HFBL 10-K & 10-Q changes, risk factors and insider trading

Our business consists primarily of originating single-family real estate loans secured by property in our market area and to a lesser extent, commercial real estate loans, commercial business loans, loans, and real estate secured lines of credit which typically have higher rates and shorter terms than single-family loans. Although our loans are primarily funded by the acquisition of deposits and it is our policy to require commercial customers to have a deposit relationship with us, which primarily consists of NOW accounts or non-interest checking accounts. Due to the continued low interest rate environment, we have sold a substantial amount of our fixed rate single-family residential residential loan originations in recent periods. Because of an increase in the weighted-average yield on our interest-earning assets, together with a decrease in our rate on total interest bearing liabilities, our average interest rate spread increased increased from 2.38%2.55% to 2.55%3.07% during fiscal 20252026 compared to 2024,2025, and our net interest income decreasedincreased $280,000$3.118 million to $18.8$21.789 million for fiscal 20252026 as compared to $19.0$18.671 million for fiscal 2024,2025, primarily due to a $37.1$9.218 million decrease increase in average balance of interest earning assets. We expect to continue to emphasize commercial lending in the future in order to improve the yield on our portfolio.

Loans receivable, net decreasedincreased $9.9$14.487 million, or 2.1%,3.1%, from $470.9$461.004 million at June 30, 20242025 to $461.0$475.491 million at June 30, 2025.2026. In recent periods we diversified the loan products we offer and increased our efforts to originate higher yielding commercial real estate loans and lines of credit and commercial business loans which were deemed attractive due to their generally higher yields and shorter anticipated lives compared to single-family residential mortgage loans. As of June 30, 2025,2026, Home Federal Bank had $138.9$141.002 million of commercial real estate loans, 29.8%29.3% of the total loan portfolio, and $54.1$58.866 million of commercial business loans, 11.6%12.3% of the total loan loan portfolio. Although commercial loans are generally considered to have greater credit risk than other certain types of loans, we attempt to mitigate such risk by originating such loans in our market area to known borrowers.

Total liabilities decreasedincreased $30.4$30.286 million, or 5.2%,5.5%, from $584.7$554.287 million at June 30, 20242025 to $554.3$584.573 million at June 30, 2025.2026. The decreaseincrease in liabilities wasresulted comprisedfrom ofan decreasesincrease in total deposits of $27.7 $31.002 million, or 4.8%,5.7%, from $574.0$546.290 million at June 30, 20242025 to $546.3$577.292 million at June 30, 2025,2026, andpartially offset by decreases in other borrowings of $3.0 million,$444,000, or 42.9%,11.1%, from $7.0$4.000 million at June 30, 20242025 to $4.0$3.556 million at June 30, 2025, partially offset by an increase in 2026, other accrued expenses and liabilities of $273,000,$240,000, or 8.6%,6.9%, from $3.2$3.454 million at June 30, 20242025 to $3.5$3.214 million at June 30, 2025,2026, and advances from borrowers for taxes and insurance of $22,000,$32,000, or 4.2%,5.9%, from $521,000$543,000 at June 30, 2024 2025 to $543,000$511,000 at June 30, 2025.2026. The decreaseincrease in deposits resulted from decreasesincreases in certificates of deposit of $27.5$34.756 million, or 18.6%, from $187.357 million at June 30, 2025 to $222.113 million at June 30, 2026, and non-interest bearing deposits of $15.643 million, or 12.8%, from $214.9$122.416 million at June 30, 20242025 to $187.4$138.059 million at June 30, 2025,2026, partially offset by decreases in money market deposits of $11.7$7.793 million, or 13.7%,10.6%, from $85.5 $73.771 million at June 30, 20242025 to $73.8 $65.978 million at June 30, 2025,2026, andNOW non-interest depositsaccounts of $7.9$7.182 million, or 6.1%,10.7%, from $130.3$67.119 million at June 30, 20242025 to $122.4$59.937 million at June 30, 2025,2026, partially offset by increases inand savings deposits of $19.0 $4.422 million, or 24.8%,4.6%, from $76.6$95.627 million at June 30, 20242025 to $95.6 $91.205 million at June 30, 2025, and NOW accounts of $506,000, or 0.8%, from $66.6 million at June 30, 2024 to $67.1 million at June 30, 2025. The Company had no balances in brokered deposits at June 30, 2025 or June 30, 2024.2026.

