Home Federal Bancorp Inc of Louisiana

Previous wording

During the six months ended December 31, 2023, the Company implemented newcurrent expected credit loss (“CECL”) accounting policies, procedures, and controls as part of its adoption of ASU No. 2016-13 and subsequent ASUs issued to amend ASC Topic 326.

Current wording

During the nine months ended March 31, 2024, the Company implemented newcurrent expected credit loss (“CECL”) accounting policies, procedures, and controls as part of its adoption of ASU No. 2016-13 and subsequent ASUs issued to amend ASC Topic 326.

Previous wording

At December 31, 2023, the Company reported total assets of $654.2 million, a decrease of $6.7 million, or 1.0%, compared to total assets of $660.9 million at June 30, 2023. The decrease in assets was comprised primarily of decreases in cash and cash equivalents of $16.1 million, or 65.0%, from $24.8 million at June 30, 2023 to $8.7 million at December 31, 2023, investment securities of $5.1 million, or 4.5%, from $114.0 million at June 30, 2023 to $108.8 million at December 31, 2023, real estate owned of $368,000, or 100.0% from $368,000 at June 30, 2023 to none at December 31, 2023, core deposit intangible of $179,000, or 11.7%, from $1.5 million at June 30, 2023 to $1.4 million at December 31, 2023, deferred tax asset of $140,000, or 10.7%, from $1.3 million at June 30, 2023 to $1.2 million at December 31, 2023, and other assets of $117,000, or 8.2%, from $1.4 million at June 30, 2023 to $1.3 million at December 31, 2023. These decreases were partially offset by increases in net loans receivable of $12.3 million, or 2.5%, from $489.5 million at June 30, 2023 to $501.8 million at December 31, 2023, loans-held-for-sale of $1.8 million, from $4,000 at June 30, 2023 to $1.9 million at December 31, 2023, premises and equipment of $1.0 million, or 6.3%, from $16.6 million at June 30, 2023 to $17.6 million at December 31, 2023, accrued interest receivable of $93,000, or 5.2%, from $1.8 million at June 30, 2023 to $1.9 million at December 31, 2023, and bank owned life insurance of $54,000, or 0.8%, from $6.7 million at June 30, 2023 to $6.8 million at December 31, 2023. The decrease in cash and cash equivalents was primarily due to a decrease in total deposits and the funding of additional loan growth. The decrease in held to maturity securities was due to $2.9 million in principal payments. The increase in loans held-for-sale primarily reflected an increase in loans originated for sale during the six months ended December 31, 2023.

Current wording

Total assets decreased $17.9 million, or 2.7%, from $660.9 million at June 30, 2023 to $643.0 million at March 31, 2024. The decrease in assets was comprised of decreases in cash and cash equivalents of $16.7 million, or 67.6%, from $24.8 million at June 30, 2023 to $8.0 million at March 31, 2024, investment securities of $13.8 million, or 12.1%, from $114.0 million at June 30, 2023 to $100.1 million at March 31, 2024, real estate owned of $368,000, or 100.0% from $368,000 at June 30, 2023 to none at March 31, 2024, core deposit intangible of $258,000, or 16.8%, from $1.5 million at June 30, 2023 to $1.3 million at March 31, 2024, other assets of $132,000, or 9.3%, from $1.4 million at June 30, 2023 to $1.3 million at March 31, 2024, deferred tax asset of $40,000, or 3.0%, from $1.31 million at June 30, 2023 to $1.27 million at March 31, 2024, and partially offset by increases in net loans receivable of $9.8 million, or 2.0%, from $489.5 million at June 30, 2023 to $499.3 million at March 31, 2024, loans-held-for-sale of $1.9 million, from $4,000 at June 30, 2023 to $1.9 million at March 31, 2024, premises and equipment of $1.6 million, or 9.7%, from $16.6 million at June 30, 2023 to $18.2 million at March 31, 2024, accrued interest receivable of $142,000, or 7.9%, from $1.8 million at June 30, 2023 to $1.9 million at March 31, 2024, and bank owned life insurance of $82,000, or 1.2%, from $6.7 million at June 30, 2023 to $6.8 million at March 31, 2024. The decrease in cash and cash equivalents was primarily due to a decrease in total deposits and the funding of additional loan growth. The decrease in held to maturity securities was primarily due to $4.2 million in principal payments.

