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Home BancShares Beats EPS Estimates for First Quarter

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Home BancShares, Inc.
Home BancShares, Inc.

CONWAY, Ark., April 21, 2022 (GLOBE NEWSWIRE) -- Home BancShares, Inc. (NYSE: HOMB) (“Home” or the “Company”), parent company of Centennial Bank, released quarterly earnings today.

Highlights of the First Quarter of 2022:

Metric

Q1 2022

Q4 2021

Q3 2021

Q2 2021

Q1 2021

Net Income

$64.9 million

$73.4 million

$75.0 million

$79.1 million

$91.6 million

Total Revenue (net)

$161.8 million

$171.0 million

$173.8 million

$172.4 million

$193.4 million

Income before income taxes

$84.9 million

$93.9 million

$98.2 million

$104.1 million

$120.5 million

Pre-tax, pre-provision, net income (PPNR) (non-GAAP)(1)

$84.9 million

$93.9 million

$98.2 million

$99.4 million

$120.5 million

Pre-tax net income to total revenue (net)

52.48%

54.94%

56.50%

60.42%

62.32%

P5NR (Pre-tax, pre-provision, profit percentage) (PPNR to total revenue (net)) (non-GAAP)(1)

52.48%

54.94%

56.50%

57.66%

62.32%

ROA

1.43%

1.62%

1.68%

1.81%

2.22%

NIM

3.21%

3.42%

3.60%

3.61%

4.02%

NIM, excluding PPP loans (non-GAAP)(1)

3.17%

3.32%

3.43%

3.54%

3.86%

Purchase Accounting Accretion

$3.1 million

$4.0 million

$4.9 million

$5.8 million

$5.5 million

ROE

9.58%

10.63%

10.97%

11.92%

14.15%

ROTCE (non-GAAP)(1)

15.03%

16.73%

17.39%

19.12%

22.90%

Diluted Earnings Per Share

$0.40

$0.45

$0.46

$0.48

$0.55

Non-Performing Assets to Total Assets

0.25%

0.29%

0.29%

0.35%

0.38%

Common Equity Tier 1 Capital

14.9%

15.4%

15.2%

15.0%

14.3%

Leverage

10.8%

11.1%

11.0%

10.9%

11.1%

Tier 1 Capital

15.4%

16.0%

15.8%

15.6%

14.9%

Total Risk-Based Capital

21.6%

19.8%

19.6%

19.5%

18.8%

Allowance for Credit Losses to Total Loans

2.34%

2.41%

2.41%

2.36%

2.25%

Allowance for Credit Losses to Total Loans, excluding PPP loans (non-GAAP)(1)

2.35%

2.43%

2.47%

2.47%

2.40%

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

“The first quarter brought about record high wholesale prices, rising interest rates, future recession fears and global unrest, thus creating one of the most volatile quarters on record during my business career,” said John Allison, Chairman. “During this time, HOMB has stayed true to our discipline and still delivered solid performance during the quarter. We like how we have positioned ourselves in the market with over $3.5 billion in excess cash, and with rising interest rates, it seems as though we have played the chess game very well so far. We believe the Fed will be forced to continue raising rates at a faster pace in the near term. As a result, we could be poised to start deploying some of the cash in the remainder of the year,” continued Allison.

Operating Highlights

Net income for the three-month period ended March 31, 2022 was $64.9 million, or $0.40 earnings per share.

During the first quarter of 2022, the Company did not record any credit loss expense. The Company determined that an additional provision for credit losses on loans was not necessary as the current level of the allowance for credit losses was considered adequate as of March 31, 2022. In addition, the Company determined that the current level of the unfunded commitment reserve was adequate and no additional provision for unfunded commitments was necessary.

Our net interest margin was 3.21% for the three-month period ended March 31, 2022 compared to 3.42% for the three-month period ended December 31, 2021. The yield on loans was 5.29% and 5.48% for the three months ended March 31, 2022 and December 31, 2021, respectively, as average loans increased from $9.91 billion to $9.94 billion. Additionally, the rate on interest bearing deposits decreased to 0.19% as of March 31, 2022 from 0.20% as of December 31, 2021, as average balances increased from $10.00 billion to $10.22 billion.

As of March 31, 2022, we had $59.6 million of Paycheck Protection Program (PPP) loans outstanding. These loans are at 1.00% plus the accretion of the origination fee. Excluding PPP loans, our net interest margin (non-GAAP) for the three-month period ended March 31, 2022 was 3.17%(1). The PPP loans were accretive to the net interest margin by 4 basis points for the three-month period ended March 31, 2022 compared to 10 basis points for the three-month period ended December 31, 2021. This was primarily due to approximately $53.2 million of the Company’s PPP loans being forgiven during the first quarter of 2022 as well as the acceleration of deferred fees for the loans that were forgiven. The deferred fee income decreased from $5.4 million to $2.0 million for the three-month periods ended December 31, 2021 and March 31, 2022, respectively.

