HOME BANCORP, INC. - Quarter Report: 2012 March (Form 10-Q)

HOME BANCORP, INC. - Quarter Report: 2012 March (Form 10-Q)

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Form 10-Q

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: March 31, 2012

¨	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 x 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):

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

At May 4, 2012, the registrant had 7,756,039 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		21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		31

Item 4.	Controls and Procedures		32

PART II

Item 1.	Legal Proceedings		32

Item 1A.	Risk Factors		32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		32

Item 3.	Defaults Upon Senior Securities		32

Item 4.	Mine Safety Disclosure		32

Item 5.	Other Information		32

Item 6.	Exhibits		33

SIGNATURES			34

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


	(Unaudited) March 31, 2012			(Audited) December 31, 2011
Assets
Cash and cash equivalents	$	33,800,736		$	31,272,508
Interest-bearing deposits in banks		4,754,000			5,583,000
Investment securities available for sale, at fair value		161,000,461			155,259,978
Investment securities held to maturity (fair values of $3,167,538 and $3,574,684, respectively)		3,064,866			3,461,717
Mortgage loans held for sale		1,794,119			1,672,597
Loans covered by loss sharing agreements		56,111,387			61,070,360
Noncovered loans, net of unearned income		622,539,181			605,301,127

Total loans, net of unearned income		678,650,568			666,371,487
Allowance for loan losses		(5,813,095	)		(5,104,363	)

Total loans, net of unearned income and allowance for loan losses		672,837,473			661,267,124

Office properties and equipment, net		30,724,675			31,763,692
Cash surrender value of bank-owned life insurance		16,902,453			16,771,174
FDIC loss sharing receivable		24,399,699			24,222,190
Accrued interest receivable and other assets		30,275,634			32,515,158

Total Assets	$	979,554,116		$	963,789,138


Liabilities
Deposits:
Noninterest-bearing	$	135,599,674		$	127,827,509
Interest-bearing		600,557,556			602,906,246

Total deposits		736,157,230			730,733,755
Short-term Federal Home Loan Bank (FHLB) advances		61,041,726			52,634,218
Long-term Federal Home Loan Bank (FHLB) advances		39,806,304			40,988,736
Accrued interest payable and other liabilities		4,827,764			5,147,595

Total Liabilities		841,833,024			829,504,304


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; 8,940,275 and 8,933,435 shares issued; 7,762,204 and 7,759,954 shares outstanding, respectively		89,404			89,335
Additional paid-in capital		90,230,748			89,741,406
Treasury stock at cost -1,178,071 and 1,173,481 shares, respectively		(15,965,319	)		(15,892,315	)
Unallocated common stock held by:					—
Employee Stock Ownership Plan (ESOP)		(5,891,720	)		(5,980,990	)
Recognition and Retention Plan (RRP)		(2,639,799	)		(2,644,523	)
Retained earnings		69,305,807			67,245,350
Accumulated other comprehensive income		2,591,971			1,726,571

Total Shareholders’ Equity		137,721,092			134,284,834

Total Liabilities and Shareholders’ Equity	$	979,554,116		$	963,789,138

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


	For the Three Months Ended
	March 31,
	2012		2011
Interest Income
Loans, including fees	$	10,371,357	$	7,160,653
Investment securities		859,482		960,821
Other investments and deposits		34,398		36,721

Total interest income		11,265,237		8,158,195


Interest Expense
Deposits		1,131,848		1,177,048
Short-term FHLB advances		15,842		912
Long-term FHLB advances		164,994		99,728

Total interest expense		1,312,684		1,277,688

Net interest income		9,952,553		6,880,507
Provision for loan losses		711,900		102,276

Net interest income after provision for loan losses		9,240,653		6,778,231


Noninterest Income
Service fees and charges		569,941		474,824
Bank card fees		468,284		398,094
Gain on sale of loans, net		326,171		104,393
Income from bank-owned life insurance		131,279		145,419
Gain/(loss) on sale of securities, net		168		(166,082	)
Discount accretion of FDIC loss sharing receivable		177,510		238,669
Other income		26,562		26,583

Total noninterest income		1,699,915		1,221,900


Noninterest Expense
Compensation and benefits		4,695,709		3,998,408
Occupancy		694,941		565,261
Marketing and advertising		151,474		161,050
Data processing and communication		672,341		541,507
Professional services		232,253		419,732
Forms, printing and supplies		126,266		113,980
Franchise and shares tax		175,651		180,500
Regulatory fees		198,158		229,739
Foreclosed assets, net		267,998		48,134
Other expenses		594,031		448,811

Total noninterest expense		7,808,822		6,707,122

Income before income tax expense		3,131,746		1,293,009
Income tax expense		1,071,289		498,325

Net Income	$	2,060,457	$	794,684


Earnings per share:
Basic	$	0.30	$	0.11
Diluted	$	0.29	$	0.11

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


	For the Three Months Ended
	March 31,
	2012			2011

Net Income	$	2,060,457		$	794,684


Other Comprehensive Income
Unrealized gains on investment securities (net of taxes, $465,985 and $203,198, respectively)	$	865,509		$	284,830

Reclassification adjustment for losses (gains) included in net income, (net of taxes, $59 and $56,468, respectively)		(109	)		109,614

Other comprehensive income, net of taxes	$	865,400		$	394,444


Comprehensive Income	$	2,925,857		$	1,189,128

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)


	Common Stock		Additional Paid-in Capital			Treasury Stock			Unallocated Common Stock Held by ESOP			Unallocated Common Stock Held by RRP			Retained Earnings		Accumulated Other Comprehensive Income			Total

Balance, December 31, 2010⁽¹⁾	$	89,270	$	88,818,862		$	(10,425,725	)	$	(6,338,070	)	$	(3,432,486	)	$	62,125,568	$	692,523		$	131,529,942
Comprehensive income:
Net income																794,684					794,684
Change in unrealized gain on securities available for sale, net of taxes																		284,830			284,830
Reclassification adjustment for realized losses on securities sold, net of taxes																		109,614			109,614
Treasury stock acquired at cost, 43,843 shares							(602,850	)													(602,850	)
RRP shares released for allocation				(4,434	)								4,724								290
ESOP shares released for allocation				36,077						89,270											125,347
Share-based compensation cost				332,642																	332,642

Balance, March 31, 2011	$	89,270	$	89,183,147		$	(11,028,575	)	$	(6,248,800	)	$	(3,427,762	)	$	62,920,252	$	1,086,967		$	132,574,499


Balance, December 31, 2011⁽¹⁾	$	89,335	$	89,741,406		$	(15,892,315	)	$	(5,980,990	)	$	(2,644,523	)	$	67,245,350	$	1,726,571		$	134,284,834
Comprehensive income:
Net income																2,060,457					2,060,457
Change in unrealized gain on securities available for sale, net of taxes																		865,509			865,509
Reclassification adjustment for realized gains on securities sold, net of taxes																		(109	)		(109	)
Treasury stock acquired at cost, 4,590 shares							(73,004	)													(73,004	)
Exercise of stock options		69		78,250																	78,319
RRP shares released for allocation				(4,198	)								4,724								526
ESOP shares released for allocation				55,131						89,270											144,401
Share-based compensation cost				360,159																	360,159

Balance, March 31, 2012	$	89,404	$	90,230,748		$	(15,965,319	)	$	(5,891,720	)	$	(2,639,799	)	$	69,305,807	$	2,591,971		$	137,721,092

⁽¹⁾	Balances as of December 31, 2010 and December 31, 2011 are audited.

