ANNUAL REPORT 2024
Growth
Continued
Headquarters
Louisiana
34
Mississippi
3
Texas
6
North Houston
Commercial Banking Offi ce
1
Total
43
In 2024, Home Bank relocated two of our
Houston banking centers into prominent
locations in Baybrook and Pasadena with the
same dynamic team serving our customers
and the communities.
Baybrook
Banking Center
Pasadena
Banking Center
April 3, 2025
To our Valued Shareholders,
The Board, Executive team and Employees of Home Bank have worked very hard this past year and the previous
four years. Since COVID-19 hit in the early months of 2020, Home Bank has handled all obstacles very well. More
importantly, our customers excelled during this period through difficult times due to high inflation and rising interest
rates. It is a testament to our outstanding customers that during this period of high interest rates, that very few of
our business customers had issues. Many of our commercial customers were able to expand their businesses in the
high rate environment.
As we move into the new year, it is important to reflect on the accomplishments of 2024. After raising prime rate
to a high of 8.5% in 2023, the Federal Reserve Bank held that position for the first three quarters of 2024.
Determined to reduce inflation, the Fed maintained its rate position until the inflation rate dropped in the second
half of the year. Deposit costs were at a 20- year high until the Fed dropped the Fed Funds rate 100 basis points in
the fourth quarter. Those reductions provided a little relief to the Net Interest Margin which climbed to 3.82% at
year-end. The bank was able to reduce certificate of deposit rates during the quarter in movement with the market.
The fixed rate loan portfolio continues to reprice from the low rates in 2020 and 2021. The bank should continue to
increase the yield on loans over the next two years as the remainder of the commercial fixed portfolio matures and
reprices.
Management consistently evaluates banking centers across our footprint to maximize our customer needs. The bank
opened a commercial banking office in northwest Houston with the Market President and team hired at the end of
2023. Management is looking to secure a permanent location in the northwest sector to continue market share
growth in this area. The bank also relocated two banking centers to more favorable locations in southeast Houston.
In 2024, we converted a Lafayette banking center, which was located within close proximity of two other full service
locations into HB Financial center and back office operations with a full service drive up ATM on the property.
After an outstanding 2022 in commercial loan production, the volume diminished a little over 2023 and 2024, but
our team did an excellent job considering the high interest rates to grow loans by approximately 6%. Construction
lending had subsided during the higher rate cycle but picked up toward the end of the year. The low amount of
classified assets is a testament to the quality credit our Relationship Managers bring to the bank.
Home Bank consistently evaluates any opportunities in our contiguous market to acquire strong partners to expand
the asset base and the geographical footprint of the company. We will continue to evaluate opportunities that fit our
culture and appetite. Until such time that an acquisition comes to fruition, our “One Team” mentality will continue
to drive organic growth in the markets we serve. Our capital position is robust and continues to strengthen in
preparation for anticipated growth. Home Bank will continue to invest in people and technology as we strive to
provide the exceptional customer service, we are known for in all of our markets.
Thank you to all of our Investors in Home Bancorp and for the confidence you place in our team.
Sincerely,
John W. Bordelon
Chairman, President & CEO
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 2024
or
☐
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which registered
Common Stock, $0.01 par value per share
HBCP
The Nasdaq Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act: none
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
The aggregate market value of the 7,333,644 shares of the Registrant’s common stock held by non-affiliates, based upon the closing price
of $40.01 for the common stock on June 30, 2024, as reported by the Nasdaq Stock Market, was approximately $293.4 million. Shares of
common stock held by the registrant’s executive officers, directors and certain benefit plans have been excluded since such persons may be
deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
Number of shares of common stock outstanding as of March 10, 2025: 8,097,592.
DOCUMENTS INCORPORATED BY REFERENCE
Set forth below are the documents incorporated by reference and the part of the Form 10-K into which the document is
incorporated:
Portions of the definitive Proxy Statement for the 2025 Annual Meeting of Shareholders are incorporated by reference into
Part III, Items 10-14 of this Form 10-K.
HOME BANCORP, INC.
2024 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Page
PART I
Item 1.
Business ....................................................................................................................................................
1
Item 1A.
Risk Factors ..............................................................................................................................................
8
Item 1B.
Unresolved Staff Comments .....................................................................................................................
15
Item 1C.
Cybersecurity ............................................................................................................................................
15
Item 2.
Properties ..................................................................................................................................................
17
Item 3.
Legal Proceedings .....................................................................................................................................
17
Item 4.
Mine Safety Disclosures ...........................................................................................................................
17
PART II
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities .......................................................................................................................................
17
Item 6.
Reserved ....................................................................................................................................................
19
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ...................
19
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk ...................................................................
41
Item 8.
Financial Statements and Supplementary Data ........................................................................................
42
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...................
95
Item 9A.
Controls and Procedures ...........................................................................................................................
95
Item 9B.
Other Information .....................................................................................................................................
95
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections .....................................................
95
PART III
Item 10.
Directors, Executive Officers and Corporate Governance .......................................................................
96
Item 11.
Executive Compensation ..........................................................................................................................
96
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
96
Item 13.
Certain Relationships and Related Transactions, and Director Independence .........................................
96
Item 14.
Principal Accounting Fees and Services ...................................................................................................
96
PART IV
Item 15.
Exhibits and Financial Statement Schedules ............................................................................................
97
Item 16.
Form 10-K Summary ................................................................................................................................
99
SIGNATURES ................................................................................................................................................................. 100
[This page intentionally left blank.]
GLOSSARY OF DEFINED TERMS
Below is a listing of certain acronyms, abbreviations and defined terms, among others, used throughout this Annual Report
on Form 10-K. As used in this report, unless the context otherwise requires, the terms “we,” “our,” “us” or the “Company”
refer to Home Bancorp, Inc., a Louisiana corporation, and the term “Bank” refers to Home Bank, National Association, a
national bank and wholly-owned subsidiary of the Company (for periods prior to March 2, 2015, the term “Bank” refers to
the predecessor federal savings bank, Home Bank). In addition, unless the context otherwise requires, references to the
operations of the Company include the operations of the Bank.
ACL
–
Allowance for credit losses
ESOP
–
Employee Stock Ownership Plan
ACT
–
Economic Growth, Regulatory
Relief and Consumer Protection
Act
FDIC
–
Federal Deposit Insurance
Corporation
ALL
–
Allowance for loan losses
FASB
–
Financial Accounting Standards
Board
AOCI
–
Accumulated other
comprehensive income
FHLB
–
Federal Home Loan Bank
ASC
–
Accounting Standards
Codification
FTC
–
Federal Tax Credit(s)
ASU
–
Accounting Standards Update
FRB or
Federal
Reserve
–
Board of Governors of the
Federal Reserve System
Bank
–
Home Bank, N.A., a wholly-
owned subsidiary of the
Company
GAAP
–
Generally Accepted Accounting
Principles in the United States of
America
BTFP
–
Bank Term Funding Program
HTC
–
Historic Tax Credit(s)
BOLI
–
Bank-owned life insurance
NMTC
–
New Markets Tax Credit(s)
bps
–
basis points, 100 basis points
being equal to 1.0%
NOO
–
Non-owner-occupied
C&D
–
Construction and land
OCC
–
Office of the Comptroller of the
Currency
C&I
–
Commercial and industrial
OCI
–
Other comprehensive income
CAA
–
Consolidated Appropriations Act
OO
–
Owner-occupied
CARES Act
–
Coronavirus Aid, Relief, and
Economic Security Act
ORE
–
Other real estate
CBLR
–
Community bank leverage ratio
PCD
–
Purchased credit deteriorated
CDI
–
Core deposit intangible
PCI
–
Purchased credit impaired
CECL
–
Current expected credit losses
PPP
–
Paycheck Protection Program
CFPB
–
Consumer Financial Protection
Bureau
RRP
–
Recognition and Retention Plan
Company
–
Home Bancorp, Inc., a Louisiana
corporation and the holding
company for Home Bank, N.A.
SBA
–
Small Business Association
COVID-19
–
The novel coronavirus
SBIC
–
Small Business Investment
Company
CRA
–
Community Reinvestment Act
SEC
–
U.S. Securities and Exchange
Commission
CRE
–
Commercial real estate
SMB
–
St. Martin Bancshares, an entity
the Company acquired on
December 6, 2017
Dodd-Frank
Act
–
Dodd-Frank Wall Street Reform
and Consumer Protection Act
TDR
–
Troubled debt restructuring
DTA
–
Deferred tax asset
TE
–
Taxable equivalent
EPS
– Earnings per common share
U.S.
–
United States
Forward-Looking Statements
This Annual Report on Form 10-K contains certain forward looking statements (as defined in the Securities Exchange Act of
1934 and the regulations thereunder). Forward looking statements are not historical facts but instead represent only the
beliefs, expectations or opinions of Home Bancorp, Inc. and its management regarding future events, many of which, by their
nature, are inherently uncertain. Forward looking statements may be identified by the use of such words as: “believe,”
“expect,” “anticipate,” “intend,” “plan,” “estimate” or words of similar meaning or future or conditional terms such as
“will,” “would,” “should,” “could,” “may,” “likely,” “probably” or “possibly.” Forward looking statements include, but
are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans,
objectives and expectations with respect to future operations, products and services; and statements regarding future
performance. Such statements are subject to certain risks, uncertainties and assumptions, many of which are difficult to
predict and generally are beyond the control of Home Bancorp, Inc. and its management, that could cause actual results to
differ materially from those expressed in, or implied or projected by, forward looking statements. The following factors,
among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in
the forward looking statements: (1) economic and competitive conditions which could affect the volume of loan originations,
deposit flows or real estate values; (2) the levels of noninterest income and expense and the amount of loan losses;
(3) competitive pressure among depository institutions increasing significantly; (4) changes in the interest rate environment
causing reduced interest margins; (5) general economic conditions, either nationally or in the markets in which Home
Bancorp, Inc. is or will be doing business, being less favorable than expected; (6) political and social unrest, including acts
of war or terrorism; (7) failure to fully realize all the benefits we anticipate in connection with any future acquisitions of
other institutions or our assumptions made in connection therewith being inaccurate; (8) cyber incidents or other failures,
disruptions or security beaches; or (9) legislation or changes in regulatory requirements adversely affecting the business of
Home Bancorp, Inc. Home Bancorp, Inc. 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.
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.
PART I
Item 1.
Business.
General. Home Bancorp, Inc. (the “Company”) is a Louisiana corporation and the holding company for Home Bank, N.A.
(the “Bank”). The Bank, which is headquartered in Lafayette, Louisiana and is a wholly-owned subsidiary of the Company,
currently conducts business through 43 banking offices in the Acadiana, Baton Rouge, Greater New Orleans and Northshore
(of Lake Pontchartrain) regions of south Louisiana, the Natchez region of west Mississippi and the Houston region of Texas.
The Company is subject to regulation as a bank holding company by the Board of Governors of the Federal Reserve System
(the “FRB” or the “Federal Reserve”). The Bank established HB Investment Fund I, LLC and HB Investment Fund II, LLC,
wholly-owned subsidiaries of the Bank to invest in New Markets Tax Credits (“NMTC”) and Federal Tax Credits ("FTC") in
our market areas.
The Bank is primarily engaged in attracting deposits from the general public and using those funds to invest in loans and
securities. Our principal sources of funds are customer deposits, repayments of loans, repayments of investments and funds
borrowed from outside sources such as the Federal Home Loan Bank (“FHLB”) of Dallas.
These funds are primarily used for the origination of loans, including one-to four-family first mortgage loans, home equity
loans and lines, commercial real estate loans, construction and land loans, multi-family residential loans, commercial and
industrial loans and consumer loans. The Bank derives its income principally from interest earned on loans and investment
securities and, to a lesser extent, from fees received in connection with the origination of loans, service charges on deposit
accounts and for other services. The Bank’s primary expenses are interest expense and general operating expenses, the most
significant of which is compensation and benefits.
Although we continue to be an active originator of residential home mortgage loans and other consumer loans in our market
areas, our efforts are focused on originating commercial real estate loans and commercial and industrial loans. Commercial
real estate loans and commercial and industrial loans are deemed attractive due to their generally higher yields and shorter
anticipated lives compared to one- to four-family residential mortgage loans. In addition, the Bank views commercial real
estate and commercial and industrial loans as attractive lending products because the Bank’s commercial borrowers typically
maintain deposit accounts at the Bank, increasing the Bank’s core deposits.
The Company’s headquarters is located at 503 Kaliste Saloom Road, Lafayette, Louisiana, and our telephone number is (337)
237-1960. We maintain a website at www.home24bank.com, and we provide our customers with online banking services.
Filings of the Company made with the U.S. Securities and Exchange Commission ("SEC") are available, without charge, on
our website. They are also available to the public at the SEC’s website at https://www.sec.gov. Information on our website
should not be considered a part of this Annual Report on Form 10-K.
Human Capital Resources
At December 31, 2024, we had 471 full-time employees and ten part-time employees. None of our employees are represented
by a collective bargaining group, and we believe that the Company's relationship with its employees is good. We believe our
ability to attract and retain employees is a key to the Bank's success.
Our human capital objectives include attracting, developing and retaining the best available talent from a diverse pool of
candidates for the Bank. To do so, we strive to maintain competitive pay and benefits, regularly updating our compensation
structure and periodically reviewing our compensation and benefits programs. Additionally, the Bank identifies opportunities
and paths for the development of our staff, and we seek to, whenever possible, fill positions by promotion within. The
Company recognizes that the skills and knowledge of its employees are critical to the success of the organization, and
promotes training and continuing education as an ongoing function for employees.
We recognize the importance of our employee's financial health and well-being, and offer benefits such as a 401(k)
retirement savings plan and make both matching and profit-sharing contributions to that plan, which also includes the
Company's stock as an investment option. Benefit programs available to eligible employees include, in addition to the 401(k)
retirement savings plan, health and life insurance, employee paid holidays and other benefits.
We value and promote diversity and inclusion in every aspect of our business and at every level within the Company. We
recruit, hire, and promote employees based on their individual ability and experience and in accordance with Affirmative
Action and Equal Employment Opportunity laws and regulations. Our policy is that we do not discriminate on the basis of
race, color, religion, sex, gender, sexual orientation, ancestry, pregnancy, medical condition, age, marital status, national
origin, citizenship status, disability veteran status, gender identity, genetic information, or any other status protected by law.
1
Market Area and Competition
The Bank has four primary market areas across south Louisiana: Acadiana, Baton Rouge, Greater New Orleans, and the
Northshore (of Lake Pontchartrain), currently, one primary market area in each of Natchez, Mississippi and the Houston,
Texas area. Since completing its initial public offering of stock in October 2008, the Company has acquired six financial
institutions. On March 26, 2022, the Company completed the acquisition of Friendswood Capital Corporation
("Friendswood"), the former holding company of Texan Bank, N.A. ("Texan Bank") of Houston, Texas, expanding the
Company's market area to Houston. The Bank currently operates 18 banking offices in Acadiana, four banking offices in
Baton Rouge, six banking offices in the Greater New Orleans area, six banking offices in the Northshore region, three
banking offices in Natchez, and six banking offices in the Houston area. For additional information on our acquisition
activity, see Part II, Item 7 in this Annual Report on Form 10-K, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Acquisition Activity.”
We face significant competition in originating loans and attracting deposits. This competition stems primarily from other
banks, credit unions and mortgage-banking companies. Many of the financial service providers operating in our market areas
are significantly larger and have greater financial resources. We face additional competition for deposits from short-term
money market funds and other corporate and government securities funds, mutual funds and from other non-depository
financial institutions such as brokerage firms and insurance companies. More recently, innovations in loan and deposit
products brought about by financial technology companies have added to the level of competition for originating loans and
attracting deposits.
Supervision and Regulation
Set forth below is a brief description of certain laws relating to the regulation of Home Bancorp, Inc. and Home Bank, N.A.
This description does not purport to be complete and is qualified in its entirety by reference to applicable laws and
regulations.
General. Home Bank, N.A. is subject to federal regulation and oversight by the Office of the Comptroller of the Currency
(“OCC”). The Bank is also subject to regulation and examination by the FDIC, which insures the deposits of the Bank to the
maximum extent permitted by law, and requirements established by the Federal Reserve. The Company has experienced
heightened regulatory requirements and scrutiny following the global financial crisis and the enactment in 2010 of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Resulting reforms have caused the
Company’s compliance and risk management processes, and the costs thereof, to increase.
Federal law provides the federal banking regulators with substantial enforcement powers. The OCC’s enforcement authority
includes, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to
initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and
unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or
untimely reports filed with the OCC. The FRB has comparable enforcement authority over the Company. In addition, the
FDIC, as the insurer of the Bank’s deposits, can initiate enforcement proceedings, remove Bank officials and suspend or
terminate deposit insurance. Any change in such regulations could have a material adverse impact on the Company and the
Bank.
In May 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Act”) was enacted to modify or
remove certain financial reform rules and regulations, including some of those implemented under the Dodd-Frank Act.
While the Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the
regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of
more than $50 billion. Many of these changes could result in meaningful regulatory relief for community banks, such as the
Bank.
The Act, among other matters, expands the definition of qualified mortgages which may be held by a financial institution and
simplifies the regulatory capital rules for financial institutions and their holding companies with total consolidated assets of
less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” of
between 8 and 10 percent to replace the leverage and risk-based regulatory capital ratios.
2
Regulation of Home Bancorp, Inc.
General. The Company is a bank holding company, subject to regulation, supervision and examination by the Federal
Reserve. The Federal Reserve has enforcement authority with respect to the Company similar to that of the OCC over the
Bank. Applicable federal law and regulations limit the activities of the Company and require the approval of the Federal
Reserve for any acquisition of a subsidiary, including another financial institution or holding company thereof, or a merger or
acquisition of the Company. The Company must serve as a source of financial and managerial strength for the Bank,
maintaining the ability to provide financial assistance if the Bank suffers financial distress. These and other Federal Reserve
policies may restrict the Company’s ability to pay dividends. In addition, dividends from the Company may depend, in part,
upon its receipt of dividends from the Bank. If the Company does not have the required capital conservation buffer or
otherwise meet its capital requirements, its ability to pay dividends to its stockholders will be limited.
A bank holding company is required to give the Federal Reserve prior written notice of any purchase or redemption of its
outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemption during the preceding 12 months, is equal to 10% or more of the
company’s consolidated net worth. The Federal Reserve may disapprove such a purchase or redemption if it determines that
the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order, or
any condition imposed by, or written agreement with the Federal Reserve. This notification requirement does not apply to any
company that meets the well-capitalized standard for bank holding companies, is well-managed and is not subject to any
unresolved supervisory issues.
Permissible Activities. The business activities of the Company are generally limited to those activities permissible for bank
holding companies under Section 4(c)(8) of the Bank Holding Company Act and certain additional activities authorized by
the Federal Reserve regulations. The Bank Holding Company Act generally prohibits a bank holding company from
acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank or
bank holding company. A bank holding company must obtain Federal Reserve Board approval before acquiring directly or
indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it
would own or control more than 5% of such shares (unless it already owns or controls the majority of such shares).
Capital Requirements. The regulatory capital requirements generally applicable to a bank holding company are the same as
the capital requirements for its subsidiary bank. For a description of the Bank's capital requirements, see “Regulation of
Home Bank, N.A. - Regulatory Capital Requirements.”
Federal Securities Laws. We have registered our common stock with the Securities and Exchange Commission under
Section 12(b) of the Securities Exchange Act of 1934. Accordingly, the Company is subject to the proxy and tender offer
rules, insider trading reporting requirements and restrictions and certain other requirements under the Securities Exchange
Act of 1934.
The Sarbanes-Oxley Act. As a public company, the Company is subject to the Sarbanes-Oxley Act of 2002 which
addresses, among other issues, corporate governance, auditing and accounting, executive compensation and enhanced and
timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act, our principal executive officer and
principal financial officer are required to certify that our quarterly and annual reports do not contain any untrue statement of a
material fact. The rules adopted by the SEC under the Sarbanes-Oxley Act have several requirements, including having these
officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our
internal control over financial reporting; they have made certain disclosures to our independent auditors and the Audit
Committee of the Board of Directors about our internal control over financial reporting; and they have included information
in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over
financial reporting or in other factors that could materially affect internal control over financial reporting.
Volcker Rule Regulations. Regulations have been adopted by the federal banking agencies to implement the provisions of
the Dodd-Frank Act commonly referred to as the Volcker Rule. The regulations contain prohibitions and restrictions on the
ability of financial institution holding companies and their affiliates to engage in proprietary trading and to hold certain
interests in, or to have certain relationships with, various types of investment funds, including hedge funds and private equity
funds. Recently promulgated federal regulations exclude from the Volker Rule restrictions on community banks with $10.0
billion or less in total consolidated assets and total trading assets and liabilities of 5.0% or less of total consolidated assets.
The Company qualifies for this exclusion from the Volker Rule restrictions.
3
Regulation of Home Bank, N.A.
General. The Bank is subject to regulation and oversight by the OCC extending to all aspects of its operations. As part of this
authority, the Bank is required to file periodic reports with the OCC and is subject to periodic examinations by the OCC and
the FDIC. The investment and lending authorities of national banks are prescribed by federal laws and regulations, and such
institutions are prohibited from engaging in any activities not permitted by such laws and regulations. Such regulation and
supervision is primarily intended for the protection of depositors and the Deposit Insurance Fund.
The OCC’s enforcement authority over national banks includes, among other things, the ability to assess civil money
penalties, to issue cease and desist or removal orders and to initiate injunctive actions. In general, these enforcement actions
may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may
provide the basis for enforcement action, including misleading or untimely reports filed with the OCC.
Insurance of Accounts. The deposits of the Bank are insured to the maximum extent permitted by the Deposit Insurance
Fund and are backed by the full faith and credit of the U.S. government. The Dodd-Frank Act permanently increased deposit
insurance on most separately insured deposit relationship category to $250,000. As insurer, the FDIC is authorized to conduct
examinations of, and to require reporting by, insured institutions. It also may prohibit any insured institution from engaging
in any activity determined by regulation or order to pose a serious threat to the FDIC. The FDIC also has the authority to
initiate enforcement actions against insured institutions.
The FDIC assesses deposit insurance premiums on the assessment base of a depository institution, which is the average total
assets reduced by the amount of its average tangible equity. Under the current rules, when the reserve ratio for the Deposit
Insurance Fund for the prior assessment period reaches, or is greater than 2.0% and less than 2.5%, assessment rates will
range from two basis points to 28 basis points and when the reserve ratio for the prior assessment period is greater than 2.5%,
assessment rates will range from one basis-point to 25 basis points. No institution may pay a dividend if it is in default on its
federal deposit insurance assessment. As of December 31, 2024, assessment rates ranged from 2.5 basis points to 32 basis
points for all institutions, subject to adjustments for unsecured debt issued by the institution, unsecured debt issued by other
FDIC-insured institutions, and brokered deposits held by the institution.
The FDIC adopted a final rule in October 2022, to increase initial base deposit insurance assessment rates by two basis points
beginning in the first quarterly assessment period of 2023. The FDIC has the authority to increase insurance assessments in
the future. A significant increase in insurance premiums would have an adverse effect on the operating expenses and results
of operations of the Bank.
The FDIC may terminate the deposit insurance of any insured depository institution if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, order or any condition imposed by an agreement with the FDIC. It
also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the
institution has no tangible capital. If insurance of accounts is terminated, the accounts at the institution at the time of the
termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined
by the FDIC. Management is aware of no existing circumstances which would result in termination of the Bank’s deposit
insurance.
Regulatory Capital Requirements. Current OCC capital standards require institutions such as the Bank to satisfy a common
equity Tier 1 capital requirement, a leverage capital requirement and a risk-based capital requirement. The common equity
Tier 1 capital component generally consists of retained earnings and common stock instruments and must equal at least 4.5%
of risk-weighted assets. Leverage capital, also known as “core” capital, must equal at least 4.0% of adjusted total assets. Core
capital generally consists of common stockholders’ equity (including retained earnings). Under the risk-based capital
requirement, “total” capital (a combination of core and “supplementary” capital) must equal at least 8.0% of “risk-weighted”
assets. In addition, in order to make capital distributions and pay discretionary bonuses to executive officers without
restriction, an institution must also maintain a capital conservation buffer consisting of additional Tier 1 Common Equity
Capital greater than 2.5% of risk weighted assets above the required minimum risk-based capital levels. The OCC also is
authorized to impose capital requirements in excess of these standards on individual institutions on a case-by-case basis.
In determining compliance with the risk-based capital requirement, a national bank is allowed to include both core capital and
supplementary capital in its total capital, provided that the amount of supplementary capital included does not exceed the
national bank’s core capital. Supplementary capital generally consists of general allowances for loan losses up to a maximum
of 1.25% of risk-weighted assets, together with certain other items. In determining the required amount of risk-based capital,
total assets, including certain off-balance sheet items, are multiplied by a risk weight based on the risks inherent in the type of
assets. The Bank does not have any assets assigned to a risk category over 400%.
4
National banks must value securities available for sale at amortized cost for regulatory capital purposes. This means that in
computing regulatory capital, national banks should add back any unrealized losses and deduct any unrealized gains, net of
income taxes, on debt securities reported as a separate component of capital, as defined by generally accepted accounting
principles.
At December 31, 2024, the Bank exceeded all of its regulatory capital requirements, with Tier 1, Tier 1 common equity, Tier
1 common equity (to risk-weighted assets) and total risk-based capital ratios of 11.38%, 13.28%, 13.28% and 14.51%,
respectively.
Any national bank that fails any of the capital requirements is subject to possible enforcement action by the OCC or the
FDIC. Such action could include a capital directive, a cease and desist order, civil money penalties, the establishment of
restrictions on the institution’s operations, termination of federal deposit insurance and the appointment of a conservator or
receiver. The OCC’s capital regulations provide that such actions, through enforcement proceedings or otherwise, could
require one or more of a variety of corrective actions.
Prompt Corrective Action. The following table shows the amount of capital associated with the different capital categories
set forth in the prompt corrective action regulations.
Capital Category
Total
Risk-Based
Capital
Tier 1
Risk-Based
Capital
Tier 1
Common
Equity
Capital
Tier 1
Leverage
Capital
Well capitalized
10% or more
8% or more
6.5% or more
5% or more
Adequately capitalized
8% or more
6% or more
4.5% or more
4% or more
Undercapitalized
Less than 8%
Less than 6%
Less than 4.5%
Less than 4%
Significantly undercapitalized
Less than 6%
Less than 4%
Less than 3%
Less than 3%
In addition, an institution is “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or
less than 2.0%. Under specified circumstances, a federal banking agency may reclassify a well-capitalized institution as
adequately capitalized and may require an adequately capitalized institution or an undercapitalized institution to comply with
supervisory actions as if it were in the next lower category (except that the OCC may not reclassify a significantly
undercapitalized institution as critically undercapitalized).
An institution generally must file a written capital restoration plan which meets specified requirements within 45 days of the
date that the institution receives notice or is deemed to have notice that it is undercapitalized, significantly undercapitalized or
critically undercapitalized. A federal banking agency must provide the institution with written notice of approval or
disapproval within 60 days after receiving a capital restoration plan, subject to extensions by the agency. An institution which
is required to submit a capital restoration plan must concurrently submit a performance guaranty by each company that
controls the institution. In addition, undercapitalized institutions are subject to various regulatory restrictions, and the
appropriate federal banking agency also may take any number of discretionary supervisory actions.
As of December 31, 2024, the Bank was deemed a well-capitalized institution for purposes of the above regulations and as
such is not subject to the above mentioned restrictions.
Community Reinvestment Act and Fair Lending Laws. All insured depository institutions have a responsibility under the
Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and
moderate-income borrowers. The Office of the Comptroller of the Currency is required to assess the Bank’s record of
compliance with the Community Reinvestment Act ("CRA"). A bank’s failure to comply with the provisions of the
Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or
mergers, or in restrictions on its activities. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit
lenders from discriminating in their lending practices. The failure to comply with the Equal Credit Opportunity Act and the
Fair Housing Act could result in enforcement actions by the Office of the Comptroller of the Currency, as well as other
federal regulatory agencies and the Department of Justice.
On October 24, 2023, the federal banking agencies, including the OCC issued a final rule designed to strengthen and
modernize regulations implementing the CRA. The changes are designed to encourage banks to expand access to credit,
investment and banking services in low- and moderate-income communities, adapt to changes in the banking industry
including mobile and internet banking, provide greater clarity and consistency in the application of the CRA regulations and
tailor CRA evaluations and data collection to bank size and type. The applicability date for the majority of the provisions in
the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027.
5
The Community Reinvestment Act requires all institutions insured by the Federal Deposit Insurance Corporation to publicly
disclose their rating. The Bank received an “Satisfactory” Community Reinvestment Act rating in its most recent federal
examination.
Limitations on Dividends. OCC regulations impose various restrictions on the ability of the Bank to pay dividends. The
Bank generally may pay dividends during any calendar year in an amount up to 100% of net income for the year-to-date plus
retained net income for the two preceding years, so long as it is well-capitalized after the distribution. If the Bank proposes to
pay a dividend when it does not meet its capital requirements or that will exceed these limitations, it must obtain the OCC’s
prior approval. The OCC may object to a proposed dividend based on safety and soundness concerns. No insured depository
institution may pay a dividend if, after paying the dividend, the institution would be undercapitalized. In addition, as noted
above, if Home Bank does not have the required capital conservation buffer, its ability to pay dividends to the Company will
be limited.
Limitations on Transactions with Affiliates. Transactions between a national bank and any affiliate are governed by
Sections 23A and 23B of the Federal Reserve Act. An affiliate of a national bank includes any company or entity which
controls the national bank or that is controlled by a company that controls the national bank. In a holding company context,
the holding company of a national bank (such as the Company) and any companies which are controlled by such holding
company are affiliates of the national bank. Generally, Section 23A limits the extent to which the national bank or its
subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of such bank’s capital
stock and surplus, and contains an aggregate limit on all such transactions with all affiliates to an amount equal to 20% of
such capital stock and surplus. Section 23B applies to “covered transactions” as well as certain other transactions and requires
that all transactions be on terms substantially the same, or at least as favorable, to the national bank as those provided to a
non-affiliate. The term “covered transaction” includes the making of loans to, purchase of assets from and issuance of a
guarantee to an affiliate and similar transactions. Section 23B transactions also include the provision of services and the sale
of assets by a national bank to an affiliate.
In addition, Sections 22(g) and (h) of the Federal Reserve Act, place restrictions on loans to executive officers, directors and
principal shareholders of a national bank and its affiliates. Under Section 22(h), loans to a director, an executive officer, a
greater than 10% shareholder of a national bank and certain affiliated interests of either, may not exceed, together with all
other outstanding loans to such person and affiliated interests, a national bank’s loans to one borrower limit (generally equal
to 15% of the bank’s unimpaired capital and surplus). Section 22(h) also requires that loans to directors, executive officers
and principal shareholders be made on terms substantially the same as offered in comparable transactions to other persons
unless the loans are made pursuant to a benefit or compensation program that (i) is widely available to employees of the bank
and (ii) does not give preference to any director, executive officer or principal shareholder or certain affiliated interests of
either, over other employees of the national bank. Section 22(h) also requires prior board approval for certain loans. In
addition, the aggregate amount of extensions of credit by a national bank to all insiders cannot exceed the bank’s unimpaired
capital and surplus. Furthermore, Section 22(g) places additional restrictions on loans to executive officers. The Bank
currently is subject to Sections 22(g) and (h) of the Federal Reserve Act, and as of December 31, 2024 was in compliance
with the above restrictions.
Consumer Financial Services. The historical structure of federal consumer protection regulation applicable to all providers
of consumer financial products and services changed significantly with the establishment of the Consumer Financial
Protection Bureau (“CFPB”) as part of the Dodd-Frank Act reforms. On July 21, 2011, the CFPB commenced operations to
supervise and enforce consumer protection laws. The CFPB has broad rulemaking authority for a wide range of consumer
protection laws that apply to all providers of consumer products and services, including the Bank, as well as the authority to
prohibit “unfair, deceptive or abusive” acts and practices. CFPB has examination and enforcement authority over providers
with more than $10 billion in assets. FDIC-insured institutions with $10 billion or less in assets, like the Bank, continue to be
examined by their applicable bank regulators.
Commercial Real Estate Lending Concentrations. The federal banking agencies have issued guidance on sound risk
management practices for concentrations in commercial real estate lending. The particular focus is on exposure to
commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be
sensitive to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of
repayment or as an abundance of caution). The purpose of the guidance is not to limit a bank’s commercial real estate
lending but to guide banks in developing risk management practices and capital levels commensurate with the level and
nature of real estate concentrations. The guidance directs the FDIC and other bank regulatory agencies to focus their
supervisory resources on institutions that may have significant commercial real estate loan concentration risk. A bank that
has experienced rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real
estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory
analysis with respect to real estate concentration risk:
6
•
Total reported loans for construction, land development and other land represent 100% or more of the bank’s total
regulatory capital; or
•
Total commercial real estate loans (as defined in the guidance) represent 300% or more of the bank’s total regulatory
capital and the outstanding balance of the bank’s commercial real estate loan portfolio has increased 50% or more
during the prior 36 months.
The guidance provides that the strength of an institution’s lending and risk management practices with respect to such
concentrations will be taken into account in supervisory guidance on evaluation of capital adequacy.
Anti-money Laundering. All financial institutions, including national banks, are subject to federal laws that are designed to
prevent the use of the U.S. financial system to fund terrorist activities. Financial institutions operating in the United States
must develop anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and
reporting of money laundering. Such compliance programs are intended to supplement compliance requirements, also
applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control Regulations. The
Bank has established policies and procedures to ensure compliance with these provisions.
Federal Home Loan Bank System. The Bank is a member of the FHLB of Dallas, which is one of 11 regional FHLBs that
administer the home financing credit function of various financial institutions. The FHLBs provides financial institutions
additional strength to serve their communities through financial services to support its mission of affordable housing and
economic development. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is
funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures established by the board of directors of the FHLB. As of
December 31, 2024, the Bank had $175.5 million of FHLB advances and $1.1 billion available on its line of credit with the
FHLB.
As a member, the Bank is required to purchase and maintain stock in the FHLB of Dallas in an amount equal to at least 0.4%
of its total assets in Class B-1 stock and activity-based investment of Class B-2 stock equal to 4.1% of its advances
outstanding and 2.0% of acquired members advances currently on the Bank’s balance sheet. As of December 31, 2024, the
Bank had $8.6 million in FHLB stock, which was in compliance with this requirement.
