Home Bancorp Announces 2018 Fourth Quarter Results And Declares Quarterly Dividend

LAFAYETTE, La., Jan. 29, 2019 /PRNewswire/ -- Home Bancorp, Inc. (Nasdaq: "HBCP") (the "Company"), the parent company for Home Bank, N.A. (the "Bank") (www.home24bank.com), reported results for the fourth quarter and full year ended December 31, 2018.  Net income for the fourth quarter of 2018 was $8.1 million, or $0.87 per diluted common share ("EPS"), compared to $8.3 million, or $0.89 EPS, for the third quarter of 2018. The fourth quarter concluded a record earnings year for the Company with net income totaling $31.6 million and EPS of $3.40, which represents an 88% increase in net income and a 49% increase in EPS for 2018 compared to 2017.

Key performance metrics for the fourth quarter of 2018 include:

• Return on average assets, return on average equity and return on average tangible common equity were 1.50%, 10.75% and 14.36%, respectively;
• Loans grew at an annualized rate of 4%;
• Acquired nonperforming assets increased $4.9 million, net charge-offs totaled $1.0 million and the provision for loan losses was $1.6 million;
• Deposits were essentially flat and the cost of deposits increased 19 basis points;
• The net interest margin declined by 16 basis points;
• Two federal income tax related items reduced income tax expense by $1.2 million; and
• Common equity ratio and tangible common equity ratio grew to 14.12% and 11.40%, respectively, as of December 31, 2018

"For the fifth consecutive year, we posted record earnings," stated John W. Bordelon, President and Chief Executive Officer of the Company and the Bank. "We've achieved this level of success because of a growing number of wonderful customers and the dedicated employees who provide the highest level of service."

"As some of our larger competitors increasingly reduce their face-to-face interactions with their business customers," continued Bordelon, "we're seeing more and more opportunity to build meaningful relationships with those businesses and the people they serve."

The Company also announced that its Board of Directors declared a quarterly cash dividend on shares of its common stock of $0.20 per share payable on February 22, 2019, to shareholders of record as of February 11, 2019.

Loans and Credit Quality

Loans totaled $1.6 billion at December 31, 2018, an increase of $16.7 million, or 1%, from September 30, 2018.  Construction and land and commercial real estate ("CRE") loans fueled loan growth during the fourth quarter of 2018. Construction loan growth was across multiple industries, including education, medical, industrial services and multi-family properties.  CRE loan growth was driven primarily by a participation buyback related to the St. Martin Bancshares, Inc. ("SMB") acquisition.                 

The following table sets forth the composition of the Company's loan portfolio as of the dates indicated.  

Nonperforming assets ("NPAs"), excluding purchased credit impaired loans, totaled $26.0 million at December 31, 2018, an increase of $4.5 million, or 21%, compared to September 30, 2018. The ratio of NPAs to total assets was 1.21% at December 31, 2018, compared to 1.00% at September 30, 2018.   The rise in NPAs during the fourth quarter was due primarily to the acquired SMB loan portfolio.  Management believes it has sufficient fair-value discounts recorded on the SMB loan portfolio to absorb loan losses associated with these loans without the need for additional provision to the allowance for loan losses.    

The Company recorded net loan charge-offs of $1.0 million during the fourth quarter of 2018, compared to net loan charge-offs of $15,000 for the third quarter of 2018.  The increase in net loan charge-offs was primarily the result of a $1.0 million charge-off related to a previously recognized non-performing commercial and industrial loan.

The Company's provision for loan losses for the fourth quarter of 2018 was $1.6 million, compared to $786,000 for the third quarter of 2018.  The provision for loan losses during the fourth quarter related primarily to downgrades in two organic loan relationships and loan growth. 

The ratio of the allowance for loan losses to total loans was 0.99% at December 31, 2018, compared to 0.96% at September 30, 2018.  Excluding acquired loans, the ratio of the allowance for loan losses to total loans was 1.36% at December 31, 2018, compared to 1.38% at September 30, 2018.

Direct Energy Exposure

The outstanding balance of direct loans to borrowers in the energy sector totaled $45.6 million, or 3% of total outstanding loans, at December 31, 2018, compared to $46.9 million at September 30, 2018.  Unfunded loan commitments to customers in the energy sector totaled $10.1 million at December 31, 2018, compared to $10.2 million at September 30, 2018.    At December 31, 2018, loans constituting 97% of the balance of our direct energy-related portfolio were performing in accordance with their original loan agreements. The Company holds no shared national credits.

