Home BancShares, Inc. Again Reports Strong and Stable Performance Metrics in All Areas During Turbulent Interest Rate Environment

Company Release - 7/18/2019 8:15 AM ET

CONWAY, Ark., July 18, 2019 (GLOBE NEWSWIRE) -- Home BancShares, Inc. (NASDAQ GS: HOMB), parent company of Centennial Bank, released solid second quarter earnings today that included over $1 billion in loan production at an average interest rate of 6.1% and a strong net interest margin that was relatively flat at 4.28%.

Highlights of the Second Quarter of 2019:

Consolidated
MetricQ2 2019Q1 2019Q4 2018
Net Income$72.2 million$71.4 million$71.0 million
Total Revenue$204.4 million$203.2 million$201.3 million
ROA 1.92%  1.92%  1.90% 
NIM 4.28%  4.30%  4.30% 
Accretion$9.2 million$9.1 million$9.4 million
ROE 12.18%  12.34%  12.05% 
ROTCE (non-GAAP)(1) 21.01%  21.53%  21.08% 
Diluted Earnings Per Share $0.43  $0.42  $0.41 


Centennial Community Banking Centennial CFG
MetricQ2 2019Q1 2019Q4 2018 MetricQ2 2019Q1 2019Q4 2018
Net Income$59.5 million$58.1 million$57.7 million Net Income$11.2 million$12.0 million$12.2 million
Total Revenue$166.5 million$166.9 million$165.9 million Total Revenue$32.4 million$31.1 million$30.6 million
ROA1.83% 1.80% 1.77%  ROA 2.77%  3.08%  3.33% 
NIM4.20% 4.20% 4.18%  NIM 5.25%  5.34%  5.50% 
Accretion$8.4 million$8.3 million$8.6 million Accretion $146,000  $33,000  $33,000 


Shore Premier Finance
MetricQ2 2019Q1 2019Q4 2018
Net Income$1.4 million$1.3 million$1.1 million
Total Revenue$5.4 million$5.2 million$4.8 million
ROA 1.27%  1.15%  1.06% 
NIM 3.02%  3.04%  3.29% 
Accretion $705,000  $741,000  $812,000 

 (1) Calculation of this metric and the reconciliation to GAAP are included in the schedules accompanying this release.

“The last three quarters show a strong trend of stability and growth in all our key metrics,” said John Allison, Chairman. “We continue to produce solid results with a positive growth trend,” Allison continued.

“Loan production was very strong during the second quarter,” said Tracy French, Centennial Bank President and Chief Executive Officer. “We saw loan production of over $1 billion dollars at an average interest rate of 6.1% and were able to increase the yield on the loan portfolio by 3 basis points,” added French.

“Our return on assets remains strong and steady at 1.92% as it was in the first quarter,” stated Randy Sims, Chief Executive Officer of Home BancShares. “Diluted earnings per share of $0.43 as compared to $0.42 from last quarter and an impressive efficiency ratio of 39.93% are just a few of the powerful numbers that contributed to another successful quarter for our shareholders,” added Sims.

Operating Highlights

Our net interest margin was 4.28% for the three-month period ended June 30, 2019 compared to 4.30% for the three-month period ended March 31, 2019. The yield on loans was 6.06% and 6.03% for the three months ended June 30, 2019 and March 31, 2019, respectively, as average loans decreased from $11.04 billion to $11.00 billion. Additionally, the rate on interest bearing deposits increased to 1.38% as of June 30, 2019 from 1.34% as of March 31, 2019, with average balances of $8.62 billion and $8.50 billion, respectively. 

During the second quarter of 2019, we experienced a $515,000 increase in investment premium amortization resulting from increased prepayment speeds on investment securities due to the declining interest rate environment. This increased investment premium amortization negatively impacted the net interest margin for the quarter ended June 30, 2019 by two basis points.

For the three months ended June 30, 2019 and March 31, 2019, we recognized $9.2 million and $9.1 million, respectively, in total net accretion for acquired loans and deposits.  Purchase accounting accretion on acquired loans was $9.2 million and $9.0 million and average purchase accounting loan discounts were $122.2 million and $131.6 million for the three-month periods ended June 30, 2019 and March 31, 2019, respectively.  Net accretion of time deposit premiums was $30,000 for the quarters ended June 30, 2019 and March 30, 2019, and net average remaining CD premiums were $327,000 and $357,000 for the three-month periods ended June 30, 2019 and March 31, 2019, respectively. 

