Good morning, ladies and gentlemen, and welcome to the Home Bancorp's First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] 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. Please go ahead, Mr. Kirkley.

Thank you, Anna. Good morning and welcome to Home Bank's First Quarter 2025 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 filings. Now I'll hand it over to John to make a few comments about the first quarter. John?

Thanks, David. Good morning and thank you for joining our earnings call today. We appreciate your interest in Home Bank as we discuss our results, expectations for the future and our approach to creating long-term shareholder value. Yesterday afternoon, we reported first quarter net income of $11 million or $1.37 per share, which was a healthy 13% increase from the fourth quarter and a 20% increase from a year ago. Net interest margin expanded for the fourth consecutive quarter to 3.91% and our return on assets increased by 17 basis points to 1.29%. First quarter margin expansion was driven by a 13 basis point decline in the cost of interest-bearing liabilities, stable yields on interest-earning assets and loan growth. Loans grew by $29.1 million in the first quarter or about 4% annualized and we've continued to see good growth so far in April. There have been a lot of headlines recently concerning the economy and tariffs that may change the direction of the economy quickly. But for now, we're sticking with our guidance of 4% to 6% loan growth in 2025. Deposits increased in the first quarter at a 7% annualized rate due to seasonal inflows of public funds and continued effort on our part to fund our loan growth with core deposits. Noninterest-bearing deposits increased $21.9 million, which equated to 27% of total deposits at the end of the quarter. CDs also increased and we've had good success using our CD product to attract and retain customer deposits since the end of the pandemic. At 27% of total deposits, CDs are a larger percentage of funding than we are used to seeing, but we expect that percentage to decline as rates eventually fall. We continue to optimize our Houston market, which has been a tremendous success since we acquired…

Thanks, John. Slide 5 in our Investor Presentation has a summary of the last six quarters and show how strong Home Bank's recent performance has been. Over that period, we maintained a NIM that never dropped below 3.64% and reached 3.91% in Q1, up nine basis points from Q4 and an ROA that bottomed out at 97 basis points, but quickly recovered and is now 1.29%. Slide 7 shows even a longer history back to 2020, but the results are similar. We maintained a core pre-provision ROA that has always been above 1% and was 1.32% in the first quarter. Core return on average tangible common equity has always been above 10% and was 14.3% in the first quarter. And our focus on expenses has helped us maintain a core efficiency ratio between 60% and 65%, which declined to 60% in Q1. As John said, we think that we can continue to deliver improving performance from here even without any Fed rate cuts. Net interest income was stable at $31.7 million in the first quarter compared to $31.6 million in the fourth quarter, but we expect it to increase from here due to continued loan growth, increasing asset yields and moderating funding costs. We expect loans to grow at 4% to 6% annually and asset yields to continue to increase as new originations drive average loan yields higher and lower-yielding securities mature. New loan originations in Q1 had a blended contractual rate of 7.4% compared to the 6.43% yield on our existing portfolio. Slide 14 provides additional details on cash flows from our loan and investment securities portfolio. Almost half of our investment portfolio is projected to be paid off over the next three years with a roll-off yield of 2.68%. Slide 15 and 16 of our Investor Presentation provides…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Joe Yanchunis of Raymond James.

Good morning.

Good morning, Joe.

Good morning, Joe.

So I was hoping you could touch a bit more on the go-forward margin expectation after the improvement in the first quarter. And then can you share what the NIM was for the month of March and how you expect the NIM to behave with a 25 basis point rate count?

All right. Well, let's piecemeal that real quick. I think what we're going to see if Fed doesn't do any cuts, I think, we'll see a slowdown in second quarter of our deposit costs. Basically, the CDs are -- we're pricing those pretty high to be able to stay up with our funding needs. So I don't see as much drop in the margin from the deposit side in the second quarter as we have seen in the first quarter. Now we'll continue on probably becoming almost no changes unless Fed does cut. Typically, when Fed does cut, we don't get the full cut in reduction. We've gotten a percentage of that cut. David, what would you say about 20 basis points out of the 25, 18 to 20 basis points out of the 25. But where we're going to continue to grow the NIM would be on the loan side as we continue to reprice whilst lower rates than what we saw in 2024 still higher than what we have in the portfolio today. So that's going to be the driving force throughout the rest of the year.

