Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: September 30, 2015

or

 

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission File Number: 001-34190

 

 

HOME BANCORP, INC.

(Exact name of Registrant as specified in its charter)

 

 

 

Louisiana   71-1051785

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

 

503 Kaliste Saloom Road, Lafayette, Louisiana   70508
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (337) 237-1960

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if changed since last report)

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  ¨    NO  x

At November 2, 2015, the registrant had 7,233,794 shares of common stock, $0.01 par value, outstanding.

 

 

 


Table of Contents

HOME BANCORP, INC. and SUBSIDIARY

TABLE OF CONTENTS

 

         Page  
PART I   
Item 1.  

Financial Statements (unaudited)

  
 

Consolidated Statements of Financial Condition

     1   
 

Consolidated Statements of Income

     2   
 

Consolidated Statements of Comprehensive Income

     3   
 

Consolidated Statements of Changes in Shareholders’ Equity

     4   
 

Consolidated Statements of Cash Flows

     5   
 

Notes to Unaudited Consolidated Financial Statements

     6   
Item 2.  

Managements’ Discussion and Analysis of Financial Condition and Results of Operations

     27   
Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

     40   
Item 4.  

Controls and Procedures

     40   
PART II   
Item 1.  

Legal Proceedings

     40   
Item 1A.  

Risk Factors

     40   
Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

     40   
Item 3.  

Defaults Upon Senior Securities

     40   
Item 4.  

Mine Safety Disclosures

     41   
Item 5.  

Other Information

     41   
Item 6.  

Exhibits

     41   
SIGNATURES      42   


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

     (Unaudited)     (Audited)  
     September 30,     December 31,  
     2015     2014  

Assets

    

Cash and cash equivalents

   $ 23,538,879      $ 29,077,907   

Interest-bearing deposits in banks

     5,762,285        5,526,000   

Investment securities available for sale, at fair value

     190,762,087        174,800,516   

Investment securities held to maturity (fair values of $14,609,405 and $11,889,335, respectively)

     14,408,624        11,705,470   

Mortgage loans held for sale

     7,170,285        4,516,835   

Loans, net of unearned income

     1,207,709,500        908,967,871   

Allowance for loan losses

     (8,931,507     (7,759,500
  

 

 

   

 

 

 

Total loans, net of unearned income and allowance for loan losses

     1,198,777,993        901,208,371   
  

 

 

   

 

 

 

Office properties and equipment, net

     42,264,398        37,964,714   

Cash surrender value of bank-owned life insurance

     19,543,520        19,163,110   

Accrued interest receivable and other assets

     55,682,411        37,451,687   
  

 

 

   

 

 

 

Total Assets

   $ 1,557,910,482      $ 1,221,414,610   
  

 

 

   

 

 

 

Liabilities

    

Deposits:

    

Noninterest-bearing

   $ 279,573,153      $ 267,660,145   

Interest-bearing

     942,114,513        725,912,448   
  

 

 

   

 

 

 

Total deposits

     1,221,687,666        993,572,593   

Short-term Federal Home Loan Bank (FHLB) advances

     77,009,432        31,000,000   

Long-term Federal Home Loan Bank (FHLB) advances

     76,435,084        16,500,000   

Securities sold under repurchase agreements

     —          20,370,892   

Accrued interest payable and other liabilities

     20,492,194        5,827,369   
  

 

 

   

 

 

 

Total Liabilities

     1,395,624,376        1,067,270,854   
  

 

 

   

 

 

 

Shareholders’ Equity

    

Preferred stock, $0.01 par value - 10,000,000 shares authorized; none issued

     —          —     

Common stock, $0.01 par value - 40,000,000 shares authorized; 7,225,311 and 7,123,442 issued and outstanding, respectively

     72,252        90,088   

Additional paid-in capital

     76,486,634        93,332,108   

Treasury stock at cost - 0 and 1,885,303 shares, respectively (1)

     —          (28,572,891

Unallocated common stock held by:

    

Employee Stock Ownership Plan (ESOP)

     (4,641,940     (4,909,750

Recognition and Retention Plan (RRP)

     (180,100     (202,590

Retained earnings

     88,646,324        93,101,915   

Accumulated other comprehensive income

     1,902,936        1,304,876   
  

 

 

   

 

 

 

Total Shareholders’ Equity

     162,286,106        154,143,756   
  

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 1,557,910,482      $ 1,221,414,610   
  

 

 

   

 

 

 

 

(1)  See Note 1 for details on the Louisiana Business Corporation Act.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

1


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

     For the Three Months Ended      For the Nine Months Ended  
     September 30,      September 30,  
     2015     2014      2015      2014  

Interest Income

          

Loans, including fees

   $ 13,435,467      $ 13,090,209       $ 38,417,015       $ 37,497,393   

Investment securities

     939,090        936,379         2,751,325         2,957,544   

Other investments and deposits

     50,613        41,723         149,684         119,403   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total interest income

     14,425,170        14,068,311         41,318,024         40,574,340   
  

 

 

   

 

 

    

 

 

    

 

 

 

Interest Expense

          

Deposits

     730,045        718,367         2,115,681         2,044,983   

Securities sold under repurchase agreement

     2,062        18,838         39,126         54,147   

Short-term FHLB advances

     9,761        30,655         15,894         99,897   

Long-term FHLB advances

     152,461        87,867         359,521         250,106   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total interest expense

     894,329        855,727         2,530,222         2,449,133   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net interest income

     13,530,841        13,212,584         38,787,802         38,125,207   

Provision for loan losses

     568,665        891,989         1,401,290         1,847,958   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net interest income after provision for loan losses

     12,962,176        12,320,595         37,386,512         36,277,249   
  

 

 

   

 

 

    

 

 

    

 

 

 

Noninterest Income

          

Service fees and charges

     1,027,938        1,008,416         2,874,602         2,781,487   

Bank card fees

     619,799        576,105         1,823,071         1,601,221   

Gain on sale of loans, net

     478,380        308,708         1,119,392         909,173   

Income from bank-owned life insurance

     123,943        116,513         380,410         342,347   

Gain on sale of securities, net

     3,053        —           3,053         1,826   

Other income

     (55,982     150,873         114,110         432,687   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total noninterest income

     2,197,131        2,160,615         6,314,638         6,068,741   
  

 

 

   

 

 

    

 

 

    

 

 

 

Noninterest Expense

          

Compensation and benefits

     6,267,791        5,785,428         18,091,203         18,292,578   

Occupancy

     1,218,193        1,213,874         3,556,403         3,419,434   

Marketing and advertising

     129,197        244,364         352,179         695,823   

Data processing and communication

     974,099        964,541         2,832,571         3,396,596   

Professional services

     648,278        210,459         1,361,688         925,961   

Forms, printing and supplies

     130,395        135,840         408,233         499,060   

Franchise and shares tax

     155,872        184,385         450,415         553,156   

Regulatory fees

     273,754        306,724         851,163         790,763   

Foreclosed assets, net

     (17,817     91,836         477,753         772,972   

Other expenses

     742,347        830,629         2,087,916         2,248,951   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total noninterest expense

     10,522,109        9,968,080         30,469,524         31,595,294   
  

 

 

   

 

 

    

 

 

    

 

 

 

Income before income tax expense

     4,637,198        4,513,130         13,231,626         10,750,696   

Income tax expense

     1,737,789        1,636,613         4,644,617         3,688,098   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net Income

   $ 2,899,409      $ 2,876,517       $ 8,587,009       $ 7,062,598   
  

 

 

   

 

 

    

 

 

    

 

 

 

Earnings per share:

          

Basic

   $ 0.43      $ 0.44       $ 1.28       $ 1.08   
  

 

 

   

 

 

    

 

 

    

 

 

 

Diluted

   $ 0.41      $ 0.41       $ 1.23       $ 1.02   
  

 

 

   

 

 

    

 

 

    

 

 

 

Cash dividends declared per common share

   $ 0.08      $ —         $ 0.22       $ —     
  

 

 

   

 

 

    

 

 

    

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

2


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

 

     For the Three Months Ended     For the Nine Months Ended  
     September 30,     September 30,  
     2015     2014     2015     2014  

Net Income

   $ 2,899,409      $ 2,876,517      $ 8,587,009      $ 7,062,598   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Comprehensive Income (Loss)

        

Unrealized gain (loss) on investment securities

   $ 1,209,078      $ (383,068   $ 923,145      $ 1,141,658   

Reclassification adjustment for gains included in net income

     (3,053     —          (3,053     (1,826

Tax effect (1)

     (422,109     134,074        (322,032     (398,941
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of taxes

   $ 783,916      $ (248,994   $ 598,060      $ 740,891   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive Income

   $ 3,683,325      $ 2,627,523      $ 9,185,069      $ 7,803,489   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) The tax effect for the three and nine months ended September 30, 2015 on the change in unrealized gains (losses) on investment securities was $423,178 and $323,101, respectively, compared to ($134,074) and $399,580, respectively, for the three and nine months ended September 30, 2014. The tax effect for the three and nine months ended September 30, 2015 on the reclassification adjustment for gains included in net income had a tax effect of $1,069 and $1,069, respectively, compared to $0 and $639, respectively, for the three and nine months ended September 30, 2014.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

3


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HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

 

     Common
Stock
    Additional
Paid-in
Capital
    Treasury
Stock
    Unallocated
Common Stock
Held by ESOP
    Unallocated
Common Stock
Held by RRP
    Retained
Earnings
    Accumulated
Other
Comprehensive
Income
     Total  

Balance, December 31, 2013(1)

   $ 89,585      $ 92,192,410      $ (28,011,398   $ (5,266,830   $ (1,018,497   $ 83,729,144      $ 195,115       $ 141,909,529   

Net income

               7,062,598           7,062,598   

Other comprehensive income

                 740,891         740,891   

Treasury stock acquired at cost, 23,148 shares

         (490,800              (490,800

Exercise of stock options

     383        443,305                   443,688   

RRP shares released for allocation

       (565,552         794,383             228,831   

ESOP shares released for allocation

       295,634          267,810               563,444   

Share-based compensation cost

       659,819                   659,819   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance, September 30, 2014

   $ 89,968      $ 93,025,616      $ (28,502,198   $ (4,999,020   $ (224,114   $ 90,791,742      $ 936,006       $ 151,118,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance, December 31, 2014(1)

   $ 90,088      $ 93,332,108      $ (28,572,891   $ (4,909,750   $ (202,590   $ 93,101,915      $ 1,304,876       $ 154,143,756   

Net income

               8,587,009           8,587,009   

Other comprehensive income

                 598,060         598,060   

Purchase of Company’s common stock at cost, 11,298 shares

         (3,188,770              (3,188,770

Reclassification of treasury stock per Louisiana law(2)

     (20,302     (20,282,138     31,761,661            (11,459,221        —     

Cash dividends declared, $0.22 per share

               (1,583,379        (1,583,379

Exercise of stock options

     2,466        2,843,499                   2,845,965   

RRP shares released for allocation

       (16,042         22,490             6,448   

ESOP shares released for allocation

       459,391          267,810               727,201   

Share-based compensation cost

       149,816                   149,816   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance, September 30, 2015

   $ 72,252      $ 76,486,634      $ —        $ (4,641,940   $ (180,100   $ 88,646,324      $ 1,902,936       $ 162,286,106   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

(1)  Balances as of December 31, 2013 and December 31, 2014 are audited.
(2)  See Note 1 for details on the Louisiana Business Corporation Act.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

4


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

     For the Nine Months Ended
September 30,
 
     2015     2014  

Cash flows from operating activities, net of effects of acquisitions:

    

Net income

   $ 8,587,009      $ 7,062,598   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Provision for loan losses

     1,401,290        1,847,958   

Depreciation

     1,331,635        1,273,030   

Amortization of purchase accounting valuations and intangibles

     3,273,960        6,953,998   

Net amortization of mortgage servicing asset

     101,231        120,053   

Federal Home Loan Bank stock dividends

     (7,300     (14,400

Net amortization of premium on investments

     1,146,875        965,267   

Gain on sale of investment securities, net

     (3,053     (1,826

Gain on loans sold, net

     (1,119,392     (909,173

Proceeds, including principal payments, from loans held for sale

     106,889,999        77,563,076   

Originations of loans held for sale

     (108,424,058     (80,453,596

Non-cash compensation

     726,982        1,223,263   

Deferred income tax benefit

     (175,272     (336,852

Decrease in interest receivable and other assets

     7,592,246        7,903,958   

Increase in cash surrender value of bank-owned life insurance

     (380,410     (342,347

Increase (decrease) in accrued interest payable and other liabilities

     8,197,772        (590,751
  

 

 

   

 

 

 

Net cash provided by operating activities

     29,139,514        22,264,256   
  

 

 

   

 

 

 

Cash flows from investing activities, net of effects of acquisitions:

    

Purchases of securities available for sale

     (18,713,313     (22,810,016

Purchases of securities held to maturity

     (2,927,988     (2,442,105

Proceeds from maturities, prepayments and calls on securities available for sale

     22,432,941        22,629,218   

Proceeds from maturities, prepayments and calls on securities held to maturity

     —          466,470   

Proceeds from sales of securities available for sale

     16,694,015        66,905,382   

Net increase in loans

     (24,444,345     (53,143,306

Reimbursement from FDIC for covered assets

     403,866        427,897   

Decrease in certificates of deposit in other institutions

     245,000        992,000   

Proceeds from sale of repossessed assets

     2,135,948        4,281,287   

Purchases of office properties and equipment

     (578,097     (3,094,322

Proceeds from sale of properties and equipment

     1,309,339        61,008   

Net cash disbursed in business combination

     (56,404,340     (22,995,649

Purchases of Federal Home Loan Bank stock

     (4,751,000     (2,742,900

Proceeds from redemption of Federal Home Loan Bank stock

     2,444,900        3,118,300   
  

 

 

   

 

 

 

Net cash used in investing activities

     (62,153,074     (8,346,736
  

 

 

   

 

 

 

Cash flows from financing activities, net of effects of acquisitions:

    

Increase in deposits

     19,400,716        25,575,056   

Increase (decrease) in Federal Home Loan Bank advances

     30,000,000        (11,149,000

Decrease in securities sold under repurchase agreements

     (20,000,000     (6,314,674

Purchase of the Company’s common stock

     (3,188,770     (490,800

Proceeds from exercise of stock options

     2,845,965        443,688   

Payment of dividends on common stock

     (1,583,379     —     
  

 

 

   

 

 

 

Net cash provided by financing activities

     27,474,532        8,064,270   
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (5,539,028     21,981,790   

Cash and cash equivalents at beginning of year

     29,077,907        32,638,900   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 23,538,879      $ 54,620,690   
  

 

 

   

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

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Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Home Bancorp, Inc. (the “Company”) were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in shareholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three-month and nine-month periods ended September 30, 2015 are not necessarily indicative of the results which may be expected for the entire fiscal year. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2014.

