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HFBL Home Federal Bancorp Inc

Filed: 12 Nov 21, 1:23pm

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, 2021
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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock (par value $0.01 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 filerAccelerated 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 $0.01 per share, outstanding as of November 11, 2021: The registrant had 3,352,356 shares of common stock outstanding.



HOME FEDERAL BANCORP, INC. OF LOUISIANA
 
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

  September 30, 2021
(Unaudited)
  
June 30, 2021
 
  (In Thousands) 
       
ASSETS      
Cash and Cash Equivalents (Includes Interest-Bearing Deposits with Other Banks of $91,713 and $94,325
      September 30, 2021 and June 30, 2021, Respectively)
 $101,256  $104,405 
Securities Available-for-Sale  26,974   29,550 
Securities Held-to-Maturity (Fair Value of $61,775 and $54,608, Respectively)  61,969   54,706 
Loans Held-for-Sale  10,573   14,427 
Loans Receivable, Net of Allowance for Loan Losses of $4,127 and $4,122, Respectively  339,424   336,394 
Accrued Interest Receivable  1,044   1,163 
Premises and Equipment, Net  15,811   14,915 
Bank Owned Life Insurance  7,242   7,214 
Deferred Tax Asset  554   819 
Foreclosed Assets  383   383 
Other Assets  1,585   1,755 
         
Total Assets $566,815  $565,731 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
LIABILITIES        
Deposits:        
Non-interest bearing $145,214  $131,014 
Interest-bearing  362,369   375,582 
Total Deposits  507,583   506,596 
Advances from Borrowers for Taxes and Insurance  527   426 
Short-term Federal Home Loan Bank Advances  35   35 
Long-term Federal Home Loan Bank Advances  824   832 
Other Borrowings  1,100   2,400 
Other Accrued Expenses and Liabilities  3,062   2,717 
Total Liabilities  513,131   513,006 
         
STOCKHOLDERS’ EQUITY        
Preferred Stock – $0.01 Par Value; 10,000,000 Shares Authorized; NaN Issued and Outstanding  0   0 
Common Stock – $0.01 Par Value; 40,000,000 Shares Authorized; 3,359,856 and 3,350,966 Shares Issued and
      Outstanding (split adjusted) at September 30, 2021 and June 30, 2021, Respectively
  34   34 
Additional Paid-in Capital  37,974   37,583 
Unearned ESOP Stock  (725)  (754)
Retained Earnings  16,153   15,587 
Accumulated Other Comprehensive Income  248   275 
         
Total Stockholders’ Equity  53,684   52,725 
         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $566,815  $565,731 

See accompanying notes to unaudited consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

  
For the Three Months Ended
September 30,
 
  
2021
  
2020
 
  (In Thousands, Except per Share Data) 
INTEREST INCOME      
Loans, Including Fees $4,397  $4,647 
Investment Securities  0   2 
Mortgage-Backed Securities  341   317 
Other Interest-Earning Assets  36   18 
Total Interest Income  4,774   4,984 
         
INTEREST EXPENSE        
Deposits  529   971 
      Other Borrowings  10   14 
Federal Home Loan Bank Borrowings  11   12 
Total Interest Expense  550   997 
Net Interest Income  4,224   3,987 
         
PROVISION FOR LOAN LOSSES  0   700 
Net Interest Income after Provision for Loan Losses  4,224   3,287 
         
NON-INTEREST INCOME        
     Gain on Sale of Loans  709   1,411 
Income on Bank Owned Life Insurance  28   34 
Service Charges on Deposit Accounts  268   248 
Other Income  11   13 
Total Non-Interest Income  1,016   1,706 
         
NON-INTEREST EXPENSE        
Compensation and Benefits  2,210   2,214 
Occupancy and Equipment  429   376 
Data Processing  207   194 
Audit and Examination Fees  72   66 
Franchise and Bank Shares Tax  130   108 
Advertising  74   26 
Legal Fees  100   131 
Loan and Collection  72   94 
Deposit Insurance Premium  38   30 
Other Expense  203   184 
Total Non-Interest Expense  3,535   3,423 
Income Before Income Taxes  1,705   1,570 
         
PROVISION FOR INCOME TAX EXPENSE  352   323 
Net Income $1,353  $1,247 
EARNINGS PER COMMON SHARE:        
Basic $0.42  $0.38 
Diluted $0.38  $0.37 
DIVIDENDS DECLARED $0.10  $0.08 

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
September 30,
 
  
2021
  
2020
 
  (In Thousands) 
       
Net Income $1,353  $1,247 
         
Other Comprehensive (Loss) Net of Tax        
   Investment securities available-for-sale:        
      Net unrealized (Losses) Gains  (35)  (256)
      Income Tax Effect  7   54 
      Reclassification adjustments for net (gains) losses realized in net income  0   0 
      Income tax effect  0   0 
Other Comprehensive Loss  (28)  (202)
        Total Comprehensive Income $1,325  $1,045 

See accompanying notes to unaudited consolidated financial statements.
HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Unaudited)

  
Common
Stock
  
Additional
Paid-in
Capital
  
Unearned
ESOP
Stock
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Income (Loss)
  
Total
Stockholders’
Equity
 
           (In Thousands)       
BALANCE – June 30, 2020
 $22  $36,531  $(870) $13,937  $915  $50,535 
                         
Net Income  0   0   0   1,247   0   1,247 
                         
Changes in Unrealized Gain on Securities Available-for-Sale, Net of Tax Effects  0   0   0   0   (202)  (202)
                         
Share Awards Earned  0   0   0   0   0   0 
                         
Stock Options Vested  0   34   0   0   0   34 
                         
Common Stock Issuance for Stock Option Exercises – Split Adjusted  0   38   0   0   0   38 
                         
ESOP Compensation Earned  0   40   29   0   0   69 
                         
Company Stock Purchased  0   0   0   (387)  0   (387)
                         
Dividends Declared  0   0   0   (282)  0   (282)
                         
BALANCE – September 30, 2020
 $22  $36,643  $(841) $14,515  $713  $51,052 
                         
BALANCE – June 30, 2021
 $34  $37,701  $(754) $15,469  $275  $52,725 
                         
Net Income  0   0   0   1,353   0   1,353 
                         
Changes in Unrealized Gain on Securities Available-for-Sale, Net of Tax Effects  0   0   0   0   (27)  (27)
                         
Share Awards Earned  0   0   0   0   0   0 
                         
Stock Split  0   0   0   0   0   0 
                         
Stock Options Vested  0   26   0   0   0   26 
                         
Common Stock Issuance for Stock Option Exercises
  0   166   0   0   0   166 
                         
ESOP Compensation Earned  0   81   29   0   0   110 
                         
Company Stock Purchased  0   0   0   (334)  0   (334)
                         
Dividends Declared  0   0   0   (335)  0   (335)
                         
BALANCE – September 30, 2021
 $34  $37,856  $(725) $16,271  $248  $53,684 

See accompanying notes to unaudited consolidated financial statements.
HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

       Three Months Ended 
       September 30, 
  2021
  2020
 
       (In Thousands) 
CASH FLOWS FROM OPERATING ACTIVITIES      
Net Income $1,353  $1,247 
Adjustments to Reconcile Net Income to Net        
Cash (Used in) Provided by Operating Activities        
Bad Debt Recovery  6   52 
Federal Home Loan Bank Stock Certificate  0   (2)
Net Amortization and Accretion on Securities  41   44 
Gain on Sale of Loans  (709)  (1,411)
Amortization of Deferred Loan Fees  (426)  (216)
Depreciation of Premises and Equipment  182   168 
ESOP Expense  110   69 
Stock Option Expense  26   34 
Deferred Income Tax  265   (188)
Provision for Loan Losses  0   700 
Increase in Cash Surrender Value on Bank Owned Life Insurance  (28)  (34)
Share Awards Expense  32   37 
Changes in Assets and Liabilities:        
Loans Held-for-Sale – Originations and Purchases  (28,495)  (60,258)
Loans Held-for-Sale – Sale and Principal Repayments  33,058   48,625 
Accrued Interest Receivable  119   238 
Other Operating Assets  170   (264)
Other Operating Liabilities  345   429 
         
