HOME FEDERAL BANCORP, INC. OF LOUISIANA MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

General


The Company's results of operations are primarily dependent on the results of
Home Federal Bank (the "Bank"), its wholly owned subsidiary. The Bank's results
of operations depend, to a large extent, on net interest income, which is the
difference between the income earned on its loan and investment portfolios and
the cost of funds, consisting of the interest paid on deposits and borrowings.
Results of operations are also affected by provisions for loan losses and loan
sale activities.  Non-interest expense principally consists of compensation and
employee benefits, office occupancy and equipment expense, data processing, and
other expenses.  Our results of operations are also significantly affected by
general economic and competitive conditions, particularly changes in interest
rates, government policies, and actions of regulatory authorities.  Future
changes in applicable law, regulations, or government policies may materially
impact our financial condition and results of operations.

The Bank operates from its main office in Shreveport, Louisiana and nine full
service branch offices located in Shreveport, Bossier City and Minden,
Louisiana
. The Company’s primary market area is the ShreveportBossier
City
Minden combined statistical area.

Critical Accounting Policies


Allowance for Loan Losses.  The Company has identified the calculation of the
allowance for loan losses as a critical accounting policy, due to the higher
degree of judgment and complexity than its other significant accounting
policies.  Provisions for loan losses are based upon management's periodic
valuation and assessment of the overall loan portfolio and the underlying
collateral, trends in non-performing loans, current economic conditions, and
other relevant factors in order to maintain the allowance for loan losses at a
level believed by management to represent all known and inherent losses in the
portfolio that are both probable and reasonably estimable.  Although management
uses the best information available, the level of the allowance for loan losses
remains an estimate which is subject to significant judgment and short-term
change.

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 basis of the various assets and liabilities
and gives current recognition to changes in tax rates and laws.  The realization
of 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.

Discussion of Financial Condition Changes from June 30, 2022 to September 30,
2022


General

At September 30, 2022, the Company reported total assets of $581.6 million, a
decrease of $8.9 million, or 1.5%, compared to total assets of $590.5 million at
June 30, 2022. The decrease in assets was comprised primarily of decreases in
cash and cash equivalents of $26.5 million, or 41.4%, from $64.1 million at June
30, 2022 to $37.5 million at September 30, 2022, loans held for sale of $2.0
million, or 50.0%, from $4.0 million at June 30, 2022 to $2.0 million at
September 30, 2022, premises and equipment of $112,000, or 0.7%, from $16.2
million at June 30, 2022 to $16.1 million at September 30, 2022, and other
assets of $103,000, or 7.4%, from $1.4 million at June 30, 2022 to $1.3 million
at September 30, 2022.  These decreases were partially offset by increases in
loans receivable, net of $18.5 million, or 4.8%, from $387.9 million at June 30,
2022 to $406.4 million at September 30, 2022, investment securities of $789,000,
or 0.7%, from $108.0 million at June 30, 2022 to $108.8 million at September 30,
2022, deferred tax asset of $323,000, or 28.3%, from $1.1 million at June 30,
2022 to $1.5 million at September 30, 2022, accrued interest receivable of
$126,000, or 11.2%, from $1.1 million at June 30, 2022 to $1.3 million at
September 30, 2022, real estate owned of $93,000, or 100.0%, from none at June
30, 2022 to $93,000 at September 30, 2022, and bank owned life insurance of
$26,000, or 0.4%, from $6.60 million at June 30, 2022 to $6.62 million at
September 30, 2022. The decrease in cash and cash equivalents was primarily due
to the funding of additional loan growth and purchases of securities with excess
liquidity.  The increase in loans receivable, net, was primarily due to an
increase of $13.9 million in commercial real estate loans.  The increase in
investment securities was primarily due to security purchases of $5.4 million
offset by principal repayments on mortgage backed securities of $3.4 million and
a $1.1 million increase in market value losses on available-for-sale
securities.  The decrease in loans held-for-sale primarily reflected a reduction
in loans originated for sale during the three months ended September 30, 2022
due mainly to a decrease in mortgage refinance activity likely attributable to
the increase in interest rates.

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                    HOME FEDERAL BANCORP, INC. OF LOUISIANA

Discussion of Financial Condition Changes from June 30, 2022 to September 30,
2022
(continued)


Cash and Cash Equivalents

Cash and cash equivalents decreased $26.5 million, or 41.4%, from $64.1 million
at June 30, 2022 to $37.5 million at September 30, 2022. The decrease in cash
and cash equivalents was primarily due to commercial loan originations.

