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Executives

John W. Allison – Chairman

Randy E. Mayor – Chief Financial Officer, Treasurer and Director

Brian S. Davis – Chief Accounting Officer and Head-Investor Relations

Kevin D. Hester – Chief Lending Officer

Donna Townsell – Vice President of Corporate Efficiencies

Analysts

Michael Rose – Raymond James

Brian Martin – FIG Partners

Brian Zabora – Keefe, Bruyette, & Woods, Inc.

Kevin Reynolds – Wunderlich Securities

Matt Olney – Stephens, Inc.

Steve Covington – Stieven Capital

Jon Arfstrom – RBC Capital Markets

Home Bancshares, Inc. (HOMB) Liberty Acquisition Analyst Conference Call June 25, 2013 5:00 PM ET

Operator

Good day and welcome to the Home Bancshares Analyst Conference Call and Webcast. All participants will be in listen-only mode (Operator Instructions). I would now like to turn the conference over to Mr. John Allison, Chairman. Mr. Allison, the floor is yours sir.

John W. Allison

Thank you, Mac. I appreciate it and welcome everyone. Randy Mayor and Brian Davis are in Conway. Randy Sims, Donna Townsell and myself are in Little Rock and Kevin Hester is in Florida. But we’re a little disjoined and we can’t see the monitor this time, but I just wanted to tell you, and announce to you, you probably already seen the news. This was a game changer deal that I’ve mentioned to you guys that was out there that I thought someday might land for us and it did. It was a $2.9 billion transaction. I think you’ve read all of the information creates $5.6 million deposits, $4.1 billion loans, and now 151 branches. The only overlap we have is malls in Arkansas, a small one there and I think they had one branch. Randy, we had one?

Randy E. Mayor

Yes sir.

John W. Allison

So it’s not a big item in Searcy, Arkansas, I think we have two and they have three.

Randy E. Mayor

Yes sir.

John W. Allison

Or four, so that will be some overlap there. But outside of that it absolutely fits like a glove, but the performance of Liberty has been pretty good. They’re running about an 8.85 ROA. We get it to our standards and you know what we think we can do with it. So someone said me, “What did you pay for it?” And I said that we bought it worth the money, it’s an accretive transaction.

The dilution to tangible book is fairly rapid less than 18 months and it could be quicker than that. We don’t anticipate going into slash and burn in Jonesboro, where we’re going to take our time, and pick out the good people and work with those people and hopefully let attrition take care of the numbers of people. Some of the good news is that it’s markets that we know well, it also they’re on our same data FIS, is that right?

Randy E. Mayor

Yes, sir.

John W. Allison

They’re on the same data system with us, FIS that’s going to make help with the conversion, due diligence went well. We marked the loans about 5% maybe a little tick over 5%. We marked OREO about 33%. The deal created about $60 million in goodwill. The bad news is we had about $80 million of goodwill. They had about $80 million of goodwill and the deal created about $60 million of goodwill. But it was only about $0.20 dilutive to tangible book. So we’re pretty pleased with that.

We don’t expect Liberty to be at optimum performance for 18 to 24 months, as we’re going to take our time and try to do it properly. Probably put us on the sideline for a little bit, if the regulators don’t put us on the sideline, we’ll put ourselves on the sideline, because this is a large transaction for us.

The Company has gotten pretty good as you know at doing these transactions and getting them efficient and we think we can glean lots of efficiency in this market, we’ll send down 1,000 of her group in there on the efficiency side and see if we can’t. I think they’re running about a 68%, 70% efficiency. So we’ll try to improve upon that. It is positive to book by about $1.50 or $2 dilutive to tangible book by about $0.20, $0.25 as I said. I’m not going to tell you how much it’s going to earn, but it’s good, and it will accomplish some goals that Home had set out.

Randy, you got any comments on the deal. We’ve worked on this one for, I’ve been on it for 10 years and it finally came to being and Fowler family is they’re great people Wallace and his son will join us on the Board to represent the Liberty shareholders.

