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: | March 31, 2023 |
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 May 10, 2023: The registrant had 3,123,651 shares of common stock outstanding. |
INDEX
Page | ||
PART I | FINANCIAL INFORMATION | |
Item 1: | Financial Statements | |
1 | ||
2 | ||
3 | ||
4 | ||
6 | ||
8 | ||
Item 2: | 33 | |
Item 3: | 41 | |
Item 4: | 41 | |
PART II | OTHER INFORMATION | |
Item 1: | 42 | |
Item 1A: | 42 | |
Item 2: | 42 | |
Item 3: | 42 | |
Item 4: | 42 | |
Item 5: | 42 | |
Item 6: | 43 | |
HOME FEDERAL BANCORP, INC. OF LOUISIANA |
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION March 31, 2023 (Unaudited) and June 30, 2022 (Audited) |
March 31, 2023 | June 30, 2022 | |||||||
(In Thousands, Except Share Data) | ||||||||
ASSETS | ||||||||
Cash and Cash Equivalents (Includes Interest-Bearing Deposits with Other Banks of $37,994 and $42,531 March 31, 2023 and June 30, 2022, Respectively) | $ | 45,568 | $ | 64,078 | ||||
Securities Available-for-Sale | 44,756 | 28,099 | ||||||
Securities Held-to-Maturity (fair value March 31, 2023: $64,012; June 30, 2022: $69,513, Respectively) | 75,812 | 79,950 | ||||||
Loans Held-for-Sale | 1,160 | 3,978 | ||||||
Loans Receivable, Net of Allowance for Loan Losses (March 31, 2023: $4,935; June 30, 2022: $4,451, Respectively) | 486,394 | 387,873 | ||||||
Accrued Interest Receivable | 1,620 | 1,124 | ||||||
Premises and Equipment, Net | 16,598 | 16,249 | ||||||
Bank Owned Life Insurance | 6,674 | 6,597 | ||||||
Goodwill | 2,990 | - | ||||||
Core Deposit Intangible | 1,636 | - | ||||||
Deferred Tax Asset | 1,096 | 1,143 | ||||||
Other Real Estate Owned | 311 | - | ||||||
Other Assets | 1,370 | 1,389 | ||||||
Total Assets | $ | 685,985 | $ | 590,480 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
LIABILITIES | ||||||||
Deposits: | ||||||||
Non-interest bearing | $ | 163,598 | $ | 161,142 | ||||
Interest-bearing | 450,776 | 370,849 | ||||||
Total Deposits | 614,374 | 531,991 | ||||||
Advances from Borrowers for Taxes and Insurance | 276 | 354 | ||||||
Short-term Federal Home Loan Bank Advances | 10,000 | 832 | ||||||
Other Borrowings | 8,250 | 2,350 | ||||||
Other Accrued Expenses and Liabilities | 2,962 | 2,606 | ||||||
Total Liabilities | 635,862 | 538,133 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred Stock - $0.01 Par Value; 10,000,000 Shares Authorized; None Issued and Outstanding | - | - | ||||||
Common Stock - $0.01 Par Value; 40,000,000 Shares Authorized: 3,123,651 and 3,387,839 Shares Issued and Outstanding at March 31, 2023 and June 30, 2022, Respectively | 31 | 34 | ||||||
Additional Paid-in Capital | 40,794 | 40,145 | ||||||
Unearned ESOP Stock | (552 | ) | (639 | ) | ||||
Retained Earnings | 11,824 | 14,506 | ||||||
Accumulated Other Comprehensive Loss | (1,974 | ) | (1,699 | ) | ||||
Total Stockholders’ Equity | 50,123 | 52,347 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 685,985 | $ | 590,480 |
HOME FEDERAL BANCORP, INC. OF LOUISIANA
(Unaudited)
For the Three Months Ended March 31, | For the Nine Months Ended March 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(In Thousands, Except per Share Data) | ||||||||||||||||
INTEREST INCOME | ||||||||||||||||
Loans, Including Fees | $ | 6,151 | $ | 4,277 | $ | 16,585 | $ | 12,985 | ||||||||
Investment Securities | 100 | - | 105 | - | ||||||||||||
Mortgage-Backed Securities | 492 | 380 | 1,472 | 1,066 | ||||||||||||
Other Interest-Earning Assets | 270 | 35 | 720 | 101 | ||||||||||||
Total Interest Income | 7,013 | 4,692 | 18,882 | 14,152 | ||||||||||||
INTEREST EXPENSE | ||||||||||||||||
Deposits | 1,342 | 394 | 2,387 | 1,397 | ||||||||||||
Other Borrowings | 146 | 20 | 321 | 46 | ||||||||||||
Federal Home Loan Bank Borrowings | 52 | 10 | 72 | 31 | ||||||||||||
Total Interest Expense | 1,540 | 424 | 2,780 | 1,474 | ||||||||||||
Net Interest Income | 5,473 | 4,268 | 16,102 | 12,678 | ||||||||||||
PROVISION FOR LOAN LOSSES | 150 | - | 718 | 61 | ||||||||||||
Net Interest Income after Provision for Loan Losses | 5,323 | 4,268 | 15,384 | 12,617 | ||||||||||||
NON-INTEREST INCOME | ||||||||||||||||
Gain on Sale of Loans | 87 | 327 | 404 | 1,747 | ||||||||||||
Gain/(Loss) on Sale of Real Estate and Fixed Assets | 4 | (48 | ) | 4 | (48 | ) | ||||||||||
Income on Bank Owned Life Insurance | 25 | 27 | 77 | 82 | ||||||||||||
Service Charges on Deposit Accounts | 380 | 289 | 1,074 | 838 | ||||||||||||
Other Income | 12 | 241 | 35 | 269 | ||||||||||||
Total Non-Interest Income | 508 | 836 | 1,594 | 2,888 | ||||||||||||
NON-INTEREST EXPENSE | ||||||||||||||||
Compensation and Benefits | 2,319 | 2,194 | 6,694 | 6,710 | ||||||||||||
Occupancy and Equipment | 541 | 449 | 1,540 | 1,320 | ||||||||||||
Data Processing | 163 | 149 | 564 | 534 | ||||||||||||
Audit and Examination Fees | 82 | 102 | 243 | 293 | ||||||||||||
Franchise and Bank Shares Tax | 145 | 132 | 386 | 403 | ||||||||||||
Advertising | 97 | 88 | 238 | 233 | ||||||||||||
Legal Fees | 268 | 82 | 469 | 287 | ||||||||||||
Loan and Collection | 34 | 44 | 148 | 184 | ||||||||||||
Amortization Core Deposit Intangible | 71 | - | 71 | - | ||||||||||||
Deposit Insurance Premium | 49 | 38 | 150 | 114 | ||||||||||||
Other Expense | 729 | 280 | 1,306 | 700 | ||||||||||||
Total Non-Interest Expense | 4,498 | 3,558 | 11,809 | 10,778 | ||||||||||||
Income Before Income Taxes | 1,333 | 1,546 | 5,169 | 4,727 | ||||||||||||
PROVISION FOR INCOME TAX EXPENSE | 271 | 269 | 723 | 922 | ||||||||||||
Net Income | $ | 1,062 | $ | 1,277 | $ | 4,446 | $ | 3,805 | ||||||||
EARNINGS PER COMMON SHARE: | ||||||||||||||||
Basic | $ | 0.35 | $ | 0.39 | $ | 1.48 | $ | 1.18 | ||||||||
Diluted | $ | 0.34 | $ | 0.37 | $ | 1.41 | $ | 1.10 | ||||||||
DIVIDENDS DECLARED | $ | 0.12 | $ | 0.10 | $ | 0.36 | $ | 0.30 |
See accompanying notes to unaudited consolidated financial statements.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
(Unaudited)
For the Three Months Ended March 31, | For the Nine Months Ended March 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||
Net Income | $ | 1,062 | $ | 1,277 | $ | 4,446 | $ | 3,805 | ||||||||
Other Comprehensive Gain (loss) Net of Tax | ||||||||||||||||
Investment Securities Available-for-Sale: | ||||||||||||||||
Net Unrealized Gains (Losses) | 763 | (1,115 | ) | (348 | ) | (1,385 | ) | |||||||||
Income Tax Effect | (160 | ) | 234 | 73 | 291 | |||||||||||
Other Comprehensive Gain (loss) Net of Tax | 603 | (881 | ) | (275 | ) | (1,094 | ) | |||||||||
Total Comprehensive Income | $ | 1,665 | $ | 396 | $ | 4,171 | $ | 2,711 |
See accompanying notes to unaudited consolidated financial statements.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Unaudited)
Common Stock | Additional Paid-in Capital | Unearned ESOP Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
BALANCE – December 31, 2021 | $ | 34 | $ | 39,271 | $ | (696 | ) | $ | 14,737 | $ | 62 | $ | 53,408 | |||||||||||
Net Income | - | - | - | 1,277 | - | 1,277 | ||||||||||||||||||
Changes in Unrealized loss on Securities Available-for-Sale, Net of Tax Effects | - | - | - | - | (881 | ) | (881 | ) | ||||||||||||||||
Share Awards Earned | - | 10 | - | - | - | 10 | ||||||||||||||||||
Stock Options Vested | - | 19 | - | - | - | 19 | ||||||||||||||||||
Common Stock Issuance for Stock Option Exercises – Split Adjusted | - | 643 | - | - | - | 643 | ||||||||||||||||||
ESOP Compensation Earned | - | 90 | 29 | - | - | 119 | ||||||||||||||||||
Company Stock Purchased | - | - | - | (1,621 | ) | - | (1,621 | ) | ||||||||||||||||
Dividends Paid | - | - | - | (342 | ) | - | (342 | ) | ||||||||||||||||
BALANCE – March 31, 2022 | $ | 34 | $ | 40,033 | $ | (667 | ) | $ | 14,051 | $ | (819 | ) | $ | 52,632 | ||||||||||
BALANCE – December 31, 2022 | $ | 31 | $ | 40,669 | $ | (581 | ) | $ | 11,147 | $ | (2,577 | ) | $ | 48,689 | ||||||||||
Net Income | - | - | - | 1,062 | - | 1,062 | ||||||||||||||||||
Changes in Unrealized Loss on Securities Available-for-Sale, Net of Tax Effects | - | - | - | - | 603 | 603 | ||||||||||||||||||
Share Awards Earned | - | 10 | - | - | - | 10 | ||||||||||||||||||
Stock Options Vested | - | 26 | - | - | - | 26 | ||||||||||||||||||
Common Stock Issuance for Stock Option Exercises | - | 19 | - | - | - | 19 | ||||||||||||||||||
ESOP Compensation Earned | - | 70 | 29 | - | - | 99 | ||||||||||||||||||
Company Stock Purchased | - | - | - | (1 | ) | - | (1 | ) | ||||||||||||||||
Dividends Paid | - | - | - | (384 | ) | - | (384 | ) | ||||||||||||||||
BALANCE – March 31, 2023 | $ | 31 | $ | 40,794 | $ | (552 | ) | $ | 11,824 | $ | (1,974 | ) | $ | 50,123 |
See accompanying notes to unaudited consolidated financial statements.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(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, 2021 | $ | 34 | $ | 37,701 | $ | (754 | ) | $ | 15,469 | $ | 275 | $ | 52,725 | |||||||||||
Net Income | - | - | - | 3,805 | - | 3,805 | ||||||||||||||||||
Changes in Unrealized loss on Securities Available-for-Sale, Net of Tax Effects | - | - | - | - | (1,094 | ) | (1,094 | ) | ||||||||||||||||
Share Awards Earned | - | 117 | - | - | - | 117 | ||||||||||||||||||
Stock Options Vested | - | 71 | - | - | - | 71 | ||||||||||||||||||
