Attached files
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EX-32.1 - EXHIBIT 32.1 - HIBERNIA HOMESTEAD BANCORP, INC. | c92599exv32w1.htm |
EX-31.2 - EXHIBIT 31.2 - HIBERNIA HOMESTEAD BANCORP, INC. | c92599exv31w2.htm |
EX-31.1 - EXHIBIT 31.1 - HIBERNIA HOMESTEAD BANCORP, INC. | c92599exv31w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2009
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 000-53555
Hibernia Homestead Bancorp, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Louisiana | 26-2833386 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
325 Carondelet Street | ||
New Orleans, Louisiana | 70130 | |
(Address of Principal Executive Offices) | (Zip Code) |
(504) 522-3203
(Registrants Telephone Number, Including Area Code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). o Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: As of November
13, 2009, 1,113,334 shares of the Registrants common stock were issued and outstanding.
Hibernia Homestead Bancorp, Inc.
Form 10-Q
Form 10-Q
Table of Contents
Page | ||||||||
PART I FINANCIAL INFORMATION |
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25 | ||||||||
33 | ||||||||
33 | ||||||||
33 | ||||||||
33 | ||||||||
34 | ||||||||
34 | ||||||||
34 | ||||||||
34 | ||||||||
35 | ||||||||
36 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 |
Table of Contents
Item
1. Financial Statements (Unaudited)
Hibernia Homestead Bancorp, Inc.
Consolidated Balance Sheets
At September 30, | At December 31, | |||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Assets |
||||||||
Cash, Non-Interest Bearing |
$ | 1,262 | $ | 879 | ||||
Cash, Interest Bearing |
516 | 16 | ||||||
Federal Funds Sold |
2,625 | 5,975 | ||||||
Total Cash and Cash Equivalents |
4,403 | 6,870 | ||||||
Certificates of Deposit |
715 | | ||||||
Investment Securities Available-for-Sale |
9,321 | 11,947 | ||||||
Loans Receivable, Net |
39,695 | 32,273 | ||||||
Accrued Interest Receivable |
199 | 192 | ||||||
Investment in FHLB of Dallas Stock |
171 | 171 | ||||||
Investment in FNBB Stock |
210 | 210 | ||||||
Foreclosed Assets |
197 | | ||||||
Premises and Equipment, Net |
5,191 | 5,346 | ||||||
Deferred Income Taxes |
445 | 339 | ||||||
Prepaid Expenses and Other Assets |
170 | 868 | ||||||
Total Assets |
$ | 60,717 | $ | 58,216 | ||||
Liabilities and Equity |
||||||||
Liabilities |
||||||||
Deposits |
$ | 36,788 | $ | 43,143 | ||||
Advance Payments by Borrowers for Taxes and Insurance |
369 | 410 | ||||||
Accrued Interest Payable |
4 | 7 | ||||||
Accounts Payable and Other Liabilities |
80 | 482 | ||||||
Total Liabilities |
37,241 | 44,042 | ||||||
Commitments and Contingencies |
| | ||||||
Equity |
||||||||
Preferred Stock, $.01 par value 1,000,000 shares authorized; none issued |
| | ||||||
Common Stock, $.01 par value 9,000,000 shares authorized; 1,113,334 and
none issued and outstanding at June 30, 2009 and December 31, 2008,
respectively |
11 | | ||||||
Additional Paid In Capital |
10,361 | | ||||||
Unearned ESOP Shares |
(864 | ) | | |||||
Accumulated Other Comprehensive Income, |
||||||||
Net of Tax Effects |
153 | 108 | ||||||
Retained Earnings |
13,815 | 14,066 | ||||||
Total Equity |
23,476 | 14,174 | ||||||
Total Liabilities and Equity |
$ | 60,717 | $ | 58,216 | ||||
See notes to consolidated financial statements.
1
Table of Contents
Hibernia Homestead Bancorp, Inc.
Consolidated Statements of Operations (Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In Thousands, Except Per Share Data) | ||||||||||||||||
Interest Income |
||||||||||||||||
Loans Receivable |
||||||||||||||||
First Mortgage Loans |
$ | 494 | $ | 451 | $ | 1,446 | $ | 1,337 | ||||||||
Commercial Loans |
56 | 2 | 71 | 2 | ||||||||||||
Consumer and Other Loans |
2 | 1 | 4 | 4 | ||||||||||||
Federal Funds Sold |
1 | 3 | 4 | 8 | ||||||||||||
Mortgage-Backed Securities |
82 | 133 | 316 | 441 | ||||||||||||
Investment Securities |
11 | | 31 | | ||||||||||||
Interest Bearing Cash in Banks |
3 | | 7 | | ||||||||||||
Total Interest Income |
649 | 590 | 1,879 | 1,792 | ||||||||||||
Interest Expense |
||||||||||||||||
Deposits |
134 | 227 | 439 | 756 | ||||||||||||
Borrowed Funds |
| | | 6 | ||||||||||||
Total Interest Expense |
134 | 227 | 439 | 762 | ||||||||||||
Net Interest Income |
515 | 363 | 1,440 | 1,030 | ||||||||||||
Provision for Loan Losses |
33 | | 48 | | ||||||||||||
Net Interest Income After |
||||||||||||||||
Provision for Loan Losses |
482 | 363 | 1,392 | 1,030 | ||||||||||||
Non-Interest Income |
||||||||||||||||
Realized Gains and Losses on Investments |
83 | | 83 | | ||||||||||||
Other Income |
9 | 10 | 24 | 35 | ||||||||||||
Rental Income, Net of Related Expenses |
22 | 15 | 65 | 74 | ||||||||||||
Total Non-Interest Income |
114 | 25 | 172 | 109 | ||||||||||||
Non-Interest Expenses |
||||||||||||||||
Salaries and Employee Benefits |
293 | 276 | 878 | 776 | ||||||||||||
Occupancy Expenses |
88 | 82 | 264 | 229 | ||||||||||||
Data Processing |
70 | 62 | 209 | 173 | ||||||||||||
Advertising |
71 | 46 | 86 | 139 | ||||||||||||
Professional Fees |
55 | 34 | 176 | 108 | ||||||||||||
Supplies and Stationery |
12 | 12 | 35 | 41 | ||||||||||||
Telephone and Postage |
16 | 16 | 42 | 46 | ||||||||||||
Supervision, Exams & Assessment |
9 | 6 | 52 | 27 | ||||||||||||
Directors Fees |
12 | 12 | 36 | 33 | ||||||||||||
Other Operating Expenses |
56 | 46 | 166 | 111 | ||||||||||||
Total Non-Interest Expenses |
682 | 592 | 1,944 | 1,683 | ||||||||||||
Loss Before Income Tax Benefit |
(86 | ) | (204 | ) | (380 | ) | (544 | ) | ||||||||
Income Tax Benefit |
(30 | ) | (69 | ) | (129 | ) | (185 | ) | ||||||||
Net Loss |
$ | (56 | ) | $ | (135 | ) | $ | (251 | ) | $ | (359 | ) | ||||
Loss Per Common Share |
||||||||||||||||
Basic |
$ | (0.05 | ) | N/A | $ | (0.23 | ) | N/A | ||||||||
Diluted |
$ | (0.05 | ) | N/A | $ | (0.23 | ) | N/A |
See notes to consolidated financial statements.
2
Table of Contents
Hibernia Homestead Bancorp, Inc.
Consolidated Statements of Equity (Unaudited)
Nine Months Ended September 30, 2009 and 2008
Accumulated | ||||||||||||||||||||||||
Other | ||||||||||||||||||||||||
Additional | Unearned | Comprehensive | ||||||||||||||||||||||
Common | Paid-In | ESOP | Income (Loss), Net | Retained | ||||||||||||||||||||
Stock | Capital | Shares | of Tax Effect | Earnings | Total | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
BALANCE January 1, 2008 |
$ | | $ | | $ | | $ | (224 | ) | $ | 14,532 | $ | 14,308 | |||||||||||
Net Loss |
| | | | (359 | ) | (359 | ) | ||||||||||||||||
Other Comprehensive Income |
| | | 175 | | 175 | ||||||||||||||||||
BALANCE September 30, 2008 |
$ | | $ | | $ | | $ | (49 | ) | $ | 14,173 | $ | 14,124 | |||||||||||
BALANCE January 1, 2009 |
$ | | $ | | $ | | $ | 108 | $ | 14,066 | $ | 14,174 | ||||||||||||
Net Loss |
| | | | (251 | ) | (251 | ) | ||||||||||||||||
Other Comprehensive Income |
| | | 45 | | 45 | ||||||||||||||||||
Issuance of Common Stock for Initial
Public Offering |
11 | 10,361 | | | | 10,372 | ||||||||||||||||||
Shares Purchased for ESOP |
| | (891 | ) | | | (891 | ) | ||||||||||||||||
ESOP Shares released for allocation |
| | 27 | | | 27 | ||||||||||||||||||
BALANCE September 30, 2009 |
$ | 11 | $ | 10,361 | $ | (864 | ) | $ | 153 | $ | 13,815 | $ | 23,476 | |||||||||||
See notes to consolidated financial statements.
3
Table of Contents
Hibernia Homestead Bancorp, Inc.