Randy E. Mayor

I would just add that it is two great friends coming together to put together one of the largest banking institutions in Arkansas. Definitely the largest instate transaction ever in the history of Arkansas. So we’re making a little bit of history as we go down the road.

As Johnny mentioned, the overlap is amazing, very little, insignificant and so it opens up both institutions to really have a great footprint across the State of Arkansas. We’ve talked in the past quarters about the performance of Arkansas and the performance of Florida, and you know that Arkansas has been a stellar performer and we hope that these same standards will apply as the two institutions come together.

There is a lot of good efficiencies that we’ve got ahead of us. Johnny mentioned one, in fact Liberty when they first started, we processed them and in our data center. And so we are on the same system and we’re on a lot of same systems. So the learning curve, the conversion curve will be – we hopefully a lot quicker. In fact we’re looking towards maybe a December conversion and having this completely converted and into our systems by the end of the year.

A lot of that will depend upon our next task and that task is to get the thing closed. As you know both shareholders will have to approve it. There will be a lot of documentation that will have to be submitted to the regulatory authorities as well as the SEC to include them, and we hope that that will be a quick timeline. Of course, it’s kind of out of our control. But if we can get everything together, we would like to see this entire transaction closed, converted before the end of the year, that is our goal. I don’t know whether we’ll get there, but we’re sure going to try. Randy Mayor any comments?

Brian S. Davis

Well, this is Brian, and Randy.

John W. Allison

Hi, Brian.

Randy E. Mayor

I think the only thing is John, I think you said $0.20 to $0.25 and that was probably pretty split, correct?

John W. Allison

That’s correct, I’m sorry.

Brian S. Davis

$0.20 to $0.25

Randy E. Mayor

Now other than that you all pretty well described it.

John W. Allison

Brian, any comments?

Brian S. Davis

No, I think that’s pretty much was it.

John W. Allison

Kevin, any discussion about the loans?

Kevin D. Hester

No sir, you covered the market, a little over 5% to 33% on the OREO. We looked at roughly two-thirds of the $1.8 billion, so we got a good coverage.

John W. Allison

Donnie, you comment on efficiencies.

Donna Townsell

Sure. As Randy said, first our focus will be on conversion, but we do look forward as in the past with other banks to looking for efficiencies and processes and operations and finding ways to work smarter as opposed to harder. So we will take a look at all that and we’re excited to start working with folks of Liberty Bank.

John W. Allison

Thank you. Having said that, if there is any question, Mac, I think we’re ready for Q&A.

Question-and-Answer Session

Operator

Yes sir. We will now begin the question-and-answer session. (Operator Instructions) At this time we would just pause momentarily to assemble our roster. And the first question we have comes from Michael Rose with Raymond James. Please go ahead.

Michael Rose – Raymond James

Can you guys hear me?

John W. Allison

Yes, we can hear you. Hi, Michael.

Michael Rose – Raymond James

Hey how are you?

John W. Allison

Great.

Michael Rose – Raymond James

Hey congratulations. Just a couple of basic questions, first off I think you mentioned that you went through two-thirds of the loan book. Can you discuss the loan mark, any loan mark that you’re taking; in past deals you’ve had some pretty creative options with loan put-back. Is there anything that we should be on the look out here for in terms of the credit mark, I mean if you can discuss that in a little detail?

John W. Allison

Kevin?

Kevin D. Hester

No, this is a pretty normal credit mark. There’s not anything particularly creative from the accounting standpoint. It will be a little different I think, there will be some accounted for in approvals and then some that will be accounted for $2 acre per [well]. So that will be a little bit different than our past transactions where we’ve just had one or the other. But other than that it’s pretty normal, a little over 5% mark on the loans, 33% on the OREO. We looked at almost 90% of the OREO balances and like I said about right at two-thirds of the loan balances.

Michael Rose – Raymond James

Okay. And what is the OREO comprised of?

Kevin D. Hester

There were two or three large tracts of land, big commercial piece in Northwest Arkansas, a large subdivision in the Memphis area and then another large piece in the Dallas area and that’s probably two-thirds of the balances in those three credits or in those three parcels.

