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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

OR

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 001-33573

 

 

Louisiana Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Louisiana		20-8715162
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
1600 Veterans Memorial Boulevard, Metairie, Louisiana		70005
(Address of Principal Executive Offices)		(Zip Code)

(504) 834-1190

(Registrant’s Telephone Number, Including Area Code)

 

 

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.    x  Yes    ¨  No

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

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

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

 

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 11, 2011, there were 3,591,443 shares of the Registrant’s common stock outstanding.

 

 

 

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PART I - FINANCIAL INFORMATION

Interim financial information required by Rule 10-01 of Regulation S-X and Item 303 of Regulation S-K is included in this Form 10-Q as referenced below.

 

				Page
Item 1 -		Financial Statements			3
Item 2 -		Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3 -		Quantitative and Qualitative Disclosures About Market Risk			26
Item 4T -		Controls and Procedures			26
		PART II - OTHER INFORMATION
Item 1 -		Legal Proceedings			27
Item 1A -		Risk Factors			27
Item 2 -		Unregistered Sales of Equity Securities and Use of Proceeds			27
Item 3 -		Defaults Upon Senior Securities			27
Item 4 -		(Removed and Reserved)			27
Item 5 -		Other Information			27
Item 6 -		Exhibits			27
Signatures					28

 

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LOUISIANA BANCORP, INC.

Consolidated Balance Sheets

 

		(unaudited)
		March 31, 2011				December 31, 2010
		(In Thousands)
Assets
Cash and Due from Banks		$	2,308			$	2,956
Short-Term Interest-Bearing Deposits			8,906				3,654
Total Cash and Cash Equivalents			11,214				6,610
Certificates of Deposit			635				635
Securities Available-for-Sale, at Fair Value (Amortized Cost of $62,556 and $61,429, respectively)			63,343				62,489
Securities Held-to-Maturity, at Amortized Cost (Estimated Fair Value of $60,628 and $67,355, respectively)			57,129				63,539
Loans, Net of Allowance for Loan Losses of $1,794 and $1,759, respectively			184,170				179,110
Accrued Interest Receivable			1,275				1,196
Other Real Estate Owned			1,346				1,696
Stock in Federal Home Loan Bank			2,012				2,002
Premises and Equipment, Net			1,669				1,688
Other Assets			1,690				1,910
Total Assets		$	324,483			$	320,875
Liabilities and Shareholders’ Equity
Deposits
Non-Interest-Bearing		$	10,251			$	8,130
Interest-Bearing			182,565				180,232
Total Deposits			192,816				188,362
Federal Home Loan Bank Advances			41,459				42,248
Reverse Repurchase Agreements			26,000				26,000
Advance Payments by Borrowers for Taxes and Insurance			1,456				1,997
Accrued Interest Payable			375				421
Other Liabilities			1,411				1,569
Total Liabilities			263,517				260,597
Commitments and Contigencies			—				—
Shareholders’ Equity
Common Stock, $.01 Par Value, 40,000,000 Shares Authorized; 6,345,732 Shares Issued; 3,623,315 and 3,640,918 Outstanding, respectively			63				63
Additional Paid-in-Capital			62,895				62,880
Unearned ESOP Shares			(4,188	)			(4,188	)
Unearned Recognition and Retention Plan Shares			(1,540	)			(2,074	)
Treasury Stock, at Cost (2,722,417 shares and 2,704,814 shares, respectively)			(37,580	)			(37,321	)
Retained Earnings			40,797				40,218
Accumulated Other Comprehensive Income			519				700
Total Shareholders’ Equity			60,966				60,278
Total Liabilities and Shareholders’ Equity		$	324,483			$	320,875

See accompanying notes to unaudited consolidated financial statements.

 

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LOUISIANA BANCORP, INC.

Consolidated Statements of Income (Unaudited)

 

		For the Three Months
		Ended March 31,
		2011				2010
		(In Thousands, Except per Share data)
Interest and Dividend Income
Loans, Including Fees		$	2,730			$	2,451
Mortgage Backed Securities			897				1,415
Investment Securities			196				218
Other Interest-Bearing Deposits			8				9
Total Interest and Dividend Income			3,831				4,093
Interest Expense
Deposits			710				836
Borrowings			653				648
Total Interest Expense			1,363				1,484
Net Interest Income			2,468				2,609
Provision for Loan Losses			37				44
Net Interest Income after Provision for Loan Losses			2,431				2,565
Non-Interest Income
Customer Service Fees			125				65
Gain on Sale of Loans			56				23
Other Income			19				4
Total Non-Interest Income			200				92
Non-Interest Expense
Salaries and Employee Benefits			1,133				1,177
Occupancy Expense			277				275
Louisiana Bank Shares Tax			57				53
FDIC Insurance Premium			53				42
Net Cost of OREO Operations			2				20
Other Expenses			224				196
Total Non-Interest Expense			1,746				1,763
Income Before Income Tax Expense			885				894
Income Tax Expense			306				309
Net Income		$	579			$	585
Earnings Per Share
Basic		$	0.19			$	0.14
Diluted		$	0.18			$	0.14

See accompanying notes to unaudited financial statements.

 

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LOUISIANA BANCORP, INC.

Consolidated Statements of Comprehensive Income

(Unaudited)

 

		For the Three Months
		Ended March 31,
		2011				2010
		(In Thousands)
Net Income		$	579			$	585
Other Comprehensive (Loss) Income, Net of Tax
Unrealized Holding (Losses) Gains Arising
During the Period			(181	)			129
Reclassification Adjustment for Gains
Included in Net Income			—				—
Total Other Comprehensive (Loss) Gain			(181	)			129
Comprehensive Income		$	398			$	714

See accompanying notes to unaudited financial statements.

 

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LOUISIANA BANCORP, INC.

Consolidated Statements of Changes in Shareholders’ Equity (unaudited)

For the Three Months Ended March 31, 2011 and 2010

(Dollars in thousands)

 

			$(23,600)				$(23,600)				$(23,600)				$(23,600)				$(23,600)				$(23,600)				$(23,600)				$(23,600)
		Common Stock				Additional Paid-in Capital				Unearned ESOP Stock				Unearned RRP Stock				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total Shareholders’ Equity
Balances at December 31, 2009		$	63			$	62,586			$	(4,442	)		$	(2,636	)		$	(20,803	)		$	37,660			$	920			$	73,348
Net Income - Three Months Ended March 31, 2010			—				—				—				—				—				585				—				585
Other Comprehensive Income,
Net of Applicable
Deferred Income Taxes			—				—				—				—				—				—				129				129
Stock Purchased for Treasury			—				—				—				—				(2,797	)			—				—				(2,797	)
RRP Shares Earned			—				(48	)			—				552				—				—				—				504
Stock Option Expense			—				65				—				—				—				—				—				65
Balances at March 31, 2010		$	63			$	62,603			$	(4,442	)		$	(2,084	)		$	(23,600	)		$	38,245			$	1,049			$	71,834
Balances at December 31, 2010			63				62,880				(4,188	)			(2,074	)			(37,321	)			40,218				700				60,278
Net Income - Three Months Ended March 31, 2011			—				—				—				—				—				579				—				579
Other Comprehensive Income,
Net of Applicable
Deferred Income Taxes			—				—				—				—				—				—				(181	)			(181	)
Stock Purchased for Treasury			—				—				—				—				(259	)			—				—				(259	)
RRP Shares Earned							(46	)							534																488
Stock Option Expense			—				61				—				—				—				—				—				61
Balances at March 31, 2011		$	63			$	62,895			$	(4,188	)		$	(1,540	)		$	(37,580	)		$	40,797			$	519			$	60,966

See accompanying notes to unaudited consolidated financial statements.

