Home Bancorp, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Home Bancorp is a bank holding company operating through Home Bank, N.A. Unless otherwise noted, amounts below are in U.S. dollars.
Financial performance and condition
| Metric | Q2 / June 30, 2021 | Comparison |
|---|---|---|
| Net income | $11.4 million; diluted EPS $1.34 | Q2 2020: $2.9 million; $0.33 diluted EPS |
| Net interest income | $24.1 million | Up 7.6% year over year |
| Noninterest income | $3.3 million | Up 6.2% year over year |
| Noninterest expense | $16.6 million | Up 7.2% year over year |
| Net interest margin | 3.75% | 3.76% in Q2 2020; excluding PPP effects, 3.71% versus 3.82% |
| Total assets | $2.765 billion | Up 6.7% from December 31, 2020 |
| Total loans | $1.918 billion | Down 3.1% from year-end; PPP loans were $197.6 million |
| Total deposits | $2.371 billion | Up 7.1% from year-end |
| Cash and cash equivalents | $393.2 million | Up from $188.0 million at year-end |
| Borrowings | $33.0 million | $5.5 million other borrowings and $27.5 million long-term FHLB advances |
| Shareholders’ equity | $337.8 million | Up 5.0% from year-end |
For the six months ended June 30, net income was $23.3 million versus $5.4 million in 2020; diluted EPS was $2.75 versus $0.60. Net interest income rose 12.5% to $49.2 million. Net interest margin was 3.94%, compared with 3.95% a year earlier; excluding PPP effects, it was 3.79% versus 3.99%.
Six-month operating cash flow was $31.8 million, investing cash flow was $24.5 million, and financing cash flow was $149.0 million. Cash increased by $205.3 million. The Bank reported a 14.82% common equity Tier 1 ratio and a 16.07% total risk-based capital ratio, both above stated regulatory minimums.
Material changes and notable items
- Profit improved substantially, primarily reflecting a $5.1 million first-half reversal of the loan-loss provision, versus a $12.7 million provision in the first half of 2020, as management cited improved economic expectations and loan prepayments. Q2 2021 included a $3.4 million reversal.
- The allowance for loan losses fell to $26.7 million, or 1.39% of loans, from $33.0 million, or 1.66%, at year-end. Nonperforming assets declined to $15.1 million, or 0.55% of assets, from $20.0 million, or 0.77%.
- Loans declined, including a $23.6 million reduction in PPP balances; deposits increased, led by demand, savings, money-market and NOW accounts. The average rate paid on interest-bearing deposits fell to 0.36% in Q2 from 0.78% a year earlier.
- Noninterest expense increased, including higher data-processing, compensation and unfunded-commitment credit-loss costs. A $457,000 loss on asset sales included the sale-leaseback of a Mississippi branch; management expects the transaction to reduce future branch operating costs.
- COVID-19-related payment deferrals were $7.0 million at quarter-end, down from $558.8 million a year earlier. Of loans that exited deferral, $443.7 million, or 99%, were current and performing at June 30, 2021.
Outlook, risks and contingencies
The filing provides no specific earnings or financial guidance. Management said the continuing effects of COVID-19 remain uncertain. Risks identified include weaker demand, increased delinquencies and foreclosures, declining collateral values, additional credit-loss provisions, interest-rate effects on asset yields and funding costs, cybersecurity exposure, and potentially higher FDIC premiums. The company had $832.4 million of additional FHLB borrowing capacity and $282.1 million of certificates of deposit maturing within 12 months. Off-balance-sheet commitments included $282.1 million available on lines of credit, $141.6 million of undisbursed loans in process and $162.6 million of commitments to originate loans. Management did not expect ordinary-course litigation to materially affect financial condition or results.
Important facts for investors to verify
- Whether credit quality and the lower allowance remain adequate as economic conditions and borrower performance evolve; the filing cautions that future ACL adjustments may be necessary.
- How much PPP fee income and loan forgiveness contribute to future net interest income, and how margins perform excluding PPP effects.
- Whether loan balances stabilize and deposit growth persists, including the renewal rate and cost of the $282.1 million of CDs maturing within a year.
- Whether the branch sale-leaseback produces the anticipated expense savings and whether noninterest expense growth moderates.
- Future draws on lending commitments and the related liquidity and credit-loss implications.