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EX-32.0 - EXHIBIT 32.0 - Home Federal Bancorp, Inc. of Louisianaexh320.htm
EX-31.2 - EXHIBIT 31.2 - Home Federal Bancorp, Inc. of Louisianaexh312.htm
EX-31.1 - EXHIBIT 31.1 - Home Federal Bancorp, Inc. of Louisianaexh311.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, 2016
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, 2016: The registrant had 1,966,084 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
26
     
Item 3:
Quantitative and Qualitative Disclosures About Market Risk
32
     
Item 4:
Controls and Procedures
32
     
PART II
OTHER INFORMATION
 
     
Item 1:
Legal Proceedings
32
     
Item 1A:
Risk Factors
32
     
Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
33
     
Item 3:
Defaults Upon Senior Securities
33
     
Item 4:
Mine Safety Disclosures
33
     
Item 5:
Other Information
33
     
Item 6:
Exhibits
33
     
     
SIGNATURES    
 
 

HOME FEDERAL BANCORP, INC. OF LOUISIANA
 
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
 
 
   
September 30, 2016
   
June 30, 2016
 
                               (In Thousands)     
ASSETS
           
Cash and Cash Equivalents (Includes Interest-Bearing Deposits with Other Banks of $2,463 and $2,529 for
September 30, 2016 and June 30, 2016, Respectively)
 
$
6,265
   
$
4,756
 
Securities Available-for-Sale
   
46,109
     
50,173
 
Securities Held-to-Maturity (Fair Value of $12,750 and $2,349, Respectively)
   
12,838
     
2,349
 
Loans Held-for-Sale
   
14,980
     
11,919
 
Loans Receivable, Net of Allowance for Loan Losses of $3,137 and $2,845, Respectively
   
287,634
     
290,827
 
Accrued Interest Receivable
   
1,011
     
1,024
 
Premises and Equipment, Net
   
12,060
     
12,366
 
Bank Owned Life Insurance
   
6,560
     
6,523
 
Deferred Tax Asset
   
1,210
     
984
 
Other Assets
   
875
     
780
 
                 
Total Assets
 
$
389,542
   
$
381,701
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
LIABILITIES
               
Deposits
 
$
299,325
   
$
287,822
 
Advances from Borrowers for Taxes and Insurance
   
898
     
716
 
Advances from Federal Home Loan Bank of Dallas
   
42,301
     
47,665
 
Other Bank Borrowings
   
400
     
400
 
Other Accrued Expenses and Liabilities
   
2,645
     
1,706
 
                 
Total Liabilities
   
345,569
     
338,309
 
                 
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; 1,959,419 and 1,967,955 Shares Issued and Outstanding at
      September 30, 2016 and June 30, 2016, Respectively
   
23
     
23
 
Additional Paid-in Capital
   
34,011
     
33,863
 
Unearned ESOP Stock
   
(1,302
)
   
(1,331
)
Unearned RRP Trust Stock
   
(241
)
   
(265
)
Retained Earnings
   
11,596
     
11,018
 
Accumulated Other Comprehensive Income
   
(114
)
   
84
 
                 
Total Stockholders' Equity
   
43,973
     
43,392
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
389,542
   
$
381,701
 
 
 
 
 
 
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,
 
   
2016
   
2015
 
   
(In Thousands, Except per Share Data)
 