 

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LOUISIANA BANCORP, INC.

Consolidated Statements of Cash Flows (Unaudited)

 

		For the Three Months
		Ended March 31
		2011				2010
		(In Thousands)
Cash Flows from Operating Activities
Net Income		$	579			$	585
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation			48				59
Provision for Loan Losses			37				44
Net Increase in RRP Shares Earned			487				504
Stock Option Plan Expense			61				65
Discount Accretion Net of Premium Amortization			(31	)			(54	)
Deferred Income Tax Benefit			(13	)			(14	)
Gain on Sale of Loans			(56	)			(21	)
Originations of Loans Held-for-Sale			(4,809	)			(3,309	)
Proceeds from Sales of Loans Held-for-Sale			3,809				3,331
Increase in Accrued Interest Receivable			(79	)			(110	)
Impairment of Other Real Estate Owned			—				20
Decrease in Other Assets			326				212
Decrease in Accrued Interest Payable			(46	)			(145	)
Decrease in Other Liabilities			(157	)			(218	)
Net Cash Provided by Operating Activities			156				949
Cash Flows from Investing Activities
Investment in Certificates of Deposit			—				(99	)
Purchase of Securities Available-for-Sale			(3,000	)			(2,000	)
Proceeds from Maturities of Certificates of Deposit			—				693
Proceeds from Maturities of Securities Available-for-Sale			1,880				4,426
Proceeds from Maturities of Securities Held-to-Maturity			6,434				6,823
Net Increase in Loans Receivable			(4,041	)			(6,065	)
Proceeds from Sales of Loans Held for Investing			—				208
Purchase of Property and Equipment			(29	)			(6	)
Proceeds from Sale of Other Real Estate Owned			350				—
Net Increase in Investment in Federal Home Loan Bank Stock			(10	)			(2	)
Net Cash Provided by Investing Activities			1,584				3,978

See accompanying notes to unaudited consolidated financial statements.

 

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		For the Three Months
		Ended March 31,
		2011				2010
		(In Thousands)
Cash Flows from Financing Activities
Increase (Decrease) in Deposits			4,455				(6,209	)
Decrease in Advances by Borrowers for Taxes and Insurance			(542	)			(401	)
(Decrease) Increase in Borrowings			(790	)			5,239
Purchase of Treasury stock			(259	)			(2,797	)
Net Cash Provided by (Used in) Financing Activities			2,864				(4,168	)
Net Increase in Cash and Cash Equivalents			4,604				759
Cash and Cash Equivalents, Beginning of Year			6,610				4,735
Cash and Cash Equivalents, End of Year		$	11,214			$	5,494
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period:
Interest		$	1,408			$	1,629
Income Taxes		$	—			$	130
Loans Transferred to Other Real Estate Owned During the Period		$	—			$	—

See accompanying notes to unaudited consolidated financial statements.

 

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LOUISIANA BANCORP, INC.

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited financial statements of the Company were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three month period ended March 31, 2011, are not necessarily indicative of the results which may be expected for the entire fiscal year.

NATURE OF OPERATIONS

Louisiana Bancorp, Inc. (the “Company”) was organized as a Louisiana corporation on March 16, 2007, for the purpose of becoming the holding company of Bank of New Orleans (the “Bank”). The Company holds all of the issued and outstanding shares of capital stock of the Bank. The Bank operates in the banking/savings and loan industry and, as such, attracts deposits from the general public and uses such deposits primarily to originate loans secured by first mortgage loans on owner-occupied single-family residences and other properties, as well as those for consumer needs.

The Bank is subject to competition from other financial institutions, and is also subject to the regulations of certain Federal agencies and undergoes periodic examinations by those regulatory authorities.

SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK

Most of the Company’s activities are with customers located within the greater New Orleans area in Louisiana. Note 2 summarizes the types of securities in which the Company invests. Note 3 summarizes the types of lending in which the Company engages. The Company does not have any significant concentrations in any one industry or to any one customer.

INVESTMENT SECURITIES

Securities are being accounted for in accordance with FASB Accounting Standards Codification (“ASC”) 320-10, Investments – Debt and Equity Securities. FASB ASC 320-10 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 these classifications periodically.

Available-for-sale securities are stated at market value, with unrealized gains and losses, net of income taxes, reported as a separate component of accumulated other comprehensive income until realized. The amortized cost of available-for-sale debt securities 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.

Securities designated as held-to-maturity are stated at cost adjusted for amortization of the related premiums and accretion of discounts, using the interest method. The Company has the positive intent and ability to hold these securities to maturity.

The Company held no trading securities as of March 31, 2011 or December 31, 2010.

Amortization, accretion and accrued 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 or losses. Gains and losses on the sale of securities available-for-sale are determined using the specific-identification method.

LOANS

The Company grants one-to four-family, multi-family residential, commercial, and land mortgage loans, and consumer and construction loans, and lines of credit to customers. Certain first mortgage loans are originated and sold under loan sale agreements. A substantial portion of the loan portfolio is represented by mortgage loans secured by properties located throughout the greater New Orleans area. The ability of the Company’s debtors to honor their contracts is dependent, in part, upon the real estate and general economic conditions in this area.

Loans are reported at their outstanding unpaid principal balance adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance.

 

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When the payment of principal or interest on a loan is delinquent for more than 90 days, or earlier in some cases, the loan is placed on non-accrual status, unless the loan is in the process of collection and the underlying collateral fully supports the carrying value of the loan. If the decision is made to continue accruing interest on the loan, periodic reviews are made to confirm the accruing status of the loan. All interest accrued but not collected on loans placed in non-accrual status or on loans charged-off, is reversed against income. The interest on these loans is accounted for on the cash basis or cost-recovery method, until qualifying for return to accrual basis. Loans are returned to accrual basis when all of the principal and interest contractually due are brought current and future payments are reasonably assured.

