Executive Summary / Key Takeaways

• Home Bancorp (HBCP) demonstrates robust financial performance, with net income increasing significantly by 30.9% year-over-year in Q3 2025, driven by expanding net interest margins and effective cost management.
• The company's strategic focus on core deposit growth, particularly in high-growth markets like Houston, and a disciplined lending approach prioritizing Commercial and Industrial (C&I) loans, underpins its stable funding and asset quality.
• HBCP is successfully leveraging the repricing of its fixed-rate loan portfolio and managing deposit costs, which is expected to continue driving Net Interest Margin (NIM) and earnings expansion through 2025, even in a flat or declining rate environment.
• Despite a notable increase in nonperforming assets, management expresses confidence in sufficient collateral and conservative underwriting to mitigate material principal losses, maintaining a strong asset quality outlook.
• With a compelling valuation, opportunistic share repurchases, and a commitment to strategic M&A, HBCP is positioned to deliver sustained shareholder value, building on its strong capital base and relationship-driven model.

A Foundation of Community Banking and Strategic Expansion

Home Bancorp, Inc., established in 1908 and headquartered in Lafayette, Louisiana, operates as the holding company for Home Bank, N.A., a regional institution deeply rooted in community banking. The company's business model centers on providing a comprehensive suite of banking products and services, including diverse deposit offerings and a broad range of loan products, across Louisiana, Mississippi, and Texas. This long history has shaped a core strategy emphasizing strong customer relationships, prudent credit management, and strategic market expansion.

A pivotal moment in HBCP's recent history was the successful acquisition of the Houston market around 2022, which management has lauded as a "tremendous success." This expansion has been followed by deliberate optimization efforts, including the opening of a Loan Production Office (LPO) in Northwest Houston in 2024 and the recent purchase of a full-service branch building in the same vicinity, slated for renovation and occupancy by the end of 2025. These initiatives underscore a commitment to deepening its presence in high-growth areas. Beyond Houston, New Orleans and Lafayette remain critical strongholds for the bank.

HBCP's overarching strategy is characterized by a disciplined approach to growth and profitability. The company has recalibrated its incentive plans over the past three years to prioritize core deposit growth over sheer loan volume, aiming for a loan-to-deposit ratio in the 90% to 92% range. Lending efforts are increasingly directed towards Commercial and Industrial (C&I) loans, which are viewed as "deposit providers," while growth in non-owner-occupied Commercial Real Estate (CRE) loans is being moderated. This strategic shift is complemented by a steadfast commitment to pricing discipline on new loans, ensuring proper risk-adjusted returns are prioritized over aggressive growth.

Strategic Technology Adoption and Operational Efficiency

While Home Bancorp does not highlight proprietary "core differentiated technology" in the traditional sense, its strategic adoption and leveraging of digital platforms and automation are central to its operational efficiency and competitive positioning. The company's investment in digital banking platforms and ongoing automation initiatives are designed to enhance customer experience and drive future efficiency. Analysts credit this focus on digital platforms for contributing to margin gains and future efficiency.

Management is actively pursuing initiatives to change customer behavior, encouraging greater utilization of technology to reduce reliance on traditional branch transactions. This strategic move is expected to have a positive impact on the expense base, potentially leading to staff reductions and the consolidation of physical branches over time. Targeted expansion in high-growth markets like Houston, combined with ongoing automation, is seen as creating potential for higher net margins and lower expense ratios. Urbanization and digital banking are broadly expected to drive future efficiency, revenue growth, and improved customer experience across the industry. For investors, these efforts translate into a stronger competitive moat by optimizing the community banking model, potentially lowering operational costs, and enhancing profitability in the long term.

Competitive Landscape and Market Positioning

Home Bancorp operates within a competitive regional banking landscape, primarily contending with other banks, credit unions, and increasingly, financial technology companies in Louisiana, Mississippi, and Texas. Key direct competitors include larger regional players such as Regions Financial Corporation (RF), Hancock Whitney Corporation (HWC), and First Horizon Corporation (FHN), all of whom have overlapping geographic footprints and offer similar banking services.

