UNITED STATES
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

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

Not Applicable

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 issuer’s classes of common stock, as of the latest practicable date: As of November 13, 2009, 1,113,334 shares of the Registrant’s common stock were issued and outstanding.

 

 

Hibernia Homestead Bancorp, Inc.
Form 10-Q

Table of Contents

		Page
PART I — FINANCIAL INFORMATION
Item 1 — Financial Statements (Unaudited)			1
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3 — Quantitative and Qualitative Disclosures About Market Risk			33
Item 4T — Controls and Procedures			33
PART II — OTHER INFORMATION
Item 1 — Legal Proceeding			33
Item 1A — Risk Factors			33
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds			34
Item 3 — Defaults Upon Senior Securities			34
Item 4 — Submission of Matters to a Vote of Security Holders			34
Item 5 — Other Information			34
Item 6 — Exhibits			35
Signatures			36
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

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.

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.

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.

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.

Hibernia Homestead Bancorp, Inc.
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 Bank’s 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 Bank’s 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 Bank’s 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 Bank’s application to convert its charter effective March 17, 2008. As a result of the charter conversion, the Bank’s primary federal banking regulator changed from the OTS to the Federal Deposit Insurance Corporation (“FDIC”). The Louisiana Office of Financial Institutions remains as the Bank’s 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 Bank’s 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 Bank’s 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 Bank’s 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.

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 Company’s 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 Bank’s 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 Bank’s 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.

Hibernia Homestead Bancorp, Inc.
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 loan’s 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 management’s 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.

Hibernia Homestead Bancorp, Inc.
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 loan’s original effective interest rate. As a practical expedient, impairment may be measured based on the loan’s 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.

Hibernia Homestead Bancorp, Inc.
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 security’s 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 member’s 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.

Hibernia Homestead Bancorp, Inc.
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 Company’s acquisition of the stock of the Bank in connection with the Bank’s 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 management’s 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 Company’s financial position or results of operations.

Hibernia Homestead Bancorp, Inc.
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.

Hibernia Homestead Bancorp, Inc.
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 entity’s 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 seller’s 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.

Hibernia Homestead Bancorp, Inc.
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 Topic’s 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.

Hibernia Homestead Bancorp, Inc.
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 Company’s 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.

Hibernia Homestead Bancorp, Inc.
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

Hibernia Homestead Bancorp, Inc.
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 Hibernia’s 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.

Hibernia Homestead Bancorp, Inc.
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 issuer’s 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 issuer’s 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.

Hibernia Homestead Bancorp, Inc.
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.

Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)

Note 3. Loans Receivable (Continued)

In 2005 Hurricane Katrina affected the residents and businesses within the Bank’s operating area. The adverse financial impacts of this event on the Bank’s 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 Bank’s market eventually recover is unknown at this time as are the ultimate adverse additional impacts that the hurricane might have, if any, on the Bank’s 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 Bank’s 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 Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s 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.

Hibernia Homestead Bancorp, Inc.
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 Bank’s 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 Bank’s 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.

Hibernia Homestead Bancorp, Inc.
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 Bank’s 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

Hibernia Homestead Bancorp, Inc.
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.

Hibernia Homestead Bancorp, Inc.
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 management’s 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 Bank’s 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 Company’s 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.

Hibernia Homestead Bancorp, Inc.
Notes to Consolidated Financial Statements (Continued)

Note 9. Recognition and Retention Plan

On July 30, 2009, the shareholders of Hibernia approved the Company’s 2009 Recognition and Retention Plan. The 2009 Recognition and Retention Plan will provide the Company’s 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 Company’s initial public offering, which will be held in the Trust subject to the Plan’s 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 Company’s 2009 Stock Option Plan. The 2009 Stock Option Plan will provide the Company’s 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.

Hibernia Homestead Bancorp, Inc.
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 — Management’s 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 Bank’s conversion to a Louisiana chartered stock form savings bank (the “Conversion”) completed on January 27, 2009. The Company’s results of operations are primarily dependent on the results of the Bank, which became a wholly owned subsidiary upon completion of the Conversion. The Bank’s results of operations depend, to a large extent, on net interest income, which is the difference between the income earned on its loan and investment portfolios and the cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by provisions for loan losses, 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 Bank’s 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.

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 loan’s 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 management’s 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.

Comparison of Financial Condition at September 30, 2009 and December 31, 2008

Hibernia Homestead Bancorp’s 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.

Hibernia’s 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 Hibernia’s 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 management’s decision not to aggressively compete for certificate deposits.

Interest Income. Hibernia’s 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. Hibernia’s 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. Hibernia’s non-interest income consists of rental income, net of related expenses, fees and service charges, and realized gains and losses on investments.

Hibernia’s 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.

Non-Interest Expense. Hibernia’s 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 Hibernia’s 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	%

		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	%