Home Bancorp Delivers Record 2025 Results Amid Headwinds

Home Bancorp ((HBCP)) has held its Q4 earnings call. Read on for the main highlights of the call.

Home Bancorp Closes 2025 With Record Profits Despite Near-Term Credit and Margin Headwinds

Home Bancorp’s latest earnings call painted a largely upbeat picture, with management emphasizing record full-year results, robust margin and return metrics, and clear progress on funding costs and capital deployment. While the quarter did bring some pressure from higher provisions, modest quarter-over-quarter net interest margin compression, and a noticeable uptick in nonperforming assets, executives framed these as manageable headwinds against a backdrop of strong earnings power, solid credit performance over time, and improving balance sheet flexibility. Overall, the tone was confident and constructive, with the positives seen as comfortably outweighing the near-term challenges.

Record 2025 Earnings and EPS Growth

Home Bancorp delivered its best year ever in 2025, with net income of $46.0 million, translating to $5.87 per share—a 29% jump in EPS versus 2024. Fourth-quarter results underscored that momentum, as net income rose 21% year-over-year to $11.4 million, or $1.46 per share. The company did acknowledge an 8% sequential decline in Q4 earnings due to higher provisions, but on a full-year basis, performance was clearly strong and reflects both disciplined balance sheet management and the benefits of prior strategic investments.

NIM and ROA Show Structural Year-Over-Year Strength

Despite some quarterly noise, Home Bancorp’s core profitability metrics moved meaningfully higher over the year. Net interest margin (NIM) in Q4 came in at 4.06%, up from 3.82% in the prior-year quarter. For full-year 2025, NIM expanded about 32 basis points to roughly 4.03%, helping drive an improvement in return on assets (ROA) of about 25 basis points to 1.33%. Management’s commentary suggested these gains reflect a healthier asset mix and better pricing discipline rather than one-off factors, reinforcing the view that the company’s earnings profile has stepped up structurally.

Deposit Growth and Funding Costs Move in the Right Direction

One of the standout themes on the call was deposit performance. Deposits grew roughly 7% in 2025, adding about $187–$192 million, with average balances up $58 million in Q4 and $187 million for the year. Noninterest-bearing deposits rose by $40 million, a valuable source of low-cost funding. The cost of interest-bearing deposits actually fell 15 basis points year-over-year, and overall deposit cost in Q4 was an attractive 1.84%. In an environment where many banks are fighting to defend their deposit bases, Home Bancorp’s ability to grow balances while easing funding costs is a key competitive advantage.

Improved Liquidity Profile and Reduced Reliance on Wholesale Funding

The company’s balance sheet is notably more liquid and less dependent on wholesale funding than a year ago. The loan-to-deposit ratio improved to 92% from 98%, reflecting the faster pace of deposit growth relative to loans. Meanwhile, Federal Home Loan Bank advances were cut dramatically—down $173 million over the year to just $3 million at quarter-end. This deleveraging gives Home Bancorp more flexibility in managing funding costs and positions it better to navigate future rate moves or market volatility.

Credit Quality: Low Losses and Steady Reserves

Credit performance remained a bright spot, even as management acknowledged some new problem credits. Net charge-offs were just $165,000 in Q4 and $908,000 for the full year—equating to about 3 basis points of total loans, and even lower than 2024 by $128,000. Over the last six years, net charge-offs have averaged around 6 basis points, underscoring a conservative credit culture. The allowance for loan losses held steady at 1.21% of loans, signaling that management believes current reserve levels appropriately cover expected losses despite a modest rise in nonperforming assets.

Loan Growth and Expansion of the Texas Franchise

Loan growth showed signs of renewed momentum toward year-end, with balances increasing $38 million in Q4, or about 6% on an annualized basis. A key growth driver remains the Texas franchise, which the company entered in 2022. Loans in Texas have compounded at roughly 15% annually since entry and now account for about 20% of the total loan book. Management reported a growing pipeline and indicated confidence in achieving mid-single-digit loan growth in 2026, although they noted that elevated payoffs and paydowns have been a drag on reported growth relative to historical norms.

Noninterest Income and Shareholder-Friendly Capital Returns

Beyond core lending, fee-based revenues are contributing steadily. Noninterest income of $4.0 million in Q4 surpassed guidance of $3.6–$3.8 million, and management expects it to run in the $3.8–$4.0 million range per quarter going forward. The company has also been aggressive in returning capital to shareholders while maintaining strong ratios. Since 2019, tangible book value per share (excluding AOCI) has grown at a 9.6% annualized pace, and EPS at an 11.5% annualized rate. The quarterly dividend was increased by 55% to $0.31, and roughly 17% of shares have been repurchased over time, signaling confidence in the franchise’s long-term value.

NIM Outlook and Asset Yield Tailwinds

Management remains optimistic about net interest margin trends, even after a modest quarterly dip. They expect NIM to edge higher in 2026, targeting roughly 4.10%–4.15%, compared with 4.06% in Q4 and 4.08% in December. Yield on interest-earning assets rose 14 basis points in 2025 to 5.88%, and a significant portion of both loans and securities is poised to reprice or roll off into higher-yielding opportunities over time. With new loans originated at around 7% in Q4 and 41% of the portfolio expected to reprice or refinance within three years at a blended 5.7% rate, there is embedded upside in asset yields if the rate environment cooperates.

