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Home BancShares, Inc. Tops Earnings Per Share and Revenue for the Fourth Quarter

CONWAY, Ark., Jan. 16, 2020 (GLOBE NEWSWIRE) -- Home BancShares, Inc. (NASDAQ GS: HOMB), parent company of Centennial Bank, released fourth quarter earnings today revealing four consecutive quarters of increased profitability.

Highlights of the Fourth Quarter of 2019:

Metric Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018
Net Income $73.3 million $72.8 million $72.2 million $71.4 million $71.0 million
Total Revenue (net) $167.8 million $167.7 million $164.1 million $163.1 million $163.8 million
ROA 1.94% 1.93% 1.92% 1.92% 1.90%
NIM 4.24% 4.32% 4.28% 4.30% 4.30%
Purchase Accounting Accretion $9.1 million $8.5 million $9.2 million $9.1 million $9.4 million
ROE 11.71% 11.84% 12.18% 12.34% 12.05%
ROTCE (non-GAAP)(1) 19.55% 20.04% 21.01% 21.53% 21.08%
Diluted Earnings Per Share $0.44 $0.44 $0.43 $0.42 $0.41
Non-Performing Assets to Total Assets 0.43% 0.45% 0.51% 0.52% 0.51%
(1) Calculation of this metric and the reconciliation to GAAP are included in the schedules accompanying this release.
 

“I am very pleased with our fourth quarter results as well as our performance for all of 2019,” said John Allison, Chairman. “Increasing our profitability during a year of fluctuating interest rates is certainly an accomplishment to be proud of,” continued Allison.

“Our steady increase in two key banking metrics: diluted earnings per share and return on assets, showcase the solid foundation of Home BancShares,” said Tracy French, Centennial Bank President and Chief Executive Officer.

 Operating Highlights

Our net interest margin was 4.24% for the three-month period ended December 31, 2019 compared to 4.32% for the three-month period ended September 30, 2019. The yield on loans was 5.90% and 6.08% for the three months ended December 31, 2019 and September 30, 2019, respectively, as average loans decreased from $10.94 billion to $10.87 billion. Additionally, the rate on interest bearing deposits decreased to 1.21% as of December 31, 2019 from 1.36% as of September 30, 2019, with average balances of $8.82 billion and $8.64 billion, respectively. 

From the third quarter of 2019 to the fourth quarter of 2019, we experienced a $468,000 increase in investment premium amortization primarily 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 December 31, 2019 by 1.4 basis points.

During the third quarter of 2019, we had several interest income events primarily related to large payoffs.  These events totaled $2.8 million of interest income and increased the net interest margin by 8.4 basis points for the third quarter of 2019. During the fourth quarter of 2019, event interest income was $549,000 which increased the net interest margin by 1.7 basis points.  The lower event interest income from the third quarter of 2019 to the fourth quarter of 2019 resulted in a 6.7 basis point decline for the margin.

For the three months ended December 31, 2019 and September 30, 2019, we recognized $9.1 million and $8.5 million, respectively, in total net accretion for acquired loans and deposits. The $671,000 increase in accretion income increased the net interest margin by 2.0 basis points for the fourth quarter of 2019.

Purchase accounting accretion on acquired loans was $9.1 million and $8.4 million and average purchase accounting loan discounts were $91.9 million and $112.6 million for the three-month periods ended December 31, 2019 and September 30, 2019, respectively. Net amortization of time deposit premiums was $30,000 per quarter and net average remaining CD premiums were $266,000 and $297,000 for the three-month periods ended December 31, 2019 and September 30, 2019, respectively.

Net interest income on a fully taxable equivalent basis decreased $3.1 million, or 2.16%, to $141.1 million for the three-month period ended December 31, 2019, from $144.2 million for the three-month period ended September 30, 2019. This decrease in net interest income for the three-month period ended December 31, 2019 was the result of a $6.9 million decrease in interest income which was partially offset by a $3.8 million decrease in interest expense. The $6.9 million decrease in interest income was primarily the result of a $6.3 million decrease in loan interest income, a $490,000 decrease in investment income and a $119,000 decrease in income on deposits with other banks. The $3.8 million decrease in interest expense was primarily the result of a $2.7 million decrease in interest expense on deposits. This decrease was the result of a $2.2 million decrease in interest expense on savings and interest-bearing transaction accounts and a $534,000 decrease in interest expense on time deposits.

During the fourth quarter of 2019, no provision for loan loss was recorded. The Company continued to see strong asset quality. Non-performing loans to total loans was 0.50% as of December 31, 2019 compared to 0.54% as of September 30, 2019, an improvement of 7.26%. Non-performing assets to total assets improved by 5.63% from 0.45% as of September 30, 2019 to 0.43% as of December 31, 2019. For the fourth quarter of 2019, net charge-offs were $2.2 million compared to net charge-offs of $1.8 million for the third quarter of 2019.

