Home Federal Bancorp, Inc. of Louisiana — Form 10-Q Summary
Reporting period: The filing covers the quarter and nine months ended March 31, 2022, the third quarter of the company’s fiscal 2022 year. The request metadata labels this “2021 Q3,” but the filing itself is for 2022 Q3. Unless stated otherwise, figures are in millions of dollars.
Business context and financial position
The company is the holding company for Home Federal Bank, a community bank serving northwest Louisiana through nine full-service branches. At March 31, 2022, total assets were $574.6 million, up 1.6% from June 30, 2021. Net loans were $362.8 million, up 7.8%, led by commercial real estate lending; deposits were $516.9 million, up 2.0%.
| Metric | March 31, 2022 | Comparable / change |
|---|---|---|
| Cash and cash equivalents | $79.1 million | Down $25.3 million from June 30, 2021 |
| Available-for-sale and held-to-maturity securities | $103.2 million carrying value | Up $18.9 million from June 30, 2021 |
| Total liabilities | $522.0 million | Up $9.0 million from June 30, 2021 |
| Shareholders’ equity | $52.6 million | Down $0.1 million from June 30, 2021 |
| Borrowings | $2.6 million | $0.8 million FHLB advances and $1.8 million other borrowings |
Results, margins, and cash flow
| Metric | Three months ended March 31, 2022 | Year-over-year change | Nine months ended March 31, 2022 | Year-over-year change |
|---|---|---|---|---|
| Net interest income | $4.27 million | Down 3.9% | $12.68 million | Down 1.8% |
| Net income | $1.28 million | Down 9.9% | $3.81 million | Down 6.5% |
| Diluted EPS | $0.37 | Versus $0.41 | $1.10 | Versus $1.20 |
| Net interest margin | 3.27% | Down 0.26 percentage points | 3.19% | Down 0.22 percentage points |
| Net interest rate spread | 3.13% | Versus 3.31% | 3.03% | Versus 3.15% |
Quarterly non-interest income fell 31.1% to $0.84 million, mainly because of lower mortgage-loan sale gains. Non-interest expense rose 4.9% to $3.56 million. No loan-loss provision was recorded in the quarter, compared with $0.45 million a year earlier. For the nine-month period, the provision was $0.06 million, versus $1.75 million a year earlier.
For the nine months, operating activities provided $16.0 million, investing activities used $47.6 million, and financing activities provided $6.2 million. Cash and cash equivalents decreased $25.3 million to $79.1 million. The company declared dividends of $0.10 per share for the quarter and $0.30 per share for the nine months.
Material changes, outlook, and risks
- Loan growth and mix: Net loans rose $26.4 million from June 30, 2021. Commercial real estate loans increased $24.0 million; non-real-estate commercial loans declined $22.7 million. Management said the commercial loan origination pipeline remained strong.
- Mortgage activity: Loans held for sale declined 83.2% to $2.4 million, and gains on loan sales fell, primarily reflecting lower refinancing activity.
- Credit quality: Non-performing assets were $341,000, or 0.06% of assets, versus $1.4 million at June 30, 2021. The allowance for loan losses was $4.17 million, or 1.14% of total loans. One residential loan with a $208,000 balance was in foreclosure.
- Liquidity and commitments: The Bank reported $28.7 million on deposit with the FHLB, $187.7 million of additional FHLB borrowing capacity, and an unused $20.4 million federal funds purchase agreement. It had $56.7 million of loan commitments and $11.1 million in unused credit lines. Certificates of deposit totaling $46.0 million were scheduled to mature within one year; management noted renewal costs could rise in a higher-rate environment.
- Capital and shareholder returns: The Bank’s tangible equity, common equity Tier 1, core, and total risk-based capital ratios were 9.61%, 14.85%, 9.61%, and 15.98%, respectively, and exceeded regulatory minimums. The company repurchased $4.21 million of stock during the nine months and approved a new program for up to 170,000 shares.
- Unusual items and securities: Other income included a $228,000 bank-owned life insurance claim related to a retired executive. Unrealized losses on available-for-sale securities reduced other comprehensive income by $1.09 million after tax for the nine months. Management attributed securities losses to interest-rate changes, not credit quality, and said it had the intent and ability to hold the securities until recovery.
- Accounting and forward risks: The company was preparing to adopt the expected-credit-loss standard (CECL), effective for it in fiscal years beginning after December 15, 2022; management said the impact was not yet known and could be material. Risks discussed include interest-rate changes, deposit flows and funding costs, local economic conditions, real estate values, credit quality, and the COVID-19 pandemic. No earnings guidance was provided.
Most important facts for investors to verify
- Whether loan growth and the stated commercial lending pipeline translate into sustainable earnings, particularly as refinance-related loan sales decline.
- How rising interest rates affect net interest margin, securities values, deposit pricing, deposit retention, and loan demand.
- Whether the $4.17 million allowance remains adequate as the loan portfolio grows and as CECL adoption approaches.
- The expected CECL adoption impact and the timing and effect of the $46.0 million of certificates of deposit maturing within one year.
- How continued share repurchases and dividends affect capital and liquidity alongside loan commitments and planned lending growth.