HOMB - Home BancShares Ends 2021 with Record Annual Profits and a Fortress Balance Sheet

CONWAY, Ark., Jan. 20, 2022 (GLOBE NEWSWIRE) -- Home BancShares, Inc. (NYSE: HOMB) (“Home” or the “Company”), parent company of Centennial Bank, released quarterly earnings today.

Highlights of the Fourth Quarter of 2021:

“The year 2021 delivered numerous exceptional results for HOMB including several record setting metrics. As we end 2021 with record profits and peer leading asset quality, combined with our recent sub-debt note issuance, HOMB is starting out 2022 with a fortress balance sheet and poised to pivot in any direction where opportunities arise,” said John Allison, Chairman.

“A strong fourth quarter assisted HOMB in reaching records for both net income and earnings per share for the year ended December 31, 2021. The fourth quarter also saw continued strong asset quality as the Company determined an additional provision for credit loss was not necessary. Another year where our solid offense and defense have played well for us,” said Tracy French, Centennial Bank President and Chief Executive Officer.

Operating Highlights

Net income for the three-month period ended December 31, 2021 was $73.4 million, or $0.45 earnings per share. Net income for the year ended December 31, 2021 was $319.0 million, or $1.94 earnings per share. Net income and earnings per share for the year ended December 31, 2021 were both records for the Company.

During the fourth quarter of 2021, the Company did not record any credit loss expense.  The Company determined that an additional provision for credit losses on loans was not necessary as the current level of the allowance for credit losses was considered adequate as of December 31, 2021. In addition, the Company determined that the current level of the unfunded commitment reserve was adequate and no additional provision for unfunded commitments was necessary.

Our net interest margin was 3.42% for the three-month period ended December 31, 2021 compared to 3.60% for the three-month period ended September 30, 2021. The yield on loans was 5.48% and 5.64% for the three months ended December 31, 2021 and September 30, 2021, respectively, as average loans decreased from $10.04 billion to $9.91 billion. Additionally, the rate on interest bearing deposits decreased to 0.20% as of December 31, 2021 from 0.23% as of September 30, 2021, with average balances of $10.00 billion and $9.86 billion, respectively.

As of December 31, 2021, we had $112.8 million of Paycheck Protection Program (PPP) loans outstanding. These loans are at 1.00% plus the accretion of the origination fee. Excluding PPP loans, our net interest margin (non-GAAP) for the three-month period ended December 31, 2021 was 3.32% ⁽¹⁾ . The PPP loans were accretive to the net interest margin by 10 basis points for the three-month period ended December 31, 2021 compared to 17 basis points for the three-month period ended September 30, 2021. This was primarily due to approximately $128.7 million of the Company’s PPP loans being forgiven during the fourth quarter of 2021 as well as the acceleration of deferred fees for the loans that were forgiven. The deferred fee income decreased from $9.3 million to $5.4 million for the three-month periods ended September 30, 2021 and December 31, 2021, respectively.

The effects of the COVID-19 pandemic continued to create a significant amount of excess liquidity in the market. As a result of this excess liquidity, we had an increase of $347.1 million of average interest-bearing cash balances in the fourth quarter of 2021 compared to the third quarter of 2021. This excess liquidity diluted the net interest margin by 7 basis points for the three-month period ended December 31, 2021.

During the fourth quarter of 2021, there was $1.2 million of event interest income compared to event interest income of $3.5 million for the third quarter of 2021. The reduction in event income led to a 6 basis point decrease to the net interest margin.

Purchase accounting accretion on acquired loans was $4.0 million and $4.9 million and average purchase accounting loan discounts were $34.6 million and $36.5 million for the three-month periods ended December 31, 2021 and September 30, 2021, respectively. The reduction in accretion income reduced the net interest margin by 2 basis points for the three-month period ended December 31, 2021.

Net interest income on a fully taxable equivalent basis was $140.8 million for the three-month period ended December 31, 2021 and $146.4 million for the three-month period ended September 30, 2021. This decrease in net interest income for the three-month period ended December 31, 2021 was the result of a $6.1 million decrease in interest income which was partially offset by a $490,000 decrease in interest expense. The $6.1 million decrease in interest income was primarily the result of  a $5.9 million decrease in loan interest income and a $382,000 net decrease in investment income, which was partially offset by a $164,000 increase in interest-bearing balances due from banks. The $490,000 decrease in interest expense was primarily the result of a decrease in interest expense on deposits.

The Company reported $32.0 million of non-interest income for the fourth quarter of 2021. The most important components of the fourth quarter non-interest income were $11.1 million from other service charges and fees, $6.2 million from service charges on deposit accounts, $5.4 million in mortgage lending income, $5.3 million from other income, $919,000 million from dividends from FHLB, FRB, FNBB and other, $792,000 from gain on sales of SBA loans and $737,000 from gain on OREO.

