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EX-32.0 - EXHIBIT 32.0 - Home Federal Bancorp, Inc. of Louisianaexh320.htm
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EX-31.1 - EXHIBIT 31.1 - Home Federal Bancorp, Inc. of Louisianaexh311.htm
EX-10.1 - EXHIBIT 10.1 - Home Federal Bancorp, Inc. of Louisianaexh101.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:
  December 31, 2017
 
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, a smaller reporting company or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth 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)
   
Emerging growth 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
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [   ]
 
Shares of common stock, par value $.01 per share, outstanding as of February 8, 2018: The registrant had 1,911,381 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
30
     
Item 3:
Quantitative and Qualitative Disclosures About Market Risk
38
     
Item 4:
Controls and Procedures
38
     
PART II
OTHER INFORMATION
 
     
Item 1:
Legal Proceedings
38
     
Item 1A:
Risk Factors
38
     
Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
39
     
Item 3:
Defaults Upon Senior Securities
39
     
Item 4:
Mine Safety Disclosures
39
     
Item 5:
Other Information
39
     
Item 6:
Exhibits
39
     
     
SIGNATURES    
 
 

HOME FEDERAL BANCORP, INC. OF LOUISIANA
 
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
 
   
December 31, 2017
   
June 30, 2017
 
    (In Thousands)      
ASSETS
           
Cash and Cash Equivalents (Includes Interest-Bearing Deposits with Other Banks of $3,213 and $8,212 for
   December 31, 2017 and June 30, 2017, Respectively)
 
$
9,444
   
$
11,905
 
Securities Available-for-Sale
   
33,497
     
36,935
 
Securities Held-to-Maturity (Fair Value of $27,580 and $27,989, Respectively)
   
28,074
     
28,357
 
Loans Held-for-Sale
   
2,750
     
13,631
 
Loans Receivable, Net of Allowance for Loan Losses of $3,383 and $3,729, Respectively
   
316,090
     
312,772
 
Accrued Interest Receivable
   
1,173
     
1,094
 
Premises and Equipment, Net
   
12,079
     
12,219
 
Bank Owned Life Insurance
   
6,739
     
6,668
 
Deferred Tax Asset
   
991
     
1,601
 
Other Real Estate Owned
   
540
     
540
 
Other Assets
   
456
     
884
 
                 
Total Assets
 
$
411,833
   
$
426,606
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
LIABILITIES
               
Deposits
 
$
342,225
   
$
329,045
 
Advances from Borrowers for Taxes and Insurance
   
314
     
698
 
Short-term Federal Home Loan Bank advances
   
10,000
     
37,000
 
Long-term Federal Home Loan Bank advances
   
11,774
     
11,907
 
Other Borrowings
   
350
     
--
 
Other Accrued Expenses and Liabilities
   
1,238
     
1,710
 
                 
                               Total Liabilities
   
365,901
     
380,360
 
                 
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; 1,911,927 and 1,953,066 Shares Issued
   and Outstanding at December 31, 2017 and June 30, 2017, Respectively
   
23
     
23
 
Additional Paid-in Capital
   
34,874
     
34,516
 
Unearned ESOP Stock
   
(1,158
)
   
(1,215
)
Unearned RRP Trust Stock
   
(22
)
   
(46
)
Retained Earnings
   
12,806
     
13,320
 
Accumulated Other Comprehensive Income
   
(591
)
   
(352
)
                 
Total Stockholders' Equity
   
45,932
     
46,246
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
411,833
   
$
426,606
 
 
See accompanying notes to unaudited consolidated financial statements.
 
