1331520--3/5/2010--HOME_BANCSHARES

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Risks Related to Our Industry Difficult market conditions and economic trends have adversely affected our industry and our business. Recent legislative and regulatory initiatives to address difficult market and economic conditions may not stabilize the U.S. banking system. Future legislation and regulation could negatively impact our ability to execute our business strategies. Recent increases in deposit insurance coverage are expected to increase our FDIC insurance assessments and result in higher noninterest expense. Current levels of market volatility are unprecedented. Our profitability is vulnerable to interest rate fluctuations and monetary policy. We are subject to extensive regulation that could limit or restrict our activities and impose financial requirements or limitations on the conduct of our business, which limitations or restrictions could adversely affect our profitability. Risks Related to Our Business Our decisions regarding credit risk could be inaccurate and our allowance for loan losses may be inadequate, which would materially and adversely affect our business, financial condition, results of operations and future prospects. Our high concentration of commercial real estate, construction and land development and commercial and industrial loans expose us to increased lending risks. Deterioration in local economic and housing markets has led to loan losses and reduced earnings and could lead to additional loan losses and reduced earnings. If the value of real estate in our Florida markets were to remain depressed or decline further, a significant portion of our loans in our Florida market could become under-collateralized, which could have a material adverse effect on us. Because we have a concentration of exposure to a number of individual borrowers, a significant loss on any of those loans could materially and adversely affect our business, financial condition, results of operations, and future prospects. A portion of our loans are to customers who have been adversely affected by the home building industry. Our cost of funds may increase as a result of general economic conditions, FDIC insurance assessments, interest rates and competitive pressures. The loss of key officers may materially and adversely affect our business, financial condition, results of operations and future prospects. The TARP Capital Purchase Program and recent legislation impose certain executive compensation and corporate governance requirements, which could adversely affect us and our business, including our ability to recruit and retain qualified employees. We may not meet TARP lending goals. Our growth and expansion strategy may not be successful and our market value and profitability may suffer. There may be undiscovered risks or losses associated with our acquisitions of bank subsidiaries which would have a negative impact upon our future income. Competition from other financial institutions may adversely affect our profitability. We may incur environmental liabilities with respect to properties to which we take title. We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements. Our recent results do not indicate our future results and may not provide guidance to assess the risk of an investment in our common stock. We may not experience continued growth. We may not be able to raise the additional capital we need to grow and, as a result, our ability to expand our operations could be materially impaired. Our directors and executive officers own a significant portion of our common stock and can exert significant influence over our business and corporate affairs. Our accounting policies and methods impact how we report our financial condition and results of operations. Application of these policies and methods may require management to make estimates about matters that are uncertain. Changes in accounting standards could materially impact our consolidated financial statements. Our internal controls may be ineffective. A natural disaster or act of terrorism, especially one affecting our market areas, could adversely affect our business, financial condition, results of operations and future prospects. Risks Related to Owning Our Stock Regulatory and contractual restrictions may limit or prevent us from paying dividends on the Series A preferred shares and our common stock. The holders of our subordinated debentures have rights that are senior to those of our shareholders. If we defer payments of interest on our outstanding subordinated debentures or if certain defaults relating to those debentures occur, we will be prohibited from declaring or paying dividends or distributions on, and from making liquidation payments with respect to, the Series A preferred shares and our common stock. The securities purchase agreement between us and the Treasury limits our ability to pay dividends on and repurchase our common stock. We may be unable to, or choose not to, pay dividends on our common stock. The price of our common stock may fluctuate significantly, and this may make it difficult for you to resell common stock when you want or at prices you find attractive. There may be future sales of additional common stock or preferred stock or other dilution of our equity, which may adversely affect the value of our common stock or the Series A preferred shares. Anti-takeover provisions could negatively impact our shareholders. We may not be able to redeem the Series A preferred shares or repurchase the warrant we issued to the Treasury. If we are unable to redeem the Series A preferred shares after five years, the cost of this capital to us will increase substantially. The Series A preferred shares impact net income available to our common shareholders and earnings per common share, and the warrant we issued to the Treasury may be dilutive to holders of our common stock.

Full 10-K form ▸

1331520--3/5/2010--HOME_BANCSHARES_INC