Previous wording

Cash and cash equivalents decreased $16.1 million, or 65.0%, from $24.8 million at June 30, 2023 to $8.7 million at December 31, 2023. The decrease in cash and cash equivalents was primarily due to the funding of loan originations along with a reduction in total deposits.

Current wording

Cash and cash equivalents decreased $16.7 million, or 67.6%, from $24.8 million at June 30, 2023 to $8.0 million at March 31, 2024. The decrease in cash and cash equivalents was primarily due to the funding of loan originations along with a reduction in total deposits.

Previous wording

Loans receivable, net, increased by $12.3 million, or 2.5%, to $501.8 million at December 31, 2023 compared to $489.5 million at June 30, 2023. The increase in loans receivable, net was primarily due to increases in multi-family residential loans of $10.7 million, one-to-four family residential loans of $8.0 million, commercial real estate loans of $2.7 million, land loans of $2.7 million, commercial non-real estate loans of $2.0 million, equity and second mortgage loans of $180,000, and consumer loans of $3,000, partially offset by decreases in construction loans of $11.9 million, and equity line-of-credit loans of $2.2 million.

Current wording

Loans receivable, net, increased by $9.8 million, or 2.0%, from $489.5 million at June 30, 2023 to $499.3 million at March 31, 2024. The increase in loans receivable, net was primarily due to increases in multi-family residential loans of $11.8 million, one-to-four family residential loans of $6.4 million, land loans of $4.6 million, commercial real estate loans of $1.7 million, commercial non-real estate loans of $1.6 million, equity and second mortgage loans of $300,000, partially offset by decreases in construction loans of $12.0 million, equity line-of-credit loans of $4.9 million, and consumer loans of $30,000.

Previous wording

Loans held-for-sale increased $1.8 million, from $4,000 at June 30, 2023 to $1.9 million at December 31, 2023. The increase in loans held-for-sale results primarily from the increase in the origination volume during the first six months of fiscal year end 2024.

Current wording

Loans held-for-sale increased $1.9 million, from $4,000 at June 30, 2023 to $1.9 million at March 31, 2024.The increase in loans held for sale at March 31, 2024, was due to the timing of loans originated and sold rather than an increase in loan originations during the period.

Previous wording

Investment securities amounted to $108.8 million at December 31, 2023 compared to $114.0 million at June 30, 2023, a decrease of $5.2 million, or 4.5%. The decrease in investment securities was primarily due to $8.7 million in principal repayments on mortgage backed securities, partially offset by security purchases of $2.7 million and a $733,000 decrease in market value losses on available-for-sale securities.

Current wording

Investment securities decreased $13.8 million, or 12.1%, from $114.0 million at June 30, 2023 to $100.1 million at March 31, 2024. The decrease in investment securities was primarily due to $13.5 million in principal repayments on mortgage backed securities and securities sold of $3.4 million, partially offset by security purchases of $2.7 million.

Previous wording

Premises and equipment, net increased $1.0 million, or 6.3%, to $17.6 million at December 31, 2023 compared to $16.6 million at June 30, 2023. The increase in premises and equipment was primarily due to construction costs of a new Minden branch that will replace an existing temporary location and is expected to open in April 2024.

Current wording

Premises and equipment, net increased $1.6 million, or 9.7%, from $16.6 million at June 30, 2023 to $18.2 million at March 31, 2024. The increase in premises and equipment was primarily due to construction costs of a new Minden branch that will replace an existing temporary location and is expected to open in May 2024.