1

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
   
For the Three Months Ended
December 31,
   
For the Six Months Ended
December 31,
 
   
2017
   
2016
   
2017
   
2016
 
   
(In Thousands, Except per Share Data)
 
INTEREST INCOME
                       
Loans, Including Fees
 
$
4,280
   
$
3,794
   
$
8,564
   
$
7,688
 
Investment Securities
   
12
     
8
     
23
     
13
 
Mortgage-Backed Securities
   
268
     
252
     
528
     
444
 
Other Interest-Earning Assets
   
27
     
8
     
65
     
12
 
Total Interest Income
   
4,587
     
4,062
     
9,180
     
8,157
 
                                 
INTEREST EXPENSE
                               
Deposits
   
738
     
563
     
1,445
     
1,103
 
Federal Home Loan Bank Borrowings
   
117
     
89
     
261
     
184
 
Other Bank Borrowings
   
1
     
5
     
1
     
8
 
Total Interest Expense
   
856
     
657
     
1,707
     
1,295
 
Net Interest Income
   
3,731
     
3,405
     
7,473
     
6,862
 
                                 
PROVISION FOR LOAN LOSSES
   
200
     
300
     
500
     
600
 
Net Interest Income after Provision for Loan Losses
   
3,531
     
3,105
     
6,973
     
6,262
 
                                 
NON-INTEREST INCOME
                               
Gain on Sale of Loans
   
430
     
587
     
1,035
     
1,385
 
     Gain on Sale of Real Estate
   
(1
)
   
-
     
(1
)
   
110
 
     Gain on Sale of Securities
   
-
     
-
     
94
     
-
 
Income on Bank Owned Life Insurance
   
35
     
37
     
71
     
74
 
     Service Charges on Deposit Accounts
   
221
     
184
     
437
     
347
 
Other Income
   
12
     
13
     
29
     
23
 
Total Non-Interest Income
   
697
     
821
     
1,665
     
1,939
 
                                 
NON-INTEREST EXPENSE
                               
Compensation and Benefits
   
1,581
     
1,737
     
3,296
     
3,459
 
Occupancy and Equipment
   
361
     
311
     
671
     
618
 
Data Processing
   
165
     
159
     
332
     
314
 
Audit and Examination Fees
   
77
     
81
     
126
     
133
 
Franchise and Bank Shares Tax
   
103
     
106
     
201
     
201
 
Advertising
   
30
     
94
     
70
     
166
 
Legal Fees
   
143
     
147
     
289
     
228
 
Loan and Collection
   
73
     
49
     
153
     
148
 
Deposit Insurance Premium
   
40
     
20
     
68
     
65
 
Other Expense
   
182
     
142
     
380
     
289
 
Total Non-Interest Expense
   
2,755
     
2,846
     
5,586
     
5,621
 
Income Before Income Taxes
   
1,473
     
1,080
     
3,052
     
2,580
 
                                 
PROVISION FOR INCOME TAX EXPENSE
   
1,112
     
317
     
1,683
     
815
 
Net Income
 
$
361
   
$
763
   
$
1,369
   
$
1,765
 
EARNINGS PER SHARE:
                               
Basic
 
$
0.20
   
$
0.42
   
$
0.76
   
$
0.97
 
Diluted
 
$
0.19
   
$
0.40
   
$
0.72
   
$
0.94
 
DIVIDENDS DECLARED
 
$
0.12
   
$
0.09
   
$
0.24
   
$
0.18
 

 
See accompanying notes to unaudited consolidated financial statements.
2

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

   
For the Three Months Ended
December 31,
   
For the Six Months Ended
December 31,
 
   
2017
   
2016
   
2017
   
2016
 
   
(In Thousands)
   
(In Thousands)
 
                         
Net Income
 
$
361
   
$
763
   
$
1,369
   
$
1,765
 
                                 
Other Comprehensive Loss, Net of Tax
                               
   Unrealized Holding Loss on Securities Available-for-Sale,
     Net of Tax of $78 and $124 in 2017 and $220 and $322 in 2016
   
(153
)
   
(427
)
   
(239
)
   
(625
)
                                 
        Total Comprehensive Income
 
$
208
   
$
336
   
$
1,130
   
$
1,140
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.
3

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED DECEMBER 31, 2017 AND 2016
(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, 2016
 
$
23
   
$
33,863
   
$
(1,331
)
 
$
(265
)
 
$
11,018
   
$
84
   
$
43,392
 
                                                         
Net Income
   
--
     
--
     
--
     
--
     
1,765
     
--
     
1,765
 
                                                         
Changes in Unrealized Gain
    on Securities Available-for-
    Sale, Net of Tax Effects
   
--
     
--
     
--
     
--
     
--
     
(625
)
   
(625
)
                                                         
