Edgar Filing: HOME BANCORP, INC.

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2013

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

For the transition period from to

Commission File Number: 001-34190

HOME BANCORP, INC.

(Exact name of Registrant as specified in its charter)


Louisiana		71-1051785
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

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

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

Not Applicable

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

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

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

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

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

At November 1, 2013, the registrant had 7,099,164 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		40

Item 4.	Controls and Procedures		40

PART II

Item 1.	Legal Proceedings		40

Item 1A.	Risk Factors		40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		40

Item 3.	Defaults Upon Senior Securities		40

Item 4.	Mine Safety Disclosure		41

Item 5.	Other Information		41

Item 6.	Exhibits		41

SIGNATURES			42

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


	(Unaudited) September 30, 2013			(Audited) December 31, 2012
Assets
Cash and cash equivalents	$	35,953,034		$	39,539,366
Interest-bearing deposits in banks		3,185,000			3,529,000
Investment securities available for sale, at fair value		151,453,721			157,255,828
Investment securities held to maturity (fair values of $8,904,726 and $1,746,375, respectively)		8,965,112			1,665,184
Mortgage loans held for sale		1,711,585			5,627,104
Loans covered by loss sharing agreements		23,723,936			45,764,397
Noncovered loans, net of unearned income		657,150,445			627,363,937

Total loans, net of unearned income		680,874,381			673,128,334
Allowance for loan losses		(6,462,841	)		(5,319,235	)

Total loans, net of unearned income and allowance for loan losses		674,411,540			667,809,099

Office properties and equipment, net		30,312,996			30,777,184
Cash surrender value of bank-owned life insurance		17,638,008			17,286,434
FDIC loss sharing receivable		13,576,606			15,545,893
Accrued interest receivable and other assets		24,688,760			23,891,172

Total Assets	$	961,896,362		$	962,926,264


Liabilities
Deposits:
Noninterest-bearing	$	171,915,471		$	152,461,606
Interest-bearing		593,894,841			618,967,729

Total deposits		765,810,312			771,429,335
Short-term Federal Home Loan Bank (FHLB) advances		40,900,000			10,000,000
Long-term Federal Home Loan Bank (FHLB) advances		10,000,000			36,256,805
Accrued interest payable and other liabilities		4,965,371			3,666,264

Total Liabilities		821,675,683			821,352,404


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; 8,957,845 and 8,950,495 shares issued; 7,099,164 and 7,439,127 shares outstanding, respectively		89,579			89,506
Additional paid-in capital		91,743,191			90,986,820
Treasury stock at cost - 1,858,681 and 1,511,368 shares, respectively		(28,003,896	)		(21,719,954	)
Unallocated common stock held by:
Employee Stock Ownership Plan (ESOP)		(5,356,100	)		(5,623,910	)
Recognition and Retention Plan (RRP)		(1,020,857	)		(1,831,759	)
Retained earnings		82,023,494			76,435,222
Accumulated other comprehensive income		745,268			3,237,935

Total Shareholders’ Equity		140,220,679			141,573,860

Total Liabilities and Shareholders’ Equity	$	961,896,362		$	962,926,264

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Interest Income
Loans, including fees	$	10,438,505	$	11,309,112	$	30,578,885	$	32,063,514
Investment securities		754,902		769,202		2,278,112		2,440,833
Other investments and deposits		32,471		41,404		96,077		110,870

Total interest income		11,225,878		12,119,718		32,953,074		34,615,217


Interest Expense
Deposits		729,941		1,036,707		2,410,621		3,253,133
Short-term FHLB advances		12,060		4,830		27,146		36,281
Long-term FHLB advances		80,550		162,154		331,660		489,306

Total interest expense		822,551		1,203,691		2,769,427		3,778,720

Net interest income		10,403,327		10,916,027		30,183,647		30,836,497
Provision for loan losses		453,133		55,736		3,221,326		1,927,962

Net interest income after provision for loan losses		9,950,194		10,860,291		26,962,321		28,908,535


Noninterest Income
Service fees and charges		627,607		535,016		1,753,547		1,688,874
Bank card fees		445,784		443,986		1,314,299		1,396,678
Gain on sale of loans, net		314,626		651,457		1,289,487		1,395,561
Income from bank-owned life insurance		114,473		124,566		351,575		386,772
Gain on sale of securities, net		—		162,534		428,200		221,781
Accretion of FDIC loss sharing receivable		111,066		108,762		334,913		461,893
Other income		52,215		60,537		170,351		134,870

Total noninterest income		1,665,771		2,086,858		5,642,372		5,686,429


Noninterest Expense
Compensation and benefits		5,017,628		5,046,836		14,993,975		14,569,194
Occupancy		779,908		722,320		2,248,632		2,119,265
Marketing and advertising		152,270		202,400		563,793		538,764
Data processing and communication		574,364		694,440		1,842,036		2,033,779
Professional services		217,657		213,294		623,909		701,030
Forms, printing and supplies		86,965		111,203		329,762		377,918
Franchise and shares tax		272,960		305,889		819,540		657,191
Regulatory fees		225,175		218,193		668,059		629,368
Foreclosed assets, net		90,982		248,089		236,740		758,813
Other expenses		471,670		626,409		1,873,530		1,855,486

Total noninterest expense		7,889,579		8,389,073		24,199,976		24,240,808

Income before income tax expense		3,726,386		4,558,076		8,404,717		10,354,156
Income tax expense		1,243,639		1,505,746		2,816,445		3,488,694

Net Income	$	2,482,747	$	3,052,330	$	5,588,272	$	6,865,462


Earnings per share:
Basic	$	0.38	$	0.44	$	0.84	$	0.99
Diluted	$	0.37	$	0.42	$	0.80	$	0.95

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2013			2012			2013			2012

Net Income	$	2,482,747		$	3,052,330		$	5,588,272		$	6,865,462


Other Comprehensive (Loss) Income
Unrealized (losses) gains on investment securities	$	(209,341	)	$	1,255,562		$	(3,759,396	)	$	2,547,374
Reclassification adjustment for gains included in net income		—			(162,534	)		(428,200	)		(221,781	)
Tax effect⁽¹⁾		59,710			(374,362	)		1,694,929			(644,326	)

Other comprehensive (loss) income, net of taxes	$	(149,631	)	$	718,666		$	(2,492,667	)	$	1,681,267


Comprehensive Income	$	2,333,116		$	3,770,996		$	3,095,605		$	8,546,729

⁽¹⁾

The tax effect for the three and nine months ended September 30, 2013 on the change in unrealized (losses) gains on investment securities was $59,710 and $1,545,059, respectively, compared to $430,030 and $720,286, respectively, for the three and nine months ended September 30, 2012. The tax effect for the three and nine months ended September 30, 2013 on the reclassification adjustment for gains included in net income had a tax effect of $0 and $149,870, respectively, compared to $55,668 and $75,960, respectively, for the three and nine months ended September 30, 2012.

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)


	Common Stock		Additional Paid-in Capital			Treasury Stock			Unallocated Common Stock Held by ESOP			Unallocated Common Stock Held by RRP			Retained Earnings		Accumulated Other Comprehensive Income			Total
Balance, December 31, 2011⁽¹⁾	$	89,335	$	89,741,406		$	(15,892,315	)	$	(5,980,990	)	$	(2,644,523	)	$	67,245,350	$	1,726,571		$	134,284,834
Comprehensive income:
Net income																6,865,462					6,865,462
Other Comprehensive income																		1,681,267			1,681,267
Treasury stock acquired at cost, 184,429 shares							(4,473,680	)													(4,473,680	)
Exercise of stock options		148		175,577																	175,725
RRP shares released for allocation				(680,600	)								812,764								132,164
ESOP shares released for allocation				181,413						267,810											449,223
Share-based compensation cost				1,095,964																	1,095,964

Balance, September 30, 2012	$	89,483	$	90,513,760		$	(20,365,995	)	$	(5,713,180	)	$	(1,831,759	)	$	74,110,812	$	3,407,838		$	140,210,959


Balance, December 31, 2012⁽¹⁾	$	89,506	$	90,986,820		$	(21,719,954	)	$	(5,623,910	)	$	(1,831,759	)	$	76,435,222	$	3,237,935		$	141,573,860
Comprehensive income:
Net income																5,588,272					5,588,272
Other Comprehensive loss																		(2,492,667	)		(2,492,667	)
Treasury stock acquired at cost, 347,313 shares							(6,283,942	)													(6,283,942	)
Exercise of stock options		73		84,734																	84,807
RRP shares released for allocation				(652,717	)								810,902								158,185
ESOP shares released for allocation				220,977						267,810											488,787
Share-based compensation cost				1,103,377																	1,103,377

Balance, September 30, 2013	$	89,579	$	91,743,191		$	(28,003,896	)	$	(5,356,100	)	$	(1,020,857	)	$	82,023,494	$	745,268		$	140,220,679

⁽¹⁾	Balances as of December 31, 2011 and December 31, 2012 are audited.

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 Nine Months Ended
	September 30,
	2013			2012
Cash flows from operating activities:
Net income	$	5,588,272		$	6,865,462
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		3,221,326			1,927,962
Depreciation		1,072,571			1,089,025
Amortization (accretion) of purchase accounting valuations and intangibles		575,194			(115,098	)
Net amortization of mortgage servicing asset		146,142			124,858
Federal Home Loan Bank stock dividends		(6,900	)		(13,700	)
Net amortization of premium on investments		832,966			858,908
Gain on sale of investment securities, net		(428,200	)		(221,781	)
Gain on loans sold, net		(1,289,487	)		(1,395,561	)
Proceeds, including principal payments, from loans held for sale		69,787,342			21,371,657
Originations of loans held for sale		(64,683,615	)		(18,585,639	)
Non-cash compensation		1,592,164			1,545,187
Deferred income tax provision		473,020			468,208
Decrease in interest receivable and other assets		53,803			456,365
Increase in cash surrender value of bank-owned life insurance		(351,574	)		(386,772	)
Increase in accrued interest payable and other liabilities		1,349,999			626,452

Net cash provided by operating activities		17,933,023			14,615,533


Cash flows from investing activities:
Purchases of securities available for sale		(28,894,559	)		(36,559,185	)
Purchases of securities held to maturity		(7,793,964	)		—
Proceeds from maturities, prepayments and calls on securities available for sale		22,865,281			25,478,920
Proceeds from maturities, prepayments and calls on securities held to maturity		456,395			1,411,471
Proceeds from sales on securities available for sale		7,704,863			15,264,114
Net increase in loans		(14,039,556	)		(11,266,490	)
Reimbursement from FDIC for covered assets		1,399,929			1,748,270
Decrease in certificates of deposit in other institutions		344,000			1,564,000
Proceeds from sale of foreclosed assets		4,177,336			5,164,085
Purchases of office properties and equipment		(608,383	)		(1,197,629	)
Proceeds from sale of properties and equipment		—			1,048,771
Purchases of Federal Home Loan Bank stock		(1,751,500	)		—
Proceeds from redemption of Federal Home Loan Bank stock		1,533,600			2,792,000

Net cash (used in) provided by investing activities		(14,606,558	)		5,448,327


Cash flows from financing activities:
(Decrease) increase in deposits		(5,554,642	)		54,594,797
Increase (decrease) in Federal Home Loan Bank advances		4,840,980			(49,822,437	)
Purchase of treasury stock		(6,283,942	)		(4,473,680	)
Proceeds from exercise of stock options		84,807			175,725

Net cash (used in) provided by financing activities		(6,912,797	)		474,405


Net change in cash and cash equivalents		(3,586,332	)		20,538,265
Cash and cash equivalents at beginning of year		39,539,366			31,769,438

Cash and cash equivalents at end of period	$	35,953,034		$	52,307,703

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 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, other 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 nine-month period ended September 30, 2013 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, 2012.

