Home BancShares, Inc.

gentlemen welcome to the home bank shares incorporated third quarter 2025 earnings call the purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday the company presenters will begin with prepared remarks and then entertain questions please note that if you would like to ask a question during the question and answer session please press star, then 1 on a touch phone. If you decide you want to withdraw your question, please press star, then 2 to remove yourself from the list. The company has asked me to remind everyone to refer to their cautionary note regarding forward-looking statements. You will find this note on page 3 of their Form 10-K, filed with the SEC in February 2025. At this time, all participants are in a listen-only mode, and this conference is being recorded. If you need operator assistance during the conference, please press star, then zero. It is now my pleasure to turn the call over to Donna Townsend, Director of Investor Relations.

Thank you. Good afternoon, and welcome to our third quarter conference call. With me for today's discussion is our Chairman, John Allison, Stephen Tipton, Chief Executive Officer of Centennial Bank, Kevin Hester, President and Chief Lending Officer, Brian Davis, our Chief Financial Officer, Chris Fulton, President of CCFG, and Scott Walter of Shore Premier Finance. The third quarter was another record-breaking quarter for HOME, and our team is excited to share the results with you. Opening remarks today will be from our chairman, John Allison.

Thanks Donna. Welcome to the third quarter. 2025 Home Bank Shares Earning Release and Conference Call. It's really hard to believe it's already mid-October and Home has had another great quarter. I think that's three in a row. We've added some graphs this time, Donna, to our presentation that you're welcome to look at that run from 9-30-24 to 9-30-25, and I think you'll see in those graphs what we're seeing here at the company. Just talk about some highlights for the third quarter. We had record net income of 123.6, record EPS of 63 cents, revenue of 277.7, pre-tax, pre-provision net revenue of 162.8, P5 NR profit percentage of 58.64. That's the best in the last 12 months. That's not 60%, Stephen, but it's pretty close to 60%. Pretty proud of that. Efficiency ratio, some naysayers said was going up, was down, and efficiency ratio was the best in 12 months at 40.21. Margin kicked up a little bit. Some said our margin would go down. Our margin kicked up 12 basis points to 456, and that's the best it's been in 12 months. Our OTCE continues to remain in the 18s, the high teens, at 18.28%. Just some balance sheet strength highlights. Common equity assets is 18.56%. We continue to grow that. Tangible equity, tangible assets, 13.08%. That continues to grow. And loans hit a record level of 15.18 billion for the quarter. Total stockholders' equity is 4.09 billion dollars. More good news, the Texas lawsuit has been settled and we've received our first partial payment of the settlement. We expect most of the balance during the fourth quarter. Hopefully we'll get it all in this year. We'll be lucky if the proceeds will match up with the expensive litigation costs, and that does not include the loss of growth and profits we've suffered over the last couple of years. However, we had no intention of just mildly standing by while damage was being done to our company. Management has a fiduciary responsibility to protect the assets of the shareholder, especially when we didn't do anything to any of those people that participated in this fiasco. I believe because of our conservative nature, we've been criticized by some. I think that home bank shares is not growing fast enough. We don't really argue at that point, but I have to disagree with that discussion point because timing and discipline matters. Moving too fast or scaling too fast can be fatal. I believe in fixing your existing problems before you make a new move. That's exactly what HOME has been doing for the past three years, dealing with multiple, distinct, unusual problems that arose in the HAPI acquisition that led us to filing a 91-page lawsuit coupled with HAPI's asset quality problems. By the way, it's still a work in progress. ALCI, loss of happy private information, defection, and loss of personnel. Don't get me wrong, we have some great people in happy, and happy performance has rebounded. I have been involved in over 45 deals in my banking career, but never anything of this magnitude. Enough of that. Forget the bad guys. The saddest part is what happened to some happy employee shareholders, who during the major with home, in a tax-free exchange, happy shareholders to exchange their private non-liquid happy stock for home stock. That is a New York Stock Exchange publicly traded dividend paying with strong liquidity and a strong balance sheet. And after getting the home stock, they listened to some snake oil salesman who talked them into selling their home and investing the proceeds into another privately held stupid non-liquid investment. There may be where the biggest lawsuit is, misleading or unsophisticated individuals. It may be too late. Excuse me, it may not be too late. If my information is correct, every one of the investors have lost money and home, and we were even forced to use the legal system to protect the assets of our shareholders. As bad as it was, the rest of the company stepped up to help us while we fought Texas lawsuit and was resolving the issues in front of us before moving to another opportunity. In other words, we waited until we had our arms around multiple problems before we moved again. During that time, I feel confident we missed several growth opportunities, but we needed to fix what was