Federal Reserve System. The FRB requires all depository institutions to maintain reserves against their transaction accounts
and non-personal time deposits. Effective March 26, 2020, the Federal Reserve Board reduced reserve requirement ratios to
zero percent. At December 31, 2024, the reserve requirement remained at zero percent.
Privacy and Cyber Security. Financial institutions are required to disclose their policies for collecting and protecting
confidential information. Customers generally may prevent financial institutions from sharing personal financial information
with nonaffiliated third parties except for third parties that market the institutions’ own products and services.
Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for
use in telemarketing, direct mail marketing or other marketing through electronic mail to consumers. The Bank has
established policies and procedures designed to safeguard its customers’ personal financial information and to ensure
compliance with applicable privacy laws.
The federal banking agencies recently adopted rules providing for new notification requirements for banking organizations
and their service providers for significant cybersecurity incidents. Specifically, the new rules require a banking organization
to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization
determines that a “computer-security incident” rising to the level of a “notification incident” has occurred. Notification is
required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking
organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. Service
providers are required under the rule to notify affected banking organization customers as soon as possible when the provider
determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to
materially affect the banking organization’s customers for four or more hours.
The Securities and Exchange Commission adopted rules requiring registrants to disclose material cybersecurity incidents they
experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy,
and governance. The rules require registrants to disclose on the new Item 1.05 of Form 8-K any cybersecurity incident they
determine to be material and to describe the material aspects of the incident's nature, scope, and timing, as well as its material
impact or reasonably likely material impact on the registrant. An Item 1.05 Form 8-K will generally be due four business
days after a registrant determines that a cybersecurity incident is material. See Item 1C. Cybersecurity for annual disclosures.
7
Item 1A.
Risk Factors.
In analyzing whether to make or to continue an investment in our securities, investors should consider, among other factors,
the following risk factors.
Risks Related to Our Lending Activities
There are increased risks involved with commercial real estate, including multi-family residential, commercial and
industrial and construction and land lending activities.
Our lending activities include loans secured by commercial real estate and commercial and industrial loans. Our multi-family
residential loans, commercial real estate loans and commercial and industrial loans, increased by an aggregate of 104.5%,
54.4% and 0.2% respectively, from December 31, 2020 through December 31, 2024. Excluding Paycheck Protection
Program ("PPP") loans, our commercial and industrial loans increased by an aggregate of 111.5% over the same time period.
Generally, multi-family residential, commercial and industrial and commercial real estate lending involve a higher degree of
risk than one- to four-family residential lending due to a variety of factors. Due to the larger loan balances typically involved
in these loans, an adverse development with respect to one loan or one borrower relationship can expose us to greater risk of
loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. As of December 31,
2024, the largest outstanding balances of our commercial real estate, commercial and industrial, and multi-family residential
loans were $20.1 million, $17.8 million, and $14.3 million, respectively. If a large loan were to become non-performing, as
we have experienced in the past, it can have a significant impact on our results of operations. Because we intend to continue
our growth in multi-family residential, commercial and industrial and commercial real estate loans, our credit risk exposure
may increase and we may need to make additional provisions to our allowance for loan losses, which could adversely affect
our future results of operations.
As of December 31, 2024, commercial real estate mortgage loans comprised approximately 42.6% of our loan portfolio.
Commercial real estate mortgage loans generally involve a greater degree of credit risk than residential real estate mortgage
loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because
payments on loans secured by commercial real estate often depend upon the successful operation and management of the
properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside
the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government
regulations. In recent years, commercial real estate markets have been particularly impacted by the economic disruption
resulting from the COVID-19 pandemic. The COVID-19 pandemic has also been a catalyst for the evolution of various
remote work options which could impact the long-term performance of some types of office properties within our
commercial real estate portfolio. Accordingly, the federal banking regulatory agencies have expressed concerns about
weaknesses in the current commercial real estate market. Failures in our risk management policies, procedures and controls
could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of
delinquencies in, and increased losses from, this portfolio, which, accordingly, could have a material adverse effect on our
business, financial condition and results of operations
In addition to commercial and industrial, multi-family residential loans, and commercial real estate, the Bank holds a
significant portfolio of construction and land loans. As of December 31, 2024, the Bank’s construction and land loans
amounted to $352.3 million, or 13.0% of our loan portfolio. Construction and land loans generally have a higher risk of loss
than one- to four-family residential mortgage loans due primarily to the critical nature of the initial estimates of a property’s
value upon completion of construction compared to the estimated costs, including interest, of construction as well as other
assumptions. If the estimates upon which construction loans are made prove to be inaccurate, we may be confronted with
projects that, upon completion, have values which are below the loan amounts. If the Bank is forced to liquidate the collateral
associated with such loans at values less than the remaining loan balance, it could have a significant impact on our results of
operations.
8
Risks Related to Our Deposit Activities
Municipal deposits are an important source of cost-effective funds for us, and a reduced level of such deposits may
hurt our profits.
Municipal deposits are an important source of our cost-effective funds, and we intend to continue to solicit municipal
deposits. As of December 31, 2024, the Bank held $182.5 million in municipal deposits, consisting of public funds on deposit
from local government entities domiciled in the States of Louisiana, Mississippi and Texas. Given our use of these high-
average balance municipal deposits as a source of spread income, our inability to retain such funds could have an adverse
effect on our liquidity. In addition, our municipal deposits are primarily demand deposit accounts or short-term deposits and
therefore are more volatile and sensitive to changes in interest rates. If we are forced to pay higher rates on our municipal
deposits to retain those funds, or if we are unable to retain those funds, it could have an adverse effect our net income and
profitability.
Risks Related to Market Interest Rates
Changes in interest rates could have a material adverse effect on our operations.
The operations of financial institutions are dependent to a large extent on net interest income, which 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. Changes in the general level of interest rates can affect our net
interest income by affecting the difference between the weighted average yield earned on our interest-earning assets and the
weighted average rate paid on our interest-bearing liabilities, or interest rate spread, and the average life of our interest-
earning assets and interest-bearing liabilities. If general market rates of interest increase, our interest expense on deposits and
borrowings would likely increase which could adversely affect our interest rate spread and net interest income. Changes in
interest rates also can affect our ability to originate loans, the value of our interest-earning assets and our ability to realize
gains from the sale of such assets, our ability to obtain and retain deposits in competition with other available investment
alternatives and the ability of our borrowers to repay adjustable or variable rate loans. Interest rates are highly sensitive to
many factors, including governmental monetary policies, domestic and international economic and political conditions and
other factors beyond our control.
Fluctuations in interest rates due to economic conditions and governmental or regulatory policies may adversely affect
our net interest income and profitability.
Interest rates are highly sensitive to many factors beyond the Company’s control, including general economic conditions and
the policies of the FRB and other governmental and regulatory agencies. Changes in monetary policy, including changes in
interest rates, will influence the origination of loans, the prepayment of loans, the fair value of existing assets and liabilities,
the purchase of investments, the retention and generation of deposits and the rates received on loans and investment securities
and paid on deposits or other sources of funding. If the interest rates paid on deposits and other borrowings increase at a
faster rate than the interest rates received on loans and other investments, our earnings could be adversely affected. Earnings
could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the
interest rates paid on deposits and other borrowings. We have adopted asset and liability management policies to mitigate the
potential adverse effects of changes in interest rates on net interest income or earnings. However, even with these policies in
place, a change in interest rates can impact our results of operations or financial condition.
On March 5, 2021, the administrator of LIBOR benchmarks confirmed it would cease the publication of the one week and
two-month LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining LIBOR
settings immediately following the LIBOR publication on June 30, 2023. We have ceased originating LIBOR-based products
effective December 2021 and have transitioned all remaining LIBOR based products to an alternative benchmarks. The
Company continues to monitor efforts and evaluate the impact of reference rate reform on its consolidated financial
statements; however, the impact is not expected to be significant.
9
Risks Related to Our Market Areas
Our business is geographically concentrated in south Louisiana, southeast Texas and west Mississippi, which are areas
where the oil and gas industry has a significant presence. Reductions in prices in crude oil and gas, among other
factors, could cause a downturn in the local economy, which could adversely affect the Company’s financial condition
and results of operations.
Most of our loans are to individuals and businesses located in south Louisiana, west Mississippi and the Houston, Texas
region. The oil and gas industry has a significant presence in the market areas in which we operate. Regional economic
conditions affect the demand for our products and services as well as the ability of our customers to repay loans. Actions by
members of the Organization of Petroleum Exporting Countries (“OPEC”) can impact global crude oil production levels and
lead to significant volatility in global oil supplies and market oil prices. In recent years, decreased market oil prices
compressed margins for many U.S. based oil producers, particularly those that utilize higher-cost production technologies
such as hydraulic fracking and horizontal drilling, as well as oilfield service providers, energy equipment manufacturers and
transportation suppliers, among others. While crude oil prices have rebounded since the Spring of 2020, global markets for
oil and gas were disrupted by the COVID-19 pandemic. The current wars in Ukraine and Israel also have impacted global oil
supplies and caused further volatility in oil prices. Continued fluctuations in crude oil prices could adversely affect our
operations and economic conditions in some of our markets during 2025 and future periods, which could adversely affect our
future results of operations. Although the Company attempts to mitigate risk by diversifying its borrower base, approximately
$94.6 million, or 3.5% of the Company’s loan portfolio, at December 31, 2024 was comprised of loans to borrowers in the oil
and gas industry (which is also referred to as the “energy sector”). We had an additional $21.4 million in unfunded loan
commitments to companies in the energy sector at such date. At December 31, 2024, $965,000 of our loans in the energy
sector were on nonaccrual status, and $1.4 million of our total allowance for loan losses was attributable to energy sector
loans. Historically, the oil and gas industry has been an important factor in the local economy in our Acadiana and Natchez
markets as well as the Houston market. If oil prices decline, it could have an adverse effect on our customers resulting in
increased levels of nonperforming loans, provisions for loan losses and expense associated with loan collection efforts.
A natural disaster, especially one affecting our market areas, could adversely affect the Company’s financial condition
and results of operations.
Since a considerable portion of our business is conducted in south Louisiana and southeast Texas, most of our credit exposure
is in that area. Historically, south Louisiana has been vulnerable to natural disasters, including hurricanes and floods. Natural
disasters could harm our operations directly through interference with communications, which would prevent us from
gathering deposits, originating loans and processing and controlling our flow of business, as well as through the destruction
of facilities and our operational, financial and management information systems. A natural disaster or recurring power
outages may also impair the value of our loan portfolio, as uninsured or underinsured losses, including losses from business
disruption, may reduce our borrowers’ ability to repay their loans. Disasters may also reduce the value of the real estate
securing our loans, impairing our ability to recover on defaulted loans through foreclosure and making it more likely that we
would suffer losses on defaulted loans. Although we have implemented several back-up systems and protections (and
maintain business interruption insurance), these measures may not protect us fully from the effects of a natural disaster. The
occurrence of natural disasters in our market areas could have a material adverse effect on our business, prospects, financial
condition and results of operations.
Economic conditions could result in increases in our level of non-performing loans and/or reduce demand for our
products and services, which could have an adverse effect on our results of operations.
Prolonged deteriorating economic conditions could significantly affect the markets in which we do business, the value of our
loans and investment securities and our ongoing operations, costs and profitability. Further, declines in real estate values and
sales volumes and elevated unemployment levels may result in higher loan delinquencies, increases in our non-performing
and classified assets and a decline in demand for our products and services. These events may cause us to incur losses and
may adversely affect our financial condition and results of operations. Reduction in problem assets can be slow, and the
process can be exacerbated by the condition of the properties securing non-performing loans and the length of time involved
in the foreclosure process. To the extent that we must work through the resolution of assets, economic problems may cause us
to incur losses and adversely affect our capital, liquidity and financial condition.
10
Risks Related to Accounting Matters
Our allowance for credit losses may not be adequate to cover losses over the life of our financial assets.
We have established an allowance for credit losses, which includes the allowance for loans losses and losses on unfunded
lending commitments, based upon various assumptions and judgments about the collectability of our loan portfolio which we
believe is adequate to offset expected losses on our existing financial assets. Determining the appropriateness of the
allowance requires judgment by management about the effect of matters that are inherently uncertain. Changes in factors and
forecasts used in evaluating the overall loan portfolio may result in significant changes in the allowance for credit losses and
related provision expense in future periods. The allowance level is influenced by loan volumes, loan asset quality ratings,
delinquency status, historical credit loss experience, loan performance characteristics, forecasted information and other
conditions influencing loss expectations. Changes to the assumptions in the model in future periods could have a material
impact on the Company's Consolidated Financial Statements.
While we are not aware of any specific factors indicating a deficiency in the amount of our allowance for credit losses, in
light of the current economic environment, one of the most pressing issues faced by financial institutions is the adequacy of
their allowance for credit losses. Federal bank regulators routinely scrutinize the level of the allowance for credit losses
maintained by regulated institutions. In the event that we have to increase our allowance for credit losses beyond current
levels, it would have an adverse effect on our results in future periods. As of December 31, 2024, our allowance for loan
losses amounted to $32.9 million, or 1.21% of total loans and our total allowance for credit losses amounted to $35.6 million,
or 1.31% of total loans. See Note 2 to the Consolidated Financial Statements for a detailed discussion of the Company's
methodologies for estimating expected credit losses.
Our decisions regarding the fair value of assets acquired could be inaccurate, which could materially and adversely
affect our business, financial condition, results of operations and future prospects.
Management makes various assumptions and judgments about the collectability of acquired loan portfolios, including the
creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of
secured loans. If our assumptions are incorrect, increased loss reserves may be needed to respond to different economic
conditions or adverse developments in the acquired loan portfolio. Any increase in future loan losses would have a negative
effect on our operating results.
Declines in the value of our investment securities may require us to take additional charges to earnings.
Current expected credit losses ("CECL") requires expected credit related losses for available for sale debt securities to be
recorded through an allowance for credit losses, while non-credit related losses will continue to be recognized through other
comprehensive income. The Company’s held to maturity debt securities are also required to utilize the CECL approach to
estimate expected credit losses.
We evaluate our securities portfolio for impairment at least quarterly, and more frequently when economic and market
conditions warrant such evaluations. If this evaluation indicates the existence of credit losses, the Company compares the
present value of cash flows expected to be collected from the security with the amortized cost basis. If the present value of
expected cash flows is less than the amortized cost basis, an allowance for credit losses is recorded, limited by the amount
that the fair value of the security is less than its amortized cost. Delinquencies and defaults in the mortgage loans underlying
these securities may adversely affect the cash flows received by us and may result in a conclusion in future periods that credit
losses are expected from our securities portfolio. Such a conclusion, would require us to take additional charges to earnings to
establish an allowance for credit losses for these securities.
The fair value of our investment securities can fluctuate due to factors outside of our control.
Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential
adverse changes to the fair value of these securities. These factors include, but are not limited to, rating agency actions with
respect to individual securities, defaults by the issuer or with respect to the underlying securities, and changes in market
interest rates and continued instability in the capital markets. Any of these factors, among others, could cause credit losses
and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could materially
and adversely affect our business, results of operations, financial condition and prospects. The process for determining
whether impairment of a security is related to credit usually requires complex, subjective judgments about the future financial
performance and liquidity of the issuer and any collateral underlying the security in order to assess the probability of
receiving all contractual principal and interest payments on the security. Significant negative changes to valuations could
result in credit losses on our securities portfolio, which could have an adverse effect on our financial condition or results of
operations. As of December 31, 2024, we had $30.0 million of accumulated other comprehensive losses.
11
Impairment of investment securities, goodwill, other intangible assets, or deferred tax assets could require charges to
earnings, which could result in a negative impact on our results of operations.
In assessing whether the impairment of investment securities is related to a deterioration in credit factors, management
considers the length of time and extent to which the fair value has been less than cost, the financial condition and near-term
prospects of the issuer, and the intent and ability to retain our investment in the security for a period of time sufficient to
allow for any anticipated recovery in fair value in the near term.
Under current accounting standards, goodwill is not amortized but, instead, is subject to impairment tests on at least an annual
basis or more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its
carrying amount. Significant negative industry or economic trends, reduced estimates of future cash flows or disruptions to
our business, could indicate that goodwill might be impaired. Our valuation methodology for assessing impairment requires
management to make judgements and assumptions based on historical experience and to rely on projections of future
operating performance. In the event that we conclude in a future assessment that all or a portion of our goodwill may be
impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no
impact on tangible capital. At December 31, 2024, we had goodwill of $81.5 million, which represents approximately 20.6%
of shareholders’ equity. See Notes 2 and 8 to the Consolidated Financial Statements for additional information concerning
our goodwill and the required impairment test.
In assessing the realizability of Deferred tax assets ("DTAs"), management considers whether it is more likely than not that
some portion or all of the DTAs will not be realized. Assessing the need for, or the sufficiency of, a valuation allowance
requires management to evaluate all available evidence, both negative and positive, including the recent trend of quarterly
earnings. Positive evidence necessary to overcome the negative evidence includes whether future taxable income in sufficient
amounts and character within the carryback and carryforward periods is available under the tax law, including the use of tax
planning strategies. When negative evidence (e.g., cumulative losses in recent years, history of operating loss or tax credit
carryforwards expiring unused) exists, more positive evidence than negative evidence will be necessary.
The impact of each of these impairment matters could have a material adverse effect on our business, results of operations,
and financial condition.
Changes in accounting policies or in accounting standards could materially affect how we report our financial
condition and results of operations.
Our accounting policies are fundamental to the understanding of our financial condition and results of operations. The
preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United
States (“GAAP”) requires management to make significant estimates and assumptions that affect the financial statements by
affecting the value of our assets or liabilities and results of operations. Some of our accounting policies are critical because
they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and
because materially different amounts may be reported if different estimates or assumptions were used. If such estimates or
assumptions underlying the financial statements are incorrect, we could experience material losses. From time to time, the
Financial Accounting Standards Board (“FASB”) and the SEC change the financial accounting and reporting standards or the
interpretation of such standards that govern the preparation of our external financial statements. These changes are beyond
our control, can be difficult to predict and could materially impact how we report our financial condition and results of
operations. Additionally, it is possible, if unlikely, we could be required to apply a new or revised standard retrospectively,
resulting in the restatement of prior period financial statements in material amounts.
Risks Related to Our Business Strategy
We are subject to certain risks in connection with our strategy of growing through mergers and acquisitions.
Mergers and acquisitions are currently a component of our business model and growth strategy. Accordingly, it is possible
that we could acquire other banking institutions, other financial services companies or branches of banks in the future.
Acquisitions typically involve the payment of a premium over book and trading values and, therefore, may result in the
dilution of our tangible book value per share. Our ability to engage in future mergers and acquisitions depends on various
factors, including: (1) our ability to identify suitable merger partners and acquisition opportunities; (2) our ability to finance
and complete transactions on acceptable terms and at acceptable prices; and (3) our ability to receive the necessary regulatory
and, when required, shareholder approvals. Our inability to engage in an acquisition or merger for any of these reasons could
have an adverse impact on the implementation of our business strategies. Furthermore, mergers and acquisitions involve a
number of risks and challenges, including: (1) our ability to achieve planned synergies and to integrate the branches and
operations we acquire and the internal controls and regulatory functions into our current operations and (2) the diversion of
12
management’s attention from existing operations, which may adversely affect our ability to successfully conduct our business
and negatively impact our financial results.
Our financial performance and future growth may be negatively affected if we are unable to successfully execute our
growth plans, which may include additional acquisitions.
Over the past several years, we have grown our branch system primarily through acquisitions of other financial institutions.
Our ability to successfully acquire other institutions depends on our ability to identify, acquire and integrate such institutions
into our franchise. Our results of operations could be adversely affected if our analysis of pending or future acquisitions was
not complete and correct or our integration efforts were not successful. Currently, we have no agreements or understandings
with anyone regarding a future acquisition.
Risks Related to Our Operational and Information Technology Systems
A failure in our operational systems or infrastructure, or those of third parties, could impair our liquidity, disrupt our
businesses, result in the unauthorized disclosure of confidential information, damage our reputation and cause
financial losses.
Our ability to adequately conduct and grow our business is dependent on our ability to create and maintain an appropriate
operational and organizational control infrastructure. Operational risk can arise in numerous ways including employee fraud,
customer fraud and control lapses in bank operations and information technology. Our dependence on our employees and
automated systems, including the automated systems used by acquired entities and third parties, to record and process
transactions may further increase the risk that technical failures or tampering of those systems will result in losses that are
difficult to detect. We are also subject to disruptions of our operating systems arising from events that are wholly or partially
beyond our control. Failure to maintain an appropriate operational infrastructure can lead to loss of service to customers, legal
actions and noncompliance with various laws and regulations.
We continuously monitor our operational and technological capabilities and make modifications and improvements when we
believe it will be cost effective to do so. In some instances, we may build and maintain these capabilities ourselves. We also
outsource some of these functions to third parties. These third parties may experience errors or disruptions that could
adversely impact us and over which we may have limited control. We also face risk from the integration of new infrastructure
platforms and/or new third party providers of such platforms into its existing businesses.
System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well
as litigation and other potential losses.
We rely heavily on communications and information systems to conduct our business. The computer systems and network
infrastructure we use could be vulnerable to unforeseen hardware and cybersecurity issues. Our operations are dependent
upon our ability to protect our computer equipment against damage from fire, power loss, telecommunications failure or a
similar catastrophic event. Any damage or failure that causes an interruption in our operations could have an adverse effect
on our financial condition and results of operations. In addition, our operations are dependent upon our ability to protect the
computer systems and network infrastructure we use, including our internet banking activities, against damage from physical
break-ins, cybersecurity breaches and other disruptive problems caused by the internet or users. Such problems could
jeopardize the security of our customers’ personal information and other information stored in and transmitted through our
computer systems and network infrastructure, which may result in significant liability to us, subject us to additional
regulatory scrutiny, damage our reputation, result in a loss of customers or inhibit current and potential customers from our
internet banking services. Any or all of these problems could have a material adverse effect on our results of operations and
financial condition. Although we have security measures, including firewalls and penetration tests, designed to mitigate the
possibility of break-ins, breaches and other disruptive problems, there can be no assurance that such security measures will be
effective in preventing such problems.
We are dependent on our information technology and telecommunications systems and third-party service providers;
systems failures, interruptions and cybersecurity breaches could have a material adverse effect on us.
Our business is dependent on the successful and uninterrupted functioning of our information technology and
telecommunications systems and third-party service providers. The failure of these systems, or the termination of a third-
party software license or service agreement on which any of these systems is based, could interrupt our operations. Because
our information technology and telecommunications systems interface with and depend on third-party systems, we could
experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience
interruptions. If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate
13
effectively, damage our reputation, result in a loss of customer business and/or subject us to additional regulatory scrutiny
and possible financial liability, any of which could have a material adverse effect on us.
Our third-party service providers may be vulnerable to unauthorized access, computer viruses, phishing schemes and other
security breaches. We likely will expend additional resources to protect against the threat of such security breaches and
computer viruses, or to alleviate problems caused by such security breaches or viruses. To the extent that the activities of our
third-party service providers or the activities of our customers involve the storage and transmission of confidential
information, security breaches and viruses could expose us to claims, regulatory scrutiny, litigation costs and other possible
liabilities.
The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-
related incidents could have a material adverse effect on our business, financial condition, results of operations and
growth prospects.
As a bank, we are susceptible to fraudulent activity, information security breaches and cybersecurity-related incidents that
may be committed against us or our customers, which may result in financial losses or increased costs to us or our customers,
disclosure or misuse of our information or our customer information, misappropriation of assets, privacy breaches against our
customers, litigation or damage to our reputation. Such fraudulent activity may take many forms, including check fraud,
electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Information security breaches and
cybersecurity-related incidents may include fraudulent or unauthorized access to systems used by us or our customers, denial
or degradation of service attacks and malware or other cyber-attacks. In recent periods, there continues to be a rise in
electronic fraudulent activity, security breaches and cyber-attacks within the financial services industry, especially in the
commercial banking sector due to cyber criminals targeting commercial bank accounts. Moreover, in recent periods, several
large corporations, including financial institutions and retail companies, have suffered major data breaches, in some cases
exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal
information of their customers and employees and subjecting them to potential fraudulent activity. Some of our customers
may have been affected by these breaches, which could increase their risks of identity theft and other fraudulent activity that
could involve their accounts with us.
Information pertaining to us and our customers is maintained, and transactions are executed, on networks and systems
maintained by us and certain third-party partners, such as our online banking, mobile banking or accounting systems. The
secure maintenance and transmission of confidential information, as well as execution of transactions over these systems, are
essential to protect us and our customers against fraud and security breaches and to maintain the confidence of our customers.
Breaches of information security also may occur through intentional or unintentional acts by those having access to our
systems or the confidential information of our customers, including employees. In addition, increases in criminal activity
levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third-party technologies
(including browsers and operating systems) or other developments could result in a compromise or breach of the technology,
processes and controls that we use to prevent fraudulent transactions and protect data about us, our customers and underlying
transactions, as well as the technology used by our customers to access our systems. Our third-party partners’ inability to
anticipate, or failure to adequately mitigate, breaches of security could result in a number of negative events, including losses
to us or our customers, loss of business or customers, damage to our reputation, the incurrence of additional expenses,
disruption to our business, additional regulatory scrutiny, penalties or exposure to civil litigation and possible financial
liability, any of which could have a material adverse effect on our business, financial condition, results of operations and
growth prospects.
Risks Related to Our Business and Industry Generally
We face strong competition which adversely affects our profitability.
We are subject to vigorous competition in all aspects and areas of our business from banks and other financial institutions.
We are significantly smaller than several of the larger depository institutions operating in our market areas. The financial
resources of these larger competitors may permit them to pay higher interest rates on their deposits and to be more aggressive
in new loan originations. We also compete with non-financial institutions, including retail stores that maintain their own
credit programs, governmental agencies that make available low cost or guaranteed loans to certain borrowers and non-
traditional financial technology firms that are offering an increasing array of online loan, deposit and treasury management
products. Some of our larger competitors have substantially greater resources, technological capabilities, lending limits,
branch systems and a wider array of commercial banking services. Vigorous competition from both bank and non-bank
organizations is expected to continue.
14
We operate in a highly regulated environment, and we may be adversely affected by changes in laws and regulations.
We are subject to extensive regulation, supervision and examination by the FRB, the OCC and the FDIC. Such regulation and
supervision governs the activities in which an institution and its holding company may engage and are intended primarily for
the protection of the insurance fund and the depositors and borrowers of the Bank rather than for holders of our common
stock. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the
imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for
loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or
supervisory action, may have a material impact on our operations.
Financial challenges at other banking institutions could lead to disruptive and destabilizing deposit outflows, as well
as an increase in FDIC deposit premiums, which could negatively impact our profitability and results of operations.
In March 2023, Silicon Valley Bank and Signature Bank experienced large deposit outflows, coupled with insufficient
liquidity to meet withdrawal demands, resulting in the institutions being placed into FDIC receivership. Additionally in May
2023, First Republic Bank experienced similar circumstances which resulted in the institution being placed into FDIC
receivership. The placement of these institutions into receivership has resulted in market disruption and increased concerns
that diminished depositor confidence across the banking industry in general could lead to deposit outflows that could
destabilize other institutions. At December 31, 2024, we had $98.5 million in cash and cash equivalents. Notwithstanding our
significant liquidity, large deposit outflows could materially and adversely affect our financial condition and results of
operations. Following the placement of Silicon Valley Bank and Signature Bank into FDIC receivership, the federal banking
regulators also issued a joint statement providing that the losses to support the uninsured deposits of those banks would be
recovered via a special assessment on banks with $5.0 billion or more in total consolidated assets. While this special
assessment does not apply to us, any future special assessments, increases in assessment rates or required prepayments in
FDIC insurance premiums, to the extent that they result in increased deposit insurance costs, would reduce our profitability.
Item 1B.
Unresolved Staff Comments.
Not applicable.
Item 1C.
Cybersecurity.
Risk Management and Strategy
The Company recognizes that the security of our banking operations is critical to protecting our customers, maintaining our
reputation and preserving the value of the Company. The Board of Directors, through the Enterprise Risk Committee
(“ERC”), the Technology Steering Committee (“TSC”) and the Cyber Risk Oversight Committee (“CROC”), provides
direction and oversight of the enterprise-wide risk management framework of the Company, and cybersecurity represents a
component of the overall approach to enterprise-wide risk management. Our risk management program is designed to
identify, assess, and mitigate risks across various aspects of our company, including financial, operational, regulatory,
reputational, and legal. Cybersecurity is a critical component of this program, given the increasing reliance on technology and
potential of cyber threats. Our Director of Information Security is primarily responsible for this cybersecurity component and
is a key member of the risk management organization, reporting directly to the Chief Risk Officer and, as discussed below,
periodically to the TSC and the CROC. The Chairman of the CROC is an independent member of the Board of Directors and
is considered an expert in technology and cybersecurity and provides regular updates on cybersecurity risk management to
the Board of Directors.
Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to
penetrate, disrupt or misuse our systems or information. The structure of our information security program is designed around
the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, regulatory guidance, and other
industry standards. In addition, we leverage certain industry and government associations, third-party benchmarking, audits,
and threat intelligence feeds to facilitate and promote program effectiveness. Our Director of Information Security and
Director of Information Technology, who reports directly to our Director of Technology Management, along with key
members of their teams, regularly collaborate with peer banks, industry groups, and policymakers to discuss cybersecurity
trends and issues and identify best practices. The information security program is reviewed periodically by such personnel
with the goal of addressing changing threats and conditions.
15
We employ an in-depth, layered, defensive strategy that embraces a “trust by design” philosophy when designing new
products, services, and technology. We leverage people, processes, and technology as part of our efforts to manage and
maintain cybersecurity controls. We also employ a variety of preventative and detective tools designed to monitor, block, and
provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats. We have established
processes and systems designed to mitigate cyber risk, including regular and on-going education and training for employees,
preparedness simulations and tabletop exercises, and recovery and resilience tests. We engage in regular assessments of our
infrastructure, software systems, and network architecture, using internal cybersecurity experts and third-party specialists. We
also maintain a third-party risk management program designed to identify, assess, and manage risks, including cybersecurity
risks associated with our use of third-party service providers and our supply chain. We also actively monitor our email
gateways for malicious phishing email campaigns and monitor remote connections as a sizable portion of our workforce has
the option to work remotely. We leverage internal and external auditors and independent external partners to periodically
review our processes, systems, and controls, including with respect to our information security program, to assess their design
and operating effectiveness and make recommendations to strengthen our risk management program.
We maintain an Incident Response Plan that provides a documented framework for responding to actual or potential
cybersecurity incidents, including timely notification of and escalation to the appropriate Board-approved management
committees, including the CROC. The Incident Response Plan is coordinated through the Director of Information Security
and key members of management are embedded into the Plan by its design. The Incident Response Plan facilitates
coordination across multiple parts of our organization and is evaluated at least annually.
Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is severe. Our internal systems,
processes, and controls are designed to mitigate loss from cyber-attacks. To our knowledge, cybersecurity threats, including
as a result of any previous cybersecurity incidents, have not materially affected the Company, including its business strategy,
results of operations or financial condition. For further discussion of risks from cybersecurity threats, see the section
captioned “Risks Related to Our Operational and Information Technology Systems” in Item 1A. Risk Factors.
Governance
Our Director of Information Security is accountable for managing our enterprise information security department and
delivering our information security program. The responsibilities of this department include cybersecurity risk assessment,
defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party
risk management, and business resilience. The foregoing responsibilities are covered on a day-to-day basis by a first line of
defense function, and our second line of defense function, including the Director of Information Security, provides guidance,
oversight, monitoring and challenging the first line’s activities. The second line of defense function is separated from the first
line of defense function through organizational structure and reports directly to the Chief Risk Officer. The department
consists of information security professionals with varying degrees of education and experience. Individuals within the
department are subject to professional education and certification requirements. Our Director of Information Security has
substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management.
Certifications include Certified Information Security Manager (“CISM”) and Certified Information Systems Security
Professional (“CISSP”), which includes continuing education requirements.
Our Board of Directors has approved management committees including the TSC, which focuses on technology impact, and
the CROC, which focuses on business impact. These committees provide oversight and governance of the technology
program and the information security program. The TSC is chaired by management within the Company and includes the
Chief Risk Officer, Director of Information Security and Director of Technology Management as well as other key
departmental managers throughout the entire company. These committees meet at least quarterly to provide oversight of the
risk management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage
security risks. More frequent meetings occur from time to time in accordance with the Incident Response Plan to facilitate
timely informing and monitoring efforts. The Director of Information Security reports summaries of key issues, including
significant cybersecurity and/or privacy incidents, discussed at committee meetings and the actions taken to the CROC on a
quarterly basis (or more frequently as may be required by the Incident Response Plan).
The CROC is responsible for overseeing our information security and technology programs, including management’s actions
to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks. Our Director of Information
Security and our Director of Technology Management provide quarterly reports to the CROC regarding the information
security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to
cybersecurity processes. Our Board of Directors reviews and approves our information security and technology budgets and
strategies annually. Additionally, the CROC reviews our cyber security risk profile on an annual basis. The chairman of our
CROC provides a report of its activities to the full Board of Directors at least quarterly.
16
Item 2.
Properties.
We currently conduct business from 18 banking offices in Acadiana, four banking offices in Baton Rouge, six banking
offices in Greater New Orleans, six banking offices in the Northshore (of Lake Pontchartrain) region of Louisiana, three
banking offices in Natchez, Mississippi, and six banking offices in the Houston area. The Bank owns 33 of its 43 banking
offices. The Bank leases the land for one banking office in our Northshore market, and leases one banking office in Acadiana,
Baton Rouge, Mississippi and Greater New Orleans, respectively, and five banking centers in the Houston market.
Item 3.
Legal Proceedings.
From time-to-time, the Bank is named as a defendant in various legal actions arising from the normal course of business in
which damages of various amounts may be claimed. While the amount, if any, of ultimate liability with respect to any such
matters cannot be currently determined, management believes, after consulting with legal counsel, that any such liability will
not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
Item 4.
Mine Safety Disclosures.
Not applicable
PART II
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
(a)
Home Bancorp, Inc.’s common stock is listed on the Nasdaq Global Select Market under the symbol “HBCP”. The
common stock commenced trading on the Nasdaq Stock Market on October 3, 2008. As of the close of business on
December 31, 2024, there were 8,091,522 shares of common stock outstanding, held by approximately 596
shareholders of record, not including the number of persons or entities whose stock is held in nominee or “street” name
through various brokerage firms and banks.
