Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

For the quarterly period ended: September 30, 2009

or

 

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

For the transition period from              to             

Commission File Number: 001-34190

 

 

HOME BANCORP, INC.

(Exact name of Registrant as specified in its charter)

 

 

 

Louisiana   71-1051785

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

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

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

Not Applicable

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

 

 

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

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

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

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   x  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

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

At November 12, 2009, the registrant had 8,800,275 shares of common stock, $0.01 par value, outstanding.

 

 

 


Table of Contents

HOME BANCORP, INC. and SUBSIDIARY

TABLE OF CONTENTS

 

         Page
PART I
Item 1.  

Financial Statements (unaudited)

  
 

Consolidated Statements of Financial Condition

   1
 

Consolidated Statements of Income

   2
 

Consolidated Statements of Changes in Shareholders’ Equity

   3
 

Consolidated Statements of Cash Flows

   4
 

Notes to Unaudited Consolidated Financial Statements

   5
Item 2.  

Managements’ Discussion and Analysis of Financial Condition and Results of Operations

   13
Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

   24
Item 4.  

Controls and Procedures

   24
PART II
Item 1.  

Legal Proceedings

   24
Item 1A.  

Risk Factors

   25
Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

   25
Item 3.  

Defaults Upon Senior Securities

   25
Item 4.  

Submission of Matters to a Vote of Security Holders

   25
Item 5.  

Other Information

   25
Item 6.  

Exhibits

   25
SIGNATURES      26


Table of Contents

PART I. FINANCIAL INFORMATION

Item  1. Financial Statements.

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

     (Unaudited)
September 30,
2009
    December 31,
2008
 

Assets

    

Cash and cash equivalents

   $ 37,352,620      $ 20,150,248   

Interest-bearing deposits in banks

     3,150,000        1,685,000   

Cash invested at other ATM locations

     8,802,596        24,243,780   

Securities available for sale, at fair value

     105,049,877        114,235,261   

Securities held to maturity (fair values of $11,512,705 and $4,134,153, respectively)

     11,372,044        4,089,466   

Mortgage loans held for sale

     2,060,453        996,600   

Loans, net of unearned income

     340,222,334        335,568,071   

Allowance for loan losses

     (3,271,926     (2,605,889
                

Loans, net

     336,950,408        332,962,182   
                

Office properties and equipment, net

     15,309,879        15,325,997   

Cash surrender value of bank-owned life insurance

     5,461,662        5,268,817   

Accrued interest receivable and other assets

     7,900,029        9,439,637   
                

Total Assets

   $ 533,409,568      $ 528,396,988   
                

Liabilities

    

Deposits:

    

Noninterest-bearing

   $ 66,305,294      $ 67,047,799   

Interest-bearing

     310,330,219        287,097,306   
                

Total deposits

     376,635,513        354,145,105   

Short-term Federal Home Loan Bank (FHLB) borrowings

     -          21,500,000   

Long-term Federal Home Loan Bank (FHLB) debt

     19,879,026        22,920,795   

Accrued interest payable and other liabilities

     4,302,342        2,868,362   
                

Total Liabilities

     400,816,881        401,434,262   
                

Shareholders’ Equity

    

Preferred stock, $0.01 par value - 10,000,000 shares authorized; none issued

     -          -     

Common stock, $0.01 par value - 40,000,000 shares authorized; 8,926,875 shares issued and outstanding

     89,270        89,270   

Additional paid-in capital

     87,714,515        87,182,281   

Unallocated common stock held by:

    

Employee Stock Ownership Plan (ESOP)

     (6,784,420     (7,052,230

Recognition and Retention Plan (RRP)

     (4,057,177     -     

Retained earnings

     57,415,818        52,055,071   

Accumulated other comprehensive loss

     (1,785,319     (5,311,666
                

Total Shareholders’ Equity

     132,592,687        126,962,726   
                

Total Liabilities and Shareholders’ Equity

   $ 533,409,568      $ 528,396,988   
                

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

 

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Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

 

     For The Three Months Ended
September 30,
   For The Nine Months Ended
September 30,
     2009    2008    2009    2008

Interest Income

           

Loans, including fees

   $ 5,616,351    $ 5,455,503    $ 16,734,665    $ 16,255,952

Investment securities

     1,722,460      1,054,336      5,211,929      2,804,997

Other investments and deposits

     296,759      387,095      960,011      1,036,913
                           

Total interest income

     7,635,570      6,896,934      22,906,605      20,097,862
                           

Interest Expense

           

Deposits

     1,371,889      1,875,504      4,219,932      6,327,808

Short-term borrowings

     69      159,472      37,749      305,325

Long-term debt

     186,099      120,669      601,594      378,117
                           

Total interest expense

     1,558,057      2,155,645      4,859,275      7,011,250
                           

Net interest income

     6,077,513      4,741,289      18,047,330      13,086,612

Provision for loan losses

     287,061      92,500      709,210      161,437
                           

Net interest income after provision for loan losses

     5,790,452      4,648,789      17,338,120      12,925,175
                           

Noninterest Income

           

Service fees and charges

     471,925      428,529      1,370,769      1,255,994

Bank card fees

     277,375      241,511      820,635      682,877

Gain on sale of loans, net

     105,149      41,555      420,441      192,553

Income from bank-owned life insurance

     66,082      66,985      192,845      194,857

Other income

     29,159      33,238      110,280      85,195
                           

Total noninterest income

     949,690      811,818      2,914,970      2,411,476
                           

Noninterest Expense

           

Compensation and benefits

     2,849,756      2,207,930      7,788,637      6,455,640

Occupancy

     325,581      297,149      971,983      887,086

Marketing and advertising

     131,119      92,830      453,051      409,403

Data processing and communication

     328,686      315,601      1,048,884      1,017,349

Professional services

     267,118      69,422      729,053      235,169

Forms, printing and supplies

     86,300      97,342      290,676      258,963

Franchise and shares tax

     226,250      -        678,750      -  

Regulatory fees

     155,559      41,672      490,725      112,998

Other expenses

     298,092      230,962      865,236      636,413
                           

Total noninterest expense

     4,668,461      3,352,908      13,316,995      10,013,021
                           

Income before income tax expense

     2,071,681      2,107,699      6,936,095      5,323,630

Income tax expense

     574,244      715,524      2,278,120      1,808,941
                           

Net Income

   $ 1,497,437    $ 1,392,175    $ 4,657,975    $ 3,514,689
                           

Earnings per share:

           

Basic

   $ 0.18      N/A    $ 0.57      N/A
                           

Diluted

   $ 0.17      N/A    $ 0.56      N/A
                           

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

 

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HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

 

    Common
Stock
  Additional
Paid-in

Capital
    Unallocated
Common Stock
Held by ESOP
    Unallocated
Common Stock
Held by RRP
    Retained
Earnings
  Accumulated Other
Comprehensive
Income (Loss)
    Total  

Balance, December 31, 2007

  $ -     $ -        $ -        $ -        $ 49,339,479   $ 43,641      $ 49,383,120   

Comprehensive income:

             

Net income

            3,514,689       3,514,689   

Change in unrealized gain on securities available for sale, net of taxes

              (1,709,382     (1,709,382
                   

Total comprehensive income

                1,805,307   
                                                   

Balance, September 30, 2008

  $ -     $ -        $ -        $ -        $ 52,854,168   $ (1,665,741   $ 51,188,427   
                                                   

Balance, December 31, 2008

  $ 89,270   $ 87,182,281      $ (7,052,230   $ -        $ 52,055,071   $ (5,311,666   $ 126,962,726   

Comprehensive income:

             

Net income

            4,657,975       4,657,975   

Change in unrealized loss on securities available for sale, net of taxes

              3,526,347        3,526,347   
                   

Total comprehensive income

                8,184,322   
                   

Cumulative effect adjustment (see Note 3)

