HOMB’s Disciplined Strategy Leads to a Beat of Management Expectations Despite Continued West Texas Headwinds

Home BancShares, Inc.

CONWAY, Ark., Jan. 19, 2023 (GLOBE NEWSWIRE) -- Home BancShares, Inc. (NYSE: HOMB) (“Home” or the “Company”), parent company of Centennial Bank, released quarterly earnings today.

Highlights of the Fourth Quarter of 2022:

Metric	Q4 2022	Q3 2022	Q2 2022	Q1 2022	Q4 2021
Net income	$115.7 million	$108.7 million	$16.0 million	$64.9 million	$73.4 million
Total revenue (net)	$272.3 million	$256.3 million	$243.3 million	$161.8 million	$171.0 million
Income before income taxes	$148.4 million	$142.0 million	$19.3 million	$84.9 million	$93.9 million
Pre-tax, pre-provision, net income (PPNR) (non-GAAP)(1)	$153.4 million	$142.0 million	$77.9 million	$84.9 million	$93.9 million
Pre-tax net income to total revenue (net)	54.50%	55.39%	7.92%	52.48%	54.94%
P5NR (Pre-tax, pre-provision, profit percentage) (PPNR to total revenue (net)) (non-GAAP)(1)	56.34%	55.39%	32.00%	52.48%	54.94%
ROA	1.98%	1.81%	0.26%	1.43%	1.62%
NIM	4.21%	4.05%	3.64%	3.21%	3.42%
Purchase accounting accretion	$3.5 million	$4.6 million	$5.2 million	$3.1 million	$4.0 million
ROE	13.29%	12.25%	1.78%	9.58%	10.63%
ROTCE (non-GAAP)(1)	22.96%	20.93%	2.96%	15.03%	16.73%
Diluted earnings per share	$0.57	$0.53	$0.08	$0.40	$0.45
Non-performing assets to total assets	0.27%	0.27%	0.25%	0.25%	0.29%
Common equity tier 1 capital	12.9%	13.0%	12.8%	14.9%	15.4%
Leverage	10.9%	10.4%	9.8%	10.8%	11.1%
Tier 1 capital	12.9%	13.0%	12.9%	15.5%	16.0%
Total risk-based capital	16.5%	16.7%	16.6%	21.6%	19.8%
Allowance for credit losses to total loans	2.01%	2.09%	2.11%	2.34%	2.41%

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

“It’s obvious all banks are not created equal. HOMB continues to try and separate ourselves from the pack. Financial strength is paramount, and I’m proud that Home BancShares is able to provide strength to our customers, especially during tough economic times. Despite the headwinds that arose out of West Texas, HOMB was able to rely on the patience and strength of the full franchise to deliver strong performance for the year,” said John Allison, Chairman.

“As a result of the discipline, patience and liquidity maintained by HOMB, we were able to profitably grow loans by $580 million in the fourth quarter, increasing loan yield to 6.23% from 5.63%, which is impressive by any standard in a rising rate environment,” said Tracy French, Centennial Bank President and Chief Executive Officer.

Operating Highlights

Net income for the three-month period ended December 31, 2022 was $115.7 million, or $0.57 earnings per share. Net income for the year ended December 31, 2022 was $305.3 million, or $1.57 earnings per share. When adjusting for merger-related and other non-fundamental items, net income and earnings per share on an as-adjusted basis (non-GAAP), were $107.5 million⁽¹⁾, or $0.53 per share⁽¹⁾, and $375.9 million⁽¹⁾, or $1.93 per share⁽¹⁾, for the three months and year ended December 31, 2022, respectively.

Our net interest margin was 4.21% for the three-month period ended December 31, 2022, compared to 4.05% for the three-month period ended September 30, 2022. The yield on loans was 6.23% and 5.63% for the three months ended December 31, 2022 and September 30, 2022, respectively, as average loans increased from $13.82 billion to $14.11 billion. Additionally, the rate on interest bearing deposits increased to 1.45% as of December 31, 2022, from 0.70% as of September 30, 2022, while average balances decreased from $13.31 billion to $12.85 billion.

During the fourth quarter of 2022, there was $871,000 of event interest income compared to event interest income of $943,000 for the third quarter of 2022.

Purchase accounting accretion on acquired loans was $3.5 million and $4.6 million and average purchase accounting loan discounts were $38.6 million and $42.1 million for the three-month periods ended December 31, 2022 and September 30, 2022, respectively. The reduction in accretion income lowered the net interest margin by two basis points for the three-month period ended December 31, 2022.