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, other 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 equity or net income.

2. Accounting Developments

In October 2012, the FASB issued Accounting Standards Update (“ASU”) No. 2012-06, Subsequent Accounting for an Indemnification Asset as a result of a Government-Assisted Acquisition of a Financial Institution. ASU 2012-06 requires the change in measurement of the indemnification asset to be accounted for on the same basis as the change in the indemnified item. Any amortization period for the changes in value is limited to the shorter of the term of the indemnification agreement or the remaining life of the indemnified assets. The amendments are effective for fiscal years beginning on or after December 15, 2012 and interim periods within those fiscal years. The amendments are applied prospectively to any new indemnification assets acquired after the date of adoption and to indemnification assets existing as of the date of adoption. The Company has adopted ASU 2012-06, and the adoption of the guidance did not have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income was issued in the first quarter of 2013 to improve the reporting of reclassifications out of accumulated other comprehensive income (“AOCI”). The ASU requires information regarding the impact to net earnings of the reclassification on significant amounts out of AOCI to be presented on either the face of the statement of earnings or in the notes to the financial statements. The amendments in this Update do not change the current reporting requirements for net earnings or AOCI. For public entities, the amendments in this Update are effective prospectively for reporting periods beginning after December 15, 2012. The Company has adopted ASU 2013-02, and the information required has been included in the Consolidated Statements of Comprehensive Income.

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210), Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments limit the scope of ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, to certain derivative instruments (including bifurcated embedded derivatives), repurchase agreements and reverse repurchase agreements, and securities borrowing and

lending arrangements that are either (1) offset on the balance sheet or (2) subject to an enforceable master netting arrangement or similar agreement. This ASU amends the scope of FASB ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which requires additional disclosure regarding the offsetting of assets and liabilities to enable users of financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. The effective date of the amendments coincides with that of ASU 2011-11 (i.e., for fiscal years beginning on or after January 1, 2013, and interim periods within those years). The amendments are applied retrospectively for all comparative periods presented on the balance sheet. The Company has adopted ASU 2013-01, and the adoption of the guidance did not have a material impact on the Company’s results of operations, financial position or disclosures.

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740), which clarifies the presentation requirements of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014 and should be applied prospectively. The adoption of this ASU is not expected to have a material effect on our consolidated statements of financial condition, results of operations, or cash flows.

3. Investment Securities

Summary information regarding the Company’s investment securities classified as available for sale and held to maturity as of September 30, 2013 and December 31, 2012 is as follows.


(dollars in thousands)					Gross Unrealized Losses
September 30, 2013	Amortized Cost		Gross Unrealized Gains		Less Than 1 Year		Over 1 Year		Fair Value
Available for sale:
U.S. agency mortgage-backed	$	95,693	$	2,015	$	802	$	1	$	96,905
Non-U.S. agency mortgage-backed		10,522		130		54		60		10,538
Municipal bonds		20,449		334		366		—		20,417
U.S. government agency		23,645		277		328		—		23,594

Total available for sale	$	150,309	$	2,756	$	1,550	$	61	$	151,454


Held to maturity:
U.S. agency mortgage-backed	$	237	$	4	$	—	$	—	$	241
Municipal bonds		8,728		80		144		—		8,664

Total held to maturity	$	8,965	$	84	$	144	$	—	$	8,905


(dollars in thousands)					Gross Unrealized Losses
December 31, 2012	Amortized Cost		Gross Unrealized Gains		Less Than 1 Year		Over 1 Year		Fair Value
Available for sale:
U.S. agency mortgage-backed	$	99,137	$	3,391	$	14	$	1	$	102,513
Non-U.S. agency mortgage-backed		12,426		280		—		38		12,668
Municipal bonds		16,843		774		32		—		17,585
U.S. government agency		23,944		553		7		—		24,490

Total available for sale	$	152,350	$	4,998	$	53	$	39	$	157,256


Held to maturity:
U.S. agency mortgage-backed	$	693	$	13	$	—	$	—	$	706
Municipal bonds		972		68		—		—		1,040

Total held to maturity	$	1,665	$	81	$	—	$	—	$	1,746

The amortized cost and estimated fair value by maturity of the Company’s investment securities as of September 30, 2013 are shown in the following tables. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. The expected maturity of a security may differ from its contractual maturity because of prepayments or the exercise of call options. Accordingly, actual maturities may differ from contractual maturities.


*(dollars in thousands)*	One Year or Less		One Year to Five Years		Five to Ten Years		Over Ten Years		Total
Fair Value
Securities available for sale:
U.S. agency mortgage-backed	$	217	$	253	$	16,352	$	80,083	$	96,905
Non-U.S. agency mortgage-backed		—		—		—		10,538		10,538
Municipal bonds		508		4,084		12,427		3,398		20,417
U.S. government agency		2,521		4,296		11,699		5,078		23,594

Total available for sale	$	3,246	$	8,633	$	40,478	$	99,097	$	151,454


Securities held to maturity:
U.S. agency mortgage-backed	$	63	$	178	$	—	$	—	$	241
Municipal bonds		219		800		6,963		682		8,664

Total held to maturity		282		978		6,963		682		8,905

Total investment securities	$	3,528	$	9,611	$	47,441	$	99,779	$	160,359


*(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	$	205	$	235	$	16,334	$	78,919	$	95,693
Non-U.S. agency mortgage-backed		—		—		—		10,522		10,522
Municipal bonds		507		4,006		12,556		3,380		20,449
U.S. government agency		2,500		4,252		11,983		4,910		23,645

Total available for sale	$	3,212	$	8,493	$	40,873	$	97,731	$	150,309


Securities held to maturity:
U.S. agency mortgage-backed	$	59	$	178	$	—	$	—	$	237
Municipal bonds		215		757		7,080		676		8,728

Total held to maturity		274		935		7,080		676		8,965

Total investment securities	$	3,486	$	9,428	$	47,953	$	98,407	$	159,274

Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic and market conditions warrant such evaluations. Consideration is given to (1) the extent and length of

time the fair value has been below cost; (2) the reasons for the decline in value; and (3) the Company’s intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost, which may extend to maturity.

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

As of September 30, 2013 and December 31, 2012, the Company had $42,941,000 and $41,462,000, respectively, of securities pledged to secure public deposits.

As of September 30, 2013, 60 of the Company’s debt securities had unrealized losses totaling 2.8% of the individual securities’ amortized cost basis and 1.1% of the Company’s total amortized cost basis of the investment securities portfolio. Two of the 60 securities had been in a continuous loss position for over 12 months at such date. The two securities had an aggregate amortized cost basis of $1,100,000 and unrealized loss of $60,000 at September 30, 2013. Management has the intent and ability to hold these debt securities until maturity, or until anticipated recovery; hence, no declines in these two securities were deemed to be other-than-temporary.

4. 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)*	2013		2012		2013		2012

Numerator:
Net income available to common shareholders	$	2,483	$	3,052	$	5,588	$	6,865

Denominator:
Weighted average common shares outstanding		6,482		6,951		6,627		6,959
Effect of dilutive securities:
Restricted stock		36		60		60		78
Stock options		251		201		257		178

Weighted average common shares outstanding - assuming dilution		6,769		7,212		6,944		7,215


Earnings per common share	$	0.38	$	0.44	$	0.84	$	0.99

Earnings per common share - assuming dilution	$	0.37	$	0.42	$	0.80	$	0.95

Options on 54,000 and 40,478 shares of common stock were not included in the computation of diluted earnings per share for the three months ended September 30, 2013 and September 30, 2012, respectively, because the effect of these shares was anti-dilutive. Options on 51,496 and 40,024 shares of common stock were not included in the computation of diluted earnings per share for the nine months ended September 30, 2013 and September 30, 2012, respectively, because the effect of these shares was anti-dilutive.

5. Credit Quality and Allowance for Loan Losses

The following briefly describes the distinction between originated, non-covered acquired and covered 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 as 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.

Non-covered Acquired Loans

Non-covered acquired loans are those associated with our acquisition of GS Financial Corp. (“GSFC”), the former holding company of Guaranty Savings Bank of Metairie, Louisiana on July 15, 2011. These loans were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The non-covered 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 development 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 fair value discount for the loan pool. Once the 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.

Covered Loans and the Related Loss Share Receivable

The loans purchased in the Company’s 2010 acquisition of certain assets and liabilities of Statewide Bank (“Statewide”) are covered by loss share agreements between the FDIC and the Company that afford the Company significant loss protection. In connection with the transaction, Home Bank entered into loss sharing agreements with the FDIC which cover the acquired loan portfolio (“Covered Loans”) and repossessed assets (collectively referred to as “Covered Assets”). Under the terms of the loss sharing agreements, the FDIC will, subject to the terms and conditions of the agreements, absorb 80% of the first $41,000,000 of losses incurred on Covered Assets and 95% of losses on Covered Assets exceeding $41,000,000 during the periods specified in the loss sharing agreements. These covered loans are accounted for as acquired impaired loans as described above. The loss share receivable is measured separately from the related covered loans as it is not contractually embedded in the loans and is not transferable should the loans be sold. The fair value of the loss share receivable at acquisition was estimated by discounting projected cash flows related to the loss share agreements based on the expected reimbursements for losses using the applicable loss share percentages. The discounted amount is accreted into non-interest income over the remaining life of the covered loan pool or the life of the loss share agreement.

The loss share receivable is reviewed and updated prospectively as loss estimates related to covered loans change. Increases in expected reimbursements under the loss sharing agreements from a covered loan pool will lead to an increase in the loss share receivable. A decrease in expected reimbursements is reflected first as a reversal of any

previously recorded increase in the loss share receivable on the covered loan pool with the remainder reflected as a reduction in the loss share receivable’s accretion rate. Increases and decreases in the loss share receivable can result in reductions in or additions to the provision for loan losses, which serve to offset the impact on the provision from impairment recognized on the underlying covered loan pool and reversals of previously recognized impairment. The impact on operations of a reduction in the loss share receivable’s accretion rate is associated with an increase in the accretable yield on the underlying loan pool.

