HBCP Home Bancorp Inc

LAFAYETTE, La., Oct. 26 /PRNewswire-FirstCall/ -- Home Bancorp, Inc. (Nasdaq: HBCP) (the "Company"), the parent company for Home Bank (www.home24bank.com), a Federally chartered savings bank headquartered in Lafayette, Louisiana (the "Bank"), announced net income of $911,000 for the third quarter of 2010, a decrease of $556,000, or 38%, compared to the second quarter of 2010 and a decrease of $586,000, or 39%, compared to the third quarter of 2009. The third quarter of 2010 was negatively impacted by an $870,000 charge for the other-than-temporary impairment ("OTTI") of investment securities. Excluding the impact of the OTTI charge, net income for the third quarter of 2010 was $1.5 million, an increase of $19,000, or 1%, compared to the second quarter of 2010 and a decrease of $12,000, or 1%, compared to the third quarter of 2009.  Diluted earnings per share were $0.12 for the third quarter of 2010, a decrease of 37% compared to the second quarter of 2010 and the third quarter of 2009. Excluding the impact of the OTTI charge, diluted earnings per share were $0.20 for the third quarter of 2010, an increase of 5% compared to the second quarter of 2010 and the third quarter of 2009.

"We expect many changes in our industry over the next 12 to 24 months," stated John W. Bordelon, President and Chief Executive Officer of the Company and the Bank. "Our team is focused on positioning our company to grow amidst the many regulatory and economic challenges facing our industry."

"Our loan quality remains strong and core deposit growth continues to be outstanding," added Mr. Bordelon. "Although our reported earnings are down this quarter due to an OTTI charge, our core earnings have been enhanced in 2010 with the acquisition of our Northshore franchise and growth in our Acadiana and Baton Rouge markets."

Loans and Credit Quality

The Company's market areas, which are located in southern Louisiana, have been affected by the Deepwater Horizon oil spill in the Gulf of Mexico and the recently lifted deep-water drilling moratorium. The Company's direct exposure to borrowers with significant operations linked to deep-water drilling in the Gulf amounted to $5.6 million in outstanding loan balances as of September 30, 2010, or 1% of total loans at such date. The Company has remained in contact with each of the impacted borrowers. All such loans are performing in accordance with their terms and, based on our discussions with the borrowers and internal reviews, the Company does not believe it will suffer losses on these loans.  

As previously reported, Home Bank entered into a purchase and assumption agreement with the Federal Deposit Insurance Corporation ("FDIC") on March 12, 2010 to purchase certain assets and to assume deposits and certain other liabilities of Statewide Bank, a full service community bank formerly headquartered in Covington, Louisiana. As a result of the transaction, the Company acquired loans with contractual balances totaling $157.0 million. After fair value adjustments, the book value of the loans acquired totaled $110.4 million. Home Bank entered into loss sharing agreements with the FDIC which cover the acquired loan portfolio ("Covered Loans") and other repossessed assets (collectively referred to as "Covered Assets"). Under the terms of the loss sharing agreements, the FDIC will absorb 80% of the first $41 million of losses incurred on Covered Assets and 95% of losses on Covered Assets exceeding $41 million. The Company distinguishes between Covered Loans and loans not covered by the loss sharing agreements ("Noncovered Loans") due to the differing risk exposure relating to the loans.  

Total loans were $446.2 million at September 30, 2010, a decrease of $8.9 million, or 2%, from June 30, 2010, and an increase of $106.0 million, or 31%, from September 30, 2009. During the third quarter of 2010, Noncovered Loans decreased $298,000, while Covered Loans decreased $8.6 million. Growth in Noncovered construction and land (up $5.0 million during the third quarter) and commercial and industrial (up $1.8 million) loans was offset by a decrease in the Noncovered 1-4 family first mortgage loans (down $8.7 million). The third quarter decrease in Covered Loans related primarily to 1-4 family first mortgage (down $4.0 million) and construction and land (down $2.9 million) loans due primarily to loan repayments and foreclosures.

The following table sets forth the composition of the Company's loan portfolio as of the dates indicated.  

