Home Bancorp, Inc. Announces 2020 Third Quarter Results And Declares Quarterly Dividend


Home Bancorp, Inc. A

iCrowdNewswire   Oct 28, 20202:02 PM ET

Home Bancorp, Inc., the parent company for Home Bank, N.A. (the “Bank”) (www.home24bank.com), reported financial results for the third quarter of 2020.  For the quarter, the Company reported net income of $8.8 million, or $1.01 per diluted common share (“diluted EPS”), up $6.3 million from $2.5 million, or $0.29 diluted EPS, for the second quarter of 2020.

“This year has created tremendous challenges for our customers due to the impact of COVID-19,” said John W. Bordelon, Chairman, President, and Chief Executive Officer of the Company and the Bank.  “The Bank is well positioned for any fallout from the pandemic financially with the reserves we established over the first two quarters of 2020.  While our delinquencies have not escalated at this point in the economic cycle, we believe that as the stimulus from the Federal Government stops, problems will arise until the virus fades or a cure is created.”

“It would be very understandable for the people of Louisiana to struggle and potentially fail due to the pandemic, a downturn in oil prices, and two hurricanes.  However, citizens of Louisiana are very resilient and will find a way to make it through these troubling times to better days.  We are very proud of the effort put forth by our employees to serve our customers for the last six months.  Together, we will move beyond this crisis and help our communities grow.”

COVID-19 Response

Banking operations have not been restrained by state and local government COVID-19 restrictions. However, we have adapted to protect our employees and customers by working remotely, enhancing cleaning procedures, and enacting several other measures to reduce the risk of transmission of the virus. State government imposed restrictions were relaxed in September 2020 within our Louisiana and Mississippi markets, though the states have not fully reopened. The changes in restrictions primarily increased capacity limits of certain businesses and relaxed social distancing guidelines.

During the second and third quarters of 2020, the Company funded approximately 3,072 loans totaling $262.2 million under the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”). At September 30, 2020, the total recorded net investment in PPP loans was $254.5 million, of which approximately 2,160 loans with an aggregate outstanding balance of $35.2 million were for amounts of $50,000 or less.

To give immediate financial support to our customers, the Company began providing principal and/or interest payment relief options in March 2020.  When we last reported the level of such deferrals in our second quarter Form 10-Q (as of August 4, 2020), $113.9 million, or 6% of total loans, were under deferral agreements. As of September 30, 2020, the level of deferrals decreased to $70.2 million, or 4% of total loans. The level of COVID-19 related deferrals formerly totaled 558.8 million, or 28% of total loans, at June 30, 2020. Of the loans that have exited deferral agreements, $469.0 million, or 98%, were current and performing as of September 30, 2020.

Third Quarter 2020 Highlights

  • Net income totaled $8.8 million, up $6.3 million, or 252%, from the prior quarter primarily due to the absence of provisions for credit losses on loans and unfunded lending commitments during the third quarter of 2020.
  • The Company recorded no provision for loan losses primarily due to limited changes to our assessment of the economic impact of the COVID-19 pandemic and the absence of loan growth from the previous quarter.
  • Loans totaled $2.0 billion at September 30, 2020, down $10.6 million, or less than 1%, from June 30, 2020
  • The allowance for loan losses totaled $33.0 million, or 1.69% of total loans, at September 30, 2020.  The allowance for credit losses (“ACL”), which includes the allowance for unfunded lending commitments, totaled $36.6 million, or 1.87% of total loans, at September 30, 2020.  Excluding PPP loans, the ratio of allowance for loan losses to total loans and the ratio for allowance for credit losses was 1.94% and 2.15%, respectively. 
  • Nonperforming assets totaled $24.8 million, or 0.96% of total assets, down $3.1 million from June 30, 2020 primarily due to pay-downs on nonaccrual loans.
  • Preliminary Tier 1 leverage capital and total risk-based capital ratios were 9.44% and 15.29% at September 30, 2020, compared to 9.11% and 14.83% at June 30, 2020.
  • The net interest margin was 3.82% for the three months ended September 30, 2020, up six basis points from the second quarter of 2020 primarily due to a decrease in the cost of interest-bearing deposits.
  • The average yield on total interest-bearing deposits was 0.60% in the third quarter of 2020, down 18 basis points from the second quarter of 2020.

Loans

Loans totaled $2.0 billion at September 30, 2020, down $10.6 million, or less than 1%, from June 30, 2020. The following table summarizes the changes in the Company’s loan portfolio from June 30, 2020 to September 30, 2020. 