Quarter-Over-Quarter Earnings Drag From Higher Provision Expense

The main blemish on an otherwise strong year was the sequential decline in Q4 earnings, driven primarily by credit provisioning. Net income fell 8% compared with Q3 as provision expense rose to $480,000, an increase of $709,000 from the prior quarter. While the absolute provision level remains modest, the jump reflects management’s response to specific credit developments and the uptick in nonperforming assets. Investors will be watching closely to see if these provisioning needs normalize in coming quarters as problem credits are resolved.

Margin and Loan Yield Compression From Fed Cuts

Home Bancorp was not immune to the impact of multiple Federal Reserve rate cuts on its variable-rate loan portfolio. The NIM slipped 4 basis points sequentially to 4.06% in Q4, while the yield on loans declined 9 basis points as adjustable-rate loans reset lower. Still, new originations during the quarter carried attractive contractual yields of about 7%, which should help offset some of that compression over time. Management’s base-case margin guidance suggests they see the recent pressure as temporary rather than the start of a sustained downtrend.

Rise in Nonperforming Assets Adds a Note of Caution

Credit quality remains solid overall, but the call highlighted a notable increase in nonperforming assets. NPAs rose $5.2 million in Q4 to $36.1 million, representing 1.03% of total assets. The increase was mainly tied to downgrades in two relationships, including a $4.1 million townhome development exposure in Houston and a separate property expected to resolve in early February. While management expressed confidence in forthcoming resolutions and noted that net charge-offs remain very low, the higher NPA level introduces a measure of caution and will likely be an area of focus for investors in upcoming quarters.

Loan Growth Constrained by Elevated Payoffs

Despite strong origination activity, Home Bancorp acknowledged that full-year 2025 loan growth fell short of its historical pace because of elevated payoffs and paydowns. This dynamic muted headline growth numbers even as underlying demand remained healthy, particularly in Texas. Looking ahead, management is planning for only mid-single-digit growth in 2026 unless payoff activity slows. This conservative stance helps set realistic expectations but also underscores the competitive and fluid nature of the current lending environment.

Rising Operating Expenses Create Near-Term Profitability Pressure

On the cost side, the bank faces some near-term pressure as expenses trend higher. Noninterest expense rose by $515,000 in Q4 to $23 million. Management guided to $22.5–$23.0 million in Q1, stepping up further to $23.3–$23.7 million thereafter as annual salary increases and new projects roll through the income statement. These investments may support future growth and efficiency, but in the short run they will offset some of the benefit from rising asset yields and improving funding costs.

Competitive Deposit Pricing and Market Outliers

The deposit market remains highly competitive, with management calling out wider dispersion in pricing across institutions. In some local markets, they are seeing aggressive outliers offering notably high certificate-of-deposit rates—around 4.25%—which can pull price-sensitive customers and pressure funding costs. While Home Bancorp has so far managed to grow deposits and lower its average cost of funds, these competitive dynamics could pose a challenge if they persist or intensify, particularly if broader rate cuts keep depositors focused on yield.

Guidance: Moderate Growth, Higher NIM, and Strong Capital

Looking to 2026, management’s guidance points to a steady, disciplined growth plan rather than an aggressive expansion. They are targeting mid-single-digit loan growth, consistent with recent trends, supported by a healthy pipeline and the maturing Texas franchise. NIM is expected to improve into the 4.10%–4.15% range as deposit pricing continues to adjust and asset yields grind higher. Deposits remain a central focus after 7% growth in 2025, with the loan-to-deposit ratio now at 92% and FHLB advances reduced to just $3 million. Noninterest income is projected at $3.8–$4.0 million per quarter, while expenses are guided to $22.5–$23.0 million in Q1 and $23.3–$23.7 million thereafter. The investment portfolio should stay around 11%–12% of assets, with $15–$20 million of additions and about half of securities rolling off at a relatively low 2.56% yield—creating a reinvestment opportunity at higher rates. On the credit front, net charge-offs remain minimal, reserves are steady at 1.21% of loans, and some of the currently elevated NPAs are expected to resolve early in the year. Management also underscored strong capital, supported by long-term growth in tangible book value and EPS, a sharply higher dividend, significant share repurchases, and a stated willingness to pursue M&A targets up to about half Home Bancorp’s size, signaling openness to strategic deals if valuations and fit are attractive.

In summary, Home Bancorp’s 2025 earnings call showcased a bank delivering record profitability, improving core margins, and better funding metrics, while maintaining a long track record of low credit losses and disciplined capital management. Short-term pressures—from higher provisions, modest NIM compression, rising nonperforming assets, and increasing expenses—are real but appear manageable against the company’s strong earnings base and conservative balance sheet. For investors, the story is one of solid underlying performance, measured growth expectations, and a management team signaling confidence through higher dividends, buybacks, and a selective eye for potential acquisitions.