Home BancShares, Inc.

Greetings, ladies and gentlemen. Welcome to the Home Bank Shares Incorporated fourth quarter of 2021 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 their 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 touchtone 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 notes regarding forward-looking statements. You will find this note on page three of their Form 10-K files with the SEC in February 2021. At this time, all participants are in 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 Townsall, Director of Investor Relations.

Thank you and good afternoon and welcome to our fourth 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, Chief Lending Officer, Chris Poulton, President of CCFG, John Marshall, President of Shore Premier Finance, and Steven Tipton, Chief Operating Officer. At this time, I will turn the call over to our chairman, John Allison, to share about another record-setting year.

Thank you and welcome and thank all of you for joining the fourth quarter and full year 2021 earnings release and conference call. The fourth quarter along with the year of 2021 is now in the record books and we're off and running on 2022. The fourth quarter and the full calendar year of 2021 earnings were both records for our company. We had strung together four quarters earlier that added up to $2, but not in the calendar year. The earnings for the fourth quarter of 2021 were $0.45 per share, or $73.4 million, and for the calendar year, a record $319 million, or $1.94 per share, both of which were records. And by the way, this is the fourth year in a row that your company's had adjusted earnings in and around the $300 million mark. While two years or more of that has been in the middle of this pandemic, I'm pretty proud of that. And while carrying an extra $3.4 billion in excess cash, that's earning virtually nothing. In spite of that, we beat on total revenue, quarterly EPS, and total EPS and earnings for the year. We did not sell our future by deploying excess cash into 2% loans and one and a quarter securities. I can assure you it would have been much easier for us to have not remained disciplined and invested the cash, but we believed if we were right, this may be a generational opportunity, and I'll talk more about that in a little bit. I said a huge generational opportunity to deploy all the excess cash at much higher rates. I guess that's the businessman in me coming out. We believe the Fed cannot continue to print funny money to flood the system without someone paying a huge price. And that's exactly what's happening. The American consumer is getting killed with pricing today. I think you'll agree it appears we were correct on the call and hope we'll be vindicated over the next three years as we put the money out at much higher rates. The bank that held their cash should reap the dividends of higher earnings and translate into higher stock prices for those that showed patience. Those that invested in long-term low rates and made loans at much lower rates can just watch the show through the window. It's called inflation and likely could be runaway inflation, like it was in the late 70s and the early 80s. When in 1981, the 10-year hit an interday peak rate of 15.84%. Well, the record for the 30-year treasury issued on February the 5th, 1982, was 14.56%. The Fed was certainly asleep at the switch then, and these times are similar and remind me of those days. I guess you say if it looks like a duck and walks like a duck and quacks like a duck, it's probably a duck. I am hearing for the year 2022 the expectations of three to six, and I've even heard seven now. So 25 basis points today. for move up to 75 to 150 total. I think the Fed has slayed this game to keep rates down way too long, and they're way behind the curve, just like they did in the early 80s. You're going to dance. You're going to have to play the pipe. Having not invested the excess cash, I believe home is in a really strong position for many years to come. That is, if history repeats itself, and if it doesn't, we still have a fortress balance sheet to look for opportunities. Having a billion or two investors at those high rates could pay dividends for our shareholders for a long time. I believe we've been dancing on the porn of a night, and it will require very careful corrections and years of high rates to stem the tide of inflation. Having a fortress balance sheet with lots of capital, best-in-class asset quality, tons of liquidity will certainly be a blessing for our company when the opportunities come out on the horizon. You know, you think about the strength of the company, we're 471% to non-performing. We ran a 162 ROA, but you pull out the liquidity in your back, it's a 2%. Efficiency kicked up a little bit at 4379. We had some merger expenses in this quarter's operation. Tangible common equity and tangible assets are 10.36 and a 2.43% reserve to loans. That equates to $236 million. Home is ready for whatever happens, good or bad. We did not get in this great financial position overnight, but I like our balance sheet position today, particularly during this crazy inflationary period. There is no substitute for expense, and my mentor, Kimmons Wilson, the founder of Hall A&M, would say that. The calculated moves that we have made over the past period of time could be powerful for us in the future. If not, we refinanced our sub-debt from a fixed rate of 5.625% to a rate of 3.125, say 2.5% annually on $300 million for five years. That's a $7.5 million reduction annually or $37.5 million over five years. Nice win-win. We have not paid off that subdebt. We're looking towards April, Brian? That's correct. So that comes up. We got the money now. We didn't wait until April because we thought rates were running on us and we'd have to pay a higher price. These were some of the thoughts that we discussed with our executive team and board that led to the decision to issue the new $300 million sub-debt. I don't feel bulletproof, but pretty darn close. There is no substitute for having financial strength. If you need the money in tough situations, it's hard to get or very expensive. As Alex Leblon told me, he said, you can get the money now, get it. So he's been a Good, strong director for us for many years, and that was what I was looking for. Well, we got it, and I'm glad we did. We're looking forward to closing the Happy Bank pretty soon, Tracy, and I think you and Michael are way down the road on closing and ready to execute once the deal closes, if I understand correctly. We have shareholder approval from both Happy and Homesides, plus the Arkansas State Bank Department, just waiting on Fed approval, hopefully not too long from now. The combination will take us to almost $25 billion in total assets with close to 2,500 associates. Many of you have been on this journey since the start, and many of you joined us in 2006 when we did our initial public offering. To all our supporters, employees, shareholders, thank you, and I hope we've provided you a happy home. Did you get that, Donna?