John Allison - Chairman Randy Sims - President and CEO Tracy French - Director Donna Townsell - Senior EVP Brian Davis - Treasurer and CFO Jennifer Floyd - Chief Accounting Officer and IR Officer Kevin Hester - Chief Lending Officer Stephen Tipton - Chief Operating Officer

Brady Gaily - KBW Michael Rose - Raymond James Jon Arfstrom - RBC Matt Olney - Stephens Incorporated Peyton Green - Piper Jaffray Joe Fenech - Hovde Group Brian Martin - FIG Partners

Greetings, ladies and gentlemen. Welcome to the Home BancShares Incorporated Third Quarter 2016 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 and 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 2016. At this time, all participants are in a 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. Allison.

Thank you, [Indiscernible]. Welcome everyone, welcome to Home BancShares third quarter conference call and earnings released. In attendance today is Randy Sims, Tracy French, Kevin Hester, Brian Davis, Jennifer Floyd and we have a new member of our group Stephen Tipton. So he’s kind of being, he is the Chief Operating Officer and I want you all to ask him lots of question, and we’ll see how you handle this pressure. You need you need to go back to the first quarter of 2011 to see where this run started. 23 record quarters in a row, nice run for our company and a powerful return for our shareholders. Home BancShares compound annual return is about 20% since the company plunged into the public arena in June of 2006. And I looked a while ago, and that’s why we are earning $14 million a year. I think we were proud of the team, we are proud of what we are earning today. Many of you have been with us since 2006, and I want to thank you for your loyal support. Let me take this opportunity to clear the air of my recent stock sale. My wife, children and I own about 11 million shares of Home BancShares, and after the sale we still own over 8 million shares and it is still my largest asset. This sale was a one in done with the sole purpose of the state planning and liquidity for my family. I tell it like it is. When I stepped down as CEO and Randy Sims took over back many years ago, after that I would not become a spectator and I haven’t done that. And I don’t intend to become one now. I’m not sick, I’m not tired, I’m not leaving and my enthusiasm for this company has never been strong as well as the performance of this company has never been better. As a businessman looking at it, if something happened to me there would be a cloud of 11 million shares hanging over the market, and for certain my family would be forced to sell the stuff. That is off the table now. I did it, I fully transparent public offer with full disclosure and incurred all the expenses offering myself. Enough is said about this and hopefully this is put to bad [ph]. The real numbers that are important are 23, 42 excuse me, 22, 436, 33, 3651, 190 and 425. Those are really the numbers that make sense. 22% increase in earnings, $43.6 million in quarterly earnings, $0.33 per share ex loan share, efficiency ratio of 36.51% a 190 ROA versus a 183 that we were bragging on last quarter with a goal of 2%, sustained organic growth, good asset quality, I think our non performance Kevin, did it pick up a little bit? Just a..

Just a little.

Just a little bit. We added the loss shares, the ones of the loss share to it, so it’s just a pick on that said, Kevin will tell more about that today. Strong margin of 425, I probably should start with that. We are 424 at last quarter and 425 this quarter. On the M&A side, we have not been aggressive; we have not had our foot on the accelerator in '16, in 2016 because of the $10 million mark. We are continuing to see in a positive direction on a Florida transaction that we mentioned in earlier conference calls. We will be more active in 2017 and 2018 and after crossing the $10 million mark. I have watched some of our friends leap over the mark and I recently, I thought that slot would be in the best interest of Home BancShares to leap over the $10 million. We were in total agreement with that strategy, however we have changed our man and decided to crawl over because the beat backs is already pretty much cooked into our runway and all we lack is the cost of the [Indiscernible] which is 6.6 to 9 million depending on which month you annualize. There are plenty of opportunities in the market place. There are 2 billion [Indiscernible] and $8 million mikes and lots of threes fours and five, 3, 4 and $500 million mark. We are just looking for the one that moves the needle. I can assure you we will remain extremely disciplined on M&A as we own all aspects of this company including loan and loan process. I am pleased with the quarter and I hope you are as well. I would be remiss if I did not thank [Indiscernible] for years of committed and tireless efforts to the efficiency ratio of this company. She noted to me that working for only efficiency ratio of this company and working with the investment community has by far been the highlight of her career. So far, I will personally miss her, however I think with her the knowledge of the executive branch of this company merger and acquisitions, operations, efficiency, technology and [Indiscernible] coupled with a marginal major and Townsell will continue to excel in her new responsibility as Head of Marketing for the Corporation as she has met her challenges of the past. Operating inside this executive bubble of this company is really like getting a PhD in business anyway. Good luck to you Donna and Mr. Sims.