Common Stock Issuance for Stock Option Exercises | - | 1,889 | - | - | - | 1,889 | ||||||||||||||||||
ESOP Compensation Earned | - | 255 | 87 | - | - | 342 | ||||||||||||||||||
Company Stock Purchased | - | - | - | (4,210 | ) | - | (4,210 | ) | ||||||||||||||||
Dividends Paid | - | - | - | (1,013 | ) | - | (1,013 | ) | ||||||||||||||||
BALANCE – March 31, 2022 | $ | 34 | $ | 40,033 | $ | (667 | ) | $ | 14,051 | $ | (819 | ) | $ | 52,632 | ||||||||||
BALANCE – June 30, 2022 | $ | 34 | $ | 40,145 | $ | (639 | ) | $ | 14,506 | $ | (1,699 | ) | $ | 52,347 | ||||||||||
Net Income | - | - | - | 4,446 | - | 4,446 | ||||||||||||||||||
Changes in Unrealized loss on Securities Available-for-Sale, Net of Tax Effects | - | - | - | - | (275 | ) | (275 | ) | ||||||||||||||||
Share Awards Earned | - | 123 | - | - | - | 123 | ||||||||||||||||||
Stock Options Vested | - | 80 | - | - | - | 80 | ||||||||||||||||||
Common Stock Issuance for Stock Option Exercises | (3 | ) | 220 | - | - | - | 217 | |||||||||||||||||
ESOP Compensation Earned | - | 226 | 87 | - | - | 313 | ||||||||||||||||||
Company Stock Purchased | - | - | - | (5,963 | ) | - | (5,963 | ) | ||||||||||||||||
Dividends Paid | - | - | - | (1,165 | ) | - | (1,165 | ) | ||||||||||||||||
BALANCE – March 31, 2023 | $ | 31 | $ | 40,794 | $ | (552 | ) | $ | 11,824 | $ | (1,974 | ) | $ | 50,123 |
See accompanying notes to unaudited consolidated financial statements.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
(Unaudited)
Nine Months Ended | ||||||||
March 31, | ||||||||
2023 | 2022 | |||||||
(In Thousands) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net Income | $ | 4,446 | $ | 3,805 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities | ||||||||
Bad Debt Recovery | 2 | 22 | ||||||
Federal Home Loan Bank Stock Dividend | 6 | - | ||||||
Net Amortization and Accretion on Securities | 21 | 103 | ||||||
(Gain) Loss on Sale of Real Estate and Fixed Assets | (4 | ) | 48 | |||||
Gain on Sale of Loans | (404 | ) | (1,747 | ) | ||||
Amortization of Deferred Loan Fees | (270 | ) | (729 | ) | ||||
Depreciation of Premises and Equipment | 648 | 561 | ||||||
ESOP Expense | 313 | 342 | ||||||
Stock Option Expense | 80 | 71 | ||||||
Deferred Income Tax | 47 | (41 | ) | |||||
Provision for Loan Losses | 718 | 61 | ||||||
(Increase) Decrease in Cash Surrender Value Bank Owned Life Insurance | (77 | ) | 642 | |||||
Share Awards Expense | 92 | 90 | ||||||
Changes in Assets and Liabilities: | ||||||||
Loans Held-for-Sale – Originations and Purchases | (22,065 | ) | (75,035 | ) | ||||
Loans Held-for-Sale – Sale and Principal Repayments | 25,287 | 88,792 | ||||||
Accrued Interest Receivable | (496 | ) | 77 | |||||
Other Operating Assets | 19 | (548 | ) | |||||
Other Operating Liabilities | 356 | (470 | ) | |||||
Net Cash Provided by Operating Activities | 8,719 | 16,044 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Loan Originations and Purchases, Net of Principal Collections | (93,680 | ) | (25,802 | ) | ||||
Deferred Loan Fees Collected | 135 | 244 | ||||||
Acquisition of Premises and Equipment | (997 | ) | (2,417 | ) | ||||
Net Cash Paid in Acquisition | (10,244 | ) | - | |||||
Proceeds from Sale of Real Estate | - | 814 | ||||||
Purchase Federal Home Loan Bank Stock | (989 | ) | - | |||||
Activity in Available-for-Sale Securities: | ||||||||
Principal Payments on Mortgage-Backed Securities | 3,764 | 7,033 | ||||||
Purchases of Securities | (20,826 | ) | - | |||||
Activity in Held-to-Maturity Securities: | ||||||||
Principal Payments on Mortgage-Backed Securities | 5,121 | 7,154 | ||||||
Purchase of Securities | - | (34,619 | ) | |||||
Net Cash Used in Investing Activities | (117,716 | ) | (47,593 | ) |
See accompanying notes to unaudited consolidated financial statements.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Nine Months Ended | ||||||||
March 31, | ||||||||
2023 | 2022 | |||||||
(In Thousands) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Net Increase in Deposits | $ | 82,383 | $ | 10,274 | ||||
Proceeds from Advances from Federal Home Loan Bank | 163,001 | - | ||||||
Repayments of Advances from Federal Home Loan Bank | (153,833 | ) | (26 | ) | ||||
Proceeds from Other Borrowings | 5,900 | 2,600 | ||||||
Repayments of Other Borrowings | - | (3,200 | ) | |||||
Net Decrease in Advances from Borrowers for Taxes and Insurance | (176 | ) | (219 | ) | ||||
Dividends Paid | (1,165 | ) | (1,013 | ) | ||||
Company Stock Purchased | (5,963 | ) | (4,210 | ) | ||||
Proceeds from Stock Options Exercised | 217 | 1,889 | ||||||
Plan Share Distributions | 123 | 117 | ||||||
Net Cash Provided by Financing Activities | 90,487 | 6,212 | ||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (18,510 | ) | (25,337 | ) | ||||
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 64,078 | 104,405 | ||||||
CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 45,568 | $ | 79,068 | ||||
SUPPLEMENTARY CASH FLOW INFORMATION | ||||||||
Interest Paid on Deposits and Borrowed Funds | $ | 2,598 | $ | 1,483 | ||||
Income Taxes Paid | 750 | 915 | ||||||
Market Value Adjustment for Loss on Debt Securities Available-for-Sale | (348 | ) | (1,385 | ) | ||||
Acquisitions: | ||||||||
Fair Value of Tangible Assets Acquired | 82,889 | - | ||||||
Other Intangible Assets Acquired | 1,510 | - | ||||||
Liabilities Assumed | 77,145 | - | ||||||
Net Identifiable Assets Acquired Over Liabilities Assumed | $ | 7,254 | $ | - |
See accompanying notes to unaudited 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 and nine month periods ended March 31, 2023 are not necessarily indicative of the results which may be expected for the fiscal year ending June 30, 2023.
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 statement of financial condition date for potential recognition in the consolidated financial statements. The effect of all subsequent events that provide additional evidence of conditions that existed at the statement of financial condition date are recognized in the consolidated financial statements as of March 31, 2022. In preparing these consolidated financial statements, the Company evaluated the events and transactions that occurred through the date these consolidated 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 nine full-service banking offices and home office, located in Caddo, Bossier and Webster Parishes, Louisiana. The area served by the Bank is primarily the Shreveport-Bossier City-Minden combined statistical area; however, loan and deposit customers are found dispersed in a wider geographical area covering much of northwest Louisiana. As of March 31, 2022, the Bank had one 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.
1. Summary of Accounting Policies (continued)
Securities
Securities are being accounted for in accordance with FASB 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 loss.
The Company held no trading securities as of March 31, 2023 and June 30, 2022.
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 loss, 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 statements 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 consolidated 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.
Acquisition Accounting
Acquisitions are accounted for under the purchase method of accounting. The acquisition method of accounting requires the Company as the acquirer to recognize the fair value of assets acquired and liabilities assumed at the acquisition date, as well as recognize goodwill. If the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed in an acquisition, goodwill is recognized. The Company records provisional amounts of fair value at the time of acquisition. The provisional fair values are subject to modification for up to one year after the acquisition.
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.
1. Summary of Accounting Policies (continued)
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.
Acquired Loans
Purchased loans acquired are recorded at their fair value. Discounts are included in the determination of the fair value. As such, an allowance for loan loss is not recorded at the acquisition date. Acquired loans are evaluated at acquisition and classified as either purchased credit impaired or purchased performing loans. Purchased credit impaired loans reflect credit deterioration since origination and as such at the date of acquisition the Company will not be able to collect all contractually required payments. The Company accounts for acquired impaired loans in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). Purchased credit impaired loans are accounted for individually. The Company estimates the amount and timing of undiscounted expected cash flows for each loan. The excess of the cash flows expected to be collected over a loan’s carrying value is considered to be the accretable yield, which is recognized as interest income over the estimated life of the loan. The excess of the undiscounted contractual balances due over the cash flows expected to be collected is considered to be the nonaccretable difference. Over the life of the loan, expected cash flows continue to be estimated.
