Company Quick10K Filing
Quick10K
Home Bancorp
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$36.30 9 $344
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-20 Officers, Exhibits
8-K 2019-05-03 Officers, Shareholder Vote, Regulation FD, Exhibits
8-K 2019-04-26 Regulation FD, Exhibits
8-K 2019-04-23 Earnings, Other Events, Exhibits
8-K 2019-03-28 Officers, Exhibits
8-K 2019-01-29 Earnings, Other Events, Exhibits
8-K 2018-10-23 Earnings, Other Events, Exhibits
8-K 2018-09-05 Regulation FD, Exhibits
8-K 2018-07-24 Earnings, Other Events, Exhibits
8-K 2018-06-07
8-K 2018-05-21 Officers, Exhibits
8-K 2018-05-09 Shareholder Vote
8-K 2018-04-27 Regulation FD, Exhibits
8-K 2018-04-24 Earnings, Other Events, Exhibits
8-K 2018-01-30 Earnings, Regulation FD, Other Events, Exhibits
CNA CNA Financial 12,370
ECA Encana 9,700
BXMT Blackstone Mortgage Trust 4,430
FCBC First Community Bancshares 542
GNMK Genmark Diagnostics 428
PROV Provident Financial 151
DLHC DLH Holdings 73
CBAK CBAK Energy Technology 0
IMPV Imperva 0
OMVS On The Move Systems 0
HBCP 2019-03-31
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and The Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits and Financial Statement Schedules.
EX-31.1 d736527dex311.htm
EX-31.2 d736527dex312.htm
EX-32.0 d736527dex320.htm

Home Bancorp Earnings 2019-03-31

HBCP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 d736527d10q.htm 10-Q 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

For the quarterly period ended: March 31, 2019

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 (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    YES  ☒    NO  ☐

Indicate by check mark whether the Registrant has submitted electronically 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  ☒    NO  ☐

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

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

symbol(s)

 

Name of each exchange

on which registered

Common Stock   HBCP   Nasdaq Stock Market

At May 3, 2019, the registrant had 9,473,491 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      26  
Item 3.   Quantitative and Qualitative Disclosures About Market Risk      37  
Item 4.   Controls and Procedures      37  
PART II

 

Item 1.   Legal Proceedings      38  
Item 1A.   Risk Factors      38  
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds      38  
Item 3.   Defaults Upon Senior Securities      38  
Item 4.   Mine Safety Disclosures      38  
Item 5.   Other Information      38  
Item 6.   Exhibits      39  
SIGNATURES      40  

 

i


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

(Dollars in thousands, except share data)

   (Unaudited)
March 31,
2019
    (Audited)
December 31,
2018
 

Assets

    

Cash and cash equivalents

   $ 103,786     $ 59,618  

Interest-bearing deposits in banks

     694       939  

Investment securities available for sale, at fair value

     267,310       260,131  

Investment securities held to maturity (fair values of $9,128 and $10,841, respectively)

     9,110       10,872  

Mortgage loans held for sale

     1,986       2,086  

Loans, net of unearned income

     1,648,968       1,649,754  

Allowance for loan losses

     (16,570     (16,348
  

 

 

   

 

 

 

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

     1,632,398       1,633,406  
  

 

 

   

 

 

 

Office properties and equipment, net

     47,030       47,124  

Cash surrender value of bank-owned life insurance

     29,725       29,560  

Goodwill and core deposit intangibles

     65,645       66,055  

Accrued interest receivable and other assets

     44,991       43,867  
  

 

 

   

 

 

 

Total Assets

   $ 2,202,675     $ 2,153,658  
  

 

 

   

 

 

 

Liabilities

    

Deposits:

    

Noninterest-bearing

   $ 442,940     $ 438,146  

Interest-bearing

     1,374,608       1,335,071  
  

 

 

   

 

 

 

Total deposits

     1,817,548       1,773,217  

Other Borrowings

     5,539       5,539  

Long-term Federal Home Loan Bank advances

     57,889       58,698  

Accrued interest payable and other liabilities

     12,764       12,164  
  

 

 

   

 

 

 

Total Liabilities

     1,893,740       1,849,618  
  

 

 

   

 

 

 

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; 9,471,857 and 9,459,050 shares issued and outstanding, respectively

     95       95  

Additional paid-in capital

     169,091       168,243  

Unallocated common stock held by:

    

Employee Stock Ownership Plan (ESOP)

     (3,392     (3,481

Recognition and Retention Plan (RRP)

     (51     (58

Retained earnings

     143,998       141,447  

Accumulated other comprehensive loss

     (806     (2,206
  

 

 

   

 

 

 

Total Shareholders’ Equity

     308,935       304,040  
  

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 2,202,675     $ 2,153,658  
  

 

 

   

 

 

 

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
March 31,
 

(Dollars in thousands, except per share data)

   2019     2018  

Interest Income

    

Loans, including fees

   $ 23,198     $ 22,804  

Investment securities:

    

Taxable interest

     1,653       1,309  

Tax-exempt interest

     155       186  

Other investments and deposits

     363       426  
  

 

 

   

 

 

 

Total interest income

     25,369       24,725  
  

 

 

   

 

 

 

Interest Expense

    

Deposits

     3,331       1,902  

Other borrowings

     53       —    

Short-term Federal Home Loan Bank advances

     —         17  

Long-term Federal Home Loan Bank advances

     263       301  
  

 

 

   

 

 

 

Total interest expense

     3,647       2,220  
  

 

 

   

 

 

 

Net interest income

     21,722       22,505  

Provision for loan losses

     390       964  
  

 

 

   

 

 

 

Net interest income after provision for loan losses

     21,332       21,541  
  

 

 

   

 

 

 

Noninterest Income

    

Service fees and charges

     1,467       1,655  

Bank card fees

     1,061       1,099  

Gain on sale of loans, net

     155       207  

Income from bank-owned life insurance

     165       161  

(Loss) gain on sale of assets, net

     (1     145  

Other income

     318       215  
  

 

 

   

 

 

 

Total noninterest income

     3,165       3,482  
  

 

 

   

 

 

 

Noninterest Expense

    

Compensation and benefits

     9,098       8,941  

Occupancy

     1,606       1,675  

Marketing and advertising

     271       281  

Data processing and communication

     1,422       1,679  

Professional services

     239       286  

Forms, printing and supplies

     161       357  

Franchise and shares tax

     399       365  

Regulatory fees

     307       379  

Foreclosed assets, net

     241       103  

Amortization of acquisition intangible

     410       502  

Other expenses

     1,137       1,022  
  

 

 

   

 

 

 

Total noninterest expense

     15,291       15,590  
  

 

 

   

 

 

 

Income before income tax expense

     9,206       9,433  

Income tax expense

     1,316       1,970  
  

 

 

   

 

 

 

Net Income

   $ 7,890     $ 7,463  
  

 

 

   

 

 

 

Earnings per share:

    

Basic

   $ 0.86     $ 0.83  
  

 

 