Well thank you Johnny. As Johnny detailed, we had a very good third quarter and on a year-to-date basis, it looks like we are in a very good position entering the fourth quarter to achieve our goals for 2016. I know Johnny discussed many of the numbers today, but we have a great team on hand to tell you about the third quarter and give you a little more color. So let’s get into the numbers. I’ll start with net income. But I would like to remind everyone that we did have a $3.8 million FDIC loss share buyout expense. We were very pleased to get this completed with the FDIC. With that said, net income for September 30, was 43.6 million, compared to 35.7 million for the third quarter of 2015 or a 22% increase or 7.9 million. Diluted earnings per share for this quarter were $0.31 per share compared to $0.26 per share split adjusted for the same period in 2015. Those are great numbers, but if you exclude the FDIC loss share buyout diluted earnings per share for the third quarter of 2016 were $0.33 as Johnny detailed. We are very pleased with our net income for this quarter as we continued the momentum of growth in EPS. If you look back over the year, our company continue to search for opportunities to maximize those metrics that increased earnings for the benefit of the shareholder, which leads me to my favorite part of the report. Even though Johnny said it, I want to say it again. That is now 22 consecutive quarters of record income for Home BancShares. Now, let’s just savor that a little bit. And I’ll say it one more time that is now 22 consecutive quarters of record income for Home BancShares. And that’s it. So as of September 30, the corporation is sitting a little less than $9.8 billion. Deposits ended the quarter at 6.8 billion with growth of over 127 million for the quarter. Time deposits represent 19.4% of total deposits. Our return on average assets for the third quarter was 1.90%, excluding the FDIC loss share buyout, that is another milestone for our company and again is evidence of the overall improvement each and every quarter. We are getting closer to that 2% that our Chairman would love to see. All regions continued to improve with few exceptions. Congratulations to our entire group of bankers. Our core return on average assets that are excluding intangibles, amortization, provisions for loss losses, merger expenses, gains on acquisitions, the loss on the FDIC loss share buyout and income taxes and that’s a mouthful was 3.43% for the quarter, as compared to 3.24% for the same period in 2015 and as compared to last quarter of 3.33%. Our return on average TCE excluding intangible, amortization for the quarter was 20.01%. These are all strong numbers, in fact if you look at the last four or five quarters, our total revenue continues to climb upward as a result of strong organic loan growth and a consistent and disciplined margin excluding accretion yield on purchased loans. Then combined the control of our expense, and you get an outstanding efficiency ratio with the result of record income. Our success continues to be our progress and improvement in these key components, which will now be discussed in more detail by our management team. So I would like to turn it over to Centennial’s CEO, Tracy French to give a additional color and his comments on our performance.

Thank you, Randy. Another solid quarter for our company. I could not be more proud of our talented and hardworking bankers for making our 2016 third quarter the best one yet. As the number show the efforts of all of our groups are rewarding. The regional networks along with other profit centers just simply get better and better and with those results it’s good for our shareholder. Our lending groups remain focused on underwriting for strong credits and have been booking volume across all regions. While we see past through normal commerce in completed projects, Kevin Hester and all of our regional Chief Lending Officers the pipeline looks to keep them very busy. When looking at the performance numbers, Johnny I did see two important ones that have decreased, over efficiency and past due loans. And so my guess is you are probably okay with that. And while we have been a little quiet on the M&A activity this year, our due diligence teams are busy working with some nice banks, but more importantly good bankers. We have stayed the course from growing and maintaining our capital, growing our revenue, holding our net interest margin strong, managing our risk while implementing services and technology to enhance our customer relationships that will deliver short and long term -- guide. We look forward to solid finish in 2016 and look forward to the opportunities that 2017 will create. Randy.

Well said, Tracy thank you. The total number of active Centennial branches is 143 with 77 in Arkansas, 59 in Florida and six along the beautiful Alabama coastline. In addition to that is our New York office. I would now like to turn it over to Stephen Tipton our Chief Operating Officer and new to the group who will fill you on some of our income methods, efficiency and key operational matters. Stephen, welcome.

Sure Randy. Thank you Mr. Allison, it’s an honor to be part of this group. As has been said congratulations to our team of bankers and departmental managers on the continued improvement in all operating metrics of this company. I am pleased to report a core efficiency ratio for the third quarter of 36.51%. On a linked quarter basis, all components of the ratio improved. Most impressively we saw a total non-interest expense excluding the loss share buyout improved by $410,000, an impressive number seeing the growth that we have seen this quarter. We continue to focus on opportunities for additional revenue that will further improve our efficiency ratio. This quarter we were pleased to see the SBA department contribute along with Michael Pal and his mortgage team who had another strong quarter. On the expense side, our teams continue to leverage their existing infrastructure and spend money wisely to support their communities and generate revenue. The branch activity continues as we evaluate our existing footprint and opportunities in other market. We are excited about the new daily location in Southeast Florida and the addition of deposit operations in our New York office. On the deposit side, we continue to work on our mix and pleased to say we are now below 20% as a percentage of CDs to total deposits. And in addition, we continue to see very solid increases in non-interest bearing and low cost checking accounts. We are very proud to see both sides of the balance sheet grow, loans and deposits while continuing our discipline on pricing, focusing on cultivating relationships rather than buying the business, and improved core net interest margin is a direct result of the hard work of all of our talented bankers in our footprint. Thank you, Randy.

