Greetings, ladies and gentlemen. Welcome to the Home BancShares Incorporated Third Quarter 2014 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 has asked me to remind everyone to refer to their cautionary note regarding forward-looking statements. You will find this note on page three of their Form 10-K filed with the SEC in February 2014. At this time, all participants are in 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. John Allison, Chairman.

Thanks, Amy. Hi, guys. Welcome to Home BancShares' third quarter earnings release and conference call. With me today is pretty much the same team, I have both, Randy’s, Kevin, Brian, Donna and Tracy with me today. I really have a lot to say today, you have seen the numbers and they pretty much speak for themselves. I’m just going to highlight a few of the performance numbers that I think are pretty outstanding. We have an EPS of $0.45, extra merger expenses and that was a target that we had. Core efficiency ratio of 41.88%, core ROA of 1.69% and I’ve told you last quarter, I though, we could get $200 million worth of loan growth and we beat that and did a little over $208 million loan growth for the quarter. We are pretty proud there. We continue to build loan loss reserve, so at the end of the year, 49.2% which were up 1.11% loan loss reserve today and after adding Florida Traditions plus the loan growth. So we continue to be a reserve. We continue to have improved asset quality. We completed the Florida Traditions transaction and even though we completed that transaction, our team continued with good expense controls. We had record revenue for the quarter of $94,232, probably came up the loan growth -- that loan growth came in late in the quarter. Continued strong margin was 5.26%. And I want to point out something to you the tangible book value December 31st was $7.94 and the tangible book value at 9/30 was $9.39. That’s an increase of $1.45 in the first three quarters. That’s 18.2% increase in three quarters on annualized rate of 24%. I think that’s pretty good job all who helped that happened. I’m going to really go to Randy right now for the quarter to put more color on it. I really couldn’t ask for any better performance for the quarter. So, Randy, I’m going to turn it over to you and let you get more specific on the numbers.

Well, thank you, Johnny. As you said, it’s been another very busy quarter and so I’ve just like to give you some updates on our activity to start with. As you may recall we had Florida Traditions this quarter and their branches opened up at Centennial Bank on July the 18th. We are very excited about this addition to the Centennial family. And as we have said in the past, our emphasis is to get that bank converted as quickly as possible after closing and we did just that. The conversation was successfully completed the weekend of September 26. So I want to say congratulations to our IT staff for job very well done. So a lot of activity in the third quarter, but perhaps, the best moves that you heard from our Chairman was our record setting loan growth of $208 million. This loan growth certainly made a difference in our earnings and we look forward to having those full earning balances on our books entering the fourth quarter and you’ll hear Kevin discuss this a little bit more in detail. So let's switch to acquisitions. We continue to be very busy looking at opportunities for more acquisitions. So heading that effort is Tracy French who will add a little color. Tracy?

Sure, Randy. As we work towards the final stages of the second acquisition this year, our due diligence team continues to be very busy, number of banks that we are communicating with or working today as many as we’ve ever had at this time. We believe some of this will be good fit for our company. If we can get to the deal to make it win-win for both shareholders, as our Chairman has said many times is a finding the partner is not the most important part but is finding right partner it is the most important part and we are fortunate to have some good choices today and we just need to stay our course and make those right choices that makes some best return for our shareholders. While some banks are out there, going through the bidding process to bring the top dollar, sometime it hasn’t worked out some of the shareholders in the past and we’re planning on staying our course, Randy and bring one in that’s going to give award to both shareholders. Opportunities are ranging in all shapes and sizes from our markets and I think, our Chairman is also getting few calls that come from the outside as some of the markets we are talking to you today. So lot’s of future hopes that will pay out. Thank you.

