Home Bancshares, Inc. (HOMB) Q3 2013 Earnings Report, Transcript and Summary

Greetings, ladies and gentlemen. Welcome to the Home BancShares, Inc. third-quarter 2013 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 March 2013. 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.

Thank you, Laura. Welcome to Home Bancshares third-quarter conference call and earnings release. Lauren has told you who is with me today. It's the regular team you are familiar with. I guess by now you've seen the numbers. This quarter is one of several records, including – one of our largest goals has been Home $2.50 or split-adjusted to Home $1.25. If you remember that goal, it strings together four quarters in a row that met or exceeded $1.25, or – before it was $2.50, as you know. Congratulations to the Home $1.25 team or Home $2.50 team. They have accomplished another great goal. They accomplished the $2 or split-adjusted $1 goal sometime back. After the Liberty closing, with some restructuring of membership, we'll probably set new goals for the future. I'm glad we hit it to fourth quarter of this year, because with all the merger acquisitions and one-time expenses, the impact of – one-time expenses to earnings – the earnings will be so convoluted the fourth quarter, I don't know if I can even figure them out. But we're here to talk about this quarter. Let's talk about some of the highlights. Record income of $18.4 million, $0.33 a share. I think that's a little more than what the Street – I think the Street was looking for $0.31 or $0.32. Net interest income up 20% year over year to $46.4 million. You can see the margin expansion, and I think Randy Mayor is going to talk more about that today. Core efficiency ratio of 44.76%. And if you actually look at the noninterest expense on a linked-quarter basis and you pull out the merger expenses, we improved by about $310,000. Great job. Positive legacy loan growth of about $30 million. Asset quality stable – and Kevin Hester…

Thank you, Johnny. Well, another very good quarter, as evidenced by the numbers that you went over. In fact, you did it really well. There's not a whole lot more to say, but I will just add a little bit of color. First of all, how exciting is it to once again say that this was the most profitable quarter in the history of our Company? In fact, 10 consecutive quarters of record earnings. We can't say that too much today. An ROA of 1.80% that resulted in an increase in earnings of $704,000, or 4% above our previously-reported earnings. And as Johnny has discussed, the big news is that we're getting very close to the acquisition of Liberty Bancshares. Shareholders will meet on October 23, and plans are to be open for business as usual on October 24 at Centennial Bank. Upon completion of the transaction, the combined Company will have approximately $7.1 billion in total assets, $5.6 billion in deposits, $4.5 billion in loans, 151 branches, 186 ATMs, and 1,500 employees across Arkansas, Florida, and South Alabama. We've been on a fast track to get the bank's data processing and back room operations converted the weekend of December 6. And as you've heard us say before, we believe the conversion is essential to the process of improving net income growth and efficiency. So, we never waste any time in getting that task done. And in the case of Liberty, this will be a record time for us. Davy Carter, who will become Regional President over Liberty, along with a conversion team of both Home BancShares and Liberty employees, have been working very hard since the announcement of the merger towards our conversion goal of December 6. From the beginning, it has been our goal to not only close…

Thank you, Randy. Well, our folks continue to impress us with their focus on efficiency, as our core efficiency ratio dropped this quarter, as Randy said, to 44.76% from 45.76% last quarter. We are extremely proud of the continued focus our people show in this area. Their continued attention to efficiency shows that it is not just a one-time fix for us. Being efficient is part of the culture at Centennial Bank and Home BancShares. It's an ongoing effort to watch for ways to increase revenue and keep our expenses under control. Since we started tracking core efficiency in September of 2008, we have dropped from 59% to today's 44%. In looking towards efficiencies out of Liberty, we ran cost savings models on acquisitions of 25% to 40%, targeting about 33%. However, we always strive to exceed the 33% goal. So, by the first quarter of next year, you should see some marked improvements. But we do expect the full process could take about 18 to 24 months to reach our goals. Many pre-conversion tasks have been mentioned that already underway, and our teams are ready to get started. Randy?

Thanks, Donna. Switching to deposits, we ended the quarter at $3.25 billion compared to $3.13 billion as of September 30, 2012. We continue to eliminate non-customer time deposits – we talked about that earlier – throughout the system of branches, and we'll do the same for our new acquisitions. Time deposits represented 36.8% of total deposits as of the first quarter end of 2012. At the end of this quarter, our dependency had dropped to 24.9%, and we may be able to do even better. Net interest income, margin, and noninterest expense – who better to talk about that than our CFO, Randy Mayor? So I'll stop at this point and turn it over to him. After that, Randy will pass it on to Brian Davis to give us more information on our capital numbers. Randy?