Stockholders’ equity increased $2.4$3.552 million, or 4.5%,6.4%, from $52.8$55.205 million at June 30, 20242025 to $55.2$58.757 million at June 30, 2025.2026. The increase in stockholders’ equity wasresulted comprised offrom net income for the year ended June June 30, 20252026 of $3.9$6.174 million, proceeds from the issuance of common stock from the exercise of stock options of $1.838 million, a decrease in the Company’s accumulated other comprehensive loss of $681,000,$72,000, and the vesting of restricted stock awards, stock options, and the release of employee stock ownership plan shares totaling $424,000, and proceeds from the issuance of common stock from the exercise of stock options of $111,000,$464,000, partially offset by stock repurchases of $3.333 million and dividends paid totaling $1.6 million, and stock repurchases of $1.1$1.663 million.

General. The increase in net income for the year ended June 30, 2025,2026, as compared to the yearsame endedperiod Junein 30, 2024,2025 resulted primarily from an increase of $421,000,$3.118 million, or 16.7%, in net interest income, an increase of $667,000, or 26.6%,33.3%, in non-interest income, and a decrease of $278,000,$66,000, or 1.7%,0.4%, in non-interest expense, and an increase of $166,000 in the recovery of credit losses, partially offset by an increase of $290,000,$845,000, or 60.9%,110.3%, in the provision for income taxes and aan increase decrease of $280,000,$720,000, or 1.5%,571.4%, in netthe interestprovision income.for credit losses. The decreaseincrease in net interest income for the year ended June 30, 2025,2026, as compared to the yearsame endedperiod Junein 30, 2024,2025, was primarily due to aan decreaseincrease of $1.4$2.036 million, or 4.4%,6.7%, in total interest income, partially offset byand a decrease of $1.1$1.082 million, or 8.7%,9.2%, in total interest expense. The Company’s average interest rate spread was 3.07% for the year ended June 30, 2026, compared to 2.55% for the year ended June 30, 2025,2025. comparedThe Company’s tonet 2.38%interest margin was 3.72% for the year ended June 30, 2024.2026, Thecompared Company’s net interest margin wasto 3.23% for the year ended June 30, 2025,2025. comparedThe increase in the provision for credit losses was primarily attributable to 3.08%growth forin the yearloan endedportfolio Juneand additional 30,reserve 2024.allocations on certain existing problem loans based on updated valuation reports.

Net Interest Income. Net interest income amounted to $18.7$21.789 million for fiscal year 2025,2026, aan decreaseincrease of $280,000,$3.118 million, or 1.5%, 16.7%, compared to $19.0 $18.671 million for fiscal year 2024.2025. The decreaseincrease primarily resulted from aan decreaseincrease in total interest income of $1.4$2.036 million,million partially offset byand a decrease in total interest expense of $1.1$1.082 million.

The average interest rate spread increased from 2.38% for fiscal 2024 to 2.55% for fiscal 2025,2025 to 3.07% for fiscal 2026, while the average balance of interest-earning assets decreasedincreased from $614.3$577.181 million to $577.2$586.399 million during the same periods. The percentage of average interest-earning assets to average interest-bearing liabilities increased to 135.13% for fiscal 2026 compared to 133.86% for fiscal 2025 compared to 133.54% for fiscal 2024.2025. The average rate paid on certificates of deposit decreased from 4.15% for fiscal 2024 to 3.92% for fiscal 2025.2025 to 3.40% for fiscal 2026. Net interest margin increased to 3.72% for fiscal 2026 compared to 3.23% for fiscal 2025 compared to 3.08% for fiscal 2024.2025.

