HFBL 10-Q Quarterly Report March 31, 2019

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10-Q 1 form10q.htm FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:	March 31, 2019
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 $.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. [X] 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). [X] 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.

Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[X]	Smaller reporting company	[X]
		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

[X] No

Shares of common stock, par value $.01 per share, outstanding as of May 14, 2019: The registrant had 1,849,990 shares of common stock outstanding.

INDEX

		Page
PART I	FINANCIAL INFORMATION

Item 1:	Financial Statements (Unaudited)

	Consolidated Statements of Financial Condition	1

	Consolidated Statements of Income	2

	Consolidated Statements of Comprehensive Income	3

	Consolidated Statements of Changes in Stockholders' Equity	4

	Consolidated Statements of Cash Flows	6

	Notes to Consolidated Financial Statements	8

Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4:	Controls and Procedures	38

PART II	OTHER INFORMATION

Item 1:	Legal Proceedings	38

Item 1A:	Risk Factors	38

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3:	Defaults Upon Senior Securities	39

Item 4:	Mine Safety Disclosures	39

Item 5:	Other Information	39

Item 6:	Exhibits	39

SIGNATURES

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

	March 31, 2019			June 30, 2018
	(In Thousands)

ASSETS
Cash and Cash Equivalents (Includes Interest-Bearing Deposits with Other Banks of $5,234 and $11,974 for March 31, 2019 and June 30, 2018, Respectively)	$	11,413		$	15,867
Securities Available-for-Sale		43,113			29,324
Securities Held-to-Maturity (Fair Value of $25,553 and $27,818, Respectively)		25,967			28,888
Loans Held-for-Sale		5,457			6,762
Loans Receivable, Net of Allowance for Loan Losses of $3,580 and $3,425, Respectively		323,783			317,493
Accrued Interest Receivable		1,289			1,146
Premises and Equipment, Net		13,538			12,243
Bank Owned Life Insurance		6,913			6,808
Deferred Tax Asset		1,044			1,102
Foreclosed Assets		1,200			1,177
Other Assets		640			840

Total Assets	$	434,357		$	421,650

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
Deposits	$	382,108		$	360,260
Advances from Borrowers for Taxes and Insurance		459			725
Short-term Federal Home Loan Bank advances		292			5,282
Long-term Federal Home Loan Bank advances		1,134			6,355
Other Borrowings		--			300
Other Accrued Expenses and Liabilities		1,381			1,691
Total Liabilities		385,374			374,613

STOCKHOLDERS’ EQUITY
Preferred Stock – $.01 Par Value; 10,000,000 Shares Authorized; None Issued and Outstanding		--			--
Common Stock – $.01 Par Value; 40,000,000 Shares Authorized; 1,854,990 and 1,894,081 Shares Issued and Outstanding at March 31, 2019 and June 30, 2018, Respectively		23			23
Additional Paid-in Capital		35,794			35,057
Unearned ESOP Stock		(1,013	)		(1,100	)
Unearned RRP Trust Stock		2			(22	)
Retained Earnings		14,818			14,125
Accumulated Other Comprehensive Loss		(641	)		(1,046	)

Total Stockholders’ Equity		48,983			47,037

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	434,357		$	421,650

See accompanying notes to unaudited consolidated financial statements.

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CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	For the Three Months Ended March 31,					For the Nine Months Ended March 31,
	2019			2018		2019			2018
	(In Thousands, Except per Share Data)
INTEREST INCOME
Loans, Including Fees	$	4,530		$	4,179	$	13,593		$	12,743
Investment Securities		16			12		45			35
Mortgage-Backed Securities		396			298		1,012			826
Other Interest-Earning Assets		60			19		234			84
Total Interest Income		5,002			4,508		14,884			13,688

INTEREST EXPENSE
Deposits		1,149			768		3,108			2,213
Federal Home Loan Bank Borrowings		17			92		127			352
Other Borrowings		2			2		6			4
Total Interest Expense		1,168			862		3,241			2,569
Net Interest Income		3,834			3,646		11,643			11,119

PROVISION FOR LOAN LOSSES		100			350		450			850
Net Interest Income after Provision for Loan Losses		3,734			3,296		11,193			10,269

NON-INTEREST INCOME
Gain on Sale of Loans		305			285		1,071			1,320
(Loss) Gain on Sale of Real Estate and Fixed Assets		(117	)		--		(345	)		1
Gain on Sale of Securities		--			--		--			94
Income on Bank Owned Life Insurance		35			35		105			105
Service Charges on Deposit Accounts		246			223		712			660
Other Income		14			13		49			41
Total Non-Interest Income		483			556		1,592			2,221

NON-INTEREST EXPENSE
Compensation and Benefits		1,632			1,565		4,795			4,860
Occupancy and Equipment		323			345		971			1,017
Data Processing		108			165		405			497
Audit and Examination Fees		62			67		189			194
Franchise and Bank Shares Tax		97			96		295			296
Advertising		89			47		232			117
Legal Fees		136			107		433			396
Loan and Collection		83			53		209			205
Real Estate Owned Valuation Adjustment		--			--		75			--
Deposit Insurance Premium		7			27		59			95
Other Expense		184			201		556			582
Total Non-Interest Expense		2,721			2,673		8,219			8,259
Income Before Income Taxes		1,496			1,179		4,566			4,231

PROVISION FOR INCOME TAX EXPENSE		307			158		984			1,840
Net Income	$	1,189		$	1,021	$	3,582		$	2,391
EARNINGS PER COMMON SHARE:
Basic	$	0.68		$	0.57	$	2.02		$	1.33
Diluted	$	0.63		$	0.54	$	1.88		$	1.26
DIVIDENDS DECLARED	$	0.14		$	0.12	$	0.42		$	0.36

See accompanying notes to unaudited consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	For the Three Months Ended March 31,					For the Nine Months Ended March 31,
	2019		2018			2019		2018
	(In Thousands)					(In Thousands)
Net Income	$	1,189	$	1,021		$	3,582	$	2,391

Other Comprehensive Income (Loss), Net of Tax
Unrealized Holding Gain /(Loss) on Securities Available-for-Sale, Net of Tax of $64 and $106 in 2019 and $179 and $270 in 2018		242		(473	)		405		(712	)

Total Comprehensive Income	$	1,431	$	548		$	3,987	$	1,679

See accompanying notes to unaudited consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

THREE AND NINE MONTHS ENDED MARCH 31, 2019 AND 2018

(Unaudited)

Three Months Ended

	Common Stock		Additional Paid-in Capital		Unearned ESOP Stock			Unearned RRP Trust Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
								(In Thousands)
BALANCE – December 31, 2017	$	23	$	34,874	$	(1,158	)	$	(22	)	$	12,806		$	(591	)	$	45,932

Net Income		--		--		--			--			1,021			--			1,021

Changes in Unrealized Loss on Securities Available-for- Sale, Net of Tax Effects		--		--		--			--			116			(473	)		(357	)

RRP Shares Earned		--		--		--			--			--			--			--

Stock Options Vested		--		34		--			--			--			--			34

Common Stock Issuance for Stock Option Exercises		--		--		--			--			--			--			--

ESOP Compensation Earned		--		55		29			--			--			--			84

Company Stock Purchased		--		--		--			--			(75	)		--			(75	)

Dividends Declared		--		--		--			--			(229	)		--			(229	)

BALANCE – March 31, 2018	$	23	$	34,963	$	(1,129	)	$	(22	)	$	13,639		$	(1,064	)	$	46,410

BALANCE – December 31, 2018	$	23	$	35,586	$	(1,042	)	$	2		$	14,952		$	(883	)	$	48,638

Net Income		--		--		--			--			1,189			--			1,189

Changes in Unrealized Loss on Securities Available-for- Sale, Net of Tax Effects		--		--		--			--			--			242			242

Share Awards Earned		--		--		--			--			--			--			--

RRP Shares Earned		--		--		--			--			--			--			--

Stock Options Vested		--		37		--			--			--			--			37

Common Stock Issuance for Stock Option Exercises		--		111		--			--			--			--			111

ESOP Compensation Earned		--		60		29			--			--			--			89

Company Stock Purchased		--		--		--			--			(1,060	)		--			(1,060	)