Loans Receivable, Net


Loans receivable, net, increased by $18.5 million, or 4.8%, to $406.4 million at
September 30, 2022 compared to $387.9 million at June 30, 2022.  The increase in
loans receivable, net was primarily due to increases in commercial real estate
loans of $13.9 million, one-to-four-family residential loans of $6.5 million,
equity line-of-credit loans of $1.1 million, land loans of $625,000, equity and
second mortgage loans of $43,000, and consumer loans of $1,000, partially offset
by decreases in multi-family residential loans of $1.8 million, construction
loans of $971,000, and commercial non-real estate loans of $619,000.

Loans Held-for-Sale

Loans held-for-sale decreased $2.0 million, or 50.0%, from $4.0 million at June
30, 2022
to $2.0 million at September 30, 2022. The decrease in loans
held-for-sale results primarily from the decrease in the origination volume
during the first three months of fiscal year end 2023.

Investment Securities


Investment securities amounted to $108.8 million at September 30, 2022 compared
to $108.0 million at June 30, 2022, an increase of $789,000, or 0.7%.  The
increase in investment securities was primarily due to security purchases of
$5.4 million offset by principal repayments on mortgage backed securities of
$3.4 million and a $1.1 million increase in market value losses on
available-for-sale securities.

Premises and Equipment, Net


Premises and equipment, net decreased $112,000, or 0.7%, to $16.1 million at
September 30, 2022 compared to $16.2 million at June 30, 2022.  The decrease in
premises and equipment was primarily due to depreciation expense for the three
month period.

Asset Quality

At September 30, 2022, the Company had $2.2 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 $2.2 million of non-performing assets at
June 30, 2022, consisting of six single-family residential loans and one single
family residence in other real estate owned at September 30, 2022, compared to
six single-family residential loans and one line of credit loan at June 30,
2022.  At both September 30, 2022 and June 30, 2022, the Company had five single
family residential loans and two commercial real estate loans classified as
substandard.  There were no loans classified as doubtful at September 30, 2022
or June 30, 2022.

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Discussion of Financial Condition Changes from June 30, 2022 to September 30,
2022
(continued)


Total Liabilities

Total liabilities decreased $3.7 million, or 0.7%, from $538.1 million at June
30, 2022 to $534.5  million at September 30, 2022 primarily due to decreases in
total deposits of $8.2 million, or 1.5%, to $523.8 million at September 30, 2022
compared to $532.0 million at June 30, 2022, and short-term advances from the
Federal Home Loan Bank of $9,000, or 1.1%, to $823,000 at September 30, 2022
compared to $832,000 at June 30, 2022,  partially offset by increases in other
borrowings of $4.0 million, or 170.2%, to $6.4 million at September 30, 2022
compared to $2.4 million at June 30, 2022, other accrued expenses and
liabilities of $431,000, or 16.5%, to $3.0 million at September 30, 2022
compared to $2.6 million at June 30, 2022, and advances from borrowers for taxes
and insurance of $136,000, or 38.4%, to $490,000 at September 30, 2022 compared
to $354,000 at June 30, 2022.  The decrease in deposits was primarily due to a
$13.1 million, or 9.8%, decrease in savings deposits from $133.0 million at June
30, 2022 to $119.9 million at September 30, 2022, a $6.4 million, or 4.0%,
decrease in non-interest bearing deposits from $161.1 million at June 30, 2022
to $154.7 million at September 30, 2022, a $2.2 million, or 2.2%, decrease in
money market deposits from $98.6 million at June 30, 2022 to $96.5 million at
September 30, 2022, partially offset by an increase of $7.8 million, or 9.8%, in
certificates of deposit from $80.3 million at June 30, 2022 to $88.1 million at
September 30, 2022, and an increase  of $5.6 million, or 9.4% in NOW accounts
from $59.0 million at June 30, 2022 compared to $64.5 million at September 30,
2022. The Company had $3.0 million in brokered deposits at September 30, 2022
compared to $6.0 million at June 30, 2022. The decrease in short-term advances
from the Federal Home Loan Bank was primarily due to principal paydowns on
amortizing advances.  The entire balance in advances from the Federal Home Loan
Bank are now short-term due to our only advance with a balloon maturity in
January 2023.

Stockholders’ Equity


Stockholders' equity decreased $5.2 million, or 10.0%, to $47.1 million at
September 30, 2022 from $52.3 million at June 30, 2022. The primary reasons for
the changes in stockholders' equity from June 30, 2022 were the repurchase of
Company stock of $5.9 million, a decrease in the Company's accumulated other
comprehensive income (loss) of $878,000, and dividends paid totaling $407,000,
partially offset by net income of $1.7 million, proceeds from the issuance of
common stock from the exercise of stock options of $147,000, and the vesting of
restricted stock awards, stock options, and the release of employee stock
ownership plan shares totaling $137,000.