Yes, Joe, we have the opportunity to reprice a good bit of loan and investment securities cash flow. And as we mentioned, new loan originations are coming in around contractual rate of around 7.4%. So we still see a couple of basis points uptick per quarter in contractual loan yields given no rate cuts. So I think, as John said, you're not going to see as much contraction on liability costs, but you're going to see growth in earning asset yields. To answer your second question about March, March NIM was about 3.95%. Sorry, the third part of your question, a 25 basis point rate reduction. We've seen what happened to our loan yields. I forgot what slide it is. We have a chart with our loan yields being stable at 6.43%. And that's in part due to a little bit lower concentration of adjustable rate loans. So whenever there's a 25 basis point rate cut, that's about a three basis point decline in loan yield, which is really offset by new loan originations. And then you also see they have about $135 million on average with overnight advances from the FHLB, which reprice automatically. And then we also have a very short concentration of a CD portfolio, duration of our CDs, which we have the ability to reprice very quickly as well as we've seen in the last couple of quarters. So even in a 25 basis point rate cut, I would anticipate stable to a slightly increasing NIM.

That was very thorough. I appreciate it. And then kind of switching over to credit. Can you discuss the two loan relationships that moved to nonaccrual in the quarter? What sectors, what geographies were they in? And then I also understand there's a lot of unknowns at the moment with respect to the potential tariffs and trade war. But it would be helpful to get a sense for what parts of the book you're paying a little closer attention to what part [indiscernible] outside exposure?

These credits have been problematic for some time. One of the credits is in Mississippi and it is basically a development of condominiums to be sold. They've sold three condominiums in the early part of 2024 and have not really sold any since then. The peak time to sell those is right now spring and summer. And so we're giving them until, I think, the end of May. And we'll reevaluate to see what's going on. We may start foreclosure, may ask for a dash on the property whatever. We believe there's equity in the property, but we also believe that the owner is asking too high a price for the property. But that being said, even if we cut the price significantly, the cost that we have, we still should be able to recoup all of that. The other credit was it's a hotel that's undergoing renovations in the Houston market. And the promises are there that we're going to read you all the rooms and obviously have a higher occupancy once that happens. We've asked them for a paydown based upon the cash flow that they've had in the last six months and they're wanting to take the other route of putting their money into the building to make sure that they can increase revenue and make full payment to us. So we'll see how that goes. The property is in a relatively good location. So we would, I think, do well, especially if oil and gas comes back to the Texas area, this hotel would do very well should that happen.

All right. Well, thank you for taking my questions.

Thank you, Joe.

Thank you. [Operator Instructions] Second question comes from Chris Marinac of Janney Montgomery.

Hey, thanks. Good morning. Thank you for hosting us. I wanted to go back to the office portfolio and just get a sense, John or David, about anything anecdotal in terms of the maturities that you've had there kind of how those have been either reset or paid off et cetera. I know that you've got a longer book. I think it was 7.5 years disclosed for that. I just was curious on kind of what you've seen on any maturities that have happened recently.

We've not seen any changes. Actually, a lot of the ones that have matured have renewed, not a lot of movement there. We don't have what a lot of people may be have in bigger cities or the high rises and things of that nature. We have two of those in Baton Rouge, but they are, one is a condo high-rise and the other is 100% occupied by the Louisiana government. So our office portfolio has performed extremely well. As shown on Page 11 of our presentation, I really don't have any criticized assets in that.

Okay. Great. Thank you for that additional background. And then you mentioned about the higher CD pricing. So just to clarify, is that going to change this quarter? I'm just trying to take the pricing out from the Fed decision, whether they do or don't cut. I mean will you still keep those rates somewhat elevated?