If the expected cash flows decrease, a provision for loan loss is recorded. If the expected cash flows increase, it is recognized as part of future income. Purchased performing loans are accounted for under ASC 310-20, Nonrefundable Fees and Other Costs (“ASC 310-20”), with the related discount or premium being recognized as an adjustment to yield over the life of the loan.
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 for loan losses when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for loan losses.
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.
1. Summary of Accounting Policies (continued)
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 consolidated statements of financial 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 costs 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 |
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired. Goodwill has an indefinite useful life and is evaluated for impairment annually, or more frequently if events and circumstances indicate that the asset might be impaired.
Core Deposit Intangible
Core deposit intangibles represent the estimated value of long-term deposit relationships acquired in business combinations. The Company’s policy is to amortize these intangibles on a straight-line basis over their estimated useful life, which the estimated useful lives are periodically reviewed for reasonableness. Core deposit intangibles are tested for impairment if events and circumstances indicate the carrying amount of the asset may not be recoverable from future cash flows.
Bank-Owned Life Insurance
The Bank 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.
1. Summary of Accounting Policies (continued)
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 FASB 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 Company 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 $1.48 and $1.41, respectively, for the nine months ended March 31, 2023 compared to basic and diluted earnings per share of $1.18 and $1.10, respectively, for the nine months ended March 31, 2022. The Company’s basic and diluted earnings per share were $0.35 and $0.34, respectively, for the three months ended March 31, 2023 compared to basic and diluted earnings per share of $0.39 and $0.37, respectively, for the three months ended March 31, 2022.
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 consolidated statements of income 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.
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 statements of financial condition along with net income, they are components of comprehensive income.
1. Summary of Accounting Policies (continued)
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 Accounting Standards Update (“ASU”) 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. Utilizing a third party vendor model, a preliminary CECL calculation was completed with the December 31, 2022 quarter end call report information. The bank is continuing to evaluate the current model and methodology as well as consideration of any necessary qualitative adjustments. The Bank will continue to work with the third-party each quarter to ensure it is conforming with the ASU at adoption date and plans to present to the Board a parallel to the existing incurred loss model with March 31, 2023 call report information.
ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326)” (“ASU 2022-02”) eliminates the guidance on troubled debt restructurings and requires entities to evaluate all loan modifications to determine if they result in a new loan or a continuation of the existing loan. ASU 2022-02 also requires that entities disclose current-period gross charge-offs by year of origination for loans and leases. 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 yet known.
2. Securities
The amortized cost and fair value of securities with gross unrealized gains and losses follows:
March 31, 2023 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Securities Available-for-Sale | Cost | Gains | Losses | Value | ||||||||||||
(In Thousands) | ||||||||||||||||
Debt Securities | ||||||||||||||||
FHLMC Mortgage-Backed Certificates | $ | 12,491 | $ | - | $ | 694 | $ | 11,797 | ||||||||
FNMA Mortgage-Backed Certificates | 15,846 | - | 1,255 | 14,591 | ||||||||||||
GNMA Mortgage-Backed Certificates | 4,669 | 2 | 654 | 4,017 | ||||||||||||
Total Debt Securities | 33,006 | 2 | 2,603 | 30,405 | ||||||||||||
US Treasury Securities | 13,179 | 87 | - | 13,266 | ||||||||||||
Municipals | 1,070 | 15 | - | 1,085 | ||||||||||||
Total Securities Available-for-Sale | $ | 47,255 | $ | 104 | $ | 2,603 | $ | 44,756 | ||||||||
Securities Held-to-Maturity | ||||||||||||||||
Debt Securities | ||||||||||||||||
GNMA Mortgage-Backed Certificates | $ | 627 | $ | - | $ | 51 | $ | 576 | ||||||||
FHLMC Mortgage-Backed Certificates | 30,528 | - | 5,169 | 25,359 | ||||||||||||
FNMA Mortgage-Backed Certificates | 41,803 | - | 6,504 | 35,299 | ||||||||||||
Total Debt Securities | 72,958 | - | 11,724 | 61,234 | ||||||||||||
Municipals | 1,317 | - | 76 | 1,241 | ||||||||||||
Equity Securities (Non-Marketable) | ||||||||||||||||
12,865 Shares – Federal Home Loan Bank | 1,287 | - | - | 1,287 | ||||||||||||
630 Shares – First National Bankers Bankshares, Inc. | 250 | - | - | 250 | ||||||||||||
Total Equity Securities | 1,537 | - | - | 1,537 | ||||||||||||
Total Securities Held-to-Maturity | $ | 75,812 | $ | - | $ | 11,800 | $ | 64,012 |
2. Securities (continued)
June 30, 2022 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Securities Available-for-Sale | Cost | Gains | Losses | Value | ||||||||||||
(In Thousands) | ||||||||||||||||
Debt Securities | ||||||||||||||||
FHLMC Mortgage-Backed Certificates | $ | 7,513 | $ | 1 | $ | 482 | $ | 7,032 | ||||||||
FNMA Mortgage-Backed Certificates | 17,753 | - | 1,067 | 16,686 | ||||||||||||
GNMA Mortgage-Backed Certificates | 4,984 | - | 603 | 4,381 | ||||||||||||
Total Debt Securities | 30,250 | 1 | 2,152 | 28,099 | ||||||||||||
Total Securities Available-for-Sale | $ | 30,250 | $ | 1 | $ | 2,152 | $ | 28,099 | ||||||||
Securities Held-to-Maturity | ||||||||||||||||
Debt Securities | ||||||||||||||||
GNMA Mortgage-Backed Certificates | $ | 640 | $ | - | $ | 40 | $ | 600 | ||||||||
FHLMC Mortgage-Backed Certificates | 32,485 | - | 4,602 | 27,883 | ||||||||||||
FNMA Mortgage-Backed Certificates | 44,947 | - | 5,693 | 39,254 | ||||||||||||
Total Debt Securities | 78,072 | - | 10,335 | 67,737 | ||||||||||||
Municipals | 1,336 | - | 102 | 1,234 | ||||||||||||
Equity Securities (Non-Marketable) | ||||||||||||||||
2,919 Shares – Federal Home Loan Bank | 292 | - | - | 292 | ||||||||||||
630 Shares – First National Bankers Bankshares, Inc. | 250 | - | - | 250 | ||||||||||||
Total Equity Securities | 542 | - | - | 542 | ||||||||||||
Total Securities Held-to-Maturity | $ | 79,950 | $ | - | $ | 10,437 | $ | 69,513 |
2. Securities (continued)
The amortized cost and fair value of securities by contractual maturity at March 31, 2023 follows:
Available-for-Sale | Held-to-Maturity | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Debt Securities | ||||||||||||||||
Within One Year or Less | $ | - | $ | - | $ | - | $ | - | ||||||||
One through Five Years | 3 | 3 | - | - | ||||||||||||
After Five through Ten Years | 2,026 | 1,968 | - | - | ||||||||||||
Over Ten Years | 30,977 | 28,434 | 72,958 | 61,234 | ||||||||||||
33,006 | 30,405 | 72,958 | 61,234 | |||||||||||||
US Treasury Securities | ||||||||||||||||
Within One Year or Less | $ | 9,683 | $ | 9,752 | $ | - | $ | - | ||||||||
One through Five Years | 3,496 | 3,514 | - | - | ||||||||||||
13,179 | 13,266 | - | - | |||||||||||||
Municipals | ||||||||||||||||
Within One Year or Less | $ | - | $ | - | $ | - | $ | - | ||||||||
One through Five Years | - | - | 223 | 213 | ||||||||||||
After Five through Ten Years | - | - | - | - | ||||||||||||
Over Ten Years | 1,070 | 1,085 | 1,094 | 1,028 | ||||||||||||
1,070 | 1,085 | 1,317 | 1,241 | |||||||||||||
Other Equity Securities | - | - | 1,537 | 1,537 | ||||||||||||
Total | $ | 47,255 | $ | 44,756 | $ | 75,812 | $ | 64,012 |
2. Securities (continued)
There were no securities sold during the nine months ended March 31, 2023. The following tables show information pertaining to gross unrealized losses on securities available-for-sale at March 31, 2023 and June 30, 2022 aggregated by investment category and length of time that individual securities have been in a continuous loss position.
March 31, 2023 | ||||||||||||||||
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 | $ | 1,353 | $ | 22,199 | $ | 1,259 | $ | 7,532 | ||||||||
Municipals | - | - | - | - | ||||||||||||
Total Securities Available-for-Sale | $ | 1,353 | $ | 22,199 | $ | 1,259 | $ | 7,532 |
March 31, 2023 | ||||||||||||||||
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 | $ | 170 | $ | 1,943 | $ | 11,554 | $ | 59,291 | ||||||||
Municipals | - | - | 76 | 1,241 | ||||||||||||
Total Securities Held-to-Maturity | $ | 170 | $ | 1,943 | $ | 11,630 | $ | 60,532 |
2. Securities (continued)
June 30, 2022 | ||||||||||||||||
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 | $ | 1,335 | $ | 21,813 | $ | 816 | $ | 6,286 | ||||||||
Total Securities Available-for-Sale | $ | 1,335 | $ | 21,813 | $ | 816 | $ | 6,286 |
June 30, 2022 | ||||||||||||||||
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 | $ | 4,591 | $ | 35,930 | $ | 5,744 | $ | 31,807 | ||||||||
Municipals | $ | 102 | $ | 1,234 | $ | - | $ | - | ||||||||
Total Securities Held-to-Maturity | $ | 4,693 | $ | 37,164 | $ | 5,744 | $ | 31,807 |
The unrealized losses on the Company’s investments in mortgage-backed securities at March 31, 2023 and June 30, 2022 were caused by interest rate changes. The contractual cash flows of these investments are guaranteed by agencies of the U.S. Government and Municipal 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 March 31, 2023.
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 March 31, 2023, securities with a carrying value of $13.6 million were pledged to secure public deposits and securities and mortgage loans with a carrying value of $40.8 million were pledged to secure FHLB advances and FHLB letter -of-credits.
