Home BancShares, Inc. Announces Record Quarterly Earnings of $31.1 Million

CONWAY, Ark., April 16, 2015 (GLOBE NEWSWIRE) -- Home BancShares, Inc. (Nasdaq:HOMB), parent company of Centennial Bank, today announced a record quarterly profit of $31.1 million, or $0.46 diluted earnings per share for the first quarter of 2015 compared to $27.3 million or $0.42 diluted earnings per share for the same quarter in 2014. The Company increased its first quarter earnings by $3.8 million or 13.8% for the three months ended March 31, 2015 compared to the same period of the previous year. Excluding the $1.4 million of merger expenses offset by $1.6 million of one-time gain on acquisition associated with the recently completed acquisition of Doral Bank's Florida Panhandle operations ("Doral Florida"), diluted earnings per share for the first quarter of 2015 remained $0.46 per share. Excluding the $918,000 of net provision for loan loss on covered loans, the diluted earnings per share for the first quarter of 2015 was $0.47 per share.

Because acquisitions are growth and capital management strategies, earnings excluding amortization of intangibles after-tax are useful in evaluating the Company. Diluted earnings per share excluding intangible amortization for the first quarter of 2015 was $0.47 compared to $0.43 diluted earnings per share excluding intangible amortization for the same period in 2014.

"With the recent acquisition of $289.1 million of national commercial real estate loans and the creation of the Centennial Commercial Finance Group, we are in a potentially prime position to ramp-up our momentum for generating organic loan growth, resulting in increased income for the Company," said John Allison, Chairman. "It's exciting to be well-positioned to take advantage of opportunities to enter new markets or expand our reach in our existing footprints as a result of our strong capital position."

"We are pleased to report the first quarter of 2015 as the sixteenth consecutive quarter reporting the most profitable quarter in the Company's history," said Randy Sims, Home BancShares, Inc. Chief Executive Officer. "The $1.2 million or 4.0% increase from our previously reported record earnings is truly another outstanding achievement. The Company also reported outstanding results for diluted earnings per share excluding merger expenses and one-time acquisition gain of $0.46 per share and core efficiency ratio of 40.84%."

Operating Highlights

Each quarter we perform credit impairment tests on the loans acquired in our FDIC loss-sharing and non-loss-sharing acquisitions. The first quarter 2015 impairment testing noted a slight decline in asset quality in a couple of covered loan pools which resulted in a net covered provision for loan loss of $918,000. Conversely, during 2014 and 2013, the quarterly impairment testing projected material credit improvements. As a result of these credit improvements, $78.3 million of adjustments to yield were determined to be recognized over the weighted average life of the loans. The recognition of these additional credit improvements has begun to slow down. Plus, the accretion income on the Liberty portfolio has begun to slow down. As result, there was a $4.7 million decline of recognized accretion yield from the fourth quarter of 2014 to the first quarter of 2015. Consequently, yields on loans and net interest margin for the quarter just ended are reduced when compared to the fourth quarter of 2014.

Net interest income for the first quarter of 2015 increased 2.7% to $79.1 million from $77.0 million during the first quarter of 2014. For the first quarter of 2015, the effective yield on non-covered loans and covered loans was 5.65% and 14.65%, respectively. Net interest margin, on a fully taxable equivalent basis, was 4.94% for the quarter just ended.

The Company experienced a $4.1 million decrease in the provision for loan losses for non-covered loans during the first quarter of 2015 versus 2014. This expected decrease is primarily a reflection of a slowdown in the migration of the acquired Liberty loans from purchased-loan accounting treatment to originated-loan accounting treatment combined with a lower level of non-performing loans. Based upon current accounting guidance, the allowance for loan losses is not carried over in an acquisition. As a result, none of the acquired loans had any allocation of the allowance for loan losses at merger date. This is the result of all loans acquired being recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820. However, as the acquired loans payoff or renew and the acquired footprint originates new loan production, it is necessary to establish an allowance which represents an amount that, in management's judgment, will be adequate to absorb credit losses. Traditionally, there is a large migration of these loans during the first year after acquisition, which can create an elevated provision for loan losses as was the case during 2014 with respect to the Liberty acquisition.

The Company reported $14.7 million of non-interest income for the first quarter of 2015, compared to $12.2 million for the first quarter of 2014. The most important components of the first quarter non-interest income were $6.2 million from other service charges and fees, $5.4 million from service charges on deposits accounts, $1.9 million from mortgage lending income, $1.6 million one-time gain on acquisition, $1.2 million from other income, $567,000 from insurance commissions, $493,000 from gain on sale of OREO and $432,000 from trust fees offset by the $4.0 million of net amortization on the FDIC indemnification asset.

