Home BancShares Will Continue Looking for Buys in its Markets

NEW YORK (The Deal) -- Home BancShares  (HOMB), the Conway, Ark.-based bank holding company for Centennial Bank, will continue eying potential bank targets in its markets in Arkansas, Florida and Alabama, said its chairman, John Ellison.

The bank with $7.5 billion in assets is currently in acquisition talks with one bank in Arkansas and another bank in Florida, Ellison revealed, though he declined to name the banks. Home BancShares is interested in targets with about $1 billion in assets, he said. The bank would like to do three more deals this year, though it's more likely that it will consummate two deals, Ellison said.

Home BancShares was recently outbid in a deal for a Florida bank by another institution, said Ellison, though he also did not want to name the auction or the banks involved as the deal has not yet been announced, he said. Home BancShares decided to pass on the deal as the bank was too expensive, he said, adding that such a deal would have been dilutive to the bank's shares. Home BancShares' stock is trading at 3 times tangible book value.

Analyst David Bishop of Drexel Hamilton LLC said Home BancShares is a regional consolidator and will continue to look at banks with from $500 million to $2 billion in assets in its markets. In the near term, it will likely consider acquisitions in Florida, namely in Orlando and Tampa, Bishop said.

According to the  Federal Deposit Insurance Corporation's database, there are five institutions in and around Tampa and Orlando with from $500 million to $2 billion in assets including Tampa-based Bay Cities Bank, Orlando-based Seaside National Bank & Trust, Tampa-based The Bank of Tampa, Orlando-based CNLBancshares  (CNLB) and Saint Petersburg-based C1 Financial  (BNK).

Last month, Home BancShares acquired national commercial real estate loans from J.C. Flowers & Co., totaling about $289.1 million, that originated from the former Doral Property Finance portfolio. Home BancShares subsequently announced its plans to establish a new loan origination office in New York, which will focus on commercial real estate plus commercial and industrial loans as well. Bishop said the bank could consider acquisitions in metropolitan New York to expand its presence there.

Home BancShares has made seven acquisitions since 2012. In the past, the bank worked with Raymond James and DD&F Consulting Group for financial advice and Mitchell, Williams, Selig, Gates & Woodyard for legal counsel on its 2013 acquisition of Ark.-based Liberty Bancshares, its largest deal to date, one accomplished for $290 million in stock and $30 million in cash.

Home BancShares is trading at such a rich multiple that it would make sense to use stock to fund deals, Bishop said.

The bank, which has 149 branches and a market capitalization of $2.3 billion, reported earnings of $31.1 million for the first quarter, an increase of $3.8 million compared with the first quarter of last year. Ellison holds a 6.38% stake in the bank, as of January.

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