Net Cash (Used in) Provided by Operating Activities  6,049   (10,730)
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Loan Originations and Purchases, Net of Principal Collections  (2,653)  4,586 
Deferred Loan Fees Collected  20   67 
Acquisition of Premises and Equipment  (1,078)  (851)
Proceeds from Sale of Real Estate  0   0 
Activity in Available-for-Sale Securities:        
Principal Payments on Mortgage-Backed Securities  2,528   8,488 
Purchase of Securities  0
   (5,090)
Activity in Held-to-Maturity Securities:        
Principal Payments on Mortgage-Backed Securities  2,652   2,496 
Purchase of Securities  (9,943)  0 
         
Net Cash (Used in) Provided by Investing Activities  (8,474)  9,696 

See accompanying notes to unaudited consolidated financial statements.
HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)

  Three Months Ended 
  September 30, 
  2021
  2020
 
  (In Thousands) 
CASH FLOWS FROM FINANCING ACTIVITIES   
Net Increase in Deposits $987  $22,895 
Repayments of Advances from Federal Home Loan Bank  (9)  (77)
Proceeds from Other Borrowings  200   700 
Repayments of Other Borrowings  (1,500)  (1,500)
Net Decrease in Advances from Borrowers for Taxes and Insurance  101   404 
Dividends Paid  (335)  (282)
Company Stock Purchased  (334)  (387)
Proceeds from Stock Options Exercised  166   38 
Plan Share Distributions  0   0 
         
Net Cash (Used in) Provided by Financing Activities
  (724)  21,791 
         
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS  (3,149)  20,757 
         
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD $104,405  $54,871 
         
CASH AND CASH EQUIVALENTS - END OF PERIOD $101,256  $75,628 
         
SUPPLEMENTARY CASH FLOW INFORMATION        
Interest Paid on Deposits and Borrowed Funds $553  $1,008 
Income Taxes Paid  0   275 
Market Value Adjustment for (Loss)/Gain on Debt Securities Available-for-Sale  (35)  (256)

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 three month period ended September 30, 2021 are not necessarily indicative of the results which may be expected for the fiscal year ending June 30, 2022.

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, 2021. 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 7 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, 2021, the Bank had 1 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

Securities are being accounted for in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 320’s, Investments which requires the classification of securities into one of three categories: Trading, Available-for-Sale, or Held-to-Maturity. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates this classification periodically.

Investments in non-marketable 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 cost, adjusted for amortization of the related premiums, and accretion of discounts, using the interest method. 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 debt securities are excluded from earnings and reported in other comprehensive income.  

The Company held 0 trading securities as of September 30, 2021 and June 30, 2021.


Purchase premiums and discounts are recognized in interest income using the interest method over the term of the securities. Securities are periodically reviewed for other-than-temporary impairment. For debt securities, management considers whether the present value of future cash flows expected to be collected are less than the security’s amortized cost basis (the difference defined as the credit loss), the magnitude and duration of the decline, the reasons underlying the decline and the Company’s intent to sell the security or whether it is more likely than not that the Company would be required to sell the security before its anticipated recovery in market value, to determine whether the loss in value is other than temporary. If a decline in value is determined to be other than temporary, if the Company does not intend to sell the security, and it is more-likely-than-not that it will not be required to sell the security before recovery of the security’s amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference defined as the non-credit portion) is recognized in other comprehensive income, net of applicable taxes. A decline in value that is considered to be other-than-temporary is recorded as a loss within noninterest income in the consolidated statement of income.



The Bank has invested in Federal Home Loan Bank (“FHLB”) stock, and other similar correspondent banks, which is reflected at cost in these financial statements. As a member of the FHLB System, the Bank is required to purchase and maintain stock in an amount determined by the FHLB. The FHLB stock is redeemable at par value at the discretion of the FHLB.

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.


8

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

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. A loan is considered impaired when, based on current information or events, it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. When a loan is impaired, the measurement of such impairment is based upon the present value of future cash flows or 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. All loans greater than 90 days past due are generally placed on nonaccrual status.

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

9

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

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.

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. The Company’s basic and diluted earnings per share were $0.42 and $0.38, respectively, for the three months ended September 30, 2021 compared to basic and diluted earnings per share (split adjusted) of $0.38 and $0.37, respectively, for the three months ended September 30, 2020.

Non-Direct Response Advertising

The Company expenses all advertising costs, except for direct-response advertising, as incurred. Non-direct response advertising costs were $74,000 and $26,000 for the three months ended September 30, 2021 and 2020, 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, 2021 and 2020, the Company did 0t 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 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 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, 2022, 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. The Company has established an implementation team and are in the process of engaging third-party consultants who have jointly developed a project plan to provide implementation oversight. The Company is in the process of developing and implementing current expected credit loss model that satisfy the requirements of ASU 2016-13. The future adoption of this ASU may have a material effect on the Company’s consolidated financial statements.

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.

11

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, 2021
 
     Gross  Gross    
  Amortized  Unrealized  Unrealized  Fair 
Securities Available-for-Sale
 Cost  Gains  Losses  Value 
     (In Thousands)
    
Debt Securities            
FHLMC Mortgage-Backed Certificates $3,761  $24  $0  $3,785 
FNMA Mortgage-Backed Certificates  16,892   439   28   17,303 
GNMA Mortgage-Backed Certificates  6,007   1   122   5,886 
Debt Securities                
Total Debt Securities  26,660   464   150   26,974 
                 
Total Securities Available-for-Sale $26,660  $464  $150  $26,974 
                 
Securities Held-to-Maturity                
                 
Debt Securities                
GNMA Mortgage-Backed Certificates $778  $10  $0  $788 
FHLMC Mortgage-Backed Certificates  19,603   59   198   19,464 
FNMA Mortgage-Backed Certificates  39,707   562   651   39,618 
                 
Total Debt Securities  60,088   631   849   59,870 
                 
Municipals  1,354   24   0   1,378 
                 
Other Securities (Non-Marketable)                
27,770 Shares – Federal Home Loan Bank  277   0   0   277 
630 Shares – First National Bankers Bankshares, Inc.  250   0   0   250 
                 
Total Other Securities  527   0   0
   527 
                 
Total Securities Held-to-Maturity $61,969  $655  $849  $61,775 

12

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

 
 June 30, 2021 
     Gross  Gross    
  Amortized  Unrealized  Unrealized  Fair 
 Securities Available-for-Sale
 Cost  Gains  Losses  Value 
  (In Thousands) 
Debt Securities            
FHLMC Mortgage-Backed Certificates $4,188
  $33
  $0
  $4,221
 
FNMA Mortgage-Backed Certificates  18,666
   486
   0
   19,152
 
GNMA Mortgage-Backed Certificates  6,347
   1
   171
   6,177
 
   
   
   
   
 
Total Debt Securities  29,201
   520
   171
   29,550
 
   
   
   
   
 
Total Securities Available-for-Sale $29,201
  $520
  $171
  $29,550
 
                 
Securities Held-to-Maturity                
                 
Debt Securities   
    
    
    
 
GNMA Mortgage-Backed Securities $
782
  $
17
  $
0
  $
799
 
FHLMC Mortgage-Backed Certificates
  9,876


0


277


9,599 
FNMA Mortgage-Backed Securities  
42,160
   
641
   
500
   
42,301
 
                 
Total Debt Securities  
52,818
   
658
   
777
   
52,699
 
                 
Municipals  
1,361
   
21
   
0
   
1,382
 
                 
Equity Securities (Non-Marketable)                
2,766 Shares – Federal Home Loan Bank  
277
   
0
   
0
   
277
 
630 Shares – First National Bankers Bankshares, Inc.  
250
   
0
   
0
   
250
 
                 
Total Equity Securities  527



0



0



527
 
                 
Total Securities Held-to-Maturity $
54,706
  $
679
  $
777
  $
54,608
 

The amortized cost and fair value of securities by contractual maturity at September 30, 2021 follows:

  Available-for-Sale  Held-to-Maturity 
  Amortized  Fair  Amortized  Fair 
  Cost  Value  Cost  Value 
     (In Thousands)
    
             
Debt Securities            
Within One Year or Less $0
  $0
  $0
  $0
 
One through Five Years  861
   868
   0
   0
 
After Five through Ten Years  51
   55
   0
   0
 
Over Ten Years  25,748
   26,051
   60,088
   59,870
 
   26,660
   26,974
   60,088
   59,870
 
                 
Municipals                
Within One Year or Less
 $0
  $0
  $0
  $0
 
One through Five Years
  0
   0
   234
   239
 
After Five through Ten Years
  0
   0
   0
   0
 
Over Ten Years
  0
   0
   1,120
   1,139
 
   0
   0
   1,354
   1,378
 
                 
Other Equity Securities  0



0



527



527
 
                 
Total
 $26,660
  $26,974
  $61,969
  $61,775
 

13

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Securities held-to-maturity totaling $9.9 million were purchased during the three months ending September 30, 2021.

