The Bank has no commitments to loan additional funds to borrowers whose loans were previously in non-accrual status.
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.
For purposes of the determination of an allowance for loan losses on these TDRs, as an identified TDR, the Company considers a loss probable on the loan and, as a result,
the loan is reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology. If it is determined losses are probable on such TDRs, either because of delinquency or other credit quality indicator, the Company
establishes specific reserves for these loans. As of September 30, 2020, there were no commitments to lend additional funds to debtors owing sums to the Company whose terms have been modified in TDRs.
Prior to the enactment of the CARES Act, the banking regulatory agencies provided guidance as to how certain short-term modifications would not be considered TDRs, and have
subsequently confirmed that such guidance could be applicable for loans that do not qualify for favorable accounting treatment under Section 4013 of the CARES Act.
The Bank handles loan payment modification requests on a case-by-case basis considering the effects of the COVID-19 pandemic, related economic slow-down and stay-at-home
orders on our customer and their current and projected cash flows through the term of the loan. Through June 30, 2020, we modified 216 loans with principal balances totaling $84.1 million representing 23.0% of our loans outstanding as of June 30,
2020. A majority of deferrals are three-month payment deferrals of principal and interest, with payments after deferral
HOME FEDERAL BANCORP, INC. OF LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Deposits
Deposits at September 30, 2020 and June 30, 2020 consist of the following classifications:
5. Earnings Per Share
Basic earnings per common share are computed based on the weighted average number of shares outstanding. Diluted earnings per share is computed based on the weighted
average number of shares outstanding and common share equivalents that would arise from the exercise of dilutive securities. Earnings per share for the three months ended September 30, 2020 and 2019 were calculated as follows:
For the three months ended September 30, 2020 and 2019, there were outstanding options to purchase 260,161 and 275,633 shares, respectively, at a weighted average exercise
price of $18.36 and $18.07 per share, respectively. For the quarter ended September 30, 2020, 63,881 options 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:
6. Stock-Based Compensation
Recognition and Retention Plan
On December 23, 2011, the shareholders of the Company approved the establishment of the Home Federal Bancorp, Inc. of Louisiana 2011 Recognition and Retention Plan and
Trust Agreement (the “Recognition Plan”) as an incentive to retain personnel of experience and ability in key positions. The aggregate number of shares of the Company’s common stock available for award under the Recognition Plan totaled 77,808
shares, all of which were vested as of July 31, 2019 such that there are no shares remaining in the Recognition Plan.
The cost associated with the Recognition Plan is based on the share price of $18.92 on July 31, 2014, which represents the fair market price of the Company’s stock on the
date on which the Recognition Plan shares were granted. The cost of the Recognition Plan was recognized over the five year vesting period.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Stock-Based Compensation (continued)
Stock Option Plan
On August 10, 2005, the shareholders of the Company approved the establishment of the Home Federal Bancorp, Inc. of Louisiana 2005 Stock Option Plan (the “2005 Option
Plan”) for the benefit of directors, officers, and other key employees. The aggregate number of shares of common stock reserved for issuance under the 2005 Option Plan totaled 158,868 (as adjusted). Both incentive stock options and non-qualified
stock options may be granted under the 2005 Option Plan. The 2005 Stock Option Plan terminated on June 8, 2015, however, the 433 outstanding options as of September 30, 2020 will remain in effect for the remainder of their original ten year terms.
On December 23, 2011, the shareholders of the Company approved the establishment of the Home Federal Bancorp, Inc. of Louisiana 2011 Stock Option Plan (the “2011 Option
Plan”, together with the 2005 Option Plan, the “Option Plans”) for the benefit of directors, officers, and other key employees. The aggregate number of shares of common stock reserved for issuance under the 2011 Option Plan totaled 194,522. Both
incentive stock options and non-qualified stock options may be granted under the 2011 Option Plan.