17
The following graph shows a comparison of the cumulative total returns for the common stock of Home Bancorp, Inc., the
Nasdaq Composite Index, and the S&P US Small Cap Banks Index for the period beginning December 31, 2019 and ending
December 31, 2024. The graph below represents $100 invested in our common stock at its closing price on December 31,
2019.
Index Value
Total Return Performance
Home Bancorp, Inc.
NASDAQ Composite
S&P US Small Cap Banks
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
50
100
150
200
250
Period Ending
Index
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
Home Bancorp, Inc.
100.00
73.79
112.14
110.73
119.56
134.82
NASDAQ Composite
100.00
144.07
174.88
117.00
167.80
215.86
S&P US Small Cap Banks
100.00
90.82
126.43
111.47
112.03
132.44
The stock price information shown above is not necessarily indicative of future price performance. Information used was
obtained from S&P Global Market Intelligence, Charlottesville, Virginia. The Company assumes no responsibility for any
errors or omissions in such information.
The Company did not sell any of its equity securities during 2024 that were not registered under the Securities Act of 1933.
For information regarding the Company’s equity compensation plans, see Item 12.
(b)
Not applicable.
(c)
On October 18, 2023, the Company announced the approval of a new repurchase program (the "2023 Repurchase
Plan"). Under the 2023 Repurchase Plan, the Company may purchase up to 405,000 shares, or approximately 5% of
its common stock outstanding, through open market or privately negotiated transactions. The Company’s purchases of
its common stock made during the fourth quarter of 2024 (which were made pursuant to the 2023 Repurchase Plan)
are set forth in the following table.
18
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 Plans or
Programs
October 1 - October 31, 2024
1,000 $
48.21
1,000
312,812
November 1 - November 30, 2024
1,000
50.00
1,000
311,812
December 1 - December 31, 2024
—
—
—
311,812
Total
2,000 $
49.11
2,000
311,812
Item 6. Reserved.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is an analysis and discussion of the financial condition and results of operations of Home Bancorp, Inc. (the
“Company”), and its wholly owned subsidiary, Home Bank, N.A. (the “Bank”). This discussion and analysis should be read
in conjunction with our Consolidated Financial Statements and related notes included herein in Part II, Item 8, “Financial
Statements and Supplementary Data” and the description of our business included herein in Part 1, Item 1 “Business”.
EXECUTIVE OVERVIEW
The Company reported net income for 2024 of $36.4 million, or $4.55 diluted EPS compared to $40.2 million, or $4.99
diluted EPS, reported for 2023. Key components of the Company's performance in 2024 are summarized below.
•
Assets increased $123.5 million, or 3.7%, from December 31, 2023 to $3.4 billion at December 31, 2024.
•
Loans increased by $136.5 million, or 5.3%, from December 31, 2023 to $2.7 billion at December 31, 2024.
•
During the year ended December 31, 2024, the Company provisioned $2.4 million of the allowance for loan losses
compared to a $2.3 million provisioned for the year ended December 31, 2023.
•
The ALL totaled $32.9 million, or 1.21% of total loans, at December 31, 2024. The ACL, which is comprised of the
allowance for loan losses plus the allowance for unfunded lending commitments, totaled $35.6 million, or 1.31% of
total loans, at December 31, 2024.
•
Total deposits increased $110.1 million, or 4.1%, from December 31, 2023 to $2.8 billion at December 31, 2024,
primarily due to increases in certificate of deposits and money market accounts.
•
The Company repurchased 124,634 shares of common stock at an average price of $37.79 per share during 2024.
•
The net interest margin was 3.71% for the year ended December 31, 2024, down 18 bps compared to 2023, primarily
due to an increase in the average cost of interest-bearing liabilities, partially offset with an increase in the average yield
earned on interest-earning assets during 2024.
•
The average rate paid on total interest-bearing deposits during 2024 was 2.66%, up 110 bps compared to 2023.
•
Noninterest income decreased $11,000, or 0.1%, in 2024 compared to 2023, primarily due to a decrease in bank card
fees and gain on sale of loans, which were offset by an increase in other noninterest income.
•
Noninterest expense increased $4.4 million, or 5.4%, in 2024 compared to 2023 primarily due to an increase in
compensation and benefits, foreclosed assets (primarily due to the absence of a $769,000 foreclosed asset recovery of a
previous loss on a OREO sale that occurred during the first quarter of 2023), data processing and communications, and
occupancy expenses, which were partially offset by a decrease in the provision for credit losses on unfunded
commitments.
19
SELECTED FINANCIAL DATA
Set forth below is selected summary historical financial and other data of the Company. When you read this summary
historical financial data, it is important that you also read the historical financial statements and related notes contained in
Item 8 of this Form 10-K. Taxable equivalent (“TE”) ratios have been calculated using a marginal tax rate of 21%.
As of December 31,
(dollars in thousands)
2024
2023
2022
2021
2020
Selected Financial Condition Data:
Total assets
$ 3,443,668 $ 3,320,122 $ 3,228,280 $ 2,938,244 $ 2,591,850
Cash and cash equivalents
98,548
75,831
87,401
601,443
187,952
Interest-bearing deposits in banks
—
99
349
349
349
Investment securities:
Available for sale
402,792
433,926
486,518
327,632
254,752
Held to maturity
1,065
1,065
1,075
2,102
2,934
Loans receivable, net
2,685,269 2,550,101 2,401,451 1,819,004 1,946,991
Intangible assets
85,044
86,372
87,973
61,949
63,112
Deposits
2,780,696 2,670,624 2,633,181 2,535,849 2,213,821
Other borrowings
5,539
5,539
5,539
5,539
5,539
Subordinated debt, net of issuance cost
54,459
54,241
54,013
—
—
Federal Home Loan Bank advances
175,546
192,713
176,213
26,046
28,824
Shareholders’ equity
396,088
367,444
329,954
351,903
321,842
For the Years Ended December 31,
(dollars in thousands, except per share data)
2024
2023
2022
2021
2020
Selected Operating Data:
Interest income
$
184,767 $
163,663 $
125,930 $
106,902 $
104,129
Interest expense
64,505
42,971
7,915
5,913
11,918
Net interest income
120,262
120,692
118,015
100,989
92,211
Provision (reversal) for loan losses
2,415
2,341
7,489
(10,161)
12,728
Net interest income after provision for loan losses
117,847
118,351
110,526
111,150
79,483
Noninterest income
14,625
14,636
13,885
16,271
14,305
Noninterest expense
87,289
82,841
81,909
66,982
62,981
Income before income taxes
45,183
50,146
42,502
60,439
30,807
Income taxes
8,756
9,906
8,430
11,818
6,042
Net income
$
36,427 $
40,240 $
34,072 $
48,621 $
24,765
Earnings per share - basic
$
4.58 $
5.02 $
4.19 $
5.80 $
2.86
Earnings per share - diluted
$
4.55 $
4.99 $
4.16 $
5.77 $
2.85
Cash dividends per share
$
1.01 $
1.00 $
0.93 $
0.91 $
0.88
Selected Operating Ratios: (1)
Average yield on interest-earning assets(TE)
5.74 %
5.28 %
4.19 %
4.11 %
4.48 %
Average rate on interest-bearing liabilities
2.90
2.08
0.41
0.35
0.76
Average interest rate spread(TE)(2)
2.84
3.20
3.78
3.76
3.72
Net interest margin(TE)(3)
3.71
3.89
3.92
3.88
3.96
Average interest-earning assets to average
interest-bearing liabilities
143.29
148.73
154.87
152.48
146.05
As of or For the Years Ended December 31,
2024
2023
2022
2021
2020
20
Noninterest expense to average assets
2.58
2.54
2.58
2.42
2.53
Efficiency ratio(4)
64.71
61.21
62.10
57.12
59.13
Return on average assets
1.08
1.23
1.07
1.76
0.99
Return on average common equity
9.56
11.59
10.16
14.38
7.83
Return on average tangible common equity (Non-
GAAP)(7)
12.68
15.95
13.93
17.98
10.24
Common stock dividend payout ratio
22.20
20.04
22.36
15.77
30.88
Average equity to average assets
11.26
10.64
10.55
12.22
12.69
Book value per common share
$
48.95
$
45.04
$
39.82
$
41.27
$
36.82
Tangible book value per common share (Non-
GAAP)(8)
38.44
34.45
29.20
34.00
29.60
Asset Quality Ratios: (5)
Non-performing loans as a percent of total loans
receivable
0.50 %
0.34 %
0.43 %
0.72 %
0.61 %
Non-performing assets as a percent of total assets
0.45
0.31
0.34
0.49
0.95
Allowance for loan losses as a percent of non-
performing loans as of end of period
242.1
357.81
278.6
158.9
110.0
Allowance for loan losses as a percent of net
loans as of end of period
1.21
1.22
1.15
1.15
1.29
Capital Ratios: (5) (6)
Tier 1 risk-based capital ratio
13.28 %
12.98 %
12.43 %
14.66 %
13.92 %
Leverage capital ratio
11.38
10.98
10.43
9.77
9.68
Total risk-based capital ratio
14.51
14.23
13.63
15.85
15.18
As of or For the Years Ended December 31,
2024
2023
2022
2021
2020
(1)
With the exception of end-of-period ratios, all ratios are based on average daily balances during the respective periods.
(2)
Average interest rate spread represents the difference between the average yield on interest-earning assets and the average rate paid
on interest-bearing liabilities.
(3)
Net interest margin represents net interest income as a percentage of average interest-earning assets. Taxable equivalent yields are
calculated using a marginal tax rate of 21%.
(4)
The efficiency ratio represents noninterest expense as a percentage of total revenues. Total revenues is the sum of net interest
income and noninterest income.
(5)
Asset quality and capital ratios are end-of-period ratios.
(6)
Capital ratios are for Home Bank only.
(7)
Tangible calculation eliminates goodwill, core deposit intangible and the corresponding amortization expense, net of tax.
(8)
Tangible calculation eliminates goodwill and core deposit intangible.
This Selected Financial Data contains financial information prepared other than in accordance with generally accepted
accounting principles (“GAAP”). The Company uses these non-GAAP financial measures in its analysis of the Company’s
performance. Management believes that the non-GAAP information provides useful data in understanding the Company’s
operations and in comparing the Company’s results to peers. This non-GAAP information should be considered in addition to
the Company’s financial information prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP
results. A reconciliation of GAAP to non-GAAP disclosures is included in the table below.
21
Non-GAAP Reconciliation
As of or For the Years Ended December 31,
(dollars in thousands, except per share data)
2024
2023
2022
2021
2020
Book value per common share
$
48.95
$
45.04
$
39.82
$
41.27
$
36.82
Less: Intangibles
10.51
10.59
10.62
7.27
7.22
Tangible book value per common share
38.44
34.45
29.20
34.00
29.60
Net Income
36,427
40,240
34,072
48,621
24,765
Add: CDI amortization, net of tax
1,049
1,264
1,266
919
1,074
Non-GAAP tangible income
37,476
41,504
35,338
49,540
25,839
Return on common equity
9.56 %
11.59 %
10.16 %
14.38 %
7.83 %
Add: Intangibles
3.12
4.36
3.77
3.60
2.41
Return on average tangible common equity
12.68 %
15.95 %
13.93 %
17.98 %
10.24 %
CRITICAL ACCOUNTING ESTIMATES
SEC guidance requires disclosure of “critical accounting estimates.” The SEC defines “critical accounting estimates” as those
estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation
uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations
of the registrant.
We follow financial accounting and reporting policies that are in accordance with accounting principles generally accepted in
the United States. Our accounting policies are discussed in detail in Note 2 - Summary of Significant Accounting Policies in
the accompanying notes to the consolidated financial statements included elsewhere in this report. Not all significant
accounting policies require management to make difficult, subjective or complex judgments. However, management believes
the policies noted below meet the SEC’s definition of critical accounting policies.
Allowance for Credit Losses
Management considers the policies related to the allowance for credit losses as the most critical to the financial statement
presentation. The total allowance for credit losses includes activity related to allowances calculated in accordance with
Accounting Standards Codification ("ASC") 326, Financial Instruments — Credit Losses. The allowance for credit losses is
established through a provision for credit losses charged to current earnings. The amount maintained in the allowance reflects
management’s continuing evaluation of the credit losses expected to be recognized over the life of the loans in our portfolio.
The allowance for loan losses is a valuation account that is deducted from the loans' amortized cost basis to present the net
amount expected to be collected on the loans. For purposes of determining the allowance for credit losses, the loan portfolio
is segregated by product types in order to recognize differing risk profiles among categories. Loans that do not share risk
characteristics are evaluated on an individual basis and are not included in the collective evaluation. Management estimates
the allowance balance using relevant available information from internal and external sources relating to past events, current
conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made to incorporate our
reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative
adjustments, including, but not limited to, changes in current and expected future economic conditions, changes in industry
experience and industry loan concentrations, changes in the volume and severity of nonperforming assets, changes in lending
policies and personnel and changes in the competitive and regulatory environment of the banking industry. Loans that do not
share similar risk characteristics are individually evaluated and are excluded from the pooled loan analysis.
Allowance for credit losses on unfunded loan commitments represents expected credit losses over the contractual period for
which the Company is exposed to credit risk from a contractual obligation to extend credit. No allowance is recorded if the
Company has the unconditional right to cancel the obligation. The allowance is reported as a component of other liabilities
within the Consolidated Statements of Financial Condition. Adjustments to the allowance for unfunded commitments are
reported in the Consolidated Statements of Income as a component of Noninterest Expense.
22
Business Combinations
Assets and liabilities acquired in business combinations are recorded at their fair value. In accordance with ASC Topic 805,
Business Combinations, the Company generally records provisional amounts at the time of acquisition based on the
information available to the Company. The determination of fair value as of the acquisition date requires management to
consider various factors that involve judgment and estimation, including the application of discount rates, prepayment rates,
attrition rates, future estimates of interest rates, as well as many other assumptions. These assumptions can have a material
impact on the estimated fair value, and as a result, the goodwill recorded in a business combination. The provisional estimates
of fair values may be adjusted for a period of up to one year ("measurement period") from the date of acquisition if new
information is obtained. Subsequently, adjustments recorded during the measurement period are recognized in the current
reporting period.
ACQUISITION ACTIVITY
The Company has completed six acquisitions since 2010. The following table is a summary of the Company’s acquisition
activity as recorded.
SUMMARY OF ACQUISITION ACTIVITY
(dollars in thousands)
Acquisition
Acquisition
Date
Total
Assets
Total
Loans
Goodwill
Core
Deposit
Intangible
Total
Deposits
Statewide Bank
3/12/2010
$
188,026 $
110,415 $
560 $
1,429 $
206,925
GS Financial Corporation
7/15/2011
256,677
182,440
296
859
193,518
Britton & Koontz Capital
Corporation
2/14/2014
298,930
161,581
43
3,030
216,600
Louisiana Bancorp, Inc.
9/15/2015
352,897
281,583
8,454
1,586
208,670
St. Martin Bancshares, Inc.
12/6/2017
592,852
439,872
49,135
6,766
533,497
Friendswood Capital Corporation
3/26/2022
413,919
317,492
23,029
4,597
367,991
Total Acquisitions
$ 2,103,301 $ 1,493,383 $
81,517 $
18,267 $ 1,727,201
FINANCIAL CONDITION
Loans, Allowance for Credit Losses and Asset Quality
Loans
The types of loans originated by the Company are subject to federal and state laws and regulations. Interest rates charged on
loans are affected principally by the demand for such loans and the supply of money available for lending purposes and the
rates offered by our competitors. These factors are, in turn, affected by general and economic conditions, the monetary policy
of the federal government, including the FRB, legislative tax policies and governmental budgetary matters.
The Company’s lending activities are subject to underwriting standards and loan origination procedures established by our
Board of Directors and management. Loan originations are obtained through a variety of sources, primarily existing
customers as well as new customers obtained from referrals and local advertising and promotional efforts. one- to four-family
residential mortgage loan applications and consumer loan applications are taken at any of the Bank’s branch offices.
Applications for other loans typically are taken personally by one of our loan officers, although they may be received by a
branch office initially and then referred to a loan officer. All loan applications are processed and underwritten centrally at the
Bank’s main office.
Total loans in portfolio (which does not include mortgage loans held for sale) increased $136.5 million, or 5.3%, from
December 31, 2023 to $2.7 billion at December 31, 2024. At December 31, 2024, the total recorded net investment in PPP
loans was $2.6 million, which is included in commercial and industrial loans. The recorded investment in PPP loans is net of
$16,000 in deferred lender fees, which will be amortized into interest income over the life of the loans. Excluding PPP loans,
total loans increased by $139.5 million, or 5.4% for the year ended December 31, 2024.
23
The following table summarizes the composition of the Company’s loan portfolio as of the dates indicated.
Real estate loans:
One- to four-family first mortgage
$
501,225 $
433,401 $
389,616 $
350,843 $
395,638
Home equity loans and lines
79,097
68,977
61,863
60,312
67,700
Commercial real estate
1,158,781 1,192,691 1,152,537
801,624
750,623
Construction and land
352,263
340,724
313,175
259,652
221,823
Multi-family residential
178,568
107,263
100,588
90,518
87,332
Total real estate loans
2,269,934 2,143,056 2,017,779 1,562,949 1,523,116
Other loans:
Commercial and industrial
418,627
405,659
377,894
244,123
417,926
Consumer
29,624
32,923
35,077
33,021
38,912
Total other loans
448,251
438,582
412,971
277,144
456,838
Total loans
$ 2,718,185 $ 2,581,638 $ 2,430,750 $ 1,840,093 $ 1,979,954
December 31,
(dollars in thousands)
2024
2023
2022
2021
2020
The following table reflects contractual loan maturities as of December 31, 2024, unadjusted for scheduled principal
reductions, prepayments, or repricing opportunities. The table also reflects the portion of loans due after one year that have
fixed or variable interest rates.
One- to four-family first mortgage
$
27,818 $
144,637 $
64,680 $ 264,090 $
501,225
Home equity loans and lines
5,010
10,928
6,356
56,803
79,097
Commercial real estate
155,821
533,981
342,225
126,754 1,158,781
Construction and land
124,404
149,607
43,820
34,432
352,263
Multi-family residential
27,414
127,086
13,573
10,495
178,568
Commercial and industrial
150,405
170,820
97,170
232
418,627
Consumer
4,280
12,568
11,766
1,010
29,624
Total
$
495,152 $ 1,149,627 $
579,590 $ 493,816 $ 2,718,185
Loans with fixed interest rates:
One- to four-family first mortgage
$
115,593 $
35,395 $ 106,851 $
257,839
Home equity loans and lines
2,807
4,977
193
7,977
Commercial real estate
467,292
254,196
7,365
728,853
Construction and land
65,339
10,476
—
75,815
Multi-family residential
116,693
11,280
3,466
131,439
Commercial and industrial
89,496
59,134
1
148,631
Consumer
9,556
11,149
806
21,511
Total
$
866,776 $
386,607 $ 118,682 $ 1,372,065
Amounts as of December 31, 2024 which mature in:
(dollars in thousands)
One year or
less
After one
but within
five years
After five
but within
fifteen years
After
fifteen
years
Total
24
Loans with variable interest rates:
One- to four-family first mortgage
$
29,044 $
29,285 $ 157,239 $
215,568
Home equity loans and lines
8,121
1,379
56,610
66,110
Commercial real estate
66,689
88,029
119,389
274,107
Construction and land
84,268
33,344
34,432
152,044
Multi-family residential
10,393
2,293
7,029
19,715
Commercial and industrial
81,324
38,036
231
119,591
Consumer
3,012
617
204
3,833
Total
$
282,851 $
192,983 $ 375,134 $
850,968
Amounts as of December 31, 2024 which mature in:
(dollars in thousands)
One year or
less
After one
but within
five years
After five
but within
fifteen years
After
fifteen
years
Total
Allowance for Credit Losses
Effective January 1, 2020, the Company adopted the guidance under ASC 326, Financial Instruments — Credit Losses,
which introduced a new model known as CECL. For reporting periods beginning on and after January 1, 2020 and the
adoption of ASC 326, the ACL is maintained at level that reflects expected losses for the full life of the financial assets. Prior
to January 1, 2020 and the adoption of ASC 326, the ALL was maintained at an amount which management determined
covered reasonably estimable and probable losses. The adoption impact of the change in accounting principle is reflected in
the table below as an increase to the beginning balance in 2020. Management recalculates the ACL at least quarterly to
reassess the estimate of credit losses for the total portfolio at the relevant reporting date. For more information on the
adoption of ASC 326 and the Company's relevant accounting policies, refer to Note 2 of the Consolidated Financial
Statements.
The following table presents the activity in the allowance for credit losses for the years indicated.
Allowance for loan losses:
Beginning balance
$
31,537 $
29,299 $
21,089 $
32,963 $
17,868
ASC 326 adoption impact
—
—
—
—
4,633
Provision for acquired PCD loans
—
—
1,415
—
—
Provision for loan losses
2,415
2,341
7,489
(10,161)
12,728
Loans charged off:
One- to four-family first mortgage
—
(12)
(80)
(176)
(99)
Home equity loans and lines
(22)
—
—
(6)
(575)
Commercial real estate
—
(29)
(270)
(1,337)
(5)
Construction and land
(123)
—
—
—
(688)
Multi-family residential
—
—
—
—
—
Commercial and industrial
(875)
(255)
(792)
(599)
(984)
Consumer
(265)
(175)
(256)
(187)
(250)
Recoveries on charged off loans
249
368
704
592
335
Ending balance - allowance for loan losses
$
32,916 $
31,537 $
29,299 $
21,089 $
32,963
For the Years Ended December 31,
(dollars in thousands)
2024
2023
2022
2021
2020
25
Allowance for unfunded lending commitments:
Beginning balance
$
2,594 $
2,093 $
1,815 $
1,425 $
—
ASC 326 adoption impact
—
—
—
—
1,425
Provision for losses on unfunded commitments
106
501
278
390
—
Ending balance - allowance for unfunded
commitments
2,700
2,594
2,093
1,815
1,425
Total allowance for credit losses
$
35,616 $
34,131 $
31,392 $
22,904 $
34,388
For the Years Ended December 31,
(dollars in thousands)
2024
2023
2022
2021
2020
At December 31, 2024, the ALL totaled $32.9 million, or 1.21% of total loans, and the ACL, which includes the reserve for
unfunded lending commitments, totaled $35.6 million, or 1.31% of total loans. For the year ended December 31, 2024, the
Company provisioned $2.4 million of the allowance for loan losses compared to a provision of $2.3 million for the year
ended December 31, 2023. The increase in the provision for loan losses during 2024 and 2023 primarily reflected our loan
growth during the year.
The following table presents the allocation of the allowance for loan losses as of December 31 for the years indicated.
December 31,
2024
2023
2022
2021
2020
(dollars in thousands)
Amount
%
Loans
Amount
%
Loans
Amount
%
Loans
Amount
%
Loans
Amount
%
Loans
One-to four-family first
mortgage
$ 4,430
18.4% $ 3,255
16.8% $ 2,883
16.0% $ 1,944
19.1% $ 3,065
20.0%
Home equity loans and lines
801
2.9
688
2.7
624
2.6
508
3.2
676
3.4
Commercial real estate
13,521
42.6
14,805
46.2
13,814
47.4
10,454
43.6
18,851
37.9
Construction and land
5,484
13.0
5,415
13.2
4,680
12.9
3,572
14.1
4,155
11.2
Multi-family residential
1,090
6.6
474
4.1
572
4.1
457
4.9
1,077
4.4
Commercial and industrial
6,861
15.4
6,166
15.7
6,024
15.6
3,520
13.3
4,276
21.1
Consumer
729
1.1
734
1.3
702
1.4
634
1.8
863
2.0
Total
$ 32,916
100.0% $ 31,537
100.0% $ 29,299
100.0% $ 21,089
100.0% $ 32,963
100.0%
The following table shows credit ratios at and for the periods indicated and each component of the ratio's calculation:
Allowance for loan losses as a percentage of total loans
outstanding
1.21 %
1.22 %
1.21 %
1.15 %
1.66 %
Allowance for loan losses
$ 32,916
$ 31,537
$ 29,299
$ 21,089
$ 32,963
Total loans outstanding
$ 2,718,185 $ 2,581,638 $ 2,430,750 $ 1,840,093 $ 1,979,954
Nonaccrual loans as a percentage of total loans outstanding
0.50 %
0.34 %
0.43 %
0.72 %
0.94 %
Total nonaccrual loans
$ 13,582
$
8,814
$ 10,513
$ 13,269
$ 18,677
Total loans outstanding
$ 2,718,185 $ 2,581,638 $ 2,430,750 $ 1,840,093 $ 1,979,954
Allowance for loan losses as a percentage of nonaccrual
loans
242.35 %
357.81 %
278.69 %
158.93 %
176.49 %
Allowance for loan losses
$ 32,916
$ 31,537
$ 29,299
$ 21,089
$ 32,963
Total nonaccrual loans
$ 13,582
$
8,814
$ 10,513
$ 13,269
$ 18,677
For the Years Ended December 31,
2024
2023
2022
2021
2020
26
Net charge-offs during period to average loans outstanding:
One-to four family residential loans
— %
0.01 %
(0.01) %
(0.04) %
(0.02) %
Net charge-offs
$
4
$
31
$
(41)
$
(131)
$
(86)
Average loans outstanding
$ 458,984
$ 414,780
$ 367,570
$ 372,207
$ 422,156
Net charge-offs during period to average loans outstanding:
Home equity loans and lines
0.02 %
0.01 %
0.02 %
0.03 %
(0.76) %
Net charge-offs
$
14
$
6
$
14
$
19
$
(559)
Average loans outstanding
$ 73,955
$ 66,428
$ 60,023
$ 62,957
$ 73,396
Net charge-offs during period to average loans outstanding:
Commercial real estate
— %
0.01 %
(0.03) %
(0.17) %
0.01 %
Net charge-offs
$
—
$
71
$ (270)
$ (1,337)
$
50
Average loans outstanding
$ 1,203,114 $ 1,170,475 $ 1,024,610 $ 769,950
$ 728,959
Net charge-offs during period to average loans outstanding:
Construction and land
(0.04) %
— %
— %
0.03 %
(0.33) %
Net charge-offs
$ (123)
$
—
$
—
$
63
$ (688)
Average loans outstanding
$ 336,020
$ 328,218
$ 297,218
$ 241,725
$ 205,591
Net charge-offs during period to average loans outstanding:
Multi-family residential
0.01 %
— %
— %
— %
— %
Net charge-offs
$
12
$
—
$
—
$
—
$
—
Average loans outstanding
$ 134,664
$ 104,166
$ 97,753
$ 87,101
$ 72,906
Net charge-offs during period to average loans outstanding:
Commercial and industrial
(0.17) %
(0.02) %
(0.10) %
(0.08) %
(0.24) %
Net charge-offs
$ (712)
$
(75)
$ (283)
$ (286)
$ (878)
Average loans outstanding
$ 414,362
$ 392,397
$ 294,459
$ 356,180
$ 360,930
Net charge-offs during period to average loans outstanding:
Consumer
(0.73) %
(0.40) %
(0.34) %
(0.12) %
(0.25) %
Net charge-offs
$ (231)
$ (136)
$ (114)
$
(41)
$ (105)
Average loans outstanding
$ 31,570
$ 33,837
$ 33,334
$ 35,647
$ 41,350
For the Years Ended December 31,
2024
2023
2022
2021
2020
Asset Quality
One of management’s key objectives has been, and continues to be, maintaining a high level of asset quality. In addition to
maintaining credit standards for new loan originations, we proactively monitor loans and collection and workout processes of
delinquent or problem loans. When a borrower fails to make a scheduled payment, we attempt to cure the deficiency by
making personal contact with the borrower. Initial contacts are generally made within 10 days after the date payment is due.
In most cases, deficiencies are promptly resolved. If the delinquency continues, late charges are assessed and additional
efforts are made to collect the deficiency. All loans which are designated as “special mention,” classified or which are
delinquent 90 days or more are reported to the Board of Directors of the Bank monthly. For loans where the collection of
principal or interest payments is doubtful, the accrual of interest income ceases. It is our policy, with certain limited
exceptions, to discontinue accruing interest and reverse any interest accrued on any loan which is 90 days or more past due.
On occasion, this action may be taken earlier if the financial condition of the borrower raises significant concern with regard
to their ability to service the debt in accordance with the terms of the loan agreement. Interest income is not accrued on these
loans until the borrower’s financial condition and payment record demonstrate an ability to service the debt.
27
Loans that do not share similar risk characteristics are individually evaluated and are excluded from the pooled loan analysis.
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 $500,000 or greater) commercial real estate loans, multi-family residential loans, construction and land loans and
commercial and industrial loans are individually evaluated for impairment. Third party property valuations are obtained at the
time of origination for real estate secured loans. When a determination is made that a loan has deteriorated to the point of
becoming a problem loan, updated valuations may be ordered to help determine if there is impairment, which may lead to a
recommendation for partial charge off or appropriate allowance allocation. Property valuations are ordered through, and are
reviewed by, an appraisal officer at the Bank. The Bank typically orders an “as is” valuation for collateral property if a loan is
in a criticized loan classification. The Board of Directors is provided with monthly reports on individually evaluated loans.
At December 31, 2024 and 2023, loans identified as individually evaluated for expected losses were $5.0 million and $4.2
million, respectively. Due to the adoption of ASC 326, total loans identified as impaired and individually evaluated at
December 31, 2024 included $1.3 million of acquired loans, of which none were acquired with deteriorated credit quality. For
more information on the adoption of ASC 326, refer to Note 2 of the Consolidated Financial Statements.
The following tables provide a summary of loans individually evaluated for expected losses as of the dates indicated.
December 31, 2024
(dollars in thousands)
Recorded
Investment
Allowance for
Loan Losses
Allowance to
Total Loans
Loans Individually Evaluated
One- to four-family first mortgage
$
— $
—
— %
Home equity loans and lines
—
—
—
Commercial real estate
4,718
200
4.24
Construction and land
—
—
—
Multi-family residential
—
—
—
Commercial and industrial
254
248
97.64
Consumer
—
—
—
Total
$
4,972 $
448
9.01 %
December 31, 2023
(dollars in thousands)
Recorded
Investment
Allowance for
Loan Losses
Allowance to
Total Loans
Loans Individually Evaluated
One- to four-family first mortgage
$
— $
—
— %
Home equity loans and lines
—
—
—
Commercial real estate
3,957
201
5.08
Construction and land
147
123
83.67
Multi-family residential
—
—
—
Commercial and industrial
112
95
84.82
Consumer
—
—
—
Total
$
4,216 $
419
9.94 %
28
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. In addition to classified assets, assets which do not
currently expose the Bank to sufficient risk to be classified may be categorized as "special mention." Special mention assets
have an existing weakness that could cause future impairment.
At December 31, 2024 and 2023, we had a total of $35.8 million and $28.2 million, respectively, in loans classified as
substandard. We had no assets classified as doubtful or loss at either date. For additional information, see Note 5 to the
Consolidated Financial Statements.
A bank’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by
Federal bank regulators which can order the establishment of additional general or specific loss allowances. The Federal
banking agencies have adopted an interagency policy statement on the allowance for loan and lease losses. The policy
statement provides guidance for financial institutions on both the responsibilities of management for the assessment and
establishment of allowances and guidance for banking agency examiners to use in determining the adequacy of general
valuation guidelines. Generally, the policy statement recommends that institutions have effective systems and controls to
identify, monitor and address asset quality problems; that management analyze all significant factors that affect the
collectability of the portfolio in a reasonable manner; and that management establish acceptable allowance evaluation
processes that meet the objectives set forth in the policy statement. Due to the adoption of ASC 326 on January 1, 2020,
management maintains, based on current and forecasted information, an ACL that reflects a current estimate of expected
credit losses for the estimated life of the loan portfolio at reporting periods subsequent to the adoption date. For reporting
periods prior to January 1, 2020, management maintained an ALL at a level which reflected losses that were probable and
reasonably estimable at the relevant reporting date. For all reporting periods, actual losses are uncertain and dependent upon
future events and, as such, further additions to the level of ACL may become necessary.
29
The following table sets forth the composition of the Company’s total nonperforming assets and troubled debt restructurings
as of the dates indicated.
December 31,
(dollars in thousands)
2024
2023
2022
2021
2020
Nonaccrual loans:
Real estate loans:
One- to four-family first mortgage
$
7,039
$
1,600
$
2,300
$
3,575
$
3,838
Home equity loans and lines
279
208
34
38
63
Commercial real estate
3,304
5,203
6,945
8,431
12,298
Construction and land
1,622
1,181
315
258
469
Multi-family residential
—
—
—
—
—
Other loans:
Commercial and industrial
1,311
331
378
763
1,717
Consumer
27
291
541
204
292
Total nonaccrual loans
13,582
8,814
10,513
13,269
18,677
Accruing loans 90 days or more past due
16
—
2
6
2
Total nonperforming loans
13,598
8,814
10,515
13,275
18,679
Foreclosed assets and ORE
2,010
1,575
461
1,189
1,302
Total nonperforming assets
15,608
10,389
10,976
14,464
19,981
Performing troubled debt restructurings(1)
—
—
6,205
4,963
2,085
Total nonperforming assets and troubled
debt restructurings
$ 15,608
$ 10,389
$ 17,181
$ 19,427
$ 22,066
Nonperforming loans to total loans
0.50 %
0.34 %
0.43 %
0.72 %
0.94 %
Nonperforming loans to total assets
0.39 %
0.27 %
0.33 %
0.45 %
0.72 %
Nonaccrual loans to total loans
0.50 %
0.34 %
0.43 %
0.72 %
0.94 %
Nonperforming assets to total assets
0.45 %
0.31 %
0.34 %
0.49 %
0.77 %
Total loans outstanding
$ 2,718,185
$ 2,581,638
$ 2,430,750
$ 1,840,093
$ 1,979,954
Total assets outstanding
$ 3,443,668
$ 3,320,122
$ 3,228,280
$ 2,938,244
$ 2,591,850
(1)
With the adoption of ASU 2022-02, effective January 1, 2023, TDR accounting has been eliminated.
Total nonperforming assets increased by $5.2 million, or 50.2%, to $15.6 million at December 31, 2024, compared to $10.4
million at December 31, 2023. The ratio of nonperforming assets to total assets was 0.45% at December 31, 2024, compared
to 0.31% at December 31, 2023.
As of December 31, 2024, total nonperforming loans were up $4.8 million, or 54.3%, from December 31, 2023. Foreclosed
assets and ORE were up $435,000, or 27.6%, from December 31, 2023.
