Attached files
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EX-32.1 - EXHIBIT 32.1 - HIBERNIA HOMESTEAD BANCORP, INC. | c04950exv32w1.htm |
EX-31.1 - EXHIBIT 31.1 - HIBERNIA HOMESTEAD BANCORP, INC. | c04950exv31w1.htm |
EX-31.2 - EXHIBIT 31.2 - HIBERNIA HOMESTEAD BANCORP, INC. | c04950exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2010 |
OR |
o | 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: 000-53555
Hibernia Homestead Bancorp, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Louisiana | 26-2833386 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
325 Carondelet Street | ||
New Orleans, Louisiana | 70130 | |
(Address of Principal Executive Offices) | (Zip Code) |
(504) 522-3203
(Registrants Telephone Number, Including Area Code)
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 (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). o Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes þ No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: As of August
11, 2010, 1,057,667 shares of the Registrants common stock were issued and outstanding.
Hibernia Homestead Bancorp, Inc.
Form 10-Q
Form 10-Q
Table of Contents
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Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 |
Table of Contents
Hibernia Homestead Bancorp, Inc.
Consolidated Balance Sheets
At June 30, | At December 31, | |||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Assets |
||||||||
Cash, Non-Interest Bearing |
$ | 1,133 | $ | 1,067 | ||||
Cash, Interest Bearing |
15 | 16 | ||||||
Federal Funds Sold |
2,650 | 5,150 | ||||||
Total Cash and Cash Equivalents |
3,798 | 6,233 | ||||||
Certificates of Deposit |
| 475 | ||||||
Investment Securities Available-for-Sale |
5,738 | 8,293 | ||||||
Loans Receivable, Net |
55,725 | 44,987 | ||||||
Accrued Interest Receivable |
255 | 206 | ||||||
Investment in FHLB of Dallas Stock |
171 | 171 | ||||||
Investment in FNBB Stock |
210 | 210 | ||||||
Premises and Equipment, Net |
5,083 | 5,127 | ||||||
Deferred Income Taxes |
512 | 492 | ||||||
Prepaid Expenses and Other Assets |
323 | 309 | ||||||
Total Assets |
$ | 71,815 | $ | 66,503 | ||||
Liabilities and Equity |
||||||||
Liabilities |
||||||||
Deposits |
$ | 49,076 | $ | 42,640 | ||||
Advance Payments by Borrowers for Taxes and Insurance |
268 | 386 | ||||||
Accrued Interest Payable |
7 | 2 | ||||||
Accounts Payable and Other Liabilities |
163 | 79 | ||||||
Total Liabilities |
49,514 | 43,107 | ||||||
Equity |
||||||||
Preferred Stock, $.01 par value 1,000,000 Shares
authorized; None Issued |
| | ||||||
Common Stock, $.01 par value 9,000,000 Shares
Authorized; 1,113,334 Issued; 1,057,667 and
1,113,334 Shares Outstanding at June 30, 2010 and
December 31, 2009, respectively |
11 | 11 | ||||||
Additional Paid-In Capital |
10,388 | 10,365 | ||||||
Treasury Stock at cost 55,667 shares at June 30,
2010 and none at December 31, 2009 |
(788 | ) | | |||||
Unallocated Common Stock held by: |
||||||||
Employee Stock Option Plan (ESOP) |
(837 | ) | (855 | ) | ||||
Recognition
and Retention Plan (RRP) |
(293 | ) | | |||||
Accumulated Other Comprehensive Income |
117 | 133 | ||||||
Retained Earnings |
13,703 | 13,742 | ||||||
Total Equity |
22,301 | 23,396 | ||||||
Total Liabilities and Equity |
$ | 71,815 | $ | 66,503 | ||||
See notes to consolidated financial statements.
1
Table of Contents
Hibernia Homestead Bancorp, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In Thousands, Except Per Share Data) | ||||||||||||||||
Interest Income |
||||||||||||||||
Loans Receivable |
||||||||||||||||
Mortgage Loans |
$ | 558 | $ | 484 | $ | 1,091 | $ | 952 | ||||||||
Commercial Loans |
200 | 13 | 329 | 15 | ||||||||||||
Consumer and Other Loans |
2 | 1 | 5 | 3 | ||||||||||||
Federal Funds Sold |
1 | | 2 | 3 | ||||||||||||
Mortgage-Backed Securities |
56 | 111 | 120 | 233 | ||||||||||||
Investment Securities |
3 | 15 | 7 | 21 | ||||||||||||
Other Investments and Deposits |
| 4 | 1 | 4 | ||||||||||||
Total Interest Income |
820 | 628 | 1,555 | 1,231 | ||||||||||||
Interest Expense |
||||||||||||||||
Deposits |
153 | 135 | 294 | 305 | ||||||||||||
Total Interest Expense |
153 | 135 | 294 | 305 | ||||||||||||
Net Interest Income |
667 | 493 | 1,261 | 926 | ||||||||||||
Provision for Loan Losses |
10 | | 10 | 15 | ||||||||||||
Net Interest Income After |
||||||||||||||||
Provision for Loan Losses |
657 | 493 | 1,251 | 911 | ||||||||||||
Non-Interest Income |
||||||||||||||||
Other Income |
5 | 7 | 12 | 15 | ||||||||||||
Rental Income, Net of Related
Expenses |
26 | 29 | 57 | 43 | ||||||||||||
Total Non-Interest Income |
31 | 36 | 69 | 58 | ||||||||||||
Non-Interest Expenses |
||||||||||||||||
Salaries and Employee Benefits |
293 | 291 | 583 | 585 | ||||||||||||
Occupancy Expenses |
102 | 85 | 195 | 176 | ||||||||||||
Data Processing |
91 | 69 | 162 | 139 | ||||||||||||
Advertising |
31 | 14 | 57 | 16 | ||||||||||||
Professional Fees |
85 | 68 | 150 | 121 | ||||||||||||
Insurance Expense |
10 | 24 | 22 | 43 | ||||||||||||
Supplies and Stationery |
25 | 11 | 37 | 23 | ||||||||||||
Telephone and Postage |
13 | 14 | 28 | 26 | ||||||||||||
Regulatory Assessments |
16 | 31 | 34 | 43 | ||||||||||||
Directors Fees |
14 | 12 | 26 | 24 | ||||||||||||
Franchise and Shares Taxes |
12 | | 24 | | ||||||||||||
Other Operating Expenses |
26 | 37 | 53 | 68 | ||||||||||||
Total Non-Interest Expenses |
718 | 656 | 1,371 | 1,264 | ||||||||||||
Loss Before Income Tax Benefit |
(30 | ) | (127 | ) | (51 | ) | (295 | ) | ||||||||
Income Tax Benefit |
(4 | ) | (44 | ) | (12 | ) | (100 | ) | ||||||||
Net Loss |
$ | (26 | ) | $ | (83 | ) | $ | (39 | ) | $ | (195 | ) | ||||
Loss Per Common Share |
||||||||||||||||
Basic |
$ | (0.03 | ) | $ | (0.08 | ) | $ | (0.04 | ) | $ | (0.18 | ) | ||||
Diluted |
$ | (0.03 | ) | $ | (0.08 | ) | $ | (0.04 | ) | $ | (0.18 | ) |
See
notes to consolidated financial statements.
2
Table of Contents
Hibernia Homestead Bancorp, Inc.
Consolidated Statements of Equity
(Unaudited)
Six Months Ended June 30, 2010 and 2009
Six Months Ended June 30, 2010 and 2009
Unallocated | Unallocated | Accumulated | ||||||||||||||||||||||||||||||
Additional | Common | Common | Other | |||||||||||||||||||||||||||||
Common | Paid-In | Treasury | Stock Held | Stock Held | Comprehensive | Retained | ||||||||||||||||||||||||||
Stock | Capital | Stock | by ESOP | by RRP | Income (Loss) | Earnings | Total | |||||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||||||
BALANCE January
1, 2009 |
$ | | $ | | $ | | $ | | $ | | $ | 108 | $ | 14,066 | $ | 14,174 | ||||||||||||||||
Net Loss |
| | | | | | (195 | ) | (195 | ) | ||||||||||||||||||||||
Other Comprehensive
Income |
| | | | | 68 | | 68 | ||||||||||||||||||||||||
Issuance of Common
Stock for Initial
Public Offering |
11 | 10,358 | | | | | | 10,369 | ||||||||||||||||||||||||
Shares Purchased
for ESOP |
| | | (891 | ) | | | | (891 | ) | ||||||||||||||||||||||
ESOP Shares
released for
allocation |
| | | 18 | | | | 18 | ||||||||||||||||||||||||
BALANCE June 30,
2009 |
$ | 11 | $ | 10,358 | $ | | $ | (873 | ) | $ | | $ | 176 | $ | 13,871 | $ | 23,543 | |||||||||||||||
BALANCE January
1, 2010 |
$ | 11 | $ | 10,365 | $ | | $ | (855 | ) | $ | | $ | 133 | $ | 13,742 | $ | 23,396 | |||||||||||||||
Net Loss |
| | | | | | (39 | ) | (39 | ) | ||||||||||||||||||||||
Other Comprehensive
Loss |
| | | | | (16 | ) | | (16 | ) | ||||||||||||||||||||||
Shares Purchased
for RRP |
| | | | (293 | ) | | | (293 | ) | ||||||||||||||||||||||
Purchase of
Treasury Stock |
| | (788 | ) | | | | | (788 | ) | ||||||||||||||||||||||
ESOP Shares
released for
allocation |
| 8 | | 18 | | | | 26 | ||||||||||||||||||||||||
Stock-based
compensation cost |
| 15 | | | | | | 15 | ||||||||||||||||||||||||
BALANCE June 30,
2010 |
$ | 11 | $ | 10,388 | $ | (788 | ) | $ | (837 | ) | $ | (293 | ) | $ | 117 | $ | 13,703 | $ | 22,301 | |||||||||||||
See
notes to consolidated financial statements.
