Home BancShares Inc (HOMB) 2011 Q4 法說會逐字稿

Greetings ladies and gentlemen. Welcome to the Home Bancshares Incorporated fourth quarter 2011 earnings call. The purpose of this call is to discuss the information and the 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 3 of their Form 10-K filed with the SEC in March 2011. 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.

Welcome, and good afternoon. With me today is Brian Davis, Randy Sims, Randy Mayor, and Kevin Hester, the regular group. Interestingly, today is the 22nd time we've reported to you since becoming a public company in June of '06, and as it should be, we're reporting both record quarterly profits and year end profits. We told you some time back that we thought we could be on a $0.50 a quarter, or $2 a share run rate, but that would come in the fourth quarter of this year or early next year. However, it came a little stronger than we thought it was going to come and we were all over it in the second quarter and for all practical purposes hit it for the third quarter. But this is the first time we've actually shown the number $0.50.

2011 was an interesting year. 2010, we made lots of acquisitions and 2011 was a year of consolidation, streamlining and organizing. Our employees made marked improvements and had an opportunity to kind of catch their breath. They kind of laugh about that because they were extremely busy, but we didn't do any acquisitions last year. So, hopefully they caught their breath and they are ready in their areas for 2012. If all goes well, our Vision acquisition should be completed by the end of February or early March and it will immediately be accretive to earnings. We look forward to welcoming the Vision team to the Centennial family. We're very happy thus far with all the outstanding personnel that will be coming over.

What can I say about the quarter? 156 ROA, a 48% efficiency ratio, a 4.73% margin, good, strong asset quality, and all of that makes for a good quarter. What I'm extremely proud of is cost control. We actually had non-interest expense of about $400,000 less this quarter than it was last quarter. If you remember, my concern was that we were having the creeps, and expenses were creeping, creeping, creeping, and it looks like we got them under control. Good job by all. The earnings of just short of $55 million worth of earnings, there are no one-time gains, there are no one-time losses. It really is a core earnings $55 million after-tax, and I call that train riding money. Let's talk about the opportunities of the future.

We should see marked improvement in our Florida franchise over the next three years, as we transform these problem banks back to healthy ones. With Florida now 43% of the assets, it's only contributing 22% of the income. So, once they come on and start contributing just their fair share, you can see what a kick in earnings we'll have. I salute to the Arkansas franchise, 57% of the asset, contributing 78% of the income, and a ROA that is way north of 2%. When we run a 156 for the quarter, you have got to know Arkansas is really kicking in some income.

The strong capital, coupled with earnings, strong earnings, and good asset quality will enable us to try to make 2012 a very acquisitive year for both FDIC and the market transactions. We'll continue to manage capital for the growth opportunities, while also being aware of the need to award our shareholders through stock buybacks and dividend increases. 156 ROA for this quarter, a 156 for last quarter, and for the entire year is a 150 ROA. Good job by all. Time to turn the numbers and get the numbers from Randy Sims. Randy?

Thank you, Mr. Chairman. As you shared, 2011 was a very good year for Home Bancshares, with numerous record results each and every quarter, as you kind of covered. I would also like to congratulate all our employees that worked so hard to make a difference and improve our banking organization. It really is truly a team effort that makes us successful. As Johnny outlined, we were successful in profitability with record income, controlled our expenses with a sub-50 efficiency ratio, and our margin improved 54 basis points during the year. And to make it even better, our asset quality totals and ratios are very good.

As we were in 2010, we've been very active in the pursuit of FDIC failed institutions throughout the year. We believe our continued discipline in the bidding process and patience for the right strategic addition to our organization is the right decision and strategy. And while we were not successful with the FDIC this past year, we believe the pending acquisition of Vision Bank, that was announced in November, will be one of our best. With all non-performing assets removed, this acquisition will be immediately accretive to us without the additional expense of adding workout specialists, as is the case with FDIC transactions. And the footprint is ideal to make us stronger in the Florida panhandle, with our locations now standing just outside of Mobile, Alabama all the way across to Tallahassee, Florida. We anticipate this transaction to close this quarter.

Yes, it was a really good year for Home Bancshares. Having said all that, let's take a look at some of the numbers. We finished the quarter with earnings of $14.2 million, or $0.50 diluted earnings per common share. This compares to $13.8 million for last quarter. For the year ended December 31, record net income was $54.7 million, as compared to $17.6 million for the year ended 2010. Diluted record earnings per share for the year was $1.85, compared to $0.52 for 2010. As I stated last quarter, we hit our goal of a $0.50 run rate, or $2 per share, on an annual basis when you excluded intangible amortization and the TARP amortization.