   

September 30,

 

June 30,

 

Increase/(Decrease)

(dollars in thousands)

 

2020

 

2020

 

Amount

 

Percent

Real estate loans:

               

One- to four-family first mortgage

 

$

409,282

   

$

431,999

   

$

(22,717)

   

(5)

%

Home equity loans and lines

 

67,766

   

72,956

   

(5,190)

   

(7)

 

Commercial real estate

 

707,638

   

689,942

   

17,696

   

3

 

Construction and land

 

201,575

   

203,592

   

(2,017)

   

(1)

 

Multi-family residential

 

86,619

   

81,635

   

4,984

   

6

 

Total real estate loans

 

1,472,880

   

1,480,124

   

(7,244)

   

 

Other loans:

               

Commercial and industrial

 

443,480

   

444,728

   

(1,248)

   

 

Consumer

 

38,937

   

41,073

   

(2,136)

   

(5)

 

Total other loans

 

482,417

   

485,801

   

(3,384)

   

(1)

 

Total loans

 

$

1,955,297

   

$

1,965,925

   

$

(10,628)

   

(1)

%

During the third quarter of 2020, substantial commercial real estate and multi-family residential loan growth was overcome by pay-downs across certain other segments of the loan portfolio. In particular, the Company experienced a steep decline in residential mortgages primarily due to refinances as borrowers sought to acquire lower interest rates.

Commercial real estate loan growth was strongest in our Acadiana market, which accounted for approximately 51% of the increase in commercial real estate loans. The remaining increase in the commercial real estate portfolio was primarily spread across the Northshore, New Orleans, and Baton Rouge markets.  Commercial real estate loan growth in Acadiana was primarily attributable to owner-occupied loans to borrowers in the healthcare sector. Multi-family residential loan growth was primarily attributable to our Northshore market.

At September 30, 2020, the total recorded investment in PPP loans was $254.5 million, up $4.9 million or 2% from June 30, 2020. At September 30, 2020, PPP loans are reported net of $7.6 million in deferred lender fees, which will be amortized into interest income over the life of the loans (on a contractual basis, approximately 2 years on average).

Credit Quality and Allowance for Credit Losses

Nonperforming assets (“NPAs”) totaled $24.8 million, or 0.96% of total assets, at September 30, 2020,  down $3.1 million, or 11%, from $28.0 million, or 1.06% of total assets, at June 30, 2020. During the third quarter of 2020, approximately $3.0 million in acquired nonaccrual loans related to a single commercial relationship were paid-off.

The Company recorded net loan charge-offs of $821,000 during the third quarter of 2020, compared to net loan charge-offs of $1.1 million for the second quarter of 2020. During the third quarter of 2020, $1.4 million of Company’s originated individually evaluated loans were eliminated through partial pay-offs and subsequent charge-offs of the remaining balances. These loans were related to a single commercial relationship and were classified as substandard prior to the COVID-19 crisis. Net charge-offs attributable to these individually evaluated loans totaled $806,000 for the third quarter of 2020.

Beginning in March 2020, in response to the economic challenges brought on by the COVID-19 crisis, we began offering our borrowers payment relief options primarily in the form of deferrals of principal and/or interest payments for an initial term of up to three months.  When we last reported the level of such deferrals in our second quarter Form 10-Q (as of August 4, 2020), $113.9 million, or 6% of total loans, were under deferral agreements.  As of September 30, 2020, the level of deferrals has decreased to $70.2 million, or 4% of total loans. The level of COVID-19 related deferrals formerly totaled 558.8 million, or 28% of total loans, at June 30, 2020. Of the loans that have exited deferral agreements, $469.0 million, or 98%, are current and performing as of September 30, 2020.

The Company recorded no provision for loan losses for the third quarter of 2020 primarily due to limited changes in our assessment of the economic impact of the COVID-19 pandemic, our assessment of all other risk factors in the loan portfolio and the absence of loan growth from the previous quarter. The provision for loan losses for the nine months ending September 30, 2020 totaled $12.7 million, up $10.4 million from the same period in 2019.  Changes in expected losses consider various factors including the changing economic activity, potential mitigating effects of governmental stimulus, the duration of the health crisis, customer specific information impacting changes in risk ratings, projected delinquencies and the impact of industry-wide loan modification efforts, among other factors.

The following table provides a summary of the loan portfolio and related reserves at September 30, 2020. We have separately identified certain information regarding PPP loans which, due to the existence of full repayment guarantees from the SBA as well as the likelihood that the vast majority of such loans will be forgiven, we believe entail minimal credit risk to the Company.

