UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended: September 30, ~~2020~~2021


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

For the transition period from to

Commission File Number: 001-34190

HOME BANCORP, INC.

(Exact name of Registrant as specified in its charter)


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

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

Not Applicable

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

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock

HBCP

NASDAQ Stock Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ NONo ☐

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 ☒ NONo ☐

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 ☐ NONo ☒

At ~~November 4, 2020,~~October 29, 2021, the registrant had ~~8,755,250~~8,523,524 shares of common stock, $0.01 par value, outstanding.

HOME BANCORP, INC. and SUBSIDIARY

TABLE OF CONTENTS


		~~Page~~
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.	Managements’ Discussion and Analysis of Financial Condition and Results of Operations	3536
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	54
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	56
SIGNATURES		57

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.~~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.~~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
PCI	–	Purchased credit impaired
PPP	–	Paycheck Protection Program
SBA	–	Small Business Association
SEC	–	Securities and Exchange Commission
TDR	–	Troubled debt restructuring
TE	–	Taxable equivalent
U.S.	–	United States

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


	(Unaudited)		(Audited)
(dollars in thousands)	September 30, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	413,694	$	187,952
Interest-bearing deposits in banks	349		349
Investment securities available for sale, at fair value	304,125		254,752
Investment securities held to maturity (fair values of $2,147 and $2,996, respectively)	2,110		2,934
Mortgage loans held for sale	3,476		9,559
Loans, net of unearned income	1,875,176		1,979,954
Allowance for loan losses	(24,149)		(32,963)
Total loans, net of unearned income and allowance for loan losses	1,851,027		1,946,991
Office properties and equipment, net	44,331		45,497
Cash surrender value of bank-owned life insurance	40,142		40,334
Goodwill and core deposit intangibles	62,229		63,112
Accrued interest receivable and other assets	41,983		40,370
Total Assets	$	2,763,466	$	2,591,850
Liabilities
Deposits:
Noninterest-bearing	$	728,352	$	615,700
Interest-bearing	1,637,365		1,598,121
Total Deposits	2,365,717		2,213,821
Other borrowings	5,539		5,539
Long-term Federal Home Loan Bank advances	26,430		28,824
Accrued interest payable and other liabilities	21,631		21,824
Total Liabilities	2,419,317		2,270,008
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; 8,523,473 and 8,740,104 shares issued and outstanding, respectively	85		87
Additional paid-in capital	164,316		164,988
Unallocated common stock held by:
Employee Stock Ownership Plan (ESOP)	(2,499)		(2,767)
Recognition and Retention Plan (RRP)	(14)		(22)
Retained earnings	180,327		154,282
Accumulated other comprehensive income	1,934		5,274
Total Shareholders’ Equity	344,149		321,842
Total Liabilities and Shareholders’ Equity	$	2,763,466	$	2,591,850

(Unaudited) (Audited)
September 30, December 31,
(dollars in thousands) 2020 2019
Assets
Cash and cash equivalents $ 185,836 $ 39,847
Interest-bearing deposits in banks 349 449
Investment securities available for sale, at fair value 251,578 257,321
Investment securities held to maturity (fair values of $3,008 and $7,194, respectively) 2,942 7,149
Mortgage loans held for sale 21,045 6,990
Loans, net of unearned income 1,955,297 1,714,361
Allowance for loan losses (33,002) (17,868)
Total loans, net of unearned income and allowance for loan losses 1,922,295 1,696,493
Office properties and equipment, net 45,696 46,425
Cash surrender value of bank-owned life insurance 40,184 39,466
Goodwill and core deposit intangibles 63,439 64,472
Accrued interest receivable and other assets 45,836 41,853
Total Assets 2,579,200 2,200,465
Liabilities
Deposits:
Noninterest-bearing 629,345 437,828
Interest-bearing 1,578,149 1,383,147
Total Deposits 2,207,494 1,820,975
Other borrowings 5,539 5,539
Long-term Federal Home Loan Bank advances 31,445 40,620
Accrued interest payable and other liabilities 21,398 17,002
Total Liabilities 2,265,876 1,884,136
Shareholders’ Equity
Preferred stock, $0.01 par value - 10,000,000 shares authorized; NaN issued 0 0
Common stock, $0.01 par value - 40,000,000 shares authorized; 8,831,406 and 9,252,418
shares issued and outstanding, respectively
88 93
Additional paid-in capital 165,522 168,545
Unallocated common stock held by:
Employee Stock Ownership Plan (ESOP) (2,857) (3,124)
Recognition and Retention Plan (RRP) (23) (35)
Retained earnings 145,373 150,158
Accumulated other comprehensive income 5,221 692
Total Shareholders’ Equity 313,324 316,329
Total Liabilities and Shareholders’ Equity $ 2,579,200 $ 2,200,465

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands, except per share data)	(dollars in thousands, except per share data)	2020		2019		2020		2019		(dollars in thousands, except per share data)	2021		2020		2021		2020
Interest Income	Interest Income									Interest Income
Loans, including fees	Loans, including fees	$	24,769	$	23,562	$	72,839	$	70,572	Loans, including fees	$	27,045	$	24,769	$	77,362	$	72,839
Investment securities:	Investment securities:									Investment securities:
Taxable interest	Taxable interest	897		1,401		3,308		4,655		Taxable interest	1,108		897		3,069		3,308
Tax-exempt interest	Tax-exempt interest	70		114		253		397		Tax-exempt interest	81		70		262		253
Other investments and deposits	Other investments and deposits	106		397		361		1,140		Other investments and deposits	189		106		421		361
Total interest income	Total interest income	25,842		25,474		76,761		76,764		Total interest income	28,423		25,842		81,114		76,761
Interest Expense	Interest Expense									Interest Expense
Deposits	Deposits	2,368		4,050		9,047		11,116		Deposits	1,120		2,368		4,256		9,047
Other borrowings	Other borrowings	53		53		159		159		Other borrowings	53		53		159		159
Short-term Federal Home Loan Bank advances	Short-term Federal Home Loan Bank advances	0		0		23		0		Short-term Federal Home Loan Bank advances	—		—		—		23
Long-term Federal Home Loan Bank advances	Long-term Federal Home Loan Bank advances	149		230		520		751		Long-term Federal Home Loan Bank advances	116		149		360		520
Total interest expense	Total interest expense	2,570		4,333		9,749		12,026		Total interest expense	1,289		2,570		4,775		9,749
Net interest income	Net interest income	23,272		21,141		67,012		64,738		Net interest income	27,134		23,272		76,339		67,012
Provision for loan losses		0		1,146		12,728		2,301
Net interest income after provision for loan losses		23,272		19,995		54,284		62,437
(Reversal) provision for loan losses										(Reversal) provision for loan losses	(2,385)		—		(7,513)		12,728
Net interest income after (reversal) provision for loan losses										Net interest income after (reversal) provision for loan losses	29,519		23,272		83,852		54,284
Noninterest Income	Noninterest Income									Noninterest Income
Service fees and charges	Service fees and charges	1,123		1,516		3,529		4,396		Service fees and charges	1,260		1,123		3,478		3,529
Bank card fees	Bank card fees	1,331		1,141		3,595		3,414		Bank card fees	1,519		1,331		4,416		3,595
Gain on sale of loans, net	Gain on sale of loans, net	904		355		1,843		758		Gain on sale of loans, net	415		904		2,142		1,843
Income from bank-owned life insurance	Income from bank-owned life insurance	231		1,464		718		1,831		Income from bank-owned life insurance	1,938		231		2,384		718
Loss on sale of assets, net	Loss on sale of assets, net	0		(8)		(11)		(336)		Loss on sale of assets, net	(3)		—		(460)		(11)
Other income	Other income	205		306		581		853		Other income	254		205		777		581
Total noninterest income	Total noninterest income	3,794		4,774		10,255		10,916		Total noninterest income	5,383		3,794		12,737		10,255
Noninterest Expense	Noninterest Expense									Noninterest Expense
Compensation and benefits	Compensation and benefits	9,740		10,266		28,518		28,977		Compensation and benefits	9,809		9,740		29,160		28,518
Occupancy	Occupancy	1,686		1,791		5,075		5,405		Occupancy	1,717		1,686		5,146		5,075
Marketing and advertising	Marketing and advertising	288		418		746		997		Marketing and advertising	399		288		838		746
Data processing and communication	Data processing and communication	1,851		1,764		5,430		4,782		Data processing and communication	2,118		1,851		6,263		5,430
Professional services	Professional services	197		227		665		684		Professional services	234		197		685		665
Forms, printing and supplies	Forms, printing and supplies	140		172		471		514		Forms, printing and supplies	158		140		480		471
Franchise and shares tax	Franchise and shares tax	378		399		1,156		1,196		Franchise and shares tax	360		378		1,079		1,156
Regulatory fees	Regulatory fees	526		127		1,004		717		Regulatory fees	301		526		986		1,004
Foreclosed assets and ORE, net	Foreclosed assets and ORE, net	162		47		324		328		Foreclosed assets and ORE, net	74		162		298		324
Amortization of acquisition intangible	Amortization of acquisition intangible	338		393		1,033		1,201		Amortization of acquisition intangible	291		338		884		1,033
Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	0		0		1,272		0		Provision for credit losses on unfunded commitments	—		—		375		—
Other expenses	Other expenses	810		1,006		2,563		3,052		Other expenses	970		810		2,771		2,563
Total noninterest expense	Total noninterest expense	16,116		16,610		48,257		47,853		Total noninterest expense	16,431		16,116		48,965		46,985
Income before income tax expense	Income before income tax expense	10,950		8,159		16,282		25,500		Income before income tax expense	18,471		10,950		47,624		17,554
Income tax expense	Income tax expense	2,168		1,303		3,102		4,174		Income tax expense	3,412		2,168		9,241		3,369
Net Income	Net Income	$	8,782	$	6,856	$	13,180	$	21,326	Net Income	$	15,059	$	8,782	$	38,383	$	14,185
Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	1.01	$	0.76	$	1.51	$	2.34	Basic	$	1.80	$	1.01	$	4.56	$	1.61
Diluted	Diluted	$	1.01	$	0.75	$	1.51	$	2.32	Diluted	$	1.79	$	1.01	$	4.54	$	1.61
Cash dividends declared per common share	Cash dividends declared per common share	$	0.22	$	0.21	$	0.66	$	0.62	Cash dividends declared per common share	$	0.23	$	0.22	$	0.68	$	0.66

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2020		2019		2020		2019		(dollars in thousands)	2021		2020		2021		2020
Net Income	Net Income	$	8,782	$	6,856	$	13,180	$	21,326	Net Income	$	15,059	$	8,782	$	38,383	$	14,185
Other Comprehensive Income
Unrealized gains on available for sale investment securities		39		14		5,815		4,287
Other Comprehensive (Loss) Income										Other Comprehensive (Loss) Income
Unrealized (losses) gains on available for sale investment securities										Unrealized (losses) gains on available for sale investment securities	(1,897)		39		(5,201)		5,815
Unrealized gains (losses) on cash flow hedges	Unrealized gains (losses) on cash flow hedges	76		0		(82)		0		Unrealized gains (losses) on cash flow hedges	55		76		974		(82)
Tax effect	Tax effect	(24)		(3)		(1,204)		(900)		Tax effect	387		(24)		887		(1,204)
Other comprehensive income, net of taxes		91		11		4,529		3,387
Other comprehensive (loss) income, net of taxes										Other comprehensive (loss) income, net of taxes	(1,455)		91		(3,340)		4,529
Comprehensive Income	Comprehensive Income	$	8,873	$	6,867	$	17,709	$	24,713	Comprehensive Income	$	13,604	$	8,873	$	35,043	$	18,714

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(dollars in thousands, except per share data) Common
stock Additional
Paid-in
capital Unallocated
Common Stock
Held by ESOP Unallocated
Common Stock
Held by RRP Retained
Earnings Accumulated Other Comprehensive Income Total
Balance, June 30, 2019 $ 94 $ 169,233 $ (3,303) $ (48) $ 146,348 $ 1,170 $ 313,494
Net income 6,856 6,856
Other comprehensive income 11 11
Purchase of Company’s common stock at cost, 123,902 shares (1) (1,238) (3,385) (4,624)
Cash dividends declared, $0.21 per share (1,976) (1,976)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 5,071 shares — 130 (2) 128
Exercise of stock options 0 143 143
RRP shares released for allocation (1) 1 0
ESOP shares released for allocation 318 90 408
Share-based compensation cost 237 237
Balance, September 30, 2019 $ 93 $ 168,822 $ (3,213) $ (47) $ 147,841 $ 1,181 $ 314,677
Balance, June 30, 2020 $ 90 $ 166,494 $ (2,946) $ (24) $ 140,582 $ 5,130 $ 309,326
Net income 8,782 8,782
Other comprehensive income 91 91
Purchase of Company’s common stock at cost, 135,224 shares (2) (1,351) (2,020) (3,373)
Cash dividends declared, $0.22 per share (1,970) (1,970)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 529 shares — 0 (1) (1)
Exercise of stock options 0 0 0
RRP shares released for allocation (1) 1 0
ESOP shares released for allocation 201 89 290
Share-based compensation cost 179 179
Balance, September 30, 2020 $ 88 $ 165,522 $ (2,857) $ (23) $ 145,373 $ 5,221 $ 313,324


(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		Total
Balance, June 30, 2020	$	90	$	166,494	$	(2,946)	$	(24)	$	142,327	$	5,130	$	311,071
Net income									8,782				8,782
Other comprehensive income											91		91
Purchase of Company’s common stock at cost, 135,224 shares	(2)		(1,351)						(2,021)				(3,374)
Cash dividends declared, $0.22 per share									(1,970)				(1,970)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 529 shares	—		—						(1)				(1)
Exercise of stock options	—		—										—
RRP shares released for allocation			(1)				1						—
ESOP shares released for allocation			201		89								290
Share-based compensation cost			179										179
Balance, September 30, 2020	$	88	$	165,522	$	(2,857)	$	(23)	$	147,117	$	5,221	$	315,068
Balance, June 30, 2021	$	87	$	165,296	$	(2,589)	$	(15)	$	171,644	$	3,389	$	337,812
Net income									15,059				15,059
Other comprehensive loss											(1,455)		(1,455)
Purchase of Company’s common stock at cost, 159,762 shares	(2)		(1,596)						(4,386)				(5,984)
Cash dividends declared, $0.23 per share									(1,988)				(1,988)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 3,549 shares	—		87						(2)				85
Exercise of stock options	—		26										26
RRP shares released for allocation			(1)				1						—
ESOP shares released for allocation			269		90								359
Share-based compensation cost			235										235
Balance, September 30, 2021	$	85	$	164,316	$	(2,499)	$	(14)	$	180,327	$	1,934	$	344,149

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - CONTINUED

(Unaudited)


(dollars in thousands, except per share data)	(dollars in thousands, except per share data)	Common stock		Additional Paid-in capital		Unallocated Common Stock Held by ESOP		Unallocated Common Stock Held by RRP		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total		(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		Total
Balance, December 31, 2018		$	95	$	168,243	$	(3,481)	$	(58)	$	141,447	$	(2,206)	$	304,040
Net income										21,326				21,326
Other comprehensive income												3,387		3,387
Purchase of Company’s common stock at cost, 341,095 shares		(3)		(3,408)						(9,008)				(12,419)
Cash dividends declared, $0.62 per share										(5,858)				(5,858)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 24,392 shares		—		233						(66)				167
Exercise of stock options		1		2,228										2,229
RRP shares released for allocation				(11)				11						0
ESOP shares released for allocation				922		268								1,190
Share-based compensation cost				615										615
Balance, September 30, 2019		$	93	$	168,822	$	(3,213)	$	(47)	$	147,841	$	1,181	$	314,677
Balance, December 31, 2019	Balance, December 31, 2019	$	93	$	168,545	$	(3,124)	$	(35)	$	150,158	$	692	$	316,329	Balance, December 31, 2019	$	93	$	168,545	$	(3,124)	$	(35)	$	150,158	$	692	$	316,329
Cumulative effect of change in accounting principle due the adoption of ASC Topic 326, net of tax	Cumulative effect of change in accounting principle due the adoption of ASC Topic 326, net of tax									(4,725)				(4,725)		Cumulative effect of change in accounting principle due the adoption of ASC Topic 326, net of tax									(3,985)				(3,985)
Net income	Net income									13,180				13,180		Net income									14,185				14,185
Other comprehensive income	Other comprehensive income											4,529		4,529		Other comprehensive income											4,529		4,529
Purchase of Company’s common stock at cost, 438,892 shares	Purchase of Company’s common stock at cost, 438,892 shares	(5)		(4,384)						(7,219)				(11,608)		Purchase of Company’s common stock at cost, 438,892 shares	(5)		(4,384)						(7,220)				(11,609)
Cash dividends declared, $0.66 per share	Cash dividends declared, $0.66 per share									(5,978)				(5,978)		Cash dividends declared, $0.66 per share									(5,978)				(5,978)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 16,175 shares	Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 16,175 shares	—		34						(43)				(9)		Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 16,175 shares	—		34						(43)				(9)
Exercise of stock options	Exercise of stock options	0		30										30		Exercise of stock options	—		30										30
RRP shares released for allocation	RRP shares released for allocation			(12)				12						0		RRP shares released for allocation			(12)				12						—
ESOP shares released for allocation	ESOP shares released for allocation			680		267								947		ESOP shares released for allocation			680		267								947
Share-based compensation cost	Share-based compensation cost			629										629		Share-based compensation cost			629										629
Balance, September 30, 2020	Balance, September 30, 2020	$	88	$	165,522	$	(2,857)	$	(23)	$	145,373	$	5,221	$	313,324	Balance, September 30, 2020	$	88	$	165,522	$	(2,857)	$	(23)	$	147,117	$	5,221	$	315,068
Balance, December 31, 2020																Balance, December 31, 2020	$	87	$	164,988	$	(2,767)	$	(22)	$	154,282	$	5,274	$	321,842
Net income																Net income									38,383				38,383
Other comprehensive loss																Other comprehensive loss											(3,340)		(3,340)
Purchase of Company’s common stock at cost, 243,497 shares																Purchase of Company’s common stock at cost, 243,497 shares	(2)		(2,433)						(6,363)				(8,798)
Cash dividends declared, $0.68 per share																Cash dividends declared, $0.68 per share									(5,906)				(5,906)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 22,273 shares																Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 22,273 shares	—		245						(69)				176
Exercise of stock options																Exercise of stock options	—		80										80
RRP shares released for allocation																RRP shares released for allocation			(8)				8						—
ESOP shares released for allocation																ESOP shares released for allocation			849		268								1,117
Share-based compensation cost																Share-based compensation cost			595										595
Balance, September 30, 2021																Balance, September 30, 2021	$	85	$	164,316	$	(2,499)	$	(14)	$	180,327	$	1,934	$	344,149

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Nine Months Ended
September 30,
(dollars in thousands) 2020 2019
Cash flows from operating activities:
Net income $ 13,180 $ 21,326
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 12,728 2,301
Depreciation 2,288 2,107
Amortization and accretion of purchase accounting valuations and intangibles 3,458 4,768
Net amortization of mortgage servicing asset 56 83
Federal Home Loan Bank stock dividends (56) (119)
Net amortization of discount on investments 2,168 1,605
Gain on loans sold, net (1,843) (758)
Proceeds, including principal payments, from loans held for sale 192,232 81,021
Originations of loans held for sale (204,444) (85,086)
Non-cash compensation 1,576 1,805
Deferred income tax (benefit) expense (2,424) 176
Increase in accrued interest receivable and other assets (2,072) (3,961)
Increase in cash surrender value of bank-owned life insurance (718) (636)
Increase in accrued interest payable and other liabilities 1,980 6,404
Net cash provided by operating activities 18,109 31,036
Cash flows from investing activities:
Purchases of securities available for sale (57,187) (46,914)
Proceeds from maturities, prepayments and calls on securities available for sale 66,653 54,775
Proceeds from maturities, prepayments and calls on securities held to maturity 4,130 3,517
Increase in loans, net (245,440) (63,679)
Reimbursement from FDIC for covered assets 0 142
Decrease in interest-bearing deposits in banks 100 490
Proceeds from sale of foreclosed assets 3,039 1,720
Purchase of bank-owned life insurance 0 (10,000)
Proceeds from bank-owned life insurance 0 2,163
Purchases of office properties and equipment (1,570) (3,009)
Proceeds from sale of office properties and equipment 4 53
Purchase of Federal Home Loan Bank stock (1,592) 0
Net cash used in investing activities (231,863) (60,742)
Cash flows from financing activities:
Increase in deposits, net 386,509 58,152
Borrowings on Federal Home Loan Bank advances 119,700 6,010
Repayments of Federal Home Loan Bank advances (128,901) (16,904)
Proceeds from exercise of stock options 30 2,229
Issuance of stock under incentive plans (9) 167
Dividends paid to shareholders (5,978) (5,858)
Purchase of Company’s common stock (11,608) (12,419)
Net cash provided by financing activities 359,743 31,377
Net change in cash and cash equivalents 145,989 1,671
Cash and cash equivalents, beginning 39,847 59,618
Cash and cash equivalents, ending $ 185,836 $ 61,289


	For the Nine Months Ended September 30,
(dollars in thousands)	2021		2020
Cash flows from operating activities:
Net income	$	38,383	$	14,185
Adjustments to reconcile net income to net cash provided by operating activities:
(Reversal) provision for loan losses	(7,513)		12,728
Depreciation	2,301		2,288
Amortization and accretion of purchase accounting valuations and intangibles	2,762		3,458
Net amortization of mortgage servicing asset	—		56
Federal Home Loan Bank stock dividends	(11)		(56)
Net amortization of discount on investments	1,484		2,168
Gain on loans sold, net	(2,142)		(1,843)
Proceeds, including principal payments, from loans held for sale	165,995		192,232
Originations of loans held for sale	(157,770)		(204,444)
Loss on sale of assets, net	460		11
Non-cash compensation	1,712		1,576
Deferred income tax expense (benefit)	1,747		(2,424)
Increase in accrued interest receivable and other assets	(3,612)		(1,818)
Increase in cash surrender value of bank-owned life insurance	(667)		(718)
Increase in accrued interest payable and other liabilities	793		711
Net cash provided by operating activities	43,922		18,110
Cash flows from investing activities:
Purchases of securities available for sale	(125,380)		(57,187)
Proceeds from maturities, prepayments and calls on securities available for sale	64,278		66,653
Proceeds from maturities, prepayments and calls on securities held to maturity	800		4,130
Proceeds from sales of securities available for sale	5,068		—
Decrease (increase) in loans, net	99,621		(245,440)
Increase in interest-bearing deposits in banks	—		100
Proceeds from sale of foreclosed assets	2,274		3,039
Purchases of office properties and equipment	(1,998)		(1,570)
Proceeds from bank-owned life insurance	1,717		—
Proceeds from sale of office properties and equipment	400		4
Purchase of Federal Home Loan Bank stock	—		(1,592)
Net cash provided by (used in) investing activities	46,780		(231,863)
Cash flows from financing activities:
Increase in deposits, net	151,896		386,509
Borrowings on Federal Home Loan Bank advances	—		119,700
Repayments of Federal Home Loan Bank advances	(2,408)		(128,901)
Proceeds from exercise of stock options	80		30
Issuance of stock under incentive plans, net	176		(9)
Dividends paid to shareholders	(5,906)		(5,978)
Purchase of Company’s common stock	(8,798)		(11,609)
Net cash provided by financing activities	135,040		359,742
Net change in cash and cash equivalents	225,742		145,989
Cash and cash equivalents, beginning	187,952		39,847
Cash and cash equivalents, ending	$	413,694	$	185,836

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

HOME BANCORP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in shareholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. Certain reclassifications have been made to prior period balances to conform to the current period presentation. The results of operations for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 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, ~~2019.~~2020.

Purchase and Assumption Agreement

On August 27, 2021, the Company entered into a Purchase and Assumption Agreement ("Agreement") to sell its deposit accounts, certain loans and branch office located in Vicksburg, Mississippi to Vidalia, Louisiana-based Delta Bank. Pursuant to the Agreement, the Bank will sell branch deposits of approximately $15.7 million, approximately $2.3 million in loans, which is included in Loans, net of unearned income on the Consolidated Statements of Financial Condition, and substantially all branch-related real estate, fixed assets and equipment. The Bank will receive a premium based on specified percentages of deposit and loan categories. The Company estimates that it will record a pre-tax loss of approximately $23,000 when the transaction closes, which is expected to occur in the first quarter of 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, ~~2019.~~

~~Accounting Policy for the Allowance for Credit Losses~~

~~During the first quarter of 2020, the Company adopted ASU No. 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~. The new standard significantly changed the impairment model for most financial assets that are measured at amortized cost, including off-balance sheet credit exposures, from an incurred loss model to an expected loss model. Determining the appropriateness of the allowance requires judgment by management about the effect of matters that are inherently uncertain. Changes in factors and forecasts used in evaluating the overall loan portfolio may result in significant changes in the allowance for credit losses and related provision expense in future periods. The allowance level is influenced by loan volumes, loan asset quality ratings, delinquency status, historical credit loss experience, loan performance characteristics, forecasted information and other conditions influencing loss expectations. Changes to the assumptions in the model in future periods could have a material impact on the Company's Consolidated Financial Statements. See ~~Note 2. Recent Accounting Pronouncements~~ ~~for a detailed discussion of the Company's methodologies for estimating expected credit losses.~~

~~Accounting Policy for Derivative Instruments and Hedging Activities~~

~~During the second quarter of 2020, the Company entered into a derivative financial instrument designated as a cash flow hedge to manage interest rate risk. Refer to~~ ~~Note 6. Derivatives and Hedging Activities~~ ~~for additional disclosures pertaining to the three and nine months ended September 30,~~ 2020. ~~FASB ASC 815,~~ ~~Derivatives and Hedging~~ (“ASC 815”), provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.