Investment Securities
The Company invests in securities pursuant to our Investment Policy, which has been approved by our Board of Directors.
The Investment Policy is designed primarily to manage the interest rate sensitivity of our assets and liabilities, to generate a
favorable return without incurring undue interest rate or credit risk and to provide and maintain liquidity. The Asset-Liability
Committee (“ALCO”), comprised of the Chief Executive Officer, Chief Financial Officer, Chief Operations Officer, Chief
Risk Officer and Director of Financial Management, monitors investment activity and ensures that investments are consistent
with the Investment Policy. The Board of Directors of the Company reviews investment activity monthly.
30
The investment securities portfolio decreased by an aggregate of $31.1 million, or 7.2%, during 2024. Securities available for
sale made up 99.7% of the investment securities portfolio as of December 31, 2024. The following table sets forth the
amortized cost and market value of our investment securities portfolio as of the dates indicated.
December 31,
2024
2023
2022
(dollars in thousands)
Amortized
Cost
Market
Value
Amortized
Cost
Market
Value
Amortized
Cost
Market
Value
Available for sale:
U.S. agency mortgage-backed
$
291,351 $
261,873 $
314,569 $
283,853 $
355,014 $
316,832
Collateralized mortgage
obligations
73,931
71,389
82,764
79,262
91,217
86,345
Municipal bonds
53,458
45,829
53,891
46,674
67,476
57,625
U.S. government agency
18,079
17,128
19,151
18,049
20,600
19,333
Corporate bonds
6,985
6,573
6,982
6,088
6,980
6,383
Total available for sale
443,804
402,792
477,357
433,926
541,287
486,518
Held to maturity:
Municipal bonds
1,065
1,065
1,065
1,066
1,075
1,072
Total held to maturity
1,065
1,065
1,065
1,066
1,075
1,072
Total investment securities
$
444,869 $
403,857 $
478,422 $
434,992 $
542,362 $
487,590
The following table sets forth the fixed versus adjustable rate profile of the investment securities portfolio as of the dates
indicated. All amounts are shown at amortized cost.
December 31,
(dollars in thousands)
2024
2023
2022
Fixed rate:
Available for sale
$
420,577 $
451,517 $
511,960
Held to maturity
1,065
1,065
1,075
Total fixed rate
421,642
452,582
513,035
Adjustable rate:
Available for sale
23,227
25,840
29,327
Total adjustable rate
23,227
25,840
29,327
Total investment securities
$
444,869 $
478,422 $
542,362
The following table sets forth the amount of investment securities which mature during each of the periods indicated and the
weighted average yields for each range of maturities as of December 31, 2024. No tax-exempt yields have been adjusted to a
tax-equivalent basis. All amounts are shown at amortized cost.
Available for sale:
U.S. agency mortgage-backed
$
3,988
$ 83,825
$ 68,941
$ 134,597
$ 291,351
Collateralized mortgage obligations
7,034
50,283
449
16,165
73,931
Municipal bonds
—
9,270
31,367
12,821
53,458
U.S. government agency
5,000
49
12,984
46
18,079
Corporate bonds
—
—
6,985
—
6,985
Total available for sale
16,022
143,427
120,726
163,629
443,804
Weighted average yield
3.13 %
2.50 %
2.68 %
2.17 %
2.45 %
Amounts as of December 31, 2024 which mature in:
(dollars in thousands)
One Year
or Less
After One
Year
Through
Five
Years
After Five
Through
Ten Years
Over Ten
Years
Total
31
Held to maturity:
Municipal bonds
—
1,065
—
—
1,065
Total held to maturity
—
1,065
—
—
1,065
Weighted average yield
— %
4.00 %
— %
— %
4.00 %
Total investment securities
$ 16,022
$ 144,492
$ 120,726
$ 163,629
$ 444,869
Weighted average yield
3.13 %
2.51 %
2.68 %
2.17 %
2.45 %
Amounts as of December 31, 2024 which mature in:
(dollars in thousands)
One Year
or Less
After One
Year
Through
Five
Years
After Five
Through
Ten Years
Over Ten
Years
Total
The following table summarizes activity in the Company’s investment securities portfolio during 2024.
(dollars in thousands)
Available
for Sale
Held to
Maturity
Balance, December 31, 2023
$
433,926 $
1,065
Purchases
10,507
—
Principal maturities, prepayments and calls
(43,779)
—
Amortization of premiums and accretion of discounts
(281)
—
Increase in market value
2,419
Balance, December 31, 2024
$
402,792 $
1,065
As of December 31, 2024, the Company had a net unrealized loss on its available for sale investment securities portfolio of
$41.0 million, compared to a net unrealized loss of $43.4 million as of December 31, 2023. Management has determined that
the declines in the fair value of these securities are due primarily to the rising interest rate environment and were not
attributable to credit losses. The Company has the intent and ability to hold the securities until maturity or until anticipated
recovery.
Funding Sources
General
Deposits, loan repayments and prepayments, proceeds from investment securities sales, calls, maturities and paydowns, cash
flows generated from operations and FHLB advances are our primary, ongoing sources of funds for use in lending, investing
and for other general purposes.
Deposits
The Company offers a variety of deposit accounts with a range of interest rates and terms. Our deposits consist of checking,
both interest-bearing and noninterest-bearing, money market, savings and certificate of deposit accounts.
The flow of deposits is influenced significantly by general economic conditions, changes in market interest rates and
competition. Our deposits are obtained predominantly from the areas where our branch offices are located. We have
historically relied primarily on a high level of customer service and long-standing relationships with customers to attract and
retain deposits; however, market interest rates and rates offered by competitors significantly affect our ability to attract and
retain deposits.
Total deposits were $2.8 billion as of December 31, 2024, up $110.1 million, or 4.1%, compared to December 31, 2023.
Certificates of deposits totaled $733.9 million as of December 31, 2024, up $89.2 million, or 13.8%, compared to
December 31, 2023. The following table sets forth the composition of the Company’s deposits as of the dates indicated.
32
December 31,
Increase/(Decrease)
(dollars in thousands)
2024
2023
Amount
Percent
Demand deposit
$
733,073 $
744,424 $
(11,351)
(1.5) %
Savings
210,977
231,624
(20,647)
(8.9)
Money market
457,483
408,024
49,459
12.1
NOW
645,246
641,818
3,428
0.5
Certificates of deposit
733,917
644,734
89,183
13.8
Total deposits
$ 2,780,696 $ 2,670,624 $
110,072
4.1 %
The following table shows the daily average balances of deposits by type and weighted-average rate paid for the periods
indicated.
For the Years Ended December 31,
(dollars in thousands)
2024
2023
2022
Average
Balance
Interest
Expense
Average
Rate
Paid
Average
Balance
Interest
Expense
Average
Rate
Paid
Average
Balance
Interest
Expense
Average
Rate
Paid
Noninterest-bearing demand
deposits
$
747,640
$
821,592
$
894,103
Interest-bearing deposits
Interest-bearing demand
deposits
625,005
8,008
1.28 %
638,846
5,464
0.86 %
745,463
1,941
0.26 %
Savings
219,880
1,209
0.55
265,850
1,079
0.41
313,151
413
0.13
Money market accounts
432,198
11,983
2.77
389,959
6,881
1.76
441,367
1,187
0.27
Certificates of deposit
704,981
31,580
4.48
465,710
14,080
3.02
358,729
1,674
0.47
Total interest-bearing deposits
1,982,064
52,780
2.66%
1,760,365
27,504
1.56%
1,858,710
5,215
0.28%
Total deposits
$ 2,729,704
$ 2,581,957
$ 2,752,813
The total amount of our uninsured deposits (deposits in excess of $250,000, as calculated in accordance with FDIC
regulations) were $813.6 million at December 31, 2024 and $748.6 million at December 31, 2023. Certificates of deposit in
the amount of $250,000 and over increased $37.7 million, or 19.7%, from $190.7 million at December 31, 2023 to $228.4
million at December 31, 2024. The following table details the remaining maturity of large-denomination certificates of
deposit of $250,000 and over as of the dates indicated.
December 31,
(dollars in thousands)
2024
2023
2022
3 months or less
$
134,885 $
46,372 $
19,826
3 - 6 months
45,424
33,421
13,646
6 - 12 months
38,623
89,262
26,620
12 - 36 months
8,538
20,366
8,040
More than 36 months
922
1,312
1,310
Total certificates of deposit greater than $250,000
$
228,392 $
190,733 $
69,442
Subordinated Debt
On June 30, 2022, the Company issued $55.0 million in aggregate principal amount of its 5.75% Fixed-to-Floating Rate
Subordinated Notes due 2032 (the "Notes"). The Notes were issued at a price equal to 100% of the aggregate principal
amount. The Notes have a stated maturity date of June 30, 2032 and bear interest at a fixed rate of 5.75% per year from and
including the issue date to but excluding June 30, 2027. From June 30, 2027, the Notes bear interest at a floating rate equal to
the then current three-month term secured overnight financing rate (“SOFR”), plus 282 basis points. The Notes may be
redeemed by the Company, in whole or in part, on or after June 30, 2027. The Notes are intended to qualify as Tier 2 capital
for regulatory purposes.
The carrying value of subordinated debt was $54.5 million and $54.2 million at December 31, 2024 and December 31, 2023,
respectively. The subordinated debt was recorded net of issuance costs, which is being amortized using the straight-line
method over five years.
33
Other Borrowings
On March 12, 2023, the Federal Reserve Board created the Bank Term Funding Program ("BTFP"), which offers loans to
banks with a term up to one year with no prepayment penalty. The loans are secured by pledging qualifying securities and are
valued at par for collateral purposes. At December 31, 2024 and 2023, the Bank pledged securities with a collateral value of
$0 and $103.4 million, respectively. The Bank participated in the BTFP during 2024 and paid off the loan before
December 31, 2024. The average balance of other borrowings, which included the BTFP loan was $128.7 million during
2024, up $123.1 million from 2023.
Federal Home Loan Bank Advances
Advances from the FHLB may be obtained by the Company upon the security of the common stock it owns in the FHLB and
certain real estate loans and investment securities, provided certain standards related to creditworthiness have been met. Such
advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities.
Advances from the FHLB may be either short-term, maturities of one year or less, or long-term, maturities in excess of one
year.
The Company had $137.2 million short-term FHLB advances as of December 31, 2024, down $12.8 million, or 8.5%,
compared to $150.0 million as of December 31, 2023. Long-term FHLB advances totaled $38.3 million as of December 31,
2024, down $4.4 million, or 10.3%, compared to $42.7 million as of December 31, 2023.
Average FHLB advances were $57.0 million during 2024, down $186.6 million, or 76.6%, from 2023.
Shareholders’ Equity
Shareholders’ equity provides a source of permanent funding, allows for future growth and provides the Company with a
cushion to withstand unforeseen adverse developments. At December 31, 2024, shareholders’ equity totaled $396.1 million,
up $28.6 million, or 7.8%, compared to $367.4 million at December 31, 2023. The increase was primarily due to the
Company’s earnings for the year ended December 31, 2024 and a reduction in accumulated other comprehensive loss,
partially offset by shareholders' dividends and repurchases of shares of the Company's common stock.
RESULTS OF OPERATIONS
Net income in 2024 was $36.4 million, down $3.8 million, or 9.5%, compared to 2023. Diluted earnings per share ("EPS")
for 2024 was $4.55, down $0.44, or 8.8%, from 2023. For the year ended December 31, 2024, the Company provisioned $2.4
million to the allowance for loan losses compared to a provision of $2.3 million for the year ended December 31, 2023.
Net income in 2023 was $40.2 million, up $6.2 million, or 18.1%, compared to 2022. Diluted EPS for 2023 was $4.99, up
$0.83, or 20.0% from 2022. For the year ended December 31, 2023, the Company provisioned $2.3 million to the allowance
for loan losses compared to a provision of $7.5 million for the year ended December 31, 2022. The provision during 2022
was significantly impacted by the acquisition of Friendswood.
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. Our 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 net interest spread was 2.84%, 3.20% and 3.78% for the years ended
December 31, 2024, 2023, and 2022, respectively.
Net interest income totaled $120.3 million in 2024, down $430,000, or 0.4%, compared to $120.7 million in 2023. The
decrease was primarily due to the cost and increase in average interest-bearing liabilities outpacing the yield and increase in
average interest-earning assets. Total interest expense increased $21.5 million, or 50.1%, in 2024 compared to 2023 primarily
related to higher deposit costs during 2024 compared to 2023. The average cost of total interest-bearing deposits increased by
110 basis points to 2.66% in 2024.
In 2023, net interest income totaled $120.7 million, up $2.7 million, or 2.3%, compared to $118.0 million in 2022. The
increase in net interest income for 2023 compared to 2022 was primarily due to the impact of a full year of Friendswood's
interest-earning assets and loan growth. Total interest expense increased $35.1 million, or 442.9%, in 2023 compared to 2022
primarily related to higher FHLB advances during 2023 compared to 2022, increased costs in interest-bearing deposits and a
34
full year of interest expense on our subordinated debt issued in 2022. The average cost of total interest-bearing deposits in
2023 totaled 1.56%, up 128 basis points from 2022.
The Company’s net interest margin, which is net interest income as a percentage of average interest-earning assets, was
3.71%, 3.89%, and 3.92% during the years ended December 31, 2024, 2023, and 2022, respectively.
The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income to
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
have been calculated using a marginal tax rate of 21%.
Interest-earning assets:
Loans receivable(1)
$ 2,652,669
$ 170,255
6.33%
$ 2,510,301
$ 149,338
5.88%
$ 2,174,967
$ 112,660
5.12%
Investment securities(TE)
Taxable
443,523
10,618
2.39
485,201
11,537
2.38
455,757
9,647
2.12
Tax-exempt
16,262
290
2.26
19,322
367
2.41
24,371
481
2.50
Total investment securities
459,785
10,908
2.39
504,523
11,904
2.38
480,128
10,128
2.14
Other interest-earning assets
71,498
3,604
5.04
54,323
2,421
4.46
325,429
3,142
0.97
Total interest-earning assets(TE)
3,183,952
184,767
5.74
3,069,147
163,663
5.28
2,980,524
125,930
4.19
Noninterest-earning assets
202,769
193,673
198,338
Total assets
$ 3,386,721
$ 3,262,820
$ 3,178,862
Interest-bearing liabilities:
Deposits:
Savings, checking and money market
$ 1,277,083
$ 21,200
1.66%
$ 1,294,655
$ 13,424
1.04%
$ 1,499,981
$ 3,541
0.24%
Certificates of deposit
704,981
31,580
4.48
465,710
14,080
3.02
358,729
1,674
0.47
Total interest-bearing deposits
1,982,064
52,780
2.66
1,760,365
27,504
1.56
1,858,710
5,215
0.28
Other borrowings
128,699
6,094
4.74
5,567
214
3.84
5,603
213
3.80
Subordinated debt
54,348
3,381
6.22
54,128
3,390
6.26
27,396
1,710
6.24
FHLB advances
56,956
2,250
3.92
243,513
11,863
4.81
32,762
777
2.36
Total interest-bearing liabilities
2,222,067
64,505
2.90
2,063,573
42,971
2.08
1,924,471
7,915
0.41
Noninterest-bearing liabilities
783,458
851,942
918,937
Total liabilities
3,005,525
2,915,515
2,843,408
Shareholders’ equity
381,196
347,305
335,454
Total liabilities and shareholders’
equity
$ 3,386,721
$ 3,262,820
$ 3,178,862
Net interest-earning assets
$ 961,885
$ 1,005,574
$ 1,056,053
Net interest income; net interest spread(TE)
$ 120,262
2.84%
$ 120,692
3.20%
$ 118,015
3.78%
Net interest margin(TE)
3.71%
3.89%
3.92%
For the Years Ended December 31,
(dollars in thousands)
2024
2023
2022
Average
Balance
Interest
Average
Yield/
Rate
Average
Balance
Interest
Average
Yield/
Rate
Average
Balance
Interest
Average
Yield/
Rate
(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 life of the respective
loans.
35
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).
Interest income:
Loans receivable
$
10,851 $
10,066 $
20,917 $
18,114 $
18,564 $
36,678
Investment securities
(359)
(637)
(996)
972
804
1,776
Other interest-earning assets
535
648
1,183
1,401
(2,122)
(721)
Total interest income
11,027
10,077
21,104
20,487
17,246
37,733
Interest expense:
Savings, checking and money
market accounts
4,719
3,057
7,776
6,501
3,382
9,883
Certificates of deposit
8,693
8,807
17,500
7,296
5,110
12,406
Other borrowings
2,350
3,530
5,880
1
—
1
Subordinated debt
(9)
—
(9)
630
1,050
1,680
FHLB advances
(3,570)
(6,043)
(9,613)
4,461
6,625
11,086
Total interest expense
12,183
9,351
21,534
18,889
16,167
35,056
Increase (decrease) in net interest
income
$
(1,156) $
726 $
(430) $
1,598 $
1,079 $
2,677
2024 Compared to 2023
Change Attributable To
2023 Compared to 2022
Change Attributable To
(dollars in thousands)
Rate
Volume
Total
Increase
(Decrease)
Rate
Volume
Total
Increase
(Decrease)
Interest income includes interest income earned on earning assets as well as applicable loan fees earned. Interest income that
would have been earned on nonaccrual loans had they been on accrual status is not included in the data reported above.
Provision for Loan Losses
For the year ended December 31, 2024, the Company provisioned $2.4 million to the allowance for loan losses compared to a
provision of $2.3 million and $7.5 million for 2023 and 2022, respectively. The provision for loan losses during 2024
reflected our assessment of the change in expected losses due primarily to loan growth during the year.
Net charge-offs were $1.0 million for 2024, compared to net charge-offs of $103,000 and $694,000 for 2023 and 2022,
respectively. Net loan charge-offs for 2024 were primarily attributable to originated commercial and industrial, consumer and
construction and land loans. Charge-offs during 2023 were primarily attributable to an originated commercial and industrial
loan and consumer loans.
Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition -
Allowance for Credit Losses" provides additional information on the changes in the ALL and ACL.
36
Noninterest Income
The following table illustrates the primary components of noninterest income for the years indicated.
(dollars in thousands)
2024
2023
2024 vs 2023
Percent
Increase
(Decrease)
2022
2023 vs 2022
Percent
Increase
(Decrease)
Noninterest income:
Service fees and charges
$
5,118 $
4,992
2.5 % $
4,920
1.5 %
Bank card fees
6,525
7,051
(7.5)
6,279
12.3
Gain on sale of loans, net
470
816
(42.4)
663
23.1
Income from bank-owned life insurance
1,100
1,045
5.3
915
14.2
Loss on sale of securities, net
—
(249)
(100.0)
—
—
Gain (loss) on sale of assets, net
33
(27)
(222.2)
26
(203.8)
Other income
1,379
1,008
36.8
1,082
(6.8)
Total noninterest income
$
14,625 $
14,636
(0.1) % $
13,885
5.4 %
2024 compared to 2023
Noninterest income for 2024 totaled $14.6 million, down $11,000, or 0.1%, compared to 2023. Income from bank card fees
for 2024 was down $526,000, or 7.5%, from 2023 primarily due to decreased transaction activity by our cardholders.
Gain on sale of loans for 2024 decreased $346,000, or 42.4%, compared to 2023, primarily due to less sales of SBA loans in
2024 compared to 2023.
Other income for 2024 increased $371,000, or 36.8%, compared to 2023 primarily due to derivative fee income and an
increase in Small Business Investment Company ("SBIC") income.
2023 compared to 2022
Noninterest income for 2023 totaled $14.6 million, up $751,000, or 5.4%, compared to 2022. Income from bank card fees for
2023 was up $772,000, or 12.3%, from 2022, primarily due to to increased transaction activity by our cardholders.
Gain on sale of loans for 2023 increased $153,000, or 23.1%, compared to 2022, primarily due to the sale of SBA loans
during the third quarter of 2023, which was partially offset by lower mortgage loans held for sale due to the current rate
environment.
The Company recorded a net loss of $249,000 related to the sale of investment securities during 2023. There were no gross
gains or gross losses related to the sale of investment securities during 2022.
Income from bank-owned life insurance for 2023 increased $130,000 primarily due to full year of income for insurance
policies purchase purchased late in the third quarter of 2022.
37
Noninterest Expense
The following table illustrates the primary components of noninterest expense for the years indicated.
(dollars in thousands)
2024
2023
2024 vs 2023
Percent
Increase
(Decrease)
2022
2023 vs 2022
Percent
Increase
(Decrease)
Noninterest expense:
Compensation and benefits
$
51,330 $
48,933
4.9 % $
47,750
2.5 %
Occupancy
10,131
9,674
4.7
8,715
11.0
Marketing and advertising
2,000
2,146
(6.8)
2,263
(5.2)
Data processing and communication
10,241
9,372
9.3
9,307
0.7
Professional services
1,922
1,690
13.7
1,740
(2.9)
Forms, printing and supplies
794
781
1.7
766
2.0
Franchise and shares tax
1,863
1,755
6.2
2,108
(16.7)
Regulatory fees
1,954
2,040
(4.2)
2,122
(3.9)
Foreclosed assets, net
341
(547)
162.3
523
(204.6)
Amortization of acquisition intangible
1,328
1,601
(17.1)
1,602
(0.1)
Provision for credit losses on unfunded
commitments
106
501
(78.8)
278
80.2
Other expenses
5,279
4,895
7.8
4,735
3.4
Total noninterest expense
$
87,289 $
82,841
5.4 % $
81,909
1.1 %
2024 compared to 2023
Noninterest expense for 2024 totaled $87.3 million, up $4.4 million, or 5.4%, from 2023.
Compensation and benefits expense for 2024 was up $2.4 million, or 4.9%, compared to 2023, primarily due to increased
salaries and compensation expense.
Data processing and communication for 2024 was up $869,000, or 9.3%, compared to 2023, primarily due to increases in
cost of maintenance contracts in 2024.
Occupancy expense for 2024 was up $457,000, or 4.7%, compared to 2023, primarily due to an additional leases in our
Houston market.
In 2024, the Company recorded a $341,000 expense related to foreclosed assets, compared to a $547,000 reversal in 2023,
primarily due to a $769,000 recovery of a previous loss on a foreclosed asset.
Provision for credit losses on unfunded commitments decreased $395,000, or 78.8%, compared to 2023, primarily due to a
decrease in unfunded commitments.
2023 compared to 2022
Noninterest expense for 2023 totaled $82.8 million, up $932,000, or 1.1%, from 2022. Noninterest expense for 2022 included
merger-related expenses from the Friendswood acquisition totaling $2.0 million (pre-tax). The increase in noninterest
expense in 2023, primarily reflects the overall growth of the Company and the impact of the Friendswood acquisition for a
full year.
Compensation and benefits expense for 2023 was up $1.2 million, or 2.5%, compared to 2022, primarily due to increased
salaries and compensation expense.
Occupancy expense for 2023 was up $959,000, or 11.0%, compared to 2022, primarily due to the additional offices in the
Houston market area.
Provision for credit losses on unfunded commitments increased $223,000, or 80.2%, compared to 2022, primarily due to
increased funding commitments.
In 2023, the Company recorded a $547,000 reversal to expenses related to foreclosed assets, primarily due to a $769,000
recovery of a previous loss on a foreclosed asset, compared to a $523,000 expense in 2022.
38
Income Taxes
For the years ended December 31, 2024, 2023 and 2022, the Company incurred income tax expense of $8.8 million, $9.9
million and $8.4 million, respectively. The Company’s effective tax rate was 19.4%, 19.8%, and 19.8% for 2024, 2023 and
2022, respectively.
The Company's effective tax rate in 2024 decreased compared to 2023 due to variances in items that are non-taxable or non-
deductible. The Company's effective tax rate in 2023 remained consistent with 2022. See Note 15 to the Consolidated
Financial Statements for additional information concerning our income taxes.
LIQUIDITY AND CAPITAL RESOURCES
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.
We also maintain excess funds in short-term, interest-bearing assets that provide additional liquidity.
We use our liquidity to fund existing and future loan commitments, to fund maturing certificates of deposit and demand
deposit withdrawals, to invest in other interest-earning assets and to meet operating expenses. At December 31, 2024,
certificates of deposit maturing within the next 12 months totaled $693.3 million. Based upon historical experience, we
anticipate that a significant portion of the maturing certificates of deposit will be redeposited with us.
In addition to cash flows from loan and securities payments and prepayments as well as from sales of available for sale
securities, we have significant borrowing capacity available to fund liquidity needs. In recent years, we have utilized
borrowings as a cost efficient addition to deposits as a source of funds. Our borrowings consist of advances from the FHLB,
of which we are a member. Under terms of the collateral agreement with the FHLB, we may pledge residential mortgage
loans and mortgage-backed securities as well as our stock in the FHLB as collateral for such advances. For the year ended
December 31, 2024, the average balance of our outstanding FHLB advances was $57.0 million. At December 31, 2024, we
had $175.5 million in outstanding FHLB advances and $1.1 billion in additional FHLB advances available to us.
Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested
in short-term investments such as overnight deposits. On a longer-term basis, the Company maintains a strategy of investing
in various lending and investment security products. The Company uses its sources of funds primarily to meet its ongoing
commitments and fund loan commitments. The Company has been able to generate sufficient cash through its deposits, as
well as borrowings, and anticipates it will continue to have sufficient funds to meet its liquidity requirements.
ASSET/ LIABILITY MANAGEMENT AND MARKET RISK
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 is also monitored by management through the use of models which generate 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 December 31, 2024.
Shift in Interest Rates
(in bps)
% Change in Projected
Net Interest Income
+200
0.4
+100
0.3
-100
(1.0)
-200
(2.3)
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 interest-earning assets and maintain a desired mix of interest-earning assets and interest-bearing
liabilities, the actual timing of asset and liability repricing, the magnitude of interest rate changes and corresponding
movement in interest rate spreads and the level of success of asset/liability management strategies.
39
Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from the
interest rate risk, which is inherent in our lending and deposit taking activities. To that end, management actively monitors
and manages interest rate risk exposure. In addition to market risk, our primary risk is credit risk on our loan portfolio. We
attempt to manage credit risk through our loan underwriting and oversight policies.
The principal objective of our interest rate risk management function is to evaluate the interest rate risk embedded in certain
balance sheet accounts, determine the level of risk appropriate given our business strategy, operating environment, capital
and liquidity requirements, performance objectives and interest rate environment and manage the risk consistent with
approved guidelines. We seek to manage our exposure to risks from changes in interest rates while at the same time trying to
improve our net interest spread. We monitor interest rate risk as such risk relates to our operating strategies. ALCO is
responsible for reviewing our asset/liability and investment policies and interest rate risk position. ALCO meets at least
quarterly. The extent of the movement of interest rates is an uncertainty that could have a negative impact on future earnings.
We primarily have utilized the following strategies in our efforts to manage interest rate risk:
•
we have increased our originations of shorter term loans, particularly commercial real estate and commercial and
industrial loans;
•
we generally sell our conforming long-term (30-year) fixed-rate one- to four--family residential mortgage loans into
the secondary market; and
•
we have invested in securities, consisting primarily of mortgage-backed securities and collateral mortgage
obligations, with relatively short average lives, generally three to five years, and we maintain adequate amounts of
liquid assets.
In addition to the strategies above, on occasion the Company has entered into certain interest rate swap agreements as part of
its interest rate risk management strategy. The Company’s objectives in using interest rate derivatives are to manage its
exposure to interest rate movements. During 2024 and 2023, such derivatives were used to hedge the variable cost associated
with existing variable rate liabilities. Refer to Note 14. Derivatives and Hedging Activities of the Consolidated Financial
Statements for more information on the effects of the derivative financial instruments on the consolidated financial
statements.
To meet the financing needs of its customers, the Company issues financial instruments which represent conditional
obligations that are not recognized, wholly or in part, in the statements of financial condition. These financial instruments
include commitments to extend credit and standby letters of credit. Such instruments expose the Company to varying degrees
of credit and interest rate risk in much the same way as funded loans. The same credit policies are used in these commitments
as for on-balance sheet instruments. 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 the undisbursed portion of construction loans as of December 31 of the
years indicated.
Contract Amount
(dollars in thousands)
2024
2023
Standby letters of credit
$
6,502 $
7,289
Available portion of lines of credit
488,930
368,398
Undisbursed portion of loans in process
76,424
221,997
Commitments to originate loans
161,482
127,076
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to be drawn upon, the total commitment amounts generally
represent future cash requirements.
Unfunded commitments under commercial lines of credit and revolving credit lines 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.
40
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 the undisbursed portion of construction loans as of December 31, 2024.
(dollars in thousands)
Less
Than One
Year
One to
Three
Years
Three to
Five
Years
Over Five
Years
Total
Unused commercial lines of credit
$
126,712 $
80,014 $
31,961 $
78,060 $
316,747
Unused personal lines of credit
51,774
35,512
13,419
71,478
172,183
Undisbursed portion of loans in process
43,512
15,634
16,295
983
76,424
Standby letters of credit
5,723
779
—
—
6,502
Commitments to originate loans
148,868
8,053
4,561
—
161,482
Total
$
376,589 $
139,992 $
66,236 $
150,521 $
733,338
The Company has utilized leasing arrangements to support the ongoing activities of the Company. The required payments
under such commitments and other contractual cash commitments as of December 31, 2024 are shown in the following table.
(dollars in thousands)
2025
2026
2027
2028
2029
Thereafter
Total
Operating leases
$
1,357 $
1,371 $
1,386 $
1,228 $
1,150
$ 10,160 $ 16,652
Certificates of deposit
693,281
30,038
3,930
2,646
2,838
1,184 733,917
Subordinated debt
—
—
—
—
—
55,000
55,000
Long-term FHLB advances
35,194
3,132
—
—
—
—
38,326
Total
$ 729,832 $ 34,541 $
5,316 $
3,874 $
3,988
$ 66,344 $ 843,895
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk.
The information contained in the section captioned “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Asset/Liability Management and Market Risk” in Item 7 hereof is incorporated herein by reference.
41
Item 8.
Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Home Bancorp, Inc.
Lafayette, Louisiana
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated statements of financial condition of Home Bancorp, Inc. and subsidiary (the
“Company”) as of December 31, 2024 and 2023, and the related consolidated statements of income, comprehensive (loss)
income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024,
including the related notes (collectively, the consolidated financial statements). We also have audited, in accordance with the
standards of the Public Accounting Oversight Board (United States) ("PCAOB"), the Company’s internal control over
financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2024 and 2023, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Report of Management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our
audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with U.S. federal securities laws and applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in
all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
42
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the consolidated
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the audit of the consolidated financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of the critical audit matter below does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter, providing separate opinion
on the critical audit matter or on the accounts or disclosures to which it relates.
Estimate of the allowance for loan losses – reserves related to collectively evaluated loans
As described in Notes 2 and 5 to the consolidated financial statements, the Company’s allowance for loan losses (“ALL”)
totaled $32.9 million of which $32.5 million relates to collectively evaluated loans (“general reserves”). The Company has
identified loan pools with similar risk characteristics. The Company estimated the general reserves for all loan pools using
the discounted cash flow method, except for general reserves for the credit card portfolio which were estimated using the
remaining life method.
The discounted cash flow method utilizes loan-level term information (including maturity date, payment amount, and interest
rate) and certain assumptions by management (including default rates, prepayment speeds, and curtailment rates) to estimate
the expected future cash flows for the full life of each loon pool. The results of the discounted cash flow calculations are
aggregated by pool to produce the net present value of each loan pool. The net present value of each loan pool is used to
calculate the ALL reserve based on the book balance of the pool. The reserves are then adjusted for certain qualitative factors
related to current conditions in addition to adjustments for reasonable and supportable forecasts for future periods to arrive at
general reserves.
The remaining life method utilized by the Company to estimate general reserves for the credit card portfolio applies historical
loss rates to the portfolio over the estimated remaining life of the portfolio then adjusts for certain qualitative factors related
to current conditions in addition to adjustments for reasonable and supportable forecasts for future periods to arrive at general
reserves for credit cards.
We identified management’s selection of qualitative factor adjustments, including reasonable and supportable forecasts, used
in the calculation of general reserves as a critical audit matter. Management’s selection of qualitative factor adjustments,
including reasonable and supportable forecasts, which are used to adjust the quantitative historical losses (both upwards and
downwards), are highly subjective and could have a significant impact on the allowance for loan losses. Auditing these
complex judgments and assumptions involved especially challenging auditor judgment due to the nature and extent of audit
evidence and effort required to address these matters, including the extent of specialized skill and knowledge needed.
43
The primary audit procedures we performed to address this critical audit matter included:
•
We evaluated the design and tested the operating effectiveness of key controls relating to the Company’s
ALL calculation, including controls over the segmentation of the loan portfolio, the completeness and
accuracy of data used in the calculation, the periods and assumptions used in the calculation, the
determination of qualitative factors including reasonable and supportable forecasts, and the precision of
management’s review and approval of the calculation and resulting estimate.
•
We tested the Company’s ALL calculation for computational accuracy.
•
We tested the completeness and accuracy of the information used by management to calculate general
reserves, including evaluating the relevance and reliability of such information.
•
We evaluated management’s judgments and assumptions used in the development of the qualitative factor
adjustments, including reasonable and supportable forecasts, for reasonableness, and tested the reliability of
the underlying data on which these factors are based, by comparing information to source documents and
external information sources.
•
We analyzed the qualitative factor adjustments in comparison to observable data utilized by management
and to historical periods to evaluate the directional consistency in relation to the Company’s loan portfolio
and local economy.
•
We evaluated the completeness and accuracy of disclosures made within the consolidated financial
statements with regards to the ALL.
We have served as the Company’s auditor since 2009.