Thanks, Randy. We'll start out with the net interest margin, , which improved 23 basis points from 5.18% to 5.41%. The net interest margin was somewhat inflated because of the accretion associated with the loans in a particular loan pool paying out, , which added $1.9 million to the margin for the quarter. Net interest margin without this adjustment would have improved 5 basis points, from 5.18% to 5.23%. The yield on earning assets improved 19 basis points, from 5.54% to 5.73%. The reported loan yield improved 6 basis points, from 6.65% to 6.71%; while investment yields improved 5 basis points. Loan yields would have been 6.43% without the loan pool adjustment. The mix of the earning assets also improved, with interest-bearing and due from balances decreasing from $135 million to $41 million. The yield on interest-bearing liabilities declined 4 basis points, primarily due to a 4 basis point decline on the yield on deposits. Also, as Randy had mentioned, we continued to see the percentage of CDs of total deposits decline. Noninterest income declined $487,000 for the quarter. There was an increase of $1.5 million in the amortization of the indemnification asset associated with the loan pool previously mentioned. Service charges increased $176,000. Gains on the sale of SBA loans, securities, premises and OREO increased $213,000. Mortgage lending income declined $92,000, and in Q2 we had received a special dividend on a venture capital investment of $231,000 that was not repeated in Q3. Reported noninterest expenses increased $860,000, , which included $170,000 of FDIC true-up expense related to the loan pool mentioned earlier. Merger expenses for the quarter increased just over $1 million, so the operating noninterest expenses decreased approximately $310,000. Just as a reminder, as we close on the Liberty transaction, there will be substantial merger-related expenses recorded in the fourth quarter of 2013 due to the size of the transaction. These expenses will significantly impact our profitability for Q4. As mentioned above, the ROA of 1.80% and the core efficiency of 44.76% resulted in a very strong quarter for the Company. With that, I'll turn it over to Brian.

Thanks, Randy. During the third quarter of 2013, we paid out dividends of $4.2 million and grew retained earnings by $14.1 million. For Q3 2013 our Tier 1 capital was $454.4 million. Total risk-based capital was $493.2 million, and risk-weighted assets were $3.2 billion. As a result the leverage ratio was 11.50% compared to 10.78% at June 30. Tier 1 capital was 14.20% compared to 14.04% at June 30, and total risk-based capital was 15.41% compared to 15.29% at June 30. Additionally, book value per common share was $9.69 compared to $9.49 at June 30. Intangible value per common share was $7.99 compared to $7.78 at June 30. And finally, the TCE ratio was 11.1% compared to 10.9% at June 30. Randy?

Thanks, Brian. Well, it's time to switch to loans. Our already strong legacy asset quality metrics improved. We had some good loan growth, and we currently have a very healthy loan pipeline going into the fourth quarter. With that said, I'll turn it over to our Chief Lending Officer, Kevin Hester, who will give us all the details. Kevin?

Thanks, Randy. As you mentioned, we are pleased to report continued improvement in the overall asset quality in the third quarter. Our noncovered, nonperforming asset ratio decreased slightly, from 1.26% to 1.15%; as did our noncovered, nonperforming loan ratio, from 1.25% to 1.20%. This improvement was anticipated with the aggressive collection of the initial challenges in the Heritage loan portfolio in Tampa. Notwithstanding any effects from the upcoming Liberty closing, we anticipate further improvement in these asset quality measures. Our allowance for loan losses as a percentage of noncovered loans declined slightly, from 1.73% to 1.58%. However, if you added a Vision, Premiere, and Heritage acquisition discounts to the allowance for loan losses, the combined figure would be 4.68% of noncovered loans at September 30, 2013. The allowance for loan loss coverage ratio declined slightly to 132%, still reflecting continued strong coverage of our noncovered, nonperforming loans. Noncovered real estate owned decreased from $16 million to $14.2 million in this quarter. The share related to Arkansas properties increased from 67% to 71% on a linked-quarter basis. Net charge-offs were at 48 basis points in the fourth quarter, , which is slightly below our average for the four previous quarters, but just above the 44 basis points incurred in the linked quarter. Early-stage past dues declined 18 basis points to 1.54%, putting it at the lowest point in the last five quarters. Noncovered loans increased $40 million in the third quarter, with the increases being seen in the areas of non-farm, non-residential loans and construction and land development loans. With the third-quarter growth rate annualized at 7%, this extends the trend of noncovered loan growth of 5% or more to four of the last five quarters. Of particular note is the $18 million increase in the Pensacola market in the quarter. Congratulations to Blaise Adams and his staff. Balancing the desire to grow loans with the mandate to maintain yield has been a difficult proposition, but we have been successful thus far. Our fourth-quarter pipeline is the strongest since before the crisis, but the anticipation of a large loan moving to a non-recourse lender in the quarter is tempering the expectations of a net increase. Third-quarter closings in secondary mortgage were as strong as any previous quarter, with purchases increasing 9% on a linked-quarter basis and 30% quarter over quarter. Just around the corner is the Liberty closing, and we are ready for the transition to begin. While the size of the transaction is much larger than any we have had to date, the processes and procedures of the transition are very much the same. By any measure it was an excellent quarter in the lending area. And with that, I'll conclude my remarks for this quarter. Thanks, Randy.

