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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)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended:
September 30, 2018
 
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.   Yes ☒   No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes ☒   No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, 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
 ☒
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 ☐    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 November 13, 2018: The registrant had 1,879,702 shares 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
28
     
Item 3:
Quantitative and Qualitative Disclosures About Market Risk
34
     
Item 4:
Controls and Procedures
34
     
PART II
OTHER INFORMATION
 
     
Item 1:
Legal Proceedings
34
     
Item 1A:
Risk Factors
34
     
Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
35
     
Item 3:
Defaults Upon Senior Securities
35
     
Item 4:
Mine Safety Disclosures
35
     
Item 5:
Other Information
35
     
Item 6:
Exhibits
35
     
SIGNATURES    
 
   
 
 

 
HOME FEDERAL BANCORP, INC. OF LOUISIANA
 
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
 
   
September 30, 2018
   
June 30, 2018
 
       (In Thousands)   
ASSETS
           
Cash and Cash Equivalents (Includes Interest-Bearing Deposits with Other Banks of $9,974 and $11,974 for
September 30, 2018 and June 30, 2018, Respectively)
 
$
13,340
   
$
15,867
 
Securities Available-for-Sale
   
31,329
     
29,324
 
Securities Held-to-Maturity (Fair Value of $26,409 and $27,818, Respectively)
   
27,692
     
28,888
 
Loans Held-for-Sale
   
4,899
     
6,762
 
Loans Receivable, Net of Allowance for Loan Losses of $3,497 and $3,425, Respectively
   
326,621
     
317,493
 
Accrued Interest Receivable
   
1,193
     
1,146
 
Premises and Equipment, Net
   
12,752
     
12,243
 
Bank Owned Life Insurance
   
6,843
     
6,808
 
Deferred Tax Asset
   
1,144
     
1,102
 
Foreclosed Assets
   
1,826
     
1,177
 
Other Assets
   
689
     
840
 
                 
Total Assets
 
$
428,328
   
$
421,650
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
LIABILITIES
               
Deposits
 
$
370,745
   
$
360,260
 
Advances from Borrowers for Taxes and Insurance
   
859
     
725
 
Short-term Federal Home Loan Bank advances
   
286
     
5,282
 
Long-term Federal Home Loan Bank advances
   
6,282
     
6,355
 
Other Borrowings
   
--
     
300
 
Other Accrued Expenses and Liabilities
   
2,197
     
1,691
 
                 
Total Liabilities
    380,369       374,613  
                 
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; 1,894,105 and 1,894,081 Shares Issued and
      Outstanding at September 30, 2018 and June 30, 2018, Respectively
   
23
     
23
 
Additional Paid-in Capital
   
35,246
     
35,057
 
Unearned ESOP Stock
   
(1,071
)
   
(1,100
)
Unearned RRP Trust Stock
   
2
     
(22
)
Retained Earnings
   
14,880
     
14,125
 
Accumulated Other Comprehensive Income
   
(1,121
)
   
(1,046
)
                 
Total Stockholders' Equity
   
47,959
     
47,037
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
428,328
   
$
421,650
 
 
 
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,
 
   
2018
   
2017
 
   
(In Thousands, Except per Share Data)
 
