Home Federal Bancorp, Inc. of Louisiana — Form 10-Q
Reporting period: Quarter and six months ended December 31, 2013. The company is a Louisiana savings-and-loan holding company operating Home Federal Bank, primarily in the Shreveport-Bossier City area. Financial amounts below are in millions unless otherwise noted.
Financial performance and position
| Metric | Three months ended Dec. 31, 2013 | Three months ended Dec. 31, 2012 | Six months ended Dec. 31, 2013 | Six months ended Dec. 31, 2012 |
|---|---|---|---|---|
| Net interest income | $2.632 | $2.652 | $5.334 | $5.298 |
| Provision for loan losses | $0.022 | $0.116 | $0.088 | $0.227 |
| Non-interest income | $0.569 | $0.919 | $1.172 | $1.851 |
| Non-interest expense | $2.225 | $2.134 | $4.407 | $4.195 |
| Net income | $0.645 | $0.881 | $1.358 | $1.819 |
| Diluted earnings per share | $0.30 | $0.35 | $0.63 | $0.71 |
| Net interest margin | 3.91% | 4.13% | 3.91% | 4.10% |
- At December 31, total assets were $285.8 million, up 3.1% from June 30, 2013. Net loans were $212.0 million, up 2.9%; deposits were $225.3 million, up 6.3%.
- Cash and cash equivalents were $6.9 million. Available-for-sale and held-to-maturity securities totaled $45.0 million, down from $49.4 million at June 30.
- FHLB advances were $18.5 million, down from $21.7 million; other bank borrowings were zero at period-end. Stockholders’ equity was $41.3 million, down 1.6%.
- For the six months, operating cash flow was negative $0.9 million, investing cash flow negative $3.3 million, and financing cash flow positive $7.4 million. Cash increased $3.2 million to $6.9 million.
- The allowance for loan losses was $2.316 million, or 1.08% of total loans. Six-month net charge-offs were $12,000.
Changes versus prior comparable periods
- Net income declined 26.8% in the quarter and 25.3% for the six months. The main pressure was lower non-interest income, especially gains on sales of loans and securities. Six-month non-interest income fell 36.7%.
- Quarterly net interest income slipped 0.8%; six-month net interest income rose 0.7%. Net interest margin narrowed to 3.91% from 4.13% for the quarter and from 4.10% for the six-month period.
- Non-interest expense increased 4.3% for the quarter and 5.1% for the six months. Management cited higher occupancy, taxes, compensation and other costs; hiring additional commercial and residential loan officers contributed to six-month compensation growth.
- Asset quality improved on reported measures: non-performing assets were $565,000 versus $649,000 at June 30, and management reported five non-performing loans versus nine totaling $1.4 million at December 31, 2012. Classified substandard loans fell to $403,000 from $5.3 million at June 30, 2013. Past-due loans totaled $2.924 million; $204,000 was more than 90 days past due and still accruing.
Outlook, risks and notable items
- No numerical earnings or operating guidance is provided. Management said it intends to use liquidity to support lending and may sell available-for-sale securities or use borrowing capacity if needed.
- Liquidity sources include $114.6 million of additional FHLB borrowing capacity and a $16.7 million federal-funds purchase facility, unused at period-end. Loan commitments were $28.8 million; certificates of deposit of $42.5 million mature within one year. Management expects a significant portion to renew but cautioned renewal costs could rise if interest rates increase.
- Regulatory capital ratios were 14.18% tangible, 14.18% core and 23.77% risk-based, above stated minimums of 1.5%, 3.0% and 8.0%. Management characterized the Bank as well capitalized relative to requirements.
- Key exposures include interest-rate changes, competition, local economic conditions, loan performance and the judgment involved in estimating the loan-loss allowance. Management cautioned that future loan losses could exceed the allowance.
- The company completed relocation of its agency office and acquired land for a future branch during the quarter. It repurchased 97,810 shares during the quarter at an average $17.36 per share, leaving 9,455 shares authorized under the announced program.
- Management reported no material off-balance-sheet arrangements, no material pending legal proceedings, and effective disclosure controls. The filing gives no formal market-risk disclosure in Item 3 and lists no applicable risk factors in Item 1A.
Important facts for investors to verify
- Whether reduced loan- and securities-sale gains persist and how loan-sale volumes affect future non-interest income.
- Whether net interest margin stabilizes as asset yields, funding costs and interest rates change.
- Loan quality trends, including past-due and non-accrual balances, and whether the $2.316 million allowance remains adequate as lending grows.
- Deposit retention and repricing for the $42.5 million of certificates maturing within one year, along with reliance on FHLB funding and available borrowing capacity.
- Use of remaining share-repurchase authorization and the effect of repurchases on capital and per-share results.