Atlanta, Georgia
March 12, 2025
44
HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
(dollars in thousands)
2024
2023
Assets
Cash and cash equivalents
$
98,548 $
75,831
Interest-bearing deposits in banks
—
99
Investment securities available for sale, at fair value (amortized cost $443,804 and $477,357,
respectively)
402,792
433,926
Investment securities held to maturity (fair values of $1,065 and $1,066, respectively)
1,065
1,065
Mortgage loans held for sale
832
361
Loans, net of unearned income
2,718,185
2,581,638
Allowance for loan losses
(32,916)
(31,537)
Total loans, net of unearned income and allowance for loan losses
2,685,269
2,550,101
Office properties and equipment, net
42,324
41,980
Cash surrender value of bank-owned life insurance
48,421
47,321
Goodwill and core deposit intangibles
85,044
86,372
Accrued interest receivable and other assets
79,373
83,066
Total Assets
$ 3,443,668 $ 3,320,122
Liabilities
Deposits:
Noninterest-bearing
$
733,073 $
744,424
Interest-bearing
2,047,623
1,926,200
Total deposits
2,780,696
2,670,624
Other borrowings
5,539
5,539
Subordinated debt, net of unamortized issuance cost
54,459
54,241
Short-term Federal Home Loan Bank advances
137,220
150,000
Long-term Federal Home Loan Bank advances
38,326
42,713
Accrued interest payable and other liabilities
31,340
29,561
Total Liabilities
3,047,580
2,952,678
Shareholders’ Equity
Preferred stock, $0.01 par value - 10,000,000 shares authorized; none issued
—
—
Common stock, $0.01 par value - 40,000,000 shares authorized; 8,091,522 and 8,158,281 shares issued
and outstanding, respectively
81
81
Additional paid-in capital
168,138
165,823
Unallocated common stock held by:
Employee Stock Ownership Plan (ESOP)
(1,339)
(1,696)
Recognition and Retention Plan (RRP)
—
(1)
Retained earnings
259,190
234,619
Accumulated other comprehensive loss
(29,982)
(31,382)
Total Shareholders’ Equity
396,088
367,444
Total Liabilities and Shareholders’ Equity
$ 3,443,668 $ 3,320,122
The accompanying Notes are an integral part of these Consolidated Financial Statements.
45
HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
(dollars in thousands except per share data)
2024
2023
2022
Interest Income
Loans, including fees
$
170,255
$
149,338
$
112,660
Investment securities:
Taxable interest
10,618
11,537
9,647
Tax-exempt interest
290
367
481
Other investments and deposits
3,604
2,421
3,142
Total interest income
184,767
163,663
125,930
Interest Expense
Deposits
52,780
27,504
5,215
Other borrowings expense
6,094
214
213
Subordinated debt expense
3,381
3,390
1,710
Short-term Federal Home Loan Bank advances
963
10,727
361
Long-term Federal Home Loan Bank advances
1,287
1,136
416
Total interest expense
64,505
42,971
7,915
Net interest income
120,262
120,692
118,015
Provision for loan losses
2,415
2,341
7,489
Net interest income after provision for loan losses
117,847
118,351
110,526
Noninterest Income
Service fees and charges
5,118
4,992
4,920
Bank card fees
6,525
7,051
6,279
Gain on sale of loans, net
470
816
663
Income from bank-owned life insurance
1,100
1,045
915
Loss on sale of securities, net
—
(249)
—
Gain (loss) on sale of assets, net
33
(27)
26
Other income
1,379
1,008
1,082
Total noninterest income
14,625
14,636
13,885
Noninterest Expense
Compensation and benefits
51,330
48,933
47,750
Occupancy
10,131
9,674
8,715
Marketing and advertising
2,000
2,146
2,263
Data processing and communication
10,241
9,372
9,307
Professional services
1,922
1,690
1,740
Forms, printing and supplies
794
781
766
Franchise and shares tax
1,863
1,755
2,108
Regulatory fees
1,954
2,040
2,122
Foreclosed assets, net
341
(547)
523
Amortization of acquisition intangible
1,328
1,601
1,602
Provision for credit losses on unfunded commitments
106
501
278
Other expenses
5,279
4,895
4,735
Total noninterest expense
87,289
82,841
81,909
Income before income tax expense
45,183
50,146
42,502
Income tax expense
8,756
9,906
8,430
Net Income
$
36,427
$
40,240
$
34,072
Earnings per share:
Basic
$
4.58
$
5.02
$
4.19
Diluted
$
4.55
$
4.99
$
4.16
Cash dividends declared per common share
$
1.01
$
1.00
$
0.93
The accompanying Notes are an integral part of these Consolidated Financial Statements.
46
HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31,
(dollars in thousands)
2024
2023
2022
Net Income
$
36,427
$
40,240
$
34,072
Other Comprehensive Income (Loss)
Unrealized gains (losses) on available for sale investment securities
2,419
11,088
(54,116)
Unrealized (losses) gains on cash flow hedges
(646)
(1,307)
3,419
Reclassification adjustment for losses included in net income
—
249
—
Tax effect
(373)
(2,105)
10,646
Other comprehensive income (loss), net of taxes
1,400
7,925
(40,051)
Comprehensive Income (Loss)
$
37,827
$
48,165
$
(5,979)
The accompanying Notes are an integral part of these Consolidated Financial Statements.
47
HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(dollars in thousands except share and per share
data)
Common
Stock
Additional
Paid-in
Capital
Unallocated
Common
Stock
Held by
ESOP
Unallocated
Common
Stock
Held by
RRP
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Balance, December 31, 2021
$
85
$ 164,982
$
(2,410) $
(13) $ 188,515
$
744
$ 351,903
Net income
34,072
34,072
Other comprehensive loss
(40,051) (40,051)
Purchase of Company’s common stock at cost,
288,350 shares
(2)
(2,881)
(8,450)
(11,333)
Cash dividends declared, $0.93 per share
(7,777)
(7,777)
Common Stock issued under incentive plans, net of
shares surrendered in payment, including tax
benefit, 25,902 shares
—
388
(64)
324
Exercise of stock options
—
375
375
RRP shares released for allocation
(6)
6
—
ESOP shares released for allocation
1,272
357
1,629
Share-based compensation cost
812
812
Balance, December 31, 2022
$
83
$ 164,942
$
(2,053) $
(7) $ 206,296
$
(39,307) $ 329,954
Net income
40,240
40,240
Other comprehensive income
7,925
7,925
Purchase of Company’s common stock at cost,
164,272 shares
(2)
(1,642)
(3,615)
(5,259)
Cash dividends declared, $1.00 per share
(8,222)
(8,222)
Common stock issued under incentive plans, net of
shares surrendered in payment, including tax
benefit, 31,419 shares
—
409
(80)
329
Exercise of stock options
—
102
102
RRP shares released for allocation
(6)
6
—
ESOP shares released for allocation
1,111
357
1,468
Share-based compensation cost
907
907
Balance, December 31, 2023
$
81
$ 165,823
$
(1,696) $
(1) $ 234,619
$
(31,382) $ 367,444
Net income
36,427
36,427
Other comprehensive income
1,400
1,400
Purchase of Company’s common stock at cost,
124,634 shares
(1)
(1,245)
(3,528)
(4,774)
Cash dividends declared, $1.01 per share
(8,189)
(8,189)
Common stock issued under incentive plans, net of
shares surrendered in payment, including tax
benefit, 54,475 shares
1
1,024
(139)
886
Exercise of stock options
—
130
130
RRP shares released for allocation
(1)
1
—
ESOP shares released for allocation
1,286
357
1,643
Share-based compensation cost
1,121
1,121
Balance, December 31, 2024
$
81
$ 168,138
$
(1,339) $
—
$ 259,190
$
(29,982) $ 396,088
The accompanying Notes are an integral part of these Consolidated Financial Statements.
48
HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
(dollars in thousands)
2024
2023
2022
Cash flows from operating activities, net of effects of acquisitions:
Net income
$
36,427
$
40,240
$
34,072
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses
2,415
2,341
7,489
Depreciation
3,498
3,571
3,464
Amortization and accretion of purchase accounting valuations and intangibles
3,073
3,682
4,078
Federal Home Loan Bank stock dividends
(497)
(607)
(53)
Net amortization of premium on investments
281
374
1,012
Amortization of subordinated debt issuance cost
218
228
120
Loss on sale of securities, net
—
249
—
Gain on sale of loans, net
(470)
(816)
(663)
(Gain) loss on sale of assets, net
(33)
27
(26)
Proceeds, including principal payments, from loans held for sale
48,373
16,540
66,748
Originations of loans held for sale
(48,488)
(16,638)
(65,079)
Non-cash compensation
2,764
2,375
2,441
Deferred income tax benefit
(44)
(33)
(882)
Decrease (increase) in accrued interest receivable and other assets
527
(8,023)
(10,427)
Increase in cash surrender value of bank-owned life insurance
(1,100)
(1,045)
(915)
Increase (decrease) in accrued interest payable and other liabilities
1,787
(1,109)
9,820
Net cash provided by operating activities
48,731
41,356
51,199
Cash flows from investing activities, net of effects of acquisitions:
Purchases of securities available for sale
(10,507)
—
(238,498)
Proceeds from maturities, prepayments and calls on securities available for sale
43,779
49,554
57,922
Proceeds from maturities, prepayments and calls on securities held to maturity
—
—
1,000
Proceeds from sales on securities available for sale
—
13,762
—
Increase in loans, net
(141,753)
(154,666)
(279,450)
Decrease in interest-bearing deposits in banks
99
250
—
Proceeds from sale of foreclosed assets
2,159
809
2,650
Purchases of office properties and equipment
(4,057)
(2,022)
(2,706)
Net cash disbursed in sale of banking center
—
—
(11,182)
Net cash disbursed in business combination
—
—
(16,123)
Proceeds from sale of office properties and equipment
248
4
82
Purchase of bank-owned life insurance
—
—
(5,000)
Purchase of Federal Home Loan Bank stock
(4,409)
(5,215)
(4,047)
Proceeds from redemption of Federal Home Loan Bank stock
7,335
3,269
—
Net cash used in investing activities
(107,106)
(94,255)
(495,352)
Cash flows from financing activities, net of effects of acquisitions:
Increase (decrease) in deposits, net
110,208
37,883
(255,520)
Borrowings on Federal Home Loan Bank advances
1,072,850
17,420,575
155,000
Repayments of Federal Home Loan Bank advances
(1,090,019)
(17,404,079)
(4,850)
Proceeds from issuance of subordinated debt, net of issuance cost
—
—
53,892
Proceeds from exercise of stock options
130
102
375
Issuance of stock under incentive plans
886
329
324
Dividends paid to shareholders
(8,189)
(8,222)
(7,777)
Purchase of Company’s common stock
(4,774)
(5,259)
(11,333)
Net cash provided by (used in) financing activities
81,092
41,329
(69,889)
Net change in cash and cash equivalents
22,717
(11,570)
(514,042)
Cash and cash equivalents at beginning of year
75,831
87,401
601,443
Cash and cash equivalents at end of year
$
98,548
$
75,831
$
87,401
Supplementary cash flow information:
Interest paid on deposits and borrowed funds
$
62,099
$
41,884
$
7,744
Income taxes paid
6,516
12,635
6,535
Noncash investing and financing activities:
Loans transferred to ORE, net of charge offs
2,396
1,793
1,297
Recognition of new operating leases
177
3,321
4,690
The accompanying Notes are an integral part of these Consolidated Financial Statements.
49
HOME BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Home Bancorp, Inc., a Louisiana corporation (the “Company”), is the parent holding company for Home Bank, N.A. (the
"Bank"). The Bank is a national bank and wholly owned subsidiary of the Company. The Company and Bank are
headquartered in Lafayette, Louisiana. As of December 31, 2024, the Company was a bank holding company. The Bank
established HB Investment Fund I, LLC and HB Investment Fund II, LLC, as wholly-owned subsidiaries of the Bank to
invest in New Markets Tax Credits (“NMTC”) and Federal Tax Credits ("FTC") in our market areas.
In 2010, the Bank expanded into the Northshore (of Lake Pontchartrain) region through a Federal Deposit Insurance
Corporation (“FDIC”) assisted acquisition of certain assets and liabilities of the former Statewide Bank. In July 2011, the
Bank expanded into the Greater New Orleans region through its acquisition of GS Financial Corporation, the former holding
company of Guaranty Savings Bank. In February 2014, the Bank expanded into west Mississippi through its acquisition of
Britton & Koontz Capital Corporation, the holding company for Britton & Koontz Bank, N.A. of Natchez, Mississippi. In
September 2015, the Bank expanded its presence in the Greater New Orleans region through the acquisition of Louisiana
Bancorp, Inc., the former holding company of Bank of New Orleans of Metairie, Louisiana. In December 2017, the Bank
expanded its presence in the Acadiana market through the acquisition of St. Martin Bancshares (“SMB”), the former holding
company of St. Martin Bank & Trust Company of St. Martinville, Louisiana. In March 2022, the Bank expanded into the
Houston, Texas region through the acquisition of Friendswood Capital Corporation ("Friendswood"), the former holding
company of Texan Bank, N.A. ("Texan Bank") of Houston, Texas. As of December 31, 2024, the Bank conducted business
from 43 banking offices in the Acadiana, Northshore, Baton Rouge, Greater New Orleans, Natchez and Houston regions of
south Louisiana, west Mississippi, and east Texas.
The Bank is primarily engaged in attracting deposits from the general public and using those funds to invest in loans and
investment securities. The Bank’s principal sources of funds are customer deposits, repayments of loans, repayments of
investments and funds borrowed from outside sources such as the Federal Home Loan Bank (“FHLB”) of Dallas. The Bank
derives its income principally from interest earned on loans and investment securities and, to a lesser extent, from fees
received in connection with the origination of loans, service charges on deposit accounts and for other services. The Bank’s
primary expenses are general operating expenses and interest expense on deposits and borrowings.
The Company’s primary banking regulator is the Board of Governors of the Federal Reserve System (the”Federal Reserve”).
The Bank’s primary regulator is the Office of the Comptroller of the Currency (“OCC”). Its deposits are insured to the
maximum amount permissible under federal law by the FDIC.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, the Bank, HB Investment Fund I, LLC and HB
Investment Fund II, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.
Subsequent Events
The Company has evaluated subsequent events for potential recognition and disclosure through the date of filing for this
Annual Report on Form 10-K with the U.S. Securities and Exchange Commission.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that
are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the
allowance for credit losses, income taxes, the valuation of foreclosed assets and other real estate ("ORE"), goodwill and other
intangible assets, acquisition accounting valuations and valuation of share-based compensation.
50
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, due from banks and interest-bearing
deposits with the FHLB. The Company considers all highly liquid debt instruments with original maturities of three months
or less (excluding interest-bearing deposits in banks) to be cash equivalents.
The Bank may be required to maintain cash reserves with the Federal Reserve Bank. The requirement is dependent upon the
Bank’s cash on hand or noninterest-bearing balances. There was no reserve requirement as of December 31, 2024 or 2023.
Investment Securities
The Company follows the guidance under the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 320, Investments – Debt and Equity Securities. This standard addresses the accounting and reporting
for investments in equity securities that have readily determinable fair values and for all investments in debt securities. Under
the topic, investment securities, which the Company both positively intends and has the ability to hold to maturity, are
classified as held to maturity and carried at amortized cost.
Investment securities that are acquired with the intention of being resold in the near term are classified as trading securities
under ASC 320 and are carried at fair value, with unrealized holding gains and losses recognized in current earnings. The
Company did not hold any securities for trading purposes at, or during the years ended, December 31, 2024 or 2023.
Securities not meeting the criteria of either trading securities or held to maturity are classified as available for sale and are
carried at fair value. Unrealized holding gains and losses for these securities are recognized, net of related income tax effects,
in the Consolidated Statements of Comprehensive Income (Loss).
Interest income earned on securities either held to maturity or available for sale is included in current earnings, including the
amortization of premiums and the accretion of discounts using the interest method. Amortization of premiums and accretion
of discounts are recognized in interest income using the effective interest method. Premiums that exceed the amount
repayable by the issuer at the next call date are amortized to the next call date. Other premiums and discounts are amortized
(accreted) over the estimated lives of the securities. The gain or loss realized on the sale of securities classified as available
for sale or held to maturity, as determined using the specific identification method for determining the cost of the securities
sold, is computed with reference to its amortized cost and is also included in current earnings.
ASC 326 requires expected credit related losses for available for sale debt securities to be recorded through an allowance for
credit losses, while non-credit related losses or declines in fair value continue to be recognized through other comprehensive
income ("OCI"). Under the guidance, the Company is also required to evaluate held to maturity debt securities for expected
credit losses.
We evaluate our investment securities portfolio for credit-related impairment at least quarterly, and more frequently when
economic and market conditions warrant such evaluations. Consideration is given to numerous factors including, but not
limited to, the extent to which the fair value is less than the amortized cost basis; adverse conditions causing changes in the
financial condition of the issuer of the security or underlying loan guarantors; changes to the rating of the security by a rating
agency; and the Company’s intent to sell a security or whether it is more likely than not the Company will be required to sell
the security before the recovery of its amortized cost, which may extend to maturity.
The Company performs a process to determine whether declines in the fair value of securities has resulted from credit losses
or other factors. This process involves evaluating each security for any indicators of potential credit losses by monitoring
credit performance, collateral type, collateral geography, bond credit support, loan-to-value ratios, credit scores, loss severity
levels, pricing levels, downgrades by rating agencies, cash flow projections and other factors as indicators of potential credit
issues. If this evaluation indicates the existence of credit losses, the Company compares the present value of cash flows
expected to be collected from the security with the amortized cost basis. If the present value of expected cash flows is less
than the amortized cost basis, an allowance for credit losses is recorded, limited by the amount that the fair value of the
security is less than its amortized cost. Subsequent changes in the allowance for credit losses on securities are recorded with a
corresponding provision for credit losses on the Consolidated Statement of Income. If the Company intends to sell the debt
security or it is more likely than not that the Company will be required to sell the security before recovery of its amortized
cost basis, the security is written down to fair value against the allowance for credit losses, with any additional impairment
reported on the Consolidated Statement of Income. The Company applies the practical expedient that permits the exclusion of
the accrued interest receivable balance from amortized cost basis of financing receivables.
51
Loans Held for Sale
The Company sells mortgage loans and loan participations for an amount equal to the principal amount of loans or
participations with yields to investors based upon current market rates. Realized gains and losses related to loan sales are
included in noninterest income.
The Company allocates the cost to acquire or originate a mortgage loan between the loan and the right to service the loan if it
intends to sell or securitize the loan and retain servicing rights. In addition, the Company periodically assesses capitalized
mortgage servicing rights for impairment based on the fair value of such rights. To the extent that temporary impairment
exists, write-downs are recognized in current earnings as an adjustment to the corresponding valuation allowance. Permanent
impairment is recognized through a write-down of the asset with a corresponding reduction in the valuation allowance. For
purposes of performing its impairment evaluation, the portfolio is stratified on the basis of certain risk characteristics,
including loan type and interest rates. Capitalized servicing rights are amortized over the period of, and in proportion to,
estimated net servicing income, which considers appropriate prepayment assumptions.
For financial reporting purposes, the Company classifies a portion of its loans as “Mortgage loans held for sale”. Included in
this category are loans which the Company has the current intent to sell and loans which are available to be sold in the event
that the Company determines that loans should be sold to support the Company’s investment and liquidity objectives, as well
as to support its overall asset and liability management strategies. Loans included in this category for which the Company has
the current intention to sell are recorded at the lower of aggregate cost or fair value. As of December 31, 2024 and 2023, the
Company had $832,000 and $361,000, respectively, in loans classified as “Mortgage loans held for sale.”
Loans
The following describes the distinction between originated and acquired loans and certain significant accounting policies
relevant to each category.
Originated Loans
Originated loans are carried net of discounts on loan originations and are amortized using the level yield interest method over
the remaining contractual life of the loan. Nonrefundable loan origination fees, net of direct loan origination costs, are
deferred and recognized over the life of the loan as an adjustment of yield using the interest method.
Interest on loans receivable is accrued as earned using the interest method over the life of the loan. Interest on loans deemed
uncollectible is excluded from income. The accrual of interest is discontinued and reversed against current income, with
certain limited exceptions, once loans become more than 90 days past due or earlier if conditions warrant. The past due status
of loans is determined based on the contractual terms. When a loan is placed on nonaccrual status, previously accrued and
uncollected interest is charged against interest income on loans. Interest payments are applied to reduce the principal balance
on nonaccrual loans. Loans are returned to accrual status when all past due payments are received in full and future payments
are probable.
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 being deemed a criticized or classified 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 reviewed by, the Company’s Appraisal and Review
Department. The Company typically orders an “as is” valuation for collateral property if the loan is in a criticized loan
classification.
Loans, or portions of loans, are charged off in the period that such loans, or portions thereof, are deemed uncollectible. The
collectability of individual loans is determined through an estimate of the fair value of the underlying collateral and/or
assessment of the financial condition and repayment capacity of the borrower.
Acquired Loans
Loans purchased in acquisition transactions are acquired loans, and are recorded at their estimated fair value on the
acquisition date.
52
Acquired loans that have evidence of more-than-insignificant deterioration in credit quality since origination are considered
purchased credit deteriorated (“PCD”) loans. At acquisition, an estimate of expected credit losses is made for PCD loans.
This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date
fair value to establish the initial amortized cost basis of the PCD loans. Any difference between the unpaid principal balance
of PCD loans and the amortized cost basis is considered to relate to noncredit factors, resulting in a discount or premium that
is amortized to interest income. For acquired loans not deemed PCD loans at acquisition, the difference between the initial
fair value mark and the unpaid principal balance are recognized in interest income over the estimated life of the loans. In
addition, an initial allowance for expected credit losses is estimated and recorded as provision expense at the acquisition date.
The subsequent measurement of expected credit losses for all acquired loans is the same as the subsequent measurement of
expected credit losses for originated loans.
Allowance for Credit Losses
ASC 326, Financial Instruments - Credit Losses, significantly changed the impairment model for most financial assets that
are measured at amortized cost, including off-balance sheet credit exposures, from an incurred loss model to an expected loss
model.
The allowance for credit losses ("ACL") is comprised of the allowance for loan losses, a valuation account available to
absorb losses on loans and leases held for investment, and the reserve for unfunded lending commitments, a liability
established to absorb credit losses for the expected life of the contractual term of on and off-balance sheet exposures as of the
date of the determination. Quarterly, management estimates losses in the portfolio and unfunded exposures based on a
number of factors, including the Company’s past loan loss experience, known and potential risks in the portfolio, adverse
situations that may affect the borrowers’ ability to repay, the estimated value of any underlying collateral, and current and
forecasted economic conditions.
Changes in the allowance for credit losses, which includes the allowance for loan losses and the reserve for unfunded lending
commitments, are charged to current operations. Loans that are determined to be uncollectible are charged-off against the
allowance for loan losses once that determination is made.
While management uses available information to make allowance evaluations, adjustments to the allowance may be
necessary based on changes in economic and other conditions or changes in accounting guidance. The OCC, as an integral
part of its examination processes, periodically reviews the allowance for credit losses. The OCC may require the recognition
of adjustments to the allowance for credit losses based on its judgment of information available to it as of the time of its
examinations. To the extent the OCC’s estimates differ from management’s estimates, additional provisions to the allowance
for credit losses may be required as of the time of its examination. As part of the Bank’s risk management program, an
independent review is performed on the loan portfolio, which supplements management’s assessment of the loan portfolio
and the allowance for credit losses. The result of the independent review is reported directly to the Audit Committee of the
Board of Directors.
Under ASC 326, the allowance for credit losses ("ACL") is measured on a pool basis when similar risk characteristics exist
and is maintained at an amount which management believes is a current estimate of the expected credit losses for the full life
of the relevant pool of loans and related unfunded lending commitments. The Company applies the practical expedient that
permits the exclusion of the accrued interest receivable balance from amortized cost basis of financing receivables when
measuring credit losses under ASC 326. The Company's ACL calculation estimates loan losses using the discounted cash
flow method for all loan pools, except for the Company's credit card portfolio. Expected losses are calculated using relevant
information about past events, including historical experience, current conditions and reasonable and supportable forecasts
that affect the collectability of future cash flows. Loan losses for the credit card portfolio are estimated using the remaining
life method due to the limited complexity and size of this portfolio. The discounted cash flow analysis uses loan-level term
information (e.g., maturity date, payment amount, interest rate, etc.) and pool-level assumptions (e.g., default rates,
prepayment speeds, etc.) to produce expected future cash flows for the full life of every loan in the pool. The expected future
cash flows are discounted and results are then aggregated to produce a net present value of the pool and ultimately the ACL
requirement for the pool. The remaining life method applies a loss rate to a given pool of loans over the estimated remaining
life of the given pool. The remaining life of the pool is based on historical data. The loss rates computed for each pool and
expected pool-level funding rates are applied to the related unfunded lending commitments to calculate an ACL on unfunded
amounts. For each pool of loans and the unfunded lending commitments, management also evaluates and applies qualitative
adjustments to the calculated ACL based on several factors, including, but not limited to, changes in current and expected
future economic conditions, changes in industry experience and loan concentrations, changes in the volume and severity of
nonperforming assets, changes in lending policies and personnel and changes in the competitive and regulatory environment
of the banking industry.
53
Loans that do not share similar risk characteristics are individually evaluated and are excluded from the pooled loan analysis.
Individually analyzed loans generally include larger (i.e., loans with balances of $500,000 or greater) commercial real estate
loans, multi-family residential loans, construction and land loans, commercial and industrial loans and other loans as deemed
appropriate by management for which it is probable that all amounts due under the contractual terms of the loan will not be
collected. The ACL for loans that are individually evaluated is based on a comparison of the recorded investment in the loan
with either the expected cash flows discounted using the loan’s original effective interest rate, observable market price for the
loan or the estimated fair value of the collateral underlying certain collateral-dependent loans.
The Company has identified the following portfolio segments based on the risk characteristics described in the table for its
pooled loan analysis under ASC 326:
Loan Pool
Risk Characteristics
One- to four-family first mortgage
This category consists of loans secured by first liens on residential real estate. The
performance of these loans may be adversely affected by, among other factors,
unemployment rates, local residential real estate market conditions and the interest rate
environment. Generally, these loans are for longer terms than home equity loans and lines.
Home equity loans and lines
This category consists of loans secured by first and junior liens on residential real estate. The
performance of these loans may be adversely affected by, among other factors,
unemployment rates, local residential real estate market conditions and the interest rate
environment.
Commercial real estate ("CRE")
This category consists of loans primarily secured by office and industrial buildings,
warehouses, retail shopping facilities and various special purpose properties, including hotels
and restaurants. The performance of CRE loans may be adversely affected by, among other
factors, conditions specific to the relevant industry, the real estate market for the property
type and geographic region where the property or borrower is located.
Construction and land ("C&D")
This category consists of loans to finance the ground-up construction and/or improvement of
residential and commercial properties and loans secured by land. The performance of C&D
loans is generally dependent upon the successful completion of improvements and/or land
development for the end user, the sale of the property to a third party, or a secondary source of
cash flow from the owners. The successful completion of planned improvements and
development may be adversely affected by changes in the estimated property value upon
completion of construction, projected costs and other conditions leading to project delays.
Multi-family residential
This category consists of loans secured by apartment or residential buildings with five or more
units used to accommodate households on a temporary or permanent basis. The performance
of multi-family loans is generally dependent on the receipt of rental income from the tenants
who occupy the subject property. The occupancy rate of the subject property and the ability of
the tenants to pay rent may be adversely affected by the location of the subject property and
local economic conditions.
Commercial and industrial ("C&I")
This category consists of secured and unsecured loans to purchase capital equipment,
agriculture operating loans and other business loans for working capital and operating
purposes. Secured loans are primarily secured by accounts receivable, inventory and other
business assets. The performance of C&I loans may be adversely affected by, among other
factors, conditions specific to the relevant industry, fluctuations in the value of the collateral
and individual performance factors related to the borrower.
Consumer
This category consists of loans to individuals for household, family and other personal use.
The performance of these loans may be adversely affected by national and local economic
conditions, unemployment rates and other factors affecting the borrower's income available to
service the debt.
Credit cards
This category consists of unsecured revolving lines of credit for personal and commercial use.
Credit card loans are generally smaller in size and are less complex relative to larger loan
categories. Due to their unsecured nature, historical loss rates for credit card loans are
generally higher than the loss rates on loans secured by real estate.
Office Properties and Equipment
Office properties and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-
line method with rates based on the estimated useful lives of the individual assets, which range from three to 40 years.
Expenditures which substantially increase the useful lives of existing property and equipment are capitalized while routine
expenditures for repairs and maintenance are expensed as incurred.
54
Operating Leases
In accordance with ASC 842, Leases, the Company recognizes lease assets and liabilities for both operating and capital
leases. For lessees, lease assets represent the right-of-use ("ROU") leased assets for the relevant lease term and lease
liabilities that represent the obligation to make lease payments. The Company has made an accounting policy election not to
recognize short-term lease assets and liabilities (less than a 12 month term) or immaterial equipment leases in its balance
sheets; instead, the Company recognizes the lease expense on a straight-line basis over the life of the lease. At December 31,
2024 and 2023, the Company's right-of-use assets, net of amortization, were $10,280,000 and $11,039,000, respectively. The
Company's lease liabilities were $10,737,000 and $11,420,000 at December 31, 2024 and 2023, respectively. The Company
reports its right-of-use assets and liabilities within accrued interest receivable and other assets and accrued interest payable
and other liabilities, respectively, on the Consolidated Statements of Financial Condition. The ROU asset and lease liability
are recognized at lease commencement based on the present value of the remaining lease payments, considering a discount
rate that represents the Company's incremental borrowing rate. Operating lease expense is recognized on a straight-line basis
over the lease term and is recognized in occupancy expense Consolidated Statements of Income. See Note 7 for additional
information and disclosures on operating leases.
Cash Surrender Value of Bank-Owned Life Insurance
Life insurance contracts represent single premium life insurance contracts on the lives of certain officers of the Bank. The
Bank is the beneficiary of these policies. These contracts are reported at their cash surrender value and changes in the cash
surrender value are included in noninterest income.
Intangible Assets
Intangible assets consist of goodwill and core deposit intangibles. Goodwill and core deposit intangibles are presented
together on the Consolidated Statements of Financial Condition. Goodwill represents the excess purchase price over the fair
value of net assets acquired in business acquisitions. Goodwill is not amortized but rather is evaluated for impairment at least
annually. Core deposit intangibles represent the estimated value related to customer deposit relationships assumed in the
Company’s acquisitions. Core deposit intangibles are being amortized over nine to 15 years. Core deposit intangibles are
evaluated for impairment at least annually.
The Company recognizes the rights to service Small Business Association ("SBA") sold guaranteed portion of loans as a
separate asset, which is recorded in other assets in the Consolidated Statements of Financial Condition. When servicing is
contractually separated from the underlying loan by sale with servicing rights retained. The servicing asset is recorded at fair
value at the time of sale for the right to service the portion sold. The Company periodically assesses SBA servicing rights for
impairment based on the fair value of such rights. To the extent that temporary impairment exists, write-downs are
recognized in current earnings as an adjustment to the corresponding valuation allowance. Permanent impairment is
recognized through a write-down of the asset with a corresponding reduction in the valuation allowance. Capitalized
servicing rights are amortized in proportion to, and over the period of, estimated net servicing income.
Foreclosed Assets and ORE
Foreclosed assets and other real estate ("ORE") includes real property and other assets that have been acquired as a result of
foreclosure, and real property no longer used in the Bank's business. Foreclosed assets are recorded at fair value less
estimated selling costs at the date acquired or upon receiving new property valuations. Write-downs from cost to fair value at
the date of foreclosure are charged against the allowance for credit losses. ORE is recorded at the lower of its net book value
or fair value at the date of transfer to ORE. Costs relating to the development and improvement of foreclosed assets and ORE
are capitalized, and costs relating to holding and maintaining foreclosed assets and ORE are expensed. Valuations are
performed periodically and a charge to operations is recorded if the carrying value of a property exceeds its fair value less
selling costs. Generally, the Company appraises foreclosed assets and ORE at the time of foreclosure or transfer to ORE and
at least every 12 months following the foreclosure or transfer to ORE. When the foreclosed property is sold, a gain or loss is
recognized on the sale for the difference between the sales proceeds and the carrying amount of the property. Financed sales
of foreclosed property are accounted for in accordance with ASC 610-20 Other Income - Gains and Losses from the
Derecognition of Nonfinancial Assets. The Company had $2,010,000 and $1,575,000 of foreclosed assets and ORE as of
December 31, 2024 and 2023, respectively. Foreclosed assets and ORE are recorded in accrued interest receivable and other
assets on the Consolidated Statements of Financial Condition.
55
Derivatives and Hedging Activities
As required by ASC 815, the Company records all derivatives on the balance sheet at fair value. The accounting for changes
in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a
derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria
necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair
value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair
value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or
other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the
matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the
hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to
economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply
hedge accounting.
In accordance with the FASB’s fair value measurement guidance (in ASU 2011-04), the Company made an accounting policy
election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net
basis by counterparty portfolio.
Other Investments
Other investments are carried at cost and consist of Federal Reserve Bank ("FRB") stock, FHLB stock, First National
Bankers Bank ("FNBB") stock, qualified investments under the Community Reinvestment Act ("CRA"), an investment in a
Small Business Investment Company ("SBIC"), and a New Market Tax Credit ("NMTC") investment. The Company's other
investments are not held for sale and do not have readily determinable fair values. As a member of the FRB and the FHLB,
the Company is required to hold stock in the FRB and the FHLB. The FRB stock may not be sold or pledged as collateral.
The FHLB stock is pledged as collateral for outstanding FHLB advances and its transfer is substantially restricted. The
Company's CRA investments include investments in funds and membership shares that fund community development in low-
and moderate-income areas. The Company's SBIC investment is guaranteed by the Small Business Association. Other
investments totaled $23,171,000 and $25,880,000 as of December 31, 2024 and 2023, respectively. Other investments are
reported in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition.
Shareholders’ Equity
Pursuant to applicable provisions of the Louisiana Business Corporation Act, shares reacquired by the Company are to be
treated as authorized but unissued shares. For the years ended December 31, 2024, 2023 and 2022, the cost of shares
repurchased by the Company has been allocated to common stock, additional paid-in capital, and retained earnings.
Transfer of Financial Assets
Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over
transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains
the right, free of conditions that constrain it from taking advantage of that right, to pledge or exchange the transferred assets
and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them
before maturity.
Salary Continuation Agreements
The Company records the expense associated with its salary continuation agreements over the service periods of the persons
covered under these agreements.
Revenue Recognition
In addition to lending and related activities, the Company offers various services to customers that generate revenue, certain
of which are governed by ASC 606, Revenue from Contracts with Customers. The Company's services that fall within the
scope of ASC 606 are presented within noninterest income and include service charges and fees, brokerage fees, and other
transaction-based fees. Revenue is recognized when the transactions occur or as services are performed over primarily
monthly or quarterly periods. Payment is typically received in the period the transactions occur. Fees may be fixed or, where
applicable, based on a percentage of transaction size.