As required by ASC 815, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.

In accordance with the FASB’s fair value measurement guidance (in ASU 2011-04), the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

There have been no ~~other~~ material changes from the critical accounting policies disclosed in the Company's Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2019.~~2020. In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

2. Recent Accounting Pronouncements

Accounting Standards Adopted in ~~2020~~

~~On January 1, 2020, the Company adopted ASU No. 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,~~ which introduced a new model known as CECL. ASC Topic 326 requires financial assets measured on an amortized cost basis, including loans and held to maturity debt securities, to be presented at an amount net of an allowance for credit losses, which reflects expected losses for the full life of the financial asset. Unfunded lending commitments are also within the scope of this amendment. Under former GAAP, credit losses were not recognized until the occurrence of the loss was probable and entities, in general, did not attempt to estimate credit losses for the full life of financial assets.

ASC Topic 326 also amended the accounting model for purchased financial assets and replaced the guidance for PCI financial assets with the concept of PCD financial assets. For non-PCD assets, the CECL estimate is recognized through an ACL and provision for credit losses. For PCD assets, the CECL estimate is recognized through an ACL with an offset to the cost basis of the PCD asset at the date of acquisition. Subsequent changes in the ACL for PCD assets are recognized through a provision for loan losses. The financial assets formerly classified as PCI are now classified as PCD assets under ASC Topic 326. Under former GAAP, an allowance and related provision expense was only recorded for purchased financial assets if the amount of estimated probable losses exceeded the fair value discount for the financial assets.

In addition, ASC Topic 326 requires expected credit related losses for available for sale debt securities to be recorded through an ACL, while non-credit related losses will continue to be recognized through OCI. The guidance under ASC Topic 326 had no impact on the Company's available for sale debt securities at January 1 or September 30, 2020. Management determined that the declines in the fair value of these securities at such dates were not attributable to credit losses. The Company’s held to maturity debt securities are also required to utilize the CECL approach to estimate expected credit losses. The guidance under ASC Topic 326 had no impact on the Company's held to maturity debt securities at January 1 or September 30, 2020.

~~The Company applied the guidance under~~ ~~ASC Topic 326~~ using the modified retrospective approach for all non-PCD loans and unfunded lending commitments. Upon adoption on January 1, 2020, the Company recorded an after-tax decrease to retained earnings of $4.7 million. The transition adjustment included $3.6 million due to the increase in allowance for non-PCD loan losses and $2.4 million due to the ACL on unfunded lending commitments.

For PCD loans, formerly classified as PCI, the Company applied the guidance under ASC Topic 326 using the prospective transition approach. As a result, the Company adjusted the amortized cost basis of the PCD loans to reclassify $1.0 million of purchase discount to the ALL on January 1, 2020.

The results for reporting periods beginning on or after January 1, 2020 are presented under ASC Topic 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP. The following table illustrates the impact of ASC Topic 326.

(dollars in thousands) December 31, 2019 ASC Topic 326 Adoption Impact January 1, 2020
Allowance for credit losses

One- to four-family first mortgage $ 2,715 $ 986 $ 3,701
Home equity loans and lines 1,084 (1) 1,083
Commercial real estate 6,541 1,974 8,515
Construction and land 2,670 519 3,189
Multi-family residential 572 (245) 327
Commercial and industrial 3,694 1,243 4,937
Consumer 592 157 749
Total allowance for loan losses 17,868 4,633 22,501
Unfunded lending commitments(1)
0 2,365 2,365
Total allowance for credit losses $ 17,868 $ 6,998 $ 24,866
Retained Earnings
Total allowance increase $ 6,998
Balance sheet reclassification(2)
(996)
Decrease to retained earnings, pre-tax 6,002
Tax effect (1,277)
Decrease to retained earnings, net of tax effect $ 4,725

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

~~(2)~~For PCD loans, formerly classified as PCI, the Company applied the guidance under CECL using the prospective transition approach. As a result, the Company adjusted the amortized cost basis of the PCD loans to reclassify the purchase discount to the ALL on January 1, 2020.

Under ASC Topic 326, the ACL is measured on a pool basis when similar risk characteristics exist and is maintained at an amount which management believes is a current estimate of the expected credit losses for the full life of the relevant pool of loans and related unfunded lending commitments. The Company's CECL calculation estimates loan losses using the discounted cash flow method for all loan pools, except for the Company's credit card portfolio. Loan losses for the credit card portfolio are estimated using the remaining life method due to the limited complexity and size of this portfolio. The discounted cash flow analysis uses loan-level term information (e.g., maturity date, payment amount, interest rate, etc.) and pool-level assumptions (e.g., default rates, prepayment speeds, etc.) to produce expected future cash flows for the full life of every loan in the pool. The expected future cash flows are discounted and results are then aggregated to produce a net present value of the pool and ultimately the ACL requirement for the pool. The remaining life method applies a loss rate to a given pool of loans over the estimate remaining life of the given pool. The remaining life of the pool is based on historical data. The loss rates computed for each pool and expected pool-level funding rates are applied to the related unfunded lending commitments to calculate an ACL on unfunded amounts. For each pool of loans, management also evaluates and applies qualitative adjustments to the calculated ACL based on several factors, including, but not limited to, changes in current and expected future economic conditions, changes in industry experience and loan concentrations, changes in the volume and severity of nonperforming assets, changes in lending policies and personnel and changes in the competitive and regulatory environment of the banking industry.

Loans that do not share similar risk characteristics are individually evaluated and are excluded from the pooled loan analysis. Individually analyzed loans generally include larger commercial real estate loans, multi-family residential loans, construction and land loans, commercial and industrial loans and other loans as deem appropriate by management for which it is probable that all the amounts due under the contractual terms of the loan will not be collected. The ACL for loans that are individually evaluated is based on a comparison of the recorded investment in the loan with either the expected cash flows discounted using the loan’s original effective interest rate, observable market price for the loan or the fair value of the collateral underlying certain collateral-dependent loans.

~~The Company has identified the following portfolio segments based on the risk characteristics described in the table for its pooled loan analysis under ASC Topic 326:~~


~~Loan Pool~~						~~Risk Characteristics~~
~~One- to four-family first mortgage~~						This category consists of loans secured by first liens on residential real estate. The performance of these loans may be adversely affected by, among other factors, unemployment rates, local residential real estate market conditions and the interest rate environment. Generally, these loans are for longer terms than home equity loans and lines.
~~Home equity loans and lines~~						This category consists of loans secured by first and junior liens on residential real estate. The performance of these loans may be adversely affected by, among other factors, unemployment rates, local residential real estate market conditions and the interest rate environment.
~~Commercial real estate~~						This category consists of loans primarily secured by office and industrial buildings, warehouses, retail shopping facilities and various special purpose properties, including hotels and restaurants. The performance of CRE loans may be adversely affected by, among other factors, conditions specific to the relevant industry, the real estate market for the property type and geographic region where the property or borrower is located.
~~Construction and land~~						This category consists of loans to finance the ground-up construction and/or improvement of residential and commercial properties and loans secured by land. The performance of C&D loans is generally dependent upon the successful completion of improvements and/or land development for the end user, the sale of the property to a third party, or a secondary source of cash flow from the owners. The successful completion of planned improvements and development may be adversely affected by changes in the estimated property value upon completion of construction, projected costs and other conditions leading to project delays.
~~Multi-family residential~~						This category consists of loans secured by apartment or residential buildings with five or more units used to accommodate households on a temporary or permanent basis. The performance of multi-family loans is generally dependent on the receipt of rental income from the tenants who occupy the subject property. The occupancy rate of the subject property and the ability of the tenants to pay rent may be adversely affected by the location of the subject property and local economic conditions.
~~Commercial and industrial~~						This category consists of secured and unsecured loans to purchase capital equipment, agriculture operating loans and other business loans for working capital and operating purposes. Secured loans are primarily secured by accounts receivable, inventory and other business assets. The performance of C&I loans may be adversely affected by, among other factors, conditions specific to the relevant industry, fluctuations in the value of the collateral and individual performance factors related to the borrower.
~~Consumer~~						This category consists of loans to individuals for household, family and other personal use. The performance of these loans may be adversely affected by national and local economic conditions, unemployment rates and other factors affecting the borrower's income available to service the debt.
~~Credit cards~~						This category consists of unsecured revolving lines of credit for personal and commercial use. Credit card loans are generally smaller in size and are less complex relative to larger loan categories. Due to their unsecured nature, historical loss rates for credit card loans are generally higher than the loss rates on loans secured by real estate.

In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” The ASU removed, modified and added certain disclosure requirements for fair value measurements. Under the ASU, public entities are no longer required to disclose the valuation processes for Level 3 fair value measurements, but will be required to disclose the range and weighted average used to develop significant unobservable inputs and the change in unrealized gains and losses included in other comprehensive income for Level 3 fair value measurements. The ASU also removed the requirement to disclose transfers between Level 1 and Level 2 fair value measurements and the policy for those transfers. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019 and did not impact our Consolidated Financial Statements, as the update only revises disclosure requirements.

~~Issued but Not Yet Adopted Accounting Standards~~2021

In December 2019, the FASB issued ASU No. 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)." The amendments in this ASU simplified the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improved the consistent application of and simplified GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in the ASU are effective for fiscal years and interim periods beginning after December 15, 2020. The ~~Company does not expect the~~ adoption of this ASU todid not impact ~~the~~our Consolidated Financial Statements.

3. Investment Securities

The following ~~table summarizes~~tables summarize the Company’s available for sale and held to maturity investment securities at September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.


(dollars in thousands)	(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses				Fair Value		(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2020						Less Than 1 Year		Over 1 Year
September 30, 2021												September 30, 2021
Available for sale:	Available for sale:											Available for sale:
U.S. agency mortgage-backed	U.S. agency mortgage-backed	$	118,843	$	4,352	$	43	$	0	$	123,152	U.S. agency mortgage-backed	$	213,091	$	2,580	$	2,155	$	213,516
Collateralized mortgage obligations	Collateralized mortgage obligations	97,371		1,853		62		5		99,157		Collateralized mortgage obligations	35,201		965		1		36,165
Municipal bonds	Municipal bonds	20,315		549		47		0		20,817		Municipal bonds	43,348		384		634		43,098
U.S. government agency	U.S. government agency	6,358		67		0		12		6,413		U.S. government agency	5,731		39		9		5,761
Corporate bonds	Corporate bonds	2,000		39		0		0		2,039		Corporate bonds	5,500		94		9		5,585
Total available for sale	Total available for sale	$	244,887	$	6,860	$	152	$	17	$	251,578	Total available for sale	$	302,871	$	4,062	$	2,808	$	304,125
Held to maturity:	Held to maturity:											Held to maturity:
Municipal bonds	Municipal bonds	$	2,942	$	66	$	0	$	0	$	3,008	Municipal bonds	$	2,110	$	37	$	—	$	2,147
Total held to maturity	Total held to maturity	$	2,942	$	66	$	0	$	0	$	3,008	Total held to maturity	$	2,110	$	37	$	—	$	2,147


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2020
Available for sale:
U.S. agency mortgage-backed	$	138,669	$	4,162	$	19	$	142,812
Collateralized mortgage obligations	74,112		1,565		57		75,620
Municipal bonds	27,306		717		12		28,011
U.S. government agency	6,210		55		10		6,255
Corporate bonds	2,000		54		—		2,054
Total available for sale	$	248,297	$	6,553	$	98	$	254,752
Held to maturity:
Municipal bonds	$	2,934	$	62	$	—	$	2,996
Total held to maturity	$	2,934	$	62	$	—	$	2,996

(dollars in thousands) Amortized
Cost Gross
Unrealized
Gains Gross Unrealized Losses Fair Value
December 31, 2019 Less Than
1 Year Over 1
Year
Available for sale:
U.S. agency mortgage-backed $ 94,446 $ 1,081 $ 292 $ 63 $ 95,172
Collateralized mortgage obligations 142,408 701 300 358 142,451
Municipal bonds 15,895 166 56 0 16,005
U.S. government agency 3,696 11 4 10 3,693
Total available for sale $ 256,445 $ 1,959 $ 652 $ 431 $ 257,321
Held to maturity:
Municipal bonds $ 7,149 $ 45 $ 0 $ 0 $ 7,194
Total held to maturity $ 7,149 $ 45 $ 0 $ 0 $ 7,194

118

The estimated fair value and amortized cost by contractual maturity of the Company’s investment securities as of September 30, ~~2020~~2021 are shown in the following tables. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. The expected maturity of a security may differ from its contractual maturity because of prepayments or the exercise of call options. Accordingly, actual maturities may differ from contractual maturities.


(dollars in thousands)	(dollars in thousands)	One Year or Less		After One Year through Five Years		After Five Years through Ten Years		After Ten Years		Total		(dollars in thousands)	One Year or Less		After One Year through Five Years		After Five Years through Ten Years		After Ten Years		Total
Fair Value	Fair Value											Fair Value
Available for sale:	Available for sale:											Available for sale:
U.S. agency mortgage-backed	U.S. agency mortgage-backed	$	16	$	16,352	$	47,727	$	59,057	$	123,152	U.S. agency mortgage-backed	$	4,150	$	18,271	$	70,572	$	120,523	$	213,516
Collateralized mortgage obligations	Collateralized mortgage obligations	1,455		15,591		30,339		51,772		99,157		Collateralized mortgage obligations	638		19,095		6,034		10,398		36,165
Municipal bonds	Municipal bonds	1,325		2,297		8,659		8,536		20,817		Municipal bonds	356		1,351		10,234		31,157		43,098
U.S. government agency	U.S. government agency	0		0		5,991		422		6,413		U.S. government agency	—		—		5,358		403		5,761
Corporate bonds	Corporate bonds	0		0		2,039		0		2,039		Corporate bonds	—		—		5,585		—		5,585
Total securities available for sale		$	2,796	$	34,240	$	94,755	$	119,787	$	251,578
Total available for sale												Total available for sale	$	5,144	$	38,717	$	97,783	$	162,481	$	304,125
Held to maturity:	Held to maturity:											Held to maturity:
Municipal bonds	Municipal bonds	$	0	$	803	$	2,205	$	0	$	3,008	Municipal bonds	$	—	$	1,127	$	1,020	$	—	$	2,147
Total securities held to maturity		$	0	$	803	$	2,205	$	0	$	3,008
Total held to maturity												Total held to maturity	$	—	$	1,127	$	1,020	$	—	$	2,147

(dollars in thousands)	(dollars in thousands)	One Year or Less		After One Year through Five Years		After Five Years through Ten Years		After Ten Years		Total		(dollars in thousands)	One Year or Less		After One Year through Five Years		After Five Years through Ten Years		After Ten Years		Total
Amortized Cost	Amortized Cost											Amortized Cost
Available for sale:	Available for sale:											Available for sale:
U.S. agency mortgage-backed	U.S. agency mortgage-backed	$	16	$	15,802	$	45,105	$	57,920	$	118,843	U.S. agency mortgage-backed	$	4,145	$	17,646	$	69,870	$	121,430	$	213,091
Collateralized mortgage obligations	Collateralized mortgage obligations	1,455		14,930		29,529		51,457		97,371		Collateralized mortgage obligations	627		18,514		5,825		10,235		35,201
Municipal bonds	Municipal bonds	1,318		2,273		8,265		8,459		20,315		Municipal bonds	355		1,349		10,004		31,640		43,348
U.S. government agency	U.S. government agency	0		0		5,929		429		6,358		U.S. government agency	—		—		5,324		407		5,731
Corporate bonds	Corporate bonds	0		0		2,000		0		2,000		Corporate bonds	—		—		5,500		—		5,500
Total securities available for sale		$	2,789	$	33,005	$	90,828	$	118,265	$	244,887
Total available for sale												Total available for sale	$	5,127	$	37,509	$	96,523	$	163,712	$	302,871
Held to maturity:	Held to maturity:											Held to maturity:
Municipal bonds	Municipal bonds	$	0	$	800	$	2,142	$	0	$	2,942	Municipal bonds	$	—	$	1,099	$	1,011	$	—	$	2,110
Total securities held to maturity		$	0	$	800	$	2,142	$	0	$	2,942
Total held to maturity												Total held to maturity	$	—	$	1,099	$	1,011	$	—	$	2,110

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.

129

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)	(dollars in thousands)	Less Than 1 Year				Over 1 Year				Total				(dollars in thousands)	Less Than 1 Year				Over 1 Year				Total
September 30, 2020		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
September 30, 2021														September 30, 2021	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale:														Available for sale:
U.S. agency mortgage-backed	U.S. agency mortgage-backed	$	14,660	$	43	$	0	$	0	$	14,660	$	43	U.S. agency mortgage-backed	$	141,158	$	2,155	$	—	$	—	$	141,158	$	2,155
Collateralized mortgage obligations	Collateralized mortgage obligations	21,557		62		2,314		5		23,871		67		Collateralized mortgage obligations	134		—		1,658		1		1,792		1
Municipal bonds	Municipal bonds	4,222		47		0		0		4,222		47		Municipal bonds	29,182		601		1,253		33		30,435		634
U.S. government agency	U.S. government agency	0		0		1,276		12		1,276		12		U.S. government agency	—		—		1,049		9		1,049		9
Corporate bonds	Corporate bonds	0		0		0		0		0		0		Corporate bonds	3,491		9		—		—		3,491		9
Total available for sale	Total available for sale	$	40,439	$	152	$	3,590	$	17	$	44,029	$	169	Total available for sale	$	173,965	$	2,765	$	3,960	$	43	$	177,925	$	2,808
Held to maturity:	Held to maturity:													Held to maturity:
Municipal bonds	Municipal bonds	$	0	$	0	$	0	$	0	$	0	$	0	Municipal bonds	$	—	$	—	$	—	$	—	$	—	$	—
Total held to maturity	Total held to maturity	$	0	$	0	$	0	$	0	$	0	$	0	Total held to maturity	$	—	$	—	$	—	$	—	$	—	$	—


(dollars in thousands)	(dollars in thousands)	Less Than 1 Year				Over 1 Year				Total				(dollars in thousands)	Less Than 1 Year				Over 1 Year				Total
December 31, 2019		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
December 31, 2020														December 31, 2020	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale:														Available for sale:
U.S. agency mortgage-backed	U.S. agency mortgage-backed	$	28,847	$	292	$	5,148	$	63	$	33,995	$	355	U.S. agency mortgage-backed	$	13,666	$	19	$	—	$	—	$	13,666	$	19
Collateralized mortgage obligations	Collateralized mortgage obligations	50,004		300		37,131		358		87,135		658		Collateralized mortgage obligations	13,615		55		2,309		2		15,924		57
Municipal bonds	Municipal bonds	3,044		56		0		0		3,044		56		Municipal bonds	1,278		12		—		—		1,278		12
U.S. government agency	U.S. government agency	1,213		4		466		10		1,679		14		U.S. government agency	—		—		1,196		10		1,196		10
Corporate bonds														Corporate bonds	—		—		—		—		—		—
Total available for sale	Total available for sale	$	83,108	$	652	$	42,745	$	431	$	125,853	$	1,083	Total available for sale	$	28,559	$	86	$	3,505	$	12	$	32,064	$	98
Held to maturity:	Held to maturity:													Held to maturity:
Municipal bonds	Municipal bonds	$	0	$	0	$	0	$	0	$	0	$	0	Municipal bonds	$	—	$	—	$	—	$	—	$	—	$	—
Total held to maturity	Total held to maturity	$	0	$	0	$	0	$	0	$	0	$	—	Total held to maturity	$	—	$	—	$	—	$	—	$	—	$	—

At September 30, ~~2020, 36~~2021, 62 of the Company’s debt securities had unrealized losses totaling ~~0.4%~~1.6% of the individual securities’ amortized cost basis and ~~0.1%~~0.9% of the Company’s total amortized cost basis of the investment securities portfolio. At such date, 34 of the 3662 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, 0no ACL was recorded for available for sale investment securities at September 30, ~~2020.~~2021.

At September 30, ~~2020,~~2021, it was determined that 0no 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 ~~table presents~~tables present the amortized cost of the Company's held-to-maturity securities by credit quality rating at September 30, 2021 and December 31, 2020.

Credit Ratings

(dollars in thousands)

AAA/AA/A

BBB/BB/B

Total

(dollars in thousands)

AAA/AA/A

BBB/BB/B

Total

September 30, 2020

September 30, 2021

Held to maturity:

Municipal bonds

2,942

Municipal bonds

2,110

—

2,110


	Credit Ratings
(dollars in thousands)	AAA/AA/A		BBB/BB/B		Total
December 31, 2020
Held to maturity:
Municipal bonds	$	2,934	$	—	$	2,934

Accrued interest receivable on the Company's investment securities was ~~$695,000~~$773,000 and ~~$894,000~~$744,000 at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. These amounts are recorded in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition.

At September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$131,668,000~~$151,330,000 and ~~$157,091,000,~~$125,889,000, respectively, of securities pledged to secure public deposits.

4. Earnings Per Share

Earnings per common share ~~were~~was computed based on the following:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2020		2019		2020		2019		(in thousands, except per share data)	2021		2020		2021		2020
Numerator:	Numerator:									Numerator:
Net income available to common shareholders	Net income available to common shareholders	$	8,782	$	6,856	$	13,180	$	21,326	Net income available to common shareholders	$	15,059	$	8,782	$	38,383	$	14,185
Denominator:	Denominator:									Denominator:
Weighted average common shares outstanding	Weighted average common shares outstanding	8,627		9,059		8,737		9,114		Weighted average common shares outstanding	8,354		8,627		8,413		8,737
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Restricted stock	Restricted stock	7		9		9		12		Restricted stock	12		7		12		9
Stock options	Stock options	17		39		23		63		Stock options	40		17		35		23
Weighted average common shares outstanding – assuming dilution	Weighted average common shares outstanding – assuming dilution	8,651		9,107		8,769		9,189		Weighted average common shares outstanding – assuming dilution	8,406		8,651		8,460		8,769
Basic earnings per common share	Basic earnings per common share	$	1.01	$	0.76	$	1.51	$	2.34	Basic earnings per common share	$	1.80	$	1.01	$	4.56	$	1.61
Diluted earnings per common share	Diluted earnings per common share	$	1.01	$	0.75	$	1.51	$	2.32	Diluted earnings per common share	$	1.79	$	1.01	$	4.54	$	1.61

Options onfor 106,190 and 160,282 ~~and 100,288~~ shares of common stock were not included in the computation of diluted EPS for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, because the effect of these shares was anti-dilutive. ~~Options~~For the nine months ended September 30, 2021 and 2020, options on 98,262 and 129,559, ~~and 90,511~~respectively, shares of common stock were not included in the computation of diluted EPS ~~for the nine months ended September 30, 2020 and 2019, respectively,~~ because the effect of these shares was anti-dilutive.

1411

5. Credit Quality and Allowance for Credit Losses

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

~~Originated~~ Loans

Loans ~~originated for investment~~ are reported at the principal balance outstanding net of unearned ~~income.~~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 ~~on an originated loan~~ is discontinued when it is probable the borrower will not be able to meet payment obligations as they become due. ~~For reporting periods prior~~It is our policy, with certain limited exceptions, to ~~January 1, 2020,~~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 ~~Company maintained~~borrower’s financial condition and payment record demonstrate an ~~ALL on originated loans~~ability to service the debt. If it is determined that ~~represented management’s estimate~~all or part of ~~probable losses incurred in this portfolio category. For reporting periods beginning on and after January 1, 2020,~~a loan is uncollectible, the ~~Company maintains an ACL on all loans that reflects management's estimate of expected credit losses for the full life~~potion of the loan ~~portfolio due~~deemed uncollectible is charged to the ~~adoption of the guidance under ASC Topic 326. Refer to~~ ~~Note 2~~allowance for ~~more information on the adoption of ASC Topic 326.~~credit losses.

Originated vs. Acquired Loans

"Originated loans" are loans that were originated for investment by the Company. Loans that were acquired as a result of business combinations are referred to as “acquired ~~loans.”~~loans” and are recorded at the principal balance net of unearned income and fair value discounts. The Company's acquired loans were purchased prior to the adoption of ASC Topic 326 on January 1, 2020 and were recorded at estimated fair value at the acquisition date with no carryover of the related ~~ALL. The~~allowance for loan losses ("ALL"). Since the adoption of ASC 326, loans that were acquired ~~loans were segregated between those considered to be performing and those~~ with evidence of credit deterioration ~~(purchased~~are referred to as "purchased credit ~~impaired or "PCI"~~deteriorated ("PCD")~~, and then further~~ loans." At acquisition, acquired loans were segregated into loan pools designed to facilitate the estimation of expected cash flows. The fair value estimate for each pool of acquired ~~performing and PCI~~ loans was based on the estimate of expected cash flows, both principal and interest, from that pool, discounted at prevailing market interest rates. The difference between the fair value of an acquired loan pool and the contractual amounts due at the acquisition date (the “fair value discount”) is accreted into income over the estimated life of the pool.

