Home Federal Bancorp Inc (HFBL) 10-Q 2022 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
FORM 10-Q
(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:	September 30, 2021
or

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from 
to

Commission file number: 
001-35019

HOME FEDERAL BANCORP, INC. OF LOUISIANA
(Exact name of registrant as specified in its charter)
Louisiana	02-0815311
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
624 Market Street, Shreveport, Louisiana	71101
(Address of principal executive offices)	(Zip Code)
(318) 222-1145
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock (par value $0.01 per share)	HFBL	Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ Yes  ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒ Yes  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐  Yes
☒   No

Shares of common stock, par value $0.01 per share, outstanding as of November 11, 2021: The registrant had 3,352,356 shares of common stock outstanding.

INDEX
 

		Page
PART I	FINANCIAL INFORMATION
Item 1:	Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Changes in Stockholders' Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	7
Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4:	Controls and Procedures	35
PART II	OTHER INFORMATION
Item 1:	Legal Proceedings	36
Item 1A:	Risk Factors	36
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3:	Defaults Upon Senior Securities	36
Item 4:	Mine Safety Disclosures	36
Item 5:	Other Information	36
Item 6:	Exhibits	37
SIGNATURES

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	September 30, 2021 (Unaudited)			June 30, 2021
	(In Thousands)
ASSETS
Cash and Cash Equivalents (Includes Interest-Bearing Deposits with Other Banks of $91,713 and $94,325       September 30, 2021 and June 30, 2021, Respectively)	$	101,256		$	104,405
Securities Available-for-Sale		26,974			29,550
Securities Held-to-Maturity (Fair Value of $61,775 and $54,608, Respectively)		61,969			54,706
Loans Held-for-Sale		10,573			14,427
Loans Receivable, Net of Allowance for Loan Losses of $4,127 and $4,122, Respectively		339,424			336,394
Accrued Interest Receivable		1,044			1,163
Premises and Equipment, Net		15,811			14,915
Bank Owned Life Insurance		7,242			7,214
Deferred Tax Asset		554			819
Foreclosed Assets		383			383
Other Assets		1,585			1,755
Total Assets	$	566,815		$	565,731
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Non-interest bearing	$	145,214		$	131,014
Interest-bearing		362,369			375,582
Total Deposits		507,583			506,596
Advances from Borrowers for Taxes and Insurance		527			426
Short-term Federal Home Loan Bank Advances		35			35
Long-term Federal Home Loan Bank Advances		824			832
Other Borrowings		1,100			2,400
Other Accrued Expenses and Liabilities		3,062			2,717
Total Liabilities		513,131			513,006
STOCKHOLDERS’ EQUITY
Preferred Stock – $0.01 Par Value; 10,000,000 Shares Authorized; NaN Issued and Outstanding		0			0
Common Stock – $0.01 Par Value; 40,000,000 Shares Authorized; 3,359,856 and 3,350,966 Shares Issued and       Outstanding (split adjusted) at September 30, 2021 and June 30, 2021, Respectively		34			34
Additional Paid-in Capital		37,974			37,583
Unearned ESOP Stock		(725	)		(754	)
Retained Earnings		16,153			15,587
Accumulated Other Comprehensive Income		248			275
Total Stockholders’ Equity		53,684			52,725
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	566,815		$	565,731

See accompanying notes to unaudited consolidated financial statements.

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	For the Three Months Ended September 30,
	2021		2020
	(In Thousands, Except per Share Data)
INTEREST INCOME
Loans, Including Fees	$	4,397	$	4,647
Investment Securities		0		2
Mortgage-Backed Securities		341		317
Other Interest-Earning Assets		36		18
Total Interest Income		4,774		4,984
INTEREST EXPENSE
Deposits		529		971
Other Borrowings		10		14
Federal Home Loan Bank Borrowings		11		12
Total Interest Expense		550		997
Net Interest Income		4,224		3,987
PROVISION FOR LOAN LOSSES		0		700
Net Interest Income after Provision for Loan Losses		4,224		3,287
NON-INTEREST INCOME
Gain on Sale of Loans		709		1,411
Income on Bank Owned Life Insurance		28		34
Service Charges on Deposit Accounts		268		248
Other Income		11		13
Total Non-Interest Income		1,016		1,706
NON-INTEREST EXPENSE
Compensation and Benefits		2,210		2,214
Occupancy and Equipment		429		376
Data Processing		207		194
Audit and Examination Fees		72		66
Franchise and Bank Shares Tax		130		108
Advertising		74		26
Legal Fees		100		131
Loan and Collection		72		94
Deposit Insurance Premium		38		30
Other Expense		203		184
Total Non-Interest Expense		3,535		3,423
Income Before Income Taxes		1,705		1,570
PROVISION FOR INCOME TAX EXPENSE		352		323
Net Income	$	1,353	$	1,247
EARNINGS PER COMMON SHARE:
Basic	$	0.42	$	0.38
Diluted	$	0.38	$	0.37
DIVIDENDS DECLARED	$	0.10	$	0.08

See accompanying notes to unaudited consolidated financial statements.

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	For the Three Months Ended September 30,
	2021			2020
	(In Thousands)
Net Income	$	1,353		$	1,247
Other Comprehensive (Loss) Net of Tax
Investment securities available-for-sale:
Net unrealized (Losses) Gains		(35	)		(256	)
Income Tax Effect		7			54
Reclassification adjustments for net (gains) losses realized in net income		0			0
Income tax effect		0			0
Other Comprehensive Loss		(28	)		(202	)
Total Comprehensive Income	$	1,325		$	1,045

See accompanying notes to unaudited consolidated financial statements.

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

	Common Stock		Additional Paid-in Capital		Unearned ESOP Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
								(In Thousands)
BALANCE – June 30, 2020	$	22	$	36,531	$	(870	)	$	13,937		$	915		$	50,535
Net Income		0		0		0			1,247			0			1,247
Changes in Unrealized Gain on Securities Available-for-Sale, Net of Tax Effects		0		0		0			0			(202	)		(202	)
Share Awards Earned		0		0		0			0			0			0
Stock Options Vested		0		34		0			0			0			34
Common Stock Issuance for Stock Option Exercises – Split Adjusted		0		38		0			0			0			38
ESOP Compensation Earned		0		40		29			0			0			69
Company Stock Purchased		0		0		0			(387	)		0			(387	)
Dividends Declared		0		0		0			(282	)		0			(282	)
BALANCE – September 30, 2020	$	22	$	36,643	$	(841	)	$	14,515		$	713		$	51,052
BALANCE – June 30, 2021	$	34	$	37,701	$	(754	)	$	15,469		$	275		$	52,725
Net Income		0		0		0			1,353			0			1,353
Changes in Unrealized Gain on Securities Available-for-Sale, Net of Tax Effects		0		0		0			0			(27	)		(27	)
Share Awards Earned		0		0		0			0			0			0
Stock Split		0		0		0			0			0			0
Stock Options Vested		0		26		0			0			0			26
Common Stock Issuance for Stock Option Exercises		0		166		0			0			0			166
ESOP Compensation Earned		0		81		29			0			0			110
Company Stock Purchased		0		0		0			(334	)		0			(334	)
Dividends Declared		0		0		0			(335	)		0			(335	)
BALANCE – September 30, 2021	$	34	$	37,856	$	(725	)	$	16,271		$	248		$	53,684

See accompanying notes to unaudited consolidated financial statements.

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	September 30,
	2021			2020
	(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	1,353		$	1,247
Adjustments to Reconcile Net Income to Net
Cash (Used in) Provided by Operating Activities
Bad Debt Recovery		6			52
Federal Home Loan Bank Stock Certificate		0			(2	)
Net Amortization and Accretion on Securities		41			44
Gain on Sale of Loans		(709	)		(1,411	)
Amortization of Deferred Loan Fees		(426	)		(216	)
Depreciation of Premises and Equipment		182			168
ESOP Expense		110			69
Stock Option Expense		26			34
Deferred Income Tax		265			(188	)
Provision for Loan Losses		0			700
Increase in Cash Surrender Value on Bank Owned Life Insurance		(28	)		(34	)
Share Awards Expense		32			37
Changes in Assets and Liabilities:
Loans Held-for-Sale – Originations and Purchases		(28,495	)		(60,258	)
Loans Held-for-Sale – Sale and Principal Repayments		33,058			48,625
Accrued Interest Receivable		119			238
Other Operating Assets		170			(264	)
Other Operating Liabilities		345			429
Net Cash (Used in) Provided by Operating Activities		6,049			(10,730	)
CASH FLOWS FROM INVESTING ACTIVITIES
Loan Originations and Purchases, Net of Principal Collections		(2,653	)		4,586
Deferred Loan Fees Collected		20			67
Acquisition of Premises and Equipment		(1,078	)		(851	)
Proceeds from Sale of Real Estate		0			0
Activity in Available-for-Sale Securities:
Principal Payments on Mortgage-Backed Securities		2,528			8,488
Purchase of Securities		0			(5,090	)
Activity in Held-to-Maturity Securities:
Principal Payments on Mortgage-Backed Securities		2,652			2,496
Purchase of Securities		(9,943	)		0
Net Cash (Used in) Provided by Investing Activities		(8,474	)		9,696

See accompanying notes to unaudited consolidated financial statements.

