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: September 30, 2017

or

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

For the transition period from                      to                     

Commission File Number: 001-34190

HOME BANCORP, INC.

(Exact name of Registrant as specified in its charter)

Louisiana	71-1051785
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
503 Kaliste Saloom Road, Lafayette, Louisiana	70508
(Address of Principal Executive Offices)	(Zip Code)

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

Not Applicable

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐

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

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

At October 31, 2017, the registrant had 7,445,716 shares of common stock, $0.01 par value, outstanding.

HOME BANCORP, INC. and SUBSIDIARY

TABLE OF CONTENTS

		Page
PART I
Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Financial Condition		1
	Consolidated Statements of Income		2
	Consolidated Statements of Comprehensive Income		3
	Consolidated Statements of Changes in Shareholders’ Equity		4
	Consolidated Statements of Cash Flows		5
	Notes to Unaudited Consolidated Financial Statements		6
Item 2.	Managements’ Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		42
Item 4.	Controls and Procedures		42
PART II
Item 1.	Legal Proceedings		43
Item 1A.	Risk Factors		43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		43
Item 3.	Defaults Upon Senior Securities		43
Item 4.	Mine Safety Disclosures		43
Item 5.	Other Information		43
Item 6.	Exhibits		43
SIGNATURES			44

i

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	(Unaudited)			(Audited)
	September 30,			December 31,
	2017			2016
Assets
Cash and cash equivalents	$	51,625,554		$	29,314,741
Interest-bearing deposits in banks		1,191,000			1,884,000
Investment securities available for sale, at fair value		202,196,322			183,729,857
Investment securities held to maturity (fair values of $13,246,498 and $13,362,062, respectively)		13,117,994			13,365,479
Mortgage loans held for sale		5,617,481			4,156,186
Loans, net of unearned income		1,227,393,063			1,227,833,309
Allowance for loan losses		(13,423,922	)		(12,510,708	)
Total loans, net of unearned income and allowance for loan losses		1,213,969,141			1,215,322,601
Office properties and equipment, net		38,700,323			39,566,639
Cash surrender value of bank-owned life insurance		20,510,427			20,149,553
Accrued interest receivable and other assets		40,433,390			49,242,977
Total Assets	$	1,587,361,632		$	1,556,732,033
Liabilities
Deposits:
Noninterest-bearing	$	272,476,799		$	296,519,496
Interest-bearing		1,047,235,987			951,552,957
Total deposits		1,319,712,786			1,248,072,453
Short-term Federal Home Loan Bank (FHLB) advances		—			40,000,000
Long-term Federal Home Loan Bank (FHLB) advances		64,804,079			78,533,173
Accrued interest payable and other liabilities		10,219,841			10,283,383
Total Liabilities		1,394,736,706			1,376,889,009
Shareholders’ Equity
Preferred stock, $0.01 par value - 10,000,000 shares authorized; none issued		—			—
Common stock, $0.01 par value - 40,000,000 shares authorized; 7,412,234 and 7,350,102 shares issued and outstanding, respectively		74,122			73,502
Additional paid-in capital		81,376,252			79,425,604
Unallocated common stock held by:
Employee Stock Ownership Plan (ESOP)		(3,927,780	)		(4,195,590	)
Recognition and Retention Plan (RRP)		(106,010	)		(119,633	)
Retained earnings		115,129,834			104,647,375
Accumulated other comprehensive income		78,508			11,766
Total Shareholders’ Equity		192,624,926			179,843,024
Total Liabilities and Shareholders’ Equity	$	1,587,361,632		$	1,556,732,033

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

1

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Interest Income
Loans, including fees	$	16,336,443		$	15,889,132		$	48,747,075		$	47,760,159
Investment securities:
Taxable interest		982,833			722,238			2,807,329			2,295,632
Tax-exempt interest		151,789			166,968			470,807			510,493
Other investments and deposits		194,664			68,860			402,555			195,449
Total interest income		17,665,729			16,847,198			52,427,766			50,761,733
Interest Expense
Deposits		1,396,087			912,756			3,538,017			2,763,761
Short-term FHLB advances		—			53,829			94,606			143,412
Long-term FHLB advances		313,293			341,693			972,141			1,040,522
Total interest expense		1,709,380			1,308,278			4,604,764			3,947,695
Net interest income		15,956,349			15,538,920			47,823,002			46,814,038
Provision for loan losses		660,447			800,000			1,117,278			2,700,000
Net interest income after provision for loan losses		15,295,902			14,738,920			46,705,724			44,114,038
Noninterest Income
Service fees and charges		1,055,631			1,045,591			2,982,992			3,083,858
Bank card fees		717,894			658,799			2,168,015			1,936,305
Gain on sale of loans, net		303,120			418,276			918,731			1,205,815
Income from bank-owned life insurance		120,508			120,618			360,874			361,297
(Loss) gain on the closure or sale of assets, net		(42,835	)		—			(147,323	)		640,580
Other income		138,694			271,392			999,475			1,301,616
Total noninterest income		2,293,012			2,514,676			7,282,764			8,529,471
Noninterest Expense
Compensation and benefits		7,061,889			6,723,365			20,729,750			20,845,310
Occupancy		1,219,173			1,307,336			3,711,301			3,939,275
Marketing and advertising		287,340			193,483			801,743			649,498
Data processing and communication		927,563			1,133,136			3,076,073			3,824,169
Professional services		406,431			244,278			819,319			797,829
Forms, printing and supplies		119,380			137,336			409,823			487,794
Franchise and shares tax		193,323			219,773			587,106			659,318
Regulatory fees		317,052			319,482			952,327			971,197
Foreclosed assets, net		(70,323	)		(472,274	)		(230,194	)		(46,472	)
Other expenses		878,726			836,706			2,564,896			2,711,401
Total noninterest expense		11,340,554			10,642,621			33,422,144			34,839,319
Income before income tax expense		6,248,360			6,610,975			20,566,344			17,804,190
Income tax expense		2,158,307			2,250,866			6,984,794			6,077,908
Net Income	$	4,090,053		$	4,360,109		$	13,581,550		$	11,726,282
Earnings per share:
Basic	$	0.58		$	0.63		$	1.95		$	1.72
Diluted	$	0.56		$	0.61		$	1.88		$	1.65
Cash dividends declared per common share	$	0.14		$	0.12		$	0.41		$	0.32

