Home BancShares ended 2019 on a strong note with increases in profitability and earnings per share as it prepares to continue growing through acquisitions over the next year.
The Conway bank announced Thursday that net income was up 3% to $73.3 million on revenue of $167.8 million. Home Bancshares reported four consecutive quarters of net-income growth in 2019.
Earnings per share increased by 7% to 44 cents and beat analysts' expectations of 42 cents.
This year, the bank is considering acquisitions that would continue to boost earnings, Chairman John Allison said on a conference call with industry analysts Thursday afternoon. "I predict that [we] will be back in the [mergers and acquisitions] business either later this year or next year," Allison said.
Allison noted the "superb asset quality" of the company. "It's about as good as it can get," he said.
All of the bank's business segments performed well in the fourth quarter, according to Allison. "It was a good job by all for the quarter," he added.
Home BancShares has built a strong foundation for success, Allison said. "We're teed up for a good year in 2020," he added.
"This company has remained as solid as anybody in the country and we'll continue to do that in the future," Allison said on the conference call.
The stock closed Thursday at $20.41, up 6.4%. Earnings were announced before the stock market opened.
Stephens Inc. analyst Matt Olney noted the bank generated "impressive fees and excellent credit trends" that boosted earnings in the quarter.
The bank's return on assets was 1.94% in the fourth quarter, the highest for the year.
"Our steady increase in two key banking metrics: diluted earnings per share and return on assets, showcase the solid foundation of Home BancShares," said Tracy French, Centennial Bank president and chief executive officer. Home BancShares operates Centennial Bank branches in Arkansas.
The banking sector was rocked in 2019 by three interest-rate cuts -- each one by a quarter point -- put in place by the Federal Reserve. Interest rates set by the Fed control the cost of mortgages, credit cards and other lending from banks and affect the overall earnings of financial institutions.
"Increasing our profitability during a year of fluctuating interest rates is certainly an accomplishment to be proud of," Allison said.
For the year, Home BancShares reported a net income drop of 3.6%. Net income was reported at $281.5 million compared with $300.4 million the previous year. Earnings per share were flat at $1.73.
Allison indicated a transaction that "gives a little kick to [earnings per share]" likely will be announced in the next 30 days.
Moreover, Allison said Home BancShares could make several small acquisitions this year to "get our feet wet" as the bank considers a larger merger of equals, meaning doing a transaction with a similar size bank.
Even so, Allison said Home BancShares "has to be the survivor" in larger transactions.
Home BancShares repurchased $75.4 million of common stock in 2019 and will continue the buyback program this year.
The bank reported net interest margin of 4.24% for the quarter, which was a slight decline but in line with the consensus forecast by banking analysts. Fee income, on the other hand, was solid at $28 million, above the consensus predictions of $24.3 million.
Organic loan growth improved to $97.8 million for the quarter. "We're pleased to see modest growth in organic loans following heavy paydowns earlier in 2019," Olney wrote in the Stephens report.
Home BancShares has 77 branches in Arkansas, 78 in Florida, five in Alabama and one in New York City.
Business on 01/17/2020