The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
Notes to Financial Statements
1. Plan Description
General
The following description of the Home Bank
Profit Sharing 401(k) Plan (the “Plan”) provides only general information. Participants should refer to
the Plan agreement for a more complete description of the Plan’s provisions.
The Plan is a defined contribution plan
covering all employees who are at least 21 years old and who have three months of service with Home Bank (the “Bank”),
the sponsor of the Plan and wholly-owned subsidiary of Home Bancorp, Inc. The Plan is subject to the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
Contributions
Eligible participants may elect to contribute,
on a pre-tax basis, from 1% to 75% of their compensation, as defined in the Plan document, subject to certain limitations. Effective
January 1, 2017, the Plan was amended to provide for automatic enrollment contributions for eligible participants of 6% of their
compensation, unless the eligible employee affirmatively elects otherwise, and the deferral percentage will be increased annually
by 1% limited to 8% unless the eligible participant affirmatively elects otherwise. The Bank may make a discretionary profit
sharing contribution as determined each year. Effective January 1, 2017, the Plan was amended to make safe harbor matching
contributions equal to 100% of employee deferral contributions that are not over 2% of compensation, plus 50% of the employee deferral
contributions that are over 2% of compensation but are not over 6% of compensation. No profit sharing contributions were made for
the years ended December 31, 2018 and 2017. Participants age 50 or older may also make catch-up contributions up to limits specified
under the Internal Revenue Code (“IRC”), but such contributions are not taken into account for purposes of determining
the Bank’s matching contribution.
Vesting
Participants are immediately vested in
their contributions plus actual earnings thereon. Vesting in the employer’s matching, other than safe harbor matching contributions,
and discretionary contribution portions of their accounts plus actual earnings thereon is based on years of continuous service.
A participant is 100% vested after six years of credited service. Prior to death or retirement, participants vest in employer contributions
and related earnings in accordance with the following schedule:
Years of Service
|
|
Vested Percent
|
|
1 year
|
|
|
-
|
%
|
2 years
|
|
|
20
|
|
3 years
|
|
|
40
|
|
4 years
|
|
|
60
|
|
5 years
|
|
|
80
|
|
6 years
|
|
|
100
|
|
Vesting in the employer’s safe harbor
matching contributions is based on years of continuous service. A participant is 100% vested after two years of credited service.
On the occurrence of death, disability,
retirement or Plan termination, a participant becomes fully vested in employer contributions and related earnings.
Payment of Benefits
Participants may elect to receive their
account value in a lump-sum distribution or, if eligible, in the form of an IRA rollover when they terminate employment or because
of death, disability or retirement. Participants may also transfer their account balance to another tax deferred qualified
plan. In accordance with the Plan provisions, hardship withdrawals and certain in-service distributions may be made
by the Plan.
Participant Accounts
Individual accounts are maintained for
each of the Plan’s participants to reflect the participant’s contributions, the Bank’s matching contributions
and allocations of the Plan’s investment income or losses and administrative expenses. Allocations are based on participant
earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from
the participant’s vested account.
Forfeited Accounts
At December 31, 2018 and 2017, the Plan
had forfeited nonvested accounts of $58 and $22,955, respectively. In 2018 and 2017, administrative expenses of $17,684 and $26,287,
respectively, were paid from forfeited nonvested accounts.
Notes Receivable from Participants
Participants may borrow from their accounts
amounts ranging from a minimum of $1,000 to a maximum of 50% of the account balance, not to exceed $50,000. Loan maturities
generally range from one to five years, but may extend up to ten years for the purchase of a primary residence. The
loans are collateralized by the balance in the participant’s account. The outstanding loan balances carried an
interest rate of 7.00% for both 2018 and 2017. Principal and interest are paid ratably through bi-weekly payroll deductions.
Investment Options
Under the provisions of the Plan, participating
employees may direct contributions to various investment options, including a common collective trust fund, mutual funds, pooled
separate accounts and a common stock fund for Home Bancorp, Inc. The Home Bancorp, Inc. Stock Fund holds common stock of Home Bancorp,
Inc. and uninvested cash to meet certain distributions and, on a short-term basis, pending investment in additional Home Bancorp,
Inc. common stock. Participants have the ability to change investment elections and transfer funds among the various
fund options on a daily basis.
