Home Bancorp(HBCP) - 2025 Q2 - Quarterly Report

Cover Page and General Information The company is designated as an accelerated filer with 7.82 million common shares outstanding as of July 31, 2025 - The company is designated as an accelerated filer[3] - As of July 31, 2025, the company had 7,824,751 common shares outstanding[3] Registered Securities Information | Title of each class | Trading symbol(s) | Name of each exchange on which registered | | :--- | :--- | :--- | | Common Stock | HBCP | NASDAQ Stock Market | Table of Contents The report is divided into two parts: financial information and other information, covering consolidated financial statements, management's discussion, market risk, controls, legal proceedings, risk factors, and exhibits - The report is divided into two main parts: Part I for financial information and Part II for other information[4][5] - Financial information includes consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures[5] - Other information covers legal proceedings, risk factors, equity security sales, defaults, mine safety disclosures, and exhibits[5] Glossary of Defined Terms This section explains abbreviations and defined terms used in the report, such as ACL, ALL, and AOCI, and clarifies the meaning of 'we,' 'our,' or 'us' - The glossary explains abbreviations and defined terms used in the report, such as ACL (Allowance for Credit Losses), ALL (Allowance for Loan Losses), and AOCI (Accumulated Other Comprehensive Income)[7][8] - 'We,' 'our,' or 'us' refer to Home Bancorp, Inc. and its consolidated subsidiaries[7] PART I - FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents the company's unaudited consolidated financial statements as of June 30, 2025, including balance sheets, income statements, comprehensive income, equity changes, cash flows, and related notes on accounting policies, investments, and fair value measurements Consolidated Statements of Financial Condition As of June 30, 2025, total assets increased to $3.49 billion, deposits grew 4.6% to $2.91 billion, and shareholders' equity rose 3.2% to $409 million compared to December 31, 2024 Consolidated Statements of Financial Condition Key Data | Metric | June 30, 2025 (thousand dollars) | December 31, 2024 (thousand dollars) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | 3,491,455 | 3,443,668 | 1.4% | | Cash and Cash Equivalents | 112,595 | 98,548 | 14.3% | | Net Loans | 2,731,106 | 2,685,269 | 1.7% | | Total Deposits | 2,908,234 | 2,780,696 | 4.6% | | Short-term FHLB Advances | 75,000 | 137,220 | -45.3% | | Long-term FHLB Advances | 13,196 | 38,326 | -65.6% | | Total Shareholders' Equity | 408,818 | 396,088 | 3.2% | Consolidated Statements of Income Net income for the three months ended June 30, 2025, was $11.33 million, up 39.6%, with diluted EPS of $1.45, driven by increased net interest income and reduced provision for loan losses Consolidated Statements of Income Key Data (Three Months) | Metric | June 30, 2025 (thousand dollars) | June 30, 2024 (thousand dollars) | Change (%) | | :--- | :--- | :--- | :--- | | Total Interest Income | 48,629 | 45,458 | 7.0% | | Total Interest Expense | 15,278 | 16,065 | -4.9% | | Net Interest Income | 33,351 | 29,393 | 13.5% | | Provision for Loan Losses | 489 | 1,261 | -61.2% | | Noninterest Income | 3,716 | 3,755 | -1.0% | | Noninterest Expense | 22,407 | 21,808 | 2.7% | | Income Tax Expense | 2,841 | 1,961 | 44.9% | | Net Income | 11,330 | 8,118 | 39.6% | | Diluted Earnings Per Share | 1.45 | 1.02 | 42.2% | | Cash Dividends Per Share | 0.27 | 0.25 | 8.0% | Consolidated Statements of Income Key Data (Six Months) | Metric | June 30, 2025 (thousand dollars) | June 30, 2024 (thousand dollars) | Change (%) | | :--- | :--- | :--- | :--- | | Total Interest Income | 95,830 | 89,584 | 7.0% | | Total Interest Expense | 30,730 | 31,290 | -1.8% | | Net Interest Income | 65,100 | 58,294 | 11.7% | | Provision for Loan Losses | 883 | 1,402 | -37.0% | | Noninterest Income | 7,725 | 7,304 | 5.8% | | Noninterest Expense | 43,986 | 42,676 | 3.1% | | Income Tax Expense | 5,662 | 4,203 | 34.7% | | Net Income | 22,294 | 17,317 | 28.7% | | Diluted Earnings Per Share | 2.82 | 2.16 | 30.6% | | Cash Dividends Per Share | 0.54 | 0.50 | 8.0% | Consolidated Statements of Comprehensive Income Comprehensive income for the three months ended June 30, 2025, significantly increased to $13.92 million, primarily due to a substantial rise in unrealized gains on available-for-sale investment securities