The Company repurchased 289,900 shares of its common stock during the three
months ended September 30, 2022 at an average price per share of $20.00. On
February 16, 2022, the Company announced that its Board of Directors approved an
eleventh stock repurchase program for the repurchase of up to 170,000 shares.
The eleventh stock repurchase program was completed on August 2, 2022.

Regulatory Capital


The Bank is required to meet minimum capital standards promulgated by the Office
of the Comptroller of the Currency ("OCC").  At September 30, 2022, Home Federal
Bank's regulatory capital was well in excess of the minimum capital
requirements. At September 30, 2022, Home Federal Bank exceeded each of its
regulatory capital requirements with tangible equity, common equity Tier 1,
core, and total risk-based capital ratios of 9.50%, 13.85%, 9.50%, and 15.06%,
respectively.

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Comparison of Operating Results for the Three Months Ended September 30, 2022
and 2021


General

The increase in net income for the three months ended September 30, 2022, as
compared to the prior year quarter resulted primarily from an increase of $1.1
million, or 25.6%, in net interest income, and a decrease of $343,000, or 97.4%,
in provision for income taxes, partially offset by a decrease of $470,000, or
46.3%, in non-interest income, an increase of $418,000, or 100.0%, in provision
for loan losses, and an increase of $218,000, or 6.2%, in non-interest expense.
The increase in net interest income for the three months ended September 30,
2022 was due to a $1.0 million, or 21.1%, increase in total interest income, and
a $74,000, or 13.5%, decrease in total interest expense.  The increase in total
interest income was primarily due to an increase of 68 basis points in the
average rate on total interest-earning assets.  The Company's average interest
rate spread was 3.74% for the three months ended September 30, 2022 compared to
2.98% for the three months ended September 30, 2021. The Company's net interest
margin was 3.90% for the three months ended September 30, 2022 compared to 3.16%
for the three months ended September 30, 2021.  The decrease in provision for
income taxes was due to an adjustment in taxes due for fiscal year ended June
30, 2022 related to stock option exercises.

Net Interest Income


The increase in net interest income for the three months ended September 30,
2022 was due to a $1.0 million, or 21.1%, increase in total interest income, and
a $74,000, or 13.5%, decrease in total interest expense.  The increase in total
interest income was primarily due to an increase of 68 basis points in the
average rate on total interest-earning assets.  The Company's average interest
rate spread was 3.74% for the three months ended September 30, 2022 compared to
2.98% for the three months ended September 30, 2021. The Company's net interest
margin was 3.90% for the three months ended September 30, 2022 compared to 3.16%
for the three months ended September 30, 2021.

Provision for Loan Losses


Based on an analysis of historical experience, the volume and type of lending
conducted by the Bank, the status of past due principal and interest payments,
general economic conditions, particularly as such conditions relate to our
market area, and other factors related to the collectability of Home Federal
Bank's loan portfolio, the provision for loan losses was $418,000 during the
three months ended September 30, 2022, compared to none made during the three
months ended September 30, 2021. The allowance for loan losses was $4.8 million,
or 1.18% of total loans receivable, at September 30, 2022 compared to $4.1
million, or 1.20% of total loans receivable, at September 30, 2021.  At
September 30, 2022, the Bank had $2.1 in non-performing loans and $93,000 in
foreclosed assets which totaled $2.2 million in non-performing assets. At
September 30, 2021, Home Federal Bank had $976,000 in non-performing loans and
$383,000 in foreclosed assets which totaled $1.4 million in non-performing
assets.

Non-interest Income


The $470,000 decrease in non-interest income for the three months ended
September 30, 2022, compared to the prior year quarterly period, was primarily
due to a decrease of $534,000 in gain on sale of loans, a $2,000 decrease in
income from bank owned life insurance, and a $1,000 decrease in other income,
partially offset by a $67,000 increase in service charges on deposit accounts.
The Company sells most of its long-term fixed rate residential mortgage loan
originations primarily in order to manage interest rate risk.  The decrease in
gain on sale of loans was due to a reduction in loans originated for sale
reflecting a decrease in mortgage refinancing activity.