2. Summary of Significant Accounting
Policies
Basis of Accounting
The financial statements of the Plan are
prepared using the accrual method of accounting and all assets of the Plan are participant directed.
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Investment Valuation and Income Recognition
Plan investments, excluding the guaranteed
investment contract (see Note 3), are stated at fair value. Home Bancorp, Inc. common stock is valued using quoted market
prices. Shares of registered investment companies are valued at the net asset value of shares held by the Plan at year
end. The Plan's interest in the common/collective trust is valued based on the daily net asset value (“NAV”)
of the fund as determined by the issuer of the fund, which is the value at which units in the funds can be withdrawn and approximates
fair value as a practical expedient.
Purchases and sales of investments are
recorded on a trade date basis. Dividends are recorded on the ex-dividend date.
Notes Receivable from Participants
Notes receivable from participants are
measured at their unpaid principal balance plus any accrued but unpaid interest.
Administrative Expenses
Investment management fees and administrative
fees related to recordkeeping are charged against the earnings of the investment fund in which the participant funds are invested.
Fees for certain transactions, such as withdrawals and loan processing, are charged directly to the account of the participant
reporting such a transaction. The Bank paid other administrative expenses of the Plan for 2018 and 2017.
Payment of Benefits
Benefits are recorded when paid.
Subsequent Events
Management has evaluated subsequent events
for potential recognition or disclosure in the financial statements through June 25, 2019, the date on which the financial statements
were available to be issued.
3. Fixed Income Guaranteed Option
As of December 31, 2018 and 2017, the Plan
invests in a fully-benefit responsive guaranteed investment contract (“GIC”) with Principal Life Insurance Company,
a guaranteed general-asset backed group annuity contract. The Plan’s portion of the net assets available for benefits attributable
to the GIC are reported at contract value. Contract value represents the amount participants would receive if they were to initiate
permitted transactions under the terms of the Plan, which approximates fair value.
The issuer of the GIC maintains the contributions
in a general account. The GIC does not have specific underlying assets assigned. The GIC issuer is contractually obligated to repay
the principal and a specified interest rate that is guaranteed to the Plan. There are no events in which the issuer can terminate
the GIC with the Plan and settle at an amount different from contract value. However, a 5% surrender charge may apply in the event
the Plan liquidates or transfers its interest in the GIC.
Certain events limit the ability of the
Plan to transact at contract value with the issuer. Such events include: (1) changes to the Plan’s policy on transfers to
competing investment options or the related equity wash provision and (2) termination of the Plan’s interest in the GIC by
the Plan’s administrator. The Plan Administrator does not believe that the occurrence of any such event is probable.
For the years ended December 31, 2018 and
2017, the average yield of the Principal Fixed Income Guaranteed Option Contract was approximately 1.21% and 1.17%, respectively,
based on actual interest earnings credited to participants.
4. Fair Value Measurements
The FASB “ASC 820,
Fair Value
Measurements and Disclosures
, provides the framework for measuring fair value. That framework provides a fair value hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable
inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:
Level 1 - Inputs to the valuation
methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to
access.
Level 2 - Inputs to
the valuation methodology include:
|
·
|
quoted prices for similar assets or liabilities in active markets;
|
|
·
|
quoted prices for identical or similar assets or liabilities in inactive markets;
|
|
·
|
inputs other than quoted prices that are observable for the asset or liability;
|
|
·
|
inputs that are derived principally from or corroborated by observable market data by correlation
or other means.
|
If the asset or liability has
a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 - Inputs to the valuation
methodology are unobservable and significant to the fair value measurement.
The Plan uses appropriate valuation techniques
based on the available inputs to measure the fair value of its investments. The asset’s fair value measurement level within
the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. When available,
valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.
Following is a description of the valuation
methodologies used for assets measured at fair value. There have been no changes in the valuation methodologies used at December
31, 2018 and 2017.