HBCP distinguishes itself through its deep local ties, extensive branch network in its core regions, and a personalized, relationship-based approach to customer service. This community-centric model fosters strong customer loyalty, which can lead to stable, recurring revenue from long-term deposits and loans. This localized expertise and customer-centricity provide HBCP with a competitive edge against larger rivals that may offer broader but less tailored services. For instance, HBCP's approach can result in notably better customer retention compared to competitors, enhancing financial outcomes through superior margins and robust growth in stable local markets.

However, HBCP's smaller scale and more limited geographic reach present vulnerabilities when compared to larger competitors like Regions Financial, which benefits from a wider presence and diversified revenue streams. While HBCP's digital banking efforts are strategic, it may lag behind the more advanced digital tools and innovation speed of a competitor like First Horizon, which has heavily invested in digital transformation. These gaps could affect HBCP's ability to compete on speed and customer acquisition in digitally-driven segments. HBCP's financial performance, including growth rates and profitability, may also trail that of larger rivals that demonstrate stronger revenue expansion and cash flow generation due to their scale.

Indirect competitors, such as fintech companies and online banks, pose a threat by offering digital-first services with potentially lower fees or faster approvals, which could erode HBCP's market share in traditional lending and deposit-taking. In response, HBCP leverages its strong local brand and regulatory licenses, which act as barriers to entry for new players, while strategically investing in its digital capabilities to enhance efficiency and customer experience. The company's focus on C&I lending also aims to attract "deposit providers," helping to offset competitive pressures on funding costs.

Robust Financial Performance and Expanding Margins

Home Bancorp has demonstrated a compelling financial trajectory, particularly in the recent reporting periods. For the third quarter of 2025, the company reported net income of $12.357 million, a significant 30.9% increase compared to the third quarter of 2024. This strong performance extended to the nine months ended September 30, 2025, with net income reaching $34.651 million, up 29.5% from the same period in 2024. Diluted earnings per share (EPS) also saw substantial growth, rising to $1.59 in Q3 2025 from $1.18 in Q3 2024, and to $4.41 for the nine months from $3.34 in the prior year.

The company's asset base expanded modestly, with total assets growing by 1.5% to $3.50 billion at September 30, 2025, from December 31, 2024. Total loans, however, experienced a slight decrease of 0.5% to $2.70 billion over the same period. A key driver of profitability has been the expanding Net Interest Margin (NIM), which reached 4.10% in Q3 2025, up 39 basis points year-over-year, and 4.02% for the nine months, up 35 basis points. This expansion was primarily fueled by higher yields on interest-earning assets and lower funding costs. The average loan yield for Q3 2025 was 6.53%, an increase from 6.43% in Q3 2024, while the average rate paid on total interest-bearing deposits decreased by 21 basis points to 2.57% over the same period. Total deposits grew by a healthy 7% to $3 billion at September 30, 2025, from December 31, 2024, with noninterest-bearing deposits comprising a strong 27% of the total.

Noninterest income for Q3 2025 saw a modest increase of 1.2% to $3.74 million, primarily due to higher service fees and charges, partially offset by a decrease in other income. For the nine months, noninterest income rose by 4.2% to $11.46 million, boosted by service fees and gains on SBA loan sales. Noninterest expense for Q3 2025 increased by 1.2% to $22.531 million, mainly due to higher compensation and benefits and foreclosed assets, though partially offset by lower other expenses and occupancy costs. The company's net profit margin has climbed from 27.8% to 30.5% over the past year, reflecting effective cost management and revenue growth.

Liquidity and Capital Strength

Home Bancorp maintains a robust liquidity position and strong capital ratios, which are critical for supporting its operations and strategic initiatives. Total shareholders' equity increased by $27 million, or 6.8%, to $423 million at September 30, 2025, from $396.1 million at December 31, 2024. This growth was primarily attributed to net income and a decrease in accumulated other comprehensive loss on available-for-sale investment securities, partially offset by cash dividends and share repurchases. Both the company and Home Bank, N.A. consistently hold regulatory capital amounts well in excess of required levels.

