Home Bancorp, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Home Bancorp is a Louisiana bank holding company; its subsidiary is Home Bank, N.A. Amounts below are in U.S. dollars. The Friendswood Capital Corporation (Texan Bank) acquisition closed March 26, 2022 and materially affects period comparisons.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Net interest income | $29.2 million | $24.1 million | $52.8 million | $49.2 million |
| Provision (reversal) for loan losses | $0.6 million | ($3.4 million) | $3.8 million | ($5.1 million) |
| Noninterest income | $3.7 million | $3.3 million | $7.1 million | $7.4 million |
| Noninterest expense | $21.8 million | $16.6 million | $40.0 million | $32.5 million |
| Net income | $8.5 million | $11.4 million | $12.9 million | $23.3 million |
| Diluted EPS | $1.03 | $1.34 | $1.56 | $2.75 |
| Net interest margin | 3.76% | 3.75% | 3.58% | 3.94% |
- Q2 net income fell $2.9 million year over year; first-half net income fell $10.5 million. Results reflect higher credit-loss provisioning versus prior-year reversals, lower PPP fee recognition, acquisition-related costs and increased operating expenses.
- Q2 average cost of interest-bearing deposits was 0.22%, down 14 basis points year over year. Total interest expense declined 23.5% in Q2 and 33.5% for the first half.
- Six-month operating cash flow was $19.7 million, versus $31.8 million a year earlier. Investing cash flow was negative $250.6 million, including securities purchases and acquisition-related outflows; financing cash flow was positive $73.6 million. Cash and cash equivalents ended at $444.2 million, down from $601.4 million at year-end 2021.
Financial position, credit and liquidity
- Total assets were $3.36 billion at June 30, up $424.0 million, or 14.4%, from year-end 2021. Total loans were $2.22 billion, up $384.6 million, or 20.9%; excluding acquired loans and PPP loans, management reported organic loan growth of $98.6 million, or 5.5%.
- Commercial real estate loans were $1.05 billion, construction and land loans $317.4 million, and commercial and industrial loans $290.2 million. CRE represented the largest loan category.
- Deposits increased $384.5 million, or 15.2%, to $2.92 billion, primarily reflecting $368.0 million of acquired Texan Bank deposits. Certificates of deposit totaling $297.0 million mature within 12 months.
- The allowance for loan losses was $26.0 million, or 1.17% of loans, versus $21.1 million, or 1.15%, at year-end. First-half net charge-offs were $290,000. Nonperforming assets rose to $18.8 million, or 0.56% of assets, from $14.5 million, or 0.49%; management attributed the increase primarily to acquired assets. Nonaccrual loans totaled $18.5 million.
- Available-for-sale securities had a $34.5 million net unrealized loss at June 30, compared with $0.7 million at year-end. The resulting first-half other comprehensive loss was $24.8 million after tax; management said the securities declines were not credit-related and recorded no securities credit-loss allowance.
- Shareholders’ equity declined 6.5% to $329.1 million, mainly due to the securities-related other comprehensive loss, $8.4 million of share repurchases and $3.9 million of dividends, partly offset by earnings. The Bank’s reported capital ratios exceeded regulatory minimums; its total risk-based capital ratio was 13.74% and leverage ratio was 9.30%.
- The Company issued $55.0 million of 5.75% fixed-to-floating subordinated notes due 2032. The rate becomes three-month term SOFR plus 282 basis points beginning June 30, 2027; the notes are intended to qualify as Tier 2 capital. Outstanding FHLB advances were $25.3 million, with $1.0 billion of additional capacity available.
Material changes, outlook and risks
- The acquisition added $317.5 million of loans and $368.0 million of deposits. Purchase consideration was $64.9 million and recorded goodwill was $22.5 million; purchase accounting valuations remained preliminary. First-half 2022 merger-related expenses were $1.9 million pretax, including $1.6 million in Q2.
- Expenses increased with the acquired business and related staffing, occupancy, regulatory and data-processing costs. Management also cited deposit-account fraud charge-offs as a contributor to higher other expense. Mortgage loan-sale gains weakened amid rising interest rates.
- No specific earnings or growth guidance was provided. Management’s interest-rate model estimated projected net interest income would change by +12.2% under an immediate, sustained 300-basis-point increase and by −9.1% under a 100-basis-point decrease; actual outcomes depend on repricing, growth and balance-sheet mix.
- Liquidity exposures include deposit withdrawals, loan funding and upcoming certificate maturities. Outstanding off-balance-sheet commitments included $347.8 million of available lines, $189.1 million of undisbursed loans in process, $185.5 million of loan-origination commitments and $6.9 million of standby letters of credit.
- Key risks identified include credit quality and commercial real estate values, interest-rate and market movements, liquidity and funding availability, economic conditions, cyber and operational incidents, regulatory changes, competition, and severe weather or other external events. Management said ordinary-course litigation was not expected to have a material effect; it reported no material change in previously disclosed risk factors and no material change in internal control over financial reporting.
Most important facts for investors to verify
- How much of reported loan, deposit and earnings growth is sustainable and attributable to the acquired Texan Bank business, versus organic activity and purchase-accounting effects.
- Whether acquired and existing CRE exposures, nonaccrual loans and substandard loans lead to further credit losses or higher provisioning.
- Whether unrealized securities losses, deposit pricing and the modeled sensitivity to rate changes affect capital, margins or liquidity differently as conditions evolve.
- Whether expense levels, including merger, integration and fraud-related costs, normalize—and how the $55.0 million subordinated notes affect future interest expense.
- How deposits perform as $297.0 million of certificates mature and whether reported borrowing capacity remains available under stress.