HOME BANCORP, INC. [HBCP] Filings

10-Q 1 hbcp-20240331.htm 10-Q hbcp-20240331

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, 2024


☐			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)

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock	HBCP	NASDAQ Stock Market

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 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 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 Exchange Act). Yes ☐ No ☒

At May 2, 2024, the registrant had 8,128,334 shares of common stock, $0.01 par value, outstanding.

HOME BANCORP, INC. and SUBSIDIARY

TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	Page
	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.	Management 's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	47
SIGNATURES		48

HOME BANCORP, INC. and SUBSIDIARY

GLOSSARY OF DEFINED TERMS

Below is a listing of certain acronyms, abbreviations and defined terms, among others, used throughout this Quarterly Report on Form 10-Q, including in "Item 1. Financial Statements" and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations." The terms "we," "our" or "us" refer to Home Bancorp, Inc. and its consolidated subsidiaries, unless the context otherwise requires.


ACL	–	Allowance for credit losses
ALL	–	Allowance for loan losses
AOCI	–	Accumulated other comprehensive income
ASC	–	Accounting Standards Codification
ASU	–	Accounting Standards Update
Bank	–	Home Bank, N. A., a wholly-owned subsidiary of the Company
BOLI	–	Bank-owned life insurance
bps	–	basis points, 100 basis points being equal to 1.0%
BTFP	–	Bank Term Funding Program
C&D	–	Construction and land
C&I	–	Commercial and industrial
CARES Act	–	Coronavirus Aid, Relief, and Economic Security Act
CECL	–	Current expected credit losses
Company	–	Home Bancorp, Inc., a Louisiana corporation and the holding company for Home Bank, N. A.
COVID-19	–	The novel coronavirus
CRE	–	Commercial real estate
EPS	–	Earnings per common share
FASB	–	Financial Accounting Standards Board
FHLB	–	Federal Home Loan Bank
GAAP	–	Generally Accepted Accounting Principles
LTV	–	Loan-to-value
NPA(s)	–	Nonperforming asset(s)
OCI	–	Other comprehensive income
ORE	–	Other real estate
PCD	–	Purchased credit deteriorated

PPP	–	Paycheck Protection Program
SBA	–	U.S. Small Business Association
SEC	–	U.S. Securities and Exchange Commission
TE	–	Taxable equivalent
U.S.	–	United States

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


	(Unaudited)		(Audited)
(dollars in thousands)	March 31, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	90,475	$	75,831
Interest-bearing deposits in banks	—		99
Investment securities available for sale, at fair value	421,813		433,926
Investment securities held to maturity (fair values of $1,062 and $1,066, respectively)	1,065		1,065
Mortgage loans held for sale	646		361
Loans, net of unearned income	2,621,690		2,581,638
Allowance for loan losses	(31,461)		(31,537)
Total loans, net of unearned income and allowance for loan losses	2,590,229		2,550,101
Office properties and equipment, net	42,341		41,980
Cash surrender value of bank-owned life insurance	47,587		47,321
Goodwill and core deposit intangibles	86,019		86,372
Accrued interest receivable and other assets	77,429		83,066
Total Assets	$	3,357,604	$	3,320,122
Liabilities
Deposits:
Noninterest-bearing	$	742,177	$	744,424
Interest-bearing	1,980,401		1,926,200
Total Deposits	2,722,578		2,670,624
Other borrowings	140,539		5,539
Subordinated debt, net of issuance cost	54,294		54,241
Short-term Federal Home Loan Bank advances	—		150,000
Long-term Federal Home Loan Bank advances	38,607		42,713
Accrued interest payable and other liabilities	29,301		29,561
Total Liabilities	2,985,319		2,952,678
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; 8,140,380 and 8,158,281 shares issued and outstanding, respectively	81		81
Additional paid-in capital	166,160		165,823
Unallocated common stock held by:
Employee Stock Ownership Plan (ESOP)	(1,607)		(1,696)
Recognition and Retention Plan (RRP)	—		(1)
Retained earnings	241,152		234,619
Accumulated other comprehensive loss	(33,501)		(31,382)
Total Shareholders’ Equity	372,285		367,444
Total Liabilities and Shareholders’ Equity	$	3,357,604	$	3,320,122

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended March 31,
(dollars in thousands, except per share data)	2024		2023
Interest Income
Loans, including fees	$	40,567	$	34,498
Investment securities:
Taxable interest	2,715		2,998
Tax-exempt interest	73		144
Other investments and deposits	771		475
Total interest income	44,126		38,115
Interest Expense
Deposits	12,132		3,240
Other borrowings	1,486		53
Subordinated debt expense	845		851
Short-term Federal Home Loan Bank advances	436		2,259
Long-term Federal Home Loan Bank advances	326		117
Total interest expense	15,225		6,520
Net interest income	28,901		31,595
Provision for loan losses	141		814
Net interest income after provision for loan losses	28,760		30,781
Noninterest Income
Service fees and charges	1,254		1,250
Bank card fees	1,575		1,787
Gain on sale of loans, net	87		57
Income from bank-owned life insurance	266		253
Loss on sale of securities, net	—		(249)
Gain (loss) on sale of assets, net	6		(17)
Other income	361		230
Total noninterest income	3,549		3,311
Noninterest Expense
Compensation and benefits	12,170		12,439
Occupancy	2,454		2,350
Marketing and advertising	466		307
Data processing and communication	2,514		2,321
Professional services	475		364
Forms, printing and supplies	205		187
Franchise and shares tax	488		541
Regulatory fees	469		539
Foreclosed assets and ORE, net	65		(739)
Amortization of acquisition intangible	353		446
Provision for credit losses on unfunded commitments	—		210
Other expenses	1,209		975
Total noninterest expense	20,868		19,940
Income before income tax expense	11,441		14,152
Income tax expense	2,242		2,832
Net Income	$	9,199	$	11,320
Earnings per share:
Basic	$	1.15	$	1.40
Diluted	$	1.14	$	1.39
Cash dividends declared per common share	$	0.25	$	0.25

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Net Income	$	9,199	$	11,320
Other Comprehensive (Loss) Income
Unrealized (losses) gains on available for sale investment securities	(3,160)		7,470
Unrealized gains (losses) on cash flow hedges	478		(716)
Reclassification adjustment for losses included in net income	—		249
Tax effect	563		(1,470)
Other comprehensive (loss) income, net of taxes	(2,119)		5,533
Comprehensive Income (Loss)	$	7,080	$	16,853

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(dollars in thousands, except 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 Loss		Total
Balance, December 31, 2022	$	83	$	164,942	$	(2,053)	$	(7)	$	206,296	$	(39,307)	$	329,954
Net income									11,320				11,320
Other comprehensive income											5,533		5,533
Purchase of Company’s common stock at cost, 10,199 shares	—		(102)						(233)				(335)
Cash dividends declared, $0.25 per share									(2,072)				(2,072)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 4,029 shares	—		33						(21)				12
Exercise of stock options	—		85										85
RRP shares released for allocation			(2)				2						—
ESOP shares released for allocation			308		89								397
Share-based compensation cost			206										206
Balance, March 31, 2023	$	83	$	165,470	$	(1,964)	$	(5)	$	215,290	$	(33,774)	$	345,100
Balance, December 31, 2023	$	81	$	165,823	$	(1,696)	$	(1)	$	234,619	$	(31,382)	$	367,444
Net income									9,199				9,199
Other comprehensive loss											(2,119)		(2,119)
Purchase of Company’s common stock at cost, 21,303 shares	—		(213)						(613)				(826)
Cash dividends declared, $0.25 per share									(2,038)				(2,038)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 3,402 shares	—		14						(15)				(1)
Exercise of stock options	—		—										—
RRP shares released for allocation			(1)				1						—
ESOP shares released for allocation			301		89								390
Share-based compensation cost			236										236
Balance, March 31, 2024	$	81	$	166,160	$	(1,607)	$	—	$	241,152	$	(33,501)	$	372,285

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Three Months Ended March 31,
(dollars in thousands)	2024		2023
Cash flows from operating activities:
Net income	$	9,199	$	11,320
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	141		814
Depreciation	888		894
Amortization and accretion of purchase accounting valuations and intangibles	806		979

Federal Home Loan Bank stock dividends	(213)		(55)
Net amortization of discount on investments	74		135
Amortization of subordinated debt issuance cost	53		60
Gain on sale of securities, net	—		249
Gain on loans sold, net	(87)		(57)
Proceeds, including principal payments, from loans held for sale	9,479		4,339
Originations of loans held for sale	(9,677)		(4,657)
(Gain) loss on sale of assets, net	(6)		17
Non-cash compensation	626		603
Deferred income tax benefit	(24)		(104)
Increase in accrued interest receivable and other assets	(893)		(2,179)
Increase in cash surrender value of bank-owned life insurance	(266)		(253)
Increase (decrease) in accrued interest payable and other liabilities	223		(2,303)
Net cash provided by operating activities	10,323		9,802
Cash flows from investing activities:

Proceeds from maturities, prepayments and calls on securities available for sale	8,879		13,590

Proceeds from sales of securities available for sale	—		13,762
Increase in loans, net	(40,913)		(36,305)
Decrease in interest-bearing deposits in banks	99		—
Proceeds from sale of foreclosed assets	112		413
Purchases of office properties and equipment	(1,250)		(199)




Proceeds from sale of office properties and equipment	8		4
Purchase of Federal Home Loan Bank stock	—		(4,193)
Proceeds from redemption of Federal Home Loan Bank stock	7,335		—
Net cash used in investing activities	(25,730)		(12,928)
Cash flows from financing activities:
Increase (decrease) in deposits, net	52,022		(75,306)
Borrowings on Federal Home Loan Bank advances	490,400		6,261,375
Repayments of Federal Home Loan Bank advances	(644,506)		(6,160,863)
Proceeds from other borrowings	135,000		—

Proceeds from exercise of stock options	—		85
Issuance of stock under incentive plans, net	(1)		12
Dividends paid to shareholders	(2,038)		(2,072)
Purchase of Company’s common stock	(826)		(335)
Net cash provided by financing activities	30,051		22,896
Net change in cash and cash equivalents	14,644		19,770
Cash and cash equivalents, beginning	75,831		87,401
Cash and cash equivalents, ending	$	90,475	$	107,171
Supplementary cash flow information:
Interest paid on deposits and borrowed funds	$	14,200	$	5,493
Income taxes paid	—		—

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

HOME BANCORP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of 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 months ended March 31, 2024 and 2023 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 SEC for the year ended December 31, 2023.

Critical Accounting Policies and Estimates

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and could reflect materially different results under different assumptions and conditions. Methodologies the Company uses when applying critical accounting policies and developing critical accounting estimates are included in its Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no material changes from the critical accounting policies previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. In preparing its 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.

Reclassifications

Certain reclassifications have been made to prior period balances to conform to the current period presentation.

2. Recent Accounting Pronouncements

Accounting Standards Adopted in 2024

Accounting Standard Update (“ASU”) ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03"). ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. ASU 2022-03 also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction and requires certain new disclosures for equity securities subject to contractual sale restrictions. ASU 2022-03 is effective for fiscal years and interim periods after December, 15, 2023, though early adoption is permitted. The adoption of ASU 2022-03 did not have a significant impact on our consolidated financial statements.

ASU 2023-01, Leases (Topic 842): Common Control Arrangements: (“ASU 2023-01”) clarifies the accounting for leasehold improvements associated with common control leases to public business entities. This update is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The adoption of ASU 2023-01 did not have a significant impact on our Consolidated Financial Statements.

ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (“ASU 2023-02”) permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. This update is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The adoption of ASU 2023-02 did not have a significant impact on our Consolidated Financial Statements.

Issued but Not Yet Adopted Accounting Standards

ASU 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative" ("ASU 2023-06") related to disclosure or presentation requirements for various subtopics in the

FASB’s Accounting Standards Codification (“Codification”). The amendments in the update are intended to align the requirements in the Codification with the U.S. Securities and Exchange Commission's (“SEC”) regulations and facilitate the application of GAAP for all entities. The effective date for each amendment is the date on which the SEC removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or if the SEC has not removed the requirements by June 30, 2027, this amendment will be removed from the Codification and will not become effective for any entity. Early adoption is prohibited. We do not expect this update to have a material impact on our consolidated financial statements.

ASU No. 2023-07, "Improvements to Reportable Segment Disclosures" ("ASU 2023-07") primarily will require enhanced disclosures about significant segment expenses. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, and are to be applied on a retrospective basis. We do not expect this update to have a material impact on our consolidated financial statements.

ASU No. 2023-09, "Improvements to Income Tax Disclosures" ("ASU 2023-09") is intended to enhance the transparency and decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid information. This update is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. We do not expect it to have a material effect on our consolidated financial statements.

3. Investment Securities

The following tables summarize the Company’s available for sale and held to maturity investment securities at March 31, 2024 and December 31, 2023.


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2024
Available for sale:
U.S. agency mortgage-backed	$	307,558	$	9	$	32,881	$	274,686
Collateralized mortgage obligations	81,218		1		3,942		77,277
Municipal bonds	53,784		4		7,692		46,096
U.S. government agency	18,862		—		1,244		17,618
Corporate bonds	6,982		—		846		6,136
Total available for sale	$	468,404	$	14	$	46,605	$	421,813
Held to maturity:
Municipal bonds	$	1,065	$	1	$	4	$	1,062
Total held to maturity	$	1,065	$	1	$	4	$	1,062


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2023
Available for sale:
U.S. agency mortgage-backed	$	314,569	$	91	$	30,807	$	283,853
Collateralized mortgage obligations	82,764		1		3,503		79,262
Municipal bonds	53,891		4		7,221		46,674
U.S. government agency	19,151		—		1,102		18,049
Corporate bonds	6,982		—		894		6,088
Total available for sale	$	477,357	$	96	$	43,527	$	433,926
Held to maturity:
Municipal bonds	$	1,065	$	1	$	—	$	1,066
Total held to maturity	$	1,065	$	1	$	—	$	1,066

The estimated fair value and amortized cost by contractual maturity of the Company’s investment securities as of March 31, 2024 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. The Company’s investment securities portfolio had an effective duration of 4.2 years at March 31, 2024 and December 31, 2023.


(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
Available for sale:
U.S. agency mortgage-backed	$	45	$	80,734	$	70,788	$	123,119	$	274,686
Collateralized mortgage obligations	466		59,107		519		17,185		77,277
Municipal bonds	—		4,448		25,176		16,472		46,096
U.S. government agency	—		5,120		12,284		214		17,618
Corporate bonds	—		—		6,136		—		6,136
Total available for sale	$	511	$	149,409	$	114,903	$	156,990	$	421,813
Held to maturity:
Municipal bonds	$	—	$	1,062	$	—	$	—	$	1,062
Total held to maturity	$	—	$	1,062	$	—	$	—	$	1,062

(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
Available for sale:
U.S. agency mortgage-backed	$	45	$	88,034	$	76,367	$	143,112	$	307,558
Collateralized mortgage obligations	470		61,875		549		18,324		81,218
Municipal bonds	—		4,732		29,425		19,627		53,784
U.S. government agency	—		5,180		13,466		216		18,862
Corporate bonds	—		—		6,982		—		6,982
Total available for sale	$	515	$	159,821	$	126,789	$	181,279	$	468,404
Held to maturity:
Municipal bonds	$	—	$	1,065	$	—	$	—	$	1,065
Total held to maturity	$	—	$	1,065	$	—	$	—	$	1,065

Management evaluates securities for impairment from credit losses at least quarterly, and more frequently when economic and market conditions warrant such evaluations. Consideration is given to numerous factors including, but not limited to, the extent to which the fair value is less than the amortized cost basis; adverse conditions causing changes in the financial condition of the issuer of the security or underlying loan guarantors; changes to the rating of the security by a rating agency; and 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 determine whether the decline in the fair value of securities has resulted from credit losses or other factors. 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. If this evaluation indicates the existence of credit losses, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis. If the present value of expected cash flows is less than the amortized cost basis, an ACL is recorded, limited by the amount that the fair value of the security is less than its amortized cost.

The Company's investment securities with unrealized losses, aggregated by type and length of time that individual securities have been in a continuous loss position, are summarized in the following tables.


(dollars in thousands)	Less Than 1 Year				Over 1 Year				Total
March 31, 2024	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale:
U.S. agency mortgage-backed	$	6,164	$	28	$	267,799	$	32,853	$	273,963	$	32,881
Collateralized mortgage obligations	—		—		77,269		3,942		77,269		3,942
Municipal bonds	1,429		26		44,163		7,666		45,592		7,692
U.S. government agency	3,663		154		13,955		1,090		17,618		1,244
Corporate bonds	—		—		6,136		846		6,136		846
Total available for sale	$	11,256	$	208	$	409,322	$	46,397	$	420,578	$	46,605
Held to maturity:
Municipal bonds	$	531	$	4	$	—	$	—	$	531	$	4
Total held to maturity	$	531	$	4	$	—	$	—	$	531	$	4


(dollars in thousands)	Less Than 1 Year				Over 1 Year				Total
December 31, 2023	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale:
U.S. agency mortgage-backed	$	4,033	$	10	$	273,128	$	30,797	$	277,161	$	30,807
Collateralized mortgage obligations	—		—		79,253		3,503		79,253		3,503
Municipal bonds	519		3		44,195		7,218		44,714		7,221
U.S. government agency	3,760		117		14,289		985		18,049		1,102
Corporate bonds	—		—		6,088		894		6,088		894
Total available for sale	$	8,312	$	130	$	416,953	$	43,397	$	425,265	$	43,527
Held to maturity:
Municipal bonds	$	—	$	—	$	—	$	—	$	—	$	—
Total held to maturity	$	—	$	—	$	—	$	—	$	—	$	—

At March 31, 2024, 291 of the Company’s debt securities had unrealized losses totaling 10.0% of the individual securities’ amortized cost basis and 9.9% of the Company’s total amortized cost basis of the investment securities portfolio. At such date, 280 of the 291 securities had been in a continuous loss position for over 12 months. Management has determined that the declines in the fair value of these securities were not attributable to credit losses. As a result, no ACL was recorded for available for sale investment securities at March 31, 2024.

At March 31, 2024, it was determined that no ACL was required for the Company's held-to-maturity investment securities. The Company monitors credit quality of debt securities held-to-maturity through the use of credit ratings. The following tables present the amortized cost of the Company's held-to-maturity securities by credit quality rating at March 31, 2024 and December 31, 2023.


	Credit Ratings
(dollars in thousands)	AAA/AA/A		BBB/BB/B		Total
March 31, 2024
Held to maturity:
Municipal bonds	$	1,065	$	—	$	1,065


	Credit Ratings
(dollars in thousands)	AAA/AA/A		BBB/BB/B		Total
December 31, 2023
Held to maturity:
Municipal bonds	$	1,065	$	—	$	1,065

For the three months ended March 31, 2024, there were no gross gains or losses related to the sale of investment securities. For the three months ended March 31, 2023, the Company recorded gross gains of $98,000 and gross losses of $347,000 related to the sale of investment securities.

Accrued interest receivable on the Company's investment securities was $1,311,000 and $1,563,000 at March 31, 2024 and December 31, 2023, respectively. These amounts are recorded in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition.

At March 31, 2024 and December 31, 2023, the Company had $135,483,000 and $127,172,000, respectively, of securities pledged to secure public deposits. In addition at March 31, 2024, the Company had $135,000,000 of securities pledged to BTFP borrowings. There were no securities pledged to BTFP borrowings at December 31, 2023,

4. Earnings Per Share

Earnings per common share was computed based on the following:


	Three Months Ended March 31,
(in thousands, except per share data)	2024		2023
Numerator:
Net income available to common shareholders	$	9,199	$	11,320
Denominator:
Weighted average common shares outstanding	7,984		8,088
Effect of dilutive securities:
Restricted stock	31		21
Stock options	24		28
Weighted average common shares outstanding – assuming dilution	8,039		8,137
Basic earnings per common share	$	1.15	$	1.40
Diluted earnings per common share	$	1.14	$	1.39

Options for 58,392 and 63,558 shares of common stock were not included in the computation of diluted EPS for the three months ended March 31, 2024 and 2023, respectively, because the effect of those shares was anti-dilutive.

5. Credit Quality and Allowance for Credit Losses

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


(dollars in thousands)	March 31, 2024		December 31, 2023
Real estate loans:
One- to four-family first mortgage	$	436,659	$	433,401
Home equity loans and lines	70,377		68,977
Commercial real estate	1,221,573		1,192,691
Construction and land	334,324		340,724
Multi-family residential	118,748		107,263
Total real estate loans	2,181,681		2,143,056
Other loans:
Commercial and industrial	407,730		405,659
Consumer	32,279		32,923
Total other loans	440,009		438,582
Total loans	$	2,621,690	$	2,581,638

The net discount on the Company’s acquired loans was $3,820,000 and $4,340,000 at March 31, 2024 and December 31, 2023, respectively. In addition, loan balances as of March 31, 2024 and December 31, 2023 are reported net of unearned income of $5,227,000 and $5,321,000, respectively.

Accrued interest receivable on the Company's loans was $12,748,000 and $11,986,000 at March 31, 2024 and December 31, 2023, respectively, and is excluded from the estimate of the ACL. Those amounts are recorded in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition.

Allowance for Credit Losses

The ACL, which includes the ALL and the ACL on unfunded lending commitments, and recorded investment in loans as of the dates indicated are as follows.