            702,772       702,772   

Cost of issuance of common stock

      (13,895             (13,895

Common stock purchased for recognition and retention plan

          (4,057,177         (4,057,177

ESOP shares released for allocation

      28,011        267,810              295,821   

Share-based compensation cost

      518,118                518,118   
                                                   

Balance, September 30, 2009

  $ 89,270   $ 87,714,515      $ (6,784,420   $ (4,057,177   $ 57,415,818   $ (1,785,319   $ 132,592,687   
                                                   

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

 

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Table of Contents

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

     For the Nine Months
Ended September 30,
 
     2009     2008  

Cash flows from operating activities

    

Net income

   $ 4,657,975      $ 3,514,689   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Provision for loan losses

     709,210        161,437   

Depreciation

     659,362        606,361   

Mortgage servicing amortization

     9,747        16,497   

Federal Home Loan Bank stock dividends

     (3,900     (25,400

Gain on sale of fixed assets, net

     (400     -     

Amortization of premium/discount on investments, net

     (567,120     1,313,376   

Gains on loans sold, net

     (420,441     (192,553

Proceeds, including principal payments, from loans held for sale

     60,360,305        25,344,755   

Originations of loans held for sale

     (61,003,717     (24,258,752

Non-cash compensation

     813,939        -   

Deferred income tax provision (benefit)

     644,912        (32,739

Increase in accrued interest receivable and other assets

     (1,789,875     (1,149,016

Increase in cash surrender value of bank-owned life insurance

     (192,845     (194,857

Increase in accrued interest payable and other liabilities

     1,241,649        6,262,374   
                

Net cash provided by operating activities

     5,118,801        11,366,172   
                

Cash flows from investing activities

    

Purchases of available-for-sale investment securities

     (11,432,148     (38,272,266

Purchases of held-to-maturity investment securities

     (8,150,000     -     

Proceeds from payments on available-for-sale investment securities

     27,596,446        13,068,462   

Proceeds from maturities and calls of available-for-sale investment securities

     -          2,000,000   

Proceeds from payments on held-to-maturity investment securities

     863,387        816,989   

Decrease (increase) in cash invested at other ATM locations

     15,441,184        (3,554,426

Net increase in loans

     (4,697,436     (9,067,010

(Increase) decrease in interest-bearing deposits in banks

     (1,465,000     2,475,000   

Proceeds from sale of real estate owned

     36,515        3,710   

Purchases of Federal Home Loan Bank stock

     -          (1,325,100

Proceeds from redemption of Federal Home Loan Bank stock

     655,900        -     

Proceeds from sale of properties and equipment

     400        -     

Purchases of office properties and equipment

     (643,244     (2,408,486
                

Net cash provided by (used in) investing activities

     18,206,004        (36,263,127
                

Cash flows from financing activities

    

Increase (decrease) in deposits

     22,490,408        (60,217

Proceeds from Federal Home Loan Bank advances

     561,600,000        424,900,000   

Payments on Federal Home Loan Bank advances

     (586,141,769     (425,940,014

Cost of issuance of common stock

     (13,895     -     

Repurchase of common stock for recognition and retention plan

     (4,057,177     -     

Cash received for common stock subscriptions

     -          74,640,116   
                

Net cash (used in) provided by financing activities

     (6,122,433     73,539,885   
                

Net increase in cash and cash equivalents

     17,202,372        48,642,930   

Cash and cash equivalents at beginning of period

     20,150,248        11,746,082   
                

Cash and cash equivalents at end of period

   $ 37,352,620      $ 60,389,012   
                

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

 

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HOME BANCORP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

Home Bancorp, Inc., a Louisiana corporation (the “Company”), was organized by Home Bank (the “Bank”) in May 2008 to facilitate the conversion of the Bank from the mutual to the stock form (the “Conversion”) of ownership. The Conversion was completed on October 2, 2008, at which time the Company became the holding company for the Bank, with the Company owning all of the issued and outstanding shares of the Bank’s common stock. Shares of the Company’s common stock were issued and sold in an offering to certain depositors of the Bank and others. The Company was newly organized and owned no assets during any period prior to October 2, 2008. Therefore, the financial information for any period prior to October 2, 2008 presented in this report is that of the Bank only.

The accompanying unaudited 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, and cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the nine-month period ended September 30, 2009, are not necessarily indicative of the results which may be expected for the entire fiscal year. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2008.

In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial condition, results of operations, changes in equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

Certain amounts reported in prior periods have been reclassified to conform to the current period presentation. Such reclassifications had no effect on previously reported equity or net income.

2. Accounting Developments

In June 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-01, Topic 105 – Generally Accepted Accounting Principles amendments based on Statement of Financial Accounting Standards No. 168 – The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles. ASU 2009-01 amends the FASB Accounting Standards Codification (“ASC”) for the issuance of FASB Statement (“SFAS”) No. 168, The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles. ASU 2009-1 includes SFAS 168 in its entirety, including the accounting standards update instructions contained in Appendix B of the Statement. The FASB Accounting Standards Codification TM (“Codification”) became the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. As of the effective date of this Statement, September 15, 2009, the Codification supersedes all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification is no longer authoritative. This Statement is effective for the Company’s financial statements beginning in the interim period ended September 30, 2009.

Following this Statement, the FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force (“EITF”) Abstracts. Instead, it now issues Accounting Standards Updates. The FASB does not consider Accounting Standards Updates as authoritative in their own right. Accounting Standards Updates serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the Codification. FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles, which became effective on November 13, 2008, identified the sources of accounting principles and the framework for selecting the principles used in preparing the financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS 162 arranged these sources of GAAP in a hierarchy for users to apply accordingly. Upon becoming effective, all of the content of the Codification carries the same level of authority, effectively superseding SFAS 162. In other words, the GAAP hierarchy has been modified to include only two levels of GAAP: authoritative and non-authoritative. As a result, this Statement replaces SFAS 162 to indicate this change to the GAAP hierarchy. The adoption of the Codification and ASU 2009-01 did not have any effect on the Company’s results of operations or financial position. All references to accounting literature included in the notes to the financial statements have been changed to reference the appropriate sections of the Codification.

 

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Table of Contents

In June 2009, the FASB issued Accounting Standards Update No. 2009-02, Omnibus Update – Amendments to Various Topics for Technical Corrections. The adoption of ASU 2009-02 did not have a material effect on the Company’s results of operations, financial position or disclosures.

In August 2009, the FASB issued Accounting Standards Update No. 2009-03, SEC Update – Amendments to Various Topics Containing SEC Staff Accounting Bulletins. ASU 2009-03 represents technical corrections to various topics containing SEC Staff Accounting Bulletins to update cross-references to Codification text. This ASU did not have a material effect on the Company’s results of operations, financial position or disclosures.

In August 2009, the FASB issued Accounting Standards Update No. 2009-04, Accounting for Redeemable Equity Instruments – Amendment to Section 480-10-S99. ASU 2009-04 represents an update to Section 480-10-S99, Distinguishing Liabilities from Equity, per Emerging Issues Task Force Topic D-98, Classification and Measurement of Redeemable Securities. ASU 2009-04 did not have a material effect on the Company’s results of operations, financial position or disclosures.

In August 2009, the FASB issued Accounting Standards Update No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) – Measuring Liabilities at Fair Value. ASU 2009-05 applies to all entities that measure liabilities at fair value within the scope of ASC Topic 820. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques:

 

  1) A valuation technique that uses:

 

  a. The quoted price of the identical liability when traded as an asset

 

  b. Quoted prices for similar liabilities or similar liabilities when traded as assets.

