Attached files
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EX-31.2 - EXHIBIT 31.2 - HIBERNIA HOMESTEAD BANCORP, INC. | c17378exv31w2.htm |
EX-31.1 - EXHIBIT 31.1 - HIBERNIA HOMESTEAD BANCORP, INC. | c17378exv31w1.htm |
EX-32.1 - EXHIBIT 32.1 - HIBERNIA HOMESTEAD BANCORP, INC. | c17378exv32w1.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 March 31, 2011
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 | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
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 May 10,
2011, 1,032,667 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
Consolidated Balance Sheets
At March 31, | At December 31, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Assets |
||||||||
Cash, Non-Interest Bearing |
$ | 1,201 | $ | 481 | ||||
Cash, Interest Bearing |
3,284 | 4,112 | ||||||
Total Cash and Cash Equivalents |
4,485 | 4,593 | ||||||
Certificates of Deposit |
100 | 100 | ||||||
Securities Available for Sale |
3,183 | 4,230 | ||||||
Loans Receivable, Net |
62,764 | 61,953 | ||||||
Accrued Interest Receivable |
236 | 227 | ||||||
Investment in FHLB of Dallas Stock |
171 | 171 | ||||||
Investment in FNBB Stock |
210 | 210 | ||||||
Premises and Equipment, Net |
5,087 | 4,988 | ||||||
Deferred Income Taxes |
516 | 528 | ||||||
Prepaid Expenses and Other Assets |
288 | 253 | ||||||
Total Assets |
$ | 77,040 | $ | 77,253 | ||||
Liabilities and Equity |
||||||||
Liabilities |
||||||||
Deposits |
$ | 54,477 | $ | 54,607 | ||||
Advance Payments by Borrowers for Taxes and Insurance |
307 | 477 | ||||||
Accrued Interest Payable |
8 | 3 | ||||||
Accounts Payable and Other Liabilities |
276 | 213 | ||||||
Total Liabilities |
55,068 | 55,300 | ||||||
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; 1,032,667 Shares Outstanding at March 31, 2011
and December 31, 2010 |
11 | 11 | ||||||
Additional Paid-In Capital |
10,472 | 10,466 | ||||||
Treasury Stock at cost 80,667 shares at March 31, 2011
and December 31, 2010 |
(1,152 | ) | (1,152 | ) | ||||
Unallocated Common Stock held by: |
||||||||
Employee Stock Ownership Plan (ESOP) |
(810 | ) | (819 | ) | ||||
Recognition and Retention Plan (RRP) |
(293 | ) | (293 | ) | ||||
Accumulated Other Comprehensive Income, Net of Tax Effect |
65 | 80 | ||||||
Retained Earnings |
13,679 | 13,660 | ||||||
Total Equity |
21,972 | 21,953 | ||||||
Total Liabilities and Equity |
$ | 77,040 | $ | 77,253 | ||||
See notes to consolidated financial statements.
1
Table of Contents
Hibernia Homestead Bancorp, Inc.
Consolidated Statements of Operations (Unaudited)
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
(In Thousands, Except Per Share Data) | ||||||||
Interest Income |
||||||||
Loans Receivable |
||||||||
Mortgage Loans |
$ | 619 | $ | 533 | ||||
Commercial Loans |
232 | 129 | ||||||
Consumer and Other Loans |
3 | 2 | ||||||
Federal Funds Sold |
| 2 | ||||||
Mortgage-Backed Securities |
35 | 64 | ||||||
Investment Securities |
2 | 4 | ||||||
Other Investments and Deposits |
2 | 1 | ||||||
Total Interest Income |
893 | 735 | ||||||
Interest Expense |
||||||||
Deposits |
169 | 141 | ||||||
Total Interest Expense |
169 | 141 | ||||||
Net Interest Income |
724 | 594 | ||||||
Provision for Loan Losses |
15 | | ||||||
Net Interest Income After |
||||||||
Provision for Loan Losses |
709 | 594 | ||||||
Non-Interest Income |
||||||||
Other Income |
14 | 7 | ||||||
Rental Income, Net of Related Expenses |
27 | 31 | ||||||
Total Non-Interest Income |
41 | 38 | ||||||
Non-Interest Expenses |
||||||||
Salaries and Employee Benefits |
336 | 289 | ||||||
Occupancy Expenses |
103 | 92 | ||||||
Data Processing |
65 | 71 | ||||||
Advertising and Promotional Expenses |
15 | 26 | ||||||
Professional Fees |
60 | 63 | ||||||
Insurance Expense |
8 | 13 | ||||||
Supplies and Stationery |
12 | 10 | ||||||
Telephone and Postage |
18 | 15 | ||||||
Supervision, Exams and Assessments |
25 | 20 | ||||||
Directors Fees |
13 | 13 | ||||||
Franchise and Shares Taxes |
17 | 3 | ||||||
Other Operating Expenses |
40 | 38 | ||||||
Total Non-Interest Expenses |
712 | 653 | ||||||
Income (Loss) Before Income Taxes |
38 | (21 | ) | |||||
Income Tax Expense (Benefit) |
19 | (8 | ) | |||||
Net Income (Loss) |
$ | 19 | $ | (13 | ) | |||
Income (Loss) Per Common Share |
||||||||
Basic |
$ | 0.02 | $ | (0.01 | ) | |||
Diluted |
$ | 0.02 | $ | (0.01 | ) |
See notes to consolidated financial statements.
2
Table of Contents
Hibernia Homestead Bancorp, Inc.
Consolidated Statements of Changes in Equity (Unaudited)
Three Months Ended March 31, 2011 and 2010
Consolidated Statements of Changes in Equity (Unaudited)
Three Months Ended March 31, 2011 and 2010
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, 2010 |
$ | 11 | $ | 10,365 | $ | | $ | (855 | ) | $ | | $ | 133 | $ | 13,742 | $ | 23,396 | |||||||||||||||
Net Loss |
| | | | | | (13 | ) | (13 | ) | ||||||||||||||||||||||
Other Comprehensive Loss,
net of Applicable Taxes |
| | | | | (12 | ) | | (12 | ) | ||||||||||||||||||||||
Shares Purchased for RRP |
| | | | (92 | ) | | | (92 | ) | ||||||||||||||||||||||
Purchase of Treasury Stock |
| | (700 | ) | | | | | (700 | ) | ||||||||||||||||||||||
ESOP Stock Released for
Allocation |
| 4 | | 8 | | | | 12 | ||||||||||||||||||||||||
Stock-Based Compensation Cost |
| | | 1 | | | | 1 | ||||||||||||||||||||||||
BALANCE March 31, 2010 |
$ | 11 | $ | 10,369 | $ | (700 | ) | $ | (846 | ) | $ | (92 | ) | $ | 121 | $ | 13,729 | $ | 22,592 | |||||||||||||
BALANCE January 1, 2011 |
$ | 11 | $ | 10,466 | $ | (1,152 | ) | $ | (819 | ) | $ | (293 | ) | $ | 80 | $ | 13,660 | $ | 21,953 | |||||||||||||
Net Income |
| | | | | | 19 | 19 | ||||||||||||||||||||||||
Other Comprehensive Loss,
net of Applicable Taxes |
| | | | | (15 | ) | | (15 | ) | ||||||||||||||||||||||
ESOP Stock Released for
Allocation |
| 5 | | 9 | | | | 14 | ||||||||||||||||||||||||
RRP Stock Earned |
| (21 | ) | | | | | | (21 | ) | ||||||||||||||||||||||
Stock-Based Compensation
Cost |
| 22 | | | | | | 22 | ||||||||||||||||||||||||
BALANCE March 31,
2011 |
$ | 11 | $ | 10,472 | $ | (1,152 | ) | $ | (810 | ) | $ | (293 | ) | $ | 65 | $ | 13,679 | $ | 21,972 | |||||||||||||
See notes to consolidated financial statements.