In the fourth quarter, diluted earnings per common share, as Johnny has already said, was $0.50 and diluted earnings per common share excluding intangible amortization was $0.51, marking the second quarter above $0.50. So for two quarters, we've achieved our goal of $2 per common share when you back out some of those things on an annual run rate. This has been a goal of our bank all year long and is a milestone for our corporation. Of course once we add Vision Bank into the corporation, our goal is to improve upon that run rate in 2012.

Return on assets for normalized earnings for the second quarter in a row was 1.56%. And our ROA, excluding intangible amortization, ended at 1.64%, another historical milestone achieved, as we surpassed our goal of an ROA of 1.50% for two quarters in a row. As Johnny mentioned, our high-performing Arkansas banks are producing great results, with all at record levels ending 2011, and we are seeing some improvement in Florida. At the bank level 43% of all assets are in Florida, with more coming from the Vision transaction. So, as we continue to see their improvement, the potential for further growth in earnings is exciting. Of course the most important component of our net income is our net interest income and margin.

Net interest income was $35.3 million, as compared with $33.4 million at December 31, 2010. Net interest margin on a fully taxable basis remains strong in the fourth quarter at 4.73% and compared on a quarter-over-quarter basis, from 4.19%, an increase, as I had said, of 54 basis points for the year. By the way, the effective yield on a fully taxable equivalent basis on non-covered loans was 6.31%, and on covered loans, was 7.63%. The covered loans yield increased again this quarter from 7.2% last quarter, as performance of the pools has exceeded our expectations. Non-interest income ended at $12.2 million, as compared to $10 million over the third quarter. The Company increased fourth quarter non-interest income by a record $5.5 million, or 81% compared to the same period of the previous year, excluding gains on acquisitions. Non-interest expense for the fourth quarter of 2011 was $23.3 million, compared to $26.2 million for the fourth quarter of 2010. Good to see that decrease.

We ended the quarter with a core efficiency ratio of 48.8%, below our goal of 50%. This was an improvement of 348 basis points from the same period of the previous year. We were very pleased with this result. Looking at deposits, we continue to allow some non-core deposits to run off and our deposit total ended at $2.86 billion at year end, compared to $2.96 billion at December 31, 2010. Loans not covered by lost share ended the quarter at $1.76 billion, compared to $1.89 billion at December 31, 2010. Total covered loans ended at $481.7 million, or 21.5% of the total, as compared to $575.8 million at December 31, 2010 as a result of our efforts with the covered problem assets.

Now, that's a lot of numbers. So, I'm going to stop at this point and turn it over to our CFO, Randy Mayor, to give a little more color on what we have just discussed. After that, Randy will pass it on to Brian Davis to give us some more information on our capital numbers. Randy?

Thanks, Randy. We'll start with the margin, which declined 2 basis points from Q3 to 4.73%. The earning asset yield declined 10 basis points, primarily due to the change in the earning asset mix. Average loans declined $45.4 million, while average investments increased $22.1 million. The yield on non-covered loans declined from 6.49% to 6.31%, as we continue to see strong competition for quality loans. Yield on interest-bearing liabilities continued to show improvement, declining 9 basis points from 1.12%, down to 1.03%. We continue to work to improve our cost of deposits, especially in the area of time deposits, which improved 6 basis points quarter-to-quarter.

As you may recall, in Q4 2010, we realized a $3.6 million loss on a fraudulent bond situation. We are pleased to report that we have recovered $2.2 million of that loss via insurance proceeds this quarter. The core efficiency ratio improved 55 basis points in Q4 over Q3, down to 48.76%. Non-interest income, excluding the recovery, was stable from quarter-to-quarter. Non-interest expense declined $467,000, primarily in the area of salary, benefits, and occupancy expense. Moving into 2012, we will continue our focus on non-interest expense and non-interest income. As for net income, as Randy mentioned, ROA, excluding intangible amortization, was a strong 1.64% for the second straight quarter. Overall, the Arkansas franchise continues to post excellent numbers, and improvement in the Florida numbers will be key to our profitability in 2012. With that, I'll turn it over to Brian for a few comments on capital.

During the fourth quarter of 2011, we retained $12 million of our $14 million of earnings. As a result, the risk-based capital ratios are up from the previous quarter. For the fourth quarter of 2011, our leverage ratio was 12.5%, tier 1 was 17.0% and the total risk-based capital was 18.3%. Additionally, book value per common share was $16.77. Tangible book value per common share was $14.35, and the TCE ratio was 11.5%. Randy?