RRP Shares Earned
   
--
     
--
     
--
     
24
     
--
     
--
     
24
 
                                                         
Stock Options Vested
   
--
     
146
     
--
     
--
     
--
     
--
     
146
 
                                                         
Common Stock Issuance for
   Share Awards Earned 
 
--
     
138
     
--
     
--
     
--
     
--
     
138
 
                                                         
Common Stock Issuance for
   Stock Option Exercises 
 
--
     
39
     
--
     
--
     
--
     
--
     
39
 
                                                         
ESOP Compensation Earned
   
--
     
79
     
58
     
--
     
--
     
--
     
137
 
                                                         
Company Stock Purchased
   
--
     
--
     
--
     
--
     
(525
)
   
--
     
(525
)
                                                         
Dividends Declared
   
--
     
--
     
--
     
--
     
(353
)
   
--
     
(353
)
                                                         
BALANCE – December 31, 2016 
$
23
   
$
34,265
   
$
(1,273
)
 
$
(241
)
 
$
11,905
   
$
(541
)
 
$
44,138
 
                                                         
BALANCE – June 30, 2017
 
$
23
   
$
34,516
   
$
(1,215
)
 
$
(46
)
 
$
13,320
   
$
(352
)
 
$
46,246
 
                                                         
Net Income
   
--
     
--
     
--
     
--
     
1,369
     
--
     
1,369
 
                                                         
Changes in Unrealized Gain
    on Securities Available-for-
    Sale, Net of Tax Effects
   
--
     
--
     
--
     
--
     
--
     
(239
)
   
(239
)
                                                         
RRP Shares Earned
   
--
     
--
     
--
     
24
     
--
     
--
     
24
 
                                                         
Stock Options Vested
   
--
     
68
     
--
     
--
     
--
     
--
     
68
 
                                                         
Common Stock Issuance for
   Stock  Option Exercises 
 
--
     
191
     
--
     
--
     
--
     
--
     
191
 
                                                         
ESOP Compensation Earned
   
--
     
99
     
57
     
--
     
--
     
--
     
156
 
                                                         
Company Stock Purchased
   
--
     
--
     
--
     
--
     
(1,417
)
   
--
     
(1,417
)
                                                         
Dividends Declared
   
--
     
--
     
--
             
(466
)
   
--
     
(466
)
                                                         
BALANCE – December 31, 2017 
$
23
   
$
34,874
   
$
(1,158
)
 
$
(22
)
 
$
12,806
   
$
(591
)
 
$
45,932
 

 
 
 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.
4

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

        
Six Months Ended
 
        
December 31,
 
   
2017
   
2016
 
        
(In Thousands)
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net Income
 
$
1,369
   
$
1,765
 
    Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
               
Net Amortization and Accretion on Securities
   
96
     
18
 
Gain/(Loss) on Sale of Real Estate
   
1
     
(110
)
Gain on Sale of Loans
   
(1,035
)
   
(1,385
)
Gain on Sale of Securities
   
(94
)
   
--
 
Amortization of Deferred Loan Fees
   
(72
)
   
(31
)
Depreciation of Premises and Equipment
   
254
     
247
 
ESOP Expense
   
156
     
137
 
Stock Option Expense
   
68
     
146
 
Recognition and Retention Plan Expense
   
14
     
116
 
Share Awards Expense
   
68
     
69
 
Deferred Income Tax
   
610
     
(252
)
Provision for Loan Losses
   
500
     
600
 
Increase in Cash Surrender Value on Bank Owned Life Insurance
   
(71
)
   
(74
)
Bad Debt Recovery
   
5
     
8
 
Changes in Assets and Liabilities:
               
Loans Held-for-Sale – Originations and Purchases
   
(44,573
)
   
(58,028
)
Loans Held-for-Sale – Sale and Principal Repayments
   
56,531
     
60,402
 
Accrued Interest Receivable
   
(79
)
   
10
 
Other Operating Assets
   
428
     
(40
)
Other Operating Liabilities
   
(472
)
   
(305
)
                 
Net Cash Provided by Operating Activities
   
13,704
     
3,293
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Loan Originations and Purchases, Net of Principal Collections
   