Dividends Declared		--		--		--			--			(263	)		--			(263	)

BALANCE – March 31, 2019	$	23	$	35,794	$	( 1,013	)	$	2		$	14,818		$	(641	)	$	48,983

See accompanying notes to unaudited consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

THREE AND NINE MONTHS ENDED MARCH 31, 2019 AND 2018

(Unaudited)

Nine Months Ended

	Common Stock		Additional Paid-in Capital		Unearned ESOP Stock			Unearned RRP Trust Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
								(In Thousands)
BALANCE – June 30, 2017	$	23	$	34,516	$	(1,215	)	$	(46	)	$	13,320		$	(352	)	$	46,246

Net Income		--		--		--			--			2,391			--			2,391

Changes in Unrealized Gain on Securities Available-for- Sale, Net of Tax Effects		--		--		--			--			116			(712	)		(596	)

RRP Shares Earned		--		--		--			24			--			--			24

Stock Options Vested		--		102		--			--			--			--			102

Common Stock Issuance for Stock Option Exercises		--		191		--			--			--			--			191

ESOP Compensation Earned		--		154		86			--			--			--			240

Company Stock Purchased		--		--		--			--			(1,493	)		--			(1,493	)

Dividends Declared		--		--		--			--			(695	)		--			(695	)

BALANCE – March 31, 2018	$	23	$	34,963	$	(1,129	)	$	(22	)	$	13,639		$	(1,064	)	$	46,410

BALANCE – June 30, 2018	$	23	$	35,057	$	(1,100	)	$	(22	)	$	14,125		$	(1,046	)	$	47,037

Net Income		--		--		--			--			3,582			--			3,582

Changes in Unrealized Gain on Securities Available-for- Sale, Net of Tax Effects		--		--		--			--			--			405			405

Share Awards Earned		--		135		--			--			--			--			135

RRP Shares Earned		--		--		--			24			--			--			24

Stock Options Vested		--		105		--			--			--			--			105

Common Stock Issuance for Stock Option Exercises		--		309		--			--			--			--			309

ESOP Compensation Earned		--		188		87			--			--			--			275

Company Stock Purchased		--		--		--			--			(2,097	)		--			(2,097	)

Dividends Declared		--		--		--			--			(792	)		--			(792	)

BALANCE – March 31, 2019	$	23	$	35,794	$	( 1,013	)	$	2		$	14,818		$	(641	)	$	48,983

See accompanying notes to unaudited consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	March 31,
	2019			2018
	(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	3,582		$	2,391
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Bad Debt Recovery		2			25
Net Amortization and Accretion on Securities		79			130
Loss/(Gain) on Sale of Real Estate		345			(1	)
Gain on Sale of Loans		(1,071	)		(1,320	)
Gain on Sale of Securities		--			(94	)
Amortization of Deferred Loan Fees		(147	)		(115	)
Depreciation of Premises and Equipment		363			378
ESOP Expense		275			240
Stock Option Expense		105			102
Recognition and Retention Plan Expense		21			21
Deferred Income Tax		(58	)		444
Valuation Adjustment Real Estate Owned		75			60
Provision for Loan Losses		450			850
Increase in Cash Surrender Value on Bank Owned Life Insurance		(105	)		(105	)
Share Awards Expense		102			101
Changes in Assets and Liabilities:
Loans Held-for-Sale – Originations and Purchases		(42,338	)		(58,068	)
Loans Held-for-Sale – Sale and Principal Repayments		44,713			67,631
Accrued Interest Receivable		(143	)		(81	)
Other Operating Assets		200			374
Other Operating Liabilities		(310	)		(428	)

Net Cash Provided by Operating Activities		6,140			12,535

CASH FLOWS FROM INVESTING ACTIVITIES
Loan Originations and Purchases, Net of Principal Collections		(6,977	)		(2,953	)
Deferred Loan Fees Collected		89			221
Acquisition of Premises and Equipment		(2,412	)		(178	)
Proceeds from Sale of Real Estate		469			--
Activity in Available-for-Sale Securities:
Principal Payments on Mortgage-Backed Securities		5,154			6,262
Sale of Securities		--			3,555
Purchases of Securities		(18,496	)		(7,717	)
Activity in Held-to-Maturity Securities:
Principal Payments on Mortgage-Backed Securities		2,952			2,217
Purchase of Securities		--			(1,174	)

Net Cash (Used in) Provided by Investing Activities		( 19,221	)		233

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,
	2019			2018
	(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposits	$	21,848		$	18,149
Proceeds from Federal Home Loan Bank Advances		--			183,775
Repayments of Advances from Federal Home Loan Bank		(10,210	)		(215,976	)
Repayments of Other Borrowings		(750	)		(350	)
Net Decrease in Advances from Borrowers for Taxes and Insurance		(266	)		(183	)
Dividends Paid		(792	)		(695	)
Company Stock Purchased		(2,097	)		(1,493	)
Proceeds from Stock Options Exercised		309			191
Proceeds from Other Bank Borrowings		450			350
Plan Share Distributions		135			--

Net Cash Provided by (Used in) Financing Activities		8,627			(16,232	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(4,454	)		(3,464	)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		15,867			11,905

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	11,413		$	8,441

SUPPLEMENTARY CASH FLOW INFORMATION
Interest Paid on Deposits and Borrowed Funds	$	2,603		$	2,407
Income Taxes Paid		1,068			1,236
Market Value Adjustment for Gain (Loss) on Securities Available-for-Sale		513			(814	)

See accompanying notes to unaudited 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 (“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 nine month period ended March 31, 2019 are not necessarily indicative of the results which may be expected for the fiscal year ending June 30, 2019.

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 March 31, 2019. In preparing these financial statements, the Company evaluated the events and transactions that occurred through the date these financial statements were issued.

Use of Estimates

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

Nature of Operations

Home Federal Bancorp, Inc. of Louisiana, a Louisiana corporation, is the fully public stock holding company for Home Federal Bank located in Shreveport, Louisiana. The Bank is a federally chartered stock savings and loan association and is subject to federal regulation by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. The Company is a savings and loan holding company regulated by the Board of Governors of the Federal Reserve System. Services are provided to the Bank’s customers by nine full-service banking offices and home office, located in Caddo and Bossier Parishes, Louisiana. The Bank opened its seventh full-service banking office during the quarter ended March 31, 2019. 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 March 31, 2019, 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.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Accounting Policies (continued)

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 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.

Allowance for Loan Losses

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

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral, and prevailing economic conditions. The evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 fair value of the collateral of the loan. If the fair value of the collateral is less than the recorded investment in the loan, the Bank will recognize the impairment by creating a valuation allowance with a corresponding charge against earnings. A loan is considered a troubled debt restructuring (“TDR”) if the Company, for economic or legal reasons related to a debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. Concessions granted under a TDR typically involve a temporary or permanent reduction in payments or interest rate or an extension of a loan’s stated maturity date at less than a current market rate of interest. Loans identified as TDRs are designated as impaired.

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

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

Off-Balance Sheet Credit Related Financial Instruments

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

Foreclosed Assets

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

Premises and Equipment

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

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

Bank-Owned Life Insurance

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

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Accounting Policies (continued)

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

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

Earnings per Share

Earnings per share are computed based upon the weighted average number of common shares outstanding during the period.

Non-Direct Response Advertising

The Company expenses all advertising costs, except for direct-response advertising, as incurred. Non-direct response advertising costs were $232,000 and $117,000 for the nine months ended March 31, 2019 and 2018, respectively.

In the event the Company incurs expense for material direct-response advertising, it will be amortized over the estimated benefit period. Direct-response advertising consists of advertising whose primary purpose is to elicit sales to customers who could be shown to have responded specifically to the advertising and results in probable future benefits. For the nine months ended March 31, 2019 and 2018, the Company did not incur any amount of direct-response advertising.