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

HOME BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	For the Three Months Ended
	March 31,
	2012			2011
Cash flows from operating activities, net of effects of acquisition:
Net income	$	2,060,457		$	794,684
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		711,900			102,276
Depreciation		365,689			307,415
Amortization of purchase accounting valuations and intangibles		3,284,055			(1,193,170	)
Net amortization of mortgage servicing asset		39,195			7,365
Federal Home Loan Bank stock dividends		(5,000	)		(1,200	)
Net amortization of discount on investments		(314,619	)		(204,622	)
Loss (gain) on sale of investment securities, net		(168	)		166,082
Gain on loans sold, net		(326,171	)		(104,393	)
Proceeds, including principal payments, from loans held for sale		10,001,360			9,827,555
Originations of loans held for sale		(9,655,739	)		(6,615,532	)
Non-cash compensation		504,560			457,989
Deferred income tax provision (benefit)		755,430			(1,087,115	)
Decrease in interest receivable and other assets		(281,497	)		737,159
Increase in cash surrender value of bank-owned life insurance		(131,279	)		(145,419	)
(Decrease) increase in accrued interest payable and other liabilities		(332,088	)		609,049

Net cash provided by operating activities		6,676,085			3,658,123


Cash flows from investing activities, net of effects of acquisition:
Purchases of securities available for sale		(13,615,599	)		(32,601,078	)
Purchases of securities held to maturity		—			(3,000,000	)
Proceeds from maturities, prepayments and calls on securities available for sale		8,003,212			7,810,943
Proceeds from maturities, prepayments and calls on securities held to maturity		396,660			10,455,897
Proceeds from sales on securities available for sale		1,558,514			3,455,913
Net increase in loans		(16,085,287	)		(1,903,653	)
Reimbursement from FDIC for covered assets		—			1,221,179
(Increase) decrease in certificates of deposit in other institutions		829,000			(990,000	)
Proceeds from sale of repossessed assets		1,363,701			324,001
Purchases of office properties and equipment		(288,222	)		(152,309	)
Proceeds from sale of properties and equipment		1,048,771			—
Purchases of Federal Home Loan Bank stock		—			(478,100	)

Net cash used in investing activities		(16,789,250	)		(15,857,207	)


Cash flows from financing activities, net of effects of acquisition:
Increase (decrease) in deposits		5,254,478			(9,701,781	)
Increase (decrease) in Federal Home Loan Bank advances		7,381,600			8,000,000
Purchase of treasury stock		(73,004	)		(602,850	)
Proceeds from exercise of stock options		78,319			—

Net cash provided by (used in) financing activities		12,641,393			(2,304,631	)


Net change in cash and cash equivalents		2,528,228			(14,503,715	)
Cash and cash equivalents at beginning of year		31,272,508			36,970,638

Cash and cash equivalents at end of period	$	33,800,736		$	22,466,923

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

HOME BANCORP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited 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 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 three-month period ended March 31, 2012 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, 2011.

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 May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement. ASU 2011-04 amends the fair value measurement and disclosure requirements in order to gain consistency between the generally accepted accounting principles in the United States and the International Financial Reporting Standards. The guidance, which became effective on January 1, 2012, did not have a material impact on the Company’s results of operations, financial position or disclosures.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income. ASU 2011-05 requires entities to present the total of comprehensive income, the components of net income and the components of other comprehensive income in a single continuous statement of comprehensive income or in two separate consecutive statements. The revised financial statement presentation for comprehensive income became effective on January 1, 2012 and has been incorporated into this quarterly report on Form 10-Q.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles—Goodwill and Other. ASU 2011-08 amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The adoption of ASU 2011-08 became effective on January 1, 2012. The adoption of the guidance did not have a material impact on the Company’s results of operations, financial position or disclosures.

3. Acquisition Activity

As previously reported, the Company completed the acquisition of GS Financial Corp. (“GSFC”), the former holding company of Guaranty Savings Bank of Metairie, Louisiana, on July 15, 2011. As a result of the transaction, the Company acquired $256.7 million of assets, including loans of $182.4 million, and $230.6 million in deposits and other liabilities.

4. Investment Securities

Summary information regarding investment securities classified as available for sale and held to maturity as of March 31, 2012 and December 31, 2011 is as follows.


*(dollars in thousands)*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses				Fair Value
					Less Than 1 Year		Over 1 Year
March 31, 2012
Available for sale:
U.S. agency mortgage-backed	$	118,719	$	3,199	$	12	$	24	$	121,882
Non-U.S. agency mortgage-backed		14,323		123		57		150		14,239
Municipal bonds		11,570		560		—		—		12,130
U.S. government agency		12,401		348		—		—		12,749

Total available for sale	$	157,013	$	4,230	$	69	$	174	$	161,000


Held to maturity:
U.S. agency mortgage-backed	$	1,893	$	35	$	—	$	—	$	1,928
Municipal bonds		1,172		68		—		—		1,240

Total held to maturity	$	3,065	$	103	$	—	$	—	$	3,168


*(dollars in thousands)*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses				Fair Value
					Less Than 1 Year		Over 1 Year
December 31, 2011
Available for sale:
U.S. agency mortgage-backed	$	113,692	$	2,879	$	42	$	—	$	116,529
Non-U.S. agency mortgage-backed		14,833		37		766		425		13,679
Municipal bonds		11,598		623		—		—		12,221
U.S. government agency		12,521		310		—		—		12,831

Total available for sale	$	152,644	$	3,849	$	808	$	425	$	155,260


Held to maturity:
U.S. agency mortgage-backed	$	2,289	$	49	$	—	$	—	$	2,338
Municipal bonds		1,173		64		—		—		1,237

Total held to maturity	$	3,462	$	113	$	—	$	—	$	3,575

The amortized cost and estimated fair value by maturity of the Company’s investment securities as of March 31, 2012 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 mortgage-backed securities, certain U.S. government agency securities and municipal bonds, may differ from its contractual maturity because of the exercise of call options. Accordingly, actual maturities may differ from contractual maturities.


*(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	$	—	$	1,490	$	12,321	$	108,071	$	121,882
Non-U.S. agency mortgage-backed		—		—		—		14,239		14,239
Municipal bonds		—		3,237		5,983		2,910		12,130
U.S. government agency		—		5,058		2,101		5,590		12,749

Total available for sale	$	—	$	9,785	$	20,405	$	130,810	$	161,000


Securities held to maturity:
U.S. agency mortgage-backed	$	—	$	1,231	$	697	$	—	$	1,928
Municipal bonds		200		1,040		—		—		1,240

Total held to maturity		200		2,271		697		—		3,168

Total investment securities	$	200	$	12,056	$	21,102	$	130,810	$	164,168


*(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	$	—	$	1,410	$	12,211	$	105,098	$	118,719
Non-U.S. agency mortgage-backed		—		—		—		14,323		14,323
Municipal bonds		—		3,162		5,660		2,748		11,570
U.S. government agency		—		5,000		1,988		5,413		12,401

Total available for sale	$	—	$	9,572	$	19,859	$	127,582	$	157,013


Securities held to maturity:
U.S. agency mortgage-backed	$	—	$	1,206	$	687	$	—	$	1,893
Municipal bonds		200		972		—		—		1,172

Total held to maturity		200		2,178		687		—		3,065

Total investment securities	$	200	$	11,750	$	20,546	$	127,582	$	160,078

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 has 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.

5. Earnings Per Share

Earnings per common share were computed based on the following:


	Three Months Ended March 31,
*(in thousands, except per share data)*	2012		2011

Numerator:
Operating income available to common shareholders	$	2,060	$	795

Denominator:
Weighted average common shares outstanding		6,953		7,177
Effect of dilutive securities:
Restricted stock		96		92
Stock options		147		8

Weighted average common shares outstanding – assuming dilution		7,196		7,277


Earnings per common share	$	0.30	$	0.11
Earnings per common share – assuming dilution	$	0.29	$	0.11

Options on 828,919 and 812,675 shares of common stock were not included in computing diluted earnings per share for the three months ended March 31, 2012 and March 31, 2011, respectively, because the effect of these shares was anti-dilutive.