3. Loans Receivable
Loans receivable are summarized as follows:
March 31, 2023 | June 30, 2022 | |||||||
(In Thousands) | ||||||||
Loans Secured by Mortgages on Real Estate | ||||||||
One-to-Four Family Residential | $ | 173,444 | $ | 120,014 | ||||
Commercial | 152,092 | 127,589 | ||||||
Multi-Family Residential | 31,002 | 30,411 | ||||||
Land | 24,784 | 22,127 | ||||||
Construction | 31,846 | 27,884 | ||||||
Equity and Second Mortgage | 1,818 | 1,587 | ||||||
Equity Lines of Credit | 23,483 | 17,831 | ||||||
Total Mortgage Loans | 438,469 | 347,443 | ||||||
Commercial Loans | 51,490 | 44,487 | ||||||
Consumer Loans | ||||||||
Loans on Savings Accounts | 164 | 266 | ||||||
Other Consumer Loans | 1,383 | 439 | ||||||
Total Consumer Other Loans | 1,547 | 705 | ||||||
Total Loans | 491,506 | 392,635 | ||||||
Less: Allowance for Loan Losses | (4,935 | ) | (4,451 | ) | ||||
Unamortized Loan Fees | (177 | ) | (311 | ) | ||||
Net Loans Receivable | $ | 486,394 | $ | 387,873 |
The Company acquired loans with fair value of $55.9 million from FNBB on February 1, 2023. Of the total $55.9 million of loans acquired, $51.6 million were determined to have no evidence of deteriorated credit quality and accounted for under Topic ASC 310-20. The unamortized discount related to the acquired performing loans total $785,000 at February 1, 2023. The unamortized $4.3 million were determined to exhibit deteriorated credit quality. The discount related to these loans related to credit and interest adjustments was $772,000.
Following is a summary of changes in the allowance for loan losses:
Nine Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
(In Thousands) | ||||||||
Balance - Beginning of Period | $ | 4,451 | $ | 4,122 | ||||
Provision for Loan Losses | 718 | 61 | ||||||
Loan Charge-Offs | (236 | ) | (31 | ) | ||||
Recoveries | 2 | 22 | ||||||
Balance - End of Period | $ | 4,935 | $ | 4,174 |
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:
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 costs 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 Bank’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 Bank 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.
3. Loans Receivable (continued)
Credit Quality Indicators (continued)
The following tables present the grading of loans, segregated by class of loans, as of March 31, 2023 and June 30, 2022:
March 31, 2023 | Pass and Pass Watch | Special Mention | Substandard | Doubtful | Total | |||||||||||||||
(In Thousands) | ||||||||||||||||||||
Real Estate Loans: | ||||||||||||||||||||
One-to-Four Family Residential | $ | 170,213 | $ | 810 | $ | 2,421 | $ | - | $ | 173,444 | ||||||||||
Commercial | 150,446 | - | 1,646 | - | 152,092 | |||||||||||||||
Multi-Family Residential | 31,002 | - | - | - | 31,002 | |||||||||||||||
Land | 24,779 | - | 5 | - | 24,784 | |||||||||||||||
Construction | 31,846 | - | - | - | 31,846 | |||||||||||||||
Equity and Second Mortgage | 1,818 | - | - | - | 1,818 | |||||||||||||||
Equity Lines of Credit | 23,483 | - | - | - | 23,483 | |||||||||||||||
Commercial Loans | 48,807 | 2,619 | 64 | - | 51,490 | |||||||||||||||
Consumer Loans | 1,518 | 2 | 27 | - | 1,547 | |||||||||||||||
Total | $ | 483,912 | $ | 3,431 | $ | 4,163 | $ | - | $ | 491,506 |
June 30, 2022 | Pass and Pass Watch | Special Mention | Substandard | Doubtful | Total | |||||||||||||||
(In Thousands) | ||||||||||||||||||||
Real Estate Loans: | ||||||||||||||||||||
One-to-Four Family Residential | $ | 117,464 | $ | 352 | $ | 2,198 | $ | - | $ | 120,014 | ||||||||||
Commercial | 123,292 | 2,548 | 1,749 | - | 127,589 | |||||||||||||||
Multi-Family Residential | 30,411 | - | - | - | 30,411 | |||||||||||||||
Land | 22,127 | - | - | - | 22,127 | |||||||||||||||
Construction | 27,884 | - | - | - | 27,884 | |||||||||||||||
Equity and Second Mortgage | 1,587 | - | - | - | 1,587 | |||||||||||||||
Equity Lines of Credit | 17,831 | - | - | - | 17,831 | |||||||||||||||
Commercial Loans | 44,275 | 212 | - | - | 44,487 | |||||||||||||||
Consumer Loans | 705 | - | - | - | 705 | |||||||||||||||
Total | $ | 385,576 | $ | 3,112 | $ | 3,947 | $ | - | $ | 392,635 |
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.
3. Loans Receivable (continued)
Credit Quality Indicators (continued)
The following tables present an aging analysis of past due loans, segregated by class of loans, as of March 31, 2023 and June 30, 2022:
March 31, 2023 | 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 | $ | 341 | $ | 112 | $ | 2,142 | $ | 2,595 | $ | 170,849 | $ | 173,444 | $ | 26 | ||||||||||||||
Commercial | - | - | - | - | 152,092 | 152,092 | - | |||||||||||||||||||||
Multi-Family Residential | - | - | - | - | 31,002 | 31,002 | - | |||||||||||||||||||||
Land | - | - | - | - | 24,784 | 24,784 | - | |||||||||||||||||||||
Construction | - | - | 5 | 5 | 31,841 | 31,846 | - | |||||||||||||||||||||
Equity and Second Mortgage | - | - | - | - | 1,818 | 1,818 | - | |||||||||||||||||||||
Equity Lines of Credit | - | - | - | - | 23,483 | 23,483 | - | |||||||||||||||||||||
Commercial Loans | - | 4 | 8 | 12 | 51,478 | 51,490 | - | |||||||||||||||||||||
Consumer Loans | - | 50 | - | 50 | 1,497 | 1,547 | - | |||||||||||||||||||||
Total | $ | 341 | $ | 166 | $ | 2,155 | $ | 2,662 | $ | 488,442 | $ | 491,506 | $ | 26 |
June 30, 2022 | 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 | $ | - | $ | 1,923 | $ | 387 | $ | 2,310 | $ | 117,704 | $ | 120,014 | $ | 26 | ||||||||||||||
Commercial | - | - | - | - | 127,589 | 127,589 | - | |||||||||||||||||||||
Multi-Family Residential | - | - | - | - | 30,411 | 30,411 | - | |||||||||||||||||||||
Land | - | - | - | - | 22,127 | 22,127 | - | |||||||||||||||||||||
Construction | - | - | - | - | 27,884 | 27,884 | - | |||||||||||||||||||||
Equity and Second Mortgage | - | - | - | - | 1,587 | 1,587 | - | |||||||||||||||||||||
Equity Lines of Credit | 24 | - | - | 24 | 17,807 | 17,831 | - | |||||||||||||||||||||
Commercial Loans | - | - | - | - | 44,487 | 44,487 | - | |||||||||||||||||||||
Consumer Loans | - | - | - | - | 705 | 705 | - | |||||||||||||||||||||
Total | $ | 24 | $ | 1,923 | $ | 387 | $ | 2,334 | $ | 390,301 | $ | 392,635 | $ | 26 |
There was no interest income recognized on non-accrual loans during the nine months ended March 31, 2023 or the year ended June 30, 2022. If the non-accrual loans had been accruing interest at their original contracted rates, gross interest income that would have been recorded for the nine months ended March 31, 2023 and the year ended June 30, 2022 was approximately $39,000 and $54,000, respectively.
3. Loans Receivable (continued)
Credit Quality Indicators (continued)
The change in the allowance for loan losses by loan portfolio class and recorded investment in loans for the nine months ended March 31, 2023 and year ended June 30, 2022 was as follows:
Real Estate Loans | ||||||||||||||||||||||||||||||||||||
March 31, 2023 | 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 | $ | 1,367 | $ | 1,295 | $ | 357 | $ | 305 | $ | 282 | $ | 197 | $ | 646 | $ | 2 | $ | 4,451 | ||||||||||||||||||
Charge-Offs | (40 | ) | - | �� | - | - | - | (26 | ) | (170 | ) | - | (236 | ) | ||||||||||||||||||||||
Recoveries | 2 | - | - | - | - | - | - | - | 2 | |||||||||||||||||||||||||||
Current Provision | 328 | 223 | (82 | ) | (23 | ) | 26 | 107 | 138 | 1 | 718 | |||||||||||||||||||||||||
Ending Balances | $ | 1,657 | $ | 1,518 | $ | 275 | $ | 282 | $ | 308 | $ | 278 | $ | 614 | $ | 3 | $ | 4,935 | ||||||||||||||||||
Evaluated for Impairment: | ||||||||||||||||||||||||||||||||||||
Individually | 231 | 101 | - | - | - | - | 31 | - | 363 | |||||||||||||||||||||||||||
Collectively | 1,426 | 1,417 | 275 | 282 | 308 | 278 | 583 | 3 | 4,572 | |||||||||||||||||||||||||||
Loans Receivable: | ||||||||||||||||||||||||||||||||||||
Ending Balances – Total | $ | 173,444 | $ | 152,092 | $ | 31,002 | $ | 24,784 | $ | 31,846 | $ | 25,301 | $ | 51,490 | $ | 1,547 | $ | 491,506 | ||||||||||||||||||
Ending Balances: | ||||||||||||||||||||||||||||||||||||
Evaluated for Impairment: | ||||||||||||||||||||||||||||||||||||
Individually | 2,715 | 1,646 | - | - | - | - | 2,309 | - | 6,670 | |||||||||||||||||||||||||||
Collectively | $ | 170,729 | $ | 150,446 | $ | 31,002 | $ | 24,784 | $ | 31,846 | $ | 25,301 | $ | 49,181 | $ | 1,547 | $ | 484,836 |
Real Estate Loans | ||||||||||||||||||||||||||||||||||||
June 30, 2022 | 1-4 Family Residential | Commercial | Multi- Family | Land | Construction | Other | 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 | (8 | ) | (6 | ) | - | - | - | (17 | ) | - | - | (31 | ) | |||||||||||||||||||||||
Recoveries | 4 | - | - | - | - | 20 | - | - | 24 | |||||||||||||||||||||||||||
Current Provision | 477 | (329 | ) | 11 | (102 | ) | 122 | 1 | 157 | (1 | ) | 336 | ||||||||||||||||||||||||
Ending Balances | $ | 1,367 | $ | 1,295 | $ | 357 | $ | 305 | $ | 282 | $ | 197 | $ | 646 | $ | 2 | $ | 4,451 | ||||||||||||||||||
Evaluated for Impairment: | ||||||||||||||||||||||||||||||||||||
Individually | 106 | 129 | - | - | - | - | 38 | - | 273 | |||||||||||||||||||||||||||
Collectively | 1,261 | 1,166 | 357 | 305 | 282 | 197 | 608 | 2 | 4,178 | |||||||||||||||||||||||||||
Loans Receivable: | ||||||||||||||||||||||||||||||||||||
Ending Balances – Total | $ | 120,014 | $ | 127,589 | $ | 30,411 | $ | 22,127 | $ | 27,884 | $ | 19,418 | $ | 44,487 | $ | 705 | $ | 392,635 | ||||||||||||||||||
Ending Balances: | ||||||||||||||||||||||||||||||||||||
Evaluated for Impairment: | ||||||||||||||||||||||||||||||||||||
Individually | 2,550 | 1,749 | - | - | - | - | 2,760 | - | 7,059 | |||||||||||||||||||||||||||
Collectively | $ | 117,464 | $ | 125,840 | $ | 30,411 | $ | 22,127 | $ | 27,884 | $ | 19,418 | $ | 41,727 | $ | 705 | $ | 385,576 |
Included in the table above for the quarter ended March 31, 2023, are purchased credit impaired loans that were individually evaluated of $549,000. There was no allowance for loan loss on purchased credit impaired loans for the quarter ended March 31, 2023. There were no purchase credit impaired loans at June 30, 2022.