The following tables show information pertaining to gross unrealized losses on securities available-for-sale at September 30, 2021 and June 30, 2021 aggregated by investment category and length of time that individual securities have been in a continuous loss position.

  September 30, 2021 
  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 $122  $6,732  $28  $1,504 
                 
Total Securities Available-for-Sale
 $122  $6,732  $28  $1,504 

  September 30, 2021 
  Less Than Twelve Months  Over Twelve Months 
  Gross     Gross    
  Unrealized  Fair  Unrealized  Fair 
  Losses  Value  Losses  Value 
  (In Thousands) 
Securities Held-to-Maturity            
             
Mortgage-Backed Securities $849  $49,887  $0  $0 
                 
Total Securities Held-to-Maturity
 $849  $49,887  $0  $0 

  June 30, 2021 
  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 $139  $4,522  $32  $1,633 
                 
Total Securities Available-for-Sale
 $139  $4,522  $32  $1,633 

  June 30, 2021 
  Less Than Twelve Months  Over Twelve Months 
  Gross     Gross    
  Unrealized  Fair  Unrealized  Fair 
  Losses  Value  Losses  Value 
  (In Thousands) 
Securities Held-to-Maturity
            
             
Mortgage-Backed Securities $777  $41,154  $0  $0 
                 
Total Securities Held-to-Maturity
 $777  $41,154  $0  $0 

14

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, 2021 and June 30, 2021 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, 2021.

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, 2021, securities with a carrying value of $800,000 were pledged to secure public deposits, and securities and mortgage loans with a carrying value of $159.4 million were pledged to secure FHLB advances.

15

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Loans Receivable

Loans receivable are summarized as follows:

    September 30, 2021  June 30, 2021 
    (In Thousands) 
Loans Secured by Mortgages on Real Estate      
One-to-Four Family Residential $108,804  $97,607 
Commercial  106,033   96,180 
Multi-Family Residential  30,409   31,015 
Land  14,354   16,260 
Construction  15,552   15,337 
Equity and Second Mortgage  1,232   1,267 
Equity Lines of Credit  12,436   12,788 
         
Total Mortgage Loans  288,820   270,454
 
         
Commercial Loans  54,184   69,891
 
Consumer Loans        
Loans on Savings Accounts  414   430 
Other Consumer Loans  471   485 
         
Total Consumer Other Loans  885   915 
Total Loans  343,889   341,260 
         
Less:  Allowance for Loan Losses  (4,127)  (4,122)
Unamortized Loan Fees  (338)  (744)
         
Net Loans Receivable $339,424  $336,394 

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

  Three Months Ended September 30, 
  2021
  2020
 
  (In Thousands) 
       
Balance - Beginning of Period $4,122
  $4,081
 
Provision for Loan Losses  0   700 
Loan Charge-Offs  0
  (280
)
Recoveries  5   52 
Balance - End of Period $4,127  $4,553 

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. Once a loan has been classified as substandard or identified as special mention, management will conduct a quarterly review to evaluate the level of deterioration, improvement, and impairment, if any, as well as assign the appropriate risk category. The delinquent loan report is monitored monthly to determine if any loan needs to be evaluated for classification or impairment.



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. All loans greater than 90 days past due are generally placed on nonaccrual status. The Company uses the following definitions for risk ratings:

16

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Credit Quality Indicators (continued)

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.

The following tables present the grading of loans, segregated by class of loans, as of September 30, 2021 and June 30, 2021:

 
September 30, 2021
 
Pass and
Pass Watch
  
Special
Mention
  
Substandard
  
Doubtful
  
Total
 
  (In Thousands) 
                
Real Estate Loans:               
One-to-Four Family Residential  $108,317   $357   $130  $
0   $108,804 
Commercial  103,353   0   2,680   0   106,033 
Multi-Family Residential  30,409   0   0   0   30,409 
Land  14,354   0   0   0   14,354 
Construction  15,552   0   0   0   15,552 
Equity and Second Mortgage  1,232   0   0   0   1,232 
Equity Lines of Credit  12,436   0   0   0   12,436 
Commercial Loans  51,440   2,744   0   0   54,184 
Consumer Loans  885   0   0   0   885 
                     
Total  $337,978   $3,101   $2,810  $
0   $343,889 

17

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Credit Quality Indicators (continued)

June 30, 2021 
Pass and
Pass Watch
  
Special
Mention
  
Substandard
  
Doubtful
  
Total
 
   (In Thousands)             
Real Estate Loans:               
One-to-Four Family Residential $97,115  $358  $134  $0  $97,607 
Commercial  93,468   0   2,712   0   96,180 
Multi-Family Residential  31,015   0   0   0   31,015 
Land  16,260   0   0   0   16,260 
Construction  15,337   0   0   0   15,337 
Equity and Second Mortgage  1,267   0   0   0   1,267 
Equity Lines of Credit  12,788   0   0   0   12,788 
Commercial Loans  67,087   2,804   0   0   69,891 
Consumer Loans  915   0   0   0   915 
                     
Total $335,252
  $3,162
  $2,846
  $0
  $341,260
 

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when contractually due.  Loans that experience insignificant payment delays or payment shortfalls are generally not classified as impaired.  On a case-by-case basis, management determines the significance of payment delays and payment shortfalls, taking into consideration all of the circumstances related to the loan, including the length of the payment delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The following tables present an aging analysis of past due loans, segregated by class of loans, as of September 30, 2021 and June 30, 2021:

September 30, 2021 
30-59 Days
Past Due
  
60-89 Days
Past Due
  
90 Days or
More
  
Total
Past Due
  Current
  
Total Loans
Receivable
  
Recorded
Investment
>90 Days
and
Accruing
 
  (In Thousands) 
Real Estate Loans:                     
One-to-Four Family Residential $0  $427  $139  $566  $108,238  $108,804  $139 
Commercial  0   0   837   837   105,196   106,033   837 
Multi-Family Residential  0   0   0   0   30,409   30,409   0 
Land  0   0   0   0   14,354   14,354   0 
Construction  0   0   0   0   15,552   15,552   0 
Equity and Second Mortgage  0   0   0   0   1,232   1,232   0 
Equity Lines of Credit  15   0   0   15   12,421   12,436   0 
Commercial Loans  0   0   0   0   54,184   54,184   0 
Consumer Loans  0   0   0   0   885   885   0 
                             
Total $15  $427  $976  $1,418  $342,471  $343,889  $976 

18

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Credit Quality Indicators (continued)

 June 30, 2021 
30-59 Days
Past Due
  
60-89 Days
Past Due
  
90 Days or
More
  
Total
Past Due
  
Current
  
Total
Loans
Receivable
  
Recorded
Investment
> 90 Days
and
Accruing
 
  (In Thousands) 
Real Estate Loans:                     
One-to-Four Family Residential $
0  $30  $176  $206  $97,401  $97,607  $33 
Commercial  0   0   837   837   95,343   96,180   0 
Multi-Family Residential  0   0   0   0   31,015   31,015   0 
Land  0   0   0   0   16,260   16,260   0 
Construction  0   0   0   0   15,337   15,337   0 
Equity and Second Mortgage  0   0   0   0   1,267   1,267   0 
Equity Lines of Credit  0   0   0   0   12,788   12,788   0 
Commercial Loans  0   0   0   0   69,891   69,891   0 
Consumer Loans  0   0   0   0   915   915   0 
                             
Total  $0
  $30
  $1,013
  $1,043
  $340,217
  $341,260
  $33
 

There was 0 interest income recognized on non-accrual loans during the three months ended September 30, 2021 or year ended June 30, 2021. 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, 2021 and the year ended June 30, 2021 was approximately $10,000 and $63,000, respectively.

