Companies: 10,793     total market cap: $134.260 T
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Home Bancorp
HBCP
#7247
Rank
$0.48 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$61.39
Share price
-0.62%
Change (1 day)
47.96%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Home Bancorp
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2023 Q2

Home Bancorp - 10-Q quarterly report FY2023 Q2


Text size:
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended: June 30, 2023
or
☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission File Number: 001-34190
 
HOME BANCORP, INC.
(Exact name of Registrant as specified in its charter)
 
Louisiana71-1051785
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification Number)
503 Kaliste Saloom Road, Lafayette, Louisiana
70508
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (337) 237-1960
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common StockHBCP
NASDAQ Stock Market
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐  Accelerated filer☒
Non-accelerated filer☐  Smaller reporting company☐
   Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
At August 2, 2023, the registrant had 8,195,561 shares of common stock, $0.01 par value, outstanding.


HOME BANCORP, INC. and SUBSIDIARY
TABLE OF CONTENTS
  
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements (unaudited)Page
Consolidated Statements of Financial Condition
1
Consolidated Statements of Income
2
Consolidated Statements of Comprehensive Income
3
Consolidated Statements of Changes in Shareholders’ Equity
4
Consolidated Statements of Cash Flows
6
Notes to Unaudited Consolidated Financial Statements
7
Item 2.
32
Item 3.
45
Item 4.
45
PART II - OTHER INFORMATION
Item 1.
46
Item 1A.
46
Item 2.
46
Item 3.
46
Item 4.
46
Item 5.
46
Item 6.
47
48

i

HOME BANCORP, INC. and SUBSIDIARY
GLOSSARY OF DEFINED TERMS

Below is a listing of certain acronyms, abbreviations and defined terms, among others, used throughout this Quarterly Report on Form 10-Q, including in "Item 1. Financial Statements" and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations." The terms "we," "our" or "us" refer to Home Bancorp, Inc. and its consolidated subsidiaries, unless the context otherwise requires.
ACL–Allowance for credit losses
ALL–Allowance for loan losses
AOCI–Accumulated other comprehensive income
ASC–Accounting Standards Codification
ASU–Accounting Standards Update
Bank–Home Bank, N. A., a wholly-owned subsidiary of the Company
BOLI–Bank-owned life insurance
bps–
basis points, 100 basis points being equal to 1.0%
C&D–Construction and land
C&I–Commercial and industrial
CARES Act–Coronavirus Aid, Relief, and Economic Security Act
CECL–Current expected credit losses
Company–Home Bancorp, Inc., a Louisiana corporation and the holding company for Home Bank, N. A.
COVID-19–The novel coronavirus
CRE–Commercial real estate
EPS–Earnings per common share
FASB–Financial Accounting Standards Board
FHLB–Federal Home Loan Bank
GAAP–Generally Accepted Accounting Principles
LTV–Loan-to-value
NPA(s)–Nonperforming asset(s)
OCI–Other comprehensive income
ORE–Other real estate
PCD–Purchased credit deteriorated
PPP–Paycheck Protection Program
SBA–U.S. Small Business Association
SEC–U.S. Securities and Exchange Commission
TDR–Troubled debt restructuring
TE–Taxable equivalent
U.S.–United States

ii

HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)(Audited)
(dollars in thousands)June 30, 2023December 31, 2022
Assets
Cash and cash equivalents$96,873 $87,401 
Interest-bearing deposits in banks99 349 
Investment securities available for sale, at fair value449,396 486,518 
Investment securities held to maturity (fair values of $1,065 and $1,072, respectively)
1,066 1,075 
Mortgage loans held for sale538 98 
Loans, net of unearned income2,510,759 2,430,750 
Allowance for loan losses(30,639)(29,299)
Total loans, net of unearned income and allowance for loan losses2,480,120 2,401,451 
Office properties and equipment, net42,904 43,560 
Cash surrender value of bank-owned life insurance46,789 46,276 
Goodwill and core deposit intangibles87,138 87,973 
Accrued interest receivable and other assets85,230 73,579 
Total Assets$3,290,153 $3,228,280 
Liabilities
Deposits:
Noninterest-bearing$816,555 $904,301 
Interest-bearing1,735,163 1,728,880 
Total Deposits2,551,718 2,633,181 
Other borrowings5,539 5,539 
Subordinated debt, net of issuance cost54,133 54,013 
Short-term Federal Home Loan Bank advances262,350 155,000 
Long-term Federal Home Loan Bank advances42,947 21,213 
Accrued interest payable and other liabilities27,349 29,380 
Total Liabilities2,944,036 2,898,326 
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; 8,197,859 and 8,286,084 shares issued and outstanding, respectively
82 83 
Additional paid-in capital
164,945 164,942 
Unallocated common stock held by:
Employee Stock Ownership Plan (ESOP)(1,875)(2,053)
Recognition and Retention Plan (RRP)(3)(7)
Retained earnings220,801 206,296 
Accumulated other comprehensive loss(37,833)(39,307)
Total Shareholders’ Equity346,117 329,954 
Total Liabilities and Shareholders’ Equity$3,290,153 $3,228,280 
 The accompanying Notes are an integral part of these Consolidated Financial Statements.
1

HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
(dollars in thousands, except per share data)2023202220232022
Interest Income
Loans, including fees$36,530 $27,304 $71,028 $49,975 
Investment securities:
Taxable interest2,911 2,222 5,909 3,764 
Tax-exempt interest
75 116 219 192 
Other investments and deposits555 863 1,030 1,140 
Total interest income40,071 30,505 78,186 55,071 
Interest Expense
Deposits5,547 1,103 8,787 1,996 
Other borrowings 55 54 108 107 
Subordinated debt expense850 — 1,701 — 
Short-term Federal Home Loan Bank advances2,973 — 5,232 — 
Long-term Federal Home Loan Bank advances340 107 457 216 
Total interest expense9,765 1,264 16,285 2,319 
Net interest income30,306 29,241 61,901 52,752 
Provision for loan losses511 591 1,325 3,806 
Net interest income after provision for loan losses29,795 28,650 60,576 48,946 
Noninterest Income
Service fees and charges1,230 1,257 2,480 2,422 
Bank card fees1,715 1,636 3,502 3,090 
Gain on sale of loans, net26 264 83 563 
Income from bank-owned life insurance260 213 513 427 
Loss on sale of securities, net— — (249)— 
Loss on sale of assets, net(3)(6)(20)(1)
Other income220 322 450 571 
Total noninterest income3,448 3,686 6,759 7,072 
Noninterest Expense
Compensation and benefits12,601 12,583 25,040 22,742 
Occupancy2,447 2,354 4,797 4,157 
Marketing and advertising442 648 749 1,055 
Data processing and communication2,132 2,533 4,453 4,728 
Professional services459 475 823 1,017 
Forms, printing and supplies204 253 391 399 
Franchise and shares tax541 391 1,082 782 
Regulatory fees401 698 940 1,144 
Foreclosed assets and ORE, net50 (10)(689)392 
Amortization of acquisition intangible389 454 835 706 
Provision for credit losses on unfunded commitments151 — 361 302 
Other expenses1,142 1,386 2,117 2,581 
Total noninterest expense20,959 21,765 40,899 40,005 
Income before income tax expense12,284 10,571 26,436 16,013 
Income tax expense2,503 2,110 5,335 3,151 
Net Income$9,781 $8,461 $21,101 $12,862 
Earnings per share:
Basic$1.22 $1.04 $2.62 $1.57 
Diluted$1.21 $1.03 $2.60 $1.56 
Cash dividends declared per common share$0.25 $0.23 $0.50 $0.46 
 The accompanying Notes are an integral part of these Consolidated Financial Statements.
2

HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
(dollars in thousands)2023202220232022
Net Income$9,781 $8,461 $21,101 $12,862 
Other Comprehensive Income (Loss)
Unrealized gains (losses) on available for sale investment securities(6,146)(13,978)1,324 (33,831)
Unrealized gains on cash flow hedges1,009 629 293 2,496 
Reclassification adjustment for losses included in net income— — 249 — 
Tax effect1,078 2,803 (392)6,580 
Other comprehensive income (loss), net of taxes(4,059)(10,546)1,474 (24,755)
Comprehensive Income (Loss)$5,722 $(2,085)$22,575 $(11,893)
 The accompanying Notes are an integral part of these Consolidated Financial Statements.
3


HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(dollars in thousands, except per share data)Common stockAdditional Paid-in capitalUnallocated Common Stock Held by ESOPUnallocated Common Stock Held by RRPRetained EarningsAccumulated Other Comprehensive LossTotal
Balance, March 31, 2022$85 $164,830 $(2,321)$(11)$188,386 $(13,465)$337,504 
Net income8,461 8,461 
Other comprehensive loss(10,546)(10,546)
Purchase of Company’s common stock at cost, 125,499 shares
(1)(1,254)(3,776)(5,031)
Cash dividends declared, $0.23 per share
(1,919)(1,919)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 10,580 shares
— 47 (38)9 
Exercise of stock options— 101 101 
RRP shares released for allocation(2)2 — 
ESOP shares released for allocation287 90 377 
Share-based compensation cost168 168 
Balance, June 30, 2022$84 $164,177 $(2,231)$(9)$191,114 $(24,011)$329,124 
Balance, March 31, 2023$83 $165,470 $(1,964)$(5)$215,290 $(33,774)$345,100 
Net income9,781 9,781 
Other comprehensive loss(4,059)(4,059)
Purchase of Company’s common stock at cost, 99,734 shares
(1)(996)(2,152)(3,149)
Cash dividends declared, $0.25 per share
(2,064)(2,064)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 13,429 shares
— (7)(54)(61)
RRP shares released for allocation(2)2 — 
ESOP shares released for allocation250 89 339 
Share-based compensation cost230 230 
Balance, June 30, 2023$82 $164,945 $(1,875)$(3)$220,801 $(37,833)$346,117 
The accompanying Notes are an integral part of these Consolidated Financial Statements.
4

HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - CONTINUED
(Unaudited)
(dollars in thousands, except per share data)Common
stock		Additional
Paid-in
capital		Unallocated
Common Stock
Held by ESOP		Unallocated
Common Stock
Held by RRP		Retained
Earnings		Accumulated Other Comprehensive Income (Loss)Total
Balance, December 31, 2021$85 $164,982 $(2,410)$(13)$188,515 $744 $351,903 
Net income12,862 12,862 
Other comprehensive loss(24,755)(24,755)
Purchase of Company’s common stock at cost, 210,014 shares
(1)(2,098)(6,323)(8,422)
Cash dividends declared, $0.46 per share
(3,880)(3,880)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 19,577 shares
— 207 (60)147 
Exercise of stock options— 129 129 
RRP shares released for allocation(4)4 — 
ESOP shares released for allocation624 179 803 
Share-based compensation cost337 337 
Balance, June 30, 2022$84 $164,177 $(2,231)$(9)$191,114 $(24,011)$329,124 
Balance, December 31, 2022$83 $164,942 $(2,053)$(7)$206,296 $(39,307)$329,954 
Net income21,101 21,101 
Other comprehensive income1,474 1,474 
Purchase of Company’s common stock at cost, 109,933 shares
(1)(1,098)(2,385)(3,484)
Cash dividends declared, $0.50 per share
(4,136)(4,136)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 17,458 shares
26 (75)(49)
Exercise of stock options— 85 85 
RRP shares released for allocation(4)4 — 
ESOP shares released for allocation558 178 736 
Share-based compensation cost436 436 
Balance, June 30, 2023$82 $164,945 $(1,875)$(3)$220,801 $(37,833)$346,117 
 
The accompanying Notes are an integral part of these Consolidated Financial Statements.
5

HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the Six Months Ended
June 30,
(dollars in thousands)20232022
Cash flows from operating activities:
Net income$21,101 $12,862 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses1,325 3,806 
Depreciation1,776 1,636 
Amortization and accretion of purchase accounting valuations and intangibles1,891 1,868 
Federal Home Loan Bank stock dividends(193)(8)
Net amortization of discount on investments226 675 
Amortization of subordinated debt issuance cost120 — 
Loss on sale of securities, net249 — 
Gain on loans sold, net(83)(563)
Proceeds, including principal payments, from loans held for sale7,174 57,234 
Originations of loans held for sale(7,531)(57,011)
Loss on sale of assets, net20 1 
Non-cash compensation1,172 1,140 
Deferred income tax (benefit) expense22 (254)
Increase in accrued interest receivable and other assets(6,947)(7,696)
Increase in cash surrender value of bank-owned life insurance(513)(427)
(Decrease) increase in accrued interest payable and other liabilities(1,731)6,413 
Net cash provided by operating activities18,078 19,676 
Cash flows from investing activities:
Purchases of securities available for sale— (185,350)
Proceeds from maturities, prepayments and calls on securities available for sale24,467 31,896 
Proceeds from sales of securities available for sale13,762 — 
Increase in loans, net(81,445)(71,129)
Decrease in interest-bearing deposits in banks250 — 
Proceeds from sale of foreclosed assets426 2,545 
Purchases of office properties and equipment(1,143)(1,277)
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 equipment4 35 
Purchase of Federal Home Loan Bank stock(5,215)— 
Net cash used in investing activities(48,894)(250,585)
Cash flows from financing activities:
(Decrease) increase in deposits, net(81,210)31,393 
Borrowings on Federal Home Loan Bank advances12,721,975 — 
Repayments of Federal Home Loan Bank advances(12,592,893)(750)
Proceeds from issuance of subordinated debt, net of issuance cost— 55,000 
Proceeds from exercise of stock options85 129 
Issuance of stock under incentive plans, net(49)147 
Dividends paid to shareholders(4,136)(3,880)
Purchase of Company’s common stock(3,484)(8,422)
Net cash provided by financing activities40,288 73,617 
Net change in cash and cash equivalents9,472 (157,292)
Cash and cash equivalents, beginning87,401 601,443 
Cash and cash equivalents, ending$96,873 $444,151 
The accompanying Notes are an integral part of these Consolidated Financial Statements.
6

HOME BANCORP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in shareholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. Certain reclassifications have been made to prior period balances to conform to the current period presentation. The results of operations for the three and six months ended June 30, 2023 and 2022 are not necessarily indicative of the results which may be expected for the entire fiscal year. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2022.

Critical Accounting Policies and Estimates
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and could reflect materially different results under different assumptions and conditions. Methodologies the Company uses when applying critical accounting policies and developing critical accounting estimates are included in its Annual Report on Form 10-K for the year ended December 31, 2022.

There have been no material changes from the critical accounting policies previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. In preparing its financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 

Reclassifications
Certain reclassifications have been made to prior period balances to conform to the current period presentation.
2. Recent Accounting Pronouncements
Accounting Standards Adopted in 2023
ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method.” Under prior guidance, entities can apply the last-of-layer hedging method to hedge the exposure of a closed portfolio of prepayable financial assets to fair value changes due to changes in interest rates for a portion of the portfolio that is not expected to be affected by prepayments, defaults, and other events affecting the timing and amount of cash flows. ASU 2022-01 expands the last-of-layer method, which permits only one hedge layer, to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. ASU 2022-01 also (i) expands the scope of the portfolio layer method to include non-prepayable financial assets, (ii) specifies eligible hedging instruments in a single-layer hedge, (iii) provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method and (iv) specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. ASU 2022-01 is effective for fiscal years and interim periods after December, 15, 2022. The adoption of ASU 2022-01 did not impact our Consolidated Financial Statements.

ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings in Accounting Standards Codification (“ASC”) Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, ASU 2022-02 requires entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost. ASU 2022-02 is effective for fiscal years and interim periods after December, 15, 2022. The Company adopted ASU 2022-02 on a prospective basis on January 1, 2023. The adoption of ASU 2022-02 did not have a significant impact on our Consolidated Financial Statements.

7

Issued but Not Yet Adopted Accounting Standards
Accounting Standard Update (“ASU”) 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 is not expected to 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 is not expected to have a significant impact on our consolidated financial statements.
3. Investment Securities
The following tables summarize the Company’s available for sale and held to maturity investment securities at June 30, 2023 and December 31, 2022.
(dollars in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
June 30, 2023   
Available for sale:
U.S. agency mortgage-backed$332,737 $49 $37,245 $295,541 
Collateralized mortgage obligations86,478 1 5,152 81,327 
Municipal bonds56,316 1 8,462 47,855 
U.S. government agency20,080 — 1,492 18,588 
Corporate bonds6,981 — 896 6,085 
Total available for sale$502,592 $51 $53,247 $449,396 
Held to maturity:
Municipal bonds$1,066 $— $1 $1,065 
Total held to maturity$1,066 $— $1 $1,065 
(dollars in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
December 31, 2022   
Available for sale:
U.S. agency mortgage-backed$355,014 $63 $38,245 $316,832 
Collateralized mortgage obligations91,217 1 4,873 86,345 
Municipal bonds67,476 50 9,901 57,625 
U.S. government agency20,600 — 1,267 19,333 
Corporate bonds6,980 — 597 6,383 
Total available for sale$541,287 $114 $54,883 $486,518 
Held to maturity:
Municipal bonds$1,075 $— $3 $1,072 
Total held to maturity$1,075 $— $3 $1,072 


8

The estimated fair value and amortized cost by contractual maturity of the Company’s investment securities as of June 30, 2023 are shown in the following tables. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. The expected maturity of a security may differ from its contractual maturity because of prepayments or the exercise of call options. Accordingly, actual maturities may differ from contractual maturities. The Company’s investment securities portfolio had an effective duration of 4.5 years at June 30, 2023 and December 31, 2022.
(dollars in thousands)One Year or LessAfter One Year through Five YearsAfter Five Years through Ten YearsAfter Ten YearsTotal
Fair Value
Available for sale:
U.S. agency mortgage-backed$2,929 $61,633 $98,003 $132,976 $295,541 
Collateralized mortgage obligations— 57,318 4,757 19,252 81,327 
Municipal bonds2,197 1,724 20,419 23,515 47,855 
U.S. government agency— 5,779 12,490 319 18,588 
Corporate bonds— — 6,085 — 6,085 
Total available for sale$5,126 $126,454 $141,754 $176,062 $449,396 
Held to maturity:
Municipal bonds$— $1,065 $— $— $1,065 
Total held to maturity$— $1,065 $— $— $1,065 
(dollars in thousands)One Year or LessAfter One Year through Five YearsAfter Five Years through Ten YearsAfter Ten YearsTotal
Amortized Cost
Available for sale:
U.S. agency mortgage-backed$2,975 $67,461 $108,239 $154,062 $332,737 
Collateralized mortgage obligations— 60,380 5,439 20,659 86,478 
Municipal bonds2,210 1,894 23,642 28,570 56,316 
U.S. government agency— 5,902 13,857 321 20,080 
Corporate bonds— — 6,981 — 6,981 
Total available for sale$5,185 $135,637 $158,158 $203,612 $502,592 
Held to maturity:
Municipal bonds$— $1,066 $— $— $1,066 
Total held to maturity$— $1,066 $— $— $1,066 

Management evaluates securities for impairment from credit losses at least quarterly, and more frequently when economic and market conditions warrant such evaluations. Consideration is given to numerous factors including, but not limited to, the extent to which the fair value is less than the amortized cost basis; adverse conditions causing changes in the financial condition of the issuer of the security or underlying loan guarantors; changes to the rating of the security by a rating agency; and the Company’s intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost, which may extend to maturity.

The Company performs a process to determine whether the decline in the fair value of securities has resulted from credit losses or other factors. This process involves evaluating each security for impairment by monitoring credit performance, collateral type, collateral geography, bond credit support, loan-to-value ratios, credit scores, loss severity levels, pricing levels, downgrades by rating agencies, cash flow projections and other factors as indicators of potential credit issues. If this evaluation indicates the existence of credit losses, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis. If the present value of expected cash flows is less than the amortized cost basis, an ACL is recorded, limited by the amount that the fair value of the security is less than its amortized cost.

9

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 YearOver 1 YearTotal
June 30, 2023Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Available for sale:
U.S. agency mortgage-backed$56,110 $2,892 $236,866 $34,353 $292,976 $37,245 
Collateralized mortgage obligations46,170 2,348 35,148 2,804 81,318 5,152 
Municipal bonds3,827 181 43,027 8,281 46,854 8,462 
U.S. government agency9,305 286 9,283 1,206 18,588 1,492 
Corporate bonds441 54 5,644 842 6,085 896 
Total available for sale$115,853 $5,761 $329,968 $47,486 $445,821 $53,247 
Held to maturity:
Municipal bonds$1,065 $1 $— $— $1,065 $1 
Total held to maturity$1,065 $1 $— $— $1,065 $1 

(dollars in thousands)Less Than 1 YearOver 1 YearTotal
December 31, 2022Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Available for sale:
U.S. agency mortgage-backed$184,896 $14,828 $129,248 $23,417 $314,144 $38,245 
Collateralized mortgage obligations85,715 4,860 620 13 86,335 4,873 
Municipal bonds28,710 3,245 24,100 6,656 52,810 9,901 
U.S. government agency18,718 1,259 615 8 19,333 1,267 
Corporate bonds3,233 247 3,150 350 6,383 597 
Total available for sale$321,272 $24,439 $157,733 $30,444 $479,005 $54,883 
Held to maturity:
Municipal bonds$1,072 $3 $— $— $1,072 $3 
Total held to maturity$1,072 $3 $— $— $1,072 $3 

At June 30, 2023, 308 of the Company’s debt securities had unrealized losses totaling 10.6% of the individual securities’ amortized cost basis and 10.6% of the Company’s total amortized cost basis of the investment securities portfolio. At such date, 234 of the 308 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 June 30, 2023.

At June 30, 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 June 30, 2023 and December 31, 2022.
Credit Ratings
(dollars in thousands)AAA/AA/ABBB/BB/BTotal
June 30, 2023
Held to maturity:
Municipal bonds$1,066 $— $1,066 
10

Credit Ratings
(dollars in thousands)AAA/AA/ABBB/BB/BTotal
December 31, 2022
Held to maturity:
Municipal bonds$1,075 $— $1,075 

For the three and six months ended June 30, 2023, the Company recorded gross gains of $0 and $98,000, respectively, and gross losses of $0 and $347,000, respectively, related to the sale of investment securities. There were no gross gains or gross losses related to the sale of investment securities for the three and six months ended June 30, 2022.

Accrued interest receivable on the Company's investment securities was $1,589,000 and $1,798,000 at June 30, 2023 and December 31, 2022, respectively. These amounts are recorded in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition.

At June 30, 2023 and December 31, 2022, the Company had $134,894,000 and $170,036,000, respectively, of securities pledged to secure public deposits.
4. Earnings Per Share
Earnings per common share was computed based on the following:
Three Months Ended
June 30,		Six Months Ended
June 30,
(in thousands, except per share data)2023202220232022
Numerator:
Net income available to common shareholders$9,781 $8,461 $21,101 $12,862 
Denominator:
Weighted average common shares outstanding8,042 8,129 8,065 8,199 
Effect of dilutive securities:
Restricted stock16 14 19 15 
Stock options21 43 24 46 
Weighted average common shares outstanding – assuming dilution8,079 8,186 8,108 8,260 
Basic earnings per common share$1.22 $1.04 $2.62 $1.57 
Diluted earnings per common share$1.21 $1.03 $2.60 $1.56 

Options for 111,999 and 65,299 shares of common stock were not included in the computation of diluted EPS for the three months ended June 30, 2023 and 2022, respectively, because the effect of those shares was anti-dilutive. For the six months ended June 30, 2023 and 2022, options on 87,912 and 62,330, respectively, shares of common stock were not included in the computation of diluted EPS because the effect of those shares was anti-dilutive.
11

5. Credit Quality and Allowance for Credit Losses
The following briefly describes the distinction between originated and acquired loans and certain significant accounting policies.