(dollars in thousands)

 

Total Loans

 

PPP Loans

 

Total ACL

 

ACL to
Total Loans

 

ACL to
Total Non-PPP
Loans

September 30, 2020

                   

Retail CRE

 

$

189,757

   

$

   

$

6,833

   

3.60

%

 

3.60

%

Hotels and short-term rentals

 

100,029

   

4,067

   

5,099

   

5.10

   

5.31

 

Restaurants and bars

 

92,715

   

31,488

   

3,108

   

3.35

   

5.08

 

Energy

 

31,652

   

   

1,701

   

5.37

   

5.37

 

Credit cards

 

3,725

   

   

375

   

10.07

   

10.07

 

Other loans

 

1,537,419

   

218,932

   

15,886

   

1.03

   

1.20

 

Total

 

$

1,955,297

   

$

254,487

   

$

33,002

   

1.69

%

 

1.94

%

                     

Unfunded lending commitments(1)

 

   

   

3,637

   

   

 

Total

 

$

1,955,297

   

$

254,487

   

$

36,639

   

1.87

%

 

2.15

%

                     

(1)

At September 30, 2020, the allowance of $3.6 million related to unfunded lending commitments of $326.8 million. The ACL on unfunded lending commitments is recorded within accrued interest payable and other liabilities on the Consolidated Statements of Financial Condition.

Investment Securities

The following table summarizes the composition of the Company’s investment securities portfolio at September 30, 2020.

(dollars in thousands)

 

Recorded
Investment

Available-for-sale

   

U.S. agency mortgage-backed

 

$

123,152

 

Collateralized mortgage obligations

 

99,157

 

Municipal bonds

 

20,817

 

U.S. government agency

 

6,413

 

Corporate bonds

 

2,039

 

Total available-for-sale

 

251,578

 

Held to Maturity

   

Municipal Bonds

 

2,942

 

Total investment securities

 

$

254,520

 
     

Securities available-for-sale (“AFS”) made up 99% of total investment securities and net unrealized gains on AFS securities totaled $6.7 million at September 30, 2020.

Deposits

Total deposits decreased $59.2 million, or 3%, from June 30, 2020 to $2.2 billion at September 30, 2020. The following table summarizes the changes in the Company’s deposits from June 30, 2020 to September 30, 2020.

   

September 30,

 

June 30,

 

Increase/(Decrease)

(dollars in thousands)

 

2020

 

2020

 

Amount

 

Percent

Demand deposits

 

$

629,345

   

$

647,789

   

$

(18,444)

   

(3)

%

Savings

 

242,849

   

237,168

   

5,681

   

2

 

Money market

 

336,310

   

305,668

   

30,642

   

10

 

NOW

 

620,081

   

688,336

   

(68,255)

   

(10)

 

Certificates of deposit

 

378,909

   

387,743

   

(8,834)

   

(2)

 

Total deposits

 

$

2,207,494

   

$

2,266,704

   

$

(59,210)

   

(3)

%

The average rate on interest-bearing deposits decreased 18 basis points from 0.78% for the second quarter of 2020 to 0.60% for the third quarter of 2020. At September 30, 2020, certificates of deposit maturing within the next 12 months totaled  $290.8 million.

Net Interest Income

The net interest margin (“NIM”) increased six basis points from 3.76% for the second quarter of 2020 to 3.82% for the third quarter of 2020 primarily due to a decrease in the cost of interest-bearing deposits, which was down 18 basis points from the second quarter of 2020.

The average loan yield was 4.94% for the third quarter of 2020, down eight basis points from the second quarter of 2020 primarily due to the full quarter impact of outstanding PPP loans.  Outstanding PPP loans negatively impacted the average loan yield by 34 basis points and the NIM by 14 basis points during the third quarter of 2020. During the second quarter of 2020,  outstanding PPP loans negatively impacted the average loan yield by 21 basis points and the NIM by 6 basis points. Loan income from deferred PPP lender fees totaled  $1.1 million during the third quarter of 2020 and $882,000 during the second quarter of 2020. The remaining balance of $7.6 million in deferred lender fees will be amortized into interest income over the life of the PPP loans. 

Loan accretion income from acquired loans totaled $847,000 for the third quarter of 2020 and $746,000 for the second quarter of 2020. At September 30, 2020, variable rate loans totaled $460.8 million, or 24% of total loans.

The following table summarizes 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 have been calculated using a marginal tax rate of 21%.

