Home BancShares (NYSE:HOMB) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.
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Summary
Home BancShares reported a strong first quarter of 2026, with a record book value per share and significant capital ratios, including CET1 at 16.7%.
The company successfully completed the merger with Mountain Commerce, although full integration savings are not expected until the end of the year.
Home BancShares ranked as the number two bank in the US over $10 billion by S&P Global for 2025.
A $110 million Texas credit was moved to non-performing status, but management is confident in resolving it without significant losses.
The company continues its stock repurchase program and remains active in the M&A market, focusing on opportunities in Florida and Tennessee.
Loan production was $917 million in Q1, with expectations for continued strong deposit growth despite some anticipated Q2 headwinds.
Home BancShares maintains a prudent credit approach, with criticized assets and early-stage past dues remaining stable.
Management expressed caution regarding inflation and potential interest rate increases, impacting loan and deposit strategies.
Full Transcript
OPERATOR
Greetings ladies and gentlemen. Welcome to the Home BancShares incorporated first quarter 2026 earnings call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday. The company presented will begin with prepared remarks, then entertain questions. Please note that if you would like to ask a question during the Q&A session, please press Star then one on your touchtone phone. If you decide you want to withdraw your question, please press Star then two to remove yourself from the list. The company has asked me to remind everyone to refer to their cautionary notes regarding the forward-looking statements. You will find this Note on page 3 of their Form 10K filed with the SEC in February 2026. At this time all participants are in listen only mode and this conference is being recorded. If you need operator assistance during the conference, please press Star then zero. It is now my pleasure to turn the call over to Donna Townsell, Director of Investor Relations.
Donna Townsell (Director of Investor Relations)
Thank you. Good afternoon and welcome to our first quarter conference call. With me for today’s discussion is our Chairman John Allison, Stephen Tipton, Chief Executive Officer of Centennial Bank, Kevin Hester, President and Chief Lending Officer Brian Davis, our Chief Financial Officer Chris Poulton, President of Central Choice Financial Group and Scott Walter of Shore Premier Finance. Our first quarter set a strong tone for 2026. Results demonstrate sound expense control, consistent operating performance and attractive returns including record setting metrics of book value per share of $22.15, tangible book value per share of $14.87 which is $1.72 per share increase year over year for 13% increase. By the way, CET1 ratio at 16.7%, leverage of 14.3% and Tier 1 capital of 16.7%. In today’s economic environment that is a meaningful accomplishment and our team is pleased to walk through the quarter’s results with you. Our opening remarks today will be from our Chairman John Allison.
John Allison (Chairman)
Thank you and welcome to Home BancShares’ first quarter 2026 earnings report to shareholders. Thank you for joining us today and I think the headline and the quotes pretty much summarize the first quarter. I want to thank our team for getting us off to a great start in 26. For those of you who are not already home based shareholders that are interested in a better understanding of home, I think it’s important that you look at the strength of the balance sheet. Couple that with the monthly and quarterly consistent level of performance over the last several years as primarily showcased by the last five quarters. The prior years reminded us of the highest interest rate cycle in the early 80s where then almost all banks struggled because of poor balance sheet management. And the same story has been even more visible today, that is lack of liquidity by investing into long term securities trying to stretch for yield. I’m proud to say Home didn’t suffer those problems during that time and was reporting record earnings while others were struggling. S and P Global just ranked Home’s performance for 2025 as number two of all banks in the US over $10 billion. We’re honored by this elite ranking by one of the world’s best and most respected experts. We were barely edged out for the number one position last year. Maybe we’ll get it this year. We’re happy to have completed the merger with our acquisition of Mountain Commerce and look forward to a successful combination. Due to the back office computer upgrade that was already in progress before Mountain Commerce, we will not be able to start converting Mountain Commerce until November. As a result, the maximum anticipated savings will not be realized until probably the end of 26. Once accomplished, we believe our new partners can soon begin helping us to continue the outstanding performance of Home BancShares that is known in the US and worldwide. Home is proud of our reputation. Always known as one of the strongest, safest, most conservative and best performing banks in the world. We’ll continue to try to make our shareholders proud and happy to be part of this outstanding company. We know who we work for and that is our shareholders. If you loan money we all know problems can and will arise from time to time. It has to