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HOME BANCSHARES INC (HOMB)·Q1 2025 Earnings Summary

Executive Summary

  • Record quarter: net income $115.2M and diluted EPS $0.58; adjusted EPS $0.56; total revenue $260.1M, with NIM up 5 bps q/q to 4.44% and ROA at 2.07% .
  • Beat vs S&P Global consensus: revenue $260.1M vs $255.2M*, Primary EPS (normalized) $0.56 vs $0.54*, driven by higher net interest spread and lower deposit costs despite lower loan yields* .
  • Asset quality improved notably post Q4 “Texas cleanup”: NPL/loans fell to 0.60% (0.67% in Q4), NPA/assets to 0.56% (0.63% in Q4); net recoveries were $4.1M in Q1 vs $53.4M net charge-offs in Q4 .
  • Community bank loan growth (+$291.5M) more than offset CCFG C&I runoff (-$103.9M), with deposits up ~$395M q/q; CET1 rose to 15.4% and TBVPS reached $13.15, both at/near records .
  • Post-quarter catalyst: Board raised quarterly dividend to $0.20 (+2.6%) payable June 4, 2025; management also plans to pay off ~$140M sub debt before its step-up to 9.7% on July 1, lowering interest expense (and total risk-based capital by ~76 bps) .

(Values marked with * are from S&P Global; see disclaimer in Estimates Context.)

What Went Well and What Went Wrong

What Went Well

  • Margin and profitability: NIM expanded to 4.44% (4.39% in Q4; 4.28% in Q3), driving ROA to 2.07% and ROTCE to 18.39%; CEO called it “a record setting first quarter” and “near perfect quarter” .
  • Funding mix/pricing: Cost on interest-bearing deposits fell to 2.67% (2.80% in Q4), and strong deposit growth (~$395M) supported liquidity; management expects further relief as ~$1.0B CDs roll in Q2–Q3 .
  • Credit normalization: After the Q4 cleanup, Q1 saw net recoveries of $4.1M, NPL/loans improved to 0.60% and coverage rose to 312% of NPLs; management expects additional recoveries (~$1.5M/quarter on a large relationship) .

What Went Wrong

  • Core loan yields drifted down to 7.38% from 7.49% in Q4 as rates declined, and net interest income FTE dipped to $217.2M from $219.5M in Q4 despite margin expansion .
  • CCFG remained a headwind: portfolio down ~$104M, entirely in C&I; management effectively exited broadly syndicated loans and is selectively rebuilding structured facilities (C&I now <10% of CCFG) .
  • Competitive pressure and macro uncertainty: management flagged aggressive competitor deposit rates (up to ~4.5%), loan quotes in the 6% range, elevated Q2 payoffs, and tariff uncertainty potentially delaying projects .

Financial Results

Headline results vs prior periods and estimates

MetricQ3 2024Q4 2024Q1 2025S&P Global Consensus (Q1 2025)
Total Revenue (net) ($M)$258.0 $258.4 $260.1 $255.2*
Diluted EPS (GAAP)$0.50 $0.51 $0.58 —
Diluted EPS (Adjusted)$0.50 $0.50 $0.56 $0.54*
Net Interest Margin (FTE)4.28% 4.39% 4.44% —
ROA1.74% 1.77% 2.07% —
Efficiency Ratio41.42% 42.24% 42.22% —
  • Revenue beat by ~$4.9M vs consensus; Primary EPS (normalized) beat by ~$0.02* .
  • S&P Global disclaimer: Values marked with * retrieved from S&P Global.

Key balance sheet and credit KPIs

KPIQ3 2024Q4 2024Q1 2025
Loans Receivable (EOP, $B)$14.824 $14.765 $14.952
Deposits (EOP, $B)$16.706 $17.146 $17.541
NPL / Total Loans0.68% 0.67% 0.60%
NPA / Total Assets0.63% 0.63% 0.56%
Net (Recoveries) / Avg Loans0.04% 1.44% (0.11)%
CET1 Ratio14.7% 15.1% 15.4%
ROTCE16.26% 15.94% 18.39%
Book Value / Share$19.91 $19.92 $20.40
Tangible BV / Share$12.67 $12.68 $13.15

Guidance Changes

Metric/ItemPeriodPreviousCurrentChange
Quarterly dividendDeclared Apr 23, 2025$0.195$0.20 payable Jun 4, 2025Raised 2.6%
Non-interest expense run-rate2025 quarterly~$111M (target)Maintain ~$111M; Q1 elevated by ~$2M legal costs tied to Texas suitMaintained; legal to abate if settlement finalized
NIM outlook2025~4.39% exit Q4Aim to “hold in the 4.40%-ish range”Maintained
Deposit costs (CDs)Q2–Q3 2025—~$600M CDs mature in Q2, ~$400M in Q3; 10–20 bps repricing benefit expectedFavorable tailwind
Subordinated debtBy Jul 31, 2025$140M at ~5.5% coupon stepping to 9.7% on Jul 1Plan to pay off; reduces total risk-based capital by ~76 bpsLowers interest expense/run-rate
Legal/tariff environment2025Texas litigation ongoingTentative resolution could reduce ongoing legal expense; watching tariff uncertaintyPotential expense benefit / macro watch