	March 31, 2024
(dollars in thousands)	Collectively Evaluated		Individually Evaluated		Total
Allowance for credit losses:
One- to four-family first mortgage	$	3,275	$	—	$	3,275
Home equity loans and lines	701		—		701
Commercial real estate	14,863		200		15,063
Construction and land	5,287		—		5,287
Multi-family residential	584		—		584
Commercial and industrial	5,733		73		5,806
Consumer	745		—		745
Total allowance for loan losses	$	31,188	$	273	$	31,461

Unfunded lending commitments(1)	$	2,594	$	—	$	2,594
Total allowance for credit losses	$	33,782	$	273	$	34,055


	March 31, 2024
(dollars in thousands)	Collectively Evaluated		Individually Evaluated(2)		Total
Loans:
One- to four-family first mortgage	$	436,659	$	—	$	436,659
Home equity loans and lines	70,377		—		70,377
Commercial real estate	1,217,734		3,839		1,221,573
Construction and land	334,324		—		334,324
Multi-family residential	118,748		—		118,748
Commercial and industrial	407,638		92		407,730
Consumer	32,279		—		32,279
Total loans	$	2,617,759	$	3,931	$	2,621,690


	December 31, 2023
(dollars in thousands)	Collectively Evaluated		Individually Evaluated		Total
Allowance for credit losses:
One- to four-family first mortgage	$	3,255	$	—	$	3,255
Home equity loans and lines	688		—		688
Commercial real estate	14,604		201		14,805
Construction and land	5,292		123		5,415
Multi-family residential	474		—		474
Commercial and industrial	6,071		95		6,166
Consumer	734		—		734
Total allowance for loan losses	$	31,118	$	419	$	31,537

Unfunded lending commitments(1)	$	2,594	$	—	$	2,594
Total allowance for credit losses	$	33,712	$	419	$	34,131

	December 31, 2023
(dollars in thousands)	Collectively Evaluated		Individually Evaluated(2)		Total
Loans:
One- to four-family first mortgage	$	433,401	$	—	$	433,401
Home equity loans and lines	68,977		—		68,977
Commercial real estate	1,188,734		3,957		1,192,691
Construction and land	340,577		147		340,724
Multi-family residential	107,263		—		107,263
Commercial and industrial	405,547		112		405,659
Consumer	32,923		—		32,923
Total loans	$	2,577,422	$	4,216	$	2,581,638

(1)The ACL on unfunded lending commitments is recorded within accrued interest payable and other liabilities on the Consolidated Statements of Financial Condition.

(2)One PCD loan was individually evaluated at March 31, 2024 and December 31, 2023, respectively.

A summary of activity in the ACL for the three months ended March 31, 2024 and March 31, 2023 follows.


	Three Months Ended March 31, 2024
(dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision (Reversal)		Ending Balance
Allowance for credit losses:
One- to four-family first mortgage	$	3,255	$	—	$	—	$	20	$	3,275
Home equity loans and lines	688		—		1		12		701
Commercial real estate	14,805		—		—		258		15,063
Construction and land	5,415		(124)		—		(4)		5,287
Multi-family residential	474		—		—		110		584
Commercial and industrial	6,166		(64)		15		(311)		5,806
Consumer	734		(53)		8		56		745
Total allowance for loan losses	$	31,537	$	(241)	$	24	$	141	$	31,461

Unfunded lending commitments	$	2,594	$	—	$	—	$	—	$	2,594
Total allowance for credit losses	$	34,131	$	(241)	$	24	$	141	$	34,055


	Three Months Ended March 31, 2023
(dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision (Reversal)		Ending Balance
Allowance for credit losses:
One- to four-family first mortgage	$	2,883	$	—	$	6	$	467	$	3,356
Home equity loans and lines	624		—		1		128		753
Commercial real estate	13,814		—		—		(20)		13,794
Construction and land	4,680		—		—		241		4,921
Multi-family residential	572		—		—		36		608
Commercial and industrial	6,024		(56)		81		(75)		5,974
Consumer	702		(37)		10		37		712
Total allowance for loan losses	$	29,299	$	(93)	$	98	$	814	$	30,118

Unfunded lending commitments	$	2,093	$	—	$	—	$	210	$	2,303
Total allowance for credit losses	$	31,392	$	(93)	$	98	$	1,024	$	32,421

Credit Quality

The following tables present the Company’s loan portfolio by credit quality classification and origination year as of March 31, 2024 and December 31, 2023.


	March 31, 2024
	Term Loans by Origination Year
(dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
One- to four-family first mortgage:
Pass	$	17,139	$	93,033	$	102,250	$	70,796	$	32,577	$	111,126	$	2,347	$	220	$	429,488
Special Mention	—		149		496		187		—		33		—		—		865
Substandard	61		700		2,159		199		416		2,771		—		—		6,306
Doubtful	—		—		—		—		—		—		—		—		—
Total one- to four-family first mortgages	$	17,200	$	93,882	$	104,905	$	71,182	$	32,993	$	113,930	$	2,347	$	220	$	436,659
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Home equity loans and lines:
Pass	$	539	$	1,794	$	1,579	$	1,190	$	687	$	4,082	$	58,606	$	1,659	$	70,136
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		27		—		—		142		29		43		241
Doubtful	—		—		—		—		—		—		—		—		—
Total home equity loans and lines	$	539	$	1,794	$	1,606	$	1,190	$	687	$	4,224	$	58,635	$	1,702	$	70,377
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Pass	$	42,842	$	166,881	$	286,394	$	251,284	$	181,044	$	231,109	$	44,560	$	352	$	1,204,466
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		2,147		1,765		2,625		10,570		—		—		17,107
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate loans	$	42,842	$	166,881	$	288,541	$	253,049	$	183,669	$	241,679	$	44,560	$	352	$	1,221,573
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Construction and land:
Pass	$	20,128	$	114,405	$	139,498	$	24,321	$	5,764	$	11,969	$	5,538	$	1,169	$	322,792
Special Mention	—		1,620		164		4,635		145		1		—		—		6,565
Substandard	—		—		462		421		—		37		4,047		—		4,967
Doubtful	—		—		—		—		—		—		—		—		—
Total construction and land loans	$	20,128	$	116,025	$	140,124	$	29,377	$	5,909	$	12,007	$	9,585	$	1,169	$	334,324
Current period gross charge-offs	$	—	$	—	$	124	$	—	$	—	$	—	$	—	$	—	$	124


	March 31, 2024
	Term Loans by Origination Year
(dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
Multi-family residential:
Pass	$	8,144	$	18,096	$	37,937	$	13,631	$	19,042	$	15,576	$	523	$	1,366	$	114,315
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		3,503		930		—		4,433
Doubtful	—		—		—		—		—		—		—		—		—
Total multi-family residential loans	$	8,144	$	18,096	$	37,937	$	13,631	$	19,042	$	19,079	$	1,453	$	1,366	$	118,748
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial:
Pass	$	13,064	$	71,325	$	74,675	$	26,972	$	9,644	$	6,901	$	194,563	$	7,642	$	404,786
Special Mention	—		—		746		—		264		138		—		—		1,148
Substandard	1,389		—		124		22		7		82		92		80		1,796
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans	$	14,453	$	71,325	$	75,545	$	26,994	$	9,915	$	7,121	$	194,655	$	7,722	$	407,730
Current period gross charge-offs	$	—	$	—	$	—	$	32	$	—	$	—	$	32	$	—	$	64
Consumer:
Pass	$	1,598	$	4,958	$	5,250	$	710	$	780	$	10,470	$	8,175	$	60	$	32,001
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		8		—		7		—		263		—		—		278
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer loans	$	1,598	$	4,966	$	5,250	$	717	$	780	$	10,733	$	8,175	$	60	$	32,279
Current period gross charge-offs	$	—	$	19	$	21	$	—	$	—	$	8	$	5	$	—	$	53
Total loans:
Pass	$	103,454	$	470,492	$	647,583	$	388,904	$	249,538	$	391,233	$	314,312	$	12,468	$	2,577,984
Special Mention	—		1,769		1,406		4,822		409		172		—		—		8,578
Substandard	1,450		708		4,919		2,414		3,048		17,368		5,098		123		35,128
Doubtful	—		—		—		—		—		—		—		—		—
Total loans	$	104,904	$	472,969	$	653,908	$	396,140	$	252,995	$	408,773	$	319,410	$	12,591	$	2,621,690
Current period gross charge-offs	$	—	$	19	$	145	$	32	$	—	$	8	$	37	$	—	$	241


	December 31, 2023
	Term Loans by Origination Year
(dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
One- to four-family first mortgage:
Pass	$	94,465	$	106,417	$	72,594	$	33,588	$	27,677	$	91,706	$	3,059	$	458	$	429,964
Special Mention	149		497		188		—		—		34		—		—		868
Substandard	—		165		117		306		60		1,921		—		—		2,569
Doubtful	—		—		—		—		—		—		—		—		—
Total one- to four-family first mortgages	$	94,614	$	107,079	$	72,899	$	33,894	$	27,737	$	93,661	$	3,059	$	458	$	433,401
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	12	$	—	$	—	$	12
Home equity loans and lines:
Pass	$	1,864	$	1,652	$	1,231	$	760	$	1,117	$	3,138	$	57,768	$	1,240	$	68,770
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		150		29		28		207
Doubtful	—		—		—		—		—		—		—		—		—
Total home equity loans and lines	$	1,864	$	1,652	$	1,231	$	760	$	1,117	$	3,288	$	57,797	$	1,268	$	68,977
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Pass	$	161,755	$	292,494	$	252,109	$	184,935	$	137,154	$	104,533	$	44,225	$	855	$	1,178,060
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		16		1,441		2,652		5,490		5,032		—		—		14,631
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate loans	$	161,755	$	292,510	$	253,550	$	187,587	$	142,644	$	109,565	$	44,225	$	855	$	1,192,691
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	29	$	—	$	—	$	29
Construction and land:
Pass	$	121,389	$	150,667	$	33,247	$	6,641	$	7,672	$	4,567	$	5,439	$	—	$	329,622
Special Mention	929		164		4,635		146		—		—		—		—		5,874
Substandard	—		609		528		—		—		44		4,047		—		5,228
Doubtful	—		—		—		—		—		—		—		—		—
Total construction and land loans	$	122,318	$	151,440	$	38,410	$	6,787	$	7,672	$	4,611	$	9,486	$	—	$	340,724
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Multi-family residential:
Pass	$	14,907	$	37,228	$	11,843	$	21,558	$	12,548	$	3,213	$	2,463	$	—	$	103,760
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		3,503		—		—		3,503


	December 31, 2023
	Term Loans by Origination Year
(dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
Doubtful	—		—		—		—		—		—		—		—		—
Total multi-family residential loans	$	14,907	$	37,228	$	11,843	$	21,558	$	12,548	$	6,716	$	2,463	$	—	$	107,263
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial:
Pass	$	73,674	$	79,886	$	30,412	$	10,674	$	4,954	$	3,386	$	191,946	$	7,800	$	402,732
Special Mention	—		784		—		264		—		138		—		—		1,186
Substandard	1,389		38		54		7		2		100		129		22		1,741
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans	$	75,063	$	80,708	$	30,466	$	10,945	$	4,956	$	3,624	$	192,075	$	7,822	$	405,659
Current period gross charge-offs	$	—	$	—	$	—	$	124	$	7	$	—	$	124	$	—	$	255
Consumer:
Pass	$	5,941	$	5,734	$	872	$	887	$	359	$	10,698	$	8,068	$	75	$	32,634
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		13		7		—		7		262		—		—		289
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer loans	$	5,941	$	5,747	$	879	$	887	$	366	$	10,960	$	8,068	$	75	$	32,923
Current period gross charge-offs	$	3	$	34	$	3	$	6	$	—	$	4	$	125	$	—	$	175
Total loans:
Pass	$	473,995	$	674,078	$	402,308	$	259,043	$	191,481	$	221,241	$	312,968	$	10,428	$	2,545,542
Special Mention	1,078		1,445		4,823		410		—		172		—		—		7,928
Substandard	1,389		841		2,147		2,965		5,559		11,012		4,205		50		28,168
Doubtful	—		—		—		—		—		—		—		—		—
Total loans	$	476,462	$	676,364	$	409,278	$	262,418	$	197,040	$	232,425	$	317,173	$	10,478	$	2,581,638
Current period gross charge-offs	$	3	$	34	$	3	$	130	$	7	$	45	$	249	$	—	$	471