3
Table of Contents
Hibernia Homestead Bancorp, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30, | ||||||||
2010 | 2009 | |||||||
(In Thousands) | ||||||||
Cash Flows from Operating Activities |
||||||||
Net Loss |
$ | (39 | ) | $ | (195 | ) | ||
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities |
||||||||
Provision for Loan Losses |
10 | 15 | ||||||
Deferred Income Taxes |
(12 | ) | (96 | ) | ||||
Depreciation and Amortization |
142 | 136 | ||||||
Net Discount Accretion |
(4 | ) | (11 | ) | ||||
Non-Cash Compensation |
41 | 18 | ||||||
(Increase) Decrease in: |
||||||||
Accrued Interest Receivable |
(49 | ) | (17 | ) | ||||
Prepaid Expenses and Other Assets |
(14 | ) | 689 | |||||
(Decrease) Increase in: |
||||||||
Accrued Interest Payable |
5 | (4 | ) | |||||
Accounts Payable and Other Liabilities |
84 | (369 | ) | |||||
Net Cash Provided by Operating Activities |
164 | 166 | ||||||
Cash Flows from Investing Activities |
||||||||
Net Increase in Loans Receivable |
(10,748 | ) | (3,669 | ) | ||||
Purchases of Securities Available-for-Sale |
| (2,527 | ) | |||||
Purchases of Certificates of Deposit |
| (1,055 | ) | |||||
Maturities, Redemptions and Sales of Securities Available-for-Sale |
2,535 | 1,508 | ||||||
Maturities, Redemptions and Sales of Certificates of Deposit |
475 | | ||||||
Purchase of Premises and Equipment |
(98 | ) | (19 | ) | ||||
Net Cash Used in Investing Activities |
(7,836 | ) | (5,762 | ) | ||||
Cash Flows from Financing Activities |
||||||||
Net Increase (Decrease) in Deposits |
6,436 | (9,266 | ) | |||||
Net Decrease in Advance Payments by Borrowers for Taxes and Insurance |
(118 | ) | (171 | ) | ||||
Proceeds from Issuance of Common Stock |
| 11,133 | ||||||
Cost of Issuance of Common Stock |
| (764 | ) | |||||
Purchase of Stock for ESOP |
| (891 | ) | |||||
Purchase of Stock for RRP |
(293 | ) | | |||||
Purchase of Treasury Stock |
(788 | ) | | |||||
Net Cash Provided by Financing Activities |
5,237 | 41 | ||||||
Net Decrease in Cash and Cash Equivalents |
(2,435 | ) | (5,555 | ) | ||||
Cash and Cash Equivalents Beginning of Period |
6,233 | 6,870 | ||||||
Cash and Cash Equivalents End of Period |
$ | 3,798 | $ | 1,315 | ||||
Supplementary Schedule of Cash Flow Information |
||||||||
Cash Paid for Interest on Deposits and Borrowings |
$ | 289 | $ | 309 | ||||
Market Value Adjustment for (Loss) Gain on Securities Available-for-Sale |
$ | (24 | ) | $ | 99 | |||
See
notes to consolidated financial statements.
4
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements
Note 1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
On January 27, 2009, Hibernia Homestead Bank (the Bank) completed its conversion from a mutual
to a stock form of organization as a subsidiary of Hibernia Homestead Bancorp, Inc. (the Holding
Company), and the Holding Company completed an initial public offering in which it issued 1,113,334
shares of its common stock for a total of $11,133,340 in gross offering proceeds.
Hibernia Homestead Bank is a Louisiana-chartered and FDIC-insured savings bank and provides a
variety of financial services primarily to individual customers through its three branches in New
Orleans and Metairie, Louisiana. The Banks primary deposit products are checking accounts, money
market accounts and interest bearing savings and certificates of deposit. Its primary lending
products are residential mortgage loans and commercial loans secured by real estate. The Bank
provides services to customers in the New Orleans, Metairie and surrounding areas.
The Banks operations are subject to customary business risks associated with activities of a
financial institution. Some of those risks include competition from other institutions and changes
in economic conditions, interest rates and regulatory requirements.
In August 2005, Hurricane Katrina caused wide-spread devastation in the areas in which the
Bank operates. Certain of the affected areas are still in the process of recovering from the
adverse impacts caused by the hurricane. The adverse financial effects of that catastrophe upon
the Bank were recognized in its financial statements at that time. To date, no significant
additional adverse effects have manifested themselves. However, since some areas within the Banks
market are still recovering, whether the extent to which those areas eventually recover could
adversely affect the future financial condition of area businesses, and the degree of such adverse
impact, if any, is unknown at this time.
The accompanying unaudited financial statements were prepared in accordance with the
instructions to Form 10-Q, and therefore do not include all the information or footnotes necessary
for complete financial statements in conformity with accounting principles generally accepted in
the United States of America. However, all normal recurring adjustments that, in the opinion of
management, are necessary for a fair presentation of the financial statements have been included.
The results for the three and six month periods ended June 30, 2010, are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31, 2010, or any other
period. These financial statements should be read in conjunction with the audited financial
statements of the Company and the accompanying notes thereto for the year ended December 31, 2009,
included in the Companys Form 10-K filed with the Securities and Exchange Commission (SEC) on March 29, 2010 (File No. 000-53555).
5
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiary, Hibernia Homestead Bank. All significant intercompany balances and transactions between
the Company and its wholly owned subsidiary have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change relate to the
determination of the allowance for losses on loans and the valuation of real estate acquired in
connection with foreclosures or in satisfaction of loans. In connection with the determination of
the allowance for losses on loans and foreclosed real estate, management obtains independent
appraisals for significant properties.
A majority of the Banks loan portfolio consists of single-family residential loans in the
metropolitan New Orleans area. In recent periods, we began offering commercial real estate loans
on both owner-occupied and non-owner occupied properties. It is our policy to lend in a first lien
position on such properties. The majority of loans are secured by first mortgages and are expected
to be repaid from the cash flows of the customers. During the second quarter of 2010, we also
began making commercial and industrial loans. Some of the activities that the economy of this
region is dependent upon include the petrochemical industry, the port of New Orleans, healthcare
and tourism. Significant declines in economic activities in these areas could affect the
borrowers ability to repay loans and cause a decline in value of assets securing the loan
portfolio.
While management uses available information to recognize losses on loans and foreclosed
assets, future additions to the allowance may be necessary based on changes in local economic
conditions. In addition, regulatory agencies, as an integral part of their examination process,
periodically review the Banks allowances for losses on loans and foreclosed assets. Such agencies
may require the Bank to recognize additions to the allowance based on their judgments about
information available to them at the time of their examination. Because of these factors, it is
reasonably possible that the allowance for losses on loans and foreclosed assets may change in the
near term.
Cash Equivalents
Cash equivalents consist of cash on hand, in banks, and federal funds sold. For purposes of
the statements of cash flows, the Company considers all highly liquid debt instruments with
original maturities, when purchased, of less than three months to be cash equivalents.
6
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Loans Receivable
Loans receivable are stated at unpaid principal balances, less the allowance for loan losses,
and net of deferred loan origination fees and discounts.
Interest on Loans
Interest on residential mortgage and commercial loans is credited to income as earned. An
allowance is established for interest accrued on loans contractually delinquent three months or
more. Unearned discounts on mortgage and commercial loans are taken into income over the life of
the loan using the interest method. Interest on savings account loans is credited to income as
earned using the simple interest method.
Allowance for Loan Losses
The allowance for loan losses is maintained to provide for probable credit losses related to
specifically identified loans and for losses inherent in the loan portfolio that have been incurred
as of the balance sheet date. The allowance is comprised of specific reserves and a general
reserve. Specific reserves are assessed for each loan that is reviewed for impairment or for which
a probable loss has been identified. The allowance related to loans that are identified as
impaired is based on discounted expected future cash flows (using the loans initial effective
interest rate), the observable market value of the loan, or the estimated fair value of the
collateral for certain collateral dependent loans. Factors contributing to the determination of
specific reserves include the financial condition of the borrower, changes in the value of pledged
collateral and general economic conditions. General reserves are established based on historical
charge-offs considering factors that include risk rating, concentrations and loan type. In
addition, the general reserve considers trends in delinquencies and non-accrual loans,
concentrations, volatility of risk ratings and the evolving mix in terms of collateral, relative
loan size and the degree of seasoning within the various loan products.
Changes in underwriting standards, credit administration and collection policies, regulation
and other factors which affect the credit quality and collectability of the loan portfolio also
impact the unallocated reserve levels. The allowance for loan losses is based on managements
estimate of probable credit losses inherent in the loan portfolio; actual credit losses may vary
from the current estimate. The allowance for loan losses is reviewed periodically, taking into
consideration the risk characteristics of the loan portfolio, past charge-off experience, general
economic conditions and other factors that warrant current recognition. As adjustments to the
allowance for loan losses become necessary, they are reflected as a provision for loan losses in
current-period earnings. Actual loan charge-offs are deducted from and subsequent recoveries of
previously charged-off loans are added to the allowance.
Impaired Loans
FASB ASC Topic 310 Receivables (which includes former Statement of Financial Accounting Standards
(SFAS) No. 114, Accounting by Creditors for Impairment of a Loan and SFAS No. 118, Accounting by
Creditors for Impairment of a Loan Income Recognition and Disclosures), requires that impaired loans be measured based on the present value of expected future cash flows discounted
at the loans original effective interest rate. As a practical expedient, impairment may be
measured based on the loans observable market price or the fair value of the collateral if the
loan is collateral dependent. When the measure of the impaired loan is less than the recorded
investment in the loan, the impairment is recorded through a valuation allowance. This valuation
allowance is recorded in the allowance for loan losses on the balance sheet.
7
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Impaired Loans (Continued)
Interest payments received on impaired loans are recorded as interest income unless collection
of the remaining recorded investment is doubtful, at which time payments received are recorded as
reductions of principal. Changes in the present value due to the passage of time are recorded as
interest income, while changes in estimated cash flows are recorded in the provision for loan
losses.
Loan Origination Fees, Commitment Fees and Related Costs
The Bank has adopted the provisions of FASB ASC Topic 310 Receivables (which includes former
SFAS No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring
Loans and Indirect Costs of Leases). Accordingly, loan origination fees and certain direct loan
origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest
income using the interest method over the contractual life of the loans, adjusted for any
prepayments.
Securities
FASB ASC Topic 320 Investments Debt and Equity Securities (which includes former SFAS No.
115, Accounting for Certain Investments in Debt and Equity Securities), requires the
classification of securities into one of three categories: Trading, Available-for-Sale or
Held-to-Maturity.
Management determines the appropriate classification of debt securities at the time of
purchase and re-evaluates this classification periodically. Trading account securities are held
for resale in anticipation of short-term market movements. Debt securities are classified as
held-to-maturity when the Bank has the positive intent and ability to hold the securities to
maturity. Securities not classified as held-to-maturity or trading are classified as
available-for-sale.
Trading account securities are carried at market value. Gains and losses, both realized and
unrealized, are reflected in earnings.