The company's liquidity management strategy focuses on ensuring funds are readily available to meet depositor and borrower needs. Primary funding sources include a stable deposit base, loan amortization, and maturing investment securities. With approximately $810.5 million in certificates of deposit maturing within the next 12 months, management anticipates a significant portion will be redeposited, reflecting strong customer relationships. HBCP also leverages substantial borrowing capacity, including Federal Home Loan Bank (FHLB) advances, as a cost-efficient supplement to deposits. The loan-to-deposit ratio of 91% positions the bank well for future loan growth.

Outlook and Guidance: A Path to Continued Expansion

Management's outlook for Home Bancorp remains optimistic, projecting continued Net Interest Margin (NIM) and earnings expansion through 2025, even in a scenario of flat or declining interest rates. This confidence is rooted in several strategic advantages. Loan growth is guided at 4% to 6% annually, though management anticipates it may trend towards the lower end of this range without one or two rate cuts in the second half of the year. New loan originations are expected to maintain attractive contractual rates, around 7.4%, which will continue to drive average loan yields higher as they replace maturing, lower-yielding loans. The fixed-rate portion of the loan portfolio, in particular, is expected to reprice from historical lows (e.g., 4% or 5%) to higher current rates, offsetting potential declines from variable-rate assets in a falling rate environment.

The company's short-term Certificate of Deposit (CD) portfolio, with 58% maturing in the next six months and 95% within a year, provides flexibility to quickly adjust funding costs downward if interest rates decline. Management believes that even with 50 to 75 basis points of rate cuts, they possess the ability to reprice their overall loan portfolio yield higher, offsetting some rate reductions. Noninterest income is projected to be stable, ranging between $3.6 million and $3.8 million per quarter, with anticipated upticks in SBA and mortgage loan sales, alongside continued growth in Treasury management fees driven by the C&I lending focus.

Noninterest expenses are expected to increase by approximately 3.5% in 2025, primarily due to annual raises and technology-related investments. However, this will be partially offset by reductions in occupancy expenses, notably from the exit of a former corporate headquarters lease. Management's initiative to encourage greater customer technology adoption also aims for long-term operational efficiencies, potentially leading to staff and branch reductions. The Zacks Consensus Estimate for 2025 EPS stands at $5.05, representing a year-over-year growth rate of 10.75%, aligning with management's positive outlook.

Risks and Challenges

Despite the positive outlook, Home Bancorp faces several pertinent risks. A significant concern is the notable increase in nonperforming assets (NPAs), which surged by 98% from $15.6 million (0.45% of total assets) at December 31, 2024, to $30.9 million (0.88% of total assets) at September 30, 2025. This rise was primarily due to ten loan relationships, totaling $19 million, that moved to nonaccrual status during 2025. While management anticipates no material principal losses due to sufficient collateral and conservative underwriting, this trend warrants close monitoring. The Allowance for Credit Losses (ACL) remains a critical accounting estimate, highly sensitive to management judgment and subject to federal regulatory review.

Interest rate risk also poses a challenge, as the actual impact of rate changes depends on various factors, including the timing of asset and liability repricing and movements in interest rate spreads. The company's geographic concentration in Gulf South markets could expose it to localized economic downturns or intensified deposit competition. Competition from larger regional banks and agile fintech companies continues to pressure pricing and market share. Furthermore, regulatory changes, particularly from the CFPB and OCC regarding fees, could impact noninterest income. Broader economic conditions, including potential tariffs and trade wars, also introduce uncertainty that could affect loan demand and overall business activity.

Conclusion

Home Bancorp presents a compelling investment thesis, grounded in its long-standing community banking model, strategic market expansion, and disciplined financial management. The company's ability to drive significant net income growth and expand its Net Interest Margin, even in a dynamic interest rate environment, highlights its operational effectiveness and strategic agility. By prioritizing core deposit growth, focusing on C&I lending, and leveraging the repricing of its fixed-rate loan portfolio, HBCP is well-positioned to sustain its profitability.

While the recent increase in nonperforming assets and intense competitive pressures warrant attention, management's proactive credit management and strong capital base provide resilience. The company's commitment to strategic technology adoption for efficiency, coupled with opportunistic share repurchases and a readiness for value-accretive M&A, underscores a clear path to continued shareholder value creation. With its shares trading at a discount to estimated fair value and consensus analyst targets, Home Bancorp offers an attractive opportunity for discerning investors seeking a resilient regional bank with a clear growth and profitability narrative.