Consolidated Statements of Comprehensive Income Key Data (Three Months) | Metric | June 30, 2025 (thousand dollars) | June 30, 2024 (thousand dollars) | Change (thousand dollars) | | :--- | :--- | :--- | :--- | | Net Income | 11,330 | 8,118 | 3,212 | | Unrealized gain on available-for-sale investment securities | 3,810 | 36 | 3,774 | | Unrealized (loss) gain on cash flow hedges | (529) | (284) | (245) | | Tax effect | (689) | 52 | (741) | | Other comprehensive income (loss), net of tax | 2,592 | (196) | 2,788 | | Comprehensive Income | 13,922 | 7,922 | 6,000 | Consolidated Statements of Comprehensive Income Key Data (Six Months) | Metric | June 30, 2025 (thousand dollars) | June 30, 2024 (thousand dollars) | Change (thousand dollars) | | :--- | :--- | :--- | :--- | | Net Income | 22,294 | 17,317 | 4,977 | | Unrealized gain on available-for-sale investment securities | 10,822 | (3,125) | 13,947 | | Unrealized (loss) gain on cash flow hedges | (1,343) | 194 | (1,537) | | Tax effect | (1,990) | 616 | (2,606) | | Other comprehensive income (loss), net of tax | 7,489 | (2,315) | 9,804 | | Comprehensive Income | 29,783 | 15,002 | 14,781 | Consolidated Statements of Changes in Shareholders' Equity Total shareholders' equity increased 3.2% to $408.8 million as of June 30, 2025, driven by net income and reduced accumulated other comprehensive losses, partially offset by dividends and share repurchases - Total shareholders' equity was $408.8 million as of June 30, 2025, an increase of $12.7 million from $396.1 million as of December 31, 2024[18][20] - The increase in shareholders' equity was primarily attributable to $22.3 million in net income and $7.5 million in other comprehensive income, partially offset by $14.3 million in common stock repurchases and $4.3 million in cash dividends[20] Summary of Changes in Shareholders' Equity (Six Months) | Item | June 30, 2025 (thousand dollars) | December 31, 2024 (thousand dollars) | | :--- | :--- | :--- | | Common Stock | 78 | 81 | | Additional Paid-in Capital | 166,576 | 168,138 | | Retained Earnings | 265,817 | 259,190 | | Accumulated Other Comprehensive Loss | (22,493) | (29,982) | | Total Shareholders' Equity | 408,818 | 396,088 | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $21.3 million, while investing activities used $28.9 million and financing activities provided $21.6 million, resulting in a $14.0 million net increase in cash Consolidated Statements of Cash Flows Key Data (Six Months) | Cash Flow Type | June 30, 2025 (thousand dollars) | June 30, 2024 (thousand dollars) | | :--- | :--- | :--- | | Net cash from operating activities | 21,325 | 25,293 | | Net cash from investing activities | (28,864) | (57,973) | | Net cash from financing activities | 21,586 | 70,311 | | Net change in cash and cash equivalents | 14,047 | 37,631 | | Cash and cash equivalents at end of period | 112,595 | 113,462 | - In the first half of 2025, cash outflows from investing activities decreased, primarily due to redemptions of available-for-sale securities and a reduction in net loan originations[23] - In the first half of 2025, cash inflows from financing activities decreased, mainly due to net repayments of FHLB advances and increased common stock repurchases[23] Notes to Unaudited Consolidated Financial Statements This section provides detailed notes to the unaudited consolidated financial statements, covering basis of presentation, recent accounting pronouncements, investment securities, EPS, credit quality, derivatives, long-term debt, and fair value measurements 1. Basis of Presentation This note outlines the preparation of unaudited consolidated financial statements in accordance with Form 10-Q and Regulation S-X, confirming all necessary adjustments are included and no significant changes to accounting policies occurred - The financial statements are prepared in accordance with Form 10-Q and Regulation S-X, including all normal recurring adjustments deemed necessary by management[25] - Operating results for the interim periods are not necessarily indicative of results for the entire fiscal year[25] - The company has not made any significant changes to the critical accounting policies disclosed in its annual report as of December 31, 2024[27] 2. Recent Accounting Pronouncements This section details the adoption of ASU 2023-07 and ASU 2023-09 in 2025, which had no material impact, and notes ASU 2024-03 may affect future disclosures, while ASU 2023-06 and ASU 2025-03 are not expected to have a