Loans
Loans are reported at the principal balance outstanding net of unearned income and fair value discounts, if applicable. Interest on loans and the accretion of unearned income are computed in a manner that approximates a level yield on recorded principal. Interest on loans is recorded as income is earned. The accrual of interest is discontinued when it is probable the borrower will not be able to meet payment obligations as they become due. 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. Interest income is not accrued on these loans until the borrower’s financial condition and payment record demonstrate an ability to service the debt. If it is determined that all or part of a loan is uncollectible, the potion of the loan deemed uncollectible is charged to the allowance for credit losses.

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

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

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

The Company’s loans, net of unearned income, consisted of the following as of the dates indicated.
(dollars in thousands)June 30, 2023December 31, 2022
Real estate loans:
One- to four-family first mortgage
$419,091 $389,616 
Home equity loans and lines66,932 61,863 
Commercial real estate1,176,976 1,152,537 
Construction and land327,488 313,175 
Multi-family residential103,951 100,588 
Total real estate loans2,094,438 2,017,779 
Other loans:
Commercial and industrial382,292 377,894 
Consumer34,029 35,077 
Total other loans416,321 412,971 
Total loans$2,510,759 $2,430,750 

The net discount on the Company’s acquired loans was $5,551,000 and $6,866,000 at June 30, 2023 and December 31, 2022, respectively. In addition, loan balances as of June 30, 2023 and December 31, 2022 are reported net of unearned income of $4,990,000 and $4,580,000, respectively.
12


Accrued interest receivable on the Company's loans was $9,975,000 and $9,520,000 at June 30, 2023 and December 31, 2022, respectively, and is excluded from the estimate of the ACL. Those amounts are recorded in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition.

Allowance for Credit Losses
The ACL, which includes the ALL and the ACL on unfunded lending commitments, and recorded investment in loans as of the dates indicated are as follows.
 June 30, 2023
(dollars in thousands)Collectively EvaluatedIndividually EvaluatedTotal
Allowance for credit losses:
One- to four-family first mortgage
$3,200 $— $3,200 
Home equity loans and lines707 — 707 
Commercial real estate14,299 499 14,798 
Construction and land4,822 — 4,822 
Multi-family residential512 — 512 
Commercial and industrial5,734 121 5,855 
Consumer745 — 745 
Total allowance for loan losses$30,019 $620 $30,639 
Unfunded lending commitments(1)
$2,454 $— $2,454 
Total allowance for credit losses$32,473 $620 $33,093 
 June 30, 2023
(dollars in thousands)Collectively Evaluated
Individually Evaluated(2)
Total
Loans:
One- to four-family first mortgage
$419,091 $— $419,091 
Home equity loans and lines66,932 — 66,932 
Commercial real estate1,172,232 4,744 1,176,976 
Construction and land327,488 — 327,488 
Multi-family residential103,951 — 103,951 
Commercial and industrial382,141 151 382,292 
Consumer34,029 — 34,029 
Total loans$2,505,864 $4,895 $2,510,759 

13


 December 31, 2022
(dollars in thousands)Collectively EvaluatedIndividually EvaluatedTotal
Allowance for credit losses:
One- to four-family first mortgage
$2,883 $— $2,883 
Home equity loans and lines624 — 624 
Commercial real estate13,264 550 13,814 
Construction and land4,680 — 4,680 
Multi-family residential572 — 572 
Commercial and industrial5,853 171 6,024 
Consumer702 — 702 
Total allowance for loan losses$28,578 $721 $29,299 
Unfunded lending commitments(1)
$2,093 $— $2,093 
Total allowance for credit losses$30,671 $721 $31,392 
 December 31, 2022
(dollars in thousands)Collectively Evaluated
Individually Evaluated(2)
Total
Loans:
One- to four-family first mortgage
$389,616 $— $389,616 
Home equity loans and lines61,863 — 61,863 
Commercial real estate1,147,794 4,743 1,152,537 
Construction and land313,175 — 313,175 
Multi-family residential100,588 — 100,588 
Commercial and industrial377,690 204 377,894 
Consumer34,991 86 35,077 
Total loans$2,425,717 $5,033 $2,430,750 
(1)The ACL on unfunded lending commitments is recorded within accrued interest payable and other liabilities on the Consolidated Statements of Financial Condition.
(2)One PCD loan was individually evaluated at June 30, 2023 and December 31, 2022, respectively.

14

A summary of activity in the ACL for the six months ended June 30, 2023 and June 30, 2022 follows.
 
 Six Months Ended June 30, 2023
(dollars in thousands)Beginning
Balance		Charge-offsRecoveriesProvision (Reversal)Ending
Balance
Allowance for credit losses:
One- to four-family first mortgage
$2,883 $— $9 $308 $3,200 
Home equity loans and lines624 — 3 80 707 
Commercial real estate13,814 — — 984 14,798 
Construction and land4,680 — — 142 4,822 
Multi-family residential572 — — (60)512 
Commercial and industrial6,024 (85)122 (206)5,855 
Consumer702 (52)18 77 745 
Total allowance for loan losses$29,299 $(137)$152 $1,325 $30,639 
Unfunded lending commitments$2,093 $— $— $361 $2,454 
Total allowance for credit losses$31,392 $(137)$152 $1,686 $33,093 

 Six Months Ended June 30, 2022
(dollars in thousands)Beginning Balance
Allowance for Acquired PCD Loans (1)
Charge-offsRecoveriesProvision (Reversal)Ending Balance
Allowance for credit losses:
One- to four-family first mortgage
$1,944 $— $— $4 $210 $2,158 
Home equity loans and lines508 — — 4 (21)491 
Commercial real estate10,454 1,220 (270)— 1,857 13,261 
Construction and land3,572 — — — 1,117 4,689 
Multi-family residential457 — — — 69 526 
Commercial and industrial3,520 195 (373)452 451 4,245 
Consumer634 — (201)94 123 650 
Total allowance for loan losses$21,089 $1,415 $(844)$554 $3,806 $26,020 
Unfunded lending commitments$1,815 $— $— $— $302 $2,117 
Total allowance for credit losses$22,904 $1,415 $(844)$554 $4,108 $28,137 
(1)Allowance recorded for PCD loans in the Company's acquisition of Friendswood Capital Corporation at the acquisition date of March 26, 2022.
15

Credit Quality
The following tables present the Company’s loan portfolio by credit quality classification and origination year as of June 30, 2023 and December 31, 2022.
June 30, 2023
Term Loans by Origination Year
(dollars in thousands)20232022202120202019PriorRevolving LoansRevolving Loans Converted to Term LoansTotal
One- to four-family first mortgage:
Pass$54,433 $106,942 $79,382 $35,853 $31,015 $103,582 $3,674 $281 $415,162 
Special Mention150 499 188 — — 35 — — 872 
Substandard— 169 54 357 106 2,371 — — 3,057 
Doubtful— — — — — — — — — 
Total one- to four-family first mortgages$54,583 $107,610 $79,624 $36,210 $31,121 $105,988 $3,674 $281 $419,091 
Current period gross charge-offs$— $— $— $— $— $— $— $— $— 
Home equity loans and lines:
Pass$1,267 $1,926 $1,222 $748 $1,066 $3,565 $56,305 $710 $66,809 
Special Mention— — — — — — — — — 
Substandard— — — — — 30 50 43 123 
Doubtful— — — — — — — — — 
Total home equity loans and lines$1,267 $1,926 $1,222 $748 $1,066 $3,595 $56,355 $753 $66,932 
Current period gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate:
Pass$89,109 $297,168 $260,312 $197,358 $144,119 $130,210 $41,229 $900 $1,160,405 
Special Mention— — — 335 — — — — 335 
Substandard— 17 1,620 2,676 5,506 6,417 — — 16,236 
Doubtful— — — — — — — — — 
Total commercial real estate loans$89,109 $297,185 $261,932 $200,369 $149,625 $136,627 $41,229 $900 $1,176,976 
Current period gross charge-offs$— $— $— $— $— $— $— $— $— 
Construction and land:
Pass$56,104 $171,690 $63,595 $9,192 $7,903 $4,643 $6,611 $— $319,738 
Special Mention488 174 4,597 151 — — — — 5,410 
Substandard— 1,752 528 — — 60 — — 2,340 
Doubtful— — — — — — — — — 
Total construction and land loans$56,592 $173,616 $68,720 $9,343 $7,903 $4,703 $6,611 $— $327,488 
Current period gross charge-offs$— $— $— $— $— $— $— $— $— 
16

June 30, 2023
Term Loans by Origination Year
(dollars in thousands)20232022202120202019PriorRevolving LoansRevolving Loans Converted to Term LoansTotal
Multi-family residential:
Pass$7,859 $37,473 $11,457 $25,143 $12,807 $4,458 $1,324 $— $100,521 
Special Mention— — — — — — — — — 
Substandard— — — — — 3,430 — — 3,430 
Doubtful— — — — — — — — — 
Total multi-family residential loans$7,859 $37,473 $11,457 $25,143 $12,807 $7,888 $1,324 $— $103,951 
Current period gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial and industrial:
Pass$32,691 $95,218 $36,076 $12,363 $6,831 $10,064 $183,048 $1,238 $377,529 
Special Mention— 1,418 — 338 — 222 916 — 2,894 
Substandard1,569 — 32 11 — 2 255 — 1,869 
Doubtful— — — — — — — — — 
Total commercial and industrial loans$34,260 $96,636 $36,108 $12,712 $6,831 $10,288 $184,219 $1,238 $382,292 
Current period gross charge-offs$— $— $— $29 $7 $— $49 $— $85 
Consumer:
Pass$3,100 $8,087 $1,521 $1,148 $436 $11,705 $7,807 $28 $33,832 
Special Mention— — — — — — — — — 
Substandard— 3 10 — — 184 — — 197 
Doubtful— — — — — — — — — 
Total consumer loans$3,100 $8,090 $1,531 $1,148 $436 $11,889 $7,807 $28 $34,029 
Current period gross charge-offs$— $12 $1 $— $2 $4 $33 $— $52 
Total loans:
Pass$244,563 $718,504 $453,565 $281,805 $204,177 $268,227 $299,998 $3,157 $2,473,996 
Special Mention638 2,091 4,785 824 — 257 916 — 9,511 
Substandard1,569 1,941 2,244 3,044 5,612 12,494 305 43 27,252 
Doubtful— — — — — — — — — 
Total loans$246,770 $722,536 $460,594 $285,673 $209,789 $280,978 $301,219 $3,200 $2,510,759 
Current period gross charge-offs$— $12 $1 $29 $9 4 82 — $137 

17

December 31, 2022
Term Loans by Origination Year
(dollars in thousands)20222021202020192018PriorRevolving LoansRevolving Loans Converted to Term LoansTotal
One- to four-family first mortgage:
Pass$107,546 $78,744 $37,876 $34,114 $26,455 $94,729 $5,387 $348 $385,199 
Special Mention150 189 — — — 355 — 500 1,194 
Substandard272 56 368 145 372 2,010 — — 3,223 
Doubtful— — — — — — — — — 
Total one- to four-family first mortgages$107,968 $78,989 $38,244 $34,259 $26,827 $97,094 $5,387 $848 $389,616 
Home equity loans and lines:
Pass$1,898 $1,453 $783 $1,142 $604 $3,453 $51,502 $995 $61,830 
Special Mention— — — — — — — — — 
Substandard— — — — — 33 — — 33 
Doubtful— — — — — — — — — 
Total home equity loans and lines$1,898 $1,453 $783 $1,142 $604 $3,486 $51,502 $995 $61,863 
Commercial real estate:
Pass$292,894 $279,397 $210,983 $159,169 $64,554 $95,083 $35,918 $586 $1,138,584 
Special Mention— 179 345 — — — — — 524 
Substandard97 — 167 5,579 294 7,292 — — 13,429 
Doubtful— — — — — — — — — 
Total commercial real estate loans$292,991 $279,576 $211,495 $164,748 $64,848 $102,375 $35,918 $586 $1,152,537 
Construction and land:
Pass$170,744 $101,321 $19,620 $8,912 $2,534 $2,716 $4,434 $1,727 $312,008 
Special Mention— 520 — — — — — — 520 
Substandard417 — 152 — — 78 — — 647 
Doubtful— — — — — — — — — 
Total construction and land loans$171,161 $101,841 $19,772 $8,912 $2,534 $2,794 $4,434 $1,727 $313,175 
18

