Home Bancshares reports first quarterly loss in two years

Home Bancshares’ two-year earnings winning streak came to a halt on Thursday (Jan. 20) after the Conway-based bank reported a fourth-quarter loss of $13.8 million, mainly due to bad loans in Arkansas and the company’s fast-growing, but troubled Florida operations.

On Jan. 3, Home Bancshares made a surprise announcement that it would book a $60-$65 million charge to cover several toxic loans at the bank’s Centennial subsidiary in Florida, as well as a fraudulent rural improvement district bond scheme that has rocked the Arkansas’ banking community.

Home Bancshares executives said then that the loan provision would pare $1.27 to $1.38 per share off the bank’s fourth-quarter net income.

For the period and year ended Dec. 31, 2010, Home Bancshares reported a loss $13.8 million, or 51 cents per share, compared to net income of $7.9 million, or 25 cents earnings per share for the same period in 2009. Wall Street expected the fast-growing Arkansas bank to report a loss of 69 cents per share on revenue of 46 million, according to Thomson Reuters.

Home Bancshares executives said that the bank has maintained strong capital and reserves, despite the New Year loan charges.

“Our sound balance sheet affords us the ability to take these charge-offs and provisions without raising additional capital," said Home Bancshares Chairman John Allison. "We have remained extremely well capitalized through the years. Even after these charge-offs and provisions, we will continue to have capital levels considerably above the capital requirement of our regulators."

The last time the Arkansas bank reported a loss was in the fourth quarter of 2008, when recession-wracked business loans, bad real estate deals and one-time corporate expenses resulted in net losses of nearly $10 million.

In 2010, Home Bancshares participated in several FDIC-assisted acquisitions, mainly boosting its presence in Florida and the Southeast. The Arkansas bank’s most recent acquisition occurred in mid-November with the purchase of Gulf State Community Bank in Carrabelle, Fla.

Company officials said the bank experienced several bad loan charges that it pre-announced on Jan. 3, including a $53.4 million charge for impairment on "certain loans" that resulted in a $63 million loss. The charges also included a $3.6 million item related to investment securities "as a result of an apparent fraud on bonds sold in Arkansas," and $2.2 million in merger expenses related to recent FDIC-assisted acquisitions.

"While we are displeased with the recent credit quality issues, we are optimistic of the improvements in base earnings our Company is continuing to accumulate," said Randy Sims, Chief Executive Officer. "We are expecting the FDIC-assisted acquisitions completed during 2010 will continue to provide progress in our base earnings into future periods.

The combined after-tax impact of these items resulted in losses of $26.5 million or 93 cents loss per diluted share.

For the full year, Home BancShares reported net of $17.6 million, down 35 percent from $26.8 million for the year ended 2009. Diluted earnings per share for the year ended 2010 were 52 cents, compared to $1.02 for 2009.

In the New Year, Home Bancshares’ stock has fallen 12.5% from a high of $22.99 on the first day of trade in 2011. Ahead of today’s opening bell, the Conway banking group’s shares were trading at $20.11.