Home BancShares Earnings Call Insights: Competitive Loan Pricing and Core Loan Growth

Home BancShares, Inc. (NASDAQ:HOMB) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Competitive Loan Pricing

Jon Arfstrom – RBC Capital Markets: Couple of question for you, maybe Kevin you first, where are you seeing the most competitive loan pricing come to the footprint.

Kevin D. Hester – CLO: I’d say it’s probably in our Central Arkansas market.

C. Randall Sims – CEO: And it’s been that way for several quarters in Arkansas and we are seeing it more in Florida now too.

Jon Arfstrom – RBC Capital Markets: Just curious where you still believe that Florida is the greatest loan growth opportunity for the Company at this point?

Randy E. Mayor – CFO and Treasurer: I believe that it is when there is – there are more things going on down there you’ve got the recovery. The recession was deeper, so the recovery is going to be – going to seem to be better.

Jon Arfstrom – RBC Capital Markets: And then, Johnny, maybe question for you in terms of just the Florida returns. I appreciate you guys sharing that you are at 1% or maybe little better. What do you think is possible in Florida when you see the franchise material?

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John W. Allison – Chairman: That is a good question, John, but this much always runs goal was the minimum 150. I think you can see for the year we ran 158 and for the quarter we ran 167. So, you can see the quarter get much stronger than the year was. So, I don’t see any reason, we don’t get them to 150 ROA I don’t – actually Alabama is already there. Alabama got there pretty quick and they are running to 150. Randy Sims stays on top of that pretty close. Randy, what do you think in there?

Randy E. Mayor – CFO and Treasurer: Exactly what you said. We’ve got to get to the 150 ROA at least and we are very pleased with what’s going on in Alabama and a lot of that is because of their efficiencies and being able to really produce a good efficiency ratio. The problem that we are going to have in Florida is we continue to spend a lot of money on the special asset side and as we get closer and closer to cleaning up and getting down to the real customers and getting the FDIC loans out of the way that’s going to really increase and be really nice return for us as well as them getting back out on the street and really bringing in new business and new loans. So, we got a lot of things going, we got a lot of levers that can be pulled in Florida and how fast, how quick, I don’t know, but it is getting better every month.

John W. Allison – Chairman: It’s nice to be spread geographically in some respect and in some respect it’s not, but we’re seeing lots of opportunities in Florida that we would have never seen in Arkansas and as Arkansas kind of just slides by we’re seeing some stuff coming out of Florida. It looks pretty good.

Jon Arfstrom – RBC Capital Markets: Then Johnny, just another question for you. When you phone rang, I was envisioning it’s a seller calling you to make a deal. It’s probably not too far from the truth, but…

John W. Allison – Chairman: No, it’s probably not far from the truth, you’re exactly right.

Jon Arfstrom – RBC Capital Markets: But just how competitive are the acquisitions. I know a year or two ago, I’d complain is a wrong word, but you were a little bit – you’re thinking that people were just too competitive and then there was too many people with too much money in the Florida market. Has your attitude changed at all? Do you feel like maybe the temperature has changed a little bit and you can strike a little better deals than maybe you thought a year or two ago?

John W. Allison – Chairman: Absolutely. I don’t know, I haven’t seen – recently we haven’t seen lot of blank pools out there in our way. We’re seeing, we have lots of opportunities because we have the capital to go and play and I don’t think we can get to nor can we buy, we don’t have enough capital, maybe asking you to help raise on sometime to do all the deals that are there right now, primarily market deals that guys are trying to bring to you. There are few FIDC assisted deals, but there is a lots of market deals. It’s kind of a pickup, John. I’d like our position. We’re driving the truck and several won’t load on.

Core Loan Growth

David Bishop – Stifel Nicolaus: Question for you. In terms of the covered loan portfolio, as it continues to run down, is there any way to segregate what sort of portion of that is stuff that’s toxic you don’t want to touch and definitely want to get out of the bank versus stuff that you might be able to rehabilitate and add to core loan growth over time?

Kevin D. Hester – CLO: We’re going through that bank-by-bank now. Probably this time next quarter I’ll have a better feel for that, but my gut says it’s probably between third and a half in most of them – maybe a little more than a half in some of them.

David Bishop – Stifel Nicolaus: That you are looking to retain?

Kevin D. Hester – CLO: Yes, they would be good enough that you want to keep and work with going forward.

John W. Allison – Chairman: We’re doing that in Orlando as we speak and should have some numbers by the end of the month and then once from there we’ll move into Panhandle of Florida and do the Panhandle, Florida and hopefully in the next four or five months we will have that answer.

David Bishop – Stifel Nicolaus: Just a commentary in terms of just the overall pipeline heading into the quarter how that compares to last quarter, I think you mentioned it could be a couple pay downs here on the first quarter. Maybe some color on those?

John W. Allison – Chairman: We go some pretty good sized deals that have sold to somebody else that are going to pay down in the first quarter. At least we anticipate that happen. Sometimes it happens, sometimes it doesn’t but our overall pipeline is that it’s been strong and the senior executive loan committees has been busy. So, we’re approving quite a bit of stuff. I hope it will get – but it takes $80 million, you got to keep stay even. So, takes a lot of money just to hold what you got. But overall we’ve been pleased. I’m still not calling it David. I’ve said in the last two calls that I don’t know that this is for sure, this loan growth, looks good, makes you feel good, but I’m not sure we’re out of the woods totally

David Bishop – Stifel Nicolaus: Is Donna still there?

Randy E. Mayor – CFO and Treasurer: Yes.

David Bishop – Stifel Nicolaus: You mentioned real quickly maybe taking a look at the mortgage banking side of the business. Maybe any specificity you can share there in terms of what you think you are doing?

Donna Townsell – VP of Corporate Efficiencies: Sure, we are just planning to try to standardize and streamline their processes to increase inclusion fee. You know back in 2008 we took several groups and did that with end of – the mortgage department was not one of them. So we just look into get us where we can close loans fasters and focus on selling and get things more efficient.