As filed with the Securities and Exchange Commission on October 27, 2010

Registration No. 333-169230

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

Pre-Effective Amendment No. 2

to the

Form S-1

 

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

Home Federal Bancorp, Inc. of Louisiana

(Exact name of registrant as specified in its articles of incorporation)

 

 

624 Market Street
Shreveport, Louisiana 71101
(318) 222-1145

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Daniel R. Herndon
Chairman, President and Chief Executive Officer
Home Federal Bancorp, Inc. of Louisiana
624 Market Street
Shreveport, Louisiana 71101
(318) 222-1145

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

 

 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective.

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. o

 

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):

(Do not check if a smaller reporting company)

 

 

CALCULATION OF REGISTRATION FEE

 

 

The Registrant hereby amends this Registration Statement on such date as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that the Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.

 

PROSPECTUS

 

(Proposed Holding Company for Home Federal Bank)

Up to 2,156,250 Shares of Common Stock

(Anticipated Maximum, Subject to Increase)

 

Home Federal Bancorp, Inc. of Louisiana, a new Louisiana corporation, is offering up to 2,156,250 shares of its common stock to the public in connection with the conversion of Home Federal Bank from the mutual holding company form of organization to the fully public stock holding company structure. The shares being offered represent the 63.8% ownership interest in Home Federal Bancorp, Inc. of Louisiana, a federal corporation, now owned by Home Federal Mutual Holding Company of Louisiana, its mutual holding company parent. The remaining 36.2% ownership interest in Home Federal Bancorp are shares held by the public which will be exchanged for shares of the new holding company’s common stock. If you are now a shareholder of the existing Home Federal Bancorp and continue to be on the date we complete the conversion and offering, your shares will be exchanged automatically for between 0.7464 and 1.0098 shares of the new holding company’s common stock, or up to 1.1612 shares in the event we increase the maximum of the offering range by 15%. The actual exchange ratio will depend upon the number of new shares we sell in our offering.

We are offering the shares of common stock in a “subscription offering” to eligible depositors and certain borrowers of Home Federal Bank. Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering,” with a preference given to our local communities and the shareholders of Home Federal Bancorp. We also may offer for sale shares of common stock not purchased in the subscription offering or community offering in a “syndicated community offering” through a syndicate of selected broker-dealers, with Stifel, Nicolaus & Company, Incorporated serving as sole book-running manager.

We are offering up to 2,156,250 shares of common stock for sale to the public on a best efforts basis, subject to certain conditions. We must sell a minimum of 1,593,750 shares to complete the offering. All shares of common stock being offered for sale will be sold at a price of $10.00 per share. If, as a result of regulatory considerations, demand for the shares or changes in market conditions, or the independent appraiser determines our market value has increased, we may sell up to 2,479,688 shares without giving you further notice or the opportunity to change or cancel your order.

Funds received before completion of the offering will be maintained in a segregated account at Home Federal Bank. We will pay interest on all funds received at a rate equal to Home Federal Bank’s passbook rate, which is currently 0.50% and subject to change at any time. If we terminate the offering for any reason, we will promptly return your funds with interest calculated at Home Federal Bank’s passbook rate, and deposit account withdrawal authorizations will be canceled.

The offering will terminate at 2:00 p.m., Central time, on [DATE1], 2010. We may extend this expiration date without notice to you for up to 45 days, until [DATE2], 2010. The minimum purchase is 25 shares. Once submitted, your order is irrevocable unless we terminate or extend the offering beyond [DATE2], 2010, with Office of Thrift Supervision approval. If we extend the offering beyond [DATE2], 2010 subscribers will be notified and have the right to confirm, modify or rescind their stock orders, and for subscribers who do not respond, funds will be returned promptly with interest, and deposit account withdrawal authorizations will be canceled.

Home Federal Bancorp’s common stock is currently quoted on the OTC Bulletin Board under the symbol “HFBL.” We expect that the new holding company’s common stock will be listed for trading on the Nasdaq Capital Market under the symbol “HFBLD” for a period of 20 trading days after completion of the offering. Thereafter, the trading symbol will be “HFBL.”

Stifel, Nicolaus & Company, Incorporated will assist us in our selling efforts on a best efforts basis, but is not obligated to purchase any of the common stock that is being offered. Purchasers will not pay any commission to purchase shares of common stock in the offering.

This investment involves a degree of risk, including the possible loss of principal.

Please read “Risk Factors” beginning on page 17.

 

 

OFFERING SUMMARY

Price per share: $10.00

 

 

These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Neither the Securities and Exchange Commission, the Office of Thrift Supervision, nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

Stifel Nicolaus Weisel

For assistance, please call the Stock Information Center, toll-free, at 1-(877)          .

The date of this prospectus is          , 2010

 

 

Table of Contents

 

 

SUMMARY

	•	Retail Lending.  We offer residential mortgage loans, home equity loans and non-real estate consumer loans through our branch offices.
	•	Commercial Lending.  We offer commercial real estate and multi-family residential loans and commercial business loans to borrowers in our market area.
	•	Deposit Products.  We offer a full range of traditional deposit products for consumers and businesses, such as checking accounts, savings accounts, money market accounts and certificates of deposit.

	•	Continuing to diversify our loan portfolio by emphasizing commercial real estate and commercial business loans;
	•	Diversifying our products and services for a larger customer base and an enhanced competitive position;
	•	Managing our expenses while building an infrastructure to support our full-service community bank products and services;
	•	Enhancing core earnings through lower cost transaction and savings accounts combined with higher yielding commercial real estate and business loans and selling our fixed rate residential mortgage loan originations;
	•	Being competitive in our market area by emphasizing local decision making and an efficient loan approval processes;
	•	Continuing expansion in our market area by opening additional de novo branches and possibly, through acquisitions of other financial institutions and banking related businesses (although we have no current plans, understandings or agreements with respect to any specific acquisitions); and
	•	Maintaining asset quality while continuing to grow and diversify our loan portfolio.

	•	While Home Federal Bank currently exceeds all regulatory capital requirements, the additional funds resulting from the offering will support continued growth and expansion, including opening new branch offices, particularly in Bossier Parish, hiring and retaining personnel, and providing enhanced lending capability. Our board of directors considered current market conditions, the amount of capital needed for continued lending and operational growth, the fact that the offering will not raise excessive capital, and the interests of existing shareholders in deciding to conduct the conversion and offering at this time.

	•	The additional shares in our employee stock ownership plan and the proposed new stock benefit plans will assist us with retaining and strengthening our management team by providing competitive

	•	The full public stock holding company structure, as compared to the mutual holding company structure, is a more familiar form of organization, which we believe will make our common stock more appealing to investors, and will give us greater flexibility to access the capital markets though possible future equity and debt offerings, although we have no current plans, agreements or understandings regarding any additional securities offerings. The mutual holding company structure is more restrictive due to the requirement that the parent mutual holding company always control a majority of the mid-tier holding company’s capital stock.