~~For reporting periods beginning on and after January 1, 2020 and the adoption of ASC Topic 326:~~

Management estimates the ACL for acquired loans under the same methodology as originated loans. Changes in the ACL for acquired loans are recognized through the provision for loan losses and the provision for credit losses on unfunded lending commitments.

ASC Topic 326 replaced the guidance for PCI loans with the concept of purchased credit deteriorated ("PCD"). For reporting periods beginning on and after January 1, 2020, PCI loans have been re-classified as PCD loans. For PCD loans, the Company applied the guidance under ~~ASC Topic 326~~ using the prospective transition approach. As a result, the Company adjusted the amortized cost basis of the PCD loans to reclassify $1.0 million of purchase discount to the ALL on January 1, 2020. The Company applied the guidance under ASC Topic 326 using the modified retrospective approach for all non-PCD assets, which resulted in an increase in the ALL and a corresponding decrease to retained earnings. Refer to ~~Note 2~~ ~~for more information on the adoption of ASC Topic 326.~~

PCD loans, under prior accounting policies, were excluded from nonperforming loans because they continued to earn interest income from the accretable yield at the pool level. With the adoption of ASC Topic 326, the pools were discontinued and performance is based on contractual terms for individual loans.

~~For reporting periods prior to January 1, 2020 and the adoption of ASC Topic 326:~~

Management estimated the ALL for acquired performing loans using a methodology similar to that used for originated loans. The allowance determined for each loan pool was compared to the remaining fair value discount for that pool. If the allowance amount calculated under the Company’s methodology was greater than the Company’s remaining discount, the additional amount called for was added to the reported allowance through a provision for loan losses. If the allowance amount calculated under the Company’s methodology was less than the Company’s recorded discount, no additional allowance or provision was recognized. Actual losses first reduced any remaining nonaccretable discount for the loan pool. Once the nonaccretable discount was fully depleted, losses were applied against the allowance established for that pool. Acquired performing loans were placed on nonaccrual status and were considered and reported as nonperforming or past due using the same criteria applied to the originated portfolio.

The excess of cash flows expected to be collected from a PCI loan pool over the pool’s estimated fair value at acquisition was referred to as the accretable yield and was recognized in interest income using an effective yield method over the remaining life

~~of the pool. Each pool of PCI loans was accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.~~

Management estimated cash flows expected to be collected on each PCI loan pool periodically. If the present value of expected cash flows for a pool was less than its carrying value, an impairment was recognized by an increase in the ALL and a charge to the provision for loan losses. If the present value of expected cash flows for a pool was greater than its carrying value, any previously established ALL was reversed and any remaining difference increased the accretable yield, which was taken into interest income over the remaining life of the loan pool. PCI loans were generally not subject to individual evaluation for impairment and were not reported with impaired loans, even if they otherwise qualified for such treatment.

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

(dollars in thousands) September 30,
2020 December 31,
2019
Real estate loans:
One- to four-family first mortgage $ 409,282 $ 430,820
Home equity loans and lines 67,766 79,812
Commercial real estate 707,638 722,807
Construction and land 201,575 195,748
Multi-family residential 86,619 54,869
Total real estate loans 1,472,880 1,484,056
Other loans:
Commercial and industrial 443,480 184,701
Consumer 38,937 45,604
Total other loans 482,417 230,305
Total loans $ 1,955,297 $ 1,714,361

The net discount on the Company’s loans was $8,343,000 and $12,315,000 at September 30, 2020 and December 31, 2019, respectively. In addition, loan balances as of September 30, 2020 and December 31, 2019 are reported net of unearned income of $10,621,000 and $3,114,000, respectively. Unearned income at September 30, 2020 included $7,606,000 of deferred lender fees related to PPP loans.

Accrued interest receivable on the Company's loans was $9,435,000 and $6,575,000 at September 30, 2020 and December 31, 2019, respectively, and is excluded from the estimate of the ACL. These amounts are recorded in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition.

Allowance for Credit Losses

Due to the adoption of ASC Topic 326 on January 1, 2020, management maintains, based on current and forecasted information, an allowance for credit losses ("ACL") that reflects a current estimate of expected credit losses ("CECL") for the estimated life of the loan portfolio at reporting periods subsequent to the adoption date.

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.

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


(dollars in thousands)	September 30, 2021		December 31, 2020
Real estate loans:
One- to four-family first mortgage	$	360,150	$	395,638
Home equity loans and lines	59,667		67,700
Commercial real estate	802,401		750,623
Construction and land	241,286		221,823
Multi-family residential	92,062		87,332
Total real estate loans	1,555,566		1,523,116
Other loans:
Commercial and industrial	284,831		417,926
Consumer	34,779		38,912
Total other loans	319,610		456,838
Total loans	$	1,875,176	$	1,979,954

The net investment in PPP loans, which is included in commercial and industrial loans, was $95,560,000 and $221,220,000 at September 30, 2021 and December 31, 2020, respectively.

The net discount on the Company’s loans was $4,773,000 and $6,650,000 at September 30, 2021 and December 31, 2020, respectively. In addition, loan balances as of September 30, 2021 and December 31, 2020 are reported net of unearned income of $6,879,000 and $8,727,000, respectively. Unearned income at September 30, 2021 and December 31, 2020 included PPP deferred lender fees of $3,334,000 and $5,449,000, respectively.

Accrued interest receivable on the Company's loans was $6,482,000 and $8,635,000 at September 30, 2021 and December 31, 2020, respectively, and is excluded from the estimate of the ACL. These amounts are recorded in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition.

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.


	September 30, 2021
(dollars in thousands)	Collectively Evaluated		Individually Evaluated		Total
Allowance for credit losses:
One- to four-family first mortgage	$	2,145	$	—	$	2,145
Home equity loans and lines	521		—		521
Commercial real estate	12,872		455		13,327
Construction and land	3,628		—		3,628
Multi-family residential	627		—		627
Commercial and industrial	2,815		435		3,250
Consumer	651		—		651
Total allowance for loan losses	$	23,259	$	890	$	24,149

Unfunded lending commitments(1)	$	1,800	$	—	$	1,800
Total allowance for credit losses	$	25,059	$	890	$	25,949

September 30, 2020
(dollars in thousands) Collectively
Evaluated Individually
Evaluated Total
Allowance for credit losses:
One- to four-family first mortgage $ 3,413 $ 0 $ 3,413
Home equity loans and lines 771 0 771
Commercial real estate 17,662 689 18,351
Construction and land 4,078 0 4,078
Multi-family residential 1,067 0 1,067
Commercial and industrial 4,006 431 4,437
Consumer 885 0 885
Total allowance for loan losses $ 31,882 $ 1,120 $ 33,002
Unfunded lending commitments(1)
3,637 0 3,637
Total allowance for credit losses $ 35,519 $ 1,120 $ 36,639


		September 30, 2020							September 30, 2021
(dollars in thousands)	(dollars in thousands)	Collectively Evaluated		Individually Evaluated(2)		Total		(dollars in thousands)	Collectively Evaluated		Individually Evaluated(2)		Total
Loans:	Loans:							Loans:
One- to four-family first mortgage	One- to four-family first mortgage	$	409,282	$	0	$	409,282	One- to four-family first mortgage	$	360,150	$	—	$	360,150
Home equity loans and lines	Home equity loans and lines	67,766		0		67,766		Home equity loans and lines	59,667		—		59,667
Commercial real estate	Commercial real estate	700,402		7,236		707,638		Commercial real estate	798,520		3,881		802,401
Construction and land	Construction and land	201,575		0		201,575		Construction and land	241,286		—		241,286
Multi-family residential	Multi-family residential	86,619		0		86,619		Multi-family residential	92,062		—		92,062
Commercial and industrial	Commercial and industrial	442,868		612		443,480		Commercial and industrial	284,055		776		284,831
Consumer	Consumer	38,937		0		38,937		Consumer	34,779		—		34,779
Total loans	Total loans	$	1,947,449	$	7,848	$	1,955,297	Total loans	$	1,870,519	$	4,657	$	1,875,176

1714


		December 31, 2019									December 31, 2020
(dollars in thousands)	(dollars in thousands)	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total		(dollars in thousands)	Collectively Evaluated		Individually Evaluated		Total
Allowance for loan losses:	Allowance for loan losses:									Allowance for loan losses:
One- to four-family first mortgage	One- to four-family first mortgage	$	2,715	$	0	$	0	$	2,715	One- to four-family first mortgage	$	2,965	$	100	$	3,065
Home equity loans and lines	Home equity loans and lines	736		348		0		1,084		Home equity loans and lines	676		—		676
Commercial real estate	Commercial real estate	6,243		298		0		6,541		Commercial real estate	17,843		1,008		18,851
Construction and land	Construction and land	2,670		0		0		2,670		Construction and land	4,155		—		4,155
Multi-family residential	Multi-family residential	572		0		0		572		Multi-family residential	1,077		—		1,077
Commercial and industrial	Commercial and industrial	2,969		701		24		3,694		Commercial and industrial	3,845		431		4,276
Consumer	Consumer	592		0				592		Consumer	863		—		863
Total allowance for loan losses	Total allowance for loan losses	$	16,497	$	1,347	$	24	$	17,868	Total allowance for loan losses	$	31,424	$	1,539	$	32,963

Unfunded lending commitments(1)										Unfunded lending commitments(1)	$	1,425	$	—	$	1,425
Total allowance for credit losses										Total allowance for credit losses	$	32,849	$	1,539	$	34,388

		December 31, 2019									December 31, 2020
(dollars in thousands)	(dollars in thousands)	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Acquired with Deteriorated Credit Quality(3)		Total		(dollars in thousands)	Collectively Evaluated		Individually Evaluated(2)		Total
Loans:	Loans:									Loans:
One- to four-family first mortgage	One- to four-family first mortgage	$	429,745	$	187	$	888	$	430,820	One- to four-family first mortgage	$	394,632	$	1,006	$	395,638
Home equity loans and lines	Home equity loans and lines	78,446		784		582		79,812		Home equity loans and lines	67,700		—		67,700
Commercial real estate	Commercial real estate	711,282		6,518		5,007		722,807		Commercial real estate	743,223		7,400		750,623
Construction and land	Construction and land	195,374		0		374		195,748		Construction and land	221,823		—		221,823
Multi-family residential	Multi-family residential	54,690		0		179		54,869		Multi-family residential	87,332		—		87,332
Commercial and industrial	Commercial and industrial	183,141		1,223		337		184,701		Commercial and industrial	417,320		606		417,926
Consumer	Consumer	45,573		0		31		45,604		Consumer	38,912		—		38,912
Total loans	Total loans	$	1,698,251	$	8,712	$	7,398	$	1,714,361	Total loans	$	1,970,942	$	9,012	$	1,979,954

(1)~~At September 30, 2020, $3.6 million of the ACL related to unfunded lending commitments of $326.8 million.~~ The ACL on unfunded lending commitments is recorded within accrued interest payable and other liabilities on the Consolidated Statements of Financial Condition.

(2)AtThere were no PCD loans individually evaluated at September 30, 2021. At December 31, 2020, loans individually evaluated ~~for impairment~~ included ~~$1.9 million~~PCD loans of ~~loans acquired with deteriorated credit quality.~~

~~(3)At December 31, 2019, loans acquired with deteriorated credit quality were deemed to be PCI and were accounted for under ASC 310-30.~~$277,000.

1815

A summary of activity in the ACL ~~and ALL~~ for the nine months ended September 30, ~~2020~~2021 and September 30, ~~2019~~2020 follows.


	Nine Months Ended September 30, 2021
(dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision (Reversal)		Ending Balance
Allowance for credit losses:
One- to four-family first mortgage	$	3,065	$	(176)	$	13	$	(757)	$	2,145
Home equity loans and lines	676		(6)		6		(155)		521
Commercial real estate	18,851		(1,024)		—		(4,500)		13,327
Construction and land	4,155		—		63		(590)		3,628
Multi-family residential	1,077		—		—		(450)		627
Commercial and industrial	4,276		(522)		307		(811)		3,250
Consumer	863		(79)		117		(250)		651
Total allowance for loan losses	$	32,963	$	(1,807)	$	506	$	(7,513)	$	24,149

Unfunded lending commitments	$	1,425	$	—	$	—	$	375	$	1,800
Total allowance for credit losses	$	34,388	$	(1,807)	$	506	$	(7,138)	$	25,949

Nine Months Ended September 30, 2020
(dollars in thousands) Beginning
Balance
ASC Topic 326 Adoption Impact(1)
Charge-offs Recoveries Provision Ending
Balance
Allowance for credit losses:
One- to four-family first mortgage $ 2,715 $ 986 $ (55) $ 12 $ (245) $ 3,413
Home equity loans and lines 1,084 (1) (575) 15 248 771
Commercial real estate 6,541 1,974 (5) 55 9,786 18,351
Construction and land 2,670 519 (688) 0 1,577 4,078
Multi-family residential 572 (245) 0 0 740 1,067
Commercial and industrial 3,694 1,243 (977) 91 386 4,437
Consumer 592 157 (222) 122 236 885
Total allowance for loan losses $ 17,868 $ 4,633 $ (2,522) $ 295 $ 12,728 $ 33,002
Unfunded lending commitments 0 2,365 0 0 1,272 3,637
Total allowance for credit losses $ 17,868 $ 6,998 $ (2,522) $ 295 $ 14,000 $ 36,639


	Nine Months Ended September 30, 2020
(dollars in thousands)	Beginning Balance		ASC Topic 326 Adoption Impact(1)		Charge-offs		Recoveries		Provision		Ending Balance
Allowance for credit losses:
One- to four-family first mortgage	$	2,715	$	986	$	(55)	$	12	$	(245)	$	3,413
Home equity loans and lines	1,084		(1)		(575)		15		248		771
Commercial real estate	6,541		1,974		(5)		55		9,786		18,351
Construction and land	2,670		519		(688)		—		1,577		4,078
Multi-family residential	572		(245)		—		—		740		1,067
Commercial and industrial	3,694		1,243		(977)		91		386		4,437
Consumer	592		157		(222)		122		236		885
Total allowance for loan losses	$	17,868	$	4,633	$	(2,522)	$	295	$	12,728	$	33,002

Unfunded lending commitments	$	—	$	1,425	$	—	$	—	$	—	$	1,425
Total allowance for credit losses	$	17,868	$	6,058	$	(2,522)	$	295	$	12,728	$	34,427

(1)On January 1, 2020 the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced a new model known as CECL. ~~Refer to~~ ~~Note 2~~ ~~for more information on the adoption of ASC Topic 326.~~

Nine Months Ended September 30, 2019
(dollars in thousands) Beginning
Balance Charge-offs Recoveries Provision Ending
Balance
Allowance for loan losses:
One- to four-family first mortgage $ 2,136 $ (4) $ 0 $ 271 $ 2,403
Home equity loans and lines 1,079 (42) 10 41 1,088
Commercial real estate 6,125 (139) 0 829 6,815
Construction and land 2,285 0 0 (113) 2,172
Multi-family residential 550 0 0 22 572
Commercial and industrial 3,228 (744) 23 1,343 3,850
Consumer 945 (189) 34 (92) 698
Total allowance for loan losses $ 16,348 $ (1,118) $ 67 $ 2,301 $ 17,598

1916

Credit Quality

The following ~~table presents~~tables present the Company’s loan portfolio by credit quality classification and origination year as of September 30, ~~2020~~2021 and December 31, 2020.


																					September 30, 2021
		Term Loans by Origination Year																			Term Loans by Origination Year
(dollars in thousands)	(dollars in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total		(dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
One- to four-family first mortgage:	One- to four-family first mortgage:																			One- to four-family first mortgage:
Pass	Pass	$	41,018	$	70,884	$	50,516	$	51,480	$	39,087	$	128,564	$	18,474	$	1,149	$	401,172	Pass	$	60,900	$	48,750	$	48,301	$	37,619	$	36,930	$	108,990	$	12,806	$	383	$	354,679
Special Mention	Special Mention	0		123		170		796		23		1,057		0		0		2,169		Special Mention	—		—		—		—		15		652		—		—		667
Substandard	Substandard	134		0		0		239		1,270		4,298		0		0		5,941		Substandard	—		596		720		269		456		2,763		—		—		4,804
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total one- to four-family first mortgages	Total one- to four-family first mortgages	$	41,152	$	71,007	$	50,686	$	52,515	$	40,380	$	133,919	$	18,474	$	1,149	$	409,282	Total one- to four-family first mortgages	$	60,900	$	49,346	$	49,021	$	37,888	$	37,401	$	112,405	$	12,806	$	383	$	360,150

Home equity loans and lines:	Home equity loans and lines:																			Home equity loans and lines:
Pass	Pass	$	707	$	1,341	$	2,155	$	1,133	$	2,098	$	6,409	$	53,065	$	420	$	67,328	Pass	$	892	$	983	$	1,147	$	1,008	$	991	$	3,775	$	50,483	$	187	$	59,466
Special Mention	Special Mention	0		43		0		43		0		77		0		166		329		Special Mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	0		0		0		1		0		108		0		0		109		Substandard	—		—		—		—		201		—		—		—		201
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total home equity loans and lines	Total home equity loans and lines	$	707	$	1,384	$	2,155	$	1,177	$	2,098	$	6,594	$	53,065	$	586	$	67,766	Total home equity loans and lines	$	892	$	983	$	1,147	$	1,008	$	1,192	$	3,775	$	50,483	$	187	$	59,667

Commercial real estate:	Commercial real estate:																			Commercial real estate:
Pass	Pass	$	161,064	$	167,785	$	99,240	$	106,999	$	63,987	$	71,310	$	18,890	$	55	$	689,330	Pass	$	171,569	$	206,657	$	148,886	$	79,170	$	90,403	$	71,890	$	20,350	$	1,734	$	790,659
Special Mention	Special Mention	1,015		0		0		54		54		0		0		0		1,123		Special Mention	—		—		—		—		—		1,238		—		—		1,238
Substandard	Substandard	475		1,758		2,285		321		2,306		10,040		0		0		17,185		Substandard	—		826		885		1,770		310		6,105		—		608		10,504
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate loans	Total commercial real estate loans	$	162,554	$	169,543	$	101,525	$	107,374	$	66,347	$	81,350	$	18,890	$	55	$	707,638	Total commercial real estate loans	$	171,569	$	207,483	$	149,771	$	80,940	$	90,713	$	79,233	$	20,350	$	2,342	$	802,401

Construction and land:	Construction and land:																			Construction and land:
Pass	Pass	$	56,923	$	99,081	$	19,765	$	5,858	$	2,735	$	2,109	$	2,141	$	449	$	189,061	Pass	$	118,216	$	56,019	$	49,358	$	7,387	$	3,052	$	2,297	$	3,528	$	—	$	239,857
Special Mention	Special Mention	875		0		0		0		0		624		0		10,415		11,914		Special Mention	587		417		—		—		—		—		—		—		1,004
Substandard	Substandard	0		53		0		0		285		262		0		0		600		Substandard	—		—		189		—		8		228		—		—		425
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total construction and land loans	Total construction and land loans	$	57,798	$	99,134	$	19,765	$	5,858	$	3,020	$	2,995	$	2,141	$	10,864	$	201,575	Total construction and land loans	$	118,803	$	56,436	$	49,547	$	7,387	$	3,060	$	2,525	$	3,528	$	—	$	241,286

2017


																					September 30, 2021
		Term Loans by Origination Year																			Term Loans by Origination Year
(dollars in thousands)	(dollars in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total		(dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total

Multi-family residential:	Multi-family residential:																			Multi-family residential:
Pass	Pass	$	34,726	$	26,721	$	10,466	$	3,892	$	2,944	$	5,550	$	2,121	$	0	$	86,420	Pass	$	12,018	$	38,482	$	14,633	$	6,382	$	2,624	$	3,236	$	187	$	—	$	77,562
Special Mention	Special Mention	0		0		0		0		0		0		0		0		0		Special Mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	0		92		0		0		0		107		0		0		199		Substandard	500		14,000		—		—		—		—		—		—		14,500
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total multi-family residential loans	Total multi-family residential loans	$	34,726	$	26,813	$	10,466	$	3,892	$	2,944	$	5,657	$	2,121	$	0	$	86,619	Total multi-family residential loans	$	12,518	$	52,482	$	14,633	$	6,382	$	2,624	$	3,236	$	187	$	—	$	92,062

Commercial and industrial:	Commercial and industrial:																			Commercial and industrial:
Pass	Pass	$	287,757	$	35,391	$	22,512	$	7,150	$	7,010	$	3,030	$	71,928	$	506	$	435,284	Pass	$	115,701	$	45,219	$	16,539	$	9,992	$	3,633	$	2,495	$	83,901	$	758	$	278,238
Special Mention	Special Mention	2,725		1,156		164		15		0		0		1,000		553		5,613		Special Mention	539		528		140		—		—		—		1,607		—		2,814
Substandard	Substandard	27		0		433		25		156		18		1,924		0		2,583		Substandard	—		2,082		—		420		6		22		1,249		—		3,779
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans	Total commercial and industrial loans	$	290,509	$	36,547	$	23,109	$	7,190	$	7,166	$	3,048	$	74,852	$	1,059	$	443,480	Total commercial and industrial loans	$	116,240	$	47,829	$	16,679	$	10,412	$	3,639	$	2,517	$	86,757	$	758	$	284,831

Consumer:	Consumer:																			Consumer:
Pass	Pass	$	4,533	$	3,312	$	1,399	$	2,388	$	1,383	$	19,357	$	6,090	$	15	$	38,477	Pass	$	4,649	$	3,340	$	1,492	$	493	$	1,243	$	16,245	$	7,080	$	3	$	34,545
Special Mention	Special Mention	0		0		4		0		21		159		0		0		184		Special Mention	—		—		—		—		—		3		—		—		3
Substandard	Substandard	0		29		2		15		16		213		1		0		276		Substandard	—		34		—		—		14		183		—		—		231
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total consumer loans	Total consumer loans	$	4,533	$	3,341	$	1,405	$	2,403	$	1,420	$	19,729	$	6,091	$	15	$	38,937	Total consumer loans	$	4,649	$	3,374	$	1,492	$	493	$	1,257	$	16,431	$	7,080	$	3	$	34,779

Total loans:	Total loans:																			Total loans:
Pass	Pass	$	586,728	$	404,515	$	206,053	$	178,900	$	119,244	$	236,329	$	172,709	$	2,594	$	1,907,072	Pass	$	483,945	$	399,450	$	280,356	$	142,051	$	138,876	$	208,928	$	178,335	$	3,065	$	1,835,006
Special Mention	Special Mention	4,615		1,322		338		908		98		1,917		1,000		11,134		21,332		Special Mention	1,126		945		140		—		15		1,893		1,607		—		5,726
Substandard	Substandard	636		1,932		2,720		601		4,033		15,046		1,925		0		26,893		Substandard	500		17,538		1,794		2,459		995		9,301		1,249		608		34,444
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total loans	Total loans	$	591,979	$	407,769	$	209,111	$	180,409	$	123,375	$	253,292	$	175,634	$	13,728	$	1,955,297	Total loans	$	485,571	$	417,933	$	282,290	$	144,510	$	139,886	$	220,122	$	181,191	$	3,673	$	1,875,176

2118

~~The following tables present the Company’s loan portfolio by credit quality classification as of December 31, 2019.~~


	December 31, 2020
	Term Loans by Origination Year
(dollars in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
One- to four-family first mortgage:
Pass	$	58,958	$	65,070	$	46,412	$	48,851	$	37,039	$	114,588	$	17,762	$	1,457	$	390,137
Special Mention	—		—		167		16		—		1,057		—		—		1,240
Substandard	129		34		—		335		1,069		2,694		—		—		4,261
Doubtful	—		—		—		—		—		—		—		—		—
Total one- to four-family first mortgages	$	59,087	$	65,104	$	46,579	$	49,202	$	38,108	$	118,339	$	17,762	$	1,457	$	395,638
Home equity loans and lines:
Pass	$	1,172	$	1,307	$	2,028	$	964	$	1,889	$	5,537	$	53,309	$	1,389	$	67,595
Special Mention	—		—		—		43		—		—		—		—		43
Substandard	—		—		—		—		—		58		4		—		62
Doubtful	—		—		—		—		—		—		—		—		—
Total home equity loans and lines	$	1,172	$	1,307	$	2,028	$	1,007	$	1,889	$	5,595	$	53,313	$	1,389	$	67,700
Commercial real estate:
Pass	$	235,900	$	156,646	$	96,153	$	102,166	$	59,859	$	60,720	$	22,962	$	56	$	734,462
Special Mention	—		—		—		15		951		—		—		—		966
Substandard	1,606		1,994		1,742		323		1,344		8,164		—		22		15,195
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate loans	$	237,506	$	158,640	$	97,895	$	102,504	$	62,154	$	68,884	$	22,962	$	78	$	750,623
Construction and land:
Pass	$	87,540	$	91,337	$	16,703	$	5,486	$	2,585	$	1,505	$	1,892	$	429	$	207,477
Special Mention	877		—		—		—		—		618		—		627		2,122
Substandard	451		50		—		—		252		249		—		11,222		12,224
Doubtful	—		—		—		—		—		—		—		—		—
Total construction and land loans	$	88,868	$	91,387	$	16,703	$	5,486	$	2,837	$	2,372	$	1,892	$	12,278	$	221,823

