On Tuesday, Home Bancorp (NASDAQ:HBCP) discussed second-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Home Bancorp Inc reported second quarter net income of $11.6 million, or $1.48 per diluted share, with earnings per share increasing by 2% from the previous quarter.

Net interest margin (NIM) expanded to 4.24%, driven by higher yields on the earning asset portfolio and stable funding costs, marking the highest quarterly net interest income in the company's history.

Loan growth was strong, with a $50.7 million increase, led by the Houston market, and deposits grew by $42.1 million, maintaining a loan-to-deposit ratio within the target range.

The company is actively resolving problem credits, with plans to rectify approximately one-third of classified assets by year-end, and net charge-offs remained low at 6 basis points annualized.

Strategically, Home Bancorp Inc has appointed Darren Guidry as the new President to focus on executing strategic priorities, while maintaining disciplined credit quality and risk management.

Guidance for mid-single-digit loan growth is maintained for the second half of the year, with expectations for continued NIM expansion due to repricing opportunities.

Noninterest expenses increased due to compensation and foreclosed asset expenses, with expectations for continued elevated expenses as the company works through problem credits.

Capital position remains strong, with tangible book value per share increasing to $47.02, and a quarterly dividend of $0.32 per share declared.

Full Transcript

OPERATOR

Good morning, ladies and gentlemen, and welcome to the Home Bancorp Inc second quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would like to turn the conference over to Home Bancorp Inc's President and CEO, John Bordelon; President, Darren Guidry; and Chief Financial Officer, David Kirkley. Please go ahead, Mr. Kirkley.

David Kirkley, Chief Financial Officer

Thank you. And good morning, and welcome to Home Bancorp Inc's second quarter 2026 earnings call. Our earnings release and investor presentation are available on our website. I'd 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 Bordelon, President and CEO

Thanks, David. Good morning, everyone, and thank you for joining our earnings call today. We appreciate your interest in Home Bancorp Inc 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 Bancorp Inc'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 will 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 in 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 Bancorp Inc'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 Bancorp Inc'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 one 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 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 one-third 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 two years the financial transformation at Home Bancorp Inc 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 management, 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.

David Kirkley, Chief Financial Officer

Thanks, John. Please feel free to refer to the investor presentation we have provided as I 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 2.38%.

Slide 14 details the repricing and maturity profile of our loan and 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 three 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 continue 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 matured CDs at lower rates.

While we've been pleased with our success in driving down deposit costs 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 into 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 stands 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, or 3.45% of total loans, primarily due to the migration of six 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 transfer from substandard to OREO and paydowns. 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 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 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 a penny from last quarter. Operator, please open the line for Q&A.

OPERATOR

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Thank you. And your first question comes from the line of Joe Yankinis from Raymond James. Please go ahead.

Joe Yankinis, Analyst at Raymond James

Good morning.

David Kirkley, Chief Financial Officer

Good morning, Joe.

Joe Yankinis, Analyst at Raymond James

Thanks for taking my questions. I was hoping to start with the NIM. The margin's expanded 18 bps over the past couple quarters, well above that 4.10% to 4.15% range you had previously outlined. As we look ahead, when do you expect the benefit from fixed-rate asset repricing to begin to moderate?

David Kirkley, Chief Financial Officer

I think you're going to see a couple 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 room for repricing opportunities. I think after Q4 and into Q1 of ’27, I think that's when you'll see some moderation.

Joe Yankinis, Analyst at Raymond James

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 unfunded loans in the back half?

John Bordelon, President and CEO

Yeah, I think through most of ’25 we did have some payoffs, especially in the third quarter of ’25, and that happened also in the first quarter. So we're seeing less payoffs in second quarter, and that's just a seasonal thing that we 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 because of them being bad assets moving somewhere else or whatever.

Joe Yankinis, Analyst at Raymond James

And is your guide for mid–single-digit growth in the back half of the year or for the full year?

John Bordelon, President and CEO

Yeah, surely the back half.

Joe Yankinis, Analyst at Raymond James

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?

John Bordelon, President and CEO

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, yeah, it's definitely been much quieter. So we have our ears open and are ready to go. Have a lot of dry powder to utilize, so we're looking for that right partner.

Joe Yankinis, Analyst at Raymond James

All right, perfect. Well, thanks for taking my question, gentlemen.

David Kirkley, Chief Financial Officer

Thank you, Joe.

John Bordelon, President and CEO

Thanks, Joe.

OPERATOR

Thank you. And your next question comes from the line of Stephen Scouten from Piper Sandler. Please go ahead.