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

	Three Months Ended
	September 30,
	2021			2020
	(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposits	$	987		$	22,895
Repayments of Advances from Federal Home Loan Bank		(9	)		(77	)
Proceeds from Other Borrowings		200			700
Repayments of Other Borrowings		(1,500	)		(1,500	)
Net Decrease in Advances from Borrowers for Taxes and Insurance		101			404
Dividends Paid		(335	)		(282	)
Company Stock Purchased		(334	)		(387	)
Proceeds from Stock Options Exercised		166			38
Plan Share Distributions		0			0
Net Cash (Used in) Provided by Financing Activities		(724	)		21,791
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(3,149	)		20,757
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	$	104,405		$	54,871
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	101,256		$	75,628
SUPPLEMENTARY CASH FLOW INFORMATION
Interest Paid on Deposits and Borrowed Funds	$	553		$	1,008
Income Taxes Paid		0			275
Market Value Adjustment for (Loss)/Gain on Debt Securities Available-for-Sale		(35	)		(256	)

See accompanying notes to unaudited consolidated financial statements.

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Home Federal Bancorp, Inc. of Louisiana (the “Company”) and its subsidiary, Home Federal Bank (“Home Federal Bank” or the “Bank”). These consolidated financial statements were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three month period ended September 30, 2021 are not necessarily indicative of the results which may be expected for the fiscal year ending June 30, 2022.

The Company follows accounting standards set by the Financial Accounting Standards Board (the “FASB”). The FASB sets generally accepted accounting principles (“GAAP”) that we follow to ensure we consistently report our financial condition, results of operations, and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification (the “Codification” or the “ASC”).

In accordance with the subsequent events topic of the ASC, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements. The effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of September 30, 2021. In preparing these financial statements, the Company evaluated the events and transactions that occurred through the date these financial statements were issued.

Use of Estimates

In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Statements of Financial Condition and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the allowance for loan losses.

Nature of Operations

Home Federal Bancorp, Inc. of Louisiana, a Louisiana corporation, is the fully public stock holding company for Home Federal Bank located in Shreveport, Louisiana. The Bank is a federally chartered stock savings and loan association and is subject to federal regulation by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. The Company is a savings and loan holding company regulated by the Board of Governors of the Federal Reserve System. Services are provided to the Bank’s customers by 7 full-service banking offices and home office, located in Caddo and Bossier Parishes, Louisiana. The area served by the Bank is primarily the Shreveport-Bossier City metropolitan area; however, loan and deposit customers are found dispersed in a wider geographical area covering much of northwest Louisiana. As of September 30, 2021, the Bank had 1 wholly-owned subsidiary, Metro Financial Services, Inc., which previously engaged in the sale of annuity contracts and does not currently engage in a meaningful amount of business.

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, cash and cash equivalents include cash on hand, balances due from banks, and federal funds sold, all of which mature within ninety days.

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.          Summary of Accounting Policies (continued)

Securities

Securities are being accounted for in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 320’s, Investments which requires the classification of securities into one of three categories: Trading, Available-for-Sale, or Held-to-Maturity. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates this classification periodically.

Investments in non-marketable equity securities and debt securities, in which the Company has the positive intent and ability to hold to maturity, are classified as held-to-maturity and carried at cost, adjusted for amortization of the related premiums, and accretion of discounts, using the interest method. Investments in debt securities that are not classified as held-to-maturity and marketable equity securities that have readily determinable fair values are classified as either trading or available-for-sale securities.

Securities that are acquired and held principally for the purpose of selling in the near term are classified as trading securities. Investments in securities not classified as trading or held-to-maturity are classified as available-for-sale. Trading account and available-for-sale securities are carried at fair value. Unrealized holding gains and losses on trading securities are included in earnings, while net unrealized holding gains and losses on available-for-sale debt securities are excluded from earnings and reported in other comprehensive income.  

The Company held 0 trading securities as of September 30, 2021 and June 30, 2021.

Purchase premiums and discounts are recognized in interest income using the interest method over the term of the securities. Securities are periodically reviewed for other-than-temporary impairment. For debt securities, management considers whether the present value of future cash flows expected to be collected are less than the security’s amortized cost basis (the difference defined as the credit loss), the magnitude and duration of the decline, the reasons underlying the decline and the Company’s intent to sell the security or whether it is more likely than not that the Company would be required to sell the security before its anticipated recovery in market value, to determine whether the loss in value is other than temporary. If a decline in value is determined to be other than temporary, if the Company does not intend to sell the security, and it is more-likely-than-not that it will not be required to sell the security before recovery of the security’s amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference defined as the non-credit portion) is recognized in other comprehensive income, net of applicable taxes. A decline in value that is considered to be other-than-temporary is recorded as a loss within noninterest income in the consolidated statement of income.

The Bank has invested in Federal Home Loan Bank (“FHLB”) stock, and other similar correspondent banks, which is reflected at cost in these financial statements. As a member of the FHLB System, the Bank is required to purchase and maintain stock in an amount determined by the FHLB. The FHLB stock is redeemable at par value at the discretion of the FHLB.

Loans Held-for-Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Loans

Loans receivable are stated as unpaid principal balances less allowances for loan losses and unamortized deferred loan fees. Net nonrefundable fees (loan origination fees, commitment fees, discount points) and costs associated with lending activities are being deferred and subsequently amortized into income as an adjustment of yield on the related interest earning assets using the interest method.  Interest income on contractual loans receivable is recognized on the accrual method. Unearned discount on property improvement and automobile loans is deferred and amortized on the interest method over the life of the loan.

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.          Summary of Accounting Policies (continued)

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, and prevailing economic conditions. The evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. A loan is considered impaired when, based on current information or events, it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. When a loan is impaired, the measurement of such impairment is based upon the present value of future cash flows or fair value of the collateral of the loan. If the fair value of the collateral is less than the recorded investment in the loan, the Bank will recognize the impairment by creating a valuation allowance with a corresponding charge against earnings. A loan is considered a troubled debt restructuring (“TDR”) if the Company, for economic or legal reasons related to a debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. Concessions granted under a TDR typically involve a temporary or permanent reduction in payments or interest rate or an extension of a loan’s stated maturity date at less than a current market rate of interest. Loans identified as TDRs are designated as impaired.

An allowance is also established for uncollectible interest on loans classified as substandard. The allowance is established by a charge to interest income equal to all interest previously accrued and income is subsequently recognized only to the extent that cash payments are received. When, in management’s judgment, the borrower’s ability to make periodic interest and principal payments is back to normal, the loan is returned to accrual status.

It should be understood that estimates of future loan losses involve an exercise of judgment. While it is possible that in particular periods the Company may sustain losses which are substantial relative to the allowance for loan losses, it is the judgment of management that the allowance for loan losses reflected in the accompanying statements of condition is adequate to absorb known and inherent losses in the existing loan portfolio both probable and reasonable to estimate. All loans greater than 90 days past due are generally placed on nonaccrual status.

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, the Bank has entered into commitments to extend credit. Such financial instruments are recorded when they are funded.

Foreclosed Assets

Assets acquired through, or in lieu of, loan foreclosure are held-for-sale and are transferred to other real estate owned at the lower of cost or current fair value minus estimated cost to sell as of the date of foreclosure. Cost is defined as the lower of the fair value of the property or the recorded investment in the loan. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell.

Premises and Equipment

Land is carried at cost. Buildings and equipment are carried at cost less accumulated depreciation computed on the straight-line method over the estimated useful lives of the assets. Estimated useful lives are as follows:

Buildings and Improvements	10 - 40 Years
Furniture and Equipment	3 - 10 Years

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.          Summary of Accounting Policies (continued)

Bank-Owned Life Insurance

The Company has purchased life insurance contracts on the lives of certain key employees. The Bank is the beneficiary of these policies. These contracts are reported at their cash surrender value, and changes in the cash surrender value are included in non-interest income.

Income Taxes

The Company and its wholly-owned subsidiary file a consolidated Federal income tax return on a fiscal year basis. Each entity pays its pro-rata share of income taxes in accordance with a written tax-sharing agreement.

The Company accounts for income taxes on the asset and liability method. Deferred tax assets and liabilities are recorded based on the difference between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized. Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized.  Current taxes are measured by applying the provisions of enacted tax laws to taxable income to determine the amount of taxes receivable or payable.

The Company follows the provisions of the Income Taxes Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740.  ASC 740 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on various related matters such as derecognition, interest, penalties, and disclosures required. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

While the Bank is exempt from Louisiana income tax, it is subject to the Louisiana Ad Valorem Tax, commonly referred to as the Louisiana Shares Tax, which is based on stockholders’ equity and net income.

Earnings per Share

Earnings per share are computed based upon the weighted average number of common shares outstanding during the period. The Company’s basic and diluted earnings per share were $0.42 and $0.38, respectively, for the three months ended September 30, 2021 compared to basic and diluted earnings per share (split adjusted) of $0.38 and $0.37, respectively, for the three months ended September 30, 2020.