December 31, 2019
(dollars in thousands) Pass Special
Mention Substandard Doubtful Total
Originated loans:
One- to four-family first mortgage $ 248,483 $ 730 $ 2,133 $ 0 $ 251,346
Home equity loans and lines 56,029 53 882 0 56,964
Commercial real estate 517,615 207 11,317 0 529,139
Construction and land 164,310 8,107 1,270 0 173,687
Multi-family residential 48,661 0 0 0 48,661
Commercial and industrial 153,286 0 2,438 0 155,724
Consumer 35,545 46 89 0 35,680
Total originated loans $ 1,223,929 $ 9,143 $ 18,129 $ 0 $ 1,251,201
Acquired loans:
One- to four-family first mortgage $ 173,482 $ 1,429 $ 4,563 $ 0 $ 179,474
Home equity loans and lines 22,370 128 350 0 22,848
Commercial real estate 181,090 1,593 10,985 0 193,668
Construction and land 19,877 747 1,437 0 22,061
Multi-family residential 5,487 502 219 0 6,208
Commercial and industrial 24,856 56 4,065 0 28,977
Consumer 9,668 166 90 0 9,924
Total acquired loans $ 436,830 $ 4,621 $ 21,709 $ 0 $ 463,160
Total loans:
One- to four-family first mortgage $ 421,965 $ 2,159 $ 6,696 $ 0 $ 430,820
Home equity loans and lines 78,399 181 1,232 0 79,812
Commercial real estate 698,705 1,800 22,302 0 722,807
Construction and land 184,187 8,854 2,707 0 195,748
Multi-family residential 54,148 502 219 0 54,869
Commercial and industrial 178,142 56 6,503 0 184,701
Consumer 45,213 212 179 0 45,604
Total loans $ 1,660,759 $ 13,764 $ 39,838 $ 0 $ 1,714,361


	December 31, 2020
	Term Loans by Origination Year
(dollars in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
Multi-family residential:
Pass	$	40,462	$	24,329	$	9,711	$	3,844	$	2,889	$	4,539	$	1,452	$	—	$	87,226
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		106		—		—		106
Doubtful	—		—		—		—		—		—		—		—		—
Total multi-family residential loans	$	40,462	$	24,329	$	9,711	$	3,844	$	2,889	$	4,645	$	1,452	$	—	$	87,332
Commercial and industrial:
Pass	$	264,079	$	29,115	$	21,053	$	6,001	$	3,952	$	2,408	$	82,039	$	1,311	$	409,958
Special Mention	2,089		792		131		—		—		1		1,801		—		4,814
Substandard	592		—		427		23		141		16		1,955		—		3,154
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans	$	266,760	$	29,907	$	21,611	$	6,024	$	4,093	$	2,425	$	85,795	$	1,311	$	417,926
Consumer:
Pass	$	6,844	$	2,667	$	1,149	$	2,073	$	1,118	$	18,258	$	6,340	$	27	$	38,476
Special Mention	4		—		4		—		13		120		—		5		146
Substandard	—		34		3		12		17		223		—		1		290
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer loans	$	6,848	$	2,701	$	1,156	$	2,085	$	1,148	$	18,601	$	6,340	$	33	$	38,912
Total loans:
Pass	$	694,955	$	370,471	$	193,209	$	169,385	$	109,331	$	207,555	$	185,756	$	4,669	$	1,935,331
Special Mention	2,970		792		302		74		964		1,796		1,801		632		9,331
Substandard	2,778		2,112		2,172		693		2,823		11,510		1,959		11,245		35,292
Doubtful	—		—		—		—		—		—		—		—		—
Total loans	$	700,703	$	373,375	$	195,683	$	170,152	$	113,118	$	220,861	$	189,516	$	16,546	$	1,979,954

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.

2221

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

September 30, 2020
(dollars in thousands) 30-59
Days
Past
Due 60-89
Days
Past
Due Greater
Than
90 Days
Past
Due Total
Past
Due Current
Loans Total
Loans
Originated loans:
Real estate loans:
One- to four-family first mortgage $ 500 $ 36 $ 1,147 $ 1,683 $ 259,246 $ 260,929
Home equity loans and lines 106 0 45 151 51,491 51,642
Commercial real estate 75 0 7,000 7,075 533,126 540,201
Construction and land 525 0 0 525 186,044 186,569
Multi-family residential 1,499 0 0 1,499 79,692 81,191
Total real estate loans 2,705 36 8,192 10,933 1,109,599 1,120,532
Other loans:
Commercial and industrial 638 0 607 1,245 422,464 423,709
Consumer 221 52 130 403 31,950 32,353
Total other loans 859 52 737 1,648 454,414 456,062
Total originated loans $ 3,564 $ 88 $ 8,929 $ 12,581 $ 1,564,013 $ 1,576,594
Acquired loans:
Real estate loans:
One- to four-family first mortgage $ 3,567 $ 437 $ 1,210 $ 5,214 $ 143,139 $ 148,353
Home equity loans and lines 44 0 20 64 16,060 16,124
Commercial real estate 1,860 0 4,198 6,058 161,379 167,437
Construction and land 0 0 434 434 14,572 15,006
Multi-family residential 0 0 0 0 5,428 5,428
Total real estate loans 5,471 437 5,862 11,770 340,578 352,348
Other loans:
Commercial and industrial 4 0 945 949 18,822 19,771
Consumer 67 23 63 153 6,431 6,584
Total other loans 71 23 1,008 1,102 25,253 26,355
Total acquired loans $ 5,542 $ 460 $ 6,870 $ 12,872 $ 365,831 $ 378,703
Total loans:
Real estate loans:
One- to four-family first mortgage $ 4,067 $ 473 $ 2,357 $ 6,897 $ 402,385 $ 409,282
Home equity loans and lines 150 0 65 215 67,551 67,766
Commercial real estate 1,935 0 11,198 13,133 694,505 707,638
Construction and land 525 0 434 959 200,616 201,575
Multi-family residential 1,499 0 0 1,499 85,120 86,619
Total real estate loans 8,176 473 14,054 22,703 1,450,177 1,472,880
Other loans:
Commercial and industrial 642 0 1,552 2,194 441,286 443,480
Consumer 288 75 193 556 38,381 38,937
Total other loans 930 75 1,745 2,750 479,667 482,417
Total loans $ 9,106 $ 548 $ 15,799 $ 25,453 $ 1,929,844 $ 1,955,297


	September 30, 2021
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current Loans		Total Loans
Originated loans:
Real estate loans:
One- to four-family first mortgage	$	1,089	$	1,161	$	499	$	2,749	$	255,156	$	257,905
Home equity loans and lines	14		—		163		177		47,734		47,911
Commercial real estate	200		679		5,312		6,191		668,947		675,138
Construction and land	211		—		189		400		231,232		231,632
Multi-family residential	—		—		—		—		88,617		88,617
Total real estate loans	1,514		1,840		6,163		9,517		1,291,686		1,301,203
Other loans:
Commercial and industrial	457		—		362		819		272,692		273,511
Consumer	149		25		92		266		30,684		30,950
Total other loans	606		25		454		1,085		303,376		304,461
Total originated loans	$	2,120	$	1,865	$	6,617	$	10,602	$	1,595,062	$	1,605,664
Acquired loans:
Real estate loans:
One- to four-family first mortgage	$	1,454	$	532	$	1,018	$	3,004	$	99,241	$	102,245
Home equity loans and lines	39		—		—		39		11,717		11,756
Commercial real estate	—		1,720		637		2,357		124,906		127,263
Construction and land	102		163		73		338		9,316		9,654
Multi-family residential	88		—		—		88		3,357		3,445
Total real estate loans	1,683		2,415		1,728		5,826		248,537		254,363
Other loans:
Commercial and industrial	20		27		420		467		10,853		11,320
Consumer	109		8		15		132		3,697		3,829
Total other loans	129		35		435		599		14,550		15,149
Total acquired loans	$	1,812	$	2,450	$	2,163	$	6,425	$	263,087	$	269,512
Total loans:
Real estate loans:
One- to four-family first mortgage	$	2,543	$	1,693	$	1,517	$	5,753	$	354,397	$	360,150
Home equity loans and lines	53		—		163		216		59,451		59,667
Commercial real estate	200		2,399		5,949		8,548		793,853		802,401
Construction and land	313		163		262		738		240,548		241,286
Multi-family residential	88		—		—		88		91,974		92,062
Total real estate loans	3,197		4,255		7,891		15,343		1,540,223		1,555,566
Other loans:
Commercial and industrial	477		27		782		1,286		283,545		284,831
Consumer	258		33		107		398		34,381		34,779
Total other loans	735		60		889		1,684		317,926		319,610
Total loans	$	3,932	$	4,315	$	8,780	$	17,027	$	1,858,149	$	1,875,176

2322


		December 31, 2019													December 31, 2020
(dollars in thousands)	(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current Loans		Total Loans		(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current Loans		Total Loans
Originated loans:	Originated loans:													Originated loans:
Real estate loans:	Real estate loans:													Real estate loans:
One- to four-family first mortgage	One- to four-family first mortgage	$	1,524	$	173	$	967	$	2,664	$	248,682	$	251,346	One- to four-family first mortgage	$	1,651	$	66	$	365	$	2,082	$	258,386	$	260,468
Home equity loans and lines	Home equity loans and lines	174		0		98		272		56,692		56,964		Home equity loans and lines	117		148		—		265		52,101		52,366
Commercial real estate	Commercial real estate	1,124		1,448		8,056		10,628		518,511		529,139		Commercial real estate	518		532		6,770		7,820		581,524		589,344
Construction and land	Construction and land	0		0		1,171		1,171		172,516		173,687		Construction and land	—		—		—		—		207,928		207,928
Multi-family residential	Multi-family residential	0		0		0		0		48,661		48,661		Multi-family residential	94		—		—		94		82,051		82,145
Total real estate loans	Total real estate loans	2,822		1,621		10,292		14,735		1,045,062		1,059,797		Total real estate loans	2,380		746		7,135		10,261		1,181,990		1,192,251
Other loans:	Other loans:													Other loans:
Commercial and industrial	Commercial and industrial	213		100		869		1,182		154,542		155,724		Commercial and industrial	797		3		603		1,403		398,377		399,780
Consumer	Consumer	533		57		34		624		35,056		35,680		Consumer	219		42		145		406		32,702		33,108
Total other loans	Total other loans	746		157		903		1,806		189,598		191,404		Total other loans	1,016		45		748		1,809		431,079		432,888
Total originated loans	Total originated loans	$	3,568	$	1,778	$	11,195	$	16,541	$	1,234,660	$	1,251,201	Total originated loans	$	3,396	$	791	$	7,883	$	12,070	$	1,613,069	$	1,625,139
Acquired loans:	Acquired loans:													Acquired loans:
Real estate loans:	Real estate loans:													Real estate loans:
One- to four-family first mortgage	One- to four-family first mortgage	$	4,555	$	1,116	$	1,108	$	6,779	$	172,695	$	179,474	One- to four-family first mortgage	$	1,823	$	502	$	1,154	$	3,479	$	131,691	$	135,170
Home equity loans and lines	Home equity loans and lines	267		93		330		690		22,158		22,848		Home equity loans and lines	34		43		25		102		15,232		15,334
Commercial real estate	Commercial real estate	337		466		1,945		2,748		190,920		193,668		Commercial real estate	603		303		2,462		3,368		157,911		161,279
Construction and land	Construction and land	413		0		1,170		1,583		20,478		22,061		Construction and land	—		—		142		142		13,753		13,895
Multi-family residential	Multi-family residential	0		0		0		0		6,208		6,208		Multi-family residential	92		—		—		92		5,095		5,187
Total real estate loans	Total real estate loans	5,572		1,675		4,553		11,800		412,459		424,259		Total real estate loans	2,552		848		3,783		7,183		323,682		330,865
Other loans:	Other loans:													Other loans:
Commercial and industrial	Commercial and industrial	3		57		792		852		28,125		28,977		Commercial and industrial	3		—		907		910		17,236		18,146
Consumer	Consumer	259		127		60		446		9,478		9,924		Consumer	126		50		66		242		5,562		5,804
Total other loans	Total other loans	262		184		852		1,298		37,603		38,901		Total other loans	129		50		973		1,152		22,798		23,950
Total acquired loans	Total acquired loans	$	5,834	$	1,859	$	5,405	$	13,098	$	450,062	$	463,160	Total acquired loans	$	2,681	$	898	$	4,756	$	8,335	$	346,480	$	354,815
Total loans:	Total loans:													Total loans:
Real estate loans:	Real estate loans:													Real estate loans:
One- to four-family first mortgage	One- to four-family first mortgage	$	6,079	$	1,289	$	2,075	$	9,443	$	421,377	$	430,820	One- to four-family first mortgage	$	3,474	$	568	$	1,519	$	5,561	$	390,077	$	395,638
Home equity loans and lines	Home equity loans and lines	441		93		428		962		78,850		79,812		Home equity loans and lines	151		191		25		367		67,333		67,700
Commercial real estate	Commercial real estate	1,461		1,914		10,001		13,376		709,431		722,807		Commercial real estate	1,121		835		9,232		11,188		739,435		750,623
Construction and land	Construction and land	413		0		2,341		2,754		192,994		195,748		Construction and land	—		—		142		142		221,681		221,823
Multi-family residential	Multi-family residential	0		0		0		0		54,869		54,869		Multi-family residential	186		—		—		186		87,146		87,332
Total real estate loans	Total real estate loans	8,394		3,296		14,845		26,535		1,457,521		1,484,056		Total real estate loans	4,932		1,594		10,918		17,444		1,505,672		1,523,116
Other loans:	Other loans:													Other loans:
Commercial and industrial	Commercial and industrial	216		157		1,661		2,034		182,667		184,701		Commercial and industrial	800		3		1,510		2,313		415,613		417,926
Consumer	Consumer	792		184		94		1,070		44,534		45,604		Consumer	345		92		211		648		38,264		38,912
Total other loans	Total other loans	1,008		341		1,755		3,104		227,201		230,305		Total other loans	1,145		95		1,721		2,961		453,877		456,838
Total loans	Total loans	$	9,402	$	3,637	$	16,600	$	29,639	$	1,684,722	$	1,714,361	Total loans	$	6,077	$	1,689	$	12,639	$	20,405	$	1,959,549	$	1,979,954

At September 30, ~~2020, $10,000 of loans were greater than 90 days past due~~2021 and ~~accruing. At~~ December 31, ~~2019, excluding PCI loans, the Company did 0t have any~~2020, loans greater than 90 days past due and ~~accruing.~~accruing totaled $13,000 and $2,000, respectively.

2423

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


		September 30, 2020						December 31, 2019			September 30, 2021
(dollars in thousands)	(dollars in thousands)	With Related Allowance		Without Related Allowance		Total(1)		Total(2)		(dollars in thousands)	With Related Allowance		Without Related Allowance		Total(1)
Nonaccrual loans:	Nonaccrual loans:									Nonaccrual loans:
One- to four-family first mortgage	One- to four-family first mortgage	$	4,609	$	0	$	4,609	$	3,948	One- to four-family first mortgage	$	3,694	$	—	$	3,694
Home equity loans and lines	Home equity loans and lines	109		0		109		1,244		Home equity loans and lines	202		—		202
Commercial real estate	Commercial real estate	15,486		0		15,486		13,325		Commercial real estate	5,755		3,310		9,065
Construction and land	Construction and land	515		0		515		2,469		Construction and land	437		—		437
Multi-family residential	Multi-family residential	95		0		95		0		Multi-family residential	—		—		—
Commercial and industrial	Commercial and industrial	1,750		0		1,750		3,224		Commercial and industrial	834		23		857
Consumer	Consumer	279		0		279		176		Consumer	233		—		233
Total	Total	$	22,843	$	0	$	22,843	$	24,386	Total	$	11,155	$	3,333	$	14,488

											December 31, 2020
(dollars in thousands)										(dollars in thousands)	With Related Allowance		Without Related Allowance		Total(1)
Nonaccrual loans:										Nonaccrual loans:
One- to four-family first mortgage										One- to four-family first mortgage	$	3,838	$	—	$	3,838
Home equity loans and lines										Home equity loans and lines	63		—		63
Commercial real estate										Commercial real estate	12,298		—		12,298
Construction and land										Construction and land	469		—		469
Multi-family residential										Multi-family residential	—		—		—
Commercial and industrial										Commercial and industrial	1,717		—		1,717
Consumer										Consumer	292		—		292
Total										Total	$	18,677	$	—	$	18,677

(1)~~Due to the adoption of ASC Topic 326,~~ PCD loans of ~~$2.1 million~~$122,000 and $390,000 are included in nonaccrual loans at September 30, ~~2020. Prior to January 1, 2020, these loans were classified as PCI~~2021 and excluded from nonperforming loans because they continued to earn interest income from the accretable yield at the pool level. At adoption, the pools were discontinued and performance is based on contractual terms for individual loans.

~~(2)~~PCI loans which were being accounted for under ASC 310-30 were excluded from nonaccrual loans because they continued to earn interest from accretable yield regardless of their status as past due or otherwise not in compliance with their contractual terms. PCI loans which were being accounted for under ASC 310-30 and which were 90 days or more past due totaled $2.2 million as of December 31, ~~2019.~~2020, respectively.

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

2524

Collateral Dependent Loans

The Company held loans that were individually evaluated for ~~impairment~~credit losses at September 30, 2021 and December 31, 2020 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 ~~table~~tables below ~~summarizes~~summarize collateral dependent loans and the related ACL at September 30, ~~2020 for which the borrower is experiencing financial difficulty.~~

(dollars in thousands) Loans ACL
One- to four-family first mortgage $ 0 $ 0
Home equity loans and lines 0 0
Commercial real estate 7,236 689
Construction and land 0 0
Multi-family residential 0 0
Commercial and industrial 612 431
Consumer 0 0
Total $ 7,848 $ 1,120
2021 and December 31, 2020.


	September 30, 2021
(dollars in thousands)	Loans		ACL
One- to four-family first mortgage	$	—	$	—
Home equity loans and lines	—		—
Commercial real estate	3,881		455
Construction and land	—		—
Multi-family residential	—		—
Commercial and industrial	776		435
Consumer	—		—
Total	$	4,657	$	890

	December 31, 2020
(dollars in thousands)	Loans		ACL
One- to four-family first mortgage	$	1,006	$	100
Home equity loans and lines	—		—
Commercial real estate	7,400		1,008
Construction and land	—		—
Multi-family residential	—		—
Commercial and industrial	606		431
Consumer	—		—
Total	$	9,012	$	1,539

There were no PCD loans included in collateral dependent loans. At ~~September 30,~~December 31, 2020, collateral dependent commercial real estate loans included 1 loan acquired with deteriorated credit quality totaling ~~$1.9 million.~~$277,000.

2625

Foreclosed Assets and ORE

Foreclosed assets and ORE include real property and other assets that have been acquired as a result of foreclosure, and real property no longer used in the Bank's business. Foreclosed assets and ORE totaled ~~$1,985,000~~$1,031,000 and ~~4,156,000~~1,302,000 at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 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 September 30, ~~2020~~2021 and December 31, ~~2019~~2020 totaled ~~$996,000~~$136,000 and ~~$1,737,000,~~$877,000, respectively. Loans secured by single family residential real estate that were in the process of foreclosure at September 30, 2021 and December 31, 2020 totaled $1,377,000 and $446,000, respectively.

Foreclosed assets and ORE included certain bank buildings that meet the criteria to be classified as assets held for sale. The carrying value of these assets totaled ~~$729,000~~$179,000 and ~~$1,275,000~~$212,000 at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. During the nine months ended September 30, ~~2020,~~2021, the ~~Company sold 5 of these properties, with a total carrying value of $410,000,~~company wrote-down an asset held for ~~a gain of $64,000~~sale by $45,000, which is recorded in foreclosed assets and ORE, net expense on the Consolidated Statements of Income. The ~~expected timing of~~Company expects the sale of the ~~remaining properties is uncertain due~~asset to occur during the ~~effects~~fourth quarter of ~~the COVID-19 pandemic.~~2021.

Troubled Debt Restructurings

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

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

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

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

•a reduction of accrued interest receivable on the debt.

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

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

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

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

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

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

If the Company concludes that both a concession has been granted and the concession was granted to a customer experiencing financial difficulties, the Company identifies the loan as a TDR. ~~For purposes of~~At least quarterly, the ~~determination of an ACL,~~Company evaluates larger commercial TDRs (i.e., TDRs with balances of ~~$250,000~~$500,000 or greater) ~~commercial TDRs are~~to determine if the assets should be individually evaluated for ~~impairment.~~credit losses. The ACL for loans that are individually evaluated is based on a comparison of the recorded investment in the loan with either the expected cash flows discounted using the loan’s original effective interest rate, observable market price for the loan or the fair value of the collateral underlying certain collateral-dependent loans. Residential, consumer and smaller balance commercial TDRs are included in the Company's pooled-loan analysis to calculate the ACL and, generally, do not have a material impact on the overall ACL.

As of September 30, ~~2020,~~2021, the Company had modified loans with an aggregate outstanding loan balance of ~~$70.2~~$4.5 million, or 4%less than 1% of total outstanding loans, via payment relief in the nature of principal and/or interest deferrals for 90 days. These modifications were done in accordance with Section 4013 of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act and the Interagency Statement on Loan Modifications on Reporting for Financial Institutions Working With Customers Affected by the Coronavirus. Accordingly, these loans were not categorized as TDRs.

The following table summarizes information pertaining to TDRs modified during the periods indicated.


	Nine Months Ended September 30,
	2021					2020
(dollars in thousands)	Number of Contracts	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment		Number of Contracts	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
Troubled debt restructurings:
One- to four-family first mortgage	2	$	77	$	74	8	$	1,095	$	484
Home equity loans and lines	—	—		—		—	—		—
Commercial real estate	2	479		445		4	1,044		992
Construction and land	—	—		—		—	—		—
Multi-family residential	—	—		—		—	—		—
Commercial and industrial	2	2,397		2,308		4	74		66
Other consumer	1	5		2		2	13		10
Total	7	$	2,958	$	2,829	18	$	2,226	$	1,552

Nine Months Ended September 30,
2020 2019
(dollars in thousands) Number of
Contracts Pre-
modification
Outstanding
Recorded
Investment Post-
modification
Outstanding
Recorded
Investment Number of
Contracts Pre-
modification
Outstanding
Recorded
Investment Post-
modification
Outstanding
Recorded
Investment
Troubled debt restructurings:
One- to four-family first mortgage 7 $ 990 $ 385 6 $ 924 $ 911
Home equity loans and lines 0 0 0 0 0 0
Commercial real estate 4 1,044 992 1 89 88
Construction and land 0 0 0 0 0 0
Multi-family residential 0 0 0 0 0 0
Commercial and industrial 3 41 38 0 0 0
Other consumer 2 13 10 2 11 10
Total 16 $ 2,088 $ 1,425 9 $ 1,024 $ 1,009
None of the the loans modified during the nine months ended September 30, 2021 defaulted during the same period.

NaN ~~residential mortgages~~one- to four-family first mortgage loans totaling ~~$543,000, 1~~$674,000, 2 commercial real estate ~~loan~~loans totaling ~~$77,000~~$282,000, 3 commercial and 1industrial loans totaling $35,000, and 2 consumer ~~loan~~loans totaling ~~$4,000~~$8,000 were modified during the nine months ended September 30, 2020 and defaulted ~~during the same period.~~within twelve months of modification. The defaults did not have a significant impact on our allowance for credit losses at September 30, 2020.

NaN residential mortgages totaling $619,000 and 1 consumer loan totaling $6,000 were modified during nine months ended September 30, 2019 and defaulted within twelve months of modification. The defaults did not have a significant impact on our allowance for loan losses at September 30, 2019.

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, ~~during the quarter ended June 30, 2020,~~ the Company ~~entered~~enters into ~~certain~~ derivative financial instruments ~~in its efforts~~ 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 ~~derivative financial instruments~~existing credit derivatives result from loan participation arrangements, therefore, are not used to manage ~~differences~~interest rate risk in the ~~amount, timing, and duration~~Company’s assets or liabilities. The Company occasionally enters into credit risk participation agreements with counterparty banks to accept a portion of the ~~Company’s known or expected cash receipts and its known or expected cash payments principally~~credit risk related to interest rate swaps. The agreements, which are typically executed in conjunction with a participation in a loan with the ~~Company’s variable~~same customer, allow customers to execute an interest rate ~~liabilities.~~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, ~~during the second quarter of 2020,~~ the Company entered into certain interest rate swap agreements as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. ~~During 2020, such~~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 ~~$63,000~~$62,000 will be reclassified as additional interest expense.

