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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
 
FORM 10-Q
(Mark One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended:
   September 30, 2014
or
 
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from
 
to
 
 
Commission file number:
   001-35019
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA
(Exact name of registrant as specified in its charter)
 
Louisiana
 
02-0815311
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)
 
624 Market Street, Shreveport, Louisiana
 
71101
(Address of principal executive offices)
 
(Zip Code)
 
(318) 222-1145
(Registrant’s telephone number, including area code)
 
N/A
(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.    [X]  Yes     [   ]  No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).         [X]  Yes    [   ]   No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
 
Large accelerated filer                             [   ]                                                 Accelerated filer                                           [   ]
Non-accelerated filer                              [   ]                                                  Smaller reporting company                         [X]
(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).
[   ]  Yes    [X]   No
 
Shares of common stock, par value $.01 per share, outstanding as of November 7, 2014: The registrant had 2,198,442 shares of common stock outstanding.
 
 
 
 

 
 
INDEX


                 Page
PART I  
FINANCIAL INFORMATION
 
       
Item 1:  
Financial Statements (Unaudited)
 
       
   
Consolidated Statements of Financial Condition
1
       
   
Consolidated Statements of Income
2
       
   
Consolidated Statements of Comprehensive Income
3
       
   
Consolidated Statements of Changes in Stockholders' Equity
4
       
   
Consolidated Statements of Cash Flows
5
       
   
Notes to Consolidated Financial Statements
7
       
Item 2:  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  25
       
Item 3:  
Quantitative and Qualitative Disclosures About Market Risk
  31
       
Item 4:  
Controls and Procedures
  31
       
PART II  
OTHER INFORMATION
 
       
Item 1:  
Legal Proceedings
  31
       
Item 1A:  
Risk Factors
  31
       
Item 2:  
Unregistered Sales of Equity Securities and Use of Proceeds
  32
       
Item 3:  
Defaults Upon Senior Securities
  32
       
Item 4:  
Mine Safety Disclosures
  32
       
Item 5:  
Other Information
  32
       
Item 6:  
Exhibits
  32
       
       
SIGNATURES  
 
 
 
 

 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA
 
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
 
   
September 30, 2014
   
June 30, 2014
 
   
(Dollars In Thousands)
 
ASSETS
           
    Cash and Cash Equivalents (Includes Interest-Bearing
       Deposits with Other Banks of $1,859 and $9,317 for
       September 30, 2014 and June 30, 2014, Respectively)
  $  4,794     $  13,633  
    Securities Available-for-Sale
    55,494       48,434  
    Securities Held-to-Maturity
    2,399       1,765  
    Loans Held-for-Sale
    11,035       9,375  
    Loans Receivable, Net of Allowance for Loan Losses
       of $2,285 and $2,396, Respectively
    248,309       239,563  
    Accrued Interest Receivable
    987       965  
    Premises and Equipment, Net
    9,994       8,454  
    Bank Owned Life Insurance
    6,244       6,203  
    Deferred Tax Asset
    776       723  
    Other Assets
    453       414  
                 
Total Assets
  $ 340,485     $ 329,529  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
LIABILITIES
               
    Deposits
  $ 252,011     $ 272,295  
    Advances from Borrowers for Taxes and Insurance
    615       428  
    Advances from Federal Home Loan Bank of Dallas
    43,589       12,897  
    Other Accrued Expenses and Liabilities
    1,612       1,130  
                 
Total Liabilities
    297,827       286,750  
                 
STOCKHOLDERS’ EQUITY
               
    Preferred Stock – 10,000,000 Shares of $.01 Par Value
       Authorized; None Issued and Outstanding
    --       --  
    Common Stock – 40,000,000 Shares of $.01 Par Value
       Authorized; 3,062,386 Shares Issued and
       2,203,442 Shares Outstanding at September 30, 2014;
       2,241,967 Shares Outstanding at June 30, 2014
        34           34  
    Additional Paid-in Capital
    32,940       32,853  
    Treasury Stock, at Cost – 858,944 shares at September 30, 2014;
       820,419 at June 30, 2014
    (16,454 )     (15,658 )
    Unearned ESOP Stock
    (1,532 )     (1,561 )
    Unearned RRP Trust Stock
    (599 )     (609 )
    Retained Earnings
    28,255       27,588  
    Accumulated Other Comprehensive Income
    14       172  
                 
Total Stockholders’ Equity
    42,658       42,779  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 340,485     $ 329,529  
 
 
 
See accompanying notes to unaudited consolidated financial statements.
 
