Home Bancshares net income down in 2017, ends year with $14.4 billion in assets

Acquisition-hungry Home Bancshares Inc. closed out the fourth quarter and 2017 with well over $14 billion in assets, aided by a blockbuster Florida merger and a year-ending surplus resulting from the recently enacted GOP tax package that cut corporate taxes from 35% to 21%.

For the period ended Dec. 31, the parent company of Conway-based Centennial Bank reported net income of $23.3 million or 13 cents per share, down 50% from $46.8 million or 35 cents a year ago. Those earnings saw a one-time charge of $36.9 million related to tax changes from tax reform package approved by Congress and signed by President Donald Trump in December. The charge primarily accounts for reduced deductions related to deferred tax assets and tax liability payments.

Excluding that one charge, after-tax earnings for the quarter were $60.2 million or 35 cents per share. Wall Street had expected the Arkansas regional bank to post fourth quarter earnings of 34 cents per share, according to Thomson Reuters.

For the full-year, Home Bancshares reported net income of $135.1 million or 89 cents per share, compared to year-ago results of $177.1 million or $1.26 per share. Those results include one-time charges related to Hurricane Irma and merger-related expenses, and the aforementioned provision for changes in future tax liabilities.

“Looking back on the last year, we were active in growing and navigating the company as we crossed over the $10 billion threshold,” Home Bancshares Chairman John Allison said in the earnings report. “In 2018, we are well-positioned to continue to execute on opportunities to grow our company with the focus of improving overall shareholder value.”

In late September, Home Bancshares closed on its previously announced $778 million acquisition of Stonegate Bank of Florida. Upon closing, the total cost of acquisition of the bank climbed to $820 million. In the first half of 2016, the Conway-based regional bank topped $10 billion in assets for the first time in the company’s history and continued a long string of profitable quarters.

As of Dec. 31, the bank had approximately $14.4 billion in total assets, $10.3 billion in loans receivable, and $10.4 billion in deposits. At year’s end, Home Bancshares closed two branch locations in Daphne, Ala., and Naples, Fla., and now has 76 branches in Arkansas, 89 branches in Florida, 5 branches in Alabama and one branch in New York City.

“We have been hard at work in 2017 managing the growth associated with our 2017 acquisitions. Once we convert the Stonegate core operating systems on Feb. 9, 2018, the company will be well-positioned to realize the anticipated cost savings, thereby rewarding our shareholders,” said Centennial Bank CEO Tracy French. “Our team is focused on this important task and is working to recognize these enhancements as quickly as possible.”

Home Bancshares announced a week ago plans to distribute a one-time bonus of $500 for more than 850 full-time tenured employees at a cost of about $425,000. Nearly 53% of full-time employees will receive this one-time bonus from a portion of the $36.9 billion surplus from the recent corporate tax cuts. Employees with base salaries exceeding $50,000 are excluded from this compensation, company officials said.

Following are other fourth quarter and 2017 highlights for the Arkansas regional bank:

• Net interest margin, on a fully taxable equivalent basis, was 4.47% for the quarter just ended compared to 4.75% for the same quarter in 2016 and compared to 4.4% for the third quarter of 2017.

• During the fourth quarter of 2017, the bank recorded a provision for loan loss of $4.9 million compared to $1.7 million in the fourth quarter of 2016. Home BancShares was able to reduce fourth quarter 2016 provision for loan losses as a result of a significant loan recovery from a borrower which was charged-off in 2010, company officials said.

• The bank reported $27.3 million of non-interest income for the fourth quarter of 2017, compared to $23.8 million for the fourth quarter of 2016. The most important components of the fourth quarter non-interest income were $10.1 million from other service charges and fees, $6.6 million from service charges on deposits accounts, and $3.6 million from mortgage lending income.

• Stockholders’ equity was $2.2 billion at Dec. 31, 2017 compared to $1.33 billion at Dec. 31, 2016, an increase of $876.8 million. The increase in stockholders’ equity is primarily associated with the $77.5 million and $742.3 million of common stock issued to the Giant Holdings,Inc. and Stonegate shareholders, respectively, plus the $74.7 million increase in retained earnings offset by $3.8 million of comprehensive loss and the repurchase of $20.8 million of our common stock during 2017.

Ahead of Thursday’s opening bell, Home BancShares stock (NASDAQ: HOMB) was trending up seven cents at $24.69 per share. The bank’s shares have traded in the range of $20.82 as a how and $29.69 as a high over the past 52 weeks.