HOMB PPT

Student Managed Investment Fund

Financial Sector

Scott Nunez – Sector ManagerPooria Dariush – Associate Manager

Laura Takacs – Analyst

I. Economic Data

II. Industry Outlook

III. Company

Information

IV. Company Drivers

V. Company Analysis

VI. Valuation Analysis

VII. SummaryTable of Contents

Economic Data

Economic Data

GDP 4th Quarter 2.2% Inflation Rate -0.1%Unemployment Rate5.5%-------------------------------------

Industry DataFed Fund Rates for Nov. 0.15%3-Month Treasury 0.01%10-Year Treasury 1.88%

FY 2

005

FY 2

006

FY 2

007

FY 2

008

FY 2

009

FY 2

010

FY 2

011

FY 2

012

FY 2

013

FY 2

014

FY 2

015

-$50,000,000

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

Revenue Interest rates

As interest rates are expected to rise so will banking revenue at an expected rate of 7.4% annually.

Industry Outlook

Banking Outlook

38%

25%

10%

3%

15%

5%

Retail Banking

Checkings & Savings Credit Cards Personal LoansCDs Mortgages Other

6%

26%

17%

50%

Commercial Banking

Business loans Auto LoansMortgage Lending Basic Investment Products

Company Info.Company Information

Market Data

52-week high 35.0052-week low 27.60Previous close 33.95Market Cap 2.32BOutstanding Shares 67.58MBeta 1.39EPS (ttm) 1.70Trailing P/E Ratio 20.19

CatalystsTransparent Business ModelFavorable Long-term prospectsOperated by Honest and Experienced ManagementAvailable at a very attractive price

Eagle Materials [Ticker: HOMB]Home BancShares, Inc. (Home BancShares) is a bank holding company. The Company is primarily engaged in providing a range of commercial and retail banking and related financial services to businesses, real estate developers and investors, individuals and municipalities through its wholly owned community bank subsidiary. The Company’s subsidiary is Centennial Bank (the Bank). The Company provides loans to single and multi-family real estate, residential construction and commercial buildings.

Home BancShares Inc.

Stock Performance

Company Overview

Key Highlights Continuous growth Stable through downturns (Early 2000’s, 2008/2009) Cheap customer acquisition

2008 2009 2010 2011 2012 2013 2014 2015E 2016E0

0.5

1

1.5

2

2.5

Earnings Per Share

2008 2009 2010 2011 2012 2013 2014 2015E 2016E0

50

100

150

200

250

300

Operating Income2014 Revenue

Interest Income

Non-Interest Income$309 Million

Company Drivers

Branch LocationsArkansas (82) Alabama (7)Florida (61)

• Central Arkansas

• North Central Arkansas

• Northeast Arkansas

• Northwest Arkansas

• Baldwin County

• Central Florida

• Panhandle Florida

• South Florida

S.W.O.T. AnalysisStrengths• Unique business model• Strong balance sheets • Outstanding credit quality• Exceptional community reputation

• Experienced executives and board members

Opportunities• Well established position with a

well defined market niche

• Non-cyclical to economy

• FDIC-assisted acquisitions

• Neutral to foreign markets

• Hire experience bankers with strong community relationships

Weaknesses• Brand recognition

• Lower lending limits

Threats• Competitive landscape

• Constant financial regulations

• Interest rate instability

Risks

Economic volatility

Government regulations

Interest rates

Competition from other financial institutions

Economic conditions continue to improve

Home Bancshares continues to mold to new regulations

Home Bancshares generally does not retain long-term, fixed-rate real estate loans in portfolio

Strong reputation and consistent business practices

Key Risks

Risk Mitigation

Value Added Matrix

Drivers

Strategy

Advantage

Acquisitions Organic Growth De Novo Branching

Largest contributor to growth

Attractive financial opportunities

High return growth Untapped markets Maximize shareholder

returns

Maintain previous banks deposits

Expand business opportunities

Cheap customer acquisition

Economic landscape is improving

Focus in on large markets to maximize potential

Lending to credible borrowers

Experienced banking officials

Strong banking reputation Quick decision making

Further increase deposits in new locations

Strategically placed branches

Evaluate potential market areas of interest

Superior operation execution

Sound strategic choices

Executive Directors

Name(age) Since/Started Position

John Allison (68) 2009/1998 Chairman of the Board

C. Randall Sims (60) 2015/1998 President, CEO, Director

Robert Adcock (66) 2007/1998 Independent Vice Chairman of the Board

Randy Mayor (50) 2010/1998 CFO, Treasurer, Director

Brian Davis (49) 2010/2004 CAO, Investor Relations Officer

Kevin Hester (51) 2010/1998 Chief Lending Officer

Tracy French (53) 2015/2002 Director

Thomas Lounge (52) 2014 Director

Various (59-72, avg- 67) 2003-2011, avg- 2005

Independent Directors (7)