1

 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

   
For the Three Months Ended
September 30,
 
   
2014
   
2013
 
   
(In Thousands, Except per Share Data)
 
INTEREST INCOME
           
Loans, Including Fees
  $ 3,307     $ 3,050  
Investment Securities
    1       1  
Mortgage-Backed Securities
    244       276  
Other Interest-Earning Assets
    3        4  
Total Interest Income
    3,555       3,331  
                 
INTEREST EXPENSE
               
Deposits
    535       575  
     Federal Home Loan Bank Borrowings
    45       48  
Other Bank Borrowings
    --       7  
Total Interest Expense
    580       630  
Net Interest Income
    2,975       2,701  
                 
PROVISION FOR LOAN LOSSES
    40       66  
Net Interest Income after
Provision for Loan Losses
     2,935        2,635  
                 
NON-INTEREST INCOME
               
Gain on Sale of Loans
    472       476  
Income on Bank Owned Life Insurance
    41       44  
     Service Charges on deposit accounts
    101       75  
Other Income
    15       9  
Total Non-Interest Income
    629       604  
                 
NON-INTEREST EXPENSE
               
Compensation and Benefits
    1,502       1,384  
Occupancy and Equipment
    229       195  
Data Processing
    119       115  
Audit and Examination Fees
    53       57  
Franchise and Bank Shares Tax
    73       93  
Advertising
    75       64  
Legal Fees
    69       93  
Loan and Collection
    66       32  
Deposit Insurance Premium
    31       33  
Other Expense
    120       116  
Total Non-Interest Expense
    2,337       2,182  
Income Before Income Taxes
    1,227       1,057  
                 
PROVISION FOR INCOME TAX EXPENSE
    404       344  
Net Income
  $ 823     $ 713  
EARNINGS PER COMMON SHARE:
               
Basic
  $ 0.41     $ 0.34  
Diluted
  $ 0.40     $ 0.33  
DIVIDENDS DECLARED
  $ 0.07     $ 0.06  
 
 
See accompanying notes to unaudited consolidated financial statements.
 
2

 
 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

   
For the Three Months Ended
September 30,
 
   
2014
   
2013
 
   
(In Thousands)
 
             
Net Income
  $ 823     $ 713  
                 
Other Comprehensive (Loss), Net of Tax
               
   Unrealized Holding (Loss) on Securities Available-for-Sale,
     Net of Tax of $81 in 2014 and $135 in 2013
    (158 )     (262 )
                 
        Total Comprehensive Income
  $ 665     $ 451  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.
 
3

 
 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(Unaudited)

   
Common
Stock
   
Additional
Paid-in
Capital
   
Unearned
ESOP
Stock
   
Unearned
RRP
Trust
Stock
   
Retained
Earnings
   
Treasury Stock
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Total
Stockholders’
Equity
 
                     
(In Thousands)
                   
BALANCE – June 30, 2013
  $ 32     $ 32,218     $ (1,676 )   $ (863 )   $ 25,395     $ (13,168 )   $ 44     $ 41,982  
                                                                 
Net Income
    --       --       --       --       713       --       --       713  
                                                                 
Changes in Unrealized Gain
    on Securities Available-for-
    Sale, Net of Tax Effects
      --         --         --         --         --         --       (262 )     (262 )
                                                                 
RRP Shares Earned
    --       --       --       10       --       --       --       10  
                                                                 