The Company reported $28.0 million of non-interest income for the fourth quarter of 2019, compared to $24.7 million for the third quarter of 2019. The most important components of the fourth quarter non-interest income were $10.6 million from other service charges and fees, $6.8 million from service charges on deposits accounts, $3.8 million from mortgage lending income, $2.5 million from other income and $2.0 million from dividends from FHLB, FRB, FNBB & other equity investments. Non-interest income for the fourth quarter of 2019 includes $861,000 in dividends related to a special dividend from an equity investment.

Non-interest expense for the fourth quarter of 2019 was $71.3 million compared to $67.8 million for the third quarter of 2019. The most important components of the fourth quarter non-interest expense were $38.4 million from salaries and employee benefits, $19.9 million in other expense and $8.7 million in occupancy and equipment expenses. For the fourth quarter of 2019, our efficiency ratio was 41.26%. 

Non-interest expense for the fourth quarter of 2019 included $631,000 in other professional fees related to an outsourced special project, and non-interest expense for the third quarter of 2019 included a $2.3 million FDIC small bank assessment credit.

Financial Condition

Total loans receivable were $10.87 billion at December 31, 2019 compared to $11.07 billion at December 31, 2018. Total deposits were $11.28 billion at December 31, 2019 compared to $10.90 billion at December 31, 2018. Total assets were $15.03 billion at December 31, 2019 compared to $15.30 billion at December 31, 2018.

During the fourth quarter 2019, the Company experienced approximately $97.8 million in organic loan growth. Centennial CFG experienced $99.4 million of organic loan growth and had loans of $1.60 billion at December 31, 2019. Our legacy footprint experienced $1.7 million in organic loan decline during the quarter.  

Non-performing loans at December 31, 2019 were $17.9 million, $34.7 million, $429,000, $1.8 million and zero in the Arkansas, Florida, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $54.8 million. Non-performing assets at December 31, 2019 were $22.9 million, $39.2 million, $463,000, $1.8 million and zero in the Arkansas, Florida, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $64.4 million. 

The Company’s allowance for loan losses was $102.1 million at December 31, 2019, or 0.94% of total loans, compared to $108.8 million, or 0.98% of total loans, at December 31, 2018. As of December 31, 2019, and December 31, 2018, the Company’s allowance for loan losses was 186.2% and 169.4% of its total non-performing loans, respectively.

Stockholders’ equity was $2.51 billion at December 31, 2019 compared to $2.35 billion at December 31, 2018, an increase of approximately $161.6 million. The increase in stockholders’ equity is primarily associated with the $204.4 million increase in retained earnings and the $30.0 million increase in accumulated other comprehensive income which were partially offset by the repurchase of $84.9 million of our common stock during 2019.  Book value per common share was $15.10 at December 31, 2019 compared to $13.76 at December 31, 2018.  Tangible book value per common share (non-GAAP) was $9.12 at December 31, 2019 compared to $7.90 at December 31, 2018, an increase of 15.4%. 

Branches

The Company currently has 77 branches in Arkansas, 78 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, January 16, 2020.  We encourage all participants to pre-register for the conference call using the following link:  http://dpregister.com/10137496.  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: 10137496, which will be available until January 23, 2020 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 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 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 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, legislative and regulatory changes and risks associated with current and future regulations, 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)
           
      Dec. 31,       Sep. 30,       Jun. 30,       Mar. 31,       Dec. 31,  
(In thousands)     2019       2019       2019       2019       2018  
           