   

For the Three Months Ended

   

September 30, 2020

 

June 30, 2020

(dollars in thousands)

 

Average
Balance

 

Interest

Average
Yield/ Rate

 

Average
Balance

 

Interest

Average
Yield/ Rate

Interest-earning assets:

                   

Loans receivable

 

$

1,971,174

   

$

24,769

 

4.94

%

 

$

1,928,185

   

$

24,371

 

5.02

%

Investment securities (TE)

 

252,314

   

967

 

1.56

   

256,069

   

1,182

 

1.88

 

Other interest-earning assets

 

170,957

   

106

 

0.25

   

186,127

   

117

 

0.25

 

Total interest-earning assets

 

$

2,394,445

   

$

25,842

 

4.25

%

 

$

2,370,381

   

$

25,670

 

4.31

%

                     

Interest-bearing liabilities:

                   

Deposits:

                   

Savings, checking, and money market

 

$

1,195,455

   

$

1,136

 

0.38

%

 

$

1,157,239

   

$

1,347

 

0.47

%

Certificates of deposit

 

381,949

   

1,232

 

1.28

   

391,380

   

1,665

 

1.71

 

Total interest-bearing deposits

 

1,577,404

   

2,368

 

0.60

   

1,548,619

   

3,012

 

0.78

 

Other borrowings

 

5,539

   

53

 

3.81

   

5,539

   

53

 

3.86

 

FHLB advances

 

34,612

   

149

 

1.73

   

70,460

   

188

 

1.07

 

Total interest-bearing liabilities

 

$

1,617,555

   

$

2,570

 

0.63

%

 

$

1,624,618

   

$

3,253

 

0.80

%

                     

Net interest spread (TE)

       

3.62

%

       

3.51

%

Net interest margin (TE)

       

3.82

%

       

3.76

%

Noninterest Income

Noninterest income for the third quarter of 2020 totaled $3.8 million, up $691,000, or 22%, from the second quarter of 2020 primarily due to increases in gains on the sale of loans (up $262,000), income from bank card fees (up $204,000) and income from service fees and charges on deposit accounts (up $181,000).

Noninterest Expense

Noninterest expense for the third quarter of 2020 totaled $16.1 million, up $121,000, or 1%, from the second quarter of 2020. The increase in noninterest expense was primarily due to increases in compensation and benefits expense, regulatory fees and marketing and advertising expense, partially offset by the absence of a provision for credit losses on unfunded lending commitments.

Compensation and benefits expense was up $378,000, from the second quarter of 2020 primarily due to bonuses paid during the third quarter of 2020.

Regulatory fees were up $164,000, from the second quarter of 2020 primarily due to an increase in FDIC assessments. Large provisions for loan losses, the impact of CECL adoption and dividends during the first half of 2020  reduced total shareholders’ equity and resulted in a less favorable leverage ratio, which is used to compute FDIC assessments.

The Company recorded no provision for credit losses on unfunded lending commitments for the third quarter of 2020 primarily due to limited changes in our assessment of the economic impact of the COVID-19 pandemic and the absence of loan growth from the previous quarter. The provision for credit losses on unfunded lending commitments totaled $1.3 million for the nine months ending September 30, 2020.

Capital and Liquidity

The Company’s tangible common equity ratio was 9.93% and 9.54% at September 30, 2020 and June 30, 2020, respectively. At September 30, 2020, the Bank’s preliminary Tier 1 leverage capital ratio was 9.44%, up 33 basis points from June 30, 2020, and preliminary total risk-based capital ratio was 15.29%, up 46 basis points from June 30, 2020. Loans covered under the PPP are included in the Bank’s Tier 1 leverage capital ratio.

The following table summarizes the Company’s primary and secondary sources of liquidity.

   

September 30,

(dollars in thousands)

 

2020

Cash and cash equivalents

 

$

185,836

 

Unpledged investment securities, amortized cost

 

116,161

 

FHLB advance availability

 

775,313

 

Unsecured lines of credit

 

55,000

 

Federal Reserve discount window availability

 

500

 

Total primary and secondary liquidity

 

$

1,132,810

 

Dividend and Share Repurchases

The Company announced that its Board of Directors declared a quarterly cash dividend on shares of its common stock of $0.22 per share payable on November 20, 2020, to shareholders of record as of November 9, 2020. 

During the third quarter, the Company completed the remaining share repurchases under the 2019 Repurchase Plan and announced the approval of a new repurchase program (the “2020 Repurchase Plan”).  The Company repurchased 135,224 shares of its common stock during the third quarter of 2020 at an average price per share of $24.94.  An additional 391,692 shares remain eligible for purchase under the 2020 Repurchase Plan.  The book value per share and tangible book value per share of the Company’s common stock was $35.48 and $28.30, respectively, at September 30, 2020.

Contact Information:

www.home24bank.com


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