Home Bancshares 3Q profits fall 66% on Hurricane Irma-related expenses

Home Bancshares announced before Thursday’s opening bell that its Hurricane Irma-impacted earnings fell 66% in the third quarter as the Arkansas bank’s fast-growing South Florida operations accrued $33.4 million in wind-blown expenses.

For the period ended Sept. 30, the parent of Centennial Bank reported a small quarterly profit of $14.8 million or 10 cents per share, compared to year ago results of $43.6 million or 31 cents per share. Company officials said the third quarter earnings were significantly impacted by Hurricane Irma, which made initial landfall in the Florida Keys and a second landfall just south of Naples, Florida, as a Category 4 hurricane on Sept. 10.

“While the total impact of this hurricane on Home BancShares’s financial condition and results of operation may not be known for some time, the company has included in third quarter earnings, certain charges, including the establishment of reserves, related to the hurricane,” Home Bancshares officials said in a statement.

Excluding Hurricane Irma costs and the $18.2 million of merger expenses associated with Home Bancshare’s $820 million acquisition of Stonegate Bank of Florida, third quarter earnings were $46.4 million, or 32 cents share.

Those results still fell short of Wall Street expectations of 34 cents per share, according to a survey of eight Wall Street analysts by Thomson Reuters.

Only three weeks ago, Conway-based Home BancShares closed on its previously announced acquisition of Stonegate, but noted that merger-related expenses pushed the previously announced price tag for the South Florida banking group up by more than $32 million. Pompano Beach-based Stonegate, located just north of Miami, has operations across South Florida that dotted the path of Hurricane Irma.

As of June 30, 2017, Stonegate had approximately $3.13 billion in total assets, $2.44 billion in loans, and $2.62 billion in deposits. With the completion of the acquisition, Home BancShares now operates 76 branches in Arkansas, 89 branches in Florida, six branches in South Alabama and one branch in New York City.

“We are pleased with the successful completion of our substantial acquisition of Stonegate Bank during the third quarter of 2017,” said Home Bancshares Chairman John Allison. “Throughout the remainder of the year, we will remain extremely focused on gaining efficiencies from our merger, while strategically investing for growth and building a quality franchise. Despite the challenges that came with the recent hurricane and completing a major acquisition, we achieved diluted earnings per share excluding merger and hurricane expenses of 32 cents per share for the third quarter of 2017.”

Added Centennial Bank President and CEO Tracy French: “A significant portion of Home BancShares’ South Florida market area and customer base have been adversely impacted by Hurricane Irma. Home BancShares has been deeply impacted by the storm with many of our customers and employees losing homes and several of our banking facilities damaged or destroyed. Immediately after the storms passed, we secured our people and their families, ensured a safe working environment for our associates and focused our entire organization on serving our customers’ needs.”

The following are some key financial highlights for Home Bancshares in the third quarter:

• The bank’s net interest income for the second quarter was $106.7 million, an increase of 3% from $103.6 million in the same period of 2016. Net interest margin was 4.40% for the quarter just ended compared to 4.86% for the same quarter in 2016.
• In the third quarter, Home Bancshares reported $21.5 million of non-interest income, compared to $22 million for the second quarter of 2016. The most important components of the second quarter non-interest income were $8.5 million from other service charges and fees, $6.4 million from service charges on deposits accounts, $3.2 million from mortgage lending income, $1.9 million from other income, and $1.3 million loss on branches, equipment and other assets.
• Total loans receivable rose to $10.3 billion in the third quarter, compared to $7.39 billion at the close of 2016. Total deposits and assets were $10.45 billion and $14.2 billion in the second quarter, respectively.
• Stockholders’ equity was $2.21 billion at Sept. 30, compared to $1.33 billion at Dec. 31, 2016, an increase of $879.2 million. The spike in stockholders’ equity is primarily associated with the $77.5 million and $742.3 million of common stock issued to the GHI and Stonegate shareholders.

In early trading on Thursday, Home Bancshares’ stock price was up 15 cents at $25.48. The Conway bank’s share price has traded in the range between $19.81 and $29.69 over the past 52 weeks.