Home BancShares (HOMB): A Banking Beacon in a Rising Rate World

As investors brace for the July 16 earnings release of Home BancShares (NYSE: HOMB), the parent company of Centennial Bank, the numbers suggest this regional banking giant is navigating today's challenging interest rate environment with the precision of a seasoned captain. Let's dive into why HOMB's projected 11.5% EPS growth and rock-solid liquidity metrics make it a compelling “Buy” ahead of its earnings reveal.

The EPS Surge: Proof of Resilience

Analysts are forecasting HOMB's Q2 2025 diluted EPS to hit $0.58, a 11.5% jump from the $0.52 reported in Q2 2024. This isn't just a numbers game—it's evidence of a bank that's mastered its cost structure while capitalizing on rising rates. The net interest margin (NIM) is projected to hold steady at 4.4%, a full 10 basis points higher than last year. That's a testament to HOMB's ability to reprice loans upward while keeping a tight lid on deposit costs.

Liquidity: The Foundation of Confidence

While some banks are sweating declining deposits, HOMB has a playbook. Total deposits dipped to $4.2 billion in Q2, but the bank offset outflows by boosting Federal Home Loan Bank (FHLB) borrowings by $146.9 million. This isn't reckless borrowing—it's strategic diversification. Brokered deposits now account for just 3.26% of total deposits, far below the danger zone, while non-brokered deposits remain the bedrock of their funding.

The loan portfolio? Healthy but cautious. Total loans dipped slightly to $3.6 billion, but average loan balances grew by 6.2% annualized, showing demand isn't枯竭. Meanwhile, asset quality remains under control. Non-performing assets (NPAs) rose to $130.1 million (0.9% of assets), but the allowance for credit losses sits at a prudent 1.26% of gross loans—a cushion that suggests management isn't ignoring risks.

Dividends and Institutional Love: A Winning Combo

HOMB just raised its dividend to $0.20 per share, a 2.6% increase from Q1. That might sound modest, but in a sector where some banks are cutting payouts, this signals confidence. Institutional investors are taking notice: entities like Capital Research and Goldman Sachs have been buyers, while insiders like CEO John Allison have doubled down with purchases. Congressional members even own shares—no small vote of confidence in this era of banking scrutiny.

The M&A Edge: Growing Without Overextending

The recent acquisition of NBC Bank, finalized July 2, adds $695 million in loans and $800 million in deposits, expanding HOMB's footprint into Oklahoma City. This isn't a reckless land grab—it's a disciplined move to deepen its presence in markets with organic growth potential. The efficiency ratio improved to 42.6%, proving integration costs are manageable.

Why “Buy” Ahead of Earnings?

The numbers scream consistency:
- Capital strength: Common Equity Tier 1 (CET1) ratio rose to 15.0%, a fortress-like buffer.
- Balance sheet discipline: Loan-to-deposit ratio remains stable at ~85%, avoiding overextension.
- Tailwinds: Rising rates continue to boost net interest income, which is projected to hit $221 million—a 3% year-over-year jump.

Historically, earnings releases have proven a positive catalyst for HOMB's stock. Since 2022, the stock has averaged a 1.26% gain on day 29 post-earnings, with a 85.7% win rate in the first three days—though momentum tapers over time. This underscores the value of taking a position ahead of the announcement, as short-term gains are statistically robust.

Sure, NPAs ticked up, but this is a regional bank with a conservative underwriting culture. Compare that to national peers facing headwinds from commercial real estate or consumer debt—HOMB's localized focus is a shield, not a sword.

Final Take

Home BancShares isn't a high-octane growth story—it's a reliable, low-volatility play for investors seeking banking exposure without the sector's volatility. With a Zacks Rank #3 (Hold), the stock is undervalued ahead of its earnings, which could push shares higher. The $0.20 dividend and 4.4% NIM aren't flashy, but in a world of banking uncertainty, they're exactly what investors crave.

Bottom Line: Buy HOMB before the earnings drop. This is a bank that's not just surviving—it's thriving.

Disclosure: The analysis is based on publicly available data and third-party projections. Always do your own research before investing.