HOME BANCORP, INC. Q1 FY2025 earnings call

• Loan growth: Loans grew $29.1 million in Q1 (4% annualized) with continued growth in April, and guidance for 4%-6% growth in 2025.
• NIM and earnings: NIM expanded to 3.91%, expected to continue expanding in 2025 without rate cuts. Net interest income stable in Q1, expected to increase due to loan growth, asset yield increase, and moderating funding costs.
• Houston market: Optimizing Houston market, opened LPO and hired commercial team, purchased branch building for renovation.
• Executive visits: Entire executive team visited branches, hosting crawfish boils to maintain family culture and gather feedback from staff and customers.
• Credit quality: Net charge-offs were $32,000, nonperforming assets increased to $21.5 million due to downgrade of two relationships, but sufficient collateral and confidence in resolution.

In the first quarter, Home Bancorp reported net income of $11 million or $1.37 per share, a 13% increase from the fourth quarter and 20% from a year ago. The net interest margin expanded to 3.91% for the fourth consecutive quarter, and return on assets increased to 1.29%. Loans grew by $29.1 million (4% annualized) in Q1, with continued growth in April. Deposits increased at a 7% annualized rate, with noninterest-bearing deposits at $21.9 million (27% of total deposits) and CDs also on the rise. Loan growth is guided at 4%-6% for 2025. Revenue contribution: Loans grew by $29.1 million, deposits increased with various components contributing to the overall balance sheet.

• Loan growth: Expect loans to grow at 4% to 6% annually.
• NIM and earnings: Anticipate NIM and earnings to continue expanding in 2025 even without Fed rate cuts. Asset yields to increase as new originations drive average loan yields higher and lower-yielding securities mature.
• Deposit costs: Expect pace of deposit cost reductions to moderate in coming quarters, with ability to adjust CD portfolio due to 62% maturing in next 6 months.

• Economic and tariff uncertainties: Headlines about economy and tariffs may quickly change economic direction.
• Loan issues: Two loan relationships downgraded, nonperforming assets increased, but collateral is sufficient and resolution expected by end of year.
• CD portfolio: 62% of CD portfolio matures in next 6 months, need to adjust to market conditions as pace of rate reductions may moderate.

Q: Touch on go-forward margin expectation after Q1 improvement and NIM for March and behavior with 25 basis point rate cut A: John said slowdown in Q2 deposit cost drop, David added about loan yield repricing and loan portfolio structure affecting NIM, March NIM was ~3.95%, anticipates stable to slightly increasing NIM with 25 basis point cut Q: Discuss two loan relationships that moved to nonaccrual in the quarter, sectors and geographies A: One in Mississippi for condominium development with sales issues, given until end of May to reevaluate; one in Houston hotel undergoing renovations, property in good location with potential if oil/gas returns Q: Anecdotal on office portfolio maturities and resets A: No major changes, maturities have mostly renewed, office portfolio in Baton Rouge with two properties, one condo high-rise and one fully occupied by Louisiana government, performing well Q: Reconcile asset sensitivity with liability sensitivity on rate cuts A: David explained slightly asset-sensitive, projecting rising NIM even in 100 basis point rate cut, loan portfolio mix and deposit beta affecting sensitivity Q: Catch-up on deposit betas and share repurchase aggressiveness A: David said deposit betas will play out over time, John said share repurchases likely not as aggressive as Q1 but will act when stock price is attractive