Non-Direct Response Advertising

The Company expenses all advertising costs, except for direct-response advertising, as incurred. Non-direct response advertising costs were $74,000 and $26,000 for the three months ended September 30, 2021 and 2020, respectively.

In the event the Company incurs expense for material direct-response advertising, it will be amortized over the estimated benefit period. Direct-response advertising consists of advertising whose primary purpose is to elicit sales to customers who could be shown to have responded specifically to the advertising and results in probable future benefits. For the three months ended September 30, 2021 and 2020, the Company did 0t incur any amount of direct-response advertising.

Stock-Based Compensation

GAAP requires all share-based payments to employees, including grants of employee stock options and recognition and retention share awards, to be recognized as expense in the statement of operations based on their fair values. The amount of compensation is measured at the fair value of the options or recognition and retention share awards when granted, and this cost is expensed over the required service period, which is normally the vesting period of the options or recognition and retention awards.

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.          Summary of Accounting Policies (continued)

Reclassification

Certain financial statement balances included in the prior year consolidated financial statements have been reclassified to conform to the current period presentation.

Comprehensive Income

Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains, and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale debt securities, are reported as a separate component of the equity section of the consolidated balance sheets along with net income, they are components of comprehensive income (loss).

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For public business entities that are SEC filers, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods with those fiscal years. The extent of the impact upon adoption is not known and will depend on the characteristics of the Company’s loan portfolio and economic conditions on that date as well as forecasted conditions thereafter. The Company has established an implementation team and are in the process of engaging third-party consultants who have jointly developed a project plan to provide implementation oversight. The Company is in the process of developing and implementing current expected credit loss model that satisfy the requirements of ASU 2016-13. The future adoption of this ASU may have a material effect on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)." The amendments in this ASU simplified the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improved the consistent application of and simplified GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in the ASU are effective for fiscal years and interim periods beginning after December 15, 2020. The Company does not expect the adoption of this ASU to impact the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Securities

The amortized cost and fair value of securities with gross unrealized gains and losses follows:

	September 30, 2021
				Gross		Gross
	Amortized			Unrealized		Unrealized		Fair
Securities Available-for-Sale	Cost			Gains		Losses		Value
				(In Thousands)
Debt Securities
FHLMC Mortgage-Backed Certificates	$	3,761		$	24	$	0	$	3,785
FNMA Mortgage-Backed Certificates		16,892			439		28		17,303
GNMA Mortgage-Backed Certificates		6,007			1		122		5,886
Debt Securities
Total Debt Securities		26,660			464		150		26,974
Total Securities Available-for-Sale	$	26,660		$	464	$	150	$	26,974
Securities Held-to-Maturity
Debt Securities
GNMA Mortgage-Backed Certificates	$	778	��	$	10	$	0	$	788
FHLMC Mortgage-Backed Certificates		19,603			59		198		19,464
FNMA Mortgage-Backed Certificates		39,707			562		651		39,618
Total Debt Securities		60,088			631		849		59,870
Municipals		1,354			24		0		1,378
Other Securities (Non-Marketable)
27,770 Shares – Federal Home Loan Bank		277			0		0		277
630 Shares – First National Bankers Bankshares, Inc.		250			0		0		250
Total Other Securities		527			0		0		527
Total Securities Held-to-Maturity	$	61,969		$	655	$	849	$	61,775

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.          Securities (continued)

	June 30, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Securities Available-for-Sale	Cost		Gains		Losses		Value
	(In Thousands)
Debt Securities
FHLMC Mortgage-Backed Certificates	$	4,188	$	33	$	0	$	4,221
FNMA Mortgage-Backed Certificates		18,666		486		0		19,152
GNMA Mortgage-Backed Certificates		6,347		1		171		6,177
Total Debt Securities		29,201		520		171		29,550
Total Securities Available-for-Sale	$	29,201	$	520	$	171	$	29,550
Securities Held-to-Maturity
Debt Securities
GNMA Mortgage-Backed Securities	$	782	$	17	$	0	$	799
FHLMC Mortgage-Backed Certificates		9,876		0		277		9,599
FNMA Mortgage-Backed Securities		42,160		641		500		42,301
Total Debt Securities		52,818		658		777		52,699
Municipals		1,361		21		0		1,382
Equity Securities (Non-Marketable)
2,766 Shares – Federal Home Loan Bank		277		0		0		277
630 Shares – First National Bankers Bankshares, Inc.		250		0		0		250
Total Equity Securities		527		0		0		527
Total Securities Held-to-Maturity	$	54,706	$	679	$	777	$	54,608

The amortized cost and fair value of securities by contractual maturity at September 30, 2021 follows:

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
			(In Thousands)
Debt Securities
Within One Year or Less	$	0	$	0	$	0	$	0
One through Five Years		861		868		0		0
After Five through Ten Years		51		55		0		0
Over Ten Years		25,748		26,051		60,088		59,870
		26,660		26,974		60,088		59,870
Municipals
Within One Year or Less	$	0	$	0	$	0	$	0
One through Five Years		0		0		234		239
After Five through Ten Years		0		0		0		0
Over Ten Years		0		0		1,120		1,139
		0		0		1,354		1,378
Other Equity Securities		0		0		527		527
Total	$	26,660	$	26,974	$	61,969	$	61,775

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.          Securities (continued)

Securities held-to-maturity totaling $9.9 million were purchased during the three months ending September 30, 2021.

The following tables show information pertaining to gross unrealized losses on securities available-for-sale at September 30, 2021 and June 30, 2021 aggregated by investment category and length of time that individual securities have been in a continuous loss position.

	September 30, 2021
	Less Than Twelve Months				Over Twelve Months
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value
	(In Thousands)
Securities Available-for-Sale
Mortgage-Backed Securities	$	122	$	6,732	$	28	$	1,504
Total Securities Available-for-Sale	$	122	$	6,732	$	28	$	1,504

	September 30, 2021
	Less Than Twelve Months				Over Twelve Months
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value
	(In Thousands)
Securities Held-to-Maturity
Mortgage-Backed Securities	$	849	$	49,887	$	0	$	0
Total Securities Held-to-Maturity	$	849	$	49,887	$	0	$	0

	June 30, 2021
	Less Than Twelve Months				Over Twelve Months
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value
	(In Thousands)
Securities Available-for-Sale
Mortgage-Backed Securities	$	139	$	4,522	$	32	$	1,633
Total Securities Available-for-Sale	$	139	$	4,522	$	32	$	1,633

	June 30, 2021
	Less Than Twelve Months				Over Twelve Months
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value
	(In Thousands)
Securities Held-to-Maturity
Mortgage-Backed Securities	$	777	$	41,154	$	0	$	0
Total Securities Held-to-Maturity	$	777	$	41,154	$	0	$	0

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.          Securities (continued)

The unrealized losses on the Company’s investment in mortgage-backed securities at September 30, 2021 and June 30, 2021 were caused by interest rate changes.  The contractual cash flows of these investments are guaranteed by agencies of the U.S. Government.  Accordingly, it is expected that these securities would not be settled at a price less than the amortized cost of the Company’s investment.  Because the decline in market value is attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2021.

The Company’s investment in equity securities consists primarily of FHLB stock and shares of First National Bankers Bankshares, Inc. (“FNBB”).  Management monitors its investment portfolio to determine whether any investment securities which have unrealized losses should be considered other than temporarily impaired.

At September 30, 2021, securities with a carrying value of $800,000 were pledged to secure public deposits, and securities and mortgage loans with a carrying value of $159.4 million were pledged to secure FHLB advances.

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HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Loans Receivable

Loans receivable are summarized as follows:

	September 30, 2021			June 30, 2021
	(In Thousands)
Loans Secured by Mortgages on Real Estate
One-to-Four Family Residential	$	108,804		$	97,607
Commercial		106,033			96,180
Multi-Family Residential		30,409			31,015
Land		14,354			16,260
Construction		15,552			15,337
Equity and Second Mortgage		1,232			1,267
Equity Lines of Credit		12,436			12,788
Total Mortgage Loans		288,820			270,454
Commercial Loans		54,184			69,891
Consumer Loans
Loans on Savings Accounts		414			430
Other Consumer Loans		471			485
Total Consumer Other Loans		885			915
Total Loans		343,889			341,260
Less:  Allowance for Loan Losses		(4,127	)		(4,122	)
Unamortized Loan Fees		(338	)		(744	)
Net Loans Receivable	$	339,424		$	336,394

Following is a summary of changes in the allowance for loan losses:

	Three Months Ended September 30,
	2021		2020
	(In Thousands)
Balance - Beginning of Period	$	4,122	$	4,081
Provision for Loan Losses		0		700
Loan Charge-Offs		0		(280	)
Recoveries		5		52
Balance - End of Period	$	4,127	$	4,553

Credit Quality Indicators

The Company segregates loans into risk categories based on the pertinent information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company analyzes loans individually by classifying the loans according to credit risk. Once a loan has been classified as substandard or identified as special mention, management will conduct a quarterly review to evaluate the level of deterioration, improvement, and impairment, if any, as well as assign the appropriate risk category. The delinquent loan report is monitored monthly to determine if any loan needs to be evaluated for classification or impairment.