3
Table of Contents
Hibernia Homestead Bancorp, Inc.
Consolidated Statements of Cash Flows (Unaudited)
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
(In Thousands) | ||||||||
Cash Flows from Operating Activities |
||||||||
Net Income (Loss) |
$ | 19 | $ | (13 | ) | |||
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities |
||||||||
Provision for Loan Losses |
15 | | ||||||
Deferred Income Taxes |
19 | (9 | ) | |||||
Depreciation and Amortization |
69 | 72 | ||||||
Net Discount Accretion |
(1 | ) | (7 | ) | ||||
Non-Cash Compensation |
36 | 13 | ||||||
(Increase) Decrease in: |
||||||||
Accrued Interest Receivable |
(9 | ) | (8 | ) | ||||
Prepaid Expenses and Other Assets |
(35 | ) | (26 | ) | ||||
Increase (Decrease) in: |
||||||||
Accrued Interest Payable |
5 | | ||||||
Accounts Payable and Other Liabilities |
42 | 25 | ||||||
Net Cash Provided by Operating Activities |
160 | 47 | ||||||
Cash Flows from Investing Activities |
||||||||
Net Increase in Loans Receivable |
(826 | ) | (3,409 | ) | ||||
Maturities, Redemptions and Sales of Certificates of Deposit |
| 475 | ||||||
Maturities, Redemptions and Sales of Securities Available for Sale |
1,026 | 1,777 | ||||||
Purchase of Premises and Equipment |
(168 | ) | (24 | ) | ||||
Net Cash Provided by (Used in) Investing Activities |
32 | (1,181 | ) | |||||
Cash Flows from Financing Activities |
||||||||
Net (Decrease) Increase in Deposits |
(130 | ) | 66 | |||||
Net Decrease in Advance Payments by Borrowers for Taxes and Insurance |
(170 | ) | (126 | ) | ||||
Purchase of Stock for RRP |
| (92 | ) | |||||
Purchase of Treasury Stock |
| (700 | ) | |||||
Net Cash Used in Financing Activities |
(300 | ) | (852 | ) | ||||
Net Decrease in Cash and Cash Equivalents |
(108 | ) | (1,986 | ) | ||||
Cash and Cash Equivalents Beginning of Period |
4,593 | 6,233 | ||||||
Cash and Cash Equivalents End of Period |
$ | 4,485 | $ | 4,247 | ||||
Supplementary Schedule of Cash Flow Information |
||||||||
Cash Paid for Interest on Deposits |
$ | 164 | $ | 141 | ||||
Cash Paid for Income Taxes |
$ | | $ | | ||||
Market Value Adjustment for Loss on Securities Available for Sale |
$ | (22 | ) | $ | (17 | ) | ||
See notes to consolidated financial statements.
4
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements
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 or the 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 to individual and commercial 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, commercial loans secured by real estate, and commercial
and industrial loans. The Bank primarily 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.
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 (GAAP). 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 month period ended March 31, 2011, are not
necessarily indicative of the results that may be expected for the fiscal year ending December 31,
2011, 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, 2010, included in the Companys Form 10-K filed with the Securities and Exchange
Commission (SEC) on March 31, 2011 (File No. 000-53555).
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 U.S. generally accepted accounting
principles (U.S. GAAP) 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 consolidated 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.
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)
Use of Estimates (Continued)
A majority of the Companys 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. During the second quarter of 2010, the Company also began making
commercial and industrial loans. Residential mortgage loans and commercial loans are expected to be
repaid from the cash flows of the customers. 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 real
estate, future additions to the allowances 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 Companys allowances for losses on loans and foreclosed real estate. Such
agencies may require the Company to recognize additions to the allowances 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 allowances for losses on loans and foreclosed real estate may
change in the near term.
Cash Equivalents
Cash equivalents consist of cash on hand and in banks, and federal funds sold. For purposes
of the consolidated 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.
Loans Receivable
Loans receivable are stated at unpaid principal balances, less the allowance for loan losses,
and net of deferred loan origination fees, direct origination costs and discounts.
In July 2010, the Financial Accounting Standard Board (the FASB) issued Accounting Standards
Update (ASU) No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the
Allowance for Credit Losses, which requires that the Company provide a greater level of
disaggregated information about the credit quality of the Companys loans and leases and the
allowance for loan and lease losses (the Allowance). This ASU also requires the Company to
disclose on a prospective basis, additional information related to credit quality indicators,
non-accrual loans and leases and past due information. For public entities, the amendments
pertaining to disclosures are effective for interim and annual reporting periods ending on or after
December 15, 2010. As this ASU amends only the disclosure requirements for loans and leases and
the allowance, the adoption had no impact on the Companys
consolidated statements of operations and condition. See Note 3 to the consolidated financial
statements for the required disclosures.
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)
Interest on Loans
Interest on 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 consolidated balance sheet date. The allowance is comprised of specific allowances and a
general allowance.
Specific allowances are assessed for each loan that is identified as impaired and for which a
probable loss has been identified. The allowance related to impaired loans 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 allowances include the
financial condition of the borrower, changes in the value of pledged collateral and general
economic conditions. General allowances are established for each loan class. Loans that have been
identified as impaired are excluded from the homogenous pools; the remaining loans are then
collectively evaluated. The Companys evaluations are based on historical charge-offs considering
factors that include risk rating, concentrations and loan type. These allowances, which are
judgmentally determined, generally serve to compensate for the uncertainty in estimating loan
losses, particularly in times of changing economic conditions, and consider the possibility of
improper risk rating and possible over or under allocation of specific allowances. It also
considers the lagging impact of historical charge-off ratios in periods where future charge-offs
are expected to increase or decrease significantly. In addition, the general allowances consider
trends in delinquencies and non-accrual loans, concentrations, the volatility of risk ratings and
the evolving portfolio 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 general 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.
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
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.
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 and Related Costs
The Company 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 Company
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 in which, after acquisition, the
Company believes it will not be able to collect all amounts due according to its contractual terms
are considered to be other-than-temporarily impaired. In accordance with U.S. 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 Company maintains investments in membership stocks of the Federal Home Loan Bank
(FHLB) of Dallas and the 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
FHLB of Dallas. As of March 31, 2011 and December 31, 2010, the membership investment requirement
was 0.06% of the members total assets, and the activity-based requirement was 4.1% of advances and
applicable Mortgage Partnership Finance assets.
Foreclosed Real Estate
Real estate acquired through, or in lieu of, foreclosure is 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 7 to 30 years for buildings and improvements and 3 to 10 years for furniture
and equipment.
