- Forward look: Home BancShares in Conway, Arkansas, has signed a letter of intent for its first bank deal in more than three years.
- Expert quote: "I believe in fixing your existing problems before you make a new move. That's exactly what Home has been doing for the past three years," Chairman and CEO John Allison said.
- Key insight: Home's third-quarter return on assets of 2.17% is nearly double the industry-wide average, according to FDIC statistics.
Conway, Arkansas-based Home BancShares appears poised to
The $22.7 billion-asset Home, which completed its last deal in April 2022, recently disclosed that it's signed a letter of intent to buy an unnamed bank.
"We'll be moving forward on that," Chairman and CEO John Allison said on a conference call with analysts last week. "It's someone we like and runs a good business. … We're excited about the opportunity."
Though he did not discuss the location of the prospective seller, Allison did note that the company has "several billion dollars" of assets.
With the merger-and-acquisition activity moving into high gear, a number of other regional banks, including the $83.2 billion-asset First Horizon Corp. in Memphis, Tennessee, and the $211 billion-asset, Buffalo, New York-based M&T Bank Corp., have indicated they're potential buyers.
Allison, 76, has been a prolific acquirer. He said on the company's most recent earnings call he's been involved in roughly four dozen transactions during his 42-year banking career, including 18 since co-founding Home in 1998. All went off more or less without a hitch — until
The deal should have been a triumph, giving Home, the parent of Centennial Bank, a presence in the Lone Star State. Instead, Home has been beset by asset-quality issues and a bitter, long-running legal dispute. Allison characterized the episode as a "fiasco" on the Oct. 16 conference call.
Home was reluctant to consider new M&A opportunities while the Happy situation was still in flux, Allison said. Now, though, with the asset-quality problems in check and its lawsuit successfully concluded, the company felt comfortable enough to resume searching for merger partners.
"I believe in fixing your existing problems before you make a new move. That's exactly what Home has been doing for the past three years," Allison said on the conference call. "We waited until we had our arms around multiple problems before we moved again."
The decision to proceed with a letter of intent was bolstered by a solid third-quarter earnings report, which saw Home report net income totaling $123.6 million, up more than 20% from the same period in 2024. Home's third-quarter return on assets of 2.17% was nearly double the industry-wide average of 1.13%, according to Federal Deposit Insurance Corp. statistics.
"We're back producing top-tier best-in-class numbers once again," Allison said.
Home "remains one of our favorite stories," Hovde analyst Brett Rabatin wrote in an Oct. 17 research note. The potential combination with the as-yet-unnamed seller "will likely be accretive to expectations for the next two years in our view, and a $2 billion-asset to $4 billion-asset-sized transaction could meaningfully move the needle," Rabatin added.
An acquisition makes strategic sense, given Home's "limited opportunity to drive profitability meaningfully higher on its current asset base," Janney Montgomery Scott analyst Brian Martin wrote Monday in a research note.
Home's loans totaled $15.3 billion on Sept. 30, up 3% from the third quarter of 2024. Deposits grew 4% year over year to $17.3 billion. At the same time, the ratio of nonperforming assets to total assets, which peaked at 0.63% a year ago, declined to 0.56% on Sept. 30.
"I'm a pretty happy camper," Allison said on the conference call. "Everything is holding together pretty good."
The third-quarter earnings report and Allison's disclosure of the letter of intent came a week after Home settled a lawsuit it had filed against several former Happy employees in 2023. The bankers quit Happy to join a competitor following the company's sale. Home claimed they took confidential information and used it to lure away clients and other employees.
Home settled the case earlier this month, with the defendants agreeing to pay an undisclosed sum. Home has received a partial payment and hopes to have the remaining balance paid by year-end, according to Allison.
