Home Federal Bancorp, Inc. of Louisiana

Previous wording

Our profitability depends primarily on our net interest income, which is the difference between interest and dividend income on interest-earning assets, principally loans, investment securities, and interest-earning deposits in other institutions, and interest expense on interest-bearing deposits and borrowings from the Federal Home Loan Bank of Dallas. Net interest income is dependent upon the level of interest rates and the extent to which such rates are changing. Our profitability also depends, to a lesser extent, on non-interest income, provision for loan losses, non-interest expenses, and federal income taxes. Home Federal Bancorp, Inc. of Louisiana had net income of $3.9 million in fiscal 2025 compared to net income of $3.6 million in fiscal 2024.

Current wording

Our profitability depends primarily on our net interest income, which is the difference between interest and dividend income on interest-earning assets, principally loans, investment securities, and interest-earning deposits in other institutions, and interest expense on interest-bearing deposits and borrowings from the Federal Home Loan Bank of Dallas. Net interest income is dependent upon the level of interest rates and the extent to which such rates are changing. Our profitability also depends, to a lesser extent, on non-interest income, provision for loan losses, non-interest expenses, and federal income taxes. Home Federal Bancorp, Inc. of Louisiana had net income of $6.174 million in fiscal 2026 compared to net income of $3.888 million in fiscal 2025.

Previous wording

Our business consists primarily of originating single-family real estate loans secured by property in our market area and to a lesser extent, commercial real estate loans, commercial business loans, and real estate secured lines of credit which typically have higher rates and shorter terms than single-family loans. Although our loans are primarily funded by the acquisition of deposits and it is our policy to require commercial customers to have a deposit relationship with us, which primarily consists of NOW accounts or non-interest checking accounts. Due to the continued low interest rate environment, we have sold a substantial amount of our fixed rate single-family residential loan originations in recent periods. Because of an increase in the weighted-average yield on our interest-earning assets, together with a decrease in our rate on total interest bearing liabilities, our average interest rate spread increased from 2.38% to 2.55% during fiscal 2025 compared to 2024, and our net interest income decreased $280,000 to $18.8 million for fiscal 2025 as compared to $19.0 million for fiscal 2024, primarily due to a $37.1 million decrease in average balance of interest earning assets. We expect to continue to emphasize commercial lending in the future in order to improve the yield on our portfolio.

Current wording

Our business consists primarily of originating single-family real estate loans secured by property in our market area and to a lesser extent, commercial real estate loans, commercial business loans, and real estate secured lines of credit which typically have higher rates and shorter terms than single-family loans. Although our loans are primarily funded by the acquisition of deposits and it is our policy to require commercial customers to have a deposit relationship with us, which primarily consists of NOW accounts or non-interest checking accounts. Due to the continued low interest rate environment, we have sold a substantial amount of our fixed rate single-family residential loan originations in recent periods. Because of an increase in the weighted-average yield on our interest-earning assets, together with a decrease in our rate on total interest bearing liabilities, our average interest rate spread increased from 2.55% to 3.07% during fiscal 2026 compared to 2025, and our net interest income increased $3.118 million to $21.789 million for fiscal 2026 as compared to $18.671 million for fiscal 2025, primarily due to a $9.218 million increase in average balance of interest earning assets. We expect to continue to emphasize commercial lending in the future in order to improve the yield on our portfolio.

Previous wording

Under the transition provisions of ASU 2016-13, the Company classified all purchased credit impaired loans (“PCI”) previously accounted for under Financial Accounting Standard Subtopic 310-30 to be classified as PCD, without reassessing whether the financial assets meet the criteria of PCD as of the date of adoption. The application of these provisions resulted in an adjustment to the amortized cost basis of the financial asset to reflect the addition of the allowance for credit losses at the date of adoption. The Company elected not to maintain pools of loans accounted for under Subtopic 310-30 at adoption. The Company was also not required to reassess whether modifications to individual acquired financial assets accounted for in pools were troubled debt restructurings as of the date ofadoption. The noncredit discount, after the adjustment for the allowance for credit losses, is accreted to interest income using the interest method based on the effective interest rate determined at the adoption date.