Thanks, Brian and Randy. Those are good numbers. As I said earlier, it was a very successful year on the loan side, too. Our asset quality metrics are very good and improved throughout the year. Legacy non-performing loans were at $49.502 million at December 31, 2010 and improved to $27.499 million. As a ratio to total loans, it was 2.62% at December 31, 2010 and ended at 1.56%. Non-performing assets were $61.205 million at December 31, 2010 and ended the year at $44.139 million. As a ratio to asset, it was 2.08% at December 31, 2010 and ended at 1.53%. I don't want to steal any more thunder, because it was a great year in loans, so now I'm going turn it over to our Chief Lending Officer, Kevin Hester, who will go into more detail and give you some more numbers.

Thanks, Randy. As you mentioned, 2011 was a very successful year in the lending area. In very difficult economic and competitive times, we have shown marked improvement in asset quality, while positioning ourselves for continued success going forward when the lending environment improves. As we take a closer look at the body of work in 2011, we improved in every asset quality category. As Randy mentioned, the non-performing asset ratio improved from 2.08% at December 31, 2010 to 1.53% at December 31, 2011. Similarly, the non-performing loans ratio improved from 2.62% to 1.56%. The primary driver of the improvement in both of these ratios was a $22 million decrease in non-accrual loans.

Non-covered real estate-owned was unchanged on a link quarter basis and increased $5 million on a quarter-over-quarter basis. As we mentioned last quarter, the mix has changed in 2011, with 73% of real estate-owned being located in Arkansas. Selling activity continues to be strong, especially in Florida. As of December 31, 2011, our allowance for loan losses provided 190% coverage of our non-performing, non-covered loans. This is a significant increase over the 108% coverage indicated at December 31, 2010. This improvement is due to the lower level of non-performing loans noted above and the relatively low level of net charge-offs experienced in 2011.

As has been the case throughout 2011, where possible, the specific exposures allocated to these credits were substantially equal to or higher than the amounts being charged off. Specifically, in the fourth quarter, we charged off $4.092 million on loans that were eligible for a specific reserve, and the allocations on those loans totaled $4.164 million. Early stage delinquencies decreased in each of our regions, as of December 31, 2011. Specifically, past-due loans decreased 20 basis points on a linked quarter basis, and 165 basis points on a quarter-over-quarter basis. We are encouraged by this improvement, as delinquencies are generally an indicator of emerging problems.

We are seeing new lending opportunities in each of our markets, but are experiencing significant rate competition, even in Florida. This competition will make loan growth challenging, especially with the anticipated reduction in covered loans, but we will pick our battles and will attempt to reverse the recent trends of declining loan balances without having a significant effect on the net interest margin. Overall, 2011 was a very successful year for the lending area and we look forward to the opportunities that 2012 will bring. Thanks, Randy.

Thanks, Kevin. Congratulations on a great year. Well, record earnings, record margin improvement of 54 basis points, a 156 ROA. We've made it to that $2 a share annual run rate for two quarters, if you exclude TARP and intangible amortization, and our asset quality ratios are at strong levels. And we continue to maintain strong reserves and capital, as we always do.

Again, a job well done to our staff and employees, and we look forward to the addition of new employees to our team from Vision Bank very soon. I think the future is very optimistic at Home Bancshares. That pretty much covers our report. I will now turn it back over to our Chairman, Mr. Allison.

I hope you're as pleased as I am with the report. Home Bancshares is certainly hitting on all cylinders. It's been a while coming, but it really is hitting on all cylinders. I think we're poised for a pretty good year in 2012 and I think we'll have -- Vision will bring a lot to the table. We're seeing some loans come out of Florida that we think are really good loans, and some opportunities there on some FDIC-assisted transactions. So, at this time, if you'll turn us -- I think we're ready for Q&A.

(Operator Instructions) The first question is from Michael Rose of Raymond James. Go ahead, please.

I wanted to get a little color on the drop in the non-covered loan portfolio this quarter. Was there any pay downs or any noticeable trends that would drive, what I thought was a pretty decent decline?

We had a big payout late in the quarter, about a $17 million to $20 million apartment complex that they took non-recourse, so that was the most significant item. Anybody else think of anything that was any big item that was significant?

We had a deal out of Florida that we had booked recently.

Yes, we had a marina loan we lost about $7 million. So, they took it to Merrill Lynch at 2-over or something, 2%. So, that was the impact.

Okay, and then on the securities portfolio, it looks like you bought some with the liquidity. Any thoughts on the portfolio there, and size going forward, and kind of how you plan to use that, given the kind of lack of loan growth that you're seeing?