Net interest income, margin and non-interest expense all will now be covered by our CFO Brian Davis. After that Brian will pass it to Jennifer Floyd, our Chief Accounting Officer to give us more information on our capital numbers. Brian?

Thanks, Randy. It’s exciting when our company is able to report the strong numbers as we did in the third quarter of 2016. Excluding the FDIC loss share buyout expense we were able to report an impressive quarterly ROA of 1.9%. That is impressive. During the third quarter of 2016 we increased net income excluding loss share buy-out experience about 2.5 million from 43.5 million in Q2 to 46 million in Q3 for an annualized increase of 22%. Net interest income increased 2.6 million to 103.7 million in Q3 versus 101 million in Q2. The yield on loans increased slightly from 5.81% to 5.84% on a linked quarter basis. The cost of loans experienced a slight increase from 45 basis points in Q2 to 46 basis points in Q3. As a result, the net interest margin on a fully taxable equivalent basis increased slightly to 4.86% for Q3, compared to 4.83% for Q2. Because of the company’s significant number of historical acquisitions, our net interest margin was impacted by 11.9 million of accretion income for the fair value adjustments recorded in purchase accounting during Q3, compared to 11.0 million during Q2. Excluding the accretion income and the associated loan discounts, the company’s net interest margin for Q3 2016 was 4.25% on a non-GAAP basis, compared to 4.24% in Q2 2016. While the company’s yield on loans for Q3 2016 improved by 1 basis points to 5.10% on a non-GAAP basis, compared to 5.09% in Q2 2016. Non-interest income was up 242,000 in Q3 2016, compared to Q2 2016. It was another record quarter for our mortgage lending income with a $451,000 increase from Q2 to Q3. Excluding the FDIC loss share buy-out expense non-interest expense was down 410,000 in Q3 compared to Q2. As a reminder, the second quarter of 2016 included 1.2 million of revaluation expense from our closed branches as we updated the appraisal on a few of these facilities. During the third quarter of 2016 there was not any revaluation expense. Currently, we have 12 vacant properties we are marketing with a book value of 5.4 million. Also, as we approach the 10 billion asset mark, we’re now incurring cost in preparation for DFAST which were 236,000 in Q3 and 233,000 in Q2. With that said, I'll turn the call over to Jennifer.

Thank you, Brian. And now for our third quarter capital results. As of September 30, 2016, we ended the quarter with $1.3 billion of capital and $57 million of cash as a parent company. During the third quarter of 2016, we paid our shareholder dividends of 12.6 million while growing retained earnings by $31 million. For the third quarter our common equity Tier 1capital was $898.9 million, total Tier 1 capital was $957.9 million, total risk based capital was $1.03 billion and risk weighted assets were approximately $8.2 billion. As a result our common equity Tier 1 capital was 11%, compared to 10.6% at June 30. Our leverage ratio was 10.4%, compared to 10.1% at June 30. Our Tier 1capital was 11.7%, compared to 11.3% at June 30 and our total risk based capital was 12.6%, compared to 12.2% at June 30. Additional third quarter capital ratios include book value per common share, which was $9.22 compared to $9.01 at June 30. Tangible book value per common share was $6.40, compared to $6.18 at June 30 and $5.71 at December 31, which represents an annualized increase of 14.16% on a linked quarter basis. And finally our tangible common equity ratio was 9.6%, compared to 9.4% at June 30. Randy?

Thank you, Jennifer. And with that you have most of the numbers, so it is time to turn to loans. And let switch to our Chief Lender, Kevin Hester, who will give us more details and color.

Thank you, Randy. As previously mentioned, organic loan growth for the third quarter totaled $90 million, which represents annualized growth rate of 5%. New York and Florida grew loans $72 million and $47 million respectively. Virtually all of these quarters loan growth was in C&I segment of the portfolio. Guidance for fourth quarter loan growth appears to be somewhere between that post in the last two quarters. Our market conditions appear favorable and most of our markets in asset classes. It can be ignored that the expansion phase of this business cycle is already 30 months longer than post World War II average of 58 months. We think they select even the latter part of this expansion phase while probably dampening today's loan will bear fruits when the end of the cycle does occur. Our asset quality ratios continue to be very strong and all improves on both the quarter over quarter and a linked quarter basis. Even with the non-linked phase to non-accrual loans due to the end of loss share, both the non-performing loan and non-performing asset ratios decrease slightly this quarter to the lowest level since before Bay Cities Bank acquisition. As a result of the slight percentage improvement in these ratios the ALLL coverage of the nonperforming loans increased slightly to a 127%. Our nonperforming balances are still elevated due to the level of problem loans acquired in the most recent acquisition, in addition to loans that have been moved to non-covered have to be in the loss share, but all are being worked aggressively. Past dues improved 5 basis points to 1.03% and net charge-offs at 21 basis points were right on the recent historic average. Allowance of loans losses as a percentage of loans increased 4 basis points to 1.07%. And if you added all the acquisition discounts to the allowance for loan losses, the combined figure would be 2.55%, which continues to drop as we amortize the acquisition discounts and since we haven't had recent acquisitions. I'd like to take this opportunity to thank our Chairman for the ability to hold our second Lender Summit last month, benefits that bringing over 200 lenders together in one location to talk about production, efficiency, team work envision are enormous. And I want to thank all of those revolves in preparation and execution to that event. It was a great success. Now Randy, I’ll turn it back over to you.