Non-interest Expense


The $218,000 increase in non-interest expense for the three months ended
September 30, 2022, compared to the same period in 2021, is primarily
attributable to increases of $93,000 in other non-operating expense, $72,000 in
compensation and benefits expense, $72,000 in occupancy and equipment expense,
$26,000 in legal fees, $9,000 in deposit insurance expense, and $3,000 in audit
and examination fees. The increases were partially offset by decreases of
$26,000 in data processing expense, $20,000 in loan and collection expense, and
$11,000 in franchise and bank shares tax expense.  The decrease in other
non-operating expense was primarily due to communication expense, correspondent
bank fees, and fraud expense related to deposit checking accounts.

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Comparison of Operating Results for the Three Months Ended September 30, 2022
and 2021 (continued)

The aggregate compensation expense recognized by the Company for its Stock
Options, Share Awards and employee stock ownership plan, amounted to $168,000
for both the three months ended September 30, 2022 and September 30, 2021.


The Louisiana bank shares tax is assessed on the Bank's equity and earnings.
For the three months ended September 30, 2022, the Company recognized franchise
and bank shares tax expense of $119,000 compared to $130,000, for the same
period in 2021.

Income Taxes


Income taxes amounted to $9,000 for the three months ended September 30, 2022,
resulting in an effective tax rate of 0.5%. Income taxes amounted to $352,000
for the three months ended September 30, 2021, resulting in an effective tax
rate of 20.6%.  The decrease in provision for income taxes was due to an
adjustment in taxes related to stock option exercises.

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Comparison of Operating Results for the Three Months Ended September 30, 2022
and 2021 (continued)


Average Balances, Net Interest Income, Yields Earned, and Rates Paid.  The
following tables show for the periods indicated the total dollar amount of
interest from average interest-earning assets and the resulting yields, as well
as the interest expense on average interest-bearing liabilities, expressed both
in dollars and rates, and the net interest margin. Tax-exempt income and yields
have not been adjusted to a tax-equivalent basis. All average balances are based
on monthly balances. Management does not believe that the monthly averages
differ significantly from what the daily averages would be.

                                                                              Three Months Ended September 30,
                                                                       2022                                      2021
                                                                                    Average                                   Average
                                                        Average                      Yield/       Average                      Yield/
                                                        Balance      

Interest Rate Balance Interest Rate

                                                                                   (Dollars In Thousands)
Interest-earning assets:
Loans receivable                                       $ 396,768     $    

5,028 5.03 % $ 342,942 $ 4,397 5.09 %
Investment securities

                                    110,602            491         1.76        86,350            341         1.57
Interest-earning deposits                                 32,706            262         3.18       101,732             36         0.14
Total interest-earning assets                            540,076          

5,781 4.25 % 531,024 4,774 3.57 %
Non-interest-earning assets

                               45,074                                    36,089
Total assets                                           $ 585,150                                 $ 567,113
Interest-bearing liabilities:
Savings accounts                                       $ 128,749             84         0.26 %   $ 133,140            108         0.32 %
NOW accounts                                              58,658             17         0.11        48,389             14         0.11
Money market accounts                                     94,694             35         0.15        86,991             25         0.12
Certificate accounts                                      84,715            264         1.24       101,364            382         1.50
Total interest-bearing deposits                          366,816            400         0.43       369,884            529         0.57
Other Borrowings                                           4,915             66         5.33         1,376             11         3.17
FHLB advances                                                826             10         4.80           861             10         4.61
Total interest-bearing liabilities                     $ 372,557            476         0.51 %   $ 372,121            550         0.59 %
Non-interest-bearing liabilities:
Non-interest-bearing demand accounts                     161,907                                   139,885
Other liabilities                                          3,294                                     2,938
Total liabilities                                        537,758                                   514,944
Total Stockholders' Equity(1)                             47,392                                    52,169

Total liabilities and stockholders' equity             $ 585,150                                 $ 567,113

Net interest-earning assets                            $ 167,519                                 $ 158,903

Net interest income; average interest rate spread(2)                 $    5,305         3.74 %                 $    4,224         2.98 %
Net interest margin(3)                                                                  3.90 %                                    3.16 %
Average interest-earning assets to average
interest-bearing liabilities                                                          144.96 %                                  142.70 %


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(1) Includes retained earnings and accumulated other comprehensive loss.

(2) Interest rate spread represents the difference between the weighted-average

yield on interest-earning assets and the weighted-average rate on

interest-bearing liabilities.

(3) Net interest margin is net interest income divided by net average

    interest-earning assets.