Interest income decreasedincreased $1.4$2.036 million, or 4.4%,6.7%, to $30.5$32.498 million for fiscal 20252026 compared to $31.9$30.462 million for fiscal 2024,2025, primarily due to a decreasean increase in interest income from loans of $1.7$2.164 million, and aan decreaseincrease of $326,000$325,000 in interest income from investmentmortgage-backed securities. The average yield of the loan portfolio increased by 1331 basis points during fiscal 20252026 mainly due to a higher interest rate environment.

At June 30, 2025,2026, the Company had $3.3$3.649 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 $1.9$3.305 million of non-performing assets at June 30, 2024,2025, consisting of sixteen one-to-four family residential loans, two home equity loans, one commercial non-real estate loan, one commercial real estate loan, one commercial real estate property in other real estate owned, and two residential lots in other real estate owned at June 30, 2026, compared to six one-to-four family residential loans, two home equity loans, three commercial non-real estate loans, two commercial real-estatereal loans,estate loans and one single-family single-family residence in other real estate owned at June 30, 2025, compared to five one-to-four family residential loans, four home equity loans, three commercial non-real estate loans, and three single-family residences in other real estate owned at June 30, 2024.2025. At June 30, 20252026 the Company had eightsixteen one-to-four family residential loans, two home equity loans, fiveone commercial non-real-estatenon-real loans,estate twoloan, commercialone real-estateconsumer loans,loan, and one commercial consumerreal estate loan classified as substandard, compared to six eight one-to-four family residential loans, five commercial non-real-estatenon-real estate loans, fourtwo home equity loans, two commercial real estate loans and one consumer loan classified as substandard at June 30, 2024.2025. There were no loans classified as doubtful at June 30, 20252026, or June 30, 2024. 2025.

Non-Interest Income. The $421,000$667,000 increase in non-interest income for the year ended June 30, 20252026, compared to the priorsame yearperiod wasin primarily2025, dueresulted tofrom an increase of $258,000 in gain on sale of loans, a decrease of $150,000$247,000 in loss on sale of real estate, an increase of $134,000 in other non-interest income, an increase of $119,000 in gain on sale of loans, an increase of $44,000$144,000 in service charges on deposit accounts, and an increase of $14,000 in other non-interest income, and a decrease of $6,000 in loss on sale of securities, partially offset by a decrease of $2,000 in income from on bank owned life insurance, partially offset by an increase of $32,000 in loss on sale of securities.insurance.

Provision for Income Tax Expense. The provision for income taxes amounted to $766,000$1.611 million and $476,000$766,000 for the fiscal years ended June 30, 20252026 and 2025, 2024, respectively. Our effective tax rate was 20.7% for fiscal 2026 and 16.5% for fiscal 2025 and 11.7% for fiscal 2024.2025.

Our 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 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 general interest rates, economic conditions, and competition. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning accounts and other assets, which which provide liquidity to meet lending requirements. Our deposit accounts with the Federal Home Loan Bank of Dallas amounted to $9.1$25.394 million and $185,000$9.124 million at June 30, 20252026 and 2024,2025, respectively.

There were no changes made to the Company’s internal control over financial reporting that occurred during the quarter ended DecemberMarch 31, 20252026 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Discussion of Financial Condition Changes from June 30, 2025 to DecemberMarch 31, 20252026

