UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended: ~~June~~September 30, 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 ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

At ~~July 30,~~October 29, 2021, the registrant had ~~8,645,924~~8,523,524 shares of common stock, $0.01 par value, outstanding.

HOME BANCORP, INC. and SUBSIDIARY

TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	Page
	Consolidated Statements of Financial Condition	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Changes in Shareholders’ Equity	4
	Consolidated Statements of Cash Flows	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Managements’ Discussion and Analysis of Financial Condition and Results of Operations	36
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., a wholly-owned subsidiary of the Company
BOLI	–	Bank-owned life insurance
bps	–	basis points, 100 basis points being equal to 1.0%
C&D	–	Construction and land
C&I	–	Commercial and industrial
CARES Act	–	Coronavirus Aid, Relief, and Economic Security Act
CECL	–	Current expected credit losses
Company	–	Home Bancorp, Inc., a Louisiana corporation and the holding company for Home Bank, N. A.
COVID-19	–	The novel coronavirus
CRE	–	Commercial real estate
EPS	–	Earnings per common share
FASB	–	Financial Accounting Standards Board
FHLB	–	Federal Home Loan Bank
GAAP	–	Generally Accepted Accounting Principles
LTV	–	Loan-to-value
NPA(s)	–	Nonperforming asset(s)
OCI	–	Other comprehensive income
ORE	–	Other real estate
PCD	–	Purchased credit deteriorated
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)			(Unaudited)		(Audited)
(dollars in thousands)	(dollars in thousands)	June 30, 2021		December 31, 2020		(dollars in thousands)	September 30, 2021		December 31, 2020
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	393,203	$	187,952	Cash and cash equivalents	$	413,694	$	187,952
Interest-bearing deposits in banks	Interest-bearing deposits in banks	349		349		Interest-bearing deposits in banks	349		349
Investment securities available for sale, at fair value	Investment securities available for sale, at fair value	285,185		254,752		Investment securities available for sale, at fair value	304,125		254,752
Investment securities held to maturity (fair values of $2,164 and $2,996, respectively)		2,118		2,934
Investment securities held to maturity (fair values of $2,147 and $2,996, respectively)						Investment securities held to maturity (fair values of $2,147 and $2,996, respectively)	2,110		2,934
Mortgage loans held for sale	Mortgage loans held for sale	3,752		9,559		Mortgage loans held for sale	3,476		9,559
Loans, net of unearned income	Loans, net of unearned income	1,918,488		1,979,954		Loans, net of unearned income	1,875,176		1,979,954
Allowance for loan losses	Allowance for loan losses	(26,687)		(32,963)		Allowance for loan losses	(24,149)		(32,963)
Total loans, net of unearned income and allowance for loan losses	Total loans, net of unearned income and allowance for loan losses	1,891,801		1,946,991		Total loans, net of unearned income and allowance for loan losses	1,851,027		1,946,991
Office properties and equipment, net	Office properties and equipment, net	44,232		45,497		Office properties and equipment, net	44,331		45,497
Cash surrender value of bank-owned life insurance	Cash surrender value of bank-owned life insurance	40,781		40,334		Cash surrender value of bank-owned life insurance	40,142		40,334
Goodwill and core deposit intangibles	Goodwill and core deposit intangibles	62,520		63,112		Goodwill and core deposit intangibles	62,229		63,112
Accrued interest receivable and other assets	Accrued interest receivable and other assets	40,815		40,370		Accrued interest receivable and other assets	41,983		40,370
Total Assets	Total Assets	$	2,764,756	$	2,591,850	Total Assets	$	2,763,466	$	2,591,850
Liabilities	Liabilities					Liabilities
Deposits:	Deposits:					Deposits:
Noninterest-bearing	Noninterest-bearing	$	715,167	$	615,700	Noninterest-bearing	$	728,352	$	615,700
Interest-bearing	Interest-bearing	1,655,597		1,598,121		Interest-bearing	1,637,365		1,598,121
Total Deposits	Total Deposits	2,370,764		2,213,821		Total Deposits	2,365,717		2,213,821
Other borrowings	Other borrowings	5,539		5,539		Other borrowings	5,539		5,539
Long-term Federal Home Loan Bank advances	Long-term Federal Home Loan Bank advances	27,502		28,824		Long-term Federal Home Loan Bank advances	26,430		28,824
Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	23,139		21,824		Accrued interest payable and other liabilities	21,631		21,824
Total Liabilities	Total Liabilities	2,426,944		2,270,008		Total Liabilities	2,419,317		2,270,008
Shareholders’ Equity	Shareholders’ Equity					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; 8,678,686 and 8,740,104 shares issued and outstanding, respectively		87		87
Preferred stock, $0.01 par value - 10,000,000 shares authorized; none issued						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						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	Additional paid-in capital	165,296		164,988		Additional paid-in capital	164,316		164,988
Unallocated common stock held by:	Unallocated common stock held by:					Unallocated common stock held by:
Employee Stock Ownership Plan (ESOP)	Employee Stock Ownership Plan (ESOP)	(2,589)		(2,767)		Employee Stock Ownership Plan (ESOP)	(2,499)		(2,767)
Recognition and Retention Plan (RRP)	Recognition and Retention Plan (RRP)	(15)		(22)		Recognition and Retention Plan (RRP)	(14)		(22)
Retained earnings	Retained earnings	171,644		154,282		Retained earnings	180,327		154,282
Accumulated other comprehensive income	Accumulated other comprehensive income	3,389		5,274		Accumulated other comprehensive income	1,934		5,274
Total Shareholders’ Equity	Total Shareholders’ Equity	337,812		321,842		Total Shareholders’ Equity	344,149		321,842
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	2,764,756	$	2,591,850	Total Liabilities and Shareholders’ Equity	$	2,763,466	$	2,591,850

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 June 30,				Six Months Ended June 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)	2021		2020		2021		2020		(dollars in thousands, except per share data)	2021		2020		2021		2020
Interest Income	Interest Income									Interest Income
Loans, including fees	Loans, including fees	$	24,500	$	24,371	$	50,317	$	48,070	Loans, including fees	$	27,045	$	24,769	$	77,362	$	72,839
Investment securities:	Investment securities:									Investment securities:
Taxable interest	Taxable interest	1,043		1,103		1,961		2,411		Taxable interest	1,108		897		3,069		3,308
Tax-exempt interest	Tax-exempt interest	87		79		181		183		Tax-exempt interest	81		70		262		253
Other investments and deposits	Other investments and deposits	133		117		232		255		Other investments and deposits	189		106		421		361
Total interest income	Total interest income	25,763		25,670		52,691		50,919		Total interest income	28,423		25,842		81,114		76,761
Interest Expense	Interest Expense									Interest Expense
Deposits	Deposits	1,480		3,012		3,136		6,679		Deposits	1,120		2,368		4,256		9,047
Other borrowings	Other borrowings	53		53		106		106		Other borrowings	53		53		159		159
Short-term Federal Home Loan Bank advances	Short-term Federal Home Loan Bank advances	0		20		0		23		Short-term Federal Home Loan Bank advances	—		—		—		23
Long-term Federal Home Loan Bank advances	Long-term Federal Home Loan Bank advances	120		168		244		371		Long-term Federal Home Loan Bank advances	116		149		360		520
Total interest expense	Total interest expense	1,653		3,253		3,486		7,179		Total interest expense	1,289		2,570		4,775		9,749
Net interest income	Net interest income	24,110		22,417		49,205		43,740		Net interest income	27,134		23,272		76,339		67,012
(Reversal) provision for loan losses	(Reversal) provision for loan losses	(3,425)		6,471		(5,128)		12,728		(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	27,535		15,946		54,333		31,012		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	1,146		942		2,218		2,406		Service fees and charges	1,260		1,123		3,478		3,529
Bank card fees	Bank card fees	1,591		1,127		2,897		2,264		Bank card fees	1,519		1,331		4,416		3,595
Gain on sale of loans, net	Gain on sale of loans, net	559		642		1,727		939		Gain on sale of loans, net	415		904		2,142		1,843
Income from bank-owned life insurance	Income from bank-owned life insurance	221		228		446		487		Income from bank-owned life insurance	1,938		231		2,384		718
Loss on sale of assets, net	Loss on sale of assets, net	(457)		(13)		(457)		(11)		Loss on sale of assets, net	(3)		—		(460)		(11)
Other income	Other income	234		177		523		376		Other income	254		205		777		581
Total noninterest income	Total noninterest income	3,294		3,103		7,354		6,461		Total noninterest income	5,383		3,794		12,737		10,255
Noninterest Expense	Noninterest Expense									Noninterest Expense
Compensation and benefits	Compensation and benefits	9,687		9,362		19,351		18,778		Compensation and benefits	9,809		9,740		29,160		28,518
Occupancy	Occupancy	1,733		1,653		3,429		3,389		Occupancy	1,717		1,686		5,146		5,075
Marketing and advertising	Marketing and advertising	268		160		439		458		Marketing and advertising	399		288		838		746
Data processing and communication	Data processing and communication	2,159		1,760		4,145		3,579		Data processing and communication	2,118		1,851		6,263		5,430
Professional services	Professional services	217		255		451		468		Professional services	234		197		685		665
Forms, printing and supplies	Forms, printing and supplies	163		160		322		331		Forms, printing and supplies	158		140		480		471
Franchise and shares tax	Franchise and shares tax	359		389		719		778		Franchise and shares tax	360		378		1,079		1,156
Regulatory fees	Regulatory fees	306		362		685		478		Regulatory fees	301		526		986		1,004
Foreclosed assets and ORE, net	Foreclosed assets and ORE, net	101		145		224		162		Foreclosed assets and ORE, net	74		162		298		324
Amortization of acquisition intangible	Amortization of acquisition intangible	293		342		593		695		Amortization of acquisition intangible	291		338		884		1,033
Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	375		0		375		0		Provision for credit losses on unfunded commitments	—		—		375		—
Other expenses	Other expenses	907		865		1,801		1,753		Other expenses	970		810		2,771		2,563
Total noninterest expense	Total noninterest expense	16,568		15,453		32,534		30,869		Total noninterest expense	16,431		16,116		48,965		46,985
Income before income tax expense	Income before income tax expense	14,261		3,596		29,153		6,604		Income before income tax expense	18,471		10,950		47,624		17,554
Income tax expense	Income tax expense	2,865		675		5,829		1,201		Income tax expense	3,412		2,168		9,241		3,369
Net Income	Net Income	$	11,396	$	2,921	$	23,324	$	5,403	Net Income	$	15,059	$	8,782	$	38,383	$	14,185
Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	1.35	$	0.33	$	2.76	$	0.60	Basic	$	1.80	$	1.01	$	4.56	$	1.61
Diluted	Diluted	$	1.34	$	0.33	$	2.75	$	0.60	Diluted	$	1.79	$	1.01	$	4.54	$	1.61
Cash dividends declared per common share	Cash dividends declared per common share	$	0.23	$	0.22	$	0.45	$	0.44	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 June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2021		2020		2021		2020		(dollars in thousands)	2021		2020		2021		2020
Net Income	Net Income	$	11,396	$	2,921	$	23,324	$	5,403	Net Income	$	15,059	$	8,782	$	38,383	$	14,185
Other Comprehensive Income (Loss)
Unrealized gains (losses) on available for sale investment securities		1,453		(211)		(3,304)		5,776
Unrealized (losses) gains on cash flow hedges		(398)		(158)		919		(158)
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	55		76		974		(82)
Tax effect	Tax effect	(222)		77		500		(1,180)		Tax effect	387		(24)		887		(1,204)
Other comprehensive income (loss), net of taxes		833		(292)		(1,885)		4,438
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	$	12,229	$	2,629	$	21,439	$	9,841	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)	(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		(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, March 31, 2020		$	91	$	167,249	$	(3,035)	$	(28)	$	143,114	$	5,422	$	312,813
Balance, June 30, 2020																Balance, June 30, 2020	$	90	$	166,494	$	(2,946)	$	(24)	$	142,327	$	5,130	$	311,071
Net income	Net income									2,921				2,921		Net income									8,782				8,782
Other comprehensive loss												(292)		(292)
Purchase of Company’s common stock at cost, 115,327 shares		(1)		(1,152)						(1,693)				(2,846)
Other comprehensive income																Other comprehensive income											91		91
Purchase of Company’s common stock at cost, 135,224 shares																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	Cash dividends declared, $0.22 per share									(1,981)				(1,981)		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, 13,508 shares		—		(3)						(34)				(37)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 529 shares																Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 529 shares	—		—						(1)				(1)
Exercise of stock options	Exercise of stock options			0										0		Exercise of stock options	—		—										—
RRP shares released for allocation	RRP shares released for allocation			(4)				4						0		RRP shares released for allocation			(1)				1						—
ESOP shares released for allocation	ESOP shares released for allocation			198		89								287		ESOP shares released for allocation			201		89								290
Share-based compensation cost	Share-based compensation cost			206										206		Share-based compensation cost			179										179
Balance, June 30, 2020		$	90	$	166,494	$	(2,946)	$	(24)	$	142,327	$	5,130	$	311,071
Balance, March 31, 2021		$	87	$	165,155	$	(2,678)	$	(17)	$	163,507	$	2,556	$	328,610
Balance, September 30, 2020																Balance, September 30, 2020	$	88	$	165,522	$	(2,857)	$	(23)	$	147,117	$	5,221	$	315,068
Balance, June 30, 2021																Balance, June 30, 2021	$	87	$	165,296	$	(2,589)	$	(15)	$	171,644	$	3,389	$	337,812
Net income	Net income									11,396				11,396		Net income									15,059				15,059
Other comprehensive income												833		833
Purchase of Company’s common stock at cost, 42,258 shares		0		(422)						(1,207)				(1,629)
Other comprehensive loss																Other comprehensive loss											(1,455)		(1,455)
Purchase of Company’s common stock at cost, 159,762 shares																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	Cash dividends declared, $0.23 per share									(2,003)				(2,003)		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, 10,720 shares		—		52						(49)				3
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 3,549 shares																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	Exercise of stock options	—		10										10		Exercise of stock options	—		26										26
RRP shares released for allocation	RRP shares released for allocation			(2)				2						0		RRP shares released for allocation			(1)				1						—
ESOP shares released for allocation	ESOP shares released for allocation			315		89								404		ESOP shares released for allocation			269		90								359
Share-based compensation cost	Share-based compensation cost			188										188		Share-based compensation cost			235										235
Balance, June 30, 2021		$	87	$	165,296	$	(2,589)	$	(15)	$	171,644	$	3,389	$	337,812
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 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 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, 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									(3,985)				(3,985)		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									5,403				5,403		Net income									14,185				14,185
Other comprehensive income	Other comprehensive income											4,438		4,438		Other comprehensive income											4,529		4,529
Purchase of Company’s common stock at cost, 303,668 shares		(3)		(3,033)						(5,199)				(8,235)
Cash dividends declared, $0.44 per share										(4,008)				(4,008)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 15,646 shares		—		34						(42)				(8)
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)						(7,220)				(11,609)
Cash dividends declared, $0.66 per share																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)
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			(11)				11						0		RRP shares released for allocation			(12)				12						—
ESOP shares released for allocation	ESOP shares released for allocation			479		178								657		ESOP shares released for allocation			680		267								947
Share-based compensation cost	Share-based compensation cost			450										450		Share-based compensation cost			629										629
Balance, June 30, 2020		$	90	$	166,494	$	(2,946)	$	(24)	$	142,327	$	5,130	$	311,071
Balance, September 30, 2020																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	Balance, December 31, 2020	$	87	$	164,988	$	(2,767)	$	(22)	$	154,282	$	5,274	$	321,842
Net income	Net income									23,324				23,324		Net income									38,383				38,383
Other comprehensive loss	Other comprehensive loss											(1,885)		(1,885)		Other comprehensive loss											(3,340)		(3,340)
Purchase of Company’s common stock at cost, 83,735 shares		0		(837)						(1,977)				(2,814)
Cash dividends declared, $0.45 per share										(3,918)				(3,918)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 18,724 shares		—		158						(67)				91
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	0		54										54		Exercise of stock options	—		80										80
RRP shares released for allocation	RRP shares released for allocation			(7)				7						0		RRP shares released for allocation			(8)				8						—
ESOP shares released for allocation	ESOP shares released for allocation			580		178								758		ESOP shares released for allocation			849		268								1,117
Share-based compensation cost	Share-based compensation cost			360										360		Share-based compensation cost			595										595
Balance, June 30, 2021		$	87	$	165,296	$	(2,589)	$	(15)	$	171,644	$	3,389	$	337,812
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 Six Months Ended June 30,					For the Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2021		2020		(dollars in thousands)	2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	23,324	$	5,403	Net income	$	38,383	$	14,185
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
(Reversal) provision for loan losses	(Reversal) provision for loan losses	(5,128)		12,728		(Reversal) provision for loan losses	(7,513)		12,728
Depreciation	Depreciation	1,532		1,525		Depreciation	2,301		2,288
Amortization and accretion of purchase accounting valuations and intangibles	Amortization and accretion of purchase accounting valuations and intangibles	1,914		2,272		Amortization and accretion of purchase accounting valuations and intangibles	2,762		3,458
Net amortization of mortgage servicing asset	Net amortization of mortgage servicing asset	0		38		Net amortization of mortgage servicing asset	—		56
Federal Home Loan Bank stock dividends	Federal Home Loan Bank stock dividends	(8)		(45)		Federal Home Loan Bank stock dividends	(11)		(56)
Net amortization of discount on investments	Net amortization of discount on investments	1,099		1,358		Net amortization of discount on investments	1,484		2,168
Gain on loans sold, net	Gain on loans sold, net	(1,727)		(939)		Gain on loans sold, net	(2,142)		(1,843)
Proceeds, including principal payments, from loans held for sale	Proceeds, including principal payments, from loans held for sale	130,051		105,307		Proceeds, including principal payments, from loans held for sale	165,995		192,232
Originations of loans held for sale	Originations of loans held for sale	(122,517)		(110,737)		Originations of loans held for sale	(157,770)		(204,444)
Loss on sale of assets, net	Loss on sale of assets, net	457		11		Loss on sale of assets, net	460		11
Non-cash compensation	Non-cash compensation	1,118		1,107		Non-cash compensation	1,712		1,576
Deferred income tax expense (benefit)	Deferred income tax expense (benefit)	1,307		(2,527)		Deferred income tax expense (benefit)	1,747		(2,424)
Increase in accrued interest receivable and other assets	Increase in accrued interest receivable and other assets	(1,468)		(1,683)		Increase in accrued interest receivable and other assets	(3,612)		(1,818)
Increase in cash surrender value of bank-owned life insurance	Increase in cash surrender value of bank-owned life insurance	(446)		(487)		Increase in cash surrender value of bank-owned life insurance	(667)		(718)
Increase (decrease) in accrued interest payable and other liabilities		2,243		(481)
Increase in accrued interest payable and other liabilities						Increase in accrued interest payable and other liabilities	793		711
Net cash provided by operating activities	Net cash provided by operating activities	31,751		12,850		Net cash provided by operating activities	43,922		18,110
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of securities available for sale	Purchases of securities available for sale	(80,483)		(36,435)		Purchases of securities available for sale	(125,380)		(57,187)
Proceeds from maturities, prepayments and calls on securities available for sale	Proceeds from maturities, prepayments and calls on securities available for sale	45,663		41,317		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	Proceeds from maturities, prepayments and calls on securities held to maturity	800		2,750		Proceeds from maturities, prepayments and calls on securities held to maturity	800		4,130
Proceeds from sales of securities available for sale						Proceeds from sales of securities available for sale	5,068		—
Decrease (increase) in loans, net	Decrease (increase) in loans, net	57,085		(253,820)		Decrease (increase) in loans, net	99,621		(245,440)