significant impact - The adoption of ASU 2023-07 (Improvements to Reportable Segment Disclosures) and ASU 2023-09 (Improvements to Income Tax Disclosures) had no material impact on the consolidated financial statements[29][30] - ASU 2024-03 (Statement of Comprehensive Income—Disaggregation of Expenses Disclosure) requires disaggregation of certain expenses in the notes to financial statements, and the company is evaluating its impact on disclosures[32] - ASU 2023-06 and ASU 2025-03 are not expected to have a material impact on the consolidated financial statements[31][33] 3. Investment Securities As of June 30, 2025, available-for-sale investment securities had a fair value of $393.5 million with $30.4 million in unrealized losses, primarily long-term, which management does not consider credit-related Investment Securities Portfolio (June 30, 2025) | Security Type | Amortized Cost (thousand dollars) | Unrealized Gains (thousand dollars) | Unrealized Losses (thousand dollars) | Fair Value (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | | Available-for-Sale: | | | | | | U.S. agency mortgage-backed securities | 280,484 | 248 | 21,807 | 258,925 | | Collateralized mortgage obligations | 68,080 | 1 | 1,466 | 66,615 | | Municipal bonds | 53,240 | — | 6,298 | 46,942 | | U.S. government agencies | 16,863 | — | 525 | 16,338 | | Corporate bonds | 4,985 | — | 343 | 4,642 | | Total Available-for-Sale | 423,652 | 249 | 30,439 | 393,462 | | Held-to-Maturity: | | | | | | Municipal bonds | 1,065 | 1 | — | 1,066 | | Total Held-to-Maturity | 1,065 | 1 | — | 1,066 | - As of June 30, 2025, 235 debt securities had unrealized losses, representing 7.5% of their amortized cost, with 224 of these in a loss position for over 12 months; management does not consider these to be credit losses and has not recorded an allowance for credit losses[40] - As of June 30, 2025, the effective duration of the company's investment securities portfolio was 3.6 years, down from 3.9 years as of December 31, 2024[36] 4. Earnings Per Share For the three months ended June 30, 2025, basic EPS was $1.47 and diluted EPS was $1.45, both higher than the prior year, with similar growth for the six-month period Earnings Per Share Data | Metric | June 30, 2025 (Three Months) | June 30, 2024 (Three Months) | June 30, 2025 (Six Months) | June 30, 2024 (Six Months) | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to common shareholders (thousand dollars) | 11,330 | 8,118 | 22,294 | 17,317 | | Weighted average common shares outstanding (thousand shares) | 7,707 | 7,972 | 7,828 | 7,978 | | Diluted weighted average common shares outstanding (thousand shares) | 7,781 | 8,019 | 7,903 | 8,029 | | Basic earnings per share | 1.47 | 1.02 | 2.85 | 2.17 | | Diluted earnings per share | 1.45 | 1.02 | 2.82 | 2.16 | - For the three months ended June 30, 2025, 6,897 common stock options were not included in the diluted EPS calculation as their effect was antidilutive[45] 5. Credit Quality and Allowance for Credit Losses As of June 30, 2025, total loans reached $2.76 billion, up 1.7%, while the total allowance for credit losses was $35.2 million; nonperforming loans significantly increased to $23.3 million, primarily due to loan downgrades Loan Portfolio Composition | Loan Type | June 30, 2025 (thousand dollars) | December 31, 2024 (thousand dollars) | Change (%) | | :--- | :--- | :--- | :--- | | Total real estate loans | 2,311,874 | 2,269,934 | 1.8% | | Total other loans | 452,664 | 448,251 | 1.0% | | Total Loans | 2,764,538 | 2,718,185 | 1.7% | Allowance for Credit Losses (ACL) Summary | Metric | June 30, 2025 (thousand dollars) | December 31, 2024 (thousand dollars) | | :--- | :--- | :--- | | Total allowance for loan losses | 33,432 | 32,916 | | ACL for unfunded loan commitments | 1,730 | 2,700 | | Total Allowance for Credit Losses | 35,162 | 35,616 | - As of June 30, 2025, total nonperforming loans were $23.3 million, a significant increase from $13.6 million as of December 31, 2024, primarily due to four loan relationships becoming nonperforming during 2025[66][148] - As of June 30, 2025, total substandard loans were $49.8 million, an increase of 39.2% from $35.8 million as of December 31, 2024[145][148] - As of June 30, 2025, total foreclosed assets and ORE were $2.1 million, slightly higher than $2.0 million as of December 31, 2024[82] 6. Derivatives and Hedging Activities The company uses interest rate derivatives, primarily swaps, for cash flow hedging of floating-rate liabilities, with