Held-to-maturity securities are stated at amortized cost. Available-for-sale securities are
stated at fair value, with unrealized gains and losses, net of applicable deferred income taxes,
reported in a separate component of other comprehensive income. The amortized cost of debt
securities classified as held-to- maturity or available-for-sale is adjusted for amortization of
premiums and accretion of discounts to maturity or, in the case of mortgage-backed securities, over
the estimated life of the security. Amortization, accretion and accruing interest are included in
interest income on securities. Realized gains and losses, and declines in value judged to be other
than temporary, are included in net securities gains. The cost of securities sold is determined
based on the specific identification method.
8
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Impaired Securities
Securities available-for-sale or held-to-maturity for which, after acquisition, the Company
believes it will not be able to collect all amounts due according to their contractual terms are
considered to be other-than-temporarily impaired. In accordance with generally accepted accounting
principles, securities considered to be other-than-temporarily impaired are written down to fair
value, and any unrealized loss is charged to net income. The written down amount then becomes the
securitys new cost basis.
Investment in FHLB of Dallas and FNBB Stock
The Bank maintains investments in membership stocks of the Federal Home Loan Bank (FHLB) of
Dallas and First National Bankers Bank (FNBB). The carrying amounts of these investments are
stated at cost. The Bank is required by law to have an investment in stock of the Federal Home Loan
Bank of Dallas. Effective April 16, 2007, the membership investment requirement is .06% of the
members total assets, and the activity-based requirement is 4.1% of advances and applicable
Mortgage Partnership Finance assets.
Foreclosed Assets
Assets acquired through, or in lieu of, foreclosure are initially recorded at the lower of
cost (principal balance of the former mortgage loan plus costs of obtaining title and possession)
or fair value at the date of acquisition. Costs relating to development and improvement of
property are capitalized, whereas costs relating to the holding of property are expensed.
Management periodically performs valuations, and an allowance for losses is established by a
charge to operations if the carrying value of a property exceeds its estimated net realizable
value.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and amortization.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets.
Estimated lives are 10 to 30 years for buildings and improvements and 3 to 10 years for furniture,
fixtures and equipment. Amortization of leasehold improvements is calculated on the straight-line
basis over the terms of the leases.
Income Taxes
The Company recognizes income taxes in accordance with FASB ASC Topic 740 Income Taxes
(formerly SFAS No. 109, Accounting for Income Taxes). Topic 740 uses the asset and liability
method of accounting for income taxes. Under the asset and liability method, deferred income taxes
are recognized for the tax consequences of temporary differences by applying enacted statutory
tax rates applicable to future years to the difference between financial statement carrying amounts
and the tax basis of existing assets and liabilities. Deferred taxes are also recognized for
operating losses and tax credits that are available to offset future income taxes.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Income Taxes (Continued)
When tax returns are filed, it is highly certain that some positions taken would be sustained
upon examination by the taxing authorities, while others are subject to uncertainty about the
merits of the position taken or the amount of the position that would be ultimately sustained. The
benefit of a tax position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not that the position
will be sustained upon examination, including the resolution of appeals or litigation processes, if
any.
Tax positions taken are not offset or aggregated with other positions. Tax positions that
meet the more-likely-than-not recognition threshold are measured as the largest amount of tax
benefit that is more than 50% likely of being realized upon settlement with the applicable taxing
authority. The portion of the benefits associated with tax positions taken that exceeds the amount
measured as described above would be reflected as a liability for unrecognized tax benefits in the
consolidated balance sheet along with any associated interest and penalties that would be payable
to the taxing authorities upon examination. Interest and penalties associated with unrecognized
tax benefits would be classified as additional income taxes in the statement of operations.
While the Bank is exempt from Louisiana Income tax, it is subject to the Louisiana Ad Valorem
Tax, commonly referred to as the Louisiana Share Tax, which is based on stockholders equity and
net income.
In accordance with FASB ASC Topic No. 740 Income Taxes (formerly SFAS 109 Accounting for
Income Taxes), the Company recognizes certain tax assets whose realization depends upon generating
future taxable income. These tax assets can only be realized through the generation of future
taxable income and thereby utilizing the net operating loss carryforwards we have available. At
June 30, 2010, the Company has net operating loss carryforwards of approximately $1.5 million. The
net operating loss carryforwards expire as follows:
2027 |
$ | 309 | ||
2028 |
922 | |||
2029 |
302 | |||
$ | 1,533 | |||
As a result of the Companys acquisition of the stock of the Bank in connection with the
Banks conversion in January 2009, a limitation on the ability to fully utilize the net operating
losses generated in 2008 and prior periods occurred. Based on managements best estimate, the
amount of annual taxable income that can be offset each year by the net operating loss carryforward
is approximately $611,000.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Comprehensive Income
The Company reports comprehensive income in accordance with FASB ASC Topic No. 220
Comprehensive Income (formerly SFAS No. 130, Reporting Comprehensive Income). Topic 220
establishes standards for reporting and presentation of comprehensive income and its components in
a full set of financial statements. Comprehensive income consists of net income and net unrealized
gains (losses) on securities and is presented in the statements of equity and comprehensive income.
Topic 220 requires only additional disclosures in the financial statements; it does not affect the
Companys financial position or results of operations.
Six Months Ended | ||||||||
June 30, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Net Loss |
$ | (39 | ) | $ | (195 | ) | ||
Other Comprehensive (Loss) Income,
Net of Tax |
||||||||
Unrealized (Loss) Gain on
Securities Available-for-Sale |
(16 | ) | 68 | |||||
Total Other Comprehensive (Loss) Income |
(16 | ) | 68 | |||||
Total Comprehensive Loss |
$ | (55 | ) | $ | (127 | ) | ||
Statement of Cash Flows
The statements of cash flows were prepared in accordance with the provisions of FASB ASC Topic
No. 230 Statement of Cash Flows (formerly SFAS No. 104, Statement of Cash Flows Net Reporting
of Certain Cash Receipts and Cash Payments and Classification of Cash Flows from Hedging
Transactions). This Topic permits certain financial institutions to report, in a statement of
cash flows, net receipts and payments for deposits placed, time deposits accepted and repaid and
loans made and collected. Additionally, in accordance with generally accepted accounting
principles, interest credited directly to deposit accounts has been accounted for as operating cash
payments.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
In June 2009, the FASB replaced The Hierarchy of Generally Accepted Accounting Principles,
with the FASB Accounting Standards Codification (the Codification) as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the
Securities and Exchange Commission under authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. The Codification was effective for financial statements
issued for periods ending after September 15, 2009.
On January 1, 2009, the Company adopted new guidance that related to accounting for
noncontrolling interests in consolidated financial statements. The new accounting guidance states
that entities should provide sufficient disclosures that clearly identify and distinguish between
the interests of the parent and the interests of the non-controlling owners separately within the
consolidated statement of financial condition within equity, but separate from the parents equity
and separately on the face of the consolidated statement of operations. Further, the new guidance
states that changes in a parents ownership interest while the parent retains its controlling
financial interest in its subsidiary should be accounted for consistently and when a subsidiary is
deconsolidated, any retained non-controlling equity investment in the former subsidiary should be
initially measured at fair value. The adoption of this guidance had no impact on the Company.
In June 2008, the FASB issued guidance which addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting and, therefore,
included in the earnings allocation in computing earnings per common share (EPS) under the
two-class method. Unvested share-based payment awards that contain non-forfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall
be included in the computation of EPS pursuant to the two-class method. This guidance was
effective for financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those years. All prior-period EPS data presented were to be adjusted
retrospectively (including interim financial statements, summaries of earnings, and selected
financial data) to conform to the provisions of this guidance. Since the Companys unvested
restricted stock awards do not contain nonforfeitable rights to dividends, they are not included
under the scope of this pronouncement, and therefore, the adoption of this guidance had no impact
on the Company.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
In May 2009, FASB issued new guidance relating to subsequent events and established general
standards of accounting for and disclosure of events that occur after the balance sheet date but
before financial statements are issued or are available to be issued. The new guidance sets forth:
the period after the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or disclosure in the
financial statements;
the circumstances under which an entity should recognize events or transactions occurring
after the balance sheet date in its financial statements; and
the disclosures that an entity should make about events or transactions that occurred after
the balance sheet date.
The Company has adopted the new guidance that was effective for financial statements issued for
interim and annual periods ending after June 15, 2009.
In April 2009, the FASB amended existing guidance for determining whether impairment is
other-than-temporary for debt securities. The guidance requires an entity to assess whether it
intends to sell, or it is more likely than not that it will be required to sell, a security in an
unrealized loss position before recovery of its amortized cost basis. If either of these criteria
is met, the entire difference between amortized cost and fair value is recognized as impairment
through earnings. For securities that do not meet the aforementioned criteria, the amount of
impairment is split into two components as follows: 1) other-than-temporary impairment (OTTI)
related to other factors, which is recognized in other comprehensive income and 2) OTTI related to
credit loss, which must be recognized in the income statement. The credit loss is defined as the
difference between the present value of the cash flows expected to be collected and the amortized
cost basis. Additionally, disclosures about other-than-temporary impairments for debt and equity
securities were expanded. This guidance was effective for interim and annual reporting periods
ending after June 15, 2009. The adoption of this guidance had no impact on the Company.
FASB ASC Topic 825 Financial Instruments (formerly FSP SFAS 107-1 Interim Disclosures about
Fair Value of Financial Instruments, which also amended APB Opinion No. 28 Interim Financial
Reporting) was issued in April 2009. This Topic requires disclosures about fair value of financial
instruments for interim reporting periods of publicly traded companies as well as in annual
financial statements. The Topic is effective for interim reporting periods ending after June 15,
2009. Adoption of this Topic did not have a monetary effect on the financial position and results of
operations of the Company, but resulted in expanded disclosures.
In June 2009, the FASB changed the accounting guidance for the consolidation of variable
interest entities. The current quantitative-based risks and rewards calculation for determining
which enterprise is the primary beneficiary of the variable interest entity will be replaced with
an approach focused on identifying which enterprise has the power to direct the activities of a
variable interest entity and the obligation to absorb losses of the entity or the right to receive
benefits from the entity. The new guidance is effective for the Company beginning January 1, 2010.
Adoption of this guidance did not have a material impact on the Companys consolidated financial
statements.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
In June 2009, the FASB changed the accounting guidance for transfers of financial assets. The
new guidance increases the information that a reporting entity provides in its financial reports
about a transfer of financial assets; the effects of a transfer on its statement of financial
condition, financial performance and cash flows; and a continuing interest in transferred financial
assets. In addition, the guidance amends various concepts associated with the accounting for
transfers and servicing of financial assets and extinguishments of liabilities including removing
the concept of qualified special purpose entities. This new guidance is applicable to transfers
occurring on or after January 1, 2010. Adoption of this guidance did not have a material impact on
the Companys consolidated financial statements.
