10-K 1 form10k.htm FORM 10-K
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)
 
☒       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended June 30, 2018
OR
☐      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________.
 
Commission File Number 001-35019
 
HOME FEDERAL BANCORP, INC. OF LOUISIANA
(Exact name of registrant as specified in its charter)
 
Louisiana
 
02-0815311
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
     
624 Market Street, Shreveport, Louisiana
 
71101
(Address of Principal Executive Offices)
 
(Zip Code)
 
Registrant's telephone number, including area code:
(318) 222-1145
 
Securities registered pursuant to Section 12(b) of the Act:
 
   
Title of each class
Name of each exchange on which registered
Common Stock (par value $.01 per share)
Nasdaq Stock Market, LLC
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 
Yes   No  ☒      
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes   No  ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 5(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒  No  ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒   No  ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
 ☐    
Accelerated filer          
 ☐
Non-accelerated filer  
 ☐  (Do not check if a smaller reporting company)  
Smaller reporting company
 ☒
       
Emerging growth company
 ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).                                              Yes ☐           No ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
The aggregate value of the 1,328,555 shares of Common Stock of the Registrant issued and outstanding on December 31, 2017, which excludes an aggregate of 583,372 shares held by all directors and executive officers of the Registrant, the Registrant's Employee Stock Ownership Plan ("ESOP"), the Recognition and Retention Plan Trust ("RRP") and Employees' Savings and Profit Sharing Plan ("401(k) Plan") as a group was $37.4 million.  This figure is based on the closing sales price of $28.125 per share of the Registrant's Common Stock on December 31, 2017, the last business day of the Registrant's second fiscal quarter.  Although directors and executive officers, the ESOP, RRP and 401(k) Plan were assumed to be "affiliates" of the Registrant for purposes of this calculation, the classification is not to be interpreted as an admission of such status.
Number of shares of Common Stock outstanding as of September 21, 2018: 1,897,924.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the Definitive Proxy Statement for the 2018 Annual Meeting of Shareholders are incorporated into Part III, Items 10 through 14.
 
 
 
 

Home Federal Bancorp Inc. of Louisiana
Form 10-K
For the Year Ended June 30, 2018
 
PART I.
     
Item 1.
Business          
1
     
Item 1A.
Risk Factors          
29
     
Item 1B.
Unresolved Staff Comments          
29
     
Item 2.
Properties          
30
     
Item 3.
Legal Proceedings          
30
     
Item 4.
Mine Safety Disclosures          
30
 
PART II.
     
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities          
31
     
Item 6.
Selected Financial Data          
31
     
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations          
33
     
Item 7A.
Quantitative and Qualitative Disclosure About Market Risk          
42
     
Item 8.
Financial Statements and Supplementary Data          
43
     
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure          
89
     
Item 9A.
Controls and Procedures          
89
     
Item 9B.
Other Information          
89
 
PART III.
     
Item 10.
Directors, Executive Officers and Corporate Governance          
90
     
Item 11.
Executive Compensation          
90
     
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters          
90
     
Item 13.
Certain Relationships and Related Transactions and Director Independence
90
     
Item 14.
Principal Accounting Fees and Services          
91
     
PART IV.
   
     
Item 15.
Exhibits and Financial Statement Schedules          
91
     
Item 16.
Form 10-K Summary          
92
   
SIGNATURES
 
 
 
 
 

 
PART I

Item 1. Business

Home Federal Bancorp, Inc. of Louisiana, a Louisiana chartered corporation ("Home Federal Bancorp" or the "Company"), is the holding company for Home Federal Bank ("Home Federal Bank" or the "Bank"). Home Federal Bank is a federally chartered stock savings bank originally organized in 1924 as Home Building and Loan Association.  The Bank reorganized into the mutual holding company structure in January 2005 and changed its name to "Home Federal Bank" in 2009 as part of its business strategy to be recognized as a community bank.  Home Federal Bank's main office and six full service branch offices are located in Shreveport and Bossier City, Louisiana and serve the Shreveport-Bossier City metropolitan area.  Home Federal Bank's business primarily consists of attracting deposits from the general public and using those funds to originate loans.

As of June 30, 2018, Home Federal Bancorp's only business activities are to hold all of the outstanding common stock of Home Federal Bank. Home Federal Bancorp is authorized to pursue other business activities permitted by applicable laws and regulations for savings and loan holding companies, which may include the issuance of additional shares of common stock to raise capital or to support mergers or acquisitions and borrowing funds for reinvestment in Home Federal Bank.

Home Federal Bancorp does not own or lease any property but instead uses the premises, equipment, and furniture of Home Federal Bank. At the present time, Home Federal Bancorp employs only persons who are officers of Home Federal Bank to serve as officers of Home Federal Bancorp and may also use the support staff of Home Federal Bank from time to time. These persons are not separately compensated by Home Federal Bancorp.

Pursuant to the regulations under Sections 23A and 23B of the Federal Reserve Act, Home Federal Bank and Home Federal Bancorp have entered into an expense sharing agreement. Under this agreement, Home Federal Bancorp will reimburse Home Federal Bank for the time that employees of Home Federal Bank devote to activities of Home Federal Bancorp, the portion of the expense of the annual independent audit attributable to Home Federal Bancorp, and all expenses attributable to Home Federal Bancorp's public filing obligations under the Securities Exchange Act of 1934.

Market Area

Our primary market area for loans and deposits is in northwest Louisiana, particularly Caddo Parish and neighboring communities in Bossier Parish, which are located in the Shreveport-Bossier City metropolitan statistical area.

Shreveport and Bossier City are located in northern Louisiana on Interstate 20, approximately fifteen miles from the Texas state border and 185 miles east of Dallas, Texas.  Our primary market area has a diversified economy with employment in services, government, and wholesale/retail trade constituting the basis of the local economy, with service jobs being the largest component.  The majority of the services are health care related as Shreveport has become a regional hub for health care.  The casino gaming industry also supports a significant number of the service jobs.  The energy sector has a prominent role in the regional economy, resulting from oil and gas exploration and drilling.

Competition.  We face significant competition both in attracting deposits and in making loans. Our most direct competition for deposits has come historically from commercial banks, credit unions, and other savings institutions located in our primary market area, including many large financial institutions which have greater financial and marketing resources available to them. In addition, we face significant competition for investors' funds from short-term money market securities, mutual funds, and other corporate and government securities. We do not rely upon any individual group or entity for a material portion of our deposits. Our ability to attract and retain deposits depends on our ability to generally provide a rate of return, liquidity, and risk comparable to that offered by competing investment opportunities.

Our competition for real estate loans comes principally from mortgage banking companies, commercial banks, other savings institutions, and credit unions. We compete for loan originations primarily through the interest rates and loan fees we charge and the efficiency and quality of services we provide borrowers. Factors which affect competition include general and local economic conditions, current interest rate levels, and volatility in the mortgage markets. Competition may increase as a result of the continuing reduction of restrictions on the interstate operations of financial institutions.
 
 
1

Lending Activities

General.  At June 30, 2018, our net loan portfolio amounted to $317.5 million, representing approximately 75.3% of total assets at that date. Historically, our principal lending activity was the origination of one-to-four family residential loans. At June 30, 2018, one-to-four family residential loans amounted to $121.3 million, or 37.8% of the total loan portfolio. Commercial real estate loans amounted to $74.4 million, or 23.2% of the total loan portfolio, at June 30, 2018.

The types of loans that we may originate are subject to federal and state laws and regulations. Interest rates charged on loans are affected principally by the demand for such loans, the supply of money available for lending purposes, and the rates offered by our competitors. These factors are, in turn, affected by general and economic conditions, the monetary policy of the federal government, including the Federal Reserve Board, legislative and tax policies, and governmental budgetary matters.