9
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)
Income Taxes
The Company recognizes income taxes in accordance with FASB ASC Topic No. 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.
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 consolidated 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 sheets along
with any associated interest or penalties that would be payable to the taxing authorities upon
examination. Interest and/or penalties associated with unrecognized tax benefits, if any, would be
classified as additional income taxes in the consolidated statements 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.
Earnings Per Share
Earnings per share represent income available to common shareholders divided by the
weighted-average number of common shares outstanding during the period. Diluted earnings per share
reflect additional common shares that would have been outstanding if dilutive potential common
shares had been issued, as well as any adjustment to income that would result from the assumed
issuance.
10
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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 (loss) and net
unrealized gains (losses) on securities and is presented in the consolidated statements of changes
in equity and comprehensive income (loss). Topic 220 requires only additional disclosures in the
financial statements; it does not affect the Companys financial position or results of operations.
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Net Income (Loss) |
$ | 19 | $ | (13 | ) | |||
Other
Comprehensive Income (Loss), Net of Tax
|
||||||||
Unrealized Loss on
Securities Available for Sale |
(15 | ) | (12 | ) | ||||
Total Other Comprehensive Loss |
(15 | ) | (12 | ) | ||||
Total Comprehensive Income (Loss) |
$ | 4 | $ | (25 | ) | |||
Statements 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 U.S. generally accepted accounting
principles, interest credited directly to deposit accounts has been accounted for as operating cash
payments.
Recent Accounting Pronouncements
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 became effective for the Company on January 1, 2010 with
no impact on its consolidated financial statements.
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 was adopted by the Company on January 1, 2010
with no impact on its consolidated financial statements.
11
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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 January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic
820) that requires new disclosures related to fair value measurements and clarifies existing
disclosure requirements about the level of disaggregation, inputs and valuation techniques.
Specifically, reporting entities now must disclose separately the amounts of significant transfers
in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the
transfers. In addition, in the reconciliation for Level 3 fair value measurements, a reporting
entity needs to use judgment in determining the appropriate classes of assets and liabilities for
disclosure of fair value measurement, considering the level of disaggregated information required
by other applicable U.S. GAAP guidance and should also provide disclosures about the valuation
techniques and inputs used to measure fair value for each class of assets and liabilities. The
guidance was effective for financial statements issued for periods ending after December 15, 2009,
except for disclosures about purchases, sales, issuances and settlements in reconciliation for
Level 3 fair value measurements, which will be effective for fiscal years beginning after December
15, 2010. The adoption of this guidance affects only the disclosure requirements and had no impact
on the Companys consolidated statements of operations and condition.
In December 2010, the FASB issued authoritative guidance that modified Step 1 of the goodwill
impairment test for reporting units with zero or negative carrying amounts. For those reporting
units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely
than not that a goodwill impairment exists. In determining whether it is more likely than not that
a goodwill impairment exists, an entity should consider whether there are any adverse qualitative
factors indicating that an impairment may exist such as if an event occurs or circumstances change
that would more likely than not reduce the fair value of a reporting unit below its carrying
amount. This new authoritative guidance became effective on January 1, 2011 and had no impact on
the Companys consolidated financial statements
In January 2011, the FASB issued authoritative guidance that deferred the effective date of
disclosure requirements for public entities about troubled debt restructurings to be concurrent
with the effective date of the guidance for determining what constitutes a troubled debt
restructuring, which is concurrently being addressed by the FASB. The guidance is anticipated to
be effective for interim and annual reporting periods ending after June 15, 2011.
In July 2010, the FASB issued 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 loan and lease losses (the Allowance) 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. The Company adopted
the provisions of this ASU in preparing the consolidated financial statements as of and for the
year ended December 31, 2010. As this ASU amends only the disclosure requirements for loans and
leases and the allowance, the
adoption had no impact on the Companys consolidated statements of operations and condition. See
Note 3 to the consolidated financial statements for the required disclosures.
12
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)
Advertising and Promotional Expenses
The Company follows the policy of charging the costs of advertising and promotions to
expense as incurred. Advertising and promotional expenses of $15,000 and $26,000 for the three
months ended March 31, 2011 and 2010, respectively, are included in non-interest expense.
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 March 31, 2011 and December
31, 2010.
Held to Maturity
There were no held to maturity securities at March 31, 2011 or December 31, 2010.
13
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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
The amortized cost and estimated fair values of available for sale securities at March
31, 2011 and December 31, 2010, are summarized as follows:
March 31, 2011 (Unaudited) | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(In Thousands) | ||||||||||||||||
U.S. Government Agencies |
$ | | $ | | $ | | $ | | ||||||||
Mortgage-Backed Securities |
3,084 | 99 | | 3,183 | ||||||||||||
Available for Sale Securities |
$ | 3,084 | $ | 99 | $ | | $ | 3,183 | ||||||||
December 31, 2010 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(In Thousands) | ||||||||||||||||
U.S. Government Agencies |
$ | 500 | $ | 2 | $ | | $ | 502 | ||||||||
Mortgage-Backed Securities |
3,609 | 119 | | 3,728 | ||||||||||||
Available for Sale Securities |
$ | 4,109 | $ | 121 | $ | | $ | 4,230 | ||||||||
14
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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 fair values of available for sale securities at March 31,
2011, 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.
March 31, 2011 (Unaudited) | ||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
(In Thousands) | ||||||||
Due in One Year or Less |
$ | 1,141 | $ | 1,157 | ||||
Due After One Year Through Five Years |
1,205 | 1,247 | ||||||
Due After Five Years Through Ten Years |
594 | 625 | ||||||
Due After Ten Years Through Twenty Years |
42 | 43 | ||||||
Due After Twenty Years |
102 | 111 | ||||||
$ | 3,084 | $ | 3,183 | |||||
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 the Companys investment securities for liquidity
or other operating purposes.
The proceeds from the sales, redemptions and maturities of securities available for sale for
the three months ended March 31, 2011 and 2010 were approximately $1.0 million and $1.8 million,
respectively. There were no realized gains or losses in the three month periods ending March 31,
2011 and March 31, 2010.
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 the
Company to retain its investment in the issuer for a period of time sufficient to allow
for any anticipated recovery in fair value.
At March 31, 2011 and December 31, 2010, there were no unrealized losses in investment
securities. In analyzing an issuers financial condition, management considers whether the
securities are issued by the federal government or its agencies, whether downgrades by bond rating
agencies have occurred, and the results of reviews of the issuers financial condition. The Company
has the ability to hold available for sale debt securities for the foreseeable future.
