Home Federal Bancorp, Inc. of Louisiana — Form 10-Q
Reporting period: Three months ended September 30, 2023, the first quarter of fiscal 2024. The filing is unaudited. The company operates Home Federal Bank, serving northwest Louisiana through ten full-service offices.
Financial performance and condition
| Metric | Period-end / 2023 quarter | Comparison |
|---|---|---|
| Total assets | $662.6 million | Up $1.7 million, or 0.3%, from June 30, 2023 |
| Loans, net | $506.6 million | Up $17.1 million, or 3.5%, from June 30, 2023 |
| Total deposits | $592.5 million | Down $4.9 million, or 0.8%, from June 30, 2023 |
| Cash and cash equivalents | $8.9 million | Down $15.9 million from June 30, 2023 |
| Borrowings | $13.45 million | $4.6 million in FHLB advances and $8.85 million in other borrowings |
| Stockholders’ equity | $50.5 million | Down $69,000 from June 30, 2023 |
For the quarter, interest income was $8.07 million and interest expense was $2.79 million, resulting in net interest income of $5.28 million. Net income was $1.22 million; basic and diluted earnings per share were $0.40 and $0.39. The net interest margin was 3.37% and the interest-rate spread was 2.68%.
Operating cash flow was $2.45 million; investing cash flow was negative $18.15 million and financing cash flow was negative $0.19 million. Cash declined by $15.89 million, primarily as loan originations and growth were funded. The Bank reported regulatory capital ratios of 8.91% tangible equity, 12.76% common equity Tier 1, 8.91% core, and 13.87% total risk-based capital, each above applicable minimum requirements.
Changes versus comparable periods
- Compared with the September 2022 quarter, net income fell from $1.67 million to $1.22 million; diluted EPS declined from $0.52 to $0.39.
- Net interest income edged down 0.4% year over year, although interest income rose 39.7%. Interest expense increased from $476,000 to $2.79 million, reflecting higher deposit and borrowing costs. Net interest margin declined from 3.90% to 3.37%, and the spread narrowed from 3.74% to 2.68%.
- Non-interest expense rose $435,000, or 11.6%, while non-interest income declined $112,000, or 20.5%. No provision for credit losses was recorded in the 2023 quarter, compared with $418,000 in the prior-year quarter; income tax expense was $310,000 versus $9,000.
- From June 30 to September 30, 2023, loan growth was primarily in residential, construction, and land loans. Deposit declines in money market and savings accounts were partly offset by higher certificates of deposit.
Outlook, risks, and unusual items
- The filing provides no numerical earnings or operating guidance. Management says it intends to use liquidity to support lending; additional funding could come from available-for-sale securities or borrowing facilities.
- At quarter-end, the Bank had $4.6 million in FHLB advances and $198.1 million of additional FHLB borrowing capacity. It also had an $11.0 million line of credit, of which $8.9 million was drawn, and a separate federal-funds purchase facility with no balance outstanding.
- Loan commitments were $53.0 million, unused lines of credit were $13.1 million, and $179.0 million of certificates of deposit were scheduled to mature within one year. Management expects a significant portion of maturing deposits to remain, but gives no assurance; renewal costs could be higher.
- Non-performing assets were $1.8 million, up from $1.6 million at June 30. Loans past due 90 days or more totaled $982,000; $68,000 was still accruing. The allowance for credit losses was $5.1 million, or 1.00% of gross loans.
- The company adopted CECL on July 1, 2023. Adoption increased the loan allowance by $359,000; the filing reports a $189,000 cumulative retained-earnings adjustment and a $149,000 after-tax decrease to equity. The quarter included $433,000 in loan charge-offs and no credit-loss provision.
- Available-for-sale securities had $4.465 million in gross unrealized losses and $138,000 in gross unrealized gains. Held-to-maturity securities had $15.249 million in unrealized losses; their fair value was $57.557 million versus $72.806 million amortized cost. Management attributes the losses to interest rates and says it has the ability and intent to hold the securities until recovery.
- Management identifies interest-rate changes, deposit flows and funding costs, local economic conditions, real-estate values, loan quality, and the adequacy of credit-loss reserves among the risks that could affect results. No material pending legal proceedings or new risk factors were reported.
Important facts for investors to verify
- Whether deposit trends, certificate maturities, and sharply higher deposit costs affect future funding and net interest margin.
- Loan performance, non-performing assets, charge-offs, and allowance adequacy, particularly as CECL estimates depend on management assumptions.
- Liquidity and borrowing usage as loan growth continues, including the impact of securities sales or additional borrowing.
- The effect of interest rates on securities values and the company’s ability to hold securities with substantial unrealized losses.
- Whether the first-quarter increases in operating expenses and taxes persist in subsequent periods.