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Home Bancshares Inc (HOMB) Q1 2021 Earnings Call Transcript | The Motley Fool

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Home Bancshares Inc (NASDAQ:HOMB)
Q1 2021 Earnings Call
Apr 15, 2021, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Home BancShares, Inc. First Quarter Earnings Conference Call. [Operator Instructions]. After today’s presentation there will be an opportunity to ask questions. [Operator Instructions].

I would now like to turn the conference over to Donna Townsell. Please go ahead.

Donna TownsellDirector of Investor Relations

Thank you, Lisa. I’m Donna Townsell, Director of Investor Relations. And our management team would like to thank you for joining our first quarterly conference call of 2021. 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 Stephen Tipton, Chief Operating Officer.

Hopefully by now, you’ve had the opportunity to review our proxy and read about the work that we have done in the last year on our ESG initiatives. While our work is not complete, we’ve made great strides and this will be an ongoing effort at Home. Some other exciting news that I’d like to share is, on Tuesday Home was named to the Forbes list of World’s Best Banks. We made this list last year, and we’ve also been named to Forbes Best Banks in America every year since 2015. One aspect of this is the performance metric and the other aspect is driven by customer service. And because of that, that makes us very proud that we continue to sail in both of these categories.

Now for our first report on the quarter, we will hear from our Chairman, John Allison.

John W. AllisonChairman, President and Chief Financial Officer

That was a mass award, we continue to stack them up over a period of time. Welcome to the Home BancShares’ first quarter earnings release and conference call. My name is John Allison, and I have the honor to serve as your Executive Chairman, President and Chief Executive Officer, and I’m also the co-founder of the company. We are here to discuss the results of our first quarter 2021 performance.

Donna mentioned the first release as you’ve probably seen it, the first quarter from a pure net profit and revenue perspective was the most powerful quarter in the company’s almost 22-year history, resulting in a record net income of $91.6 million. That’s another world record for our company as one of our former team mates would say. Home BancShares is known for being one of the top-performing banks and corporations in America for the last 10 to 15 years and this quarter was no different.

Sales revenue was off the charts, with total revenue of $207,927,000, the best ever. That’s total revenue. But what’s more important is how much of the total revenue we bring down to the bottom line after-tax for our shareholders. I want you to know that of the gross $207 million, we brought 44.05% to the after-tax bottom line or $91.6 million that is available to our shareholders. In addition to total revenue, our net revenue was also the highest it’d ever been at $193.4 million, and I think that’s a beat on the street, but our company also brought 47.36% of the net revenue after tax to the bottom line. These numbers reflect the earnings power of your company through the low cost of funds, strong yields and best-in-class efficiency, it resulted in another high watermark for our shareholders of $0.55 earnings per share for the quarter.

PPNR also hit a new record high of $120.5 million, representing a P5NR of 62.32%. That means that we brought 62.32% of the net revenue to the pre-tax pre-provision shoebox as our Long-time Director, Alex Lieblong has liability. Here’s some additional highlights. Pretax pre-provision ROA was 2.92%. I think that’s a record. I think it’s the best. After-tax ROA, 2.22%, return on tangible common equity, 22.90%. That’s one of the best ever. I think we’ve had one better than that. Earnings per share $0.55, that is the best. And on the NIM, interestingly enough, we have increased our NIM by 2 basis points to 4.02% from 4 basis points. Reserve to loans without the PPP loans remains at 2.40%. Stable asset quality, overall yields have remained strong at 5.56%. Now includes accretion of net income and PPP. And without those, the yield was 5.16%.

Mortgage produced another strong quarter with $8,167,000 versus last year at $2.6 million. Efficiency ratio of 36.6%, that’s got to be best-in-class or right at it. Are you happy with that, Donna? You have been with 36%, you hear the efficiency line.

Donna TownsellDirector of Investor Relations

Considering the size of the bank and the regulatory hurdles we’ve overcome in the last few years, I’m happy to be below 40%. But I know that we will probably be challenged and continue to push that downward.

John W. AllisonChairman, President and Chief Financial Officer

I agree with that. That sure is fun to talk about when you get it. First quarter loan originations were $671,650,000 at 5.10%. We only funded $250 million, it kind of came late in the quarter. March origination was the highest by the way of the quarter. It was right at $320 million. 75% of the originations came from the community footprint. But $671 million, we need a little more than that, but it happened mostly in March. That appears to be continued in April also.

Last quarter, I said, that loan growth will come in the second half of the year, but it might be coming a little sooner than I expected. Negative side with payoffs of about $800 million in Q1, that’s pretty much in line with what we had in Q4. However, that will slow down at some point in time and we will be able to match on the origination side.

We have a $2 million charge-off, I just don’t remember reporting on this. $2 million charge-off was — I made the statement to you all when we did our first fireside chat that I don’t see any losses as a result of COVID. And I’m still saying that, this was a problem created before the COVID-19. And I’m optimistic, we’re going to recover recover here. But the conservative nature of our group is that we charge it off. And that was $2 million of the — $2.6 million net or something [Multiple Speech].

Your team has also done a really good job funding these in numbers. Now when — I haven’t been tracking them in the past. I mean, I track them, but not like year-over-year. This is year-over-year cost your liabilities versus your assets.

Our total interest income for the year-over-year was down $9,524,000, that didn’t sounds very good. But interest expense was down $17,887,000, which resulted in positive net interest income of $8,363,000, that is a nice job by our Presidents and Stephen Tipton hopes echo, Tracy hopes it every day. So good job. Yeah, that’s pretty impressive numbers, that added $8.3 million to the earnings, so good job.

Over the year, we have tried to position Home to win. We’ve made several investment, both long-term and short-term, and we’re continuing to do that again this year with all this excess cash. Last year, we purchased from underpriced good dividend paying bank stocks that have performed very nice for us. We’re also in four or five different ventures that likewise have performed nicely for us.

This quarter, we picked up several million dollars in income for the company. Past performance is no guarantee of future performance, but Home has still made these investments. Our investments produced income of $9.5 million in 2020. And so far this year, they produced $13.8 million. Home is continuing to work on M&A and personally have active discussions building Home, so stay tuned.

On repurchase, we spent about $8.8 million in the first quarter, repurchased 330,000 shares at a weighted average price of $26.55, and we will continue to be active through our 10b5-1 even today, and we will remain active the rest of the year. It certainly looks like Home is off to a great start. Business is picking up and I’ll say we’re entering a powerful recovery. My concern surrounding places, which I think may already be out of control. Companies existing inflation with the new $2.7 trillion fee add money premium coming down the road, and we could be back to March ’80 during the Carter administration. They also thought they can control inflation, but had rates close to 20%. I wrote this and then when I’m watching TV yesterday, Tracy, and The Talk in hands comes on and he said, we’re not careful, we’ll be back where we were in the Carter administration. So I might not be the only one saying it that way.

And he bought in gasoline lately. It’s an $0.80 a gallon [Indecipherable] is straight up. Lumber went from $300 a 1,000 board feet to a $1,050, that’s a 350% increase in the cost of lumber. I would hope that the Biden administration will shut down their discussions on the huge tax increase as we’re just starting to recover from the COVID-19 crisis. I don’t say this as a democrat or republican. I only say this as an American business man that has a privilege leading one of the best companies in America.

