8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K/A

(Amendment No. 2)

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) July 30, 2010

Home BancShares, Inc.

(Exact name of registrant as specified in its charter)

Arkansas
(State or other jurisdiction of incorporation)

000-51904	71-0682831
(Commission File Number)	(IRS Employer Identification No.)

719 Harkrider, Suite 100, Conway, Arkansas	72032
(Address of principal executive offices)	(Zip Code)

(501) 328-4770
(Registrant’s telephone number, including area code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

     Home BancShares, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Report”) dated July 30, 2010, to report that its wholly owned subsidiary, Centennial Bank (the “Bank”), had acquired the banking operations of Coastal Community Bank, a Florida state-chartered bank headquartered in Panama City, Florida (“Coastal”), and Bayside Savings Bank, a federally chartered thrift savings bank headquartered in Port Saint Joe, Florida (“Bayside”), through agreements with the Federal Deposit Insurance Corporation (“FDIC”). Prior to the FDIC stepping in as receiver, Coastal and Bayside were wholly owned subsidiaries of Coastal Community Investments, Inc., a privately held bank holding company.

     Centennial Bank entered into purchase and assumption agreements with the FDIC (collectively, the “Agreements”), as receiver for each bank, on July 30, 2010, pursuant to which Centennial Bank acquired the loans and certain assets and assumed the deposits and certain liabilities of Coastal and Bayside, respectively.

     On August 5, 2010, the Company filed an amended Current Report on Form 8-K/A (Amendment No. 1) to report under Item 1.01 and Item 2.01 additional details of the terms and conditions of the Coastal and Bayside Agreements, copies of which were included as Exhibit 2.1 and 2.2 to Amendment No. 1.

     This Current Report on Form 8-K/A (Amendment No. 2) is being filed to amend and supplement the disclosure provided in the Original Report, as previously amended and supplemented by Amendment No. 1. This Amendment No. 2 provides an audited Combined Statement of Assets Acquired and Liabilities Assumed, and updates the disclosures provided in Item 2.01 and 9.01 of the Original Report. All financial and other numeric measures of Coastal and Bayside as described below were based upon information as of July 30, 2010 or June 30, 2010 and may be subject to change.

     Statements made in this Amendment, other than those concerning historical financial information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. These forward-looking statements include, without limitation, statements regarding the Company’s expectations concerning its financial condition, operating results, cash flows, liquidity and capital resources. A discussion of risks, uncertainties and other factors that could cause actual results to differ materially from management’s expectations is set forth under the captions “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, and in its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010.

Item 2.01 Completion of Acquisition or Disposition of Assets

     The following discussion of assets acquired and liabilities assumed are presented at estimated fair value on the date of the Coastal and Bayside Agreements. The fair values of the assets acquired and liabilities assumed were determined as described in Note 3 to the Company’s audited Combined Statement of Assets Acquired and Liabilities Assumed, dated as of July 30, 2010, and the accompanying notes thereto, which is attached hereto as Exhibit 99.3 and incorporated herein by reference (the Audited Statement). These fair value estimates are based on the information available, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to closing date fair values may become available. Centennial Bank and the FDIC are engaged in on-going discussions that may impact which assets and liabilities are ultimately acquired or assumed by the Bank and/or the purchase price. In addition, the tax treatment of FDIC-assisted acquisitions is complex and subject to interpretations that may result in future adjustments of deferred taxes as of the acquisition date. The disclosure set forth in this Item 2.01 reflects the status of these items to the best of management’s knowledge as of October 15, 2010.

     Effective July 30, 2010, Centennial Bank assumed all deposits and acquired certain assets and liabilities of Coastal and Bayside from the FDIC, as receiver for each bank (the “Acquisition”), pursuant to the terms of a Purchase and Assumption Agreement entered into by and among Centennial Bank, the FDIC, as receiver for Coastal, and the FDIC, and a Purchase and Assumption Agreement entered into by and among Centennial Bank, the FDIC, as receiver for Bayside, and the FDIC.

     Under the terms of the Agreements, Centennial Bank acquired, in the aggregate, approximately $430.2 million in assets, including approximately $214.3 million in loans held and other real estate owned by Coastal or Bayside, $18.5 million of investment securities, $56.1 million of cash and cash equivalents (excluding cash paid by the FDIC to complete the Acquisition), a $98.0 million FDIC indemnification asset and $10.5 million of other assets. Centennial Bank also assumed, in the aggregate, approximately $436.8 million in liabilities, including approximately $424.6 million in customer deposits, and $12.2 million in other liabilities. No assets were acquired or liabilities assumed from Coastal’s and Bayside’s parent entity. The deposits were acquired at no premium, and net assets were acquired at an aggregate discount to historic book value as of July 30, 2010 of approximately $25.1 million, subject to customary adjustments. In connection with the Acquisition, the FDIC made a payment to Centennial Bank in the amount of approximately $32.8 million, subject to customary post-closing adjustments based upon the final closing date balance sheets for Coastal and Bayside. The cash payment is settlement for the net equity received, assets discount bid, charge-off since April 29, 2010 in the case of Coastal and February 19, 2010 in the case of Bayside, and other customary closing adjustments. The terms of the Agreements provide for the FDIC to indemnify Centennial Bank against certain claims, including claims with respect to liabilities of Coastal and Bayside not assumed or otherwise purchased by Centennial Bank, claims made by shareholders of Coastal and Bayside, and claims based on any prior action or inaction by Coastal’s and Bayside’s directors, officers and other employees.