Current wording

Under the transition provisions of ASU 2016-13, the Company classified all purchased credit impaired loans (“PCI”) previously accounted for under Financial Accounting Standard Subtopic 310-30 to be classified as PCD, without reassessing whether the financial assets meet the criteria of PCD as of the date of adoption. The application of these provisions resulted in an adjustment to the amortized cost basis of the financial asset to reflect the addition of the allowance for credit losses at the date of adoption. The Company elected not to maintain pools of loans accounted for under Subtopic 310-30 at adoption. The Company was also not required to reassess whether modifications to individual acquired financial assets accounted for in pools were troubled debt restructurings as of the date of adoption. The noncredit discount, after the adjustment for the allowance for credit losses, is accreted to interest income using the interest method based on the effective interest rate determined at the adoption date.

Previous wording

Total assets decreased $28.0 million, or 4.4%, from $637.5 million at June 30, 2024 to $609.5 million at June 30, 2025. The decrease in assets was comprised of decreases in cash and cash equivalents of $17.6 million, or 50.4%, from $34.9 million at June 30, 2024 to $17.3 million at June 30, 2025, net loans receivable of $9.9 million, or 2.1%, from $470.9 million at June 30, 2024 to $461.0 million at June 30, 2025, premises and equipment of $1.0 million, or 5.7%, from $18.3 million at June 30, 2024 to $17.3 million at June 30, 2025, core deposit intangible of $284,000, or 23.7%, from $1.2 million at June 30, 2024 to $915,000 at June 30, 2025, loans-held-for-sale of $193,000, or 11.1%, from $1.7 million at June 30, 2024 to $1.5 at June 30, 2025, other assets of $45,000, or 3.3%, from $1.35 million at June 30, 2024 to $1.31 million at June 30, 2025, and deferred tax asset of $18,000, or 1.5%, from $1.18 million at June 30, 2024 to $1.16 million at June 30, 2025, partially offset by increases in real estate owned of $552,000, or 132.1% from $418,000 at June 30, 2024 to $970,000 at June 30, 2025, investment securities of $277,000, or 0.3%, from $96.0 million at June 30, 2024 to $96.2 million at June 30, 2025, bank owned life insurance of $116,000, or 1.7%, from $6.8 million at June 30, 2024 to $6.9 million at June 30, 2025, and accrued interest receivable of $61,000, or 3.4%, from $1.78 million at June 30, 2024 to $1.84 million at June 30, 2025.

Current wording

Total assets increased $33.838 million, or 5.6%, from $609.492 million at June 30, 2025 to $643.330 million at June 30, 2026. The increase in assets resulted from increases in cash and cash equivalents of $16.957 million, or 97.8%, from $17.347 million at June 30, 2025 to $34.304 million at June 30, 2026, net loans receivable of $14.487 million, or 3.1%, from $461.004 million at June 30, 2025 to $475.491 million at June 30, 2026, investment securities of $3.787 million, or 3.9%, from $96.230 million at June 30, 2025 to $100.017 million at June 30, 2026, other assets of $115,000, or 8.8%, from $1.305 million at June 30, 2025 to $1.420 million at June 30, 2026, loans-held-for-sale of $114,000, or 7.4%, from $1.540 million at June 30, 2025 to $1.654 million at June 30, 2026, bank owned life insurance of $114,000, or 1.6%, from $6.926 million at June 30, 2025 to $7.040 million at June 30, 2026, and accrued interest receivable of $59,000, or 3.2%, from $1.836 million at June 30, 2025 to $1.895 million at June 30, 2026, partially offset by decreases in premises and equipment of $1.093 million, or 6.3%, from $17.266 million at June 30, 2025 to $16.173 million at June 30, 2026, real estate owned of $357,000, or 36.8%, from $970,000 at June 30, 2025 to $613,000 at June 30, 2026, core deposit intangible of $240,000, or 26.2%, from $915,000 at June 30, 2025 to $675,000 at June 30, 2026, and deferred tax asset of $105,000, or 9.0%, from $1.163 million at June 30, 2025 to $1.058 million at June 30, 2026.

Previous wording

Loans receivable, net decreased $9.9 million, or 2.1%, from $470.9 million at June 30, 2024 to $461.0 million at June 30, 2025. In recent periods we diversified the loan products we offer and increased our efforts to originate higher yielding commercial real estate loans and lines of credit and commercial business loans which were deemed attractive due to their generally higher yields and shorter anticipated lives compared to single-family residential mortgage loans. As of June 30, 2025, Home Federal Bank had $138.9 million of commercial real estate loans, 29.8% of the total loan portfolio, and $54.1 million of commercial business loans, 11.6% of the total loan portfolio. Although commercial loans are generally considered to have greater credit risk than other certain types of loans, we attempt to mitigate such risk by originating such loans in our market area to known borrowers.

