Home Bancshares, Inc. earnings

Management highlights

### Merger Integration (Mountain Commerce Bank) - The Mountain Commerce Bank merger closed and integration proceeded smoother and faster than expected, with positive earnings contributions occurring earlier than management projected - The full system conversion of Mountain Commerce Bank was completed in June with no major operational issues - Expected annual cost savings from the merger are $5.5 million, most of which will be realized starting in Q4 2026 after full operational conversion, with full savings hitting in 2027 - The merger was structured as a non-dilutive transaction for existing Home Bank Shares shareholders, aligned with the firm's longstanding M&A strategy ### Balance Sheet & Lending - Legacy footprint organic loan growth outperformed projections dramatically: management expected a $600 million net loan decline, but achieved $26 million net organic growth, a $626 million positive surprise swing - Total loans including the Mountain Commerce acquisition grew by $1.5 billion sequentially - The South Florida market has a robust pipeline of large, high-quality lending opportunities, with $350 million in new loans approved on the most recent weekly loan committee, including large multi-year commercial development projects expected to drive future growth - Asset quality improved sequentially: non-performing loans fell 8 basis points, non-performing assets fell 4 basis points, early-stage delinquencies remain under 50 basis points, and loan loss reserve coverage of non-performing loans improved to 177% - The large previously-reported non-performing loan (under $100 million) saw meaningful progress during the quarter, with management still expecting no net loss on the exposure; no interest income was recognized on the loan this quarter, which would have made reported results even stronger ### Capital Management - The firm accelerated share repurchases in Q2 2026, repurchasing 1.5 million shares for $40.4 million, up from 500,000 shares repurchased in Q1 2026 - The firm has already reached the halfway mark in its goal to repurchase all shares issued for the Mountain Commerce transaction - As of quarter end, 15 million shares remain available under the existing repurchase authorization, with $450 million in cash held at the parent company ### Strategic M&A - The firm is pursuing additional acquisition opportunities, but strictly adheres to a non-dilutive transaction requirement - A previously targeted acquisition was not pursued when Home Bank's stock price was temporarily depressed, as the terms would have been dilutive; management expects to revisit this opportunity after the recent recovery in the firm's share price ### Operational Updates - Hired the firm's first in-house corporate counsel, Jeff Campbell, during the quarter - The Dallas region, which previously oversaw the large non-performing credit, now fully aligns with Home Bank's credit culture and underwriting standards

Guidance

- Management does not provide explicit near-term loan growth guidance after the large Q2 projection miss, though management is optimistic about medium-term growth from the large South Florida opportunity pipeline; near-term, management expects to at least maintain current loan balances without compromising credit standards or net interest margin - Long-term normalized non-interest income is expected to average ~$50 million per quarter, after Q1 2026 posted an unusually low result and Q2 2026 came in at ~$53 million - Core net interest margin is expected to remain stable around current levels; a 100 basis point Fed rate hike would be net positive for the firm due to its asset sensitivity - Scheduled payoffs for Q3 2026 are still expected to be ~$1 billion, similar to the magnitude experienced in Q2 2026; achieving net loan growth in Q3 will require strong new production to offset scheduled paydowns - Quarterly operating expenses (excluding merger-related one-time costs) are expected to stabilize around the current run rate after the Mountain Commerce acquisition and expected cost savings post-conversion

Segment performance

The firm does not break out results into separate public product segments in this call. Consolidated Q2 2026 adjusted results are: adjusted net income of $128.1 million, an 8.4% increase from Q1 2026 and a nearly 12% increase year-over-year from Q2 2025; total revenue of $295 million, up 10.6% from the prior quarter; adjusted pre-tax pre-provision net revenue (PPNR) of a company record $171 million; adjusted efficiency ratio of 40.46%; adjusted return on assets (ROA) of 2.09%; net interest margin of 4.51% (flat quarter-over-quarter, up 6 basis points year-over-year); non-interest income of over $53 million, driven by higher loan recovery income, CCFG fee income, and higher SBIC investment returns, returning to levels seen in H2 2025. Total assets ended the quarter with $19.1 billion in total deposits, after sequential legacy deposit outflows from tax season reversed with $286 million in net deposit growth in May and June. Tangible book value per share grew to $15.32, a 45 cent sequential increase (12.1% annualized). Common equity tier 1 capital ended at 16.4% and total risk-based capital at 19%, with loan loss reserves equal to 1.92% of total loans.

Risks & headwinds

- Industry-wide competitive pressure on lending is intensifying, with some competitors offering unreasonably low interest rates and loose loan structure/underwriting terms (including stretched loan-to-cost and loan-to-value ratios) to drive loan growth; this echoes risky underwriting behavior seen prior to the 2008 financial crisis that will likely result in future credit losses for other firms - Deposit competition is also intensifying, with competitors offering high rates on certificates of deposit; the firm has $1.25 billion in CDs maturing in H2 2026, and higher than expected deposit costs could pressure net interest margin - Large, unanticipated swings in scheduled loan payoffs make near-term loan growth forecasting highly uncertain, as customer funding requests are often last-minute and hard to predict - Sustained intense competition could pressure net interest margin if the firm is forced to either lower lending rates to compete or lose market share - The large non-performing loan resolution is still dependent on the borrower/other third parties, so the timeline for full resolution remains uncertain even though management expects no net loss

Analyst Q&A

• Q: With conflicting signals on Q3 loan growth (expected high paydowns but a large upcoming pipeline from Florida), what is management's near-term outlook for loan balances?

  A: Management notes it has a historically poor track record of forecasting near-term loan growth due to unanticipated customer transaction timing, but is optimistic given the very large pipeline of high-quality opportunities in South Florida from long-term repeat customers. The firm will not sacrifice credit quality or net interest margin to hit arbitrary growth targets, and expects to at least maintain current loan balances with effort.

• Q: Mountain Commerce Bank is contributing earnings earlier and stronger than expected — what is driving this, and could the acquisition lead to structurally higher long-term loan growth for the firm?

  A: Management saw consistent positive monthly revenue contributions from Mountain Commerce throughout the quarter that exceeded internal projections, even before full conversion and cost savings in November. While the combination and expanded footprint could support stronger long-term loan growth, management will not loosen underwriting standards to chase growth. Management notes growing loan volume is easy if you compromise on price and credit structure, but this creates long-term risk that the firm will not accept.

• Q: With the firm's stock price recovering recently, how have M&A dynamics changed, and what is the outlook for future acquisitions?

  A: Higher broad bank stock prices have lifted seller price expectations, but management remains strictly committed to only doing non-dilutive transactions. The firm is in ongoing conversations to revisit a previously abandoned acquisition opportunity that was too dilutive when Home Bank's stock was depressed, and it remains interested in the target given its similar operating philosophy and attractive geography. There are not a large number of attractive, reasonably priced deals currently available in the market.

• Q: What is the outlook for credit quality and resolution of the large previously disclosed non-performing loan?

  A: Management reaffirms it expects no net loss on the large non-performing loan (just under $100 million), and has seen meaningful progress on resolution during the quarter. Outside of this single exposure, credit quality is very strong, and management expects charge-offs to remain at normal low levels going forward, with further improvement possible. Resolution timeline depends on the borrower, but management is confident it will collect the full outstanding balance.