	•	To eliminate some of the uncertainties associated with the recently enacted financial regulatory legislation which will result in changes to our primary bank regulator and holding company regulator, currently the Office of Thrift Supervision, as well as possibly material changes in regulations governing the conversion to a full public stock holding company structure. Neither the Office of the Comptroller of Currency nor the Federal Reserve Board have adopted regulations addressing second-step conversions and there is no assurance that those agencies will adopt, without material change, the regulations issued by the Office of Thrift Supervision that currently govern second-step conversions. The statutory transfer date of the functions of the Office of Thrift Supervision to the other federal banking agencies is July 21, 2011, subject to extension up to January 21, 2012, during which time it may be difficult to receive regulatory approval for second-step conversions.

	•	We believe that our current mutual holding company structure limits our opportunities to acquire other institutions because we cannot now issue stock in an acquisition in an amount that would cause Home Federal Mutual Holding Company to own less than a majority of the outstanding shares of Home Federal Bancorp’s common stock. The conversion will facilitate our ability to acquire other institutions by eliminating the mutual holding company, although we do not currently have any agreements or understandings regarding any specific acquisition transaction.

	•	We expect that the conversion will result in greater liquidity for our stock by increasing the number of outstanding shares held by public shareholders and by being listed for trading on the Nasdaq Capital Market.

		Price to				Price to				Price to Tangible
		Earnings Multiple				Book Value Ratio				Book Value Ratio
Home Federal Bancorp (pro forma)
Minimum			41.7	x			53.9	%			53.9	%
Midpoint			50.0	x			60.3				60.3
Maximum			58.8	x			66.1				66.1
Maximum, as adjusted			66.7	x			72.0				72.0
Peer group companies as of August 27, 2010
Elmira Savings Bank, FSB			9.7	x			83.1	%			126.7	%
First Advantage Bancorp			67.0	x			66.0				66.0
First Capital, Inc.			17.9	x			87.5				99.0
GS Financial Corp.			NM				54.3				54.3
Louisiana Bancorp, Inc.			26.1	x			91.7				91.7
LSB Financial Corp.			18.1	x			44.0				44.0
Newport Bancorp, Inc.			34.6	x			84.8				84.8
North Central Bancshares, Inc.			13.8	x			53.6				53.6
Rome Bancorp, Inc.			16.5	x			102.2				102.2
Wayne Savings Bancshares, Inc.			9.9	x			63.3				66.9
Average			23.7	x			73.0				78.9
Median			17.9	x			74.5				75.9
All publicly traded savings banks
Average			15.3	x			71.0	%			79.2	%
Median			13.7	x			71.3				77.0

										Price to				Price Performance from Initial Offering Price
		Closing				Net				Tangible Book																Through
Issuer (Market/Symbol)		Date				Proceeds				Value Ratio				1 Day				1 Week				1 Month				August 27, 2010
						(In millions)
Jacksonville Bancorp, Inc. (Nasdaq/JXSB)			07/15/10			$	8.7				59.9	%			6.5	%			5.8	%			3.0	%			(0.1	)%
Colonial Financial Services, Inc. (Nasdaq/COBK)			07/13/10				19.0				64.7				0.5				(1.6	)			(2.6	)			(1.5	)
Oneida Financial Corp. (Nasdaq/ONFC)			07/07/10				26.5				97.8				(6.3	)			(3.1	)			(1.3	)			(2.8	)
ViewPoint Financial Group, Inc. (Nasdaq/VPFG)			07/07/10				166.8				93.9				(5.0	)			(2.9	)			(3.0	)			(8.3	)
Fox Chase Bancorp, Inc. (Nasdaq/FXCB)			06/29/10				76.6				72.6				(4.1	)			(3.7	)			(1.8	)			(3.2	)
Oritani Financial Corp. (Nasdaq/ORIT)			06/24/10				364.7				90.6				3.1				—				(0.9	)			(3.9	)
Eagle Bancorp Montana, Inc. (Nasdaq/EBMT)			04/05/10				19.9				81.2				5.5				5.0				4.0				(8.5	)
Ocean Shore Holding Co. (Nasdaq/OSHC)			12/21/09				26.9				63.0				7.5				11.9				13.1				33.8
Northwest Bancshares, Inc. (Nasdaq/NWBI)			12/18/09				603.0				103.8				13.5				13.0				14.0				10.3
Average			N/A				145.8				80.8				2.4				2.7				2.7				1.8
Median			N/A				26.9				81.2				3.1				—				(0.9	)			(2.8	)

																														New
																		Total												Shares
																		Shares of												that
										New Shares to be								Common								Equivalent				Would be
		New Shares to be								Exchanged for								Stock to be								per Share				Received
		Sold in this								Existing								Outstanding								Current				for 100
		Offering								Common Stock								After the				Exchange				Market				Existing
		Amount				Percent				Amount				Percent				Offering				Ratio				Value(1)				Shares(2)
Minimum			1,593,750				63.8	%			904,481				36.2	%			2,498,231				0.7464			$					74
Midpoint			1,875,000				63.8				1,064,095				36.2				2,939,095				0.8781								87
Maximum			2,156,250				63.8				1,223,709				36.2				3,379,959				1.0098								100
15% above the maximum			2,479,688				63.8				1,407,266				36.2				3,886,954				1.1612								116

(1)		Represents the value of shares of the new holding company’s common stock received in the conversion by a holder of one share of Home Federal Bancorp’s common stock at the exchange ratio, based on the market price of $      per share as quoted on the OTC Bulletin Board on          , 2010.
(2)		Cash will be paid instead of issuing fractional shares.

	•	Full-time employees, including officers, will be participants in our existing employee stock ownership plan which will purchase additional shares in connection with the conversion;

	•	Subsequent to completion of the conversion and offering, we intend to implement the following plans which will benefit our employees and directors:

	•	a new stock recognition and retention plan; and
	•	a new stock option plan.

		Number of Shares to be Granted or Purchased
										As a % of				Dilution
										Common				Resulting
										Stock to Be				from				Value of Grants At
		At Minimum of				At Maximum of				Sold in the				Issuance of				Minimum of				Maximum of
		Offering Range				Offering Range				Offering				Shares(3)				Offering Range				Offering Range
																		(Dollars in thousands)
Employee stock ownership plan(1)			95,625				129,375				6.00	%			—	%		$	956			$	1,294
Recognition and retention plan awards(1)			63,750				86,250				4.00				2.34				638				863
Stock options(2)			159,375				215,625				10.00				5.86				385				521
Total			318,750				431,250				20.00	%			8.20	%		$	1,979			$	2,677

(1)		Assumes the value of the new holding company’s common stock is $10.00 per share for purposes of determining the total estimated value of the grants.
(2)		Assumes the value of a stock option is $2.42, which was determined using the Black-Scholes option-pricing formula. See “Pro Forma Data.”
(3)		Represents the dilution of stock ownership interest. No dilution is reflected for the employee ownership because such shares are assumed to be purchased in the offering.