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, 2024
(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	$	873	$	1,628	$	1,942	$	4,443	$	360,732	$	365,175
Home equity loans and lines	—		66		29		95		62,764		62,859
Commercial real estate	2,903		15		1,065		3,983		953,976		957,959
Construction and land	302		—		4,930		5,232		304,061		309,293
Multi-family residential	3,437		—		930		4,367		110,752		115,119
Total real estate loans	7,515		1,709		8,896		18,120		1,792,285		1,810,405
Other loans:
Commercial and industrial	414		51		155		620		378,456		379,076
Consumer	73		13		97		183		29,821		30,004
Total other loans	487		64		252		803		408,277		409,080
Total originated loans	$	8,002	$	1,773	$	9,148	$	18,923	$	2,200,562	$	2,219,485
Acquired loans:
Real estate loans:
One- to four-family first mortgage	$	1,207	$	237	$	889	$	2,333	$	69,151	$	71,484
Home equity loans and lines	18		—		—		18		7,500		7,518
Commercial real estate	58		—		—		58		263,556		263,614
Construction and land	—		—		8		8		25,023		25,031
Multi-family residential	—		—		—		—		3,629		3,629
Total real estate loans	1,283		237		897		2,417		368,859		371,276
Other loans:
Commercial and industrial	15		346		1		362		28,292		28,654
Consumer	—		7		42		49		2,226		2,275
Total other loans	15		353		43		411		30,518		30,929
Total acquired loans	$	1,298	$	590	$	940	$	2,828	$	399,377	$	402,205
Total loans:
Real estate loans:
One- to four-family first mortgage	$	2,080	$	1,865	$	2,831	$	6,776	$	429,883	$	436,659
Home equity loans and lines	18		66		29		113		70,264		70,377


	March 31, 2024
(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
Commercial real estate	2,961		15		1,065		4,041		1,217,532		1,221,573
Construction and land	302		—		4,938		5,240		329,084		334,324
Multi-family residential	3,437		—		930		4,367		114,381		118,748
Total real estate loans	8,798		1,946		9,793		20,537		2,161,144		2,181,681
Other loans:
Commercial and industrial	429		397		156		982		406,748		407,730
Consumer	73		20		139		232		32,047		32,279
Total other loans	502		417		295		1,214		438,795		440,009
Total loans	$	9,300	$	2,363	$	10,088	$	21,751	$	2,599,939	$	2,621,690


	December 31, 2023
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current Loans		Total Loans
Originated loans:
Real estate loans:
One- to four-family first mortgage	$	2,867	$	978	$	331	$	4,176	$	354,694	$	358,870
Home equity loans and lines	143		—		35		178		61,105		61,283
Commercial real estate	112		769		—		881		922,843		923,724
Construction and land	432		1		1,136		1,569		312,710		314,279
Multi-family residential	—		—		—		—		103,598		103,598
Total real estate loans	3,554		1,748		1,502		6,804		1,754,950		1,761,754
Other loans:
Commercial and industrial	325		11		189		525		376,739		377,264
Consumer	404		131		—		535		29,947		30,482
Total other loans	729		142		189		1,060		406,686		407,746
Total originated loans	$	4,283	$	1,890	$	1,691	$	7,864	$	2,161,636	$	2,169,500
Acquired loans:
Real estate loans:
One- to four-family first mortgage	$	1,543	$	497	$	467	$	2,507	$	72,024	$	74,531
Home equity loans and lines	19		1		—		20		7,674		7,694
Commercial real estate	—		2,645		—		2,645		266,322		268,967
Construction and land	—		—		15		15		26,430		26,445
Multi-family residential	—		—		—		—		3,665		3,665
Total real estate loans	1,562		3,143		482		5,187		376,115		381,302
Other loans:
Commercial and industrial	271		—		32		303		28,092		28,395
Consumer	12		12		55		79		2,362		2,441
Total other loans	283		12		87		382		30,454		30,836
Total acquired loans	$	1,845	$	3,155	$	569	$	5,569	$	406,569	$	412,138
Total loans:
Real estate loans:
One- to four-family first mortgage	$	4,410	$	1,475	$	798	$	6,683	$	426,718	$	433,401


	December 31, 2023
(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
Home equity loans and lines	162		1		35		198		68,779		68,977
Commercial real estate	112		3,414		—		3,526		1,189,165		1,192,691
Construction and land	432		1		1,151		1,584		339,140		340,724
Multi-family residential	—		—		—		—		107,263		107,263
Total real estate loans	5,116		4,891		1,984		11,991		2,131,065		2,143,056
Other loans:
Commercial and industrial	596		11		221		828		404,831		405,659
Consumer	416		143		55		614		32,309		32,923
Total other loans	1,012		154		276		1,442		437,140		438,582
Total loans	$	6,128	$	5,045	$	2,260	$	13,433	$	2,568,205	$	2,581,638

There were $4,978,000 and $0 of loans greater than 90 days past due and accruing at March 31, 2024 and December 31, 2023, respectively.

The following tables summarize information pertaining to nonaccrual loans as of dates indicated.


	March 31, 2024
(dollars in thousands)		With Related Allowance		Without Related Allowance		Total
Nonaccrual loans(1):
One- to four-family first mortgage		$	5,795	$	—	$	5,795
Home equity loans and lines		242		—		242
Commercial real estate		5,279		2,471		7,750
Construction and land		920		—		920
Multi-family residential		—		—		—
Commercial and industrial		386		—		386
Consumer		278		—		278
Total		$	12,900	$	2,471	$	15,371

	December 31, 2023
(dollars in thousands)		With Related Allowance		Without Related Allowance		Total
Nonaccrual loans(1):
One- to four-family first mortgage		$	1,600	$	—	$	1,600
Home equity loans and lines		208		—		208
Commercial real estate		2,655		2,548		5,203
Construction and land		1,181		—		1,181
Multi-family residential		—		—		—
Commercial and industrial		331		—		331
Consumer		291		—		291
Total		$	6,266	$	2,548	$	8,814

(1)Nonaccrual acquired loans include PCD loans of $1,368,000 and $1,410,000 at March 31, 2024 and December 31, 2023, respectively.

All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. All payments received while on nonaccrual status are applied against the principal balance of nonaccrual loans. The Company does not recognize interest income while loans are on nonaccrual status.

Collateral Dependent Loans

The Company held loans that were individually evaluated for credit losses at March 31, 2024 and December 31, 2023 for which the repayment, on the basis of our assessment at the reporting date, is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The ACL for these collateral-dependent loans is primarily based on the fair value of the underlying collateral at the reporting date. The following describes the types of collateral that secure collateral dependent loans:

•One- to four-family first mortgages are primarily secured by first liens on residential real estate.

•Home equity loans and lines are primarily secured by first and junior liens on residential real estate.

•Commercial real estate loans are primarily secured by office and industrial buildings, warehouses, retail shopping facilities and various special purpose properties, including hotels and restaurants.

•Construction and land loans are primarily secured by residential and commercial properties, which are under construction and/or redevelopment, and by raw land.

•Commercial and industrial loans considered collateral dependent are primarily secured by accounts receivable, inventory and equipment.

The tables below summarize collateral dependent loans and the related ACL at March 31, 2024 and December 31, 2023.


	March 31, 2024
(dollars in thousands)	Loans		ACL
One- to four-family first mortgage	$	—	$	—
Home equity loans and lines	—		—
Commercial real estate	3,839		200
Construction and land	—		—
Multi-family residential	—		—
Commercial and industrial	92		73
Consumer	—		—
Total	$	3,931	$	273

	December 31, 2023
(dollars in thousands)	Loans		ACL
One- to four-family first mortgage	$	—	$	—
Home equity loans and lines	—		—
Commercial real estate	3,957		201
Construction and land	147		123
Multi-family residential	—		—
Commercial and industrial	112		95
Consumer	—		—
Total	$	4,216	$	419

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

Occasionally, the Company modifies loans to borrowers in financial distress by providing certain concessions, such as principal forgiveness, term extension, an other-than-insignificant payment delay, interest only for a specified period of time, an interest rate reduction, or a combination of such concessions. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses. Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is charged-off. The balance of loan

modifications, segregated by type of modification, to borrowers experiencing financial difficulty are set forth in the table below for the periods indicated.


	Three Months Ended March 31, 2024
(dollars in thousands)	Payment Deferral		Principal Forgiveness		Term Extension		Interest Rate Reduction		Combination Term Extension and Principal Forgiveness		Combination Term Extension and Interest Rate Reduction		Percent of Total Class of Loans
One-to four-family first mortgage	$	—	$	—	$	668	$	—	$	—	$	—	0.2	%
Home equity loans and lines	—		—		—		—		—		—		—
Commercial real estate	—		—		1,081		—		—		—		0.1
Construction and land	—		—		29		—		—		—		—
Multi-family residential	—		—		—		—		—		—		—
Commercial and industrial	—		—		—		—		—		—		—
Consumer	—		—		—		—		—		—		—
Total	$	—	$	—	$	1,778	$	—	$	—	$	—	0.1	%


	Three Months Ended March 31, 2023
(dollars in thousands)	Payment Deferral		Principal Forgiveness		Term Extension		Interest Rate Reduction		Combination Term Extension and Principal Forgiveness		Combination Term Extension and Interest Rate Reduction		Percent of Total Class of Loans
One-to four-family first mortgage	$	—	$	—	$	232	$	—	$	—	$	—	0.1	%
Home equity loans and lines	—		—		—		—		—		—		—
Commercial real estate	—		—		1,319		—		—		—		0.1
Construction and land	—		—		33		—		—		—		—
Multi-family residential	—		—		—		—		—		—		—
Commercial and industrial	—		—		1,569		—		—		—		0.4
Consumer	—		—		—		—		—		—		—
Total	$	—	$	—	$	3,153	$	—	$	—	$	—	0.1	%

During the three months ended March 31, 2024 and 2023, no loan experienced a default subsequent to being granted a payment deferral or term extension. Default is defined as movement to past due 90 days, foreclosure or charge-off, whichever occurs first.

The following table details the financial impacts of loan modifications made to borrowers experiencing financial difficulty for the periods presented.


	March 31, 2024		March 31, 2023
	Minimum Term Extensions (in months)	Maximum Term Extensions (in months)	Minimum Term Extensions (in months)	Maximum Term Extensions (in months)
One-to four-family first mortgage	12	96	12	12
Home equity loans and lines	0	0	0	0
Commercial real estate	12	12	12	12
Construction and land	12	12	12	12
Multi-family residential	0	0	0	0
Commercial and industrial	0	0	10	10
Consumer	0	0	0	0

The table below reflects the performance of loans that have been modified in the last 12 months.


(dollars in thousands)	30-89 Days Past Due		90+ Days Past Due		Nonaccrual		Current		Total
March 31, 2024
One-to four-family first mortgage	$	—	$	—	$	—	$	1,499	$	1,499
Home equity loans and lines	—		—		—		57		57
Commercial real estate	—		—		—		1,360		1,360
Construction and land	—		—		—		29		29
Multi-family residential	—		—		—		—		—
Commercial and industrial	—		—		—		1,389		1,389
Consumer	—		—		—		—		—
Total	$	—	$	—	$	—	$	4,334	$	4,334

The loan modifications reported in the table above did not significantly impact the Company's allowance for loan losses during 2024.

Foreclosed Assets and ORE

Foreclosed assets and ORE include real property and other assets that have been acquired as a result of foreclosure, and real property no longer used in the Bank's business. Foreclosed assets and ORE totaled $1,601,000 and $1,575,000 at March 31, 2024 and December 31, 2023, respectively. These amounts are recorded in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition.

