Q1 2024 Home Bancorp Inc Earnings Call

Okay.

Operator: Good morning, ladies and gentlemen, and welcome to Home Bancorp's first quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star 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 now like to turn the conference over to Home Bancorp's Chairman, President, and CEO, John Bordelon, and Chief Financial Officer, David Kirkley. Mr. Kirkley, please go ahead.

Good morning, ladies and gentlemen, and welcome to the home Banc Corp's first quarter 2024 earnings conference call all participants will be in listen only mode.

Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions. Please.

Please note. This event is being recorded I would now like to turn the conference over to home Bancorp's, Chairman, President and CEO, John what alone and Chief Financial Officer, David correctly, Mr. Kirk Cliff. Please go ahead.

Okay.

John W. Bordelon: Thanks, Joelle, good morning, and welcome to home Bank's first quarter 2024 earnings call.

David T. Kirkley: Good morning and welcome to Home Bank's first quarter 2024 earnings call. Our earnings release and investor presentation are available on our website. I'd ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation and our SEC filing. And I'll hand it over to John to make a few comments about the first quarter. John?

David Kirkland: Our earnings release and Investor presentation are available on our website I would ask that everyone. Please refer to the disclaimer regarding forward looking statements and the investor presentation, and our SEC filings.

David Kirkland: And it over to John to make a few comments about the first quarter John.

John W. Bordelon: Thanks, David. Good morning, and thank you for joining Home Bancorp's earnings call today. We appreciate your interest in Home Bancorp as we discuss our strong quarterly results and describe our approach to creating long-term shareholder value. Home Bank delivered a solid first quarter performance with healthy loan and deposit growth and continued expense discipline. We are quite proud of our accomplishments in the first quarter, as net income was $9.2 million, or $1.14 per share, which generated a return on assets of 1.11%.

John W. Bordelon: Thanks, David Good morning, and thank you for joining home Bancorp's earnings call. Today. We appreciate your interest in home Bancorp as we discuss our strong quarterly results and describe our approach to creating long term shareholder value.

John W. Bordelon: Home Bank delivered a solid first quarter performance with healthy loan and deposit growth and continued expense discipline.

John W. Bordelon: We're quite.

John W. Bordelon: Proud of our accomplishments in the first quarter as net income was $9 2 million or $1 14 per share, which generated a return on assets of 1.11%.

John W. Bordelon: Loans increased $40.1 million over the quarter, or about 6% annualized, which is in line with our expectations for 2021. Houston was again a big contributor to our loan growth as we relocated an acquired branch and opened an LPO to house the commercial team we brought on board in the fourth quarter. We will be relocating an additional branch next week in Houston as we continue to invest in our markets and seek ways to drive additional activity.

John W. Bordelon: Loans increased $40 1 million over the quarter or about 6% annualized which is in line with our expectations for 2024.

John W. Bordelon: Houston was again, a big contributor to our loan growth as we relocated and acquired branch and opening L. P. O to house the commercial team we brought on board in the fourth quarter.

John W. Bordelon: We will be relocating them additional branch next week in Houston, as we continue to invest in our markets and seek ways to drive additional activity.

John W. Bordelon: First quarter deposits increased 52 million following a $73 million increase in the fourth quarter.

John W. Bordelon: First quarter deposits increased $52 million following a $73 million increase in the fourth quarter. Deposits have increased by 6.4% since March 31st of last year, which we feel very good about considering everything that's happened in the banking industry in the last 12 months. Our loan-to-deposit ratio came down slightly to 96.3, which is still a little above the upper end of our target range. As we indicated last quarter, we saw some additional pressure on the net interest margin, which decreased to 3.64% in the first quarter. While the last couple of weeks have made predicting rates challenging, we continue to expect them to stabilize around this level in the next two quarters. With that, I'll turn it back over to David, our Chief Financial Officer.

John W. Bordelon: While others have increased by six 4% since March 31 of last year, which we feel very good about considering everything that's happening in the banking industry in the last 12 months.

John W. Bordelon: Our loan to deposit ratio came down slightly to $96, three which is still a little above the upper end of our target range.

John W. Bordelon: As we indicated last quarter, we saw some additional pressure on the net interest margin, which decreased to 364% in the first quarter. While the last couple of weeks has been.

John W. Bordelon: Has made predicting rates challenging we continue to expect NIM to stabilize around this level in the next two quarters.