INTEREST INCOME
           
Loans, Including Fees
 
$
3,894
   
$
3,636
 
Investment Securities
   
5
     
6
 
Mortgage-Backed Securities
   
192
     
195
 
Other Interest-Earning Assets
   
4
     
8
 
Total Interest Income
   
4,095
     
3,845
 
                 
INTEREST EXPENSE
               
Deposits
   
540
     
605
 
     Other Borrowings
   
3
     
--
 
Federal Home Loan Bank Borrowings
   
95
     
62
 
Total Interest Expense
   
638
     
667
 
Net Interest Income
   
3,457
     
3,178
 
                 
PROVISION FOR LOAN LOSSES
   
300
     
65
 
Net Interest Income after Provision for Loan Losses
   
3,157
     
3,113
 
                 
NON-INTEREST INCOME
               
     Gain on Sale of Real Estate
   
110
     
--
 
Gain on Sale of Loans
   
798
     
725
 
Income on Bank Owned Life Insurance
   
37
     
40
 
     Service Charges on deposit accounts
   
163
     
134
 
Other Income
   
10
     
13
 
Total Non-Interest Income
   
1,118
     
912
 
                 
NON-INTEREST EXPENSE
               
Compensation and Benefits
   
1,722
     
1,708
 
Occupancy and Equipment
   
307
     
239
 
Data Processing
   
155
     
130
 
Audit and Examination Fees
   
52
     
50
 
Franchise and Bank Shares Tax
   
95
     
91
 
Advertising
   
72
     
61
 
Legal Fees
   
81
     
66
 
Loan and Collection
   
99
     
83
 
Deposit Insurance Premium
   
45
     
60
 
Other Expense
   
147
     
145
 
Total Non-Interest Expense
   
2,775
     
2,633
 
Income Before Income Taxes
   
1,500
     
1,392
 
                 
PROVISION FOR INCOME TAX EXPENSE
   
498
     
451
 
Net Income
 
$
1,002
   
$
941
 
EARNINGS PER COMMON SHARE:
               
Basic
 
$
0.55
   
$
0.49
 
Diluted
 
$
0.53
   
$
0.47
 
DIVIDENDS DECLARED
 
$
0.09
   
$
0.08
 
 
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,
 
   
2016
   
2015
 
   
(In Thousands)
 
             
Net Income
 
$
1,002
   
$
941
 
                 
Other Comprehensive Loss, Net of Tax
               
   Unrealized Holding Loss on Securities Available-for-Sale, Net of Tax of $103 in 2016 and $26 in 2015
   
(198
)
   
(50
)
                 
        Total Comprehensive Income
 
$
804
   
$
891
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2016 AND 2015
(Unaudited)
 
 
   
Common
Stock
   
Additional
Paid-in
Capital
   
Unearned
ESOP
Stock
   
Unearned RRP
Trust
Stock
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Total
Stockholders'
Equity
 
                     
(In Thousands)
             
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
   
--
     
--
     
--
     
--
     
(169
)
   
--
     
(169
)
                                                         
BALANCE – September 30, 2015
 
$
25
   
$
33,502
   
$
(1,417
)
 
$
(278
)
 
$
12,137
   
$
50
   
$
44,019
 
                                                         
BALANCE – June 30, 2016
 
$
23
   
$
33,863
   
$
(1,331
)
 
$
(265
)
 
$
11,018
   
$
84
   
$
43,392
 
                                                         
Net Income
   
--
     
--
     
--
     
--
     
1,002
     
--
     
1,002
 
                                                         
Changes in Unrealized Gain
    on Securities Available-for-
    Sale, Net of Tax Effects
   
--
     
--
     
--
     
--
     
--
     
(198
)
   
(198
)
                                                         
RRP Shares Earned
   
--
     
--
     
--
     
24
     
--
     
--
     
24
 
                                                         
Stock Options Vested
   
--
     
73
     
--
     
--
     
--
     
--
     
73
 
                                                         
Common Stock Issuance for Stock
    Option Exercises
   
--
     
39
     
--
     
--
     
--
     
--
     
39
 
                                                         
ESOP Compensation Earned
   
--
     
36
     
29
     
--
     
--
     
--
     
65
 
                                                         
Company Stock Purchased
   
--
     
--
     
--
     
--
     
(247
)
   
--
     
(247
)
                                                         
Dividends Declared
   
--
     
--
     
--
     
--
     
(177
)
   
--
     
(177
)
                                                         
BALANCE – September 30, 2016
 
$
23
   
$
34,011
   
$
(1,302
)
 
$
(241
)
 
$
11,596
   
$
(114
)
 
$
43,973
 

 
 
 
 
 
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,
 
   
2016
   
2015
 
                       (In Thousands)  
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net Income
 
$
1,002
   
$
941
 
Adjustments to Reconcile Net Income to Net
               
Cash Provided by (Used in) Operating Activities
               
     Gain on Sale of Real Estate
   
(110
)
   