The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company’s impaired loans include performing and non-performing loans on which full payment of principal or interest is not expected. The Company calculates an allowance required for impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of its collateral.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is a valuation allowance available for losses incurred on loans. All losses are charged to the allowance for loan losses when the loss actually occurs or when a determination is made that a loss is likely to occur. Recoveries are credited to the allowance at the time of recovery.

The allowance is an amount that represents the amount of probable and reasonably estimable known and inherent losses in the loan portfolio, based on evaluations of the collectibility of loans. The evaluations take into consideration such factors as changes in the types and amount of loans in the loan portfolio, historical loss experience, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, estimated losses relating to specifically identified loans, and current economic conditions. This evaluation is inherently subjective as it requires material estimates including, among others, exposure at default, the amount and timing of expected future cash flows on impacted loans, value of collateral, estimated losses on our commercial and residential loan portfolios and general amounts for historical loss experience. All of these estimates may be susceptible to significant change.

It should be understood that estimates of future loan losses involve an exercise of judgment. While it is possible that in particular periods, the Company may sustain losses which are substantial relative to the allowance for loan losses, it is the judgment of management that the allowance for loan losses reflected in the accompanying statements of condition is adequate to absorb possible losses in the existing loan portfolio.

LOANS HELD-FOR-SALE

Loans held-for-sale include originated mortgage loans intended for sale in the secondary market, which are carried at the lower of cost or estimated market value. Loans held-for-sale are identified at the time of origination, in accordance with the Company’s interest rate risk strategy. In addition, the Company occasionally sells loans that it originates, but cannot hold, due to regulatory limitations on loans to one borrower or concentrations of credit in a particular property type or industry.

LOAN FEES, LOAN COSTS, DISCOUNTS AND PREMIUMS

Loan origination and commitment fees and certain direct loan origination costs are deferred and amortized as an adjustment to the related loan’s yield using the interest method over the contractual life of the loan.

Discounts received in connection with mortgage loans purchased are accreted to income over the term of the loan using the interest method. Premiums on purchased loans are amortized over the term of the loan using the interest method.

INCOME TAXES

Deferred income tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

COMPREHENSIVE EARNINGS

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the shareholders’ equity section of the balance sheets, such items, along with net earnings, are components of comprehensive earnings.

 

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USE OF ESTIMATES

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and 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 deferred taxes.

NOTE 2 – SECURITIES

A summary of securities classified as available-for-sale at March 31, 2011 and December 31, 2010, with gross unrealized gains and losses, follows:

 

			$62,556				$62,556				$62,556				$62,556
		March 31, 2011
		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair  Value
		(In Thousands)
Securities Available-for-Sale
Mortgage-Backed Securities
FNMA		$	8,423			$	513			$	—			$	8,936
FHLMC			4,204				280				—				4,484
			12,627				793				—				13,420
U.S. Government and Agency Obligations			49,929				241				(247	)			49,923
Total		$	62,556			$	1,034			$	(247	)		$	63,343
		December 31, 2010
		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
		(In Thousands)
Securities Available-for-Sale
Mortgage-Backed Securities
FNMA		$	9,770			$	584			$	—			$	10,354
FHLMC			4,735				294				—				5,029
			14,505				878				—				15,383
U.S. Government and Agency Obligations			46,924				307				(125	)			47,106
Total		$	61,429			$	1,185			$	(125	)		$	62,489

 

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A summary of securities classified as held-to-maturity at March 31, 2011 and December 31, 2010, with gross unrealized gains and losses, follows:

 

			$57,129				$57,129				$57,129				$57,129
		March 31, 2011
		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair  Value
		(In Thousands)
Securities Held-to-Maturity
Mortgage-Backed Securities
GNMA		$	7,931			$	284			$	—			$	8,215
FNMA			29,861				1,893				—				31,754
FHLMC			18,333				1,314				—				19,647
			56,125				3,491				—				59,616
Municipal Bonds
Revenue Bonds			285				4				—				289
General Obligation Bonds			719				4				—				723
			1,004				8				—				1,012
Total		$	57,129			$	3,499			$	—			$	60,628
		December 31, 2010
		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
		(In Thousands)
Securities Held-to-Maturity
Mortgage-Backed Securities
GNMA		$	8,949			$	352			$	—			$	9,301
FNMA			33,249				2,080				—				35,329
FHLMC			19,987				1,368				—				21,355
			62,185				3,800				—				65,985
Municipal Bonds
Revenue Bonds			285				6				—				291
General Obligation Bonds			1,069				10				—				1,079
			1,354				16				—				1,370
Total		$	63,539			$	3,816			$	—			$	67,355

The amortized cost and fair value of available-for-sale and held-to-maturity securities by contractual maturity at March 31, 2011, follows. Actual maturities will differ from contractual maturities because borrowers have the right to put or prepay obligations with or without call or prepayment penalties.

 

		Available-for-Sale Securities								Held-to-Maturity Securities
		Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value
		(In Thousands)
Amounts Maturing in:
Less than One Year		$	—			$	—			$	1,004			$	1,012
One to Five Years			53,137				53,251				2,129				2,251
Five to Ten Years			4,981				5,337				17,492				18,746
Over Ten Years			4,438				4,755				36,504				38,619
Total		$	62,556			$	63,343			$	57,129			$	60,628

 

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Information pertaining to securities with gross unrealized losses at March 31, 2011 and December 31, 2010, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

 

		Available-for-Sale
		Losses Less Than 12 Months								Losses Greater Than 12 Months
		Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value
		(In Thousands)
March 31, 2011
Mortgage-Backed Securities
GNMA		$	—			$	—			$	—			$	—
FNMA			—				—				—				—
FHLMC			—				—				—				—
			—				—				—				—
U.S. Government and Agency Obligations			247				38,753				—				—
Total		$	247			$	38,753			$	—			$	—
December 31, 2010
Mortgage-Backed Securities
GNMA		$	—			$	—			$	—			$	—
FNMA			—				—				—				—
FHLMC			—				—				—				—
			—				—				—				—
U.S. Government and Agency Obligations			125				22,875				—				—
Total		$	125			$	22,875			$	—			$	—
		Held-to-Maturity
		Losses Less Than 12 Months								Losses Greater Than 12 Months
		Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value
		(In Thousands)
March 31, 2011
Mortgage-Backed Securities
GNMA		$	—			$	—			$	—			$	—
FNMA			—				—				—				—
FHLMC			—				—				—				—
			—				—				—				—
U.S. Government and Agency Obligations			—				—				—				—
Total		$	—			$	—			$	—			$	—
December 31, 2010
Mortgage-Backed Securities
GNMA		$	—			$	—			$	—			$	—
FNMA			—				—				—				—
FHLMC			—				—				—				—
			—				—				—				—
U.S. Government and Agency Obligations			—				—				—				—
Total		$	—			$	—			$	—			$	—

 

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The unrealized losses on the Company’s investments were caused by interest rate increases. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired at March 31, 2011 or December 31, 2010.