     In connection with the Acquisition, Centennial Bank entered into loss sharing agreements with the FDIC. Pursuant to the terms of the loss sharing agreements, the FDIC is obligated to reimburse Centennial Bank for 80% of all losses with respect to covered assets. Centennial Bank will reimburse the FDIC for 80% of recoveries with respect to losses for which the FDIC paid Centennial Bank 80% reimbursement under the loss sharing agreements.

     In addition, on September 14, 2020 (the “True-Up Measurement Date”), Centennial Bank has agreed to pay the FDIC with respect to Coastal and Bayside, respectively, 50% of the excess, if any, of (i) 20% of an intrinsic loss estimate of $121.0 million in the case of Coastal and $24.0 million in the case of Bayside, less (ii) the sum of (A) 20% of the net loss amount (the sum of all losses less the sum of all recoveries on covered assets) plus (B) 25% of the asset premium (discount) plus (C) 3.5% of the total loans subject to loss sharing under the loss sharing agreements as specified in the schedules to the Agreements.

     The foregoing summary of the Agreements is not complete and is qualified in its entirety by reference to the full text of the Agreements and certain exhibits attached thereto, copies of which are attached hereto as Exhibits 2.1 and 2.2, respectively, and incorporated by reference herein.

     The following table summarizes the assets covered by the loss sharing agreements, the amount covered by the FDIC and the fair value:

	July 30, 2010
	Amount Covered by
	FDIC		Fair Value
	(In thousands)
Assets covered by loss share
Loans receivable covered by loss share	$	317,208	$	200,569
Foreclosed assets held for sale covered by loss share		22,954		9,637

     The amounts covered by the loss sharing agreements are the pre-acquisition book values of the underlying covered assets, the contractual balance of unfunded commitments that were acquired, and certain future net direct costs. The loss sharing agreements applicable to single family residential mortgage loans provide for FDIC loss sharing and Centennial Bank reimbursement to the FDIC for ten years. The loss sharing agreements applicable to all other covered assets provide for FDIC loss sharing for five years and Centennial Bank reimbursement of recoveries to the FDIC for eight years.

     The loss sharing agreements are subject to certain servicing procedures as specified in the agreements with the FDIC. The fair value of the loss sharing agreements was recorded as an indemnification asset at their estimated fair value of $98.0 million on the acquisition date. The indemnification asset reflects the present value of the expected net cash reimbursement related to the loss sharing agreements described above. Based upon the acquisition date fair values of the net assets acquired, $6.6 million of goodwill was recorded. Due to the difference in tax bases of the assets acquired and liabilities assumed, the Company recorded a deferred tax asset of $4.3 million.

     An analysis of the likely short-term and long-term effects of the loss sharing agreements on the Company’s cash flows and reported results is included in Item 9.01(a) below.

Item 9.01 Financial Statements and Exhibits

     (a) Financial Statements of Business Acquired

     As set forth in Item 2.01 above, on July 30, 2010, Centennial Bank acquired certain assets and assumed substantially all deposits and certain liabilities of Coastal and Bayside pursuant to the Coastal and Bayside Agreements. A narrative description of the anticipated effects of the Acquisition on the Company’s financial condition, liquidity, capital resources and operating results is presented below. This discussion should be read in conjunction with the historical financial statements and the related notes of the Company, which have been filed with the SEC and the Audited Statement, which is attached hereto as Exhibit 99.3.

     The Acquisition increased the Company’s total assets and total deposits by approximately 14.2% and 19.4%, respectively, as compared with balances at June 30, 2010, and is expected to positively affect the Company’s operating results, to the extent the Company earns more from interest earned on its assets than it pays in interest on deposits and other borrowings. The ability of the Company to successfully collect interest and principal on loans acquired and collect reimbursement from the FDIC on the related indemnification asset will also impact cash flows and operating results.

     The Company considers that the determination of the initial fair value of loans acquired in the July 30, 2010 FDIC-assisted transaction and the initial fair value of the related FDIC indemnification asset involves a high degree of judgment and complexity. The carrying value of the acquired loans and the FDIC indemnification asset reflect management’s best estimate of the amount to be realized on each of these assets. The Company estimated the acquisition date fair value of the acquired assets and assumed liabilities in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 805, Business Combinations (formerly Statement of Financial Accounting Standards (“SFAS”) No. 141(R), Business Combinations). However, the amount that the Company realizes on these assets could differ materially from the carrying value reflected in the attached Audited Statement primarily as a result of changes in the timing and amount of collections on the acquired loans in future periods. Because of the loss sharing agreements with the FDIC on these assets, as described in Item 2.01 above, the Company does not expect to incur significant losses. To the extent the actual values realized for the acquired loans differ from the estimated amounts; the indemnification asset will generally be impacted in an offsetting manner due to the loss sharing support from the FDIC.

