Home Federal Bancorp, Inc. of Louisiana — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended March 31, 2023; balance-sheet comparisons are with June 30, 2022. The filing is unaudited. The supplied metadata labels the period “2022 Q3,” but the filing itself covers the quarter ended March 31, 2023.
Business context
The company is the holding company for Home Federal Bank, a Louisiana savings and loan association operating nine full-service branches, primarily in the Shreveport–Bossier City–Minden area. The company completed its acquisition of Northwest Bancshares Corporation, parent of First National Bank of Benton (FNBB), on February 1, 2023.
Financial results and key metrics
| Metric | Three months ended March 31, 2023 | Nine months ended March 31, 2023 |
|---|---|---|
| Net interest income | $5.47 million, up 28.2% year over year | $16.10 million, up 27.0% |
| Net interest margin | 3.56%, versus 3.27% | 3.84%, versus 3.19% |
| Provision for loan losses | $150,000, versus none | $718,000, versus $61,000 |
| Non-interest income | $508,000, down 39.2% | $1.59 million, down 44.8% |
| Non-interest expense | $4.50 million, up 26.4% | $11.81 million, up 9.6% |
| Net income | $1.06 million, down 16.8% | $4.45 million, up 16.8% |
| Diluted earnings per share | $0.34, versus $0.37 | $1.41, versus $1.10 |
At March 31, total assets were $686.0 million, up 16.2% from June 30, 2022. Net loans were $486.4 million, up 25.4%; deposits were $614.4 million, up 15.5%; and stockholders’ equity was $50.1 million, down 4.2%. Cash and cash equivalents were $45.6 million, down $18.5 million. The allowance for loan losses was $4.94 million, or 1.00% of total loans.
For the nine months, operating cash flow was $8.72 million; investing cash flow was negative $117.72 million, including $10.24 million net cash paid for the acquisition; and financing cash flow was $90.49 million. Net cash decreased $18.51 million. Funding included $82.38 million of deposit growth and net FHLB advances; the company also paid $1.17 million in dividends and repurchased $5.96 million of shares.
At period-end, FHLB advances were $10.0 million and other borrowings were $8.25 million. The Bank reported $168.6 million of additional FHLB borrowing capacity and an $8.3 million balance on a $10.0 million line of credit. Regulatory capital ratios were 8.43% tangible equity, 11.73% common equity Tier 1, 8.43% core, and 12.91% total risk-based capital; management said the Bank exceeded minimum requirements.
Material changes and unusual items
- The FNBB acquisition added approximately $53.3 million of loans, $77.9 million of deposits, and $13.5 million of securities. The cash purchase price was approximately $10.2 million; the company recorded $3.0 million of goodwill and a $1.5 million core deposit intangible. Acquisition fair values remain preliminary and may be adjusted for up to one year.
- Quarterly net income declined despite higher net interest income, primarily because of higher expenses, including acquisition-related professional fees, and lower non-interest income. Nine-month earnings increased as net interest income growth more than offset weaker non-interest income, higher expenses, and increased loan-loss provision.
- Deposit costs rose: quarterly interest expense on deposits was $1.34 million versus $394,000 a year earlier. Certificates of deposit reached $161.6 million, up from $80.3 million at June 30, 2022; $135.9 million of certificates were scheduled to mature within one year.
- Non-performing assets were $2.7 million, including $2.4 million of non-performing loans and $311,000 of other real estate owned, versus $2.2 million at June 30, 2022. Past-due loans of 90 days or more totaled $2.16 million; one commercial equipment loan was in foreclosure.
- Available-for-sale securities had $2.60 million of gross unrealized losses; held-to-maturity securities had $11.80 million. Management attributed the declines to interest rates, not credit quality, and said it intended and was able to hold the securities until recovery.
Outlook, risks, and contingencies
The filing provides no numerical earnings or revenue guidance. Management identifies interest rates, deposit flows and funding costs, loan demand and credit quality, economic conditions, competition, real estate values, regulatory changes, and acquisition-related goodwill or intangible impairment as risks. Management noted that deposit renewals could cost more in a rising-rate environment and that deposit retention is not assured. The Bank had $76.5 million of loan origination commitments and $13.3 million of commitments under unused credit lines.
The company was evaluating adoption of the current expected credit losses (CECL) standard; the effect was not yet known. Management reported effective disclosure controls and no material change in internal control over financial reporting. Routine legal proceedings were described as immaterial; the filing reported no other material legal proceedings and no subsequent events requiring disclosure.
Important facts for investors to verify
- How the FNBB acquisition affects ongoing earnings, integration costs, loan performance, and the final purchase accounting valuations.
- Deposit retention and repricing, especially the $135.9 million of certificates maturing within one year, and the resulting funding cost and net interest margin.
- Credit trends, including the rise in non-performing assets and substandard loans, and the adequacy of the allowance as the portfolio grows.
- Exposure to interest-rate changes and the unrealized losses on securities, including the distinction between available-for-sale and held-to-maturity portfolios.
- The eventual CECL adoption impact and the sustainability of earnings after acquisition-related expenses and lower mortgage loan-sale gains.