Home Bancorp, Inc. (HBCP) Earnings Call Transcript
July 21, 2026
Earnings Call Speaker Segments
Good morning, ladies and gentlemen, and welcome to the Home Bancorp's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Home Bancorp's Chairman and CEO, John Bordelon; President, Darren Guidry; and Chief Financial Officer, David Kirkley. Please go ahead, Mr. Kirkley.
Thank you, Ana. Good morning, and welcome to Home Bank's Second Quarter 2026 Earnings Call. Our earnings release and investor presentation are available on our website, and I ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation and our SEC filings. Now I'll hand it over to John to make a few comments about the second quarter. John?
Thanks, David. Good morning, everyone, and thank you for joining our earnings call today. We appreciate your interest in Home Bank as we discuss our results, expectations for the future and our approach to creating long-term shareholder value. Before I discuss our second quarter results, I want to take a moment to introduce Darren Guidry as Home Bank's new President. Darren has served as our Chief Risk Officer since 2022, and prior to that, Chief Credit Officer beginning in 2013 and Chief Lending Officer since he came to the bank in 1993. His deep knowledge of our business, our customers and our markets makes him exceptionally well suited for this expanded role. By separating the CEO and President roles, we are creating a leadership structure designed to sustain our next phase of growth. As CEO, I'll remain focused on overall corporate strategy, capital planning and shareholder relations while Darren will lead the day-to-day execution of our strategic priorities. He'll be working closely with our executive leadership team to drive performance across the organization while maintaining our strong discipline in credit quality, risk management and customer service. We are enthusiastic about this transition and confident it will serve our shareholders, employees and customers well for years to come. Now turning to second quarter results. Yesterday afternoon, we reported second quarter net income of $11.6 million or $1.48 per diluted share. Earnings per share increased 2% from the first quarter and were up from $1.46 per share a year ago. Net interest margin expanded to 4.24% in the second quarter, and return on assets increased to 1.31%. Net interest income increased to $35.8 million in the second quarter and was the highest quarterly net interest income in Home Bank's 118-year history. This continued net interest income growth and margin expansion was driven by higher yields on our earning asset portfolio and stable funding costs. Our cost of deposits was stable at 1.66% for the quarter, which is one of the lowest in our peer group and reflects the continued strength of our core deposit franchise. Loans grew by $50.7 million in the second quarter or approximately 7% annualized, which was a nice recovery from the slight contraction we saw in the first quarter. Our Houston market continues to lead the way, growing at a 9% annualized rate year-to-date. The Tomball branch in Northwest Houston, which opened in the first quarter, is gaining momentum and building its customer base. We believe the pipeline we have been building will support continued mid-single-digit loan growth in the second half of the year, but predicting when our customers will make decisions about financing has become challenging. Total deposits grew by $42.1 million or 6% annualized in the second quarter, which kept our loan-to-deposit ratio in the middle of its 90% to 92% target range. The quality and stability of our deposit base remains one of Home Bank's most important competitive advantages. We continue to work our problem credits to resolution. There does not appear to be any specific industry-related stress, but more individual customers are struggling in this economy. Substandard loans increased during the quarter primarily due to 1 C&I loan to a manufacturing company, which is paying as agreed and has a very strong guarantor. We continue to work through our classified assets toward improvement as much of -- as some of the loans are refinanced elsewhere, businesses are sold or some loans are moved to real estate owned and eventually, the assets sold. We anticipate that 14 loans with balances of approximately 1/3 of our classified assets will be rectified and removed off the bank's balance sheet by year-end. Our net charge-offs remain extremely low at just 6 basis points annualized, and we remain confident that our conservative underwriting and proactive management of challenged loans will minimize any losses we ultimately incur. Over the past 2 years, the financial transformation at Home Bank has been significant. Net interest margin has expanded approximately 58 basis points since the second quarter of 2024. Net interest income has increased by more than 7% year-over-year, and tangible book value per share has grown more than 13% from a year ago to $47.02. These improvements reflect the benefits of our disciplined balance sheet benefit, the strength of our core deposit franchise and the earning power of our loan portfolio. We believe we are well positioned to continue delivering strong, sustainable results. With that, I'll turn it back over to David, our Chief Financial Officer.