Thanks, Kevin. Good report. I'd just like to say congratulations to all our employees on their hard work this quarter. This is really shaping up to be a great year for Home BancShares – probably a historic year, with record income for the 10th consecutive quarter; branches opening; and, of course, the Liberty acquisition that will take us to over $7 billion in assets. We are excited about the opportunity of adding a great banking organization with some very talented bankers to our family at Home BancShares, and it is right around the corner. So with that, I will turn it back over to our Chairman, Mr. Allison.

Thank you. It was a great report. It appears to me that good banks keep producing good results. We had about $1 million in gains in OREO sales – it was in OREO and a gain on some premises? We also had offsetting of about $1 million merger expenses. The large adjustment Randy talked about on the margin side – we had said it was $1.9 million, but on the offsetting interest, it was about $1.6 million on the expense side with noninterest income before it hits the balance sheet. So overall, it was a great quarter for this Company. We look forward to the Liberty transaction. And I think, Lauren, we're ready for Q&A. So, if you're ready for that, we're ready to go.

(Operator Instructions). And our first question is from Jon Arfstrom of RBC Capital Markets. Jon Arfstrom – RBC Capital Markets: Hey. Good afternoon.

Good afternoon, John. Jon Arfstrom – RBC Capital Markets: Just a bigger-picture question for you, John, and then I have got a couple others. But you talked about once Liberty is under wraps, you will look at acquisitions again. What in your mind marks under wraps?

I want to see – the way this team normally performs is that once we make an acquisition and we take over, shortly thereafter the cost saves start rolling in to me, and I start sharing those with the Street as to Tracy French will walk in and say, we've got $2 million worth of savings coming in; it looks like it is going to happen over this period of time. And he and Randy Mayor and Brian Davis will get together on those numbers. So, they kind of lay those out. So, I think we don't have to wait to get Liberty to a 1.50% ROA; as long as I see the fact that we're going to get Liberty to 1.50% ROA as a starting point, then I think we'll be moving. I actually leave Friday. I'm going to look at another deal Friday. I was on another one yesterday. I believe this team will – sometime between now and the end of the first quarter, we'll have those numbers, too. I'm already seeing them – I'm already beginning to see them. So, once I see it's headed to 1.50%, then I'm pretty comfortable with that because Randy's team last quarter ran a 2.40% in Arkansas. So, I think 1.50% is actually a starting point for us. It's just a matter of feeling it. We don't need to bite off something else until we've got this one under wraps. That's what I mean by under wraps. Is that good enough for you? Jon Arfstrom – RBC Capital Markets: Yeah, that's good enough. I guess the other – just the related question is, you've done, call it, a string of deals in the Panhandle. And this one is obviously a bigger deal. Just curious if you have changed your thinking at all, and you think a bigger deal is a better deal or you're agnostic?

