HOMB’s Balance Sheet Continues to Weather the Storm

Centennial Bank Office Portfolio Geography

Centennial Bank Office Portfolio Stratifications

Centennial Bank Office Portfolio Stratifications – Part 2

CONWAY, Ark., April 20, 2023 (GLOBE NEWSWIRE) — Home BancShares, Inc. (NYSE: HOMB) (“Home” or the “Company”), parent company of Centennial Bank, released quarterly earnings today.

Highlights of the First Quarter of 2023:

^{(1) Calculation of this metric and the reconciliation to GAAP are included in the schedules accompanying this release.}

“The strength of Home BancShares’ liquidity and availability provides more than 100% coverage for all uninsured and uncollateralized depositors as of March 31, 2023,” stated John Allison, Chairman and CEO of HOMB. “The strong liquidity of HOMB would have allowed HOMB to pay all uninsured and uncollateralized deposits in excess of the FDIC limits of $250,000 and still have $1.7 billion remaining,” Allison continued.

“We are very proud of the fortress balance sheet we have built at Home BancShares. Home BancShares with its wholly-owned subsidiary Centennial Bank is one of the strongest financial institutions in America. There are only a handful of banks in the country that can make that statement. Our strength and liquidity have put HOMB in an enviable position,” Allison added.

“As the banking environment continues to be volatile, our ability to pay uninsured and uncollateralized deposits at Centennial Bank and deliver strong earnings for our shareholders is nothing less than remarkable,” said Tracy French, President and CEO of Centennial Bank.

Liquidity and Funding Sources

At March 31, 2023, the Company held $2.74 billion in net available internal liquidity. This balance consisted of $2.15 billion in unpledged investment securities which could be used for additional secured borrowing capacity, $407.2 million in cash with the Federal Reserve Bank (FRB) and $185.9 million in other liquid cash accounts.

Consistent with the Company’s practice of maintaining access to significant external liquidity, the Company had $4.18 billion in net available external liquidity as of March 31, 2023. This included $5.20 billion in available liquidity with the Federal Home Loan Bank (FHLB), of which $1.80 billion has been drawn upon in the ordinary course of business, resulting in $3.40 billion in net available liquidity with the FHLB as of March 31, 2023. The $1.80 billion consisted of $650.0 million in outstanding FHLB advances and $1.15 billion used for pledging purposes. The Company also had access to approximately $677.7 million in liquidity with the FRB as of March 31, 2023. This consisted of $71.8 million available from the Discount Window and $605.9 million available through the Bank Term Funding Program (BTFP). As of March 31, 2023, the Company also had access to $55.0 million from First National Bankers’ Bank (FNBB), and $45.0 million from other various external sources.

Overall, the Company had $6.92 billion net available liquidity as of March 31, 2023, which consisted of $2.74 billion of net available internal liquidity and $4.18 billion in net available external liquidity. Details on the Company’s available liquidity as of March 31, 2023 is available below.

The Company has continued to limit its exposure to uninsured deposits and has been actively monitoring this in light of the current banking environment. As of March 31, 2023, the Company held approximately $7.89 billion in uninsured deposits of which $2.68 billion were collateralized deposits, for a net position of $5.21 billion. This represents approximately 29.9% of total deposits. In addition, net available liquidity exceeded uninsured and uncollateralized deposits by $1.71 billion.

In the event the Company’s $5.21 billion net position of uninsured deposits had been called by depositors during the first quarter of 2023, the Company estimates that interest expense would have increased by approximately $64.2 million for the period ended March 31, 2023, assuming the event occurred on January 1, 2023. The outflow of deposits could have been funded through available sources of liquidity. In this event, the Company estimates that it would still have achieved return on average assets (ROA) of 1.21% for the period ended March 31, 2023.

Subsequent to the end of the quarter, the Company made the decision to pledge additional investment securities with a market value of $761.5 million in order to increase the Company’s BTFP borrowing capacity by $825.5 million, which represents the par value of the pledged investment securities. This increased the net available liquidity exceeding uninsured deposits by $64.0 million.

Operating Highlights

Net income for the three-month period ended March 31, 2023 was $103.0 million, or $0.51 diluted earnings per share. When adjusting for non-fundamental items, net income and diluted earnings per share on an as-adjusted basis (non-GAAP), was $108.9 million⁽¹⁾, or $0.54 per share⁽¹⁾ for the three months ended March 31, 2023.

Our net interest margin was 4.37% for the three-month period ended March 31, 2023, compared to 4.21% for the three-month period ended December 31, 2022. The yield on loans was 6.64% and 6.23% for the three months ended March 31, 2023 and December 31, 2022, respectively, as average loans increased from $14.11 billion to $14.47 billion. Additionally, the rate on interest bearing deposits increased to 1.90% as of March 31, 2023, from 1.45% as of December 31, 2022, while average interest-bearing balances decreased from $12.85 billion to $12.65 billion.