Financial Condition

     In the Acquisition, Centennial Bank purchased $204.6 million in loans receivable, at fair value, net of a $119.7 million estimated discount to the outstanding principal balance, representing approximately 9.6% of the Company’s total loans (net of the allowance for loan losses) at June 30, 2010. Foreclosed assets acquired were $9.6 million at fair value.

     Centennial Bank acquired $56.1 million in cash and cash equivalents in the transaction. In addition to the cash and cash equivalents acquired, Centennial Bank received $32.8 million from the FDIC. Centennial Bank also acquired $18.5 million in securities, at fair value. These assets provided additional liquidity to the Company.

     The following table presents information with respect to the fair value of certain acquired earning assets and loans, as well as their book balance at acquisition date, contractual term and average effective yield.

Schedule of Earning Assets Acquired

	July 30, 2010
					Average		Effective
	Initial				Months to		Interest
	Value		Fair Value		Maturity		Rate
	(Dollars in thousands)
Earning assets
Interest-bearing deposits with other banks	$	49,486	$	49,486		—		0.25	%
Investment securities		18,541		18,541		**		**
Loans receivable not covered by loss share:
Consumer		7,077		4,055		43		5.32
Loans receivable covered by FDIC loss share:
Commercial real estate		176,920		112,681		29		5.44
Residential real estate		116,486		75,209		28		4.91
Commercial and industrial		23,802		12,679		20		5.25
Total loans	$	324,285	$	204,624
Total earning assets	$	392,312	$	272,651

** Amount not meaningful due to the immediate disposal of $15.0 million of securities associated with Coastal.

     The following table reflects the scheduled maturities of the acquired loans:

			Over One
			Year
	One Year		Through		Over Five
	or Less		Five		Years		Total
Contractual maturities:
Commercial real estate	$	55,417	$	49,921	$	7,343	$	112,681
Residential real estate		40,245		30,116		4,848		75,209
Consumer		1,478		2,152		425		4,055
Commercial and industrial		7,698		4,792		189		12,679
Total	$	104,838	$	86,981	$	12,805	$	204,624
Rate sensitivity:
Fixed	$	51,617	$	36,151	$	3,110	$	90,878
Variable		53,221		50,830		9,695		113,746
Total	$	104,838	$	86,981	$	12,805	$	204,624

     In the acquisition, Centennial Bank assumed $424.6 million in deposits, at fair value. This amount represents approximately 19.4% of the Company’s total deposits of $2.19 billion at June 30, 2010. Demand and non-interest bearing, savings and interest bearing transaction accounts, and time deposits assumed were $14.3 million, $96.0 million and $314.4 million, respectively.

     In its assumption of the deposit liabilities, the Company believed that the customer relationships associated with these deposits have intangible value. The Company applied FASB ASC 805, which prescribes the accounting for goodwill and other intangible assets such as core deposit intangibles, in a business combination. The Bank determined the estimated fair value of the core deposit intangible asset totaled $2.7 million, which will be amortized utilizing a straight line method over an estimated economic life of 5 years. In determining the estimated life and valuation, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates, age of deposit relationships, and the maturities of time deposits.

     Future amortization of this core deposit intangible asset over the estimated life will decrease results of operations, net of any potential tax effect. Future capital will be reduced by the amount of expected amortization, net of any tax effect. Since amortization is a noncash item, it will have no effect upon future liquidity and cash flows. For the calculation of regulatory capital, this core deposit intangible asset is disallowed and is a reduction to equity capital. It is expected that the results of disallowing this intangible asset should not materially affect the Company’s or Centennial Bank’s regulatory capital ratios.

     The core deposit intangible asset is subject to significant estimates by management of the Company related to the value and the life of the asset. These estimates could change over time. The Company will review the valuation of this asset periodically to ensure that no impairment has occurred. If any impairment is subsequently determined, the Company will record the impairment as an expense in its Consolidated Statement of Income.

Nonperforming Loans

     ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, applies to a loan with evidence of deterioration of credit quality since origination, for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. ASC Topic 310-30 prohibits carrying over or creating an allowance for loan losses upon initial recognition for loans that fall under its scope. The Company evaluated loans purchased in conjunction with the Coastal-Bayside acquisition for impairment in accordance with the provisions of ASC Topic 310-30. Purchased covered loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected. All covered loans acquired in this transaction were deemed to be impaired loans. These loans were not classified as nonperforming assets at September 30, 2010, as the loans are accounted for on a pooled basis and the pools are considered to be performing. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all purchased impaired loans.

