HBCP 10-Q Quarter ended Sept. 30, 2018

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2018

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  ☒    NO  ☐

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

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

Large accelerated filer		☐		Accelerated filer		☒
Non-accelerated filer		☐		Smaller reporting company		☐
				Emerging growth company		☐

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

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

At October 31, 2018, the registrant had 9,480,140 shares of common stock, $0.01 par value, outstanding.

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 Comprehensive Income			3
		Consolidated Statements of Changes in Shareholders’ Equity			4
		Consolidated Statements of Cash Flows			5
		Notes to Unaudited Consolidated Financial Statements			6
Item 2.		Managements’ Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			40
Item 4.		Controls and Procedures			40
PART II
Item 1.		Legal Proceedings			40
Item 1A.		Risk Factors			41
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			41
Item 3.		Defaults Upon Senior Securities			41
Item 4.		Mine Safety Disclosures			41
Item 5.		Other Information			41
Item 6.		Exhibits			41
SIGNATURES					42

i

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

		(Unaudited)				(Audited)
		September 30,				December 31,
(Dollars in thousands, except share data)		2018				2017
Assets
Cash and cash equivalents		$	61,724			$	150,418
Interest-bearing deposits in banks			1,184				2,421
Investment securities available for sale, at fair value			258,948				234,993
Investment securities held to maturity (fair values of $10,868 and $13,055, respectively)			10,942				13,034
Mortgage loans held for sale			3,470				5,873
Loans, net of unearned income			1,633,019				1,657,795
Allowance for loan losses			(15,743	)			(14,807	)
Total loans, net of unearned income and allowance for loan losses			1,617,276				1,642,988
Office properties and equipment, net			45,758				45,605
Cash surrender value of bank-owned life insurance			29,394				28,904
Goodwill and core deposit intangibles			66,493				68,033
Accrued interest receivable and other assets			45,341				35,852
Total Assets		$	2,140,530			$	2,228,121
Liabilities
Deposits:
Noninterest-bearing		$	447,422			$	461,999
Interest-bearing			1,323,890				1,404,228
Total deposits			1,771,312				1,866,227
Short-term Federal Home Loan Bank advances			41				3,642
Long-term Federal Home Loan Bank advances			59,536				68,183
Accrued interest payable and other liabilities			13,953				12,198
Total Liabilities			1,844,842				1,950,250
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; 9,479,611 and 9,395,488 shares issued and outstanding, respectively			95				94
Additional paid-in capital			167,942				165,341
Unallocated common stock held by:
Employee Stock Ownership Plan (ESOP)			(3,571	)			(3,838	)
Recognition and Retention Plan (RRP)			(77	)			(84	)
Retained earnings			135,848				117,313
Accumulated other comprehensive loss			(4,549	)			(955	)
Total Shareholders’ Equity			295,688				277,871
Total Liabilities and Shareholders’ Equity		$	2,140,530			$	2,228,121

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

1

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
(Dollars in thousands, except per share data)		2018				2017				2018				2017
Interest Income
Loans, including fees		$	24,118			$	16,336			$	70,449			$	48,747
Investment securities:
Taxable interest			1,516				983				4,355				2,807
Tax-exempt interest			178				152				543				471
Other investments and deposits			297				194				1,063				403
Total interest income			26,109				17,665				76,410				52,428
Interest Expense
Deposits			2,312				1,396				6,141				3,538
Short-term Federal Home Loan Bank advances			6				—				39				95
Long-term Federal Home Loan Bank advances			281				313				877				972
Total interest expense			2,599				1,709				7,057				4,605
Net interest income			23,510				15,956				69,353				47,823
Provision for loan losses			786				660				2,331				1,117
Net interest income after provision for loan losses			22,724				15,296				67,022				46,706
Noninterest Income
Service fees and charges			1,638				1,056				4,812				2,983
Bank card fees			1,110				718				3,405				2,168
Gain on sale of loans, net			206				303				614				919
Income from bank-owned life insurance			166				121				490				361
(Loss) gain on sale of assets, net			(68	)			(43	)			77				(147	)
Other income			289				138				768				999
Total noninterest income			3,341				2,293				10,166				7,283
Noninterest Expense
Compensation and benefits			9,328				7,062				27,492				20,730
Occupancy			1,661				1,219				5,056				3,711
Marketing and advertising			286				287				852				802
Data processing and communication			1,804				928				5,827				3,076
Professional services			265				407				856				819
Forms, printing and supplies			180				119				811				410
Franchise and shares tax			362				193				1,091				587
Regulatory fees			455				317				1,177				952
Foreclosed assets, net			58				(70	)			247				(230	)
Other expenses			1,297				879				4,199				2,565
Total noninterest expense			15,696				11,341				47,608				33,422
Income before income tax expense			10,369				6,248				29,580				20,567
Income tax expense			2,107				2,158				6,079				6,985
Net Income		$	8,262			$	4,090			$	23,501			$	13,582
Earnings per share:
Basic		$	0.91			$	0.58			$	2.60			$	1.95
Diluted		$	0.89			$	0.56			$	2.53			$	1.88
Cash dividends declared per common share		$	0.19			$	0.14			$	0.51			$	0.41

