Home Bancshares Profits Jump Nearly 14% On Strong Loan Growth, Acquisitions

Acquisition hungry Home Bancshares, parent company of Centennial Bank, on Thursday reported record first quarter profits of $31.1 million, or 46 cents per share, up 13.9% from first quarter profits of $27.3 million, or 42 cents per share a year ago.

“With the recent acquisition of $289.1 million of national commercial real estate loans and the creation of the Centennial Commercial Finance Group, we are in a potentially prime position to ramp-up our momentum for generating organic loan growth, resulting in increased income for the company,” said Home Bancshares Chairman John Allison. “It’s exciting to be well-positioned to take advantage of opportunities to enter new markets or expand our reach in our existing footprints as a result of our strong capital position.”

The fast-growing regional Arkansas bank recorded several small gains and losses, related to merger and acquisitions expenses and other one-time issues, but the diluted earnings per share for the quarter still remained at a robust 46 cents per share. That came in just one penny below the 47 cent average estimate of analysts surveyed by Thomson Reuters.

According to Home Bancshares CEO Randy Sims, the Conway-based banking group posted its 16th straight quarter of increasing earnings, making the first quarter of the fiscal 2015 the “most profitable in the bank’s history.”

“The $1.2 million or 4% increase from our previously reported record earnings is truly another outstanding achievement. The company also reported outstanding results for diluted earnings per share excluding merger expenses and one-time acquisition gain of $0.46 per share and core efficiency ratio of 40.84%.”

In the first quarter, Home Bancshares expanded its out-of-state territory with strategy acquisitions in New York and Florida, where the Arkansas-based banking group has seen rapid growth over the past several years.

In late February, Home Bancshares won another FDIC bidding contest for the troubled Puerto Rican banking group Doral Financial with a fire-sale bid of nearly $6 million.

At the time, federal regulators unexpectedly closed Doral Bank in Puerto Rico after years of accounting problems, legal struggles and financial missteps. The Puerto Rico bank, which had nearly $6 billion in assets, was the largest U.S.-based failure in the FDIC system in nearly five years. Doral’s Latin American rival, Banco Popular, also plans to purchase $3.25 billion of the Puerto Rico bank’s assets after agreeing to pay a premium of 1.59% for the right to assume the bank’s deposits.

As receiver of the deposits and substantially all assets of Doral Bank’s operations in the fast-growing Florida Panhandle, Home Bancshares’ Centennial Bank took over loans valued at nearly $42.2 million and deposits worth more than $466 million. Those assets were part of Doral’s five branch locations in Panama City, Panama City Beach and Pensacola, along with a loan production office in Tallahassee.

Last week, a federal bankruptcy court judge in New York City set an auction date to sell off the remaining parts of Doral’s assets, including the Anglo-Puerto Rican Insurance Corp. that is expected to get bids of at least $10 million.

And out of the Doral deal, Home Bancshares announced on April 1 that it had completed a deal to acquire commercial real estate loans worth nearly $290 million from J.C. Flowers & Co. LLC in New York City. The pool of loans were part of the former Doral’s property finance portfolio and will now be housed in a newly created division of Centennial known as the Commercial Finance Group (CFG).

Home Bancshares said it plans to open a new loan production office next week around April 23 in downtown Manhattan. Centennial has notified the Arkansas State Bank Department and the New York Department of Financial Services of its plans to establish its new offices in the center of the nation’s financial marketplace.

Once the loan production office has been established, Centennial CFG plans to build out a national lending platform focusing on commercial real estate plus commercial and industrial loans, bank officials said.

In addition, Centennial’s board of directors in early January reported that Tracy M. French was promoted to President, CEO and a director at Centennial Bank, replacing Home Bancshares CEO Randy Sims. Sims, however, will remain as a director and CEO of the Conway-based bank holding company with French reporting directly to him.

Key financial highlights for the bank’s first quarter included:

· Net interest income for the first quarter of 2015 increased 2.7% to $79.1 million from $77.0 million during the first quarter of 2014.
· The Arkansas bank experienced a $4.1 million decrease in the provision for loan losses for non-covered loans during the first quarter of 2015 versus 2014. This expected decrease is primarily a reflection of a slowdown in the migration of the acquired loans from the Liberty Bank acquisition, officials said.
· Total deposits were $5.90 billion at March 31, 2015 compared to $5.42 billion at December 31, 2014.
· Total assets were $7.51 billion at March 31, 2015 compared to $7.40 billion at December 31, 2014.

Shares of Home Bancshares were up 12 cents at $34.59 in early trading on Thursday on the Nasdaq stock exchange, just off the Arkansas bank’s 52-week high of $35.00 touched on April 22, 2014. The company’s stock has traded between $27.60 per share and $35.00 per share during the past year.

Home Bancshares has 82 branches in Arkansas, 61 branches in Florida and 7 branches in Alabama.