--
 
 Bad Debt Recovery
   
6
     
33
 
 Net Amortization and Accretion on Securities
   
5
     
6
 
 Gain on Sale of Loans
   
(798
)
   
(725
)
 Amortization of Deferred Loan Fees
   
(20
)
   
(20
)
 Depreciation of Premises and Equipment
   
132
     
98
 
 ESOP Expense
   
65
     
61
 
 Stock Option Expense
   
73
     
44
 
 Recognition and Retention Plan Expense
   
58
     
59
 
 Deferred Income Tax
   
(124
)
   
(39
)
 Provision for Loan Losses
   
300
     
65
 
 Increase in Cash Surrender Value on Bank Owned Life Insurance
   
(37
)
   
(40
)
 Share Awards Expense
   
34
     
--
 
 Changes in Assets and Liabilities:
               
Loans Held-for-Sale – Originations and Purchases
   
(31,710
)
   
(27,007
)
Loans Held-for-Sale – Sale and Principal Repayments
   
29,448
     
30,986
 
Accrued Interest Receivable
   
12
     
(22
)
Other Operating Assets
   
(93
)
   
73
 
Other Operating Liabilities
   
871
     
532
 
                 
Net Cash (Used In) Provided by Operating Activities
   
(886
)
   
5,045
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Loan Originations and Purchases, Net of Principal Collections
   
2,890
     
(635
)
Deferred Loan Fees Collected
   
16
     
1
 
Acquisition of Premises and Equipment
   
(140
)
   
(1,284
)
Proceeds From Sale of Real Estate
   
423
     
--
 
Activity in Available-for-Sale Securities:
               
Principal Payments on Mortgage-Backed Securities
   
3,759
     
3,255
 
Activity in Held-to-Maturity Securities:
               
Redemption Proceeds
   
--
     
509
 
Purchases of Securities
   
(10,489
)
   
(2
)
                 
Net Cash (Used in) Provided by Investing Activities
   
(3,541
)
   
1,844
 
 
 
 
 
 
 
 
 

 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,
 
   
2016
   
2015
 
   
       (In Thousands)
 
CASH FLOWS FROM FINANCING ACTIVITIES
     
Net Increase in Deposits
 
$
11,502
   
$
7,037
 
Proceeds from Federal Home Loan Bank Advances
   
431,600
     
44,000
 
Repayments of Advances from Federal Home Loan Bank
   
(436,963
)
   
(56,060
)
Net Increase in Advances from Borrowers for Taxes and Insurance
   
182
     
166
 
Dividends Paid
   
(177
)
   
(169
)
Company Stock Purchased
   
(247
)
   
(299
)
Proceeds from Stock Options Exercised
   
39
     
50
 
                 
Net Cash Provided by (Used in) Financing Activities
   
5,936
     
(5,275
)
                 
NET INCREASE IN CASH AND CASH EQUIVALENTS
   
1,509
     
1,614
 
                 
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
   
4,756
     
21,166
 
                 
CASH AND CASH EQUIVALENTS - END OF PERIOD
 
$
6,265
   
$
22,780
 
                 
SUPPLEMENTARY CASH FLOW INFORMATION
               
Interest Paid on Deposits and Borrowed Funds
 
$
625
   
$
665
 
Income Taxes Paid
   
1
     
1
 
Market Value Adjustment for Loss on Securities Available-for-Sale
   
(301
)
   
(75
)
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2016 are not necessarily indicative of the results which may be expected for the fiscal year ending June 30, 2017.

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, 2016.  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 six 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, 2016, 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 as 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.