John W. Bordelon: With that I'll turn it back over to David Our Chief Financial Officer.

Thanks, John.

David T. Kirkley: Net interest income totaled $28.9 million in Q1, a slight decline of $381,000 from the previous quarter as deposit costs continued to put pressure on NIM. The pace of deposit migration is certainly slowing, but we are still seeing customers move funds out of savings checking and non-interest bearing deposits into higher yielding CDs and money markets. The 26-basis point increase in yield on interest-bearing deposits during the first quarter was less than the 40-basis point increase in the fourth quarter and 54-basis point increase in the third quarter. So, it does appear that the pace of increase is slowing.

David: Net interest income totaled $28 9 million in Q1, a slight decline of 381000 from the previous quarter as deposit cost continued to put pressure on NIM.

David: Pace of deposit migration is certainly slowing, but we're still seeing customers move funds out of savings checking and noninterest bearing deposits and a higher yielding Cds and money market accounts.

David: <unk> six basis point increase in yield on interest bearing deposits. During the first quarter was less than the 40 basis point increase in the fourth quarter and 54 basis point increase in the third quarter. So it does appear that the pace of increase is slowing.

David T. Kirkley: As deposit migration slows and the spread between new CD origination rates and the rate of the existing CD portfolio narrows, we should continue to see smaller increases in deposits. Page 11 and 12 of our investor presentation provide some additional detail and credit. Non-performing loans increased by $11.5 million in the first quarter to $20.3 million, primarily due to two relationships totaling $9.6 million. The first relationship has loans totaling $4.6 million and is secured by a portfolio of residential investment properties with an LTV in the 65% range, and we expect minimal, if any, losses.

David: As deposit migration slows and the spread between new CD origination rates and the rate of the existing CD portfolio narrows, we should continue to see smaller increase in deposit costs.

David: Page 11, and 12 are of our Investor presentation provides some additional detail on credit.

David: Nonperforming loans increased by $11 5 million in the first quarter to $23 million higher.

David: Primarily due to two relationships totaling $9 6 million.

David: The first relationship has loans totaling $4 6 million and are secured by a portfolio of residential investment properties with an L. T V. In the 65% range and we expect minimal if any losses.

David T. Kirkley: The other relationship is about $5 million and was included in the 90 days past due and still accruing bucket, which is not a category we utilize very often. A small multifamily construction project that was waiting for its certificate of occupancy, which it just received yesterday. We expect a sale of two units totaling $970,000 to close tomorrow and a couple more units to close this month.

David: The other relationship is about $5 million. It was included in the 90 days past due and still accruing bucket, which is not a category we use utilize very often.

David: It's a small multifamily construction project that was waiting for a certificate of occupancy, which you just received yesterday.

David: We expect the sale of two units totaling $970000 to close tomorrow and a couple of more units to close this month.

David: Our loan allowance for loan loss ratio was one 2% down two basis points from the prior quarter.

David T. Kirkley: Our allowance for loan loss ratio is 1.2%, down two basis points from the prior quarter. The decline in this ratio was due to the migration of CD loans into permanent loans and CESA. There were no changes in our qualitative factors during this quarter, and we feel confident in our reserve level. Slide 16 has some detail on our historic NIM and its components.

David: The decline in this ratio was due to the migration of CD loans, and the permanent loans and Cecil.

David: There were no changes in our qualitative factors during this quarter and we feel confident in our reserve levels.

David: Slide 16 has some detail on our historic NIM and its components as John mentioned NIM declined by five basis points in the first quarter, but appears close to stabilizing.

David T. Kirkley: As John mentioned, NIM declined by 5 basis points in the first quarter but appears close to stabilizing. Slide 17 has our current and historic deposit beta statistics and shows that our cost of total deposits in Q1 was 1.82%, with a cycle-to-date beta of 32%. At 1.95%, our cost of funding earning assets is 35% of the upper limit of the Fed Fund's target range of 5.5%. Loan growth picked up in the first quarter to $40.1 million with an average origination rate of 8.23% during the quarter.

David: Slide 17 is our current and historic deposit betas statistics and shows that our cost of total deposits in Q1 was $1 eight 2% with our cycle to date beta of 32%.

David: At 1.95% our cost of funding, earning assets is 35% of the upper limit of the fed funds target range of five 5%.