6. Credit Quality and Allowance for Loan Losses

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


	As of March 31, 2012
*(dollars in thousands)*	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Loans Acquired with Deteriorated Credit Quality		Total
Allowance for loan losses:
One- to four-family first mortgage	$	747	$	72	$	—	$	819
Home equity loans and lines		318		—		—		318
Commercial real estate		2,010		182		—		2,192
Construction and land		843		316		—		1,159
Multi-family residential		82		—		—		82
Commercial and industrial		775		57		50		882
Consumer		361		—		—		361

Total allowance for loan losses	$	5,136	$	627	$	50	$	5,813


	As of March 31, 2012
*(dollars in thousands)*	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Loans Acquired with Deteriorated Credit Quality		Total
Loans:
One- to four-family first mortgage	$	164,735	$	1,473	$	12,618	$	178,826
Home equity loans and lines		36,922		78		4,337		41,337
Commercial real estate		203,354		1,798		32,867		238,019
Construction and land		79,720		1,913		4,475		86,108
Multi-family residential		16,947		529		2,373		19,849
Commercial and industrial		78,063		127		3,740		81,930
Consumer		31,626		—		956		32,582

Total loans	$	611,367	$	5,918	$	61,366	$	678,651


	As of December 31, 2011
*(dollars in thousands)*	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Loans Acquired with Deteriorated Credit Quality		Total
Allowance for loan losses:
One- to four-family first mortgage	$	706	$	72	$	—	$	778
Home equity loans and lines		321		15		—		336
Commercial real estate		1,626		129		—		1,755
Construction and land		708		196		—		904
Multi-family residential		64		—		—		64
Commercial and industrial		806		66		50		922
Consumer		345		—		—		345

Total allowance for loan losses	$	4,576	$	478	$	50	$	5,104


Loans:
One- to four-family first mortgage	$	168,943	$	1,090	$	12,784	$	182,817
Home equity loans and lines		38,406		94		5,165		43,665
Commercial real estate		190,553		2,249		34,197		226,999
Construction and land		71,207		2,305		5,481		78,993
Multi-family residential		16,392		529		3,204		20,125
Commercial and industrial		78,495		136		4,350		82,981
Consumer		29,529		—		1,262		30,791

Total loans	$	593,525	$	6,403	$	66,443	$	666,371

A summary of the activity in the allowance for loan losses during the three months ended March 31, 2012 and 2011 is as follows.


	For the Three Months Ended March 31, 2012
*(dollars in thousands)*	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Allowance for loan losses:
One- to four-family first mortgage	$	778	$	—		$	—	$	41		$	819
Home equity loans and lines		336		(15	)		3		(6	)		318
Commercial real estate		1,755		—			2		435			2,192
Construction and land		904		—			3		251			1,158
Multi-family residential		64		—			—		19			83
Commercial and industrial		922		—			—		(41	)		881
Consumer		345		—			4		13			362

Total allowance for loan losses	$	5,104	$	(15	)	$	12	$	712		$	5,813


	For the Three Months Ended March 31, 2011
*(dollars in thousands)*	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Allowance for loan losses:
One- to four-family first mortgage	$	641	$	—		$	—	$	(19	)	$	622
Home equity loans and lines		296		—			—		—			296
Commercial real estate		1258		—			2		55			1,315
Construction and land		666		—			—		(22	)		644
Multi-family residential		46		—			—		2			48
Commercial and industrial		746		—			2		70			818
Consumer		267		(9	)		2		16			276

Total allowance for loan losses	$	3,920	$	(9	)	$	6	$	102		$	4,019

On March 12, 2010, the Bank acquired certain assets and liabilities of the former Statewide Bank in a Federal Deposit Insurance Corporation (“FDIC”) assisted transaction. In connection with the transaction, Home Bank entered into loss sharing agreements with the FDIC which cover the acquired loan portfolio (“Covered Loans”) and repossessed assets (collectively referred to as “Covered Assets”). Under the terms of the loss sharing agreements, the FDIC will, subject to the terms and conditions of the agreements, absorb 80% of the first $41,000,000 of losses incurred on Covered Assets and 95% of losses on Covered Assets exceeding $41,000,000 during the periods specified in the loss sharing agreements.

On July 15, 2011, the Company acquired GSFC and its subsidiary, Guaranty Savings Bank. The acquired loans were accounted for under the purchase method of accounting. A portion of the loan portfolio acquired was assumed to have deteriorated credit quality and those acquired loans were recorded at their aggregate fair value of $6.2 million at the date of acquisition.

Over the life of the loans acquired with deteriorated credit quality, the Company continues to estimate cash flows expected to be collected on individual loans or on pools of loans sharing common risk characteristics. The Company evaluates whether the present values of such loans have decreased and if so, a provision for loan loss is recognized. For any increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the remaining life of the applicable pool of loans.

Credit quality indicators on the Company’s loan portfolio, excluding loans acquired with deteriorated credit quality, as of the dates indicated are as follows.


	March 31, 2012
*(dollars in thousands)*	Pass		Special Mention		Substandard		Doubtful		Total
One- to four-family first mortgage	$	160,000	$	2,073	$	4,135	$	—	$	166,208
Home equity loans and lines		36,400		195		405		—		37,000
Commercial real estate		191,127		3,377		10,648		—		205,152
Construction and land		78,879		788		1,966		—		81,633
Multi-family residential		16,663		228		585		—		17,476
Commercial and industrial		75,420		2,615		155		—		78,190
Consumer		31,554		23		49		—		31,626

Total loans	$	590,043	$	9,299	$	17,943	$	—	$	617,285


	December 31, 2011
*(dollars in thousands)*	Pass		Special Mention		Substandard		Doubtful		Total
One- to four-family first mortgage	$	165,997	$	2,595	$	1,441	$	—	$	170,033
Home equity loans and lines		37,849		320		331		—		38,500
Commercial real estate		176,651		11,435		4,716		—		192,802
Construction and land		69,537		1,595		2,380		—		73,512
Multi-family residential		16,164		228		529		—		16,921
Commercial and industrial		74,823		3,621		187		—		78,631
Consumer		29,429		22		78		—		29,529

Total loans	$	570,450	$	19,816	$	9,662	$	—	$	599,928

The above classifications follow regulatory guidelines and can generally be described as follows:

•

Pass loans are of satisfactory quality.

•

Special mention loans have an existing weakness that could cause future impairment, including the deterioration of financial ratios, past due status, questionable management capabilities and possible reduction in the collateral values.

•

Substandard loans have an existing specific and well defined weakness that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.

•

Doubtful loans have specific weaknesses that are severe enough to make collection or liquidation in full highly questionable and improbable.

In addition, residential loans are classified using an inter-agency regulatory methodology that incorporates the extent of the delinquency and the loan-to-value ratios. These classifications were the most current available as of the dates indicated and were generally updated within the quarter. Loans acquired with deteriorated credit quality are excluded from the schedule of credit quality indicators.

Age analysis of past due loans, excluding loans acquired with deteriorated credit quality, as of the dates indicated is as follows.


	March 31, 2012
*(dollars in thousands)*	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current Loans		Total Loans
Real estate loans:
One- to four-family first mortgage	$	4,720	$	562	$	5,134	$	10,416	$	155,792	$	166,208
Home equity loans and lines		132		112		249		493		36,507		37,000
Commercial real estate		451		2,496		7,321		10,268		194,884		205,152
Construction and land		2110		—		798		2,908		78,725		81,633
Multi-family residential		40		—		528		568		16,908		17,476

Total real estate loans		7,453		3,170		14,030		24,653		482,816		507,469


Other loans:
Commercial and industrial		457		82		95		634		77,556		78,190
Consumer		107		45		9		161		31,465		31,626

Total other loans		564		127		104		795		109,021		109,816

Total loans	$	8,017	$	3,297	$	14,134	$	25,448	$	591,837	$	617,285


	December 31, 2011
*(dollars in thousands)*	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current Loans		Total Loans
Real estate loans:
One- to four-family first mortgage	$	3,740	$	451	$	2,053	$	6,244	$	163,789	$	170,033
Home equity loans and lines		242		—		171		413		38,087		38,500
Commercial real estate		1,384		704		1,862		3,950		188,852		192,802
Construction and land		1,376		13		812		2,201		71,311		73,512
Multi-family residential		944		—		707		1,651		15,270		16,921

Total real estate loans		7,686		1,168		5,605		14,459		477,309		491,768


Other loans:
Commercial and industrial		309		95		—		404		78,227		78,631
Consumer		216		38		50		304		29,225		29,529

Total other loans		525		133		50		708		107,452		108,160

Total loans	$	8,211	$	1,301	$	5,655	$	15,167	$	584,761	$	599,928

As of March 31, 2012 and December 31, 2011, the Company did not have any loans that are not subject to the FDIC loss sharing agreements, which are referred to as “Noncovered Loans,” greater than 90 days past due and accruing.