The change in the allowance for loan losses by loan portfolio class and recorded investment in loans for the three months ended September 30, 2021 and year ended June 30, 2021 was as follows:

  
Real Estate Loans
          
 
 
 
 
September 30, 2021
 
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 $894  $1,630  $346  $407  $160  $193  $489  $3  $4,122 
Charge-Offs  0   0   0   0   0   0   0   0   0 
Recoveries  1   0   0   0   0   4   0   0   5 
Current Provision  73   24   (20)  (72)  (4)  (19)  18   0   0 
Ending Balances $968  $1,654  $326  $335  $156  $178  $507  $3  $4,127 
                                     
Evaluated for Impairment:                                    
Individually  0   301   0   0   0   0   232   0   533 
Collectively  968   1,353   326   335   156   178   275   3   3,594 
                                     
Loans Receivable:                                    
Ending Balances – Total $108,804  $106,033  $30,409  $14,354  $15,552  $13,668  $54,184  $885  $343,889 
Ending Balances:                                    
Evaluated for Impairment:                                    
Individually  487   2,680   0   0   0   0   2,744   0   5,911 
Collectively $108,317  $103,353  $30,409  $14,354  $15,552  $13,668  $51,440  $885  $337,978 

19

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Credit Quality Indicators (continued)

  
Real Estate Loans
          
 
 
 
 
June 30, 2021
 
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 $966  $568  $364  $1,024  $80  $126  $949  $4  $4,081 
Charge-Offs  (40)  0   0   (907)  0   0   (1,014)  0   (1,961)
Recoveries  3   0   0   120   0   5   74   0   202 
Current Provision  (35)  1,062
   (18)  170
   80
   62
   480
   (1)  1,800
 
Ending Balances $894  $1,630  $346  $407  $160  $193  $489  $3  $4,122 
                                     
Evaluated for Impairment:                                    
Individually  0   317   0   0   0   0   251   0   568 
Collectively  894   1,313   346   407   160   193   238   3   3,554 
                                     
Loans Receivable:                                    
Ending Balances – Total $97,607  $96,180  $31,015  $16,260  $15,337  $14,055  $69,891  $915  $341,260 
Ending Balances:                                    
Evaluated for Impairment:                                    
Individually  492   2,712   0   0   0   0
   2,804   0   6,008
 
   Collectively $97,115  $93,468  $31,015  $16,260  $15,337  $14,055  $67,087  $915  $335,252 

The following tables present loans individually evaluated for impairment, segregated by class of loans, as of September 30, 2021 and June 30, 2021:

September 30, 2021 
Unpaid
Principal
Balance
  
Recorded
Investment With
No Allowance
  
Recorded
Investment With
Allowance
  
Total
Recorded
Investment
  
Related
Allowance
  
Average Recorded
Investment
 
  (In Thousands) 
Real Estate Loans:                  
  One-to-Four Family Residential $487  $487  $0  $487  $0  $531 
  Commercial  2,680   1,580   1,100   2,680   301   2,726 
  Multi-Family Residential  0   0   0   0   0   0 
  Land  0   0   0   0   0   0 
  Construction  0   0   0   0   0   0 
  Equity and Second Mortgage  0   0   0   0   0   0 
  Equity Lines of Credit  0   0   0   0   0   0 
Commercial Loans  2,744   0   2,744   2,744   232   2,803 
Consumer Loans  0   0   0   0   0   0 
                         
Total $5,911  $2,067  $3,844  $5,911  $533  $6,060 

June 30, 2021 
Unpaid
Principal
Balance
  
Recorded
Investment With
No Allowance
  
Recorded
Investment With
Allowance
  
Total
Recorded
Investment
  
Related
Allowance
  
Average Recorded
Investment
 
  (In Thousands) 
Real Estate Loans:   
One-to-Four Family Residential $492  $492  $0  $492  $0  $530 
Commercial  2,712   1,596   1,116   2,712   317   3,384 
Multi-Family Residential  0   0   0   0   0   0 
Land  0   0   0   0   0   0 
Construction  0   0   0   0   0   0 
Equity and Second Mortgage  0   0   0   0   0   0 
Equity Lines of Credit  0   0   0   0   0   0 
Commercial Loans  2,804   0   2,804   2,804   251   2,836 
Consumer Loans  0   0   0   0   0   0 
                         
Total $6,008
  $2,088
  $3,920
  $6,008
  $568
  $6,750
 

20

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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

Credit Quality Indicators (continued)

The Bank has no commitments to loan additional funds to borrowers whose loans were previously in non-accrual status. As of September 30, 2021, there were 0 residential loans in the process of foreclosure.

A troubled debt restructuring (“TDR”) is a restructuring of a debt made by the Company to a debtor for economic or legal reasons related to the debtor’s financial difficulties that it would not otherwise consider.  The Company grants the concession in an attempt to protect as much of its investment as possible.

Information about the Company’s TDRs is as follows (in thousands):

 September 30, 2021 
 Current 
Past Due Greater
Than 30 Days
 
Nonaccrual
TDRs
 Total TDRs 
Commercial real estate $
0  $
837  $
837  $
837 

 June 30, 2021 
 Current 
Past Due Greater
Than 30 Days
 
Nonaccrual
TDRs
 Total TDRs 
Commercial business  $0
  $837
  $837
  $837
 

For purposes of the determination of an allowance for loan losses on these TDRs, as an identified TDR, the Company considers a loss probable on the loan and, as a result, the loan is reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology.  If it is determined losses are probable on such TDRs, either because of delinquency or other credit quality indicator, the Company establishes specific reserves for these loans.  As of September 30, 2021, there were 0 commitments to lend additional funds to debtors owing sums to the Company whose terms have been modified in TDRs. The Company had 0 trouble debt restructuring that has subsequently defaulted in the last 12 months.

Loan Modifications/Troubled Debt Restructurings. Under the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 modifications. A financial institution can then suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring (“TDR”), and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Financial institutions wishing to utilize this authority must make a policy election, which applies to any COVID-19 modification made between March 1, 2020 and the earlier of either January 1, 2022 or the 60th day after the end of the COVID-19 national emergency. Home Federal Bank has made that election. Similarly, the Financial Accounting Standards Board has confirmed that short-term modifications made on a good-faith basis in response to COVID-19 to loan customers who were current prior to any relief will not be considered TDRs.

Prior to the enactment of the CARES Act, the banking regulatory agencies provided guidance as to how certain short-term modifications would not be considered TDRs, and have subsequently confirmed that such guidance could be applicable for loans that do not qualify for favorable accounting treatment under Section 4013 of the CARES Act.
21

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Deposits

Deposits at September 30, 2021 and June 30, 2021 consist of the following classifications:

  
September 30, 2021
  
June 30, 2021
 
  (In Thousands) 
Non-Interest Bearing $145,214  $131,014 
NOW Accounts  47,698   49,262 
Money Markets  85,120   88,181 
Passbook Savings  134,711   129,130 
   412,743   397,587 
         
Certificates of Deposit  94,840   109,009
 
         
Total Deposits $507,583  $506,596
 
 
5. Earnings Per Share

Home Federal Bank announced that its Board of Directors declared a 2-for-one stock split in the form of a 100% stock dividend, payable March 31, 2021, to stockholders of record as of March 22, 2021. Under the terms of the stock split, the Company’s stockholders received a dividend of 1 share for every share held on the record date. The dividend was paid in authorized but unissued shares of common stock of the Company. The par value of the Company's stock was not affected by the split and will remain at $0.01 per share. The outstanding shares of stock after the split increased from approximately 1.7 million shares to 3.4 million shares.

Basic earnings per common share are computed based on the weighted average number of shares outstanding.  Diluted earnings per share is computed based on the weighted average number of shares outstanding and common share equivalents that would arise from the exercise of dilutive securities. Earnings per share for the three months ended September 30, 2021 and 2020 were calculated as follows:

 

 
Three Months Ended
September 30,
 
  
2021
  
2020
 
  (In Thousands, Except Per Share Data) 
       
Net income 
$
1,353  $1,247 
         
Weighted average shares outstanding – basic  3,204   3,262 
Effect of dilutive common stock equivalents  310   128 
Adjusted weighted average shares outstanding – diluted  3,514   3,390 
         
Basic earnings per share 
$
0.42  $0.38 
Diluted earnings per share 
$
0.38  $0.37 

For the three months ended September 30, 2021 and 2020, there were outstanding options to purchase 626,132 and 520,322 shares, respectively, at a weighted average exercise price of $9.96 and $9.18 per share, respectively. For the quarter ended September 30, 2021 and 2020, 310,552 options and 127,762 options, respectively, were included in the computation of diluted earnings per share.
22

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.    Earnings Per Share (continued)

The following table presents the components of weighted average outstanding shares for purposes of calculating earnings per share:

  
Three Months Ended
September 30,
 
  
2021
  
2020
 
  (In Thousands) 
    
Average common shares issued  6,125   6,125 
Average unearned ESOP shares  (148)  (171)
Average unearned RRP shares  0   0 
Average Company stock purchased  (2,773)  (2,692)
         
Weighted average shares outstanding  3,204   3,262 

6. Stock-Based Compensation

Stock Option Plan

On August 10, 2005, the shareholders of the Company approved the establishment of the Home Federal Bancorp, Inc. of Louisiana 2005 Stock Option Plan (the “2005 Option Plan”) for the benefit of directors, officers, and other key employees.  The aggregate number of shares of common stock reserved for issuance under the 2005 Option Plan totaled 317,736 (as adjusted).  Both incentive stock options and non-qualified stock options may be granted under the 2005 Option Plan.  The 2005 Stock Option Plan terminated on June 8, 2015, however, the 866 outstanding options as of September 30, 2021 will remain in effect for the remainder of their original ten year terms.