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
(In Thousands) | ||||||||
Cash Flows from Operating Activities |
||||||||
Net Loss |
$ | (251 | ) | $ | (359 | ) | ||
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities |
||||||||
Provision for Loan Losses |
48 | | ||||||
Foreclosed Assets Valuation Adjustment |
10 | | ||||||
Deferred Income Taxes |
(129 | ) | (185 | ) | ||||
Depreciation and Amortization |
204 | 180 | ||||||
Net Discount Accretion |
(22 | ) | (14 | ) | ||||
Gain on Sale of Securities |
83 | | ||||||
Stock Dividend on FHLB of Dallas Stock |
| (4 | ) | |||||
Non-Cash Compensation |
27 | | ||||||
(Increase) Decrease in: |
||||||||
Accrued Interest Receivable |
(7 | ) | 9 | |||||
Prepaid Expenses and Other Assets |
698 | (342 | ) | |||||
Prepaid Income Taxes |
| 91 | ||||||
(Decrease) Increase in: |
||||||||
Accrued Interest Payable |
(3 | ) | 1 | |||||
Accounts Payable and Other Liabilities |
(402 | ) | (38 | ) | ||||
Net Cash Provided by (Used in) Operating Activities |
256 | (661 | ) | |||||
Cash Flows from Investing Activities |
||||||||
Net Increase in Loans Receivable |
(7,642 | ) | (658 | ) | ||||
Purchases of Securities Available-for-Sale |
(2,527 | ) | | |||||
Purchases of Certificates of Deposit |
(1,055 | ) | | |||||
Maturities, Redemptions and Sales of Securities Available-for-Sale |
5,160 | 2,997 | ||||||
Maturities, Redemptions and Sales of Certificates of Deposit |
340 | | ||||||
Capital Improvements to Foreclosed Assets |
(45 | ) | | |||||
Proceeds from Sales of Foreclosed Assets |
10 | | ||||||
Purchase of Premises and Equipment |
(49 | ) | (940 | ) | ||||
Net Cash (Used in) Provided by Investing Activities |
(5,808 | ) | 1,399 | |||||
Cash Flows from Financing Activities |
||||||||
Net (Decrease) Increase in Deposits |
(6,355 | ) | 513 | |||||
Repayments of Short-Term Borrowings from FHLB of Dallas |
| (600 | ) | |||||
Increase in Federal Funds Purchased |
| 275 | ||||||
Net (Decrease) Increase in Advance Payments by Borrowers for Taxes and Insurance |
(41 | ) | 31 | |||||
Proceeds from Issuance of Common Stock |
11,133 | | ||||||
Cost of Issuance of Common Stock |
(766 | ) | | |||||
ESOP Shares Released Allocation |
5 | | ||||||
Purchase of Stock for ESOP |
(891 | ) | | |||||
Net Cash Provided by Financing Activities |
3,085 | 219 | ||||||
Net (Decrease) Increase in Cash and Cash Equivalents |
(2,467 | ) | 957 | |||||
Cash and Cash Equivalents Beginning of Period |
6,870 | 83 | ||||||
Cash and Cash Equivalents End of Period |
$ | 4,403 | $ | 1,040 | ||||
Supplementary Schedule of Cash Flow Information |
||||||||
Cash Paid for Interest on Deposits and Borrowings |
$ | 442 | $ | 762 | ||||
Cash (Received) Paid for Income Taxes |
$ | | $ | (91 | ) | |||
Market Value Adjustment for Gain on Securities Available-for-Sale |
$ | 68 | $ | 270 | ||||
See notes to consolidated financial statements.
4
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note 1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Hibernia Homestead Bancorp, Inc. (the Company or Hibernia) is a Louisiana corporation,
which was organized to be the holding company for Hibernia Homestead Bank (the Bank), which is a
Louisiana-chartered, FDIC-insured savings bank. The Company was organized in June 2008 in
conjunction with the Banks conversion from a mutual savings bank to a stock savings bank.
Financial statements prior to the conversion, which was completed on January 27, 2009, are the
financial statements of the Bank. A total of 1,113,334 shares of common stock of the Company were
sold at $10 per share in the subscription and community offerings through which the Company
received proceeds of approximately $10.4 million, net of offering costs of approximately $766,000.
As a result of the Banks election pursuant to Section 10(1) of the Home Owners Loan Act, the
Company is a savings and loan holding company regulated by the Office of Thrift Supervision (the
OTS). For further information on Hibernia Homestead Banks conversion, see Note 5 in these Notes
to Consolidated Financial Statements.
Prior to the conversion described above, the Board of Directors approved a plan of charter
conversion in December 2007 by which the Bank would convert its charter from a Louisiana-chartered
mutual homestead and savings association to a Louisiana-chartered mutual savings bank. Such
conversion was subject to receipt of both member and regulatory approval. The members of the Bank
approved the plan of charter conversion at the annual meeting held on February 29, 2008 and the
Louisiana Office of Financial Institutions approved the Banks application to convert its charter
effective March 17, 2008. As a result of the charter conversion, the Banks primary federal
banking regulator changed from the OTS to the Federal Deposit Insurance Corporation (FDIC). The
Louisiana Office of Financial Institutions remains as the Banks state banking regulator.
The Bank provides a variety of financial services primarily to individual customers through
its three branches in New Orleans and Metairie, Louisiana. The Banks primary deposit products are
checking accounts, money market accounts, interest bearing savings and certificates of deposit.
Its primary lending products are residential mortgage loans. In 2008, the Bank introduced new
commercial loan products. The Bank provides services to customers in the New Orleans, Metairie and
surrounding areas.
The Banks operations are subject to customary business risks associated with activities of a
financial institution. Some of those risks include competition from other institutions and changes
in economic conditions, interest rates and regulatory requirements.
In August 2005, Hurricane Katrina caused wide-spread devastation in the areas in which the
Bank operates. Certain of the affected areas are still in the process of recovering from the
adverse impacts caused by the hurricane. The adverse financial effects of that catastrophe upon
the Bank were recognized in its financial statements at that time. To date, no significant
additional adverse effects have manifested themselves. However, since some areas within the Banks
market are still recovering, whether the extent to which those areas eventually recover could
adversely affect the future financial condition of area businesses, and the degree of such adverse
impact, if any, is unknown at this time.
5
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Nature of Operations (Continued)
The accompanying unaudited financial statements were prepared in accordance with the instructions
to Form 10-Q, and therefore do not include all the information or footnotes necessary for complete
financial statements in conformity with accounting principles generally accepted in the United
States of America. However, all normal recurring adjustments that, in the opinion of management,
are necessary for a fair presentation of the financial statements have been included. The results
for the three and nine month periods ended September 30, 2009, are not necessarily indicative of
the results that may be expected for the fiscal year ending December 31, 2009, or any other period.
These financial statements should be read in conjunction with the audited financial statements of
the Bank and the accompanying notes thereto for the year ended December 31, 2008, included in the
Companys Form 10-K filed with the Securities and Exchange Commission (SEC) on March 31, 2009
(File No. 000-53555).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiary, Hibernia Homestead Bank. All significant intercompany balances and transactions between
the Company and its wholly owned subsidiary have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change relate to the
determination of the allowance for losses on loans and the valuation of real estate acquired in
connection with foreclosures or in satisfaction of loans. In connection with the determination of
the allowance for losses on loans and foreclosed real estate, management obtains independent
appraisals for significant properties.
A majority of the Banks loan portfolio consists of single-family residential loans in the
metropolitan New Orleans area. The majority of loans are secured by first mortgages on the
residences of the borrowers and are expected to be repaid from the cash flows of the customers.
Some of the activities that the economy of this region is dependent upon include the petrochemical
industry, the port of New Orleans, healthcare and tourism. Significant declines in economic
activities in these areas could affect the borrowers ability to repay loans and cause a decline in
value of assets securing the loan portfolio.
While management uses available information to recognize losses on loans and foreclosed
assets, future additions to the allowance may be necessary based on changes in local economic
conditions. In addition, regulatory agencies, as an integral part of their examination process,
periodically review the Banks allowances for losses on loans and foreclosed assets. Such agencies
may require the Bank to recognize additions to the allowance based on their judgments about
information available to them at the time of their examination. Because of these factors, it is
reasonably possible that the allowance for losses on loans and foreclosed assets may change in the
near term.
6
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Cash Equivalents
Cash equivalents consist of cash on hand, in banks, and federal funds sold. For purposes of
the statements of cash flows, the Company considers all highly liquid debt instruments with
original maturities, when purchased, of less than three months to be cash equivalents.
Loans Receivable
Loans receivable are stated at unpaid principal balances, less the allowance for loan losses,
and net of deferred loan origination fees and discounts.
Interest on Loans
Interest on residential mortgage and commercial loans is credited to income as earned. An
allowance is established for interest accrued on loans contractually delinquent three months or
more. Unearned discounts on mortgage and commercial loans are taken into income over the life of
the loan using the interest method. Interest on savings account loans is credited to income as
earned using the simple interest method.
Allowance for Loan Losses
The allowance for loan losses is maintained to provide for probable credit losses related to
specifically identified loans and for losses inherent in the loan portfolio that have been incurred
as of the balance sheet date. The allowance is comprised of specific reserves and a general
reserve. Specific reserves are assessed for each loan that is reviewed for impairment or for which
a probable loss has been identified. The allowance related to loans that are identified as
impaired is based on discounted expected future cash flows (using the loans initial effective
interest rate), the observable market value of the loan, or the estimated fair value of the
collateral for certain collateral dependent loans. Factors contributing to the determination of
specific reserves include the financial condition of the borrower, changes in the value of pledged
collateral and general economic conditions. General reserves are established based on historical
charge-offs considering factors that include risk rating, concentrations and loan type. In
addition, the general reserve considers trends in delinquencies and non-accrual loans,
concentrations, volatility of risk ratings and the evolving mix in terms of collateral, relative
loan size and the degree of seasoning within the various loan products.
Changes in underwriting standards, credit administration and collection policies, regulation
and other factors which affect the credit quality and collectability of the loan portfolio also
impact the unallocated reserve levels. The allowance for loan losses is based on managements
estimate of probable credit losses inherent in the loan portfolio; actual credit losses may vary
from the current estimate. The allowance for loan losses is reviewed periodically, taking into
consideration the risk characteristics of the loan portfolio, past charge-off experience, general
economic conditions and other factors that warrant current recognition. As adjustments to the
allowance for loan losses become necessary, they are reflected as a provision for loan losses in
current-period earnings. Actual loan charge-offs are deducted from and subsequent recoveries of
previously charged-off loans are added to the allowance.
7
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Impaired Loans
FASB ASC Topic 310 Receivables (which includes former SFAS No. 114, Accounting by Creditors
for Impairment of a Loan and SFAS No. 118, Accounting by Creditors for Impairment of a Loan
Income Recognition and Disclosures), requires that impaired loans be measured based on the present
value of expected future cash flows discounted at the loans original effective interest rate. As
a practical expedient, impairment may be measured based on the loans observable market price or
the fair value of the collateral if the loan is collateral dependent. When the measure of the
impaired loan is less than the recorded investment in the loan, the impairment is recorded through
a valuation allowance. This valuation allowance is recorded in the allowance for loan losses on
the balance sheet.
Interest payments received on impaired loans are recorded as interest income unless
collection of the remaining recorded investment is doubtful, at which time payments received are
recorded as reductions of principal. Changes in the present value due to the passage of time are
recorded as interest income, while changes in estimated cash flows are recorded in the provision
for loan losses.
Loan Origination Fees, Commitment Fees and Related Costs
The Bank has adopted the provisions of FASB ASC Topic 310 Receivables (which includes former
SFAS No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring
Loans and Indirect Costs of Leases). Accordingly, loan origination fees and certain direct loan
origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest
income using the interest method over the contractual life of the loans, adjusted for any
prepayments.