   

 

 

 

Diluted

   $ 0.85     $ 0.81  
  

 

 

   

 

 

 

Cash dividends declared per common share

   $ 0.20     $ 0.15  
  

 

 

   

 

 

 

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  
(Dollars in thousands)    2019     2018  

Net Income

   $ 7,890     $ 7,463  

Other Comprehensive Income (Loss)

    

Unrealized gains (losses) on investment securities

     1,772       (1,997

Tax effect

     (372     420  
  

 

 

   

 

 

 

Other comprehensive income (loss) , net of taxes

     1,400       (1,577
  

 

 

   

 

 

 

Comprehensive Income

   $ 9,290     $ 5,886  
  

 

 

   

 

 

 

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

 

3


Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

 

(Dollars in thousands, except share and per share data)   Common
Stock
    Additional
Paid-in
Capital
    Unallocated
Common Stock
Held by ESOP
    Unallocated
Common Stock
Held by RRP
    Retained
Earnings
    Accumulated
Other
Comprehensive
Income (Loss)
    Total  

Balance, December 31, 2017

  $ 94     $ 165,341     $ (3,838   $ (84   $ 117,313     $ (955   $ 277,871  

Net income

            7,463         7,463  

Other comprehensive loss

              (1,577     (1,577

Reclassification of stranded tax effects in accumulated other comprehensive income(1)

            206       (206     —    

Purchase of Company’s common stock at cost, 41 shares

    —         —             (2       (2

Cash dividends declared, $0.15 per share

    —               (1,409       (1,409

Common stock issued under incentive plans, net of shares surrendered in payment, including tax benefit 714 shares

    —         18               18  

Exercise of stock options

    —         153               153  

RRP shares released for allocation

      (3       4           1  

ESOP shares released for allocation

      344       89             433  

Share-based compensation cost

      138               138  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2018

  $ 94     $ 165,991     $ (3,749   $ (80   $ 123,571     $ (2,738   $ 283,089  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2018

  $ 95     $ 168,243     $ (3,481   $ (58   $ 141,447     $ (2,206   $ 304,040  

Net income

            7,890         7,890  

Other comprehensive income

              1,400       1,400  

Purchase of Company’s common stock at cost, 134,005 shares

    (1     (1,339         (3,445       (4,785

Cash dividends declared, $0.20 per share

            (1,894       (1,894

Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 1,440 shares

    —         35               35  

Exercise of stock options

    1       1,676               1,677  

RRP shares released for allocation

      (7       7           —    

ESOP shares released for allocation

      297       89             386  

Share-based compensation cost

      186               186  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2019

  $ 95     $ 169,091     $ (3,392   $ (51   $ 143,998     $ (806   $ 308,935  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

ASU No. 2018-02 - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.    

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

 

4


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HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

     For the Three Months Ended  
     March 31,  
(Dollars in thousands)    2019     2018  

Cash flows from operating activities:

    

Net income

   $ 7,890     $ 7,463  

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

    

Provision for loan losses

     390       964  

Depreciation

     678       576  

Amortization and accretion of purchase accounting valuations and intangibles

     1,659       1,970  

Net amortization of mortgage servicing asset

     28       38  

Federal Home Loan Bank stock dividends

     (39     (26

Net amortization of discount on investments

     446       476  

Gain on loans sold, net

     (155     (207

Proceeds, including principal payments, from mortgage loans held for sale

     18,081       29,783  

Originations of mortgage loans held for sale

     (17,825     (25,013

Non-cash compensation

     572       571  

Deferred income tax expense

     186       150  

(Increase) decrease in accrued interest receivable and other assets

     (882     1,733  

Increase in cash surrender value of bank-owned life insurance

     (165     (161

Decrease in accrued interest payable and other liabilities

     600       1,454  
  

 

 

   

 

 

 

Net cash provided by operating activities

     11,464       19,771  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of securities available for sale

     (21,035     (42,046

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

     15,244       11,480  

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

     1,700       —    

(Increase) decrease in loans, net

     (1,560     13,568  

Reimbursement from FDIC for covered assets

     142       —    

Decrease in interest-bearing deposits in banks

     245       —    

Proceeds from sale of repossessed assets

     31       215  

Purchases of office properties and equipment

     (584     (790

Proceeds from sale of office properties and equipment

     —         769  
  

 

 

   

 

 

 

Net cash used in investing activities

     (5,817     (16,804
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Increase (decrease) in deposits, net

     44,316       (27,039

Borrowings on Federal Home Loan Bank advances

     4,010       —    

Repayments of Federal Home Loan Bank advances

     (4,838     (964

Proceeds from exercise of stock options

     1,677       153  

Issuance of stock under incentive plans

     35       18  

Dividends paid to shareholders

     (1,894     (1,409

Purchase of Company’s common stock

     (4,785     (2
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     38,521       (29,243
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     44,168       (26,276

Cash and cash equivalents at beginning of year

     59,618       150,418  
  

 

 

   

 

 

 

Cash and cash equivalents at end of year

   $ 103,786     $ 124,142  
  

 

 

   

 

 

 

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

 

5


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. Certain reclassifications have been made to prior period balances to conform to the current period presentation. The results of operations for the three-month periods ended March 31, 2019 and 2018 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, 2018.

Critical Accounting Policies and Estimates

There were no material changes or developments during the reporting period with respect to methodologies the Company uses when applying critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2018.

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.    

2. Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, “Conforming Amendments Related to Leases”. This ASU amends the codification regarding leases in order to increase transparency and comparability. Under former GAAP, the recognition of lease assets and lease liabilities by lessees was not required if the terms of the lease qualify it as an operating lease. ASU No. 2016-02 requires companies to recognize lease assets and liabilities on the statement of condition and disclose key information about leasing arrangements, for both operating and capital or finance leases. A lessee must recognize a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. The ASU is effective for annual and interim periods beginning after December 15, 2018. The Company implemented an accounting policy election to keep leases with an initial term of 12 months or less off the Company’s consolidated balance sheet. As of March 31, 2019, the Company’s right-of-use assets and liabilities, net of amortization was $2.3 million. The ASU did not have material impact to the consolidated income statement.

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments”. The standard introduces a new impairment model known as CECL (Current Expected Credit Losses). The ASU requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at an amount net of an allowance for credit losses, which reflect expected losses for the full life of the financial asset. Under current GAAP, credit losses are not recognized until the occurrence of the loss is probable and entities, in general, only consider past events and current conditions when measuring incurred losses. ASU No. 2016-13 will require entities to recognize a current estimate of all expected credit losses, thus eliminating the “probable” recognition threshold. To produce a current estimate of expected credit losses, the standard will require entities to incorporate forecasted information along with relevant information about past events, including historical experience, and current conditions that affect the collectability of the reported amount of financial assets. The ASU also amends the accounting model for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. The initial estimate of expected credit losses for the related purchased financial asset will be recognized

 

6


Table of Contents

through the allowance for credit losses with an offset to the cost basis of the purchased asset. Off-balance-sheet arrangements such as commitments to extend credit, guarantees and standby letters of credit that are not unconditionally cancellable are also within the scope of this amendment. In addition, ASU 2016-13 will require expected credit related losses for debt securities to be recorded through an allowance for credit losses, while non-credit related losses will continue to be recognized through OCI. This ASU is effective for fiscal years beginning after December 31, 2019. An entity will apply the amendments in this update on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is in the process of implementing a new software application to assist in determining the impact to our Consolidated Financial Statements. The adoption of this ASU could result in material changes in our accounting for credit losses. Currently, the Company expects the adoption of the ASU to increase the allowance for loan losses and the provision for loan losses. The extent of the impact upon adoption is not known and will depend on the characteristics of the Company’s loan portfolio and economic conditions on that date as well as forecasted conditions thereafter.