INTEREST INCOME
           
Loans, Including Fees
 
$
4,494
   
$
4,284
 
Investment Securities
   
14
     
11
 
Mortgage-Backed Securities
   
298
     
260
 
Other Interest-Earning Assets
   
80
     
38
 
Total Interest Income
   
4,886
     
4,593
 
                 
INTEREST EXPENSE
               
Deposits
   
929
     
707
 
     Other Borrowings
   
1
     
--
 
Federal Home Loan Bank Borrowings
   
68
     
144
 
Total Interest Expense
   
998
     
851
 
Net Interest Income
   
3,888
     
3,742
 
                 
PROVISION FOR LOAN LOSSES
   
250
     
300
 
Net Interest Income after Provision for Loan Losses
   
3,638
     
3,442
 
                 
NON-INTEREST INCOME
               
     Gain on Sale of Fixed Asset
   
3
     
--
 
     Gain on Sale of Securities
   
--
     
94
 
Gain on Sale of Loans
   
392
     
605
 
Income on Bank Owned Life Insurance
   
35
     
36
 
     Service Charges on Deposit Accounts
   
227
     
216
 
Other Income
   
13
     
17
 
Total Non-Interest Income
   
670
     
968
 
                 
NON-INTEREST EXPENSE
               
Compensation and Benefits
   
1,616
     
1,714
 
Occupancy and Equipment
   
320
     
310
 
Data Processing
   
150
     
167
 
Audit and Examination Fees
   
54
     
50
 
Franchise and Bank Shares Tax
   
100
     
98
 
Advertising
   
58
     
40
 
Legal Fees
   
139
     
146
 
Loan and Collection
   
62
     
80
 
Deposit Insurance Premium
   
30
     
28
 
 Valuation Adjustment Real Estate Owned
   
75
     
--
 
Other Expense
   
172
     
198
 
Total Non-Interest Expense
   
2,776
     
2,831
 
Income Before Income Taxes
   
1,532
     
1,579
 
                 
PROVISION FOR INCOME TAX EXPENSE
   
314
     
571
 
Net Income
 
$
1,218
   
$
1,008
 
EARNINGS PER COMMON SHARE:
               
Basic
 
$
0.68
   
$
0.55
 
Diluted
 
$
0.63
   
$
0.53
 
DIVIDENDS DECLARED
 
$
0.14
   
$
0.12
 
 
See accompanying notes to unaudited consolidated financial statements.
 
2

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

   
For the Three Months Ended
September 30,
 
   
2018
   
2017
 
   
(In Thousands)
 
Net Income
 
$
1,218
   
$
1,008
 
                 
Other Comprehensive Loss, Net of Tax
               
   Unrealized Holding Loss on Securities Available-for-Sale,  Net of Tax of $20 in 2018 and $45 in 2017
   
(75
)
   
(86
)
                 
        Total Comprehensive Income
 
$
1,143
   
$
922
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2018 AND 2017
(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, 2017
 
$
23
   
$
34,516
   
$
(1,215
)
 
$
(46
)
 
$
13,320
   
$
(352
)
 
$
46,246
 
                                                         
Net Income
   
--
     
--
     
--
     
--
     
1,008
     
--
     
1,008
 
                                                         
Changes in Unrealized Gain
    on Securities Available-for-
    Sale, Net of Tax Effects
   
--
     
--
     
--
     
--
     
--
     
(86
)
   
(86
)
                                                         
RRP Shares Earned
   
--
     
--
     
--
     
24
     
--
     
--
     
24
 
                                                         
Stock Options Vested
   
--
     
34
     
--
     
--
     
--
     
--
     
34
 
                                                         
Common Stock Issuance for Stock
    Option Exercises
   
--
     
13
     
--
     
--
     
--
     
--
     
13
 
                                                         
ESOP Compensation Earned
   
--
     
48
     
29
     
--
     
--
     
--
     
77
 
                                                         
Company Stock Purchased
   
--
     
--
     
--
     
--
     
(719
)
   
--
     
(719
)
                                                         
Dividends Declared
   
--
     
--
     
--
     
--
     
(234
)
   
--
     
(234
)
                                                         
BALANCE – September 30, 2017
 
$
23
   
$
34,611
   
$
(1,186
)
 
$
(22
)
 
$
13,375
     
(438
)
 
$
46,363
 
                                                         
BALANCE – June 30, 2018
 
$
23
   
$
35,057
   
$
(1,100
)
 
$
(22
)
 
$
14,125
   
$
(1,046
)
 
$
47,037
 
                                                         
Net Income
   
--
     
--
     
--
     
--
     
1,218
     
--
     
1,218
 
                                                         
Changes in Unrealized Gain
    on Securities Available-for-
    Sale, Net of Tax Effects
   
--
     
--
     
--
     
--
     
--
     
(75
)
   
