Ina: Good morning, ladies and gentlemen, and welcome to the Home Bancorp's second quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would like to turn the conference over to Home Bancorp's chairman and CEO, John Bordelon, President Darren Guidry, and Chief Financial Officer David Kirkley. Please go ahead, Mr. Kirkley.
David Kirkley: Thank you, Ina. Good morning and welcome to HomeBank's second quarter 2026 earnings call. Earnings released in the investor presentation are available on our website. I ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation in our SEC files. I'll hand it over to John to make a few comments about the second quarter.
John Bordelon: John? Thanks, David. Good morning, everyone, and thank you for joining me on this call today. We appreciate your interest in HomeBank as we discuss our results, expectations for the future, and our approach to creating long-term shareholder value. Before I discuss our second quarter results, I want to take a moment to introduce Darren Guidry as HomeBank's new president. Darren has served as our Chief Risk Officer since 2022, and prior to that, Chief Credit Officer beginning in 2013, and Chief Lending Officer since he came to the bank in 1993. His deep knowledge of our business, our customers, and our markets makes him exceptionally well-suited for this expanded role. By separating the CEO and President roles, we are creating a leadership structure designed to sustain our next phase of growth. As CEO, I will remain focused on overall corporate strategy, capital planning, and shareholder relations, while Darren will lead the day-to-day execution of our strategic priorities. He'll be working closely with our executive leadership team to drive performance across the organization while maintaining our strong discipline in credit quality, risk management, and customer service. We are enthusiastic about this transition and confident it will serve our shareholders, employees, and customers well for years to come. Now turning to second quarter results. Yesterday afternoon, we reported second quarter net income of $11.6 million, or $1.48 per value of share. Earnings per share increased 2% from the first quarter and were up from $1.46 per share a year ago. Net interest margin expanded to 4.24% in the second quarter and return on assets increased to 1.31%. Net interest income increased to $35.8 million in the second quarter and was the highest quarterly net interest income in Home Bank's 118-year history. This continued net interest income growth and margin expansion was driven by higher yields in our earning asset portfolio and stable funding costs. Our cost of deposits was stable at $1.66. and our peer group and reflects the continuous strength of our quarter-positive franchise. Loans grew by $50.7 million in the second quarter, approximately 7% annualized, which was a nice recovery from the slight contraction we saw in the first quarter. Our Houston market continues to lead the way, going at a 9% annualized grade year-to-date. The Tomball branch in northwest Houston, which opened in the first quarter, is gaining momentum and building its customer base. We believe the pipeline we have been building will support continued mid-single-digit loan growth in the second half of the year, but predicting when our customers will make decisions about financing has become challenging. Total deposits grew by $42.1 million, or 6% annualized in the second quarter, which kept our loan-to-deposit ratio in the middle of its 90-92 target range. The quality and stability of our department base remains one of HomeMate's most important competitive advantages. We continue to work our problem credits to resolution. There does not appear to be any specific industry-related stress, but more individual customers are struggling in this economy. Substandard loans increase during the four, primarily due to one C&I loan from a manufacturing company, which is paying as agreed and has a very strong guarantor. We continue to work through our classified assets toward improvement. As some of the loans are refinanced elsewhere, businesses are sold, some loans are moved to real estate owned, and eventually the assets sold. We anticipate that 14 loans with balances of approximately one-third of our classified assets will be rectified and removed off the bank's balance sheet by year-end. Our net charge-offs remain extremely low at just six basis points annualized and remain confident that our conservative underwriting and proactive management of challenge loans will minimize any losses we ultimately incur. Over the past two years, the financial transformation at HomeAid has been significant. Net interest margin has expanded approximately 58 basis points since the second quarter of 2024. Net interest income has increased by more than 7% year over year Thank you. Thanks, John.