David: Loan growth picked up in the first quarter to $40 1 million with an average origination rate of eight 3% during the quarter.

David: Our loan pipeline remains strong and we continue to expect 4% to 6% growth in 2024, but recognize that fed activity could impact both growth and yields.

David T. Kirkley: Our loan pipeline remains strong, and we continue to expect 4-6% growth in 2024 but recognize that Fed activity could impact both growth and yield. Slide 18 of the presentation has some additional details on non-interest income and expenses. Non-interest income was stable in the first quarter at $3.5 million. Non-interest expense increased slightly to $20.9 million but still came in below our forecast due to lower than expected compensation expenses and several P&E projects being pushed further into 2024.

David: Slide 18 of the presentation at some additional details on noninterest income and expenses.

David: Noninterest income was stable in the first quarter at $3 5 million.

David: Noninterest expense increased slightly to $20 9 million, but still came in below our forecast due to lower than expected compensation expenses and several P&A projects being pushed further into 2024.

David T. Kirkley: Annual salary increases took effect April 1st, and we expect core non-interest expenses to be around $22 to $22.5 million in the second and third quarters. Slide 19 summarizes the impact our capital management strategy has had on home banks over the last few years. We've grown adjusted tangible book value by 55% since 2018, increased our dividend by 67% since 2016, and repurchased 13% of our shares, all while maintaining a robust capital ratio. This positions us to be successful in any economic environment and to take advantage of opportunities as they arise. With that said, Operator, please open the line for Q&A.

David: Annual salary increases took effect April one and we expect core noninterest expenses to be around 22 to 'twenty, two and a half million dollars in the second and third quarters.

Slide 19 summary, summarizes the impact of our capital management strategy has had on home bank over the last few years we've.

David: We've grown adjustable adjusted tangible book value by 55% since 2000, 22018 increased our dividend by 67% since 2016 and repurchased 13% of our shares.

David: All while maintaining a robust capital ratios this positions us to be successful in any economic environment and to take advantages of opportunities as they arise.

Speaker Change: With that operator, please open the line for Q&A.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: We will now begin the question and answer session.

Operator: We will now begin the question and answer session. If you have a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the... To withdraw your question, please press star, then Q. At this time, we will pause momentarily to assemble a roster. Your first question comes from Graham Dick with Piper Sadler. Please go ahead.

Speaker Change: You May press Star then one on your Touchtone phone.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the key to it.

Speaker Change: Your question. Please press Star then queue at this time, we will pause momentarily to assemble our roster.

Speaker Change: Your first question comes from Graham <expletive> with Piper Sandler. Please go ahead.

Speaker Change: Yeah.

Graham Conrad Dick: Thank you, more guys. Good morning, Graham. Okay, I just wanted to start on, call out those two credits in the press release that moved to non-accrual this quarter. Doesn't sound like you guys are expecting much loss there, but I just wanted to know a little more color around industry types of credit and what sort of gives you confidence that you might be able to move these out of the bank without having to really charge anything?

Graham: Hey, good morning, guys.

Graham: Good morning, Brad.

Graham: Okay I just wanted to start on call out those two credits in the press release.

Graham: That moved to non accrual this quarter does it sound like you guys are expecting much loss, there, but I just wanted to know a little more color around.

Graham: Ooh industry type of credit and what sort of gives you confidence that you might be able movies out of the bank without having to really charged anything off.

John W. Bordelon: Well, the first one.

John W. Bordelon: Well, the first credit that David described is a situation where there are five partners and one of the partners has kind of turned against the other four. There are, I think, 15 properties, I'm not exactly sure how many properties, in a very, very strong location next to Tulane University. And they're all leased and such, but they stopped paying us for some disputes that they were having internally. We have sent a 30-day letter.

Speaker Change: Well the first part of that David described it as a situation where there are five partners and one of the partners has.

Speaker Change: Kind of turned against the other four.

Speaker Change: There are I think 15 properties I'm not exactly sure how many properties in it.

Speaker Change: Very very strong location next to the University, and they're all leased and such but they stopped paying us.

Speaker Change: For some disputes that theyre, having internally.

Speaker Change: We have a 30 day letter we have started foreclosure proceedings.