Previous wording

At December 31, 2023, the Company had $2.2 million of non-performing assets (defined as non-accruing loans, accruing loans 90 days or more past due, and other real estate owned) compared to $1.6 million on non-performing assets at June 30, 2023, consisting of eleven commercial non-real estate loans, six single-family residential loans, three land loans, and three home equity line-of-credit loans at December 31, 2023, compared to seven single-family residential loans, three commercial non-real estate loans, one consumer loan and two single-family residences in other real estate owned at June 30, 2023. At December 31, 2023 the Company had 12 commercial non-real-estate loans, seven single family residential loans, four home-equity line-of-credit loans, two land loans, one commercial real estate loan, and one auto loan classified as substandard, compared to ten single family residential loans, three commercial non-real-estate loans, two commercial real estate loans, and three home equity line-of-credit loans classified as substandard at June 30, 2023. There were no loans classified as doubtful at December 31, 2023 or June 30, 2023.

Current wording

At March 31, 2024, the Company had $2.4 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 $1.6 million on non-performing assets at June 30, 2023, consisting of six commercial non-real estate loans, six single-family residential loans, three home equity line-of-credit loans, and one land loan at March 31, 2024, compared to seven single-family residential loans, three commercial non-real estate loans, one consumer loan and two single-family residences in other real estate owned at June 30, 2023. At March 31, 2024 the Company had seven commercial non-real-estate loans, seven single family residential loans, four home-equity line-of-credit loans, one land loan, and one auto loan classified as substandard, compared to ten single family residential loans, three commercial non-real-estate loans, two commercial real estate loans, and three home equity line-of-credit loans classified as substandard at June 30, 2023. There were no loans classified as doubtful at March 31, 2024 or June 30, 2023.

Previous wording

Total liabilities decreased $8.8 million, or 1.4%, from $610.4 million at June 30, 2023 to $601.6 million at December 31, 2023. The decrease in liabilities was comprised primarily of decreases in total deposits of $13.7 million, or 2.3%, from $597.4 million at June 30, 2023 to $583.7 million at December 31, 2023, other accrued expenses and liabilities of $1.4 million, or 35.8%, from $3.9 million at June 30, 2023 to $2.5 million at December 31, 2023, and advances from borrowers for taxes and insurance of $209,000, or 37.7%, from $554,000 at June 30, 2023 to $345,000 at December 31, 2023. The decreases were partially offset by increases in short term advances from FHLB of $5.4 million from none at June 30, 2023 to $5.4 million at December 31, 2023, and other borrowings of $1.1 million, or 12.9%, from $8.6 million at June 30, 2023 to $9.7 million at December 31, 2023. The decrease in deposits was primarily due to decreases in money market deposits of $21.8 million, or 19.1%, from $114.2 million at June 30, 2023 to $92.4 million at December 31, 2023, savings deposits of $11.3 million, or 13.8%, from $81.9 million at June 30, 2023 to $70.6 million at December 31, 2023, non-interest deposits of $9.4 million, or 6.4%, from $145.6 million at June 30, 2023 to $136.2 million at December 31, 2023, NOW accounts of $150,000, or 0.2%, from $65.3 million at June 30, 2023 to $65.2 million at December 31, 2023, partially offset by an increase in certificates of deposit of $28.9 million, or 15.2%, from $190.4 million at June 30, 2023 to $219.2 million at December 31, 2023. The Company had $3.0 million in brokered deposits at both December 31, 2023 and June 30, 2023. There was a shift of balances between deposit categories due to customers moving funds from lower yielding categories to higher yielding categories. The $13.7 million decrease in deposits from June 30, 2023 to December 31, 2023 was primarily due to an estate settlement totaling $24.2 million. $15.4 million of the settlement has been paid out to date, with the remaining $8.8 million to be paid out in the future. This loss of deposits resulted in an increase in short term advances from FHLB.

