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HOME BANCSHARES INC (HOMB)·Q2 2025 Earnings Summary

Executive Summary

  • HOMB delivered record net income of $118.4M and diluted EPS of $0.60; net revenue rose to $271.0M, with core efficiency ratio improving to 42.01% .
  • Results beat Wall Street: EPS $0.60 vs $0.567 consensus (+$0.03) and revenue $266.8M–$271.0M vs $262.6M consensus (+$4.2M–$8.4M); beat driven by higher loan income and stable deposit costs* .
  • Management guided that Q3 should look similar to Q1–Q2; core NIM trended up to 4.47% in June, and sub-debt payoff should add ~5–6 bps to core NIM starting late Q3 .
  • Capital return remains active: 1.0M shares repurchased in Q2 (0.49% buyback yield) and dividend raised to $0.20; Board subsequently declared another $0.20 dividend for Q3 .

What Went Well and What Went Wrong

  • What Went Well

    • Record EPS ($0.60), net income ($118.4M), and book/tangible book per share; ROTCE 18.26% with adjusted ROTCE 17.68% .
    • Core margin stability/uptick: NIM 4.44% (flat Q/Q), core margin 4.43% in Q2 and 4.47% in June; ROA 2.08% with adjusted ROA 2.02% .
    • Organic loan growth: +$228.5M total, split community bank +$106.8M and CCFG +$121.7M; CCFG portfolio at $1.83B .

  • What Went Wrong

    • Non-performing metrics ticked up: NPLs to total loans 0.63% (from 0.60%) and NPAs to total assets 0.60% (from 0.56%) due in part to a large yacht non-accrual in Shore Premier Finance .
    • Elevated legal costs: $3.3M legal claims expense in Q2 related to a settlement; management noted reported expenses included one-timers and sees normalized run-rate ~$111–$112M next quarter .
    • Competition pressuring loan/deposit pricing; some peers “loaned into rate cuts,” elevating payoffs and requiring disciplined pricing across footprint .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Diluted EPS ($)$0.51 $0.51 $0.58 $0.60
Net Income ($M)$101.5 $100.6 $115.2 $118.4
Total Revenue (net) ($M)$254.6 $258.4 $260.1 $271.0
ROA (%)1.79% 1.77% 2.07% 2.08%
ROTCE (%) (non-GAAP)17.29% 15.94% 18.39% 18.26%
NIM (FTE) (%)4.27% 4.39% 4.44% 4.44%
Efficiency Ratio (%)43.17% 42.24% 42.22% 41.68%

Results vs S&P Global consensus (Q2 2025, Q1 2025, Q4 2024):

MetricQ4 2024Q1 2025Q2 2025
EPS (actual vs consensus)$0.50 vs $0.518*$0.56 vs $0.537*$0.60 vs $0.567*
Revenue ($M) (actual vs consensus)$241.6 vs $256.7*$260.1 vs $255.2*$266.8 vs $262.6*

Note: Values retrieved from S&P Global.*

Segment/Business Mix (loans):

SegmentQ1 2025 ChangeQ2 2025 ChangePeriod-end Balance
Community Banking+$291.5M growth +$106.8M growth N/A
Centennial CFG–$103.9M decline +$121.7M growth $1.83B

Key KPIs & Credit:

KPIQ2 2024Q1 2025Q2 2025
NPLs / Total Loans (%)0.58% 0.60% 0.63%
NPAs / Total Assets (%)0.56% 0.56% 0.60%
ACL / Loans (%)2.00% 1.87% 1.86%
Net Charge-offs ($M)$2.44 $(4.06) (net recoveries) $1.08

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core NIM trajectoryQ3 2025Hold ~4.40–4.44% (Q1 commentary) June core NIM 4.47%; aim to hold ~4.45% range in Q3 Maintained/slightly improved
Sub-debt payoffLate Jul 2025Plan to pay off $140M sub-debt resetting to 9.7% Payoff end of July; ~5–6 bps benefit to core NIM; 2/3 effect in Q3, full in Q4 Implemented
Deposit CDs repricingH2 2025$600M Q2 and $400M Q3 maturing; opportunity to lower rates ~$1.1B CDs mature in H2; optimistic on repricing down Maintained with larger scope
Expenses (core)Q3 2025Target ~$111M run-rate (Q1) Q2 elevated by ~$3.3M legal claims; normalized ~$111–$112M next quarter Maintained normal run-rate
Capital returnsOngoingContinue buybacks; dividend increased to $0.195 in Q1 Repurchased 1.0M shares in Q2 (0.49% buyback yield); dividend $0.20; Q3 dividend $0.20 declared Maintained/increased dividend
Strategic/M&A2025Exploring deals; faster regulatory approvals may help Target bank assets $2–$6B; aim for accretive, non-dilutive deals; possible announcement before next quarter Active pursuit