Net interest income on a fully taxable equivalent basis was $217.7 million for the three-month period ended December 31, 2022, and $215.5 million for the three-month period ended September 30, 2022. This increase in net interest income for the three-month period ended December 31, 2022, was the result of a $29.5 million increase in interest income, partially offset by a $27.4 million increase in interest expense. The $29.5 million increase in interest income was primarily the result of a $25.5 million increase in loan interest income and a $4.6 million increase in investment income. The increase in interest income is a result of the rising interest rate environment as well as loan growth during the quarter. The $27.4 million increase in interest expense was due to a $23.7 million increase in interest expense on deposits and a $3.5 million increase in interest expense on FHLB borrowed funds. The increase in interest expense on deposits and FHLB borrowed funds is a result of the rising interest rate environment as well as an increase in FHLB borrowed funds during the quarter.

The Company reported $56.7 million of non-interest income for the fourth quarter of 2022. The most important components of fourth quarter non-interest income were $23.2 million from other income, $10.4 million from other service charges and fees, $10.1 million from service charges on deposit accounts, $4.0 million from trust fees, $3.6 million in mortgage lending income, $2.8 million from dividends from FHLB, FRB, FNBB and other, a $1.1 million increase in cash value of life insurance, a $1.0 million loss from the fair value adjustment for marketable securities, and $453,000 from insurance commissions. The $23.2 million in other income includes $15.0 million income from the settlement of a lawsuit brought by the Company.

Non-interest expense for the fourth quarter of 2022 was $118.9 million. The most important components of the fourth quarter non-interest expense were $64.2 million from salaries and employee benefits, $30.7 million in other operating expense, $14.9 million in occupancy and equipment expenses and $9.1 million in data processing expenses. Other operating expense includes $5.0 million in legal expense from a lawsuit brought by the Company. There were no merger and acquisition expenses during the fourth quarter of 2022. For the fourth quarter of 2022, our efficiency ratio was 42.44%; and, our efficiency ratio, as adjusted (non-GAAP), was 43.07%⁽¹⁾_.

Financial Condition

Total loans receivable were $14.41 billion at December 31, 2022, compared to $13.83 billion at September 30, 2022. Total deposits were $17.94 billion at December 31, 2022, compared to $18.54 billion at September 30, 2022. Total assets were $22.88 billion at December 31, 2022, compared to $23.16 billion at September 30, 2022.

During the fourth quarter of 2022, the Company experienced approximately $580.2 million in loan growth. Centennial CFG experienced $196.0 million of organic loan growth and had loans of $2.27 billion at December 31, 2022. Our remaining footprint experienced $387.6 million in organic loan growth and $3.4 million in PPP loan decline during the quarter.

Non-performing loans to total loans was 0.42% and 0.45% at December 31, 2022 and September 30, 2022, respectively. Non-performing assets to total assets was 0.27% at both December 31, 2022 and September 30, 2022. Net charge-offs were $4.5 million and $5.1 million for the three months ended December 31, 2022 and September 30, 2022, respectively.

Non-performing loans at December 31, 2022, were $8.4 million, $20.5 million, $22.2 million, $404,000, $2.3 million and $7.1 million in the Arkansas, Florida, Texas, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $60.9 million. Non-performing assets at December 31, 2022, were $8.5 million, $20.8 million, $22.4 million, $404,000, $2.3 million and $7.1 million in the Arkansas, Florida, Texas, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $61.5 million.

The Company’s allowance for credit losses on loans was $289.7 million at December 31, 2022, or 2.01% of total loans, compared to the allowance for credit losses on loans of $289.2 million, or 2.09% of total loans, at September 30, 2022. As of December 31, 2022 and September 30, 2022, the Company’s allowance for credit losses on loans was 475.99% and 468.77% of its total non-performing loans, respectively.

Stockholders’ equity was $3.53 billion at December 31, 2022, compared to $3.46 billion at September 30, 2022, an increase of approximately $66.3 million. The increase in stockholders’ equity is primarily associated with the $82.0 million increase in retained earnings and the $2.0 million decrease in accumulated other comprehensive loss, which were partially offset by $20.0 million in stock repurchases. Book value per common share was $17.33 at December 31, 2022, compared to $16.94 at September 30, 2022. Tangible book value per common share (non-GAAP) was $10.17⁽¹⁾ at December 31, 2022, compared to $9.82⁽¹⁾ at September 30, 2022.

