Home Bancshares, Inc. Q3 FY2024 earnings call

• The quarter was strong until hurricanes affected Florida, where the company has over $1 billion in customer loans. - Net interest margin expanded one basis point in Q3 to 4.28%, with yield on loans excluding event income improving 10 basis points to 7.59%. - Deposits were a key focus, with total deposits declining $250 million, mostly in Florida regions. - Loan balances increased $43 million, with growth from Community Bank regions and Shore Premier offsetting CCFG's decline. - Asset quality metrics saw slight increases in nonperforming loans and assets due to Texas credits, but resolution expected in current or first quarter 2025. - Strong capital ratios, with CET1 ratio at 14.7%, and tangible book value improved to $12.67 from $10.90 year-over-year. - The company purchased 1 million shares for $26.9 million, reducing shares outstanding to around 198.8 million.

Total revenue for the third quarter was $258 million. Pretax, pre-provision net income (PPNR) was $148 million. Margin was up, with the yield on loans improving quarter-over-quarter. Interest bearing deposits had a slight increase. Non-interest expense for Q3 2024 was $110 million, down from previous quarters. Efficiency ratio was 41.42%. Loans continued to grow in the legacy footprint, with a $131.6 million increase, while CCFG had an $89.1 million decline in balances but still had $2 billion in outstanding loans. Revenue contribution details: PPNR was 57.36% of total revenue.

• Looking to M&A opportunities, with the team needing more assets; expecting to find deals if not this year, then early next year. - Regulatory environment was easier under Trump, and optimistic that a Trump win could boost M&A activity. - Loan growth outlook for 2025 with Community Bank expected to continue growth, though Q4 may be flat to down slightly due to payoffs. - Expense outlook: non-interest expense at $110 million is sustainable, with potential for savings from IT contracts in 2025 and beyond.

• Hurricanes Helene and Milton impacted Florida, with over $2.2 billion in loans subject to disaster areas; reserve of $16.7 million established for Helene, and potential additional reserves for Milton. - Legacy credit issues in Texas, including hotels and multifamily projects, with resolution taking time. - Insurance complexities with hurricanes, as flood events may have lower thresholds and payouts affecting loss calculations.

Q: Curious about M&A outlook and BTFP impact, and regulatory relief with Trump?

A: John Allison said they're looking at opportunities, better M&A support under Trump, and need to find right trade to pick up assets.

Q: On loan growth outlook for 2025?

A: Kevin Hester said Community Bank has good year but slight softness in Q4, expecting continuation in 2025; Chris Poulton said they'll grow over time with good assets.

Q: On operating expenses and cost controls?

A: Stephen Tipton mentioned headcount as biggest driver, with potential savings from IT contracts in 2025.

Q: On credit front, legacy issues and resolutions?

A: Kevin Hester said primarily legacy issues in Texas, with some resolution expected in next few quarters but taking time.

Q: On hurricane reserves and potential losses?

A: John Allison and Kevin Hester discussed uncertainty with hurricane losses, insurance complexities, and optimism but potential for unexpected losses.

Q: On margin and loan/deposit betas?

A: Stephen Tipton talked about margin trends, loan repricing opportunities, and deposit cost management.

Q: On M&A market focus and size?

A: John Allison mentioned interest in an out-of-market opportunity with good growth potential.

Q: On expense sustainability and 2025 outlook?

A: John Allison said $110 million expense level is sustainable.

Q: On Shore Premier Finance impact from hurricanes and loan-to-deposit ratio?

A: Kevin Hester said no impact on Shore Premier yet, and loan-to-deposit ratio at 88.7% is comfortable.