The tax increase makes absolutely no sense to me, we’re currently trying just to climb out of one. Instead of trying to suppress American business, the President should be offering add deals to help all businesses. Think about it. This is not the time for tax increase. The talking heads on business channel side 2.25 to 2.50 on the 10-year by June is going to happen and 40% by the end of the year. If true, if that happens to be the case and it may be, I personally kind of believe it. Those minds routing fixed rates in the twos and the threes will pay the price and those investing all of this excess liquidity in the long yielding, long-term securities will also pay the price.

The risk is absolutely too dangerous for us. This is most of our largest personal asset and I refuse my staff and our executive team guys putting it in long-term fixed-rate securities in selling the future of our company. Those that remained discipline like Home will win the race. So when you get to the one-year circle, just look for Home standing in the middle of the circle. I want to thank our teammates for an amazing start to 2021 and the investment community for your trust that you’ve committed many years of that.

Donna, I think it’s a pretty good quarter, and I will let you have the floor and move it.

Donna TownsellDirector of Investor Relations

All right. Well, thank you very much for that report and that is a fabulous revenue and EPS results. So congratulations to all. Now we will go to Tracy French for a report on Centennial Bank.

Tracy M. FrenchChairman Centennial Bank, President and Chief Executive Officer.

Thank you, Donna. And good afternoon to all. The first quarter for Centennial Bank and Home BancShares is without question a [Indecipherable] report. In fact, we might be the safest banking institution in the nation, along with being one of the best or top performer in the country. The result of our group we’ll share today are phenomenal and not only show what hard work delivers, but also managing each detail that turned out to be financially rewarding. Our banking company continues to work hard and remain disciplined in all areas of the bank, putting our customers first.

For the shareholders, the report today is very rewarding. All of our regions had a great quarter. You will hear from Christopher and John in a moment. For Centennial Bank, our net — excuse me, for Centennial Bank, our total net revenue was $192 million for the quarter, making our old fashion ROA just at 2.25%. Our return on average tangible common equity non-GAAP was 21.03% and on our efficiency ratio was 35.36% with the last two quarters in the low 35 — excuse me, last two months in the low 34s.

Donna TownsellDirector of Investor Relations

Great job, Tracy.

Tracy M. FrenchChairman Centennial Bank, President and Chief Executive Officer.

Thank you. And now what we know as the Allison P5NR was at 63.56% for the first quarter. These numbers are what they are because of all the effort from every single person that works in our bank.

Brian will share with you our capital position, which is very strong with our risk-based capital at 18.76%. Stephen will give the details on the loans and deposits. As our excess cash has gone from over $1 billion at the beginning of the year to over $2 billion today, with our liquidity ratio at 27.21%. Kevin will share the latest on our loan portfolio with a reported 0.66% non-performing to total loans, while our allowance for loan loss excluding the PPP loans is at 2.40% at the end of the quarter. That makes up to be 383.47% allowance on our loans to non-performing loans. These reports represent a very profitable and safe company.

As always, we are staying in touch with our customers. I’m glad to report all are doing better and some have not missed a beat. Our markets and customers have navigated through this past year, and we believe the economy is doing fine. Although the cost of operating that Johnny mentioned earlier is certainly up.

Our regional leaders reported that most of our branches are open to full service with the few that are not or should be opened by next week. Our customer activity is increasing in both loans and deposits. Loan production is showing good signs of growth along with our pipelines. Our deposit growth has been great and our managers are working hard on the cost of these deposits. The loans that have been granted deferrals are showing much improvement, while some are back to full speed even our hotel loans, — excuse me, our airport hotel loans are feeling very good.

Donna, I’ve always use the word better as we are getting better every day, every week, every month and so on and our company will continue those efforts for our shareholders. Thank you.

Donna TownsellDirector of Investor Relations

I’ve no doubt that’s true, Tracy. Thank you for that report. Now we will turn to Brian Davis for our finance report.

Brian S. DavisTreasurer and Chief Fiancial Officer

Thanks, Donna. I’m pleased to report $148.1 million of net interest income and a 4.02% net interest margin for Q1 2021. Our first quarter net interest margin increased 2 basis points from Q4. Today, I would like to give you some color on the Q1 NIM.

First, during the first quarter, we had $314 million of PPP loans forgiven. This forgiveness of the acceleration of deferred fee income for the loans forgiven. The deferred fee income increased $3.5 million from Q4 to Q1. The acceleration was 9 basis points accretive to the NIM.

Second, the COVID crisis and the resulting governmental response has created a tremendous amount of excess liquidity in the market. As a result of the excess liquidity, we’ve $581 million of additional interest-bearing cash in Q1 compared to Q4. The excess liquidity was 16 basis points dilutive to the NIM.

Third, for Q1, we recognized $1.1 million of event interest primarily from large payoffs. The $1.1 million of event interest was 3 basis points accretive to the NIM. In conclusion, the 9 basis points increase for PPP loans, plus the 3 basis points for event interest income, less 16 basis points decline for excess liquidity results in a net 4 basis points of noise when comparing linked quarters. With that said, our net interest margin is actually up 6 basis points on an apples-to-apples comparison.

I’ll conclude with a few remarks on capital. Our goal at Home BancShares is to be extremely well capitalized. I’m pleased to report the following strong capital information. For Q1 2021, our Tier 1 capital was $1.7 billion, total risk based capital was $2.2 billion and risk-weighted assets were $11.7 billion. As a result, the leverage ratio was 11.1%, which is 122% above the well capitalized benchmark of 5%. Common equity Tier 1 was 14.3%, which is 120% above the well capitalized benchmark of 6.5%. Tier 1 capital was 14.9%, which is 86% above the well capitalized benchmark of 8%. And the total risk-based capital was 18.8%, which is 88% above the well capitalized benchmark of 10%.

With that said, I’ll turn the call back over to Donna. Donna?

Donna TownsellDirector of Investor Relations

Thank you, Brian. Those are amazing capital ratios.

John W. AllisonChairman, President and Chief Financial Officer

We still do have a lot of money, Brian. Wow.

Brian S. DavisTreasurer and Chief Fiancial Officer

I must like what’s underneath my wallet, if that’s OK. Mr. Allison.

John W. AllisonChairman, President and Chief Financial Officer

That’ll work.

Donna TownsellDirector of Investor Relations

Sleep well, Brian. And now Kevin Hester will update us on our loan portfolio.

Kevin D. HesterChief Lending Officer

Thanks, Donna. The accomplishments on the lending side this quarter are very impressive. I’ll begin with PPP. Round three approval and funding continues with the recent extension of the program through May 31. Applications have certainly slowed down, but we have crossed the 4,000 loan approved mark. Those approved loans total about $350 million, and we have closed and funded just over $300 million of that amount.

Rounds one and two forgiveness continue with over $550 million requested from SBA and over $450 million paid. We have initiated round three forgiveness as well, and we have a push to focus on these two efforts during the next two quarters.

COVID-modified loans showed little change during the first quarter. This was not unexpected because a large majority of the $330 million modification balance was placed on an 18 to 24 month interest only modification just three months ago to provide the runway to weather the remainder of the pandemic. With the majority of these loans being hotels and just coming through the seasonally slow first quarter of the year, I didn’t expect much movement in these balances.

Two positive developments did occur though. First, anecdotally, virtually all of our hotel operators have experienced a significant pickup in occupancy in March. And in the Florida market, especially, we expect this pick up to continue throughout the year. Even our hotels that were dependent upon airport traffic are showing signs of life. Given that this is a March trend, we do not have hard numbers on these, but we do expect the April reports from our hoteliers to look much more favorable.