Non-interest expense for the fourth quarter of 2021 was $77.1 million. The most important components of the fourth quarter non-interest expense were $43.8 million from salaries and employee benefits, $16.9 million in other expense, $9.0 million in occupancy and equipment expenses and $6.5 million in data processing expenses. Also included within non-interest expense was $880,000 in merger and acquisition expenses. For the fourth quarter of 2021, our efficiency ratio was 43.79%.

Financial Condition

Total loans receivable were $9.84 billion at December 31, 2021 compared to $9.90 billion at September 30, 2021. Total deposits were $14.26 billion at December 31, 2021 compared to $14.00 billion at September 30, 2021. Total assets were $18.05 billion at December 31, 2021 compared to $17.77 billion at September 30, 2021.

During the fourth quarter 2021, the Company experienced approximately $65.0 million in loan decline. Centennial CFG experienced $285.7 million of organic loan growth and had loans of $1.92 billion at December 31, 2021. Our legacy footprint experienced $222.0 million in organic loan decline and $128.7 million in PPP loan decline during the quarter.

Non-performing loans to total loans was 0.51% as of September 30, 2021 and December 31, 2021. Non-performing assets to total assets was 0.29% as of September 30, 2021 and December 31, 2021. Net charge-offs were $2.0 million and $1.8 million for the three months ended December 31, 2021 and September 30, 2021, respectively.

Non-performing loans at December 31, 2021 were $13.9 million, $26.8 million, $470,000, $1.5 million and $7.5 million in the Arkansas, Florida, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $50.2 million. Non-performing assets at December 31, 2021 were $14.4 million, $27.9 million, $470,000, $1.5 million and $7.5 million in the Arkansas, Florida, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $51.8 million.

The Company’s allowance for credit losses on loans was $236.7 million at December 31, 2021, or 2.41% of total loans, compared to the allowance for credit losses of $238.7 million, or 2.41% of total loans, at September 30, 2021. The Company’s allowance for credit losses on loans to total loans, excluding PPP loans (non-GAAP), was 2.43% ⁽¹⁾ and 2.47% ⁽¹⁾ for the three months ended  December 31, 2021 and September 30, 2021, respectively. As of December 31, 2021 and September 30, 2021, the Company’s allowance for credit losses on loans was 471.61% and 468.77% of its total non-performing loans, respectively.

Stockholders’ equity was $2.77 billion at December 31, 2021 compared to $2.74 billion at September 30, 2021, an increase of approximately $29.7 million. The increase in stockholders’ equity was primarily associated with the $50.4 million increase in retained earnings, which was partially offset by a $15.5 million decrease in accumulated other comprehensive income and net stock repurchases and share-based compensation activity of $5.2 million. Book value per common share was $16.90 at December 31, 2021 compared to $16.68 at September 30, 2021. Tangible book value per common share (non-GAAP) was $10.80 ⁽¹⁾ at December 31, 2021 compared to $10.59 ⁽¹⁾ at September 30, 2021, an increase of 7.86% on an annualized basis.
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(1) Calculation of this metric and the reconciliation to GAAP are included in the schedules accompanying this release.

Branches

The Company currently has 76 branches in Arkansas, 78 branches in Florida, 5 branches in Alabama and one branch in New York City.

Acquisition

The Company’s previously announced acquisition of Happy Bancshares, Inc. (“Happy”) and its bank subsidiary, Happy State Bank, is currently expected to close during the first quarter of 2022, subject to Federal Reserve Board approval. The Company received approval for the merger from the Arkansas State Banking Board and the Arkansas State Bank Commissioner as well as the approval of the shareholders of each company in December of 2021.

Conference Call

Management will conduct a conference call to review this information at 1:00 p.m. CT (2:00 ET) on Thursday, January 20, 2022. We encourage all participants to pre-register for the conference call using the following link: https://events.q4inc.com/attendee/357760552. Callers who pre-register will be given dial-in instructions and a unique PIN to gain immediate access to the live call. Participants may pre-register now, or at any time prior to the call, and will immediately receive simple instructions via email. The Home BancShares conference call will also be automatically scheduled as an event in your Outlook calendar.

Those without internet access or unable to pre-register may dial in and listen to the live call by calling 1-844-200-6205, Passcode: 865838.  A replay of the call will be available by calling 1-866-813-9403, Passcode: 153312, which will be available until February 3, 2022 at 10:59 p.m. CT (11:59 p.m. ET).  Internet access to the call will be available live or in recorded version on the Company's website at www.homebancshares.com under “Investor Relations” for 12 months.

