Merger costs drop Home BancShares Q2 profits

by Roby Brock ([email protected]) 856 views 

It costs a lot to buy a big bank, and even if it’s a “Happy” acquisition, the move can take a toll.

Home BancShares, parent company of Centennial Bank, reported lower second quarter earnings in large part due to costs associated with its acquisition of Texas financial giant, Happy Bancshares. Home Bancshares completed in April its $918 million purchase of Texas-based Happy Bancshares Inc., parent of $6.2 billion-asset Happy State Bank.

Net income for Home BancShares for the three-month period ended June 30, 2022 was $16 million, or 8 cents earnings per share, compared to $79 million, or 48 cents earnings per share, in the previous year’s second quarter.

Conway-based Home BancShares added $3.65 billion in new loans to its portfolio from the Happy acquisition. It said it experienced $273.0 million in organic loan growth.

Bank officials said the Happy BancShares’ acquisition resulted in an additional $45.2 million provision for credit losses on loans, an $11.4 million provision for credit losses on unfunded commitments, a $2.0 million provision for credit losses on investment securities held-to-maturity, and $48.7 million in merger expenses. The one-time expenses did not result in diminished optimism.

“It was a very busy quarter, and I’m very pleased with the operating results. We are much farther ahead than I thought we would be after only one full quarter of the combined company. We expected a $100 million run rate for Happy by the second or third quarter of 2023, so this moves the ball down the field even quicker than we had hoped,” said Tracy French, Centennial Bank President and Chief Executive Officer.

“Patience is not just the ability to wait; it’s what you do while you’re waiting. We have remained disciplined and implemented our defensive initiatives: not making low rate loans, not deploying all of our cash in low rate securities, paying off debt and managing our loan to deposit ratio, among other things. As it appears, the pendulum is about to swing back toward defensive stocks from growth stocks, and when it does, HOMB is sitting in the catbird seat,” said John Allison, Home BancShares Chairman.

Other financial highlights for the quarter included:

  • Net interest income on a fully taxable equivalent basis was $201.2 million for the three-month period ended June 30, 2022 and $132.9 million for the three-month period ended March 31, 2022;
  • The financial institution reported $44.6 million of non-interest income for the second quarter of 2022;
  • Total loans receivable were $13.92 billion at June 30, 2022 compared to $10.05 billion at March 31, 2022;
  • Total deposits were $19.58 billion at June 30, 2022 compared to $14.58 billion at March 31, 2022; and
  • Total assets were $24.25 billion at June 30, 2022 compared to $18.62 billion at March 31, 2022.

Home BancShares stock (NASDAQ: HOMB) was lower in mid-morning trading at $21.77 per share. Over the past 52 weeks, shares of Home BancShares traded between a low of $19.83 and a high of $26.64.