 

  2) Another valuation technique that is consistent with the principles of ASC Topic 820. Two examples would be an income approach, such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability.

The amendments in ASU 2009-5 also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. It also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The guidance provided in ASU 2009-5 is effective for the Company in the fourth quarter of 2009. Because the Company does not currently have any liabilities that are recorded at fair value, the adoption of this guidance will not have any impact on the Company’s results of operations, financial position or disclosures.

In September 2009, the FASB issued Accounting Standards Update No. 2009-06, Income Taxes (Topic 740) – Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities. ASU 2009-06 provides additional implementation guidance on accounting for uncertainty in income taxes by addressing 1) whether income taxes paid by an entity are attributable to the entity or its owners, 2) what constitutes a tax position for a pass-through entity or a tax-exempt not-for-profit entity, and 3) how accounting for uncertainty in income taxes should be applied when a group of related entities comprise both taxable and nontaxable entities. ASU 2009-06 also eliminates certain disclosure requirements for nonpublic entities. The guidance and disclosure amendments included in ASU 2009-06 were effective for the Company in the third quarter of 2009 and had no impact on the Company’s results of operations, financial position or disclosures.

 

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3. Investment Securities

Summary information regarding investment securities classified as available for sale and held to maturity as of September 30, 2009 and December 31, 2008 follows.

 

(dollars in thousands)

   Amortized
Cost(1)
   Gross
Unrealized
Gains
   Gross Unrealized
Losses
   Fair Value
September 30, 2009              Less Than
1 Year
   Over 1
Year
    

Available for sale:

              

U.S. agency mortgage-backed

   $ 63,262    $ 1,864    $ 2    $ 1    $ 65,123

Non-U.S. agency mortgage-backed

     44,493      349      665      4,250      39,927
                                  

Total available for sale

   $ 107,755    $ 2,213    $ 667    $ 4,251    $ 105,050
                                  

Held to maturity:

              

U.S. agency mortgage-backed

   $ 4,008    $ 54    $ -      $ -      $ 4,062

Municipal bonds

     1,364      84      -        -        1,448

U.S. government agency securities

     6,000      6      3      -        6,003
                                  

Total held to maturity

   $ 11,372    $ 144    $ 3    $ -      $ 11,513
                                  

 

(1)

Net of other than temporary impairment charges.

 

(dollars in thousands)

   Amortized
Cost(1)
   Gross
Unrealized
Gains
   Gross Unrealized
Losses
   Fair Value
December 31, 2008              Less Than
1 Year
   Over 1
Year
    

Available for sale:

              

U.S. agency mortgage-backed

   $ 71,175    $ 613    $ 307    $ 1    $ 71,480

Non-U.S. agency mortgage-backed

     51,108      56      8,339      70      42,755
                                  

Total available for sale

   $ 122,283    $ 669    $ 8,646    $ 71    $ 114,235
                                  

Held to maturity:

              

U.S. agency mortgage-backed

   $ 2,545    $ 25    $ -      $ -      $ 2,570

Municipal bonds

     1,544      25      5      -        1,564
                                  

Total held to maturity

   $ 4,089    $ 50    $ 5    $ -      $ 4,134
                                  

 

(1)

Net of other than temporary impairment charges.

The amortized cost and estimated fair value by maturity of investment securities at September 30, 2009 are shown in the following table. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. The expected maturity of a security, in particular certain U.S. agency securities and obligations of states and political subdivisions, may differ from its contractual maturity because of the exercise of call options. Accordingly, actual maturities may differ from contractual maturities.

 

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(dollars in thousands)

   One Year
or Less
   One Year
to Five
Years
   Five to
Ten Years
   Over Ten
Years
   Total

Fair Value

              

Securities available for sale:

              

U.S. agency mortgage-backed

   $ -      $ 5,066    $ 1,768    $ 58,289    $ 65,123

Non-U.S. agency mortgage-backed

     -        -        3,883      36,044      39,927
                                  

Total available for sale

     -        5,066      5,651      94,333      105,050
                                  

Securities held to maturity:

              

U.S. agency mortgage-backed

     -        1,973      2,089      -        4,062

Municipal bonds

     -        640      808      -        1,448

U.S. government agency securities

     -        -        6,003      -        6,003
                                  

Total held to maturity

     -        2,613      8,900      -        11,513
                                  

Total investment securities

   $ -      $ 7,679    $ 14,551    $ 94,333    $ 116,563
                                  

 

(dollars in thousands)

   One Year
or Less
   One Year
to Five
Years
   Five to
Ten Years
   Over Ten
Years
   Total

Amortized Cost

              

Securities available for sale:

              

U.S. agency mortgage-backed

   $ -      $ 4,926    $ 1,671    $ 56,665    $ 63,262

Non-U.S. agency mortgage-backed

     -        -        3,805      40,688      44,493
                                  

Total available for sale

     -        4,926      5,476      97,353      107,755
                                  

Securities held to maturity:

              

U.S. agency mortgage-backed

     -        1,924      2,084      -        4,008

Municipal bonds

     -        605      759      -        1,364

U.S. government agency securities

     -        -        6,000      -        6,000
                                  

Total held to maturity

     -        2,529      8,843      -        11,372
                                  

Total investment securities

   $ -      $ 7,455    $ 14,319    $ 97,353    $ 119,127
                                  

Management evaluates securities for other than temporary impairment at least quarterly, and more frequently when economic and market conditions warrant such evaluations. Consideration is given to (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the Company’s intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost, which may extend to maturity and its ability and intent to hold the security for a period of time that allows for the recovery in value in the case of equity securities.

The FASB’s ASC Topic on Debt and Equity Securities was updated recently to provide additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities. Upon adoption of the new guidance on April 1, 2009, the Company recognized a cumulative effect adjustment in retained earnings from accumulated other comprehensive income to reclassify other than temporary impairments previously taken under the former authoritative accounting guidance for securities held as of April 1, 2009. In accordance with the guidance, the Company determined that of the $2,833,000 in other than temporary impairments previously recorded in earnings on investments available for sale as of April 1, 2009, $1,065,000 of these impairments are not considered other than temporary. As a result, the Company increased the amortized cost basis of these investments available for sale by $1,065,000. The cumulative effect adjustment resulted in a decrease in accumulated other comprehensive income and an increase in retained earnings totaling $703,000 (net of tax). The cumulative effect adjustment had no net effect on the Company’s shareholders’ equity or previously reported net income.

 

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

4. Earnings Per Share

Earnings per common share were computed based on the following:

 

     Three Months Ended
September 30,
   Nine Months Ended
September 30,

(in thousands, except per share data)

   2009    2008    2009    2008

Numerator:

           

Income applicable to common shares

   $ 1,497    $ 1,392    $ 4,658    $ 3,515
                           

Denominator:

           

Weighted average common shares outstanding

     8,532      N/A      8,295      N/A

Effect of dilutive securities:

           

Stock options

     32      N/A      12      N/A
                           

Weighted average common shares outstanding – assuming dilution

     8,564      N/A      8,307      N/A
                           

Earnings per common share

   $ 0.18      N/A    $ 0.57      N/A

Earnings per common share – assuming dilution

   $ 0.17      N/A    $ 0.56      N/A
                           

Options on 815,080 shares of common stock were not included in computing diluted earnings per shares for the three and nine months ended September 30, 2009 because the effect of these shares was anti-dilutive. The Company completed its initial public stock offering (“IPO”) on October 2, 2008 and began trading on the Nasdaq Global Market on October 3, 2008. Therefore, no shares were outstanding during the first nine months of 2008.

5. Fair Value Disclosures

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

 

 

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

 

 

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

 

 

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

A description of the valuation methodologies used for instruments measured at fair value follows, as well as the classification of such instruments within the valuation hierarchy.