NOTE 3 – LOANS

The following table summarizes the composition of our total net loans receivable:

 

		March 31, 2011				December 31, 2010
		(In Thousands)
Loans Secured by Mortgages on Real Estate
1-4 Family Residential		$	98,247			$	98,635
Home Equity Loans and Lines			15,595				15,745
Multi-family Residential			13,895				11,785
Commercial Real Estate			56,053				52,594
Land			922				951
Total Loans Secured by Real Estate			184,712				179,710
Consumer and Other Loans
Loans Secured by Deposits			427				464
Other			1,005				900
Total Consumer and Other Loans			1,432				1,364
Less:
Allowance for Loan Losses			(1,794	)			(1,759	)
Net Deferred Loan Origination Fess/Costs			(180	)			(205	)
Total Loans, Net		$	184,170			$	179,110

A summary of our current, past due and nonaccrual loans as of March 31, 2011 follows:

 

			$184,836				$184,836				$184,836				$184,836				$184,836				$184,836
		30-89 Days Past  Due				90 Days or  More Past Due and Accruing				Nonaccrual Loans				Total Past  Due				Current Loans				Total Loans
Real Estate Secured Loans
1-4 Family Residential		$	196			$	—			$	—			$	196			$	98,051			$	98,247
Home Equity Loans and Lines			65				—				633				698				14,897				15,595
Multi-family Residential			—				—				—				—				13,895				13,895
Commercial Real Estate			312				—				—				312				55,741				56,053
Land			—				—				34				34				888				922
Consumer and Other Loans			—				—				68				68				1,364				1,432
Total		$	573			$	—			$	735			$	1,308			$	184,836			$	186,144

 

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An analysis of the allowance for loan losses follows:

 

		Three Months Ended March 31, 2011				Year Ended December 31,  2010
		(in thousands)
Balance, Beginning of Period		$	1,759			$	1,661
Provision for Loan Losses			37				269
Loans Charged-Off			(2	)			(174	)
Loan Recoveries			—				3
Balance, End of Period		$	1,794			$	1,759

The following table details the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2011.

 

			$98,247				$98,247				$98,247				$98,247				$98,247				$98,247				$98,247
		Real Estate Secured Mortgage Loans
		1-4 Family				Home Equity				Multi-Family												Consumer
		Residential				Loans/Lines				Residential				Commercial				Land				and Other				Total
Balance, Beginning of Year		$	858			$	270			$	100			$	442			$	9			$	80			$	1,759
Provision for (Recovery of) Loan Losses			1				(4	)			15				27				(1	)			(1	)			37
Loans Charged-Off			—				(2	)			—				—				—				—				(2	)
Recoveries of prior charge-offs			—				—				—				—				—				—				—
Balance, End of Year		$	859			$	264			$	115			$	469			$	8			$	79			$	1,794
Ending Balance Allocated to:
Loans individually evaluated for impairment		$	—			$	146			$	—			$	—			$	1			$	68			$	215
Loans collectively evaluated for impairment			859				118				115				469				7				11				1,579
		$	859			$	264			$	115			$	469			$	8			$	79			$	1,794
Ending Loan Balance
Disaggregated by Evaluation Method
Loans individually evaluated for impairment		$	—			$	309			$	—			$	—			$	—			$	68			$	377
Loans collectively evaluated for impairment			98,247				15,286				13,895				56,053				922				1,364				185,767
		$	98,247			$	15,595			$	13,895			$	56,053			$	922			$	1,432			$	186,144

A summary of the loans evaluated for possible impairment follows:

 

		March 31, 2011				December 31, 2010
		(In Thousands)
Impaired Loans Requiring a Loss Allowance		$	377			$	410
Impaired Loans not Requiring a Loss Allowance			358				498
Total Impaired Loans		$	735			$	908
Loss Allowance on Impaired Loans		$	215			$	222

At March 31, 2011 and December 31, 2010, all impaired loans were in nonaccrual status. The Bank did not hold any renegotiated loans on these dates. At both March 31, 2011 and December 31, 2010, approximately $34,000 of interest was foregone on nonaccrual loans.

 

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The following table provides additional information with respect to impaired loans by portfolio segment and the impairment methodology used to analyze the credit. The recorded investment is presented gross of any specific valuation allowance.

 

As of March 31, 2011		Recorded Investment				Unpaid Principal Balance				Related Allowance				Average Recorded Investment YTD				Interest Income Recognized
Impaired loans with no related allowance:
Loans Secured by Mortgages on Real Estate
1-4 Family Residential		$	—			$	—			$	—			$	62			$	—
Home Equity Loans and Lines			324				324				—				333				—
Multi-family Residential			—				—				—				—				—
Commercial Real Estate			—				—				—				—				—
Land			34				34				—				34				—
Consumer and Other Loans			—				—				—				—				—
Total		$	358			$	358			$	—			$	429			$	—
Impaired loans with a related allowance:
Loans Secured by Mortgages on Real Estate
1-4 Family Residential		$	—			$	—			$	—			$	—			$	—
Home Equity Loans and Lines			309				309				146				325				—
Multi-family Residential			—				—				—				—				—
Commercial Real Estate			—				—				—				—				—
Land			—				—				1				—				—
Consumer and Other Loans			68				68				68				69				—
Total		$	377			$	377			$	215			$	394			$	—
Total Impaired Loans
Loans Secured by Mortgages on Real Estate
1-4 Family Residential		$	—			$	—			$	—			$	62			$	—
Home Equity Loans and Lines			633				633				146				658				—
Multi-family Residential			—				—				—				—				—
Commercial Real Estate			—				—				—				—				—
Land			34				34				1				34				—
Consumer and Other Loans			68				68				68				69				—
Total		$	735			$	735			$	215			$	823			$	—

The following table summarizes the credit grades assigned to our loan portfolio as of March 31, 2011. Additional information related to the criteria used to assess these risk ratings can be found in the Company’s Annual Report for the year ended December 31, 2010. These balances are presented gross on any allowance for loan loss.

 

			$186,144				$186,144				$186,144				$186,144				$186,144				$186,144				$186,144
		Real Estate Secured Mortgage Loans
		1-4 Family Residential				Home Equity Loans/Lines				Multi-Family Residential				Commercial				Land				Consumer and Other				Total
Credit Classification:
Pass		$	98,247			$	14,888			$	13,895			$	56,053			$	888			$	1,364			$	185,335
Special Mention			—				130				—				—				—				—				130
Substandard			—				268				—				—				34				—				302
Loss			—				309				—				—				—				68				377
Total		$	98,247			$	15,595			$	13,895			$	56,053			$	922			$	1,432			$	186,144

 

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NOTE 4 – EARNINGS PER COMMON SHARE

Earnings per common share (“EPS”) are computed using the weighted average number of shares outstanding as prescribed in FASB ASC 260-10, Earnings per Share. Net income is divided by the weighted average number of shares outstanding during the period to calculate basic net earnings per common share. Diluted earnings per common share are calculated to give effect to dilutive stock options.