Current wording

Total liabilities decreased $19.9 million, or 3.3%, from $610.4 million at June 30, 2023 to $590.5 million at March 31, 2024. The decrease in liabilities was comprised of decreases in total deposits of $18.5 million, or 3.1%, from $597.4 million at June 30, 2023 to $578.9 million at March 31, 2024, other accrued expenses and liabilities of $1.2 million, or 31.4%, from $3.9 million at June 30, 2023 to $2.7 million at March 31, 2024, advances from borrowers for taxes and insurance of $138,000, or 24.9 %, from $554,000 at June 30, 2023 to $416,000 at March 31, 2024, and other borrowings of $50,000, or 0.6%, from $8.6 million at June 30, 2023 to $8.5 million at March 31, 2024. The decrease in deposits resulted from decreases in money market deposits of $33.9 million, or 29.6%, from $114.2 million at June 30, 2023 to $80.3 million at March 31, 2024, non-interest deposits of $13.0 million, or 8.9%, from $145.6 million at June 30, 2023 to $132.6 million at March 31, 2024, and savings deposits of $10.1 million, or 12.3%, from $81.9 million at June 30, 2023 to $71.8 million at March 31, 2024, partially offset by increases in certificates of deposit of $38.4 million, or 20.2%, from $190.4 million at June 30, 2023 to $228.8 million at March 31, 2024, and NOW accounts of $37,000, or 0.1%, from $65.3 million at June 30, 2023 to $65.4 million at March 31, 2024. The Company had no balances in brokered deposits at March 31, 2024 compared to $3.0 million at June 30, 2023. There was a shift of balances between deposit categories due to customers moving funds from lower yielding categories to higher yielding categories. The $18.5 million decrease in deposits from June 30, 2023 to March 31, 2024 was primarily due to an estate settlement totaling $24.8 million. $15.4 million of the settlement has been paid out to date, with the remaining $9.4 million expected to be paid out in the future.

Previous wording

Shareholders’ equity increased $2.1 million, or 4.1%, to $52.6 million at December 31, 2023 from $50.5 million at June 30, 2023. The primary reasons for the changes in shareholders’ equity from June 30, 2023 was net income of $2.2 million, a decrease in the Company’s accumulated other comprehensive loss of $532,000, the vesting of restricted stock awards, stock options, and the release of employee stock ownership plan shares totaling $300,000, partially offset by dividends paid totaling $784,000, CECL implementation totaling $189,000, and stock repurchases of $30,000.

Current wording

Stockholders’ equity increased $2.0 million, or 4.0%, from $50.5 million at June 30, 2023 to $52.6 million at March 31, 2024. The increase in stockholders’ equity was comprised of current year net income of $3.0 million, a decrease in the Company’s accumulated other comprehensive loss of $31,000, the vesting of restricted stock awards, stock options, and the release of employee stock ownership plan shares totaling $407,000, and proceeds from the issuance of common stock from the exercise of stock options of $19,000, partially offset by dividends paid totaling $1.2 million, CECL implementation totaling $189,000, and stock repurchases of $39,000.

Previous wording

The Bank is required to meet minimum capital standards promulgated by the Office of the Comptroller of the Currency (“OCC”). At December 31, 2023, Home Federal Bank’s regulatory capital was well in excess of the minimum capital requirements. At December 31, 2023, Home Federal Bank exceeded each of its regulatory capital requirements with tangible equity, common equity Tier 1, core, and total risk-based capital ratios of 9.15%, 13.09%, 9.15%, and 14.19%, respectively.

Current wording

The Bank is required to meet minimum capital standards promulgated by the Office of the Comptroller of the Currency (“OCC”). At March 31, 2024, Home Federal Bank’s regulatory capital was well in excess of the minimum capital requirements. At March 31, 2024, Home Federal Bank exceeded each of its regulatory capital requirements with tangible equity, common equity Tier 1, core, and total risk-based capital ratios of 9.05%, 12.97%, 9.05%, and 14.05%, respectively.

