Home Bancshares 1Q earnings meet Wall Street expectations, tops $10 billion in assets for first time in bank’s history

Home Bancshares ongoing expansion into the lucrative Florida market helped the Conway-based regional financial group to top $10 billion in assets for the first time and continued the Arkansas bank’s string of profitable quarters.

For the period ended March 31, the parent company of Centennial Bank, reported first quarter earnings of $46.9 million, or 33 cents per share, compared to $41.4 million, or 29 cents per share, in the same period a year ago.

Excluding the $6.7 million of merger expenses associated with the recently completed acquisitions of Giant Holdings Inc. and The Bank of Commerce that were offset by $3.8 million of one-time non-taxable gains associated with Commerce, first quarter earnings were 33 cents per share. That matches the view of nine Wall Street analysts that cover the fast-growing Arkansas bank, according to Thomson Reuters.

“We were active on many fronts during the first quarter of 2017, and we delivered solid quarterly financial results in spite of the additional expenses associated with the recently closed acquisitions of GHI and Commerce,” said John Allison, Chairman. “We also look forward to the completion of the merger with Stonegate Bank in Pompano Beach, Florida later this year and the opportunity to welcome them to the Home Bancshares family.”

Nearly three weeks ago, Home Bancshares announced an agreement to merge with Stonegate Bank of Florida in a deal that will boost the Arkansas bank’s asset base to nearly $13.5 billion. The merger-of-equals deal calls for Stonegate to merge into Centennial with Stonegate shareholders receiving $50 million in cash and approximately $699.8 million of Home Bancshares common stock. Also, holders of outstanding Stonegate stock options will receive $28.6 million in cash.

Stonegate, based in the north Miami suburb of Pompano Beach, Fla., has 25 branch locations in Broward and Sarasota counties and other key markets in the Miami area. As of Dec. 31, 2016, Stonegate had $3.1 billion in total assets, $2.5 billion in total loans, and $2.7 billion in deposits.

The deal, which is expected to close in the fourth quarter, will likely allow the Conway financial group’s Florida operations to outgrow its Arkansas bank’s physical footprint inside the state. Today, the bank’s Centennial subsidiary has 76 branches in Arkansas, 68 branches in Florida, 6 branches in Alabama and one branch in New York City.

“The acquisition of Stonegate is a game-changer for Home in the Florida market. Stonegate is a top tier franchise with high profitability and has the perfect footprint to enhance Home’s presence in Florida,” said Allison, during a ceremony at the Little Rock Chamber of Commerce on March 27 when the deal was announced.

The following are some key financial highlights for Home Bancshares in the first quarter.

• The Arkansas bank reported $26.5 million of non-interest income for the first quarter of 2017, compared to $19.4 million in the same period a year ago. The most important components of the first quarter non-interest income were $8.9 million from other service charges and fees, $6 million from service charges on deposits accounts, $3.8 million from gain on acquisitions, $2.8 million from mortgage lending income, $1.8 million from other income and $1.1 million from dividends.

• Non-interest expense for the first quarter of 2017 was $55.1 million compared to $45.6 million for the first quarter of 2016. Non-interest expense excluding merger expenses for the first quarter of 2017 was $48.4 million compared to $45.6 million for the first quarter of 2016, an increase of $2.8 million.

• Total loans receivable were $7.85 billion at March 31, 2017 compared to $7.39 billion in the previous quarter. Total deposits and assets were $7.57 billion and $10.72 billion in the first quarter, respectively.

• Stockholders’ equity was $1.44 billion at March 31, 2017 compared to $1.33 billion at December 31, 2016, an increase of $114.1 million. Book value per common share was $10.05 at March 31, 2017 compared to $9.45 at December 31, 2016. Tangible book value per common share was $6.96 at March 31, 2017 compared to $6.63 at December 31, 2016 for an annualized increase of 20.2%.

The 9.3% spike in asset growth to $10.7 billion from the previous quarter moves the Arkansas bank from “super community bank” to “regional bank” status, joining Bank of the Ozarks and Arvest Bank. The $10 billion asset mark is an important banking milestone established by the Dodd-Frank Wall Street Reform and Consumer Protection Act as the regulatory baseline between super-community banks and larger regional banking groups.

Pine Bluff-based Simmons First National Corp. is poised to also join the regional banking group in the third quarter of 2017 after it closes on two acquisitions of community banks in Fort Worth, Texas and Stillwater, Okla. At that time, Home Bancshares and Simmons expect to have more than $13.5 billion in assets by the end of 2017.