Securities are classified within Level 1 where quoted market prices are available in an active market. Inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are unavailable, fair

 

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value is estimated using pricing models or quoted prices of securities with similar characteristics, at which point the securities would be classified within Level 2 of the hierarchy. Examples may include certain collateralized mortgage obligations. The Company’s investment portfolio does not include Level 3 securities as of September 30, 2009.

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

 

          Fair Value Measurements Using

(dollars in thousands)

   September 30,
2009
   Quoted Prices in
Active Markets
for Identical
Assets

(Level 1)
   Significant
Other
Observable
Inputs

(Level 2)
   Significant
Unobservable
Inputs

(Level 3)

Securities available for sale:

           

U.S. agency mortgage-backed

   $ 65,123    $ -      $ 65,123    $ -  

Non-U.S. agency mortgage-backed

   $ 39,927    $ -      $ 39,927    $ -  
                           

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

Certain assets and liabilities are measured at fair value on a non-recurring basis and therefore are not included in the table above. Impaired loans are level 2 assets measured using appraisals from third parties of the collateral less any prior liens. As of September 30, 2009, the fair value of impaired loans was $1,461,000.

The FASB ASC Topic on Financial Instruments 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. The Topic on Financial Instruments 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.

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

The carrying value of cash and cash equivalents, short-term investments, and cash invested at ATM locations approximate their fair value.

The fair value for investment securities is determined from quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturity.

The carrying value of FHLB stock approximates fair value based upon the redemption provisions of the FHLB.

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

 

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The carrying amount of the FHLB advances is estimated using the rates currently offered for advances of similar maturities.

The fair value of off-balance sheet financial instruments as of September 30, 2009 was immaterial.

 

     September 30, 2009    December 31, 2008

(dollars in thousands)

   Carrying
Amount
   Fair
Value
   Carrying
Amount
   Fair
Value

Financial Assets:

           

Cash and cash equivalents

   $ 37,353    $ 37,353    $ 20,150    $ 20,150

Certificates of deposit in other institutions

     3,150      3,150      1,685      1,685

Cash invested at other ATM locations

     8,803      8,803      24,244      24,244

Investment securities

     116,422      116,563      118,325      118,369

Loans and mortgage loans held for sale, net

     339,011      347,686      333,959      343,293

FHLB stock

     1,433      1,433      2,085      2,085

Financial Liabilities:

           

Deposits

   $ 376,636    $ 373,068    $ 354,145    $ 356,865

Short-term FHLB borrowings

     -        -        21,500      21,500

Long-term FHLB debt

     19,879      18,861      22,921      22,921
                           

6. Share-based Payment Arrangements

The Company’s shareholders approved the 2009 Stock Option Plan and the 2009 Recognition and Retention Plan on May 12, 2009 to provide incentives and awards for directors, officers, and employees of the Company and its subsidiary. These plans are administered by a committee appointed by the Board of Directors, which selects persons eligible to receive awards and determines the number of shares and/or options subject to each award, the terms, conditions and other provisions of the awards. In accordance with the requirements of the FASB ACS Topic on Stock Compensation, the Company has adopted a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.

Stock Option Plan

The Company issues stock options under the 2009 Stock Option Plan to directors, officers and other key employees. The option exercise price cannot be less than the fair value of the underlying common stock as of the date of the option grant and the maximum option term cannot exceed ten years. The stock options granted were issued with vesting periods of five years. The maximum number of shares issuable under the 2009 Stock Option Plan is 892,687, subject to adjustment. As of September 30, 2009, options had been granted under the 2009 Stock Option Plan for 815,080 shares.

The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing model. This model requires management to make certain assumptions, including the expected life of the option, the risk-free rate of interest, the expected volatility, and the expected dividend yield. The following assumptions were made in estimating 2009 fair values:

 

Expected dividends

   1.5

Expected volatility

   34.3

Risk-free interest rate

   2.5

Expected term (in years)

   6.5   

 

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At September 30, 2009, there was $2,599,000 of unrecognized compensation cost related to stock options which is expected to be recognized over a period of 4.6 years.

For the three and nine months ended September 30, 2009, the Company recognized $142,000 and $219,000 in compensation cost related to stock options, respectively, which is included in compensation and benefits expense in the accompanying consolidated statements of income.

The following table represents stock option activity for the nine months ended September 30, 2009 is presented below:

 

Options

   Number of
Shares
   Weighted-
Average

Exercise
Price
   Weighted-Average
Remaining

Contractual Term
(Years)
   Aggregate
Intrinsic Value
(in thousands)

Outstanding at January 1, 2009

   -      $ -      -      $ -  

Granted

   815,080      11.45         587,000
                       

Outstanding at September 30, 2009

   815,080    $ 11.45    9.6    $ 587,000
                       

Exercisable at September 30, 2009

   -      $ -      -      $ -  
                       

Recognition and Retention Plan

In May 2009, the shareholders of the Company approved the 2009 Recognition and Retention Plan (the “RRP”). A total of 357,075 shares of the Company’s outstanding common stock, or 4% of total shares outstanding, were approved for restricted stock awards under the RRP. During 2009, the Company purchased in the open market all shares required to fund the RRP at an average cost of $11.81 per share. At September 30, 2009, the cost of such shares held by the RRP totaled $4,057,000, which is included in the Company’s unallocated common stock held by the RRP on the consolidated statements of financial condition.

The Company issues restricted stock under the RRP for directors, officers and other key employees. The RRP allows for the issuance of restricted stock awards that may not be sold or otherwise transferred until certain restrictions have lapsed. The holders of the restricted stock have the right to vote the shares as awards are earned. The unearned compensation related to these awards is amortized to compensation expense over the five-year vesting period. The total share-based compensation expense for these awards is determined based on the market price of the Company’s common stock at the date of grant applied to the total number of shares granted and is amortized over the vesting period. As of September 30, 2009, unearned share-based compensation associated with these awards totaled $3,544,000.

For the three and nine months ended September 30, 2009, the Company recognized $193,000 and $299,000 in compensation cost related to restricted stock grants, respectively, which is included in compensation and benefits expense in the accompanying consolidated financial statements.

The following table represents unvested restricted stock activity for the periods indicated:

 

     Three Months Ended
September 30,
   Nine Months Ended
September 30,
     2009    2008    2009    2008

Balance, beginning of year

   -      -      -      -  

Granted

   -      -      335,600    -  
                   

Balance, end of period

   -      -      335,600    -  
                   

7. Subsequent Events

The Company evaluated the need for disclosures and/or adjustments resulting from subsequent events through November 13, 2009, the date the financial statements were available to be issued. This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments under general accounting standards.

 

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

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of Home Bancorp, Inc. and its subsidiary, Home Bank, from December 31, 2008 to September 30, 2009 and on its results of operations for the three and nine months ended September 30, 2009 and September 30, 2008. Home Bancorp, Inc. was newly organized and owned no assets during any period prior to October 2, 2008. Therefore, the financial information for any period prior to October 2, 2008 presented in this report is that of Home Bank only. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this quarterly report on Form 10-Q, particularly the 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 the words “plan”, “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions. 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, 2008.

EXECUTIVE OVERVIEW

During the third quarter of 2009, the Company earned $1.5 million, representing a $105,000, or 7.6%, increase compared to the third quarter of 2008. For the nine months ended September 30, 2009, net income was $4.7 million, an increase of $1.1 million, or 32.5%, over net income for the nine months ended September 30, 2008. Diluted earnings per share were $0.17 and $0.56 for the three and nine months ended September 30, 2009, respectively. No shares were outstanding during the first nine months of 2008. Key components of the Company’s performance in the third quarter of 2009 are summarized below.

 

   

Assets totaled $533.4 million at September 30, 2009, up $5.0 million, or 0.9%, from December 31, 2008. The increase was primarily driven by commercial loan growth.