In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial condition, results of operations, comprehensive income, changes in shareholders’ equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

Certain amounts reported in prior periods have been reclassified to conform to the current period presentation. Such reclassifications had no effect on previously reported shareholders’ equity or net income.

Louisiana Business Corporation Act

Effective January 1, 2015, companies incorporated under Louisiana law became subject to the Louisiana Business Corporation Act. Provisions of the Louisiana Business Corporation Act eliminate the concept of treasury stock and provide that shares reacquired by a company are to be treated as authorized unissued shares. Accounting principles generally accepted in the United States of America state that accounting for treasury stock shall conform to state law. The Company’s Consolidated Financial Statements reflect this change. The cost of shares purchased by the Company has been allocated to common stock, additional paid-in capital and retained earnings.

2. Recent Accounting Pronouncements

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 requires companies to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued. Management will be required to make the evaluation and disclose for both annual and interim reporting periods. The ASU is effective for interim and annual periods after December 15, 2016. The adoption of this ASU is not expected to have a material effect on our Consolidated Financial Statements.

In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis,” which eliminates the deferral of certain investments in variable interest entities. ASU 2015-02 will allow companies with interests in certain investment funds to follow preceding consolidation guidance and make changes to the variable interest model and the voting model. The ASU is effective for annual and interim periods beginning after December 15, 2015. The adoption of this ASU is not expected to have a material effect on our Consolidated Financial Statements.

 

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In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments”. The guidance eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. The ASU is effective for annual and interim periods beginning after December 15, 2015. The adoption of this ASU is not expected to have a material effect on our Consolidated Financial Statements.

3. Acquisition Activity

On September 15, 2015, the Company completed the acquisition of Louisiana Bancorp, Inc. (“Louisiana Bancorp”), the former holding company of Bank of New Orleans (“BNO”) of Metairie, Louisiana. Shareholders of Louisiana Bancorp received $24.25 per share in cash, resulting in aggregate transaction consideration of $70,021,000.

The acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. In accordance with ASC 805, the Company recorded goodwill totaling $10,668,000 from the acquisition as a result of consideration transferred over net assets acquired. Both the assets acquired and liabilities assumed were recorded at their respective acquisition date fair values. Identifiable intangible assets, consisting of core deposit intangible assets, were recorded at fair value.

The fair value estimates of Louisiana Bancorp’s assets and liabilities reflected below are preliminary and subject to refinement as additional information become available. Under current accounting principles, the Company’s estimates of fair values may be adjusted for a period of up to one year from the acquisition date.

The assets acquired and liabilities assumed, as well as the adjustments to record the assets and liabilities at fair value, are presented in the following table as of September 15, 2015.

 

(dollars in thousands)

   As Acquired      Fair Value
Adjustments
    As recorded by
Home Bancorp
 

Assets

       

Cash and cash equivalents

   $ 14,098       $ —        $ 14,098   

Investment securities

     35,794         578 (a)      36,372   

Loans

     281,909         (1,554 )(b)      280,355   

Repossessed assets

     64         (14 )(c)      50   

Office properties and equipment, net

     3,349         3,506 (d)      6,855   

Core deposit intangible

     —           1,500 (e)      1,500   

Other assets

     10,747         620 (f)      11,367   
  

 

 

    

 

 

   

 

 

 

Total assets acquired

   $ 345,961       $ 4,636      $ 350,597   
  

 

 

    

 

 

   

 

 

 

Liabilities

       

Interest-bearing deposits

   $ 180,318       $ 37 (g)    $ 180,355   

Noninterest-bearing deposits

     28,315         —          28,315   

FHLB advances

     75,754         203 (h)      75,957   

Other liabilities

     5,993         624        6,617   
  

 

 

    

 

 

   

 

 

 

Total liabilities assumed

   $ 290,380       $ 864      $ 291,244   
  

 

 

    

 

 

   

 

 

 

Excess of assets acquired over liabilities assumed

          59,353   

Cash consideration paid

          (70,021
       

 

 

 

Total goodwill recorded

        $ 10,668   
       

 

 

 

 

(a) The adjustment represents the market value adjustments on investment securities based on their interest rate risk and credit risk.
(b) The adjustment to reflect the estimated fair value of loans includes:

 

    Adjustment of $2.4 million to reflect the removal of Louisiana Bancorp’s allowance for loan losses in accordance with ASC 805.

 

    Adjustment of ($4.0 million) for all loans determined not to be within the scope of ASC 310-30. In determining the fair value of the loans which are not within the scope of ASC 310-30, the acquired loan portfolio was evaluated based on risk characteristics and other credit and market criteria to determine a credit quality adjustment to the fair value of the loans acquired. The acquired loan balance was reduced by the aggregate amount of the credit quality adjustment in determining the fair value of the loans.

 

(c) The adjustment represents the write down of the book value of repossessed assets to their estimated fair value less estimated costs to sell.

 

(Footnotes continued on next page.)

 

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(Footnotes continued from prior page.)

 

(d) The adjustment represents the estimated adjustment of office properties and equipment to their estimated fair values.
(e) The adjustment represents the estimated value of the core deposit base. The core deposit asset was recorded as an identifiable intangible asset and will be amortized on an accelerated basis over the estimated life of the deposit base of 15 years.
(f) The adjustment is to record the deferred tax asset on the transaction and the estimated fair value of other assets.
(g) The adjustment represents the estimated fair value of certificates of deposit acquired based on current interest rates for similar instruments. The adjustment will be recognized using a level yield amortization method based on maturities of the deposit liabilities.
(h) The adjustment is to record the fair value of FHLB advances acquired at various terms and maturities based on market rates at the acquisition date. The adjustment will be recognized using a level yield amortization method based on maturities of the borrowings.

The following pro forma information for the nine months ended September 30, 2015 and September 30, 2014 reflects the Company’s estimated consolidated results of operations as if the acquisition of Louisiana Bancorp occurred at January 1, 2014, unadjusted for potential cost savings.

 

(dollars in thousands except per share information)

   2015      2014  

Net interest income

   $ 47,305       $ 46,252   

Noninterest income

     7,660         7,561   

Noninterest expense

     36,571         37,553   

Net income

     11,028         9,467   

Earnings per share – basic

   $ 1.65       $ 1.45   

Earnings per share – diluted

     1.58         1.37   

4. Investment Securities

Summary information regarding the Company’s investment securities classified as available for sale and held to maturity as of September 30, 2015 and December 31, 2014 is as follows.

 

(dollars in thousands)

   Amortized
Cost
     Gross
Unrealized
Gains
     Gross Unrealized
Losses
     Fair Value  
September 30, 2015                  Less Than
1 Year
     Over 1
Year
        

Available for sale:

              

U.S. agency mortgage-backed

   $ 146,509       $ 2,528       $ 69       $ 283       $ 148,685   

Non-U.S. agency mortgage-backed

     6,541         55         1         44         6,551   

Municipal bonds

     22,537         528         26         —           23,039   

U.S. government agency

     12,247         240         —           —           12,487   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total available for sale

   $ 187,834       $ 3,351       $ 96       $ 327       $ 190,762   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Held to maturity:

              

Municipal bonds

   $ 14,409       $ 252       $ 51       $ 1       $ 14,609   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

(dollars in thousands)

   Amortized
Cost
     Gross
Unrealized
Gains
     Gross Unrealized
Losses
     Fair Value  
December 31, 2014                  Less Than
1 Year
     Over 1
Year
        

Available for sale:

              

U.S. agency mortgage-backed

   $ 120,009       $ 1,984       $ 10       $ 485       $ 121,498   

Non-U.S. agency mortgage-backed

     7,757         61         28         26         7,764   

Municipal bonds

     24,388         561         2         51         24,896   

U.S. government agency

     20,639         190         —           186         20,643   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total available for sale

   $ 172,793       $ 2,796       $ 40       $ 748       $ 174,801   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Held to maturity:

              

Municipal bonds

   $ 11,705       $ 202       $ 3       $ 15       $ 11,889   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The estimated fair value and amortized cost by maturity of the Company’s investment securities as of September 30, 2015 are shown in the following tables. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. The expected maturity of a security may differ from its contractual maturity because of prepayments or the exercise of call options. Accordingly, actual maturities may differ from contractual maturities.

 

(dollars in thousands)

   One Year
or Less
     One Year
to Five
Years
     Five to
Ten Years
     Over Ten
Years
     Total  

Fair Value

              

Securities available for sale:

              

U.S. agency mortgage-backed

   $ 8       $ 2,530       $ 31,528       $ 114,619       $ 148,685   

Non-U.S. agency mortgage-backed

     —           —           —           6,551         6,551   

Municipal bonds

     939         7,833         11,599         2,668         23,039   

U.S. government agency

     —           8,111         —           4,376         12,487   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total available for sale

   $ 947       $ 18,474       $ 43,127       $ 128,214       $ 190,762   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities held to maturity:

              

Municipal bonds

   $ 643       $ 1,115       $ 8,856       $ 3,995       $ 14,609   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities

   $ 1,590       $ 19,589       $ 51,983       $ 132,209       $ 205,371   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(dollars in thousands)

   One Year
or Less
     One Year
to Five
Years
     Five to
Ten Years
     Over Ten
Years
     Total  

Amortized Cost

              

Securities available for sale:

              

U.S. agency mortgage-backed

   $ 11       $ 2,457       $ 31,162       $ 112,879       $ 146,509   

Non-U.S. agency mortgage-backed

     —           —           —           6,541         6,541   

Municipal bonds

     935         7,643         11,406         2,553         22,537   

U.S. government agency

     —           7,987         —           4,260         12,247   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total available for sale

   $ 946       $ 18,087       $ 42,568       $ 126,233       $ 187,834   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities held to maturity:

              

Municipal bonds

   $ 636       $ 1,095       $ 8,653       $ 4,025       $ 14,409   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities

   $ 1,582       $ 19,182       $ 51,221       $ 130,258       $ 202,243   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic and market conditions warrant such evaluations. Consideration is given to (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; and (3) the Company’s intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost, which may extend to maturity.

The Company performs a process to identify securities that could potentially have a credit impairment that is other-than-temporary. This process involves evaluating each security for impairment by monitoring credit performance, collateral type, collateral geography, bond credit support, loan-to-value ratios, credit scores, loss severity levels, pricing levels, downgrades by rating agencies, cash flow projections and other factors as indicators of potential credit issues. When the Company determines that a security is deemed to be other-than-temporarily impaired, an impairment loss is recognized.

As of September 30, 2015, 30 of the Company’s debt securities had unrealized losses totaling 1.3% of the individual securities’ amortized cost basis and 0.2% of the Company’s total amortized cost basis of the investment securities portfolio. At such date, 14 of the 30 securities had been in a continuous loss position for over 12 months. The 14 securities had an aggregate amortized cost basis of $17.5 million and unrealized loss of $328,000 at September 30, 2015. Management has the intent and ability to hold these debt securities until maturity, or until anticipated recovery; hence, no declines in these 14 securities were deemed to be other-than-temporary.

As of September 30, 2015 and December 31, 2014, the Company had $96,519,000 and $76,491,000, respectively, of securities pledged to secure public deposits. As of December 31, 2014, the Company had $21,211,000 of securities pledged to securities sold under repurchase agreements. The securities pledged for securities sold under repurchase agreements were released in July 2015 once the agreements matured.

5. Earnings Per Share

Earnings per common share were computed based on the following:

 

    

Three Months Ended

September 30,

     Nine Months Ended
September 30,
 

(in thousands, except per share data)

   2015      2014      2015      2014  

Numerator:

           

Net income available to common shareholders

   $ 2,899       $ 2,877       $ 8,587       $ 7,063   

Denominator:

           

Weighted average common shares outstanding

     6,743         6,577         6,690         6,534   

Effect of dilutive securities:

           

Restricted stock

     5         5         4         32   

Stock options

     275         369         292         349   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding – assuming dilution

     7,023         6,951         6,986         6,915   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic earnings per common share

   $ 0.43       $ 0.44       $ 1.28       $ 1.08   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per common share

   $ 0.41       $ 0.41       $ 1.23       $ 1.02   
  

 

 

    

 

 

    

 

 

    

 

 

 

Options on 52,258 and 9,500 shares of common stock were not included in the computation of diluted earnings per share for the three months ended September 30, 2015 and September 30, 2014, respectively, because the effect of these shares was anti-dilutive. Options on 39,177 and 34,833 shares of common stock were not included in the computation of diluted earnings per share for the nine months ended September 30, 2015 and September 30, 2014, respectively, because the effect of these shares was anti-dilutive.