in front of us first. Well, you can see from the charts, we're back producing top two best-in-class numbers once again. We would have been there a couple years ago had the annoyances of these unusual situations not come up. More good news. During the first quarter of 2025, for all banks over 10 billion, home ranked number two in the nation in return on assets. During the second quarter of 2025, for all banks over $10 billion, home ranked number one in the nation in return on assets. During the third quarter of 2025, home outperformed both our first and second quarter ROA. It's early to be able to tell But we're expecting to be, once again, one of the best, if not the best, in the market of all banks over $10 billion. With the performance of the company back, producing pure leading numbers, we're ready to move forward and do a large transaction or a couple of smaller transactions. So those of you pushing for growth, the time is right, and we agree with you. I said last quarter I was looking for $500 million in income in 2026. I'm holding that number so far this year through three quarters. Home has earned $357.2 million with one quarter left to go. Add a couple acquisitions and a little growth, and I think the number is achievable and maybe a little better. Last year at this time, we'd earned $302 million. So far, we're up about $55 million this year, or 18.21% from last year. with the third quarter showing even stronger earnings growth, up 23.6% for Q3-25, with $123.6 million in income versus Q3-24 of $100 million. During the fourth quarter, a bank was selling bonds, including a $20 million piece of home bank's sub-debt at a discount and repositioning. They were paying the paper, I guess I say, that they incurred on AOCI losses. and home was given the opportunity to buy. And we did buy that. We bought that $20 million piece of our sub debt and picked up $1.9 million gain. Nice trade. Being as profitable as home is allows us to move quickly on opportunities. During the third quarter, we opened up an exciting new branch in San Antonio, and we met several of the local business people. Great market. We're wishing Michael Rodriguez our team leader and his team in San Antonio market, but success. Strength is no accident. That's our slogan. Another reason home has been hesitant on acquisitions is the hesitancy to take on banks' ALCI problems. We're expecting many more bank failures than what happened. We were told to keep our powder dry. We missed on that call on bank failures. But the big one, the one that most banks got in trouble, we got that one right, the interest rate call. Many banks and their shareholders are and will continue to suffer from an earnings perspective because their management made huge mistakes of investing their liquidity into long-term securities and loans during the low-rate environment that we all experienced, and now they must pay the piper. The problem is, how long does it take to fix it? It relates to how long a bank's duration is on both its loans and security, whether fixed or variable. Five years, 10 years, some shorter, some longer. Making the decision at home not to invest in long-term securities and loans is the single best decision we have ever made or I have ever made in my 50 years of running companies. As I said, when a bank gets in that dilemma, their options are do nothing and ride out the duration until the bonds and loans mature, praying all the time that interest rates come down. Or if they have enough capital, they can sell the bonds and or loans at the market and reinvest the proceeds and recognize loss. This can create a capital problem, forcing banks to raise capital by selling more stock. Since banks trade on a multiple of tangible book value, the losses incurred will reduce tangible book value, thus resulting in a lower stock price. The recovery period can be long and painful, and sometimes a death sentence. as we saw with signature by Silicon Valley and Republic. Regardless of the decision that is made, at this point, there is commensurate damage to the balance sheet based on interest rates, duration, and quality. Regardless of while the bank is trying to recuperate by whatever methods, they are losing years of earnings power. Either way, if they decide to write it out or recognize an unrecoverable loss in income and tangible book, the loss is a loss regardless of how it's presented. It reminds me of the Fram oil filter guy quote, you can pay me now, pay me later. Or another analogy is, it reminds me of losing Park Place while playing Monopoly. You never get it back. The whole time watching others that did not make the same mistake, busy sacking up capital as their ship leaves you at the port. Last option is to find a partner that likes your operation, understands your dilemma, and has lots of capital and is willing to use their capital to mark the balance sheet to take the hit immediately, which allows the company to accrete the mark into income over the duration of the paper. A huge example of this is the latest deal that was just done, CMA, Co-America, who was acquired and the stock shot up $11.77 in one day. That was extremely positive for both the buyer and the seller shareholder. There is no easy answer to resolve these mistakes that were made. But if your shareholders will ride with you, maybe you live to find another day. But regardless, it's not an easy fix. And if they don't want to ride, they sell their stock and invest in companies that are already out there that didn't have the problem stacking up equity. Donna, I think that's pretty much it. Companies humming along pretty good. I told you last quarter that I hoped that we'd have a deal done this quarter. We probably don't have one yet, but we're getting close. Thank you.