10-Q: Hoyne Bancorp Q3 2025: Net Income Rebounds Amid Conversion

Hoyne Bancorp, Inc. reported a net income of $70,000 for Q3 2025, a significant improvement from a net loss in the prior year, driven by commercial loan growth and reduced interest expense.

Summary

• Hoyne Bancorp, Inc. (currently Hoyne Savings, MHC and subsidiaries) reported a net income of $70,063 for the three months ended September 30, 2025, a substantial improvement from a net loss of $397,298 for the same period in 2024.
• For the nine months ended September 30, 2025, net income was $31,086, compared to a net loss of $1,535,928 for the nine months ended September 30, 2024.
• Total assets increased by $5.3 million (1.2%) to $454.8 million as of September 30, 2025, from $449.5 million at December 31, 2024.
• Loans receivable, net, grew by $8.5 million (3.5%) to $249.4 million, reflecting an emphasis on increasing the commercial loan portfolio.
• Cash and cash equivalents increased significantly by $11.6 million (75.7%) to $26.9 million, intended to increase liquidity for commercial loan expansion.
• Total equity increased by $4.3 million (5.0%) to $90.1 million, primarily due to a decrease in accumulated other comprehensive loss.
• Net interest income for the three months ended September 30, 2025, was $3.41 million, up from $2.38 million in the prior year, driven by increased loan interest income and decreased deposit interest expense.
• The company is undergoing a conversion from a mutual holding company to a stock holding company, with Hoyne Bancorp, Inc. becoming the parent of Hoyne Savings Bank upon completion.

Sentiment

Score: 7

Explanation: The company shows a strong turnaround in profitability, driven by strategic loan growth and effective interest expense management. The ongoing conversion to a stock holding company is a significant positive for future capital access. However, increased noninterest expenses and potential interest rate sensitivity pose challenges.

Positives

• Net income for Q3 2025 was $70,063, a significant turnaround from a net loss of $397,298 in Q3 2024.
• Net income for the nine months ended September 30, 2025, was $31,086, compared to a net loss of $1,535,928 in the prior year period.
• Total assets increased by $5.3 million (1.2%) to $454.8 million as of September 30, 2025.
• Loans receivable, net, increased by $8.5 million (3.5%) to $249.4 million, driven by growth in the commercial loan portfolio.
• Cash and cash equivalents surged by $11.6 million (75.7%) to $26.9 million, enhancing liquidity.
• Total equity increased by $4.3 million (5.0%) to $90.1 million, primarily due to a $4.3 million decrease in accumulated other comprehensive loss.
• Net interest income for the three months ended September 30, 2025, increased by $1.04 million (43.6%) to $3.41 million.
• Interest income on loans receivable increased by $1.1 million for the three months and $3.6 million for the nine months ended September 30, 2025, reflecting successful commercial loan growth.
• Interest expense on deposits decreased by $222,000 for the three months and $498,000 for the nine months ended September 30, 2025, due to lower interest rates on certain accounts.
• The Bank's Tier 1 capital to average assets for the leverage ratio was 20.2% as of September 30, 2025, significantly exceeding the 9.0% well-capitalized requirement under the CBLRF.

Negatives

• Investment securities available-for-sale decreased by $7.7 million (6.6%) to $108.8 million.
• Investment securities held-to-maturity decreased by $4.2 million (12.4%) to $29.8 million.
• Real estate owned increased significantly by $729,000 (525.2%) to $868,000, due to the transfer of a closed branch location held for sale.
• Noninterest income decreased by $50,000 for the three months and $117,000 for the nine months ended September 30, 2025.
• Noninterest expense increased by $230,000 for the three months and $498,000 for the nine months ended September 30, 2025, driven by higher compensation, software costs, and professional fees.
• Provision for credit losses increased by $18,000 (15.4%) to $135,000 for the three months and $405,000 for the nine months ended September 30, 2025, related to the increase in the commercial loan portfolio.
• The net interest income analysis indicates a potential decrease of $1.9 million (13.3%) in net interest income for the twelve months ending September 30, 2026, in an immediate and sustained 300 basis point increase in interest rates.

Risks

• General economic conditions, either nationally or in market areas, that are worse than expected.
• Changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses.
• Ability to access cost-effective funding.
• Fluctuations in real estate values and both residential and commercial real estate market conditions.
• Demand for loans and deposits in the market area.
• Ability to implement and change business strategies.
• Competition among depository and other financial institutions.
• Inflation and changes in the interest rate environment that reduce margins and yields, the fair value of financial instruments or the level of loan originations, or increase in the level of defaults, losses and prepayments on loans.
• Adverse changes in the securities or secondary mortgage markets.
• Changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums.
• Changes in monetary or fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board.
• Changes in the quality or composition of loan or investment portfolios.
• Technological changes that may be more difficult or expensive than expected.
• A failure or breach of operational or security systems or infrastructure, including cyber-attacks.
• The inability of third-party providers to perform as expected.
• Ability to manage market risk, credit risk and operational risk in the current economic environment.
• Ability to enter new markets successfully and capitalize on growth opportunities.
• Ability to successfully integrate into operations any acquired assets, liabilities, customers, systems and management personnel and to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto.
• Changes in consumer spending, borrowing and savings habits.
• Changes in accounting policies and practices, as may be adopted by bank regulatory agencies, FASB, SEC, or PCAOB.
• Ability to retain key employees.
• Compensation expense associated with equity allocation or awarded employees.
• The potential for a substantial portion of maturing certificates of deposit not to be retained, requiring the use of FHLB advances or higher interest rates on deposits, leading to increased interest expense.