On August 19, 2010 and July 31, 2014, the Company granted 21,616 options and 2,133 options, respectively, under the 2005 Option Plan that were previously forfeited (as
adjusted for the conversion) at an exercise price of $10.93 and $18.92 per share, respectively. On January 31, 2012 and July 31, 2014, 165,344 options and 29,178 options, respectively, were granted to directors and employees at an exercise price
of $14.70 and $18.92 per share, respectively, under the 2011 Option Plan. As of September 30, 2020, there were 389 stock options available for future grant under the 2011 Option Plan.
Incentive stock options and non-qualified stock options granted under the Option Plan become vested and exercisable at a rate of 20% per year over five years, commencing
one year from the date of the grant, with an additional 20% vesting on each successive anniversary of the date the option was granted. No vesting shall occur after an employee’s employment or service as a director is terminated. In the event of
death or disability of an employee or director or change in control of the Company, the unvested options shall become vested and exercisable. The Company recognizes compensation expense during the vesting period based on the fair value of the
option on the date of the grant.
Stock Incentive Plan
On November 12, 2014, the shareholders of the Company approved the adoption of the Company’s 2014 Stock Incentive Plan (the “Stock Incentive Plan”) for the benefit of
employees and non-employee directors as an incentive to contribute to the success of the Company and reward employees for outstanding performance and the attainment of targeted goals. The Stock Incentive Plan covers a total of 150,000 shares, of
which no more than 37,500 shares, or 25% of the plan, may be share rewards. The balance of the plan is reserved for stock option awards which would total 112,500 stock options, assuming all the share awards are issued. All incentive stock options
granted under the Stock Incentive Plan are intended to comply with the requirements of Section 422 of the Internal Revenue Code. On October 26, 2015, the Company granted a total of 34,500 plan share awards and 103,500 stock options to directors,
officers, and other key employees vesting ratably over five years. On February 5, 2019, the Company granted a total of 3,000 plan share awards and 13,500 stock options to key employees vesting ratably over five years. The Stock Incentive Plan cost
is recognized over the five year vesting period.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Stock-Based Compensation (continued)
Stock Incentive Plan (continued)
On November 13, 2019, the shareholders of the Company approved the adoption of the Company’s 2019 Stock Incentive Plan which provides for a total of 125,000 shares reserved
for future issuance as stock awards or stock options. No more than 31,250 shares, or 25%, may be granted as stock awards. The balance of the plan is reserved for stock option awards. As of September 30, 2020, no plan share awards or stock options
were granted under the 2019 Stock Incentive Plan.
Compensation expense pertaining to the 2011 Recognition Plan and the share awards under the Stock Incentive Plan was approximately $106,000 and $72,000 for the three months
ended September 30, 2020 and 2019, respectively. For the three months ended September 30, 2020 and 2019, compensation expense charged to operations for stock options granted under the Option Plan and the Stock Incentive Plan was $34,000 and
$35,000, respectively.
7. Related Party Transactions
Certain directors and executive officers were indebted to the Bank in the approximate aggregate amounts of $3.9 million and $3.8 million at September 30, 2020 and June 30,
2020, respectively.
8. Fair Value Disclosures
The following disclosure is made in accordance with the requirements of ASC 825, Financial Instruments. Financial instruments are
defined as cash and contractual rights and obligations that require settlement, directly or indirectly, in cash. In cases where quoted market prices are not available, fair values have been estimated using the present value of future cash flows or
other valuation techniques. The results of these techniques are highly sensitive to the assumptions used, such as those concerning appropriate discount rates and estimates of future cash flows, which require considerable judgment. Accordingly,
estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current settlement of the underlying financial instruments.
ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. These disclosures should not be interpreted as
representing an aggregate measure of the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating fair values of financial instruments:
Cash and Cash Equivalents
The carrying amount approximates the fair value of cash and cash equivalents.
Investment Securities
Fair values for investment securities, including mortgage-backed securities, are based on quoted market prices, where available. If quoted market prices
are not available, fair values are based on quoted market prices of comparable instruments. The carrying values of restricted or non-marketable equity securities approximate their fair values. The carrying amount of accrued investment income
approximates its fair value.
Mortgage Loans Held-for-Sale
Because these loans are normally disposed of within ninety days of origination, their carrying value closely approximates the fair value of such loans.