Yes, this is Randy. We are actually buying some extra securities, getting ready, or anticipating the Vision transaction for some pledging purposes there. But we continue to stay pretty consistent with relatively short-term to plug the gap as more of Fed funds alternative at this point. So, not really reaching out to try to grab a lot of yields. Just using it to use up a little bit of the liquidity, but mainly the increase you see right now is getting ready for pledging purposes.

Okay. That's helpful. I'll hop off. Thanks.

Thanks.

Our next question comes from Dave Bishop of Stifel Nicolaus.

Hi, good afternoon, gentlemen. I was wondering, just in terms of the charge-offs, if you can give some more color around that. And Johnny, as we look out into 2012, I know we've had some recoveries in the past. What's the outlook for more potential recoveries of striking credit quality as we move into 2012?

I'm going to let Kevin talk to you about the charge-offs. You remember, we had past-dues jump up on us in the third quarter, particularly one credit in Florida, and that was primarily the major portion of the charge-off. Kevin, do you want--

Yes, there were -- the majority of charge-offs this quarter related to credits that we had already allocated monies for, and we moved them to an AB note structure this quarter, where the cash flow will more support the debt that's left on the books and we charged off the portion that the current cash flow won't support. And those were all identified in our reserve.

As far as allocation, there's a few more recoveries out there, but so far as allocations for this year, I think we're well reserved. I don't anticipate any major loan loss allocation. I don't see anything in the horizon that -- you can see past-dues are down significantly. We don't see anything in there that concerns us anywhere.

So far as the first quarter, as we plow into the first quarter, Dave, it looks very good for asset quality. You'll see the asset quality numbers on non-performing loans and non-performing assets drop pretty drastically the first quarter percentage wise, because once Vision -- once that $400 million from Vision comes in, there are no classified non-performing, or OREO, in those pools, so you'll see a pretty significant jump in the second quarter as a result of that.

Got you.

Did that answer your question?

Yes, I appreciate that. And then a follow-up, Johnny, you hit on the cost saves this quarter. Did you pretty much reach the floor there in terms of carving out additional efficiencies as we look forward?

Well, this company has gone through a pretty good process. We're running a 65% efficiency ratio. We have major -- we thought we were pretty efficient. We didn't know we were inefficient. We embarked on what we call a B3 program, Build a Better Bank. We had major savings in that.

With us today, you've met her, [Donna Townsend], Donna headed that B3 program. I think it's -- we hit 48% and change. I think 45% is out there. I'll let Donna visit a little bit with you about what she's thinking about doing. B4 will start, that's the new program, we'll be firing up with this company on the efficiency side once Vision's brought in. Donna, you got a comment or two?

Thank you, Johnny. Well, we plan to come back about four years and seven banks later, after our first look at Building the Best Bank to look for other ways to continue to stay on top of our efficiency ratio. So, we just want to stay on top of it and give it another look.

We spent -- we paid these guys $1 million last time. We're saving about $3 million annually. I don't think there's that much, anywhere near that much savings this time. But, I don't know that 45% is not a realistic efficiency ratio. We're going to work on it anyway.

Everybody -- all the management's kind of turning around, thinking this is going to be tough. It is going to be tough, but things are very good right now. It's a good time to do it. There's not a lot of loan growth out there, so why not get a little more efficient internally.

Got you. Great. Thanks, guys.

Thanks.

The next question is from Matthew Olney of Stephens.

Hi, first off congratulations on hitting all your goals in 2011. I want to ask about the margin going forward, with the addition of Vision here in the first quarter. What kind of impact will that have on your margin in the near term?

They have got -- I think their loan yield, Randy, is about 100 basis points. Do you want to talk about that?

Yes, Matt, overall the cost of funds is very similar to ours, so don't see a lot of change on the cost of funds side. But on a loan yield, as Johnny said, they are about 100 basis points less than us at this point. So, we would expect a little bit of compression to the actual margin ratio.

Okay, and then as a follow-up, as far as the discussions with other would-be sellers, can you give us an update on, first, maybe the volume of chatter. Are there other banks out there looking to sell that you are talking to right now?

We can't get to them. We have a list -- Randy Mayor is keeping a list and we're checking it twice. But we have 11 on the list presently that would like to do something with us or maybe need to do something. We're taking them kind of one at a time. Kevin's people were very, very busy last year.

We didn't acquire anything, but we were extremely busy and we'll be getting to these as we can get to them. We're under some confidentialities as we speak on some deals. We're bidding on some deals. We're as busy as we ever were.

