Home Bancorp, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Home Bancorp is a bank holding company headquartered in Lafayette, Louisiana. Amounts below are in millions of dollars unless otherwise stated.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Net interest income | $30.3 | $29.2 | $61.9 | $52.8 |
| Provision for loan losses | $0.5 | $0.6 | $1.3 | $3.8 |
| Net income | $9.8 | $8.5 | $21.1 | $12.9 |
| Diluted EPS | $1.21 | $1.03 | $2.60 | $1.56 |
| Net interest margin | 3.94% | 3.76% | 4.06% | 3.58% |
| Noninterest income | $3.4 | $3.7 | $6.8 | $7.1 |
| Noninterest expense | $21.0 | $21.8 | $40.9 | $40.0 |
- Q2 net income increased $1.3 million year over year; first-half net income increased $8.2 million. Prior-year periods included Friendswood acquisition merger costs of $1.3 million after tax for Q2 and $1.6 million after tax for the first half.
- Interest income rose substantially with higher loan yields and loan growth, but funding costs also increased: Q2 interest expense rose $8.5 million year over year, and first-half expense rose $14.0 million. The average rate paid on interest-bearing deposits was 1.30% in Q2, versus 0.22% a year earlier.
- Q2 noninterest expense declined 3.7%, partly reflecting the absence of merger costs in the comparison period. First-half expense increased 2.2%; 2023 included a $0.7 million recovery related to a previously recognized foreclosed-asset loss.
Financial position, cash flow and liquidity
- Total assets were $3.29 billion at June 30, up 1.9% from year-end 2022. Loans were $2.51 billion, up $80.0 million, or 3.3%.
- Deposits declined $81.5 million, or 3.1%, to $2.55 billion. Noninterest-bearing deposits fell $87.7 million; certificates of deposit increased $129.1 million. $402.3 million of certificates mature within 12 months, and uninsured deposits totaled $735.4 million.
- To support funding needs, short-term FHLB advances increased to $262.4 million from $155.0 million; long-term advances were $42.9 million. Total outstanding FHLB advances were $305.3 million. Reported available primary and secondary liquidity sources totaled $1.23 billion, including $897.8 million of FHLB availability.
- Cash from operating activities was $18.1 million for the first half, versus $19.7 million a year earlier. Investing activities used $48.9 million; financing activities provided $40.3 million. Cash and cash equivalents ended the period at $96.9 million.
- Shareholders’ equity was $346.1 million, up 4.9% from year-end. The Bank reported regulatory capital ratios above stated minimums: common equity Tier 1 of 12.84% and total risk-based capital of 14.07%.
- Available-for-sale securities had $53.2 million of net unrealized losses at period-end, compared with $54.8 million at December 31, 2022. Management attributed the declines to noncredit factors and recorded no securities credit-loss allowance.
Credit quality, risks and outlook
- Nonperforming assets increased to $12.4 million, or 0.38% of assets, from $11.0 million, or 0.34%, at year-end. Management cited credit downgrades as the primary driver. Nonaccrual loans were $12.2 million.
- Substandard loans rose 26.6% to $27.3 million; special-mention loans increased 34.3% to $9.5 million. The allowance for loan losses was $30.6 million, or 1.22% of loans; total allowance for credit losses, including unfunded commitments, was $33.1 million.
- Management’s interest-rate model estimated projected net interest income changes of +1.6% under an immediate +300-basis-point rate shift and −1.5% under a −100-basis-point shift. Actual results depend on repricing, deposit behavior, growth and other factors.
- Commitments included $366.2 million of available lines of credit, $215.7 million of undisbursed loans in process and $151.9 million of commitments to originate loans. Management said ordinary-course legal matters were not expected to have a material effect.
- The filing gives no specific earnings or financial guidance. Management cautioned that results may differ due to credit quality, interest rates, real estate values, economic and market conditions, funding availability, competition, cybersecurity and other risks. The company reported no material change in previously disclosed risk factors.
Important facts for investors to verify
- Deposit retention and repricing, including the $402.3 million of certificates maturing within 12 months and the cost and availability of wholesale funding.
- Trends in criticized and nonperforming loans, especially commercial real estate, construction and land, and multifamily exposures, and whether allowance levels remain adequate.
- Net interest margin durability as deposit costs and FHLB borrowing costs change.
- Potential liquidity or capital effects if available-for-sale securities are sold or unrealized losses worsen.
- Reported results’ comparability, including prior-year Friendswood merger expenses and the 2023 foreclosed-asset recovery and securities-sale loss.