The following is a summary of information pertaining to impaired loans excluding Acquired Loans as of the dates indicated.


	For the Three Months Ended March 31, 2012
*(dollars in thousands)*	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One- to four-family first mortgage	$	925	$	925	$	—	$	733	$	7
Home equity loans and lines		78		78		—		79		1
Commercial real estate		1,303		1,303		—		1,634		3
Construction and land		340		340		—		535		5
Multi-family residential		529		529		—		528		—
Commercial and industrial		70		70		—		53		1
Consumer		—		—		—		—		—

Total	$	3,245	$	3,245	$	—	$	3,562	$	17


With an allowance recorded:
One- to four-family first mortgage	$	548	$	548	$	72	$	742	$	9
Home equity loans and lines		—		—		—		11		—
Commercial real estate		496		496		182		499		7
Construction and land		1572		1572		316		1,573		18
Multi-family residential		—		—		—		—		—
Commercial and industrial		57		57		57		81		1
Consumer		—		—		—		—		—

Total	$	2,673	$	2,673	$	627	$	2,906	$	35

Total impaired loans:
One- to four-family first mortgage	$	1,473	$	1,473	$	72	$	1,475	$	16
Home equity loans and lines		78		78		—		90		1
Commercial real estate		1,798		1,798		182		2,133		10
Construction and land		1,913		1,913		316		2,108		23
Multi-family residential		529		529		—		528		—
Commercial and industrial		127		127		57		134		2
Consumer		—		—		—		—		—

Total	$	5,918	$	5,918	$	627	$	6,468	$	52


	For the Year Ended December 31, 2011
*(dollars in thousands)*	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One- to four-family first mortgage	$	540	$	540	$	—	$	745	$	28
Home equity loans and lines		79		79		—		58		3
Commercial real estate		1,747		1,747		—		996		60
Construction and land		734		734		—		672		40
Multi-family residential		529		529		—		41		25
Commercial and industrial		70		70		—		55		4
Consumer		—		—		—		—		—

Total	$	3,699	$	3,699	$	—	$	2,567	$	160


With an allowance recorded:
One- to four-family first mortgage	$	550	$	550	$	72	$	78	$	38
Home equity loans and lines		15		15		15		10		1
Commercial real estate		501		501		129		301		14
Construction and land		1,572		1,572		196		510		88
Multi-family residential		—		—		—		25		—
Commercial and industrial		66		66		66		130		3
Consumer		—		—		—		2		—

Total	$	2,704	$	2,704	$	478	$	1,056	$	144


Total impaired loans:
One- to four-family first mortgage	$	1,090	$	1,090	$	72	$	823	$	66
Home equity loans and lines		94		94		15		68		4
Commercial real estate		2,249		2,249		129		1,297		74
Construction and land		2,305		2,305		196		1,182		128
Multi-family residential		529		529		—		66		25
Commercial and industrial		136		136		66		185		7
Consumer		—		—		—		2		—

Total	$	6,403	$	6,403	$	478	$	3,623	$	304

A summary of information pertaining to nonaccrual Noncovered Loans as of dates indicated is as follows.


*(dollars in thousands)*	March 31, 2012		December 31, 2011
Nonaccrual loans⁽¹⁾:
One- to four-family first mortgage	$	3,981	$	4,298
Home equity loans and lines		269		191
Commercial real estate		9,025		4,194
Construction and land		922		813
Multi-family residential		1,319		1,322
Commercial and industrial		234		139
Consumer		9		50

Total	$	15,759	$	11,007

⁽¹⁾	Includes $7.1 million and $7.2 million in Acquired Loans from GSFC as of March 31, 2012 and December 31, 2012, respectively.

As of March 31, 2012, the Company was not committed to lend additional funds to any customer whose loan was classified as impaired.

Troubled Debt Restructurings

During the course of its lending operations, the Company periodically grants concessions to its customers in an attempt to protect as much of its investment as possible and to minimize risk of loss. These concessions may include restructuring the terms of a customer loan to alleviate the burden of the customer’s near-term cash requirements. Effective January 1, 2011, the Company adopted the provisions of ASU No.2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, which provides clarification on the determination of whether loan restructurings are considered troubled debt restructurings (“TDRs”). In accordance with the ASU, in order to be considered a TDR, the Company must conclude that the restructuring of a loan to a borrower who is experiencing financial difficulties constitutes a “concession”. The Company defines a concession to the customer as a modification of existing terms granted to the borrower for economic or legal reasons related to the borrower’s financial difficulties that the Company would otherwise not consider. The concession is either granted through an agreement with the customer or is imposed by a court or law. Concessions include modifying original loan terms to reduce or defer cash payments required as part of the loan agreement, including but not limited to:

•

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

•

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

•

a reduction of the face amount or maturity amount of the debt as stated in the agreement, or

•

a reduction of accrued interest receivable on the debt.

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

•

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

•

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

•

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

•

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

•

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

If the Company concludes that both a concession has been granted and the concession was granted to a customer experiencing financial difficulties, the Company identifies the loan as a TDR in its loan system. For purposes of the determination of an allowance for loan losses on these TDRs, the loan is reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology. If it is determined that losses are probable on such TDRs, either because of delinquency or other credit quality indicators, the Company establishes specific reserves for these loans.

Information about the Company’s TDRs is presented in the following tables.


	For the Three Months Ended March 31, 2012
*(dollars in thousands)*	Current		Past Due Greater Than 30 Days		Nonaccrual TDRs		Total TDRs

Real estate loans:
One- to four-family first mortgage	$	—	$	—	$	—	$	—
Home equity loans and lines		—		—		—		—
Commercial real estate		314		—		116		430
Construction and land		27		168		—		195
Multi-family residential		—		—		—		—

Total real estate loans		341		168		116		625


Other loans:
Commercial and industrial		19		—		—		19
Consumer		40		—		—		40

Total other loans		59		—		—		59

Total loans	$	400	$	168	$	116	$	684


	For the Year Ended December 31, 2011
*(dollars in thousands)*	Current		Past Due Greater Than 30 Days		Nonaccrual TDRs		Total TDRs

Real estate loans:
One- to four-family first mortgage	$	—	$	—	$	—	$	—
Home equity loans and lines		15		—		—		15
Commercial real estate		319		—		117		436
Construction and land		198		—		—		198
Multi-family residential		—		—		—		—

Total real estate loans		532		—		117		649


Other loans:
Commercial and industrial		22		—		—		22
Consumer		44		—		—		44

Total other loans		66		—		—		66

Total loans	$	598	$	—	$	117	$	715

None of the troubled debt restructurings defaulted subsequent to the restructuring through the date the financial statements were available to be issued. The Company did not restructure any additional loans during the first quarter of 2012.

7. Fair Value Disclosures

The Company groups its financial assets and liabilities measured at fair value in three levels as required by ASC 820, Fair Value Measurements and Disclosures. Under this guidance, fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value

hierarchy that prioritizes the inputs used to develop those assumptions and measure fair value. The hierarchy requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels 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.

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

Recurring Basis

Investment Securities Available for Sale

Fair values of investment securities available for sale are primarily measured using information from a third-party pricing service. This pricing service provides pricing information by utilizing evaluated pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data from market research publications. If quoted prices are available in an active market, investment securities are classified as Level 1 measurements. If quoted prices are not available in an active market, fair values are estimated primarily by the use of pricing models. Level 2 investment securities are primarily comprised of mortgage-backed securities issued by government agencies and U.S. government-sponsored enterprises. In certain cases, where there is limited or less transparent information provided by the Company’s third-party pricing service, fair value is estimated by the use of secondary pricing services or through the use of non-binding third-party broker quotes. Investment securities are classified within Level 3 when little or no market activity supports the fair value.