David Kirkley: Please feel free to refer to the investor presentation we have provided that will discuss the company's second quarter financial performance. Net interest income totaled $35.8 billion in the second quarter, an increase of $1.3 million from the first quarter, and a $2.5 million increase from a year ago. NIM expanded eight basis points to 4.24% in the second quarter, driven by loan yields increasing five basis points to 6.46% remain flat at 2.38%. Slide 14 details the repricing and maturity profile of our loan and investments portfolio. We continue to see opportunities to increase yields in maturing and repricing loans. Our investment portfolio, with a weighted average rate of 2.61%, and significant cash flows expected over the next three years, also presents meaningful reinvestment opportunity at current yields that are substantially above the roll-off rate. Yield and earning assets increased seven basis points quarter over quarter, and we believe future repricing opportunities will support room for additional name expansion. Deposit growth continues to be a key strength. As shown on slide 18, total deposits grew to $3.1 billion, with quarter deposit growth of $46.6 million during the quarter, more than offsetting a modest decline in certificates of deposit. Thank you for joining us today. We don't expect further material declines. Slides 15 and 16 provide additional detail and credit quality. Non-performing loans declined during the quarter from $35.8 million to $26.4 million, or from 1.31% to 95 basis points total loans. This was primarily driven by the transfer of approximately $10 million of non-performing loans into OREO. Total non-performing assets were $39.2 million, for 1.09% of total assets as foreclosed asset balances increased due to the foreclosure of multiple properties with the largest being 2.6 million. We provisioned 762,000 in the second quarter, down from 922,000 in the first quarter. The allowance for loan losses stand at 34 million, or 1.22% of total loans, and we are comfortable with our reserve levels given the composition and risk profile of the portfolio. Total criticized loans increased during the quarter to $95.8 million, a 3.45% of total loans, primarily due to the migration of six relationships into the special mention category and a $7.4 million increase in substandard loans. Substandard loans increased during the quarter primarily due to the downgrade of the $12.4 million C&I credit, which was partially offset by almost $10 million in transfer from substandard to Oreo and paydowns. We are actively monitoring these credits and believe our proactive approach to credit management will continue to limit actual loss exposure. Slide 22 provides detail on non-interest income and expenses. Non-interest income totaled 3.9 million in the second quarter, up 181,000 from the first quarter. We continue to expect quarterly non-interest income to be in the range of 3.8 to 4.1 million. Non-interest expense totaled $24.6 million in the second quarter, an increase of $1.6 million from the first quarter. The increase was primarily driven by compensation and benefit expense of $1.3 million, a $331,000 increase of foreclosed asset expense. Due to elevated expenses working through foreclosed assets, we expect non-interest expenses will be in the range of $24 to $24.8 billion over the next several quarters. Slide 23 and 24 summarize our capital position and the progress of our capital management strategy. Tangible book value per share increased to $47.02, up from $46.04 in the first quarter, and up more than 13% from a year ago. Since 2019, we have increased adjusted tangible book value per share at an annualized rate of approximately 9.7%, increased EPS at a more than 11% annualized rate, and John Bordelon. They increased our quarterly dividend by almost 50%. We have also repurchased approximately 17% of shares outstanding since 2019. Capital ratios remain strong with a Tier 1 leverage ratio of 12.1% and a total risk-based capital ratio of 15.6%. Lastly, we declare a quarterly cash dividend of 32 cents per share, an increase of a penny from last quarter. That operator, please open the line for Q&A.
Ina: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Thank you, and your first question comes from the line of Joe Yankinis from Raymond James. Please go ahead.
Joe Yankinis: Good morning.
David Kirkley: Good morning, Joe.
John Bordelon: Good morning, Joe.
Joe Yankinis: So thanks for taking my questions. I was hoping to start with the NIM. So the market's expanded, you know, 18 bits over the past couple quarters, well above that 410 to 415 range you had previously outlined. As you look ahead, when do you expect the benefit from fixed rate asset repricing to begin to moderate?
David Kirkley: I think you're going to see a couple of basis points increase. I think in Q3 and a little bit in the Q4, you're still having some lower yielding loans roll off in a size and manner that will continue to see loan yields increase. In the second quarter, new loan originations came on at A little bit north of 6.6%. So that still leaves the room for repricing opportunities. I think after Q4 and into Q1 of 27, I think that's when you'll see some moderation.
Joe Yankinis: Got it. That was very helpful. And then shifting over to loans. So loan growth, you know, really accelerated in that previous quarter. How much of that improvement reflected stronger customer demand versus, you know, seasonality or lower payoff activity? And then also, you know, on the last quarter call, you mentioned the pipeline had increased by about 30 million sequentially. Can you provide an update on where the pipeline stands today and how you're seeing that, you know, conversion for those in the front lines and the back hash?