Previous wording

Comparison of Operating Results for the Three and Six Months Ended December 31, 2023 and 2022

Current wording

Comparison of Operating Results for the Three and Nine Months Ended March 31, 2024 and 2023

Previous wording

The decrease in net income for the three months ended December 31, 2023, as compared to same period in 2022 resulted primarily from an increase of $693,000, or 19.4%, in non-interest expense, a decrease of $421,000, or 7.9%, in net interest income, and a decrease of $402,000, or 74.5%, in non-interest income, partially offset by a decrease of $640,000, or 144.1%, in provision (benefit) for income taxes, and a decrease of $166,000, or 110.7%, in the provision for credit losses. The decrease in net interest income for the three months ended December 31, 2023, as compared to same period in 2022, was primarily due to an increase of $2.4 million, or 315.9%, in total interest expense, partially offset by an increase of $2.0 million, or 32.7%, in total interest income. The Company’s average interest rate spread was 2.45% for the three months ended December 31, 2023, compared to 3.67% for the three months ended December 31, 2022. The Company’s net interest margin was 3.14% for the three months ended December 31, 2023, compared to 3.91% for the three months ended December 31, 2022.

Current wording

The decrease in net income for the three months ended March 31, 2024, compared to the same period in 2023, resulted from a decrease in net interest income of $1.1 million, or 19.5%, and a decrease in non-interest income of $2,000, or 0.4%, partially offset by a decrease in non-interest expense of $507,000, or 11.3%, a decrease in the provision of credit losses of $139,000, or 92.7%, and a decrease in provision for income taxes of $95,000, or 35.1%. The decrease in net interest income for the three months ended March 31, 2024, compared to the same period in 2023, resulted from an increase in total interest expense of $1.9 million, or 126.4%, partially offset by an increase in total interest income of $877,000, or 12.5%. The Company’s average interest rate spread was 2.16% for the three months ended March 31, 2024, compared to 3.15% for the three months ended March 31, 2023. The Company’s net interest margin was 2.89% for the three months ended March 31, 2024, compared to 3.56% for the three months ended March 31, 2023.

Previous wording

The decrease in net income for the six months ended December 31, 2023, as compared to same period in 2022 resulted primarily from an increase of $1.1 million, or 15.4%, in non-interest expense, a decrease of $514,000, or 47.3%, in non-interest income, and a decrease of $443,000, or 4.2%, in net interest income, partially offset by a decrease of $584,000, or 102.8%, in the provision for credit losses, and a decrease of $339,000, or 74.7%, in provision for income taxes. The decrease in net interest income for the six months ended December 31, 2023, as compared to same period in 2022, was primarily due to an increase of $4.7 million, or 381.3%, in total interest expense, partially offset by an increase of $4.3 million, or 36.1%, in total interest income. The Company’s average interest rate spread was 2.60% for the six months ended December 31, 2023 compared to 3.70% for the six months ended December 31, 2022. The Company’s net interest margin was 3.26% for the six months ended December 31, 2023 compared to 3.91% for the six months ended December 31, 2022.

Current wording

The decrease in net income for the nine months ended March 31, 2024, compared to the same period in 2023, resulted from a decrease in net interest income of $1.5 million, or 9.4%, an increase in non-interest expense of $619,000, or 5.2%, and a decrease in non-interest income of $516,000, or 32.4%, partially offset by a decrease in the provision of credit losses of $723,000, or 100.7%, and a decrease in provision for income taxes of $433,000, or 59.9%. The decrease in net interest income for the nine months ended March 31, 2024, compared to the same period in 2023, resulted from an increase in total interest expense of $6.7 million, or 240.1%, partially offset by an increase in total interest income of $5.2 million, or 27.3%. The Company’s average interest rate spread was 2.46% for the nine months ended March 31, 2024 compared to 3.55% for the nine months ended March 31, 2023. The Company’s net interest margin was 3.14% for the nine months ended March 31, 2024 compared to 3.84% for the nine months ended March 31, 2023.