Thanks, John. Please feel free to refer to the investor presentation we have provided to discuss the company's second quarter financial performance. Net interest income totaled $35.8 million in the second quarter, an increase of $1.3 million from the first quarter and a $2.5 million increase from a year ago. NIM expanded 8 basis points to 4.24% in the second quarter, driven by loan yields increasing 5 basis points to 6.46%, while our cost of interest-bearing liabilities remained flat at 2.3%. Slide 14 details the repricing and maturity profile of our loan investments portfolio. We continue to see opportunities to increase yields on maturing and repricing loans. Our investment portfolio with a weighted average rate of 2.61% and significant cash flows expected over the next 3 years also presents meaningful reinvestment opportunity at current yields that are substantially above the roll-off rate. Yield on earning assets increased 7 basis points quarter-over-quarter, and we believe future repricing opportunities will support room for additional NIM expansion. Deposit growth continues to be a key strength. As shown on Slide 18, total deposits grew to $3.1 billion, with core deposit growth of $46.6 million during the quarter more than offsetting a modest decline in certificates of deposit. Noninterest-bearing demand deposits increased $5.1 million during the quarter and continued to represent 27% of total deposits. The average cost of interest-bearing deposits declined to 2.28% in the second quarter, reflecting both the benefit of deposit mix improvement and the repricing of mature CDs at lower rates. While we've been pleased with our success in driving down deposit costs down by 37 basis points since the recent peak in Q3 of 2024, we don't expect further material declines. Slides 15 and 16 provide additional detail on credit quality. Nonperforming loans declined during the quarter from $35.8 million to $26.4 million or from 1.31% to 95 basis points of total loans. This was primarily driven by the transfer of approximately $10 million of nonperforming loans in [ OREO ]. Total nonperforming assets were $39.2 million or 1.09% of total assets as foreclosed asset balances increased due to the foreclosure of multiple properties, with the largest being $2.6 million. We provisioned $762,000 in the second quarter, down from $922,000 in the first quarter. The allowance for loan losses stand at $34 million or 1.22% of total loans, and we are comfortable with our reserve levels given the composition and risk profile of the portfolio. Total criticized loans increased during the quarter to $95.8 million at 3.45% of total loans primarily due to the migration of 6 relationships into the special mention category and a $7.4 million increase in substandard loans. Substandard loans increased during the quarter primarily due to the downgrade of a $12.4 million C&I credit, which was partially offset by almost $10 million in transfer from substandard to [ OREO ] and pay downs. We are actively monitoring these credits and believe our proactive approach to credit management will continue to limit actual loss exposure. Slide 22 provides detail on noninterest income and expenses. Noninterest income totaled $3.9 million in the second quarter, up $181,000 from the first quarter. We continue to expect quarterly noninterest income to be in the range of $3.8 million to $4.1 million. Noninterest expense totaled $24.6 million in the second quarter, an increase of $1.6 million from the first quarter. The increase was primarily driven by compensation and benefit expense of $1.3 million and a $331,000 increase of foreclosed asset expense. Due to elevated expenses working through foreclosed assets, we expect noninterest expenses will be in the range of $24 million to $24.8 million over the next several quarters. Slides 23 and 24 summarize our capital position and the progress of our capital management strategy. Tangible book value per share increased to $47.02, up from $46.04 in the first quarter and up more than 13% from a year ago. Since 2019, we have increased adjusted tangible book value per share at an annualized rate of approximately 9.7%, increased EPS at a more than 11% annualized rate and increased our quarterly dividend by almost 50%. We have also repurchased approximately 17% of shares outstanding since 2019. Capital ratios remain strong with a Tier 1 leverage ratio of 12.1% and a total risk-based capital ratio of 15.6%. Lastly, we declared a quarterly cash dividend of $0.32 per share, an increase of $0.01 from last quarter. With that, operator, please open the line for Q&A.
[Operator Instructions] And your first question comes from the line of Joe Yanchunis from Raymond James.
I was hoping to start with the NIM. So the margins expanded 18 bps over the past couple of quarters, well above that 410 to 415 range you had previously outlined. As we look ahead, when do you expect the benefit from fixed rate asset repricing to begin to moderate?
I think you're going to see a couple of basis points increase. I think in Q3 and a little bit into Q4, you're still having some lower-yielding loans roll off in a size and manner that will continue to see loan yields increase. In the second quarter, new loan originations came on at a little bit north of 6.6%. So that still leaves the room for repricing opportunities. I think after Q4 and into Q1 of '27, I think that's when you'll see some moderation.