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

2

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Net Income	$	4,090,053		$	4,360,109		$	13,581,550		$	11,726,282
Other Comprehensive Income
Unrealized gain on investment securities	$	(59,967	)	$	(626,747	)	$	102,680		$	1,126,558
Tax effect		20,988			219,361			(35,938	)		(394,296	)
Other comprehensive income, net of taxes	$	(38,979	)	$	(407,386	)	$	66,742		$	732,262
Comprehensive Income	$	4,051,074		$	3,952,723		$	13,648,292		$	12,458,544

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

3

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

																Accumulated
				Additional			Unallocated			Unallocated						Other
	Common			Paid-in			Common Stock			Common Stock			Retained			Comprehensive
	Stock			Capital			Held by ESOP			Held by RRP			Earnings			Income		Total
Balance, December 31, 2015(1)	$	72,399		$	76,948,914		$	(4,552,670	)	$	(158,590	)	$	91,864,543		$	871,758	$	165,046,354
Net income														11,726,282					11,726,282
Other comprehensive income																	732,262		732,262
Purchase of Company’s common shares at cost, 12,091 shares		(121	)		(121,159	)								(214,592	)				(335,872	)
Cash dividends declared, $0.32 per share														(2,109,790	)				(2,109,790	)
Common stock issued under incentive plans, net of shares surrendered in payment, including tax benefit 3,877 shares		39			3,442									(9,221	)				(5,740	)
Exercise of stock options		902			1,175,117														1,176,019
ESOP shares released for allocation					591,341			267,810											859,151
Restricted stock vesting					(11,310	)					16,849								5,539
Share-based compensation cost					267,413														267,413
Balance, September 30, 2016	$	73,219		$	78,853,758		$	(4,284,860	)	$	(141,741	)	$	101,257,222		$	1,604,020	$	177,361,618
Balance, December 31, 2016(1)	$	73,502		$	79,425,604		$	(4,195,590	)	$	(119,633	)	$	104,647,375		$	11,766	$	179,843,024
Net income														13,581,550					13,581,550
Other comprehensive income																	66,742		66,742
Purchase of Company’s common shares at cost, 1,233 shares		(14	)		(11,948	)								(36,229	)				(48,191	)
Cash dividends declared, $0.41 per share														(3,027,826	)				(3,027,826	)
Common stock issued under incentive plans, net of shares surrendered in payment, including tax benefit 7,905 shares		79			19,854									(35,036	)				(15,103	)
Exercise of stock options		555			650,212														650,767
ESOP shares released for allocation					915,263			267,810											1,183,073
Restricted stock vesting					(5,601	)					13,623								8,022
Share-based compensation cost					382,868														382,868
Balance, September 30, 2017	$	74,122		$	81,376,252		$	(3,927,780	)	$	(106,010	)	$	115,129,834		$	78,508	$	192,624,926

⁽¹⁾  Balances as of December 31, 2015 and December 31, 2016 are audited.

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

4

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	For the Nine Months Ended
	September 30,
	2017			2016
Cash flows from operating activities:
Net income	$	13,581,550		$	11,726,282
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,117,278			2,700,000
Depreciation		1,439,259			1,334,181
Amortization of purchase accounting valuations and intangibles		3,495,744			2,409,426
Net amortization of mortgage servicing asset		150,014			190,558
Federal Home Loan Bank stock dividends		(83,100	)		(63,200	)
Net amortization of premium on investments		1,269,454			1,185,643
Gain on loans sold, net		(918,731	)		(1,205,815	)
Proceeds, including principal payments, from loans held for sale		94,171,150			119,140,089
Originations of loans held for sale		(94,713,714	)		(122,926,413	)
Non-cash compensation		1,565,941			1,126,564
Deferred income tax benefit		(315,105	)		(809,823	)
Decrease (increase) in interest receivable and other assets		1,459,376			290,256
Increase in cash surrender value of bank-owned life insurance		(360,874	)		(361,298	)
Decrease in accrued interest payable and other liabilities		(63,542	)		(5,025,195	)
Net cash provided by operating activities		21,794,700			9,711,255
Cash flows from investing activities:
Purchases of securities available for sale		(48,408,171	)		(21,751,932	)
Purchases of securities held to maturity		—			—
Proceeds from maturities, prepayments and calls on securities available for sale		29,022,417			27,705,751
Proceeds from maturities, prepayments and calls on securities held to maturity		—			235,000
Net (increase) decrease in loans		(2,516,314	)		(10,845,158	)
Reimbursement from FDIC for covered assets		141,635			51,128
Decrease in interest bearing deposits in other banks		693,000			3,014,585
Proceeds from sale of repossessed assets		2,632,000			883,798
Purchases of office properties and equipment		(1,360,036	)		(3,399,917	)
Proceeds from sale of properties and equipment		639,770			4,335,095
Proceeds from redemption of Federal Home Loan Bank stock		4,180,100			—
Net cash (used in) provided by investing activities		(14,975,599	)		228,350
Cash flows from financing activities:
Increase (decrease) in deposits		71,644,739			(23,308,435	)
Borrowings on Federal Home Loan Bank advances		130,750,000			2,496,429,496
Repayments of Federal Home Loan Bank advances		(184,462,674	)		(2,482,629,802	)
Purchase of Company’s common stock		(48,191	)		(335,872	)
Proceeds from exercise of stock options		650,767			1,176,019
Issuance of stock under incentive plans		(15,103	)		(5,740	)
Payment of dividends on common stock		(3,027,826	)		(2,109,790	)
Net cash provided by (used in) financing activities		15,491,712			(10,784,124	)
Net change in cash and cash equivalents		22,310,813			(844,519	)
Cash and cash equivalents at beginning of year		29,314,741			24,797,599
Cash and cash equivalents at end of period	$	51,625,554		$	23,953,080

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

5

HOME BANCORP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Home Bancorp, Inc. (the “Company”) were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in shareholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three and nine month periods ended September 30, 2017 are not necessarily indicative of the results which may be expected for the entire fiscal year. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2016.