Thank you, Kevin. Well another good quarter. Let's just recap real quick, and I can't let you off without saying this one more time, record earnings for the 22nd consecutive quarter, ROI of 1.9% excluding the loss share buyout expenses, a strong core efficiency ratio of 36.5, a powerful margins, very good and improved non-interest income, loan growth of 90 million and great asset quality metrics, consistent and continued improvement in our major components. That really is what we're all about and we look forward to continued improvement as we close after year with the next quarter. And with that, I’ll now turn it back over to our Chairman, Mr. Allison.

Well, since everyone reported, I think we're ready for Q&A, [Indiscernible] are you there?

Yes, sir. We will now begin the question and answer session. [Operator Instructions] Today's first question comes from Brady Gaily of KBW. Please go ahead.

Hey, good afternoon guys.

Good afternoon.

So, commercial real estate, can you just remind, let us know where that finished just end of the quarter as a percentage of regulatory capital?

Kevin, would take that one.

Yes. We were about 115% in the construction bucket and around 360 in the overall which is basically flat over the last two quarters, a little bit of a decrease, not much, I call it flat.

Okay. And we've seen a lot of companies raise up debt to help keep their CRE as a percentage capital closer to 300% for those guys that are over, is that soften that, is on yours radar screen at all?

And that really, we've been – someone figure out the bucket and as we've been out of the bucket since year one, so we will continue to do what we do and we do a good job of commercial real estate and we're commercial real estate lenders and we'll continue to keep on keeping on.

Okay. And then, I think in the past you all talk about growing this CFG group by around $150 million a quarter, I mean obviously we haven't seen that last couple of quarters, but can you just update us on how you are thinking about CFG's growth going forward?

Well, CFG Chris and his team will take want they giving and his profitability, he has not hit. He had its own targets, his own goals, targets, growth targets, we didn't put any. Our attitude is, he takes what they're giving. We can't push. He'll probably go to $1.5 billion [ph] and we'll probably stop at that point in time, so at least catch our breath and back and take a look at it, but his growth has been a little slower, But he said there's not been payoffs.

Kevin.

Yes. They certainly have the payoffs just like other regions have along the way and right now it’s well over 900 million, so end of the year probably in the $1 billion range, there have been a billion billion plus, we've seen pickup a little bit here lately. I think his fourth quarter as all of our fourth quarter appears at this point to be pretty strong.

Okay. And then lastly for me, John, I think you talk about this quarter deal on a least last two or three quarters, what's the hold up? Is it pricing and then maybe not even necessarily for that, just M&A and general, you have announced the deal well over year, maybe little over year. Is it pricing or what's the main factor that keeping away from you there?

The main factors can be, we've had our foot on the accelerator and we didn't want to go over the 10 billion, I think you'll see our foot go back on the accelerator in 2017 and 2018, and you'll see things pickup. The acquisition that we've mentioned, we had some – they had a problem or two, we had a problem or two and we have to resolve those problems, those problems have been resolved. It is a good bank and with good people and we're moving forward with due-diligence on that and at bank and hopefully we'll have something for you.

All right. Great. Thanks for the color and congrats on another nice quarter.

Thanks, Brady.

And today's next question comes from Michael Rose of Raymond James. Please go ahead.

Hey, good afternoon, guys everyone.

Michael, how are you?

I feel great. Thanks for asking. I just wanted to dig into the loan growth a little bit. Even if you exclude CFG it looked like the core business was a little bit lighter than perhaps I was looking for. Was there any sort of paydown activity outside of CFG that we should be aware of or just kind of what happened at the growth slowed quarter to quarter?

Kevin.

Hey, Mike, this is Kevin. It was a combination of the production and payoffs. Production in the third quarter was about 80% of what it was in the second quarter and that's across the legacy group and payoffs were elevated little bit across the groups, so it was a combination of those two.

Any change in pipeline since quarter end?

The pipeline is strong. We need to get some stuff closed at the end of the third quarter that's closed in the fourth quarter, so pipeline and watch the pipeline and watch it real close as we will go over [Indiscernible] so it’s a situation watching that pipeline right now. Watching what you're doing. So, its business is very good let me say that. It is continue to be good. It was good. We had our meeting with our senior with all our lenders, 278 people met in Pensacola. And I asked them did you all take vacation in July and August? And it looked like it, we were actually down a little bit in July and not much was happening there. And in August we jumped up 30 million and then we ended up closing up [Indiscernible] we're going to be over 100, but we short between 120, 130, we didn't get it close, so it closed the fourth quarter and but its overall company as the business is very good.

