Conway, AR – Home BancShares, Inc. (NASDAQ GS: HOMB), parent company of Centennial Bank, today announced a record quarterly profit of $33.9 million, or $0.50 diluted earnings per share for the second quarter of 2015 compared to $28.4 million or $0.43 diluted earnings per share for the same quarter in 2014. The Company increased its second quarter earnings by $5.5 million or 19.3% for the three months ended June 30, 2015 compared to the same period of the previous year. Additionally, the Company produced record quarterly organic non-covered loan growth of $279.9 million during the second quarter of 2015.
Because acquisitions are growth and capital management strategies, earnings excluding amortization of intangibles after-tax are useful in evaluating the Company. Diluted earnings per share excluding intangible amortization for the second quarter of 2015 was $0.51 compared to $0.44 diluted earnings per share excluding intangible amortization for the same period in 2014.
“I’m pleased to report the non-covered loan portfolio has increased $569.0 million since the first quarter. Excluding the acquisition of $289.1 million of national commercial real estate loans, our momentum for generating non-covered organic loan growth was great this quarter, growing non-covered loans organically by a record $279.9 million,” said John Allison, Chairman. “As a result of our strong capital position, we are adequately prepared to continue entertaining strategic opportunities in areas within and surrounding our existing footprint and supporting loan growth in our legacy organization.”
“For the seventeenth consecutive quarter, the second quarter of 2015 has become the most profitable quarter in the Company's history,” said Randy Sims, Home BancShares, Inc. Chief Executive Officer. “Not only did the Company report an outstanding $2.8 million or 9.0% increase from our previously reported record earnings, but we also reported record results for diluted earnings per share of $0.50 per share and core efficiency ratio of 40.30%. Additionally, on July 11, 2015, we completed the systems conversion of Doral Florida and now can speed up the process of improving the financial metrics to maximize returns to our shareholders.”
Each quarter we perform credit impairment tests on the loans acquired in our FDIC loss sharing and non-loss sharing acquisitions. During our second quarter 2015 impairment testing, no pools were determined to have a material projected credit improvement. There have been no projected credit improvements since the third quarter of 2014 testing. As a result, there was only a $59,000 decline of recognized accretion yield from the first quarter of 2015 to the second quarter of 2015. Consequently, yields on loans and net interest margin for the quarter just ended are relatively comparable to the first quarter of 2015.
Net interest income for the second quarter of 2015 increased 9.5% to $85.4 million from $78.0 million during the second quarter of 2014. For the second quarter of 2015, the effective yield on non-covered loans and covered loans was 5.63% and 18.40%, respectively. Net interest margin, on a fully taxable equivalent basis, was 5.00% for the quarter just ended.
The Company experienced an $814,000 decrease in the provision for loan losses for non-covered loans during the second quarter of 2015 versus 2014. This expected decrease is primarily a reflection of a slowdown in the migration of the acquired Liberty loans from purchased-loan accounting treatment to originated-loan accounting treatment offset by provisioning for second quarter 2015 organic loan growth. Based upon current accounting guidance, the allowance for loan losses is not carried over in an acquisition. As a result, none of the acquired loans had any allocation of the allowance for loan losses at merger date. This is the result of all loans acquired being recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820. However, as the acquired loans payoff or renew and the acquired footprint originates new loan production, it is necessary to establish an allowance which represents an amount that, in management's judgment, will be adequate to absorb credit losses. Traditionally, there is a large migration of these loans during the first year after acquisition, which can create an elevated provision for loan losses as was the case during 2014 with respect to the Liberty acquisition.
The Company reported $17.0 million of non-interest income for the second quarter of 2015, compared to $11.5 million for the second quarter of 2014. The most important components of the second quarter non-interest income were $6.5 million from other service charges and fees, $6.1 million from service charges on deposits accounts, $3.0 million from mortgage lending income, $1.4 million from other income, $1.2 million from trust fees (includes a $788,000 one-time receipt of trust fees), $640,000 from insurance commissions offset by the $2.2 million of net amortization on the FDIC indemnification asset.
As a result of the recognized credit improvements in prior years, the Company has been decreasing the base of the indemnification asset to be recognized as FDIC amortization over the weighted average life of the loss-share agreements. The recognition of this amortization has begun to slow down as the five-year loss-share is beginning to expire. Consequently, there was a $1.8 million decline of FDIC indemnification amortization from the first quarter of 2015 to the second quarter of 2015.