Company Analysis

Liability Distribution

1-Year Default FY 2012

FY 2013

FY 2014

Probability 0.0045%

0.0041%

0.0118%

Risk IG3 IG3 IG4

2010

2011

2012

2013

2014

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Historical Liability Allocation (In Thousands)

Total Deposits LT Borrowings Current Portion of LT DebtSections Sold Under Repo Other Liabilities

2010 2011 2012 2013 2014 2015E0

1

2

3

4

Acquired Banks per Year

FDIC Acquistions Normal Acquistion

Growth Outlook

2011 2012 2013 2014 2015E 2016E26.00%27.00%28.00%29.00%30.00%31.00%32.00%33.00%34.00%35.00%

Net Income Margin

2011 2012 2013 2014 2015E 2016E $-

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

Interest Income

2011 2012 2013 2014 2015E 2016E $-

$0.50

$1.00

$1.50

$2.00

$2.50

EPS (Adj.)

Operating Goals

Outstanding Credit Quality

Improve Profitability

Hire Experienced Bankers

Maintain “Fortress” Balance Sheet

  2010 2011 2012 2013 2014

Profitability

Net Interest Margin 4.27% 4.69% 4.70% 4.39% 5.37%

Operating Margin 13.01% 46.20% 49.63% 43.00% 48.97%

Efficiency Ratio 45.79% 50.65% 49.20% 53.91% 43.93%

Management Effectiveness

  Return on Assets 0.55 1.49 1.61 1.20 1.59

  Return on Equity 3.54 11.74 12.74 9.81 12.18

  Return on Capital 2.18 7.32 8.61 6.18 6.72

Balance Sheet Strength

Total Debt-to- Total Assets 7.87 6.92 5.32 8.40 12.63

Interest Rate Sensitivity 120.2% 121.3% 116.2% 92.1% 85.0%

Tier 1 Ratio 16.69% 17.04% 13.94% 10.88% 12.55%

Fundamental Analysis

Increasing Efficiency

Strong Returns Greater

Leverage

Valuation Analysis

Comparable AnalysisNarrow Competitors

Bank of OzarksIberiabank Corp

Hancock Holding CoTrustmark Corp

Greater Margins Greater Efficiency Better Liquidity

Management Effectiveness

HOMB Narrow Competitor

Broad Competitor

ROA 1.63% 1.27% 1.17%

ROE 12.25% 9.97% 9.51%

ROIC 9.19% 7.60% 7.09%

Efficiency Ratio 42.59% 59.41% 60.35%

Financial Strength HOMB Narrow Competitors

Broad Competitor

Common equity to Capital

66.79% 63.59% 66.14%

Tier 1 Ratio 12.55% 12.03% 12.20%

Total Debt to Total Assets

6.88% 6.98% 6.30%

Profitability Ratios

HOMB Narrow Competitors

Broad Competitor

Net Interest Margin

5.14% 4.38% 4.08%

Revenue 3yr Avg Growth

22.61% 5.39% 5.39%

Operating Margin 52.53% 35.82% 35.77%

FCF Margin 67.81% 33.22% 35.77%

Valuation

Buy

Current Price $33.95Target Price $44.04% Upside 22.9%

Average

ANR

DDM

P/TBV

P/CF

MV/ Avg Shares Comp

$25.00 $35.00 $45.00 $55.00

Min to MedianMedian to Max

Valuation Metrics

HOMB OZRK IBKC HBHC TRMK

P/FCF 8.65x 67.96x 22.68x 7.56x 8.32x

P/E18.61x 23.86x 16.56 14.37

x13.41

x

P/TBV 3.23x 3.78x 1.65x 1.44x 1.62x

Market Cap/Revenue 5.71x 8.05x 3.20x 2.65x 2.76x

DDM Assumptions

Growth Rate 10.77%

Cost of Equity 11.64%

Dividend/Share $0.40

Summary

Summary

Transparent Business Model Favorable Long-term prospects Operated by Honest and Experienced Management Available at a very attractive price

Buy

Current Price $33.95Target Price $44.04% Upside 22.9%

Catalyst

6/1/2014 7/1/2014 8/1/2014 9/1/2014 10/1/201411/1/201412/1/2014 1/1/2015 2/1/2015 3/1/2015 4/1/20150.00%

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Analyst Reccomendations

Buy sell Hold 12 mnth tgt Price