Loans excluded from the scope of the quarterly review process above are generally identified as pass credits until: (a) they become past due; (b) management becomes aware of deterioration in the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification.  In these circumstances, the loan is specifically evaluated for potential classification and the need to allocate reserves or charge-off. All loans greater than 90 days past due are generally placed on nonaccrual status. The Company uses the following definitions for risk ratings:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.          Loans Receivable (continued)

Credit Quality Indicators (continued)

Pass - Loans classified as pass are well protected by the current net worth or paying capacity of the obligor or by the fair value, less cost to acquire and sell the underlying collateral in a timely manner.

Pass Watch - Loans are considered marginal, meaning some weakness has been identified which could cause future impairment of repayment. However, these relationships are currently protected from any apparent loss by collateral.

Special Mention - Loans identified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss - This classification includes those loans which are considered uncollectible and of such little value that their continuance as loans is not warranted.  Even though partial recovery may be possible in the future, it is not practical or desirable to defer writing off these basically worthless loans.  Accordingly, these loans are charged-off before period end.

The following tables present the grading of loans, segregated by class of loans, as of September 30, 2021 and June 30, 2021:

September 30, 2021	Pass and Pass Watch			Special Mention		Substandard		Doubtful		Total
	(In Thousands)
Real Estate Loans:			��
One-to-Four Family Residential	$	108,317		$	357	$	130	$	0	$	108,804
Commercial		103,353			0		2,680		0		106,033
Multi-Family Residential		30,409			0		0		0		30,409
Land		14,354			0		0		0		14,354
Construction		15,552			0		0		0		15,552
Equity and Second Mortgage		1,232			0		0		0		1,232
Equity Lines of Credit		12,436			0		0		0		12,436
Commercial Loans		51,440			2,744		0		0		54,184
Consumer Loans		885			0		0		0		885
Total	$	337,978		$	3,101	$	2,810	$	0	$	343,889

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.          Loans Receivable (continued)

Credit Quality Indicators (continued)

June 30, 2021	Pass and Pass Watch		Special Mention		Substandard		Doubtful		Total
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	97,115	$	358	$	134	$	0	$	97,607
Commercial		93,468		0		2,712		0		96,180
Multi-Family Residential		31,015		0		0		0		31,015
Land		16,260		0		0		0		16,260
Construction		15,337		0		0		0		15,337
Equity and Second Mortgage		1,267		0		0		0		1,267
Equity Lines of Credit		12,788		0		0		0		12,788
Commercial Loans		67,087		2,804		0		0		69,891
Consumer Loans		915		0		0		0		915
Total	$	335,252	$	3,162	$	2,846	$	0	$	341,260

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when contractually due.  Loans that experience insignificant payment delays or payment shortfalls are generally not classified as impaired.  On a case-by-case basis, management determines the significance of payment delays and payment shortfalls, taking into consideration all of the circumstances related to the loan, including the length of the payment delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The following tables present an aging analysis of past due loans, segregated by class of loans, as of September 30, 2021 and June 30, 2021:

September 30, 2021	30-59 Days Past Due		60-89 Days Past Due		90 Days or More		Total Past Due		Current		Total Loans Receivable		Recorded Investment >90 Days and Accruing
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	0	$	427	$	139	$	566	$	108,238	$	108,804	$	139
Commercial		0		0		837		837		105,196		106,033		837
Multi-Family Residential		0		0		0		0		30,409		30,409		0
Land		0		0		0		0		14,354		14,354		0
Construction		0		0		0		0		15,552		15,552		0
Equity and Second Mortgage		0		0		0		0		1,232		1,232		0
Equity Lines of Credit		15		0		0		15		12,421		12,436		0
Commercial Loans		0		0		0		0		54,184		54,184		0
Consumer Loans		0		0		0		0		885		885		0
Total	$	15	$	427	$	976	$	1,418	$	342,471	$	343,889	$	976

18

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.          Loans Receivable (continued)

Credit Quality Indicators (continued)

June 30, 2021	30-59 Days Past Due		60-89 Days Past Due		90 Days or More		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	0	$	30	$	176	$	206	$	97,401	$	97,607	$	33
Commercial		0		0		837		837		95,343		96,180		0
Multi-Family Residential		0		0		0		0		31,015		31,015		0
Land		0		0		0		0		16,260		16,260		0
Construction		0		0		0		0		15,337		15,337		0
Equity and Second Mortgage		0		0		0		0		1,267		1,267		0
Equity Lines of Credit		0		0		0		0		12,788		12,788		0
Commercial Loans		0		0		0		0		69,891		69,891		0
Consumer Loans		0		0		0		0		915		915		0
Total	$	0	$	30	$	1,013	$	1,043	$	340,217	$	341,260	$	33

There was 0 interest income recognized on non-accrual loans during the three months ended September 30, 2021 or year ended June 30, 2021. If the non-accrual loans had been accruing interest at their original contracted rates, gross interest income that would have been recorded for the three months ended September 30, 2021 and the year ended June 30, 2021 was approximately $10,000 and $63,000, respectively.

The change in the allowance for loan losses by loan portfolio class and recorded investment in loans for the three months ended September 30, 2021 and year ended June 30, 2021 was as follows:

	Real Estate Loans
September 30, 2021	1-4 Family Residential		Commercial		Multi- Family			Land			Construction			Home Equity Loans and Lines of Credit			Commercial Loans		Consumer Loans		Total
								(In Thousands)
Allowance for loan losses:
Beginning Balances	$	894	$	1,630	$	346		$	407		$	160		$	193		$	489	$	3	$	4,122
Charge-Offs		0		0		0			0			0			0			0		0		0
Recoveries		1		0		0			0			0			4			0		0		5
Current Provision		73		24		(20	)		(72	)		(4	)		(19	)		18		0		0
Ending Balances	$	968	$	1,654	$	326		$	335		$	156		$	178		$	507	$	3	$	4,127
Evaluated for Impairment:
Individually		0		301		0			0			0			0			232		0		533
Collectively		968		1,353		326			335			156			178			275		3		3,594
Loans Receivable:
Ending Balances – Total	$	108,804	$	106,033	$	30,409		$	14,354		$	15,552		$	13,668		$	54,184	$	885	$	343,889
Ending Balances:
Evaluated for Impairment:
Individually		487		2,680		0			0			0			0			2,744		0		5,911
Collectively	$	108,317	$	103,353	$	30,409		$	14,354		$	15,552		$	13,668		$	51,440	$	885	$	337,978

19

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.          Loans Receivable (continued)

Credit Quality Indicators (continued)

	Real Estate Loans
June 30, 2021	1-4 Family Residential			Commercial		Multi- Family			Land			Construction		Home Equity Loans And Lines of Credit		Commercial Loans			Consumer Loans			Total
									(In Thousands)
Allowance for loan losses:
Beginning Balances	$	966		$	568	$	364		$	1,024		$	80	$	126	$	949		$	4		$	4,081
Charge-Offs		(40	)		0		0			(907	)		0		0		(1,014	)		0			(1,961	)
Recoveries		3			0		0			120			0		5		74			0			202
Current Provision		(35	)		1,062		(18	)		170			80		62		480			(1	)		1,800
Ending Balances	$	894		$	1,630	$	346		$	407		$	160	$	193	$	489		$	3		$	4,122
Evaluated for Impairment:
Individually		0			317		0			0			0		0		251			0			568
Collectively		894			1,313		346			407			160		193		238			3			3,554
Loans Receivable:
Ending Balances – Total	$	97,607		$	96,180	$	31,015		$	16,260		$	15,337	$	14,055	$	69,891		$	915		$	341,260
Ending Balances:
Evaluated for Impairment:
Individually		492			2,712		0			0			0		0		2,804			0			6,008
Collectively	$	97,115		$	93,468	$	31,015		$	16,260		$	15,337	$	14,055	$	67,087		$	915		$	335,252

The following tables present loans individually evaluated for impairment, segregated by class of loans, as of September 30, 2021 and June 30, 2021:

September 30, 2021	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	487	$	487	$	0	$	487	$	0	$	531
Commercial		2,680		1,580		1,100		2,680		301		2,726
Multi-Family Residential		0		0		0		0		0		0
Land		0		0		0		0		0		0
Construction		0		0		0		0		0		0
Equity and Second Mortgage		0		0		0		0		0		0
Equity Lines of Credit		0		0		0		0		0		0
Commercial Loans		2,744		0		2,744		2,744		232		2,803
Consumer Loans		0		0		0		0		0		0
Total	$	5,911	$	2,067	$	3,844	$	5,911	$	533	$	6,060

June 30, 2021	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	492	$	492	$	0	$	492	$	0	$	530
Commercial		2,712		1,596		1,116		2,712		317		3,384
Multi-Family Residential		0		0		0		0		0		0
Land		0		0		0		0		0		0
Construction		0		0		0		0		0		0
Equity and Second Mortgage		0		0		0		0		0		0
Equity Lines of Credit		0		0		0		0		0		0
Commercial Loans		2,804		0		2,804		2,804		251		2,836
Consumer Loans		0		0		0		0		0		0
Total	$	6,008	$	2,088	$	3,920	$	6,008	$	568	$	6,750

20

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.          Loans Receivable (continued)

Credit Quality Indicators (continued)

The Bank has no commitments to loan additional funds to borrowers whose loans were previously in non-accrual status. As of September 30, 2021, there were 0 residential loans in the process of foreclosure.