In August 2009, the FASB updated its guidance for the fair value measurement of liabilities.
The update provided clarification that in circumstances in which a quoted price in an active market
for the identical liability is not available, a reporting entity is required to measure fair value
of the liability using: (1) the quoted price of the identical liability when traded as an asset,
(2) quoted prices for similar liabilities or similar liabilities when traded as assets, (3) an
income approach, such as a present value technique, (4) a market approach such as the amount the
reporting entity would pay to transfer the liability or enter into the identical liability. The
update also states that a reporting entity would not adjust the fair value of a liability for
restrictions that prevent the transfer of the liability. The updated liability fair value
measurement guidance is effective as of September 30, 2009. This update did not have a material
effect on the Companys financial statements.
In March 2008, FASB ASC Topic 815 Derivative and Hedging (formerly SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities) was issued. Topic 815 is
intended to improve financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their effects on an
entitys financial position, financial performance, and cash flows. Topic 815 is effective for
financial statements issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. The adoption of Topic 815 did not have a material impact on the
Companys consolidated financial statements.
In September 2008 FASB ASC Topic 815 Derivatives and Hedging (which includes former FASB
Staff Position (FSP) FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Financial
Guarantees) was issued. This Topic requires companies that sell credit derivatives to disclose
information that will enable financial statement users to assess the potential effect of the credit
derivatives on the sellers financial position, financial performance, and cash flows. Topic 815 is
effective for interim and annual periods ending after November 15, 2008. This pronouncement did
not have an effect on the financial position and results of operations of the Company.
In February 2008, FASB ASC Topic 860 Transfers and Servicing (which includes former FSP FAS
140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions) was
issued, which provides guidance on accounting for a transfer of a financial asset and a repurchase
financing. The Topic presumes that an initial transfer of a financial asset and a repurchase
financing are considered part of the same arrangement under Topic 860. However, if certain
criteria are met, the initial transfer and repurchase shall not be evaluated as a linked
transaction and therefore evaluated separately under Topic 860. The Topic is effective for
repurchase financing in which the initial transfer is entered in fiscal years beginning after
November 15, 2008. The pronouncement did not have a material impact on the Companys consolidated
financial statements.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
In April 2008, FASB ASC Topic 350 Intangibles Goodwill and Other (which includes former
FSP 142-3) was issued which amends the list of factors an entity should consider in developing
renewal of extension assumptions used in determining the useful life of recognized intangible
assets under Topic 350. The new guidance applies to intangible assets that are acquired
individually or with a group of other assets and to intangible assets acquired in both business
combinations and asset acquisitions. The Topic is effective for financial statements issued for
fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The
guidance must be applied prospectively only to intangible assets acquired after the Topics
effective date. This pronouncement did not have a material impact on the Companys financial
statements.
In July 2010, the FASB issued Accounting Standards Update (ASU) 2010-20, Disclosures about
the Credit Quality of Financing Receivables and the Allowance for Credit Losses, which amends ASC
Topic 310 Receivables. The primary objective of ASU 2010-20 is to provide financial statement
users with greater transparency about an entitys allowance for credit losses and the credit
quality of its financing receivables. For public entities, the amendments pertaining to
disclosures are effective for interim and annual reporting periods ending on or after December 15,
2010.
Advertising
The Company follows the policy of charging the costs of advertising to expense as incurred.
Advertising expense was $31,000 and $14,000 for the three months ended June 30, 2010 and 2009,
respectively, and $57,000 and $16,000 for the six months ended June 30, 2010 and 2009,
respectively.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 2. Investment Securities
A summary of investment securities classified as trading, held-to-maturity and
available-for-sale is presented below.
Trading Securities
The Company had no securities classified as trading securities at June 30, 2010 and December
31, 2009.
Held-to-Maturity
There were no held-to-maturity securities at June 30, 2010 or December 31, 2009.
Available-for-Sale
The carrying values and estimated market values of available-for-sale securities at June 30,
2010 and December 31, 2009, are summarized as follows:
June 30, 2010 (Unaudited) | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Government Agencies |
$ | 500 | $ | 7 | $ | | $ | 507 | ||||||||
Mortgage Backed Securities |
5,061 | 170 | | 5,231 | ||||||||||||
Total Securities Available-for-Sale |
$ | 5,561 | $ | 177 | $ | | $ | 5,738 | ||||||||
December 31, 2009 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Government Agencies |
$ | 1,501 | $ | 8 | $ | | $ | 1,509 | ||||||||
Mortgage Backed Securities |
6,591 | 193 | | 6,784 | ||||||||||||
Total Securities Available-for-Sale |
$ | 8,092 | $ | 201 | $ | | $ | 8,293 | ||||||||
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 2. Investment Securities (Continued)
Available-for-Sale (Continued)
The amortized cost and estimated market values of available-for-sale securities at June
30, 2010 and at December 31, 2009, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
June 30, 2010 (Unaudited) | ||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
(In Thousands) | ||||||||
Due in One Year or Less |
$ | 558 | $ | 568 | ||||
Due After One Year Through Five Years |
3,936 | 4,036 | ||||||
Due After Five Years Through Ten Years |
786 | 835 | ||||||
Due After Ten Years Through Twenty Years |
49 | 49 | ||||||
Due After Twenty Years |
232 | 250 | ||||||
$ | 5,561 | $ | 5,738 | |||||
December 31, 2009 | ||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
(In Thousands) | ||||||||
Due in One Year or Less |
$ | 915 | $ | 919 | ||||
Due After One Year Through Five Years |
4,179 | 4,268 | ||||||
Due After Five Years Through Ten Years |
2,649 | 2,739 | ||||||
Due After Ten Years Through Twenty Years |
| | ||||||
Due After Twenty Years |
349 | 367 | ||||||
$ | 8,092 | $ | 8,293 | |||||
Fair values for securities are determined from quoted prices or quoted market prices of
similar securities of comparable risk and maturity where no quoted market price exists. Management
does not anticipate a requirement to sell any of Hibernias investment securities for liquidity or
other operating purposes.
The proceeds from the sales, redemptions and maturities of securities available-for-sale for
the six months ended June 30, 2010 and 2009 were approximately $2.5 million and $1.5 million,
respectively. There were no gross realized gains for the three or six month periods ended June 30,
2010 or June 30, 2009.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 2. Investment Securities (Continued)
There were no gross unrealized losses in investment securities at June 30, 2010 or December
31, 2009 existing for continuous periods of less than 12 months or for continuous periods of 12
months or more.
Management evaluates securities for other-than-temporary impairment on a periodic and regular
basis, as well as when economic or market concerns warrant such evaluation. Consideration is given
to (1) the length of time and the extent to which the fair value has been less than cost, (2) the
financial condition and near-term prospects of the issuer, and (3) the intent and ability of
Hibernia to retain its investment in the issuer for a period of time sufficient to allow
for any anticipated recovery in fair value.
Note 3. Loans Receivable
Loans receivable at June 30, 2010 and December 31, 2009 are summarized as follows:
June 30, 2010 | December 31, 2009 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Real Estate Loans: |
||||||||
One-to-Four Family Residential |
$ | 39,248 | $ | 35,736 | ||||
Multi-Family Residential |
179 | 184 | ||||||
Second Mortgage Residential |
212 | 219 | ||||||
Residential Construction and Land Loans |
1,453 | 410 | ||||||
Commercial Loans Secured by Real Estate |
12,147 | 8,447 | ||||||
Total Real Estate Loans |
53,239 | 44,996 | ||||||
Commercial and Industrial Loans |
2,469 | | ||||||
Other Loans: |
||||||||
Home equity line of credit |
277 | 244 | ||||||
Loans secured by deposits |
25 | 25 | ||||||
Total Other Loans |
302 | 269 | ||||||
Total Loans |
56,010 | 45,265 | ||||||
Less: |
||||||||
Allowance for loan losses |
340 | 330 | ||||||
Deferred loan fees |
(55 | ) | (52 | ) | ||||
285 | 278 | |||||||
Net Loans |
$ | 55,725 | $ | 44,987 | ||||
Loans past due more than ninety days amounted to $157,000 and $0 at June 30, 2010 and
December 31, 2009, respectively. Non-accruing loan balances amounted to $263,000 and $315,000 at
June 30, 2010 and December 31, 2009, respectively.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Note 3. Loans Receivable (Continued)
Activity in the allowance for loan losses is summarized as follows: |
Six Months Ended | Year Ended | |||||||
June 30, 2010 | December 31, 2009 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Balance, Beginning of Period |
$ | 330 | $ | 273 | ||||
Provision Charged to Operating Expense |
10 | 78 | ||||||
Loans Charged Off, Net of Recoveries |
| (21 | ) | |||||
Balance, End of Period |
$ | 340 | $ | 330 | ||||
At June 30, 2010 and December 31, 2009, the total recorded investment in impaired loans,
all of which have reserves determined in accordance with FASB ASC Topic 310, amounted to $525,000
and $403,000, respectively. The allowance for loan losses related to impaired loans at June 30,
2010 and December 31, 2009 amounted to $34,000 and $26,000, respectively. Interest income
recognized on impaired loans was not significant for the six months ended June 30, 2010 and 2009.
The Bank is not committed to lend additional funds to debtors whose loans have been modified.
In 2005 Hurricane Katrina affected the residents and businesses within the Banks operating
area. The adverse financial impacts of this event on the Banks loan portfolio were recognized at
that time. Management continues to closely monitor the loan portfolio, and no substantial
additional losses directly related to this catastrophe have been experienced to date. However, as
indicated previously, the extent to which the still affected areas within the Banks market area
eventually recover is unknown at this time as are the ultimate adverse additional impacts that the
hurricane might have, if any, on the Banks loan portfolio.
On April 22, 2010, an oil rig exploded in the Gulf of Mexico off the coast of Louisiana.
Since that date a substantial amount of oil has leaked from the damaged well into the Gulf and it
has only recently been fully contained. The spill poses a potentially grave threat to the coast of
Louisiana and its estuaries. In addition, the spill has caused significant disruption to the gulf
coast tourism and fishing industries. The U.S. Government imposed a six-month drilling moratorium
on deepwater drilling rigs through November 30, 2010 and has implemented new safety regulations for
all offshore drilling operations. The economic impact of the spill and the government imposed
drilling moratorium on the economy of Louisiana has not been determined but could be severe. The
Company is monitoring developments in the Gulf and will assess potential adverse impacts on the
Banks customers as events unfold and more information is available. To date, there has been no
discernable impact on the Banks loan portfolio.