The allowance for loan losses attributable to originated direct energy-related loans totaled 2.39% of the outstanding balance of originated energy-related portfolio at December 31, 2018, compared to 2.50% at September 30, 2018.

Deposits

Total deposits were $1.8 billion at December 31, 2018, an increase of $1.9 million compared to September 30, 2018.   The cost of interest-bearing deposits increased 19 basis points during the quarter as management increased rates on several accounts and has offered special rates to attract new deposits. 

The following table sets forth the composition of the Company's deposits as of the dates indicated.

Net Interest Income

Net interest income for the fourth quarter of 2018 totaled $22.7 million, a decrease of $855,000, or 4%, compared to the third quarter of 2018. Net interest income decreased primarily due to a $622,000 increase in the cost of deposits and the absence of $515,000 of interest income recognized in the third quarter of 2018 upon the repayment in full of certain loans which had been on nonaccrual status.  The Company's net interest margin was 4.58% for the fourth quarter of 2018, 16 basis points lower than the third quarter of 2018, primarily due to the reasons noted above.

The following table sets forth the Company's average volume and rate of its interest-earning assets and interest-bearing liabilities for the periods indicated.  Taxable equivalent ("TE") yields on investment securities are calculated using a marginal tax rate of 21%. 

Noninterest Income

Noninterest income for the fourth quarter of 2018 totaled $3.3 million, a decrease of $62,000, or 2%, compared to the third quarter of 2018.  Decreases in service fees and charges and write-downs on two soon-to-be-relocated branch locations drove the decrease in noninterest income. The decrease in noninterest income was partially offset by an increase in the gains on the sale of mortgage loans and additional fee income generated from a $2.6 million equity investment in a New Market Tax Credit ("NMTC") recorded in other income.

Noninterest Expense

Noninterest expense for the fourth quarter of 2018 totaled $15.6 million, a decrease of 1% compared to the third quarter of 2018. A decrease in franchise and shares tax expense was partially offset by an increase in other expense. Other expenses for the fourth quarter of 2018 increased primarily due to the amortization of the Company's investment in a NMTC totaling $285,000.

Income Tax Expense

Income tax expense for the fourth quarter of 2018 totaled $616,000, a decrease of $1.5 million, or 71%, compared to the third quarter of 2018. The Company's effective tax rate for the fourth quarter of 2018 equaled 7.1%, compared to 20.3% for the third quarter of 2018. Income tax expense for the fourth quarter of 2018 was reduced by $1.2 million primarily due to an updated analysis of the Company's depreciation of certain assets as the result of a cost segregation study that reduced fourth quarter income tax expense by $819,000 and a $400,000 reduction related to the recognition of certain tax credits and benefits upon its new investment in a Federal NMTC project.  The benefit of the cost segregation study is not expected to be recurring, while the savings related to NMTC are expected to be achieved annually for the next six years. 

Non-GAAP Reconciliation 

This news release contains financial information determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). The Company's management uses this non-GAAP financial information in its analysis of the Company's performance. In this news release, information is included which excludes acquired loans and intangible assets.  Management believes the presentation of this non-GAAP financial information provides useful information that is helpful to a full understanding of the Company's financial position and operating results. This non-GAAP financial information should not be viewed as a substitute for financial information determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP financial information presented by other companies. 

This news release contains certain forward‑looking statements. Forward‑looking statements can be identified by the fact that they do not relate strictly to historical or current facts.  They often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could" or "may."

Forward‑looking statements, by their nature, are subject to risks and uncertainties.  A number of factors ‑ many of which are beyond our control ‑ could cause actual conditions, events or results to differ significantly from those described in the forward‑looking statements.  Home Bancorp's Annual Report on Form 10-K for the year ended December 31, 2017, describes some of these factors, including risk elements in the loan portfolio, the level of the allowance for losses on loans, risks of our growth strategy, geographic concentration of our business, dependence on our management team, risks of market rates of interest and of regulation on our business and risks of competition. Forward‑looking statements speak only as of the date they are made.  We do not undertake to update forward‑looking statements to reflect circumstances or events that occur after the date the forward‑looking statements are made or to reflect the occurrence of unanticipated events.

 

 

 

 

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SOURCE Home Bancorp, Inc.