 

		Three Months Ended March 31,
		2011				2010
Net Income		$	579,000			$	585,000
Weighted Average Shares Issued			6,345,732				6,345,732
Weighted Average Unearned ESOP Shares			(418,813	)			(444,204	)
Weighted Average Unearned RRP Shares			(142,892	)			(186,710	)
Weighted Average Treasury Shares			(2,715,169	)			(1,672,548	)
Weighted Average Shares Outstanding for Basic EPS			3,068,858				4,042,270
Earnings per Share, Basic		$	0.19			$	0.14
Weighted Average Shares Outstanding for Basic EPS			3,068,858				4,042,270
Effect of Dilutive Securities			107,572				110,822
Weighted Average Shares Outstanding for Diluted EPS			3,176,430				4,153,092
Earnings per Shares, Diluted		$	0.18			$	0.14

NOTE 5 – REGULATORY CAPITAL

The actual and required regulatory capital amounts and ratios applicable to the Bank at March 31, 2011 and December 31, 2010, are presented in the following table:

 

		Actual								Minimum for  Adequacy Purposes								Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
		Amount				Ratio				Amount				Ratio				Amount				Ratio
		(Dollars In Thousands)
March 31, 2011
Tangible Capital		$	51,621				16.01	%		$	4,837				1.50	%			N/A				N/A
Core/Leverage Capital			51,621				16.01	%			9,675				3.00	%		$	16,125				5.00	%
Tier 1 Risk-Based Capital			51,560				33.30	%			6,192				4.00	%			9,289				6.00	%
Total Risk-Based Capital			53,140				34.33	%			12,385				8.00	%			15,481				10.00	%
December 31, 2010
Tangible Capital		$	51,060				16.02	%		$	4,780				1.50	%			N/A				N/A
Core/Leverage Capital			51,060				16.02	%			9,559				3.00	%		$	15,932				5.00	%
Tier 1 Risk-Based Capital			50,999				33.68	%			6,056				4.00	%			9,084				6.00	%
Total Risk-Based Capital			52,537				34.70	%			12,112				8.00	%			15,140				10.00	%

 

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The Bank’s capital under accounting principles generally accepted in the United States (“GAAP”) is reconciled to its regulatory capital as follows:

 

		March 31, 2011				December 31, 2010
		(In Thousands)
Capital Under GAAP		$	52,079			$	51,697
Unrealized Gains on Available-for-Sale Securities			(458	)			(637	)
Tier 1 Capital			51,621				51,060
Allowance for Loan Losses			1,580				1,538
Recourse Obligations			(61	)			(61	)
Total Risk-Based Capital		$	53,140			$	52,537

NOTE 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company adopted FASB ASC 820, Fair Value Measurements, on January 1, 2008 for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized at fair value in the financial statements. FASB ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

FASB ASC 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, FASB ASC 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. The level in the fair value hierarchy within which a fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

 

•

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

 

•

Level 2 - Observable inputs other than quoted prices included within Level I, such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or other inputs that are observable in the market or can be corroborated by observable market data.

 

•

Level 3 - Inputs are generally unobservable and typically reflect management’s 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.

 

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The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2011 and December 31, 2010. All of the mortgage-backed securities reported at fair value on March 31, 2011, and December 31, 2010, were secured by first mortgage loans on residential real estate.

 

		Fair Value Measurements
March 31, 2011		Total				(Level 1)				(Level 2)				(Level 3)
		(In Thousands)
Assets:
Available-for-Sale Securities
Mortgage-Backed Securities		$	13,420			$	—			$	13,420			$	—
US Government and Agency Obligations			49,923				—				49,923				—
Loans Held-for-Sale			213				213				—				—
Total		$	63,556			$	213			$	63,343			$	—
		Fair Value Measurements
December 31, 2010		Total				(Level 1)				(Level 2)				(Level 3)
		(In Thousands)
Assets:
Available-for-Sale Securities
Mortgage-Backed Securities		$	15,383			$	—			$	15,383			$	—
US Government and Agency Obligations			47,106				—				47,106				—
Loans Held-for-Sale			187				187				—				—
Total		$	62,676			$	187			$	62,489			$	—

The Company did not record any liabilities at fair market value for which measurement of the fair value was made on a recurring basis at March 31, 2011 or December 31, 2010.

The following table presents the Company’s assets and liabilities measured at fair value on a non-recurring basis at March 31, 2011 and December 31, 2010.

 

		Fair Value Measurements
March 31, 2011		Total				(Level 1)				(Level 2)				(Level 3)
		(In Thousands)
Assets:
Impaired Loans		$	479			$	—			$	—			$	479
Other Real Estate Owned			1,346				—				1,346				—
Total		$	1,825			$	—			$	1,346			$	479
		Fair Value Measurements
December 31, 2010		Total				(Level 1)				(Level 2)				(Level 3)
		(In Thousands)
Assets:
Impaired Loans		$	522			$	—			$	—			$	522
Other Real Estate Owned			1,696				—				1,696				—
Total		$	2,218			$	—			$	1,696			$	522

The Company did not record any liabilities at fair market value for which measurement of the fair value was made on a non-recurring basis at March 31, 2011 or December 31, 2010.

 

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FASB ASC 825, Financial Instruments, requires disclosure of the fair value of financial instruments for which it is practical to estimate. Included in this disclosure are the methods and significant assumptions used to estimate the fair value of financial instruments. A detailed description of the valuation methodologies used in estimating the fair value of the financial instruments can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

 

		March 31, 2011								December 31, 2010
		Carrying Amount				Fair Value				Carrying Amount				Fair Value
		(In Thousands)
Financial Assets
Cash and Cash Equivalents		$	11,214			$	11,214			$	6,610			$	6,610
Certificates of Deposit			635				639				635				640
Securities			120,472				123,971				126,028				129,844
Loans			185,964				193,201				180,869				187,846
Less Allowance for Loan Losses			(1,794	)			(1,802	)			(1,759	)			(1,759	)
Loans, Net of Allowance			184,170				191,399				179,110				186,087
Federal Home Loan Bank Stock			2,012				2,012				2,002				2,002
Financial Liabilities
Deposits		$	192,816			$	194,709			$	188,362			$	193,225
Borrowings			67,459				70,753				68,248				71,556
Unrecognized Financial Instruments Commitments to Extend Credit		$	15,997			$	16,301			$	17,398			$	17,739

NOTE 7 – SUBSEQUENT EVENTS

On April 20, 2011, the Office of Thrift Supervision (“OTS”) notified the Bank that it had no objection to a proposed dividend of $6.8 million payable to the Company, the Bank’s sole shareholder. The Bank requested permission from the OTS to pay the dividend in order to provide liquidity to the Company’s capital management strategies including, but not limited to, cash dividends and stock repurchase plans. On April 28, 2011, following approval from the Bank’s board of directors, the cash dividend of $6.8 million was paid to the Company. The Bank’s regulatory capital continued to exceed the amounts required to be considered well capitalized after the payment of this dividend.