designated derivative assets valued at $1.88 million as of June 30, 2025, while non-designated derivatives serve client needs with minimized company risk - The company uses interest rate derivatives to stabilize interest expense and manage interest rate fluctuation risk, primarily through interest rate swap agreements for cash flow hedges of floating-rate liabilities[86] Fair Value of Derivative Financial Instruments | Derivative Type | June 30, 2025 (thousand dollars) | December 31, 2024 (thousand dollars) | | :--- | :--- | :--- | | Designated as Hedging Instruments: | | | | Interest rate swaps - floating rate liabilities (asset) | 1,881 | 3,241 | | Not Designated as Hedging Instruments: | | | | Interest rate contracts (asset) | 279 | 26 | | Interest rate contracts (liability) | 310 | 42 | | Risk participation agreements (liability) | 1 | — | | Net Derivative Assets | 2,160 | 3,267 | | Net Derivative Liabilities | 311 | 42 | - As of June 30, 2025, accumulated unrealized gains on derivative instruments (net of tax) were $1.36 million, down from $2.42 million as of December 31, 2024[91] - The company estimates that an additional $1.40 million in interest expense will be reclassified from accumulated other comprehensive income within the next twelve months[87] 7. Long-term Debt and Borrowings Long-term debt includes $55 million in subordinated notes due 2032, with a carrying value of $54.6 million as of June 30, 2025; total FHLB advances significantly decreased to $88.2 million from $175.5 million at year-end 2024 - On June 30, 2022, the company issued $55 million of 5.75% fixed-to-floating rate subordinated notes due 2032, intended as Tier 2 capital for regulatory purposes[102] Summary of Long-term Debt and Borrowings | Debt Type | June 30, 2025 (thousand dollars) | December 31, 2024 (thousand dollars) | | :--- | :--- | :--- | | Subordinated debt, net | 54,567 | 54,459 | | Other borrowings | 5,539 | 5,539 | | Short-term FHLB advances | 75,000 | 137,220 | | Long-term FHLB advances | 13,196 | 38,326 | | Total FHLB Advances | 88,196 | 175,546 | - As of June 30, 2025, the company had an additional $1.20 billion in available FHLB advances[106] 8. Fair Value Measurements and Disclosures The company categorizes fair value measurements into three levels, with available-for-sale securities and derivatives primarily Level 2; non-recurring measurements for individually evaluated loans and ORE are typically Level 3, relying on unobservable inputs like appraisals and discounted cash flows - Fair value measurements are categorized into three levels: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[111] Assets Measured at Fair Value on a Recurring Basis (June 30, 2025) | Asset Type | Total (thousand dollars) | Level 1 (thousand dollars) | Level 2 (thousand dollars) | Level 3 (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | | Available-for-sale securities | 393,462 | — | 393,462 | — | | Derivative assets | 2,160 | — | 2,160 | — | | Total | 395,622 | — | 395,622 | — | Assets Measured at Fair Value on a Nonrecurring Basis (June 30, 2025) | Asset Type | Total (thousand dollars) | Level 1 (thousand dollars) | Level 2 (thousand dollars) | Level 3 (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | | Individually evaluated loans | 2,811 | — | — | 2,811 | | Foreclosed assets and ORE | 2,077 | — | — | 2,077 | | Total | 4,888 | — | — | 4,888 | - Fair value measurements for individually evaluated loans and foreclosed assets and ORE primarily use third-party appraisals and discounted cash flows, involving unobservable inputs such as collateral values, market discounts, and estimated costs to sell[122] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and operating results for the period ended June 30, 2025, including forward-looking statements, an executive overview, detailed financial analysis, liquidity management, and critical accounting estimates Forward-Looking Statements This section cautions that statements regarding future plans, objectives, or financial performance are forward-looking and subject to risks and uncertainties, and the company undertakes no obligation to update them - Forward-looking statements are based on management's current information, estimates, and assumptions, and are influenced by current economic conditions[129] - Actual results may differ materially from expectations due to various risks and uncertainties, including loan activity, credit quality, interest rates, real estate values, economic