Home Federal Bancorp, Inc. of Louisiana - FORM 10-Q

Attached files

file	filename
EX-32.0 - EXHIBIT 32.0 - Home Federal Bancorp, Inc. of Louisiana	exh320.htm
EX-31.2 - EXHIBIT 31.2 - Home Federal Bancorp, Inc. of Louisiana	exh312.htm
EX-31.1 - EXHIBIT 31.1 - Home Federal Bancorp, Inc. of Louisiana	exh311.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:	March 31, 2020
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)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock (par value $.01 per share)	HFBL	Nasdaq Stock Market, LLC

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, 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	☒
		Emerging growth company	☐

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

Shares of common stock, par value $.01 per share, outstanding as of May 12, 2020: The registrant had 1,733,434 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	6

	Notes to Consolidated Financial Statements	8

Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	40

Item 4:	Controls and Procedures	41

PART II	OTHER INFORMATION

Item 1:	Legal Proceedings	40

Item 1A:	Risk Factors	40

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 3:	Defaults Upon Senior Securities	41

Item 4:	Mine Safety Disclosures	42

Item 5:	Other Information	42

Item 6:	Exhibits	42

SIGNATURES

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

	March 31, 2020			June 30, 2019
	(In Thousands)

ASSETS
Cash and Cash Equivalents (Includes Interest-Bearing Deposits with Other Banks of $37,736 and $10,632 for March 31, 2020 and June 30, 2019, Respectively)	$	41,612		$	18,108
Debt Securities Available-for-Sale		44,874			41,655
Securities Held-to-Maturity (Fair Value of $22,870 and $25,532, Respectively)		21,840			25,349
Loans Held-for-Sale		10,478			8,608
Loans Receivable, Net of Allowance for Loan Losses of $3,783 and $3,452, Respectively		318,707			324,134
Accrued Interest Receivable		1,072			1,172
Premises and Equipment, Net		13,132			13,554
Bank Owned Life Insurance		7,053			6,948
Deferred Tax Asset		788			849
Foreclosed Assets		118			1,366
Other Assets		824			710

Total Assets	$	460,498		$	442,453

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
Deposits	$	406,064		$	388,164
Advances from Borrowers for Taxes and Insurance		373			584
Short-term Federal Home Loan Bank Advances		259			295
Long-term Federal Home Loan Bank Advances		876			1,060
Other Borrowings		1,800			450
Other Accrued Expenses and Liabilities		1,472			1,558
Total Liabilities		410,844			392,111

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; 1,739,434, and 1,845,482 Shares Issued and Outstanding at March 31, 2020 and June 30, 2019, Respectively		23			23
Additional Paid-in Capital		36,454			35,914
Unearned ESOP Stock		(899	)		(985	)
Retained Earnings		13,538			15,370
Accumulated Other Comprehensive Income		538			20

Total Stockholders’ Equity		49,654			50,342

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	460,498		$	442,453

See accompanying notes to unaudited consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	For the Three Months Ended March 31,						For the Nine Months Ended March 31,
	2020			2019			2020		2019
	(In Thousands, Except per Share Data)
INTEREST INCOME
Loans, Including Fees	$	4,378		$	4,530		$	13,662	$	13,593
Investment Securities		12			16			43		45
Mortgage-Backed Securities		401			396			1,218		1,012
Other Interest-Earning Assets		83			60			281		234
Total Interest Income		4,874			5,002			15,204		14,884

INTEREST EXPENSE
Deposits		1,298			1,149			3,992		3,108
Other Borrowings		19			2			36		6
Federal Home Loan Bank Borrowings		14			17			44		127
Total Interest Expense		1,331			1,168			4,072		3,241
Net Interest Income		3,543			3,834			11,132		11,643

PROVISION FOR LOAN LOSSES		316			100			1,441		450
Net Interest Income after Provision for Loan Losses		3,227			3,734			9,691		11,193

NON-INTEREST INCOME
Gain on Sale of Loans		604			305			1,751		1,071
(Loss) Gain on Sale of Real Estate and Fixed Assets		(76	)		(117	)		4		(345	)
Gain on Sale of Securities		219			--			219		--
Income on Bank Owned Life Insurance		34			35			105		105
Service Charges on Deposit Accounts		258			246			821		712
Other Income		8			14			28		49
Total Non-Interest Income		1,047			483			2,928		1,592