Okay that is helpful. And maybe a follow-up, now you guys are out of lost share. How should we think about the impact depending on the margin going forward, not sure if there is a rate hike in December what that will do for you, but how should we think about the trajectory of the margin over the next couple of quarters?

Well, for the core margin we've done a pretty good job of holding the core margin. I believe that we can maintain the core margin that we have now, maybe increase it a basis point or two. The GAAP margin maybe a little more of a struggle, we've had in the first quarter we had 10.7 million of accretion income and I can thought we'll probably go to $10 million in Q2, whilst debt went to $11 million. And then after the second quarter I thought it will probably come back $10 million, well, it went to $11.9 million in Q3. It can't continue to go up from the accretion income. We had quite a bit payoff accretion, this quarter we have 4.3 million of our total accretion as payoff accretion. And then also we had some pool projects that we did on several of our newer acquisitions including liberty, and we were able to release about $2.5 million of additional accretion income that was on the non-accretable bucket and into the accretable bucket and we recognize another 400,000 which is included in that 11.9. So I think we'll probably struggle to get back to the 11.9 million will be consisted and predicted it goes again, so if I'm wrong, I'm wrong all year long. But because of the accretion income I think it will be struggle to continue with the GAAP margin going up.

Okay. That is helpful. Maybe one more for me. John in the past you talked about building loan loss reserves closer to $150 million over time. Credit keeps getting better or remains relatively benign. How should we think about that ratio growing and provisioning going forward? Thanks.

Well, we have kind of rule of thumb around here, we cover charge-offs plus 1% loan growth and we've done infrastructure in there, so we kick that up this quarter. We did an extra million dollars reserve if you see 107, we finish liberty deal we're at [Indiscernible] If we never quit buying banks we would get there, we keep buying banks and reserve is 107. I think we had some recoveries coming if we should – I thought we might have seen them by now, I think that will come in the fourth quarter or the first quarter too pretty size of recoveries just go in to loan losses. I think we talked about CRE and if there's a risk to CRE maybe we need to be a reserve, so rather than do equity I think maybe to be able reserves, but we really have a good quarter like we did this quarter, we put another $1 million in reserve for the quarter, over and above our normal 1% grew and our charges-offs, so we kind of look at this doing that, if we do $200 million loan growth next quarter we'll put about $2 million in there plus the charge-offs, that kind of the way we -- that kind of the rule of the thump, it’s not guaranteed around here, but when we get a chance to build reserves, we build reserves, it just something healthy about 150 reserve and that's held for years and [Indiscernible] reserve works. I guess when you take all the reserves we're about, and most about 255 [ph], so that's a good number to have to but, others lack of 150 reserves, it just always been have – operation First Commercial Corporation, I understand we got rules and regulation about how to get there, but that 150, I think everybody have 150, even though asset quality is great today and its get better, it won't always be here. We will cycle again sometime in those who have will burn to hat reserve first, those who have good reserve level will be rewarded, so we learn at the last cycle, its good lesson learn and hopefully Home will be prepared for the next cycle.

Great, guys. Thanks for taking my questions.

Thank you. And our next question comes from Jon Arfstrom of RBC. Please go ahead.

Thanks. Good afternoon everyone.

Hi, John.

Maybe somewhat of follow-up to Rose's question, but I guess on the loan growth part of this, Kevin, you talked about, you made a comment about being selective in the latter part of the expansion, are you guys starting to see anything that doesn't make sense or is it just healthy as can be at this point?

It's healthy, but I mean you see competition do things from time to time. It's not across the board, it’s not in every market, but it’s here and there you see advanced rates creeping up and you see people going longer for –lower for longer than you have seen, so for us it’s just picking the deals that make sense.

Okay, good. And then maybe comment little bit about Florida health how you feel about the Florida economy at this point?

I mean for us everything, all the markets look good, all the asset classic appear to be holding up and looking good. So, we were trying to watch that, that's part of the work we've done in CRE, the last 12 months we put a lot of effort in that reporting in the market analysis, so we're really trying to watch that almost in a real time nowadays and everything looks -- there is nothing out there that just looks crazy.

We are not seeing any crazy stuff. I'm looking for – well I looking for, I think we're looking for it and expecting it. We just not seen it.

Okay, okay good. And then a question on CFG you're almost at $1 billion and one number that stands out is the nonperforming level which is zero. I know you expected a pristine portfolio when the group came on board but have there been any close calls or is this just been a near perfect portfolio for you?

