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Home BancShares touts ROA success, does not expect changes in CRE business

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Home BancShares touts ROA success, does not expect changes in CRE business

notched a 1.83%return on assets during the second quarter, and the company's executives made sureinvestors know it.

The company'sability to push its ROA to that level — at a time when many competitors are strugglingto earn 100 basis points on assets — came up repeatedly during its quarterly earningsconference call on July 21. "It just keeps growing," company Presidentand CEO Randy Sims said, crediting the company's expense and efficiency improvementsas well as its bankers' battle to push its net interest margin higher from the firstto second quarter.

The companyreported a core efficiency ratio of 36.84% for the quarter. Senior Executive VicePresident of Corporate Efficiencies Donna Townsell said during the call that thecompany is continuing to review its expense base through the first half of the yearand that she believes the company will hit its 35% efficiency target.

The successof those efforts had Home BancShares Chairman and Founder Johnny Allison jokingthat things "had gone too far." Allison said during the call that a recenttrip to replace his cell phone revealed that the bank had not authorized him tobuy a new device and that his corporate credit card had been cut off.

He alsojokingly chided one analyst who referenced the company's 1.80% return on assets."Don't miss those 3 basis points," Allison said.

Allisonsaid that the bank's focus is on holding and expanding its net interest margin."Our team in the field is pushing hard on renewals, new originations is thesame thought process. We still take every loan one at a time. Some of these meetingsare long … but we go back, we push to get an extra quarter of a point, we push toget just a little bit more on each deal," Allison said.

Executivesalso downplayed the impact that the growing focus on commercial real estate willhave on their business, despite the fact the bank is operating with a concentrationin excess of the level at which regulators have said they could ask banks to holdhigher capital levels.

"Wefully intend to keep doing what we're doing. We're doing everything that we canto continue show the examiners that we understand our risks and exposures,"Kevin Hester, chief lending officer with the company, said.

An SNLanalysis showed that thecompany's main subsidiary, CentennialBank, had CRE assets totaling about 364.1% of its risk-weighted capitalat the end of the first quarter.