6. Credit Quality and Allowance for Loan Losses

The following briefly describes the distinction between originated and acquired loans and certain significant accounting policies relevant to each category.

 

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Table of Contents

Originated Loans

Loans originated for investment are reported at the principal balance outstanding net of unearned income. Interest on loans and accretion of unearned income are computed in a manner that approximates a level yield on recorded principal. Interest on loans is recorded as income is earned. The accrual of interest on an originated loan is discontinued when it is probable the borrower will not be able to meet payment obligations as they become due. The Company maintains an allowance for loan losses on originated loans that represents management’s estimate of probable losses incurred in this portfolio category.

Acquired Loans

Loans that were acquired as a result of our acquisitions of certain assets and liabilities of Statewide Bank (“Statewide”) of Covington, Louisiana, on March 12, 2010, GS Financial Corp. (“GSFC”), the former holding company of Guaranty Savings Bank of Metairie, Louisiana, on July 15, 2011, Britton & Koontz Capital Corporation (“Britton & Koontz”), the former holding company of Britton & Koontz Bank, N.A. (“Britton & Koontz Bank”) of Natchez, Mississippi on February 14, 2014, and Louisiana Bancorp, Inc. (“Louisiana Bancorp”), the former holding company of Bank of New Orleans (“BNO”) of Metairie, Louisiana on September 15, 2015 are referred to as “Acquired Loans.”

Acquired Loans were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The acquired loans were segregated between those considered to be performing (“acquired performing”) and those with evidence of credit deterioration (“acquired impaired”), and then further segregated into loan pools designed to facilitate the estimation of expected cash flows. The fair value estimate for each pool of acquired performing and acquired impaired loans was based on the estimate of expected cash flows, both principal and interest, from that pool, discounted at prevailing market interest rates.

The difference between the fair value of an acquired performing loan pool and the contractual amounts due at the acquisition date (the “fair value discount”) is accreted into income over the estimated life of the pool. Management estimates an allowance for loan losses for acquired performing loans using a methodology similar to that used for originated loans. The allowance determined for each loan pool is compared to the remaining fair value discount for that pool. If the allowance amount calculated under the Company’s methodology is greater than the Company’s remaining discount, the additional amount called for is added to the reported allowance through a provision for loan losses. If the allowance amount calculated under the Company’s methodology is less than the Company’s recorded discount, no additional allowance or provision is recognized. Actual losses first reduce any remaining nonaccretable discount for the loan pool. Once the nonaccretable discount is fully depleted, losses are applied against the allowance established for that pool. Acquired performing loans are placed on nonaccrual status and considered and reported as nonperforming or past due using the same criteria applied to the originated portfolio.

The excess of cash flows expected to be collected from an acquired impaired loan pool over the pool’s estimated fair value at acquisition is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the pool. Each pool of acquired impaired loans is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

Management recasts the estimate of cash flows expected to be collected on each acquired impaired loan pool periodically. If the present value of expected cash flows for a pool is less than its carrying value, an impairment is recognized by an increase in the allowance for loan losses and a charge to the provision for loan losses. If the present value of expected cash flows for a pool is greater than its carrying value, any previously established allowance for loan losses is reversed and any remaining difference increases the accretable yield which will be taken into interest income over the remaining life of the loan pool. Acquired impaired loans are generally not subject to individual evaluation for impairment and are not reported with impaired loans, even if they would otherwise qualify for such treatment.

 

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Table of Contents

The allowance for loan losses and recorded investment in loans as of the dates indicated are as follows.

 

     As of September 30, 2015  
     Originated Loans                

(dollars in thousands)

   Collectively
Evaluated for
Impairment
     Individually
Evaluated for
Impairment
     Acquired
Loans
     Total  

Allowance for loan losses:

           

One- to four-family first mortgage

   $ 1,369       $ —         $ 93       $ 1,462   

Home equity loans and lines

     538         —           236         774   

Commercial real estate

     3,063         86         —           3,149   

Construction and land

     1,186         —           59         1,245   

Multi-family residential

     192         —           —           192   

Commercial and industrial

     1,500         33         —           1,533   

Consumer

     577         —           —           577   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $     8,425       $    119       $        388       $        8,932   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     As of September 30, 2015  
     Originated Loans                

(dollars in thousands)

   Collectively
Evaluated for
Impairment
     Individually
Evaluated for
Impairment
     Acquired
Loans(1)
     Total  

Loans:

           

One- to four-family first mortgage

   $ 178,206       $ 78       $ 213,263       $ 391,547   

Home equity loans and lines

     38,348         —           56,154         94,502   

Commercial real estate

     288,022         185         121,848         410,055   

Construction and land

     93,906         —           8,875         102,781   

Multi-family residential

     15,623         —           30,169         45,792   

Commercial and industrial

     102,127         707         12,339         115,173   

Consumer

     45,403         —           2,457         47,860   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 761,635       $    970       $ 445,105       $ 1,207,710   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     As of December 31, 2014  
     Originated Loans                

(dollars in thousands)

   Collectively
Evaluated for
Impairment
     Individually
Evaluated for
Impairment
     Acquired
Loans
     Total  

Allowance for loan losses:

           

One- to four-family first mortgage

   $ 1,136       $ —         $ 174       $ 1,310   

Home equity loans and lines

     442         —           111         553   

Commercial real estate

     2,815         107         —           2,922   

Construction and land

     968         —           133         1,101   

Multi-family residential

     192         —           —           192   

Commercial and industrial

     1,128         33         —           1,161   

Consumer

     521         —           —           521   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $     7,202       $    140       $        418       $        7,760   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     As of December 31, 2014  
     Originated Loans                

(dollars in thousands)

   Collectively
Evaluated for
Impairment
     Individually
Evaluated for
Impairment
     Acquired
Loans(1)
     Total  

Loans:

           

One- to four-family first mortgage

   $ 164,450       $ 78       $ 68,721       $ 233,249   

Home equity loans and lines

     34,485         —           21,515         56,000   

Commercial real estate

     279,493         777         72,593         352,863   

Construction and land

     77,057         —           12,097         89,154   

Multi-family residential

     16,507         —           10,868         27,375   

Commercial and industrial

     88,411         1,128         14,907         104,446   

Consumer

     43,049         —           2,832         45,881   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 703,452       $ 1,983       $ 203,533       $    908,968   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  $22.1 million and $31.9 million in acquired loans were accounted for under ASC 310-30 at September 30, 2015 and December 31, 2014, respectively.

A summary of activity in the allowance for loan losses during the nine months ended September 30, 2015 and September 30, 2014 follows.

 

     For the Nine Months Ended September 30, 2015  

(dollars in thousands)

   Beginning
Balance
     Charge-offs     Recoveries      Provision     Ending
Balance
 

Originated loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 1,136       $ —        $ 30       $ 203      $ 1,369   

Home equity loans and lines

     442         (14     5         105        538   

Commercial real estate

     2,922         —          1         226        3,149   

Construction and land

     968         —          —           218        1,186   

Multi-family residential

     192         —          —           —          192   

Commercial and industrial

     1,161         (133     111         394        1,533   

Consumer

     521         (79     1         134        577   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 7,342       $ (226   $ 148       $ 1,280      $ 8,544   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Acquired loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 174       $ (42   $ —         $ (39   $ 93   

Home equity loans and lines

     111         —          —           125        236   

Commercial real estate

     —           —          —           —          —     

Construction and land

     133         (109     —           35        59   

Multi-family residential

     —           —          —           —          —     

Commercial and industrial

     —           —          —           —          —     

Consumer

     —           —          —           —          —     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 418       $ (151   $ —         $ 121      $ 388   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 1,310       $ (42   $ 30       $ 164      $ 1,462   

Home equity loans and lines

     553         (14     5         230        774   

Commercial real estate

     2,922         —          1         226        3,149   

Construction and land

     1,101         (109     —           253        1,245   

Multi-family residential

     192         —          —           —          192   

Commercial and industrial

     1,161         (133     111         394        1,533   

Consumer

     521         (79     1         134        577   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 7,760       $    (377   $ 148       $ 1,401      $ 8,932   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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Table of Contents
     For the Nine Months Ended September 30, 2014  

(dollars in thousands)

   Beginning
Balance
     Charge-offs     Recoveries      Provision      Ending
Balance
 

Originated loans:

             

Allowance for loan losses:

             

One- to four-family first mortgage

   $ 904       $ (99   $ —         $ 316       $ 1,121   

Home equity loans and lines

     366         —          4         67         437   

Commercial real estate

     2,528         —          —           175         2,703   

Construction and land

     977         (20     —           221         1,178   

Multi-family residential

     90         —          —           55         145   

Commercial and industrial

     1,332         (1,183     79         657         885   

Consumer

     473         (18     3         56         514   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $ 6,670       $ (1,320   $ 86       $ 1,547       $ 6,983   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Acquired loans:

             

Allowance for loan losses:

             

One- to four-family first mortgage

   $ 184       $ (114   $ —         $ 104       $ 174   

Home equity loans and lines

     58         —          —           53         111   

Commercial real estate

     —           —          —           —           —     

Construction and land

     —           —          —           133         133   

Multi-family residential

     —           —          —           —           —     

Commercial and industrial

     6         —          —           11         17   

Consumer

     —           —          —           —           —     
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $ 248       $ (114   $ —         $ 301       $ 435   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total loans:

             

Allowance for loan losses:

             

One- to four-family first mortgage

   $ 1,088       $ (213   $ —         $ 420       $ 1,295   

Home equity loans and lines

     424         —          4         120         548   

Commercial real estate

     2,528         —          —           175         2,703   

Construction and land

     977         (20     —           354         1,311   

Multi-family residential

     90         —          —           55         145   

Commercial and industrial

     1,338         (1,183     79         668         902   

Consumer

     473         (18     3         56         514   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $ 6,918       $ (1,434   $ 86       $ 1,848       $ 7,418   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Credit quality indicators on the Company’s loan portfolio as of the dates indicated are as follows.

 

     September 30, 2015  

(dollars in thousands)

   Pass      Special
Mention
     Substandard      Doubtful      Total  

Originated loans:

              

One- to four-family first mortgage

   $ 176,515       $ 448       $ 1,321       $ —         $ 178,284   

Home equity loans and lines

     37,828         398         122         —           38,348   

Commercial real estate

     283,037         2,643         2,527         —           288,207   

Construction and land

     92,799         87         1,020         —           93,906   

Multi-family residential

     15,623         —           —           —           15,623   

Commercial and industrial

     100,134         26         2,674         —           102,834   

Consumer

     44,991         63         349         —           45,403   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 750,927       $ 3,665       $ 8,013       $ —         $ 762,605   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Acquired loans:

              

One- to four-family first mortgage

   $ 207,724       $ 868       $ 4,671       $ —         $ 213,263   

Home equity loans and lines

     55,749         56         349         —           56,154   

Commercial real estate

     113,423         2,230         6,195         —           121,848   

Construction and land

     5,043         2,378         1,454         —           8,875   

Multi-family residential

     29,172         18         979         —           30,169   

Commercial and industrial

     9,993         1,181         1,165         —           12,339   

Consumer

     2,317         76         64         —           2,457   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 423,421       $ 6,807       $ 14,877       $ —         $ 445,105   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total:

              

One- to four-family first mortgage

   $ 384,239       $ 1,316       $ 5,992       $ —         $ 391,547   

Home equity loans and lines

     93,577         454         471         —           94,502   

Commercial real estate

     396,460         4,873         8,722         —           410,055   

Construction and land

     97,842         2,465         2,474         —           102,781   

Multi-family residential

     44,795         18         979         —           45,792   

Commercial and industrial

     110,127         1,207         3,839         —           115,173   

Consumer

     47,308         139         413         —           47,860   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,174,348       $ 10,472       $ 22,890       $ —         $ 1,207,710   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2014  

(dollars in thousands)

   Pass      Special
Mention
     Substandard      Doubtful      Total  

Originated loans:

              

One- to four-family first mortgage

   $ 161,922       $ 251       $ 2,355       $ —         $ 164,528   

Home equity loans and lines

     33,731         255         499         —           34,485   

Commercial real estate

     274,878         3,655         1,737         —           280,270   

Construction and land

     75,888         103         1,066         —           77,057   

Multi-family residential

     15,642         865         —           —           16,507   

Commercial and industrial

     88,309         39         1,191         —           89,539   

Consumer

     42,718         2         329         —           43,049   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 693,088       $ 5,170       $ 7,177       $ —         $ 705,435   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

              

One- to four-family first mortgage

   $ 62,761       $ 1,007       $ 4,953       $ —         $ 68,721   

Home equity loans and lines

     20,842         57         616         —           21,515   

Commercial real estate

     61,172         2,071         9,350         —           72,593   

Construction and land

     6,407         1         5,689         —           12,097   

Multi-family residential

     8,175         923         1,770         —           10,868   

Commercial and industrial

     13,699         —           1,208         —           14,907   

Consumer

     2,741         40         51         —           2,832   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 175,797       $ 4,099       $ 23,637       $ —         $ 203,533   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Total:

              

One- to four-family first mortgage

   $ 224,683       $ 1,258       $ 7,308       $ —         $ 233,249   

Home equity loans and lines

     54,573         312         1,115         —           56,000   

Commercial real estate

     336,050         5,726         11,087         —           352,863   

Construction and land

     82,295         104         6,755         —           89,154   

Multi-family residential

     23,817         1,788         1,770         —           27,375   

Commercial and industrial

     102,008         39         2,399         —           104,446   

Consumer

     45,459         42         380         —           45,881   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 868,885       $ 9,269       $ 30,814       $ —         $ 908,968   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The above classifications follow regulatory guidelines and can generally be described as follows:

 

  Pass loans are of satisfactory quality.