(3,920
)
   
(6,950
)
Deferred Loan Fees Collected
   
169
     
86
 
Acquisition of Premises and Equipment
   
(114
)
   
(241
)
Proceeds from Sale of Real Estate
   
--
     
423
 
Activity in Available-for-Sale Securities:
               
Principal Payments on Mortgage-Backed Securities
   
4,479
     
7,178
 
Sale of Securities
   
3,555
     
--
 
Purchases of Securities
   
(4,947
)
   
--
 
Activity in Held-to-Maturity Securities:
               
Principal Payments on Mortgage-Backed Securities
   
1,466
     
591
 
Purchases of Securities
   
(1,174
)
   
(22,793
)
                 
Net Cash Used In  Investing Activities
   
(486
)
   
(21,706
)
                 

 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.
5

HOME FEDERAL BANCORP, INC. OF LOUISIANA
 
   
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 
(Unaudited)
 
   
   
Six Months Ended
 
   
December 31,
 
   
2017
   
2016
 
   
(In Thousands)
 
CASH FLOWS FROM FINANCING ACTIVITIES
     
Net Increase in Deposits
 
$
13,180
   
$
22,832
 
Proceeds from Federal Home Loan Bank Advances
   
61,675
     
512,100
 
Repayments of Advances from Federal Home Loan Bank
   
(88,808
)
   
(506,727
)
Net Decrease in Advances from Borrowers for Taxes and Insurance
   
(384
)
   
(363
)
Dividends Paid
   
(466
)
   
(353
)
Company Stock Purchased
   
(1,417
)
   
(525
)
Proceeds from Stock Options Exercised
   
191
     
39
 
Proceeds from other Bank Borrowings
   
350
     
300
 
Recognition and Retention Plan Share Distributions
   
--
     
--
 
                 
Net Cash Provided (Used In) Financing Activities
   
(15,679
)
   
27,303
 
                 
NET INCREASE IN CASH AND CASH EQUIVALENTS
   
(2,461
)
   
8,890
 
                 
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
   
11,905
     
4,756
 
                 
CASH AND CASH EQUIVALENTS - END OF PERIOD
 
$
9,444
   
$
13,646
 
                 
SUPPLEMENTARY CASH FLOW INFORMATION
               
Interest Paid on Deposits and Borrowed Funds
 
$
1,614
   
$
1,288
 
Income Taxes Paid
   
1,101
     
1,083
 
Market Value Adjustment for Loss on Securities Available-for-Sale
   
(363
)
   
(947
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.
6

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
1. Summary of Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Home Federal Bancorp, Inc. of Louisiana (the "Company") and its subsidiary, Home Federal Bank ("Home Federal Bank" or the "Bank").  These consolidated financial statements were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the six month period ended December 31, 2017 are not necessarily indicative of the results which may be expected for the fiscal year ending June 30, 2018.

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

In accordance with the subsequent events topic of the ASC, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements.  The effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of December 31, 2017.  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 home office, located in Caddo and Bossier Parishes, Louisiana.  The area served by the Bank is primarily the Shreveport-Bossier City metropolitan area; however, loan and deposit customers are found dispersed in a wider geographical area covering much of northwest Louisiana. As of December 31, 2017, 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 fair value of the collateral of the loan.  If the 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.  A loan is considered a troubled debt restructuring ("TDR") if the Company, for economic or legal reasons related to a debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider.  Concessions granted under a TDR typically involve a temporary or permanent reduction in payments or interest rate or an extension of a loan's stated maturity date at less than a current market rate of interest.  Loans identified as TDRs are designated as impaired.

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 known and inherent losses in the existing loan portfolio both probable and reasonable to estimate.

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. Estimated useful lives are as follows:

Buildings and Improvements 10 - 40 Years
Furniture and Equipment          3 - 10 Years

Bank-Owned Life Insurance

The Company has purchased life insurance contracts on the lives of certain key employees.  The Bank is the beneficiary of these policies.  These contracts are reported at their cash surrender value, and changes in the cash surrender value are included in non-interest income.
 
 
 
 
 
 
 
9

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Allowance for Loan Losses (continued)

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.

