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EX-32.0 - EXHIBIT 32.0 - Home Federal Bancorp, Inc. of Louisianaex320.htm
EX-31.1 - EXHIBIT 31.1 - Home Federal Bancorp, Inc. of Louisianaexh311.htm
EX-31.2 - EXHIBIT 31.2 - Home Federal Bancorp, Inc. of Louisianaexh312.htm
EX-31.3 - EXHIBIT 31.3 - Home Federal Bancorp, Inc. of Louisianaexh313.htm
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, 2015
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 9, 2015: The registrant had 2,086,561 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, 2015
   
June 30, 2015
 
         
ASSETS
       
Cash and Cash Equivalents (Includes Interest-Bearing
Deposits with Other Banks of $19,001 and $16,105 for
September 30, 2015 and June 30, 2015, Respectively)
 
$
22,780
   
$
21,166
 
Securities Available-for-Sale
   
41,549
     
44,885
 
Securities Held-to-Maturity (Fair Value of $1,502 and
      $2,010, Respectively)
   
1,502
     
2,010
 
Loans Held-for-Sale
   
10,948
     
14,203
 
Loans Receivable, Net of Allowance for Loan Losses
of $2,613 and $2,515, Respectively
   
268,982
     
268,427
 
Accrued Interest Receivable
   
949
     
927
 
Premises and Equipment, Net
   
11,375
     
10,188
 
Bank Owned Life Insurance
   
6,405
     
6,365
 
Deferred Tax Asset
   
889
     
824
 
Other Real Estate Owned
   
--
     
40
 
Other Assets
   
765
     
798
 
                 
Total Assets
 
$
366,144
   
$
369,833
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
LIABILITIES
               
Deposits
 
$
293,274
   
$
286,238
 
Advances from Borrowers for Taxes and Insurance
   
744
     
578
 
Advances from Federal Home Loan Bank of Dallas
   
26,351
     
38,411
 
Other Accrued Expenses and Liabilities
   
1,756
     
1,220
 
 
Total Liabilities
   
322,125
     
326,447
 
                 
STOCKHOLDERS' EQUITY
               
Preferred Stock – $.01 Par Value; 10,000,000 Shares
Authorized; None Issued and Outstanding
   
--
     
--
 
Common Stock – $.01 Par Value; 40,000,000 Shares
      Authorized; 2,100,241 and 2,109,606 Shares Issued and Outstanding at
      September 30, 2015 and June 30, 2015, Respectively
   
25
     
25
 
Additional Paid-in Capital
   
33,502
     
33,375
 
Unearned ESOP Stock
   
(1,417
)
   
(1,445
)
Unearned RRP Trust Stock
   
(278
)
   
(333
)
Retained Earnings
   
12,137
     
11,664
 
Accumulated Other Comprehensive Income
   
50
     
100
 
                 
Total Stockholders' Equity
   
44,019
     
43,386
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
366,144
   
$
369,833
 
 
 
 
 
 
 
 
 
 
 
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,
 
   
2015
   
2014
 
   
(In Thousands, Except per Share Data)
 