In addition, since month end, the single largest deferred loan of $58 million went back to full payment, showing good occupancy and cash flow. This brings our overall modified loan balance to just below $270 million or 2.5% of the loan portfolio. We are very encouraged by the improvements we’re seeing around the segment of loans.

As Johnny said, mortgage continues very strong showing from last year. First quarter closings were up 50% on a quarter-over-quarter basis with secondary market loans consisting of over 80% of those balance $100 million in each of the three months of the quarter, indicating a strong second quarter to be expected.

Lastly, the accomplishments in the asset quality area are certainly worth discussing. Non-performing loans are 59 basis points, up only 6 basis points pre-COVID and down 7 basis points on a linked quarter basis. Non-performing assets are even better at 38 basis points, down 6 basis points pre-COVID and down 10 basis points on a linked quarter basis. The allowance coverage of non-performing loans is at 384%, up 52% on a linked quarter basis. Early stage pass-throughs remain very low at 46 basis points, which is below where we were pre-COVID. Combined with the encouraging reporting around modified loans, I feel very good about the asset quality of this company. We are seeing new lending opportunities in our markets and despite the low pricing and high leverage we’re seeing, I’m optimistic that the second half of the year will result in some organic loan growth.

Donna, what a quarter. I’ll turn it back over to you.

Donna TownsellDirector of Investor Relations

Great, Kevin did gave some good information on the hotel occupancy.

John W. AllisonChairman, President and Chief Financial Officer

It’s a great report.

Donna TownsellDirector of Investor Relations

Yes, yes. Next, we have Chris Poulton with our CCFG division.

Christopher PoultonPresident, Centennial Commercial Finance Group

Thank you. Donna, and good afternoon. The New Year brought increased activity during the first quarter. Overall loan balances were roughly flat, new fundings were offset by increased payoff and pay-downs as loans that would have generally paid off in 2020 were able to finally execute refinancings and sales. During this time, we’ve been able to maintain margins and returns, while ensuring our asset quality remains high.

New loan commitments totaled close to $300 million, and we ended the quarter with over $300 million of loans that are approved, awaiting closing or in active underwriting. By comparison, we generated $700 million in originations during all of 2020. Real estate values in our key New York and California markets appear to have stabilized with sales and leasing activity up significantly in Manhattan and Brooklyn during the quarter. Thus far that trend has continued into Q2 as well.

With that said, we remain our usual cautious selves and continue to focus on leverage and structure that reflects a post-pandemic environment. While many of our Southern and Southwestern markets have thrived over the past few months, we expect the recovery in New York in particular to take a bit longer to mature. During this time, we remain focused on our core purpose of building a portfolio delivers above average returns for below average risk.

With that, I’ll turn it over to you, Donna.

Donna TownsellDirector of Investor Relations

Thank you, Chris. And now, John Marshall will update us on Shore Premier.

John MarshallPresident of Shore Premier Finance

Thank you. Donna. And good afternoon. I’m pleased to offer an update on Centennial Premier Finance division. First quarter continued to reflect elevated activity, as the 2020 consumer COVID yacht buying frenzy spilled over into the new year, tempered only by limited new boat inventories. We’ve seen our retail applications shift from 80% new, 20% pre-owned to a 65-35 split, just because of the lack of new inventory. The quality of our applicants remained strong with declination rates dropping from 39% in 4Q 2020 to 32% in 1Q 2021. Funding retail loans were $50 million in the quarter with average FICOs of 780 compared to 776 for full year 2020.

Our commercial floor plan business was essentially flat in the quarter as shipments of new boats from European factories have been pre-sold prior to arrival. Utilization rates on inventory lines remains at 30%, down from a customary 62%. It may be mid 2022 before dealer stocks are restored to historical levels. We’re witnessing some pressure on marine as inventory lenders hungry for assets are unsatisfied. Dealer financial health is very strong as a result of this conversion of debts.

The health of the consumer and commercial portfolios has been favorable as reflected in our asset quality metrics, achieving the lowest levels of delinquency and default since Shore was acquired by Centennial. A profit contribution continues to grow and ROA in the quarter was 2.76%. Cash has emerged as a formidable competitor in the marine lending space, offers bulging with stimulus money have continued to accelerate our prepayment speeds, offsetting some organic growth. The outlook for marine is good. Factories are returning to sustainable production. Dealers are placing optimistic orders. And retail buyers are placing larger deposits on their next boat. Industry experts believe the COVID has pushed more consumers onto the water and with a long-term profound impact on the pleasure yachting industry.

On that positive note, Donna, I return the discussion to you.

Donna TownsellDirector of Investor Relations

Thank you, John. And our final report today comes from Stephen Tipton.

Stephen TiptonChief Operating Officer

Thank you, Donna. I’ll give color on deposit activity, repricing efforts and trends and a few additional details on the balance sheet today. On the deposit side, the wave of liquidity continued in the first quarter of 2021, as total deposits increased $787 million from year end to just over $13.5 billion. That marks a nearly $2 billion increase or 17% year-over-year. Most importantly, our non-interest bearing account balances increased nearly $600 million on a linked quarter basis and over $1.4 billion year-over-year. And today, non-interest bearing balances stand at 29% of total deposit.

We’ve mentioned over the past several quarters how fortunate we are to operate in states that did not shut down, states that have seen an increase in tourism and steady population growth. Of the increase in the overall deposit base in Q1, $542 million or 69% of the increase came from our four Florida regions, all of which had non-figure increases in total deposits. While the increase is certainly attributable to the government’s response to the pandemic, we believe the growth is also a result of the business development efforts, the customer service our bankers provide and the resiliency of our customer base and geographic footprint.

Switching to funding costs, interest-bearing deposits averaged 33 basis points in Q1, down 11 basis points on a linked quarter basis and exited the quarter in March at 30 basis points. Total deposit costs were 24 basis points in Q1, and we’re down to 22 basis points in the month of March. We continue to work rates down as liquidity levels persist. In addition to certain negotiated demand account rates, we have $745 million in time deposits maturing over the remainder of the year at an average rate of just under 1%.

Switching to loans, we saw total production of a little over $670 million in the first quarter, with $400 million coming from the community bank footprint. As Johnny mentioned, only slightly more than one-third of the origination volume in Q1 was funded at quarter end. Although loan balances declined, this along with the robust origination volume in March gives us optimism going forward.

Payoff volume was in line with Q4 at $844 million, as we saw a number of borrowers monetize large assets or go to the permanent market. As Brian Davis mentioned in his remarks, when normalizing for the impact from PPP lending, event income and excess liquidity, the NIM would have shown a solid increase linked quarter. We are extremely pleased with how the NIM has held up over the past year. The word discipline has been mentioned a number of times today and over the past year. That discipline has put Home in a great position to capitalize on the continued economic recovery, and as Johnny mentioned, the prospects of rising interest rates in the future.

With that, I’ll turn it back over to you, Donna.

Donna TownsellDirector of Investor Relations

Thank you, Stephen. A lot of good reports today. Johnny, before we go to Q&A, do you have any additional comments you’d like to make?