Got it. That was very helpful. And then shifting over to loans. So loan growth really accelerated nicely this quarter. How much of that improvement reflected stronger customer demand versus seasonality or lower payoff activity? And then also on the last quarter call, you mentioned your pipeline had increased by about $30 million sequentially. Can you provide an update on where the pipeline stands today and how you're thinking about conversion for those into funded loans in the back half?
Yes. I think through most of '25, we did have some payoffs, especially in third quarter of '25. And that happened also in the first quarter. So we're seeing less payoffs in the second quarter. And that's just a seasonal thing that we don't know. We do have some classified assets that Darren will talk about, but we anticipate some of those going away, which will hurt our overall loan growth. But our pipeline, I think, remains consistent. While not robust, it remains consistent. And so we should be able to generate loan production. It's just a matter of how much of our loans are paid off in terms of them being bad assets moving somewhere else or whatever.
And is your guide for mid-single-digit growth in the back half of the year or for the full year?
Yes, surely the back half.
All right. And then one more for me here. So capital remains a pretty clear strength, yet acquisition activity across the industry remains pretty subdued at the moment. Have your views on M&A opportunities changed over the past few months?
Not really. I agree that we're hearing a lot less noise than we heard in 2025. I'm not sure if that's because of potentially a rate increase by the Fed or what. But yes, it's definitely been much quieter. So we have our ears open and are ready to go and have a lot of dry power to utilize. So we're looking for that right partner.
And your next question comes from the line of Stephen Scouten from Piper Sandler.
Maybe just following up on that line of questioning. If for whatever reason, M&A is not able to come across the finish line here, what would be kind of how you think about capital uses beyond M&A? Because obviously, your excess capital continues to build quarterly based on really strong profitability. So good problem to have, I guess, if we want to call it a problem, but just can you help us think about other uses for that capital as it builds?
Yes, I'll answer our little part, and then I'll turn it over to David. Surely, we've shown over our history as a public company that we have had periods where we've grown capital, and that was very handy for us to be able to utilize that capital in an M&A transaction. So we still anticipate that the primary use in that. Now I'll turn it over to David as far as dividends or buybacks.
So we've been selective in buybacks based off the stock price, and our stock price has had a nice run over the last couple of quarters. So we've really been out of the buyback space, but we'll always evaluate that. We increased our dividend $0.01, which, from a capital management standpoint, deploys a little bit, but it's not really impacting the ratios. So we're really looking -- keeping the dry powder for M&A. And also, we have our sub debt which is callable in 2027, which could potentially be an option given the M&A landscape.
Okay. And can you remind us what you're paying on that sub debt currently and kind of what that could potentially do maybe to your NIM as you've modeled some of that?
Our coupon rate is 5.75%.
Okay. And in terms of Fed rate hikes, can you remind us what you think if the Fed were to hike -- and in fairness, I'm not really a believer in that personally. But if they do hike, could that do to the trajectory of your NIM from here?
Look, I think our balance sheet is very well positioned for rising rates. I think we've demonstrated when the Fed makes a move, we have a little bit of a blip with earning asset yields increasing 2 to 3 basis points, and then we adjust our deposit prices. So you have probably a quarter of, let's call it, a decline when deposit rates increase. But then -- like I said, we have a good cash flow coming due. So I think we'll be able to sustain as well as improve NIM with a rate hike.
I'll just add to that, it depends on the shape of the yield curve, is it staying in its current normal shape or do we go back towards a little more inverted. So what that could do is hurt NIMs on all banks because the deposit customers may be seeking a little bit higher yield. So I'm more concerned about what happens with our deposits than with our loans really because we are repricing loans at a better rate today. But deposits, because so many banks are or at a very high loan-to-deposit ratio, they're paying up significantly. So a rise in interest rates could cause a little bit of a run on the deposit side. So we'll have to be competitive in that arena.
Yes, I think that's a good point. And that's a big message we're hearing across the industry right now is just competitive dynamics. John, how would you say you feel like competition has been in your market? Has it been relatively rational? Or where isn't -- where are you seeing pressure? Is it more on rate, deposit rate structure of loans? Where is the kind of tension points from a competitive environment perspective?
We're seeing in both loan and deposit, Texas is probably more competitive than Louisiana. We're seeing some -- not as much maybe the last month as it was first and second quarter, where loan rates were really low, but also deposit rates there are 4 or 5 banks in the Texas market that were paying back up close to 4%. I think in the first quarter, we had 2 or 3 banks in Texas that were at 4.25%. So way above the market. And so competing against those has been a little bit of a challenge. But I still think we're going to have banks across all of our footprint that periodically are going to need more liquidity and going to raise their rates.
