Home Bancshares 2018 net income tops $300 million

by Wesley Brown (wesbrocomm@gmail.com) 263 views 

After celebrating 20 years in business at the beginning of the New Year, Home Bancshares Inc. ended 2018 with a string of 31 straight profitable quarters and assets of more than $15 billion, the Arkansas regional banking group reported Thursday (Jan. 17).

For the period ended Dec. 31, the parent company of Conway-based Centennial Bank reported net income of $71 million or 41 cents per share, up 204% from $23.3 million or 13 cents a year ago. Excluding, expenses and costs related to acquisitions, the fast-growing regional banking group reported fourth quarter profits of 44 cents on revenue of $201.3 million.

That was slightly ahead of Wall Street views of fourth quarter earnings of 45 cents per share on revenue of $173.6 million according to Thomson Reuters.

“2017 was a great year for HOMB; however, 2018 was even better,” said Home Bancshares Chairman John Allison. “Even though bank stocks have underperformed as a sector for the second consecutive year, we didn’t. We saw our earnings, as adjusted (non-GAAP), grow from a record $204.8 million in 2017 to a record $305.2 million in 2018 and were recognized again by Forbes as the Best Bank in America for the second year in a row.”

Centennial Bank President and CEO Tracy French said the strong fourth quarter was highlighted by organic loan growth of $239.1 million, a whopping 431% spike over the previous year. “Reaching a record $1.14 billion in loan originations this quarter indicates that loan demand is still out there,” said French.

For the full-year, Home Bancshares reported profits of $300.4 million, or $1.73 per share. Revenue was reported as $663.8 million. In the third quarter, the Arkansas bank moved forward from completion of its $400 million cash-and-stock deal earlier this summer to acquire Shore Premier Finance, a high-end East Coast financier of sail and power boats that is now a new division within Centennial Bank.

Home Bancshares exceeded $10 billion in assets during the first quarter of 2017 and became subject to the Durbin Amendment to the Dodd-Frank Act’s interchange fee restrictions beginning in the third quarter of 2018. The Durbin Amendment negatively impacted debit card and ATM fees beginning in the second half of 2018, officials said, noting that quarterly interchange fees were $3 million.

The amendment, named after U.S. Sen. Richard Durbin, D-Ill., and introduced in 2010, restricts interchange fees, which averaged 44 cents per transaction based on 1% to 3% of the transaction amount, to 12 cents per transaction for banks with $10 billion or more in assets.

As of Dec. 31, the bank had approximately $15.3 billion in total assets, $11 billion in loans receivable, and $10.9 billion in deposits. During the fourth quarter of 2018, Home Bancshares opened a new loan production office in Dallas. The bank has 77 branches in Arkansas, 76 branches in Florida, 5 branches in Alabama and one branch in New York City.

At the end of 2017, Home Bancshares handed out a one-time bonus of $500 to more than 850 full-time tenured employees at a cost of about $425,000. Nearly 53% of full-time employees received that one-time bonus from a portion of the $36.9 billion surplus from the 2017 corporate tax cuts. Employees with base salaries exceeding $50,000 were excluded from receiving the compensation packages.

Following are other fourth quarter and 2018 highlights for the Arkansas regional bank:

– Net interest margin, on a fully taxable equivalent basis, was 4.30% for the quarter just ended compared to 4.47% for the same quarter in 2017.

– During the fourth quarter of 2018, the Arkansas bank did not record a provision for loan loss compared to $4.9 million recorded in the fourth quarter of 2017. The company continues to see strong asset quality including a decline in net charge-offs, officials said.

– Total loans receivable were $11.07 billion at December 31, 2018 compared to $10.33 billion at December 31, 2017. Total deposits were $10.90 billion at December 31, 2018 compared to $10.39 billion at December 31, 2017. Total assets were $15.30 billion at December 31, 2018 compared to $14.45 billion at December 31, 2017.

– As noted, the Conway bank holding company saw $239.1 million in organic loan growth. Centennial CFG experienced $86.6 million of organic loan growth and had loans of $1.56 billion at December 31, 2018. The bank’s legacy footprint produced approximately $152.5 million in organic loan growth during the quarter.

– Stockholders’ equity was $2.35 billion in the fourth quarter compared to $2.20 billion a year ago, an increase of $145.6 million.

Ahead of Thursday’s opening bell, Home Bancshares stock (NASDAQ: HOMB) was down 6.6%, or $1.23 at $17.23 per share. The bank’s shares have declined 24% in the past year, trading in the range of $15.35 as a low and $25.23 as a high over the past 52 weeks.

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