Securities
FASB ASC Topic 320 Investments Debt and Equity Securities (which includes former SFAS No.
115, Accounting for Certain Investments in Debt and Equity Securities), requires the
classification of securities into one of three categories: Trading, Available-for-Sale or
Held-to-Maturity.
Management determines the appropriate classification of debt securities at the time of
purchase and re-evaluates this classification periodically. Trading account securities are held
for resale in anticipation of short-term market movements. Debt securities are classified as held
to maturity when the Bank has the positive intent and ability to hold the securities to maturity.
Securities not classified as held-to-maturity or trading are classified as available-for-sale.
Trading account securities are carried at market value. Gains and losses, both realized and
unrealized, are reflected in earnings.
Held-to-maturity securities are stated at amortized cost. Available-for-sale securities are
stated at fair value, with unrealized gains and losses, net of applicable deferred income taxes,
reported in a separate component of other comprehensive income. The amortized cost of debt
securities classified as held-to- maturity or available-for-sale is adjusted for amortization of
premiums and accretion of discounts to maturity or, in the case of mortgage-backed securities, over
the estimated life of the security. Amortization, accretion and accruing interest are included in
interest income on securities. Realized gains and losses, and declines in value judged to be other
than temporary, are included in net securities gains. The cost of securities sold is determined
based on the specific identification method.
8
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Impaired Securities
Securities available-for-sale or held-to-maturity in which, after acquisition, the Company
believes it will not be able to collect all amounts due according to its contractual terms are
considered to be other-than- temporarily impaired. In accordance with generally accepted
accounting principles, securities considered to be other-than-temporarily impaired are written down
to fair value, and any unrealized loss is charged to net income. The written down amount then
becomes the securitys new cost basis.
Investment in FHLB of Dallas and FNBB Stock
The Bank maintains investments in membership stocks of the Federal Home Loan Bank (FHLB) of
Dallas and First National Bankers Bank (FNBB). The carrying amounts of these investments are
stated at cost. The Bank is required by law to have an investment in stock of the Federal Home Loan
Bank of Dallas. Effective April 16, 2007, the membership investment requirement is .06% of the
members total assets, and the activity-based requirement is 4.1% of advances and applicable
Mortgage Partnership Finance assets.
Foreclosed Assets
Assets acquired through, or in lieu of, foreclosure are initially recorded at the lower
of cost (principal balance of the former mortgage loan plus costs of obtaining title and
possession) or fair value at the date of acquisition. Costs relating to development and
improvement of property are capitalized, whereas costs relating to the holding of property are
expensed.
Management periodically performs valuations, and an allowance for losses is established by a
charge to operations if the carrying value of a property exceeds its estimated net realizable
value.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and amortization.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets.
Estimated lives are 10 to 30 years for buildings and improvements and 3 to 10 years for furniture,
fixtures and equipment. Amortization of leasehold improvements is calculated on the straight-line
basis over the terms of the leases.
Income Taxes
Deferred income taxes are provided using the liability method whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax credit carryforwards,
and deferred tax liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and liabilities and their
tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred tax assets will not
be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax
laws and rates as of the date of enactment.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Income Taxes (Continued)
When tax returns are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others are subject to uncertainty about
the merits of the position taken or the amount of the position that would be ultimately sustained.
The benefit of a tax position is
recognized in the financial statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be sustained upon
examination, including the resolution of appeals or litigation processes, if any. Tax positions
taken are not offset or aggregated with other positions. Tax positions that meet the
more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that
is more than 50% likely of being realized upon settlement with the applicable taxing authority.
The portion of the benefits associated with tax positions taken that exceeds the amount measured as
described above would be reflected as a liability for unrecognized tax benefits in the consolidated
balance sheet along with any associated interest and penalties that would be payable to the taxing
authorities upon examination. Interest and penalties associated with unrecognized tax benefits
would be classified as additional income taxes in the statement of operations.
In accordance with FASB ASC Topic No. 740 Income Taxes (formerly SFAS 109 Accounting for
Income Taxes), the Company recognizes certain tax assets whose realization depends upon generating
future taxable income. These tax assets can only be realized through the generation of future
taxable income and thereby utilizing the net operating loss carryforwards we have available. At
September 30, 2009, the Company has net operating loss carryforwards of approximately $1.5 million.
The net operating loss carryforwards expire as follows:
2027 |
$ | 309 | ||
2028 |
937 | |||
2029 |
239 | |||
$ | 1,485 | |||
As a result of the Companys acquisition of the stock of the Bank in connection with the
Banks conversion in January 2009, a limitation on the ability to fully utilize the net operating
losses generated in 2008 and prior periods occurred. Based on managements best estimate, the
amount of annual taxable income that can be offset each year by the net operating loss carryforward
is approximately $611,000.
Comprehensive Income
The Company reports comprehensive income in accordance with FASB ASC Topic No. 220
Comprehensive Income (formerly SFAS 130, Reporting Comprehensive Income). Topic 220
establishes standards for reporting and presentation of comprehensive income and its components in
a full set of financial statements. Comprehensive income consists of net income and net unrealized
gains (losses) on securities and is presented in the statements of equity and comprehensive income.
Topic 220 requires only additional disclosures in the financial statements; it does not affect the
Companys financial position or results of operations.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Comprehensive Income (Continued)
Nine Months Ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Net Loss |
$ | (251 | ) | $ | (359 | ) | ||
Other Comprehensive Income,
Net of Tax |
||||||||
Unrealized Gain on Securities |
45 | 175 | ||||||
Total Other Comprehensive Income |
45 | 175 | ||||||
Total Comprehensive Loss |
$ | (206 | ) | $ | (184 | ) | ||
Statement of Cash Flows
The statements of cash flows were prepared in accordance with the provisions of FASB ASC Topic
No. 230 Statement of Cash Flows (formerly Statement of Financial Accounting Standards (SFAS) No.
104, Statement of Cash Flows Net Reporting of Certain Cash Receipts and Cash Payments and
Classification of Cash Flows from Hedging Transactions). This Topic permits certain financial
institutions to report, in a statement of cash flows, net receipts and payments for deposits
placed, time deposits accepted and repaid and loans made and collected. Additionally, in
accordance with generally accepted accounting principles, interest credited directly to deposit
accounts has been accounted for as operating cash payments.
Recent Accounting Pronouncements
FASB ASC Topic No. 820 Fair Value Measurement and Disclosures (formerly SFAS 157 Fair Value
Measurements) was issued in September 2006. This Topic defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and expands disclosures about
fair value measurements. This Topic is effective for financial statements issued for fiscal years
beginning after November 15, 2007. During 2008, FASB deferred the effective date for nonfinancial
assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually), to fiscal years beginning after
November 15, 2008, and interim periods within the fiscal year. Adoption of this pronouncement did
not have a monetary effect on the financial position and results of operations of the Company, but
resulted in expanded disclosures.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
FASB ASC Topic No. 810 Consolidation (formerly SFAS 160 Noncontrolling Interests in
Consolidated Financial Statements) was issued in December 2007. This Topic amends Accounting
Research Bulletin 51, Consolidated Financial Statements, to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. The Topic is effective for fiscal periods, and interim periods within those fiscal
years, beginning on or after December 15, 2008. Management believes the adoption of this Topic
will not have a material impact on the financial statements.
FASB ASC Topic No. 805 Business Combinations (formerly SFAS 141R Business Combinations)
was issued in December 2007. The objective of this Topic is to improve the relevance,
representational faithfulness, and comparability of the information that a reporting entity
provides in its financial reports about a business combination and its effects. To accomplish
that, it establishes principles and requirements for how the acquirer: 1) Recognizes and measures
in its financial statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree; 2) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase; and 3) determines what information to
disclose to enable users of the financial statements to evaluate the nature and financial effects
of the business combination. This Topic applies prospectively to business combinations for which
the acquisition date is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2008. This Topic will change the accounting treatment for business
combinations on a prospective basis.
FASB ASC Topic No. 815 Derivatives and Hedging (formerly SFAS 161 Disclosures about
Derivative Instruments and Hedging Activities) was issued in March 2008 which is intended to
improve financial reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on an entitys
financial position, financial performance, and cash flows. Topic 815 is effective for financial
statements issued for fiscal years and interim periods beginning after November 15, 2008, with
early application encouraged. Management does not expect that the adoption of Topic 815 will have
a material impact on its consolidated financial statements.
FASB ASC Topic 105 Generally Accepted Accounting Principles (formerly SFAS 168 The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles
which was a replacement of FASB Statement No. 162) was issued in May 2008. This Topic establishes
the FASB Accounting Standards Codification as the source of authoritative accounting principles
recognized by the FASB to be applied by non-governmental entities in the preparation of financial
statements in conformity with Generally Accepted Accounting Principles (GAAP). The Topic is
effective for fiscal years beginning on or after September 15, 2009 and is not expected to have a
material effect on the consolidated financial statements.
FASB ASC Topic No. 815 Derivatives and Hedging (which includes former FSP 133-1 and FIN 45-4
Disclosures about Credit Derivatives and Financial Guarantees) was issued in September 2008. This
Topic requires companies that sell credit derivatives to disclose information that will enable
financial statement users to assess the potential effect of the credit derivatives on the sellers
financial position, financial performance, and cash flows. The Topic is effective for interim and
annual periods ending after November 15, 2008. This Topic is not expected to have an effect on the
consolidated financial statements.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
FASB ASC Topic No. 860 Transfers and Servicing (which includes former FSP 140-3 Accounting
for Transfers of Financial Assets and Repurchase Financing Transactions) was issued in February
2008. This Topic provides guidance on accounting for a transfer of a financial asset and a
repurchase financing. The Topic presumes that an initial transfer of a financial asset and a
repurchase financing are considered part of the same arrangement. However, if certain criteria are
met, the initial transfer and repurchase shall not be evaluated as a linked transaction and
therefore evaluated separately under Topic 860. The Topic is effective for repurchase financing in
which the initial transfer is entered in fiscal years beginning after November 15, 2008. Management
does not anticipate a material impact on its consolidated financial statements as a result of this
Topic.
FASB ASC Topic No. 350 Intangibles Goodwill and Other (includes former FSP 142-3), issued
in April 2008, which amends the list of factors an entity should consider in developing renewal of
extension assumptions used in determining the useful life of recognized intangible assets. The new
guidance applies to intangible assets that are acquired individually or with a group of other
assets and to intangible assets acquired in both business combinations and asset acquisitions. The
Topic is effective for financial statements issued for fiscal years beginning after December 15,
2008 and interim periods within those fiscal years. The guidance must be applied prospectively
only to intangible assets acquired after the Topics effective date. This Topic is not expected to
have an effect on the consolidated financial statements.