Net interest income on a fully taxable equivalent basis increased $1.5 million, or 1.04%, to $142.3 million for the three-month period ended June 30, 2019, from $140.8 million for the three-month period ended March 31, 2019.  This increase in net interest income for the three-month period ended June 30, 2019 was the result of a $1.8 million increase in interest income, which was partially offset by a $283,000 increase in interest expense.  The $1.8 million increase in interest income was primarily the result of a $2.0 million increase in loan interest income. The $283,000 increase in interest expense was primarily the result of a $1.7 million increase in interest expense on deposits which was offset by a $1.4 million decrease in interest expense on FHLB and other borrowed funds resulting from the average balance of FHLB and other borrowings decreasing by $227.3 million or 19.60%.

Centennial Commercial Finance Group (“Centennial CFG”) net interest margin was 5.25% for the quarter just ended compared to 5.34% for the quarter ended March 31, 2019. Centennial CFG net interest margin for the second quarter of 2019 includes average interest earning assets of $1.59 billion and net interest income of $20.9 million, compared to average interest earning assets of $1.55 billion and net interest income of $20.4 million for the quarter ended March 31, 2019.

Centennial Community Banking (excluding Centennial CFG and Shore Premier Finance) net interest margin was 4.20% for the quarter just ended as well as for the quarter ended March 31, 2019. The net interest margin for the second quarter of 2019 includes average interest earning assets of $11.29 billion and net interest income of $118.1 million, compared to average interest earning assets of $11.31 billion and net interest income of $117.2 million for the first quarter of 2019. 

During the second quarter of 2019, the Company recorded a $1.3 million provision for loan loss, but no provision was recorded during the first quarter of 2019.  The Company continues to see strong asset quality.  Non-performing loans to total loans was 0.57% as of June 30, 2019 compared to 0.58% as of March 31, 2019. Non-performing assets to total assets was 0.51% as of June 30, 2019 compared to 0.52% as of March 31, 2019. For the second quarter of 2019, net charge-offs were $1.6 million compared to net charge-offs of $2.4 million for the first quarter of 2019.

The Company reported $23.1 million of non-interest income for the second quarter of 2019, compared to $23.7 million for the first quarter of 2019. The most important components of the second quarter non-interest income were $8.2 million from other service charges and fees, $6.3 million from service charges on deposits accounts, $3.5 million from mortgage lending income, $2.1 million from other income and $1.1 million from dividends from the FHLB, FRB, FNBB & other equity investments.  The Company exceeded $10 billion in assets during the first quarter of 2017 and became subject to the Durbin Amendment to the Dodd-Frank Act interchange fee restrictions beginning in the third quarter of 2018. The Durbin Amendment negatively impacted debit card and ATM fees beginning in the second half of 2018. The Company estimates quarterly interchange fees are approximately $3.0 million dollars lower as a result of the Durbin Amendment.

Non-interest expense for the second quarter of 2019 was $67.6 million compared to $69.1 million for the first quarter of 2019.  The most important components of the second quarter non-interest expense were $38.0 million from salaries and employee benefits, $17.0 million in other expense and $8.9 million in occupancy and equipment expenses.  Non-interest expense for the first quarter of 2019 included $900,000 related to an outsourced special project and $897,000 in hurricane expense associated with Hurricane Michael which made landfall in Mexico Beach, Florida on October 10, 2018.  For the second quarter of 2019, our efficiency ratio improved to 39.93% compared to 41.01% reported for the first quarter of 2019. 

Financial Condition

Total loans receivable were $11.05 billion at June 30, 2019 compared to $11.07 billion at December 31, 2018.  Total deposits were $11.35 billion at June 30, 2019 compared to $10.90 billion at December 31, 2018.  Total assets were $15.29 billion at June 30, 2019 compared to $15.30 billion at December 31, 2018.

During the second quarter 2019, the Company experienced approximately $74.2 million in organic loan growth. Centennial CFG experienced $146.1 million of organic loan growth and had loans of $1.67 billion at June 30, 2019.  Centennial Community Banking experienced approximately $77.8 million in organic loan decline.   Additionally, Shore Premier Finance experienced $5.8 million of organic loan growth and had loans of $442.1 million at June 30, 2019.

