Working from home has lending institutions looking at bottom line

The work-from-home evolution that picked up momentum in the past decade is now a coronavirus-driven revolution.

Many workplaces remain shuttered, and employees are doing business from their homes. Other companies have reduced hours, and medical facilities are cutting patient visits and increasing telemedicine consultations.

Remote working is likely to remain in place for years, perhaps even decades.

The changes have potential to affect lending practices and alter the long-term financial health of banks.

Last week, Home BancShares Inc. offered details on how the movement and the lingering pandemic are affecting its office loan portfolio.

Based on the report, there are no major concerns on the near-term horizon for the bank, which operates as Centennial Bank and has 77 branches in Arkansas, 78 branches in Florida, five branches in Alabama and one branch in New York City.

“After looking at this, I’m less concerned about the office portfolio than I would have been going into it,” Chief Lending Officer Kevin Hester told banking analysts in a Sept. 15 conference call.

The call was the last of a series of public “Fireside Chats” that bank management has held examining various segments of its loan portfolio.

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Office loans were the last sector revealed before the bank closes the third quarter on Sept. 30.

Executives are confident that the office loan portfolio is in good shape. “Overall I have to say we’re extremely pleased with the asset quality we’ve seen,” President and Chief Executive Officer Johnny Allison said in the call.

Office loans make up the third-largest segment in the bank’s commercial real estate portfolio, with 363 loans valued at $635 million. For comparison, a year ago office loans were the largest segment in the commercial real estate portfolio and were valued at $800 million.

Its largest office loan is $66 million, and there are only a dozen loans of more than $10 million. The average loan balance is $7.1 million.

“Overall, that’s a pretty low-balance portfolio,” Hester said.

Of the $635 million in office loans, 40% or $263 million are in Florida, and 43% of those are in the Fort Lauderdale area alone.

About 20% of the loans, or $131 million, are in Arkansas; 7% in California; and 6% in Alabama. Missouri, Texas and Georgia all are about 5%. A dozen other states have a combined 11%.

The office portfolio includes 9 million square feet of space averaging about $70 per square foot. About 55% of the square footage is considered Class B, while 36% is Class A.

Generally, Class A space represents newer and higher-quality buildings, while Class B is a step down into a little older building.

The weighted average occupancy rate is 84% for Home BancShares’ office portfolio. In the U.S., the average office occupancy rate was 88% at the end of the second quarter, according to Colliers International, which has two offices in Arkansas.

The great majority of the bank’s loans are in central business districts or suburban areas, with only $11 million in rural areas. Only 3% of the total office portfolio is secured by properties of more than 10 stories.

That means most of the offices are low-rise properties, which are viewed as carrying less risk than high-rise towers.

Hester noted that the government and medical sectors are the two largest tenant types and “would not be expected to be at risk” from the work-from-home trend. Those two economic sectors have 161 of the bank’s 363 office loans.

More importantly, nearly half of those loans – 46% — mature in 2024 or later, which would give the economy and the bank plenty of time to work through a post-coronavirus recovery.

Related to the pandemic, Home BancShares reported in Tuesday’s call that its overall loan deferments have been reduced by 70% to $943 million, which is 8% of all loans.

The bank did not provide specifics on its hotel loans, which make up about half of the deferrals, but Hester did say the sector still “presents the most risk going forward.”


Little Rock’s Venture Center is continuing to attract international attention for its leadership and support in the financial technology sector.

The entrepreneurial support organization won the top prize last week in the Best Fintech Accelerator/Incubator category at the second annual Finovate Awards.

The Venture Center beat out four other finalists and was chosen by a group of international judges in the financial technology industry.

In addition, two Venture Center alumni who recently participated in the ThinkTech accelerator program won key recognition for their efforts working with community banks.

Finzly of Charlotte, N.C., won top prize in the best enterprise payments solution category, and Teslar Software of Springdale won the best fintech partnership category.

“Congratulations to the Venture Center for this hard-earned and well-deserved recognition,” Arkansas Gov. Asa Hutchinson said in a news release. “The Venture Center has supported and groomed many impressive companies and entrepreneurs in a short amount of time. The center’s success enhances Arkansas’s reputation as a leader in financial technology and computer science.”

Finovate is a highly regarded international conference and competition that showcases innovative banking and financial technology.

Venture Center Executive Director Wayne Miller cited the importance of key partnerships that the organization has formed with Fidelity National Information Services Inc., the Independent Community Bankers of America and the state of Arkansas — all of which provide substantial annual financial support to the Venture Center.

“Together, we’re showing the world that Little Rock, Arkansas, continues to build on its esteemed fintech history,” Miller said in announcing the awards. “Previously known as the birthplace of fintech, today Little Rock is the epicenter of fintech innovation.”


ABC Financial Services Inc. of Sherwood has acquired a Canadian company that provides mobile fitness products. Financial terms were not disclosed.

The Vancouver company offers a mobile app and software that allows fitness coaches and fitness businesses to expand their reach beyond their physical spaces, better connect with members and digitize training programs.

The acquisition “allows us to create a total fitness experience,” ABC Financial Chief Executive Officer Bill Davis said in a news release. “In a total fitness experience, the gym plays a central role as it provides all the equipment, guidance and community that many people thrive on. And now with Trainerize, ABC can extend the health club beyond the walls of the gym to include all the aspects of fitness.”

ABC said it will add the entire staff of Trainerize to its operations. ABC Financial provides software, billing and membership services to more than 7,000 North American fitness centers.

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