What caused the significant decline in loan yields this quarter, and how much did the nonaccrual credit affect reported loan yields?

Stephen Tipton clarified that the reported 4.51% NIM did not include any accrual from the nonaccrual credit. Had it been on accrual, NIM would have been 4.55% (vs 4.56% in Q4). The decline in loan yield was primarily due to variable rate resets from Fed moves. New loan production yields averaged 7.2-7.25% in Q1. “So the 451 margin doesn't have any -- doesn't have any accrual in that number. So it was about $1.6 million impact for the quarter, which is about 5 basis points to the loan yield and about 4 basis points to NIM.”

How is the company thinking about organic loan trends given elevated paydown activity, and which parts of the book are seeing these paydowns?

Kevin Hester explained that the company has better visibility into payoffs (4-6 month lead time) than new loans (30-45 days). Q2 and Q3 are expected to have higher payoffs, potentially close to $1 billion each, primarily from CCFG's 2-3 year turn portfolio and construction deals. He noted that MCB's contribution to the pipeline is not yet fully integrated. “So our -- I would say our pipeline process is more highly skewed towards knowing our payoffs. That said, we do see second and third quarter payoffs being higher than they have been in the last couple of quarters.”

If there are no more rate cuts, will deposit costs continue to increase, especially after Q2?

Stephen Tipton expects MCB's deposit costs to come down as wholesale deposits reprice or roll off. For the legacy portfolio, while some deposits are tied to T-Bills, he remains optimistic about inching down deposit costs throughout the year by repricing maturing CDs, despite ongoing competition from banks offering 4% for CDs. “I'm still optimistic that we can inch out a basis point or as we go throughout the year. But I'll couch all that with competition, like Kevin talked about on the loan side, I mean, we're seeing -- yes, you're still seeing banks offer 4% for CDs and 37 to 40 money market.”

HOMB

Home BancShares (HOMB) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Financials· Apr 16, 2026

Source: earnings call transcript

Executive summary

Home BancShares, Inc. Q1 FY26 — Strong Capital and Returns Amidst Credit Headwinds

Home BancShares delivered a strong Q1 FY26, marked by record book values and robust capital levels, despite navigating a significant nonaccrual credit and a competitive rate environment. The company continues to prioritize conservative balance sheet management and shareholder returns through buybacks, while actively seeking accretive M&A opportunities. Management expressed caution regarding the economic outlook, particularly inflation and credit quality, but remains confident in its ability to manage potential challenges.

Highlights

Record book value per share of $22.15 and tangible book value per share of $14.87, up 13% year-over-year.
Strong capital ratios with CET1 at 16.7% and total risk-based capital at 19.5%.
Net income of $118.2 million, a 2.09% return on assets and 16.56% return on tangible common equity.
Noninterest-bearing balances grew by $126 million, now accounting for 22.5% of total deposits.
S&P Global ranked Home's performance for 2025 as #2 of all US banks over $10 billion.

Concerns

A $110 million Texas C&I credit moved to nonaccrual this quarter, impacting NIM by 4 basis points.
Loan yields declined by 15 basis points to 7.08% due to variable rate resets.
Anticipated higher loan payoffs in Q2 and Q3, with Q2 potentially seeing close to $1 billion in payoffs.
Noninterest income was the lowest since December 2024, partly due to an FDIC assessment.
Inflation is not dead, with potential for rates to go back up before coming down, posing a risk to the balance sheet.