conditions, and regulatory changes[129] - The company undertakes no obligation to update these forward-looking statements to reflect future events or circumstances[129] EXECUTIVE OVERVIEW The company achieved $11.3 million net income in Q2 2025, up 39.6%, with diluted EPS of $1.45, and $22.3 million net income for H1, up 28.7%, with improved net interest margin despite rising nonperforming assets Q2 and H1 2025 Performance Overview | Metric | 2025 Q2 | 2024 Q2 | Change (%) | 2025 H1 | 2024 H1 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Income (million dollars) | 11.3 | 8.1 | 39.6% | 22.3 | 17.3 | 28.7% | | Diluted EPS (dollars) | 1.45 | 1.02 | 42.2% | 2.82 | 2.16 | 30.6% | | Total Assets (billion dollars) | 3.5 | N/A | 1.4% (vs Dec 2024) | N/A | N/A | N/A | | Total Loans (billion dollars) | 2.8 | N/A | 1.7% (vs Dec 2024) | N/A | N/A | N/A | | Provision for Loan Losses (thousand dollars) | 489 | 1,261 | -61.2% | 883 | 1,402 | -37.0% | | Nonperforming Assets (million dollars) | 25.4 | N/A | 62.9% (vs Dec 2024) | N/A | N/A | N/A | | Total Deposits (billion dollars) | 2.9 | N/A | 4.6% (vs Dec 2024) | N/A | N/A | N/A | | Net Interest Margin | 4.04% | 3.66% | +38 bps | 3.98% | 3.65% | +33 bps | | Average Rate on Interest-Bearing Deposits | 2.52% | 2.69% | -17 bps | 2.52% | 2.60% | -8 bps | | Total Interest Expense (thousand dollars) | 15,278 | 16,065 | -4.9% | 30,730 | 31,290 | -1.8% | - The increase in nonperforming assets was primarily due to three loan relationships classified as substandard in 2024 and moved to nonaccrual in 2025, and three loan relationships downgraded to substandard and moved to nonaccrual in 2025[131] FINANCIAL CONDITION This section analyzes the company's financial position, covering loan portfolio, allowance for credit losses, asset quality, investment securities, funding sources (deposits, subordinated debt, FHLB advances), shareholders' equity, and regulatory capital ratios Loans, Allowance for Credit Losses and Asset Quality As of June 30, 2025, total loans reached $2.8 billion, up 1.7%, with an allowance for loan losses of $33.4 million; nonperforming loans surged 71.7% to $23.4 million, and substandard loans increased 39.2% to $49.8 million Loan Portfolio Composition and Changes | Loan Type | June 30, 2025 (thousand dollars) | December 31, 2024 (thousand dollars) | Change (thousand dollars) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | One-to-four family first mortgage loans | 504,145 | 501,225 | 2,920 | 0.6% | | Home equity loans and lines of credit | 81,178 | 79,097 | 2,081 | 2.6% | | Commercial real estate | 1,218,168 | 1,158,781 | 59,387 | 5.1% | | Construction and land | 324,574 | 352,263 | (27,689) | (7.9)% | | Multi-family residential | 183,809 | 178,568 | 5,241 | 2.9% | | Commercial and industrial | 421,997 | 418,627 | 3,370 | 0.8% | | Consumer loans | 30,667 | 29,624 | 1,043 | 3.5% | | Total Loans | 2,764,538 | 2,718,185 | 46,353 | 1.7% | - As of June 30, 2025, the total allowance for loan losses was $33.4 million, representing 1.21% of total loans, consistent with December 31, 2024[139] - Total nonperforming loans increased from $13.6 million as of December 31, 2024, to $23.4 million as of June 30, 2025, a 71.7% increase, primarily due to four loan relationships becoming nonperforming[148] Nonperforming Assets Composition | Nonperforming Asset Type | June 30, 2025 (thousand dollars) | December 31, 2024 (thousand dollars) | | :--- | :--- | :--- | | Total nonaccrual loans | 23,340 | 13,582 | | Accruing loans 90 days or more past due | 12 | 16 | | Foreclosed assets and ORE | 2,077 | 2,010 | | Total Nonperforming Assets | 25,429 | 15,608 | Investment Securities As of June 30, 2025, the total investment securities portfolio was $394.5 million, a 2.3% decrease from year-end 2024, with net unrealized losses on available-for-sale securities decreasing to $30.2 million, and effective duration falling to 3.6 years - The total investment securities portfolio was $394.5 million, a decrease of $9.3 million (2.3%) from December 31, 2024[154] - Net unrealized losses on the available-for-sale investment securities portfolio decreased from $41.0 million as of December 31, 2024, to $30.2 million as of June 30, 2025[154] - The effective duration of the investment securities portfolio decreased from 3.9 years as of December 31, 2024, to 3.6 years as of June 30, 2025[154] Funding Sources As of June 30, 2025, total deposits grew 4.6% to $2.9 billion, with time deposits up 11.5%, while the average rate on