     A summary of past due and non-accrual loans at July 30, 2010 follows:

Past Due and Non-Accrual Loans

			July 30, 2010
	Assets Not		Assets Covered
	Covered by		by FDIC
	Loss Share		Loss Share		Total
	(Dollars, in thousands)
Non-accrual loans	$	—	$	—	$	—
Loans past due 90 days or more (principal or interest payments)		227		37,219		37,446
Total	$	227	$	37,219	$	37,446

     Operating Results and Cash Flows. The Company’s management has from time to time become aware of acquisition opportunities and has performed various levels of review related to potential acquisitions in the past. This Acquisition was attractive to the Company for a variety of reasons, including the:

• ability to expand into an opportunistic market and increase Home BancShares’ market share in Florida;

• anticipated profitability in the pricing of the acquired loan portfolio including the indemnification asset;

• attractiveness of immediate deposit growth with low cost of funds given that over the past several years, organic deposit growth has been exceptionally difficult as financial institutions compete for deposits. This acquisition allowed us to immediately increase deposits at an attractive cost;

• opportunities to enhance income and efficiency due to duplications of effort. The Company has operated efficiently and expects to enhance income by centralizing some duties and removing duplications of effort.

     Based on these and other factors, including the level of FDIC support related to the acquired loans and foreclosed assets, the Company believes that this acquisition will have an immediate positive impact on its earnings.

     Based on June 30, 2010 information, total assets acquired make up 14.2%, or $430.2 million, of the Company’s total assets of $3.04 billion, and total deposits assumed make up 19.4%, or $424.6 million, of the Company’s total deposits of $2.19 billion. The Coastal-Bayside transaction resulted in recording $6.6 million of goodwill. The Company believes that the transaction will improve the Company’s net interest income, as the Bank earns more from interest earned on its loans and investments than it pays in interest on deposits and borrowings.

     The extent to which the Bank’s operating results may be adversely affected by the acquired loans is largely offset by the loss sharing agreements and the related discounts reflected in the estimated fair value of these assets at the acquisition date. In accordance with the provisions of ASC Topic 310-30, the fair values of the acquired loans reflect an estimate of expected credit losses related to these assets. As a result, the Company’s operating results would only be adversely affected by loan losses to the extent that such losses exceed the expected credit losses reflected in the fair value of these assets at the acquisition date. In addition, to the extent that the stated interest rate on acquired loans was not considered a market rate of interest at the acquisition date, appropriate adjustments to the acquisition-date fair values were recorded. These adjustments mitigate the risk associated with the acquisition of loans earning a below-market rate of return.

     The long-term effects that the Company may experience will depend primarily on the ability of the borrowers under the various loans covered by the loss sharing agreements to make payments over time. As the loss sharing agreements cover up to a 10-year period (5 years for commercial loans and other assets), changing economic conditions will likely impact the timing of future charge-offs and the resulting reimbursements from the FDIC. The Company believes that any recapture of interest income and recognition of cash flows from the borrowers or received from the FDIC (as part of the FDIC indemnification asset) may be recognized unevenly over this period, as the Company exhausts its collection efforts under its normal practices. In addition, the Company recorded substantial discounts related to the purchase of these covered assets. A portion of these discounts may be accretable to income over the economic life of the loans and will be dependent upon the timing and success of the Company’s collection efforts on the covered assets.

     Liquidity and Capital Resources. The transaction significantly enhanced the liquidity position of the Bank. The Company acquired $56.1 million in cash and cash equivalents as well as $18.5 million of investment securities. These securities provide monthly cash flows in the form of principal and interest payments and are readily marketable. In addition, the FDIC also transferred $32.8 million in cash to Centennial Bank to compensate for the net liability that resulted from the transfer of Coastal’s and Bayside’s assets and liabilities adjusted for the Bank’s discount bid.

     Deposits in the amount of $424.6 million were also assumed. Of this amount, 26.0%, or $110.3 million, were in the form of highly liquid transaction accounts. Certificates of deposit and other time deposits comprised 74.0%, or $314.4 million, of total deposits.

     At June 30, 2010, the Company was considered “well-capitalized” under relevant regulatory ratios. The Company remains “well-capitalized” after taking into consideration the results of the transaction. The Company had the following pro-forma capital ratios at July 31, 2010 (includes the effects of this FDIC-assisted transaction) and June 30, 2010:

	Pro-Forma
	July 31, 2010			June 30, 2010
Tier 1 leverage ratio		13.6	%		15.7	%
Tier 1 risk-based capital ratio		18.5			19.9
Total risk-based capital ratio		19.8			21.2

     At June 30, 2010, the Bank was considered “well-capitalized” under relevant regulatory ratios. The Bank remains “well-capitalized” after taking into consideration the results of the transaction and $32.0 million additional capital injected by the Company. The Bank had the following pro-forma capital ratios at July 31, 2010 (includes the effects of this FDIC-assisted transaction) and June 30, 2010:

	Pro-Forma
	July 31, 2010			June 30, 2010
Tier 1 leverage ratio		10.2	%		10.8	%
Tier 1 risk-based capital ratio		14.0			13.8
Total risk-based capital ratio		15.3			15.1

     Financial Statements

     Attached hereto as Exhibit 99.3 and incorporated by reference into this Item 9.01(a) is an audited Combined Statement of Assets Acquired and Liabilities Assumed by Centennial Bank (a wholly owned subsidiary of Home BancShares, Inc.) related to its acquisition of Coastal and Bayside at July 30, 2010 and the accompanying notes thereto.

