Home BancShares, Inc. (HOMB)

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Home Bancshares Inc. (HOMB)

Q1 2013 Earnings Call

April 18, 2013 2:00 PM ET


John Allison – Chairman

Randy Mayor – Treasurer and CFO

Donna Townsell – VP, Corporate Efficiencies

Randy Sims – CEO

Brian Davis – Chief Accounting Officer and Investor Relations Officer

Kevin Hester – Chief Lending Officer


Michael Rose – Raymond James

Jon Arfstrom – RBC Capital Markets

Joe Fenech – Sandler O’Neill

Matt Olney – Stephens

Brian Martin – FIG Partners

Kevin Reynolds – Wunderlich



Greetings, ladies and gentlemen. Welcome to the Home Bancshares, Incorporated First Quarter 2013 Earnings Call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued this morning. The company presenters will begin with prepared remarks then entertain questions.

(Operator Instructions)

The company has asked me to remind everyone to refer to their cautionary note regarding forward-looking statements. You will find this note on page three of their Form 10-K filed with the SEC in March 2013.

At this time, all participants are in a listen-only mode, and this conference is being recorded. (Operator Instructions) It is now my pleasure to turn the call over to our first presenter, Mr. Allison.

John Allison

Thank you, Amy. Welcome to Home Bancshares’ first quarter earnings release and conference call. I’m here with the regular crew, Randy Sims, our Chief Executive Officer; Randy Mayor, Chief Financial Officer; Brian Davis, Chief Accounting Officer; Kevin Hester, Chief Lending Officer; and Donna Townsell, Vice President of Corporate Efficiencies. They are all be reporting to you today.

The numbers came out before the market opened this morning and I hope you are as pleased with them as I am. I kind of hit the hotspots today and let Randy be more specific, but we came out with a record ROI for the quarter on both a regular basis, GAAP basis as well as core basis. We came out with a 2.77% core, 46% efficiency ratio, 5.15% margin, improvement in asset quality, non-performers went down. Non-performing loans and non-performing assets both declined.

Reserve remained strong, and a good 1.83% reserve, I guess non-performing loans. In addition to 5.13% credit mark if you add in the additional mark. Income of $17.5 million or $0.62 per share. We – March 26, we paid off the $26 million in trust preferred that we told you we were going to do. We only have about $3 million of that left and it’s 2%, so we’re going to leave that a little bit. I think we have some federal home loan borrowings coming in June that make more sense at a higher rate. We converted Tampa in mid-March. We’ll convert Tallahassee this weekend. We had record interest income and net interest income.

On the loan side, loans were down by about $10 million, but we actually had a pretty good first quarter. We told you the fourth quarter that we were expecting some pretty good fast payoffs. Well, that happened in the first quarter. However, we booked $114 million in new loans but with normal amortization and the big pay downs, we fell a little short. Nice pipeline exist today and we are up from March 31. If things fall our way, it could really be a nice second quarter. We’re back into same position we were last year with more opportunities on acquisitions than we have time and money.

We will be prioritizing the deals this week and traveling to those selected banks this month – towards the end of the month. I’m confident that we’re bringing one or two deals this year, obviously, our company is on the way to our current goal of Home $2.50. I do not see $3 yet, but looking at some of the deals that we’re looking at, I see a way we may be able to get there. So stay tuned.

Overall, record quarter for the company, I want to thank our employees, customers, shareholders for their continued support and work. Their efforts have created one of the most profitable, reasonable banks in the country. Home ranks 19th of all 1,016 publicly traded banks in operating profit. We didn’t buy any stock this quarter because we’re kind of counting our money with $26 million trust payoff and keeping our rates for new deals. It may be time to take a look at our dividend. It appears that we are now below our target of 1.5%. Good earnings, plenty of capital, lots of opportunity should bode well per Home $3 in the near future. Randy?

Randy Mayor

Thank you, Johnny. Well, another first quarter and a New Year and we’re off to a very good start. Congratulations to all our employees. And as Johnny said, once again, this was the most profitable quarter in the history of our company reporting an ROA of 1.70% and an increase in earnings of $609,000 or 3.6% above our previously reported earnings.

That makes eight consecutive quarters of record earnings. I am also pleased and Johnny talked about this to announce that the conversion of our last acquisition is in process as we speak and to be completed this weekend. You may recall on our last call we had added to our corporation Premier Bank in Tallahassee in December and Heritage Bank in Tampa this past November.

And as I have said before, we believe the conversion is essential to the process of improving net income for these acquisitions. So we waste no time in getting it done. And in the case of these two acquisitions, we have been running three backroom operations since we acquired them. All conversions will be behind us with Heritage that was completed on March 8 and with Premier Bank to be completed this weekend. In addition with Premier, we will be also consolidating branches in Tallahassee, which will result in closing three or four allowing even more savings.

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