The carrying amount of foreclosed residential real estate properties held at March 31, 2024 and December 31, 2023 totaled $141,000 and $115,000, respectively. Loans secured by single family residential real estate that were in the process of foreclosure at March 31, 2024 and December 31, 2023 totaled $809,000 and $517,000, respectively.

6. Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

The Company’s existing credit derivatives result from loan participation arrangements, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company occasionally enters into credit risk participation agreements with counterparty banks to accept a portion of the credit risk related to interest rate swaps. The agreements, which

are typically executed in conjunction with a participation in a loan with the same customer, allow customers to execute an interest rate swap with one bank while allowing for the distribution of the credit risk among participating members. Collateral used to support the credit risk for the underlying lending relationship is also available to offset the risk of credit risk participations and customer derivative positions.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. As part of its efforts to accomplish this objective, the Company entered into certain interest rate swap agreements as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Such derivatives were used to hedge the variable cash flows associated with existing variable rate liabilities.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable rate liabilities. During the next twelve months, the Company estimates that an additional $2,086,000 will be reclassified as additional interest expense.

Non-designated Hedges

The Company’s existing credit derivatives result from participations in interest rate swaps provided by external lenders as part of loan participation arrangements, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain lenders which participate in loans. For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately.

Fair Values of Derivative Instruments

The tables below present the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statement of Financial Condition as of March 31, 2024 and December 31, 2023.


	March 31, 2024
	Derivative Assets(1)				Derivative Liabilities(1)
(dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps - variable rate liabilities	$	60,000	$	4,392	$	—	$	—

Derivatives not designated as hedging instruments:
Risk participation agreements	—		—		11,736		2

Netting adjustments			—				—


Net derivative amounts			$	4,392			$	2

	December 31, 2023
	Derivative Assets(1)				Derivative Liabilities(1)
(dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps - variable rate liabilities	$	60,000	$	3,914	$	—	$	—

Derivatives not designated as hedging instruments:
Risk participation agreements	—		—		11,797		3

Netting adjustments			—				—


Net derivative amounts			$	3,914			$	3

(1)Derivative assets and liabilities are reported at fair value in accrued interest receivable and other assets and accrued interest payable and other liabilities, respectively, in the Consolidated Statements of Financial Condition.

At March 31, 2024 and December 31, 2023, accumulated unrealized gains, net of taxes, on derivative instruments totaled $3,306,000 and $2,928,000, respectively.

Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income and the Consolidated Statements of Income

The tables below present the effect of cash flow hedge accounting on Accumulated Other Comprehensive Income and the Consolidated Statements of Income as of March 31, 2024 and March 31, 2023.


	Three Months Ended March 31, 2024
	Amount of Gain Recognized in OCI				Location of Gain Reclassified from AOCI into Income	Amount of Gain Reclassified from AOCI into Income
(dollars in thousands)	Total		Included Component			Total		Included Component
Derivatives in cash flows hedging relationships:
Interest rate swaps - variable rate liabilities	$	1,084	$	1,084	Interest income	$	606	$	606


	Three Months Ended March 31, 2023
	Amount of Loss Recognized in OCI				Location of Gain Reclassified from AOCI into Income	Amount of Gain Reclassified from AOCI into Income
(dollars in thousands)	Total		Included Component			Total		Included Component
Derivatives in cash flows hedging relationships:
Interest rate swaps - variable rate liabilities	$	(295)	$	(295)	Interest income	$	421	$	421

Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Income

The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Consolidated Statements of Income as of March 31, 2024 and March 31, 2023.

(dollars in thousands)

Location of Income Recognized on Non-designated Hedges

Three Months Ended March 31, 2024

Effects of non-designated hedges

Risk participation agreements

Other noninterest income

(dollars in thousands)

Location of Income Recognized on Non-designated Hedges

Three Months Ended March 31, 2023

Effects of non-designated hedges

Risk participation agreements

Other noninterest income

(1)

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision to the effect that, if the Company (either) defaults (or is capable of being declared in default) on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

The Company has agreements with certain of its derivative counterparties that contain a provision to the effect that, if the Company fails to maintain its status as a well or adequately capitalized institution, then the Company could be required to post additional collateral.

As of March 31, 2024, there were no derivatives with credit-risk-related contingent features in a net liability position. Such derivatives are measured at fair value, which includes accrued interest but excludes any adjustment for nonperformance risk. If the Company had breached any provisions at March 31, 2024, it would not have been required to settle any obligations under the agreements since the termination value was $0.

7. Long-term Debt and Borrowings

Subordinated Debt

On June 30, 2022, the Company issued $55,000,000 in aggregate principal amount of its 5.75% Fixed-to-Floating Rate Subordinated Notes (the "Notes") due 2032. The Notes were issued at a price equal to 100% of the aggregate principal amount. The Notes have a stated maturity date of June 30, 2032 and bear interest at a fixed rate of 5.75% per year from and including the issue date to but excluding June 30, 2027. From June 30, 2027, the Notes will bear interest at a floating rate equal to the then current three-month term secured overnight financing rate (“SOFR”), plus 282 basis points. The Notes may be redeemed by the Company, in whole or in part, on or after June 30, 2027. The Notes are intended to qualify as Tier 2 capital for regulatory purposes.

The carrying value of subordinated debt was $54,294,000 and $54,241,000 at March 31, 2024 and December 31, 2023, respectively. The subordinated debt was recorded net of issuance costs which is being amortized using the straight-line method over five years.

Other Borrowings

On March 12, 2023, the Federal Reserve Board created the BTFP, which offers loans to banks with a term up to one year with no prepayment penalty. The loans are secured by pledging qualifying securities and are valued at par for collateral. In 2024, the Bank participated in the BTFP and had an outstanding debt of $135.0 million at March 31, 2024. The average balance of other borrowings, which included the BTFP loan was $126.0 million for the first quarter of 2024, up $120.4 million compared to the first quarter of 2023.

Federal Home Loan Bank Advances

The average balance of total FHLB advances was $71.7 million for the first quarter of 2024, down $143.8 million compared to the first quarter of 2023.

The Company had no short-term FHLB advances as of March 31, 2024 compared to $150.0 million as of December 31, 2023. At March 31, 2024 and December 31, 2023, the Company had $38.6 million and $42.7 million in long-term FHLB advances, respectively, and $1.1 billion and $1.0 billion in additional FHLB advances available, respectively.

8. Fair Value Measurements and Disclosures

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

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

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

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

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

Recurring Basis

Investment Securities Available for Sale

Fair values of investment securities available for sale are primarily measured using information from a third-party pricing service. This pricing service provides pricing information by utilizing pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark

securities bids, offers and other reference data from market research publications. If quoted prices are available in an active market, investment securities are classified as Level 1 measurements. If quoted prices are not available in an active market, fair values are estimated primarily by the use of pricing models. Level 2 investment securities are primarily comprised of mortgage-backed securities issued by government agencies and U.S. government-sponsored enterprises. In certain cases, where there is limited or less transparent information provided by the Company’s third-party pricing service, fair value is estimated by the use of secondary pricing services or through the use of non-binding third-party broker quotes. Investment securities are classified within Level 3 when little or no market activity supports the fair value.

Management primarily identifies investment securities which may have traded in illiquid or inactive markets, by identifying instances of a significant decrease in the volume and frequency of trades, relative to historical levels, as well as instances of a significant widening of the bid-ask spread in the brokered markets. Investment securities that are deemed to have been trading in illiquid or inactive markets may require the use of significant unobservable inputs. For example, management may use quoted prices for similar investment securities in the absence of a liquid and active market for the investment securities being valued. As of March 31, 2024, management did not make adjustments to prices provided by the third-party pricing service as a result of illiquid or inactive markets.

Derivative Assets and Liabilities

Derivative assets and liabilities are reported at fair value in accrued interest receivable and other assets and accrued interest payable and other liabilities, respectively, in the Consolidated Statements of Financial Condition. The fair value of these derivative financial instruments is obtained from a third-party pricing service that uses widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. The analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company has determined that its derivative valuations are classified in Level 2 of the fair vale hierarchy.

The following tables present the balances of assets measured for fair value on a recurring basis as of March 31, 2024 and December 31, 2023.


(dollars in thousands)	March 31, 2024		Level 1		Level 2		Level 3
Assets
Available for sale securities:
U.S. agency mortgage-backed	$	274,686	$	—	$	274,686	$	—
Collateralized mortgage obligations	77,277		—		77,277		—
Municipal bonds	46,096		—		46,096		—
U.S. government agency	17,618		—		17,618		—
Corporate bonds	6,136		—		6,136		—
Total	$	421,813	$	—	$	421,813	$	—

Derivative assets	$	4,392	$	—	$	4,392	$	—
Total	$	426,205	$	—	$	426,205	$	—

Liabilities
Derivative liabilities	$	2	$	—	$	2	$	—


(dollars in thousands)	December 31, 2023		Level 1		Level 2		Level 3
Assets
Available for sale securities:
U.S. agency mortgage-backed	$	283,853	$	—	$	283,853	$	—
Collateralized mortgage obligations	79,262		—		79,262		—
Municipal bonds	46,674		—		46,674		—
U.S. government agency	18,049		—		18,049		—
Corporate bonds	6,088		—		6,088		—
Total	$	433,926	$	—	$	433,926	$	—

Derivative assets	$	3,914	$	—	$	3,914	$	—
Total	$	437,840	$	—	$	437,840	$	—

Liabilities
Derivative liabilities	$	3	$	—	$	3	$	—

Nonrecurring Basis

The Company records loans individually evaluated for credit losses at fair value on a nonrecurring basis. 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. Loans individually evaluated 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.

Foreclosed assets and ORE are also recorded at fair value on a nonrecurring basis. Foreclosed assets are initially recorded at fair value less estimated costs to sell. ORE is recorded at the lower of its net book value or fair value at the date of transfer to ORE. The fair value of foreclosed assets and ORE is based on property appraisals and an analysis of similar properties available. As such, the Company classifies foreclosed and ORE assets as Level 3 assets.

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, 2024		Level 1		Level 2		Level 3
Assets
Loans individually evaluated	$	3,658	$	—	$	—	$	3,658
Foreclosed assets and ORE	1,601		—		—		1,601
Total	$	5,259	$	—	$	—	$	5,259

			Fair Value Measurements Using
(dollars in thousands)	December 31, 2023		Level 1		Level 2		Level 3
Assets
Loans individually evaluated	$	3,797	$	—	$	—	$	3,797
Foreclosed assets and ORE	1,575		—		—		1,575
Total	$	5,372	$	—	$	—	$	5,372

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

March 31, 2024

Loans individually evaluated

3,658

Third party appraisals and discounted cash flows

Collateral values, market discounts and estimated costs to sell

0% - 79%

Foreclosed assets and ORE

1,601

Third party appraisals, sales contracts, broker price opinions

Collateral values, market discounts and estimated costs to sell

52% - 99%

63%

(dollars in thousands)

Fair Value

Valuation Technique

Unobservable Inputs

Range of
Discounts

Weighted Average Discount

December 31, 2023

Loans individually evaluated

3,797

Third party appraisals and discounted cash flows

Collateral values, market discounts and estimated costs to sell

0% - 89%

10%

Foreclosed assets and ORE

1,575

Third party appraisals, sales contracts, broker price opinions

Collateral values, market discounts and estimated costs to sell

31% - 71%

62%

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.