3. Loans Receivable (continued)
Credit Quality Indicators (continued)
The following tables present loans individually evaluated for impairment, segregated by class of loans, as of March 31, 2023 and June 30, 2022:
March 31, 2023 | 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 | $ | 2,715 | $ | 194 | $ | 2,521 | $ | 2,715 | $ | 231 | $ | 3,228 | ||||||||||||
Commercial | 1,646 | - | 1,646 | 1,646 | 101 | 1,695 | ||||||||||||||||||
Multi-Family Residential | - | - | - | - | - | - | ||||||||||||||||||
Land | - | - | - | - | - | - | ||||||||||||||||||
Construction | - | - | - | - | - | - | ||||||||||||||||||
Equity and Second Mortgage | - | - | - | - | - | - | ||||||||||||||||||
Equity Lines of Credit | - | - | - | - | - | - | ||||||||||||||||||
Commercial Loans | 2,309 | - | 2,309 | 2,309 | 31 | 2,447 | ||||||||||||||||||
Consumer Loans | - | - | - | - | - | - | ||||||||||||||||||
Total | $ | 6,670 | $ | 194 | $ | 6,476 | $ | 6,670 | $ | 363 | $ | 6,349 |
June 30, 2022 | 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 | $ | 2,550 | $ | 163 | $ | 2,387 | $ | 2,550 | $ | 106 | $ | 3,032 | ||||||||||||
Commercial | 1,749 | - | 1,749 | 1,749 | 129 | 1,811 | ||||||||||||||||||
Multi-Family Residential | - | - | - | - | - | - | ||||||||||||||||||
Land | - | - | - | - | - | - | ||||||||||||||||||
Construction | - | - | - | - | - | - | ||||||||||||||||||
Equity and Second Mortgage | - | - | - | - | - | - | ||||||||||||||||||
Equity Lines of Credit | - | - | - | - | - | - | ||||||||||||||||||
Commercial Loans | 2,760 | 212 | 2,548 | 2,760 | 38 | 2,880 | ||||||||||||||||||
Consumer Loans | - | - | - | - | - | - | ||||||||||||||||||
Total | $ | 7,059 | $ | 375 | $ | 6,684 | $ | 7,059 | $ | 273 | $ | 7,723 |
The Bank has no commitments to loan additional funds to borrowers whose loans were previously in non-accrual status. As of March 31, 2023, there was one commercial equipment loan in the process of foreclosure.
3. Loans Receivable (continued)
Credit Quality Indicators (continued)
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):
March 31, 2023 | ||||||||||||||||
Current | Past Due Greater Than 30 Days | Nonaccrual TDRs | Total TDRs | |||||||||||||
One-to-Four Family | $ | - | $ | 1,760 | $ | 1,760 | $ | 1,760 |
June 30, 2022 | ||||||||||||||||
Current | Past Due Greater Than 30 Days | Nonaccrual TDRs | Total TDRs | |||||||||||||
One-to-Four Family | $ | - | $ | 1,818 | $ | 1,818 | $ | 1,818 | ||||||||
Commercial Loans | 212 | - | 212 | 212 |
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 March 31, 2023, there were no commitments to lend additional funds to debtors owing sums to the Company whose terms have been modified in TDRs. The Company had no TDR that has subsequently defaulted in the last 12 months. There was one loan secured by commercial equipment in foreclosure.
4. Deposits
Deposits at March 31, 2023 and June 30, 2022 consist of the following classifications:
March 31, 2023 | June 30, 2022 | |||||||
(In Thousands) | ||||||||
Non-Interest Bearing | $ | 163,598 | $ | 161,142 | ||||
NOW Accounts | 66,296 | 58,957 | ||||||
Money Markets | 130,337 | 98,627 | ||||||
Passbook Savings | 92,557 | 132,981 | ||||||
452,788 | 451,707 | |||||||
Certificates of Deposit | 161,586 | 80,284 | ||||||
Total Deposits | $ | 614,374 | $ | 531,991 |
5. Earnings Per Share
Basic earnings per common share is 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 and nine months ended March 31, 2023 and 2022 were calculated as follows:
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(In Thousands, Except Per Share Data) | ||||||||||||||||
Net income | $ | 1,062 | $ | 1,277 | $ | 4,446 | $ | 3,805 | ||||||||
Weighted average shares outstanding – basic | 3,006 | 3,274 | 3,022 | 3,235 | ||||||||||||
Effect of dilutive common stock equivalents | 126 | 191 | 142 | 227 | ||||||||||||
Adjusted weighted average shares outstanding – diluted | 3,132 | 3,465 | 3,164 | 3,462 | ||||||||||||
Basic earnings per share | $ | 0.35 | $ | 0.39 | $ | 1.48 | $ | 1.18 | ||||||||
Diluted earnings per share | $ | 0.34 | $ | 0.37 | $ | 1.41 | $ | 1.10 |
For the three months ended March 31, 2023 and 2022, there were outstanding options to purchase 384,789 and 438,745 shares, respectively, at a weighted average exercise price of $11.81 and $11.61 per share, respectively, and for the nine months ended March 31, 2023 and 2022, there were outstanding options to purchase 387,701 and 558,175 shares, respectively, at a weighted average exercise price of $11.81 and $11.61 per share, respectively. For the quarter ended March 31, 2023 and 2022, 126,427 options and 191,513 options, respectively, were included in the computation of diluted earnings per share. For the nine month period ended March 31, 2023 and 2022, 142,259 options and 226,920 options, respectively, were included in the computation of diluted earnings per share.
The following table presents the components of weighted average outstanding shares for purposes of calculating earnings per share:
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(In Thousands) | ||||||||||||||||
Average common shares issued | 6,124 | 6,124 | 6,124 | 6,124 | ||||||||||||
Average unearned ESOP shares | (113 | ) | (139 | ) | (119 | ) | (142 | ) | ||||||||
Average Company stock purchased | (3,005 | ) | (2,711 | ) | (2,983 | ) | (2,747 | ) | ||||||||
Weighted average shares outstanding | 3,006 | 3,274 | 3,022 | 3,235 |
6. Stock-Based Compensation
Stock Option Plans
On August 10, 2005, the stockholders 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 2005 Option Plan terminated on June 8, 2015; however, the 4,266 outstanding options as of March 31, 2023, all of which are vested, will remain in effect for the remainder of their original ten year term, expiring July 31, 2024.
On December 23, 2011, the stockholders of the Company approved the establishment of the Home Federal Bancorp, Inc. of Louisiana 2011 Stock Option Plan (the “2011 Option Plan)” for the benefit of directors, officers, and other key employees. The 2011 Option Plan terminated on December 23, 2021; however, the 38,350 outstanding options as of March 31, 2023 will remain in effect for the remainder of their original ten year term, expiring July 31, 2024.
Stock Incentive Plans
On November 12, 2014, the stockholders of the Company approved the adoption of the Company’s 2014 Stock Incentive Plan (the “2014 Stock Incentive Plan”) which covers a total of 300,000 shares (as adjusted), of which no more than 75,000 shares (as adjusted), 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 (as adjusted), assuming all the share awards are issued. On July 21, 2022 and August 15, 2022, the Company granted a total of 8,000 stock options under the 2014 Stock Incentive Plan to key employees vesting ratably over five years.
On November 13, 2019, the stockholders 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 (as adjusted) reserved for future issuance as stock awards or stock options. No more than 62,500 shares (as adjusted), or 25%, may be granted as stock awards. The balance of the plan is reserved for stock option awards. As of March 31, 2023, there are 1,200 plan share awards and 14,000 stock options available for future grants under the 2014 Stock Incentive Plan and none available under the 2019 Stock Incentive Plan.
Compensation expense pertaining to the Stock Incentive Plans was $173,000 and $117,000 for the nine months ended March 31, 2023 and 2022, respectively. For the three months ended March 31, 2023 and 2022, compensation expense charged to operations under the Stock Incentive Plans was $81,000 and $71,000, respectively. The Stock Incentive Plans costs are recognized over the five year vesting period of the awards.
7. Related Party Transactions
Certain directors and executive officers were indebted to the Bank in the approximate aggregate amount of $4.4 million at March 31, 2023 and $4.4 million June 30, 2022.
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.
8. Fair Value Disclosures (continued)
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.
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.