In January 2017, FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other, Simplifying the Test for Goodwill Impairment”. The amendment in this ASU eliminates the requirement to calculate the implied fair value of goodwill in order to measure a goodwill impairment charge. An entity will record an impairment charge based on the excess of the carrying amount over its fair value. This ASU is effective for fiscal and interim testing periods beginning after December 15, 2019. The Company does not anticipate it will have a material impact on our Consolidated Financial Statements.

In April 2017, FASB issued ASU No. 2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities”. This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. The accounting for purchased callable debt securities held at a discount does not change under the new guidance. This ASU is effective for fiscal and interim periods beginning after December 15, 2018. The adoption of the ASU did not have an impact on our Consolidated Financial Statements.

In July 2018, the FASB issued ASU No. 2018-11, “Leases – Targeted Improvements” to provide alternative transition methods to reduce the costs and complexities of implementing the new leases standard, ASU No. 2016-02. The amendments in the update allow entities to recognize a cumulative-effect adjustment in the opening balance of retained earnings in the period of adoption of ASU No. 2016-02, which eliminates the need to re-state amounts presented for prior-periods. In addition, under certain conditions, lessors are allowed to account for lease and non-lease components as a single component. The amendments have the same effective date as ASU No. 2016-02 (periods beginning after December 15, 2018). The Company adopted the standard upon adoption of ASU No. 2016-02. ASU No. 2018-11 did not have an impact on our Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” The ASU removes, modifies and adds certain disclosure requirements for fair value measurements. For example, public entities will no longer be required to disclose the valuation processes for Level 3 fair value measurements, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019. In addition, entities may early adopt the modified or eliminated disclosure requirements and delay adoption of the additional disclosure requirements until their effective date. The Company does not believe ASU No. 2018-13 will have a material impact on our Consolidated Financial Statements, as the update only revises disclosure requirements.

 

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3. Investment Securities

Summary information regarding the Company’s investment securities classified as available for sale and held to maturity as of March 31, 2019 and December 31, 2018 is as follows.

 

(dollars in thousands)

   Amortized
Cost
     Gross
Unrealized
Gains
     Gross Unrealized Losses      Fair Value  
March 31, 2019                  Less Than
1 Year
     Over 1
Year
        

Available for sale:

              

U.S. agency mortgage-backed

   $ 86,092      $ 636      $ 22      $ 493      $ 86,213  

Collateralized mortgage obligations

     156,605        350        120        1,475        155,360  

Municipal bonds

     16,622        109        —          2        16,729  

U.S. government agency

     9,011        25        —          28        9,008  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total available for sale

   $ 268,330      $ 1,120      $ 142      $ 1,998      $ 267,310  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Held to maturity:

              

Municipal bonds

   $ 9,110      $ 32      $ —        $ 14      $ 9,128  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total held to maturity

   $ 9,110      $ 32      $ —        $ 14      $ 9,128  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(dollars in thousands)

   Amortized
Cost
     Gross
Unrealized
Gains
     Gross Unrealized Losses      Fair Value  
December 31, 2018                  Less Than
1 Year
     Over 1
Year
        

Available for sale:

              

U.S. agency mortgage-backed

   $ 86,487      $ 485      $ 171      $ 892      $ 85,909  

Collateralized mortgage obligations

     145,814        129        161        2,191        143,591  

Municipal bonds

     21,453        52        16        12        21,477  

U.S. government agency

     9,169        29        19        25        9,154  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total available for sale

   $ 262,923      $ 695      $ 367      $ 3,120      $ 260,131  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Held to maturity:

              

Municipal bonds

   $ 10,872      $ 11      $ 5      $ 37      $ 10,841  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total held to maturity

   $ 10,872      $ 11      $ 5      $ 37      $ 10,841  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The estimated fair value and amortized cost by contractual maturity of the Company’s investment securities as of March 31, 2019 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
     After One
Year through
Five Years
     After Five
Years
through Ten
Years
     After Ten
Years
     Total  

Fair Value

              

Securities available for sale:

              

U.S. agency mortgage-backed

   $ 1,694      $ 16,238      $ 34,889      $ 33,392      $ 86,213  

Collateralized mortgage obligations

     —          5,035        26,444        123,881        155,360  

Municipal bonds

     2,069        7,877        5,393        1,390        16,729  

U.S. government agency

     3,988        —          3,685        1,335        9,008  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities available for sale

   $ 7,751      $ 29,150      $ 70,411      $ 159,998      $ 267,310  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities held to maturity:

              

Municipal bonds

   $ —        $ 4,216      $ 3,875      $ 1,037      $ 9,128  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities held to maturity

   $ —        $ 4,216      $ 3,875      $ 1,037      $ 9,128  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

(dollars in thousands)

   One Year
or Less
     After One
Year through
Five Years
     After Five
Years
through Ten
Years
     After Ten
Years
     Total  

Amortized Cost

              

Securities available for sale:

              

U.S. agency mortgage-backed

   $ 1,697      $ 16,358      $ 35,011      $ 33,026      $ 86,092  

Collateralized mortgage obligations

     —          5,037        26,612        124,956        156,605  

Municipal bonds

     2,064        7,839        5,354        1,365        16,622  

U.S. government agency

     3,999        —          3,659        1,353        9,011  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities available for sale

   $ 7,760      $ 29,234      $ 70,636      $ 160,700      $ 268,330  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities held to maturity:

              

Municipal bonds

   $ —        $ 4,204      $ 3,867      $ 1,039      $ 9,110  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities held to maturity

   $ —        $ 4,204      $ 3,867      $ 1,039      $ 9,110  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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 other-than-temporarily impaired, an impairment loss is recognized.

As of March 31, 2019, 123 of the Company’s investment securities had unrealized losses totaling 1.4% of the individual securities’ amortized cost basis and 0.8% of the Company’s total amortized cost basis of the investment securities portfolio. At such date, 108 of the 123 securities had been in a continuous loss position for over 12 months. The 108 securities had an aggregate amortized cost basis of $134,829,000 and an unrealized loss of $2,012,000 at March 31, 2019. Management has the intent and ability to hold these securities until maturity, or until anticipated recovery; hence, no declines in these securities were deemed other-than-temporary at March 31, 2019.