Michael Rose – Raymond James

Okay that’s helpful. And then can you give us some context around their efficiency ratio and where it was? Obviously, I know it’s going to take some time, like a slash and burn, but is there reason why they are running at the efficiency ratio that they were anything that you can comment on directly? And then how should we think about the combined efficiency ratio of the company maybe over the next year?

Kevin D. Hester

Well, Michael, give me 18 months, we plan on bringing Liberty to the level maybe not to $2.30 billion level of the banks in Arkansas, but if we can get it to 150, get the performance in Liberty to 150. You can figure out what those numbers are, and if we can go above that.

But it will be and it certain will be a goal of this Company and I can tell you that we have established an efficiency ratio goal at this point in time. But my goal is all efficiency below 50%. So it won’t be overnight getting there. There is a lot of low hanging fruit in this deal, but there are some of them take some culture changes.

Michael Rose – Raymond James

Yeah.

Kevin D. Hester

So I can’t give you that number, and we’ve got Florida running to 115 right now. We get Arkansas, we get Liberty running to 150 in the next 12 to 14 months, and at the end of 18 to 24 months get them above that and get our efficiency ratio 50 or below and that will be my goal to get it 50 or below.

So you can play with those numbers, it gets pretty exciting when you start playing with those numbers. And I’ll do it overnight. They didn’t get there. They didn’t create a higher efficiency ratio and I really didn’t calculate that. Randy Mayor, did you calculate their efficiency ratio, or Brian I never did calculate.

Michael Rose – Raymond James

Well, and Johnny I guess that speaks to the genesis of my question, which is you just mentioned there is some low hanging fruit, can you just give us without showing your poker hand, maybe one or two examples what those examples might be?

John W. Allison

Randy?

Randy E. Mayor

Well, Michael it’s going to be the normal stuff.

Michael Rose – Raymond James

Okay.

Randy E. Mayor

It’s going to be the back room. We have two, when you take $2.8 billion of back room and you put it into…

Michael Rose – Raymond James

Yeah.

Randy E. Mayor

Our back room and I’m hopeful that there were some things that they’re doing that we can learn from. When you combine those type of numbers, you’re going to have some really good results and we’re very confident that that’s going to happen in every department from compliance and audit all the way down, through IT and our branches will eventually put in the same model that we have for all our other branches. So that we can standardize what we’re doing whether it’s in Orange Beach, Alabama or Tallahassee Florida it will be the same in Conway, Arkansas, and Jonesboro.

And so when you start looking at some of the things that we’ve done with all of these FDIC banks and implement those deals, I think that’s some low hanging fruit that I think we’re referring to. But I’m really looking forward to getting together with the Liberty team, because I think there are some things that they do that we can learn from and together really get that efficiency level to the efficiency ratio to the levels that Mr. Allison has referred to and of course that he likes.

Michael Rose – Raymond James

Fair enough. And just one more if I may.

Randy E. Mayor

We’re going to drive and I’m not going to be happy with 150 ROA at Liberty. I will in the short run but the rest of Arkansas is running to 230 and there is no reason that we can’t reach those kind of numbers.

Michael Rose – Raymond James

Fair enough. And just one more question if I can, and I’m sure Tracy French has mixed feelings on this deal, but I know maybe in the near-term this may prevent you from looking at maybe open bank transactions, but would this take you out of the FDIC assisted gain at least in the near term in Florida?

John W. Allison

Maybe, probably we’re going to put ourselves. The regulators may put us in time out for a year or six months or something. They don’t have to. We’ll put ourselves in time out. I mean this is a $30 billion deal. It will be all hands on deck. So everybody would be involved in getting this one to where it needs to get to.

Once it gets to a point to where we see the momentum rolling in that direction, we’ll open back up and go again. And I think as I told you our goal was to get about $8 billion. So I think this took our tangible common equity down to about $7.6 billion, $7.5 billion and that’s about as low as I want to get it right now. Let’s build it up over the next six, eight, 10 months and the Company should be making a lot of money over that period of time. We’ll build it back pretty quick.