8. Fair Value Disclosures (continued)
At March 31, 2023 and June 30, 2022, the carrying amount and estimated fair values of the Company’s financial instruments were as follows:
March 31, 2023 | June 30, 2022 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Financial Assets | ||||||||||||||||
Cash and Cash Equivalents | $ | 45,568 | $ | 45,568 | $ | 64,078 | $ | 64,078 | ||||||||
Securities Available-for-Sale | 44,756 | 44,756 | 28,099 | 28,099 | ||||||||||||
Securities to be Held-to-Maturity | 75,812 | 64,012 | 79,950 | 69,513 | ||||||||||||
Loans Held-for-Sale | 1,160 | 1,160 | 3,978 | 3,978 | ||||||||||||
Loans Receivable | 486,394 | 437,755 | 387,873 | 369,728 | ||||||||||||
Financial Liabilities | ||||||||||||||||
Deposits | $ | 614,374 | $ | 487,009 | $ | 531,991 | $ | 490,789 | ||||||||
Advances from FHLB | 10,000 | 10,000 | 832 | 844 | ||||||||||||
Off-Balance Sheet Items | ||||||||||||||||
Mortgage Loan Commitments | $ | 13,277 | $ | 13,277 | $ | 11,365 | $ | 11,365 |
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; |
• | 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. |
8. Fair Value Disclosures (continued)
• | 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 nine months ended March 31, 2023.
Fair values of assets and liabilities measured on a recurring basis at March 31, 2023 and June 30, 2022 are as follows:
Fair Value Measurements | ||||||||||||||||
March 31, 2023 | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(In Thousands) | ||||||||||||||||
Available-for-Sale | ||||||||||||||||
Debt Securities | ||||||||||||||||
FHLMC | $ | - | $ | 11,797 | $ | - | $ | 11,797 | ||||||||
FNMA | - | 14,591 | - | 14,591 | ||||||||||||
GNMA | - | 4,017 | - | 4,017 | ||||||||||||
- | 30,405 | - | 30,405 | |||||||||||||
US Treasury Securities | - | 13,266 | - | 13,266 | ||||||||||||
Municipals | - | 1,085 | - | 1,085 | ||||||||||||
Total | $ | - | $ | 44,756 | $ | - | $ | 44,756 |
Fair Value Measurements | ||||||||||||||||
June 30, 2022 | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(In Thousands) | ||||||||||||||||
Available-for-Sale | ||||||||||||||||
Debt Securities | ||||||||||||||||
FHLMC | $ | - | $ | 7,032 | $ | - | $ | 7,032 | ||||||||
FNMA | - | 16,686 | - | 16,686 | ||||||||||||
GNMA | - | 4,381 | - | 4,381 | ||||||||||||
Total | $ | - | $ | 28,099 | $ | - | $ | 28,099 |
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 financial condition. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated statements of financial condition as right-of-use (“ROU”) assets and corresponding lease liabilities. See table;
(In Thousands) | March 31, 2023 | June 30, 2022 | |||||||
Lease Right-of-Use Assets | Classification | ||||||||
Operating lease right-of-use assets | Other Assets | $ | 833 | $ | 844 | ||||
Total Lease Right-of-Use Assets | $ | 833 | $ | 844 | |||||
Lease Liabilities | |||||||||
Operating lease liabilities | Other Accrued Expenses and Liabilities | $ | 867 | $ | 871 | ||||
Total Lease Liabilities | $ | 867 | $ | 871 |
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.
March 31, 2023 | June 30, 2022 | |||||||
Weighted-average remaining lease term | ||||||||
Operating leases | 35.7 years | 36.4 years | ||||||
Weighted-average discount rate | ||||||||
Operating leases | 3.00 | % | 3.00 | % |
10. Acquisition Activity
On February 1, 2023, the Company completed the acquisition of Northwest Bancshares Corporation (“NWB”), the former holding company of First National Bank of Benton (“FNBB”). Shareholders of NWB received $128.16 in cash for each share of NWB common stock they held yielding an aggregate purchase price of $10.2 million.
The acquisition was accounted for under the purchase method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”), if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. In accordance with ASC 805, the Company recorded goodwill totaling $3.0 million from the acquisition as a result of consideration transferred over net assets acquired. Both the assets acquired and liabilities assumed were recorded at their respective acquisition date fair values. Identifiable intangible assets, including core deposit intangible assets, were recorded at fair value.
The fair value estimates of the NWB assets and liabilities are preliminary and require management to make estimates about discount rates, expected cash flows, market conditions, and other future events that are highly subjective in nature and are subject to refinement for a one year period after the date of the acquisition. Under current accounting principles, the Company’s estimates of fair values may be adjusted for a period of up to one year from the acquisition date if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.
10. Acquisition Activity (continued)
The assets acquired and liabilities assumed, as well as the adjustments to record the assets and liabilities at fair value, are presented in the following table as of February 1, 2023.
(dollars in thousands) | As Acquired | Fair Value Adjustment | As recorded by Home Federal Bancorp | |||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 13,255 | $ | - | $ | 13,255 | ||||||
Investment securities | 14,862 | - | 14,862 | |||||||||
Loans | 54,949 | (829 | )(a) | 54,120 | ||||||||
Office properties and equipment, net | 17 | 668 | (b) | 685 | ||||||||
Core deposit intangible | - | 1,510 | (c) | 1,510 | ||||||||
Other assets | 310 | (343 | ) | (33 | ) | |||||||
Total assets acquired | $ | 83,393 | $ | 1,006 | $ | 84,399 | ||||||
Liabilities | ||||||||||||
Noninterest-bearing deposits | $ | 18,121 | - | $ | 18,121 | |||||||
Interest-bearing deposits | 57,540 | (197 | )(d) | 57,343 | ||||||||
Other liabilities | 1,681 | - | 1,681 | |||||||||
Total liabilities assumed | $ | 77,342 | $ | (197 | ) | $ | 77,145 | |||||
Excess of assets acquired over liabilities assumed | 7,254 | |||||||||||
Cash consideration paid | (10,244 | ) | ||||||||||
Total goodwill recorded | $ | 2,990 |
(a) | The adjustment to reflect the fair value of loans includes: |
• | Preliminary adjustment of $727,000 to reflect the removal of FNBB’s allowance for loan losses at the acquisition date, in accordance with ASC 805. |
• | Preliminary net discount of $772,000 for all purchased credit impaired loans that were determined to be within the scope of ASC 310-30, which totaled $3.3 million. The acquired loan balance was reduced by the net amount of the credit and interest adjustments in determining the fair value of the loans. |
• | Preliminary net discount of $785,000 for all performing loans were determined not to be within the scope of ASC 310-30, which totaled $51.6 million. The acquired loan balance was reduced by the net amount of the credit and interest adjustments in determining the fair value of the loans. |
(b) | The adjustment represents the appraisal of the FNBB office property to its estimated fair value at the acquisition date. |
(c) | The adjustment represents the value of the core deposit base assumed in the acquisition. The core deposit asset was recorded as an identifiable intangible asset and will be amortized on an accelerated basis over the estimated life of the deposit base of 10 years. |
(d) | The adjustment represents the fair value of certificates of deposit acquired based on current interest rates for similar instruments. The adjustment will be recognized using a level yield amortization method based on maturities of the deposit liabilities. |
11. Subsequent Events
There have been no subsequent events that have occurred after March 31, 2023, through the date of the financial statements, that would require disclosure or have an adverse impact on the financial statements.
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 condition and results of operations.
The Bank operates from its main office in Shreveport, Louisiana and nine full service branch offices located in Shreveport, Bossier City and Minden, Louisiana. The Company’s primary market area is the Shreveport-Bossier City-Minden combined statistical 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.
Business Combinations
Acquisition Accounting
Acquisitions are accounted for under the acquisition method of accounting. The acquisition method of accounting requires the Company as the acquirer to recognize the fair value of assets acquired and liabilities assumed at the acquisition date, as well as recognize goodwill. If the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed in an acquisition, goodwill is recognized. The Company records provisional amounts of fair value at the time of acquisition. The provisional fair values are subject to modification for up to one year after the acquisition.
Acquired Loans
Purchased loans acquired are recorded at their fair value. Discounts are included in the determination of the fair value. As such, an allowance for loan loss is not recorded at the acquisition date. Acquired loans are evaluated at acquisition and classified as either purchased credit impaired or purchased performing loans. Purchased credit impaired loans reflect credit deterioration since origination and as such at the date of acquisition the Company will not be able to collect all contractually required payments. The Company accounts for acquired impaired loans in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). Purchased credit impaired loans are accounted for individually. The Company estimates the amount and timing of undiscounted expected cash flows for each loan. The excess of the cash flows expected to be collected over a loan's carrying value is considered to be the accretable yield, which is recognized as interest income over the estimated life of the loan. The excess of the undiscounted contractual balances due over the cash flows expected to be collected is considered to be the nonaccretable difference. Over the life of the loan, expected cash flows continue to be estimated. If the expected cash flows decrease, a provision for loan loss is recorded. If the expected cash flows increase, it is recognized as part of future income. Purchased performing loans are accounted for under ASC 310-20, Nonrefundable Fees and Other Costs (“ASC 310-20”), with the related discount or premium being recognized as an adjustment to yield over the life of the loan.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired. Goodwill has an indefinite useful life and is evaluated for impairment annually, or more frequently if events and circumstances indicate that the asset might be impaired.
Core Deposit Intangible
Core deposit intangibles represent the estimated value of long-term deposit relationships acquired in business combinations. The Company’s policy is to amortize these intangibles on a straight-line basis over their estimated useful life, which the estimated useful lives are periodically reviewed for reasonableness. Core deposit intangibles are tested for impairment if events and circumstances indicate the carrying amount of the asset may not be recoverable from future cash flows.