John W. Bordelon: We have started foreclosure proceedings. The four individuals on one side are trying to find a way to not lose the $2.2 million of equity that they have in the project. As far as our concern is, if they don't update this and bring it current, we'll probably, you know, third quarter, end of third quarter or so, have a sheriff sale, at which time I think we'll have no trouble selling it. So it's really about a dispute. The properties aren't bad. They're all in very good shape. They're all leased. It's just a problem with the partners.

Speaker Change: The four individuals' on one side are trying to find a way to.

Speaker Change: Not lose the $2 $2 million of equity that they have in the project.

Speaker Change: As far as the our concern is if they don't update this and bringing current.

We will probably you know third quarter in the third quarter or so.

Have a share of sale of which time I think we'll have no trouble selling it so it's really about a dispute its not.

Speaker Change: The properties are bad they're all in very good shape, there all leased.

Speaker Change: It's just a problem with the partners. The second project really was a situation where.

John W. Bordelon: The second project really was a situation where cost overruns and such; the borrower ran out of funds for the most part, and the project is finished. It has its ability to sell. We have two sales tomorrow for $970,000. That will bring all the interest current and also reduce the principal by about $750,000. There are two additional sales that will happen before the end of the month, so we feel as though that one will take care of itself now that they've gotten their certificate of occupancy and can start selling the property.

Speaker Change: Cost overruns and such the the borrower ran out of ran out of funds for the most part. The project is finished it has the ability to sell we have two sales tomorrow for $970000 that will bring all the interest current and also.

Speaker Change: Reduced principal by about 750000, there are two additional sales that will happen.

Speaker Change: For the end of the month, so we feel as though that one will take care of itself now that they've gotten their certificate of occupancy occupancy and can start selling the properties.

Speaker Change: Yeah.

Speaker Change: So I would anticipate.

John W. Bordelon: So I would anticipate one of those being off of classified by next quarter, the larger one being off, and the other one's just going to take until they decide to work together or until a share of sale. But no losses on either one.

One of those being off as classified by next quarter. The large one being off the other one is just going to take until they decide to work together or until its share itself.

Speaker Change: But no losses on either one.

Graham Conrad Dick: Okay, that sounds good. All right, I just wanted to kind of turn on the NIM. I think last quarter, yeah, you guys had hoped that, obviously, it would be maybe a little downside this quarter, but then stabilize in the 2Q and sort of drift higher from there. How do you feel about the way that outlook might be evolving given what you're seeing on the rate outlook in the Fed right now if we were to only get one, two, or maybe no rate cuts this year?

Speaker Change: Okay. It sounds good.

Speaker Change: Alright, I just wanted to kind of tell me the name I think last quarter.

Speaker Change: You guys. It helps that obviously would be maybe a little downside this quarter, but then stabilize at a check you in sort of drift higher from there.

Speaker Change: How do you feel about the way that outlook might be evolving given what youre seeing on the on the rate outlook from the fed right now if you were to only get.

Speaker Change: One two maybe no rate cuts this year.

Speaker Change: Yeah I think.

David T. Kirkley: Yeah, I think, um... I think Q2 is probably going to be a much more stable NIM for Home Bank. Our deposit costs are kind of starting to peak out, as I mentioned earlier on the call that the spread between our CD portfolio and the rate at which we're putting on CDs right now is narrowing very quickly. So you're not going to see that rapid rise in deposit costs that we have been experiencing.

Speaker Change: I think Q2.

Speaker Change: It's probably going to be a much more stable NIM for home bank.

Speaker Change: Our deposit costs are kind of starting to peak out where I mentioned earlier on the call that.

Speaker Change: The way that the spread between our CD portfolio and the rate at which we're putting on Cds right. Now is narrowing very quickly so youre not going to see that rapid rise in deposit costs that we have been experiencing.

David T. Kirkley: We've also looked at kind of the migration from customers, retail customers specifically, that have been moving funds out of checking accounts into money markets and CDs over the past couple quarters, and that pace has slowed significantly. So it's almost as if the people that were looking for rates have found them, and that outflow into higher yielding deposit products is slowing, and the pace at which CDs are pricing higher has slowed significantly.

Speaker Change: We've also looked at kind of the migration from customers retail customers, specifically that have been moving funds out of checking accounts into money markets.

Speaker Change: Over the past couple of quarters and that pace has slowed significantly so it's almost as if the people that we're looking for rates are have found them.

Speaker Change: And that outflow into higher yielding.

Speaker Change: Deposit products is slowing in.