I don't know if there's any more transactions. We'll be looking for more Vision transactions, those opportunities. We like that trade. We would like to have some more of those trades like that. So, time will tell, but there's 11 on our list right now.

Okay. Thanks, guys.

Thank you.

Next, we have a question from Kevin Reynolds of Wunderlich Securities.

How are you guys doing?

We're doing pretty good. What do you think? How do you think we're doing, Kevin? That's what's important.

Well, obviously that's what's important, Johnny. You guys had a good quarter. Most of my questions have been asked, but I wanted to sort of see, is there anything -- following up on Matt's question about Vision, is there anything about Vision as an open bank transaction versus the FDIC's that sort of changes your view?

I know you've got a slide out there that talks about what the FDIC opportunities still are as you go into 2012. But, do you start to feel like maybe the open bank structure is the way to go? Is it easier to pull off, or do you have the same kinds of challenges, just without the government getting in your business?

One comment and then I'll let Randy comment. It's just a matter of pricing it. You just price it. If -- some of these banks that are not going to bring book. Some of them are going to bring $0.50 a book and some of them are going to bring $0.80 a book. You just price them. That's the bottom line.

So far as looking them, we like all the guarantees and the ability to break all the contracts, but it's all a matter of price. I would buy about anything if the price is right and we can figure out how to make money with it. Randy, you got a comment on that?

Well, you hit it accurately, and the only thing I would add to what you said is, it really was a great deal for us at this point in time because -- and it was an unusual deal with someone being able to take out all the non-performing assets and for us to come in with a clean bank at this time without any additional personnel having to be added in the special asset area.

So, with the FDIC deals, even though you get to turn back those leases and you can do some really good stuff that helps make you profitable right off the bat. This one also, without the special asset or the sweat equity that you're going to put into the deal, also has some really good sides to it from the standpoint that it really puts us in a great position in some of the markets that we're already in, plus we're not having to expend money on a special asset team. So again, it is also very accretive right off the bat.

Okay. So, both of you mentioned price there being critical, how you price the deal. Is -- do you think the seller knows that yet and is starting to come to terms with that, and if they need a little help getting in there, how do you do that? How do you sell them that, taking a price that's a little bit less than what they would like to go to the country club and brag about is a good thing? It's got to be more than just owning Home Banc stock.

It is what it is, Kevin. We don't -- we're not in this for our health. We're in it for our shareholders and our employees, and we're not going to intentionally do a stupid deal.

There's a lot of banks out there. There's zombie banks that would be a hell of a lot better off owning Home Bancshares stock than owning their own stock, because this management team has the ability to run a 150-plus ROA and they will help them get to that point in time.

So, part of it's an education process, and part of it's salesmanship, and part of it's just reality. Just wake up and see what's happening in the industry and what's going on. So, I think it's a combination of factors and being able to explain something to a seller without insulting them is an important aspect of it.

Okay. Well, good luck, and I think you'll be successful. Good luck.

Thank you.

The next question is from Brian Martin of FIG Partners.

One question for, just maybe for Brian Davis, just on the classified trends. Can you give an update on where the classified loan levels were at quarter end relative to last quarter?

I'll let Kevin Hester.

Kevin Hester will take this one.

Brian, this is Kevin. Classified's were up about $6 million over September, and it was a mix between Florida and Little Rock.

Okay, and was there any -- I guess any certain categories that were up? What were the areas that you saw increases in?

A little bit of CRE. In Florida, it was a lodging credit.

Okay, and how about the level of TDRs at quarter end? Where were those at?

TDRs were down about $3 million.

Okay, and what was the absolute level of the early stage delinquencies in the quarter? I don't think you guys said what that was.

We'll get it for you. It was down. I think we had about $900,000 total of early stage delinquencies, as I remember. And last time we had like $6 million or $8 million worth. We dealt with some of those problems.

Okay, and--

$7.7 million, I believe.

$7.7 million.

Absolute dollars, 30 to 89.

30 to 89, $7.7 million.

Okay, and you said that was down from $9 million last quarter?

That was down more than $9 million from last quarter.

More than $9 million, okay.

Yes, really our pass-through percentage was one of the best that we've ever posted, and we saw some improvement in some of the markets to record levels that they had never seen before.

It was a good quarter. It was a good quarter for past-dues.

Perfect. And maybe one question for you, Johnny. Just when we think about the losses in -- I guess the charge-offs, the losses in 2012 relative to 2011, how to think about provisioning for those. Knowing that it sounds like there's not much on the horizon you're concerned about, but seeing a return to the provision this quarter, how do we reconcile, I guess, how do we think about what the loss is relative to provisioning look like in 2012, with the assets of a lot of loan growth out there?