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


	As of September 30, 2013
	Originated Loans				Acquired Loans
*(dollars in thousands)*	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Non-covered Acquired Loans		Covered Loans		Total
Allowance for loan losses:
One- to four-family first mortgage	$	848	$	—	$	218	$	—	$	1,066
Home equity loans and lines		368		—		121		—		489
Commercial real estate		2,374		—		—		—		2,374
Construction and land		858		—		—		—		858
Multi-family residential		88		—		—		—		88
Commercial and industrial		822		295		11		—		1,128
Consumer		459		—		—		—		459

Total allowance for loan losses	$	5,817	$	295	$	350	$	—	$	6,463


	As of September 30, 2013
	Originated Loans				Acquired Loans
*(dollars in thousands)*	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Non-covered Acquired Loans⁽¹⁾		Covered Loans		Total
Loans:
One- to four-family first mortgage	$	131,477	$	656	$	40,017	$	5,992	$	178,142
Home equity loans and lines		30,630		3		7,861		2,427		40,921
Commercial real estate		207,520		360		34,926		10,842		253,648
Construction and land		68,003		19		2,126		2,054		72,202
Multi-family residential		7,545		—		7,982		1,337		16,864
Commercial and industrial		74,664		2,241		2,301		1,072		80,278
Consumer		38,312		—		507		—		38,819

Total loans	$	558,151	$	3,279	$	95,720	$	23,724	$	680,874


	As of December 31, 2012
	Originated Loans				Acquired Loans
*(dollars in thousands)*	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Non-covered Acquired Loans⁽¹⁾		Covered Loans		Total
Allowance for loan losses:
One- to four-family first mortgage	$	749	$	49	$	184	$	—	$	982
Home equity loans and lines		322		—		21		—		343
Commercial real estate		1,906		134		—		—		2,040
Construction and land		785		—		—		—		785
Multi-family residential		86		—		—		—		86
Commercial and industrial		683		—		—		—		683
Consumer		400		—		—		—		400

Total allowance for loan losses	$	4,931	$	183	$	205	$	—	$	5,319


	As of December 31, 2012
	Originated Loans				Acquired Loans
*(dollars in thousands)*	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Non-covered Acquired Loans⁽¹⁾		Covered Loans		Total
Loans:
One- to four-family first mortgage	$	115,278	$	1,464	$	49,943	$	11,131	$	177,816
Home equity loans and lines		26,938		56		10,123		3,309		40,426
Commercial real estate		182,376		3,428		44,132		22,869		252,805
Construction and land		66,815		60		3,650		5,004		75,529
Multi-family residential		7,929		528		9,818		1,383		19,658
Commercial and industrial		66,321		—		4,469		1,463		72,253
Consumer		33,341		—		695		605		34,641

Total loans	$	498,998	$	5,536	$	122,830	$	45,764	$	673,128

⁽¹⁾	$4.7 million and $5.3 million in GSFC loans were accounted for under ASC 310-30 at September 30, 2013 and December 31, 2012, respectively.

A summary of the activity in the allowance for loan losses during the nine months ended September 30, 2013 and September 30, 2012 is as follows.


	For the Nine Months Ended September 30, 2013
*(dollars in thousands)*	Beginning Balance		Charge-offs			Recoveries		Provision		Ending Balance
Originated loans:
Allowance for loan losses:
One- to four-family first mortgage	$	798	$	(76	)	$	—	$	126	$	848
Home equity loans and lines		322		—			10		37		369
Commercial real estate		2,040		—			—		334		2,374
Construction and land		785		(25	)		8		90		858
Multi-family residential		86		—			—		2		88
Commercial and industrial		683		(1,990	)		18		2,406		1,117
Consumer		400		(8	)		22		45		459

Total allowance for loan losses	$	5,114	$	(2,099	)	$	58	$	3,040	$	6,113


Non-covered acquired loans:
Allowance for loan losses:
One- to four-family first mortgage	$	184	$	(36	)	$	—	$	70	$	218
Home equity loans and lines		21		—			—		100		121
Commercial real estate		—		—			—		—		—
Construction and land		—		—			—		—		—
Multi-family residential		—		—			—		—		—
Commercial and industrial		—		—			—		11		11
Consumer		—		—			—		—		—

Total allowance for loan losses	$	205	$	(36	)	$	—	$	181	$	350


Covered loans:
Allowance for loan losses:
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 allowance for loan losses	$	—	$	—		$	—	$	—	$	—


Total loans:
Allowance for loan losses:
One- to four-family first mortgage	$	982	$	(112	)	$	—	$	196	$	1,066
Home equity loans and lines		343		—			10		137		490
Commercial real estate		2,040		—			—		334		2,374
Construction and land		785		(25	)		8		90		858
Multi-family residential		86		—			—		2		88
Commercial and industrial		683		(1,990	)		18		2,417		1,128
Consumer		400		(8	)		22		45		459

Total allowance for loan losses	$	5,319	$	(2,135	)	$	58	$	3,221	$	6,463


	For the Nine Months Ended September 30, 2012
*(dollars in thousands)*	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Originated loans:
Allowance for loan losses:
One- to four-family first mortgage	$	778	$	—		$	—	$	5		$	783
Home equity loans and lines		336		(15	)		13		(16	)		318
Commercial real estate		1,755		(1,836	)		—		2,100			2,019
Construction and land		904		(215	)		—		(40	)		649
Multi-family residential		64		—			—		15			79
Commercial and industrial		872		(56	)		5		(147	)		674
Consumer		345		(29	)		7		61			384

Total allowance for loan losses	$	5,054	$	(2,151	)	$	25	$	1,978		$	4,906


Non-covered acquired loans:
Allowance for loan losses:
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 allowance for loan losses	$	—	$	—		$	—	$	—		$	—


Covered loans:
Allowance for loan losses:
One- to four-family first mortgage	$	—	$	—		$	—	$	—		$	—
Home equity loans and lines		—		—			—		—			—
Commercial real estate		—		—			—		—			—
Construction and land		—		—			—		—			—
Multi-family residential		—		—			—		—			—
Commercial and industrial		50		—			—		(50	)		—
Consumer		—		—			—		—			—

Total allowance for loan losses	$	50	$	—		$	—	$	(50	)	$	—


Total loans:
Allowance for loan losses:
One- to four-family first mortgage	$	778	$	—		$	—	$	5		$	783
Home equity loans and lines		336		(15	)		13		(16	)		318
Commercial real estate		1,755		(1,836	)		—		2,100			2,019
Construction and land		904		(215	)		—		(40	)		649
Multi-family residential		64		—			—		15			79
Commercial and industrial		922		(56	)		5		(197	)		674
Consumer		345		(29	)		7		61			384

Total allowance for loan losses	$	5,104	$	(2,151	)	$	25	$	1,928		$	4,906

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


	September 30, 2013
*(dollars in thousands)*	Pass		Special Mention		Substandard		Doubtful		Total
Originated loans:
One- to four-family first mortgage	$	130,088	$	504	$	1,541	$	—	$	132,133
Home equity loans and lines		30,228		402		3		—		30,633
Commercial real estate		201,698		1,875		4,307		—		207,880
Construction and land		66,559		151		1,312		—		68,022
Multi-family residential		6,664		881		—		—		7,545
Commercial and industrial		70,899		3,765		2,241		—		76,905
Consumer		38,089		49		174		—		38,312

Total loans	$	544,225	$	7,627	$	9,578	$	—	$	561,430


Non-covered acquired loans:
One- to four-family first mortgage	$	34,340	$	66	$	5,611	$	—	$	40,017
Home equity loans and lines		7,200		87		574		—		7,861
Commercial real estate		31,155		—		3,771		—		34,926
Construction and land		1,090		63		973		—		2,126
Multi-family residential		5,473		35		2,474		—		7,982
Commercial and industrial		2,301		—		—		—		2,301
Consumer		507		—		—		—		507

Total loans	$	82,066	$	251	$	13,403	$	—	$	95,720


Covered:
One- to four-family first mortgage	$	4,053	$	483	$	1,456	$	—	$	5,992
Home equity loans and lines		2,194		19		214		—		2,427
Commercial real estate		9,412		241		1,189		—		10,842
Construction and land		1,717		117		220		—		2,054
Multi-family residential		414		923		—		—		1,337
Commercial and industrial		358		4		710		—		1,072
Consumer		—		—		—		—		—

Total loans	$	18,148	$	1,787	$	3,789	$	—	$	23,724


Total:
One- to four-family first mortgage	$	168,481	$	1,053	$	8,608	$	—	$	178,142
Home equity loans and lines		39,622		508		791		—		40,921
Commercial real estate		242,265		2,116		9,267		—		253,648
Construction and land		69,366		331		2,505		—		72,202
Multi-family residential		12,551		1,839		2,474		—		16,864
Commercial and industrial		73,558		3,769		2,951		—		80,278
Consumer		38,596		49		174		—		38,819

Total loans	$	644,439	$	9,665	$	26,770	$	—	$	680,874


	December 31, 2012
*(dollars in thousands)*	Pass		Special Mention		Substandard		Doubtful		Total
Originated loans:
One- to four-family first mortgage	$	114,278	$	690	$	1,774	$	—	$	116,742
Home equity loans and lines		26,871		56		67		—		26,994
Commercial real estate		176,410		4,951		4,443		—		185,804
Construction and land		66,441		267		167		—		66,875
Multi-family residential		7,030		899		528		—		8,457
Commercial and industrial		63,561		2,590		170		—		66,321
Consumer		33,280		60		1		—		33,341

Total loans	$	487,871	$	9,513	$	7,150	$	—	$	504,534


Non-covered acquired loans:
One- to four-family first mortgage	$	43,673	$	952	$	5,318	$	—	$	49,943
Home equity loans and lines		9,402		82		639		—		10,123
Commercial real estate		37,137		782		6,213		—		44,132
Construction and land		3,072		106		472		—		3,650
Multi-family residential		8,756		264		798		—		9,818
Commercial and industrial		4,424		—		45		—		4,469
Consumer		695		—		—		—		695

Total loans	$	107,159	$	2,186	$	13,485	$	—	$	122,830


Covered:
One- to four-family first mortgage	$	8,555	$	254	$	2,322	$	—	$	11,131
Home equity loans and lines		3,147		28		134		—		3,309
Commercial real estate		20,563		—		2,306		—		22,869
Construction and land		3,432		4		1,568		—		5,004
Multi-family residential		424		959		—		—		1,383
Commercial and industrial		577		5		881		—		1,463
Consumer		565		23		17		—		605

Total loans	$	37,263	$	1,273	$	7,228	$	—	$	45,764


Total:
One- to four-family first mortgage	$	166,506	$	1,896	$	9,414	$	—	$	177,816
Home equity loans and lines		39,420		166		840		—		40,426
Commercial real estate		234,110		5,733		12,962		—		252,805
Construction and land		72,945		377		2,207		—		75,529
Multi-family residential		16,210		2,122		1,326		—		19,658
Commercial and industrial		68,562		2,595		1,096		—		72,253
Consumer		34,540		83		18		—		34,641

Total loans	$	632,293	$	12,972	$	27,863	$	—	$	673,128

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

•

Pass loans are of satisfactory quality.

