Home Bancorp(HBCP) - 2018 Q4 - Annual Report

PART I Business Home Bancorp, Inc. is the bank holding company for Home Bank, N.A., operating 39 banking offices across south Louisiana and west Mississippi - The Company operates as the holding company for Home Bank, N.A., with 39 banking offices in Louisiana and Mississippi[14] - The Bank's primary business is attracting deposits to fund investments in loans and securities, with a strategic focus on originating higher-yield commercial real estate and commercial & industrial loans[16][18] - Growth has been supported by five acquisitions since 2010, expanding the Company's presence in the Northshore, Greater New Orleans, Mississippi, and Acadiana regions[20] - The Company and the Bank are subject to extensive federal regulation by the Federal Reserve (FRB) and the Office of the Comptroller of the Currency (OCC), respectively, with recent legislative changes potentially reducing some regulatory burdens[22][24][26] Risk Factors The Company identifies several key risks to its business, primarily related to its lending activities, market conditions, and operational environment - The company faces increased credit risk from its focus on commercial real estate, multi-family, commercial & industrial, and construction loans, which have grown significantly and carry higher risk than single-family residential loans[69][70] - Operations are highly sensitive to changes in interest rates, which can adversely affect net interest income, loan origination volumes, and asset values[71][73] - Business is geographically concentrated in south Louisiana and west Mississippi, areas with significant exposure to the oil and gas industry, with 2.8% of the loan portfolio in the energy sector as of December 31, 2018[80] - The upcoming implementation of the Current Expected Credit Loss (CECL) accounting standard is expected to require an increase in the allowance for loan losses, potentially having a material adverse effect on financial condition and results of operations[87] - The company is exposed to significant operational risks, including system failures and cybersecurity breaches, which could lead to financial losses, reputational damage, and increased regulatory scrutiny[92][96] Unresolved Staff Comments There are no unresolved staff comments - Not applicable[101] Properties The Company conducts its business through 39 banking offices located across Louisiana and Mississippi - The Company operates from 39 banking offices, of which 37 are owned and 2 are leased[102] Legal Proceedings The Company is involved in various legal actions arising from the normal course of business - Management believes that ongoing legal proceedings from normal business operations will not materially impact the Company's financial condition[103] Mine Safety Disclosures This item is not applicable to the Company - Not applicable[105] PART II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Home Bancorp, Inc.'s common stock trades on the Nasdaq Global Select Market under the symbol "HBCP" - The Company's common stock is listed on the Nasdaq Global Select Market under the symbol "HBCP" with 9,459,050 shares outstanding as of year-end 2018[107] Share Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | | October 1 - October 31, 2018 | 471 | $ 40.77 | 358,215 | | November 1 - November 30, 2018 | 17 | $ 38.89 | 358,198 | | December 1 - December 31, 2018 | 22,116 | $ 35.93 | 336,082 | | Total | 22,604 | $ 36.03 | 336,082 | Selected Financial Data The company presents five years of selected financial data, showing consistent growth in total assets, loans, and deposits Consolidated Financial Condition (dollars in thousands) | (dollars in thousands) | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total assets | $2,153,658 | $2,228,121 | $1,556,732 | $1,551,912 | $1,221,415 | | Loans receivable, net | 1,633,406 | 1,642,988 | 1,215,323 | 1,214,818 | 901,208 | | Deposits | 1,773,217 | 1,866,227 | 1,248,072 | 1,244,217 | 993,573 | | Shareholders' equity | 304,040 | 277,871 | 179,843 | 165,046 | 154,144 | Consolidated Statements of Operations (dollars in thousands, except per share data) | (dollars in thousands, except per share data) | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net interest income | 92,006 | 67,849 | 62,416 | 54,544 | 51,039 | | Net income | $ 31,590 | $16,824 | $16,008 | $12,550 | $ 9,872 | | Earnings per share - diluted | $ 3.40 | $ 2.28 | $ 2.25 | $ 1.79 | $ 1.42 | | Cash dividends per share | $ 0.71 | $ 0.55 | $ 0.41 | $ 0.30 | $ 0.07 | Key Performance Ratios | | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Return on average assets | 1.46% | 1.04% | 1.04% | 0.94% | 0.80% | | Return on average common equity | 10.88% | 8.63% | 9.19% | 7.83% | 6.65% | | Book value per common share | $ 32.14 | $ 29.57 | $ 24.47 | $ 22.80 | $ 21.64 | | Tangible book value per common share (Non-GAAP) | 25.16 | 22.33 | 22.73 | 20.68 | 21.04 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion provides a detailed analysis of the company's financial performance and condition for 2018 - The Company reported a record net income of $31.6 million for 2018, an 87.8% increase from 2017, with diluted EPS rising 49.1% to $3.40, significantly impacted by the December 2017 acquisition of St. Martin Bancshares, Inc. ("SMB")[123] - Total assets decreased by 