56
Income Taxes
The Company accounts for income taxes under the liability method. Deferred tax assets and liabilities are recorded for the
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Future tax benefits are recognized to the extent that realization of such benefits is
more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which the assets and liabilities are expected to be recovered or settled. The effect of a change in tax
rates on deferred tax assets and liabilities is recognized in income taxes during the period that includes the enactment date.
In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the
Company’s assets and liabilities result in deferred tax assets, an evaluation of the probability of being able to realize the
future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset
when it is more likely than not that some or all of the deferred tax asset will not be realized. In assessing the realizability of
the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable
earnings and tax planning strategies.
The income tax benefit or expense is the total of the current year income tax due or refundable and the change in deferred tax
assets and liabilities.
A tax position is recognized as a benefit only if it is more likely than not that the tax position would be sustained in a tax
examination, with a tax examination presumed to occur. The amount recognized is the largest amount of tax benefit that is
greater than 50 percent likely of being realized on examination. For tax positions not meeting the more likely than not test, no
tax benefit is recorded.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits, if applicable, in noninterest
expense. During the years ended December 31, 2024, 2023 and 2022, the Company did not recognize any interest or penalties
in its financial statements and did not record an accrued liability for interest or penalty payments.
Investments that generate investment tax credits are accounted for under the deferral method. Under the deferral method, the
allowable investment credit is recognized as a reduction in income tax expense over the life of the acquired investment.
Stock-based Compensation Plans
The Company has issued stock options under the 2009 Stock Option Plan and the 2014 Equity Incentive Plan to directors,
officers and other key employees. The Company had not issued stock options under the 2021 Equity Incentive Plan as of
December 31, 2022. In accordance with the requirements of ASC 718, Compensation – Stock Compensation, the Company
has adopted a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is
measured as of the grant date based on the fair value of the award and is recognized over the service period, which is usually
the vesting period.
The Company has issued restricted stock under the 2009 Recognition and Retention Plan and restricted stock units under the
2014 Equity Incentive Plan and 2021 Equity Incentive Plan to directors, officers and other key employees. Awards under the
plans may not be sold or otherwise transferred until certain restrictions have lapsed. The unearned compensation related to
these awards is amortized to compensation expense over the service period, which is usually the vesting period. The total
share-based compensation expense for these awards is determined based on the market price of the Company’s common
stock as of the date of grant applied to the total number of shares granted and is amortized over the vesting period.
Earnings Per Share
Earnings per share represents income available to common shareholders divided by the weighted-average number of common
shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been
outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from
the assumed issuance.
57
Comprehensive Income (Loss)
GAAP generally requires that recognized revenues, expenses, gains and losses be included in net earnings. Although certain
changes in assets and liabilities, such as unrealized gains and losses on available for sale securities and cash flow hedges, are
reported as a separate component of the equity section of the balance sheets, such items, along with net earnings, are
components of comprehensive income (loss). The tax effect for unrealized gains and losses on investment securities and cash
flow hedges was a $373,000 expense, a $2,105,000 expense and a $10,646,000 benefit for the periods ending December 31,
2024, 2023 and 2022, respectively. Comprehensive income (loss) is reflected in the Consolidated Statements of
Comprehensive Income (Loss).
Loss Contingency Disclosure
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities
when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not
believe there are such matters that will have a material effect on the financial statements.
Reclassifications
Certain reclassifications have been made to prior period balances to conform to the current period presentation.
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
Accounting Standard Update (“ASU”) ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of
Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03"). ASU 2022-03 clarifies that a contractual
restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is
not considered in measuring fair value. ASU 2022-03 also clarifies that an entity cannot, as a separate unit of account,
recognize and measure a contractual sale restriction and requires certain new disclosures for equity securities subject to
contractual sale restrictions. ASU 2022-03 is effective for fiscal years and interim periods after December, 15, 2023, though
early adoption is permitted. The adoption of ASU 2022-03 did not have a significant impact on our consolidated financial
statements.
ASU 2023-01, Leases (Topic 842): Common Control Arrangements: (“ASU 2023-01”) clarifies the accounting for leasehold
improvements associated with common control leases to public business entities. This update is effective for fiscal years
beginning after December 15, 2023, including interim periods within those fiscal years. The adoption of ASU 2023-01 did
not have a significant impact on our Consolidated Financial Statements.
ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit
Structures Using the Proportional Amortization Method (“ASU 2023-02”) permits reporting entities to elect to account for
their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the
proportional amortization method if certain conditions are met. This update is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years. The adoption of ASU 2023-02 did not have a
significant impact on our Consolidated Financial Statements.
ASU No. 2023-07, "Improvements to Reportable Segment Disclosures" ("ASU 2023-07") primarily will require enhanced
disclosures about significant segment expenses. The amendments in ASU 2023-07 are effective for fiscal years beginning
after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption
permitted, and are to be applied on a retrospective basis. The adoption of ASU 2023-07 did not have a significant impact on
our Consolidated Financial Statements.
58
Issued but Not Yet Adopted Accounting Standards
ASU 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and
Simplification Initiative" ("ASU 2023-06") related to disclosure or presentation requirements for various subtopics in the
FASB’s Accounting Standards Codification (“Codification”). The amendments in the update are intended to align the
requirements in the Codification with the U.S. Securities and Exchange Commission's (“SEC”) regulations and facilitate the
application of GAAP for all entities. The effective date for each amendment is the date on which the SEC removal of the
related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or if the SEC has not removed the
requirements by June 30, 2027, this amendment will be removed from the Codification and will not become effective for any
entity. Early adoption is prohibited. We do not expect this update to have a material impact on our consolidated financial
statements.
ASU No. 2023-09, "Improvements to Income Tax Disclosures" ("ASU 2023-09") is intended to enhance the transparency and
decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid
information. This update is effective for annual periods beginning after December 15, 2024, though early adoption is
permitted. We do not expect this update to have a material effect on our consolidated financial statements.
ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures" (ASU
2024-03") requires the disaggregation of certain expenses in the notes to the financial statements, to provide enhanced
transparency into the expense captions presented on the face of the income statement. The amendments in ASU 2024-03 are
effective for annual reporting periods beginning after December 31, 2026, and interim reporting periods beginning after
December 15, 2027. Early adoption is permitted. The amendments in this ASU may be applied either prospectively or
retrospectively. The Company is currently evaluating the impact that this update will have on its disclosures in the
consolidated financial statements.
3. Acquisition Activity
The Company has completed six acquisitions since 2010. The following table is a summary of the Company's acquisition
activity as recorded:
SUMMARY OF ACQUISITION ACTIVITY
(dollars in thousands)
Acquisition
Acquisition
Date
Total Assets
Total Loans
Goodwill
Core
Deposit
Intangible
Total
Deposits
Statewide Bank
3/12/2010
$
188,026 $
110,415 $
560 $
1,429 $
206,925
GS Financial Corporation
7/15/2011
256,677
182,440
296
859
193,518
Britton & Koontz Capital Corporation
2/14/2014
298,930
161,581
43
3,030
216,600
Louisiana Bancorp, Inc.
9/15/2015
352,897
281,583
8,454
1,586
208,670
St. Martin Bancshares, Inc.
12/6/2017
592,852
439,872
49,135
6,766
533,497
Friendswood Capital Corporation
3/26/2022
413,919
317,492
23,029
4,597
367,991
Total Acquisitions
$ 2,103,301 $ 1,493,383 $
81,517 $
18,267 $ 1,727,201
59
4. Investment Securities
The following table summarizes the Company’s available for sale and held to maturity investment securities at December 31,
2024 and 2023.
(dollars in thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross Unrealized Losses
Fair Value
December 31, 2024
Less Than
1 Year
Over 1
Year
Available for sale:
U.S. agency mortgage-backed
$
291,351 $
45 $
336 $
29,187 $
261,873
Collateralized mortgage obligations
73,931
1
—
2,543
71,389
Municipal bonds
53,458
1
14
7,616
45,829
U.S. government agency
18,079
—
—
951
17,128
Corporate bonds
6,985
—
—
412
6,573
Total available for sale
$
443,804 $
47 $
350 $
40,709 $
402,792
Held to maturity:
Municipal bonds
$
1,065 $
1 $
1 $
— $
1,065
Total held to maturity
$
1,065 $
1 $
1 $
— $
1,065
(dollars in thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross Unrealized Losses
Fair Value
December 31, 2023
Less Than
1 Year
Over 1
Year
Available for sale:
U.S. agency mortgage-backed
$
314,569 $
91 $
10 $
30,797 $
283,853
Collateralized mortgage obligations
82,764
1
—
3,503
79,262
Municipal bonds
53,891
4
3
7,218
46,674
U.S. government agency
19,151
—
117
985
18,049
Corporate bonds
6,982
—
—
894
6,088
Total available for sale
$
477,357 $
96 $
130 $
43,397 $
433,926
Held to maturity:
Municipal bonds
$
1,065 $
1 $
— $
— $
1,066
Total held to maturity
$
1,065 $
1 $
— $
— $
1,066
60
The Company's investment securities with unrealized losses, aggregated by type and length of time that individual securities
have been in a continuous loss position, are summarized in the following tables.
(dollars in thousands)
Less Than 1 Year
Over 1 Year
Total
December 31, 2024
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Available for sale:
U.S. agency mortgage-backed
$
16,024 $
336 $
240,693 $
29,187 $
256,717 $
29,523
Collateralized mortgage
obligations
—
—
71,342
2,543
71,342
2,543
Municipal bonds
1,435
14
43,893
7,616
45,328
7,630
U.S. government agency
—
—
17,128
951
17,128
951
Corporate bonds
—
—
6,573
412
6,573
412
Total available for sale
$
17,459 $
350 $
379,629 $
40,709 $
397,088 $
41,059
Held to maturity:
Municipal bonds
$
534 $
1 $
— $
— $
534 $
1
Total held to maturity
$
534 $
1 $
— $
— $
534 $
1
(dollars in thousands)
Less Than 1 Year
Over 1 Year
Total
December 31, 2023
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Available for sale:
U.S. agency mortgage-backed
$
4,033 $
10 $
273,128 $
30,797 $
277,161 $
30,807
Collateralized mortgage
obligations
—
—
79,253
3,503
79,253
3,503
Municipal bonds
519
3
44,195
7,218
44,714
7,221
U.S. government agency
3,760
117
14,289
985
18,049
1,102
Corporate bonds
—
—
6,088
894
6,088
894
Total available for sale
$
8,312 $
130 $
416,953 $
43,397 $
425,265 $
43,527
Held to maturity:
Municipal bonds
$
— $
— $
— $
— $
— $
—
Total held to maturity
$
— $
— $
— $
— $
— $
—
At December 31, 2024, 250 of the Company’s debt securities had unrealized losses totaling 9.4% of the individual securities’
amortized cost basis and 9.2% of the Company’s total amortized cost basis of the investment securities portfolio. At such
date, 233 of the 250 securities had been in a continuous loss position for over 12 months. Management has determined that
the declines in the fair value of these securities were not attributable to credit losses. As a result, no ACL was recorded for
available for sale investment securities at December 31, 2024.
At December 31, 2024 and December 31, 2023, it was determined that no ACL was required for the Company's held to
maturity investment securities. The Company monitors credit quality of debt securities held to maturity through the use of
credit ratings. The following tables present the amortized cost of the Company's held to maturity securities by credit quality
rating at December 31, 2024 and December 31, 2023.
Credit Ratings
(dollars in thousands)
AAA/AA/A
BBB/BB/B
Total
December 31, 2024
Held to maturity:
Municipal bonds
$
1,065 $
— $
1,065
61
Credit Ratings
(dollars in thousands)
AAA/AA/A
BBB/BB/B
Total
December 31, 2023
Held to maturity:
Municipal bonds
$
1,065 $
— $
1,065
The amortized cost and estimated fair value by maturity of the Company’s investment securities as of December 31, 2024 are
shown in the following tables. Securities are classified according to their contractual maturities without consideration of
principal amortization, potential prepayments or call options. The expected maturity of a security may differ from its
contractual maturity because of the exercise of call options and potential paydowns. Accordingly, actual maturities may differ
from contractual maturities.
(dollars in thousands)
One Year
or Less
After One
Year through
Five Years
After Five
Years
through Ten
Years
After Ten
Years
Total
Fair Value
Available for sale:
U.S. agency mortgage-backed
$
3,958 $
77,976 $
64,937 $
115,002 $
261,873
Collateralized mortgage obligations
6,971
48,695
432
15,291
71,389
Municipal bonds
—
8,618
26,439
10,772
45,829
U.S. government agency
4,987
49
12,046
46
17,128
Corporate bonds
—
—
6,573
—
6,573
Total securities available for sale
$
15,916 $
135,338 $
110,427 $
141,111 $
402,792
Held to maturity:
Municipal bonds
$
— $
1,065 $
— $
— $
1,065
Total securities held to maturity
$
— $
1,065 $
— $
— $
1,065
(dollars in thousands)
One Year
or Less
After One
Year through
Five Years
After Five
Years
through Ten
Years
After Ten
Years
Total
Amortized Cost
Available for sale:
U.S. agency mortgage-backed
$
3,988 $
83,825 $
68,941 $
134,597 $
291,351
Collateralized mortgage obligations
7,034
50,283
449
16,165
73,931
Municipal bonds
—
9,270
31,367
12,821
53,458
U.S. government agency
5,000
49
12,984
46
18,079
Corporate bonds
—
—
6,985
—
6,985
Total securities available for sale
$
16,022 $
143,427 $
120,726 $
163,629 $
443,804
Held to maturity:
Municipal bonds
$
— $
1,065 $
— $
— $
1,065
Total securities held to maturity
$
— $
1,065 $
— $
— $
1,065
For the year ended December 31, 2024, the Company recorded no gross gains and losses related to the sale of investment
securities. For the year ended December 31, 2023, the Company recorded gross gains of $98,000 and gross losses of
$347,000 related to the sale of investment securities. For the year ended December 31, 2022, the Company recorded no gross
gains and losses recorded related to the sale of investment securities.
As of December 31, 2024 and 2023, the Company had accrued interest receivable for investment securities of $1,471,000 and
$1,563,000, respectively. These amounts are recorded in accrued interest receivable and other assets on the Consolidated
Statements of Financial Condition.
62
As of December 31, 2024 and 2023, the Company had $134,887,000 and $127,172,000, respectively, of securities pledged to
secure public deposits. At December 31, 2024 and 2023, the Company had securities in safekeeping with Federal Reserve
with a collateral value of $0 and $103.4 million, respectively, to utilize under the Bank Term Funding Program ("BTFP")
facility.
5. Loans
The Company’s loans, net of unearned income, consisted of the following as of December 31 of the years indicated.
(dollars in thousands)
2024
2023
Real estate loans:
One- to four-family first mortgage
$
501,225 $
433,401
Home equity loans and lines
79,097
68,977
Commercial real estate
1,158,781 1,192,691
Construction and land
352,263
340,724
Multi-family residential
178,568
107,263
Total real estate loans
2,269,934 2,143,056
Other loans:
Commercial and industrial
418,627
405,659
Consumer
29,624
32,923
Total other loans
448,251
438,582
Total loans
$ 2,718,185 $ 2,581,638
The net discount on the Company’s acquired loans was $2,469,000 and $4,340,000 at December 31, 2024 and 2023,
respectively. In addition, loan balances as of December 31, 2024 and 2023 are reported net of unearned income of $5,122,000
and $5,321,000, respectively. Unearned income at December 31, 2024 and December 31, 2023 included $16,000 and $60,000
of deferred lender fees related to PPP loans, respectively. The total recorded investment in PPP loans was $2,617,000 and
$5,532,000 at December 31, 2024 and 2023, respectively, which is included in commercial and industrial loans.
Accrued interest receivable on the Company's loans was $13,314,000 and $11,986,000 at December 31, 2024 and 2023,
respectively, and is excluded from the estimate of the ACL. These amounts are recorded in accrued interest receivable and
other assets on the Consolidated Statements of Financial Condition.
A summary of activity in the ACL for the years ended December 31, 2024, 2023 and 2022 follows.
Allowance for credit losses:
One- to four-family first mortgage
$
3,255 $
— $
4 $
1,171 $
4,430
Home equity loans and lines
688
(22)
36
99
801
Commercial real estate
14,805
—
—
(1,284)
13,521
Construction and land
5,415
(123)
—
192
5,484
Multi-family residential
474
—
12
604
1,090
Commercial and industrial
6,166
(875)
163
1,407
6,861
Consumer
734
(265)
34
226
729
Total allowance for loan losses
$
31,537 $
(1,285) $
249 $
2,415 $
32,916
Unfunded lending commitments
2,594
—
—
106
2,700
Total allowance for credit losses
$
34,131 $
(1,285) $
249 $
2,521 $
35,616
For the Year Ended December 31, 2024
(dollars in thousands)
Beginning
Balance
Charge-offs
Recoveries
Provision
(Reversal)
Ending
Balance
63
Allowance for credit losses:
One- to four-family first mortgage
$
2,883 $
(12) $
43 $
341 $
3,255
Home equity loans and lines
624
—
6
58
688
Commercial real estate
13,814
(29)
100
920
14,805
Construction and land
4,680
—
—
735
5,415
Multi-family residential
572
—
—
(98)
474
Commercial and industrial
6,024
(255)
180
217
6,166
Consumer
702
(175)
39
168
734
Total allowance for loan losses
$
29,299 $
(471) $
368 $
2,341 $
31,537
Unfunded lending commitments
2,093
—
—
501
2,594
Total allowance for credit losses
$
31,392 $
(471) $
368 $
2,842 $
34,131
For the Year Ended December 31, 2023
(dollars in thousands)
Beginning
Balance
Charge-offs
Recoveries
Provision
(Reversal)
Ending
Balance
Allowance for credit losses:
One- to four-family first mortgage
$
1,944 $
— $
(80) $
39 $
980 $
2,883
Home equity loans and lines
508
—
—
14
102
624
Commercial real estate
10,454
1,220
(270)
—
2,410
13,814
Construction and land
3,572
—
—
—
1,108
4,680
Multi-family residential
457
—
—
—
115
572
Commercial and industrial
3,520
195
(792)
509
2,592
6,024
Consumer
634
—
(256)
142
182
702
Total allowance for loan losses
$
21,089 $
1,415 $
(1,398) $
704 $
7,489 $
29,299
Unfunded lending commitments
1,815
—
—
—
278
2,093
Total allowance for credit losses
$
22,904 $
1,415 $
(1,398) $
704 $
7,767 $
31,392
For the Year Ended December 31, 2022
(dollars in thousands)
Beginning
Balance
Allowance
for
Acquired
PCD Loans
Charge-offs
Recoveries
Provision
(Reversal)
Ending
Balance
64
The ACL, which includes the ALL and the ACL on unfunded lending commitments, and recorded investment in loans as of
the dates indicated are as follows.
Allowance for credit losses:
One- to four-family first mortgage
$
4,430 $
— $
4,430
Home equity loans and lines
801
—
801
Commercial real estate
13,321
200
13,521
Construction and land
5,484
—
5,484
Multi-family residential
1,090
—
1,090
Commercial and industrial
6,613
248
6,861
Consumer
729
—
729
Total allowance for loan losses
$
32,468 $
448 $
32,916
Unfunded lending commitments(1)
$
2,700 $
— $
2,700
Total allowance for credit losses
$
35,168 $
448 $
35,616
As of December 31, 2024
(dollars in thousands)
Collectively
Evaluated
Individually
Evaluated
Total
As of December 31, 2024
(dollars in thousands)
Collectively
Evaluated
Individually
Evaluated(2)
Total
Loans:
One- to four-family first mortgage
$
501,225 $
— $
501,225
Home equity loans and lines
79,097
—
79,097
Commercial real estate
1,154,063
4,718
1,158,781
Construction and land
352,263
—
352,263
Multi-family residential
178,568
—
178,568
Commercial and industrial
418,373
254
418,627
Consumer
29,624
—
29,624
Total loans
$ 2,713,213 $
4,972 $ 2,718,185
As of December 31, 2023
(dollars in thousands)
Collectively
Evaluated
Individually
Evaluated
Total
Allowance for credit losses:
One- to four-family first mortgage
$
3,255 $
— $
3,255
Home equity loans and lines
688
—
688
Commercial real estate
14,604
201
14,805
Construction and land
5,292
123
5,415
Multi-family residential
474
—
474
Commercial and industrial
6,071
95
6,166
Consumer
734
—
734
Total allowance for loan losses
$
31,118 $
419 $
31,537
Unfunded lending commitments(3)
$
2,594 $
— $
2,594
Total allowance for credit losses
$
33,712 $
419 $
34,131
65
As of December 31, 2023
(dollars in thousands)
Collectively
Evaluated
Individually
Evaluated(2)
Total
Loans:
One- to four-family first mortgage
$
433,401 $
— $
433,401
Home equity loans and lines
68,977
—
68,977
Commercial real estate
1,188,734
3,957
1,192,691
Construction and land
340,577
147
340,724
Multi-family residential
107,263
—
107,263
Commercial and industrial
405,547
112
405,659
Consumer
32,923
—
32,923
Total loans
$ 2,577,422 $
4,216 $ 2,581,638
(1)
At December 31, 2024, $2.7 million of the ACL related to noncancellable unfunded lending commitments of $516.8 million. The
ACL on unfunded lending commitments is recorded within accrued interest payable and other liabilities on the Consolidated
Statements of Financial Condition. Adjustments to the ACL on unfunded lending commitments are reported as a component of
noninterest expense on the Consolidated Statements of Income.
(2)
PCD loans individually evaluated totaled $1.3 million and $1.4 million at December 31, 2024 and December 31, 2023, respectively.
(3)
At December 31, 2023, $2.6 million of the ACL related to noncancellable unfunded lending commitments of $534.7 million. The
ACL on unfunded lending commitments is recorded within accrued interest payable and other liabilities on the Consolidated
Statements of Financial Condition. Adjustments to the ACL on unfunded lending commitments are reported as a component of
noninterest expense on the Consolidated Statements of Income.
Although the Company has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by
improved and unimproved real estate and is dependent, in part, on values in the real estate market.
The following table presents the Company’s loan portfolio by credit quality classification and origination year as of
December 31, 2024.
One- to four-family first mortgage:
Pass
$ 71,582
$ 95,261
$ 108,853
$ 76,116
$ 31,482
$ 88,472
$
20,042
$
1,560
$ 493,368
Special Mention
—
146
491
186
—
—
—
—
823
Substandard
56
1,040
2,316
575
340
2,707
—
—
7,034
Doubtful
—
—
—
—
—
—
—
—
—
Total one- to four-family first
mortgages
$ 71,638
$ 96,447
$ 111,660
$ 76,877
$ 31,822
$ 91,179
$
20,042
$
1,560
$ 501,225
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Home equity loans and lines:
Pass
$ 1,833
$ 1,249
$ 2,359
$ 1,409
$
627
$ 3,535
$
65,597
$
2,209
$
78,818
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
—
—
65
—
—
185
29
—
279
Doubtful
—
—
—
—
—
—
—
—
—
Total home equity loans and lines
$ 1,833
$ 1,249
$ 2,424
$ 1,409
$
627
$ 3,720
$
65,626
$
2,209
$
79,097
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
22
$
—
$
22
Commercial real estate:
Pass
$ 151,397
$ 130,833
$ 298,344
$ 217,602
$ 153,122
$ 162,925
$
25,820
$
197
$ 1,140,240
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
—
—
1,754
1,405
2,788
12,594
—
—
18,541
Doubtful
—
—
—
—
—
—
—
—
—
Total commercial real estate
loans
$ 151,397
$ 130,833
$ 300,098
$ 219,007
$ 155,910
$ 175,519
$
25,820
$
197
$ 1,158,781
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Term Loans by Origination Year
(dollars in thousands)
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Revolving
Loans
Converted
to Term
Loans
Total
66
Construction and land:
Pass
$ 141,926
$ 131,483
$ 51,789
$ 4,529
$ 6,656
$ 2,925
$
7,749
$
(18) $ 347,039
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
30
135
1,201
253
3
—
—
3,602
5,224
Doubtful
—
—
—
—
—
—
—
—
—
Total construction and land loans
$ 141,956
$ 131,618
$ 52,990
$ 4,782
$ 6,659
$ 2,925
$
7,749
$
3,584
$ 352,263
Current period gross charge-offs
$
—
$
—
$
123
$
—
$
—
$
—
$
—
$
—
$
123
Multi-family residential:
Pass
$ 38,559
$ 25,331
$ 48,047
$ 22,401
$ 14,523
$ 27,549
$
1,228
$
—
$ 177,638
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
930
—
930
Doubtful
—
—
—
—
—
—
—
—
—
Total multi-family residential
loans
$ 38,559
$ 25,331
$ 48,047
$ 22,401
$ 14,523
$ 27,549
$
2,158
$
—
$ 178,568
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Commercial and industrial:
Pass
$ 75,576
$ 59,626
$ 60,175
$ 17,993
$ 6,547
$ 4,482
$ 188,676
$
1,797
$ 414,872
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
1,344
284
368
345
46
19
49
1,300
3,755
Doubtful
—
—
—
—
—
—
—
—
—
Total commercial and industrial
loans
$ 76,920
$ 59,910
$ 60,543
$ 18,338
$ 6,593
$ 4,501
$ 188,725
$
3,097
$ 418,627
Current period gross charge-offs
$
—
$
17
$
317
$
53
$
—
$
17
$
471
$
—
$
875
Consumer:
Pass
$ 5,815
$ 2,952
$ 1,842
$
371
$
585
$ 9,056
$
8,850
$
126
$
29,597
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
—
6
4
4
—
11
—
2
27
Doubtful
—
—
—
—
—
—
—
—
—
Total consumer loans
$ 5,815
$ 2,958
$ 1,846
$
375
$
585
$ 9,067
$
8,850
$
128
$
29,624
Current period gross charge-offs
$
7
$
39
$
24
$
—
$
10
$
8
$
177
$
—
$
265
Total loans:
Pass
$ 486,688
$ 446,735
$ 571,409
$ 340,421
$ 213,542
$ 298,944
$ 317,962
$
5,871
$ 2,681,572
Special Mention
—
146
491
186
—
—
—
—
823
Substandard
1,430
1,465
5,708
2,582
3,177
15,516
1,008
4,904
35,790
Doubtful
—
—
—
—
—
—
—
—
—
Total loans
$ 488,118
$ 448,346
$ 577,608
$ 343,189
$ 216,719
$ 314,460
$ 318,970
$
10,775
$ 2,718,185
Current period gross charge-offs
$
7
$
56
$
464
$
53
$
10
$
25
$
670
$
—
$
1,285
Term Loans by Origination Year
(dollars in thousands)
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Revolving
Loans
Converted
to Term
Loans
Total
The following table presents the Company’s loan portfolio by credit quality classification and origination year as of
December 31, 2023.
One- to four-family first mortgage:
Pass
$ 94,465
$ 106,417
$ 72,594
$ 33,588
$ 27,677
$ 91,706
$
3,059
$
458
$ 429,964
Special Mention
149
497
188
—
—
34
—
—
868
Substandard
—
165
117
306
60
1,921
—
—
2,569
Doubtful
—
—
—
—
—
—
—
—
—
Total one- to four-family first
mortgages
$ 94,614
$ 107,079
$ 72,899
$ 33,894
$ 27,737
$ 93,661
$
3,059
$
458
$ 433,401
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
12
$
—
$
—
$
12
Term Loans by Origination Year
(dollars in thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Revolving
Loans
Converted
to Term
Loans
Total
67
Home equity loans and lines:
Pass
$ 1,864
$ 1,652
$ 1,231
$
760
$ 1,117
$ 3,138
$
57,768
$
1,240
$
68,770
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
150
29
28
207
Doubtful
—
—
—
—
—
—
—
—
—
Total home equity loans and lines
$ 1,864
$ 1,652
$ 1,231
$
760
$ 1,117
$ 3,288
$
57,797
$
1,268
$
68,977
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Commercial real estate:
Pass
$ 161,755
$ 292,494
$ 252,109
$ 184,935
$ 137,154
$ 104,533
$
44,225
$
855
$ 1,178,060
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
—
16
1,441
2,652
5,490
5,032
—
—
14,631
Doubtful
—
—
—
—
—
—
—
—
—
Total commercial real estate
loans
$ 161,755
$ 292,510
$ 253,550
$ 187,587
$ 142,644
$ 109,565
$
44,225
$
855
$ 1,192,691
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
29
$
—
$
—
$
29
Construction and land:
Pass
$ 121,389
$ 150,667
$ 33,247
$ 6,641
$ 7,672
$ 4,567
$
5,439
$
—
$ 329,622
Special Mention
929
164
4,635
146
—
—
—
—
5,874
Substandard
—
609
528
—
—
44
4,047
—
5,228
Doubtful
—
—
—
—
—
—
—
—
—
Total construction and land loans
$ 122,318
$ 151,440
$ 38,410
$ 6,787
$ 7,672
$ 4,611
$
9,486
$
—
$ 340,724
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Multi-family residential:
Pass
$ 14,907
$ 37,228
$ 11,843
$ 21,558
$ 12,548
$ 3,213
$
2,463
$
—
$ 103,760
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
3,503
—
—
3,503
Doubtful
—
—
—
—
—
—
—
—
—
Total multi-family residential
loans
$ 14,907
$ 37,228
$ 11,843
$ 21,558
$ 12,548
$ 6,716
$
2,463
$
—
$ 107,263
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Commercial and industrial:
Pass
$ 73,674
$ 79,886
$ 30,412
$ 10,674
$ 4,954
$ 3,386
$ 191,946
$
7,800
$ 402,732
Special Mention
—
784
—
264
—
138
—
—
1,186
Substandard
1,389
38
54
7
2
100
129
22
1,741
Doubtful
—
—
—
—
—
—
—
—
—
Total commercial and industrial
loans
$ 75,063
$ 80,708
$ 30,466
$ 10,945
$ 4,956
$ 3,624
$ 192,075
$
7,822
$ 405,659
Current period gross charge-offs
$
—
$
—
$
—
$
124
$
7
$
—
$
124
$
—
$
255
Consumer:
Pass
$ 5,941
$ 5,734
$
872
$
887
$
359
$ 10,698
$
8,068
$
75
$
32,634
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
—
13
7
—
7
262
—
—
289
Doubtful
—
—
—
—
—
—
—
—
—
Total consumer loans
$ 5,941
$ 5,747
$
879
$
887
$
366
$ 10,960
$
8,068
$
75
$
32,923
Current period gross charge-offs
$
3
$
34
$
3
$
6
$
—
$
4
$
125
$
—
$
175
Total loans:
Pass
$ 473,995
$ 674,078
$ 402,308
$ 259,043
$ 191,481
$ 221,241
$ 312,968
$
10,428
$ 2,545,542
Special Mention
1,078
1,445
4,823
410
—
172
—
—
7,928
Substandard
1,389
841
2,147
2,965
5,559
11,012
4,205
50
28,168
Doubtful
—
—
—
—
—
—
—
—
—
Total loans
$ 476,462
$ 676,364
$ 409,278
$ 262,418
$ 197,040
$ 232,425
$ 317,173
$
10,478
$ 2,581,638
Current period gross charge-offs
$
3
$
34
$
3
$
130
$
7
$
45
$
249
$
—
$
471
Term Loans by Origination Year
(dollars in thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Revolving
Loans
Converted
to Term
Loans
Total
68
Age analysis of past due loans, as of the dates indicated, is as follows.
Real estate loans:
One- to four-family first mortgage
$
4,208
$
382
$
5,850
$
10,440
$
490,785
$
501,225
Home equity loans and lines
224
—
129
353
78,744
79,097
Commercial real estate
1,454
—
1,960
3,414
1,155,367
1,158,781
Construction and land
767
240
1,399
2,406
349,857
352,263
Multi-family residential
330
—
—
330
178,238
178,568
Total real estate loans
6,983
622
9,338
16,943
2,252,991
2,269,934
Other loans:
Commercial and industrial
491
2,110
649
3,250
415,377
418,627
Consumer
353
42
13
408
29,216
29,624
Total other loans
844
2,152
662
3,658
444,593
448,251
Total loans
$
7,827
$
2,774
$
10,000
$
20,601
$ 2,697,584
$ 2,718,185
December 31, 2024
(dollars in thousands)
30-59 Days
Past Due
60-89 Days
Past Due
Greater
Than
90 Days Past
Due
Total Past
Due
Current
Loans
Total Loans
Real estate loans:
One- to four-family first mortgage
$
4,410
$
1,475
$
798
$
6,683
$
426,718
$
433,401
Home equity loans and lines
162
1
35
198
68,779
68,977
Commercial real estate
112
3,414
—
3,526
1,189,165
1,192,691
Construction and land
432
1
1,151
1,584
339,140
340,724
Multi-family residential
—
—
—
—
107,263
107,263
Total real estate loans
5,116
4,891
1,984
11,991
2,131,065
2,143,056
Other loans:
Commercial and industrial
596
11
221
828
404,831
405,659
Consumer
416
143
55
614
32,309
32,923
Total other loans
1,012
154
276
1,442
437,140
438,582
Total loans
$
6,128
$
5,045
$
2,260
$
13,433
$ 2,568,205
$ 2,581,638
December 31, 2023
(dollars in thousands)
30-59 Days
Past Due
60-89 Days
Past Due
Greater
Than
90 Days Past
Due
Total Past
Due
Current
Loans
Total Loans
Loans greater than 90 days past due and accruing interest were $16,000 and $0 at December 31, 2024 and December 31,
2023, respectively.
The Company reviews its significant nonaccrual loans (i.e., loans with balances of $500,000 or greater) for specific
impairment in accordance with its allowance for credit loss methodology. If it is determined that it is probable that all
amounts due will not be collected when other credit quality indicators are considered, the loan is considered impaired and the
Company individually evaluates those loans to determine the expected credit losses. The following table summarizes
information pertaining to nonaccrual loans as of dates indicated.
69
December 31, 2024
December 31, 2023
(dollars in thousands)
Total
Without
Related
Allowance
Total
Without
Related
Allowance
Nonaccrual loans(1):
One- to four-family first mortgage
$
7,039 $
— $
1,600 $
—
Home equity loans and lines
279
—
208
—
Commercial real estate
3,304
—
5,203
2,548
Construction and land
1,622
—
1,181
—
Multi-family residential
—
—
—
—
Commercial and industrial
1,311
—
331
—
Consumer
27
—
291
—
Total
$
13,582 $
— $
8,814 $
2,548
(1)
Nonaccrual acquired loans include PCD loans of $1,256,000 and $1,410,000 at December 31, 2024 and December 31,
2023, respectively.
