Arkansas bank's earnings dip 52 percent in fourth quarter; hurricane, tax law are cited

Graphs showing information about Home BancShares' Fourth quarter
Graphs showing information about Home BancShares' Fourth quarter

Hit hard by Hurricane Irma and the federal tax overhaul, Home BancShares earned $23.3 million in the fourth quarter, a decline of 52 percent compared with $48.6 million earned in the same period of 2016, the Conway bank said Thursday.

The parent of Centennial Bank branches in four states, Home BancShares had earnings of 13 cents per share in the fourth quarter, down from 35 cents in 2016's fourth quarter.

Excluding a half-dozen one-time events, Home BancShares made 35 cents a share, compared with 33 cents per share in the same period of 2016. That beat the average estimate of 34 cents per share predicted by seven analysts surveyed by Thomson Reuters.

Home BancShares stock closed at $23.86 Thursday, down 83 cents in trading on the Nasdaq exchange.

The bank had earnings of $135.1 million last year, down from a profit of $177.1 million in 2016.

Home BancShares had a one-time charge of $36.9 million related to the federal tax overhaul. In September, Hurricane Irma struck Florida, where the company has 89 branches. It amounted to a one-time expense for the bank of $33.4 million.

Total deposits on Dec. 31 were $10.4 billion and total loans were $10.3 billion. Total assets were $14.4 billion.

"Looking back on the last year, we were active in growing and navigating the company as we crossed over the $10 billion threshold," John Allison, chairman of Home BancShares, said. "In 2018, we are well-positioned to continue to execute on opportunities to grow our company with the focus of improving overall shareholder value."

Except in one area, Home BancShares' fourth-quarter report was good, said Matt Olney, a banking analyst in Little Rock with Stephens Inc.

"There were some good things and some areas that still need improvement," said Olney, who does not own Home BancShares stock. Home BancShares paid Stephens Inc. for investment banking services in the past 12 months.

The bank's credit was outstanding, expenses were good and the core margins were outstanding, Olney said. Net interest margin measures the difference between a bank's interest income and the amount of interest paid to its lenders, for example, on deposits.

"The only thing lacking right now is loan growth," Olney said. Nonpurchased loan growth was just 2 percent for the year, Olney said.

Olney is expecting that Home BancShares' loan growth will improve this year, particularly from the bank's 2017 purchase of Stonegate Bank.

One analyst asked Allison on Thursday's conference call what the prospects were for loans for customers in Florida and particularly the Keys rebuilding after Hurricane Irma.

"The insurance checks are not coming at the speed at which we anticipated," Allison said. "My biggest concern is that the people have not returned."

His wife recently visited the Keys and noticed that the restaurants were closing early, Allison said.

"She asked them why they were closing so early," Allison said. "They said the workers haven't returned. But I'm pretty optimistic. So far, so good."

Home BancShares is still considering making more acquisitions.

"We were on one [an acquisition] just recently but it got pulled," Allison said. "That may or may not come back up. We have been waiting on it for several years."

An analyst asked Allison if Home BancShares is considering banks outside its existing states.

"We're always interested in acquisitions," Allison said. "But we're not going to do them when our stock is down. We're not going to do it in the $23 to $24 range."

This year looks like a power year for Home BancShares, Allison said.

"The tax savings alone will be over $53 million," Allison said.

At the start of the bank's 20th year, goals include $2 in annual earnings per share and a return on average assets of 2.10 percent to 2.25 percent, Allison said. The $2 earnings per share is a reasonable goal but may not be possible until 2019, Allison said.

Business on 01/19/2018

Upcoming Events