15
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 3. Loans Receivable
Loans receivable at March 31, 2011 and December 31, 2010 are summarized as follows:
March 31, 2011 | December 31, 2010 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
One-to-Four Family Residential |
$ | 41,690 | $ | 41,421 | ||||
Multi-Family Residential |
170 | 173 | ||||||
Second Mortgage Residential |
171 | 174 | ||||||
Residential Construction and Land Loans |
4,636 | 3,375 | ||||||
Commercial Loans Secured by Real Estate |
13,736 | 14,317 | ||||||
Commercial and Industrial Loans |
2,325 | 2,375 | ||||||
Home Equity Lines of Credit |
366 | 426 | ||||||
Loans Secured by Deposits |
24 | 24 | ||||||
63,118 | 62,285 | |||||||
Deferred Loan Costs (Fees) |
55 | 62 | ||||||
Less: Allowance for Loan Losses |
(409 | ) | (394 | ) | ||||
Total |
$ | 62,764 | $ | 61,953 | ||||
The following presents by portfolio segment, the
activity in the allowance for the
three months ended March 31, 2011 (unaudited). The following also presents by portfolio segment, the balance in the allowance
disaggregated on the basis of the Companys impairment measurement method and the related recorded
investment in loans and leases as of March 31, 2011 (unaudited).
Quarter Ended March 31, 2011 | ||||||||||||||||||||
Commercial | Commercial | |||||||||||||||||||
and Industrial | Real Estate | Consumer | Residential | Total | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||
Beginning Balance |
$ | 12 | $ | 72 | $ | | $ | 310 | $ | 394 | ||||||||||
Charge-offs |
| | | | | |||||||||||||||
Recoveries |
| | | | | |||||||||||||||
Provisions |
| (3 | ) | | 18 | 15 | ||||||||||||||
Ending Balance |
$ | 12 | $ | 69 | $ | | $ | 328 | $ | 409 | ||||||||||
Ending balance: individually evaluated for
impairment |
$ | | $ | | $ | | $ | 72 | $ | 72 | ||||||||||
Ending balance: collectively evaluated for
impairment |
$ | 12 | $ | 69 | $ | | $ | 256 | $ | 337 | ||||||||||
Ending balance: loans acquired with
deteriorated credit quality |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Financing receivables: |
||||||||||||||||||||
Ending Balance |
$ | 2,325 | $ | 13,736 | $ | 390 | $ | 46,667 | $ | 63,118 | ||||||||||
Ending balance: individually evaluated for
impairment |
$ | | $ | | $ | | $ | 1,033 | $ | 1,033 | ||||||||||
Ending balance: collectively evaluated for
impairment |
$ | 2,325 | $ | 13,736 | $ | 390 | $ | 45,634 | $ | 62,085 | ||||||||||
Ending balance: loans acquired with
deteriorated credit quality |
$ | | $ | | $ | | $ | | $ | | ||||||||||
16
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 3. Loans Receivable (Continued)
Credit Quality Indicators
The Company uses several credit quality indicators to manage credit risk in an ongoing
manner. The Companys primary credit quality indicators are to use an internal credit risk
rating system that categorizes loans and leases into pass, special mention, or classified
categories. Credit risk ratings are applied individually to those classes of loans and
leases that have significant or unique credit characteristics that benefit from a
case-by-case evaluation. Groups of loans and leases that are underwritten and structured
using standardized criteria and characteristics, such as statistical models (e.g., credit
scoring or payment performance), are typically risk rated and monitored collectively.
The following are the definitions of the Companys credit quality indicators:
Pass Level 1 Loans that comply in all material respects with the Companys loan
policies, that are adequately secured with conforming collateral and that are extended to
borrowers with documented cash flow and/or liquidity to safely cover their total debt
service requirements. |
Pass Level 2 Loan that may have one or more approved exceptions to loan policy
including exceptions to collateral guidelines, loan-to-value parameters, debt service
coverage ratios or other guidelines but that are extended to borrowers with strong histories
and adequate cash flow and/or liquidity to cover total debt service requirements. These
loans are deemed by management to pose only modest risk of deterioration or default. |
Pass Level 3 Loans that may have one or more approved exceptions to loan policy
and that exhibit weakness in collateral value, debt service capacity or other factors that,
in the judgment of management, increase the likelihood of the loan deteriorating in the
event of unfavorable changes in market conditions or the borrowers circumstances. |
Special Mention Special Mention includes loans with a recent history of repeat
delinquencies, indications of possible deterioration in credit strength, decline in
collateral value or lack of current information. Also included in this rating are loans
that have not exhibited frequent delinquency but which are of concern due to suspected
deterioration in the borrowers status, decline in collateral value, weakness in the
borrowers industry or other indications of risk that have come to managements attention. |
Substandard The substandard classification includes loans that are inadequately
protected by current equity and paying capacity of the obligor or of the collateral pledged.
Such loans have one or more weaknesses that jeopardize the liquidation of the debt and
expose the Company to loss if the weaknesses are not corrected. Weaknesses may include
inadequate cash flow, unmarketable collateral or other factors which could cause the
borrower to default. |
Doubtful Loans that have all the weaknesses inherent in substandard loans and
those weaknesses are so serious as to make full repayment of the loan, based on currently
known facts, improbable. These loans expose the Company to serious risk, but the extent of
the loss cannot be determined because of pending factors that could strengthen the credit in
the near term. |
The Companys credit quality indicators are periodically updated on a case-by-case basis. |
17
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 3. Loans Receivable (Continued)
Credit Quality Indicators (Continued)
The following presents by class and by credit quality indicator, the recorded
investment in the Companys loans and leases as of
March 31, 2011 (unaudited) and December 31, 2010.
Commercial Real Estate | Commercial Real Estate | |||||||||||||||||||||||||
Commercial and Industrial | Construction | Other | ||||||||||||||||||||||||
March 31, 2011 | December 31, 2010 | March 31, 2011 | December 31, 2010 | March 31, 2011 | December 31, 2010 | |||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||
Pass Level 1 |
$ | 2,325 | $ | 2,375 | $ | 1,224 | $ | 1,229 | $ | 12,141 | $ | 12,709 | ||||||||||||||
Pass Level 2 |
| | | | 371 | 379 | ||||||||||||||||||||
Pass Level 3 |
| | | | | | ||||||||||||||||||||
Special Mention |
| | | | | | ||||||||||||||||||||
Substandard |
| | | | | | ||||||||||||||||||||
Doubtful |
| | | | | | ||||||||||||||||||||
Total |
$ | 2,325 | $ | 2,375 | $ | 1,224 | $ | 1,229 | $ | 12,512 | $ | 13,088 | ||||||||||||||
Residential Credit Exposure Credit Risk Profile by Internally Assigned Credit Quality Indicator |
Residential - Prime | ||||||||
March 31, 2011 | December 31, 2010 | |||||||
(In Thousands) | ||||||||
Grade: |
||||||||
Pass Level 1 |
$ | 38,582 | $ | 37,129 | ||||
Pass Level 2 |
5,616 | 5,536 | ||||||
Pass Level 3 |
174 | 175 | ||||||
Special Mention |
1,106 | 660 | ||||||
Substandard |
1,189 | 1,643 | ||||||
Doubtful |
| | ||||||
Total |
$ | 46,667 | $ | 45,143 | ||||
Consumer Credit Exposure Credit Risk Profile Based on Payment Activity |
Consumer - Other | ||||||||
March 31, 2011 | December 31, 2010 | |||||||
(In Thousands) | ||||||||
Performing |
$ | 390 | $ | 450 | ||||
Nonperforming |
| | ||||||
Total |
$ | 390 | $ | 450 | ||||
18
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 3. Loans Receivable (Continued)
Impaired Loans
The following presents by class, information related to impaired loans as of and for
the period ended March 31, 2011 (unaudited):
Quarter Ended March 31, 2011 | ||||||||||||||||||||
Average | Interest | |||||||||||||||||||
Recorded | Unpaid Principal | Related | Recorded | Income | ||||||||||||||||
Investment | Balance | Allowance | Investment | Recognized | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
With no related allowance recorded: |
||||||||||||||||||||
Commercial |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Commercial real estate |
| | | | | |||||||||||||||
Residential prime |
174 | 176 | | 175 | 1 | |||||||||||||||
With an allowance recorded: |
||||||||||||||||||||
Commercial |
| | | | | |||||||||||||||
Commercial real estate |
| | | | | |||||||||||||||
Residential prime |
859 | 870 | 72 | 865 | | |||||||||||||||
Total: |
||||||||||||||||||||
Commercial |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Consumer |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Residential
prime |
$ | 1,033 | $ | 1,046 | $ | 72 | $ | 1,040 | $ | 1 |
The Company is not committed to lend additional funds to debtors whose loans have
been modified.