 

  Special mention loans have an existing weakness that could cause future impairment, including the deterioration of financial ratios, past due status, questionable management capabilities and possible reduction in the collateral values.

 

  Substandard loans have an existing specific and well-defined weakness that may include poor liquidity and deterioration of financial performance. Such loans may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.

 

  Doubtful loans have specific weaknesses that are severe enough to make collection or liquidation in full highly questionable and improbable.

In addition, residential loans are classified using an inter-agency regulatory methodology that incorporates the extent of delinquencies and loan-to-value ratios. These classifications were the most current available as of the dates indicated and were generally updated within the quarter.

Age analysis of past due loans as of the dates indicated are as follows.

 

     September 30, 2015  

(dollars in thousands)

   30-59
Days

Past Due
     60-89
Days

Past Due
     Greater
Than 90
Days

Past Due
     Total
Past Due
     Current
Loans
     Total
Loans
 

Originated loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 2,686       $ 368       $ 627       $ 3,681       $ 174,603       $ 178,284   

Home equity loans and lines

     137         —           121         258         38,090         38,348   

Commercial real estate

     1,611         —           617         2,228         285,979         288,207   

Construction and land

     95         —           —           95         93,811         93,906   

Multi-family residential

     —           —           —           —           15,623         15,623   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     4,529         368         1,365         6,262         608,106         614,368   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     1,569         17         84         1,670         101,164         102,834   

Consumer

     717         137         308         1,162         44,241         45,403   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     2,286         154         392         2,832         145,405         148,237   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 6,815       $ 522       $ 1,757       $ 9,094       $ 753,511       $ 762,605   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Acquired loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 1,872       $ 1,409       $ 3,249       $ 6,530       $ 206,733       $ 213,263   

Home equity loans and lines

     280         120         122         522         55,632         56,154   

Commercial real estate

     146         —           2,092         2,238         119,610         121,848   

Construction and land

     630         8         50         688         8,187         8,875   

Multi-family residential

     —           18         12         30         30,139         30,169   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     2,928         1,555         5,525         10,008         420,301         430,309   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     —           —           768         768         11,571         12,339   

Consumer

     18         17         49         84         2,373         2,457   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     18         17         817         852         13,944         14,796   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 2,946       $ 1,572       $ 6,342       $ 10,860       $ 434,245       $ 445,105   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 4,558       $ 1,777       $ 3,876       $ 10,211       $ 381,336       $ 391,547   

Home equity loans and lines

     417         120         243         780         93,722         94,502   

Commercial real estate

     1,757         —           2,709         4,466         405,589         410,055   

Construction and land

     725         8         50         783         101,998         102,781   

Multi-family residential

     —           18         12         30         45,762         45,792   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     7,457         1,923         6,890         16,270         1,028,407         1,044,677   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     1,569         17         852         2,438         112,735         115,173   

Consumer

     735         154         357         1,246         46,614         47,860   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     2,304         171         1,209         3,684         159,349         163,033   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 9,761       $ 2,094       $ 8,099       $ 19,954       $ 1,187,756       $ 1,207,710   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2014  

(dollars in thousands)

   30-59
Days

Past Due
     60-89
Days

Past Due
     Greater
Than 90
Days

Past Due
     Total
Past Due
     Current
Loans
     Total
Loans
 

Originated loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 2,056       $ 90       $ 1,058       $ 3,204       $ 161,324       $ 164,528   

Home equity loans and lines

     434         —           65         499         33,986         34,485   

Commercial real estate

     1,284         —           829         2,113         278,157         280,270   

Construction and land

     309         —           —           309         76,748         77,057   

Multi-family residential

     —           —           —           —           16,507         16,507   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     4,083         90         1,952         6,125         566,722         572,847   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     271         49         451         771         88,768         89,539   

Consumer

     924         133         329         1,386         41,663         43,049   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     1,195         182         780         2,157         130,431         132,588   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 5,278       $ 272       $ 2,732       $ 8,282       $ 697,153       $ 705,435   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Acquired loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 2,323       $ 1,341       $ 2,836       $ 6,500       $ 62,221       $ 68,721   

Home equity loans and lines

     249         97         220         566         20,949         21,515   

Commercial real estate

     4,551         1         1,840         6,392         66,201         72,593   

Construction and land

     499         755         702         1,956         10,141         12,097   

Multi-family residential

     1,052         25         319         1,396         9,472         10,868   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     8,674         2,219         5,917         16,810         168,984         185,794   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     177         392         336         905         14,002         14,907   

Consumer

     47         33         41         121         2,711         2,832   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     224         425         377         1,026         16,713         17,739   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 8,898       $ 2,644       $ 6,294       $ 17,836       $ 185,697       $ 203,533   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 4,379       $ 1,431       $ 3,894       $ 9,704       $ 223,545       $ 233,249   

Home equity loans and lines

     683         97         285         1,065         54,935         56,000   

Commercial real estate

     5,835         1         2,669         8,505         344,358         352,863   

Construction and land

     808         755         702         2,265         86,889         89,154   

Multi-family residential

     1,052         25         319         1,396         25,979         27,375   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     12,757         2,309         7,869         22,935         735,706         758,641   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     448         441         787         1,676         102,770         104,446   

Consumer

     971         166         370         1,507         44,374         45,881   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     1,419         607         1,157         3,183         147,144         150,327   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 14,176       $ 2,916       $ 9,026       $ 26,118       $ 882,850       $ 908,968   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Excluding Acquired Loans with deteriorated credit quality, as of September 30, 2015 and December 31, 2014, the Company did not have any loans greater than 90 days past due and accruing.

The following is a summary of information pertaining to Originated Loans which were deemed to be impaired loans as of the dates indicated.

 

     As of Period Ended September 30, 2015  

(dollars in thousands)

   Recorded
Investment
     Unpaid
Principal

Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

With no related allowance recorded:

              

One- to four-family first mortgage

   $ 78       $ 78       $ —         $ 78       $ 4   

Home equity loans and lines

     —           —           —           —           —     

Commercial real estate

     —           —           —           —           —     

Construction and land

     —           —           —           —           —     

Multi-family residential

     —           —           —           —           —     

Commercial and industrial

     —           —           —           393         —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 78       $ 78       $ —         $ 471       $ 4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With an allowance recorded:

              

One- to four-family first mortgage

   $ —         $ —         $ —         $ —         $ —     

Home equity loans and lines

     —           —           —           —           —     

Commercial real estate

     185         185         86         695         8   

Construction and land

     —           —           —           —           —     

Multi-family residential

     —           —           —           —           —     

Commercial and industrial

        707            707         33         732         29   

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 892       $ 892       $ 119       $ 1,427       $ 37   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired Originated Loans:

              

One- to four-family first mortgage

   $ 78       $ 78       $ —         $ 78       $ 4   

Home equity loans and lines

     —           —           —           —           —     

Commercial real estate

     185         185         86         695         8   

Construction and land

     —           —           —           —           —     

Multi-family residential

     —           —           —           —           —     

Commercial and industrial

     707         707         33         1,125         29   

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 970       $ 970       $ 119       $ 1,898       $ 41   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     As of Period Ended December 31, 2014  

(dollars in thousands)

   Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

With no related allowance recorded:

              

One- to four-family first mortgage

   $ 78       $ 78       $ —         $ 214       $ —     

Home equity loans and lines

     —           —           —           —           —     

Commercial real estate

     —           —           —           64         —     

Construction and land

     —           —           —           15         —     

Multi-family residential

     —           —           —           —           —     

Commercial and industrial

     398         398         —           494         4   

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 476       $ 476       $ —         $ 787       $ 4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With an allowance recorded:

              

One- to four-family first mortgage

   $ —         $ —         $ —         $ —         $ —     

Home equity loans and lines

     —           —           —           —           —     

Commercial real estate

     777         777         107         239         10   

Construction and land

     —           —           —           —           —     

Multi-family residential

     —           —           —           —           —     

Commercial and industrial

     730         730         33         923         40   

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,507       $ 1,507       $ 140       $ 1,162       $ 50   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired Originated Loans:

              

One- to four-family first mortgage

   $ 78       $ 78       $ —         $ 214       $ —     

Home equity loans and lines

     —           —           —           —           —     

Commercial real estate

     777         777         107         303         10   

Construction and land

     —           —           —           15         —     

Multi-family residential

     —           —           —           —           —     

Commercial and industrial

     1,128         1,128         33         1,417         44   

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,983       $ 1,983       $ 140       $ 1,949       $ 54   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

A summary of information pertaining to nonaccrual loans as of dates indicated is as follows.

 

     September 30, 2015      December 31, 2014  

(dollars in thousands)

   Originated      Acquired(1)      Total      Originated      Acquired(1)      Total  

Nonaccrual loans:

                 

One- to four-family first mortgage

   $ 666       $ 3,745       $ 4,411       $ 1,429       $ 5,072       $ 6,501   

Home equity loans and lines

     122         325         447         65         482         547   

Commercial real estate

     1,701         3,387         5,088         829         5,498         6,327   

Construction and land

     —           130         130         —           5,356         5,356   

Multi-family residential

     —           782         782         —           1,770         1,770   

Commercial and industrial

     2,674         1,001         3,675         1,191         1,168         2,359   

Consumer

     349         125         474         329         92         421   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 5,512       $ 9,495       $ 15,007       $ 3,843       $ 19,438       $ 23,281   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
(1) Nonaccrual acquired loans accounted for under ASC 310-30 totaled $5.9 million and $15.1 million as of September 30, 2015 and December 31, 2014, respectively.

As of September 30, 2015, the Company had no outstanding commitments to lend additional funds to any customer whose loan was classified as impaired.

Troubled Debt Restructurings

During the course of its lending operations, the Company periodically grants concessions to its customers in an attempt to protect as much of its investment as possible and to minimize risk of loss. These concessions may include restructuring the terms of a customer loan to alleviate the burden of the customer’s near-term cash requirements. The Company adopted the provisions of ASU No. 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, which provides clarification on the determination of whether loan restructurings are considered troubled debt restructurings (“TDRs”). In accordance with the ASU, in order to be considered a TDR, the Company must conclude that the restructuring of a loan to a borrower who is experiencing financial difficulties constitutes a “concession”. The Company defines a concession as a modification of existing terms granted to a borrower for economic or legal reasons related to the borrower’s financial difficulties that the Company would otherwise not consider. The concession is either granted through an agreement with the customer or is imposed by a court or by a law. Concessions include modifying original loan terms to reduce or defer cash payments required as part of the loan agreement, including but not limited to:

 

  a reduction of the stated interest rate for the remaining original life of the debt,

 

  an extension of the maturity date or dates at an interest rate lower than the current market rate for new debt with similar risk characteristics,

 

  a reduction of the face amount or maturity amount of the debt, or

 

  a reduction of accrued interest receivable on the debt.

In its determination of whether the customer is experiencing financial difficulties, the Company considers numerous indicators, including, but not limited to:

 

  whether the customer is currently in default on its existing loan, or is in an economic position where it is probable the customer will be in default on its loan in the foreseeable future without a modification,

 

  whether the customer has declared or is in the process of declaring bankruptcy,

 

  whether there is substantial doubt about the customer’s ability to continue as a going concern,

 

  whether, based on its projections of the customer’s current capabilities, the Company believes the customer’s future cash flows will be insufficient to service the debt, including interest, in accordance with the contractual terms of the existing agreement for the foreseeable future, and

 

  whether, without modification, the customer cannot obtain sufficient funds from other sources at an effective interest rate equal to the current market rate for similar debt for a non-troubled debtor.

If the Company concludes that both a concession has been granted and the concession was granted to a customer experiencing financial difficulties, the Company identifies the loan as a TDR. For purposes of the determination of an allowance for loan losses on TDRs, such loans are reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology. If it is determined that losses are probable on such TDRs, either because of delinquency or other credit quality indicators, the Company specifically allocates a portion of the allowance for loan losses to these loans.

 

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Table of Contents

Information about the Company’s TDRs is presented in the following tables.

