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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:
  December 31, 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 February 12, 2015: The registrant had 2,166,343 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
33
     
Item 4:
Controls and Procedures
33
     
PART II
OTHER INFORMATION
 
     
Item 1:
Legal Proceedings
33
     
Item 1A:
Risk Factors
33
     
Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
34
     
Item 3:
Defaults Upon Senior Securities
34
     
Item 4:
Mine Safety Disclosures
34
     
Item 5:
Other Information
34
     
Item 6:
Exhibits
34
     
     
SIGNATURES
   

 
 

HOME FEDERAL BANCORP, INC. OF LOUISIANA  
 
     
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)  
 
     
    
December 31, 2014
   
June 30, 2014
 
   
(Dollars In Thousands)  
 
ASSETS
       
Cash and Cash Equivalents (Includes Interest-Bearing
Deposits with Other Banks of $809 and $9,317 for
December 31, 2014 and June 30, 2014, Respectively)
 
$
4,611
   
$
13,633
 
Securities Available-for-Sale
   
50,799
     
48,434
 
Securities Held-to-Maturity
   
2,376
     
1,765
 
Loans Held-for-Sale
   
9,761
     
9,375
 
Loans Receivable, Net of Allowance for Loan Losses
of $2,365 and $2,396, Respectively
   
260,147
     
239,563
 
Accrued Interest Receivable
   
943
     
965
 
Premises and Equipment, Net
   
10,084
     
8,454
 
Bank Owned Life Insurance
   
6,285
     
6,203
 
Deferred Tax Asset
   
748
     
723
 
Other Assets
   
553
     
414
 
                 
Total Assets
 
$
346,307
   
$
329,529
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
         
                 
LIABILITIES
               
Deposits
 
$
252,764
   
$
272,295
 
Advances from Borrowers for Taxes and Insurance
   
264
     
428
 
Advances from Federal Home Loan Bank of Dallas
   
49,030
     
12,897
 
Other Accrued Expenses and Liabilities
   
957
     
1,130
 
 
Total Liabilities
   
303,015
     
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
   2,190,812 Shares Outstanding at December 31, 2014;
   2,241,967 Shares Outstanding at June 30, 2014
   
34
     
34
 
Additional Paid-in Capital
   
33,037
     
32,853
 
Treasury Stock, at Cost – 871,574 shares at December 31, 2014;
   820,419 at June 30, 2014
   
(16,750
)
   
(15,698
)
Unearned ESOP Stock
   
(1,503
)
   
(1,561
)
Unearned RRP Trust Stock
   
(599
)
   
(609
)
Retained Earnings
   
28,936
     
27,588
 
Accumulated Other Comprehensive Income
   
137
     
172
 
                 
Total Stockholders' Equity
   
43,292
     
42,779
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
346,307
   
$
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
December 31,
   
For the Six Months Ended
December 31
 
   
2014
   
2013
   
2014
   
2013
 
   
(In Thousands, Except per Share Data)
         