Stock-Based Compensation

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

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Accounting Policies (continued)

Reclassification

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

Comprehensive Income

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

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in ASU 2014-09 supersede the revenue recognition requirements in Topic 605, Revenue Recognition , and most industry-specific guidance. The general principle of ASU 2014-09 requires an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration of which the entity expects to be entitled in exchange for those goods or services. The guidance sets forth a five step approach to be utilized for revenue recognition. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 making it effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. In April 2016, the FASB issued ASU 2016-10 which does not change the core principle of the guidance in Topic 606. The amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. In May 2016, the FASB issued ASU 2016-12 which does not change the core principle of the guidance in Topic 606. The amendments in this Update affect only certain narrow aspects of Topic 606. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments . The amendments in this Update supersede the guidance to classify equity securities with readily determinable fair values into different categories and require equity securities to be measured at fair value with changes in the fair value recognized through net income. The amendments allow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of impairment. The amendments in this Update also simplify the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period. In addition, the amendments in this Update exempt all entities that are not public business entities from disclosing fair value information for financial instruments measured at amortized cost. In addition, for public business entities, the amendments supersede the requirement to disclose the methods and significant assumptions used in calculating the fair value of financial instruments required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The amendments in this Update require public business entities that are required to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion consistent with Topic 820, Fair Value Measurement .

The provisions within this Update require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option. This amendment excludes from net income gains or losses that the entity may not realize because those financial liabilities are not usually transferred or settled at their fair values before maturity. The amendments in this Update require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or in the accompanying notes to the financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

For public business entities, the amendments in ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases . From the lessee’s perspective, the new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting pattern of expense recognition in the income statement for a lessee.

The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements, with certain practical expedients available. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For public business entities that are SEC filers, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods with those fiscal years. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20). This Update was issued in response to diversity in practice in the amortization period for premiums of callable debt securities and in how the potential for exercise of a call is factored into current impairment assessments. As such, these amendments reduce the amortization period for certain callable debt securities carried at a premium and require the premium to be amortized over the period not to exceed the earliest call date. These amendments do not apply to securities carried at a discount. The effective date of this Update is for fiscal years beginning on or after December 15, 2018. The Company does not expect ASU 2017-08 to have a material impact on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718). The amendments in this ASU provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in FASB ASC 718. The effective date of this Update is for fiscal years beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company does not expect ASU 2017-09 to have a material impact on its consolidated financial statements.

In November 2017, the FASB issued ASU 2017-14, Income Statement – Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606) (SEC Update). This Update adds, amends, and supersedes SEC paragraphs of the ASC pursuant to Staff Accounting Bulletin No. 116 and SEC Release 33-10403. This ASU is effective upon issuance.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. On December 22, 2017, the U.S. Federal Government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Cuts and Jobs Act). The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments in this Update eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments in this Update only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this Update are affective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of this Update is permitted, including adoption in any interim period (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In May 2018, the FASB issued ASU 2018-06, Codification Improvements to Topic 942, Financial Services – Depository and Lending . The amendments in this Update supersede the guidance in Subtopic 942-740, Financial Services – Depository and Lending – Income Taxes, that is related to Circular 202 because that guidance has been rescinded by the Office of the Comptroller of the Currency (OCC) and is no longer relevant. This ASU is effective upon issuance.

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Topic 718 improves several areas of nonemployee share-based payment accounting. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption on Topic 606. The Company does expect ASU 2018-07 to have a material impact on its consolidated financial statements.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Securities

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

	March 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Securities Available-for-Sale

Debt Securities
FHLMC Mortgage-Backed Certificates	$	8,508	$	14	$	310	$	8,212
FNMA Mortgage-Backed Certificates		26,384		88		343		26,129
GNMA Mortgage-Backed Certificates		9,033		1		262		8,772

Total Debt Securities		43,925		103		915		43,113

Total Securities Available-for-Sale	$	43,925	$	103	$	915	$	43,113

Securities Held-to-Maturity

Debt Securities
GNMA Mortgage-Backed Certificates	$	1,141	$	--	$	28	$	1,113
FNMA Mortgage-Backed Certificates		21,935		--		386		21,549

Total Debt Securities		23,076		--		414		22,662

Equity Securities (Non-Marketable)
26,408 Shares – Federal Home Loan Bank		2,641		--		--		2,641
630 Shares – First National Bankers Bankshares, Inc.		250		--		--		250

Total Equity Securities		2,891		--		--		2,891

Total Securities Held-to-Maturity	$	25,967	$	--	$	414	$	25,553

	June 30, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Securities Available-for-Sale

Debt Securities
FHLMC Mortgage-Backed Certificates	$	7,601	$	2	$	518	$	7,085
FNMA Mortgage-Backed Certificates		12,465		1		554		11,912
GNMA Mortgage-Backed Certificates		10,581		2		256		10,327

Total Debt Securities		30,647		5		1,328		29,324

Total Securities Available-for-Sale	$	30,647	$	5	$	1,328	$	29,324

Securities Held-to-Maturity

Debt Securities
GNMA Mortgage-Backed Securities	$	1,160	$	--	$	45	$	1,115
FNMA Mortgage-Backed Securities		24,882		--		1,025		23,857

Total Debt Securities		26,042		--		1,070		24,972

Equity Securities (Non-Marketable)
25,959 Shares – Federal Home Loan Bank		2,596		--		--		2,596
630 Shares – First National Bankers Bankshares, Inc.		250		--		--		250

Total Equity Securities		2,846		--		--		2,846

Total Securities Held-to-Maturity	$	28,888	$	--	$	1,070	$	27,818

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Securities (continued)

The amortized cost and fair value of securities by contractual maturity at March 31, 2019 follows:

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Debt Securities
Within One Year or Less	$	35	$	36	$	--	$	--
One through Five Years		15,538		15,227		--		--
After Five through Ten Years		17,507		16,941		--		--
Over Ten Years		10,845		10,909		23,076		22,662
		43,925		43,113		23,076		22,662

Other Equity Securities		--		--		2,891		2,891

Total	$	43,925	$	43,113	$	25,967	$	25,553

Securities available-for-sale totaling $18.5 million were purchased during the nine months ended March 31, 2019.

The following tables show information pertaining to gross unrealized losses on securities available-for-sale at March 31, 2019 and June 30, 2018 aggregated by investment category and length of time that individual securities have been in a continuous loss position.

	March 31, 2019
	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	$	126	$	4,265	$	789	$	20,839

Total Securities Available-for-Sale	$	126	$	4,265	$	789	$	20,839

	June 30, 2018
	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	$	71	$	4,709	$	1,257	$	24,547

Total Securities Available-for-Sale	$	71	$	4,709	$	1,257	$	24,547

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Securities (continued)

The unrealized losses on the Company’s investment in mortgage-backed securities at March 31, 2019 and June 30, 2018 were caused by interest rate changes. The contractual cash flows of these investments are guaranteed by agencies of the U.S. Government. Accordingly, it is expected that these securities would not be settled at a price less than the amortized cost of the Company’s investment. Because the decline in market value is attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2019.

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, 2019, securities with a carrying value of $2.4 million were pledged to secure public deposits, and securities and mortgage loans with a carrying value of $149.1 million were pledged to secure FHLB advances.

3. Loans Receivable

Loans receivable are summarized as follows:

	March 31, 2019			June 30, 2018
	(In Thousands)
Loans Secured by Mortgages on Real Estate
One-to-Four Family Residential	$	120,144		$	121,257
Commercial		81,732			74,416
Multi-Family Residential		46,150			38,079
Land		18,908			20,474
Construction		10,116			11,921
Equity and Second Mortgage		1,289			1,541
Equity Lines of Credit		16,521			17,387

Total Mortgage Loans		294,860			285,075

Commercial Loans		32,043			35,458
Consumer Loans
Loans on Savings Accounts		461			462
Other Consumer Loans		203			185

Total Consumer Loans		664			647
Total Loans		327,567			321,180

Less: Allowance for Loan Losses		(3,580	)		(3,425	)
Unamortized Loan Fees		(204	)		(262	)

Net Loans Receivable	$	323,783		$	317,493

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Loans Receivable (continued)

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

	Nine Months Ended March 31,
	2019			2018
	(In Thousands)
Balance - Beginning of Period	$	3,425		$	3,729
Provision for Loan Losses		450			850
Loan Charge-Offs		(297	)		(911	)
Recoveries		2			25
Balance - End of Period	$	3,580		$	3,693

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. Loans classified as substandard or identified as special mention are reviewed quarterly by management to evaluate the level of deterioration, improvement, and impairment, if any, as well as assign the appropriate risk category.

