Business context and reporting period
Home Federal Bancorp, Inc. of Louisiana is the holding company for Home Federal Bank, a community bank operating in northwest Louisiana. The filing covers the quarter and nine months ended March 31, 2018 (fiscal 2018 Q3). The request metadata says “2017 Q3,” but the filing itself reports 2018 Q3.
Financial results and position
Amounts are in millions, except per-share data and percentages.
| Metric | Three months ended Mar. 31, 2018 | Nine months ended Mar. 31, 2018 |
|---|---|---|
| Interest income | $4.51 | $13.69 |
| Net interest income | $3.65 | $11.12 |
| Provision for loan losses | $0.35 | $0.85 |
| Net income | $1.02 | $2.39 |
| Diluted EPS | $0.54 | $1.26 |
| Net interest margin | 3.76% | 3.78% |
| Net interest rate spread | 3.58% | 3.55% |
At March 31, 2018, assets were $412.1 million, net loans $314.2 million, deposits $347.2 million, FHLB advances $16.7 million, and stockholders’ equity $46.4 million. Cash and cash equivalents were $8.4 million. The allowance for loan losses was $3.7 million, or 1.16% of loans.
For the nine months, operating cash flow was $12.5 million, investing cash flow was positive $0.2 million, and financing cash flow was negative $16.2 million. Cash declined $3.5 million to $8.4 million. The bank reported regulatory capital ratios of 11.38% tangible, 16.34% common equity Tier 1, 11.38% core, and 17.59% risk-based.
Material changes versus comparable periods
- Quarterly net income rose 19.8% from $0.85 million; nine-month net income fell 8.6% from $2.62 million. Quarterly diluted EPS was $0.54 versus $0.44; nine-month diluted EPS was $1.26 versus $1.38.
- Net interest income increased 3.6% for the quarter and 7.1% for nine months. Nine-month interest income rose 10.5%, while interest expense increased 27.9%.
- Non-interest income declined 29.2% for the quarter and 18.5% for nine months, primarily reflecting lower gains on loan sales. Non-interest expense fell 6.8% and 2.7%, respectively.
- Compared with June 30, 2017, assets declined 3.4%; deposits increased 5.5%, while FHLB advances fell 65.8%. Net loans edged up 0.4%. Money-market deposits increased $19.3 million.
- Quarterly dividends declared were $0.12 per share versus $0.09 a year earlier; nine-month dividends were $0.36 versus $0.27. The company repurchased $1.5 million of stock during the nine months.
Outlook, commentary, risks, and unusual items
- No earnings or financial guidance is provided. Management says liquidity is intended to support lending and identifies deposits, loan and securities repayments, loan sales, operating cash flow, and FHLB borrowing as funding sources.
- Available additional FHLB borrowing capacity was $144.4 million. Loan commitments were $49.3 million, unused credit lines $10.9 million, and certificates of deposit maturing within one year $61.9 million. Management expects a significant portion of those deposits to remain, but cautions that renewals could cost more in a rising-rate environment.
- The Tax Cuts and Jobs Act reduced the federal corporate tax rate and prompted a $0.642 million deferred-tax-asset remeasurement charge in the nine-month period. The lower blended tax rate reduced quarterly tax expense to $0.158 million from $0.428 million.
- Credit quality warrants attention: nine-month charge-offs were $0.911 million versus $0.030 million in the prior-year period. The filing describes a $1.6 million nonaccrual commercial-borrower exposure following charge-offs, and a newly restructured $4.7 million commercial loan group that was current, with no expected losses stated. Management says the allowance is adequate but warns it may not cover future losses.
- The filing gives differing March 31 nonperforming-asset totals: $4.0 million in one discussion and $3.7 million elsewhere. Management also identifies $1.1 million of other real estate owned, including two residences acquired during the quarter.
- Available-for-sale securities had $1.352 million of gross unrealized losses, attributed by management to interest rates rather than credit quality; the securities are largely agency mortgage-backed securities. Management says it intends and is able to hold them until value recovers.
Important facts for investors to verify
- Reconcile the filing’s $4.0 million versus $3.7 million nonperforming-asset figures and confirm the definitions and included balances.
- Track performance and collateral/recovery prospects for the nonaccrual commercial borrower and the $4.7 million restructured loans.
- Assess whether the higher deposit and borrowing costs continue to pressure net interest spread and margin.
- Confirm deposit retention and funding needs as $61.9 million of certificates mature within one year and lending commitments remain outstanding.
- Review the impact of the tax-rate change and the $0.642 million deferred-tax remeasurement on period-to-period earnings comparability.