Lender’s 2Q beats forecasts

Despite lockdown, Home BancShares’ net income $62.8M

Home BancShares reported robust second-quarter earnings Thursday with net income of $62.8 million and earnings per share of 38 cents, besting analysts’ expectations by 12 cents per share.

The Conway bank recorded $11.4 million of credit-loss expense during the quarter, primarily to account for any potential losses from the coronavirus pandemic. This was the first full quarter the bank reported earnings since the economic shutdown caused by the pandemic.

Outside of those expenses, the bank would have reported net income of $78 million and earnings per share of 47 cents, Chairman John Allison noted on a call with banking analysts after earnings were released.

The bank reported $72.2 million in net income in the same quarter last year and earnings per share of 43 cents.

“We believe we are in a very strong loan position during the pandemic cycle,” Allison said.

Analysts who follow the company applauded the performance for outpacing consensus forecasts.

Stephens Inc. banking analyst Matt Olney wrote in a report Thursday that Home BancShares’ “core profitability remains excellent.”

Net interest income was a record for the company, Allison said.

On a fully taxable equivalent basis it increased $9.1 million, up 6.5% to $150.1 mil

lion for the quarter.

“Home BancShares had a good second quarter, and Home’s earnings were commendable considering that this was the first full quarter of earnings during the covid-19 pandemic,” said Little Rock banking analyst Garland Binns.

Total deposits were $13.18 billion at June 30, compared with $11.51 billion at March 31. Total assets were $16.9 billion, compared with $15.53 billion at March 31. Total revenue was $173.7 million, up about 6% from the same quarter last year.

“The new normal is the normal, for Centennial Bank” said Tracy French, chairman, president and chief executive officer of Centennial Bank operations. Home BancShares operates in the markets it serves through Centennial branches.

Home BancShares reported net interest margin of 4.1% in the quarter, compared with 4.2% in the first quarter.

During the quarter, the bank had $848.6 million in Paycheck Protection Program loans, a federal program offered at low-interest rates to help small businesses survive the pandemic. The loans are issued at 1% and are dilutive to net interest income.

“I’m convinced this plan has saved many small businesses from failure,” Allison said on Thursday’s call.

Like other financial institutions nationwide, Home BancShares has offered loan deferments to customers hit hardest by the health and financial crisis, particularly to those in the hospitality and services industries.

Loan deferments were granted to 4,200 borrowers valued at $3.2 billion, or 27% of total loans. Florida borrowers made up 58% of deferments followed by Arkansas companies at 35%.

Home BancShares closed up 57 cents at $16.30 per share. Stephens Inc. also raised its target price for the stock to $19 per share, up from $18.