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| HIBE.OB > SEC Filings for HIBE.OB > Form 10-Q on 15-May-2009 | All Recent SEC Filings |
15-May-2009
Quarterly Report
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 reserve is comprised of specific reserves and a
general reserve. Specific reserves are assessed for each loan that is reviewed
for impairment or for which a probable loss has been identified. The reserve
related to loans that are identified as impaired is based on discounted expected
future cash flows using the 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 reserve levels. The reserve
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 reserve 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 reserve 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 reserve.
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 March 31, 2009 and December 31, 2008
Hibernia Homestead Bancorp's total assets decreased $1.0 million, or 1.7%, to
$57.2 million at March 31, 2009 compared to $58.2 million at December 31, 2008.
During the first three months of 2009, the largest decrease was in cash and cash
equivalents, which decreased $3.2 million and was partially offset by an
increase of $2.0 million in investment securities available for sale. The
decrease in cash and cash equivalents as of March 31, 2009, is primarily a
result of the investment of excess liquidity in available for sale securities.
Our net loans receivable increased by $779,000, or 2.4%, to $33.1 million at
March 31, 2009, compared to $32.3 million at December 31, 2008. During the first
three months of 2009 our total loan originations amounted to $2.9 million and
loan principal payments were $2.1 million. Our total investment securities
amounted to $14.0 million at March 31, 2009, compared to $11.9 million at
December 31, 2008, an increase of $2.1 million, or 17.0%. The increase in
investment securities was offset by maturities and paydowns of $600,000 received
during the period.
Hibernia's deposits decreased $9.8 million, or 22.9%, to $33.3 million at
March 31, 2009, compared to $43.1 million at December 31, 2008, primarily as a
result of the completion of our mutual to stock conversion 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 the Hibernia's initial public
offering. The average balance of deposits, however, increased to $36.0 million
for the three months ended March 31, 2009 from $35.3 million for the prior year
period. We did not hold any Federal Home Loan Bank advances at March 31, 2009,
or December 31, 2008, as we continued our strategy in recent periods to manage
interest rate risk by paying down higher cost borrowings. Our stockholders'
equity amounted to $23.6 million at March 31, 2009 compared to $14.2 million at
December 31, 2008, an increase of $9.4 million, or 66.6%. The increase in
stockholders' equity was the result of $10.4 million in net proceeds from the
issuance of common stock partially offset by $891,000 in the value of shares
allocated to the employee stock ownership plan and a $40,000 decrease in
accumulated other comprehensive income.
Comparison of Operating Results for the Three Months Ended March 31, 2009 and
2008.
For the three months ended March 31, 2009, Hibernia Homestead Bancorp had a net
loss of $112,000 compared to a net loss of $114,000 for the three months ended
March 31, 2008. Our results in the 2009 period reflect in part an increase in
our net interest margin for the quarterly period ended March 31, 2009. In
addition, our non-interest expenses increased over the prior year period. Our
net interest margin increased by 58 basis points to 3.55% for the three months
ended March 31, 2009 compared to 2.97% for the three months ended March 31,
2008, while our average interest rate spread improved to 2.98% for the three
months ended March 31, 2009, compared to 2.22% for the three months ended
March 31, 2008. During the first three months of 2009, the average rate paid on
certificates of deposit decreased 170 basis points from 4.45% for the three
months ended March 31, 2008, to 2.75% for the three months ended March 31, 2009.
Lower rates on certificates of deposit during the three months ended March 31,
2009, reflect general interest rate declines during the period and management's
decision not to aggressively compete for certificate deposits.
Hibernia's total interest income was $603,000 for the three months ended
March 31, 2009, compared to $608,000 for the three months ended March 31, 2008,
a $5,000 or 0.8% decrease. The decrease in interest income in the three months
ended March 31, 2009, compared to the three months ended March 31, 2008, was due
primarily to decreases in the average yields on loans and investments. The
average yield on our interest-earning assets was 4.88% for the three months
ended March 31, 2009, compared to 5.52% for the comparable period in 2008.
Average interest-earning assets were $49.4 million for the three months ended
March 31, 2009, compared to $44.1 million for the comparable period in 2008.
Hibernia's total interest expense was $170,000 for the three months ended
March 31, 2009, compared to $283,000 for the three months ended March 31, 2008,
a decrease of $113,000 or 39.9%. The decrease in interest expense for the three
month period ended March 31, 2009 was primarily due to lower average rates of
interest paid on both our certificates of deposit and our borrowings in the 2009
period combined with decreases in the average balances of certificates of
deposit and borrowings. Our average rate paid on interest-bearing liabilities
was 1.90% for the three months ended March 31, 2009, compared to 3.30% for the
three months ended March 31, 2008.