The Company follows the provisions of the Income Taxes Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740.  ASC 740 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on various related matters such as derecognition, interest, penalties, and disclosures required.  The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

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.

Earnings per Share

Earnings per share are computed based upon the weighted average number of common shares outstanding during the period.

Non-Direct Response Advertising

The Company expenses all advertising costs, except for direct-response advertising, as incurred.  Non-direct response advertising costs were $70,000 and $166,000 for the six months ended December 31, 2017 and 2016, respectively.

In the event the Company incurs expense for material direct-response advertising, it will be amortized over the estimated benefit period.  Direct-response advertising consists of advertising whose primary purpose is to elicit sales to customers who could be shown to have responded specifically to the advertising and results in probable future benefits.  For the six months ended December 31, 2017 and 2016, the Company did not incur any amount of direct-response advertising.

Stock-Based Compensation

GAAP requires all share-based payments to employees, including grants of employee stock options and recognition and retention share awards, to be recognized as expense in the statement of operations based on their fair values.  The amount of compensation is measured at the fair value of the options or recognition and retention share awards when granted, and this cost is expensed over the required service period, which is normally the vesting period of the options or recognition and retention awards.  This guidance applies to awards granted or modified after January 1, 2006 or any unvested awards outstanding prior to that date.
 
 
 
 
 
 
10

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Reclassification

Certain financial statement balances included in the prior year consolidated financial statements have been reclassified to conform to the current period presentation.

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 balance sheets along with net income, they are components of comprehensive income (loss).

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606).  The amendments in ASU 2014-09 supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance.  The general principle of ASU 2014-09 requires an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration of which the entity expects to be entitled in exchange for those goods or services.  The guidance sets forth a five-step approach to be utilized for revenue recognition.  In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 making it effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  In April 2016, the FASB issued ASU 2016-10 which does not change the core principle of the guidance in Topic 606.  The amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas.  In May 2016, the FASB issued ASU 2016-12 which does not change the core principle of the guidance in Topic 606.  The amendments in this Update affect only certain narrow aspects of Topic 606.  Management is currently assessing the impact to the Company's consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities to be classified as non-current on the balance sheet.  This update is effective for fiscal years beginning after December 15, 2017.  The guidance may be adopted prospectively or retrospectively, and early adoption is permitted.  The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments.  The amendments in this Update supersede the guidance to classify equity securities with readily determinable fair values into different categories and require equity securities to be measured at fair value with changes in the fair value recognized through net income.  The amendments allow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of impairment.  The amendments in this Update also simplify the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period.  In addition, the amendments in this Update exempt all entities that are not public business entities from disclosing fair value information for financial instruments measured at amortized cost.  In addition, for public business entities, the amendments supersede the requirement to disclose the methods and significant assumptions used in calculating the fair value of financial instruments required to be disclosed for financial instruments measured at amortized cost on the balance sheet.  The amendments in this Update require public business entities that are required to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion consistent with Topic 820, Fair Value Measurement.
 
 
 
11

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

The provisions within this Update require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option.  This amendment excludes from net income gains or losses that the entity may not realize because those financial liabilities are not usually transferred or settled at their fair values before maturity.  The amendments in this Update require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or in the accompanying notes to the financial statements.

For public business entities, the amendments in ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases.  From the lessee's perspective, the new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.  Leases will be classified as either finance or operating, with classification affecting pattern of expense recognition in the income statement for a lessee.

The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements, with certain practical expedients available.  The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  This Update is being issued as part of the Simplification Initiative.  The areas of simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  Some areas only apply to nonpublic entities.  For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.  For public business entities that are SEC filers, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods with those fiscal years.  The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
12

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Recent Accounting Pronouncements (continued)

In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323).   This Update addresses and codifies the practical considerations and application of the required disclosures under SAB Topic 11.M for the implementation of ASU 2014-09, Revenue from Contracts with Customers (Topic 606); ASU 2016-02, Leases (Topic 842); and ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). The SEC Staff has emphasized on a number of occasions, including the December 2016 AICPA National Conference on Current SEC and PCAOB Developments, the requirements to disclose the potential material effects of newly issued standards, and the importance of providing investors with this information. Such disclosures should explain the impact the new standard is expected to have on the financial statements, and how the adoption of the new standard will affect comparability.  Entities should discuss both quantitative and qualitative information as available when assessing implementation of a new standard.  This ASU was effective immediately for public business entities.