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. The Company uses the following definitions for risk ratings:

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

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

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

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

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

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

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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, 2019 and June 30, 2018:

			Special
March 31, 2019	Pass		Mention		Substandard		Doubtful		Total
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	119,530	$	18	$	596	$	--	$	120,144
Commercial		78,422		--		3,310		--		81,732
Multi-Family Residential		46,150		--		--		--		46,150
Land		15,638		--		2,980		290		18,908
Construction		10,116		--		--		--		10,116
Equity and Second Mortgage		1,197		62		30		--		1,289
Equity Lines of Credit		16,521		--		--		--		16,521
Commercial Loans		31,464		--		579		--		32,043
Consumer Loans		664		--		--		--		664

Total	$	319,702	$	80	$	7,495	$	290	$	327,567

June 30, 2018	Pass		Special Mention		Substandard		Doubtful		Total
	(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	120,317	$	652	$	996	$	--	$	121,257
Commercial		74,416		--		4,060		--		74,416
Multi-Family Residential		38,079		--		--		--		38,079
Land		20,474		--		--		--		20,474
Construction		11,921		--		--		--		11,921
Equity and Second Mortgage		1,541		--		--		--		1,541
Equity Lines of Credit		17,300		--		87		--		17,387
Commercial Loans		29,817		--		873		--		35,458
Consumer Loans		647		--		--		--		647

Total	$	314,512	$	652	$	6,016	$	--	$	321,180

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.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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, 2019 and June 30, 2018:

March 31, 2019	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Recorded Investment >90 Days and Accruing
							(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	2,238	$	1,495	$	1,230	$	4,963	$	115,181	$	120,144	$	296
Commercial		--		--		--		--		81,732		81,732		--
Multi-Family Residential		--		--		--		--		46,150		46,150		--
Land		--		--		3,270		3,270		15,638		18,908		3,270
Construction		--		--		--		--		10,116		10,116		--
Equity and Second Mortgage		46		--		--		46		1,243		1,289		--
Equity Lines of Credit		32		49		--		81		16,440		16,521		--
Commercial Loans		87		--		171		258		31,785		32,043		49
Consumer Loans		--		--		--		--		664		664		--

Total	$	2,403	$	1,544	$	4,671	$	8,618	$	318,949	$	327,567	$	3,615

June 30, 2018	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Recorded Investment >90 Days and Accruing
							(In Thousands)
Real Estate Loans:
One-to-Four Family Residential	$	1,481	$	230	$	1,954	$	3,665	$	117,592	$	121,257	$	680
Commercial		--		--		--		--		74,416		74,416		--
Multi-Family Residential		--		--		--		--		38,079		38,079		--
Land		--		--		--		--		20,474		20,474		--
Construction		--		--		--		--		11,921		11,921		--
Equity and Second Mortgage		--		--		--		--		1,541		1,541		--
Equity Lines of Credit		134		59		117		310		17,077		17,387		30
Commercial Loans		--		--		416		416		35,042		35,458		--
Consumer Loans		--		--		--		--		647		647		--

Total	$	1,615	$	289	$	2,487	$	4,391	$	316,789	$	321,180	$	710

There was no interest income recognized on non-accrual loans during the nine months ended March 31, 2019 or year ended June 30, 2018. 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, 2019 and the year ended June 30, 2018 was approximately $19,000 and $126,000, respectively.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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, 2019 was as follows:

	Real Estate Loans
													Home
													Equity
													Loans and
	1-4 Family					Multi-							Lines of			Commercial			Consumer
March 31, 2019	Residential			Commercial		Family		Land		Construction			Credit			Loans			Loans		Total
	(In Thousands)
Allowance for loan losses:
Beginning Balances	$	1,166		$	436	$	256	$	161	$	163		$	311		$	929		$	3	$	3,425
Charge-Offs		(277	)		--		--		--		--			(20	)		--			--		(297	)
Recoveries		--			--		--		--		--			2			--			--		2
Current Provision		125			125		87		316		(49	)		(141	)		(13	)		--		450
Ending Balances	$	1,014		$	561	$	343	$	477	$	114		$	152		$	916		$	3	$	3,580

Evaluated for Impairment:
Individually		--			238		--		--		--			--			--			--		238
Collectively		1,014			323		343		477		114			152			916			3		3,342

Loans Receivable:
Ending Balances - Total	$	120,144		$	81,732	$	46,150	$	18,908	$	10,116		$	17,810		$	32,043		$	664	$	327,567
Ending Balances:
Evaluated for Impairment:
Individually		614			3,310		--		3,270		--			92			579			--		7,865
Collectively	$	119,580		$	78,422	$	46,150	$	15,638	$	10,116		$	17,718		$	31,464		$	664	$	319,702

The change in the allowance for loan losses by loan portfolio class and recorded investment in loans for the year ended June 30, 2018 was as follows:

	Real Estate Loans
June 30, 2018	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	$	1,822		$	353	$	73	$	203		$	147	$	142		$	979		$	10		$	3,729
Charge-Offs		(797	)		--		--		(109	)		--		(217	)		(250	)		(7	)		(1,380	)
Recoveries		5			--		--		20			--		1			--			--			26
Current Provision		136			83		183		47			16		385			200			--			1,050
Ending Balances	$	1,166		$	436	$	256	$	161		$	163	$	311		$	929		$	3		$	3,425

Evaluated for Impairment:
Individually		--			--		--		--			--		--			--			--			--
Collectively		1, 166			436		256		161			163		311			929			3			3,425

Loans Receivable:
Ending Balances - Total	$	121,257		$	74,416	$	38,079	$	20,474		$	11,921	$	18,928		$	35,458		$	647		$	321,180
Ending Balances:
Evaluated for Impairment:
Individually		1,648			4,060		--		--			--		87			873			--			6,668
Collectively	$	119,609		$	70,356	$	38,079	$	20,474		$	11,921	$	18,841		$	34,585		$	647		$	314,512

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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, 2018 was as follows:

	Real Estate Loans
March 31, 2018	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	$	1,822		$	353	$	73	$	203		$	147	$	142		$	979		$	10		$	3,729
Charge-Offs		--			--		--		(109	)		--		(5	)		(797	)		--			(911	)
Recoveries		5			--		--		20			--		--			--			--			25
Current Provision		(735	)		146		99		41			67		58			1,181			(7	)		850
Ending Balances	$	1,092		$	499	$	172	$	155		$	214	$	195		$	1,363		$	3		$	3,693

Evaluated for Impairment:
Individually		--			--		--		--			--		--			--			--			--
Collectively		1,092			499		172		155			214		195			1,363			3			3,693

Loans Receivable:
Ending Balances – Total	$	123,555		$	75,029	$	34,092	$	19,690		$	10,264	$	21,104		$	33,810		$	618		$	318,162
Ending Balances:
Evaluated for Impairment:
Individually		1,225			4,212		--		--			--		172			2,061			--			7,700
Collectively	$	122,300		$	70,817	$	34,092	$	19,690		$	10,264	$	20,932		$	31,749		$	618		$	310,462

The following tables present loans individually evaluated for impairment, segregated by class of loans, as of March 31, 2019 and June 30, 2018:

March 31, 2019	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	$	614	$	538	$	76	$	614	$	--	$	619
Commercial		3,310		--		3,310		3,310		238		3,877
Multi-Family Residential		--		--		--		--		--		--
Land		3,270		--		3,270		3,270		--		2,952
Construction		--		--		--		--		--		--
Equity and Second Mortgage		--		--		--		--		--		--
Equity Lines of Credit		92		92		--		92		--		73
Commercial Loans		579		--		579		579		--		640
Consumer Loans		--		--		--		--		--		--

Total	$	7,865	$	630	$	7,235	$	7,865	$	238	$	8,161

June 30, 2018	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	$	1,648	$	1,648	$	--	$	1,648	$	--	$	1,687
Commercial		4,060		4,060		--		4,060		--		4,186
Multi-Family Residential		--		--		--		--		--		--
Land		--		--		--		--		--		--
Construction		--		--		--		--		--		--
Equity and Second Mortgage		--		--		--		--		--		--
Equity Lines of Credit		87		87		--		87		--		87
Commercial Loans		873		873		--		873		--		877
Consumer Loans		--		--		--		--		--		--

Total	$	6,668	$	6,668	$	--	$	6,668	$	--	$	6,837

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Loans Receivable (continued)

Credit Quality Indicators (continued)

The Bank has no commitments to loan additional funds to borrowers whose loans were previously in non-accrual status.