(75
)
                                                         
RRP Shares Earned
   
--
     
--
     
--
     
24
     
--
     
--
     
24
 
                                                         
Stock Options Vested
   
--
     
34
     
--
     
--
     
--
     
--
     
34
 
                                                         
Common Stock Issuance for Stock
    Option Exercises
   
--
     
90
     
--
     
--
     
--
     
--
     
90
 
                                                         
ESOP Compensation Earned
   
--
     
65
     
29
     
--
     
--
     
--
     
94
 
                                                         
Company Stock Purchased
   
--
     
--
     
--
     
--
     
(198
)
   
--
     
(198
)
                                                         
Dividends Declared
   
--
     
--
     
--
     
--
     
(265
)
   
--
     
(265
)
                                                         
BALANCE – September 30, 2018
 
$
23
   
$
35,246
   
$
(1,071
)
 
$
2
   
$
14,880
   
$
(1.121
)
 
$
47,959
 

 
 
 
 
 
 
 
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,
 
   
2018
   
2017
 
       (In Thousands)   
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net Income
 
$
1,218
   
$
1,008
 
Adjustments to Reconcile Net Income to Net
               
Cash Provided by Operating Activities
               
Bad Debt Recovery
   
1
     
4
 
Net Amortization and Accretion on Securities
   
28
     
55
 
Gain on Sale of Loans
   
(392
)
   
(605
)
Gain on Sale of Securities
   
--
     
(94
)
Amortization of Deferred Loan Fees
   
(44
)
   
(26
)
Depreciation of Premises and Equipment
   
121
     
128
 
ESOP Expense
   
94
     
77
 
Stock Option Expense
   
34
     
34
 
Recognition and Retention Plan Expense
   
7
     
7
 
Deferred Income Tax
   
(42
)
   
(89
)
Valuation Adjustment Real Estate Owned
   
75
     
--
 
Provision for Loan Losses
   
250
     
300
 
Increase in Cash Surrender Value on Bank Owned Life Insurance
   
(35
)
   
(36
)
Share Awards Expense
   
34
     
34
 
Changes in Assets and Liabilities:
               
Loans Held-for-Sale – Originations and Purchases
   
(14,507
)
   
(25,285
)
Loans Held-for-Sale – Sale and Principal Repayments
   
16,762
     
31,279
 
Accrued Interest Receivable
   
(47
)
   
(27
)
Other Operating Assets
   
151
     
229
 
Other Operating Liabilities
   
506
     
722
 
                 
Net Cash Provided by Operating Activities
   
4,214
     
7,715
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Loan Originations and Purchases, Net of Principal Collections
   
(10,001
)
   
(8,796
)
Deferred Loan Fees Collected
   
7
     
115
 
Acquisition of Premises and Equipment
   
(705
)
   
101
 
Activity in Available-for-Sale Securities:
               
Principal Payments on Mortgage-Backed Securities
   
1,628
     
2,491
 
Purchases of Securities
   
(3,751
)
   
--
 
Sale of Securities
   
--
     
3,555
 
Activity in Held-to-Maturity Securities:
               
Principal Payments on Mortgage-Backed Securities
   
1,204
     
800
 
                 
Net Cash Used in Investing Activities
   
(11,618
)
   
(1,734
)
 
 
 
 
 
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,
 
   
2018
   
2017
 
   
(In Thousands)
 
CASH FLOWS FROM FINANCING ACTIVITIES
     
Net Increase in Deposits
 
$
10,485
   
$
4,456
 
Proceeds from Federal Home Loan Bank Advances
   
--
     
17,400
 
Repayments of Advances from Federal Home Loan Bank
   
(5,069
)
   
(31,466
)
Repayments of Other Borrowings
   
(300
)
   
--
 
Net Increase in Advances from Borrowers for Taxes and Insurance
   
134
     
211
 
Dividends Paid
   
(265
)
   
(234
)
Company Stock Purchased
   
(198
)
   