John W. AllisonChairman, President and Chief Financial Officer

It’s a great quarter as you know. Although we’re down a little bit, we’ll get our fair share of having Tracy and Kevin, our group would go out and take that $2.5 million we have at present as the $125 million pre-tax, so that’s what I see in front of us. Actually, I see and I’ve routed it all of what we could do that’s $100 million. So I think that is pretty exciting as the economy picks up with the company hitting in every area except that last and doing too bad, they’re in the middle of there. It’s interesting in the long term has gone down, non-performing percentages have even gone down with it.

So I remember back in 2008 and 2009 and 2010, I kind of got a snapshot of our loan, you really got to look at the book of business, recall it was a solid book and didn’t move too much up or down. And that’s the same thing that’s going on right now to see our non-performing numbers come down on percentage wise, a little bit more balancing as impressive.

So Donna, I don’t have anything else to say. I think we need to hear from Q&A and now let you have it and go to.

Donna TownsellDirector of Investor Relations

Okay. That sounds great. Yes, thank you. I guess, Lisa, we are going to turn to you now and go to Q&A.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from Michael Rose with Raymond James. Please go ahead.

Michael RoseRaymond James — Analyst

Hey, good morning, everyone. How are you?

John W. AllisonChairman, President and Chief Financial Officer

We’re good, Michael. How are you? Good afternoon. Where are you?

Michael RoseRaymond James — Analyst

Yeah. Good afternoon. Sorry, maybe we could just start on credit quality. Good to see non-accruals come down, it seems like everything is moving in the right direction. Is there any reason to think that you guys would have a provision expense anytime soon, understanding that you don’t expect any losses from COVID and the charge-off you had this quarter was previously identified credit just seems like all the pieces are there your reserve levels really high that you guys won’t need a provision kind of anytime soon?

Kevin D. HesterChief Lending Officer

This is Kevin. I would say no.

John W. AllisonChairman, President and Chief Financial Officer

Yeah. I’d say the same. Tracy?

Tracy M. FrenchChairman Centennial Bank, President and Chief Executive Officer.

Yes. Stay the same.

John W. AllisonChairman, President and Chief Financial Officer

I think — back when we hedged, it was really kind of I ask Chris, it’s Chris when the COVID first hit and he had some snips over there and he said as very much we want to lose that, we sell that today. He said, we sell it today, I think Chris, correct me if I’m wrong, Chris, I think you said $15 million. And as Chris said today, before the call, and he said may or may not. Am I saying that correct, Chris?

Christopher PoultonPresident, Centennial Commercial Finance Group

Yes. I think that’s about right.

Michael RoseRaymond James — Analyst

Okay. And then just curious just on the expenses, it looks like expenses were down sequentially, expense control has always been a hallmark of the company. Any sort of color there on a run rate perspective and any considerations for the year in terms of bonus accruals or incentive compensation that we should be thinking about? Thanks.

Brian S. DavisTreasurer and Chief Fiancial Officer

I’ll take that one, Mr. Allison.

John W. AllisonChairman, President and Chief Financial Officer

Okay.

Brian S. DavisTreasurer and Chief Fiancial Officer

Like on the salary employee benefit, we accrue those salaries on a day-by-day basis, so we had 92 days in Q4 versus 91 days in Q1. So I mean so at 90 days in Q1, so they’re down a little bit there. We did have a little bit of incentive reversal from the end of the year, but it was primarily offset, these always have an increase in the pocket taxes that we have in Q1. We did have some PPE expense in Q4, fog and buildings and doing that kind of stuff that was several hundred thousand dollars. So while it is down a little bit, most of it’s really due to the number of days on our salary employee benefit accrual, plus we didn’t have really a whole lot of the PPE expenses. Our FDIC assessment was down just a little bit. That was mostly due a true-up on the accrual, so there’s really not any noise other than the PPE from our last quarter in the numbers.

Michael RoseRaymond James — Analyst

Okay. And then maybe finally for me. So there is a big increase in the share repurchase authorization. I guess, given where your stock is and how much cap rate you have, I mean how active would you expect to be as we move forward? Thanks.

John W. AllisonChairman, President and Chief Financial Officer

I’m not going to ask Brian that question, would you guys leave that question. We’re active, we’re going to continue to remain active and I think our average price was $26.60 that we bought back about 330,000 shares of first quarter our team with the earnings hit the pound to dollars so as we will create a few more shares that will be in the float and which is a good thing, really is a good things, but we will probably buy all shares back, so we don’t impact — so we don’t dilute our shareholders. So we’re active and we really, Michael, looked at stepping in and then we increased our authorization by 20 million shares, and we looked at stepping in there. We decided that probably it was time for us to look at doing some M&A. So we were buying a little bit, and we were probably buying there where we don’t dilute our shareholders on the Home $2 program.

Michael RoseRaymond James — Analyst

Great. Thanks for taking my questions.

John W. AllisonChairman, President and Chief Financial Officer

You bet. Thank you.

Operator

The next question is from Jon Arfstrom with RBC Capital Markets. Please go ahead.

Jon ArfstromRBC Capital Markets — Analyst

Good afternoon, everyone.

John W. AllisonChairman, President and Chief Financial Officer

How are you, Jon.

Jon ArfstromRBC Capital Markets — Analyst

I’m good. I’m good. Good to hear you, hear the report.

John W. AllisonChairman, President and Chief Financial Officer

Thank you.

Jon ArfstromRBC Capital Markets — Analyst

Can you guys touch a little bit more on the pipelines? It seems like it’s better, it seems like it’s materially better. But maybe I don’t know, Kevin or Tracy, if you want to touch on it? And then Chris, can you expand a little bit more on that, the commitment numbers and why you think it’s jumped so much? Thanks.

Kevin D. HesterChief Lending Officer

Yeah. This is Kevin. So yes, pipeline looking right now compared to this time last quarter is definitely stronger than it was. We’re seeing some good projects across the footprint, some construction projects that are back on the table. So I do think we’ve been talking for a couple of quarters that we think second half of the year is where look like things will get better, and I think we still feel that way. It may be that this quarter is even better than we expected, but it is stronger right now for sure. Chris?

Christopher PoultonPresident, Centennial Commercial Finance Group

Yeah. This is Chris. Yeah, with regard to our pipeline, I think what you see and I think we saw in the first quarter, and we’re seeing now into the second quarter, is the vast majority of probably what we’re looking at closing now were deals that we worked on for the better part of last year. We worked through the summer and the fall and such with the number of our borrowers on transactions that I think we talked during the second half of last year. Things were just taking longer to close, take longer to get the equity together, etcetera, and part of that is really starting to get to a point we felt like there was a recovery coming and that you could start to see some post-COVID trades, etcetera, so I think we’re seeing that.

Majority of what’s in our pipeline to close for the second quarter are those types of deals that have been long time coming. We have one closing tomorrow that we worked on all summer with the borrowers just finally gotten to the point where they can get their deal together and close. So I think we’re seeing in our pipeline what the economy is seeing, which is things starting to open up and, therefore, transaction starting to be completed. Most of our first quarter volume was facilities, which was nice to see. We like that part of our business and seeing a couple of facilities closed, where folks have gotten money together and there they’re looking to put that money out over the rest of the year. So I think we feel good about where we’re at now. Last year was only $700 million, that was probably down 30% from what we normally do. So I think that was the anomaly.

Jon ArfstromRBC Capital Markets — Analyst

Thanks. Go ahead, Johnny. Sorry.

John W. AllisonChairman, President and Chief Financial Officer

Go ahead, Jon.