Increase in interest-bearing deposits in banks						Increase in interest-bearing deposits in banks	—		100
Proceeds from sale of foreclosed assets	Proceeds from sale of foreclosed assets	2,138		2,516		Proceeds from sale of foreclosed assets	2,274		3,039

Purchases of office properties and equipment	Purchases of office properties and equipment	(1,127)		(1,080)		Purchases of office properties and equipment	(1,998)		(1,570)
Proceeds from bank-owned life insurance						Proceeds from bank-owned life insurance	1,717		—
Proceeds from sale of office properties and equipment	Proceeds from sale of office properties and equipment	400		4		Proceeds from sale of office properties and equipment	400		4
Purchase of Federal Home Loan Bank stock	Purchase of Federal Home Loan Bank stock	0		(1,592)		Purchase of Federal Home Loan Bank stock	—		(1,592)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	24,476		(246,340)		Net cash provided by (used in) investing activities	46,780		(231,863)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Increase in deposits, net	Increase in deposits, net	156,942		445,720		Increase in deposits, net	151,896		386,509
Borrowings on Federal Home Loan Bank advances	Borrowings on Federal Home Loan Bank advances	0		119,700		Borrowings on Federal Home Loan Bank advances	—		119,700
Repayments of Federal Home Loan Bank advances	Repayments of Federal Home Loan Bank advances	(1,331)		(125,301)		Repayments of Federal Home Loan Bank advances	(2,408)		(128,901)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	54		30		Proceeds from exercise of stock options	80		30
Issuance of stock under incentive plans		91		(8)
Issuance of stock under incentive plans, net						Issuance of stock under incentive plans, net	176		(9)
Dividends paid to shareholders	Dividends paid to shareholders	(3,918)		(4,008)		Dividends paid to shareholders	(5,906)		(5,978)
Purchase of Company’s common stock	Purchase of Company’s common stock	(2,814)		(8,235)		Purchase of Company’s common stock	(8,798)		(11,609)
Net cash provided by financing activities	Net cash provided by financing activities	149,024		427,898		Net cash provided by financing activities	135,040		359,742
Net change in cash and cash equivalents	Net change in cash and cash equivalents	205,251		194,408		Net change in cash and cash equivalents	225,742		145,989
Cash and cash equivalents, beginning	Cash and cash equivalents, beginning	187,952		39,847		Cash and cash equivalents, beginning	187,952		39,847
Cash and cash equivalents, ending	Cash and cash equivalents, ending	$	393,203	$	234,255	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 ~~six~~nine months ended ~~June~~September 30, 2021 and 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, 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, 2020.

There have been no 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, 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 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 adoption of this ASU did not impact our Consolidated Financial Statements.

3. Investment Securities

The following tables summarize the Company’s available for sale and held to maturity investment securities at ~~June~~September 30, 2021 and December 31, 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
June 30, 2021
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	$	179,704	$	3,026	$	1,062	$	181,668	U.S. agency mortgage-backed	$	213,091	$	2,580	$	2,155	$	213,516
Collateralized mortgage obligations	Collateralized mortgage obligations	46,417		1,074		3		47,488		Collateralized mortgage obligations	35,201		965		1		36,165
Municipal bonds	Municipal bonds	44,420		452		472		44,400		Municipal bonds	43,348		384		634		43,098
U.S. government agency	U.S. government agency	5,993		70		8		6,055		U.S. government agency	5,731		39		9		5,761
Corporate bonds	Corporate bonds	5,500		74		0		5,574		Corporate bonds	5,500		94		9		5,585
Total available for sale	Total available for sale	$	282,034	$	4,696	$	1,545	$	285,185	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	$	2,118	$	46	$	0	$	2,164	Municipal bonds	$	2,110	$	37	$	—	$	2,147
Total held to maturity	Total held to maturity	$	2,118	$	46	$	0	$	2,164	Total held to maturity	$	2,110	$	37	$	—	$	2,147


(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
December 31, 2020	December 31, 2020									December 31, 2020
Available for sale:	Available for sale:									Available for sale:
U.S. agency mortgage-backed	U.S. agency mortgage-backed	$	138,669	$	4,162	$	19	$	142,812	U.S. agency mortgage-backed	$	138,669	$	4,162	$	19	$	142,812
Collateralized mortgage obligations	Collateralized mortgage obligations	74,112		1,565		57		75,620		Collateralized mortgage obligations	74,112		1,565		57		75,620
Municipal bonds	Municipal bonds	27,306		717		12		28,011		Municipal bonds	27,306		717		12		28,011
U.S. government agency	U.S. government agency	6,210		55		10		6,255		U.S. government agency	6,210		55		10		6,255
Corporate bonds	Corporate bonds	2,000		54		0		2,054		Corporate bonds	2,000		54		—		2,054
Total available for sale	Total available for sale	$	248,297	$	6,553	$	98	$	254,752	Total available for sale	$	248,297	$	6,553	$	98	$	254,752
Held to maturity:	Held to maturity:									Held to maturity:
Municipal bonds	Municipal bonds	$	2,934	$	62	$	0	$	2,996	Municipal bonds	$	2,934	$	62	$	—	$	2,996
Total held to maturity	Total held to maturity	$	2,934	$	62	$	0	$	2,996	Total held to maturity	$	2,934	$	62	$	—	$	2,996

The estimated fair value and amortized cost by contractual maturity of the Company’s investment securities as of ~~June~~September 30, 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	$	4,164	$	12,407	$	55,844	$	109,253	$	181,668	U.S. agency mortgage-backed	$	4,150	$	18,271	$	70,572	$	120,523	$	213,516
Collateralized mortgage obligations	Collateralized mortgage obligations	0		20,886		9,749		16,853		47,488		Collateralized mortgage obligations	638		19,095		6,034		10,398		36,165
Municipal bonds	Municipal bonds	1,142		1,558		9,122		32,578		44,400		Municipal bonds	356		1,351		10,234		31,157		43,098
U.S. government agency	U.S. government agency	0		0		5,647		408		6,055		U.S. government agency	—		—		5,358		403		5,761
Corporate bonds	Corporate bonds	0		0		5,574		0		5,574		Corporate bonds	—		—		5,585		—		5,585
Total available for sale	Total available for sale	$	5,306	$	34,851	$	85,936	$	159,092	$	285,185	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	$	555	$	1,609	$	0	$	2,164	Municipal bonds	$	—	$	1,127	$	1,020	$	—	$	2,147
Total held to maturity	Total held to maturity	$	0	$	555	$	1,609	$	0	$	2,164	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	$	4,145	$	11,995	$	54,139	$	109,425	$	179,704	U.S. agency mortgage-backed	$	4,145	$	17,646	$	69,870	$	121,430	$	213,091
Collateralized mortgage obligations	Collateralized mortgage obligations	0		20,197		9,592		16,628		46,417		Collateralized mortgage obligations	627		18,514		5,825		10,235		35,201
Municipal bonds	Municipal bonds	1,140		1,552		8,877		32,851		44,420		Municipal bonds	355		1,349		10,004		31,640		43,348
U.S. government agency	U.S. government agency	0		0		5,581		412		5,993		U.S. government agency	—		—		5,324		407		5,731
Corporate bonds	Corporate bonds	0		0		5,500		0		5,500		Corporate bonds	—		—		5,500		—		5,500
Total available for sale	Total available for sale	$	5,285	$	33,744	$	83,689	$	159,316	$	282,034	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	$	540	$	1,578	$	0	$	2,118	Municipal bonds	$	—	$	1,099	$	1,011	$	—	$	2,110
Total held to maturity	Total held to maturity	$	0	$	540	$	1,578	$	0	$	2,118	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.

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
June 30, 2021		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2021														September 30, 2021	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale:	Available for sale:													Available for sale:
U.S. agency mortgage-backed	U.S. agency mortgage-backed	$	86,422	$	1,062	$	0	$	0	$	86,422	$	1,062	U.S. agency mortgage-backed	$	141,158	$	2,155	$	—	$	—	$	141,158	$	2,155
Collateralized mortgage obligations	Collateralized mortgage obligations	544		1		2,758		2		3,302		3		Collateralized mortgage obligations	134		—		1,658		1		1,792		1
Municipal bonds	Municipal bonds	25,448		472		0		0		25,448		472		Municipal bonds	29,182		601		1,253		33		30,435		634
U.S. government agency	U.S. government agency	0		0		1,114		8		1,114		8		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	$	112,414	$	1,535	$	3,872	$	10	$	116,286	$	1,545	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, 2020	December 31, 2020	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		December 31, 2020	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale:	Available for sale:													Available for sale:
U.S. agency mortgage-backed	U.S. agency mortgage-backed	$	13,666	$	19	$	0	$	0	$	13,666	$	19	U.S. agency mortgage-backed	$	13,666	$	19	$	—	$	—	$	13,666	$	19
Collateralized mortgage obligations	Collateralized mortgage obligations	13,615		55		2,309		2		15,924		57		Collateralized mortgage obligations	13,615		55		2,309		2		15,924		57
Municipal bonds	Municipal bonds	1,278		12		0		0		1,278		12		Municipal bonds	1,278		12		—		—		1,278		12
U.S. government agency	U.S. government agency	0		0		1,196		10		1,196		10		U.S. government agency	—		—		1,196		10		1,196		10
Corporate bonds	Corporate bonds	0		0		0		0		0		0		Corporate bonds	—		—		—		—		—		—
Total available for sale	Total available for sale	$	28,559	$	86	$	3,505	$	12	$	32,064	$	98	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	$	0	Total held to maturity	$	—	$	—	$	—	$	—	$	—	$	—

At ~~June~~September 30, 2021, 5062 of the Company’s debt securities had unrealized losses totaling ~~1.3%~~1.6% of the individual securities’ amortized cost basis and ~~0.5%~~0.9% of the Company’s total amortized cost basis of the investment securities portfolio. At such date, 74 of the 5062 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 ~~June~~September 30, 2021.

At ~~June~~September 30, 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 tables present the amortized cost of the Company's held-to-maturity securities by credit quality rating at ~~June~~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

June 30, 2021

September 30, 2021

Held to maturity:

Municipal bonds

2,118

Municipal bonds

2,110

—

2,110

Credit Ratings

(dollars in thousands)

AAA/AA/A

BBB/BB/B

Total

(dollars in thousands)

AAA/AA/A

BBB/BB/B

Total

December 31, 2020

Held to maturity:

Municipal bonds

2,934

Municipal bonds

2,934

—

2,934

Accrued interest receivable on the Company's investment securities was ~~$891,000~~$773,000 and $744,000 at ~~June~~September 30, 2021 and December 31, 2020, respectively. These amounts are recorded in accrued interest receivable and other assets on the Consolidated Statements of Financial Condition.

At ~~June~~September 30, 2021 and December 31, 2020, the Company had ~~$153,841,000~~$151,330,000 and $125,889,000, respectively, of securities pledged to secure public deposits.

4. Earnings Per Share

Earnings per common share was computed based on the following:
Three Months Ended
June 30, Six Months Ended
June 30,
(in thousands, except per share data) 2021 2020 2021 2020
Numerator:
Net income available to common shareholders $ 11,396 $ 2,921 $ 23,324 $ 5,403
Denominator:
Weighted average common shares outstanding 8,449 8,702 8,443 8,792
Effect of dilutive securities:
Restricted stock 13 8 12 11
Stock options 37 20 33 26
Weighted average common shares outstanding – assuming dilution 8,499 8,730 8,488 8,829
Basic earnings per common share $ 1.35 $ 0.33 $ 2.76 $ 0.60
Diluted earnings per common share $ 1.34 $ 0.33 $ 2.75 $ 0.60


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

Options for ~~92,068~~106,190 and ~~131,382~~160,282 shares of common stock were not included in the computation of diluted EPS for the three months ended ~~June~~September 30, 2021 and 2020, respectively, because the effect of these shares was anti-dilutive. For the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, options on ~~94,233~~98,262 and ~~114,028,~~129,559, respectively, shares of common stock were not included in the computation of diluted EPS because the effect of these shares was anti-dilutive.

5. Credit Quality and Allowance for Credit Losses

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

Loans

Loans are reported at the principal balance outstanding net of unearned income and fair value discounts, if applicable. Interest on loans and the accretion of unearned income are computed in a manner that approximates a level yield on recorded principal. Interest on loans is recorded as income is earned. The accrual of interest is discontinued when it is probable the borrower will not be able to meet payment obligations as they become due. It is our policy, with certain limited exceptions, to discontinue accruing interest and reverse any interest accrued on any loan which is 90 days or more past due. Interest income is not accrued on these loans until the borrower’s financial condition and payment record demonstrate an ability to service the debt. If it is determined that all or part of a loan is uncollectible, the potion of the loan deemed uncollectible is charged to the allowance for credit losses.

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” 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 allowance for loan losses ("ALL"). Since the adoption of ASC 326, loans that were acquired with evidence of credit deterioration are referred to as "purchased credit deteriorated ("PCD") 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 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.

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)	(dollars in thousands)	June 30, 2021		December 31, 2020		(dollars in thousands)	September 30, 2021		December 31, 2020
Real estate loans:	Real estate loans:					Real estate loans:
One- to four-family first mortgage	One- to four-family first mortgage	$	365,640	$	395,638	One- to four-family first mortgage	$	360,150	$	395,638
Home equity loans and lines	Home equity loans and lines	64,614		67,700		Home equity loans and lines	59,667		67,700
Commercial real estate	Commercial real estate	755,707		750,623		Commercial real estate	802,401		750,623
Construction and land	Construction and land	233,714		221,823		Construction and land	241,286		221,823
Multi-family residential	Multi-family residential	82,966		87,332		Multi-family residential	92,062		87,332
Total real estate loans	Total real estate loans	1,502,641		1,523,116		Total real estate loans	1,555,566		1,523,116
Other loans:	Other loans:					Other loans:
Commercial and industrial	Commercial and industrial	380,751		417,926		Commercial and industrial	284,831		417,926
Consumer	Consumer	35,096		38,912		Consumer	34,779		38,912
Total other loans	Total other loans	415,847		456,838		Total other loans	319,610		456,838
Total loans	Total loans	$	1,918,488	$	1,979,954	Total loans	$	1,875,176	$	1,979,954

The net investment in PPP loans, which is included in commercial and industrial loans, was ~~$197,614,000~~$95,560,000 and $221,220,000 at ~~June~~September 30, 2021 and December 31, 2020, respectively.