INTEREST INCOME
               
Loans, Including Fees
 
$
3,436
   
$
2,961
   
$
6,744
   
$
6,011
 
Investment Securities
   
2
     
1
     
3
     
3
 
Mortgage-Backed Securities
   
283
     
270
     
527
     
545
 
Other Interest-Earning Assets
   
2
     
3
     
4
     
8
 
Total Interest Income
   
3,723
     
3,235
     
7,278
     
6,567
 
                                 
INTEREST EXPENSE
                               
Deposits
   
552
     
556
     
1,087
     
1,131
 
Federal Home Loan Bank Borrowings
   
66
     
40
     
111
     
88
 
Other Bank Borrowings
   
-
     
7
     
-
     
14
 
Total Interest Expense
   
618
     
603
     
1,198
     
1,233
 
Net Interest Income
   
3,105
     
2,632
     
6,080
     
5,334
 
                                 
PROVISION FOR LOAN LOSSES
   
80
     
22
     
120
     
88
 
Net Interest Income after
Provision for Loan Losses
   
3,025
     
2,610
     
5,960
     
5,246
 
                                 
NON-INTEREST INCOME
                               
Gain on Sale of Loans
   
415
     
404
     
887
     
880
 
     Gain on Sale of Securities
   
10
     
34
     
10
     
34
 
Income on Bank Owned Life Insurance
   
41
     
44
     
83
     
88
 
     Service Charges on deposit accounts
   
113
     
79
     
213
     
154
 
Other Income
   
15
     
8
     
31
     
16
 
Total Non-Interest Income
   
594
     
569
     
1,224
     
1,172
 
                                 
NON-INTEREST EXPENSE
                               
Compensation and Benefits
   
1,445
     
1,346
     
2,947
     
2,730
 
Occupancy and Equipment
   
269
     
236
     
498
     
431
 
Data Processing
   
124
     
86
     
243
     
201
 
Audit and Examination Fees
   
49
     
50
     
101
     
106
 
Franchise and Bank Shares Tax
   
47
     
85
     
122
     
178
 
Advertising
   
60
     
69
     
135
     
133
 
Legal Fees
   
134
     
144
     
203
     
238
 
Loan Collection
   
50
     
32
     
117
     
64
 
Deposit Insurance Premium
   
44
     
35
     
75
     
68
 
Other Expense
   
153
     
142
     
272
     
258
 
Total Non-Interest Expense
   
2,375
     
2,225
     
4,713
     
4,407
 
Income Before Income Taxes
   
1,244
     
954
     
2,471
     
2,011
 
                                 
PROVISION FOR INCOME TAX EXPENSE
   
409
     
309
     
813
     
653
 
Net Income
 
$
835
   
$
645
   
$
1,658
   
$
1,358
 
EARNINGS PER COMMON SHARE:
                               
Basic
 
$
0.42
   
$
0.31
   
$
0.83
   
$
0.64
 
Diluted
 
$
0.41
   
$
0.30
   
$
0.81
   
$
0.63
 
DIVIDENDS DECLARED
 
$
0.07
   
$
0.06
   
$
0.14
   
$
0.12
 
 
 
 
 
 
 
 
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
December 31,
   
For the Six Months Ended
December 31,
 
   
2014
   
2013
   
2014
   
2013
 
    (In Thousands)     (In Thousands)  
                 
                 
Net Income
 
$
835
   
$
645
   
$
1,658
   
$
1,358
 
                                 
Other Comprehensive Income (Loss), Net of Tax
                               
   Unrealized Holding Gain (Loss) on Securities Available-for-Sale,
     Net of Tax of $68 and $12 in 2014, respectively, and $149 and $20 in 2013, respectively
   
132
     
289
     
(24
)
   
39
 
 
   Reclassification Adjustment for Gain Included in Net Income,
   Net of Tax of $5 and $6 in 2014, respectively, and $18 and
   $24 in 2013, respectively
   
(9
)
   
(35
)
   
(11
)
   
(47
)
 
        Net Other Comprehensive Income (Loss)
 
   
123
     
254
     
(35
)
   
(8
)
        Total Comprehensive Income
 
$
958
   
$
899
   
$
1,623
   
$
1,350
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.
 
3

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED DECEMBER 31, 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
   
--
     
--
     
--
     
--
     
1,358
     
--
     
--
     
1,358
 
                                                                 
Changes in Unrealized Gain
    on Securities Available-for-
    Sale, Net of Tax Effects
   
--
     
--
     
--
     
--
     
--
     
--
     
(8
)
   
(8
)
                                                                 
RRP Shares Earned
   
--
     
--
     
--
     
10
     
--
     
--
     
--
     
10
 
                                                                 
Stock Options Vested
   
--
     
81
     
--
     
--
     
--
     
--
     
--
     
81
 
                                                                 
Common Stock Issuance for Stock
    Option Exercises
   
1
     
249
     
--
     
--
     
--
     
--
     
--
     
250
 
                                                                 
ESOP Compensation Earned
   
--
     
43
     
57
     
--
     
--
     
--
     
--
     
100
 
                                                                 
Acquisition of Treasury Stock
   
--
     
--
     
--
     
--
     
--
     
(2,171
)
   
--
     
(2,171
)
                                                                 
Dividends Declared
   
--
     
--
     
--
     
--
     
(282
)
   
--
     
--
     
(282
)
                                                                 
BALANCE – December  31, 2013
 
$
33
   
$
32,591
   
$
(1,619
)
 
$
(853
)
 
$
26,471
   
$
(15,339
)
 
$
36
   
$
41,320
 
                                                                 
BALANCE – June 30, 2014
 
$
34
   
$
32,853
   
$
(1,561
)
 
$
(609
)
 
$
27,588
   
$
(15,698
)
 