Non-interest expense for the second quarter of 2015 was $43.3 million compared to $38.6 million for the second quarter of 2014. This increase is primarily associated with the establishment of the Centennial Commercial Finance Group (Centennial CFG) in New York City. For the second quarter of 2015, our core efficiency ratio was 40.30% which is improved from the 41.56% reported for second quarter of 2014.
Total non-covered loans were $5.50 billion at June 30, 2015 compared to $4.82 billion at December 31, 2014. Total covered loans were $159.9 million at June 30, 2015 compared to $240.2 million at December 31, 2014. Total deposits were $5.88 billion at June 30, 2015 compared to $5.42 billion at December 31, 2014. Total assets were $8.07 billion at June 30, 2015 compared to $7.40 billion at December 31, 2014.
Since the first quarter of 2015, non-covered loans increased $569.0 million. On April 1, 2015, the Company acquired a pool of national commercial real estate loans from J.C. Flowers & Co. LLC totaling approximately $289.1 million. The Company produced approximately $279.9 million of organic non-covered loan growth since March 31, 2015, of which $223.7 million is associated with loan originations in the legacy footprint with the remaining $56.2 million being associated with Centennial CFG.
Non-performing non-covered loans were $39.9 million as of June 30, 2015, of which $25.6 million, $13.6 million and $686,000 were located in Arkansas, Florida and Alabama, respectively. Non-performing non-covered loans as a percent of total non-covered loans were 0.73% as of June 30, 2015 compared to 0.82% as of December 31, 2014. Non-performing non-covered assets were $56.4 million as of June 30, 2015, of which $37.5 million, $18.2 million and $701,000 were located in Arkansas, Florida and Alabama, respectively. Non-performing non-covered assets as a percent of total non-covered assets were 0.71% as of June 30, 2015 compared to 0.79% as of December 31, 2014.
The Company’s allowance for loan losses for non-covered loans was $55.9 million at June 30, 2015, or 1.02% of total non-covered loans, compared to $52.5 million, or 1.09% of total non-covered loans, at December 31, 2014. As of June 30, 2015 and December 31, 2014, the allowance for loan losses for non-covered loans plus discount for credit losses on non-covered loans acquired to total non-covered loans plus discount for credit losses on non-covered loans acquired was 3.33% and 3.88%, respectively. This decrease is primarily the result of the increase in non-covered loans during 2015 plus projected credit improvement on the acquired impaired loans. As of June 30, 2015 and December 31, 2014, the Company’s allowance for loan losses for non-covered loans was 140% and 133% of its total non-performing non-covered loans, respectively.
Stockholders’ equity was $1.06 billion at June 30, 2015 compared to $1.02 billion at December 31, 2014, an increase of $46.4 million. Book value per common share was $15.67 at June 30, 2015 compared to $15.03 at December 31, 2014. Tangible book value per common share was $10.61 at June 30, 2015 compared to $9.90 December 31, 2014 for an annualized increase of 14.5%.
In an effort to achieve efficiencies primarily from the acquisitions prior to 2015, the Company closed one Arkansas location during the second quarter of 2015 and has plans to close two Arkansas, one Alabama and two Florida locations during the third quarter of 2015. The Company currently has 82 branches in Arkansas, 59 branches in Florida, 7 branches in Alabama and has opened a loan production office in New York City.
Management will conduct a conference call to review this information at 1:00 p.m. CT (2:00 ET) on Thursday, July 16, 2015. Interested parties can listen to this call by calling 1-877-508-9586 and asking for the Home BancShares conference call. A replay of the call will be available by calling 1-877-344-7529, Passcode: 10067277, which will be available until July 23, 2015 at 10:59 p.m. CT (11:59 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.
This release contains forward-looking statements regarding the Company's plans, expectations, goals and outlook for the future. 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, including, but not limited to, economic conditions, credit quality, interest rates, loan demand, the ability to successfully integrate new acquisitions and changes in the assumptions used in making the forward-looking statements, could cause actual results to differ materially from those contemplated by the forward-looking statements. Additional information on factors that might affect Home BancShares, Inc.'s financial results is included in its Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2015, and in its Registration Statement on Form S-4 filed with the SEC on July 2, 2015.
Home BancShares, Inc. is a bank holding company, headquartered in Conway, Arkansas. Our 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 locations in Arkansas, Florida, South Alabama and has opened a loan production office in New York City. The Company's common stock is traded through the NASDAQ Global Select Market under the symbol “HOMB.”
FOR MORE INFORMATION CONTACT:
Jennifer C. Floyd
Chief Accounting Officer &
Investor Relations Officer
Home BancShares, Inc.
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