The net discount on the Company’s loans was ~~$5,329,000~~$4,773,000 and $6,650,000 at ~~June~~September 30, 2021 and December 31, 2020, respectively. In addition, loan balances as of ~~June~~September 30, 2021 and December 31, 2020 are reported net of unearned income of ~~$11,096,000~~$6,879,000 and $8,727,000, respectively. Unearned income at ~~June~~September 30, 2021 and December 31, 2020 included PPP deferred lender fees of ~~$7,693,000~~$3,334,000 and $5,449,000, respectively.

Accrued interest receivable on the Company's loans was ~~$7,224,000~~$6,482,000 and $8,635,000 at ~~June~~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.


		June 30, 2021							September 30, 2021
(dollars in thousands)	(dollars in thousands)	Collectively Evaluated		Individually Evaluated		Total		(dollars in thousands)	Collectively Evaluated		Individually Evaluated		Total
Allowance for credit losses:	Allowance for credit losses:							Allowance for credit losses:
One- to four-family first mortgage	One- to four-family first mortgage	$	2,397	$	0	$	2,397	One- to four-family first mortgage	$	2,145	$	—	$	2,145
Home equity loans and lines	Home equity loans and lines	582		0		582		Home equity loans and lines	521		—		521
Commercial real estate	Commercial real estate	15,219		218		15,437		Commercial real estate	12,872		455		13,327
Construction and land	Construction and land	3,585		0		3,585		Construction and land	3,628		—		3,628
Multi-family residential	Multi-family residential	745		0		745		Multi-family residential	627		—		627
Commercial and industrial	Commercial and industrial	2,790		478		3,268		Commercial and industrial	2,815		435		3,250
Consumer	Consumer	673		0		673		Consumer	651		—		651
Total allowance for loan losses	Total allowance for loan losses	$	25,991	$	696	$	26,687	Total allowance for loan losses	$	23,259	$	890	$	24,149

Unfunded lending commitments(1)	Unfunded lending commitments(1)	$	1,800	$	0	$	1,800	Unfunded lending commitments(1)	$	1,800	$	—	$	1,800
Total allowance for credit losses	Total allowance for credit losses	$	27,791	$	696	$	28,487	Total allowance for credit losses	$	25,059	$	890	$	25,949


		June 30, 2021							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	$	365,640	$	0	$	365,640	One- to four-family first mortgage	$	360,150	$	—	$	360,150
Home equity loans and lines	Home equity loans and lines	64,614		0		64,614		Home equity loans and lines	59,667		—		59,667
Commercial real estate	Commercial real estate	751,488		4,219		755,707		Commercial real estate	798,520		3,881		802,401
Construction and land	Construction and land	233,714		0		233,714		Construction and land	241,286		—		241,286
Multi-family residential	Multi-family residential	82,966		0		82,966		Multi-family residential	92,062		—		92,062
Commercial and industrial	Commercial and industrial	379,951		800		380,751		Commercial and industrial	284,055		776		284,831
Consumer	Consumer	35,096		0		35,096		Consumer	34,779		—		34,779
Total loans	Total loans	$	1,913,469	$	5,019	$	1,918,488	Total loans	$	1,870,519	$	4,657	$	1,875,176


		December 31, 2020							December 31, 2020
(dollars in thousands)	(dollars in thousands)	Collectively Evaluated		Individually Evaluated		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	$	2,965	$	100	$	3,065	One- to four-family first mortgage	$	2,965	$	100	$	3,065
Home equity loans and lines	Home equity loans and lines	676		0		676		Home equity loans and lines	676		—		676
Commercial real estate	Commercial real estate	17,843		1,008		18,851		Commercial real estate	17,843		1,008		18,851
Construction and land	Construction and land	4,155		0		4,155		Construction and land	4,155		—		4,155
Multi-family residential	Multi-family residential	1,077		0		1,077		Multi-family residential	1,077		—		1,077
Commercial and industrial	Commercial and industrial	3,845		431		4,276		Commercial and industrial	3,845		431		4,276
Consumer	Consumer	863		0		863		Consumer	863		—		863
Total allowance for loan losses	Total allowance for loan losses	$	31,424	$	1,539	$	32,963	Total allowance for loan losses	$	31,424	$	1,539	$	32,963

Unfunded lending commitments(1)	Unfunded lending commitments(1)	$	1,425	$	0	$	1,425	Unfunded lending commitments(1)	$	1,425	$	—	$	1,425
Total allowance for credit losses	Total allowance for credit losses	$	32,849	$	1,539	$	34,388	Total allowance for credit losses	$	32,849	$	1,539	$	34,388

		December 31, 2020							December 31, 2020
(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	$	394,632	$	1,006	$	395,638	One- to four-family first mortgage	$	394,632	$	1,006	$	395,638
Home equity loans and lines	Home equity loans and lines	67,700		0		67,700		Home equity loans and lines	67,700		—		67,700
Commercial real estate	Commercial real estate	743,223		7,400		750,623		Commercial real estate	743,223		7,400		750,623
Construction and land	Construction and land	221,823		0		221,823		Construction and land	221,823		—		221,823
Multi-family residential	Multi-family residential	87,332		0		87,332		Multi-family residential	87,332		—		87,332
Commercial and industrial	Commercial and industrial	417,320		606		417,926		Commercial and industrial	417,320		606		417,926
Consumer	Consumer	38,912		0		38,912		Consumer	38,912		—		38,912
Total loans	Total loans	$	1,970,942	$	9,012	$	1,979,954	Total loans	$	1,970,942	$	9,012	$	1,979,954

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

(2)~~Loans~~There were no PCD loans individually evaluated at September 30, 2021. At December 31, 2020, loans individually evaluated included PCD loans of ~~$277,000 at June 30, 2021 and December 31, 2020.~~$277,000.

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


		Six Months Ended June 30, 2021											Nine Months Ended September 30, 2021
(dollars in thousands)	(dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision (Reversal)		Ending Balance		(dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision (Reversal)		Ending Balance
Allowance for credit losses:	Allowance for credit losses:											Allowance for credit losses:
One- to four-family first mortgage	One- to four-family first mortgage	$	3,065	$	(172)	$	10	$	(506)	$	2,397	One- to four-family first mortgage	$	3,065	$	(176)	$	13	$	(757)	$	2,145
Home equity loans and lines	Home equity loans and lines	676		0		4		(98)		582		Home equity loans and lines	676		(6)		6		(155)		521
Commercial real estate	Commercial real estate	18,851		(1,003)		0		(2,411)		15,437		Commercial real estate	18,851		(1,024)		—		(4,500)		13,327
Construction and land	Construction and land	4,155		0		63		(633)		3,585		Construction and land	4,155		—		63		(590)		3,628
Multi-family residential	Multi-family residential	1,077		0		0		(332)		745		Multi-family residential	1,077		—		—		(450)		627
Commercial and industrial	Commercial and industrial	4,276		(324)		282		(966)		3,268		Commercial and industrial	4,276		(522)		307		(811)		3,250
Consumer	Consumer	863		(60)		52		(182)		673		Consumer	863		(79)		117		(250)		651
Total allowance for loan losses	Total allowance for loan losses	$	32,963	$	(1,559)	$	411	$	(5,128)	$	26,687	Total allowance for loan losses	$	32,963	$	(1,807)	$	506	$	(7,513)	$	24,149

Unfunded lending commitments	Unfunded lending commitments	$	1,425	$	0	$	0	$	375	$	1,800	Unfunded lending commitments	$	1,425	$	—	$	—	$	375	$	1,800
Total allowance for credit losses	Total allowance for credit losses	$	34,388	$	(1,559)	$	411	$	(4,753)	$	28,487	Total allowance for credit losses	$	34,388	$	(1,807)	$	506	$	(7,138)	$	25,949


		Six Months Ended June 30, 2020													Nine Months Ended September 30, 2020
(dollars in thousands)	(dollars in thousands)	Beginning Balance		ASC Topic 326 Adoption Impact(1)		Charge-offs		Recoveries		Provision		Ending Balance		(dollars in thousands)	Beginning Balance		ASC Topic 326 Adoption Impact(1)		Charge-offs		Recoveries		Provision		Ending Balance
Allowance for credit losses:	Allowance for credit losses:													Allowance for credit losses:
One- to four-family first mortgage	One- to four-family first mortgage	$	2,715	$	986	$	(55)	$	2	$	792	$	4,440	One- to four-family first mortgage	$	2,715	$	986	$	(55)	$	12	$	(245)	$	3,413
Home equity loans and lines	Home equity loans and lines	1,084		(1)		(161)		12		613		1,547		Home equity loans and lines	1,084		(1)		(575)		15		248		771
Commercial real estate	Commercial real estate	6,541		1,974		0		0		9,297		17,812		Commercial real estate	6,541		1,974		(5)		55		9,786		18,351
Construction and land	Construction and land	2,670		519		(657)		55		1,204		3,791		Construction and land	2,670		519		(688)		—		1,577		4,078
Multi-family residential	Multi-family residential	572		(245)		0		0		613		940		Multi-family residential	572		(245)		—		—		740		1,067
Commercial and industrial	Commercial and industrial	3,694		1,243		(565)		59		(194)		4,237		Commercial and industrial	3,694		1,243		(977)		91		386		4,437
Consumer	Consumer	592		157		(189)		93		403		1,056		Consumer	592		157		(222)		122		236		885
Total allowance for loan losses	Total allowance for loan losses	$	17,868	$	4,633	$	(1,627)	$	221	$	12,728	$	33,823	Total allowance for loan losses	$	17,868	$	4,633	$	(2,522)	$	295	$	12,728	$	33,002

Unfunded lending commitments	Unfunded lending commitments	$	0	$	1,425	$	0	$	0	$	0	$	1,425	Unfunded lending commitments	$	—	$	1,425	$	—	$	—	$	—	$	1,425
Total allowance for credit losses	Total allowance for credit losses	$	17,868	$	6,058	$	(1,627)	$	221	$	12,728	$	35,248	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.

Credit Quality

The following tables present the Company’s loan portfolio by credit quality classification and origination year as of ~~June~~September 30, 2021 and December 31, 2020.
June 30, 2021
Term Loans by Origination Year
(dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Revolving Loans Converted to Term Loans Total
One- to four-family first mortgage:
Pass $ 41,653 $ 50,880 $ 51,469 $ 39,590 $ 39,692 $ 124,502 $ 14,004 $ 388 $ 362,178
Special Mention 0 0 0 0 15 435 0 0 450
Substandard 0 133 115 332 260 2,172 0 0 3,012
Doubtful 0 0 0 0 0 0 0 0 0
Total one- to four-family first mortgages $ 41,653 $ 51,013 $ 51,584 $ 39,922 $ 39,967 $ 127,109 $ 14,004 $ 388 $ 365,640
Home equity loans and lines:
Pass $ 948 $ 1,005 $ 1,353 $ 1,608 $ 1,039 $ 5,550 $ 52,869 $ 35 $ 64,407
Special Mention 0 0 0 0 0 0 0 0 0
Substandard 0 0 0 5 202 0 0 0 207
Doubtful 0 0 0 0 0 0 0 0 0
Total home equity loans and lines $ 948 $ 1,005 $ 1,353 $ 1,613 $ 1,241 $ 5,550 $ 52,869 $ 35 $ 64,614
Commercial real estate:
Pass $ 85,793 $ 210,270 $ 154,433 $ 86,160 $ 93,877 $ 90,930 $ 21,636 $ 599 $ 743,698
Special Mention 0 0 0 0 0 881 0 0 881
Substandard 0 832 1,948 1,679 314 6,355 0 0 11,128
Doubtful 0 0 0 0 0 0 0 0 0
Total commercial real estate loans $ 85,793 $ 211,102 $ 156,381 $ 87,839 $ 94,191 $ 98,166 $ 21,636 $ 599 $ 755,707
Construction and land:
Pass $ 74,769 $ 71,635 $ 52,454 $ 10,185 $ 3,265 $ 2,604 $ 3,512 $ 0 $ 218,424
Special Mention 0 601 0 0 0 0 0 0 601
Substandard 0 14,451 0 0 0 238 0 0 14,689
Doubtful 0 0 0 0 0 0 0 0 0
Total construction and land loans $ 74,769 $ 86,687 $ 52,454 $ 10,185 $ 3,265 $ 2,842 $ 3,512 $ 0 $ 233,714


	September 30, 2021
	Term Loans by Origination Year
(dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
One- to four-family first mortgage:
Pass	$	60,900	$	48,750	$	48,301	$	37,619	$	36,930	$	108,990	$	12,806	$	383	$	354,679
Special Mention	—		—		—		—		15		652		—		—		667
Substandard	—		596		720		269		456		2,763		—		—		4,804
Doubtful	—		—		—		—		—		—		—		—		—
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:
Pass	$	892	$	983	$	1,147	$	1,008	$	991	$	3,775	$	50,483	$	187	$	59,466
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		201		—		—		—		201
Doubtful	—		—		—		—		—		—		—		—		—
Total home equity loans and lines	$	892	$	983	$	1,147	$	1,008	$	1,192	$	3,775	$	50,483	$	187	$	59,667
Commercial real estate:
Pass	$	171,569	$	206,657	$	148,886	$	79,170	$	90,403	$	71,890	$	20,350	$	1,734	$	790,659
Special Mention	—		—		—		—		—		1,238		—		—		1,238
Substandard	—		826		885		1,770		310		6,105		—		608		10,504
Doubtful	—		—		—		—		—		—		—		—		—
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:
Pass	$	118,216	$	56,019	$	49,358	$	7,387	$	3,052	$	2,297	$	3,528	$	—	$	239,857
Special Mention	587		417		—		—		—		—		—		—		1,004
Substandard	—		—		189		—		8		228		—		—		425
Doubtful	—		—		—		—		—		—		—		—		—
Total construction and land loans	$	118,803	$	56,436	$	49,547	$	7,387	$	3,060	$	2,525	$	3,528	$	—	$	241,286


		June 30, 2021																			September 30, 2021
		Term Loans by Origination Year																			Term Loans by Origination Year
(dollars in thousands)	(dollars in thousands)	2021		2020		2019		2018		2017		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	$	10,589	$	40,262	$	14,764	$	9,150	$	3,126	$	4,123	$	952	$	0	$	82,966	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		0		0		0		0		0		0		0		0		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	$	10,589	$	40,262	$	14,764	$	9,150	$	3,126	$	4,123	$	952	$	0	$	82,966	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	$	143,207	$	108,508	$	23,661	$	17,025	$	4,259	$	3,936	$	73,231	$	496	$	374,323	Pass	$	115,701	$	45,219	$	16,539	$	9,992	$	3,633	$	2,495	$	83,901	$	758	$	278,238
Special Mention	Special Mention	0		0		150		0		0		0		1,761		0		1,911		Special Mention	539		528		140		—		—		—		1,607		—		2,814
Substandard	Substandard	0		2,856		0		421		7		33		1,200		0		4,517		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	$	143,207	$	111,364	$	23,811	$	17,446	$	4,266	$	3,969	$	76,192	$	496	$	380,751	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	$	2,898	$	4,718	$	1,801	$	694	$	1,455	$	17,154	$	6,145	$	0	$	34,865	Pass	$	4,649	$	3,340	$	1,492	$	493	$	1,243	$	16,245	$	7,080	$	3	$	34,545
Special Mention	Special Mention	0		0		0		0		0		8		0		0		8		Special Mention	—		—		—		—		—		3		—		—		3
Substandard	Substandard	0		35		4		0		17		167		0		0		223		Substandard	—		34		—		—		14		183		—		—		231
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total consumer loans	Total consumer loans	$	2,898	$	4,753	$	1,805	$	694	$	1,472	$	17,329	$	6,145	$	0	$	35,096	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	$	359,857	$	487,278	$	299,935	$	164,412	$	146,713	$	248,799	$	172,349	$	1,518	$	1,880,861	Pass	$	483,945	$	399,450	$	280,356	$	142,051	$	138,876	$	208,928	$	178,335	$	3,065	$	1,835,006
Special Mention	Special Mention	0		601		150		0		15		1,324		1,761		0		3,851		Special Mention	1,126		945		140		—		15		1,893		1,607		—		5,726
Substandard	Substandard	0		18,307		2,067		2,437		800		8,965		1,200		0		33,776		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	$	359,857	$	506,186	$	302,152	$	166,849	$	147,528	$	259,088	$	175,310	$	1,518	$	1,918,488	Total loans	$	485,571	$	417,933	$	282,290	$	144,510	$	139,886	$	220,122	$	181,191	$	3,673	$	1,875,176