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, 2019
			Past Due Greater		Nonaccrual
	Current		Thank 30 Days		TDRs		Total TDRs
Commercial business	$	457	$	122	$	122	$	579
1-4 Family Residential		76		--		--		76
Commercial real estate		3,310		--		--		3,310

	June 30, 2018
			Past Due Greater		Nonaccrual
	Current		Than 30 Days		TDRs		Total TDRs
Commercial business	$	4,943	$	416	$	416	$	5,359
1-4 Family Residential		1,943		--		--		1,943

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, 2019, there were no commitments to lend additional funds to debtors owing sums to the Company whose terms have been modified in TDRs.

4. Deposits

Deposits at March 31, 2019 and June 30, 2018 consist of the following classifications:

	March 31, 2019		June 30, 2018
	(In Thousands)
Non-Interest Bearing	$	58,979	$	58,001
NOW Accounts		29,678		34,576
Money Markets		73,318		70,175
Passbook Savings		34,030		36,241
		196,005		198,993

Certificates of Deposit		186,103		161,267

Total Deposits	$	382,108	$	360,260

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 and nine months ended March 31, 2019 and 2018 were calculated as follows:

	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2018		2019		2018
	(In Thousands, Except Per Share Data)
Net income	$	1,189	$	1,021	$	3,582	$	2,391

Weighted average shares outstanding – basic		1,761		1,793		1,774		1,804
Effect of dilutive common stock equivalents		126		102		117		100
Adjusted weighted average shares outstanding – diluted		1,887		1,895		1,891		1,904

Basic earnings per share	$	0.68	$	0.57	$	2.02	$	1.33
Diluted earnings per share	$	0.63	$	0.54	$	1.88	$	1.26

For the three months ended March 31, 2019 and 2018, there were outstanding options to purchase 279,916 and 296,551 shares, respectively, at a weighted average exercise price of $18.06 and $17.88 per share, respectively and for the nine months ended March 31, 2019 and 2018, there were average outstanding options to purchase 287,231 and 296,551 shares, respectively, at a weighted average exercise price of $18.06 and $17.88 per share, respectively. For the quarter ended March 31, 2019 and 2018, 126,239 options and 102,413 options were included in the computation of diluted earnings per share. For the nine month period ended March 31, 2019 and 2018, 117,473 options and 100,363 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:

	Three Months Ended March 31,						Nine Months Ended March 31,
	2019			2018			2019			2018
	(In Thousands)
Average common shares issued		3,062			3,062			3,062			3,062
Average unearned ESOP shares		(103	)		(114	)		(105	)		(116	)
Average unearned RRP shares		(1	)		(3	)		(2	)		(3	)
Average Company stock purchased		( 1,197	)		( 1,152	)		( 1,181	)		( 1,139	)

Weighted average shares outstanding		1,761			1,793			1,774			1,804

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 awarded as of March 31, 2019.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Stock-Based Compensation (continued)

Recognition and Retention Plan (continued)

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 will 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.

The cost associated with the Recognition Plan is based on a 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 is being recognized over the five year vesting period. Compensation expense pertaining to the Recognition Plan was $21,000 for both the nine months ended March 31, 2019 and 2018.

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 for the exchange ratio). 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 outstanding stock options will remain in effect for the remainder of their original ten year terms. As of March 31, 2019, there were 12,705 options outstanding under the 2005 Option Plan.

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 March 31, 2019, 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 Plans become vested and exercisable at a rate of 20% per year over five years, commencing one year from the date of the grant, with an additional 20% vesting on each successive anniversary of the date the option was granted. No vesting shall occur after an employee’s employment or service as a director is terminated. In the event of death or disability of an employee or director or change in control of the Company, the unvested options shall become vested and exercisable. The Company recognizes compensation expense during the vesting period based on the fair value of the option on the date of the grant. For both the nine months ended March 31, 2019 and 2018, compensation expense charged to operations was $105,000.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Stock-Based Compensation (continued)

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 awards. 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. Of the original grant, 4,500 options were forfeited. During the quarter ended March 31, 2019, 3,000 plan share awards and 13,500 options were granted to employees. The Stock Incentive Plan cost is recognized over the five year vesting period. During the nine months ended March 31, 2019 and 2018 the Company recognized $188,000 and $102,000, respectively, in expenses related to the Stock Incentive Plan.

7. Related Party Transactions

Certain directors and executive officers were indebted to the Bank in the approximate aggregate amounts of $2.4 million and $2.6 million at March 31, 2019 and June 30, 2018, 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 March 31, 2019 and June 30, 2018, the carrying amount and estimated fair values of the Company’s financial instruments were as follows:

	March 31, 2019				June 30, 2018
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
	(In Thousands)
Financial Assets
Cash and Cash Equivalents	$	11,413	$	11,413	$	15,867	$	15,867
Securities Available-for-Sale		43,113		43,113		29,324		29,324
Securities to be Held-to-Maturity		25,967		25,553		28,888		27,818
Loans Held-for-Sale		5,457		5,457		6,762		6,762
Loans Receivable		323,783		313,551		317,493		314,724

Financial Liabilities
Deposits	$	382,108	$	362,026	$	360,260	$	345,347
Advances from FHLB		1,426		1,305		11,637		11,517

Off-Balance Sheet Items
Mortgage Loan Commitments	$	6,939	$	6,939	$	5,827	$	5,827

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:

●	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;

HOME FEDERAL BANCORP, INC. OF LOUISIANA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Fair Value Disclosures (continued)

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

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

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

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

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

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

●

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

●

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

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

The preceding methods described may produce a fair value calculation that may not be indicative of the net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used during the nine months ended March 31, 2019.

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 March 31, 2019 and June 30, 2018 are as follows:

	Fair Value Measurements Using:
	Quoted Prices in		Significant
	Active Markets for		Other Observable		Unobservable
	Identical Assets		Inputs		Inputs
March 31, 2019	(Level 1)		(Level 2)		(Level 3)		Total
	(In Thousands)
Available-for-Sale Debt Securities
FHLMC	$	--	$	8,212	$	--	$	8,212
FNMA		--		26,129		--		26,129
GNMA		--		8,772		--		8,772

Total	$	--	$	43,113	$	--	$	43,113

	Fair Value Measurements Using:
	Quoted Prices in		Significant
	Active Markets for		Other Observable		Unobservable
	Identical Assets		Inputs		Inputs
June 30, 2018	(Level 1)		(Level 2)		(Level 3)		Total
	(In Thousands)
Available-for-Sale Debt Securities
FHLMC	$	--	$	7,085	$	--	$	7,085
FNMA		--		11,912		--		11,912
GNMA		--		10,327		--		10,327

Total	$	--	$	29,324	$	--	$	29,324

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

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 the Bank, which became a wholly owned subsidiary upon completion of the second-step conversion and reorganization of the Bank on December 22, 2010. 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.

Home Federal Bank operates from its head 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. The Company offers security brokerage and advisory services through a third party provider at its agency office, which also serves as the office for the commercial lending division and as a loan production office.