A savings institution generally may not make loans to one borrower and related entities in an amount which exceeds 15% of its unimpaired capital and surplus, although loans in an amount equal to an additional 10% of unimpaired capital and surplus may be made to a borrower, if the loans are fully secured by readily marketable securities. In addition, upon application, the Office of the Comptroller of the Currency permits a savings institution to lend up to an additional 15% of unimpaired capital and surplus to one borrower to develop domestic residential housing units. At June 30, 2018, our regulatory limit on loans to one borrower was $7.6 million, and the five largest loans or groups of loans to one borrower, including related entities, aggregated $7.4 million, $7.1 million, $7.0 million, $6.2 million and $5.1 million. Each of our five largest loans or groups of loans was originated with strong guarantor support to known borrowers in our market area and was performing in accordance with its terms at June 30, 2018.

Loans to or guaranteed by general obligations of a state or political subdivision are not subject to the foregoing lending limits.

Loan Portfolio Composition.  The following table shows the composition of our loan portfolio by type of loan at the dates indicated.
   
June 30,
 
   
2018
   
2017
   
2016
   
2015
   
2014
 
   
Amount
   
Percent
of Total
Loans
   
Amount
   
Percent
of Total
 Loans
   
Amount
   
Percent
of Total
 Loans
   
Amount
   
Percent
 of Total
Loans
   
Amount
   
Percent
of Total
 Loans
 
   
(Dollars in thousands)
 
Real estate loans:
                                                           
   One-to-four family residential(1)
 
$
121,257
     
37.76
%
 
$
125,306
     
39.57
%
 
$
118,035
     
40.17
%
 
$
103,332
     
38.11
%
 
$
89,545
     
36.96
%
   Commercial – real estate secured:
                                                                               
      Owner occupied          
   
52,823
     
16.45
     
51,749
     
16.34
     
47,425
     
16.14
     
38,280
     
14.12
     
29,210
     
12.06
 
      Non-owner occupied          
   
21,593
     
6.72
     
26,196
     
8.27
     
21,772
     
7.41
     
23,800
     
8.78
     
27,056
     
11.17
 
           Total commercial-real estate
                 secured          
   
74,416
     
23.17
     
77,945
     
24.61
     
69,197
     
23.55
     
62,080
     
22.90
     
56,266
     
23.23
 
   Multi-family residential
   
38,079
     
11.86
     
21,281
     
6.72
     
20,661
     
7.03
     
15,246
     
5.62
     
20,368
     
8.41
 
   Land          
   
20,474
     
6.37
     
25,038
     
7.91
     
24,308
     
8.27
     
19,866
     
7.33
     
19,945
     
8.23
 
   Construction          
   
11,921
     
3.71
     
9,529
     
3.01
     
14,442
     
4.92
     
17,620
     
6.50
     
12,505
     
5.16
 
   Home equity loans and second
       mortgage loans          
   
1,541
     
0.48
     
1,710
     
0.54
     
1,526
     
0.52
     
2,460
     
0.91
     
2,563
     
1.06
 
   Equity lines of credit          
   
17,387
     
5.41
     
20,976
     
6.62
     
17,290
     
5.88
     
22,187
     
8.18
     
14,950
     
6.17
 
      Total real estate loans          
   
285,075
     
88.76
     
281,785
     
88.98
     
265,459
     
90.34
     
242,791
     
89.55
     
216,142
     
89.22
 
Commercial business          
   
35,458
     
11.04
     
34,429
     
10.87
     
27,886
     
9.49
     
28,019
     
10.33
     
25,749
     
10.63
 
Consumer non-real estate loans:
                                                                               
   Savings accounts          
   
462
     
0.14
     
420
     
0.13
     
404
     
0.14
     
209
     
0.08
     
255
     
0.11
 
   Consumer loans          
   
185
     
0.06
     
63
     
0.02
     
86
     
0.03
     
110
     
0.04
     
111
     
0.04
 
      Total non-real estate loans
   
36,105
     
11.24
     
34,912
     
11.02
     
28,376
     
9.66
     
28,338
     
10.45
     
26,115
     
10.78
 
      Total loans          
   
321,180
     
100.00
%
   
316,697
     
100.00
%
   
293,835
     
100.00
%
   
271,129
     
100.00
%
   
242,257
     
100.00
%
Less:
                                                                               
   Allowance for loan losses
   
(3,425
)
           
(3,729
)
           
(2,845
)
           
(2,515
)
           
(2,396
)
       
   Deferred loan fees          
   
(262
)
           
(196
)
           
(163
)
           
(187
)
           
(298
)
       
      Net loans receivable(1)
 
$
317,493
           
$
312,772
           
$
290,827
           
$
268,427
           
$
239,563
         
 _________________
(1)
Does not include loans held-for-sale amounting to $6.8 million, $13.6 million, $11.9 million, $14.2 million and $9.4 million at June 30, 2018, 2017, 2016, 2015 and 2014, respectively.
 
 
2

                Origination of Loans.  Our lending activities are subject to written underwriting standards and loan origination procedures established by the board of directors and management. When applicable, loans originated are also subject to the underwriting standards of Fannie Mae, Freddie Mac, HUD, VA, USDA, and correspondent banks that purchase loans we originate. Loan originations are obtained through a variety of sources, primarily from existing customers, local realtors, and builders. Written loan applications are taken by one of our loan officers. The loan officer also supervises the procurement of credit reports, income and asset documentation, and other documentation involved with a loan. All appraisals are ordered through an approved appraisal management company in compliance with the Dodd-Frank Consumer Protection Act. Under our lending policy, a title insurance policy is required on most mortgage loans, with the exception of certain smaller loan amounts where our policy requires a title opinion only. We also require fire and extended coverage casualty insurance in order to protect the properties securing the real estate loans. Borrowers must also obtain flood insurance policies when the property is in a flood hazard area.

Our loan approval process is intended to assess the borrower's ability to repay the loan, the viability of the loan, and the value of the property that will secure the loan. All residential loans originated for sale to FNMA or other investor banks that receive an Approve-Eligible recommendation on the automated underwriting feedback certificate that is applicable for each loan type must be approved by a Bank mortgage underwriter. Loans that do not receive an Approve-Eligible recommendation must be approved by a Bank mortgage underwriter and the Senior Vice President of Mortgage. In addition, all loans originated to be held on the Bank's portfolio must be approved by a Bank mortgage underwriter and the Senior Vice President of Mortgage for loans up to $500,000, and for loans up to $1.0 million by the Senior Credit Officer. Commercial real estate secured loans and lines of credit and commercial business loans up to $1.0 million must be approved by the Senior Credit Officer or the President/Chief Executive Officer or the Chairman of the Board, up to $2.0 million by two of the following three officers, Senior Credit Officer, President/Chief Executive Officer, Chairman of the Board, and in excess of $2.0 million by the Executive Committee. In accordance with past practice, all loans are ratified by our board of directors.

In the past, we purchased loans from a mortgage originator secured by single-family housing primarily located in predominantly rural areas of Texas and to a lesser extent, Tennessee, Arkansas, Alabama, Louisiana, and Mississippi. We have not purchased any such mortgage loans since fiscal 2008. The loans were generally secured by rural properties and the seller retained servicing rights. Although the loans were originated with fixed-rates, Home Federal Bank receives an adjustable-rate of interest equal to the Federal Housing Finance Board rate, with rate floors and ceilings of approximately 5.0% and 8.0%, respectively. Under the terms of the loan agreements, the seller must repurchase any loan that becomes more than 90 days delinquent. At June 30, 2018, we had approximately $5.8 million of such loans in our portfolio with an average contractual remaining term of approximately 11.7 years.