Well, let me say that we're looking at lots of deals from [300] (ph) to $3 billion. Now, would a $3 billion deal in Florida be a little more difficult? Probably, than a $3 billion deal in Arkansas would be. So I'm not afraid of it. And we've got the team to do it, because we've got them on the ground in Florida. So, we'll be looking at opportunities, and as when we decided on doing the Liberty transaction versus these other transactions at the time, I think that was the right call for us. The next transaction hopefully will be as accretive or as good a deal as the Liberty deal. There are some deals – prices are getting a little – we're beginning to hear about some prices getting a little screwy out there right now. And it seems like every time there's a bid, and somebody's bidding on something, you always get a screwball that runs in there with crazy pricing. So, we're kind of trying to stay away from that. Jon Arfstrom – RBC Capital Markets: Okay. That's helpful. And then maybe this for you, Kevin Hester – Randy gave us some good details on the margin, but you talked a little bit about balancing growth with pricing pressure. Just curious what kind of yields you are seeing on new loans? And what makes the cut and what doesn't make the cut in terms of some of the new loan growth we're seeing?

The average of new loan growth is somewhere in the low 5s. We're seeing stuff in the 4s. We're doing some stuff in the high to mid 4s. Other people are doing stuff in the low 4s and 3s for long periods of time. So, we're just having to pick and choose. Like I said, we would like to grow loans, but we're going to maintain yield as much as we can. We just have to pick and choose our battles. Jon Arfstrom – RBC Capital Markets: We just take them one at the time. We haven't thrown out the credit cards. Our philosophies work; wouldn't you say, Randy Sims?

Absolutely.

We just hung in there. We fight them one at a time, and I think that's – it takes a long time, it takes a lot of effort, but I think it's the right thing for us to do. I'm seeing stuff in one of the markets right now – 3.25% fixed, 5 years; 3.5% fixed, 7; 3.75% fixed, 10. Those are just people selling the future. By the way, on the loan pipeline, it is extremely strong right now. We've got a big payoff coming in the fourth quarter – about a $50 million – Kevin, is that about right? But it looks like we've overcome that and may have some loan growth. So, pretty pleased with what we're seeing out there. Jon Arfstrom – RBC Capital Markets: Okay. That was my other question, was just the big, potential payoff. But you feel better about that?

We just – I feel better. We will lose it, because that's how we always do. But they've got more projects coming that they'll be pulling up. But we picked up a $45 million credit that we'll close – the 11th? November 1 we'll close. It's $30 million term and $25 million on a line of credit. Great piece of business, and we're thrilled to have it. So, that will be coming in, and then we've got a $25 million one from one of our (inaudible) close the fourth quarter. Anything else, Stephen?

Across.

Across?

It’s across. Then, you gain, you know…

Across?

Yes. From each region. Jon Arfstrom – RBC Capital Markets: Okay, okay. All right. Thanks for the help guys.

And our next question comes from Michael Rose of Raymond James. Michael Rose – Raymond James & Associates: Hey. Good afternoon, guys. How are you?

Great, Michael. How are you? Michael Rose – Raymond James & Associates: Good. Hey, sorry if I missed this, but the construction balances have grown pretty significantly over the past two quarters. Is there any trends there? Is there anything you're noticing? Are you actively going after that piece of business? Can you give any color there?

I wouldn't say that it's a concerted effort. It happens to be what we're seeing in the markets that we're in. I mean, we're in some markets that are recovering in Florida, and there's a little activity here in Arkansas. So, I think it's just a function of the markets that we're in. Michael Rose – Raymond James & Associates: Okay. And then you guys have the third-quarter results for Liberty. And do they vary materially from either the first half of the year or the second quarter?

No. They seem to be pretty much right on budget, so we're not seeing any material change there. Michael Rose – Raymond James & Associates: Okay. Thanks for taking my question.

You bet. Bye.

And our next question is from Brian Zabora of KBW. Brian Zabora – Keefe, Bruyette & Woods:

Hi, Brian. Brian Zabora – Keefe, Bruyette & Woods: Hi. How are you? Brian Zabora – Keefe, Bruyette & Woods: Good. Hey, a question on FSUB borrowings. They were up in the quarter. I was just wondering if there was any strategy to maybe try to lock in some funding at lower cost, or if that was just ahead of the closing?

Brian, this is Randy. That's really part of our strategy on the investment portfolio. We're pre-buying, so to speak, anticipating at close selling some of the investments that are at Liberty. So, it's not long-term anything. It's pretty much just short-term funding to get us through until after we close, and we'll be selling a substantial piece of their portfolio. Brian Zabora – Keefe, Bruyette & Woods: And then as far as deposit pricing, do you think you still have more room to continue to improve that shift – the mix shift?