John Bordelon: Yeah, I think for most of 25, we did have some payoffs, especially in third quarter of 25. And that happened also in first quarter. So we're seeing less payoffs in second quarter. And that's just a seasonal thing that we, you know, I don't know. We do have some classified assets that Darren will talk about, but we anticipate some of those going away, which will hurt our overall loan growth. But our pipeline, I think, remains consistent. While not robust, it remains consistent. And so we should be able to generate loan production. It's just a matter of how much of our loans are paid off instead of them being bad assets moving somewhere else or whatever.
Joe Yankinis: And is your guide for mid-single-digit growth in the back half of the year or for the full year?
John Bordelon: Yeah, it's really the back half.
Joe Yankinis: All right. And then one more for me here. So, capital remains a pretty clear strength, you know, yet acquisition activity, you know, across the industry remains pretty subdued at the moment. Have your views on M&A opportunities changed over the past few months?
John Bordelon: Not really, no. I agree that we're hearing a lot less noise than we heard in 2025. I'm not sure if that's because of potentially a rate increase by the Fed or what, but it has definitely been much quieter. So we have our ears open and are ready to go. We have a lot of drive power to utilize, so we're looking for that right format.
Joe Yankinis: All right, perfect. Well, thanks for taking my questions, Ellen.
Ina: Thank you. And your next question comes from the line of Stephen Scouting from Piper Sandler. Please go ahead.
Stephen Scouting: Hey, good morning, everyone. Maybe just following up on that line of questioning, you know, if for whatever reason M&A is not able to come, you know, across the finish line here, what would be kind of how you think about capital uses? beyond M&A, because obviously your excess capital continues to build quarterly based on really strong profitability. So good problem to have, I guess, if we want to call it a problem, but just can you help us think about other uses for that capital as it builds?
John Bordelon: Yeah, I'll answer it a little far, and then I'll turn it over to David. Surely we've shown over our history as a public company that we have had periods where we've grown capital, and that was very handy for us to be able to utilize that capital in a
David Kirkley: We've been selective in buybacks based off the stock price, and our stock price has had a nice run over the last couple of quarters, so we've really been out of the buyback space, but we'll always evaluate that. We increase our dividend one cent, which, from a capital management standpoint, deploys a little bit, but it's not really impacting So we're really looking, keeping the dry powder for M&A. And also we have our sub-debt, which is callable in 2027, which could potentially be an option given the M&A landscape.
Stephen Scouting: Okay. And can you remind us what you're paying on that sub-debt currently and kind of what that could potentially do maybe to your name as you've modeled some of that out?
David Kirkley: Our coupon rate is $575,000.
Stephen Scouting: Okay. And in terms of, you know, Fed rate hikes, can you remind us what you think if the Fed were to hike? And in fairness, I'm not really a believer in that personally, but if they do hike, what could that do to the trajectory of your game from here?
David Kirkley: Look, I think our balance sheet is very well positioned for rising rates. I think we've demonstrated when the Fed makes a move, we have a little bit of a blip with earning asset yields. increasing two to three basis points, and then we adjust our deposit prices. So you have probably a quarter of, let's call it a decline when the product rates increase. But then, like I said, we have a good cash flow coming through. So I think we'll be able to sustain as well as improve NAM with a great hike.
John Bordelon: I'll just add to that. It depends on the shape of the yield curve. is it staying in its current normal shape or do we go back towards a little more inverted? So what that could do is hurt NIMS and all banks because the deposit customers may be seeking a little bit higher yield. So, you know, I'm more concerned about what happens with our deposits than with our loans, really, because we are repricing loans at a better rate today. But deposits, because so many banks are are at a very high loan-to-deposit ratio. They're paying up significantly. So a rise in interest rates could cause a little bit of a run on the deposit side. So we'll have to be competitive with that.
Stephen Scouting: Yeah, I think that's a good point. And that's a big message we're hearing across the industry right now. It's just competitive dynamics. John, how would you say you feel like competition has been in your markets and has it been relatively rational, or where are you seeing pressure? Is it more on rate, deposit rate, structure of loans? Where's the kind of tension points from a competitive environment perspective?
John Bordelon: We're seeing it both loan and deposit. Texas is probably more competitive than Louisiana. We're seeing some, not as much maybe the last month as it was first and second quarter, where loan rates were pretty low, but also deposit rates. There are four or five banks in The Texas market that we're paying back up close to 4%. I think in the first quarter, we had two or three banks in Texas that were at four and a quarter, so way above the market. And so competing against those has been a little bit of a challenge. But I still think we're going to have banks across all of our footprint that periodically are going to need more liquidity and are going to raise the rates.
