An optimistic forecast predicts banks will close out 2021 on a strong note, bolstered by more loan activity and fewer liquidity challenges. That outlook is supported by a survey of loan officers, who are projecting continued easing of loan standards to encourage lending.
An analysis of third-quarter earnings reported by 28 regional banks projects that lending activity will pick up in the current quarter and has promising predictions for loan growth through 2023.
The research report from the Stephens Inc. banking team also lists Home BancShares Inc. of Conway as a highly regarded stock with a price target of $29 per share. The stock has been trading in the $24-$26 range this month after opening the year just below $20.
Stephens said the stock should be a "core holding" for small- and medium-sized capital bank investors. Home will get a boost from its recent announced acquisition of Happy Bancshares Inc. of Texas, the report said.
"Integration of Happy Bancshares deal allows entrance into Texas which should support organic loan growth and (an) M&A program," the Stephens report noted.
In September, Home announced it was expanding into Texas by buying Happy Bancshares in an all-stock transaction valued at $919 million. The deal is scheduled to close in the first quarter of 2022 and company officials have indicated their interest in examining more growth through acquisitions in Texas.
Looking ahead, Stephens estimates that Home BancShares will have the largest organic loan growth next year of all Southwest region banks. The forecast projects organic loan growth of 37% next year, driven by the addition of the Happy loan book.
The median organic growth for the region as a whole is projected at 8% in 2022. Stephens estimates both Bank OZK of Little Rock and Simmons First National Corp. of Pine Bluff will fall below the median, with OZK at 4% growth and Simmons at 3%.
Conversely, for the current quarter, Stephens has an annualized estimate of loan growth of 50% for Simmons – which benefits by adding the loan portfolios of two recently acquired Tennessee banks – and a dip of minus 3% for OZK and minus 8% for Home BancShares.
Simmons is the leader in the region for fourth-quarter estimates. The median growth estimate for the entire region is 8%.
Regarding liquidity, which has been a drag on bank earnings because of bloated deposits and deflated income related to interest earned on loans and securities, Stephens says the third quarter "represents the peak of liquidity balances" and levels should begin to fall off in the current quarter. Overall liquidity levels are three times higher than they were in the fourth quarter of 2019, the report noted.
A separate nationwide survey of senior loan officers nationwide released this month by the Federal Reserve found that banks are easing lending requirements as demand picks up, especially in the commercial and industrial sectors, where the largest loans often are made.
Bankers also said they are making it easier for commercial real estate businesses to borrow in all categories. Loan demand by multifamily property developers and non-farm residential borrowers is picking up, the loan officers said in the survey.
Though reports of interest for consumer loans was mixed, the bankers said they were easing standards for two top consumer categories: credit cards and autos.
At the same time, the loan officers said demand has weakened for most categories of residential real estate.
PITCH N PINT WINNERS
A Little Rock firm that helps place drivers with companies in the trucking industry took top prize in a pitch competition for entrepreneurs last week.
Kissa Kimble of Elite Recruiting won $5,000 in the Pitch N Pint competition held in conjunction with Global Entrepreneurship Week. Eight Central Arkansas entrepreneurs were awarded a total of $15,000 in the competition sponsored by the Little Rock Venture Center along with the Little Rock Regional Chamber of Commerce and the Arkansas Small Business Technology Development Center, among others.
The event featured members of the 2021 Spark! cohort, with each entrepreneur giving a two-minute pitch to sell their business to a panel of local judges. Spark! is the Venture Center's local small business pre-accelerator program. Second place and $3,000 was awarded to Miya Blackmon of Little Rock Lighting while Whitney Gray of Whit's End took third place and won $2,000. Other participants were awarded $1,000 each.
"The brave entrepreneurs who participated in the 2021 Pitch N Pint competition showed the community what hard work and grit looks like," said Ashley Jones, managing director of community programs for the Venture Center. "Throughout the course of the 10-week program, this cohort has improved their sales and marketing strategies, as well as their pitching skills, which was evident to all in attendance."
AG MARKETING EXPANSION
Little Rock marketing firm Team SI is establishing a new company, SI EQ, to lead agricultural marketing efforts in the state with a specialty in farm equipment dealers.
"As we continue to streamline our company's growth, we are proud to introduce SI EQ and the launch of its new, respective website," said Tim Whitley, chief executive officer of Team SI. "Since 2010, we have been innovative trailblazers in ag-marketing and are thrilled to continue expanding our services and offerings while diversifying our clientele."
The new company's website, sieq.com, will be a data hub for clients. Users will have access to marketing newsletters and content, including up-to-date trends in the agriculture and equipment industry.
BOOST FOR WINROCK
Winrock International has received a $500,000 grant to encourage small business development in Arkansas and six other states. Funding promotes economic growth in the South and Southeast by helping small businesses access loans through the Southern Opportunity and Resilience Fund (SOAR).
All small businesses in the seven states, which include Alabama, Louisiana, Mississippi, Oklahoma, Tennessee and West Virginia, are eligible for assistance if they have fewer than 50 employees and operations have been harmed by the pandemic. Funding also focuses on helping businesses that have been traditionally underbanked.
Funding "will improve access to the unique loan opportunities presented by the SOAR Fund," said Linsley Kinkade, Winrock's senior director of U.S. programs.
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