A troubled debt restructuring (“TDR”) is a restructuring of a debt made by the Company to a debtor for economic or legal reasons related to the debtor’s financial difficulties that it would not otherwise consider.  The Company grants the concession in an attempt to protect as much of its investment as possible.

Information about the Company’s TDRs is as follows (in thousands):

	September 30, 2021
	Current			Past Due Greater Than 30 Days			Nonaccrual TDRs			Total TDRs
Commercial real estate		$	0		$	837		$	837		$	837

	June 30, 2021
	Current			Past Due Greater Than 30 Days			Nonaccrual TDRs			Total TDRs
Commercial business		$	0		$	837		$	837		$	837

For purposes of the determination of an allowance for loan losses on these TDRs, as an identified TDR, the Company considers a loss probable on the loan and, as a result, the loan is reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology.  If it is determined losses are probable on such TDRs, either because of delinquency or other credit quality indicator, the Company establishes specific reserves for these loans.  As of September 30, 2021, there were 0 commitments to lend additional funds to debtors owing sums to the Company whose terms have been modified in TDRs. The Company had 0 trouble debt restructuring that has subsequently defaulted in the last 12 months.

Loan Modifications/Troubled Debt Restructurings. Under the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 modifications. A financial institution can then suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring (“TDR”), and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Financial institutions wishing to utilize this authority must make a policy election, which applies to any COVID-19 modification made between March 1, 2020 and the earlier of either January 1, 2022 or the 60th day after the end of the COVID-19 national emergency. Home Federal Bank has made that election. Similarly, the Financial Accounting Standards Board has confirmed that short-term modifications made on a good-faith basis in response to COVID-19 to loan customers who were current prior to any relief will not be considered TDRs.

Prior to the enactment of the CARES Act, the banking regulatory agencies provided guidance as to how certain short-term modifications would not be considered TDRs, and have subsequently confirmed that such guidance could be applicable for loans that do not qualify for favorable accounting treatment under Section 4013 of the CARES Act.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Deposits

Deposits at September 30, 2021 and June 30, 2021 consist of the following classifications:

	September 30, 2021		June 30, 2021
	(In Thousands)
Non-Interest Bearing	$	145,214	$	131,014
NOW Accounts		47,698		49,262
Money Markets		85,120		88,181
Passbook Savings		134,711		129,130
		412,743		397,587
Certificates of Deposit		94,840		109,009
Total Deposits	$	507,583	$	506,596

5. Earnings Per Share

Home Federal Bank announced that its Board of Directors declared a 2-for-one stock split in the form of a 100% stock dividend, payable March 31, 2021, to stockholders of record as of March 22, 2021. Under the terms of the stock split, the Company’s stockholders received a dividend of 1 share for every share held on the record date. The dividend was paid in authorized but unissued shares of common stock of the Company. The par value of the Company's stock was not affected by the split and will remain at $0.01 per share. The outstanding shares of stock after the split increased from approximately 1.7 million shares to 3.4 million shares.

Basic earnings per common share are computed based on the weighted average number of shares outstanding.  Diluted earnings per share is computed based on the weighted average number of shares outstanding and common share equivalents that would arise from the exercise of dilutive securities. Earnings per share for the three months ended September 30, 2021 and 2020 were calculated as follows:

	Three Months Ended September 30,
	2021		2020
	(In Thousands, Except Per Share Data)
Net income	$	1,353	$	1,247
Weighted average shares outstanding – basic		3,204		3,262
Effect of dilutive common stock equivalents		310		128
Adjusted weighted average shares outstanding – diluted		3,514		3,390
Basic earnings per share	$	0.42	$	0.38
Diluted earnings per share	$	0.38	$	0.37

For the three months ended September 30, 2021 and 2020, there were outstanding options to purchase 626,132 and 520,322 shares, respectively, at a weighted average exercise price of $9.96 and $9.18 per share, respectively. For the quarter ended September 30, 2021 and 2020, 310,552 options and 127,762 options, respectively, were included in the computation of diluted earnings per share.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.    Earnings Per Share (continued)

The following table presents the components of weighted average outstanding shares for purposes of calculating earnings per share:

	Three Months Ended September 30,
	2021			2020
	(In Thousands)
Average common shares issued		6,125			6,125
Average unearned ESOP shares		(148	)		(171	)
Average unearned RRP shares		0			0
Average Company stock purchased		(2,773	)		(2,692	)
Weighted average shares outstanding		3,204			3,262

6. Stock-Based Compensation

Stock Option Plan

On August 10, 2005, the shareholders of the Company approved the establishment of the Home Federal Bancorp, Inc. of Louisiana 2005 Stock Option Plan (the “2005 Option Plan”) for the benefit of directors, officers, and other key employees.  The aggregate number of shares of common stock reserved for issuance under the 2005 Option Plan totaled 317,736 (as adjusted).  Both incentive stock options and non-qualified stock options may be granted under the 2005 Option Plan.  The 2005 Stock Option Plan terminated on June 8, 2015, however, the 866 outstanding options as of September 30, 2021 will remain in effect for the remainder of their original ten year terms.

On December 23, 2011, the shareholders of the Company approved the establishment of the Home Federal Bancorp, Inc. of Louisiana 2011 Stock Option Plan (the “2011 Option Plan,” together with the 2005 Option Plan, the “Option Plans”) for the benefit of directors, officers, and other key employees.  The aggregate number of shares of common stock reserved for issuance under the 2011 Option Plan totaled 389,044.  Both incentive stock options and non-qualified stock options may be granted under the 2011 Option Plan. As of September 30, 2021, there were 778 stock options available for future grant under the 2011 Option Plan.

Incentive stock options and non-qualified stock options granted under the Option Plans become vested and exercisable at a rate of 20% per year over five years, commencing one year from the date of the grant, with an additional 20% vesting on each successive anniversary of the date the option was granted.  No vesting shall occur after an employee’s employment or service as a director is terminated.  In the event of death or disability of an employee or director or change in control of the Company, the unvested options shall become vested and exercisable.  The Company recognizes compensation expense during the vesting period based on the fair value of the option on the date of the grant.

Stock Incentive Plan

On November 12, 2014, the shareholders of the Company approved the adoption of the Company’s 2014 Stock Incentive Plan (the “2014 Stock Incentive Plan”) for the benefit of employees and non-employee directors as an incentive to contribute to the success of the Company and reward employees for outstanding performance and the attainment of targeted goals.  The 2014 Stock Incentive Plan covers a total of 300,000 shares, of which no more than 74,000 shares, or 25% of the plan, may be share rewards.  The balance of the plan is reserved for stock option awards which would total 225,000 stock options, assuming all the share awards are issued. All incentive stock options granted under the 2014 Stock Incentive Plan are intended to comply with the requirements of Section 422 of the Internal Revenue Code.  On October 26, 2015, the Company granted a total of 69,000 plan share awards and 207,000 stock options to directors, officers, and other key employees vesting ratably over five years. On February 5, 2019, the Company granted a total of 6,000 plan share awards and 27,000 stock options (which includes 9,000 stock options forfeited from the October 26, 2015 grants) to key employees vesting ratably over five years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.          Stock-Based Compensation (continued)

Stock Incentive Plan (continued)

On November 13, 2019, the shareholders of the Company approved the adoption of the Company’s 2019 Stock Incentive Plan (the “2019 Stock Incentive Plan,” together with the 2014 Stock Incentive Plan, the “Stock Incentive Plans”) which provides for a total of 250,000 shares reserved for future issuance as stock awards or stock options. No more than 62,500 shares, or 25%, may be granted as stock awards.  The balance of the plan is reserved for stock option awards. On November 11, 2020, the Company granted a total of 62,500 plan share awards and 187,500 stock options to directors, officers and other key employees vesting ratably over five years. The Stock Incentive Plans costs are recognized over the five year vesting period.  As of September 30, 2021, there are 0 plan share awards or stock options available for future grants under the Stock Incentive Plans.

Compensation expense pertaining to the 2011 Recognition Plan and the share awards under the Stock Incentive Plans was 0 and $106,000 for the three months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021 and 2020, compensation expense charged to operations for stock options granted under the 2011 Option Plan and the Stock Incentive Plans was $26,000 and $34,000, respectively.

7. Related Party Transactions

Certain directors and executive officers were indebted to the Bank in the approximate aggregate amounts of $3.1 million and $3.4 million at September 30, 2021 and June 30, 2021, respectively.

8. Fair Value Disclosures

The following disclosure is made in accordance with the requirements of ASC 825, Financial Instruments.  Financial instruments are defined as cash and contractual rights and obligations that require settlement, directly or indirectly, in cash.  In cases where quoted market prices are not available, fair values have been estimated using the present value of future cash flows or other valuation techniques.  The results of these techniques are highly sensitive to the assumptions used, such as those concerning appropriate discount rates and estimates of future cash flows, which require considerable judgment.  Accordingly, estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current settlement of the underlying financial instruments.

ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements.  These disclosures should not be interpreted as representing an aggregate measure of the underlying value of the Company.

The following methods and assumptions were used by the Company in estimating fair values of financial instruments:

Cash and Cash Equivalents

The carrying amount approximates the fair value of cash and cash equivalents.

Investment Securities

Fair values for investment securities, including mortgage-backed securities, are based on quoted market prices, where available.  If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.  The carrying values of restricted or non-marketable equity securities approximate their fair values.  The carrying amount of accrued investment income approximates its fair value.

Mortgage Loans Held-for-Sale

Because these loans are normally disposed of within ninety days of origination, their carrying value closely approximates the fair value of such loans.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.          Fair Value Disclosures (continued)

Loans Receivable

For variable-rate loans that re-price frequently and with no significant changes in credit risk, fair value approximates the carrying value.  Fair values for other loans are estimated using the discounted value of expected future cash flows. Interest rates used are those being offered currently for loans with similar terms to borrowers of similar credit quality. The carrying amount of accrued interest receivable approximates its fair value.

Deposit Liabilities

The fair values for demand deposit accounts are, by definition, equal to the amount payable on demand at the reporting date, that is, their carrying amounts.  Fair values for other deposit accounts are estimated using the discounted value of expected future cash flows. The discount rate is estimated using the rates currently offered for deposits of similar maturities.

Advances from Federal Home Loan Bank

The carrying amount of short-term borrowings approximates their fair value.  The fair value of long-term debt is estimated using discounted cash flow analyses based on current incremental borrowing rates for similar borrowing arrangements.

Off-Balance Sheet Credit-Related Instruments

Fair values for outstanding mortgage loan commitments to lend are based on fees currently charged to enter into similar agreements, taking into account the remaining term of the agreements, customer credit quality, and changes in lending rates.

The fair value of interest rate floors and caps contained in some loan servicing agreements and variable rate mortgage loan contracts are considered immaterial within the context of fair value disclosure requirements.  Accordingly, no fair value estimate is provided for these instruments.

At September 30, 2021 and June 30, 2021, the carrying amount and estimated fair values of the Company’s financial instruments were as follows:

	September 30, 2021				June 30, 2021
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
	(In Thousands)
Financial Assets
Cash and Cash Equivalents	$	101,256	$	101,256	$	104,405	$	104,405
Securities Available-for-Sale		26,974		26,974		29,550		29,550
Securities to be Held-to-Maturity		61,969		61,775		54,706		54,608
Loans Held-for-Sale		10,573		10,573		14,427		14,427
Loans Receivable		339,424		340,330		336,394		336,865
Financial Liabilities
Deposits	$	507,583	$	496,289	$	506,596	$	492,492
Advances from FHLB		859		907		867		924
Off-Balance Sheet Items
Mortgage Loan Commitments	$	9,886	$	9,886	$	9,677	$	9,677

The estimated fair values presented above could be materially different than net realizable value and are only indicative of the individual financial instrument’s fair value.  Accordingly, these estimates should not be considered an indication of the fair value of the Company taken as a whole.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.          Fair Value Disclosures (continued)

The Company follows the guidance of FASB ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820").  ASC 820 affirms a framework for measuring fair value and expands disclosures about fair value measurements.  ASC 820 was issued to establish a uniform definition of fair value.  The definition of fair value is market-based as opposed to company-specific and includes the following:

• Defines fair value as the price that would be received to sell an asset or paid to transfer a liability, in either case, through an orderly transaction between market participants at a measurement date and establishes a framework for measuring fair value;

• Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date;

• Nullifies the guidance in EITF 02-3, which required the deferral of profit at inception of a transaction involving a derivative financial instrument in the absence of observable data supporting the valuation technique;

• Eliminates large position discounts for financial instruments quoted in active markets and requires consideration of the company’s creditworthiness when valuing liabilities; and

• Expands disclosures about instruments that are measured at fair value.

The standard establishes a three-level valuation hierarchy for disclosure of fair value measurements.  The valuation hierarchy favors the transparency of inputs to the valuation of an asset or liability as of the measurement date.  The three levels are defined as follows:

• Level 1 – Fair value is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets in which the Company can participate.

• Level 2 – Fair value is based upon (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active, that is, markets in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly; (c) inputs other than quoted prices that are observable for the asset or liability; or (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3 – Fair value is based upon inputs that are unobservable for the asset or liability.  These inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).  These inputs are developed based on the best information available in the circumstances, which include the Company’s own data. The Company’s own data used to develop unobservable inputs are adjusted if information indicates that market participants would use different assumptions.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The preceding methods described may produce a fair value calculation that may not be indicative of the net realizable value or reflective of future fair values.  Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.  There have been no changes in the methodologies used during the three months ended September 30, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.          Fair Value Disclosures (continued)

Fair values of assets and liabilities measured on a recurring basis at September 30, 2021 and June 30, 2021 are as follows: see table

	Fair Value Measurements Using:
September 30, 2021	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Unobservable Inputs (Level 3)			Total
	(In Thousands)
Available-for-Sale
Debt Securities
FHLMC		$	0		$	3,785		$	0		$	3,785
FNMA			0			17,303			0			17,303
GNMA			0			5,886			0			5,886
Total		$	0		$	26,974		$	0		$	26,974

	Fair Value Measurements Using:
June 30, 2021	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Unobservable Inputs (Level 3)			Total
				(In Thousands)
Available-for-Sale
Debt Securities
FHLMC		$	0		$	4,221		$	0		$	4,221
FNMA			0			19,152			0			19,152
GNMA			0			6,177			0			6,177
Total		$	0		$	29,550		$	0		$	29,550

9.           Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On July 1, 2019, the Company adopted ASU No. 2016-02 “Leases” (Topic 842) and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee. Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches with terms extending through 2058. Substantially all of the Company’s leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated statements of condition. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated statements of condition as right-of-use (“ROU”) assets and corresponding lease liabilities. See table

(In Thousands)		September 30, 2021		June 30, 2021
Lease Right-of-Use Assets	Classification
Operating lease right-of-use assets	Other Assets	$	855	$	858
Total Lease Right-of-Use Assets		$	855	$	858
Lease Liabilities
Operating lease liabilities	Other Accrued Expenses and Liabilities	$	875	$	876
Total Lease Liabilities		$	875	$	876

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.          Leases (continued)

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to July 1, 2019, the rate for the remaining lease term as of July 1, 2019, was the Company’s only finance lease, the Company utilized its incremental borrowing rate at lease inception.

	September 30, 2021			June 30, 2021
Weighted-average remaining lease term
Operating leases	37.1 years			37.4 years
Weighted-average discount rate
Operating leases		3.00	%		3.00	%

10. Subsequent Events

There have been no subsequent events that have occurred after September 30, 2021, through the date of the financial statements, that would require disclosure or have an adverse impact on the financial statement.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The Company’s results of operations are primarily dependent on the results of Home Federal Bank (the “Bank”), its wholly owned subsidiary. The Bank’s results of operations depend, to a large extent, on net interest income, which is the difference between the income earned on its loan and investment portfolios and the cost of funds, consisting of the interest paid on deposits and borrowings.  Results of operations are also affected by provisions for loan losses and loan sale activities.  Non-interest expense principally consists of compensation and employee benefits, office occupancy and equipment expense, data processing, and other expenses.  Our results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies, and actions of regulatory authorities.  Future changes in applicable law, regulations, or government policies may materially impact our financial conditions and results of operations.

The Bank operates from its main office in Shreveport, Louisiana and seven full service branch offices located in Shreveport and Bossier City, Louisiana.  The Company’s primary market area is the Shreveport-Bossier City metropolitan area.

Critical Accounting Policies

Allowance for Loan Losses.  The Company has identified the calculation of the allowance for loan losses as a critical accounting policy, due to the higher degree of judgment and complexity than its other significant accounting policies.  Provisions for loan losses are based upon management’s periodic valuation and assessment of the overall loan portfolio and the underlying collateral, trends in non-performing loans, current economic conditions, and other relevant factors in order to maintain the allowance for loan losses at a level believed by management to represent all known and inherent losses in the portfolio that are both probable and reasonably estimable.  Although management uses the best information available, the level of the allowance for loan losses remains an estimate which is subject to significant judgment and short-term change.

Income Taxes. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method.  Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax basis of the various assets and liabilities and gives current recognition to changes in tax rates and laws.  The realization of our deferred tax assets principally depends upon our achieving projected future taxable income.  We may change our judgments regarding future profitability due to future market conditions and other factors.  We may adjust our deferred tax asset balances, if our judgments change.