All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. All payments
received while on nonaccrual status are applied against the principal balance of nonaccrual loans. The Company does not
recognize interest income while loans are on nonaccrual status.
As of December 31, 2024, the Company was not committed to lend additional funds to any customer whose loan was
individually evaluated for impairment.
Collateral Dependent Loans
The Company held loans that were individually evaluated for credit losses at December 31, 2024 and 2023 for which the
repayments, on the basis of our assessment at the reporting date, were expected to be provided substantially through the
operation or sale of the collateral and the borrower was experiencing financial difficulty. The ACL for these collateral-
dependent loans is primarily based on the fair value of the underlying collateral at the reporting date. The following describes
the types of collateral that secure collateral dependent loans:
•
One- to four-family first mortgages are primarily secured by first liens on residential real estate.
•
Home equity loans and lines are primarily secured by first and junior liens on residential real estate.
•
Commercial real estate loans are primarily secured by office and industrial buildings, warehouses, retail shopping
facilities and various special purpose properties, including hotels and restaurants.
•
Construction and land loans are primarily secured by residential and commercial properties, which are under
construction and/or redevelopment, and by raw land.
•
Commercial and industrial loans considered collateral dependent are primarily secured by accounts receivable,
inventory and equipment.
The table below summarizes collateral dependent loans and the related ACL as of the periods indicated for which the
borrower was experiencing financial difficulty.
December 31, 2024
December 31, 2023
(dollars in thousands)
Loans
ACL
Loans
ACL
One- to four-family first mortgage
$
— $
— $
— $
—
Home equity loans and lines
—
—
—
—
Commercial real estate
4,718
200
3,957
201
Construction and land
—
—
147
123
Multi-family residential
—
—
—
—
Commercial and industrial
254
248
112
95
Consumer
—
—
—
—
Total
$
4,972 $
448 $
4,216 $
419
70
Foreclosed Assets and ORE
Foreclosed assets and ORE include real property and other assets that have been acquired as a result of foreclosure, and real
property no longer used in the Bank's business. Foreclosed assets and ORE totaled $2,010,000 and $1,575,000 at
December 31, 2024 and December 31, 2023, respectively. These amounts are recorded in accrued interest receivable and
other assets on the Consolidated Statements of Financial Condition.
The carrying amount of foreclosed residential real estate properties held at December 31, 2024 and December 31, 2023
totaled $2,010,000 and $115,000, respectively. Loans secured by one- to four-family residential real estate that were in the
process of foreclosure at December 31, 2024 and December 31, 2023 totaled $4,472,000 and $517,000, respectively.
Loan Modifications Made to Borrowers Experiencing Financial Difficulty
Occasionally, the Company modifies loans to borrowers in financial distress by providing certain concessions, such as
principal forgiveness, term extension, an other-than-insignificant payment delay, interest only for a specified period of time,
an interest rate reduction, or a combination of such concessions. When principal forgiveness is provided, the amount of
forgiveness is charged-off against the allowance for credit losses. Upon the Company's determination that a modified loan (or
portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is charged-off. The balance of
loan modifications, segregated by type of modification, to borrowers experiencing financial difficulty are set forth in the table
below.
(dollars in thousands)
Payment
Deferral
Principal
Forgiveness
Term Extension
Interest Rate
Reduction
Combination
Term
Extension
and Principal
Forgiveness
Combination
Term
Extension
and Interest
Rate
Reduction
Percent
of Total
Class of
Loans
December 31, 2024
One-to four-family first mortgage
$
— $
— $
801 $
— $
— $
—
0.2 %
Home equity loans and lines
—
—
—
—
—
—
—
Commercial real estate
—
—
2,465
—
—
—
0.2
Construction and land
—
—
207
—
—
—
0.1
Multi-family residential
—
—
—
—
—
—
—
Commercial and industrial
—
—
1,106
—
—
—
0.3
Consumer
—
—
—
—
—
—
—
Total
$
— $
— $
4,579 $
— $
— $
—
0.2 %
(dollars in thousands)
Payment
Deferral
Principal
Forgiveness
Term
Extension
Interest Rate
Reduction
Combination
Term
Extension
and
Principal
Forgiveness
Combination
Term
Extension
and Interest
Rate
Reduction
Percent
of Total
Class of
Loans
December 31, 2023
One-to four-family first mortgage $
— $
— $
1,055 $
— $
— $
—
0.2 %
Home equity loans and lines
60
—
—
—
—
—
0.1
Commercial real estate
280
—
1,102
—
—
—
0.1
Construction and land
—
—
31
—
—
—
—
Multi-family residential
—
—
3,437
—
—
—
3.2
Commercial and industrial
—
—
1,389
—
—
—
0.3
Consumer
—
—
—
—
—
—
—
Total
$
340 $
— $
7,014 $
— $
— $
—
0.3 %
During the year ended December 31, 2024 and 2023, one commercial real estate loan with a balance of $965,000 and one
commercial real estate loan with a balance of $278,000, respectively, experienced a default subsequent to being granted a
payment deferral or term extension. Default is defined as movement to past due 90 days, foreclosure or charge-off, whichever
occurs first.
71
The following table details the financial impacts of loan modifications made to borrowers experiencing financial difficulty for
the periods presented.
Year Ended December 31, 2024
Year Ended December 31, 2023
Payment
Deferral
(dollars in
thousands)
Minimum
Term
Extensions
(in months)
Maximum
Term
Extensions
(in months)
Payment
Deferral
(dollars in
thousands)
Minimum
Term
Extensions
(in months)
Maximum
Term
Extensions
(in months)
One-to four-family first mortgage
$
—
12
96
$
—
0
24
Home equity loans and lines
—
0
0
3
0
0
Commercial real estate
—
6
12
9
12
12
Construction and land
—
3
3
—
12
12
Multi-family residential
—
0
0
—
2
2
Commercial and industrial
—
3
3
—
10
10
Consumer
—
0
0
—
0
0
The table below provides an aging analysis of loans as of December 31, 2024 granted a modification to borrowers
experiencing financial difficulty that were modified in the last 12 months.
(dollars in thousands)
30-89 Days
Past Due
90+ Days
Past Due
Current
Total
December 31, 2024
One-to four-family first mortgage
$
— $
— $
801 $
801
Home equity loans and lines
—
—
—
—
Commercial real estate
—
965
1,500
2,465
Construction and land
—
—
207
207
Multi-family residential
—
—
—
—
Commercial and industrial
—
—
1,106
1,106
Consumer
—
—
—
—
Total
$
— $
965 $
3,614 $
4,579
The loan modifications reported in the table above did not significantly impact the Company's allowance for loan losses
during 2024.
6. Loan Servicing
Mortgage loans sold to and serviced for others are not included in the accompanying statements of financial condition. The
unpaid principal balances of these loans as of December 31 of the years indicated are summarized as follows:
(dollars in thousands)
2024
2023
Mortgage loans sold to Federal Home Loan Mortgage Corporation without recourse
$
1,134 $
1,251
Mortgage loans sold to Federal National Mortgage Association without recourse
32,238
37,614
Mortgage loans sold to Federal Home Loan Bank without recourse
124
138
Total, end of period
$
33,496 $
39,003
The Company no longer retains servicing rights for mortgage loans sold.
Custodial and escrow account balances maintained in connection with the foregoing loan servicing arrangements were
$1,102,000 and $1,049,000 as of December 31, 2024 and 2023, respectively.
During the years ended December 31, 2024 and 2023, the Company sold $1,302,000 and $8,936,000, respectively, of SBA
guaranteed portion of loans originated and retained the servicing rights. The portion of SBA loans serviced for others are not
included in the Consolidated Statements of Financial Condition. The unpaid principal balance of SBA loans serviced for
others was $59,633,000 and $69,877,000 at December 31, 2024 and December 31, 2023, respectively.
72
SBA servicing assets are recognized separately when rights are acquired through the sale of the SBA guarantees. These
servicing rights are initially measured at fair value at the date of sale and included in the gain on sale of loans recorded in the
Consolidated Statements of Income. The servicing assets are amortized over the estimated net servicing life of the loans.
Changes in the carrying value of servicing assets are recorded in service fees and charges on the Consolidated Statements of
Income. Activity related to servicing assets for SBA loans and selected other related information for the years ended
December 31, 2024, 2023 and 2022 is summarized as follows.
(dollars in thousands)
2024
2023
2022
Balance, beginning of period
$
124
$
—
$
—
Recognition of SBA servicing asset
—
132
—
Amortization
(21)
(8)
—
Balance, end of period
103
124
—
Fair value, end of period
$
132
$
130
$
—
Additional information related to SBA servicing assets
Weighted average prepayment rate
11.70 %
11.60 %
— %
Weighted average term (years)
6.50
6.67
0.00
Weighted average discount rate
13.50 %
14.50 %
— %
The fair value adjustments to servicing rights are mainly due to market-based assumptions associated with discounted cash
flows, loan prepayment speeds, and changes in interest rates. A significant change in prepayments of the loans in the
servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the
carrying amount of the servicing rights.
7. Office Properties and Equipment
Office properties and equipment consisted of the following at December 31 of the years indicated.
(dollars in thousands)
2024
2023
Land
$
13,657 $
13,709
Buildings and improvements
41,266
38,599
Furniture and equipment
19,016
18,850
Total office properties and equipment
73,939
71,158
Less accumulated depreciation
31,615
29,178
Total office properties and equipment, net
$
42,324 $
41,980
Depreciation expense for the years ended December 31, 2024, 2023 and 2022 was $3,498,000, $3,571,000 and $3,464,000,
respectively.
The Company leases space under non-cancelable operating leases agreements for certain bank branch facilities with
remaining lease terms of 1 to 10 years. Certain lease arrangements contain extension options which typically range from 4 to
10 years at the fair market rental rates. The lease and asset liability considers renewal options when they are reasonably
certain of being exercised. Refer to Note 2, Summary of Significant Accounting Policies.
73
The following table summarizes net lease cost and selected other information related to operating leases at December 31 of
the years indicated.
(dollars in thousands)
2024
2023
2022
Net lease cost:
Operating lease cost
$
1,693 $
1,442 $
1,197
Variable lease cost
—
—
—
Net lease cost
$
1,693 $
1,442 $
1,197
Selected other operating lease information
Weighted average remaining lease term (years)
6.1
7.0
6.7
Weighted average discount rate
5.9%
5.7%
5.7%
The following table summarizes the maturity of remaining lease liabilities.
Years Ending December 31,
(dollars in thousands)
2025
$
1,357
2026
1,371
2027
1,386
2028
1,228
2029
1,150
Thereafter
10,160
Total future minimum lease payments
16,652
Less: amount representing interest
(5,915)
Present value of net future minimum lease payments
$
10,737
8. Goodwill and Intangibles
Goodwill and other intangible assets are presented in the table below. Changes in carrying amount of the Company’s
goodwill and core deposit intangible (“CDI”) for the years ended December 31, 2024, 2023 and 2022 were as follows.
(dollars in thousands)
Goodwill
CDI
Balance, December 31, 2021
$
58,488 $
3,461
Friendswood acquisition
23,029
4,597
Amortization of intangibles
—
(1,602)
Balance, December 31, 2022
81,517
6,456
Amortization of intangibles
—
(1,601)
Balance, December 31, 2023
81,517
4,855
Amortization of intangibles
—
(1,328)
Balance, December 31, 2024
$
81,517 $
3,527
The weighted-average amortization period for CDI acquired is 11 years. The Company completed its annual impairment test
of goodwill and other intangible assets as of December 31, 2024. The evaluation did not indicate impairment on its goodwill
or other intangible assets.
74
Estimated future amortization expense for CDI remaining at December 31, 2024, was as follows.
(dollars in thousands)
Amount
2025
1,087
2026
851
2027
618
2028
393
2029
290
Thereafter
288
Total CDI
$
3,527
9. Deposits
The Company’s deposits consisted of the following major classifications as of December 31 of the years indicated.
(dollars in thousands)
2024
2023
Demand deposit accounts
$ 733,073 $ 744,424
Savings
210,977
231,624
Money market accounts
457,483
408,024
NOW accounts
645,246
641,818
Certificates of deposit
733,917
644,734
Total deposits
$ 2,780,696 $ 2,670,624
As of December 31, 2024, the scheduled maturities of the Company’s certificates of deposit were as follows.
(dollars in thousands)
Amount
2025
$
693,281
2026
30,038
2027
3,930
2028
2,646
2029
2,838
Thereafter
1,184
Total certificates of deposit
$
733,917
The amount of our total uninsured deposits (that is, deposits in excess of the FDIC insurance limit) was $813,553,000 and
$748,586,000 at December 31, 2024 and December 31, 2023, respectively. As of December 31, 2024 and 2023, the aggregate
amount of certificates of deposit with balances of $250,000 or more was $228,392,000 and $190,733,000, respectively.
10. Other Borrowings
Other borrowings at December 31, 2024 and 2023 included a $5,539,000 note payable with a rate of 3.83% on the
Company’s investment in a new market tax credit entity. The note payable is a 20-year leverage loan with interest-only
payments for the first seven years. The note was originated in October 2018.
On March 12, 2023, the Federal Reserve Board developed the BTFP, which offers loans to banks with a term of up to one
year. The loans are secured by pledging the banks’ U.S. treasuries, agency securities, agency mortgage-backed securities, and
any other qualifying assets. These pledged securities were valued at par for collateral purposes. At December 31, 2024 and
2023, the Bank pledged securities with a collateral value of $0 and $103.4 million, respectively, and had no outstanding debt
for 2024 and 2023, respectively. For the years ended December 31, 2024 and 2023, the average volume of BTFP advances
carried by the Company was $123,160,000 and $0, respectively.
75
11. Subordinated Debt
On June 30, 2022, the Company issued $55,000,000 in aggregate principal amount of its 5.75% Fixed-to-Floating Rate
Subordinated Notes (the "Notes") due 2032. The Notes were issued at a price equal to 100% of the aggregate principal
amount. The Notes have a stated maturity date of June 30, 2032 and bear interest at a fixed rate of 5.75% per year from and
including the issue date to but excluding June 30, 2027. From June 30, 2027, the Notes bear interest at a floating rate equal to
the then current three-month term secured overnight financing rate (“SOFR”), plus 282 basis points. The Notes may be
redeemed by the Company, in whole or in part, on or after June 30, 2027. The Notes are intended to qualify as Tier 2 capital
for regulatory purposes.
The carrying value of subordinated debt was $54,459,000 and $54,241,000 at December 31, 2024 and December 31, 2023,
respectively. The subordinated debt was recorded net of issuance costs, which is being amortized using the straight-line
method over five years.
12. Short-term FHLB Advances
As of December 31, 2024 and 2023, the Company had short-term FHLB advances of $137,220,000 and $150,000,000,
respectively. Interest rates for FHLB short-term advances outstanding at December 31, 2024 and 2023 ranged from 4.38% to
4.55% and 5.38% to 5.58%, respectively. For the years ended December 31, 2024 and 2023, the average volume of short-
term FHLB advances carried by the Company was $18,157,000 and $205,361,000, respectively.
Collateral for short- and long-term FHLB advances is secured through a blanket lien evidenced by the Company’s pledge of
first mortgage collateral, demand deposit accounts, capital stock and certain other assets pursuant to the “Advances,
Collateral Pledge and Security Agreement.” Under this collateral pledge agreement, the Bank must meet all statutory and
regulatory capital standards and must meet all FHLB credit underwriting standards. Management believes that the Bank was
in compliance with all such requirements as of December 31, 2024 and 2023.
As of December 31, 2024 and 2023, the Company had $1,088,068,000 and $1,020,494,000, respectively, of additional FHLB
advances available based on collateral pledged. As of December 31, 2024 and 2023, the Company had $1,202,054,000 and
$1,159,170,000, respectively, of loans pledged through the Company’s blanket lien.
13. Long-term FHLB Advances
As of December 31, 2024 and 2023, the Company’s long-term FHLB advances totaled $38,326,000 and $42,713,000,
respectively. The following table summarizes long-term advances as of December 31, 2024.
(dollars in thousands)
Amount
Weighted
Average
Rate
Fixed rate advances maturing in:
2025
$
35,194
3.49 %
2026
3,132
1.55
Total long-term FHLB advances
$
38,326
3.33 %
14. Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company
principally manages its exposures to a wide variety of business and operational risks through management of its core business
activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the
amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the
Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the
receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.
76
The Company’s existing credit derivatives result from loan participation arrangements, therefore, are not used to manage
interest rate risk in the Company’s assets or liabilities. The Company occasionally enters into credit risk participation
agreements with counterparty banks to accept a portion of the credit risk related to interest rate swaps. The agreements, which
are typically executed in conjunction with a participation in a loan with the same customer, allow customers to execute an
interest rate swap with one bank while allowing for the distribution of the credit risk among participating members. Collateral
used to support the credit risk for the underlying lending relationship is also available to offset the risk of credit risk
participations and customer derivative positions.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure
to interest rate movements. As part of its efforts to accomplish this objective, the Company entered into certain interest rate
swap agreements as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges
involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over
the life of the agreements without exchange of the underlying notional amount. During 2024 and 2023, such derivatives were
used to hedge the variable cash flows associated with existing variable rate liabilities.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is
recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same
period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive
income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable
rate liabilities. During the next twelve months, the Company estimates that an additional $1,766,000 will be reclassified as
additional interest income.
Non-designated Hedges
Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain
customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk
management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company
executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the
interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of
both the customer derivatives and the offsetting derivatives are recognized directly in earnings through other income.
Fair Values of Derivative Instruments
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the
Consolidated Statement of Financial Condition.
Derivatives
designated as
hedging
instruments:
Interest rate
swaps - variable
rate liabilities
$ 80,000 $
3,241 $
— $
— $ 60,000 $
3,914 $
— $
—
December 31, 2024
December 31, 2023
Derivative Assets(1)
Derivative Liabilities(1)
Derivative Assets(1)
Derivative Liabilities(1)
(dollars in thousands)
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
77
Derivatives not
designated as
hedging
instruments:
Interest rate
contracts
9,000
26
9,000
42
—
—
—
—
Risk
participation
agreements
—
—
11,550
—
—
—
11,797
3
Netting
adjustments
—
—
—
—
Net derivative
amounts
$
3,267
$
42
$
3,914
$
3
December 31, 2024
December 31, 2023
Derivative Assets(1)
Derivative Liabilities(1)
Derivative Assets(1)
Derivative Liabilities(1)
(dollars in thousands)
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
(1)
Derivative assets and liabilities are reported at fair value in accrued interest receivable and other assets and accrued interest payable
and other liabilities, respectively, in the Consolidated Statements of Financial Condition.
At December 31, 2024 and 2023, accumulated unrealized gains, net of taxes, on derivative instruments totaled $2,418,000
and $2,928,000, respectively.
Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income
The following tables below presents the effect of cash flow hedge accounting on Accumulated Other Comprehensive (Loss)
Income as of December 31, 2024 and 2023.
Year Ended December 31, 2024
Amount of Gain Recognized
in OCI
Location of
Gain
Reclassified
from AOCI
into Income
Amount of Gain Reclassified
from AOCI into Income
(dollars in thousands)
Total
Included
Component
Total
Included
Component
Derivatives in cash flows hedging
relationships:
Interest rate swaps - variable rate
liabilities
$
1,770 $
1,770
Interest
income
$
2,416 $
2,416
For the Year Ended December 31, 2023
Amount of Gain Recognized
in OCI
Location of
Gain
Reclassified
from AOCI
into Income
Amount of Gain Reclassified
from AOCI into Income
(dollars in thousands)
Total
Included
Component
Total
Included
Component
Derivatives in cash flows hedging
relationships:
Interest rate swaps - variable rate
liabilities
$
878 $
878
Interest
income
$
2,185 $
2,185
78
Effect of Cash Flow Hedge Accounting on the Consolidated Statements of Income
The following tables below presents the effect of the Company’s derivative financial instruments on the Consolidated
Statements of Income as of December 31, 2024 and 2023.
(dollars in thousands)
Location of Gain
Reclassified from AOCI
into Income
For the Year Ended
December 31, 2024
Effects of cash flow hedging
Interest rate swaps - variable rate liabilities
Interest income
$
2,416
(dollars in thousands)
Location of Gain
Reclassified from AOCI
into Income
For the Year Ended
December 31, 2023
Effects of cash flow hedging
Interest rate swaps - variable rate liabilities
Interest income
$
2,185
Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Income
The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging
instruments on the Consolidated Statements of Income as of December 31, 2024 and 2023.
(dollars in thousands)
Location of Loss
Recognized on Non-
designated Hedges
For the Year Ended
December 31, 2024
Effects of non-designated hedges
Interest rate contracts
Other noninterest income
$
8
Risk participation agreements
Other noninterest expense
$
(22)
(dollars in thousands)
Location of Income
Recognized on Non-
designated Hedges
For the Year Ended
December 31, 2023
Effects of non-designated hedges
Interest rate contracts
Other noninterest expense
$
—
Risk participation agreements
Other noninterest income
$
5
Derivative fee income from non-designated hedges totaled $175,000 and $0 for the twelve months ended December 31, 2024
and December 31, 2023, respectively.
Credit-risk-related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision to the effect that, if the
Company (either) defaults (or is capable of being declared in default) on any of its indebtedness, then the Company could
also be declared in default on its derivative obligations.
The Company has agreements with certain of its derivative counterparties that contain a provision to the effect that, if the
Company fails to maintain its status as a well or adequately capitalized institution, then the Company could be required to
post additional collateral.
As of December 31, 2024, there were no derivatives with credit-risk-related contingent features in a net liability position.
Such derivatives are measured at fair value, which includes accrued interest but excludes any adjustment for nonperformance
risk. If the Company had breached any provisions at December 31, 2024, it would not have been required to settle any
obligations under the agreements since the termination value was $0.
79
15. Income Taxes
The Company files federal income tax returns on a calendar year basis. Income tax expense for the years indicated is
summarized as follows:
(dollars in thousands)
2024
2023
2022
Current
$
9,583 $
10,722 $
9,792
Deferred
(44)
(33)
(882)
Historic Tax Credits ("HTC")
(303)
(303)
—
New Markets Tax Credits ("NMTC")
(480)
(480)
(480)
Total income tax expense
$
8,756 $
9,906 $
8,430
The components of the Company’s net deferred tax asset, which is included in accrued interest receivable and other assets in
the accompanying Statement of Financial Condition at December 31 of the years indicated are as follows:
Deferred tax assets:
Provision for loan losses
$
7,479 $
7,168
Discount on purchased loans
474
822
Salary continuation plan
619
657
Mortgage servicing rights
13
30
Deferred compensation
6
5
Stock-based compensation
280
260
Unrealized loss on securities available for sale
8,613
9,121
Net operating loss acquired
61
334
HTC
83
41
Other
173
219
Deferred tax assets
$
17,801 $
18,657
Deferred tax liabilities:
FHLB stock dividends
$
(161) $
(169)
Accumulated depreciation
(3,110)
(3,280)
Intangible assets
(619)
(842)
Derivatives
(643)
(778)
NMTC
(188)
(159)
Other
(45)
(46)
Deferred tax liabilities
(4,766)
(5,274)
Net deferred tax asset
$
13,035 $
13,383
(dollars in thousands)
2024
2023
80
For the years ended December 31, 2024, 2023 and 2022, the Company’s provision for federal income taxes differed from the
amount computed by applying the federal income tax statutory rate of 21% on income from operations as indicated in the
following analysis:
(dollars in thousands)
2024
2023
2022
Federal tax based on statutory rate
$
9,548
$ 10,658
$
8,994
State tax based on statutory rate
205
175
151
(Decrease) increase resulting from:
HTC
(303)
(303)
—
NMTC
(480)
(480)
(480)
Effect of tax-exempt income
(105)
(155)
(276)
Changes in the cash surrender value of bank owned life insurance
(231)
(219)
(192)
Nondeductible merger-related expenses
—
—
41
Nondeductible share based compensation expense
151
161
188
Exercise of stock options
(104)
(50)
(37)
Other
75
119
41
Income tax expense
$
8,756
$
9,906
$
8,430
Effective tax rate
19.4 %
19.8 %
19.8 %
Retained earnings as of December 31, 2024 and 2023, included $5,837,000 for which no deferred federal income tax liability
has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only.
Reductions of amounts so allocated for purposes other than bad debt losses would create income for tax purposes only, which
would be subject to the then-current federal statutory income tax rate. The unrecorded deferred income tax liability on the
above amount was $1,985,000 as of December 31, 2024 and 2023. Current accounting standards do not require the accrual of
this deferred tax amount to be recorded unless it is probable that the reserve (for tax purposes) will be significantly depleted
by loan losses deductible for tax purposes in the future. Based on current estimates of losses within the Company’s loan
portfolio, accrual of the deferred tax liability associated with this reserve was not required as of December 31, 2024 and
2023.
16. Commitments
Standby letters of credit represent commitments by the Bank to meet the obligations of certain customers if called upon. The
Bank normally secures its outstanding standby letters of credit with deposits from the customer. Additionally, in the normal
course of business, there were various other commitments and contingent liabilities which are not reflected in the financial
statements. Loan commitments are single-purpose commitments to lend which will be funded and reduced according to
specified repayment schedules. Most of these commitments have maturities of less than one year.
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 the undisbursed portion of construction loans as of December 31 of the
years indicated.
Contract Amount
(dollars in thousands)
2024
2023
Standby letters of credit
$
6,502 $
7,289
Available portion of lines of credit
488,930
368,398
Undisbursed portion of loans in process
76,424
221,997
Commitments to originate loans
161,482
127,076
The Bank uses the same credit policies in making commitments as it does for on-balance-sheet instruments. The Bank
evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary
by the Bank upon extension of credit, is based on management’s credit evaluation of the customer. Collateral held varies but
may include certificates of deposit, property, plant and equipment and income-producing properties. There are no
commitments which present an unusual risk to the Bank, and no material losses are anticipated as a result of these
transactions.
81
17. Regulatory Matters
The Bank is subject to regulatory capital requirements administered by the OCC. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative
measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The
Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
In July 2013, the Federal bank regulatory agencies issued a final rule that revised their risk-based capital requirements and the
method for calculating components of capital and of computing risk-weighted assets to make them consistent with
agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act.
The rule established a common equity Tier 1 minimum capital requirement, increased the minimum capital ratios and
assigned a higher risk weight to certain assets based on the risk associated with these assets. The final rule also included a
capital conservation buffer which was phased in over a five-year period until it reached 2.5% on January 1, 2019.
Dividends paid by the Bank are the primary source of funds available to the Company. Banking regulations limit the amount
of dividends that may be paid without prior approval of the regulatory authorities.
Quantitative measures established by regulation to ensure capital adequacy requires the Bank to maintain minimum amounts
and ratios (set forth in the table below) of total and Tier 1 risk-based capital (as defined) to average assets and risk-weighted
assets (as defined). Management believes, as of December 31, 2024 and 2023, that the Bank met all capital adequacy
requirements to which it was subject.
As of December 31, 2024 and 2023, the most recent notification from the OCC categorized the Bank as “well capitalized”
under the OCC regulatory classification framework. To be categorized as “well capitalized,” the Bank must maintain
minimum Total risk-based, Tier 1 risk-based, Tier 1 leverage and common equity Tier 1 ratios as set forth in the following
table. There are no conditions or events since that notification that management believes have changed the Bank’s category.
The following tables present actual and required capital ratios for the the Bank under the Basel III Capital Rules. The
minimum required capital amounts presented include the minimum required capital levels as of December 31, 2024 and
2023. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as
amended to reflect the changes under the Basel III Capital Rules.
Actual
Minimum Capital
Required – Basel III
Fully Phased-In
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
(dollars in thousands)
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2024
Company:
Tier 1 risk-based capital
$ 341,026
11.85 % $ 244,587
8.50 %
N/A
N/A
Total risk-based capital
430,901
14.97
302,137
10.50
N/A
N/A
Tier 1 leverage capital
341,026
10.17
134,195
4.00
N/A
N/A
Bank:
Common equity Tier 1 capital
$ 380,777
13.28 % $ 200,779
7.00 % $ 186,437
6.50 %
Tier 1 risk-based capital
380,777
13.28
243,803
8.50
229,461
8.00
Total risk-based capital
416,193
14.51
301,168
10.50
286,826
10.00
Tier 1 leverage capital
380,777
11.38
133,833
4.00
167,292
5.00
82
Actual
Minimum Capital
Required – Basel III
Fully Phased-In
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
(dollars in thousands)
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2023
Company:
Tier 1 risk-based capital
$ 312,454
11.49 % $ 231,087
8.50 %
N/A
N/A
Total risk-based capital
400,578
14.73
285,460
10.50
N/A
N/A
Tier 1 leverage capital
312,454
9.73
128,508
4.00
N/A
N/A
Bank:
Common equity Tier 1 capital
$ 351,939
12.98 % $ 189,732
7.00 % $ 176,180
6.50 %
Tier 1 risk-based capital
351,939
12.98
230,389
8.50
216,837
8.00
Total risk-based capital
385,822
14.23
284,599
10.50
271,046
10.00
Tier 1 leverage capital
351,939
10.98
128,188
4.00
160,235
5.00
18. Benefit Plans
401(k) and Profit Sharing Plan
The Company’s 401(k) defined contribution plan allows its participants to contribute up to 75% of their pretax earnings on a
tax-deferred basis up to the statutory limit. The Company’s matching contributions are equal to 100% of the employee’s
contributions up to 4%, plus 50% of the employee's contributions over 4% but not over 6% of the employee’s pay. For the
years ended December 31, 2024, 2023 and 2022, the Company made contributions of $1,638,000, $1,610,000 and
$1,255,000, respectively, in connection with the plan, which is included in compensation and benefits expense in the
accompanying Consolidated Statements of Income.
Employee Stock Ownership Plan
In 2008, the Company established an employee stock ownership plan (“ESOP”) for the benefit of all eligible employees of
the Company. The leveraged ESOP is accounted for in accordance with the requirements of ASC 718, Compensation – Stock
Compensation.
Employees of the Bank who have been employed with 500 hours of service during a computation period and who have
attained age 21 are eligible to participate in the ESOP. Contributions are being made to the ESOP in amounts necessary to
amortize the debt to the Company over a period of 20 years.
Under ASC 718, unearned ESOP shares are not considered outstanding and are shown as a reduction of shareholders’ equity
as unearned compensation. Dividends on unallocated ESOP shares are considered to be compensation expense. The
Company recognizes compensation cost equal to the fair value of the ESOP shares during the periods in which they are
committed to be released. To the extent that the fair value of the Company’s ESOP shares differs from the cost of such
shares, the differential is credited to shareholders’ equity. The Company receives a tax deduction equal to the cost of the
shares released. As the loan is internally leveraged, the loan receivable from the ESOP to the Company is not reported as an
asset nor is the debt of the ESOP shown as a Company liability.
83
Compensation cost related to the ESOP was $1,095,000, $908,000 and $1,096,000 for the years ended December 31, 2024,
2023 and 2022, respectively. The fair value of the unearned ESOP shares, using the closing quoted market price per share as
of year-end, was approximately $6,188,000 and $7,125,000 as of December 31, 2024 and 2023, respectively. A summary of
the ESOP share allocation as of December 31, 2024 and 2023 follows.
2024
2023
Shares allocated, beginning of year
378,791
361,195
Shares allocated during the year
35,708
35,708
Shares distributed during the year
(23,652)
(18,112)
Allocated shares held by ESOP trust as of year end
390,847
378,791
Unallocated shares
133,903
169,611
Total ESOP shares
524,750
548,402
Salary Continuation Agreements
As a supplement to its 401(k) retirement plan, the Bank has entered into nonqualified salary continuation agreements with
four executive officers of the Bank. The Bank's 2007 salary continuation agreement with its Chief Executive Officer (“CEO”)
provides that the executive will receive a stated annual benefit for a period of ten years upon retirement from the Bank.
Benefits under the 2007 agreement vested over ten years, with 100% of this benefit having vested in 2017. Also, effective
May 20, 2019, the Bank entered into a new salary continuation agreement with its CEO, which will provide the CEO with an
additional stated annual benefit for a period of ten years upon his retirement after attaining age 65. The CEO is 100% vested
in his normal retirement benefit under the 2019 agreement. In the event of early retirement, the Bank will pay the CEO his
vested benefits, in a lump sum on the first day of the month following the separation from service.
On May 23, 2022, the Bank amended the salary continuation agreement with its Chief Risk Officer ("CRO"). The agreement
provides that the executive will be entitled to a stated annual benefit, distributed monthly, for a period of ten years upon
retirement from the Bank after attaining age 65. Benefits under the agreement became fully vested in August 2019. In the
event of early retirement, the Bank shall pay the executive his vested benefits in 120 equal monthly installments upon
attaining age 65. In the event of a separation from service within 24 months following a change in control of the Bank prior to
reaching age 65, the Bank shall pay the executive officer an amount equal to the greater of (i) his accrued benefits as of the
end of the year immediately preceding the separation from service or (ii) a stated amount. This amount will be paid in a lump
sum on the first day of the month following the separation from service.
In July 2023, the Company's Chief Operations Officer ("COO") resigned from his position with the Company and the Bank.
Prior to the his resignation, the Bank was under a salary continuation agreement with the COO. Under the terms of the
agreement, the Company paid his vested benefits of $100,254 in one lump sum on January 1, 2024.
On May 23, 2022, the Bank entered into a salary continuation agreement with its Chief Financial Officer ("CFO"). The
agreement provides that the CFO will be entitled to a stated annual benefit, distributed monthly, for a period of ten years
upon retirement from the Bank after attaining age 65. The retirement benefits vest over a period of ten years or until the
executive officer reaches age 65. In the event of early retirement, the Bank will pay the executive officer his vested benefits
in a lump sum on the first day of the month following the separation from service. If the executive has a separation from
service within 24 months following a change in control of the Bank prior to reaching age 65, the Bank shall pay the executive
officer an amount equal to the greater of (i) his accrued benefits as of the end of the year immediately preceding the
separation from service or (ii) a stated amount. This amount will be paid in a lump sum on the first day of the month
following the separation from service.
Britton & Koontz Capital Corporation had two salary continuation agreements funded in the amount of $465,000 at the time
of acquisition in February 2014. Former executives of Britton & Koontz Capital Corporation or their beneficiaries are being
paid over 15 years from the time of acquisition in February 2014. Louisiana Bancorp, Inc. also had two salary continuation
agreements funded in the amount of $1,200,000 at the time of acquisition in September 2015. The Bank will pay former
executives of Louisiana Bancorp, Inc. or their beneficiary within 10 years subsequent to the time of the acquisition in
September 2015. SMB had a salary continuation agreement for an executive officer related to its acquisition of American
Bank in 2007. The former executive of American Bank or his beneficiaries are being paid $358,000 over 14 years from the
time of the SMB acquisition in December 2017.
