Bank’s buying power is noted

LITTLE ROCK — Home BancShares, which bought its sixth Florida bank of the year on Friday, still has the resources to buy another $2 billion in assets from failed banks, a Stephens Inc. analyst said Monday.

The six banks Home BancShares acquired had a total of $1.4 billion in assets. With its resources, the Conway-based bank, which owns Centennial Bank, still would remain well capitalized if it acquires another $2 billion in assets, Stephens analyst Matt Olney estimated in a research report Monday. The bank has used only about 40 percent of the $107 million it raised last year in a stock offering, Olney said.

“They are definitely looking for more assets. It’s just a matter if that amount of assets will come up in the markets they want,” Olney said in an interview.

Olney owns no stock in Home BancShares, but Stephens was the lead underwriter when Home Banc-Shares went public five years ago. Stephens also markets Home BancShares stock and expects to be paid for investment banking services by the bank in the future.

Home BancShares closed at $20.69 Monday, down 5 cents, in trading on the Nasdaq exchange. Olney expects Home BancShares to trade as high as $27 a share within a year.

On Friday, Home Banc-Shares bought Gulf State Community Bank of Carrabelle, Fla., which has $112 million in assets and five branches in the Florida panhandle.

“What makes it good for [Home BancShares] is that they already have a presence in those markets,” Olney said.

With its purchases of Wakulla Bank and Gulf State Community Bank, Home BancShares now has the No. 1 market share in Franklin and Wakulla counties, with more than 58 percent of the deposits in the market.

The two counties have a total population of about 44,000.

Home BancShares has “No. 2 market share position in its combined Florida markets,” Olney said.

The four most recent purchases have been in the Florida panhandle.

“Some Arkansas residents like to vacation in the Florida panhandle. The panhandle is a below-the-radar investment they are making, and I think it’s going to turn out well,” Olney said.

Home BancShares has said it is interested in buying more banks in the areas where it already has branches. There are53 banks in Florida that could be sold because of their poor financial condition, Home BancShares said in its news release Friday.

“There will be a lot more banks that will fail in the Orlando area,” Olney said. “But there will be a lot more banks bidding on those. So there’s more supply there, but more competition. In the panhandle, there will be fewer that fail but there will be a lot less competition bidding on those [banks].”

Nationally, the smallest banks will not be able to remain in business for a long time, said Tim Yeager, an associate professor of finance at the University of Arkansas at Fayetteville.

“Academic research has shown that banks under $100 million are at a competitive disadvantage,” Yeager said.“Those are the banks that are under pressure right now. That doesn’t mean that every one is going to fail or sell out. But over time, we’re going to see that market size shrink.”

The Florida economy has been bad for two years, primarily because of the collapse of the real estate market.

“Florida still has a couple of years to go in terms of working through its [declining] property levels,” Yeager said.

But now is a good time to buy banks, Olney said.

“Florida will come back,” Olney said. “Unfortunately, Florida has seen this boom-to bust cycle many times in the last 80 years. That is really opposite from Arkansas, which has been pretty steady. But eventually Home BancShares is going to have a very impressive Florida franchise.”