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HOME BANCSHARES INC (HOMB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered steady profitability despite a proactive asset quality cleanup and hurricane provisions: net income $100.6M, diluted EPS $0.51, revenue $258.4M, NIM expanded to 4.39% from 4.28% in Q3 .
  • Management paid off the $700M BTFP advance, lowering interest expense and adding ~6 bps to NIM; interest-bearing deposit costs fell 22 bps q/q to 2.80%, supporting margin expansion .
  • Credit actions concentrated in Texas drove $53.4M net charge-offs (89% Texas), reducing ACL/loans to 1.87%; management expects ~$30M of recoveries over time and a ~$30–40M NPA reduction in the next couple of quarters .
  • Formal Street consensus (S&P Global) was unavailable due to system limits; management indicated EPS would have been $0.57 absent the additional hurricane reserve, implying a positive underlying run-rate heading into 2025 .

What Went Well and What Went Wrong

What Went Well

  • Margin management: NIM expanded to 4.39% (+11 bps q/q), aided by BTFP payoff (+6 bps) and lower deposit costs; management exited December at ~4.42% margin and 2.75% deposit cost, positioning for stability .
  • Strong liquidity and deposits: Total deposits rose $441M in Q4; noninterest-bearing balances increased $69M to 23.4% of deposits; broker deposits only ~2.4% of liabilities, reducing funding risk .
  • Capital and returns: CET1 15.1%, total risk-based capital 18.7%, ROA 1.77%, ROTCE 15.94%—supporting M&A optionality and organic growth amid higher-for-longer rates .

Management quotes:

  • “Our strong balance sheet, capital and loan loss reserve allowed us to make a proactive cleanup… and sets us up for an even greater year in 2025.” — John Allison, Chairman & CEO .
  • “Excluding event income, NIM was 4.36%… deposit costs fell to 2.80% and exited December at 2.75%.” — Stephen Tipton, CEO of Centennial Bank .

What Went Wrong

  • Elevated net charge-offs: $53.4M in Q4 (vs. $1.5M in Q3) from a Texas-centric cleanup reduced ACL/loans to 1.87%; management targets a longer path back to ~2% over 12–18 months .
  • Hurricane impact: Additional $16.7M provision for Milton raised total hurricane reserve to $33.4M; ~$110.9M of loans on deferral, with loss visibility dependent on insurance settlement timelines .
  • Loan balances dipped: End-period loans declined $59.5M, largely at CCFG (to $1.82B), while community banking grew; CCFG pipeline is being rebuilt, limiting near-term growth .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total Revenue (net) ($MM)$245.6 $254.6 $258.0 $258.4
Net Income ($MM)$86.2 $101.5 $100.0 $100.6
Diluted EPS ($)$0.43 $0.51 $0.50 $0.51
NIM (FTE, %)4.17 4.27 4.28 4.39
ROA (%)1.55 1.79 1.74 1.77
ROE (%)9.36 10.73 10.23 10.13
PPNR ($MM)$118.4 $141.4 $148.0 $146.2
Efficiency Ratio (%)50.64 43.17 41.42 42.24

Segment/KPI highlights:

  • CCFG loans (EOP, $B): Q3 2024 $2.00 → Q4 2024 $1.82
  • Deposit growth by geography in Q4 2024 ($MM): Florida +$232, Texas +$92, Arkansas +$77
  • NPL ratio (% of loans): Q3 0.68 → Q4 0.67
  • NPAs/assets (%): Q3 0.63 → Q4 0.63
KPIQ3 2024Q4 2024
Loans Receivable ($B)$14.82 $14.76
Deposits ($B)$16.71 $17.15
Total Assets ($B)$22.82 $22.49
ACL on Loans ($MM)$312.6 $275.9
ACL/Loans (%)2.11 1.87
Net Charge-offs ($MM)$1.5 $53.4
NPL/Loans (%)0.68 0.67
NPAs/Assets (%)0.63 0.63
CET1 (%)14.7 15.1
Total RBC (%)18.3 18.7
L/D Ratio (%)88.74 86.11
Book Value/Share ($)19.91 19.92
Tangible BV/Share ($)12.67 12.68
Purchase Accretion ($MM)1.9 1.6

Estimates vs. Actuals:

  • S&P Global consensus EPS and revenue for Q4 2024 were unavailable due to system limits; comparisons to estimates are not provided (S&P Global data unavailable).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginNear-term (Q1–Q2 2025)Hold around Q3 levelsExit Dec at ~4.42%; management would be “pleased” to hold in that range Maintained
Deposit CostsNear-termIncremental repricing lower2.80% in Q4; exited Dec at 2.75%; further CD repricing down modestly Lowered
Provision/ACL Strategy12–18 months~2% preferred long-termGradual path back to ~2% over 12–18 months; no near-term large allocations expected Maintained long-term target
NPAs Resolution/RecoveriesNext 1–2 quartersN/AExpect $30–40M NPA reduction next couple of quarters; ~$30M recoveries over time, with monthly recoveries on a performing Texas C&I credit New visibility
Loan Growth2025Q4 softness anticipatedSlow in Q1; improve starting Q2, led by Florida/community markets; rebuild CCFG pipeline Raised 2H bias
M&A2025Active evaluationPaused one LOI for transparency; still actively pursuing $0.75–$2.5B targets in existing markets; expect faster regulatory timelines Opportunistic stance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4 2024)Trend
NIM & Deposit CostsQ2: NIM 4.27%; deposit rate 3.00% . Q3: NIM 4.28%; deposit rate 3.02% .NIM 4.39%; deposit costs 2.80%; exit Dec margin ~4.42% and deposit cost 2.75% .Improving margin; deposit costs falling.
Asset Quality CleanupQ2: NPL 0.58%; NPAs 0.56% . Q3: Hurricane reserve; NPL 0.68%; NPAs 0.63% .$53.4M net charge-offs (89% TX); ACL/loans 1.87%; NPL 0.67%; NPAs 0.63%; $30–40M NPA reduction and ~$30M recoveries expected .Cleanup executed; recoveries ahead.
Hurricanes ImpactQ3: $16.7M Helene reserve .Additional $16.7M Milton reserve; total $33.4M; ~$110.9M loans on deferral .Reserve built; monitoring outcomes.
Liquidity & Uninsured DepositsQ2: $5.82B net liquidity; uninsured deposits ~27.6% . Q3: $5.65B net liquidity; safe-harbor scenario analysis .BTFP payoff; deposits +$441M; L/D back to 86.1%; broker deposits 2.4% of liabilities .Strong, diversified funding.
CCFG SegmentQ2: CCFG loans $2.09B (+$56M) . Q3: CCFG −$89M; loans $2.00B .CCFG −$180.4M; loans $1.82B; pipeline being rebuilt; pricing discipline .Contraction in 2H; rebuild in 2025.
Competitive Deposit PricingQ3: Competition notable .Ads at 4.80% cited; HOMB repricing CDs ~3.68% while defending core customers .Competitive but managed.
Rate EnvironmentQ3: Higher-for-longer supportive .Higher-for-longer seen as net positive for margin stability and pricing discipline .Supportive backdrop.
Regulatory/Legal—Disagreement with regulators on Texas C&I accrual; resolved via charge-off; optimism on M&A approvals and timelines .Improving regulatory outlook per mgmt.

Management Commentary

  • “Record CET1 of 15.1%, record risk-based capital of 18.7% and record book value per share of 19.92… Efficiency ratio for the fourth quarter of 42.24%” — John Allison .
  • “We chose to charge off a portion of the [Texas C&I] credit to keep the rest on… it made sense to rightsize a few other credits” — Kevin Hester .
  • “Total deposits increased $441 million… noninterest-bearing balances now 23.4% of total deposits… loan-to-deposit ratio trended back down to 86.1%” — Stephen Tipton .
  • “We expect recoveries to begin immediately… over time, we will recover in excess of $30 million” — Kevin Hester .
  • “Gradual path back to ~2% reserve… 12–18 months out… not in a hurry” — John Allison .

Q&A Highlights

  • Growth outlook: Q1 loan growth slow with pickup in Q2; Florida/community bank markets carry “war chest of deals” and CCFG pipeline rebuild underway .
  • Margin trajectory: Management aims to hold around exit margin (~4.42%); sees continued deposit repricing opportunities and potential mix shift into loans to support NIM .
  • Deposits: Broad-based inflows without aggressive pricing; strength in business banking relationships and uninsured-deposit “safe harbor” messaging .
  • Capital/M&A: High capital levels enable opportunistic M&A; one LOI paused for transparency post-cleanup; pursuing $0.75–$2.5B targets in existing markets; anticipates faster regulatory timelines .
  • Credit/Provision: Post-scrub provisioning expected to be modest near term; monthly recoveries on performing Texas C&I relationship; NPAs expected to decline $30–40M next couple of quarters .

Guidance Changes

(See table above; the company does not issue formal revenue/EPS guidance. Operational outlook emphasizes margin stability, deposit cost relief, gradual ACL normalization, targeted NPAs reduction, and opportunistic M&A.)

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable due to API limits; therefore, a direct beat/miss comparison cannot be provided (S&P Global data unavailable).
  • Management indicated hurricane reserve reduced reported EPS by ~$0.06; underlying EPS would have been ~$0.57, highlighting core earnings power despite transitory headwinds .

Key Takeaways for Investors

  • Margin expansion and deposit cost relief are the quarter’s core positives; BTFP payoff and disciplined pricing should help maintain NIM around the ~4.4% exit level near term .
  • Proactive credit cleanup concentrated in Texas resets the asset base ahead of 2025; expect recoveries (~$30M) and NPAs decline ($30–40M) over the next couple of quarters—potential catalysts for sentiment .
  • Fortress capital (CET1 15.1%, TRBC 18.7%) and deposit inflows (+$441M) support both organic growth (community markets, Florida) and opportunistic M&A in core geographies .
  • Hurricane reserves ($33.4M) and $110.9M deferrals introduce timing uncertainty on losses, but prior-cycle experience and strong reserves mitigate tail risk .
  • Near-term loan growth likely muted in Q1 with acceleration in Q2 as pipelines rebuild; CCFG contraction in 2H’24 should reverse as pricing improves and pipeline refreshes .
  • Trading lens: monitor NIM stability vs. deposit repricing cadence; credit recoveries/NPAs reduction could drive multiple expansion, while clearer M&A timelines may be medium-term catalysts .
  • Without observable consensus data this quarter, focus on core run-rate signals (NIM, efficiency ratio) and mgmt’s qualitative guideposts for 2025 rather than beat/miss headlines (S&P Global data unavailable).