In accordance with FASB ASC 855, Subsequent Events, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements. The effect 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 March 31, 2011. In preparing these financial statements, the Company evaluated the events and transactions that occurred through the date these financial statements were issued.

 

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Item 2 – Management’s 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 the Company and 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’s results of operations are primarily dependent on the results of the Bank, which is a wholly owned subsidiary of the Company. The Bank’s 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, or recoveries from, the allowance 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. Our 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 conditions and results of operations.

Critical Accounting Policies

In reviewing and understanding financial information for the Company, 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 the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the 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 established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. Subsequent recoveries are added to the allowance. The allowance is an amount that represents the amount of probable and reasonably estimable known and inherent losses in the loan portfolio, based on evaluations of the collectibility of loans. The evaluations take into consideration such factors as changes in the types and amount of loans in the loan portfolio, historical loss experience, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, estimated losses relating to specifically identified loans, and current economic conditions. This evaluation is inherently subjective as it requires material estimates including, among others, exposure at default, the amount and timing of expected future cash flows on impacted loans, the value of collateral, estimated losses on our commercial and residential loan portfolios and general amounts for historical loss experience. All of these estimates may be susceptible to significant change.

While management uses the best information available to make loan loss allowance evaluations, adjustments to the allowance may be necessary based on changes in economic and other conditions or changes in accounting guidance. Historically, our estimates of the allowance for loan loss have not required significant adjustments from management’s initial estimates. In addition, the Office of Thrift Supervision, as an integral part of its examination processes, periodically reviews our allowance for loan losses. The Office of Thrift Supervision may require the recognition of adjustments to the allowance for loan losses based on its judgment of information available to it at the time of its examinations. To the extent that actual outcomes differ from management’s estimates, additional provisions to the allowance for loan losses may be required that would adversely impact earnings in future periods.

Income Taxes. We make estimates and judgments to calculate some of our tax liabilities and determine the recoverability of some of our deferred tax assets, which arise from temporary differences between the tax and financial

 

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statement recognition of revenues and expenses. We also estimate a reserve for deferred tax assets if, based on the available evidence, it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. These estimates and judgments are inherently subjective. Historically, our estimates and judgments to calculate our deferred tax accounts have not required significant revision to our initial estimates.

In evaluating our ability to recover deferred tax assets, we consider all available positive and negative evidence, including our past operating results, recent cumulative losses and our forecast of future taxable income. In determining future taxable income, we make assumptions for the amount of taxable income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require us to make judgments about our future taxable income and are consistent with the plans and estimates we use to manage our business. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. An increase in the valuation allowance would result in additional income tax expense in the period and could have a significant impact on our future earnings.

Comparison of Financial Condition at March 31, 2011 and December 31, 2010

Total assets were $324.5 million at March 31, 2011, an increase of $3.6 million from December 31, 2010. Cash and cash equivalents were $11.2 million and $6.6 million at March 31, 2011 and December 31, 2010, respectively. Total securities available-for-sale were $63.3 million at March 31, 2011, an increase of $854,000 compared to December 31, 2010. This increase incurred primarily in US Agency debt securities with maturities of three years or less. During the first quarter of 2011, total securities held-to-maturity decreased by $6.4 million, to $57.1 million. This decrease in the balance of our securities held-to-maturity was due to the receipt of scheduled principal reductions in addition to accelerated prepayments of the underlying mortgage loans on mortgage-backed securities. Net loans receivable were $184.2 million at March 31, 2011, an increase of $5.1 million compared to December 31, 2010. During the quarter ended March 31, 2011, our first mortgage loans secured by multifamily residential collateral increased by $2.1 million, and our first mortgage loans secured by non-residential commercial real estate increased by $3.5 million.

Total impaired loans were $735,000 and $908,000, respectively, at March 31, 2011 and December 31, 2010. At these dates, our impaired loans were comprised solely of nonaccrual loans. Other real estate owned was $1.3 million at March 31, 2011, and $1.7 million at December 31, 2010. At March 31, 2011, our other real estate owned consisted a single-family residence located in suburban New Orleans with a fair market value of $900,000 and a $1 million participation interest in a $170 million construction loan to finance a multi-use property in Baton Rouge, Louisiana. The fair market value of our participation interest in this project was $446,000 at March 31, 2011. Total nonperforming assets were $2.1 million at March 31, 2011, and $2.6 million at December 31, 2010. Expressed as a percentage of total assets, nonperforming assets were 0.64% at March 31, 2011, and 0.81% at December 31, 2010.

Total deposits were $192.8 million at March 31, 2011, and $188.4 million at December 31, 2010. Non-interest bearing deposits increased during the first three months of 2011 by $2.1 million, to $10.3 million, and interest-bearing deposits increased by $2.3 million, to $182.6 million. Total Federal Home Loan Bank advances and other borrowings were $67.5 million at March 31, 2011, a decrease of $789,000 from December 31, 2010.

Total shareholders’ equity was $61.0 million at March 31, 2011, an increase of $688,000 from December 31, 2010. During the first quarter of 2011, the Company acquired 17,603 shares of Treasury stock at a cost of $259,000, pursuant to its repurchase plans. Total shareholders’ equity was further decreased by a reduction in accumulated other comprehensive income of $181,000 These decreases were offset by net income of $579,000, and the release of 42,284 shares held by the Recognition and Retention Plan Trust, with a cost basis of $533,000, which became vested and were released to plan participants. The Bank’s tier 1 capital ratio was 16.01% at March 31, 2011, which was well in excess of well-capitalized regulatory standards at such date. Tier 1 risk-based capital and total risk-based capital were 33.30% and 34.33%, respectively, at March 31, 2011.