As a result of excess liquidity, we had an increase of $236.0 million of average interest-bearing cash balances in the first quarter of 2022 compared to the fourth quarter of 2021. This excess liquidity diluted the net interest margin by 5 basis points for the three-month period ended March 31, 2022.

During the first quarter of 2022, there was $1.4 million of event interest income compared to event interest income of $1.2 million for the fourth quarter of 2021. The increase in event income led to a 0.6 basis point increase to the net interest margin.

Purchase accounting accretion on acquired loans was $3.1 million and $4.0 million and average purchase accounting loan discounts were $25.4 million and $28.9 million for the three-month periods ended March 31, 2022 and December 31, 2021, respectively. The reduction in accretion income reduced the net interest margin by 2 basis points for the three-month period ended March 31, 2022.

Net interest income on a fully taxable equivalent basis was $132.9 million for the three-month period ended March 31, 2022 and $140.8 million for the three-month period ended December 31, 2021. This decrease in net interest income for the three-month period ended March 31, 2022 was the result of a $6.1 million decrease in interest income and a $1.8 million increase in interest expense. The $6.1 million decrease in interest income was primarily the result of a $7.3 million decrease in loan interest income, partially offset by an $835,000 increase in investment income. The $1.8 million increase in interest expense was due to a $2.1 million increase in interest expense on subordinated debentures, which was partially offset by a $261,000 decrease in interest expense on deposits. The increase in interest expense on subordinated debentures was the result of the Company completing an underwritten public offering of $300.0 million in aggregate principal of its 3.125% Fixed-to-Floating Rate Subordinated Notes due 2032 during the first quarter of 2022. The new subordinated debt was dilutive to the net interest margin by 5 basis points.

The Company reported $30.7 million of non-interest income for the first quarter of 2022. The most important components of the first quarter non-interest income were $7.7 million from other service charges and fees, $6.1 million from service charges on deposit accounts, $3.9 million in mortgage lending income, $7.9 million from other income, $2.1 million income from the fair value adjustment for marketable securities, $698,000 million from dividends from FHLB, FRB, FNBB and other, $574,000 from trust fees, $492,000 increase in cash value of life insurance, $480,000 from insurance commissions and $478,000 from gain on OREO. The $7.9 million in other income includes $3.3 million in recoveries on historic losses for a single borrower.

Non-interest expense for the first quarter of 2022 was $76.9 million. The most important components of the first quarter non-interest expense were $43.6 million from salaries and employee benefits, $16.3 million in other expense, $9.1 million in occupancy and equipment expenses and $7.0 million in data processing expenses. Also included within non-interest expense was $863,000 in merger and acquisition expenses. For the first quarter of 2022, our efficiency ratio was 46.15%.

Financial Condition

Total loans receivable were $10.05 billion at March 31, 2022 compared to $9.84 billion at December 31, 2021. Total deposits were $14.58 billion at March 31, 2022 compared to $14.26 billion at December 31, 2021. Total assets were $18.62 billion at March 31, 2022 compared to $18.05 billion at December 31, 2021.

During the first quarter of 2022, the Company experienced approximately $216.6 million in loan growth. On February 7, 2022, the Company completed the acquisition of $242.2 million of marine loans, from LendingClub Bank. Centennial CFG experienced $225.6 million of organic loan growth and had loans of $2.15 billion at March 31, 2022. Our legacy footprint experienced $198.0 million in organic loan decline and $53.2 million in PPP loan decline during the quarter.

Non-performing loans to total loans was 0.44% and 0.51% as of March 31, 2022 and December 31, 2021, respectively. Non-performing assets to total assets was 0.25% and 0.29% as of March 31, 2022 and December 31, 2021, respectively. Net charge-offs were $1.9 million and $2.0 million for the three months ended March 31, 2022 and December 31, 2021, respectively.

Non-performing loans at March 31, 2022 were $13.2 million, $24.8 million, $480,000, $1.4 million and $4.8 million in the Arkansas, Florida, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $44.7 million. Non-performing assets at March 31, 2022 were $13.2 million, $25.9 million, $480,000, $1.4 million and $4.8 million in the Arkansas, Florida, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $45.8 million.