								Estimated				Percentage of Total
Existing and New Stock Benefit Plans		Participants		Shares(1)				Value				Shares Outstanding
				(Dollars in thousands)
Employee Stock Ownership Plan:		All Employees
Shares purchased in 2005 mutual holding company reorganization					115,005	(2)		$	1,150				3.4	%
Shares to be purchased in this offering					129,375				1,294				3.8	%
Total employee stock ownership plan shares					244,380				2,444				7.2	%
Recognition and Retention Plans:		Directors and Officers
2005 Recognition and Retention Plan					70,440				704				2.1	%
Proposed new recognition and retention plan					86,250	(3)			863				2.6	%
Total recognition and retention plan shares					156,690	(4)			1,567				4.6	%
Stock Option Plans:		Directors and Officers
2005 Stock Option Plan					176,098	(5)			426	(6)			5.2	%
Proposed new stock option plan					215,625				521	(7)			6.4	%
Total stock option plan shares					391,723				947				11.6	%
Total stock benefit plans					792,793			$	4,957				23.5	%

(1)		Shares purchased or awarded and options granted prior to the conversion and offering have been adjusted for the 1.0098 exchange ratio at the maximum of the offering range for shares of Home Federal Bancorp.
(2)		Approximately 28,751 (28,472 shares prior to adjustment for the exchange ratio) of these shares have been allocated to the accounts of participants. The employee stock ownership plan purchased 8.0% (113,889 shares) of the shares issued to other than Home Federal Mutual Holding Company (1,423,583 shares) in the mutual holding company reorganization completed in January 2005.
(3)		Home Federal Bancorp reserved 69,756 shares (before applying exchange ratio) which reflected an amount equal to 4.0% of the shares that would have been issued to persons other than Home Federal Mutual Holding Company in the mutual holding company reorganization if Home Federal Bancorp had issued 49% (1,743,889 shares) of the total shares issued in the reorganization (3,558,958 shares) to minority shareholders rather than 40% actually issued to such persons (1,423,583 shares). As of June 30, 2010, awards covering 158,134 (159,683 shares after adjustment for the exchange ratio) of the indicated 2005 Recognition and Retention Plan awards have vested, and the shares of Home Federal Bancorp common stock subject to these vested awards have been distributed.
(4)		The actual value of new recognition and retention plan awards will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value is assumed to be the same as the offering price of $10.00 per share.
(5)		Of this amount, no options have been exercised to date, and all previously granted options remain outstanding. Home Federal Bancorp reserved 174,389 shares (before applying exchange ratio) under this plan which reflected 10.0% of the shares that would have been issued to persons other than Home Federal Mutual Holding Company in the mutual holding company reorganization if Home Federal Bancorp had issued 49% (1,743,889 shares) of the total shares issued in the reorganization (3,558,958 shares) to minority shareholders rather than the 40% actually issued to such persons (1,423,583 shares). As of June 30, 2010, options covering 158,134 shares (before applying the exchange ratio) were issued and outstanding.
(6)		The weighted-average fair value of stock options under the 2005 Stock Option Plan has been estimated at $2.42 using the Black-Scholes option pricing model and assumes that all options have been granted and are outstanding. Prior to the adjustment for exchange ratio, the 2005 Stock Option Plan covered a total of 174,389 shares. The weighted-average assumptions used for the options issued in 2005 under the 2005 Stock Option Plan were the following: exercise price, $10.00; dividend yield, 2.4%; expected life, 10 years; expected volatility, 23.23%; and risk-free interest rate, 2.97%.
(7)		The fair value of stock options to be granted under the new stock option plan has been estimated at $2.42 per option using the Black-Scholes option pricing model with the following assumptions: exercise price, $10.00; trading price on date of grant, $10.00; dividend yield, 2.4%; expected life, 10 years; expected volatility, 23.23%; and risk-free interest rate, 2.97%.

	•	relatives living in your house;
	•	companies, trusts or other entities in which you have a controlling interest or hold a position; or
	•	other persons who may be acting together with you.

	•	personal check, bank check or money order payable to “Home Federal Bancorp, Inc.”; or
	•	authorizing Home Federal Bank to withdraw money from the types of Home Federal Bank deposit accounts permitted on the stock order form (we will waive any applicable penalties for early withdrawals from certificate of deposit accounts).

		1,593,750				2,156,250
		Shares at				Shares at
		$10.00				$10.00
		per Share				per Share
		(Dollars in thousands)
Offering proceeds		$	15,938			$	21,563
Less: offering expenses			(1,496	)			(1,689	)
Net offering proceeds		$	14,442			$	19,873
Plus: MHC capital contribution			100				100
Less:
Proceeds contributed to Home Federal Bank		$	(7,221	)		$	(9,937	)
Proceeds used for loan to employee stock ownership plan			(956	)			(1,294	)
Proceeds used to repurchase shares for stock recognition plan			(638	)			(863	)
Proceeds remaining for Home Federal Bancorp		$	5,727			$	7,880

	•	The Plan of Conversion and Reorganization is approved by at least a majority of votes eligible to be cast by members of Home Federal Mutual Holding Company (depositors and certain borrowers of Home Federal Bank);
	•	The Plan of Conversion and Reorganization is approved by at least:

	•	two-thirds of the outstanding shares of Home Federal Bancorp common stock; and
	•	a majority of the outstanding shares of Home Federal Bancorp common stock, not including those shares held by Home Federal Mutual Holding Company;

	•	We sell at least the minimum number of shares offered; and
	•	We receive the final approval of the Office of Thrift Supervision to complete the conversion and offering and related transactions.

	•	restrictions on the acquisition of more than 10% of our common stock and limitations on voting rights of shares held in excess of 10%;
	•	staggered election of only approximately one-third of our board of directors each year;
	•	the absence of cumulative voting by shareholders in the election of directors;
	•	limitations on the ability of shareholders to call special meetings;
	•	advance notice requirements for shareholder nominations and new business;
	•	removal of directors without cause by a 75% vote of shareholders and with cause by a majority vote of all shareholders;
	•	requirement of a 75% vote of shareholders for certain amendments to the bylaws and certain provisions of the articles of incorporation;
	•	supermajority vote requirements for the approval of certain business combinations not approved by the board of directors; and
	•	the right of the board of directors to issue shares of preferred or common stock without shareholder approval.

 

You should consider carefully the following risk factors before deciding whether to invest in Home Federal Bancorp’s common stock. Our business could be harmed by any of these risks. In assessing these risks you should also refer to the other information contained in this prospectus, including our financial statements and the related notes thereto.