19
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 3. Loans Receivable (Continued)
Non-Accrual Loans
The following presents by class, the recorded investment in loans on non-accrual status
as of March 31, 2011 (unaudited) and December 31, 2010:
Loans on Nonaccrual Status
March 31, 2011 | December 31, 2010 | |||||||
(In Thousands) | ||||||||
Commercial and Industrial |
$ | | $ | | ||||
Commercial Real Estate |
| | ||||||
Consumer |
| | ||||||
Residential prime |
981 | $ | 1,138 | |||||
$ | 981 | $ | 1,138 | |||||
20
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 3. Loans Receivable (Continued)
Aging Analysis of Past Due Loans
The following presents by class, an aging analysis and the recorded investment in loans
as of March 31, 2011 and December 31, 2010 (in thousands):
March 31, 2011
Recorded | ||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||
> 90 Days | ||||||||||||||||||||||||||||
30-59 Days Past | 60-89 Days Past | Greater than 90 | Total Past | Total Financing | and | |||||||||||||||||||||||
Due | Due | Days | Due | Current | Receivables | Accruing | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
Commercial and Industrial |
$ | | $ | | $ | | $ | | $ | 2,325 | $ | 2,325 | $ | | ||||||||||||||
Commercial real estate: |
||||||||||||||||||||||||||||
Commercial real estate construction |
| | | | 1,224 | 1,224 | | |||||||||||||||||||||
Commercial real estate other |
| | | | 12,512 | 12,512 | | |||||||||||||||||||||
Consumer: |
||||||||||||||||||||||||||||
Consumer other |
| | | | 390 | 390 | | |||||||||||||||||||||
Residential: |
||||||||||||||||||||||||||||
Residential prime |
289 | | 766 | 1,055 | 45,612 | 46,667 | | |||||||||||||||||||||
Total |
$ | 289 | $ | | $ | 766 | $ | 1,055 | $ | 62,063 | $ | 63,118 | $ | | ||||||||||||||
December 31, 2010
Recorded | ||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||
> 90 Days | ||||||||||||||||||||||||||||
30-59 Days Past | 60-89 Days Past | Greater than 90 | Total Past | Total Financing | and | |||||||||||||||||||||||
Due | Due | Days | Due | Current | Receivables | Accruing | ||||||||||||||||||||||
Commercial and Industrial |
$ | | $ | | $ | | $ | | $ | 2,375 | $ | 2,375 | $ | | ||||||||||||||
Commercial real estate: |
||||||||||||||||||||||||||||
Commercial real estate construction |
| | | | 1,229 | 1,229 | | |||||||||||||||||||||
Commercial real estate other |
| | | | 13,088 | 13,088 | | |||||||||||||||||||||
Consumer: |
||||||||||||||||||||||||||||
Consumer other |
| | | | 450 | 450 | | |||||||||||||||||||||
Residential: |
||||||||||||||||||||||||||||
Residential prime |
625 | 70 | 888 | 1,583 | 43,560 | 45,143 | | |||||||||||||||||||||
Total |
$ | 625 | $ | 70 | $ | 888 | $ | 1,583 | $ | 60,702 | $ | 62,285 | $ | | ||||||||||||||
21
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 4. Earnings Per Share
The computation of basic earnings per share (EPS) is based on the weighted-average number of
shares of common stock outstanding. The computation of diluted earnings per share is based on the
weighted average number of shares of common stock outstanding plus the shares resulting from the
assumed exercise of all outstanding share-based awards using the treasury stock method.
Earnings per common share was computed based on the following:
(in thousands, except per share data) | March 31, 2011 | March 31, 2010 | ||||||
(Unaudited) | ||||||||
Numerator: |
||||||||
Income (loss) applicable to common shares |
$ | 19 | $ | (13 | ) | |||
Denominator: |
||||||||
Weighted average common shares outstanding |
931 | 1,016 | ||||||
Effect of dilutive securities |
19 | | ||||||
Weighted average common shares outstandingassuming dilution |
950 | 1,016 | ||||||
Earnings (loss) per common share |
$ | 0.02 | $ | (0.01 | ) | |||
Earnings (loss) per common shareassuming dilution |
$ | 0.02 | $ | (0.01 | ) | |||
Due to the net loss attributable to common shareholders for the three months ended March
31, 2010, no potentially dilutive shares were included in the loss per share calculation, as
including such shares would have been anti-dilutive. Anti-dilutive stock options of 36,000 with a
weighted average exercise price of $14.00 per share for the period ended March 31, 2010 were
excluded from diluted shares. Share-based awards did not have an anti-dilutive effect on diluted
earnings per share for the period ended March 31, 2011.
Note 5. 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 effect on
the Bank and the consolidated financial statements.
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.
22
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 5. Regulatory Matters (Continued)
Quantitative measures established by regulation to ensure capital adequacy require the Bank to
maintain minimum amounts and ratios of: Total and Tier I capital to
risk-weighted assets (as defined in the regulations) and of Tier I
capital to average assets (as
defined). Management believes, as of
March 31, 2011, 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 March 31, 2011 and December 31, 2010, 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) | ||||||||||||||||
March 31, 2011 |
||||||||||||||||
Tier 1 Capital (to Average Assets) |
$ | 18,570 | 24.51 | % | $ | 3,031 | 4.00 | % | ||||||||
Tier 1 Capital (to Risk-Weighted Assets) |
$ | 18,570 | 36.25 | % | $ | 2,049 | 4.00 | % | ||||||||
Total Capital (to Risk-Weighted Assets) |
$ | 18,979 | 37.05 | % | $ | 4,098 | 8.00 | % |
Actual | Required | |||||||||||||||
Amount | Ratio | Amount | Ratio | |||||||||||||
(Dollars in Thousands) | ||||||||||||||||
December 31, 2010 |
||||||||||||||||
Tier 1 Capital (to Average Assets) |
$ | 18,518 | 25.61 | % | $ | 2,892 | 4.00 | % | ||||||||
Tier 1 Capital (to Risk-Weighted Assets) |
$ | 18,518 | 35.97 | % | $ | 2,059 | 4.00 | % | ||||||||
Total Capital (to Risk-Weighted Assets) |
$ | 18,912 | 36.73 | % | $ | 4,119 | 8.00 | % |
Note 6. Disclosure About Fair Value of Financial Instruments
The following disclosure is made in accordance with the requirements of ASC 825, Financial
Instruments. Financial instruments are defined as cash and contractual rights and obligations
that require settlement, directly or indirectly, in cash. Fair values are based on quoted market
prices for similar instruments or estimated using discounted cash flow analysis. The discount
rates used are estimated using comparable risk-free market rates for similar types of instruments
adjusted to be commensurate with the credit risk, overhead costs, and optionality of such
instruments. The results of these techniques are highly sensitive to the assumptions used, such as
those concerning appropriate discount rates and estimates of future cash flows, which require
considerable judgment. Accordingly, estimates presented herein are not necessarily indicative of
the amounts the Company could realize in a current settlement of the underlying financial
instruments.