Guidance & targets

Category	Target	Timeline	Confidence
Mountain Commerce conversion timing	November medium materiality	Q4 · FY26	High
Mountain Commerce anticipated savings realization	End of 2026 medium materiality	FY26	Medium
Loan payoffs	Close to $1 billion medium materiality	Q2 · FY26	Medium
Loan payoffs	Approach $1 billion medium materiality	Q3 · FY26	Medium
CCFG portfolio growth	Mid-single-digit type of growth medium materiality	FY26	Medium

HOMB operating KPIs by quarter

HOMB operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Sep 2026 Q3 FY26	Change vs prior quarter
Common equity tier 1 ratio (CET1)	16.7% And 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 a 13% increase, by the way, CET1 at 16.7%, leverage of 14.3% and and Tier 1 capital of 16.7%. Source: earnings call transcript	16.4% Capital levels remain extremely strong with common equity Tier 1 capital ending at 16.4% and total risk-based capital at 19%. Source: earnings call transcript	16.7% Capital levels remain extremely strong with common equity Tier 1 capital ending at 16.7% and total risk-based capital at 19.4% and reserve to total loans of 1.93%. Source: earnings call transcript	+0.3 pt
Return on tangible common equity (ROTCE)	16.56% As Johnny mentioned, the first quarter of 2026 was a good start to the year with $118.2 million in net income a 2.09% return on assets and 16.56% return on tangible common equity. Source: earnings call transcript	—	16.54% Performance metrics are again top tier with a 2.11% return on assets at a 16.54% return on tangible common equity, which is on a TCE ratio of 13.48%. Source: earnings call transcript	—
Net interest margin	4.51% The reported net interest margin was 4.51%, down 10 basis points from Q4 and as there was 0 event income in Q1 and up 7 basis points from the same period a year ago. Source: earnings call transcript	4.51% The reported net interest margin was 4.51% in line with Q1, all while adding $1.5 billion in loans and deposits from Tennessee. Source: earnings call transcript	4.53% The reported net interest margin was 4.53%, an increase of 2 basis points from Q2. Source: earnings call transcript	0 pt
Net interest margin Core	4.51% The core margin, having no event income was 4.51% versus 4.56% in Q4. Source: earnings call transcript	4.47% The core margin, excluding event income, was 4.47% and in line with where we guided to on the call in April. Source: earnings call transcript	4.5% The core margin, excluding event income, was 4.50%, up 3 basis points from the prior quarter, and up 4 basis points year-over-year. Source: earnings call transcript	0 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

Mountain Commerce Merger with Mountain Commerce Bank

The merger was completed, but the system conversion will not start until November due to an existing back-office computer upgrade. This will delay the full realization of cost savings.

Risks & headwinds

Texas C&I credit nonaccrual Q1 FY26, resolution expected in next quarter or two

$110 million credit moved to nonaccrual; 4 bps impact to NIM; $1.6 million impact to net interest income.

Mitigation:Forbearance agreement executed; legal counsel advising; anticipate either payoff or liquidation of collateral; no additional loss expected due to sufficient assets and personal guarantees; strong reserves ($300M) and consistent PPNR ($100M-$160M) provide buffer.

Inflation and interest rate uncertainty Near to medium term

Inflation is not dead; rates could go back up before coming down; reference to late '70s/early '80s 21% rates.

Mitigation:Being very careful on the loan side; conservative balance sheet management; monitoring for 'cockroaches' in asset classes; management believes market pricing on acquisition deals is more in line with correct value.

Elevated loan payoffs Q2 and Q3 FY26

Q2 projected payoffs close to $1 billion; Q3 could approach that. Q1 payoffs were $650 million, compared to $750 million-$950 million in Q4 FY25.

Mitigation:Pipeline process provides visibility into payoffs; Mountain Commerce acquisition will add over $1.4 billion in loans; hope to offset with new production, but it will be challenging.

Private credit market conditions Ongoing

CCFG reduced private credit exposure by over 80% from $500 million peak to $87 million due to yield compression and loosening credit standards.

Mitigation:Maintaining a cautious stance; bias towards further reductions; waiting for market dislocation and 'capitulation' on pricing before considering expansion; focus on shorter duration positions and AA-rated structures with strong sponsor equity support.

Noninterest income being lowest since December 2024 Q1 FY26

Lowest since December 2024, partly due to FDIC assessment.

Mitigation:Hopes for improvement in next quarter; management noted the absence of specific event-driven income this quarter.

Problem credits (Boat loan and Dallas apartments) Ongoing resolution

$5 million boat loan; Dallas apartments with no anticipated loss.