Stock Options Vested
    --       41       --       --       --       --       --       41  
                                                                 
Common Stock Issuance for Stock
    Option Exercises
    1       245       --       --       --       --       --       246  
                                                                 
ESOP Compensation Earned
    --       21       28       --       --       --       --       49  
                                                                 
Acquisition of Treasury Stock
    --       --       --       --       --       (473 )     --       (473 )
                                                                 
Dividends Declared
    --       --       --       --       (141 )     --       --       (141 )
                                                                 
BALANCE – September  30, 2013
  $ 33     $ 32,525     $ (1,648 )   $ (853 )   $ 25,967     $ (13,641 )   $ (218 )   $ 42,165  
                                                                 
BALANCE – June 30, 2014
  $  34     $ 32,853     $ (1,561 )   $ (609 )   $ 27,588     $ (15,698 )   $ 172     $ 42,779  
                                                                 
Net Income
    --       --       --       --       823       --       --       823  
                                                                 
Changes in Unrealized Gain
    on Securities Available-for-
    Sale, Net of Tax Effects
    --       --       --       --       --       --       (158 )     (158 )
                                                                 
RRP Shares Earned
    --       --       --       10       --       --       --       10  
                                                                 
Stock Options Vested
    --       43       --       --       --       --       --       43  
                                                                 
Common Stock Issuance for Stock
    Option Exercises
    --       17       --       --       --       --       --       17  
                                                                 
ESOP Compensation Earned
    --       27       29       --       --       --       --       56  
                                                                 
Acquisition of Treasury Stock
    --       --       --       --       --       (756 )     --       (756 )
                                                                 
Dividends Declared
    --       --       --       --       (156 )     --       ---       (156 )
                                                                 
BALANCE – September  30, 2014
  $ 34     $ 32,940     $ (1,532 )   $ (599 )   $ 28,255     $ (16,454 )   $ 14     $ 42,658  
 
 
 
 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.
 
4

 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA
 
   
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Unaudited)
 
   
   
Three Months Ended
 
   
September 30,
 
   
2014
   
2013
 
   
(In Thousands)
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net Income
  $ 823     $ 713  
Adjustments to Reconcile Net Income to Net
               
Cash Used in Operating Activities
               
Net Amortization and Accretion on Securities
    3       18  
Gain on Sale of Loans
    (472 )     (476 )
Amortization of Deferred Loan Fees
    (76 )     (18 )
Depreciation of Premises and Equipment
    84       69  
ESOP Expense
    56       49  
Stock Option Expense
    44       41  
Recognition and Retention Plan Expense
    57       53  
Deferred Income Tax
    29       (17 )
Provision for Loan Losses
    40       66  
Increase in Cash Surrender Value on Bank Owned Life Insurance
    (41 )     (44 )
Changes in Assets and Liabilities:
               
Loans Held-for-Sale – Originations and Purchases
    (23,062 )     (20,378 )
Loans Held-for-Sale – Sale and Principal Repayments
    21,874       18,341  
Accrued Interest Receivable
    (21 )     (4 )
Other Operating Assets
    (40 )     46  
Other Operating Liabilities
    435       419  
                 
Net Cash Used In Operating Activities
    (267 )      (1,122 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Loan Originations and Purchases, Net of Principal Collections
    (8,714 )     (849 )
Deferred Loan Fees Collected
    4       17  
Acquisition of Premises and Equipment
    (1,624 )     (445 )
Activity in Available-for-Sale Securities:
               
Principal Payments on Mortgage-Backed Securities
    2,540       3,401  
Purchases of Securities
    (9,843 )     (8,798 )
Activity in Held-to-Maturity Securities:
               
Redemption Proceeds
    128       --  
Purchases of Securities
    (762 )     (134 )
                 
Net Cash Used in Investing Activities
     (18,271 )     (6,808 )
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.
 