Methods and assumptions used to estimate fair value of each class of financial instruments for which it is practicable to estimate fair value are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. The fair value of subordinated debt is estimated based on current market rates on similar debt in the market. The Company classifies this debt in Level 2 of the fair value table. There have been no other material changes from the fair value estimate methods and assumptions previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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


			Fair Value Measurements at March 31, 2024
(dollars in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	90,475	$	90,475	$	90,475	$	—	$	—

Investment securities available for sale	421,813		421,813		—		421,813		—
Investment securities held to maturity	1,065		1,062		—		1,062		—
Mortgage loans held for sale	646		646		—		646		—
Loans, net	2,590,229		2,437,430		—		2,433,772		3,658
Cash surrender value of BOLI	47,587		47,587		47,587		—		—
Derivative assets(1)	4,392		4,392		—		4,392		—
Financial Liabilities
Deposits	$	2,722,578	$	2,716,263	$	2,024,707	$	691,556	$	—
Other borrowings	140,539		139,954		—		139,954		—
Subordinated debt, net of issuance cost	54,294		49,930		—		49,930		—

Long-term FHLB advances	38,607		37,594		—		37,594		—
Derivative liabilities(1)	2		2		—		2		—

			Fair Value Measurements at December 31, 2023
(dollars in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	75,831	$	75,831	$	75,831	$	—	$	—
Interest-bearing deposits in banks	99		99		99		—		—
Investment securities available for sale	433,926		433,926		—		433,926		—
Investment securities held to maturity	1,065		1,066		—		1,066		—
Mortgage loans held for sale	361		361		—		361		—
Loans, net	2,550,101		2,381,863		—		2,378,066		3,797
Cash surrender value of BOLI	47,321		47,321		47,321		—		—
Derivative assets(1)	3,914		3,914		—		3,914		—
Financial Liabilities
Deposits	$	2,670,624	$	2,665,590	$	2,025,890	$	639,700	$	—
Other borrowings	5,539		5,498		—		5,498		—
Subordinated debt, net of issuance cost	54,241		50,865		—		50,865		—
Short-term FHLB advances	150,000		150,000		150,000		—		—
Long-term FHLB advances	42,713		41,792		—		41,792		—
Derivative liabilities(1)	3		3		—		3		—


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 the Company and the Bank from December 31, 2023 through March 31, 2024 and on its results of operations for the three months ended March 31, 2024 and 2023. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this quarterly report on Form 10-Q, particularly the consolidated financial statements and related notes appearing in Item 1.

Forward-Looking Statements

To the extent that statements in this Form 10-Q relate to future plans, objectives, financial results or performance of the Company or Bank, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which are based on management’s current information, estimates and assumptions and the current economic environment, are generally identified by the use of words such as “plan”, “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions, or by future or conditional terms such as “will”, “would”, “should”, “could”, “may”, “likely”, “probably”, or “possibly”. The Company’s or the Bank’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties. Certain risks, uncertainties and other factors, including those set forth under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023 and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K, may cause actual results to differ materially from the results discussed in the forward-looking statements appearing in this discussion and analysis and may include factors such as, but not limited to, our lending activities, our use of municipal deposits as a source of funds, credit quality and risk, industry and technological changes, cyber incidents or other failures, disruptions or security breaches, interest rates, commercial and residential real estate values, economic and market conditions in the markets we operate in or generally in the United States, funds availability, accounting estimates and risk management processes, legislative and regulatory changes, the fair values of our acquired assets and our investment securities portfolio, business strategy execution, key personnel, competition, mortgage markets, fraud, environmental liability and severe weather, natural disasters, acts of war or terrorism or other external events. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

EXECUTIVE OVERVIEW

The Company reported net income for the first quarter of 2024 of $9.2 million, or $1.14 diluted EPS, down $2.1 million compared to the first quarter of 2023. Net income for the first quarter of 2023 totaled $11.3 million, or $1.39 diluted EPS.

Key components of the Company’s performance during the three months ended March 31, 2024 include:

•Assets increased $37.5 million, or 1.1%, from December 31, 2023 to $3.4 billion at March 31, 2024.

•Total loans were $2.6 billion at March 31, 2024, up $40.1 million, or 1.6%, from December 31, 2023.

•During the three months ended March 31, 2024, the Company provisioned $141,000 to the allowance for loan losses. During the three months ended March 31, 2023, the Company provisioned $814,000 to the allowance for loan losses.

•The ALL totaled $31.5 million, or 1.20% of total loans, at March 31, 2024 compared to $31.5 million, or 1.22% of total loans, at December 31, 2023. The ACL, which is comprised of the allowance for loan losses plus the allowance for unfunded lending commitments, totaled $34.1 million, or 1.30% of total loans, at March 31, 2024 compared to $34.1 million, or 1.32% of total loans, at December 31, 2023.

•Nonperforming assets increased $11.6 million, or 111.3%, from $10.4 million, or 0.31% of total assets, at December 31, 2023 to $22.0 million, or 0.65% of total assets, at March 31, 2024. The increase in nonperforming assets is primarily due to two loan relationships which were classified as nonperforming in the first quarter of 2024, for which management does not anticipate any loss.

•Total deposits amounted to $2.7 billion at March 31, 2024, an increase of $52.0 million, or 1.9%, from December 31, 2023.

•The net interest margin was 3.64% for the three months ended March 31, 2024, down 54 bps from the three months ended March 31, 2023.

•The average rate paid on total interest-bearing deposits was 2.52% for the first quarter of 2024, which was up 175 bps from the first quarter of 2023.

•Total interest expense for the first quarter of 2024 was up $8.7 million, or 133.5%, compared to the first quarter of 2023 primarily due to the rising interest rate environment and the higher costs on deposits.

•Noninterest income for the first quarter of 2024 was up $238,000, or 7.2%, compared to the first quarter of 2023, primarily due to an increase in other income of $131,000 and the absence of a loss on sale of securities totaling $249,000 that occurred during the first quarter of 2023, which were partially offset with a decrease in bank card fees of $212,000.

•Noninterest expense for the first quarter of 2024 was up $928,000, or 4.7%, compared to the first quarter of 2023, primarily due to increases in foreclosed assets (up $804,000 primarily due to the absence of a $739,000 recovery of a previous loss on a OREO sale that occurred during the first quarter of 2023), marketing and advertising (up $159,000), and professional

services (up $111,000), which were partially offset by the absence of any provision for credit losses on unfunded commitments in the 2024 period.

FINANCIAL CONDITION

Loans, Allowance for Credit Losses and Asset Quality

Loans

Total loans at March 31, 2024 were $2.6 billion, up $40.1 million, or 1.6%, from December 31, 2023. The loan growth resulted primarily from the additions of loans across all loan types, with the exception of construction and land loans and consumer loans.

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


(dollars in thousands)	March 31, 2024		December 31, 2023		Increase/(Decrease)
Real estate loans:
One-to four-family first mortgage	$	436,659	$	433,401	$	3,258	0.8	%
Home equity loans and lines	70,377		68,977		1,400		2.0
Commercial real estate	1,221,573		1,192,691		28,882		2.4
Construction and land	334,324		340,724		(6,400)		(1.9)
Multi-family residential	118,748		107,263		11,485		10.7
Total real estate loans	2,181,681		2,143,056		38,625		1.8	%
Other loans:
Commercial and industrial	407,730		405,659		2,071		0.5
Consumer	32,279		32,923		(644)		(2.0)
Total other loans	440,009		438,582		1,427		0.3
Total loans	$	2,621,690	$	2,581,638	$	40,052	1.6	%

Allowance for Credit Losses

The ACL which equals the sum of the ALL and the ACL on unfunded lending commitments, is established through provisions for credit losses. Management recalculates the ACL at least quarterly to reassess the estimate of credit losses for the total portfolio at the relevant reporting date. Under ASC Topic 326, the ACL is measured on a pool basis when similar risk characteristics exist. For each pool of loans, management also evaluates and applies qualitative adjustments to the calculated ACL based on several factors, including, but not limited to, changes in current and expected future economic conditions, changes in industry experience and industry loan concentrations, changes in the volume and severity of nonperforming assets, changes in lending policies and personnel and changes in the competitive and regulatory environment of the banking industry. Loans that do not share similar risk characteristics are individually evaluated and are excluded from the pooled loan analysis.

The ACL policy described above is supplemented by periodic reviews and validations performed by independent loan reviewers. The results of the reviews are reported to the Audit Committee of the Board of Directors. The establishment of the ACL is significantly affected by management judgment. There is likelihood that different amounts would be reported under different conditions or assumptions. Federal regulatory agencies, as an integral part of their examination process, periodically review our ACL. Such agencies may require management to make additional provisions for estimated losses based upon judgments different from those of management.

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

At March 31, 2024, the ALL totaled $31.5 million, or 1.20% of total loans, down $76,000 from $31.5 million, or 1.22% of total loans, at December 31, 2023. During the three months ended March 31, 2024, the Company provisioned $141,000 of the allowance loan losses primarily due to loan growth. Net loan charge-offs totaled $217,000 for the three months ended March 31, 2024.

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.

Under our allowance policy, credit losses are measured on a pool basis when similar risk characteristics exist. Loans that do not share similar risk characteristics are individually evaluated for credit losses and are excluded from the pooled loan analysis. At least quarterly, management evaluates the loan portfolio to determine which loans should be individually evaluated for credit losses. Management's evaluation involves an analysis of larger (i.e., loans with balances of $500,000 or greater) commercial real estate loans, multi-family residential loans, construction and land loans and commercial and industrial loans. 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 determine if a short-fall exists, 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. Loans individually evaluated for credit losses are reported to the Board of Directors monthly.

At March 31, 2024 and December 31, 2023, loans identified as credit deteriorated loans and individually evaluated for expected losses were $3.9 million and $4.2 million, respectively. The following tables provide a summary of loans individually evaluated for credit losses as of the dates indicated.


	March 31, 2024
(dollars in thousands)	Recorded investment		Allowance for Loan Losses		Allowance to Total Loans
Loans Individually Evaluated
One- to four-family first mortgage	$	—	$	—	—	%
Home equity loans and lines	—		—		—
Commercial real estate	3,839		200		5.21
Construction and land	—		—		—
Multi-family residential	—		—		—
Commercial and industrial	92		73		79.35
Consumer	—		—		—
Total	$	3,931	$	273	6.94	%


	December 31, 2023
(dollars in thousands)	Recorded investment		Allowance for Loan Losses		Allowance to Total Loans
Loans Individually Evaluated
One- to four-family first mortgage	$	—	$	—	—	%
Home equity loans and lines	—		—		—
Commercial real estate	3,957		201		5.08
Construction and land	147		123		83.67
Multi-family residential	—		—		—
Commercial and industrial	112		95		84.82
Consumer	—		—		—
Total	$	4,216	$	419	9.94	%

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.

At March 31, 2024 and December 31, 2023, loans classified as substandard totaled $35.1 million and $28.2 million, respectively. There were no assets classified as doubtful at either date. For additional information, refer to Note 5 to the Consolidated Financial Statements. The $7.0 million, or 24.7%, increase in substandard loans at March 31, 2024 compared to December 31, 2023 was primarily due to two credit relationships being downgraded, partially offset by loan payoffs and improvements in other classified loans.

The following tables provide a summary of loans classified as special mention and substandard as of the dates indicated.


