**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-QSB**

**(Mark One)**

**x**                              QUARTERLYREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**For the quarterly period ended December 31, 2004**

**OR**

**o**                                 TRANSITIONREPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

**For the transition period from                   to                   **

**Commission File Number***: *000-51117

**HOME FEDERAL BANCORP, INC. OF LOUISIANA**

(Exact name of smallbusiness issuer as specified in its charter)

| **Federal**                                                      | **86-1127166**                     |
|------------------------------------------------------------------|------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) | (IRS Employer  Identification No.) |

 

**624 Market Street,Shreveport, Louisiana 71101**

(Address of principalexecutive offices)

**(318) 222-1145**

(Issuer’s telephonenumber)

(Former name, formeraddress and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes  x   No  o

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the ExchangeAct)  Yes  o  No  x

Shares of common stock, par value $.01 per share,outstanding as of February 11, 2005: The registrant had 3,558,958 sharesof common stock outstanding, of which 2,135,375 shares were held by HomeFederal Mutual Holding Company of Louisiana, the registrant’s mutual holdingcompany, and 1,423,583 shares were held by the public and directors, officersand employees of the registrant.

Transitional Small Business Disclosure Format:  Yes  o  No  x

 

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**INDEX**
|                                         | ** **                                 | ** **                                                                      | ** ** | **Page** | ** ** |
|-----------------------------------------|--------------------------------------------|---------------------------------------------------------------------------------|------------|----------|------------|
| PART I—FINANCIAL  INFORMATION |                                       |                                                                            |       |
| Item 1:                                 |                                       | Financial  Statements (Unaudited)(1)                                            |       |     |       |
|                                    |                                       | Consolidated Statements of  Financial Condition                                 |       | 1        |       |
|                                    |                                       | Consolidated Statements of Income                                               |       | 2        |       |
|                                    |                                       | Consolidated Statements of Changes in Equity                                    |       | 3        |       |
|                                    |                                       | Consolidated Statements of Cash Flows                                           |       | 4        |       |
|                                    |                                       | Notes to Consolidated Financial Statements                                      |       | 5        |       |
| Item 2:                                 |                                       | Management’s Discussion and Analysis or Plan of Operation                  |       | 9        |       |
| Item 3:                                 |                                       | Controls and Procedures                                                         |       | 13       |       |
| PART II—OTHER INFORMATION     |
| Item 1:                                 |                                       | Legal  Proceedings                                                              |       | 14       |       |
| Item 2:                                 |                                       | Changes in  Securities and Small Business Issuer Purchases of Equity Securities |       | 14       |       |
| Item 3:                                 |         | Default  upon Senior Securities                                                 |       | 14       |       |
| Item 4:                                 |                                       | Submission  of Matters to a Vote of Security Holders                            |       | 14       |       |
| Item 5:                                 |                                       | Other  information                                                              |       | 14       |       |
| Item 6:                                 |                                       | Exhibits                                                                        |       | 14       |       |
| **SIGNATURES**                          |                                       |                                                                            |       |
|                                         |                                            |                                                                                 |            |          |            |  |  |

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(1)          OnJanuary 18, 2005, Home Federal Savings and Loan Association (the “Association”)completed its reorganization into the mutual holding company form oforganization and formed Home Federal Bancorp, Inc. of Louisiana (the “Company”)to serve as the stock holding company for the Association. In connection withthe reorganization, the Company sold 1,423,583 shares of its common stock in asubscription and community offering at a price of $10.00 per share. Thefinancial statements set forth herein reflect the financial condition andoperations of the Association prior to the completion of the reorganization. Asof December 31, 2004, the Company had not issued any stock, had no assetsor liabilities, and had not conducted any business other than that of anorganizational nature. For a further discussion of the Company’s formation andoperations, see the Company’s Registration Statement on Form SB-2,as amended, and declared effective on November 12, 2004 (File Number 333-119026).Based upon the foregoing, the unaudited interim financial statements filed as apart of this quarterly report are those of the Association.

 

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**HOME FEDERALSAVINGS AND LOAN ASSOCIATION AND SUBSIDIARYCONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**
| ** **                                        | ** ** | **December 31,  2004** | ** **  | **June 30,  2004** | ** ** |
|---------------------------------------------------|------------|-----------------------------|-------------|-------------------------|------------|
| ** **                                        | ** ** | **(Unaudited)**             | ** **  | **(Audited)**           | ** ** |
| **ASSETS**                                        |       |                        |        |                    |       |
| Cash and Cash  Equivalents                        |       | $                           | 17,022,579  |                    | $          | 4,342,125 |   |
| Securities  Available-for-Sale                    |       | 67,556,495                  |        | 64,253,764              |       |
| Securities  Held-to-Maturity                      |       | 1,764,932                   |        | 2,515,557               |       |
| Loans  Held-for-Sale                              |       | —                      |        | 107,500                 |       |
| Loans Receivable,  Net                            |       | 22,199,198                  |        | 22,678,740              |       |
| Accrued Interest  Receivable                      |       | 391,044                     |        | 405,812                 |       |
| Premises and  Equipment, Net                      |       | 492,122                     |        | 467,783                 |       |
| Deferred Tax  Asset                               |       | 27,883                      |        | 832,752                 |       |
| Other Assets                                      |       | 390,657                     |        | 58,555                  |       |
| Total Assets                                      |       | $                           | 109,844,910 |                    | $          | 95,662,588 |   |
| **LIABILITIES AND EQUITY**                        |       |                        |        |                    |       |
| **LIABILITIES**                                   |       |                        |        |                    |       |
| Deposits                                          |       | $                           | 69,071,054  |                    | $          | 68,133,506 |   |
| Advances from Borrowers for Taxes and Insurance   |       | 26,232                      |        | 232,947                 |       |
| Advances from Federal Home Loan Bank of Dallas    |       | 8,496,311                   |        | 9,748,316               |       |
| Stock Subscription Escrow                         |       | 12,947,055                  |        | ––            |       |
| Other Accrued Expenses and Liabilities            |       | 165,414                     |        | 238,666                 |       |
| Total Liabilities                                 |       | 90,706,066                  |        | 78,353,435              |       |
| **COMMITMENTS**                                   |       |                        |        |                    |       |
| **EQUITY**                                        |       |                        |        |                    |       |
| Retained Earnings––Partially Restricted |       | 19,244,837                  |        | 18,977,541              |       |
| Accumulated Other Comprehensive Loss              |       | (105,993                    | )           | (1,668,388              | )          |
| Total Equity                                      |       | 19,138,844                  |        | 17,309,153              |       |
| Total Liabilities  and Equity                     |       | $                           | 109,844,910 |                    | $          | 95,662,588 |   |

 

See accompanying notes to consolidated financial statements.

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**HOME FEDERAL SAVINGS AND LOAN ASSOCIATION ANDSUBSIDIARYCONSOLIDATED STATEMENTS OF INCOME(Unaudited)**
| ** **                                          | ** ** | **Three Months Ended  December 31,** | ** ** | **Six Months Ended  December 31,** | ** ** |
|-----------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                          | ** ** | **2004**                                            | ** ** | **2003**                                          | ** ** | **2004** | ** ** | **2003** | ** ** |
| **INTEREST INCOME**                                 |       |                                                |       |                                              |       |   |   |   |   |
| Loans, Including Fees                               |       | $                                                   | 383,304    |                                              | $          | 505,366 |   | $ | 764,423 |   | $ | 1,104,474 |   |
| Investment Securities                               |       | 26,647                                              |       | 18,234                                            |       | 47,095 |   | 38,381 |   |
| Mortgage-Backed Securities                          |       | 786,259                                             |       | 770,750                                           |       | 1,567,662 |   | 1,546,291 |   |
| Other Interest-Earning Assets                       |       | 20,359                                              |       | 12,707                                            |       | 30,728 |   | 28,305 |   |
| Total Interest Income                               |       | 1,216,569                                           |       | 1,307,057                                         |       | 2,409,908 |   | 2,717,451 |   |
| **INTEREST  EXPENSE**                               |       |                                                |       |                                              |       |   |   |   |   |
| Deposits                                            |       | 444,729                                             |       | 474,562                                           |       | 884,488 |   | 972,785 |   |
| Federal Home Loan Bank Borrowings                   |       | 67,845                                              |       | 74,623                                            |       | 137,548 |   | 149,194 |   |
| Total Interest Expense                              |       | 512,574                                             |       | 549,185                                           |       | 1,022,036 |   | 1,121,979 |   |
| Net Interest Income                                 |       | 703,995                                             |       | 757,872                                           |       | 1,387,872 |   | 1,595,472 |   |
| **PROVISION FOR LOAN LOSSES**                       |       | —                                              |       | —                                            |       | — |   | — |   |
| Net Interest Income after Provision for Loan Losses |       | 703,995                                             |       | 757,872                                           |       | 1,387,872 |   | 1,595,472 |   |
| **NON-INTEREST  INCOME**                            |       |                                                |       |                                              |       |   |   |   |   |
| Gain on Sale of Loans                               |       | 4,915                                               |       | 3,384                                             |       | 9,253 |   | 40,159 |   |
| Gain on Sale of Investments                         |       | —                                              |       | 89,884                                            |       | — |   | 89,884 |   |
| Other Income                                        |       | 6,942                                               |       | 9,392                                             |       | 13,386 |   | 18,956 |   |
| Total Non-Interest Income                           |       | 11,857                                              |       | 102,660                                           |       | 22,639 |   | 148,999 |   |
| **NON-INTEREST  EXPENSE**                           |       |                                                |       |                                              |       |   |   |   |   |
| Compensation and Benefits                           |       | 335,605                                             |       | 365,552                                           |       | 666,448 |   | 741,634 |   |
| Occupancy and Equipment                             |       | 45,752                                              |       | 41,365                                            |       | 88,603 |   | 85,517 |   |
| Data Processing                                     |       | 16,709                                              |       | 27,444                                            |       | 33,200 |   | 60,193 |   |
| Deposit Insurance Premiums                          |       | 2,470                                               |       | 2,693                                             |       | 4,999 |   | 5,576 |   |
| Other Expense                                       |       | 119,892                                             |       | 60,370                                            |       | 212,910 |   | 151,454 |   |
| Total Non-Interest Expense                          |       | 520,427                                             |       | 497,424                                           |       | 1,006,159 |   | 1,044,374 |   |
| Income Before Income Taxes                          |       | 195,425                                             |       | 363,108                                           |       | 404,352 |   | 700,097 |   |
| **PROVISION FOR INCOME TAX EXPENSE**                |       | 66,251                                              |       | 121,230                                           |       | 137,056 |   | 233,011 |   |
| Net Income                                          |       | $                                                   | 129,174    |                                              | $          | 241,878 |   | $ | 267,296 |   | $ | 467,086 |   |

 

See accompanying notes to consolidated financial statements.

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**HOME FEDERALSAVINGS AND LOAN ASSOCIATION AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYSIX MONTHS ENDED DECEMBER 31, 2004 AND 2003**
| ** **                                                                                                              | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income (Loss)** | ** ** | **Total  Equity** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------------------------------------------|------------|-------------------|------------|
| **BALANCE—JUNE  30, 2003**                                                                                         |       | $                      | 18,156,800 |                                                      |       | $                 | 992,350    |   |   | $ | 19,149,150 |   |
| Comprehensive  Income                                                                                                   |       |                   |       |                                                      |       |              |       |   |   |
| Net Income                                                                                                              |       | 467,086                |       |                                                      | —     |              |       | 467,086 |   |
| Other  Comprehensive Income                                                                                             |       |                   |       |                                                      |       |              |       |   |   |
| Changes in Unrealized Gain (Loss) on Securities  Available-for-Sale, Net of Reclassification Adjustment and Tax Effects |       | —                 |       |                                                      | (827,101   | )                 |       | (827,101 | ) |
| Total Comprehensive Income                                                                                              |       | —                 |       |                                                      | —     |              |       | (360,015 | ) |
| **BALANCE—DECEMBER 31, 2003**                                                                                      |       | $                      | 18,623,886 |                                                      |       | $                 | 165,249    |   |   | $ | 18,789,135 |   |
| **BALANCE—JUNE 30, 2004**                                                                                          |       | $                      | 18,977,541 |                                                      |       | $                 | (1,668,388 | ) |   | $ | 17,309,153 |   |
| Comprehensive  Income                                                                                                   |       |                   |       |                                                      |       |              |       |   |   |
| Net Income                                                                                                              |       | 267,296                |       |                                                      | —     |              |       | 267,296 |   |
| Other  Comprehensive Income                                                                                             |       |                   |       |                                                      |       |              |       |   |   |
| Changes in Unrealized Gain (Loss) on Securities  Available-for-Sale, Net of Reclassification Adjustment and Tax Effects |       | —                 |       |                                                      | 1,562,395  |              |       | 1,562,395 |   |
| Total Comprehensive Income                                                                                              |       | —                 |       |                                                      | —     |              |       | 1,829,691 |   |
| **BALANCE—DECEMBER  31, 2004**                                                                                     |       | $                      | 19,244,837 |                                                      |       | $                 | (105,993   | ) |   | $ | 19,138,844 |   |

 

See accompanying notes to consolidated financial statements.

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**HOME FEDERALSAVINGS AND LOAN ASSOCIATION AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)**
| ** **                                                                        | ** ** | **Six Months Ended  December 31,** | ** ** |
|-----------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                        | ** ** | **2004**                                          | ** ** | **2003** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES**                                          |       |                                              |       |   |   |
| Net Income                                                                        |       | $                                                 | 267,296    |   | $ | 467,086 |   |
| Adjustments to Reconcile Net Income to Net Cash  Provided by Operating Activities |       |                                              |       |   |   |
| Net Amortization  and Accretion on Securities                                     |       | 36,658                                            |       | (5,434 | ) |
| Gain on Sale of  Investments                                                      |       | —                                            |       | (89,884 | ) |
| Amortization of  Deferred Loan Fees                                               |       | (24,163                                           | )          | (72,174 | ) |
| Depreciation of  Premises and Equipment                                           |       | 25,370                                            |       | 22,694 |   |
| Changes in Assets and  Liabilities                                                |       |                                              |       |   |   |
| Loans  Held-for-Sale                                                              |       | 107,500                                           |       | 1,147,800 |   |
| Accrued Interest  Receivable                                                      |       | 14,768                                            |       | 16,421 |   |
| Other Operating  Assets                                                           |       | (9,162                                            | )          | 15,636 |   |
| Other Operating  Liabilities                                                      |       | (73,252                                           | )          | (78,366 | ) |
| Net Cash Provided  by Operating Activities                                        |       | 345,015                                           |       | 1,423,779 |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES**                                          |       |                                              |       |   |   |
| Loan Originations and  Purchases, Net of Principal Collections                    |       | 498,755                                           |       | 4,775,614 |   |
| Deferred Loan Fees  Collected                                                     |       | 4,950                                             |       | 20,399 |   |
| Acquisition of  Depreciable Assets                                                |       | (49,709                                           | )          | (10,890 | ) |
| Activity in Available-for-Sale Securities                                         |       |                                              |       |   |   |
| Proceeds from Sales and  Principal Payments on Mortgage-Backed Securities         |       | 904,743                                           |       | 8,202,000 |   |
| Purchases                                                                         |       | (1,877,000                                        | )          | (16,374,426 | ) |
| Activity in Held-to-Maturity Securities                                           |       |                                              |       |   |   |
| Proceeds from Redemption  or Maturity of Investments                              |       | 541,600                                           |       | 999,869 |   |
| Principal Payments on  Mortgage-Backed Securities                                 |       | 429,560                                           |       | — |   |
| Purchases                                                                         |       | (220,403                                          | )          | — |   |
| Net Cash Provided by  (Used in) Investing Activities                              |       | 232,496                                           |       | (2,387,434 | ) |
| **CASH FLOWS FROM FINANCING ACTIVITIES**                                          |       |                                              |       |   |   |
| Net Increase (Decrease)  in Deposits                                              |       | 937,548                                           |       | (1,733,546 | ) |
| Increase in Stock  Purchase Deposit Escrow Account                                |       | 12,947,055                                        |       | — |   |
| Payments for Costs  associated with Stock Conversion                              |       | (322,940                                          | )          | — |   |
| (Repayments)/Proceeds  from Advances from Federal Home Loan Bank, Net             |       | (1,252,005                                        | )          | 466,362 |   |
| Repayments on Other  Long-Term Debt                                               |       | —                                            |       | (20,414 | ) |
| Net Decrease in  Mortgage-Escrow Funds                                            |       | (206,715                                          | )          | (195,758 | ) |
| Net Cash Provided  by (Used in) Financing Activities                              |       | 12,102,943                                        |       | (1,483,356 | ) |
| **NET  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**                         |       | 12,680,454                                        |       | (2,447,011 | ) |
| **CASH AND  CASH EQUIVALENTS—BEGINNING OF PERIOD**                           |       | 4,342,125                                         |       | 9,470,593 |   |
| **CASH AND  CASH EQUIVALENTS—END OF PERIOD**                                 |       | $                                                 | 17,022,579 |   | $ | 7,023,582 |   |
| **SUPPLEMENTARY CASH FLOW INFORMATION**                                           |       |                                              |       |   |   |
| Interest Paid on Deposits  and Borrowed Funds                                     |       | $                                                 | 1,031,087  |   | $ | 1,133,207 |   |
| Income Taxes Paid                                                                 |       | 135,000                                           |       | 183,214 |   |
| Market Value Adjustment for Gain (Loss) on Securities  Available-for-Sale         |       | 2,367,263                                         |       | (1,253,182 | ) |

 

See accompanying notes to consolidated financial statements.

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**HOME FEDERAL SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**1.**   SUMMARYOF ACCOUNTING POLICIES

**Basis ofPresentation**

The accompanying unauditedfinancial statements were prepared in accordance with instructions for Form 10-QSBand Regulation S-X and do not include information or footnotes necessary for acomplete presentation of financial condition, results of operations, and cashflows in conformity with generally accepted accounting principles. However, inthe opinion of management, all adjustments (consisting of normal recurringadjustments) necessary for a fair presentation of the financial statements havebeen included. The results of operations for the six month period ended December 31,2004, is not necessarily indicative of the results which may be expected forthe entire fiscal year.

**Use of Estimates**

In preparing consolidatedfinancial statements in conformity with accounting principles generallyaccepted in the United States of America, management is required to makeestimates and assumptions that affect the reported amounts of assets andliabilities as of the date of the Consolidated Statements of FinancialCondition and reported amounts of revenues and expenses during the reportingperiod. Actual results could differ from those estimates. Material estimatesthat are particularly susceptible to significant change in the near term relateto the allowance for loan losses.

**Nature ofOperations**

OnJanuary 18, 2005, Home Federal Savings and Loan Association (the “Association”),completed its reorganization to the mutual holding company form of organizationand formed Home Federal Bancorp, Inc. of Louisiana (the “Company”) toserve as the stock holding company for the Association. As of December 31,2004, the Company had not issued any stock, had no assets or liabilities, andhad not conducted any business other than that of an organizational nature. TheAssociation is a federally chartered, stock savings and loan association and issubject to federal regulation by the Federal Deposit Insurance Corporation andthe Office of Thrift Supervision. Services are provided to its customers bythree offices, all of which are located in the City of Shreveport, Louisiana. Thearea served by the Association is primarily the Shreveport-Bossier Citymetropolitan area; however, loan and deposit customers are found dispersed in awider geographical area covering much of northwest Louisiana.

**Cash and CashEquivalents**

For purposes of theConsolidated Statements of Cash Flows, cash and cash equivalents include cashon hand, balances due from banks, and federal funds sold, all of which maturewithin ninety days.

**Securities**

The Association classifies its debt and equityinvestment securities into one of three categories:  held-to-maturity, available-for-sale, ortrading. Investments in nonmarketable equity securities and debt securities, inwhich the Association has the positive intent and ability to hold to maturity,are classified as held-to-maturity and carried at amortized cost. Investmentsin debt securities that are not classified as held-to-maturity and marketableequity securities that have readily determinable fair values are classified aseither trading or available-for-sale securities. Securities that are acquiredand held principally for the 

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**HOME FEDERAL SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

purpose of selling in thenear term are classified as trading securities. Investments in securities notclassified as trading or held-to-maturity are classified as available-for-sale.

Trading account andavailable-for-sale securities are carried at fair value. Unrealized holdinggains and losses on trading securities are included in earnings while netunrealized holding gains and losses on available-for-sale securities areexcluded from earnings and reported in other comprehensive income. Purchasepremiums and discounts are recognized in interest income using the interestmethod over the term of the securities. Declines in the fair value ofheld-to-maturity and available-for-sale securities below their cost that aredeemed to be other than temporary are reflected in earnings as realized losses.In estimating other-then-temporary impairment losses, management considers (1) thelength of time and the extent to which the fair value has been less than cost, (2) thefinancial condition and near-term prospects of the issuer, and (3) theintent and ability of the Association to retain its investment in the issuerfor a period of time sufficient to allow for any anticipated recovery in fairvalue. Gains and losses on the sale of securities are recorded on the tradedate and are determined using the specific identification method.

**Loans Held For Sale**

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

**Loans**

Loans receivable are statedat unpaid principal balances, less allowances for loan losses and unamortizeddeferred loan fees. Net nonrefundable fees (loan origination fees, commitmentfees, discount points) and costs associated with lending activities are beingdeferred and subsequently amortized into income as an adjustment of yield onthe related interest earning assets using the interest method. Interest incomeon contractual loans receivable is recognized on the accrual method. Unearneddiscount on property improvement and automobile loans is deferred and amortizedon the interest method over the life of the loan.

**Allowance For LoanLosses**

The allowance for loan losses is established as lossesare estimated to have occurred through a provision for loan losses charged toearnings. Loan losses are charged against the allowance when managementbelieves the uncollectibility of a loan balance is confirmed. Subsequentrecoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on aregular basis by management and is based upon management’s periodic review ofthe collectibility of the loans in light of historical experience, the natureand volume of the loan portfolio, adverse situations that may affect theborrower’s ability to repay, estimated value of the underlying collateral andprevailing economic conditions. The evaluation is inherently subjective as itrequires estimates that are susceptible to significant revision as moreinformation becomes available.

A loan is considered impaired when, based on currentinformation or events, it is probable that the Association will be unable tocollect the scheduled payments of principal and interest when due according tothe contractual terms of the loan agreement. When a loan is impaired, themeasurement of such 

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**HOME FEDERAL SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

impairment is based uponthe fair value of the collateral of the loan. If the fair value of thecollateral is less than the recorded investment in the loan, the Associationwill recognize the impairment by creating a valuation allowance with a correspondingcharge against earnings.

An allowance is alsoestablished for uncollectible interest on loans classified as substandard.Substandard loans are those, which are in excess of ninety days delinquent. Theallowance is established by a charge to interest income equal to all interestpreviously accrued and income is subsequently recognized only to the extentthat cash payments are received. When, in management’s judgment, the borrower’sability to make period interest and principal payments is back to normal, theloan is returned to accrual status.

**Off-Balance SheetCredit Related Financial Instruments**

In the ordinary course ofbusiness, the Association has entered into commitments to extend credit. Suchfinancial instruments are recorded when they are funded.

**Premises andEquipment**

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

**Income Taxes**

Deferred income tax assetsand liabilities are determined using the liability (or balance sheet) method. Underthis method, the net deferred tax asset or liability is determined based on thetax effects of the temporary differences between the book and tax bases of thevarious assets and liabilities and gives current recognition to changes in taxrates and laws.

**ComprehensiveIncome**

Accounting principlesgenerally require that recognized revenue, expenses, gains and losses beincluded in net income. Although certain changes in assets and liabilities,such as unrealized gains and losses on available-for-sale securities, arereported as a separate component of the equity section of the ConsolidatedStatements of Financial Condition, such items, along with net income, arecomponents of comprehensive income.

**2.   NET INCOMEPER COMMON SHARE**

Basic and diluted netincome per common share is not calculated since the Association was in theprocess of reorganizing to stock form at December 31, 2004.

**3.   CONVERSIONTO STOCK FORM OF OWNERSHIP**

On April 14, 2004, the Board of Directorsunanimously adopted the Plan of Reorganization and the Plan of Stock Issuance(together, the “Plan”). Pursuant to the Plan, on January 18, 2005, theAssociation converted to a stock savings and loan association as the successorto the Association in its mutual form and organized Home Federal Bancorp, Inc.of Louisiana (the “Company”) as a federally-chartered corporation that owns100% of the common stock of the Association. The Association organized HomeFederal Mutual Holding Company of Louisiana (the “Mutual Holding Company”) as afederally-chartered mutual 

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**HOME FEDERAL SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

holding company thatacquired 60% of the Common Stock of the Company. The Company sold 1,423,583shares of Common Stock in a subscription and community offering.

All depositors who had liquidation and other rightswith respect to the Association as of the effective date of the reorganizationcontinue to have such rights solely with respect to the Mutual Holding Companyso long as they continue to hold deposit accounts with the Association. Inaddition, all persons who become depositors of the Association subsequent tothe reorganization will have such liquidation and other rights with respect tothe Mutual Holding Company.

The shares of common stock sold in the public offeringrepresent a minority ownership of the estimated pro forma market value of theAssociation as determined by an independent appraisal. The Mutual HoldingCompany is the majority owner of the Stock Holding Company. Cost incurred inconnection with the offering will be recorded as a reduction of the proceedsfrom the offering. As of December 31, 2004, costs in the amount ofapproximately $323,000 were incurred in connection with the offering.

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**ITEM2**—MANAGEMENT’S DISCUSSION ANDANALYSIS OR PLAN OF OPERATION

**General**

The Company was formed bythe Association in connection with the Association’s reorganization and had notyet commenced operations as of December 31, 2004. The Company’s results ofoperations initially will be primarily dependent on the results of theAssociation, which became a wholly owned subsidiary upon completion of thereorganization. The Association’s results of operations depend, to a large extent,on net interest income, which is the difference between the income earned onits loan and investment portfolios and the cost of funds, consisting of theinterest paid on deposits and borrowings. Results of operations are alsoaffected by provisions for loan losses and loan sale activities. Non-interestexpense principally consists of compensation and employee benefits, officeoccupancy and equipment expense, data processing and other expense. Our resultsof operations are also significantly affected by general economic andcompetitive conditions, particularly changes in interest rates, governmentpolicies and actions of regulatory authorities. Future changes in applicablelaw, regulations or government policies may materially impact our financial conditionsand results of operations.

**Critical AccountingPolicies**

Home Federal Savings andLoan Association has identified the calculation of the allowance for loanlosses as a critical accounting policy, due to the higher degree of judgmentand complexity than its other significant accounting policies. Provisions forloan losses will continue to be based upon management’s periodic valuation andassessment of the overall loan portfolio and the underlying collateral, trendsin non-performing loans, current economic conditions and other relevant factorsin order to maintain the allowance for loan losses at a level believed bymanagement to be sufficient to absorb estimated, probable losses. Althoughmanagement uses the best information available, the level of the allowance forloan losses remains an estimate which is subject to significant judgment andshort-term change.

***Discussion of Financial Condition Changes from June 30,2004 to December 31, 2004***

At December 31, 2004, total assets amounted to$109.8 million compared to $95.7 million at June 30, 2004, an increase of$14.1 million or 14.8%. This increase was primarily due to an increase in cashand cash equivalents primarily as a result of funds received for subscriptionorders in the Association’s recently completed subscription and communityoffering conducted in connection with the Association’s mutual holding companyreorganization. Securities available for sale increased $3.3 million or 5.1%due to purchases of securities during the first quarter ended September 30,2004. Loans receivable, net decreased $479,000 or 2.1% primarily due to loanpayments. Home Federal Savings and Loan has continued to invest funds fromoperations primarily in marketable securities rather than long-term, fixed rateloans as part of its interest-rate risk strategy during this period ofhistorically low interest rates. Securities held-to-maturity decreased$751,000, or 30% for the six months ended December 31, 2004 compared tosecurities held-to-maturity at June 30, 2004 primarily due to maturitiesand principal payments.

The Association’s total liabilities amounted to $90.7million at December 31, 2004, an increase of $12.4 million, or 15.8%,compared to total liabilities at June 30, 2004. The primary reason for theincrease in liabilities was $12.9 million of stock subscription funds held inescrow by the Association at December 31, 2004, partially offset by adecrease in FHLB advances during the same time period of $1.3 million or 12.8%.Deposits increased $937,000 or 1.4% to $69.1 million at December 31, 2004compared to June 30, 2004, due to normal deposits inflow. The decrease inFHLB advances was due to repayments of maturing advances.

Equity increased $1.8 million or 10.6% to $19.1million at December 31, 2004 compared to $17.3 million at June 30,2004. This increase was primarily due to a change in accumulated othercomprehensive loss from a loss of $1.7 million at June 30, 2004 to a lossof $106,000 at December 31, 2004, as a result of an 

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**MANAGEMENT’S DISCUSSIONAND ANALYSIS OR PLAN OF OPERATION (Continued)**

increase in the marketvalue of securities available for sale at December 31, 2004 compared to June 30,2004. The increase in equity was also due to continued profitable operationsduring the six months ended December 31, 2004 of $267,000.

The Association isrequired to meet minimum capital standards promulgated by the Office of ThriftSupervision (“OTS”). At December 31, 2004, Home Federal Savings and Loan’sregulatory capital was well in excess of the minimum capital requirements.

***Comparison of Operating Results for the three and sixMonth Periods Ended December 31, 2004 and 2003***

*General*

Net income amounted to$129,000 for the three months ended December 31, 2004 compared to $242,000for the same period in 2003, a decrease of $113,000 or 46.6%. For the sixmonths ended December 31, 2004, the Association’s net income was $267,000,a $200,000, or 42.8% decrease from $467,000 for the six months ended December 31,2003. The decreases during the respective periods were primarily due todecreases in net interest income and non-interest income, partially offset bydecreases in non-interest expense and income taxes.

*Net Interest Income*

Net interest incomedecreased $54,000 and $208,000 for the three and six months, respectively, endedDecember 31, 2004 over the prior year periods primarily due to continuedmargin compression. Home Federal Savings and Loan’s average interest ratespread was 2.34% and 2.41%, respectively, for the three and six months ended December 31,2004 compared to 2.62% and 2.75%, respectively, for the same periods in 2003. TheAssociation’s net interest margin was 2.89% and 2.90%, respectively, for thethree and six months ended December 31, 2004, compared to 3.12% and 3.27%,respectively for the 2003 periods. This margin compression was due in largepart to Home Federal Savings and Loan’s interest rate risk strategy ofinvesting in marketable securities rather than long-term, fixed rate loans. Whilemanagement believes that purchasing available for sale securities rather thaninvesting in long-term, fixed rate loans is a better interest rate riskstrategy during this period of historically low interest rates, theseinvestment securities generally yield less than loans, resulting in lower netinterest income.

*Provision forLosses on Loans*

As a result of an analysisof historical experience, the volume and type of lending conducted by HomeFederal, the status of past due principal and interest payments, generaleconomic conditions, particularly as such conditions relate to Home Federal’smarket area, the decrease in the loan portfolio and other factors related tothe collectibility of Home Federal’s loan portfolio, no provisions were madeduring the three and six months ended December 31, 2004 or 2003. TheAssociation’s allowance for loan losses was $235,000, or 1.04% of total loans,at December 31, 2004 compared to $235,000, or 0.85% of total loans at December 31,2003. Home Federal did not have any non-performing loans at December 31,2004 or 2003. There can be no assurance that the loan loss allowance will besufficient to cover losses on nonperforming assets in the future.

*Non-interest Income*

Total non-interest incomeamounted to $12,000 for the three months ended December 31, 2004 comparedto $103,000 for the same period in 2003. The decrease was primarily due to a$90,000 decrease in gain on sale of investment securities due to a decrease insales activity during the three-month period ended December 31, 2004.Total non-interest income decreased $126,000 for the six months ended 

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**MANAGEMENT’SDISCUSSION AND ANALYSIS OR PLAN OF OPERATION (Continued)**

December 31,2004 compared to the prior year period. The decrease was primarily due to adecrease in gain on sale of securities, as well as a decrease in gain on saleof loans as a result of a decrease in the volume of loans sold.

*Non-interestExpense*

Total non-interest expenseincreased $23,000 or 4.6% for the three months ended December 31, 2004compared to the prior year period. The increase was primarily due to anincrease of $59,000 in other expense, consisting primarily of advertisingexpenses and audit fees, which was partially offset by decreases incompensation and benefits expense of $30,000 due to decreased staffing levelsand an $11,000 decrease in data processing expense. Total non-interest expensedecreased $38,000 or 3.7% for the six months ended December 31, 2004compared to the prior year period. The decrease was primarily related to a$75,000 decrease in compensation and benefits expense and a $27,000 decrease indata processing expense, which were partially offset by a $61,000 increase inother expense, consisting primarily of advertising expenses and audit fees.

*Income Taxes*

Income taxes amounted to$66,000 and $121,000 for the three months ended December 31, 2004 and2003, respectively, resulting in effective tax rates of 33.9% and 33.4%,respectively. Income taxes amounted to $137,000 and $233,000 for the six monthsended December 31, 2004 and 2003, respectively, resulting in effective taxrates of 33.9% and 33.3%, respectively. The decrease in income taxes for thethree and six months ended December 31, 2004 was due to decreased incomebefore income taxes.

*Liquidity andCapital Resources*

Home Federal Savings and Loan maintains levels ofliquid assets deemed adequate by management. The Association adjusts itsliquidity levels to fund deposit outflows, repay its borrowings and to fundloan commitments. Home Federal Savings and Loan also adjusts liquidity asappropriate to meet asset and liability management objectives.

Home Federal Savings and Loan’s primary sources offunds are deposits, amortization and prepayment of loans and mortgage-backedsecurities, maturities of investment securities and other short-term investments,loan sales and earnings and funds provided from operations. While scheduledprincipal repayments on loans and mortgage-backed securities are a relativelypredictable source of funds, deposit flows and loan prepayments are greatlyinfluenced by general interest rates, economic conditions and competition. TheAssociation sets the interest rates on its deposits to maintain a desired levelof total deposits. In addition, Home Federal Savings and Loan invests excessfunds in short-term interest-earning accounts and other assets, which provideliquidity to meet lending requirements. Home Federal Savings and Loan’s depositaccounts with the Federal Home Loan Bank of Dallas amounted to $7.6 million at December 31,2004.

A significant portion of Home Federal Savings and Loan’sliquidity consists of securities classified as available for sale and cash andcash equivalents. Home Federal Savings and Loan’s primary sources of cash arenet income, principal repayments on loans and mortgage-backed securities and increasesin deposit accounts. If Home Federal Savings and Loan requires funds beyond itsability to generate them internally, borrowing agreements exist with theFederal Home Loan Bank of Dallas which provide an additional source of funds. AtDecember 31, 2004, Home Federal Savings and Loan had $8.5 million inadvances from the Federal Home Loan Bank of Dallas.

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**MANAGEMENT’SDISCUSSION AND ANALYSIS OR PLAN OF OPERATION (Continued)**

At December 31, 2004, Home Federal Savings andLoan had outstanding loan commitments of $3.1 million to originate loans. At December 31,2004, certificates of deposit scheduled to mature in less than one year,totaled $27.3 million.

Based on prior experience, management believes that asignificant portion of such deposits will remain with us, although there can beno assurance that this will be the case. In addition, the cost of such depositscould be significantly higher upon renewal, in a rising interest rateenvironment. Home Federal Savings and Loan intends to utilize its high levelsof liquidity to fund its lending activities. If additional funds are requiredto fund lending activities, Home Federal Savings and Loan intends to sell itssecurities classified as available for sale as needed.

Home Federal Savings and Loan is required to maintainregulatory capital sufficient to meet tangible, core and risk-based capitalratios of at least 1.5%, 3.0% and 8.0%, respectively. At December 31,2004, Home Federal Savings and Loan exceeded each of its capital requirementswith ratios of 17.46%, 66.31% and 67.12%, respectively.

In connection with theAssociation’s reorganization to the mutual holding company form oforganization, Home Federal Bancorp, Inc., the parent holding company ofthe Association, sold 1,423,583 shares of its common stock in a subscriptionand community offering, which was completed on January 18, 2005 at a priceof $10.00 per share. This includes 113,887 shares acquired by the Association’sEmployee Stock Ownership Plan. The Company has invested 50% of the net proceedsfrom the reorganization in the Association.

*Off-Balance SheetArrangements*

At December 31, 2004,the Association did not have any off-balance sheet arrangements, as defined bySecurities and Exchange Commission rules.

*Impact of Inflationand Changing Prices*

The financial statements and related financial datapresented herein have been prepared in accordance with instructions to Form 10-QSB,which require the measurement of financial position and operating results interms of historical dollars, without considering changes in relative purchasingpower over time due to inflation.

Unlike most industrialcompanies, virtually all of the Association’s assets and liabilities aremonetary in nature. As a result, interest rates generally have a moresignificant impact on a financial institution’s performance than does theeffect of inflation.

*Forward-LookingStatements*

This Form 10-QSBcontains certain forward-looking statements and information relating to theAssociation that are based on the beliefs of management as well as assumptionsmade by and information currently available to management. In addition, inthose 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 Association or the Association’s management, are intendedto identify forward-looking statements. Such statements reflect the currentviews of the Association with respect to future looking events and are subjectto certain risks, uncertainties and assumptions. Should one or more of theserisks or uncertainties materialize or should underlying assumptions proveincorrect, actual results may vary from those described herein as anticipated,believed, estimated, expected or intended. The Association does not intend toupdate these forward-looking statements.

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**ITEM3**.   CONTROLS AND PROCEDURES

Under the supervision and with the participation ofour management, including our Chief Executive Officer and our principalofficer, we evaluated the effectiveness of the design and operation of ourdisclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934) as of the endof the period covered by this report. Based upon that evaluation, the ChiefExecutive Officer and the principal financial officer has concluded that, as ofthe end of the period covered by this report, our disclosure controls andprocedures are effective to ensure that information required to be disclosed inthe reports that the Company files or submits under the Securities Exchange Actof 1934, is recorded, processed, summarized and reported within the applicabletime periods specified by the Securities and Exchange Commission’s rules andforms. There has been no change in the Association’s internal control overfinancial reporting during the Association’s most recent fiscal quarter thathas materially affected, or is reasonably likely to materially affect, theAssociation’s internal control over financial reporting.

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**PART II**

**ITEM 1.     LEGALPROCEEDINGS**

The Association is notinvolved in any pending legal proceedings other than routine legal proceedingsoccurring in the ordinary course of business, which involve amounts in theaggregate believed by management to be immaterial to the financial condition ofthe Association.

**ITEM 2.     CHANGESIN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES**

(a), (b) and (c) Not applicable.

(d)         The Company’s Form SB-2(File No. 333-119026) was declared effective by the SEC on November 12,2004. A total of 1,423,583 shares of common stock were sold at $10.00 per sharein the subscription and community offering, including 113,887 shares acquiredby the Home Federal Savings and Loan Association Employee Stock Ownership Plan,which was consummated on January 18, 2005. The gross offering proceedswere $14,235,830 and net proceeds are estimated to be approximately$13,635,830.

(e)          Notapplicable.

**ITEM 3.**   DEFAULTS UPON SENIOR SECURITIES

Not applicable.

**ITEM 4.**   SUBMISSION OF MATTERS TO A VOTEOF SECURITY HOLDERS

Not applicable.

**ITEM 5.**   OTHER INFORMATION

Not applicable.

**ITEM 6.**   EXHIBITS

Thefollowing Exhibits are filed as part of this report:
| No.  | ** ** | ** **                                                                                                | ** ** | **Description** |
|------|------------|-----------------------------------------------------------------------------------------------------------|------------|-----------------|
| 31.1 |       | Certification of Chief Executive Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 |       | Certification of Chief Financial Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.0 |       | Section 1350 Certification.                                                                          |

 

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

| Date:  | February 14, 2005 |                                    | By:           | /s/ Daniel R. Herndon  |
|-------------|------------------------|-----------------------------------------|--------------------|------------------------|
|        |                   | Daniel R. Herndon                       |
|        |                   | *President and Chief Executive Officer* |
| Date:  | February 14, 2005 |                                    | By:           | /s/ Clyde D. Patterson |
|        |                   |                                    | Clyde D. Patterson |
|        |                   | *Executive Vice President*              |
|        |                   | *(principal financial officer)*         |

 

 

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