 

Risks Related to Our Business

 

Increased emphasis on commercial real estate lending may expose us to increased lending risks.  We intend to continue to emphasize commercial lending which includes loans secured by owner occupied and non-owner occupied commercial real estate, investment real estate with guarantor support. At June 30, 2010, commercial real estate loans totaled $15.4 million, or 16.4% of our total loan portfolio compared to $8.2 million, or 17.2%, at June 30, 2009. Such lending activities generally are considered to involve a higher degree of risk than single-family residential lending due to a variety of factors, including generally larger loan balances, shorter terms to maturity and loan terms which often do not require full amortization of the loan over its term and, instead, provide for a balloon payment at stated maturity. Several of our borrowers have more than one commercial real estate loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. Finally, if we foreclose on a commercial real estate loan, our holding period for the collateral, if any, typically is longer than for one- to four-family residential property because there are fewer potential purchasers of the collateral. Since we plan to continue to emphasize our originations of these loans, it may be necessary to increase the level of our allowance for loan losses due to the increased risk characteristics associated with these types of loans. Any increase to our allowance for loan losses would adversely affect our earnings. Any delinquent payments or the failure to repay these loans would hurt our earnings.

 

Increased emphasis on commercial business lending may expose us to increased lending risks.  We intend to continue to emphasize commercial business lending which includes lines of credit, inventory financing and equipment loans. At June 30, 2010, our commercial business loans were $9.5 million, or 10.1% of our total loan portfolio compared to $3.9 million or 8.2% of our total loans at June 30, 2009. Although commercial business loans generally have shorter terms and higher interests rates than mortgage loans, they generally involve more risk than mortgage loans because of the nature of, or in certain cases the absence of, the collateral which secures such loans.

 

The loans in our commercial loan portfolio are unseasoned which means that we do not have a history of payments which would assist us in predicting future performance.  As a result of our increasing emphasis on commercial lending over the past year, a large portion of our commercial real estate and commercial non-mortgage loan portfolios is relatively unseasoned. As a result, we may not have enough payment history upon which to judge future collectibility or to predict the future performance of this part of our loan portfolio. These loans may have delinquency or charge-off levels above our historical experience, which could adversely affect our future performance. We attempt to mitigate such risks by lending to known borrowers in our market area. Many of our commercial loans originated in fiscal 2010, were to borrowers who had prior lending relationships with our loan officers.

 

If we do not achieve profitability on new branches, the new branches may hurt our earnings and negatively impact our expense ratio.  We intend to open a new branch office in North Bossier in November 2010 and expect to open an office in South Bossier at a future time. Our branch expansion strategy and our branch upgrading may not increase our earnings in the short term or within a reasonable period of time, if at all. Numerous factors will affect our branch expansion strategy, including our ability to attract new customers, select suitable branch locations and hire and retain qualified managers and personnel. It takes time for a new branch to generate significant deposits and loan volume to offset expenses, some of which like salaries, occupancy expense and depreciation of real property, are relatively fixed costs. We may not be able to increase the volume of our loans and deposits by expanding our branch network. We also may not be able to manage

the costs and implementation risks associated with this strategy so that expansion of our branch network will be profitable.

 

Recently, we have increased our concentrations in land loans and commercial construction loans, including loans secured by speculative property and land loans.  At June 30, 2010, $8.4 million, or 9.0%, of our loan portfolio consisted of land loans and $7.8 million, or 8.3% of our loan portfolio, consisted of construction loans, including $3.4 million in loans secured by speculative property. Speculative construction loans are loans made to builders who have not identified a buyer for the completed property at the time of loan origination. We intend to continue to originate land loans and commercial construction loans. It is our policy to only originate construction loans with a permanent takeout. These loan types generally expose a lender to greater risk of non-payment and loss than one-to-four family mortgage loans because the repayment of such loans often depends on the successful operation or sale of the property and the income stream of the borrowers and such loans typically involve larger balances to a single borrower or groups of related borrowers. In addition, many borrowers of these types of loans have more than one loan outstanding with us so an adverse development with respect to one loan or credit relationship can expose us to significantly greater risk of non-payment and loss. We may need to increase our allowance for loan losses through future charges to income as the portfolio of these types of loans grows, which would hurt our earnings. Additionally, as a result of our increasing emphasis on this type of lending over the past year, a large portion of our land and construction loan portfolios is relatively unseasoned. As a result, we may not have enough payment history upon which to judge future collectibility or to predict the future performance of these parts of our loan portfolio. These loans may have delinquency or charge-off levels above our historical experience, which could adversely affect our future performance.

 

An expansion of gaming activities in other states, may lead to a decline in gaming revenue in Shreveport and Bossier City, Louisiana, which could hurt our business and our prospects.  Shreveport and Bossier City, Louisiana compete with other areas of the country for gaming revenue, and it is possible that the expansion of gaming operations in other states, as a result of changes in laws or otherwise, could significantly reduce gaming revenue in the Shreveport and Bossier City metropolitan area. This is particularly true if gaming operations are expanded in Oklahoma or were to be authorized in Texas, a state from which the Shreveport casino industry generally draws substantial year-round clientele. The expansion of casinos in Oklahoma or establishment of casino gaming in Texas, or other states, could have a substantial adverse effect on gaming revenue in Shreveport and Bossier City which would adversely affect the Shreveport economy and our business.

 

If our allowance for losses on loans is not adequate to cover losses, our earnings could decrease.  We have established an allowance for loan losses which we believe is adequate to offset probable losses on our existing loans. We anticipate originating more commercial real estate loans for which we will require additional provisions for loan losses. Material additions to our allowance would materially decrease our net income. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. We rely on our loan quality reviews, our experience and our evaluation of economic conditions, among other factors, in determining the amount of the allowance for loan losses. While we are not aware of any specific factors indicating a deficiency in the amount of our allowance for loan losses, in light of the current economic slowdown, the increased number of foreclosures and lower real estate values, one of the most pressing current issues faced by financial institutions is the adequacy of their allowance for loan losses. Federal bank regulators have increased their scrutiny of the level of the allowance for losses maintained by regulated institutions. Many banks and other lenders are reporting significantly higher provisions to their allowance for loan losses, which are materially impacting their earnings. In the event that we have to increase our allowance for loan losses, it would have an adverse effect on our results in future periods. At June 30, 2010, our allowance for loan losses amounted to $489,000, or 0.52% of our total loan portfolio at such date.

 

The recent economic recession could result in increases in our level of non-performing loans and/or reduce demand for our products and services, which could have an adverse effect on our results of operations.  In recent periods, there has been a decline in the housing and real estate markets and the national economy has recently experienced a recession. Although improving, housing market conditions had

deteriorated nationally as evidenced by reduced levels of sales, increasing inventories of houses on the market, declining house prices and an increase in the length of time houses remain on the market. These conditions may not continue to improve or may worsen in the near term. Concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, the mortgage market and a declining real estate market have contributed to increased volatility and diminished expectations for the economy and markets going forward. This turbulence in the markets also has been largely attributable to the fallout associated with a deteriorating market for subprime mortgage loans and securities backed by such loans.