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Comparison of Operating Results for the Three Months Ended September 30, 2022
and 2021 (continued)

Liquidity and Capital Resources


The Bank maintains levels of liquid assets deemed adequate by management.  The
Bank adjusts its liquidity levels to fund deposit outflows, repay its
borrowings, and to fund loan commitments. The Bank also adjusts liquidity as
appropriate to meet asset and liability management objectives.

The Bank's primary sources of funds are deposits, amortization and prepayment of
loans and mortgage-backed securities, maturities of investment securities and
other short-term investments, loan sales, and earnings and funds provided from
operations.  While scheduled principal repayments on loans and mortgage-backed
securities are a relatively predictable source of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic
conditions, and competition.  The Bank sets the interest rates on its deposits
to maintain a desired level of total deposits.  In addition, the Bank invests
excess funds in short-term interest-earning accounts and other assets which
provide liquidity to meet lending requirements.  The Bank's deposit accounts
with the Federal Home Loan Bank of Dallas amounted to $6.4 million at September
30, 2022.

A significant portion of the Bank's liquidity consists of securities classified
as available-for-sale and cash and cash equivalents. The Bank's primary sources
of cash are net income, principal repayments on loans and mortgage-backed
securities, 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 provides an additional source of
funds.  At September 30, 2022, The Bank had $823,000 in advances from the
Federal Home Loan Bank of Dallas and had $159.4 million in additional borrowing
capacity.  Additionally, at September 30, 2022, the 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 $20.4 million. There were no amounts purchased under this agreement as of
September 30, 2022. In addition, the Company had available a $10.0 million line
of credit agreement at September 30, 2022 with First National Bankers Bank. At
September 30, 2022, there was a $6.4 million balance in the credit line.

At September 30, 2022, the Bank had outstanding loan commitments of $58.9
million to originate loans and commitments under unused lines of credit of $13.6
million. At September 30, 2022, certificates of deposit scheduled to mature in
less than one year totaled $59.2 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, the
cost of such deposits could be significantly higher upon renewal in a rising
interest rate environment.  The Bank intends to utilize its high levels of
liquidity to fund its lending activities.  If additional funds are required to
fund lending activities, Home Federal Bank intends to sell its securities
classified as available-for-sale, as needed.

At September 30, 2022, the Bank exceeded each of its regulatory capital
requirements with tangible equity, common equity Tier 1, core, and total
risk-based capital ratios of 9.50%, 13.85%, 9.50%, and 15.06%, respectively.

Off-Balance Sheet Arrangements

At September 30, 2022, the Company did not have any off-balance sheet
arrangements as defined by Securities and Exchange Commission rules.

Impact of Inflation and Changing Prices


The financial statements and related financial data presented herein have been
prepared in accordance with instructions to Form 10-Q which 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 the Company's assets and
liabilities are monetary in nature.  As a result, interest rates generally have
a more significant impact on a financial institution's performance than does the
effect of inflation.

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Forward-Looking Statements


This Form 10-Q contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of management, as well as
assumptions made by and information currently available to management.  In
addition, in those and other portions of this document the words "anticipate",
"believe", "estimate", "except", "intend", "should", and similar expressions, or
the negative thereof, as they relate to the Company or the Company's management
are intended to identify forward-looking statements.  Such statements reflect
the current views of the Company with respect to future looking events and are
subject to certain risks, uncertainties, and assumptions.  Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary from those described herein as anticipated,
believed, estimated, expected, or intended.  The Company does not intend to
update these forward-looking statements.

In addition to factors previously disclosed in the reports filed by the Company
with the Securities and Exchange Commission and those identified elsewhere in
this Form 10-Q, the following factors, among others, could cause actual results
to differ materially from forward-looking statements or historical performance:
the strength of the United States economy in general and the strength of the
local economies in which the Company conducts its operations; general economic
conditions; the scope and duration of the COVID-19 pandemic; the effects of the
COVID-19 pandemic, including on the Company's credit quality and operations as
well as its impact on general economic conditions; legislative and regulatory
changes including actions taken by governmental authorities in response to the
COVID-19 pandemic; monetary and fiscal policies of the federal government;
changes in tax policies, rates and regulations of federal, state and local tax
authorities including the effects of the Tax Reform Act; changes in interest
rates, deposit flows, the cost of funds, demand for loan products and the demand
for financial services, in each case as may be affected by the COVID-19
pandemic, competition, changes in the quality or composition of the Company's
loans, investment and mortgage-backed securities portfolios; geographic
concentration of the Company's business; fluctuations in real estate values; the
adequacy of loan loss reserves; the risk that goodwill and intangibles recorded
in the Company's financial statements will become impaired; changes in
accounting principles, policies or guidelines and other economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and fees.

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