We had – if you remember we bought $296 million piece that Chris and his team has originated that I think flowers ended up with an we ended up bought it from flowers, and one of those which Chris has originated the whole $296 million piece that Chris and his team one of them went bankrupt. It was a Houston multifamily project. Bankruptcy, filed bankruptcy. And I thought here we go, we're going to watch this, so, we $55 million senior piece in that transaction. There were five bids and bankruptcy court and the low bid was $110 million. So the bad news is we got paid out, good news is we got paid off. And because of the structure they had with the mezzanine behind it’s a mezzanine would require to keep as current until

Mezzanine was required to keep its current, so it was a great lesson and we thanks the great underwriters and it was a great lesson to watch and see how well they under wrote that credit and because of the way they structure that and the capital stack we were well covered, well taken care of and they had to keep us current. So it's paid off that's one of the unexpected payoffs that Chris has had since we started. So, but it's well underwritten, we not see anything. They are so diligent. If they see some they get at and get with the customers and restructure, do something, fixed stuff, change stuff, give them additional collateral there, there are lots of touch, they only have 17 loans and of the 17 they may touch them all a lot, so that feel pretty good about watching

And the comment about being picky, we had an opportunity with that credit its paid off, to stay in it at a lower level, and Joe's it was time to exit that particular day.

Chris said, I think it’s time to go. We've been here, we've done this time ago, so that was their call.

All right, that's help, guys. Thanks a lot.

Thank you.

And our next question comes from Matt Olney of Stephens Incorporated. Please go ahead.

Hi, thanks guys. How are you?

Good, we're good. How are you doing Matt?

Doing great. I want to ask about expenses, another great quarter of cost controls. Anything of note going forward here on the core expense outlook from the 3Q run rate?

Well, we moved on ahead of marketing and gave it – and he improved. No, that's not, well thanks. Matter of fact, that all the down I will get it back. I mean the company is just hitting [Indiscernible] there, I don't expect expenses to go up this quarter. I mean I'm thinking that they hold where they are, we can pick up another capital $100 million where the loans is pore, I think it just going to -- I think that the efficiency is going to get better, I think the income is going to get better, so we have –I think we have the capacity that solve another $1 billion with the loans with adjusting infrastructure that we have and the people we have. Tracy, you got to comment on that?

No, sir, I know we just proved it over the past year little quite on the M&A part so we just focused it and I think that Steven and his team continue to focus on and but Johnny since I don't have the choice to make it better.

But Stephen you said it, you see that – you're going comment on.

I agree with Tracy, I think it’s back to the leverage that we can still pull over existing loan teams and regions out to the footprint. I think one of the key is just trying one of the key is the fact that Stephen has put together a set of reports that we really had, never had, so if something jumps up we allotted it a much quicker, the regional presidents are alerted to it much quicker and we can try to fix it or see what's going on.

Yes. We will act quickly to those situations as you know.

Okay. That's helpful. And then on the deposit side, I think this is the core what you're taken since deposits have been New York, I'm curious how that's progressing rather few expectation so far?

It’s doing good and we've certainly have increased our deposit base up there, we not had to raise interest rate to attract anything and that wasn't plan from the start as we're seeing there really what's going after the customer base that we currently have, so that's in place to there in similar over 50 million.

Yes. Little over $50 million in the past, it’s primarily from the customers that we have that we're doing some of the 70 plus [Indiscernible]. And we haven't raised cost funds by the way.

Got it. Thanks guys. Great quarter.

Matt, thank you.

And our next question comes from Peyton Green of Piper Jaffray. Please go ahead.

Yes, good afternoon. With regard to the expense outlook maybe not necessarily the fourth quarter Jon, but as you look at the 2017 and you are going to cross 10 billion in assets, is there – are there opportunities to maybe spend more to generate stronger growth and then stronger revenue growth or is the capacity really still there to drive the incremental billion?

I think we have, I don't think we need to spend any more money at this time, if we get our acquisition closed that will be a nice piece of business for us, they have a nice bank and good operations, good people, I think that will be an accretive transaction to us, we don’t do diluted transaction. We have – I think our team has a $1 billion actually a couple billion with capacity without spending a lot of extra money, so they just keep on, keep it on and I don't see anything.

I think you're right and the additions or that we could throughout 2017 what we've done this past year, I’ve been able to produce the revenue to offset the additional cost was in there and actually making the numbers force in all of our other profit centers that we have today.

Okay.

So actually, we feel pretty good where we are. This is good and we're pretty happy. We got a smile on our face around this table.

Okay, great. And then I guess with regard to the footprint lending that had a nice trajectory up over the last three quarters, but it pulled back in the third quarter. I know the third quarter can be seasonally a more challenging quarter. And thinking through like grew loans 43 million on the fourth quarter last year, 77 in the first, 130 in the second and I know you want to stay below 10 as of December 31. How would you characterize what you think the volume might be another footprint side?

Somewhere in between the numbers that you have, lower number you had it between those two its better than last quarter and it’s probably not that 100 for the quarter that you mentioned there? Okay. And then Brian would you just bring down cash and security if you had. Good growth Adam, the footprint.

That is correct. We are changing some of the pledging requirements right now and using our line of credit with federal home loan buying just secure some pledging of some of our investment portfolio. And if we need to sale $100 million of our investment portfolio in November, December we'll have that freed up and be able to do that and that one time we paid on federal home loan bank advances and shrink the balance sheet to $100 million.