interest-bearing deposits decreased 17 bps; FHLB advances significantly reduced to $88.2 million due to repayments Deposit Composition and Changes | Deposit Type | June 30, 2025 (thousand dollars) | December 31, 2024 (thousand dollars) | Change (thousand dollars) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Noninterest-bearing demand deposits | 796,844 | 733,073 | 63,771 | 8.7% | | Savings deposits | 204,191 | 210,977 | (6,786) | (3.2)% | | Money market deposits | 463,332 | 457,483 | 5,849 | 1.3% | | NOW accounts | 625,793 | 645,246 | (19,453) | (3.0)% | | Time deposits | 818,074 | 733,917 | 84,157 | 11.5% | | Total Deposits | 2,908,234 | 2,780,696 | 127,538 | 4.6% | - The average rate on interest-bearing deposits for the second quarter of 2025 was 2.52%, a decrease of 17 basis points from the second quarter of 2024[159] - Total FHLB advances decreased from $175.5 million as of December 31, 2024, to $88.2 million as of June 30, 2025, primarily due to the repayment of BTFP borrowings and a reduction in short-term FHLB advances[164][165] - As of June 30, 2025, total uninsured deposits were $887.9 million, up from $813.6 million as of December 31, 2024[160] Shareholders' Equity Total shareholders' equity increased 3.2% to $408.8 million as of June 30, 2025, driven by net income and reduced accumulated other comprehensive losses, with both company and bank regulatory capital ratios exceeding requirements - Total shareholders' equity increased from $396.1 million as of December 31, 2024, to $408.8 million as of June 30, 2025, a $12.7 million (3.2%) increase[166] - The increase in shareholders' equity was primarily attributable to $22.3 million in net income and a reduction in accumulated other comprehensive losses on available-for-sale investment securities, partially offset by cash dividends on common stock and share repurchases[166] Company and Bank Regulatory Capital Ratios (June 30, 2025) | Capital Type | Company Actual Ratio | Bank Actual Ratio | Regulatory Minimum (Basel III) | To Be Well Capitalized | | :--- | :--- | :--- | :--- | :--- | | Tier 1 Risk-Based Capital | 11.99% | 13.45% | 8.50% | N/A | | Total Risk-Based Capital | 15.08% | 14.66% | 10.50% | N/A | | Tier 1 Leverage Capital | 10.23% | 11.47% | 4.00% | N/A | | Common Equity Tier 1 Capital (Bank) | N/A | 13.45% | 7.00% | 6.50% | LIQUIDITY AND ASSET/LIABILITY MANAGEMENT The company manages liquidity through deposits, loan amortizations, and FHLB borrowing capacity, while asset/liability management optimizes net interest income via interest rate sensitivity analysis and uses interest rate swaps to mitigate risk, with disclosures on unfunded commitments - The company primarily obtains funds through deposits, loan amortizations, loan prepayments, investment securities maturities, and funds provided by operations[169] - As of June 30, 2025, total time deposits maturing within the next 12 months amounted to $781.9 million[170] Impact of Interest Rate Changes on Net Interest Income (June 30, 2025) | Interest Rate Change (basis points) | Estimated Change in Net Interest Income (%) | | :--- | :--- | | +200 | 3.8% | | +100 | 2.0% | | -100 | (2.4)% | | -200 | (5.2)% | Commitments for Unfunded Loans and Letters of Credit | Commitment Type | June 30, 2025 (thousand dollars) | December 31, 2024 (thousand dollars) | | :--- | :--- | :--- | | Standby letters of credit | 6,121 | 6,502 | | Available portion of lines of credit | 469,065 | 488,930 | | Undisbursed portion of loans in process | 72,543 | 76,424 | | Loan commitments | 155,614 | 161,482 | RESULTS OF OPERATIONS This section analyzes the company's operating results for Q2 and H1 2025, detailing net income, provision for loan losses, net interest income, noninterest income, noninterest expense, and income tax expense, along with year-over-year changes and driving factors Net Income and Provision for Loan Losses Net income for Q2 2025 was $11.3 million, up 39.6%, with diluted EPS of $1.45; H1 net income was $22.3 million, up 28.7%, with diluted EPS of $2.82, and loan loss provisions were $489 thousand and $883 thousand respectively, driven by loan growth - Net income for the second quarter of 2025 was $11.3 million, a 39.6% increase year-over-year; diluted EPS was $1.45, up 42.2%[182] - Net income for the first half of 2025 was $22.3 million, a 28.7% increase year-over-year; diluted EPS was $2.82, up 30.6%[183] - For the second quarter and first half of 2025, the company recorded provisions for loan losses of $489 thousand