During the first quarter of 2023, there was $2.1 million of event interest income compared to event interest income of $871,000 for the fourth quarter of 2022.

Purchase accounting accretion on acquired loans was $3.2 million and $3.5 million and average purchase accounting loan discounts were $35.5 million and $38.6 million for the three-month periods ended March 31, 2023 and December 31, 2022, respectively.

Net interest income on a fully taxable equivalent basis was $216.2 million for the three-month period ended March 31, 2023, and $217.7 million for the three-month period ended December 31, 2022. This reduction in net interest income for the three-month period ended March 31, 2023, was the result of a $13.1 million increase in interest expense, partially offset by an $11.7 million increase in interest income. The $13.1 million increase in interest expense was due to a $12.1 million increase in interest expense on deposits and an $802,000 increase in interest expense on FHLB borrowed funds. The increase in interest expense on deposits and FHLB borrowed funds is a result of the rising interest rate environment. The $11.7 million increase in interest income was primarily the result of a $15.6 million increase in loan interest income and a $1.5 million increase in investment income, partially offset by a $5.4 million decrease in income from interest-bearing balances due from banks. The increase in interest income is a result of the rising interest rate environment as well as an increase in average loan balances during the quarter.

The Company reported $34.2 million of non-interest income for the first quarter of 2023. The most important components of first quarter non-interest income were $11.9 million from other income, $11.9 million from other service charges and fees, $9.8 million from service charges on deposit accounts, $4.9 million from trust fees, $2.8 million from dividends from FHLB, FRB, FNBB and other, $2.6 million in mortgage lending income and a $1.1 million increase in cash value of life insurance, partially offset by an $11.4 million fair value adjustment for marketable securities. The $11.9 million in other income includes $3.5 million in recoveries on historic losses.

Non-interest expense for the first quarter of 2023 was $114.6 million. The most important components of non-interest expense were $64.5 million from salaries and employee benefits, $26.2 million in other operating expense, $15.0 million in occupancy and equipment expenses and $9.0 million in data processing expenses. For the first quarter of 2023, our efficiency ratio was 44.80%; and our efficiency ratio, as adjusted (non-GAAP), was 43.42%⁽¹⁾_.

Financial Condition

Total loans receivable were $14.39 billion at March 31, 2023, compared to $14.41 billion at December 31, 2022. Total deposits were $17.45 billion at March 31, 2023, compared to $17.94 billion at December 31, 2022. Total assets were $22.52 billion at March 31, 2023, compared to $22.88 billion at December 31, 2022.

During the first quarter of 2023, the Company experienced approximately $22.8 million in loan decline. Centennial CFG experienced $94.6 million of organic loan decline and had loans of $2.18 billion at March 31, 2023. Our remaining footprint experienced $73.9 million in organic loan growth and $2.1 million in PPP loan decline during the quarter.

Non-performing loans to total loans was 0.51% and 0.42% at March 31, 2023 and December 31, 2022, respectively. Non-performing assets to total assets was 0.33% and 0.27% at March 31, 2023 and December 31, 2022, respectively. Net charge-offs were $3.7 million and $4.5 million for the three months ended March 31, 2023 and December 31, 2022, respectively.

Non-performing loans at March 31, 2023 were $11.2 million, $20.0 million, $26.9 million, $390,000, $2.1 million and $13.4 million in the Arkansas, Florida, Texas, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $74.0 million. Non-performing assets at March 31, 2023 were $11.2 million, $20.2 million, $27.2 million, $390,000, $2.1 million and $13.4 million in the Arkansas, Florida, Texas, Alabama, Shore Premier Finance and Centennial CFG markets, respectively, for a total of $74.5 million.

The Company’s allowance for credit losses on loans was $287.2 million at March 31, 2023, or 2.00% of total loans, compared to the allowance for credit losses on loans of $289.7 million, or 2.01% of total loans, at December 31, 2022. As of March 31, 2023 and December 31, 2022, the Company’s allowance for credit losses on loans was 388.23% and 475.99% of its total non-performing loans, respectively.

Stockholders’ equity was $3.63 billion at March 31, 2023, compared to $3.53 billion at December 31, 2022, an increase of approximately $104.5 million. The increase in stockholders’ equity is primarily associated with the $66.3 million increase in retained earnings and the $49.2 million decrease in accumulated other comprehensive loss, which were partially offset by $13.5 million in stock repurchases. Book value per common share was $17.87 at March 31, 2023, compared to $17.33 at December 31, 2022. Tangible book value per common share (non-GAAP) was $10.71⁽¹⁾ at March 31, 2023, compared to $10.17⁽¹⁾ at December 31, 2022.

Office Loan Portfolio Detail

The following charts and graphs provide additional information related to our loan portfolio secured by commercial office space, which represents an aggregate outstanding principal balance of $1.03 billion, or 7.1% of our total loans receivable as of December 31, 2022.