Registered investment companies:
The
fair values of these securities are based on
quoted market prices in an
active market, which represent
the net asset values of shares held by the Plan at year end.
Affiliated stock:
The
Home Bancorp Inc. Stock Fund is an account comprised of common stock of Home Bancorp, Inc. and short-term cash investments. The
fair value of the fund is derived from the fair value of the common stock based on quoted market prices in an active market and
the short-term cash investments.
Common/collective trust and pooled separate
accounts:
Valued at NAV of shares held by the Plan at year-end, provided by the administrator of the fund. The NAV of the investments
in the common/collective trust is
derived from
the fair value of
the underlying securities
based on quoted market prices in an active market
and short-term cash investments. The NAV is used as the practical expedient to estimate fair value.
The Plan’s investments, excluding
the guaranteed investment contract, are reported at fair value in the accompanying statement of net assets available for benefits.
The methods used to measure fair value may produce a fair value calculation that may not be indicative of net realizable value
or reflective of future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent
with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement at the reporting date.
The following table sets forth by level,
within the fair value hierarchy, the Plan’s assets at fair value as of the date indicated:
|
|
Value at
December 31,
2018
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Registered investment companies
|
|
$
|
4,606,794
|
|
|
$
|
4,606,794
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Affiliated stock
|
|
|
8,407,689
|
|
|
|
8,407,689
|
|
|
|
-
|
|
|
|
-
|
|
Total assets in fair value hierarchy
|
|
|
13,014,483
|
|
|
|
13,014,483
|
|
|
|
-
|
|
|
|
-
|
|
Investments measured at NAV
(1)
|
|
|
10,589,936
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
23,604,419
|
|
|
$
|
13,014,483
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Value at
December 31,
2017
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Registered investment companies
|
|
$
|
4,911,285
|
|
|
$
|
4,911,285
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Affiliated stock
|
|
|
10,219,279
|
|
|
|
10,219,279
|
|
|
|
-
|
|
|
|
-
|
|
Total assets in fair value hierarchy
|
|
|
15,130,564
|
|
|
|
15,130,564
|
|
|
|
-
|
|
|
|
-
|
|
Investments measured at NAV
(1)
|
|
|
9,318,663
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
24,449,227
|
|
|
$
|
15,130,564
|
|
|
$
|
-
|
|
|
$
|
-
|
|
(1)
In accordance with Subtopic
820-10, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the
fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy
to the line items presented in the statement of net assets available for benefits.
5. Risks and Uncertainties
The Plan provides for various investments
in registered investment companies, a common/collective trust, pooled separate accounts, a guaranteed investment contract and common
stock of Home Bancorp, Inc. Investment securities, in general, are exposed to various risks, such as overall market
volatility, credit and interest rate risk. Due to the level of risk associated with certain investment securities, it
is reasonably possible that changes in the values of investment securities will occur in the near term, and that such change could
materially affect the value of participants’ account balances and the amounts to be reported in the statements of net assets
available for benefits for future periods.
6. Related Party and Party-in-Interest
Transactions
The Plan invests in Home Bancorp, Inc.
common stock, the parent company of the plan sponsor; these transactions qualify as related party transactions, which are exempt
from the prohibited transaction rules. Fees incurred by the Plan for investment management services are paid to the trustee, and
other fees related to the Plan's operations are paid by the Plan sponsor.
Certain Plan investments are held in pooled
separate accounts, common/collective trust and a guaranteed investment contract managed by Principal Life Insurance Company. Since
Principal Life Insurance Company is the Plan custodian, these transactions qualify as party-in-interest transactions.
7. Tax Status
The Internal Revenue Service has determined
and informed the Bank by a determination letter dated March 17, 2017, that the Plan, as designed, was in accordance with applicable
sections of the IRC. The Plan administrator and the Plan’s tax counsel believe that the Plan is designed and is currently
being operated in compliance with the applicable requirements of the IRC, and, therefore, believe that the Plan is qualified and
tax exempt.
8. Plan Termination
While it has not expressed any intention
to do so, the Bank has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject
to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their employer contributions.
Cost information has not been included
above because all included investments are participant directed.