Jon ArfstromRBC Capital Markets — Analyst

I was just going to say, it seems like some of this is catch up. And I guess are lingering projects, is the new called the new pipeline, the new activity is that increasing as well for us?

Christopher PoultonPresident, Centennial Commercial Finance Group

I believe so yes. I mean we’re seeing now what starts to come in as new transactions, etc, but I think you’re still — the market overall was down last year and a lot of projects that were on hold are starting to come through. So it’s going to take — I think it will take some time to get through that backlog.

Jon ArfstromRBC Capital Markets — Analyst

Maybe one for you, Johnny, on inflation. Are the borrowers telling you the same thing that you’re feeling? Or is that not part of the narrative yet?

John W. AllisonChairman, President and Chief Financial Officer

On Inflation, you say, asking Johnny?

Jon ArfstromRBC Capital Markets — Analyst

Yeah, exactly.

John W. AllisonChairman, President and Chief Financial Officer

Oh yeah. I mean, Kevin is there, and he’s a homebuilder. We kind of track a little bit of that and may need to send a special order home for a customer. When we got through adding up all, what it calls, the guy said I can’t board it, I can’t do that. So I don’t think there’s any doubt about inflation being out there and our bet is to sit tight on this $2.4 million as ties we can sit on it. Tracy is about to rub all the hair off in front of his head because he can’t stand it. But he knows it’s a smart thing to do is to set TAT and remain disciplined and that’s what we’re doing. And we’ll have an opportunity to deploy this money at some point in time, and we have not done low rates if we needed to do that we can do it. We have not done that. We have not entered into those markets.

So it really wasn’t a lot of business after the pandemic, Chris is right. He said he worked on those projects all summer long. That’s because uncertainty that was in the market, and we’re seeing that. Now we’re seeing it change. We’re seeing it turnover where there is optimism and there is excitement about new projects. And I mean some of the projects, one of our good testaments have brought us, which is bill mall we don’t have that, I mean we could, we just don’t go to that level of loan to one customer, but yeah, it is right customer done well.

I just think we’re often running it. I mean, I think inflation is going to hit us at some point in time. But think about it, the job this team did over the last year by reducing cost of funds by more than the loan yield and increase in profitability, it should be like a roller coaster on a track and in our track exactly, then always do that. I know it’s better for banks in rising rates environment and I think we’re going to get that. So I think the fed has done a hell of a job, and I think they’re trying to do that. But I don’t know what they’re seeing and it says, inflation is only 1.5% or 1.75% because I see it everywhere outlook, all of the time our customers are talking about it. It was a piece of was it plywood or OBS or what it was the other day it went from 7 to 21. It’s just those guys and supply going to get appliances is the problem. I think some of that might impact the economy a little bit, but essentially building houses these stay longer keep selling.

Jon ArfstromRBC Capital Markets — Analyst

And so the message is, you’re being patient, you’re going to wait it out and that’s the way to kind of take advantage of some of your views on inflation is what are the people make the mistakes and see what happens longer term?

John W. AllisonChairman, President and Chief Financial Officer

I think that’s exactly right. And it’s come in a little faster. Our comment was, it will be the second half of the year. But Chris has come in pretty strong and Kevin speak with his report looks much better than. I mean normally, we look at report like this from about $200 million or $300 million at this time, we’re not now. So I now will forecast loan growth close last time I did it. We went down, but it is much better. I can say that, it is much better and it’s good customers and it’s good equity in the deals and not much of funny money stuff. It’s the real deal like we underwrite. So there were some deals that went back, but they were 80% and 85%. We’re not going to do that. So we don’t operate that way.

Jon ArfstromRBC Capital Markets — Analyst

All right. Thanks for taking my questions.

John W. AllisonChairman, President and Chief Financial Officer

Thanks, Jon.

Operator

The next question is from Brady Gailey with KBW. Please go ahead.

Brady GaileyKBW — Analyst

Hello. Thank you. So I wanted to just hit on loan growth from a slightly different angle. And if you listened a lot of the other Florida banks, everybody is talking about Florida really being on fire right now. They’re seeing a lot of population inflow. They’re seeing a lot of business relocations down there. I know you guys I think Florida is now your biggest market even bigger than Arkansas. But will Florida specifically play a big piece and the loan growth returning? And just maybe any commentary about what you guys are seeing in that state?

Kevin D. HesterChief Lending Officer

Yeah. Hey, this is Kevin. I believe it will. I mean, obviously this is over half of our footprint and it has to supply. It always has because it’s obviously a lot more economic activity going on. It’s sorted then there will be in Arkansas, and they know they really never shutdown. And then you are coming into for most of the markets, the busy time of the year. So yeah, I fully expect that it will play a large role in that.

Brady GaileyKBW — Analyst

All right. Then just looking at when loan growth returns to Home, what should we expect like excluding any sort of noise with PPP forgiveness? But should we expect loan to Home to be growing and kind of the low-single digit range? Or could it be higher than that as we come out of this?

John W. AllisonChairman, President and Chief Financial Officer

I’d just stay well done. Let’s say, well with it that way it might be, I’ll be wrong. Stay low, but it looks pretty good right now.

Brady GaileyKBW — Analyst

All right.

John W. AllisonChairman, President and Chief Financial Officer

You know, I don’t — I think it’s sustainable. I think this is sustainable. First he thought the customers all of then, we’re certainly didn’t opportunities for better than we’ve had in the past year. I guess the question comes from my mind, when you ask that question. Brady, is really more of the payout day, as we are hearing some customers that are getting some good opportunities to cash in on what they’ve done over the past few years.

So, that’s always the question for us is the payoff amounts that trickle in — primarily what we’ve seen on the larger payoffs, we’ve seen lately and so there — so there are opportunities and that’s a good thing for them. And they’ll be back and they’ll continue to come back. It’s construction type projects. It takes us a little time prepare on the books, comparative it’s going to full balancing, gets paid off today. But we actually feel pretty — I think if you got the sentiment — it all feels pretty good in all our markets where we are in.

Brady GaileyKBW — Analyst

Yeah. And then finally, I just wanted to ask about the M&A, John. I know you said earlier that you were active having some conversations, but I know you sometimes also give us a little additional color. I think last time we connected, you were chasing two or three deals, but maybe just an update — a little more detailed update on M&A. And if you feel like you’re getting closer on anything.

John W. AllisonChairman, President and Chief Financial Officer

I will answer that. I’ve been disappointed in the couple of deals recently where we made an offer that was the highest for us offer a bit of banking and so forth in the U.S. in the past six or eight months and that CEO commented that if he made that offer to his Board, they’d laugh him out the room. I don’t quite know what to say, I was somewhat speechless at that point in time. And I said, let’s go have lunch and [Indecipherable] our lip, but I guess Tracy had one yesterday that the — what they’re trying to do that the bankers getting in the way is through step up most of the time because what they’re doing is they’re they know we don’t dilute and they know how we operate. So they take — they back into a process, they take their customer just back into a process and everybody still will make more money next year and I’ve [Indecipherable] this year.

