HOMB

Home BancShares, Inc. (HOMB)

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Home BancShares, Inc. (HOMB)

Q1 2014 Earnings Conference Call

April 17, 2014 14:00 ET

Executives

John Allison - Chairman

Randy Sims - Chief Executive Officer

Randy Mayor - Chief Financial Officer

Brian Davis - Chief Accounting Officer

Kevin Hester - Chief Lending Officer

Donna Townsell - Vice President, Corporate Efficiencies

Analysts

Brian Zabora - KBW

Jon Arfstrom - RBC Capital Markets

Michael Rose - Raymond James

Matt Olney - Stephens

Brian Martin - FIG Partners

Kevin Reynolds - Wunderlich Securities

Nathan Race - Sterne, Agee

Presentation

Operator

Greetings, ladies and gentlemen. Welcome to the Home BancShares Incorporated First Quarter 2014 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 participants in this call are John Allison, Chairman; Randy Sims, 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.

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 3 of their Form 10-K filed with the SEC in February 2014. 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 - Chairman

Thank you, Gary and welcome to Home Bancshares’ first quarter earnings release and conference call. Well, it’s been about three months since we talked to you the game changing acquisition of Liberty Bank has led to a quarter of much improved performance and many new records. In less than nine months from the announcement to the end of the quarter, our team alongside some great and willing Liberty people has transformed that operation into a strong earnings machine. Congrats to both teams, but especially our Home Bancshares team who brought our culture and operating efficiency to the Liberty acquisition. Change is difficult and we had plenty of resistance, but the numbers don’t let, it is what it is. This team doesn’t just talk about it, they do it.

And let’s just look at some of the highlights. Record earnings up 55.8%, almost $10 million increase in earnings for the first quarter, record EPS, record efficiency ratio, record revenue, record pre-tax pre-provision ROA, strong GAAP ROA, much better than most people thought, good reserve deal, improvement in asset quality and good margins. Great job. On the acquisition front, we are very busy and looking at many opportunities. Randy, we will go to you for the more specific numbers and the rest of the game.

Randy Sims - Chief Executive Officer

Thank you, Johnny. It has been a very busy quarter centered around the progress with the Liberty acquisition. As I stated last quarter, a key element was getting the conversion of Liberty completed before the end of last year in order to have a first quarter of combined results between the two institutions. And as Johnny has stated, record, record, record, record, it was a very good first quarter. We are also back and extremely busy looking at banks and other growth opportunities, including de novo branching for the right strategic additions to our organization. And in addition, we are also evaluating our current branches for consolidation and have plans to close or merge 4 in Arkansas and 2 in Florida during the second quarter.

Well, let’s get through the numbers, because they were extremely good. It was another record quarterly profit of $27.3 million or $0.42 diluted earnings per share compared with the income of $17.5 million or $0.31 diluted earnings per share over the same quarter in 2013. That is an increase of $9.8 million or 55.8% as Johnny told you. Now, included in those numbers is $849,000 of Liberty merger expenses. So if you exclude that amount, then our diluted earnings per share for the first quarter of 2014 was $0.43 per share. We are very pleased with the income. And now that makes 12 straight quarters of record earnings when you exclude merger expenses, especially in the fourth quarter of 2013.

Our return on average assets, including all merger-related expenses was 1.64% for the quarter, well above where we thought we might be. But let’s exclude just the merger expenses again and our ROA was a 1.67%. Our core return on average assets that include – excludes intangibles, provision, merger expenses and taxes was 3.26% for the quarter as compared to 2.77% as of last quarter. Our return on average TCE excluding intangible amortization for the year was 21.48%, great numbers.

Now let’s look at the internal ROAs. While the internal overall ROAs for the Arkansas banks dropped some due to the Liberty transaction, we continue to see those same old legacy banks well over 2%. And as you are aware we have said – we said it last quarter, our goal was to get the Liberty regions to an overall 1.5% internal ROA before the end of the second quarter. And now while there were a few Liberty branches that we merged into Arkansas regions that makes it little confusion, we have calculated and I am pleased to announce that Liberty is well over the 1.5% ROA as of the end of this quarter, quite an improvement in a short period of time.

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