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

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

2. Recent Accounting Pronouncements

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”. The ASU amendments include changes related to how certain equity investments are measured, recognize changes in the fair value of certain financial liabilities measured under the fair value option, and disclose and present financial assets and liabilities on the Company’s consolidated financial statements. Additionally, the ASU will also require entities to present financial assets and financial liabilities separately, grouped by measurement category and form of financial asset in the statement of financial position or in the accompanying notes to the financial statements. Entities will also no longer have to disclose the methods and significant assumptions for financial instruments measured at amortized cost, but will be required to measure such instruments under the “exit price” notion for disclosure purposes. The ASU is effective for annual and interim periods beginning after December 15, 2017. The Company assessed this amendment earlier this year and anticipates that it will have no material impact on its Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, “Conforming Amendments Related to Leases”. This ASU amends the codification regarding leases in order to increase transparency and comparability. The ASU requires companies to recognize lease assets and liabilities on the statement of condition and disclose key information about leasing arrangements. Upon implementation, lessee will recognize a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. The ASU is effective for annual and interim periods beginning after December 15, 2018. The Company is currently assessing the amendment but does not anticipate it will have a material impact on our Consolidated Financial Statements. Based on the Company’s preliminary assessment of its current leases, the impact to the Company’s consolidated balance sheet is estimated to be less than a 1% increase in assets and liabilities.

6

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”. The ASU requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net carrying value at the amount expected to be collected on the financial assets. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount of financial assets. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis is determined in a similar manner to other financial assets measured at amortized cost basis; however, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Only subsequent changes in the allowance for credit losses are recorded as a credit loss expense for these assets. Off-balance-sheet arrangements such as commitments to extend credit, guarantees, and standby letters of credit that and are not unconditionally cancellable are also within the scope of this amendment. Credit losses relating to debt securities should be recorded through an allowance for credit losses. This ASU is effective for fiscal years beginning after December 31, 2019. An entity will apply the amendments in this update on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently assessing this accounting standard and the implementation of a new software program during 2018 to assist in determining the impact to our Consolidated Financial Statements. It is too early to assess the impact that this guidance will have on our Consolidated Financial Statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. The amendments in this ASU clarify the proper classification for certain cash receipts and cash payments, including clarification on debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, among others. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently assessing the amendment but does not anticipate it will have a material impact on our Consolidated Financial Statements.

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

In April 2017, FASB issued ASU No. 2017-8, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities”. This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. The accounting for purchased callable debt securities held at a discount does not change under the new guidance. This ASU is effective for fiscal and interim periods beginning after December 15, 2018. The Company is currently assessing the amendment but does not anticipate it will have a material impact on our Consolidated Financial Statements.

3. Acquisition Activity

On August 23, 2017, the Company entered into a definitive agreement to merge with St. Martin Bancshares, Inc. (“St. Martin Bancshares”), the holding company of the 83-year-old St. Martin Bank & Trust Company (“St. Martin Bank”). Under the terms of the agreement, St. Martin Bancshares will be merged with and into the Company (the “Merger”), and St. Martin Bank will be merged with and into Home Bank, N.A.. Upon consummation of the Merger, shareholders of St. Martin Bancshares will receive 9.2839 shares of Home Bancorp common stock for each share of St. Martin Bancshares common stock (the “Stock Consideration”). In addition, immediately prior to the

7

closing of the Merger, St. Martin Bancshares will pay a special cash distribution of $94.00 per share to its shareholders (the “Special Distribution”). The closing price of Home Bancorp’s common stock on October 20, 2017 ($42.00 per share), the Stock Consideration plus the Special Distribution has a combined value of $483.92 per share to holders of St. Martin Bancshares common stock, or $100.4 million in the aggregate.

The merger, which is expected to be completed in the fourth quarter of 2017 or first quarter of 2018, remains subject to approval by the shareholders of the Company and St. Martin Bancshares, Inc., and the satisfaction of all other customary conditions. The Company has received all necessary regulatory approvals or non-objections necessary in order to consummate the merger. Upon completion of the merger, the combined company will have total assets of approximately $2.2 billion, $1.7 billion in loans and $1.8 billion in deposits. The Company incurred $247,000 in pre-tax merger-related expenses during the third quarter of 2017.

4. Investment Securities

Summary information regarding the Company’s investment securities classified as available for sale and held to maturity as of September 30, 2017 and December 31, 2016 is as follows.

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses				Fair Value
					Less Than 1 Year		Over 1 Year
September 30, 2017
Available for sale:
U.S. agency mortgage-backed	$	74,699	$	835	$	223	$	57	$	75,254
Collateralized mortgage obligations		100,666		108		517		384		99,873
Municipal bonds		18,202		292		1		—		18,493
U.S. government agency		8,509		74		7		—		8,576
Total available for sale	$	202,076	$	1,309	$	748	$	441	$	202,196
Held to maturity:
Municipal bonds	$	13,118	$	144	$	16	$	—	$	13,246
Total held to maturity	$	13,118	$	144	$	16	$	—	$	13,246
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses				Fair Value
					Less Than 1 Year		Over 1 Year
December 31, 2016
Available for sale:
U.S. agency mortgage-backed	$	78,361	$	938	$	368	$	—	$	78,931
Collateralized mortgage obligations		75,193		84		613		334		74,330
Municipal bonds		21,212		260		44		—		21,428
U.S. government agency		8,946		95		—		—		9,041
Total available for sale	$	183,712	$	1,377	$	1,025	$	334	$	183,730
Held to maturity:
Municipal bonds	$	13,365	$	69	$	72	$	—	$	13,362
Total held to maturity	$	13,365	$	69	$	72	$	—	$	13,362

The estimated fair value and amortized cost by contractual maturity of the Company’s investment securities as of September 30, 2017 are shown in the following tables. Securities are classified according to their contractual

8

maturities without consideration of principal amortization, potential prepayments or call options. The expected maturity of a security may differ from its contractual maturity because of prepayments or the exercise of call options. Accordingly, actual maturities may differ from contractual maturities.