On December 23, 2011, the shareholders of the Company approved the establishment of the Home Federal Bancorp, Inc. of Louisiana 2011 Stock Option Plan (the “2011 Option Plan,” together with the 2005 Option Plan, the “Option Plans”) for the benefit of directors, officers, and other key employees.  The aggregate number of shares of common stock reserved for issuance under the 2011 Option Plan totaled 389,044.  Both incentive stock options and non-qualified stock options may be granted under the 2011 Option Plan. As of September 30, 2021, there were 778 stock options available for future grant under the 2011 Option Plan.

Incentive stock options and non-qualified stock options granted under the Option Plans become vested and exercisable at a rate of 20% per year over five years, commencing one year from the date of the grant, with an additional 20% vesting on each successive anniversary of the date the option was granted.  No vesting shall occur after an employee’s employment or service as a director is terminated.  In the event of death or disability of an employee or director or change in control of the Company, the unvested options shall become vested and exercisable.  The Company recognizes compensation expense during the vesting period based on the fair value of the option on the date of the grant.

Stock Incentive Plan

On November 12, 2014, the shareholders of the Company approved the adoption of the Company’s 2014 Stock Incentive Plan (the “2014 Stock Incentive Plan”) for the benefit of employees and non-employee directors as an incentive to contribute to the success of the Company and reward employees for outstanding performance and the attainment of targeted goals.  The 2014 Stock Incentive Plan covers a total of 300,000 shares, of which no more than 74,000 shares, or 25% of the plan, may be share rewards.  The balance of the plan is reserved for stock option awards which would total 225,000 stock options, assuming all the share awards are issued. All incentive stock options granted under the 2014 Stock Incentive Plan are intended to comply with the requirements of Section 422 of the Internal Revenue Code.  On October 26, 2015, the Company granted a total of 69,000 plan share awards and 207,000 stock options to directors, officers, and other key employees vesting ratably over five years. On February 5, 2019, the Company granted a total of 6,000 plan share awards and 27,000 stock options (which includes 9,000 stock options forfeited from the October 26, 2015 grants) to key employees vesting ratably over five years.

23

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6.          Stock-Based Compensation (continued)

Stock Incentive Plan (continued)

On November 13, 2019, the shareholders of the Company approved the adoption of the Company’s 2019 Stock Incentive Plan (the “2019 Stock Incentive Plan,” together with the 2014 Stock Incentive Plan, the “Stock Incentive Plans”) which provides for a total of 250,000 shares reserved for future issuance as stock awards or stock options. No more than 62,500 shares, or 25%, may be granted as stock awards.  The balance of the plan is reserved for stock option awards. On November 11, 2020, the Company granted a total of 62,500 plan share awards and 187,500 stock options to directors, officers and other key employees vesting ratably over five years. The Stock Incentive Plans costs are recognized over the five year vesting period.  As of September 30, 2021, there are 0 plan share awards or stock options available for future grants under the Stock Incentive Plans.

Compensation expense pertaining to the 2011 Recognition Plan and the share awards under the Stock Incentive Plans was 0 and $106,000 for the three months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021 and 2020, compensation expense charged to operations for stock options granted under the 2011 Option Plan and the Stock Incentive Plans was $26,000 and $34,000, respectively.

7. Related Party Transactions

Certain directors and executive officers were indebted to the Bank in the approximate aggregate amounts of $3.1 million and $3.4 million at September 30, 2021 and June 30, 2021, respectively.

8. Fair Value Disclosures

The following disclosure is made in accordance with the requirements of ASC 825, Financial Instruments.  Financial instruments are defined as cash and contractual rights and obligations that require settlement, directly or indirectly, in cash.  In cases where quoted market prices are not available, fair values have been estimated using the present value of future cash flows or other valuation techniques.  The results of these techniques are highly sensitive to the assumptions used, such as those concerning appropriate discount rates and estimates of future cash flows, which require considerable judgment.  Accordingly, estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current settlement of the underlying financial instruments.

ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements.  These disclosures should not be interpreted as representing an aggregate measure of the underlying value of the Company.

The following methods and assumptions were used by the Company in estimating fair values of financial instruments:


Cash and Cash Equivalents

The carrying amount approximates the fair value of cash and cash equivalents.

Investment Securities
Fair values for investment securities, including mortgage-backed securities, are based on quoted market prices, where available.  If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.  The carrying values of restricted or non-marketable equity securities approximate their fair values.  The carrying amount of accrued investment income approximates its fair value.


Mortgage Loans Held-for-Sale
Because these loans are normally disposed of within ninety days of origination, their carrying value closely approximates the fair value of such loans.

24

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8.          Fair Value Disclosures (continued)

Loans Receivable

For variable-rate loans that re-price frequently and with no significant changes in credit risk, fair value approximates the carrying value.  Fair values for other loans are estimated using the discounted value of expected future cash flows. Interest rates used are those being offered currently for loans with similar terms to borrowers of similar credit quality. The carrying amount of accrued interest receivable approximates its fair value.

Deposit Liabilities
The fair values for demand deposit accounts are, by definition, equal to the amount payable on demand at the reporting date, that is, their carrying amounts.  Fair values for other deposit accounts are estimated using the discounted value of expected future cash flows. The discount rate is estimated using the rates currently offered for deposits of similar maturities.

Advances from Federal Home Loan Bank
The carrying amount of short-term borrowings approximates their fair value.  The fair value of long-term debt is estimated using discounted cash flow analyses based on current incremental borrowing rates for similar borrowing arrangements.

Off-Balance Sheet Credit-Related Instruments
Fair values for outstanding mortgage loan commitments to lend are based on fees currently charged to enter into similar agreements, taking into account the remaining term of the agreements, customer credit quality, and changes in lending rates.

The fair value of interest rate floors and caps contained in some loan servicing agreements and variable rate mortgage loan contracts are considered immaterial within the context of fair value disclosure requirements.  Accordingly, no fair value estimate is provided for these instruments.

At September 30, 2021 and June 30, 2021, the carrying amount and estimated fair values of the Company’s financial instruments were as follows:

  September 30, 2021  June 30, 2021 
  Carrying  Estimated  Carrying  Estimated 
  Value  Fair Value  Value  Fair Value 
  (In Thousands) 
Financial Assets            
   Cash and Cash Equivalents 
$
101,256
  
$
101,256
  
$
104,405
  
$
104,405
 
   Securities Available-for-Sale  
26,974
   
26,974
   
29,550
   
29,550
 
   Securities to be Held-to-Maturity  
61,969
   
61,775
   
54,706
   
54,608
 
   Loans Held-for-Sale  
10,573
   
10,573
   
14,427
   
14,427
 
   Loans Receivable  
339,424
   
340,330
   
336,394
   
336,865
 
                 
Financial Liabilities                
   Deposits 
$
507,583
  
$
496,289
  
$
506,596
  
$
492,492
 
   Advances from FHLB  
859
   
907
   
867
   
924
 
                 
Off-Balance Sheet Items                
   Mortgage Loan Commitments 
$
9,886
  
$
9,886
  
$
9,677
  
$
9,677


The estimated fair values presented above could be materially different than net realizable value and are only indicative of the individual financial instrument’s fair value.  Accordingly, these estimates should not be considered an indication of the fair value of the Company taken as a whole.

25

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8.          Fair Value Disclosures (continued)

The Company follows the guidance of FASB ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820").  ASC 820 affirms a framework for measuring fair value and expands disclosures about fair value measurements.  ASC 820 was issued to establish a uniform definition of fair value.  The definition of fair value is market-based as opposed to company-specific and includes the following:

Defines fair value as the price that would be received to sell an asset or paid to transfer a liability, in either case, through an orderly transaction between market participants at a measurement date and establishes a framework for measuring fair value;

Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date;

Nullifies the guidance in EITF 02-3, which required the deferral of profit at inception of a transaction involving a derivative financial instrument in the absence of observable data supporting the valuation technique;

Eliminates large position discounts for financial instruments quoted in active markets and requires consideration of the company’s creditworthiness when valuing liabilities; and

Expands disclosures about instruments that are measured at fair value.

