Release Date: April 22, 2025
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 13% increase in net income from the previous quarter and a 20% increase year-over-year.
- Net interest margin expanded for the fourth consecutive quarter to 3.91%, indicating improved profitability.
- Loan growth was strong, with a $29.1 million increase in the first quarter, and continued growth is expected.
- Deposits increased at a 7% annualized rate, with noninterest-bearing deposits comprising 27% of total deposits.
- The company successfully optimized its Houston market, with plans to expand its physical footprint to drive more business.
Negative Points
- First quarter nonperforming assets increased by $5.9 million, primarily due to the downgrade of two loan relationships.
- The cost of CDs remains elevated, and while there is potential for reduction, it is expected to be incremental.
- The loan-to-deposit ratio is tighter than desired, indicating potential challenges in liquidity management.
- Non-interest expenses are expected to increase by 3.5% in 2025 due to raises and technology-related expenses.
- The company faces potential risks from economic volatility and tariffs, which could impact future performance.
Q & A Highlights
Q: Can you discuss the go-forward margin expectation after the improvement in the first quarter, and how do you expect the NIM to behave with a 25 basis points rate cut?
A: John Bordelon, CEO: If the Fed doesn't cut rates, we expect a slowdown in the second quarter of our deposit costs. We don't anticipate much drop in the margin from the deposit side. If the Fed cuts rates, we typically don't get the full reduction. We expect to grow the NIM through loan repricing, as new originations are still higher than our current portfolio. David Kirkley, CFO: March NIM was about 3.95%. A 25 basis points rate cut would likely result in a stable to slightly increasing NIM due to our ability to reprice loans and CDs quickly.
Q: Can you discuss the two loan relationships that moved to nonaccrual in the quarter?
A: John Bordelon, CEO: One credit is a condominium development in Mississippi, which hasn't sold units recently. We believe there's equity in the property, but the owner may be asking too high a price. The other is a hotel undergoing renovations in Houston. We are monitoring their progress and believe the location is favorable, especially if the oil and gas sector rebounds.
Q: What is the status of your office portfolio, and have you seen any changes in maturities?
A: John Bordelon, CEO: Our office portfolio has performed well, with many maturities renewing. We don't have significant exposure to high-rise buildings. Our portfolio includes a condo high-rise and a government-occupied building in Baton Rouge, both performing well.
Q: Will the higher CD pricing change this quarter, and how do you see the loan-to-deposit ratio evolving?
A: David Kirkley, CFO: CD rates will remain slightly elevated but below overnight funding costs. We expect incremental reductions in CD costs over the next quarter. John Bordelon, CEO: The loan-to-deposit ratio may remain tight due to strong loan demand, but we are working to attract core deposits, especially in our Houston market.
Q: How do you reconcile asset sensitivity with liability sensitivity on rate cuts?
A: David Kirkley, CFO: We are slightly asset-sensitive, projecting a rising NIM even in a down 100 basis points rate environment. Our loan portfolio is 41% variable, with many loans adjustable daily. Our deposit repricing beta is lower than peers, starting at a lower point, which impacts sensitivity.
Q: Do you expect deposit betas to catch up on the way down as they did on the way up?
A: David Kirkley, CFO: Over time, we expect deposit betas to catch up, but it may be slower due to our tighter loan-to-deposit ratio. We anticipate it will eventually align with the average of around 35% to 40%.
Q: How aggressive will you be with share repurchases?
A: John Bordelon, CEO: We may not be as aggressive as in the first quarter, but we will act when opportunities arise, especially if the stock price drops to around tangible book value. David Kirkley, CFO: We feel confident in our capital positions and performance, so we will remain active in the market if conditions are favorable.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