Okay. And I guess the excess the overnight liquidity piece is about 175, do you think that goes back to more normal 50?

We did have some excess liquidity on the balance sheet, over $100 million at the end of this last quarter, we could have paid it down with our own place, I could it paid it now was some federal home land bank advances that we're not ready to mature between now and the end of Thanksgiving we’ve got $150 million of federal home loan banks advances that just mature. And so we'll use up all of our excess liquidities we have any that point in time. And they will run pretty tight on our cash position between then and at the end of the year.

Okay, great. And then maybe stepping back as you kind of have worked through a very strong year and the outlook seems a little bit muddled kind of nationally, not necessarily in your markets. What do you see, do you see the opportunity set for you getting better in 2017 versus 2016?

Well, key is call the cause, and don’t panic and don't jump and move, but the company is performing extremely well. We are more active on the M&A side excuse me, we’ve this $2 million bank and $7 million bank recently so we're more active on that side, which we cross the 10 and we cross the 10 we move on from there. I think nobody has been our opportunities in this entire market than home buying shares with the power of home buying share stock. We still do smart transaction. We will not a dump transaction, you see have placebo pay too much for deals, I mean it obviously get [indiscernible] taken off. We're not going to do that. So the opportunities for this company, on both the organic growth side coupled with M&A side. I think it was good as it ever been our lab every seen it in the history this corporation so I don’t – you will see homes slowing down, I think you will see, I think we rank community bank [indiscernible] America and I think you'll see and continue that path in the future. I don't see things stopping it, I don’t see thing held us back, but the transaction. The only thing I would back it would be pass and its only M&A side and we have this one we are, it accretive, accretive than we are good.

Okay, great. Thanks for the color. Really appreciate it.

And our next question comes from Joe Fenech of Hovde Group. Please go ahead.

So, most of my questions were answered, just a quick one now, when you touch on last response but you mentioned the whole range of potential acquisitions candidates 8 billion I think it couple of 100 million, but if you could draw it up, what's the perfect profile of a home target, not asking for a specific bank, but what's the general, what's the size range to the [Indiscernible] is it Florida, what's the profile of the bank you think would fit perfectly in 2017 for you guys?

That's pretty touch Joe, you go via bank that’s doing 180 or – excuse me, you don’t see any banks doing that. Your bank is doing 110 and 120 all the way, they look at the upside of that there's not a lot of upside for home bank here, you go buy a bond at $2 billion in our footprint and its due to three, fourth then you get some, it’s going to move your needles. So if it’s a little dirty then they bother us that what we made a lot of money. We have David Dore that runs South Florida to ran as you heard this store, part of our conceal was most profitable, most efficient operator we had in the company. He is running the bank in Florida that we bought [indiscernible] it’s 180 million bank and he's kicking out 2% on our way, so David needs another billion dollars with assets. So if we could find another billion dollar with asset geographically and that market for David that makes lots and lots of sense for us. So the truth is Jim Haynes in the panhandle who is now outside of New York, New York is a most profitable region and number two as Panhandle Florida run by Jim Haynes and his team in Florida and they have really done an amazing job and rank second in profitability in the company. So we'd like to see Jim and his team get some more add affects and we think there is some opportunities down there. We think three run the – takes more assets and David Carter in -- who took over the liberty deal, we’re looking at trade of two for David that could make some sense and he can take on another million dollars work add, so all the people capability everywhere but if its $2 million – geographically number one and which person will hand that off too and what is it due for and preferred one it was doing [indiscernible] because we will get to 180 or 190, this much you get it there pretty quick so that move the needle. I think that it’s pretty well distribution, anyway from zero for 8 billion, I don't know we're ready for 8 billion to that, but they are fast outlook here. Probably [Indiscernible].

Good stuff. I appreciate it.

And our next question today, comes from Brian Martin of FIG Partners. Please go ahead.

Hey, guys.

Hi, Brian.

Maybe just couple of things here just follow-ups, just on the CRE concentration you guys talked about earlier, I mean Charlie do you have any internal targets I mean I know you're going to operate what you do, but I guess internally other targets you guys have that you don't want to exceed?

I don't know that we have a much higher target than where we are today, but I guess you have to look at the portfolio and realize that years ago with HBCR in the game now with a quality of portfolio and the equity that’s in these deals maintaining good capital ratios, maintaining good loan loss reserves. I think that you can go a lot -- I mean I think it makes all the sense in the world, I’m not afraid to do that. I guess that’s my point, I’m not afraid to do that. Kevin.

We’re continuing to generate enough internal capital that we keep to offset the last couple of quarters. And we are watching the markets and we are looking at our underwriting and continuing to be conservative, even more conservative as we go along. So I mean, I’m comfortable going up from the levels that we are at, how much further I mean, I don’t want to draw a line there, I think we’ll keep looking at the market analysis and we’ll keep looking at our underwriting the deals that we are looking at and we’ll make that decision as we go. But I feel at 120 and 360 I’m comfortable going up from there no one what we know today.