be worked through. We haven’t. We had a $110 million Texas credit that we decided to non perform this quarter. This is the same credit we’ve been talking about for a year and a half or two years. The credit remained current until this quarter. It has been one we’ve been monitoring intensely for about eight months. We’ve entered into a short term forbearance agreement with multiple deadlines and requirements. We are advised by legal counsel not to discuss. In that I can say we’re either going to get paid off or we’ll liquidate the existing collateral. We do not anticipate any additional loss but if things were to result in some loss, Home BancShares’ strength puts us in a position to deal with whatever comes because the conservative balance sheet we’re carrying right at $300 million in loan loss reserves, one of the highest reserve percentages in the world. Couple that with the strong Couple the strong reserves with a consistent quarterly pre tax pre provision net revenue of 100 to 150 to 160 million and we’re confident of our ability with whatever happens and do not expect this loan to have any major impact on earnings, if any at all. It is our belief that there is more sufficient assets and personal guarantees to properly resolve this issue. I’m pleased with the results comparing Q1 to Q1. Last year the first quarter only had 90 days and we had two extra. If we’d had the two extra days in the normal quarter plus just a little touch of wind I think I said last year we had to wind our back two or three times. We had no wind this time this quarter we got zero. When Brian, you always come up with. When you didn’t come up with any juice this time. Well, we did have that FDIC assessment but we got a reduction. Well we had a write off to balance that off. So that’s evident in the non interest income category being the lowest since December of 24. Maybe next quarter will be the best on M&A. I want to congratulate the administration and the Fed along with the Arkansas State Bank Department for the fast approval process. The speed of the approval may possibly give time for another deal this year. We’re certainly in the market and looking for another good fit. We continue to repurchase stock as the volatility of uncertain world as a war kind of makes it uncertain had provided opportunity for us to purchase more recently. That is before we were in a blackout period. However, we did file our normal 10B5 for this time. If the volatility continues we will be very active on the repurchase side. I think we have essentially bought back if not all of the shares issued in the Happy bank transaction and will endeavor to do the same for Mountain Commerce bank transaction. Particularly if volatility continues to create opportunities. The repurchases will take some time but once MC is converted on our system the additional share reduction should have a positive impact on earnings. We’re being very careful on the loan side because the uncertainty of the war, the consumers business asset class and what this cycle might ultimately evolve into. The talking heads have all said rates are coming down but we have cautioned that there is possibly that possibly they will go back up before they come down. Inflation is not dead. Let me say that again. Inflation is not dead and as Jamie Dimon would say, that’s a major cockroach in the mix. The question is how high and how long do they remain high? It depends on how aggressive the Fed is going to be with the escalating interest rates to try to get a Handle on inflation. Remember the late 70s and the early 80s? 21%. It’s not going to be that high, but it has to be corral. Chris Pelton, who runs our New York office has a great sign. He said the year of the lender is followed by the year of the collector. I think. I think our early Texas experience confirms some of Chris’s statements. I think it’s a time to be very careful. The normal structure of some asset classes that worked in the past may not work today. It is our job to watch and hopefully recognize in advance these loans that we think may be infected with, as Jamie Dimon would say, cockroaches. You will hear from Chris Paulson today about his attitude on private credit and the changes made because of it. His call on private credit was outstanding. The good news market pricing on acquisition deals are more in line with the correct value and slowed the insane dilution, at least for a while. One of the CEOs that did a fairly flagrant. I use the term here, maybe it’s a Johnny word, dilutionary. It may have been delusionary. Actually, the trade was so silly. He did a trade some time back, came up to me at a bank conference and said, I’m here to get my butt chewed out. And I proceeded to do just that. Then I gave him a hug and we discussed the pros and cons and the impact and the damage done to long term loyal shareholders and agreed that dilution is not the friend of a shareholder. Enough said. With all the attention that diluted transactions are getting, maybe the publicity and management embarrassment has slowed the shareholder damage. At least I certainly hope so. I hope it’s finally the start of a sea change that forces management to do the right thing for the shareholders. Donna, great quarter. I’m pleased with the strong continuation of Holmes earnings. And again, I’m going to hand it back to you and let’s go. Since I teed up Chris, if you don’t mind, let’s go to Chris first and let him comment and carry forward. Then we’ll go to Stephen and Kevin and Brian and back to you to wrap up.