(719
)
Proceeds from Stock Options Exercised
   
90
     
13
 
                 
Net Cash Provided by (Used in) Financing Activities
   
4,877
     
(10,339
)
                 
NET DECREASE IN CASH AND CASH EQUIVALENTS
   
(2,527
)
   
(4,358
)
                 
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
   
15,867
     
11,905
 
                 
CASH AND CASH EQUIVALENTS - END OF PERIOD
 
$
13,340
   
$
7,547
 
                 
SUPPLEMENTARY CASH FLOW INFORMATION
               
Interest Paid on Deposits and Borrowed Funds
 
$
695
   
$
807
 
Income Taxes Paid
   
--
     
1
 
Market Value Adjustment for Loss on Securities Available-for-Sale
   
(95
)
   
(131
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2018 are not necessarily indicative of the results which may be expected for the fiscal year ending June 30, 2019.

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, 2018.  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 September 30, 2018, 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 basis 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 $58,000 and $40,000 for the three months ended September 30, 2018 and 2017, 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 three months ended September 30, 2018 and 2017, 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. 
 
 
 
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 minor aspects of Topic 606.  The adoption of this guidance did not have a material impact 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.

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.
 
 
 
 
11

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Recent Accounting Pronouncements (continued)

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 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.

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.

In November 2017, the FASB issued ASU 2017-14, Income Statement – Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606) (SEC Update).  This Update adds, amends, and supersedes SEC paragraphs of the ASC pursuant to Staff Accounting Bulletin No. 116 and SEC Release 33-10403.  This ASU is effective upon issuance.
 
 
 
 
 
 
 
 
12

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Recent Accounting Pronouncements (continued)

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220):  Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  On December 22, 2017, the U.S. Federal Government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Cuts and Jobs Act). The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act.  Consequently, the amendments in this Update eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users.  However, because the amendments in this Update only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected.  The amendments in this Update are affective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.  Early adoption of this Update is permitted, including adoption in any interim period (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance.  The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.  The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

In May 2018, the FASB issued ASU 2018-06, Codification Improvements to Topic 942, Financial Services – Depository and Lending.  The amendments in this Update supersede the guidance in Subtopic 942-740, Financial Services – Depository and Lending – Income Taxes, that is related to Circular 202 because that guidance has been rescinded by the Office of the Comptroller of the Currency (OCC) and is no longer relevant.  This ASU is effective upon issuance.

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718):  Improvements to Nonemployee Share-Based Payment Accounting.  Topic 718 improves several areas of nonemployee share-based payment accounting.  The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.  Early adoption is permitted, but no earlier than an entity's adoption on Topic 606.  The Company does expect ASU 2018-07 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:

   
September 30, 2018
 
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
 
 
Cost
   
Gains
   
Losses
   
Value
 
   (In Thousands)  
Securities Available-for-Sale      
     
Debt Securities
                       
  FHLMC Mortgage-Backed Certificates
 
$
9,119
   
$
2
   
$
628
   
$
8,493
 
  FNMA Mortgage-Backed Certificates
   
13,546
     
1
     
483
     
13,064
 
  GNMA Mortgage-Backed Certificates
   
10,083
     
1
     
312
     
9,772
 
                                 
          Total Debt Securities
   
32,748
     
4
     
1,423
     
31,329
 
                                 
          Total Securities Available-for-Sale
 
$
32,748
   
$
4
   
1,423
   
$
31,329
 
                                 
Securities Held-to-Maturity
                               
                                 
Debt Securities
                               
  GNMA Mortgage-Backed Certificates
 
$
1,154
   
$
--
   
$
56
   
$
1,098
 
  FNMA Mortgage-Backed Certificates
   
23,678
     
--
     
1,227
     
22,451
 
                                 
          Total Debt Securities
   
24,832
     
--
     
1,283
     
23,549
 
Equity Securities (Non-Marketable)
                               