(dollars in thousands)	One Year or Less		One Year to Five Years		Five to Ten Years		Over Ten Years		Total
Fair Value
Securities available for sale:
U.S. agency mortgage-backed	$	97	$	5,935	$	33,317	$	35,905	$	75,254
Collateralized mortgage obligations		—		1,732		6,659		91,482		99,873
Municipal bonds		1,541		9,560		6,864		528		18,493
U.S. government agency		1,002		5,001		2,573		—		8,576
Total available for sale	$	2,640	$	22,228	$	49,413	$	127,915		202,196
Securities held to maturity:
Municipal bonds	$	—	$	5,418	$	6,187	$	1,641	$	13,246
Total investment securities	$	2,640	$	27,646	$	55,600	$	129,556	$	215,442
(dollars in thousands)	One Year or Less		One Year to Five Years		Five to Ten Years		Over Ten Years		Total
Amortized Cost
Securities available for sale:
U.S. agency mortgage-backed	$	95	$	5,916	$	33,322	$	35,366	$	74,699
Collateralized mortgage obligations		—		1,722		6,720		92,224		100,666
Municipal bonds		1,536		9,403		6,758		505		18,202
U.S. government agency		1,000		4,995		2,514		—		8,509
Total available for sale	$	2,631	$	22,036	$	49,314	$	128,095	$	202,076
Securities held to maturity:
Municipal bonds	$	—	$	5,369	$	6,118	$	1,631	$	13,118
Total investment securities	$	2,631	$	27,405	$	55,432	$	129,726	$	215,194

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

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

As of September 30, 2017, 65 of the Company’s debt securities had unrealized losses totaling 1.1% of the individual securities’ amortized cost basis and 0.6% of the Company’s total amortized cost basis of the investment securities portfolio. At such date, 18 of the 65 securities had been in a continuous loss position for over 12 months. The 18 securities had an aggregate amortized cost basis of $22.9 million and an unrealized loss of $441,000 at September 30, 2017. Management has the intent and ability to hold these debt securities until maturity, or until anticipated recovery; hence, no declines in these 65 securities were deemed other-than-temporary at September 30, 2017.

9

As of September 30, 2017 and December 31, 2016, the Company had $102,401,000 and $91,773,000, respectively, of securities pledged to secure public deposits.

5. Earnings Per Share

Earnings per common share were computed based on the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	2017		2016		2017		2016
Numerator:
Net income available to common shareholders	$	4,090	$	4,360	$	13,582	$	11,726
Denominator:
Weighted average common shares outstanding		7,007		6,872		6,972		6,824
Effect of dilutive securities:
Restricted stock		3		4		3		4
Stock options		271		248		266		260
Weighted average common shares outstanding – assuming dilution		7,281		7,124		7,241		7,088
Basic earnings per common share	$	0.58	$	0.63	$	1.95	$	1.72
Diluted earnings per common share	$	0.56	$	0.61	$	1.88	$	1.65

Options on 77,024 and 91,372 shares of common stock were not included in the computation of diluted earnings per share for the three months ended September 30, 2017 and September 30, 2016, respectively, because the effect of these shares was anti-dilutive. Options on 60,849 and 64,549 shares of common stock were not included in the computation of diluted earnings per share for the nine months ended September 30, 2017 and September 30, 2016, respectively, because the effect of these shares was anti-dilutive.

6. Credit Quality and Allowance for Loan Losses

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

Originated Loans

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

Acquired Loans

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

10

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

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

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

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

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

	As of September 30, 2017
	Originated Loans
(dollars in thousands)	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Acquired Loans		Total
Allowance for loan losses:
One- to four-family first mortgage	$	1,553	$	—	$	59	$	1,612
Home equity loans and lines		713		348		62		1,123
Commercial real estate		4,604		—		77		4,681
Construction and land		1,677		—		7		1,684
Multi-family residential		351		—		—		351
Commercial and industrial		2,460		865		176		3,501
Consumer		469		—		3		472
Total allowance for loan losses	$	11,827	$	1,213	$	384	$	13,424

11

	As of September 30, 2017
	Originated Loans
(dollars in thousands)	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Acquired Loans(1)		Total
Recorded investment in loans:
One- to four-family first mortgage	$	193,987	$	—	$	139,655	$	333,642
Home equity loans and lines		53,836		932		35,356		90,124
Commercial real estate		367,243		23		98,286		465,552
Construction and land		122,788		—		1,766		124,554
Multi-family residential		30,635		—		15,497		46,132
Commercial and industrial		116,988		4,940		6,856		128,784
Consumer		37,398		—		1,207		38,605
Total loans	$	922,875	$	5,895	$	298,623	$	1,227,393
	As of December 31, 2016
	Originated Loans
(dollars in thousands)	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Acquired Loans		Total
Allowance for loan losses:
One- to four-family first mortgage	$	1,397	$	39	$	75	$	1,511
Home equity loans and lines		654		—		74		728
Commercial real estate		4,158		19		—		4,177
Construction and land		1,763		—		19		1,782
Multi-family residential		361		—		—		361
Commercial and industrial		2,579		737		123		3,439
Consumer		513		—		—		513
Total allowance for loan losses	$	11,425	$	795	$	291	$	12,511
	As of December 31, 2016
	Originated Loans
(dollars in thousands)	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Acquired Loans(1)		Total
Recorded investment in loans:
One- to four-family first mortgage	$	176,392	$	252	$	165,239	$	341,883
Home equity loans and lines		47,865		—		40,956		88,821
Commercial real estate		321,361		462		105,692		427,515
Construction and land		138,955		—		2,212		141,167
Multi-family residential		26,941		—		19,428		46,369
Commercial and industrial		126,791		4,844		8,175		139,810
Consumer		40,827		—		1,441		42,268
Total loans	$	879,132	$	5,558	$	343,143	$	1,227,833

⁽¹⁾ $9.3 million and $13.1 million in acquired loans were deemed to be acquired impaired loans and were accounted for under ASC 310-30 at September 30, 2017 and December 31, 2016, respectively.

12

A summary of activity in the allowance for loan losses for the nine months ended September 30, 2017 and September 30, 2016 follows.