Current wording

Loans receivable, net increased $14.487 million, or 3.1%, from $461.004 million at June 30, 2025 to $475.491 million at June 30, 2026. In recent periods we diversified the loan products we offer and increased our efforts to originate higher yielding commercial real estate loans and lines of credit and commercial business loans which were deemed attractive due to their generally higher yields and shorter anticipated lives compared to single-family residential mortgage loans. As of June 30, 2026, Home Federal Bank had $141.002 million of commercial real estate loans, 29.3% of the total loan portfolio, and $58.866 million of commercial business loans, 12.3% of the total loan portfolio. Although commercial loans are generally considered to have greater credit risk than other certain types of loans, we attempt to mitigate such risk by originating such loans in our market area to known borrowers.

Previous wording

Securities available-for-sale increased $7.2 million, or 26.7%, from $27.0 million at June 30, 2024 to $34.2 million at June 30, 2025. This increase resulted primarily from purchases of $12.7 million in securities, partially offset by principal repayments of $5.9 million. Securities held-to-maturity decreased $6.0 million, or 8.9%, from $67.3 million at June 30, 2024 to $61.3 million at June 30, 2025. This decrease was primarily due to principal repayments of $6.0 million.

Current wording

Securities available-for-sale increased $9.378 million, or 27.4%, from $34.246 million at June 30, 2025 to $43.624 million at June 30, 2026. This increase resulted primarily from purchases of $15.169 million in securities, partially offset by principal repayments of $6.292 million. Securities held-to-maturity decreased $5.895 million, or 9.6%, from $61.334 million at June 30, 2025 to $55.439 million at June 30, 2026. This decrease was primarily due to principal repayments of $5.865 million.

Previous wording

Stockholders’ equity increased $2.4 million, or 4.5%, from $52.8 million at June 30, 2024 to $55.2 million at June 30, 2025. The increase in stockholders’ equity was comprised of net income for the year ended June 30, 2025 of $3.9 million, a decrease in the Company’s accumulated other comprehensive loss of $681,000, the vesting of restricted stock awards, stock options, and the release of employee stock ownership plan shares totaling $424,000, and proceeds from the issuance of common stock from the exercise of stock options of $111,000, partially offset by dividends paid totaling $1.6 million, and stock repurchases of $1.1 million.

Current wording

Stockholders’ equity increased $3.552 million, or 6.4%, from $55.205 million at June 30, 2025 to $58.757 million at June 30, 2026. The increase in stockholders’ equity resulted from net income for the year ended June 30, 2026 of $6.174 million, proceeds from the issuance of common stock from the exercise of stock options of $1.838 million, a decrease in the Company’s accumulated other comprehensive loss of $72,000, and the vesting of restricted stock awards, stock options, and the release of employee stock ownership plan shares totaling $464,000, partially offset by stock repurchases of $3.333 million and dividends paid totaling $1.663 million.

Previous wording

General. The increase in net income for the year ended June 30, 2025, as compared to the year ended June 30, 2024, resulted primarily from an increase of $421,000, or 26.6%, in non-interest income, a decrease of $278,000, or 1.7%, in non-interest expense, and an increase of $166,000 in the recovery of credit losses, partially offset by an increase of $290,000, or 60.9%, in the provision for income taxes and a decrease of $280,000, or 1.5%, in net interest income. The decrease in net interest income for the year ended June 30, 2025, as compared to the year ended June 30, 2024, was primarily due to a decrease of $1.4 million, or 4.4%, in total interest income, partially offset by a decrease of $1.1 million, or 8.7%, in total interest expense. The Company’s average interest rate spread was 2.55% for the year ended June 30, 2025, compared to 2.38% for the year ended June 30, 2024. The Company’s net interest margin was 3.23% for the year ended June 30, 2025, compared to 3.08% for the year ended June 30, 2024.