Nonperforming assets, excluding Covered Assets, were $1.4 million at September 30, 2010, a decrease of $723,000, or 34%, from June 30, 2010, and a decrease of $1.3 million, or 49%, from September 30, 2009.  The decrease in the third quarter of 2010 was due to the sale of other real estate owned and a loan relationship which was brought current by the borrower and was returned to performing status.  The ratio of nonperforming assets to total assets (excluding Covered Assets) was 0.23% at September 30, 2010, compared to 0.35% at June 30, 2010 and 0.51% at September 30, 2009.  Total nonperforming assets, including Covered Assets, were $24.0 million at September 30, 2010 and June 30, 2010.  The ratio of total nonperforming assets to total assets (including Covered Assets) was 3.42% at September 30, 2010, compared to 3.38% at June 30, 2010.  

The Company recorded net loan charge-offs of $48,000 during the third quarter of 2010, compared to $76,000 in the second quarter of 2010 and $37,000 in the third quarter of 2009. The Company's loan loss provision for the third quarter of 2010 was $168,000, compared to $200,000 for the second quarter of 2010 and $287,000 for the third quarter of 2009.    

At September 30, 2010, the Company's allowance for loan losses to Noncovered Loans ratio was 1.11%, compared to 1.07% and 0.96% at June 30, 2010 and September 30, 2009, respectively.  The allowance for loan losses to total loans ratio was 0.88% at September 30, 2010, compared to 0.84% and 0.96% at June 30, 2010 and September 30, 2009, respectively.

Investment Securities Portfolio

The Company's investment securities portfolio totaled $132.4 million at September 30, 2010, a decrease of $3.9 million, or 3%, from June 30, 2010, and an increase of $16.0 million, or 14%, from September 30, 2009.  The increase in investment securities from September 30, 2009 resulted primarily from the addition of $24.8 million of U.S. agency mortgage-backed securities acquired from Statewide Bank.  At September 30, 2010, the Company had a net unrealized gain position on its investment securities portfolio of $1.1 million, compared to a net unrealized gain of $786,000 at June 30, 2010 and a net unrealized loss of $2.7 million at September 30, 2009.  Due to increasing delinquencies and defaults in the mortgage loans underlying certain non-agency mortgage-backed securities, the Company recorded an OTTI charge of $870,000 during the third quarter of 2010.

The amortized cost of the Company's non-agency mortgage-backed securities portfolio has decreased $8.4 million, or 21%, during 2010 primarily due to paydowns.  The following table summarizes the Company's non-agency mortgage-backed securities portfolio as of September 30, 2010 (in thousands).

The Company holds no Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac) preferred stock, equity securities, corporate bonds, trust preferred securities, hedge fund investments, collateralized debt obligations or structured investment vehicles.

Deposits

The Company's strong growth in core deposits (i.e., checking, savings and money market) continued during the third quarter of 2010, increasing $21.1 million during the quarter.  Excluding the core deposits acquired from Statewide Bank, core deposits have increased $45.0 million in 2010 (a 28% annualized growth rate).  Total deposits, which includes certificates of deposit, were $546.7 million at September 30, 2010, an increase of $10.2 million, or 2%, from June 30, 2010, and an increase of $170.0 million, or 45%, from September 30, 2009.  The Statewide Bank acquisition added $206.9 million in deposits during the first quarter of 2010, including $46.2 million of higher-cost, out-of-state brokered deposits which the Company elected to re-price.  Consistent with management's expectations, the vast majority of out-of-state depositors elected to withdraw their deposits.  

The following table sets forth the composition of the Company's deposits at the dates indicated.

Net Interest Income

Net interest income for the third quarter of 2010 totaled $7.3 million, a decrease of $235,000, or 3%, compared to the second quarter of 2010, and an increase of $1.2 million, or 20%, compared to the third quarter of 2009.  The Company's net interest margin was 4.75% for the third quarter of 2010, 15 basis points lower than the second quarter of 2010 and eight basis points lower than the third quarter of 2009.  The decreases in net interest margin were primarily due to lower average yields on interest-earning assets as a result of the current low rate environment.  