Non-performing loans at June 30, 2019 were $20.0 million, $37.1 million, $3.3 million, $2.4 million and zero in the Arkansas, Florida, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $62.8 million.  Non-performing assets at June 30, 2019 were $26.6 million, $45.3 million, $3.3 million, $2.4 million and zero in the Arkansas, Florida, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $77.5 million. 

The Company’s allowance for loan losses was $106.1 million at June 30, 2019, or 0.96% of total loans, compared to $108.8 million, or 0.98% of total loans, at December 31, 2018. As of June 30, 2019, and December 31, 2018, the Company’s allowance for loan losses was 168.9% and 169.4% of its total non-performing loans, respectively.

Stockholders’ equity was $2.42 billion at June 30, 2019 compared to $2.35 billion at December 31, 2018, an increase of $71.5 million. The increase in stockholders’ equity is primarily associated with the $101.8 million increase in retained earnings and the $28.6 million increase in comprehensive income which were partially offset by the repurchase of $64.4 million of our common stock during 2019.  Book value per common share was $14.46 at June 30, 2019 compared to $13.76 at December 31, 2018.  Tangible book value per common share (non-GAAP) was $8.50 at June 30, 2019 compared to $7.90 at December 31, 2018, an annualized increase of 15.3%. 

Branches

The Company currently has 77 branches in Arkansas, 76 branches in Florida, 5 branches in Alabama and one branch in New York City.

Conference Call

Management will conduct a conference call to review this information at 1:00 p.m. CT (2:00 ET) on Thursday, July 18, 2019.  We encourage all participants to pre-register for the conference call using the following link:  http://dpregister.com/10132572.  Callers who pre-register will be given dial-in instructions and a unique PIN to gain immediate access to the live call.  Participants may pre-register now, or at any time prior to the call, and will immediately receive simple instructions via email.  The Home BancShares conference call will also be automatically scheduled as an event in your Outlook calendar.

Those without internet access or unable to pre-register may dial in and listen to the live call by calling 1-877-508-9586 and asking for the Home BancShares conference call.  A replay of the call will be available by calling 1-877-344-7529, Passcode: 10132572, which will be available until July 25, 2019 at 10:59 p.m. CT (11:59 ET).  Internet access to the call will be available live or in recorded version on the Company's website at www.homebancshares.com under “Investor Relations” for 12 months.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP). The Company’s management uses these non-GAAP financial measures--including net income (earnings), as adjusted; diluted earnings per common share, as adjusted; return on average assets, as adjusted; return on average common equity, as adjusted; return on average tangible common equity; return on average tangible common equity, as adjusted; efficiency ratio, as adjusted, tangible book value per common share and tangible common equity to tangible assets--to provide meaningful supplemental information regarding our performance.  These measures typically adjust GAAP performance measures to include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant items or transactions.  Since the presentation of these GAAP performance measures and their impact differ between companies, management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s business. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the tables of this release.

General

This release contains forward-looking statements regarding the Company’s plans, expectations, goals and outlook for the future. Statements in this press release that are not historical facts should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements of this type speak only as of the date of this news release. By nature, forward-looking statements involve inherent risk and uncertainties. Various factors could cause actual results to differ materially from those contemplated by the forward-looking statements.  These factors include, but are not limited to, the following:  economic conditions, credit quality, interest rates, loan demand, the ability to successfully integrate new acquisitions, increased regulatory requirements as a result of our exceeding $10 billion in total assets, legislative and regulatory changes, technological changes and cybersecurity risks, competition from other financial institutions, changes in the assumptions used in making the forward-looking statements, and other factors described in reports we file with the Securities and Exchange Commission (the “SEC”), including those factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 26, 2019.

Home BancShares, Inc. is a bank holding company, headquartered in Conway, Arkansas. Its wholly-owned subsidiary, Centennial Bank, provides a broad range of commercial and retail banking plus related financial services to businesses, real estate developers, investors, individuals and municipalities. Centennial Bank has branch locations in Arkansas, Florida, South Alabama and New York City. The Company’s common stock is traded through the NASDAQ Global Select Market under the symbol “HOMB.”