In recent periods, we have originated and sold a substantial amount of our fixed-rate conforming mortgages to correspondent banks. For the year ended June 30, 2018, we originated $104.4 million of one-to-four family residential loans and sold $82.0 million of such loans. Our residential loan originations primarily consist of rural development, FHA, and VA loans.
 
 
 
 
 
 
 
 
 
 
3

                The following table shows total loans originated, sold, and repaid during the periods indicated.

   
Year Ended June 30,
 
   
2018
   
2017
   
2016
 
   
(In thousands)
 
Loan originations:
                 
     One-to-four family residential          
 
$
104,375
   
$
127,233
   
$
115,449
 
     Commercial — real estate secured:
                       
          Owner occupied          
   
58,652
     
64,522
     
48,076
 
          Non-owner occupied          
   
6,801
     
8,313
     
8,169
 
     Multi-family residential          
   
25,820
     
2,979
     
5,914
 
     Commercial business          
   
46,729
     
51,183
     
33,092
 
     Land          
   
3,263
     
11,081
     
8,302
 
     Construction          
   
23,829
     
28,809
     
19,538
 
     Home equity loans and lines of credit and other consumer          
   
10,625
     
10,587
     
9,351
 
          Total loan originations          
   
280,094
     
304,707
     
247,891
 
Loans purchased          
   
--
     
--
     
--
 
Total loan originations and loans purchased          
   
280,094
     
304,707
     
247,891
 
Loans Sold
   
(81,990
)
   
(111,171
)
   
(101,295
)
Loan principal repayments
   
(188,546
)
   
(165,177
)
   
(126,172
)
Total loans sold and principal repayments
   
(270,536
)
   
(276,348
)
   
(227,467
)
Increase (decrease) due to other items, net(1)
   
(7,410
)
   
(6,414
)
   
1,976
 
Net increase in loan portfolio          
 
$
(2,148
)
 
$
21,945
   
$
22,400
 
 ___________________
(1)          Other items consist of deferred loan fees, the allowance for loan losses, and loans held-for-sale at year end.

Although federal laws and regulations permit savings institutions to originate and purchase loans secured by real estate located throughout the United States, we concentrate our lending activity in our primary market area in Caddo and Bossier Parishes, Louisiana and the surrounding area. Subject to our loans-to-one borrower limitation, we are permitted to invest without limitation in residential mortgage loans and up to 400% of our capital in loans secured by non-residential or commercial real estate. We also may invest in secured and unsecured consumer loans in an amount not exceeding 35% of total assets. This 35% limitation may be exceeded for certain types of consumer loans, such as home equity and property improvement loans secured by residential real property. In addition, we may invest up to 10% of our total assets in secured and unsecured loans for commercial, corporate, business, or agricultural purposes. At June 30, 2018, we were within each of the above lending limits.
 
During fiscal 2018 and 2017, we sold $82.0 million and $111.2 million of loans, respectively. We recognized gain on sale of loans of $1.8 million during fiscal 2018 and $2.8 million during fiscal 2017. Loans were sold during these periods primarily to other financial institutions. Such loans were sold against forward sales commitments with servicing released and without recourse after a certain period of time, typically 90 days. The loans sold primarily consisted of long-term, fixed rate residential real estate loans. These loans were originated during this period of historically low interest rates and were sold to reduce our interest rate risk. We will continue to sell loans in the future to the extent we believe the interest rate environment is unfavorable and interest rate risk is unacceptable.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4

                    Contractual Terms to Final Maturities.  The following table shows the scheduled contractual maturities of our loans as of June 30, 2018, before giving effect to net items. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less. The amounts shown below do not take into account loan prepayments.

 
   
One-to-
Four
Family
Residential
   
Commercial
Real Estate
Secured
   
Multi
Family
Residential
   
Commercial
Business
   
Land
   
Construction
   
Home
Equity
 Loans
and Lines
of Credit
and Other
Consumer
   
Total
 
   
(In thousands)
 
  Amounts due after
June 30, 2018 in:
                                               
  One year or less          
 
$
7,979
   
$
10,214
   
$
12,560
   
$
12,302
   
$
10,827
   
$
11,849
   
$
4,467
   
$
70,198
 
  After one year through
two years          
   
4,260
     
9,767
     
10,074
     
9,142
     
5,810
     
72
     
1,547
     
40,672
 
  After two years through
three years          
   
12,917
     
5,905
     
--
     
3,303
     
905
     
--
     
194
     
23,224
 
  After three years through
five years          
   
24,658
     
31,616
     
2,179
     
8,398
     
1,863
     
--
     
259
     
68,973
 
  After five years through
ten years          
   
7,184
     
15,189
     
9,706
     
2,313
     
1,069
     
--
     
737
     
36,198
 
  After ten years through
fifteen years          
   
6,851
     
1,725
     
1,629
     
--
     
--
     
--
     
12,303
     
22,508
 
  After fifteen years          
   
57,408
     
--
     
1,931
     
--
     
--
     
--
     
68
     
59,407
 
                                                                 
      Total          
 
$
121,257
   
$
74,416
   
$
38,079
   
$
35,458
   
$
20,474
   
$
11,921
   
$
19,575
   
$
321,180
 


The following table sets forth the dollar amount of all loans at June 30, 2018, before net items, due after June 30, 2019, which have fixed interest rates or which have floating or adjustable interest rates.

         
Floating or
       
   
Fixed-Rate
   
Adjustable-Rate
   
Total
 
         
(In thousands)
       
One-to-four family residential          
 
$
88,300
   
$
24,978
   
$
113,278
 
Commercial — real estate secured          
   
54,106
     
10,095
     
64,201
 
Multi-family residential          
   
25,519
     
--
     
25,519
 
Commercial business          
   
15,003
     
8,153
     
23,156
 
Land          
   
7,320
     
2,327
     
9,647
 
Construction          
   
--
     
72
     
72
 
Home equity loans and lines of credit and other consumer
   
1,898
     
13,211
     
15,109
 
                         
   Total          
 
$
192,146
   
$
58,836
   
$
250,982
 

Scheduled contractual maturities of loans do not necessarily reflect the actual expected term of the loan portfolio. The average life of mortgage loans is substantially less than their average contractual terms because of prepayments. The average life of mortgage loans tends to increase when current mortgage loan rates are higher than rates on existing mortgage loans and, conversely, decrease when rates on current mortgage loans are lower than existing mortgage loan rates (due to refinancing of adjustable-rate and fixed-rate loans at lower rates). Under the latter circumstance, the weighted average yield on loans decreases as higher yielding loans are repaid or refinanced at lower rates.
 
 
 
 
 
 
5

                One-to-Four Family Residential Real Estate Loans.  At June 30, 2018, $121.3 million, or 37.8%, of the total loan portfolio, before net items, consisted of one-to-four family residential loans.

The loan-to-value ratios, maturities, and other provisions of the loans made by us generally have reflected the policy of making less than the maximum loan permissible under applicable regulations, in accordance with sound lending practices, market conditions, and underwriting standards established by us. Our current lending policy on one-to-four family residential loans generally limits the maximum loan-to-value ratio to 90% or less of the appraised value of the property, although we will lend up to a 100% loan-to-value ratio with private mortgage insurance. These loans are amortized on a monthly basis with principal and interest due each month, terms not in excess of 30 years, and generally include "due-on-sale" clauses.