The pace of which Cds or pricing higher has slowed significantly on the flip side. We are seeing some success in our loan portfolio as I mentioned, the weighted average rate of new originations was eight 3%. So that's starting to offset.

David T. Kirkley: On the flip side, we are seeing some success in our loan portfolio. As I mentioned, the weighted average rate of new originations was 8.23%. So that's starting to offset the increase in liability costs as well. So I feel good about... A slight decline to stability in NAMM and Q-Tip.

Speaker Change: The increase in liability cost as well.

Speaker Change: So we feel good about.

Speaker Change: A slight decline to stability in NIM in Q2.

Speaker Change: Okay, and then as you just sort of look ahead do you think that theres, a chance that as needed deposit cost continue to tighten.

Graham Conrad Dick: Okay, and then as you just sort of look ahead, do you think that there's a chance that as these deposit costs continue to top off and new loan yields come on at higher rates, given no change to the Fed funds rate, do you think the NEM could still tick higher, I guess, in the back half of the year? Is that a possibility?

Speaker Change: Hop off.

Speaker Change: And new loan yields come on at higher rates, given no change to that.

Speaker Change: Funds rate do you think the NIM can still take higher I guess in the back half of the year is that a possibility.

David T. Kirkley: I think the pace would be slower, but yeah, I think it's a possibility that it could tick higher for sure.

Speaker Change: I think I think the pace would be slower, but yes, I think it's a possibility that it could tick higher for sure.

Graham Conrad Dick: Okay, okay, great. And then I guess just one more for me on loan growth, which came in inside your guidance of mid-single digit, but still a good start to the year. Do you expect the Houston team to continue to do the heavy lifting there for the rest of the year? And if so, what are you seeing in your legacy markets that are maybe holding back growth there a little bit? I think all the markets will slow down as the year goes on somewhat, especially if rates stay where they are.

Speaker Change: Okay, Okay, Great and then I guess just one more for me is on loan growth.

Speaker Change: With inside your guidance of mid single digit, but still a good start to the year do you expect.

Speaker Change: The Houston team to continue to do the heavy lifting there for the rest of the year.

Speaker Change: And if so.

Speaker Change: What are you sort of seeing in your legacy markets that are maybe holding back growth. There I think all the mortgage will slow as the year goes on somewhat especially if rates stay where they are.

John W. Bordelon: 4.6 or whatever, but so there is a slowdown, but we have a lot that's in the pipeline right now. Some C&D that's starting to build out a little bit. So I think you'll At the end of the day, I don't know that we'll finish the fourth quarter if rates are where they are today with the type of quarter that we had in the first. I think you'll see a diminishing growth rate. Now, if Ted does reduce rates two or three times, that could change a lot.

Speaker Change: The treasury going up I think yesterday.

Speaker Change:

Speaker Change: Six or whatever but.

Speaker Change: There is a slowdown but we.

Speaker Change: We have a lot thats in the pipeline right now some C and D that.

Speaker Change: Starting to build out a little bit.

Speaker Change: So I think youll.

At the end of the day I don't know that we'll finish fourth quarter if rates are where they are today with the type of quarter that we had in the first I think youll see a diminishing growth rate.

Speaker Change: No.

Speaker Change: It does.

Speaker Change: <unk> rates.

Speaker Change: It was three times that that could change a lot.

Graham Conrad Dick: Right, right, right. Understandable. Okay. All right. That's it for me. I appreciate it.

Speaker Change: Right right right understood. Okay, Alright, that's it for me I appreciate it.

Speaker Change: Thanks Graham.

Speaker Change: Your next question comes from Brett Robinson with hopefully the group. Please go ahead.

Operator: Your next question comes from Brett Rabatin with the Hovide Group. Please go ahead.

Brett Robinson: Hey, guys good morning.

Brett D. Rabatin: Hey guys, good morning. If I look at slide 11, the total substandard, and granted, you know, your criticized assets are still at very, very low levels, but I saw that the substandard bucket moved up about 7 million last quarter. I was just curious what you were seeing in terms of migration in or out of the substandard bucket, in particular, and then, you know, just any industries or things that you're seeing incrementally where maybe there's pressure either on revenue or just, you know, overall sales.

Brett Robinson: Wanted to just wanted to go back to credit and you know if I look at slide 11, the total substandard and granted your criticized assets are still at very.

Brett Robinson: Low levels, but I saw that the substandard bucket.