•

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

•

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

•

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

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

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


	September 30, 2013
*(dollars in thousands)*	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current Loans		Total Loans
Originated loans:
Real estate loans:
One- to four-family first mortgage	$	1,667	$	368	$	274	$	2,309	$	129,824	$	132,133
Home equity loans and lines		48		15		3		66		30,567		30,633
Commercial real estate		53		—		1,253		1,306		206,574		207,880
Construction and land		2		13		102		117		67,905		68,022
Multi-family residential		—		—		—		—		7,545		7,545

Total real estate loans		1,770		396		1,632		3,798		442,415		446,213


Other loans:
Commercial and industrial		1,557		497		1		2,055		74,850		76,905
Consumer		415		54		174		643		37,669		38,312

Total other loans		1,972		551		175		2,698		112,519		115,217

Total loans	$	3,742	$	947	$	1,807	$	6,496	$	554,934	$	561,430


Non-covered acquired loans:
Real estate loans:
One- to four-family first mortgage	$	1,726	$	388	$	3,991	$	6,105	$	33,912	$	40,017
Home equity loans and lines		26		—		243		269		7,592		7,861
Commercial real estate		2,232		96		701		3,029		31,897		34,926
Construction and land		8		69		973		1,050		1,076		2,126
Multi-family residential		854		—		897		1,751		6,231		7,982

Total real estate loans		4,846		553		6,805		12,204		80,708		92,912


Other loans:
Commercial and industrial		—		—		—		—		2,301		2,301
Consumer		23		—		—		23		484		507

Total other loans		23		—		—		23		2,785		2,808

Total loans	$	4,869	$	553	$	6,805	$	12,227	$	83,493	$	95,720


Covered loans:
Real estate loans:
One- to four-family first mortgage	$	740	$	586	$	1,115	$	2,441	$	3,551	$	5,992
Home equity loans and lines		187		49		127		363		2,064		2,427
Commercial real estate		65		—		668		733		10,109		10,842
Construction and land		38		30		95		163		1,891		2,054
Multi-family residential		—		—		—		—		1,337		1,337

Total real estate loans		1,030		665		2,005		3,700		18,952		22,652


Other loans:
Commercial and industrial		3		—		169		172		900		1,072
Consumer		—		—		—		—		—		—

Total other loans		3		—		169		172		900		1,072

Total loans	$	1,033	$	665	$	2,174	$	3,872	$	19,852	$	23,724


Total loans:
Real estate loans:
One- to four-family first mortgage	$	4,133	$	1,342	$	5,380	$	10,855	$	167,287	$	178,142
Home equity loans and lines		261		64		373		698		40,223		40,921
Commercial real estate		2,350		96		2,622		5,068		248,580		253,648
Construction and land		48		112		1,170		1,330		70,872		72,202
Multi-family residential		854		—		897		1,751		15,113		16,864

Total real estate loans		7,646		1,614		10,442		19,702		542,075		561,777


Other loans:
Commercial and industrial		1,560		497		170		2,227		78,051		80,278
Consumer		438		54		174		666		38,153		38,819

Total other loans		1,998		551		344		2,893		116,204		119,097

Total loans	$	9,644	$	2,165	$	10,786	$	22,595	$	658,279	$	680,874


	December 31, 2012
*(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	$	2,241	$	236	$	20	$	2,497	$	114,245	$	116,742
Home equity loans and lines		63		17		—		80		26,914		26,994
Commercial real estate		1,008		757		511		2,276		183,528		185,804
Construction and land		285		—		167		452		66,423		66,875
Multi-family residential		220		—		528		748		7,709		8,457

Total real estate loans		3,817		1,010		1,226		6,053		398,819		404,872


Other loans:
Commercial and industrial		60		35		170		265		66,056		66,321
Consumer		479		449		1		929		32,412		33,341

Total other loans		539		484		171		1,194		98,468		99,662

Total loans	$	4,356	$	1,494	$	1,397	$	7,247	$	497,287	$	504,534


Non-covered acquired loans:
Real estate loans:
One- to four-family first mortgage	$	726	$	240	$	1,489	$	2,455	$	47,488	$	49,943
Home equity loans and lines		54		98		147		299		9,824		10,123
Commercial real estate		348		92		2,907		3,347		40,785		44,132
Construction and land		577		—		366		943		2,707		3,650
Multi-family residential		311		—		678		989		8,829		9,818

Total real estate loans		2,016		430		5,587		8,033		109,633		117,666


Other loans:
Commercial and industrial		48		65		—		113		4,356		4,469
Consumer		—		—		—		—		695		695

Total other loans		48		65		—		113		5,051		5,164

Total loans	$	2,064	$	495	$	5,587	$	8,146	$	114,684	$	122,830


Covered loans:
Real estate loans:
One- to four-family first mortgage	$	1,438	$	1,079	$	1,706	$	4,223	$	6,908	$	11,131
Home equity loans and lines		294		—		135		429		2,880		3,309
Commercial real estate		76		4		1,209		1,289		21,580		22,869
Construction and land		89		6		1,249		1,344		3,660		5,004
Multi-family residential		—		—		—		—		1,383		1,383

Total real estate loans		1,897		1,089		4,299		7,285		36,411		43,696


Other loans:
Commercial and industrial		—		75		366		441		1,022		1,463
Consumer		44		4		13		61		544		605

Total other loans		44		79		379		502		1,566		2,068

Total loans	$	1,941	$	1,168	$	4,678	$	7,787	$	37,977	$	45,764


Total loans:
Real estate loans:
One- to four-family first mortgage	$	4,405	$	1,555	$	3,215	$	9,175	$	168,641	$	177,816
Home equity loans and lines		411		115		282		808		39,618		40,426
Commercial real estate		1,432		853		4,627		6,912		245,893		252,805
Construction and land		951		6		1,782		2,739		72,790		75,529
Multi-family residential		531		—		1,206		1,737		17,921		19,658

Total real estate loans	$	7,730		2,529		11,112		21,371		544,863		566,234


Other loans:
Commercial and industrial		108		175		536		819		71,434		72,253
Consumer		523		453		14		990		33,651		34,641

Total other loans		631		628		550		1,809		105,085		106,894

Total loans	$	8,361	$	3,157	$	11,662	$	23,180	$	649,948	$	673,128

Excluding non-covered acquired and covered loans (collectively referred to as “Acquired Loans”) with deteriorated credit quality, as of September 30, 2013 and December 31, 2012, the Company did not have any loans greater than 90 days past due and accruing.

The following is a summary of information pertaining to impaired loans excluding acquired loans with deteriorated credit quality as of the dates indicated.


	As of Period Ended September 30, 2013
*(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	$	656	$	656	$	—	$	820	$	21
Home equity loans and lines		3		3		—		33		—
Commercial real estate		360		360		—		1,657		—
Construction and land		19		19		—		100		—
Multi-family residential		—		—		—		423		—
Commercial and industrial		970		970		—		717		21
Consumer		—		—		—		—		—

Total	$	2,008	$	2,008	$	—	$	3,750	$	42


With an allowance recorded:
One- to four-family first mortgage	$	—	$	—	$	—	$	163	$	—
Home equity loans and lines		—		—		—		—		—
Commercial real estate		—		—		—		133		—
Construction and land		—		—		—		7		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		1,271		1,271		295		907		29
Consumer		—		—		—		—		—

Total	$	1,271	$	1,271	$	295	$	1,210	$	29


Total impaired loans:
One- to four-family first mortgage	$	656	$	656	$	—	$	983	$	21
Home equity loans and lines		3		3		—		33		—
Commercial real estate		360		360		—		1,790		—
Construction and land		19		19		—		107		—
Multi-family residential		—		—		—		423		—
Commercial and industrial		2,241		2,241		295		1,624		50
Consumer		—		—		—		—		—

Total	$	3,279	$	3,279	$	295	$	4,960	$	71


	As of Period Ended December 31, 2012
*(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	$	1,117	$	1,117	$	—	$	956	$	62
Home equity loans and lines		56		56		—		71		2
Commercial real estate		2,985		2,985		—		3,451		100
Construction and land		60		60		—		631		—
Multi-family residential		528		528		—		528		—
Commercial and industrial		—		—		—		48		—
Consumer		—		—		—		—		—

Total	$	4,746	$	4,746	$	—	$	5,685	$	164


With an allowance recorded:
One- to four-family first mortgage	$	347	$	347	$	49	$	445	$	23
Home equity loans and lines		—		—		—		3		—
Commercial real estate		443		443		134		296		30
Construction and land		—		—		—		950		—
Multi-family residential		—		—		—		—		—
Commercial and industrial		—		—		—		29		—
Consumer		—		—		—		—		—

Total	$	790	$	790	$	183	$	1,723	$	53


Total impaired loans:
One- to four-family first mortgage	$	1,464	$	1,464	$	49	$	1,401	$	85
Home equity loans and lines		56		56		—		74		2
Commercial real estate		3,428		3,428		134		3,747		130
Construction and land		60		60		—		1,581		—
Multi-family residential		528		528		—		528		—
Commercial and industrial		—		—		—		77		—
Consumer		—		—		—		—		—

Total	$	5,536	$	5,536	$	183	$	7,408	$	217

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


	September 30, 2013								December 31, 2012
*(dollars in thousands)*	Originated		Non- covered Acquired⁽¹⁾		Covered		Total		Originated		Non- covered Acquired⁽¹⁾		Covered		Total
Nonaccrual loans:
One- to four-family first mortgage	$	661	$	4,610	$	2,426	$	7,697	$	126	$	4,518	$	2,616	$	7,260
Home equity loans and lines		3		561		149		713		—		149		135		284
Commercial real estate		1,943		1,806		1,212		4,961		1,187		4,180		1,617		6,984
Construction and land		102		1,209		749		2,060		166		543		3,404		4,113
Multi-family residential		—		2,473		—		2,473		529		798		—		1,327
Commercial and industrial		2,242		—		1,155		3,397		170		—		1,746		1,916
Consumer		174		—		115		289		1		—		62		63

Total	$	5,125	$	10,659	$	5,806	$	21,590	$	2,179	$	10,188	$	9,580	$	21,947

⁽¹⁾	Nonaccrual non-covered acquired loans accounted for under ASC 310-30 totaled $3.4 million as of September 30, 2013 and December 31, 2012.