Comparison of Our Operating Results for the Three Months Ended March 31, 2011 and 2010

General. Net income for the quarter ended March 31, 2011 was $579,000, a decrease of $6,000 from the first quarter of 2010. Net interest income was $2.5 million for the three months ended March 31, 2011, a decrease of $141,000 compared to the three months ended March 31, 2010. Interest income for the first quarter of 2011 was $3.8 million, a decrease of $262,000 compared to the first quarter of 2010. This decrease in interest income was primarily due to a $4.9 million decrease in our average interest-earning assets during the respective periods, and a 25 basis point decrease in the average yield of our interest-earning assets. The decrease in average yield between the respective periods was due to a

 

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decrease in market rates of interest for comparable duration assets. Interest expense for the first quarter of 2011 was $1.4 million, a decrease of $121,000 compared to the first quarter of 2010. Between these periods, the average balance of our interest-bearing liabilities increased by $5.1 million, while the average cost of our interest-bearing liabilities decreased by 24 basis points. Non-interest income increased by $108,000 between the respective first quarters of 2011 and 2010 due primarily to increases in our fees earned on reverse mortgage loan originations and increased gains on the sale of residential mortgage loans. Non-interest expense for the three month period ended March 31, 2011 was $1.7 million, a decrease of $17,000 compared to the three month period ended March 31, 2010.

Average Balances, Net Interest Income, and Yields Earned and Rates Paid. The following tables show for the periods indicated the total dollar amount of interest income 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. Tax-exempt income and yields have not been adjusted to a tax-equivalent basis. All average balances are based on monthly balances. Management does not believe that the monthly averages differ significantly from what the daily averages would be.

 

		Three months Ended March 31,
		2011												2010
		Average Balance				Interest				Average Yield/ Rate				Average Balance				Interest				Average Yield/ Rate
		(Dollars in Thousands)
Interest-Earning Assets:
Loans Receivable (1)		$	183,032			$	2,730				5.97	%		$	161,031			$	2,451				6.09	%
Mortgage-backed Securities			73,316				897				4.89	%			112,711				1,415				5.02	%
Investment Securities			50,366				196				1.56	%			39,933				218				2.18	%
Other Interest-Earnings Assets			7,467				8				0.43	%			5,426				9				0.66	%
Total Interest-Earning Assets			314,181				3,831				4.88	%			319,101				4,093				5.13	%
Non-Interest Earning Assets			8,185												7,900
Total Assets		$	322,366											$	327,001
Interest-Bearing Liabilities:
Passbook, Checking and Money Market Accounts		$	45,505				42				0.37	%		$	43,544				41				0.38	%
Certificates of Deposit			135,305				668				1.97	%			133,817				795				2.38	%
Total Interest-Bearing Deposits			180,810				710				1.57	%			177,361				836				1.89	%
Borrowings			68,147				653				3.83	%			66,467				648				3.90	%
Total Interest-Bearing Liabilities			248,957				1,363				2.19	%			243,828				1,484				2.43	%
Non-Interest Bearing Liabilities			12,797												10,303
Total Liabilities			261,754												254,131
Stockholders’ Equity			60,612												72,870
Total Liabilities and Stockholders’ Equity		$	322,366											$	327,001
Net Interest-Earning Assets		$	65,224											$	75,273
Net Interest Income; Average Interest Rate Spread						$	2,468				2.69	%						$	2,609				2.70	%
Net Interest Margin (2)											3.14	%											3.27	%
Average Interest-Earning Assets to Average Interest-Bearing Liabilities											126.20	%											130.87	%

 

(1)	Includes nonaccrual loans during the respective periods. Calculated net of deferred fees/costs and allowance for loan losses.

(2)	Equals net interest income divided by average interest-earning assets.

 

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Interest Income. Net interest income was $2.5 million for the three months ended March 31, 2011, a decrease of $141,000 compared to the three months ended March 31, 2010. Interest income for the first quarter of 2011 was $3.8 million, a decrease of $262,000 compared to the first quarter of 2010. This decrease in interest income was primarily due to a $4.9 million decrease in our average interest-earning assets during the respective periods, and a 25 basis point decrease in the average yield of our interest-earning assets. The decrease in average yield between the respective periods was due to a decrease in market rates of interest for comparable duration assets. Interest income on loans receivable was $2.7 million during the first quarter of 2011, an increase of $279,000 compared to the first quarter of 2010. The increase in interest income from loans was due primarily to a $22.0 million increase in the average balance of our loans receivable, the effect of which was reduced by a 12 basis point decrease in the average yield of our loan portfolio. The average balance of our mortgage-backed securities decreased by $39.4 million during the first quarter of 2011 compared to the first quarter of 2010, contributing to a decrease in interest income on mortgage-backed securities of $518,000. The average balance of our investment securities was $50.4 million with an average yield of 1.56% during the quarter ended March 31, 2011, compared to $39.9 million with an average yield of 2.18% during the quarter ended March 31, 2010. All of the Company’s investment securities are US Agency issued debt securities with original maturities ranging from three to four years.

Interest Expense. Total interest expense was $1.4 million, with our interest-bearing liabilities having an average cost of 2.19% during the first quarter of 2011, compared to $1.5 million and an average cost of 2.43% for the first quarter of 2010. The average rate paid on interest-bearing deposits was 1.57% during the quarter ended March 31, 2011, a decrease of 32 basis points from the quarter ended March 31, 2010. Interest expense on borrowings was $653,000 at an average cost of 3.83% during the first quarter of 2011, and $648,000 at an average cost of 3.90% during the first quarter of 2010. The net interest rate spread between our interest-earning assets and our interest-bearing liabilities was 2.69% for first quarter of 2011, compared to 2.70% for the first quarter of 2010. Our net interest margin, which expresses net interest income as a percentage of average interest-earning assets, was 3.14% for the three month period ended March 31, 2011, a decrease of 13 basis points from the three month period ended March 31, 2010.

Provision for Loan Losses. We have identified the evaluation of the allowance for loan losses as a critical accounting policy where amounts are sensitive to material variation. This policy is significantly affected by our judgment and uncertainties and there is a likelihood that materially different amounts would be reported under different, but reasonably plausible, conditions or assumptions. Our activity in the provision for loan losses, which are charges or recoveries to operating results, is undertaken in order to maintain a level of total allowance for losses that management believes covers all known and inherent losses that are both probable and reasonably estimable at each reporting date. Our evaluation process typically includes, among other things, an analysis of delinquency trends, non-performing loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of our loans, the value of collateral securing the loan, the borrower’s ability to repay and repayment performance, the number of loans requiring heightened management oversight, local economic conditions and industry experience. Various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to make additional provisions for estimated loan losses based upon judgments different from those of management.

The Company recorded provisions for loan losses of $37,000 during the first quarter of 2011, compared to provisions for loan losses of $44,000 during the first quarter of 2010. During the first quarter of 2011, the Company recorded charge-offs of $2,000 against its home equity loans and lines of credit. In addition, non-performing assets decreased by $523,000 during the 2011 period. This decrease in non-performing assets was due to a $173,000 reduction in our loans that were accounted for on a non-accrual basis, and a $350,000 reduction in other real estate owned. Our allowance for loan losses was $1.8 million at March 31, 2011, or 244.08% of our non-performing loans at such date. Stated as a percentage of total loans receivable, our allowance for loan losses was 0.96% and 0.97% at March 31, 2011 and December 31, 2010, respectively.