INTEREST INCOME
       
Loans, Including Fees
 
$
3,636
   
$
3,307
 
Investment Securities
   
6
     
1
 
Mortgage-Backed Securities
   
195
     
244
 
Other Interest-Earning Assets
   
8
     
3
 
Total Interest Income
   
3,845
     
3,555
 
                 
INTEREST EXPENSE
               
Deposits
   
605
     
535
 
Federal Home Loan Bank Borrowings
   
62
     
45
 
Total Interest Expense
   
667
     
580
 
Net Interest Income
   
3,178
     
2,975
 
                 
PROVISION FOR LOAN LOSSES
   
65
     
40
 
Net Interest Income after
Provision for Loan Losses
   
3,113
     
2,935
 
                 
NON-INTEREST INCOME
               
Gain on Sale of Loans
   
725
     
472
 
Income on Bank Owned Life Insurance
   
40
     
41
 
     Service Charges on deposit accounts
   
134
     
101
 
Other Income
   
13
     
15
 
Total Non-Interest Income
   
912
     
629
 
                 
NON-INTEREST EXPENSE
               
Compensation and Benefits
   
1,708
     
1,500
 
Occupancy and Equipment
   
239
     
229
 
Data Processing
   
130
     
119
 
Audit and Examination Fees
   
50
     
53
 
Franchise and Bank Shares Tax
   
91
     
73
 
Advertising
   
61
     
75
 
Legal Fees
   
66
     
69
 
Loan and Collection
   
83
     
66
 
Deposit Insurance Premium
   
60
     
31
 
Other Expense
   
145
     
122
 
Total Non-Interest Expense
   
2,633
     
2,337
 
Income Before Income Taxes
   
1,392
     
1,227
 
                 
PROVISION FOR INCOME TAX EXPENSE
   
451
     
404
 
Net Income
 
$
941
   
$
823
 
EARNINGS PER COMMON SHARE:
               
Basic
 
$
0.49
   
$
0.41
 
Diluted
 
$
0.47
   
$
0.40
 
DIVIDENDS DECLARED
 
$
0.08
   
$
0.07
 
 
 
 
 
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,
 
   
2015
   
2014
 
   
(In Thousands)
 
         
Net Income
 
$
941
   
$
823
 
                 
Other Comprehensive Loss, Net of Tax
               
   Unrealized Holding Loss on Securities Available-for-Sale,
     Net of Tax of $26 in 2015 and $81 in 2014
   
(50
)
   
(158
)
                 
        Total Comprehensive Income
 
$
891
   
$
665
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2015 AND 2014
(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, 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
 
                                                                 
Company Stock Purchased
   
--
     
--
     
--
     
--
     
--
     
(756
)
   
--
     
(756
)
                                                                 
Dividends Declared
   
--
     
--
     
--
     
--
     
(156
)
   
--
     
--
     
(156
)
                                                                 
BALANCE – September 30, 2014
 
$
34
   
$
32,940
   
$
(1,532
)
 
$
(599
)
 
$
28,255
   
$
(16,454
)
 
$
14
   
$
42,658
 
                                                                 
BALANCE – June 30, 2015
 
$
25
   
$
33,375
   
$
(1,445
)
 
$
(333
)
 
$
11,664
   
$
--
   
$
100
   
$
43,386
 
                                                                 
Net Income
   
--
     
--
     
--
     
--
     
941
     
--
     
--
     
941
 
                                                                 
Changes in Unrealized Gain
    on Securities Available-for-
    Sale, Net of Tax Effects
   
--
     
--
     
--
     
--
     
--
     
--
     
(50
)
   
(50
)
                                                                 
RRP Shares Earned
   
--
     
--
     
--
     
55
     
--
     
--
     
--
     
55
 
                                                                 
Stock Options Vested
   
--
     
44
     
--
     
--
     
--
     
--
     
--
     
44
 
                                                                 
Common Stock Issuance for Stock
    Option Exercises
   
--
     
50
     
--
     
--
     
--
     
--
     
--
     
50
 
                                                                 
ESOP Compensation Earned
   
--
     
33
     
28
     
--
     
--
     
--
     
--
     
61
 
                                                                 
Company Stock Purchased
   
--
     
--
     
--
     
--
     
(299
)
   
--
     
--
     
(299
)
                                                                 
Dividends Declared
   
25
     
--
     
--
     
--
     
(169
)
   
--
     
--
     
(169
)
                                                                 
BALANCE – September 30, 2015
 
$
25
   
$
33,502
   
$
(1,417
)
 
$
(278
)
 
$
12,137
   
$
--
   
$
50
   
$
44,019
 

 
 
 
 
 
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,
 
   
2015
   
2014
 
         
CASH FLOWS FROM OPERATING ACTIVITIES
       
Net Income
 
$
941
   
$
823
 
Adjustments to Reconcile Net Income to Net
               
Cash Provided by (Used in) Operating Activities
               
Bad Debt Recovery
   
33
     
--
 
Net Amortization and Accretion on Securities
   
6
     
3
 
Gain on Sale of Loans
   
(725
)
   
(472
)
Amortization of Deferred Loan Fees
   
(20
)
   
(76
)
Depreciation of Premises and Equipment
   
98
     
84
 
ESOP Expense
   
61
     
56
 
Stock Option Expense
   
44
     
44
 
Recognition and Retention Plan Expense
   
59
     
57
 
Deferred Income Tax
   
(39
)
   