		December 31, 2020																			December 31, 2020
		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)	2020		2019		2018		2017		2016		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	$	58,958	$	65,070	$	46,412	$	48,851	$	37,039	$	114,588	$	17,762	$	1,457	$	390,137	Pass	$	58,958	$	65,070	$	46,412	$	48,851	$	37,039	$	114,588	$	17,762	$	1,457	$	390,137
Special Mention	Special Mention	0		0		167		16		0		1,057		0		0		1,240		Special Mention	—		—		167		16		—		1,057		—		—		1,240
Substandard	Substandard	129		34		0		335		1,069		2,694		0		0		4,261		Substandard	129		34		—		335		1,069		2,694		—		—		4,261
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	$	59,087	$	65,104	$	46,579	$	49,202	$	38,108	$	118,339	$	17,762	$	1,457	$	395,638	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:	Home equity loans and lines:																			Home equity loans and lines:
Pass	Pass	$	1,172	$	1,307	$	2,028	$	964	$	1,889	$	5,537	$	53,309	$	1,389	$	67,595	Pass	$	1,172	$	1,307	$	2,028	$	964	$	1,889	$	5,537	$	53,309	$	1,389	$	67,595
Special Mention	Special Mention	0		0		0		43		0		0		0		0		43		Special Mention	—		—		—		43		—		—		—		—		43
Substandard	Substandard	0		0		0		0		0		58		4		0		62		Substandard	—		—		—		—		—		58		4		—		62
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total home equity loans and lines	Total home equity loans and lines	$	1,172	$	1,307	$	2,028	$	1,007	$	1,889	$	5,595	$	53,313	$	1,389	$	67,700	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:	Commercial real estate:																			Commercial real estate:
Pass	Pass	$	235,900	$	156,646	$	96,153	$	102,166	$	59,859	$	60,720	$	22,962	$	56	$	734,462	Pass	$	235,900	$	156,646	$	96,153	$	102,166	$	59,859	$	60,720	$	22,962	$	56	$	734,462
Special Mention	Special Mention	0		0		0		15		951		0		0		0		966		Special Mention	—		—		—		15		951		—		—		—		966
Substandard	Substandard	1,606		1,994		1,742		323		1,344		8,164		0		22		15,195		Substandard	1,606		1,994		1,742		323		1,344		8,164		—		22		15,195
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate loans	Total commercial real estate loans	$	237,506	$	158,640	$	97,895	$	102,504	$	62,154	$	68,884	$	22,962	$	78	$	750,623	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:	Construction and land:																			Construction and land:
Pass	Pass	$	87,540	$	91,337	$	16,703	$	5,486	$	2,585	$	1,505	$	1,892	$	429	$	207,477	Pass	$	87,540	$	91,337	$	16,703	$	5,486	$	2,585	$	1,505	$	1,892	$	429	$	207,477
Special Mention	Special Mention	877		0		0		0		0		618		0		627		2,122		Special Mention	877		—		—		—		—		618		—		627		2,122
Substandard	Substandard	451		50		0		0		252		249		0		11,222		12,224		Substandard	451		50		—		—		252		249		—		11,222		12,224
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total construction and land loans	Total construction and land loans	$	88,868	$	91,387	$	16,703	$	5,486	$	2,837	$	2,372	$	1,892	$	12,278	$	221,823	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, 2020																			December 31, 2020
		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)	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
Multi-family residential:	Multi-family residential:																			Multi-family residential:
Pass	Pass	$	40,462	$	24,329	$	9,711	$	3,844	$	2,889	$	4,539	$	1,452	$	0	$	87,226	Pass	$	40,462	$	24,329	$	9,711	$	3,844	$	2,889	$	4,539	$	1,452	$	—	$	87,226
Special Mention	Special Mention	0		0		0		0		0		0		0		0		0		Special Mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	0		0		0		0		0		106		0		0		106		Substandard	—		—		—		—		—		106		—		—		106
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total multi-family residential loans	Total multi-family residential loans	$	40,462	$	24,329	$	9,711	$	3,844	$	2,889	$	4,645	$	1,452	$	0	$	87,332	Total multi-family residential loans	$	40,462	$	24,329	$	9,711	$	3,844	$	2,889	$	4,645	$	1,452	$	—	$	87,332
Commercial and industrial:	Commercial and industrial:																			Commercial and industrial:
Pass	Pass	$	264,079	$	29,115	$	21,053	$	6,001	$	3,952	$	2,408	$	82,039	$	1,311	$	409,958	Pass	$	264,079	$	29,115	$	21,053	$	6,001	$	3,952	$	2,408	$	82,039	$	1,311	$	409,958
Special Mention	Special Mention	2,089		792		131		0		0		1		1,801		0		4,814		Special Mention	2,089		792		131		—		—		1		1,801		—		4,814
Substandard	Substandard	592		0		427		23		141		16		1,955		0		3,154		Substandard	592		—		427		23		141		16		1,955		—		3,154
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans	Total commercial and industrial loans	$	266,760	$	29,907	$	21,611	$	6,024	$	4,093	$	2,425	$	85,795	$	1,311	$	417,926	Total commercial and industrial loans	$	266,760	$	29,907	$	21,611	$	6,024	$	4,093	$	2,425	$	85,795	$	1,311	$	417,926
Consumer:	Consumer:																			Consumer:
Pass	Pass	$	6,844	$	2,667	$	1,149	$	2,073	$	1,118	$	18,258	$	6,340	$	27	$	38,476	Pass	$	6,844	$	2,667	$	1,149	$	2,073	$	1,118	$	18,258	$	6,340	$	27	$	38,476
Special Mention	Special Mention	4		0		4		0		13		120		0		5		146		Special Mention	4		—		4		—		13		120		—		5		146
Substandard	Substandard	0		34		3		12		17		223		0		1		290		Substandard	—		34		3		12		17		223		—		1		290
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total consumer loans	Total consumer loans	$	6,848	$	2,701	$	1,156	$	2,085	$	1,148	$	18,601	$	6,340	$	33	$	38,912	Total consumer loans	$	6,848	$	2,701	$	1,156	$	2,085	$	1,148	$	18,601	$	6,340	$	33	$	38,912
Total loans:	Total loans:																			Total loans:
Pass	Pass	$	694,955	$	370,471	$	193,209	$	169,385	$	109,331	$	207,555	$	185,756	$	4,669	$	1,935,331	Pass	$	694,955	$	370,471	$	193,209	$	169,385	$	109,331	$	207,555	$	185,756	$	4,669	$	1,935,331
Special Mention	Special Mention	2,970		792		302		74		964		1,796		1,801		632		9,331		Special Mention	2,970		792		302		74		964		1,796		1,801		632		9,331
Substandard	Substandard	2,778		2,112		2,172		693		2,823		11,510		1,959		11,245		35,292		Substandard	2,778		2,112		2,172		693		2,823		11,510		1,959		11,245		35,292
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total loans	Total loans	$	700,703	$	373,375	$	195,683	$	170,152	$	113,118	$	220,861	$	189,516	$	16,546	$	1,979,954	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.

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


		June 30, 2021													September 30, 2021
(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	$	1,632	$	21	$	327	$	1,980	$	252,876	$	254,856	One- to four-family first mortgage	$	1,089	$	1,161	$	499	$	2,749	$	255,156	$	257,905
Home equity loans and lines	Home equity loans and lines	0		0		168		168		51,851		52,019		Home equity loans and lines	14		—		163		177		47,734		47,911
Commercial real estate	Commercial real estate	0		191		6,414		6,605		612,555		619,160		Commercial real estate	200		679		5,312		6,191		668,947		675,138
Construction and land	Construction and land	147		0		0		147		222,547		222,694		Construction and land	211		—		189		400		231,232		231,632
Multi-family residential	Multi-family residential	0		0		0		0		78,167		78,167		Multi-family residential	—		—		—		—		88,617		88,617
Total real estate loans	Total real estate loans	1,779		212		6,909		8,900		1,217,996		1,226,896		Total real estate loans	1,514		1,840		6,163		9,517		1,291,686		1,301,203
Other loans:	Other loans:													Other loans:
Commercial and industrial	Commercial and industrial	461		179		412		1,052		366,544		367,596		Commercial and industrial	457		—		362		819		272,692		273,511
Consumer	Consumer	131		4		91		226		30,475		30,701		Consumer	149		25		92		266		30,684		30,950
Total other loans	Total other loans	592		183		503		1,278		397,019		398,297		Total other loans	606		25		454		1,085		303,376		304,461
Total originated loans	Total originated loans	$	2,371	$	395	$	7,412	$	10,178	$	1,615,015	$	1,625,193	Total originated loans	$	2,120	$	1,865	$	6,617	$	10,602	$	1,595,062	$	1,605,664
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	$	1,285	$	531	$	769	$	2,585	$	108,199	$	110,784	One- to four-family first mortgage	$	1,454	$	532	$	1,018	$	3,004	$	99,241	$	102,245
Home equity loans and lines	Home equity loans and lines	40		0		0		40		12,555		12,595		Home equity loans and lines	39		—		—		39		11,717		11,756
Commercial real estate	Commercial real estate	2,017		0		647		2,664		133,883		136,547		Commercial real estate	—		1,720		637		2,357		124,906		127,263
Construction and land	Construction and land	0		9		80		89		10,931		11,020		Construction and land	102		163		73		338		9,316		9,654
Multi-family residential	Multi-family residential	0		0		0		0		4,799		4,799		Multi-family residential	88		—		—		88		3,357		3,445
Total real estate loans	Total real estate loans	3,342		540		1,496		5,378		270,367		275,745		Total real estate loans	1,683		2,415		1,728		5,826		248,537		254,363
Other loans:	Other loans:													Other loans:
Commercial and industrial	Commercial and industrial	30		2		421		453		12,702		13,155		Commercial and industrial	20		27		420		467		10,853		11,320
Consumer	Consumer	16		18		16		50		4,345		4,395		Consumer	109		8		15		132		3,697		3,829
Total other loans	Total other loans	46		20		437		503		17,047		17,550		Total other loans	129		35		435		599		14,550		15,149
Total acquired loans	Total acquired loans	$	3,388	$	560	$	1,933	$	5,881	$	287,414	$	293,295	Total acquired loans	$	1,812	$	2,450	$	2,163	$	6,425	$	263,087	$	269,512
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	$	2,917	$	552	$	1,096	$	4,565	$	361,075	$	365,640	One- to four-family first mortgage	$	2,543	$	1,693	$	1,517	$	5,753	$	354,397	$	360,150
Home equity loans and lines	Home equity loans and lines	40		0		168		208		64,406		64,614		Home equity loans and lines	53		—		163		216		59,451		59,667
Commercial real estate	Commercial real estate	2,017		191		7,061		9,269		746,438		755,707		Commercial real estate	200		2,399		5,949		8,548		793,853		802,401
Construction and land	Construction and land	147		9		80		236		233,478		233,714		Construction and land	313		163		262		738		240,548		241,286
Multi-family residential	Multi-family residential	0		0		0		0		82,966		82,966		Multi-family residential	88		—		—		88		91,974		92,062
Total real estate loans	Total real estate loans	5,121		752		8,405		14,278		1,488,363		1,502,641		Total real estate loans	3,197		4,255		7,891		15,343		1,540,223		1,555,566
Other loans:	Other loans:													Other loans:
Commercial and industrial	Commercial and industrial	491		181		833		1,505		379,246		380,751		Commercial and industrial	477		27		782		1,286		283,545		284,831
Consumer	Consumer	147		22		107		276		34,820		35,096		Consumer	258		33		107		398		34,381		34,779
Total other loans	Total other loans	638		203		940		1,781		414,066		415,847		Total other loans	735		60		889		1,684		317,926		319,610
Total loans	Total loans	$	5,759	$	955	$	9,345	$	16,059	$	1,902,429	$	1,918,488	Total loans	$	3,932	$	4,315	$	8,780	$	17,027	$	1,858,149	$	1,875,176


		December 31, 2020													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	$	1,651	$	66	$	365	$	2,082	$	258,386	$	260,468	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	117		148		0		265		52,101		52,366		Home equity loans and lines	117		148		—		265		52,101		52,366
Commercial real estate	Commercial real estate	518		532		6,770		7,820		581,524		589,344		Commercial real estate	518		532		6,770		7,820		581,524		589,344
Construction and land	Construction and land	0		0		0		0		207,928		207,928		Construction and land	—		—		—		—		207,928		207,928
Multi-family residential	Multi-family residential	94		0		0		94		82,051		82,145		Multi-family residential	94		—		—		94		82,051		82,145
Total real estate loans	Total real estate loans	2,380		746		7,135		10,261		1,181,990		1,192,251		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	797		3		603		1,403		398,377		399,780		Commercial and industrial	797		3		603		1,403		398,377		399,780
Consumer	Consumer	219		42		145		406		32,702		33,108		Consumer	219		42		145		406		32,702		33,108
Total other loans	Total other loans	1,016		45		748		1,809		431,079		432,888		Total other loans	1,016		45		748		1,809		431,079		432,888
Total originated loans	Total originated loans	$	3,396	$	791	$	7,883	$	12,070	$	1,613,069	$	1,625,139	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	$	1,823	$	502	$	1,154	$	3,479	$	131,691	$	135,170	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	34		43		25		102		15,232		15,334		Home equity loans and lines	34		43		25		102		15,232		15,334
Commercial real estate	Commercial real estate	603		303		2,462		3,368		157,911		161,279		Commercial real estate	603		303		2,462		3,368		157,911		161,279
Construction and land	Construction and land	0		0		142		142		13,753		13,895		Construction and land	—		—		142		142		13,753		13,895
Multi-family residential	Multi-family residential	92		0		0		92		5,095		5,187		Multi-family residential	92		—		—		92		5,095		5,187
Total real estate loans	Total real estate loans	2,552		848		3,783		7,183		323,682		330,865		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		0		907		910		17,236		18,146		Commercial and industrial	3		—		907		910		17,236		18,146
Consumer	Consumer	126		50		66		242		5,562		5,804		Consumer	126		50		66		242		5,562		5,804
Total other loans	Total other loans	129		50		973		1,152		22,798		23,950		Total other loans	129		50		973		1,152		22,798		23,950
Total acquired loans	Total acquired loans	$	2,681	$	898	$	4,756	$	8,335	$	346,480	$	354,815	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	$	3,474	$	568	$	1,519	$	5,561	$	390,077	$	395,638	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	151		191		25		367		67,333		67,700		Home equity loans and lines	151		191		25		367		67,333		67,700
Commercial real estate	Commercial real estate	1,121		835		9,232		11,188		739,435		750,623		Commercial real estate	1,121		835		9,232		11,188		739,435		750,623
Construction and land	Construction and land	0		0		142		142		221,681		221,823		Construction and land	—		—		142		142		221,681		221,823
Multi-family residential	Multi-family residential	186		0		0		186		87,146		87,332		Multi-family residential	186		—		—		186		87,146		87,332
Total real estate loans	Total real estate loans	4,932		1,594		10,918		17,444		1,505,672		1,523,116		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	800		3		1,510		2,313		415,613		417,926		Commercial and industrial	800		3		1,510		2,313		415,613		417,926
Consumer	Consumer	345		92		211		648		38,264		38,912		Consumer	345		92		211		648		38,264		38,912
Total other loans	Total other loans	1,145		95		1,721		2,961		453,877		456,838		Total other loans	1,145		95		1,721		2,961		453,877		456,838
Total loans	Total loans	$	6,077	$	1,689	$	12,639	$	20,405	$	1,959,549	$	1,979,954	Total loans	$	6,077	$	1,689	$	12,639	$	20,405	$	1,959,549	$	1,979,954

At ~~June~~September 30, 2021 and December 31, 2020, loans greater than 90 days past due and accruing totaled ~~$4,000~~$13,000 and $2,000, respectively.

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

June 30, 2021
(dollars in thousands) With Related Allowance Without Related Allowance
Total(1)
Nonaccrual loans:
One- to four-family first mortgage $ 2,530 $ 0 $ 2,530
Home equity loans and lines 209 0 209
Commercial real estate 6,290 3,367 9,657
Construction and land 250 0 250
Multi-family residential 0 0 0
Commercial and industrial 916 185 1,101
Consumer 225 0 225
Total $ 10,420 $ 3,552 $ 13,972
December 31, 2020
(dollars in thousands) With Related Allowance Without Related Allowance
Total(1)
Nonaccrual loans:
One- to four-family first mortgage $ 3,838 $ 0 $ 3,838
Home equity loans and lines 63 0 63
Commercial real estate 12,298 0 12,298
Construction and land 469 0 469
Multi-family residential 0 0 0
Commercial and industrial 1,717 0 1,717
Consumer 292 0 292
Total $ 18,677 $ 0 $ 18,677


	September 30, 2021
(dollars in thousands)	With Related Allowance		Without Related Allowance		Total(1)
Nonaccrual loans:
One- to four-family first mortgage	$	3,694	$	—	$	3,694
Home equity loans and lines	202		—		202
Commercial real estate	5,755		3,310		9,065
Construction and land	437		—		437
Multi-family residential	—		—		—
Commercial and industrial	834		23		857
Consumer	233		—		233
Total	$	11,155	$	3,333	$	14,488

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

(1)PCD loans of ~~$413,000~~$122,000 and $390,000 are included in nonaccrual loans at ~~June~~September 30, 2021 and December 31, 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.