The standard establishes a three-level valuation hierarchy for disclosure of fair value measurements.  The valuation hierarchy favors the transparency of inputs to the valuation of an asset or liability as of the measurement date.  The three levels are defined as follows:

Level 1 – Fair value is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets in which the Company can participate.

Level 2 – Fair value is based upon (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active, that is, markets in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly; (c) inputs other than quoted prices that are observable for the asset or liability; or (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – Fair value is based upon inputs that are unobservable for the asset or liability.  These inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).  These inputs are developed based on the best information available in the circumstances, which include the Company’s own data. The Company’s own data used to develop unobservable inputs are adjusted if information indicates that market participants would use different assumptions.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The preceding methods described may produce a fair value calculation that may not be indicative of the net realizable value or reflective of future fair values.  Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.  There have been no changes in the methodologies used during the three months ended September 30, 2021.

26

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8.          Fair Value Disclosures (continued)

Fair values of assets and liabilities measured on a recurring basis at September 30, 2021 and June 30, 2021 are as follows: see table

 
Fair Value Measurements Using:
   
September 30, 2021
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other Observable
Inputs
(Level 2)
 

Unobservable
Inputs
(Level 3)
 
Total
 
 (In Thousands) 
Available-for-Sale
        
Debt Securities            
FHLMC $0  $3,785  $0  $3,785 
FNMA  0   17,303   0   17,303 
GNMA  0   5,886   0   5,886 
                 
Total $0  $26,974  $0  $26,974 

 
Fair Value Measurements Using:
   
June 30, 2021
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 


Total
 
   (In Thousands)     
Available-for-Sale
        
Debt Securities            
FHLMC $0  $4,221  $0  $4,221 
FNMA  0   19,152   0   19,152 
GNMA  0   6,177   0   6,177 
                 
Total $0  $29,550  $0  $29,550 

9.           Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On July 1, 2019, the Company adopted ASU No. 2016-02 “Leases” (Topic 842) and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee. Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches with terms extending through 2058. Substantially all of the Company’s leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated statements of condition. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated statements of condition as right-of-use (“ROU”) assets and corresponding lease liabilities. See table

(In Thousands)  September 30, 2021  June 30, 2021 
Lease Right-of-Use AssetsClassification      
Operating lease right-of-use assets
Other Assets
 $855  $858 
Total Lease Right-of-Use Assets
  $855  $858 
          
Lease Liabilities         
Operating lease liabilities
Other Accrued Expenses and Liabilities
 $875  $876 
Total Lease Liabilities  $875  $876 

27

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9.          Leases (continued)

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to July 1, 2019, the rate for the remaining lease term as of July 1, 2019, was the Company’s only finance lease, the Company utilized its incremental borrowing rate at lease inception.

  September 30, 2021  June 30, 2021 
Weighted-average remaining lease term      
Operating leases 37.1 years
  37.4 years
 
  

  

 
Weighted-average discount rate        
Operating leases  3.00%  3.00%

10. Subsequent Events

There have been no subsequent events that have occurred after September 30, 2021, through the date of the financial statements, that would require disclosure or have an adverse impact on the financial statement.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The Company’s results of operations are primarily dependent on the results of Home Federal Bank (the “Bank”), its wholly owned subsidiary. The Bank’s results of operations depend, to a large extent, on net interest income, which is the difference between the income earned on its loan and investment portfolios and the cost of funds, consisting of the interest paid on deposits and borrowings.  Results of operations are also affected by provisions for loan losses and loan sale activities.  Non-interest expense principally consists of compensation and employee benefits, office occupancy and equipment expense, data processing, and other expenses.  Our results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies, and actions of regulatory authorities.  Future changes in applicable law, regulations, or government policies may materially impact our financial conditions and results of operations.

The Bank operates from its main office in Shreveport, Louisiana and seven full service branch offices located in Shreveport and Bossier City, Louisiana.  The Company’s primary market area is the Shreveport-Bossier City metropolitan area.

Critical Accounting Policies

Allowance for Loan Losses.  The Company has identified the calculation of the allowance for loan losses as a critical accounting policy, due to the higher degree of judgment and complexity than its other significant accounting policies.  Provisions for loan losses are based upon management’s periodic valuation and assessment of the overall loan portfolio and the underlying collateral, trends in non-performing loans, current economic conditions, and other relevant factors in order to maintain the allowance for loan losses at a level believed by management to represent all known and inherent losses in the portfolio that are both probable and reasonably estimable.  Although management uses the best information available, the level of the allowance for loan losses remains an estimate which is subject to significant judgment and short-term change.

Income Taxes. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method.  Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax basis of the various assets and liabilities and gives current recognition to changes in tax rates and laws.  The realization of our deferred tax assets principally depends upon our achieving projected future taxable income.  We may change our judgments regarding future profitability due to future market conditions and other factors.  We may adjust our deferred tax asset balances, if our judgments change.

Discussion of Financial Condition Changes from June 30, 2021 to September 30, 2021

General

At September 30, 2021, the Company reported total assets of $566.8 million, an increase of $1.1 million, or 0.2%, compared to total assets of $565.7 million at June 30, 2021. The increase in assets was comprised primarily of increases in investment securities of $4.7 million, or 5.6%, from $84.3 million at June 30, 2021 to $88.9 million at September 30, 2021, loans receivable, net of $3.0 million, or 0.9%, from $336.4 million at June 30, 2021 to $339.4 million at September 30, 2021, and premises and equipment of $896,000, or 6.0%, from $14.9 million at June 30, 2021 to $15.8 million at September 30, 2021. These increases were partially offset by decreases in loans held-for-sale of $3.9, or 26.7%, from $14.4 million at June 30, 2021 to $10.6 million at September 30, 2021, cash and cash equivalents of $3.1 million, or 3.0%, from $104.4 million at June 30, 2021 to $101.3 million at September 30, 2021, deferred tax assets of $265,000, or 32.4%, from $819,000 at June 30, 2021 to $554,000 at September 30, 2021, other assets of $170,000, or 9.7%, from $1.8 million at June 30, 2021 to $1.6 million at September 30, 2021, and accrued interest receivable of $119,000, or 10.2%, from $1.2 million at June 30, 2021 to $1.0 million at September 30, 2021. The increase in investment securities was primarily due to security purchases of $9.9 million offset by principal repayments on mortgage backed securities of $5.2 million.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

Discussion of Financial Condition Changes from June 30, 2021 to September 30, 2021 (continued)

Cash and Cash Equivalents

Cash and cash equivalents decreased $3.1 million, or 3.0%, from $104.4 million at June 30, 2021 to $101.3 million at September 30, 2021. The decrease in cash and cash equivalents was primarily due to the purchases of investment securities.

Loans Receivable, Net

Loans receivable, net, decreased by $3.0 million, or 0.9%, to $339.4 million at September 30, 2021 compared to $336.4 million at June 30, 2021.  The decrease in loans receivable, net was primarily due to decreases in commercial non-real estate loans of $15.7 million, land loans of $1.9 million, multi-family residential loans of $606,000, equity line-of-credit loans of $352,000, equity and second mortgage loans of $35,000, and consumer loans of $30,000, partially offset by increases in one-to-four-family residential loans of $11.2 million, commercial real estate loans of $9.9 million, and construction loans of $215,000.

Loans Held-for-Sale

Loans held-for-sale decreased $3.9 million, or 26.7%, from $14.4 million at June 30, 2021 to $10.6 million at September 30, 2021.  The decrease in loans held-for-sale results primarily from the decrease in the origination volume during the first three months of fiscal 2022.

Investment Securities

Investment securities amounted to $88.9 million at September 30, 2021 compared to $84.3 million at June 30, 2021, an increase of $4.7 million, or 5.6%.  The increase in investment securities was primarily due to security purchases of $9.9 million offset by principal repayments on mortgage backed securities of $5.2 million.

Premises and Equipment, Net

Premises and equipment, net increased $896,000, or 6.0%, to $15.8 million at September 30, 2021 compared to $14.9 million at June 30, 2021.  The increase in premises and equipment was primarily due to the construction of the Company’s new Huntington branch on Pines Road.