NON-INTEREST EXPENSE
Compensation and Benefits		1,961			1,632			5,657		4,795
Occupancy and Equipment		353			323			1,081		971
Data Processing		144			108			435		405
Audit and Examination Fees		51			62			165		189
Franchise and Bank Shares Tax		111			97			348		295
Advertising		45			89			257		232
Legal Fees		113			136			376		433
Loan and Collection		58			83			226		209
Deposit Insurance Premium		12			7			12		59
Valuation Adjustment Real Estate Owned		--			--			--		75
Other Expense		185			184			560		556
Total Non-Interest Expense		3,033			2,721			9,117		8,219
Income Before Income Taxes		1,241			1,496			3,502		4,566

PROVISION FOR INCOME TAX EXPENSE		264			307			690		984
Net Income	$	977		$	1,189		$	2,812	$	3,582
EARNINGS PER COMMON SHARE:
Basic	$	0.58		$	0.68		$	1.65	$	2.02
Diluted	$	0.54		$	0.63		$	1.54	$	1.88
DIVIDENDS DECLARED	$	0.16		$	0.14		$	0.48	$	0.42

See accompanying notes to unaudited consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	For the Three Months Ended March 31,				For the Nine Months Ended March 31,
	2020		2019		2020		2019
	(In Thousands)				(In Thousands)

Net Income	$	977	$	1,189	$	2,812	$	3,582

Other Comprehensive Income, Net of Tax
Unrealized Holding Gain on Debt Securities Available-for-Sale, Net of Tax of $162 and $138 in 2020 and $64 and $106 in 2019		608		242		518		405

Total Comprehensive Income	$	1,585	$	1,431	$	3,330	$	3,987

See accompanying notes to unaudited consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

THREE AND NINE MONTHS ENDED MARCH 31, 2020 AND 2019

(Unaudited)

Three Months Ended

	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 – December 31, 2018	$	23	$	35,586	$	(1,042	)	$	2	$	14,952		$	(883	)	$	48,638

Net Income		--		--		--			--		1,189			--			1,189

Changes in Unrealized Gain on Debt Securities Available-for-Sale, Net of Tax Effects		--		--		--			--		--			242			242

Share Awards Earned		--		--		--			--		--			--			--

RRP Shares Earned		--		--		--			--		--			--			--

Stock Options Vested		--		37		--			--		--			--			37

Common Stock Issuance for Stock Option Exercises		--		111		--			--		--			--			111

ESOP Compensation Earned		--		60		29			--		--			--			89

Company Stock Purchased		--		--		--			--		(1,060	)		--			(1,060	)

Dividends Declared		--		--		--			--		(263	)		--			(263	)

BALANCE – March 31, 2019	$	23	$	35,794	$	(1,013	)	$	2	$	14,818		$	(641	)	$	48,983

BALANCE – December 31, 2019	$	23	$	36,327	$	(927	)	$	--	$	14,621		$	(70	)	$	49,974

Net Income		--		--		--			--		977			--			977

Changes in Unrealized Gain on Debt Securities Available-for-Sale, Net of Tax Effects		--		--		--			--		--			608			608

Share Awards Earned		--		19		--			--		--			--			19

RRP Shares Earned		--		--		--			--		--			--			--

Stock Options Vested		--		34		--			--		--			--			34

Common Stock Issuance for Stock Option Exercises		--		15		--			--		--			--			15

ESOP Compensation Earned		--		59		28			--		--			--			87

Company Stock Purchased		--		--		--			--		(1,774	)		--			(1,774	)

Dividends Declared		--		--		--			--		(286	)		--			(286	)

BALANCE – March 31, 2020	$	23	$	36,454	$	(899	)	$	--	$	13,538		$	538		$	49,654

See accompanying notes to unaudited consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

THREE AND NINE MONTHS ENDED MARCH 31, 2020 AND 2019

(Unaudited)