I think, you know, we've got Liberty coming on. We're going to be implementing our policy and procedure of trying to lower the dependency on time deposits. We still have some Florida locations that have some room to improve. Arkansas is in pretty good shape. I think we can drive down that. I think what you'll see, when we add Liberty, the 24% will come up some, and then we'll drive it back down. So, there is some room, and I think everyone is on board with the fact that if it's not a good core customer, that we don't need the time deposits.

And the next question comes from Matt Olney of Stephens. Matt Olney – Stephens Inc.: Hey, good morning, guys.

Good morning, Matt. Matt Olney – Stephens Inc.: Hey. From the Liberty Bank acquisition, I was initially assuming some dilution of tangible book value, but that was on a much lower stock price. So, given where the stock is now, is it fair to assume that the overall impact on tangible book value from Liberty will be pretty minimal?

It's accretive. Matt Olney – Stephens Inc.: It is accretive.

Yes, it is accretive. It's accretive by…

The last time I did a run, Johnny, I thought it was going to be about $0.05 accretive tangible book.

We reported that to be 18-month earn back, but that was at about $19 or $20. It became an accretive transaction for us. We reported it as dilution of tangible book, because that was what it was the day we announced it. But the stock price improved, and it was a nice trade. Matt Olney – Stephens Inc.: Yes, absolutely. And now, Johnny, you are going to be $7.1 billion of assets; you're talking about more M&A at some point, it sounds like. It could be a small deal, could be a larger deal. What are your current thoughts on your overall asset size relative to the $10 billion asset threshold?

Well, I want to hear more about the consumer finance protection, or whatever they call themselves. I want to hear more about that. We're probably going to go over $10 billion. I mean, there's too many opportunities; and there's 5 or 6 of us in the country that have been blessed with a power stock. Another one is in Arkansas – Bank of the Ozarks – and Renaissance in Mississippi. You know those players. And First Financial in Texas, and Prosperity and SCBT. We've kind of separated ourselves from the pack with our currency, and it gives us a real opportunity to use our currency to go to deals. So I think we would be negligent if, as many opportunities as there are out there, if we don't use that. But we have to take our time, as we always have; and err on the conservative side; and make sure that Liberty is on board, headed towards a 2% ROA or a 1.50% ROA – you know I won't be satisfied with a 1.50% for Liberty, but it's starting point. So once we get there, we'll hopefully have another deal. There's just lots of – it's kind of a fun place to be sitting right now. So, we'll probably go over $10 billion; and if we are going to do $10 billion, we might as well $12 billion or $14 billion or $15 billion. Matt Olney – Stephens Inc.: Great. Thanks, Johnny.

Yes. I'm not sure what that word satisfied means. [LAUGHTER]

And if it happens.

And if it ever happens. Sorry for that.

No, that's a good point.

All right. And our next question comes from Kevin Reynolds of Wunderlich Securities. Kevin Reynolds – Wunderlich Securities: Can you hear me okay?

Hey, there, Kevin. I can hear you now. Kevin Reynolds – Wunderlich Securities: Okay. How are you doing, Johnny?

I'm doing great. How are you doing? Kevin Reynolds – Wunderlich Securities: I'm doing all right. I… [CROSSTALK]

Why did you lower your rating from a buy to a hold? Kevin Reynolds – Wunderlich Securities: Well, I want to talk about it offline. [LAUGHTER]

Do you not think we're going to do another deal? I'm teasing you. Go ahead. I don't blame you; we didn't hit your price target. Kevin Reynolds – Wunderlich Securities: So while we're talking about things associated with deals, looking at the Liberty deal, you made a comment earlier about the integration proceeding well, , which is ahead of the deal closing. So I wanted to ask you a couple of questions about how is that going? How do you approach that with the liberty employees? Because clearly, there's going to be some that won't be staying around. What do you do in terms of the change of control contracts and things like that? And then I guess the final question is – and Johnny, maybe you might want to pass this one off to Davy for his thoughts on it. But are there any ideas or any thoughts about using some kind of different marketing or advertising techniques in the northern Arkansas franchise, like billboards, or smile models, or anything like that?