Collateral Dependent Loans

The Company held loans that were individually evaluated for credit losses at ~~June~~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 tables below summarize collateral dependent loans and the related ACL at ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021					September 30, 2021
(dollars in thousands)	(dollars in thousands)	Loans		ACL		(dollars in thousands)	Loans		ACL
One- to four-family first mortgage	One- to four-family first mortgage	$	0	$	0	One- to four-family first mortgage	$	—	$	—
Home equity loans and lines	Home equity loans and lines	0		0		Home equity loans and lines	—		—
Commercial real estate	Commercial real estate	4,219		218		Commercial real estate	3,881		455
Construction and land	Construction and land	0		0		Construction and land	—		—
Multi-family residential	Multi-family residential	0		0		Multi-family residential	—		—
Commercial and industrial	Commercial and industrial	800		478		Commercial and industrial	776		435
Consumer	Consumer	0		0		Consumer	—		—
Total	Total	$	5,019	$	696	Total	$	4,657	$	890

		December 31, 2020					December 31, 2020
(dollars in thousands)	(dollars in thousands)	Loans		ACL		(dollars in thousands)	Loans		ACL
One- to four-family first mortgage	One- to four-family first mortgage	$	1,006	$	100	One- to four-family first mortgage	$	1,006	$	100
Home equity loans and lines	Home equity loans and lines	0		0		Home equity loans and lines	—		—
Commercial real estate	Commercial real estate	7,400		1,008		Commercial real estate	7,400		1,008
Construction and land	Construction and land	0		0		Construction and land	—		—
Multi-family residential	Multi-family residential	0		0		Multi-family residential	—		—
Commercial and industrial	Commercial and industrial	606		431		Commercial and industrial	606		431
Consumer	Consumer	0		0		Consumer	—		—
Total	Total	$	9,012	$	1,539	Total	$	9,012	$	1,539

There were no PCD loans included in collateral dependent loans. At ~~June 30, 2021 and~~ December 31, 2020, collateral dependent commercial real estate loans included 1 loan acquired with deteriorated credit quality totaling $277,000.

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 ~~$1,113,000~~$1,031,000 and 1,302,000 at ~~June~~September 30, 2021 and December 31, 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 ~~June~~September 30, 2021 and December 31, 2020 totaled ~~$178,000~~$136,000 and $877,000, respectively. Loans secured by single family residential real estate that were in the process of foreclosure at ~~June~~September 30, 2021 and December 31, 2020 totaled ~~$385,000~~$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 $179,000 and $212,000 at ~~June~~September 30, 2021 and December 31, ~~2020.~~2020, respectively. During the nine months ended September 30, 2021, the company wrote-down an asset held for 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 ~~properties is uncertain.~~asset to occur during the fourth quarter of 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. At least quarterly, the Company evaluates larger commercial TDRs (i.e., TDRs with balances of $500,000 or greater) to determine if the assets should be individually evaluated for 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 ~~June~~September 30, 2021, the Company had modified loans with an aggregate outstanding loan balance of ~~$7.0~~$4.5 million, or 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.


		Six Months Ended June 30,											Nine Months Ended September 30,
		2021					2020						2021					2020
(dollars in thousands)	(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		(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:	Troubled debt restructurings:											Troubled debt restructurings:
One- to four-family first mortgage	One- to four-family first mortgage	0	$	0	$	0	7	$	967	$	472	One- to four-family first mortgage	2	$	77	$	74	8	$	1,095	$	484
Home equity loans and lines	Home equity loans and lines	0	0		0		0	0		0		Home equity loans and lines	—	—		—		—	—		—
Commercial real estate	Commercial real estate	2	479		450		4	1,044		1,025		Commercial real estate	2	479		445		4	1,044		992
Construction and land	Construction and land	0	0		0		0	0		0		Construction and land	—	—		—		—	—		—
Multi-family residential	Multi-family residential	0	0		0		0	0		0		Multi-family residential	—	—		—		—	—		—
Commercial and industrial	Commercial and industrial	2	2,397		2,370		1	33		32		Commercial and industrial	2	2,397		2,308		4	74		66
Other consumer	Other consumer	1	5		3		1	4		4		Other consumer	1	5		2		2	13		10
Total	Total	5	$	2,881	$	2,823	13	$	2,048	$	1,533	Total	7	$	2,958	$	2,829	18	$	2,226	$	1,552

~~NaN~~None of the the loans modified during the ~~six~~nine months ended ~~June~~September 30, 2021 defaulted during the same period.

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

6. Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

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

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

Cash Flow Hedges of Interest Rate Risk

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

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable rate liabilities. During the next twelve months, the Company estimates that an additional ~~$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 tables below present the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statement of Financial Condition as of ~~June~~September 30, 2021 and December 31, 2020.


		June 30, 2021									September 30, 2021
		Derivative Assets(1)				Derivative Liabilities(1)					Derivative Assets(1)				Derivative Liabilities(1)
(dollars in thousands)	(dollars in thousands)	Notional Amount		Fair Value		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	$	1,133	$	0	$	0	Interest rate swaps - variable rate liabilities	$	40,000	$	1,188	$	—	$	—

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:									Derivatives not designated as hedging instruments:
Risk participation agreements	Risk participation agreements	0		0		10,000		38		Risk participation agreements	—		—		10,000		33

Netting adjustments	Netting adjustments			0				0		Netting adjustments			—				—

Net derivative amounts	Net derivative amounts			$	1,133			$	38	Net derivative amounts			$	1,188			$	33

		December 31, 2020									December 31, 2020
		Derivative Assets(1)				Derivative Liabilities(1)					Derivative Assets(1)				Derivative Liabilities(1)
(dollars in thousands)	(dollars in thousands)	Notional Amount		Fair Value		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	$	214	$	0	$	0	Interest rate swaps - variable rate liabilities	$	40,000	$	214	$	—	$	—

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:									Derivatives not designated as hedging instruments:
Risk participation agreements	Risk participation agreements	0		0		10,000		58		Risk participation agreements	—		—		10,000		58

Netting adjustments	Netting adjustments			0				0		Netting adjustments			—				—

Net derivative amounts	Net derivative amounts			$	214			$	58	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.

At ~~June~~September 30, 2021 and December 31, 2020, accumulated unrealized gains, net of taxes, on derivative instruments totaled ~~$900,000~~$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 ~~June~~September 30, 2021 and ~~June~~September 30, 2020.

Three Months Ended June 30, 2021
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 $ (414) $ (414) Interest expense $ (16) $ (16)
Six Months Ended June 30, 2021
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 $ 887 $ 887 Interest expense $ (32) $ (32)


	Three Months Ended September 30, 2021
	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	$	39	$	39	Interest expense	$	(16)	$	(16)


	Nine Months Ended September 30, 2021
	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	$	926	$	926	Interest expense	$	(48)	$	(48)

Three Months Ended June 30, 2020

Three 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

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

(170)

Interest expense

(12)

Interest rate swaps - variable rate liabilities

Interest expense

(16)

Six Months Ended June 30, 2020

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

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

(dollars in thousands)

Total

Included Component

Total

Included Component

Derivatives in cash flows hedging relationships:

Interest rate swaps - variable rate liabilities

(170)

Interest expense

(12)

Interest rate swaps - variable rate liabilities

(110)

Interest expense

(28)

Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Income

The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Consolidated Statements of Income as of ~~June~~September 30, 2021.

(dollars in thousands)

Location of (Loss) Income Recognized on Non-designated Hedges

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

(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

(18)

Risk participation agreements

Other noninterest income

At and during the three and ~~six~~nine months ended ~~June~~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 to the effect that, if the Company (either) defaults (or is capable of being declared in default) on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

The Company has agreements with certain of its derivative counterparties that contain a provision to the effect that, if the company fails to maintain its status as a well or adequately capitalized institution, then the Company could be required to post additional collateral.

As of ~~June~~September 30, 2021, there were 0no derivatives with credit-risk-related contingent features in a net liability position. Such derivatives are measured at fair value, which includes accrued interest but excludes any adjustment for nonperformance risk. If the Company had breached any provisions at ~~June~~September 30, 2021, it would not have been required to settle any obligations under the agreements since the termination value 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 ~~June~~September 30, 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 ~~June~~September 30, 2021 and December 31, 2020.


(dollars in thousands)	(dollars in thousands)	June 30, 2021		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	$	181,668	$	0	$	181,668	$	0	U.S. agency mortgage-backed	$	213,516	$	—	$	213,516	$	—
Collateralized mortgage obligations	Collateralized mortgage obligations	47,488		0		47,488		0		Collateralized mortgage obligations	36,165		—		36,165		—
Municipal bonds	Municipal bonds	44,400		0		44,400		0		Municipal bonds	43,098		—		43,098		—
U.S. government agency	U.S. government agency	6,055		0		6,055		0		U.S. government agency	5,761		—		5,761		—
Corporate bonds	Corporate bonds	5,574		0		5,574		0		Corporate bonds	5,585		—		5,585		—
Total	Total	$	285,185	$	0	$	285,185	$	0	Total	$	304,125	$	—	$	304,125	$	—

Derivative assets	Derivative assets	$	1,133	$	0	$	1,133	$	0	Derivative assets	$	1,188	$	—	$	1,188	$	—
Total	Total	$	286,318	$	0	$	286,318	$	0	Total	$	305,313	$	—	$	305,313	$	—

Liabilities	Liabilities									Liabilities
Derivative liabilities	Derivative liabilities	$	38	$	0	$	38	$	0	Derivative liabilities	$	33	$	—	$	33	$	—

(dollars in thousands) December 31, 2020 Level 1 Level 2 Level 3
Assets
Available for sale securities:
U.S. agency mortgage-backed $ 142,812 $ 0 $ 142,812 $ 0
Collateralized mortgage obligations 75,620 0 75,620 0
Municipal bonds 28,011 0 28,011 0
U.S. government agency 6,255 0 6,255 0
Corporate bonds 2,054 0 2,054 0
Total $ 254,752 $ 0 $ 254,752 $ 0
Derivative assets $ 214 $ 0 $ 214 $ 0
Total $ 254,966 $ 0 $ 254,966 $ 0
Liabilities
Derivative liabilities $ 58 $ 0 $ 58 $ 0


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

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

Liabilities
Derivative liabilities	$	58	$	—	$	58	$	—

Nonrecurring Basis

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

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

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


				Fair Value Measurements Using									Fair Value Measurements Using
(dollars in thousands)	(dollars in thousands)	June 30, 2021		Level 1		Level 2		Level 3		(dollars in thousands)	September 30, 2021		Level 1		Level 2		Level 3
Assets	Assets									Assets
Loans individually evaluated	Loans individually evaluated	$	4,323	$	0	$	0	$	4,323	Loans individually evaluated	$	3,767	$	—	$	—	$	3,767
Foreclosed assets and ORE	Foreclosed assets and ORE	1,113		0		0		1,113		Foreclosed assets and ORE	1,031		—		—		1,031
Total	Total	$	5,436	$	0	$	0	$	5,436	Total	$	4,798	$	—	$	—	$	4,798

				Fair Value Measurements Using									Fair Value Measurements Using
(dollars in thousands)	(dollars in thousands)	December 31, 2020		Level 1		Level 2		Level 3		(dollars in thousands)	December 31, 2020		Level 1		Level 2		Level 3
Assets	Assets									Assets
Loans individually evaluated	Loans individually evaluated	$	7,473	$	0	$	0	$	7,473	Loans individually evaluated	$	7,473	$	—	$	—	$	7,473
Foreclosed assets and ORE	Foreclosed assets and ORE	1,302		0		0		1,302		Foreclosed assets and ORE	1,302		—		—		1,302
Total	Total	$	8,775	$	0	$	0	$	8,775	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

June 30, 2021

September 30, 2021

Loans individually evaluated

4,323

Third party appraisals and discounted cash flows

Collateral values, market discounts and estimated costs to sell

0% - 95%

14%

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

1,113

Third party appraisals, sales contracts, broker price opinions

Collateral values, market discounts and estimated costs to sell

6% - 41%

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

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%

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

1,302

Third party appraisals, sales contracts, broker price opinions

Collateral values, market discounts and estimated costs to sell

6% - 42%

11%

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%

ASC 820, Fair Value Measurements and Disclosures, requires the disclosure of each class of financial instruments for which it is practicable to estimate. The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. ASC 820 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

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

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

Methods and assumptions used to estimate fair value of each class of financial instruments for which it is practicable to estimate fair value are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes from the fair value estimate methods and assumptions disclosed in the Company's Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, 2020.

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


				Fair Value Measurements at June 30, 2021											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	$	393,203	$	393,203	$	393,203	$	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	285,185		285,185		0		285,185		0		Investment securities available for sale	304,125		304,125		—		304,125		—
Investment securities held to maturity	Investment securities held to maturity	2,118		2,164		0		2,164		0		Investment securities held to maturity	2,110		2,147		—		2,147		—
Mortgage loans held for sale	Mortgage loans held for sale	3,752		3,752		0		3,752		0		Mortgage loans held for sale	3,476		3,476		—		3,476		—
Loans, net	Loans, net	1,891,801		1,893,253		0		1,888,930		4,323		Loans, net	1,851,027		1,856,000		—		1,852,233		3,767
Cash surrender value of BOLI	Cash surrender value of BOLI	40,781		40,781		40,781		0		0		Cash surrender value of BOLI	40,142		40,142		40,142		—		—
Derivative assets(1)	Derivative assets(1)	1,133		1,133		0		1,133		0		Derivative assets(1)	1,188		1,188		—		1,188		—
Financial Liabilities	Financial Liabilities											Financial Liabilities
Deposits	Deposits	$	2,370,764	$	2,371,879	$	0	$	2,371,879	$	0	Deposits	$	2,365,717	$	2,366,388	$	—	$	2,366,388	$	—
Other borrowings	Other borrowings	5,539		6,050		0		6,050		0		Other borrowings	5,539		5,993		—		5,993		—
Long-term FHLB advances	Long-term FHLB advances	27,502		28,028		0		28,028		0		Long-term FHLB advances	26,430		26,843		—		26,843		—
Derivative liabilities(1)	Derivative liabilities(1)	38		38		0		38		0		Derivative liabilities(1)	33		33		—		33		—

				Fair Value Measurements at December 31, 2020											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	$	187,952	$	187,952	$	187,952	$	0	$	0	Cash and cash equivalents	$	187,952	$	187,952	$	187,952	$	—	$	—
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	254,752		254,752		0		254,752		0		Investment securities available for sale	254,752		254,752		—		254,752		—
Investment securities held to maturity	Investment securities held to maturity	2,934		2,996		0		2,996		0		Investment securities held to maturity	2,934		2,996		—		2,996		—
Mortgage loans held for sale	Mortgage loans held for sale	9,559		9,559		0		9,559		0		Mortgage loans held for sale	9,559		9,559		—		9,559		—
Loans, net	Loans, net	1,946,991		1,957,705		0		1,950,232		7,473		Loans, net	1,946,991		1,957,705		—		1,950,232		7,473
Cash surrender value of BOLI	Cash surrender value of BOLI	40,334		40,334		40,334		0		0		Cash surrender value of BOLI	40,334		40,334		40,334		—		—
Derivative assets(1)	Derivative assets(1)	214		214		0		214		0		Derivative assets(1)	214		214		—		214		—
Financial Liabilities	Financial Liabilities											Financial Liabilities
Deposits	Deposits	$	2,213,821	$	2,216,002	$	0	$	2,216,002	$	0	Deposits	$	2,213,821	$	2,216,002	$	—	$	2,216,002	$	—
Other borrowings	Other borrowings	5,539		6,224		0		6,224		0		Other borrowings	5,539		6,224		—		6,224		—
Long-term FHLB advances	Long-term FHLB advances	28,824		29,662		0		29,662		0		Long-term FHLB advances	28,824		29,662		—		29,662		—
Derivative liabilities(1)	Derivative liabilities(1)	58		58		0		58		0		Derivative liabilities(1)	58		58		—		58		—


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, 2020 through ~~June~~September 30, 2021 and on its results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 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, 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,~~Item 2, information is included which excludes PPP ~~loans.~~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 ~~second~~third quarter of 2021 of ~~$11.4~~$15.1 million, or ~~$1.34~~$1.79 diluted EPS, up ~~$8.5~~$6.3 million compared to the the ~~second~~third quarter of 2020. Net income for the ~~second~~third quarter of 2020 totaled ~~$2.9~~$8.8 million, or ~~$0.33~~$1.01 diluted EPS. For the ~~six~~nine months ended ~~June~~September 30, 2021, the Company reported net income of ~~$23.3~~$38.4 million, or ~~$2.75~~$4.54 diluted EPS, up ~~$17.9~~$24.2 million from ~~$5.4~~$14.2 million, or ~~$0.60~~$1.61 diluted EPS, ~~reported~~ for the ~~six~~nine months ended ~~June~~September 30, 2020.

