Home Bancorp, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; includes unaudited fourth-quarter results. Home Bancorp is the holding company for Home Bank, N.A., operating 43 offices across Louisiana, west Mississippi, and Houston, Texas.
Financial results and condition
| Metric | FY2022 / Dec. 31, 2022 | Prior comparable period |
|---|---|---|
| Total assets | $3.23 billion | $2.94 billion; +9.9% |
| Total loans | $2.43 billion | $1.84 billion; +32.1% |
| Total deposits | $2.63 billion | $2.54 billion; +3.8% |
| Net interest income | $118.0 million | $101.0 million; +16.9% |
| Net interest margin (taxable-equivalent) | 3.92% | 3.88% |
| Net income / diluted EPS | $34.1 million / $4.16 | $48.6 million / $5.77 |
| Net cash provided by operating activities | $51.2 million | $55.7 million |
| Cash and cash equivalents | $87.4 million | $601.4 million |
| Shareholders’ equity | $330.0 million | $351.9 million |
FY2022 noninterest income was $13.9 million, down 14.7%; noninterest expense was $81.9 million, up 22.3%. The efficiency ratio rose to 62.10% from 57.12%, while return on average assets fell to 1.07% from 1.76%. Fourth-quarter net income was $10.8 million and diluted EPS was $1.32, versus $10.2 million and $1.23 in Q4 2021. Fourth-quarter net interest income was $33.3 million; provision for loan losses was $2.0 million, compared with a $2.6 million reversal in Q4 2021.
Credit, liquidity, and capital
- Allowance for loan losses was $29.3 million, or 1.21% of loans; total allowance for credit losses, including unfunded commitments, was $31.4 million, or 1.29%. FY2022 provision expense was $7.5 million, versus a $10.2 million reversal in 2021. Net charge-offs were $694,000.
- Nonperforming loans were 0.43% of loans, down from 0.72%; nonperforming assets were 0.34% of assets, down from 0.49%. Substandard loans increased to $21.5 million from $17.5 million.
- Uninsured deposits were $830.9 million. Certificates of deposit totaling $259.1 million mature within 12 months. Management said it expected to meet liquidity needs; available additional FHLB borrowing capacity was $937.4 million.
- Year-end funding included $176.2 million of FHLB advances and $54.0 million carrying value of subordinated debt. The Company issued $55.0 million of 5.75% fixed-to-floating subordinated notes due 2032.
- Home Bank was categorized as well capitalized. Its year-end common equity Tier 1, total risk-based capital, and leverage ratios were 12.43%, 13.63%, and 10.43%, respectively.
- Operating cash flow was positive, but cash declined substantially as investing activities used $495.4 million, including loan growth and securities purchases; financing activities used $69.9 million.
Material changes, outlook, and risks
- The March 2022 Friendswood acquisition expanded the franchise into Houston. It added $413.9 million of assets, including $317.5 million of loans and $368.0 million of deposits; purchase price was $64.9 million and recorded goodwill was $23.0 million. Acquisition-related expenses were $2.0 million in 2022.
- Loan growth also reflected organic expansion. Commercial real estate loans reached $1.15 billion; construction and land loans were $313.2 million, or 12.9% of the portfolio. Management’s strategy emphasizes commercial real estate and commercial and industrial lending.
- Lower earnings reflected the prior-year $10.2 million credit-provision reversal, reduced PPP fee recognition ($1.2 million versus $11.4 million), lower loan-sale gains, and higher expenses associated largely with Friendswood. The 2021 comparison also included $1.7 million of non-taxable BOLI proceeds.
- Available-for-sale securities had a $54.9 million net unrealized loss at year-end, attributed primarily to rising rates rather than credit losses. The after-tax securities and hedge effects contributed to accumulated other comprehensive loss of $39.3 million, compared with income of $744,000 a year earlier.
- The filing provides no specific earnings or growth guidance. Management described liquidity as sufficient for anticipated needs. Its interest-rate model estimated projected net interest income would change +5.3% under an immediate, sustained 300-basis-point increase and −2.4% under a 100-basis-point decrease; actual results may differ.
- Key risks include rate-driven deposit costs and margin pressure, concentrated commercial real estate and construction lending, regional exposure to energy markets and natural disasters, economic deterioration, cybersecurity and third-party system failures, and acquisition integration. Unfunded commitments totaled $733.0 million, including $367.2 million of available lines of credit.
- Management and the auditor reported effective internal control over financial reporting; Friendswood, representing approximately 12% of assets and 7% of revenue, was excluded from the control assessment and audit scope for the first year after acquisition. Management said ordinary-course legal matters were not expected to have a material effect.
Important facts for investors to verify
- Deposit retention and pricing, particularly uninsured balances and the $259.1 million of CDs due within one year, alongside the use and cost of FHLB funding.
- Credit performance and reserve adequacy as rapid loan growth continues, especially in commercial real estate, construction and land, energy, and acquired Friendswood loans.
- Whether the sizable securities valuation loss remains manageable without asset sales, and how rate changes affect tangible equity, liquidity, and net interest income.
- Friendswood integration, purchase-accounting estimates, ongoing expense levels, and realized benefits relative to the acquisition price and goodwill recorded.
- The durability of earnings after the unusually large 2021 credit reversal and PPP fee income; no forward earnings guidance is provided in this filing.