Report of Independent Registered Public Accounting Firm
Combined Statement of Assets Acquired and Liabilities Assumed at July 30, 2010
Notes to Combined Statement of Assets Acquired and Liabilities Assumed

     The Company has omitted certain financial information of Coastal and Bayside required by Rule 3-05 of Regulation S-X and the related pro forma financial information under Article 11 of Regulation S-X in accordance with a request for relief submitted to the Commission in accordance with the guidance provided in Staff Accounting Bulletin 1:K, Financial Statements of Acquired Troubled Financial Institutions (SAB:1K). SAB 1:K provides relief from the requirements of Rule 3-05 in certain instances, such as the transaction, where a registrant engages in an acquisition of a significant amount of assets of a troubled financial institution that involves pervasive federal assistance and audited financial statements of the troubled financial institution that are not reasonably available.

     (d) Exhibits

2.1	Purchase and Assumption Agreement Whole Bank All Deposits, among the Federal Deposit Insurance Corporation, receiver of Coastal Community Bank, Panama City Beach, Florida, the Federal Deposit Insurance Corporation, and Centennial Bank, dated as of July 30, 2010 (filed as Exhibit 99.2 to the Form 8-K/A on August 5, 2010, and incorporated herein by reference).
2.2	Purchase and Assumption Agreement Whole Bank All Deposits, among the Federal Deposit Insurance Corporation, receiver of Bayside Savings Bank, Port Saint Joe, Florida, the Federal Deposit Insurance Corporation, and Centennial Bank, dated as of July 30, 2010 (filed as Exhibit 99.2 to the Form 8-K/A on August 5, 2010, and incorporated herein by reference).
23.1	Consent of Independent Registered Public Accounting Firm
99.1	Press Release: Home BancShares, Inc. and Centennial Bank Announce Opportunistic Florida Acquisition (filed as Exhibit 99.1 to the Form 8-K/A on August 5, 2010, and incorporated herein by reference).
99.2	Supplemental materials to Press Release dated July 30, 2010 (filed as Exhibit 99.2 to the Form 8-K/A on August 5, 2010, and incorporated herein by reference).
99.3	Report of Independent Registered Public Accounting Firm Combined Statement of Assets Acquired and Liabilities Assumed at July 30, 2010 Notes to Combined Statements of Assets Acquired and Liabilities Assumed

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Home BancShares, Inc.  

(Registrant) 

Date: October 15, 2010	/s/ Brian Davis
	Brian Davis
	Chief Accounting Officer

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders
Home BancShares, Inc.
Conway, Arkansas

We consent to the incorporation by reference in the Registration Statements on Forms S-8 (Nos. 333-136645, 333-148763 and 333-151843) and Forms S-3 (Nos. 333-157165, 333-161198 and 333-164341) of our report dated October 15, 2010, on our audit of the combined statement of assets acquired and liabilities assumed by Centennial Bank (a wholly owned subsidiary of Home BancShares, Inc.) pursuant to the purchase and assumption agreements dated July 30, 2010, and included in this Form 8-K/A.

/s/ BKD, llp  

Little Rock, Arkansas
October 15, 2010

EX-99.3

Exhibit 99.3

COASTAL COMMUNITY BANK AND BAYSIDE SAVINGS BANK

INDEX OF FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	2
Combined Statement of Assets Acquired and Liabilities Assumed at July 30, 2010	3
Notes to Combined Statement of Assets Acquired and Liabilities Assumed	4 - 10

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders
Home BancShares, Inc.
Conway, Arkansas

We have audited the accompanying combined statement of assets acquired and liabilities assumed by Centennial Bank (a wholly owned subsidiary of Home BancShares, Inc.) pursuant to the purchase and assumption agreements dated July 30, 2010. The Company’s management is responsible for this financial statement. Our responsibility is to express an opinion on the financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the combined statement of assets acquired and liabilities assumed referred to above is presented fairly, in all material respects, as of July 30, 2010, in conformity with accounting principles generally accepted in the United States of America.

/s/ BKD, LLP  

Little Rock, Arkansas
October 15, 2010

2

COMBINED STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
By Centennial Bank
(a wholly owned subsidiary of Home BancShares, Inc.)

(In thousands)	July 30, 2010
Assets
Cash and due from banks	$	6,652
Interest-bearing deposits with other banks		49,486
Cash received from FDIC		32,797
Investment securities		18,541
Loans receivable not covered by FDIC loss share		4,055
Loans receivable covered by FDIC loss share		200,569
Foreclosed assets held for sale covered by loss share		9,637
FDIC indemnification asset		98,000
Deferred tax asset		4,275
Core deposit intangible		2,670
Goodwill		6,623
Other assets		3,511
Total assets acquired	$	436,816
Liabilities
Deposits:
Demand and non-interest bearing	$	14,288
Savings and interest-bearing transaction accounts		95,975
Time deposits		314,376
Total deposits		424,639
FHLB borrowed funds		10,665
Accrued interest payable and other liabilities		1,512
Total liabilities assumed	$	436,816

See Notes to Combined Statement of Assets Acquired and Liabilities Assumed.

