Home BancShares(HOMB) - 2025 Q4 - Annual Report

Financial Performance - Total revenue reached $1.09 billion in 2025, compared to $1.02 billion in 2024, reflecting a growth of 7.5%[1] - Net income for 2025 was $475.44 million, an increase from $402.24 million in 2024, representing a growth of 18.2%[1] - Basic earnings per common share increased to $2.41 in 2025, up from $2.01 in 2024 and $1.94 in 2023[215] - The return on average assets improved to 2.10% in 2025, compared to 1.77% in both 2024 and 2023[215] - The efficiency ratio improved to 40.88% in 2025, down from 42.74% in 2024 and 46.21% in 2023, indicating better cost management[215] - Net interest income after provision for credit losses increased to $871,455 in 2025 from $800,704 in 2024, while the provision for credit losses decreased significantly to $20,905 from $48,070[215] - The net interest margin increased to 4.51% in 2025, compared to 4.27% in 2024 and 4.25% in 2023, indicating enhanced profitability on interest-earning assets[215] - Dividends per common share increased to $0.805 in 2025 from $0.75 in 2024 and $0.72 in 2023, reflecting a commitment to returning value to shareholders[215] Asset and Deposit Growth - Total assets increased to $22.88 billion in 2025 from $22.49 billion in 2024, representing a growth of 1.74%[1] - Total deposits rose to $17.48 billion in 2025, up from $17.15 billion in 2024, marking an increase of 1.93%[1] - The loan portfolio as of December 31, 2025, totaled $15.69 billion, with commercial real estate loans making up 33.7% of the portfolio[33] - The bank had approximately $7.46 billion in assets under management and custody as of December 31, 2025[48] Loan Portfolio Composition - Commercial real estate loans constituted 53.2% of gross loans as of December 31, 2025[1] - As of December 31, 2025, the residential mortgage loan portfolio consisted of approximately 57.7% owner-occupied properties and 34.9% non-owner-occupied properties[37] - The commercial and industrial loan portfolio included 9.5% unsecured loans, 30.8% inventory/accounts receivable financing, and 51.4% other types of financing[39] - As of December 31, 2025, approximately 74.1% of the total loan portfolio was secured by real estate, including $5.62 billion in commercial real estate loans, $2.73 billion in construction/land development loans, and $3.28 billion in residential real estate loans[150] - Commercial real estate and construction/land development loans comprised 53.2% of the total loan portfolio, exposing the company to greater risk of loss compared to residential real estate loans, which made up 20.9%[151] Regulatory Compliance and Risk Management - The bank subsidiary's total assets exceed $10 billion, subjecting it to additional supervision and regulation by the Consumer Financial Protection Bureau (CFPB) [62] - The capital conservation buffer was 10.30%, with CET1 capital, Tier 1 risk-based capital, total risk-based capital, and leverage ratios at 16.30%, 16.30%, 19.06%, and 14.09%, respectively [73] - The Dodd-Frank Act mandates annual company-run stress tests for institutions with average total consolidated assets greater than $10 billion [80] - The bank must maintain adequate capital above regulatory guidelines, and paying dividends that deplete capital to inadequate levels is considered unsafe and unsound banking practice[86] - The liquidity coverage ratio (LCR) ensures that the banking entity maintains an adequate level of unencumbered high-quality liquid assets equal to expected net cash outflows for a 30-day period [79] - The risk management framework must include policies and procedures to manage risks commensurate with the company's structure and complexity [82] Mergers and Acquisitions - The company completed the acquisition of Happy Bancshares, Inc. for a total transaction value of approximately $962.5 million on April 1, 2022[20] - The company plans to acquire Mountain Commerce Bancorp, Inc. in a merger expected to close in Q2 2026, issuing approximately 5.4 million shares to MCBI shareholders[22][25] - The completion of the merger with Mountain Commerce Bancorp, Inc. is subject to regulatory approvals, which may impose conditions affecting the combined company's operations[184] - The combined company expects to incur substantial expenses related to the merger, which could exceed anticipated savings from eliminating duplicative expenses[185] Employee and Diversity Metrics - As of December 31, 2025, the bank employed 2,543 full-time equivalent employees[55] - 68% of the bank's employees were women, and 28% identified as persons of color as of December 31, 2025[57] Cybersecurity and Information Security - The Company maintains a formal Information Security Program that includes regular risk assessments conducted by both internal resources and third-party experts[192] - The Chief Information Security Officer (CISO) leads the Information Security Program and has over 25 years of experience in information technology and cybersecurity[193] - The Company has 24x7 cybersecurity monitoring and maintains an incident response plan to address potential cybersecurity incidents[194] - The Company has a third-party risk management program to assess and manage cybersecurity risks associated with its third-party providers[194] - The Board of Directors oversees cybersecurity risks primarily through the Executive Risk Committee, which receives quarterly reports on cybersecurity issues[199] Market and Economic Risks - The company faces risks related to changes in monetary policy, which can affect interest rates and, consequently, its operating results[143] - Economic downturns have historically had a significant adverse impact on the banking industry, affecting credit performance and leading to potential write-downs[139] - The financial system's interrelated nature means that failures of other financial institutions could adversely affect the company[145] - Future public health crises could materially and adversely affect the company's business and financial condition[146] Shareholder Returns and Stock Performance - The Company repurchased a total of 540,706 shares of its common stock during the three months ended December 31, 2025, with an average price of $27.31 per share[210] - The Company's common stock has shown a cumulative return of 64.02% from December 31, 2020, to December 31, 2025, compared to the Russell 2000 Index's return of 34.40% and the S&P U.S. BMI Banks Index's return of 111.47%[213]