Home Federal Bancorp, Inc. of Louisiana — FY2023 Form 10-K
Reporting period: Fiscal year ended June 30, 2023, compared with fiscal 2022. The request labels the period “2022 Q4,” but this filing covers the full fiscal year ended June 30, 2023, not a standalone quarter.
Business context
Home Federal Bancorp is the holding company for Home Federal Bank, a community bank operating primarily in northwest Louisiana. The Bank gathers deposits and lends mainly in residential and commercial real estate and commercial business markets. In February 2023, it acquired Northwest Bancshares Corporation, parent of First National Bank of Benton, adding a Benton branch and expanding the franchise to ten full-service offices.
Key financial results
| Metric | FY2023 / June 30, 2023 | FY2022 / June 30, 2022 |
|---|---|---|
| Total assets | $660.9 million | $590.5 million |
| Net interest income | $21.6 million | $17.4 million |
| Net income | $5.7 million | $4.9 million |
| Diluted earnings per share | $1.81 | $1.41 |
| Net interest margin | 3.73% | 3.27% |
| Efficiency ratio | 67.71% | 69.59% |
| Net loans | $489.5 million | $387.9 million |
| Deposits | $597.4 million | $532.0 million |
| Cash and cash equivalents | $24.8 million | $64.1 million |
| Stockholders’ equity | $50.5 million | $52.3 million |
Interest income rose to $26.6 million from $19.2 million, while interest expense increased to $5.1 million from $1.9 million. Average yield on interest-earning assets was 4.61%, versus 3.62%; average cost of interest-bearing liabilities was 1.24%, versus 0.51%.
Operating cash flow was $12.1 million, investing cash use was $115.3 million, and financing cash flow was $63.9 million. Cash declined $39.3 million during the year, mainly reflecting loan growth and securities purchases. The Bank reported an average liquidity ratio of 21.42% for the quarter ended June 30, 2023.
The allowance for loan losses was $5.2 million, or 1.05% of loans, after an $868,000 provision. Nonperforming assets were reported at $1.6 million; the filing also reports nonperforming assets at 0.24% of total assets. Regulatory capital ratios included 8.69% tangible/core capital, 12.79% common equity Tier 1, and 13.95% total risk-based capital; the Bank was classified as well capitalized.
Material changes versus FY2022
- Assets grew 11.9%, and net loans increased 26.2%. Loan growth included $54.9 million of loans acquired from First National Bank of Benton.
- Net income increased 17.1%, supported by higher net interest income and margin. Higher asset yields outweighed, for the year, rising deposit and borrowing costs.
- Deposit composition shifted: certificates of deposit increased $110.1 million to $190.4 million, while savings deposits fell $51.1 million to $81.9 million. Certificates were 31.9% of deposits, compared with 15.1% a year earlier.
- Non-interest income fell 39.6% to $2.1 million, primarily because gain on loan sales decreased to $466,000 from $2.0 million as mortgage refinancing and originations slowed. Loan sales declined to $24.9 million from $87.2 million.
- Non-interest expense rose 10.5% to $16.0 million; professional fees increased $875,000, primarily due to acquisition costs. The Company repurchased $6.0 million of stock during FY2023 and paid $1.5 million in dividends.
- Stockholders’ equity declined $1.8 million, reflecting repurchases, dividends, and a $1.0 million decrease in accumulated other comprehensive income, partly offset by net income.
Outlook, risks and unusual items
- Management intends to grow and diversify commercial real estate and business lending, sell a substantial portion of long-term fixed-rate residential originations, control expenses, and consider expansion through branches or acquisitions. No quantified earnings or margin guidance is provided.
- Interest-rate and funding risk are significant: $168.2 million, or 88.3% of certificates of deposit, were scheduled to mature within one year. Renewal costs could rise, and management cautions that deposit retention is not assured. At year-end, the Bank had $145.6 million of non-interest-bearing deposits and $59.1 million of certificates of deposit of $250,000 or more.
- At June 30, 2023, the Company had $8.6 million outstanding on its First National Bankers Bank line of credit, which carried an initial rate of 8.25% under the subsequent agreement. The Bank had no FHLB advances outstanding and reported $212.2 million of FHLB borrowing capacity.
- Held-to-maturity securities had amortized cost of $74.4 million and fair value of $61.2 million, an unrealized shortfall of approximately $13.2 million. Available-for-sale securities had $3.4 million of gross unrealized losses. Management attributed securities losses principally to interest rates and said it intended and was able to hold the affected investments.
- The Company expected its July 1, 2023 adoption of CECL to increase the allowance for credit losses by 4% to 9%; the estimate was preliminary. A three-year phase-in of the regulatory capital impact was described.
- Credit quality improved by some measures: nonperforming assets declined from $2.2 million to $1.6 million, while the allowance rose. The provision increased to $868,000 from $336,000, which management primarily attributed to portfolio growth. Classified assets totaled $7.1 million, including $3.977 million classified substandard; none were classified doubtful or loss.
- Commitment disclosures differ within the filing: MD&A cites $53.4 million of loan-originating commitments and $15.0 million of unused lines, while the notes report $13.277 million of commitments to grant loans and $76.5 million of unfunded line commitments. These amounts may reflect different definitions or scopes; the filing text does not clearly reconcile them.
- The audit opinion was unqualified. The auditor identified the allowance’s qualitative factors and fair valuation of acquired loans and the core deposit intangible as critical audit matters. The auditor did not opine on internal-control effectiveness; management concluded controls were effective.
- The filing says there were no material pending legal proceedings outside ordinary-course matters and identifies no unresolved staff comments. Its risk-factor section is marked “Not applicable,” while the MD&A separately describes forward-looking risks including economic conditions, competition, interest rates, credit losses, and regulation.
Most important facts for investors to verify
- Reconcile the loan commitment and unused-line figures, and confirm which amounts represent funded or potential liquidity needs.
- Review deposit maturities, deposit-rate repricing, uninsured balances, and the ability to retain or replace deposits without materially compressing margins.
- Assess the acquired loan portfolio, preliminary purchase accounting, goodwill of $3.0 million, and core deposit intangible of $1.5 million; fair-value estimates could be refined during the measurement period.
- Evaluate the effects of CECL adoption against the estimated 4%–9% allowance increase and monitor subsequent provision, charge-offs, and classified loans.
- Track the fair-value shortfall in held-to-maturity securities, available liquidity, borrowing availability, and the impact of future interest-rate changes on capital and earnings.
- Confirm post-acquisition operating performance, commercial-loan growth and concentration, and whether margin gains persist as deposit costs reset.