So then we’ll move again. We will stay where we are for a while and then we’ll move again and then we’ll hit the $8 billion mark and fill in probably some Florida deals and then we’ll sit for a while and figure out what’s in the best interest to the Company, is it sell it, run it, merge it, MOEs what’s the best interest of all employees, customers and shareholders.

Michael Rose – Raymond James

Great. Thanks for taking my questions guys and congratulations.

John W. Allison

Thank you very much. I appreciate it, Michael. I appreciate your support.

Operator

The next question we have comes from Brian Martin of FIG Partners.

Brian Martin – FIG Partners

Hey guys, congratulations.

John W. Allison

Thanks Brian.

Brian Martin – FIG Partners

Hey Johnny, did you say I guess I missed a little bit of the call, but the payback period on the transaction what that was in and just what the pro-forma capital numbers look like?

John W. Allison

I think it took tangible down to about 7.5 and the paybacks 18 months or less.

Brian Martin – FIG Partners

18 months or less, okay. And then did you guys comment at all on the EPS accretion with the transaction?

John W. Allison

We did not.

Brian Martin – FIG Partners

You did not.

John W. Allison

I’m going to let you play with those numbers.

Brian Martin – FIG Partners

Okay, and…

John W. Allison

You know how we run our balance sheet? You can play with them as well as I can play with them.

Brian Martin – FIG Partners

Right, and just the rationale Johnny, just you talked maybe a little bit about this Gulf south, but just looking at an Arkansas deal if you will versus kind of looking at Florida, I mean what was the driver of kind of going this route versus I guess doing stringing a handful of deals together in Florida?

Brian S. Davis

Well, we know this market. We know these people. We know their operation. They’ve been in business about just a little bit less than we have. We know the performance that these Arkansas banks have run. So you apply those numbers of what you think, you can get this bank to on the performance scale and compare that to what happens in Florida. And I think we’re turning our back on Florida because we’re certainly not, we’re going to continue to play in there. But if you want a quicker EPS run, you get it in this deal than you get it in the other.

So that was really the deciding factor for Johnny was to look at it and you just play with the number if you get it to 120 ROA and a 150 and a 170 and a 190 and when you look at the rest of Arkansas running at 230. You play with those numbers and it will help make your decision pretty quick that this was the right trade for us to do. We’re going to be in time out for a while. We will be back in the game here when we get this one under control, and we won’t be back in the game until we get it under control.

John W. Allison

And I would just add again the footprint and the lack of overlap. I just got an e-mail a few minutes ago from a fellow banker and his quote was and I thought it was really thumbs up a lot of this deal is he could think of no other deal possible in the State of Arkansas that brings the synergy that this one does.

Brian Martin – FIG Partners

Right, okay, perfect and thanks; and then just maybe one last thing…

John W. Allison

So it’s easy conversion for us to not as easy. Randy Mayor, can you just unplug theirs, and plug it into ours.

Randy E. Mayor

Not quite that easy.

John W. Allison

All right, well I’m sorry.

Brian Martin – FIG Partners

The last thing, I think did you guys mention what the cost savings were on the transaction? I think you mentioned most of it was going to come through attrition and the back office stuff, but what the cost saves you guys were expecting more?

John W. Allison

Well, we forecast about 30% on our cost saves, we usually beat that, but we forecast about 30%.

Brian Martin – FIG Partners

Okay, all right, congratulation guys. Thanks for the questions.

John W. Allison

You bet. Thank you.

Operator

Next we have Brian Zabora of KBW.

Brian Zabora – Keefe, Bruyette, & Woods, Inc.

Thanks, congratulations.

John W. Allison

Thanks Brian.

Brian Zabora – Keefe, Bruyette, & Woods, Inc.

A question, how does this maybe impact the margin with the combined company? Maybe you can just talk about on the funding side, what you might do regarding deposit costs or maybe some funding that they have that you may consider retiring?

John W. Allison

Randy Mayor you and Brian...

Randy E. Mayor

Yeah, well and I think we mentioned in there. The SBLF, we hope to pay that off rather quickly when we do the transaction. As far as the cost of funding on their side, it’s not too much different than ours. They do have a little bit different structure, if you noticed in some of the presentation. They have a little bit more time deposit base than we do.