December 31, 2022
Term Loans by Origination Year
(dollars in thousands)20222021202020192018PriorRevolving LoansRevolving Loans Converted to Term LoansTotal
Multi-family residential:
Pass$33,822 $15,775 $25,661 $13,070 $2,241 $2,491 $1,302 $2,840 $97,202 
Special Mention— — — — 3,312 — — — 3,312 
Substandard— — — — 74 — — — 74 
Doubtful— — — — — — — — — 
Total multi-family residential loans$33,822 $15,775 $25,661 $13,070 $5,627 $2,491 $1,302 $2,840 $100,588 
Commercial and industrial:
Pass$108,464 $50,850 $16,043 $8,599 $11,203 $2,759 $174,145 $712 $372,775 
Special Mention338 — — — 7 — 1,188 — 1,533 
Substandard590 — 2,317 8 — 293 328 50 3,586 
Doubtful— — — — — — — — — 
Total commercial and industrial loans$109,392 $50,850 $18,360 $8,607 $11,210 $3,052 $175,661 $762 $377,894 
Consumer:
Pass$10,012 $2,048 $1,577 $536 $136 $12,785 $7,420 $29 $34,543 
Special Mention— — — — — — — — — 
Substandard9 298 — — — 227 — — 534 
Doubtful— — — — — — — — — 
Total consumer loans$10,021 $2,346 $1,577 $536 $136 $13,012 $7,420 $29 $35,077 
Total loans:
Pass$725,380 $529,588 $312,543 $225,542 $107,727 $214,016 $280,108 $7,237 $2,402,141 
Special Mention488 888 345 — 3,319 355 1,188 500 7,083 
Substandard1,385 354 3,004 5,732 740 9,933 328 50 21,526 
Doubtful— — — — — — — — — 
Total loans$727,253 $530,830 $315,892 $231,274 $111,786 $224,304 $281,624 $7,787 $2,430,750 

19

The above classifications follow regulatory guidelines and can generally be described as follows:
 
•Pass loans are of satisfactory quality.
•Special mention loans have an existing weakness that could cause future impairment, including the deterioration of financial ratios, past due status, questionable management capabilities and possible reduction in the collateral values.
•Substandard loans have an existing specific and well-defined weakness that may include poor liquidity and deterioration of financial performance. Such loans may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.
•Doubtful loans have specific weaknesses that are severe enough to make collection or liquidation in full highly questionable and improbable.

In addition, residential loans are classified using an inter-agency regulatory methodology that incorporates, among other factors, the extent of delinquencies and loan-to-value ratios. These classifications were the most current available as of the dates indicated and were generally updated within the quarter.
Age analysis of past due loans as of the dates indicated are as follows.
 June 30, 2023
(dollars in thousands)30-59 Days Past Due60-89 Days Past DueGreater Than 90 Days Past DueTotal Past DueCurrent LoansTotal Loans
Originated loans:
Real estate loans:
One- to four-family first mortgage
$1,309 $— $592 $1,901 $334,574 $336,475 
Home equity loans and lines— 54 50 104 58,245 58,349 
Commercial real estate1,995 64 — 2,059 890,309 892,368 
Construction and land— 262 2,018 2,280 301,110 303,390 
Multi-family residential— — — — 99,985 99,985 
Total real estate loans3,304 380 2,660 6,344 1,684,223 1,690,567 
Other loans:
Commercial and industrial266 74 152 492 349,610 350,102 
Consumer264 83 77 424 30,793 31,217 
Total other loans530 157 229 916 380,403 381,319 
Total originated loans$3,834 $537 $2,889 $7,260 $2,064,626 $2,071,886 
Acquired loans:
Real estate loans:
One- to four-family first mortgage
$685 $245 $709 $1,639 $80,977 $82,616 
Home equity loans and lines23 102 — 125 8,458 8,583 
Commercial real estate828 33 — 861 283,747 284,608 
Construction and land— — 28 28 24,070 24,098 
Multi-family residential— — — — 3,966 3,966 
Total real estate loans1,536 380 737 2,653 401,218 403,871 
Other loans:
Commercial and industrial— — 32 32 32,158 32,190 
Consumer14 23 42 79 2,733 2,812 
Total other loans14 23 74 111 34,891 35,002 
Total acquired loans$1,550 $403 $811 $2,764 $436,109 $438,873 
Total loans:
Real estate loans:
One- to four-family first mortgage
$1,994 $245 $1,301 $3,540 $415,551 $419,091 
Home equity loans and lines23 156 50 229 66,703 66,932 
20

 June 30, 2023
(dollars in thousands)30-59 Days Past Due60-89 Days Past DueGreater Than 90 Days Past DueTotal Past DueCurrent LoansTotal Loans
Commercial real estate2,823 97 — 2,920 1,174,056 1,176,976 
Construction and land— 262 2,046 2,308 325,180 327,488 
Multi-family residential— — — — 103,951 103,951 
Total real estate loans4,840 760 3,397 8,997 2,085,441 2,094,438 
Other loans:
Commercial and industrial266 74 184 524 381,768 382,292 
Consumer278 106 119 503 33,526 34,029 
Total other loans544 180 303 1,027 415,294 416,321 
Total loans$5,384 $940 $3,700 $10,024 $2,500,735 $2,510,759 
 December 31, 2022
(dollars in thousands)30-59 Days Past Due60-89 Days Past DueGreater Than 90 Days Past DueTotal Past DueCurrent LoansTotal Loans
Originated loans:
Real estate loans:
One- to four-family first mortgage
$490 $147 $646 $1,283 $298,547 $299,830 
Home equity loans and lines40 — — 40 52,950 52,990 
Commercial real estate3,210 179 27 3,416 853,096 856,512 
Construction and land345 160 147 652 284,740 285,392 
Multi-family residential— — — — 96,400 96,400 
Total real estate loans4,085 486 820 5,391 1,585,733 1,591,124 
Other loans:
Commercial and industrial152 — 210 362 338,418 338,780 
Consumer264 7 191 462 31,059 31,521 
Total other loans416 7 401 824 369,477 370,301 
Total originated loans$4,501 $493 $1,221 $6,215 $1,955,210 $1,961,425 
Acquired loans:
Real estate loans:
One- to four-family first mortgage
$1,591 $136 $519 $2,246 $87,540 $89,786 
Home equity loans and lines116 — 1 117 8,756 8,873 
Commercial real estate294 — 566 860 295,165 296,025 
Construction and land— — 132 132 27,651 27,783 
Multi-family residential— — — — 4,188 4,188 
Total real estate loans2,001 136 1,218 3,355 423,300 426,655 
Other loans:
Commercial and industrial— 225 38 263 38,851 39,114 
Consumer41 3 21 65 3,491 3,556 
Total other loans41 228 59 328 42,342 42,670 
Total acquired loans$2,042 $364 $1,277 $3,683 $465,642 $469,325 
Total loans:
Real estate loans:
One- to four-family first mortgage
$2,081 $283 $1,165 $3,529 $386,087 $389,616 
21

 December 31, 2022
(dollars in thousands)30-59 Days Past Due60-89 Days Past DueGreater Than 90 Days Past DueTotal Past DueCurrent LoansTotal Loans
Home equity loans and lines156 — 1 157 61,706 61,863 
Commercial real estate3,504 179 593 4,276 1,148,261 1,152,537 
Construction and land345 160 279 784 312,391 313,175 
Multi-family residential— — — — 100,588 100,588 
Total real estate loans6,086 622 2,038 8,746 2,009,033 2,017,779 
Other loans:
Commercial and industrial152 225 248 625 377,269 377,894 
Consumer305 10 212 527 34,550 35,077 
Total other loans457 235 460 1,152 411,819 412,971 
Total loans$6,543 $857 $2,498 $9,898 $2,420,852 $2,430,750 
There were $26,000 and $2,000 of loans greater than 90 days past due and accruing at June 30, 2023 and December 31, 2022, respectively.
The following tables summarize information pertaining to nonaccrual loans as of dates indicated.

June 30, 2023
(dollars in thousands)With Related AllowanceWithout Related AllowanceTotal
Nonaccrual loans(1):
One- to four-family first mortgage
$2,187 $— $2,187 
Home equity loans and lines124 — 124 
Commercial real estate4,339 2,701 7,040 
Construction and land2,341 — 2,341 
Multi-family residential— — — 
Commercial and industrial280 — 280 
Consumer198 — 198 
Total$9,469 $2,701 $12,170 
December 31, 2022
(dollars in thousands)With Related AllowanceWithout Related AllowanceTotal
Nonaccrual loans(1):
One- to four-family first mortgage
$2,300 $— $2,300 
Home equity loans and lines34 — 34 
Commercial real estate4,031 2,914 6,945 
Construction and land315 — 315 
Multi-family residential— — — 
Commercial and industrial365 13 378 
Consumer455 86 541 
Total$7,500 $3,013 $10,513 
(1)Nonaccrual acquired loans include PCD loans of $1,494,000 and $1,530,000 at June 30, 2023 and December 31, 2022, respectively.

22

All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. All payments received while on nonaccrual status are applied against the principal balance of nonaccrual loans. The Company does not recognize interest income while loans are on nonaccrual status.
Collateral Dependent Loans
The Company held loans that were individually evaluated for credit losses at June 30, 2023 and December 31, 2022 for which the repayment, on the basis of our assessment at the reporting date, is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The ACL for these collateral-dependent loans is primarily based on the fair value of the underlying collateral at the reporting date. The following describes the types of collateral that secure collateral dependent loans:
•One- to four-family first mortgages are primarily secured by first liens on residential real estate.
•Home equity loans and lines are primarily secured by first and junior liens on residential real estate.
•Commercial real estate loans are primarily secured by office and industrial buildings, warehouses, retail shopping facilities and various special purpose properties, including hotels and restaurants.
•Construction and land loans are primarily secured by residential and commercial properties, which are under construction and/or redevelopment, and by raw land.
•Commercial and industrial loans considered collateral dependent are primarily secured by accounts receivable, inventory and equipment.
The tables below summarize collateral dependent loans and the related ACL at June 30, 2023 and December 31, 2022.

June 30, 2023
(dollars in thousands)LoansACL
One- to four-family first mortgage
$— $— 
Home equity loans and lines— — 
Commercial real estate4,744 499 
Construction and land— — 
Multi-family residential— — 
Commercial and industrial151 121 
Consumer— — 
Total$4,895 $620 
December 31, 2022
(dollars in thousands)LoansACL
One- to four-family first mortgage
$— $— 
Home equity loans and lines— — 
Commercial real estate4,743 550 
Construction and land— — 
Multi-family residential— — 
Commercial and industrial204 171 
Consumer86 — 
Total$5,033 $721 

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. During the six months ended
23

June 30, 2023, there were no modifications of loans to borrowers who were experiencing financial difficulty. The Company did not provide any modifications under these circumstances to borrowers. Four loans were modified during the six months ended June 30, 2022 and they did not default within twelve months of modification.

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 $201,000 and $461,000 at June 30, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022 totaled $201,000 and $231,000, respectively. Loans secured by single family residential real estate that were in the process of foreclosure at June 30, 2023 and December 31, 2022 totaled $351,000 and $179,000, respectively.
6. Derivatives and Hedging Activities

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

The Company’s existing credit derivatives result from loan participation arrangements, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company occasionally enters into credit risk participation agreements with counterparty banks to accept a portion of the credit risk related to interest rate swaps. The agreements, which are typically executed in conjunction with a participation in a loan with the same customer, allow customers to execute an interest rate swap with one bank while allowing for the distribution of the credit risk among participating members. Collateral used to support the credit risk for the underlying lending relationship is also available to offset the risk of credit risk participations and customer derivative positions.

