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Home BancShares, Inc. Announces Record Quarterly Net Income Of $17.5 Million

Stocks in this article: HOMB

CONWAY, Ark., April 18, 2013 (GLOBE NEWSWIRE) -- Home BancShares, Inc. (Nasdaq:HOMB), parent company of Centennial Bank, today announced first quarter net income of $17.5 million, or $0.62 diluted earnings per common share, compared to $14.5 million of net income, or $0.51 diluted earnings per common share for the same quarter in 2012. The Company increased its first quarter earnings by $3.1 million or 21.0% for the three months ended March 31, 2013 compared to the same period of the previous year.

Because acquisitions are growth and capital management strategies, earnings excluding amortization of intangibles after-tax are useful in evaluating the Company. Diluted earnings per common share excluding intangible amortization for the first quarter of 2013 was $0.64 compared to $0.52 diluted earnings per common share excluding intangible amortization for the same period in 2012.

"This is the eighth consecutive quarter we have reported the most profitable quarter in the Company's history," said John Allison, Chairman. "The Company has demonstrated an improvement in our non-performing non-covered loans and assets this quarter plus a very impressive return on average assets of 1.70% for the first quarter of 2013. We continue to remain strong in our capital levels, which are considerably above the regulators' capital requirements. These strong reserves place us in a position to benefit from both FDIC and market acquisition transaction opportunities as they are presented."

Randy Sims, Chief Executive Officer, added, "The record net income reported for the first quarter is an outstanding accomplishment for our Company. This quarter the Company increased its earnings above our previously recorded record earnings by $609,000 or 3.6%. We improved our net interest margin 50 basis points during the first quarter of 2013 when compared to the first quarter of 2012."

Operating Highlights

Each quarter we perform credit impairment tests on the loans acquired in our FDIC loss sharing and non-loss sharing acquisitions. During our first quarter 2013 impairment testing, five FDIC loss sharing pools evaluated by the Company were determined to have a materially projected credit improvement. As a result of this improvement, the Company will recognize approximately $15.6 million as an adjustment to yield over the weighted average life of the loans ($2.2 million was recognized during the first quarter of 2013). Improvements in credit quality decrease the basis in the related indemnification asset and increase our FDIC true up liability. This positive event will reduce the indemnification asset by approximately $12.5 million ($2.1 was recognized for the first quarter of 2013) and increase our FDIC true-up liability by $1.6 million ($57,000 was recognized for the first quarter of 2013). The $12.5 million will be amortized over the weighted average life of the shared-loss agreement. This amortization will be shown as a reduction to FDIC indemnification non-interest income. The $1.6 million will be expensed over the remaining true-up measurement date as other non-interest expense. In October 2012, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2012-06, Business Combinations (Topic 805): "Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution". ASU 2012-06 did not impact or change the first quarter 2013 impairment tests or results; the Company was already following the guidance provided for in this new standard.

Net interest income for the first quarter of 2013 increased 21.4% to $44.3 million from $36.5 million during the first quarter of 2012. For the first quarter of 2013, the effective yield on non-covered loans and covered loans was 6.11% and 10.30%, respectively. Excluding the $2.2 million of additional yield for first quarter, the pro-forma effective yield on covered loans was 7.94%. Net interest margin, on a fully taxable equivalent basis, was 5.15% for the quarter just ended compared to 4.65% in the first quarter of 2012, an increase of 50 basis points. When adjusted for the previously discussed $2.2 million, net interest margin, on a fully taxable equivalent basis, was 4.91% for the quarter just ended compared to 4.65% in the first quarter of 2012, an increase of 26 basis points. The Company was able to expand its net interest margin because of its ability to improve pricing on interest bearing deposits combined with additional yield on FDIC loss sharing loans which more than offset the lower interest rates on newly originated loans in the loan portfolio during this historically low rate environment.

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