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

2

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
(Dollars in thousands)		2018				2017				2018				2017
Net Income		$	8,262			$	4,090			$	23,501			$	13,582
Other Comprehensive (Loss) Income
Unrealized (losses) gains on investment securities			(1,279	)			(60	)			(4,289	)			103
Tax effect			269				21				901				(36	)
Other comprehensive (loss) income, net of taxes			(1,010	)			(39	)			(3,388	)			67
Comprehensive Income		$	7,252			$	4,051			$	20,113			$	13,649

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

3

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

																						Accumulated
						Additional				Unallocated				Unallocated								Other
		Common				Paid-in				Common Stock				Common Stock				Retained				Comprehensive
(Dollars in thousands, except share and per share data)		Stock				Capital				Held by ESOP				Held by RRP				Earnings				Income (Loss)				Total
Balance, December 31, 2016		$	74			$	79,426			$	(4,196	)		$	(120	)		$	104,647			$	12			$	179,843
Net income																			13,582								13,582
Other comprehensive income																							67				67
Purchase of Company’s common stock at cost, 1,233 shares			—				(12	)											(36	)							(48	)
Cash dividends declared, $0.41 per share			—																(3,028	)							(3,028	)
Common stock issued under incentive plans, net of shares surrendered in payment, including tax benefit 7,905 shares			—				20												(35	)							(15	)
Exercise of stock options			—				650																				650
RRP shares released for allocation							(6	)							14												8
ESOP shares released for allocation							915				268																1,183
Share-based compensation cost							383																				383
Balance, September 30, 2017		$	74			$	81,376			$	(3,928	)		$	(106	)		$	115,130			$	79			$	192,625
Balance, December 31, 2017		$	94			$	165,341			$	(3,838	)		$	(84	)		$	117,313			$	(955	)		$	277,871
Net income																			23,501								23,501
Other comprehensive loss																							(3,388	)			(3,388	)
Reclassification of stranded tax effects in accumulated other comprehensive income (1)																			206				(206	)			—
Purchase of Company’s common stock at cost, 8,283 s hares			—				(83	)											(297	)							(380	)
Cash dividends declared, $0.51 per share																			(4,810	)							(4,810	)
Common Stock issued under incentive plans, net of shares surrendered in payment, including tax benefit, 16,898 shares			—				139												(65	)							74
Exercise of stock options			1				897																				898
RRP shares released for allocation							(7	)							7												—
ESOP shares released for allocation							1,109				267																1,376
Share-based compensation cost							546																				546
Balance, September 30, 2018		$	95			$	167,942			$	(3,571	)		$	(77	)		$	135,848			$	(4,549	)		$	295,688