Pretty said it, Tracy. So let’s get with some numbers. I will go through this quickly as Johnny has highlighted the really good ones and we will give you a few more. Our quarterly profit was $27.4 million or $0.41 diluted earnings per share, compared with income of $18.4 million or $0.33 diluted earnings per share the same quarter in 2013. That is an increase of $9 million or 49.1%. More importantly, excluding merger expenses associated with the recent completed Florida Traditions acquisition of $3.8 million, diluted earnings per share for the third quarter as our Chairman said was $0.45 per share. That was the goal we wanted to reach for the third quarter. And that makes 14 straight quarters reporting the most profitable quarter in the country -- in the company’s history of diluted earnings per share excluding merger expenses. We are very pleased with the income for the third quarter. Our return on average assets for the third quarter was 1.56% as compared to 1.7% for the seventh -- second quarter 2014. But, again, that included merger expenses. So if you just take out the merger expenses then our return on assets is 1.69%. So we are pleased to see some consistency around that 1.70% mark, even with the addition of acquisition assets with lower returns and I think that is an important point. Again, we believe a quick conversion is the key to realizing our bottom-line acquisition savings. Our return on average assets excluding intangible amortization was 1.68%. Our core return on average assets that includes intangibles, provision, merger expenses and taxes was 3.08% for the quarter. Our return on average TCE excluding intangible amortization for the quarter was 18.46%. The overall average internal ROA for the Arkansas Bank was 2%, including all the former Liberty branches.…

Thank you Randy. Well sometimes they are just worth repeating, our core efficiency ratio has averaged 41.6% over the last three quarters. Considering all the other activity that has been going on while running the bank, staying consistently around 41% brings a sense of accomplishment to our organization. I feel like we’re getting proficient at being efficient and congratulations to everyone. Here is a little information about how we accomplished that this quarter. We told you that by the end of this quarter, we planned to have our Liberty footprint in line with the rest of the company staffing model and we have done just that. I’m proud to report that Northeast Arkansas and Northwest Arkansas have made great strides in their efficiencies through things such as staffing and contract negotiations. And we believe that they will be on par with their peer Arkansas region very soon. In the third quarter, we closed two branches in North Central market as Randy just mentioned and we’re still working on efficiencies in that area as well. The rest of the organization has held their own on efficiencies this quarter. Our revenue in expense initiatives are not mutually explicit though. While we have been working in a Liberty market on expense control, we have also been working on growth opportunities. The change of an acquisition has really brought out some superstars who have stepped up. We have merged together a strong leadership team of about 12 Liberty and Centennial employees. We are passed the transition period and the synergy is really there. Their loan growth is evidence of their motivation. We’re closed to $100 million in loan growth this quarter for Northeast Arkansas and Northwest Arkansas. Are there more efficiencies to gain from Liberty? We can always look but that is true across the whole company. I think everyone is really working hard together right now on a revenue side and that is what makes the banking fun. Randy?

Great report, Donna. Let’s switch to deposits. We ended the quarter at $5.28 billion compared to $5.19 billion at the end of the second quarter 2014. Time deposits represented 24.2% of total deposits down 1% from the 25.2% of total deposits at the end of the second quarter and 29.8% at the end of 2013 as we continue to make improvement. Our goal was to be under 25% and we have now made it after the jump due to the large Liberty acquisition. So I guess, it looks like we need to settle lower goal. Net interest income, improvement in our margin and non-interest expense; I'll now turn it over as usual to our CFO, Randy Mayor, to give you all the numbers. After that, Randy will pass it to Brian Davis to give us more information on capital. So let’s switch to Randy?

Thanks, Randy. Our net interest margin on a fully taxable equivalent basis was 5.26% for the quarter compared to 5.50% for Q2. The yield on interest-bearing liabilities was basically unchanged at 39 basis points in Q3 versus 38 basis points in Q2. The effective yield on our non-covered loans was 5.84% versus 6.08% in Q2 and was 17.23% versus 19.38% in Q2 for covered loans. The decline in yields resulted from a decline in the accretion income from Q2 to Q3. Despite the increase in accretion income of $1.1 million from the reevaluation of some Liberty accruals, the overall accretion income was down $2.9 million from $16.4 million in Q2 to $13.5 million in Q3. In Q3, we also added the Florida Traditions portfolio and we incurred slightly lower rates associated with some of the loan growth during the quarter. The provision for loan loss for non-covered loans was $4.2 million in Q3 versus $6.1 million in Q2. The decline coming primarily as a result of less loans moving from purchase accounting to origination accounting for the loan loss reserve purposes. Moving to non-interest income. As mentioned in the press release, we have been in discussions with the FDIC regarding the remaining loss share agreements associated with the Key West Bank. We have not been able to reach an agreement for buyout. So we have began accreting the credit improvement which was $186,000 for the quarter, the amortization of the indemnification asset which was $1.1 million for the quarter and the resulting throughout which was $41,000 for the quarter. The net impact earnings for the quarter was approximately $1 million. Other changes in the non-interest income category were reduction in the gain on sale of premises. We had $500,000 gain on the sale of the branch in Q2 and the reduction of $329,000 on the gain on sale of OREO properties in Q3 versus Q2. In the non-interest expense category, salary and benefits increased by $555,000 from Q2 to Q3. However, with the addition of Florida Traditions staff, expenses were added of $883,000 for the quarter. So our legacy expense was actually down $328,000. Also merger expenses associated with Florida Traditions increased $3.7 million from Q2 to Q3. Overall we're pleased with the adjusted ROA of 1.69% and the core efficiency ratio of 41.88%. Brian?

