Home Bancorp, Inc. — 2013 Form 10-K
Business context and reporting period
Home Bancorp is the parent of Home Bank, a community-focused bank headquartered in Lafayette, Louisiana. This filing covers the fiscal year ended December 31, 2013; quarterly figures below refer to the fourth quarter. At year-end, the Bank operated 22 offices in south Louisiana. Its February 2014 acquisition of Britton & Koontz, completed after year-end, expanded operations into Mississippi and increased pro forma assets to approximately $1.2 billion.
Financial and operating results
| Metric | 2013 | 2012 |
|---|---|---|
| Total assets | $984.2 million | $962.9 million |
| Total loans | $707.5 million | $673.1 million |
| Total deposits | $741.3 million | $771.4 million |
| Interest income | $43.7 million | $46.1 million |
| Net interest income | $40.2 million | $41.2 million |
| Net income | $7.3 million | $9.2 million |
| Diluted EPS | $1.06 | $1.28 |
| Operating cash flow | $21.3 million | $11.3 million |
- Total revenue, calculated as net interest income plus noninterest income, was approximately $47.9 million, down from $49.0 million in 2012. Pre-tax income was $11.0 million versus $13.8 million.
- Net interest margin was 4.65%, down from 4.79% in the selected-data table; average asset yield fell to 5.06% from 5.36%. Interest expense declined 28.7%, partly offsetting lower interest income.
- Fourth-quarter net income was $1.7 million and diluted EPS was $0.25, versus $2.3 million and $0.33 in fourth-quarter 2012.
- Net cash from operating activities was $21.3 million; investing activities used $42.9 million and financing activities provided $14.7 million. Cash and cash equivalents ended the year at $32.6 million, down $6.9 million.
- FHLB advances totaled $97.0 million, up from $46.3 million. The Bank reported $262.3 million of additional FHLB borrowing capacity. Shareholders’ equity was $141.9 million.
- Bank capital ratios were strong: total risk-based 21.88%, Tier 1 risk-based 20.84%, and leverage 14.17%; the Bank was classified as well capitalized.
Material changes versus 2012
- Net income declined 20.6% and diluted EPS declined 17.2%, primarily as lower loan yields reduced interest income and a higher loan-loss provision offset lower funding costs.
- The provision for loan losses increased 51.5% to $3.7 million. A $1.7 million partial charge-off on an accounts-receivable credit line was a principal factor. Net charge-offs were $2.1 million, or 0.29% of loans, compared with $2.2 million, or 0.33%.
- Loans grew 5.1%, led by commercial real estate, construction and land, consumer, and commercial and industrial lending. Commercial real estate was $269.8 million; construction and land loans were $83.3 million, or 11.8% of the portfolio.
- Deposits decreased 3.9% as certificates of deposit fell $60.5 million, while core deposits grew 5.9% to $548.9 million. Short-term FHLB advances rose substantially as deposit balances declined.
- Nonperforming loans, including acquired and FDIC-covered loans, were $24.8 million, compared with $21.9 million. Excluding acquired and covered loans, the filing reports nonperforming-loan ratios of 1.17% in 2013 and 0.43% in 2012. The allowance was $6.9 million, or 0.98% of total loans.
- Available-for-sale securities had a $0.3 million net unrealized gain at year-end, versus $4.9 million in 2012; the change contributed to a $3.0 million after-tax decline in other comprehensive income.
Outlook, risks, contingencies and unusual items
- No numerical earnings or growth guidance is provided. Management said it expected sufficient liquidity to meet needs, while warning that low rates could pressure asset yields and profitability. It also expects FDIC-asset accretion to decline as anticipated reimbursements fall.
- The Britton & Koontz acquisition closed February 14, 2014 for approximately $34.5 million in cash. The combined company was reported at approximately $1.2 billion in assets, $870 million in loans and $960 million in deposits. Integration and realization of acquisition benefits remain risks.
- The FDIC loss-sharing receivable was $12.7 million at year-end, down from $15.5 million. Coverage for commercial assets expires in March 2015 and residential assets in March 2020; changes in estimates or failure to meet agreement requirements could affect earnings and reimbursements.
- Key disclosed risks include credit losses and concentration in commercial real estate, construction and commercial lending; regional economic and real-estate conditions, including oil-and-gas exposure; interest-rate changes; competition; regulatory changes; natural disasters; operational and cybersecurity disruptions; and possible securities impairment.
- Unfunded credit commitments totaled $183.2 million. Management did not expect material losses from these commitments. Ordinary-course legal matters were not expected to materially affect the company. The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Important facts for investors to verify
- Review the trend and composition of nonperforming loans, criticized loans and charge-offs, particularly commercial and industrial problem credits and acquired-loan exposures.
- Assess the sustainability of net interest margin and earnings given declining loan yields, very low funding costs, and the company’s sensitivity to rate changes.
- Confirm deposit retention and refinancing or repayment plans for $115.2 million of certificates of deposit maturing in 2014, alongside the higher year-end reliance on short-term FHLB advances.
- Evaluate the assumptions, remaining balance and expiration schedule for the $12.7 million FDIC loss-sharing asset.
- Track Britton & Koontz integration, acquisition accounting and post-acquisition capital, funding and credit quality.
- Reconcile the filing’s differing presentations of 2012 net interest margin (4.79% in selected data and 4.81% in MD&A); the filing text does not provide a single consistent value.