Non-designated Hedges

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

Fair Values of Derivative Instruments

The ~~table~~tables below ~~presents~~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 September 30, 2021 and December 31, 2020.


							September 30, 2021
		Derivative Liabilities(1)					Derivative Assets(1)				Derivative Liabilities(1)
(dollars in thousands)	(dollars in thousands)	Notional Amount		Fair Value		(dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:					Derivatives designated as hedging instruments:
Interest rate swaps - variable rate liabilities	Interest rate swaps - variable rate liabilities	$	40,000	$	87	Interest rate swaps - variable rate liabilities	$	40,000	$	1,188	$	—	$	—

Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:
Risk participation agreements						Risk participation agreements	—		—		10,000		33

Netting adjustments	Netting adjustments			0		Netting adjustments			—				—

Less: Cash posted as collateral(2)				(87)

Net derivative amounts	Net derivative amounts			$	0	Net derivative amounts			$	1,188			$	33

							December 31, 2020
							Derivative Assets(1)				Derivative Liabilities(1)
(dollars in thousands)						(dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives designated as hedging instruments:						Derivatives designated as hedging instruments:
Interest rate swaps - variable rate liabilities						Interest rate swaps - variable rate liabilities	$	40,000	$	214	$	—	$	—

Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:
Risk participation agreements						Risk participation agreements	—		—		10,000		58

Netting adjustments						Netting adjustments			—				—

Net derivative amounts						Net derivative amounts			$	214			$	58

(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.

~~(2)~~Cash posted as collateral is held by the Company's derivative counterparties. At September 30, 2020, the Company had excess collateral compared to total exposure due to initial margin requirements for day-to-day volatility. The excess collateral is not reflected above.

At September 30, 2021 and December 31, 2020, accumulated unrealized gains, net of taxes, on derivative instruments totaled $943,000 and $174,000, 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 September 30, 2021 and September 30, 2020.

Three Months Ended September 30, 2020

Three Months Ended September 30, 2021

Amount of Gain Recognized in OCI

Location of Gain Reclassified from AOCI into Income

Amount of Loss Reclassified from AOCI into Income

Amount of Gain Recognized in OCI

Location of Loss Reclassified from AOCI into Income

Amount of Loss Reclassified from AOCI into Income

(dollars in thousands)

Total

Included Component

Total

Included Component

(dollars in thousands)

Total

Included Component

Total

Included Component

Derivatives in cash flows hedging relationships:

Interest rate swaps - variable rate liabilities

Interest expense

(16)

Interest rate swaps - variable rate liabilities

Interest expense

(16)

Nine Months Ended September 30, 2020

Nine Months Ended September 30, 2021

Amount of Loss Recognized in OCI

Location of Loss Reclassified from AOCI into Income

Amount of Loss Reclassified from AOCI into Income

Amount of Gain Recognized in OCI

Location of Loss Reclassified from AOCI into Income

Amount of Loss Reclassified from AOCI into Income

(dollars in thousands)

Total

Included Component

Total

Included Component

(dollars in thousands)

Total

Included Component

Total

Included Component

Derivatives in cash flows hedging relationships:

Interest rate swaps - variable rate liabilities

(110)

Interest expense

(28)

Interest rate swaps - variable rate liabilities

926

Interest expense

(48)


	Three Months Ended September 30, 2020
	Amount of Gain Recognized in OCI				Location of Loss Reclassified from AOCI into Income	Amount of Loss Reclassified from AOCI into Income
(dollars in thousands)	Total		Included Component			Total		Included Component
Derivatives in cash flows hedging relationships:
Interest rate swaps - variable rate liabilities	$	60	$	60	Interest expense	$	(16)	$	(16)


	Nine Months Ended September 30, 2020
	Amount of Loss Recognized in OCI				Location of Loss Reclassified from AOCI into Income	Amount of Loss Reclassified from AOCI into Income
(dollars in thousands)	Total		Included Component			Total		Included Component
Derivatives in cash flows hedging relationships:
Interest rate swaps - variable rate liabilities	$	(110)	$	(110)	Interest expense	$	(28)	$	(28)

Effect of ~~Cash Flow Hedge Accounting~~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 September 30, ~~2020.~~2021.

(dollars in thousands) Location of Loss Reclassified from AOCI into Income Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
Effects of cash flow hedging
Interest rate swaps - variable rate liabilities Interest expense $ (16) $ (28)

(dollars in thousands)

Location of Income Recognized on Non-designated Hedges

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Effects of non-designated hedges

Risk participation agreements

Other noninterest income

At and during the three and nine months ended September 30, 2020, the Company was not a party to derivative contracts not designated as hedging instruments.

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision ~~where~~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 ~~where~~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 September 30, ~~2020, the fair value of~~2021, there were no derivatives with credit-risk-related contingent features in a net liability ~~position,~~position. Such derivatives are measured at fair value, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $87,000. As of September 30, 2020, the Company had minimum collateral posting thresholds with certain of its derivative counterparties and posted collateral of $493,000 in excess of thresholds.risk. If the Company had breached any ~~of these~~ provisions at September 30, ~~2020,~~2021, it ~~could~~would not have been required to settle ~~its~~any obligations under the agreements ~~at their~~since the termination value ~~of $87,000.~~was $0.

7. Fair Value Measurements and Disclosures

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

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

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

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

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

Recurring Basis

Investment Securities Available for Sale

Fair values of investment securities available for sale are primarily measured using information from a third-party pricing service. This pricing service provides pricing information by utilizing pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities bids, offers and other reference data from market research publications. If quoted prices are available in an active market, investment securities are classified as Level 1 measurements. If quoted prices are not available in an active market, fair values are estimated primarily by the use of pricing models. Level 2 investment securities are primarily comprised of mortgage-backed securities issued by government agencies and U.S. government-sponsored enterprises. In certain cases, where there is limited or less transparent information provided by the Company’s third-party pricing service, fair value is estimated by the use

of secondary pricing services or through the use of non-binding third-party broker quotes. Investment securities are classified within Level 3 when little or no market activity supports the fair value.

Management primarily identifies investment securities which may have traded in illiquid or inactive markets, by identifying instances of a significant decrease in the volume and frequency of trades, relative to historical levels, as well as instances of a significant widening of the bid-ask spread in the brokered markets. Investment securities that are deemed to have been trading in illiquid or inactive markets may require the use of significant unobservable inputs. For example, management may use quoted prices for similar investment securities in the absence of a liquid and active market for the investment securities being valued. As of September 30, ~~2020,~~2021, 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 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 September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.


(dollars in thousands)	(dollars in thousands)	September 30, 2020		Level 1		Level 2		Level 3		(dollars in thousands)	September 30, 2021		Level 1		Level 2		Level 3
Assets	Assets									Assets
Available for sale securities:	Available for sale securities:									Available for sale securities:
U.S. agency mortgage-backed	U.S. agency mortgage-backed	$	123,152	$	0	$	123,152	$	0	U.S. agency mortgage-backed	$	213,516	$	—	$	213,516	$	—
Collateralized mortgage obligations	Collateralized mortgage obligations	99,157		0		99,157		0		Collateralized mortgage obligations	36,165		—		36,165		—
Municipal bonds	Municipal bonds	20,817		0		20,817		0		Municipal bonds	43,098		—		43,098		—
U.S. government agency	U.S. government agency	6,413		0		6,413		0		U.S. government agency	5,761		—		5,761		—
Corporate bonds	Corporate bonds	2,039		0		2,039		0		Corporate bonds	5,585		—		5,585		—
Total	Total	$	251,578	$	0	$	251,578	$	0	Total	$	304,125	$	—	$	304,125	$	—

Derivative assets										Derivative assets	$	1,188	$	—	$	1,188	$	—
Total										Total	$	305,313	$	—	$	305,313	$	—

Liabilities	Liabilities									Liabilities
Derivative liabilities(1)		$	87	$	0	$	87	$	0
Derivative liabilities										Derivative liabilities	$	33	$	—	$	33	$	—

~~(1)For more information, refer to~~ ~~Note 6. Derivatives and Hedging Activities~~.


(dollars in thousands)	(dollars in thousands)	December 31, 2019		Level 1		Level 2		Level 3		(dollars in thousands)	December 31, 2020		Level 1		Level 2		Level 3
Assets	Assets									Assets
Available for sale securities:	Available for sale securities:									Available for sale securities:
U.S. agency mortgage-backed	U.S. agency mortgage-backed	$	95,172	$	0	$	95,172	$	0	U.S. agency mortgage-backed	$	142,812	$	—	$	142,812	$	—
Collateralized mortgage obligations	Collateralized mortgage obligations	142,451		0		142,451		0		Collateralized mortgage obligations	75,620		—		75,620		—
Municipal bonds	Municipal bonds	16,005		0		16,005		0		Municipal bonds	28,011		—		28,011		—
U.S. government agency	U.S. government agency	3,693		0		3,693		0		U.S. government agency	6,255		—		6,255		—
Corporate bonds										Corporate bonds	2,054		—		2,054		—
Total	Total	$	257,321	$	0	$	257,321	$	0	Total	$	254,752	$	—	$	254,752	$	—

Derivative assets										Derivative assets	$	214	$	—	$	214	$	—
Total										Total	$	254,966	$	—	$	254,966	$	—

Liabilities										Liabilities
Derivative liabilities										Derivative liabilities	$	58	$	—	$	58	$	—

~~The Company did 0t record any liabilities at fair value as of December 31, 2019 for which the measurement of the fair value was made on a recurring basis.~~

3132

Nonrecurring Basis

The Company records loans individually evaluated for ~~impairment~~credit losses at fair value on a nonrecurring basis. ~~A loan is considered impaired if it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.~~ Fair value is measured at the fair value of the collateral for collateral-dependent loans. For non-collateral-dependent loans, fair value is measured by present valuing expected future cash flows. ~~Impaired loans~~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) September 30, 2020 Level 1 Level 2 Level 3
Assets
Individually evaluated for impairment $ 6,728 $ 0 $ 0 $ 6,728
Foreclosed assets and ORE 1,985 0 0 1,985
Total $ 8,713 $ 0 $ 0 $ 8,713
Fair Value Measurements Using
(dollars in thousands) December 31, 2019 Level 1 Level 2 Level 3
Assets
Individually evaluated for impairment $ 7,365 $ 0 $ 0 $ 7,365
Foreclosed assets and ORE 4,156 0 0 4,156
Total $ 11,521 $ 0 $ 0 $ 11,521


			Fair Value Measurements Using
(dollars in thousands)	September 30, 2021		Level 1		Level 2		Level 3
Assets
Loans individually evaluated	$	3,767	$	—	$	—	$	3,767
Foreclosed assets and ORE	1,031		—		—		1,031
Total	$	4,798	$	—	$	—	$	4,798

			Fair Value Measurements Using
(dollars in thousands)	December 31, 2020		Level 1		Level 2		Level 3
Assets
Loans individually evaluated	$	7,473	$	—	$	—	$	7,473
Foreclosed assets and ORE	1,302		—		—		1,302
Total	$	8,775	$	—	$	—	$	8,775

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

(dollars in thousands)

Fair
Value

Valuation Technique

Unobservable
Inputs

Range of
Discounts

Weighted
Average
Discount

(dollars in thousands)

Fair Value

Valuation Technique

Unobservable Inputs

Range of Discounts

Weighted Average Discount

As of September 30, 2020:

Individually evaluated for impairment

6,728

Third party appraisals and discounted cash flows

Collateral values, market discounts and estimated costs to sell

3% - 80%

14%

September 30, 2021

Loans individually evaluated

3,767

Third party appraisals and discounted cash flows

Collateral values, market discounts and estimated costs to sell

0% - 100%

19%

Foreclosed assets and ORE

1,985

Third party appraisals, sales contracts, broker price opinions

Collateral values, market discounts and estimated costs to sell

6% - 52%

12%

Foreclosed assets and ORE

1,031

Third party appraisals, sales contracts, broker price opinions

Collateral values, market discounts and estimated costs to sell

6% - 61%

(dollars in thousands)

Fair
Value

Valuation Technique

Unobservable
Inputs

Range of
Discounts

Weighted
Average
Discount

(dollars in thousands)

Fair Value

Valuation Technique

Unobservable Inputs

Range of
Discounts

Weighted Average Discount

As of December 31, 2019:

Individually evaluated for impairment

7,365

Third party appraisals and discounted cash flows

Collateral values, market discounts and estimated costs to sell

0% - 84%

13%

December 31, 2020

Loans individually evaluated

7,473

Third party appraisals and discounted cash flows

Collateral values, market discounts and estimated costs to sell

3% - 87%

17%

Foreclosed assets and ORE

4,156

Third party appraisals, sales contracts, broker price opinions

Collateral values, market discounts and estimated costs to sell

6% - 61%

14%

Foreclosed assets and ORE

1,302

Third party appraisals, sales contracts, broker price opinions

Collateral values, market discounts and estimated costs to sell

6% - 42%

11%

3233

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.

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

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

•~~The~~ fair value are described in the Company's Annual Report on Form 10-K for ~~investment securities is determined~~the year ended December 31, 2020. There have been no material changes from ~~quoted market prices when available. If a quoted market price is not available,~~the fair value ~~is estimated using third party pricing services or quoted market prices of securities with similar characteristics.~~

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

•~~The fair value of loans is estimated by discounting~~estimate methods and assumptions disclosed in the ~~future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and~~Company's Annual Report on Form 10-K for the ~~same remaining maturity.~~year ended December 31, 2020.

•~~The cash surrender value of BOLI approximates its fair value.~~

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

•~~The fair value of other borrowings and long-term FHLB advances is estimated by discounting the future cash flows using the rates currently offered for borrowings of similar maturities.~~

•The fair value of derivative liabilities are obtained from a third-party pricing service that uses the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).

3334

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


				Fair Value Measurements at September 30, 2020											Fair Value Measurements at September 30, 2021
(dollars in thousands)	(dollars in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3		(dollars in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial Assets	Financial Assets											Financial Assets
Cash and cash equivalents	Cash and cash equivalents	$	185,836	$	185,836	$	185,836	$	0	$	0	Cash and cash equivalents	$	413,694	$	413,694	$	413,694	$	—	$	—
Interest-bearing deposits in banks	Interest-bearing deposits in banks	349		349		349		0		0		Interest-bearing deposits in banks	349		349		349		—		—
Investment securities available for sale	Investment securities available for sale	251,578		251,578		0		251,578		0		Investment securities available for sale	304,125		304,125		—		304,125		—
Investment securities held to maturity	Investment securities held to maturity	2,942		3,008		0		3,008		0		Investment securities held to maturity	2,110		2,147		—		2,147		—
Mortgage loans held for sale	Mortgage loans held for sale	21,045		21,045		0		21,045		0		Mortgage loans held for sale	3,476		3,476		—		3,476		—
Loans, net	Loans, net	1,922,295		1,945,125		0		1,938,397		6,728		Loans, net	1,851,027		1,856,000		—		1,852,233		3,767
Cash surrender value of BOLI	Cash surrender value of BOLI	40,184		40,184		40,184		0		0		Cash surrender value of BOLI	40,142		40,142		40,142		—		—
Derivative assets(1)												Derivative assets(1)	1,188		1,188		—		1,188		—
Financial Liabilities	Financial Liabilities											Financial Liabilities
Deposits	Deposits	$	2,207,494	$	2,210,331	$	0	$	2,210,331	$	0	Deposits	$	2,365,717	$	2,366,388	$	—	$	2,366,388	$	—
Other borrowings	Other borrowings	5,539		6,233		0		6,233		0		Other borrowings	5,539		5,993		—		5,993		—
Long-term FHLB advances	Long-term FHLB advances	31,445		32,399		0		32,399		0		Long-term FHLB advances	26,430		26,843		—		26,843		—
Derivative liabilities(1)	Derivative liabilities(1)	87		87		0		87		0		Derivative liabilities(1)	33		33		—		33		—
(1)Derivative liabilities are reported at fair value in accrued interest payable and other liabilities in the Consolidated Statements of Financial Condition.

				Fair Value Measurements at December 31, 2019											Fair Value Measurements at December 31, 2020
(dollars in thousands)	(dollars in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3		(dollars in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial Assets	Financial Assets											Financial Assets
Cash and cash equivalents	Cash and cash equivalents	$	39,847	$	39,847	$	39,847	$	0	$	0	Cash and cash equivalents	$	187,952	$	187,952	$	187,952	$	—	$	—
Interest-bearing deposits in banks	Interest-bearing deposits in banks	449		449		449		0		0		Interest-bearing deposits in banks	349		349		349		—		—
Investment securities available for sale	Investment securities available for sale	257,321		257,321		0		257,321		0		Investment securities available for sale	254,752		254,752		—		254,752		—
Investment securities held to maturity	Investment securities held to maturity	7,149		7,194		0		7,194		0		Investment securities held to maturity	2,934		2,996		—		2,996		—
Mortgage loans held for sale	Mortgage loans held for sale	6,990		6,990		0		6,990		0		Mortgage loans held for sale	9,559		9,559		—		9,559		—
Loans, net	Loans, net	1,696,493		1,690,308		0		1,682,943		7,365		Loans, net	1,946,991		1,957,705		—		1,950,232		7,473
Cash surrender value of BOLI	Cash surrender value of BOLI	39,466		39,466		39,466		0		0		Cash surrender value of BOLI	40,334		40,334		40,334		—		—
Derivative assets(1)												Derivative assets(1)	214		214		—		214		—
Financial Liabilities	Financial Liabilities											Financial Liabilities
Deposits	Deposits	$	1,820,975	$	1,821,868	$	0	$	1,821,868	$	0	Deposits	$	2,213,821	$	2,216,002	$	—	$	2,216,002	$	—
Other borrowings	Other borrowings	5,539		5,895		0		5,895		0		Other borrowings	5,539		6,224		—		6,224		—
Long-term FHLB advances	Long-term FHLB advances	40,620		40,580		0		40,580		0		Long-term FHLB advances	28,824		29,662		—		29,662		—
Derivative liabilities(1)												Derivative liabilities(1)	58		58		—		58		—

3435


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, ~~2019~~2020 through September 30, ~~2020~~2021 and on its results of operations for the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this quarterly report on Form 10-Q, particularly the consolidated financial statements and related notes appearing in Item 1.

Forward-Looking Statements

To the extent that statements in this Form 10-Q relate to future plans, objectives, financial results or performance of the Company or Bank, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which are based on management’s current information, estimates and assumptions and the current economic environment, are generally identified by the use of words such as “plan”, “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions, or by future or conditional terms such as “will”, “would”, “should”, “could”, “may”, “likely”, “probably”, or “possibly”. The Company’s or the Bank’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties. Factors that may cause actual results to differ materially from these forward-looking statements include, but are not limited to, the risk factors described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, ~~2019, as supplemented by the additional risk factor included in Part II, Item 1A of this Quarterly Report on Form 10-Q.~~2020.

The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments have ordered non-essential businesses to close and residents to shelter in place at home. Given its ongoing and dynamic nature, it is difficult to predict the full impact of COVID-19 on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the national and local economies may be reopened. As a result of the COVID-19 pandemic and the related adverse local and national economic consequences, our forward-looking statements are subject to the following additional risks, uncertainties and assumptions, among others:

•Demand for our products and services may decline;

•If high levels of unemployment continue, our loan delinquencies, non-performing assets and loan foreclosures may increase;

•Collateral for loans, especially real estate, may decline in value;

•Our allowance for loan losses may have to be increased if our borrowers continue to experience financial difficulties;

•As a result of the reduction in the Federal Reserve Board's target federal funds rate to near 0%, the yield on our interest-earning assets may decline more than the decline in the cost of our interest-bearing liabilities;

•A material decrease in our net income or a net loss over several quarters could result in a suspension of our stock repurchase program and/or a reduction of our quarterly stock dividend;

•Our cyber security risks may be increased as a result of more of our employees working remotely; and

•FDIC deposit insurance premiums may increase if the agency experiences additional resolution costs.

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.

Non-GAAP Financial Measures

Management's Discussion and Analysis of Financial Condition and Results of Operations contains financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). The Company's management uses this non-GAAP financial information in its analysis of the Company's performance. In this Item 2, information is included which excludes PPP loans and the effect of PPP loans on income. Management believes the presentation of this non-GAAP financial information provides useful information that is helpful to a full understanding of the Company’s financial position and operating results. This non-GAAP financial information should not be viewed as a substitute for financial information determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP financial information presented by other companies. A reconciliation on non-GAAP information included herein to GAAP is presented at the end of this item.

EXECUTIVE OVERVIEW

The Company reported net income for the third quarter of 2021 of $15.1 million, or $1.79 diluted EPS, up $6.3 million compared to the the third quarter of 2020. Net income for the third quarter of 2020 oftotaled $8.8 million, or $1.01 diluted ~~EPS, compared to $6.9 million, or $0.75 diluted EPS, reported for the third quarter of 2019.~~EPS. For the nine months ended September 30, ~~2020,~~2021, the Company reported net income of ~~$13.2~~$38.4 million, or ~~$1.51~~$4.54 diluted EPS, ~~compared to $21.3~~up $24.2 million from $14.2 million, or ~~$2.32~~$1.61 diluted EPS, ~~reported~~ for the nine months ended September 30, ~~2019.~~2020.

Key components of the Company’s performance during the three and nine months ended September 30, ~~2020~~2021 include:

•Assets increased ~~$378.7~~$171.6 million, or ~~17.2%~~6.6%, from December 31, ~~2019~~2020 to ~~$2.6~~$2.8 billion at September 30, ~~2020.~~

2021.

•Total loans were ~~$2.0~~$1.9 billion ~~up $240.9~~at September 30, 2021, down $104.8 million, or ~~14.1%~~5.3%, from December 31, ~~2019,~~2020.

•PPP loans totaled $95.6 million at September 30, 2021, down $125.7 million, or 56.8%, from December 31, 2020.

•During the three and nine months ended September 30, 2021, the Company reversed $2.4 million and $7.5 million, respectively, of the allowance for loan losses, primarily due to t~~he recorded net investment~~improvements in ~~PPP loans of $254.5 million.~~

•~~On January 1, 2020, the Company adopted the CECL framework, which resulted in a $7.0 million, or 39.2%, increase in the ACL at the adoption date.~~

•~~The Company recorded no provisions for credit losses for the third quarter of 2020 primarily due to limited changes to~~ our assessment of the economic impact of the COVID-19 ~~pandemic and the absence of loan growth from the previous quarter. In the aggregate, the provisions for credit losses on loans and unfunded lending commitments totaled $14.0 million for the~~pandemic. During nine months ended September 30, ~~2020.~~

2020, the Company provisioned $12.7 million to the allowance for loan losses.

•The ALL totaled ~~$33.0~~$24.1 million, or ~~1.69%~~1.29% of total loans, at September 30, ~~2020. The ACL, which includes the allowance for unfunded lending commitments, totaled $36.6~~2021 compared to $33.0 million, or ~~1.87%~~1.66% of total loans, at ~~September 30,~~December 31, 2020. Excluding PPP loans, the ~~ratios~~ratio of the ALL to total loans was 1.36% and ~~ACL to total loans were 1.94%~~1.87% at September 30, 2021 and ~~2.15%,~~December 31, 2020, respectively.

•Nonperforming assets ~~were down $3.7~~decreased $4.4 million, or ~~13.0%~~22.3%, from ~~the~~$20.0 million, or 0.77% of total assets, at December 31, ~~2019.~~

2020 to $15.5 million, or 0.56% of total assets, at September 30, 2021.

•Total deposits increased ~~$386.5~~$151.9 million, or ~~21.2%~~6.9%, from $2.2 billion at December 31, ~~2019~~2020 to ~~$2.2~~$2.4 billion at September 30, ~~2020.~~

2021.

•The net interest margin was ~~3.82%~~4.16% and 4.01% for the ~~third quarter of 2020, down 30 bps compared to the third quarter of 2019,~~three and ~~3.91% for the~~ nine months ended September 30, ~~2020, down 39~~2021, respectively, up 34 and 10 bps, ~~compared to~~respectively, from the comparable periods in 2020. Excluding the impact of PPP loans, the net interest margin was 3.64% and 3.74% for the three and nine months ended September 30, ~~2019, primarily due~~2021, respectively, compared to ~~the decrease in the average yield on interest-earning assets during 2020.~~

•The average yield paid on total interest-bearing deposits was 0.60%, down 56 bps from the third quarter of 2019. For the nine months ended September 30, 2020, the average yield paid on total interest-bearing deposits was 0.80%, down 29 bps from the nine months ended September 30, 2019.

•~~Noninterest income decreased $980,000, or 20.5%,~~3.96% and ~~$661,000, or 6.1%,~~3.98% for the three and nine months ended September 30, 2020, ~~respectively,~~respectively.

•The average rate paid on total interest-bearing deposits was 0.27%, down 33 bps from the ~~comparable periods in 2019. Income from BOLI for the for the three months ended September 30, 2019 included a non-taxable death benefit~~third quarter of ~~$1.2 million.~~2020. For the nine months ended September 30, ~~2019,~~2021, the ~~impact~~average rate paid on total interest-bearing deposits was 0.35%, down 45 bps from the nine months ended September 30, 2020.