Anyway, we have a couple of really good opportunities out there. We feel like right now. We actually have a total authority, and we we’re working on one as we speak and we will see that resolve itself in the next two to three weeks. And then we’ll move to the next one and the next one. And we’ve taken a couple off the table because and they weren’t realistic and the bankers were really, I don’t know if they bump their head or what they did so. But anyway, they were somewhat unrealistic. But when you what you say Tracy [Technical Issues] let me give me what they ask of that [Indecipherable] he said no, its not a joke. I mean, they seriously made that. And as well, I don’t know, maybe they bumped their head on the way to get it running, doing the run. But anyway, that’s, you got to be realistic. It’s going to be a fair trade on both sides and you got to allow room for a stop to breathe. But, I think we’ve got two or three deals out there that could take off. So we’re just continuing in the market and we will continue to be really smart about the deals. And you know how this when we are Brady, with this going to leverage the high end.

You know, as I tell one one seller, I said you’ll be proud, you think I’m too disciplined now once you become a home venture shareholder, you’ll be really proud to be with a disciplined company, because we protect your stock as much as we can. So anyway, that — it is interesting as Tracy has not been out here, working on some of these traits. But I think we got — I think we got one we can get done and maybe another.

Brady GaileyKBW — Analyst

Great, thanks for the color, guys.

John W. AllisonChairman, President and Chief Financial Officer

You bet.

Operator

The next question is from Matt Olney with Stephens. Please go ahead.

Matt OlneyStephens, Inc. — Analyst

Hi, thanks guys, good afternoon.

John W. AllisonChairman, President and Chief Financial Officer

Good afternoon.

Matt OlneyStephens, Inc. — Analyst

Sticking with the M&A discussion, we’ve seen some pretty sizable deals recently that are more MOE like. Would love to hear how Home Bank is thinking about M&A with respect to the size of deals? Are you becoming any more open to larger deals over $10 million of assets? or you think you’re going to stick with the smaller deals that we’ve discussed in the past?

Brian S. DavisTreasurer and Chief Fiancial Officer

Well, we’re primarily sticking with the smaller $2 million or $3 million deals to forward at this point. We’re not afraid to do a $10 million deal if we understand our asset classes Matt. One of the larger deals done recently, we just really didn’t understand or have the expertise in some of those asset classes, primarily oil and gas. We don’t know much about the except its for us oil and gas going up. I know that. But, we’ve just stayed pretty conservative there. Tracy is going to comment on that.

Tracy M. FrenchChairman Centennial Bank, President and Chief Executive Officer.

Its a combination, we’ll get some good banks that we would fit well with us and other banks may broaden, hit that niche today.

Brian S. DavisTreasurer and Chief Fiancial Officer

Kevin talked about some of the asset classes on one of these larger deals, while back and he was right. We don’t — we’re not a big C&I lender, we’re really construction lender. We do a lot of construction. We like it. We’ve done well in that business. And we will continue doing that. So, it’s somehow got a big book, 25% in both oil and gas, it’s probably not the place we’re going to be. So, we probably be somewhere else.

Matt OlneyStephens, Inc. — Analyst

Okay, got it. That’s helpful. And then switching gears over to loan growth, I appreciate the commentary that the loan pipeline, you’ve seen a nice inflection kind of late in the quarter. What about on the other side, the payoffs still remain elevated during 1Q. Would love to hear more details around those payoffs, and anyway I think about the payoff with respect to customer deleveraging or just exiting lower quality credits, and was there any change in the pace of pay-offs during the quarter? Thanks.

John W. AllisonChairman, President and Chief Financial Officer

Yeah, I think the scale, and I think Tracy — both Tracy and Chris mentioned that — and for the larger credits the two biggest things that I saw this quarter were customers taking advantage of selling their project and refi after a project gets completed multifamily those sorts of things, and customer taking a permanent taken it not recourse, things like that. Those were the two biggest things that sprinkled in there, a little bit of refi for rates, but those other two were the main things this quarter, just looking at pay-offs for the past several quarters, yeah, the last still look pretty much the same. And over over $800 million. I would anticipate you probably still going to see some of that because we’ve got, I think we’ve got more customers that I know of a few that are — that are selling that will materialize in this quarter or next quarter. So, I think you’re still going to see some of that. We’re going to have to outpace that to have loan growth.

Matt OlneyStephens, Inc. — Analyst

Got it. OK. Okay, thank you.

John W. AllisonChairman, President and Chief Financial Officer

There was a shot at it now because things have turned and even border never shutdown, is those projects that are coming back on stream in Florida. So I’m optimistic that we’re going to see some loan growth, maybe better this quarter than I anticipate. I really went looking forward to the third and fourth quarter, but it may sneak up a little bit, and I don’t get too optimistic because every time I do that it goes the other way.

Matt OlneyStephens, Inc. — Analyst

Understood. Thank you.

Operator

The next question is from Stephen Scouten with Piper Sandler. Please go ahead.

Stephen ScoutenPiper Sandler — Analyst

Hey, good afternoon, everyone.

John W. AllisonChairman, President and Chief Financial Officer

Thanks, Stephen.

Stephen ScoutenPiper Sandler — Analyst

Maybe one question just for Brian first. Do you have the number on the remaining PPP — deferred PPP fees that could come through over the next few quarters.

Brian S. DavisTreasurer and Chief Fiancial Officer

As of 3/31, we had $20.9 million. And as of today with up about $1 million to $21.9 million.

Stephen ScoutenPiper Sandler — Analyst

Great, thank you. And then maybe. I don’t know if this will be Kevin or Tracy maybe. But with your lenders, do you feel like they have gotten distracted at all by PPP lending? Or do you feel like you could actually see better core growth as PPP kind of winds down? Or if they’ve been able to kind of manage both effectively.

Kevin D. HesterChief Lending Officer

Yeah, I would say, this is Kevin. I would say they have absolutely been distracted by both the funding and the forgiveness aspects of PPP without a doubt. I’m sorry, funding has slowed down a lot as I mentioned. We’re not doing that many. And we’re not really actively looking or responding to requests for funding, but we are still, we still have a lot of forgiveness to deal with particularly around three.

Stephen ScoutenPiper Sandler — Analyst

Got it. Okay, very helpful. Okay. And then maybe one for Stephen, on the deposit cost side, how much lower do you think you could get deposit costs, because you guys have made phenomenal progress, but it seems like maybe still some room to go with CD costs. Could we see deposit costs down in the 10 to 15 basis point kind of range? And if you could.

Stephen TiptonChief Operating Officer

Hi, Stephen, I think the way we looked at it here over the last six months at least is, kind of where we were prior to the last tightening cycle, I think interest-bearing costs were down in the low ’20s, which that was obviously a number of years into that low rate environment. Interest cost today are down in below 30, so that we continue to move down. We have some under contract that will come up over the course of this year. I mentioned — you mentioned that the CD maturities that will continue to help. So, we’ll find a floor somewhere, but given the liquidity that is in the system and in the bank today, I mean I think we will continue to push on it as we go. And whether we can get down below 20 we’ll see, but there is still opportunity over the next couple of quarters for sure.

Stephen ScoutenPiper Sandler — Analyst

Got it. Perfect. Okay. And then Johnny maybe last one kind of for you would be jumping back to M&A. I know you mentioned maybe $2 billion to $3 billion kind of deals will be the sweet spot. But have you broadened the horizon at all in terms of geographies? Or would it still largely be kind of Arkansas, Florida, or do you start looking at Georgia or Tennessee or any other states kind of in between so to speak.