Previous wording

On July 1, 2023, the Company adopted the new current expected credit loss (“CECL”) methodology for estimating credit losses. This resulted in a $189,000 increase to the allowance for credit losses (the “ACL”) and a one-time cumulative adjustment resulted in a $149,000, net of tax, decrease to stockholders’ equity. For purchased credit deteriorated loans, the Company applied the guidance under CECL using the prospective transition approach. As a result, the Company adjusted the amortized cost basis of the purchased credit deteriorated loans by $170,000 to reclassify the purchase discount to the allowance for credit losses on July 1, 2023. The ACL account increased $359,000 from these two transactions. No provision expense was recorded in the first quarter of 2024 and a recovery of credit losses of $16,000 was recorded in the second quarter of 2024. As of December 31, 2023, the ACL was $5.1 million, and the ratio of ACL to gross loans was 1.00%. As of June 30, 2023, the ACL was $5.2 million, and the ratio of allowance for loan and lease losses (“ALLL”) to gross loans was 1.05%. No ACL was recorded for unfunded commitments due to all unfunded commitments being unconditionally cancellable.

Current wording

On July 1, 2023, the Company adopted the new current expected credit loss (“CECL”) methodology for estimating credit losses. This resulted in a $189,000 increase to the allowance for credit losses (the “ACL”) and a one-time cumulative adjustment resulted in a $189,000 decrease to stockholders’ equity. For purchased credit deteriorated loans, the Company applied the guidance under CECL using the prospective transition approach. As a result, the Company adjusted the amortized cost basis of the purchased credit deteriorated loans by $170,000 to reclassify the purchase discount to the allowance for credit losses on July 1, 2023. The ACL account increased $359,000 from these two transactions. No provision expense was recorded in the first quarter of fiscal 2024, a recovery of credit losses of $16,000 was recorded in the second quarter of fiscal 2024 and a provision of $11,000 was recorded in the third quarter of fiscal 2024. As of March 31, 2024, the ACL was $4.9 million, and the ratio of ACL to gross loans was 0.97%. As of June 30, 2023, the ACL was $5.2 million, and the ratio of ACL to gross loans was 1.05%. No ACL was recorded for unfunded commitments due to all unfunded commitments being unconditionally cancellable.

Previous wording

The $402,000 decrease in non-interest income for the three months ended December 31, 2023, compared to the prior year quarterly period, was primarily due to an increase of $381,000 in loss on sale of real estate, and a $66,000 decrease in gain on sale of loans, partially offset by a $38,000 increase in service charges on deposit accounts, an increase of $5,000 in other non-interest income, and an increase of $2,000 in income on bank owned life insurance. The $514,000 decrease in non-interest income for the six months ended December 31, 2023 compared to the prior year six-month period was primarily due to an increase of $415,000 in loss on sale of real estate, and a decrease of $202,000 in gain on sale of loans, partially offset by a $94,000 increase in service charges on deposit accounts, an increase of $7,000 in other non-interest income, and a $2,000 increase in income from bank owned life insurance. The decreases in gain on sale of loans for both the quarter and six months ended December 31, 2023, were primarily due to a decrease in refinance activity causing a decrease in mortgage loan originations. In addition, in recent periods the Company has increased its originations of adjustable rate mortgages for portfolio rather than for sale in the secondary market. The increases in loss on sale of real estate for both the quarter and six months ended December 31, 2023, were primarily due to the bulk sale of twenty-one distressed rental properties.