As of September 30, 2013, the Company was not committed 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. Effective January 1, 2011, the Company adopted the provisions of ASU No. 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, which provides clarification on the determination of whether loan restructurings are considered troubled debt restructurings (“TDRs”). In accordance with the ASU, in order to be considered a TDR, the Company must conclude that the restructuring of a loan to a borrower who is experiencing financial difficulties constitutes a “concession”. The Company defines a concession as a modification of existing terms granted to a borrower for economic or legal reasons related to the borrower’s financial difficulties that the Company would otherwise not consider. The concession is either granted through an agreement with the customer or is imposed by a court or by a law. Concessions include modifying original loan terms to reduce or defer cash payments required as part of the loan agreement, including but not limited to:

•

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

•

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

•

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

•

a reduction of accrued interest receivable on the debt.

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

•

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

•

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

•

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

•

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

•

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

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

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


	As of September 30, 2013
*(dollars in thousands)*	Current		Past Due Greater Than 30 Days		Nonaccrual TDRs		Total TDRs⁽¹⁾
Originated loans:
Real estate loans:
One- to four-family first mortgage	$	—	$	—	$	298	$	298
Home equity loans and lines		—		—		—		—
Commercial real estate		281		—		111		392
Construction and land		151		—		—		151
Multi-family residential		—		—		—		—

Total real estate loans		432		—		409		841


Other loans:
Commercial and industrial		—		—		—		—
Consumer		5		—		—		5

Total other loans		5		—		—		5

Total loans	$	437	$	—	$	409	$	846


Non-covered acquired loans:
Real estate loans:
One- to four-family first mortgage	$	—	$	—	$	590	$	590
Home equity loans and lines		—		—		—		—
Commercial real estate		—		—		1,067		1,067
Construction and land		—		—		—		—
Multi-family residential		—		—		676		676

Total real estate loans		—		—		2,333		2,333


Other loans:
Commercial and industrial		—		—		—		—
Consumer		—		—		—		—

Total other loans		—		—		—		—

Total loans	$	—	$	—	$	2,333	$	2,333


Covered loans:
Real estate loans:
One- to four-family first mortgage	$	—	$	—	$	—	$	—
Home equity loans and lines		—		—		—		—
Commercial real estate		—		—		—		—
Construction and land		—		—		413		413
Multi-family residential		—		—		—		—

Total real estate loans		—		—		413		413


Other loans:
Commercial and industrial		—		—		846		846
Consumer		6		—		35		41

Total other loans		6		—		881		887

Total loans	$	6	$	—	$	1,294	$	1,300


Total loans:
Real estate loans:
One- to four-family first mortgage	$	—	$	—	$	888	$	888
Home equity loans and lines		—		—		—		—
Commercial real estate		281		—		1,178		1,459
Construction and land		151		—		413		564
Multi-family residential		—		—		676		676

Total real estate loans		432		—		3,155		3,587


Other loans:
Commercial and industrial		—		—		846		846
Consumer		11		—		35		46

Total other loans		11		—		881		892

Total loans	$	443	$	—	$	4,036	$	4,479


	As of December 31, 2012
*(dollars in thousands)*	Current		Past Due Greater Than 30 Days		Nonaccrual TDRs		Total TDRs⁽¹⁾
Originated loans:
Real estate loans:
One- to four-family first mortgage	$	—	$	310	$	—	$	310
Home equity loans and lines		—		—		—		—
Commercial real estate		—		299		112		411
Construction and land		182		—		—		182
Multi-family residential		—		—		—		—

Total real estate loans		182		609		112		903


Other loans:
Commercial and industrial		5		—		—		5
Consumer		12		—		—		12

Total other loans		17		—		—		17

Total loans	$	199	$	609	$	112	$	920


Non-covered acquired loans:
Real estate loans:
One- to four-family first mortgage	$	—	$	—	$	52	$	52
Home equity loans and lines		—		—		—		—
Commercial real estate		—		—		1,126		1,126
Construction and land		—		—		—		—
Multi-family residential		—		—		678		678

Total real estate loans		—		—		1,856		1,856


Other loans:
Commercial and industrial		—		—		—		—
Consumer		—		—		—		—

Total other loans		—		—		—		—

Total loans	$	—	$	—	$	1,856	$	1,856


Covered loans:
Real estate loans:
One- to four-family first mortgage	$	—	$	—	$	—	$	—
Home equity loans and lines		—		—		—		—
Commercial real estate		—		—		—		—
Construction and land		289		—		—		289
Multi-family residential		—		—		—		—

Total real estate loans		289		—		—		289


Other loans:
Commercial and industrial		—		—		896		896
Consumer		17		—		—		17

Total other loans		17		—		896		913

Total loans	$	306	$	—	$	896	$	1,202


Total loans:
Real estate loans:
One- to four-family first mortgage	$	—	$	310	$	52	$	362
Home equity loans and lines		—		—		—		—
Commercial real estate		—		299		1,238		1,537
Construction and land		471		—		—		471
Multi-family residential		—		—		678		678

Total real estate loans		471		609		1,968		3,048


Other loans:
Commercial and industrial		5		—		896		901
Consumer		29		—		—		29

Total other loans		34		—		896		930

Total loans	$	505	$	609	$	2,864	$	3,978

None of the TDRs defaulted subsequent to the restructuring through the date the financial statements were issued. The Company restructured, as a TDR, one loan totaling $442,000 during the third quarter of 2013.

6. Fair Value Disclosures

The Company groups its financial assets and liabilities measured 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 of inputs 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 of input that is significant to the fair value measurement. Management reviews and updates the fair value hierarchy classifications of the Company’s assets and liabilities quarterly.

Recurring Basis

Investment Securities Available for Sale

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

Management primarily identifies investment securities which may have traded in illiquid or inactive markets by identifying instances of a significant decrease in the volume and frequency of trades, relative to historical levels, as well as instances of a significant widening of the bid-ask spread in the brokered markets. Investment securities that are deemed to have been trading in illiquid or inactive markets may require the use of significant unobservable inputs. For example, management may use quoted prices for similar investment securities in the absence of a liquid and active market for the investment securities being valued. As of September 30, 2013, 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 and liabilities measured for fair value on a recurring basis as of September 30, 2013 and December 31, 2012.


			Fair Value Measurements Using
*(dollars in thousands)*	September 30, 2013		Level 1		Level 2		Level 3
Available for sale securities:
U.S. agency mortgage-backed	$	96,905	$	—	$	96,905	$	—
Non-U.S. agency mortgage-backed		10,538		—		10,538		—
Municipal bonds		20,417		—		20,417		—
U.S. government agency		23,594		—		23,594		—

Total	$	151,454	$	—	$	151,454	$	—


			Fair Value Measurements Using
*(dollars in thousands)*	December 31, 2012		Level 1		Level 2		Level 3
Available for sale securities:
U.S. agency mortgage-backed	$	102,513	$	—	$	102,513	$	—
Non-U.S. agency mortgage-backed		12,668		—		12,668		—
Municipal bonds		17,585		—		17,585		—
U.S. government agency		24,490		—		24,490		—

Total	$	157,256	$	—	$	157,256	$	—

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

Nonrecurring Basis

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

Acquired loans, the FDIC loss sharing receivable, acquired FHLB advances, and acquired interest-bearing deposit liabilities are measured on a nonrecurring basis using significant unobservable inputs (Level 3).

The Company has segregated all financial assets and liabilities 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, 2013		Level 1		Level 2		Level 3

Assets
Acquired loans with deteriorated credit quality	$	28,343	$	—	$	—	$	28,343
Acquired loans without deteriorated credit quality		90,751		—		—		90,751
Impaired loans, excluding acquired loans		2,985		—		—		2,985
Repossessed assets		5,850		—		—		5,850
FDIC loss sharing receivable		13,577		—		—		13,577

Total	$	141,506	$	—	$	—	$	141,506


Liabilities
Deposits acquired through business combinations	$	42,437	$	—	$	—	$	42,437

Total	$	42,437	$	—	$	—	$	42,437


			Fair Value Measurements Using
*(dollars in thousands)*	December 31, 2012		Level 1		Level 2		Level 3

Assets
Acquired loans with deteriorated credit quality	$	50,854	$	—	$	—	$	50,854
Acquired loans without deteriorated credit quality		117,536		—		—		117,536
Impaired loans, excluding acquired loans		5,353		—		—		5,353
Repossessed assets		6,454		—		—		6,454
FDIC loss sharing receivable		15,546		—		—		15,546

Total	$	195,743	$	—	$	—	$	195,743


Liabilities
Deposits acquired through business combinations	$	81,948	$	—	$	—	$	81,948
FHLB advances acquired through business combinations		18,257		—		—		18,257

Total	$	100,205	$	—	$	—	$	100,205

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 statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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

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

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

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

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

The fair value of loans are 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 the FDIC loss sharing receivable is determined by discounting projected cash flows from loss sharing agreements based on expected reimbursements for losses at the applicable loss sharing percentages based on the terms of the loss sharing agreements.

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 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, 2013
*(dollars in thousands)*	Carrying Amount		Total		Level 1		Level 2		Level 3

Financial Assets
Cash and cash equivalents	$	35,953	$	35,953	$	35,953	$	—	$	—
Interest-bearing deposits in banks		3,185		3,185		3,185		—		—
Investment securities available for sale		151,454		151,454		—		151,454		—
Investment securities held to maturity		8,965		8,904		—		8,904		—
Mortgage loans held for sale		1,712		1,712		—		1,712		—
Loans, net		674,412		679,035		—		—		679,035
Cash surrender value of BOLI		17,638		17,638		17,638		—		—
FDIC loss sharing receivable		13,577		13,577		—		—		13,577

Financial Liabilities
Deposits	$	765,810	$	766,274	$	—	$	723,837	$	42,437
Short-term FHLB advances		40,900		40,900		40,900		—		—
Long-term FHLB advances		10,000		10,521		—		10,521		—


			Fair Value Measurements at December 31, 2012
*(dollars in thousands)*	Carrying Amount		Total		Level 1		Level 2		Level 3

Financial Assets
Cash and cash equivalents	$	39,539	$	39,539	$	39,539	$	—	$	—
Interest-bearing deposits in banks		3,529		3,529		3,529		—		—
Investment securities available for sale		157,256		157,256		—		157,256		—
Investment securities held to maturity		1,665		1,746		—		1,746		—
Mortgage loans held for sale		5,627		5,627		—		5,627		—
Loans, net		667,809		676,622		—		—		676,622
Cash surrender value of BOLI		17,286		17,286		17,286		—		—
FDIC loss sharing receivable		15,546		15,546		—		—		15,546

Financial Liabilities
Deposits	$	771,429	$	774,325	$	—	$	692,377	$	81,948
Short-term FHLB advances		10,000		10,000		10,000		—		—
Long-term FHLB advances		36,257		37,619		—		19,362		18,257

7. Subsequent Events

On November 5, 2013, the Company announced it has entered into a definitive agreement to acquire Britton & Koontz Capital Corporation. Under the terms of the agreement, shareholders of Britton & Koontz Capital Corporation will receive $16.14 per share in cash upon completion of the merger. The combined company will have total assets of approximately $1.2 billion, $843 million in loans and $990 million in deposits. The merger, which is expected to be completed in the first quarter of 2014, is subject to Britton & Koontz Capital Corporation shareholder approval, regulatory approval, which is incorporated herein by reference, and other customary conditions. For additional information, see the Company’s current report on Form 8-K filed on November 5, 2013 related to the definitive agreement.