Stephen Scouten, Analyst at Piper Sandler

Hey, good morning, everyone. 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, how would 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?

John Bordelon, President and CEO

Yeah, I'll answer a little part and 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 the primary use in that. Now, turn it over to David.

David Kirkley, Chief Financial Officer

As far as dividends or buybacks, 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 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.

Stephen Scouten, Analyst at Piper Sandler

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 out?

David Kirkley, Chief Financial Officer

Our coupon rate is 5.75%.

Stephen Scouten, Analyst at Piper Sandler

And in terms of, you know, 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, what could that do to the trajectory of your NIM from here?

David Kirkley, Chief Financial Officer

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 good cash flow coming due. So I think we'll be able to sustain as well as improve NIM with a rate hike.

John Bordelon, President and CEO

I'd just add to that: 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 in 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 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.

Stephen Scouten, Analyst at Piper Sandler

Yeah, I think that's a good point. And that's a big message we're hearing across the industry right now—just competitive dynamics. John, how would you say you feel like competition has been in your markets, and has it been relatively rational? Or where it isn't, where are you seeing pressure? Is it more on deposit rate, structure of loans? Where's the kind of tension points from a competitive environment perspective?

John Bordelon, President and CEO

We see that on 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 pretty low, but also deposit rates. There are four or five banks in the Texas market that were paying back up close to 4%. I think in the first quarter we had two or three 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 are going to raise the rates.

Stephen Scouten, Analyst at Piper Sandler

Yeah, very good point. Great color. Appreciate it. And congrats on a great quarter.

John Bordelon, President and CEO

Thanks, Scott.

OPERATOR

Thank you. And your next question comes from the line of Fadi Strickland from Hovde Group. Please go ahead.

Fadi Strickland, Analyst at Hovde Group

Just wanted to ask on loan growth. 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 quarters?

John Bordelon, President and CEO

Yeah, you know, 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 as much as we can in the loan portfolio. So you'll continue to see growth in other areas than just plain CRE.

We've done a good job over the last—oh, I'm sorry—we've done a good job over the last probably four quarters of reducing our non-owner-occupied CRE and increasing our owner-occupied. So that was a goal of ours starting about two and a half years ago and it's really paying off.

Fadi Strickland, Analyst at Hovde Group

Got it. And just switching gears on the expense side, again appreciate the guide there. I think you mentioned some of the expenses working through some of these credits, foreclosure expenses, what have you, are 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?

David Kirkley, Chief Financial Officer

Yeah, I'll touch up on it 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.

Fadi Strickland, Analyst at Hovde Group

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 stay around that 90% to 92% range that you've been targeting? Do you see anything that will cause you to kind of jump above or below that the next couple quarters?

John Bordelon, President and CEO

No. On the deposit side, you know, we tried to lower our rates a little bit in 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 the remaining part of this year and going into next year.

Fadi Strickland, Analyst at Hovde Group

Understood. That's helpful. Thanks for taking my questions.

OPERATOR

Thank you once again. If you have a question, please press star followed by one. And your next question comes from the line of Christopher Marinek from Brean Capital. Please go ahead.

Christopher Marinek, Analyst at Brean Capital

Hey, good morning. Thanks for hosting the call, and just had a question for Darren in his new role. Do you see additional hires, or maybe an acceleration of lending hires, as this next year plus unfolds?

Darren Guidry, President

Yeah, we're not anticipating any major changes, Chris. We've just got a strong crew. 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.

Christopher Marinek, Analyst at Brean Capital

All right, very well, thank you.

Darren Guidry, President

We did just add one new RM in the Baton Rouge market, which is our slowest developing market. So hopefully that will help.

Christopher Marinek, Analyst at Brean Capital

Got it. All right, thank you both for that. 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?

Darren Guidry, President

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, is 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 owned—approximately $7 million of improvement there. So overall, between now and the end of the year, and many happening throughout the next five months, we should exceed about $30 million of improvement in special assets.

Christopher Marinek, Analyst at Brean Capital

Good. Thank you, Darren. That's very helpful. I appreciate it. And thanks again for hosting the call this morning.

John Bordelon, President and CEO

Thank you, Chris.

David Kirkley, Chief Financial Officer

Thanks, Chris.

OPERATOR

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.

John Bordelon, President and CEO

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. Appreciate your interest in Home Bancorp Inc. Have a great day.

OPERATOR

The conference has now concluded. Thank you for attending today's presentation. You may disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.