Brian, our CRE team has put a tremendous amount of effort in over the past 18 months that is supporting that at that not only it’s great for our board of directors to see on a regular basis as we present to them regulators good to see that and our loan committee that Johnny talked about all the time which has been on loan committee since the inception I guess from new from all the credits and the types of credits that we have done. They make adjustments throughout the year, we don’t have a cookie cutter formula to do, if we think whether its one equity in there. If we have a commercial loans that we say hey that percentage maybe a little half of the guidance over there. We take it seriously and focus on it and we make that credit that makes it safe for the company, but watching Kevin and the CRE team over the past 18 months specifically the data and information that our board receiving and our management receiving our leaders that Johnny just mentioned a while ago on the field we certainly respected and watch it. And so we take a look and if we add a certain percentage to that, and we get an opportunity to make a group or a few loans on that, that go to the board we present it and we can adjust that figure as it --. It still comes back that is it a good well written, underwritten credit. Kevin Hester : We just send out loan officers in Pensacola. Great meeting. Get everybody on the same page and we looked at national trends, multi family kind of ticking at the little delinquency of multifamily.

What else was it guys.

Well we all know that the hospitality markets reaching out were demanding as flyer got across so you have to watch out especially in the markets that we are in.

Office, office, yeah office delinquency on office was picking up a little bit. So we shouldered the national trends and told them not to – we wouldn’t loan in that field. We wouldn’t loan in there, but we will loan there, we will continue to loan in there, let’s just get more equity in the video. And our attitude is that if we loan on a hotel, if we ran our hotels at $40 a night and still catch [Indiscernible] in our basis in there, then it’s worth an opportunity for us to go forward. For other people have to get $130, $140 of that and we ran out of $40 of that and it is still cash flow for us. So if we take it back, so that’s kind of how we are looking at. We are going to continue the loan end of those markets. We just want more money in the deal, want more protection, call it more insurance, call it more conservativeness, but that’s what we are looking at.

I got you. That’s helpful. And the last couple of things, Johnny you talked initially about kind of maybe crawling over the 10 billion versus leaping. But then later on it seems like you are kind of holding out for a target that has more scale. I guess is that what you're thinking about it? The latter going more scale than the smaller deals as you get more aggressive in 2017 and 2018?

We’ll take what they give us. Brian, if they give us a deal in the market place David, [Indiscernible] then we’ll take a strong look at the deal, but I don’t care about the size, it’s what the trade is and what it does for us. I mean you see people buying $2 billion and $3 billion and $4 million deals, they will do anything for them. They will add EPS. Actually they could possibly dilute or they have to get one hell of an hour away out of those new assets to get – jut to get anything. So I don’t know, I put you kind of [Indiscernible] I like to be in front of that deal, so if it’s a $400 million or a $600 or an $800 or $2 billion or [Indiscernible] So depends on what we do any of those, I don’t know it depends on the one who makes the most sense that moves the needle, that is a geographic fit for us. I know that I’m not really answering your question, but I can’t. There is no, it’s not cookie cutter. It’s not a cookie cutter.

Okay I got you. And then just the last thing, maybe one for Brian. You talked about the cost, the expenses from crossing the 10 billion Brian; I think there are 230,000 this quarter. What will those ramp-up to in 2017? Is it just the steady increase from where we are at? Or is there a big amount?

No, that’s not really right. Because when we cross in the first quarter of 2017 that means that we are not going to have to file our report until July 1st of 2019. I have asked my team to do a practice run and have it ready for July of 2018. But for next year, I mean it should be a $1 million and that should be about all that it cost us for [Indiscernible]. So I’m not just very much for the increase for next year.

Hey [Indiscernible] about the amount of million dollars. And I say what is that? [Indiscernible]

Well I mean we got a million dollars built into our run rate now and I think we’ll have a million dollars in our run rate next year and then the year that we have to go, all we have to do some validation of models and things like that and so the cost will start piling up the demand and so when we actually have to do the – transmission they will probably run it up from 1 million a year to 2 million a year.

Yeah, I got you. I appreciate the time nice quarter guys.

Thank you.

And this concludes the question and answer session. I would like to turn the conference back over to Mr. Allison for any closing remarks.

Thanks, Rocco. Thank you all for your participation and your support of this company. We work hard. We’ll continue to be working hard. We are looking for the next rate. The company is performing extremely well. That is an example performed. And the history of this company as Randy Sims, what did you say – how many of that. What is that?

Four consecutive quarters of record income.

How many years is that?

Well let’s see...

[Indiscernible] Thank you. Hopefully next quarter we’ll be 23 and when we will hit 24 that will be 6 years. So, thank [Indiscernible]. When we break the 35% efficiency, I don’t know if we got the red Wolf fans or the ECA band or the Razorback fighting band coming in. But we are not going to do [Indiscernible].Anyway, thank you for your support. We’ll talk to you all later.

And thank you sir. Today’s conference has concluded. And we thank you all for attending today’s presentation. You may now disconnect and have a wonderful day.