FOR MORE INFORMATION CONTACT:
Donna Townsell
Director of Investor Relations
Home BancShares, Inc.
(501) 328-4625

 Home BancShares, Inc. 
 Consolidated End of Period Balance Sheets 
 (Unaudited) 
       
   Jun. 30,  Mar. 31,  Dec. 31,  Sep. 30,  Jun. 30, 
 (In thousands)    2019     2019     2018     2018     2018  
                     
ASSETS                    
                     
Cash and due from banks $183,745  $141,027  $175,024  $208,681  $197,658 
Interest-bearing deposits with other banks  373,557   421,443   482,915   323,376   298,085 
Cash and cash equivalents  557,302   562,470   657,939   532,057   495,743 
Federal funds sold  1,075   1,700   325   500   500 
Investment securities - available-for-sale  2,053,939   2,013,123   1,785,862   1,744,430   1,718,704 
Investment securities - held-to-maturity  -   -   192,776   199,266   204,401 
Loans receivable  11,053,129   10,978,935   11,071,879   10,832,815   10,897,970 
Allowance for loan losses  (106,066)  (106,357)  (108,791)  (110,191)  (111,516)
Loans receivable, net  10,947,063   10,872,578   10,963,088   10,722,624   10,786,454 
Bank premises and equipment, net  278,821   279,012   233,261   233,652   234,634 
Foreclosed assets held for sale  13,734   14,466   13,236   13,507   17,853 
Cash value of life insurance  149,708   149,353   148,621   148,014   147,281 
Accrued interest receivable  48,992   50,288   48,945   48,909   45,682 
Deferred tax asset, net  58,517   64,061   73,275   79,548   78,435 
Goodwill  958,408   958,408   958,408   958,408   956,418 
Core deposit and other intangibles  39,723   41,310   42,896   44,484   46,101 
Other assets  180,293   172,732   183,806   187,339   191,914 
Total assets  $15,287,575  $15,179,501  $15,302,438  $14,912,738  $14,924,120 
                     
LIABILITIES AND STOCKHOLDERS' EQUITY                    
                     
Liabilities                    
Deposits:                    
Demand and non-interest-bearing $2,575,696  $2,519,175  $2,401,232  $2,482,857  $2,523,553 
Savings and interest-bearing transaction accounts  6,774,162   6,650,181   6,624,407   6,420,951   6,573,902 
Time deposits  1,997,458   1,898,096   1,874,139   1,720,930   1,638,578 
Total deposits  11,347,316   11,067,452   10,899,778   10,624,738   10,736,033 
Securities sold under agreements to repurchase  142,541   152,239   143,679   142,146   139,750 
FHLB and other borrowed funds  899,447   1,105,175   1,472,393   1,363,851   1,309,950 
Accrued interest payable and other liabilities  107,695   124,172   67,912   72,381   55,971 
Subordinated debentures  369,170   368,979   368,790   368,596   368,403 
Total liabilities   12,866,169   12,818,017   12,952,552   12,571,712   12,610,107 
                     
 Stockholders' equity                     
Common stock  1,675   1,682   1,707   1,741   1,745 
Capital surplus  1,550,999   1,560,994   1,609,810   1,668,106   1,693,337 
Retained earnings  853,964   803,629   752,184   701,900   642,540 
Accumulated other comprehensive (loss) income  14,768   (4,821)  (13,815)  (30,721)  (23,609)
Total stockholders' equity   2,421,406   2,361,484   2,349,886   2,341,026   2,314,013 
Total liabilities and stockholders' equity  $15,287,575  $15,179,501  $15,302,438  $14,912,738  $14,924,120 
                     

 

 Home BancShares, Inc.  
 Consolidated Statements of Income  
 (Unaudited)  
           
   Quarter Ended   Six Months Ended  
   Jun. 30,  Mar. 31,  Dec. 31,  Sep. 30,  Jun. 30,   Jun. 30,  Jun. 30,  
 (In thousands)    2019     2019    2018     2018    2018    2019    2018  
                           
Interest income                           
Loans $165,816  $163,848 $163,201  $166,334  $152,996 $329,664  $301,061 
Investment securities                          
Taxable  10,650   10,706  9,873   9,011   8,979  21,356   17,949 
Tax-exempt  3,183   3,379  3,456   3,427   3,368  6,562   6,374 
Deposits - other banks  1,628   1,543  1,241   1,273   1,206  3,171   2,135 
Federal funds sold  10   11  9   6   12  21   18 
                           