, which question did you ask? Davy is not here, but just let me address a little bit of that from the standpoint that – this is an acquisition, and we're all in this together as one team. We have to centralize the back room – that's not a surprise to anyone. And there will be job loss. Would we like for Liberty employees to participate and come to Conway, or can we set up some other areas? Yes. We do everything we can to minimize that impact. But there will be some savings through this acquisition, especially on the back room side, right off the bat, because we are on the fast track to that December 6 conversion date. Your other part of the question – unique marketing and everything – we're looking at that right now. There is some branding that we're going to need to do, although we're pretty well – Johnny is pretty well known in the Jonesboro area, and we're going to do a lot of the same things that we do when we have a new acquisition. Not only branding, but meet-and-greets, and talking to the customers, and getting out to see them. We have our own methodology, whether – even though this is a very healthy organization instead of a failed bank, we're going to approach it with the same checklist, and get the things done, and try to get it going down the same road with us. The big date is that December 6. Can't overemphasize that when we're both on the same systems, and we can start really looking at things, and becoming much more efficient together – because when you look at this deal, it is three-quarters the size of what we are right now today. And the economy of scale and the efficiencies have to be there. And I'm really looking forward to the first quarter to see what we can do. Kevin Reynolds – Wunderlich Securities: Okay. And then…

We'll talk to Davy about his marketing plan, but I think we're going to stay hitched to our marketing plan here. To kind of give you an example, we were looking at one phase of Liberty, and they had 130 people – these are approximate numbers. And in order to maintain Donna's efficiency ratio, we were allocated 110. And they asked for – I sat in on that meeting and listened to our people request the number – talk about the numbers they needed to accomplish those goals, and the number was 78. So, that equated to an efficiency ratio in the 30s on that segment of it. So that's kind of how we attack it. They've got some great people, though. They got some great loans, great loan officers, great facilities. And they got bigger facilities that we've got, and we're kind of strapped with those things. We don't normally build big banks; they built several big banks. They're really nice facilities, but I guess in some of the markets they were in, that northwest Arkansas – if you're going to be recognized, you need a big facility up there. But we'll talk about that other later, Kevin; thank you. Kevin Reynolds – Wunderlich Securities: I guess, to kind of go along, I know that you've done a lot of meet-and-greets already with business leaders, particularly in the Jonesboro area, and they know who you are. But does the – sort of the mass-market consumer that would be driving the activity in the branches – do they know who Centennial Bank is? And how much are they attached to the Liberty brand? I know you have got the name on the stadium, and those kinds of things. How aggressive will you be about changing that? Or if you are aggressive in changing that again quick, what will you do with the consumer base up there in their footprint to ease them into Centennial?

They're on the same system we're on. I don't think there will be lots of changes. Wallace Fowler operates, in lots of respect, just like I operate. We'll close the 23rd, and that night we have 400 or 500 people in Jonesboro invited to a meet-and-greet. Our team will be airborne the next day to northwest Arkansas for a meet-and-greet in northwest Arkansas. And I don't know how many they've invited. Donna, do you know? Another 300 or 400 guests to that meet-and-greet. Then November 4 we'll have our next meet-and-greet in Russellville, Arkansas, and we'll all go up and meet those people. So Centennial is – even though it's not in those markets, it's kind of a known – a lot of shareholders. We have lots and lots of shareholders from northwest Arkansas. Lots of people have followed the Home BancShares story and are owners of the stock. Even a lot of Liberty shareholders are owners of the stock. So I think that will be healthy. I think the Liberty shareholder is excited to be part of Home BancShares. I think we invited 400 to the Jonesboro Country Club the night of the 23rd. So, we'll be up there, and we'll do a little presentation – you've seen those presentations we do. We'll do one there, and I think that will be healthy for us in the market.

And to piggyback on one thing that Johnny said – same system. Let me just give you one quick example, since you asked about the consumers. No change of debit cards. None. That's almost unheard of in conversions. So, the debit card they have today – even though it says Liberty, they will keep that card. There will be no mass mailing of debit cards. They move right over, because we are on the same systems. So, the consumer will have no changeover there. Because we're on the same systems, there will be a lot of things that normally affect the consumer that will not happen in this particular conversion.

See, I learned something. I didn't realize the debit cards were on. That's great. That's excellent. Kevin Reynolds – Wunderlich Securities: Great quarter, Johnny.

Thank you.

And our next question will come from Brian Martin of FIG Partners. Brian Martin – FIG Partners: Hey, Johnny.

Hey, Brian. Brian Martin – FIG Partners: Hey, Johnny or Randy, can you talk about that ROA target on the Liberty deal – the 1.50%? As far as kind of getting those early cost savings, how much time, I guess, is your expectation it takes to get to that minimum bogey of the 1.50%?

