Home BancShares posts record quarter

Centennial’s parent nets $28.4 million

Home BancShares, the parent company of Centennial Bank, reported $28.4 million in net income in the second quarter, its best quarter ever and a 61 percent increase compared with the same period in 2013.

The Conway-based bank earned $17.7 million in the second quarter last year. The bank on Thursday reported earnings per share of 43 cents, up from 31 cents in the same period last year but slightly below the earnings projections of 44 cents a share expected by nine analysts surveyed by Thomson Reuters.

Shares of Home BancShares, which has $6.7 billion in assets, fell $1.08 Thursday to close at $30 in trading on the Nasdaq exchange.

The bank's loans -- excluding those loans carried by the failed banks that Home BancShares purchased -- were down slightly in the second quarter to $4.13 billion from $4.19 billion at the end of 2013.

The past few quarters, Home BancShares' loan growth has been "soft," said Matt Olney, a banking analyst for Stephens Inc. in Little Rock. Olney owns no stock in Home BancShares.

The purchase last year of Liberty Bancshares of Jonesboro, which had $2.9 billion in assets, contributed to the slowdown in loans, Olney said.

"Anytime you acquire a bank that is almost as big as you are, it is going to create headwinds," Olney said. "The way we think about it, every acquisition, there will be a runoff of loans that you acquire, somewhere between 5 and 15 percent. Just because the target bank likes those loans doesn't mean the acquiring bank has to keep all those loans."

But Home BancShares has its largest level ever of future loans, John Allison, chairman of the bank, said in a conference call Thursday. There are several hundred millions of dollars of loans that the bank is working through in all of its markets, Allison said.

About $60 million to $70 million in loans already have been approved by loan committees, Allison said.

The loans have increased by about 50 percent since the close of the first quarter, said Kevin Hester, chief lending officer.

It would not be surprising if Home BancShares acquires another bank before the end of the year, Olney said.

"They have the capacity to do additional deals," Olney said. "It's just a matter of finding the right target and agreeing on the price."

Home BancShares is talking with banks it could potentially acquire with assets from $2.5 billion on down, Allison said. Two teams are ready to do financial research on potential target banks, said Tracy French, regional president for Home BancShares markets in Florida.

"Our visits have gone well," French said. "These banks are in markets we're currently in. Some banks are in regions that we cover today. These are nice, healthy banks with good bankers who are making profits."

Home BancShares had an efficiency ratio of 41.09 percent in the second quarter, down from almost 45 percent in the same period last year. The efficiency ratio means it costs Home BancShares $41.09 to earn $100.

That level of efficiency most likely is among the top 5 percent of banks in the country, Olney said.

Centennial Bank has a total of 141 branches, with 84 in Arkansas, 50 in Florida and seven in Alabama. Seventy percent of its assets are in Arkansas, 26 percent in Florida and 4 percent in Alabama.

Business on 07/18/2014

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