Discussion of Financial Condition Changes from June 30, 2021 to September 30, 2021

General

At September 30, 2021, the Company reported total assets of $566.8 million, an increase of $1.1 million, or 0.2%, compared to total assets of $565.7 million at June 30, 2021. The increase in assets was comprised primarily of increases in investment securities of $4.7 million, or 5.6%, from $84.3 million at June 30, 2021 to $88.9 million at September 30, 2021, loans receivable, net of $3.0 million, or 0.9%, from $336.4 million at June 30, 2021 to $339.4 million at September 30, 2021, and premises and equipment of $896,000, or 6.0%, from $14.9 million at June 30, 2021 to $15.8 million at September 30, 2021. These increases were partially offset by decreases in loans held-for-sale of $3.9, or 26.7%, from $14.4 million at June 30, 2021 to $10.6 million at September 30, 2021, cash and cash equivalents of $3.1 million, or 3.0%, from $104.4 million at June 30, 2021 to $101.3 million at September 30, 2021, deferred tax assets of $265,000, or 32.4%, from $819,000 at June 30, 2021 to $554,000 at September 30, 2021, other assets of $170,000, or 9.7%, from $1.8 million at June 30, 2021 to $1.6 million at September 30, 2021, and accrued interest receivable of $119,000, or 10.2%, from $1.2 million at June 30, 2021 to $1.0 million at September 30, 2021. The increase in investment securities was primarily due to security purchases of $9.9 million offset by principal repayments on mortgage backed securities of $5.2 million.

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Discussion of Financial Condition Changes from June 30, 2021 to September 30, 2021 (continued)

Cash and Cash Equivalents

Cash and cash equivalents decreased $3.1 million, or 3.0%, from $104.4 million at June 30, 2021 to $101.3 million at September 30, 2021. The decrease in cash and cash equivalents was primarily due to the purchases of investment securities.

Loans Receivable, Net

Loans receivable, net, decreased by $3.0 million, or 0.9%, to $339.4 million at September 30, 2021 compared to $336.4 million at June 30, 2021.  The decrease in loans receivable, net was primarily due to decreases in commercial non-real estate loans of $15.7 million, land loans of $1.9 million, multi-family residential loans of $606,000, equity line-of-credit loans of $352,000, equity and second mortgage loans of $35,000, and consumer loans of $30,000, partially offset by increases in one-to-four-family residential loans of $11.2 million, commercial real estate loans of $9.9 million, and construction loans of $215,000.

Loans Held-for-Sale

Loans held-for-sale decreased $3.9 million, or 26.7%, from $14.4 million at June 30, 2021 to $10.6 million at September 30, 2021.  The decrease in loans held-for-sale results primarily from the decrease in the origination volume during the first three months of fiscal 2022.

Investment Securities

Investment securities amounted to $88.9 million at September 30, 2021 compared to $84.3 million at June 30, 2021, an increase of $4.7 million, or 5.6%.  The increase in investment securities was primarily due to security purchases of $9.9 million offset by principal repayments on mortgage backed securities of $5.2 million.

Premises and Equipment, Net

Premises and equipment, net increased $896,000, or 6.0%, to $15.8 million at September 30, 2021 compared to $14.9 million at June 30, 2021.  The increase in premises and equipment was primarily due to the construction of the Company’s new Huntington branch on Pines Road.

Asset Quality

At both September 30, 2021 and June 30, 2021, the Company had $1.4 million of non-performing assets (defined as non-accruing loans, accruing loans 90 days or more past due, and other real estate owned), consisting of six commercial real estate loans to one borrower, two single-family residential loans, and one commercial real estate property and one single family residence in other real estate owned at September 30, 2021, compared to six commercial real estate loans to one borrower, three single-family residential loans, and one commercial real estate property and one single family residence in other real estate owned at June 30, 2021.  At September 30, 2021, the Company had one single family residential loan and eight commercial real estate loans classified as substandard compared to two single family residential loans and eight commercial real estate loans classified as substandard at June 30, 2021. There were no loans classified as doubtful at September 30, 2021 or June 30, 2021.

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Discussion of Financial Condition Changes from June 30, 2021 to September 30, 2021 (continued)

Total Liabilities

Total liabilities increased $125,000, or 0.02%, from $513.0 million at June 30, 2021 to $513.1 million at September 30, 2021 primarily due to increases in total deposits of $987,000, or 0.2%, to $507.6 million at September 30, 2021 compared to $506.6 million at June 30, 2021, and $345,000, or 12.7%, in other liabilities from $2.7 million at June 30, 2021 to $3.1 million at September 30, 2021, partially offset by a decrease of $1.3 million, or 54.2%, in other borrowings from $2.4 million at June 30, 2021 to $1.1 million at September 30, 2021, and a decrease of $8,000, or 0.9%, in advances from the Federal Home Loan Bank from $867,000 at June 30, 2021 to $859,000 at September 30, 2021.  The increase in deposits was primarily due to a $14.2 million, or 10.8%, increase in non-interest bearing deposits from $131.0 million at June 30, 2021 to $145.2 million at September 30, 2021, and a $5.6 million, or 4.3%, increase in savings deposits from $129.1 million at June 30, 2021 to $134.7 million at September 30, 2021, partially offset by a decrease of $14.2 million, or 13.0%, in certificates of deposit from $109.0 million at June 30, 2021 to $94.8 million at September 30, 2021, a $3.1 million, or 3.5%, decrease in money market deposits from $88.2 million at June 30, 2021 to $85.1 million at September 30, 2021, and a decrease in NOW accounts of $1.6 million, or 3.2%, from $49.3  million at June 30, 2021 to $47.7 million at September 30, 2021. The Company had $9.1 million in brokered deposits at September 30, 2021 compared to $10.7 million at June 30, 2021.  The decrease in advances from the Federal Home Loan Bank was primarily due to principal paydowns on amortizing advances.

Shareholders’ Equity

Shareholders’ equity increased $959,000, or 1.8%, to $53.7 million at September 30, 2021 from $52.7 million at June 30, 2021.  The primary reasons for the changes in shareholders’ equity from June 30, 2021 were net income of $1.4 million, the vesting of share awards, stock options, and the release of employee stock ownership plan shares totaling $168,000, and proceeds from the issuance of common stock from the exercise of stock options of $166,000, partially offset by the repurchase of Company stock of $334,000, dividends paid totaling $335,000, and a decrease in the Company’s accumulated other comprehensive income of $27,000.

Regulatory Capital

The Bank is required to meet minimum capital standards promulgated by the Office of the Comptroller of the Currency (“OCC”).  At September 30, 2021, Home Federal Bank’s regulatory capital was well in excess of the minimum capital requirements. At September 30, 2021, Home Federal Bank exceeded each of its regulatory capital requirements with tangible equity, common equity Tier 1, core, and total risk-based capital ratios of 9.57%, 15.97%, 9.57%, and 17.19%, respectively.

Comparison of Operating Results for the Three Months Ended September 30, 2021 and 2020

General

The increase in net income for the three months ended September 30, 2021, as compared to the prior year quarter resulted primarily from a $700,000, or 100.0%, decrease in provision for loan losses, and an increase of $237,000, or 5.9%, in net interest income, partially offset by a decrease of $690,000, or 40.4%, in non-interest income, an increase of $112,000, or 3.3%, in non-interest expense, and a $29,000, or 9.0%, increase in provision for income taxes.  The decrease in provision for loan losses is mainly due to improved economic quality factors along with an improvement in our overall credit quality.

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Comparison of Operating Results for the Three Months Ended September 30, 2021 and 2020 (continued)

Net Interest Income

The increase in net interest income for the three months ended September 30, 2021 was primarily due to a $447,000, or 44.8%, decrease in total interest expense, partially offset by a $210,000, or 4.2%, decrease in total interest income.  The decrease in total interest expense was primarily due to a decrease of 50 basis points in the average rate on total interest-bearing deposits.  The Company’s average interest rate spread was 2.98% for the three months ended September 30, 2021 compared to 2.92% for the three months ended September 30, 2020. The Company’s net interest margin was 3.16% for the three months ended September 30, 2021 compared to 3.21% for the three months ended September 30, 2020.

Provision for Losses on Loans

Based on an analysis of historical experience, the volume and type of lending conducted by Home Federal Bank, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to our market area, and other factors related to the collectability of Home Federal Bank’s loan portfolio, the provision for loan losses was none during the three months ended September 30, 2021, compared to a $700,000 provision made during the three months ended September 30, 2020. The allowance for loan losses was $4.1 million, or 1.20% of total loans receivable, at September 30, 2021 compared to $4.5 million, or 1.26% of total loans receivable, at September 30, 2020.  At September 30, 2021, Home Federal Bank had $976,000 in non-performing loans and $383,000 in foreclosed assets which totaled $1.4 million in non-performing assets.

Non-interest Income

The $690,000 decrease in non-interest income for the three months ended September 30, 2021, compared to the prior year quarterly period, was primarily due to a decrease of $702,000 in gain on sale of loans, and a $6,000 decrease in income from bank owned life insurance, partially offset by a $20,000 increase in service charges on deposit accounts. The Company sells most of its long-term fixed rate residential mortgage loan originations primarily in order to manage interest rate risk.

Non-interest Expense

The $112,000 increase in non-interest expense for the three months ended September 30, 2021, compared to the same period in 2020, is primarily attributable to increases of $53,000 in occupancy and equipment expense, $48,000 in advertising expense, $22,000 in franchise and bank shares tax expense, $19,000 in other non-interest expenses, $13,000 in data processing expense, $8,000 in deposit insurance premiums expense, and $6,000 in audit and examination fees. The increases were partially offset by decreases of $31,000 in legal fees, $22,000 in loan and collection expense, and $4,000 in compensation and benefits expense.