The Company’s allowance for credit losses on loans was $234.8 million at March 31, 2022, or 2.34% of total loans, compared to the allowance for credit losses of $236.7 million, or 2.41% of total loans, at December 31, 2021. The Company’s allowance for credit losses on loans to total loans, excluding PPP loans (non-GAAP), was 2.35%(1) and 2.43%(1) for the three months ended March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022 and December 31, 2021, the Company’s allowance for credit losses on loans was 525.50% and 471.61% of its total non-performing loans, respectively.

Stockholders’ equity was $2.69 billion at March 31, 2022 compared to $2.77 billion at December 31, 2021, a decrease of approximately $79.0 million. The decrease in stockholders’ equity was associated with a $115.0 million decrease in accumulated other comprehensive income as well as net stock repurchases and share-based compensation activity of $1.8 million, which was partially offset by a $37.8 million increase in retained earnings. Book value per common share was $16.41 at March 31, 2022 compared to $16.90 at December 31, 2021. Tangible book value per common share (non-GAAP) was $10.32(1) at March 31, 2022 compared to $10.80(1) at December 31, 2021, a decrease of 17.94% on an annualized basis.

Branches

The Company currently has 76 branches in Arkansas, 78 branches in Florida, 62 branches in Texas, 5 branches in Alabama and one branch in New York City.

Acquisition

The Company’s previously announced acquisition of Happy Bancshares, Inc. (“Happy”) and its bank subsidiary, Happy State Bank, was completed on April 1, 2022. As of March 31, 2022, Happy had approximately $6.76 billion in total assets, $3.60 billion in loans, and $5.85 billion in deposits. With the completion of the acquisition, the Company now operates 62 branches in Texas.

Subordinated Debt Payoff

On April 15, 2022, the Company completed the payoff of its $300.0 million in aggregate principal amount of 5.625% Fixed-to-Floating Rate Subordinated Notes due 2027. Each 2027 Note was redeemed pursuant to the terms of the Subordinated Indenture, as supplemented by the First Supplemental Indenture, each dated as of April 3, 2017, between the Company and U.S. Bank Trust Company, National Association, the Trustee for the 2027 Notes, at the redemption price of 100% of its principal amount, plus accrued and unpaid interest to, but excluding, the Redemption Date.

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

Conference Call

Management will conduct a conference call to review this information at 1:00 p.m. CT (2:00 ET) on Thursday, April 21, 2022. 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/468089456. 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.incommglobalevents.com/registration/q4inc/10378/home-bancshares-inc-1st-quarter-earnings-call/. 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: 064337. A replay of the call will be available by calling 1-866-813-9403, Passcode: 129968, which will be available until April 28, 2022, 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.

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); pre-tax, pre-provision, profit percentage; diluted earnings per common share, as adjusted; return on average assets, as adjusted; return on average assets excluding intangible amortization; return on average assets excluding excess liquidity; return on average common equity, as adjusted; return on average tangible common equity; return on average tangible common equity excluding intangible amortization; return on average tangible common equity, as adjusted; efficiency ratio, as adjusted; net interest margin, excluding PPP loans; allowance for credit losses to total loans, excluding PPP loans; 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 (including the effect of the PPP loans) 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 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, real estate values and unemployment; 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 possibility that the acquisition of Happy may be more expensive to complete than anticipated, including as a result of unexpected factors or events; the risk that the benefits from the transaction 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 promptly and 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, including those in response to the COVID-19 pandemic; technological changes and cybersecurity risks; the effects of changes in accounting policies and practices; changes in governmental monetary and fiscal policies; political instability; 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)

Mar. 31,
2022

Dec. 31,
2021

Sep. 30,
2021

Jun. 30,
2021

Mar. 31,
2021

ASSETS

Cash and due from banks

$

173,134

$

119,908

$

146,378

$

182,226

$

218,814

Interest-bearing deposits with other banks

3,446,324

3,530,407

3,133,878

2,759,027

2,259,734

Cash and cash equivalents

3,619,458

3,650,315

3,280,256

2,941,253

2,478,548

Investment securities - available-for sale, net of allowance for credit losses

2,957,322

3,119,807

3,150,608

3,053,712

2,539,123

Investment securities - held-to-maturity

499,265

-

-

-

-

Loans receivable

10,052,714

9,836,089

9,901,100

10,199,175

10,778,493

Allowance for credit losses

(234,768

)

(236,714

)

(238,673

)

(240,451

)

(242,932

)