How long do I think it will take for the minimum bogey before we get to 1.50%? Is that the question? Brian Martin – FIG Partners: Yes.

Well, I don't think we'll get there in the first quarter. But I would expect we will be scaring the hell out of it the second quarter. Brian Martin – FIG Partners: Okay. And Randy mentioned the Florida operations – the year-to-date internal ROA of 1.30%. What are your expectations there over the next 12 months as far as ramping that up? And how close can you get it to where the Arkansas franchise is running?

Well, I don't know anyone else in the country that's running a 2.40% like Arkansas ran this quarter. But even in the good times, if you remember, the Florida banks never ran – they thought they were doing great on the 1%. We are now running a 1.30% down there. And our Keys franchise, , which is more of a legacy franchise, is 2% or better. So, we just continue incrementally – you think about those. These were banks that were in trouble. And they were a 0.2% and then a 0.3% and a 0.4%. And I didn't know if I was going to live long enough to see them do a 1%. They did a 1%. And then last quarter I think we were talking about a 1.22% on them. Now they're doing a 1.30%. So it's just incremental improvement in those markets. And the economy is much better down there than it has been. We're getting some good loans – we ended up with some great people out of the Florida acquisition. So, I think we'll just continue to inch at that. Where will it get to? I didn't think we could get to 2.40% in Arkansas. So, I would certainly hope that we get to a 1.50% and bring Florida up to 1.50% over the next 12 months or so.

It really is a factor of the fact that we're starting to see some really good loan growth. We're expanding a few of our markets. I mentioned the Pensacola de novo branches – $30 million worth of loans in a very short period of time. Those guys are rocking and rolling. And it is also a factor that we're starting to see a lot – get down to the bottom of the cleanup of the bad loans. Not in every pool; not in every location. But we're starting to see a lot of that improvement in the number of balances that we had of loans that we had to go through, and go through the process of the legal deal starting to come down, and enter into OREO, and getting rid of some of those things. It's a factor of those two things. And then you're going to see the performance improve. Brian Martin – FIG Partners: Okay. Thanks. Johnny, you mentioned earlier maybe some goofy pricing that you've seen lately in some of the transactions. How do you think that impacts your opportunities going forward, given your disciplines on pricing?

Well, the scariest thing is dumb bankers doing dumb deals. And you've heard me say that before. And you got some people out there that don't know how to do a deal and haven't done a deal. So, me of these expectations are crazy. I mean, the majority of the deals are still relatively priced right there in the 1 time book range. You just have to look at these deals; you end up doing one at 1.50 a book, and by the time you get through marketing it, you're at 2 times book. And you do one at 1 times book; then by the time you get through marketing it, you're at 1.5. So people – they may get higher. If they do, that kind of tells me if I need to stay at $8.5 billion. And if the deals stay where they are, we'll continue to use our currency if they get crazy. You know, I looked at a deal in the last week or so that was in the 1.65 range to book. And it just didn't work. The deal didn't work. Even with my stock, it didn't work. So, I don't – if a deal doesn't work with the 5 or 6 of us that have these power stocks, it won't work with somebody that doesn't have a stock that's as powerful as ours. You've heard me say, where our stock trades, it will take a bad deal to make it fair, and a fair deal to make it good, and a good deal to make it great. So these people who don't have the currency are trying – and you get in these bid processes, and some quack throws in a wild price. He can't close, and he's not going to get the deal done. So it's just frustrating. But it's part of life. It's part of what I deal with every day on that side of the business. And we will continue to pitch; we won't fall in love with a deal. We'll just move to next. It either works, or it doesn't work. If it works, we're in. If it doesn't work, we'll just move to the next deal. So, it is a little frustrating seeing people do silly deals. Brian Martin – FIG Partners: Okay. I appreciate it. Thanks. Nice quarter.

Thank you.

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

Thank you. I just want to say to our investors that you invested your money; your invested your confidence; you have invested your guidance and support in our Company, and I'm honored to have your trust. I know the value of trust, and I don't take it for granted. I won't let you down, and we haven't let you down, let me say that – if it's within our control. But it was a great quarter, great results; and I think it's been a great ride thus far. And we're not through. So, we'll talk to you in 90 days. Thank you.

The conference is now concluded. Thank you for attending today's presentation.