Non-interest Income. Non-interest income for the first quarter of 2011 was $200,000, an increase of $108,000 from the first quarter of 2010. Customer service fees, which are primarily comprised of fees earned on transaction accounts and broker fees earned on certain loan sales, were $125,000 during the 2011 period, an increase of $60,000 from the 2010 period. This increase was due to a $56,000 increase in the fees earned on reverse mortgage loan originations. During the first quarter of 2011, we sold $3.8 million in residential mortgage loans resulting in gains of $56,000 compared to sales of $2.1 million in residential mortgage loans and student loans with aggregate gains of $23,000 during the first quarter of 2010. Other non-interest income was $19,000 and $4,000, respectively for the three month periods ended March 31, 2011 and 2010.

 

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Non-interest Expense. Non-interest expense for the quarter ended March 31, 2011 was $1.7 million, a decrease of $17,000 from the quarter ended March 31, 2010. Salaries and employee benefits expense decreased by $44,000, to $1.1 million, during the first quarter of 2011 compared to the first quarter of 2010. Occupancy expenses were $277,000 and $275,000 for the respective quarters ended March 31, 2011 and 2010. Our FDIC deposit insurance premiums increased by $11,000 during the first three months of 2011 compared to the first three months of 2010. This increase was due to increases in our deposit assessment base and the prevailing FDIC insurance premium rate. Other non-interest expenses were $224,000 and $196,000, respectively, for the period ended March 31, 2011 and 2010. This increase was primarily due to an increase in our pre-foreclosure legal expenses and an increase in our advertising expenditures compared to the 2010 period.

Income Tax Expense. Income tax expense was $306,000 based on pre-tax income of $885,000 during the first quarter of 2011 compared to income tax expense of $309,000 on pre-tax income of $894,000 during the first quarter of 2010.

Liquidity and Capital Resources

Our primary sources of funds are from deposits, amortization of loans, loan prepayments and the maturity of loans, mortgage-backed securities and other investments, and other funds provided from operations. While scheduled payments from the amortization of loans and mortgage-backed securities and maturing investment securities are relatively predictable sources of funds, deposit flows and loan prepayments can be greatly influenced by general interest rates, economic conditions and competition. We also maintain excess funds in short-term, interest-bearing assets that provide additional liquidity. At March 31, 2011, our cash and cash equivalents amounted to $11.2 million. In addition, at such date our available-for-sale investment and mortgage-backed securities amounted to an aggregate of $63.3 million.

We use our liquidity to fund existing and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to invest in other interest-earning assets, and to meet operating expenses. At March 31, 2011, we had certificates of deposit maturing within the next 12 months amounting to $86.8 million. Based upon historical experience, we anticipate that a significant portion of the maturing certificates of deposit will be redeposited with us. At March 31, 2011, we had $67.4 million in total borrowings, including $41.4 million in FHLB advances and $26.0 million in reverse repurchase agreements with commercial banks.

In addition to cash flow from loan and securities payments and prepayments as well as from sales of available for sale securities, we have significant borrowing capacity available to fund liquidity needs. In recent years we have utilized borrowings as a cost efficient addition to deposits as a source of funds. As a member of the Federal Home Loan Bank of Dallas, we pledge residential mortgage loans and mortgage-backed securities as collateral for advances. At March 31, 2011, the Company had $134.2 million in additional borrowings available through the Federal Home Loan Bank.

The following table summarizes our contractual cash obligations at March 31, 2011.

 

		Payments Due by Period
		Total				To 1 Year				More Than 1 Year to 3 Years				More Than 3 Years to 5 Years				More Than 5 Years
		(Dollars In Thousands)
Certificates of Deposit		$	136,115			$	86,839			$	25,720			$	23,556			$	—
FHLB Advances and Other Borrowings			67,459				11,852				39,364				8,951				7,292
Total Long-Term Debt			203,574				98,691				65,084				32,507				7,292
Operating Lease Obligations		$	170			$	34			$	68			$	68			$	—
Total Contractual Obligations		$	203,744			$	98,725			$	65,152			$	32,575			$	7,292

We anticipate that we will continue to have sufficient funds and alternative funding sources to meet our current commitments.

Impact of Inflation and Changing Prices

The financial statements, accompanying notes, and related financial data of the Company presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of operations. Most of our assets and liabilities are monetary in nature; therefore, the impact of interest rates has a greater impact on our performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

 

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Item 3 – Quantitative and Qualitative Disclosures About Market Risk.

For a discussion of the Company’s asset and liability management policies as well as the methods used to manage its exposure to the risk of loss from adverse changes in market prices and rates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – How We Manage Market Risk” at Part II, Item 7 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Item 4T – Controls and Procedures.

Our management evaluated, with the participation of our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer of 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 Senior Vice President 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 SEC’s rules and regulations and are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a-15 or 15d-15 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.

See “Risk Factors” at pages 31-34 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 (SEC File No. 1-33573), which is incorporated herein by reference thereto.

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

(a) Not applicable.

(b) Not applicable.

(c) The Company’s purchases of its common stock made during the quarter consisted of purchases of shares pursuant to repurchase plans approved by the Company’s Board of Directors, as set forth in the following table.

 

Period		Total Number of Shares Purchased				Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Plan or Program				Maximum Number of Shares that May Yet be Purchased Under the  Plan or Program (1)(2)
January 1 - January 31, 2011			3,000			$	14.70				3,000				21,971
February 1 - February 28, 2011			14,554				14.74				14,554				188,214
March 1 - March 31, 2011			49				14.98				49				188,165
Total			17,603			$	14.73				17,603

 

(1)

On November 1, 2010, the Company announced an eleventh stock repurchase program to acquire up to 5%, or 189,891 shares of its outstanding common stock over a six-month period. On May 2, 2011, the Company extended the duration of this program to November 2, 2011. There were 4,096 shares remaining to be repurchased as of May 2, 2011.

(2)	On February 23, 2011, the Company announced a twelfth stock repurchase program to acquire up to 5%, or 180,797 shares of its outstanding common stock over a six-month period. On May 2, 2011, the Company extended the duration of this program to November  2, 2011.

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.

(a) List of exhibits: (filed herewith unless otherwise noted)

 

31.1		Rule 13a-14(a)/15d-14(a) /Section 302 Certification of the Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a)/Section 302 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.

 

				LOUISIANA BANCORP, INC.
Date: May 11, 2011		By:		/s/ Lawrence J. LeBon, III
				Lawrence J. LeBon, III
				President and Chief Executive Officer
Date: May 11, 2011		By:		/s/ John LeBlanc
				John LeBlanc
				Senior Vice President and Chief Financial Officer

 

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