Note 4. Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by its primary
federal regulator, the Federal Deposit Insurance Corporation. Failure to meet the minimum
regulatory capital requirements can initiate certain mandatory and possible additional
discretionary actions by regulators, which if undertaken, could have a direct material impact on
the Bank and the consolidated financial statements. As a savings and loan holding company,
Hibernia is not subject to any regulatory capital requirements.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Note 4. Regulatory Matters (Continued)
Under the regulatory capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines involving quantitative measures
of the Banks assets, liabilities and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Banks capital amounts and classification under the prompt
corrective action guidelines are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to
maintain minimum amounts and ratios of: total risk-based capital and Tier I capital to
risk-weighted assets (as defined in the regulations), Tier I capital to adjusted total assets (as
defined), and tangible capital to adjusted total assets (as defined). Management believes, as of
June 30, 2010, that the Bank meets all capital adequacy requirements to which they are subject.
The Bank was considered well capitalized according to its last regulatory examination.
The Bank, at June 30, 2010 and December 31, 2009, exceeds all of the capital adequacy
requirements to which it is subject as illustrated by the following:
Actual | Required | |||||||||||||||
Amount | Ratio | Amount | Ratio | |||||||||||||
(Unaudited) | ||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||
June 30, 2010 |
||||||||||||||||
Tier 1 Capital (to Average Assets) |
$ | 18,532 | 27.08 | % | $ | 2,737 | 4.00 | % | ||||||||
Tier 1 Capital (to Risk-Weighted Assets) |
$ | 18,532 | 39.92 | % | $ | 1,857 | 4.00 | % | ||||||||
Total Risk-Based Capital (to
Risk-Weighted Assets) |
$ | 18,872 | 40.66 | % | $ | 3,713 | 8.00 | % |
Actual | Required | |||||||||||||||
Amount | Ratio | Amount | Ratio | |||||||||||||
(Dollars in Thousands) | ||||||||||||||||
December 31, 2009 |
||||||||||||||||
Tier 1 Capital (to Average Assets) |
$ | 18,525 | 29.37 | % | $ | 2,523 | 4.00 | % | ||||||||
Tier 1 Capital (to Risk-Weighted Assets) |
$ | 18,525 | 50.41 | % | $ | 1,470 | 4.00 | % | ||||||||
Total Risk-Based Capital (to
Risk-Weighted Assets) |
$ | 18,855 | 51.31 | % | $ | 2,940 | 8.00 | % |
Note 5. Mutual to Stock Conversion
On January 27, 2009, the Bank completed its conversion from a mutual to a stock form of
organization as a subsidiary of Hibernia Homestead Bancorp and the Company completed an initial
public offering in which it issued 1,113,334 shares of its common stock for a total of $11,133,340
in gross offering proceeds. In conjunction with the conversion, the Bank established a liquidation
account in an amount equal to the Banks retained earnings contained in the final prospectus. The liquidation
account will be maintained for the benefit of eligible account holders and supplemental eligible
account holders who maintain deposit accounts in the Bank after the conversion.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 5. Mutual to Stock Conversion (Continued)
In the event of a complete liquidation (and only in such event), each eligible account holder
and supplemental eligible account holder will be entitled to receive a liquidation distribution
from the liquidation account in the amount of the then current adjusted balance of deposit accounts
held, before any liquidation distribution may be made with respect to common stock. Except for the
repurchase of stock and payment of dividends by the Bank, the existence of the liquidation account
will not restrict the use or application of such retained earnings.
Note 6. Disclosure About Fair Value of Financial Instruments
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 the value:
Cash and Short -Term Investments
For cash, the carrying amount approximates fair value. For short-term investments, fair
values are calculated based upon general investment market interest rates for similar
maturity investments.
Investment Securities
For securities and marketable equity securities held-for-investment purposes, fair values
are based on quoted market prices.
Loan Receivables
For certain homogeneous categories of loans, such as residential mortgages, commercial real
estate loans, credit card receivables and other consumer loans, fair value is estimated
using the current U.S. treasury interest rate curve, a factor for cost of processing and a
factor for historical credit risk to determine the discount rate.
Deposit Liabilities
The fair value of demand deposits, savings deposits and certain money market deposits are
calculated based upon general investment market interest rates for investments with similar
maturities. The value of fixed maturity certificates of deposit is estimated using the U.S.
treasury interest rate curve currently offered for deposits of similar remaining maturities.
Commitments to Extend Credit
The fair value of commitments is estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements and the
present credit-worthiness of the counterparties.
21
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 6. Disclosure About Fair Value of Financial Instruments (Continued)
The estimated fair values of the Banks financial instruments at June 30, 2010 and December
31, 2009, are as follows (reported in thousands):
June 30, 2010 | ||||||||
(Unaudited) | ||||||||
Carrying | Fair | |||||||
Amount | Value | |||||||
Financial Assets |
||||||||
Cash and Short-Term Investments |
$ | 3,798 | $ | 3,798 | ||||
Investment Securities |
5,738 | 5,738 | ||||||
Loans, net |
55,725 | 55,744 | ||||||
$ | 65,261 | $ | 65,280 | |||||
Financial Liabilities |
||||||||
Deposits and Advance Payments by Borrowers
for Taxes and Insurance |
$ | 49,344 | $ | 48,344 | ||||
Unrecognized Financial Instruments |
||||||||
Commitments to Extend Credit |
$ | 3,475 | $ | 3,475 | ||||
December 31, 2009 | ||||||||
Carrying | Fair | |||||||
Amount | Value | |||||||
Financial Assets |
||||||||
Cash and Short-Term Investments |
$ | 6,233 | $ | 6,233 | ||||
Investment Securities |
8,293 | 8,293 | ||||||
Certificates of Deposit |
475 | 475 | ||||||
Loans, net |
44,987 | 43,742 | ||||||
$ | 59,988 | $ | 58,743 | |||||
Financial Liabilities |
||||||||
Deposits and Advance Payments by Borrowers
for Taxes and Insurance |
$ | 43,026 | $ | 41,977 | ||||
Unrecognized Financial Instruments |
||||||||
Commitments to Extend Credit |
$ | 8,519 | $ | 8,519 | ||||
22
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 7. Fair Value of Financial Instruments
The Company adopted FASB ASC Topic No. 820, Fair Value Measurement and Disclosures (formerly
SFAS No. 157 Fair Value Measurements), on January 1, 2008 for all financial assets and
liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value
in the financial statements on a recurring basis (at least annually). This Topic defines fair
value, establishes a framework for measuring fair value, and expands disclosures about fair value
measurements.
Topic No. 820 defines fair value as the price that would be received upon sale of an asset or
paid upon transfer of a liability in an orderly transaction between market participants at the
measurement date and in the principal or most advantageous market for that asset or liability. The
fair value should be calculated based on assumptions that market participants would use in pricing
the asset or liability, not on assumptions specific to the entity. In addition, the fair value of
liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, Topic No. 820 expands the disclosure requirements around
fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes
the inputs into three levels based on the extent to which inputs used in measuring fair value are
observable in the market. Each fair value measurement is reported in one of the three levels which
are determined by the lowest level input that is significant to the fair value measurement in its
entirety. These levels are:
| Level 1 Inputs are based upon unadjusted quoted prices for identical instruments
traded in active markets. |
| Level 2 Inputs are based upon quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques for which all significant assumptions are
observable in the market or can be corroborated by observable market data for
substantially the full term of the assets or liabilities. |
| Level 3 Inputs are generally unobservable and typically reflect managements
estimates of assumptions that market participants would use in pricing the asset or
liability. The fair values are therefore determined using model-based techniques that
include option pricing models, discounted cash flow models, and similar techniques. |
The following table presents the Banks assets and liabilities measured at fair value on a
recurring basis at June 30, 2010:
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
(In Thousands) | ||||||||||||||||
Assets |
||||||||||||||||
Investment Securities |
$ | 5,738 | $ | | $ | 5,738 | $ | | ||||||||
Total |
$ | 5,738 | $ | | $ | 5,738 | $ | | ||||||||
Liabilities |
$ | | $ | | $ | | $ | | ||||||||
Total |
$ | | $ | | $ | | $ | | ||||||||
23
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 8. Employee Stock Ownership Plan
In connection with the Conversion, the Company established an employee stock ownership plan
(ESOP) that provides retirement benefits to all eligible employees of Hibernia Homestead Bank.
On January 27, 2009, the ESOP borrowed $890,660 from the Company and used these funds to purchase
8%, or 89,066 shares, of the shares sold in the Companys initial public offering. As the loan is
repaid and shares are released from collateral, the shares are allocated to the ESOP participants
based on their individual compensation as a percentage of total compensation of all eligible
participants. The Bank recognizes compensation expense equal to the fair value of the ESOP shares
committed to be released during the period. ESOP compensation expense for the quarters ended June
30, 2010 and 2009 amounted to $13,000 and $11,000, respectively. ESOP Compensation expense for the
six months ended June 30, 2010 and 2009 amounted to $26,000 and $18,000, respectively.
Note 9. Recognition and Retention Plan
On July 30, 2009, the shareholders of the Company approved the Companys 2009 Recognition and
Retention Plan. The 2009 Recognition and Retention Plan will provide the Companys directors and
key employees with an equity interest in the Company as compensation for their contributions to the
success of the Company, and as an incentive for future such contributions. The Board of Directors
of the Company may make grants under the 2009 Recognition and Retention Plan to eligible
participants based on these factors. Plan participants will vest in their share awards at a rate
no more rapid than 20% per year over a five year period, beginning on the date of the plan share
award. If service to the Company is terminated for any reason other than death, disability or
change in control, the unvested share awards shall be forfeited. As of June 30, 2010, 11,133
shares have been awarded under the Plan.
The Recognition and Retention Plan Trust (RRP) has been established to acquire, hold,
administer, invest, and make distributions from the Trust in accordance with provisions of the Plan
and Trust. The Trust will acquire 4%, or 44,533 shares, of the shares sold in the Companys
initial public offering, which will be held in the Trust subject to the Plans vesting
requirements. The Recognition and Retention Plan provides that grants to each employee and
non-employee director shall not exceed 25% and 5% of the shares available under the Plan,
respectively. Shares awarded to non-employee directors in the aggregate shall not exceed 30% of the
shares available under the Plan. As of June 30, 2010, 20,000 shares have been acquired by the
Trust.