29
 
Provision for Loan Losses
   
65
     
40
 
Increase in Cash Surrender Value on Bank Owned Life Insurance
   
(40
)
   
(41
)
Changes in Assets and Liabilities:
               
Loans Held-for-Sale – Originations and Purchases
   
(27,007
)
   
(23,062
)
Loans Held-for-Sale – Sale and Principal Repayments
   
30,986
     
21,874
 
Accrued Interest Receivable
   
(22
)
   
(21
)
Other Operating Assets
   
73
     
(40
)
Other Operating Liabilities
   
532
     
435
 
                 
Net Cash Provided by (Used In) Operating Activities
   
5,045
     
(267
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Loan Originations and Purchases, Net of Principal Collections
   
(635
)
   
(8,714
)
Deferred Loan Fees Collected
   
1
     
4
 
Acquisition of Premises and Equipment
   
(1,284
)
   
(1,624
)
Activity in Available-for-Sale Securities:
               
Principal Payments on Mortgage-Backed Securities
   
3,255
     
2,540
 
Purchases of Securities
   
--
     
(9,843
)
Activity in Held-to-Maturity Securities:
               
Redemption Proceeds
   
509
     
128
 
Purchases of Securities
   
(2
)
   
(762
)
                 
Net Cash Provided by (Used in) Investing Activities
   
1,844
     
(18,271
)
 
 
 
 
 
 
 
 
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,
 
   
2015
   
2014
 
   
(In Thousands)
 
CASH FLOWS FROM FINANCING ACTIVITIES
   
Net Increase (Decrease) in Deposits
 
$
7,037
   
$
(20,284
)
Proceeds from Federal Home Loan Bank Advances
   
44,000
     
349,750
 
Repayments of Advances from Federal Home Loan Bank
   
(56,060
)
   
(319,058
)
Net Increase in Advances from Borrowers for Taxes and Insurance
   
166
     
186
 
Dividends Paid
   
(169
)
   
(156
)
Company Stock Purchased
   
(299
)
   
(756
)
Proceeds from Stock Options Exercised
   
50
     
17
 
                 
Net Cash (Used in) Provided by Financing Activities
   
(5,275
)
   
9,699
 
                 
NET INCREASE (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
   
1,614
     
(8,839
)
                 
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
   
21,166
     
13,633
 
                 
CASH AND CASH EQUIVALENTS - END OF PERIOD
 
$
22,780
   
$
4,794
 
                 
SUPPLEMENTARY CASH FLOW INFORMATION
               
Interest Paid on Deposits and Borrowed Funds
 
$
665
   
$
571
 
Income Taxes Paid
   
1
     
1
 
Market Value Adjustment for Loss on Securities Available-for-Sale
   
(75
)
   
(240
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2015, are not necessarily indicative of the results which may be expected for the fiscal year ending June 30, 2016.

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, 2015.  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 administrative 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, 2015, 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.

Stockholders' Equity

On January 1, 2015, the Louisiana Business Corporation Act (the Act) became effective.  Under the provisions of the Act, there is no concept of "Treasury Shares".  Rather, shares purchased by the Company constitute authorized but unissued shares.  Under Accounting Standards Codification (ASC) 505-30, Treasury Stock, accounting for treasury stock shall conform to state law.  Accordingly, the Company's Consolidated Statements of Financial Condition as of June 30, 2015 and September 30, 2015 reflect this change.  The cost of shares purchased by the Company has been allocated to Common Stock and Retained Earnings balances.
 
Recent Accounting Pronouncements

In August 2014, the FASB issued ASU 2014-13, Consolidation (Topic 810):  Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity.  The amendments of ASU 2014-13 allow for a reporting entity that consolidates a collateralized financing entity within the scope of the guidance to elect to measure the financial assets and the financial liabilities of that collateralized financing entity using the measurement alternative.  Under the measurement alternative, the reporting entity should  measure both the financial assets and the financial liabilities of that collateralized financing entity in its consolidated financial statements using the more observable of  the  fair value of the financial assets and the fair value of the financial liabilities.   The amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015.   The adoption of this guidance is not expected to have a material effect on the Company's financial statements.

In August 2014, the FASB issued ASU 2014-14, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40).  The amendments in this Update require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met:  (1) the loan has a government guarantee that is not separable from the loan before foreclosure, (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim, and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed.  Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor.  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.  This Update did not have a significant impact on the Company's financial statements.