and $883 thousand, respectively, primarily due to loan growth[184] Net Interest Income Net interest income for Q2 2025 was $33.4 million, up 13.5%, and for H1 was $65.1 million, up 11.7%, with improved net interest margin and yield, driven by higher earning asset yields and lower funding costs - Net interest income for the second quarter of 2025 was $33.4 million, a 13.5% increase year-over-year; for the first half, it was $65.1 million, up 11.7%[186] - The net interest margin (tax-equivalent) for the second quarter of 2025 was 3.21%, and the net interest yield was 4.04%, both higher than the prior year period[185][187] Net Interest Income Variance Analysis (2025 vs 2024) | Item | Due to Rate Change (thousand dollars) | Due to Volume Change (thousand dollars) | Total Change (thousand dollars) | | :--- | :--- | :--- | :--- | | Three Months | | | | | Total interest income | 1,482 | 1,689 | 3,171 | | Total interest expense | (1,508) | 721 | (787) | | Increase in Net Interest Income | 2,990 | 968 | 3,958 | | Six Months | | | | | Total interest income | 2,915 | 3,331 | 6,246 | | Total interest expense | (1,281) | 721 | (560) | | Increase in Net Interest Income | 4,196 | 2,610 | 6,806 | Noninterest Income Noninterest income for Q2 2025 was $3.7 million, down 1.0%, mainly due to reduced other income (lack of derivative fee income), partially offset by higher service charges; H1 noninterest income was $7.7 million, up 5.8%, driven by increased loan sale gains and service fees - Noninterest income for the second quarter of 2025 was $3.7 million, a 1.0% decrease year-over-year, primarily due to a $143 thousand reduction in other income (absence of derivative fee income), partially offset by a $106 thousand increase in service charges and fees[195] - Noninterest income for the first half of 2025 was $7.7 million, a 5.8% increase year-over-year, primarily due to a $278 thousand increase in gains on sale of loans (mainly SBA loan sales) and a $161 thousand increase in service charges and fees, partially offset by a $46 thousand decrease in other income[196] Noninterest Expense Noninterest expense for Q2 2025 was $22.4 million, up 2.7%, driven by higher other expenses, compensation, and foreclosed assets, partially offset by a reversal of unfunded loan commitment credit losses and reduced professional services; H1 saw similar trends with a 3.1% increase - Noninterest expense for the second quarter of 2025 was $22.4 million, a 2.7% increase year-over-year, primarily due to an $852 thousand increase in other expenses (SBA receivable guarantee write-offs), a $534 thousand increase in salaries and employee benefits, and a $330 thousand increase in foreclosed assets, partially offset by an $836 thousand reversal of the allowance for credit losses on unfunded loan commitments and an $185 thousand decrease in professional services fees[197] - Noninterest expense for the first half of 2025 was $44.0 million, a 3.1% increase year-over-year, primarily due to a $1.0 million increase in salaries and employee benefits, an $821 thousand increase in other expenses, and a $492 thousand net increase in foreclosed assets, partially offset by an $836 thousand reversal of the allowance for credit losses on unfunded loan commitments[198] Income Taxes Income tax expense for Q2 2025 was $2.8 million and for H1 was $5.7 million, both increasing year-over-year due to higher taxable income, with effective tax rates of 20.0% and 20.3% respectively - Income tax expense for the second quarter of 2025 was $2.8 million, compared to $2.0 million in the prior year period[199] - Income tax expense for the first half of 2025 was $5.7 million, compared to $4.2 million in the prior year period[199] - The increase in income tax expense was primarily due to growth in taxable income[199] - The effective tax rates for the second quarter and first half of 2025 were 20.0% and 20.3%, respectively, higher than the 19.5% in the prior year period[200] CRITICAL ACCOUNTING ESTIMATES Management considers the allowance for credit losses policy the most critical accounting estimate, determined by continuous evaluation of the loan portfolio and reasonable forecasts of future credit losses, considering economic conditions and asset quality changes, subject to regulatory review - Management considers the allowance for credit losses policy to be the most critical accounting policy in the presentation of the financial statements[203] - The amount of the allowance for credit losses reflects