Note 10. Stock Option Plan
On July 30, 2009, the shareholders of the Company approved the Companys 2009 Stock Option
Plan. The 2009 Stock Option Plan will provide the Companys directors and key employees with a
proprietary interest in the Company as compensation for their contributions to the success of the
Company, and as an incentive for future such contributions. The Board of Directors of the Company
may grant options to eligible employees and non-employee directors based on these factors. Plan
participants will vest in their options at a rate no more rapid than 20% per year over a five year
period, beginning on the grant date of the option. Vested options will have an exercise period of
ten years commencing on the date of grant. If service to the Company is terminated for any reason
other than death, disability or change in control, the unvested options shall be forfeited. The
Company recognizes compensation expense during the vesting period based on the fair value of the
option on the date of grant. As of June 30, 2010, 63,833 options have been granted to eligible
employees. For the quarter and six months ended June 30, 2010 the Company recognized $14,000 and
$15,000, respectively, of compensation expense related to stock options granted. For the six
months ended June 30, 2009, the Company recognized no compensation expense related to stock
options.
24
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 11. Subsequent Events
In accordance with the subsequent events topic of the FASB ASC, Topic No. 855, Subsequent
Events, the Company evaluates events and transactions that occur after the balance sheet date for
potential recognition in the financial statements. The effects of all subsequent events that
provide additional evidence of conditions that existed at the balance sheet date are recognized in
the financial statements as of June 30, 2010. In preparing these financial statements, the Company
evaluated the events and transactions that occurred through the date these financial statements
were issued.
Item 2 | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements and information
relating to Hibernia Homestead Bancorp, Inc. (the Company or Hibernia) and Hibernia Homestead
Bank (the Bank) that are based on the beliefs of management as well as assumptions made by and
information currently available to management. In addition, in portions of this document the words
anticipate, believe, estimate, expect, intend, should and similar expressions, or the
negative thereof, as they relate to the Company or the Bank or their management, are intended to
identify forward-looking statements. Such statements reflect the current views of the Company
and/or the Bank with respect to forward-looking events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or uncertainties materialize or
should underlying assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated, expected or intended. The Company does not
intend to update these forward-looking statements.
General
The Company was formed by the Bank in June 2008, in connection with the Banks conversion to a
Louisiana chartered stock form savings bank (the Conversion) completed on January 27, 2009. The
Companys results of operations are primarily dependent on the results of the Bank, which became a
wholly owned subsidiary upon completion of the Conversion. The Banks results of operations
depend, to a large extent, on net interest income, which is the difference between the income
earned on its loan and investment portfolios and the cost of funds, consisting of the interest paid
on deposits and borrowings. Results of operations are also affected by provisions for loan losses,
fee income and other non-interest income and non-interest expense. Non-interest expense
principally consists of compensation and employee benefits, office occupancy and equipment expense,
data processing, advertising and business promotion and other expense. The Banks results of
operations are also significantly affected by general economic and competitive conditions,
particularly changes in interest rates, government policies and actions of regulatory authorities.
Future changes in applicable law, regulations or government policies may materially impact our
financial condition and results of operations.
25
Table of Contents
Critical Accounting Policies
In reviewing and understanding financial information for Hibernia, you are encouraged to read
and understand the significant accounting policies used in preparing our financial statements.
These policies are described in Note 1 of the notes to our financial statements. The accounting and
financial reporting policies of Hibernia conform to accounting principles generally accepted in the
United States of America and to general practices within the banking industry. Accordingly, the
consolidated financial statements require certain estimates, judgments, and assumptions, which are
believed to be reasonable, based upon the information available. These estimates and assumptions
affect the reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the periods presented. The following accounting
policies comprise those that management believes are the most critical to aid in fully
understanding and evaluating our reported financial results. These policies require numerous
estimates or economic assumptions that may prove inaccurate or may be subject to variations which
may significantly affect our reported results and financial condition for the period or in future
periods.
Allowance for Loan Losses. The allowance for loan losses is maintained at a level to provide
for probable credit losses related to specifically identified loans and for losses inherent in the
loan portfolio that have been incurred as of the balance sheet date. The allowance is comprised of
specific reserves and a general reserve. Specific reserves are assessed for each loan that is
reviewed for impairment or for which a probable loss has been identified. The allowance related to
loans that are identified as impaired is based on discounted expected future cash flows using the
loans initial effective interest rate, the observable market value of the loan, or the estimated
fair value of the collateral for certain collateral dependent loans. Factors contributing to the
determination of specific reserves include the financial condition of the borrower, changes in the
value of pledged collateral and general economic conditions. General reserves are established
based on historical charge-offs considering factors that include risk rating, concentrations and
loan type. For the general reserve, management also considers trends in delinquencies and
non-accrual loans, concentrations, volatility of risk ratings and the evolving mix in terms of
collateral, relative loan size and the degree of seasoning within the various loan products.
Changes in underwriting standards, credit administration and collection policies, regulation
and other factors which affect the credit quality and collectability of the loan portfolio also
impact the allowance levels. The allowance for loan losses is based on managements estimate of
probable credit losses inherent in the loan portfolio; actual credit losses may vary from the
current estimate. The allowance for loan losses is reviewed periodically, taking into
consideration the risk characteristics of the loan portfolio, past charge-off experience, general
economic conditions and other factors that warrant current recognition. As adjustments to the
allowance for loan losses become necessary, they are reflected as a provision for loan losses in
current-period earnings. Actual loan charge-offs are deducted from and subsequent recoveries of
previously charged-off loans are added to the allowance.
Income Taxes. Deferred income tax assets and liabilities are determined using the liability
(or balance sheet) method. Under this method, the net deferred tax asset or liability is
determined based on the tax effects of the temporary differences between the book and tax bases of
the various assets and liabilities and gives current recognition to changes in tax rates and laws.
Realizing our deferred tax assets principally depends upon our achieving projected future taxable
income. We may change our judgments regarding future profitability due to future market conditions
and other factors. We may adjust our deferred tax asset balances if our judgments change.
26
Table of Contents
Comparison of Financial Condition at June 30, 2010 and December 31, 2009
Hibernia Homestead Bancorps total assets increased $5.3 million, or 8%, to $71.8 million at
June 30, 2010 compared to $66.5 million at December 31, 2009. During the first six months of 2010,
net loans receivable increased $10.7 million offset by a decrease of $2.6 million in investment
securities available-for-sale and a decrease of $2.5 million in federal funds sold. The decrease
of $2.4 million in cash and cash equivalents as of June 30, 2010, is primarily a result of the
funding of new loans. Our net loans receivable increased by $10.7 million, or 23.9%, to $55.7
million at June 30, 2010, compared to $45.0 million at December 31, 2009 primarily due to an
increase in commercial loans secured by real estate of $3.7 million, a $2.5 million increase in
commercial and industrial loans, an increase of $3.5 million in residential mortgage loans and a
$1.0 million increase in residential construction loans. During the first six months of 2010 our
total loan originations amounted to approximately$13.1 million and loan principal repayments were
approximately $2.4 million. Our total investment securities amounted to $5.7 million at June 30,
2010, compared to $8.3 million at December 31, 2009, a decrease of $2.6 million, or 30.8%. The
decrease in investment securities was due to maturities and redemptions of securities
available-for-sale received during the period.
Hibernias deposits increased $6.4 million, or 15.1%, to $49.1 million at June 30, 2010,
compared to $42.6 million at December 31, 2009. The Bank had no Federal Home Loan Bank advances at
June 31, 2010, or December 31, 2009, as we continued our strategy in recent periods of managing
interest rate risk by paying down higher cost borrowings. Our stockholders equity amounted to
$22.3 million at June 30, 2010 compared to $23.4 million at December 31, 2009, a decrease of $1.1
million, or 4.7%. The decrease in stockholders equity was due primarily to purchases of treasury
stock for an aggregate purchase price of $788,000 and purchases of shares to fund our Recognition
and Retention Plan of $293,000 and, to a lesser extent, our net loss of $39,000 for the six months
ended June 30, 2010, and other comprehensive loss of $16,000. During the first six months of 2010
we repurchased 55,667 shares of the Companys common stock as treasury stock and purchased 20,000
shares to fund our Recognition and Retention Plan.
Comparison of Operating Results for the Three and Six Months Ended June 30, 2010 and 2009.
For the three months ended June 30, 2010, Hibernia Homestead Bancorp had a net loss of $26,000
compared to a net loss of $83,000 for the three months ended June 30, 2009. Our results in the
2010 quarterly period reflect an increase in our net interest margin for the quarter ended June 30,
2010. Our net interest margin increased by 39 basis points to 4.35% for the three months ended
June 30, 2010 compared to 3.96% for the three months ended June 30, 2009, while our average
interest rate spread improved to 3.92% for the three months ended June 30, 2010, compared to 3.37%
for the three months ended June 30, 2009. During the three months ended June 30, 2010, the average
rate paid on certificates of deposit decreased 64 basis points from 2.38% for the three months
ended June 30, 2009, to 1.74% for the three months ended June 30, 2010.
For the six months ended June 30, 2010, our net loss was $39,000 compared to a net loss of
$195,000 for first six months of 2009. Our results in the 2010 period reflect in part an increase
in our net interest margin for the six months ended June 30, 2010. In addition, our non-interest
expenses increased $107,000, or 8.5%, over the prior six month period. For the first six months of
2010, our net interest margin and average interest rate spread were 4.24% and 3.78%, respectively,
compared to 3.74% and 3.15%, respectively for the six months ended June 30, 2009. During the first
six months of 2010, the average rate paid on certificates of deposit decreased 75 basis points from
2.57% for the six months ended June 30, 2009, to 1.82% for the six months ended June 30, 2010.
Lower rates on certificates of deposit during the six months ended June 30, 2010 reflect general
interest rate declines during the period.
27
Table of Contents
Interest Income. Hibernias total interest income was $820,000 for the three months ended
June 30, 2010, compared to $628,000 for the three months ended June 30, 2009, a $192,000 or 30.6%
increase. The increase in interest income in the three months ended June 30, 2010, compared to the three
months ended June 30, 2009, was due primarily to an increase in loans and a decrease in lower
yielding investment securities as a percentage of earning assets. The average yield on our
interest-earning assets was 5.33% for the three months ended June 30, 2010, compared to 5.03% for
the comparable period in 2009. Average interest-earning assets were $61.5 million for the three
months ended June 30, 2010, compared to $49.9 million for the comparable period in 2009.
For the six months ended June 30, 2010, total interest income was $1.6 million, compared to
$1.2 million for the six months ended June 30, 2009, a $324,000, or 26.3% increase. The increase
in interest income for the six months ended June 30, 2010, compared to the six months ended June
30, 2009, was due primarily to an increase in loans and a decrease in lower yielding investment
securities as a percentage of earning assets. The average yield on our interest-earning assets was
5.18% for the six months ended June 30, 2010, compared to 4.93% for the comparable period in 2009.
Average interest-earning assets were $60.1 million for the six months ended June 30, 2010, compared
to $49.9 million for the comparable period in 2009.