 

Dramatic declines in the housing market, with falling home prices and increasing foreclosures and unemployment, resulted in significant asset write-downs by financial institutions, which have caused many financial institutions to seek additional capital, to merge with other institutions and, in some cases, to fail. These developments also have contributed to a substantial decrease in both lending activities by banks and other financial institutions and activity in the secondary residential mortgage loan market. If these conditions do not improve or worsen, they could adversely affect our results of operations.

 

Our business is geographically concentrated in northern Louisiana, which makes us vulnerable to downturns in the local and regional economy.  Most of our loans are to individuals and businesses located in northern Louisiana. Regional economic conditions affect the demand for our products and services as well as the ability of our customers to repay loans. While economic conditions in northern Louisiana have been relatively good in recent periods, the concentration of our business operations makes us particularly vulnerable to downturns in the local economy. According to the US Department of Labor’s Bureau of Labor Statistics, unemployment in the Shreveport/Bossier metropolitan statistical area has increased from 6.2% in 2005 to 7.8% in June 2010. The population of Caddo Parish is projected to decline 1.3% from 2010 to 2015 according to the Louisiana Parish Population Projection Series, 2010-2030 available at www.louisiana.gov/Explore/Population_Projections/. Declines in local real estate values, both residential and commercial, could adversely affect the value of property used as collateral for the loans we make. Historically, the oil and gas industry has constituted a significant component of the local economy. The oil and gas industry remains an important factor in the regional economy in the markets that Home Federal Bank operates in and downturns in the local oil and gas industry could adversely affect Home Federal Bank.

 

Changes in interest rates could have a material adverse effect on our operations.  Our profitability is dependent to a large extent on net interest income, which is the difference between the interest income earned on interest-earning assets such as loans and investment securities and the interest expense paid on interest-bearing liabilities such as deposits and borrowings. Changes in the general level of interest rates can affect our net interest income by affecting the difference between the weighted average yield earned on our interest-earning assets and the weighted average rate paid on our interest-bearing liabilities, or interest rate spread, and the average life of our interest-earning assets and interest-bearing liabilities. For the year ended June 30, 2010, our average interest rate spread was 3.03% compared to 1.89% for the year ended June 30, 2009. We continue to monitor our interest rate sensitivity and expect to emphasize higher yielding types of lending and grow our lower cost transaction deposit accounts, but may not be able to effectively do so.

 

We are dependent upon the services of key officers.  We rely heavily on our President and Chief Operating Officer, James R. Barlow, and our senior commercial lending team. The loss of Mr. Barlow or our other senior commercial loan officers could have a material adverse impact on our operations because, as a small company, we have fewer management-level personnel that have the experience and expertise to readily replace these individuals who were responsible for the increase in our commercial loan portfolio. In addition, competition with respect to hiring and retaining commercial loan officers in our market area is intense. Changes in key personnel and their responsibilities may be disruptive to our business and could have a material adverse effect on our business, financial condition, and results of operations.

 

Increased and/or special Federal Deposit Insurance Corporation assessments will hurt our earnings.  The recent economic recession has caused a high level of bank failures, which has dramatically increased Federal Deposit Insurance Corporation resolution costs and led to a significant reduction in the balance of the Deposit Insurance Fund. As a result, the Federal Deposit Insurance Corporation has significantly increased the initial base assessment rates paid by financial institutions for deposit insurance. Increases in the base

assessment rate have increased our deposit insurance costs and negatively impacted our earnings. In addition, in May 2009, the Federal Deposit Insurance Corporation imposed a special assessment on all insured institutions. Our special assessment, which was reflected in earnings for the year ended June 30, 2009, was $65,000. In lieu of imposing an additional special assessment, the Federal Deposit Insurance Corporation required all institutions to prepay their assessments for the fourth quarter of 2009 and all of 2010, 2011 and 2012. Additional increases in the base assessment rate or special assessments would negatively impact our earnings.

 

We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations.  We are subject to extensive regulation, supervision and examination by the Office of Thrift Supervision, our primary federal regulator, and by the Federal Deposit Insurance Corporation, as insurer of our deposits. Such regulation and supervision governs the activities in which an institution and its holding company may engage and are intended primarily for the protection of the insurance fund and the depositors and borrowers of Home Federal Bank rather than for holders of our common stock. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.

 

Recently enacted regulatory reform may have a material impact on our operations.  On July 21, 2010, the President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act that, among other things, imposes new restrictions and an expanded framework of regulatory oversight for financial institutions and their holding companies, including Home Federal Bank and Home Federal Bancorp. Under the new law, Home Federal Bank’s primary regulator, the Office of Thrift Supervision, will be eliminated and existing federal thrifts will be subject to regulation and supervision by the Office of Comptroller of the Currency, which currently supervises and regulates all national banks. Savings and loan holding companies will be regulated by the Federal Reserve Board, which will have the authority to promulgate new regulations governing Home Federal Bancorp that will impose additional capital requirements and may result in additional restrictions on investments and other holding company activities. The law also creates a new consumer financial protection bureau that will have the authority to promulgate rules intended to protect consumers in the financial products and services market. The creation of this independent bureau could result in new regulatory requirements and raise the cost of regulatory compliance. The federal preemption of state laws currently accorded federally chartered financial institutions will be reduced. In addition, regulation mandated by the new law could require changes in regulatory capital requirements, loan loss provisioning practices, and compensation practices which may have a material impact on our operations. Because the regulations under the new law have not been promulgated, we cannot determine the full impact on our business and operations at this time. See “Regulation — Recently Enacted Regulatory Reform.”

 

We face strong competition in our primary market area which may adversely affect our profitability.  We are subject to vigorous competition in all aspects and areas of our business from commercial banks, mortgage banking companies, credit unions and other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies and insurance companies. Based on data from the Federal Deposit Insurance Corporation, as of June 30, 2009, the most recent date for which data is available, we had 1.6% of the total deposits in the Shreveport/Bossier metropolitan statistical area. The financial resources of our larger competitors may permit them to pay higher interest rates on their deposits and to be more aggressive in new loan originations. We also compete with non-financial institutions, including retail stores that maintain their own credit programs and governmental agencies that make available low cost or guaranteed loans to certain borrowers. Competition from both bank and non-bank organizations will continue.

Risks Related to this Offering

 

The implementation of stock-based benefit plans will increase our future compensation and may adversely affect our net income.  Following the offering, we will recognize additional employee compensation and benefit expenses stemming from options and shares granted to employees, directors and executives under our proposed new stock benefit plans. These additional expenses will adversely affect our net income. We cannot determine the actual amount of these new stock-related compensation and benefit expenses at this time because applicable accounting practices generally require that they be based on the fair market value of the options or shares of common stock at the date of the grant; however, we expect them to be significant. We will recognize expenses for our employee stock ownership plan when additional shares are committed to be released to participants’ accounts and will recognize expenses for restricted stock awards and stock options generally over the vesting period of awards made to recipients under our new plans. These benefit expenses in the first year following the offering have been estimated to be approximately $261,000, in the aggregate, at the maximum of the offering range as set forth in the pro forma financial information under “Pro Forma Data” assuming the $10.00 per share purchase price as fair market value. Actual expenses, however, may be higher or lower, depending on the price of our common stock at that time. For further discussion of these plans, see “Management — New Stock Benefit Plans.”

