Home BancShares Inc. reported skyrocketing second-quarter profits as its net income climbed nearly 26% to $ 79.1 million. Earnings per share also rose 26.3% to 48 cents from the same period a year ago, Conway Bank said Thursday.
Adjusted for one-time gains, profit was 46 cents per share, matching Wall Street projections as reported by Zacks Investment Research.
“The second quarter performance was another strong quarter for our company,” Chairman and CEO John Allison told analysts on a conference call Thursday afternoon.
Net Interest Income and Net Interest Margin (NIM), however, were lower than analysts’ expectations and demand for loans is down, according to an analysis by Stephens Inc. Home BancShares generated strong revenue growth other than interest of $ 28 million, exceeding analyst consensus of $ 26 million.
Net interest income of $ 143 million fell short of analysts’ forecast of $ 147 million and net interest margin fell 41 basis points to 3.61% from 4.11% as of same quarter of last year. The margin was 3.92% lower than analysts’ forecast.
“Income trends remain contested as core loan growth and the NIM were each disappointing,” Stephens analyst Matt Olney wrote in a report Thursday ahead of the bank’s earnings call with analysts.
During the call, Home’s management team answered several questions about the slowdown in loan growth, and bank officials responded that they were confident that a disciplined approach would pay off in the long run. term. Officials say the bank will not respond to market pressure to grant loans at unacceptable interest rates.
Total loans receivable in the quarter stood at $ 10.2 billion, down significantly from $ 11.9 billion a year ago.
“The demand for loans is the frustrating part of the equation,” Allison said at the start of the call, noting the bank’s high profitability and asset quality.
Home BancShares, which operates as Centennial Bank in its markets, will continue to remain disciplined in its lending practices, officials said.
“One of the hardest things we do is maintain our discipline, and while loan growth may seem a bit slow, we too plan to be patient as we don’t intend to sell. the future of our business, ”said Tracy French, President of Centennial Bank and Chief Executive Officer, said in the earnings press release. “We’re not going to be the type to look for short-term gains in the market to create long-term pain.”
On the call with analysts, chief loan officer Kevin Hester said the bank’s lending pipeline is strong and he expects lending activity to pick up steam in the near future. second half of the year.
Hester noted that “growth is elusive” with excess liquidity flooding the market. “All along we thought it would be the second half of 2021 before we see any loan growth and we still think that way,” he added. “The good news is that our production pipeline is stronger than it was 90 or 180 days ago.”
Loans in the hotel industry that were changed during the pandemic are in better shape today, Hester said. “The recovery is definitely underway with virtually all modified properties experiencing significant improvement in cash flow,” he said.
Meanwhile, Home BancShares continues to seek merger and acquisition opportunities, although none have materialized.
“We have worked on some great opportunities but to no avail so far,” Allison told analysts, adding that the bank was interested in non-dilutive transactions for shareholders. “We will continue to look for like-minded partners in the space.”
The bank is currently in negotiations with a potential M&A partner which Allison says will be announced soon, although he has not given a specific timeline for a deal.
“We are very active on mergers and acquisitions,” Allison said. “We’re a little further along on a M&A deal at this point than we’ve been for some time.”
In the quarter, Home BancShares reported total assets of $ 17.6 billion, up 4% from $ 16.9 billion in the same period last year. Revenue was $ 172.4 million, down slightly from $ 173.7 million in the second quarter last year.
The bank’s shares fell 16 cents to close Thursday at $ 23.29 as the Dow Jones Industrial Average rose 53.79 points. The company has 160 bank branches in Arkansas, Florida, Alabama and New York.