Thanks Randy. During the third quarter of 2014, we paid out dividends of $6.6 million and grew retained earnings about $20.7 million. For Q3 2014, our Tier 1 capital was $678.4 million, total risk-based capital was $731.3 million and risk weighted assets were $5.5 billion. As a result, the leverage ratio was 10.2% compared to 9.7% at 6.30%. Tier 1 capital was 12.4% compared to 12.5% at 6.30% and the total risk-based capital was 13.4% compared to 13.5% at 6.30%. Additional capital ratios include book value per common share was $14.42 compared to $13.77 at 6.30%. Our tangible book value per common share was $9.39 compared to $8.83 at 6.30% and the TCE ratio was 9.1% at both September 30th and June 30th. As we previously noted, the Florida Traditions Bank acquisition was immediately accretive to tangible book value by $0.21 and was virtually neutral to the risk based capital ratios. Randy?

Thanks, Brian. I’m sure everyone wants to hear a little more color on the record loan growth, so I will turn it over to Kevin Hester, our Chief Lender. Kevin?

Thanks Randy. From a lending perspective, this was a great quarter for the company, maybe even a world record quarter, led by decline of 16 basis points in the non-covered, non-performing asset ratio from 1.04% to 0.88%, all asset quality measures improved on a linked quarter basis. An equally strong 19 basis point drop occurred in the non-covered, non-performing loan ratio from 1.09% to 0.90%. Reversing the recent trend, our allowance for loan losses as a percentage of non-covered loans declined 6 basis points from 1.17% to 1.11% in the third quarter. This is due to the strong legacy loan growth and the Florida Traditions acquisition. However, if you added the Vision, Premiere, Heritage and now the Florida Traditions acquisition discounts to the allowance for loan losses, the combined figure would be 4.20%. Non-covered real estate owned decreased 8% on a linked quarter basis from $21 million to $19.4 million. This is a third consecutive quarterly drop since the Liberty acquisition in the fourth quarter of last year. For the third consecutive quarter, net charge-offs were less than 20 basis points. At 16 basis points, net charge-offs were the lowest level in 13 quarters. Early stage past dues continued to decline in the third quarter, posting a 17 basis point drop from 1.37% to 1.20%. A particular note in the third quarter given our previous discussions about the loan pipeline was the organic loan growth within the company. At $208 million or 20% on an annualized basis, it was exactly what we were expecting 90-days ago and was the largest quarter since before the downturn. Loan production is still expected to be strong in the fourth quarter, but there were projected paydowns from a couple of large projects into non-recourse financing. In the third quarter, we hired our first President of the Mortgage Division. I would like to welcome Michael Powell to our team. And in just a few weeks, he is already making a difference. Volume is still strong and we expect to add originators in several of our markets over the next few months. As my comments have indicated, it was a very positive quarter for all things related to lending. I will give it back to you, Randy?

Great report. Well, we are very pleased with the results of the third quarter and we are looking forward to continue improvement in the fourth. We saw our fourteenth consecutive quarter of record earnings excluding merger expenses and more improvement in an already outstanding core efficiency ratio. We completed the conversion of the Florida Traditions acquisition. Plus, we opened the new branch in Naples. So it was another strong and active quarter and was been a record breaking year. And with that, I'll now turn it back over to our Chairman, Mr. Allison.

Thank you. Thanks to all of you for your reports today. I thought they were excellent reports. Interesting, our stock continues to go down but I think we are following the market more with ourselves than with other. We got a bunch today. So it’s a lot of volatility. Sometimes it’s up, sometimes it’s down and it changes on a daily basis. So who knows what will happen today? So, I guess, I think we are ready for Q&A.

Thank you. (Operator Instructions) And our first question comes from Michael Rose at Raymond James.

Hey. Good afternoon, guys. How are you?

Hey, Michael.