I think they're going to remain a little bit elevated but below our overnight funding cost. We have the opportunity to reduce marginally our rates, we believe, but there will most likely remain a slightly elevated and cost of CDs will remain -- will come down incrementally over the next quarter, but not very materially.

Okay. And then in general, do you plan to see the loan-to-deposit ratio come down over time? I mean it's been fairly consistent. I'm just curious if you look at the next year or two if you think that's going to change much from here.

It's been a really weird cycle considering everything that's happened with COVID and the higher interest rate that we still have as much loan demand as we do. That's kind of unprecedented in the history of Home Bank. Usually, when higher rates come up, the loan demand slows. I think the general population thinks that rates were going to go up and come back down quicker than they did. And so they went ahead with their projects. I'm not sure. But, yes, I think we keep waiting for a slower loan demand and really haven't seen it. So the question of the loan-to-deposit ratio, I think, is going to stay tight until such time as we see lower loan demand in our areas. We're working very hard to attract core deposits and expansion in our Houston market is going to help us with that.

Perfect. Thank you both. I appreciate it.

Thanks, Chris.

Next question will come from Stephen Scouten of Piper Sandler.

Thanks. Good morning, guys.

Good morning.

Good morning.

Curious you did a lot of fixed-rate loans. I think you did [Technical Difficulty].

Stephen, You're breaking up. We can't quite hear you.

Can you hear me better now?

Yes.

Okay. Can you help me reconcile the -- what looks like asset sensitivity with what in practice sounds like maybe liability sensitivity on rate cuts?

Yes, I think one of the issues that we're having is an interpretation of changes in interest sensitivity. So if you look at our slide deck, it shows that we are slightly asset-sensitive. Really, we're projecting in the base case, a rising NIM. And even in a down 100 basis point rate environment, we're seeing a change from that base case down slightly, almost 2%. But still a rising NIM from where we are today. So I just wanted to clarify that point that we still see NIM increasing from where we are today even in a 100 basis point rate environment. Our loan portfolio, which is 41% variable. About almost 60% of those loans are adjustable daily with some of the other loans being more annual repricing. So that impacts the sensitivity a little bit. And as we said earlier on our call, our beta is a little bit lower on our deposit repricing than some peers because we're starting at a lower point. So we don't have as much room to come down as quickly as some of our other peers. So that all those things combined help explain the difference between our asset sensitivity position.

Okay. Very helpful. Thanks, David. And then I guess, following up on that Slide 21 and all the data you provided, do you think we start to see a catch-up at some point with those betas on the deposit side similar to what we saw on the way up or to that last point, because we're at lower rates maybe, do we not see the same improvement on the way back down maybe that we saw on the way up?

I think it's going to play out over time and I think it would catch up over time. But as we talked about on our last slide, our loan-to-deposit ratio is a little bit tighter than we'd like it to be. And so it is going to be a little bit slower. But I have no reason to believe that it wouldn't fall into the average of around 35% to 40%.

Okay. Great. And then [Technical Difficulty].

We are losing you again.

How aggressive do you think you'll be around the share repurchase?

Probably not as aggressive as we've been in the first quarter here. But when there's opportunity, especially when our stock price drops down to the 42%, 43%, just above tangible book value, it's a no-brainer. So I think marginally if our stock price continues to go up, that percentage of repurchases will come down significantly.

Yes. I mean we really honestly feel comfortable with our capital positions. We feel like they're very strong. And we feel confident in our ability to perform in the next couple of quarters. So given the opportunity we're going to be in the market, hopefully, our share price increases will be less in the market.

I agree. I like it. Thanks for the time and the color.

Thank you. Appreciate it.

[Operator Instructions] I think there are no more questions. So this concludes our question-and-answer session. I would like to turn the conference over to John for any closing remarks.

Once again, thank you all for joining us today. We look forward to speaking to many of you in the coming days and weeks. Hope you have a wonderful day and the remainder of the week. Thank you.

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