Total assets increased $11.957$32.157 million, or 2.0%,5.3%, from $609.492 million at June 30, 2025 to $621.449$641.649 million at DecemberMarch 31, 2025.2026. The increase in assets resulted from increases in net loans receivable of $10.529$17.921 million, million, or 2.3%,3.9%, from $461.004 million at June 30, 2025 to $471.533$478.925 million at DecemberMarch 31, 2025,2026, cash and cash equivalents of $1.921$11.596 million, or 11.1%,66.8%, from $17.347 million at June 30, 2025 to $19.268$28.943 million at DecemberMarch 31, 2025,2026, investment securities of $1.108 $2.449 million, or 1.2%,2.5%, from $96.230 million at June 30, 2025 to $97.338$98.679 million at DecemberMarch 31, 2025,2026, loans-held-for-sale of $1.205 million, or 78.2%, from $1.540 million at June 30, 2025 to $2.745 million at March 31, 2026, accrued interest receivable of $86,000, or 4.7%, from $1.836 million at June 30, 2025 to $1.922 million at March 31, 2026, and bank owned life insurance of $58,000,$86,000, or 0.8%,1.2%, from $6.926 million at June 30, 2025 to $6.984$7.012 million at DecemberMarch 31, 2025, and accrued interest receivable of $37,000, or 2.0%, from $1.836 million at June 30, 2025 to $1.873 million at December 31, 2025,2026, partially offset by decreases in loans-held-for-sale of $679,000, or 44.1%, from $1.540 million at June 30, 2025 to $861,000 at December 31, 2025, premises and equipment of $514,000,$763,000, or 3.0%,4.4%, from $17.266 million at June 30, 2025 to $16.752$16.503 million at DecemberMarch 31, 2025,2026, deferredcore taxdeposit assetintangible of $181,000,$188,000, or 15.6%,20.5%, from $1.163 million$915,000 at June 30, 2025 to $982,000 $727,000 at DecemberMarch 31, 2025,2026, real estate owned of $161,000, $156,000, or 16.6%16.1%, from $970,000 at June 30, 2025 to $809,000$814,000 at DecemberMarch 31, 2025, core deposit intangible of $131,000, or 14.3%, from $915,000 at June 30, 2025 to $784,000 at December 31, 2025, and2026, other assets of $30,000,$42,000, or 2.3%,3.2%, from $1.305 million at June 30, 2025 to $1.275$1.263 million at DecemberMarch 31, 2025.2026, and deferred tax asset of $37,000, or 3.2%, from $1.163 million at June 30, 2025 to $1.126 million at March 31, 2026.

Cash and cash equivalents increased $1.921$11.596 million, or 11.1%,66.8%, from $17.347 million at June 30, 2025 to $19.268$28.943 million at DecemberMarch 31, 2025.2026. The increase in cash and cash equivalents was primarily due to increases in deposits.

Loans receivable, net, increased by $10.529$17.921 million, or 2.3%,3.9%, to $471.533$478.925 million at DecemberMarch 31, 20252026 compared to $461.004 million at June 30, 2025. The increase in loans receivable, net was primarily due to increases in land loans of $23.764$25.380 million, commercial real estate loans of $2.489 million, commercial non-real estate loans of $2.217 million, equity line-of-credit loans of $1.215$1.013 million, and equity and second mortgage loans of $403,000,$393,000, partially offset by decreases in construction loans of $6.791 million, one-to-four-family residential loans of $5.656$6.387 million, commercial real estateconstruction loans of $2.039$5.060 million, consumer loans of $266,000, multi-family residential loans of $120,000,$1.483 million, and commercial non-real estateconsumer loans of $18,000.$385,000.

Loans held-for-sale decreasedincreased $679,000,$1.205 million, from $1.540 million at June 30, 2025 to $861,000$2.745 million at DecemberMarch 31, 2025.The2026.The decreaseincrease in loans held-for-sale is primarily due to normal timing differences in our loan origination and sale activities.

Investment securities amounted to $97.338$98.679 million at DecemberMarch 31, 2025,2026, compared to $96.230 million at June 30, 2025, an increase of $1.108$2.449 million, or 1.2%.2.5%. The increase in investment securities was primarily due to security purchases of $6.547 $10.852 million and a $698,000$173,000 decrease in market value losses on available-for-sale securities, partially offset by $6.306$9.127 million of principal repayments on mortgage backed securities.