As of March 31, 2019 and December 31, 2018, the Company had $185,903,000 and $157,198,000, respectively, of securities pledged to secure public deposits.

 

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Table of Contents

4. Earnings Per Share

Earnings per common share were computed based on the following:

 

     Three Months Ended  
   March 31,  

(in thousands, except per share data)

   2019      2018  

Numerator:

     

Net income available to common shareholders

   $ 7,890      $ 7,463  

Denominator:

     

Weighted average common shares outstanding

     9,130        9,012  

Effect of dilutive securities:

     

Restricted stock

     16        23  

Stock options

     108        234  
  

 

 

    

 

 

 

Weighted average common shares outstanding – assuming dilution

     9,254        9,269  
  

 

 

    

 

 

 

Basic earnings per common share

   $ 0.86      $ 0.83  
  

 

 

    

 

 

 

Diluted earnings per common share

   $ 0.85      $ 0.81  
  

 

 

    

 

 

 

Options on 75,135 and 444 shares of common stock were not included in the computation of diluted earnings per share for the three months ended March 31, 2019 and 2018, respectively, because the effect of these shares was anti-dilutive.

5. 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.

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 business combinations 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

 

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Table of Contents

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.

The Company’s loans, net of unearned income, consisted of the following as of the dates indicated.

 

(dollars in thousands)

   March 31,
2019
     December 31,
2018
 

Real estate loans:

     

One- to four-family first mortgage

   $ 441,921      $ 450,363  

Home equity loans and lines

     80,598        83,976  

Commercial real estate

     661,446        640,575  

Construction and land

     193,541        193,597  

Multi-family residential

     46,055        54,455  
  

 

 

    

 

 

 

Total real estate loans

     1,423,561        1,422,966  
  

 

 

    

 

 

 

Other loans:

     

Commercial and industrial

     174,405        172,934  

Consumer

     51,002        53,854  
  

 

 

    

 

 

 

Total other loans

     225,407        226,788  
  

 

 

    

 

 

 

Total loans

   $ 1,648,968      $ 1,649,754  
  

 

 

    

 

 

 

The net discount on the Company’s loans was $16,663,000 and $18,811,000 at March 31, 2019 and December 31, 2018, respectively, of which $7,148,000 and $7,865,000 for the same time periods, respectively, was related to impaired loans. In addition, loan balances as of March 31, 2019 and December 31, 2018 are reported net of unearned income of $2,599,000 and $2,716,000, respectively.

 

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Table of Contents

Allowance for Loan Losses

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

 

     As of March 31, 2019  
     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

   $ 1,933      $ —        $ 449      $ 2,382  

Home equity loans and lines

     660        348        53        1,061  

Commercial real estate

     5,391        361        659        6,411  

Construction and land

     2,299        —          5        2,304  

Multi-family residential

     471        —          —          471  

Commercial and industrial

     2,605        301        298        3,204  

Consumer

     460        —          277        737  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $ 13,819      $ 1,010      $ 1,741      $ 16,570  
  

 

 

    

 

 

    

 

 

    

 

 

 
     As of March 31, 2019  
     Originated Loans                

(dollars in thousands)

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

Loans:

           

One- to four-family first mortgage

   $ 229,759      $ —        $ 212,162      $ 441,921  

Home equity loans and lines

     52,417        843        27,338        80,598  

Commercial real estate

     445,494        6,856        209,096        661,446  

Construction and land

     163,328        —          30,213        193,541  

Multi-family residential

     34,974        —          11,081        46,055  

Commercial and industrial

     136,341        1,912        36,152        174,405  

Consumer

     36,731        —          14,271        51,002  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,099,044      $ 9,611      $ 540,313      $ 1,648,968  
  

 

 

    

 

 

    

 

 

    

 

 

 
     As of December 31, 2018  
     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

   $ 1,937      $ —        $ 199      $ 2,136  

Home equity loans and lines

     682        349        48        1,079  

Commercial real estate

     5,272        484        369        6,125  

Construction and land

     2,280        —          5        2,285  

Multi-family residential

     522        —          28        550  

Commercial and industrial

     2,541        321        366        3,228  

Consumer

     472        —          473        945  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $ 13,706      $ 1,154      $ 1,488      $ 16,348  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     As of December 31, 2018  
     Originated Loans                

(dollars in thousands)

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

Loans:

           

One- to four-family first mortgage

   $ 227,602      $ —        $ 222,761      $ 450,363  

Home equity loans and lines

     53,049        866        30,061        83,976  

Commercial real estate

     432,217        7,059        201,299        640,575  

Construction and land

     161,232        —          32,365        193,597  

Multi-family residential

     42,222        —          12,233        54,455  

Commercial and industrial

     131,250        1,952        39,732        172,934  

Consumer

     37,711        —          16,143        53,854  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,085,283      $ 9,877      $ 554,594      $ 1,649,754  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

$9.4 million and $10.0 million in Acquired Loans were deemed to be acquired impaired loans and were accounted for under ASC 310-30 at March 31, 2019 and December 31, 2018, respectively.

A summary of activity in the allowance for loan losses for the three months ended March 31, 2019 and March 31, 2018 follows.

 

     For the Three Months Ended March 31, 2019  

(dollars in thousands)

   Beginning
Balance
     Charge-offs     Recoveries      Provision     Ending
Balance
 

Originated loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 1,937      $ —       $ —        $ (4   $ 1,933  

Home equity loans and lines

     1,031        —         2        (25     1,008  

Commercial real estate

     5,756        (128     —          124       5,752  

Construction and land

     2,280        —         —          19       2,299  

Multi-family residential

     522        —         —          (51     471  

Commercial and industrial

     2,862        (32     3        73       2,906  

Consumer

     472        (20     7        1       460  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 14,860      $ (180     12      $ 137     $ 14,829  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Acquired loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 199      $ —       $ —        $ 250     $ 449  

Home equity loans and lines

     48        —         —          5       53  

Commercial real estate

     369        —         —          290       659  

Construction and land

     5        —         —          —         5  

Multi-family residential

     28        —         —          (28     —    

Commercial and industrial

     366        —         —          (68     298  

Consumer

     473        —         —          (196     277  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 1,488      $ —       $ —        $ 253     $ 1,741  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total loans:

            

Allowance for loan losses:

            

One- to four-family first mortgage

   $ 2,136      $ —       $ —        $ 246     $ 2,382  

Home equity loans and lines

     1,079        —         2        (20     1,061  

Commercial real estate

     6,125        (128     —          414       6,411  

Construction and land

     2,285        —         —          19       2,304  

Multi-family residential

     550        —         —          (79     471  

Commercial and industrial

     3,228        (32     3        5       3,204  

Consumer

     945        (20     7        (195     737  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total allowance for loan losses

   $ 16,348      $ (180     12      $ 390     $ 16,570  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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Table of Contents
     For the Three Months Ended March 31, 2018  