Asset Quality

At both September 30, 2021 and June 30, 2021, the Company had $1.4 million of non-performing assets (defined as non-accruing loans, accruing loans 90 days or more past due, and other real estate owned), consisting of six commercial real estate loans to one borrower, two single-family residential loans, and one commercial real estate property and one single family residence in other real estate owned at September 30, 2021, compared to six commercial real estate loans to one borrower, three single-family residential loans, and one commercial real estate property and one single family residence in other real estate owned at June 30, 2021.  At September 30, 2021, the Company had one single family residential loan and eight commercial real estate loans classified as substandard compared to two single family residential loans and eight commercial real estate loans classified as substandard at June 30, 2021. There were no loans classified as doubtful at September 30, 2021 or June 30, 2021.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

Discussion of Financial Condition Changes from June 30, 2021 to September 30, 2021 (continued)

Total Liabilities

Total liabilities increased $125,000, or 0.02%, from $513.0 million at June 30, 2021 to $513.1 million at September 30, 2021 primarily due to increases in total deposits of $987,000, or 0.2%, to $507.6 million at September 30, 2021 compared to $506.6 million at June 30, 2021, and $345,000, or 12.7%, in other liabilities from $2.7 million at June 30, 2021 to $3.1 million at September 30, 2021, partially offset by a decrease of $1.3 million, or 54.2%, in other borrowings from $2.4 million at June 30, 2021 to $1.1 million at September 30, 2021, and a decrease of $8,000, or 0.9%, in advances from the Federal Home Loan Bank from $867,000 at June 30, 2021 to $859,000 at September 30, 2021.  The increase in deposits was primarily due to a $14.2 million, or 10.8%, increase in non-interest bearing deposits from $131.0 million at June 30, 2021 to $145.2 million at September 30, 2021, and a $5.6 million, or 4.3%, increase in savings deposits from $129.1 million at June 30, 2021 to $134.7 million at September 30, 2021, partially offset by a decrease of $14.2 million, or 13.0%, in certificates of deposit from $109.0 million at June 30, 2021 to $94.8 million at September 30, 2021, a $3.1 million, or 3.5%, decrease in money market deposits from $88.2 million at June 30, 2021 to $85.1 million at September 30, 2021, and a decrease in NOW accounts of $1.6 million, or 3.2%, from $49.3  million at June 30, 2021 to $47.7 million at September 30, 2021. The Company had $9.1 million in brokered deposits at September 30, 2021 compared to $10.7 million at June 30, 2021.  The decrease in advances from the Federal Home Loan Bank was primarily due to principal paydowns on amortizing advances.

Shareholders’ Equity

Shareholders’ equity increased $959,000, or 1.8%, to $53.7 million at September 30, 2021 from $52.7 million at June 30, 2021.  The primary reasons for the changes in shareholders’ equity from June 30, 2021 were net income of $1.4 million, the vesting of share awards, stock options, and the release of employee stock ownership plan shares totaling $168,000, and proceeds from the issuance of common stock from the exercise of stock options of $166,000, partially offset by the repurchase of Company stock of $334,000, dividends paid totaling $335,000, and a decrease in the Company’s accumulated other comprehensive income of $27,000.

Regulatory Capital

The Bank is required to meet minimum capital standards promulgated by the Office of the Comptroller of the Currency (“OCC”).  At September 30, 2021, Home Federal Bank’s regulatory capital was well in excess of the minimum capital requirements. At September 30, 2021, Home Federal Bank exceeded each of its regulatory capital requirements with tangible equity, common equity Tier 1, core, and total risk-based capital ratios of 9.57%, 15.97%, 9.57%, and 17.19%, respectively.

Comparison of Operating Results for the Three Months Ended September 30, 2021 and 2020

General

The increase in net income for the three months ended September 30, 2021, as compared to the prior year quarter resulted primarily from a $700,000, or 100.0%, decrease in provision for loan losses, and an increase of $237,000, or 5.9%, in net interest income, partially offset by a decrease of $690,000, or 40.4%, in non-interest income, an increase of $112,000, or 3.3%, in non-interest expense, and a $29,000, or 9.0%, increase in provision for income taxes.  The decrease in provision for loan losses is mainly due to improved economic quality factors along with an improvement in our overall credit quality.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

Comparison of Operating Results for the Three Months Ended September 30, 2021 and 2020 (continued)

Net Interest Income

The increase in net interest income for the three months ended September 30, 2021 was primarily due to a $447,000, or 44.8%, decrease in total interest expense, partially offset by a $210,000, or 4.2%, decrease in total interest income.  The decrease in total interest expense was primarily due to a decrease of 50 basis points in the average rate on total interest-bearing deposits.  The Company’s average interest rate spread was 2.98% for the three months ended September 30, 2021 compared to 2.92% for the three months ended September 30, 2020. The Company’s net interest margin was 3.16% for the three months ended September 30, 2021 compared to 3.21% for the three months ended September 30, 2020.

Provision for Losses on Loans

Based on an analysis of historical experience, the volume and type of lending conducted by Home Federal Bank, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to our market area, and other factors related to the collectability of Home Federal Bank’s loan portfolio, the provision for loan losses was none during the three months ended September 30, 2021, compared to a $700,000 provision made during the three months ended September 30, 2020. The allowance for loan losses was $4.1 million, or 1.20% of total loans receivable, at September 30, 2021 compared to $4.5 million, or 1.26% of total loans receivable, at September 30, 2020.  At September 30, 2021, Home Federal Bank had $976,000 in non-performing loans and $383,000 in foreclosed assets which totaled $1.4 million in non-performing assets.
 
Non-interest Income

The $690,000 decrease in non-interest income for the three months ended September 30, 2021, compared to the prior year quarterly period, was primarily due to a decrease of $702,000 in gain on sale of loans, and a $6,000 decrease in income from bank owned life insurance, partially offset by a $20,000 increase in service charges on deposit accounts. The Company sells most of its long-term fixed rate residential mortgage loan originations primarily in order to manage interest rate risk.

Non-interest Expense

The $112,000 increase in non-interest expense for the three months ended September 30, 2021, compared to the same period in 2020, is primarily attributable to increases of $53,000 in occupancy and equipment expense, $48,000 in advertising expense, $22,000 in franchise and bank shares tax expense, $19,000 in other non-interest expenses, $13,000 in data processing expense, $8,000 in deposit insurance premiums expense, and $6,000 in audit and examination fees. The increases were partially offset by decreases of $31,000 in legal fees, $22,000 in loan and collection expense, and $4,000 in compensation and benefits expense.

The aggregate compensation expense recognized by the Company for its Stock Option, Share Award, ESOP, and Recognition and Retention Plans amounted to $168,000 and $140,000 for the three months ended September 30, 2021 and September 30, 2020, respectively.

The Louisiana bank shares tax is assessed on the Bank’s equity and earnings.  For the three months ended September 30, 2021, the Company recognized franchise and bank shares tax expense of $130,000 compared to $108,000, for the same period in 2020.

Income Taxes

Income taxes amounted to $352,000 for the three months ended September 30, 2021, respectively, resulting in an effective tax rate of 20.6%. Income taxes amounted to $323,000 for the three months ended September 30, 2020, resulting in an effective tax rate of 18.3%.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

Comparison of Operating Results for the Three Months Ended September 30, 2021 and 2020 (continued)

Average Balances, Net Interest Income, Yields Earned, and Rates Paid.  The following tables show for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Tax-exempt income and yields have not been adjusted to a tax-equivalent basis. All average balances are based on monthly balances. Management does not believe that the monthly averages differ significantly from what the daily averages would be.