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

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable rate liabilities. During the next twelve months, the Company estimates that an additional $2,319,000 will be reclassified as additional interest income.

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


24

Fair Values of Derivative Instruments
The tables below present the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statement of Financial Condition as of June 30, 2023 and December 31, 2022.
June 30, 2023
Derivative Assets(1)
Derivative Liabilities(1)
(dollars in thousands)Notional AmountFair ValueNotional AmountFair Value
Derivatives designated as hedging instruments:
Interest rate swaps - variable rate liabilities$60,000 $5,494 $— $— 
Derivatives not designated as hedging instruments:
Risk participation agreements— — 11,919 8 
Netting adjustments— — 
Net derivative amounts$5,494 $8 
December 31, 2022
Derivative Assets(1)
Derivative Liabilities(1)
(dollars in thousands)Notional AmountFair ValueNotional AmountFair Value
Derivatives designated as hedging instruments:
Interest rate swaps - variable rate liabilities$40,000 $5,144 $— $— 
Derivatives not designated as hedging instruments:
Risk participation agreements— — 12,036 9 
Netting adjustments— — 
Net derivative amounts$5,144 $9 

(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 June 30, 2023 and December 31, 2022, accumulated unrealized gains, net of taxes, on derivative instruments totaled $4,192,000 and $3,961,000, respectively.
Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income and the Consolidated Statements of Income
The tables below present the effect of cash flow hedge accounting on Accumulated Other Comprehensive Income and the Consolidated Statements of Income as of June 30, 2023 and June 30, 2022.

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Three Months Ended June 30, 2023
Amount of Gain Recognized in OCILocation of Gain Reclassified from AOCI into IncomeAmount of Gain Reclassified from AOCI into Income
(dollars in thousands)TotalIncluded ComponentTotalIncluded Component
Derivatives in cash flows hedging relationships:
Interest rate swaps - variable rate liabilities$1,557 $1,557 Interest income$548 $548 
Six Months Ended June 30, 2023
Amount of Gain Recognized in OCILocation of Gain Reclassified from AOCI into IncomeAmount of Gain Reclassified from AOCI into Income
(dollars in thousands)TotalIncluded ComponentTotalIncluded Component
Derivatives in cash flows hedging relationships:
Interest rate swaps - variable rate liabilities$1,262 $1,262 Interest income$969 $969 


Three Months Ended June 30, 2022
Amount of Gain Recognized in OCILocation of Gain Reclassified from AOCI into IncomeAmount of Gain Reclassified from AOCI into Income
(dollars in thousands)TotalIncluded ComponentTotalIncluded Component
Derivatives in cash flows hedging relationships:
Interest rate swaps - variable rate liabilities$678 $678 Interest income$49 $49 
Six Months Ended June 30, 2022
Amount of Gain Recognized in OCILocation of Gain Reclassified from AOCI into IncomeAmount of Gain Reclassified from AOCI into Income
(dollars in thousands)TotalIncluded ComponentTotalIncluded Component
Derivatives in cash flows hedging relationships:
Interest rate swaps - variable rate liabilities$2,533 $2,533 Interest income$37 $37 

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 June 30, 2023 and June 30, 2022.
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(dollars in thousands)Location of Income Recognized on Non-designated Hedges Three Months Ended June 30, 2023 Six Months Ended June 30, 2023
Effects of non-designated hedges
Risk participation agreementsOther noninterest income$3 $1 
(dollars in thousands)Location of Income Recognized on Non-designated Hedges Three Months Ended June 30, 2022 Six months ended June 30, 2022
Effects of non-designated hedges
Risk participation agreementsOther noninterest income$60 $67 

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 June 30, 2023, 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 June 30, 2023, it would not have been required to settle any obligations under the agreements since the termination value was $0.

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

The carrying value of subordinated debt was $54,133,000 and $54,013,000 at June 30, 2023 and December 31, 2022, respectively. The subordinated debt was recorded net of issuance costs which is being amortized using the straight-line method over five years.
8. Fair Value Measurements and Disclosures
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Company groups assets and liabilities measured or disclosed at fair value in three levels as required by ASC 820, Fair Value Measurements and Disclosures. Under this guidance, fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the inputs used to develop those assumptions and measure fair value. The hierarchy requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels used to measure fair value are as follows:
 
•Level 1 – Quoted prices in active markets for identical assets or liabilities.
•Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
27


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

Management primarily identifies investment securities which may have traded in illiquid or inactive markets, by identifying instances of a significant decrease in the volume and frequency of trades, relative to historical levels, as well as instances of a significant widening of the bid-ask spread in the brokered markets. Investment securities that are deemed to have been trading in illiquid or inactive markets may require the use of significant unobservable inputs. For example, management may use quoted prices for similar investment securities in the absence of a liquid and active market for the investment securities being valued. As of June 30, 2023, management did not make adjustments to prices provided by the third-party pricing service as a result of illiquid or inactive markets.
Derivative Assets and Liabilities
Derivative assets and liabilities are reported at fair value in accrued interest receivable and other assets and accrued interest payable and other liabilities, respectively, in the Consolidated Statements of Financial Condition. The fair value of these derivative financial instruments is obtained from a third-party pricing service that uses widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. The analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company has determined that its derivative valuations are classified in Level 2 of the fair vale hierarchy.

The following tables present the balances of assets measured for fair value on a recurring basis as of June 30, 2023 and December 31, 2022.

28

(dollars in thousands)June 30, 2023Level 1Level 2Level 3
Assets
Available for sale securities:
U.S. agency mortgage-backed$295,541 $— $295,541 $— 
Collateralized mortgage obligations81,327 — 81,327 — 
Municipal bonds47,855 — 47,855 — 
U.S. government agency18,588 — 18,588 — 
Corporate bonds6,085 — 6,085 — 
Total$449,396 $— $449,396 $— 
Derivative assets$5,494 $— $5,494 $— 
Total$454,890 $— $454,890 $— 
Liabilities
Derivative liabilities$8 $— $8 $— 


(dollars in thousands)December 31, 2022Level 1Level 2Level 3
Assets
Available for sale securities:
U.S. agency mortgage-backed$316,832 $— $316,832 $— 
Collateralized mortgage obligations86,345 — 86,345 — 
Municipal bonds57,625 — 57,625 — 
U.S. government agency19,333 — 19,333 — 
Corporate bonds6,383 — 6,383 — 
Total$486,518 $— $486,518 $— 
Derivative assets$5,144 $— $5,144 $— 
Total$491,662 $— $491,662 $— 
Liabilities
Derivative liabilities$9 $— $9 $— 

29

Nonrecurring Basis
The Company records loans individually evaluated for credit losses at fair value on a nonrecurring basis. Fair value is measured at the fair value of the collateral for collateral-dependent loans. For non-collateral-dependent loans, fair value is measured by present valuing expected future cash flows. Loans individually evaluated are classified as Level 3 assets when measured using appraisals from third parties of the collateral less any prior liens and when there is no observable market price.

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

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

  Fair Value Measurements Using
(dollars in thousands)June 30, 2023Level 1Level 2Level 3
Assets
Loans individually evaluated$4,275 $— $— $4,275 
Foreclosed assets and ORE201 — — 201 
Total$4,476 $— $— $4,476 
  Fair Value Measurements Using
(dollars in thousands)December 31, 2022Level 1Level 2Level 3
Assets
Loans individually evaluated$4,312 $— $— $4,312 
Foreclosed assets and ORE461 — — 461 
Total$4,773 $— $— $4,773 

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

(dollars in thousands)Fair ValueValuation TechniqueUnobservable InputsRange of DiscountsWeighted Average Discount
June 30, 2023
Loans individually evaluated$4,275 Third party appraisals and discounted cash flowsCollateral values, market discounts and estimated costs to sell
0% - 80%
13%
Foreclosed assets and ORE$201 Third party appraisals, sales contracts, broker price opinionsCollateral values, market discounts and estimated costs to sell
31% - 53%
44%
(dollars in thousands)Fair ValueValuation TechniqueUnobservable InputsRange of
Discounts		Weighted Average Discount
December 31, 2022
Loans individually evaluated$4,312 Third party appraisals and discounted cash flowsCollateral values, market discounts and estimated costs to sell
0% - 89%
14%
Foreclosed assets and ORE$461 Third party appraisals, sales contracts, broker price opinionsCollateral values, market discounts and estimated costs to sell
6% - 31%
16%
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ASC 820, Fair Value Measurements and Disclosures, requires the disclosure of each class of financial instruments for which it is practicable to estimate. The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. ASC 820 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

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

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

Methods and assumptions used to estimate fair value of each class of financial instruments for which it is practicable to estimate fair value are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. The fair value of subordinated debt is estimated based on current market rates on similar debt in the market. The Company classifies this debt in Level 2 of the fair value table. There have been no other material changes from the fair value estimate methods and assumptions previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

The following table presents estimated fair values of the Company’s financial instruments as of the dates indicated.
  Fair Value Measurements at June 30, 2023
(dollars in thousands)Carrying AmountTotalLevel 1Level 2Level 3
Financial Assets
Cash and cash equivalents$96,873 $96,873 $96,873 $— $— 
Interest-bearing deposits in banks99 99 99 — — 
Investment securities available for sale449,396 449,396 — 449,396 — 
Investment securities held to maturity1,066 1,065 — 1,065 — 
Mortgage loans held for sale538 538 — 538 — 
Loans, net2,480,120 2,365,584 — 2,361,309 4,275 
Cash surrender value of BOLI46,789 46,789 46,789 — — 
Derivative assets(1)
5,494 5,494 — 5,494 — 
Financial Liabilities
Deposits$2,551,718 $2,542,489 $2,087,222 $455,267 $— 
Other borrowings5,539 5,356 — 5,356 — 
Subordinated debt, net of issuance cost54,133 50,601 — 50,601 — 
Short-term FHLB advances262,350 262,346 262,346 — — 
Long-term FHLB advances42,947 41,353 — 41,353 — 
Derivative liabilities(1)
8 8 — 8 — 
31

  Fair Value Measurements at December 31, 2022
(dollars in thousands)Carrying AmountTotalLevel 1Level 2Level 3
Financial Assets
Cash and cash equivalents$87,401 $87,401 $87,401 $— $— 
Interest-bearing deposits in banks349 349 349 — — 
Investment securities available for sale486,518 486,518 — 486,518 — 
Investment securities held to maturity1,075 1,072 — 1,072 — 
Mortgage loans held for sale98 98 — 98 — 
Loans, net2,401,451 2,326,104 — 2,321,792 4,312 
Cash surrender value of BOLI46,276 46,276 46,276 — — 
Derivative assets(1)
5,144 5,144 — 5,144 — 
Financial Liabilities
Deposits$2,633,181 $2,620,577 $2,297,736 $322,841 $— 
Other borrowings5,539 5,388 — 5,388 — 
Subordinated debt, net of issuance cost54,013 51,287 — 51,287 — 
Short-term FHLB advances155,000 155,000 155,000 — — 
Long-term FHLB advances21,213 20,019 — 20,019 — 
Derivative liabilities(1)
9 9 — 9 — 
(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.
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The purpose of this discussion and analysis is to focus on significant changes in the financial condition of the Company and the Bank from December 31, 2022 through June 30, 2023 and on its results of operations for the three and six months ended June 30, 2023 and 2022. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this quarterly report on Form 10-Q, particularly the consolidated financial statements and related notes appearing in Item 1.