5

 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA
 
   
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 
(Unaudited)
 
   
   
Three Months Ended
 
   
September 30,
 
   
2014
   
2013
 
   
(In Thousands)
 
CASH FLOWS FROM FINANCING ACTIVITIES
     
Net (Decrease) Increase in Deposits
  $ (20,284 )   $ 20,603  
Proceeds from Federal Home Loan Bank Advances
    349,750       217,750  
Repayments of Advances from Federal Home Loan Bank
    (319,058 )     (223,879 )
Net Increase in Advances from Borrowers for Taxes and Insurance
    186       115  
Dividends Paid
    (156 )     (141 )
Acquisition of Treasury Stock
    (756 )     (473 )
Proceeds from Stock Options Exercised
    17       245  
Proceeds from other Bank Borrowings
    --       300  
                 
Net Cash Provided by Financing Activities
    9,699        14,520  
                 
NET (DECREASE)  INCREASE  IN CASH AND CASH EQUIVALENTS
    (8,839 )     6,590  
                 
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
    13,633        3,685  
                 
CASH AND CASH EQUIVALENTS - END OF PERIOD
  $ 4,794     $ 10,275  
                 
SUPPLEMENTARY CASH FLOW INFORMATION
               
Interest Paid on Deposits and Borrowed Funds
  $ 571     $  636  
Income Taxes Paid
    1       --  
Market Value Adjustment for Loss on Securities Available-for-Sale
    (240 )     (397 )
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.
 
6

 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
1.           Summary of Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Home Federal Bancorp, Inc. of Louisiana (the “Company”) and its subsidiary, Home Federal Bank (“Home Federal Bank” or the “Bank”).  These consolidated financial statements were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three month period ended September 30, 2014, is not necessarily indicative of the results which may be expected for the fiscal year ending June 30, 2015.

The Company follows accounting standards set by the Financial Accounting Standards Board (the “FASB”). The FASB sets generally accepted accounting principles (“GAAP”) that we follow to ensure we consistently report our financial condition, results of operations and cash flows.  References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification (the “Codification” or the “ASC”).

In accordance with the subsequent events topic of the ASC, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements.  The effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of September 30, 2014.  In preparing these financial statements, the Company evaluated the events and transactions that occurred through the date these financial statements were issued.

Use of Estimates

In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Statements of Financial Condition and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the allowance for loan losses.

Nature of Operations

Home Federal Bancorp, Inc. of Louisiana, a Louisiana corporation, is the fully public stock holding company for Home Federal Bank located in Shreveport, Louisiana.  The Bank is a federally chartered, stock savings and loan association and is subject to federal regulation by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.  The Company is a savings and loan holding company regulated by the Board of Governors of the Federal Reserve System. Services are provided to the Bank’s customers by five full-service banking offices and one agency office, located in Caddo and Bossier Parishes, Louisiana.  The area served by the Bank is primarily the Shreveport-Bossier City metropolitan area; however, loan and deposit customers are found dispersed in a wider geographical area covering much of northwest Louisiana. As of September 30, 2014, the Bank had one wholly-owned subsidiary, Metro Financial Services, Inc., which previously engaged in the sale of annuity contracts and does not currently engage in a meaningful amount of business.

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, cash and cash equivalents include cash on hand, balances due from banks, and federal funds sold, all of which mature within ninety days.

 
 
 
 
 
 
 
7

 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
1.           Summary of Accounting Policies (continued)

Securities

The Company classifies its debt and equity investment securities into one of three categories:  held-to-maturity, available-for-sale, or trading.  Investments in nonmarketable equity securities and debt securities, in which the Company has the positive intent and ability to hold to maturity, are classified as held-to-maturity and carried at amortized cost.  Investments in debt securities that are not classified as held-to-maturity and marketable equity securities that have readily determinable fair values are classified as either trading or available-for-sale securities.  Securities that are acquired and held principally for the purpose of selling in the near term are classified as trading securities.  Investments in securities not classified as trading or held-to-maturity are classified as available-for-sale.