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, 2018 to March 31, 2019

General

At March 31, 2019, the Company reported total assets of $434.4 million, an increase of $12.7 million, or 3.0%, compared to total assets of $421.7 million at June 30, 2018. The increase in assets was comprised primarily of increases in investment securities of $10.9 million, or 18.7%, from $58.2 million at June 30, 2018 to $69.1 million at March 31, 2019, loans receivable, net, of $6.3 million, or 2.0%, from $317.5 million at June 30, 2018 to $323.8 million at March 31, 2019, premises and equipment, net, of $1.3 million, or 10.6%, from $12.2 million at June 30, 2018 to $13.5 million at March 31, 2019, accrued interest receivable of $143,000, or 12.5%, from $1.1 million at June 30, 2018 to $1.3 million at March 31, 2019. These increases were partially offset by decreases in cash and cash equivalents of $4.5 million, or 28.1%, from $15.9 million at June 30, 2018 to $11.4 million at March 31, 2019, loans held-for-sale of $1.3 million, or 19.3%, from $6.8 million at June 30, 2018 to $5.5 million at March 31, 2019, other assets of $200,000, or 23.8%, from $840,000 at June 30, 2018 to $640,000 at March 31, 2019, and deferred tax assets of $58,000, or 5.3%, from $1.1 million at June 30, 2018 to $1.0 million at March 31, 2019. The increase in investment securities was primarily due to the purchase $18.5 million of mortgage-backed securities offset by $8.1 million of principal repayments on mortgage-backed securities. The decrease in loans held-for-sale resulted primarily from a decrease in loans originated for sale during the nine months ended March 31, 2019.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

Discussion of Financial Condition Changes from June 30, 2018 to March 31, 2019 (continued)

Cash and Cash Equivalents

Cash and cash equivalents decreased $4.5 million, or 28.1%, from $15.9 million at June 30, 2018 to $11.4 million at March 31, 2019. The $4.5 million decrease in cash and cash equivalents was used to help fund loan growth and pay off Federal Home Loan Bank advances.

Loans Receivable, Net

Loans receivable, net, increased by $6.3 million, or 2.0%, to $323.8 million at March 31, 2019 compared to $317.5 million at June 30, 2018. The increase in loans receivable, net was primarily due to increases in multi-family residential loans of $8.1 million, commercial real estate loans of $7.3 million, and other consumer loans of $18,000, partially offset by decreases in commercial non-real estate loans of $3.4 million, construction loans of $1.8 million, land loans of $1.6 million, one-to-four family residential loans of $1.1 million, equity lines of credit of $866,000, equity and second mortgage loans of $252,000, and loans on savings accounts of $1,000.

Loans Held-for-Sale

Loans held-for-sale decreased $1.3 million, or 19.3%, from $6.8 million at June 30, 2018 to $5.5 million at March 31, 2019 . The decrease in loans held-for-sale reflects a reduced emphasis on the Company’s mortgage banking operations in recent periods and a decrease in loans originated for sale during the nine months ended March 31, 2019.

Investment Securities

Investment securities amounted to $69.1 million at March 31, 2019 compared to $58.2 million at June 30, 2018, an increase of $10.9 million, or 18.7%. The increase in investment securities was primarily due to the purchase of $18.5 million of mortgage-backed securities offset by $8.1 million of principal repayments on mortgage-backed securities.

Premises and Equipment, Net

Premises and equipment, net increased $1.3 million, or 10.6%, to $13.5 million at March 31, 2019 compared to $12.2 million at June 30, 2018, primarily as a result of our new banking office that opened during the quarter ended March 31, 2019.

Asset Quality

At March 31, 2019, the Company had $5.9 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 $3.0 million of non-performing assets at June 30, 2018, consisting of one commercial business loan, one commercial unsecured loan, two commercial land and lot development loans, six single-family residential loans, one line of credit loan, one residential lot in other real estate owned, and one single family residential loan in other real estate owned at March 31, 2019, compared to nine single-family residential loans, three line of credit loans, one commercial business loan, one residential lot in other real estate owned, and two single-family residential loans in other real estate owned at June 30, 2018. At March 31, 2019, the Company had six single-family residential loans, one line of credit loan, one commercial business loan, two commercial land and lot development loans, and five loans to one borrower consisting of two commercial real estate loans, two non-real estate loans, and one single-family residential loan classified as substandard, compared to eight single-family residential loans, two lines of credit loans, one commercial business loan, and five loans to one borrower, consisting of two commercial real estate loans, two non-real estate loans, and one single-family residential loan classified as substandard at June 30, 2018. There was a portion of a commercial raw land development loan that was classified as doubtful in the amount of $290,000 at March 31, 2019.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

Discussion of Financial Condition Changes from June 30, 2018 to March 31, 2019 (continued)

Total Liabilities

Total liabilities increased $10.8 million, or 2.9%, from $374.6 million at June 30, 2018 to $385.4 million at March 31, 2019 primarily due to an increase in total deposits of $21.8 million, or 6.1%, to $382.1 million at March 31, 2019 compared to $360.3 million at June 30, 2018, partially offset by a decrease of $10.2 million, or 87.7%, in advances from the Federal Home Loan Bank from $11.6 million at June 30, 2018, to $1.4 million at March 31, 2019, a decrease in other liabilities of $310,000, or 2.9%, from $1.7 million at June 30, 2018 to $1.4 million at March 31, 2019, and a decrease in other borrowings of $300,000, or 100.0%, from $300,000 at June 30, 2018 to zero at March 31, 2019. The increase in deposits was primarily due to a $24.8 million, or 15.4%, increase in certificates of deposits from $161.3 million at June 30, 2018 to $186.1 million at March 31, 2019, a $3.1 million, or 4.5%, increase in money market deposits from $70.2 million at June 30, 2018 to $73.3 million at March 31, 2019, and a $978,000, or 1.7%, increase in non-interest bearing deposits from $58.0 million at June 30, 2018 to $59.0 million at March 31, 2019, partially offset by a decrease of $4.9 million, or 14.2%, in NOW accounts from $34.6 million at June 30, 2018 to $29.7 million at March 31, 2019, and a decrease in savings deposits of $2.2 million, or 6.1%, from $36.2 million at June 30, 2018 to $34.0 million at March 31, 2019. The Company had $8.7 million in brokered deposits at June 30, 2018 and $11.2 million at March 31, 2019. The brokered certificates of deposit which have maturity dates greater than twelve months are callable by Home Federal Bank after twelve months pursuant to early redemption provisions. The decrease in advances from the Federal Home Loan Bank was primarily due to growth in total deposits which replaced advances as a source of funds.

Shareholders’ Equity

Shareholders’ equity increased $2.0 million, or 4.1%, to $49.0 million at March 31, 2019 from $47.0 million at June 30, 2018. The primary reasons for the changes in shareholders’ equity from June 30, 2018 were net income of $3.6 million, the increase in the Company’s accumulated other comprehensive income of $405,000, the vesting of restricted stock awards, stock options, and the release of employee stock ownership plan shares totaling $539,000, and proceeds from the issuance of common stock from the exercise of stock options of $309,000. These increases in shareholders’ equity were partially offset by the acquisition of Company stock of $2.1 million, and dividends paid totaling $792,000.

The Bank is required to meet minimum capital standards promulgated by the OCC. At March 31, 2019, Home Federal Bank’s regulatory capital was well in excess of the minimum capital requirements.

Comparison of Operating Results for the Three and Nine Month Periods Ended March 31, 2019 and 2018

General

Net income amounted to $1.2 million for the three months ended March 31, 2019 compared to $1.0 million for the same period in 2018, an increase of $168,000, or 16.5%. The increase was primarily due to a decrease of $250,000, or 71.4%, in provision for loan losses, and a $188,000, or 5.2%, increase in net interest income, partially offset by an increase of $149,000, or 94.3%, in provision for income taxes, a decrease of $73,000, or 13.1%, in non-interest income, and an increase of $48,000, or 1.8%, in non-interest expense.

