Credit costs, tax reform take bite out of Home BancShares' profit

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Home BancShares in Conway, Ark., reported lower quarterly profit that reflected higher credit costs and a hit from tax reform.

The $14.5 billion-asset company said in a press release Thursday that its fourth-quarter earnings fell by 52% from a year earlier, to $23.3 million, or 13 cents a share. Excluding a nearly $37 million charge tied to recently passed tax reform, net income would have increased by 24%.

Net interest income increased by 33% to $137 million. Total loans rose by 43% to $147.4 million. The net interest margin narrowed by 28 basis points to 4.47%.

The company’s year-over-year results were skewed by its 2017 purchases Landmark Bank, Insignia Bank and Stonegate Bank.

The loan-loss provision increased nearly tripled to $4.9 million. The company had $6.3 million in net chargeoffs, compared with $1.9 million in net recoveries a year earlier. Nonperforming assets fell by 20% to $63.6 million.

Noninterest income rose by 15% to $27.3 million. Higher service charges and fees more than offset a decline in mortgage lending income. Home also reported $1.2 million in securities gains.

Noninterest expense rose by 31% to $63.2 million. Salaries and occupancy costs increased following the company’s recent acquisitions.

“Looking back on the last year, we were active in growing and navigating the company as we crossed over the $10 billion threshold,” said John Allison, Home’s chairman.

“While we experienced challenges through the year that largely impacted our earnings … we achieved milestone earnings,” Allison added. “In 2018, we are well-positioned to continue to execute on opportunities to grow our company with the focus of improving overall shareholder value.”

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