HOMB

Home BancShares, Inc. (HOMB)

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Home BancShares, Inc. (HOMB)

F4Q08 Earnings Call

January 15, 2009 2:00 pm ET

Executives

John W. Allison – Chairman of the Board & Chief Executive Officer

Ron W. Strother – President, Chief Operating Officer & Director

Randy E. Mayor – Chief Financial Officer & Treasurer

Brian S. Davis – Director of Financial Reporting

Analysts

Tony Montemurro – Howe Barnes Hoefer & Arnett

Jon Arfstrom - RBC Capital Markets

Matt Olney - Stephens, Inc.

Brian Martin – Howe Barnes Hoefer & Arnett

[Joe Finnick] – Sandler O’Neil

Analyst for Steve Covington – Stieven Capital

Brian Hagler – Kennedy Capital

Jordan Hymowitz – Philadelphia Financial

Charles Ernst – Sandler O’Neil

Presentation

Operator

Welcome to the Home BancShare Incorporated fourth quarter 2008 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’s participants will begin with prepared remarks and then entertain questions. (Operator Instructions) The company participants in this call are John Allison, Chief Executive Officer; Ron Strother, Chief Operating Officer; Randy Mayor, Chief Financial Officer; and Brian Davis, Investor Relations Officer.

The company has asked me to remind everyone to refer to the cautionary note regarding forward-looking statements. You will find this note on page 3 of their Form 10K filed with the SEC in March of 2008. At this time all participants are in a listen only mode and this conference is being recorded. It is now my pleasure to turn the call over to our first participant, Mr. Allison.

John W. Allison

Welcome to the fourth quarter earnings report for Home Bancshares. During the third quarter conference call I said that the fourth quarter of ’08 and the first quarter of ’09 would be a little noisy but I didn’t expect them to be quite this noisy and the noise in Florida was more than we thought and warned about.

We’re known for having a straightforward style, no BS when dealing with asset quality. If a problem exists, we deal with it. It is what it is good or bad. Our Arkansas asset quality which is 85% of our total loan portfolio has been excellent. There have been only a small number of problem credits in Arkansas.

Our problem has been Florida which represents only 15% of our total loan portfolio. The problems resulted from a slowdown in economic activities in the Florida market. Our company has dedicated strong resources to both the loan and loan review process in Florida. Effective December the 5th Marine was merged in to Conway Centennial Bank and the Florida assets are now on the watch of one of our star CEO’s Randy Sims and Kevin has assumed the Chief Lending Position at Marine.

Ron Strother, our Chief Operating Officer attends all loan committees either by phone or in person. In addition, the head of our loan review for Arkansas for nine and a half years [Marissa Langford] has moved to Florida and will be instrumental in overseeing all loans in the Florida region. A former bank regulator herself, she takes no prisoners.

We reported a $9.4 million loss for the quarter and we ought to talk about the components of it. I think they’re in the press release but maybe I can add a little color to these components. Number one, we took a $20 million provision for loan loss. We charged off about $15.4 million which nearly all of that came from Florida, the charge offs but, we replenished the loan loss reserves with about $20 million and Ron will add a lot more color on that in a little bit. But, we took loan loss reserves to a record 2.06%.

We had discussed our merger expenses that would run $2 to $3 million. We took about $1.8 million worth of merger expenses during the quarter and we had OREO write offs of $2.4 million. All but $150,000 of that was Florida again. We had trust write off of $3,860,000. If you remember in the second quarter we wrote about $2 million on trust. I told you then that I thought about writing it all off but I think it may recover in part or in whole within the next period of time.

But, as we’ve seen more defaults and more problems with that we decided to write it completely off so there is no more and you won’t see more write offs on it. It might recover partially in 48 to 60 months but it is gone from our books. Actually, I think they are on the books at about $1. The last item was a pre-tax gain of $448,000 resulting from our ownership in Arkansas Bankers bank stock.

That’s pretty well the components of what made the quarter. The strength of our balance sheet afforded us the ability to take this head on, rather than on a piece meal fashion over several quarters. We built strong capital reserves for tough economic times such as these and we dealt with our problems head on.


Without the noise for the fourth quarter the actual core earnings would have been $6.8 million or $0.34 a share. That would have been a tick above expectations. We’ve talked about these items that made up the fourth quarter loss so as we go to the operating highlights I want to deal with just the core earnings basis so it’s not confusing. These financial highlights will be on a core basis.

Read the rest of this transcript for free on seekingalpha.com