Management primarily identifies investment securities which may have traded in illiquid or inactive markets by identifying instances of a significant decrease in the volume and frequency of trades, relative to historical levels, as well as instances of a significant widening of the bid-ask spread in the brokered markets. Investment securities that are deemed to have been trading in illiquid or inactive markets may require the use of significant unobservable inputs. For example, management may use quoted prices for similar investment securities in the absence of a liquid and active market for the investment securities being valued. As of March 31, 2012, management did not make adjustments to prices provided by the third-party pricing service as a result of illiquid or inactive markets.

The following tables present the balances of assets and liabilities measured on a recurring basis as of March 31, 2012 and December 31, 2011.

		00000000		00000000		00000000		00000000
			Fair Value Measurements Using
*(dollars in thousands)*	March 31, 2012		Level 1		Level 2		Level 3
Available for sale securities:
U.S. agency mortgage-backed	$	121,882	$	—	$	121,882	$	—
Non-U.S. agency mortgage-backed		14,239		—		14,239		—
Municipal bonds		12,130		—		12,130		—
U.S. government agency		12,749		—		12,749		—

Total	$	161,000	$	—	$	161,000	$	—

		00000000		00000000		00000000		00000000
			Fair Value Measurements Using
*(dollars in thousands)*	December 31, 2011		Level 1		Level 2		Level 3
Available for sale securities:
U.S. agency mortgage-backed	$	116,529	$	—	$	116,529	$	—
Non-U.S. agency mortgage-backed		13,679		—		13,679		—
Municipal bonds		12,221		—		12,221		—
U.S. government agency		12,831		—		12,831		—

Total	$	155,260	$	—	$	155,260	$	—

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

Nonrecurring Basis

In accordance with the provisions of ASC 310, Receivables, the Company records loans considered impaired at their fair value. A loan is considered impaired if it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Fair value is measured at the fair value of the collateral for collateral-dependent loans. For non-collateral-dependent loans, fair value is measured by present valuing expected future cash flows. Impaired loans are classified as Level 2 assets when measured using appraisals from external parties of the collateral less any prior liens. Impaired loans are classified as Level 3 when an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price. Repossessed assets are initially recorded at fair value less estimated costs to sell. The fair value of repossessed assets is based on property appraisals and an analysis of similar properties available. As such, the Company classifies repossessed assets as Level 3 assets. Repossessed assets are classified as Level 3 assets when an appraised value is not available or management determines the fair value of the property is further impaired below the appraised value and there is no observable market price.

Loans acquired from GSFC and Statewide (“Acquired Loans”), the FDIC loss sharing receivable, acquired FHLB advances, and acquired interest-bearing deposit liabilities are measured on a nonrecurring basis using significant unobservable inputs (Level 3).

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


			Fair Value Measurements Using
*(dollars in thousands)*	March 31, 2012		Level 1		Level 2		Level 3

Assets
Acquired Loans with deteriorated credit quality	$	61,316	$	—	$	—	$	61,316
Acquired Loans without deteriorated credit quality		143,270		—		—		143,270
Impaired loans excluding Acquired Loans		5,291		—		—		5,291
Repossessed assets		7,844		—		—		7,844
FDIC loss sharing receivable		24,400		—		—		24,400

Total	$	242,121	$	—	$	—	$	242,121


Liabilities
Deposits acquired through business combination	$	107,889	$	—	$	—	$	107,889
FHLB advances acquired through business combination		24,348		—		—		24,348

Total	$	132,237	$	—	$	—	$	132,237


			Fair Value Measurements Using
*(dollars in thousands)*	December 31, 2011		Level 1		Level 2		Level 3

Assets
Acquired Loans with deteriorated credit quality	$	66,393	$	—	$	—	$	66,393
Acquired Loans without deteriorated credit quality		155,064		—		—		155,064
Impaired loans excluding Acquired Loans		5,925		—		—		5,925
Repossessed assets		8,964		—		—		8,964
FDIC loss sharing receivable		24,222		—		—		24,222

Total	$	260,568	$	—	$	—	$	260,568


Liabilities
Deposits acquired through business combination	$	129,034	$	—	$	—	$	129,034
FHLB advances acquired through business combination		34,123		—		—		34,123

Total	$	163,157	$	—	$	—	$	163,157

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

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

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

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

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

The fair value for investment securities is determined from quoted market prices when available. If a quoted market price is not available, fair value is estimated using third party pricing services or quoted market prices of securities with similar characteristics.

The fair value of mortgage loans held for sale and loans are 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 cash surrender value of bank-owned life insurance (“BOLI”) approximates its fair value.

The fair value of the FDIC loss sharing receivable is determined by discounting projected cash flows from loss sharing agreements based on expected reimbursements for losses at the applicable loss sharing percentages based on the terms of the loss sharing agreements.

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 deposits of similar remaining maturities.

The fair value of short-term FHLB advances is the amount payable at maturity. The fair value of long-term FHLB advances is estimated using the rates currently offered for advances of similar maturities.

Fair Value Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect the premium or discount on any particular financial instrument that could result from the sale of the Company’s entire holdings. Fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes, premises and equipment and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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


			Fair Value Measurements at March 31, 2012
*(dollars in thousands)*	Carrying Amount		Total		Level 1		Level 2		Level 3

Financial Assets
Cash and cash equivalents	$	33,801	$	33,801	$	33,801	$	—	$	—
Interest-bearing deposits in banks		4,754		4,754		4,754		—		—
Investment securities available for sale		161,000		161,000		—		161,000		—
Investment securities held to maturity		3,065		3,168		—		3,168		—
Mortgage loans held for sale		1,794		1,794		—		—		1,794
Loans, net		672,837		692,771		—		—		692,771
Cash surrender value of BOLI		16,902		16,902		16,902		—		—
FDIC loss sharing receivable		24,400		24,400		—		—		24,400

Financial Liabilities
Deposits	$	736,157	$	737,885	$	—	$	629,996	$	107,889
Short-term FHLB advances		61,042		61,042		55,500		—		5,542
Long-term FHLB advances		39,806		41,291		—		22,485		18,806


			Fair Value Measurements at December 31, 2011
*(dollars in thousands)*	Carrying Amount		Total		Level 1		Level 2		Level 3

Financial Assets
Cash and cash equivalents	$	31,273	$	31,273	$	31,273	$	—	$	—
Interest-bearing deposits in banks		5,583		5,583		5,583		—		—
Investment securities available for sale		155,260		155,260		—		155,260		—
Investment securities held to maturity		3,462		3,575		—		3,575		—
Mortgage loans held for sale		1,673		1,673		—		—		1,673
Loans, net		661,267		686,538		—		—		686,538
Cash surrender value of BOLI		16,771		16,771		16,771		—		—
FDIC loss sharing receivable		24,222		24,222		—		—		24,222

Financial Liabilities
Deposits	$	730,734	$	732,266	$	—	$	603,232	$	129,034
Short-term FHLB advances		52,634		52,634		37,500		—		15,134
Long-term FHLB advances		40,989		42,465		—		23,476		18,989

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, 2011 to March 31, 2012 and on its results of operations for the three months ended March 31, 2012 and March 31, 2011. 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 words such as “plan”, “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions, or by future or conditional terms such as “will”, “would”, “should”, “could”, “may”, “likely”, “probably”, or “possibly”. The Company’s or the Bank’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties. Factors that may cause actual results to differ materially from these forward-looking statements include, but are not limited to, the risk factors described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2011. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

EXECUTIVE OVERVIEW

During the first quarter of 2012, the Company earned $2.1 million, an increase of $1.3 million, or 159.3%, compared to the first quarter of 2011. Diluted earnings per share for the first quarter of 2012 were $0.29, an increase of $0.18, or 163.6%, compared to the first quarter of 2011.