The following table sets forth the Company's average balance and average yields earned and rates paid on its interest-earning assets and interest-bearing liabilities for the periods indicated.

Noninterest Income

Noninterest income for the third quarter of 2010 totaled $613,000, a decrease of $722,000, or 54%, compared to the second quarter of 2010 and a decrease of $337,000, or 35%, compared to the third quarter of 2009.  Excluding the impact of the OTTI charge incurred in the third quarter of 2010, noninterest income for the third quarter of 2010 was $1.5 million, an increase of $148,000, or 11%, compared to the second quarter of 2010 and $534,000, or 56%, compared to the third quarter of 2009.

The increase in pre-OTTI noninterest income in the third quarter of 2010 compared to the second quarter of 2010 was primarily the result of increased gains on the sale of mortgage loans and higher levels of service fees and charges.  These increases were partially offset by a decrease in bank card fees and an OTTI charge of $141,000 incurred in the second quarter of 2010.

The increase in pre-OTTI noninterest income in the third quarter of 2010 compared to the third quarter of 2009 was primarily the result of increased gains on the sale of mortgage loans, higher levels of service fees and charges and bank card fees, and discount accretion related to the FDIC loss sharing receivable. The increase in gains on the sale of mortgage loans was the result of increased loan originations and refinancing due to the current low interest rate environment.  The increase in service fees and charges and bank card fees was primarily the result of the addition of accounts through the Statewide Bank acquistion.

Noninterest Expense

Noninterest expense for the third quarter of 2010 totaled $6.4 million, a decrease of $78,000, or 1%, compared to the second quarter of 2010 and an increase of $1.7 million, or 36%, compared to the third quarter of 2009.  

The decrease in noninterest expense in the third quarter of 2010 compared to the second quarter of 2010 was primarily attributable to decreases in compensation and benefits and occupancy expenses resulting from efficiencies gained from the conversion of the former Statewide Bank loan and deposit accounts into Home Bank's operating system during the third quarter of 2010.

The increase in noninterest expense in the third quarter of 2010 compared to the third quarter of 2009 was driven by higher compensation and benefits, occupancy and data processing and communications expenses related to the Statewide Bank acquisition and the addition of our Baton Rouge headquarters location in March 2010.  The Company began 2010 with 11 full-service banking offices.  The acquisition of six Statewide Bank locations and the opening of our Baton Rouge headquarters has increased our total number of full-service banking offices to 18.  Additionally, other expenses increased due to the amortization of the core deposit intangible resulting from the Statewide Bank acquisition, which amounted to $64,000 and $143,000 during the quarter and nine months ended September 30, 2010, respectively.

This news release contains financial information determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). The Company's management uses this non-GAAP financial information in its analysis of the Company's performance. In this news release, information is included which excludes the impact of other-than-temporary impairment charges.  Management believes the presentation of this non-GAAP financial information provides useful information that is essential to a proper understanding of the Company's core operating results. This non-GAAP financial information should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial information presented by other companies.

This news release contains certain forwardlooking statements. Forwardlooking statements can be identified by the fact that they do not relate strictly to historical or current facts.  They often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could" or "may."

Forwardlooking statements, by their nature, are subject to risks and uncertainties.  A number of factors many of which are beyond our control could cause actual conditions, events or results to differ significantly from those described in the forwardlooking statements.  The Company's Annual Report on Form 10-K for the year ended December 31, 2009 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, describes some of these factors, including risk elements in the loan portfolio, the level of the allowance for losses on loans, risks of our growth strategy, geographic concentration of our business, dependence on our management team, risks of market rates of interest and of regulation on our business, risks of competition, risks of our decisions regarding the fair value of assets acquired and risks regarding our ability to obtain reimbursement under the loss sharing agreements on Covered Assets. Forwardlooking statements speak only as of the date they are made.  We do not undertake to update forwardlooking statements to reflect circumstances or events that occur after the date the forwardlooking statements are made or to reflect the occurrence of unanticipated events.