John W. AllisonChairman, President and Chief Financial Officer

Well, I’ll just tell you that we’ve always liked North and South Carolina, we thought that was with all — those not like Arkansas over the years and we’ve always liked Texas, maybe some opportunity pretty approximately in Texas. But I think we’re just looking for what comes our way right now. And a couple of then come away, and some of the following — following by the wayside. So it’s just a misunderstanding, with probably one day or one day and when our stock was 21, as 26 and 27, had he taken our deal, he left about $50 million on the time. So, it’s something we don’t understand what can happen to the market and bank stars to starting to move up, and it would have been a great opportunity for them in their good bank, it was a good bank. It was a mass Bank, now speaking. But as usual, the bank was going to get in the way or appears to me, but that may not be correct.

Stephen ScoutenPiper Sandler — Analyst

Fair enough, fair enough. But we look forward to see in the next one. We know it will be a good one and congrats on a good quarter.

John W. AllisonChairman, President and Chief Financial Officer

Thanks, Steve.

Stephen TiptonChief Operating Officer

Thank you.

John W. AllisonChairman, President and Chief Financial Officer

Don’t count out. I think Brady counted all our extra income. I think he took it all off, didn’t he take is all off Brady, because we’re still in those investments. I don’t want you to understand that. I don’t know that we’ll have that return income in the worst year. But we’re still in all of those investments. Every one of them that we’re in, we’re still in. And so, and we didn’t get it. I’m just to be there. We have there. Got them to make money. And as you can see, we’re making money with them. So, a little faster, a little bit our sales.

Operator

Our next question is from Will Curtiss with Hovde Group. Please go ahead.

Will CurtissHovde Group LLC — Analyst

Hey, good afternoon, everyone.

John W. AllisonChairman, President and Chief Financial Officer

Hey say, Will.

Will CurtissHovde Group LLC — Analyst

How are you.

John W. AllisonChairman, President and Chief Financial Officer

Good.

Will CurtissHovde Group LLC — Analyst

Wanted to kind of piggyback on the Florida discussion. And just in terms of how well the market is doing. I’m just curious as kind of this recovery moves along. Is there anything that that’s of concern? or you’re watching a little closer these days, Johnny.

John W. AllisonChairman, President and Chief Financial Officer

Well from an asset quality perspective, I always keep it on our hotels. But they information coming in on hotels is much improved from where it was. So, I’ve got push that out of the sad. I do worry about — I do worry about inflation. I think inflation here will and we’re about a devaluation of the dollar. I’m scared today if that’s going to happen. I listen to a guy who I have done pretty good with on investing, and he says it’s coming and he says it’s going be quick and severe. So, am — he said you got cash, get rid of it. That just concerns me, the manpower, the dollar goes down and inflation goes up, and we have to fight that battle.

And I’ve said earlier, I think that the bank has done a good job, and I think they’re trying to the do-it-by-do it. They might do it. I think he can do it. But I just don’t believe that I don’t believe they’re not look at where I’m looking. So, the thing it bothers me the most is the inflationary its at it. But that could be good too. A little inflation then hurt us all and a little, let me kick up in rights, not, I mean you got, you think about it, you have the money. We get $2 billion. We tied up one in a quarter today, 130, 140 today, and the tenure goes to 3% by the end of the year and you look so stupid. You think when did I do that. What’s happened, wanted to let. My deal is where they tried to, don’t have any hair left on the front of his head, because he is rubbing his head. Everyday I walk in, he said I know we’re doing the damage [Indecipherable] not to invest some of this money.

We talked about everything in the world. I mean, we allowed some buy stocks and done extremely well for paying a good, it’s been basic. We all know the people would run them and know how well they did. They run their companies and those have done well for us. The good dividend paying stocks. I mean, as we will sit with those for a little bit and other than that I don’t know what, I don’t have it. I think, I feel this, if they go to, we go to 31 or 32, or what do you say what brand. What we don’t do on the tax rate, right. What do you say, Brian.

Brian S. DavisTreasurer and Chief Fiancial Officer

Well, we were talking before the call and you were asking me what the marginal rate might go to. And the margin right that we have right now is 26, 135. And if we get the 28% tax bracket, it would go to 32.68% would be our marginal tax break right, which is an increase of 6.545.

John W. AllisonChairman, President and Chief Financial Officer

Yeah, I think about it, you buy it on the day based on today’s tax bracket and then you turn around and get this yet. With this, so it’s a dangerous — in some respects it’s a dangerous time to be in the M&A business for then to do a deal because they’re going to — perhaps it out what todays tax rate is. And if it goes up 6%, [Indecipherable] I mean, we made $300 million a year, I have to pretend something like they have, yield 7 points that’s what, $21 million, $22 million a year comes out of our shareholder’s pocket. I think that delays a dividend probably for our shareholders. Instead of doing one every year, it might be one — like three years or two years before we’re doing that one. That bothers me a little bit. I know my wife is concerned about that because she like, if you remember, she likes her dividend every month. She likes the amount we pay, she just wants the same amount every month. She said she is going to visit with pricing of Brian Davis about that.

But I like to have — I guess the government would spend it less than we spend it. So that concerns me a little bit, outside of that, I mean the company you run it 292 pre-tax are only in the 222 after that in the 36% efficiency ratio, and you make me count money we’re making. You get some good investments kicking in for you. I could not be happier at is, I’m ready for a loan growth and I think we’ll get it. But you know us, we are not going to push it, and we’re not going to chase. We’re not going to chase 2% and 3% loans, and I will do that. We’re not in that business. We’re not going to sell our future. I mean we’re looking at one by now. The problem is that nice banks, its the real stocks. You got to find that price, right. If you go and write low rising payment out and pay me later and that’s not fair is — not my favorite. We don’t do that. So, but in the future how rates come up a little bit, I think you stamp a little and [Indecipherable] I probably told you what you want to hear it in it.

Will CurtissHovde Group LLC — Analyst

Now that that was great. I appreciate your thoughts and nice quarter.

John W. AllisonChairman, President and Chief Financial Officer

Thank you very much.

Operator

The next question is from Brian Martin with Janney Montgomery. Please go ahead.

Brian Joseph MartinJanney Montgomery Scott — Analyst

Hey guys, good afternoon.

John W. AllisonChairman, President and Chief Financial Officer

Hey Brian, how are you.

Brian Joseph MartinJanney Montgomery Scott — Analyst

Feeling good, John. Hope all as well there. Just the, a couple of things. Maybe one for Brian or for Kevin. Just on those PPP fees. Brian, I think you said there were $22 million. So the — the remaining, give the breakdown of what remains on one and two versus three. And then just maybe for Kevin. Just if the forgiveness that you talked about just the — how to think about that forgiveness particularly for around 3, just how are you thinking about that? Or just how should we big picture? Any thoughts on that?

Brian S. DavisTreasurer and Chief Fiancial Officer

I’ll go first, of the approximately $22 million of PPP fees, we have $7 million of it left approximately from around $1 million, and we started at $30 million. At that point in time, and so that would leave about $15 million from around $2 million.

Brian Joseph MartinJanney Montgomery Scott — Analyst

Okay. Okay, perfect. Thanks, Brian.

Kevin D. HesterChief Lending Officer

So, Brian, I think we’re going to see the rounds one and two slowdown had been pretty consistent in the last two quarters are really the two quarters that we’ve been doing it. You’re going to see that flow damage, you’re going to see free pick up. So, I would think that the next quarter or two should be pretty consistent with the last two quarters. And then past that I’m not sure. I don’t know how round three will finish up, because some of that stuff we won’t be able to to start on until later in the year, some of it will get to start now, but some folks will wait as long as they can. So, I do expect a couple of quarters similar to the last two.