management's ongoing evaluation of expected credit losses over the life of the loan portfolio[203] - The estimation process considers relevant information from internal and external sources, including past events, current conditions, and reasonable and supportable forecasts of future losses, with qualitative adjustments[203] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the company's 2024 10-K annual report for market risk disclosures, with additional information for June 30, 2025, included in Item 2's 'Liquidity and Asset/Liability Management' section - Quantitative and qualitative disclosures about market risk primarily refer to the relevant sections in the company's 2024 10-K annual report[204] - Additional market risk information as of June 30, 2025, is included in Item 2, 'Liquidity and Asset/Liability Management'[204] Item 4. Controls and Procedures Management assessed the effectiveness of disclosure controls and procedures as of the reporting period end, concluding they are effectively designed and operated, with no significant internal control changes during the quarter - The company's management evaluated the effectiveness of disclosure controls and procedures and concluded they are effectively designed and operated[205] - Disclosure controls and procedures are designed to ensure that information required to be recorded, processed, summarized, and reported is done so on a timely and accurate basis in accordance with SEC rules and regulations[205] - No significant changes in internal control occurred during the second quarter of 2025[206] PART II - OTHER INFORMATION Item 1. Legal Proceedings There are no legal proceedings requiring disclosure during this reporting period - Not applicable[207] Item 1A. Risk Factors No material changes to the risk factors disclosed in the 2024 10-K annual report were identified during this reporting period - There have been no material changes to the risk factors disclosed in the company's 2024 10-K annual report during this reporting period[208] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2025, the company repurchased 147,243 common shares at an average price of $43.72 per share, with 391,072 shares remaining available under the 2025 repurchase plan as of June 30, 2025 Common Stock Repurchases in Q2 2025 | Period | Total Shares Repurchased | Average Price Paid Per Share (dollars) | Total Number of Shares Purchased as Part of Publicly Announced Plans | Maximum Number of Shares That May Yet Be Purchased Under the Plans | | :--- | :--- | :--- | :--- | :--- | | April 1 – April 30, 2025 | 126,503 | 42.57 | 126,503 | 411,812 | | May 1 – May 31, 2025 | — | — | — | 411,812 | | June 1 – June 30, 2025 | 20,740 | 50.78 | 20,740 | 391,072 | | Total | 147,243 | 43.72 | 147,243 | 391,072 | - On April 21, 2025, the company approved a new stock repurchase plan (2025 Repurchase Plan) authorizing the repurchase of up to an additional 400,000 shares[210] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during this reporting period - Not applicable[211] Item 4. Mine Safety Disclosures There were no mine safety disclosures during this reporting period - Not applicable[211] Item 5. Other Information No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025 - No directors or executive officers of the company adopted, terminated, or modified any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025[212] Item 6. Exhibits This section lists exhibits filed with the report, including the indenture for subordinated notes, CEO and CFO certifications, and XBRL data files - Exhibits include the indenture dated June 30, 2022, for the 5.75% fixed-to-floating rate subordinated notes[216] - Exhibits also include Rule 13(a)-14(a) certifications by the Chief Executive Officer and Chief Financial Officer, as well as Section 1350 certifications[216] - XBRL-related documents (Instance Document, Schema Document, Calculation Linkbase Document, Definitions Linkbase Document, Label Linkbase Document, Presentation Linkbase Document) are also filed as exhibits[216] SIGNATURES The report is signed by John W. Bordelon, David T. Kirkley, and Mary H. Hopkins, with all signatures dated August 1, 2025 - The report is signed by John W. Bordelon (Chairman, President, and Chief Executive Officer), David T. Kirkley (Senior Executive Vice President and Chief Financial Officer), and Mary H. Hopkins (Senior Vice President and Director of Financial Management of Home Bank, N. A.)[221] - All signatures are dated August 1, 2025[221]