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

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of Home Bancorp, Inc. and its wholly owned subsidiary, Home Bank, from December 31, 2012 to September 30, 2013 and on its results of operations for the three and nine months ended September 30, 2013 and September 30, 2012. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this quarterly report on Form 10-Q, particularly the consolidated financial statements and related notes appearing in Item 1.

Forward-Looking Statements

To the extent that statements in this Form 10-Q relate to future plans, objectives, financial results or performance of the Company or Bank, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which are based on management’s current information, estimates and assumptions and the current economic environment, are generally identified by the use of words such as “plan”, “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions, or by future or conditional terms such as “will”, “would”, “should”, “could”, “may”, “likely”, “probably”, or “possibly”. The Company’s or the Bank’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties. Factors that may cause actual results to differ materially from these forward-looking statements include, but are not limited to, the risk factors described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the Securities Exchange Commission (“SEC”) for the year ended December 31, 2012. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

EXECUTIVE OVERVIEW

During the third quarter of 2013, the Company earned $2.5 million, a decrease of $570,000, or 18.7%, compared to the third quarter of 2012. Diluted earnings per share for the third quarter of 2013 were $0.37, a decrease of $0.05, or 11.9%, compared to the third quarter of 2012. During the nine months ended September 30, 2013, the Company earned $5.6 million, a decrease of $1.3 million, or 18.6%, compared to the nine months ended September 30, 2012. Diluted earnings per share for the nine months ended September 30, 2013 were $0.80, a decrease of $0.15, or 15.8%, compared to the nine months ended September 30, 2012.

Key components of the Company’s performance during the three months and nine months ended September 30, 2013 are summarized below.

•

Total loans as of September 30, 2013 were $680.9 million, an increase of $7.7 million, or 1.2%, from December 31, 2012. Increases in commercial and industrial loans (up $8.0 million) and other consumer loans (up $4.2 million) were partially offset by decreases in construction and land loans (down $3.3 million) and multi-family residential loans (down $2.8 million). As of September 30, 2013, Covered Loans totaled $23.7 million, a decrease of $22.0 million, or 48.2%, from December 31, 2012.

•

Core deposits (i.e., checking, savings, and money market accounts) totaled $556.4 million as of September 30, 2013, an increase of $38.0 million, or 7.3%, from December 31, 2012. The increase in core deposits was offset by declines in certificate of deposits (“CDs”), as higher-priced CDs matured. Total customer deposits as of September 30, 2013 were $765.8 million, a decrease of $5.6 million, or 0.7%, from December 31, 2012.

•

Interest income decreased $894,000, or 7.4%, in the third quarter of 2013 compared to the third quarter of 2012. For the nine months ended September 30, 2013, interest income decreased $1.7 million, or 4.8%, compared to the nine months ended September 30, 2012. The decreases relate primarily to a decline in loan interest income as a result of lower average yields earned on loans, reflecting the continuing low interest rate environment as well as the effect of significant competition for loans.

•

Interest expense decreased $381,000, or 31.7%, for the third quarter of 2013 compared to the third quarter of 2012. For the nine months ended September 30, 2013, interest expense decreased $1.0 million, or 26.7%, compared to the nine months ended September 30, 2012. The decreases were primarily the result of reduced market rates and changes in the mix of customer deposits.

•

The provision for loan losses totaled $453,000 for the third quarter of 2013, an increase of $397,000, or 713.0%, compared to the third quarter of 2012. The increase in provisions for loan losses was primarily the result of loan growth and deterioration in non-covered acquired loans. For the nine months ended September 30, 2013, the provision for loan losses totaled $3.2 million, an increase of $1.3 million, or 67.1%, compared to the nine months ended September 30, 2012. The increase in provisions for loan losses was primarily the result of loan growth.

•

As of September 30, 2013, the Company’s ratio of allowance for loan losses to total loans was 0.95%, compared to 0.79% at December 31, 2012. Excluding Acquired Loans, the ratio of the allowance for loan losses to total loans was 1.09% at September 30, 2013, compared to 1.01% at December 31, 2012. Net charge-offs were $2.1 million for the first nine months of 2013 and 2012.

•

Noninterest income for the third quarter of 2013 decreased $421,000, or 20.2%, compared to the third quarter of 2012, due primarily to lower gains on the sale of loans (down $337,000) and the absence of gains on the sale of securities ($163,000). For the nine months ended September 30, 2013, noninterest income decreased $44,000, or 0.8%, compared to the nine months ended September 30, 2012, due primarily to lower discount accretion on the FDIC loss sharing receivable (down $127,000) and lower gains on the sale of mortgage loans (down $106,000), which were partially offset by increases in gains on the sale of securities (up $206,000).

•

Noninterest expense for the third quarter of 2013 decreased $499,000, or 6.0%, compared to the third quarter of 2012, due primarily to lower foreclosed asset expenses (down $157,000), other expenses (down $155,000), data processing and communication expenses (down $120,000) and marketing and advertising expenses (down $50,000). For the nine months ended September 30, 2013, noninterest expense decreased $41,000, or 0.2%, compared to the nine months ended September 30, 2012, due primarily to lower foreclosed asset expenses (down $522,000), data processing and communications (down $192,000) and professional services (down $77,000), which were partially offset by higher compensation and benefits expenses (up $425,000), Louisiana shares tax (up $162,000) and occupancy expenses (up $129,000).

FINANCIAL CONDITION

Loans, Asset Quality and Allowance for Loan Losses

Loans – Loans totaled $680.9 million as of September 30, 2013, an increase of $7.7 million, or 1.2%, from December 31, 2012. The increase in loans was primarily driven by commercial and industrial loans (up $8.0 million) and other consumer loans (up $4.2 million), which were largely offset by decreases in construction and land loans (down $3.3 million) and multi-family residential loans (down $2.8 million). Covered Loans totaled $23.7 million as of September 30, 2013, a decrease of $22.0 million, or 48.2%, compared to December 31, 2012. The decrease in the Covered Loan portfolio was primarily the result of principal repayments.

The following table summarizes the composition of the Company’s loan portfolio (including Covered Loans) as of the dates indicated.


	September 30,		December 31,		Increase/(Decrease)
*(dollars in thousands)*	2013		2012		Amount			Percent
Real estate loans:
One- to four-family first mortgage	$	178,142	$	177,816	$	326			0.2	%
Home equity loans and lines		40,922		40,425		497			1.2
Commercial real estate		253,648		252,805		843			0.3
Construction and land		72,201		75,529		(3,328	)		(4.4	)
Multi-family residential		16,864		19,659		(2,795	)		(14.2	)

Total real estate loans		561,777		566,234		(4,457	)		(0.8	)

Other loans:
Commercial and industrial		80,278		72,253		8,025			11.1
Consumer		38,819		34,641		4,178			12.1

Total other loans		119,097		106,894		12,203			11.4

Total loans	$	680,874	$	673,128	$	7,746			1.2	%

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 the payment is due. In most cases, deficiencies are promptly resolved. If the delinquency continues, late charges are assessed and additional efforts are made to collect the deficiency. All loans which are designated as “special mention,” classified or which are delinquent 90 days or more are reported to the Board of Directors of the Bank monthly. For loans where the collection of principal or interest payments is doubtful, the accrual of interest income ceases. It is our policy, with certain limited exceptions, to discontinue accruing interest and reverse any interest accrued on any loan which is 90 days or more past due. On occasion, this action may be taken earlier if the financial condition of the borrower raises significant concern with regard to his/her ability to service the debt in accordance with the terms of the loan agreement. Interest income is not accrued on these loans until the borrower’s financial condition and payment record demonstrate an ability to service the debt.

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

An impaired loan generally is one for which it is probable, based on current information, that the lender will not collect all the amounts due under the contractual terms of the loan. Large groups of smaller balance, homogeneous loans are collectively evaluated for impairment. Loans collectively evaluated for impairment include smaller balance commercial loans, residential real estate loans and consumer loans. These loans are evaluated as a group because they have similar characteristics and performance experience. Larger (i.e., loans with balances of $100,000 or greater) commercial real estate, multi-family residential, construction and land loans and commercial and industrial loans are individually evaluated for impairment. Third party property valuations are obtained at the time of origination for real estate secured loans. When a determination is made that a loan has deteriorated to the point of becoming a problem loan, updated valuations may be ordered to help determine if there is impairment, which may lead to a recommendation for partial charge off or appropriate allowance allocation. Property valuations are ordered through, and are reviewed by, an appraisal officer. The Company typically orders an “as is” valuation for collateral property if the loan is in a criticized loan classification. The Board of Directors is provided with monthly reports on impaired loans. As of September 30, 2013 and December 31, 2012, loans individually evaluated for impairment, excluding Acquired Loans, amounted to $3.3 million and $5.5 million, respectively. As of September 30, 2013 and December 31, 2012, substandard loans, excluding Covered Loans, amounted to $23.0 million and $20.6 million, respectively. The amount of the allowance for loan losses allocated to originated impaired or substandard loans totaled $295,000 and $183,000 as of September 30, 2013 and December 31, 2012, respectively. There were no assets classified as doubtful or loss as of September 30, 2013 and December 31, 2012.

Federal regulations and our policies require that we utilize an internal asset classification system as a means of reporting problem and potential problem assets. We have incorporated an internal asset classification system, substantially consistent with Federal banking regulations, as a part of our credit monitoring system. Federal banking regulations set forth a classification scheme for problem and potential problem assets as “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net

worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

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

Nonperforming assets (“NPAs”) defined as nonaccrual loans, accruing loans past due 90 days or more and foreclosed assets, excluding Covered Assets, amounted to $18.6 million, or 2.0% of total assets, as of September 30, 2013, compared to $16.1 million, or 1.8% of total assets, as of December 31, 2012. Total NPAs, including Covered Assets, amounted to $27.4 million, or 2.9% of total assets as of September 30, 2013, compared to $28.4 million, or 2.9% of total assets as of December 31, 2012.

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

The following table sets forth the composition of the Company’s NPAs and troubled debt restructurings as of the dates indicated.