Trading account and available-for-sale securities are carried at fair value.  Unrealized holding gains and losses on trading securities are included in earnings while net unrealized holding gains and losses on available-for-sale securities are excluded from earnings and reported in other comprehensive income.  Purchase premiums and discounts are recognized in interest income using the interest method over the term of the securities.  Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers (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 Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.  Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Loans Held-for-Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate.  Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Loans

Loans receivable are stated at unpaid principal balances, less allowances for loan losses and unamortized deferred loan fees.  Net nonrefundable fees (loan origination fees, commitment fees, discount points) and costs associated with lending activities are being deferred and subsequently amortized into income as an adjustment of yield on the related interest earning assets using the interest method.  Interest income on contractual loans receivable is recognized on the accrual method.  Unearned discount on property improvement and automobile loans is deferred and amortized on the interest method over the life of the loan.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral and prevailing economic conditions.  The evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
 
 
 
 
 
 
 
8

 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
1.           Summary of Accounting Policies (continued)

Allowance for Loan Losses (continued)

A loan is considered impaired when, based on current information or events, it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement.  When a loan is impaired, the measurement of such impairment is based upon the present value of expected future cash flows or the fair value of the collateral of the loan.  If the present value of expected future cash flows or fair value of the collateral is less than the recorded investment in the loan, the Bank will recognize the impairment by creating a valuation allowance with a corresponding charge against earnings.

An allowance is also established for uncollectible interest on loans classified as substandard.  The allowance is established by a charge to interest income equal to all interest previously accrued and income is subsequently recognized only to the extent that cash payments are received.  When, in management’s judgment, the borrower’s ability to make periodic interest and principal payments is back to normal, the loan is returned to accrual status.

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

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, the Bank has entered into commitments to extend credit.  Such financial instruments are recorded when they are funded.

Foreclosed Assets

Assets acquired through, or in lieu of, loan foreclosure are held-for-sale and are transferred to other real estate owned at the lower of cost or current fair value minus estimated cost to sell as of the date of foreclosure.  Cost is defined as the lower of the fair value of the property or the recorded investment in the loan.  Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell.

Premises and Equipment

Land is carried at cost.  Buildings and equipment are carried at cost less accumulated depreciation computed on the straight-line method over the estimated useful lives of the assets.

Income Taxes

The Company and its wholly-owned subsidiary file a consolidated Federal income tax return on a fiscal year basis.  Each entity pays its pro-rata share of income taxes in accordance with a written tax-sharing agreement.

The Company accounts for income taxes on the asset and liability method.  Deferred tax assets and liabilities are recorded based on the difference between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, computed using enacted tax rates.  A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized. Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years.  Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized.  Current taxes are measured by applying the provisions of enacted tax laws to taxable income to determine the amount of taxes receivable or payable.

 
 
 
 
9

 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
1.           Summary of Accounting Policies (continued)

Income Taxes (continued)

While the Bank is exempt from Louisiana income tax, it is subject to the Louisiana Ad Valorem Tax, commonly referred to as the Louisiana Shares Tax, which is based on stockholders’ equity and net income.

Comprehensive Income

Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains and losses be included in net income.  Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the Consolidated Statements of Financial Condition, such items, along with net income, are components of comprehensive income.

Recent Accounting Pronouncements

In January 2014, the FASB issued ASU 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this Update using either a modified retrospective transition method or a prospective transition method.  This ASU is not expected to have a significant impact on the Company’s financial statements.

In June 2014, the FASB issued ASU No. 2014-12, Compensation-Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.  The new guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.   ASU 2014-12 is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted.  The Company’s current accounting treatment of performance conditions for employees who are or become eligible prior to the achievement of the performance target are consistent with ASU 2014-12, and as such does not expect the new guidance to have a material effect on the Corporation's financial condition and results of operations.  The Company expects to prospectively adopt ASU 2014-12 in the first quarter of 2015.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10

 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
2.           Securities

The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:

   
September 30, 2014
 
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
 
 
Cost
   
Gains
   
Losses
   
Value
 
   
(In Thousands)
 