 

   

Loans totaled $340.2 million at September 30, 2009, an increase of $4.7 million, or 1.4%, from December 31, 2008. The Company’s loan mix continues to change as commercial loan balances have grown, while 1-4 family mortgage loans have decreased. Commercial loans (including commercial real estate, construction and land, multi-family residential, and other commercial loans) increased by an aggregate of $14.1 million, or 8.8%, during the first nine months of 2009.

 

   

Customer deposits totaled $376.6 million at September 30, 2009, an increase of $22.5 million, or 6.4%, from December 31, 2008. Core deposits (i.e., demand deposit, money market and savings accounts) experienced strong growth in the first nine months of 2009, increasing $17.6 million, or 8.9%.

 

   

Interest income increased $739,000, or 10.7%, in the third quarter of 2009, compared to the third quarter of 2008. For the nine months ended September 30, 2009, interest income increased $2.8 million, or 14.0%, compared to the nine months ended September 30, 2008. The increases in the three and nine months ended September 30, 2009 were primarily due to increases in the average balances of interest-earning assets, particularly loans and investment securities, which more than offset decreases in the average yields earned on loans and other interest-earning assets.

 

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Interest expense decreased $598,000, or 27.7%, for the third quarter of 2009, compared to the third quarter of 2008. For the nine months ended September 30, 2009, interest expense decreased $2.2 million, or 30.7%, compared to the nine months ended September 30, 2008. The decreases in the three and nine months ended September 30, 2009 were primarily due to decreases in the average rate paid on interest-bearing liabilities as a result of reduced market rates of interest and changes in the composition of our interest-bearing liabilities.

 

   

The provision for loan losses totaled $287,000 for the third quarter of 2009, an increase of $195,000 compared to the third quarter of 2008. For the nine months ended September 30, 2009, the provision for loan losses increased $548,000 from the nine months ended 2008. As of September 30, 2009, the allowance for loan losses as a percentage of total loans was 0.96%, compared to 0.78% at December 31, 2008. Net charge-offs for the first nine months of 2009 were $43,000, compared to $85,000 for the same period of 2008.

 

   

Noninterest income increased $138,000, or 17.0%, in the third quarter of 2009, compared to the third quarter of 2008. For the nine months ended September 30, 2009, noninterest income increased $503,000, or 20.9%, compared to the same period in 2008. The increases were primarily the result of increased gains on the sale of mortgage loans and higher levels of bank card fees and service fees and charges on deposit accounts.

 

   

Noninterest expense for the third quarter of 2009 increased $1.3 million, or 39.2%, compared to the same quarter a year ago. In the nine-month comparison, noninterest expense increased $3.3 million, or 33.0%, from 2008 to 2009. Noninterest expense levels have increased over the past year due primarily to increased compensation and benefits expense resulting from our Baton Rouge expansion, where two full-service banking offices were opened during the second half of 2008, as well as expense related to the employee stock ownership plan (“ESOP”) and the stock option and recognition and retention plans. Additionally, noninterest expense for the nine months ended September 30, 2009 includes the FDIC’s special assessment of $200,000 that the Company accrued in the second quarter.

FINANCIAL CONDITION

Loans, Asset Quality and Allowance for Loan Losses

Loans – The loan portfolio increased $4.7 million, or 1.4%, during the first nine months of 2009. The following table shows the composition of the Company’s loan portfolio as of the dates indicated.

 

     September 30,
2009
   December 31,
2008
   Increase (Decrease)  

(dollars in thousands)

         Amount     Percent  

Real estate loans:

          

One- to four-family first mortgage

   $ 125,157    $ 138,173    $ (13,016   (9.4 )% 

Home equity loans and lines

     24,258      23,127      1,131      4.9   

Commercial real estate

     91,964      84,096      7,868      9.4   

Construction and land

     42,619      35,399      7,220      20.4   

Multi-family residential

     6,077      7,142      (1,065   (14.9
                            

Total real estate loans

     290,075      287,937      2,138      0.7   
                            

Other loans:

          

Commercial

     34,521      34,434      87      0.3   

Consumer

     15,626      13,197      2,429      18.4   
                            

Total other loans

     50,147      47,631      2,516      5.3   
                            

Total loans

   $ 340,222    $ 335,568    $ 4,654      1.4
                            

Commercial real estate loan growth during 2009 has primarily been driven by loans on owner-occupied office buildings in the Bank’s market areas. Construction and land loan growth during the year is primarily attributable to loans to builders on pre-sold single-family residential properties in the Bank’s market areas. Consumer loan growth in 2009 relates primarily to mobile home loans.

 

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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, the Company proactively monitors loans and collection and workout processes of delinquent or problem loans. When a borrower fails to make a scheduled payment, the Company attempts to cure the deficiency by making personal contact with the borrower. Initial contacts are generally made within 10 days after the date the payment is due. In most cases, deficiencies are promptly resolved. If the delinquency continues, late charges are assessed and additional efforts are made to collect the deficiency. 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 Company monthly. For loans where the collection of principal or interest payments is doubtful, the accrual of interest income ceases. It is our policy, with certain limited exceptions, to discontinue accruing interest and reverse any interest accrued on any loan which is 90 days or more past due. On occasion, this action may be taken earlier if the financial condition of the borrower raises significant concern with regard to his/her ability to service the debt in accordance with the terms of the loan agreement. Interest income is not accrued on these loans until the borrower’s financial condition and payment record demonstrate an ability to service the debt.

Real estate which is acquired as a result of foreclosure is classified as foreclosed property until sold. Foreclosed property is recorded at the lower of cost, which is the carrying value of the loan, or fair value less estimated selling costs. Costs associated with acquiring and improving a foreclosed property are usually capitalized to the extent that the carrying value does not exceed fair value less estimated selling costs. Holding costs are charged to expense. Gains and losses on the sale of real estate owned are charged to operations, as incurred.

An impaired loan generally is one for which it is probable, based on current information, that the lender will not collect all the amounts due under the contractual terms of the loan. Large groups of smaller balance, homogeneous loans are collectively evaluated for impairment. Loans collectively evaluated for impairment include smaller balance commercial real estate loans, residential real estate loans and consumer loans. These loans are evaluated as a group because they have similar characteristics and performance experience. Larger commercial real estate, multi-family residential, construction and land, and commercial business loans are individually evaluated for impairment. As of September 30, 2009 and December 31, 2008, impaired loans amounted to $1.5 million and $1.8 million, respectively. The amount of the allowance for loan losses allocated to impaired loans totaled $351,000 as of September 30, 2009 and $122,000 as of December 31, 2008.

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

A savings institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by Federal bank regulators which can order the establishment of additional general or specific loss allowances. The Federal banking agencies have adopted an interagency policy statement on the allowance for loan and lease losses. The policy statement provides guidance for financial institutions on both the responsibilities of management for the assessment and establishment of allowances and guidance for banking agency examiners to use in determining the adequacy of general valuation guidelines. Generally, the policy statement recommends that institutions have effective systems and controls to identify, monitor and address asset quality problems; that management 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. Our management believes that, based on information currently available, our allowance for loan losses is maintained at a level which covers all known and inherent losses that are both probable and reasonably estimable at

 

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each reporting date. However, actual losses are dependent upon future events and, as such, further additions to the level of allowances for loan losses may become necessary.

The Company reviews and classifies assets monthly. The Board of Directors is provided with monthly reports on our classified assets. Assets are classified in accordance with the management guidelines described above. As of September 30, 2009, the Company had $3.8 million of assets classified as substandard, compared to $1.7 million as of December 31, 2008. There were no assets classified as doubtful or loss at September 30, 2009 or December 31, 2008.