So we will work on that to try to lower some of the cost of funds there and some of the public funds maybe that they have on their balance sheet at this point. But overall, their cost of funds seemed pretty comparable to ours and it will just be kind of the same process we use, as take them one at a time and try to lower that best we can.

Brian Zabora – Keefe, Bruyette, & Woods, Inc.

Okay.

Brian S. Davis

As Randy said, we’ll pay off the SBLF. And then they’ve got about $60 million in trust preferreds I think. We’ll probably work on those to knock that down. They’ve got quite a bit of Federal Home Loan borrowings, and we’ll probably work on that too. So as we work on the CDs, as Randy Mayor said.

Brian Zabora – Keefe, Bruyette, & Woods, Inc.

Okay. And then also is this a fixed stock price conversion or are there collars involved?

Brian S. Davis

I don’t guess you would call it a collar.

Randy E. Mayor

It’s fixed.

Brian S. Davis

Right, it’s fixed. It’s the average price for 20 days prior to closing.

Brian Zabora – Keefe, Bruyette, & Woods, Inc.

Okay.

Brian S. Davis

And there are walks at 25% or 30% up and down.

Randy E. Mayor

280…

Brian S. Davis

Yeah the 280 is fixed. The 280 is fixed, the stock floats. The 280 is fixed, the stock floats and it’s the 20 day average price.

Brian Zabora – Keefe, Bruyette, & Woods, Inc.

Great. Thanks for answering all my questions.

Brian S. Davis

You’re welcome, thank you.

Operator

The next question we have comes from Kevin Reynolds of Wunderlich Securities. Please go ahead.

Kevin Reynolds – Wunderlich Securities

Thank you, afternoon everybody. Can you hear me okay?

John W. Allison

Yes, go ahead.

Kevin Reynolds – Wunderlich Securities

Hi congratulations Johnny, a great deal. Most of my questions have been answered, but I had one question or two questions for you. We talked about positives of the deal, but this is a sizable transaction, in your mind what are the risks here and what do you say and what you do to kind of make investors that may not be as familiar with your story, comfortable with your ability to execute on a transaction this size, that’s the first big question. And the second one is I was kind of intrigued to hear that there is a big tract of OREO in the Memphis area, subdivision there kind of wondering where that is?

John W. Allison

You wondered why there was tract of land where it was. I don’t know where it is. Kevin you know where that tract, did you look at it or who looked, Davy or who look at that.

Randy E. Mayor

I looked at it. It’s actually south of the Memphis area, and I think it’s North Mississippi. It’s just out of Olive Branch.

Kevin Reynolds – Wunderlich Securities

Okay.

Randy E. Mayor

So it’s a residential subdivision.

Kevin Reynolds – Wunderlich Securities

Gotcha, but, okay, thank you. And Johnny just like you said, what would you say, how would you address investors to just sort of make them feel comfortable that you’ve got your arms and your teams got your arms around something this size?

John W. Allison

Well, one thing about it is local. We can be at any branch in three hours by driving, we don’t have. Of course, we can be at any branch in Florida by three hours by flying, but we can be at any branch. And we know Arkansas pretty well. We know that efficiencies in Arkansas, we know the ups and downs.

I guess the downside of it, the downside of it, if there is a risk involved it’s a loan side of it, and we don’t know their loan book, as well as we know our loan book. So when I tell you that it’s an 18 month, but earn back, I’m covering myself a little bit, just in case I were to need something.

If I would tell you how good it could be if it’s Utopia. But I’m covering myself a little bit because even though our people, they’re not many people, better at doing due diligence than our team is on this loan side and particularly Arkansas loans.

I guess I always have the fear that something is out there that we don’t know about. So you can’t look at everything and you can’t be all things to all people. So far as the management, we run this company with Randy Sims and two other regional guys, Bob Birch and Tracy French. I think you’ll probably see us name another regional guy here in the next short period of time, who is a quality guy that has our culture, knows what he is doing that that we’ll take this.