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.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Fair Value Disclosures (continued)
Deposit Liabilities
The fair values for demand deposit accounts are, by definition, equal to the amount payable on demand at the reporting date, that is, their carrying
amounts. Fair values for other deposit accounts are estimated using the discounted value of expected future cash flows. The discount rate is estimated using the rates currently offered for deposits of similar maturities.
Advances from Federal Home Loan Bank
The carrying amount of short-term borrowings approximates their fair value. The fair value of long-term debt is estimated using discounted cash flow
analyses based on current incremental borrowing rates for similar borrowing arrangements.
Off-Balance Sheet Credit-Related Instruments
Fair values for outstanding mortgage loan commitments to lend are based on fees currently charged to enter into similar agreements, taking into account
the remaining term of the agreements, customer credit quality, and changes in lending rates.
The fair value of interest rate floors and caps contained in some loan servicing agreements and variable rate mortgage loan contracts are considered
immaterial within the context of fair value disclosure requirements. Accordingly, no fair value estimate is provided for these instruments.
At September 30, 2020 and June 30, 2020, the carrying amount and estimated fair values of the Company’s financial instruments were as follows:
The estimated fair values presented above could be materially different than net realizable value and are only indicative of the individual financial instrument’s fair
value. Accordingly, these estimates should not be considered an indication of the fair value of the Company taken as a whole.
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:
HOME FEDERAL BANCORP, INC. OF LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Fair Value Disclosures (continued)
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:
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The preceding methods described may produce a fair value calculation that may not be indicative of the net realizable value or reflective of future fair values.
Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could
result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used during the three months ended September 30, 2020.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Fair Value Disclosures (continued)
Fair values of assets and liabilities measured on a recurring basis at September 30, 2020 and June 30, 2020 are as follows:
9. Subsequent Events
In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through the date that the
financial statements were available to be issued.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
General
The Company’s results of operations are primarily dependent on the results of Home Federal Bank (the “Bank”), its wholly owned subsidiary. The Bank’s results of operations
depend, to a large extent, on net interest income, which is the difference between the income earned on its loan and investment portfolios and the cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are
also affected by provisions for loan losses and loan sale activities. Non-interest expense principally consists of compensation and employee benefits, office occupancy and equipment expense, data processing, and other expenses. Our results of
operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies, and actions of regulatory authorities. Future changes in applicable law, regulations, or
government policies may materially impact our financial conditions and results of operations.
The Bank operates from its main office in Shreveport, Louisiana and seven full service branch offices located in Shreveport and Bossier City, Louisiana. The Company’s
primary market area is the Shreveport-Bossier City metropolitan area.
Critical Accounting Policies
Allowance for Loan Losses. The Company has identified the calculation of the allowance for loan losses as a critical accounting
policy, due to the higher degree of judgment and complexity than its other significant accounting policies. Provisions for loan losses are based upon management’s periodic valuation and assessment of the overall loan portfolio and the underlying
collateral, trends in non-performing loans, current economic conditions, and other relevant factors in order to maintain the allowance for loan losses at a level believed by management to represent all known and inherent losses in the portfolio
that are both probable and reasonably estimable. Although management uses the best information available, the level of the allowance for loan losses remains an estimate which is subject to significant judgment and short-term change.
Income Taxes. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under
this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax basis of the various assets and liabilities and gives current recognition to changes in tax rates and
laws. The realization of our deferred tax assets principally depends upon our achieving projected future taxable income. We may change our judgments regarding future profitability due to future market conditions and other factors. We may adjust
our deferred tax asset balances, if our judgments change.