Nonperforming assets, defined as nonaccrual loans, accruing loans past due 90 days or more and foreclosed property, amounted to $2.7 million, or 0.5% of total assets, at September 30, 2009, compared to $1.5 million, or 0.3% of total assets, at December 31, 2008. The following table sets forth the composition of the Company’s nonperforming assets and troubled debt restructurings as of the dates indicated.

 

(dollars in thousands)

   September 30,
2009
    December 31,
2008
 

Nonaccrual loans:

    

Real estate loans:

    

One- to four-family first mortgage

   $ 1,685      $ 871   

Home equity loans and lines

     545        156   

Commercial real estate and multi-family

     201        362   

Construction and land

     169        -     

Other loans:

    

Commercial

     6        9   

Consumer

     110        29   
                

Total nonaccrual loans

     2,716        1,427   

Accruing loans 90 days or more past due

     -          -     
                

Total nonperforming loans

     2,716        1,427   

Foreclosed property

     -          37   
                

Total nonperforming assets

     2,716        1,464   

Performing troubled debt restructurings

     798        449   
                

Total nonperforming assets and troubled debt restructurings

   $ 3,514      $ 1,913   
                

Nonperforming loans to total loans

     0.80     0.43

Nonperforming loans to total assets

     0.51     0.27

Nonperforming assets to total assets

     0.51     0.28
                

Net charge-offs for the third quarter of 2009 were $37,000, compared to $80,000 for the same quarter last year. Net charge-offs for the nine months ended September 30, 2009 were $43,000, compared to $85,000 for the same nine-month period last year.

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

 

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

The following table presents the activity in the allowance for loan losses during the first nine months of 2009.

 

(dollars in thousands)

   Amount  

Balance, December 31, 2008

   $ 2,606   

Provision charged to operations

     709   

Loans charged off

     (58

Recoveries on charged off loans

     15   
        

Balance, September 30, 2009

   $ 3,272   
        

The allowance for loan losses amounted to 0.96% of total loans and 120.5% of total nonperforming loans at September 30, 2009, compared to 0.78% and 182.6%, respectively, at December 31, 2008. The Company increased its ratio of allowance for loan losses to total loans due to, among other factors, consideration of the rising unemployment rate in the Company’s markets and general economic conditions.

Investment Securities

The investment securities portfolio decreased by an aggregate of $1.9 million, or 1.6%, during the first nine months of 2009, as principal payments and calls of securities available for sale more than offset purchases. Securities available for sale made up the vast majority of the investment securities portfolio at September 30, 2009.

The following table summarizes activity in the Company’s investment securities portfolio during the first nine months of 2009.

 

(dollars in thousands)

   Available for Sale     Held to Maturity  

Balance, December 31, 2008

   $ 114,235      $ 4,089   

Purchases

     11,432        8,150   

Principal payments and calls

     (27,596     (863

(Amortization) of premiums and accretion of discounts

     571        (4

Increase in market value

     5,343        -     

Cumulative effect adjustment

     1,065        -     
                

Balance, September 30, 2009

   $ 105,050      $ 11,372   
                

At September 30, 2009, the Company had an unrealized loss position on its available for sale investment securities portfolio of $2.6 million, compared to an unrealized loss of $8.0 million at December 31, 2008. The unrealized loss position in the market value of the investment securities portfolio relates primarily to our non-agency mortgage-backed securities holdings. The non-agency mortgage-backed securities portfolio totaled $44.5 million, or 8.3% of total assets, at September 30, 2009. The unrealized loss position of these securities reflects, among other factors, the impact that an illiquid market and distressed sales have had on the market value of non-agency mortgage-backed securities.

In the second quarter of 2009, the Company adopted the new guidance issued on FASB’s ASC Topic on Debt and Equity Securities, which was updated to provide additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities. As a result of its adoption, the Company recovered the market illiquidity portion of an investment security deemed impaired in the fourth quarter of 2008. The amortized cost of the security increased $1.1 million and the tax adjusted amount was applied to beginning retained earnings as a cumulative effect adjustment of $703,000.

 

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

The following table summarizes the Company’s non-agency mortgage-backed securities portfolio as of September 30, 2009 (dollars in thousands).

 

Collateral

  

Tranche

  

S&P Rating

   # of
Securities
   Amortized
Cost
   Unrealized
Gain (Loss)
 

Prime

   Super senior    AAA    5    $ 10,667    $ 194   

Prime

   Super senior    Below investment grade    2      2,639      (635

Prime

   Senior    AAA (1)    9      20,199      (1,685

Prime

   Senior    Below investment grade    1      3,322      (775

Prime

   Senior support    Below investment grade    4      3,920      (669

Alt-A

   Senior    AAA    1      983      30   

Alt-A

   Senior    Below investment grade (2)    1      1,958      (929

Alt-A

   Senior support    Below investment grade    1      805      (97
                          

Total non-agency mortgage-backed securities

   24    $ 44,493    $ (4,566
                          

 

(1)

Includes one security with an amortized cost of $2.1 million and an unrealized loss of $63,000 not rated by S&P. This security is rated “Aaa” by Moody’s.

(2)

This security was not rated by S&P. It was rated “Caa2” by Moody’s.

The Company holds no Federal National Mortgage Association (“Fannie Mae”) or Federal Home Loan Mortgage Corporation (“Freddie Mac”) preferred stock, equity securities, corporate bonds, trust preferred securities, hedge fund investments, or collateralized debt obligations.

Cash Invested at Other ATM Locations

Home Bank has historically maintained contracts with various counterparties to provide cash for ATMs throughout the United States. The Bank has elected not to renew these contracts; hence, the balance of cash invested at other ATM locations has significantly decreased during 2009.

Cash invested at other ATM locations totaled $8.8 million at September 30, 2009, a decrease of $15.4 million from December 31, 2008. The Bank expects to receive the balance of cash invested at other ATM locations from its one remaining counterparty during the fourth quarter of 2009.

Funding Sources

Deposits – At September 30, 2009, deposits increased $22.5 million, or 6.4%, compared to December 31, 2008. The following table sets forth the composition of the Company’s deposits at the dates indicated.

 

     September 30,    December 31,    Increase (Decrease)  

(dollars in thousands)

   2009    2008    Amount     Percent  

Demand deposit

   $ 66,305    $ 67,047    $ (742   (1.1 )% 

Savings

     21,782      19,741      2,041      10.3   

Money market

     86,411      68,850      17,561      25.5   

NOW

     40,921      42,200      (1,279   (3.0

Certificates of deposit

     161,217      156,307      4,910      3.1   
                            

Total deposits

   $ 376,636    $ 354,145    $ 22,491      6.4
                            

 

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The increase in deposits relates to several factors, including the Company’s emphasis on growing core deposits and expansion into a new market as well as changes in consumer behavior relating to the national recession.

Federal Home Loan Bank Advances – At September 30, 2009, the Company had no short-term FHLB borrowings, compared to $21.5 million at December 31, 2008. The interest paid on these borrowings decreased from the three and nine months ended September 30, 2008 to the three and nine months ended September 30, 2009 as the result of lower average balances in addition to reduced average rates paid for these borrowings. Short-term FHLB borrowings were paid down early in the third quarter of 2009 and no new borrowings were originated. Therefore, the interest paid on short-term borrowings in the third quarter of 2009 was negligible. The average rate paid on short-term FHLB borrowings for the nine months ended September 30, 2009 was 1.01%.

Long-term FHLB debt decreased $3.0 million, or 13.3%, totaling $19.9 million at September 30, 2009 compared to December 31, 2008. The interest paid on these borrowings increased from the three and nine months ended September 30, 2008 to the three and nine months ended September 30, 2009. The increases were primarily the result of increased average balances of long-term FHLB debt in three- and nine-month comparisons. The average rate paid on long-term FHLB debt was 3.59% and 3.61%, for the three and nine months ended September 30, 2009, respectively.