At June 30, 2018, $95.8 million, or 79.0%, of our one-to-four family residential mortgage loans were fixed-rate loans. Fixed-rate loans generally have maturities ranging from 15 to 30 years and are fully amortizing with monthly loan payments sufficient to repay the total amount of the loan with interest by the end of the loan term. Our fixed-rate loans generally are originated under terms, conditions, and documentation which permit them to be sold to U.S. Government-sponsored agencies, such as the Federal Home Loan Mortgage Corporation and other investors in the secondary mortgage market. Consistent with our asset/liability management, we have sold a significant portion of our long-term, fixed rate loans.  Servicing is released on all loans sold except those loans sold to FNMA.

Although we offer adjustable rate loans, substantially all of the single-family loan originations over the last few years have consisted of fixed-rate loans due to the low interest rate environment. The adjustable-rate loans held in portfolio typically have interest rates which adjust on an annual basis. These loans generally have an annual cap of 1% on any increase or decrease and a cap of 6% above or below the initial rate over the life of the loan. Such loans are underwritten based on the initial rate plus 2%. At June 30, 2018, $25.5 million, or 21.0%, of our one-to-four family residential mortgage loans were adjustable rate loans.

Commercial Real Estate Secured Loans.  As of June 30, 2018, Home Federal Bank had outstanding $74.4 million of loans secured by commercial real estate, $52.8 million, or 71.0%, of which were owner occupied. It is the current policy of Home Federal Bank to lend in a first lien position on real property occupied as a commercial business property. Home Federal Bank offers fixed and variable rate commercial real estate loans. Home Federal Bank's commercial real estate loans are limited to a maximum of 85% of the appraised value and have terms up to 15 years, however, the terms are generally no more than five years with amortization periods of 20 years or less. It is our policy that commercial real estate secured lines of credit are limited to a maximum of 85% of the appraised value of the property and shall not exceed three to five year amortizations.

Multi-Family Residential Loans.  At June 30, 2018, we had outstanding approximately $38.1 million of multi-family residential loans. Our multi-family residential loan portfolio includes income producing properties of 50 or more units and low income housing developments. We obtain personal guarantees on all properties other than those of the public housing authority for which they are not permitted.

Commercial Business Loans.  At June 30, 2018, we had outstanding approximately $35.5 million of non-real estate secured commercial loans. The business lending products we offer include lines of credit, inventory financing, and equipment loans. Commercial business loans and lines of credit carry more credit risk than other types of commercial loans. We attempt to limit such risk by making loans predominantly to small- and mid-sized businesses located within our market area and having the loans personally guaranteed by the principals involved. We have established underwriting standards in regard to business loans which set forth the criteria for sources of repayment, borrower's capacity to repay, specific financial and collateral margins, and financial enhancements such as guarantees. The primary source of repayment is cash flow from the business and the general financial strength of the borrower.
 
 
 
 
 
 
6

Land Loans.  As of June 30, 2018, land loans were $20.5 million, or 6.4%, of the total loan portfolio, before net items. Land loans include land which has been acquired for the purpose of development and unimproved land. Our loan policy provides for loan-to-value ratios of 50% for unimproved land loans. Land loans are originated with fixed rates and terms up to five years with longer amortizations. Although land loans generally are considered to have greater credit risk than certain other types of loans, we expect to mitigate such risk by requiring personal guarantees and identifying other secondary sources of repayment for the land loan other than the sale of the collateral. It is our practice to only originate a limited amount of loans for speculative development to borrowers with whom our lenders have a prior relationship.

Construction Loans.  At June 30, 2018, we had outstanding approximately $11.9 million of construction loans which included loans for the construction of residential and commercial property. Our residential construction loans typically have terms of six to twelve months with a takeout letter from Home Federal for the permanent mortgage. Our commercial construction loans include owner occupied commercial properties, pre-sold property, and speculative office property. As of June 30, 2018, we held $2.4 million of speculative construction loans.

Home Equity and Second Mortgage Loans.  At June 30, 2018, we held $1.5 million of home equity and second mortgage loans. These loans are secured by the underlying equity in the borrower's residence. We do not require that we hold the first mortgage on the properties that secure the second mortgage loans. The amount of our second mortgage loans generally cannot exceed a loan-to-value ratio of 90% after taking into consideration the first mortgage loan. These loans are typically three-to-five year balloon loans with fixed rates and terms that will not exceed 10 years and contain an on-demand clause that allows us to call the loan in at any time.

Equity Lines of Credit.  We offer lines of credit secured by a borrower's equity in real estate. These loans amounted to $17.4 million, or 5.4% of the total loan portfolio, before net items, at June 30, 2018.  The unused portion of equity lines was $11.1 million at June 30, 2018.  The rates and terms of such lines of credit depend on the history and income of the borrower, purpose of the loan, and collateral. Lines of credit will not exceed 90% of the value of the equity in the collateral.

Consumer Non-Real Estate Loans.  We are authorized to make loans for a wide variety of personal or consumer purposes. We originate consumer loans primarily in order to accommodate our customers. The consumer loans at June 30, 2018 consist of loans secured by deposit accounts with us, automobile loans, overdraft, and other unsecured loans.

Consumer non-real estate loans generally have shorter terms and higher interest rates than residential mortgage loans and generally entail greater credit risk than residential mortgage loans, particularly those loans secured by assets that depreciate rapidly, such as automobiles, boats, and recreational vehicles. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan, and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In particular, amounts realizable on the sale of repossessed automobiles may be significantly reduced based upon the condition of the automobiles and the fluctuating demand for used automobiles.

We offer loans secured by deposit accounts held with us. These loans amounted to $462,000, or 0.14% of the total loan portfolio, before net items, at June 30, 2018. Such loans are originated for up to 100% of the account balance, with a hold placed on the account restricting the withdrawal of the account balance. The interest rate on the loan is equal to the interest rate paid on the account plus 2%. These loans typically are payable on demand with a maturity date of one year.

Loan Origination and Other Fees.  In addition to interest earned on loans, we generally receive loan origination fees or "points" for originating loans. Loan points are a percentage of the principal amount of the mortgage loan and are charged to the borrower in connection with the origination of the loan. In accordance with accounting guidance, loan origination fees and points are deferred and amortized into income as an adjustment of yield over the life of the loan.

 
 
7

Asset Quality

General.  During fiscal 2018, we engaged a third party to review loans, policies, and procedures. The scope of the services provided included credit underwriting, adherence to our loan policies, as well as regulatory policies, and recommendations regarding reserve allocations. We expect these reviews will be done annually.

Our collection procedures provide that when a loan is 10 days past due personal contact efforts are attempted, either in person or by telephone. At 15 days past due, a late charge notice is sent to the borrower requesting payment. If the loan is still past due at 30 days, a formal letter is sent to the borrower stating that the loan is past due and that legal action, including foreclosure proceedings, may be necessary. If a loan becomes 60 days past due and no progress has been made in resolving the delinquency, a collection letter from legal counsel is sent and personal contact is attempted. When a loan continues in a delinquent status for 90 days or more, and a repayment schedule has not been made or kept by the borrower, generally a notice of intent to foreclose is sent to the borrower. If the delinquency is not cured, foreclosure proceedings are initiated. In most cases, deficiencies are cured promptly. While we generally prefer to work with borrowers to resolve such problems, we will institute foreclosure or other collection proceedings, when necessary, to minimize any potential loss.

Loans are placed on non-accrual status when management believes the probability of collection of interest is doubtful. When a loan is placed on non-accrual status, previously accrued but unpaid interest is deducted from interest income. We generally discontinue the accrual of interest income when the loan becomes 90 days past due, as to principal or interest, unless the credit is well secured and we believe we will fully collect.

Real estate and other assets we acquire as a result of foreclosure or by deed-in-lieu of foreclosure are classified as real estate owned until sold.  At June 30, 2018, we had $1.2 million of other real estate owned consisting of one residential lot and two one-to-four family residential properties compared to one residential lot acquired through foreclosure with a carrying value of $540,000 at June 30, 2017.