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

•Assets increased ~~$172.9~~$171.6 million, or ~~6.7%~~6.6%, from December 31, 2020 to $2.8 billion at ~~June~~September 30, 2021.

•Total loans were $1.9 billion at September 30, 2021, down ~~$61.5~~$104.8 million, or ~~3.1%~~5.3%, from December 31, 2020.

•PPP loans totaled ~~$197.6~~$95.6 million at September 30, 2021, down ~~$23.6~~$125.7 million, or ~~10.7%~~56.8%, from December 31, 2020.

•During the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company reversed ~~$3.4~~$2.4 million and ~~$5.1~~$7.5 million, respectively, of the allowance for loan losses, primarily due to improvements in our assessment of the economic impact of the COVID-19 ~~pandemic and an increase in prepayments on loans.~~

pandemic. During nine months ended September 30, 2020, the Company provisioned $12.7 million to the allowance for loan losses.

•The ALL totaled ~~$26.7~~$24.1 million, or ~~1.39%~~1.29% of total loans, at ~~June~~September 30, 2021 compared to $33.0 million, or 1.66% of total loans, at December 31, 2020. Excluding PPP loans, the ~~ratios~~ratio of the ALL to total loans ~~were 1.55%~~was 1.36% and 1.87% at ~~June~~September 30, 2021 and December 31, 2020, respectively.

•Nonperforming assets decreased ~~$4.9~~$4.4 million, or ~~24.5%~~22.3%, from $20.0 million, or 0.77% of total assets, at December 31, 2020 to ~~$15.1~~$15.5 million, or ~~0.55%~~0.56% of total assets, at ~~June~~September 30, 2021.

•Total deposits increased ~~$156.9~~$151.9 million, or ~~7.1%~~6.9%, from $2.2 billion at December 31, 2020 to $2.4 billion at ~~June~~September 30, 2021.

•The net interest margin was ~~3.75%~~4.16% and ~~3.94%~~4.01% for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, ~~down one basis point~~up 34 and 10 bps, respectively, from the comparable periods in 2020. Excluding the impact of PPP loans, the net interest margin was ~~3.71%~~3.64% and ~~3.79%~~3.74% for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, compared to ~~3.82%~~3.96% and ~~3.99%~~3.98% for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively.

•The average rate paid on total interest-bearing deposits was ~~0.36%~~0.27%, down 4233 bps from the ~~second~~third quarter of 2020. For the ~~six~~nine months ended ~~June~~September 30, 2021, the average ~~yield~~rate paid on total interest-bearing deposits was ~~0.39%~~0.35%, down 5345 bps from the ~~six~~nine months ended ~~June~~September 30, 2020.

•Total interest expense for the ~~second~~third quarter of 2021 was down ~~$1.6~~$1.3 million, or ~~49.2%~~49.8%, compared to the ~~second~~third quarter of 2020. For the ~~six~~nine months ended ~~June~~September 30, 2021, total interest expense was down ~~$3.7~~$5.0 million, or ~~51.4%~~51.0%, from the comparable period in 2020.

•Noninterest income for the ~~second~~third quarter of 2021 was up ~~$191,000,~~$1.6 million, or ~~6.2%~~41.9%, compared to the ~~second~~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 ~~$464,000)~~$821,000), and ~~service fees and charges~~gains on the sale of loans (up ~~$204,000)~~$299,000), which were partially offset by an increase in net losses on the sale of assets (up ~~$444,000)~~$449,000). For the six months ended June 30, 2021, noninterest income was up $893,000, or 13.8%, from the comparable period in 2020 primarily due gains on the sale of loans (up $788,000) and income from bank card fees (up $633,000), partially offset by an increase in net losses on the sale of assets (up $446,000).

•Noninterest expense for the ~~second~~third quarter of 2021 was up ~~$1.1 million,~~$315,000, or ~~7.2%~~2.0%, compared to the ~~second~~third quarter of 2020, primarily due to increases in expenses for data processing and communication (up ~~$399,000)~~$267,000), ~~the provision for credit losses on unfunded commitments (up $375,000) compensation and benefits (up $325,000) and~~ marketing and advertising (up ~~$108,000)~~$111,000), and other expenses (up $160,000), which were partially offset by a decrease in regulatory fees (down $225,000). For the ~~six~~nine months ended ~~June~~September 30, 2021, noninterest expense was up ~~$1.7~~$2.0 million, or ~~5.4%~~4.2%, from the comparable period in 2020, primarily due to increases in expenses for compensation and benefits (up ~~$573,000)~~$642,000), data processing and communication (up ~~$566,000)~~$833,000), the provision for ~~credit~~ losses on unfunded lending commitments (up $375,000), and ~~regulatory fees~~other expenses (up ~~$207,000)~~$208,000).

COVID-19 IMPACTS

~~Nearly all~~After an increase in COVID-19 ~~related~~cases during the third quarter of 2021, Louisiana reinstituted its indoor mask mandate in August 2021. Mississippi's COVID-19 restrictions were ~~removed in Mississippi~~lifted during the first quarter of ~~2021, while Louisiana lifted its mask mandate in April 2021 and ended capacity limits in May~~ 2021.

Under the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP"), the Company funded ~~3,072~~4,875 PPP loans totaling ~~$262.2~~$388.7 million during ~~2020. During~~2020 and 2021, ~~the Company funded an additional 1,803 PPP loans totaling $126.5 million.~~in aggregate. At ~~June~~September 30, 2021, the total recorded net investment in PPP loans was ~~$197.6~~$95.6 million, of which ~~2,209~~565 loans with an aggregate outstanding balance of ~~$64.1~~$17.9 million were for amounts of $150,000 or less.

To give immediate financial support to our customers, the Company began providing principal and/or interest payment deferral options in March 2020. At ~~June~~September 30, 2021, ~~$7.0~~$4.5 million, or less than 1% of total loans, were under COVID-19 related deferral agreements. 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, ~~$443.7~~$384.8 million, or 99%, were current and performing as of ~~June~~September 30, 2021.

FINANCIAL CONDITION

Loans, Allowance for Credit Losses and Asset Quality

Loans

Total loans at ~~June~~September 30, 2021 were $1.9 billion, down ~~$61.5~~$104.8 million, or ~~3.1%~~5.3%, from December 31, 2020. PPP loans, included in commercial and industrial loans, totaled ~~$197.6~~$95.6 million at ~~June~~September 30, 2021, down ~~$23.6~~$125.7 million, or ~~10.7%, from December 31, 2020. Excluding PPP loans, loans decreased $37.9 million, or 2.2%~~56.8%, from December 31, 2020.

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


(dollars in thousands)	(dollars in thousands)	June 30, 2021		December 31, 2020		Increase/(Decrease)				(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	$	365,640	$	395,638	$	(29,998)	(7.6)	%	One-to four-family first mortgage	$	360,150	$	395,638	$	(35,488)	(9.0)	%
Home equity loans and lines	Home equity loans and lines	64,614		67,700		(3,086)		(4.6)		Home equity loans and lines	59,667		67,700		(8,033)		(11.9)
Commercial real estate	Commercial real estate	755,707		750,623		5,084		0.7		Commercial real estate	802,401		750,623		51,778		6.9
Construction and land	Construction and land	233,714		221,823		11,891		5.4		Construction and land	241,286		221,823		19,463		8.8
Multi-family residential	Multi-family residential	82,966		87,332		(4,366)		(5.0)		Multi-family residential	92,062		87,332		4,730		5.4
Total real estate loans	Total real estate loans	1,502,641		1,523,116		(20,475)		(1.3)	%	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	380,751		417,926		(37,175)		(8.9)		Commercial and industrial	284,831		417,926		(133,095)		(31.8)
Consumer	Consumer	35,096		38,912		(3,816)		(9.8)		Consumer	34,779		38,912		(4,133)		(10.6)
Total other loans	Total other loans	415,847		456,838		(40,991)		(9.0)		Total other loans	319,610		456,838		(137,228)		(30.0)
Total loans	Total loans	$	1,918,488	$	1,979,954	$	(61,466)	(3.1)	%	Total loans	$	1,875,176	$	1,979,954	$	(104,778)	(5.3)	%

~~During the first half of 2021, the Company experienced significant pay-downs across nearly all segments of the~~

Excluding PPP loans, loans increased $20.9 million, or 1.2%, from December 31, 2020. Commercial real estate and construction and land loan ~~portfolio.~~growth was primarily driven by our New Orleans and Northshore markets. The ~~increase~~growth in ~~commercial real estate~~multifamily loans was primarily due to the conversion of existing construction loans to permanent ~~financing during the second quarter of 2021. Construction~~financing. The Company experienced significant pay-downs in commercial and ~~land loan growth was strongest in~~industrial loans primarily due to PPP loans and our ~~New Orleans and Northshore markets.~~

residential loans, primarily due to refinances as customers sought to acquire lower interest rates.

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 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.

~~Additional Information on Loan Portfolio Composition and Allowance for Credit Losses~~

At ~~June~~September 30, 2021, the ALL totaled ~~$26.7~~$24.1 million, or ~~1.39%~~1.29% of total loans, down ~~$6.3~~$8.8 million from $33.0 million, or 1.66% of total loans, at December 31, 2020. During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company reversed ~~$5.1~~$7.5 million of the allowance loan losses primarily due to improvements in our assessment of the economic impact of the COVID-19 ~~pandemic and an increase in prepayments on loans.~~pandemic. Net loan charge-offs totaled ~~$1.1~~$1.3 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and were primarily attributable to an acquired hotel loan and one originated commercial relationship, both of which were nonperforming prior to the COVID-19 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 June 30, 2021. 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.

Loans Allowance for Credit Losses
(dollars in thousands) Total Loans PPP Loans Total ACL ACL to
Total Loans ACL to
Total Non-PPP Loans
June 30, 2021
Retail CRE $ 180,608 $ — $ 5,267 2.92 % 2.92 %
Hotels and short-term rentals 102,542 6,661 4,718 4.60 4.92
Restaurants and bars 92,928 31,927 2,255 2.43 3.70
Energy 41,944 8,818 1,024 2.44 3.09
Credit cards 3,826 — 306 8.00 8.00
Other loans 1,496,640 150,208 13,117 0.88 0.97
Total $ 1,918,488 $ 197,614 $ 26,687 1.39 % 1.55 %
Unfunded lending commitments(1)
$ — $ — $ 1,800 — —
Total $ 1,918,488 $ 197,614 $ 28,487 1.48 % 1.66 %

~~(1)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.

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

At ~~June~~September 30, 2021 and December 31, 2020, loans individually evaluated for credit losses were ~~$5.0~~$4.7 million and $9.0 million, respectively. Total loans individually evaluated for credit losses at ~~June~~September 30, 2021 included ~~$1.0~~$0.7 million of acquired loans, of which ~~$277,000 was~~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.

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


		June 30, 2021							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	Loans Individually Evaluated							Loans Individually Evaluated
One- to four-family first mortgage	One- to four-family first mortgage	$	—	$	—	—	%	One- to four-family first mortgage	$	—	$	—	—	%
Home equity loans and lines	Home equity loans and lines	—		—		—		Home equity loans and lines	—		—		—
Commercial real estate	Commercial real estate	4,219		218		5.17		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	800		478		59.75		Commercial and industrial	776		435		56.06
Consumer	Consumer	—		—		—		Consumer	—		—		—
Total	Total	$	5,019	$	696	13.87	%	Total	$	4,657	$	890	19.11	%

		December 31, 2020							December 31, 2020
(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	Loans Individually Evaluated							Loans Individually Evaluated
One- to four-family first mortgage	One- to four-family first mortgage	$	1,006	$	100	9.94	%	One- to four-family first mortgage	$	1,006	$	100	9.94	%
Home equity loans and lines	Home equity loans and lines	—		—		—		Home equity loans and lines	—		—		—
Commercial real estate	Commercial real estate	7,400		1,008		13.62		Commercial real estate	7,400		1,008		13.62
Construction and land	Construction and land	—		—		—		Construction and land	—		—		—
Multi-family residential	Multi-family residential	—		—		—		Multi-family residential	—		—		—
Commercial and industrial	Commercial and industrial	606		431		71.12		Commercial and industrial	606		431		71.12
Consumer	Consumer	—		—		—		Consumer	—		—		—
Total	Total	$	9,012	$	1,539	17.08	%	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 ~~June~~September 30, 2021 and December 31, 2020, loans classified as substandard totaled ~~$33.8~~$34.4 million and $35.3 million, respectively. There were no assets classified as doubtful at either date. For additional information, refer to Note 5 to the Consolidated Financial Statements.

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


(dollars in thousands)	(dollars in thousands)	June 30, 2021		December 31, 2020		Increase/(Decrease)				(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	$	450	$	1,240	$	(790)	(63.7)	%	One- to four-family first mortgage	$	667	$	1,240	$	(573)	(46.2)	%
Home equity loans and lines	Home equity loans and lines	—		43		(43)		(100.0)		Home equity loans and lines	—		43		(43)		(100.0)
Commercial real estate	Commercial real estate	881		966		(85)		(8.8)		Commercial real estate	1,238		966		272		28.2
Construction and land	Construction and land	601		2,122		(1,521)		(71.7)		Construction and land	1,004		2,122		(1,118)		(52.7)
Multi-family residential	Multi-family residential	—		—		—		—		Multi-family residential	—		—		—		—
Commercial and industrial	Commercial and industrial	1,911		4,814		(2,903)		(60.3)		Commercial and industrial	2,814		4,814		(2,000)		(41.5)
Consumer	Consumer	8		146		(138)		(94.5)		Consumer	3		146		(143)		(97.9)
Total special mention loans	Total special mention loans	$	3,851	$	9,331	$	(5,480)	(58.7)	%	Total special mention loans	$	5,726	$	9,331	$	(3,605)	(38.6)	%

(dollars in thousands)	(dollars in thousands)	June 30, 2021		December 31, 2020		Increase/(Decrease)				(dollars in thousands)	September 30, 2021		December 31, 2020		Increase/(Decrease)
Substandard Loans	Substandard Loans									Substandard Loans
One- to four-family first mortgage	One- to four-family first mortgage	$	3,012	$	4,261	$	(1,249)	(29.3)	%	One- to four-family first mortgage	$	4,804	$	4,261	$	543	12.7	%
Home equity loans and lines	Home equity loans and lines	207		62		145		233.9		Home equity loans and lines	201		62		139		224.2
Commercial real estate	Commercial real estate	11,128		15,195		(4,067)		(26.8)		Commercial real estate	10,504		15,195		(4,691)		(30.9)
Construction and land	Construction and land	14,689		12,224		2,465		20.2		Construction and land	425		12,224		(11,799)		(96.5)
Multi-family residential	Multi-family residential	—		106		(106)		(100.0)		Multi-family residential	14,500		106		14,394		13579.2
Commercial and industrial	Commercial and industrial	4,517		3,154		1,363		43.2		Commercial and industrial	3,779		3,154		625		19.8
Consumer	Consumer	223		290		(67)		(23.1)		Consumer	231		290		(59)		(20.3)
Total substandard loans	Total substandard loans	$	33,776	$	35,292	$	(1,516)	(4.3)	%	Total substandard loans	$	34,444	$	35,292	$	(848)	(2.4)	%

Special mention loans decreased ~~$5.5~~$3.6 million from December 31, 2020 to ~~June~~September 30, 2021 primarily due to upgrades of special mention loans to a pass ~~rating.~~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 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.