Brian Joseph MartinJanney Montgomery Scott — Analyst

Okay, so not much bleeding over into next year to ’22.

Kevin D. HesterChief Lending Officer

I would. I hope not. I really hope not. I hope to get it done this year from our peoples sake.

Brian Joseph MartinJanney Montgomery Scott — Analyst

Yeah. Got you. Okay. And then maybe just one, I guess, I’m not sure for who. But just on the liquidity, I guess, I understand about sitting tight. But just think, I guess your comments about the loan growth funding late in the quarter. But then you have a full quarter impact of the liquidity from the deposit growth. Just kind of wondering how to think about the size of the balance sheet going forward? And then maybe just kind of the margin impact, I guess, particularly as you get to the Q2 here with, but the full quarter of both those items.

Stephen TiptonChief Operating Officer

Brian, this is Stephen to answer the last part first. We had, I think on an average for the quarter about 40 basis points impact to the NIM from the liquidity that we had, and I think it was about 50 basis points in the month of March. So, we try to — we really tried to strip all that out and see where would we be on a core basis. I think we’re still in that 4% range on a core basis that we’ve tracked in the past.

Some of the stimulus, well — the last round of stimulus came early March, yeah that’s still — we’ll see how some of that gets spent over this period of time and certainly seems like people are saving money of interest. Our debit card spend in March was up 50% over what it was a year ago and is probably at 25% or 30% from what it had been the last four or five months in a row. So, certainly some of that money is getting spent and put out in the economy, but maybe some of the — maybe some of the liquidity gets spent over the next few months and maybe some of that gets traded in the loan balances or so — earning asset size today to me is probably flattish to maybe down a little bit over the next several months.

Brian Joseph MartinJanney Montgomery Scott — Analyst

Okay, perfect. And then Steven just a deposit flows, you talked about strong as they were this quarter, I guess, is your expectation. Those kind of slowed down a bit at this point. I guess now that, I mean maybe stops.

Stephen TiptonChief Operating Officer

I do, I mean, Q1 historically when you had tax refunds and those kinds of things is good for us. And then you had PPP funding and you had the latest round of stimulus that all helps that. So, I would not — I wouldn’t necessarily expect the deposit increases that we had this past quarter to continue at that level going from here. We’ll continue to watch where interest-bearing balances are and what we’re paying there and try to sort of mitigate some of the inflows there just from an interest rate standpoint.

Brian Joseph MartinJanney Montgomery Scott — Analyst

Got you. Okay. All right, that’s all from me. I had it. Thanks guys.

John W. AllisonChairman, President and Chief Financial Officer

Thanks, Brian, per se.

Operator

The next question is from John Helfst with Voya. Please go ahead.

John HelfstVoya Investment Management — Analyst

Hey guys, nice quarter.

John W. AllisonChairman, President and Chief Financial Officer

Thank you. How are you.

John HelfstVoya Investment Management — Analyst

I’m good, living the dream, working on my bedroom. Any — I don’t know, maybe you discussed. But in the construction like your crystal ball. What sub sectors do you see potential growth or demand like industrial or medical office, or maybe it’s a bad question, maybe you only focus on one or two areas, so I apologize. But if there is a few areas, and where are you seeing any green shoots or whatever you want to call it in terms of construction demand? Thanks.

Brian S. DavisTreasurer and Chief Fiancial Officer

Yeah, I think you could — several areas. I think, at least in the footprint, and Chris can talk for his group because there may be different from his group. But in the footprint, certainly, multifamily in part of the footprint industrial in that Central Florida area, there is a lot of that to be had, although that’s generally pretty cheap. There will actually be probably a little bit of hotel that comes around, and so it’s going to be dependent upon which market we’re talking about will determine kind of which asset classes there are Chris, do you see something different than that.

Christopher PoultonPresident, Centennial Commercial Finance Group

No, I think that’s right. Industrial is hot everywhere, maybe a little too hot. And so we’re a little cautious, to be honest with you on industrial. But anything residentials doing well. A little bit of mixed use is OK, depending on the market. But yeah, I think it’s — I think it’s the stuff you’d expect for the most part.

On industrial, it just depends a little bit of what you’re taking a look at. Cold storage is really, really in demand, as a subset of that. But again, it’s everything from single-family homes to condos to rentals, all pretty good in most markets.

John W. AllisonChairman, President and Chief Financial Officer

John. Yeah, Chris mentioned single family, and certainly I didn’t mention that in my comments, but definitely the single-family construction side is strong, and it really all of our, all of our markets.

John HelfstVoya Investment Management — Analyst

Okay. And then, ex that it, this maybe too theoretical, like the the loan to cost, the cost is going to be coming higher. So that gives you more comfort, maybe do you underwrite to higher rents as a result? Or the loan to value, or do you — I guess I’m saying the loan to cost, loan to value or maybe getting separated a little bit. So that would seem to me like put upward pressure on rent. Are you underwriting that. And that’s not your question, maybe, it may be a bit radical, I just was curious.

Stephen TiptonChief Operating Officer

Yeah, we’re definitely seeing the relationship between cost and value changing in our appraisals, and we are seeing that as costs are going up. I mean, where — it’s not normal for us to really try to underwrite to higher rents in the market. I mean, that’s not something we typically will do, although a lot of our projects — new project that we’re sensitive with about that and really try to — while we may give them credit for it on one side, we are also conservative and look at what happens if I don’t get that premium. So that’s not something that we typically would hang our underwriting on.

John HelfstVoya Investment Management — Analyst

That makes sense. Good answer. So it’s a little cushion maybe for the underwriting in the future as well. Okay, thank you. Appreciate it.

John W. AllisonChairman, President and Chief Financial Officer

Thank you, John.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Allison for any closing remarks.

John W. AllisonChairman, President and Chief Financial Officer

Thank you all for joining today, thank you for your support. Hopefully, next quarter, we’ll have another good one. We’re off to a good year and things are picking up countrywide, and I think rates are going to pick up a little bit and I think that’s good for banks. So, I’m pretty optimistic that this could be another really good year for Home, and we certainly are out to a great start this season. We’ve never made $90 million in a month. I don’t know if we’ve ever run a 36.60 efficiency ratio heavily, somewhere it would get down close to. Okay. Anyway, I don’t say something wrong with that. Anyway, thank you. Thank you very much for your support, and we’ll talk to you in about 90 days.

Operator

[Operator Closing Remarks]

Duration: 74 minutes

Call participants:

Donna TownsellDirector of Investor Relations

John W. AllisonChairman, President and Chief Financial Officer

Tracy M. FrenchChairman Centennial Bank, President and Chief Executive Officer.

Brian S. DavisTreasurer and Chief Fiancial Officer

Kevin D. HesterChief Lending Officer

Christopher PoultonPresident, Centennial Commercial Finance Group

John MarshallPresident of Shore Premier Finance

Stephen TiptonChief Operating Officer

Michael RoseRaymond James — Analyst

Jon ArfstromRBC Capital Markets — Analyst

Brady GaileyKBW — Analyst

Matt OlneyStephens, Inc. — Analyst

Stephen ScoutenPiper Sandler — Analyst

Will CurtissHovde Group LLC — Analyst

Brian Joseph MartinJanney Montgomery Scott — Analyst

John HelfstVoya Investment Management — Analyst

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