Home Bancorp, Inc. 2026 Q3 Earnings Call

Good morning, ladies and gentlemen. Welcome to Home Bancorp's third quarter 2026 earnings call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. At this time, I would like to turn the call over to Home Bancorp's Chairman and CEO, John Bordelon, President Darren Guidry, and Chief Financial Officer, David Kirkley. Mr. Kirkley, please go ahead.

Thank you. Good morning, and welcome to Home Bank's third 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 third quarter. John? Thanks, Dave. Good morning, and thank you for joining our earnings call today.

We appreciate your interest in Home Bank as we discuss our results, expectations for the future, and our approach to creating long-term shareholder value. Before we discuss the quarter, I want to share some personal news. I was informed by our board of directors yesterday of my decision to retire as Chief Executive Officer in January of 2027, and the board has named Darren Guidry, our President, as my successor. I will remain part of Home Bank's leadership as Chairman of the Board, and I look forward to working closely with Darren and the rest of our leadership team in that role. This is a planned and deliberate transition.

When we named Darren President in July, we said we were putting in place a leadership structure to sustain our next phase of growth, and this is the next step in that plan. Darren has more than 40 years of banking experience, more than three decades here at Home Bank. He knows our customers, our markets, our credit culture, as well as everyone in the company. Our executive team has worked closely together for many years, and our shareholders, customers, and employees do not expect any significant change in how we operate. Leading Home Bank has been a privilege of my career. Over my 45 years at the bank, including 33 years as CEO, I have watched Home Bank grow from a Lafayette-based savings institution into one of the leading community banks in the Gulf South.

Since our IPO in 2008, we have completed six acquisitions, expanded into Greater New Orleans, Baton Rouge, Mississippi, and Houston, and grown total assets at a compound annual rate of more than 11% to $3.6 billion with 43 locations. What I'm most proud of, however, is not the size of the balance sheet but the quality of the franchise we have built. We have a core deposit base that is among the most valuable in our region, with a high level of non-interest-bearing deposits and a cost of deposits that's one of the lowest in our peer group. We have a relationship-based lending culture, a strong capital position, and a long record of consistent profitability. Most importantly, we have a team of bankers who are committed to taking care of our customers and our communities.

I am confident that Home Bank's best days are ahead of it and that the company is in very good hands. With that, I'll turn it over to the President and soon-to-be CEO, Darren Guidry, to discuss our third quarter results. Darren? Thank you, John. Before turning to our results, I want to say a few words about John.

No one has had a greater impact on Home Bank. Under John's leadership, the bank has successfully navigated hurricanes, the S&L crisis, the financial crisis, a pandemic, and multiple interest rate cycles. Through all of it, he kept us focused on disciplined underwriting, the strength of our core deposit franchise, and building long-term value for our shareholders. On a personal level, John has been a mentor and a friend to me for more than 30 years. I am honored by the confidence that John and the board have placed in me and in our team. I am very happy that John will continue to help lead Home Bank as Chairman of the board.

His experience and perspective will continue to be a tremendous asset to this company, and I look forward to working with John, the board, and our team as we build on the foundation he established and lead Home Bank into its next chapter. Now, turning to our third quarter results. Yesterday afternoon, we reported third quarter net income of $10.1 million, or $1.28 per share, compared to $1.48 per share in the second quarter. Return on assets was 1.12% for the quarter. Our results were impacted by higher credit-related costs, including elevated foreclosed asset expense and the reversal of interest on loans moved to nonaccrual status. The quarter did demonstrate the resilience of our core earnings. Net interest income reached a record high for Home Bank, and our cost of deposits remained one of the lowest in our peer group.

Loans decreased $4 million in the third quarter. Production was steady, but payoffs were elevated and construction fundings slowed during the quarter. Year to date, loans have grown at an annualized rate of approximately 1.5%, with our Houston market continuing to lead the way at 6% annualized. Looking ahead, our pipeline is healthy. Both our approved commitments and the volume of loans in underwriting are running above normal levels. We expect a good portion of those commitments to close by the end of the year.

The pipeline is well diversified across our markets and loan types and consists primarily of smaller business banking credits with a heavy focus on C&I owner-occupied commercial real estate, along with a few larger commercial relationships. However, as we work through our problem loans, we expect paydowns and payoffs from those workouts to offset a portion of the new production, which will likely temper net loan growth in the near term. We will continue to focus on growing relationships that produce appropriate risk-adjusted returns. Deposits were down slightly in the third quarter. Year to date, deposits have grown at an annualized rate of approximately 4%, and our loan-to-deposit ratio of 91% remains in our target range. Credit was the primary challenge this quarter, and we moved promptly to recognize and address emerging credit issues.

Six loan relationships totaling $19.5 million were placed on nonaccrual status during the quarter, which drove an increase in nonperforming assets. These reflect the individual borrowers' situations rather than stress in any one industry or market. Based on our current assessment, we believe these credits are appropriately reserved, and we are working closely with each borrower to resolve. We also recorded elevated foreclosed asset expense in the third quarter, primarily due to write-downs on properties in other real estate owned, resulting from updated appraisals and list price reductions. We are making progress on resolving these properties with several currently under contract. Going forward, we expect foreclosed asset expense to be lower than what we saw in the third quarter, although likely above historical levels, as we continue to work through our problem assets. We are also seeing some encouraging signs across the rest of our watch list.

Several substandard credits are positioned for upgrades or paydowns, and we expect to see some of those resolutions in the fourth quarter, with others extending into early 2027. While we may see a few additional downgrades through year-end, we do not currently expect any of significant size. Past due loans are limited to credits we've already identified and are actively monitoring. We have workout strategies in place for all substandard and nonaccrual loans. Net charge-offs, which were 7 basis points annualized year to date, may be somewhat elevated over the next couple of quarters as we resolve these credits. Our approach remains the same: identify problems early, work toward resolution, and limit our loss exposure. At the same time, while higher interest rates benefit our net interest income, they could place pressure on certain borrowers over time. We are monitoring these exposures closely as rates move.

Importantly, the fundamentals of Home Bancorp remain very strong with robust capital, a solid reserve position, ample liquidity, and a balance sheet that is well-positioned for a rising rate environment. With that, I'll turn it over to David, our Chief Financial Officer. David? Thanks, Darren. Please feel free to refer to the investor presentation we have provided as I discuss the company's third quarter financial performance.

Net interest income was a record $35.9 million in the third quarter, an increase of $110,000 from the second quarter, and $1.8 million or 5% from a year ago. NIM was 4.19% in the third quarter, down 5 basis points from the second quarter. Loan yields declined 6 basis points to 6.4% as interest reversals of $862,000 on loans moved to nonaccrual status, reduced loan yield by 12 basis points. Excluding the interest reversals, NIM would have been 4.28% up 4 basis points from the second quarter.