Current wording

General. The increase in net income for the year ended June 30, 2026, as compared to the same period in 2025 resulted primarily from an increase of $3.118 million, or 16.7%, in net interest income, an increase of $667,000, or 33.3%, in non-interest income, and a decrease of $66,000, or 0.4%, in non-interest expense, partially offset by an increase of $845,000, or 110.3%, in provision for income taxes and an increase of $720,000, or 571.4%, in the provision for credit losses. The increase in net interest income for the year ended June 30, 2026, as compared to the same period in 2025, was primarily due to an increase of $2.036 million, or 6.7%, in total interest income, and a decrease of $1.082 million, or 9.2%, in total interest expense. The Company’s average interest rate spread was 3.07% for the year ended June 30, 2026, compared to 2.55% for the year ended June 30, 2025. The Company’s net interest margin was 3.72% for the year ended June 30, 2026, compared to 3.23% for the year ended June 30, 2025. The increase in the provision for credit losses was primarily attributable to growth in the loan portfolio and additional reserve allocations on certain existing problem loans based on updated valuation reports.

Previous wording

Net Interest Income. Net interest income amounted to $18.7 million for fiscal year 2025, a decrease of $280,000, or 1.5%, compared to $19.0 million for fiscal year 2024. The decrease primarily resulted from a decrease in total interest income of $1.4 million, partially offset by a decrease in total interest expense of $1.1 million.

Current wording

Net Interest Income. Net interest income amounted to $21.789 million for fiscal year 2026, an increase of $3.118 million, or 16.7%, compared to $18.671 million for fiscal year 2025. The increase primarily resulted from an increase in total interest income of $2.036 million and a decrease in total interest expense of $1.082 million.

Previous wording

The average interest rate spread increased from 2.38% for fiscal 2024 to 2.55% for fiscal 2025, while the average balance of interest-earning assets decreased from $614.3 million to $577.2 million during the same periods. The percentage of average interest-earning assets to average interest-bearing liabilities increased to 133.86% for fiscal 2025 compared to 133.54% for fiscal 2024. The average rate paid on certificates of deposit decreased from 4.15% for fiscal 2024 to 3.92% for fiscal 2025. Net interest margin increased to 3.23% for fiscal 2025 compared to 3.08% for fiscal 2024.

Current wording

The average interest rate spread increased from 2.55% for fiscal 2025 to 3.07% for fiscal 2026, while the average balance of interest-earning assets increased from $577.181 million to $586.399 million during the same periods. The percentage of average interest-earning assets to average interest-bearing liabilities increased to 135.13% for fiscal 2026 compared to 133.86% for fiscal 2025. The average rate paid on certificates of deposit decreased from 3.92% for fiscal 2025 to 3.40% for fiscal 2026. Net interest margin increased to 3.72% for fiscal 2026 compared to 3.23% for fiscal 2025.

Previous wording

Interest income decreased $1.4 million, or 4.4%, to $30.5 million for fiscal 2025 compared to $31.9 million for fiscal 2024, primarily due to a decrease in interest income from loans of $1.7 million, and a decrease of $326,000 in interest income from investment securities. The average yield of the loan portfolio increased by 13 basis points during fiscal 2025 mainly due to a higher interest rate environment.

Current wording

Interest income increased $2.036 million, or 6.7%, to $32.498 million for fiscal 2026 compared to $30.462 million for fiscal 2025, primarily due to an increase in interest income from loans of $2.164 million, and an increase of $325,000 in interest income from mortgage-backed securities. The average yield of the loan portfolio increased by 31 basis points during fiscal 2026 mainly due to a higher interest rate environment.

Previous wording

Interest expense decreased $1.1 million, or 8.7%, to $11.8 million for fiscal 2025 compared to $12.9 million for fiscal 2024, primarily as a result of decreases in the average rate paid on money market accounts and certificates of deposit.

Current wording

Interest expense decreased $1.082 million, or 9.2%, to $10.709 million for fiscal 2026 compared to $11.791 million for fiscal 2025, primarily as a result of decreases in the average rate paid on money market accounts and certificates of deposit.

Previous wording

Provision for Credit Losses. As of June 30, 2025, the allowance for credit losses was $4.5 million, and the ratio of allowance for credit losses to gross loans was 0.96%. As of June 30, 2024, the allowance for credit losses was $4.6 million, and the ratio of allowance for credit losses to gross loans was 0.96%.

Current wording

Provision for Credit Losses. As of June 30, 2026, the allowance for credit losses was $4.926 million, and the ratio of allowance for credit losses to gross loans was 1.03%. As of June 30, 2025, the allowance for credit losses was $4.484 million, and the ratio of allowance for credit losses to gross loans was 0.96%.

Previous wording

At June 30, 2025, the Company had $3.3 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 $1.9 million of non-performing assets at June 30, 2024, consisting of six one-to-four family residential loans, two home equity loans, three commercial non-real estate loans, two commercial real-estate loans, and one single-family residence in other real estate owned at June 30, 2025, compared to five one-to-four family residential loans, four home equity loans, three commercial non-real estate loans, and three single-family residences in other real estate owned at June 30, 2024. At June 30, 2025 the Company had eight one-to-four family residential loans, two home equity loans, five commercial non-real-estate loans, two commercial real-estate loans, and one consumer loan classified as substandard, compared to six one-to-four family residential loans, five commercial non-real-estate loans, four home equity loans and one consumer loan classified as substandard at June 30, 2024. There were no loans classified as doubtful at June 30, 2025 or June 30, 2024.

Current wording

At June 30, 2026, the Company had $3.649 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 $3.305 million of non-performing assets at June 30, 2025, consisting of sixteen one-to-four family residential loans, two home equity loans, one commercial non-real estate loan, one commercial real estate loan, one commercial real estate property in other real estate owned, and two residential lots in other real estate owned at June 30, 2026, compared to six one-to-four family residential loans, two home equity loans, three commercial non-real estate loans, two commercial real estate loans and one single-family residence in other real estate owned at June 30, 2025. At June 30, 2026 the Company had sixteen one-to-four family residential loans, two home equity loans, one commercial non-real estate loan, one consumer loan, and one commercial real estate loan classified as substandard, compared to eight one-to-four family residential loans, five commercial non-real estate loans, two home equity loans, two commercial real estate loans and one consumer loan classified as substandard at June 30, 2025. There were no loans classified as doubtful at June 30, 2026, or June 30, 2025.

Previous wording

Non-Interest Income. The $421,000 increase in non-interest income for the year ended June 30, 2025 compared to the prior year was primarily due to a decrease of $150,000 in loss on sale of real estate, an increase of $134,000 in other non-interest income, an increase of $119,000 in gain on sale of loans, an increase of $44,000 in service charges on deposit accounts, and an increase of $6,000 in income from bank owned life insurance, partially offset by an increase of $32,000 in loss on sale of securities.

Current wording

Non-Interest Income. The $667,000 increase in non-interest income for the year ended June 30, 2026, compared to the same period in 2025, resulted from an increase of $258,000 in gain on sale of loans, a decrease of $247,000 in loss on sale of real estate, an increase of $144,000 in service charges on deposit accounts, an increase of $14,000 in other non-interest income, and a decrease of $6,000 in loss on sale of securities, partially offset by a decrease of $2,000 in income on bank owned life insurance.

Previous wording

Non-Interest Expense. The $278,000 decrease in non-interest expense for the year ended June 30, 2025, compared to the year ended June 30, 2024, is primarily attributable to decreases of $584,000 in compensation and benefits expense, $217,000 in franchise and bank shares tax expense, $215,000 in advertising expense, $68,000 in other non-interest expense, $62,000 in professional fees, $49,000 in amortization of core deposit intangible expense, $46,000 in deposit insurance premium expense, and $21,000 in loan and collection expense. The decreases were partially offset by increases of $784,000 in data processing expense, $152,000 in occupancy and equipment expense, and $48,000 in audit and examination fees. The increase in data processing expense resulted from a billing discrepancy with our core processor, which had failed to issue invoices for certain services dating back to December 2022. Upon discovery of the issue, we negotiated a discounted settlement to resolve the outstanding invoices, which resulted in the increase for the year ended June 30, 2025.

Current wording

Non-Interest Expense. The $66,000 decrease in non-interest expense for the year ended June 30, 2026, compared to the same period in 2025, resulted from decreases of $186,000 in audit and examination fees, $89,000 in compensation and benefits, $89,000 in data processing, $44,000 in amortization of core deposit intangible, $22,000 in advertising, $18,000 in professional fees, and $10,000 in franchise and bank shares tax, partially offset by increases of $200,000 in other real estate owned write-down expense, $105,000 in other expenses, $33,000 in deposit insurance premium, $30,000 in occupancy and equipment, and $24,000 in loan and collection. The $200,000 increase in other real estate owned write-down expense for the three months and year ended June 30, 2026, compared to the same period in 2025, related to the value of one large commercial property which was adjusted to reflect current market sentiment. No further adjustments are expected at this time.

Previous wording

Provision for Income Tax Expense. The provision for income taxes amounted to $766,000 and $476,000 for the fiscal years ended June 30, 2025 and 2024, respectively. Our effective tax rate was 16.5% for fiscal 2025 and 11.7% for fiscal 2024.

Current wording

Provision for Income Tax Expense. The provision for income taxes amounted to $1.611 million and $766,000 for the fiscal years ended June 30, 2026 and 2025, respectively. Our effective tax rate was 20.7% for fiscal 2026 and 16.5% for fiscal 2025.

Previous wording

We have maintained a significant portfolio of available-for-sale securities during the past few years in order to better position the Company for a rising interest rate environment in the long term. At June 30, 2025 and 2024, securities available-for-sale amounted to $34.2 million and $27.0 million, respectively, or 5.62% and 4.24%, respectively, of total assets at such dates.

Current wording

We have maintained a significant portfolio of available-for-sale securities during the past few years in order to better position the Company for a rising interest rate environment in the long term. At June 30, 2026 and 2025, securities available-for-sale amounted to $43.624 million and $34.246 million, respectively, or 6.78% and 5.62%, respectively, of total assets at such dates.

Previous wording

Qualitative Analysis. Our ability to maintain a positive “spread” between the interest earned on assets and the interest paid on deposits and borrowings is affected by changes in interest rates. Our fixed-rate loans generally are profitable, if interest rates are stable or declining since these loans have yields that exceed our cost of funds. If interest rates increase, however, we would have to pay more on our deposits and new borrowings, which would adversely affect our interest rate spread. In order to counter the potential effects of dramatic increases in market rates of interest, we have underwritten our mortgage loans to allow for their sale in the secondary market. Total loan originations amounted to $156.4 million for fiscal 2025 and $210.0 million for fiscal 2024, while loans sold amounted to $18.3 million and $16.0 million during the same respective periods. We have invested excess funds from loan payments and prepayments and loan sales in investment securities classified as available-for-sale. As a result, Home Federal Bancorp is not as susceptible to rising interest rates as it would be if its interest-earning assets were primarily comprised of long-term fixed rate mortgage loans. With respect to its floating or adjustable rate loans, Home Federal Bancorp writes interest rate floors and caps into such loan documents. Interest rate floors limit our interest rate risk by limiting potential decreases in the interest yield on an adjustable rate loan to a certain level. As a result, we receive a minimum yield even if rates decline farther, and the interest rate on the particular loan would otherwise adjust to a lower amount. Conversely, interest rate ceilings limit the amount by which the yield on an adjustable rate loan may increase to no more than six percentage points over the rate at the time of origination. Finally, we intend to place a greater emphasis on shorter-term consumer loans and commercial business loans in the future.

Current wording

Qualitative Analysis. Our ability to maintain a positive “spread” between the interest earned on assets and the interest paid on deposits and borrowings is affected by changes in interest rates. Our fixed-rate loans generally are profitable, if interest rates are stable or declining since these loans have yields that exceed our cost of funds. If interest rates increase, however, we would have to pay more on our deposits and new borrowings, which would adversely affect our interest rate spread. In order to counter the potential effects of dramatic increases in market rates of interest, we have underwritten our mortgage loans to allow for their sale in the secondary market. Total loan originations amounted to $193.386 million for fiscal 2026 and $156.430 million for fiscal 2025, while loans sold amounted to $30.046 million and $18.312 million during the same respective periods. We have invested excess funds from loan payments and prepayments and loan sales in investment securities classified as available-for-sale. As a result, Home Federal Bancorp is not as susceptible to rising interest rates as it would be if its interest-earning assets were primarily comprised of long-term fixed rate mortgage loans. With respect to its floating or adjustable rate loans, Home Federal Bancorp writes interest rate floors and caps into such loan documents. Interest rate floors limit our interest rate risk by limiting potential decreases in the interest yield on an adjustable rate loan to a certain level. As a result, we receive a minimum yield even if rates decline farther, and the interest rate on the particular loan would otherwise adjust to a lower amount. Conversely, interest rate ceilings limit the amount by which the yield on an adjustable rate loan may increase to no more than six percentage points over the rate at the time of origination. Finally, we intend to place a greater emphasis on shorter-term consumer loans and commercial business loans in the future.