(1)	See Note 2 - Recent Accounting Pronouncements

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

4

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

		For the Nine Months Ended
		September 30,
(Dollars in thousands)		2018				2017
Cash flows from operating activities:
Net income		$	23,501			$	13,582
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses			2,331				1,117
Depreciation			1,832				1,439
Amortization and accretion of purchase accounting valuations and intangibles			6,259				3,496
Net amortization of mortgage servicing asset			113				150
Federal Home Loan Bank stock dividends			(90	)			(83	)
Net amortization of discount on investments			1,516				1,269
Gain on loans sold, net			(614	)			(919	)
Proceeds, including principal payments, from loans held for sale			73,539				94,171
Originations of loans held for sale			(70,521	)			(94,714	)
Non-cash compensation			1,922				1,566
Deferred income tax expense (benefit)			225				(315	)
(Increase) decrease in accrued interest receivable and other assets			(9,003	)			1,460
Increase in cash surrender value of bank-owned life insurance			(490	)			(361	)
Decrease (increase) in accrued interest payable and other liabilities			1,685				(63	)
Net cash provided by operating activities			32,205				21,795
Cash flows from investing activities:
Purchases of securities available for sale			(67,539	)			(48,408	)
Proceeds from maturities, prepayments and calls on securities available for sale			38,016				29,022
Proceeds from maturities, prepayments and calls on securities held to maturity			1,855				—
Decrease (increase) in loans, net			18,222				(2,516	)
Reimbursement from FDIC for covered assets			—				142
Decrease in interest-bearing deposits in banks			1,237				693
Proceeds from sale of repossessed assets			616				2,632
Purchases of office properties and equipment			(2,824	)			(1,360	)
Proceeds from sale of office properties and equipment			1,051				640
Proceeds from redemption of Federal Home Loan Bank stock			—				4,180
Net cash (used in) provided by investing activities			(9,366	)			(14,975	)
Cash flows from financing activities:
(Decrease) increase in deposits, net			(94,992	)			71,645
Borrowings on Federal Home Loan Bank advances			—				130,750
Repayments of Federal Home Loan Bank advances			(12,323	)			(184,463	)
Proceeds from exercise of stock options			898				650
Issuance of stock under incentive plans			74				(15	)
Dividends paid to shareholders			(4,810	)			(3,028	)
Purchase of Company’s common stock			(380	)			(48	)
Net cash (used in) provided by financing activities			(111,533	)			15,491
Net change in cash and cash equivalents			(88,694	)			22,311
Cash and cash equivalents at beginning of year			150,418				29,315
Cash and cash equivalents at end of year		$	61,724			$	51,626
			—				—

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

5

HOME BANCORP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Home Bancorp, Inc. (the “Company”) were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in shareholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the nine-month period ended September 30, 2018 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, 2017.

Critical Accounting Policies and Estimates

There were no material changes or developments during the reporting period with respect to methodologies the Company uses when applying critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2017.

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, comprehensive income, changes in shareholders’ equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

2. Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Conforming Amendments Related to Leases”. This ASU amends the codification regarding leases in order to increase transparency and comparability. The ASU requires companies to recognize lease assets and liabilities on the statement of condition and disclose key information about leasing arrangements. Upon implementation, a lessee will recognize a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. The ASU is effective for annual and interim periods beginning after December 15, 2018. The Company is currently assessing the amendment but does not anticipate it will have a material impact on our Consolidated Financial Statements. Based on the Company’s preliminary assessment of its current leases, the impact to the Company’s consolidated balance sheet is estimated to be less than a 1% increase in assets and liabilities.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”. The ASU requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net carrying value at the amount expected to be collected on the financial assets. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount of financial assets. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis is determined in a similar manner to other financial assets

6

measured at amortized cost basis; however, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Only subsequent changes in the allowance for credit losses are recorded as a credit loss expense for these assets. Off-balance-sheet arrangements such as commitments to extend credit, guarantees, and standby letters of credit that and are not unconditionally cancellable are also within the scope of this amendment. Credit losses relating to debt securities should be recorded through an allowance for credit losses. This ASU is effective for fiscal years beginning after December 31, 2019. An entity will apply the amendments in this update on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently assessing this accounting standard and the implementation of a new software application during 2018 to assist in determining the impact to our Consolidated Financial Statements. The adoption of this ASU could result in material changes in our accounting for credit losses. The extent of the impact upon adoption will depend on the characteristics of the Company’s loan portfolio and economic conditions on that date as well as forecasted conditions thereafter.

In January 2017, FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other, Simplifying the Test for Goodwill Impairment”. The amendment in this ASU eliminates the requirement to calculate the implied fair value of goodwill in order to measure a goodwill impairment charge. An entity will record an impairment charge based on the excess of the carrying amount over its fair value. This ASU is effective for fiscal and interim testing periods beginning after December 15, 2019. The Company is currently assessing the amendment and does not anticipate it will have a material impact on our Consolidated Financial Statements.

In April 2017, FASB issued ASU No. 2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities”. This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. The accounting for purchased callable debt securities held at a discount does not change under the new guidance. This ASU is effective for fiscal and interim periods beginning after December 15, 2018. The Company is currently assessing the amendment and does not anticipate it will have an impact on our Consolidated Financial Statements.