		June 30, 2021							December 31, 2020								September 30, 2021							December 31, 2020
(dollars in thousands)	(dollars in thousands)	Originated		Acquired(1)		Total			Originated		Acquired(1)		Total			(dollars in thousands)	Originated		Acquired(1)		Total			Originated		Acquired(1)		Total
Nonaccrual loans(2):	Nonaccrual loans(2):															Nonaccrual loans(2):
Real estate loans:	Real estate loans:															Real estate loans:
One- to four-family first mortgage	One- to four-family first mortgage	$	686	$	1,844	$	2,530		$	1,464	$	2,374	$	3,838		One- to four-family first mortgage	$	1,723	$	1,971	$	3,694		$	1,464	$	2,374	$	3,838
Home equity loans and lines	Home equity loans and lines	168		41		209			24		39		63			Home equity loans and lines	163		39		202			24		39		63
Commercial real estate	Commercial real estate	6,627		3,030		9,657			7,650		4,648		12,298			Commercial real estate	5,958		3,107		9,065			7,650		4,648		12,298
Construction and land	Construction and land	—		250		250			—		469		469			Construction and land	189		248		437			—		469		469
Multi-family residential	Multi-family residential	—		—		—			—		—		—			Multi-family residential	—		—		—			—		—		—
Other loans:	Other loans:															Other loans:
Commercial and industrial	Commercial and industrial	621		480		1,101			603		1,114		1,717			Commercial and industrial	385		472		857			603		1,114		1,717
Consumer	Consumer	177		48		225			188		104		292			Consumer	174		59		233			188		104		292
Total nonaccrual loans	Total nonaccrual loans	8,279		5,693		13,972			9,929		8,748		18,677			Total nonaccrual loans	8,592		5,896		14,488			9,929		8,748		18,677
Accruing loans 90 days or more past due	Accruing loans 90 days or more past due	4		—		4			2		—		2			Accruing loans 90 days or more past due	13		—		13			2		—		2
Total nonperforming loans	Total nonperforming loans	8,283		5,693		13,976			9,931		8,748		18,679			Total nonperforming loans	8,605		5,896		14,501			9,931		8,748		18,679
Foreclosed assets and ORE	Foreclosed assets and ORE	724		389		1,113			422		880		1,302			Foreclosed assets and ORE	772		259		1,031			422		880		1,302
Total nonperforming assets	Total nonperforming assets	9,007		6,082		15,089			10,353		9,628		19,981			Total nonperforming assets	9,377		6,155		15,532			10,353		9,628		19,981
Performing troubled debt restructurings	Performing troubled debt restructurings	4,117		1,103		5,220			1,512		573		2,085			Performing troubled debt restructurings	3,961		1,085		5,046			1,512		573		2,085
Total nonperforming assets and troubled debt restructurings	Total nonperforming assets and troubled debt restructurings	$	13,124	$	7,185	$	20,309		$	11,865	$	10,201	$	22,066		Total nonperforming assets and troubled debt restructurings	$	13,338	$	7,240	$	20,578		$	11,865	$	10,201	$	22,066

Nonperforming loans to total loans	Nonperforming loans to total loans					0.73		%					0.94		%	Nonperforming loans to total loans					0.77		%					0.94		%
Nonperforming loans to total assets	Nonperforming loans to total assets					0.51		%					0.72		%	Nonperforming loans to total assets					0.52		%					0.72		%
Nonperforming assets to total assets	Nonperforming assets to total assets					0.55		%					0.77		%	Nonperforming assets to total assets					0.56		%					0.77		%

(1)Nonaccrual acquired loans include PCD loans of ~~$413,000~~$122,000 and $390,000 at ~~June~~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 ~~June~~September 30, 2021 and December 31, 2020, respectively. Acquired restructured loans placed on nonaccrual totaled $3.5 million and $3.5 million at ~~June~~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 ~~$7.0~~$4.5 million, or less than 1% of total loans, at ~~June~~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 capitalized to the extent that the carrying value does not exceed fair value less estimated selling costs.

Investment Securities

The Company’s investment securities portfolio totaled ~~$287.3~~$306.2 million as of ~~June~~September 30, 2021, an increase of ~~$29.6~~$48.5 million, or ~~11.5%~~18.8%, from December 31, 2020. At ~~June~~September 30, 2021, the Company had a net unrealized gain on its available for sale investment securities portfolio of ~~$3.2~~$1.3 million, compared to a net unrealized gain of $6.5 million at December 31, 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 ~~six~~nine months ended ~~June~~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, 2020	Balance, December 31, 2020	$	254,752	$	2,934	Balance, December 31, 2020	$	254,752	$	2,934
Purchases	Purchases	80,483		—		Purchases	125,380		—
Sales	Sales	—		—		Sales	(5,068)		—
Principal maturities, prepayments and calls	Principal maturities, prepayments and calls	(45,663)		(800)		Principal maturities, prepayments and calls	(64,278)		(800)
Amortization of premiums and accretion of discounts	Amortization of premiums and accretion of discounts	(1,083)		(16)		Amortization of premiums and accretion of discounts	(1,460)		(24)
Decrease in market value	Decrease in market value	(3,304)		—		Decrease in market value	(5,201)		—
Balance, June 30, 2021		$	285,185	$	2,118
Balance, September 30, 2021						Balance, September 30, 2021	$	304,125	$	2,110

Funding Sources

Deposits

Deposits totaled $2.4 billion at ~~June~~September 30, 2021, an increase of ~~$156.9~~$151.9 million, or ~~7.1%~~6.9%, compared to December 31, 2020. The following table summarizes the changes in the Company’s deposits from December 31, 2020 to ~~June~~September 30, 2021.


(dollars in thousands)	(dollars in thousands)	June 30, 2021		December 31, 2020		Increase/(Decrease)				(dollars in thousands)	September 30, 2021		December 31, 2020		Increase/(Decrease)
Demand deposit	Demand deposit	$	715,167	$	615,700	$	99,467	16.2	%	Demand deposit	$	728,352	$	615,700	$	112,652	18.3	%
Savings	Savings	277,899		250,165		27,734		11.1		Savings	280,651		250,165		30,486		12.2
Money market	Money market	362,938		333,078		29,860		9.0		Money market	355,923		333,078		22,845		6.9
NOW	NOW	680,297		646,085		34,212		5.3		NOW	669,414		646,085		23,329		3.6
Certificates of deposit	Certificates of deposit	334,463		368,793		(34,330)		(9.3)		Certificates of deposit	331,377		368,793		(37,416)		(10.1)
Total deposits	Total deposits	$	2,370,764	$	2,213,821	$	156,943	7.1	%	Total deposits	$	2,365,717	$	2,213,821	$	151,896	6.9	%

The average rate paid on interest-bearing deposits was ~~0.36%~~0.27% for the ~~second~~third quarter of 2021, down 4233 bps compared to the ~~second~~third quarter of 2020. For the ~~six~~nine months ended ~~June~~September 30, 2021, the average rate paid on interest-bearing deposits was ~~0.39%~~0.35%, down 5345 bps from the comparable period in 2020.

At ~~June~~September 30, 2021, certificates of deposit maturing within the next 12 months totaled ~~$282.1~~$271.6 million.

Federal Home Loan Bank Advances

The average balance of total FHLB advances was ~~$27.7~~$27.0 million for the ~~second~~third quarter of 2021, down ~~$42.8~~$7.6 million compared to the ~~second~~third quarter of 2020. For the ~~six~~nine months ended ~~June~~September 30, 2021, the average balance of total FHLB advances was ~~$28.1~~$27.7 million, down ~~$30.0~~$22.5 million compared to the ~~six~~nine months ended ~~June~~September 30, 2020. Average total FHLB advances decreased over the comparable periods primarily due to the absence of short-term FHLB borrowings and paydowns during the ~~six~~nine months ended ~~June~~September 30, 2021.

At ~~June~~September 30, 2021 and December 31, 2020, the Company had ~~$27.5~~$26.4 million and $28.8 million in total outstanding FHLB advances, respectively, and ~~had $832.4~~$776.7 million and $787.2 million in additional FHLB advances ~~available.~~available, respectively.

Shareholders’ Equity

Total shareholders’ equity increased ~~$16.0~~$22.3 million, or ~~5.0%~~6.9%, from $321.8 million at December 31, 2020 to ~~$337.8~~$344.1 million at ~~June~~September 30, 2021. Shareholders' equity increased primarily due to net income of ~~$23.3~~$38.4 million, partially offset by an other comprehensive loss of ~~$1.9~~$3.3 million, share repurchases of ~~$2.8~~$8.8 million and cash dividends of ~~$3.9~~$5.9 million during ~~six~~the nine months ended ~~June~~September 30, 2021.

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


		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)	$	264,447	14.82	%	$	124,944	7.00	%	$	116,020	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	264,447		14.82		151,718		8.50		142,793		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	286,834		16.07		187,416		10.50		178,492		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	264,447		9.89		106,953		4.00		133,691		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 ~~June~~September 30, 2021, certificates of deposit maturing within the next 12 months totaled ~~$282.1~~$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 ~~six~~nine months ended ~~June~~September 30, 2021, the average balances of outstanding FHLB advances were ~~$27.7~~$27.0 million and ~~$28.1~~$27.7 million, respectively. At ~~June~~September 30, 2021, the Company had ~~$27.5~~$26.4 million in total outstanding FHLB advances and had ~~$832.4~~$776.7 million in additional FHLB advances available.

Asset/Liability Management

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


Shift in Interest Rates (in bps)	Shift in Interest Rates (in bps)	% Change in Projected Net Interest Income	Shift in Interest Rates (in bps)	% Change in Projected Net Interest Income
+300	+300	17.1%	+300	18.4%
+200	+200	11.4%	+200	12.3%
+100	+100	5.7%	+100	6.3%
-100	-100	(4.8)%	-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 of the Consolidated Financial Statements for more information on the effects of the derivative financial instruments on the consolidated financial statements.

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. At ~~June~~September 30, 2021 and December 31, 2020, the Company's allowance for credit losses 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					Contract Amount
(dollars in thousands)	(dollars in thousands)	June 30, 2021		December 31, 2020		(dollars in thousands)	September 30, 2021		December 31, 2020
Standby letters of credit	Standby letters of credit	$	4,925	$	5,781	Standby letters of credit	$	5,581	$	5,781
Available portion of lines of credit	Available portion of lines of credit	282,130		266,349		Available portion of lines of credit	308,324		266,349
Undisbursed portion of loans in process	Undisbursed portion of loans in process	141,578		99,527		Undisbursed portion of loans in process	126,710		99,527
Commitments to originate loans	Commitments to originate loans	162,638		139,471		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.

RESULTS OF OPERATIONS

Net income for the ~~second~~third quarter of 2021 was ~~$11.4~~$15.1 million, up ~~$8.5~~$6.3 million compared to the ~~second~~third quarter of 2020. Diluted EPS for the ~~second~~third quarter of 2021 was ~~$1.34,~~$1.79, up ~~$1.01~~$0.78 compared to the ~~second~~third quarter of 2020.

Net income for the ~~six~~nine months ended ~~June~~September 30, 2021 was ~~$23.3~~$38.4 million, up ~~$17.9~~$24.2 million compared to the ~~six~~nine months ended ~~June~~September 30, 2020. Diluted EPS for the ~~six~~nine months ended ~~June~~September 30, 2021 was ~~$2.75,~~$4.54, up ~~$2.15~~$2.93 compared to the ~~six~~nine months ended ~~June~~September 30, 2020.

The net income for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 ~~were~~was significantly impacted by the change in our estimate of the allowance for loan losses over the comparable ~~periods.~~periods and the recognition of PPP lender fees. During the the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company reversed ~~$3.4~~$2.4 million and ~~$5.1~~$7.5 million, respectively, of the allowance for loan losses. During ~~the three and six~~nine months ended ~~June~~September 30, 2020, the Company provisioned ~~$6.5 million and~~ $12.7 million ~~respectively,~~ for expected credit losses on loans primarily due to the uncertainty and economic disruption brought on by the COVID-19 pandemic. The Company recognized $4.4 million and $9.4 million of deferred PPP lender fees during the three and nine months ended September 30, 2021, respectively, compared to $1.1 million and $1.9 million during the 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 ~~3.51%~~3.62% for the quarters ended ~~June~~September 30, 2021 and 2020, respectively, and ~~3.80%~~3.89% and ~~3.67%~~3.64% for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

Net interest income totaled ~~$24.1~~$27.1 million for the ~~second~~third quarter of 2021, up ~~$1.7~~$3.9 million, or ~~7.6%~~16.6%, compared to the ~~second~~third quarter of 2020. For the ~~six~~nine months ended ~~June~~September 30, 2021, net interest income totaled ~~$49.2~~$76.3 million, up ~~$5.5~~$9.3 million, or ~~12.5%~~13.9%, compared to the ~~six~~nine months ended ~~June~~September 30, 2020.

Loan income from deferred PPP lender fees totaled ~~$1.8~~$4.4 million for the ~~second~~third quarter of 2021, up ~~$892,000,~~$3.3 million, or ~~101.1%~~310.5%, compared to the ~~second~~third quarter of 2020. For the ~~six~~nine months ended ~~June~~September 30, 2021, loan income from PPP lender fees totaled ~~$5.0~~$9.4 million, up ~~$4.2~~$7.5 million from the comparable period in 2020. Unrecognized PPP lender fees totaled ~~$7.7~~$3.3 million at ~~June~~September 30, ~~2021 and will be amortized into interest income over the life of the loans.~~2021.

The Company’s tax-equivalent net interest margin, which is net interest income as a percentage of average interest-earning assets, was ~~3.75%~~4.16% and ~~3.76%~~3.82% for the quarters ended ~~June~~September 30, 2021 and 2020, respectively. For the same periods, the average loan yield was ~~4.95%~~5.60% and ~~5.02%~~4.94%, respectively. PPP loans increased the ~~the~~ net interest margin by 452 bps and ~~decreased~~increased the average loan yield by 1160 bps during the ~~second~~third quarter of 2021. During the ~~second~~third quarter of 2020, PPP loans decreased the net interest margin by 614 bps and the average loan yield by 2134 bps. Excluding the impact of PPP loans, the net interest margin and the average loan yield decreased by 1132 and 1728 bps, respectively, over the comparable quarters.

The net interest margin for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was ~~3.94%~~4.01% and ~~3.95%~~3.91%, respectively. For the same periods, the average loan yield was ~~5.08%~~5.25% and ~~5.21%~~5.12%, respectively. PPP loans increased the the net interest margin by 1527 bps and the average loan yield by 322 bps during the ~~six~~nine months ended ~~June~~September 30, 2021. During the ~~six~~nine months ended ~~June~~September 30, 2020, PPP loans decreased the net interest margin by 47 bps and the average loan yield by 1219 bps. Excluding the impact of PPP loans, the net interest margin and the average loan yield decreased by 2024 and 28 bps, respectively, over the comparable year-to-date periods.

Average PPP loans were ~~$228.1~~$144.6 million and ~~$180.7~~$252.5 million for the ~~second~~third quarters of 2021 and 2020, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, average PPP loans were ~~$233.4~~$203.5 million and ~~$90.4~~$144.8 million, respectively.

The net interest margin was also impacted by the increase in average cash and cash equivalents when comparing the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. During the ~~second~~third quarter of ~~2020,~~2021, the increase in average cash and cash equivalents decreased the net interest margin and the average yield on total interest-earning assets by 1938 and 2140 bps, respectively. During the ~~six~~nine months ended ~~June~~September 30, 2021, the increase in average cash and cash equivalents decreased the net interest margin and the average yield on total interest-earning assets by 2328 and 2530 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 three and ~~six~~nine months ended ~~June~~September 30, 2021 were up ~~$127.8~~$217.8 million, or ~~68.7%~~127.4%, and ~~$142.2~~$167.7 million, or ~~132.8%~~130.5%, respectively, from the comparable periods in 2020.

Acquired loan discount accretion included in interest income totaled ~~$585,000~~$556,000 and ~~$746,000~~$847,000 for the quarters ended ~~June~~September 30, 2021 and 2020, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, acquired loan discount accretion included in interest income totaled ~~$1.3~~$1.9 million and ~~$1.6~~$2.4 million, 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 June 30,													Three Months Ended September 30,
		2021						2020							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)	$	1,963,935	$	24,500	4.95	%	$	1,928,185	$	24,371	5.02	%	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	256,700		1,043		1.63		243,011		1,103		1.82		Taxable	259,282		1,108		1.71		240,830		897		1.49
Tax-exempt (TE)	Tax-exempt (TE)	20,196		87		2.19		13,058		79		3.07		Tax-exempt (TE)	19,168		81		2.13		11,484		70		3.10
Total investment securities	Total investment securities	276,896		1,130		1.67		256,069		1,182		1.88		Total investment securities	278,450		1,189		1.74		252,314		967		1.56
Other interest-earning assets	Other interest-earning assets	313,954		133		0.17		186,127		117		0.25		Other interest-earning assets	388,723		189		0.19		170,957		106		0.25
Total interest-earning assets (TE)	Total interest-earning assets (TE)	2,554,785		$	25,763	4.01		2,370,381		$	25,670	4.31		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	187,016						193,829						Noninterest-earning assets	192,372						187,329
Total assets	Total assets	$	2,741,801					$	2,564,210					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	$	1,315,432	$	842	0.26	%	$	1,157,239	$	1,347	0.47	%	Savings, checking and money market	$	1,312,131	$	605	0.18	%	$	1,195,455	$	1,136	0.38	%
Certificates of deposit	Certificates of deposit	341,300		638		0.75		391,380		1,665		1.71		Certificates of deposit	332,916		515		0.61		381,949		1,232		1.28
Total interest-bearing deposits	Total interest-bearing deposits	1,656,732		1,480		0.36		1,548,619		3,012		0.78		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		3.84		5,539		53		3.86		Other borrowings	5,539		53		3.80		5,539		53		3.81
Short-term FHLB advances	Short-term FHLB advances	—		—		—		31,868		20		0.25		Short-term FHLB advances	—		—		—		—		—		—
Long term FHLB advances	Long term FHLB advances	27,699		120		1.73		38,592		168		1.74		Long term FHLB advances	27,011		116		1.72		34,612		149		1.73
Total interest-bearing liabilities	Total interest-bearing liabilities	1,689,970		$	1,653	0.39		1,624,618		$	3,253	0.80		Total interest-bearing liabilities	1,677,597		$	1,289	0.31		1,617,555		$	2,570	0.63
Noninterest-bearing liabilities	Noninterest-bearing liabilities	717,739						624,418						Noninterest-bearing liabilities	736,567						649,634
Total liabilities	Total liabilities	2,407,709						2,249,036						Total liabilities	2,414,164						2,267,189
Shareholders’ equity	Shareholders’ equity	334,092						315,174						Shareholders’ equity	342,189						314,585
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	2,741,801					$	2,564,210					Total liabilities and shareholders' equity	$	2,756,353					$	2,581,774
Net interest-earning assets	Net interest-earning assets	$	864,815					$	745,763					Net interest-earning assets	$	886,384					$	776,890
Net interest spread (TE)	Net interest spread (TE)			$	24,110	3.62	%			$	22,417	3.51	%	Net interest spread (TE)			$	27,134	4.05	%			$	23,272	3.62	%
Net interest margin (TE)	Net interest margin (TE)					3.75	%					3.76	%	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.