$
172
   
$
42,779
 
                                                                 
Net Income
   
--
     
--
     
--
     
--
     
1,658
     
--
     
--
     
1,658
 
                                                                 
Changes in Unrealized Gain
    on Securities Available-for-
    Sale, Net of Tax Effects
   
--
     
--
     
--
     
--
     
--
     
--
     
(35
)
   
(35
)
                                                                 
RRP Shares Earned
   
--
     
--
     
--
     
10
     
--
     
--
     
--
     
10
 
                                                                 
Stock Options Vested
   
--
     
88
     
--
     
--
     
--
     
--
     
--
     
88
 
                                                                 
Common Stock Issuance for Stock
    Option Exercises
   
--
     
42
     
--
     
--
     
--
     
--
     
--
     
42
 
                                                                 
ESOP Compensation Earned
   
--
     
54
     
58
     
--
     
--
     
--
     
--
     
112
 
                                                                 
Acquisition of Treasury Stock
   
--
     
--
     
--
     
--
     
--
     
(1,052
)
   
--
     
(1,052
)
                                                                 
Dividends Declared
   
--
     
--
     
--
     
--
     
(310
)
   
--
     
---
     
(310
)
                                                                 
BALANCE – December 31, 2014
 
$
34
   
$
33,037
   
$
( 1,503
)
 
$
(599
)
 
$
28,936
   
$
(16,750
)
 
$
137
   
$
43,292
 

 
 
See accompanying notes to unaudited consolidated financial statements.
 
 
4

HOME FEDERAL BANCORP, INC. OF LOUISIANA
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Unaudited)
 
 
        
Six Months Ended
 
        
December 31,
 
   
2014
   
2013
 
        
(In Thousands)
 
CASH FLOWS FROM OPERATING ACTIVITIES
       
Net Income
 
$
1,658
   
$
1,358
 
Adjustments to Reconcile Net Income to Net
               
Cash Used in Operating Activities
               
Net Amortization and Accretion on Securities
   
7
     
38
 
Gain on Sale of Securities
   
(10
)
   
(34
)
Gain on Sale of Loans
   
(887
)
   
(880
)
Amortization of Deferred Loan Fees
   
(101
)
   
(40
)
Depreciation of Premises and Equipment
   
179
     
145
 
ESOP Expense
   
112
     
100
 
Stock Option Expense
   
88
     
81
 
Recognition and Retention Plan Expense
   
117
     
105
 
Deferred Income Tax
   
(6
)
   
(29
)
Provision for Loan Losses
   
120
     
88
 
Increase in Cash Surrender Value on Bank Owned Life Insurance
   
(83
)
   
(88
)
Changes in Assets and Liabilities:
               
Loans Held-for-Sale – Originations and Purchases
   
(40,827
)
   
(35,178
)
Loans Held-for-Sale – Sale and Principal Repayments
   
41,329
     
33,921
 
Accrued Interest Receivable
   
23
     
(52
)
Other Operating Assets
   
(138
)
   
(99
)
Other Operating Liabilities
   
(281
)
   
(344
)
                 
Net Cash Provided by (Used In) Operating Activities
   
1,300
     
(908
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Loan Originations and Purchases, Net of Principal Collections
   
(20,611
)
   
(6,025
)
Deferred Loan Fees Collected
   
7
     
44
 
Acquisition of Premises and Equipment
   
(1,810
)
   
(1,726
)
Activity in Available-for-Sale Securities:
               
Proceeds from Sale of Securities
   
1,964
     
6,782
 
Principal Payments on Mortgage-Backed Securities
   
5,464
     
6,259
 
Purchases of Securities
   
( 9,843
)
   
(8,798
)
Activity in Held-to-Maturity Securities:
               
Redemption Proceeds
   
297
     
341
 
Purchases of Securities
   
( 908
)
   
(135
)
                 
Net Cash Used in Investing Activities
   
( 25,440
)
   
(3,258
)
 
 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.
 
