Conway bank's profit jumps in second quarter

Graphs showing Home BancShares second quarter information.
Graphs showing Home BancShares second quarter information.

Home BancShares, which owns Centennial Bank branches in four states, earned $76 million in net income for the second quarter, its highest quarterly earnings ever, the Conway-based bank said Thursday.

That was more than a 50 percent jump compared with earnings of $50.1 million in the second quarter last year.

Home BancShares made a profit of 44 cents per share for the quarter, matching average expectations of 44 cents a share from nine bank analysts surveyed by Thomson Reuters.

The bank's shares rose 8 cents to close Thursday at $23.32 in trading on the Nasdaq exchange.

Total deposits were $10.7 billion and total loans were $10.9 billion, as of June 30.

John Allison, Home BancShares' chairman, called the quarter "outstanding."

In the past year, Home BancShares' assets grew $4 billion to $14.9 billion, net income was up $26 million and earnings per share rose 9 cents, Allison noted.

"Earnings are up but the stock is down," Allison said in a conference call Thursday, speaking of the stock's trend. "Somebody's wrong. Either we are or the market, is. The stock is still trading where it was in 2016 and below where it was in 2017. Our stock has huge upside. We should be trading north of $30 [a share]."

With the stock price low, Home BancShares bought back 350,000 shares in the second quarter, Allison said.

During the second quarter, Home BancShares announced it paid about $375 million in cash and 1.25 million shares of Home BancShares to Union Bankshares Corp. of Richmond, Va., to buy a lending division of Union -- Shore Premier Finance, which provides direct consumer financing to U.S. Coast Guard-registered high-end sailboats and powerboats.

Shore Premier Finance had $384 million in assets and $383 million in total loans.

"After several quarters of immaterial [nonpurchased] loan growth, we're encouraged to see loan balances rebound in the second quarter," Matt Olney, a banking analyst with Stephens Inc. in Little Rock, said in a research note.

Asked by an analyst about Home BancShares plans to purchase another bank, considering the current share price, Allison said it is unlikely.

"With the surprising high prices paid for the last several deals, it appears that whole bank [acquisitions] may be beyond reach for disciplined acquirers," Allison said.

Home BancShares continues to have strong earnings performance, including a return on assets of 2.13 percent and an efficiency ratio of 36.74 percent, said Garland Binns, a Little Rock banking attorney.

The bank's efficiency ratio means it costs $36.74 to earn $100.

"Going forward, it will be interesting to see what effect on earnings with the entry of Home [BancShares] into the marine lending business once the acquisition of Shore Premier Finance is closed," Binns said.

The efficiency ratio is "even more impressive considering the recent conversion of Stonegate [Bank] in February and our ability to quickly reap the dividends of consolidation," said Randy Sims, chief executive officer of Home BancShares.

Centennial Bank opened a branch in Jonesboro during the second quarter. It plans to open a lending office in Chesapeake, Va., under the management of Shore Premier Finance in the third quarter.

Centennial has 159 branches, with 77 in Arkansas, 76 in Florida, five in Alabama and one in New York City.

Business on 07/20/2018

Upcoming Events