Hibernia's total non-interest income, which consists of rental income, net of
related expenses, fees and service charges, and realized gains and losses on
investments, amounted to a $22,000 for the three months ended March 31, 2009,
compared to $38,000 for the three months ended March 31, 2008, a $16,000 or
42.1% decrease due primarily to higher maintenance costs associated with the
related rental properties.
Hibernia's total non-interest expense increased by $72,000, or 13.4%, to
$608,000 in the quarter ended March 31, 2009, compared to $536,000 in the
quarter ended March 31, 2008. The primary reasons for the increase in
non-interest expense for the first three months of 2009 were salaries and
employee benefits expense, as additional staff was added to manage Hibernia's
operations as a publically 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.
Average Balances, Net Interest Income, and Yields Earned and Rates Paid. The following table shows 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 March 31,
2009 2008
Average Average
Average Yield/ Average Yield/
Balance Interest Rate(1) Balance Interest Rate
(Dollars in thousands)
Interest-earning assets:
Loans receivable(1) $ 32,091 $ 472 5.88 % $ 28,978 $ 445 6.14 %
Investment securities 12,719 128 4.04 14,872 161 4.33
Other interest-earning assets 4,640 3 0.24 211 2 4.00
Total interest-earning assets 49,450 603 4.88 % 44,061 608 5.52 %
Non-interest-earning assets 7,960 6,115
Total assets $ 57,410 $ 50,176
Interest-bearing liabilities:
Savings, NOW and money market accounts 16,508 36 0.88 % 11,776 33 1.11 %
Certificates of deposit 19,759 134 2.75 22,110 245 4.45
Total interest-bearing deposits 36,267 170 1.90 33,886 278 3.30
FHLB advances 1 - 0.73 655 5 3.31
Total interest-bearing liabilities 36,268 170 1.90 % 34,541 283 3.30 %
Non-interest-bearing liabilities 232 1,266
Total liabilities 36,500 35,807
Retained earnings 20,910 14,369
Total liabilities and retained earnings $ 57,410 $ 50,176
Net interest-earning assets $ 13,182 $ 9,520
Net interest income; average interest
rate spread $ 433 2.98 % $ 325 2.22 %
Net interest margin(2) 3.55 % 2.97 %
Average interest-earning assets
to average interest-bearing liabilities 136.35 % 127.56 %
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(1) Calculated net of deferred fees and discounts, loans in process and allowance for loan losses.
(2) Equals net interest income divided by average interest-earning assets.
Provision for Loan Losses. The allowance for loan losses is established through
a provision for loan losses charged to earnings as losses are estimated to have
occurred in our loan portfolio. The allowance for loan losses is maintained at a
level to provide for probable credit losses related to specifically identified
loans and for losses inherent in the loan portfolio that have been incurred as
of the balance sheet date. The reserve is comprised of specific reserves and a
general reserve.
Specific reserves are assessed for each loan that is reviewed for impairment or
for which a probable loss has been identified. The reserve related to loans that
are identified as impaired is based on discounted expected future cash flows
using the 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 reserve levels. The reserve
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 reserve 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 reserve 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 reserve.
A loan loss provision of $15,000 was made to the allowance during the three
months ended March 31, 2009. No provision was made during the three months ended
March 31, 2008. To the best of management's knowledge, the allowance is
maintained at a level believed to cover all known and inherent losses in the
loan portfolio, both probable and reasonable.
In 2005, Hurricane Katrina affected the residents and businesses within the
Hibernia's market 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 Hurricane Katrina have been experienced to date. However,
the extent to which the still affected areas within the Company's market
eventually recover is unknown at this time as are the ultimate adverse
additional impacts that might have, if any, on the Company's loan portfolio.
Liquidity and Capital Resources
Hibernia maintains levels of liquid assets deemed adequate by management.
Hibernia adjusts its liquidity levels to fund deposit outflows, repay its
borrowings and to fund loan commitments. Hibernia also adjusts liquidity as
appropriate to meet asset and liability management objectives.
Hibernia's primary sources of funds are deposits, amortization and prepayment of
loans and to a lesser extent, rental income and funds provided from operations.
While scheduled principal repayments on loans are a relatively predictable
source of funds, deposit flows and loan prepayments are greatly influenced by
general interest rates, economic conditions and competition. Hibernia sets the
interest rates on its deposits to maintain a desired level of total deposits. In
addition, the Company invests excess funds in short-term interest-earning
accounts and other assets, which provide liquidity to meet lending requirements.