Premises and equipment, net decreased $514,000,$763,000, or 3.0%,4.4%, to $16.752$16.503 million at DecemberMarch 31, 20252026 compared to $17.266 million at June 30, 2025, due to depreciation.

At DecemberMarch 31, 2025,2026, the Company had $2.533$4.197 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 $3.305 million of non-performing assets at June 30, 2025, consisting of nineeighteen one-to-four family residential loans, three home equity loans, two commercial non-real estate loans, one commercial real estate loan, one land loan, one consumer loan, and one commercial real estate property in other real estate owned at DecemberMarch 31, 2025,2026, compared to six one-to-four family residential loans, two home equity loans, three commercial non-real estate loans, two commercial real estate loans and one single-family residence in other real estate owned at June 30, 2025. At DecemberMarch 31, 20252026 the Company had sixseventeen one-to-four family residential loans, three home equity loans, two commercial non-real estate loans, two consumer loans, and one commercial real estate loan, and one land loan classified as substandard, compared to eight one-to-four family residential loans, five commercial non-real estate loans, two home equity loans, two commercial real estate loans and one consumer loan classified as substandard at June 30, 2025. There were no loans classified as doubtful at DecemberMarch 31, 20252026 or June 30, 2025.

Total liabilities increased $9.413$29.358 million, or 1.7%,5.3%, from $554.287 million at June 30, 2025 to $563.700$583.645 million at DecemberMarch 31, 2025.2026. The increase in liabilities resulted from increases in total deposits of $28.142 $8.587 million, or 1.6%,5.2%, from $546.290 million at June 30, 2025 to $554.877$574.432 million at DecemberMarch 31, 2025,2026, and advances from the Federal Home Loan Bank of Dallas of $2.000 million, from none at June 30, 2025 to $2.000 million at March 31, 2026, partially offset by decreases in other borrowings of $444,000, or 11.1%, from $4.000 million at June 30, 2025 to $3.556 million at March 31, 2026, other accrued expenses and liabilities of $976,000,$280,000, or 28.3%,8.1%, from $3.454 million at June 30, 2025 to $4.430$3.174 million at December March 31, 2025, partially2026, offset by a decrease inand advances from borrowers for taxes and insurance of $150,000,$60,000, or 27.6%,11.0%, from $543,000 at June 30, 2025 to $393,000$483,000 at DecemberMarch 31, 2025.2026. The increase in deposits resulted from increases in certificates of deposit of $11.334$21.683 million, or 6.0%, 11.6%, from $187.357 million at June 30, 2025 to $198.691$209.040 million at DecemberMarch 31, 2025,2026, and non-interest deposits of $5.430$16.694 million, or 4.4%,13.6%, from $122.416 million at June 30, 2025 to $127.846$139.110 million at December March 31, 2025,2026, partially offset by decreases in money market deposits of $4.701 million, or 6.4%, from $73.771 million at June 30, 2025 to $69.070 million at March 31, 2026, savings deposits of $2.854 million, or 3.0%, from $95.627 million at June 30, 2025 to $92.773 million at March 31, 2026, and NOW accounts of $630,000,$2.680 million, or 0.9%,4.0%, from $67.119 million at June 30, 2025 to $67.749$64.439 million at DecemberMarch 31, 2025, partially offset by decreases in money market deposits of $7.661 million, or 10.4%, from $73.771 million at June 30, 2025 to $66.110 million at December 31, 2025, and savings deposits of $1.146 million, or 1.2%, from $95.627 million at June 30, 2025 to $94.481 million at December 31, 2025. The Company had no balances in brokered deposits at December 31, 2025 or June 30, 2025.2026.