Key components of the Company’s performance in the first quarter of 2012 are summarized below.

•

Assets totaled $979.6 million as of March 31, 2012, up $15.8 million, or 1.6%, from December 31, 2011.

•

Net loans as of March 31, 2012 were $672.8 million, an increase of $11.6 million, or 1.7%, from December 31, 2011. The increase in loans was driven by commercial real estate (up $11.0 million), construction and land (up $7.1 million) and consumer (up $1.8 million) loans. These increases were partially offset by decreases in one- to four-family first mortgage (down $4.0 million), home equity (down $2.3 million) and commercial and industrial (down $1.1 million) loans. As of March 31, 2012, Covered Loans totaled $56.1 million, a decrease of $5.0 million, or 8.1%, from December 31, 2011.

•

Investment securities totaled $164.1 million as of March 31, 2012, an increase of $5.3 million, or 3.4%, from December 31, 2011. The increase was attributable to purchases of U.S. agency mortgage-backed securities, which more than offset paydowns and investment securities sales.

•

Core deposits (i.e., checking, savings, and money market accounts) grew for the eleventh consecutive quarter, increasing $12.6 million, or 2.8%, from December 31, 2011. Core deposits totaled $458.6 million as of March 31, 2012.

•

Total customer deposits as of March 31, 2012 were $736.2 million, an increase of $5.4 million, or 0.7%, from December 31, 2011.

•

Interest income increased $3.1 million, or 38.1%, in the first quarter of 2012 compared to the first quarter of 2011. The increase was driven by the GSFC acquisition and organic loan growth.

•

Interest expense increased $35,000, or 2.7%, for the first quarter of 2012 compared to the first quarter of 2011. The increase was primarily the result of higher average balances of interest-bearing liabilities due to the GSFC acquisition, offset by reduced market rates and changes in the composition of our interest-bearing liabilities.

•

The provision for loan losses totaled $712,000 for the first quarter of 2012, an increase of $610,000, or 596.1%, compared to the first quarter of 2011. The increase in the provision was the result of organic loan growth over the past 12 months, a $5.4 million commercial real estate loan which was placed on nonaccrual status during the quarter and modest downgrades of certain other loans in the Company’s loan portfolio. As of March 31, 2012, the Company’s ratio of allowance for loan losses to total loans was 0.86%, compared to 0.77% at December 31, 2011. Excluding Acquired Loans, the ratio of the allowance for loan losses to total was 1.22% at March 31, 2012, compared to 1.14% at December 31, 2011. Net charge-offs for the first three months of 2012 and 2011 were $3,000.

•

Noninterest income for the first quarter of 2012 increased $478,000, or 39.1%, compared to the first quarter of 2011. The increase in noninterest income was primarily the result of increased gains on the sale of mortgage loans of $222,000 and the absence of losses on sale of securities, which totaled $166,000 during the first quarter of 2011. Additionally, service fees and charges and bank card fees increased as a result of the accounts added through our acquisition of GSFC and organic customer growth.

•

Noninterest expense for the first quarter of 2012 increased $1.1 million, or 16.4%, compared to the first quarter of 2011. The increase in noninterest expense was primarily due to higher compensation and benefits, occupancy and data processing and communication expenses primarily reflecting our increase in offices and employees as a result of the GSFC acquisition. Additionally, expenses related to foreclosed assets increased primarily due to resolution costs related to nonperforming assets (“NPAs”) acquired from GSFC.

FINANCIAL CONDITION

Loans, Asset Quality and Allowance for Loan Losses

Loans – Loans totaled $678.7 million as of March 31, 2012, an increase of $12.3 million, or 1.8%, from December 31, 2011. The increase in loans was driven by commercial real estate (up $11.0 million), construction and land (up $7.1 million) and consumer (up $1.8 million) loans. These increases were partially offset by decreases in one- to four-family first mortgage (down $4.0 million), home equity (down $2.3 million) and commercial and industrial (down $1.1 million) loans. Covered Loans totaled $56.1 million as of March 31, 2012, a decrease of $5.0 million, or 8.1%, compared to December 31, 2011. The decrease in the Covered Loan portfolio was primarily the result of principal repayments and foreclosures.

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


	March 31,		December 31,		Increase/(Decrease)
*(dollars in thousands)*	2012		2011		Amount			Percent
Real estate loans:
One- to four-family first mortgage	$	178,826	$	182,817	$	(3,991	)		(2.2	)%
Home equity loans and lines		41,337		43,665		(2,328	)		(5.3	)
Commercial real estate		238,019		226,999		11,020			4.9
Construction and land		86,108		78,993		7,115			9.0
Multi-family residential		19,849		20,125		(276	)		(1.4	)

Total real estate loans		564,139		552,599		11,540			2.1

Other loans:
Commercial and industrial		81,930		82,981		(1,051	)		(1.3	)
Consumer		32,582		30,791		1,791			5.8

Total other loans		114,512		113,772		740			0.7

Total loans	$	678,651	$	666,371	$	12,280			1.8

Asset Quality – One of management’s key objectives has been, and continues to be, maintaining a high level of asset quality. In addition to maintaining credit standards for new loan originations, we proactively monitor loans and collection and workout processes of delinquent or problem loans. When a borrower fails to make a scheduled payment, we attempt to cure the deficiency by making personal contact with the borrower. Initial contacts are generally made within 10 days after the date 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. All loans which are designated as “special mention,” classified or which are delinquent 90 days or more are reported to the Board of Directors of the Bank monthly. For loans where the collection of principal or interest payments is doubtful, the accrual of interest income ceases. It is our policy, with certain limited exceptions, to discontinue accruing interest and reverse any interest accrued on any loan which is 90 days or more past due. On occasion, this action may be taken earlier if the financial condition of the borrower raises significant concern with regard to 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.

Repossessed assets which are acquired as a result of foreclosure are classified as repossessed assets until sold. Third party property valuations are obtained at the time the asset is repossessed and periodically until the property

is liquidated. Repossessed assets are recorded at the lesser of the balance of the loan or fair value less estimated selling costs, at the date acquired or upon receiving new property valuations. 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 repossessed assets 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 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 loans and commercial and industrial loans are individually evaluated for impairment with balances of $100,000 or greater. Third party property valuations are obtained at the time of origination for real estate secured loans. When a determination is made that a loan has deteriorated to the point of becoming a problem loan, updated valuations may be ordered to help determine if there is impairment, which may lead to a recommendation for partial charge off or appropriate allowance allocation. Property valuations are ordered through, and are reviewed by, an appraisal officer. The Company typically orders an “as is” valuation for collateral property if the loan is in a criticized loan classification. The Board of Directors is provided with monthly reports on impaired loans. As of March 31, 2012 and December 31, 2011, impaired loans, excluding Covered Loans, amounted to $11.2 million and $11.8 million, respectively. The impaired loans include loans acquired from GSFC, which totaled $5.3 million and $5.4 million at March 31, 2012 and December 31, 2011, respectively. As of March 31, 2012 and December 31, 2011, substandard loans, excluding Covered Loans, amounted to $23.2 million and $15.0 million, respectively. The increase in substandard loans for 2012 includes a $5.4 million commercial real estate loan which was placed on nonaccrual status during the quarter and $12.9 million acquired from GSFC. The amount of the allowance for loan losses allocated to impaired or substandard loans, excluding Covered Loans, totaled $627,000 and $478,000 as of March 31, 2012 and December 31, 2011, respectively. There were no assets classified as doubtful or loss as of March 31, 2012 and December 31, 2011.

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

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 as of 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.

Nonperforming assets defined as nonaccrual loans, accruing loans past due 90 days or more and foreclosed assets, excluding Covered Assets, amounted to $19.0 million, or 2.0% of total assets, as of March 31, 2012, compared to $14.4 million, or 1.6% of total assets, as of December 31, 2011. The increase in NPAs relates primarily to a $5.4 million commercial real estate loan which was placed on nonaccrual status during the first quarter of 2012.