ASC 825 excludes certain financial instruments and all nonfinancial instruments from its
disclosure requirements. These disclosures should not be interpreted as representing an aggregate
measure of the underlying value of the Company.
23
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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 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 and short-term investments with other institutions, the carrying amount
approximates fair value.
Certificates of Deposit
For short-term certificates of deposit with other institutions, the carrying amount
approximates cash value.
Investment Securities
For securities and marketable equity securities held for investment purposes, fair values
are based on quoted market prices.
Loans
The fair value of loans is estimated by discounting the future cash flows using the current
rates at which similar loans would be made to borrowers with similar credit ratings and for
the same remaining maturity. The allowance for loan losses is allocated to each individual
loan account prior to the calculation of the fair value of loans.
Deposits
and Advance Payments by Borrowers for Taxes and Insurance
The fair value of demand deposits, savings deposits, certain money market deposits and
advance payments by borrowers for taxes and insurance is the amount payable on demand. The
value of fixed maturity certificates of deposit is estimated by discounting the future cash
flows using interest rates 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.
24
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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 March 31, 2011 and December
31, 2010, are as follows (reported in thousands):
March 31, 2011 | ||||||||
(Unaudited) | ||||||||
Carrying | Fair | |||||||
Amount | Value | |||||||
Financial Assets |
||||||||
Cash and Short-Term Investments |
$ | 4,485 | $ | 4,485 | ||||
Investment Securities |
3,183 | 3,183 | ||||||
Certificates of Deposit |
100 | 100 | ||||||
Loans |
63,173 | 60,932 | ||||||
Less: Allowance for Loan Losses |
(409 | ) | ||||||
$ | 70,532 | $ | 68,700 | |||||
Financial Liabilities |
||||||||
Deposits and Advance Payments by Borrowers
for Taxes and Insurance |
$ | 54,784 | $ | 54,091 | ||||
Unrecognized Financial Instruments |
||||||||
Commitments to Extend Credit |
$ | 11,433 | $ | 11,433 | ||||
December 31, 2010 | ||||||||
Carrying | Fair | |||||||
Amount | Value | |||||||
Financial Assets |
||||||||
Cash and Short-Term Investments |
$ | 4,593 | $ | 4,593 | ||||
Investment Securities |
4,230 | 4,230 | ||||||
Certificates of Deposit |
100 | 100 | ||||||
Loans |
62,347 | 60,778 | ||||||
Less: Allowance for Loan Losses |
(394 | ) | ||||||
$ | 70,876 | $ | 69,701 | |||||
Financial Liabilities |
||||||||
Deposits and Advance Payments by Borrowers
for Taxes and Insurance |
$ | 55,084 | $ | 54,404 | ||||
Unrecognized Financial Instruments |
||||||||
Commitments to Extend Credit |
$ | 6,562 | $ | 6,562 | ||||
25
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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 the FASBs fair value guidance 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). The fair value
guidance defines fair value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements.
The fair value guidance 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, the fair value guidance 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 Companys assets and liabilities measured at fair value on a
recurring basis at March 31, 2011 (unaudited) and December 31, 2010:
March 31, 2011 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
(In Thousands) | ||||||||||||||||
Assets |
||||||||||||||||
Investment Securities |
$ | 3,183 | $ | | $ | 3,183 | $ | | ||||||||
Total |
$ | 3,183 | $ | | $ | 3,183 | $ | | ||||||||
Liabilities |
$ | | $ | | $ | | $ | | ||||||||
Total |
$ | | $ | | $ | | $ | | ||||||||
26
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 7. Fair Value of Financial Instruments (Continued)
December 31, 2010 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
(In Thousands) | ||||||||||||||||
Assets |
||||||||||||||||
Investment Securities |
$ | 4,230 | $ | | $ | 4,230 | $ | | ||||||||
Total |
$ | 4,230 | $ | | $ | 4,230 | $ | | ||||||||
Liabilities |
$ | | $ | | $ | | $ | | ||||||||
Total |
$ | | $ | | $ | | $ | | ||||||||
Note 8. Employee Stock Ownership Plan
During fiscal 2008, the Company instituted an employee stock ownership plan. The Hibernia
Homestead Bancorp, Inc. Employee Stock Ownership Plan (ESOP) enables all eligible employees of
the Bank to share in the growth of the Company through the acquisition of stock. Employees are
generally eligible to participate in the ESOP after completion of one year of service and attaining
the age of 21.
The ESOP purchased the statutory limit of eight percent of the shares sold in the initial
public offering of the Company on January 17, 2009. This purchase was facilitated by a loan from
the Company to the ESOP in the amount of $891,000. The loan is secured by a pledge of the ESOP
shares. The shares pledged as collateral are reported as unearned ESOP shares in the consolidated
balance sheets. The corresponding note is being repaid in 100 quarterly debt service payments of
$13,000 on the last business day of each quarter, beginning March 31, 2009, at the rate of 3.25%.
The Company, at its discretion, may contribute to the ESOP, in the form of debt service. Cash
dividends on the Companys stock shall be used to either repay the loan, be distributed to the
participants in the ESOP, or retained in the ESOP and reinvested in Company stock. Shares are
released for allocation to ESOP participants based on principal and interest payments of the note.
Compensation expense is recognized based on the number of shares allocated to ESOP participants
each year and the average market price of the stock for the current year.
ESOP compensation expense for the three months ended March 31, 2011 and March 31, 2010 was
$14,000 and $12,000, respectively.
27
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 9. Recognition and Retention Plan
On July 30, 2009, the shareholders of the Company approved the Companys 2009 Recognition and
Retention Plan (RRP). 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 March 31,
2011, 11,133 shares have been awarded under the Plan. During the quarter ended March 31, 2011, no
shares vested and were released. Compensation expense is being recognized over the vesting period.
RRP compensation expense for the three months ended March 31, 2011 amounted to $9,000. For the
three months ended March 31, 2010 the Company recognized no compensation expense related to the
Recognition and Retention Plan.
The Recognition and Retention Plan Trust (the Trust) 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 are 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.
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 March 31, 2011, 63,833 options have been granted to eligible
employees. For the three months ended
March 31, 2011 and March 31, 2010, the Company recognized $22,000 and $1,000, respectively, of
compensation expense related to stock options granted.