 

A limited market for our common stock may depress our market price and make it difficult to buy or sell our stock.  We expect our stock to be listed on the Nasdaq Capital Market. If an active and liquid trading market for our stock does not develop, you may not be able to buy or sell our common stock immediately following the close of the offering or at or above the $10.00 per share offering price. There may be a wide spread between the bid and asked price for our common stock after the conversion. You should consider the potentially long-term nature of an investment in our common stock.

 

Our stock price may decline when trading commences.  We are offering shares of our common stock at a uniform price of $10.00 per share. After the offering is completed, the trading price of the common stock will be determined by the marketplace, and will be influenced by many factors outside of our control, including prevailing interest rates, investor perceptions, securities analyst research reports and general industry, geopolitical and economic conditions. Publicly traded stock, including stocks of financial institutions, often experience substantial market price volatility. Market fluctuations in the price of our common stock may not be related to the operating performance of Home Federal Bancorp.

 

We intend to remain independent, which may mean you will not receive a premium for your common stock.  We intend to remain independent for the foreseeable future. Because we do not plan on seeking possible acquirors, it is unlikely that we will be acquired in the foreseeable future. Accordingly, you should not purchase our common stock with any expectation that a takeover premium will be paid to you in the near term.

 

We have broad discretion in investing the net proceeds of the offering.  Home Federal Bancorp intends to contribute 50% of the net proceeds as equity capital to Home Federal Bank for the purchase of all of Home Federal Bank’s capital stock and the remaining 50% of the net proceeds will be retained by Home Federal Bancorp. Initially, Home Federal Bancorp intends to use the proceeds that it retains to loan funds to the employee stock ownership plan to purchase 6.0% of the shares sold in the offering and will invest the remaining amount in a deposit account at Home Federal Bank. Under applicable regulations, Home Federal Bancorp may during the first year following the conversion, assuming shareholder approval, use a portion of the net proceeds it retains to fund the recognition and retention plan. After one year following the conversion, we may repurchase shares of common stock, subject to regulatory restriction. Home Federal Bank initially intends to use the net proceeds it receives as a contribution of capital from Home Federal Bancorp to fund loans and to invest in securities. We have not allocated specific amounts of proceeds for any of these purposes, and we will have significant flexibility in determining how much of the net proceeds we apply to different uses and the timing of such applications. There is a risk that we may fail to effectively use the net proceeds which could have a negative effect on our future profitability ratios.

 

Our stock-based benefit plans will be dilutive.  If the offering is completed and shareholders subsequently approve a new recognition and retention plan and a new stock option plan, we will allocate stock to

our officers, employees and directors through these plans. If the shares for the recognition and retention plan are issued from our authorized but unissued stock, the ownership percentage of outstanding shares of Home Federal Bancorp would be diluted by approximately 2.34%. However, it is our intention to purchase shares of our common stock in the open market to fund the recognition and retention plan. Assuming the shares of our common stock to be awarded under the recognition and retention plan are purchased at a price equal to the offering price in the offering, the reduction to stockholders’ equity from the recognition and retention plan would be between $638,000 and $992,000 at the minimum and the maximum, as adjusted, of the offering range. The ownership percentage of Home Federal Bancorp shareholders would also decrease by approximately 5.86% if all potential stock options under our proposed stock option plan are exercised and are filled using shares issued from authorized but unissued common stock, assuming the offering closes at the maximum of the offering range. See “Pro Forma Data” for data on the dilutive effect of the recognition and retention plan and the stock option plan and “Management — New Stock Benefit Plans” for a description of the plans.

 

Our stock value may suffer from anti-takeover provisions in our articles of incorporation and bylaws that may impede potential takeovers that management opposes.  Provisions in our corporate documents, as well as certain federal regulations, may make it difficult and expensive to pursue a tender offer, change in control or takeover attempt that our board of directors opposes. As a result, our shareholders may not have an opportunity to participate in such a transaction, and the trading price of our stock may not rise to the level of other institutions that are more vulnerable to hostile takeovers. Anti-takeover provisions contained in our corporate documents include:

 

 

See “Restrictions on Acquisition of Home Federal Bancorp and Home Federal Bank and Related Anti-Takeover Provisions” for a description of anti-takeover provisions in our corporate documents and federal regulations.

 

This document contains forward-looking statements, which can be identified by the use of words such as “would be,” “will,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and similar expressions. These forward-looking statements include:

 

 

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the factors discussed under the heading “Risk Factors” beginning on page    that could affect the actual outcome of future events and the following factors:

 

 

Any of the forward-looking statements that we make in this prospectus and in other public statements we make may turn out to be wrong because of inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee.

 

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements and you should not rely on such statements.

 

Set forth below is selected consolidated financial and other data of Home Federal Bancorp. The information at or for the years ended June 30, 2010 and 2009 is derived in part from the audited financial statements that appear in this prospectus. The information at or for the years ended June 30, 2008, 2007 and 2006, is also derived from audited financial statements that do not appear in this prospectus. You should read the consolidated financial statements and related notes contained at the end of this prospectus which provide more detailed information.

 

 

 

(Footnotes on following page)

 

 

 

 

The following tables contain certain information concerning the financial position and results of operations of Home Federal Bancorp at and for the three months ended September 30, 2010 as well as the prior comparison periods. You should read this information in conjunction with the audited financial statements included in this prospectus. The financial information as of and for the three months ended September 30, 2010 and 2009 are unaudited and are derived from our interim condensed consolidated financial statements. The balance sheet data as of June 30, 2010 is derived from Home Federal Bancorp’s audited consolidated financial statements. In the opinion of management, financial information at September 30, 2010 and for the three months ended September 30, 2010 and 2009 reflect all adjustments, consisting only of normal recurring accruals, which are necessary to present fairly the results for such periods. Results for the three-month period ended September 30, 2010 may not be indicative of operations of Home Federal Bancorp for the year ending June 30, 2011.

 

 

 

 

(Footnotes on the following page)

 

 

 

 

 

 

 

(Footnotes on the following page)

 

Comparison of Financial Condition at September 30, 2010 and June 30, 2010

 

Home Federal Bancorp’s total assets increased $8.3 million, or 4.5%, to $193.4 million at September 30, 2010, compared to $185.1 million at June 30, 2010. This increase was primarily due to an increase in cash and cash equivalents of $15.8 million, an increase in loans receivable and loans held-for-sale of $506,000, partially offset by a decrease in available-for-sale securities of $8.2 million at September 30, 2010 compared to June 30, 2010.