Discussion of Financial Condition Changes from June 30, 2022 to March 31, 2023
General
At March 31, 2023, the Company reported total assets of $686.0 million, an increase of $95.5 million, or 16.2%, compared to total assets of $590.5 million at June 30, 2022. The increase in assets was comprised primarily of increases in loans receivable, net of $98.5 million, or 25.4%, from $387.9 million at June 30, 2022 to $486.4 million at March 31, 2023, investment securities of $12.5 million, or 11.6%, from $108.0 million at June 30, 2022 to $120.6 million at March 31, 2023, goodwill of $3.0 million from none at June 30, 2022 to $3.0 million at March 31, 2023, core deposit intangible of $1.6 million, from none at June 30, 2022 to $1.6 million at March 31, 2023, accrued interest receivable of $496,000, or 44.1%, from $1.1 million at June 30, 2022 to $1.6 million at March 31, 2023, premises and equipment of $349,000, or 2.1%, from $16.2 million June 30, 2022 to $16.6 million at March 31, 2023, real estate owned of none at June 30, 2022 to $311,000 at March 31, 2023, and bank owned life insurance of $77,000, or 1.2%, from $6.6 million at June 30, 2022 to $6.7 million at March 31, 2023. The increases were partially offset by decreases in cash and cash equivalents of $18.5 million, or 28.9%, from $64.1 million at June 30, 2022 to $45.6 million at March 31, 2023, loans-held-for-sale of $2.8 million, or 70.8%, from $4.0 million at June 30, 2022 to $1.2 million at March 31, 2023, and deferred tax asset of $47,000, or 4.1%, from $1.1 million at June 30, 2022 to $1.0 million at March 31, 2023. The decrease in cash and cash equivalents was primarily due to funding of additional loan growth and purchase of securities. The increase in loans receivable, net, was primarily due to an increase of $53.3 million in loans acquired from the acquisition of First National Bank of Benton. The decrease in loans-held-for-sale primarily reflected a reduction in loans originated for sale during the nine months ended March 31, 2023 due mainly to a decrease in mortgage refinance activity likely attributable to the increase in interest rates. The increase in investment securities was primarily due to acquisition of $13.5 million in securities from FNBB.
Cash and Cash Equivalents
Cash and cash equivalents decreased $18.5 million, or 28.9%, from $64.1 million at June 30, 2022 to $45.6 million at March 31, 2023. The decrease in cash and cash equivalents was primarily due to an increase in commercial loan originations and security purchases.
Loans Receivable, Net
Loans receivable, net, increased by $98.5 million, or 25.4%, to $486.4 million at March 31, 2023 compared to $387.9 million at June 30, 2022. FNBB loans totaled $53.3 million at March 31, 2023. Loan portfolio increases not including FNBB loans were primarily due to growth in commercial real estate loans and one-to-four-family loans.
Loans Held-for-Sale
Loans held-for-sale decreased $2.8 million, or 70.8%, from $4.0 million at June 30, 2022 to $1.2 million at March 31, 2023. The decrease in loans held-for-sale resulted primarily from the decrease in the origination volume during the first nine months of fiscal year end 2023.
Investment Securities
Investment securities amounted to $120.6 million at March 31, 2023 compared to $108.0 million at June 30, 2022, an increase of $12.5 million, or 11.6%. The increase in investment securities was primarily due to acquisition of $13.5 million in securities from FNBB. FNBB securities were composed of $13.3 million in US Treasury securities along with $205,000 in mortgage-backed-securities.
Premises and Equipment, Net
Premises and equipment, net, increased $349,000, or 2.1%, to $16.6 million at March 31, 2023 compared to $16.2 million at June 30, 2022. The increase in premises and equipment was primarily due to acquisition of premises and equipment of $685,000 from the FNBB acquisition.
Asset Quality
At March 31, 2023, the Company had $2.7 million of non-performing assets (defined as non-accruing loans, accruing loans 90 days or more past due, and other real estate owned) compared to $2.2 million on non-performing assets at June 30, 2022, consisting of fourteen single-family residential loans, one land loan, one commercial loan, and one single family residence in other real estate owned at March 31, 2023, compared to nine single-family residential loans and one line of credit loan at June 30, 2022. At March 31, 2023 the Company had thirteen single family residential loans, two commercial real estate loans, three commercial loans, two consumer loans, and one land loan classified as substandard compared to five single family residential loans and two commercial real estate loans classified as substandard at June 30, 2022. There were no loans classified as doubtful at March 31, 2023 or June 30, 2022.
Discussion of Financial Condition Changes from June 30, 2022 to March 31, 2023 (continued)
Total Liabilities
Total liabilities increased $97.7 million, or 18.2%, from $538.1 million at June 30, 2022 to $635.9 million at March 31, 2023 primarily due to increases in total deposits of $82.4 million (deposits acquired in the acquisition of FNBB totaled $77.9 million), or 15.5%, to $614.4 million at March 31, 2023 compared to $532.0 million at June 30, 2022, advances from FHLB of $9.2 million, or 1,101.9%, to $10.0 million at March 31, 2023 compared to $832,000 at June 30, 2022, other borrowings of $5.9 million, or 251.1%, to $8.3 million at March 31, 2023 compared to $2.4 million at June 30,2022, and other accrued expenses and liabilities of $356,000, or 13.7%, to $3.0 million at March 31, 2023 compared to $2.6 million at June 30, 2022, partially offset by an decrease in advances for borrowers taxes and insurance of $78,000, or 22.0%, to $276,000 at March 31, 2023 compared to $354,000 at June 30, 2022. The increase in deposits was primarily due to a $81.3 million, or 101.3%, increase in certificates of deposits from $80.3 million at June 30, 2022 to $161.6 million at March 31, 2023, a $31.7 million, or 32.2%, increase in money market deposits from $98.6 million at June 30, 2022 to $130.3 million at March 31, 2023, a $7.3 million, or 12.4%, increase in NOW accounts from $59.0 million at June 30, 2022 to $66.3 million at March 31, 2023, and a increase of $2.5 million, or 1.5%, in non-interest bearing deposits from $161.1 million at June 30, 2022 to $163.6 million at March 31, 2023, partially offset by a decrease of $40.4 million, or 30.4%, in savings deposits from $133.0 million at June 30, 2022 to $92.6 million at March 31, 2023. The Company had $3.0 million in brokered deposits at March 31, 2023 compared to $6.0 million at June 30, 2022. The increase in advances from the Federal Home Loan Bank was primarily due to an advance with an overnight maturity for $10.0 million.
Stockholders’ Equity
Shareholders’ equity decreased $2.2 million, or 4.2%, to $50.1 million at March 31, 2023 from $52.3 million at June 30, 2022. The primary reasons for the changes in shareholders’ equity from June 30, 2022 were the repurchase of Company stock of $6.0 million, a decrease in the Company’s accumulated other comprehensive income of $275,000, and dividends paid totaling $1.1 million, partially offset by net income of $4.4 million, the vesting of restricted stock awards, stock options, and the release of employee stock ownership plan shares totaling $516,000, and proceeds from the issuance of common stock from the exercise of stock options of $217,000.
The Company repurchased 291,000 shares of its common stock during the nine months ended March 31, 2023 at an average price per share of $19.99. On February 16, 2022, the Company announced that its Board of Directors approved an eleventh stock repurchase program for the repurchase of up to 170,000 shares. The eleventh stock repurchase program was completed on August 2, 2022.
Regulatory Capital
The Bank is required to meet minimum capital standards promulgated by the Office of the Comptroller of the Currency (“OCC”). At March 31, 2023, Home Federal Bank’s regulatory capital was well in excess of the minimum capital requirements. At March 31, 2023, 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 8.43%, 11.73%, 8.43%, and 12.91%, respectively.
Comparison of Operating Results for the Three and Nine Months Ended March 31, 2023 and 2022
General
The decrease in net income for the three months ended March 31, 2023, as compared to the prior year quarter resulted primarily from a $940,000, or 26.4%, increase in non-interest expense, a decrease of $328,000, or 39.2%, in non-interest income, a $150,000 increase in provision for loan losses, and a $2,000, or 0.7%, increase in provision for income taxes, partially offset by an increase of $1.2 million, or 28.2%, in net interest income. The increase in the provision for loan losses for the three months ended March 31, 2023, was primarily due to loan growth of $14.0 million exclusive of the loans acquired from FNBB. The increase in net income for the nine months ended March 31, 2023 resulted primarily from a $3.4 million, or 27.0%, increase in net interest income, a decrease of $199,000, or 21.6%, in provision for income taxes, partially offset by a decrease of $1.3 million, or 44.8% in non-interest income, an increase of $1.0 million, or 9.6%, in non-interest expense, and an increase of $657,000, or 1,077.0%, in provision for loan losses. The increase in the provision for loan losses for the nine-month period was primarily due to loan growth.
Comparison of Operating Results for the Three and Nine Months Ended March 31, 2023 and 2022 (continued)
Net Interest Income
The increase in net interest income for the three months ended March 31, 2023, was primarily due to a $2.3 million, or 49.5%, increase in total interest income, partially offset by an increase of $1.1 million, or 263.2% in total interest expense. The Company’s average interest rate spread was 3.15% for the three months ended March 31, 2023, compared to 3.13% for the three months ended March 31, 2022. The Company’s net interest margin was 3.56% for the three months ended March 31, 2023, compared to 3.27% for the three months ended March 31, 2022.
The increase in net interest income for the nine-month period was primarily due to a $4.7 million, or 33.4%, increase in total interest income, partially offset by an increase of $1.3 million, or 88.6%, in total interest expense. The Company’s average interest rate spread was 3.55% for the nine months ended March 31, 2023, compared to 3.03% for the nine months ended March 31, 2022. The Company’s net interest margin was 3.84% for the nine months ended March 31, 2023, compared to 3.19% for the nine months ended March 31, 2022.
Provision for Loans Losses
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 $150,000 and $718,000 for the three and nine months ended March 31, 2023, compared to none and $61,000 in provisions made during the three and nine months ended March 31, 2022. The allowance for loan losses was $4.9 million, or 1.00% of total loans receivable, at March 31, 2023 compared to $4.2 million, or 1.14% of total loans receivable, at March 31, 2022. At March 31, 2023, Home Federal Bank had $2.4 million in non-performing loans and $311,000 in other real estate owned which totaled $2.7 million in non-performing assets.
Non-interest Income
The $328,000 decrease in non-interest income for the three months ended March 31, 2023, compared to the prior year quarterly period, was primarily due to a decrease of $240,000 in gain on sale of loans, a $229,000 decrease in other non-interest income, and a $2,000 decrease in income from bank owned life insurance, partially offset by an increase of $91,000 in service charges on deposit accounts and a $52,000 decrease in loss on sale of fixed assets and real estate owned.
