H. MAURICE MITCHELL (1925-2011) WILLIAM H.L. WOODYARD, III (1945-2014)
MICHELE ALLGOOD JOHN K. BAKER SHERRY P. BARTLEY TRAV BAXTER R. T. BEARD, III BENJAMIN D. BRENNER1 JASON T. BROWNING MICHELLE L. BROWNING JOHN S. BRYANT C. DOUGLAS BUFORD, JR. BURNIE BURNER2 FREDERICK K. CAMPBELL3 CHARLES B. CLIETT, JR.4 ADRIA W. CONKLIN5 KEN COOK COURTNEY C. CROUCH, III ELISABETH S. DELARGY6 JILL GRIMSLEY DREWYOR7 JANE W. DUKE DOAK FOSTER3 | BYRON FREELAND KAREN P. FREEMAN5 ALLAN GATES3 KATHLYN GRAVES HAROLD W. HAMLIN MEGAN D. HARGRAVES L. KYLE HEFFLEY8 BEN D. JACKSON ANTON L. JANIK, JR. 9 WENDY L. JOHNSON MARGARET A. JOHNSTON M. SAMUEL JONES III JOHN ALAN LEWIS D. NICOLE LOVELL AMANDA L. MACLENNAN2 WALTER E. MAY BRUCE MCCANDLESS III10 CHRISTOPHER A. MCNULTY LANCE R. MILLER STUART P. MILLER T. ARK MONROE, III3 JENNIFER R. PIERCE BRIAN A. PIPKIN CHRISTOPHER D. PLUMLEE JULIE M. POMERANTZ11 |
425 WEST CAPITOL AVENUE, SUITE 1800 LITTLE ROCK, ARKANSAS 72201-3525 TELEPHONE501-688-8800 FAX501-688-8807 | SCOTT PROVENCHER LYN P. PRUITT CHRISTOPHER T. ROGERS J. SCOTT SCHALLHORN 12BARRY G. SKOLNICK 3DERRICK W. SMITH STAN D. SMITH MANDY L. STANTON ZACHARY T. STEADMAN CLAYBORNE S. STONE 3JEFFREY THOMAS MARY CATHERINE WAY WALTER G. WRIGHT, JR. 5TOD YESLOW
MATT BRUNSON 8BRYCE G. CRAWFORD 14LAUREN DILIZIA 2LANA L. FREEMAN ASHLEY L. GILL DAVID F. KOEHLER 13BETHANY N. MARSHALL 2REBECCA PATEL BRITTANY H. PETTINGILL KENDRA PRUITT | 15SAINABOU M. SONKO GRAHAM C. TALLEY
COUNSEL JOHN E. ALEXANDER MELISSA BANDY 16DAVID N. BLACKORBY CRAIG R. COCKRELL MORRIL H. HARRIMAN, JR 5MARTHA MCKENZIE HILL 17GINGER HYNEMAN KELLY MARCHAND 18NATHAN A. READ 2STANTON K. STRICKLAND ALBERT J. THOMAS III
OF COUNSEL W. CHRISTOPHER BARRIER JOSEPH W. GELZINE DONALD H. HENRY 19HERMANN IVESTER ANNE S. PARKER JOHN S. SELIG MARCELLA J. TAYLOR RICHARD A. WILLIAMS | ||||
1 ADMITTEDIN CALIFORNIAAND ARKANSAS 2 ONLY ADMITTEDIN TEXAS 3 ADMITTEDIN DISTRICTOF COLUMBIAAND ARKANSAS 4 ADMITTEDIN ARIZONA, TEXASAND ARKANSAS 5 ADMITTEDIN TEXASAND ARKANSAS 6 ADMITTEDIN TENNESSEEAND TEXAS 7 ADMITTEDIN OKLAHOMA, MISSOURIAND ARKANSAS 8 ADMITTEDIN MISSOURIAND ARKANSAS 9 ADMITTEDIN COLORADOAND ARKANSAS 10 ADMITTEDIN DISTRICTOF COLUMBIA, NEW YORK,AND TEXAS | WRITER’S DIRECT DIAL 501-688-8866
March 29, 2017 | 11 ADMITTEDIN GEORGIAAND TEXAS 12 ADMITTEDIN NEW YORKAND PENNSYLVANIA 13 ADMITTEDIN OKLAHOMAAND ARKANSAS 14 ADMITTEDIN ALABAMA AND TEXAS 15 ADMITTEDIN GEORGIA, NEW JERSEY,AND NEW YORK 16 ADMITTEDIN ARKANSAS, ARIZONA, OREGON,AND TEXAS 17 ADMITTEDIN TENNESSEEAND ARKANSAS 18 ADMITTEDIN ARKANSAS, NEW JERSEY,AND PENNSYLVANIA 19 ADMITTEDINTHE U.S. PATENTAND TRADEMARK OFFICEAND ARKANSAS ALL OTHERS ADMITTED ONLYIN ARKANSAS |
