Why is Home Bancshares Inc (NASDAQ: HOMB) Stock Under Pressure?

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Home Bancshares Inc (NASDAQ: HOMB) stock fell over 2.5% on 16th July, 2021 (As of 13:06:34 UTC-4 · USD; Source: Google finance) after the company posted mixed results for the second quarter of FY 21. The company has delivered net income for the three-month period ended June 30, 2021 of $79.1 million.

During the second quarter of 2021, the Company recorded a negative provision for unfunded commitments of $4.8 million. This was mainly due to a single commercial & industrial loan for which a reserve was no longer considered necessary due to the borrower’s current cash flow position. The Company determined that an additional provision for credit losses on loans was not necessary as the current level of the allowance for credit losses was considered adequate as of June 30, 2021. Net interest income on a fully taxable equivalent basis has decreased to $143.1 million for the three-month period ended June 30, 2021 and $149.9 million for the three-month period ended March 31, 2021. This decrease in net interest income for the three-month period ended June 30, 2021 was on the back of an $8.2 million decrease in interest income, which was partially offset by a $1.3 million decrease in interest expense. The $8.2 million decrease in interest income was mainly due to a $9.2 million decrease in loan interest income, which was partially offset by a $727,000 net increase in investment income and a $297,000 increase in interest-bearing balances due from banks. The $1.3 million decrease in interest expense was mainly due to a decrease in interest expense on deposits.

The net interest margin has fallen to 3.61% for the three-month period ended June 30, 2021 compared to 4.02% for the three-month period ended March 31, 2021. The yield on loans was 5.40% and 5.56% for the three months ended June 30, 2021 and March 31, 2021, respectively, as average loans decreased from $11.02 billion to $10.54 billion. Additionally, the rate on interest bearing deposits declined to 0.26% as of June 30, 2021 from 0.33% as of March 31, 2021, with average balances of $9.81 billion and $9.55 billion, respectively.

HOMB in the second quarter of FY 21 has reported the adjusted earnings per share of 46 cents, which is inline with the analysts’ estimates for the adjusted earnings per share of 46 cents, according to Zacks Investment Research. Book value per common share has increased to $16.39 at June 30, 2021 compared to $16.02 at March 31, 2021. Tangible book value per common share (non-GAAP) was $10.31 at June 30, 2021 compared to $9.95 at March 31, 2021, which represents an increase of 14.51% on an annualized basis.   The company had reported the adjusted revenue of $172.4 million in the second quarter of FY 21, missing the analysts’ estimates for revenue of $175.3 million.

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