Brett Robinson: Moved up about 7 million linked quarter I was just curious what you were seeing in terms of migration in or out of the substandard bucket in particular, and then you know just any any industries or things that you're seeing incrementally where maybe theres pressure either on Rev.

Brett Robinson: Revenue or just you know overall sales.

John W. Bordelon: I think the general thought for Home Bank is that 2024 will continue as 2023 did in reducing classified assets. These two one-offs that we discussed momentarily are really not because of the economy as much as it is just mismanagement a little bit in the project. So I don't anticipate that continuing throughout 2024; I would anticipate those classifieds coming down as they did towards the end of the year. So we're not seeing any sign that there's a wave of bad assets coming our way.

Speaker Change: I think the general thought for whole banks that 2024 will continue as 23 did in reducing classified assets.

Speaker Change: These two one offs that we discuss momentarily.

Speaker Change: Are are really not because of the economy as much as it is just.

Speaker Change: Mismanagement, and a little bit in the project so.

Speaker Change: I don't anticipate that continuing throughout 'twenty four I would anticipate those classifieds coming down as they as they did towards the end of the year.

Speaker Change: So we're not seeing any signs that there is a wave of of bad assets coming our way outside of the two credits that we mentioned there was a little bit of a migration in from a mix between some residential properties. Some small CRE, some very small C&I as well as some outflow.

David T. Kirkley: Outside of the two credits that we mentioned, there was a little bit of a migration in from a mix between some residential properties, some small CREs, some very small CNI, as well as some outflows that basically were the exact same thing, some residential, some small CRE, and some various payoffs. So they're kind of washing each other out right now.

Speaker Change: Does that basically versus the exact same thing some residential some small CRE and <unk>.

Speaker Change: Some various payoffs so it kind of Washington, each other out right now.

Speaker Change: Okay.

David T. Kirkley: And then from a capital perspective, your ratios are building a little bit. You bought back a little bit of stock. Any thoughts on the level of buyback activity from here? And then are you going to keep maybe some powder dry for potential M&A? Or do you kind of feel like that?

Speaker Change: And then from a cat excuse me from a capital perspective.

Speaker Change: Our ratios are building a little bit you bought back a little bit of stock.

Speaker Change: Any thoughts on the level of buyback activity from here and then are you going to keep maybe some powder dry for potential M&A or do you kind of feel like.

Brett D. Rabatin: M&A is less likely with higher marks, given where the tenures have moved.

Speaker Change: M&A is less likely with higher marks given where the 10 years moved.

David T. Kirkley: We're going to be picking back up our buybacks a little bit more in Q2. We did start a little bit in the earlier part of Q1. But it's kind of a balancing act of, one, keeping the powder dry, and two, buying back at the levels that our stock is trading at.

Speaker Change: We're going to be picking up picking back up our buybacks a little bit more in Q2, we did we did start a little bit in earlier part of Q1.

Speaker Change: But it's kind of a balancing act.

Speaker Change: One keeping the powder dry in too.

Speaker Change: Buying back at the levels that our stock is trading at today.

Brett D. Rabatin: Okay, and are there any comments going on?

Okay.

Speaker Change: And one other comment.

John W. Bordelon: One other point in that regard: we kind of pulled off the buybacks. We were engaged in a potential purchase of some branch locations from another bank, which was very much in line to be announced yesterday, and unfortunately, another bank came in and offered what we felt was a little bit on the high side price-wise, but anyway, the seller basically reneged on us three days before closing and took another bank, so that was one of the reasons that we stopped the buybacks, about 60 days ago, for the most part.

Speaker Change: Yes.

Speaker Change: In that regard, we had kind of hold off on the buyback.

Speaker Change: We were engaged in a potential purchase of some branch locations from another bank.

Speaker Change: Yeah.

That was.

Speaker Change: It was very much in line to be announced yesterday and unfortunately.

Speaker Change: The other bank came in and.

Speaker Change: What we felt was a little bit.

Speaker Change: On the high side price wise, but anyway, the seller basically rene join US three days before closing and took another banks. So that was one of the reasons that we saw.

Speaker Change: Stop the buybacks.

Speaker Change: About 60 days ago for the most part.

Speaker Change: Yeah.

Speaker Change: Okay. That's helpful.

Brett D. Rabatin: Okay, that's helpful. And then, just lastly, any comments on, I think...

