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Tight net margins, mergers in bankers’ forecasts for the rest of the year

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Later this month, Arkansas’ three biggest public banks will release their third quarter results as they head into the home stretch of 2021 and the first indications are that the second half will look a lot like the first.

Demand for loans remains weak and net interest margins will continue to be squeezed as bankers seek opportunities to leverage their excess liquidity. However, it looks like no major improvements will be made until 2022.

These are the trends indicated by a recent industry note from the banking research team at Stephens Inc., which last week reported on the key takeaways from the 11th Annual Banking Forum recently held in Little Rock.

The 61 banks that participated in the event have combined assets of approximately $ 751 billion and a market capitalization of nearly $ 117 billion – a representative sample of banks in the United States, Home BancShares Inc. and Simmons First National Corp. participated in the forum. although OZK Bank 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 pointed to the further rise in future income if the current level of excess liquidity was used to fund new loans in an environment of higher interest rates,” the Stephens team noted. “We expect these opportunities to gradually emerge in 2022.”

At the same time, Stephens reports that the increase in M&A activity this year is expected to continue. “M&A activity has accelerated this year, and based on our conversations over the past week [we] sense that there is more to come, ”the research note states.

So far, banks have announced more than $ 54 billion in deals, allowing the industry to have its biggest year of M&A activity since 2008, according to a report released last week in Wall Street. Newspaper. Mergers and acquisitions were worth $ 17 billion at the same time in 2020.

Home BancShares last month announced its expansion into Texas with the $ 919 million acquisition of Happy Bancshares Inc.

The acquisition will give Home BancShares assets of more than $ 23 billion, an increase of 31%.

In last week’s report, Stephens reiterated his projection that Home is in a good position to buy more properties in Texas. The state has 31 banks with assets ranging from $ 2 billion to $ 10 billion, ideal targets for Home acquisition and growth. The Stephens team noted “we are optimistic [Home’s] Entry into Texas could lead to increased M&A opportunities and drive higher valuation. “

In June, Simmons announced it was paying $ 278 million to buy two Tennessee community banks, Landmark Community Bank and Triumph Bancshares Inc. The deal strengthens Simmons’ presence in the state’s two largest cities, Memphis and Nashville, and gives the Bank of Arkansas more than $ 25 billion in assets. Simmons also said the deals would immediately increase profits.

Regarding Simmons, the Stephens team noted that the bank will focus on integrating the two new properties into existing operations during this month. Simmons halted its share buyback program in the second quarter but, with acquisitions behind it after October, Stephens expects a resumption of the program.

The buyout initiative has been extended for one year and is authorized at $ 150 million.

And Stephens predicts that Simmons could also be ready for more M&A activity next year. “In 2022, we expect [Simmons] to remain active with its M&A program for transactions within its current footprint, ”the report said.

CELEBRATE THE MANUFACTURING

October is Manufacturing Month in the United States, and the Small Business Administration is honoring the country’s goods-producing sector with a series of month-long events starting Thursday.

The series will aim to help business owners increase their bottom line through new export sales. Virtual roundtable discussions will feature small business manufacturers and experts with experience in expanding international sales efforts.

The free webinars will provide start-up manufacturers with an overview of the federal resources available to their businesses. All sessions will take place Thursdays in October at 1 p.m.

The next seminars will focus on financing and credit insurance on October 14; improving logistics and supply chain management on October 21; and a Spanish seminar featuring Hispanic small businesses on October 28.

With over 95% of global consumers living outside of the United States, the focus will be on helping American businesses tap the global market to grow their businesses and export globally.

More information is available at sba.gov.

FINANCING OF TRAINING

Finance often guides decision making in businesses, especially when it comes to making key investments that drive growth and expansion.

On October 15, the Sam Walton College of Business at the University of Arkansas is hosting a one-day training course to help executives and business owners learn about the fundamentals of finance.

Participants will gain a better understanding of financial decision making, how to properly value assets and how to get the most out of a given investment. The course will include details on building project cash flow forecasts as well as how to estimate project risks.

Additionally, the course will provide a framework for understanding how investors and business leaders can assess and influence cash flow and investment risk to create 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, visit walton.uark.edu.

CYBERSECURITY OVERVIEW

Mainstream Technologies and the Little Rock Venture Center offer entrepreneurs the opportunity to learn how to put in place protections against cyber attacks.

Two mainstream tech gurus will offer information at noon Friday at a Lunch ‘N Learn event. Daniel Weatherly, Director of Security Services, and Sara Christie, Head of Security Client Relations, will share tips on protecting business-to-business cybersecurity as part of National Cyber ​​Security Awareness Month.

The discussion will offer guidelines on how small businesses can implement tools and strategies to resist cyber attacks. Statistics show that around 20% of small businesses experience damaging cyber intrusions.

For more information or to register, visit venturecenter.co.

Ideas for columns or recommendations? Any thoughts or reflections to pursue? Contact me at [email protected] or at 501-378-3567.


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