 

     As of September 30, 2015  

(dollars in thousands)

   Current      Past Due
Greater Than

30 Days
     Nonaccrual
TDRs
     Total
TDRs
 

Originated loans:

           

Real estate loans:

           

One- to four-family first mortgage

   $ 283       $ —         $ 39       $ 322   

Home equity loans and lines

     398         —           3         401   

Commercial real estate

     109         —           1,083         1,192   

Construction and land

     —           87         —           87   

Multi-family residential

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     790         87         1,125         2,002   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

           

Commercial and industrial

     —           —           2,590         2,590   

Consumer

     —           —           41         41   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     —           —           2,631         2,631   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 790       $ 87       $ 3,756       $ 4,633   
  

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

           

Real estate loans:

           

One- to four-family first mortgage

   $ 498       $ —         $ 18       $ 516   

Home equity loans and lines

     —           —           —           —     

Commercial real estate

     —           —           1,214         1,214   

Construction and land

     —           —           61         61   

Multi-family residential

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     498         —           1,293         1,791   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

           

Commercial and industrial

     —           —           —           —     

Consumer

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 498       $ —         $ 1,293       $ 1,791   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

           

Real estate loans:

           

One- to four-family first mortgage

   $ 781       $ —         $ 57       $ 838   

Home equity loans and lines

     398         —           3         401   

Commercial real estate

     109         —           2,297         2,406   

Construction and land

     —           87         61         148   

Multi-family residential

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     1,288         87         2,418         3,793   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

           

Commercial and industrial

     —           —           2,590         2,590   

Consumer

     —           —           41         41   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     —           —           2,631         2631   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,288       $ 87       $ 5,049       $ 6,424   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     As of December 31, 2014  

(dollars in thousands)

   Current      Past Due
Greater Than
30 Days
     Nonaccrual
TDRs
     Total
TDRs
 

Originated loans:

           

Real estate loans:

           

One- to four-family first mortgage

   $ —         $ —         $ 291       $ 291   

Home equity loans and lines

     —           —           —           —     

Commercial real estate

     111         —           —           111   

Construction and land

     103         —           —           103   

Multi-family residential

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     214         —           291         505   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

           

Commercial and industrial

     —           —           730         730   

Consumer

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     —           —           730         730   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 214       $ —         $ 1,021       $ 1,235   
  

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

           

Real estate loans:

           

One- to four-family first mortgage

   $ 432       $ 77       $ 49       $ 558   

Home equity loans and lines

     —           —           —           —     

Commercial real estate

     —           —           967         967   

Construction and land

     —           —           117         117   

Multi-family residential

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     432         77         1,133         1,642   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

           

Commercial and industrial

     —           —           —           —     

Consumer

     2         —           2         4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     2         —           2         4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 434       $ 77       $ 1,135       $ 1,646   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

           

Real estate loans:

           

One- to four-family first mortgage

   $ 432       $ 77       $ 340       $ 849   

Home equity loans and lines

     —           —           —           —     

Commercial real estate

     111         —           967         1,078   

Construction and land

     103         —           117         220   

Multi-family residential

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     646         77         1,424         2,147   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

           

Commercial and industrial

     —           —           730         730   

Consumer

     2         —           2         4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     2         —           732         734   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 648       $ 77       $ 2,156       $ 2,881   
  

 

 

    

 

 

    

 

 

    

 

 

 

None of the above referenced TDRs defaulted subsequent to the restructuring through the date the financial statements were issued. The Company restructured, as a TDR, loans totaling $3.3 million during the third quarter of 2015. $3.2 million of the loans were related to one energy industry relationship.

 

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Table of Contents

7. Fair Value Measurements and Disclosures

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Company groups assets and liabilities measured or disclosed at fair value in three levels as required by ASC 820, Fair Value Measurements and Disclosures. Under this guidance, fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the inputs used to develop those assumptions and measure fair value. The hierarchy requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels used to measure fair value are as follows:

 

  Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

  Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

  Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

An asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level that is significant to the fair value measurement. Management reviews and updates the fair value hierarchy classifications of the Company’s assets and liabilities quarterly.

Recurring Basis

Investment Securities Available for Sale

Fair values of investment securities available for sale are primarily measured using information from a third-party pricing service. This pricing service provides pricing information by utilizing pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities bids, offers and other reference data from market research publications. If quoted prices are available in an active market, investment securities are classified as Level 1 measurements. If quoted prices are not available in an active market, fair values are estimated primarily by the use of pricing models. Level 2 investment securities are primarily comprised of mortgage-backed securities issued by government agencies and U.S. government-sponsored enterprises. In certain cases, where there is limited or less transparent information provided by the Company’s third-party pricing service, fair value is estimated by the use of secondary pricing services or through the use of non-binding third-party broker quotes. Investment securities are classified within Level 3 when little or no market activity supports the fair value.

Management primarily identifies investment securities which may have traded in illiquid or inactive markets by identifying instances of a significant decrease in the volume and frequency of trades, relative to historical levels, as well as instances of a significant widening of the bid-ask spread in the brokered markets. Investment securities that are deemed to have been trading in illiquid or inactive markets may require the use of significant unobservable inputs. For example, management may use quoted prices for similar investment securities in the absence of a liquid and active market for the investment securities being valued. As of September 30, 2015, management did not make adjustments to prices provided by the third-party pricing service as a result of illiquid or inactive markets.

 

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Table of Contents

The following tables present the balances of assets and liabilities measured for fair value on a recurring basis as of September 30, 2015 and December 31, 2014.

 

            Fair Value Measurements Using  

(dollars in thousands)

   September 30, 2015      Level 1      Level 2      Level 3  

Available for sale securities:

           

U.S. agency mortgage-backed

   $ 148,685       $ —         $ 148,685       $ —     

Non-U.S. agency mortgage-backed

     6,551         —           6,551         —     

Municipal bonds

     23,039         —           23,039         —     

U.S. government agency

     12,487         —           12,487         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 190,762       $ —         $ 190,762       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

            Fair Value Measurements Using  

(dollars in thousands)

   December 31, 2014      Level 1      Level 2      Level 3  

Available for sale securities:

           

U.S. agency mortgage-backed

   $ 121,498       $ —         $ 121,498       $ —     

Non-U.S. agency mortgage-backed

     7,764         —           7,764         —     

Municipal bonds

     24,896         —           24,896         —     

U.S. government agency

     20,643         —           20,643         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 174,801       $ —         $ 174,801       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company did not record any liabilities at fair value for which measurement of the fair value was made on a recurring basis.

Nonrecurring Basis

In accordance with the provisions of ASC 310, Receivables, the Company records loans considered impaired at fair value. A loan is considered impaired if it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Fair value is measured at the fair value of the collateral for collateral-dependent loans. For non-collateral-dependent loans, fair value is measured by present valuing expected future cash flows. Impaired loans are classified as Level 3 assets when measured using appraisals from external parties of the collateral less any prior liens and when there is no observable market price. Repossessed assets are initially recorded at fair value less estimated costs to sell. The fair value of repossessed assets is based on property appraisals and an analysis of similar properties available. As such, the Company classifies repossessed assets as Level 3 assets.

Acquired loans and the FDIC loss sharing receivable are measured on a nonrecurring basis using significant unobservable inputs (Level 3).

 

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Table of Contents

The Company has segregated all financial assets that are measured at fair value on a nonrecurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below.

 

            Fair Value Measurements Using  

(dollars in thousands)

   September 30,
2015
     Level 1      Level 2      Level 3  

Assets

     

Acquired loans with deteriorated credit quality

   $ 21,929       $ —         $ —         $ 21,929   

Impaired loans, excluding acquired loans

     851         —           —           851   

Repossessed assets

     5,817         —           —           5,817   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 28,597       $ —         $ —         $ 28,597   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

            Fair Value Measurements Using  

(dollars in thousands)

   December 31,
2014
     Level 1      Level 2      Level 3  

Assets

        

Acquired loans with deteriorated credit quality

   $ 31,908       $ —         $ —         $ 31,908   

Impaired loans, excluding acquired loans

     1,843         —           —           1,843   

Repossessed assets

     5,214         —           —           5,214   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 38,965       $ —         $ —         $ 38,965   
  

 

 

    

 

 

    

 

 

    

 

 

 

ASC 820, Fair Value Measurements and Disclosures, requires the disclosure of each class of financial instruments for which it is practicable to estimate. The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. ASC 820 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statements. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates included herein are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the fair value of assets and liabilities that are not required to be recorded or disclosed at fair value like premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

The carrying value of cash and cash equivalents and interest-bearing deposits in banks approximate their fair value.

The fair value for investment securities is determined from quoted market prices when available. If a quoted market price is not available, fair value is estimated using third party pricing services or quoted market prices of securities with similar characteristics.

 

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Table of Contents

The carrying value of mortgage loans held for sale approximates their fair value.

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturity.

The cash surrender value of bank-owned life insurance (“BOLI”) approximates its fair value.

The fair value of customer deposits, excluding certificates of deposit, is the amount payable on demand. The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

The fair value of short-term FHLB advances is the amount payable at maturity. The fair value of long-term FHLB advances is estimated by discounting the future cash flows using the rates currently offered for advances of similar maturities.

The carrying value of the securities sold under repurchase agreement is its fair value.

The following table presents estimated fair values of the Company’s financial instruments as of the dates indicated.

 

            Fair Value Measurements at September 30, 2015  

(dollars in thousands)

   Carrying
Amount
     Total      Level 1      Level 2      Level 3  

Financial Assets

              

Cash and cash equivalents

   $ 23,539       $ 23,539       $ 23,539       $ —         $ —     

Interest-bearing deposits in banks

     5,762         5,762         5,762         —           —     

Investment securities available for sale

     190,762         190,762         —           190,762         —     

Investment securities held to maturity

     14,409         14,609         —           14,609         —     

Mortgage loans held for sale

     7,170         7,170         —           7,170         —     

Loans, net

     1,198,778         1,208,156         —           —           1,208,156   

Cash surrender value of BOLI

     19,544         19,544         19,544         —           —     

Financial Liabilities

              

Deposits

   $ 1,221,688       $ 1,222,429       $ —         $ 1,075,885       $ 146,544   

Short-term FHLB advances

     77,009         77,009         77,009         —           —     

Long-term FHLB advances

     76,435         76,669         —           27,724         48,945   

 

            Fair Value Measurements at December 31, 2014  

(dollars in thousands)

   Carrying
Amount
     Total      Level 1      Level 2      Level 3  

Financial Assets

              

Cash and cash equivalents

   $ 29,078       $ 29,078       $ 29,078       $ —         $ —     

Interest-bearing deposits in banks

     5,526         5,526         5,526         —           —     

Investment securities available for sale

        174,801            174,801         —              174,801         —     

Investment securities held to maturity

     11,705         11,889         —           11,889         —     

Mortgage loans held for sale

     4,517         4,517         —           4,517         —     

Loans, net

     901,208         908,346         —           —              908,346   

Cash surrender value of BOLI

     19,163         19,163         19,163         —           —     

Financial Liabilities

              

Deposits

   $ 993,573       $ 993,994       $ —         $ 924,816       $ 69,178   

Short-term FHLB advances

     31,000         31,000         31,000         —           —     

Long-term FHLB advances

     16,500         16,987         —           16,987         —     

Securities sold under repurchase agreement

     20,371         20,371         —           —           20,371   

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of Home Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, Home Bank, N. A. (the “Bank”), from December 31, 2014 through September 30, 2015 and on its results of operations for the three and nine months ended September 30, 2015 and September 30, 2014. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this quarterly report on Form 10-Q, particularly the consolidated financial statements and related notes appearing in Item 1.

Forward-Looking Statements

To the extent that statements in this Form 10-Q relate to future plans, objectives, financial results or performance of the Company or Bank, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which are based on management’s current information, estimates and assumptions and the current economic environment, are generally identified by the use of words such as “plan”, “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions, or by future or conditional terms such as “will”, “would”, “should”, “could”, “may”, “likely”, “probably”, or “possibly”. The Company’s or the Bank’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties. Factors that may cause actual results to differ materially from these forward-looking statements include, but are not limited to, the risk factors described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the Securities Exchange Commission (“SEC”) for the year ended December 31, 2014. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

EXECUTIVE OVERVIEW

The Company’s financial condition and income as of September 30, 2015 were impacted by the acquisition of Louisiana Bancorp, Inc. (“Louisiana Bancorp”), the holding company for Bank of New Orleans (“BNO”) of Metairie, Louisiana, on September 15, 2015. As a result of the acquisition, the Company acquired assets of $350.6 million, which included loans of $280.4 million, and $291.2 million in deposits and other liabilities. Shareholders of Louisiana Bancorp received $24.25 per share in cash, resulting in an aggregate transaction consideration of $70.0 million. The Company incurred $593,000 in pre-tax merger-related expenses during the third quarter of 2015. See Note 3 to the Unaudited Consolidated Financial Statements for additional information concerning the acquisition.

During the third quarter of 2015, the Company earned $2.9 million, an increase of $23,000, or 0.8%, compared to the third quarter of 2014. Diluted earnings per share for the third quarter of 2015 were $0.41, unchanged compared to the third quarter of 2014. The three and nine months ended September 30, 2015 included $527,000 and $759,000, respectively, net of taxes related to the acquisition of Louisiana Bancorp. The nine months ended September 30, 2014 included $1.5 million of net of taxes related to the acquisition of Britton & Koontz Capital Corporation (“Britton & Koontz”) in February 2014. Excluding merger-related expenses, net income for the third quarter of 2015 increased 18.9% compared to the third quarter of 2014 (see the “Non-GAAP Reconciliation” on page 29). Excluding merger-related expenses, diluted earnings per share for the third quarter of 2015 increased 19.5% compared to the third quarter of 2014.

 

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During the nine months ended September 30, 2015, the Company earned $8.6 million, an increase of $1.5 million, or 21.6%, compared to the nine months ended September 30, 2014. Diluted earnings per share for the nine months ended September 30, 2015 were $1.23, an increase of $0.21, or 20.6%, compared to the nine months ended September 30, 2014. Excluding merger-related expenses, net income for the nine months ended September 30, 2015 increased 9.1% compared to the nine months ended September 30, 2014. Excluding merger-related expenses, diluted earnings per share for the nine months ended September 30, 2015 increased 8.1% compared to the nine months ended September 30, 2014.