Speaker Change: And then just lastly, any comments on I think.

Brett D. Rabatin: If I understand correctly, you still want to migrate the loan-to-deposit ratio a little lower. So just, you know, how do you fund the loan growth from here? Is it CDs?

Speaker Change: If I have this right you still want to migrate the loan to deposit ratio a little lower so just you know how do you fund the loan growth from here or is it C. DS and it's good to see the DDA was stable this quarter any thoughts on how you fund growth.

Brett D. Rabatin: You know, it's good to see the DDA was kind of stable this quarter. Any thoughts on how you fund growth? Well, I think our focus...

Speaker Change: Well I think our focus completely is on C&I customers and with that comes the deposit relationship.

John W. Bordelon: Well, I think our focus completely is on C&I customers, and with that comes their positive relationship.

Operator: We're trying to get away right now from non-occupied CRE just from the standpoint that it doesn't bring deposits. So bringing in the whole customer is extremely important to us, and that's going to help us maintain the DDA level that we have acquired and or attained up till this year. So even though some of those balances moved when rates started going up for CDs, we still are ahead of where we were pre-pandemic as a percent of total deposits and DDAs and savings accounts. So we're going to continue to drive the C&I portfolio much more so than anything else. That'll help with that deposit mix. We'd love to get that down to 92, 93, something like that.

Speaker Change: Trying to get away right now from.

Speaker Change: Non owner occupied CRE, just from the standpoint that it doesn't bring the deposits so bringing the whole customers are extremely important to us and thats going to help us maintain the D. D. D. A level that we have acquired <unk> attain up until this year, so even though some of those balances moved when rates.

Speaker Change: Already going up into Cds, we still are ahead of where we were pre pandemic as a percent of total deposits and DDA and savings accounts. So.

Speaker Change: We're going to continue to drive the C&I portfolio much more so than than anything else that will help with that deposit mix, we'd love to get that down to <unk>.

Speaker Change: 90, 293, something like that.

Speaker Change: Okay.

Speaker Change: Appreciate all the color guys.

Speaker Change: Thank you Brett.

Again, if you have a question. Please press Star then one.

Operator: Again, if you have a question, please press star, then 1. Your next question comes from Joseph Yanchunis with Raymond James. Please go ahead.

Speaker Change: Your next question comes from Joseph <unk> with Raymond James. Please go ahead.

Joseph: Hi, there.

Joseph Peter Yanchunis: Thank you. How are you doing?

Joseph: Hey, Joe how are you doing.

Joseph: I'm doing well.

Joseph Peter Yanchunis: I'm doing well. I was hoping to start with kind of, It sounds like the cost of interest-bearing deposits may have peaked, kind of based on what you said earlier. So if we assume the forward curve, do you have a sense for how deposit betas will behave when the Fed starts cutting?

Joseph: I'm going to start with.

Joseph:

Joseph: Kind of.

Joe: Okay. It sounds like the cost of interest bearing deposits near peak kind of based on what you said earlier.

Joe: So if we assume the forward curve you have a sense for how deposit betas will behave when the.

Joe: When the fed starts cutting rates.

Speaker Change: So I don't.

David T. Kirkley: So I don't want to use the word peak because I still think that it's going to continue to drift up a little bit, but just at a much slower pace. So there is still some low-hanging fruit out there. So there's still going to be some upward migration and deposit costs. But it's slowing down. It's coming down pretty quick.

Speaker Change: I don't want to use the word peak because I still think that's going to continue to drift up a little bit, but just at a much slower pace.

Speaker Change: So there is still some some low hanging fruit out there so they're still going to be some upward migration in deposit costs, but it's slowing it is coming down pretty quick pace of increase is slowing.

David T. Kirkley: The pace of increase is slowing. As far as deposit betas are concerned, when rates start ticking down, I think a lot of banks are going to be anxious to lower rates. But a lot of loan and deposit ratios are not where banks want to be, and customers are getting used to five handles on their CDs, which will force those customers to be a little bit shop a lot more. So I think the 25 or 50 basis point rate cut is going to, the beta is eventually going to work its way out to a normalized beta. But I think it might take a little bit longer to play out as customers continue to fight for higher rates.

Speaker Change: As far as.

Speaker Change: The deposit betas when rates start ticking down I think a lot of banks are going to be one anxious to lower rates.