The Company had an outstanding liability totaling $2,947,000 and $3,128,000 as of December 31, 2024 and 2023,
respectively, in connection with the agreements, which is included in accrued interest payable and other liabilities in the
accompanying statements of financial condition.
84
19. Stock-based Payment Arrangements
The Company’s shareholders approved the 2009 Stock Option Plan (the “SOP”) and the 2009 Recognition and Retention
Plan (the “RRP”) on May 12, 2009 to provide incentives and awards for directors, officers, and other key employees of the
Company and its subsidiary. A maximum of 892,687 shares of Company common stock were reserved for issuance upon the
exercise of options granted under the SOP. A total of 357,075 shares of the Company’s outstanding common stock, or 4% of
total shares outstanding at the time the RRP was implemented, were approved for restricted stock awards under the RRP. The
SOP and RRP expired February 2019. Expiration of the SOP and RRP did not affect any unvested options or awards granted.
On May 6, 2014, the Company’s shareholders approved the 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan
authorizes the granting of stock options, restricted stock units and other awards to directors, officers and other key
employees. An aggregate of 350,000 shares of our common stock was reserved for issuance pursuant to awards under the
2014 Plan. The 2014 Plan expired on May 6, 2024. On May 5, 2021, the Company’s shareholders approved the 2021 Equity
Incentive Plan (the “2021 Plan”). The 2021 Plan authorizes the granting of stock options, restricted stock units and other
awards to directors, officers and other key employees. An aggregate of 435,000 shares of our common stock was reserved for
issuance pursuant to awards under the 2021 Plan. These plans are administered by a committee appointed by the Board of
Directors, which selects persons eligible to receive awards and determines the number of shares and/or options subject to
each award, the terms, conditions and other provisions of the awards. In accordance with ASC 718, the Company adopted a
fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured as of
the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting
period.
Stock Option Plans
The Company has issued stock options under the SOP and the 2014 Plan to directors, officers and other key employees. The
option exercise price cannot be less than the fair value of the underlying common stock as of the date of the option grant and
the maximum option term cannot exceed ten years. All stock options granted have been issued with vesting periods of five
years with accelerated vesting provided under certain circumstances. As of December 31, 2024, options to acquire an
aggregate of 117,967 shares were outstanding under the SOP and the 2014 Plan.
The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing model. This model
requires management to make certain assumptions, including the expected life of the option, the risk-free rate of interest, the
expected volatility and the expected dividend yield. The following weighted-average assumptions were used for option
awards issued during the years ended December 31:
2024
2023
2022
Expected dividends
—%
—%
2.24%
Expected volatility
—%
—%
34.34%
Risk-free interest rate
—%
—%
1.8%
Expected term (in years)
0.0
0.0
6.5
As of December 31, 2024, there was $107,000 of unrecognized compensation cost related to stock options which is expected
to be recognized over a period of 1.5 years.
For the years ended December 31, 2024, 2023 and 2022, the Company recognized $104,000, $144,000 and $187,000,
respectively, in compensation cost related to stock options, which is included in compensation and benefits expense in the
accompanying consolidated statements of income.
85
The following table represents stock option activity for the years indicated.
Options
Number of
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Grant Date
Fair Value
Weighted-
Average
Remaining
Contractual
Term
(Years)
Outstanding as of December 31, 2021
213,857 $
30.73 $
6.69
Granted
3,800
41.15
11.72
Exercised
(35,794)
22.00
5.85
Forfeited
(480)
45.12
10.43
Outstanding as of December 31, 2022
181,383 $
32.64 $
6.95
5.7
Granted
—
—
—
Exercised
(20,816)
26.31
5.58
Forfeited
(3,880)
34.33
7.61
Outstanding as of December 31, 2023
156,687 $
33.43 $
7.11
4.9
Granted
—
—
—
Exercised
(37,820)
31.85
6.48
Forfeited
(900)
44.14
10.16
Outstanding as of December 31, 2024
117,967 $
33.85 $
7.29
4.1
Exercisable as of December 31, 2022
116,239 $
32.03 $
6.64
4.7
Exercisable as of December 31, 2023
117,870 $
33.54 $
6.97
4.3
Exercisable as of December 31, 2024
97,504 $
33.90 $
7.11
3.7
Restricted Stock Plans
The Company has issued restricted stock under the RRP to directors, officers and other key employees. During 2009, the
Company purchased in the open market all shares required to fund the RRP at an average cost of $11.81 per share. As of
December 31, 2024, no shares were outstanding under the RRP Plan.
Awards under the RRP, 2014 and the 2021 Plan may not be sold or otherwise transferred until certain restrictions have
lapsed. The unearned compensation related to these awards is amortized to compensation expense over the 5-year vesting
period. The total share-based compensation expense for these awards is determined based on the market price of the
Company’s common stock as of the date of grant applied to the total number of shares granted and is amortized over the
vesting period. As of December 31, 2024, unearned share-based compensation associated with these awards totaled
$3,223,000 with a weighted average remaining life of 3.4 years.
For the years ended December 31, 2024, 2023 and 2022, the Company recognized $1,017,000, $762,000 and $625,000,
respectively, in compensation cost related to restricted stock and restricted stock units, which is included in compensation and
benefits expense in the accompanying consolidated statements of income.
86
The following table represents unvested restricted stock activity for the years indicated.
Restricted Stock
Number of
Shares
Weighted-
Average
Grant Date
Fair Value
Balance, December 31, 2021
46,207 $
33.93
Granted
42,495
35.32
Forfeited
—
—
Released
(14,640)
34.67
Balance, December 31, 2022
74,062 $
34.58
Granted
45,065
30.37
Forfeited
(6,375)
32.88
Released
(19,814)
35.04
Balance, December 31, 2023
92,938 $
32.55
Granted
46,800
37.52
Forfeited
(340)
32.06
Released
(25,156)
32.66
Balance, December 31, 2024
114,242 $
34.56
20. Earnings Per Share
Earnings per common share was computed based on the following:
Years Ended December 31,
(dollars in thousands, except per share data)
2024
2023
2022
Numerator:
Income applicable to common shares
$
36,427 $
40,240 $
34,072
Denominator:
Weighted average common shares outstanding
7,956
8,028
8,139
Effect of dilutive securities:
Restricted stock
26
15
13
Stock options
23
22
42
Weighted average common shares outstanding - assuming dilution
8,005
8,065
8,194
Earnings per common share
$
4.58 $
5.02 $
4.19
Earnings per common share - assuming dilution
$
4.55 $
4.99 $
4.16
Options on 69,337, 111,234 and 77,655 shares of common stock were not included in computing diluted earnings per share
for the years ended December 31, 2024, 2023 and 2022, respectively, because the effect of these shares was anti-dilutive.
21. Related Party Transactions
Certain directors and officers of the Company are customers of the Company. Loan transactions with directors, officers and
employees are made on the same terms as those prevailing at the time for comparable loans to other persons. A summary of
related party loan activity during 2024 and 2023 follows.
(dollars in thousands)
2024
2023
Balance, beginning of year
$
12,143 $
10,717
New loans
498
2,361
Change in related parties, net
448
—
Repayments, net
(1,752)
(935)
Balance, end of year
$
11,337 $
12,143
87
None of the related party loans were identified as impaired or exceeded 5% of shareholders’ equity for the years ended 2024
or 2023.
Related party deposits totaled $8,527,000 and $6,080,000 as of December 31, 2024 and 2023, respectively.
22. Fair Value Measurements and Disclosures
The Company values 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 is 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 evaluated pricing models supported with market data
information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark
securities, bids, offers, and 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 December 31, 2024, management did not make adjustments to prices provided by the third-party pricing
service as a result of illiquid or inactive markets.
Derivative Assets and Liabilities
The fair value of these derivative financial instruments is obtained from a third-party pricing service that uses widely
accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. The
analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based
inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the
market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected
variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest
rates (forward curves) derived from observable market interest rate curves. The Company has determined that its derivative
valuations are classified in Level 2 of the fair value hierarchy.
88
The following tables present the balances of assets and liabilities measured on a recurring basis as of December 31, 2024 and
2023 aggregated by the level in the fair value hierarchy in which these measurements fall.
(dollars in thousands)
December 31,
2024
Level 1
Level 2
Level 3
Assets
Available for sale securities:
U.S. agency mortgage-backed
$
261,873 $
— $
261,873 $
—
Collateralized mortgage obligations
71,389
—
71,389
—
Municipal bonds
45,829
—
45,829
—
U.S. government agency
17,128
—
17,128
—
Corporate bonds
6,573
—
6,573
—
Total available for sale securities
$
402,792 $
— $
402,792 $
—
Derivative assets(1)
$
3,267 $
— $
3,267 $
—
Total
$
406,059 $
— $
406,059 $
—
Liabilities
Derivative liabilities(1)
$
42 $
— $
42 $
—
(dollars in thousands)
December 31,
2023
Level 1
Level 2
Level 3
Assets
Available for sale securities:
U.S. agency mortgage-backed
$
283,853 $
— $
283,853 $
—
Collateralized mortgage obligations
79,262
—
79,262
—
Municipal bonds
46,674
—
46,674
—
U.S. government agency
18,049
—
18,049
—
Corporate bonds
6,088
—
6,088
—
Total available for sale securities
$
433,926 $
— $
433,926 $
—
Derivative assets(1)
$
3,914 $
— $
3,914 $
—
Total
$
437,840 $
— $
437,840 $
—
Liabilities
Derivative liabilities(1)
$
3 $
— $
3 $
—
(1)
For more information, refer to Note 14.
Nonrecurring Basis
The Company records loans individually evaluated for impairment at fair value on a nonrecurring basis. A loan is considered
impaired if it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan
agreement. Fair value is measured at the fair value of the collateral for collateral-dependent loans. For non-collateral-
dependent loans, fair value is measured by present valuing expected future cash flows. Impaired loans are classified as
Level 3 assets when measured using appraisals from third parties of the collateral less any prior liens and when there is no
observable market price.
Foreclosed assets and ORE are also recorded at fair value on a nonrecurring basis. Foreclosed assets are initially recorded at
fair value less estimated costs to sell. ORE is recorded at the lower of its net book value or fair value at the date of transfer to
ORE. The fair value of foreclosed assets and ORE is based on property appraisals and an analysis of similar properties
available. As such, the Company classifies foreclosed and ORE assets as Level 3 assets.
89
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 tables below.
Fair Value Measurements Using
(dollars in thousands)
December 31,
2024
Level 1
Level 2
Level 3
Assets
Individually evaluated loans
$
4,524 $
— $
— $
4,524
Foreclosed assets and ORE
2,010
—
—
2,010
Total
$
6,534 $
— $
— $
6,534
Fair Value Measurements Using
(dollars in thousands)
December 31,
2023
Level 1
Level 2
Level 3
Assets
Individually evaluated loans
$
3,797 $
— $
— $
3,797
Foreclosed assets and ORE
1,575
—
—
1,575
Total
$
5,372 $
— $
— $
5,372
The following tables show significant unobservable inputs used in the fair value measurement of Level 3 assets.
(dollars in thousands)
Fair Value
Valuation Technique
Unobservable Inputs
Range of
Discounts
Weighted
Average
Discount
As of December 31, 2024
Loans individually evaluated
for impairment
$
4,524
Third party appraisals and
discounted cash flows
Collateral values, market
discounts and estimated
costs to sell
0% - 100%
9 %
Foreclosed assets and ORE
$
2,010
Third party appraisals,
sales contracts, broker
price opinions
Collateral values, market
discounts and estimated
costs to sell
19% - 69%
23 %
(dollars in thousands)
Fair Value
Valuation Technique
Unobservable Inputs
Range of
Discounts
Weighted
Average
Discount
As of December 31, 2023
Loans individually evaluated
for impairment
$
3,797
Third party appraisals and
discounted cash flows
Collateral values, market
discounts and estimated
costs to sell
0% - 89%
10 %
Foreclosed assets and ORE
$
1,575
Third party appraisals,
sales contracts, broker
price opinions
Collateral values, market
discounts and estimated
costs to sell
31% - 71%
62 %
ASC 820, Fair Value Measurements and Disclosures, requires the disclosure of each class of financial instruments for which
it is practicable to estimate. The fair value of a financial instrument is the current amount that would be exchanged between
willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in
many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted
market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.
Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. ASC 820 excludes
certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate
fair value amounts presented may not necessarily represent the underlying fair value of the Company.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the
financial statement element. 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.
90
Fair value estimates included herein are based on existing on- and off-balance-sheet financial instruments without attempting
to estimate the value of anticipated future business and the fair value of assets and liabilities that are not required to be
recorded or disclosed at fair value like premises and equipment. In addition, the tax ramifications related to the realization of
the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the
estimates.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which
it is practicable to estimate that value:
•
The carrying value of cash and cash equivalents and interest-bearing deposits in banks approximate their fair value.
•
The fair value for investment securities is determined from quoted market prices when available. If a quoted market
price is not available, fair value is estimated using third party pricing services or quoted market prices of securities
with similar characteristics.
•
The carrying value of mortgage loans held for sale approximates their fair value.
•
The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit ratings and for the same remaining maturity.
•
The cash surrender value of BOLI approximates its fair value.
•
The fair value of customer deposits, excluding certificates of deposit, is the amount payable on demand. The fair
value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates
currently offered for deposits of similar remaining maturities.
•
The fair value of subordinated debt is estimated based on current market rates on similar debt in the market.
•
The fair value of other borrowings and FHLB advances is estimated by discounting the future cash flows using the
rates currently offered for borrowings of similar maturities.
•
The fair value of derivative assets and liabilities are obtained from a third-party pricing service that uses the market
standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected
variable cash payments (or receipts).
The fair value of off-balance sheet financial instruments as of December 31, 2024 and 2023 was immaterial.
Fair Value Measurements at December 31, 2024
(dollars in thousands)
Carrying
Amount
Total
Level 1
Level 2
Level 3
Financial Assets
Cash and cash equivalents
$
98,548 $
98,548 $
98,548 $
— $
—
Investment securities available for sale
402,792
402,792
—
402,792
—
Investment securities held to maturity
1,065
1,065
—
1,065
—
Mortgage loans held for sale
832
832
—
832
—
Loans, net
2,685,269 2,617,254
— 2,612,730
4,524
Cash surrender value of BOLI
48,421
48,421
48,421
—
—
Derivative assets(1)
3,267
3,267
—
3,267
—
Financial Liabilities
Deposits
$ 2,780,696 $ 2,778,056 $ 2,046,779 $
731,277 $
—
Other borrowings
5,539
5,528
—
5,528
—
Subordinated debt, net of issuance cost
54,459
49,563
—
49,563
—
Short-term FHLB advances
137,220
137,220
137,220
—
—
Long-term FHLB advances
38,326
38,111
—
38,111
—
Derivative liabilities(1)
42
42
—
42
—
91
Fair value Measurements at December 31, 2023
(dollars in thousands)
Carrying
Amount
Total
Level 1
Level 2
Level 3
Financial Assets
Cash and cash equivalents
$
75,831 $
75,831 $
75,831 $
— $
—
Interest-bearing deposits in banks
99
99
99
—
—
Investment securities available for sale
433,926
433,926
—
433,926
—
Investment securities held to maturity
1,065
1,066
—
1,066
—
Mortgage loans held for sale
361
361
—
361
—
Loans, net
2,550,101 2,381,863
— 2,378,066
3,797
Cash surrender value of BOLI
47,321
47,321
47,321
—
—
Derivative assets(1)
3,914
3,914
—
3,914
—
Financial Liabilities
Deposits
$ 2,670,624 $ 2,665,590 $ 2,025,890 $
639,700 $
—
Other borrowings
5,539
5,498
—
5,498
—
Subordinated debt, net of issuance cost
54,241
50,865
—
50,865
—
Short-term FHLB advances
150,000
150,000
150,000
—
—
Long-term FHLB advances
42,713
41,792
—
41,792
—
Derivative liabilities(1)
3
3
—
3
—
(1)
Derivative assets and liabilities are reported at fair value in accrued interest receivable and other assets and accrued interest
payable and other liabilities, respectively, in the Consolidated Statements of Financial Condition.
23. Condensed Parent Company Only Financial Statements
Condensed financial statements of Home Bancorp, Inc. (parent company only) are shown below. The parent company has no
significant operating activities.
Condensed Balance Sheets
For the Years Ended December 31, 2024 and 2023
(dollars in thousands)
2024
2023
Assets
Cash in bank
$
5,295 $
6,584
Investment in subsidiary
435,839
406,929
Other assets
9,488
8,207
Total assets
$
450,622 $
421,720
Liabilities
Subordinated debt, net of issuance cost
$
54,459 $
54,241
Other liabilities
75
35
Total liabilities
$
54,534 $
54,276
Shareholders’ equity
396,088
367,444
Total liabilities and shareholders’ equity
$
450,622 $
421,720
92
Condensed Statements of Income
For the Years Ended December 31, 2024, 2023 and 2022
(dollars in thousands)
2024
2023
2022
Operating income
Dividend from subsidiary
$
13,000 $
15,000 $
74,576
Total operating income
13,000
15,000
74,576
Operating expenses
Other expenses
369
340
289
Total operating expenses
369
340
289
Interest expense
Subordinated debt expense
3,381
3,390
1,710
Total interest expense
3,381
3,390
1,710
Income before income tax benefit and equity in undistributed earnings of
subsidiary
9,250
11,270
72,577
Income tax benefit
788
783
420
Income before equity in undistributed earnings of subsidiary
10,038
12,053
72,997
Undistributed earnings of subsidiary
26,389
28,187
(38,925)
Net income
$
36,427 $
40,240 $
34,072
Condensed Statements of Cash Flows
For the Years Ended December 31, 2024, 2023 and 2022
(dollars in thousands)
2024
2023
2022
Cash flows from operating activities
Net income
$
36,427 $
40,240 $
34,072
Adjustments to reconcile net income to net cash provided by operating
activities:
Non-cash compensation
1,643
1,468
1,629
Amortization of subordinated debt issuance cost
218
228
120
Increase in accrued interest receivable and other assets
(1,281)
(558)
(1,225)
Undistributed earnings in subsidiary
(26,389)
(28,187)
38,925
Increase (decrease) in accrued expenses and other liabilities
40
—
(9)
Net cash provided by operating activities
10,658
13,191
73,512
Cash flows from investing activities
Net cash paid in acquisitions
—
—
(64,593)
Investment in subsidiaries
—
—
(40,000)
Net cash used in investing activities
—
—
(104,593)
Cash flows from financing activities
Proceeds from exercise of stock options
130
102
375
Proceeds from issuance of subordinated debt, net of issuance cost
—
—
53,892
Payment of dividends on common stock
(8,189)
(8,222)
(7,777)
Issuance of stock under incentive plan
886
329
324
Purchase of Company’s common stock
(4,774)
(5,259)
(11,333)
Net cash (used in) provided by financing activities
(11,947)
(13,050)
35,481
Net change in cash and cash equivalents
(1,289)
141
4,400
Cash and cash equivalents at beginning of year
6,584
6,443
2,043
Cash and cash equivalents at end of year
$
5,295 $
6,584 $
6,443
93
24. Consolidated Quarterly Results of Operations (unaudited)
Year Ended December 31, 2024
Total interest income
$
44,126 $
45,458 $
47,379 $
47,804
Total interest expense
15,225
16,065
16,997
16,218
Net interest income
28,901
29,393
30,382
31,586
Provision for loan losses
141
1,261
140
873
Net interest income after provision for loan losses
28,760
28,132
30,242
30,713
Noninterest income
3,549
3,755
3,692
3,629
Noninterest expense
20,868
21,808
22,258
22,355
Income before income taxes
11,441
10,079
11,676
11,987
Income tax expense
2,242
1,961
2,239
2,314
Net income
$
9,199 $
8,118 $
9,437 $
9,673
Earnings per share – basic
$
1.15 $
1.02 $
1.19 $
1.22
Earnings per share – diluted
$
1.14 $
1.02 $
1.18 $
1.21
Year Ended December 31, 2023
Total interest income
$
38,115 $
40,071 $
42,078 $
43,399
Total interest expense
6,520
9,765
12,569
14,117
Net interest income
31,595
30,306
29,509
29,282
Provision for loan losses
814
511
351
665
Net interest income after provision for loan losses
30,781
29,795
29,158
28,617
Noninterest income
3,311
3,448
4,399
3,478
Noninterest expense
19,940
20,959
21,338
20,604
Income before income taxes
14,152
12,284
12,219
11,491
Income tax expense
2,832
2,503
2,465
2,106
Net income
$
11,320 $
9,781 $
9,754 $
9,385
Earnings per share – basic
$
1.40 $
1.22 $
1.22 $
1.18
Earnings per share – diluted
$
1.39 $
1.21 $
1.22 $
1.17
(dollars in thousands, except per share data)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Year Ended December 31, 2022
Total interest income
$
24,566 $
30,505 $
34,264 $
36,595
Total interest expense
1,055
1,264
2,287
3,309
Net interest income
23,511
29,241
31,977
33,286
Provision for loan losses
3,215
591
1,696
1,987
Net interest income after provision for loan losses
20,296
28,650
30,281
31,299
Noninterest income
3,386
3,686
3,474
3,339
Noninterest expense
18,240
21,765
20,723
21,181
Income before income taxes
5,442
10,571
13,032
13,457
Income tax expense
1,041
2,110
2,598
2,681
Net income
$
4,401 $
8,461 $
10,434 $
10,776
Earnings per share – basic
$
0.53 $
1.04 $
1.29 $
1.33
Earnings per share – diluted
$
0.53 $
1.03 $
1.28 $
1.32
(dollars in thousands, except per share data)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
94
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A.
Controls and Procedures.
Evaluation of Disclosure 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 December 31, 2024. 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.
Management’s Report on Internal Control over Financial Reporting
The management of Home Bancorp, Inc. is responsible for establishing and maintaining adequate internal control over
financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of
the Company’s Chief Executive Officer and the Chief Financial Officer to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in
accordance with the accounting principles generally accepted in the United States of America. Internal control over financial
reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended.
The Company’s internal control systems are designed to ensure that transactions are properly authorized and recorded in the
financial records and to safeguard assets from material loss or misuse. Such assurance cannot be absolute because of inherent
limitations in any internal control system.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024
based on the criteria for effective internal control established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on the assessment, management
determined that the Company maintained effective internal control over financial reporting as of December 31, 2024. Our
independent registered public accountants have issued an audit report on the Company’s internal control over financial
reporting. This report appears at the beginning of Item 8. Financial Statements and Supplementary Data.
Changes in Internal Control over Financial Reporting
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 fourth fiscal quarter of 2024 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B.
Other Information.
During the fiscal quarter ended December 31, 2024, none of our directors or "officers" (as such term is defined in Rule
16a-1(f)) under the Exchange Act) adopted, terminated or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1
trading arrangement.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
95
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
The information required herein is incorporated by reference from the information contained in the sections captioned
“Information with Respect to Nominees for Director, Continuing Directors and Executive Officers” and “Beneficial
Ownership of Common Stock by Certain Beneficial Owners and Management – Section 16(a) Beneficial Ownership
Reporting Compliance” in the Company’s definitive proxy statement to be filed with the SEC for the 2025 Annual Meeting
of Shareholders expected to be held in May 2025 (the “Proxy Statement”).
The Company has adopted a Code of Conduct and Ethics that applies to its principal executive officer and principal financial
officer, as well as other officers and employees of the Company and the Bank. A copy of the Code of Ethics is available on
the Company’s website at www.home24bank.com.
The information required herein with respect to the Company’s insider trading policy is incorporated by reference from the
information contained in the section captioned “Code of Conduct and Ethics and Insider trading Policy” in the Proxy
Statement.
Item 11.
Executive Compensation.
The information required herein with respect to the executive compensation and management is incorporated by reference
from the information contained in the sections captioned “Management Compensation” in the Proxy Statement.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Equity Compensation Plan Information. The following table provides information as of December 31, 2024 with respect to
shares of common stock that may be issued under our existing equity compensation plans, which consist of the 2009 Stock
Option Plan, 2009 Recognition and Retention Plan, the 2014 Equity Incentive Plan and the 2021 Equity Incentive Plan, each
of which was approved by our shareholders.
Plan Category
Number of
securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities
remaining
available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
Equity compensation plans approved by security
holders
232,209 (1) $
33.85 (1)
314,459
Equity compensation plans not approved by
security holders
—
—
—
Total
232,209
$
33.85
314,459
(1)
Includes 114,242 restricted share units which were not vested as of December 31, 2024. The weighted-average exercise price
excludes such restricted stock grants.
The information required herein is incorporated by reference from the information contained in the section captioned
“Beneficial Ownership of Common Stock by Certain Beneficial Owners and Management” in the Proxy Statement.
Item 13.
Certain Relationships and Related Transactions and Director Independence.
The information required herein is incorporated by reference from the information contained in the sections captioned
“Management Compensation – Related Party Transactions” and “Information with Respect to Nominees for Director,
Continuing Directors and Executive Officers” in the Proxy Statement.
Item 14.
Principal Accounting Fees and Services.
The information required herein is incorporated by reference from the information contained in the sections captioned
“Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement.
96
PART IV
Item 15.
Exhibits and Financial Statement Schedules.
(a)
(1) The following financial statements are incorporated by reference from Item 8 hereof:
Report of Independent Registered Public Accounting Firm (Wipfli LLP, Atlanta, Georgia, PCAOB Firm ID
344)
Consolidated Statements of Financial Condition
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) All schedules are omitted because they are not required or applicable, or the required information is shown in the
consolidated financial statements or the notes thereto.
(3) Exhibits
The following exhibits are filed as part of this Form 10-K and this list includes the Exhibit Index.
3.1
Articles of Incorporation of Home Bancorp, Inc.
(1)
3.2
Amended and Restated Bylaws of Home Bancorp, Inc.
(2)
4.1
Form of Stock Certificate of Home Bancorp, Inc.
(1)
4.2
Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities
Exchange Act of 1934
(3)
4.3
Indenture, dated June 30, 2022, by and between Home Bancorp, Inc. and UMB Bank,
National Association, as trustee.
(4)
4.4
Forms of 5.75% Fixed-to-Floating Rate Definitive Subordinated Note due 2032
(5)
10.1
2005 Directors’ Deferral Plan*
(6)
10.2
Amended and Restated Employment Agreement by and between Home Bank and John W.
Bordelon*
(7)
10.3
Amended and Restated Employment Agreement by and between Home Bancorp, Inc. and
John W. Bordelon*
(7)
10.4
Amended and Restated Employment Agreement by and between Home Bank and Darren E.
Guidry*
(7)
10.6
Home Bancorp, Inc. 2009 Stock Option Plan*
(8)
10.7
Home Bancorp, Inc. 2009 Recognition and Retention Plan and Trust Agreement*
(9)
10.8
Home Bancorp, Inc. 2014 Equity Incentive Plan*
(10)
10.9
Home Bancorp, Inc. 2021 Equity Incentive Plan*
(12)
10.10
Amended and Restated Salary Continuation Agreement by and between Home Bank and John
W. Bordelon*
(7)
10.11
Amended and Restated Salary Continuation Agreement by and between Home Bank and
Darren E. Guidry*
(7)
10.12
Salary Continuation Agreement by and between Home Bank and John W. Bordelon*
(7)
No.
Description
Location
97
10.13
Amendment to the Amended and Restated Employment Agreement between Home Bancorp,
Inc. and John W. Bordelon*
(11)
10.14
Amendment to the Amended and Restated Employment Agreement between Home Bank,
N.A. and John W. Bordelon*
(11)
10.15
Amendment to the Amended and Restated Employment Agreement between Home Bank,
N.A. and Darren E. Guidry*
(11)
10.16
Employment Agreement between Home Bank, N.A. and David T. Kirkley*
(13)
10.17
Amendment to the Employment Agreement between Home Bank, N.A. and David T. Kirkley*
(11)
10.18
Amendment to the Amended and Restated Salary Continuation Agreement between Home
Bank, N.A. and Darren E. Guidry*
(14)
10.19
Salary Continuation Agreement by and between Home Bank and David T. Kirkley*
(14)
19.1
Insider Trading Policy
Filed
herewith
23.1
Consent of Wipfli LLP
Filed
herewith
31.1
Rule 13(a)-14(a) Certification of the Chief Executive Officer
Filed
herewith
31.2
Rule 13(a)-14(a) Certification of the Chief Financial Officer
Filed
herewith
32.1
Section 1350 Certification
Filed
herewith
97.1
Clawback Policy
(15)
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
No.
Description
Location
_______________
*
Denotes a management contract or compensatory plan or arrangement.
(1)
Incorporated by reference from the exhibit included in Home Bancorp’s registration statement on Form S-1, filed June 6, 2008
(SEC File No. 333-151492).
(2)
Incorporated by reference from the exhibit included in the Company's Annual Report on From 10-K for the year ended December
31, 2022 and filed March 9, 2023 (SEC File No 0001-34190)
(3)
Incorporated by reference from the exhibit 4.2 included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2019 and filed March 12, 2020 (SEC File No. 001-34190).
(4)
Incorporated by reference from Exhibit 4.1 included in Home Bancorp’s Current Report on Form 8-K, dated as of June 30, 2022
and filed July 1, 2022 (SEC File No. 001-34190).
(5)
Incorporated by reference from Exhibits 4.2 and 4.3 included in Home Bancorp’s registration statement on Form S-4 dated as of
August 12, 2022 and filed August 12, 2022 (SEC File No. 333-266819).
(6)
Incorporated by reference from the exhibit included in the Company’s Current Report on Form 8-K, dated as of December 22, 2008
and filed December 29, 2008 (SEC File No. 001-34190).
(7)
Incorporated by reference from the exhibit included in the Company’s Current Report on Form 8-K, dated as of May 20, 2019 and
filed May 24, 2019 (SEC File No. 001-34190).
(8)
Incorporated by reference from Appendix A to Home Bancorp’s definitive proxy statement filed April 1, 2009 (SEC File
No. 001-34190) and included in Form S-8, filed June 23, 2009 (SEC File No. 333-160155).
98
(9)
Incorporated by reference from Appendix B to Home Bancorp’s definitive proxy statement filed April 1, 2009 (SEC File
No. 001-34190).
(10)
Incorporated by reference from Appendix A to Home Bancorp’s definitive proxy statement filed April 3, 2014 (SEC File No.
001-34190)
(11)
Incorporated by reference from the exhibit included in the Company's Current Report on Form 8-K, dated as of May 20, 2024, and
filed May 22, 2024 (SEC File No. 001-34190).
(12)
Incorporated by reference from Appendix A to Home Bancorp’s definitive proxy statement filed March 26, 2021 (SEC File No.
001-34190)
(13)
Incorporated by reference from the exhibit included in the Company’s Current Report on Form 8-K, dated as of May 20, 2021 and
filed May 20, 2021 (SEC File No. 001-34190)
(14)
Incorporated by reference from the exhibit included in the Company’s Current Report on Form 8-K, dated as of May 25, 2022 and
filed May 25, 2022 (SEC File No. 001-34190)
(15)
Incorporated by reference from the exhibit included in the Company's Annual Report on From 10-K for the year ended December
31, 2023 and filed March 5, 2024 (SEC File No 0001-34190)
(b)
Exhibits
The exhibits listed under (a)(3) of this Item 15 are filed herewith.
(c)
Reference is made to (a)(2) of this Item 15.
Item 16.
Form 10-K Summary
Not applicable.
99
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
March 12, 2025
By: /s/ John W. Bordelon
John W. Bordelon
Chairman of the Board, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the date indicated.
Name
Title
Date
/s/ John W. Bordelon
John W. Bordelon
Chairman of the Board, President and Chief Executive Officer
March 12, 2025
John W. Bordelon
/s/ J. Scott Ballard
Director
March 12, 2025
J. Scott Ballard
/s/ Paul J. Blanchet, III
Director, Chairman of Audit Committee
March 12, 2025
Paul J. Blanchet, III
/s/ Daniel G. Guidry
Director
March 12, 2025
Daniel G. Guidry
/s/ John A. Hendry
Director
March 12, 2025
John A. Hendry
/s/ Chris P. Rader
Director
March 12, 2025
Chris P. Rader
/s/ Ann F. Trappey
Director
March 12, 2025
Ann F. Trappey
/s/ Donald W. Washington
Director
March 12, 2025
Donald W. Washington
/s/ David T. Kirkley
Senior Executive Vice President and Chief Financial Officer
March 12, 2025
David T. Kirkley
/s/ Mary H. Hopkins
Home Bank Senior Vice President and Director of Financial Management
March 12, 2025
Mary H. Hopkins
100
Board of Directors
John W. Bordelon
Chairman, President & Chief Executive Officer
Daniel G. Guidry
Secretary
J. Scott Ballard
Paul J. Blanchet, III
John A. Hendry, D.D.S.
Chris P. Rader
Ann Forte Trappey
Donald W. Washington
Executive Officers
John W. Bordelon
Chairman, President & Chief Executive Officer
Darren E. Guidry
Senior Executive Vice President & Chief Risk Officer
Mark C. Herpin
Senior Executive Vice President & Chief Operations Officer
David T. Kirkley
Senior Executive Vice President & Chief Financial Officer
Natalie B. Lemoine
Senior Executive Vice President & Chief Administrative Officer
John J. Zollinger, IV
Senior Executive Vice President & Chief Banking Officer
Shareholder Information
Shareholders, investors, and analysts
interested in corporate information may
contact David T. Kirkley, Chief Financial
Officer of Home Bancorp, Inc.
David T. Kirkley, CFO
Home Bancorp, Inc.
P.O. Box 81459
Lafayette, LA 70598-1459
337.237.1960
investor@home24bank.com
Annual Meeting
The annual shareholders meeting will
be held on Tuesday, May 13, 2025, at
10:00 a.m. at Petroleum Club of Lafayette.
Registrar Agent
Computershare Shareholder Services
150 Royall Street, Suite 101
Canton, MA 02021
800.368.5948
computershare.com
Information about Home Bancorp, Inc. and Home Bank may be obtained on our website at home24bank.com. Investors
interested in stock quotes, news releases, SEC filings and other corporate information may click on the Investor Relations link
on our website.
Main Office
503 Kaliste Saloom Road | Lafayette, LA 70508
337.237.1960
Mailing Address
P.O. Box 81459 | Lafayette, LA 70598-1459
home24bank.com
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