Home Bancorp, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; balance-sheet comparisons are to December 31, 2016. Financial statements are unaudited. Home Bancorp is a bank holding company whose wholly owned subsidiary is Home Bank, N.A.
Financial performance
| Metric | Q1 2017 | Comparable / change |
|---|---|---|
| Interest income | $17.36 million | Up $315,000, or 1.8%, year over year |
| Net interest income | $15.97 million | Up $247,000, or 1.6% |
| Tax-equivalent net interest margin | 4.42% | 4.40% in Q1 2016 |
| Noninterest income | $2.83 million | Up 10.1%; included $380,000 banking-center sale gain |
| Noninterest expense | $11.03 million | Down 10.6%; Q1 2016 included $613,000 merger expenses |
| Net income | $5.01 million | $3.35 million; up 49.4% |
| Diluted EPS | $0.69 | $0.47; up 46.8% |
| Operating cash flow | $6.79 million | $1.80 million in Q1 2016 |
Management’s non-GAAP comparison removes the after-tax banking-center gain and adds back prior-year after-tax merger expenses: adjusted net income was $4.76 million versus $3.75 million, up 27.0%; adjusted diluted EPS was $0.66 versus $0.53, up 24.5%. The company declared dividends of $0.13 per share, compared with $0.09 a year earlier.
Financial position, funding and capital
- Total assets were $1.58 billion, up $26.8 million, or 1.7%, from year-end. Shareholders’ equity was $184.7 million, up 2.7%.
- Loans were $1.227 billion, down $905,000, or 0.1%, from year-end. Originated loans grew 1.7%, offset by paydowns in acquired loans. Commercial real estate loans increased 4.0%; construction and land loans declined 6.2%.
- Deposits were $1.272 billion, up $24.1 million, or 1.9%; core deposits were $990.8 million, up 1.5%. Certificates of deposit totaling $177.3 million mature within 12 months.
- Cash and cash equivalents totaled $52.4 million; available-for-sale securities were $192.2 million. The company reported $118.2 million in FHLB advances outstanding, including $40.0 million short-term, and $497.9 million of additional FHLB borrowing capacity.
- Regulatory capital ratios were well above stated minimums: the Bank reported 13.44% Tier 1 risk-based capital and 14.55% total risk-based capital.
Credit quality, liquidity and risks
- The allowance for loan losses was $12.9 million, or 1.05% of total loans; excluding acquired loans, the ratio was 1.38%. The quarter included $307,000 of provision and $100,000 of net recoveries.
- Nonperforming loans were $14.6 million, or 1.19% of loans; nonperforming assets were $16.2 million, or 1.02% of assets. Nonperforming loans increased from $13.8 million at year-end, while nonperforming assets declined from $16.6 million. The filing excludes certain acquired credit-impaired loans from some delinquency measures.
- Direct energy-sector loans were $33.2 million, 2.7% of loans; $5.7 million of additional energy-sector commitments were unfunded. Management reported 94.7% of direct energy loans performing under original terms; the remainder was restructured and paying under modified terms. Indirect exposure through borrowers serving energy-sector customers also exists.
- Outstanding off-balance-sheet commitments included $142.3 million of available lines, $49.4 million of undisbursed loans in process, $94.3 million of loan-origination commitments and $4.2 million of standby letters of credit.
- Interest-rate simulations estimated projected net interest income increases of 0.7%, 0.9% and 1.0% for immediate, sustained rate increases of 100, 200 and 300 basis points, respectively; actual results depend on balance growth, repricing and spreads.
- Management said ordinary-course claims and litigation were not expected to materially affect financial condition or results. No material change to previously reported risk factors was disclosed. Management reported effective disclosure controls and no material quarterly change in internal control over financial reporting.
Changes, outlook and unusual items
Reported earnings growth was boosted by the $380,000 pretax gain on sale of a banking center in Q1 2017 and by $613,000 of merger expenses in Q1 2016. Excluding those items, management reported 27.0% net-income growth. Net interest income benefited in part from a $343,000 year-over-year increase in accretion income on acquired loans; management attributed the modest margin improvement primarily to higher yields on the acquired portfolio. No numerical earnings or operating guidance was provided. Management cautioned that quarterly results are not necessarily indicative of full-year results and that actual outcomes may differ from forward-looking statements.
The company was assessing newly issued accounting standards, including the expected-credit-loss standard (ASU 2016-13); it stated that the impact was too early to assess. It estimated the lease standard’s preliminary balance-sheet impact at less than a 1% increase in assets and liabilities.
Key facts for investors to verify
- Whether earnings and margin performance persist after the banking-center gain and acquired-loan accretion are considered.
- Trends in nonperforming loans, criticized and restructured credits, allowance adequacy, and direct and indirect energy-sector exposure.
- Loan growth and composition, particularly commercial real estate and construction lending, alongside acquired-loan runoff.
- Deposit retention and pricing as $177.3 million of certificates mature, and the company’s reliance on FHLB funding and available borrowing capacity.
- The assumptions behind interest-rate sensitivity and the eventual implementation impact of the expected-credit-loss standard.