Speaker Change: But a lot of loan to deposit ratios are not where people want to banks want to be and customers are getting used to five handles on their Cds, which will.

For those customers to be a little bit.

Speaker Change: Shop, a lot more so I think the 25 or 50 basis point rate cut is going to the betas are eventually going to work its way out to a normalized data I think it might take a little bit longer to play out as customers continue to fight for higher rates.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: I appreciate that.

Joseph Peter Yanchunis: I appreciate that. You know, the Houston market continues to generate strong loan growth. So with 18% of loans being in Texas, do you have a medium-term target for how large you'd like to grow that portfolio?

Speaker Change: The Houston market continues to generate strong loan growth.

Speaker Change: So with 18% of loans being in Texas do you have a medium term target for how large you'd like to grow that portfolio.

John W. Bordelon: No, we do not. We think it's a tremendous market and the people that we have there, including the new group that we pulled out in the fourth quarter, are doing a great job of staying in the arena that we want to play in. So, I know a lot of banks complain about going to Texas and having to play big to get anything. But we're not seeing that. The talent that we have there is keeping them in the type of portfolio, type of loans that we're searching for and doing a very good job and doing it at a high volume.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: No. We do not we think it's a tremendous market and people that we have there, including the new group that we've pulled out of the fourth quarter.

Speaker Change: <unk> are doing a great job of staying in the arena that we want to play and so I know a lot of banks complained about going in Texas.

Speaker Change: You have to play big to get anything we're not seeing that the talent that we have there is as keeping it.

Speaker Change: And the type of portfolio type of loans that were searching for and doing a very good job and doing it at a high volume. So we're very excited about what's going on there and unfortunately, we didn't get the the M&A deal that we wanted to help us expand in the Houston market, but I'm sure there'll be other opportunities.

John W. Bordelon: So, we're very excited about what's going on there. Unfortunately, we didn't get the M&A deal that we wanted to help us expand in the Houston market, but I'm sure there'll be other opportunities in that market to come.

Speaker Change: And that market to come.

Speaker Change: Yeah.

Speaker Change: Okay, and then last one for me here.

Joseph Peter Yanchunis: Okay, then last one for me here. So we've heard from a lot of banks on this earnings call that, you know, their outlooks call for an acceleration in loan growth throughout 2024, but kind of based on your reiterated outlook, it seems like, you know, for it to reach the high end of your guide, that loan growth would remain stable. Do you have a sense for why there's a disconnect there?

Speaker Change: Well, we've heard from a lot of banks this earnings call that you know.

Speaker Change: Their outlets call for an acceleration in loan growth throughout 2024, but kind of based on your reiterated outlook it seems like.

Speaker Change: For it to reach the high end of your guide that loan growth will remain stable.

Speaker Change: Do you have a sense for why there is a disconnect there.

John W. Bordelon: Um, no, I really don't. I think if... We probably wouldn't be so optimistic without our Houston franchise. Things are slowing a little bit more in Louisiana than they are in Texas. But I do believe every market is slowing to some degree, but Texas is keeping us propped up. So that's the only explanation I can find.

Speaker Change: No I really don't I think if.

Speaker Change: We probably wouldn't be so optimistic without our Houston franchise.

Things are slowing a little bit more in Louisiana than they are in Texas, but I do believe every market is slowing to some degree, but Texas is keeping us propped up so that's the only explanation I can find.

Speaker Change: Okay, great well, thank you for taking my questions.

Joseph Peter Yanchunis: Okay, great. Well, thank you for taking my questions.

Speaker Change: Thank you Joe have a good evening.

Speaker Change: This concludes our question and answer session.

John W. Bordelon: Thank you, Joe. Have a good day.

John W. Bordelon: This concludes our question-and-answer session. I would like to turn the conference back over to John Bordelon for any closing remarks.

Speaker Change: I would like to turn the conference back over to John Borderlands for any closing remarks.

John W. Bordelon: Once again, thank you all for joining us today. We look forward to speaking to many of you in the coming days and weeks. Thank you for your interest in Home Bancorp. Hope you have a wonderful day.

John W. Bordelon: Once again, thank you all for joining US today, we look forward to speaking to many of you in the coming days and weeks. Thank.

John W. Bordelon: Thank you for your interest in home Bancorp Hope you have a wonderful day.

John W. Bordelon: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

John W. Bordelon: Yes.