The aggregate compensation expense recognized by the Company for its Stock Option, Share Award, ESOP, and Recognition and Retention Plans amounted to $168,000 and $140,000 for the three months ended September 30, 2021 and September 30, 2020, respectively.

The Louisiana bank shares tax is assessed on the Bank’s equity and earnings.  For the three months ended September 30, 2021, the Company recognized franchise and bank shares tax expense of $130,000 compared to $108,000, for the same period in 2020.

Income Taxes

Income taxes amounted to $352,000 for the three months ended September 30, 2021, respectively, resulting in an effective tax rate of 20.6%. Income taxes amounted to $323,000 for the three months ended September 30, 2020, resulting in an effective tax rate of 18.3%.

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Comparison of Operating Results for the Three Months Ended September 30, 2021 and 2020 (continued)

Average Balances, Net Interest Income, Yields Earned, and Rates Paid.  The following tables show for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Tax-exempt income and yields have not been adjusted to a tax-equivalent basis. All average balances are based on monthly balances. Management does not believe that the monthly averages differ significantly from what the daily averages would be.

	Three Months Ended September 30,
	2021							2020
	Average Balance		Interest		Average Yield/ Rate			Average Balance		Interest		Average Yield/ Rate
	(Dollars In Thousands)
Interest-earning assets:
Loans receivable	$	342,942	$	4,397		5.09	%	$	373,311	$	4,647		4.94	%
Investment securities		86,350		341		1.57			58,881		319		2.15
Interest-earning deposits		101,732		36		0.14			60,651		18		0.12
Total interest-earning assets		531,024		4,774		3.57	%		492,843		4,984		4.01	%
Non-interest-earning assets		36,089							35,121
Total assets	$	567,113						$	527,964
Interest-bearing liabilities:
Savings accounts	$	133,140		108		0.32	%	$	90,621		158		0.69	%
NOW accounts		48,389		14		0.11			40,611		32		0.31
Money market accounts		86,991		25		0.12			73,180		75		0.41
Certificate accounts		101,364		382		1.50			156,320		706		1.79
Total interest-bearing deposits		369,884		529		0.57			360,732		971		1.07
Other Borrowings		1,376		11		3.17			1,752		14		3.17
FHLB advances		861		10		4.61			1,010		12		4.71
Total interest-bearing liabilities	$	372,121		550		0.59	%	$	363,494		997		1.09	%
Non-interest-bearing liabilities:
Non-interest-bearing demand accounts		139,885							111,352
Other liabilities		2,938							3,498
Total liabilities		514,944							478,344
Total Stockholders’ Equity(1)		52,169							49,620
Total liabilities and equity	$	567,113						$	527,964
Net interest-earning assets	$	158,903						$	129,349
Net interest income; average interest rate spread(2)			$	4,224		2.98	%			$	3,987		2.92	%
Net interest margin(3)						3.16	%						3.21	%
Average interest-earning assets to average interest-bearing liabilities						142.70	%						135.58	%

(1) Includes retained earnings and accumulated other comprehensive loss.

(2) Interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average rate on interest-bearing liabilities.

(3) Net interest margin is net interest income divided by net average interest-earning assets.

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Comparison of Operating Results for the Three Months Ended September 30, 2021 and 2020 (continued)

Liquidity and Capital Resources

Home Federal Bank maintains levels of liquid assets deemed adequate by management.  The Bank adjusts its liquidity levels to fund deposit outflows, repay its borrowings, and to fund loan commitments.  Home Federal Bank also adjusts liquidity as appropriate to meet asset and liability management objectives.

Home Federal Bank’s primary sources of funds are deposits, amortization and prepayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, loan sales, and earnings and funds provided from operations.  While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition.  The Bank sets the interest rates on its deposits to maintain a desired level of total deposits.  In addition, Home Federal Bank invests excess funds in short-term interest-earning accounts and other assets which provide liquidity to meet lending requirements.  Home Federal Bank’s deposit accounts with the Federal Home Loan Bank of Dallas amounted to $34.5 million at September 30, 2021.

A significant portion of Home Federal Bank’s liquidity consists of securities classified as available-for-sale and cash and cash equivalents.   Home Federal Bank’s primary sources of cash are net income, principal repayments on loans and mortgage-backed securities, and increases in deposit accounts.  If Home Federal Bank requires funds beyond its ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Dallas which provides an additional source of funds.  At September 30, 2021, Home Federal Bank had $859,000 in advances from the Federal Home Loan Bank of Dallas and had $178.9 million in additional borrowing capacity.  Additionally, at September 30, 2021, Home Federal Bank was a party to a Master Purchase Agreement with First National Bankers Bank whereby Home Federal Bank may purchase Federal Funds from First National Bankers Bank in an amount not to exceed $20.4 million. There were no amounts purchased under this agreement as of September 30, 2021. In addition, the Company had available a $5.0 million line of credit agreement at September 30, 2021 with First National Bankers Bank. At September 30, 2021 there was a $1.5 million balance in the credit line.

At September 30, 2021, Home Federal Bank had outstanding loan commitments of $53.0 million to originate loans and commitments under unused lines of credit of $9.9 million. At September 30, 2021, certificates of deposit scheduled to mature in less than one year totaled $73.8 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In addition, the cost of such deposits could be significantly higher upon renewal in a rising interest rate environment.  Home Federal Bank intends to utilize its high levels of liquidity to fund its lending activities.  If additional funds are required to fund lending activities, Home Federal Bank intends to sell its securities classified as available-for-sale, as needed.

At September 30, 2021, Home Federal Bank exceeded each of its regulatory capital requirements with tangible equity, common equity Tier 1, core, and total risk-based capital ratios of 9.57%, 15.97%, 9.57%, and 17.19%, respectively.

Off-Balance Sheet Arrangements

At September 30, 2021, the Company did not have any off-balance sheet arrangements as defined by Securities and Exchange Commission rules.

Impact of Inflation and Changing Prices

The financial statements and related financial data presented herein have been prepared in accordance with instructions to Form 10-Q which require the measurement of financial position and operating results in terms of historical dollars without considering changes in relative purchasing power over time due to inflation.

Unlike most industrial companies, virtually all of the Company’s assets and liabilities are monetary in nature.  As a result, interest rates generally have a more significant impact on a financial institution’s performance than does the effect of inflation.

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Forward-Looking Statements

This Form 10-Q contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management, as well as assumptions made by and information currently available to management.  In addition, in those and other portions of this document the words “anticipate”, “believe”, “estimate”, “except”, “intend”, “should”, and similar expressions, or the negative thereof, as they relate to the Company or the Company’s management are intended to identify forward-looking statements.  Such statements reflect the current views of the Company with respect to future looking events and are subject to certain risks, uncertainties, and assumptions.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary from those described herein as anticipated, believed, estimated, expected, or intended.  The Company does not intend to update these forward-looking statements.

In addition to factors previously disclosed in the reports filed by the Company with the Securities and Exchange Commission and those identified elsewhere in this Form 10-Q, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations; general economic conditions; the scope and duration of the COVID-19 pandemic; the effects of the COVID-19 pandemic, including on the Company’s credit quality and operations as well as its impact on general economic conditions; legislative and regulatory changes including actions taken by governmental authorities in response to the COVID-19 pandemic; monetary and fiscal policies of the federal government; changes in tax policies, rates and regulations of federal, state and local tax authorities including the effects of the Tax Reform Act; changes in interest rates, deposit flows, the cost of funds, demand for loan products and the demand for financial services, in each case as may be affected by the COVID-19 pandemic, competition, changes in the quality or composition of the Company’s loans, investment and mortgage-backed securities portfolios; geographic concentration of the Company’s business; fluctuations in real estate values; the adequacy of loan loss reserves; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; changes in accounting principles, policies or guidelines and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and fees.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosures Controls and Procedures.  Under the supervision and with the participation of our management including our President and Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the applicable time periods specified by the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control over Financial Reporting.  There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which involve amounts in the aggregate believed by management to be immaterial to the financial condition of the Company.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Not applicable.

(b) Not applicable.

(c) Purchases of Equity Securities

The Company’s repurchases of its common stock (split adjusted) made during the quarter ended March 31, 2021 are set forth in the table below, including stock-for-stock option exercises:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (a)
July 1, 2021 – July 31, 2021		--	$	--		--		134,000
August 1, 2020 – August 31, 2021		--		--		--		134,000
September 1, 2020 – September 30, 2021		17,672	$	18.89		17,672		116,328
Total		17,672	$	18.89		17,672		116,328

Notes to this table:

(a) On November 18, 2020, the Company announced that its Board of Directors approved a tenth stock repurchase program for the repurchase of up to 170,000 shares (split adjusted), or approximately 5.0% of its then outstanding shares of common stock. The repurchase program does not have an expiration date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. 
EXHIBITS

No.	Description
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.0	Certification Pursuant to 18 U.S.C Section 1350
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definitions Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HOME FEDERAL BANCORP, INC. OF LOUISIANA
Date:   November 12, 2021	By:	/s/ Glen W. Brown
		Glen W. Brown
		Senior Vice President and Chief Financial Officer
		(Duly authorized officer and principal financial and accounting officer)