Home Bancshares (Conway, Ar) (HOMB -0.77%), the Arkansas-based community banking group, released its earnings for the second quarter of fiscal 2025 on July 16, 2025. The company reported record results, with both revenue and adjusted earnings per share exceeding analyst expectations. Non-GAAP earnings per share were $0.58, compared to analyst estimates of $0.57, while revenue reached $271.0 million, surpassing forecasts of $262.61 million. Diluted earnings per share also reached a company high of $0.60, and net income reported at $118.4 million represented a 16.7 % increase from the same quarter last year. The efficiency ratio improved to 41.68 %, reflecting tight cost control. Overall, the period delivered strong profitability, though increases in non-performing loans and net charge-offs indicate areas to watch.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.58 | $0.57 | $0.52 | 11.5 % |
| Revenue (GAAP) | $271.0 million | $262.61 million | $254.6 million | 6.4 % |
| Diluted EPS (GAAP) | $0.60 | $0.51 | 17.6 % | |
| Net Income (GAAP) | $118.4 million | $101.5 million | 16.7 % | |
| Efficiency Ratio (GAAP) | 41.68 % | 43.17 % | (1.49) pp |
Source: Analyst estimates for the quarter provided by FactSet.
Business Overview and Key Focuses
Home Bancshares specializes in community banking, with operations spanning Arkansas, Florida, Texas, Alabama, and New York City through a network of over 200 branches. The company’s business centers on offering loans, deposit services, and local decision-making that aims to foster customer loyalty and satisfy regional banking needs. A significant portion of its loan book is focused on commercial real estate, which includes lending for properties such as offices, retail centers, and industrial facilities.
The company’s main areas of strategic focus include its high concentration in commercial real estate lending, a track record of growth via strategic bank acquisitions, and maintaining strong regulatory capital positions. Its approach as a community-centric bank distinguishes it from larger national competitors. Home Bancshares also seeks to expand organically by entering attractive markets and growing its deposit and loan base at existing locations, particularly in major metropolitan areas in the Southeast and Texas.
Quarter Highlights and Financial Drivers
During the period, profitability reached new highs. Record net income and earnings per share reflected both top-line growth and improved cost control. The revenue figure, at $271.0 million, was up 6.4 % from the prior year, and net income increased by 16.7 % to $118.4 million. The efficiency ratio, which measures non-interest expenses as a percentage of total revenue, improved year over year from 43.17 % to 41.68 %. This ratio reflects the bank’s control over operating costs relative to its income, and a lower figure signals higher efficiency.
Balance sheet trends underscored the company’s continued focus on measured growth. Total loans receivable hit a company record of $15.18 billion, rising by $228.5 million compared to the prior quarter. Loan pipelines remained strong, especially in community banking and the Centennial Commercial Finance Group, which contributed organic loan growth of $106.8 million and $121.7 million, respectively. However, deposit growth did not keep pace, with total deposits slightly declining quarter over quarter to $17.49 billion. The resulting loan-to-deposit ratio increased from 85.2 % to 86.8 %. This ratio, which compares loans made to deposits held, is used as an indicator of a bank’s ability to fund lending with low-cost deposits, and shifts in either component can highlight pressures or changes in funding strategy.
In terms of asset quality and risk, non-performing loans and non-performing assets ticked up during the quarter. Non-performing loans reached 0.63 % of total loans, compared to 0.60 % in the prior quarter and 0.58 % a year earlier. Net charge-offs, which occur when loans are deemed uncollectable, registered at $1.1 million after net recoveries in recent quarters. The allowance for credit losses remained steady at 1.86 % of loan balances, supporting a coverage ratio of 292.7 % against non-performing loans. While these figures remain strong by industry standards, the sequential increases may merit attention, particularly given the bank’s large commercial real estate portfolio.
Net interest margin, a key measure of lending profitability that expresses the difference between interest earned on loans and paid on deposits as a percent of average earning assets, held firm at 4.44 %. While many banks have faced pressure on margins due to competition for deposits and evolving interest rates, Home Bancshares maintained this rate both quarter over quarter and saw improvement from the 4.27 % reported a year ago. Average loan yields stayed above 7 %, and deposit costs moderated slightly, providing support to this result. This margin reflects the impact of both loan rates and the cost and mix of funding sources, and its stability suggests effective asset and liability management for the period.
The company’s capital position remained robust. The Common Equity Tier 1 (CET1) ratio stood at 15.6 %, up from 15.4 % in the prior quarter and well above regulatory minimums. Total risk-based capital was reported at 19.3 %. Book value per share reached $20.71, a company record and up 7.3 % from last year. Shareholder returns were augmented through the repurchase of 1.0 million shares, and the quarterly dividend was raised 2.6 % to $0.20 per share. Management also referenced plans to pay down subordinated debt from prior acquisitions, which will lower risk-based capital ratios by about 76 basis points but is expected to keep capital well above target requirements.
Operational Developments and Portfolio Composition
Commercial real estate lending continued to dominate the loan portfolio, accounting for 57.6 % of gross loans and totaling 214.6 % of total stockholders’ equity at year end. While this strategy supports above-peer profitability and scale, it also places greater importance on real estate market trends, tenant occupancy, and economic cycles. Management confirmed that concentration levels in commercial real estate did not materially decrease in the first half of the year, adding to the bank’s overall risk profile.
The bank’s commitment to its community banking model was evident again this quarter. Organic loan growth came mainly from local markets in the Southeast, especially Florida and Texas metros. The branch network, now spanning 75 locations in Arkansas, 78 in Florida, 58 in Texas, 5 in Alabama, and a presence in New York City, underpins the company’s local service focus and broadens its customer base. The opening of new branches and continued investment in personnel highlight its ongoing expansion efforts in both established and new markets.
Non-interest income played a notable role in results, reaching $51.1 million. The primary contributors were service charges, fees, and deposit-related income. One-time special items in the quarter included $3.5 million from equity investment returns and roughly $0.9 million in legal fee reimbursements. Non-interest expenses were well-contained outside of elevated legal costs. Salaries and employee benefits accounted for $64.3 million of total non-interest expenses. Expense control was a highlight again, with cost management helping deliver the improved efficiency ratio. Legal expenses, largely due to a lawsuit related to prior acquisitions, are expected to normalize going forward.
No new acquisitions were announced during the period, but management reiterated its openness to future strategic bank acquisitions, particularly those that could be integrated to achieve improved efficiency and profitability. Historical acquisitions, such as the 2022 purchase of Happy Bancshares, have played an essential role in expanding Home Bancshares' asset base and market reach. The company continues to express interest in both large and smaller, "in-market" deals if they fit established financial and strategic criteria.
Looking Ahead: Management Outlook and Investor Considerations
Management provided a cautiously optimistic outlook for the third quarter, stating that it expects performance to be “as good or better than” the current period. It noted that, as of the earnings call, the earnings run rate for the upcoming quarter was already tracking $1.3 million ahead of the prior quarter. The net interest margin is expected to remain in the current 4.4 % range, though competition for both loans and deposits remains "aggressive." Some relief on deposit funding costs is anticipated as maturing certificates of deposit reprice at lower rates, potentially supporting continued margin resilience.
Expense guidance suggested that legal costs, which inflated recent expenses, should abate, helping maintain the low-40s efficiency ratio target. Management again cited the desire to gradually return the allowance for credit losses to 2 % of loans, though no large build-up is planned absent changes in credit performance. Regarding growth, strong loan production pipelines remain a focus, but recent elevated loan payoffs—where borrowers repay loans ahead of schedule—represent a possible headwind.
The quarterly dividend was raised 2.6 % to $0.20 per share.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