Discussion of Financial Condition Changes from June 30, 2020 to September 30, 2020
General
At September 30, 2020, the Company reported total assets of $541.6 million, an increase of $23.4 million, or 4.5%, compared to total assets of $518.2 million at June 30,
2020. The increase in assets was comprised primarily of increases in cash and cash equivalents of $20.7 million, or 37.8%, from $54.9 million at June 30, 2020 to $75.6 million at September 30, 2020, loans held-for-sale of $13.0 million, or 88.1%,
from $14.8 million at June 30, 2020 to $27.8 million at September 30, 2020, premises and equipment of $683,000, or 5.2%, from $13.2 million at June 30, 2020 to $13.9 million at September 30, 2020, deferred tax assets of $188,000, or 24.8%, from
$757,000 at June 30, 2020 to $945,000 at September 30, 2020, bank owned life insurance of $33,000, or 0.5%, from $7.09 million at June 30, 2020 to $7.1 million at September 30, 2020, and other assets of $264,000, or 14.5%, from $1.8 million at June
30, 2020 to $2.1 million at September 30, 2020. These increases were partially offset by decreases in investment securities of $6.2 million, or 9.8%, from $62.9 million at June 30, 2020 to $56.7 million at September 30, 2020, and loans receivable
net of $5.1 million, or 1.4%, from $359.9 million at June 30, 2020 to $354.8 million at September 30, 2020. The decrease in investment securities was primarily due to $11.0 million of principal repayments on mortgage backed securities, partially
offset by purchases of $5.1 million in mortgage-backed securities. The increase in loans held-for-sale resulted primarily from an increase in loans originated for sale during the three months ended September 30, 2020.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
Discussion of Financial Condition Changes from June 30, 2020 to September 30, 2020 (continued)
Cash and Cash Equivalents
Cash and cash equivalents increased $20.7 million, or 37.8%, from $54.9 million at June 30, 2020 to $75.6 million at September 30,
2020. The $20.7 million increase in cash and cash equivalents was primarily due to deposit growth.
Loans Receivable, Net
Loans receivable, net, decreased by $5.1 million, or 1.4%, to $354.8 million at September 30, 2020 compared to $359.9 million at June 30, 2020. The decrease in loans
receivable, net was primarily due to decreases in one-to-four-family residential loans of $4.5 million, commercial non-real estate loans of $1.8 million, multi-family residential loans of $950,000, equity line-of-credit loans of $720,000, land
loans of $239,000, and consumer loans of $79,000, partially offset by increases in commercial real estate loans of $2.1 million, construction loans of $1.4 million, and equity and second mortgage loans of $54,000.
Loans Held-for-Sale
Loans held-for-sale increased $13.0 million, or 88.1%, from $14.8 million at June 30, 2020 to $27.8 million at September 30, 2020. The increase in loans held-for-sale
results primarily from an increase in the origination volume during the first quarter of fiscal 2021.
Investment Securities
Investment securities amounted to $56.7 million at September 30, 2020 compared to $62.9 million at June 30, 2020, a decrease of $6.2 million, or 9.8%. The decrease in
investment securities was primarily due to $11.0 million of principal repayments on mortgage backed securities offset by purchases of $5.1 million in mortgage backed securities.
Premises and Equipment, Net
Premises and equipment, net increased $683,000, or 5.2%, to $13.9 million at September 30, 2020 compared to $13.2 million at June 30, 2020.
Asset Quality
At September 30, 2020, the Company had $6.2 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 $7.2 million of non-performing assets at June 30, 2020, consisting of six commercial real estate loans to one borrower, four single-family residential loans, one lot loan, one land loan,
and two commercial real estate properties in other real estate owned at September 30, 2020, compared to five single-family residential loans, six commercial real estate loans to one borrower, one lot loan, one land loan and two commercial real
estate properties in other real estate owned at June 30, 2020. The decrease in non-performing assets from $7.2 million at June 30, 2020 to $6.2 million at September 30, 2020 was primarily due to a write-down on a commercial real estate loan and
the sale of a portion of the collateral on the same commercial real estate loan totaling $690,000. At September 30, 2020, the Company had four single family residential loans, two commercial land and lot development loans to one borrower, six
commercial real estate loans to one borrower, and two commercial real estate loans to one borrower classified as substandard compared to four single family residential loans, two commercial land and lot development loans, and six commercial real
estate loans to one borrower classified as substandard at June 30, 2020. There were no loans classified as doubtful at September 30, 2020 or June 30, 2020.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