Previous wording

Home Federal Bancorp maintains levels of liquid assets deemed adequate by management. Our liquidity ratio averaged 19.6% for the quarter ended June 30, 2025. We adjust our liquidity levels to fund deposit outflows, repay our borrowings, and to fund loan commitments. We also adjust liquidity, as appropriate, to meet asset and liability management objectives.

Current wording

Home Federal Bancorp maintains levels of liquid assets deemed adequate by management. Our liquidity ratio averaged 22.6% for the quarter ended June 30, 2026. We adjust our liquidity levels to fund deposit outflows, repay our borrowings, and to fund loan commitments. We also adjust liquidity, as appropriate, to meet asset and liability management objectives.

Previous wording

Our 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. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning accounts and other assets, which provide liquidity to meet lending requirements. Our deposit accounts with the Federal Home Loan Bank of Dallas amounted to $9.1 million and $185,000 at June 30, 2025 and 2024, respectively.

Current wording

Our 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. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning accounts and other assets, which provide liquidity to meet lending requirements. Our deposit accounts with the Federal Home Loan Bank of Dallas amounted to $25.394 million and $9.124 million at June 30, 2026 and 2025, respectively.

Previous wording

A significant portion of our liquidity consists of securities classified as available-for-sale and cash and cash equivalents. Our primary sources of cash are net income, principal repayments on loans and mortgage-backed securities, and increases in deposit accounts. If we require funds beyond our ability to generate them internally, we have borrowing agreements with the Federal Home Loan Bank of Dallas, which provide an additional source of funds. At June 30, 2025, we had no advances from the Federal Home Loan Bank of Dallas and had $56.4 million in additional borrowing capacity. Additionally, at June 30, 2025, 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 $20.4 million. There were no amounts purchased under this agreement as of June 30, 2025. At June 30, 2025, Home Federal Bancorp had a $4.0 million outstanding loan with First National Bankers Bank, which matures on February 5, 2034.

Current wording

A significant portion of our liquidity consists of securities classified as available-for-sale and cash and cash equivalents. Our primary sources of cash are net income, principal repayments on loans and mortgage-backed securities, and increases in deposit accounts. If we require funds beyond our ability to generate them internally, we have borrowing agreements with the Federal Home Loan Bank of Dallas, which provide an additional source of funds. At June 30, 2026, we had no advances from the Federal Home Loan Bank of Dallas and had $136.376 million in additional borrowing capacity. Additionally, at June 30, 2026, 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 $19.9 million. There were no amounts purchased under this agreement as of June 30, 2026. At June 30, 2026, Home Federal Bancorp had a $3.556 million outstanding loan with First National Bankers Bank, which matures on February 5, 2034.

Previous wording

At June 30, 2025, the Company had outstanding loan commitments of $50.5 million to originate loans and commitments under unused lines of credit of $13.1 million. At June 30, 2025, certificates of deposit scheduled to mature in one year or less totaled $172.6 million, or 92.14% of total certificates of deposit. 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. We intend to utilize our high levels of liquidity to fund our lending activities. If additional funds are required to fund lending activities, we intend to sell our securities classified as available-for-sale, as needed.

Current wording

At June 30, 2026, the Company had outstanding loan commitments of $55.880 million to originate loans and commitments under unused lines of credit of $14.911 million. At June 30, 2026, certificates of deposit scheduled to mature in one year or less totaled $174.383 million, or 78.51% of total certificates of deposit. 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. We intend to utilize our high levels of liquidity to fund our lending activities. If additional funds are required to fund lending activities, we intend to sell our securities classified as available-for-sale, as needed.

Previous wording

At June 30, 2025, Home Federal Bank exceeded each of its capital requirements with common equity tier 1, tier 1 capital, total capital, leverage, and tangible capital ratios of 13.59%, 13.59%, 14.67%, 9.40%, and 9.40%, respectively.

Current wording

At June 30, 2026, Home Federal Bank exceeded each of its capital requirements with common equity tier 1, tier 1 capital, total capital, leverage, and tangible capital ratios of 13.11%, 13.11%, 14.20%, 9.29%, and 9.29%, respectively.