Donna Townsell (Director of Investor Relations)
Okay, sounds good. Thank you, Johnny. So up next, we have a report on CCFG from Chris Fulton.
Chris Poulton (President of CCFG)
All right, thank you, Donna. Today I’ll provide a brief update on Central Choice Financial Group’s first quarter and then, as Johnny said, we’ll share some perspectives on the private credit market. During Q1, we grew the portfolio to approximately $2.1 billion. This represents a roughly $60 million increase supported by $370 million in new loan production. Loan productions remain steady and this number is in line with prior year levels. Payoffs for the quarter total just under $200 million, which is also consistent with historical averages. We do expect slightly higher payoffs in Q2, so I do think our pipeline should allow us to replace those balances either this quarter or the next. Over the past several years, I’ve discussed declining balances in our corporate lending portfolio. This is an appropriate time maybe to provide some additional context and particularly in light of recent news around private credit. Central Choice Financial Group has long participated in the private corporate credit market. Our exposure has varied over time, but we’ve maintained a consistent presence and have long term experience in the space. Our private credit balances peaked at just under $500 million at the end of 2022 and today outstandings are $87 million. That’s a reduction of over 80% in the past three years. So why do we make the choice to reduce our private credit exposure? Well, beginning in 2023 we observed several trends that influence this decision. First, we saw new bank entrance. As some banks looked to reduce their reliance on commercial real estate, many chose to lend into the growing private credit space through participations in structured facilities. This led to broad yield compression across the private credit market and as often happens, some loosening of credit structures and underwriting standards. At the same time, we saw significant equity inflows from individual investors or retail investors into these sponsored investment vehicles. We’ve seen this movie a few times before and we haven’t always enjoyed the ending. We’ve maintained and we have historically maintained an intentional focus on the shorter duration positions, typically under three years, and as a result, we were able to actively exit credit facilities as they reached the end of their reinvestment period. In total, we exited eight corporate lending facilities through repayment during this time. Our remaining exposure is limited to a few facilities primarily within double A rated structures. Our attachment points approximately 58% of par value of the underlying loans which provides 40% sponsor equity support beneath our senior position. While market dislocation often creates opportunity, we believe it’s still early in the cycle and as a result we’re remaining cautious and at present are biased towards further reductions while continuing to monitor this closely. With that Don, I’ll turn it back to you.
Donna Townsell (Director of Investor Relations)
Thank you. That was a great call, Chris. Yeah, thank you for keeping your eye on the ball with private credit, Chris. Next we will hear a few words from Steven Tipton.
Stephen Tipton (Chief Executive Officer of Centennial Bank)
Thanks Donna. Chris, we appreciate your approach and discipline over the last 11 years with us as Johnny mentioned the first quarter of 2026 was a good start to the year with 118.2 million in net income, a 2.009% return on assets and 16.56% return on tangible common equity. Q1 2026 earnings were in line with the prior quarter despite two fewer days and were up $3 million or 2.6% from the first quarter of 2025. The reported net interest margin was 4.51%, down 10 basis points from Q4 as there was zero event income in Q1 2026 and up 7 basis points from the same period a year ago. The core margin having no event income was 4.51% versus 4.56% in Q4. The overall loan yield declined by 15 basis points to 7.08% while interest bearing deposit costs declined by 12 basis points to 2.35%. Total deposit costs were 1.83% in Q1 2026 and exited the quarter at 1.82%. Deposit balances increased $258 million, driven by all of our Florida regions. I would expect some headwinds in Q2 from tax payments, but we’re pleased to start the year strong. A highlight from the quarter was that non interest bearing balances grew by $126 million to almost $4 billion and now account for 22.5% of total deposits. As we typically see in Q1 2026, loan production softened coming off of a very strong fourth quarter, we had total loan production of $917 million with over half of that coming from the community bank footprint. Switching to Capital, we repurchased 507,000 shares of stock during the quarter for a total of $13.9 million. And as Johnny said, we will continue to be active with our share repurchase plan. Capital levels continue to build with common equity tier 1 capital ending at 16.7% and total risk based capital at 19 and a half percent. Lastly, we’re thrilled to have the Mountain Commerce employees, customers and shareholders on board and look forward to growing the Tennessee franchise for home. With that said, I’ll turn it back over to you Donna.