Current wording

The $2,000 decrease in non-interest income for the three months ended March 31, 2024, compared to the same period in 2023, resulted from a decrease in gain on sale of loans of $18,000, a decrease in service charges on deposit accounts of $17,000, and a decrease in gain on sale of fixed assets of $4,000, partially offset by an increase in gain on sale of securities of $26,000, an increase in other non-interest income of $8,000, and an increase in income on bank owned life insurance of $3,000. The $516,000 decrease in non-interest income for the nine months ended March 31, 2024, compared to the same period in 2023, resulted from an increase in loss on sale of real estate of $415,000, a decrease in gain on sale of loans of $220,000, and a decrease in gain on sale of fixed assets of $4,000, partially offset by an increase in service charges on deposit accounts of $77,000, an increase in gain on sale of securities of $26,000, an increase in other non-interest income of $15,000, and an increase in income from bank owned life insurance of $5,000. The decreases in gain on sale of loans for both the quarter and nine months ended March 31, 2024, were primarily due to a decrease in mortgage loan originations caused by the higher interest rate environment. The loss on sale of real estate for the nine months ended March 31, 2024, was primarily due to the bulk sale of twenty-one distressed rental properties.

Previous wording

The $693,000 increase in non-interest expense for the three months ended December 31, 2023, compared to the same period in 2022, is primarily attributable to increases of $235,000 in compensation and benefits expense, $186,000 in audit and examination fees, $113,000 in professional fees, $85,000 in amortization of core deposit intangible expense, $55,000 in deposit insurance premium expense, $46,000 in occupancy and equipment expense, $42,000 in franchise and bank shares tax expense, $38,000 in other non-interest expense, and $14,000 in advertising expense. The increases were partially offset by a decrease of $91,000 in data processing expense, and $30,000 in loan and collection expense. The $1.1 million increase in non-interest expense for the six months ended December 31, 2023, compared to the same six-month period in 2022, is primarily attributable to increases of $309,000 in compensation and benefits expense, $213,000 in audit and examination fees, $179,000 in amortization of core deposit intangible expense, $147,000 in professional fees, $99,000 in deposit insurance premium expense, $93,000 in occupancy and equipment expense, $83,000 in advertising expense, and $79,000 in franchise and bank shares tax expense. The increases were partially offset by decreases of $27,000 in data processing expense, $26,000 in other non-interest expense, and $22,000 in loan and collection expense. The increases in compensation and benefits expense were primarily due to additional branch and back office staff.

Current wording

The $507,000 decrease in non-interest expense for the three months ended March 31, 2024, compared to the same period in 2023, resulted from decreases in professional fees of $789,000, data processing expense of $24,000, advertising expense of $20,000, occupancy and equipment expense of $8,000, and loan and collection expense of $3,000, partially offset by increases in compensation and benefits expense of $134,000, other non-interest expense of $130,000, deposit insurance premium expense of $41,000, franchise and bank shares tax expense of $23,000, amortization of core deposit intangible expense of $8,000, and audit and examination fees of $1,000. The $619,000 increase in non-interest expense for the nine months ended March 31, 2024, compared to the same period in 2023, resulted from increases in compensation and benefits expense of $443,000, audit and examination fees of $213,000, amortization of core deposit intangible expense of $187,000, deposit insurance premium expense of $139,000, other non-interest expense of $104,000, franchise and bank shares tax expense of $102,000, occupancy and equipment expense of $85,000, and advertising expense of $64,000, partially offset by decreases in professional fees of $642,000, data processing expense of $51,000, and loan and collection expense of $25,000. The decrease in professional fees for both periods was due to the acquisition of First National Bank of Benton, which increased professional fees for the March 31, 2023 quarter. The increases in compensation and benefits expense were primarily due to additional branch and back office staff.

Previous wording

There was an income tax benefit of $196,000 and an income tax expense of $114,000 for the three and six months ended December 31, 2023, respectively, resulting in an effective tax rate of (24.23)% and 4.90%. Income taxes amounted to $444,000 and $453,000 for the three and six months ended December 31, 2022, respectively. The decrease in provision for income taxes was due to an adjustment in taxes related to stock option exercises for the 2022 period.

Current wording

There was an income tax expense of $176,000 and $290,000 for the three and nine months ended March 31, 2024, respectively, resulting in an effective tax rate of 19.4% and 8.9%. Income taxes amounted to $271,000 and $723,000 for the three and nine months ended March 31, 2023, respectively.