Securities Available-for-Sale      
       
Debt Securities
                       
  FHLMC Mortgage-Backed Certificates
  $ 301     $ 11     $ --     $ 312  
  FNMA Mortgage-Backed Certificates
    33,901       732       121       34,512  
  GNMA Mortgage-Backed Certificates
    21,271       6       607       20,670  
                                 
          Total Debt Securities
    55,473        749        728        55,494  
                                 
    Total Securities Available-for-Sale
  $ 55,473     $ 749     $ 728     $ 55,494  
                                 
Securities Held-to-Maturity
                               
                                 
Equity Securities (Non-Marketable)
                               
  21,487 Shares – Federal Home Loan Bank
  $ 2,149     $ --     $ --     $ 2,149  
  630 Shares – First National Bankers
    Bankshares, Inc.
     250        --        --        250  
                                 
          Total Equity Securities
    2,399       --       --       2,399  
                                 
    Total Securities Held-to-Maturity
  $  2,399     $  --     $  --     $  2,399  
 
 
   
June 30, 2014
 
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
 
 
Cost
   
Gains
   
Losses
   
Value
 
   
(In Thousands)
 
Securities Available-for-Sale      
       
Debt Securities
                       
  FHLMC Mortgage-Backed Certificates
  $ 311     $ 12     $ --     $ 323  
  FNMA Mortgage-Backed Certificates
    24,947       857       24       25,780  
  GNMA Mortgage-Backed Certificates
    22,915       6       590       22,331  
                                 
          Total Debt Securities
    48,173       875       614       48,434  
                                 
          Total Securities Available-for-Sale
  $ 48,173     $  875     $  614     $  48,434  
                                 
Securities Held-to-Maturity
                               
                                 
Equity Securities (Non-Marketable)
                               
  15,145 Shares – Federal Home Loan Bank
  $   1,515     $  --     $  --     $  1,515  
  630 Shares – First National Bankers
    Bankshares, Inc.
     250        --        --        250  
                                 
          Total Equity Securities
    1,765       --       --       1,765  
                                 
          Total Securities Held-to-Maturity
  $ 1,765     $ --     $ --     $ 1,765  
 
 
 
 
 
11

 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
2.           Securities (continued)

The amortized cost and fair value of securities by contractual maturity at September 30, 2014, follows:

    
Available-for-Sale
   
Held-to-Maturity
 
   
Amortized
   
Fair
   
Amortized
   
Fair
 
   
Cost
   
Value
   
Cost
   
Value
 
   
(In Thousands)
 
Debt Securities
                       
  Within One Year or Less
  $ --     $  --     $  --     $  --  
  One through Five Years
    239       246       --       --  
  After Five through Ten Years
    152       157       --       --  
  Over Ten Years
    55,082       55,091        --       --  
      55,473       55,494       --       --  
  Other Equity Securities
    --       --       2,399       2,399  
                                 
   Total
  $ 55,473     $ 55,494     $ 2,399     $ 2,399  

There were no sales of available-for-sale securities during the three months ended September 30, 2014.

The following tables show information pertaining to gross unrealized losses on securities available-for-sale at September 30, 2014 and June 30, 2014 aggregated by investment category and length of time that individual securities have been in a continuous loss position.

   
September 30, 2014
   
Less Than Twelve Months
 
Over Twelve Months
   
Gross
     
Gross
   
   
Unrealized
 
Fair
 
Unrealized
 
Fair
   
Losses
 
Value
 
Losses
 
Value
   
(In Thousands)
Securities Available-for-Sale
               
                 
Debt Securities
               
    Mortgage-Backed Securities
 
$             91
 
$   19,697
 
$         637
 
$     22,471
Marketable Equity Securities
 
              -- 
 
            --
 
            --
 
            --
                 
        Total Securities Available-for-Sale
 
$             91
 
$    19,697
 
$         637
 
$     22,471
                 
 
 