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20).  This Update was issued in response to diversity in practice in the amortization period for premiums of callable debt securities and in how the potential for exercise of a call is factored into current impairment assessments.  As such, these amendments reduce the amortization period for certain callable debt securities carried at a premium and require the premium to be amortized over the period not to exceed the earliest call date.  These amendments do not apply to securities carried at a discount.  The effective date of this Update is for fiscal years beginning on or after December 15, 2018. The Company does not expect ASU 2017-08 to have a material impact on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718).  The amendments in this ASU provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in FASB ASC 718.  The effective date of this Update is for fiscal years beginning after December 15, 2018.  Early adoption is permitted, including adoption in an interim period.  The Company does not expect ASU 2017-09 to have a material impact on its consolidated financial statements.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
2. Securities
 
The amortized cost and fair value of securities with gross unrealized gains and losses follows:
 
   
December 31, 2017
 
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
 
 
Cost
   
Gains
   
Losses
   
Value
 
     (In Thousands)  
Securities Available-for-Sale      
   
 
 
Debt Securities
                       
  FHLMC Mortgage-Backed Certificates
 
$
8,251
   
$
1
   
$
434
   
$
7,818
 
  FNMA Mortgage-Backed Certificates
   
14,391
     
1
     
354
     
14,038
 
  GNMA Mortgage-Backed Certificates
   
11,802
     
2
     
163
     
11,641
 
                                 
          Total Debt Securities
   
34,444
     
4
     
951
     
33,497
 
                                 
    Total Securities Available-for-Sale
 
$
34,444
   
$
4
   
$
951
   
$
33,497
 
                                 
Securities Held-to-Maturity
                               
                                 
Debt Securities
                               
  GNMA Mortgage-Backed Certificates
 
$
1,171
   
$
-
   
$
20
   
$
1,151
 
  FNMA Mortgage-Backed Certificates
   
24,081
     
-
     
474
     
23,607
 
           Total Debt Securities
   
25,252
     
-
     
494
     
24,758
 
                                 
Equity Securities (Non-Marketable)
                               
  25,720 Shares – Federal Home Loan Bank
   
2,572
     
-
     
-
     
2,572
 
  630 Shares – First National Bankers Bankshares, Inc.
   
250
     
-
     
-
     
250
 
                                 
          Total Equity Securities
   
2,822
     
-
     
-
     
2,822
 
                                 
    Total Securities Held-to-Maturity
 
$
28,074
   
$
-
   
$
494
   
$
27,580
 
 
              June 30, 2017  
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
 
 
Cost
   
Gains
   
Losses
   
Value
 
            (In Thousands)   
Securities Available-for-Sale                        
                         
Debt Securities
                       
  FHLMC Mortgage-Backed Certificates
 
$
9,140
   
$
5
   
$
297
   
$
8,848
 
  FNMA Mortgage-Backed Certificates
   
19,986
     
256
     
285
     
19,957
 
  GNMA Mortgage-Backed Certificates
   
8,342
     
3
     
215
     
8,130
 
                                 
          Total Debt Securities
   
37,468
     
264
     
797
     
36,935
 
                                 
          Total Securities Available-for-Sale
 
$
37,468
   
$
264
   
$
797
   
$
36,935
 
                                 
Securities Held-to-Maturity
                               
                                 
Debt Securities
                               
  FNMA Mortgage-Backed Securities
 
$
25,558
   
$
2
   
$
370
   
$
25,190
 
                                 
Equity Securities (Non-Marketable)
                               
  25,488 Shares – Federal Home Loan Bank
   
2,549
     
--
     
--
     
2,549
 
  630 Shares – First National Bankers Bankshares, Inc.
   
250
     
--
     
--
     
250
 
                                 
          Total Equity Securities
   
2,799
     
--
     
--
     
2,799
 
                                 
          Total Securities Held-to-Maturity
 
$
28,357
   
$
2
   
$
370
   
$
27,989
 
 
 