Delinquent Loans.  The following table shows the delinquencies in our loan portfolio as of the dates indicated.

       June 30,   
     2018         2017   
     30-89      90 or More Days     30-89       90 or More Days  
        Days Overdue        Overdue         Days Overdue         Overdue  
   
Number
   
Principal
   
Number
 
Principal
   
Number
   
Principal
   
Number
   
Principal
 
 
of Loans
   
Balance
   
of Loans
 
Balance
   
of Loans
   
Balance
   
of Loans
   
Balance
 
                     
(Dollars in thousands)
             
One-to-four family residential
   
18
   
$
1,711
     
14
   
$
1,954
     
23
   
$
2,000
     
6
   
$
662
 
Commercial — real estate secured
   
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Multi-family residential          
   
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Commercial business          
   
--
     
--
     
1
     
416
     
1
     
8
     
15
     
2,503
 
Land          
   
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Construction          
   
--
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Home equity loans and lines of credit
    and other consumer 
 
6
     
193
     
3
     
117
     
4
     
194
     
1
     
4
 
 
                                                               
     Total delinquent loans          
   
24
   
$
1,904
     
18
   
$
2,487
     
28
   
$
2,202
     
22
   
$
3,169
 
 
                                                               
Delinquent loans to total net loans
           
0.60
%
           
0.78
%
           
0.70
%
           
1.01
%
Delinquent loans to total loans
           
0.59
%
           
0.77
%
           
0.70
%
           
1.00
%
 
 
 
 
 
 
 
 
8

Non-Performing Assets.  The following table shows the amounts of our non-performing assets (defined as non-accruing loans, accruing loans 90 days or more past due, and real estate owned) at the dates indicated.

   
June 30,
 
   
2018
   
2017
   
2016
   
2015
   
2014
 
   
(Dollars in thousands)
 
Non-accruing loans:
                             
     One-to-four family residential          
   
643
   
$
317
   
$
13
   
$
13
   
$
151
 
     Commercial — real estate secured          
   
--
     
--
     
--
     
--
     
--
 
     Multi-family residential          
   
--
     
--
     
--
     
--
     
--
 
     Commercial business          
   
416
     
2,503
     
--
     
--
     
--
 
     Land          
   
--
     
--
     
--
     
--
     
--
 
     Construction          
   
--
     
--
     
--
     
--
     
--
 
     Home equity loans and lines of credit and other consumer          
   
87
     
--
     
--
     
--
     
27
 
          Total non-accruing loans          
   
1,146
     
2,820
     
13
     
13
     
178
 
Accruing loans 90 days or more past due:
                                       
 One-to-four family residential          
   
680
     
181
     
101
     
67
     
13
 
     Commercial — real estate secured          
   
--
     
--
     
--
     
--
     
--
 
     Multi-family residential          
   
--
     
--
     
--
     
--
     
--
 
     Commercial business          
   
--
     
--
     
--
     
--
     
--
 
     Land          
   
--
     
--
     
--
     
--
     
--
 
     Construction          
   
--
     
--
     
--
     
--
     
--
 
     Home equity loans and lines of credit and other consumer          
   
30
     
4
     
--
     
--
     
--
 
               Total non-performing loans(1)          
   
1,856
     
3,005
     
114
     
80
     
191
 
          Real estate owned, net          
   
 1,177
     
540
     
--
     
40
     
--
 
               Total non-performing assets          
 
$
$3,033
   
$
3,545
   
$
114
   
$
120
   
$
191
 
                                         
Troubled debt restructurings (2)          
   
6,886
     
--
     
1,990
     
--
     
--
 
Total non-performing assets and troubled debt restructurings
 
$
9,919
   
$
3,545
   
$
2,104
   
$
120
   
$
191
 
                                         
Total non-performing loans as a percent of loans, net          
   
0.58
%
   
0.96
%
   
0.04
%
   
0.03
%
   
0.07
%
Total non-performing assets as a percent of total assets          
   
0.72
%
   
0.83
%
   
0.03
%
   
0.03
%
   
0.05
%
Total non-performing assets and troubled debt restructurings
     as a percentage of total assets          
   
2.45
%
   
0.83
%
   
0.55
%
   
0.03
%
   
0.05
%
_________________
(1)          Non-performing loans consist of non-accruing loans plus accruing loans 90 days or more past due.
(2)          Troubled debt restructurings not included in non-accruing loans and accruing loans 90 days or more past due.

At June 30, 2018, the Company had $3.0 million of non-performing assets (defined as non-accruing loans, accruing loans 90 days or more past due, and other real estate owned) compared to $3.5 million of non-performing assets at June 30, 2017, consisting of one commercial business loan, nine single-family residential loans, three line of credit loans, one residential lot in other real estate owned, and two single family residential loans in other real estate owned at June 30, 2018 compared to four single-family residential loans, one line of credit loan, fifteen commercial business loans, and one residential lot in other real estate owned at June 30, 2017. At June 30, 2018, the Company had eight single family residential loans, two line of credit loans, one commercial business loan, and five loans to one borrower consisting of two commercial real estate loans, two non-real estate loans, and one single family residential loan classified as substandard compared to four single family residential loans, one line of credit loan, one commercial real estate loan, and fifteen commercial business loans to two borrowers classified as substandard at June 30, 2017. There were no loans classified as doubtful at June 30, 2018 or June 30, 2017.

                During the three months ended December 31, 2016, we became aware that one of two related borrowers of fifteen commercial business loans in the aggregate amount of $2.8 million that were classified as substandard filed for Chapter 11 (reorganization) bankruptcy protection during that period. We charged off nine of the fifteen loans in the amount of $797,000 against the allowance for loan losses during the three months ended September 30, 2017 along with an additional charge-off of $250,000 against one of the remaining six loans against the allowance for loan losses during the three months ended June 30, 2018. We received principal payments in March 2017 for $272,000, May 2017 for $10,000, and monthly payments of $15,000 from July 2017 through January 2018 totaling $105,000.  We also received $938,000 from the proceeds of the sale of equipment in May and June of 2018 reducing our exposure to one outstanding loan with a balance of $416,000.  This loan continues to be classified as substandard and was on non-accrual at June 30, 2018. We are continuing to monitor this credit and presently believe that our allowance for loan losses at June 30, 2018 is adequate.  No additional losses are currently anticipated with respect to these loans.
 
9

                    Classified Assets.  Federal regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: "substandard", "doubtful", and "loss". Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss, if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values questionable, and there is a higher possibility of loss. An asset classified as loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. Another category designated "special mention" also must be established and maintained for assets which do not currently expose an insured institution to a sufficient degree of risk to warrant classification as substandard, doubtful, or loss. Assets classified as substandard or doubtful require the institution to establish general allowances for loan losses. If an asset, or portion thereof, is classified as loss, the insured institution must either establish specific allowances for loan losses in the amount of 100% of the portion of the asset classified loss, or charge-off such amount. General loss allowances established to cover possible losses related to assets classified substandard or doubtful may be included in determining an institution's regulatory capital, while specific valuation allowances for loan losses do not qualify as regulatory capital. Federal examiners may disagree with an insured institution's classifications and amounts reserved. At June 30, 2018, we held $652,000 of assets designated as special mention and $6.0 million classified as substandard. The classified assets are related to 14 residential mortgage loans, two commercial real estate loans, three commercial business loans, and two line-of-credit loans. There were no loans classified as doubtful or loss at June 30, 2018.