And your next question comes from the line of Feddie Strickland from Hovde Group.
Just wanted to ask on loan growth. I appreciate the overall guide. In terms of mix, it seems like you had pretty healthy CRE, C&I, multifamily growth in the quarter and a step down in construction. Should we expect more of the same in terms of the buckets of growth in the next couple of quarters?
Yes. It is surprising a little bit that construction is continuing to head down. When rates were higher, it slowed down for sure, but we're still seeing a little bit of reduction there. We've always been a very strong construction lender, so that is probably the biggest surprise in our balance sheet. But yes, I think we're doing well in other categories, trying to diversify our risk and as much as we can in the loan portfolio. So you'll continue to see growth in other areas than just playing CRE. We've done a good job -- I'm sorry. We've done a good job over the last probably 4 quarters of reducing our nonowner-occupied CRE and increasing our owner occupied. So that was a goal of ours starting about 2.5 years ago, and it's really paying off.
Got it. Appreciate that, John. And just switching gears on the expense side. Again, I appreciate the guide there. I think you mentioned some of the expenses working through some of these credits for closure expenses, what have you, or keeping that a little elevated in the second half of the year. But as we get into early '27 as you work through a good bit of these existing NPAs, assuming nothing new comes up, could we maybe see expenses overall decline a little bit just as you work through some of those problem assets?
Yes. I'll touch up on them for a second. As we work through those, we're just going to have some elevated expenses on the OREO side. In Q2 and Q1, we've had a little bit of elevated fraud activity on our deposits. And I think we're getting that back down to a more normalized run rate going into Q3 and into Q4, so you'll see a little bit of help from that. But I think once we work through the OREO expenses, depending on the pipeline of how that shapes out, you'll see a little bit more normalized rate of our expense base.
Got it. And just last question for me real quick. It seems like you've got pretty good loan and deposit pipelines. But do you expect loans and deposits kind of stays around that 90% to 92% range that you've been targeting? Do you see anything that would cause you to kind of jump above or below that in the next couple of quarters?
No. On the deposit side, we try to lower our rates a little bit in the first quarter, and we lost about $60 million of CDs and such. And we have not moved from there. We still are down for the year, about $60 million in CDs. So holding our CDs intact, I think, is important to maintaining the growth. So a lot of our growth is coming in the core deposit sector, but we have to make sure that we don't lose our CDs to offset that. So that's a big strategy for us in the remaining part of this year and going into next year.
[Operator Instructions] And your next question comes from the line of Christopher Marinac from Brean Capital.
I just had a question for Darren in his new role. Do you see additional hires or maybe an acceleration of kind of lending hires as this next year plus unfolds?
Yes. We're not anticipating any major changes, Chris. We just got a strong crew. Our executive team is strong. Our Chief Banking Officer has a really good crew. We haven't had much in terms of turnover. So we're just looking to add good bankers when they're available, but no major plans for additions at this time. We did just add 1 new RM in Baton Rouge market, which is our slowest developing market. So hopefully, that will help.
Got it. All right. And then just to go back on the criticized trends and other comments related to that, that you've already made. Is there anything else in the pipeline or any other trends you see kind of under the surface in terms of either risk ratings going back and getting upgraded or additional items that may pop up over time?
I can speak to what's in the watch list now. We've got -- as John and David mentioned earlier, our special assets group has been working on watch credits and has a significant number of resolutions in place. Specifically, we downgraded about $15 million this past quarter into special mention, but we have resolutions in place that should occur by the end of the year amounting to about $22 million. In fact, more than half of that should occur within this quarter. Substandard credit resolutions, including our longest tenured classified loan, it's set to be resolved by the end of the fourth quarter as well. We're really excited about that. Substandard resolutions should be a little more than $4 million through the end of the year. And finally, our nonperforming assets, we're expecting through payoffs, upgrades and sales of other real estate on approximately $7 million of improvement there. So overall, between now and the end of the year and [indiscernible] happening throughout the next 5 months, we should exceed about $30 million of improvement in special assets.
Thank you. There are no further questions at this time. I would like to turn the conference back over to John for any closing remarks.
Once again, thank you very much for joining us today. We look forward to speaking with many of you in the coming days or weeks. I appreciate your interest in Home Bancorp. Have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may disconnect.
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