 

Loans receivable, net, excluding loans-held-for sale, increased $6.5 million, or 7.0%, from $93.1 million at June 30, 2010, to $99.6 million at September 30, 2010. The increase in loans receivable, net was attributable primarily to increases in commercial real estate loans, land loans and one-to four family residential loans. Commercial real estate loans increased $1.1 million, one-to-four family residential loans increased $2.6 million, land loans increased $2.8 million and commercial business loans increased $570,000 at September 30, 2010, compared to June 30, 2010. Although we primarily originate one-to-four family residential loans for sale, certain lending relationships are retained for portfolio. Home equity and second mortgage loans decreased $902,000 and construction loans decreased $221,000 at September 30, 2010 compared to the year ended June 30, 2010. Loans held-for-sale decreased $6.0 million at September 30, 2010 compared to June 30, 2010. During the quarter ended September 30, 2010, originations of loans available-for-sale declined to $41.0 million, a decrease of $3.0 million from $44.0 million originated during the previous quarter ended June 30, 2010. In addition, originations of all other loans for portfolio declined to $8.0 million, a decrease of $20.0 million from $28.0 million originated during the previous quarter. A decline in commercial loan originations during the quarter was the primary reason for the decrease in portfolio loan originations.

 

Securities available-for-sale decreased $8.2 million, or 12.8%, from $63.7 million at June 30, 2010 to $55.5 million at September 30, 2010. This decrease resulted primarily from the reduction of new investment acquisitions, the sale of securities and normal principal paydowns, offset by market value increases in the portfolio. In recent periods, there have been significant loan prepayments due to the heavy volume of loan refinancing.

 

Cash and cash equivalents increased $15.8 million, or 178.9%, from $8.8 million at June 30, 2010 to $24.6 million at September 30, 2010. The net increase in cash and cash equivalents was attributable primarily to the growth in our deposits and sales and principal payments from our securities, offset by the funding of our loan growth and repayment of advances from Federal Home Loan Bank.

 

Total liabilities increased $7.8 million, or 5.2%, from $151.8 million at June 30, 2010 to $159.6 million at September 30, 2010 due primarily to an increase of $11.2 million, or 9.5%, in our deposits, offset by a decrease in advances from the Federal Home Loan Bank of $3.5 million, or 11.1%. The increase in deposits was attributable primarily to increases in our NOW accounts, certificates of deposit accounts, and savings accounts. NOW accounts increased $5.9 million as the result of an expansion of commercial deposit accounts. Certificate accounts increased $4.4 million, or 5.9%, from $73.9 million at June 30, 2010 to $78.2 million at September 30, 2010. Savings accounts increased $703,000 from $5.3 million at June 30, 2010 to $6.0 million at September 30, 2010.

 

Stockholders’ equity increased $394,000 million, or 1.2%, to $33.8 million at September 30, 2010 from $33.4 million at June 30, 2010, due primarily to net income of 646,000 for the three months ended September 30, 2010, and the distribution of shares associated with Home Federal Bancorp’s Recognition Plan of $116,000, less dividends of $73,000 paid during the three months ended September 30, 2010, treasury stock acquisitions of $46,000, and a decrease of $270,000 in Home Federal Bancorp’s accumulated other comprehensive income. The change in accumulated other comprehensive income was primarily due to the change in net unrealized gain on securities available for sale due to recent declines in interest rates. The net unrealized loss on securities available-for-sale is affected by interest rate fluctuations. Generally, an increase in interest rates will have an adverse impact while a decrease in interest rates will have a positive impact.

 

Comparison of Operating Results for the Three Months Ended September 30, 2010 and 2009

 

General.  Net income amounted to $646,000 for the three months ended September 30, 2010, reflecting an increase of $394,000 compared to net income of $252,000 for the three months ended September 30, 2009. This change was due to an increase of $780,000 in non-interest income and a $425,000 increase in net interest income, partially offset by an increase of $537,000 in non-interest expense and an increase of $202,000 in the provision for income taxes and an increase in the provision for loan losses of $72,000.

 

Net Interest Income.  Net interest income after provision for loan losses amounted to $1.6 million for the three months ended September 30, 2010, an increase of $353,000, or 27.6%, compared to $1.3 million for the three months ended September 30, 2009. The increase was due primarily to an increase of $347,000 in total interest income, and a $78,000 decrease in interest expense.

 

The average interest rate spread increased from 2.50% for the three months ended September 30, 2009 to 3.47% for the three months ended September 30, 2010 while the average balance of net interest-earning assets increased from $155.7 million to $180.0 million during the same periods. The percentage of average interest-earning assets to average interest-bearing liabilities decreased to 117.47% for the three months ended September 30, 2010 compared to 123.07% for the three months ended September 30, 2009. The increase in the average interest rate spread reflects the lower interest rates paid on interest bearing liabilities. Additionally, Home Federal Bancorp’s average cost of funds decreased 71 basis points for the three months ended September 30, 2010, compared to the three months ended September 30, 2009, as the Federal Reserve continued to reduce short-term rates. Lower certificate of deposit interest rates in our market area led us to decrease the average rates paid on certificates of deposit 74 basis points for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. Net interest margin increased to 3.79% for the three months ended September 30, 2010 compared to 3.04% for the three months ended September 30, 2009.

 

Interest income increased $347,000, or 15.8%, to $2.5 million for the three months ended September 30, 2010 compared to $2.2 million for the three months ended September 30, 2009. Such increase was primarily due to an increase in the average balance of total interest earning assets as well as an increase in the average yield. The increase in average yields on interest earning assets reflects an increase in higher yielding loans during the three months ended September 30, 2010. The decrease in the average balance of investment securities was due to security sales and normal principal payments while no purchase of new securities were made. The increase in the average balance of loans receivable was primarily due to new loans originated by our new commercial lending activities.

 

Interest expense decreased $78,000, or 8.5%, to $831,000 for the three months ended September 30, 2010, compared to $909,000 for the three months ended September 30, 2009, primarily as a result of decreases in the average rates paid on interest-bearing liabilities, partially offset by increases in the average balance of interest-bearing deposits.

 

Provision for Loan Losses.  A provision of $72,000 was made to the allowance in the first quarter of fiscal 2011, primarily in response to the increase in commercial lending during the period. No provision for loan losses was made in the first quarter of fiscal 2010. We held two residential mortgage loans at September 30, 2010 classified as substandard compared to one at September 30, 2009.

 

Non-Interest Income.  Non-interest income amounted to $834,000 for the three months ended September 30, 2010, an increase of $780,000 compared to non-interest income of $54,000 for the three months ended September 30, 2009. The increase was primarily due to a $229,000 increase in gain on sale of securities, and a $535,000 increase in gain on sale of loans.