Stockholders’ equity increased $2.544$2.799 million, or 4.6%,5.1%, from $55.205 million at June 30, 2025 to $57.749$58.004 million at DecemberMarch 31, 2025.2026. The increase in stockholders’ equity resulted from net income for the sixnine months months ended DecemberMarch 31, 20252026 of $3.274$4.746 million, proceeds from the issuance of common stock from the exercise of stock options of $1.589$1.769 million, a decrease in the Company’s accumulated other comprehensive loss of $551,000,$136,000, and the vesting of sharerestricted stock awards, stock options, and the release of employee stock ownership plan shares totaling $233,000,$290,000, partially offset by stock repurchases of $2.270$2.892 million and dividends paid totaling $833,000.$1.250 million.

The Bank is required to meet minimum capital standards promulgated by the Office of the Comptroller of the Currency (“OCC”). At DecemberMarch 31, 2025,2026, Home Federal Bank’s regulatory capital was well in excess of the minimum capital requirements. At DecemberMarch 31, 2025,2026, Home Federal Bank exceeded each of its capital requirements with common equity tier 1, tier 1 capital, total capital, leverage, and tangible capital ratios of 13.39%,13.05%, 13.39%,13.05%, 14.42%, 9.36%,14.1%, 9.44%, and 9.36%, 9.44%, respectively.

Comparison of Operating Results for the Three and Six Months Ended DecemberMarch 31, 20252026 and 20242025

The increase in net income for the three months ended DecemberMarch 31, 2025,2026, as compared to the same period in 2024, primarily2025, resulted from an increase of $777,000,$733,000, or 16.9%,15.7%, in net interest income, a decrease of $282,000, or 6.6%, in non-interest expense, and an increase of $150,000, $83,000, or 30.7%,15.4%, in non-interest income, and a decrease of $43,000, or 1.1%, in non-interest expense, partially offset by an increase of $251,000,$263,000, or 134.2%,4,383.3%, in the provision for credit losses, and an increase of $111,000, or 53.6%, in the provision for income taxes, and an increase of $64,000, or 142.2%, in the provision for credit losses.taxes.

The increase in net income for the sixnine months ended DecemberMarch 31, 2025,2026, as compared to the same period in 20242025 resulted primarily from an increase of $1.612$2.346 million, or 17.9%,17.1%, in net interest income, an increase of of $500,000,$583,000, or 63.5%,44.0%, in non-interest income, and a decrease of $202,000,$484,000, or 2.6%,4.0%, in non-interest expense, partially offset by an increase of $671,000,$782,000, or 362.7%,199.5%, in provision for income taxes and an increase of $330,000,$593,000, or 185.4%,344.8%, in the provision provision for credit losses.

The increase in net interest income for the three months ended DecemberMarch 31, 2025,2026, as compared to the same period in 2024,2025, resulted from an increase of $405,000,$590,000, or 5.3%,7.9%, in total interest income and a decrease of of $372,000,$143,000, or 12.2%,5.2%, in total interest expense. The Company’s average interest rate spread was 3.03%3.13% for the three months ended DecemberMarch 31, 2025,2026, compared to 2.41%2.66% for the three months ended DecemberMarch 31, 2024.2025. The Company’s net interest margin was 3.67%3.75% for the three months ended March 31, 2026, compared to 3.33% for the three months ended DecemberMarch 31, 2025, compared to 3.12% for the three months ended December 31, 2024.2025.

The increase in net interest income for the sixnine months ended DecemberMarch 31, 2025,2026, as compared to the same period in 2024,2025, was primarily due to aan decreaseincrease of $938,000,$1.264 million, or 14.7%,5.5%, in total interest expenseincome, and ana increasedecrease of $674,000,$1.082 million, or 4.4%,11.9%, in total interest income.expense. The Company’s average interest rate spread was 3.01%3.04% for the sixnine months ended DecemberMarch 31, 2025,2026, compared to 2.32%2.44% for the sixnine months ended DecemberMarch 31, 2024.2025. The Company’s net interest margin was 3.65%3.68% for the sixnine months ended DecemberMarch 31, 2025,2026, compared to 3.06%3.14% for the sixnine months ended DecemberMarch 31, 2024.2025.