(dollars in thousands)

   Beginning
Balance
     Charge-offs     Recoveries      Provision      Ending
Balance
 

Originated loans:

             

Allowance for loan losses:

             

One- to four-family first mortgage

   $ 1,574      $ —       $ —        $ 88      $ 1,662  

Home equity loans and lines

     1,024        —         2        13        1,039  

Commercial real estate

     4,766        —         —          103        4,869  

Construction and land

     1,742        —         —          85        1,827  

Multi-family residential

     355        —         —          45        400  

Commercial and industrial

     4,346        (1,497     21        325        3,195  

Consumer

     496        (29     1        28        496  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $ 14,303      $ (1,526   $ 24      $ 687      $ 13,488  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Acquired loans:

             

Allowance for loan losses:

             

One- to four-family first mortgage

   $ 89      $ —       $ —        $ 48      $ 137  

Home equity loans and lines

     78        —         —          36        114  

Commercial real estate

     140        —         —          42        182  

Construction and land

     7        —         —          —          7  

Multi-family residential

     —          —         —          —          —    

Commercial and industrial

     184        —         —          140        324  

Consumer

     6        —         —          11        17  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $ 504      $ —       $ —        $ 277      $ 781  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total loans:

             

Allowance for loan losses:

             

One- to four-family first mortgage

   $ 1,663      $ —       $ —        $ 136      $ 1,799  

Home equity loans and lines

     1,102        —         2        49        1,153  

Commercial real estate

     4,906        —         —          145        5,051  

Construction and land

     1,749        —         —          85        1,834  

Multi-family residential

     355        —         —          45        400  

Commercial and industrial

     4,530        (1,497     21        465        3,519  

Consumer

     502        (29     1        39        513  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total allowance for loan losses

   $ 14,807      $ (1,526   $ 24      $ 964      $ 14,269  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

14


Table of Contents

Credit Quality

The following tables present the Company’s loan portfolio by credit quality classification as of the dates indicated.

 

     March 31, 2019  

(dollars in thousands)

   Pass      Special
Mention
     Substandard      Doubtful      Total  

Originated loans:

              

One- to four-family first mortgage

   $ 224,589      $ 1,922      $ 3,248      $ —        $ 229,759  

Home equity loans and lines

     51,984        59        1,217        —          53,260  

Commercial real estate

     443,446        381        8,523        —          452,350  

Construction and land

     161,631        —          1,697        —          163,328  

Multi-family residential

     34,974        —          —          —          34,974  

Commercial and industrial

     133,322        481        4,450        —          138,253  

Consumer

     36,211        272        248        —          36,731  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

   $ 1,086,157      $ 3,115      $ 19,383      $ —        $ 1,108,655  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

              

One- to four-family first mortgage

   $ 203,438      $ 2,640      $ 6,084      $ —        $ 212,162  

Home equity loans and lines

     26,812        317        209        —          27,338  

Commercial real estate

     190,271        6,216        12,609        —          209,096  

Construction and land

     27,553        1,144        1,516        —          30,213  

Multi-family residential

     10,266        572        243        —          11,081  

Commercial and industrial

     30,870        1,907        3,375        —          36,152  

Consumer

     13,705        310        256        —          14,271  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

   $ 502,915      $ 13,106      $ 24,292      $ —        $ 540,313  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

              

One- to four-family first mortgage

   $ 428,027      $ 4,562      $ 9,332      $ —        $ 441,921  

Home equity loans and lines

     78,796        376        1,426        —          80,598  

Commercial real estate

     633,717        6,597        21,132        —          661,446  

Construction and land

     189,184        1,144        3,213        —          193,541  

Multi-family residential

     45,240        572        243        —          46,055  

Commercial and industrial

     164,192        2,388        7,825        —          174,405  

Consumer

     49,916        582        504        —          51,002  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,589,072      $ 16,221      $ 43,675      $ —        $ 1,648,968  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2018  

(dollars in thousands)

   Pass      Special
Mention
     Substandard      Doubtful      Total  

Originated loans:

              

One- to four-family first mortgage

   $ 221,930      $ 1,852      $ 3,820      $ —        $ 227,602  

Home equity loans and lines

     52,344        69        1,502        —          53,915  

Commercial real estate

     425,851        4,463        8,962        —          439,276  

Construction and land

     159,428        —          1,804        —          161,232  

Multi-family residential

     42,222        —          —          —          42,222  

Commercial and industrial

     126,126        1,717        5,359        —          133,202  

Consumer

     37,312        126        273        —          37,711  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

   $ 1,065,213      $ 8,227      $ 21,720      $ —        $ 1,095,160  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

              

One- to four-family first mortgage

   $ 213,199      $ 2,474      $ 7,088      $ —        $ 222,761  

Home equity loans and lines

     29,451        270        340        —          30,061  

Commercial real estate

     183,514        5,189        12,596        —          201,299  

Construction and land

     30,005        917        1,443        —          32,365  

Multi-family residential

     11,401        582        250        —          12,233  

Commercial and industrial

     35,918        1,376        2,438        —          39,732  

Consumer

     15,521        262        360        —          16,143  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

   $ 519,009      $ 11,070      $ 24,515      $ —        $ 554,594  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

              

One- to four-family first mortgage

   $ 435,129      $ 4,326      $ 10,908      $ —        $ 450,363  

Home equity loans and lines

     81,795        339        1,842        —          83,976  

Commercial real estate

     609,365        9,652        21,558        —          640,575  

Construction and land

     189,433        917        3,247        —          193,597  

Multi-family residential

     53,623        582        250        —          54,455  

Commercial and industrial

     162,044        3,093        7,797        —          172,934  

Consumer

     52,833        388        633        —          53,854  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,584,222      $ 19,297      $ 46,235      $ —        $ 1,649,754  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

15


Table of Contents

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, among other factors, 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.

 

     March 31, 2019  

(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

   $ 1,819      $ 286      $ 247      $ 2,352      $ 227,407      $ 229,759  

Home equity loans and lines

     382        49        40        471        52,789        53,260  

Commercial real estate

     3,179        —          —          3,179        449,171        452,350  

Construction and land

     263        —          686        949        162,379        163,328  

Multi-family residential

     —          —          —          —          34,974        34,974  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     5,643        335        973        6,951        926,720        933,671  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     436        12        2,052        2,500        135,753        138,253  

Consumer

     209        2        183        394        36,337        36,731  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     645        14        2,235        2,894        172,090        174,984  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

   $ 6,288      $ 349      $ 3,208      $ 9,845      $ 1,098,810      $ 1,108,655  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 3,576      $ 209      $ 3,036      $ 6,821      $ 205,341      $ 212,162  

Home equity loans and lines

     452        —          142        594        26,744        27,338  

Commercial real estate

     2,503        240        297        3,040        206,056        209,096  

Construction and land

     89        171        1,264        1,524        28,689        30,213  

Multi-family residential

     —          —          —          —          11,081        11,081  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     6,620        620        4,739        11,979        477,911        489,890  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     66        54        1,415        1,535        34,617        36,152  