June 30, 2014
 
Less Than Twelve Months
 
Over Twelve Months
 
Gross
     
Gross
   
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Losses
 
Value
 
Losses
 
Value
 
(In Thousands)
Securities Available-for-Sale
             
               
Debt Securities
             
    Mortgage-Backed Securities
$             24
 
$       1,947
 
$          590
 
$     22,193
Marketable Equity Securities
              --
 
              --
 
              --
 
               --
               
        Total Securities Available-for-Sale
$             24
 
$       1,947
 
$          590
 
$     22,193

The Company’s investment in equity securities consists primarily of FHLB stock, and shares of First National Bankers Bankshares, Inc. (“FNBB”).  Management monitors its investment portfolio to determine whether any investment securities which have unrealized losses should be considered other than temporarily impaired.

 
 
 
12

 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
2.           Securities (continued)

At September 30, 2014, securities with a carrying value of $9.1 million were pledged to secure public deposits, and securities and mortgage loans with a carrying value of $149.9 million were pledged to secure FHLB advances.

3.           Loans Receivable

Loans receivable are summarized as follows:
 
     September 30, 2014      June 30, 2014  
    (In Thousands)  
Loans Secured by Mortgages on Real Estate
           
One- to Four-Family Residential
  $ 96,279     $ 89,545  
Commercial
    55,554       56,266  
Multi-Family Residential
    15,967       20,368  
Land
    22,513       19,945  
Construction
    13,366       12,505  
Equity and Second Mortgage
    2,318       2,563  
Equity Lines of Credit
    17,380       14,950  
Total Mortgage Loans
    223,377       216,142  
                 
Commercial Loans
    27,032       25,749  
Consumer Loans
               
Loans on Savings Accounts
    304       255  
Automobile and Other Consumer Loans
     107       111  
Total Consumer and Other Loans
    411       366  
Total Loans
    250,820       242,257  
                 
Less:  Allowance for Loan Losses
    (2,285 )     (2,396 )
           Unamortized Loan Fees
    (226 )     (298 )
                     Net Loans Receivable
  $ 248,309     $ 239,563  
 
Following is a summary of changes in the allowance for loan losses:

   
Three Months Ended September 30,
 
   
2014
 
2013
 
   
(In Thousands)
 
             
Balance - Beginning of Period
  $ 2,396     $ 2,240  
Provision for Loan Losses
    40       66  
Loan Charge-Offs
    (151 )      --  
                 
Balance - End of Period
  $ 2,285     $ 2,306  

Credit Quality Indicators

The Company segregates loans into risk categories based on the pertinent information about the ability of borrowers to service their debt such as:  current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company analyzes loans individually by classifying the loans according to credit risk.  Loans classified as substandard or identified as special mention are reviewed quarterly by management to evaluate the level of deterioration, improvement, and impairment, if any, as well as assign the appropriate risk category.
 
 
 
13

 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
3.           Loans Receivable (continued)

Credit Quality Indicators (continued)

Loans excluded from the scope of the quarterly review process above are generally identified as pass credits until:  (a) they become past due; (b) management becomes aware of deterioration in the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification.  In these circumstances, the loan is specifically evaluated for potential classification and the need to allocate reserves or charge-off.  The Company uses the following definitions for risk ratings:

Special Mention - Loans identified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss - This classification includes those loans which are considered uncollectible and of such little value that their continuance as loans is not warranted.  Even though partial recovery may be possible in the future, it is not practical or desirable to defer writing off these basically worthless loans.  Accordingly, these loans are charged-off before period end.