Net income amounted to $3.6 million for the nine months ended March 31, 2019 compared to net income of $2.4 million for the same period in 2018, an increase of $1.2 million, or 49.8%. The increase was primarily due to a decrease of $856,000, or 46.5%, in the provision for income taxes, an increase of $524,000, or 4.7%, in net interest income, a decrease of $400,000, or 47.1%, in provision for loan losses, and a decrease of $40,000, or 0.5%, in non-interest expense partially offset by a decrease of $629,000, or 28.3%, in non-interest income. The decrease in the provision for income taxes for the nine months ended March 31, 2019 over the same prior year period was primarily due to the reduction in the Company’s effective tax rate for the nine months ended March 31, 2019 combined with the $642,000 re-measurement charge of the Company’s net deferred tax asset as a result of the Tax Act during the nine months ended March 31, 2018.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

Comparison of Operating Results for the Three and Nine Month Periods Ended March 31, 2019 and 2018 (continued)

Net Interest Income

The increase in net interest income for the three months ended March 31, 2019 was primarily due to a $494,000, or 11.0%, increase in total interest income, primarily due to an increase in the average yield on loans receivable, partially offset by an increase of $306,000, or 35.5%, in interest expense. The cost of funds from Federal Home Loan Bank borrowings decreased $75,000, or 81.5%, compared to the prior year three month period and interest paid on deposits increased $381,000, or 49.6%, compared to the prior year three month period. Interest paid on other borrowings was $2,000 for the current three month period as well as the prior year three month period. The Company’s average interest rate spread was 3.56% for the three months ended March 31, 2019 compared to 3.58% for the three months ended March 31, 2018. The Company’s net interest margin was 3.86% for the three months ended March 31, 2019 compared to 3.76% for the three months ended March 31, 2018. The increase in net interest margin on a comparative quarterly basis was primarily the result of an increase of 47 basis points in average yield on average balances of loans receivable for the three months ended March 31, 2019 compared to the prior quarterly period.

Net interest income for the nine months ended March 31, 2019 was $11.6 million, an increase of $524,000, or 4.7%, in comparison to the nine months ended March 31, 2018. The increase in net interest income for the nine month period was primarily due to a $1.2 million, or 8.7%, increase in total interest income, partially offset by a $672,000, or 26.2%, increase in interest expense on borrowings and deposits. The cost of funds from Federal Home Loan Bank borrowings decreased $225,000, or 63.9%, compared to the prior year nine month period and interest paid on deposits increased $895,000, or 40.4%, compared to the prior year nine month period. Interest paid on other borrowing increased $2,000 compared to the prior year nine month period. The Company’s average interest rate spread was 3.59% for the nine months ended March 31, 2019, compared to 3.55% for the nine months ended March 31, 2018. The Company’s net interest margin was 3.86% for the nine months ended March 31, 2019, compared to 3.78% for the nine months ended March 31, 2018. The increase in the average interest rate spread is attributable primarily to an increase of 31 basis points in average yield on average balances of loans receivable.

Provision for Losses on Loans

Based on an analysis of historical experience, the volume and type of lending conducted by Home Federal Bank, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to our market area, and other factors related to the collectability of Home Federal Bank’s loan portfolio, a provision for loan losses of $100,000 and $450,000 was made during the three and nine months ended March 31, 2019, respectively, compared to a $350,000 and $850,000 provision made during the three and nine months ended March 31, 2018, respectively. The allowance for loan losses was $3.6 million, or 1.09% of total loans receivable, at March 31, 2019 compared to $3.7 million, or 1.16% of total loans receivable, at March 31, 2018. At March 31, 2019, Home Federal Bank had $4.1 million in non-performing loans and $1.2 million in foreclosed assets which totaled $5.3 million in non-performing assets. At March 31, 2018, Home Federal Bank had $2.6 million in non-performing loans and $1.1 million in other real-estate owned. At March 31, 2019, the Company had five single family residential loans, one commercial business loan, two commercial land and lot development loans, and five loans to one borrower consisting of two commercial real estate loans, two non-real estate loans, and one single family residential loan classified as substandard compared to eight single family residential loans, two line of credit loans, one commercial business loan, and five loans to one borrower consisting of two commercial real estate loans, two non-real estate loans, and one single family residential loan classified as substandard at June 30, 2018. There was a portion of a commercial raw land development loan that was classified as doubtful in the amount of $290,000 at March 31, 2019. At March 31, 2019 the Bank had troubled debt restructurings involving one commercial loan with a balance of $122,000, and five loans to one borrower consisting of two commercial real estate loans, two non-real estate loans, and one one-to-four family residential loan totaling $3.8 million. At March 31, 2018 the Bank had troubled debt restructurings involving nine commercial loan contracts to one borrower with a recorded investment of approximately $1.6 million along with another troubled debt restructuring at March 31, 2018 consisting of five loans to one borrower consisting of two commercial real estate loans, two non-real estate loans, and one one-to-four family residential loan totaling $4.7 million There can be no assurance that the loan loss allowance will be sufficient to cover losses on non-performing assets in the future.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

Comparison of Operating Results for the Three and Nine Month Periods Ended March 31, 2019 and 2018 (continued)

Non-interest Income

Total non-interest income amounted to $483,000 for the three months ended March 31, 2019, a decrease of $73,000, or 13.1%, compared to $556,000 for the same period in 2018. The $73,000 decrease in non-interest income for the three months ended March 31, 2019, compared to the prior year quarterly period, was primarily due to an increase of $117,000 in loss on sale of real estate, partially offset by an increase of $23,000 in service charges on deposit accounts, an increase of $20,000 in gain on sale of loans, and a $1,000 increase in other income.

Total non-interest income amounted to $1.6 million for the nine months ended March 31, 2019, a decrease of $629,000, or 28.3%, compared to $2.2 million for the same period in 2018. The $629,000 decrease was primarily due to a $345,000 loss on sale of real estate, decreases of $249,000 in gain on sale of loans, and $94,000 in gain on sale of securities, partially offset by a $52,000 increase in income in service charges on deposit accounts, and an $8,000 increase in other non-interest income. The Company sells most of its long term fixed rate residential mortgage loan originations primarily in order to manage interest rate risk. The decrease in gain on sale of loans for the nine months ended March 31, 2019 over the same prior year period reflects a reduced emphasis on the Company’s mortgage banking operations in recent periods and fewer loans originated for sale.

Non-interest Expense

Total non-interest expense increased $48,000, or 1.8%, for the three months ended March 31, 2019 compared to the prior year period. The $48,000 increase in non-interest expense for the three months ended March 31, 2019, compared to the same period in 2018, is primarily attributable to increases of $67,000 in compensation and benefits expense, $42,000 in advertising expense, $30,000 in loan and collection expense, $29,000 in legal fees, and a $1,000 increase in franchise and bank shares tax expense. The increases were partially offset by decreases of $57,000 in data processing expense, $22,000 in occupancy and equipment expense, $20,000 in deposit insurance premiums, $17,000 in other expense, and $5,000 in audit and examination fees.

Total non-interest expense decreased $40,000, or 0.5%, for the nine months ended March 31, 2019 compared to the same nine month period in 2018. The decrease in non-interest expense for the nine months ended March 31, 2019, compared to the same period in 2018, is primarily attributable to decreases of $92,000 in data processing expense, $65,000 in compensation and benefits expense, $46,000 in occupancy and equipment expense, $36,000 in deposit insurance premiums, $26,000 in other expense, $5,000 in audit and examination fees, and $1,000 in franchise and bank shares tax expense. These decreases were partially offset by increases of $115,000 in advertising expense, $75,000 in real estate owned valuation adjustment expense, $37,000 in legal fees, and $4,000 in loan and collection expenses.

The aggregate compensation expense recognized by the Company for its Stock Option, Share Award, ESOP, and Recognition and Retention Plans amounted to $125,000 and $539,000 for the three and nine months ended March 31, 2019, respectively, compared to $159,000 and $464,000 for the three and nine months ended March 31, 2018, respectively.

The Louisiana bank shares tax is assessed on the Bank’s equity and earnings. For the three and nine months ended March 31, 2019, the Company recognized franchise and bank shares tax expense of $97,000 and $295,000, respectively, compared to $96,000 and $296,000 for the same periods in 2018.

Income Taxes

Income taxes amounted to $307,000 and $984,000 for the three and nine months ended March 31, 2019, respectively, resulting in an effective tax rate of 20.52% and 21.55%. Income taxes amounted to $158,000 and $1.8 million for the three and nine months ended March 31, 2018, respectively. The decrease in the provision for income taxes for the nine months ended March 31, 2019 was primarily due to the Tax Cuts and Jobs Act (the “Tax Act”) signed into law on December 22, 2017, which reduced the Company’s effective tax rate for the nine months ended March 31, 2019 over the prior year nine month period combined with the $642,000 re-measurement charge of the Company’s net deferred tax asset during the nine months ended March 31, 2018.

