Home BancShares, Inc. 2026 Q3 Earnings Call

Welcome, everyone. It's another strong quarter for Home Bancshares, led by record earnings of $129.1 million or $0.65 a share. For the first nine months of 2026, we remain on a strong path towards my goal, our goal of $500 million. Or does it sound better to say a half a billion? I never thought I'd be saying that, but we're on a path for that. For the first nine months of 2026, we produced $380 million in adjusted earnings, keeping us on a strong path towards our goal of $500 million. Really, the real difference between the earnings and the adjusted earnings is primarily Mountain Commerce, the merger expense of $12 million to $13 million. During the quarter, we paid our new dividend of $0.23 a share. I know you all are all happy with that.

I would think that's a 9.5% increase, and my wife is extremely happy. As you all remember, she's a dividend hawk for everyone. Increase from the last quarter, we repurchased 1,300,000 shares for approximately $39.3 million, created a shareholder buyback yield of 0.69% in the third quarter. Second quarter, we created a shareholder buyback yield of 0.77%, and the first quarter of 0.25%. So total through three quarters, additional shareholder return of 1.71%. For the three quarters, we repurchased 3.3 million shares, approximately $94.4 million, with plans to continue stock repurchases during the fourth quarter. Couple that with the new dividend yield of approximately 3%. It is our goal to return as much capital to our shareholders as prudent to do so. I understand the importance of shareholders because they are the ones who we work for.

Being a founder, Chairman, owner, operator, and largest individual shareholder, I understand the alignment firsthand. Management is invested in alongside our shareholders, and we remain committed to sharing the rewards of the company performance with them. That more than confirms the passion and drive to share the rewards with all our shareholders. Home's earnings power and balance sheet flexibility was shining brightly in the third quarter. With record profitability, strong stock repurchases, margin expansion, increased dividend, consistent ROA, strong PPNR, tangible book per share growth, low efficiency ratio. It'll be interesting to see, as time goes on in this quarter, how we compare to the rest of the industry. We're proud of the fact that we've been named by many companies for outstanding peer leading performance awards year in and year out, and as we forge forward on our goal of a half a billion dollars in profit.

As I said, in the second quarter, Mountain Commerce transaction is performing very well and making a continued contribution to this total company. Based on what I've seen, I'd do that transaction again. We expect additional benefits as we complete the back office integration during the fourth quarter. Congratulations on a good job to our new Tennessee partners. I'm proud of the work you're doing. Again, the big surprise, like the second quarter, was the third quarter average loan growth balance is outstanding. What appeared to be a large down quarter, like last quarter, turned out to be only down $28 million on average balances from last quarter. That's a result of keeping many of the loans and payoffs coming late in the quarter. Our funding strategy also continued to benefit earnings. Borrowing expenses during the quarter declined by $2.3 million.

Decrease in interest expense on deposits was $1.2 million of that, and decrease of $1.1 million in interest expense on Federal Home Loan Bank borrowings and other borrowings, as we reduced total borrowings by $200 million during the quarter. Many banks may think their AOCI pain is over because they restructured their balance sheet. It took hundreds of millions of dollars, in some case, billions of dollars of losses attempting to repair the damage inflicted by their decisions. The story appears to be repeating itself again as rates continue to climb. Home avoided taking excessive duration risks, maintained balance sheet flexibility, and protected shareholder capital. Our disciplined decision not to build a large, long-duration securities portfolio has proven to be the right one. Higher rates still affected our AOCI during the quarter, but impact remained manageable relative to our size.

If you remember, we've not bought securities in years to speak of. A key point that differentiates Home from most banks, as evidenced by the increase in margin for the quarter, is the balance sheet is structured to increase the margin as rates increase. Donna said all banks are not created equally, and they're not created equally. But when rates go up, bank stocks usually go down. When it's actually positive for Home BancShares, as you can see for the quarter. We built this balance sheet to perform through different economic and interest rate environments, and that discipline continues to benefit our shareholders through today. Those pushing public banks to buy low rate long-term securities several years ago are now the ones pushing for growth. Grow, grow. Growth at any expense.

They say, "Johnny, open up that loan machine." I really bet that few, if any of them, have ever run a bank. Being one of the most profitable and safest banks in the country year in and year out has worked for our shareholders. We will stay the course as we have in the past. I'd rather be known as one of the safest and most profitable banks in the United States than one with problems, losing millions of hard-earned money of the shareholders. We will grow when opportunities meet our standards for credit quality, pricing, and shareholder returns. We will stay the course, and you can bank on that. Regarding our large non-performing loan we've been discussing for several quarters, our long-standing guidance has been we have no additional loss in the large Texas C&I relationship, and in fact, we expect recoveries over time.

There's been a lot of positive movement in this credit over the last 90 days. 80% of the assets of the company are under a signed asset purchase agreement that we expect to close tomorrow, next week, 3 weeks from now, but soon. The remaining 20% have a preliminary agreement with only one contingency that will be resolved once the first part is sold and completed. When the 80% sold, we understand the other 20% will come right after that. We expect these transactions to close this quarter. The scheduled proceeds from these two sale transactions would result in a recovery over the current carrying balance. Remaining balance is owed, and the proceeds would be between the personal guarantors and Home Bancshares. Profitability, as I said already, of our company, we had a 166 PPNR, and I think Stephen is going to cover most of those.

We came out with a pretty good efficiency ratio of 40.84% for the quarter and a 2.11% ROA, and that's without the Mountain Commerce conversion. Our non-performing ticked up a little bit, but that's not concerning to us. At that, I think Chris had a little one that popped up, 11 or 12 million, and he's around to discuss it if anybody wants to ask a question. I'd like to say a special thanks to our team for continuing to produce better numbers almost every quarter in our 26-year life. We're honored to be a continuing top performer year in and year out. Donna, I think that's all the news I have because all the news I have was good, and I have no bad news.