ASU 2018-02, “Income Statement — Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU 2018-02 was issued to address the income tax accounting treatment of the stranded tax effects within accumulated other comprehensive income as a result of tax reform. This issue came about from the enactment of the Tax Cuts and Jobs Act of 2017 on December 22, 2017 that changed the Company’s statutory income tax rate from 35% to 21%. The ASU changed current accounting whereby an entity may elect to reclassify the stranded tax effect from accumulated other comprehensive income to retained earnings. The ASU is effective for periods beginning after December 15, 2018 although early adoption is permitted. The Company adopted ASU 2018-02 in the first quarter of 2018 and reclassified its stranded tax credit of $206,000 from accumulated other comprehensive income to retained earnings.

In July 2018, the FASB issued ASU No. 2018-11, “Leases – Targeted Improvements” to provide alternative transition methods to reduce the costs and complexities of implementing the new leases standard, ASU No. 2016-02. The amendments in the update allow entities to recognize a cumulative-effect adjustment in the opening balance of retained earnings in the period of adoption of ASU No. 2016-02, which eliminates the need to re-state amounts presented for prior-periods. In addition, under certain conditions, lessors are allowed to account for lease and non-lease components as a single component. The amendments have the same effective date as ASU No. 2016-02 (periods beginning after December 15, 2018). The Company is currently assessing ASU No. 2018-11, but does not anticipate it will have a material impact on our Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” The ASU removes, modifies, and adds certain disclosure requirements for fair value measurements. For example, public entities will no longer be required to disclose the valuation processes for Level 3 fair value measurements, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019. In addition, entities may early adopt the modified or eliminated disclosure requirements and delay adoption of the additional disclosure requirements until their effective date. The Company does not believe ASU No. 2018-13 will have a material impact on our Consolidated Financial Statements, as the update only revises disclosure requirements.

7

3. Investment Securities

Summary information regarding the Company’s investment securities classified as available for sale and held to maturity as of September 30, 2018 and December 31, 2017 is as follows.

(dollars in thousands)		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses								Fair Value
										Less Than 1 Year				Over 1 Year
September 30, 2018
Available for sale:
U.S. agency mortgage-backed		$	80,917			$	447			$	1,083			$	789			$	79,492
Collateralized mortgage obligations			151,719				42				1,321				2,999				147,441
Municipal bonds			21,690				57				73				—				21,674
U.S. government agency			10,380				27				33				33				10,341
Total available for sale		$	264,706			$	573			$	2,510			$	3,821			$	258,948
Held to maturity:
Municipal bonds		$	10,942			$	6			$	40			$	40			$	10,868
Total held to maturity		$	10,942			$	6			$	40			$	40			$	10,868
(dollars in thousands)		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses								Fair Value
										Less Than 1 Year				Over 1 Year
December 31, 2017
Available for sale:
U.S. agency mortgage-backed		$	84,639			$	619			$	270			$	298			$	84,690
Collateralized mortgage obligations			115,435				46				671				1,075				113,735
Municipal bonds			25,362				177				17				1				25,521
U.S. government agency			11,026				42				21				—				11,047
Total available for sale		$	236,462			$	884			$	979			$	1,374			$	234,993
Held to maturity:
Municipal bonds		$	13,034			$	54			$	18			$	15			$	13,055
Total held to maturity		$	13,034			$	54			$	18			$	15			$	13,055

The estimated fair value and amortized cost by contractual maturity of the Company’s investment securities as of September 30, 2018 are shown in the following tables. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. The expected maturity of a security may differ from its contractual maturity because of prepayments or the exercise of call options. Accordingly, actual maturities may differ from contractual maturities.

8

(dollars in thousands)		One Year or Less				After One Year through Five Years				After Five Years through Ten Years				After Ten Years				Total
Fair Value
Securities available for sale:
U.S. agency mortgage-backed		$	1,718			$	12,321			$	37,171			$	28,282			$	79,492
Collateralized mortgage obligations			—				5,662				18,171				123,608				147,441
Municipal bonds			3,585				9,919				5,355				2,815				21,674
U.S. government agency			4,965				—				3,940				1,436				10,341
Total securities available for sale		$	10,268			$	27,902			$	64,637			$	156,141			$	258,948
Securities held to maturity:
Municipal bonds		$	—			$	5,767			$	4,055			$	1,046			$	10,868
Total securities held to maturity		$	—			$	5,767			$	4,055			$	1,046			$	10,868
(dollars in thousands)		One Year or Less				After One Year through Five Years				After Five Years through Ten Years				After Ten Years				Total
Amortized Cost
Securities available for sale:
U.S. agency mortgage-backed		$	1,720			$	12,693			$	38,212			$	28,292			$	80,917
Collateralized mortgage obligations			—				5,719				18,694				127,306				151,719
Municipal bonds			3,580				9,920				5,345				2,845				21,690
U.S. government agency			4,998				—				3,913				1,469				10,380
Total securities available for sale		$	10,298			$	28,332			$	66,164			$	159,912			$	264,706
Securities held to maturity:
Municipal bonds		$	—			$	5,777			$	4,108			$	1,057			$	10,942
Total securities held to maturity		$	—			$	5,777			$	4,108			$	1,057			$	10,942

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; and (3) the Company’s intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost, which may extend to maturity.