Shareholders’ Equity – Shareholders’ equity provides a source of permanent funding that allows for future growth and provides the Company with a cushion to withstand unforeseen adverse developments. Shareholders’ equity increased $5.6 million, or 4.4%, from $127.0 million at December 31, 2008 to $132.6 million at September 30, 2009.

At September 30, 2009, the Bank had regulatory capital that was well in excess of regulatory requirements. The following table details the Bank’s actual levels and current regulatory capital requirements as of September 30, 2009.

 

     Actual     Required for Capital
Adequacy Purposes
    To Be Well Capitalized
Under Prompt
Corrective Action
Provisions
 

(dollars in thousands)

   Amount    Ratio     Amount    Ratio     Amount    Ratio  

Tier 1 (core) capital

   $ 101,357    29.49   $ 13,108    4.00   $ 19,662    6.00

Total risk-based capital

     99,553    30.38        26,216    8.00        32,770    10.00   

Tier 1 leverage capital

     101,357    19.86        20,415    4.00        25,518    5.00   

Tangible capital

     101,357    19.86        7,656    1.50        N/A    N/A   
                                       

LIQUIDITY AND ASSET/LIABILITY MANAGEMENT

Liquidity Management

Liquidity management encompasses our ability to ensure that funds are available to meet the cash flow requirements of depositors and borrowers, while also ensuring adequate cash flow exists to meet the Company’s needs, including operating, strategic and capital. The Company develops its liquidity management strategies as part of its overall asset/liability management process. Our primary sources of funds are from deposits, amortization of loans, loan prepayments and the maturity of loans, investment securities and other investments, and other funds provided from operations. While scheduled payments from the amortization of loans and investment securities and maturing investment securities are relatively predictable sources of funds, deposit flows and loan prepayments can be greatly influenced by general interest rates, economic conditions and competition. The Company also maintains excess funds in short-term, interest-bearing assets that provide additional liquidity. At September 30, 2009, cash and cash equivalents totaled $37.4 million. At such date, available for sale investment securities totaled $105.1 million.

The Company uses its liquidity to fund existing and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to invest in other interest-earning assets, and to meet operating expenses. At September 30, 2009, certificates of deposit maturing within the next 12 months totaled $108.9 million. Based upon historical experience, the Company anticipates that a significant portion of the maturing certificates of deposit will be redeposited with us. For the three months ended September 30, 2009,

 

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the average balance of our outstanding long-term FHLB debt was $20.7 million. At September 30, 2009, the Company had $19.9 million in outstanding FHLB advances and had $210.2 million in additional FHLB advances available.

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

Asset/Liability Management

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

Our interest rate sensitivity also is monitored by management through the use of models which generate estimates of the change in its net interest income over a range of interest rate scenarios. Based on the Company’s interest rate risk model, the table below sets forth the results of immediate and sustained changes in interest rate as of September 30, 2009.

 

Shift in Interest Rates
(in bps)
   % Change in Projected
Net Interest Income
 
+200    5.6
+100    3.0   
-100    (0.9
        

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

Off-Balance Sheet Activities

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

The following table summarizes our outstanding commitments to originate loans, to fund additional amounts of cash at other ATM locations pursuant to existing agreements and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans at September 30, 2009 and December 31, 2008.

 

     Contract Amount

(dollars in thousands)

   September 30,
2009
   December 31,
2008

Letters of credit

   $ 980    $ 1,034

Lines of credit

     25,368      24,493

Cash invested in other ATM locations

     -        6,761

Undisbursed portion of loans in process

     19,417      18,851

Commitments to originate loans

     27,028      34,520
             

 

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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

The Company reported net income for the third quarter of 2009 of $1.5 million, an increase of $105,000, or 7.6%, compared to the third quarter of 2008. For the nine months ended September 30, 2009, the Company reported net income of $4.7 million, an increase of $1.1 million, or 32.5%, from the same period in 2008. Diluted earnings per share were $0.17 and $0.56 for the three and nine months ended September 30, 2009, respectively. No shares were outstanding in the first nine months of 2008.

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 net interest spread was 4.21% and 3.74% for the three months ended September 30, 2009 and September 30, 2008, respectively, and 4.14% and 3.54% for the nine months ended September 30, 2009 and September 30, 2008, respectively. The Company’s net interest margin, which is net interest income as a percentage of average interest-earning assets, was 4.83% and 4.31% for the three months ended September 30, 2009 and 2008, respectively, and 4.83% and 4.17% for the nine months ended September 30, 2009 and September 30, 2008, respectively. The net interest spread and margin ratios increased for the three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008, primarily due to the fall in short-term interest rates during the year and the associated repricing of the Company’s assets and liabilities as well as changes in the mix of the Company’s assets and liabilities.

Net interest income totaled $6.1 million for the three months ended September 30, 2009, an increase of $1.3 million, or 28.2%, compared to $4.7 million for the three months ended September 30, 2008. For the nine months ended September 30, 2009, net interest income totaled $18.0 million, an increase of $5.0 million, or 37.9%, compared to $13.1 million for the nine months ended September 30, 2008.

Interest income increased $739,000, or 10.7%, in the third quarter of 2009 compared to the third quarter of 2008. For the nine months ended September 30, 2009, interest income increased $2.8 million, or 14.0%, compared to the nine months ended September 30, 2008. The increases in three and nine months ended September 30, 2009 were primarily due to increases in the average balances of interest-earnings assets, particularly loans and investment securities, which more than offset decreases in the average yields earned on loans and other interest-earning assets.

Interest expense decreased $598,000, or 27.7%, for the third quarter of 2009 compared to the third quarter of 2008. For the nine months ended September 30, 2009, interest expense decreased $2.2 million, or 30.7%, compared to the nine months ended September 30, 2008. The decreases in three and nine months ended September 30, 2009 were primarily due to decreases in the average rate paid on interest-bearing liabilities as the result of reduced market rates and mix change. In addition to the decrease in the average rate paid, a reduction in the average balance of interest-bearing liabilities also contributed to the decrease in interest expense for the third quarter 2009 compared to the third quarter 2008.

 

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

 

     Three Months Ended September 30,  

(dollars in thousands)

   2009     2008  
     Average
Balance
   Interest    Average
Yield/
Rate (1)
    Average
Balance
   Interest    Average
Yield/
Rate(1)
 

Interest-earning assets:

                

Loans receivable(1)

   $ 343,618    $ 5,616    6.50   $ 319,242    $ 5,456    6.81

Investment securities

     118,990      1,722    5.79        76,861      1,054    5.49   

Other interest-earning assets

     36,861      298    3.21        41,459      387    3.71   
                                        

Total earning assets

     499,469      7,636    6.09        437,562      6,897    6.29   

Noninterest-earning assets

     29,993           27,314      
                        

Total assets

   $ 529,462         $ 464,876      
                        

Interest-bearing liabilities:

                

Deposits:

                

Savings, checking and money market

   $ 146,643    $ 273    0.74   $ 128,668    $ 398    1.23

Certificates of deposit

     161,017      1,099    2.71        167,817      1,478    3.50   
                                        

Total interest-bearing deposits

     307,660      1,372    1.77        296,485      1,876    2.52   

Short-term FHLB borrowings

     65      -      -          27,089      159    2.35   

Long-term FHLB debt

     20,744      186    3.59        11,913      121    4.06   
                                        

Total interest-bearing liabilities

     328,469      1,558    1.88        335,487      2,156    2.55   

Noninterest-bearing liabilities

     69,350           78,121      
                        

Total liabilities

     397,819           413,608      

Shareholders’ equity

     131,643           51,268      
                        

Total liabilities and shareholders’ equity

   $ 529,462         $ 464,876      
                        

Net interest-earning assets

   $ 171,000         $ 102,075      

Net interest spread

      $ 6,078    4.21      $ 4,741    3.74

Net interest margin(2)