About Home BancShares

Home BancShares, Inc. is a bank holding company, headquartered in Conway, Arkansas. Its wholly-owned subsidiary, Centennial Bank, provides a broad range of commercial and retail banking plus related financial services to businesses, real estate developers, investors, individuals and municipalities. Centennial Bank has branch locations in Arkansas, Florida, South Alabama and New York City. The Company’s common stock is traded through the New York Stock Exchange under the symbol “HOMB.” The Company was founded in 1998. Visit www.homebancshares.com or www.my100bank.com for more information.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP). The Company’s management uses these non-GAAP financial measures--including net income (earnings), as adjusted; pre-tax, pre-provision, net income (PPNR); pre-tax, pre-provision, profit percentage; diluted earnings per common share, as adjusted; return on average assets, as adjusted; return on average assets excluding intangible amortization; return on average assets excluding excess liquidity; return on average common equity, as adjusted; return on average tangible common equity; return on average tangible common equity excluding intangible amortization; return on average tangible common equity, as adjusted; efficiency ratio, as adjusted; net interest margin, excluding PPP loans; allowance for credit losses to total loans, excluding PPP loans; tangible book value per common share and tangible common equity to tangible assets--to provide meaningful supplemental information regarding our performance. These measures typically adjust GAAP performance measures to include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant items or transactions (including the effect of the PPP loans) that management believes are not indicative of the Company’s primary business operating results. Since the presentation of these GAAP performance measures and their impact differ between companies, management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s business. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the tables of this release.

General

This release may contain forward-looking statements regarding the Company’s plans, expectations, goals and outlook for the future, as well as statements about the benefits of the business combination transaction involving Home and Happy. Statements in this press release that are not historical facts should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements of this type speak only as of the date of this news release. By nature, forward-looking statements involve inherent risk and uncertainties. Various factors could cause actual results to differ materially from those contemplated by the forward-looking statements. These factors include, but are not limited to, the following:  economic conditions, credit quality, interest rates, loan demand, real estate values and unemployment; disruptions, uncertainties and related effects on our business and operations as a result of the ongoing coronavirus (COVID-19) pandemic and measures that have been or may be implemented or imposed in response to the pandemic, including the impact on, among other things, credit quality and liquidity; the possibility that the proposed acquisition of Happy does not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all; the possibility that such transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events? the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, ongoing or future effects of the COVID-19 pandemic, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Home and Happy operate; the ability to promptly and effectively integrate the businesses of Home and Happy; the reaction to the transaction of the companies’ customers, employees and counterparties; diversion of management time on acquisition-related issues; the effect of any future mergers, acquisitions or other transactions to which we or our bank subsidiary may from time to time be a party, including as a result of one or more of the factors described above as they would relate to such transaction; the ability to identify, enter into and/or close additional acquisitions; legislative and regulatory changes and risks and expenses associated with current and future legislation and regulations, including those in response to the COVID-19 pandemic; technological changes and cybersecurity risks; the effects of changes in accounting policies and practices; changes in governmental monetary and fiscal policies; political instability; competition from other financial institutions; potential claims, expenses and other adverse effects related to current or future litigation, regulatory examinations or other government actions; changes in the assumptions used in making the forward-looking statements; and other factors described in reports we file with the Securities and Exchange Commission (the “SEC”), including those factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021.

Additional Important Information and Where to Find It

In connection with the proposed acquisition of Happy, the Company has filed with the SEC a Registration Statement on Form S-4 (the “Registration Statement”) to register the shares of the Company’s common stock to be issued to shareholders of Happy in connection with the transaction. The Registration Statement includes a Joint Proxy Statement of the Company and Happy and a Prospectus of the Company, as well as other relevant materials regarding the proposed merger transaction involving the Company and Happy. INVESTORS AND SECURITY HOLDERS OF THE COMPANY AND HAPPY ARE ADVISED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE MERGER OR INCORPORATED BY REFERENCE IN THE JOINT PROXY STATEMENT/PROSPECTUS BECAUSE THEY CONTAIN IMPORTANT INFORMATION REGARDING THE PROPOSED MERGER TRANSACTION. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC on the SEC’s website at http://www.sec.gov. Investors and security holders may also obtain free copies of the documents filed with the SEC by the Company at the Company’s website at http://www.homebancshares.com, Investor Relations, or by contacting Donna Townsell, by telephone at (501) 328-4625.

FOR MORE INFORMATION CONTACT:
Donna Townsell
Director of Investor Relations
Home BancShares, Inc.
(501) 328-4625