The Company performs a process to 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. When the Company determines that a security is deemed other-than-temporarily impaired, an impairment loss is recognized.

As of September 30, 2018, 184 of the Company’s investment securities had unrealized losses totaling 2.8% of the individual securities’ amortized cost basis and 2.3% of the Company’s total amortized cost basis of the investment securities portfolio. At such date, 59 of the 184 securities had been in a continuous loss position for over 12 months. The 59 securities had an aggregate amortized cost basis of $94.1 million and an unrealized loss of $3.8 million at September 30, 2018. Management has the intent and ability to hold these securities until maturity, or until anticipated recovery; hence, no declines in these securities were deemed other-than-temporary at September 30, 2018.

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As of September 30, 2018 and December 31, 2017, the Company had $152,374,000 and $121,984,000, respectively, of securities pledged to secure public deposits.

4. Earnings Per Share

Earnings per common share were computed based on the following:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share data)		2018				2017				2018				2017
Numerator:
Net income available to common shareholders		$	8,262			$	4,090			$	23,501			$	13,582
Denominator:
Weighted average common shares outstanding			9,098				7,007				9,053				6,972
Effect of dilutive securities:
Restricted stock			19				3				21				3
Stock options			204				271				223				266
Weighted average common shares outstanding – assuming dilution			9,321				7,281				9,297				7,241
Basic earnings per common share		$	0.91			$	0.58			$	2.60			$	1.95
Diluted earnings per common share		$	0.89			$	0.56			$	2.53			$	1.88

Options on 27,934 and 77,024 shares of common stock were not included in the computation of diluted earnings per share for the three months ended September 30, 2018 and September 30, 2017, respectively, because the effect of these shares was anti-dilutive. Options on 15,850 and 60,849 shares of common stock were not included in the computation of diluted earnings per share for the nine months ended September 30, 2018 and September 30, 2017, respectively, because the effect of these shares was anti-dilutive.

5. Credit Quality and Allowance for Loan Losses

The following briefly describes the distinction between originated and Acquired Loans and certain significant accounting policies relevant to each category.

Originated Loans

Loans originated for investment are reported at the principal balance outstanding net of unearned income. Interest on loans and accretion of unearned income are computed in a manner that approximates a level yield on recorded principal. Interest on loans is recorded as income is earned. The accrual of interest on an originated loan is discontinued when it is probable the borrower will not be able to meet payment obligations as they become due. The Company maintains an allowance for loan losses on originated loans that represents management’s estimate of probable losses incurred in this portfolio category.

Acquired Loans

Loans that were acquired as a result of business combinations are referred to as “Acquired Loans.” Acquired Loans were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The Acquired Loans were segregated between those considered to be performing (“acquired performing”) and those with evidence of credit deterioration (“acquired impaired”), and then further segregated into loan pools designed to facilitate the estimation of expected cash flows. The fair value estimate for each pool of acquired performing and acquired impaired loans was based on the estimate of expected cash flows, both principal and interest, from that pool, discounted at prevailing market interest rates.

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The difference between the fair value of an acquired performing loan pool and the contractual amounts due at the acquisition date (the “fair value discount”) is accreted into income over the estimated life of the pool. Management estimates an allowance for loan losses for acquired performing loans using a methodology similar to that used for originated loans. The allowance determined for each loan pool is compared to the remaining fair value discount for that pool. If the allowance amount calculated under the Company’s methodology is greater than the Company’s remaining discount, the additional amount called for is added to the reported allowance through a provision for loan losses. If the allowance amount calculated under the Company’s methodology is less than the Company’s recorded discount, no additional allowance or provision is recognized. Actual losses first reduce any remaining nonaccretable discount for the loan pool. Once the nonaccretable discount is fully depleted, losses are applied against the allowance established for that pool. Acquired performing loans are placed on nonaccrual status and considered and reported as nonperforming or past due using the same criteria applied to the originated portfolio.