  26,100 Shares – Federal Home Loan Bank
   
2,610
     
--
     
--
     
2,610
 
  630 Shares – First National Bankers Bankshares, Inc.
   
250
     
--
     
--
     
250
 
                                 
          Total Equity Securities
   
2,860
     
--
     
--
     
2,860
 
                                 
          Total Securities Held-to-Maturity
 
$
27,692
   
$
--
   
$
1,283
   
$
26,409
 

   
June 30, 2018
 
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
 
 
Cost
   
Gains
   
Losses
   
Value
 
 
(In Thousands)
 
Securities Available-for-Sale                        
                         
Debt Securities
                       
  FHLMC Mortgage-Backed Certificates
 
$
7,601
   
$
2
   
$
518
   
$
7,085
 
  FNMA Mortgage-Backed Certificates
   
12,465
     
1
     
554
     
11,912
 
  GNMA Mortgage-Backed Certificates
   
10,581
     
2
     
256
     
10,327
 
                                 
          Total Debt Securities
   
30,647
     
5
     
1,328
     
29,324
 
                                 
          Total Securities Available-for-Sale
 
$
30,647
   
$
5
   
$
1,328
   
$
29,324
 
                                 
Securities Held-to-Maturity
                               
                                 
Debt Securities
                               
  GNMA Mortgage-Backed Securities
 
$
1,160
   
$
--
   
$
45
   
$
1,115
 
  FNMA Mortgage-Backed Securities
   
24,882
     
--
     
1,025
     
23,857
 
                                 
          Total Debt Securities
   
26,042
     
--
     
1,070
     
24,972
 
                                 
Equity Securities (Non-Marketable)
                               
  25,959 Shares – Federal Home Loan Bank
   
2,596
     
--
     
--
     
2,596
 
  630 Shares – First National Bankers Bankshares, Inc.
   
250
     
--
     
--
     
250
 
                                 
          Total Equity Securities
   
2,846
     
--
     
--
     
2,846
 
                                 
          Total Securities Held-to-Maturity
 
$
28,888
   
$
--
   
$
1,070
   
$
27,818
 

 
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 September 30, 2018 follows:

   
Available-for-Sale
   
Held-to-Maturity
 
   
Amortized
   
Fair
   
Amortized
   
Fair
 
   
Cost
   
Value
   
Cost
   
Value
 
   
(In Thousands)
 
Debt Securities
                       
    Within One Year or Less
 
$
8
   
$
8
   
$
--
   
$
--
 
    One through Five Years
   
17,666
     
17,055
     
--
     
--
 
    After Five through Ten Years
   
8,163
     
7,925
     
--
     
--
 
    Over Ten Years
   
6,911
     
6,341
     
24,832
     
23,549
 
     
32,748
     
31,329
     
24,832
     
23,549
 
                                 
Other Equity Securities
   
--
     
--
     
2,860
     
2,860
 
                                 
   Total
 
$
32,748
   
$
31,329
   
$
27,692
   
$
26,409
 

Securities available-for-sale totaling $3.8 million were purchased during the three months ending September 30, 2018.

The following tables show information pertaining to gross unrealized losses on securities available-for-sale at September 30, 2018 and June 30, 2018 aggregated by investment category and length of time that individual securities have been in a continuous loss position.

   
September 30, 2018
 
   
Less Than Twelve Months
   
Over Twelve Months
 
   
Gross
         
Gross
       
   
Unrealized
   
Fair
   
Unrealized
   
Fair
 
   
Losses
   
Value
   
Losses
   
Value
 
   
(In Thousands)
 
Securities Available-for-Sale
                       
                         
Mortgage-Backed Securities
 
$
257
   
$
8,368
   
$
1,166
   
$
22,350
 
                                 
        Total Securities Available-for-Sale
 
$
257
   
$
8,368
   
$
1,166
   
$
22,350
 
                                 

   
June 30, 2018
 
   
Less Than Twelve Months
   
Over Twelve Months
 
   
Gross
         
Gross
       
   
Unrealized
   
Fair
   
Unrealized
   
Fair
 
   
Losses
   
Value
   
Losses
   
Value
 
   
(In Thousands)
 
Securities Available-for-Sale
                       
                         
Mortgage-Backed Securities
 
$
71
   
$
4,709
   
$
1,257
   
$
24,547
 
                                 
        Total Securities Available-for-Sale
 
$
71
   
$
4,709
   
$
1,257
   
$
24,547
 

 
 
 
 
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 September 30, 2018 and June 30, 2018 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 September 30, 2018.