28
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 10. Stock Option Plan (Continued)
Following is a summary of the status of the Option Plan during the three months ended March 31,
2011 (unaudited):
Number of | Weighted-average | |||||||
Shares | Exercise Price | |||||||
Outstanding at January 1, 2011 |
63,833 | $ | 14.65 | |||||
Granted |
| | ||||||
Exercised |
| | ||||||
Forfeited |
| | ||||||
Outstanding at March 31, 2011 |
63,833 | $ | 14.65 | |||||
Options Exercisable at March 31, 2011 |
7,200 | $ | 14.00 | |||||
Note 11. Subsequent Events
In accordance with the subsequent events topic of the FASB ASC, Topic No. 855, Subsequent
Events, management has evaluated subsequent events through the date that the financial statements
were issued and determined that no events occurred that require disclosure. No subsequent events
occurring after this date have been evaluated for inclusion in these financial statements.
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.
29
Table of Contents
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 operating expenses. 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.
Critical Accounting Policies
In reviewing and understanding financial information for Hibernia Homestead Bancorp, Inc., 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 consolidated
financial statements. The accounting and financial reporting policies of Hibernia Homestead
Bancorp, Inc. conform to U.S. generally accepted accounting principles 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 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 consolidated balance sheet date. The allowance is comprised of specific allowances and a
general allowance.
Specific allowances are assessed for each loan that is identified as impaired and for which a
probable loss has been identified. The allowance related to impaired loans 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 allowances include the
financial condition of the borrower, changes in the value of pledged collateral and general
economic conditions. General allowances are established for each loan class. Loans that have been
identified as impaired are excluded from the homogenous pools; the remaining loans are then
collectively evaluated. The Companys evaluations are based on historical charge-offs considering
factors that include risk rating, concentrations and loan type. These allowances, which are
judgmentally determined, generally serve to compensate for the uncertainty in estimating loan
losses, particularly in times of changing economic conditions, and consider the possibility of
improper risk rating and possible over or under allocation of specific allowances. It also
considers the lagging impact of historical charge-off ratios in periods where future charge-offs
are expected to increase or decrease significantly. In addition, the general allowances consider
trends in delinquencies and non-accrual loans, concentrations, the volatility of risk ratings and
the evolving portfolio 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 general 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.
30
Table of Contents
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.
Comparison of Financial Condition at March 31, 2011 and December 31, 2010
Hibernia Homestead Bancorps consolidated total assets decreased $213,000, or 0.3%, to $77.0
million at March 31, 2011 compared to $77.3 million at December 31, 2010. The decrease was
primarily the result of a decrease of $1.0 million in investment securities available for sale
which was partially offset by an increase in net loans receivable of $811,000 during the three
months ended March 31, 2011. The additional loan volume was primarily funded by a decrease of
$1.0 million in investment securities available for sale. Our gross loans receivable increased by
$833,000, or 1.3%, to $63.1 million at March 31, 2011, compared to $62.3 million at December 31,
2010 reflecting a $1.3 million increase in residential construction loans, and a $269,000 increase
in one-to-four family residential mortgage loans. These increases were partially offset by
decreases of $581000 in commercial loans secured by real estate and $60,000 in home equity lines of
credit. During the first three months of 2011 our total loan originations amounted to
approximately $3.7 million and loan principal repayments were approximately $2.9 million. Our
total investment securities amounted to $3.2 million at March 31, 2011, compared to $4.2 million at
December 31, 2010, a decrease of $1.0 million, or 24.8%. The decrease in investment securities was
due to maturities and redemptions of securities available for sale received during the period.
Hibernias deposits decreased $130,000, or 0.2%, to $54.5 million at March 31, 2011, compared
to $54.6 million at December 31, 2010. The decrease reflects a $670,000 increase in money market
accounts offset by decreases in interest-bearing checking accounts and certificates of deposit.
The Bank had no Federal Home Loan Bank advances at March 31, 2011, or December 31, 2010, as we
continued our strategy in recent periods of managing interest rate risk by not utilizing higher
cost borrowings. Our stockholders equity remained unchanged at $22.0 million as of March 31, 2011
and December 31, 2010.
Comparison of Operating Results for the Three Months Ended March 31, 2011 and 2010.
For the three months ended March 31, 2011, Hibernia Homestead Bancorp had net income of
$19,000 compared to a net loss of $13,000 for the three months ended March 31, 2010. Our results
for the quarterly period reflect an increase in our net interest margin for the quarter ended March
31, 2011 compared to the 2010 quarter. Our net interest margin increased by 9 basis points to
4.22% for the three months ended March 31, 2011 compared to 4.13% for the three months ended March
31, 2010 while our average interest rate spread improved to 3.78% for the three months ended March
31, 2011, compared to 3.64% for the three months ended March 31, 2010. During the three months
ended March 31, 2011, the average rate paid on certificates of deposit decreased 22 basis points
from 1.90% for the three months ended March 31, 2010, to 1.68% for the three months ended March 31,
2011.
Interest Income. Hibernias total interest income was $893,000 for the three months ended
March 31, 2011, compared to $735,000 for the three months ended March 31, 2010, an increase of
$158,000 or 21.5%. The increase in interest income in the three months ended March 31, 2011,
compared to the three months ended March 31, 2010, was due primarily to an increase in the average
balance of loans and a decrease in lower yielding investment securities as a percentage of earning
assets. The average yield on our interest-earning assets was 5.14% for the three months ended
March 31, 2011, compared to 5.04% for the comparable period in 2010. Average interest-earning
assets were $69.6 million for the three months ended March 31, 2011, compared to $58.3 million for
the comparable period in 2010.
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Table of Contents
Interest Expense. Hibernias total interest expense was $169,000 for the three months ended
March 31, 2011, compared to $141,000 for the three months ended March 31, 2010, an increase of
$28,000, or 19.9%. The increase in interest expense for the three months ended March 31, 2011 was
primarily due to an increase in the average balance of 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 1.35% for the three months ended March 31, 2011, compared to 1.40%
for the three months ended March 31, 2010.
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 $41,000 for the three months ended March 31,
2011, compared to $38,000 for the three months ended March 31, 2010, a $3,000, or 7.9%, increase.
Non-Interest Expense. Hibernias total non-interest expense increased by $59,000, or 9.0%, to
$712,000 for the three months ended March 31, 2011, compared to $653,000 for the three months ended
March 31, 2010. The increase in non-interest expense for the quarter ended March 31, 2011 was due
primarily to a $47,000 increase in salary and employee benefits expense primarily relating to
awards under Hibernias stock benefit plans. See Notes 9 and 10 in the Notes to Consolidated
Financial Statements. These increases were partially offset by an $11,000 decrease in advertising
and promotional expenses.