Previous wording

The Bank’s primary sources of funds are deposits, amortization and prepayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, loan sales, and earnings and funds provided from operations. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. The Bank sets the interest rates on its deposits to maintain a desired level of total deposits. In addition, the Bank invests excess funds in short-term interest-earning accounts and other assets which provide liquidity to meet lending requirements. The Bank’s deposit accounts with the Federal Home Loan Bank of Dallas amounted to $70,000 at December 31, 2023.

Current wording

The Bank’s primary sources of funds are deposits, amortization and prepayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, loan sales, and earnings and funds provided from operations. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. The Bank sets the interest rates on its deposits to maintain a desired level of total deposits. In addition, the Bank invests excess funds in short-term interest-earning accounts and other assets which provide liquidity to meet lending requirements. The Bank’s deposit accounts with the Federal Home Loan Bank of Dallas amounted to $23,000 at March 31, 2024.

Previous wording

A significant portion of the Bank’s liquidity consists of securities classified as available-for-sale and cash and cash equivalents. The Bank’s primary sources of cash are net income, principal repayments on loans and mortgage-backed securities, and increases in deposit accounts. If the Bank requires funds beyond its ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Dallas which provides an additional source of funds. At December 31, 2023, The Bank had $5.4 million in advances from the Federal Home Loan Bank of Dallasand had $192.8 million in additional borrowing capacity. Additionally, at December 31, 2023, the Bank was a party to a Master Purchase Agreement with First National Bankers Bank whereby Home Federal Bank may purchase Federal Funds from First National Bankers Bank in an amount not to exceed $20.4 million. There were no amounts purchased under this agreement as of December 31, 2023. In addition, the Company had available an $11.0 million line of credit agreement at December 31, 2023 with First National Bankers Bank. At December 31, 2023, there was a $9.7 million balance in the credit line.

Current wording

A significant portion of the Bank’s liquidity consists of securities classified as available-for-sale and cash and cash equivalents. The Bank’s primary sources of cash are net income, principal repayments on loans and mortgage-backed securities, and increases in deposit accounts. If the Bank requires funds beyond its ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Dallas which provides an additional source of funds. At March 31, 2024, The Bank had no advances from the Federal Home Loan Bank of Dallasand had $188.9 million in additional borrowing capacity. Additionally, at March 31, 2024, the Bank was a party to a Master Purchase Agreement with First National Bankers Bank whereby Home Federal Bank may purchase Federal Funds from First National Bankers Bank in an amount not to exceed $20.4 million. There were no amounts purchased under this agreement as of March 31, 2024. In addition, the Company had available an $11.0 million line of credit agreement at March 31, 2024 with First National Bankers Bank. At March 31, 2024, there was an $8.5 million balance in the credit line.

Previous wording

At December 31, 2023, the Bank had outstanding loan commitments of $52.6 million to originate loans and commitments under unused lines of credit of $14.3 million. At December 31, 2023, certificates of deposit scheduled to mature in less than one year totaled $184.7 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. The 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.

Current wording

At March 31, 2024, the Bank had outstanding loan commitments of $41.0 million to originate loans and commitments under unused lines of credit of $14.6 million. At March 31, 2024, certificates of deposit scheduled to mature in less than one year totaled $185.1 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. The 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 can utilize available borrowing capacity, if necessary.

Previous wording

At December 31, 2023, the Bank exceeded each of its regulatory capital requirements with tangible equity, common equity Tier 1, core, and total risk-based capital ratios of 9.15%, 13.09%, 9.15%, and 14.19%, respectively.

Current wording

At March 31, 2024, the Bank exceeded each of its regulatory capital requirements with tangible equity, common equity Tier 1, core, and total risk-based capital ratios of 9.05 %, 12.97%, 9.05%, and 14.05%, respectively.