•Total interest expense for the third quarter of 2021 was down $1.3 million, or 49.8%, compared to the ~~BOLI~~third quarter of 2020. For the nine months ended September 30, 2021, total interest expense was down $5.0 million, or 51.0%, from the comparable period in 2020.

•Noninterest income for the third quarter of 2021 was up $1.6 million, or 41.9%, compared to the third quarter of 2020, primarily due to a non-taxable bank-owned life insurance benefit (up $1.7 million), partially offset by a decrease in gains on the the sale of loans (down $489,000). The Company recognized a life insurance benefit of $1.7 million following the death of an employee during the third quarter of 2021. For the nine months ended September 30, 2021, noninterest income was up $2.5 million, or 24.2%, from the comparable period in 2020, primarily due to income from bank-owned life insurance (up $1.7 million), income from bank card fees (up $821,000), and gains on the sale of loans (up $299,000), which were partially offset by ~~asset write-downs totaling $347,000 (pre-tax) recorded during~~an increase in net losses on the ~~second quarter~~sale of ~~2019.~~

assets (up $449,000).

•Noninterest expense for the third quarter of ~~2020 decreased $494,000,~~2021 was up $315,000, or ~~3.0%~~2.0%, compared to the third quarter of ~~2019~~2020, primarily due to ~~decreases~~increases in ~~compensation~~expenses for data processing and ~~benefits (down $526,000)~~communication (up $267,000), marketing and advertising ~~(down $130,000)~~(up $111,000), and ~~occupancy~~other expenses ~~(down $105,000)~~(up $160,000), ~~partiality~~which were partially offset by ~~an increase~~a decrease in regulatory fees ~~(up $399,000)~~(down $225,000). For the nine months ended September 30, ~~2020,~~2021, noninterest expense was up ~~$404,000,~~$2.0 million, or ~~0.8%~~4.2%, from the comparable period in ~~2019~~2020, primarily due to increases in expenses for compensation and benefits (up $642,000), data processing and communication (up $833,000), the ~~provisions~~provision for ~~credit~~ losses on unfunded lending commitments ~~recorded during the first half of 2020 ($1.3 million) and an increase in data processing and communication expense~~ (up ~~$648,000)~~$375,000), ~~partially offset by decreases in compensation and benefits (down $459,000), occupancy (down $330,000), marketing and advertising (down $251,000)~~ and other expenses ~~(down $489,000)~~(up $208,000).

3637

COVID-19 ~~RESPONSE~~IMPACTS

~~Banking operations have not been restrained by state and local government~~After an increase in COVID-19 ~~restrictions. However, we have adapted to protect our employees and customers by working remotely, enhancing cleaning procedures, and enacting several other measures to reduce~~cases during the ~~risk~~third quarter of ~~transmission of the virus. State government imposed~~2021, Louisiana reinstituted its indoor mask mandate in August 2021. Mississippi's COVID-19 restrictions were ~~relaxed in September 2020 within our Louisiana and Mississippi markets, though~~lifted during the ~~states have not fully reopened. The changes in restrictions primarily increased capacity limits~~first quarter of ~~certain businesses and relaxed social distancing guidelines.~~2021.

~~During the second and third quarters of 2020, the Company funded approximately 3,072 loans totaling $262.2 million under~~Under the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP")., the Company funded 4,875 PPP loans totaling $388.7 million during 2020 and 2021, in aggregate. At September 30, ~~2020,~~2021, the total recorded net investment in PPP loans was ~~$254.5~~$95.6 million, of which ~~approximately 2,160~~565 loans with an aggregate outstanding balance of ~~$35.2~~$17.9 million were for amounts of ~~$50,000~~$150,000 or less.

To give immediate financial support to our customers, the Company began providing principal and/or interest payment ~~relief~~deferral options in March 2020. ~~When we last reported the level of such deferrals in our second quarter Form 10-Q (as of August 4, 2020), $113.9~~At September 30, 2021, $4.5 million, or 6%less than 1% of total loans, were under COVID-19 related deferral agreements. ~~As of September 30, 2020, the level of deferrals decreased to $70.2 million, or 4% of total loans.~~ The level of COVID-19 ~~related~~ deferrals ~~formerly~~previously totaled $558.8 million, or 28% of total loans, at June 30, 2020. Of the loans that have exited deferral agreements, ~~$469.0~~$384.8 million, or ~~98%~~99%, were current and performing as of September 30, ~~2020.~~2021.

FINANCIAL CONDITION

Loans, Allowance for Credit Losses and Asset Quality

Loans

~~Loans outstanding~~Total loans at September 30, ~~2020~~2021 were ~~$2.0~~$1.9 billion, ~~an increase of $240.9~~down $104.8 million, or ~~14.1%~~5.3%, from December 31, ~~2019 primarily due to PPP loans. At September 30, 2020, the total recorded investment in~~2020. PPP loans, ~~was $254.5 million, which is~~ included ~~with~~in commercial and industrial ~~loans. The recorded investment in PPP~~ loans, ~~is net of $7.6~~totaled $95.6 million ~~in deferred lender fees, which will be amortized into interest income over the life of the loans. Excluding PPP loans, loans decreased $13.6~~at September 30, 2021, down $125.7 million, or ~~0.8%~~56.8%, from December 31, ~~2019.~~2020.

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


		September 30,		December 31,		Increase/(Decrease)
(dollars in thousands)	(dollars in thousands)	2020		2019		Amount		Percent		(dollars in thousands)	September 30, 2021		December 31, 2020		Increase/(Decrease)
Real estate loans:	Real estate loans:									Real estate loans:
One-to four-family first mortgage	One-to four-family first mortgage	$	409,282	$	430,820	$	(21,538)	(5.0)	%	One-to four-family first mortgage	$	360,150	$	395,638	$	(35,488)	(9.0)	%
Home equity loans and lines	Home equity loans and lines	67,766		79,812		(12,046)		(15.1)		Home equity loans and lines	59,667		67,700		(8,033)		(11.9)
Commercial real estate	Commercial real estate	707,638		722,807		(15,169)		(2.1)		Commercial real estate	802,401		750,623		51,778		6.9
Construction and land	Construction and land	201,575		195,748		5,827		3.0		Construction and land	241,286		221,823		19,463		8.8
Multi-family residential	Multi-family residential	86,619		54,869		31,750		57.9		Multi-family residential	92,062		87,332		4,730		5.4
Total real estate loans	Total real estate loans	1,472,880		1,484,056		(11,176)		(0.8)	%	Total real estate loans	1,555,566		1,523,116		32,450		2.1	%
Other loans:	Other loans:									Other loans:
Commercial and industrial	Commercial and industrial	443,480		184,701		258,779		140.1		Commercial and industrial	284,831		417,926		(133,095)		(31.8)
Consumer	Consumer	38,937		45,604		(6,667)		(14.6)		Consumer	34,779		38,912		(4,133)		(10.6)
Total other loans	Total other loans	482,417		230,305		252,112		109.5		Total other loans	319,610		456,838		(137,228)		(30.0)
Total loans	Total loans	$	1,955,297	$	1,714,361	$	240,936	14.1	%	Total loans	$	1,875,176	$	1,979,954	$	(104,778)	(5.3)	%

Excluding PPP loans, loans increased $20.9 million, or 1.2%, from December 31, 2020. Commercial real estate and construction and land loan growth was primarily driven by our New Orleans and Northshore markets. The growth in multifamily loans was primarily due to the conversion of existing construction loans to permanent financing. The Company experienced significant pay-downs in commercial and industrial loans primarily due to PPP loans and our residential loans, primarily due to refinances as customers sought to acquire lower interest rates.

3738

~~Adoption of ASU No. 2016-13, Financial Instruments -~~Allowance for Credit Losses ~~(Topic 326): Measurement of Credit Losses on Financial Instruments~~

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 ("CECL") for the estimated life of the loan portfolio at reporting periods subsequent to the adoption date. ~~For reporting periods prior to January 1, 2020, management maintained an ALL at a level which reflected losses that were probable and reasonably estimable at the relevant reporting date.~~

The ACL and ALL policies described below are 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 and ALL is and was 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 and ALL. Such agencies may require management to make additional provisions for estimated losses based upon judgments different from those of management.

~~For reporting periods beginning on and after January 1, 2020 and the adoption of ASC Topic 326:~~

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. ~~Refer to~~ ~~Note 2~~ ~~of the Consolidated Financial Statements for more information on the adoption of ASC Topic 326 and its impact on the Consolidated Financial Statements.~~

~~For reporting periods prior to January 1, 2020~~The ACL policy described above is supplemented by periodic reviews and ~~the adoption of ASC Topic 326:~~

validations performed by independent loan reviewers. The ALL estimation process included, among other things, an analysis of delinquency trends, nonperforming loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of loans, the value of collateral securing loans, the borrower’s ability to repay and repayment performance, the number of loans requiring heightened management oversight, economic conditions and industry experience. Based on the evaluation, management assigned risk ratings to segmentsresults of the ~~loan portfolio. Such risk ratings were periodically reviewed~~reviews are reported to the Audit Committee of the Board of Directors. The establishment of the ACL is significantly affected by management ~~and revised as deemed appropriate.~~

~~With respect to acquired loans, prior to January 1, 2020, the Company followed the reserve standard set forth in ASC 310,~~ ~~Receivables. At acquisition, the Company reviewed each loan to determine whether there~~judgment. There is ~~evidence of deterioration in credit quality since origination and if it was probable~~likelihood that ~~the Company~~different amounts would be unable to collect all amounts due according to the loan’s contractual terms. The Company considered expected prepayments and estimated the amount and timing of undiscounted expected principal, interest and other cash flows for each loan pool meeting the criteria above, and determined the excess of the loan pool’s scheduled contractual principal and interest payments in excess of cash flows expected at acquisitionreported under different conditions or assumptions. Federal regulatory agencies, as an ~~amount that should not be accreted (nonaccretable difference). The remaining amount, representing the excess~~integral part of ~~the pool’s cash flows expected~~their examination process, periodically review our ACL. Such agencies may require management to ~~be collected over the fair value, was accreted into interest income over the remaining life~~make additional provisions for estimated losses based upon judgments different from those of the pool (accretable yield). The Company recorded a discount on these loans at acquisition to record them at their estimated fair values. As a result, acquired loans subject to ASC 310 were excluded from the calculation of the ALL at the acquisition date. If the present value of expected cash flows for a pool was less than its carrying value, an impairment was recognized by an increase in the ALL and a charge to the provision for loan losses. See ~~Note 5~~ ~~to the Unaudited Consolidated Financial Statements for additional information concerning our allowance for acquired loans prior to the adoption of ASC Topic 326.~~management.

38We 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.

~~Reserve Build and Additional Information on Loan Portfolio Composition~~

At September 30, ~~2020,~~2021, the ALL totaled $24.1 million, or 1.29% of total loans, down $8.8 million from $33.0 million, or ~~1.69%~~1.66% of total loans, ~~and~~at December 31, 2020. During the ~~ACL, which includes~~nine months ended September 30, 2021, the ~~reserve for unfunded lending commitments, totaled $36.6~~Company reversed $7.5 million ~~or 1.87%~~ of ~~total loans. The Company recorded no provision for~~the allowance loan losses ~~for the third quarter of 2020~~ primarily due to ~~limited changes~~improvements in our assessment of the economic impact of the COVID-19 ~~pandemic, our assessment of all other risk factors in the~~pandemic. Net loan ~~portfolio and the absence of loan growth from the previous quarter. For~~charge-offs totaled $1.3 million for the nine months ended September 30, ~~2020, the provision for~~2021 and were primarily attributable to an acquired hotel loan ~~losses was $12.7 million, up $10.4 million from the nine months ended September 30, 2019. The provision for loan losses during 2020 reflected our assessment~~and one originated commercial relationship, both of ~~the change in expected losses due primarily~~which were nonperforming prior to the ~~economic impact of the~~ COVID-19 ~~pandemic.~~crisis.

As the fallout of the COVID-19 pandemic continues to impact the national, regional and local economies, management continues to proactively monitor the loan portfolio to identify potential weaknesses that may develop. Specifically, management has identified and is monitoring exposures to borrowers and industries that may be impacted more immediately and acutely than others. In many instances, management has directly reached out to specific borrowers to provide guidance and assistance as appropriate. On a portfolio level, management continues to monitor aggregate exposures to highly sensitive segments for changes in asset quality, payment performance and liquidity levels. Additionally, management is monitoring unfunded commitments, such as lines of credit and overdraft protection, to monitor liquidity and funding issues that may arise with our customers.

The following table provides a summary of the loan portfolio and related reserves at September 30, 2020. We have separately identified certain information regarding PPP loans which, due to the existence of full repayment guarantees from the SBA as well as the likelihood that the vast majority of such loans will be forgiven, we believe entail minimal credit risk to the Company.

(dollars in thousands) Total Loans PPP Loans Total ACL ACL to
Total Loans ACL to
Total Non-PPP Loans
September 30, 2020
Retail CRE $ 189,757 $ — $ 6,833 3.60 % 3.60 %
Hotels and short-term rentals 100,029 4,067 5,099 5.10 5.31
Restaurants and bars 92,715 31,488 3,108 3.35 5.08
Energy 31,652 — 1,701 5.37 5.37
Credit cards 3,725 — 375 10.07 10.07
Other loans 1,537,419 218,932 15,886 1.03 1.20
Total $ 1,955,297 $ 254,487 $ 33,002 1.69 % 1.94 %
Unfunded lending commitments(2)
— — 3,637 — —
Total $ 1,955,297 $ 254,487 $ 36,639 1.87 % 2.15 %

~~(1)~~At September 30, 2020, the allowance of $3.6 million related to unfunded lending commitments of $326.8 million. The ACL on unfunded lending commitments is recorded within accrued interest payable and other liabilities on the Consolidated Statements of Financial Condition.

Asset Quality

One of management’s key objectives has been, and continues to be, maintaining a high level of asset quality. In addition to maintaining credit standards for new loan originations, we proactively monitor loans and collection and workout processes of delinquent or problem loans. When a borrower fails to make a scheduled payment, we attempt to cure the deficiency by making personal contact with the borrower. Initial contacts are generally made within 10 days after the date payment is due. In most cases, deficiencies are promptly resolved. If the delinquency continues, late charges are assessed and additional efforts are made to collect the deficiency. All loans which are designated as “special mention,” classified or which are delinquent 90 days or more are reported to the Board of Directors of the Bank monthly. For loans where the collection of principal or interest payments is doubtful, the accrual of interest income ceases. It is our policy, with certain limited exceptions, to discontinue accruing interest and reverse any interest accrued on any loan which is 90 days or more past due. On occasion, this action may be taken earlier if the financial condition of the borrower raises significant concern with regard to their ability to service the debt in accordance with the terms of the loan agreement. Interest income is not accrued on these loans until the borrower’s financial condition and payment record demonstrate an ability to service the debt.

~~An impaired loan generally is one for which it is probable, based~~Under our allowance policy, credit losses are measured on ~~current information,~~a pool basis when similar risk characteristics exist. Loans that ~~the lender will~~do not ~~collect all the amounts due under the contractual terms of the loan. Large groups of smaller balance, homogeneous loans~~share similar risk characteristics are ~~collectively~~individually evaluated for ~~impairment. Loans collectively~~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 impairment include smaller balance commercial loans, residential real estate loans and consumer loans. These loans are evaluated as a group because they have similar characteristics and performance experience. Largercredit losses. Management's evaluation involves an analysis of larger (i.e., loans with balances of ~~$250,000~~$500,000 or greater) commercial real estate loans, multi-family residential loans, construction and land loans and commercial and industrial ~~loans are individually evaluated for impairment.~~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 ~~help~~ determine if ~~there is impairment,~~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. ~~The~~Loans individually evaluated for credit losses are reported to the Board of Directors ~~is provided with monthly reports on impaired loans.~~monthly.

At September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, loans ~~identified as impaired and~~ individually evaluated for ~~impairment~~credit losses were ~~$7.8~~$4.7 million and ~~$8.7~~$9.0 million, respectively. ~~Due to the adoption of ASC Topic 326, total~~Total loans ~~identified as impaired and~~ individually evaluated for credit losses at September 30, ~~2020~~2021 included ~~$2.2~~$0.7 million of acquired loans, of which ~~$1.9~~no loans were acquired with deteriorated credit quality. At December 31, 2020, loans individually evaluated for credit losses included $2.4 million of acquired loans, of which $277,000 was acquired with deteriorated credit quality. ~~Under the former accounting guidance, acquired loans were evaluated on a pool basis and excluded from total loans individually evaluated for impairment at December 31, 2019.~~

The following tables provide a summary of loans individually evaluated for ~~impairment~~credit losses as of the dates indicated.

September 30, 2020
(dollars in thousands) Recorded investment Allowance for Loan Losses Allowance to Total Loans
Loans Individually Evaluated for Impairment
One- to four-family first mortgage $ — $ — — %
Home equity loans and lines — — —
Commercial real estate 7,236 689 9.52
Construction and land — — —
Multi-family residential — — —
Commercial and industrial 612 431 70.42
Consumer — — —
Total $ 7,848 $ 1,120 14.27 %


		December 31, 2019							September 30, 2021
(dollars in thousands)	(dollars in thousands)	Recorded investment		Allowance for Loan Losses		Allowance to Total Loans		(dollars in thousands)	Recorded investment		Allowance for Loan Losses		Allowance to Total Loans
Loans Individually Evaluated for Impairment
Loans Individually Evaluated								Loans Individually Evaluated
One- to four-family first mortgage	One- to four-family first mortgage	$	187	$	—	—	%	One- to four-family first mortgage	$	—	$	—	—	%
Home equity loans and lines	Home equity loans and lines	784		348		44.39		Home equity loans and lines	—		—		—
Commercial real estate	Commercial real estate	6,518		298		4.57		Commercial real estate	3,881		455		11.72
Construction and land	Construction and land	—		—		—		Construction and land	—		—		—
Multi-family residential	Multi-family residential	—		—		—		Multi-family residential	—		—		—
Commercial and industrial	Commercial and industrial	1,223		701		57.32		Commercial and industrial	776		435		56.06
Consumer	Consumer	—		—		—		Consumer	—		—		—
Total	Total	$	8,712	$	1,347	15.46	%	Total	$	4,657	$	890	19.11	%

									December 31, 2020
(dollars in thousands)								(dollars in thousands)	Recorded investment		Allowance for Loan Losses		Allowance to Total Loans
Loans Individually Evaluated								Loans Individually Evaluated
One- to four-family first mortgage								One- to four-family first mortgage	$	1,006	$	100	9.94	%
Home equity loans and lines								Home equity loans and lines	—		—		—
Commercial real estate								Commercial real estate	7,400		1,008		13.62
Construction and land								Construction and land	—		—		—
Multi-family residential								Multi-family residential	—		—		—
Commercial and industrial								Commercial and industrial	606		431		71.12
Consumer								Consumer	—		—		—
Total								Total	$	9,012	$	1,539	17.08	%

Federal regulations and our policies require that we utilize an internal asset classification system as a means of reporting problem and potential problem assets. We have incorporated an internal asset classification system, substantially consistent with Federal banking regulations, as a part of our credit monitoring system. Federal banking regulations set forth a classification scheme for problem and potential problem assets as “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

At September 30, ~~2020~~2021 and December 31, ~~2019, substandard loans, excluding acquired loans, were $12.7 million and $18.1 million, respectively. At September 30,~~ 2020, ~~and December 31, 2019, acquired~~ loans classified as substandard ~~were $14.2~~totaled $34.4 million and ~~$21.7~~$35.3 million, respectively. There were no assets classified as doubtful ~~or loss~~ at ~~September 30, 2020 and December 31, 2019.~~either date. For additional information, refer to Note 5 to the Consolidated Financial Statements.

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


		September 30,		December 31,		Increase/(Decrease)
(dollars in thousands)	(dollars in thousands)	2020		2019		Amount		Percent		(dollars in thousands)	September 30, 2021		December 31, 2020		Increase/(Decrease)
Special Mention Loans	Special Mention Loans									Special Mention Loans
One- to four-family first mortgage	One- to four-family first mortgage	$	2,169	$	2,159	$	10	0.5	%	One- to four-family first mortgage	$	667	$	1,240	$	(573)	(46.2)	%
Home equity loans and lines	Home equity loans and lines	329		181		148		81.8		Home equity loans and lines	—		43		(43)		(100.0)
Commercial real estate	Commercial real estate	1,123		1,800		(677)		(37.6)		Commercial real estate	1,238		966		272		28.2
Construction and land	Construction and land	11,914		8,854		3,060		34.6		Construction and land	1,004		2,122		(1,118)		(52.7)
Multi-family residential	Multi-family residential	—		502		(502)		(100.0)		Multi-family residential	—		—		—		—
Commercial and industrial	Commercial and industrial	5,613		56		5,557		9923.2		Commercial and industrial	2,814		4,814		(2,000)		(41.5)
Consumer	Consumer	184		212		(28)		(13.2)		Consumer	3		146		(143)		(97.9)
Total special mention loans	Total special mention loans	$	21,332	$	13,764	$	7,568	55.0	%	Total special mention loans	$	5,726	$	9,331	$	(3,605)	(38.6)	%

(dollars in thousands)										(dollars in thousands)	September 30, 2021		December 31, 2020		Increase/(Decrease)
Substandard Loans										Substandard Loans
One- to four-family first mortgage										One- to four-family first mortgage	$	4,804	$	4,261	$	543	12.7	%
Home equity loans and lines										Home equity loans and lines	201		62		139		224.2
Commercial real estate										Commercial real estate	10,504		15,195		(4,691)		(30.9)
Construction and land										Construction and land	425		12,224		(11,799)		(96.5)
Multi-family residential										Multi-family residential	14,500		106		14,394		13579.2
Commercial and industrial										Commercial and industrial	3,779		3,154		625		19.8
Consumer										Consumer	231		290		(59)		(20.3)
Total substandard loans										Total substandard loans	$	34,444	$	35,292	$	(848)	(2.4)	%

September 30, December 31, Increase/(Decrease)
(dollars in thousands) 2020 2019 Amount Percent
Substandard Loans
One- to four-family first mortgage $ 5,941 $ 6,696 $ (755) (11.3) %
Home equity loans and lines 109 1,232 (1,123) (91.2)
Commercial real estate 17,185 22,302 (5,117) (22.9)
Construction and land 600 2,707 (2,107) (77.8)
Multi-family residential 199 219 (20) (9.1)
Commercial and industrial 2,583 6,503 (3,920) (60.3)
Consumer 276 179 97 54.2
Total substandard loans $ 26,893 $ 39,838 $ (12,945) (32.5) %

~~Substandard~~Special mention loans decreased ~~$12.9~~$3.6 million ~~or 32.5%,~~ from December 31, ~~2019~~2020 to ~~$26.9 million at~~ September 30, ~~2020~~2021 primarily due to ~~pay-downs.~~upgrades of special mention loans to a pass rating and pay-offs.

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 ~~reporting periods prior to January 1, 2020, management maintained an ALL at a level which reflected losses that were probable and reasonably estimable at the relevant reporting date. For~~ all reporting periods, actual losses are uncertain and dependent upon future events and, as such, further additions to the level of ACL may become necessary.

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


	September 30, 2021							December 31, 2020
(dollars in thousands)	Originated		Acquired(1)		Total			Originated		Acquired(1)		Total
Nonaccrual loans(2):
Real estate loans:
One- to four-family first mortgage	$	1,723	$	1,971	$	3,694		$	1,464	$	2,374	$	3,838
Home equity loans and lines	163		39		202			24		39		63
Commercial real estate	5,958		3,107		9,065			7,650		4,648		12,298
Construction and land	189		248		437			—		469		469
Multi-family residential	—		—		—			—		—		—
Other loans:
Commercial and industrial	385		472		857			603		1,114		1,717
Consumer	174		59		233			188		104		292
Total nonaccrual loans	8,592		5,896		14,488			9,929		8,748		18,677
Accruing loans 90 days or more past due	13		—		13			2		—		2
Total nonperforming loans	8,605		5,896		14,501			9,931		8,748		18,679
Foreclosed assets and ORE	772		259		1,031			422		880		1,302
Total nonperforming assets	9,377		6,155		15,532			10,353		9,628		19,981
Performing troubled debt restructurings	3,961		1,085		5,046			1,512		573		2,085
Total nonperforming assets and troubled debt restructurings	$	13,338	$	7,240	$	20,578		$	11,865	$	10,201	$	22,066

Nonperforming loans to total loans					0.77		%					0.94		%
Nonperforming loans to total assets					0.52		%					0.72		%
Nonperforming assets to total assets					0.56		%					0.77		%

(1)Nonaccrual acquired loans include PCD loans of $122,000 and $390,000 at September 30, 2021 and December 31, 2020, respectively.

(2)Nonaccrual loans include originated restructured loans placed on nonaccrual totaling $4.1 million and $6.5 million at September 30, 2021 and December 31, 2020, respectively. Acquired restructured loans placed on nonaccrual totaled $3.5 million and $3.5 million at September 30, 2021 and December 31, 2020, respectively.