  Three Months Ended September 30, 
  2021  2020 
  
Average
Balance
  Interest  
Average
Yield/
Rate
  
Average
Balance
  Interest  
Average
Yield/
Rate
 
  (Dollars In Thousands) 
Interest-earning assets:                  
Loans receivable 
$
342,942
  
$
4,397
   
5.09
%
 
$
373,311
  
$
4,647
   
4.94
%
Investment securities  
86,350
   
341
   
1.57
   
58,881
   
319
   
2.15
 
Interest-earning deposits  
101,732
   
36
   
0.14
   
60,651
   
18
   
0.12
 
Total interest-earning assets  
531,024
   
4,774
   
3.57
%
  
492,843
   
4,984
   
4.01
%
Non-interest-earning assets  
36,089
           
35,121
         
Total assets 
$
567,113
          
$
527,964
         
Interest-bearing liabilities:                        
Savings accounts 
$
133,140
   
108
   
0.32
%
 
$
90,621
   
158
   
0.69
%
NOW accounts  
48,389
   
14
   
0.11
   
40,611
   
32
   
0.31
 
Money market accounts  
86,991
   
25
   
0.12
   
73,180
   
75
   
0.41
 
Certificate accounts  
101,364
   
382
   
1.50
   
156,320
   
706
   
1.79
 
Total interest-bearing deposits  
369,884
   
529
   
0.57
   
360,732
   
971
   
1.07
 
Other Borrowings  
1,376
   
11
   
3.17
   
1,752
   
14
   
3.17
 
FHLB advances  
861
   
10
   
4.61
   
1,010
   
12
   
4.71
 
Total interest-bearing liabilities 
$
372,121
   
550
   0.59% 
$
363,494
   
997
   1.09%
Non-interest-bearing liabilities:                        
Non-interest-bearing demand accounts  
139,885
           
111,352
         
Other liabilities  
2,938
           
3,498
         
Total liabilities  
514,944
           
478,344
         
Total Stockholders’ Equity(1)  
52,169
           
49,620
         
                         
Total liabilities and equity 
$
567,113
          
$
527,964
         
                         
Net interest-earning assets 
$
158,903
          
$
129,349
         
                         
Net interest income; average interest rate spread(2)     
$
4,224
   
2.98
%
     
$
3,987
   
2.92
%
Net interest margin(3)          
3.16
%
          
3.21
%
Average interest-earning assets to average interest-bearing liabilities          142.70%          135.58%


(1)
Includes retained earnings and accumulated other comprehensive loss.
(2)
Interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average rate on interest-bearing liabilities.
(3)
Net interest margin is net interest income divided by net average interest-earning assets.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

Comparison of Operating Results for the Three Months Ended September 30, 2021 and 2020 (continued)

Liquidity and Capital Resources

Home Federal Bank maintains levels of liquid assets deemed adequate by management.  The Bank adjusts its liquidity levels to fund deposit outflows, repay its borrowings, and to fund loan commitments.  Home Federal Bank also adjusts liquidity as appropriate to meet asset and liability management objectives.

Home Federal Bank’s primary sources of funds are deposits, amortization and prepayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, loan sales, and earnings and funds provided from operations.  While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition.  The Bank sets the interest rates on its deposits to maintain a desired level of total deposits.  In addition, Home Federal Bank invests excess funds in short-term interest-earning accounts and other assets which provide liquidity to meet lending requirements.  Home Federal Bank’s deposit accounts with the Federal Home Loan Bank of Dallas amounted to $34.5 million at September 30, 2021.

A significant portion of Home Federal Bank’s liquidity consists of securities classified as available-for-sale and cash and cash equivalents.   Home Federal Bank’s primary sources of cash are net income, principal repayments on loans and mortgage-backed securities, and increases in deposit accounts.  If Home Federal Bank requires funds beyond its ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Dallas which provides an additional source of funds.  At September 30, 2021, Home Federal Bank had $859,000 in advances from the Federal Home Loan Bank of Dallas and had $178.9 million in additional borrowing capacity.  Additionally, at September 30, 2021, Home Federal Bank was a party to a Master Purchase Agreement with First National Bankers Bank whereby Home Federal Bank may purchase Federal Funds from First National Bankers Bank in an amount not to exceed $20.4 million. There were no amounts purchased under this agreement as of September 30, 2021. In addition, the Company had available a $5.0 million line of credit agreement at September 30, 2021 with First National Bankers Bank. At September 30, 2021 there was a $1.5 million balance in the credit line.

At September 30, 2021, Home Federal Bank had outstanding loan commitments of $53.0 million to originate loans and commitments under unused lines of credit of $9.9 million. At September 30, 2021, certificates of deposit scheduled to mature in less than one year totaled $73.8 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In addition, the cost of such deposits could be significantly higher upon renewal in a rising interest rate environment.  Home Federal Bank intends to utilize its high levels of liquidity to fund its lending activities.  If additional funds are required to fund lending activities, Home Federal Bank intends to sell its securities classified as available-for-sale, as needed.

At September 30, 2021, Home Federal Bank exceeded each of its regulatory capital requirements with tangible equity, common equity Tier 1, core, and total risk-based capital ratios of 9.57%, 15.97%, 9.57%, and 17.19%, respectively.

Off-Balance Sheet Arrangements

At September 30, 2021, the Company did not have any off-balance sheet arrangements as defined by Securities and Exchange Commission rules.

Impact of Inflation and Changing Prices

The financial statements and related financial data presented herein have been prepared in accordance with instructions to Form 10-Q which require the measurement of financial position and operating results in terms of historical dollars without considering changes in relative purchasing power over time due to inflation.

Unlike most industrial companies, virtually all of the Company’s assets and liabilities are monetary in nature.  As a result, interest rates generally have a more significant impact on a financial institution’s performance than does the effect of inflation.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

Forward-Looking Statements

This Form 10-Q contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management, as well as assumptions made by and information currently available to management.  In addition, in those and other portions of this document the words “anticipate”, “believe”, “estimate”, “except”, “intend”, “should”, and similar expressions, or the negative thereof, as they relate to the Company or the Company’s management are intended to identify forward-looking statements.  Such statements reflect the current views of the Company with respect to future looking events and are subject to certain risks, uncertainties, and assumptions.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary from those described herein as anticipated, believed, estimated, expected, or intended.  The Company does not intend to update these forward-looking statements.

In addition to factors previously disclosed in the reports filed by the Company with the Securities and Exchange Commission and those identified elsewhere in this Form 10-Q, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations; general economic conditions; the scope and duration of the COVID-19 pandemic; the effects of the COVID-19 pandemic, including on the Company’s credit quality and operations as well as its impact on general economic conditions; legislative and regulatory changes including actions taken by governmental authorities in response to the COVID-19 pandemic; monetary and fiscal policies of the federal government; changes in tax policies, rates and regulations of federal, state and local tax authorities including the effects of the Tax Reform Act; changes in interest rates, deposit flows, the cost of funds, demand for loan products and the demand for financial services, in each case as may be affected by the COVID-19 pandemic, competition, changes in the quality or composition of the Company’s loans, investment and mortgage-backed securities portfolios; geographic concentration of the Company’s business; fluctuations in real estate values; the adequacy of loan loss reserves; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; changes in accounting principles, policies or guidelines and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and fees.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosures Controls and Procedures.  Under the supervision and with the participation of our management including our President and Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the applicable time periods specified by the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control over Financial Reporting.  There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

PART II

ITEM 1.LEGAL PROCEEDINGS

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which involve amounts in the aggregate believed by management to be immaterial to the financial condition of the Company.

ITEM 1A.RISK FACTORS

Not applicable.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


(a)
Not applicable.

(b)
Not applicable.

(c)
Purchases of Equity Securities

The Company’s repurchases of its common stock (split adjusted) made during the quarter ended March 31, 2021 are set forth in the table below, including stock-for-stock option exercises:

Period 
Total Number of
Shares
Purchased
  
Average
Price Paid
per Share
  
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
  
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (a)
 
July 1, 2021 – July 31, 2021  
--
  
$
--
   
--
   
134,000
 
August 1, 2020 – August 31, 2021  
--
   
--
   
--
   
134,000
 
September 1, 2020 – September 30, 2021  
17,672
  
$
18.89
   
17,672
   
116,328
 
Total  
17,672
  
$
18.89
   
17,672
   
116,328
 


Notes to this table:


(a)
On November 18, 2020, the Company announced that its Board of Directors approved a tenth stock repurchase program for the repurchase of up to 170,000 shares (split adjusted), or approximately 5.0% of its then outstanding shares of common stock. The repurchase program does not have an expiration date.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

Not applicable.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

ITEM 6. 
EXHIBITS

No. Description
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
 
Certification Pursuant to 18 U.S.C Section 1350
101.INS
 
Inline XBRL Instance Document
101.SCH
 
Inline XBRL Taxonomy Extension Schema Document
101.CAL
 
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
 
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
 
Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF

Inline XBRL Taxonomy Extension Definitions Linkbase Document
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 HOME FEDERAL BANCORP, INC. OF LOUISIANA
   
Date:   November 12, 2021
By:
/s/ Glen W. Brown
  
Glen W. Brown
  
Senior Vice President and Chief Financial Officer
  
(Duly authorized officer and principal financial and
accounting officer)