Allowance for Loan Losses.  At June 30, 2018, our allowance for loan losses amounted to $3.4 million. The allowance for loan losses is maintained at a level believed, to the best of our knowledge, to cover all known and inherent losses in the portfolio, both probable and reasonable, to be estimated at each reporting date. The level of allowance for loan losses is based on our periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral, and prevailing conditions. We are primarily engaged in originating single-family residential loans. Our management considers the deficiencies of all classified loans in determining the amount of allowance for loan losses required at each reporting date. Our management analyzes the probability of the correction of the substandard loans' weaknesses and the extent of any known or inherent losses that we might sustain on them. During the fiscal year 2018, we recorded a provision for loan losses of $1.1 million, as compared to $900,000 recorded for fiscal year 2017. The 2018 provision reflects our estimate to maintain the allowance for loan losses at a level to cover probable losses inherent in the loan portfolio.

The provision for fiscal year 2018 reflects the risks associated with our commercial lending (both real estate secured and non-real estate secured), as well as other risks in our portfolio.  Total non-performing loans decreased by approximately $1.1 million as of June 30, 2018 compared to June 30, 2017.

While management believes that it determines the size of the allowance based on the best information available at the time, the allowance will need to be adjusted as circumstances change and assumptions are updated. Future adjustments to the allowance could significantly affect net income.
 
 
 

10

               The following table shows changes in our allowance for loan losses during the periods presented.  We had $1.4 million, $30,000, $181,000 and $12,000 of loan charge-offs during fiscal 2018, 2017, 2015 and 2014, respectively.  There were no loan charge-offs during fiscal 2016.  Bad debt recoveries amounted to $26,000 during fiscal 2018.
 
   
June 30,
 
   
2018
   
2017
   
2016
   
2015
   
2014
 
                               
Total loans outstanding at end of period          
 
$
$321,180
   
$
316,697
   
$
293,835
   
$
271,129
   
$
242,257
 
Average loans outstanding          
   
323,692
     
312,132
     
287,405
     
269,408
     
224,463
 
Allowance for loan losses, beginning of period          
   
3,729
     
2,845
     
2,515
     
2,396
     
2,240
 
Provision for loan losses          
   
1,050
     
900
     
271
     
300
     
168
 
Recoveries          
   
26
     
14
     
59
     
--
     
--
 
Charge-offs          
   
(1,380
)
   
(30
)
   
--
     
(181
)
   
(12
)
        Allowance for loan losses, end of period          
 
$
3,425
   
$
3,729
   
$
2,845
   
$
2,515
   
$
2,396
 
 
                                       
Allowance for loan losses as a percent of  non-performing loans 
 
183.57
%
   
123.65
%
   
2,501.99
%
   
3,143.75
%
   
1,254.45
%
Allowance for loan losses as a percent of  loans outstanding  
 
1.07
%
   
1.18
%
   
0.97
%
   
0.93
%
   
0.99
%


The following table shows how our allowance for loan losses is allocated by type of loan at each of the dates indicated.

   
June 30,
 
   
2018
   
2017
   
2016
   
2015
   
2014
 
   
Amount of
Allowance
   
Loan Category
as a %
of Total Loans
   
Amount of
Allowance
   
Loan
Category
as a %
of Total Loans
   
Amount of
Allowance
   
Loan
Category
as a %
of Total Loans
   
Amount of
Allowance
   
Loan
Category
as a %
of Total Loans
   
Amount of
Allowance
   
Loan
Category
as a %
of Total Loans
 
 
 
 
   
(Dollars in thousands)
 
One-to-four family residential 
$
1,166
     
37.76
%
 
$
1,822
     
39.57
%
 
$
1,517
     
40.17
%
 
$
1,195
     
38.11
%
 
$
1,224
     
36.96
%
Commercial – real estate secured 
 
436
     
23.17
     
353
     
24.61
     
321
     
23.55
     
415
     
22.90
     
464
     
23.23
 
Multi-family residential  
 
256
     
11.86
     
73
     
6.72
     
111
     
7.03
     
103
     
5.62
     
128
     
8.41
 
Commercial business 
 
929
     
11.04
     
979
     
10.87
     
444
     
9.49
     
305
     
10.33
     
202
     
10.63
 
Land          
   
161
     
6.37
     
203
     
7.91
     
201
     
8.27
     
154
     
7.33
     
168
     
8.23
 
Construction          
   
163
     
3.71
     
147
     
3.01
     
126
     
4.92
     
146
     
6.50
     
105
     
5.16
 
Home equity loans and lines of
    credit and other consumer 
 
314
     
6.09
     
152
     
7.31
     
125
     
6.57
     
197
     
9.21
     
105
     
7.38
 
       Total          
 
$
3,425
     
100.00
%
 
$
3,729
     
100.00
%
 
$
2,845
     
100.00
%
 
$
2,515
     
100.00
%
 
$
2,396
     
100.00
%


 
 
 
11

 Investment Securities
 
We have authority to invest in various types of securities, including mortgage-backed securities, U.S. Treasury obligations, securities of various federal agencies and of state and municipal governments, certificates of deposit at federally insured banks and savings institutions, certain bankers' acceptances, and federal funds.  Our investment strategy is established by the board of directors.

The following table sets forth certain information relating to our investment securities portfolio at the dates indicated.
 
   
June 30,
 
   
2018
   
2017
    2016  
   
Amortized
Cost
   
Fair
Value
   
Amortized
Cost
   
Fair
Value
   
Amortized
Cost
   
Fair
Value
 
   
(In thousands)
 
Securities Held-to-Maturity:
                                   
Mortgage-backed securities
 
$
26,042
   
$
24,972
   
$
25,558
   
$
25,190
   
$
--
   
$
--
 
FNBB stock          
   
250
     
250
     
250
     
250
     
250
     
250
 
FHLB stock          
   
2,596
     
2,596
     
2,549
     
2,549
     
2,099
     
2,099
 
Total Securities Held-to-Maturity
   
28,888
     
27,818
     
28,357
     
27,989
     
2,349
     
2,349
 
                                                 
Securities Available-for-Sale:
                                               
Mortgage-backed securities
   
30,647
     
29,324
     
37,468
     
36,935
     
50,045
     
50,173
 
                                                 
                                                 
Total Investment Securities
 
$
59,535
   
$
57,142
   
$
65,825
   
$
64,924
   
$
52,394
   
$
52,522
 


The following table sets forth the amount of investment securities which contractually mature during each of the periods indicated and the weighted average yields for each range of maturities at June 30, 2018. The amounts reflect the fair value of our securities at June 30, 2018.

   
Amounts at June 30, 2018 which Mature in
 
   
 
 
One Year
or Less
   
 
Weighted
Average
Yield
   
Over One
Year
Through
Five Years
   
 
Weighted
Average
Yield
   
 
Over Five
Through
Ten Years
   
 
Weighted
Average
Yield
   
 
 
Over
Ten Years
   
 
Weighted
Average
Yield
 
   
(Dollars in thousands)
 
Bonds and other debt securities:
                                               
Mortgage-backed securities
 
$
1
     
5.62
%
 
$
24
     
5.51
%
 
$
36
     
2.26
%
 
$
54,235
     
2.16
%
Equity securities(1):
                                                               
FNBB stock          
   
--
     
--
     
--
     
--
     
--
     
--
     
250
     
0.56
%
FHLB stock          
   
--
     
--
     
--
     
--
     
--
     
--
     
2,596
     
1.90
%
                                                                 
Total investment securities
    and bank stock          
 
$
1
     
5.62
%
 
$
24
     
5.51
%
 
$
36
     
2.26
%
 
$
57,081
     
2.14
%
 ____________________
(1)          None of the listed equity securities has a stated maturity.