Forward-Looking Statements
To the extent that statements in this Form 10-Q relate to future plans, objectives, financial results or performance of the Company or Bank, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which are based on management’s current information, estimates and assumptions and the current economic environment, are generally identified by the use of words such as “plan”, “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions, or by future or conditional terms such as “will”, “would”, “should”, “could”, “may”, “likely”, “probably”, or “possibly”. The Company’s or the Bank’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties. Certain risks, uncertainties and other factors, including those set forth under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2022 and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K, may cause actual results to differ materially from the results discussed in the forward-looking statements appearing in this discussion and analysis and may include factors such as, but not limited to, credit quality and risk, the COVID-19 pandemic, industry and technological changes, cyber incidents or other failures, disruptions or security breaches, interest rates, commercial and residential real estate values, economic and market conditions in the United States or internationally, fund availability, accounting estimates and risk management processes, the transition away from the London Interbank Offered Rate (LIBOR), legislative and regulatory changes, business strategy execution, key personnel, competition, mortgage markets, fraud, environmental liability and severe weather, natural disasters, acts of war or terrorism or other external events. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.
EXECUTIVE OVERVIEW
The Company reported net income for the second quarter of 2023 of $9.8 million, or $1.21 diluted EPS, up $1.3 million compared to the second quarter of 2022. Net income for the second quarter of 2022 totaled $8.5 million, or $1.03 diluted EPS. The second quarter of 2022 included merger expenses related to the acquisition of Friendswood Capital Corporation (“Friendswood”) on March 26, 2022 totaling $1.3 million, net of taxes.
32


For the six months ended June 30, 2023, the Company reported net income $21.1 million, or $2.60 diluted EPS, up $8.2 million from $12.9 million, or $1.56 diluted EPS, reported for the six months ended June 30, 2022. The six months ended June 30, 2022 includes merger expenses related to the acquisition of Friendswood totaling $1.6 million, net of taxes.

Key components of the Company’s performance during the three and six months ended June 30, 2023 include:

•Assets increased $61.9 million, or 1.9%, from December 31, 2022 to $3.3 billion at June 30, 2023.
•Total loans were $2.5 billion at June 30, 2023, up $80.0 million, or 3.3%, from December 31, 2022.
•During the three and six months ended June 30, 2023, the Company provisioned $511,000 and $1.3 million, respectively, to the allowance for loan losses, primarily due to loan growth. During the three and six months ended June 30, 2022, the Company provisioned $591,000 and $3.8 million, respectively, to the allowance for loan losses primarily due to the acquisition of Friendswood's loan portfolio and loan growth.
•The ALL totaled $30.6 million, or 1.22% of total loans, at June 30, 2023 compared to $29.3 million, or 1.21% of total loans, at December 31, 2022. The ACL, which is comprised of the allowance for loan losses plus the allowance for unfunded lending commitments, totaled $33.1 million, or 1.32% of total loans, at June 30, 2023 compared to $31.4 million, or 1.29% of total loans, at December 31, 2022.
•Nonperforming assets increased $1.4 million, or 12.9%, from $11.0 million, or 0.34% of total assets, at December 31, 2022 to $12.4 million, or 0.38% of total assets, at June 30, 2023. The increase in NPAs was primarily due to three credit relationships being downgraded to substandard.
•Total deposits amounted to $2.6 billion at June 30, 2023, a decrease of $81.5 million, or 3.1%, from December 31, 2022.
•The net interest margin was 3.94% and 4.06% for the three and six months ended June 30, 2023, respectively, up 18 bps and up 48 bps, from the three and six months ended June 30, 2022, respectively.
•The average rate paid on total interest-bearing deposits was 1.30% for the second quarter of 2023, which was up 108 bps from the second quarter of 2022. For the six months ended June 30, 2023, the average rate paid on total interest-bearing deposits was 1.04%, up 83 bps from the six months ended June 30, 2022.
•Total interest expense for the second quarter of 2023 was up $8.5 million, or 672.5%, compared to the second quarter of 2022 primarily due to the rising interest rate environment and the higher costs on deposits, expense related to subordinated debt, and an increase in short-term FHLB borrowings in the 2023 period. For the six months ended June 30, 2023, total interest expense was up $14.0 million, or 602.2%, from the comparable period in 2022.
•Noninterest income for the second quarter of 2023 was down $238,000, or 6.5%, compared to the second quarter of 2022, primarily due to a decrease in gains on sale of loans (down $238,000). For the six months ended June 30, 2023, noninterest income was down $313,000, or 4.4%, from the comparable period in 2022 primarily due to a decrease in gains on sale of loans (down $480,000) and a net loss on sale of securities totaling $249,000 during the first quarter of 2023, which were partially offset by an increase in bank card fees (up $412,000).
•Noninterest expense for the second quarter of 2023 was down $806,000, or 3.7%, compared to the second quarter of 2022. For the six months ended June 30, 2023, noninterest expense was up $894,000, or 2.2%, from the comparable period in 2022. Noninterest expense for the three and six months ended June 30, 2022 included $1.6 million and $1.9 million (pre-tax), respectively, of merger-related expenses for the Friendswood acquisition. The increase in noninterest expense for the six months ended June 30, 2023 related primarily to the growth of the Company's employee base, occupancy and franchise tax expenses as a result of the Friendswood acquisition, which were partially offset by a $739,000 recovery of a previous loss on a foreclosed asset in the first quarter of 2023.

FINANCIAL CONDITION

Loans, Allowance for Credit Losses and Asset Quality

Loans
33

Total loans at June 30, 2023 were $2.5 billion, up $80.0 million, or 3.3%, from December 31, 2022. The loan growth resulted primarily from the additions of loans across all loan types and most markets of the Company.
The following table summarizes the composition of the Company’s loan portfolio as of the dates indicated.

(dollars in thousands)June 30, 2023December 31, 2022Increase/(Decrease)
Real estate loans:
One-to four-family first mortgage
$419,091 $389,616 $29,475 7.6 %
Home equity loans and lines66,932 61,863 5,069 8.2 
Commercial real estate1,176,976 1,152,537 24,439 2.1 
Construction and land327,488 313,175 14,313 4.6 
Multi-family residential103,951 100,588 3,363 3.3 
Total real estate loans2,094,438 2,017,779 76,659 3.8 %
Other loans:
Commercial and industrial382,292 377,894 4,398 1.2 
Consumer34,029 35,077 (1,048)(3.0)
Total other loans416,321 412,971 3,350 0.8 
Total loans$2,510,759 $2,430,750 $80,009 3.3 %

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

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

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

At June 30, 2023, the ALL totaled $30.6 million, or 1.22% of total loans, up $1.3 million from $29.3 million, or 1.21% of total loans, at December 31, 2022. During the six months ended June 30, 2023, the Company provisioned $1.3 million of the allowance loan losses primarily due to loan growth. Net loan recoveries totaled $15,000 for the six months ended June 30, 2023.
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
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payments is doubtful, the accrual of interest income ceases. It is our policy, with certain limited exceptions, to discontinue accruing interest and reverse any interest accrued on any loan which is 90 days or more past due. On occasion, this action may be taken earlier if the financial condition of the borrower raises significant concern with regard to their ability to service the debt in accordance with the terms of the loan agreement. Interest income is not accrued on these loans until the borrower’s financial condition and payment record demonstrate an ability to service the debt.

Under our allowance policy, credit losses are measured on a pool basis when similar risk characteristics exist. Loans that do not share similar risk characteristics are individually evaluated for credit losses and are excluded from the pooled loan analysis. At least quarterly, management evaluates the loan portfolio to determine which loans should be individually evaluated for credit losses. Management's evaluation involves an analysis of larger (i.e., loans with balances of $500,000 or greater) commercial real estate loans, multi-family residential loans, construction and land loans and commercial and industrial loans. Third party property valuations are obtained at the time of origination for real estate secured loans. When a determination is made that a loan has deteriorated to the point of becoming a problem loan, updated valuations may be ordered to determine if a short-fall exists, which may lead to a recommendation for partial charge off or appropriate allowance allocation. Property valuations are ordered through, and are reviewed by, an appraisal officer at the Bank. The Company typically orders an “as is” valuation for collateral property if a loan is in a criticized loan classification. Loans individually evaluated for credit losses are reported to the Board of Directors monthly.

At June 30, 2023 and December 31, 2022, loans identified as impaired and individually evaluated for expected losses were $4.9 million and $5.0 million, respectively. The following tables provide a summary of loans individually evaluated for credit losses as of the dates indicated.
June 30, 2023
(dollars in thousands)Recorded investmentAllowance for Loan LossesAllowance to Total Loans
Loans Individually Evaluated
One- to four-family first mortgage
$— $— — %
Home equity loans and lines— — — 
Commercial real estate4,744 499 10.52 
Construction and land— — — 
Multi-family residential— — — 
Commercial and industrial151 121 80.13 
Consumer— — — 
Total$4,895 $620 12.67 %
December 31, 2022
(dollars in thousands)Recorded investmentAllowance for Loan LossesAllowance to Total Loans
Loans Individually Evaluated
One- to four-family first mortgage
$— $— — %
Home equity loans and lines— — — 
Commercial real estate4,743 550 11.60 
Construction and land— — — 
Multi-family residential— — — 
Commercial and industrial204 171 83.82 
Consumer86 — — 
Total$5,033 $721 14.33 %

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

At June 30, 2023 and December 31, 2022, loans classified as substandard totaled $27.3 million and $21.5 million, respectively. There were no assets classified as doubtful at either date. For additional information, refer to Note 5 to the Consolidated Financial Statements. The $5.7 million, or 26.6%, increase in substandard loans at June 30, 2023 compared to December 31, 2022 was primarily due to four credit relationships being downgraded to substandard, partially offset by loan payoffs and improvements in other classified loans.

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

(dollars in thousands)June 30, 2023December 31, 2022Increase/(Decrease)
Special Mention Loans
One- to four-family first mortgage
$872 $1,194 $(322)(27.0)%
Home equity loans and lines— — — — 
Commercial real estate335 524 (189)(36.1)
Construction and land5,410 520 4,890 940.4 
Multi-family residential— 3,312 (3,312)(100.0)
Commercial and industrial2,894 1,533 1,361 88.8 
Consumer— — — — 
Total special mention loans$9,511 $7,083 $2,428 34.3 %
(dollars in thousands)June 30, 2023December 31, 2022Increase/(Decrease)
Substandard Loans
One- to four-family first mortgage
$3,057 $3,223 $(166)(5.2)%
Home equity loans and lines123 33 90 272.7 
Commercial real estate16,236 13,429 2,807 20.9 
Construction and land2,340 647 1,693 261.7 
Multi-family residential3,430 74 3,356 4535.1 
Commercial and industrial1,869 3,586 (1,717)(47.9)
Consumer197 534 (337)(63.1)
Total substandard loans$27,252 $21,526 $5,726 26.6 %
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 Topic 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 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.
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The following table sets forth the composition of the Company’s nonperforming assets and performing troubled debt restructurings as of the dates indicated.
 June 30, 2023December 31, 2022
(dollars in thousands)Originated
Acquired(1)
TotalOriginated
Acquired(1)
Total 
Nonaccrual loans(2):
Real estate loans:
One- to four-family first mortgage
$613 $1,574 $2,187 $711 $1,589 $2,300 
Home equity loans and lines94 30 124 — 34 34 
Commercial real estate3,511 3,529 7,040 3,039 3,906 6,945 
Construction and land2,280 61 2,341 147 168 315 
Multi-family residential— — — — — — 
Other loans:
Commercial and industrial166 114 280 224 154 378 
Consumer142 56 198 215 326 541 
Total nonaccrual loans6,806 5,364 12,170 4,336 6,177 10,513 
Accruing loans 90 days or more past due26 — 26 2 — 2 
Total nonperforming loans 
6,832 5,364 12,196 4,338 6,177 10,515 
Foreclosed assets and ORE121 80 201 151 310 461 
Total nonperforming assets6,953 5,444 12,397 4,489 6,487 10,976 
Performing troubled debt restructurings(2)
— — — 4,600 1,605 6,205 
Total nonperforming assets and troubled debt restructurings$6,953 $5,444 $12,397 $9,089 $8,092 $17,181 
Nonperforming loans to total loans0.49 %0.43 %
Nonperforming loans to total assets0.37 %0.33 %
Nonperforming assets to total assets0.38 %0.34 %
(1)Nonaccrual acquired loans include PCD loans of $1.5 million and $1.5 million for the periods ending June 30, 2023 and December 31, 2022, respectively.
(2)Nonaccrual loans include originated restructured loans placed on nonaccrual totaling $3.1 million at December 31, 2022. Acquired restructured loans placed on nonaccrual totaled $3.7 million at December 31, 2022. With the adoption of ASU 2022-02, effective January 1, 2023, TDR accounting has been eliminated.
Foreclosed assets and ORE includes real property and other assets that have been acquired as a result of foreclosure, and real property no longer used in the Bank's business. Foreclosed assets and ORE are classified as such until sold or disposed. Foreclosed assets are recorded at fair value less estimated selling costs based on third party property valuations which are obtained at the time the asset is repossessed and periodically until the property is liquidated. ORE is recorded at the lower of its net book value or fair value at the date of transfer to ORE. Foreclosed assets and ORE holding costs are charged to expense. Gains and losses on the sale of foreclosed assets and ORE are charged to operations, as incurred. Costs associated with acquiring and improving a foreclosed property or ORE are capitalized to the extent that the carrying value does not exceed fair value less estimated selling costs.
Investment Securities

The Company’s investment securities portfolio totaled $450.5 million as of June 30, 2023, a decrease of $37.1 million, or 7.6%, from December 31, 2022. During the first quarter 2023, the Company recorded a net loss of $249,000 related to the sale of available-for-sale investment securities totaling $14.0 million of securities. At June 30, 2023, the Company had a net unrealized loss on its available for sale investment securities portfolio of $53.2 million, compared to a net unrealized loss of $54.8 million at December 31, 2022. The Company’s investment securities portfolio had an effective duration of 4.5 years at June 30, 2023 and December 31, 2022.