Interest Expense. Hibernias total interest expense was $153,000 for the three months ended
June 30, 2010, compared to $135,000 for the three months ended June 30, 2009, an increase of
$18,000, or 13.3%. The increase in interest expense for the three month period ended June 30, 2010
was primarily due to an increase in interest-bearing deposits partially offset by a reduction in
the average rate paid on certificates of deposit. Our average rate paid on interest-bearing
liabilities was 1.41% for the three months ended June 30, 2010, compared to 1.66% for the three
months ended June 30, 2009.
Our total interest expense was $294,000 for the six months ended June 30, 2010, compared to
$305,000 for the six months ended June 30, 2009, a decrease of $11,000, or 3.6%. The decrease in
interest expense for the six months ended June 30, 2010 was primarily due to lower average rates of
interest paid on our certificates of deposit in the 2010 period combined with decreases in the
average balances of certificates of deposit. For the six months ended June 30, 2010, our average
rate paid on interest-bearing liabilities was 1.40%, compared to 1.78% for the six months ended
June 30, 2009.
Non-Interest Income. Hibernias non-interest income consists of rental income, net of related
expenses, fees and service charges, and realized gains and losses on investments.
Hibernias total non-interest income amounted to $31,000 for the three months ended June 30,
2010, compared to $36,000 for the three months ended June 30, 2009, a $5,000, or 13.9%, decrease.
The decrease for the three month period was primarily due to lower rental income as property
previously leased was converted to a branch office in 2009.
For the six months ended June 30, 2010, our non-interest income was $69,000, compared to
$58,000 for the six months ended June 30, 2009, an $11,000, or 19.0%, increase. The increase for
the six month period was primarily due to lower maintenance costs associated with the related
rental properties, partially offset by lower rental income as property previously leased was
converted to a branch office in 2009.
Non-Interest Expense. Hibernias total non-interest expense increased by $62,000, or 9.5%, to
$718,000 for the three months ended June 30, 2010, compared to $656,000 for the three months ended
June 30, 2009. For the six months ended June 30, 2010, compared to the six months ended June 30,
2009, our non-interest expense increased by $107,000, or 8.5%. The primary reasons for the
increase in non-interest expense for the three months and six months ended June 30, 2010 was higher
data processing, occupancy and advertising expenses, along with an increase in professional fees
and franchise and shares taxes.
28
Table of Contents
Average Balances, Net Interest Income, and Yields Earned and Rates Paid. The following table shows
for the periods indicated the total dollar amount of interest from average interest-earning assets
and the resulting yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates, and the net interest margin. As the Company owned no
tax-exempt securities during the periods presented, no yield adjustments were made. All average
balances are based on daily averages.
Three Months Ended June 30, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
Balance(3) | Interest(3) | Rate(1) | Balance(3) | Interest(3) | Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans receivable(1) |
$ | 54,000 | $ | 760 | 5.63 | % | $ | 34,319 | $ | 498 | 5.80 | % | ||||||||||||
Investment securities |
6,113 | 59 | 3.81 | 13,623 | 126 | 3.70 | ||||||||||||||||||
Other interest-earning assets |
1,401 | 1 | 0.26 | 1,938 | 4 | 0.74 | ||||||||||||||||||
Total interest-earning assets |
61,514 | 820 | 5.33 | % | 49,880 | 628 | 5.03 | % | ||||||||||||||||
Non-interest-earning assets |
7,604 | 7,337 | ||||||||||||||||||||||
Total assets |
$ | 69,118 | $ | 57,217 | ||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Savings, NOW and money market accounts |
17,119 | 37 | 0.87 | % | 13,613 | 22 | 0.65 | % | ||||||||||||||||
Certificates of deposit |
26,500 | 116 | 1.74 | 19,003 | 113 | 2.38 | ||||||||||||||||||
Total interest-bearing deposits |
43,619 | 153 | 1.41 | % | 32,616 | 135 | 1.66 | % | ||||||||||||||||
FHLB advances and Federal Funds Purchased |
789 | | | | | | ||||||||||||||||||
Total interest-bearing liabilities |
44,408 | 153 | 1.41 | % | 32,616 | 135 | 1.66 | % | ||||||||||||||||
Non-interest-bearing liabilities |
2,173 | 946 | ||||||||||||||||||||||
Total liabilities |
46,581 | 33,562 | ||||||||||||||||||||||
Equity |
22,537 | 23,655 | ||||||||||||||||||||||
Total liabilities and equity |
$ | 69,118 | $ | 57,217 | ||||||||||||||||||||
Net interest-earning assets |
$ | 17,106 | $ | 17,264 | ||||||||||||||||||||
Net interest income; average interest
rate spread |
$ | 667 | 3.92 | % | $ | 493 | 3.37 | % | ||||||||||||||||
Net interest margin(2) |
4.35 | % | 3.96 | % | ||||||||||||||||||||
Average interest-earning assets to
average interest-bearing liabilities |
138.52 | % | 152.93 | % | ||||||||||||||||||||
(1) | Calculated net of deferred fees and discounts, loans in process and allowance for
loan losses. |
|
(2) | Equals net interest income divided by average interest-earning assets. |
|
(3) | Amounts that do not round to $1,000 are reflected as none. |
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Table of Contents
Six Months Ended June 30, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
Balance(3) | Interest(3) | Rate(1) | Balance(3) | Interest(3) | Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans receivable(1) |
$ | 50,304 | $ | 1,425 | 5.66 | % | $ | 33,211 | $ | 970 | 5.84 | % | ||||||||||||
Investment securities |
6,589 | 127 | 3.85 | 13,173 | 254 | 3.86 | ||||||||||||||||||
Other interest-earning assets |
3,169 | 3 | 0.21 | 3,531 | 7 | 0.41 | ||||||||||||||||||
Total interest-earning assets |
60,062 | 1,555 | 5.18 | % | 49,915 | 1,231 | 4.93 | % | ||||||||||||||||
Non-interest-earning assets |
7,532 | 7,398 | ||||||||||||||||||||||
Total assets |
$ | 67,594 | $ | 57,313 | ||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Savings, NOW and money market accounts |
16,928 | 64 | 0.77 | % | 15,052 | 58 | 0.77 | % | ||||||||||||||||
Certificates of deposit |
25,364 | 230 | 1.82 | 19,379 | 247 | 2.57 | ||||||||||||||||||
Total interest-bearing deposits |
42,292 | 294 | 1.40 | 34,431 | 305 | 1.78 | ||||||||||||||||||
FHLB advances |
397 | | | | | | ||||||||||||||||||
Total interest-bearing liabilities |
42,689 | 294 | 1.40 | % | 34,431 | 305 | 1.78 | % | ||||||||||||||||
Non-interest-bearing liabilities |
2,033 | 592 | ||||||||||||||||||||||
Total liabilities |
44,722 | 35,023 | ||||||||||||||||||||||
Retained earnings |
22,872 | 22,290 | ||||||||||||||||||||||
Total liabilities and retained earnings |
$ | 67,594 | $ | 57,313 | ||||||||||||||||||||
Net interest-earning assets |
$ | 17,373 | $ | 15,484 | ||||||||||||||||||||
Net interest income; average interest
rate spread |
$ | 1,261 | 3.78 | % | $ | 926 | 3.15 | % | ||||||||||||||||
Net interest margin(2) |
4.24 | % | 3.74 | % | ||||||||||||||||||||
Average interest-earning assets to
average interest-bearing liabilities |
140.70 | % | 144.97 | % | ||||||||||||||||||||
(1) | Calculated net of deferred fees and discounts, loans in process and allowance for loan
losses. |
|
(2) | Equals net interest income divided by average interest-earning assets. |
|
(3) | Amounts that do not round to $1,000 are reflected as none. |
Provision for Loan Losses. The allowance for loan losses is established through a
provision for loan losses charged to earnings as losses are estimated to have occurred in our loan
portfolio. The allowance for loan losses is maintained at a level to provide for probable credit
losses related to specifically identified loans and for losses inherent in the loan portfolio that
have been incurred as of the balance sheet date. The allowance is comprised of specific reserves
and a general reserve.
Specific reserves are assessed for each loan that is reviewed for impairment or for which a
probable loss has been identified. The reserve related to loans that are identified as impaired is
based on discounted expected future cash flows using the loans initial effective interest rate,
the observable market value of the loan, or the estimated fair value of the collateral for certain
collateral dependent loans. Factors contributing to the determination of specific reserves include
the financial condition of the borrower, changes in the value of pledged collateral and general
economic conditions. General reserves are established based on historical charge-offs considering
factors that include risk rating, concentrations and loan type. For the general reserve,
management also considers trends in delinquencies and non-accrual loans, concentrations, volatility
of risk ratings and the evolving mix in terms of collateral, relative loan size and the degree of
seasoning within the various loan products.
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Changes in underwriting standards, credit administration and collection policies, regulation
and other factors which affect the credit quality and collectability of the loan portfolio also
impact the allowance levels. The allowance for loan losses is based on managements estimate of
probable credit losses inherent in the loan portfolio; actual credit losses may vary from the
current estimate. The allowance for loan losses is reviewed periodically, taking into
consideration the risk characteristics of the loan portfolio, past charge-off experience, general
economic conditions and other factors that warrant current recognition. As adjustments to the
allowance for loan losses become necessary, they are reflected as a provision for loan losses in
current-period earnings. Actual loan charge-offs are deducted from and subsequent recoveries of
previously charged-off loans are added to the allowance.
Hibernias nonperforming assets, defined as non-accrual loans, accruing loans past due 90 days
or more and foreclosed property, totaled $263,000, or 0.4%, of total assets at June 30, 2010,
compared to $315,000, or 0.5%, of total assets at December 31, 2009. The non-performing loans
totaling $263,000 at June 30, 2010, consist of two loans secured by first mortgages on one-to-four
family residential real estate. Management believes that the allowance for loan losses is
sufficient to cover any losses that may be incurred on these loans. The Company had no foreclosed
property at June 30, 2010 or December 31, 2009.
Loan loss provisions of $10,000 and -0- were made to the allowance for loan losses during the
three months ended June 30, 2010 and 2009.
Loan loss provisions of $10,000 were made to the allowance for loan losses during the six
months ended June 30, 2010, compared to $15,000 for the six months ended June 30, 2009.
To the best of managements knowledge, the allowance is maintained at a level believed to
cover all known and inherent losses in the loan portfolio, both probable and reasonable to
estimate.
