Home BancShares Q2 Earnings Call Highlights

Home BancShares (NYSE:HOMB) executives said the company delivered a record second quarter on an adjusted basis, helped by the early contribution from its Mountain Commerce Bank acquisition, stable margins, strong fee income and better-than-expected loan trends.

Donna Townsell, director of investor relations, said Home BancShares reported “another solid quarter,” generating record net income as adjusted of $128 million while expanding the balance sheet and maintaining profitability, loan growth, stable margins and improving book value.

Chairman John Allison said the quarter produced several records, including adjusted earnings of $128.1 million, or $0.64 per share, excluding approximately $12.7 million of merger-related expenses. Revenue totaled $295 million, up 10.6% from $266.7 million in the prior quarter, while adjusted pre-tax, pre-provision net revenue reached a company record of $171 million. Allison also cited an adjusted efficiency ratio of 40.46%, an adjusted return on assets of 2.09% and a net interest margin of 4.51%, unchanged from the prior quarter.

Mountain Commerce Deal Contributes Earlier Than Expected

Allison said the company’s merger with Mountain Commerce Bank was contributing “a little earlier and a little stronger” than expected. He characterized the transaction as non-dilutive and said both Mountain Commerce and Home BancShares shareholders should benefit from the combination.

In response to an analyst question, Allison said he could see the effect of Mountain Commerce in the company’s daily income statements during the quarter. “I wasn't prepared for it that quick,” he said, adding that the impact was visible in revenue and earnings trends.

Stephen Tipton, chief executive officer of Centennial Bank, said the inclusion of Mountain Commerce added about $1.5 billion in loans and deposits from Tennessee. He said the company modeled approximately 20% cost savings from the transaction, or about $5.5 million annually, with the bulk of those savings expected after a November conversion.

Loan Growth Beats Internal Expectations, But Forecasting Remains Difficult

Allison said one of the quarter’s biggest surprises was loan growth in the legacy footprint. The company had forecast a $600 million decline in loans but instead posted a $26 million increase, a $626 million swing from expectations.

“As a result, we will no longer forecast next quarter's loan growth,” Allison said, noting that customers often move quickly on transactions and approach the bank when funding is needed. Later in the call, he said the company had approved about $350 million of loans in a recent loan committee meeting, largely tied to activity in South Florida.

Kevin Hester, president and chief lending officer, said the company found a way to post marginal organic loan growth even though conditions appeared difficult 90 days earlier. He said anticipated payoffs remain high in the third quarter, and “we have work to do in order to post loan growth in this quarter.”

Hester said competitors are offering lower loan rates, while expectations for the next Federal Reserve move appear to be higher rather than lower. He said Home BancShares will seek to maximize loan opportunities while protecting its net interest margin.

Tipton said loan production rebounded to just over $1.4 billion in the second quarter, with nearly $1 billion coming from the community bank footprint. He said the overall loan yield, excluding event income, averaged 6.96% and exited the quarter at 6.99%.

Margin Holds Stable as Deposit Costs Remain in Focus

Tipton said the reported net interest margin was 4.51%, in line with the first quarter. The core margin, excluding event income, was 4.47%, consistent with the guidance provided on the prior quarter’s call. Interest-bearing deposit costs averaged 2.38% and exited the quarter at the same level, while total deposit costs were 1.85% in the quarter and exited at 1.84%.

Legacy deposit balances declined by $179 million in the second quarter due to tax payments and seasonal outflows in April, Tipton said. However, deposits increased by $86 million in May and more than $200 million in June, ending the quarter at $19.1 billion.

In response to questions about margin sustainability, Tipton said the company’s interest-rate model shows an almost 6% increase in an up-100-basis-point environment. He said a Fed move higher by a quarter or half point would likely be a net positive for the company.

Tipton also said the company has about $1.25 billion in certificates of deposit maturing in the second half of the year at rates in the mid-3% range. Mountain Commerce has approximately $300 million in CDs maturing in the second half, which Tipton said could provide an opportunity to improve funding costs or allow some balances to roll off.

Fee Income Rebounds, Capital Levels Remain Strong

Non-interest income exceeded $53 million in the quarter, which Tipton called a highlight. He attributed the increase to higher loan recovery income, fee income at CCFG and gains from SBIC investments, bringing fee income back to levels seen in the second through fourth quarters of 2025.

Brian Davis, chief financial officer, said the increase in equity investment income was about $2.4 million. He also said purchase accounting accretion rose by $2.5 million, including $1.5 million related to Mountain Commerce and about $900,000 tied to early loan payoffs.

Home BancShares repurchased 1.5 million shares during the quarter for $40.4 million, up from 500,000 shares in the first quarter. Tipton said the company had more than 15 million shares remaining under its current repurchase authorization and nearly $450 million in cash at the parent company as of June 30.

Tangible book value per share increased by $0.45 to $15.32, an annualized increase of 12.1%. Tipton said capital levels remained strong, with common equity tier 1 capital ending at 16.4%, total risk-based capital at 19% and reserves to total loans at 1.92%.

Credit Metrics Improve as Company Maintains Conservative Stance

Hester said asset quality remained solid, with an eight-basis-point drop in non-performing loans and a four-basis-point drop in non-performing assets. Early-stage past dues remained under 50 basis points, and loan-loss reserve coverage of non-performing loans improved to 177%.

Allison said there had been “significant movement” on a large non-performing loan discussed on the prior quarter’s call, and the company continues to expect no further loss. In a later exchange, he said the credit remains “a little less than $100 million.”

Executives repeatedly emphasized that the company is not willing to sacrifice credit standards, structure or pricing to generate loan growth. Allison said Home BancShares has the capital and earnings power to grow, but will not pursue loans with terms it views as too aggressive.

On mergers and acquisitions, Allison said the company remains interested in additional deals but continues to insist on non-dilutive transactions. He said a previous opportunity was not completed because the company’s stock price had been temporarily depressed, making the proposed trade unacceptable under Home BancShares’ standards. He added that the company may revisit that opportunity.

“Our game is to continue to grow the company over a period of time through both organic growth and M,” Allison said in closing remarks.

About Home BancShares (NYSE:HOMB)

Home BancShares, Inc is a bank holding company based in Conway, Arkansas, operating through its primary subsidiary, Home Bank, National Association. Founded in March 1999, the company provides a comprehensive suite of banking services to individuals, small and middle-market businesses, and public entities. These services encompass deposit accounts, consumer and commercial lending, mortgage origination and servicing, treasury management, and wealth management solutions.

The company's core products include checking and savings accounts, certificates of deposit, and money market accounts, as well as a variety of loan offerings such as commercial real estate financing, equipment loans, agricultural lending, and residential mortgages.

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