Real estate, or other collateral, which is acquired as a result of foreclosure is classified as a foreclosed asset until sold. Foreclosed assets are recorded at the lesser of the balance of the loan or fair value less estimated selling costs, at the date acquired or upon receiving new property valuations. Holding costs are charged to expense. Gains and losses on the sale of real estate owned are charged to operations, as incurred.

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)*	March 31, 2012⁽¹⁾			December 31, 2011⁽²⁾
Nonaccrual loans:
Real estate loans:
One- to four-family first mortgage	$	7,652		$	8,526
Home equity loans and lines		665			857
Commercial real estate		10,263			6,570
Construction and land		2,752			2,624
Multi-family residential		1,319			1,321
Other loans:
Commercial and industrial		3,416			1,382
Consumer		147			187

Total nonaccrual loans		26,214			21,467
Accruing loans 90 days or more past due		—			—

Total nonperforming loans		26,214			21,467
Foreclosed asset		7,844			8,964

Total nonperforming assets		34,058			30,431
Performing troubled debt restructurings		568			598

Total nonperforming assets and troubled debt restructurings	$	34,626		$	31,029

Nonperforming loans to total loans		3.86	%		3.22	%
Nonperforming loans to total assets		2.68	%		2.23	%
Nonperforming assets to total assets		3.48	%		3.16	%

⁽¹⁾

Includes $15.6 million in Covered Assets acquired from Statewide and $9.5 million of assets acquired from GSFC. Excluding Acquired Loans and assets, ratios for nonperforming loans to total loans, nonperforming loans to total assets and nonperforming assets to total assets were 1.83%, 1.13% and 1.16%, respectively, at March 31, 2012.

²⁾

Includes $16.6 million in Covered Assets acquired from Statewide and $9.9 million of assets acquired from GSFC. Excluding Acquired Loans and assets, ratios for nonperforming loans to total loans, nonperforming loans to total assets and nonperforming assets to total assets were 0.85%, 0.51% and 0.54%, respectively, at December 31, 2011.

Net loan charge-offs for the first quarter of 2012 and 2011 were $3,000.

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, nonperforming loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of loans, the value of collateral securing loans, the borrower’s ability to repay and repayment performance, the number of loans requiring heightened management oversight, economic conditions and industry experience. Based on 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. These efforts are supplemented by independent reviews and validations performed by an independent loan reviewer. The results of the reviews are reported directly to the Audit Committee of the Board of Directors. The establishment of the allowance for loan losses is significantly affected by management judgment and uncertainties and there is a likelihood that different amounts would be reported under different conditions or assumptions. Federal regulatory agencies, as an integral part of their examination process, periodically review our 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.

With respect to Acquired Loans, the Company follows the reserve standard set forth in ASC 310, Receivables. At acquisition, the Company reviews each loan to determine whether there is evidence of deterioration in credit quality since origination and if it is probable that the Company will be unable to collect all amounts due according to the loan’s contractual terms. The Company considers expected prepayments and estimates the amount and timing of undiscounted expected principal, interest and other cash flows for each loan pool meeting the criteria above, and determines the excess of the loan pool’s scheduled contractual principal and interest payments in excess of cash flows expected at acquisition as an amount that should not be accreted (nonaccretable difference). The remaining amount, representing the excess of the pool’s cash flows expected to be collected over the fair value, is accreted into interest income over the remaining life of the pool (accretable yield). The Company records a discount on these loans at acquisition to record them at their estimated fair values. As a result, Acquired Loans subject to ASC 310 are excluded from the calculation of the allowance for loan losses as of the acquisition date.

Acquired Loans were recorded as of their acquisition date fair value, which was based on expected cash flows and included an estimation of expected future loan losses. Under current accounting principles, if the Company determines that losses arose after the acquisition date, the additional losses will be reflected as a provision for loan losses. As of March 31, 2012, $50,000 of our allowance for loan losses was allocated to Acquired Loans with deteriorated credit quality.

We 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 three months of 2012.


*(dollars in thousands)*	Amount

Balance, December 31, 2011	$	5,104
Provision charged to operations		712
Loans charged off		(15	)
Recoveries on charged off loans		12

Balance, March 31, 2012	$	5,813

At March 31, 2012 the Company’s ratio of allowance for loan losses to total loans was 0.86%, compared to 0.91% at March 31, 2011. The decrease in the ratio of the allowance for loan losses to total loans relates to the accounting for Acquired Loans. Under accounting principles generally accepted in the United States, an acquirer may not carry over the acquiree’s allowance for loan losses. Instead, the acquirer must fair value the cash flows expected to be derived from the acquired loan portfolio. Management has included its credit loss expectations in the acquired loan portfolios’ cash flow assumptions used to derive the portfolios’ fair value. Hence, management

believes that expected credit losses in the acquired loan portfolios were appropriately addressed in the fair value adjustments recorded on the acquired loan portfolios. Ongoing evaluations of the acquired loan portfolios may result in additional provisions for Acquired Loans. Excluding Acquired Loans, the ratio of allowance for loan losses to total loans was 1.22% at March 31, 2012, compared to 1.10% at March 31, 2011.

Investment Securities

The Company’s investment securities portfolio totaled $164.1 million as of March 31, 2012, an increase of $5.3 million, or 3.4%, from December 31, 2011. As of March 31, 2012, the Company had a net unrealized gain on its available for sale investment securities portfolio of $4.0 million, compared to $2.6 million as of December 31, 2011. At March 31, 2012, the investment securities portfolio had a modified duration of 3.2 years.

The following table summarizes activity in the Company’s investment securities portfolio during the first three months of 2012.


*(dollars in thousands)*	Available for Sale			Held to Maturity

Balance, December 31, 2011	$	155,260		$	3,462
Purchases		13,615			—
Sales		(1,558	)		—
Principal payments and calls		(8,003	)		(397	)
Accretion of discounts and amortization of premiums, net		315			—
Increase in market value		1,371			—

Balance, March 31, 2012	$	161,000		$	3,065

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.

Funding Sources

Deposits – Deposits totaled $736.2 million as of March 31, 2012, an increase of $5.4 million, or 0.7%, compared to December 31, 2011. The Company experienced its eleventh consecutive quarter of core deposit (i.e., checking, savings, and money market accounts) growth during the first quarter of 2012. Core deposits totaled $458.6 million as of March 31, 2012, an increase of $12.6 million, or 2.8 %, compared to December 31, 2011. The following table sets forth the composition of the Company’s deposits at the dates indicated.


	March 31,		December 31,		Increase (Decrease)
*(dollars in thousands)*	2012		2011		Amount			Percent

Demand deposit	$	135,600	$	127,828	$	7,772			6.1	%
Savings		46,569		43,671		2,898			6.6
Money market		182,442		180,790		1,652			0.9
NOW		93,970		93,679		291			0.3
Certificates of deposit		277,576		284,766		(7,190	)		(2.5	)

Total deposits	$	736,157	$	730,734	$	5,423			0.7	%

Federal Home Loan Bank Advances – Short-term FHLB advances totaled $61.0 million as of March 31, 2012, compared to $52.6 million as of December 31, 2011. The average rates paid on short-term FHLB advances were 0.10% for the three months ended March 31, 2012, compared to 0.16% for the three months ended March 31, 2011.

Long-term FHLB advances totaled $39.8 million as of March 31, 2012, compared to $41.0 million as of December 31, 2011. The average rates paid on long-term FHLB advances were 1.63% for the three months ended March 31, 2012, compared to 3.08% for the three months ended March 31, 2011.

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 $3.4 million, or 2.6%, from $134.3 million as of December 31, 2011 to $137.7 million as of March 31, 2012.

As of March 31, 2012, 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 March 31, 2012.