Discussion of Financial Condition Changes from June 30, 2020 to September 30, 2020 (continued)
Total Liabilities
Total liabilities increased $22.9 million, or 4.9%, from $467.7 million at June 30, 2020 to $490.6 million at September 30, 2020 primarily due to an increase in total
deposits of $22.9 million, or 5.0%, to $483.7 million at September 30, 2020 compared to $460.8 million at June 30, 2020, an increase of $403,000, or 77.2%, in advances from borrowers for taxes and insurance from $522,000 at June 30, 2020 to
$925,000 at September 30, 2020 and an increase of $466,000, or 15.6%, in other liabilities from $3.0 million at June 30, 2020 to $3.5 million at September 30, 2020, partially offset by a decrease in other borrowings of $800,000 that was paid down
from dividend proceeds, or 34.8%, from $2.3 million at June 30, 2020 to $1.5 million at September 30, 2020, and a decrease of $77,000, or 7.3%, in advances from the Federal Home Loan Bank from $1.1 million at June 30, 2020 to $983,000 at September
30, 2020. The increase in deposits was primarily due to a $17.6 million, or 17.0%, increase in non-interest bearing deposits from $103.4 million at June 30, 2020 to $121.0 million at September 30, 2020, an $11.4 million, or 13.6%, increase in
savings deposits from $83.8 million at June 30, 2020 to $95.2 million at September 30, 2020, and a $1.9 million, or 4.5%, increase in NOW accounts from $41.4 million at June 30, 2020 to $43.2 million at September 30, 2020, partially offset by a
decrease of $6.0 million, or 3.8%, in certificates of deposit from $157.6 million at June 30, 2020 to $151.6 million at September 30, 2020, and a decrease in money market deposits of $2.0 million, or 2.6%, from $74.6 million at June 30, 2020 to
$72.7 million at September 30, 2020. The Company had $13.6 million in brokered deposits at September 30, 2020 compared to $16.1 million at June 30, 2020. The decrease in advances from the Federal Home Loan Bank was primarily due to principal
paydowns on amortizing advances.
Shareholders’ Equity
Shareholders’ equity increased $517,000, or 1.0%, to $51.0 million at September 30, 2020 from $50.5 million at June 30, 2020. The primary reasons for the changes in
shareholders’ equity from June 30, 2020 were net income of $1.2 million, the vesting of restricted stock awards, stock options, and the release of employee stock ownership plan shares totaling $103,000, and proceeds from the issuance of common
stock from the exercise of stock options of $38,000, partially offset by the acquisition of Company stock of $387,000, dividends paid totaling $282,000, and a decrease in the Company’s accumulated other comprehensive income of $203,000.
Regulatory Capital
The Bank is required to meet minimum capital standards promulgated by the Office of the Comptroller of the Currency (“OCC”). At September 30, 2020, Home Federal Bank’s
regulatory capital was well in excess of the minimum capital requirements.
Comparison of Operating Results for the Three Month Periods Ended September 30, 2020 and 2019
General
Net income for the three months ended September 30, 2020 was $1.2 million, consistent with $1.2 million for the three months ended September 30, 2019. Non-interest income
increased $742,000, or 77.0%, and net interest income increased $173,000, or 4.5%. Provision for loan losses increased $525,000, or 300%, non-interest expense increased $346,000, or 11.2%, and provision for income taxes increased $44,000, or
15.8%.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
Comparison of Operating Results for the Three Month Periods Ended September 30, 2020 and 2019 (continued)
Net Interest Income
Net interest income increased $173,000 for the three months ended September 30, 2020 compared to the prior year three month period due to a $357,000, or 26.4%, decrease in
total interest expense, partially offset by a decrease of $184,000, or 3.6%, in total interest income, primarily due to a 53 basis point reduction in the average rate on interest bearing liabilities. The Company’s average interest rate spread was
2.92% for the three months ended September 30, 2020 compared to 3.30% for the three months ended September 30, 2019. The Company’s net interest margin was 3.21% for the three months ended September 30, 2020 compared to 3.63% for the three months
ended September 30, 2019. The decrease in net interest margin on a comparative quarterly basis was primarily the result of a decrease of 91 basis points in the average yield on average balances of interest-earning assets. This decrease in average
yield was mainly due to an increase in interest-earning deposits earning only 12 basis points for the three months ended September 30, 2020 compared to 220 basis points for the prior year due to the substantial rate decrease in overnight rates at
the Federal Home Loan Bank, First National Bankers Bank, and Texas Independent Bank.
Provision for Losses on Loans
Based on an analysis of historical experience, the volume and type of lending conducted by Home Federal Bank, the status of past due principal and interest payments,
general economic conditions, particularly as such conditions relate to our market area and the current COVID-19 recessionary environment, and other factors related to the collectability of Home Federal Bank’s loan portfolio, a provision for loan
losses of $700,000 was made during the three months ended September 30, 2020 compared to a $175,000 provision made during the three months ended September 30, 2019. The allowance for loan losses was $4.5 million, or 1.26% of total loans receivable,
at September 30, 2020 compared to $3.6 million, or 1.09% of total loans receivable, at September 30, 2019. At September 30, 2020, Home Federal Bank had $5.3 million in non-performing loans and $950,000 in foreclosed assets which totaled $6.2
million in non-performing assets. At September 30, 2019, Home Federal Bank had $3.6 million in non-performing loans and $480,000 in foreclosed assets which totaled $4.1 million in non-performing assets. At September 30, 2020, the Bank had
troubled debt restructurings involving six commercial real estate loans to one borrower totaling $1.6 million that are current on all interest payments due with no expected losses at this time. At September 30, 2019, the Bank had troubled debt
restructurings involving one commercial loan with a balance of $122,000, and six commercial real estate loans totaling $3.6 million to one borrower that are current on all interest payments due. There can be no assurance that the loan loss
allowance will be sufficient to cover losses on non-performing assets in the future.
Non-interest Income
The $742,000 increase in non-interest income for the three months ended September 30, 2020 compared to the prior year quarterly period was primarily due to increases of
$844,000 in gain on sale of loans, and $3,000 in other income, partially offset by decreases of $80,000 in gain on sale of real estate, $24,000 in service charges on deposit accounts, and $1,000 on income from bank owned life insurance. The Company
sells most of its long term fixed rate residential mortgage loan originations primarily in order to manage interest rate risk. The increase in gain on sale of loans for the three months ended September 30, 2020 over the prior year three month
period reflects an increase in the amount of loans sold primarily due to the low interest rate environment.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
Comparison of Operating Results for the Three Month Periods Ended September 30, 2020 and 2019 (continued)
Non-interest Expense
The $346,000 increase in non-interest expense for the three months ended September 30, 2020, compared to the same period in 2019, is primarily attributable to increases of $408,000 in
compensation and benefits expense, $34,000 in data processing, $30,000 in deposit insurance premiums, $21,000 in legal fees, $10,000 in audit and examination fees, and $4,000 in occupancy and equipment expense. The increases were partially offset
by decreases of $121,000 in advertising expense, $25,000 in loan and collection expense, $8,000 in other non-interest expense, and $7,000 in franchise and bank shares tax expense. The increase in compensation and benefits expense for the three
months ended September 30, 2020 was primarily due to increased payroll costs in our mortgage division due to the high volume of mortgage loan sales, along with additional hires in our commercial department, and normal annual payroll increases.
The aggregate compensation expense recognized by the Company for its Stock Option, Share Award, ESOP, and Recognition and Retention Plans amounted to $140,000 and $154,000
for the three months ended September 30, 2020 and September 30, 2019, respectively.
The Louisiana bank shares tax is assessed on the Bank’s equity and earnings. For the three months ended September 30, 2020, the Company recognized franchise and bank
shares tax expense of $108,000 compared to $115,000 for the same period in 2019.
Income Taxes
Income taxes amounted to $323,000 for the three months ended September 30, 2020 resulting in an effective tax rate of 20.6%. Income taxes amounted to $279,000 for the
three months ended September 30, 2019 resulting in an effective tax rate of 18.3%.
HOME FEDERAL BANCORP, INC. OF LOUISIANA
Average Balances, Net Interest Income, Yields Earned, and Rates Paid. The following table shows 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.
__________________
(1) Includes retained earnings and accumulated other comprehensive income.