3.3% to $2.2 billion, primarily due to a reduction in cash, while total loans remained stable at $1.6 billion as organic growth was offset by paydowns in the acquired loan portfolio[124] - Net interest income grew by 35.6% to $92.0 million in 2018, driven by a 37.5% increase in interest income from the full-year inclusion of SMB's assets, which outpaced a 57.4% rise in interest expense[191] - Noninterest expense increased by 36.9% to $63.2 million, mainly due to higher compensation, data processing, and occupancy costs associated with the expanded operations following the SMB acquisition[211][212] - Income tax expense decreased by 46.4% to $6.7 million, reflecting the lower federal corporate tax rate from the 2017 Tax Cuts and Jobs Act, a cost segregation study, and benefits from a New Market Tax Credit investment[131][214] Quantitative and Qualitative Disclosures about Market Risk This section incorporates by reference the information from the 'Asset/Liability Management and Market Risk' section within Item 7 - The disclosures required for this item are provided in the "Asset/Liability Management and Market Risk" section of Item 7[238] Projected Net Interest Income Sensitivity | Shift in Interest Rates (in bps) | % Change in Projected Net Interest Income | | :--- | :--- | | +300 | (1.5)% | | +200 | (0.6) | | +100 | 0.0 | Financial Statements and Supplementary Data This section includes the company's consolidated financial statements for the fiscal year ended December 31, 2018, audited by Porter Keadle Moore, LLC - The independent registered public accounting firm, Porter Keadle Moore, LLC, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2018[242] Consolidated Statements of Financial Condition (dollars in thousands) | (dollars in thousands) | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Total Assets | $2,153,658 | $2,228,121 | | Total loans, net | 1,633,406 | 1,642,988 | | Goodwill and core deposit intangibles | 66,055 | 68,033 | | Total Liabilities | 1,849,618 | 1,950,250 | | Total deposits | 1,773,217 | 1,866,227 | | Total Shareholders' Equity | 304,040 | 277,871 | Consolidated Statements of Income (dollars in thousands) | (dollars in thousands) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net interest income | 92,006 | 67,849 | 62,416 | | Provision for loan losses | 3,943 | 2,317 | 3,200 | | Noninterest income | 13,447 | 9,962 | 11,157 | | Noninterest expense | 63,225 | 46,177 | 46,797 | | Net Income | $ 31,590 | $16,824 | $16,008 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with the company's accountants on accounting and financial disclosure - Not applicable[472] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of December 31, 2018 - Based on an evaluation as of December 31, 2018, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[474] - Management's assessment concluded that the Company maintained effective internal control over financial reporting as of December 31, 2018[477] - No material changes to the internal control over financial reporting occurred during the fourth quarter of 2018[478] Other Information There is no other information to report for this item - Not applicable[479] PART III Directors, Executive Officers and Corporate Governance The information required for this item is incorporated by reference from the Company's definitive proxy statement for its 2019 Annual Meeting of Shareholders - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2019 Annual Meeting of Shareholders Proxy Statement[481] Executive Compensation Details regarding executive compensation are incorporated by reference from the Company's definitive proxy statement for its 2019 Annual Meeting of Shareholders - Information regarding executive compensation is incorporated by reference from the 2019 Proxy Statement[484] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership by certain beneficial owners and management is incorporated by reference from the Company's 2019 proxy statement - Information regarding security ownership is incorporated by reference from the 2019 Proxy Statement[487] Equity Compensation Plan Information | Plan Category | Number of securities to be issued upon exercise (a) | Weighted-average exercise price of outstanding options (b) | Number of securities remaining available for future issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 407,748 | $ 19.78 | 153,637 | Certain Relationships and Related Transactions, and Director Independence The required information concerning related party transactions and director independence is incorporated by reference from the Company's definitive proxy statement for its 2019 Annual Meeting of Shareholders - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2019 Proxy Statement[488] Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the Company's 2019 proxy statement - Information regarding principal accounting fees and services is incorporated by reference from the 2019 Proxy Statement[489] PART IV Exhibits and Financial Statement Schedules This section lists the financial statements included in Item 8 and provides an index of all exhibits filed as part of the Form 10-K - This item lists the financial statements incorporated from Item 8 and provides an index of exhibits filed with the Form 10-K[492][493] Form 10-K Summary This item is not applicable - Not applicable[498]