 

Non-Interest Expense.  Non-interest expense increased $537,000, or 56.3%, for the three months ended September 30, 2010, largely due to increases in compensation and benefits of $405,000, legal and examination fees of $33,000, occupancy expenses of $31,000 and miscellaneous non-interest expenses of $68,000. The increase in compensation and benefits expense was primarily attributable to the hiring of additional personnel and operating costs associated with our new and expanding commercial loan activities. Non-interest expense

also increased as a result of increases in advertising expense, and other general overhead expenses, including printing and office supplies expense.

 

Provision for Income Tax Expense.  The provision for income taxes amounted to $332,000 and $130,000 for the three months ended September 30, 2010 and 2009, respectively. Our effective tax rate was 33.9% for the three months ended September 30, 2010 and 34.0% for the three months Ended September 30, 2009.

 

The following table shows how we intend to use the net proceeds of the offering. The actual net proceeds will depend on the number of shares of common stock sold in the offering and the expenses incurred in connection with the offering. Payments for shares made through withdrawals from deposit accounts at Home Federal Bank will reduce Home Federal Bank’s deposits and will not result in the receipt of new funds for investment. See “Pro Forma Data” for the assumptions used to arrive at these amounts.

 

 

The new holding company will retain 50% of the net proceeds of the offering, with the remaining 50% being contributed to Home Federal Bank, and intends to initially invest 100% of the proceeds it retains (other than the amount used to fund the employee stock ownership plan loan) in short-term, liquid investments. The actual amounts to be invested in different instruments will depend on the interest rate environment and the new holding company’s liquidity needs. Although there can be no assurance that we will invest the net proceeds in anything other than short-term, liquid investments, over time, the new holding company may use the proceeds it retains from the offering:

 

 

Under current Office of Thrift Supervision regulations, the new holding company may not repurchase shares of its common stock during the first year following the conversion and offering, except to fund

recognition plans that have been ratified by shareholders or tax qualified employee stock benefit plans or, with prior regulatory approval, when extraordinary circumstances exist.

 

Home Federal Bank intends to use the net proceeds it receives to purchase investment and mortgage-backed securities and in the future, may use the additional proceeds that it receives from the offering to fund new loans, both residential and commercial, or for other general corporate purposes.

 

We may need regulatory approvals to engage in some of the activities listed above. We currently have no specific plans or agreements regarding any expansion activities or acquisitions. Except as described above, neither the new holding company nor Home Federal Bank has any specific plans for the investment of the proceeds of this offering and has not allocated a specific portion of the proceeds to any particular use.

 

Home Federal Bancorp has paid quarterly cash dividends since the third quarter of fiscal 2005. Home Federal Bancorp’s current quarterly dividend is $0.06 per share. After we complete the conversion and offering, dividends will be paid by the new holding company on its outstanding shares of common stock. We currently expect that the level of cash dividends per share after the conversion and offering will be substantially consistent with the current amount of dividends of $0.06 per share. However, the rate of such dividends and the initial or continued payment thereof will be in the discretion of the board of directors of the new holding company and will depend upon a number of factors, including the amount of net proceeds retained by us in the offering, investment opportunities available to us, capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions. No assurance can be given that we will continue to pay dividends or that they will not be reduced or eliminated in the future. In addition, during the first three years after the conversion and offering, no dividend will be declared or paid if it would be classified as a return of capital.

 

Dividends from the new holding company may eventually depend, primarily upon receipt of dividends from Home Federal Bank, because the new holding company initially will have no source of income other than dividends from Home Federal Bank, earnings from the investment of proceeds from the sale of common stock retained by us, and interest payments with respect to our loan to our employee stock ownership plan.

 

Home Federal Bank’s ability to pay dividends to the new holding company will be governed by the Home Owners’ Loan Act, as amended, and the regulations of the Office of Thrift Supervision. In addition, the prior approval of the Office of Thrift Supervision will be required for the payment of a dividend if the total of all dividends declared by Home Federal Bank in any calendar year would exceed the total of its net profits for the year combined with its net profits for the two preceding years, less any required transfers to surplus or a fund for the retirement of any preferred stock. In addition, Home Federal Bank will be prohibited from paying cash dividends to the new holding company to the extent that any such payment would reduce Home Federal Bank’s regulatory capital below required capital levels or would impair the liquidation account to be established for the benefit of Home Federal Bank’s eligible account holders and supplemental eligible account holders. See “The Conversion and Offering — Liquidation Rights.”

 

Any payment of dividends by Home Federal Bank to the new holding company which would be deemed to be drawn out of Home Federal Bank’s bad debt reserves would require a payment of taxes at the then-current tax rate by Home Federal Bank on the amount of earnings deemed to be removed from the reserves for such distribution. Home Federal Bank does not intend to make any distribution to the new holding company that would create such a federal tax liability. See “Taxation.”

 

Unlike Home Federal Bank, the new holding company is not subject to the above regulatory restrictions on the payment of dividends to our shareholders. Under Louisiana law, the new holding company generally may pay dividends out of surplus, or if no surplus is available, may pay dividends out of its net profits for the current or preceding fiscal year or both.

 

Home Federal Bancorp’s common stock is currently quoted on the OTC Bulletin Board under the symbol “HFBL.” We expect that the new holding company’s commons stock will be listed for trading on the Nasdaq Capital Market under the symbol “HFBLD” for a period of 20 trading days after completion of the offering. Thereafter, the trading symbol will be “HFBL.” We cannot assure you that our common stock will be approved for listing on the Nasdaq Capital Market.

 

Making a market may include the solicitation of potential buyers and sellers in order to match buy and sell orders. The development of a liquid public market depends upon the existence of willing buyers and sellers, the presence of which is not within our control or the control of any market maker. You should view the common stock as a long-term investment. Furthermore, there can be no assurance that you will be able to sell your shares at or above the $10.00 per share purchase price.

 

Presented below is the high and low bid information for Home Federal Bancorp’s common stock and cash dividends declared for the periods indicated. The over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Information relating to bid quotations has been obtained from the Nasdaq Stock Market, Inc.

 

 

At July 7, 2010, the business day immediately preceding the public announcement of the conversion and offering, and at          , 2010, the date of this prospectus, the closing prices of Home Federal Bancorp common stock as reported on the OTC Bulletin Board were $8.00 per share and $      per share, respectively. At          , 2010, Home Federal Bancorp had approximately           shareholders of record.

 

At June 30, 2010, Home Federal Bank exceeded all of its regulatory capital requirements. The table below sets forth Home Federal Bank’s historical capital under accounting principles generally accepted in the United States of America and regulatory capital at June 30, 2010, and pro forma capital after giving effect to the offering. The pro forma capital amounts reflect the receipt by Home Federal Bank of 50.0% of the net offering proceeds. The pro forma risk-based capital amounts assume the investment of the net proceeds received by Home Federal Bank in assets which have a risk-weight of 20% under applicable regulations, as if such net proceeds had been received and so applied at June 30, 2010.