Hibernia Homestead Bancorp's cash and cash equivalents amounted to $3.7 million
at March 31, 2009.
A significant portion of the Hibernia's liquidity consists of non-interest
earning deposits. Primary sources of cash are principal repayments on loans and
increases in deposit accounts. If the Bank requires funds beyond its ability to
generate them internally, borrowing agreements exist with the Federal Home Loan
Bank of Dallas, which provide an additional source of funds. At March 31, 2009,
Hibernia did not have any advances from the Federal Home Loan Bank of Dallas and
had $20.4 million in borrowing capacity. Additionally, at March 31, 2009, the
Bank was a party to a Master Purchase Agreement with First National Banker's
Bank whereby First National Banker's Bank may sell to Hibernia Homestead Bank
federal funds in an amount not to exceed $4.3 million. As of March 31, 2009,
Hibernia Homestead Bank had $-0- of federal funds purchased from First National
Banker's Bank.
At March 31, 2009, the Bank had outstanding loan commitments of $1.7 million to
originate loans. At March 31, 2009, certificates of deposit scheduled to mature
in less than one year totaled $17.2 million. Based on prior experience,
management believes that a significant portion of such deposits will remain with
us, although there can be no assurance that this will be the case. In addition,
in a rising interest rate environment, the cost of such deposits could be
significantly higher upon renewal. The Bank intends to utilize its liquidity to
fund its lending activities.
Hibernia Homestead Bank is required to maintain regulatory capital sufficient to
meet tier 1 leverage, tier 1 risk-based and total risk-based capital ratios of
at least 4.0%, 4.0% and 8.0%, respectively. At March 31, 2009, Hibernia
Homestead Bank exceeded each of its capital requirements with ratios of 32.9%,
67.4% and 68.4%, respectively.
Off-Balance Sheet Arrangements
In the normal course of operations, we engage in a variety of financial
transactions that, in accordance with generally accepted accounting principles
are not recorded in our financial statements. These transactions involve, to
varying degrees, elements of credit, interest rate, and liquidity risk. Such
transactions are used primarily to manage customers' requests for funding and
take the form of loan commitments and lines of credit. Our exposure to credit
loss from non-performance by the other party to the above-mentioned financial
instruments is represented by the contractual amount of those instruments. We
use the same credit policies in making commitments and conditional obligations
as we do for on-balance sheet instruments. In general, we do not require
collateral or other security to support financial instruments with off-balance
sheet credit risk.
Commitments. The following table summarizes our outstanding commitments to
originate loans and to advance additional amounts pursuant to outstanding
letters of credit, lines of credit and undisbursed construction loans at
March 31, 2009.
Total
Amounts Amount of Commitment Expiration - Per Period
Committed at March To 1-3 4-5 After 5
31, 2009 1 Year Years Years Years
(In thousands)
Lines of credit $ 787 $ 787 $ - $ - $ -
Undisbursed portion of
loans in process 178 178 - - -
Commitments to originate
loans 1,560 1,560 - - -
Total commitments $ 2,525 $ 2,525 $ - $ - $ -
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Contractual Cash Obligations. The following table summarizes our contractual cash obligations at March 31, 2009.
Payments Due By Period
Total at To 1-3 4-5 After 5
March 31, 2009 1 Year Years Years Years
(In thousands)
Certificates of deposit $ 19,238 $ 17,192 $ 2,046 $ - $ -
Total contractual obligations $ 19,238 $ 17,192 $ 2,046 $ - $ -
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Impact of Inflation and Changing Prices
The consolidated financial statements and related financial data presented
herein regarding Hibernia Homestead Bancorp, Inc. have been prepared in
accordance with accounting principles generally accepted in the United States of
America which generally require the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
relative purchasing power over time due to inflation. Unlike most industrial
companies, virtually all of Hibernia's assets and liabilities are monetary in
nature. As a result, interest rates generally have a more significant impact on
the Company's performance than does the effect of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the
prices of goods and services, since such prices are affected by inflation to a
larger extent than interest rates.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4T - Controls and Procedures.
Our management evaluated, with the participation of our President and Chief
Executive Officer and our Senior Vice President and Chief Financial Officer, our
disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e)
under the Securities Exchange Act of 1934) as of the end of the period covered
by this report. Based on such evaluation, our President and Chief Executive
Officer and our Senior Vice President and Chief Financial Officer concluded that
our disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and regulations and are
operating in an effective manner.
No change in our internal control over financial reporting (as defined in
Rules 13a-15(f) or 15(d)-15(f) under the Securities Exchange Act of 1934)
. . .
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