	For the Nine Months Ended September 30, 2017
(dollars in thousands)	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Originated loans:
Allowance for loan losses:
One- to four-family first mortgage	$	1,436	$	—		$	—	$	117		$	1,553
Home equity loans and lines		654		(10	)		18		399			1,061
Commercial real estate		4,177		(4	)		—		431			4,604
Construction and land		1,763		—			—		(86	)		1,677
Multi-family residential		361		—			—		(10	)		351
Commercial and industrial		3,316		(358	)		203		164			3,325
Consumer		513		(58	)		5		9			469
Total allowance for loan losses	$	12,220	$	(430	)	$	226	$	1,024		$	13,040
Acquired loans:
Allowance for loan losses:
One- to four-family first mortgage	$	75	$	—		$	—	$	(16	)	$	59
Home equity loans and lines		74		—			—		(12	)		62
Commercial real estate		—		—			—		77			77
Construction and land		19		—			—		(12	)		7
Multi-family residential		—		—			—		—			—
Commercial and industrial		123		—			—		53			176
Consumer		—		—			—		3			3
Total allowance for loan losses	$	291	$	—		$	—	$	93		$	384
Total loans:
Allowance for loan losses:
One- to four-family first mortgage	$	1,511	$	—		$	—	$	101		$	1,612
Home equity loans and lines		728		(10	)		18		387			1,123
Commercial real estate		4,177		(4	)		—		508			4,681
Construction and land		1,782		—			—		(98	)		1,684
Multi-family residential		361		—			—		(10	)		351
Commercial and industrial		3,439		(358	)		203		217			3,501
Consumer		513		(58	)		5		12			472
Total allowance for loan losses	$	12,511	$	(430	)	$	226	$	1,117		$	13,424
	For the Nine Months Ended September 30, 2016
(dollars in thousands)	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Originated loans:
Allowance for loan losses:
One- to four-family first mortgage	$	1,372	$	—		$	—	$	32		$	1,404
Home equity loans and lines		536		(9	)		2		133			662
Commercial real estate		3,152		—			1		883			4,036
Construction and land		1,360		—			51		260			1,671
Multi-family residential		173		—			—		169			342
Commercial and industrial		2,010		(128	)		43		1,250			3,175
Consumer		571		(112	)		4		69			532
Total allowance for loan losses	$	9,174	$	(249	)	$	101	$	2,796		$	11,822

13

Acquired loans:
Allowance for loan losses:
One- to four-family first mortgage	$	92	$	—		$	—	$	8		$	100
Home equity loans and lines		224		—			—		(150	)		74
Commercial real estate		—		—			—		—			—
Construction and land		57		—			—		17			74
Multi-family residential		—		—			—		—			—
Commercial and industrial		—		—			94		29			123
Consumer		—		—			—		—			—
Total allowance for loan losses	$	373	$	—		$	94	$	(96	)	$	371
Total loans:
Allowance for loan losses:
One- to four-family first mortgage	$	1,464	$	—		$	—	$	40		$	1,504
Home equity loans and lines		760		(9	)		2		(17	)		736
Commercial real estate		3,152		—			1		883			4,036
Construction and land		1,417		—			51		277			1,745
Multi-family residential		173		—			—		169			342
Commercial and industrial		2,010		(128	)		137		1,279			3,298
Consumer		571		(112	)		4		69			532
Total allowance for loan losses	$	9,547	$	(249	)	$	195	$	2,700		$	12,193

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

	September 30, 2017
(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Originated loans:
One- to four-family first mortgage	$	191,783	$	367	$	1,837	$	—	$	193,987
Home equity loans and lines		52,588		292		1,888		—		54,768
Commercial real estate		357,342		746		9,178		—		367,266
Construction and land		121,459		215		1,114		—		122,788
Multi-family residential		30,635		—		—		—		30,635
Commercial and industrial		104,566		3,471		13,891		—		121,928
Consumer		36,955		122		321		—		37,398
Total originated loans	$	895,328	$	5,213	$	28,229	$	—	$	928,770
Acquired loans:
One- to four-family first mortgage	$	136,775	$	507	$	2,373	$	—	$	139,655
Home equity loans and lines		35,210		28		118		—		35,356
Commercial real estate		95,265		1,855		1,166		—		98,286
Construction and land		1,296		—		470		—		1,766
Multi-family residential		15,333		—		164		—		15,497
Commercial and industrial		4,107		—		2,749		—		6,856
Consumer		1,175		32		—		—		1,207
Total acquired loans	$	289,161	$	2,422	$	7,040	$	—	$	298,623

14

Total:
One- to four-family first mortgage	$	328,558	$	874	$	4,210	$	—	$	333,642
Home equity loans and lines		87,798		320		2,006		—		90,124
Commercial real estate		452,607		2,601		10,344		—		465,552
Construction and land		122,755		215		1,584		—		124,554
Multi-family residential		45,968		—		164		—		46,132
Commercial and industrial		108,673		3,471		16,640		—		128,784
Consumer		38,130		154		321		—		38,605
Total loans	$	1,184,489	$	7,635	$	35,269	$	—	$	1,227,393
	December 31, 2016
(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Originated loans:
One- to four-family first mortgage	$	175,045	$	276	$	1,323	$	—	$	176,644
Home equity loans and lines		46,536		331		998		—		47,865
Commercial real estate		311,517		822		9,484		—		321,823
Construction and land		138,000		22		933		—		138,955
Multi-family residential		26,941		—		—		—		26,941
Commercial and industrial		114,962		5,979		10,694		—		131,635
Consumer		40,369		98		360		—		40,827
Total originated loans	$	853,370	$	7,528	$	23,792	$	—	$	884,690
Acquired loans:
One- to four-family first mortgage	$	162,037	$	245	$	2,957	$	—	$	165,239
Home equity loans and lines		40,812		47		97		—		40,956
Commercial real estate		101,546		2,758		1,388		—		105,692
Construction and land		1,537		71		604		—		2,212
Multi-family residential		19,250		—		178		—		19,428
Commercial and industrial		4,843		—		3,332		—		8,175
Consumer		1,401		38		2		—		1,441
Total acquired loans	$	331,426	$	3,159	$	8,558	$	—	$	343,143
Total:
One- to four-family first mortgage	$	337,082	$	521	$	4,280	$	—	$	341,883
Home equity loans and lines		87,348		378		1,095		—		88,821
Commercial real estate		413,063		3,580		10,872		—		427,515
Construction and land		139,537		93		1,537		—		141,167
Multi-family residential		46,191		—		178		—		46,369
Commercial and industrial		119,805		5,979		14,026		—		139,810
Consumer		41,770		136		362		—		42,268
Total loans	$	1,184,796	$	10,687	$	32,350	$	—	$	1,227,833

15

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.