We’ll probably split this one up a little bit too, probably it won’t all be in this new region, some of it will probably be assigned to Conway, some of it will be assigned to Northwest Arkansas, but there will be one regional guy that will probably run Jonesboro, Mountain Home and Northwest Arkansas, Fort Smith might be spun out, I don’t know yet Randy Sims hasn’t really made that decision. Russ McLars will probably roll into Conway. Wallace in a row is already in Conway. So we all don’t have our people with know-how to run our banks on the ground in those markets.

That has not been a fear of mine of us being able to manage it. My only fear is do we have our arms around all the asset quality? And I have to believe in my team, I mean how many loans have they looked at over the last four, five years. I just have to believe that they’ve nailed this right. But Liberty is a good bank. They do a good job, but their asset quality was not quite at the same as ours. So we mark it 5% and change in the OREO 33%, may we missed it half a point or maybe we got too much, I don’t know time will tell you. That’s my only fear Randy.

Randy E. Mayor

Well, I would just add to give you comfort. This isn’t like us going into a brand new market with brand new people. We know these people. When we originally started that way back when in Conway with First State Bank, we exchanged ideas. We met together with this banking group and both of our institutions kind of grew in parallel. So they've been long-time friends and of course Mr. Fowler and Mr. Allison have been friends forever.

So it's not like we don't know the markets. It's not like that we're walking into a bank full of people that we don't know. We know them. They’re our friends. And while we have kind of stayed out of each other's territory, I don't know whether that was designed or accident or what, but we only have two areas that overlap.

And so it's going to be unlike any other deal that we've done before and I'm sure there will be some surprises and I think the concern of asset quality is the number one thing that something out of left field could come to. But I think you can find comfort doing that, these are two organizations that know each other, and so we’re well ahead of the game.

Kevin Reynolds – Wunderlich Securities

Okay. And then I guess last question Johnny in the last year 18 months or so we heard you talk about a game changer acquisition, and you referenced that today, I think in your press conference or maybe on this call. Would you call this, the game changer acquisition or a game changer acquisition, Is there something else out there similar size that you might have had your eye on that just because this one came to be kind of fell down the list in terms of priority?

John W. Allison

There are other ones, but when you look at the low-hanging fruit, we believe in this deal, and you look at the markets. And as Randy said, we've known this bank a long time. This was the game changer I was talking about. This was the deal that I thought, I've been after this deal for 10 years and it got better, and better and better for us.

And I’ve walked off from it, I have been hit in the nose, I have been run off, the door has been shut in my face and I said many times I’ll never go back and I went back and went back and the deal got done. So you all know me, I don’t have a lot of patience, but I have plenty of patience for this deal because it is the right deal for Home Bancshares and we will do very well with it.

Kevin Reynolds – Wunderlich Securities

Right, agreed. Big congratulations again.

John W. Allison

Thank you very much. We have Matt Olney. Matt is going to ask a question now.

Matt Olney – Stephens, Inc.

Yeah, as far as I look at the kind of pro forma Arkansas footprint for you guys now, it seems to me you’re in every strategically important market in Arkansas. Do you see that the same way or are there any other market that you eventually hope to get into the next several years?

John W. Allison

I don’t think so, Ran I think we’ve covered Arkansas the way it need to be covered Arkansas, I mean there are still some opportunities in South Arkansas, but some of that got most of that covered down there and I don’t – maybe a little something else in Little Rock might be if Bob Birch is sitting here, if I don’t say that he will have a heart attack.

Robert F. Birch

Thank you.

John W. Allison

Maybe something else in Little Rock if the right opportunity came up there, but we're doing pretty good with Arkansas and Florida. If we can get the kind of ROAs out of this organization that homes of customer running in Arkansas and we take Florida, we continue to bring on another $1 billion or $2 billion worth of assets over a period of time in Florida in the right strategic transactions.

And let me say this, when I told you all, that I went to Florida and met seven different banks, I met seven really, really good banks, guys that are ready to do a deal tomorrow, next week, but what happened was, this one was far more core deep day one and we knew the markets, so we pulled the trigger on this one. Not to say, we’re not going (inaudible) Florida deals we’d really, really like to it to put together.