Our investment in equity securities consists primarily of FHLB stock and shares of First National Bankers Bankshares, Inc. ("FNBB").  Management monitors its investment portfolio to determine whether any investment securities which have unrealized losses should be considered other than temporarily impaired.

Mortgage-backed securities represent a participation interest in a pool of one-to-four family or multi-family mortgages. The mortgage originators use intermediaries (generally U.S. Government agencies and government-sponsored enterprises) to pool and repackage the participation interests in the form of securities, with investors receiving the principal and interest payments on the mortgages. Such U.S. Government agencies and government-sponsored enterprises guarantee the payment of principal and interest to investors.
 
 
 
12

                Mortgage-backed securities are typically issued with stated principal amounts, and the securities are backed by pools of mortgages that have loans with interest rates that are within a range and have varying maturities. The underlying pool of mortgages, i.e., fixed-rate or adjustable-rate, as well as prepayment risk, are passed on to the certificate holder. The life of a mortgage-backed pass-through security approximates the life of the underlying mortgages.
 
Our mortgage-backed securities consist of Ginnie Mae securities ("GNMA"), Freddie Mac securities ("FHLMC"), and Fannie Mae securities ("FNMA"). Ginnie Mae is a government agency within the Department of Housing and Urban Development, which is intended to help finance government-assisted housing programs. Ginnie Mae securities are backed by loans insured by the Federal Housing Administration or guaranteed by the Veterans Administration. The timely payment of principal and interest on Ginnie Mae securities is guaranteed by Ginnie Mae and backed by the full faith and credit of the U.S. Government. Freddie Mac is a private corporation chartered by the U.S. Government. Freddie Mac issues participation certificates backed principally by conventional mortgage loans. Freddie Mac guarantees the timely payment of interest and the ultimate return of principal on participation certificates. Fannie Mae is a private corporation chartered by the U.S. Congress with a mandate to establish a secondary market for mortgage loans. Fannie Mae guarantees the timely payment of principal and interest on Fannie Mae securities. Freddie Mac and Fannie Mae securities are not backed by the full faith and credit of the U.S. Government. In September 2008, the Federal Housing Finance Agency was appointed as conservator of Fannie Mae and Freddie Mac. The U.S. Department of the Treasury agreed to provide capital, as needed, to ensure that Fannie Mae and Freddie Mac continue to provide liquidity to the housing and mortgage markets.
 
Mortgage-backed securities generally yield less than the loans which underlie such securities because of their payment guarantees or credit enhancements, which offer nominal credit risk. In addition, mortgage-backed securities are more liquid than individual mortgage loans and may be used to collateralize our borrowings or other obligations.
 
The following table sets forth the composition of our mortgage-backed securities portfolio at each of the dates indicated. The amounts reflect the fair value of our mortgage-backed securities at June 30, 2018, 2017, and 2016.

   
June 30,
 
   
2018
   
2017
   
2016
 
   
(In thousands)
 
Fixed rate:
                 
   GNMA          
 
$
5,819
   
$
32
   
$
41
 
   FHLMC          
   
7,042
     
8,781
     
10,698
 
   FNMA          
   
35,760
     
45,110
     
27,108
 
      Total fixed rate          
   
48,621
     
53,923
     
37,847
 
Adjustable rate:
                       
   GNMA          
   
5,623
     
8,098
     
12,116
 
   FHLMC          
   
43
     
67
     
96
 
   FNMA          
   
9
     
37
     
114
 
      Total adjustable-rate          
   
5,675
     
8,202
     
12,326
 
      Total mortgage-backed securities          
 
$
54,296
   
$
62,125
   
$
50,173
 

 
 
 
 
 
 
 
13

          Information regarding the contractual maturities and weighted average yield of our mortgage-backed securities portfolio at June 30, 2018 is presented below. Due to repayments of the underlying loans, the actual maturities of mortgage-backed securities generally are substantially less than the scheduled maturities. The amounts reflect the fair value of our mortgage-backed securities at June 30, 2018.
 
 
 
Amounts at June 30, 2018 which Mature in
 
 
       
Weighted
   
Over One
   
Weighted
         
Weighted
 
 
 
One Year
   
Average
   
through
   
Average
   
Over
   
Average
 
 
 
or Less
   
Yield
   
Five Years
   
Yield
   
Five Years
   
Yield
 
 
 
(In thousands)
 
Fixed rate:
                                   
     GNMA          
 
$
--
     
--
%
 
$
13
     
8.52
%
 
$
5,806
     
7.85
%
     FHLMC          
   
--
     
--
     
--
     
--
     
7,042
     
1.50
 
     FNMA          
   
--
     
--
     
--
     
--
     
35,760
     
2.15
 
          Total fixed-rate          
   
--
     
--
%
   
13
     
8.52
%
   
48,608
     
2.07
%
 
                                               
Adjustable rate:
                                               
     GNMA          
 
$
--
     
--
%
 
$
--
     
--
%
 
$
5,623
     
2.88
%
     FHLMC          
   
--
     
--
     
5
     
2.42
     
38
     
2.64
 
     FNMA          
   
1
     
5.62
     
6
     
1.59
     
2
     
3.85
 
          Total adjustable-rate          
   
1
     
5.62
%
   
11
     
1.96
%
   
5,663
     
2.88
 
                                                 
               Total          
 
$
1
     
5.62
%
 
$
24
     
5.51
%
 
$
54,271
     
2.16
%
 
The following table sets forth the purchases, sales, and principal repayments of our mortgage-backed securities during the periods indicated.

   
At or For the
Year Ended June 30,
 
   
2018
   
2017
   
2016
 
   
(Dollars in thousands)
 
Mortgage-backed securities at beginning of period
 
$
63,026
   
$
50,046
   
$
44,733
 
Purchases          
   
8,890
     
27,234
     
16,722
 
Repayments          
   
(11,602
)
   
(14,218
)
   
(11,392
)
Sales          
   
(3,461
)
   
--
     
--
 
Amortizations of premiums and discounts, net          
   
(164
)
   
(36
)
   
(17
)
 
                       
Mortgage-backed securities at end of period          
 
$
56,689
   
$
63,026
   
$
50,046
 
 
                       
Weighted average yield at end of period          
   
2.16
%
   
1.98
%
   
1.77
%

Sources of Funds
 
General.  Deposits are our primary source of funds for lending and other investment purposes. In addition to deposits, principal and interest payments on loans and investment securities are a source of funds. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows are significantly influenced by general interest rates and money market conditions. Borrowings may also be used on a short-term basis to compensate for reductions in the availability of funds from other sources and on a longer-term basis for general business purposes.
 
Deposits.  We attract deposits principally from residents of Louisiana and particularly from Caddo and Bossier Parishes. Deposit account terms vary, with the principal differences being the minimum balance required, the time periods the funds must remain on deposit, and the interest rate. We utilize brokered certificates of deposit as a component of our strategy for lowering the overall cost of funds. The brokered certificates of deposit are callable by Home Federal Bank after twelve months. At June 30, 2018 and 2017, we had $8.7 million and $11.5 million, respectively, in brokered certificates of deposit.
 
 
 
14

               We establish interest rates paid, maturity terms, service fees, and withdrawal penalties on a periodic basis. Management determines the rates and terms based on rates paid by competitors, the need for funds or liquidity, growth goals, and federal regulations. We attempt to control the flow of deposits by pricing our accounts to remain generally competitive with other financial institutions in the market area.

The following table shows the distribution of, and certain other information relating to, our deposits by type of deposit, as of the dates indicated.