	September 30, 2017
(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	$	4,187	$	429	$	401	$	5,017	$	188,970	$	193,987
Home equity loans and lines		100		9		13		122		54,646		54,768
Commercial real estate		1,180		—		384		1,564		365,702		367,266
Construction and land		302		200		—		502		122,286		122,788
Multi-family residential		—		—		—		—		30,635		30,635
Total real estate loans		5,769		638		798		7,205		762,239		769,444
Other loans:
Commercial and industrial		28		497		521		1,046		120,882		121,928
Consumer		361		95		171		627		36,771		37,398
Total other loans		389		592		692		1,673		157,653		159,326
Total originated loans	$	6,158	$	1,230	$	1,490	$	8,878	$	919,892	$	928,770
Acquired loans:
Real estate loans:
One- to four-family first mortgage	$	1,300	$	488	$	1,502	$	3,290	$	136,365	$	139,655
Home equity loans and lines		231		—		42		273		35,083		35,356
Commercial real estate		—		44		209		253		98,033		98,286
Construction and land		15		32		—		47		1,719		1,766
Multi-family residential		—		—		—		—		15,497		15,497
Total real estate loans		1,546		564		1,753		3,863		286,697		290,560
Other loans:
Commercial and industrial		—		—		—		—		6,856		6,856
Consumer		4		8		—		12		1,195		1,207
Total other loans		4		8		—		12		8,051		8,063
Total acquired loans	$	1,550	$	572	$	1,753	$	3,875	$	294,748	$	298,623

16

Total loans:
Real estate loans:
One- to four-family first mortgage	$	5,487	$	917	$	1,903	$	8,307	$	325,335	$	333,642
Home equity loans and lines		331		9		55		395		89,729		90,124
Commercial real estate		1,180		44		593		1,817		463,735		465,552
Construction and land		317		232		—		549		124,005		124,554
Multi-family residential		—		—		—		—		46,132		46,132
Total real estate loans		7,315		1,202		2,551		11,068		1,048,936		1,060,004
Other loans:
Commercial and industrial		28		497		521		1,046		127,738		128,784
Consumer		365		103		171		639		37,966		38,605
Total other loans		393		600		692		1,685		165,704		167,389
Total loans	$	7,708	$	1,802	$	3,243	$	12,753	$	1,214,640	$	1,227,393
	December 31, 2016
(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	$	651	$	—	$	563	$	1,214	$	175,430	$	176,644
Home equity loans and lines		37		29		—		66		47,799		47,865
Commercial real estate		475		—		587		1,062		320,761		321,823
Construction and land		467		—		12		479		138,476		138,955
Multi-family residential		—		—		—		—		26,941		26,941
Total real estate loans		1,630		29		1,162		2,821		709,407		712,228
Other loans:
Commercial and industrial		656		706		650		2,012		129,623		131,635
Consumer		531		97		192		820		40,007		40,827
Total other loans		1,187		803		842		2,832		169,630		172,462
Total originated loans	$	2,817	$	832	$	2,004	$	5,653	$	879,037	$	884,690
Acquired loans:
Real estate loans:
One- to four-family first mortgage	$	1,471	$	969	$	2,025	$	4,465	$	160,774	$	165,239
Home equity loans and lines		136		27		38		201		40,755		40,956
Commercial real estate		—		—		1,164		1,164		104,528		105,692
Construction and land		21		—		30		51		2,161		2,212
Multi-family residential		19		—		—		19		19,409		19,428
Total real estate loans		1,647		996		3,257		5,900		327,627		333,527
Other loans:
Commercial and industrial		—		—		—		—		8,175		8,175
Consumer		2		8		2		12		1,429		1,441
Total other loans		2		8		2		12		9,604		9,616
Total acquired loans	$	1,649	$	1,004	$	3,259	$	5,912	$	337,231	$	343,143

17

Total loans:
Real estate loans:
One- to four-family first mortgage	$	2,122	$	969	$	2,588	$	5,679	$	336,204	$	341,883
Home equity loans and lines		173		56		38		267		88,554		88,821
Commercial real estate		475		—		1,751		2,226		425,289		427,515
Construction and land		488		—		42		530		140,637		141,167
Multi-family residential		19		—		—		19		46,350		46,369
Total real estate loans		3,277		1,025		4,419		8,721		1,037,034		1,045,755
Other loans:
Commercial and industrial		656		706		650		2,012		137,798		139,810
Consumer		533		105		194		832		41,436		42,268
Total other loans		1,189		811		844		2,844		179,234		182,078
Total loans	$	4,466	$	1,836	$	5,263	$	11,565	$	1,216,268	$	1,227,833

Excluding Acquired Loans with deteriorated credit quality, the Company did not have any loans greater than 90 days past due and accruing as of September 30, 2017 or December 31, 2016.

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

	For the Nine Months Ended
(dollars in thousands)	September 30, 2017			September 30, 2016
Balance at beginning of period	$	(11,091	)	$	(16,792	)
Accretion		2,495			5,155
Transfers from nonaccretable difference to accretable yield		(1,208	)		(879	)
Balance at end of period	$	(9,804	)	$	(12,516	)

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

	As of September 30, 2017
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One- to four-family first mortgage	$	—	$	—	$	—	$	—	$	—
Home equity loans and lines		473		476		—		370		18
Commercial real estate		23		33		—		18		1
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		2,952		3,131		—		3,209		133
Consumer		—		—		—		—		—
Total	$	3,448	$	3,640	$	—	$	3,597	$	152

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With an allowance recorded:
One- to four-family first mortgage	$	—	$	—	$	—	$	55	$	—
Home equity loans and lines		459		460		348		358		17
Commercial real estate		—		—		—		395		—
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		1,988		2,102		865		1,985		80
Consumer		—		—		—		—		—
Total	$	2,447	$	2,562	$	1,213	$	2,793	$	97
Total impaired Originated Loans:
One- to four-family first mortgage	$	—	$	—	$	—	$	55	$	—
Home equity loans and lines		932		936		348		728		35
Commercial real estate		23		33		—		413		1
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		4,940		5,233		865		5,194		213
Consumer		—		—		—		—		—
Total	$	5,895	$	6,202	$	1,213	$	6,390	$	249

	As of December 31, 2016
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One- to four-family first mortgage	$	—	$	—	$	—	$	—	$	—
Home equity loans and lines		—		—		—		—		—
Commercial real estate		—		—		—		—		—
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		3,144		3,178		—		262		166
Consumer		—		—		—		—		—
Total	$	3,144	$	3,178	$	—	$	262	$	166
With an allowance recorded:
One- to four-family first mortgage	$	252	$	260	$	39	$	93	$	13
Home equity loans and lines		—		—		—		—		—
Commercial real estate		462		483		19		423		14
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		1,700		1,737		737		1,635		87
Consumer		—		—		—		—		—
Total	$	2,414	$	2,480	$	795	$	2,151	$	114
Total impaired loans:
One- to four-family first mortgage	$	252	$	260	$	39	$	93	$	13
Home equity loans and lines		—		—		—		—		—
Commercial real estate		462		483		19		423		14
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		4,844		4,915		737		1,897		253
Consumer		—		—		—		—		—
Total	$	5,558	$	5,658	$	795	$	2,413	$	280

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	As of September 30, 2016
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One- to four-family first mortgage	$	—	$	—	$	—	$	—	$	—
Home equity loans and lines		—		—		—		—		—
Commercial real estate		—		—		—		—		—
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		—		—		—		—		—
Consumer		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—
With an allowance recorded:
One- to four-family first mortgage	$	75	$	81	$	28	$	79	$	4
Home equity loans and lines		—		—		—		—		—
Commercial real estate		619		650		64		375		17
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		3,554		3,593		547		1,290		149
Consumer		—		—		—		—		—
Total	$	4,248	$	4,324	$	639	$	1,744	$	170
Total impaired loans:
One- to four-family first mortgage	$	75	$	81	$	28	$	79	$	4
Home equity loans and lines		—		—		—		—		—
Commercial real estate		619		650		64		375		17
Construction and land		—		—		—		—		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		3,554		3,593		547		1,290		149
Consumer		—		—		—		—		—
Total	$	4,248	$	4,324	$	639	$	1,744	$	170

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

	September 30, 2017						December 31, 2016
(dollars in thousands)	Originated		Acquired(1)		Total		Originated		Acquired(1)		Total
Nonaccrual loans(2):
One- to four-family first mortgage	$	1,425	$	877	$	2,302	$	891	$	833	$	1,724
Home equity loans and lines		1,823		100		1,923		998		90		1,088
Commercial real estate		3,255		—		3,255		1,799		164		1,963
Construction and land		—		—		—		12		63		75
Multi-family residential		—		—		—		—		—		—
Commercial and industrial		9,657		243		9,900		8,230		312		8,542
Consumer		321		—		321		360		1		361
Total	$	16,481	$	1,220	$	17,701	$	12,290	$	1,463	$	13,753

⁽¹⁾ Table excludes acquired loans which were being accounted for under ASC 310-30 because they continue to earn interest from accretable yield regardless of their status as past due or otherwise not in compliance with their contractual terms. Acquired loans with deteriorated credit quality, which were being accounted for under ASC 310-30 and which were 90 days or more past due, totaled $1.5 million and $2.7 million as of September 30, 2017 and December 31, 2016, respectively.

⁽²⁾ Nonaccrual loans include loans restructured and placed on nonaccrual status. Originated restructured nonaccrual loans totaled $8.9 million and $10.0 million at September 30, 2017 and December 31, 2016, respectively. Acquired restructured nonaccrual loans totaled $457,000 and $435,000 at September 30, 2017 and December 31, 2016, respectively.

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As of September 30, 2017, the Company had no outstanding commitments to lend additional funds to any customer whose loan was classified as impaired.

Troubled Debt Restructurings

During the course of its lending operations, the Company periodically grants concessions to its customers in an attempt to protect as much of its investment as possible and to minimize risk of loss. These concessions may include restructuring the terms of a customer loan to alleviate the burden of the customer’s near-term cash requirements. The Company must conclude that the restructuring of a loan to a borrower who is experiencing financial difficulties constitutes a “concession”. The Company defines a concession as a modification of existing terms granted to a borrower for economic or legal reasons related to the borrower’s financial difficulties that the Company would otherwise not consider. The concession either is granted through an agreement with the customer or is imposed by a court or by law. Concessions include modifying original loan terms to reduce or defer cash payments required as part of the loan agreement, including but not limited to:

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

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

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

• a reduction of accrued interest receivable on the debt.

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

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

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

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

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

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

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

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

	As of September 30, 2017
(dollars in thousands)	Current		Past Due Greater Than 30 Days and Accruing		Nonaccrual TDRs		Total TDRs
Originated loans:
Real estate loans:
One- to four-family first mortgage	$	300	$	67	$	487	$	854
Home equity loans and lines		312		44		836		1,192
Commercial real estate		—		99		1,505		1,604
Construction and land		177		—		—		177
Multi-family residential		—		—		—		—
Total real estate loans		789		210		2,828		3,827
Other loans:
Commercial and industrial		—		—		5,917		5,917
Consumer		—		—		192		192
Total other loans		—		—		6,109		6,109
Total originated loans	$	789	$	210	$	8,937	$	9,936
Acquired loans:
Real estate loans:
One- to four-family first mortgage	$	218	$	4	$	120	$	342
Home equity loans and lines		—		—		94		94
Commercial real estate		1,139		—		—		1,139
Construction and land		—		—		—		—
Multi-family residential		—		—		—		—
Total real estate loans		1,357		4		214		1,575
Other loans:
Commercial and industrial		1,567		—		243		1,810
Consumer		—		—		—		—
Total other loans		1,567		—		243		1,810
Total acquired loans	$	2,924	$	4	$	457	$	3,385
Total loans:
Real estate loans:
One- to four-family first mortgage	$	518	$	71	$	607		1,196
Home equity loans and lines		312		44		930		1,286
Commercial real estate		1,139		99		1,505		2,743
Construction and land		177		—		—		177
Multi-family residential		—		—		—		—
Total real estate loans		2,146		214		3,042		5,402
Other loans:
Commercial and industrial		1,567		—		6,160		7,727
Consumer		—		—		192		192
Total other loans		1,567		—		6,352		7,919
Total loans	$	3,713	$	214	$	9,394	$	13,321

