Home Federal Bancorp, Inc. of Louisiana — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended December 31, 2018. The consolidated financial statements are unaudited; balance-sheet comparisons are to June 30, 2018. Amounts are in millions except per-share data.
Financial performance
| Metric | Three months ended Dec. 31, 2018 | Three months ended Dec. 31, 2017 | Six months ended Dec. 31, 2018 | Six months ended Dec. 31, 2017 |
|---|---|---|---|---|
| Net interest income | $3.921 | $3.731 | $7.809 | $7.473 |
| Provision for loan losses | $0.100 | $0.200 | $0.350 | $0.500 |
| Non-interest income | $0.439 | $0.697 | $1.108 | $1.665 |
| Non-interest expense | $2.722 | $2.755 | $5.497 | $5.586 |
| Net income | $1.175 | $0.361 | $2.393 | $1.369 |
| Diluted EPS | $0.62 | $0.19 | $1.25 | $0.72 |
- Second-quarter net interest margin was 3.86%, versus 3.76% a year earlier; net interest rate spread was 3.58%, versus 3.54%. Six-month NIM was 3.86%, versus 3.75%.
- Interest income rose 8.9% in the quarter and 7.6% for six months, while interest expense increased 25.6% and 21.4%, respectively. Higher deposit costs were partly offset by reduced FHLB borrowing costs.
- Second-quarter effective tax rate was 23.60%; the six-month rate was 22.06%. Management attributed the lower tax expense versus prior-year periods to the Tax Cuts and Jobs Act and a $0.642 million deferred-tax-asset remeasurement charge in the prior-year period.
Financial position, cash flow and liquidity
- Total assets were $425.6 million, up 0.9% from June 30, 2018. Net loans were $322.1 million, up 1.4%; total deposits were $373.4 million, up 3.6%; and stockholders’ equity was $48.6 million, up 3.4%.
- Cash and cash equivalents declined $5.0 million to $10.9 million. For the six months, operating cash flow was $6.2 million, investing cash flow was negative $12.7 million, and financing cash flow was positive $1.5 million, producing the $5.0 million net cash decrease.
- FHLB advances fell to $1.5 million from $11.6 million; other borrowings were $0.45 million. Deposit growth, particularly certificates of deposit, helped replace FHLB funding. Certificates totaling $95.8 million mature within one year; management expects a significant portion to remain, but gives no assurance.
- The Bank reported $150 million of additional FHLB borrowing capacity and a $15.5 million federal-funds purchase facility, unused at period-end. Regulatory capital ratios were 11.47% tangible, 16.81% CET1, 11.47% core and 18.00% risk-based, all above minimum requirements.
- Loan commitments to originate totaled $38.1 million, with $9.7 million of unused lines of credit. The filing reports no off-balance-sheet arrangements as defined by SEC rules.
Material changes, outlook and risks
- Loan growth was concentrated in commercial real estate and multifamily lending. The company purchased $12.5 million of mortgage-backed securities; total investment securities rose to $65.1 million.
- Nonperforming assets declined to $1.4 million from $3.0 million at June 30, 2018, comprising $0.670 million of nonperforming loans and $0.747 million of foreclosed assets. The allowance was $3.479 million, or 1.06% of total loans; management cautions it may not cover future losses. Past-due loans totaled $5.341 million, including $1.296 million over 90 days.
- Non-interest income declined, in part due to a $0.230 million quarterly loss on real estate and lower gains on mortgage loan sales. Mortgage banking activity had been reduced. The six-month period also included a $0.075 million real-estate-owned valuation adjustment.
- The Bank operated six full-service offices and expected to open a seventh during the quarter ending March 31, 2019. Premises and equipment investment increased partly in connection with the new office.
- The company repurchased $1.037 million of stock in the six-month period; 24,311 shares were purchased during the quarter at an average $32.67 per share. A new authorization for up to 95,000 shares was approved to follow completion of the existing program.
- No earnings or financial targets were provided. Management identifies interest rates, competition, economic conditions, loan-loss estimates, deposit retention and renewal costs as factors that could affect results. The allowance for loan losses is a significant judgmental estimate. Routine legal proceedings were described as immaterial; the filing lists no applicable risk factors.
Important facts for investors to verify
- Whether deposit pricing and certificate renewals pressure funding costs and net interest margin.
- Credit performance of commercial real estate, TDRs and past-due loans, and whether allowance levels remain adequate.
- Progress, cost and opening timing of the planned seventh branch.
- Future mortgage-sale volumes and real-estate disposition results, given reduced mortgage banking activity and the quarter’s property-sale loss.
- Capital, liquidity and share-repurchase developments, including execution of the newly authorized repurchase program.