Mr. John P. Nolan
Senior Assistant Chief Accountant
Office of Financial Services
United States Securities and Exchange Commission
100 F Street N.E.
Mail Stop 4720
Washington, DC 20549
Re: | Home BancShares, Inc. |
Form10-K for Fiscal Year Ended December 31, 2016
Filed February 28, 2017
Form8-K Filed January 19, 2017
FileNo. 000-51904
Dear Mr. Nolan:
The following is the response of Home BancShares, Inc. (“Home BancShares” or the “Company”) to the Staff’s comments contained in your letter to Mr. Brian Davis, dated March 15, 2017. For convenient reference, this response letter duplicates the text of the enumerated Staff comment, as well as the heading contained in your letter.
MITCHELL, WILLIAMS, SELIG, GATES & WOODYARD, P.L.L.C. | ATTORNEYSAT LAW
MITCHELLWILLIAMSLAW.COM
Mr. John P. Nolan
Senior Assistant Chief Accountant
March 29, 2017
Page 2
Comments and Responses
Form10-K
Non-GAAP Financial Measurements, page 88
1. | Please tell us how you considered whether thenon-GAAP measure “Allowance for loan losses plus discount for credit losses on purchased loans to total loans plus discount for credit losses on purchased loans” uses an individually tailored recognition and measurement method which could violate Rule 100(b) of Regulation G. Please refer to Question 100.04 of the Compliance and Disclosure Interpretations for guidance. |
Response: The Company acknowledges the Staff’s comment and confirms that it has reviewed and considered Rule 100(b) of Regulation G and Question 100.04 of the Compliance and Disclosure Interpretations (“C&DI’s”) updated on May 17, 2016.
The Company believes that certainnon-GAAP measures and ratios disclosed in Table 32 on page 90 of the Company’s December 31, 2016 Form10-K, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding our “allowance for loan losses to total loans receivable ratio” and that investors benefit from referring to thisnon-GAAP measurement in assessing our asset quality. Thenon-GAAP measurement referenced in the Staff’s comments has been included in the Company’s Form10-K as a result of questions received from investors regarding the impact of purchase accounting on the Company’s “allowance for loan losses to total loans receivable ratio.” Specifically, because of the Company’s significant number of historical acquisitions, investors have inquired how the “allowance for loan losses to total loans receivable ratio” has been impacted by the projected credit losses which were recorded as a discount on purchased loans during the fair value adjustments recognized in purchase accounting. For financial assets the Company has purchased in its acquisitions, GAAP requires a discount embedded in the purchase price that is attributable to the expected credit losses at the date of acquisition. Because the discount for credit losses on purchased loans is not applied to the allowance for loan losses, investors have indicated and the Company believes it is useful information to show the same accounting, on anon-GAAP basis, as if applied to all loans receivable, including those acquired in a business combination.
