Home Bancorp, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2015. Unaudited consolidated results include Home Bancorp and its subsidiary, Home Bank. The September 15 acquisition of Louisiana Bancorp materially affects comparisons with December 2014 and prior-year results.
Key financial metrics
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Net interest income | $13.53 million | $13.21 million | $38.79 million | $38.13 million |
| Net income | $2.90 million | $2.88 million | $8.59 million | $7.06 million |
| Diluted EPS | $0.41 | $0.41 | $1.23 | $1.02 |
| Provision for loan losses | $569,000 | $892,000 | $1.40 million | $1.85 million |
| Noninterest income | $2.20 million | $2.16 million | $6.31 million | $6.07 million |
| Noninterest expense | $10.52 million | $9.97 million | $30.47 million | $31.60 million |
- Margins: Tax-equivalent net interest margin was 4.55% in Q3 versus 4.63% a year earlier, and 4.51% for the nine-month period versus 4.66%. Management attributed the decline primarily to lower average loan yields.
- Period-end balance sheet: Assets were $1.558 billion, loans $1.208 billion, deposits $1.222 billion, and shareholders’ equity $162.3 million at September 30, 2015.
- Liquidity and funding: Cash and cash equivalents were $23.5 million; available-for-sale and held-to-maturity securities totaled about $205.2 million. FHLB advances were $153.4 million, comprising $77.0 million short-term and $76.4 million long-term. The company reported $336.3 million of additional FHLB borrowing capacity. Certificates of deposit totaling $183.9 million mature within 12 months.
- Cash flows, nine months: Operating activities provided $29.1 million; investing activities used $62.2 million, including $56.4 million net cash disbursed for the acquisition; financing activities provided $27.5 million. Cash and cash equivalents declined $5.5 million to $23.5 million.
- Credit metrics: Allowance for loan losses was $8.9 million, or 0.74% of total loans (1.12% excluding acquired loans). Nonperforming loans were $15.0 million, 1.24% of loans; nonperforming assets were $20.8 million, 1.34% of assets. Net charge-offs were $103,000 in Q3 and $229,000 year to date.
- Capital: Reported regulatory ratios included Tier 1 risk-based capital of 12.73%, total risk-based capital of 13.51%, and Tier 1 leverage capital of 11.47%. The filing states capital was well in excess of regulatory requirements.
Material changes versus comparable periods
- Q3 reported net income rose 0.8% year over year; nine-month net income increased 21.6%. Q3 diluted EPS was unchanged, while nine-month diluted EPS rose 20.6%.
- Management reported that, excluding merger expenses, Q3 net income increased 18.9% and diluted EPS increased 19.5%; nine-month net income increased 9.1% and diluted EPS increased 8.1%. These are non-GAAP measures.
- Net interest income increased 2.4% in Q3 and 1.7% year to date. Loan-volume growth supported interest income, partly offset by lower loan yields. Interest expense rose 4.5% in Q3 and 3.3% year to date.
- Noninterest expense rose 5.6% in Q3, including $593,000 of acquisition-related expenses; it declined 3.6% year to date, partly reflecting higher merger costs in the 2014 comparison. Excluding merger costs, year-to-date noninterest expense increased 1.1%.
- Compared with December 31, 2014, assets increased 27.5%, loans 32.9%, and deposits 23.0%, primarily due to Louisiana Bancorp. The acquired business contributed $350.6 million of assets, $280.4 million of loans, and $208.7 million of deposits at acquisition-date fair value.
- Nonperforming assets declined to $20.8 million from $28.5 million at year-end 2014; nonperforming loans as a share of assets declined to 0.96% from 1.91%. Acquired loans remain a significant component of reported problem assets.
Outlook, commentary, risks and unusual items
- Acquisition: Louisiana Bancorp shareholders received $24.25 per share in cash; total consideration was $70.0 million. Home Bancorp recorded preliminary goodwill of $10.7 million and a $1.5 million core deposit intangible. Purchase accounting values remain subject to refinement. Pro forma results are presented without potential cost savings.
- Acquisition costs: Louisiana Bancorp merger-related expense was $593,000 pretax in Q3 and $848,000 year to date. Management’s adjusted earnings comparisons exclude these costs; adjusted results are not GAAP measures.
- Credit risks: Total past-due loans were $19.95 million, including $8.10 million more than 90 days past due; no originated loans more than 90 days past due were accruing. The company restructured $3.3 million of loans as troubled debt restructurings in Q3, including $3.2 million tied to one energy-industry relationship. Management says none of the referenced TDRs defaulted after restructuring through the financial-statement issuance date.
- Interest-rate risk: The company’s model estimated projected net interest income would decline 0.7%, 1.6%, and 2.8% under immediate, sustained rate increases of 100, 200, and 300 basis points, respectively. Actual outcomes may differ.
- Commitments and contingencies: Off-balance-sheet commitments included $129.5 million of available credit lines, $61.0 million of undisbursed loans in process, $113.1 million of commitments to originate loans, and $4.4 million of standby letters of credit. Management said ordinary-course litigation was not expected to materially affect financial condition or results.
- Guidance: The filing provides no specific earnings or financial guidance. Management cautions that interim results are not necessarily indicative of full-year results and identifies forward-looking statements as subject to risks and uncertainties.
Important facts for investors to verify
- How Louisiana Bancorp integration, purchase-accounting adjustments, and realized cost savings compare with the transaction assumptions; acquisition fair values are preliminary.
- Whether reported earnings growth persists after merger expenses, and how Q3’s acquisition costs affect comparisons with both prior periods and management’s non-GAAP figures.
- Credit trends in acquired and originated portfolios, including the energy-industry TDR, delinquency migration, charge-offs, and adequacy of the allowance.
- Deposit retention and repricing for the $183.9 million of certificates of deposit maturing within 12 months, along with the cost and use of FHLB funding.
- Net interest margin sensitivity to loan yields, funding costs, and the interest-rate scenarios disclosed in the filing.