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The following table summarizes activity in the Company’s investment securities portfolio during the six months ended June 30, 2023.

(dollars in thousands)Available for SaleHeld to Maturity
Balance, December 31, 2022$486,518 $1,075 
Purchases— — 
Sales(14,011)— 
Principal maturities, prepayments and calls(24,467)— 
Amortization of premiums and accretion of discounts(217)(9)
Increase in market value1,573 — 
Balance, June 30, 2023$449,396 $1,066 

Funding Sources

Deposits
Deposits totaled $2.6 billion at June 30, 2023, a decrease of $81.5 million, or 3.1%, compared to December 31, 2022. The following table summarizes the changes in the Company’s deposits from December 31, 2022 to June 30, 2023.

(dollars in thousands)June 30, 2023December 31, 2022Increase/(Decrease)
Demand deposit$816,555 $904,301 $(87,746)(9.7)%
Savings261,780 305,871 (44,091)(14.4)
Money market363,801 423,990 (60,189)(14.2)
NOW645,087 663,574 (18,487)(2.8)
Certificates of deposit464,495 335,445 129,050 38.5 
Total deposits$2,551,718 $2,633,181 $(81,463)(3.1)%

The average rate paid on interest-bearing deposits was 1.30% for the second quarter of 2023, up 108 bps compared to the second quarter of 2022. At June 30, 2023, certificates of deposit maturing within the next 12 months totaled $402.3 million.

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

June 30, 2023December 31, 2022
Individuals51%51%
Small businesses3940
Public funds87
Broker 22
Total100%100%

The total amounts of our uninsured deposits (deposits in excess of $250,000, as calculated in accordance with FDIC regulations) were $735.4 million at June 30, 2023 and $830.9 million at December 31, 2022. Public funds in excess of the FDIC insurance limits are fully collateralized.

Subordinated Debt

On June 30, 2022, The Company issued $55.0 million in aggregate principal amount of its 5.75% Fixed-to-Floating Rate Subordinated Notes due 2032. The Notes were issued at a price equal to 100% of the aggregate principal amount. The Notes have a stated maturity date of June 30, 2032 and bear interest at a fixed rate of 5.75% per year from and including the issue date to but excluding June 30, 2027. From June 30, 2027, the Notes will bear interest at a floating rate equal to the then current three-month term secured overnight financing rate (“SOFR”), plus 282 basis points. The Notes may be redeemed by the
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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 $54.1 million and $54.0 million at June 30, 2023 and December 31, 2022, respectively. The subordinated debt was recorded net of issuance costs and amortized using the straight-line method over five years.

Federal Home Loan Bank Advances
The average balance of total FHLB advances was $272.8 million for the second quarter of 2023, up $247.4 million compared to the second quarter of 2022. For the six months ended June 30, 2023, the average balance of total FHLB advances was $244.3 million, up $218.7 million compared to the six months ended June 30, 2022. Average FHLB advances increased over the comparable periods due to loan growth and a decline in deposits.

The Company had $262.4 million short-term FHLB advances as of June 30, 2023 compared to $155.0 million as of December 31, 2022. As discussed above, the increase in FHLB advances was due to loan growth and a decline in deposits. At June 30, 2023 and December 31, 2022, the Company had $42.9 million and $21.2 million in long-term FHLB advances, respectively, and $897.8 million and $937.4 million in additional FHLB advances available, respectively.

Shareholders’ Equity
Total shareholders’ equity increased $16.2 million, or 4.9%, from $330.0 million at December 31, 2022 to $346.1 million at June 30, 2023. Shareholders' equity increased primarily due to net income of $21.1 million and improvement in the accumulated other comprehensive loss on available for sale investment securities, which were partially offset by cash dividends and share repurchases during the six months ended June 30, 2023.

At June 30, 2023, the Bank had regulatory capital amounts that were well in excess of regulatory requirements. The following table presents actual and required capital ratios for the Bank under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of June 30, 2023 based on the required capital levels as of January 1, 2019 when the Basel III Capital Rules were fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.
 ActualMinimum Capital Required – Basel III Fully Phased-InTo Be Well Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)AmountRatioAmountRatioAmountRatio
Company:
Tier 1 risk-based capital296,812 11.17 225,819 8.50 N/AN/A
Total risk-based capital383,589 14.44 278,952 10.50 N/AN/A
Tier 1 leverage capital296,812 9.38 126,522 4.00 N/AN/A
Bank:
Common equity Tier 1 capital (to risk-weighted assets)$340,106 12.84 %$185,425 7.00 %$172,181 6.50 %
Tier 1 risk-based capital340,106 12.84 225,159 8.50 211,915 8.00 
Total risk-based capital372,750 14.07 278,138 10.50 264,893 10.00 
Tier 1 leverage capital340,106 10.78 126,222 4.00 157,777 5.00 

LIQUIDITY AND ASSET/LIABILITY MANAGEMENT

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

The Company uses its liquidity to fund existing and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to invest in other interest-earning assets and to meet operating expenses. At June 30, 2023, certificates of deposit maturing within the next 12 months totaled $402.3 million. Based upon historical experience, the Company anticipates that a significant portion of the maturing certificates of deposit will be redeposited with us.

In addition to cash flow from loan and securities payments and prepayments as well as from sales of securities available for sale, the Company has significant borrowing capacity available to fund liquidity needs. In recent years, the Company has utilized borrowings as a cost efficient addition to deposits as a source of funds. Borrowings consist of advances from the FHLB of Dallas, of which the Company is a member. Under terms of the collateral agreement with the FHLB, the Company pledges residential mortgage loans and investment securities as well as the Company’s stock in the FHLB as collateral for such advances. For the six months ended June 30, 2023, the average balance of outstanding FHLB advances was $244.3 million. At June 30, 2023, the Company had $305.3 million in total outstanding FHLB advances.

The following table summarizes the Company's primary and secondary sources of liquidity which were available at June 30, 2023.
(dollars in thousands)June 30, 2023
Cash and cash equivalents$96,873 
Unencumbered investment securities, amortized cost72,354 
FHLB advance availability897,776 
Amounts available from unsecured lines of credit55,000 
Federal Reserve bank term funding program109,379 
Federal Reserve discount window availability500 
Total primary and secondary sources of available liquidity$1,231,882 

Asset/Liability Management
The objective of asset/liability management is to implement strategies for the funding and deployment of the Company’s financial resources that are expected to maximize soundness and profitability over time at acceptable levels of risk. Interest rate sensitivity is the potential impact of changing rate environments on both net interest income and cash flows. The Company measures its interest rate sensitivity over the near term primarily by running net interest income simulations. Our interest rate sensitivity also is monitored by management through the use of a model which generates estimates of the change in its net interest income over a range of interest rate scenarios. Based on the Company’s interest rate risk model, the table below sets forth the results of immediate and sustained changes in interest rates as of June 30, 2023.

Shift in Interest Rates (in bps)% Change in Projected Net Interest Income
+3001.6%
+2001.1%
+1000.7%
-100(1.5)%

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

During the second quarter of 2020 and 2023, the Company entered into certain interest rate swap agreements as part of its interest rate risk management strategy. The Company’s objectives in using interest rate derivatives are to manage its exposure to interest rate movements. During 2023 and 2022, such derivatives were used to hedge the variable cost associated with existing variable rate liabilities. Refer to Note 6 of the Consolidated Financial Statements for more information on the effects of the derivative financial instruments on the consolidated financial statements.
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To meet the financing needs of its customers, the Company issues financial instruments which represent conditional obligations that are not recognized, wholly or in part, in the statements of financial condition. These financial instruments include commitments to extend credit and standby letters of credit. Such instruments expose the Company to varying degrees of credit and interest rate risk in much the same way as funded loans. The same credit policies are used in these commitments as for on-balance sheet instruments. At June 30, 2023 and December 31, 2022, the Company's allowance for credit losses on unfunded commitments totaled $2.5 million and $2.1 million, respectively.

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

 Contract Amount
(dollars in thousands)June 30, 2023December 31, 2022
Standby letters of credit$7,049 $6,969 
Available portion of lines of credit366,232 367,167 
Undisbursed portion of loans in process215,722 194,182 
Commitments to originate loans151,883 164,682 

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

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

The Company is subject to certain claims and litigation arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material effect on the financial condition or results of operations of the Company.
RESULTS OF OPERATIONS
Net income for the second quarter of 2023 was $9.8 million, up $1.3 million compared to the second quarter of 2022. Diluted EPS for the second quarter of 2023 was $1.21, up $0.18 compared to the second quarter of 2022.

Net income for the six months ended June 30, 2023 was $21.1 million, up $8.2 million, compared to the six months ended June 30, 2022. Diluted EPS for the six months ended June 30, 2023 was $2.60, up $1.04 compared to the six months ended June 30, 2022.

During the three and six months ended June 30, 2023, the Company provisioned $511,000 and $1.3 million. respectively, to the allowance for loan losses primarily due to loan growth. During the three and six months ended June 30, 2022, the Company provisioned $591,000 and $3.8 million to the allowance for loan losses primarily due to 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. The Company’s net interest income is largely determined by our net interest spread, which is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities, and the relative amounts of interest-earning assets and interest-bearing liabilities. The Company’s tax-equivalent net interest spread was 3.31% and 3.68% for the quarters ended June 30, 2023 and 2022, respectively, and 3.51% and 3.50% for the six months ended June 30, 2023 and 2022, respectively.

Net interest income totaled $30.3 million for the second quarter of 2023, up $1.1 million, or 3.6%, compared to the second quarter of 2022. For the six months ended June 30, 2023, net interest income totaled $61.9 million, up $9.1 million, or 17.3%, compared to the six months ended June 30, 2022.


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The Company’s tax-equivalent net interest margin, which is net interest income as a percentage of average interest-earning assets, was 3.94% and 3.76% for the quarters ended June 30, 2023 and 2022, respectively. For the same periods, the average loan yield was 5.82% and 4.94%, respectively.

The net interest margin for the six months ended June 30, 2023 and 2022 was 4.06% and 3.58%, respectively. For the same periods, the average loan yield was 5.74% and 4.91%, respectively.

Acquired loan discount accretion included in interest income totaled $647,000 and $879,000 for the quarters ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023 and 2022, acquired loan discount accretion included in interest income totaled $1.3 million and $1.3 million, respectively.