Branches

The Company currently has 76 branches in Arkansas, 78 branches in Florida, 63 branches in Texas, 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 p.m. ET) on Thursday, January 19, 2023. We strongly encourage all participants to pre-register for the conference call webcast or the live call using one of the following links. First, participants can pre-register for the conference call webcast using the following link: https://events.q4inc.com/attendee/223948707. Participants who pre-register will be given a unique webcast link to gain immediate access to the conference call webcast. Second, participants can pre-register for the live call using the following link: https://www.netroadshow.com/events/login?show=863c0014&confId=45606. Participants who pre-register will be given the phone number and unique access codes 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 1-844-200-6205, Passcode: 794589. A replay of the call will be available by calling 1-866-813-9403, Passcode: 384771, which will be available until January 26, 2023, at 10:59 p.m. CT (11:59 p.m. ET). Internet access to the call will be available live or in recorded version on the Company's website at www.homebancshares.com.

About Home BancShares

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, Texas, South Alabama and New York City. The Company’s common stock is traded through the New York Stock Exchange under the symbol “HOMB.” The Company was founded in 1998. Visit www.homebancshares.com or www.my100bank.com for more information.

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

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; pre-tax, pre-provision, net income (PPNR); PPNR, as adjusted; pre-tax net income, as adjusted, to total revenue (net); pre-tax, pre-provision, profit percentage; pre-tax, pre-provision, profit percentage, as adjusted; diluted earnings per common share, as adjusted; return on average assets, as adjusted; return on average assets excluding intangible amortization; return on average assets, as adjusted, excluding intangible amortization; return on average common equity, as adjusted; return on average tangible common equity; return on average tangible common equity, as adjusted; return on average tangible common equity excluding intangible amortization; return on average tangible common equity, as adjusted, excluding intangible amortization; 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 that management believes are not indicative of the Company’s primary business operating results. 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 may contain 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 are not guarantees of future events, performance or results. When we use words like “may,” “plan,” “propose,” “contemplate,” “anticipate,” “believe,” “intend,” “continue,” “expect,” “project,” “predict,” “estimate,” “could,” “should,” “would,” and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. Forward-looking statements of this type speak only as of the date of this news release. By nature, forward-looking statements involve inherent risks 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, real estate values and unemployment, including the ongoing impacts of inflation; disruptions, uncertainties and related effects on our business and operations as a result of the ongoing coronavirus (COVID-19) pandemic and measures that have been or may be implemented or imposed in response to the pandemic, including the impact on, among other things, credit quality and liquidity; the risk that the benefits from the acquisition of Happy Bancshares, Inc. (“Happy”) may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, ongoing or future effects of the COVID-19 pandemic, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Home and Happy operate; the ability to effectively integrate the businesses of Home and Happy; the reaction to the transaction of the companies’ customers, employees and counterparties; diversion of management time on acquisition-related issues; the effect of any future mergers, acquisitions or other transactions to which we or our bank subsidiary may from time to time be a party, including as a result of one or more of the factors described above as they would relate to such transaction; the ability to identify, enter into and/or close additional acquisitions; legislative and regulatory changes and risks and expenses associated with current and future legislation and regulations; technological changes and cybersecurity risks; the effects of changes in accounting policies and practices; changes in governmental monetary and fiscal policies; political instability, military conflicts and other major domestic or international events; adverse weather events, including hurricanes, and other natural disasters; competition from other financial institutions; potential claims, expenses and other adverse effects related to current or future litigation, regulatory examinations or other government actions; 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, 2021, filed with the SEC on February 24, 2022.