	September 30, 2013									December 31, 2012
			Acquired Loans									Acquired Loans
*(dollars in thousands)*	Originated		Non-covered Acquired⁽¹⁾		Covered		Total			Originated		Non-covered Acquired⁽¹⁾		Covered		Total
Nonaccrual loans:
Real estate loans:
One- to four-family first mortgage	$	661	$	4,610	$	2,426	$	7,697		$	126	$	4,518	$	2,616	$	7,260
Home equity loans and lines		3		561		149		713			—		149		135		284
Commercial real estate		1,943		1,806		1,212		4,961			1,187		4,180		1,617		6,984
Construction and land		102		1,209		749		2,060			166		543		3,404		4,113
Multi-family residential		—		2,473		—		2,473			529		798		—		1,327
Other loans:
Commercial and industrial		2,242		—		1,155		3,397			170		—		1,746		1,916
Consumer		174		—		115		289			1		—		62		63

Total nonaccrual loans		5,125		10,659		5,806		21,590			2,179		10,188		9,580		21,947
Accruing loans 90 days or more past due		—		—		—		—			—		—		—		—

Total nonperforming loans		5,125		10,659		5,806		21,590			2,179		10,188		9,580		21,947
Foreclosed assets		638		2,148		3,064		5,850			2,760		1,011		2,683		6,454

Total nonperforming assets		5,763		12,807		8,870		27,440			4,939		11,199		12,263		28,401
Performing troubled debt restructurings		437		—		6		443			808		—		306		1,114

Total nonperforming assets and troubled debt restructurings	$	6,200	$	12,807	$	8,876	$	27,883		$	5,747	$	11,199	$	12,569	$	29,515

Nonperforming loans to total loans								3.17	%								3.26	%
Nonperforming loans to total assets								2.24	%								2.28	%
Nonperforming assets to total assets								2.85	%								2.95	%

⁽¹⁾

Includes $3.4 million in non-covered acquired loans accounted for under ASC 310-30 at September 30, 2013 and December 31, 2012. Excluding acquired loans and assets, ratios for nonperforming loans to total loans, nonperforming loans to total assets and nonperforming assets to total assets were 0.91%, 0.61% and 0.69%, respectively, at September 30, 2013.

Net loan charge-offs for the third quarter of 2013 were $84,000, compared to $464,000 for the third quarter of 2012. Net loan charge-offs for the nine months ended September 30, 2013 and September 30, 2012 were $2.1 million.

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

With respect to acquired loans, the Company follows the reserve standard set forth in ASC 310, Receivables. At acquisition, the Company reviews each loan to determine whether there is evidence of deterioration in credit quality since origination and if it is probable that the Company will be unable to collect all amounts due according to the loan’s contractual terms. The Company considers expected prepayments and estimates the amount and timing of undiscounted expected principal, interest and other cash flows for each loan pool meeting the criteria above, and determines the excess of the loan pool’s scheduled contractual principal and interest payments in excess of cash flows expected at acquisition as an amount that should not be accreted (nonaccretable difference). The remaining amount, representing the excess of the pool’s cash flows expected to be collected over the fair value, is accreted into interest income over the remaining life of the pool (accretable yield). The Company records a discount on these loans at acquisition to record them at their estimated fair values. As a result, acquired loans subject to ASC 310 are excluded from the calculation of the allowance for loan losses as of the acquisition date. See Note 5 to the Consolidated Financial Statements for additional information concerning our allowance for Acquired Loans.

Acquired loans were recorded as of their acquisition date fair value, which was based on expected cash flows and included an estimation of expected future loan losses. Under current accounting principles, if the Company determines that losses arose after the acquisition date, the additional losses will be reflected as a provision to the allowance for loan losses. As of September 30, 2013, $283,000 of our allowance for loan losses was allocated to loans acquired without deteriorated credit quality and $67,000 of our allowance for loan losses was allocated to acquired loans with deteriorated credit quality.

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

The following table presents the activity in the allowance for loan losses during the first nine months of 2013.


*(dollars in thousands)*	Originated			Non-covered Acquired			Covered		Total

Balance, December 31, 2012	$	5,114		$	205		$	—	$	5,319
Provision charged to operations		3,040			181			—		3,221
Loans charged off		(2,099	)		(36	)		—		(2,135	)
Recoveries on charged off loans		58			—			—		58

Balance, September 30, 2013	$	6,113		$	350		$	—	$	6,463

At September 30, 2013, the Company’s ratio of allowance for loan losses to total loans was 0.95%, compared to 0.79% and 0.73% at December 31, 2012 and September 30, 2012, respectively. Excluding acquired loans, the ratio of allowance for loan losses to total loans was 1.09% at September 30, 2013, compared to 1.01% at December 31, 2012 and September 30, 2012.

Investment Securities

The Company’s investment securities portfolio totaled $160.4 million as of September 30, 2013, an increase of $1.5 million, or 0.9%, from December 31, 2012. As of September 30, 2013, the Company had a net unrealized gain on its available for sale investment securities portfolio of $1.1 million, compared to $4.9 million as of December 31, 2012. The decrease in the unrealized gain primarily reflects increasing long-term market interest rates. The investment securities portfolio had a modified duration of 4.7 and 3.7 years at September 30, 2013 and December 31, 2012, respectively.

The following table summarizes activity in the Company’s investment securities portfolio during the first nine months of 2013.


*(dollars in thousands)*	Available for Sale			Held to Maturity

Balance, December 31, 2012	$	157,256		$	1,665
Purchases		28,895			7,794
Sales		(7,277	)		—
Principal payments and calls		(22,866	)		(456	)
Accretion of discounts and amortization of premiums, net		(795	)		(38	)
Decrease in market value		(3,759	)		—

Balance, September 30, 2013	$	151,454		$	8,965

Funding Sources

Deposits – Deposits totaled $765.8 million as of September 30, 2013, a decrease of $5.6 million, or 0.7%, compared to December 31, 2012. Core deposits totaled $556.4 million as of September 30, 2013, an increase of $38.0 million, or 7.3%, compared to December 31, 2012.

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


	September 30,		December 31,		Increase (Decrease)
*(dollars in thousands)*	2013		2012		Amount			Percent

Demand deposit	$	171,915	$	152,462	$	19,453			12.8	%
Savings		54,709		51,515		3,194			6.2
Money market		203,218		191,191		12,027			6.3
NOW		126,595		123,294		3,301			2.7
Certificates of deposit		209,373		252,967		(43,594	)		(17.2	)

Total deposits	$	765,810	$	771,429	$	(5,619	)		(0.7	)%

Federal Home Loan Bank Advances – Short-term FHLB advances totaled $40.9 million as of September 30, 2013, compared to $10.0 million as of December 31, 2012. Short-term FHLB advances increased primarily due to the payoff of $26.3 million in long-term FHLB advances. Long-term FHLB advances totaled $10.0 million as of September 30, 2013, compared to $36.3 million as of December 31, 2012.

Shareholders’ Equity – Shareholders’ equity provides a source of permanent funding that allows for future growth and provides the Company with a cushion to withstand unforeseen adverse developments. Shareholders’ equity decreased $1.4 million, or 1.0%, from $141.6 million as of December 31, 2012 to $140.2 million as of September 30, 2013. The decrease was primarily the result of stock repurchases of $6.3 million and a $2.5 million decrease in other comprehensive income, which were offset partially by a $5.6 million increase in retained earnings.

As of September 30, 2013, the Bank had regulatory capital that was well in excess of regulatory requirements. The following table details the Bank’s actual levels and current regulatory capital requirements as of September 30, 2013.


	Actual					Required for Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
*(dollars in thousands)*	Amount		Ratio			Amount		Ratio			Amount		Ratio

Tier 1 risk-based capital	$	137,016		21.33	%	$	25,697		4.00	%	$	38,546		6.00	%
Total risk-based capital		143,479		22.33			51,394		8.00			64,243		10.00
Tier 1 leverage capital		137,016		14.29			38,353		4.00			47,942		5.00
Tangible capital		137,016		14.29			14,382		1.50			N/A		N/A

LIQUIDITY AND ASSET/LIABILITY MANAGEMENT

Liquidity Management

Liquidity management encompasses our ability to ensure that funds are available to meet the cash flow requirements of depositors and borrowers, while also ensuring adequate cash flow exists to meet the Company’s needs, including operating, strategic and capital. The Company develops its liquidity management strategies as part of its overall asset/liability management process. Our primary sources of funds are from deposits, amortization of loans, loan prepayments and the maturity of loans, investment securities and other investments, and other funds provided from operations. While scheduled payments from the amortization of loans and investment securities and maturing investment securities are relatively predictable sources of funds, deposit flows and loan prepayments can be greatly influenced by general interest rates, economic conditions and competition. The Company also maintains excess funds in short-term, interest-bearing assets that provide additional liquidity. As of September 30, 2013, cash and cash equivalents totaled $36.0 million. At such date, investment securities available for sale totaled $151.5 million.

The Company uses its liquidity to fund existing and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to invest in other interest-earning assets, and to meet operating expenses. As of September 30, 2013, certificates of deposit maturing within the next 12 months totaled $142.0 million. Based upon historical experience, the Company anticipates that a significant portion of the maturing certificates of deposit will be redeposited with us. For the three months ended September 30, 2013, the average balance of our outstanding FHLB advances was $41.1 million. As of September 30, 2013, the Company had $50.9 million in outstanding FHLB advances and had $311.8 million in additional FHLB advances available.

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

Asset/Liability Management

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

Our interest rate sensitivity also is monitored by management through the use of a model which generates estimates of the change in its net interest income over a range of interest rate scenarios. Based on the Company’s interest rate risk model, the table below sets forth the results of immediate and sustained changes in interest rates as of September 30, 2013.


Shift in Interest Rates (in bps)	% Change in Projected Net Interest Income
+300		(0.5	)%
+200		—
+100		0.2

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 repricings, the magnitude of interest rate changes and corresponding movement in interest rate spreads, and the level of success of asset/liability management strategies.

Off-Balance Sheet Activities

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

The following table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans as of September 30, 2013 and December 31, 2012.


	Contract Amount
*(dollars in thousands)*	September 30, 2013		December 31, 2012

Standby letters of credit	$	2,483	$	2,907
Available portion of lines of credit		66,436		59,124
Undisbursed portion of loans in process		78,423		47,678
Commitments to originate loans		54,787		77,857

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

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

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

RESULTS OF OPERATIONS

During the third quarter of 2013, the Company earned $2.5 million, a decrease of $570,000, or 18.7%, compared to the third quarter of 2012. For the nine months ended September 30, 2013, the Company’s net income was $5.6 million, a decrease of $1.3 million, or 18.6%, compared to the nine months ended September 30, 2012. Diluted earnings per share for the third quarter of 2013 were $0.37, a decrease of $0.05, or 11.9%, compared to the third quarter of 2012. Diluted earnings per share for the nine months ended September 30, 2013 were $0.80, a decrease of $0.15, or 15.8%, compared to the nine months ended September 30, 2012.