     
June 30,
 
     
2018
   
2017
   
2016
 
     
Amount
   
Percent of
Total
Deposits
   
Amount
   
Percent of
Total
Deposits
   
Amount
   
Percent of
Total
Deposits
 
   
     
(Dollars in thousands)
 
Certificate accounts:
                                     
 
0.00%- 0.99%
 
 
$
15,310
     
4.24
%
 
$
28,293
     
8.60
%
 
$
46,544
     
16.17
%
 
1.00%- 1.99%
 
   
121,572
     
33.75
     
123,037
     
37.39
     
70,606
     
24.53
 
 
2.00%- 2.99%
 
   
24,234
     
6.73
     
11,306
     
3.44
     
14,961
     
5.20
 
 
3.00%- 3.99%
 
   
151
     
0.04
     
--
     
--
     
386
     
0.13
 
                                                     
Total certificate accounts 
 
161,267
     
44.76
     
162,636
     
49.43
     
132,497
     
46.03
 
                                                     
Transaction accounts:
                                                 
Passbook savings
     
36,241
     
10.06
     
35,050
     
10.65
     
29,033
     
10.09
 
Non-interest bearing
    demand accounts
     
58,001
     
16.10
     
54,420
     
16.54
     
39,280
     
13.65
 
NOW accounts
     
34,576
     
9.60
     
34,500
     
10.48
     
37,761
     
13.12
 
Money market
     
70,175
     
19.48
     
42,439
     
12.90
     
49,251
     
17.11
 
                                                     
Total transaction
     accounts  
 
198,993
     
55.24
     
166,409
     
50.57
     
155,325
     
53.97
 
                                                     
Total deposits
   
$
360,260
     
100.00
%
 
$
329,045
     
100.00
%
 
$
287,822
     
100.00
%

The following table shows the average balance of each type of deposit and the average rate paid on each type of deposit for the periods indicated.

   
Year Ended June 30,
 
   
2018
   
2017
   
2016
 
               
Average
               
Average
               
Average
 
   
Average
   
Interest
   
Rate
   
Average
   
Interest
   
Rate
   
Average
   
Interest
   
Rate
 
   
Balance
   
Expense
   
Paid
   
Balance
   
Expense
   
Paid
   
Balance
   
Expense
   
Paid
 
   
(Dollars in thousands)
 
Passbook savings
 
$
36,323
   
$
194
     
0.53
%
 
$
33,441
   
$
160
     
0.48
%
 
$
23,993
   
$
92
     
0.38
%
NOW accounts 
 
34,892
     
165
     
0.47
     
34,701
     
189
     
0.54
     
35,797
     
283
     
0.79
 
Money market  
 
51,571
     
293
     
0.57
     
45,615
     
147
     
0.32
     
47,953
     
149
     
0.31
 
Certificates of deposit 
 
165,141
     
2,394
     
1.45
     
145,445
     
1,860
     
1.28
     
141,160
     
1,805
     
1.28
 
Total interest-bearing deposits 
 
287,927
     
3,046
     
1.06
     
259,202
     
2,356
     
0.91
     
248,903
     
2,329
     
0.94
 
Non-Interest bearing   
                                                                 
     demand accounts 
$
55,960
   
$
--
     
--
%
 
$
51,311
   
$
--
     
--
%
 
$
43,100
   
$
--
     
--
%
     Total deposits
 
$
343,887
   
$
3,046
     
0.89
%
 
$
310,513
   
$
2,356
     
0.76
%
 
$
292,003
   
$
2,329
     
0.80
%
 
 
 
 
 
 
15

               The following table shows our deposit flows during the periods indicated.
 
   
Year Ended June 30,
 
   
2018
   
2017
   
2016
 
   
(In thousands)
 
Net deposits (withdrawals)          
 
$
28,743
   
$
38,952
   
$
(205
)
Interest credited          
   
2,472
     
2,271
     
1,789
 
     Total increase in deposits          
 
$
31,215
   
$
41,223
   
$
1,584
 


The following table presents, by various interest rate categories and maturities, the amount of certificates of deposit at June 30, 2018.

     
Balance at June 30, 2018
 
     
Maturing in the 12 Months Ending June 30,
 
Certificates of Deposit
   
2019
   
2020
   
2021
   
Thereafter
   
Total
 
     
(In thousands)
 
 
0.00%- 0.99%
 
 
$
10,969
   
$
1,970
   
$
2,371
   
$
--
   
$
15,310
 
 
1.00%- 1.99%
 
   
58,049
     
37,078
     
14,376
     
12,069
     
121,572
 
 
2.00%- 2.99%
 
   
2,923
     
7,735
     
1,602
     
11,974
     
24,234
 
 
3.00%- 3.99%
 
   
--
     
--
     
--
     
151
     
151
 
Total certificate
    accounts
   
$
71,941
   
$
46,783
   
$
18,349
   
$
24,194
   
$
161,267
 


The following table shows the maturities of our certificates of deposit of $100,000 or more at June 30, 2018 by time remaining to maturity.

         
Weighted
 
   
Amount
   
Average Rate
 
   
(Dollars in thousands)
 
September 30, 2018          
 
$
7,321
     
1.07
%
December 31, 2018          
   
7,830
     
1.10
 
March 31, 2019          
   
16,125
     
1.22
 
June 30, 2019          
   
20,902
     
1.46
 
After June 30, 2019          
   
62,046
     
1.81
 
Total certificates of deposit with balances of $100,000 or more
 
$
114,224
     
1.57
%

Borrowings.  We may obtain advances from the Federal Home Loan Bank of Dallas upon the security of the common stock we own in that bank and certain of our residential mortgage loans and mortgage-backed and other investment securities, provided certain standards related to creditworthiness have been met. These advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. Federal Home Loan Bank advances are generally available to meet seasonal and other withdrawals of deposit accounts and to permit increased lending.
 
As of June 30, 2018, we were permitted to borrow up to an aggregate total of $193.8 million from the Federal Home Loan Bank of Dallas. We had $11.6 million and $48.9 million of Federal Home Loan Bank advances outstanding at June 30, 2018 and 2017, respectively.  Additionally, at June 30, 2018, Home Federal Bank was a party to a Master Purchase Agreement with First National Bankers Bank whereby Home Federal Bank may purchase Federal Funds from First National Bankers Bank in an amount not to exceed $15.5 million.  There were no amounts purchased under this agreement as of June 30, 2018.  At June 30, 2018, Home Federal Bancorp had available a $15.5 million line of credit agreement with First National Bankers Bank, maturing June 30, 2019.  The line is secured by 100 shares of Home Federal Bank's common stock and bears interest at the Prime Rate, which is currently 5.00% per annum and subject to change when adjustments are made to Wall Street Journal Prime.  At June 30, 2018, the line had an outstanding balance of $300,000.
 
 

 
16

                 The following table shows certain information regarding our borrowings at or for the dates indicated:
 
          At or For the Year        
           Ended June 30,        
     2018      2017      2016  
           (Dollars in thousands)        
FHLB advances:
         
 
     
Average balance outstanding          
 
$
27,242
   
$
46,918
   
$
30,277
 
Maximum amount outstanding at any month-end during the period
   
43,885
     
56,715
     
47,665
 
Balance outstanding at end of period          
   
11,637
     
48,907
     
47,665
 
Average interest rate during the period          
   
1.63
%
   
0.92
%
   
0.87
%
Weighted average interest rate at end of period          
   
2.51
%
   
1.30
%
   
0.81
%
 
At June 30, 2018, $5.3 million of our borrowings were short-term (maturities of one year or less). Such short-term borrowings had a weighted average interest rate of 2.3% at June 30, 2018.
 
The following table shows maturities of Federal Home Loan Bank advances at June 30, 2018 for the years indicated:

Years Ending June 30,