3

NOTES TO COMBINED STATEMENT OF ASSETS
ACQUIRED AND LIABILITIES ASSUMED
By Centennial Bank
(a wholly owned subsidiary of Home BancShares, Inc.)

1. FDIC-Assisted Acquisition of Certain Assets and Liabilities of Coastal Community Bank and Bayside Savings Bank

     On July 30, 2010, Centennial Bank (the Bank) entered into purchase and assumption agreements (Coastal-Bayside Agreements) with the FDIC, as receiver, pursuant to which the Bank acquired the loans and certain assets and assumed the deposits and certain liabilities of Coastal Community Bank (Coastal) and Bayside Savings Bank (Bayside). Prior to the FDIC stepping in as receiver, Coastal and Bayside were wholly owned subsidiaries of Coastal Community Corporation and were under common ownership. Coastal and Bayside represent related businesses and have been accounted for as a single acquisition; therefore, a combined statement of assets acquired and liabilities assumed has been presented for these related acquired businesses.

     Prior to the acquisition, Coastal and Bayside operated 12 banking centers in the Florida Panhandle area. Excluding the effects of purchase accounting adjustments, Centennial Bank acquired $425.4 million in assets and assumed approximately $422.3 million of the deposits of Coastal and Bayside. Additionally, Centennial Bank purchased loans with an estimated fair value of $204.6 million, $9.6 million of foreclosed assets and $18.5 million of investment securities.

     The assets acquired and liabilities assumed are presented at fair value on the date of acquisition, after adjustment for expected loss recoveries under the loss sharing agreement described below. Fair values for the categories of assets and liabilities were determined as described in Note 3 to the Combined Statement of Assets Acquired and Liabilities Assumed. These fair value estimates are considered preliminary, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available. Centennial Bank and the FDIC are engaged in on-going discussions that may impact which assets and liabilities are ultimately acquired or assumed by Centennial Bank and/or the purchase prices. In addition, the tax treatment of the FDIC assisted acquisition is complex and subject to interpretations that may result in future adjustments of deferred taxes as of the acquisition date.

2. Loss Sharing Agreement and FDIC Indemnification Asset

     In connection with the Coastal-Bayside acquisition, Centennial Bank entered into loss sharing agreements with the FDIC that cover $340.2 million of assets, based upon the seller’s records, including single family residential mortgage loans, commercial real estate, commercial and industrial loans, and foreclosed assets (collectively, “covered assets”). Centennial Bank acquired other Coastal and Bayside assets that are not covered by the loss sharing agreements with the FDIC including interest-bearing deposits with other banks, investment securities purchased at fair market value, consumer loans and other tangible assets. Pursuant to the terms of the loss sharing agreements, the FDIC will reimburse Centennial Bank for 80% of losses on the covered assets. Centennial Bank will reimburse the FDIC for its share of recoveries with respect to losses for which the FDIC paid Centennial Bank a reimbursement under the loss sharing agreements. The FDIC’s obligation to reimburse Centennial Bank for losses with respect to covered assets begins with the first dollar of loss incurred.

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     The following table summarizes the assets covered by the loss sharing agreements, the amount covered by the FDIC and the fair value:

	July 30, 2010
	Amount Covered
	by FDIC		Fair Value
	(In thousands)
Assets covered by loss share
Loans receivable covered by loss share	$	317,208	$	200,569
Foreclosed assets held for sale covered by loss share		22,954		9,637

     The amounts covered by the loss sharing agreements are the pre-acquisition book values of the underlying covered assets, the contractual balance of unfunded commitments that were acquired, and certain future net direct costs. The loss sharing agreements applicable to single family residential mortgage loans provide for FDIC loss sharing and Centennial Bank reimbursement to the FDIC for ten years. The loss sharing agreements applicable to all other covered assets provide for FDIC loss sharing for five years and Centennial Bank reimbursement of recoveries to the FDIC for eight years.

     The loss sharing agreements are subject to certain servicing procedures as specified in the agreements with the FDIC. The expected reimbursements under the loss sharing agreements were recorded as indemnification asset at their estimated fair values of $98.0 million for the Coastal-Bayside Agreement, on the acquisition date. The indemnification asset reflects the present value of the expected net cash reimbursement related to the loss sharing agreements described above.

3. Summary of Significant Accounting Policies

     Centennial Bank has determined that the acquisition of the net assets of Coastal and Bayside constitute a business combination as defined by the FASB ASC Topic 805, Business Combinations. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of FASB ASC Topic 820, Fair Value Measurements. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following is a description of the methods used to determine the fair values of significant assets and liabilities.

     Cash and due from banks, cash received from FDIC and interest-bearing deposits with other banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets. The $32.8 million cash received from the FDIC is the first pro-forma cash settlement received from the FDIC on Monday following the closing weekend.

     Investment securities – Investment securities were acquired from the FDIC at fair market value. The fair values provided by the FDIC were reviewed and considered reasonable based on the Bank’s understanding of the market conditions.

     Loans – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques.

