Home Bancshares Inc. closed out the first three months of 2018 with record first quarter earnings, largely boosted by strong loan growth from the bank’s commercial real estate lending arm and a year-ending acquisition of a fast-growing south Florida community bank.
For the period ended March 31, the parent company of Conway-based Centennial Bank reported net income of $73.1 million, or 42 cents per share, up 55.9% from $46.8 million, or 33 cents a year ago. Wall Street had expected the Arkansas regional bank to post first quarter earnings of 41 cents per share, according to Thomson Reuters.
“Our first quarter earnings were $73.1 million and $97.0 million before taxes, both of which are records for Home,” said Home Bancshares Chairman John Allison. “We achieved an impressive return on average assets of 2.08%, which combined with our 37.83% efficiency ratio, has us positioned for another year of solid returns for our shareholders.”
Added Centennial Bank President and CEO Tracy French: “We are pleased to deliver strong financial results for the first quarter while continuing to maintain high asset quality. We maintained a non-performing assets to total assets ratio below 50 basis points and originated over $575 million in loans during the quarter. In addition, our conversion teams completed the system conversion of Stonegate during the quarter which will provide opportunity for continued efficiencies.”
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.
Among the key highlights in the first quarter, the bank’s Centennial Commercial Financial Group, or CFG, produced $63.8 million of organic loan growth, largely offsetting a 69.3% decline in the bank’s traditional legacy lending operations across the Southeast U.S.
Home Bancshares first expanded its CFG operations three years ago following the acquisition of nearly $290 million in national commercial real estate loans from J.C. Flowers & Co. that originated as part of the bank’s purchase of Doral Bank’s Florida Panhandle operations. That deal was part of an FDIC auction for the failed bank assets of Banco Popular of Puerto Rico.
From that deal, Centennial acquired five branch locations in Panama City, Panama City Beach and Pensacola, Fla., plus a loan production office in Tallahassee, Fla. At the same time, Centennial CFG established a new loan production office in New York City. Centennial CFG had loans of $1.51 billion in the first quarter.
As of March 31, the Arkansas regional bank had total loans receivable of $10.33 billion for the three-month period. Total deposits were $10.4 billion and total assets came in at $14.32 billion. To achieve efficiencies primarily from recent acquisitions, bank officials said five branches were closed in central Florida, one in south Florida and six branches in southeast Florida. The bank holding company now has 76 branches in Arkansas, 76 branches in Florida, 5 branches in Alabama and one branch in New York City.
Following are other first quarter highlights for the Arkansas regional bank.
• Non-performing loans in the first quarter were $14.5 million, $34.9 million, $42,000 and zero in the Arkansas, Florida, Alabama and Centennial CFG markets, respectively, for a total of $49.5 million.
• Non-performing loans as a percent of total loans were 0.48% during the quarter, compared to 0.43% as of Dec. 31, 2017. Non-performing assets at March 31, 2018 were $25.2 million, $43 million, $1.4 million and zero in the Arkansas, Florida and Alabama and Centennial CFG markets, respectively, for a total of $69.6 million.
• During the first quarter of 2018, the bank recorded a provision for loan loss of $1.6 million compared to $3.9 million a year ago. The Arkansas bank’s allowance for loan losses was $110.2 million, or 1.07% of total loans, compared to $110.3 million, or 1.07% of total loans, in the fourth quarter. As of March 31, Centennial’s allowance for loan losses was 223% and 247% of its total non-performing loans, respectively.
• The bank reported $25.8 million of non-interest income for the first quarter, compared to $22.7 million in the same period of 2017, excluding gains on acquisitions. The most important components of the first quarter non-interest income were $10.2 million from other service charges and fees, $6.1 million from service charges on deposit accounts, $2.7 million from mortgage lending income, $3.7 million from other income and $877,000 from dividends from affiliate banks.
• Stockholders’ equity was $2.24 billion on March 31, compared to $2.2 billion in the previous month, an increase of $33.9 million. The increase in stockholders’ equity is primarily associated with the $54.9 million increase in retained earnings offset by $16.9 million of comprehensive loss and the repurchase of $7.1 million of our common stock during the first quarter of 2018.
Ahead of Thursday’s opening bell, Home Bancshares stock (NASDAQ: HOMB) was trending down 27 cents at $21.91 per share. The bank’s shares traded down 15% for the year in the range of $20.82 as a low and $26.53 as a high over the past 52 weeks.