Well, I'm probably going to let it run down. I'm probably going to let the percentage run down. I think if I saw something out there that concerned me, I would probably beef it a little bit. I don't at this point in time.

Doesn't mean it's not there, as you understand, but I don't see anything out there that alarms me. So, I think I'll let it run down. We're sitting at, what, 293, 297 some, where around there, isn't that about right?

Yes.

I may let that trickle down a little bit. But you know the history of this Company. We'll always err with too much reserves, even when the sky's totally clear, we'll have too much reserves.

Okay. All right.

I think I'll let -- I'm going to let it drip down. We put in -- we had a recovery, an insurance recovery in the fourth quarter of about $2.5 million and we put about $2 million in reserves. So, you can kind of see the whole clean slate. That would have gone to income and Kevin had some charge-offs for the quarter, so we just put it in reserve.

Okay. I appreciate it. Thanks, guys. Nice quarter.

Thank you.

Next, we have a question from Jon Arfstrom of RBC Capital Markets. Go ahead, Mr. Arfstrom.

Hi, this is Andy Hedberg in for Jon.

Hi, Andy.

One quick question on Arkansas. Looks like you closed two branches during the quarter. Just wondering if there are plans to close any more there, or is the footprint optimized the way you like it?

I don't think, Randy, we don't have any plans on closing anymore branches. Well, we closed that one in Searcy.

Yes, we actually closed one in Searcy that wasn't doing that well and closed another one in Searcy to build a brand-new one in a much better location. So, that was -- what was the other one?

Closed one in Multan and we're moving it.

And then the other branch that we closed was an old Centennial, the acquisition that we got several years ago, that was in an upscale shopping center that really had no transactions to speak of that will actually end up saving us -- the lease finally ran out -- saving us several $100,000 in expenses this coming year.

So, all of them were strategic moves, not closing anything that decreases our market share or whatever. In fact, hopefully, it is going to save us a bunch of bucks and the other one is going to increase the market share with a much better location.

Okay, great. That's helpful.

We're using some manufactured homes and move in some locations, and if they work in those markets, then we go ahead and build brick and mortar, and we're doing that in two or three locations right now.

Okay, and then just a quick one on the repurchase plan. Johnny, you touched on this a little bit, but what are your longer term thoughts on it? Is there a chance that you get more constructive with the buyback as capital builds here?

Maybe. Our internal goal is about $6 billion doing a 150. I think if we were there today, I think you would see a heavy stock buyback, but with the availability to pull the different levers right now, we bought back 50,000 this quarter, Brian, is that right, and 250 last quarter.

We'll continue to buy some stock back. We'll probably look at a dividend increase for our shareholders. Probably look at it this quarter. We'll -- but we'll keep -- we'll maintain plenty of capital. I don't think -- I think to get us to $6 billion, that pulls our TCE down into the high $6 billion or low $7 billion would be a guess. But as we're building lots of capital on a quarterly basis right now, we wouldn't mind going down into the $7 billions, as long as we can build it back to $8 billion fairly rapidly.

Okay. And then a final one just on Florida, what's the longer-term plan on Orlando and the West Coast? Do you guys see an opportunity to get bigger there? Or is your growth more focused in the panhandle?

Well, you cast your net and you catch your fish. We caught them in Orlando. And we've got a lot of fish in the panhandle. So, our longer term is to build Orlando. We're a little bitty fish in that pond, and we're on some transactions now that may make some sense in the Orlando market, because we need to beat that. We need $1 billion, around $1 billion-plus presence in that market.

We're going to continue to try to grow that. That's a big focus of ours. Bob Birch, who -- one of the regional presidents who runs Little Rock is under -- that's under his wing. And he believes we can grow it. So, I think we can grow that.

We're going to acquire something else, though. We'll either do a market transaction in there. We'll do another FDIC-assisted deal. But we're -- we recognize the importance of Orlando. It's a great market, and we need to build it. We'll continue to build in the panhandle, and there's some opportunities that are showing up in different parts of Florida that we can tie together. So, we'll continue to keep our eye on the ball in Florida and continue to remain focused on Florida.

If something were to come up in Arkansas, we would certainly be all over that. But as of right now, Florida is where all eyes are and hopefully we'll pick up through market and FDIC-assisted deals this year, provided that the we don't run into these blind pools on these bids. When they bid, it's, it's almost comical. We just looked at one of the bids that came out on the one that was done a while back and it was, the bid was almost comical and it's going to blow up.