Freddie Strickland: yeah very good point great color appreciate it and congrats on a great quarter thank you thank you and your next question comes from the line of freddie strickland from pop the group please go ahead hey good morning um just wanted to ask one wonder appreciate the overall guide um in terms of mix it seems like you have pretty healthy cre cni multifamily growth in the quarter and a step down into disruption Should we expect more of the same in terms of the buckets of growth in the next couple quarters?
John Bordelon: Yeah, you know, it is surprising a little bit. Construction is continuing to head down. When rates were higher, it slowed down for sure. But we're still seeing a little bit of reduction there. We've always been a very strong construction lender, so that is probably the biggest surprise in our balance sheet. But, yes, I think we're – We've done a good job over the last probably four quarters of reducing our non-owner occupied and increasing our own occupied. So that was a goal of ours starting about two and a half years ago, and it's really paying off.
Freddie Strickland: Got it. Appreciate that, John. you know, again, appreciate the guide there. I think you mentioned, you know, some of the expenses working through some of these credits, foreclosure expenses, what have you, are keeping that a little elevated in the second half of the year. But as we get into early 27, as you work through a good bit of these existing NPAs, assuming nothing new comes up, could we maybe see expenses overall decline a little bit just as you work through some of those problem aspects?
David Kirkley: Yeah, I'll touch up on it for a second. As we work through those, we're just going to have some elevated expenses on the Oreo side. In Q2 and Q1, we've had a little bit of elevated fraud activity on our deposits. And I think we're getting that back down to a more normalized run rate going into Q3 and into Q4. So you'll see a little bit of help from that. But I think once we work through the Oreo expenses, depending on the pipeline of how that shapes out, you'll see a little bit more normalized rate. of our expense base.
Freddie Strickland: Got it. Hey, just last question for me real quick. It seems like you've got pretty good loan and deposit pipelines, but do you expect, you know, once deposits kind of stays around that 90% to 92% range that you've been targeting, do you see anything that would cause you to kind of jump above or below that the next couple quarters?
John Bordelon: No, on the deposit side, you know, we tried to lower our rates a little bit in the first quarter, and we lost about $60 million of CDs and such. And we have not moved from there. We still are down for the year by $60 million in CDs. So holding our CDs intact, I think, is important to maintaining the growth. So a lot of our growth is coming into core deposits. Thank you. Have a good day. Thank you. Once again, if you have a question, please press star, folder 1. And your next question comes from the line of Christopher Marinek from Ring Capital.
Freddie Strickland: Please go ahead.
Christopher Marinek: Hey, good morning. Thanks for hosting the call. And just had a question for Darren in his new role. Do you see additional hires or maybe an acceleration of kind of lending hires as this next year plus unfolds?
John Bordelon: Yeah, we're not anticipating any major changes, Chris. We've just got a strong crew, executive team, a strong team. Our chief banking officer has a really good crew. We haven't had much in terms of turnover. So we're just looking to add good bankers when they're available, but no major plans for additions at this time. All right. Very well. Thank you. We did just add one new ORM in Baton Rouge Market, which is our slowest developing market. So hopefully that will help.
Christopher Marinek: Got it. All right. Thank you both for that. And then just to go back on the criticized trends and other comments related to that, you've already made. Is there anything else in the pipeline or any other trends you see kind of under the surface in terms of either risk ratings going back and getting upgraded or additional items that may pop up over time?
John Bordelon: I can speak to what's in the watch list now. We've got, as John and David mentioned earlier, our special assets group that's been working on watch credits and has a significant number of resolutions in place. Specifically, we downgraded about $15 million this past quarter into special mention. We have resolutions in place that should occur by the end of the year amounting to about $22 million. In fact, more than half of that should occur within this quarter. Substandard credit resolutions, including our longest-tenured classified loan, is set to be resolved by the end of the fourth quarter as well. We're really excited about that. Substandard resolutions should be a little more than $4 million through the end of the year. And finally, our non-performing assets, we're expecting through payoffs, upgrades, and sales of other real estate on approximately $7 million. Thank you very much, Chris.
Ina: Thank you. There are no further questions at this time. I would like to turn the conference back over to John for any closing remarks.
John Bordelon: Once again, thank you very much for joining us today. We look forward to speaking with many of you in the coming days or weeks. Appreciate your interest in HomeBancorp. Have a great day.
Ina: Our conference has now concluded. Thank you for attending today's presentation. You may disconnect.
