout. And maybe instead of – they may be at 5 average, maybe there is 5 or 5.5 and we are right in 9 or 8.5, we will see what we can do to keep some of those. So, I think it’s got downward pressure, but I think we got a good shot at holding it within range. Somewhere in this, give or take 6 basis points or 7 basis points to 10 basis points.
Brady Gailey
Okay. Great. Thanks for all the color today guys.
John Allison
Thank you.
Operator
Thank you. Our final question comes from the line of Brian Martin with Janney. Your line is now open.
Brian Martin
Hey guys. I appreciate taking the question here. Just one follow-up to Brady’s question. Just on the margin, Stephen, I guess would your expectation be that it does begin to kind of trough fourth quarter, maybe first quarter? Is that kind of what you are thinking time wise? I don’t recall the timing of what those loans re-pricing were. But is that kind of a fair outlook at this point?
Stephen Tipton
The loan re-pricing is over – on the second half of the year, and it’s pretty consistent at $100 million to $150 million a month that come due. I think so it just depends on balance sheet size and what we see in terms of the interest rate environment, both competitively and just the shape of the curve, too, right. The length of time we have been inverted here and then what we have seen from competition. But I have been reading and seeing some of the earnings releases so far and it seems like some of the banks that have already reported say they may not be as aggressive in the second half of the year on deposit pricing as they had been in the first half, so we will see.
Brian Martin
Got it. Okay. And then just, Stephen, just – whoever, just on kind of the deposit outflows, you have talked about the seasonality this quarter with the taxes. I guess how are you thinking about deposits if the loan growth or the loan demand isn’t robust at this point? It sounds like the pipelines are okay there. But in your comments about shrinking maybe a bit, is that how to think about the deposits as we look in the back half of the year?
John Allison
Well, we are going to balance those based on need for loans. We are going to balance those. I mean there is no need, as I have said earlier, carry $1 billion of extra deposits in our pocket today. So, we are not doing that and you get all the deposits that you want are expensive, but you get all the deposits you want. We have got room to go in any direction to get deposits. That’s – someone said we lost deposits. Well, part of that is purposely right. We are just balancing the deposits with the loans. So, we will play the deposit side with the loan side. If the loan side goes up, we will go on the deposit side or vice versa. So, I think we have played it pretty well thus far. We are about 82% loans and deposits somewhere in there now. I think that’s fine for us. And if we need more, we can get them. So, they are just expensive. So, you don’t want to carry around something you pocket that cost you money that there is no value to you whatsoever today when you know you don’t get them tomorrow. You can go to 2-year, 3-year or 5-year money. So, if you wanted to or you can do some – how much when we got on bulk…
Stephen Tipton
Our internal limits give us about $1 billion forward runway. We are like 2% on broker deposits to liabilities today.
John Allison
We haven’t done it in March [ph] to speak. We are keeping our powder dry. That’s the fine, keep your powder dry. I don’t want to get overreacted here. I want to get past all of this concern over bank runs. I want to get out – personally, I want to get that behind us because that could happen. It could get out. It can get out overnight.
Brian Martin
Right. Okay. Perfect. And then just last one for me. Johnny, you talked about the liquidity scare, just talking about the soft landing and potential recession and credits still continuing to hold up really well. I know you had the one credit you talked about. But where is the biggest area? I mean do you see a big credit-related recession, if you will, as you get into next year? Is that kind of what you are thinking at this point, or do you think it’s more of a soft landing and you can kind of manage through this, just kind of big picture of your outlook on how that plays out.
John Allison
Well, we had that discussion yesterday. Kevin and Donna, myself and Stephen, Tracy yesterday, Brian, we had that discussion in here. He may have a shot. I think he is going to have – I didn’t think he had a shot at a safe landing. I didn’t think he had a chance. He has – on one side, the inflation is better. So, I am going to give this administration credit to that. This inflation is better. And one thing they have done and I don’t know how to help out it, tell you the truth with Trump spending money and Biden spending money, I don’t want to have an act they did it. I worry about the U.S. dollar. I don’t know that’s getting far faster, what about by the U.S. dollar, what they are going to do with it. And I worry about this Fed point bringing out. I mean Roosevelt [ph] did it back in the ‘20s. And then when we came back and then mix and messed with it, the money and the gold in the ‘70s and then I hate to see a mess with it again right now. So, I don’t know what’s going to happen. I saw gold jumped $40 yesterday. I am not the only one thinking that that something could be already out there somewhere. So usually, we get the value when they start messing with gold and coins. And that’s really it. I don’t really have – I don’t have – I can’t put my arms around it right now. Kevin, you – we talked about it yesterday about we are looking at land safe or not. If we can land safely, that’s time, but something has to give somewhere as – I mean, as Kevin said, commercial real estate prices really have not come down. The assets of – home prices are up, there really needs to be somewhat of a little bit of adjustment somewhere. I don’t know if that is a slowdown. I think we could see a slowdown for five months or six months, call it a minor recession. I don’t know that, that would hurt anybody. We did that and maybe get some price adjustments. We really haven’t seen a lot of price adjustments. Kevin, you…
Kevin Hester
As we were talking yesterday, I mean rents were so high and prices for homes are so high. The one thing we don’t have today is an overhang of housing. So, that’s a positive, I guess in the direction that maybe there could be a soft landing. We talked about it for one an hour yesterday, and I don’t think we came up with any answers one direction or the other. So, the best thing I think we can do is continue to block and tackle and make the right calls daily here and let the rest of that play out and be prepared for whichever way it happens to go.
John Allison
You got to think about where we are going to be in the year and where we are going to be in 2 years and where we are going to be in 3 years. What impact and the different variables there and what if there are some glide path and that’s the process that goes on around here. And we don’t know what that is yet, but we will try to protect ourselves. You can’t protect yourselves on all wings, but we will try to protect ourselves on most of the wings. So, I don’t want to give you the answer that you want, but we don’t have it yet. You know what, you will get it when you get it. You walk around, work on it, you will hit. As everything has happened over time with this company a hit, we walk around sometimes and don’t have the answer, but we never quit thinking about it until we finally get the answer. So, hopefully we will get the answer on this one before too long. Thanks for your support. You bring a big support for a long time. Thank you.
Brian Martin
I appreciate it guys. Thanks.
Operator
Thank you. There are no additional questions at this time. So, I would like to pass the conference back to Mr. Allison for closing remarks.
John Allison
That’s been a long call today. Thank you for your interest and your time. We will talk to you in 90 days and maybe things will be a little brighter in 90 days than they are today. And it’s time to be comfortable and smart with moves and make good loans and protect your chuckwagon. Thanks everyone. Goodbye.
Operator
That concludes today’s call. Thank you for your participation. You may now disconnect your lines.
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Home Bancshares, Inc. (Conway, AR) (HOMB) Q2 2023 Earnings Call Transcript