Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Home Bancorp Inc (HBCP, Financial) reported a net income of $8.1 million or $1.02 per share for the second quarter of 2024.
- Net interest margin (NIM) improved slightly to 3.66%, showing stabilization.
- Loan growth continued at a 6% annualized pace, with new loans coming in at a rate of 8.25%.
- Core deposit growth in the Houston market was strong, with an increase of $12.6 million.
- Nonperforming loans decreased by $3.5 million to $16.8 million, or 0.63% of total loans.
Negative Points
- The duration of higher rates is negatively impacting the loan pipeline.
- Interest-bearing checking accounts and savings accounts saw a combined decline of about $25 million.
- Provision expense for the quarter increased to $1.3 million, up $1.1 million from the prior quarter.
- Noninterest expense increased by $940,000 to $21.8 million due to annual salary increases.
- The loan to deposit ratio increased to 97.7%, indicating a higher reliance on deposits for loan funding.
Q & A Highlights
Q: Can you talk more about the growth in non-interest bearing deposits? Was this growth primarily in Houston or across your entire footprint?
A: The growth was mostly in Houston, driven by a new team we brought in from another bank at the beginning of the year. They have been successful in attracting new customers, focusing on both loans and deposits. Additionally, we have seen growth in the DDA space in the Acadiana market due to a stronger focus on the C&I business.
Q: Are you focusing on bringing in more C&I loans to attract deposits?
A: Yes, absolutely. Our focus is on bringing in more C&I loans as they are more likely to come with deposits.
Q: Will share repurchases slow down if the share price continues to rise?
A: Yes, we would likely slow down share repurchases at higher prices to keep some dry powder.
Q: What are the key factors driving the NIM expansion in the second half of the year?
A: The key factors include loan growth and loan repricing. We have been consistently raising our loan yield, and we expect this trend to continue. Additionally, the pace of deposit cost increases has slowed, and there are fewer opportunities for deposits to reprice higher. Any movement by the Fed could also help stabilize or reduce CD rates.
Q: Have you experienced increased competition for deposits, and what is the near-term trajectory for deposit costs?
A: We haven't seen much pressure from competition. There are some one-offs, but overall, we have not had any problems attracting deposits. We expect deposit costs to stabilize or decrease, depending on Fed actions.
Q: Asset quality metrics improved in the quarter, but you increased your reserve ratio. What drove this decision?
A: The increase in our allowance was due to changes in the mix of our loan portfolio and the duration of new loans. We did not change any qualitative factors or make any industry-specific adjustments.
Q: Do you think criticized and non-performing assets have peaked, especially if we see rate cuts and the economy doesn't deteriorate?
A: We are optimistic that credit issues will be minimal and not industry-specific. We believe the economy could improve in 2025 with a lower rate environment.
Q: Can you provide more details on the impact of loan growth and deposit stabilization on your financials?
A: Loan growth continued at a 6% annualized pace, with new loans coming in at a higher rate compared to our total loan portfolio. Deposits were flat quarter over quarter, increasing our loan-to-deposit ratio. Non-interest bearing deposits increased, while interest-bearing checking and savings accounts declined, offset by increases in money market and CD balances.
Q: What are your expectations for non-interest income and expenses in the coming quarters?
A: Non-interest income should be between $3.6 million and $3.8 million in the third and fourth quarters. Non-interest expense is expected to be between $22 million and $22.5 million in the same period.
Q: How has your capital management strategy impacted Home Bank over the last few years?
A: We have grown adjusted tangible book value per share by 58% since 2018, increased our dividend by 67% since 2016, and repurchased 14% of our shares. This has been achieved while maintaining robust capital ratios, positioning us for success in any economic environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