Consumer

     368        93        163        624        13,647        14,271  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     434        147        1,578        2,159        48,264        50,423  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

   $ 7,054      $ 767      $ 6,317      $ 14,138      $ 526,175      $ 540,313  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 5,395      $ 495      $ 3,283      $ 9,173      $ 432,748      $ 441,921  

Home equity loans and lines

     834        49        182        1,065        79,533        80,598  

Commercial real estate

     5,682        240        297        6,219        655,227        661,446  

Construction and land

     352        171        1,950        2,473        191,068        193,541  

Multi-family residential

     —          —          —          —          46,055        46,055  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     12,263        955        5,712        18,930        1,404,631        1,423,561  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     502        66        3,467        4,035        170,370        174,405  

Consumer

     577        95        346        1,018        49,984        51,002  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     1,079        161        3,813        5,053        220,354        225,407  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 13,342      $ 1,116      $ 9,525      $ 23,983      $ 1,624,985      $ 1,648,968  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

16


Table of Contents
     December 31, 2018  

(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

   $ 3,913      $ 270      $ 64      $ 4,247      $ 223,355      $ 227,602  

Home equity loans and lines

     326        61        41        428        53,487        53,915  

Commercial real estate

     714        34        168        916        438,360        439,276  

Construction and land

     576        —          740        1,316        159,916        161,232  

Multi-family residential

     —          —          —          —          42,222        42,222  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     5,529        365        1,013        6,907        917,340        924,247  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     362        1,369        265        1,996        131,206        133,202  

Consumer

     319        131        196        646        37,065        37,711  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     681        1,500        461        2,642        168,271        170,913  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

   $ 6,210      $ 1,865      $ 1,474      $ 9,549      $ 1,085,611      $ 1,095,160  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 4,196      $ 1,258      $ 3,702      $ 9,156      $ 213,605      $ 222,761  

Home equity loans and lines

     462        116        163        741        29,320        30,061  

Commercial real estate

     3,104        265        1,143        4,512        196,787        201,299  

Construction and land

     1,050        488        813        2,351        30,014        32,365  

Multi-family residential

     84        —          —          84        12,149        12,233  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     8,896        2,127        5,821        16,844        481,875        498,719  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     4,315        109        329        4,753        34,979        39,732  

Consumer

     357        277        262        896        15,247        16,143  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     4,672        386        591        5,649        50,226        55,875  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

   $ 13,568      $ 2,513      $ 6,412      $ 22,493      $ 532,101      $ 554,594  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 8,109      $ 1,528      $ 3,766      $ 13,403      $ 436,960      $ 450,363  

Home equity loans and lines

     788        177        204        1,169        82,807        83,976  

Commercial real estate

     3,818        299        1,311        5,428        635,147        640,575  

Construction and land

     1,626        488        1,553        3,667        189,930        193,597  

Multi-family residential

     84        —          —          84        54,371        54,455  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     14,425        2,492        6,834        23,751        1,399,215        1,422,966  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other loans:

                 

Commercial and industrial

     4,677        1,478        594        6,749        166,185        172,934  

Consumer

     676        408        458        1,542        52,312        53,854  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other loans

     5,353        1,886        1,052        8,291        218,497        226,788  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 19,778      $ 4,378      $ 7,886      $ 32,042      $ 1,617,712      $ 1,649,754  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

17


Table of Contents

Excluding Acquired Loans with deteriorated credit quality, the Company did not have any loans greater than 90 days past due and accruing as of March 31, 2019 or December 31, 2018.

The following table summarizes the accretable discount on loans accounted for under ASC 310-30 as of the dates indicated.

 

     For the Three Months Ended  

(dollars in thousands)

   March 31,
2019
     March 31,
2018
 

Balance at beginning of period

   $ (9,147    $ (9,303

Accretion

     1,500        478  

Transfers from nonaccretable difference to accretable discount

     (21      (966
  

 

 

    

 

 

 

Balance at end of period

   $ (7,668    $ (9,791
  

 

 

    

 

 

 

The following table summarizes information pertaining to Originated Loans, which were deemed impaired loans as of the dates indicated.

 

     For the Period Ended March 31, 2019  

(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

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     428        464        —          434        —    

Commercial real estate

     20        22        —          106        —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     1,533        1,896        —          1,536        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,981      $ 2,392      $ —        $ 2,076      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With an allowance recorded:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     415        449        348        419        —    

Commercial real estate

     6,836        6,910        361        6,860        —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     379        411        301        398        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 7,630      $ 7,770      $ 1,010      $ 7,677      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     843        913        348        853        —    

Commercial real estate

     6,856        6,942        361        6,966        —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     1,912        2,307        301        1,934        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,611      $ 10,162      $ 1,010      $ 9,753      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

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Table of Contents
     For the Period Ended December 31, 2018  

(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

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     441        476        —          454        —    

Commercial real estate

     149        161        —          32        7  

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     1,540        1,904        —          438        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,130      $ 2,541      $ —        $ 924      $ 7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With an allowance recorded:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     425        457        349        440        —    

Commercial real estate

     6,910        6,910        484        2,057        38  

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     412        442        321        1,367        1  

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 7,747      $ 7,809      $ 1,154      $ 3,864      $ 39  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     866        933        349        894        —    

Commercial real estate

     7,059        7,071        484        2,089        45  

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     1,952        2,346        321        1,805        1  

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,877      $ 10,350      $ 1,154      $ 4,788      $ 46  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     For the Period Ended March 31, 2018  

(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

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     462        476        —          464        —    

Commercial real estate

     22        23        —          22        —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     335        348        —          354        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 819      $ 847      $ —        $ 840      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With an allowance recorded:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $ —    

Home equity loans and lines

     447        460        348        449        —    

Commercial real estate

     —          —          —          —          —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     803        903        408        1622        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,250      $ 1,363      $ 756      $ 2,071      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans:

              

One- to four-family first mortgage

   $ —        $ —        $ —        $ —        $  

Home equity loans and lines

     909        936        348        913        —    

Commercial real estate

     22        23        —          22        —    

Construction and land

     —          —          —          —          —    

Multi-family residential

     —          —          —          —          —    

Commercial and industrial

     1,138        1,251        408        1,976        —    

Consumer

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,069      $ 2,210      $ 756      $ 2,911      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table summarizes information pertaining to nonaccrual loans as of dates indicated.