Matt Olney – Stephens, Inc.

And as far as, you mentioned a few minutes ago Randy, Liberty you’re going to look and see what they can do, they could help improve your processes, are there any synergies or any unique products that they have that you could consider bringing over to your platform at this point?

Randy E. Mayor

Yes, there are, without going into detail on them like I mean anything as simple as I’m hearing that their image system is a lot better than ours. So we’re going to be looking for step that’s a lot better than what we’re doing. And I think that over the years they’ve become a great organization, and they’ve been around almost as long as we have, and I think there is going to be some things there that we can help each other out in.

Matt Olney – Stephens, Inc.

And then last switch to maybe housekeeping question, maybe Randy Mayor question. Does that 7.5% kind of pro forma TCE ratio, does that include the payback of the SBLF or is that before you get to that point?

Randy E. Mayor

Well, I’ll take that Matt. I mean the SBLF actually isn’t part of our common equity, so it has no impact on paying it off.

Matt Olney – Stephens, Inc.

Okay, okay.

John W. Allison

Remembers if that didn’t count, that SBLF doesn’t account towards tangible they get?

Randy E. Mayor

So we’re going that’s not a number that is in there.

John W. Allison

We ask that same questions…

Brian S. Davis

It would just lower our risk based capital ratios coming out as the account to risk based capital, but it doesn’t account for the TCE ratio. And the dilution on that risk based capital ratio is about the same as it is for the TCE ratio with SBLF in it.

Matt Olney – Stephens, Inc.

With SBLF in it?

Brian S. Davis

Yeah.

Matt Olney – Stephens, Inc.

Okay, I’m good guys. Thank you, congrats again.

John W. Allison

Mac, anything else? You’ve got any other questions?

Operator

Yes sir. It appears that, we do have another question (Operator Instructions). The next question we have comes from Steve Covington of Stieven Capital.

Steve Covington – Stieven Capital

Good afternoon guys. Congratulations on the deal.

John W. Allison

Thank you. Who is this?

Steve Covington – Stieven Capital

Steve Covington, Stieven Capital

John W. Allison

Hi, Steve, thank you. I didn’t hear what you said. Thanks for calling in.

Steve Covington – Stieven Capital

Well, congrats and just a quick question. As far as the cash in the deal, issued in the deal and to pay off SBLF and then you mentioned your trust. Is there – is your accretion estimate factoring any kind of debt or preferred rates to replace that?

Randy E. Mayor

No, no, we have enough cash. We will get enough cash at the holding company level, so we don’t have to issue any preferred or do an offering or if we did anything we do some debt. We think we earn it back looking at that if we did anything, there is no need to diluting our shareholders.

Steve Covington – Stieven Capital

Okay. And then I think I may have misheard you Johnny, but did you say that that new goodwill was a $160 million or was $60 million?

John W. Allison

The deal creates $60 million in goodwill.

Steve Covington – Stieven Capital

Okay I might have to talk to you; I’m a little, because if only you’re issuing about 11.8 million shares.

Randy E. Mayor

No, no.

Steve Covington – Stieven Capital

Right.

John W. Allison

Okay excuse me, I forgot the split, you are right. It’s about 11 million shares, correct I’m sorry.

Steve Covington – Stieven Capital

Yeah.

John W. Allison

Go ahead what do you say?

Steve Covington – Stieven Capital

Well it seems like if you are going to have, because if it’s only $60 million of goodwill then it would actually be accretive to tangible books, so am I missing something there, is there a big interest rate marker or anything that I’m missing?

John W. Allison

There’s about $100 million, the loan mark is about a $100 million and the OREO mark is about $10 million. We got a mark on the Federal Home Loan borrowings of about $5 million, I don’t have it in front of me, I am just trying, Randy Mayor, Brian Davis come and help me.

Randy E. Mayor

Okay. You are pretty good off the top of your head, so I fetched it up on the back. It is about $94 million I think that we’re looking at for the mark on the loans and we had about nine for the OREO and about six for the FHLB.

Steve Covington – Stieven Capital

Okay.

Randy E. Mayor

And the CDI was about 11 or so.