5

HOME FEDERAL BANCORP, INC. OF LOUISIANA
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 
(Unaudited)
 
 
   
Six Months Ended
 
   
December 31,
 
   
2014
   
2013
 
   
(In Thousands)
 
CASH FLOWS FROM FINANCING ACTIVITIES
   
Net (Decrease) Increase in Deposits
 
$
( 19,531
)
 
$
13,417
 
Proceeds from Federal Home Loan Bank Advances
   
523,700
     
296,350
 
Repayments of Advances from Federal Home Loan Bank
   
( 487,567
)
   
(299,555
)
Net Increase in Advances from Borrowers for Taxes and Insurance
   
(164
)
   
(148
)
Dividends Paid
   
(310
)
   
(282
)
Acquisition of Treasury Stock
   
(1,031
)
   
(1,983
)
Proceeds from Stock Options Exercised
   
21
     
63
 
Proceeds from other Bank Borrowings
   
--
     
300
 
     Repayment of other Bank Borrowings
   
--
     
(800
)
Net Cash Provided by Financing Activities
   
15,118
     
7,362
 
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
   
( 9,022
)
   
3,196
 
                 
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
   
13,633
     
3,685
 
                 
CASH AND CASH EQUIVALENTS - END OF PERIOD
 
$
4,611
   
$
6,881
 
                 
SUPPLEMENTARY CASH FLOW INFORMATION
               
Interest Paid on Deposits and Borrowed Funds
 
$
1,153
   
$
1,344
 
Income Taxes Paid
   
785
     
691
 
Market Value Adjustment for Loss on Securities Available-for-Sale
   
( 53
)
   
(12
)
 
 
 
 
 
 
 
 
 
 
 
 
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 six month period ended December 31, 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 December 31, 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 December 31, 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 uncollectability 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 collectability 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:

   
December 31, 2014
 
       
Gross
   
Gross
     
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
Losses
   
Value
 
   
(In Thousands)
 
Securities Available-for-Sale
               
                 
Debt Securities
               
  FHLMC Mortgage-Backed Certificates
 
$
289
   
$
18
   
$
--
   
$
307
 
  FNMA Mortgage-Backed Certificates
   
30,364
     
851
     
128
     
31,087
 
  GNMA Mortgage-Backed Certificates
   
19,938
     
6
     
539
     
19,405
 
                                 
          Total Debt Securities
   
50,591
     
875
     
667
     
50,799
 
                                 
    Total Securities Available-for-Sale
 
$
50,591
   
$
875
   
$
667
   
$
50,799
 
                                 
Securities Held-to-Maturity
                               
                                 
Equity Securities (Non-Marketable)
                               
  21,262 Shares – Federal Home Loan Bank
 
$
2,126
   
$
--
   
$
--
   
$
2,126
 
  630 Shares – First National Bankers
    Bankshares, Inc.
   
250
     
--
     
--
     
250
 
                                 
          Total Equity Securities
   
2,376
     
--
     
--
     
2,376
 
                                 
    Total Securities Held-to-Maturity
 
$
2,376
   
$
--
   
$
--
   
$
2,376
 

   
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 December 31, 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
 
$
2
   
$
2
   
$
--
   
$
--
 
    One through Five Years
   
216
     
220
     
--
     
--
 
    After Five through Ten Years
   
143
     
147
     
--
     
--
 
    Over Ten Years
   
50,230
     
50,430
     
--
     
--
 
     
50,591
     
50,799
     
--
     
--
 
                                 
Other Equity Securities
   
--
     
--
     
2,376
     
2,376
 
                                 
   Total
 
$
50,591
   
$
50,799
   
$
2,376
   
$
2,376
 

For the six months ended December 31, 2014, proceeds from the sale of securities available-for-sale amounted to $2.0 million and gross realized gains amounted to $10,000 for the six months ended December 31, 2014.

The following tables show information pertaining to gross unrealized losses on securities available-for-sale for the six months ended December 31, 2014 and at June 30, 2014 aggregated by investment category and length of time that individual securities have been in a continuous loss position.

   
December 31, 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
 
$
128
   
$
3,778
   
$
539
   
$
19,279
 
Marketable Equity Securities
   
--
     
--
     
--
     
--
 
                                 
        Total Securities Available-for-Sale
 
$
128
   
$
3,778
   
$
539
   
$
19,279
 
                                 

   
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 December 31, 2014, securities with a carrying value of $806,000 were pledged to secure public deposits, and securities and mortgage loans with a carrying value of $166.9 million were pledged to secure FHLB advances.

