Home BancShares, Inc. Announces a 33.1% Increase in First Quarter Earnings

CONWAY, Ark., April 21, 2016 (GLOBE NEWSWIRE) -- Home BancShares, Inc. (NASDAQ:HOMB), parent company of Centennial Bank, today announced a record quarterly profit of $41.4 million, or $0.59 diluted earnings per share for the first quarter of 2016 compared to $31.1 million or $0.46 diluted earnings per share for the same quarter in 2015.  The Company increased its first quarter earnings by $10.3 million or 33.1% for the three months ended March 31, 2016 compared to the same period of the previous year.  The Company also announced $212.8 million in quarterly organic loan growth during the first quarter of 2016 and a core efficiency ratio of 37.52%. 

“As anticipated, the Company has started the year with another outstanding quarter,” said John Allison, Chairman. “During the first quarter of 2016, we have continued to achieve and, in some cases, exceed our internal goals.  We organically grew loans by $212.8 million while further improving the core efficiency ratio to 37.52%.  We are well-positioned and committed to making 2016 another remarkable year of maximizing the returns to our shareholders.” 

“We are happy to report the first quarter of 2016 as the twentieth consecutive quarter reporting the most profitable quarter in the Company's history,” said Randy Sims, Home BancShares, Inc. Chief Executive Officer. “The 10.7%, or $4.0 million increase in earnings over our previously reported record quarterly earnings is an impressive accomplishment.  For the quarter just ended, the Company also reported excellent results for diluted earnings per share of $0.59 per share and a 1.79% return on average assets.” 

“We are pleased with the first quarter’s strong financial results and organic loan growth," added Tracy French, Centennial Bank President and Chief Executive Officer.  “We will continue to use this momentum to seek opportunities to expand our existing footprint or enter new markets.  Our ability to generate and retain a significant amount of capital each quarter leaves us in a position to continue supporting organic growth, but also taking advantage of new opportunities as they are presented.” 

Operating Highlights 

Net interest margin, on a fully taxable equivalent basis, was 4.81% for the quarter just ended compared to 4.94% for the same quarter in 2015 and compared to 4.95% for the fourth quarter of 2015.  As was expected, accretion yield on purchased loans decreased $2.5 million from $13.2 million for the fourth quarter of 2015 to $10.7 million for first quarter of 2016.  This decline is a result of a slow-down in payoff accretion and the maturing of our acquired loan portfolios.  Our loan interest income per day for the first quarter 2016 was approximately $1,065,000 compared to $1,063,000 for the fourth quarter of 2015.  Although we had a decline in yield accretion on purchased loans there was approximately a $2,000 per day improvement in loan interest income due to our first quarter organic loan growth.   If there had been 92 days in the first quarter of 2016 versus 91 days our proforma loan interest income would have been approximately $98.0 million or a $200,000 increase from the $97.8 million in the fourth quarter of 2015.  As a result, the net interest margin, excluding accretion yield on purchased loans was relatively flat from fourth quarter 2015 to first quarter of 2016 at 4.23% and 4.22%, respectively. 

During the first quarter of 2016, the Company recorded a provision for loan loss of $5.7 million compared to $3.8 million in the first quarter of 2015.  This increase of $1.9 million is primarily a result of the $212.8 million organic loan growth generated during the first quarter of 2016 compared to $18.5 million generated in the first quarter of 2015. 

The Company reported $19.4 million of non-interest income for the first quarter of 2016, compared to $14.7 million for the first quarter of 2015.  The most important components of the first quarter non-interest income were $7.1 million from other service charges and fees, $5.9 million from service charges on deposits accounts, $2.9 million from mortgage lending income, $1.8 million from other income, and $657,000 from insurance commissions offset by the $362,000 of net amortization on the FDIC indemnification asset.  Other income includes loan recoveries on our FDIC covered transactions and other purchased loans of $594,000.  