Nine Months Ended

	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, 2018	$	23	$	35,057	$	(1,100	)	$	(22	)	$	14,125		$	(1,046	)	$	47,037

Net Income		--		--		--			--			3,582			--			3,582

Changes in Unrealized Gain on Debt Securities Available-for-Sale, Net of Tax Effects		--		--		--			--			--			405			405

Share Awards Earned		--		135		--			--			--			--			135

RRP Shares Earned		--		--		--			24			--			--			24

Stock Options Vested		--		105		--			--			--			--			105

Common Stock Issuance for Stock Option Exercises		--		309		--			--			--			--			309

ESOP Compensation Earned		--		188		87			--			--			--			275

Company Stock Purchased		--		--		--			--			(2,097	)		--			(2,097	)

Dividends Declared		--		--		--			--			(792	)		--			(792	)

BALANCE – March 31, 2019	$	23	$	35,794	$	(1,013	)	$	2		$	14,818		$	(641	)	$	48,983

BALANCE – June 30, 2019	$	23	$	35,914	$	(985	)	$	--		$	15,370		$	20		$	50,342

Net Income		--		--		--			--			2,812			--			2,812

Changes in Unrealized Gain on Debt Securities Available-for-Sale, Net of Tax Effects		--		--		--			--			--			518			518

Share Awards Earned		--		153		--			--			--			--			153

RRP Shares Earned		--		24		--			--			--			--			24

Stock Options Vested		--		103		--			--			--			--			103

Common Stock Issuance for Stock Option Exercises		--		65		--			--			--			--			65

ESOP Compensation Earned		--		195		86			--			--			--			281

Company Stock Purchased		--		--		--			--			(3,779	)		--			(3,779	)

Dividends Declared		--		--		--			--			(865	)		--			(865	)

BALANCE – March 31, 2020	$	23	$	36,454	$	(899	)	$	--		$	13,538		$	538		$	49,654

See accompanying notes to unaudited consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	March 31,
	2020			2019
	(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	2,812		$	3,582
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Bad Debt Recovery		8			2
Federal Home Loan Bank Stock Certificate		(43	)		(35	)
Net Amortization and Accretion on Securities		70			79
(Gain) Loss on Sale of Real Estate		(4	)		345
Gain on Sale of Loans		(1,751	)		(1,071	)
Gain on Sale of Securities		(219	)		--
Amortization of Deferred Loan Fees		(107	)		(147	)
Depreciation of Premises and Equipment		487			363
ESOP Expense		281			275
Stock Option Expense		103			105
Recognition and Retention Plan Expense		2			21
Deferred Income Tax		61			(58	)
Valuation Adjustment Real Estate Owned		--			75
Provision for Loan Losses		1,441			450
Increase in Cash Surrender Value on Bank Owned Life Insurance		(105	)		(105	)
Share Awards Expense		111			102
Changes in Assets and Liabilities:
Loans Held-for-Sale – Originations and Purchases		(75,089	)		(42,338	)
Loans Held-for-Sale – Sale and Principal Repayments		74,970			44,713
Accrued Interest Receivable		100			(143	)
Other Operating Assets		(114	)		200
Other Operating Liabilities		(86	)		(310	)

Net Cash Provided by Operating Activities		2,928			6,105

CASH FLOWS FROM INVESTING ACTIVITIES
Loan Originations and Purchases, Net of Principal Collections		3,284			(6,942	)
Deferred Loan Fees Collected		120			89
Acquisition of Premises and Equipment		(701	)		(2,412	)
Proceeds from Sale of Real Estate		2,343			469
Activity in Available-for-Sale Securities:
Principal Payments on Mortgage-Backed Securities		8,991			5,154
Sale of Securities		9,856			--
Purchases of Securities		(21,250	)		(18,496	)
Activity in Held-to-Maturity Securities:
Principal Payments on Mortgage-Backed Securities		3,785			2,952
Purchase of Securities		(245	)		--

Net Cash Provided by (Used in) Investing Activities		6,183			(19,186	)

See accompanying notes to unaudited consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)