 

     March 31, 2019      December 31, 2018  

(dollars in thousands)

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

Nonaccrual loans:

                 

One- to four-family first mortgage

   $ 2,141      $ 3,055      $ 5,196      $ 1,984      $ 3,188      $ 5,172  

Home equity loans and lines

     1,173        216        1,389        1,457        242        1,699  

Commercial real estate

     7,532        4,954        12,486        7,940        3,403        11,343  

Construction and land

     686        1,357        2,043        740        854        1,594  

Multi-family residential

     —          —          —          —          —          —    

Commercial and industrial

     3,058        1,921        4,979        2,986        1,002        3,988  

Consumer

     248        230        478        273        343        616  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 14,838      $ 11,733      $ 26,571      $ 15,380      $ 9,032      $ 24,412  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

 

(1)

Table excludes Acquired Loans which were being accounted for under ASC 310-30 because they continue to earn interest from accretable yield regardless of their status as past due or otherwise not in compliance with their contractual terms. Acquired Loans with deteriorated credit quality which were being accounted for under ASC 310-30 and which were 90 days or more past due totaled $660,000 and $1.7 million as of March 31, 2019 and December 31, 2018, respectively.

As of March 31, 2019, 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. Loans are considered troubled debt restructurings (“TDR”) when the Company agrees to restructure a loan to a borrower who is experiencing financial difficulties in a manner that is deemed to be 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 either is granted through an agreement with the customer or is imposed by a court or by 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

The following table summarizes information pertaining to TDRs modified during the periods indicated.

 

     For the Three Months Ended March 31,  
     2019      2018  

(dollars in thousands)

   Number of
Contracts
     Pre-
modification
Outstanding
Recorded
Investment
     Post-
modification
Outstanding
Recorded
Investment
     Number of
Contracts
     Pre-
modification
Outstanding
Recorded
Investment
     Post-
modification
Outstanding
Recorded
Investment
 

Troubled debt restructurings:

                 

One- to four-family first mortgage

     1      $ 37      $ 37        1      $ 1,138      $ 1,138  

Home equity loans and lines

     —          —          —          —          —          —    

Commercial real estate

     —          —          —          1        6,423        5,923  

Construction and land

     —          —          —          —          —          —    

Multi-family residential

     —          —          —          —          —          —    

Commercial and industrial

     —          —          —          2        776        714  

Other consumer

     —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1      $ 37      $ 37        4      $ 8,337      $ 7,775  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

None of the performing troubled debt restructurings as of March 31, 2019 had defaulted subsequent to the restructuring through the date the financial statements were available to be issued.

6. 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

 

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Table of Contents

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 March 31, 2019, management did not make adjustments to prices provided by the third-party pricing service as a result of illiquid or inactive markets.

The following tables present the balances of assets measured for fair value on a recurring basis as of March 31, 2019 and December 31, 2018.

 

(dollars in thousands)

   March 31, 2019      Level 1      Level 2      Level 3  

Available for sale securities:

           

U.S. agency mortgage-backed

   $ 86,213      $ —        $ 86,213      $ —    

Collateralized mortgage obligations

     155,360        —          155,360        —    

Municipal bonds

     16,729        —          16,729        —    

U.S. government agency

     9,008        —          9,008        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 267,310      $ —        $ 267,310      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

(dollars in thousands)

   December 31, 2018      Level 1      Level 2      Level 3  

Available for sale securities:

           

U.S. agency mortgage-backed

   $ 85,909      $ —        $ 85,909      $ —    

Collateralized mortgage obligations

     143,591        —          143,591        —    

Municipal bonds

     21,477        —          21,477        —    

U.S. government agency

     9,154        —          9,154        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 260,131      $ —        $ 260,131      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

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 third 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.

 

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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 as reflected in the table below.

 

            Fair Value Measurements Using  

(dollars in thousands)

   March 31, 2019      Level 1      Level 2      Level 3  

Assets

           

Impaired loans

   $ 8,601      $ —        $ —        $ 8,601  

Repossessed assets

     2,481        —          —          2,481  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 11,082      $ —        $ —        $ 11,082  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

            Fair Value Measurements Using  

(dollars in thousands)

   December 31, 2018      Level 1      Level 2      Level 3  

Assets

           

Impaired loans

   $ 8,723      $ —        $ —        $ 8,723  

Repossessed assets

     1,558        —          —          1,558  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 10,281      $ —        $ —        $ 10,281  
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets.

 

(dollars in thousands)

   Fair
Value
    

Valuation Technique

  

Unobservable

Inputs

   Range of
Discounts
    Weighted
Average
Discount
 

As of March 31, 2019:

             

Impaired loans

   $ 8,601      Third party appraisals and discounted cash flows    Collateral values, market discounts and estimated costs to sell      0% - 84%       10

Repossessed assets

   $ 2,481      Third party appraisals, sales contracts, broker price opinions    Collateral values, market discounts and estimated costs to sell      6% - 100%       29

 

(dollars in thousands)

   Fair
Value
    

Valuation Technique

  

Unobservable

Inputs

   Range of
Discounts
    Weighted
Average
Discount
 

As of December 31, 2018:

             

Impaired loans

   $ 8,723      Third party appraisals and discounted cash flows    Collateral values, market discounts and estimated costs to sell      0% - 100%       12

Repossessed assets

   $ 1,558      Third party appraisals, sales contracts, broker price opinions    Collateral values, market discounts and estimated costs to sell      6% - 68%       20

 

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Table of Contents

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, 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.

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 long-term FHLB advances is estimated by discounting the future cash flows using the rates currently offered for advances of similar maturities.

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

 

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Table of Contents
            Fair Value Measurements at March 31, 2019  
     Carrying                              

(dollars in thousands)

   Amount      Total      Level 1      Level 2      Level 3  

Financial Assets

              

Cash and cash equivalents

   $ 103,786      $ 103,786      $ 103,786      $ —        $ —    

Interest-bearing deposits in banks

     694        694        694        —          —    

Investment securities available for sale

     267,310        267,310        —          267,310        —    

Investment securities held to maturity

     9,110        9,128        —          9,128        —    

Mortgage loans held for sale

     1,986        1,986        —          1,986        —    

Loans, net

     1,632,398        1,614,521        —          1,605,920        8,601  

Cash surrender value of BOLI

     29,725        29,725        29,725        —          —    

Financial Liabilities

              

Deposits

   $ 1,817,548      $ 1,815,687      $ —        $ 1,815,687      $ —    

Other borrowings

     5,539        5,727        —          5,727        —    

Long-term FHLB advances

     57,889        57,243        —          57,243        —    

 

            Fair Value Measurements at December 31, 2018  
     Carrying                              

(dollars in thousands)

   Amount      Total      Level 1      Level 2      Level 3  

Financial Assets

              

Cash and cash equivalents

   $ 59,618      $ 59,618      $ 59,618      $ —        $ —    

Interest-bearing deposits in banks

     939        939        939        —          —    

Investment securities available for sale

     260,131        260,131        —          260,131        —    

Investment securities held to maturity

     10,872        10,841        —          10,841        —    

Mortgage loans held for sale

     2,086        2,086        —          2,086        —    

Loans, net

     1,633,406        1,623,920        —          1,615,197        8,723  

Cash surrender value of BOLI

     29,560        29,560        29,560        —          —    

Financial Liabilities

              

Deposits

   $ 1,773,217      $ 1,769,087      $ —        $ 1,769,087      $ —    

Other borrowings

     5,539        5,542        —          5,542        —    

Long-term FHLB advances

     58,698        57,527        —          57,527        —    

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, 2018 through March 31, 2019 and on its results of operations for the three months ended March 31, 2019 and 2018. 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.