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

 Three Months Ended June 30,
 20232022
(dollars in thousands)Average BalanceInterestAverage Yield/RateAverage BalanceInterestAverage Yield/Rate
Interest-earning assets:
Loans receivable(1)
$2,491,029 $36,530 5.82 %$2,190,721 $27,304 4.94 %
Investment securities
Taxable490,076 2,911 2.38 451,993 2,222 1.97 
Tax-exempt (TE)
16,974 75 2.23 23,860 116 2.47 
Total investment securities507,050 2,986 2.37 475,853 2,338 1.99 
Other interest-earning assets52,256 555 4.26 422,265 863 0.82 
Total interest-earning assets (TE)
3,050,335 $40,071 5.22 3,088,839 $30,505 3.93 
Noninterest-earning assets199,855 206,357 
Total assets$3,250,190 $3,295,196 
Interest-bearing liabilities:
Deposits:
Savings, checking and money market$1,300,245 $3,023 0.93 %$1,584,118 $673 0.17 %
Certificates of deposit407,038 2,524 2.49 406,367 430 0.42 
Total interest-bearing deposits1,707,283 5,547 1.30 1,990,485 1,103 0.22 
Other borrowings5,651 55 3.88 5,794 54 3.71 
Subordinated debt54,098 850 6.29 774 — — 
Short-term FHLB advances229,794 2,973 5.12 — — — 
Long term FHLB advances42,989 340 3.16 25,426 107 1.69 
Total interest-bearing liabilities2,039,815 $9,765 1.91 2,022,479 $1,264 0.25 
Noninterest-bearing liabilities861,961 940,077 
Total liabilities2,901,776 2,962,556 
Shareholders’ equity348,414 332,640 
Total liabilities and shareholders' equity$3,250,190 $3,295,196 
Net interest-earning assets$1,010,520 $1,066,360 
Net interest spread (TE)
$30,306 3.31 %$29,241 3.68 %
Net interest margin (TE)
3.94 %3.76 %
(1)Nonperforming loans are included in the respective average loan balances, net of deferred fees, discounts and loans in process.
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 Six Months Ended June 30,
 20232022
(dollars in thousands)Average BalanceInterestAverage Yield/RateAverage BalanceInterestAverage Yield/Rate
Interest-earning assets:
Loans receivable(1)
$2,464,547 $71,028 5.74 %$2,027,575 $49,975 4.91 %
Investment securities
Taxable498,965 5,909 2.37 397,197 3,764 1.90 
Tax-exempt (TE)
22,080 219 2.51 20,918 192 2.32 
Total investment securities521,045 6,128 2.37 418,115 3,956 1.92 
Other interest-earning assets52,853 1,030 3.93 491,380 1,140 0.47 
Total interest-earning assets (TE)
3,038,445 $78,186 5.14 2,937,070 $55,071 3.74 
Noninterest-earning assets196,662 200,185 
Total assets$3,235,107 $3,137,255 
Interest-bearing liabilities:
Deposits:
Savings, checking and money market$1,324,580 $5,071 0.77 %$1,523,380 $1,203 0.16 %
Certificates of deposit378,518 3,716 1.98 362,361 793 0.44 
Total interest-bearing deposits1,703,098 8,787 1.04 1,885,741 1,996 0.21 
Other borrowings5,596 108 3.88 5,667 107 3.79 
Subordinated debt54,070 1,701 6.29 389 — — 
Short-term FHLB advances210,869 5,232 4.93 — — — 
Long term FHLB advances33,420 457 2.74 25,609 216 1.69 
Total interest-bearing liabilities2,007,053 $16,285 1.63 1,917,406 $2,319 0.24 
Noninterest-bearing liabilities884,167 877,912 
Total liabilities2,891,220 2,795,318 
Shareholders’ equity343,887 341,937 
Total liabilities and shareholders' equity$3,235,107 $3,137,255 
Net interest-earning assets$1,031,392 $1,019,664 
Net interest spread (TE)
$61,901 3.51 %$52,752 3.50 %
Net interest margin (TE)
4.06 %3.58 %
(1)Nonperforming loans are included in the respective average loan balances, net of deferred fees, discounts and loans in process.
43

The following table displays the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. The table distinguishes between (i) changes attributable to volume (changes in average volume between periods times prior year rate), (ii) changes attributable to rate (changes in average rate between periods times prior year volume) and (iii) total increase (decrease).
Three Months Ended June 30,Six Months Ended June 30,
2023 Compared to 2022
2023 Compared to 2022
Change Attributable ToChange Attributable To
(dollars in thousands)RateVolumeIncrease/ (Decrease)RateVolumeIncrease/ (Decrease)
Interest income:
Loans receivable$4,952 $4,274 $9,226 $9,788 $11,265 $21,053 
Investment securities476 172 648 1,081 1,091 2,172 
Other interest-earning assets2,037 (2,345)(308)2,322 (2,432)(110)
Total interest income7,465 2,101 9,566 13,191 9,924 23,115 
Interest expense:
Savings, checking and money market accounts2,784 (434)2,350 3,141 727 3,868 
Certificates of deposit2,092 2 2,094 2,148 775 2,923 
Other borrowings2 (1)1 1 — 1 
Subordinated debt431 419 850 854 847 1,701 
FHLB advances126 3,080 3,206 138 5,335 5,473 
Total interest expense5,435 3,066 8,501 6,282 7,684 13,966 
Increase in net interest income$2,030 $(965)$1,065 $6,909 $2,240 $9,149 

Noninterest Income
Noninterest income for the second quarter of 2023 totaled $3.4 million, down $238,000, or 6.5%, from $3.7 million earned for the same period in 2022.
Noninterest income for the six months ended June 30, 2023 totaled $6.8 million, down $313,000, or 4.4%, from $7.1 million earned for the same period in 2022.

Gains on the sale of loans for the second quarter of 2023 were down $238,000, or 90.2%, from the comparable period in 2022. For the six months ended June 30, 2023, gains on the sale of loans were down $480,000 or 85.3% from the comparable period in 2022 due to a decrease in mortgage loan sales.

The Company recorded a net loss of $249,000 related to the sale of investment securities for the six months ended June 30, 2023. There were no gross gains or gross losses related to the sale of investment securities for the three months ended June 30, 2023 or for the three and six months ended June 30, 2022.

Income from bank card fees for the three and six months ended June 30, 2023 was up $79,000, or 4.8% and $412,000, or 13.3%, respectively, from the comparable period in 2022 primarily due to increased transaction activity by our cardholders.

Noninterest Expense
Noninterest expense for the second quarter of 2023 totaled $21.0 million, down $806,000, or 3.7%, from the second quarter of 2022. Noninterest expense for the second quarter of 2022 included merger-related expenses for the Friendswood acquisition totaling $1.6 million (pre-tax). Noninterest expense decreased over the comparable quarters primarily due to the absence of merger-related expenses, which were partially offset by increases in compensation and benefits, occupancy and franchise tax expenses.
Noninterest expense for the six months ended June 30, 2023 totaled $40.9 million, up $894,000, or 2.2%, from the same period in 2022. Noninterest expense included merger-related expenses totaling $1.9 million (pre-tax) for the six months ended June 30, 2022. The increase in noninterest expense for the six months ended June 30, 2023 related primarily to the growth of the
44

Company's employee base, occupancy and franchise tax expenses as a result of the Friendswood acquisition, which were partially offset by a $739,000 recovery of a previous loss on a foreclosed asset in the first quarter of 2023.
Income Taxes
Income tax expense for the three and six months ended June 30, 2023 totaled $2.5 million and $5.3 million, respectively, compared to $2.1 million and $3.2 million for the three and six months ended June 30, 2022, respectively. The increase in income tax expense over the comparable periods was primarily due to increased taxable earnings. The Company's effective tax rates for the second quarters of 2023 and 2022 were 20.4% and 20.0%, respectively. For the six months ended June 30, 2023 and 2022, the Company's effective tax rates were 20.2% and 19.7%, respectively.
CRITICAL ACCOUNTING ESTIMATES

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

We follow financial accounting and reporting policies that are in accordance with accounting principles generally accepted in the United States. Our accounting policies are discussed in detail in Note 1 - Basis of Presentation in the accompanying notes to the consolidated financial statements included elsewhere in this report and in our 2022 Annual Report on Form 10-K. Not all significant accounting policies require management to make difficult, subjective or complex judgments. However, management believes the policy noted below meets the SEC’s definition of a critical accounting policy.
Allowance for Credit Losses
Management considers the policies related to the allowance for credit losses as the most critical to the financial statement presentation. The total allowance for credit losses includes activity related to allowances calculated in accordance with Accounting Standards Codification 326, Credit Losses. The allowance for credit losses is established through a provision for credit losses charged to current earnings. The amount maintained in the allowance reflects management’s continuing evaluation of the credit losses expected to be recognized over the life of the loans in our portfolio. The allowance for credit losses on loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. For purposes of determining the allowance for credit losses, the loan portfolio is segregated by product types in order to recognize differing risk profiles among categories. Loans that do not share risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative adjustments, including, but not limited to, changes in current and expected future economic conditions, changes in industry experience and industry loan concentrations, changes in the volume and severity of nonperforming assets, changes in lending policies and personnel and changes in the competitive and regulatory environment of the banking industry. Loans that do not share similar risk characteristics are individually evaluated and are excluded from the pooled loan analysis.


Item 3.Quantitative and Qualitative Disclosures About Market Risk.
Quantitative and qualitative disclosures about market risk are presented in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2022, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset/Liability Management and Market Risk”. Additional information at June 30, 2023 is included herein under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Asset/Liability Management”.

Item 4.Controls and Procedures.
Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed,
45

summarized and reported within the time periods specified in the SEC’s rules and regulations and are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the second quarter of 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.
Legal Proceedings.
Not applicable.
Item 1A.
Risk Factors.
There have been no material changes from the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission.
.

Item 2.
Unregistered Sales of Equity Securities and the Use of Proceeds.
(a)    Not applicable.
(b)    Not applicable.
(c)    The Company’s purchases of its common stock made during the quarter ended June 30, 2023 consisted of stock repurchases under the Company’s approved plans and are set forth in the following table.
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that May Yet be Purchased Under the Plan or Programs(1)
April 1 – April 30, 2023
28,269 $32.64 28,269 157,250 
May 1 – May 31, 2023
57,932 30.81 57,932 99,318 
June 1 – June 30, 2023
13,533 32.61 13,533 85,785 
Total99,734 $31.58 99,734 85,785 
(1)On October 26, 2021, the Company announced the approval of a new repurchase program (the “2021 Repurchase Plan”). Under the 2021 Repurchase Plan, the Company may purchase up to an additional 430,000 shares, or approximately 5% of the Company’s outstanding common stock.
Item 3.
Defaults Upon Senior Securities.
(a)    Not applicable.
(b)    Not applicable.

Item 4.
Mine Safety Disclosures.
Not applicable.

Item 5.
Other Information.
(a)    Not applicable.
(b)    Not applicable.
46

(c)    During the fiscal quarter ended June 30, 2023, none of the Company’s directors or executive officers none of our directors or executive officers adopted, terminated or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement.

Item 6.
Exhibits and Financial Statement Schedules.
No.    DescriptionLocation
4.1Indenture, dated June 30, 2022, by and between Home Bancorp, Inc. and UMB Bank, National Association, as trustee.(incorporated by reference from the like-numbered exhibit included in Home Bancorp’s Current Report on Form 8-K, dated as of June 30, 2022 and filed July 1, 2022 (SEC File No. 001-34190))
31.1
Filed herewith
31.2
Filed herewith
32.0
Filed herewith
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definitions Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover page Interactive Data File (embedded within the Inline XBRL document)

47

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HOME BANCORP, INC.
August 4, 2023By:/s/ John W. Bordelon
John W. Bordelon
Chairman of the Board, President and Chief Executive Officer
August 4, 2023By:/s/ David T. Kirkley
David T. Kirkley
Senior Executive Vice President and Chief Financial Officer
August 4, 2023By:/s/ Mary H. Hopkins
Mary H. Hopkins
Home Bank, N. A. Senior Vice President and Director of Financial Management

48

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In most cases it can be easily calculated by multiplying the share price with the amount of outstanding shares.

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