Future Outlook

The company aims to position Hoyne Bancorp, Inc. to prosper in an evolving financial services landscape and enhance its position as a leading community banking institution in its local market. It intends to continue providing a broad array of banking services while growing its presence and expanding its franchise, leveraging recent investments in technology and infrastructure. After the conversion, noninterest expenses are expected to increase due to growth, expansion, and new stock benefit plans. The company anticipates having sufficient funds to meet current short-term and long-term funding commitments and expects a substantial portion of maturing certificates of deposit to be renewed. However, in a scenario of an immediate and sustained 300 basis point increase in interest rates, net interest income for the twelve months ending September 30, 2026, is expected to decrease by $1.9 million (13.3%) to $12.1 million.

Management Comments

• Management believes the Bank will collect all amounts owed on securities held to maturity issued by the U.S. government or a U.S. government-sponsored agency since these securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses.
• Management is of the opinion the cost of this investment [FHLB and Bankers Bank stock] will be recovered.
• In the opinion of management, any liability resulting from such proceedings [legal claims] would not have a material impact on the financial statements of the Bank.
• Management believes, as of September 30, 2025 and December 31, 2024, that the Bank meets all capital adequacy requirements to which it is subject.
• Management expects that a substantial portion of the maturing certificates of deposit will be renewed.
• The increase [in cash and cash equivalents] reflects managements intention to increase liquidity to expand the commercial loan portfolio.
• The increase [in loans receivable, net] reflects the emphasis to increase the commercial loan portfolio during the first nine months of 2025.

Industry Context

The filing highlights the company's strategic focus on expanding its commercial loan portfolio and investing in technology and infrastructure to compete in an evolving financial services landscape. This aligns with broader trends in community banking where institutions seek to differentiate through specialized lending and improved digital delivery channels. The discussion of interest rate sensitivity and the impact of rising rates on net interest income reflects a common challenge faced by banks in the current macroeconomic environment, where managing interest rate risk is crucial for profitability. The conversion to a stock holding company structure is a strategic move often undertaken by mutual institutions to gain access to capital markets for growth and flexibility.

Comparison to Industry Standards

• The Bank's Tier 1 capital to average assets (leverage ratio) of 20.2% as of September 30, 2025, significantly exceeds the 9.0% well-capitalized requirement under the Community Bank Leverage Ratio Framework (CBLRF). This indicates a very strong capital position compared to regulatory benchmarks for qualifying community banking organizations.
• The company's focus on commercial real estate and commercial and industrial loans is typical for community banks operating in urban/suburban markets like Chicago, Illinois.
• The use of a CECL model for allowance for credit losses is a standard accounting practice for financial institutions.

Corporate Governance

Related Party Transactions

• Loans to directors and executive officers totaled $305,000 as of September 30, 2025, decreasing from $313,000 at December 31, 2024, and are made on comparable terms to other customers.
• Deposits from directors and executive officers and their affiliates amounted to approximately $2.2 million at September 30, 2025, an increase from $2.0 million at December 31, 2024.

Stakeholder Impact

• Shareholders (future): The conversion to a stock holding company will create public shareholders for Hoyne Bancorp, Inc., providing them with exclusive voting rights and rights to the company's stock.
• Depositors: Eligible deposit account holders will benefit from a liquidation account established after the conversion. Current depositors of Hoyne Savings, MHC will cease to have voting rights upon conversion.
• Employees: An employee stock ownership plan will be adopted, subscribing for up to approximately 8% of the common stock, providing a benefit to employees. Compensation expense will increase due to new stock benefit plans.
• Customers: The company aims to enhance its position as a leading community banking institution and expand its franchise, potentially leading to improved or expanded banking services.
• Creditors: The strong capital position (Tier 1 leverage ratio of 20.2%) indicates a low credit risk for creditors.

Next Steps

• Completion of the conversion of Hoyne Savings, MHC into the stock form of organization.
• Hoyne Bancorp, Inc. will own all outstanding common stock of the Bank upon completion of the conversion.
• Hoyne Bancorp, Inc. will be authorized to pursue other business activities permitted by applicable laws and regulations after the conversion.
• Implementation of new stock benefit plans, which will increase compensation expense.
• The Bank and Bancorp will establish a liquidation account for eligible deposit account holders after the conversion.

Key Dates

Recommendation

The company has demonstrated a strong financial turnaround, moving from a net loss to net income, driven by strategic growth in its commercial loan portfolio and effective interest expense management. The ongoing conversion to a stock holding company is a significant event that will provide access to public capital markets and enhance strategic flexibility. However, the increase in noninterest expenses and the projected decrease in net interest income under rising interest rate scenarios present headwinds. While the capital position is robust, the stock is not yet publicly traded, and the full impact of the conversion and market reception remains to be seen. A "hold" recommendation is appropriate for existing or potential investors to observe the successful completion of the conversion and the company's performance in the new structure and evolving interest rate environment before making a more definitive investment decision.

Keywords

Community banking, Commercial real estate loans, Commercial and industrial loans, Residential mortgage loans, Deposits, Net interest income, Allowance for credit losses, Mutual-to-stock conversion, SEC filing, Financial performance, Liquidity, Capital adequacy, Interest rate risk, Illinois banking