FASB ASC Topic No. 825 Financial Instruments (formerly FSP SFAS 107-1 Interim Disclosures
about Fair Value of Financial Instruments, which also amended APB Opinion No. 28 Interim
Financial Reporting) was issued in April 2009. This Topic requires disclosures about fair value
of financial instruments for interim reporting periods of publicly traded companies as well as in
annual financial statements. The Topic is effective for interim reporting periods ending after
June 15, 2009. Adoption of this Topic did not have a monetary effect on the financial position and
results of operations of the Company, but resulted in expanded disclosures.
In June 2009, the FASB changed the accounting guidance for the consolidation of variable
interest entities. The current quantitative-based risks and rewards calculation for determining
which enterprise is the primary beneficiary of the variable interest entity will be replaced with
an approach focused on identifying which enterprise has the power to direct the activities of a
variable interest entity and the obligation to absorb losses of the entity or the right to receive
benefits from the entity. The new guidance will be effective for the Company beginning January 1,
2010. Management believes the adoption of this guidance will not have a material impact on the
financial statements.
In June 2009, the FASB changed the accounting guidance for transfers of financial assets. The
new guidance increases the information that a reporting entity provides in its financial reports
about a transfer of financial assets; the effects of a transfer on its statement of financial
condition, financial performance and cash flows; and a continuing interest in transferred financial
assets. In addition, the guidance amends various concepts associated with the accounting for
transfers and servicing of financial assets and extinguishments of liabilities including removing
the concept of qualified special purpose entities. This new guidance must be applied to transfers
occurring on or after January 1, 2010. Management believes the adoption of this guidance will not
have a material impact on the financial statements.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
In August 2009, the FASB updated its guidance for the fair value measurement of liabilities.
The update provided clarification that in circumstances in which a quoted price in an active market
for the identical liability is not available, a reporting entity is required to measure fair value
of the liability using: (1) the quoted price of the identical liability when traded as an asset,
(2) quoted prices for similar liabilities or similar liabilities when traded as assets, (3) an
income approach, such as a present value technique, (4) a market approach such as the amount the
reporting entity would pay to transfer the liability or enter into the identical liability. The
update also states that a reporting entity would not adjust the fair value of a liability for
restrictions that prevent the transfer of the liability. The updated liability fair value
measurement guidance is effective as of September 30, 2009. This update did not have a material
effect on the Companys financial statements.
Advertising
The Company follows the policy of charging the costs of advertising to expense as incurred.
Advertising expense was $71,000 and $46,000 for the three months ended September 30, 2009 and 2008,
respectively, and $86,000 and $139,000 for the nine months ended September 30, 2009 and 2008,
respectively.
Note 2. Investment Securities
A summary of investment securities classified as trading, available-for-sale and
held-to-maturity is presented below.
Trading Securities
The Company had no securities classified as trading securities at September 30, 2009 and
December 31, 2008.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 2. Investment Securities (Continued)
Available-for-Sale
The carrying values and estimated market values of available-for-sale securities at September
30, 2009 and December 31, 2008, are summarized as follows:
September 30, 2009 (Unaudited) | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Government Agencies |
$ | 2,007 | $ | 11 | $ | | $ | 2,018 | ||||||||
Mortgage Backed Securities |
7,082 | 221 | | 7,303 | ||||||||||||
Total Securities
Available-for-Sale |
$ | 9,089 | $ | 232 | $ | | $ | 9,321 | ||||||||
December 31, 2008 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Mortgage Backed Securities |
$ | 11,782 | $ | 167 | $ | 2 | $ | 11,947 | ||||||||
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 2. Investment Securities (Continued)
Available-For-Sale (Continued)
The amortized cost and estimated market values of available-for-sale securities at September
30, 2009 and at December 31, 2008, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
September 30, 2009 (Unaudited) | ||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
(In Thousands) | ||||||||
Due in One Year or Less |
$ | 1,302 | $ | 1,330 | ||||
Due After One Year Through Five Years |
7,284 | 7,485 | ||||||
Due After Five Years Through Ten Years |
503 | 506 | ||||||
Due After Ten Years Through Twenty Years |
| | ||||||
Due After Twenty Years |
| | ||||||
$ | 9,089 | $ | 9,321 | |||||
December 31, 2008 | ||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
(In Thousands) | ||||||||
Due in One Year or Less |
$ | | $ | | ||||
Due After One Year Through Five Years |
5,034 | 5,048 | ||||||
Due After Five Years Through Ten Years |
2,318 | 2,359 | ||||||
Due After Ten Years Through Twenty Years |
3,970 | 4,075 | ||||||
Due After Twenty Years |
460 | 465 | ||||||
$ | 11,782 | $ | 11,947 | |||||
Fair values for securities are determined from quoted prices or quoted market prices of
similar securities of comparable risk and maturity where no quoted market price exists. Management
does not anticipate a requirement to sell any of Hibernias investment securities for liquidity or
other operating purposes.
The proceeds from the sales, redemptions and maturities of securities available-for-sale for
the nine months ended September 30, 2009 and 2008 were approximately $5.2 million and $3.0 million,
respectively. There were $83,000 of gross realized gains for the period ended September 30, 2009
and no gross realized gains or losses for the period ended September 30, 2008.
Held-to-Maturity
There were no held-to-maturity securities at September 30, 2009 or December 31, 2008.
16
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 2. Investment Securities (Continued)
Available-For-Sale (Continued)
There were no gross unrealized losses in investment securities at September 30, 2009 existing
for continuous periods of less than 12 months or for continuous periods of 12 months or more.
Gross unrealized losses in investment securities at December 31, 2008 existing for continuous
periods of less than 12 months and for continuous periods of 12 months or more at that date are as
follows:
December 31, 2008 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Security | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||||||
Description | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
Available-for-Sale |
||||||||||||||||||||||||
Mortgage Backed Securities |
$ | 331 | $ | 2 | $ | | $ | | $ | 331 | $ | 2 | ||||||||||||
Management evaluates securities for other-than-temporary impairment on a periodic and
regular basis, as well as when economic or market concerns warrant such evaluation. Consideration
is given to (1) the length of time and the extent to which the fair value has been less than cost,
(2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability
of Hibernia to retain its investment in the issuer for a period of time sufficient to
allow for any anticipated recovery in fair value.
At September 30, 2009, there were no unrealized losses in investment securities. At December
31, 2008, the unrealized losses related principally to current interest rates for similar types of
securities. In analyzing an issuers financial condition, management considers whether the
securities are issued by the federal government or its agencies, whether downgrades by bond rating
agencies have occurred, and the results of reviews of the issuers financial condition. As the
Company has the ability to hold available-for-sale debt securities for the foreseeable future, no
declines are deemed to be other-than-temporary.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 3. Loans Receivable
Loans receivable at September 30, 2009 and December 31, 2008 are summarized as follows:
September 30, 2009 | December 31, 2008 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Real Estate Loans: |
||||||||
One-to-Four Family Residential |
$ | 34,231 | $ | 29,936 | ||||
Multi-Family Residential |
187 | 769 | ||||||
Second Mortgage Residential |
223 | 63 | ||||||
Residential Construction and Land Loans |
178 | 1,468 | ||||||
Commercial Loans Secured by Real Estate |
4,904 | 91 | ||||||
Total Real Estate Loans |
$ | 39,723 | $ | 32,327 | ||||
Other Loans: |
||||||||
Home equity line of credit |
186 | 153 | ||||||
Loans secured by deposits |
28 | 32 | ||||||
Total Other Loans |
214 | 185 | ||||||
Total Loans |
$ | 39,937 | $ | 32,512 | ||||
Less: |
||||||||
Allowance for loan losses |
300 | 273 | ||||||
Deferred loan fees |
(58 | ) | (34 | ) | ||||
242 | 239 | |||||||
Net Loans |
$ | 39,695 | $ | 32,273 | ||||
There were no loans past due more than ninety days at September 30, 2009. Loan balances
past due more than ninety days amounted to $150,000 at December 31, 2008. Non-accruing loan
balances amounted to $157,000 and $150,000 at September 30, 2009 and December 31, 2008,
respectively.
Activity in the allowance for loan losses is summarized as follows: |
Nine Months Ended | Year Ended | |||||||
September 30, 2009 | December 31, 2008 | |||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Balance, Beginning of Period |
$ | 273 | $ | 273 | ||||
Provision Charged to Operating Expense |
48 | | ||||||
Loans Charged Off, Net of Recoveries |
(21 | ) | | |||||
Balance, End of Period |
$ | 300 | $ | 273 | ||||
At September 30, 2009, there were $245,000 of loans considered to be impaired under the
guidance provided by FASB ASC Topic 310 Receivables (which includes former SFAS No. 114,
Accounting by Creditors for Impairment of a Loan and SFAS No. 118, Accounting by Creditors for
Impairment of a Loan Income Recognition and Disclosures). The allowance for loan losses related
to impaired loans at that date amounted to $44,000. As of December 31, 2008, there were no loans
considered to be impaired. Interest income recognized on impaired loans was not significant for the
nine months ended September 30, 2009, and for the year ended December 31, 2008. The Bank is not
committed to lend additional funds to debtors whose loans have been modified.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 3. Loans Receivable (Continued)
In 2005 Hurricane Katrina affected the residents and businesses within the Banks operating
area. The adverse financial impacts of this event on the Banks loan portfolio were recognized at
that time. Management continues to closely monitor the loan portfolio, and no substantial
additional losses directly related to this catastrophe have been experienced to date. However, as
indicated previously, the extent to which the still affected areas within the Banks market
eventually recover is unknown at this time as are the ultimate adverse additional impacts that the
hurricane might have, if any, on the Banks loan portfolio.
Note 4. Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by its primary
federal regulator, the Federal Deposit Insurance Corporation, as a result of its conversion to a
state chartered savings bank in March 2008. Prior to this date, the Banks primary federal
regulator was the Office of Thrift Supervision. Failure to meet the minimum regulatory capital
requirements can initiate certain mandatory and possible additional discretionary actions by
regulators, which if undertaken, could have a direct material affect on the Bank and the
consolidated financial statements. As a savings and loan holding company, Hibernia is not subject
to any regulatory capital requirements.