The deal's going to blow up. They bid it wrong. It's going to blow up. The world doesn't know that, but we know it. It's going to blow up. When we get these blind pools out of the way, we'll get back to business as usual.

All right, thank you.

Thank you.

Our next question is a follow-up from Michael Rose of Raymond James.

Hi, guys. Just one quick follow-up, touching on the branch question. I think you originally said with the Vision deal, you're planning to keep all 17 branches. Is that still the case?

I'll let Randy talk about that. I don't think that's correct. We got some -- we've got -- we've gleaned some efficiencies there. I think when Donna's team -- when Randy gets through and Donna's team gets there, I think we've got some overlap. Randy, do you want to talk about that?

Yes, there is some natural overlap in some of the cities and towns we're in, especially some of the outlying ones. And anything else, we just have to analyze and see how many transactions they are doing and what's going on with that. Until we actually close it and get it, no decisions will be made until then.

But we are looking at each and every one of those branches and if you look at some of the markets, especially the small markets, both of us are there. So, that is a high potential for that, one of those to be closed. But really, it's too early to say, and we just need to see our staff, who we got there, because we're going to get a lot of really good, talented people with the Vision deal.

Fair enough. Thanks, guys.

Go ahead. What did you say?

That's all I have. Thanks, guys.

Okay. Thank you.

Thank you.

And our next question is from Dave Bishop of Stifel Nicolaus.

Yes, hi, Johnny, just a follow-up in terms of your preamble in terms of the contribution from the Florida banks. You said 43% of assets and 22% of income. Is that after-tax bottom line income, pre-tax, pre-provision income? I'm just trying to wrap my arms around the potential.

That's Randy's toy. Let Randy--

That is not -- that is pre-tax internal comparison with corporate and investments not even included. So, there's nothing that you can actually compare that back to. We just like to talk about it from the standpoint that it's kind of an internal comparison that really gives us the core rate on what those banks are doing.

From an ROA perspective, any sort of color you can give there at the moment? I think you said Arkansas is around 2% or so?

Well, actually, it probably would scare us off to see where Arkansas is running. But it's strong north of 2%. And the Florida banks are probably running less than 70, probably less than 70. So, we get those kicked up over the next three years, as I said in my earlier remarks. We get those kicked up to a 1%, 1.25% like the performance with the Arkansas banks, you can see the kick in earnings. Plus the Vision deal coming on board, nice kick in earnings and hopefully we'll pick up another deal.

Are you seeing any pick up in terms of the commercial business environment within the Florida footprint?

Are you talking about on the loan side?

On the loan side, yes, demand--

Yes, we are. Actually we have. We've approved about $10 million or $12 million worth of loans here in the last two or three weeks. Good credits. Good, nice credits coming in out of the, out of the panhandle primarily right now. Bob, are you seeing anything in Orlando? Bob Birch is with us today.

We have $7 million in our pipeline in Orlando right now. And that's the largest amount it's been in the last 12 months of doable transactions.

That's good. I wasn't aware we had $7 million in the pipeline in Orlando. That's good. There are loans out there. You got to be real careful right now though, Dave. There's not the kind of loan growth -- we used to grow $20 million a month. There's not that kind of loan growth in the marketplace anymore that is good, solid stuff.

Now, you can roll that and you can price it at 3% and get cheap and get your margins down and do something really stupid. But in order to -- it's just not there right now. It's kind of like pushing a rope. You can't make it happen. So, it's got to come to you and you got to analyze it, but if you get aggressive on the loan side, you're going to get in trouble in this market.

Got you. Thanks, Johnny.

You bet. Thank you.

The next question is from Joe Fenech of Sandler O'Neill.

Good afternoon, guys. Most of my questions were answered. But Johnny, just wanted to get your take on the commentary coming out of Bank United this week. With the company putting itself up for sale, the speculation in some of the articles was that John Kanas was frustrated by what he's seeing in terms of acquisition opportunities in Florida. Is he just kind of playing in a different pond than you guys? Maybe just the focus is a little bit different? Or is there something to what, to what he's saying?

Well, I've got all respect in the world for John Kanas I think he's an outstanding operator. I can understand his frustration. I'm sure he's looked at some opportunities, as we have.

Kevin Hester will tell you, he's done due diligence on north of 32 banks. We worked hard on those deals and you got these blind pools come in here throwing money around like a drunken sailor. So, it is frustrating. He plays at a different level, though.

I'm sure he has looked at some of those bigger transactions in Florida, and -- but probably the small ones, he didn't. But you see these blind pools coming in and bidding on these smaller transactions. Some of those, too. But it is frustrating.