		Six Months Ended June 30,													Nine Months Ended September 30,
		2021						2020							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)	$	1,975,535	$	50,317	5.08	%	$	1,831,704	$	48,070	5.21	%	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	248,765		1,961		1.58		243,965		2,411		1.98		Taxable	252,309		3,069		1.62		242,913		3,308		1.82
Tax-exempt (TE)	Tax-exempt (TE)	20,373		181		2.25		15,589		183		2.98		Tax-exempt (TE)	19,967		262		2.22		14,210		253		3.01
Total investment securities	Total investment securities	269,138		2,142		1.63		259,554		2,594		2.04		Total investment securities	272,276		3,331		1.67		257,123		3,561		1.88
Other interest-earning assets	Other interest-earning assets	249,222		232		0.19		107,065		255		0.48		Other interest-earning assets	296,233		421		0.19		128,518		361		0.37
Total interest-earning assets (TE)	Total interest-earning assets (TE)	2,493,895		$	52,691	4.22		2,198,323		$	50,919	4.61		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	187,672						193,239						Noninterest-earning assets	189,256						191,255
Total assets	Total assets	$	2,681,567					$	2,391,562					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	$	1,278,388	$	1,723	0.27	%	$	1,073,133	$	3,169	0.59	%	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	346,870		1,413		0.82		392,025		3,510		1.80		Certificates of deposit	342,167		1,928		0.75		388,642		4,742		1.63
Total interest-bearing deposits	Total interest-bearing deposits	1,625,258		3,136		0.39		1,465,158		6,679		0.92		Total interest-bearing deposits	1,631,926		4,256		0.35		1,502,847		9,047		0.80
Other borrowings	Other borrowings	5,622		106		3.81		5,539		106		3.86		Other borrowings	5,594		159		3.81		5,539		159		3.84
Short-term FHLB advances	Short-term FHLB advances	—		—		—		16,251		23		0.28		Short-term FHLB advances	—		—		—		10,795		23		0.28
Long term FHLB advances	Long term FHLB advances	28,059		244		1.73		41,844		371		1.77		Long term FHLB advances	27,706		360		1.73		39,415		520		1.76
Total interest-bearing liabilities	Total interest-bearing liabilities	1,658,939		$	3,486	0.42		1,528,792		$	7,179	0.94		Total interest-bearing liabilities	1,665,226		$	4,775	0.38		1,558,596		$	9,749	0.84
Noninterest-bearing liabilities	Noninterest-bearing liabilities	692,147						547,007						Noninterest-bearing liabilities	707,117						581,465
Total liabilities	Total liabilities	2,351,086						2,075,799						Total liabilities	2,372,343						2,140,061
Shareholders’ equity	Shareholders’ equity	330,481						315,763						Shareholders’ equity	334,426						315,368
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	2,681,567					$	2,391,562					Total liabilities and shareholders’ equity	$	2,706,769					$	2,455,429
Net interest-earning assets	Net interest-earning assets	$	834,956					$	669,531					Net interest-earning assets	$	852,287					$	705,578
Net interest spread (TE)	Net interest spread (TE)			$	49,205	3.80	%			$	43,740	3.67	%	Net interest spread (TE)			$	76,339	3.89	%			$	67,012	3.64	%
Net interest margin (TE)	Net interest margin (TE)					3.94	%					3.95	%	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 June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021 Compared to 2020						2021 Compared to 2020							2021 Compared to 2020						2021 Compared to 2020
		Change Attributable To						Change Attributable To							Change Attributable To						Change Attributable To
(dollars in thousands)	(dollars in thousands)	Rate		Volume		Increase/ (Decrease)		Rate		Volume		Increase/ (Decrease)		(dollars in thousands)	Rate		Volume		Increase/ (Decrease)		Rate		Volume		Increase/ (Decrease)
Interest income:	Interest income:													Interest income:
Loans receivable	Loans receivable	$	(311)	$	440	$	129	$	(138)	$	2,385	$	2,247	Loans receivable	$	3,595	$	(1,319)	$	2,276	$	2,098	$	2,425	$	4,523
Investment securities	Investment securities	(157)		105		(52)		(392)		(60)		(452)		Investment securities	99		123		222		(231)		1		(230)
Other interest-earning assets	Other interest-earning assets	(51)		67		16		(135)		112		(23)		Other interest-earning assets	(38)		121		83		(79)		139		60
Total interest income	Total interest income	(519)		612		93		(665)		2,437		1,772		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	(630)		125		(505)		(1,295)		(151)		(1,446)		Savings, checking and money market accounts	(608)		77		(531)		(1,479)		(498)		(1,977)
Certificates of deposit	Certificates of deposit	(875)		(152)		(1,027)		(1,426)		(671)		(2,097)		Certificates of deposit	(602)		(115)		(717)		(1,741)		(1,073)		(2,814)
Other borrowings	Other borrowings	—		—		—		—		—		—		Other borrowings	—		—		—		—		—		—
FHLB advances	FHLB advances	(11)		(57)		(68)		(46)		(104)		(150)		FHLB advances	(1)		(32)		(33)		(67)		(116)		(183)
Total interest expense	Total interest expense	(1,516)		(84)		(1,600)		(2,767)		(926)		(3,693)		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	$	997	$	696	$	1,693	$	2,102	$	3,363	$	5,465	Increase (decrease) in net interest income	$	4,867	$	(1,005)	$	3,862	$	5,075	$	4,252	$	9,327

Noninterest Income

Noninterest income for the ~~second~~third quarter of 2021 totaled ~~$3.3~~$5.4 million, up ~~$191,000,~~$1.6 million, or ~~6.2%~~41.9%, from ~~$3.1~~$3.8 million earned for the same period in 2020. Noninterest income for the ~~six~~nine months ended ~~June~~September 30, 2021 totaled ~~$7.4~~$12.7 million, up ~~$893,000,~~$2.5 million, or ~~13.8%~~24.2%, from ~~$6.5~~$10.3 million earned for the same period in 2020.

Income from service fees and charges for the second quarter of 2021 was up $204,000, or 21.7%, from the second quarter of 2020. For the six months ended June 30, 2021, income from service fees and charges was down $188,000, or 7.8%. The change in income from service fees and charges over the three- and six-month periods was primarily due to the change in income from overdraft fees on deposit accounts.

~~Income from~~ bank card fees for the three and ~~six~~nine months ended ~~June~~September 30, 2021 was up ~~$464,000,~~$188,000, or ~~41.2%~~14.1%, and ~~$633,000,~~$821,000, or ~~28.0%~~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 ~~second~~third quarter of 2021 were down ~~$83,000,~~$489,000, or ~~12.9%~~54.1%, from the comparable period in 2020. For the ~~six~~nine months ended ~~June~~September 30, 2021, gains on the sale of loans were up ~~$788,000,~~$299,000, or ~~83.9%~~16.2%, from the comparable period in 2020. The origination of mortgage loans held for sale slowed in the second ~~quarter~~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 ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same ~~six-month~~nine-month period in 2020.

Income from BOLI for the three and nine months ended September 30, 2021 was up $1.7 million, or 739.0%, and $1.7 million, or 232.0%, respectively, from the comparable periods in 2020. The Company recognized a life insurance benefit of $1.7 million following the death of an employee during the third quarter of 2021.

Losses on the sale of assets for the three and ~~six~~nine months ended ~~June~~September 30, 2021 totaled ~~$457,000.~~$3,000 and $460,000. This was an increase in losses of ~~$444,000~~$3,000 and ~~$446,000,~~$449,000, from the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively. During the second quarter of 2021, the Company 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.

Noninterest Expense

Noninterest expense for the ~~second~~third quarter of 2021 totaled ~~$16.6~~$16.4 million, up ~~$1.1 million,~~$315,000, or ~~7.2%~~2.0%, from the ~~second~~third quarter of 2020. Noninterest expense for the ~~six~~nine months ended ~~June~~September 30, 2021 totaled ~~$32.5~~$49.0 million, up ~~$1.7~~$2.0 million, or ~~5.4%~~4.2%, from the same period in 2020.

Compensation and benefits expense for the three and ~~six~~nine months ended ~~June~~September 30, 2021 was up ~~$325,000,~~$69,000, or ~~3.5%~~0.7%, and ~~$573,000,~~$642,000, or ~~3.1%~~2.3%, respectively, from the comparable periods in 2020 primarily due to ~~increases in wages and incentive pay,~~increased health insurance costs and compensation expense related to the Company's ESOP driven primarily by the increase in market value of shares of the Company's common stock held by the ~~ESOP.~~ESOP which were partially offset by a decrease in incentive pay.

Marketing and advertising expense for the ~~second quarter of~~three and nine months ended September 30, 2021 was up ~~$108,000,~~$111,000, or ~~67.5%~~38.5%, and $92,000, or 12.3%, respectively, from the comparable period in 2020 primarily due to an increase in ~~sponsorships~~charitable donations and ~~donations. For the six months ended June 30, 2021, marketing and~~general advertising ~~expense was down $19,000, or 4.1%, from the comparable period in 2020.~~activities.

Data processing and communication expense for the three and ~~six~~nine months ended ~~June~~September 30, 2021 was up ~~$399,000,~~$267,000, or ~~22.7%~~14.4%, and ~~$566,000,~~$833,000, or ~~15.8%~~15.3%, respectively, from the comparable periods in 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 enhancements to our lending software.

Regulatory fees for the the ~~second~~third quarter of 2021 were down ~~$56,000,~~$225,000, or ~~15.5%~~42.8%, from the comparable period in 2020. For the ~~six~~nine months ended ~~June~~September 30, 2021, regulatory fees were ~~up $207,000,~~down $18,000, or ~~43.3%~~1.8%, primarily due to the ~~absence of FDIC assessment credits during~~decline in nonperforming loans and an increase in the ~~first quarter of 2021. FDIC assessment credits were exhausted during the first quarter of 2020.~~leverage ratio.

The Company ~~provisioned~~recorded no provision for credit losses on unfunded lending commitments for the third quarter of 2021 and 2020. Provisions totaling $375,000 for credit losses on unfunded ~~loan~~ commitments ~~for~~during the ~~second quarter of~~nine months ended September 30, 2021 ~~primarily~~were due to the growth in unfunded construction loan commitments ~~during the quarter. The Company did not record a~~and no provision for ~~credit losses on unfunded commitments during~~ the ~~first quarter of 2021 or~~comparable period in 2020.

Other noninterest expense for the ~~six~~three and nine months ended ~~June~~September 30, ~~2020.~~2021 was up $160,000, or 19.8%, and $208,000, or 8.1%, respectively, from the comparable periods in 2020 primarily due to an increase in other loan fee expenses.

Income Taxes

Income tax expense for the three and ~~six~~nine months ended ~~June~~September 30, 2021 totaled ~~$2.9~~$3.4 million and ~~$5.8~~$9.2 million, respectively, compared to ~~$675,000~~$2.2 million and ~~$1.2~~$3.4 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively. The increases in income tax expense over the comparable periods were primarily due to increases in taxable earnings.

The Company's effective tax rates for the ~~second~~third quarters of 2021 and 2020 were ~~20.1%~~18.5% and ~~18.8%~~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 ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company's effective tax rates were ~~20.0%~~19.4% and ~~18.2%~~19.2%, respectively.

Reconciliation of Non-GAAP Measures

The following table provides a reconciliation of Non-GAAP financial measures used herein to GAAP reporting. For further information, see "-Non-GAAP Financial Measures" at page 36.

Financial Condition


(dollars in thousands)	(dollars in thousands)	June 30, 2021			December 31, 2020			(dollars in thousands)	September 30, 2021			December 31, 2020
Total loans	Total loans	$	1,918,488		$	1,979,954		Total loans	$	1,875,176		$	1,979,954
Less: PPP loans	Less: PPP loans	197,614			221,220			Less: PPP loans	95,560			221,220
Total loans excluding PPP loans	Total loans excluding PPP loans	$	1,720,874		$	1,758,734		Total loans excluding PPP loans	$	1,779,616		$	1,758,734

Allowance for loan losses to total loans	Allowance for loan losses to total loans	1.39		%	1.66		%	Allowance for loan losses to total loans	1.29		%	1.66		%
Less: PPP loans	Less: PPP loans	0.16			0.21			Less: PPP loans	0.07			0.21
Non-GAAP allowance for loan losses to total loans	Non-GAAP allowance for loan losses to total loans	1.55		%	1.87		%	Non-GAAP allowance for loan losses to total loans	1.36		%	1.87		%

Results of Operations


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2021			2020			2021			2020			(dollars in thousands)	2021			2020			2021			2020
Reported loan income	Reported loan income	$	24,500		$	24,371		$	50,317		$	48,070		Reported loan income	$	27,045		$	24,769		$	77,362		$	72,839
Less: PPP loan income	Less: PPP loan income	2,372			1,373			6,265			1,373			Less: PPP loan income	4,742			1,729			11,007			3,102
Loan income excluding PPP loan income	Loan income excluding PPP loan income	$	22,128		$	22,998		$	44,052		$	46,697		Loan income excluding PPP loan income	$	22,303		$	23,040		$	66,355		$	69,737

Average total loans	Average total loans	$	1,963,935		$	1,928,185		$	1,975,535		$	1,831,704		Average total loans	$	1,896,808		$	1,971,174		$	1,949,004		$	1,878,533
Less: average PPP loans	Less: average PPP loans	228,114			180,712			233,434			90,356			Less: average PPP loans	144,626			252,504			203,506			144,800
Average total loans excluding PPP loans	Average total loans excluding PPP loans	$	1,735,821		$	1,747,473		$	1,742,101		$	1,741,348		Average total loans excluding PPP loans	$	1,752,182		$	1,718,670		$	1,745,498		$	1,733,733

Loan yield	Loan yield	4.95		%	5.02		%	5.08		%	5.21		%	Loan yield	5.60		%	4.94		%	5.25		%	5.12		%
Negative (positive) impact of PPP loans		0.11			0.21			(0.03)			0.12
(Positive) negative impact of PPP loans														(Positive) negative impact of PPP loans	(0.60)			0.34			(0.22)			0.19
Loan yield excluding PPP loans	Loan yield excluding PPP loans	5.06		%	5.23		%	5.05		%	5.33		%	Loan yield excluding PPP loans	5.00		%	5.28		%	5.03		%	5.31		%

Net interest margin	Net interest margin	3.75		%	3.76		%	3.94		%	3.95		%	Net interest margin	4.16		%	3.82		%	4.01		%	3.91		%
(Positive) negative impact of PPP loans	(Positive) negative impact of PPP loans	(0.04)			0.06			(0.15)			0.04			(Positive) negative impact of PPP loans	(0.52)			0.14			(0.27)			0.07
Net interest margin excluding PPP loans	Net interest margin excluding PPP loans	3.71		%	3.82		%	3.79		%	3.99		%	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, 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 ~~June~~September 30, 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 Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and are operating in an effective manner.

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

There have been no material changes from the risk factors previously disclosed in the Company's Annual report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission.


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

The Company’s purchases of its common stock made during the quarter 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)
April 1 – April 30, 2021 29 $ 37.76 29 258,574
May 1 – May 31, 2021 — — — 258,574
June 1 – June 30, 2021 42,229 38.55 42,229 216,345
Total 42,258 $ 38.55 42,258 216,345


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)On August 31, 2020, the Company announced the approval of a repurchase program (the "2020 Repurchase Plan"). Under the 2020 Repurchase Plan, the Company ~~may~~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 an additional 430,000 shares, or approximately 5% of ~~its~~the 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

~~3.2~~

~~Amended and Restated Bylaws of Home Bancorp~~

~~Filed herewith~~

31.1

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

Filed herewith

31.2

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

Filed herewith

32.0

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.

~~August~~November 5, 2021

By:

/s/ John W. Bordelon

John W. Bordelon

Chairman of the Board, President and Chief Executive Officer

~~August~~November 5, 2021

By:

/s/ David T. Kirkley

David T. Kirkley

Executive Vice President and Chief Financial Officer

~~August~~November 5, 2021

By:

/s/ Mary H. Hopkins

Mary H. Hopkins

Home Bank, N.A. Senior Vice President and Director of Financial Management