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Comparison of Operating Results for the Three and Nine Month Periods Ended March 31, 2019 and 2018 (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,
	2019							2018
	Average Balance		Interest		Average Yield/ Rate			Average Balance		Interest		Average Yield/ Rate
	(Dollars In Thousands)
Interest-earning assets:
Loans receivable	$	324,522	$	4,530		5.66	%	$	319,163	$	4,179		5.19	%
Investment securities		68,025		412		2.46			60,542		310		2.03
Interest-earning deposits		10.752		60		2.26			4,605		19		1.64
Total interest-earning assets	$	403,299		5,002		5.03	%	$	384,310		4,508		4.65	%
Non-interest-earning assets		26,421							26,588
Total assets	$	429,720						$	410,898
Interest-bearing liabilities:
Savings accounts	$	34,348		45		0.53	%	$	36,480		48		0.52	%
NOW accounts		28,463		40		0.57			30,824		38		0.49
Money market accounts		72,227		212		1.19			54,205		80		0.59
Certificate accounts		184,651		852		1.87			166,522		602		1.43
Total interest-bearing deposits		319,689		1,149		1.46			288,031		768		1.06
Other bank borrowings		250		2		3.25			226		2		3.51
FHLB advances		1,351		17		5.10			18,834		92		1.18
Total interest-bearing liabilities	$	321,290		1,168		1.47	%	$	307,091		862		1.07	%
Non-interest-bearing liabilities:
Non-interest bearing demand accounts		58,772							56,302
Other liabilities		1,766							1,460
Total liabilities		381,828							364,853
Total Stockholders’ Equity(1)		47,892							46,045
Total liabilities and equity	$	429,720						$	410,898

Net interest-earning assets	$	82,009						$	77,219

Net interest income; average interest rate spread(2)			$	3,834		3.56	%			$	3,646		3.58	%
Net interest margin(3)						3.86	%						3.76	%
Average interest-earning assets to average interest-bearing liabilities						125.52	%						120.44	%

__________________

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

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

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

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Comparison of Operating Results for the Three and Nine Month Periods Ended March 31, 2019 and 2018 (continued)

	Nine Months Ended March 31,
	2019							2018
	Average Balance		Interest		Average Yield/ Rate			Average Balance		Interest		Average Yield/ Rate
	(Dollars In Thousands)
Interest-earning assets:
Loans receivable	$	326,058	$	13,593		5.55	%	$	323,650	$	12,743		5.24	%
Investment securities		61,416		1,057		2.29			59,941		861		1.91
Interest-earning deposits		14,063		234		2.22			8,157		84		1.37
Total interest-earning assets	$	401,537		14,884		4.94	%	$	391,748		13,688		4.65	%
Non-interest-earning assets		28,289							27,147
Total assets	$	429,826						$	418,895
Interest-bearing liabilities:
Savings accounts	$	35,384		141		0.53	%	$	36,518		146		0.53	%
NOW accounts		30,587		123		0.54			32,359		123		0.51
Money market accounts		70,929		530		1.00			45,780		160		0.47
Certificate accounts		176,325		2,314		1.75			166,364		1,784		1.43
Total interest-bearing deposits		313,225		3,108		1.32			281,021		2,213		1.05
Other bank borrowings		218		6		3.67			116		4		4.59
FHLB advances		5,765		127		2.93			30,829		352		1.52
Total interest-bearing liabilities	$	319,208		3,241		1.35	%	$	311,966		2,569		1.10	%
Non-interest-bearing liabilities:
Non-interest bearing demand accounts		60,301							58,474
Other liabilities		2,508							2,156
Total liabilities		382,017							372,596
Total Stockholders’ Equity(1)		47,809							46,299

Total liabilities and equity	$	429,826						$	418,895

Net interest-earning assets	$	82,329						$	79,782

Net interest income; average interest rate spread(2)			$	11,643		3.59	%			$	11,119		3.55	%
Net interest margin(3)						3.86	%						3.78	%
Average interest-earning assets to average interest-bearing liabilities						125.79	%						125.57	%

____________________

(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.

Liquidity and Capital Resources

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

Home Federal Bank’s primary sources of funds are deposits, amortization and prepayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, loan sales, and earnings and funds provided from operations. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. The Bank sets the interest rates on its deposits to maintain a desired level of total deposits. In addition, Home Federal Bank invests excess funds in short-term interest-earning accounts and other assets which provide liquidity to meet lending requirements. Home Federal Bank’s deposit accounts with the Federal Home Loan Bank of Dallas amounted to $1.2 million at March 31, 2019.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

Liquidity and Capital Resources (continued)

A significant portion of Home Federal Bank’s liquidity consists of securities classified as available-for-sale and cash and cash equivalents. Home Federal Bank’s primary sources of cash are net income, principal repayments on loans and mortgage-backed securities, and increases in deposit accounts. If Home Federal Bank requires funds beyond its ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Dallas which provides an additional source of funds. At March 31, 2019, Home Federal Bank had $1.4 million in advances from the Federal Home Loan Bank of Dallas and had $149.1 million in additional borrowing capacity. Additionally, at March 31, 2019, Home Federal Bank was a party to a Master Purchase Agreement with First National Bankers Bank whereby Home Federal Bank may purchase Federal Funds from First National Bankers Bank in an amount not to exceed $15.5 million. There were no amounts purchased under this agreement as of March 31, 2019.

At March 31, 2019, Home Federal Bank had outstanding loan commitments of $38.7 million to originate loans and commitments under unused lines of credit of $12.5 million. At March 31, 2019, certificates of deposit scheduled to mature in less than one year totaled $100.8 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In addition, the cost of such deposits could be significantly higher upon renewal in a rising interest rate environment. Home Federal Bank intends to utilize its high levels of liquidity to fund its lending activities. If additional funds are required to fund lending activities, Home Federal Bank intends to sell its securities classified as available-for-sale, as needed.

At March 31, 2019, Home Federal Bank exceeded each of its regulatory capital requirements with tangible, common equity Tier 1, core, and risk-based capital ratios of 11.41%, 16.35%, 11.41%, and 17.55%, respectively.

Off-Balance Sheet Arrangements

At March 31, 2019, 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.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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’s repurchases of its common stock made during the quarter ended March 31, 2019 are set forth in the table below, including stock-for-stock option exercises:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (a)(b)
January 1, 2019 – January 31, 2019		10,000	$	30.74		10,000		90,066
February 1, 2019 – February 28, 2019		22,071		31.02		22,071		67,995
March 1, 2019 – March 31, 2019		2,089		32.49		2,089		65,906
Total		34,160	$	31.03		34,160

______________

Notes to this table:

(a)	On October 12, 2016, the Company announced that its Board of Directors approved a seventh stock repurchase program for the repurchase of up to 97,000 shares. The seventh stock repurchase program was completed during the quarter ended March 31, 2019.

(b)	On December 12, 2018, the Company announced that its Board of Directors approved an eighth stock repurchase program for the repurchase of up to 95,000 shares to commence after the completion of the seventh stock repurchase program. The repurchase program does not have an expiration date.

HOME FEDERAL BANCORP, INC. OF LOUISIANA

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
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.0		Certification Pursuant to 18 U.S.C Section 1350
	101.INS	XBRL Instance Document
	101.SCH	XBRL Taxonomy Extension Schema Document
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
	101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document

SIGNATURES

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

	HOME FEDERAL BANCORP, INC. OF LOUISIANA



Date: May 14, 2019	By:	/s/Glen W. Brown
		Glen W. Brown Senior Vice President and Chief Financial Officer (Duly authorized officer and principal financial and accounting officer)

TABLE OF CONTENTS

Part I Item 1: Financial Statements (unaudited)Item 2: Management's Discussion and Analysis Of Financial Condition and Results Of Operations 30 Item 3: Quantitative and Qualitative Disclosures About Market Risk 38 Item 4: Controls and Procedures 38 Part II Other Information Part II Item 1: Legal Proceedings 38 Item 1A: Risk Factors 38 Item 2: Unregistered Sales Of Equity Securities and Use Of Proceeds 38 Item 3: Defaults Upon Senior Securities 39 Item 4: Mine Safety Disclosures 39 Item 5: Other Information 39 Item 6: Exhibits 39 Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer 32.0 Certification Pursuant to 18 U.S.C Section 1350

HFBL 10-Q Quarter ended March 31, 2019

Exhibits