Donna Townsell (Director of Investor Relations)
Thank you Stephen. And to close out our prepared remarks, Kevin Hester has a lending report.
Kevin Hester (President and Chief Lending Officer)
Thanks Donna. Given our Strong showing in 2025, it could be easy to look at this quarter as boring. I think that shows the high bar that we’ve set for ourselves because any quarter that posts a return on assets of 2.09%, maintains solid asset quality and is an earnings beat over the same quarter a year ago is not an easy task. And should be inspiring. As I anticipated, last quarter ending loan balances dropped by a little over $50 million. But it happened very late in the quarter which resulted in average loan balances actually being up $174 million on a linked quarter basis. I see this downward trend continuing in the legacy bank into the second quarter because Q2 and Q3 projected payoffs very high. The Mountain Commerce Bank acquisition will however add over 1.4 billion in loans to the balance sheet. Based on my meetings with their lenders, I expect them to settle into our credit culture quickly and be accretive to loan production in short order. Johnny mentioned the non accrual of the Texas C&I credit that we’ve been wrestling with since 2024 and this increased non accrual balances significantly. But we have made recent progress with the executed forbearance agreement which leads us to a couple of ways to exit this credit during the next quarter or two. We are continuing to work with the small same set of issues that we’ve been dealing with for a while now. We took our medicine in 4Q24, but maximizing the exit sometimes takes more time and effort than you would like. It’s wonderful to have the level of capital and reserves that we have which allows you to work to maximize recovery on this limited set of problems. To that end, criticized assets were flat on a linked quarter basis and early stage past dues were below 50 basis points. Even with the large increase, the reserve coverage of non performing loans is still over 160%. As a point of reference, our loan loss Reserve would cover 15 years of our historical charge offs. If you use the last five years of average charge offs as a base. And that base includes the large 4Q24 Texas cleanup quarter. There’s nothing wrong with a workman like quarter where you meet expectations. I expect that a majority of banks would trade results with us. On that note, Donna, I’ll send it back to you.
Donna Townsell (Director of Investor Relations)
I expect you’re right. Kevin, thank you for that report. Before we go to Q&A, does anyone have any additional comments? My pleasure. And with that, I think we’ll go to live Q and A.
OPERATOR
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. First question comes from Steven Scooten with Piper Sandler. Your line is open. Please go ahead.
Steven Scooten
Hey, good afternoon, everyone. Appreciate the time. I guess, Johnny, maybe if you can talk a little bit more about how the Progress is going to acquire even more assets on top of Mountain Commerce. I mean, like you said that your returns are phenomenal. So it just feels like you need to be able to multiply that on a larger balance sheet. So what have conversations been like and how aggressive would you be? Kind of within that. Would you ever think about loosening. This might be a crazy question for you, loosening the triple accretive mantra to
John Allison (Chairman)
get a deal done. Well, I think, folks, we hold pretty tight to our philosophy around here. You know, my fear is. My fear is they will say, well, he lied. You know he lied. I hear. I can hear the market saying, oh, he lied. He broke it. He diluted a deal. So I just don’t believe it. You know, I’m the largest individual shareholder and I’m not interested in diluting myself. So I think I hurt our shareholders when we do. You know, my philosophy on that. You know, we stretch as much as we can on a trade, but, you know, people have joined this company because we don’t dilute. And if I dilute it now, I think it would be kind of in. In as I’m getting older, in my career, I think people say, well, he got weak. He weak. Got weak and gave up. You know, so. But I haven’t as of yet. And I think it’s known when we tell it, when we’re talking to another perspective seller, we say we don’t dilute. You need to understand we’re not going to be your highest price. But if you’re going to sell a stock tomorrow, it doesn’t matter. You do a deal and the buyer dilutes the hell out of himself. If you sell a stock tomorrow, it doesn’t matter. Just get out and get going. But if you’re going to be going to ride with him for a while, it makes lots …
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