For the reasons described above, the Company believes thenon-GAAP measurement identified by the Staff in its comment is currently presented in a manner that provides valuable supplemental information to help investors better understand the Company’s asset quality and is not misleading when taken together with the information accompanying such measurement. Therefore the Company believes its current presentation is in compliance with Question 100.04 of the C&DI’s and Rule 100(b) of Regulation G.
MITCHELL, WILLIAMS, SELIG, GATES & WOODYARD, P.L.L.C. | ATTORNEYSAT LAW
MITCHELLWILLIAMSLAW.COM
Mr. John P. Nolan
Senior Assistant Chief Accountant
March 29, 2017
Page 3
The Company also respectfully notes that its disclosure regarding thisnon-GAAP measure was the subject of prior Staff comments dated May 16, 2013 and June 28, 2013, and the Company’s current disclosure, including Table 32 of the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operation included in its Form10-K for the year ended December 31, 2016, is based on the Company’s responses to the Staff dated June 11, 2013 and July 5, 2013, respectively. Excerpts from the Company’s June 11, 2013 and July 5, 2013 response letters to the Staff, including the text of each applicable enumerated Staff comment and the Company’s response, are provided inExhibits A and B, respectively, attached hereto.
Form8-K Filed January 19, 2017 – Exhibit 99.1
2. | Please revise future Form8-K filings in which you presentnon-GAAP financial measures to disclose the information required in Rule 100(a) of Regulation G and Item 10(e)(1)(i) of RegulationS-K. |
Response:The Company will revise its future Form8-K filings in which it presentsnon-GAAP financial measures to disclose the information required in Rule 100(a) of Regulation G and Item 10(e)(1)(i) of RegulationS-K.
If you have any questions or require further information, please contact me at (501)688-8866 or dbuford@mwlaw.com.
Sincerely, | ||
MITCHELL, WILLIAMS, SELIG, GATES & WOODYARD, P.L.L.C. | ||
By | /s/ C. Douglas Buford, Jr. | |
C. Douglas Buford, Jr. |
CDB:dw
cc: | Mr. Brian Davis |
Mr. Michael Volley
MITCHELL, WILLIAMS, SELIG, GATES & WOODYARD, P.L.L.C. | ATTORNEYSAT LAW
MITCHELLWILLIAMSLAW.COM
Exhibit A
Excerpt from June 11, 2013 Response Letter
Table 14: Analysis of Allowance for Loan Losses forNon-Covered Loans, page 72
6. | We note your disclosure of the “allowance for loan losses fornon-covered loans plus discount for credit losses onnon-covered loans acquired to totalnon-covered loans plus discount for credit losses onnon-covered loans acquired.” Please consider removing this credit metric in future filings or tell us why you believe the discount for credit losses onacquired loans is relevant tonon-acquired loans in order to make this ratio meaningful. In other words, this ratio makes it appear that the discount for credit losses on acquired loans is available for credit losses onnon-acquired loans. |
Response: We believe this presentation is an informative number to investors, and it was not our intention to make it appear that the discount for credit losses on acquired loans is available for credit losses onnon-acquired loans. As a result, we propose to improve the disclosure by expanding it to include the components of how it is calculated. We will include the new disclosure set forth below in “Management’s Discussion and Analysis of Financial Condition and Results of Operation” (“MD&A”) under the“Non-GAAP Financial Measurements” section.
We also plan to reference the new disclosure under “Table 14: Analysis of Allowance for Loan Losses forNon-Covered Loans” by stating, “See ‘Management’s Discussion and Analysis of Financial Condition and Results of Operation—Table 28,’ for thenon-GAAP tabular reconciliation.”