In 2005, Hurricane Katrina affected the residents and businesses within Hibernias market
area. The adverse financial impacts of this event on the Banks loan portfolio were recognized at
that time. Management continues to closely monitor the loan portfolio, and no substantial
additional losses directly related to Hurricane Katrina have been experienced to date. However,
the extent to which the still affected areas within the Companys market area eventually recover is
unknown at this time as are the ultimate adverse additional impacts that might have, if any, on the
Companys loan portfolio.
On April 22, 2010, an oil rig exploded in the Gulf of Mexico off the coast of Louisiana.
Since that date a substantial amount of oil has leaked from the damaged well into the Gulf and it
has only recently been fully contained. The spill poses a potentially grave threat to the coast of
Louisiana and its estuaries. In addition, the spill has caused significant disruption to the gulf
coast tourism and fishing industries. The U.S. Government imposed a six-month drilling moratorium
on deepwater drilling rigs through November 30, 2010 and has implemented new safety regulations for
all offshore drilling operations. The economic impact of the spill and the government imposed
drilling moratorium on the economy of Louisiana has not been determined but could be severe. The
Company is monitoring developments in the Gulf and will assess potential adverse impacts on the
Banks customers as events unfold and more information is available. To date, there has been no
discernable impact on the Banks loan portfolio.
Liquidity and Capital Resources
Hibernia maintains levels of liquid assets deemed adequate by management. Hibernia adjusts
its liquidity levels to fund deposit outflows, repay its borrowings and to fund loan commitments.
Hibernia also adjusts liquidity as appropriate to meet asset and liability management objectives.
Hibernias primary sources of funds are deposits, amortization and prepayment of loans and to
a lesser extent, rental income and funds provided from operations. While scheduled principal
repayments on loans are a relatively predictable source of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic conditions and competition.
Hibernia sets the interest rates on its deposits to maintain a desired level of total deposits. In
addition, the Company invests excess funds in short-term interest-earning accounts and other
assets, which provide liquidity to meet lending requirements. Hibernia Homestead Bancorps cash
and cash equivalents amounted to $3.8 million at June 30, 2010.
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A significant portion of the Hibernias liquidity consists of non-interest earning deposits.
Primary sources of cash are principal repayments on loans and increases in deposit accounts. If
the Bank requires funds beyond its ability to generate them internally, borrowing agreements exist
with the Federal Home Loan Bank of Dallas, which provide an additional source of funds. At June
30, 2010, Hibernia did not have any advances from the Federal Home Loan Bank of Dallas and had $3.2
million in borrowing capacity. At June 30, 2010, the Bank was also a party to a Master Purchase
Agreement with First National Bankers Bank whereby First National Bankers Bank may sell to
Hibernia Homestead Bank federal funds in an amount not to exceed $5.7 million. As of June 30,
2010, Hibernia Homestead Bank had no federal funds purchased from First National Bankers Bank. As
of June 30, 2010, the Bank participated in the Certificate of Deposit Account Registry Service
(CDARS) of Promontory Interfinancial Network, which allows the Bank to provide FDIC deposit
insurance in excess of account coverage limits by exchanging deposits (known as reciprocal
deposits) with other CDARS members. The Company may also purchase deposits (known as One-Way
Buy deposits) from other CDARS members in an amount not to exceed $6.6 million, or 10% of the
Banks total assets. Such deposits are generally considered a form of brokered deposits. As of
June 30, 2010, the Bank held no reciprocal deposits and has $3.0 million in One-Way Buy deposits
from the CDARS program.
At June 30, 2010, the Bank had outstanding loan commitments of $3.5 million to originate
loans. At June 30, 2010, certificates of deposit scheduled to mature in less than one year totaled
$17.0 million. Based on prior experience, management believes that a significant portion of such
deposits will remain with us, although there can be no assurance that this will be the case. The
Bank intends to utilize its liquidity to fund its lending activities.
Contractual Cash Obligations. The following table summarizes our contractual cash obligations
at June 30, 2010.
Payments Due By Period | ||||||||||||||||||||
Total at | To | 1-3 | 4-5 | After 5 | ||||||||||||||||
June 30, 2010 | 1 Year | Years | Years | Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Certificates of deposit |
$ | 29,671 | $ | 16,953 | $ | 10,686 | $ | 2,032 | $ | | ||||||||||
Total contractual obligations |
$ | 29,671 | $ | 16,953 | $ | 10,686 | $ | 2,032 | $ | | ||||||||||
Hibernia Homestead Bank is required to maintain regulatory capital sufficient to meet
tier 1 leverage, tier 1 risk-based and total risk-based capital ratios of at least 4.0%, 4.0% and
8.0%, respectively. At June 30, 2010, Hibernia Homestead Bank exceeded each of its capital
requirements with ratios of 27.08%, 39.92% and 40.66%, respectively.
Off-Balance Sheet Arrangements
In the normal course of operations, we engage in a variety of financial transactions that, in
accordance with generally accepted accounting principles are not recorded in our financial
statements. These transactions involve, to varying degrees, elements of credit, interest rate, and
liquidity risk. Such transactions are used primarily to manage customers requests for funding and take the form of loan
commitments and lines of credit. Our exposure to credit loss from non-performance by the other
party to the above-mentioned financial instruments is represented by the contractual amount of
those instruments. We use the same credit policies in making commitments and conditional
obligations as we do for on-balance sheet instruments. In general, we do not require collateral or
other security to support financial instruments with off-balance sheet credit risk.
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Commitments. 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 at June 30, 2010.
Total Amounts | Amount of Commitment Expiration Per Period | |||||||||||||||||||
Committed at June | To | 1-3 | 4-5 | After 5 | ||||||||||||||||
30, 2010 | 1 Year | Years | Years | Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Lines of credit |
$ | 1,519 | $ | 1,519 | $ | | $ | | $ | | ||||||||||
Undisbursed portion of loans
in process |
1,412 | 1,412 | | | | |||||||||||||||
Commitments to originate loans |
3,475 | 3,475 | | | | |||||||||||||||
Total commitments |
$ | 6,406 | $ | 6,406 | $ | | $ | | $ | | ||||||||||
Impact of Inflation and Changing Prices
The consolidated financial statements and related financial data presented herein regarding
Hibernia Homestead Bancorp, Inc. have been prepared in accordance with accounting principles
generally accepted in the United States of America which generally require the measurement of
financial position and operating results in terms of historical dollars, without considering
changes in relative purchasing power over time due to inflation. Unlike most industrial companies,
virtually all of Hibernias assets and liabilities are monetary in nature. As a result, interest
rates generally have a more significant impact on the Companys performance than does the effect of
inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as
the prices of goods and services, since such prices are affected by inflation to a larger extent
than interest rates.
Item 3 | Quantitative and Qualitative Disclosures About Market Risk. |
Not applicable.
Item 4 | Controls and Procedures. |
Our management evaluated, with the participation of our President and Chief Executive Officer
and our Assistant Secretary and Chief Financial Officer, our disclosure controls and procedures (as
defined in Rules 13a-15(e) or 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 President and Chief Executive
Officer and our Assistant Secretary and Chief Financial Officer 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 SECs 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) or
15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
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PART II OTHER INFORMATION
Item 1 | Legal Proceedings. |
There are no matters required to be reported under this item.
Item 1A | Risk Factors. |
Not applicable.
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds. |
(a) Not applicable.
(b) Not applicable.
(c) Purchases of Equity Securities
The Companys repurchases of its common stock made during the three month period ended June
30, 2010, are set forth in the table below:
Total | ||||||||||||||||
Number of | Maximum | |||||||||||||||
Shares | Number of | |||||||||||||||
Purchased | Shares that | |||||||||||||||
as Part of | May Yet Be | |||||||||||||||
Total | Average | Publicly | Purchased | |||||||||||||
Number of | Price | Announced | Under the | |||||||||||||
Shares | Paid per | Plans or | Plans or | |||||||||||||
Period | Purchased | Share | Programs | Programs | ||||||||||||
April 1, 2010 April 30, 2010 |
5,867 | $ | 15.05 | 5,867 | | |||||||||||
May 1, 2010 May 31, 2010 |
| | | 52,883 | ||||||||||||
June 1, 2010 June 30, 2010 |
| | | 52,883 | ||||||||||||
Total |
5,867 | $ | 15.05 | 5,867 | 52,883 | |||||||||||
Notes to this table:
(a) | On February 12, 2010, the Company announced by press release its first stock
repurchase program to repurchase 55,667 shares, or 5% of its outstanding common stock.
As of June 30, 2010, the maximum number of shares has been purchased under this
program. (b) On May 27, 2010, the Company announced by press release its second stock
repurchase program to repurchase 52,883 shares, or 5% of its outstanding common stock.
The program does not have an expiration date. |
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The following table represents the purchasing activity of the Recognition and Retention
Plan Trust during the three month period ended June 30, 2010:
Total Number | Maximum | |||||||||||||||
of Shares | Number of | |||||||||||||||
Purchased as | Shares that May | |||||||||||||||
Total | Average | Part of Publicly | Yet Be | |||||||||||||
Number of | Price | Announced | Purchased | |||||||||||||
Shares | Paid per | Plans or | Under the Plans | |||||||||||||
Period | Purchased | Share | Programs | or Programs | ||||||||||||
April 1, 2010 April 30, 2010 |
| $ | | | 37,833 | |||||||||||
May 1, 2010 May 31, 2010 |
13,300 | 15.05 | 13,300 | 24,533 | ||||||||||||
June 1, 2010 June 30, 2010 |
| | | 24,533 | ||||||||||||
Total |
13,300 | $ | 15.05 | 13,300 | 24,533 | |||||||||||
Notes to this table:
(a) | The Companys 2009 Recognition and Retention Plan was authorized to purchase up to a maximum
of 44,533 shares of common stock, or 4.0% of the common stock sold in the initial public
offering completed on January 27, 2009, as disclosed in the Companys prospectus dated
November 12, 2008, and announced by press release on July 31, 2009. |
Item 3 | Defaults Upon Senior Securities. |
There are no matters required to be reported under this item.
Item 4 | (Removed and Reserved) |
Item 5 | Other Information. |
There are no matters required to be reported under this item.
Item 6 | Exhibits. |
List of exhibits: (filed herewith unless otherwise noted) |
No. | Description | |||
31.1 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer |
|||
31.2 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer |
|||
32.1 | Section 1350 Certification |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HIBERNIA HOMESTEAD BANCORP, INC. |
||||
Date: August 13, 2010 | By: | /s/ A. Peyton Bush, III | ||
A. Peyton Bush, III | ||||
President and Chief Executive Officer | ||||
Date: August 13, 2010 | By: | /s/ Donna T. Guerra | ||
Donna T. Guerra | ||||
Assistant Secretary and Chief Financial Officer |
36