	Nine Months Ended
	March 31,
	2020			2019
	(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposits	$	17,900		$	21,848
Repayments of Advances from Federal Home Loan Bank		(220	)		(10,210	)
Proceeds from Other Borrowings		1,800			450
Repayments of Other Borrowings		(450	)		(750	)
Net Decrease in Advances from Borrowers for Taxes and Insurance		(211	)		(266	)
Dividends Paid		(865	)		(792	)
Company Stock Purchased		(3,779	)		(2,097	)
Proceeds from Stock Options Exercised		65			309
Plan Share Distributions		153			135

Net Cash Provided by Financing Activities		14,393			8,627

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		23,504			(4,454	)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		18,108			15,867

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	41,612		$	11,413

SUPPLEMENTARY CASH FLOW INFORMATION
Interest Paid on Deposits and Borrowed Funds	$	3,002		$	2,603
Income Taxes Paid		760			1,068
Market Value Adjustment for Gain on Debt Securities Available-for-Sale		656			513

See accompanying notes to unaudited consolidated financial statements.

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 nine month period ended March 31, 2020 are not necessarily indicative of the results which may be expected for the fiscal year ending June 30, 2020.

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 March 31, 2020. 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 seven 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 March 31, 2020, 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.

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 debt 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 debt 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.

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.

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 $257,000 and $232,000 for the nine months ended March 31, 2020 and 2019, 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 nine months ended March 31, 2020 and 2019, 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, plan share awards 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, plan share awards 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, plan share awards or recognition and retention awards.

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 debt 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 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. In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this Update include items brought to the FASB Board’s attention regarding ASU 2016-01.

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 did not have a material impact on the Company’s consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1. Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements (Continued)

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 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 did not 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 extent of the impact upon adoption is not known and will depend on the characteristics of the Company’s loan portfolio and economic conditions on that date as well as forecasted conditions thereafter.

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 adoption of this guidance is not expected to have a material effect on the Company’s 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 adoption of this guidance did not have a material effect on the Company’s 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 was effective upon issuance.

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 was effective upon issuance. Adoption of this ASU did not have a material effect on our consolidated financial statements.

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. Adoption of this ASU did not have a material effect on our consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1. Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements (Continued)

In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” The ASU removes, modifies, and adds certain disclosure requirements for fair value measurements. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019. In addition, entities may early adopt the modified or eliminated disclosure requirements and delay adoption of the additional disclosure requirements until effective date. The Company is currently assessing the impact of adoption of this guidance upon its disclosures. ASU No. 2018-13 will not impact our consolidated financial statements, as the update only revises disclosure requirements.

In December 2019, the FASB issued ASU No. 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)." The amendments in this ASU simplified the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improved the consistent application of and simplified GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in the ASU are effective for fiscal years and interim periods beginning after December 15, 2020. The Company does not expect the adoption of this ASU to impact the Consolidated Financial Statements.

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:

	March 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Securities Available-for-Sale

Debt Securities
FHLMC Mortgage-Backed Certificates	$	5,453	$	5	$	105	$	5,353
FNMA Mortgage-Backed Certificates		32,589		739		2		33,326
GNMA Mortgage-Backed Certificates		6,150		78		33		6,195

Total Debt Securities		44,192		822		140		44,874

Total Securities Available-for-Sale	$	44,192	$	822	$	140	$	44,874

Securities Held-to-Maturity

Debt Securities
GNMA Mortgage-Backed Certificates	$	1,115	$	9	$	--	$	1,124
FNMA Mortgage-Backed Certificates		17,530		1,021		--		18,551

Total Debt Securities		18,645		1,030		--		19,675

Municipals		245		--		--		245
Equity Securities (Non-Marketable)
27,000 Shares – Federal Home Loan Bank		2,700		--		--		2,700
630 Shares – First National Bankers Bankshares, Inc.		250		--		--		250

Total Equity Securities		2,950		--		--		2,950

Total Securities Held-to-Maturity	$	21,840	$	1,030	$	--	$	22,870

June 30, 2019

Gross

Amortized

Unrealized

Fair

Cost

Gains

Losses

Value

(In Thousands)

Securities Available-for-Sale

Home Federal Bancorp, Inc. of Louisiana - FORM 10-Q - May 13, 2020

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