 

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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, 2018. 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

During the first quarter of 2019, the Company earned $7.9 million, an increase of $427,000, or 5.7%, compared to the first quarter of 2018. Diluted earnings per share for the first quarter of 2019 were $0.85, an increase of $0.04, or 4.9%, compared to the first quarter of 2018. Net income for the first quarter of 2018 included merger expenses related to the acquisition of St. Martin Bancshares, Inc. (“SMB”) totaling $694,000, net of taxes. No merger-related expenses were recorded during the first quarter of 2019.    

Key components of the Company’s performance during the three months ended March 31, 2019 include:

 

   

Assets totaled $2.2 billion as of March 31, 2019, an increase of $49.0 million, or 2.3%, from December 31, 2018.

 

   

Loans as of March 31, 2019 were $1.6 billion, a decrease of $786,000 from December 31, 2018.

 

   

Deposits totaled $1.8 billion as of March 31, 2019, an increase of $44.3 million, or 2.5%, from December 31, 2018.

 

   

Interest income increased $644,000, or 2.6%, in the first quarter of 2019 compared to the first quarter of 2018 primarily due to higher yields on loans and investment securities. Interest expense increased $1.4 million, or 64.3%, in the first quarter of 2019 compared to the first quarter of 2018 primarily due to an increase in the cost of deposits.

 

   

The provision for loan losses totaled $390,000 for the first quarter of 2019, a decrease of $574,000, or 59.5%, compared to the first quarter of 2018. The ratio of allowance for loan losses to total loans was 1.0% at March 31, 2019, compared to 0.99% at December 31, 2018.

 

   

Noninterest income for the first quarter of 2019 decreased $317,000, or 9.1%, compared to the first quarter of 2018.

 

   

Noninterest expense for the first quarter of 2019 decreased $299,000, or 1.9%, compared to the first quarter of 2018 primarily due to decreased data processing and communication and forms and printing and supplies expenses, which were partially offset with higher compensation and benefits expense.

FINANCIAL CONDITION

Loans, Asset Quality and Allowance for Loan Losses

Loans – Loans outstanding as of March 31, 2019 were $1.6 billion, a decrease of $786,000 from December 31, 2018. Growth in commercial real estate loans (up $20.9 million) was offset by paydowns in several other loan categories.

 

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

 

     March 31,      December 31,      Increase/(Decrease)  

(dollars in thousands)

   2019      2018      Amount     Percent  

Real estate loans:

          

One- to four-family first mortgage

   $ 441,921      $ 450,363      $ (8,442     (1.9 )% 

Home equity loans and lines

     80,598        83,976        (3,378     (4.0

Commercial real estate

     661,446        640,575        20,871       3.3  

Construction and land

     193,541        193,597        (56     —    

Multi-family residential

     46,055        54,455        (8,400     (15.4
  

 

 

    

 

 

    

 

 

   

 

 

 

Total real estate loans

     1,423,561        1,422,966        595       —    
  

 

 

    

 

 

    

 

 

   

 

 

 

Other loans:

          

Commercial and industrial

     174,405        172,934        1,471       0.9  

Consumer

     51,002        53,854        (2,852     (5.3
  

 

 

    

 

 

    

 

 

   

 

 

 

Total other loans

     225,407        226,788        (1,381     (0.6
  

 

 

    

 

 

    

 

 

   

 

 

 

Total loans

   $ 1,648,968      $ 1,649,754      $ (786     —  
  

 

 

    

 

 

    

 

 

   

 

 

 

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 their 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 initially recorded at fair value less estimated costs to sell. 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 $250,000 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 at the bank. The Company typically orders an “as is” valuation for collateral property if a loan is in a criticized loan classification. The Board of Directors is provided with monthly reports on impaired loans. As of March 31, 2019 and December 31, 2018, loans identified as impaired and individually evaluated for impairment, excluding Acquired Loans, amounted to $9.6 million and $9.9 million,

 

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respectively. As of March 31, 2019 and December 31, 2018, acquired impaired loans (loans considered to have deteriorated credit quality at the time of acquisition) amounted to $9.4 million and $10.0 million, respectively. As of March 31, 2019 and December 31, 2018, substandard loans, excluding Acquired Loans, amounted to $19.4 million and $21.7 million, respectively. As of March 31, 2019 and December 31, 2018, Acquired Loans considered substandard amounted to $24.3 million and $24.5 million, respectively. The amount of the allowance for loan losses allocated to originated impaired loans totaled $1.0 million as of March 31, 2019 and $1.2 million as of December 31, 2018. The amount of the allowance for loan losses allocated to Acquired Loans totaled $1.7 million and $1.5 million, respectively, at such dates. There were no assets classified as doubtful or loss as of March 31, 2019 or December 31, 2018.

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 analyze all significant factors that affect the collectability of the portfolio in a reasonable manner; and that management establish 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.

 

     March 31, 2019      December 31, 2018  

(dollars in thousands)

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

Nonaccrual loans(2):

                 

Real estate loans:

                 

One- to four-family first mortgage

   $ 2,141      $ 3,055      $ 5,196      $ 1,984      $ 3,188      $ 5,172  

Home equity loans and lines

     1,173        216        1,389        1,457        242        1,699  

Commercial real estate

     7,532        4,954        12,486        7,940        3,403        11,343  

Construction and land

     686        1,357        2,043        740        854        1,594  

Multi-family residential

     —          —          —          —          —          —    

 

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Other loans:

                

Commercial and industrial

     3,058        1,921        4,979       2,986        1,002        3,988  

Consumer

     248        230        478       273        343        616  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total nonaccrual loans

     14,838        11,733        26,571       15,380        9,032        24,412  

Accruing loans 90 days or more past due

     —          —          —         —          —          —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total nonperforming loans

     14,838        11,733        26,571       15,380        9,032        24,412  

Foreclosed assets

     145        2,336        2,481       146        1,412        1,558  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total nonperforming assets

     14,983        14,069        29,052       15,526        10,444        25,970  

Performing troubled debt restructurings

     1,131        219        1,350       1,117        289        1,406  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total nonperforming assets and troubled debt restructurings

   $ 16,114      $ 14,288      $ 30,402     $ 16,643      $ 10,733      $ 27,376  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Nonperforming loans to total loans

           1.61           1.48

Nonperforming loans to total assets

           1.21           1.13

Nonperforming assets to total assets

           1.32           1.21

 

(1) 

Table excludes Acquired Loans which were being accounted for under ASC 310-30 because they continue to earn interest from accretable yield regardless of their status as past due or otherwise not in compliance with their contractual terms. Acquired Loans with deteriorated credit quality which were being accounted for under ASC 310-30, and which were 90 days or more past due, totaled $660,000 and $1.7 million as of March 31, 2019 and December 31, 2018, respectively.