In January 2015, the FASB issued ASU 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20):  Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.   The amendments of ASU 2015-01 eliminate from Generally Accepted Accounting Principles the concept of extraordinary items.  The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 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, 2015
 
       
Gross
   
Gross
     
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
Losses
   
Value
 
   
(In Thousands)
 
Securities Available-for-Sale
               
                 
Debt Securities
               
  FHLMC Mortgage-Backed Certificates
 
$
257
   
$
16
   
$
--
   
$
273
 
  FNMA Mortgage-Backed Certificates
   
25,368
     
603
     
170
     
25,801
 
  GNMA Mortgage-Backed Certificates
   
15,847
     
4
     
376
     
15,475
 
                                 
          Total Debt Securities
   
41,472
     
623
     
546
     
41,549
 
                                 
    Total Securities Available-for-Sale
 
$
41,472
   
$
623
   
$
546
   
$
41,549
 
                                 
Securities Held-to-Maturity
                               
                                 
Equity Securities (Non-Marketable)
                               
  12,520 Shares – Federal Home Loan Bank
 
$
1,252
   
$
--
   
$
--
   
$
1,252
 
  630 Shares – First National Bankers
    Bankshares, Inc.
   
250
     
--
     
--
     
250
 
                                 
          Total Equity Securities
   
1,502
     
--
     
--
     
1,502
 
                                 
    Total Securities Held-to-Maturity
 
$
1,502
   
$
--
   
$
--
   
$
1,502
 

   
June 30, 2015
 
       
Gross
   
Gross
     
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
Losses
   
Value
 
   
(In Thousands)
 
Securities Available-for-Sale
   
                 
Debt Securities
               
  FHLMC Mortgage-Backed Certificates
 
$
267
   
$
17
   
$
--
   
$
284
 
  FNMA Mortgage-Backed Certificates
   
27,263
     
605
     
61
     
27,807
 
  GNMA Mortgage-Backed Certificates
   
17,203
     
5
     
414
     
16,794
 
                                 
          Total Debt Securities
   
44,733
     
627
     
475
     
44,885
 
                                 
          Total Securities Available-for-Sale
 
$
44,733
   
$
627
   
$
475
   
$
44,885
 
                                 
Securities Held-to-Maturity
                               
                                 
Equity Securities (Non-Marketable)
                               
  17,600 shares – Federal Home Loan Bank
 
$
1,760
   
$
--
   
$
--
   
$
1,760
 
  630 Shares – First National Bankers
    Bankshares, Inc.
   
250
     
--
     
--
     
250
 
                                 
          Total Equity Securities
   
2,010
     
--
     
--
     
2,010
 
                                 
          Total Securities Held-to-Maturity
 
$
2,010
   
$
--
   
$
--
   
$
2,010
 

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, 2015, follows:

   
Available-for-Sale
   
Held-to-Maturity
 
   
Amortized
   
Fair
   
Amortized
   
Fair
 
   
Cost
   
Value
   
Cost
   
Value
 
   
(In Thousands)
 
                 
Debt Securities
               
    Within One Year or Less
 
$
1
   
$
1
   
$
--
   
$
--
 
    One through Five Years
   
169
     
172
     
--
     
--
 
    After Five through Ten Years
   
90
     
94
     
--
     
--
 
    Over Ten Years
   
41,212
     
41,282
     
--
     
--
 
     
41,472
     
41,549
     
--
     
--
 
                                 
Other Equity Securities
   
--
     
--
     
1,502
     
1,502
 
                                 
   Total
 
$
41,472
   
$
41,549
   
$
1,502
   
$
1,502
 

There were no sales of available-for-sale securities during the three months ended September 30, 2015.

The following tables show information pertaining to gross unrealized losses on securities available-for-sale at September 30, 2015 and June 30, 2015 aggregated by investment category and length of time that individual securities have been in a continuous loss position.

