Home Federal Bancorp, Inc. of Louisiana — Form 10-Q
Business context and reporting period. The company is a Louisiana bank holding company operating Home Federal Bank in the Shreveport-Bossier City area. This unaudited report covers the quarter and six months ended December 31, 2014, the second quarter of fiscal 2015. The bank opened a fifth full-service office during the six-month period.
Key financial results
Amounts are in millions except per-share data and ratios. Income-statement comparisons are against the corresponding 2013 periods; balance-sheet comparisons are against June 30, 2014.
| Metric | Three months ended Dec. 31, 2014 | Six months ended Dec. 31, 2014 |
|---|---|---|
| Net interest income | $3.105 million, up 18.0% | $6.080 million, up 14.0% |
| Provision for loan losses | $80,000 | $120,000 |
| Non-interest income | $594,000, up 4.4% | $1.224 million, up 4.4% |
| Non-interest expense | $2.375 million, up 6.7% | $4.713 million, up 6.9% |
| Net income | $835,000, up 29.5% | $1.658 million, up 22.1% |
| Diluted earnings per share | $0.41 | $0.81 |
| Dividends declared per share | $0.07 | $0.14 |
- For the six-month period, net interest margin was 3.83%, down from 3.91%; average interest-rate spread was 3.64%, down from 3.66%. Management attributed the declines primarily to lower yields on interest-earning assets.
- At December 31, total assets were $346.3 million, up 5.1% from June 30. Net loans were $260.1 million, up 8.6%; total securities were approximately $53.2 million, versus $50.2 million; and stockholders’ equity was $43.3 million. Book value per share was $19.76, versus $19.08.
- Deposits fell 7.2% to $252.8 million, while FHLB advances increased $36.1 million to $49.0 million. Cash and cash equivalents declined 66.2% to $4.6 million.
- Six-month cash flows: $1.3 million provided by operations, $25.4 million used in investing, and $15.1 million provided by financing. Cash decreased $9.0 million.
Changes, outlook, and risks
- Management attributed much of the deposit and cash decline to a short-term money-market deposit of approximately $30.6 million at June 30 that was fully withdrawn by September 30. Increased FHLB borrowing helped fund the outflow and lending growth.
- Loan originations were $134.0 million for the six months, compared with $109.3 million a year earlier. Growth was concentrated in residential, home-equity, construction, land, and commercial business lending.
- Asset quality: four non-performing loans totaled $171,000, versus five loans totaling $565,000 a year earlier. The allowance was $2.365 million, or 0.90% of total loans. The period included $151,000 of charge-offs; no troubled debt restructurings were reported.
- Liquidity resources included $103.4 million of additional FHLB borrowing capacity and an unused $16.3 million federal-funds purchase facility. Loan commitments were $28.2 million; certificates of deposit maturing within one year totaled $64.3 million. Management said it intended to use liquidity to support lending and could sell available-for-sale securities if needed.
- The bank exceeded regulatory capital requirements, reporting tangible, core, and risk-based capital ratios of 12.35%, 12.35%, and 20.28%, respectively. Management cautioned that deposit renewal costs could rise in a higher-rate environment and that the loan-loss allowance may not cover future losses.
- No specific earnings or financial targets were provided. Management stated that results for the six months are not necessarily indicative of full-year results. Forward-looking statements are subject to risks and the company disclaimed an intent to update them.
- Other notable items: the company repurchased 13,841 shares during the quarter at an average $19.85 per share; $51,874 shares remained under its repurchase authorization. Management reported effective disclosure controls and no material change in internal control. Legal proceedings were described as routine and immaterial.
Important facts for investors to verify
- Whether loan growth and improved earnings persist while net interest margin remains below the prior-year level.
- Deposit stability after the large transitory withdrawal, and the cost and availability of FHLB and other funding.
- Loan quality trends, particularly past-due and classified loans, charge-offs, and adequacy of the allowance as the portfolio expands.
- Liquidity coverage of loan commitments and near-term certificate maturities, including the effect of potential higher renewal rates.
- Capital ratios and the effects of continued share repurchases, dividends, branch investment, and lending growth.