The excess of cash flows expected to be collected from an acquired impaired loan pool over the pool’s estimated fair value at acquisition is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the pool. Each pool of acquired impaired loans is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

Management recasts the estimate of cash flows expected to be collected on each acquired impaired loan pool periodically. If the present value of expected cash flows for a pool is less than its carrying value, an impairment is recognized by an increase in the allowance for loan losses and a charge to the provision for loan losses. If the present value of expected cash flows for a pool is greater than its carrying value, any previously established allowance for loan losses is reversed and any remaining difference increases the accretable yield, which will be taken into interest income over the remaining life of the loan pool. Acquired impaired loans are generally not subject to individual evaluation for impairment and are not reported with impaired loans, even if they would otherwise qualify for such treatment .

Allowance for Loan Losses

The allowance for loan losses and recorded investment in loans as of the dates indicated are as follows.

		As of September 30, 2018
		Originated Loans
(dollars in thousands)		Collectively Evaluated for Impairment				Individually Evaluated for Impairment				Acquired Loans				Total
Allowance for loan losses:
One- to four-family first mortgage		$	1,861			$	—			$	53			$	1,914
Home equity loans and lines			692				348				52				1,092
Commercial real estate			5,144				187				237				5,568
Construction and land			2,021				—				6				2,027
Multi-family residential			540				—				60				600
Commercial and industrial			2,253				862				575				3,690
Consumer			484				—				368				852
Total allowance for loan losses		$	12,995			$	1,397			$	1,351			$	15,743
		As of September 30, 2018
		Originated Loans
(dollars in thousands)		Collectively Evaluated for Impairment				Individually Evaluated for Impairment				Acquired Loans (1)				Total
Loans:
One- to four-family first mortgage		$	221,283			$	—			$	235,514			$	456,797
Home equity loans and lines			52,734				885				32,786				86,405
Commercial real estate			417,338				5,944				206,015				629,297
Construction and land			139,869				—				34,704				174,573
Multi-family residential			43,219				—				12,934				56,153
Commercial and industrial			119,987				3,010				50,941				173,938
Consumer			37,929				—				17,927				55,856
Total loans		$	1,032,359			$	9,839			$	590,821			$	1,633,019

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		As of December 31, 2017
		Originated Loans
(dollars in thousands)		Collectively Evaluated for Impairment				Individually Evaluated for Impairment				Acquired Loans				Total
Allowance for loan losses:
One- to four-family first mortgage		$	1,574			$	—			$	89			$	1,663
Home equity loans and lines			676				348				78				1,102
Commercial real estate			4,766				—				140				4,906
Construction and land			1,742				—				7				1,749
Multi-family residential			355				—				—				355
Commercial and industrial			2,721				1,625				184				4,530
Consumer			496				—				6				502
Total allowance for loan losses		$	12,330			$	1,973			$	504			$	14,807
		As of December 31, 2017
		Originated Loans
(dollars in thousands)		Collectively Evaluated for Impairment				Individually Evaluated for Impairment				Acquired Loans (1)				Total
Loans:
One- to four-family first mortgage		$	199,199			$	—			$	278,012			$	477,211
Home equity loans and lines			53,349				925				40,171				94,445
Commercial real estate			369,740				22				241,596				611,358
Construction and land			124,963				—				52,300				177,263
Multi-family residential			30,540				—				20,438				50,978
Commercial and industrial			120,818				2,512				61,954				185,284
Consumer			39,854				—				21,402				61,256
Total loans		$	938,463			$	3,459			$	715,873			$	1,657,795

(1)	$11.0 million and $14.2 million in Acquired Loans were deemed to be acquired impaired loans and were accounted for under ASC 310-30 at September 30, 2018 and December 31, 2017, respectively.

A summary of activity in the allowance for loan losses for the nine months ended September 30, 2018 and September 30, 2017 follows.

		For the Nine Months Ended September 30, 2018
(dollars in thousands)		Beginning Balance				Charge-offs				Recoveries				Provision				Ending Balance
Originated loans:
Allowance for loan losses:
One- to four-family first mortgage		$	1,574			$	(1	)		$	—			$	288			$	1,861
Home equity loans and lines			1,024				—				3				13				1,040
Commercial real estate			4,766				—				—				565				5,331
Construction and land			1,742				—				—				279				2,021
Multi-family residential			355				—				—				185				540
Commercial and industrial			4,346				(1,503	)			153				119				3,115
Consumer			496				(60	)			13				35				484
Total allowance for loan losses		$	14,303			$	(1,564	)			169			$	1,484			$	14,392

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