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 September 30, 2018, securities with a carrying value of $1.2 million were pledged to secure public deposits, and securities and mortgage loans with a carrying value of $147.8 million were pledged to secure FHLB advances.

3.          Loans Receivable

Loans receivable are summarized as follows:

   
 
September 30, 2018
   
June 30, 2018
 
     
(In Thousands)
 
Loans Secured by Mortgages on Real Estate
           
One-to-Four Family Residential
 
$
121,280
   
$
121,257
 
Commercial
   
80,413
     
74,416
 
Multi-Family Residential
   
46,230
     
38,079
 
Land
   
19,875
     
20,474
 
Construction
   
9,266
     
11,921
 
Equity and Second Mortgage
   
1,507
     
1,541
 
Equity Lines of Credit
   
16,545
     
17,387
 
                 
Total Mortgage Loans
   
295,116
     
285,075
 
                 
Commercial Loans
   
34,553
     
35,458
 
Consumer Loans
               
Loans on Savings Accounts
   
466
     
462
 
Other Consumer Loans
   
208
     
185
 
                 
Total Consumer Loans
   
674
     
647
 
Total Loans
   
330,343
     
321,180
 
                 
Less:   Allowance for Loan Losses
   
(3,497
)
   
(3,425
)
     Unamortized Loan Fees
   
(225
)
   
(262
)
                 
Net Loans Receivable
 
$
326,621
   
$
317,493
 
 
 
 
 
 
 
 
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:

   
Three Months Ended September 30,
 
 
 
2018
   
2017
 
   
(In Thousands)
 
Balance - Beginning of Period
 
$
3,425
   
$
3,729
 
Provision for Loan Losses
   
250
     
300
 
Loan Charge-Offs
   
(179
)
   
(802
)
Recoveries
   
1
     
4
 
Balance - End of Period
 
$
3,497
   
$
3,231
 

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 September 30, 2018 and June 30, 2018:

 September 30, 2018  
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Total
 
   
(In Thousands)
 
Real Estate Loans:
                             
  One-to-Four Family Residential
 
$
120,481
   
$
20
   
$
779
   
$
--
   
$
121,280
 
  Commercial
   
76,353
     
--
     
4,060
     
--
     
80,413
 
  Multi-Family Residential
   
46,230
     
--
     
--
     
--
     
46,230
 
  Land
   
16,659
     
3,216
     
--
     
--
     
19,875
 
  Construction
   
9,266
     
--
     
--
     
--
     
9,266
 
  Equity and Second Mortgage
   
1,507
     
--
     
--
     
--
     
1,507
 
  Equity Lines of Credit
   
16,477
     
--
     
68
     
--
     
16,545
 
Commercial Loans
   
33,974
     
--
     
579
     
--
     
34,553
 
Consumer Loans
   
674
     
--
     
--
     
--
     
674
 
                                         
     Total
 
$
321,621
   
$
3,236
   
$
5,486
   
$
--
   
$
330,343
 
                                         

 
June 30, 2018
 
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Total
 
   
(In Thousands)
 
Real Estate Loans:
                             
  One-to-Four Family Residential
 
$
120,317
   
$
652
   
$
996
   
$
--
   
$
121,257
 
  Commercial
   
74,416
     
--
     
4,060
     
--
     
74,416
 
  Multi-Family Residential
   
38,079
     
--
     
--
     
--
     
38,079
 
  Land
   
20,474
     
--
     
--
     
--
     
20,474
 
  Construction
   
11,921
     
--
     
--
     
--
     
11,921
 
  Equity and Second Mortgage
   
1,541
     
--
     
--
     
--
     
1,541
 
  Equity Lines of Credit
   
17,300
     
--
     
87
     
--
     
17,387
 
Commercial Loans
   
29,817
     
--
     
873
     
--
     
35,458
 
Consumer Loans
   
647
     
--
     
--
     
--
     
647
 
                                         
     Total
 
$
314,512
   
$
652
   
$
6,016
   
$
--
   
$
321,180
 
                                         