Mitigation:Boat loan is going to trial in June; company has possession of the boat. Dallas apartments are in receivership, working through safety issues, no loss anticipated as it has been written down.

What to watch in Q2 FY26

Texas C&I credit resolution

next quarter or two

Current $110 million nonaccrual

Target Resolution (payoff or liquidation) with no additional loss

Why it matters

This large credit significantly impacted Q1 NIM and its resolution will remove a major overhang on credit quality and earnings.

We've entered into a short term for BC 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 will liquidate the existing canal. We do not anticipate any additional loss

Find out whether HOMB delivers this. Inve re-checks your case every morning.

Q&A highlights

How aggressive will the company be in acquiring more assets, and would they consider loosening the 'triple accretive' mantra for a deal?

John Allison firmly stated that the company will not dilute shareholders, as he is the largest individual shareholder and believes dilution harms long-term investors. They will bid to the maximum they can without dilution and will not pursue deals that do not fit their philosophy, even if it means missing out on some opportunities.

“I'm the largest individual shareholder, and I'm not interested in diluting myself. So I think I hurt our shareholders and we do you know my philosophy on that. we stretch as much as we can on the trade. But people have joined this company because we don't dilute.”

asked by Stephen Scouten · answered by John Allison

2 min read 6 chapters

Detailed narrative

Balance Sheet Strength and Performance Recognition

Home BancShares highlighted its robust balance sheet, achieving record book value per share of $22.15 and tangible book value per share of $14.87, representing a 13% year-over-year increase. The company also reported strong capital ratios, with CET1 at 16.7% and total risk-based capital at 19.5%.

S&P Global recognized Home's performance for 2025 as the #2 bank in the U.S. over $10 billion, underscoring its consistent operating performance and conservative management.

Mountain Commerce Acquisition and Integration

The merger with Mountain Commerce was completed, adding over $1.4 billion in loans to the balance sheet. However, due to an ongoing back-office computer upgrade, the system conversion for Mountain Commerce will not begin until November 2026, delaying the full realization of anticipated savings until the end of 2026.

Management expects the Mountain Commerce team to quickly integrate and contribute positively to loan production and the Tennessee franchise.

Private Credit Strategy and De-risking

CCFG, the company's corporate lending arm, significantly reduced its private credit exposure by over 80% from a peak of $500 million in 2022 to $87 million today. This reduction was driven by observed yield compression, loosening of credit standards, and increased equity inflows from retail investors into private credit vehicles.

CCFG maintains a cautious stance, biased towards further reductions, believing it is still early in the credit cycle and awaiting more appropriate market pricing and credit support.

Loan Portfolio Dynamics and Payoff Visibility

Ending loan balances dropped by over $50 million in Q1, though average loan balances increased by $174 million linked-quarter. The company anticipates higher payoffs in Q2 and Q3, with Q2 projected to be close to $1 billion. Management noted that their pipeline process offers more visibility into payoffs than new loan production, which is typically approved closer to funding.

Despite this, they expect Mountain Commerce to be accretive to loan production.

Credit Quality and Specific Problem Credits

A $110 million Texas C&I credit moved to nonaccrual this quarter, impacting NIM by 4 basis points. Management expressed confidence in resolving this credit without additional loss, citing strong guarantors and in-demand assets. Other problem credits, including a $5 million boat loan and Dallas apartments, are being actively managed, with no anticipated losses.

Criticized assets remained flat, and early-stage past dues were below 50 basis points, with loan loss reserves covering 15 years of historical charge-offs.

M&A Philosophy and Capital Allocation

Chairman John Allison reiterated the company's strict anti-dilution philosophy for M&A, emphasizing shareholder value. While open to new deals, particularly in Florida and Tennessee, the focus remains on accretive transactions that align with their conservative approach. The company continues to actively repurchase stock, buying back 507,000 shares for $13.9 million in Q1, with a goal to offset shares issued in the Mountain Commerce transaction, similar to the Happy Bank deal.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.