Sign in

    HOME BANCSHARES (HOMB)

    HOMB Q3 2024: $1B Loans Repricing Set to Lift Net Interest Margin

    Reported on Jul 28, 2025 (After Market Close)
    Pre-Earnings Price$26.98Last close (Oct 17, 2024)
    Post-Earnings Price$27.18Open (Oct 18, 2024)
    Price Change
    $0.20(+0.74%)
    • Margin Expansion Potential: Executives highlighted significant opportunities to ramp up net interest margins through loan repricing – with around $1 billion in loans expected to reprice over the next three quarters, which could further enhance earnings.
    • Operational Efficiency: Management emphasized robust cost control with noninterest expenses already showing a 4% YoY reduction, underscoring a sustainable and efficient operating model that supports profitability.
    • Stable Liquidity and Funding: The leadership noted comfort with the bank's liquidity — even with a lower loan-to-deposit ratio around 88-89% — and a diversified, well-managed deposit base, suggesting strong resilience in funding growth.
    • Legacy Credit and Litigation Risk: Management acknowledged ongoing issues with legacy credits in Texas, including nonperforming hotel loans that could result in potential losses totaling around $200 million if litigation and resolution issues worsen.
    • Deposit Base Erosion: Concerns were raised over declining deposits, particularly due to municipal drawdowns, which may pressure the bank’s liquidity and funding profile in an increasingly competitive market.
    • Margin Compression Risk: The sensitivity of margins to interest rate movements—especially with loan repricing and competition on deposit rates—could lead to margin compression if interest spreads narrow further in the current environment.
    1. Loan Growth
      Q: Outlook on 2025 loan pipeline vs payoffs?
      A: Management noted that although Q4 may be flat due to some higher payoffs, the strong performance in their community bank footprint supports steady, gradual loan growth into 2025.

    2. Hurricane Reserves
      Q: Extra hurricane reserve needed?
      A: They mentioned potentially needing an additional $20 million in reserves if losses materialize, though robust insurance coverage is helping to manage the risk.

    3. Credit Quality
      Q: How are nonperforming loans trending?
      A: The focus remains on legacy credits, especially in Texas, with anticipated losses totaling around $200 million overall, and most issues are expected to resolve soon.

    4. M&A Opportunities
      Q: Is M&A activity under consideration?
      A: Management is exploring strategic transactions in adjoining states, sensing that market pricing and shareholder pressures may lead to further deals.

    5. Net Interest Margin
      Q: What is the outlook for margin trends?
      A: The bank anticipates a stable net interest margin near 4.28%, as adjustments in loan yields and deposit rates are meant to offset each other.

    6. Deposit Flows
      Q: What drove the deposit declines?
      A: Deposits dropped by approximately $100–$150 million this quarter, mainly due to seasonal municipal outflows, although overall liquidity remains robust.

    7. Operating Expenses
      Q: What is behind the cost savings?
      A: Improvements are credited to controlled headcount dynamics and promising IT contract negotiations, keeping noninterest expenses around $110 million.

    8. Repriced Loan Yields
      Q: What yield range is expected on repriced loans?
      A: Management expects that loans up for renewal should target yields in the 8–8.25% range amid competitive pressures.

    9. Loan Product Mix
      Q: How are variable-rate loans structured?
      A: Around $5.5 billion of the loan book is variable, predominantly tied to SOFR with a smaller portion linked to prime, underscoring a well-balanced product mix.

    Research analysts covering HOME BANCSHARES.