Home Bancorp's Q1 2025: Navigating Contradictions in Deposit Rates, NIM, and Loan Growth

Deposit Beta and Deposit Rate Reduction, Net Interest Margin (NIM) Expectations and Impact of Rate Cuts, Loan-to-Deposit Ratio and Deposit Growth Strategy, Loan Growth Expectations, and Deposit Beta Convergence are the key contradictions discussed in Home Bancorp's latest 2025Q1 earnings call.



Net Income and Earnings Growth:
- Home Bancorp reported first quarter net income of $11 million or $1.37 per share, indicating a 13% increase from the fourth quarter and a 20% increase from a year ago.
- The growth was driven by a 13 basis point decline in the cost of interest-bearing liabilities, stable yields on interest-earning assets, and loan growth.

Net Interest Margin (NIM) and Return on Assets:
- The net interest margin expanded for the fourth consecutive quarter to 3.91%, with the return on assets increasing by 17 basis points to 1.29%.
- This was attributed to a decline in the cost of interest-bearing liabilities, stable yields on interest-earning assets, and loan growth.

Loan and Deposit Growth:
- Loans grew by $29.1 million in the first quarter, equivalent to about 4% annualized. Deposits increased at a 7% annualized rate due to seasonal inflows of public funds.
- The growth was supported by Home Bank's efforts to fund loan growth with core deposits and seasonal inflows.

Deposit Mix and Funding Strategy:
- Noninterest-bearing deposits increased $21.9 million, equating to 27% of total deposits at the end of the quarter, while CDs increased, accounting for 27% of total deposits.
- This strategy has helped to optimize funding costs and attract customer deposits, although the percentage of CDs is expected to decline as rates eventually fall.

Capital Management and Shareholder Returns:
- Home Bank repurchased 297,000 shares through April 17 at an average price of $43.82 per share, with about 14,500 shares remaining in the existing buyback plan. A new 400,000 share repurchase plan was approved by the Board.
- This decision reflects the company's confidence in its intrinsic value, strong capital position, and commitment to returning capital to shareholders.