As previously indicated, as a result of Section 4013 of the CARES Act and recent interagency guidance issued by Federal banking regulators, modifications, such as deferrals of principal and/or interest payments, to borrowers affected by the COVID-19 pandemic are not deemed to be TDRs if such modifications are made on loans that were current as of December 31, 2019. Such deferrals and loan modifications totaled $4.5 million, or less than 1% of total loans, at September 30, 2021 and $36.0 million, or 2% of total loans, at December 31, 2020. We will continue to follow the guidance of Federal banking regulators in making any TDR determinations.

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 ~~usually~~ capitalized to the extent that the carrying value does not exceed fair value less estimated selling costs.

~~The following table sets forth the composition of the Company’s nonperforming assets and performing troubled debt restructurings as of the dates indicated.~~

September 30, 2020 December 31, 2019
(dollars in thousands) Originated
Acquired(1)
Total Originated
Acquired(1)
Total
Nonaccrual loans(2):
Real estate loans:
One- to four-family first mortgage $ 2,287 $ 2,322 $ 4,609 $ 2,133 $ 1,815 $ 3,948
Home equity loans and lines 73 36 109 883 361 1,244
Commercial real estate 9,062 6,424 15,486 8,750 4,575 13,325
Construction and land — 515 515 1,170 1,299 2,469
Multi-family residential — 95 95 — — —
Other loans:
Commercial and industrial 607 1,143 1,750 1,603 1,621 3,224
Consumer 175 104 279 89 87 176
Total nonaccrual loans 12,204 10,639 22,843 14,628 9,758 24,386
Accruing loans 90 days or more past due 10 — 10 — — —
Total nonperforming loans 12,214 10,639 22,853 14,628 9,758 24,386
Foreclosed assets and ORE 956 1,029 1,985 1,793 2,363 4,156
Total nonperforming assets 13,170 11,668 24,838 16,421 12,121 28,542
Performing troubled debt restructurings 910 480 1,390 1,903 475 2,378
Total nonperforming assets and troubled debt restructurings $ 14,080 $ 12,148 $ 26,228 $ 18,324 $ 12,596 $ 30,920
Nonperforming loans to total loans 1.17 % 1.42 %
Nonperforming loans to total assets 0.89 % 1.11 %
Nonperforming assets to total assets 0.96 % 1.30 %

~~(1)~~Due to the adoption of ASC Topic 326, PCD loans of $2.1 million are included in nonperforming acquired loans at September 30, 2020. Prior to January 1, 2020, these loans were classified as PCI and excluded from nonperforming loans because they continued to earn interest income from the accretable yield at the pool level. At adoption, the pools were discontinued and performance is based on contractual terms for individual loans. Refer to ~~Note 2~~ to the Consolidated Financial statements for more information on the adoption of ASC Topic 326. At December 31, 2019, PCI loans that were 90 days or more past due totaled $2.2 million and were accounted for under ASC 310-30.

~~(2)~~Nonaccrual loans include originated restructured loans placed on nonaccrual totaling $7.2 million and $7.6 million at September 30, 2020 and December 31, 2019, respectively. Acquired restructured loans placed on nonaccrual totaled $1.2 million and $2.2 million at September 30, 2020 and December 31, 2019, respectively.

As previously indicated, as a result of Section 4013 of the CARES Act and recent interagency guidance issued by Federal banking regulators, modifications, such as deferrals of principal and/or interest payments, to borrowers affected by the COVID-19 pandemic are not deemed to be TDRs if such modifications are made on loans that were current as of December 31, 2019. Such deferrals and loan modifications totaled $70.2 million, or 4% of total loans at September 30, 2020 compared to $558.8 million (28% of total loans) at June 30, 2020. We will continue to follow the guidance of Federal banking regulators in making any TDR determinations.

Investment Securities

The Company’s investment securities portfolio totaled ~~$254.5~~$306.2 million as of September 30, ~~2020, a decrease~~2021, an increase of ~~$10.0~~$48.5 million, or ~~3.8%~~18.8%, from December 31, ~~2019.~~2020. At September 30, ~~2020,~~2021, the Company had a net unrealized gain on its available for sale investment securities portfolio of ~~$6.7~~$1.3 million, compared to a net unrealized gain of ~~$876,000~~$6.5 million at December 31, ~~2019.~~2020. For the period ended September 30, 2021, the Company recorded an immaterial amount of gross gains or losses related to the sale of investments.

The following table summarizes activity in the Company’s investment securities portfolio during the ~~first~~ nine months ~~of 2020.~~ended September 30, 2021.


(dollars in thousands)	(dollars in thousands)	Available for Sale		Held to Maturity		(dollars in thousands)	Available for Sale		Held to Maturity
Balance, December 31, 2019		$	257,321	$	7,149
Balance, December 31, 2020						Balance, December 31, 2020	$	254,752	$	2,934
Purchases	Purchases	57,187		—		Purchases	125,380		—
Sales	Sales	—		—		Sales	(5,068)		—
Principal maturities, prepayments and calls	Principal maturities, prepayments and calls	(66,653)		(4,130)		Principal maturities, prepayments and calls	(64,278)		(800)
Amortization of premiums and accretion of discounts	Amortization of premiums and accretion of discounts	(2,092)		(77)		Amortization of premiums and accretion of discounts	(1,460)		(24)
Increase in market value		5,815		—
Balance, September 30, 2020		$	251,578	$	2,942
Decrease in market value						Decrease in market value	(5,201)		—
Balance, September 30, 2021						Balance, September 30, 2021	$	304,125	$	2,110

Funding Sources

Deposits

Deposits totaled ~~$2.2~~$2.4 billion at September 30, ~~2020,~~2021, an increase of ~~$386.5~~$151.9 million, or ~~21.2%~~6.9%, compared to December 31, ~~2019.~~2020. The following table summarizes the changes in the Company’s deposits from December 31, ~~2019~~2020 to September 30, ~~2020.~~2021.


		September 30,		December 31,		Increase/(Decrease)
(dollars in thousands)	(dollars in thousands)	2020		2019		Amount		Percent		(dollars in thousands)	September 30, 2021		December 31, 2020		Increase/(Decrease)
Demand deposit	Demand deposit	$	629,345	$	437,828	$	191,517	43.7	%	Demand deposit	$	728,352	$	615,700	$	112,652	18.3	%
Savings	Savings	242,849		201,887		40,962		20.3		Savings	280,651		250,165		30,486		12.2
Money market	Money market	336,310		273,741		62,569		22.9		Money market	355,923		333,078		22,845		6.9
NOW	NOW	620,081		512,054		108,027		21.1		NOW	669,414		646,085		23,329		3.6
Certificates of deposit	Certificates of deposit	378,909		395,465		(16,556)		(4.2)		Certificates of deposit	331,377		368,793		(37,416)		(10.1)
Total deposits	Total deposits	$	2,207,494	$	1,820,975	$	386,519	21.2	%	Total deposits	$	2,365,717	$	2,213,821	$	151,896	6.9	%

The average rate paid on interest-bearing deposits was ~~0.60%~~0.27% for the third quarter of ~~2020,~~2021, down 5633 bps compared to the third quarter of ~~2019.~~2020. For the nine months ended September 30, ~~2020,~~2021, the average rate paid on interest-bearing deposits was ~~0.80%~~0.35%, down 2945 bps from the comparable period in ~~2019.~~2020.

At September 30, ~~2020,~~2021, certificates of deposit maturing within the next 12 months totaled ~~$290.8~~$271.6 million.

Federal Home Loan Bank Advances

The average balance of total FHLB advances was ~~$34.6~~$27.0 million for the third quarter of ~~2020,~~2021, down ~~$16.6~~$7.6 million compared to the third quarter of ~~2019. The average yield paid on total FHLB advances for the third quarter of 2020 was 1.73%, down 7 bps compared to the third quarter of 2019.~~

2020. For the nine months ended September 30, ~~2020,~~2021, the average balance of total FHLB advances was ~~$50.2~~$27.7 million, down ~~$5.3~~$22.5 million compared to the nine months ended September 30, ~~2019. The average yield paid on~~2020. Average total FHLB advances ~~for~~decreased over the comparable periods primarily due to the absence of short-term FHLB borrowings and paydowns during the nine months ended September 30, ~~2020 was 1.44%, down 36 bps compared to the nine months ended September 30, 2019.~~2021.

At September 30, 2021 and December 31, 2020, the Company had ~~$31.4~~$26.4 million and $28.8 million in total outstanding FHLB advances, respectively, and ~~had $775.3~~$776.7 million and $787.2 million in additional FHLB advances ~~available.~~available, respectively.

4544

Shareholders’ Equity

~~Shareholders’~~Total shareholders’ equity ~~decreased $3.0~~increased $22.3 million, or ~~0.9%~~6.9%, from ~~$316.3~~$321.8 million at December 31, ~~2019~~2020 to ~~$313.3~~$344.1 million at September 30, ~~2020. The Company’s purchases~~2021. Shareholders' equity increased primarily due to net income of ~~its common stock~~$38.4 million, partially offset by an other comprehensive loss of $3.3 million, share repurchases of $8.8 million and cash dividends of $5.9 million during the nine months ended September 30, 2020 and the transition adjustment for the adoption of ASC Topic 326 on January 1, 2020 decreased shareholders' equity by $11.6 million and $4.7 million, respectively. These decreases were partially offset by the net positive impact of comprehensive income of $17.7 million less cash dividends of $6.0 million for the nine months ended September 30, 2020.2021.

At September 30, ~~2020,~~2021, 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 September 30, ~~2020~~2021 based on the ~~minimum~~ required capital levels as of January 1, 2019 when the Basel III Capital Rules were fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.


		Actual				Minimum Capital Required – Basel III Fully Phased-In				To Be Well Capitalized Under Prompt Corrective Action Provisions					Actual				Minimum Capital Required – Basel III Fully Phased-In				To Be Well Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)	(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Bank:	Bank:													Bank:
Common equity Tier 1 capital (to risk-weighted assets)	Common equity Tier 1 capital (to risk-weighted assets)	$	237,231	14.03	%	$	118,367	7.00	%	$	109,912	6.50	%	Common equity Tier 1 capital (to risk-weighted assets)	$	270,063	14.35	%	$	131,714	7.00	%	$	122,306	6.50	%
Tier 1 risk-based capital	Tier 1 risk-based capital	237,231		14.03		143,732		8.50		135,277		8.00		Tier 1 risk-based capital	270,063		14.35		159,939		8.50		150,531		8.00
Total risk-based capital	Total risk-based capital	258,559		15.29		177,551		10.50		169,096		10.00		Total risk-based capital	293,613		15.60		197,572		10.50		188,164		10.00
Tier 1 leverage capital	Tier 1 leverage capital	237,231		9.44		100,546		4.00		125,682		5.00		Tier 1 leverage capital	270,063		10.05		107,535		4.00		134,419		5.00

LIQUIDITY AND ASSET/LIABILITY MANAGEMENT

Liquidity Management

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

The Company uses its liquidity to fund existing and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to invest in other interest-earning assets and to meet operating expenses. At September 30, ~~2020,~~2021, certificates of deposit maturing within the next 12 months totaled ~~$290.8~~$271.6 million. Based upon historical experience, the Company anticipates that a significant portion of the maturing certificates of deposit will be redeposited with us.

In addition to cash flow from loan and securities payments and prepayments as well as from sales of securities available for sale, the Company has significant borrowing capacity available to fund liquidity needs. In recent years, the Company has utilized borrowings as a cost efficient addition to deposits as a source of funds. Borrowings consist of advances from the FHLB of Dallas, of which the Company is a member. Under terms of the collateral agreement with the FHLB, the Company pledges residential mortgage loans and investment securities as well as the Company’s stock in the FHLB as collateral for such advances. For the three and nine months ended September 30, ~~2020,~~2021, the average ~~balance~~balances of outstanding FHLB advances ~~was $34.6 million.~~were $27.0 million and $27.7 million, respectively. At September 30, ~~2020,~~2021, the Company had ~~$31.4~~$26.4 million in total outstanding FHLB advances and had ~~$775.3~~$776.7 million in additional FHLB advances available.

4645

~~The following table summarizes the Company's primary and secondary sources of liquidity as of the date indicated.~~


	~~September 30,~~
~~(dollars in thousands)~~	~~2020~~
~~Cash and cash equivalents~~	$	~~185,836~~
~~Unpledged investment securities, amortized cost~~	~~116,161~~
~~FHLB advance availability~~	~~775,313~~
~~Unsecured lines of credit~~	~~55,000~~
~~Federal Reserve discount window availability~~	~~500~~
~~Total primary and secondary liquidity~~	$	~~1,132,810~~

Asset/Liability Management

The objective of asset/liability management is to implement strategies for the funding and deployment of the Company’s financial resources that are expected to maximize soundness and profitability over time at acceptable levels of risk. Interest rate sensitivity is the potential impact of changing rate environments on both net interest income and cash flows. The Company measures its interest rate sensitivity over the near term primarily by running net interest income simulations. Our interest rate sensitivity also is monitored by management through the use of a model which generates estimates of the change in its net interest income over a range of interest rate scenarios. Based on the Company’s interest rate risk model, the table below sets forth the results of immediate and sustained changes in interest rates as of September 30, ~~2020.~~2021.

Shift in Interest Rates
(in bps) % Change in Projected
Net Interest Income
200 2.1
100 1.2
(100) (3.2)


Shift in Interest Rates (in bps)						% Change in Projected Net Interest Income
+300						18.4%
+200						12.3%
+100						6.3%
-100						(6.7)%

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, 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 2021 and 2020, such derivatives were used to hedge the variable cost associated with existing variable rate liabilities. Refer to Note ~~6. Derivatives and Hedging Activities~~6 of the Consolidated Financial Statements for more information on the effects of the derivative financial instruments on the consolidated financial statements.

4746

Off-Balance Sheet Activities

To meet the financing needs of its customers, the ~~Bank~~Company issues financial instruments which represent conditional obligations that are not recognized, wholly or in part, in the statements of financial condition. These financial instruments include commitments to extend credit and standby letters of credit. Such instruments expose the Company to varying degrees of credit and interest rate risk in much the same way as funded loans. The same credit policies are used in these commitments as for on-balance sheet instruments. ~~The Company’s exposure to~~At September 30, 2021 and December 31, 2020, the Company's allowance for credit losses ~~from these financial instruments is represented by their contractual amounts.~~on unfunded commitments totaled $1.8 million and $1.4 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
		September 30,		December 31,			Contract Amount
(dollars in thousands)	(dollars in thousands)	2020		2019		(dollars in thousands)	September 30, 2021		December 31, 2020
Standby letters of credit	Standby letters of credit	$	6,388	$	6,098	Standby letters of credit	$	5,581	$	5,781
Available portion of lines of credit	Available portion of lines of credit	267,546		247,670		Available portion of lines of credit	308,324		266,349
Undisbursed portion of loans in process	Undisbursed portion of loans in process	85,371		111,466		Undisbursed portion of loans in process	126,710		99,527
Commitments to originate loans	Commitments to originate loans	142,400		87,446		Commitments to originate loans	134,983		139,471

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.

4847

RESULTS OF OPERATIONS

Net income for the third quarter of ~~2020~~2021 was ~~$8.8~~$15.1 million, up ~~$1.9~~$6.3 million ~~or 28.1%,~~ compared to the third quarter of ~~2019.~~2020. Diluted EPS for the third quarter of ~~2020~~2021 was ~~$1.01,~~$1.79, up ~~$0.26~~$0.78 compared to the third quarter of 2019. The increase in net income for the third quarter of 2020 compared to the same period in 2019 was primarily due to a substantial decrease in interest expense and the absence of a provision for loan losses, partially offset by a reduction in income from BOLI due to a death benefit totaling $1.2 million received during the third quarter of 2019. The Company recorded no provision for loan losses for the third quarter of 2020 primarily due to limited changes in our assessment of the economic impact of the COVID-19 pandemic, our assessment of all other risk factors in the loan portfolio and the absence of loan growth from the previous quarter.2020.

Net income for the nine months ended September 30, ~~2020~~2021 was ~~$13.2~~$38.4 million, ~~down $8.1~~up $24.2 million ~~or 38.2%,~~ compared to the nine months ended September 30, ~~2019.~~2020. Diluted EPS for the nine months ended September 30, ~~2020~~2021 was ~~$1.51, down $0.81~~$4.54, up $2.93 compared to the nine months ended September 30, ~~2019.~~ 2020.

The ~~decrease in~~ net income for the three and nine months ended September 30, 2021 and 2020 was significantly impacted by the change in our estimate of the allowance for loan losses over the comparable periods and the recognition of PPP lender fees. During the the three and nine months ended September 30, 2021, the Company reversed $2.4 million and $7.5 million, respectively, of the allowance for loan losses. During nine months ended September 30, 2020, ~~compared to~~ the ~~same period in 2019 was~~Company provisioned $12.7 million for expected credit losses on loans primarily due to the ~~provisions for loan losses~~uncertainty and ~~unfunded lending commitments in~~economic disruption brought on by the ~~first~~COVID-19 pandemic. The Company recognized $4.4 million and ~~second quarters~~$9.4 million of ~~2020. In aggregate,~~deferred PPP lender fees during the ~~Company made provisions of $14.0 million to the allowances for loan losses~~three and ~~unfunded lending commitments during the~~ nine months ended September 30, ~~2020, reflecting our assessment of expected losses due primarily~~2021, respectively, compared to $1.1 million and $1.9 million during the ~~economic impact of the COVID-19 pandemic.~~comparable periods in 2020.

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 ~~3.62%~~4.05% and ~~3.79%~~3.62% for the quarters ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~3.64%~~3.89% and ~~3.97%~~3.64% for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Net interest income totaled ~~$23.3~~$27.1 million for the third quarter of ~~2020,~~2021, up ~~$2.1~~$3.9 million, or ~~10.1%~~16.6%, compared to the third quarter of ~~2019.~~2020. For the nine months ended September 30, ~~2020,~~2021, net interest income totaled ~~$67.0~~$76.3 million, up ~~$2.3~~$9.3 million, or ~~3.5%~~13.9%, compared to the nine months ended September 30, ~~2019.~~ 2020.

Loan income from deferred PPP lender fees totaled ~~$1.1~~$4.4 million for the third quarter of 2021, up $3.3 million, or 310.5%, compared to the third quarter of 2020. For the nine months ended September 30, 2021, loan income from PPP lender fees totaled $9.4 million, up $7.5 million from the comparable period in 2020. Unrecognized PPP lender fees totaled $3.3 million at September 30, 2021.

The Company’s tax-equivalent net interest margin, which is net interest income as a percentage of average interest-earning assets, was 4.16% and 3.82% for the quarters ended September 30, 2021 and 2020, respectively. For the same periods, the average loan yield was 5.60% and 4.94%, respectively. PPP loans increased the net interest margin by 52 bps and increased the average loan yield by 60 bps during the third quarter of 2021. During the third quarter of 2020, PPP loans decreased the net interest margin by 14 bps and ~~$882,000~~the average loan yield by 34 bps. Excluding the impact of PPP loans, the net interest margin and the average loan yield decreased by 32 and 28 bps, respectively, over the comparable quarters.

The net interest margin for the nine months ended September 30, 2021 and 2020 was 4.01% and 3.91%, respectively. For the same periods, the average loan yield was 5.25% and 5.12%, respectively. PPP loans increased the the net interest margin by 27 bps and the average loan yield by 22 bps during the ~~second quarter~~nine months ended September 30, 2021. During the nine months ended September 30, 2020, PPP loans decreased the net interest margin by 7 bps and the average loan yield by 19 bps. Excluding the impact of ~~2020. The Company recognized $1.1~~PPP loans, the net interest margin and the average loan yield decreased by 24 and 28 bps, respectively, over the comparable year-to-date periods.

Average PPP loans were $144.6 million and ~~$1.9~~$252.5 million for the third quarters of 2021 and 2020, respectively. For the nine months ended September 30, 2021 and 2020, average PPP ~~lender fees~~loans were $203.5 million and $144.8 million, respectively.

The net interest margin was also impacted by the increase in ~~loan interest income for~~average cash and cash equivalents when comparing the three and nine months ended September 30, ~~2020, respectively. The remaining balance of $7.6 million in deferred lender fees will be amortized into interest income over the life of the PPP loans.~~

~~Though net interest income increased, outstanding PPP loans negatively impacted the average loan yield by 34 bps~~2021 and ~~the net interest margin by 14 bps during~~2020. During the third quarter of ~~2020. During the nine months ended September 30, 2020, outstanding PPP loans negatively impacted the average loan yield by 19 bps and the net interest margin by 7 bps.~~

~~In addition,~~2021, the increase in average cash and cash equivalents ~~from~~decreased the ~~third quarter of 2019 to the third quarter of 2020 negatively impacted~~net interest margin and the average yield on total interest-earning assets by 38 and ~~the net interest margin by 21 and 19~~40 bps, respectively. ~~For~~During the nine months ended September 30, ~~2020,~~2021, the increase in average cash and cash equivalents ~~from~~decreased the ~~comparable period in 2019 negatively impacted~~net interest margin and the average yield on total interest-earning assets by 28 and ~~the net interest margin by 15 and 12~~30 bps, respectively.

Average cash and cash equivalents are reflected in the increases in the average balances of other interest-earning assets. Average other interest-earning assets for the ~~third quarter of 2020 were up $112.1 million compared to the average of $58.9 million during the third quarter of 2019. For the~~three and nine months ended September 30, ~~2020, average other interest-earning assets~~2021 were up ~~$71.7~~$217.8 million, ~~compared to~~or 127.4%, and $167.7 million, or 130.5%, respectively, from the ~~average of $56.8 million during the nine months ended September 30, 2019.~~comparable periods in 2020.

Acquired loan discount accretion included in interest income totaled ~~$847,000~~$556,000 and ~~$420,000~~$847,000 for the quarters ended September 30, 2021 and 2020, ~~and 2019,~~ respectively. ~~Acquired loan discount for the third quarter of 2019 was reduced by $680,000 (pre-tax) due to the write-off of the Company's FDIC loss sharing indemnification receivable.~~ For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, acquired loan discount accretion included in interest income totaled ~~$2.4~~$1.9 million and ~~$2.5~~$2.4 million, respectively.

The Company’s tax-equivalent net interest margin, which is net interest income as a percentage of average interest-earning assets, was 3.82% and 4.12% for the quarters ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, the Company's tax-equivalent net interest margin was 3.91% and 4.30%, respectively.