Branches

The Company currently has 76 branches in Arkansas, 78 branches in Florida, 63 branches in Texas, 5 branches in Alabama and one branch in New York City.

Conference Call

Management will conduct a conference call to review this information at 1:00 p.m. CT (2:00 p.m. ET) on Thursday, April 20, 2023. We strongly encourage all participants to pre-register for the conference call webcast or the live call using one of the following links. First, participants can pre-register for the conference call webcast using the following link: https://events.q4inc.com/attendee/775702912. Participants who pre-register will be given a unique webcast link to gain immediate access to the conference call webcast. Second, participants can pre-register for the live call using the following link: https://www.netroadshow.com/events/login?show=a2c2eedd&confId=48539. Participants who pre-register will be given the phone number and unique access codes to gain immediate access to the live call. Participants may pre-register now, or at any time prior to the call, and will immediately receive simple instructions via email. The Home BancShares conference call will also be scheduled as an event in your Outlook calendar.

Those without internet access or unable to pre-register may dial in and listen to the live call by calling 1-833-470-1428, Passcode: 716837. A replay of the call will be available by calling 1-866-813-9403, Passcode: 964704, which will be available until April 27, 2023, at 10:59 p.m. CT (11:59 p.m. ET). Internet access to the call will be available live or in recorded version on the Company’s website at www.homebancshares.com.

About Home BancShares

Home BancShares, Inc. is a bank holding company, headquartered in Conway, Arkansas. Its 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 branch locations in Arkansas, Florida, Texas, South Alabama and New York City. The Company’s common stock is traded through the New York Stock Exchange under the symbol “HOMB.” The Company was founded in 1998. Visit www.homebancshares.com or www.my100bank.com for more information.

^{(1) Calculation of this metric and the reconciliation to GAAP are included in the schedules accompanying this release.}

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP). The Company’s management uses these non-GAAP financial measures–including net income (earnings), as adjusted; pre-tax, pre-provision, net income (PPNR); PPNR, as adjusted; pre-tax net income, as adjusted, to total revenue (net); pre-tax, pre-provision, profit percentage; pre-tax, pre-provision, profit percentage, as adjusted; diluted earnings per common share, as adjusted; return on average assets, as adjusted; return on average assets excluding intangible amortization; return on average assets, as adjusted, excluding intangible amortization; return on average common equity, as adjusted; return on average tangible common equity; return on average tangible common equity, as adjusted; return on average tangible common equity excluding intangible amortization; return on average tangible common equity, as adjusted, excluding intangible amortization; efficiency ratio, as adjusted; tangible book value per common share and tangible common equity to tangible assets–to provide meaningful supplemental information regarding our performance. These measures typically adjust GAAP performance measures to include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant items or transactions that management believes are not indicative of the Company’s primary business operating results. Since the presentation of these GAAP performance measures and their impact differ between companies, management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s business. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the tables of this release.

General

This release may contain 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 are not guarantees of future events, performance or results. When we use words like “may,” “plan,” “propose,” “contemplate,” “anticipate,” “believe,” “intend,” “continue,” “expect,” “project,” “predict,” “estimate,” “could,” “should,” “would,” and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. Forward-looking statements of this type speak only as of the date of this news release. By nature, forward-looking statements involve inherent risks and uncertainties. Various factors could cause actual results to differ materially from those contemplated by the forward-looking statements. These factors include, but are not limited to, the following: economic conditions, credit quality, interest rates, loan demand, real estate values and unemployment, including the ongoing impacts of inflation; disruptions, uncertainties and related effects on our business and operations that may result from any future outbreaks of the COVID-19 pandemic, including the impact on, among other things, credit quality and liquidity; the ability to identify, complete and successfully integrate new acquisitions; the risk that expected cost savings and other benefits from acquisitions may not be fully realized or may take longer to realize than expected; diversion of management time on acquisition-related issues; the availability of and access to capital and liquidity on terms acceptable to us; legislative and regulatory changes and risks and expenses associated with current and future legislation and regulations; technological changes and cybersecurity risks and incidents; the effects of changes in accounting policies and practices; changes in governmental monetary and fiscal policies; political instability, military conflicts and other major domestic or international events; adverse weather events, including hurricanes, and other natural disasters; competition from other financial institutions; potential claims, expenses and other adverse effects related to current or future litigation, regulatory examinations or other government actions; potential increases in deposit insurance assessments, increased regulatory scrutiny or market disruptions resulting from financial challenges in the banking industry; changes in the assumptions used in making the forward-looking statements; and other factors described in reports we file with the Securities and Exchange Commission (the “SEC”), including those factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023.

FOR MORE INFORMATION CONTACT:
Donna Townsell
Director of Investor Relations
Home BancShares, Inc.
(501) 328-4625