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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 March 31, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
Balance(3) | Interest(3) | Rate | Balance(3) | Interest(3) | Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans receivable(1) |
$ | 62,299 | $ | 854 | 5.48 | % | $ | 46,275 | $ | 664 | 5.74 | % | ||||||||||||
Investment securities |
3,919 | 37 | 3.78 | 7,244 | 68 | 3.75 | ||||||||||||||||||
Other interest-earning assets |
3,339 | 2 | 0.24 | 4,769 | 3 | 0.22 | ||||||||||||||||||
Total interest-earning assets |
69,557 | 893 | 5.14 | % | 58,288 | 735 | 5.04 | % | ||||||||||||||||
Non-interest-earning assets |
6,723 | 7,970 | ||||||||||||||||||||||
Total assets |
$ | 76,280 | $ | 66,258 | ||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Savings, NOW and money market accounts |
16,839 | 28 | 0.67 | % | 16,627 | 27 | 0.67 | % | ||||||||||||||||
Certificates of deposit |
34,008 | 141 | 1.68 | 24,277 | 114 | 1.90 | ||||||||||||||||||
Total interest-bearing deposits |
50,847 | 169 | 1.35 | % | 40,904 | 141 | 1.40 | % | ||||||||||||||||
FHLB advances and Federal Funds Purchased |
| | | | | | ||||||||||||||||||
Total interest-bearing liabilities |
50,847 | 169 | 1.35 | % | 40,904 | 141 | 1.40 | % | ||||||||||||||||
Non-interest-bearing liabilities |
3,378 | 2,083 | ||||||||||||||||||||||
Total liabilities |
54,225 | 42,987 | ||||||||||||||||||||||
Equity |
22,055 | 23,271 | ||||||||||||||||||||||
Total liabilities and equity |
$ | 76,280 | $ | 66,258 | ||||||||||||||||||||
Net interest-earning assets |
$ | 18,710 | $ | 17,384 | ||||||||||||||||||||
Net interest income; average interest rate spread |
$ | 724 | 3.78 | % | $ | 594 | 3.64 | % | ||||||||||||||||
Net interest margin(2) |
4.22 | % | 4.13 | % | ||||||||||||||||||||
Average interest-earning assets to
average interest-bearing liabilities |
136.80 | % | 142.50 | % | ||||||||||||||||||||
(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 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 consolidated balance sheet date. The allowance is comprised of specific allowances and a
general allowance.
Specific allowances are assessed for each loan that is identified as impaired and for which a
probable loss has been identified. The allowance related to impaired loans 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 allowances include the
financial condition of the borrower, changes in the value of pledged collateral and general
economic conditions. General allowances are established for each loan class. Loans that have been
identified as impaired are excluded from the homogenous pools; the remaining loans are then
collectively evaluated. The Companys evaluations are based on historical charge-offs considering
factors that include risk rating, concentrations and loan type. These allowances, which are
judgmentally determined, generally serve to compensate for the uncertainty in estimating loan
losses, particularly in times of changing economic conditions, and consider the possibility of
improper risk rating and possible over or under allocation of specific allowances. It also
considers the lagging impact of historical charge-off ratios in periods where future charge-offs
are expected to increase or decrease significantly. In addition, the general allowances consider
trends in delinquencies and non-accrual loans, concentrations, the volatility of risk ratings and
the evolving portfolio 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 general 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 real estate, totaled $981,000, or 1.3%, of total assets at March 31, 2011,
compared to $1.1 million, or 1.5%, of total assets at December 31, 2010. The non-performing loans
totaling $981,000 at March 31, 2011, consist of five loans secured by first mortgages on
one-to-four family residential real estate. The net decrease in non-performing loans for the three
months ended March 31, 2011 was due to the return to accruing status of one performing troubled
debt restructured loan. 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
March 31, 2011 or December 31, 2010.
A loan loss provision of $15,000 was made to the allowance for loan losses during the three
months ended March 31, 2011. No loan loss provision was made to the allowance for loan losses for
the three months ended March 31, 2010.
To the best of managements knowledge, the reserve is maintained at a level believed to cover
all known and inherent losses in the loan portfolio, both probable and reasonable to estimate.
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 $4.5 million at March 31, 2011.
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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 March
31, 2011, Hibernia did not have any advances from the Federal Home Loan Bank of Dallas and had $3.2
million in borrowing capacity. At March 31, 2011, 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 March 31,
2011, Hibernia Homestead Bank
had no federal funds purchased from First National Bankers Bank. As of March 31, 2011, 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 10% of the Banks total
assets, calculated based on its last quarterly call report. As of
March 31, 2011, the Banks limit for One-Way Buy deposits was $7.7
million based on total assets on its December 31, 2010 call report. As of March 31, 2011, the Bank held no
reciprocal deposits and had $3.0 million in One-Way Buy deposits
from the CDARS program. Such deposits
are generally considered a form of brokered deposits.
At March 31, 2011, the Bank had outstanding loan commitments of $5.7 million to originate
loans. At March 31, 2011, certificates of deposit scheduled to mature in less than one year
totaled $19.6 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 March 31, 2011.
Payments Due By Period | ||||||||||||||||||||
Total at | To | 1-3 | 4-5 | After 5 | ||||||||||||||||
March 31, 2011 | 1 Year | Years | Years | Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Certificates of deposit |
$ | 34,073 | $ | 19,612 | $ | 9,905 | $ | 4,556 | $ | | ||||||||||
Total contractual obligations |
$ | 34,073 | $ | 19,612 | $ | 9,905 | $ | 4,556 | $ | | ||||||||||
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 March 31, 2011, Hibernia Homestead Bank exceeded each of its capital
requirements with ratios of 24.51%, 36.25% and 37.05%, 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 March 31, 2011.
Total Amounts | Amount of Commitment Expiration - Per Period | |||||||||||||||||||
Committed at | To | 1-3 | 4-5 | After 5 | ||||||||||||||||
March 31, 2011 | 1 Year | Years | Years | Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Lines of credit |
$ | 1,101 | $ | 1,101 | $ | | $ | | $ | | ||||||||||
Undisbursed portion of loans in process |
4,628 | 4,628 | | | | |||||||||||||||
Commitments to originate loans |
5,704 | 5,704 | | | | |||||||||||||||
Total commitments |
$ | 11,433 | $ | 11,433 | $ | | $ | | $ | | ||||||||||
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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Table of Contents
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 following presents the Companys repurchase activity during the three month period ended
March 31, 2011:
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 (a) | ||||||||||||
January 1, 2011 January 31, 2011 |
| $ | | | 27,883 | |||||||||||
February 1, 2011 February 28, 2011 |
| | | 27,883 | ||||||||||||
March 1, 2011 March 31, 2011 |
| | | 27,883 | ||||||||||||
Total |
| $ | | | 27,883 | |||||||||||
Notes to this table:
(a) | 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 presents the purchasing activity of the Recognition and Retention
Plan Trust during the three month period ended March 31, 2011:
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 (a) | ||||||||||||
January 1, 2011 January 31, 2011 |
| $ | | | 24,533 | |||||||||||
February 1, 2011 February 28, 2011 |
| | | 24,533 | ||||||||||||
March 1, 2011 March 31, 2011 |
| | | 24,533 | ||||||||||||
Total |
| $ | | | 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: May 16, 2011 | By: | /s/ A. Peyton Bush, III | ||
A. Peyton Bush, III | ||||
President and Chief Executive Officer |
Date: May 16, 2011 | By: | /s/ Donna T. Guerra | ||
Donna T. Guerra | ||||
Assistant Secretary and Chief Financial Officer |
39