         4.83         4.31

 

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Table of Contents
     Nine Months Ended September 30,  

(dollars in thousands)

   2009     2008  
     Average
Balance
   Interest    Average
Yield/
Rate (1)
    Average
Balance
   Interest    Average
Yield/
Rate(1)
 

Interest-earning assets:

                

Loans receivable(1)

   $ 342,340    $ 16,735    6.53   $ 315,310    $ 16,256    6.88

Investment securities

     121,906      5,212    5.70        70,703      2,805    5.29   

Other interest-earning assets

     35,649      960    3.60        33,319      1,037    4.16   
                                        

Total earning assets

     499,895      22,907    6.12        419,332      20,098    6.40   

Noninterest-earning assets

     29,782           26,432      
                        

Total assets

   $ 529,677         $ 445,764      
                        

Interest-bearing liabilities:

                

Deposits:

                

Savings, checking and money market

   $ 140,827    $ 771    0.73   $ 130,148    $ 1,332    1.37

Certificates of deposit

     160,363      3,449    2.88        170,669      4,996    3.91   
                                        

Total interest-bearing deposits

     301,190      4,220    1.87        300,817      6,328    2.81   

Short-term FHLB borrowings

     4,997      38    1.01        14,815      305    2.74   

Long-term FHLB debt

     22,227      601    3.61        12,409      378    4.06   
                                        

Total interest-bearing liabilities

     328,414      4,859    1.98        328,041      7,011    2.86   

Noninterest-bearing liabilities

     71,034           66,605      
                        

Total liabilities

     399,448           394,646      

Shareholders’ equity

     130,229           51,118      
                        

Total liabilities and shareholders’ equity

   $ 529,677         $ 445,764      
                        

Net interest-earning assets

   $ 171,481         $ 91,291      

Net interest spread

      $ 18,048    4.14      $ 13,087    3.54

Net interest margin(2)

         4.83         4.17

 

(1)

Includes nonaccrual loans during the respective periods. Calculated net of deferred fees and discounts and loans in process.

(2)

Equals net interest income divided by average interest-earning assets.

Interest income includes interest income earned on earning assets as well as applicable loan fees earned. Interest income that would have been earned on nonaccrual loans had they been on accrual status is not included in the data reported above.

Provision for Loan Losses – For the quarter ended September 30, 2009, the Company recorded a provision for loan losses of $287,000, compared to a provision of $93,000 for the same period in 2008. For the nine months ended September 30, 2009, the Company recorded a provision of $709,000, compared to a provision of $161,000 for the same period in 2008. The increases in the amount of provision for loan losses during the three and nine months ended September 30, 2009 is the result of a change in the loan mix with increasing levels of commercial loans, which generally are considered to have a higher degree of risk than single-family residential mortgage loans, as well as the Company’s consideration of, among other factors, rising unemployment rates in its markets and general economic conditions.

Noninterest Income – The Company’s noninterest income was $949,000 for the three months ended September 30, 2009, $137,000, or 17.0%, higher than the $812,000 in noninterest income earned for the same period in 2008. The primary reasons for the increase in the 2009 period to the 2008 period were increases in gains on sale of mortgage loans of $64,000, service fees and charges of $43,000, and bank card fees of $36,000.

Noninterest income increased $503,000, or 20.9%, for the nine months ended September 30, 2009 to $2.9 million from $2.4 million for same period of 2008. The primary reasons for the increase in the 2009 period compared to the 2008 period were increases in gains on sale of mortgage loans of $228,000, bank card fees of $138,000, and service fees and charges on deposit accounts of $115,000.

 

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Noninterest Expense – The Company’s noninterest expense was $4.7 million for the three months ended September 30, 2009, an increase of $1.3 million, or 39.2%, from the $3.4 million incurred for the same period in 2008. For the nine months ended September 30, 2009, noninterest expense was $13.3 million, an increase of $3.3 million, or 33.0%, from the $10.0 million incurred during the nine months ended September 30, 2008. The primary reason for the increase in noninterest expense relates to increases of $642,000 and $1.3 million in compensation and benefits expense in the three- and nine-month comparison, respectively. Compensation and benefits expense has increased primarily due to three factors: 1) the Bank’s expansion into Baton Rouge, where two full-service banking offices were opened during the second half of 2008; 2) the employee stock ownership plan (“ESOP”), which commenced during the fourth quarter of 2008; and 3) award grants under the stock option and recognition and retention plans approved by the Company’s shareholders in May 2009. Award grants were issued in May 2009 under the stock option and recognition and retention plans. Regulatory fees increased primarily due to a $200,000 (pre-tax) special FDIC assessment required for all FDIC-insured depository institutions, which was accrued in the second quarter of 2009. In addition, the FDIC has also increased the base insurance premium assessment on deposits. Other increases in noninterest expense were the result of higher professional and other fees due to the increased cost of operating as a public company and the Louisiana bank shares tax.

Income Taxes – For the quarters ended September 30, 2009 and September 30, 2008, the Company incurred income tax expense of $574,000 and $716,000, respectively. The Company’s effective tax rate amounted to 27.7% and 33.9% during the third quarters of 2009 and 2008, respectively. For the nine months ended September 30, 2009 and September 30, 2008, income tax expense was $2.3 million and $1.8 million, respectively. The effective tax rates for the nine months ended September 30, 2009 and September 30, 2008 were 32.8% and 34.0%, respectively. The difference between the effective tax rate and the statutory tax rate primarily relates to variances in items that are non-taxable or non-deductible.

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, 2008, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset/ Liability Management and Market Risk”. Additional information at September 30, 2009 is included herein under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Asset/Liability Management”.

Item 4. Controls and Procedures.

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

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the third quarter of 2009 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.

 

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Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for December 31, 2008 filed with the Securities and Exchange Committee.

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

The Company’s purchases of its common stock made during the quarter consisted solely of purchases to fund the 2009 Recognition and Retention Plan and Trust, which is an affiliate of the Company, and are set forth in the following table.

 

Period

   Total
Number of
Shares

Purchased
   Average Price
Paid per Share
   Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
   Maximum Number of
Shares that May Yet
be Purchased Under
the Plan or
Programs(1)

July 1 - July 31, 2009

   -      $ -      263,700    93,375

August 1 - August 31, 2009

   27,500      12.48    291,200    65,875

September 1 - September 30, 2009

   52,900      12.36    344,100    12,975
                     

Total

   80,400    $ 12.40    344,100    12,975
                     

 

(1)

On May 12, 2009, shareholders of the Company approved the 2009 Recognition and Retention Plan and Trust Agreement (“2009 RRP”) authorizing the purchase of up to 357,075 shares of the Company’s common stock. Purchases to fund the 2009 RRP were completed in October 2009 when the 2009 RRP was fully funded.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits and Financial Statement Schedules.

 

No.

  

Description

31.1    Rule 13(a)-14(a) Certification of the Chief Executive Officer
31.2    Rule 13(a)-14(a) Certification of the Chief Financial Officer
32.0    Section 1350 Certification

 

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SIGNATURES

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

 

    HOME BANCORP, INC.
November 13, 2009     By:  

<s>John W. Bordelon

      John W. Bordelon
      President and Chief Executive Officer
November 13, 2009     By:  

<s>Joseph B. Zanco

      Joseph B. Zanco
      Executive Vice President and Chief Financial Officer
November 13, 2009     By:  

<s>Mary H. Hopkins

      Mary H. Hopkins
      Home Bank First Vice President and Controller

 

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