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, 2016 and September 30, 2016 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, 2016
 
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
Losses
   
Value
 
   
(In Thousands)
 
Securities Available-for-Sale
                       
                         
Debt Securities
                       
  FHLMC Mortgage-Backed Certificates
 
$
10,229
   
$
9
   
$
377
   
$
9,861
 
  FNMA Mortgage-Backed Certificates
   
24,748
     
549
     
46
     
25,251
 
  GNMA Mortgage-Backed Certificates
   
11,305
     
4
     
312
     
10,997
 
                                 
          Total Debt Securities
   
46,282
     
562
     
735
     
46,109
 
                                 
    Total Securities Available-for-Sale
 
$
46,282
   
$
562
   
$
735
   
$
46,109
 
                                 
Securities Held-to-Maturity
                               
Debt Securities
                               
 FNMA Mortgage-Backed Certificates
 
$
10,292
   
$
--
   
$
88
   
$
10,204
 
Equity Securities (Non-Marketable)
                               
  22,956 Shares – Federal Home Loan Bank
   
2,296
     
--
     
--
     
2,296
 
  630 Shares – First National Bankers Bankshares, Inc.
   
250
     
--
     
--
     
250
 
                                 
          Total Equity Securities
   
2,546
     
--
     
--
     
2,546
 
                                 
    Total Securities Held-to-Maturity
 
$
12,838
   
$
--
   
$
88
   
$
12,750
 

   
June 30, 2016
 
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
Losses
   
Value
 
   
(In Thousands)
 
Securities Available-for-Sale
     
                         
Debt Securities
                       
  FHLMC Mortgage-Backed Certificates
 
$
10,928
   
$
12
   
$
147
   
$
10,793
 
  FNMA Mortgage-Backed Certificates
   
26,610
     
613
     
--
     
27,223
 
  GNMA Mortgage-Backed Certificates
   
12,507
     
4
     
354
     
12,157
 
                                 
          Total Debt Securities
   
50,045
     
629
     
501
     
50,173
 
                                 
          Total Securities Available-for-Sale
 
$
50,045
   
$
629
   
$
501
   
$
50,173
 
                                 
Securities Held-to-Maturity
                               
                                 
Equity Securities (Non-Marketable)
                               
  20,989 shares – Federal Home Loan Bank
 
$
2,099
   
$
--
   
$
--
   
$
2,099
 
  630 Shares – First National Bankers Bankshares, Inc.
   
250
     
--
     
--
     
250
 
                                 
          Total Equity Securities
   
2,349
     
--
     
--
     
2,349
 
                                 
          Total Securities Held-to-Maturity
 
$
2,349
   
$
--
   
$
--
   
$
2,349
 

 
 
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, 2016 follows:

   
Available-for-Sale
   
Held-to-Maturity
 
   
Amortized
   
Fair
   
Amortized
   
Fair
 
   
Cost
   
Value
   
Cost
   
Value
 
   
(In Thousands)
 
Debt Securities
                       
    Within One Year or Less
 
$
18
   
$
18
   
$
--
   
$
--
 
    One through Five Years
   
86
     
88
     
--
     
--
 
    After Five through Ten Years
   
51
     
53
     
--
     
--
 
    Over Ten Years
   
46,127
     
45,950
     
10,292
     
10,204
 
     
46,282
     
46,109
     
10,292
     
10,204
 
                                 
Other Equity Securities
   
--
     
--
     
2,546
     
2,546
 
                                 
   Total
 
$
46,282
   
$
46,109
   
$
12,838
   
$
12,750
 

There were no sales of available-for-sale securities during the three months ended September 30, 2016.

The following tables show information pertaining to gross unrealized losses on securities available-for-sale at September 30, 2016 and June 30, 2016 aggregated by investment category and length of time that individual securities have been in a continuous loss position.

   
September 30, 2016
 
   
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
 
$
392
   
$
14,990
   
$
343
   
$
18,123
 
Marketable Equity Securities
   
--
     
--
     
--
     
--
 
                                 
        Total Securities Available-for-Sale
 
$
392
   
$
14,990
   
$
343
   
$
18,123
 

   
June 30, 2016
 
   
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
 
$
147
   
$
17,852
   
$
354
   
$
12,066
 
Marketable Equity Securities
   
--
     
--
     
--
     
--
 
                                 
        Total Securities Available-for-Sale
 
$
147
   
$
17,852
   
$
354
   
$
12,066
 

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, 2016, securities with a carrying value of $1.1 million were pledged to secure public deposits, and securities and mortgage loans with a carrying value of $187.0 million were pledged to secure FHLB advances.