The $1.3 million decrease in non-interest income for the nine months ended March 31, 2023, compared to the prior year nine-month period was primarily due to a decrease of $1.3 million in gain on sale of loans, a decrease of $234,000 in other non-interest income, and a $5,000 decrease in income from bank owned life insurance, partially offset by a $236,000 increase in service charges on deposit accounts and a $52,000 decrease in loss on sake of fixed assets and real estate owned. The decreases in gain on sale of loans for both the quarter and nine-month periods were primarily due to a decrease in refinance activity causing a decrease in mortgage loan originations. 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 $940,000 increase in non-interest expense for the three months ended March 31, 2023, compared to the same period in 2022, is primarily attributable to increases of $750,000 in professional fees which were due to acquisition costs of FNBB, $125,000 in compensation and benefits expense, $92,000 in occupancy and equipment expense, $71,000 in amortization of core deposit intangible expense related to the acquisition of FNBB, $14,000 in data processing expense, $13,000 in franchise and bank shares tax expense, $11,000 in deposit insurance premium expense, and $9,000 in advertising expense. The increases were partially offset by decreases of $115,000 in other non-interest expense, $20,000 in audit and examination expense, and $10,000 in loan and collection expense.
Comparison of Operating Results for the Three and Nine Months Ended March 31, 2023 and 2022 (continued)
The $1.0 million increase in non-interest expense for the nine months ended March 31, 2023, compared to the same nine-month period in 2022, is primarily attributable to increases of $627,000 in professional fees which were due to acquisition costs of FNBB, $220,000 in occupancy and equipment expense, $161,000 in other non-interest expense, $71,000 in amortization of core deposit intangible expense related to the acquisition of FNBB, $36,000 in deposit insurance premium expense, $30,000 in data processing expense, and $5,000 in advertising expense. The increases were partially offset by decreases $50,000 in audit and examination fees, $36,000 in loan and collection expense, $17,000 in franchise and bank shares tax expense, and $16,000 in compensation and benefits expense. The increase in professional fees for both the three and nine months ended March 31, 2023 was primarily due to the acquisition of FNBB in February 2023.
The Louisiana bank shares tax is assessed on the Bank’s equity and earnings. For the three and nine months ended March 31, 2023, the Company recognized franchise and bank shares tax expense of $145,000 and $386,000, respectively, compared to $132,000 and $403,000 for the same periods in 2022.
Income Taxes
Income taxes amounted to $271,000 and $723,000 for the three and nine months ended March 31, 2023, respectively, resulting in an effective tax rate of 20.3% and 14.0%. Income taxes amounted to $269,000 and $922,000 for the three and nine months ended March 31, 2022, respectively. The decrease in provision for income taxes was due to an adjustment in taxes related to stock option exercises.
Comparison of Operating Results for the Three and Nine Months Ended March 31, 2023 and 2022 (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 March 31, | ||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||
Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | |||||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans receivable | $ | 476,721 | $ | 6,151 | 5.23 | % | $ | 365,277 | $ | 4,277 | 4.75 | % | ||||||||||||
Investment securities | 120,852 | 592 | 1.99 | 102,549 | 380 | 1.50 | ||||||||||||||||||
Interest-earning deposits | 25,867 | 270 | 4.22 | 61,733 | 35 | 0.23 | ||||||||||||||||||
Total interest-earning assets | 623,440 | 7,013 | 4.56 | $ | 529,559 | 4,692 | 3.59 | % | ||||||||||||||||
Non-interest-earning assets | 43,545 | 41,840 | ||||||||||||||||||||||
Total assets | $ | 666,985 | $ | 571,399 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Savings accounts | $ | 99.252 | 75 | 0.31 | % | $ | 138,742 | 96 | 0.28 | % | ||||||||||||||
NOW accounts | 70,064 | 44 | 0.26 | 53,980 | 14 | 0.11 | ||||||||||||||||||
Money market accounts | 121,256 | 380 | 1.27 | 94,986 | 28 | 0.12 | ||||||||||||||||||
Certificate accounts | 141,358 | 843 | 2.42 | 80,850 | 256 | 1.29 | ||||||||||||||||||
Total interest-bearing deposits | 431,930 | 1,342 | 1.26 | 368,558 | 394 | 0.43 | ||||||||||||||||||
Other Borrowings | 7,513 | 146 | 7.88 | 2,400 | 20 | 3.35 | ||||||||||||||||||
FHLB advances | 4,313 | 52 | 4.89 | 844 | 10 | 4.90 | ||||||||||||||||||
Total interest-bearing liabilities | $ | 443,756 | 1,540 | 1.41 | % | $ | 371,802 | 424 | 0.46 | % | ||||||||||||||
Non-interest-bearing liabilities: | ||||||||||||||||||||||||
Non-interest-bearing demand accounts | 167,516 | 144,523 | ||||||||||||||||||||||
Other liabilities | 3,031 | 2,659 | ||||||||||||||||||||||
Total liabilities | 614,303 | 518,984 | ||||||||||||||||||||||
Total Stockholders’ Equity(1) | 52,682 | 52,415 | ||||||||||||||||||||||
Total liabilities and equity | $ | 666,985 | $ | 571,399 | ||||||||||||||||||||
Net interest-earning assets | $ | 179,684 | $ | 157,757 | ||||||||||||||||||||
Net interest income; average interest rate spread(2) | $ | 5,473 | 3.15 | % | $ | 4,268 | 3.13 | % | ||||||||||||||||
Net interest margin(3) | 3.56 | % | 3.27 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 140.49 | % | 142.43 | % |
(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. |
Comparison of Operating Results for the Three and Nine Months Ended March 31, 2023 and 2022 (continued)
Nine Months Ended March 31, | ||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||
Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | |||||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans receivable | $ | 423,451 | $ | 16,586 | 5.22 | % | $ | 355,732 | $ | 12,985 | 4.86 | % | ||||||||||||
Investment securities | 111,448 | 1,577 | 1.88 | 95,141 | 1,066 | 1.49 | ||||||||||||||||||
Interest-earning deposits | 23,950 | 719 | 4.00 | 78,223 | 101 | 0.17 | ||||||||||||||||||
Total interest-earning assets | $ | 558,849 | 18,882 | 4.50 | % | $ | 529,096 | 14,152 | 3.56 | % | ||||||||||||||
Non-interest-earning assets | 40,952 | 39,229 | ||||||||||||||||||||||
Total assets | $ | 599,801 | $ | 568,325 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Savings accounts | $ | 111,948 | 239 | 0.28 | % | $ | 136,102 | 304 | 0.30 | % | ||||||||||||||
NOW accounts | 61,509 | 103 | 0.22 | 49,972 | 41 | 0.11 | ||||||||||||||||||
Money market accounts | 100,919 | 509 | 0.67 | 89,624 | 79 | 0.12 | ||||||||||||||||||
Certificate accounts | 108,211 | 1,536 | 1.89 | 91,642 | 973 | 1.41 | ||||||||||||||||||
Total interest-bearing deposits | 382,587 | 2,387 | 0.83 | 367,340 | 1,397 | 0.51 | ||||||||||||||||||
Other bank borrowings | 6,274 | 321 | 6.82 | 1,892 | 46 | 3.24 | ||||||||||||||||||
FHLB advances | 1.969 | 72 | 4.87 | 853 | 31 | 4.84 | ||||||||||||||||||
Total interest-bearing liabilities | $ | 390,830 | 2,780 | 0.95 | % | $ | 370,085 | 1,474 | 0.53 | % | ||||||||||||||
Non-interest-bearing liabilities: | ||||||||||||||||||||||||
Non-interest bearing demand accounts | 157,356 | 142,661 | ||||||||||||||||||||||
Other liabilities | 3,245 | 2,852 | ||||||||||||||||||||||
Total liabilities | 551,431 | 515,598 | ||||||||||||||||||||||
Total Stockholders’ Equity(1) | 48,370 | 52,727 | ||||||||||||||||||||||
Total liabilities and equity | $ | 599,801 | $ | 568,325 | ||||||||||||||||||||
Net interest-earning assets | $ | 168,019 | $ | 159,011 | ||||||||||||||||||||
Net interest income; average interest rate spread(2) | $ | 16.102 | 3.55 | % | $ | 12,678 | 3.03 | % | ||||||||||||||||
Net interest margin(3) | 3.84 | % | 3.19 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 142.99 | % | 142.97 | % |
(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. |
Comparison of Operating Results for the Three and Nine Months Ended March 31, 2023 and 2022 (continued)
Liquidity and Capital Resources
The 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. The Bank also adjusts liquidity as appropriate to meet asset and liability management objectives.
The 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, the Bank invests excess funds in short-term interest-earning accounts and other assets which provide liquidity to meet lending requirements. The Bank’s deposit accounts with the Federal Home Loan Bank of Dallas amounted to $12.3 million at March 31, 2023.
A significant portion of the Bank’s liquidity consists of securities classified as available-for-sale and cash and cash equivalents. The Bank’s primary sources of cash are net income, principal repayments on loans and mortgage-backed securities, and increases in deposit accounts. If the 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 March 31, 2023, the Bank had $10.0 million in advances from the Federal Home Loan Bank of Dallas and had $168.6 million in additional borrowing capacity. Additionally, at March 31, 2023, the Bank was a party to a Master Purchase Agreement with First National Bankers Bank where-by 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 March 31, 2023. In addition, the Company had available a $10.0 million line of credit agreement at March 31, 2023 with First National Bankers Bank. At March 31, 2023, there was a $8.3 million balance in the credit line.
At March 31, 2023, the Bank had outstanding loan commitments of $76.5 million to originate loans and commitments under unused lines of credit of $13.3 million. At March 31, 2023, certificates of deposit scheduled to mature in less than one year totaled $135.9 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. 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 March 31, 2023, the Bank exceeded each of its regulatory capital requirements with tangible equity, common equity Tier 1, core, and total risk-based capital ratios of 8.43%, 11.73%, 8.43%, and 12.91%, respectively.
Off-Balance Sheet Arrangements
At March 31, 2023, 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.
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; legislative and regulatory changes; 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, 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.
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 did not repurchase any of its common stock during the quarter ended March 31, 2023, 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 | ||||||||||||
January 1, 2023 – January 31, 2023 | -- | $ | -- | -- | -- | |||||||||||
February 1, 2023 – February 28, 2023 | -- | -- | -- | -- | ||||||||||||
March 1, 2023 – March 31, 2023 | -- | -- | -- | -- | ||||||||||||
Total | $ | -- | -- |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
Not applicable.
ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
ITEM 5. | OTHER INFORMATION |
Not applicable.
ITEM 6. | EXHIBITS |
No. | Description | |
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | ||
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | ||
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) |
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: May 19, 2023 | By: | /s/ Glen W. Brown |
Glen W. Brown | ||
Senior Vice President and Chief Financial Officer | ||
(Duly authorized officer and principal financial and | ||
accounting officer) |
44