14

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
2.   Securities (continued)
 
The amortized cost and fair value of securities by contractual maturity at December 31, 2017 follows:

        Available-for-Sale         Available-for-Sale  
   
Amortized
   
Fair
   
Amortized
   
Fair
 
   
Cost
   
Value
   
Cost
   
Value
 
            (In Thousands)         
                         
Debt Securities
                       
    Within One Year or Less
 
$
4
   
$
4
   
$
--
   
$
--
 
    One through Five Years
   
40
     
40
     
--
     
--
 
    After Five through Ten Years
   
39
     
39
     
--
     
--
 
    Over Ten Years
   
34,361
     
33,414
     
25,252
     
24,758
 
     
34,444
     
33,497
     
25,252
     
24,758
 
                                 
Other Equity Securities
   
--
     
--
     
2,822
     
2,822
 
                                 
   Total
 
$
34,444
   
$
33,497
   
$
28,074
   
$
27,580
 

Securities available-for-sale totaling $3.5 million were sold for $3.6 million during the six months ending December 31, 2017 resulting in a profit on sale of securities of $94,000.

The following tables show information pertaining to gross unrealized losses on securities available-for-sale at December 31, 2017 and June 30, 2017 aggregated by investment category and length of time that individual securities have been in a continuous loss position.

   
December 31, 2017
 
   
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
 
$
1
   
$
48
   
$
950
   
$
28,438
 
Marketable Equity Securities
   
--
     
--
     
--
     
--
 
                                 
        Total Securities Available-for-Sale
 
$
1
   
$
48
   
$
950
   
$
28,438
 
                                 

   
June 30, 2017
 
   
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
 
$
144
   
$
10,278
   
$
653
   
$
21,719
 
Marketable Equity Securities
   
--
     
--
     
--
     
--
 
                                 
        Total Securities Available-for-Sale
 
$
144
   
$
10,278
   
$
653
   
$
21,719
 
 

 
15

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

The unrealized losses on the Company's investment in mortgage-backed securities at December 31, 2017 and June 30, 2017 were caused by interest rate changes.  The contractual cash flows of these investments are guaranteed by agencies of the U.S. government.  Accordingly, it is expected that these securities would not be settled at a price less than the amortized cost of the Company's investment.  Because the decline in market value is attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2017.

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.

At December 31, 2017, securities with a carrying value of $246,000 were pledged to secure public deposits, and securities and mortgage loans with a carrying value of $146.5 million were pledged to secure FHLB advances.

3. Loans Receivable

Loans receivable are summarized as follows:

   
 
December 31, 2017
   
June 30, 2017
 
     
(In Thousands)
 
Loans Secured by Mortgages on Real Estate
           
One-to-Four Family Residential
 
$
129,053
   
$
125,306
 
Commercial
   
73,044
     
77,945
 
Multi-Family Residential
   
30,844
     
21,281
 
Land
   
20,657
     
25,038
 
Construction
   
8,724
     
9,529
 
Equity and Second Mortgage
   
1,609
     
1,710
 
Equity Lines of Credit
   
20,343
     
20,976
 
                 
Total Mortgage Loans
   
284,274
     
281,785
 
                 
Commercial Loans
   
34,979
     
34,429
 
Consumer Loans
               
Loans on Savings Accounts
   
401
     
420
 
Other Consumer Loans
   
112
     
63
 
                 
Total Consumer Loans
   
513
     
483
 
Total Loans
   
319,766
     
316,697
 
                 
Less:   Allowance for Loan Losses
   
(3,383
)
   
(3,729
)
      Unamortized Loan Fees
   
(293
)
   
(196
)
                 
Net Loans Receivable
 
$
316,090
   
$
312,772
 
 
 
 
 
 
 
16

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

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

   
Six Months Ended December 31,
 
 
 
2017
   
2016
 
   
(In Thousands)
 
             
Balance - Beginning of Period
 
$
3,729
   
$
2,845
 
Provision for Loan Losses
   
500
     
600
 
Loan Charge-Offs
   
(851
)
   
(14
)
Recoveries
   
5
     
8
 
     Balance - End of Period
 
$
3,383
   
$
3,439
 

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.

