Home Bancorp, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; balance-sheet comparisons are against December 31, 2021. Financial statements are unaudited. Home Bancorp is a Louisiana bank holding company operating through Home Bank, N.A.
Financial performance and condition
- Earnings: Net income was $4.4 million, or $0.53 per diluted share, versus $11.9 million, or $1.41, in Q1 2021. Cash dividends declared were $0.23 per share, compared with $0.22.
- Revenue and margins: Net interest income was $23.5 million, down 6.3% year over year; total noninterest income was $3.4 million, down 16.5%. Tax-equivalent net interest margin fell to 3.39% from 4.14%; excluding PPP effects, it was 3.31% versus 3.88%.
- Expenses and credit costs: Noninterest expense rose 14.2% to $18.2 million. The company recorded $3.2 million of provision for loan losses, compared with a $1.7 million reversal in Q1 2021, and a $302,000 provision for unfunded commitments.
- Assets and loans: Total assets were $3.33 billion, up $394.0 million (13.4%) from year-end. Loans were $2.16 billion, up $317.9 million (17.3%); reported growth was primarily acquisition-driven. Excluding PPP loans and the acquired portfolio, organic loans increased $20.7 million (1.2%).
- Credit quality: Allowance for loan losses was $26.7 million, or 1.24% of loans, versus $21.1 million, or 1.15%, at year-end. Nonperforming assets rose to $22.4 million, or 0.67% of assets, from $14.5 million, or 0.49%; the increase primarily reflected acquired assets. Nonaccrual loans were $21.1 million. Substandard loans increased to $26.9 million from $17.5 million.
- Deposits, debt and liquidity: Deposits totaled $2.94 billion, up $405.3 million (16.0%) from year-end. Cash and cash equivalents were $548.0 million. FHLB advances were $25.7 million, and additional FHLB borrowing capacity was $840.9 million. Certificates of deposit totaling $321.7 million mature within 12 months. Bank regulatory capital ratios exceeded minimum requirements; total risk-based capital was 12.28%.
- Cash flow: Operating activities provided $1.5 million, compared with $11.2 million in Q1 2021. Investing activities used $101.4 million, including securities purchases, acquisition-related outflows and the banking-center sale; financing activities provided $46.4 million. Cash and cash equivalents declined $53.4 million during the quarter.
- Other comprehensive loss: Net other comprehensive loss was $14.2 million, largely reflecting unrealized available-for-sale securities losses. AOCI moved from $744,000 income at year-end to a $13.5 million loss.
Material changes and significant events
- On March 26, 2022, the company completed its acquisition of Friendswood Capital Corporation, parent of Texan Bank, for $64.9 million in cash. The acquired portfolio included $318.9 million of loans and $368.0 million of deposits; the company recorded $20.9 million of preliminary goodwill. Purchase accounting fair values remain subject to refinement.
- The acquisition contributed to higher loans, deposits, assets and nonperforming assets. It also drove much of the loan-loss provision; management said this was partly offset by improved assessment of the economic impact of COVID-19.
- PPP deferred lender-fee income was $721,000, versus $3.3 million in Q1 2021, contributing to lower interest income. Lower loan-sale gains also reduced noninterest income by $869,000.
- Q1 noninterest expense included $328,000 in merger costs. Other expense increases included fraud-related deposit-account charge-offs, marketing, data processing and compensation.
- The company repurchased 84,515 shares for approximately $3.4 million during the quarter.
Outlook, risks and contingencies
- The filing provides no specific earnings, revenue or margin guidance. Management notes that interim results are not necessarily indicative of full-year results.
- Interest-rate modeling estimated projected net interest income would increase 15.8% under an immediate, sustained +300 basis-point shock and decline 5.2% under a −100 basis-point shock. Actual results depend on repricing, balance-sheet mix, growth and other factors.
- Key disclosed risks include credit quality, real estate values, interest rates, economic conditions, deposit and funding availability, competition, cyber incidents, regulation, weather and execution of business strategy. Management cautions that the allowance depends on estimates and may require future additions.
- Management stated that ordinary-course legal matters are not expected to materially affect the company. It reported no material changes to previously disclosed risk factors and concluded disclosure controls were effective.
Important facts for investors to verify
- How the acquired Texan Bank loan portfolio performs, including the acquired nonaccrual and PCD loans, and whether preliminary acquisition marks or goodwill change.
- Whether asset-quality measures and the allowance remain adequate as the acquired portfolio is integrated.
- How rising rates affect deposit costs, net interest margin and modeled asset-liability sensitivity.
- Whether deposit retention, upcoming certificate maturities and available borrowing capacity support liquidity needs.
- Whether the sharp year-over-year earnings decline, including lower PPP fees and loan-sale gains and higher credit and operating costs, persists in subsequent periods.
- The potential impact of available-for-sale securities valuation losses on equity and capital if market conditions change.