3. Loans Receivable

Loans receivable are summarized as follows:

   
 
September 30, 2016
   
June 30, 2016
 
     
(In Thousands)
 
Loans Secured by Mortgages on Real Estate
           
One- to Four-Family Residential
 
$
120,767
   
$
118,035
 
Commercial
   
71,883
     
69,197
 
Multi-Family Residential
   
15,472
     
20,661
 
 Land
   
26,201
     
24,308
 
Construction
   
9,605
     
14,442
 
Equity and Second Mortgage
   
1,586
     
1,526
 
Equity Lines of Credit
   
17,587
     
17,290
 
Total Mortgage Loans
   
263,101
     
265,459
 
                 
Commercial Loans
   
27,344
     
27,886
 
Consumer Loans
               
Loans on Savings Accounts
   
409
     
404
 
Automobile and Other Consumer Loans
   
76
     
86
 
Total Consumer and Other Loans
   
485
     
490
 
Total Loans
   
290,930
     
293,835
 
                 
Less:   Allowance for Loan Losses
   
(3,137
)
   
(2,845
)
   Unamortized Loan Fees
   
(159
)
   
(163
)
 Net Loans Receivable
 
$
287,634
   
$
290,827
 

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

   
Three Months Ended September 30,
 
 
 
2016
   
2015
 
   
(In Thousands)
 
Balance - Beginning of Period
 
$
2,845
   
$
2,515
 
Provision for Loan Losses
   
300
     
65
 
Loan Charge-Offs
   
(14
)
   
--
 
Recoveries
   
6
     
33
 
Balance - End of Period
 
$
3,137
   
$
2,613
 

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, 2016 and June 30, 2016:

 
September 30, 2016
  Pass    
Special
Mention
    Substandard     Doubtful     Total  
                 (In Thousands)              
Real Estate Loans:
                             
  One- to Four-Family Residential
 
$
119,669
   
$
596
   
$
502
   
$
--
   
$
120,767
 
  Commercial
   
71,619
     
--
     
264
     
--
     
71,883
 
  Multi-Family Residential
   
15,472
     
--
     
--
     
--
     
15,472
 
  Land
   
25,522
     
123
     
556
     
--
     
26,201
 
  Construction
   
9,305
     
300
     
--
     
--
     
9,605
 
  Equity and Second Mortgage
   
1,586
     
--
     
--
     
--
     
1,586
 
  Equity Lines of Credit
   
17,587
     
--
     
--
     
--
     
17,587
 
Commercial Loans
   
25,354
     
--
     
1,990
     
--
     
27,344
 
Consumer Loans
   
485
     
--
     
--
     
--
     
485
 
     Total
 
$
286,599
   
$
1,019
   
$
3,312
   
$
--
   
$
290,930
 
 
 
 
14

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
3. Loans Receivable (continued)
 
Credit Quality Indicators (continued)
                   
                     
June 30, 2016
 
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Total
 
   
(In Thousands)
 
Real Estate Loans:
                             
  One- to Four-Family Residential
 
$
117,881
   
$
40
   
$
114
   
$
--
   
$
118,035
 
  Commercial
   
68,899
     
30
     
268
     
--
     
69,197
 
  Multi-Family Residential
   
20,661
     
--
     
--
     
--
     
20,661
 
  Land
   
23,753
     
555
     
--
     
--
     
24,308
 
  Construction
   
14,442
     
--
     
--
     
--
     
14,442
 
  Equity and Second Mortgage
   
1,526
     
--
     
--
     
--
     
1,526
 
  Equity Lines of Credit
   
17,290
     
--
     
--
     
--
     
17,290
 
Commercial Loans
   
25,896
     
--
     
1,990
     
--
     
27,886
 
Consumer Loans
   
490
     
--
     
--
     
--
     
490
 
                                         
     Total
 
$
290,838
   
$
625
   
$
2,372
   
$
--
   
$
293,835
 

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, 2016 and June 30, 2016:

September 30, 2016
 
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
 
$
1,440
   
$
1,679
   
$
568
   
$
3,687
   
$
117,080
   
$
120,767
   
$
167
 
  Commercial
   
--
     
--
     
--
     
--
     
71,883
     
71,883
     
--
 
  Multi-Family Residential
   
--
     
--
     
--
     
--
     
15,472
     
15,472
     
--
 
  Land
   
--
     
--
     
556
     
556
     
25,645
     
26,201
     
--
 
  Construction
   
--
     
--
     
--
     
--
     
9,605
     
9,605
     
--
 
  Equity and Second Mortgage
   
--
     
--
     
--
     
--
     
1,586
     
1,586
     
--
 
  Equity Lines of Credit
   
--
     
--
     
--
     
--
     
17,587
     
17,587
     
--
 
Commercial Loans
   
2,536
     
--
     
--
     
2,536
     
24,808
     
27,344
     
--
 
Consumer Loans
   
--
     
--
     
--
     
--
     
485
     
485
     
--
 
     Total
 
$
3,976
   
$
1,679
   
$
1,124
   
$
6,779
   
$
284,151
   
$
290,930
   
$
167
 
 
 
 
 
15

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Credit Quality Indicators (continued)

 June 30, 2016
 
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
 
$
2,646
   
$
1,674
   
$
114
   
$
4,434
   
$
113,601
   
$
118,035
   
$
101
 
  Commercial
   
--
     
--
     
--
     
--
     
69,197
     
69,197
     
--
 
  Multi-Family Residential
   
--
     
--
     
--
     
--
     
20,661
     
20,661
     
--
 
  Land
   
--
     
555
     
--
     
555
     
23,753
     
24,308
     
--
 
  Construction
   
--
     
--
     
--
     
--
     
14,442
     
14,442
     
--
 
  Equity and Second Mortgage
   
--
     
--
     
--
     
--
     
1,526
     
1,526
     
--
 
  Equity Lines of Credit
   
78
     
15
     
--
     
93
     
17,197
     
17,290
     
--
 
Commercial Loans
   
--
     
--
     
--
     
--
     
27,886
     
27,886
     
--
 
Consumer Loans
   
--
     
--
     
--
     
--
     
490
     
490
     
--
 
                                                         
     Total
 
$
2,724
   
$
2,244
   
$
114
   
$
5,082
   
$
288,753
   
$
293,835
   
$
101
 


There was no interest income recognized on non-accrual loans during the three months ended September 30, 2016 or year ended June 30, 2016. If the non-accrual loans had been accruing interest at their original contracted rates, gross interest income that would have been recorded for the three months ended September 30, 2016 and year ended June 30, 2016 was approximately $17,546 and $1,000, respectively.

The change in the allowance for loan losses by loan portfolio class and recorded investment in loans for the three months ended September 30, 2016 was as follows:

   
Real Estate Loans
                   
 
 
 
 
September 30, 2016
 
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
 
$
1,517
   
$
321
   
$
111
   
$
201
   
$
126
   
$
117
   
$
444
   
$
8
   
$
2,845
 
Charge-Offs
   
--
     
--
     
--
     
--
     
--
     
(14
)
   
--
     
--
     
(14
)
Recoveries
   
6
     
--
     
--
     
--
     
--
     
--
     
--
     
--
     
6
 
Current Provision
   
226
     
7
     
(28
)
   
11
     
(42
)
   
67
     
67
     
(8
)
   
300
 
Ending Balances
 
$
1,749
   
$
328
   
$
83
   
$
212
   
$
84
   
$
170
   
$
511
   
$
--
   
$
3,137
 
                                                                         
Evaluated for Impairment:   
                                                                 
   Individually
   
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
   Collectively
   
1,749
     
328
     
83
     
212
     
84
     
170
     
511
     
--
     
3,137
 
                                                                         
Loans Receivable:
                                                                       
Ending Balances – Total
 
$
120,767
   
$
71,883
   
$
15,472
   
$
26,201
   
$
9,605
   
$
19,173
   
$
27,344
   
$
485
   
$
290,930
 
Ending Balances: