Home Federal Bancorp, Inc. of Louisiana - Quarter Report: 2010 December (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

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

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

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. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). o Yes o No

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

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

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

Shares of common stock, par value $.01 per share, outstanding as of February 14, 2011: The registrant had 3,045,913 shares of common stock outstanding.

 

 

INDEX

		Page
PART I FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited)
Consolidated Statements of Financial Condition			1
Consolidated Statements of Income			2
Consolidated Statements of Changes in Stockholders’ Equity			3
Consolidated Statements of Cash Flows			4
Notes to Consolidated Financial Statements			6
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3 Quantitative and Qualitative Disclosures About Market Risk			22
Item 4: Controls and Procedures			22
PART II OTHER INFORMATION
Item 1: Legal Proceedings			22
Item 1A: Risk Factors			22
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds			22
Item 3: Defaults Upon Senior Securities			24
Item 4: [Removed and Reserved]			24
Item 5: Other Information			24
Item 6: Exhibits			24
SIGNATURES
Exhibit 31.1
Exhibit 31.2
Exhibit 32.0

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

		December 31,				June 30,
		2010				2010
		(In Thousands)
ASSETS
Cash and Cash Equivalents (Includes Interest-Bearing Deposits with Other Banks of $4,645 and $4,698 for December 31, 2010 and June 30, 2010, Respectively)		$	36,406			$	8,837
Securities Available-for-Sale			51,163				63,688
Securities Held-to-Maturity			1,785				2,138
Loans Held-for-Sale			5,451				13,403
Loans Receivable, Net			111,196				93,056
Accrued Interest Receivable			620				560
Premises and Equipment, Net			3,934				3,049
Other Assets			388				414
Total Assets		$	210,943			$	185,145
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits			132,979				117,722
Advances from Borrowers for Taxes and Insurance			126				205
Advances from Federal Home Loan Bank of Dallas			25,981				31,507
Other Accrued Expenses and Liabilities			946				1,425
Deferred Tax Liability			327				921
Total Liabilities			160,359				151,780
STOCKHOLDERS’ EQUITY
Preferred Stock — No Par Value; 10,000,000 Shares Authorized; None Issued and Outstanding			—				—
Common Stock — 40,000,000 Shares of $.01 Par Value Authorized; 3,045,913 Shares Issued; 3,045,913 Shares and 3,050,244 Shares Outstanding at December 31, 2010 and June 30, 2010, Respectively (1)			32				14
Additional Paid-in Capital			31,092				13,655
Treasury Stock, at Cost — 0 Shares at December 31, 2010; 191,967 Shares at June 30, 2010 (1)			—				(2,094	)
Unearned ESOP Stock			(1,965	)			(826	)
Unearned RRP Trust Stock			(29	)			(145	)
Retained Earnings			20,356				20,665
Accumulated Other Comprehensive Income			1,098				2,096
Total Stockholders’ Equity			50,584				33,365
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	210,943			$	185,145

See accompanying notes to consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2010				2009				2010				2009
		(In Thousands, Except Per Share Data)
INTEREST INCOME
Loans, Including Fees		$	1,894			$	1,189			$	3,692			$	2,228
Investment Securities			12				17				24				36
Mortgage-Backed Securities			631				1,027				1,354				2,157
Other Interest-Earning Assets			7				2				11				4
Total Interest Income			2,544				2,235				5,081				4,425
INTEREST EXPENSE
Deposits			566				556				1,140				1,134
Federal Home Loan Bank Borrowings			238				312				495				643
Total Interest Expense			804				868				1,635				1,777
Net Interest Income			1,740				1,367				3,446				2,648
PROVISION FOR LOAN LOSSES			151				—				223				—
Net Interest Income after
Provision for Loan Losses			1,589				1,367				3,223				2,648
NON-INTEREST INCOME
Gain on Sale of Loans			451				85				1,030				129
Gain on Sale of Investments			82				186				311				186
Other Income			247				14				273				24
Total Non-Interest Income			780				285				1,614				339
NON-INTEREST EXPENSE
Compensation and Benefits			984				817				2,001				1,429
Occupancy and Equipment			120				87				244				180
Data Processing			52				22				88				46
Audit and Professional Fees			90				117				182				177
Franchise and Bank Shares Tax			55				37				55				75
Other Expense			309				195				530				321
Total Non-Interest Expense			1,610				1,275				3,100				2,228
Income Before Income Taxes			759				377				1,737				759
PROVISION FOR INCOME TAX EXPENSE			257				128				589				258
Net Income		$	502			$	249			$	1,148			$	501
EARNINGS PER COMMON SHARE(1):
Basic		$	0.17			$	0.08			$	0.39			$	0.17
Diluted		$	0.17			$	0.08			$	0.39			$	0.17
DIVIDENDS DECLARED		$	0.06			$	0.06			$	0.12			$	0.12

See accompanying notes to consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
SIX MONTHS ENDED DECEMBER 31, 2010 AND 2009
(Unaudited)

														Unearned												Accumulated
						Additional				Unearned				RRP												Other				Total
		Common				Paid-in				ESOP				Trust				Retained				Treasury				Comprehensive				Stockholders’
		Stock				Capital				Stock				Stock				Earnings				Stock				(Loss) Income				Equity
		(In Thousands)
BALANCE — June 30, 2009		$	14			$	13,608			$	(883	)		$	(269	)		$	20,288			$	(1,887	)		$	439			$	31,310
Net Income			—				—				—				—				501				—				—				501
Other Comprehensive Income:
Changes in Unrealized Gain on Securities Available-for- Sale, Net of Tax Effects			—				—				—				—				—				—				713				713
RRP Shares Earned			—				—				—				124				—				—				—				124
Stock Options Vested			—				28				—				—				—				—				—				28
ESOP Compensation Earned			—				(5	)			29				—				—				—				—				24
Dividends Declared			—				—				—				—				(147	)			—				—				(147	)
Acquisition Treasury Stock			—				—				—				—				—				(207	)			—				(207	)
BALANCE — December 31, 2009		$	14			$	13,631			$	(854	)		$	(145	)		$	20,642			$	(2,094	)		$	1,152			$	32,346
BALANCE — June 30, 2010		$	14			$	13,655			$	(826	)		$	(145	)		$	20,665			$	(2,094	)		$	2,096			$	33,365
COMMON STOCK ISSUANCE			20				18,253				(1,167	)																			17,106
Net Income			—				—				—				—				1,148				—				—				1,148
Other Comprehensive Loss:
Changes in Unrealized Gain on Securities Available-for- Sale, Net of Tax Effects			—				—				—				—				—				—				(998	)			(998	)
RRP Shares Earned			—				—				—				116				—				—				—				116
Stock Options Vested			—				11				—				—				—				—				—				11
ESOP Compensation Earned			—				(1	)			28				—				—				—				—				27
Dividends Declared			—				—				—				—				(145	)			—				—				(145	)
TREASURY STOCK RETIREMENT			(2	)			(826	)			—				—				(1,312	)			2,140				—				—
Acquisition Treasury Stock			—				—				—				—				—				(46	)			—				(46	)
BALANCE — December 31, 2010		$	32			$	31,092			$	(1,965	)		$	(29	)		$	20,356			$	—			$	1,098			$	50,584

See accompanying notes to consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Six Months Ended
		December 31,
		2010				2009
		(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income		$	1,148			$	501
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
Net Amortization and Accretion on Securities			(123	)			(168	)
Gain on Sale of Securities			(311	)			(186	)
Gain on Sale of Loans			(1,030	)			(129	)
Amortization of Deferred Loan Fees			(35	)			(103	)
Depreciation of Premises and Equipment			85				48
ESOP Expense			27				23
Stock Option Expense			11				29
Recognition and Retention Plan Expense			16				63
Deferred Income Tax			(80	)			(5	)
Provision for Loan Losses			223				—
Changes in Assets and Liabilities:
Loans Held-for-Sale — Originations and Purchases			(74,741	)			(21,364	)
Loans Held-for-Sale — Sale and Principal Repayments			83,723				21,230
Accrued Interest Receivable			(60	)			(20	)
Other Operating Assets			27				(226	)
Other Operating Liabilities			(1,558	)			18
Net Cash Provided by (Used in) Operating Activities			7,322				(289	)
CASH FLOWS FROM INVESTING ACTIVITIES
Loan Originations and Purchases, Net of Principal Collections			(18,395	)			(23,474	)
Deferred Loan Fees Collected			67				121
Acquisition of Premises and Equipment			(971	)			(1,945	)
Activity in Available-for-Sale Securities:
Proceeds from Sales of Securities			6,805				4,663
Principal Payments on Mortgage-Backed Securities			8,609				8,558
Purchases of Securities			(3,967	)			—
Activity in Held-to-Maturity Securities:
Redemption Proceeds			558				—
Principal Payments on Mortgage-Backed Securities			49				39
Purchases of Securities			(253	)			(31	)
Net Cash Used in Investing Activities			(7,498	)			(12,069	)

See accompanying notes to consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)

		Six Months Ended
		December 31,
		2010				2009
		(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposits			15,256				9,648
Proceeds from Federal Home Loan Bank Advances			—				15,500
Repayments of Advances from Federal Home Loan Bank			(5,526	)			(8,955	)
Net Decrease in Mortgage-Escrow Funds			(79	)			(72	)
Dividends Paid			(145	)			(147	)
Acquisition of Treasury Stock			(46	)			(207	)
Net Proceeds from Stock Issuance			18,285				—
Net Cash Provided by Financing Activities			27,745				15,767
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			27,569				3,409
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD			8,837				10,007
CASH AND CASH EQUIVALENTS — END OF PERIOD		$	36,406			$	13,416
SUPPLEMENTARY CASH FLOW INFORMATION
Interest Paid on Deposits and Borrowed Funds		$	1,661			$	1,817
Income Taxes Paid			677				177
Market Value Adjustment for Gain (Loss) on Securities
Available-for-Sale			(1,512	)			1,081

See accompanying notes to consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Home Federal Bancorp, Inc. of Louisiana (the “Company”) and its subsidiary, Home Federal Bank (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 six month period ended December 31, 2010, is not necessarily indicative of the results which may be expected for the fiscal year ending June 30, 2011. Certain items previously reported have been reclassified to conform with the current reporting period’s format. Prior period earnings per share and weighted average shares outstanding figures were adjusted for comparability using the conversion ratio of 0.9110 due to completion of second step offering on December 22, 2010.

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

In accordance with the subsequent events topic of the ASC, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements. The effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of December 31, 2010. In preparing these financial statements, the company evaluated the events and transactions that occurred from December 31, 2010 through February 14, 2011, the date these financial statements were issued.

Use of Estimates

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

Nature of Operations

On December 22, 2010, Home Federal Bancorp, Inc. of Louisiana, completed its conversion and reorganization from the mutual holding company form of organization to the fully public stock holding structure and formed Home Federal Bancorp, Inc. of Louisiana, a Louisiana corporation (the “Company”) to serve as the stock holding company for the Bank. In connection with the conversion and reorganization, the Company sold 1,945,220 shares of its common stock in a subscription and community offering and syndicated community offering at a price of $10.00 per share. The Company also issued 1,100,693 shares of common stock in exchange for shares of the former holding company, other than shares held by Home Federal Mutual Holding Company of Louisiana, which were cancelled. The Company received net proceeds of $18.3 million, after offering expenses. 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 Thrift Supervision. Services are provided to its customers by four full-service banking offices and one agency office, which are located in the Caddo and Bossier Parishes, Louisiana. The area served by the Bank is primarily the Shreveport-Bossier City metropolitan area; however, loan and deposit customers are found dispersed in a wider geographical area covering much of northwest Louisiana. As of December 31, 2010, the Bank had one wholly-owned subsidiary, Metro Financial Services, Inc., which is currently inactive.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Accounting Policies (continued)

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.

Securities

The Company classifies its debt and equity investment securities into one of three categories: held-to-maturity, available-for-sale, or trading. Investments in nonmarketable 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 amortized cost. 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 securities are excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the term of the securities. Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Loans Held-for-Sale

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

Loans

Loans receivable are stated at 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.

Allowance for Loan Losses

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

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility 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.

1. Summary of Accounting Policies (continued)

Allowance for Loan Losses (continued)

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 expected future cash flows or the fair value of the collateral of the loan. If the present value of expected future cash flows or 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.

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

It should be understood that estimates of future loan losses involve an exercise of judgment. While it is possible that in particular periods, the Company may sustain losses, which are substantial relative to the allowance for loan losses, it is the judgment of management that the allowance for loan losses reflected in the accompanying statements of condition is adequate to absorb possible losses in the existing loan portfolio.

Off-Balance Sheet Credit Related Financial Instruments

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

Foreclosed Assets

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

Premises and Equipment

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

Income Taxes

The Company and its wholly-owned subsidiary file a consolidated Federal income tax return on a fiscal year basis. Each entity will pay 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 bases 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.

1. Summary of Accounting Policies (continued)

Income Taxes (continued)

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

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 securities, are reported as a separate component of the equity section of the Consolidated Statements of Financial Condition, such items, along with net income, are components of comprehensive income.

2. Securities

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

		December 31, 2010
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
		(In Thousands)
Securities Available-for-Sale
Debt Securities
FHLMC Mortgage-Backed Certificates		$	2,325			$	105			$	—			$	2,430
FNMA Mortgage-Backed Certificates			45,775				1,538								47,313
GNMA Mortgage-Backed Certificates			108								—				108
Total Debt Securities			48,208				1,643								49,851
Equity Securities
176,612 Shares, AMF ARM Fund			1,291				21				—				1,312
Total Securities Available-for-Sale		$	49,499			$	1,664			$	—			$	51,163
Securities Held-to-Maturity
Debt Securities
GNMA Mortgage-Backed Certificates		$	158			$	21			$	—			$	179
FNMA Mortgage-Backed Certificates			67				2								69
FHLMC Mortgage-Backed Certificates			24				2				—				26
Total Debt Securities			249				25				—				274
Equity Securities (Non-Marketable
630 Shares-First National Bankers Bankshares, Inc.			250				—				—				250
12,856 Shares — Federal Home Loan Bank			1,286				—				—				1,286
Total Equity Securitie			1,536				—				—				1,536
Total Securities Held-to-Maturity		$	1,785			$	25			$	—			$	1,810

2. Securities (continued)

		June 30, 2010
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
		(In Thousands)
Securities Available-for-Sale
Debt Securities
FHLMC Mortgage-Backed Certificates		$	3,031			$	175			$	—			$	3,206
FNMA Mortgage-Backed Certificates			55,828				2,980								58,808
GNMA Mortgage-Backed Certificates			115				1				1				115
Total Debt Securities			58,974				3,156				1				62,129
Equity Securities
210,350 Shares, AMF ARM Fund			1,538				21				—				1,559
Total Securities Available-for-Sale		$	60,512			$	3,177			$	1			$	63,688
Securities Held-to-Maturity
Debt Securities
GNMA Mortgage-Backed Certificates		$	196			$	22			$	—			$	218
FNMA Mortgage-Backed Certificates			75				2				—				77
FHLMC Mortgage-Backed Certificates			27				1				—				28
Total Debt Securities			298				25				—				323
Equity Securities (Non-Marketable)
18,402 Shares — Federal Home Loan Bank			1,840				—				—				1,840
Total Securities Held-to- Maturity		$	2,138			$	25			$	—			$	2,163

The amortized cost and fair value of debt securities by contractual maturity at December 31, 2010, follows:

		Available-for-Sale								Held-to-Maturity
		Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value
		(In Thousands)
Within One Year or Less		$				$				$	1			$	1
One through Five Years											14				15
After Five through Ten Years			667				681				103				110
Over Ten Years			47,541				49,170				131				148
Total		$	48,208			$	49,851			$	249			$	274

For the six months ended December 31, 2010 and 2009, proceeds from the sale of securities available-for-sale amounted to $6.8 million and $4.7 million, respectively. Gross realized gains amounted to $311,000 and $186,000 for the six months ended December 31, 2010 and 2009, respectively.

2. Securities (continued)

The following tables show information pertaining to gross unrealized losses on securities available-for-sale at December 31, 2010 and June 30, 2010, aggregated by investment category and length of time that individual securities have been in a continuous loss position. There were no unrealized losses on securities held-to-maturity at December 31, 2010 or June 30, 2010.

December 31, 2010

Less than Twelve Months

Over Twelve Months

Gross

Gross

Unrealized

Fair

Unrealized

Fair

Losses

Value

Losses

Value

(In Thousands)

Debt Securities

Mortgage-Backed Securities

$

—

$

—

$

—

$

—

Marketable Equity Securities

—

—

—

—

Total Securities Available-for-Sale

$

—

$

—

$

—

$

—

		June 30, 2010
		Less than Twelve Months								Over Twelve Months
		Gross								Gross
		Unrealized				Fair				Unrealized				Fair
		Losses				Value				Losses				Value
		(In Thousands)
Debt Securities
Mortgage-Backed Securities		$	—			$	—			$	1			$	89
Marketable Equity Securities			—				—				—				—
Total Securities Available-for-Sale		$	—			$	—			$	1			$	89

The Company’s investment in equity securities consists primarily of shares of an adjustable rate mortgage loan mutual fund. During the year ended June 30, 2010, the Company made a determination that the impairment of this investment was other-than-temporary based upon conditions which indicated that a significant recovery in fair value of this investment would not occur. Accordingly, the Company recognized an impairment charge against earnings in the amount of $627,000. No impairment charges were recognized during the six months ended December 31, 2010.

At December 31, 2010, securities with a carrying value of $3.1 million were pledged to secure public deposits, and securities and mortgage loans with a carrying value of $50.1 million were pledged to secure FHLB advances.

3. 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. Prior period share amounts were adjusted for comparability using the conversion ratio of 0.9110 due to completion of second step offering on December 22, 2010. Earnings per share for the three and six months ended December 31, 2010 and 2009 were calculated as follows:

		Three Months Ended								Three Months Ended
		December 31, 2010								December 31, 2009
		Basic				Diluted				Basic				Diluted
Net income		$	501,358			$	501,358			$	249,500			$	249,500
Weighted average shares outstanding			2,965,576				2,965,576				2,945,673				2,945,673
Effect of unvested common stock awards			—				—				—				—
Adjusted weighted average shares used in earnings per share computation			2,965,576				2,965,576				2,945,673				2,945,673
Earnings per share		$	0.17			$	0.17			$	0.08			$	0.08

		Six Months Ended								Six Months Ended
		December 31, 2010								December 31, 2009
		Basic				Diluted				Basic				Diluted
Net income		$	1,147,673			$	1,147,673			$	501,250			$	501,250
Weighted average shares outstanding			2,962,061				2,962,061				2,951,958				2,951,958
Effect of unvested common stock awards
Adjusted weighted average shares used in earnings per share computation			2,962,061				2,962,061				2,951,958				2,951,958
Earnings per share		$	0.39			$	0.39			$	0.17			$	0.17

For the three months ended December 31, 2010 and 2009, there were outstanding options to purchase 174,389 and 158,134 shares, respectively, at a weighted average exercise price of $9.85 per share and for the six months ended December 31, 2010 and 2009, there were weighted-average outstanding options to purchase 168,429 and 158,134 shares, respectively, at $9.85 per share. For the quarter ended December 31, 2010, the options were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market value price of the common shares during the period.

4. Recognition and Retention Plan

On August 10, 2005, the shareholders of the Company approved the establishment of the Home Federal Bancorp, Inc. of Louisiana 2005 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 subject to award under the Recognition Plan totaled 63,547 shares (as adjusted). As the shares were acquired for the Recognition Plan, the purchase price of these shares was recorded as a contra equity account. As the shares are distributed, the contra equity account is reduced. During the six months ended December 31, 2010, 10,758 shares vested and were released from the Recognition Plan Trust and 2,808 shares remained in the Recognition Plan Trust at December 31, 2010.

Recognition Plan shares are earned by recipients at a rate of 20% of the aggregate number of shares covered by the Recognition Plan award over five years. Generally, if the employment of an employee or service as a non-employee director is terminated prior to the fifth anniversary of the date of grant of Recognition Plan share award, the recipient shall forfeit the right to any shares subject to the award that have not been earned. In the case of death or disability of the recipient or a change in control of the Company, the Recognition Plan awards will be vested and shall be distributed as soon as practicable thereafter.

4. Recognition and Retention Plan (continued)

The present cost associated with the Recognition Plan is based on share prices of $10.82 and $10.93, which represent the market price of the Company’s stock on August 18, 2005 and August 19, 2010, the dates on which the Recognition Plan shares were granted, as adjusted for the exchange ratio of 0.9110 on December 22, 2010. The cost is recognized over the five year vesting period.

5. 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 “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 Option Plan totaled 158,868 (as adjusted). Both incentive stock options and non-qualified stock options may be granted under the Option Plan.

On August 18, 2005, the Company granted 158,868 options to directors and employees. Under the Option Plan, the exercise price of each option cannot be less than the fair market value of the underlying common stock as of the date of the option grant, which was $10.82, and the maximum term is ten years. On August 19, 2010, 21,616 options, which had been forfeited, were granted at an exercise price of $10.93 per share. 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. As of December 31, 2010, 2,121 stock options were available for future grant. In the event of the 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 accounts for the Option Plan under the guidance of FASB ASC Topic 718, Compensation — Stock Compensation.

6. Fair Value of Financial Instruments

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 Bank in estimating fair values of financial instruments:

Cash and Cash Equivalents

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

Securities to be Held-to-Maturity and Available-for-Sale

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.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Fair Value of Financial Instruments (continued)

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.

The carrying amount and estimated fair values of the Bank’s financial instruments were as follows:

		December 31, 2010								June 30, 2010
		Carrying				Estimated				Carrying				Estimated
		Value				Fair Value				Value				Fair Value
		(In Thousands)
Financial Assets
Cash and Cash Equivalents		$	36,406			$	36,406			$	8,837			$	8,837
Securities Available-for-Sale			51,163				51,163				63,688				63,688
Securities to be Held-to-Maturity			1,785				1,810				2,138				2,163
Loans Held-for-Sale			5,451				5,451				13,403				13,403
Loans Receivable			111,196				125,652				93,056				109,322
Financial Liabilities
Deposits			132,979				137,633				117,722				120,460
Advances from FHLB			25,981				27,774				31,507				33,175
Off-Balance Sheet Items
Mortgage Loan Commitments			—				82				—				142

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 Bank taken as a whole.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Fair Value Accounting

On July 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurement, now codified in 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. SFAS No. 157 was issued to establish a uniform definition of fair value. The definition of fair value is market-based as opposed to company-specific, and includes the following:

	•		Defines fair value as the price that would be received to sell an asset or paid to transfer a liability, in either case, through an orderly transaction between market participants at a measurement date and establishes a framework for measuring fair value;
	•		Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date;
	•		Nullifies the guidance in EITF 02-3, which required the deferral of profit at inception of a transaction involving a derivative financial instrument in the absence of observable data supporting the valuation technique;
	•		Eliminates large position discounts for financial instruments quoted in active markets and requires consideration of the company’s creditworthiness when valuing liabilities; and
	•		Expands disclosures about instrument that are measured at fair value.

ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy favors the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

	•		Level 1 — Fair value is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets in which the Company can participate.
	•		Level 2 — Fair value is based upon (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active, that is, markets in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly; (c) inputs other than quoted prices that are observable for the asset or liability or (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means.
	•		Level 3 — Fair value is based upon inputs that are unobservable for the asset or liability. These inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are developed based on the best information available in the circumstances, which include the Company’s own data. The Company’s own data used to develop unobservable inputs are adjusted if information indicates that market participants would use different assumptions.

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

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Fair Value Accounting (continued)

Fair values of assets and liabilities measured on a recurring basis at December 31, 2010 and June 30, 2010 are as follows:

		Fair Value Measurements Using:
		Quoted Prices in				Significant
		Active Markets for				Other Observable
		Identical Assets				Inputs
December 31, 2010		(Level 1)				(Level 2)				Total
		(In Thousands)
Available-for-Sale
Debt Securities
FHLMC		$				$	2,430			$	2,430
FNMA							47,313				47,313
GNMA							108				108
Equity Securities
ARM Fund			1,312								1,312
Total		$	1,312			$	49,851			$	51,163