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:

Pass - Loans classified as pass are well protected by the current net worth or paying capacity of the obligor or by the fair value, less cost to acquire and sell the underlying collateral in a timely manner.

Pass Watch - Loans are considered marginal, meaning some weakness has been identified which could cause future impairment of repayment. However, these relationships are currently protected from any apparent loss by collateral.

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.
 
 
 
 
 
17

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Credit Quality Indicators (continued)

The following tables present the grading of loans, segregated by class of loans, as of December 31, 2017 and June 30, 2017:

          Special                    
December 31, 2017   Pass     Mention     Substandard     Doubtful     Total  
    (In Thousands)  
Real Estate Loans:
                             
One-to-Four Family Residential   $ 127,828     $ -     $ 1,225     $ -     $ 129,053  
  Commercial
   
68,833
     
-
     
4,211
     
-
     
73,044
 
  Multi-Family Residential
   
30,844
     
-
     
-
     
-
     
30,844
 
   Land
   
20,657
     
-
     
-
     
-
     
20,657
 
  Construction
   
8,724
     
-
     
-
     
-
     
8,724
 
  Equity and Second Mortgage
   
1,570
     
-
     
39
     
-
     
1,609
 
  Equity Lines of Credit
   
20,343
     
-
     
-
     
-
     
20,343
 
Commercial Loans
   
32,903
     
-
     
2,076
     
-
     
34,979
 
Consumer Loans
   
513
     
-
     
-
     
-
     
513
 
     Total
 
$
312,215
   
$
-
   
$
7,551
   
$
-
   
$
319,766
 
                                         

 
June 30, 2017
 
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Total
 
   
(In Thousands)
 
Real Estate Loans:
                             
  One-to-Four Family Residential
 
$
124,450
   
$
303
   
$
553
   
$
--
   
$
125,306
 
  Commercial
   
77,690
     
--
     
255
     
--
     
77,945
 
  Multi-Family Residential
   
21,281
     
--
     
--
     
--
     
21,281
 
  Land
   
24,915
     
123
     
--
     
--
     
25,038
 
  Construction
   
9,232
     
297
     
--
     
--
     
9,529
 
  Equity and Second Mortgage
   
1,710
     
--
     
--
     
--
     
1,710
 
  Equity Lines of Credit
   
20,976
     
--
     
--
     
--
     
20,976
 
Commercial Loans
   
31,926
     
--
     
2,503
     
--
     
34,429
 
Consumer Loans
   
483
     
--
     
--
     
--
     
483
 
                                         
     Total
 
$
312,663
   
$
723
   
$
3,311
   
$
--
   
$
316,697
 
                                         

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.
 
 
 
 
 
 
 
 

18

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Credit Quality Indicators (continued)

The following tables present an aging analysis of past due loans, segregated by class of loans, as December 31, 2017 and June 30, 2017:
 
 
 
 
 
December 31, 2017
 
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
$
2,387
   
$
1,380
   
$
1,305
   
$
5,072
   
$
123,981
   
$
129,053
   
$
--
 
  Commercial
   
--
     
--
     
--
     
--
     
73,044
     
73,044
     
--
 
  Multi-Family Residential
   
--
     
--
     
--
     
--
     
30,844
     
30,844
     
--
 
  Land
   
--
     
--
     
--
     
--
     
20,657
     
20,657
     
--
 
  Construction
   
--
     
--
     
--
     
--
     
8,724
     
8,724
     
--
 
  Equity and Second Mortgage
   
--
     
--
     
--
     
--
     
1,609
     
1,609
     
--
 
  Equity Lines of Credit
   
209
     
30
     
19
     
258
     
20,085
     
20,343
     
--
 
Commercial Loans
   
--
     
--
     
1,619
     
1,619
     
33,360
     
34,979
     
--
 
Consumer Loans
   
--
     
--
     
--
     
--
     
513
     
513
     
--
 
 
       Total
 
$
2,596
   
$
1,410
   
$
2,943
   
$
6,949
   
$
312,817
   
$
319,766
   
$
--  


 June 30, 2017
 
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
 
$
1,650
   
$
350
   
$
662
   
$
2,662
   
$
122,644