Hey. Just want to get a sense on where the pipeline stands today. Obviously this quarter’s growth was great. It seems like from Donna, what Donna said about $100 million. More than half of the growth came from Northeast and Northwest Arkansas. But I’m just trying to get a sense for, if the pipeline continues to backfill against the strong growth and where you are seeing the most strength in the pipeline? Thanks.

Hey. This is Kevin. Yeah, fourth quarter production is strong. It’s probably not quite as strong as it was in mid third quarter. We’ve got about probably three seven figure paydowns that we are expecting in the fourth quarter, couple of them due to going to non-recourse market and one that we’ve been expecting for probably 12 months that was scheduled. We are building in some growth in the next few quarters with the increased construction, so that’s a good thing. The growth in the pipeline is coming from really, from a lot of the regions. As you mentioned just second ago, about a third of it was -- in third quarter at least was Northeast Arkansas and the rest then it was split really evenly between about five or six of the other regions. So that's really encouraging.

Okay.

Big payoff. We’ve got some big payoffs coming but it’s holding pretty good. We started yesterday. It’s 9.30 in the morning and we finished loan committee -- senior executive loan committee about 12.45. So we were in there for little over three hours.

Has there been any changes in the type of credits that you're seeing, are you seeing larger credits, are you seeing more confidence among your borrowers even with this, what’s going on with the markets?

Kevin, I would say we are seeing an increase as I said in construction and that’s relates to last couple of quarters and that’s led probably in the Panhandle Florida and then also Northeast Arkansas but other than that, not really a lot of difference in the normal CRE and C&I lending.

We are writing in the 4.5s, is about where we are writing right now on that stuff. That put a little pressure on margin.

Okay. And then one follow-up if I can. Just, Johnny, on acquisitions, I think you have been looking at something in the neighborhood of 12 or 16 different deals or something of the like. Is there any update to activity levels on the M&A front? Thanks.

It just continues on. The problem is that you got to pick the right one. It makes the deal work. We are seeing deals done for the sake of deals right now and you heard me speak about just like kissing your sister then do anything for anybody. So we are working aggressively. We’ve got a couple picked outs that we want to do, that we think we can do and hopefully we can bring those homes sometime of next year. They are pretty good sized transactions.

All right. Thanks guys.

The next question comes from Jon Arfstrom at RBC Capital Markets.

Thanks. Good afternoon.

Hi, Jon.

Hey.

All right. Stocks up 6%, Johnny, so the market turned around.

I was at the Governor’s mansion last night, having dinner with the governor and he said, how you are doing? I said pretty good, lost $6 million a while ago.

French threw some chum in the water that I guess I will bite on, but one of the comments he made was acquisitions outside of the current markets and you’ve talked about a little bit historically but maybe should we read a little bit more into that?

We are looking. We’ve been invited to look, not with the group but just one-on-one to kind of Howdy Doody in Texas. So we’ve always said that we’ve been in Texas before. It might be a place. We went outside our footprint, we might go in, might go out from there. So we are probably -- we are probably going to look in that state. I don’t know how -- you remember my statement, when all went from 50 to 10 and Texas blew up and that was -- it was 110, now it’s 83. So, I don’t know if it’s time to be stepping into those waters.

Yeah. I hear you. I remember that quote. Okay. I guess the other part. Just this is actually like I’m following on Michael’s questions. But on loan growth you talked about backend loaded. What is the magnitude of that and how does that flow into Q4?

It’s probably a couple of $100 million. And I would say in fourth quarter, you are looking at 50 to 75 coming out of the construction side.

Okay. And then I guess the one other question on the Liberty, the former Liberty footprint, is that growth maybe just pivoting from cleaning up the company and focused internally to going out and beating the bushes for loans, or would you say that that’s what the market has given you right now and that could continue?

Well, certainly in Northeast Arkansas, I mean, those guys have really hit their stride the last 90 to 180 days. Northwest Arkansas really didn’t miss a beat. So it’s a little bit of both.

Little bit of both, okay. All right. Thanks, guys.

The next question comes from Stephen Scouten at Sandler O'Neill.

Hey, guys. Thanks for taking my questions. Question for you on the NIM, maybe a little bit here. The decline of 24 bps, was that more than you had anticipated and does it change your thoughts about where your NIM will go moving forward? And also with that, I don’t know, did you guys disclose the amount of accretion in the quarter?

Majority of the NIM decline is related to purchase accounting. We had -- for comparisons, we had $16.3 million of accretion income related to all of our historical acquisitions from FDIC all the way through Liberty. It dropped $3 million this quarter to $13.3 million. And if you were to compare an apples-to-apples yield on the loans, excluding purchase accounting accretion, we had a 5, 10 yield on the loans last quarter and we had a 5.08 this quarter.

Okay. And did you say new loan yields coming on in about 4.5%, is that what I heard, or was that a specific segment of the construction revenue?

That’s right, Stephen, about 4.5%. The last quarter came on about 4.75%, 4.80% and this came over -- a little over 4.5% for this quarter, the $200 million, 4.5%.

The one other things to counter balance that, they didn’t show dropping in our loan yield, the fact we brought on Florida Traditions that held the mix up.

Okay. And then one other question is kind of maybe beating the dead horse on the expected loan growth from here. But on an organic basis with these couple of these seven figure pay downs you are expecting, I mean, I guess what’s the net magnitude, another $100 million in growth or I mean should we be pretty conservative as we think about what 4Q is going to look like?

I think the $100 million would be the top end of a range. I mean, it could be less than that, but I think a 100 would be optimistic where we sit today. It is early in the quarter so I mean we do have things that materialize that happen quicker than we expect, but right now I’d say that’s the upper end of the range.

Okay, great. That’s helpful.

That’s probably clear.

The next question comes from David Bishop at Drexel Hamilton.

Hey, good afternoon, guys.

Good afternoon, David.

Hey, question on the funding side this quarter, the growth in borrowings there, I was just curious in terms of the strategy and how we should think about the funding of loan growth moving forward?

This is Randy. We did do some borrowings there to kind of plug some holes. As you know we have been working for quite a while to draw down or decrease some of Liberty’s public fund reliance. And we have kind of gotten to a point now where we are kind of leveling off on that. And then with the loan growth coming in on the other side, it changed just sort of a little bit of borrowed position, which to what Randy Sims wants to be. He then thinks zero was right. It needs to be negative.

You got the engine running hot when you bark just a little bit.

So that will probably level off or you will probably see that kind of volumes sitting there for a while.

Okay. And then in terms of the loan loss reserve, obviously purchase accounting plays role. Did we think of that in terms of the build it out in the future? Is the dollar amount targeting a better way to look at that in terms of the increase on a quarterly basis?

Well, we are just building it. We are just continuing to build that reserve. We did the Liberty transaction. If you remember, reserve fell to 0.92 and we’ve never operated at a 0.92 reserve. It may have been okay. It just didn’t get, I think like that. We have always run around the 150 and we will continue to build reserves and probably will till we get up in that, somewhere around that range and then we will quick reserve it.

And then as you noted David, I mean when you bring in all the Liberty loans, there is no ALLL associated with it. But once those loans move, you have to account for it in your ALLLs, so you have to put some provision over there, otherwise it would be short in your ALLL because you no longer have to discount on those loans, because they are gone from purchase accounting to originated accounting.

Great. Thank you.

Our next question comes from Brian Zabora at KBW.

Thanks. Good afternoon.

Hi, Brian.

The question on Key West Bank loss share negotiations, are you continuing to negotiate, or have you made decision that you’re maybe not going to pursue that any further with the FDIC?

It was really important to us to get that thing done in the third quarter and things have dragged down and dragged down. And it’s certainly not did and we will still consider it, but we also took the good amount of amortization towards that particular -- to the intangible asset, I am sorry. And so as we knock that down, it becomes a lot less attractive. So if we don’t hear something pretty soon, if we don’t move forward pretty soon, then it’s going to be a very -- it’s going to be as attractive as it once was and we might as well just go ahead and knock it down further and then enjoy the earnings, as I flow through over the life of the loans.

We are at about $4 million. We’ve hit. We beat out the last two quarters about half of that, swallowing that $4 million, so we only got about two more quarters to swallowing the $1 million a quarter. I think it’s about Iraq gas and it turns the other way. It flips the other way. And had we done the last year deal, it would have been a one-time hit and we got rid all at one time. But since we hadn’t gotten an answer back, a final answer back, we are only $2 million from solving that problem. So you got about $2 million hanging out there to amortize over the next two quarters. It flips the other direction. So it gets very positive.

Exactly, right. You said it litter better than I did. That’s exactly, right.

That’s helpful. Thanks. Then, Donna you mentioned kind of focus on revenues kind of going forward in your speech about efficiencies, was there any one segment that you think there is lot of opportunity to talk about? Are you adding mortgage brokers or any other fee income lines that we may see focus on?

Well, just a variety of things, Brian. Cross selling into other lines of business that we have an access to, obviously loan growth and we may export some new products. The future of banking is going to be very different. So we may just kind of start looking into what that could take us to and just retail sales efforts. It’s a variety of those things together. Mortgages, things like that, insurance, there is just a variety of things we can cross sell there.

Our loans, the average on that $208 million was $66 million booked for the quarter. So you can see you got another $140 million that you are going to carry into the fourth quarter that will give you a kick in there. And as Donna said, talking about mortgage, we hired a Mortgage President who headed that company up and headed our mortgage operation up and we expect big and better times coming from that side.

In addition to that we have made some other changes. We have changed our investment company. And they are going to be recruiting more brokers. And we’re going to be growing that area. So it will take a little while but we hope good things come from that too.

Great. Well, thanks for taking my questions.

Yes, sir.

The next question comes from Matt Olney at Stephens.

Hey, thanks guys. I want to go back to M&A and thinking that what you’re doing East Coast of Florida with Broward Bank. Can you talk more about your appetite for growth all along that East Coast of Florida? Are there M&A target on that side of the state or is that going to more of an organic loan growth buildout?

Now that there will be -- there’s targets. There is lots of target on the East Coast. Tracy has been working on a bunch. I have been working on some. We’ve been working together on some. So we like the East Coast of Florida. We’re just not there and we need to fill in over there.

Okay. And then shifting over towards expenses, I think in the past you’ve talked about shrinking some of the legacy infrastructure around special assets and loss share. Can you quantify what that potential could be over the next few quarters?

Randy?

It’s really hard to say. Matt, as we continue to get acquisitions, it prevents me from shrinking that staff because I get more loans to work with. But I will say that it is and as we get closer to the end of these contracts that it’s getting -- the work is getting smaller and smaller and we expect to see some savings from that, especially next year.

I think Randy Mayor, you were talking about the -- with Broward pulled out, we actually had decrease and so we had let our expenses drop that.

Yeah. That will begin in 25 days.

Again on 25 days, not less expenses for the quarter than we did in the prior quarter?

Right. And some of that’s coming from the North East Arkansas and the Liberty transaction still implementing our staffing models and reductions there.

And we’re continued on the brand study to and we’re probably close more branches so.

Thank you.

You bet.

The next question comes from Brian Martin at FIG Partners.

Hey, guys. Most of my stuffs been answered, just maybe two things, the brand study. Johnny, I guess, what’s the timing of when you think you get more clarity on how many brands it could potentially be close or what possibilities there are on that front?

I’ve said it, Donna and I were e-mailing back and forth the other day about that. And she has given me a list of these branches and her evaluation on a bunch of them. And after you go out there and close about five, you'll see that bunch of changes happen in Arkansas. I don’t know if you ready do that, are you?

Well, I don’t know about that. We just got the total running at about last quarter or quarter before. We’re still fancying that, Brian. Even though they put a plan in place, you still have to give them a little time to start implement that. So I mean, Johnny you’re right. We do need to make a plan and work the plan but I don’t think we’re ready to give any kind of numbers or even a prediction on that just yet.

Okay. And just maybe last thing, the reserve build, Johnny, what’s the timing as far as kind of get into the way you think it needs to be. Is that a 2015 event? It’s kind of done before that in the next year or is it just the next couple of quarters or how should we be thinking about that?

I think it’s an ongoing process like everything in our efficiency study. Donna continues, our team continues to work every day of efficiency in this company. So it’s just -- it's an ongoing project. It will continue on and on and on and maybe we’ll learn more and more as we go. May we’re closing the branch with $10 million with the deposits in it today and we’re closing one next year with $15 million because it still makes sense to do that. So I think it’s an ongoing process but I would like to have it finished by mid ‘16.

And let me just add to that. Take you back a little bit. There is a lot of technology coming down the pipeline that’s going the change face of branches. If the consumer grabs the hold of that technology, you’ve seen that the Apple Pay announced and some of you things, they grab a hold of that technology. And it will always be a continual look at our branches and how many transactions they’re doing? And what kind of branch do we really need? Certainly, smaller, more efficient and full of technology, if things go the way everyone is predicting. So, I think you're going to see lots of changes in banking over the next five years and it will all depend upon what the consumer accepts and where they go. That’s why I put Randy here. I’m just back from Europe and I’m looking at a branch in Europe and it has four ATMs in it and no personnel. And I’d tell you what the marquee was but it was in Italian and I can’t tell you if I couldn’t read it. So that was their branch. It was downtown, East France and it had four ATMs in it and no live bodies. Just to give you an example, we’ve had Internet banking for 15 years. We’ve had mobile banking for two years. And in those two years, mobile banking has far exceeded the number of transactions that we have seen as compare to the Internet banking which is just -- that’s our opening to me.

Okay. That’s helpful. And just the reserve build, Johnnie, I guess that 1.11 level that we’re at this quarter and trying to get to an optimal level if that’s a 150 or 140 type of level. What’s the timing and how long it takes to get there? Is that…

Brian, you think about it, we are 1.15 and 1.17 and then we did the Florida Traditions transaction, took us back to 1.11, even though we put $4 million in. So for the quarter -- I can’t answer that question. It depends on the deals that we do in the future. We do another Liberty deal it’s going to pull $2 billion deals. It’s going to pull that down to beans in a hurry. So what you said, that’s difficult to answer. I mean, we can’t stop. If we stopped, we just stop growing today and I will do that.

What kind of heart that burns is that like you just mentioned for Florida Traditions. What you can’t see there is that there is a $8.5 million credit mark on the loans that we acquired from Florida Traditions. And under the good old accounting days, we would have had another $8.5 million and in A-Triple. Instead it’s over their net of the loans but if we have losses, it will observe those losses.

I mean, if you take in, I don’t know come out all in about 4.30s or 4.20.

420. You actually got, call it reserve, call it mark, call it whatever. We get about a 420.

Correct.

Okay. And did I hear right that some of the biggest -- it sounds like some of the deals from an M&A standpoint, at least more recently are a little bit larger rather than smaller?

Yeah. We’ve seen -- you’re talking about the loan deals?

No, just the….

Yeah. We’ll let me tell you. And Tracy’s done a good job and he’s got a bunch of great candidates. And we’re evaluating each one of those candidates but you got to find the one that moves the needle. I mean, Liberty moves the needle. You got to found the next deal. It moves the needle and a lot of these deals don’t move the needle. They just don’t, they don’t do anything for us and we probably do those trades. It didn’t make any sense to do those. It’s a waste of time and effort to do something than do anything for us. So we’re looking for those deals as it makes sense. We’re known for doing good deals. We’re known for doing smart deals and we’re just looking for the next trade. And we’ve got some staked out that makes some sense and moves the needle. So if we can bring those home over the next six months or so then, I thank you will be pleased as an investor and I will be pleased as an investor also. So that’s what we’re trying to do. We’re not doing deals for the sake of doing deals and you are seeing people do deals for the sake of doing deals and I don’t understand stand that but anyway.

Okay. I appreciate the color. Nice quarter guys.

Thanks.

(Operator Instructions) And our next question comes from Peyton Green with Sterne, Agee.

Yes. Good afternoon. I was just wondering maybe if you could comment a little bit and apologize if I missed this. The indemnification asset is down about $59 million year-over-year. And I was just wondering, maybe if you could comment over the next year, what you expected the reduction to be versus the amortization component? I know it’s hard to model, but just trying to get the right order of magnitude?

Okay. I guess I’ll take a shot at it. We’re all pointing.

Yeah. We are all pointing around the room

Before we start, I will tell you the ones that are expiring. It’s gone go to zero.

Yeah.

Thank you for stealing my thunder, Randy. Okay. Sorry. We’ve a tremendous amount of our acquisitions. In fact, all of them are pretty much winding down next year. Old Southern Bank has nothing but five year loss share left and all the10-year loss share has paid off. So the loss -- indemnification asset will later be paid off by the government or written off by Home BancShares by March 12th of next year. Key West is about 50-50 but as you know, we are knocking it down a $1 million, $1.1 million this quarter. And we will do that in the next couple of quarter but it has about half of it left and 10-year loss share. And we are working on the Bay side and the coastal committee which is July of next year. And then we’ve Wakulla and Gulf, which is in the fourth quarter of next year where a lot of that will go away. So we’re monitoring it. The reason we’ve the big amortization is because we realized that we’ve positive credit marks in there that we are crediting into income and we are amortizing the offset setting identification asset. Do I have a crystal ball and tell you what it’s going to look like now but it will be a whole lot less by the end of next year.

