Home Federal Bancorp, Inc. of Louisiana — Form 10-Q
Reporting period: Quarter ended March 31, 2015, with nine-month results for the period then ended; financial statements are unaudited. The request metadata says “2014 Q3,” but the filing itself covers fiscal 2015’s third quarter.
Business context and financial condition
The company is the holding company for Home Federal Bank, a community bank serving the Shreveport-Bossier City area of Louisiana. At March 31, 2015, total assets were $357.7 million, up 8.6% from June 30, 2014. Net loans grew 10.8% to $265.5 million, while deposits increased 0.9% to $274.8 million.
- Cash and cash equivalents: $12.4 million, down from $13.6 million at June 30, 2014.
- FHLB advances: $38.5 million, up from $12.9 million; the increase followed the withdrawal of a temporary deposit that had helped fund repayment of advances.
- Stockholders’ equity: $43.1 million, compared with $42.8 million. Tangible book value per share was $20.25, versus $19.08.
- Regulatory capital ratios at the Bank were 12.29% tangible, 12.29% core, and 19.24% risk-based, each above the applicable minimum requirements.
Results and key metrics
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Net income | $843,000 in 2015; $638,000 in 2014, up 32.1% | $2.501 million in 2015; $1.996 million in 2014, up 25.3% |
| Diluted earnings per share | $0.42; $0.31 in 2014 | $1.22; $0.94 in 2014 |
| Net interest income | $3.077 million; $2.647 million in 2014 | $9.157 million; $7.982 million in 2014 |
| Net interest margin | 3.73%; 3.92% in 2014 | 3.79%; 3.91% in 2014 |
| Non-interest income | $946,000; $627,000 in 2014 | $2.170 million; $1.799 million in 2014 |
| Non-interest expense | $2.677 million; $2.304 million in 2014 | $7.390 million; $6.712 million in 2014 |
For the nine months, provision for loan losses was $210,000, versus $118,000 a year earlier. The allowance was $2.455 million, or 0.92% of total loans. Cash provided by operating activities was $1.835 million, compared with cash used of $1.191 million in the prior-year period. Investing activities used $28.485 million; financing activities provided $25.388 million.
Material changes and management commentary
- Loan growth reflected higher one-to-four-family residential, home-equity line, construction, land, and commercial business balances. Total loans were $268.1 million before the allowance and deferred fees.
- Net interest income increased with higher average loan balances and interest income, although margin and spread declined. Management attributed the margin pressure primarily to lower average yields on earning assets.
- Loan-sale gains rose to $781,000 for the quarter and $1.668 million for the nine months. Management said a change in accrual methodology recognized gains upon execution of sales agreements rather than when proceeds were received.
- Compensation costs also increased partly because of a change in the timing of mortgage-originator commission accruals. A new Bossier City branch and real estate acquired for a future Shreveport branch contributed to higher premises and equipment.
- The company repurchased 64,519 shares during the quarter at an average $19.42 per share. A new authorization announced in February 2015 permits repurchases of up to 108,000 shares; 95,355 remained available at March 31.
- Effective January 1, 2015, Louisiana law eliminated treasury shares; the company reclassified the cost of repurchased shares among common stock and retained earnings.
Outlook, risks, and contingencies
- No specific earnings or growth guidance was provided. Management intends to use liquidity to support lending and may sell available-for-sale securities if needed.
- At March 31, 2015, the Bank had $114.1 million of additional FHLB borrowing capacity, a separate federal-funds purchase facility capped at $16.3 million with no balance outstanding, and $27.3 million of loan commitments.
- Certificates of deposit totaling $61.8 million were scheduled to mature within one year. Management expected a significant portion to remain, but noted there is no assurance and renewal costs could rise if interest rates increase.
- Non-performing assets were $144,000, compared with $178,000 at June 30, 2014. The filing reports no troubled debt restructurings. Management cautioned that the allowance may not cover future losses; estimating loan losses is a significant judgment.
- Interest rates, economic conditions, competition, deposit flows, loan prepayments, and regulatory changes may affect results. The company said it would not update forward-looking statements. No material off-balance-sheet arrangements or material pending litigation were reported; the filing marked risk factors “not applicable.”
Important facts for investors to verify
- Confirm the reporting period: the filing is for the quarter ended March 31, 2015, despite the request metadata’s “2014 Q3” label.
- Assess whether the loan-sale gain recognition and commission-accrual methodology changes affect comparability or the timing of reported earnings.
- Track loan growth, delinquency and credit classifications, charge-offs, and the adequacy of the 0.92%-of-loans allowance.
- Monitor reliance on FHLB advances, upcoming certificate maturities, deposit composition, and actual borrowing capacity and liquidity needs.
- Reconcile share counts and repurchases: the filing reports 2,131,343 shares outstanding at March 31, while it reports 2,115,484 outstanding as of May 11, 2015.