(dollars in thousands)	March 31, 2024		December 31, 2023		Increase/(Decrease)
Special Mention Loans
One- to four-family first mortgage	$	865	$	868	$	(3)	(0.3)	%
Home equity loans and lines	—		—		—		—
Commercial real estate	—		—		—		—
Construction and land	6,565		5,874		691		11.8
Multi-family residential	—		—		—		—
Commercial and industrial	1,148		1,186		(38)		(3.2)
Consumer	—		—		—		—
Total special mention loans	$	8,578	$	7,928	$	650	8.2	%


(dollars in thousands)	March 31, 2024		December 31, 2023		Increase/(Decrease)
Substandard Loans
One- to four-family first mortgage	$	6,306	$	2,569	$	3,737	145.5	%
Home equity loans and lines	241		207		34		16.4
Commercial real estate	17,107		14,631		2,476		16.9
Construction and land	4,967		5,228		(261)		(5.0)
Multi-family residential	4,433		3,503		930		26.5
Commercial and industrial	1,796		1,741		55		3.2
Consumer	278		289		(11)		(3.8)
Total substandard loans	$	35,128	$	28,168	$	6,960	24.7	%

Total nonperforming loans increased by $11.5 million, or 130.9%, to $20.3 million at March 31, 2024, compared to $8.8 million at December 31, 2023. The primary reason for the increase was two loan relationships with an aggregate outstanding balance of $9.7 million at March 31, 2024 that became nonperforming during the first quarter of 2024. The first relationship is a $5.0 million construction and land loan for the construction of two multi-family, 15 condominium units to be sold and three commercial spaces for lease in Bay St. Louis, Mississippi that were more than 90-days past due and still accruing at March 31. 2024. There have been delays in the developer’s receipt of necessary certificates of occupancy which impeded its ability to sell the units and bring the loan current. Recently, the developer has begun receiving the certificates of occupancy and entered into purchase agreements on two of the units. Upon such sales, the loans were brought current, and the outstanding balance of this relationship has been reduced by $170,000 since March 31, 2024. We do not anticipate any loss on this relationship. The second relationship that was the primary reason for our increase in nonperforming loans is a $4.7 million relationship which was placed on non-accrual status during the first quarter and is secured by 17 residential units in eight investment properties in New Orleans and have a loan-to-value ratio of approximately 65%. We have commenced foreclosure proceedings on this relationship and do not expect any loss.

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. Management maintains, based on current and forecasted information, an ACL that reflects a current estimate of expected credit losses for the estimated life of the loan portfolio at reporting periods subsequent to the adoption date. For all reporting periods, actual losses are uncertain and dependent upon future events and, as such, further additions to the level of ACL may become necessary.

The following table sets forth the composition of the Company’s nonperforming assets as of the dates indicated.


	March 31, 2024						December 31, 2023
(dollars in thousands)	Originated		Acquired(1)		Total		Originated		Acquired(1)		Total
Nonaccrual loans:
Real estate loans:
One- to four-family first mortgage	$	4,266	$	1,529	$	5,795	$	528	$	1,072	$	1,600
Home equity loans and lines	179		63		242		143		65		208
Commercial real estate	5,300		2,450		7,750		2,691		2,512		5,203
Construction and land	883		37		920		1,136		45		1,181
Multi-family residential	—		—		—		—		—		—
Other loans:
Commercial and industrial	385		1		386		298		33		331
Consumer	219		59		278		227		64		291


Total nonaccrual loans	11,232	4,139	15,371		5,023	3,791	8,814
Accruing loans 90 days or more past due	4,978	—	4,978		—	—	—
Total nonperforming loans	16,210	4,139	20,349		5,023	3,791	8,814
Foreclosed assets and ORE	1,539	62	1,601		1,495	80	1,575
Total nonperforming assets	17,749	4,201	21,950		6,518	3,871	10,389



Nonperforming loans to total loans			0.78	%			0.34	%
Nonperforming loans to total assets			0.61	%			0.27	%
Nonperforming assets to total assets			0.65	%			0.31	%

(1)Nonaccrual acquired loans include PCD loans of $1.4 million and $1.4 million at March 31, 2024 and December 31, 2023, respectively.

Foreclosed assets and ORE includes real property and other assets that have been acquired as a result of foreclosure, and real property no longer used in the Bank's business. Foreclosed assets and ORE are classified as such until sold or disposed. Foreclosed assets are recorded at fair value less estimated selling costs based on third party property valuations which are obtained at the time the asset is repossessed and periodically until the property is liquidated. ORE is recorded at the lower of its net book value or fair value at the date of transfer to ORE. Foreclosed assets and ORE holding costs are charged to expense. Gains and losses on the sale of foreclosed assets and ORE are charged to operations, as incurred. Costs associated with acquiring and improving a foreclosed property or ORE are capitalized to the extent that the carrying value does not exceed fair value less estimated selling costs.

Investment Securities

The Company’s investment securities portfolio totaled $422.9 million as of March 31, 2024, a decrease of $12.1 million, or 2.8%, from December 31, 2023. During the first quarter of 2024, the Company had no gain or losses related to the sale of available-for-sale investment securities compared to a net loss of $249,000 during the first quarter of 2023. At March 31, 2024, the Company had a net unrealized loss on its available for sale investment securities portfolio of $46.6 million, compared to a net unrealized loss of $43.4 million at December 31, 2023. The Company’s investment securities portfolio had an effective duration of 4.2 years at March 31, 2024 and December 31, 2023.

The following table summarizes activity in the Company’s investment securities portfolio during the three months ended March 31, 2024.


(dollars in thousands)	Available for Sale		Held to Maturity
Balance, December 31, 2023	$	433,926	$	1,065
Purchases	—		—
Sales	—		—
Principal maturities, prepayments and calls	(8,879)		—
Amortization of premiums and accretion of discounts	(74)		—
Decrease in market value	(3,160)		—
Balance, March 31, 2024	$	421,813	$	1,065

Funding Sources

Deposits

Deposits totaled $2.7 billion at March 31, 2024, an increase of $52.0 million, or 1.9%, compared to December 31, 2023. The following table summarizes the changes in the Company’s deposits from December 31, 2023 to March 31, 2024.


(dollars in thousands)	March 31, 2024		December 31, 2023		Increase/(Decrease)
Demand deposit	$	742,177	$	744,424	$	(2,247)	(0.3)	%
Savings	228,047		231,624		(3,577)		(1.5)
Money market	423,521		408,024		15,497		3.8
NOW	630,962		641,818		(10,856)		(1.7)
Certificates of deposit	697,871		644,734		53,137		8.2
Total deposits	$	2,722,578	$	2,670,624	$	51,954	1.9	%

The average rate paid on interest-bearing deposits was 2.52% for the first quarter of 2024, up 175 bps compared to the first quarter of 2023. At March 31, 2024, certificates of deposit maturing within the next 12 months totaled $640.2 million.

We obtain most of our deposits from individuals, small businesses and public funds in our market areas. The following table presents our deposits per customer type for the periods indicated.


	March 31, 2024	December 31, 2023
Individuals	54%	53%
Small businesses	36	38
Public funds	8	7
Broker	2	2
Total	100%	100%

The total amounts of our uninsured deposits (deposits in excess of $250,000, as calculated in accordance with FDIC regulations) were $781.9 million at March 31, 2024 and $748.6 million at December 31, 2023. Public funds in excess of the FDIC insurance limits are fully collateralized.

Subordinated Debt

On June 30, 2022, the Company issued $55.0 million in aggregate principal amount of its 5.75% Fixed-to-Floating Rate Subordinated Notes due 2032. The Notes were issued at a price equal to 100% of the aggregate principal amount. The Notes have a stated maturity date of June 30, 2032 and bear interest at a fixed rate of 5.75% per year from and including the issue date to but excluding June 30, 2027. From June 30, 2027, the Notes will bear interest at a floating rate equal to the then current three-month term secured overnight financing rate (“SOFR”), plus 282 basis points. The Notes may be redeemed by the Company, in whole or in part, on or after June 30, 2027. The Notes are intended to qualify as Tier 2 capital for regulatory purposes.

The carrying value of subordinated debt was $54.3 million and $54.2 million at March 31, 2024 and December 31, 2023, respectively. The subordinated debt was recorded net of issuance costs and amortized using the straight-line method over five years.

Other Borrowings

Federal Home Loan Bank Advances

The average balance of total FHLB advances was $71.7 million for the first quarter of 2024, down $143.8 million compared to the first quarter of 2023.

Shareholders’ Equity

Total shareholders’ equity increased $4.8 million, or 1.3%, from $367.4 million at December 31, 2023 to $372.3 million at March 31, 2024. Shareholders' equity increased primarily due to net income of $9.2 million, which was partially offset by an increase in accumulated other comprehensive loss on available for sale investment securities, cash dividends and share repurchases during the three months ended March 31, 2024.

At March 31, 2024, the Company and the Bank had regulatory capital amounts that were well in excess of regulatory requirements. The following table presents actual and required capital ratios for the Company and the Bank under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of March 31, 2024 based on the required capital levels as of January 1, 2019 when the Basel III Capital Rules were fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.


	Actual				Minimum Capital Required – Basel III Fully Phased-In				To Be Well Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Company:
Tier 1 risk-based capital	319,767		11.57		234,825		8.50		N/A		N/A
Total risk-based capital	407,916		14.77		290,078		10.50		N/A		N/A
Tier 1 leverage capital	319,767		9.85		129,915		4.00		N/A		N/A

Bank:
Common equity Tier 1 capital (to risk-weighted assets)	$	362,461	13.16	%	$	192,817	7.00	%	$	179,045	6.50	%
Tier 1 risk-based capital	362,461		13.16		234,135		8.50		220,363		8.00
Total risk-based capital	396,316		14.39		289,226		10.50		275,453		10.00
Tier 1 leverage capital	362,461		11.19		129,584		4.00		161,980		5.00

LIQUIDITY AND ASSET/LIABILITY MANAGEMENT

Liquidity Management

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

The Company uses its liquidity to fund existing and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to invest in other interest-earning assets and to meet operating expenses. At March 31, 2024, certificates of deposit maturing within the next 12 months totaled $640.2 million. Based upon historical experience, the Company anticipates that a significant portion of the maturing certificates of deposit will be redeposited with us.

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

advances. For the three months ended March 31, 2024, the average balance of outstanding FHLB advances was $71.7 million. At March 31, 2024, the Company had $38.6 million in total outstanding FHLB advances.

The following table summarizes the Company's primary and secondary sources of liquidity which were available at March 31, 2024.


(dollars in thousands)	March 31, 2024
Cash and cash equivalents	$	90,475
Unencumbered investment securities, amortized cost	86,091
FHLB advance availability	1,107,888
Amounts available from unsecured lines of credit	55,000

Federal Reserve discount window availability	500
Total primary and secondary sources of available liquidity	$	1,339,954

Asset/Liability Management

The objective of asset/liability management is to implement strategies for the funding and deployment of the Company’s financial resources that are expected to maximize soundness and profitability over time at acceptable levels of risk. Interest rate sensitivity is the potential impact of changing rate environments on both net interest income and cash flows. The Company measures its interest rate sensitivity over the near term primarily by running net interest income simulations. Our interest rate sensitivity also is monitored by management through the use of a model which generates estimates of the change in its net interest income over a range of interest rate scenarios. Based on the Company’s interest rate risk model, the table below sets forth the results of immediate and sustained changes in interest rates as of March 31, 2024.