Under the regulatory capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines involving quantitative measures
of the Banks assets, liabilities and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Banks capital amounts and classification under the prompt
corrective action guidelines are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to
maintain minimum amounts and ratios of: total risk-based capital and Tier I capital to
risk-weighted assets (as defined in the regulations), Tier I capital to adjusted total assets (as
defined), and tangible capital to adjusted total assets (as defined). Management believes, as of
September 30, 2009, that the Bank meets all capital adequacy requirements to which they are
subject. The Bank was considered well capitalized according to its last regulatory examination.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note
4. Regulatory Matters (Continued)
The Bank, at September 30, 2009 and December 31, 2008, exceeds all of the capital adequacy
requirements to which it is subject as illustrated by the following:
Actual | Required | |||||||||||||||
Amount | Ratio | Amount | Ratio | |||||||||||||
(Unaudited) | ||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||
September 30, 2009 |
||||||||||||||||
Tier 1 Capital (to Average Assets) |
$ | 18,630 | 31.81 | % | $ | 2,343 | 4.00 | % | ||||||||
Tier 1 Capital (to Risk-Weighted Assets) |
$ | 18,630 | 57.93 | % | $ | 1,286 | 4.00 | % | ||||||||
Total Risk-Based Capital (to
Risk-Weighted Assets) |
$ | 18,930 | 58.86 | % | $ | 2,573 | 8.00 | % |
Actual | Required | |||||||||||||||
Amount | Ratio | Amount | Ratio | |||||||||||||
(Dollars in Thousands) | ||||||||||||||||
December 31, 2008 |
||||||||||||||||
Tier 1 Capital (to Average Assets) |
$ | 13,727 | 26.83 | % | $ | 2,047 | 4.00 | % | ||||||||
Tier 1 Capital (to Risk-Weighted Assets) |
$ | 13,727 | 47.98 | % | $ | 1,144 | 4.00 | % | ||||||||
Total Risk-Based Capital (to
Risk-Weighted Assets) |
$ | 14,000 | 48.93 | % | $ | 2,289 | 8.00 | % |
Note 5. Mutual to Stock Conversion
On March 17, 2008, the Bank received approval from the Louisiana Office of Financial
Institutions to change its name from Hibernia Homestead and Savings Association to Hibernia
Homestead Bank. The name change was done in conjunction with the Banks conversion from a
Louisiana-chartered mutual homestead and savings association to a Louisiana-chartered mutual
savings bank.
On January 27, 2009, the Bank completed its conversion from a mutual to a stock form of
organization as a subsidiary of Hibernia Homestead Bancorp and the Company completed an initial
public offering in which it issued 1,113,334 shares of its common stock for a total of $11,133,340
in gross offering proceeds. In conjunction with the conversion, the Bank established a liquidation
account in an amount equal to the Banks retained earnings contained in the final prospectus. The
liquidation account will be maintained for the benefit of eligible account holders and supplemental
eligible account holders who maintain deposit accounts in the Bank after the conversion.
In the event of a complete liquidation (and only in such event), each eligible account holder
and supplemental eligible account holder will be entitled to receive a liquidation distribution
from the liquidation account in the amount of the then current adjusted balance of deposit accounts
held, before any liquidation distribution may be made with respect to common stock. Except for the
repurchase of stock and payment of dividends by the Bank, the existence of the liquidation account
will not restrict the use or application of such retained earnings.
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 6. Disclosure About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of
financial instruments for which it is practicable to estimate the value:
Cash and Short -Term Investments |
For cash, the carrying amount approximates fair value. For short-term investments, fair
values are calculated based upon general investment market interest rates for similar
maturity investments. |
Investment Securities |
For securities and marketable equity securities held-for-investment purposes, fair values
are based on quoted market prices. |
Loan Receivables |
For certain homogeneous categories of loans, such as residential mortgages, credit card
receivables and other consumer loans, fair value is estimated using the current U.S.
treasury interest rate curve, a factor for cost of processing and a factor for historical
credit risk to determine the discount rate. |
Deposit Liabilities |
The fair value of demand deposits, savings deposits and certain money market deposits are
calculated based upon general investment market interest rates for investments with similar
maturities. The value of fixed maturity certificates of deposit is estimated using the U.S.
treasury interest rate curve currently offered for deposits of similar remaining maturities. |
Commitments to Extend Credit |
The fair value of commitments is estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements and the
present credit-worthiness of the counterparties. |
The estimated fair values of the Banks financial instruments at September 30, 2009 and
December 31, 2008, are as follows (reported in thousands):
September 30, 2009 | ||||||||
(Unaudited) | ||||||||
Carrying | Fair | |||||||
Amount | Value | |||||||
Financial Assets |
||||||||
Cash and Short-Term Investments |
$ | 4,403 | $ | 4,403 | ||||
Certificates of Deposit |
715 | 715 | ||||||
Investment Securities |
9,321 | 9,321 | ||||||
Loans |
39,995 | 39,259 | ||||||
Less: Allowance for Loan Losses |
(300 | ) | (300 | ) | ||||
$ | 54,134 | $ | 53,398 | |||||
Financial Liabilities |
||||||||
Deposits and Advance Payments by Borrowers
for Taxes and Insurance |
$ | 37,157 | $ | 36,426 | ||||
Unrecognized Financial Instruments |
||||||||
Commitments to Extend Credit |
$ | 71 | $ | 71 | ||||
21
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Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 6. Disclosure About Fair Value of Financial Instruments (Continued)
December 31, 2008 | ||||||||
Carrying | Fair | |||||||
Amount | Value | |||||||
Financial Assets |
||||||||
Cash and Short-Term Investments |
$ | 6,870 | $ | 6,870 | ||||
Investment Securities |
11,947 | 11,947 | ||||||
Loans |
32,546 | 31,358 | ||||||
Less: Allowance for Loan Losses |
(273 | ) | (273 | ) | ||||
$ | 51,090 | $ | 49,902 | |||||
Financial Liabilities |
||||||||
Deposits and Advance Payments by Borrowers
for Taxes and Insurance |
$ | 43,553 | $ | 43,122 | ||||
Unrecognized Financial Instruments |
||||||||
Commitments to Extend Credit |
$ | 512 | $ | 502 | ||||
Note 7. Fair Value of Financial Instruments
The Company adopted FASB ASC Topic No. 820 Fair Value Measurement and Disclosures (formerly
SFAS No. 157 Fair Value Measurements) on January 1, 2008 for all financial assets and liabilities
and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). This Topic defines fair value,
establishes a framework for measuring fair value, and expands disclosures about fair value
measurements.
Topic No. 820 Fair Value Measurement and Disclosures defines fair value as the price that
would be received upon sale of an asset or paid upon transfer of a liability in an orderly
transaction between market participants at the measurement date and in the principal or most
advantageous market for that asset or liability. The fair value should be calculated based on
assumptions that market participants would use in pricing the asset or liability, not on
assumptions specific to the entity. In addition, the fair value of liabilities should include
consideration of non-performance risk including our own credit risk.
22
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 7. Fair Value of Financial Instruments (Continued)
In addition to defining fair value, Topic No. 820 Fair Value Measurement and Disclosures
expands the disclosure requirements around fair value and establishes a fair value hierarchy for
valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to
which inputs used in measuring fair value are observable in the market. Each fair value
measurement is reported in one of the three levels which are determined by the lowest level input
that is significant to the fair value measurement in its entirety. These levels are:
| Level 1 Inputs are based upon unadjusted quoted prices for identical instruments
traded in active markets. |
| Level 2 Inputs are based upon quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques for which all significant assumptions are
observable in the market or can be corroborated by observable market date for
substantially the full term of the assets or liabilities. |
| Level 3 Inputs are generally unobservable and typically reflect managements
estimates of assumptions that market participants would use in pricing the asset or
liability. The fair values are therefore determined using model-based techniques that
include option pricing models, discounted cash flow models, and similar techniques. |
The following table presents the Banks assets and liabilities measured at fair value on a
recurring basis at September 30, 2009:
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
(In Thousands) | ||||||||||||||||
Assets |
||||||||||||||||
Investment Securities |
$ | 9,321 | $ | | $ | 9,321 | $ | | ||||||||
Foreclosed Assets |
197 | 197 | ||||||||||||||
Total |
$ | 9,518 | $ | | $ | 9,518 | $ | | ||||||||
Liabilities |
$ | | $ | | $ | | $ | | ||||||||
Total |
$ | | $ | | $ | | $ | | ||||||||
Note 8. Employee Stock Ownership Plan
In connection with the Conversion, the Company established an employee stock ownership plan
(ESOP) that will provide retirement benefits to all eligible employees of Hibernia Homestead
Bank. On January 27, 2009, the ESOP borrowed $890,660 from the Company and used these funds to
purchase 8%, or 89,066 shares, of the shares sold in the Companys initial public offering. As the
loan is repaid and shares are released from collateral, the shares will be allocated to the ESOP
participants based on their individual compensation as a percentage of total compensation of all
eligible participants. The Bank will recognize compensation expense equal to the fair value of the
ESOP shares committed to be released during the period.
23
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 9. Recognition and Retention Plan
On July 30, 2009, the shareholders of Hibernia approved the Companys 2009 Recognition and
Retention Plan. The 2009 Recognition and Retention Plan will provide the Companys directors and
key employees with an equity interest in the Company as compensation for their contributions to the
success of the Company, and as an incentive for future such contributions. The Board of Directors
of the Company may make grants under the 2009 Recognition and Retention Plan to eligible
participants based on these factors. Plan participants will vest in their share awards at a rate
no more rapid than 20% per year over a five year period, beginning on the date of the plan share
award. If service to the Company is terminated for any reason other than death, disability or
change in control, the unvested share awards shall be forfeited.
The Recognition and Retention Plan Trust has been established to acquire, hold, administer,
invest, and make distributions from the Trust in accordance with provisions of the Plan and Trust.
The Trust will acquire 4%, or 44,533 shares, of the shares sold in the Companys initial public
offering, which will be held in the Trust subject to the Plans vesting requirements. The
Recognition and Retention Plan provides that grants to each employee and non-employee director
shall not exceed 25% and 5% of the shares available under the Plan, respectively. Shares awarded to
non-employee directors in the aggregate shall not exceed 30% of the shares available under the
Plan. At September 30, 2009, no shares have been acquired by the Trust.
Note 10. Stock Option Plan
On July 30, 2009, the shareholders of the Company approved the Companys 2009 Stock Option
Plan. The 2009 Stock Option Plan will provide the Companys directors and key employees with a
proprietary interest in the Company as compensation for their contributions to the success of the
Company, and as an incentive for future such contributions. The Board of Directors of the Company
may grant options to eligible employees and non-employee directors based on these factors. Plan
participants will vest in their options at a rate no more rapid than 20% per year over a five year
period, beginning on the grant date of the option. Vested options will have an exercise period of
ten years commencing on the date of grant. If service to the Company is terminated for any reason
other than death, disability or change in control, the unvested options shall be forfeited. The
Company will recognize compensation expense during the vesting period based on the fair value of
the option on the date of grant. No options have been granted as of September 30, 2009.
24
Table of Contents
Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)
Notes to Consolidated Financial Statements (Continued)
Note 11. Subsequent Events
In accordance with the subsequent events topic of the FASB ASC, Topic No. 855, Subsequent
Events, the Company evaluates events and transactions that occur after the balance sheet date for
potential recognition in the financial statements. The effects of all subsequent events that
provide additional evidence of conditions that existed at the balance sheet date are recognized in
the financial statements as of September 30, 2009. In preparing these financial statements, the
Company evaluated the events and transactions that occurred from September 30, 2009 through
November 13, 2009, the date these financial statements were issued.
Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements and information
relating to Hibernia Homestead Bancorp, Inc. (the Company or Hibernia) and Hibernia Homestead
Bank (the Bank) that are based on the beliefs of management as well as assumptions made by and
information currently available to management. In addition, in portions of this document the words
anticipate, believe, estimate, expect, intend, should and similar expressions, or the
negative thereof, as they relate to the Company or the Bank or their management, are intended to
identify forward-looking statements. Such statements reflect the current views of the Company
and/or the Bank with respect to forward-looking events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or uncertainties materialize or
should underlying assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated, expected or intended. The Company does not
intend to update these forward-looking statements.
General
The Company was formed by the Bank in June 2008, in connection with the Banks conversion to a
Louisiana chartered stock form savings bank (the Conversion) completed on January 27, 2009. The
Companys results of operations are primarily dependent on the results of the Bank, which became a
wholly owned subsidiary upon completion of the Conversion. The Banks results of operations
depend, to a large extent, on net interest income, which is the difference between the income
earned on its loan and investment portfolios and the cost of funds, consisting of the interest paid
on deposits and borrowings. Results of operations are also affected by provisions for loan losses,
fee income and other non-interest income and non-interest expense. Non-interest expense
principally consists of compensation and employee benefits, office occupancy and equipment expense,
data processing, advertising and business promotion and other expense. The Banks results of
operations are also significantly affected by general economic and competitive conditions,
particularly changes in interest rates, government policies and actions of regulatory authorities.
Future changes in applicable law, regulations or government policies may materially impact our
financial condition and results of operations.
25
Table of Contents
Critical Accounting Policies
In reviewing and understanding financial information for Hibernia, you are encouraged to read
and understand the significant accounting policies used in preparing our financial statements.
These policies are described in Note 1 of the notes to our financial statements. The accounting and
financial reporting policies of Hibernia conform to accounting principles generally accepted in the
United States of America and to general practices within the banking industry. Accordingly, the
consolidated financial statements require certain estimates, judgments, and assumptions, which are
believed to be reasonable, based upon the information available. These estimates and assumptions
affect the reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the periods presented. The following accounting
policies comprise those that management believes are the most critical to aid in fully
understanding and evaluating our reported financial results. These policies require numerous
estimates or economic assumptions that may prove inaccurate or may be subject to variations which
may significantly affect our reported results and financial condition for the period or in future
periods.
Allowance for Loan Losses. The allowance for loan losses is maintained at a level to provide
for probable credit losses related to specifically identified loans and for losses inherent in the
loan portfolio that have been incurred as of the balance sheet date. The allowance is comprised of
specific reserves and a general reserve. Specific reserves are assessed for each loan that is
reviewed for impairment or for which a probable loss has been identified. The allowance related to
loans that are identified as impaired is based on discounted expected future cash flows using the
loans initial effective interest rate, the observable market value of the loan, or the estimated
fair value of the collateral for certain collateral dependent loans. Factors contributing to the
determination of specific reserves include the financial condition of the borrower, changes in the
value of pledged collateral and general economic conditions. General reserves are established
based on historical charge-offs considering factors that include risk rating, concentrations and
loan type. For the general reserve, management also considers trends in delinquencies and
non-accrual loans, concentrations, volatility of risk ratings and the evolving mix in terms of
collateral, relative loan size and the degree of seasoning within the various loan products.
Changes in underwriting standards, credit administration and collection policies, regulation
and other factors which affect the credit quality and collectability of the loan portfolio also
impact the allowance levels. The allowance for loan losses is based on managements estimate of
probable credit losses inherent in the loan portfolio; actual credit losses may vary from the
current estimate. The allowance for loan losses is reviewed periodically, taking into
consideration the risk characteristics of the loan portfolio, past charge-off experience, general
economic conditions and other factors that warrant current recognition. As adjustments to the
allowance for loan losses become necessary, they are reflected as a provision for loan losses in
current-period earnings. Actual loan charge-offs are deducted from and subsequent recoveries of
previously charged-off loans are added to the allowance.
Income Taxes. Deferred income tax assets and liabilities are determined using the liability
(or balance sheet) method. Under this method, the net deferred tax asset or liability is
determined based on the tax effects of the temporary differences between the book and tax bases of
the various assets and liabilities and gives current recognition to changes in tax rates and laws.
Realizing our deferred tax assets principally depends upon our achieving projected future taxable
income. We may change our judgments regarding future profitability due to future market conditions
and other factors. We may adjust our deferred tax asset balances if our judgments change.
26
Table of Contents
Comparison of Financial Condition at September 30, 2009 and December 31, 2008
Hibernia Homestead Bancorps total assets increased $2.5 million, or 4.3%, to $60.7 million at
September 30, 2009 compared to $58.2 million at December 31, 2008. During the first nine months of
2009, the largest increase was in net loans receivable, which increased $7.4 million and was offset
by a decrease of $2.6 million in investment securities available-for-sale and a decrease of $3.4
million in federal funds sold. The decrease of $2.5 million in cash and cash equivalents as of
September 30, 2009, is primarily a result of the funding of new loans and the investment of excess
liquidity in certificates of deposit. Our net loans receivable increased by $7.4 million, or
23.0%, to $39.7 million at September 30, 2009, compared to $32.3 million at December 31, 2008
primarily due to an increase in commercial loans secured by real estate of $4.8 million and an
increase of $4.3 million in one-to-four family residential loans. During the first nine months of
2009 our total loan originations amounted to approximately $15.7 million and loan principal
repayments were approximately $8.2 million. Our total investment securities amounted to $9.3
million at September 30, 2009, compared to $11.9 million at December 31, 2008, a decrease of $2.6
million, or 22.0%. The decrease in investment securities was primarily due to maturities,
redemptions and sales of securities available-for-sale of $5.2 million received during the period,
partially offset by purchases of securities available-for-sale of $2.5 million.
Hibernias deposits decreased $6.4 million, or 14.7%, to $36.8 million at September 30, 2009,
compared to $43.1 million at December 31, 2008, primarily as a result of the completion of our
mutual to stock conversion and initial public offering in January, 2009. Deposits as of December
31, 2008 included $9.3 million in deposits being held in escrow for stock subscriptions in
connection with Hibernias initial public offering. The average balance of deposits was $34.7
million for the nine months ended September 30, 2009 as compared to $35.0 million for the prior
year period. The Bank had no Federal Home Loan Bank advances at September 30, 2009, or December
31, 2008, as we continued our strategy in recent periods of managing interest rate risk by paying
down higher cost borrowings. Our stockholders equity amounted to $23.5 million at September 30,
2009 compared to $14.2 million at December 31, 2008, an increase of $9.3 million, or 65.6%. The
increase in stockholders equity was the result of $10.4 million in net proceeds from the issuance
of common stock and a $45,000 increase in accumulated other comprehensive income partially offset
by $891,000 in the value of shares allocated to the employee stock ownership plan.
Comparison
of Operating Results for the Three and Nine Months Ended September 30, 2009 and 2008.
For the three months ended September 30, 2009, Hibernia Homestead Bancorp had a net loss of
$56,000 compared to a net loss of $135,000 for the three months ended September 30, 2008. Our
results in the 2009 quarterly period reflect, in part, an $83,000 gain on the sale of
available-for-sale securities and an increase in our net interest margin for the quarter ended
September 30, 2009. In addition, our non-interest expenses increased $90,000, or 15.2%, over the
prior three month period. Our net interest margin increased by 59 basis points to 3.97% for the
three months ended September 30, 2009 compared to 3.38% for the three months ended September 30,
2008, while our average interest rate spread improved to 3.49% for the three months ended September
30, 2009, compared to 2.90% for the three months ended September 30, 2008. During the three months
ended September 30, 2009, the average rate paid on certificates of deposit decreased 133 basis
points from 3.48% for the three months ended September 30, 2008, to 2.15% for the three months
ended September 30, 2009.
For the nine months ended September 30, 2009, our net loss was $251,000 compared to a net loss
of $359,000 for first nine months of 2008. Our results in the 2009 period reflect, in part, an
$83,000 gain on the sale of available-for-sale securities and an increase in our net interest
margin for the nine months ended September 30, 2009. In addition, our non-interest expenses
increased $261,000, or 15.5%, over the prior nine month period. For the first nine months of 2009,
our net interest margin and average interest rate spread were 3.82% and 3.26%, respectively,
compared to 3.18% and 2.56%, respectively for the nine
months ended September 30, 2008. During the first nine months of 2009, the average rate paid
on certificates of deposit decreased 153 basis points from 3.95% for the nine months ended
September 30, 2008, to 2.42% for the nine months ended September 30, 2009. Lower rates on
certificates of deposit during the nine months ended September 30, 2009 reflect general interest
rate declines during the period and managements decision not to aggressively compete for
certificate deposits.
27
Table of Contents
Interest Income. Hibernias total interest income was $649,000 for the three months ended
September 30, 2009, compared to $590,000 for the three months ended September 30, 2008, a $59,000
or 10.0% increase. The increase in interest income in the three months ended September 30, 2009,
compared to the three months ended September 30, 2008, was due primarily to increases in average
interest-earning assets, partially offset by decreases in the average yields on loans and
investments. The average yield on our interest-earning assets was 5.04% for the three months ended
September 30, 2009, compared to 5.52% for the comparable period in 2008. Average interest-earning
assets were $51.5 million for the three months ended September 30, 2009, compared to $42.7 million
for the comparable period in 2008.
For the nine months ended September 30, 2009, total interest income was $1.9 million, compared
to $1.8 million for the nine months ended September 30, 2008, an $87,000 or 4.9% increase. The
increase in interest income for the nine months ended September 30, 2009, compared to the nine
months ended September 30, 2008, was due primarily to increases in average interest-earning assets,
partially offset by decreases in the average yields on loans and investments. The average yield on
our interest-earning assets was 4.97% for the nine months ended September 30, 2009, compared to
5.52% for the comparable period in 2008. Average interest-earning assets were $50.5 million for
the nine months ended September 30, 2009, compared to $43.3 million for the comparable period in
2008.
Interest Expense. Hibernias total interest expense was $134,000 for the three months ended
September 30, 2009, compared to $227,000 for the three months ended September 30, 2008, a decrease
of $93,000, or 41.0%. The decrease in interest expense for the three month period ended September
30, 2009 was primarily due to lower average rates of interest paid on our certificates of deposit
in the 2009 period combined with decreases in the average balances of certificates of deposit. Our
average rate paid on interest-bearing liabilities was 1.55% for the three months ended September
30, 2009, compared to 2.62% for the three months ended September 30, 2008.
Our total interest expense was $439,000 for the nine months ended September 30, 2009, compared
to $762,000 for the nine months ended September 30, 2008, a decrease of $323,000, or 42.4%. The
decrease in interest expense for the nine months ended September 30, 2009 was primarily due to
lower average rates of interest paid on our certificates of deposit in the 2009 period combined
with decreases in the average balances of certificates of deposit. For the nine months ended
September 30, 2009, our average rate paid on interest-bearing liabilities was 1.71%, compared to
2.96% for the nine months ended September 30, 2008.
Non-Interest Income. Hibernias non-interest income consists of rental income, net of related
expenses, fees and service charges, and realized gains and losses on investments.
Hibernias total non-interest income amounted to $114,000 for the three months ended September
30, 2009, compared to $25,000 for the three months ended September 30, 2008, an $89,000 or 356.0%,
increase. For the nine months ended September 30, 2009, our non-interest income was $172,000,
compared to $109,000 for the nine months ended September 30, 2008, a $63,000, or 57.8%, increase.
The increase for the three and nine month periods was primarily due to the realized gain on the
sale of available-for-sale securities which was sold to fund loan originations.
28
Table of Contents
Non-Interest Expense. Hibernias total non-interest expense increased by $90,000, or 15.2%,
to $682,000 in the quarter ended September 30, 2009, compared to $592,000 in the quarter ended
September 30, 2008. For the nine months ended September 30, 2009, compared to the nine months
ended September 30, 2008, our non-interest expense increased by $261,000, or 15.5%. The primary
reasons for the
increase in non-interest expense for the three months and nine months ended September 30, 2009
were salaries and employee benefits expense, as additional staff was added to manage Hibernias
operations as a publicly owned company, higher insurance, data processing, and occupancy expenses,
and legal and audit professional fees incurred in connection with public company reporting
requirements following the conversion of Hibernia Homestead Bank from a mutual savings bank to a
stock savings bank effective in January 2009. The three month period ended September 30, 2009 also
reflected a $25,000 increase on advertising expenses over the same period last year. Non-interest
expense for the nine months ended September 30, 2009, included a mandatory $19,000 special deposit
insurance assessment paid to the Federal Deposit Insurance Corporation which was assessed in the
quarter ended June 30, 2009, and was applicable for all insured depository institutions.
Average Balances, Net Interest Income, and Yields Earned and Rates Paid. The following tables
show for the periods indicated the total dollar amount of interest from average interest-earning
assets and the resulting yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates, and the net interest margin. As the Company
owned no tax-exempt securities during the periods presented, no yield adjustments were made. All
average balances are based on daily averages.
Three Months Ended September 30, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
Balance | Interest(3) | Rate(1) | Balance | Interest(3) | Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans receivable(1) |
$ | 38,220 | $ | 552 | 5.79 | % | $ | 29,783 | $ | 454 | 6.10 | % | ||||||||||||
Investment securities |
10,224 | 93 | 3.60 | 12,257 | 133 | 4.33 | ||||||||||||||||||
Other interest-earning assets |
3,058 | 4 | 0.51 | 684 | 3 | 1.99 | ||||||||||||||||||
Total interest-earning assets |
51,502 | 649 | 5.04 | % | 42,724 | 590 | 5.52 | % | ||||||||||||||||
Non-interest-earning assets |
7,515 | 7,235 | ||||||||||||||||||||||
Total assets |
$ | 59,017 | $ | 49,959 | ||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Savings, NOW and money market accounts |
13,144 | 20 | 0.61 | % | 12,456 | 33 | 1.04 | % | ||||||||||||||||
Certificates of deposit |
21,062 | 114 | 2.15 | 22,138 | 194 | 3.48 | ||||||||||||||||||
Total interest-bearing deposits |
34,206 | 134 | 1.56 | 34,594 | 227 | 2.61 | % | |||||||||||||||||
FHLB advances |
59 | | 0.37 | 20 | | 2.43 | ||||||||||||||||||
Total interest-bearing liabilities |
34,265 | 134 | 1.55 | % | 34,614 | 227 | 2.61 | % | ||||||||||||||||
Non-interest-bearing liabilities |
1,191 | 1,332 | ||||||||||||||||||||||
Total liabilities |
35,456 | 35,946 | ||||||||||||||||||||||
Retained earnings |
23,561 | 14,013 | ||||||||||||||||||||||
Total liabilities and retained earnings |
$ | 59,017 | $ | 49,959 | ||||||||||||||||||||
Net interest-earning assets |
$ | 17,237 | $ | 8,110 | ||||||||||||||||||||
Net interest income; average interest rate spread |
$ | 515 | 3.49 | % | $ | 363 | 2.91 | % | ||||||||||||||||
Net interest margin(2) |
3.97 | % | 3.38 | % | ||||||||||||||||||||
Average interest-earning assets to
average interest-bearing liabilities |
150.30 | % | 123.43 | % | ||||||||||||||||||||
(1) | Calculated net of deferred fees and discounts, loans in process and allowance for loan
losses. |
|
(2) | Equals net interest income divided by average interest-earning assets. |
|
(3) | Amounts that do not round to $1,000 are reflected as zero. |
29
Table of Contents
Nine Months Ended September 30, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
Balance | Interest(3) | Rate(1) | Balance | Interest(3) | Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans receivable(1) |
$ | 34,899 | $ | 1,521 | 5.81 | % | $ | 29,287 | $ | 1,343 | 6.12 | % | ||||||||||||
Investment securities |
12,179 | 347 | 3.80 | 13,559 | 441 | 4.33 | ||||||||||||||||||
Other interest-earning assets |
3,372 | 11 | 0.44 | 472 | 8 | 2.30 | ||||||||||||||||||
Total interest-earning assets |
50,450 | 1,879 | 4.97 | % | 43,318 | 1,792 | 5.52 | % | ||||||||||||||||
Non-interest-earning assets |
7,437 | 6,672 | ||||||||||||||||||||||
Total assets |
$ | 57,887 | $ | 49,990 | ||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Savings, NOW and money market accounts |
14,409 | 78 | 0.72 | % | 12,026 | 96 | 1.07 | % | ||||||||||||||||
Certificates of deposit |
19,946 | 361 | 2.42 | 22,265 | 660 | 3.96 | ||||||||||||||||||
Total interest-bearing deposits |
34,355 | 439 | 1.71 | 34,291 | 756 | 2.95 | ||||||||||||||||||
FHLB advances |
20 | | 0.37 | 235 | 6 | 3.22 | ||||||||||||||||||
Total interest-bearing liabilities |
34,375 | 439 | 1.71 | % | 34,526 | 762 | 2.95 | % | ||||||||||||||||
Non-interest-bearing liabilities |
794 | 1,245 | ||||||||||||||||||||||
Total liabilities |
35,169 | 35,771 | ||||||||||||||||||||||
Retained earnings |
22,718 | 14,219 | ||||||||||||||||||||||
Total liabilities and retained earnings |
$ | 57,887 | $ | 49,990 | ||||||||||||||||||||
Net interest-earning assets |
$ | 16,075 | $ | 8,792 | ||||||||||||||||||||
Net interest income; average interest
rate spread |
$ | 1,440 | 3.26 | % | $ | 1,030 | 2.57 | % | ||||||||||||||||
Net interest margin(2) |
3.82 | % | 3.18 | % | ||||||||||||||||||||
Average interest-earning assets to
average interest-bearing liabilities |
146.76 | % | 125.46 | % | ||||||||||||||||||||
(1) | Calculated net of deferred fees and discounts, loans in process and allowance for loan
losses. |
|
(2) | Equals net interest income divided by average interest-earning assets. |
|
(3) | Amounts that do not round to $1,000 are reflected as zero. |
Provision for Loan Losses. The allowance for loan losses is established through a provision
for loan losses charged to earnings as losses are estimated to have occurred in our loan portfolio.
The allowance for loan losses is maintained at a level to provide for probable credit losses
related to specifically identified loans and for losses inherent in the loan portfolio that have
been incurred as of the balance sheet date. The allowance is comprised of specific reserves and a
general reserve.
Specific reserves are assessed for each loan that is reviewed for impairment or for which a
probable loss has been identified. The reserve related to loans that are identified as impaired is
based on discounted expected future cash flows using the loans initial effective interest rate,
the observable market value of the loan, or the estimated fair value of the collateral for certain
collateral dependent loans. Factors contributing to the determination of specific reserves include
the financial condition of the borrower, changes in the value of pledged collateral and general
economic conditions. General reserves are established based on historical charge-offs considering
factors that include risk rating, concentrations and loan type. For the general reserve,
management also considers trends in delinquencies and non-accrual loans, concentrations, volatility
of risk ratings and the evolving mix in terms of collateral, relative loan size and the degree of
seasoning within the various loan products.
Changes in underwriting standards, credit administration and collection policies, regulation
and other factors which affect the credit quality and collectability of the loan portfolio also
impact the allowance levels. The allowance for loan losses is based on managements estimate of
probable credit losses inherent in the loan portfolio; actual credit losses may vary from the
current estimate. The allowance for loan losses is reviewed periodically, taking into
consideration the risk characteristics of the loan portfolio, past charge-off experience, general
economic conditions and other factors that warrant current recognition. As adjustments to the
allowance for loan losses become necessary, they are reflected
as a provision for loan losses in current-period earnings. Actual loan charge-offs are deducted
from and subsequent recoveries of previously charged-off loans are added to the allowance.
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Hibernias nonperforming assets, defined as non-accrual loans, accruing loans past due 90 days
or more and foreclosed property, totaled $354,000, or 0.6%, of total assets at September 30, 2009,
compared to $150,000, or 0.3%, of total assets at December 31, 2008. The non-performing loans
totaling $157,000 at September 30, 2009, consist of two loans secured by first mortgages on
one-to-four family residential real estate. Management believes that the allowance for loan and
lease losses is sufficient to cover any losses that may be incurred on these loans. Foreclosed
property at September 30, 2009 totaling $197,000 consisted of two residential homes in the greater
New Orleans area.
Loan loss provisions of $33,000 and $48,000 were made to the allowance during the three and
nine months ended September 30, 2009, respectively, compared to none for the three and nine months
ended September 30, 2008. To the best of managements knowledge, the allowance is maintained at a
level believed to cover all known and inherent losses in the loan portfolio, both probable and
reasonable.
In 2005, Hurricane Katrina affected the residents and businesses within the Hibernias market
area. The adverse financial impacts of this event on the Banks loan portfolio were recognized at
that time. Management continues to closely monitor the loan portfolio, and no substantial
additional losses directly related to Hurricane Katrina have been experienced to date. However,
the extent to which the still affected areas within the Companys market eventually recover is
unknown at this time as are the ultimate adverse additional impacts that might have, if any, on the
Companys loan portfolio.
Liquidity and Capital Resources
Hibernia maintains levels of liquid assets deemed adequate by management. Hibernia adjusts
its liquidity levels to fund deposit outflows, repay its borrowings and to fund loan commitments.
Hibernia also adjusts liquidity as appropriate to meet asset and liability management objectives.
Hibernias primary sources of funds are deposits, amortization and prepayment of loans and to
a lesser extent, rental income and funds provided from operations. While scheduled principal
repayments on loans are a relatively predictable source of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic conditions and competition.
Hibernia sets the interest rates on its deposits to maintain a desired level of total deposits. In
addition, the Company invests excess funds in short-term interest-earning accounts and other
assets, which provide liquidity to meet lending requirements. Hibernia Homestead Bancorps cash
and cash equivalents amounted to $4.4 million at September 30, 2009.
A significant portion of the Hibernias liquidity consists of non-interest earning deposits.
Primary sources of cash are principal repayments on loans and increases in deposit accounts. If
the Bank requires funds beyond its ability to generate them internally, borrowing agreements exist
with the Federal Home Loan Bank of Dallas, which provide an additional source of funds. At
September 30, 2009, Hibernia did not have any advances from the Federal Home Loan Bank of Dallas
and had $20.2 million in borrowing capacity. At September 30, 2009, the Bank was also a party to a
Master Purchase Agreement with First National Bankers Bank whereby First National Bankers Bank
may sell to Hibernia Homestead Bank federal funds in an amount not to exceed $5.0 million. As of
September 30, 2009, Hibernia Homestead Bank had no federal funds purchased from First National
Bankers Bank. As of September 30, 2009, the Bank participated in the Certificate of Deposit
Account Registry Service (CDARS) of Promontory Interfinancial Network, which allows the Bank to
provide FDIC deposit insurance in excess of account coverage limits by exchanging deposits (known
as reciprocal deposits) with other CDARS members. The Company may also purchase deposits (known
as One-Way Buy deposits) from other CDARS members in an amount not to exceed $5.7 million, or 10%
of the Banks total assets. Such deposits are generally considered a form of brokered deposits.
As of September 30, 2009, the Bank held no reciprocal deposits or One-Way Buy deposits in the CDARS
program.
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At September 30, 2009, the Bank had outstanding loan commitments of $2.3 million to originate
loans. At September 30, 2009, certificates of deposit scheduled to mature in less than one year
totaled $16.4 million. Based on prior experience, management believes that a significant portion of
such deposits will remain with us, although there can be no assurance that this will be the case.
In addition, in a rising interest rate environment, the cost of such deposits could be
significantly higher upon renewal. The Bank intends to utilize its liquidity to fund its lending
activities.
Contractual Cash Obligations. The following table summarizes our contractual cash obligations
at September 30, 2009.
Payments Due By Period | ||||||||||||||||||||
Total at | To | 1-3 | 4-5 | After 5 | ||||||||||||||||
September 30, 2009 | 1 Year | Years | Years | Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Certificates of deposit |
$ | 22,855 | $ | 16,386 | $ | 5,751 | $ | 718 | $ | | ||||||||||
Total contractual obligations |
$ | 22,855 | $ | 16,386 | $ | 5,751 | $ | 718 | $ | | ||||||||||
Hibernia Homestead Bank is required to maintain regulatory capital sufficient to meet tier 1
leverage, tier 1 risk-based and total risk-based capital ratios of at least 4.0%, 4.0% and 8.0%,
respectively. At September 30, 2009, Hibernia Homestead Bank exceeded each of its capital
requirements with ratios of 31.81%, 57.93% and 58.86%, respectively.
Off-Balance Sheet Arrangements
In the normal course of operations, we engage in a variety of financial transactions that, in
accordance with generally accepted accounting principles are not recorded in our financial
statements. These transactions involve, to varying degrees, elements of credit, interest rate, and
liquidity risk. Such transactions are used primarily to manage customers requests for funding and
take the form of loan commitments and lines of credit. Our exposure to credit loss from
non-performance by the other party to the above-mentioned financial instruments is represented by
the contractual amount of those instruments. We use the same credit policies in making commitments
and conditional obligations as we do for on-balance sheet instruments. In general, we do not
require collateral or other security to support financial instruments with offbalance sheet credit
risk.
Commitments. The following table summarizes our outstanding commitments to originate loans
and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and
undisbursed construction loans at September 30, 2009.
Total Amounts | Amount of Commitment Expiration - Per Period | |||||||||||||||||||
Committed at | To | 1-3 | 4-5 | After 5 | ||||||||||||||||
September 30, 2009 | 1 Year | Years | Years | Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Lines of credit |
$ | 71 | $ | 71 | $ | | $ | | $ | | ||||||||||
Undisbursed portion of loans in process |
262 | 262 | | | | |||||||||||||||
Commitments to originate loans |
2,323 | 2,323 | | | | |||||||||||||||
Total commitments |
$ | 2,656 | $ | 2,656 | $ | | $ | | $ | | ||||||||||
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Impact of Inflation and Changing Prices
The consolidated financial statements and related financial data presented herein regarding
Hibernia Homestead Bancorp, Inc. have been prepared in accordance with accounting principles
generally accepted in the United States of America which generally require the measurement of
financial position
and operating results in terms of historical dollars, without considering changes in relative
purchasing power over time due to inflation. Unlike most industrial companies, virtually all of
Hibernias assets and liabilities are monetary in nature. As a result, interest rates generally
have a more significant impact on the Companys performance than does the effect of inflation.
Interest rates do not necessarily move in the same direction or in the same magnitude as the prices
of goods and services, since such prices are affected by inflation to a larger extent than interest
rates.
Item 3 Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4T Controls and Procedures.
Our management evaluated, with the participation of our President and Chief Executive Officer
and our Senior Vice President and Chief Financial Officer, our disclosure controls and procedures
(as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the
end of the period covered by this report. Based on such evaluation, our President and Chief
Executive Officer and our Senior Vice President and Chief Financial Officer concluded that our
disclosure controls and procedures are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and
regulations and are operating in an effective manner.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) or
15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART II OTHER INFORMATION
Item 1 Legal Proceedings.
There are no matters required to be reported under this item.
Item 1A Risk Factors.
Not applicable.
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Item 2 Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Not applicable.
(b) Not applicable.
(c) Purchases of Equity Securities
The following table represents the purchasing activity of the Recognition and Retention Plan
Trust during the third quarter of fiscal 2009:
Maximum | ||||||||||||||||
Total Number | Number of | |||||||||||||||
of Shares | Shares that | |||||||||||||||
Purchased as | May Yet Be | |||||||||||||||
Total | Average | Part of Publicly | Purchased | |||||||||||||
Number of | Price | Announced | Under the | |||||||||||||
Shares | Paid per | Plans or | Plans or | |||||||||||||
Period | Purchased | Share | Programs | Programs | ||||||||||||
July 1, 2009 July 31, 2009 |
| $ | | | 44,533 | |||||||||||
August 1, 2008 August 31, 2009 |
| | | 44,533 | ||||||||||||
September 1, 2009 September
30, 2009 |
| | | 44,533 | ||||||||||||
Total |
| $ | | | 44,533 | |||||||||||
Notes to this table:
(a) | The Companys 2009 Recognition and Retention Plan was authorized to purchase up to a maximum
of 44,533 shares of common stock, or 4.0% of the common stock sold in the initial public
offering completed on January 27, 2009, as disclosed in the Companys prospectus dated
November 12, 2008, and announced by press release on July 31, 2009. |
(b) | On July 30, 2009, the shareholders of Hibernia approved the adoption of the 2009 Recognition
and Retention Plan and Trust Agreement. |
Item 3 Defaults Upon Senior Securities.
There are no matters required to be reported under this item.
Item 4 Submission of Matters to a Vote of Security Holders.
Incorporated by reference from the Companys Form 10-Q for the quarter ended June 30, 2009,
filed with the Securities and Exchange Commission August 14, 2009 (SEC File No. 000-53555).
Item 5 Other Information.
There are no matters required to be reported under this item.
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Item 6
Exhibits.
List of exhibits: (filed herewith unless otherwise noted)
No. | Description | |||
10.1 | 2009 Stock Option Plan (1) |
|||
10.2 | 2009 Recognition and Retention Plan and Trust Agreement (1) |
|||
31.1 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer |
|||
31.2 | 13a-14(a)/15d-14(a) Section 302 Certification of the Chief Financial Officer |
|||
32.1 | Section 1350 Certification |
(1) | Incorporated by reference from the Companys proxy statement on
Schedule 14A, filed with the Securities and Exchange Commission on June 19,
2009 (SEC File No. 000-53555). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HIBERNIA HOMESTEAD BANCORP, INC. |
||||
Date: November 13, 2009 | By: | /s/ A. Peyton Bush, III | ||
A. Peyton Bush, III | ||||
President and Chief Executive Officer | ||||
Date: November 13, 2009 | By: | /s/ Donna T. Guerra | ||
Donna T. Guerra | ||||
Chief Financial Officer |
36