Okay. No -- I guess I’m just trying to gage. If we dropped $59 million and $21 million that was amortization over the last year, do you expect the same kind of ratio or do you think it swings the other way where you don’t have as much amortization going forward as a ratio I guess?

Well. I mean, probably it’s going to be about as much amortization because we are coming, we are winding these things down and the loans for the most part have performed better than was anticipated on day one. What’s might possibly happen is that -- what we say around here. Good is good and good is bad and bad is bad. And what that mean is when we have impairment on indemnification asset, we get to accrete the additional interest income. But the loss at this point left on the weighted average life of the long portfolio is now going be greater than the weighted average life on indemnification asset. So you may have a little bit negative arbitrage on that between now and the end of next year.

Okay. Fair enough. And then…

After that it should be -- it’s all gravy because then we don’t have any indemnification left to write-off except for a little bit is left on the 10-year loss share and then we have five more years to correct it.

Sure. Sure. And then with regard to M&A, how would you say pricing is moving? I mean, certainly if you’re publicly traded bank you are seeing a reduction in your valuation over the past few months. But the private guys, I mean, how are they -- are they knowledgeable? I mean, how would you describe the bid-ask gap I guess?

It’s probably running anywhere from 140 -- for a bad bank, there is not many bad banks left. They are probably at bad bank to probably 140 to 180, looks like they’re trying to push them to two, like they are trying to push them up to two. There is not many people that can pay to it and make it accretive. You’ve got some people in the country and you can do those deal with the power stocks, five or six hours but outside of that, they’ve become dilutive and you see them talking about dilution and dilution to tangible book. And we haven’t done any dilution to tangible book thus far. As in, I’ve been accretive as I said earlier we’re on annualized growth of tangible book of about 24% increase this year. We’re 18.2 right now to three quarters. So we’re very disciplined on that side and we’re watching it. We’ll let some people run out here and do deals for the second doing deals. And we’ll just pass and move to next one. The biggest job that we’ve is to educate the seller that the deal has to make sense. If it works for the seller and it works for the buyer than the combined entity shareholder gets rewarded. As you’ve seen our stocks perform over the years because we’ve been rewarded as a result of doing smart deals. But there is lots of people just doing deals for the second, doing deals and there are three years on back or four year on back or five year on back on tangible. And that’s how maybe we’re smoking mirror. So we saw one recently, he said it was 3.5 earn back and that’s based on earning $20 million, the target earned on $20 million a year and the target was earned $8 million. So we’ve got to take it from $8 million to $20 million to give it 3.5 year earn back or they may have an earn back last to infinity and that’s probably what they got. So that’s how we look at it. We’re trying to do about 15 times earnings. We think the target ought to trade is about 15 times earning that they are making. The problem here is that they are all going to expand the margin next year and they are all going to grow loans and they are all going to cut their expenses and they are all going to do 150 ROA. Well, the truth is they never had and they never will. So you just get a little more on. And somebody wants to pay that price, let them pay it. We’re not going to be one to do it.

Okay. All right. And then last question, what do you think the effect of lower long-term and short-term rates for that matter over the course of the year? How much margin pressure would you expect to have over the next year from that?

We are pretty neutral on our position and our modeling pretty much shows that maybe if they were to go down which I stopped, couldn’t happen but have over the last couple of days. We believe there’s a little bit more compared to what happens when it goes out. But overall I think we’re like 0.4 or 0.14 negative gap. So our position is pretty good either way.

Okay. Now, I guess just year-to-date market rates were down kind of across the board. I was just wondering if you seeing more competition on the loan pricing side maybe this quarter than you had a couple of quarter ago?

Not really. We let them run for a while. We said that we really didn’t get in the 4% game for a while. We kind of stayed out of that. We weren’t sure. To the maintain the 5% margin right in the 4%, it’s pretty difficult. So we kind of stayed away from that. Obviously we got in the game and you could see what happened to loan growth and we got in the game. It’s up $200 million. So we’re still seeing some silly stuff out there. But mid-4s is working pretty good.

Okay. Great, thank you.

Thanks.

At this time, we show no other questions. And I would like to turn the conference back over to Mr. Allison for any closing remarks.

Thank you, Amy. And thanks everyone for your interest and we’ll talk to you in 90 days.

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