Shift in Interest Rates (in bps)						% Change in Projected Net Interest Income


+200						3.4%
+100						1.8%
-100						(2.8)%
-200						(5.2)%

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

During the second quarter of 2020 and 2023, the Company entered into certain interest rate swap agreements as part of its interest rate risk management strategy. The Company’s objectives in using interest rate derivatives are to manage its exposure to interest rate movements. During 2024 and 2023, such derivatives were used to hedge the variable cost associated with existing variable rate liabilities. Refer to Note 6 of the Consolidated Financial Statements for more information on the effects of the derivative financial instruments on the consolidated financial statements.

To meet the financing needs of its customers, the Company issues financial instruments which represent conditional obligations that are not recognized, wholly or in part, in the statements of financial condition. These financial instruments include commitments to extend credit and standby letters of credit. Such instruments expose the Company to varying degrees of credit and interest rate risk in much the same way as funded loans. The same credit policies are used in these commitments as for on-balance sheet instruments. At both March 31, 2024 and December 31, 2023, the Company's allowance for credit losses on unfunded commitments totaled $2.6 million.

The following table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans as of the periods indicated.


	Contract Amount
(dollars in thousands)	March 31, 2024		December 31, 2023
Standby letters of credit	$	6,693	$	7,289
Available portion of lines of credit	373,602		368,398
Undisbursed portion of loans in process	203,760		221,997
Commitments to originate loans	174,534		127,076

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

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

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

RESULTS OF OPERATIONS

Net income for the first quarter of 2024 was $9.2 million, down $2.1 million compared to the first quarter of 2023. Diluted EPS for the first quarter of 2024 was $1.14, down $0.25 compared to the first quarter of 2023.

During the three months ended March 31, 2024, the Company provisioned $141,000 to the allowance for loan losses primarily due to loan growth. During the three months ended March 31, 2023, the Company provisioned $814,000 to the allowance for loan losses primarily due to loan growth.

Net Interest Income

Net interest income is the difference between the interest income earned on interest-earning assets, such as loans and investment securities, and the interest expense paid on interest-bearing liabilities, such as deposits and borrowings. The Company’s net interest income is largely determined by our net interest spread, which is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities, and the relative amounts of interest-earning assets and interest-bearing liabilities. The Company’s tax-equivalent net interest spread was 2.81% and 3.72% for the quarters ended March 31, 2024 and 2023, respectively.

Net interest income totaled $28.9 million for the first quarter of 2024, down $2.7 million, or 8.5%, compared to the first quarter of 2023.

The Company’s tax-equivalent net interest margin, which is net interest income as a percentage of average interest-earning assets, was 3.64% and 4.18% for the quarters ended March 31, 2024 and 2023, respectively. For the same periods, the average loan yield was 6.18% and 5.67%, respectively.

Acquired loan discount accretion included in interest income totaled $525,000 and $668,000 for the quarters ended March 31, 2024 and 2023, respectively.

The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rate; (iii) net interest income; (iv) net interest spread; and (v) net interest margin. Information is based on average monthly balances during the indicated periods. Taxable equivalent yields are calculated using a marginal tax rate of 21%.


	Three Months Ended March 31,
	2024						2023
(dollars in thousands)	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate
Interest-earning assets:
Loans receivable(1)	$	2,602,941	$	40,567	6.18	%	$	2,437,770	$	34,498	5.67	%
Investment securities
Taxable	456,246		2,715		2.38		507,952		2,998		2.36
Tax-exempt (TE)	16,332		73		2.26		27,243		144		2.67
Total investment securities	472,578		2,788		2.38		535,195		3,142		2.38
Other interest-earning assets	57,103		771		5.43		53,456		475		3.60
Total interest-earning assets (TE)	3,132,622		$	44,126	5.60		3,026,421		$	38,115	5.05
Noninterest-earning assets	201,261						193,435
Total assets	$	3,333,883					$	3,219,856
Interest-bearing liabilities:
Deposits:
Savings, checking and money market	$	1,269,293	$	4,800	1.52	%	$	1,349,185	$	2,048	0.62	%


	Three Months Ended March 31,
	2024						2023
(dollars in thousands)	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate
Certificates of deposit	668,353		7,332		4.41		349,683		1,192		1.38
Total interest-bearing deposits	1,937,646		12,132		2.52		1,698,868		3,240		0.77
Other borrowings	125,979		1,486		4.74		5,539		53		3.89
Subordinated debt	54,268		845		6.22		54,041		851		6.30
Short-term FHLB advances	31,831		436		5.42		191,734		2,259		4.71
Long term FHLB advances	39,873		326		3.27		23,744		117		1.97
Total interest-bearing liabilities	2,189,597		$	15,225	2.79		1,973,926		$	6,520	1.33
Noninterest-bearing liabilities	773,525						906,619
Total liabilities	2,963,122						2,880,545
Shareholders’ equity	370,761						339,311
Total liabilities and shareholders' equity	$	3,333,883					$	3,219,856
Net interest-earning assets	$	943,025					$	1,052,495
Net interest spread (TE)			$	28,901	2.81	%			$	31,595	3.72	%
Net interest margin (TE)					3.64	%					4.18	%

(1)Nonperforming loans are included in the respective average loan balances, net of deferred fees, discounts and loans in process.

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


	Three Months Ended March 31,
	2024 Compared to 2023
	Change Attributable To
(dollars in thousands)	Rate		Volume		Increase/ (Decrease)
Interest income:
Loans receivable	$	3,400	$	2,669	$	6,069
Investment securities	10		(364)		(354)
Other interest-earning assets	254		42		296
Total interest income	3,664		2,347		6,011
Interest expense:
Savings, checking and money market accounts	2,837		(85)		2,752
Certificates of deposit	3,842		2,298		6,140
Other borrowings	139		1,294		1,433
Subordinated debt	(10)		4		(6)
FHLB advances	303		(1,917)		(1,614)
Total interest expense	7,111		1,594		8,705
Increase in net interest income	$	(3,447)	$	753	$	(2,694)

Noninterest Income

Noninterest income for the first quarter of 2024 totaled $3.5 million, up $238,000, or 7.2%, from $3.3 million earned for the same period in 2023. Noninterest income increased over the prior comparable quarter primarily due to an increase in other income of $131,000 and the absence of a loss on sale of securities totaling $249,000 that occurred during the first quarter of 2023, which were partially offset with a decrease in bank card fees of $212,000.

Noninterest Expense

Noninterest expense for the first quarter of 2024 totaled $20.9 million, up $928,000, or 4.7%, from the first quarter of 2023. Noninterest expense increased over the prior comparable quarter primarily due to increases in foreclosed assets expense (up $804,000 primarily due to the absence of a $739,000 recovery of a previous loss on a OREO sale that occurred during the first quarter of 2023), marketing and advertising (up $159,000), and professional services (up $111,000), which were partially offset by the absence of any provision for credit losses on unfunded commitments in the 2024 period.

Income Taxes

Income tax expense for the three months ended March 31, 2024 totaled $2.2 million compared to $2.8 million for the three months ended March 31, 2023. Income tax expense decreased over the prior comparable quarter primarily due to decreased taxable earnings in the first quarter of 2024. The Company's effective tax rates for the first quarters of 2024 and 2023 were 19.6% and 20.0%, respectively.

CRITICAL ACCOUNTING ESTIMATES

SEC guidance requires disclosure of “critical accounting estimates.” The SEC defines “critical accounting estimates” as those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant.

We follow financial accounting and reporting policies that are in accordance with accounting principles generally accepted in the United States. Our accounting policies are discussed in detail in Note 1 - Basis of Presentation in the accompanying notes to the consolidated financial statements included elsewhere in this report and in our 2023 Annual Report on Form 10-K. Not all significant accounting policies require management to make difficult, subjective or complex judgments. However, management believes the policy noted below meets the SEC’s definition of a critical accounting policy.

Allowance for Credit Losses

Management considers the policies related to the allowance for credit losses as the most critical to the financial statement presentation. The total allowance for credit losses includes activity related to allowances calculated in accordance with Accounting Standards Codification 326, Credit Losses. The allowance for credit losses is established through a provision for credit losses charged to current earnings. The amount maintained in the allowance reflects management’s continuing evaluation of the credit losses expected to be recognized over the life of the loans in our portfolio. The allowance for credit losses on loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. For purposes of determining the allowance for credit losses, the loan portfolio is segregated by product types in order to recognize differing risk profiles among categories. Loans that do not share risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative adjustments, including, but not limited to, changes in current and expected future economic conditions, changes in industry experience and industry loan concentrations, changes in the volume and severity of nonperforming assets, changes in lending policies and personnel and changes in the competitive and regulatory environment of the banking industry. Loans that do not share similar risk characteristics are individually evaluated and are excluded from the pooled loan analysis.


Item 3.			Quantitative and Qualitative Disclosures About Market Risk.

Quantitative and qualitative disclosures about market risk are presented in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset/Liability Management and Market Risk”. Additional information at March 31, 2024 is included herein under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Asset/Liability Management”.


Item 4.			Controls and Procedures.

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

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the first quarter of 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1.			Legal Proceedings.

Not applicable.


Item 1A.			Risk Factors.

There have been no material changes from the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission.


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

(a) Not applicable.

(b) Not applicable.

(c) The Company’s purchases of its common stock made during the quarter ended March 31, 2024 consisted of stock repurchases under the Company’s approved plans and are set forth in the following table.


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plan or Programs(1)
January 1 – January 31, 2024	10,000	$	42.28	10,000	426,446
February 1 – February 29, 2024	34	35.68		34	426,412
March 1 – March 31, 2024	11,269	35.68		11,269	415,143
Total	21,303	$	38.78	21,303	415,143

(1)On October 18, 2023, the Company announced the approval of a new repurchase program (the “2023 Repurchase Plan”). Under the 2023 Repurchase Plan, the Company may purchase up to an additional 405,000 shares, or approximately 5% of the Company’s outstanding common stock. Share repurchases under the 2023 Repurchase Plan may commence upon the completion of the Company’s 2021 Repurchase Plan.


Item 3.			Defaults Upon Senior Securities.

(a) Not applicable.

(b) Not applicable.


Item 4.			Mine Safety Disclosures.

Not applicable.


Item 5.			Other Information.

(a) Not applicable.

(b) Not applicable.

(c) During the fiscal quarter ended March 31, 2024, none of our directors or executive officers adopted, terminated or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement.


Item 6.			Exhibits and Financial Statement Schedules.

No.

Description

Location

4.1

Indenture, dated June 30, 2022, by and between Home Bancorp, Inc. and UMB Bank, National Association, as trustee.

(incorporated by reference from the like-numbered exhibit included in Home Bancorp’s Current Report on Form 8-K, dated as of June 30, 2022 and filed July 1, 2022 (SEC File No. 001-34190))

31.1

Rule 13(a)-14(a) Certification of the Chief Executive Officer

Filed herewith

31.2

Rule 13(a)-14(a) Certification of the Chief Financial Officer

Filed herewith

32.0

Section 1350 Certification

Filed herewith

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definitions Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

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

HOME BANCORP, INC.

May 3, 2024

By:

/s/ John W. Bordelon

John W. Bordelon

Chairman of the Board, President and Chief Executive Officer

May 3, 2024

By:

/s/ David T. Kirkley

David T. Kirkley

Senior Executive Vice President and Chief Financial Officer

May 3, 2024

By:

/s/ Mary H. Hopkins

Mary H. Hopkins

Home Bank, N. A. Senior Vice President and Director of Financial Management