Garnet Capital Advisors Blog

April 27, 2015

Home Bancshares takes creative approach to loan growth

Home Bancshares recently took an innovative approach to bolstering loan growth, buying nearly $300 million worth of national commercial real estate loans. The Conway, Arkansas-based bank was able to snap up this loan portfolio after Doral Bank's failure, purchasing it from private equity firm J.C. Flowers & Co.

New unit
Home Bancshares, which has bought several companies over the years, will house the pool of loans in a unit of Centennial Bank, one of its subsidiaries. Home Bancshares also announced it has hired Christopher Poulton - former executive vice president of U.S. operations for Doral Bank - to serve as president of the newly established unit, called Centennial Commercial Finance Group.

Nicholas Santoro, former senior managing director for Doral Property Finance, has also been hired to work for Centennial Bank's new unit, and will retain his previous role at CCFG. As the two seasoned executives go to work at the fresh entity, Poulton has announced plans to create a team of professional lenders holding the proper qualifications.

Entering new territory
This move shows that Home Bancshares is willing to branch out into new territory, as the bank mainly does business in Arkansas and Florida, and now it has delved into commercial real estate lending, according to American Banker. During an interview, Home Bancshares chairman John Allison elaborated on his latest move, emphasizing the strong opportunity involved.

"I know we've got to answer to the world with this … but if my team read it right, these loans are really good," Allison told American Banker. "We've recruited the same team that created those loans … I've told them 'Just give me good credits. There is no need to be in a hurry, don't think you have to run out and give me $1 billion.' I'm not interested in that. I'd much rather prefer $300 million that is good."

In addition, Home Bancshares has stated that the transaction would immediately become accretive to earnings, according to American Banker. At the time of report, the loans in the portfolio had a weighted average loan-to-value ratio of less than 50 percent and an average weighted yield of 6 percent.

Substantial opportunity
Depending on how successful the new office is, Poulton's new team could grow to between 15 and 20 percent of Home Bancshare's current loan book over the course of a few years, Allison told American Banker.

Financial institutions looking to expand and or produce loan growth could learn something from Home Bancshare's recent loan purchase. If these organizations want to expand their loan portfolios, they might consider working with Garnet Capital Advisors, which can help them acquire loans in many different product areas.