As a result of the previously mentioned 2013 and 2014 credit improvements, there was a $54.7 million decrease in the base of the indemnification asset to be recognized as FDIC amortization over the weighted average life of the loss-share agreements. The recognition of this amortization has begun to slow down as the five-year loss-share is beginning to expire. Consequently, there was a $3.5 million decline of FDIC indemnification amortization from the fourth quarter of 2014 to the first quarter of 2015.

Non-interest expense for the first quarter of 2015 was $40.7 million compared to $39.4 million for the first quarter of 2014. Non-interest expense excluding merger expenses was $39.3 million for the first quarter of 2015 compared to $38.5 million for the same quarter in 2014. The change in non-interest expense excluding merger expenses this quarter was relatively flat when compared to a year ago even though we completed the acquisitions of Florida Traditions Bank and Broward Financial Holdings, Inc. during the second half of 2014 and Doral Florida during the first quarter of 2015. As a result, for the first quarter of 2015, our core efficiency ratio was 40.84% which is improved from the 41.39% reported for first quarter of 2014.

Financial Condition

Total non-covered loans were $4.93 billion at March 31, 2015 compared to $4.82 billion at December 31, 2014. Total covered loans were $169.5 million at March 31, 2015 compared to $240.2 million at December 31, 2014. Total deposits were $5.90 billion at March 31, 2015 compared to $5.42 billion at December 31, 2014. Total assets were $7.51 billion at March 31, 2015 compared to $7.40 billion at December 31, 2014.

On February 27, 2015, the Company acquired all the deposits and substantially all the assets of Doral Florida through an alliance agreement with Banco Popular of Puerto Rico ("Popular") who was the successful lead bidder with the Federal Deposit Insurance Corporation ("FDIC") on the failed Doral Bank of San Juan, Puerto Rico. The Doral Florida acquisition provided approximately $37.9 million in total loans after $4.3 million of loan discounts and approximately $466.3 million in deposits.

During the first quarter of 2015, the five-year loss share agreements on the commercial real estate and commercial and industrial loans acquired through the FDIC-assisted acquisitions of Old Southern and Key West concluded. As a result, $56.3 million of these loans including their associated discounts previously classified as covered loans have migrated to non-covered loans status.

From December 31, 2014 to March 31, 2015, the Company had $112.7 million growth in non-covered loans. Excluding the loans acquired from Doral Florida and the migration of loans from covered to non-covered status, the Company produced approximately $18.5 million of organic non-covered loan growth since December 31, 2014.

Non-performing non-covered loans were $37.5 million as of March 31, 2015, of which $15.2 million were located in Florida. Non-performing non-covered loans as a percent of total non-covered loans were 0.76% as of March 31, 2015 compared to 0.82% as of December 31, 2014. Non-performing non-covered assets were $54.9 million as of March 31, 2015, of which $18.1 million were located in Florida. Non-performing non-covered assets as a percent of total non-covered assets were 0.75% as of March 31, 2015 compared to 0.79% as of December 31, 2014.

The Company's allowance for loan losses for non-covered loans was $52.7 million at March 31, 2015, or 1.07% of total non-covered loans, compared to $52.5 million, or 1.09% of total non-covered loans, at December 31, 2014. As of March 31, 2015 and December 31, 2014, the allowance for loan losses for non-covered loans plus discount for credit losses on non-covered loans acquired to total non-covered loans plus discount for credit losses on non-covered loans acquired was 3.70% and 3.88%, respectively. This decrease is the result of projected credit improvement on the acquired impaired loans. As of March 31, 2015 and December 31, 2014, the Company's allowance for loan losses for non-covered loans was 141% and 133% of its total non-performing non-covered loans, respectively.

Stockholders' equity was $1.04 billion at March 31, 2015 compared to $1.02 billion at December 31, 2014, an increase of $24.3 million. Book value per common share was $15.38 at March 31, 2015 compared to $15.03 at December 31, 2014. Tangible book value per common share was $10.30 at March 31, 2015 compared to $9.90 December 31, 2014 for an increase of 4.0%.

Branches

In an effort to achieve efficiencies primarily from the acquisitions prior to 2015, the Company closed one Florida location during the first quarter of 2015 and has plans to close one Arkansas and one Florida location during the second quarter of 2015. The Company currently has 82 branches in Arkansas, 60 branches in Florida, 7 branches in Alabama and has plans to open a loan production office 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, April 16, 2015. Interested parties can listen to this 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: 10062460, which will be available until April 23, 2015 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.

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, including, but not limited to, economic conditions, credit quality, interest rates, loan demand, the ability to successfully integrate new acquisitions and changes in the assumptions used in making the forward-looking statements, could cause actual results to differ materially from those contemplated by the forward-looking statements. Additional information on factors that might affect Home BancShares, Inc.'s financial results is included in its Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission.

Home BancShares, Inc. is a bank holding company, headquartered in Conway, Arkansas. Our 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 locations in Arkansas, Florida, South Alabama and has plans to open a loan production office in New York City. The Company's common stock is traded through the NASDAQ Global Select Market under the symbol "HOMB."