   
September 30, 2015
 
   
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
 
$
--
   
$
--
   
$
546
   
$
25,028
 
Marketable Equity Securities
   
--
     
--
     
--
     
--
 
                                 
        Total Securities Available-for-Sale
 
$
--
   
$
--
   
$
546
   
$
25,028
 
                                 

   
June 30, 2015
 
   
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
 
$
61
   
$
10,345
   
$
414
   
$
16,683
 
Marketable Equity Securities
   
--
     
--
     
--
     
--
 
                                 
        Total Securities Available-for-Sale
 
$
61
   
$
10,345
   
$
414
   
$
16,683
 

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, 2015, securities with a carrying value of $1.7 million were pledged to secure public deposits, and securities and mortgage loans with a carrying value of $167.9 million were pledged to secure FHLB advances.

3.            Loans Receivable

Loans receivable are summarized as follows:

   
 
September 30, 2015
   
June 30, 2015
 
     
(In Thousands)
 
Loans Secured by Mortgages on Real Estate
       
One- to Four-Family Residential
 
$
106,924
   
$
103,332
 
Commercial
   
60,283
     
62,080
 
Multi-Family Residential
   
15,135
     
15,246
 
 Land
   
19,057
     
19,866
 
Construction
   
17,804
     
17,620
 
Equity and Second Mortgage
   
2,247
     
2,460
 
Equity Lines of Credit
   
21,656
     
22,187
 
Total Mortgage Loans
   
243,106
     
242,791
 
                 
Commercial Loans
   
28,348
     
28,019
 
Consumer Loans
               
Loans on Savings Accounts
   
206
     
209
 
Automobile and Other Consumer Loans
   
104
     
110
 
Total Consumer and Other Loans
   
310
     
319
 
Total Loans
   
271,764
     
271,129
 
                 
Less:   Allowance for Loan Losses
   
(2,613
)
   
(2,515
)
     Unamortized Loan Fees
   
(169
)
   
(187
)
Net Loans Receivable
 
$
268,982
   
$
268,427
 

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

   
Three Months Ended September 30,
 
 
 
2015
   
2014
 
   
(In Thousands)
 
         
Balance - Beginning of Period
 
$
2,515
   
$
2,396
 
Provision for Loan Losses
   
65
     
40
 
Loan Charge-Offs
   
--
     
(151
)
Recoveries
   
33
     
--
 
Balance - End of Period
 
$
2,613
   
$
2,285
 

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, 2015 and June 30, 2015:

 
September 30, 2015
  Pass    
Special
Mention
    Substandard     Doubtful     Total  
            (In Thousands)          
Real Estate Loans:
                   
  One- to Four-Family Residential
 
$
106,591
   
$
218
   
$
115
   
$
--
   
$
106,924
 
  Commercial
   
59,719
     
346
     
218
     
--
     
60,283
 
  Multi-Family Residential
   
15,135
     
--
     
--
     
--
     
15,135
 
  Land
   
19,057
     
--
     
--
     
--
     
19,057
 
  Construction
   
17,804
     
--
     
--
     
--
     
17,804
 
  Equity and Second Mortgage
   
2,247
     
--
     
--
     
--
     
2,247
 
  Equity Lines of Credit
   
21,656
     
--
     
--
     
--
     
21,656
 
Commercial Loans
   
28,348
     
--
     
--
     
--
     
28,348
 
Consumer Loans
   
310
     
--
     
--
     
--
     
310
 
     Total
 
$
270,867
   
$
564
   
$
333
   
$
--
   
$
271,764
 
                                         
 
 
 
 
 
 
 
 
 
 
 
 
14

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
3. Loans Receivable (continued)
 
Credit Quality Indicators (continued)
             
             
June 30, 2015
 
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Total
 
   
(In Thousands)
 
Real Estate Loans:
                   
  One- to Four-Family Residential
 
$
103,207
   
$
112
   
$
13
   
$
--
   
$
103,332
 
  Commercial
   
61,542
     
538
     
--
     
--
     
62,080
 
  Multi-Family Residential
   
15,246
     
--
     
--
     
--
     
15,246
 
  Land
   
19,866
     
--
     
--
     
--
     
19,866
 
  Construction
   
17,620
     
--
     
--
     
--
     
17,620
 
  Equity and Second Mortgage
   
2,460
     
--
     
--
     
--
     
2,460
 
  Equity Lines of Credit
   
22,163
     
--
     
24
     
--
     
22,187
 
Commercial Loans
   
28,019
     
--
     
--
     
--
     
28,019
 
Consumer Loans
   
319
     
--
     
--
     
--
     
319
 
                                         
     Total
 
$
270,442
   
$
650
   
$
37
   
$
--
   
$
271,129
 

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, 2015 and June 30, 2015:

 
 
 
 
September 30, 2015
 
 30-59 Days
Past Due
   
 60-89
Days Past
Due
   
 Greater
Than 90
Days
   
 Tota
Past Due
     Current    
 Total
Loans
Receivable
   
 Recorded
Investment
> 90 Days
and
Accruing
 
                       (In Thousands)                    
                                           
Real Estate Loans:
                           
  One- to Four-Family
     Residential
 
$
1,954
   
$
1,178
   
$
289
   
$
3,421
   
$
103,503
   
$
106,924
   
$
276
 
  Commercial
   
--
     
--
     
--
     
--
     
60,283
     
60,283
     
--
 
  Multi-Family Residential
   
--
     
--
     
--
     
--
     
15,135
     
15,135
     
--
 
  Land
   
570
     
--
     
--
     
570
     
18,487
     
19,057
     
--
 
  Construction
   
--
     
--
     
--
     
--
     
17,804
     
17,804
     
--
 
  Equity and Second Mortgage
   
--
     
--
     
--
     
--
     
2,247
     
2,247
     
--
 
  Equity Lines of Credit
   
--
     
--
     
--
     
--
     
21,656
     
21,656
     
--
 
Commercial Loans
   
--
     
--
     
--
     
--
     
28,348
     
28,348
     
--
 
Consumer Loans
   
--
     
--
     
--
     
--
     
310
     
310
     
--
 
     Total
 
$
2,524
   
$
1,178
   
$
289
   
$
3,991
   
$
267,773
   
$
271,764
   
$
276
 
 
 
 
 
 
 
 
 
15

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Credit Quality Indicators (continued)

 June 30, 2015
 
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
 
$
2,137
   
$
1,100
   
$
80
   
$
3,317
   
$
100,015
   
$
103,332
   
$
67
 
  Commercial
   
--
     
--
     
--
     
--
     
62,080
     
62,080
     
--
 
  Multi-Family Residential
   
--
     
--
     
--
     
--
     
15,246
     
15,246
     
--
 
  Land
   
--
     
--
     
--
     
--
     
19,866
     
19,866
     
--
 
  Construction
   
--
     
--
     
--
     
--
     
17,620
     
17,620
     
--
 
  Equity and Second Mortgage
   
--
     
--
     
--
     
--
     
2,460
     
2,460
     
--
 
  Equity Lines of Credit
   
--
     
--
     
--
     
--
     
22,187
     
22,187
     
--
 
Commercial Loans
   
--
     
--
     
--
     
--
     
28,019
     
28,019
     
--
 
Consumer Loans
   
3
     
--
     
--
     
3
     
316
     
319
     
--
 
                                                         
     Total
 
$
2,140
   
$
1,100
   
$
80
   
$
3,320
   
$
267,809
   
$
271,129
   
$
67
 

Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties are considered troubled debt restructurings and designated as impaired.  There were no troubled debt restructurings as of September 30, 2015 or June 30, 2015.

The change in the allowance for loan losses by loan portfolio class and recorded investment in loans for the three months ended September 30, 2015 was as follows:

   
Real Estate Loans
             
 
 
 
 
September 30, 2015
 
1-4 Family
Residential
   
Commercial
   
Multi-
Family
   
Land
   
Construction
   
Home
Equity
Loans
and Lines
of Credit
   
Commercial
Loans
   
Consumer
Loans
   
Total
 
               
(In Thousands)
             
Allowance for loan losses:
                           
Beginning Balances
 
$
1,195
   
$
415
   
$
103
   
$
154
   
$
146
   
$
192
   
$
305
   
$
5
   
$
2,515
 
Charge-Offs
   
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Recoveries
   
33
     
--
     
--
     
--
     
--
     
--
     
--
     
--
     
33
 
Current Provision
   
129
     
6
     
(30
)
   
(6
)
   
(29
)
   
(55
)
   
51
     
(1
)
   
65
 
Ending Balances
 
$
1,357
   
$
421
   
$
73
   
$
148
   
$
117
   
$
137
   
$
356
   
$
4
   
$
2,613
 
                                                                         
Evaluated for Impairment:
                                                                       
   Individually
   
--
     
--
     
--
     
--
     
--