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
Net interest margin4.28% (Q3) with stable outlook; 4.39% (Q4) with stability goal 4.44%; aim to hold ~4.40% despite cuts, aided by deposit repricing Improving, then stable
Deposit pricing & flowsCompetition high; deposit costs 3.02% (Q3); deposits +$441M (Q4) Cost down to 2.67%; +$395M deposits; CDs rolling provide 10–20 bps relief Positive
Loan growth & yieldsCommunity growth; CCFG paydowns; yields ~7.60% (Q3), 7.49% (Q4) Community +$291.5M; CCFG -$103.9M; new prod ~7.75%; core loan yield 7.38% Mixed: volume up, yields easing
Credit qualityQ4 “Texas cleanup” and hurricane reserves ($33.4M); elevated Q4 charge-offs Net recoveries $4.1M; NPL/loans 0.60%; ongoing $1.5M quarterly recoveries expected Improving
Capital & buybacksCET1 14.7%→15.1%; active repurchases (to <199M shares) CET1 15.4%; ~1M shares repurchased; plan to redeem sub debt Strong capital deployment
M&AActively evaluating; regulatory timing could improve; paused LOI during cleanup Open to deals (even smaller, in-market); faster approvals could accelerate activity Opportunistic

Management Commentary

  • “A record setting first quarter has paved the way for a strong year.” – John Allison, Chairman & CEO .
  • “Our continued conservative philosophy...have led to an almost perfect quarter… setting six new performance record[s].” – John Allison .
  • “For the quarter, excluding event income, the net interest margin was 4.42% versus 4.36% in Q4… deposit growth… will allow us to continue to work on negotiated deposit pricing.” – Stephen (John) Tipton, CEO Centennial Bank .
  • “Recoveries from the fourth quarter cleanup were in process with nearly $7 million recovered… I still believe [total] recoveries… exceed $30 million over time.” – Kevin Hester, President & CLO .

Q&A Highlights

  • Margin durability and deposit repricing: ~$1.0B of CDs mature over Q2–Q3; opportunity to lower rates 10–20 bps; NIM targeted to hold near current range despite rate cuts .
  • Loan production and pricing: Q1 new originations >$800M at ~7.75% coupon; competition quoting in the 6s on some terms; willingness to defend pricing .
  • Credit recoveries: Expect ~$1.5M per quarter from a large charged-off Texas relationship; additional recoveries possible as NPAs work down; further NPA improvement expected in Q2 .
  • Capital actions: Plan to repay ~$140M sub debt before 9.7% step-up; buybacks continue opportunistically; holding company cash ~$582M .
  • Expenses: Core non-interest expense run-rate targeted around $111M; Q1 included ~$2M after-tax legal tied to Texas lawsuit; anticipated to be non-recurring if settlement finalized .

Estimates Context

  • Q1 2025: Primary EPS Consensus Mean $0.54 (8 est.) vs actual primary EPS $0.56*; Revenue Consensus Mean $255.2M (7 est.) vs actual $260.1M* (both beats).
  • S&P Global disclaimer: Values retrieved from S&P Global.

Key Takeaways for Investors

  • Beat-and-raise cadence on fundamentals: revenue and normalized EPS beat; NIM expanded; asset quality improved with net recoveries, supporting premium ROTCE and record TBVPS .
  • Near-term tailwinds: ~$1.0B CD maturities, falling deposit betas, planned sub-debt repayment, and dividend increase enhance earnings power and capital returns .
  • Watch list: loan yields slipping with rate cuts and competitive pricing; management discipline on pricing may trade some volume for margin .
  • CCFG reset largely complete: exit from broadly syndicated C&I reduces risk; selective rebuild of structured C&I and stable CRE pipeline point to steadier balances ahead .
  • Expense control credible: management aims to hold ~$111M quarterly non-interest expense ex unusuals; Texas legal costs likely abate on settlement .
  • Stock narrative: “Fortress” capital and 2% ROA ambition, plus shareholder-friendly capital deployment and M&A optionality, are likely key catalysts into 2Q/2H’25 .

Additional Data Detail (Operating & Financial)

  • Operating drivers: Net interest income FTE was $217.2M (vs $219.5M in Q4), with a $10.0M decrease in interest income offset by a $7.7M decrease in interest expense; deposit cost fell to 2.67% and FHLB/other borrowings costs declined post-BTFP payoff .
  • Non-interest items: Non-interest income $45.4M with $3.9M special income from equity investments; non-interest expense $112.9M; efficiency ratio 42.22% .
  • Credit metrics by region available show broad-based improvement q/q in NPLs and NPAs, with the largest NPA balances in Florida and Texas; allowance to loans stable at 1.87% and coverage to NPLs improved to 312% .

All document-based figures are cited above. Values marked with * are from S&P Global.