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 of September 30, 2018 and June 30, 2018:

 September 30, 2018  
 
 
 
 
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
 
$
1,014
   
$
1,665
   
$
1,568
   
$
4,247
   
$
117,033
   
$
121,280
   
$
724
 
  Commercial
   
--
     
--
     
--
     
--
     
80,413
     
80,413
     
--
 
  Multi-Family Residential
   
--
     
--
     
--
     
--
     
46,230
     
46,230
     
--
 
  Land
   
--
     
--
     
--
     
--
     
19,875
     
19,875
     
--
 
  Construction
   
--
     
--
     
--
     
--
     
9,266
     
9,266
     
--
 
  Equity and Second Mortgage 
 
--
     
--
     
--
     
--
     
1,507
     
1,507
     
--
 
  Equity Lines of Credit
   
29
     
49
     
159
     
237
     
16,308
     
16,545
     
91
 
Commercial Loans
   
--
     
--
     
122
     
122
     
34,431
     
34,553
     
--
 
Consumer Loans
   
--
     
--
     
--
     
--
     
674
     
674
      --  
 
Total
 
$
1,043
   
$
1,714
   
$
1,849
   
$
4,606
   
$
325,737
   
$
330,343
   
$
815
 

 June 30, 2018
 
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
 
$
1,481
   
$
230
   
$
1,954
   
$
3,665
   
$
117,592
   
$
121,257
   
$
680
 
  Commercial
   
--
     
--
     
--
     
--
     
74,416
     
74,416
     
--
 
  Multi-Family Residential
   
--
     
--
     
--
     
--
     
38,079
     
38,079
     
--
 
  Land
   
--
     
--
     
--
     
--
     
20,474
     
20,474
     
--
 
  Construction
   
--
     
--
     
--
     
--
     
11,921
     
11,921
     
--
 
  Equity and Second Mortgage 
 
--
     
--
     
--
     
--
     
1,541
     
1,541
     
--
 
  Equity Lines of Credit
   
134
     
59
     
117
     
310
     
17,077
     
17,387
     
30
 
Commercial Loans
   
--
     
--
     
416
     
416
     
35,042
     
35,458
     
--
 
Consumer Loans
   
--
     
--
     
--
     
--
     
647
     
647
     
--
 
                                                         
     Total
 
$
1,615
   
$
289
   
$
2,487
   
$
4,391
   
$
316,789
   
$
321,180
   
$
710
 

There was no interest income recognized on non-accrual loans during the three months ended September 30, 2018 or year ended June 30, 2018. 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, 2018 and the year ended June 30, 2018 was approximately $19,000 and $126,000, respectively.
 
 
 
 
 
 
 
 
19

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Credit Quality Indicators (continued)

The change in the allowance for loan losses by loan portfolio class and recorded investment in loans for the three months ended September 30, 2018 was as follows:

   
Real Estate Loans
                   
 
 
 
 
September 30, 2018
 
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
 
$
1,166
   
$
436
   
$
256
   
$
161
   
$
163
   
$
311
   
$
929
   
$
3
   
$
3,425
 
Charge-Offs
   
(159
)
   
--
     
--
     
--
     
--
     
(20
)
   
--
     
--
     
(179
)
Recoveries
   
--
     
--
     
--
     
--
     
--
     
1
     
--
     
--
     
1
 
Current Provision
   
64
     
86
     
(6
)
   
48
     
55
     
(142
)
   
145
     
--
     
250
 
Ending Balances
 
$
1,071
   
$
522
   
$
250
   
$
209
   
$
218
   
$
150
   
$
1,074
   
$
3
   
$
3,497