Net Interest Income – Net interest income is the difference between the interest income earned on interest-earning assets, such as loans and investment securities, and the interest expense paid on interest-bearing liabilities, such as deposits and borrowings. The Company’s net interest income is largely determined by our net interest spread, which is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities, and the relative amounts of interest-earning assets and interest-bearing liabilities. The Company’s tax-equivalent net interest spread was 4.66% and 4.81% for the three months ended September 30, 2013 and September 30, 2012, respectively, and 4.53% and 4.61% for the nine months ended September 30, 2013 and September 30, 2012, respectively. The Company’s tax-equivalent net interest margin, which is net interest income as a percentage of average interest-earning assets, was 4.79% and 4.96% for the three months ended September 30, 2013 and September 30, 2012, respectively, and 4.67% and 4.76% for the nine months ended September 30, 2013 and September 30, 2012, respectively. The decrease in the net interest spread and net interest margin related primarily to lower average loan yields.

Net interest income totaled $10.4 million for the three months ended September 30, 2013, a decrease of $513,000, or 4.7%, compared to the three months ended September 30, 2012. For the nine months ended September 30, 2013, net interest income totaled $30.2 million, a decrease of $653,000, or 2.1%, compared to the nine months ended September 30, 2012. The decline in net interest income was due largely to a decline in loan interest income as a result of lower average yields earned on loans, reflecting the continuing low interest rate environment as well as the effect of significant competition for loans.

Interest income decreased $894,000, or 7.4%, in the third quarter of 2013, compared to the third quarter of 2012. For the nine months ended September 30, 2013, interest income decreased $1.7 million, or 4.8%, compared to the nine months ended September 30, 2012. The decline in interest income was due largely to a decline in loan interest income for the reasons described in the preceding paragraph.

Interest expense decreased $381,000, or 31.7%, in the third quarter of 2013 compared to the third quarter of 2012. For the nine months ended September 30, 2013, interest expense decreased $1.0 million, or 26.7%, compared to the nine months ended September 30, 2012. The decrease was primarily the result of reduced market rates and changes in the mix of customer deposits.

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


	Three Months Ended September 30,
	2013							2012
*(dollars in thousands)*	Average Balance		Interest		Average Yield/ Rate⁽¹⁾			Average Balance		Interest		Average Yield/ Rate⁽¹⁾
Interest-earning assets:
Loans receivable⁽¹⁾	$	676,639	$	10,439		6.07	%	$	678,936	$	11,309		6.56	%
Investment securities (TE)		157,352		755		2.10			149,472		769		2.18
Other interest-earning assets		27,293		32		0.47			41,373		42		0.40

Total interest-earning assets (TE)		861,284		11,226		5.17			869,781		12,120		5.52

Noninterest-earning assets		97,276							104,980

Total assets	$	958,560						$	974,761


Interest-bearing liabilities:
Deposits:
Savings, checking and money market	$	389,773	$	240		0.24	%	$	355,107	$	302		0.34	%
Certificates of deposit		215,745		490		0.90			269,840		735		1.08

Total interest-bearing deposits		605,518		730		0.48			624,947		1,037		0.66
FHLB advances		41,083		93		0.90			48,175		167		1.39

Total interest-bearing liabilities		646,601		823		0.51			673,122		1,204		0.71

Noninterest-bearing liabilities		172,899							161,091

Total liabilities		819,500							834,213
Shareholders’ equity		139,060							140,548

Total liabilities and shareholders’ equity	$	958,560						$	974,761


Net interest-earning assets	$	214,683						$	196,659

Net interest spread (TE)			$	10,403		4.66	%			$	10,916		4.81	%

Net interest margin (TE)						4.79	%						4.96	%


	Nine Months Ended September 30,
	2013							2012
*(dollars in thousands)*	Average Balance		Interest		Average Yield/ Rate⁽¹⁾			Average Balance		Interest		Average Yield/ Rate⁽¹⁾
Interest-earning assets:
Loans receivable⁽¹⁾	$	678,483	$	30,579		5.97	%	$	675,297	$	32,063		6.27	%
Investment securities (TE)		155,277		2,278		2.12			152,622		2,441		2.25
Other interest-earning assets		28,067		96		0.46			31,012		111		0.48

Total interest-earning assets (TE)		861,827		32,953		5.10			858,931		34,615		5.35

Noninterest-earning assets		100,767							108,974

Total assets	$	962,594						$	967,905


Interest-bearing liabilities:
Deposits:
Savings, checking and money market	$	377,326	$	749		0.27	%	$	333,494	$	974		0.39	%
Certificates of deposit		230,997		1,661		0.96			276,372		2,279		1.10

Total interest-bearing deposits		608,323		2,410		0.53			609,866		3,253		0.71
FHLB advances		44,354		359		1.08			74,379		526		0.94

Total interest-bearing liabilities		652,677		2,769		0.57			684,245		3,779		0.74

Noninterest-bearing liabilities		167,958							145,115

Total liabilities		820,635							829,360
Shareholders’ equity		141,959							138,545

Total liabilities and shareholders’ equity	$	962,594						$	967,905


Net interest-earning assets	$	209,150						$	174,686

Net interest spread (TE)			$	30,184		4.53	%			$	30,836		4.61	%

Net interest margin (TE)						4.67	%						4.76	%

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

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


	For the Three Months Ended September 30, 2013 Compared to 2012 Change Attributable To									For the Nine Months Ended September 30, 2013 Compared to 2012 Change Attributable To
*(dollars in thousands)*	Rate			Volume			Total Increase (Decrease)			Rate			Volume			Total Increase (Decrease)
Interest income:
Loans receivable	$	(861	)	$	(9	)	$	(870	)	$	(1,331	)	$	(153	)	$	(1,484	)
Investment securities (TE)		(78	)		64			(14	)		(200	)		37			(163	)
Other interest-earning assets		6			(16	)		(10	)		(5	)		(10	)		(15	)

Total interest income		(933	)		39			(894	)		(1,536	)		(126	)		(1,662	)


Interest expense:
Savings, checking and money market accounts		(84	)		22			(62	)		(247	)		22			(225	)
Certificates of deposit		(111	)		(134	)		(245	)		(281	)		(337	)		(618	)
FHLB advances		95			(169	)		(74	)		66			(233	)		(167	)

Total interest expense		(100	)		(281	)		(381	)		(462	)		(548	)		(1,010	)

Increase (decrease) in net interest income	$	(833	)	$	320		$	(513	)	$	(1,074	)	$	422		$	(652	)

Provision for Loan Losses – For the quarter ended September 30, 2013, the Company recorded a provision for loan losses of $453,000, 713% higher than the $56,000 for the same period in 2012. The increase in provisions for loan losses was primarily the result of loan growth and deterioration in non-covered acquired loans. For the nine months ended September 30, 2013, the provision for loan losses totaled $3.2 million, an increase of $1.3 million, or 67.1%, compared to the nine months ended September 30, 2012. The increase in provisions for loan losses was primarily the result of loan growth.

As of September 30, 2013, the Company’s ratio of allowance for loan losses to total loans was 0.95%, compared to 0.79% and 0.73% at December 31, 2012 and September 30, 2012, respectively. Excluding acquired loans, the ratio of the allowance for loan losses to total loans was 1.09% at September 30, 2013, compared to 1.01% at December 31, 2012 and 1.01% at September 30, 2012.

Noninterest Income – The Company’s noninterest income was $1.7 million for the three months ended September 30, 2013, $421,000, or 20.2%, lower than the $2.1 million earned for the same period in 2012. Noninterest income was $5.6 million for the nine months ended September 30, 2012, $44,000, or 0.8%, lower than the $5.7 million earned for the same period of 2012.

The decrease in noninterest income in the third quarter of 2013 compared to the third quarter of 2012 resulted primarily from lower gains on the sale of mortgage loans (down $337,000) and the absence of gains on the sale of securities (down $163,000).

The decrease in noninterest income for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 resulted primarily from higher gains on the sale of securities (up $206,000), which were offset by decreases in discount accretion on the FDIC loss sharing receivable (down $127,000) and gain on sale of mortgage loans (down $106,000).

Noninterest Expense – The Company’s noninterest expense was $7.9 million for the three months ended September 30, 2013, $499,000, or 6.0%, lower than the $8.4 million recorded for the same period in 2012. Noninterest expense was $24.2 million for the nine months ended September 30, 2013, $41,000, or 0.2%, lower than the $24.2 million for the same period of 2012.

The decrease in noninterest expense in the third quarter of 2013 compared to the third quarter of 2012 resulted primarily from lower foreclosed asset expenses (down $157,000), other expenses (down $155,000), data processing and communication expenses (down $120,000) and marketing and advertising expenses (down $50,000).

The decrease in noninterest expense for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 resulted primarily from lower foreclosed asset expenses (down $522,000), data processing and communications (down $192,000) and professional services (down $77,000), which were partially offset by higher compensation and benefits expenses (up $425,000), Louisiana shares tax (up $162,000) and occupancy expenses (up $129,000).

Income Taxes – For the quarters ended September 30, 2013 and September 30, 2012, the Company incurred income tax expense of $1.2 and $1.5 million, respectively. The Company’s effective tax rate amounted to 33.4% and 33.0% during the third quarters of 2013 and 2012, respectively. For the nine months ended September 30, 2013 and September 30, 2012, the Company incurred income tax expense of $2.8 million and $3.5 million, respectively. The Company’s effective tax rate amounted to 33.5% and 33.7% during the nine months ended September 30, 2013 and September 30, 2012, respectively. Differences between the effective tax rate and the statutory tax rate primarily relate to variances in items that are non-taxable or non-deductible (e.g., state tax, tax-exempt income, tax credits, etc.).

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, 2012, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset/ Liability Management and Market Risk”. Additional information at September 30, 2013 is included herein under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Asset/Liability Management”.

Item 4. Controls and Procedures.

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

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the third quarter of 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Not applicable.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for December 31, 2012 filed with the Securities and Exchange Commission.

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

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


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet be Purchased Under the Plan or Programs⁽¹⁾
July 1 - July 30, 2013		34,555	$	18.55		34,555		177,745
August 1 - August 31, 2013		9,500		18.20		9,500		168,245
September 1 - September 30, 2013		122		17.38		122		168,123

Total		44,177	$	18.47		44,177		168,123

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

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosure.

None.

Item 5. Other Information.

None.

Item 6. Exhibits and Financial Statement Schedules.


No.		Description

2.1		Agreement and Plan of Merger, dated as of November 4, 2013, between Home Bancorp, Inc. and Britton & Koontz Capital Corp.*

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

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

32.0		Section 1350 Certification

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definitions Linkbase Document

*	Incorporated by reference from the like-numbered exhibit to the registrant’s current report on Form 8-K (dated November 4, 2013 and filed on November 5, 2013, SEC File No. 001-34190).

SIGNATURES

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


		HOME BANCORP, INC.

November 8, 2013	By:	/s/ John W. Bordelon
		John W. Bordelon
		President, Chief Executive Officer and Director

November 8, 2013	By:	/s/ Joseph B. Zanco
		Joseph B. Zanco
		Executive Vice President and Chief Financial Officer

November 8, 2013	By:	/s/ Mary H. Hopkins
		Mary H. Hopkins
		Home Bank First Vice President and Director of Financial Reporting