Key components of the Company’s performance during the three and nine months ended September 30, 2015 include:

 

  Assets totaled $1.6 billion as of September 30, 2015, up $336.5 million, or 27.5%, from December 31, 2014. The increase was primarily the result of the acquisition of Louisiana Bancorp, which had assets of $350.6 million, on a fair value basis, as of the date of acquisition.

 

  Investment securities totaled $205.2 million as of September 30, 2015, an increase of $18.7 million, or 10.0%, from December 31, 2014. The increase was driven by $36.4 million in securities acquired from Louisiana Bancorp as of the date of acquisition.

 

  Loans as of September 30, 2015 were $1.2 billion, an increase of $298.7 million, or 32.9%, from December 31, 2014. The increase in loans was primarily driven by $280.4 million in loans acquired from Louisiana Bancorp as of the date of acquisition.

 

  Deposits as of September 30, 2015 were $1.2 billion, an increase of $228.1 million, or 23.0%, from December 31, 2014. The acquisition of Louisiana Bancorp added $208.7 million in deposits at acquisition date. Core deposits (i.e., checking, savings, and money market accounts) totaled $926.4 million as of September 30, 2015, an increase of $153.6 million, or 19.9%, from December 31, 2014. The increase in core deposits was primarily driven by $118.1 million in core deposits acquired from Louisiana Bancorp at acquisition date.

 

  Interest income increased $357,000, or 2.5%, in the third quarter of 2015, compared to the third quarter of 2014. For the nine months ended September 30, 2015, interest income increased $744,000, or 1.8%, compared to the nine months ended September 30, 2014. Interest income has remained relatively stable primarily because the increase in average loan volume has offset the decrease in the average yield earned on loans.

 

  Interest expense increased $39,000, or 4.5%, from the third quarter of 2015 compared to the third quarter of 2014. For the nine months ended September 30, 2015, interest expense increased $81,000, or 3.3%, compared to the nine months ended September 30, 2014. The average cost of interest-bearing liabilities changed slightly while the mix in volume of interest bearing liabilities shifted for the quarter and nine months ended September 30, 2015 compared to the prior comparable period.

 

  The provision for loan losses totaled $569,000 for the third quarter of 2015, a decrease of $323,000, or 36.2%, compared to the third quarter of 2014. For the nine months ended September 30, 2015, the provision for loan losses decreased $447,000, or 24.2%, compared to the nine months ended September 30, 2014. At September 30, 2015, the Company’s ratio of allowance for loan losses to total loans was 0.74%, compared to 0.82% at September 30, 2014. Excluding acquired loans, the ratio of the allowance for loan losses to total loans was 1.12% at September 30, 2015, compared to 1.01% at September 30, 2014, respectively. Net loan charge-offs for the first nine months of 2015 were $229,000 compared to net charge-offs of $1.3 million during the first nine months of 2014.

 

  Noninterest income for the third quarter of 2015 increased $37,000, or 1.7%, compared to the third quarter of 2014, due primarily to increased gains on the sale of loans, which was partially offset by decreases in other income. For the nine months ended September 30, 2015, noninterest income increased $246,000, or 4.1%, compared to the nine months ended September 30, 2014. The increase resulted primarily from increases in bank card fees and gains on the sale of loans, which were partially offset by decreases in other income.

 

  Noninterest expense for the third quarter of 2015 increased $554,000, or 5.6%, compared to the third quarter of 2014. Noninterest expense for the nine months ended September 30, 2015 decreased 3.6% compared to the nine months ended September 30, 2014. Noninterest expense includes merger-related expenses related to the acquisition of Louisiana Bancorp of $593,000 and $848,000 for the three and nine months ended September, 30, 2015, respectively, and $2.3 million for the nine months ended September 30, 2014 due to the Britton & Koontz acquisition. Excluding merger-related expenses, noninterest expense decreased $35,000, or 0.4%, for the third quarter of 2015 compared to the third quarter of 2014. Excluding merger-related expenses, noninterest expense increased $316,000, or 1.1%, for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014.

 

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The discussion and analysis contains financial information prepared other than in accordance with generally accepted accounting principles (“GAAP”). The Company uses these non-GAAP financial measures in their analysis of the Company’s performance. Management believes that the non-GAAP information provides useful data in understanding the Company’s operations and in comparing the Company’s results of operation to peers. This non-GAAP information should be considered in addition to the Company’s financial information prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results. Reconciliation of GAAP to non-GAAP disclosures is included in the table below.

Non-GAAP Reconciliation

 

     For the Three Months Ended      For the Nine Months Ended  

(dollars in thousands)

   September 30,
2015
     September 30,
2014
     September 30,
2015
     September 30,
2014
 

Reported noninterest expense

   $ 10,522       $ 9,968       $ 30,470       $ 31,595   

Less: Merger-related expenses

     593         4         848         2,290   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP noninterest expense

   $ 9,929       $ 9,964       $ 29,622       $ 29,305   
  

 

 

    

 

 

    

 

 

    

 

 

 

Reported net income

   $ 2,899       $ 2,877       $ 8,587       $ 7,063   

Add: Merger-related expenses (after tax)

     527         4         759         1,505   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net income

   $ 3,426       $ 2,881       $ 9,346       $ 8,567   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted EPS

   $ 0.41       $ 0.41       $ 1.23       $ 1.02   

Add: Merger-related expenses

     0.08         —           0.11         0.22   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP diluted EPS

   $ 0.49       $ 0.41       $ 1.34       $ 1.24   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total shareholders’ equity

   $ 162,286       $ 151,118       $ 162,286       $ 151,118   

Less: Intangible assets

     15,911         4,672         15,911         4,672   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP tangible book value

   $ 146,375       $ 146,446       $ 146,375       $ 146,446   
  

 

 

    

 

 

    

 

 

    

 

 

 

FINANCIAL CONDITION

Loans, Asset Quality and Allowance for Loan Losses

Loans – Loans outstanding as of September 30, 2015 were $1.2 billion, an increase of $298.7 million, or 32.9%, from December 31, 2014. Growth in the loan portfolio was primarily driven by the acquisition of Louisiana Bancorp, which added $280.4 million in loans at acquisition date. During the first nine months of 2015, organic loan growth was related primarily to construction and land loans (up $12.2 million) and commercial and industrial loans (up $10.5 million).

 

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The following table summarizes the composition of the Company’s loan portfolio as of the dates indicated.

 

     September 30,      December 31,      Increase/(Decrease)  

(dollars in thousands)

   2015      2014      Amount      Percent  

Real estate loans:

           

One- to four-family first mortgage

   $ 391,547       $ 233,249       $ 158,298         67.9

Home equity loans and lines

     94,502         56,000         38,502         68.8   

Commercial real estate

     410,055         352,863         57,192         16.2   

Construction and land

     102,781         89,154         13,627         15.3   

Multi-family residential

     45,792         27,375         18,417         67.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     1,044,677         758,641         286,036         37.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

           

Commercial and industrial

     115,173         104,446         10,727         10.3   

Consumer

     47,860         45,881         1,979         4.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     163,033         150,327         12,706         8.5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,207,710       $ 908,968       $ 298,742         32.9
  

 

 

    

 

 

    

 

 

    

 

 

 

Asset Quality – One of management’s key objectives has been, and continues to be, maintaining a high level of asset quality. In addition to maintaining credit standards for new loan originations, we proactively monitor loans and collection and workout processes of delinquent or problem loans. When a borrower fails to make a scheduled payment, we attempt to cure the deficiency by making personal contact with the borrower. Initial contacts are generally made within 10 days after the date payment is due. In most cases, deficiencies are promptly resolved. If the delinquency continues, late charges are assessed and additional efforts are made to collect the deficiency. All loans which are designated as “special mention,” classified or which are delinquent 90 days or more are reported to the Board of Directors of the Bank monthly. For loans where the collection of principal or interest payments is doubtful, the accrual of interest income ceases. It is our policy, with certain limited exceptions, to discontinue accruing interest and reverse any interest accrued on any loan which is 90 days or more past due. On occasion, this action may be taken earlier if the financial condition of the borrower raises significant concern with regard to his/her ability to service the debt in accordance with the terms of the loan agreement. Interest income is not accrued on these loans until the borrower’s financial condition and payment record demonstrate an ability to service the debt.

Repossessed assets which are acquired as a result of foreclosure are classified as repossessed assets until sold. Third party property valuations are obtained at the time the asset is repossessed and periodically until the property is liquidated. Repossessed assets are recorded at the lesser of the balance of the loan or fair value less estimated selling costs, at the date acquired or upon receiving new property valuations. Costs associated with acquiring and improving a foreclosed property are usually capitalized to the extent that the carrying value does not exceed fair value less estimated selling costs. Holding costs are charged to expense. Gains and losses on the sale of repossessed assets are charged to operations, as incurred.

An impaired loan generally is one for which it is probable, based on current information, that the lender will not collect all the amounts due under the contractual terms of the loan. Large groups of smaller balance, homogeneous loans are collectively evaluated for impairment. Loans collectively evaluated for impairment include smaller balance commercial loans, residential real estate loans and consumer loans. These loans are evaluated as a group because they have similar characteristics and performance experience. Larger (i.e., loans with balances of $100,000 or greater) commercial real estate loans, multi-family residential loans, construction and land loans and commercial and industrial loans are individually evaluated for impairment. Third party property valuations are obtained at the time of origination for real estate secured loans. When a determination is made that a loan has deteriorated to the point of becoming a problem loan, updated valuations may be ordered to help determine if there is impairment, which may lead to a recommendation for partial charge off or appropriate allowance allocation. Property valuations are ordered through, and are reviewed by, an appraisal officer. The Company typically orders an “as is” valuation for collateral property if the loan is in a criticized loan classification. The Board of Directors is provided with monthly reports on impaired loans. As of September 30, 2015 and

 

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December 31, 2014, loans individually evaluated for impairment, excluding acquired loans, amounted to $970,000 and $2.0 million, respectively. As of September 30, 2015 and December 31, 2014, substandard loans, excluding acquired loans, amounted to $8.0 million and $7.2 million, respectively. The amount of the allowance for loan losses allocated to impaired or substandard loans originated by Home Bank totaled $119,000 as of September 30, 2015 and $140,000 as of December 31, 2014. There were no assets classified as doubtful or loss as of September 30, 2015 or December 31, 2014.

Federal regulations and our policies require that we utilize an internal asset classification system as a means of reporting problem and potential problem assets. We have incorporated an internal asset classification system, substantially consistent with Federal banking regulations, as a part of our credit monitoring system. Federal banking regulations set forth a classification scheme for problem and potential problem assets as “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

A bank’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by Federal bank regulators which can order the establishment of additional general or specific loss allowances. The Federal banking agencies have adopted an interagency policy statement on the allowance for loan and lease losses. The policy statement provides guidance for financial institutions on both the responsibilities of management for the assessment and establishment of allowances and guidance for banking agency examiners to use in determining the adequacy of general valuation guidelines. Generally, the policy statement recommends that institutions have effective systems and controls to identify, monitor and address asset quality problems; that management analyzes all significant factors that affect the collectability of the portfolio in a reasonable manner; and that management establishes acceptable allowance evaluation processes that meet the objectives set forth in the policy statement. Our management believes that, based on information currently available, our allowance for loan losses is maintained at a level which covers all known and inherent losses that are both probable and reasonably estimable as of each reporting date. However, actual losses are dependent upon future events and, as such, further additions to the level of allowance for loan losses may become necessary.

Real estate, or other collateral, which is acquired as a result of foreclosure is classified as a foreclosed asset until sold. Foreclosed assets are recorded at the lesser of the balance of the loan or fair value less estimated selling costs, at the date acquired or upon receiving new property valuations. Holding costs are charged to expense. Gains and losses on the sale of real estate owned are charged to operations, as incurred.

The following table sets forth the composition of the Company’s nonperforming assets (“NPAs”) and performing troubled debt restructurings as of the dates indicated.

 

     September 30, 2015     December 31, 2014  

(dollars in thousands)

   Originated      Acquired(1)      Total     Originated      Acquired(1)      Total  

Nonaccrual loans:

                

Real estate loans:

                

One- to four-family first mortgage

   $ 666       $ 3,745       $ 4,411      $ 1,429       $ 5,072       $ 6,501   

Home equity loans and lines

     122         325         447        65         482         547   

Commercial real estate

     1,701         3,387         5,088        829         5,498         6,327   

Construction and land

     —           130         130        —           5,356         5,356   

Multi-family residential

     —           782         782        —           1,770         1,770   

Other loans:

                

Commercial and industrial

     2,674         1,001         3,675        1,191         1,168         2,359   

Consumer

     349         125         474        329         92         421   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total nonaccrual loans

     5,512         9,495         15,007        3,843         19,438         23,281   

Accruing loans 90 days or more past due

     —           —           —          —           —           —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total nonperforming loans

     5,512         9,495         15,007        3,843         19,438         23,281   

Foreclosed assets

     1,723         4,094         5,817        1,835         3,380         5,215   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total nonperforming assets

     7,235         13,589         20,824        5,678         22,818         28,496   

Performing troubled debt restructurings

     876         498         1,374        214         510         724   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total nonperforming assets and troubled debt restructurings

   $ 8,111       $ 14,087       $ 22,198      $ 5,892       $ 23,328       $ 29,220   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Nonperforming loans to total loans

           1.24           2.56

Nonperforming loans to total assets

           0.96           1.91

Nonperforming assets to total assets

           1.34           2.33

 

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(1)  Includes $5.9 million and $15.1 million in acquired loans accounted for under ASC 310-30 at September 30, 2015 and December 31, 2014, respectively. Excluding acquired loans and assets, ratios for nonperforming loans to total loans, nonperforming loans to total assets and nonperforming assets to total assets were 0.72%, 0.49% and 0.65%, respectively, at September 30, 2015.