ASSETS          
           
Cash and due from banks   $ 168,914     $ 171,492     $ 183,745     $ 141,027     $ 175,024  
Interest-bearing deposits with other banks     321,687       270,804       373,557       421,443       482,915  
  Cash and cash equivalents     490,601       442,296       557,302       562,470       657,939  
Federal funds sold     -       1,650       1,075       1,700       325  
Investment securities - available-for-sale     2,083,838       2,087,508       2,053,939       2,013,123       1,785,862  
Investment securities - held-to-maturity     -       -       -       -       192,776  
Loans receivable     10,869,710       10,771,946       11,053,129       10,978,935       11,071,879  
Allowance for loan losses     (102,122 )     (104,304 )     (106,066 )     (106,357 )     (108,791 )
  Loans receivable, net     10,767,588       10,667,642       10,947,063       10,872,578       10,963,088  
Bank premises and equipment, net     280,103       277,966       278,821       279,012       233,261  
Foreclosed assets held for sale     9,143       8,639       13,734       14,466       13,236  
Cash value of life insurance     102,562       102,003       149,708       149,353       148,621  
Accrued interest receivable     45,086       47,557       48,992       50,288       48,945  
Deferred tax asset, net     44,301       53,436       58,517       64,061       73,275  
Goodwill     958,408       958,408       958,408       958,408       958,408  
Core deposit and other intangibles     36,572       38,136       39,723       41,310       42,896  
Other assets     213,845       216,694       180,293       172,732       183,806  
  Total assets   $ 15,032,047     $ 14,901,935     $ 15,287,575     $ 15,179,501     $ 15,302,438  
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Liabilities          
Deposits:          
  Demand and non-interest-bearing   $ 2,367,091     $ 2,394,207     $ 2,575,696     $ 2,519,175     $ 2,401,232  
  Savings and interest-bearing transaction accounts     6,933,964       6,620,616       6,774,162       6,650,181       6,624,407  
  Time deposits     1,977,328       2,032,547       1,997,458       1,898,096       1,874,139  
  Total deposits     11,278,383       11,047,370       11,347,316       11,067,452       10,899,778  
Federal funds purchased     5,000       50,000       -       -       -  
Securities sold under agreements to repurchase     143,727       157,038       142,541       152,239       143,679  
FHLB and other borrowed funds     621,439       691,443       899,447       1,105,175       1,472,393  
Accrued interest payable and other liabilities     102,410       117,332       107,695       124,172       67,912  
Subordinated debentures     369,557       369,363       369,170       368,979       368,790  
  Total liabilities     12,520,516       12,432,546       12,866,169       12,818,017       12,952,552  
           
Stockholders' equity          
Common stock     1,664       1,669       1,675       1,682       1,707  
Capital surplus     1,537,091       1,542,858       1,550,999       1,560,994       1,609,810  
Retained earnings     956,555       904,980       853,964       803,629       752,184  
Accumulated other comprehensive (loss) income     16,221       19,882       14,768       (4,821 )     (13,815 )
  Total stockholders' equity     2,511,531       2,469,389       2,421,406       2,361,484       2,349,886  
  Total liabilities and stockholders' equity   $ 15,032,047     $ 14,901,935     $ 15,287,575     $ 15,179,501     $ 15,302,438  
           


...
 
Home BancShares, Inc.
Consolidated Statements of Income
(Unaudited)
                 
    Quarter Ended   Year Ended
      Dec. 31,       Sep. 30,     Jun. 30,       Mar. 31,     Dec. 31,       Dec. 31,       Dec. 31,  
(In thousands)     2019       2019     2019       2019     2018       2019       2018  
                 
Interest income                
  Loans   $ 161,211     $ 167,470   $ 165,816     $ 163,848   $ 163,201     $ 658,345     $ 630,596  
  Investment securities                
  Taxable     9,707       10,343     10,650       10,706     9,873       41,406       36,833  
  Tax-exempt     3,260       3,193     3,183       3,379     3,456       13,015       13,257  
  Deposits - other banks     949       1,068     1,628       1,543     1,241       5,188       4,649  
  Federal funds sold     5       8     10       11     9       34       33  
                 
Total interest income     175,132       182,082     181,287       179,487     177,780       717,988       685,368  
                 
Interest expense                
  Interest on deposits     26,823       29,566     29,709       28,006     25,207       114,104       79,589  
  Federal funds purchased     33       21     -       -     -       54       1  
  FHLB borrowed funds     2,686       3,683     4,722       6,118     6,474       17,209       22,354  
  Securities sold under agreements to repurchase     652       628     630       634     602       2,544       1,822  
  Subordinated debentures     5,155       5,207     5,239       5,259     5,215       20,860       20,589  
                 
Total interest expense     35,349       39,105     40,300       40,017     37,498       154,771       124,355  
                 
Net interest income     139,783       142,977     140,987       139,470     140,282       563,217       561,013  
  Provision for loan losses     -       -     1,325       -     -       1,325       4,322  
Net interest income after                
  provision for loan losses     139,783       142,977     139,662       139,470     140,282       561,892       556,691  
                 
Non-interest income                
  Service charges on deposit accounts     6,778       6,492     6,259       6,401     7,004       25,930       26,851  
  Other service charges and fees     10,636       8,710     8,177       6,563     7,598       34,086       36,591  
  Trust fees     390       382     391       403     290       1,566       1,552  
  Mortgage lending income     3,801       4,610     3,457       2,435     2,554       14,303       12,379  
  Insurance commissions     551       603     515       609     442       2,278       2,110  
  Increase in cash value of life insurance     562       714     740       736     737       2,752       2,856  
  Dividends from FHLB, FRB, FNBB & other     1,952       1,101     1,149       3,505     1,992       7,707       5,757  
  Gain (loss) on SBA loans     686       291     355       241     75       1,573       566  
 Gain (loss) on branches, equipment and                                                    
   other assets, net     35       12     (129 )     79     (25 )     (3 )     (120 )
  Gain (loss) on OREO, net     159       334     58       206     114       757       2,401  
  Gain (loss) on securities, net     (2 )     -     -