Steve Covington – Stieven Capital

Okay.

Randy E. Mayor

And a little over $60 million in goodwill.

Steve Covington – Stieven Capital

Okay, almost it so I’ll talk to...

Randy E. Mayor

Maybe call it to the 65.

Steve Covington – Stieven Capital

Okay.

Randy E. Mayor

Now that relates to $250 million in debt and then we will have $30 million in cash and all of those counts as part of the formula.

Steve Covington – Stieven Capital

Got it.

John W. Allison

These shareholders hadn’t had any money in some time actually we are giving them some trying trainer out in money so they got $30 million in their pockets and I think most of them will be good long-term holders that where they got money, they will have a good dividend income and then they count on it would be consistent and hopefully they would be good shareholders.

Steve Covington – Stieven Capital

Good, well guys again congrats, thanks for that call.

John W. Allison

Yeah thank you, I appreciate Steve. Anything else?

Operator

Yes sir. We have a question from Jon Arfstrom, RBC.

John W. Allison

There he is.

Jon Arfstrom – RBC Capital Markets

Okay guys, good afternoon.

John W. Allison

Hey Jon, how are you?

Jon Arfstrom – RBC Capital Markets

Good doing well. Just one question Johnny you said you’ve been on this deal for 10 years; I’m just curious what you think the tipping point finally was to get the sellers to say yes?

John W. Allison

Probably a combination of factors the way our stock performed, how well it’s performed in the market seems like we pull it up to a train station, we got five seats on the train, we have got 20 people trying to get those five seats we’re at now. So it’s – I think that the train is running down the tract and it’s running pretty good and I think a lot of people have decided to get on plus the fact that Wallace shareholder base was getting older, they haven’t seen liquidity in 14 years, 15 years and that’s the same story Jon as we saw when we made the trip to Florida, it’s the same thing all over the country.

There is no liquidity to these privately owned banks and they – the days of the flip in this is over, so they finally decided to get on the train. And Wallace getting a little older but we’re all getting a little older, Wallace is 79, years old I think. So I think all is just a combination of factors of that.

Jon Arfstrom – RBC Capital Markets

Okay, okay. And the number obviously for accretion but is it the EPS accretion that has either most excited? I mean you obviously have laid out some pretty lofty goals for EPS accretion, one number in particular, but just help you get there, does it get you all the way there?

John W. Allison

Absolutely, this is a game changer. This deal is a game changer for us. I mean we’re not going to do it overnight. We’re going to take our time and do it right. But this management team has not disappointed me in the past, and I don’t expect they will disappoint me in the future.

They seem to get the job done everyday, they can be methodical about it, I mean this deal got close in a hurry Randy Sims took bull by the horns and with Mark Fowler and they got this deal done with our attorneys who did an outstanding job by the way. So my point is that I think our team will get there with this one. It will be fun getting there and I believe it will be when I say it’s a game changer, I’d be really, really disappointed if it’s not a huge game changer for Home.

Jon Arfstrom – RBC Capital Markets

Yes, okay. Thanks guys. Good job.

John W. Allison

Okay, okay. Thanks guys, good job.

Randy E. Mayor

You bet. Thanks.

Operator

And then ladies and gentlemen…

John W. Allison

Actually we don’t.

Operator

Yes, sir. I’m showing no further questions at this time.

John W. Allison

Okay, well thank you for your interest in Home Bancshares. Hopefully, we hadn’t disappointed you in the past, and we won’t disappoint you in the future. And we’ll talk to you at the end of the quarter. And I think it’s going to be a decent quarter. To tell you the truth, I’ve been focused on something else this quarter. So we’re off a little bit, I don’t think we’ll be off, I really can’t answer that. Last time, we’re pretty much on track. Aren’t we, Mr. Mayor?

Randy E. Mayor

Pass.

John W. Allison

You all know Randy, that’s about all we’re going to get out of him. All right, thanks again. See you guys.

Operator

Thank you sir and to the rest of management for your time, your conference call has now concluded. We thank you all for attending today’s presentation. At this time, you may disconnect your lines. Thank you and take care everyone.

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