	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 risk-based capital	$	121,442		19.87	%	$	24,443		4.00	%	$	36,664		6.00	%
Total risk-based capital		127,255		20.83			48,885		8.00			61,106		10.00
Tier 1 leverage capital		121,442		12.59			38,592		4.00			48,240		5.00
Tangible capital		121,442		12.59			14,472		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. As of March 31, 2012, cash and cash equivalents totaled $33.8 million. At such date, investment securities available for sale totaled $161.0 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. As of March 31, 2012, certificates of deposit maturing within the next 12 months totaled $159.7 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 March 31, 2012, the average balance of our outstanding FHLB advances was $101.5 million. As of March 31, 2012, the Company had $100.8 million in outstanding FHLB advances and had $276.4 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 a model 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 rates as of March 31, 2012.


Shift in Interest Rates (in bps)	% Change in Projected Net Interest Income
+300		4.7	%
+200		3.3
+100		1.9

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 and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans as of March 31, 2012 and December 31, 2011.


	Contract Amount
*(dollars in thousands)*	March 31, 2012		December 31, 2011

Standby letters of credit	$	1,413	$	1,626
Available portion of lines of credit		65,912		60,675
Undisbursed portion of loans in process		36,459		37,840
Commitments to originate loans		75,581		53,711

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 first quarter of 2012 of $2.1 million, an increase of $1.3 million, or 159.3%, compared to the first quarter of 2011. Diluted earnings per share were $0.29 for the first quarter of 2012, an increase of $0.18, or 163.6%, compared to the first quarter of 2011.

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 4.56% and 4.42% for the three months ended March 31, 2012 and 2011, respectively. The Company’s net interest margin, which is net interest income as a percentage of average interest-earning assets, was 4.69% and 4.67% for the three months ended March 31, 2012 and 2011, respectively. The increase in net interest margin was primarily due to the asset and liability mix changes resulting from the GSFC acquisition and organic loan and deposit growth and additional FHLB borrowings.

Net interest income totaled $10.0 million for the three months ended March 31, 2012, an increase of $3.1 million, or 44.6%, compared to the three months ended March 31, 2011.

Interest income increased $3.1 million, or 38.1%, in the first quarter of 2012 compared to the first quarter of 2011. The increase was primarily due to a higher average volume of loans receivable in the three months ended March 31, 2012 as the result of the GSFC acquisition and organic loan growth, which more than offset a decrease in the average yield on interest-earning assets.

Interest expense increased $35,000, or 2.7%, in the first quarter of 2012 compared to the first quarter of 2011. The increase was primarily due to a higher average volume of interest-bearing liabilities as the result of the GSFC acquisition, offset by a decrease in the average rate paid on interest-bearing liabilities as the result of reduced market rates.

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 March 31,
	2012							2011
*(dollars in thousands)*	Average Balance		Interest		Average Yield/ Rate ⁽¹⁾			Average Balance		Interest		Average Yield/ Rate⁽¹⁾
Interest-earning assets:
Loans receivable⁽¹⁾	$	672,713	$	10,371		6.20	%	$	439,490	$	7,161		6.59	%
Investment securities		155,476		860		2.21			130,607		961		2.94
Other interest-earning assets		25,160		34		0.55			24,423		37		0.61

Total interest-earning assets		853,349		11,265		5.31			594,520		8,159		5.55

Noninterest-earning assets		112,334							98,235

Total assets	$	965,683						$	692,755

Interest-bearing liabilities:
Deposits:
Savings, checking and money market	$	316,004	$	352		0.45	%	$	233,440	$	302		0.53	%
Certificates of deposit		282,476		780		1.11			209,734		875		1.69

Total interest-bearing deposits		598,480		1,132		0.76			443,174		1,177		1.08
FHLB advances		101,473		181		0.71			15,280		101		2.64

Total interest-bearing liabilities		699,953		1,313		0.75			458,454		1,278		1.13

Noninterest-bearing liabilities		129,755							102,307

Total liabilities		829,708							560,761
Shareholders’ equity		135,975							131,994

Total liabilities and shareholders’ equity	$	965,683						$	692,755


Net interest-earning assets	$	153,396						$	136,066

Net interest spread			$	9,952		4.56	%			$	6,881		4.42	%

Net interest margin						4.69	%						4.67	%

⁽¹⁾	Nonperforming loans are included in the respective average loan balances, net of deferred fees, discounts and loans in process. Acquired Loans were recorded at fair value upon acquisition and accrete interest income over the remaining lives of the respective loans.

Provision for Loan Losses – For the quarter ended March 31, 2012, the Company recorded a provision for loan losses of $712,000, compared to a provision of $102,000 for the same period in 2011. The increase was primarily the result of a $5.4 million commercial real estate loan which was placed on nonaccrual status during the first quarter of 2012. As of March 31, 2012, the Company’s ratio of allowance for loan losses to total loans was 0.86%, compared to 0.77% as of December 31, 2011. Excluding Acquired Loans, the ratio of allowance for loan losses to total loans was 1.22% at March 31, 2012, compared to 1.14% at December 31, 2011.

Noninterest Income – The Company’s noninterest income was $1.7 million for the three months ended March 31, 2012, $478,000, or 39.1%, higher than the $1.2 million earned for the same period in 2011. The increase was primarily the result of increased gains on the sale of mortgage loans of $222,000 and the absence of losses on the sale of securities, which totaled $166,000 during the first quarter of 2011. Additionally, service fees and charges and bank card fees increased compared to the first quarter of 2011 as a result of the accounts added through our acquisition of GSFC and organic customer growth.

Noninterest Expense – The Company’s noninterest expense was $7.8 million for the three months ended March 31, 2012, $1.1 million, or 16.4%, higher than the $6.7 million recorded for the same period in 2011. The increase was primarily due to higher compensation and benefits, occupancy and data processing and communication expenses primarily reflecting our increase in offices and employees as a result of the GSFC acquisition. Additionally, expenses related to foreclosed assets increased during the first quarter 2012 compared to the same quarter a year ago due primarily to resolution costs related to NPAs acquired in the GSFC acquisition.

Income Taxes – For the quarters ended March 31, 2012 and March 31, 2011, the Company incurred income tax expense of $1.1 million and $498,000, respectively. The Company’s effective tax rate amounted to 34.2% and 38.5% during the first quarters of 2012 and 2011, respectively. The effective tax rate during the first quarter of 2011 was higher than the statutory rate due to non-deductible merger-related expenses of $191,000. Other differences between the effective tax rate and the statutory tax rate primarily relates to variances in items that are non-taxable or non-deductible (i.e., state tax, tax-exempt income, tax credits, etc.).

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, 2011, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset/ Liability Management and Market Risk”. Additional information at March 31, 2012 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 first quarter of 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Not applicable.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for December 31, 2011 filed with the Securities and Exchange Commission.

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

The Company’s purchases of its common stock made during the quarter consisted of stock repurchases under the Company’s approved plan 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⁾
January 1 - January 31, 2012		1,215	$	15.54		1,215		98,510
February 1 - February 28, 2012		2,721		15.97		2,721		95,789
March 1 - March 31, 2012		654		16.31		654		95,135

Total		4,590	$	15.91		4,590		95,135

⁽¹⁾	On May 23, 2011, the Company’s Board of Directors approved a share repurchase program. Under the plan, the Company can repurchase up to 402,835 shares, or 5% of its common stock outstanding, through open market or privately negotiated transactions.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosure.

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

101.INS		XBRL Instance Document*

101.SCH		XBRL Taxonomy Extension Schema Document*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

101.DEF		XBRL Taxonomy Extension Definitions Linkbase Document*

These interactive data files are being furnished as part of this Quarterly Report, and, in accordance with Rule 402 of Regulation S-T, shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.

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.

May 9, 2012	By:	/s/ John W. Bordelon
		John W. Bordelon
		President, Chief Executive Officer and Director

May 9, 2012	By:	/s/ Joseph B. Zanco
		Joseph B. Zanco
		Executive Vice President and Chief Financial Officer

May 9, 2012	By:	/s/ Mary H. Hopkins
		Mary H. Hopkins
		Home Bank First Vice President and Director of Financial Reporting

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