Net loan charge-offs for the third quarter of 2015 were $103,000, compared to net charge-offs of $1.2 million for the third quarter of 2014. Net loan charge-offs for the nine months ended September 30, 2015 were $229,000 compared to $1.3 million for the nine months ended September 30, 2014.

Allowance for Loan Losses – The allowance for loan losses is established through provisions for loan losses. The Company maintains the allowance at a level believed, to the best of management’s knowledge, to cover all known and inherent losses in the portfolio that are both probable and reasonable to estimate at each reporting date. Management reviews the allowance for loan losses at least quarterly in order to identify those inherent losses and to assess the overall collection probability for the loan portfolio. The evaluation process includes, among other things, an analysis of delinquency trends, nonperforming loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of loans, the value of collateral securing loans, the borrower’s ability to repay and repayment performance, the number of loans requiring heightened management oversight, economic conditions and industry experience. Based on this evaluation, management assigns risk ratings to segments of the loan portfolio. Such risk ratings are periodically reviewed by management and revised as deemed appropriate. These efforts are supplemented by reviews and validations performed by independent loan reviewers. The results of the reviews are reported to the Audit Committee of the Board of Directors. The establishment of the allowance for loan losses is significantly affected by management judgment. There is likelihood that different amounts would be reported under different conditions or assumptions. Federal regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require management to make additional provisions for estimated loan losses based upon judgments different from those of management.

With respect to acquired loans, the Company follows the reserve standard set forth in ASC 310, Receivables. At acquisition, the Company reviews each loan to determine whether there is evidence of deterioration in credit quality since origination and if it is probable that the Company will be unable to collect all amounts due according to the loan’s contractual terms. The Company considers expected prepayments and estimates the amount and timing of undiscounted expected principal, interest and other cash flows for each loan pool meeting the criteria above, and determines the excess of the loan pool’s scheduled contractual principal and interest payments in excess of cash flows expected at acquisition as an amount that should not be accreted (nonaccretable difference). The remaining amount, representing the excess of the pool’s cash flows expected to be collected over the fair value, is accreted into interest income over the remaining life of the pool (accretable yield). The Company records a discount on these loans at acquisition to record them at their estimated fair values. As a result, acquired loans subject to ASC 310 are excluded from the calculation of the allowance for loan losses as of the acquisition date. See Note 6 to the Unaudited Consolidated Financial Statements for additional information concerning our allowance for acquired loans.

Acquired loans were recorded at their acquisition date fair value, which was based on expected cash flows and included an estimation of expected future loan losses. Under current accounting principles, additional losses after

 

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the acquisition date are reflected as a provision to the allowance for loan losses. As September 30, 2015 and December 31, 2014, $128,000 and $124,000, respectively of our allowance for loan losses was allocated to acquired loans with deteriorated credit quality.

We will continue to monitor and modify our allowance for loan losses as conditions warrant. No assurance can be given that our level of allowance for loan losses will cover all of the inherent losses on our loans or that future adjustments to the allowance for loan losses will not be necessary if economic and other conditions differ substantially from the conditions used by management to determine the current level of the allowance for loan losses.

The following table presents the activity in the allowance for loan losses during the first nine months of 2015.

 

(dollars in thousands)

   Originated      Acquired      Total  

Balance, December 31, 2014

   $ 7,342       $ 418       $ 7,760   

Provision charged to operations

     1,280         121         1,401   

Loans charged off

     (226      (151      (377

Recoveries on charged off loans

     148         —           148   
  

 

 

    

 

 

    

 

 

 

Balance, September 30, 2015

   $ 8,544       $ 388       $ 8,932   
  

 

 

    

 

 

    

 

 

 

At September 30, 2015, the Company’s ratio of allowance for loan losses to total loans was 0.74%, compared to 0.85% and 0.82% at December 31, 2014 and September 30, 2014, respectively. Excluding acquired loans, the ratio of allowance for loan losses to total loans was 1.12% at September 30, 2015, compared to 1.04% and 1.01% at December 31, 2014 and September 30, 2014, respectively.

Investment Securities

The Company’s investment securities portfolio totaled $205.2 million as of September 30, 2015, an increase of $18.7 million, or 10.0%, from December 31, 2014. The increase resulted primarily from securities acquired from Louisiana Bancorp. The Company acquired $36.4 million at the acquisition date, and subsequently sold $8.1 million of the acquired investments during the third quarter. As of September 30, 2015, the Company had a net unrealized gain on its available for sale investment securities portfolio of $2.9 million, compared to $2.0 million as of December 31, 2014. The investment securities portfolio had a modified duration of 3.5 and 3.8 years at September 30, 2015 and December 31, 2014, respectively.

The following table summarizes activity in the Company’s investment securities portfolio during the first nine months of 2015.

 

(dollars in thousands)

   Available for Sale      Held to Maturity  

Balance, December 31, 2014

   $ 174,801       $ 11,705   

Purchases

     18,713         2,928   

Sales

     (16,691      —     

Principal payments and calls

     (22,433      —     

Accretion of discounts and amortization of premiums, net

     (922      (224

Acquired from Louisiana Bancorp, at fair value

     36,372         —     

Increase in market value

     922         —     
  

 

 

    

 

 

 

Balance, September 30, 2015

   $ 190,762       $ 14,409   
  

 

 

    

 

 

 

Funding Sources

Deposits – Deposits totaled $1.2 billion as of September 30, 2015, an increase of $228.1 million, or 23.0%, compared to December 31, 2014. The acquisition of Louisiana Bancorp added $208.7 million in deposits. Core

 

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deposits totaled $926.4 million as of September 30, 2015, an increase of $153.6 million, or 19.9%, compared to December 31, 2014. Core deposits acquired from Louisiana Bancorp totaled $118.1 million at the acquisition date.

The following table sets forth the composition of the Company’s deposits at the dates indicated.

 

     September 30,      December 31,      Increase (Decrease)  

(dollars in thousands)

   2015      2014      Amount      Percent  

Demand deposit

   $ 279,573       $ 267,660       $ 11,913         4.5

Savings

     109,100         81,145         27,955         34.5   

Money market

     286,464         219,456         67,008         30.5   

NOW

     251,221         204,536         46,685         22.8   

Certificates of deposit

     295,329         220,775         74,554         33.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total deposits

   $ 1,221,687       $ 993,572       $ 228,115         23.0
  

 

 

    

 

 

    

 

 

    

 

 

 

Federal Home Loan Bank Advances – Short-term FHLB advances increased $46.0 million, or 148.4% from $31.0 million as of December 31, 2014 to $77.0 million as of September 30, 2015. Long-term FHLB advances totaled $76.4 million as of September 30, 2015, an increase of $59.9 million, or 363.2% compared December 31, 2014. The increase in FHLB advances was primarily due to two factors: 1) the Company utilized FHLB advances in part to fund the acquisition of Louisiana Bancorp and 2) Louisiana Bancorp had $76.0 million in advances at acquisition date.

Shareholders’ Equity – Shareholders’ equity increased $8.1 million, or 5.3%, from $154.1 million as of December 31, 2014 to $162.3 million as of September 30, 2015.

As of September 30, 2015, the Company had regulatory capital that was well in excess of regulatory requirements. The following table details the Company’s actual levels and current regulatory capital requirements as of September 30, 2015.

 

     Actual     Required for Capital
Adequacy Purposes
    To Be Well Capitalized
Under Prompt
Corrective Action
Provisions
 

(dollars in thousands)

   Amount      Ratio     Amount      Ratio     Amount      Ratio  

Tier 1 risk-based capital

   $ 145,497         12.73   $ 45,709         4.00   $ 68,563         6.00

Common equity tier 1 capital

     145,497         12.73        51,423         4.50        74,277         6.50   

Total risk-based capital

     154,429         13.51        91,418         8.00        114,272         10.00   

Tier 1 leverage capital

     145,497         11.47        45,709         4.00        57,136         5.00   

Tangible capital

     145,497         11.47        17,141         1.50        N/A         N/A   

LIQUIDITY AND ASSET/LIABILITY MANAGEMENT

Liquidity Management

Liquidity management encompasses our ability to ensure that funds are available to meet the cash flow requirements of depositors and borrowers, while also ensuring adequate cash flow exists to meet the Company’s needs, including operating, strategic and capital. The Company develops its liquidity management strategies as part of its overall asset/liability management process. Our primary sources of funds are from deposits, amortization of loans, loan prepayments and the maturity of loans, investment securities and other investments, and other funds provided from operations. While scheduled payments from the amortization of loans and investment securities and maturing investment securities are relatively predictable sources of funds, deposit flows and loan prepayments can be greatly influenced by general interest rates, economic conditions and competition. The Company also maintains excess funds in short-term, interest-bearing assets that provide additional liquidity. As of September 30, 2015, cash and cash equivalents totaled $23.5 million. At such date, investment securities available for sale totaled $205.2 million.

 

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The Company uses its liquidity to fund existing and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to invest in other interest-earning assets, and to meet operating expenses. As of September 30, 2015, certificates of deposit maturing within the next 12 months totaled $183.9 million. Based upon historical experience, the Company anticipates that a significant portion of the maturing certificates of deposit will be redeposited with us. For the three months ended September 30, 2015, the average balance of outstanding FHLB advances was $52.1 million. As of September 30, 2015, the Company had $153.4 million in total outstanding FHLB advances and had $336.3 million in additional FHLB advances available.

In addition to cash flow from loan and securities payments and prepayments as well as from sales of securities available for sale, the Company has significant borrowing capacity available to fund liquidity needs. In recent years, the Company has utilized borrowings as a cost efficient addition to deposits as a source of funds. Borrowings consist of advances from the FHLB of Dallas, of which the Company is a member. Under terms of the collateral agreement with the FHLB, the Company pledges residential mortgage loans and investment securities as well as the Company’s stock in the FHLB as collateral for such advances.

Asset/Liability Management

The objective of asset/liability management is to implement strategies for the funding and deployment of the Company’s financial resources that are expected to maximize soundness and profitability over time at acceptable levels of risk. Interest rate sensitivity is the potential impact of changing rate environments on both net interest income and cash flows. The Company measures its interest rate sensitivity over the near term primarily by running net interest income simulations.

Our interest rate sensitivity also is monitored by management through the use of a model which generates estimates of the change in its net interest income over a range of interest rate scenarios. Based on the Company’s interest rate risk model, the table below sets forth the results of immediate and sustained changes in interest rates as of September 30, 2015.

 

Shift in Interest Rates (in bps)

   % Change in Projected
Net Interest Income
 

+300

     (2.8 )% 

+200

     (1.6

+100

     (0.7

The actual impact of changes in interest rates will depend on many factors. These factors include the Company’s ability to achieve expected growth in earning assets and maintain a desired mix of earning assets and interest-bearing liabilities, the actual timing of asset and liability repricings, the magnitude of interest rate changes and corresponding movement in interest rate spreads, and the level of success of asset/liability management strategies.

Off-Balance Sheet Activities

To meet the financing needs of its customers, the Bank issues financial instruments which represent conditional obligations that are not recognized, wholly or in part, in the statements of financial condition. These financial instruments include commitments to extend credit and standby letters of credit. Such instruments expose the Company to varying degrees of credit and interest rate risk in much the same way as funded loans. The same credit policies are used in these commitments as for on-balance sheet instruments. The Company’s exposure to credit losses from these financial instruments is represented by their contractual amounts.

 

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The following table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans as of September 30, 2015 and December 31, 2014.

 

     Contract Amount  
     September 30,      December 31,  

(dollars in thousands)

   2015      2014  

Standby letters of credit

   $ 4,413       $ 5,405   

Available portion of lines of credit

     129,458         107,242   

Undisbursed portion of loans in process

     60,976         54,200   

Commitments to originate loans

     113,131         96,506   

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to be drawn upon, the total commitment amounts generally represent future cash requirements.

Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.

The Company is subject to certain claims and litigation arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material effect on the financial condition or results of operations of the Company.

RESULTS OF OPERATIONS

During the third quarter of 2015, the Company earned $2.9 million, an increase of $23,000, or 0.8%, compared to the third quarter of 2014. The third quarter of 2015 includes $593,000 of pre-tax merger-related expenses related to the acquisition of Louisiana Bancorp. Excluding merger-related expenses, net income for the third quarter of 2015 increased 18.9% compared to the third quarter of 2014. Diluted earnings per share for the third quarter of 2015 matched the third quarter of 2014. Excluding merger-related expenses, diluted earnings per share for the third quarter of 2015 increased 19.5% compared to the third quarter of 2014.

During the nine months ended September 30, 2015, the Company earned $8.6 million, an increase of $1.5 million, or 21.6%, compared to the nine months ended September 30, 2014. The first nine months of 2015 includes $848,000 of pre-tax merger-related expenses related to the acquisition of Louisiana Bancorp. The first nine months of 2014 includes $2.3 million of pre-tax merger related expenses related to the acquisition of Britton & Koontz. Excluding merger-related expenses, net income for the nine months ended September 30, 2015 increased 9.1% compared to the nine months ended September 30, 2014. Diluted earnings per share for the nine months ended September 30, 2015 were $1.23, an increase of $0.21, or 20.6%, compared to the nine months ended September 30, 2014. Excluding merger-related expenses, diluted earnings per share for the nine months ended September 30, 2015 increased 8.1% compared to the nine months ended September 30, 2014.