3.            Loans Receivable

Loans receivable are summarized as follows:

   
 
December 31, 2014
   
June 30, 2014
 
     
(In Thousands)
 
Loans Secured by Mortgages on Real Estate
       
One- to Four-Family Residential
 
$
98,472
   
$
89,545
 
Commercial
   
55,787
     
56,266
 
Multi-Family Residential
   
15,845
     
20,368
 
 Land
   
23,283
     
19,945
 
Construction
   
16,228
     
12,505
 
Equity and Second Mortgage
   
2,926
     
2,563
 
Equity Lines of Credit
   
21,224
     
14,950
 
     
233,765
     
216,142
 
                 
Commercial Loans
   
28,607
     
25,749
 
Consumer Loans
               
Loans on Savings Accounts
   
242
     
255
 
Automobile and Other Consumer Loans
   
103
     
111
 
Total Consumer and Other Loans
   
345
     
366
 
Total Loans
   
262,717
     
242,257
 
                 
Less:   Allowance for Loan Losses
   
(2,365
)
   
(2,396
)
     Unamortized Loan Fees
   
(205
)
   
(298
)
Net Loans Receivable
 
$
260,147
   
$
239,563
 

Following is a summary of changes in the allowance for loan losses:

   
Six Months Ended December 31,
 
 
 
2014
   
2013
 
   
(In Thousands)
 
         
Balance - Beginning of Period
 
$
2,396
   
$
2,240
 
Provision for Loan Losses
   
120
     
88
 
Loan Charge-Offs
   
(151
)
   
(12
)
                 
Balance - End of Period
 
$
2,365
   
$
2,316
 

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 December 31, 2014 and June 30, 2014:

       
Special
             
December 31, 2014  
Pass
   
Mention
   
Substandard
   
Doubtful
   
Total
 
       
(In Thousands)
     
Real Estate Loans:
                   
  One- to Four-Family Residential
 
$
98,345
   
$
114
   
$
13
   
$
-
   
$
98,472
 
  Commercial
   
55,178
     
546
     
-
     
63
     
55,787
 
  Multi-Family Residential
   
15,845
     
-
     
-
     
-
     
15,845
 
  Land
   
23,283
     
-
     
-
     
-
     
23,283
 
  Construction
   
16,228
     
-
     
-
     
-
     
16,228
 
  Equity and Second Mortgage
   
2,926
     
-
     
-
     
-
     
2,926
 
  Equity Lines of Credit
   
21,197
     
-
     
-
     
27
     
21,224
 
Commercial Loans
   
28,607
     
-
     
-
     
-
     
28,607
 
Consumer Loans
   
345
     
-
     
-
     
-
     
345
 
     Total
 
$
261,954
   
$
660
   
$
13
   
$
90
   
$
262,717
 
                                         
 
 
 
 
 
 
 
14

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
3.                Loans Receivable (continued)
 
Credit Quality Indicators (continued)
     
             
June 30, 2014
 
Pass
   
Special
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 December 31, 2014 and June 30, 2014:

 December 31, 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
 
$
1,214
   
$
861
   
$
80
   
$
2,155
   
$
96,317
   
$
98,472
   
$
67
 
  Commercial
   
--
     
--
     
64
     
64
     
55,723
     
55,787
     
--
 
  Multi-Family Residential
   
--
     
--
     
--
     
--
     
15,845
     
15,845
     
--
 
  Land
   
--
     
--
     
--
     
--
     
23,283
     
23,283
     
--
 
  Construction
   
--
     
--
     
--
     
--
     
16,228
     
16,228
     
--
 
  Equity and Second Mortgage
   
--
     
--
     
--
     
--
     
2,926
     
2,926
     
--
 
  Equity Lines of Credit
   
100
     
--
     
--
     
100
     
21,124
     
21,224
     
--
 
Commercial Loans
   
--
     
--
     
--
     
--
     
28,607
     
28,607
     
--
 
Consumer Loans
   
4
     
--
     
--
     
4
     
341
     
345
     
--
 
   
$
1,318
   
$
861
   
$
144
   
$
2,323
   
$
260,394
   
$
262,717
   
$
67
 

 
 
 
 
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
   
--
     
--
     
27
     
27
     
14,923
     
14,950
     
--
 
Commercial Loans
   
259
     
--
     
--
     
259
     
25,490
     
25,749
     
--
 
Consumer Loans
   
--
     
--
     
--
     
--
     
366
     
366
     
--
 
                                                         
     Total
 
$
1,585
   
$
435
   
$
191
   
$
2,211
   
$
240,046
   
$