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)
(In thousands)		Dec. 31, 2022				Sep. 30, 2022				Jun. 30, 2022				Mar. 31, 2022				Dec. 31, 2021
ASSETS
Cash and due from banks		$	263,893			$	268,929			$	287,451			$	173,134			$	119,908
Interest-bearing deposits with other banks			460,897				1,311,492				2,528,925				3,446,324				3,530,407
Cash and cash equivalents			724,790				1,580,421				2,816,376				3,619,458				3,650,315
Federal funds sold			—				2,700				—				—				—
Investment securities - available-for sale, net of allowance for credit losses			4,041,590				4,085,102				3,791,509				2,957,322				3,119,807
Investment securities - held-to-maturity, net of allowance for credit losses			1,287,705				1,251,007				1,366,781				499,265				—
Total investment securities			5,329,295				5,336,109				5,158,290				3,456,587				3,119,807
Loans receivable			14,409,480				13,829,311				13,923,873				10,052,714				9,836,089
Allowance for credit losses			(289,669	)			(289,203	)			(294,267	)			(234,768	)			(236,714	)
Loans receivable, net			14,119,811				13,540,108				13,629,606				9,817,946				9,599,375
Bank premises and equipment, net			405,073				411,479				415,056				274,503				275,760
Foreclosed assets held for sale			546				365				373				1,144				1,630
Cash value of life insurance			213,693				212,619				211,811				105,623				105,135
Accrued interest receivable			103,199				88,671				80,274				46,934				46,736
Deferred tax asset, net			209,321				228,979				208,585				116,605				78,290
Goodwill			1,398,253				1,394,353				1,398,400				973,025				973,025
Core deposit intangible			58,455				60,932				63,410				23,624				25,045
Other assets			321,152				300,634				270,987				182,546				177,020
Total assets		$	22,883,588			$	23,157,370			$	24,253,168			$	18,617,995			$	18,052,138
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Demand and non-interest-bearing		$	5,164,997			$	5,540,539			$	6,036,583			$	4,311,400			$	4,127,878
Savings and interest-bearing transaction accounts			11,730,552				11,968,519				12,424,192				9,461,393				9,251,805
Time deposits			1,043,234				1,033,266				1,119,297				808,141				880,887
Total deposits			17,938,783				18,542,324				19,580,072				14,580,934				14,260,570
Securities sold under agreements to repurchase			131,146				121,555				118,573				151,151				140,886
FHLB and other borrowed funds			650,000				400,000				400,000				400,000				400,000
Accrued interest payable and other liabilities			196,877				192,908				197,503				131,339				113,868
Subordinated debentures			440,420				440,568				458,455				667,868				371,093
Total liabilities			19,357,226				19,697,355				20,754,603				15,931,292				15,286,417
Stockholders' equity
Common stock			2,034				2,042				2,053				1,638				1,637
Capital surplus			2,386,699				2,404,388				2,426,271				1,485,524				1,487,373
Retained earnings			1,443,087				1,361,040				1,286,146				1,304,098				1,266,249
Accumulated other comprehensive (loss) income			(305,458	)			(307,455	)			(215,905	)			(104,557	)			10,462
Total stockholders' equity			3,526,362				3,460,015				3,498,565				2,686,703				2,765,721
Total liabilities and stockholders' equity		$	22,883,588			$	23,157,370			$	24,253,168			$	18,617,995			$	18,052,138

Home BancShares, Inc.
Consolidated Statements of Income
(Unaudited)
		Quarter Ended																				Year Ended
(In thousands)		Dec. 31, 2022				Sep. 30, 2022				Jun. 30, 2022				Mar. 31, 2022				Dec. 31, 2021				Dec. 31, 2022				Dec. 31, 2021
Interest income:
Loans		$	221,280			$	195,841			$	181,779			$	129,442			$	136,750			$	728,342			$	571,960
Investment securities
Taxable			33,639				28,273				20,941				9,080				8,121				91,933				30,054
Tax-exempt			7,855				8,069				7,725				4,707				4,827				28,356				19,642
Deposits - other banks			10,109				10,763				6,565				1,673				1,281				29,110				3,515
Federal funds sold			12				9				3				1				—				25				—
Total interest income			272,895				242,955				217,013				144,903				150,979				877,766				625,171
Interest expense:
Interest on deposits			47,019				23,347				10,729				4,894				5,155				85,989				24,936
Federal funds purchased			—				—				2				—				—				2				—
FHLB borrowed funds			5,388				1,917				1,896				1,875				1,916				11,076				7,604
Securities sold under agreements to repurchase			701				434				187				108				98				1,430				497
Subordinated debentures			4,121				4,153				5,441				6,878				4,790				20,593				19,163
Total interest expense			57,229				29,851				18,255				13,755				11,959				119,090				52,200
Net interest income			215,666				213,104				198,758				131,148				139,020				758,676				572,971
Provision for credit losses on loans			5,000				—				—				—				—				5,000				—
Provision for credit losses on acquired loans			—				—				45,170				—				—				45,170				—
Provision for credit losses on acquired unfunded commitments			—				—				11,410				—				—				11,410				—
Provision for credit losses on unfunded commitments			—				—				—				—				—				—				(4,752	)
Provision for credit losses on acquired investment securities			—				—				2,005				—				—				2,005				—
Total credit loss expense (benefit)			5,000				—				58,585				—				—				63,585				(4,752	)
Net interest income after credit loss expense (benefit)			210,666				213,104				140,173				131,148				139,020				695,091				577,723
Non-interest income:
Service charges on deposit accounts			10,134				10,756				10,084				6,140				6,217				37,114				22,276
Other service charges and fees			10,363				13,951				12,541				7,733				11,133				44,588				36,451
Trust fees			3,981				3,980				4,320				574				515				12,855				1,960
Mortgage lending income			3,566