The following tables present the grading of loans, segregated by class of loans, as of September 30, 2014 and June 30, 2014:
 
          Special                    
September 30, 2014   Pass     Mention     Substandard     Doubtful     Total  
          (In Thousands)        
Real Estate Loans:
                             
  One- to Four-Family Residential
  $ 96,151     $ 115     $ 13     $ --     $ 96,279  
  Commercial
    54,937       553       --       64       55,554  
  Multi-Family Residential
    15,967       --       --       --       15,967  
  Land
    22,513       --       --       --       22,513  
  Construction
    13,366       --       --       --       13,366  
  Equity and Second Mortgage
    2,318       --       --       --       2,318  
  Equity Lines of Credit
    17,353       --       --       27       17,380  
Commercial Loans
    27,032       --       --       --       27,032  
Consumer Loans
    411       --       --       --       411  
     Total
  $ 250,048     $ 668     $ 13     $ 91     $ 250,820  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14

 
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
3.           Loans Receivable (continued)
 
Credit Quality Indicators (continued)
   
 
          Special                    
June 30, 2014    Pass     Mention      Substandard     Doubtful     Total  
                (In Thousands)              
Real Estate Loans:
                             
  One- to Four-Family Residential
  $ 89,345     $ 49     $ --     $ 151     $  89,545  
  Commercial
    53,621       2,645       --       --       56,266  
  Multi-Family Residential
    20,368       --       --       --       20,368  
  Land
    19,945       --       --       --       19,945  
  Construction
    12,505       --       --       --       12,505  
  Equity and Second Mortgage
    2,563       --       --       --       2,563  
  Equity Lines of Credit
    14,923       --       --       27       14,950  
Commercial Loans
    25,749       --       --       --       25,749  
Consumer Loans
     366        --        --        --        366  
                                         
     Total
  $ 239,385     $ 2,694     $ --     $ 178     $ 242,257  
 
Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when contractually due.  Loans that experience insignificant payment delays or payment shortfalls are generally not classified as impaired.  On a case-by-case basis, management determines the significance of payment delays and payment shortfalls, taking into consideration all of the circumstances related to the loan, including:  the length of the payment delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The following tables present an aging analysis of past due loans, segregated by class of loans, as of September 30, 2014 and June 30, 2014:
 
                                        Recorded  
                                        Investment  
          60-89     Greater                  Total      > 90 Days  
    30-59 Days     Days Past     Than 90     Total           Loans     and  
September 30, 2014   Past Due     Due     Days     Past Due     Current     Receivable     Accruing  
                (In Thousands)              
Real Estate Loans:
                                         
  One- to Four-Family
     Residential
  $ 1,138     $ 923     $ 81     $ 2,142     $ 94,137     $ 96,279     $ 68  
  Commercial
    --       --       --       --       55,554       55,554       --  
  Multi-Family
     Residential
    --       --       --       --       15,967       15,967       --  
  Land
    --       --       --       --       22,513       22,513       --  
  Construction
    --       --       --       --       13,366       13,366       --  
  Equity and Second
      Mortgage
    --       --       --       --       2,318       2,318       --  
  Equity Lines of Credit
    --       --       27       27       17,353       17,380       --  
Commercial Loans
    --       --       --       --       27,032       27,032       --  
Consumer Loans
    --       --       --       --       411       411       --  
     Total
  $ 1,138     $  923     $ 108     $ 2,169     $ 248,651     $ 250,820     $ 68  
 
 
 
 
 
 
 
 
 
 
 
 
 
15

 
HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
3.           Loans Receivable (continued)

Credit Quality Indicators (continued)

 June 30, 2014
 
30-59 Days
Past Due
   
60-89
Days Past
Due
   
Greater
Than 90
Days
   
Total
Past Due
   
Current
   
Total
Loans
Receivable
   
Recorded
Investment
 > 90 Days
and
Accruing
 
   
(In Thousands)
 
Real Estate Loans:
                                         
One- to Four-Family
     Residential
  $  1,326     $  435     $  164     $ 1,925     $  87,620     $  89,545     $  13  
  Commercial
    --       --       --       --       56,266       56,266       --  
  Multi-Family
     Residential
    --       --       --       --       20,368       20,368       --  
  Land
    --       --       --       --       19,945       19,945       --  
  Construction
    --       --       --       --       12,505       12,505       --  
  Equity and Second
     Mortgage
    --       --       --       --       2,563       2,563       --  
  Equity Lines of Credit
    --       --