     Foreclosed assets held for sale – These assets are presented at the estimated present values that management expects to receive when the properties are sold, net of related costs of disposal.

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     FDIC indemnification asset – This loss sharing asset is measured separately from the related covered assets as it is not contractually embedded in the covered assets and is not transferable with the covered assets should Centennial Bank choose to dispose of them. Fair value was estimated using projected cash flows related to the loss sharing agreements based on the expected reimbursements for losses and the applicable loss sharing percentages. These cash flows were discounted to reflect the uncertainty of the timing and receipt of the loss-sharing reimbursement from the FDIC.

     Goodwill – The amount of goodwill is the residual difference in the fair value of liabilities assumed and net consideration paid to the FDIC over the fair value of the assets acquired. The goodwill is deductible for income tax purposes.

     Core deposit intangible – This intangible asset represents the value of the relationships that Coastal and Bayside had with their deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits.

     Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The Bank did not reset deposit rates to current market rates even though the rates were above market; therefore, a $2.4 million fair value adjustment was recorded for time deposits.

     FDIC Clawback Provision – The Coastal-Bayside Agreement allows the FDIC to recover a portion of the loss share funds previously paid out under the indemnification agreement in the event losses fail to reach the expected loss level under a claw back provision (“Clawback Provision”). A true-up is scheduled to occur in the calendar month in which the tenth anniversary of the Coastal-Bayside closing occurs. If the threshold is not met, the assuming institution is required to pay the FDIC 50 percent of the excess, if any, within 45 days following the true-up.

     The value of the Clawback Provision liability is calculated as the present value of the estimated payment to the FDIC in the tenth year using the formula provided in the Coastal-Bayside Agreement. Pursuant to the formula in the Coastal-Bayside Agreement, the liability was calculated at 50 percent of the excess, if any, of (i) twenty percent (20%) of the total intrinsic loss estimate of $121.0 million in the case of Coastal and $24.0 million in the case of Bayside, less (ii) the sum of (A) 20% of the net loss amount (the sum of all losses less the sum of all recoveries on covered assets) plus (B) 25% of the asset premium (discount) plus (C) 3.5% of the total loans subject to loss sharing under the loss sharing agreements as specified in the schedules to the Agreements.

     As of July 30, 2010 the Clawback Provision is estimated to be a liability of $333,000. The result of the calculation            is based on the net present value of expected future cash payments to be made by the Company to the FDIC at the conclusion of the loss share agreements. The discount rate used was based on current market rates. The expected cash flows were calculated in accordance with the loss share agreements and are based primarily on the expected losses on the covered assets.

     Unfunded Commitments – Unfunded loan commitments represent the unused portion of lines of credit available to customers based on previously agreed rates and terms.

     The fair value of the unfunded loan commitments (the “Commitments”) was estimated using the income approach. Assumptions regarding expected utilization were applied to the unfunded balances. A premium or discount was estimated for the Commitments. The premium/discount for the Commitments was then adjusted for the time value of money over the average remaining life of the Commitments. In addition, the present value of the opportunity cost associated with regulatory requirements to hold reserve capital in connection with the Commitments was included to arrive at its fair value.

     Based on the facts, assumptions, and valuation methodologies used in our analysis, we estimated the fair value of the Commitments, as of July 30, 2010 and expressed as a liability, to be $354,000.

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4. Bank Premises and Equipment

     Centennial Bank did not acquire a material amount of the real estate, banking facilities, furniture and equipment of Coastal and Bayside as part of the purchase and assumption agreements but has the option to purchase these assets at fair market value from the FDIC. This purchase option expires 90 days after acquisition date. Fair market values for the real estate, facilities, furniture and equipment will be based on current appraisals and determined at a later date. Centennial Bank is leasing these facilities and equipment from the FDIC until current appraisals are received and a final decision is made.

5. Investment Securities

     Included in the acquisitions were investment securities totaling $18.5 million for Coastal and Bayside. The Coastal securities consisted entirely of Agency Mortgage-Backed Pass Through securities. Because these securities did not comply with our current investment strategies, all securities were sold at a negligible loss. The Bayside securities consisted of the following security types (at fair value on the date of acquisition):

			Tax Equivalent
	Fair Value		Yield
	(In thousands)
Agency MBS	$	2,513		2.42	%
Agency Callable Debenture		1,037		0.88

     The Bayside securities comply with our current investment strategies and have been merged into the Centennial Bank investment portfolio.

6. Loans Receivable, Net

The composition of loans receivable acquired, net, at July 30, 2010 is as follows:

			Effective
	Fair Value		Interest Rate
	(In thousands)
Loans receivable not covered by loss share:
Consumer	$	4,055		5.32	%
Loans receivable covered by FDIC loss share:
Commercial real estate loans		112,681		5.44
Residential real estate loans		75,209		4.91
Commercial and industrial		12,679		5.25
Total	$	204,624

     The following is a summary of the covered impaired loans acquired in the Coastal-Bayside acquisition during 2010 as of the dates of acquisition.