Total interest income  181,287   179,487  177,780   180,051   166,561  360,774   327,537 
                           
Interest expense                           
Interest on deposits  29,709   28,006  25,207   21,412   18,164  57,715   32,970 
Federal funds purchased  -   -  -   -   -  -   1 
FHLB borrowed funds  4,722   6,118  6,474   7,055   4,245  10,840   8,825 
Securities sold under agreements to repurchase  630   634  602   472   372  1,264   748 
Subordinated debentures  5,239   5,259  5,215   5,202   5,168  10,498   10,172 
                           
Total interest expense  40,300   40,017  37,498   34,141   27,949  80,317   52,716 
                           
 Net interest income   140,987   139,470  140,282   145,910   138,612  280,457   274,821 
Provision for loan losses  1,325   -  -   -   2,722  1,325   4,322 
 Net interest income after                           
provision for loan losses   139,662   139,470  140,282   145,910   135,890  279,132   270,499 
                           
Non-interest income                           
Service charges on deposit accounts  6,259   6,401  7,004   6,992   6,780  12,660   12,855 
Other service charges and fees  8,177   6,563  7,598   9,041   9,797  14,740   19,952 
Trust fees  391   403  290   437   379  794   825 
Mortgage lending income  3,457   2,435  2,554   3,691   3,477  5,892   6,134 
Insurance commissions  515   609  442   463   526  1,124   1,205 
Increase in cash value of life insurance  740   736  737   735   730  1,476   1,384 
Dividends from FHLB, FRB, FNBB & other  1,149   3,505  1,992   1,288   1,600  4,654   2,477 
Gain (loss) on SBA loans  355   241  75   47   262  596   444 
Gain (loss) on branches, equipment and
  other assets, net
  (129)  79  (25)  (102)  -  (50)  7 
Gain (loss) on OREO, net  58   206  114   836   1,046  264   1,451 
Other income  2,094   2,494  2,726   2,419   3,076  4,588   6,744 
                           
Total non-interest income  23,066   23,672  23,507   25,847   27,673  46,738   53,478 
                           
Non-interest expense                           
Salaries and employee benefits  37,976   37,836  36,230   37,825   34,476  75,812   69,490 
Occupancy and equipment  8,853   8,823  8,310   8,148   8,519  17,676   17,502 
Data processing expense  3,838   3,970  3,642   3,461   3,339  7,808   7,325 
Other operating expenses  16,957   18,428  23,090   16,689   16,894  35,385   32,291 
                           
Total non-interest expense  67,624   69,057  71,272   66,123   63,228  136,681   126,608 
                           
Income before income taxes   95,104   94,085  92,517   105,634   100,335  189,189   197,369 
Income tax expense  22,940   22,735  21,487   25,350   24,310  45,675   48,280 
Net income  $72,164  $71,350 $71,030  $80,284  $76,025 $143,514  $149,089 
                           

 

 Home BancShares, Inc.  
 Selected Financial Information  
 (Unaudited)  
          
   Quarter Ended 
  Six Months Ended  
  Jun. 30,  Mar. 31,  Dec. 31,  Sep. 30,  Jun. 30,   Jun. 30,  Jun. 30,  
 (Dollars and shares in thousands, except per share data)    2019    2019   2018    2018    2018     2019    2018   
                         
PER SHARE DATA                        
                         
Diluted earnings per common share $  0.43 $  0.42 $  0.41 $  0.46 $  0.44  $  0.85 $  0.86  
Diluted earnings per common share, as adjusted, excluding
  special dividend from equity investment, merger expenses,
  hurricane expenses & outsourced special project expense
  (non-GAAP)(1)
    0.43    0.42    0.44    0.46    0.44     0.85    0.86  
Basic earnings per common share    0.43    0.42    0.41    0.46    0.44     0.85    0.86  
Dividends per share - common    0.1300    0.1200    0.1200    0.1200    0.1100     0.2500    0.2200  
Book value per common share    14.46    14.04    13.76    13.44    13.26     14.46    13.26  
Tangible book value per common share (non-GAAP)(1)    8.50    8.10    7.90    7.68    7.52     8.50    7.52  
          
          
STOCK INFORMATION         
          
Average common shares outstanding