As a result of the recognized credit improvements in prior years, the Company has been decreasing 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 has expired and only the ten-year loss-share remains.  Consequently, there was a $3.6 million decline of FDIC indemnification amortization from the first quarter of 2015 to the first quarter of 2016.

Non-interest expense, excluding merger expenses for the first quarter of 2016 was $45.6 million compared to $39.3 million for the first quarter of 2015.  This increase is primarily associated with the establishment of the Centennial Commercial Finance Group (“Centennial CFG”) in New York City during the second quarter of 2015, the acquisition of FBBI during the fourth quarter of 2015 and write-downs on vacant properties from closed branches.  For the first quarter of 2016, our core efficiency ratio was 37.52% which is improved from the 40.84% reported for first quarter of 2015.

Financial Condition 

Total non-covered loans were $6.79 billion at March 31, 2016 compared to $6.58 billion at December 31, 2015.  Total covered loans were $60.0 million at March 31, 2016 compared to $62.2 million at December 31, 2015.  Total deposits were $6.58 billion at March 31, 2016 compared to $6.44 billion at December 31, 2015.  Total assets were $9.40 billion at March 31, 2016 compared to $9.29 billion at December 31, 2015. 

From December 31, 2015 to March 31, 2016, the Company produced approximately $212.8 million of organic non-covered loan growth, of which $77.2 million is associated with loan originations in the legacy footprint with the remaining $135.6 million being associated with Centennial CFG.  Centennial CFG had loans of $851.4 million at March 31, 2016.

Non-performing non-covered loans were $55.4 million as of March 31, 2016, of which $27.4 million, $28.0 million and $25,000 were located in Arkansas, Florida and Alabama, respectively.  Non-performing non-covered loans as a percent of total non-covered loans were 0.82% as of March 31, 2016 compared to 0.92% as of December 31, 2015.  Non-performing non-covered assets were $75.1 million as of March 31, 2016, of which $41.7 million, $32.8 million and $626,000 were located in Arkansas, Florida and Alabama, respectively.  Non-performing non-covered assets as a percent of total non-covered assets were 0.80% as of March 31, 2016 compared to 0.85% as of December 31, 2015.  There were no non-performing assets from Centennial CFG at March 31, 2016. 

The Company’s allowance for loan losses for non-covered loans was $69.8 million at March 31, 2016, or 1.03% of total non-covered loans, compared to $66.6 million, or 1.01% of total non-covered loans, at December 31, 2015.  As of March 31, 2016 and December 31, 2015, 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 2.88% and 3.07%, respectively.  This decrease is primarily the result of organic loan growth in 2016 plus projected credit improvement from previous periods on the acquired impaired loans.  As of March 31, 2016 and December 31, 2015, the Company’s allowance for loan losses for non-covered loans was 126% and 111% of its total non-performing non-covered loans, respectively. 

Stockholders’ equity was $1.23 billion at March 31, 2016 compared to $1.20 billion at December 31, 2015, an increase of $28.0 million.  Book value per common share was $17.49 at March 31, 2016 compared to $17.11 at December 31, 2015.  Tangible book value per common share was $11.81 at March 31, 2016 compared to $11.41 at December 31, 2015 for an annualized increase of 14.1%. 

Branches 

During the first quarter of 2016, the Company received approval to open a deposit-only branch location in New York City during the second quarter of 2016.  In an effort to achieve efficiencies primarily from the acquisitions, the Company closed two Arkansas locations and two Florida locations during the first quarter of 2016 and has plans to close one Florida location during the second quarter of 2016.  The Company currently has 77 branches in Arkansas, 59 branches in Florida, 6 branches in Alabama and 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 21, 2016.  We encourage all participants to pre-register for the conference call using the following link:  http://dpregister.com/10082807.  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 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: 10082807, which will be available until April 28, 2016 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, 2015 filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2016. 

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 branch locations in Arkansas, Florida, South Alabama and 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.”