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	As of December 31, 2016
(dollars in thousands)	Current		Past Due Greater Than 30 Days and Accruing		Nonaccrual TDRs		Total TDRs
Originated loans:
Real estate loans:
One- to four-family first mortgage	$	276	$	—	$	327	$	603
Home equity loans and lines		331		—		988		1,319
Commercial real estate		102		—		1,717		1,819
Construction and land		562		—		—		562
Multi-family residential		—		—		—		—
Total real estate loans		1,271		—		3,032		4,303
Other loans:
Commercial and industrial		—		—		6,775		6,775
Consumer		—		—		168		168
Total other loans		—		—		6,943		6,943
Total originated loans	$	1,271	$	—	$	9,975	$	11,246
Acquired loans:
Real estate loans:
One- to four-family first mortgage	$	292	$	86	$	60	$	438
Home equity loans and lines		—		—		62		62
Commercial real estate		288		860		—		1,148
Construction and land		—		—		—		—
Multi-family residential		—		—		—		—
Total real estate loans		580		946		122		1,648
Other loans:
Commercial and industrial		1,853		—		313		2,166
Consumer		—		—		—		—
Total other loans		1,853		—		313		2,166
Total acquired loans	$	2,433	$	946	$	435	$	3,814
Total loans:
Real estate loans:
One- to four-family first mortgage	$	568	$	86	$	387	$	1,041
Home equity loans and lines		331		—		1,050		1,381
Commercial real estate		390		860		1,717		2,967
Construction and land		562		—		—		562
Multi-family residential		—		—		—		—
Total real estate loans		1,851		946		3,154		5,951
Other loans:
Commercial and industrial		1,853		—		7,088		8,941
Consumer		—		—		168		168
Total other loans		1,853		—		7,256		9,109
Total loans	$	3,704	$	946	$	10,410	$	15,060

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The following table summarizes information pertaining to loans modified as of the periods indicated.

	For the Nine Months Ended
	September 30, 2017						September 30, 2016
(dollars in thousands)	Number of Contracts		Pre- modification Outstanding Recorded Investment		Post- modification Outstanding Recorded Investment		Number of Contracts		Pre- modification Outstanding Recorded Investment		Post- modification Outstanding Recorded Investment
Troubled debt restructurings:
One- to four-family first mortgage		5	$	268	$	263		7	$	1,098	$	648
Home equity loans and lines		2		38		37		3		939		930
Commercial real estate		1		431		431		4		1,006		893
Construction and land		—		—		—		1		351		211
Multi-family residential		—		—		—		—		—		—
Commercial and industrial		1		1,439		1,146		16		3,717		3,698
Other consumer		2		60		57		1		51		40
Total		11	$	2,236	$	1,934		32	$	7,162	$	6,420

None of the performing troubled debt restructurings as of September 30, 2017 had defaulted subsequent to the restructuring through the date the financial statements were available to be issued.

7. Fair Value Measurements and Disclosures

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

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

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

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

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

Recurring Basis

Investment Securities Available for Sale

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

24

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

Management primarily identifies investment securities, which may have traded in illiquid or inactive markets, by identifying instances of a significant decrease in the volume and frequency of trades, relative to historical levels, as well as instances of a significant widening of the bid-ask spread in the brokered markets. Investment securities that are deemed to have been trading in illiquid or inactive markets may require the use of significant unobservable inputs. For example, management may use quoted prices for similar investment securities in the absence of a liquid and active market for the investment securities being valued. As of September 30, 2017, management did not make adjustments to prices provided by the third-party pricing service as a result of illiquid or inactive markets.

The following tables present the balances of assets measured for fair value on a recurring basis as of September 30, 2017 and December 31, 2016.

			Fair Value Measurements Using
(dollars in thousands)	September 30, 2017		Level 1		Level 2		Level 3
Available for sale securities:
U.S. agency mortgage-backed	$	75,254	$	—	$	75,254	$	—
Collateralized mortgage obligations		99,873		—		99,873		—
Municipal bonds		18,493		—		18,493		—
U.S. government agency		8,576		—		8,576		—
Total	$	202,196	$	—	$	202,196	$	—
			Fair Value Measurements Using
(dollars in thousands)	December 31, 2016		Level 1		Level 2		Level 3
Available for sale securities:
U.S. agency mortgage-backed	$	78,931	$	—	$	78,931	$	—
Collateralized mortgage obligations		74,330		—		74,330		—
Municipal bonds		21,428		—		21,428		—
U.S. government agency		9,041		—		9,041		—
Total	$	183,730	$	—	$	183,730	$	—

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

Nonrecurring Basis

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

25

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

			Fair Value Measurements Using
(dollars in thousands)	September 30, 2017		Level 1		Level 2		Level 3
Repossessed assets	$	454	$	—	$	—	$	454
Impaired loans		4,682		—		—		4,682
Total	$	5,136	$	—	$	—	$	5,136
			Fair Value Measurements Using
(dollars in thousands)	December 31, 2016		Level 1		Level 2		Level 3
Repossessed assets	$	2,893	$	—	$	—	$	2,893
Impaired loans		4,763		—		—		4,763
Total	$	7,656	$	—	$	—	$	7,656

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

(dollars in thousands)	Fair Value		Valuation Technique	Unobservable Inputs	Range of Discounts		Weighted Average Discount
As of September 30, 2017
Repossessed assets	$	454	Third party appraisals, sales contracts, broker price opinions	Collateral discounts and estimated costs to sell		6% - 100%		41	%
Impaired loans	$	4,682	Third party appraisals and discounted cash flows	Collateral discounts and discount rates		0% - 100%		20	%
As of December 31, 2016
Repossessed assets	$	2,893	Third party appraisals, sales contracts, Broker price opinions	Collateral discounts and estimated costs to sell		6% - 96%		19	%
Impaired loans	$	4,763	Third party appraisals and discounted cash flows	Collateral discounts and discount rates		0% - 100%		15	%

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.

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

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

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

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

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

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

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

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

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

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

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

			Fair Value Measurements at September 30, 2017
(dollars in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	51,626	$	51,626	$	51,626	$	—	$	—
Interest-bearing deposits in banks		1,191		1,191		1,191		—		—
Investment securities available for sale		202,196		202,196		—		202,196		—
Investment securities held to maturity		13,118		13,246		—		13,246		—
Mortgage loans held for sale		5,617		5,617		—		5,617		—
Loans, net		1,213,969		1,214,156		—		1,209,474		4,682
Cash surrender value of BOLI		20,510		20,510		20,510		—		—
Financial Liabilities
Deposits	$	1,319,713	$	1,319,692	$	—	$	1,319,692	$	—
Short-term FHLB advances		—		—		—		—		—
Long-term FHLB advances		64,804		64,498		—		64,498		—

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			Fair Value Measurements at December 31, 2016
(dollars in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	29,315	$	29,315	$	29,315	$	—	$	—
Interest-bearing deposits in banks		1,884		1,884