He quoted -- I think he also talked about the regulations that were coming down on him. Dodd-Frank, we still don't know what that is. I think he's, I think he said to heck with it. I'm not going to live in this kind of environment and have to do that.

John was out for a while and came back, but that is the environment. That's the environment we live in, and it's just another day to Home Bancshares. We're going to continue to just do what we have to do. It's put one foot in front of the other and keep moving. I'm a little disappointed that he said he was -- I understand he has rebuked though, and said he's not going to sell now, isn't that right? Isn't that correct?

That's the latest, yes.

Yes, well, I know it is frustrating and it's tough and all the regulations and the regulators, and he's $11 billion, so he's got to deal with a different set of rules than we have to deal with. And trying to do acquisitions and running into blind pools, I can understand the frustration, because we had it, too.

I would just prefer the regulators tell us there's two blind pools bidding on this deal and we'll save our $35,000 or $40,000 and won't go down. It is frustrating, but you can't quit, so just keep pushing. That's what we're going to do.

Thanks.

Thank you. The ducks are flying, by the way, Joe. And they are really flying good. You ought to be here.

Good to hear.

And next we have a question from Derek Hewett of KBW.

Hi, Derek. You still got your finger on the trigger?

It's still there.

It ought, it ought to be quivering by now.

Hi, Johnny, you talked a little bit about expectations for growth, loan growth in Florida and it being a challenging environment. What about Arkansas and as you look kind of further into 2012, do you expect to see at least modest organic loan growth?

I'm not going to say that. We're seeing some opportunities in Arkansas. We're seeing, we're seeing actually some run-off in Arkansas because we had a couple of big payoffs. But Florida's pretty good. I'm kind of liking what we're seeing there. Arkansas has been kind of flat. I guess, Randy is going to comment on that? Are you seeing --

I think Kevin --

The rate competition we found in Arkansas has been -- through the last 12 to 18 months, has been really strong and it's gotten even worse. It's not near as strong in Florida. We're beginning to see it a little bit in Florida. But Arkansas, 4.25% for 5% prime floating, with a 5.25% cap, 3.9% fixed for 10 years. These are levels that we're not going to. So, that makes loan growth difficult.

Well said. I can't add anything to that.

Well, it's going to be a slug fest here for a while. Hopefully, the fact that we're not just based in Arkansas will give us some opportunities to do some stuff in Florida, and looks like with Bob's $7 million in Orlando, we got some stuff coming from the Keys that we could -- I think we approved about $1.5 million in the Keys the other day. We got another request in the Keys for probably about a total of $7 million.

And looks like there's a lot of activity -- Tracy, you got any comment? Tracy's with us. You got any comment on what you're seeing on the loan demand side in the panhandle?

Well, we are. We actually, to back up on Bob's comment in the non-covered portfolio in the panhandle, we've actually increased about 24% this past year. Not that we've bought across non-covered performing credits, but we also get a look at a lot of credits along the way, as Kevin stated.

We don't sometimes meet the rate demand that some other institutions are doing. But we have credit meetings every week and discuss lots of opportunities out there, and even during the year that we helped put the banks together, our non-covered portfolio has grown 24%. Now, that's not a lot of money, but percentage wise, that's pretty good.

Okay, great. Thank you very much.

Maybe Florida, Derek. Pull the trigger, Derek. I'm waiting on you.

Thank you.

All right.

And the next question is from Brian Martin of FIG Partners.

Thanks. Just one question for Randy Mayor. Absent any more deals and following the Vision deal, what are your thoughts on the margin? Does the margin trend lower in the back half of the year, absent any further deals? Given there's not much opportunity further on the cost of funds?

Yes, there's still a little bit of room on our cost of funds, on our CD portfolio mainly. But, yes, that number is getting smaller and smaller. And it just depends on the loan volume. That's what drives community banks and that's what we're looking at.

So, if we don't have the loan volume, we'll continue to manage the best we can on the cost of funds side. But, yes, you would expect some compression there without any loan growth. Unless some of this Florida stuff does come on.

Okay. All right, perfect. Thanks.

This concludes our question and answer session. I would now like to turn the conference back over to management for any closing remarks.

Well, thank you. Thank you for your support and thank you for your calls. It's a far cry from last year when we had some clean up matters we had to deal with and we dealt with those. It's a lot more pleasant reporting record income and record EPS and record profits for the Company.

I think 2012 will be a good year for the Company. I think we'll acquire some opportunity, acquire some financial institutions, both FDIC and maybe even on the market transaction, as I said earlier. So, thank you for your support, and we'll talk to you in 90 days.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.