The following revised disclosure will be included in future filings:
We have $569.7 million of purchasednon-covered loans, which includes $81.7 million of discount for credit losses onnon-covered loans acquired at December 31, 2012. For purchased credit-impaired financial assets, GAAP requires a discount embedded in the purchase price that is attributable to the expected credit losses at the date of acquisition, which is a different approach fromnon-purchased-credit-impaired assets. While the discount for credit losses purchased onnon-covered loans is not available for credit losses onnon-purchasednon-covered loans, management believes it is useful information to show the same accounting as if applied to all loans, including those acquired in a business combination. Therefore, management believes the allowance for loan losses fornon-covered loans plus discount for credit losses onnon-covered loans acquired to totalnon-covered loans plus discount for credit losses onnon-covered loans acquired is useful in evaluating our company. This calculation, which is similar to the GAAP calculation of allowance for loan losses fornon-covered loans to totalnon-covered loans, is presented in Table 28 below.
[Table follows on next page.]
MITCHELL, WILLIAMS, SELIG, GATES & WOODYARD, P.L.L.C. | ATTORNEYSAT LAW
MITCHELLWILLIAMSLAW.COM
Table 28: Allowance for Loan Losses forNon-Covered Loans to TotalNon-Covered Loans
As of December 31, 2012 | ||||||||||||
Non-Covered Loans | Purchased Non- Covered Loans | Total | ||||||||||
(Dollars in thousands) | ||||||||||||
Loan balance reported (A) | $ | 1,843,249 | $ | 487,950 | $ | 2,331,199 | ||||||
Loan balance reported plus discount (B) | 1,843,249 | 569,667 | 2,412,916 | |||||||||
Allowance for loan losses fornon-covered loans (C) | $ | 45,170 | $ | — | $ | 45,170 | ||||||
Discount for credit losses onnon-covered loans acquired (D) | — | 81,717 | 81,717 | |||||||||
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Total allowance for loan losses fornon-covered loans plus discount for credit losses onnon-covered loans acquired (E) | $ | 45,170 | $ | 81,717 | $ | 126,887 | ||||||
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Allowance for loan losses fornon-covered loans to totalnon-covered loans (C/A) | 2.45 | % | N/A | 1.94 | % | |||||||
Discount for credit losses onnon-covered loans acquired tonon-covered loans acquired plus discount for credit losses onnon-covered loans acquired (D/B) | N/A | 14.34 | % | N/A | ||||||||
Allowance for loan losses fornon-covered loans plus discount for credit losses onnon-covered loans acquired to totalnon-covered loans plus discount for credit losses onnon-covered loans acquired (E/B) | N/A | N/A | 5.26 | % |
Note: Discount for credit losses on acquired loans are accounted for on a pool by pool basis and are not available to cover credit losses onnon-acquired loans or other pools.
MITCHELL, WILLIAMS, SELIG, GATES & WOODYARD, P.L.L.C. | ATTORNEYSAT LAW
MITCHELLWILLIAMSLAW.COM
Exhibit B
Excerpt from July 5, 2013 Response Letter
Table 14: Analysis of Allowance for Loan Losses forNon-Covered Loans, page 72
2. | We note your response to comment 6 in your letter dated June 11, 2013, and especially your statement that it is not your intention to make it appear that the discount for credit losses on acquired loans is available for credit losses onnon-acquired loans. We do not believe aggregating the allowance for loan losses and the discount for credit losses on acquired loans and expressing the amount as a single credit metric is appropriate. Therefore, please remove this credit metric in future filings. We do not object to disclosing the information in the first two columns of the proposed Table 28. |
Response: In the past, the Company has received comments from investors that they have trouble comparing our bank with other banks with no acquisitions. Since the purchase accounting rules are so different for originated loans versus purchased loans, this credit metric is a useful tool to help investors bridge the gap between the two sets of rules. We will remove this credit metric from Table 14: Analysis of Allowance for Loan Losses forNon-Covered Loans. However, after addressing the staff’s recommended improvements in the previous correspondence, this credit metric is now clearly labeled as to its calculation, use and availability. As a result, we believe it is appropriate to disclose this credit metric in theNon-GAAP section of our future filings.
MITCHELL, WILLIAMS, SELIG, GATES & WOODYARD, P.L.L.C. | ATTORNEYSAT LAW
MITCHELLWILLIAMSLAW.COM