The following tables set 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 September 30,													Three Months Ended September 30,
		2020						2019							2021						2020
(dollars in thousands)	(dollars in thousands)	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate		(dollars in thousands)	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Loans receivable(1)	Loans receivable(1)	$	1,971,174	$	24,769	4.94	%	$	1,698,046	$	23,562	5.46	%	Loans receivable(1)	$	1,896,808	$	27,045	5.60	%	$	1,971,174	$	24,769	4.94	%
Investment securities	Investment securities													Investment securities
Taxable	Taxable	240,830		897		1.49		241,475		1,401		2.32		Taxable	259,282		1,108		1.71		240,830		897		1.49
Tax-exempt (TE)	Tax-exempt (TE)	11,484		70		3.10		20,303		114		2.83		Tax-exempt (TE)	19,168		81		2.13		11,484		70		3.10
Total investment securities	Total investment securities	252,314		967		1.56		261,778		1,515		2.36		Total investment securities	278,450		1,189		1.74		252,314		967		1.56
Other interest-earning assets	Other interest-earning assets	170,957		106		0.25		58,878		397		2.68		Other interest-earning assets	388,723		189		0.19		170,957		106		0.25
Total interest-earning assets (TE)	Total interest-earning assets (TE)	2,394,445		$	25,842	4.25		2,018,702		$	25,474	4.98		Total interest-earning assets (TE)	2,563,981		$	28,423	4.36		2,394,445		$	25,842	4.25
Noninterest-earning assets	Noninterest-earning assets	187,794						198,476						Noninterest-earning assets	192,372						187,329
Total assets	Total assets	$	2,582,239					$	2,217,178					Total assets	$	2,756,353					$	2,581,774
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Deposits:	Deposits:													Deposits:
Savings, checking and money market	Savings, checking and money market	$	1,195,455	$	1,136	0.38	%	$	991,248	$	2,215	0.89	%	Savings, checking and money market	$	1,312,131	$	605	0.18	%	$	1,195,455	$	1,136	0.38	%
Certificates of deposit	Certificates of deposit	381,949		1,232		1.28		392,214		1,835		1.86		Certificates of deposit	332,916		515		0.61		381,949		1,232		1.28
Total interest-bearing deposits	Total interest-bearing deposits	1,577,404		2,368		0.60		1,383,462		4,050		1.16		Total interest-bearing deposits	1,645,047		1,120		0.27		1,577,404		2,368		0.60
Other borrowings	Other borrowings	5,539		53		3.81		5,550		53		3.80		Other borrowings	5,539		53		3.80		5,539		53		3.81
Short-term FHLB advances	Short-term FHLB advances	—		—		—		22		—		2.45		Short-term FHLB advances	—		—		—		—		—		—
Long term FHLB advances	Long term FHLB advances	34,612		149		1.73		51,144		230		1.80		Long term FHLB advances	27,011		116		1.72		34,612		149		1.73
Total interest-bearing liabilities	Total interest-bearing liabilities	1,617,555		$	2,570	0.63		1,440,178		$	4,333	1.19		Total interest-bearing liabilities	1,677,597		$	1,289	0.31		1,617,555		$	2,570	0.63
Noninterest-bearing liabilities	Noninterest-bearing liabilities	651,843						462,227						Noninterest-bearing liabilities	736,567						649,634
Total liabilities	Total liabilities	2,269,398						1,902,405						Total liabilities	2,414,164						2,267,189
Shareholders’ equity	Shareholders’ equity	312,841						314,773						Shareholders’ equity	342,189						314,585
Total liabilities and shareholders’ equity		$	2,582,239					$	2,217,178
Total liabilities and shareholders' equity														Total liabilities and shareholders' equity	$	2,756,353					$	2,581,774
Net interest-earning assets	Net interest-earning assets	$	776,890					$	578,524					Net interest-earning assets	$	886,384					$	776,890
Net interest spread (TE)	Net interest spread (TE)			$	23,272	3.62	%			$	21,141	3.79	%	Net interest spread (TE)			$	27,134	4.05	%			$	23,272	3.62	%
Net interest margin (TE)	Net interest margin (TE)					3.82	%					4.12	%	Net interest margin (TE)					4.16	%					3.82	%

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

5049


		Nine Months Ended September 30,													Nine Months Ended September 30,
		2020						2019							2021						2020
(dollars in thousands)	(dollars in thousands)	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate		(dollars in thousands)	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Loans receivable(1)	Loans receivable(1)	$	1,878,533	$	72,839	5.12	%	$	1,671,348	$	70,572	5.59	%	Loans receivable(1)	$	1,949,004	$	77,362	5.25	%	$	1,878,533	$	72,839	5.12	%
Investment securities	Investment securities													Investment securities
Taxable	Taxable	242,913		3,308		1.82		244,555		4,655		2.54		Taxable	252,309		3,069		1.62		242,913		3,308		1.82
Tax-exempt (TE)	Tax-exempt (TE)	14,210		253		3.01		24,001		397		2.79		Tax-exempt (TE)	19,967		262		2.22		14,210		253		3.01
Total investment securities	Total investment securities	257,123		3,561		1.88		268,556		5,052		2.56		Total investment securities	272,276		3,331		1.67		257,123		3,561		1.88
Other interest-earning assets	Other interest-earning assets	128,518		361		0.37		56,808		1,140		2.68		Other interest-earning assets	296,233		421		0.19		128,518		361		0.37
Total interest-earning assets (TE)	Total interest-earning assets (TE)	2,264,174		$	76,761	4.48		1,996,712		$	76,764	5.10		Total interest-earning assets (TE)	2,517,513		$	81,114	4.27		2,264,174		$	76,761	4.48
Noninterest-earning assets	Noninterest-earning assets	191,594						194,840						Noninterest-earning assets	189,256						191,255
Total assets	Total assets	$	2,455,768					$	2,191,552					Total assets	$	2,706,769					$	2,455,429
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Deposits:	Deposits:													Deposits:
Savings, checking and money market	Savings, checking and money market	$	1,114,205	$	4,305	0.52	%	$	986,623	$	6,318	0.86	%	Savings, checking and money market	$	1,289,759	$	2,328	0.24	%	$	1,114,205	$	4,305	0.52	%
Certificates of deposit	Certificates of deposit	388,642		4,742		1.63		381,148		4,798		1.68		Certificates of deposit	342,167		1,928		0.75		388,642		4,742		1.63
Total interest-bearing deposits	Total interest-bearing deposits	1,502,847		9,047		0.80		1,367,771		11,116		1.09		Total interest-bearing deposits	1,631,926		4,256		0.35		1,502,847		9,047		0.80
Other borrowings	Other borrowings	5,539		159		3.84		5,543		159		3.84		Other borrowings	5,594		159		3.81		5,539		159		3.84
Short-term FHLB advances	Short-term FHLB advances	10,795		23		0.28		22		—		2.58		Short-term FHLB advances	—		—		—		10,795		23		0.28
Long term FHLB advances	Long term FHLB advances	39,415		520		1.76		55,466		751		1.80		Long term FHLB advances	27,706		360		1.73		39,415		520		1.76
Total interest-bearing liabilities	Total interest-bearing liabilities	1,558,596		$	9,749	0.84		1,428,802		$	12,026	1.13		Total interest-bearing liabilities	1,665,226		$	4,775	0.38		1,558,596		$	9,749	0.84
Noninterest-bearing liabilities	Noninterest-bearing liabilities	583,076						451,945						Noninterest-bearing liabilities	707,117						581,465
Total liabilities	Total liabilities	2,141,672						1,880,747						Total liabilities	2,372,343						2,140,061
Shareholders’ equity	Shareholders’ equity	314,096						310,805						Shareholders’ equity	334,426						315,368
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	2,455,768					$	2,191,552					Total liabilities and shareholders’ equity	$	2,706,769					$	2,455,429
Net interest-earning assets	Net interest-earning assets	$	705,578					$	567,910					Net interest-earning assets	$	852,287					$	705,578
Net interest spread (TE)	Net interest spread (TE)			$	67,012	3.64	%			$	64,738	3.97	%	Net interest spread (TE)			$	76,339	3.89	%			$	67,012	3.64	%
Net interest margin (TE)	Net interest margin (TE)					3.91	%					4.30	%	Net interest margin (TE)					4.01	%					3.91	%

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

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


		Three Months Ended September 30,						Nine Months Ended September 30,
		2020 Compared to 2019						2020 Compared to 2019							Three Months Ended September 30,						Nine Months Ended September 30,
		Change Attributable To						Change Attributable To							2021 Compared to 2020						2021 Compared to 2020
						Total Increase/						Total Increase/			Change Attributable To						Change Attributable To
(dollars in thousands)	(dollars in thousands)	Rate		Volume		(Decrease)		Rate		Volume		(Decrease)		(dollars in thousands)	Rate		Volume		Increase/ (Decrease)		Rate		Volume		Increase/ (Decrease)
Interest income:	Interest income:													Interest income:
Loans receivable	Loans receivable	$	(2,372)	$	3,579	$	1,207	$	(1,301)	$	3,568	$	2,267	Loans receivable	$	3,595	$	(1,319)	$	2,276	$	2,098	$	2,425	$	4,523
Investment securities	Investment securities	(485)		(63)		(548)		(920)		(571)		(1,491)		Investment securities	99		123		222		(231)		1		(230)
Other interest-earning assets	Other interest-earning assets	(704)		413		(291)		(797)		18		(779)		Other interest-earning assets	(38)		121		83		(79)		139		60
Total interest income	Total interest income	(3,561)		3,929		368		(3,018)		3,015		(3)		Total interest income	3,656		(1,075)		2,581		1,788		2,565		4,353
Interest expense:	Interest expense:													Interest expense:
Savings, checking and money market accounts	Savings, checking and money market accounts	(1,409)		330		(1,079)		(1,573)		(440)		(2,013)		Savings, checking and money market accounts	(608)		77		(531)		(1,479)		(498)		(1,977)
Certificates of deposit	Certificates of deposit	(560)		(43)		(603)		(69)		13		(56)		Certificates of deposit	(602)		(115)		(717)		(1,741)		(1,073)		(2,814)

Other borrowings														Other borrowings	—		—		—		—		—		—
FHLB advances	FHLB advances	(8)		(73)		(81)		(106)		(102)		(208)		FHLB advances	(1)		(32)		(33)		(67)		(116)		(183)
Total interest expense	Total interest expense	(1,977)		214		(1,763)		(1,748)		(529)		(2,277)		Total interest expense	(1,211)		(70)		(1,281)		(3,287)		(1,687)		(4,974)
Increase (decrease) in net interest income	Increase (decrease) in net interest income	$	(1,584)	$	3,715	$	2,131	$	(1,270)	$	3,544	$	2,274	Increase (decrease) in net interest income	$	4,867	$	(1,005)	$	3,862	$	5,075	$	4,252	$	9,327

Noninterest Income

Noninterest income for the third quarter of ~~2020~~2021 totaled ~~$3.8~~$5.4 million, ~~down $980,000,~~up $1.6 million, or ~~20.5%~~41.9%, from ~~$4.8~~$3.8 million earned for the same period in ~~2019.~~2020. Noninterest income for the nine months ended September 30, ~~2020~~2021 totaled ~~$10.3~~$12.7 million, ~~down $661,000,~~up $2.5 million, or ~~6.1%~~24.2%, from ~~$10.9~~$10.3 million earned for the same period in ~~2019.~~2020.

Income from bank card fees for the three and nine months ended September 30, 2021 was up $188,000, or 14.1%, and $821,000, or 22.8%, respectively, from the comparable periods in 2020 primarily due to increased transaction activity by our cardholders.

Gains on the sale of loans for the third quarter of 2021 were down $489,000, or 54.1%, from the comparable period in 2020. For the nine months ended September 30, 2021, gains on the sale of loans were up $299,000, or 16.2%, from the comparable period in 2020. The origination of mortgage loans held for sale slowed in the second and third quarters of 2021, however earnings from the sale of loans during the first quarter of 2021 were strong and resulted in a net increase in gains on the sale of loans for the nine months ended September 30, 2021 compared to the same nine-month period in 2020.

Income from BOLI for the three and nine months ended September 30, ~~2020~~2021 was ~~down $1.2~~up $1.7 million, or ~~84.2%~~739.0%, and ~~$1.1~~$1.7 million, or ~~60.8%~~232.0%, respectively, from the comparable periods in ~~2019. During the third quarter of 2019, the~~2020. The Company ~~received~~recognized a ~~non-taxable BOLI~~life insurance benefit of ~~$1.2~~$1.7 million following the death of ~~a former employee.~~

~~Income from service fees and charges for~~an employee during the three and nine months ended September 30, 2020 was down $393,000, or 25.9%, and $867,000, or 19.7%, respectively, from the comparable periods in 2019. Service fees and charges decreased primarily due to a decline in income from overdraft fees on deposit accounts.

~~Gains on the sale~~third quarter of loans for the three and nine months ended September 30, 2020 were up $549,000, or 154.6%, and $1.1 million, or 143.1%, respectively, from the comparable periods in 2019. Due to the changes in the interest rate environment during 2020, borrowers found it advantageous to refinance residential mortgages.2021.

Losses on the sale of assets for the three and nine months ended September 30, 2021 totaled $3,000 and $460,000. This was an increase in losses of $3,000 and $449,000, from the three and nine months ended September 30, 2020, ~~were down $325,000, or 96.7%, compared to the same period in 2019.~~respectively. During the second quarter of ~~2019,~~2021, the Company ~~recorded asset write-downs totaling $347,000 (pre-tax).~~

sold and leased back one of its Mississippi branch locations. The sale transferred control to the buyer-lessor and all losses were recognized at the time of the sale. The Company believes that the sale/leaseback will reduce the operating expenses related to this branch office in future periods.

5251

Noninterest Expense

Noninterest expense for the third quarter of ~~2020~~2021 totaled ~~$16.1~~$16.4 million, ~~down $494,000,~~up $315,000, or ~~3.0%~~2.0%, from the third quarter of ~~2019.~~2020. Noninterest expense for the nine months ended September 30, ~~2020~~2021 totaled ~~$48.3~~$49.0 million, up ~~$404,000,~~$2.0 million, or ~~0.8%~~4.2%, from the same period in ~~2019.~~2020.

Compensation and benefits expense for the three and nine months ended September 30, ~~2020~~2021 was ~~down $526,000,~~up $69,000, or ~~5.1%~~0.7%, and ~~$459,000,~~$642,000, or ~~1.6%~~2.3%, respectively, from the comparable periods in ~~2019~~2020 primarily due to ~~decreases in~~increased health insurance costs and compensation expense related to the Company's ESOP driven primarily by the ~~decline~~increase in market value of shares of the Company's common stock held by the ~~ESOP.~~

~~Occupancy expense for the three and nine months ended September 30, 2020 was down $105,000, or 5.9%, and $330,000, or 6.1%, respectively, from the comparable periods~~ESOP which were partially offset by a decrease in 2019. During the third quarter of 2020, occupancy expense decreased primarily due to a decline in building maintenance costs. Occupancy expense for nine months ended September 30, 2019 included $291,000 (pre-tax) of costs to terminate an office lease during the second quarter of 2019.incentive pay.

Marketing and advertising expense for the three and nine months ended September 30, ~~2020~~2021 was ~~down $130,000,~~up $111,000, or ~~31.1%~~38.5%, and ~~$251,000,~~$92,000, or ~~25.2%~~12.3%, respectively, from the comparable ~~periods~~period in ~~2019~~2020 primarily due to aan increase in charitable donations and general ~~decline across all marketing~~advertising activities.

Data processing and communication expense for the three and nine months ended September 30, ~~2020~~2021 was up ~~$87,000,~~$267,000, or ~~4.9%~~14.4%, and ~~$648,000,~~$833,000, or ~~13.6%~~15.3%, respectively, from the comparable periods in ~~2019~~2020 primarily due to a general increase in the cost of software and data processing, increased costs related to higher PPP loan origination volume as well as costs related to the implementation of ~~software contracts.~~enhancements to our lending software.

Regulatory fees for the three and nine months ended September 30, 2020 were up $399,000, or 314.2%, and $287,000, or 40.0%, respectively, from the comparable periods in 2019 primarily due to an increase in FDIC assessments. Large provisions for loan losses, the impact of CECL adoption and dividends during the first half of 2020 reduced total shareholders' equity and resulted in a less favorable leverage ratio, which is used to compute FDIC assessments~~. In addition, the Company benefited from FDIC assessment credits during~~ the third quarter of ~~2019. The credits~~2021 were ~~exhausted during~~down $225,000, or 42.8%, from the ~~first quarter of~~comparable period in 2020.

~~The provision for credit losses on unfunded lending commitments for~~ For the nine months ended September 30, ~~2020 totaled $1.3 million.~~ 2021, regulatory fees were down $18,000, or 1.8%, primarily due to the decline in nonperforming loans and an increase in the leverage ratio.

The Company recorded no provision for credit losses on unfunded lending commitments for the third quarter of ~~2020 primarily~~2021 and 2020. Provisions totaling $375,000 for credit losses on unfunded commitments during the nine months ended September 30, 2021 were due to ~~limited changes in our assessment of~~ the ~~economic impact of the COVID-19 pandemic and the absence of~~ growth in unfunded construction loan commitments ~~from~~and no provision for the ~~previous quarter.~~comparable period in 2020.

Other noninterest expense for the three and nine months ended September 30, ~~2020~~2021 was ~~down $196,000,~~up $160,000, or ~~19.5%~~19.8%, and ~~$489,000,~~$208,000, or ~~16.0%~~8.1%, respectively, from the comparable periods in ~~2019~~2020 primarily due to ~~declines~~an increase in ~~several expense categories.~~other loan fee expenses.

Income Taxes

Income tax expense for the ~~third quarter of 2020 increased $865,000, or 66.4%,~~three and nine months ended September 30, 2021 totaled $3.4 million and $9.2 million, respectively, compared to $2.2 million and $3.4 million for the ~~third quarter of 2019~~three and nine months ended September 30, 2020, respectively. The increases in income tax expense over the comparable periods were primarily due to ~~an increase~~increases in taxable earnings. The Company recorded no provisions for credit losses on loans and unfunded lending commitments during the third quarter of 2020. During the third quarter of 2019, the Company received a non-taxable BOLI benefit of $1.2 million following the death of a former employee.

The Company's effective tax rates for the third quarters of 2021 and 2020 were 18.5% and 19.8%, respectively. The effective tax rate decreased over the comparable three-month periods primarily due an increase in non-taxable earnings from bank-owned life insurance during 2021. For the nine months ended September 30, 2021 and 2020, ~~income tax expense decreased $1.1 million, or 25.7%, from~~ the ~~comparable period in 2019 primarily due to the decrease in taxable earnings. The~~ Company's effective tax ~~rate for the three~~rates were 19.4% and ~~six months ended June 30, 2020 was 19.8% and 19.1%~~19.2%, ~~respectively, compared~~respectively.

Reconciliation of Non-GAAP Measures

The following table provides a reconciliation of Non-GAAP financial measures used herein to ~~16.0% and 16.4%, respectively, from the comparable periods in 2019.~~GAAP reporting. For further information, see "-Non-GAAP Financial Measures" at page 36.

Financial Condition


(dollars in thousands)	September 30, 2021			December 31, 2020
Total loans	$	1,875,176		$	1,979,954
Less: PPP loans	95,560			221,220
Total loans excluding PPP loans	$	1,779,616		$	1,758,734

Allowance for loan losses to total loans	1.29		%	1.66		%
Less: PPP loans	0.07			0.21
Non-GAAP allowance for loan losses to total loans	1.36		%	1.87		%

Results of Operations


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2021			2020			2021			2020
Reported loan income	$	27,045		$	24,769		$	77,362		$	72,839
Less: PPP loan income	4,742			1,729			11,007			3,102
Loan income excluding PPP loan income	$	22,303		$	23,040		$	66,355		$	69,737

Average total loans	$	1,896,808		$	1,971,174		$	1,949,004		$	1,878,533
Less: average PPP loans	144,626			252,504			203,506			144,800
Average total loans excluding PPP loans	$	1,752,182		$	1,718,670		$	1,745,498		$	1,733,733

Loan yield	5.60		%	4.94		%	5.25		%	5.12		%
(Positive) negative impact of PPP loans	(0.60)			0.34			(0.22)			0.19
Loan yield excluding PPP loans	5.00		%	5.28		%	5.03		%	5.31		%

Net interest margin	4.16		%	3.82		%	4.01		%	3.91		%
(Positive) negative impact of PPP loans	(0.52)			0.14			(0.27)			0.07
Net interest margin excluding PPP loans	3.64		%	3.96		%	3.74		%	3.98		%


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, ~~2019,~~2020, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset/Liability Management and Market Risk”. Additional information at September 30, ~~2020~~2021 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 ~~the Bank's Senior Vice President and Director of~~Chief Financial ~~Management (who was performing the duties of acting principal financial officer at the time of filing of this Form 10-Q,~~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 ~~the Bank's Senior Vice President and Director of~~Chief Financial ~~Management (who was performing the duties of acting principal financial officer at the time of filing of this Form 10-Q~~Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the third quarter of ~~2020~~2021 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.

~~Other than the following additional risk factor which supplements the “Risk Factors” section in Item 1A of the Company's Annual Report on Form 10-K for the year ended~~ ~~December 31, 2019 ("Form 10-K") filed with the Securities and Exchange Commission, there~~There have been no material changes from the risk factors previously disclosed ~~by the Company~~ in the Company's Annual report on Form ~~10-K:~~10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission.

The COVID-19 pandemic has adversely impacted our business and financial results, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in Louisiana and many other states and communities. Global markets for oil and gas have, and may continue to be, adversely impacted by the COVID-19 pandemic and/or other events beyond our control, and further volatility in commodity prices could have a negative impact on the economies of energy-dominated states in which we operate. As a result, the demand for our products and services may be significantly impacted, which could adversely affect our revenue. Furthermore, the pandemic could continue to result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain closed, the impact on the global economy worsens, or more customers draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions affecting issuers, we may be required to recognize impairments on the securities we hold as well as reductions in other comprehensive income. Our business operations may also be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic, and we have already temporarily limited access to certain of our branches and offices. In response to the pandemic, we have also suspended residential property foreclosure sales, evictions, and involuntary automobile repossessions, and are offering fee waivers, payment deferrals, and other expanded assistance for credit card, automobile, mortgage, small business and personal lending customers, and future governmental actions may require these and other types of customer-related responses. The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.


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

The Company’s purchases of its common stock made during the quarter ended September 30, 2021 consisted of stock repurchases under the Company’s approved plans and are set forth in the following table.

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that May Yet be Purchased Under the Plan or Programs(1)
July 1 – July 31, 2020 10,894 $ 24.91 10,894 516,022
August 1 – August 31, 2020 53,296 24.71 53,296 462,726
September 1 – September 30, 2020 71,034 25.11 71,034 391,692
Total 135,224 $ 24.94 135,224 391,692


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plan or Programs(1)
July 1 – July 31, 2021	32,771	$	37.98	32,771	183,574
August 1 – August 31, 2021	55,392	37.43		55,392	128,182
September 1 – September 30, 2021	71,599	37.24		71,599	56,583
Total	159,762	$	37.45	159,762	56,583

(1)~~During the third quarter of 2020, the Company completed the remaining share repurchases under the 2019 Repurchase Plan.~~ On August 31, 2020, the Company announced the approval of a ~~new~~ repurchase program (the "2020 Repurchase Plan"). Under the 2020 Repurchase Plan, the Company had authority to purchase up to 444,000 shares of its common stock. As of September 30, 2021, 56,583 shares remained to be purchased under the 2020 Repurchase Plan. 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 ~~444,000~~an additional 430,000 shares, or approximately 5% of the ~~its~~Company’s outstanding common ~~stock outstanding, through open market or privately negotiated transactions.~~stock. Share repurchases under the 2021 Repurchase Plan may commence upon the completion of the Company’s 2020 Repurchase Plan.


Item 3.			Defaults Upon Senior Securities.

None.


Item 4.			Mine Safety Disclosures.

None.


Item 5.			Other Information.

None.


Item 6.			Exhibits and Financial Statement Schedules.

No.

Description

Location

31.1

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

Filed herewith

31.2

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

Filed herewith

32.0

Section 1350 Certification

Filed herewith

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definitions Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

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

HOME BANCORP, INC.

November ~~6, 2020~~5, 2021

By:

/s/ John W. Bordelon

John W. Bordelon

Chairman of the Board, President and Chief Executive Officer

November 5, 2021

By:

/s/ David T. Kirkley

David T. Kirkley

Executive Vice President and Chief Financial Officer

November ~~6, 2020~~5, 2021

By:

/s/ Mary H. Hopkins

Mary H. Hopkins

Home Bank, N.A. Senior Vice President and Director of Financial Management ~~(authorized to sign this report as acting principal financial officer at the time this Form 10-Q is signed)~~


(dollars in thousands)	December 31, 2019		ASC Topic 326 Adoption Impact		January 1, 2020
Allowance for credit losses
One- to four-family first mortgage	$	2,715	$	986	$	3,701
Home equity loans and lines	1,084		(1)		1,083
Commercial real estate	6,541		1,974		8,515
Construction and land	2,670		519		3,189
Multi-family residential	572		(245)		327
Commercial and industrial	3,694		1,243		4,937
Consumer	592		157		749
Total allowance for loan losses	17,868		4,633		22,501

Unfunded lending commitments(1)	0		2,365		2,365
Total allowance for credit losses	$	17,868	$	6,998	$	24,866

Retained Earnings
Total allowance increase			$	6,998
Balance sheet reclassification(2)			(996)
Decrease to retained earnings, pre-tax			6,002
Tax effect			(1,277)
Decrease to retained earnings, net of tax effect			$	4,725


(dollars in thousands)	September 30, 2020		December 31, 2019
Real estate loans:
One- to four-family first mortgage	$	409,282	$	430,820
Home equity loans and lines	67,766		79,812
Commercial real estate	707,638		722,807
Construction and land	201,575		195,748
Multi-family residential	86,619		54,869
Total real estate loans	1,472,880		1,484,056
Other loans:
Commercial and industrial	443,480		184,701
Consumer	38,937		45,604
Total other loans	482,417		230,305
Total loans	$	1,955,297	$	1,714,361


	Nine Months Ended September 30, 2019
(dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision		Ending Balance
Allowance for loan losses:
One- to four-family first mortgage	$	2,136	$	(4)	$	0	$	271	$	2,403
Home equity loans and lines	1,079		(42)		10		41		1,088
Commercial real estate	6,125		(139)		0		829		6,815
Construction and land	2,285		0		0		(113)		2,172
Multi-family residential	550		0		0		22		572
Commercial and industrial	3,228		(744)		23		1,343		3,850
Consumer	945		(189)		34		(92)		698
Total allowance for loan losses	$	16,348	$	(1,118)	$	67	$	2,301	$	17,598


(dollars in thousands)	Total Loans		PPP Loans		Total ACL		ACL to Total Loans		ACL to Total Non-PPP Loans
September 30, 2020
Retail CRE	$	189,757	$	—	$	6,833	3.60	%	3.60	%
Hotels and short-term rentals	100,029		4,067		5,099		5.10		5.31
Restaurants and bars	92,715		31,488		3,108		3.35		5.08
Energy	31,652		—		1,701		5.37		5.37
Credit cards	3,725		—		375		10.07		10.07
Other loans	1,537,419		218,932		15,886		1.03		1.20
Total	$	1,955,297	$	254,487	$	33,002	1.69	%	1.94	%

Unfunded lending commitments(2)	—		—		3,637		—		—
Total	$	1,955,297	$	254,487	$	36,639	1.87	%	2.15	%


Shift in Interest Rates (in bps)						% Change in Projected Net Interest Income
200						2.1
100						1.2
(100)						(3.2)