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Asset quality cleanupSignificant charge-offs ($53.959M) to clean Texas portfolio Recoveries ~$7.5M; expect >$30M over time Continued recoveries (~$2M this quarter); one large non-accrual yacht near resolution Improving, some residual items
Margin/NIMNIM 4.39%; deposit costs elevated Core margin up; aim to hold range Core margin 4.43% Q2; June 4.47%; sub-debt payoff adds 5–6 bps Slightly improving
Tariffs/macroN/A (cleanup focus)Uncertainty affecting borrower sentiment Competitive pricing pressures; cautious on rate paths Ongoing watch
Regional trendsN/AStrong SE Florida and Dallas metro growth Organic growth across AR, TX, AL, FL; trust/wealth/mortgage contributing Broad-based strength
Legal/regulatoryWest Texas lawsuit expense in Q1 Settlement progressing $3.3M legal claims; reimbursement $0.885M; settlement resolved Largely resolved
Capital actionsBuybacks; sub-debt payoff plan 1.0M shares Q1; contemplating more 1.0M shares Q2; dividend $0.20; special dividend considered Consistent returns

Management Commentary

  • “Record earnings of $119.4 million or $0.60 EPS producing ROA of 2.08%… two record quarters back to back.” (Chairman; non-GAAP figure referenced; GAAP net income $118.4M) .
  • “Reported NIM came in at 4.44%… core margin excluding event income was 4.43%… up 20 bps YoY.” (CFO Tipton) .
  • “We recovered a total of $2 million… expect $30 million total recoveries over time.” (President/CLO Hester) .
  • “Closed approximately $500 million in new commitments… portfolio grew ~$122 million; unfunded commitments ~$1 billion.” (Centennial CFG President Poulton) .

Q&A Highlights

  • Deposit pricing: competition running specials; ~$1.1B CDs mature in H2 with opportunity to reprice lower .
  • Buyback yield and capital: holding company cash ~$400M; payoff $140M sub-debt 7/31; continued buybacks; special dividend under consideration .
  • M&A appetite: targeting bank assets $2–$6B in/near footprint; accretive, non-dilutive focus; open to multiple deals if attractive .
  • Margin outlook: June core NIM 4.47%; sub-debt payoff adds ~5–6 bps to core NIM (partial Q3, full Q4) .
  • Credit specifics: non-accrual $9M yacht in SPF expected full payoff; asset quality mixed but changes immaterial; NPLs and NPAs modestly higher .

Estimates Context

  • EPS beat: $0.60 actual vs $0.567 consensus (+$0.033); 8 EPS estimates tracked*
  • Revenue beat: $266.8M actual vs $262.6M consensus (+$4.2M); 7 revenue estimates tracked*
  • Prior quarters: Q1 2025 EPS $0.56 vs $0.537; revenue $260.1M vs $255.2M; Q4 2024 EPS $0.50 vs $0.518; revenue $241.6M vs $256.7M*

Note: Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Core profitability remains exceptional: ROA 2.08%, ROTCE 18.26%, efficiency ratio 41.68%, indicating sustained operating leverage and discipline .
  • Growth balanced across community and CCFG with record loans ($15.18B); pipeline supports stability despite expected Q3 payoffs .
  • Margin tailwinds: core NIM momentum in June and sub-debt payoff benefit (5–6 bps) should support Q3–Q4 spreads even if rates cut modestly .
  • Credit watchlist manageable: yacht non-accrual and memory care resolutions expected; ACL coverage remains robust at ~293% of NPLs .
  • Capital returns consistent: 1.0M shares repurchased; dividend at $0.20 with Q3 maintained; potential special dividend discussed (catalyst) .
  • M&A optionality: management pursuing accretive deals in $2–$6B asset range; non-dilutive stance, possible announcement before next quarter .
  • Near-term setup: company expects Q3 similar to Q1–Q2 with record cadence continuing; traders should watch NIM trajectory, CD repricing, and any M&A headlines .