Loans receivable, net

9,817,946

9,599,375

9,662,427

9,958,724

10,535,561

Bank premises and equipment, net

274,503

275,760

276,972

278,502

278,620

Foreclosed assets held for sale

1,144

1,630

1,171

1,969

3,004

Cash value of life insurance

105,623

105,135

104,638

104,132

103,599

Accrued interest receivable

46,934

46,736

48,577

48,725

55,495

Deferred tax asset, net

116,605

78,290

69,724

72,273

77,145

Goodwill

973,025

973,025

973,025

973,025

973,025

Core deposit and other intangibles

23,624

25,045

26,466

27,886

29,307

Other assets

182,546

177,020

171,192

166,991

166,814

Total assets

$

18,617,995

$

18,052,138

$

17,765,056

$

17,627,192

$

17,240,241

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Deposits:

Demand and non-interest-bearing

$

4,311,400

$

4,127,878

$

4,139,149

$

4,076,570

$

3,859,722

Savings and interest-bearing transaction accounts

9,461,393

9,251,805

8,813,326

8,744,900

8,477,208

Time deposits

808,141

880,887

1,050,896

1,069,871

1,175,664

Total deposits

14,580,934

14,260,570

14,003,371

13,891,341

13,512,594

Securities sold under agreements to repurchase

151,151

140,886

141,002

150,540

162,929

FHLB and other borrowed funds

400,000

400,000

400,000

400,000

400,000

Accrued interest payable and other liabilities

131,339

113,868

113,721

118,415

148,999

Subordinated debentures

667,868

371,093

370,900

370,707

370,515

Total liabilities

15,931,292

15,286,417

15,028,994

14,931,003

14,595,037

Stockholders' equity

Common stock

1,638

1,637

1,640

1,645

1,651

Capital surplus

1,485,524

1,487,373

1,492,588

1,501,615

1,516,286

Retained earnings

1,304,098

1,266,249

1,215,831

1,163,810

1,107,818

Accumulated other comprehensive (loss) income

(104,557

)

10,462

26,003

29,119

19,449

Total stockholders' equity

2,686,703

2,765,721

2,736,062

2,696,189

2,645,204

Total liabilities and stockholders' equity

$

18,617,995

$

18,052,138

$

17,765,056

$

17,627,192

$

17,240,241


Home BancShares, Inc.

Consolidated Statements of Income

(Unaudited)

Quarter Ended

Three Months Ended

(In thousands)

Mar. 31,
2022

Dec. 31,
2021

Sep. 30,
2021

Jun. 30,
2021

Mar. 31,
2021

Mar. 31,
2022

Mar. 31,
2021

Interest income

Loans

$

129,442

$

136,750

$

142,609

$

141,684

$

150,917

$

129,442

$

150,917

Investment securities

Taxable

9,080

8,121

8,495

7,185

6,253

9,080

6,253

Tax-exempt

4,707

4,827

4,839

4,905

5,071

4,707

5,071

Deposits - other banks

1,673

1,281

1,117

707

410

1,673

410

Federal funds sold

1

-

-

-

-

1

-

Total interest income

144,903

150,979

157,060

154,481

162,651

144,903

162,651

Interest expense

Interest on deposits

4,894

5,155

5,642

6,434

7,705

4,894

7,705

FHLB borrowed funds

1,875

1,916

1,917

1,896

1,875

1,875

1,875

Securities sold under agreements to repurchase

108

98

102

107

190

108

190

Subordinated debentures

6,878

4,790

4,788

4,792

4,793

6,878

4,793

Total interest expense

13,755

11,959

12,449

13,229

14,563

13,755

14,563

Net interest income

131,148

139,020

144,611

141,252

148,088

131,148

148,088

Provision for credit losses

-

-

-

-

-

-

-

Provision for credit loss - unfunded commitments

-

-

-

(4,752

)

-

-

-

Total credit loss expense

-

-

-

(4,752

)

-

-

-

Net interest income after provision for credit losses

131,148

139,020

144,611

146,004

148,088

131,148

148,088

Non-interest income

Service charges on deposit accounts

6,140

6,217

5,941

5,116

5,002

6,140

5,002

Other service charges and fees

7,733

11,133

8,051

9,659

7,608

7,733

7,608

Trust fees

574

515

479

444

522

574

522

Mortgage lending income

3,916

5,359

5,948

6,202

8,167

3,916

8,167

Insurance commissions

480

387

586

478

492

480

492

Increase in cash value of life insurance

492

501

509

537

502

492

502

Dividends from FHLB, FRB, FNBB & other

698

919

2,661

2,646

8,609

698

8,609

Gain on SBA loans

95

792

439

1,149

-

95

-

Gain (loss) on branches, equipment and other assets, net

16

(19

)

(34

)

(23

)

(29

)

16

(29

)

Gain on OREO, net

478

737

246

619