Later this month Arkansas' three largest public banks will report third-quarter earnings as they head into the home stretch of 2021 and early indications are the second half of the year will look much like the first.
Loan demand remains down and net interest margins will continue to be compressed as bankers search for opportunities to put their excess liquidity to work. However, it looks like no major improvements will be realized until 2022.
Those are the trends indicated by a recent industry note from the bank research team at Stephens Inc., which last week reported key takeaways from the 11th annual bank forum held recently in Little Rock.
The 61 banks that participated in the event have combined assets of about $751 billion and a market cap of nearly $117 billion – a representative sampling of banks in the U.S. Arkansas-based Home BancShares Inc. and Simmons First National Corp. took part in the forum though Bank OZK did not.
Management teams had a positive outlook on their local economies and Stephens noted that optimism should lead investors to anticipate growth in 2022 and beyond.
"Bankers stressed the incremental upside to future revenue should the current level of excess liquidity be utilized to fund new loans in a higher interest rate environment," the Stephens team noted. "We expect these opportunities to emerge gradually in 2022."
At the same time, Stephens reports that the boost in merger and acquisition activity this year is expected to continue. "M&A activity has accelerated this year, and based on our conversations last week [we] feel there is more to come," the research note said.
So far, banks have announced more than $54 billion in deals, setting up the industry to have its biggest year in M&A activity since 2008, according to report last week in The Wall Street Journal. Mergers and acquisitions were at $17 billion at the same point in 2020.
Home BancShares announced last month that it was expanding into Texas with the $919 million acquisition of Happy Bancshares Inc. in an all-stock transaction that the Conway bank touted as being immediately triple accretive to earnings beginning next year and through 2023.
The acquisition will give Home BancShares assets of more than $23 billion, a 31% increase.
In last week's report, Stephens reiterated its projection that Home is well-positioned to buy more Texas properties. The state has 31 banks with assets between $2 billion and $10 billion, ideal targets for Home to acquire and grow. The Stephens team noted "we're optimistic [Home's] Texas entry could drive increased M&A opportunities and support higher valuation."
In June, Simmons announced it was paying $278 million to purchase two Tennessee community banks, Landmark Community Bank and Triumph Bancshares Inc. The deal bolsters Simmons' presence in the state's two largest cities, Memphis and Nashville, and gives the Arkansas bank assets of more than $25 billion. Simmons also said the deals would be immediately accretive to earnings.
Related to Simmons, the Stephens team noted the bank will focus on integrating the two new properties into existing operations through this month. Simmons halted its share repurchase program in the second quarter but, with the acquisitions behind it after October, Stephens is projecting a resumption of the program.
The repurchase initiative has been extended for another year and is authorized at $150 million.
And Stephens predicts Simmons also could be primed for more M&A activity next year. "In 2022, we expect [Simmons] to remain active with its M&A program for deals within its current footprint," the report said.
CELEBRATING MANUFACTURING
October is manufacturing month in the U.S. and the Small Business Administration is honoring the nation's goods-producing sector with a monthlong series of events beginning Thursday.
The series will focus on helping business owners build their bottom line through new export sales. The virtual roundtable discussions will feature small business manufacturers and experts with experience expanding international sales efforts.
The free webinars will provide insight for early-stage manufacturers to find out about federal resources available to their businesses. All sessions will be held Thursdays in October at 1 p.m.
Upcoming seminars will focus on financing and credit insurance on Oct. 14; improving supply chain logistics and management on Oct. 21; and a Spanish-language seminar featuring Hispanic-owned small businesses on Oct. 28.
With more than 95% of the world's consumers living outside the United States, the focus will be on helping U.S. companies tap into the global marketplace to expand their business and export worldwide.
More information is available at sba.gov.
FINANCE TRAINING
Finance often drives decision-making in businesses, especially when it comes to making key investments that spark growth and expansion.
On Oct. 15, the University of Arkansas Sam Walton College of Business is holding a daylong training course to help executives and business owners learn more about the fundamentals of finance.
Participants will gain more understanding of financial decision-making, how to correctly value assets and how to get the most value from any given investment. The course will include details on building forecasts of project cash flows as well as how to estimate project risks.
In addition, the course will provide a framework for understanding how investors and company managers can evaluate and influence cash flows and investment risks to build shareholder value.
The in-person course will begin at 8 a.m. at 702 SE Fifth St. in Bentonville.
For more information or to register go to walton.uark.edu.
CYBERSECURITY INSIGHTS
Mainstream Technologies and the Little Rock Venture Center are offering entrepreneurs the opportunity learn how to build safeguards against cyber-attacks.
Two Mainstream technology gurus will offer insights at noon Friday during a Lunch 'N Learn event. Daniel Weatherly, director of security services, and Sara Christie, security customer relationship manager, will share tips on business-to-business cybersecurity protection as part of national cybersecurity awareness month.
The discussion will offer guidelines on how small businesses can implement tools and strategies to resist cyber-attacks. Statistics show that about 20% of small businesses suffer damaging cyber intrusions.
For more information or to register go to venturecenter.co.
Column ideas or recommendations? Thoughts or musings that need pursuing? Contact me at amoreau@adgnewsroom.com or at 501-378-3567.