	July 30, 2010
	(In thousands)
Contractually required principal and interest at acquisition	$	334,091
Non-accretable difference (expected losses and foregone interest)		116,252
Cash flows expected to be collected at acquisition		217,839
Accretable yield		17,270
Basis in acquired loans at acquisition	$	200,569

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     ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, applies to a loan with evidence of deterioration of credit quality since origination, for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. ASC Topic 310-30 prohibits carrying over or creating an allowance for loan losses upon initial recognition for loans that fall under its scope. The Company evaluated loans purchased in conjunction with the Coastal-Bayside acquisition for impairment in accordance with the provisions of FASB ASC Topic 310-30. Purchased covered loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected. All covered loans acquired in this transaction were deemed to be impaired loans. These loans were not classified as nonperforming assets at September 30, 2010, as the loans are accounted for on a pooled basis and the pools are considered to be performing. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all purchased impaired loans.

     A summary of past due and non-accrual loans at July 30, 2010 follows:

Past Due and Non-Accrual Loans

	July 30, 2010
	Assets Not		Assets Covered
	Covered by		by FDIC
	Loss Share		Loss Share		Total
			(Dollars, in thousands)
Non-accrual loans	$	—	$	—	$	—
Loans past due 90 days or more (principal or interest payments)		227		37,219		37,446
Total	$	227	$	37,219	$	37,446

7. Goodwill and Core Deposit Intangible

     In connection with the Coastal-Bayside acquisition, the consideration paid exceeded the fair value of the assets received. Accordingly, the Company recorded $6.6 million of goodwill as a result of the acquisition.

     The audited Combined Statement of Assets Acquired and Liabilities Assumed reflects a core deposit intangible asset of $2.7 million at July 30, 2010 related to the Coastal-Bayside acquisition. The core deposit intangible asset will be amortized utilizing a straight-line amortization method over an estimated economic life of 5 years. Estimated amortization expense of core deposit intangibles for each of the years 2010 through 2014 is: 2010 — $222,500; 2011 — $534,000; 2012 — $534,000; 2013 — $534,000; and 2014 — $534,000. Centennial Bank will review the valuation of this intangible asset annually during the fourth quarter to ensure that no impairment has occurred. If any impairment is subsequently determined, the Company will record the impairment as an expense in its consolidated statement of income.

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8. Deposits

Deposit liabilities assumed are composed of the following at July 30, 2010:

	July 30, 2010
	(In thousands)
Demand and non-interest bearing	$	14,288
Savings and interest-bearing transaction accounts		95,975
Time deposits		314,376
Total deposits	$	424,639

     The following is a summary of the scheduled maturities of the assumed time deposits at July 30, 2010 (in thousands):

	Fair Value
	(In thousands)
Three months or less	$	86,442
Over three months to six months		74,663
Over six months to 12 months		86,476
Over 12 months		66,795
Total	$	314,376

     At the time of the acquisition, the Bank did not reset time deposit rates to current market rates even though the rates were above market, which resulted in a $2.4 million fair value adjustment for time deposits. The weighted average contractual interest rate for time deposits after the fair market value adjustment was 0.74%.

     The aggregate amount of time deposits with a minimum denomination of $100,000 was $175.7 million at July 30, 2010.

9. FHLB Borrowed Funds

     Included in the acquisitions were FHLB borrowed funds totaling $10.7 million for Coastal and Bayside. Because the Company did not need these advances to meet our present liquidity needs, all advances were redeemed at a negligible loss during the third quarter of 2010.

10. Deferred Income Taxes

     The deferred tax asset of $4.3 million as of July 30, 2010 is solely related to the differences between the financial statement and tax bases of assets acquired and liabilities assumed in this transaction.

11. Commitments

     In the ordinary course of business, Coastal and Bayside made various commitments and incurred certain contingent liabilities to fulfill the financing needs of their customers. At July 30, 2010 commitments to extend credit of $4.6 million were outstanding and assumed by Centennial Bank.

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12. Goodwill Recorded

     Under the terms of the purchase and assumption agreements, the FDIC agreed to transfer to Centennial Bank certain assets subject to loss-sharing agreements at book value, certain assets that are not subject to the loss-sharing agreements at a contractually-specified purchase price, certain assets at fair value and certain liabilities at book value. The FDIC also transferred cash to Centennial Bank to compensate for the net liability that resulted from the transfer of Coastal and Bayside assets and liabilities adjusted for the Bank’s discount bid.

     Details related to the transfer at July 30, 2010 are as follows:

	July 30, 2010
	(In thousands)
Net assets acquired per purchase and assumption agreements	$	(7,215	)
Cash received by the FDIC		32,797
Cash overpayment by the FDIC		(498	)
Purchase accounting adjustments:
Loans receivable not covered by loss share		(3,022	)
Loans receivable covered by FDIC loss share		(116,639	)
Foreclosed assets held for sale covered by FDIC loss share		(13,317	)
FDIC indemnification asset		98,000
Core deposit intangibles		2,670
Deferred tax impact		4,275
Time deposits		(2,368	)
FHLB borrowed funds		(619	)
Other liabilities		(687	)
Goodwill	$	(6,623	)

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