Home Bancorp, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Home Bancorp is a Louisiana bank holding company; its subsidiary, Home Bank, operated 38 offices in south Louisiana and west Mississippi. The bank focuses on commercial real estate (CRE) and commercial and industrial lending, alongside residential and consumer banking.
Key financial results
| Metric | 2021 | 2020 |
|---|---|---|
| Total assets, year-end | $2.94 billion | $2.59 billion |
| Net income | $48.6 million | $24.8 million |
| Diluted earnings per share | $5.77 | $2.85 |
| Net interest income | $101.0 million | $92.2 million |
| Net interest margin (taxable-equivalent) | 3.88% | 3.96% |
| Noninterest income | $16.3 million | $14.3 million |
| Noninterest expense | $67.0 million | $63.0 million |
| Cash and cash equivalents, year-end | $601.4 million | $188.0 million |
| Deposits, year-end | $2.54 billion | $2.21 billion |
| Shareholders’ equity, year-end | $351.9 million | $321.8 million |
- Earnings and drivers: Net income rose 96.3%. Results included a $10.2 million reversal of loan-loss provision, versus a $12.7 million provision in 2020, as management’s assessment of pandemic-related expected losses improved. PPP lender fees contributed $11.4 million to 2021 loan interest income, up from $4.1 million.
- Revenue and margins: Net interest income increased 9.5%, supported by lower deposit costs and PPP fees. Average interest-bearing deposit cost fell to 0.32% from 0.72%; net interest margin declined 8 basis points, as lower earning-asset yields and elevated cash balances weighed on it. The efficiency ratio improved to 57.12% from 59.13%.
- Loans and credit: Loans were $1.84 billion, down 7.1% year over year; excluding PPP loans, they grew 2.1%. CRE loans were $801.6 million and construction and land loans were $259.7 million. The allowance for loan losses was $21.1 million, or 1.15% of loans; total allowance for credit losses, including unfunded commitments, was $22.9 million. Nonperforming assets declined to $14.5 million from $20.0 million.
- Cash flow and liquidity: Operating cash flow was $55.7 million; investing activities provided $54.9 million and financing activities provided $302.8 million. Cash and cash equivalents increased $413.5 million during the year, primarily alongside deposit growth and loan runoff. The bank had $26.0 million of FHLB advances outstanding and $810.4 million of additional FHLB borrowing capacity.
- Funding, debt and capital: Deposits increased 14.5%, particularly demand and NOW accounts; certificates of deposit declined 13.4%. Other borrowings were $5.5 million, in addition to FHLB advances. The bank was classified as well capitalized; year-end ratios included 14.66% common equity Tier 1 and 15.85% total risk-based capital.
- Cash returns: Cash dividends declared were $0.91 per share. The company repurchased 246,012 shares during 2021 at an average price of $36.18.
Material changes and unusual items
- Asset growth of 13.4% was accompanied by substantial cash accumulation and deposit growth; total loans declined, largely reflecting PPP loan forgiveness and repayment.
- Noninterest income included a $1.7 million BOLI death benefit. The company also recorded a $504,000 net loss on asset sales, including a branch sale-leaseback transaction.
- Fourth-quarter 2021 net income was $10.2 million and diluted EPS was $1.23, compared with $10.6 million and $1.24 in fourth-quarter 2020.
- Available-for-sale securities had a $653,000 net unrealized loss at year-end, compared with a $6.5 million net unrealized gain a year earlier; the change contributed to lower accumulated other comprehensive income.
Outlook, risks and contingencies
- No formal earnings or financial guidance is provided. The company expected to complete its acquisition of Friendswood Capital Corporation, parent of Texan Bank, in the first quarter of 2022. The announced cash consideration was $66.6 million; the combined company was expected to have approximately $3.2 billion in assets, $2.2 billion in loans and $2.7 billion in deposits. Completion, integration, cost savings and entry into Houston remain execution risks.
- Management cited continuing uncertainty from COVID-19 and potential effects on borrowers, credit losses, collateral values and operations. Only $3.9 million of loans remained under COVID-related deferral arrangements at year-end, versus $558.8 million at June 2020.
- Key exposures include CRE and construction lending, concentration in south Louisiana and west Mississippi, oil-and-gas-linked regional conditions, hurricanes and flooding, competition, cybersecurity and interest-rate changes. Energy-sector loans totaled $40.3 million, with $14.6 million of additional unfunded commitments.
- Uninsured deposits were $820.0 million at year-end. The company reported $251.6 million of certificates of deposit maturing within 12 months and $621.2 million of total loan and credit commitments.
- Management said ordinary-course litigation was not expected to have a material effect. The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting; the allowance for collectively evaluated loans was identified as a critical audit matter.
Important facts for investors to verify
- How much of 2021 earnings growth is repeatable after the loan-loss reserve reversal and elevated PPP fee recognition?
- Whether credit quality and allowance adequacy remain sound as the loan mix grows in CRE and construction, and as pandemic-related support ends.
- The completion terms, integration costs, expected synergies and post-close performance of the Friendswood/Texan Bank acquisition.
- Deposit stability and funding costs, especially given uninsured deposits and upcoming certificate maturities.
- Effects of changing interest rates on net interest income; the company’s model projected a 19.8% increase under a 300-basis-point rise and a 6.2% decline under a 100-basis-point fall, subject to stated assumptions.