Net Interest Income – Net interest income is the difference between the interest income earned on interest-earning assets, such as loans and investment securities, and the interest expense paid on interest-bearing liabilities, such as deposits and borrowings. The Company’s net interest income is largely determined by our net interest spread, which is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities, and the relative amounts of interest-earning assets and interest-bearing liabilities. The Company’s tax-equivalent net interest spread was 4.43% and 4.53% for the three months ended September 30, 2015 and September 30, 2014, respectively, and 4.39% and 4.56% for the nine months ended September 30, 2015 and September 30, 2014, respectively. The Company’s tax-equivalent net interest margin, which is net interest income as a percentage of average interest-earning assets, was 4.55% and 4.63% for the three months ended September 30, 2015 and September 30, 2014, respectively, and 4.51% and 4.66% for the nine months ended September 30, 2015 and September 30, 2014, respectively. The decrease in the net interest spread and net interest margin in the 2015 periods related primarily to a decrease in the average yield on loans.

 

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Net interest income totaled $13.5 million for the three months ended September 30, 2015, an increase of $318,000, or 2.4%, compared to the three months ended September 30, 2014. For the nine months ended September 30, 2015, net interest income totaled $38.8 million, an increase of $663,000, or 1.7%, compared to the nine months ended September 30, 2014.

Interest income increased $357,000, or 2.5%, in the third quarter of 2015, compared to the third quarter of 2014. For the nine months ended September 30, 2015, interest income increased $744,000, or 1.8%, compared to the nine months ended September 30, 2014. Increases in the average balance of loans were partially offset by decreases of 24 basis points and 30 basis points, respectively, in the average yield on loans during the quarter and nine months ended September 30, 2015 from the prior comparable period.

Interest expense increased $39,000, or 4.5%, from the third quarter of 2015 compared to the third quarter of 2014. For the nine months ended September 30, 2015, interest expense increased $81,000, or 3.3%, compared to the nine months ended September 30, 2014. The increases primarily were the result of higher levels of interest-bearing liabilities.

The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rate; (iii) net interest income; (iv) net interest spread; and (v) net interest margin. Information is based on average monthly balances during the indicated periods. Taxable equivalent (“TE”) yields are calculated using a marginal tax rate of 35%.

 

     Three Months Ended September 30,  
     2015     2014  
                   Average                   Average  
     Average             Yield/     Average             Yield/  

(dollars in thousands)

   Balance      Interest      Rate (1)     Balance      Interest      Rate(1)  

Interest-earning assets:

                

Loans receivable(1)

   $ 969,272       $ 13,435         5.46   $ 904,216       $ 13,090         5.70

Investment securities (TE)

     192,023         939         2.16        187,201         936         2.20   

Other interest-earning assets

     18,651         51         1.08        40,094         42         0.41   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-earning assets (TE)

     1,179,946         14,425         4.85        1,131,511         14,068         4.93   
     

 

 

         

 

 

    

Noninterest-earning assets

     105,356              110,859         
  

 

 

         

 

 

       

Total assets

   $ 1,285,302            $ 1,242,370         
  

 

 

         

 

 

       

Interest-bearing liabilities:

                

Deposits:

                

Savings, checking and money market

   $ 575,185       $ 322         0.22   $ 505,458       $ 297         0.23

Certificates of deposit

     224,205         408         0.72        228,446         421         0.73   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-bearing deposits

     799,390         730         0.36        733,904         718         0.39   

Securities sold under repurchase agreement

     4,094         2         0.20        20,643         19         0.36   

FHLB advances

     52,097         162         1.24        92,324         119         0.51   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-bearing liabilities

     855,581         894         0.42        846,871         856         0.40   
     

 

 

         

 

 

    

Noninterest-bearing liabilities

     268,688              245,412         
  

 

 

         

 

 

       

Total liabilities

     1,124,269              1,092,283         

Shareholders’ equity

     161,033              150,087         
  

 

 

         

 

 

       

Total liabilities and shareholders’ equity

   $ 1,285,302            $ 1,242,370         
  

 

 

         

 

 

       

Net interest-earning assets

   $ 324,365            $ 284,640         
  

 

 

         

 

 

       

Net interest spread (TE)

      $ 13,531         4.43      $ 13,212         4.53
     

 

 

         

 

 

    

Net interest margin (TE)

           4.55           4.63

 

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     Nine Months Ended September 30,  
     2015     2014  
                   Average                   Average  
     Average             Yield/     Average             Yield/  

(dollars in thousands)

   Balance      Interest      Rate (1)     Balance      Interest      Rate(1)  

Interest-earning assets:

                

Loans receivable(1)

   $ 934,752       $ 38,417         5.44   $ 865,283       $ 37,497         5.74

Investment securities (TE)

     188,012         2,751         2.16        189,650         2,958         2.29   

Other interest-earning assets

     24,861         150         0.81        37,362         119         0.43   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-earning assets (TE)

     1,147,625         41,318         4.80        1,092,295         40,574         4.96   
     

 

 

         

 

 

    

Noninterest-earning assets

     105,960              110,048         
  

 

 

         

 

 

       

Total assets

   $ 1,253,585            $ 1,202,343         
  

 

 

         

 

 

       

Interest-bearing liabilities:

                

Deposits:

                

Savings, checking and money market

   $ 556,545       $ 930         0.22   $ 474,187       $ 817         0.23

Certificates of deposit

     218,767         1,186         0.72        229,593         1,228         0.72   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-bearing deposits

     775,312         2,116         0.36        703,780         2,045         0.39   

Securities sold under repurchase agreement

     14,839         39         0.35        18,498         54         0.39   

FHLB advances

     35,554         375         1.41        99,373         350         0.47   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total interest-bearing liabilities

     825,705         2,530         0.41        821,651         2,449         0.40   
     

 

 

         

 

 

    

Noninterest-bearing liabilities

     269,295              234,618         
  

 

 

         

 

 

       

Total liabilities

     1,095,000              1,056,269         

Shareholders’ equity

     158,585              146,074         
  

 

 

         

 

 

       

Total liabilities and shareholders’ equity

   $ 1,253,585            $ 1,202,343         
  

 

 

         

 

 

       

Net interest-earning assets

   $ 321,920            $ 270,644         
  

 

 

         

 

 

       

Net interest spread (TE)

      $ 38,788         4.39      $ 38,125         4.56
     

 

 

         

 

 

    

Net interest margin (TE)

           4.51           4.66

 

(1)  Nonperforming loans are included in the respective average loan balances, net of deferred fees, discounts and loans in process. Acquired loans were recorded at fair value upon acquisition and accrete interest income over the remaining lives of the respective loans.

The following table displays the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. The table distinguishes between (i) changes attributable to volume (changes in average volume between periods times prior year rate), (ii) changes attributable to rate (changes in average rate between periods times prior year volume) and (iii) total increase (decrease).

 

     For the Three Months Ended     For the Nine Months Ended  
     September 30,     September 30,  
     2015 Compared to 2014     2015 Compared to 2014  
     Change Attributable To     Change Attributable To  
                 Total                 Total  
                 Increase                 Increase  

(dollars in thousands)

   Rate     Volume     (Decrease)     Rate     Volume     (Decrease)  

Interest income:

            

Loans receivable

   $ (354   $ 699      $ 345      $ (763   $ 1,683      $ 920   

Investment securities (TE)

     (18     21        3        (158     (49     (207

Other interest-earning assets

     48        (39     9        64        (33     31   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     (324     681        357        (857     1,601        744   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

            

Savings, checking and money market accounts

     (12     37        25        (6     119        113   

Certificates of deposit

     (6     (7     (13     (2     (40     (42

Securities sold under repurchase agreement

     (5     (12     (17     (6     (9     (15

FHLB advances

     (25     68        43        (58     83        25   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     (48     86        38        (72     153        81   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in net interest income

   $ (276   $ 595      $ 319      $ (785   $ 1,448      $ 663   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Provision for Loan Losses – For the quarter ended September 30, 2015, the Company recorded a provision for loan losses of $569,000, or 36.2% lower than the $892,000 recorded for the same period in 2014. For the nine months ended September 30, 2015, the provision for loan losses totaled $1.4 million, a decrease of $447,000, or 24.2%, compared to the nine months ended September 30, 2014. Net loan charge-offs amounted to $103,000 and $229,000, respectively, during the quarter and nine-months ended September 30, 2015.

As of September 30, 2015, the Company’s ratio of allowance for loan losses to total loans was 0.74%, compared to 0.85% and 0.82% at December 31, 2014 and September 30, 2014, respectively. Excluding acquired loans, the ratio of allowance for loan losses to total loans was 1.12% at September 30, 2015, compared to 1.04% and 1.01% at December 31, 2014 and September 30, 2014, respectively. The ratio of non-performing loans to total assets was 0.96% at September 30, 2015, compared to 1.91% at December 31, 2014.

Noninterest Income – Noninterest income was $2.2 million for the three months ended September 30, 2015, $37,000, or 1.7%, higher than the $2.2 million earned for the same period in 2014. Noninterest income was $6.3 million for the nine months ended September 30, 2015, $246,000, or 4.1%, higher than the $6.1 million earned for the same period of 2014.

The increase in noninterest income in the third quarter of 2015 compared to the third quarter of 2014 resulted primarily from increases in gains on the sale of mortgage loans (up $170,000), bank card fees (up $44,000) and service fees and charges (up $20,000), which were partially offset by decreases in other income (down $207,000 due primarily to a net loss incurred on the sale of a fixed asset).

The increase in noninterest income for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 resulted primarily from increases in bank card fees (up $222,000), gains on the sale of mortgage loans (up $210,000) and service fees and charges (up $93,000), which were partially offset by decreases in other income (down $319,000) due primarily to a net loss incurred on the sale of a fixed asset).

Noninterest Expense – Noninterest expense was $10.5 million for the three months ended September 30, 2015, $554,000, or 5.6%, higher than the $10.0 million recorded for the same period in 2014. Noninterest expense was $30.5 million for the nine months ended September 30, 2015, $1.1 million, or 3.6% lower than the $31.6 million for the same period of 2014. Noninterest expense includes merger-related expenses due to the acquisition of Louisiana Bancorp of $593,000 and $848,000 for the three and nine months ended September, 30, 2015, respectively, and $2.3 million for the nine months ended September 30, 2014 due to the Britton & Koontz acquisition. Excluding merger-related expenses, noninterest expense decreased $35,000, or 0.4%, for the three months ended September 30, 2015 compared to the three months ended September 30, 2014. Excluding merger-related expenses, noninterest expense increased $316,000, or 1.1%, for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014.

Income Taxes – For the quarters ended September 30, 2015 and September 30, 2014, the Company incurred income tax expense of $1.7 million and $1.6 million, respectively. The Company’s effective tax rate was 37.5% and 36.3% during the third quarters of 2015 and 2014, respectively. For the nine months ended September 30, 2015 and September 30, 2014, the Company incurred income tax expense of $4.6 million and $3.7 million, respectively. The Company’s effective tax rate amounted to 35.1% and 34.3% during the nine months ended September 30, 2015 and September 30, 2014, respectively. Differences between the effective tax rate and the statutory tax rate primarily relate to variances in items that are non-taxable or non-deductible (e.g., state tax, tax-exempt income, merger-related expenses, etc.).

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Quantitative and qualitative disclosures about market risk are presented in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2014, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset/ Liability Management and Market Risk”. Additional information at September 30, 2015 is included herein under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Asset/Liability Management”.

Item 4. Controls and Procedures.

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the third quarter of 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Not applicable.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for December 31, 2014 filed with the Securities and Exchange Commission.

Item 2. Unregistered Sales of Equity Securities and the Use of Proceeds.

The Company’s purchases of its common stock made during the quarter consisted of stock repurchases under the Company’s approved plan and are set forth in the following table.

 

Period

   Total
Number of
Shares

Purchased
     Average Price
Paid per Share
     Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
     Maximum Number of
Shares that May Yet
be Purchased Under
the Plan or
Programs(1)
 

July 1 - July 30, 2015

     474       $ 24.46         474         37,922   

August 1 – August 31, 2015

     10,700         24.77         10,700         27,222   

September 1 – September 30, 2015

     124         24.80         124         27,098   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     11,298       $ 24.76         11,298         27,098   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  On June 7, 2013, the Company announced the commencement of a new stock repurchase program. Under the plan, the Company can repurchase up to 370,000 shares, or approximately 5% of its common stock outstanding, through open market or privately negotiated transactions.

Item 3. Defaults Upon Senior Securities.

None.

 

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Table of Contents

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits and Financial Statement Schedules.

 

No.

  

Description

  31.1    Rule 13(a)-14(a) Certification of the Chief Executive Officer
  31.2    Rule 13(a)-14(a) Certification of the Chief Financial Officer
  32.0    Section 1350 Certification
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF    XBRL Taxonomy Extension Definitions Linkbase Document

 

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

      HOME BANCORP, INC.
November 9, 2015     By:  

/s/ John W. Bordelon

      John W. Bordelon
      President, Chief Executive Officer and Director
November 9, 2015     By:  

/s/ Joseph B. Zanco

      Joseph B. Zanco
      Executive Vice President and Chief Financial Officer

 

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