The provision for credit losses for the three months ended DecemberMarch 31, 2025,2026, compared to the same period in 2024,2025, increased by $64,000$263,000 primarily due to an increase in net loans receivable. The provision for credit losses for the sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in 2024,2025, increased by $330,000, $593,000, reflecting a change from a $178,000$172,000 recovery in the prior year period to a $152,000$421,000 provision in the current period, primarily due to higher net loans receivable.

The $150,000$83,000 increase in non-interest income for the three months ended DecemberMarch 31, 2025,2026, compared to the priorsame yearperiod quarterlyin period,2025, resulted from an increase of $125,000$49,000 in gain on sale of loans, an increase of $44,000$42,000 in service charges on deposit accounts, aand decreasean increase of $6,000$3,000 in lossother onnon-interest saleincome, partially offset by an increase of securities, and a decrease of $4,000$10,000 in loss on sale of real estate, partially offset byand a decrease of $29,000$1,000 in otherincome non-intereston income. bank owned life insurance. The $500,000 $583,000 increase in non-interest income for the sixnine months ended DecemberMarch 31, 2025,2026, compared to the priorsame yearperiod six-monthin period,2025, resulted primarily from a decrease of $258,000$248,000 in loss on sale of real estate, an increase of $175,000$224,000 in gain on sale of loans, an increase of $76,000 $118,000 in service charges on deposit accounts, and a decrease of $6,000 in loss on sale of securities, partially offset by a decrease of $15,000$12,000 in other non-interest income.income, Theand $266,000a lossdecrease of $1,000 in income on sale of real estate for the prior year six-month period related to a one-to-four family residence in other real estatebank owned thatlife was sold during the period.insurance.

The $43,000$282,000 decrease in non-interest expense for the three months ended DecemberMarch 31, 2025,2026, compared to the same period in 2024,2025, resulted from decreases of $128,000 in compensation and benefits expense, $81,000 in audit and examination fees, $20,000 in advertising expense, $18,000$203,000 in data processingprocessing, expense, and $8,000 in amortization of core deposit intangible expense, partially offset by increases of $108,000 in other non-interest expense, $53,000 in franchise and bank shares tax, $21,000 in occupancy and equipment expense, $16,000 in professional fees, $9,000 in deposit insurance premium expense, and $5,000 in loan and collection expense. The $202,000 decrease in non-interest expense for the six months ended December 31, 2025, compared to the same six-month period in 2024, resulted from decreases of $280,000 in compensation and benefits expense, $144,000$37,000 in audit and examination fees, $48,000 in advertising expense, $16,000 in professional fees, and $15,000 in amortization of core deposit intangible expense, partially offset by increases of $125,000$27,000 in other non-interestexpenses, expense, $100,000 in data processing expense, $25,000 in occupancy and equipment expense, $20,000$15,000 in franchise and bank shares tax, $19,000$13,000 in amortization core deposit intangible, $11,000 in loan and collectioncollection, expense,$9,000 in professional fees, and $12,000$3,000 in occupancy and equipment, partially offset by increases in $25,000 in compensation and benefits, $9,000 in advertising, and $2,000 in deposit insurance premium expense.premium. The increase$484,000 decrease in non-interest expense for the nine months ended March 31, 2026, compared to the same period in 2025, resulted from decreases of $255,000 in compensation and benefits, $181,000 in audit and examination fees, $103,000 in data processingprocessing, expense$39,000 resultedin fromadvertising, a$28,000 billingin discrepancy with ouramortization core processor, whichdeposit had failed to issue invoices for certain services dating back to December 2022. Upon discovery of the issue, we negotiated a discounted settlement to resolve the outstanding invoices,intangible, and all invoices going forward included all services. The increase$25,000 in servicesprofessional billedfees, resultedpartially offset by increases in the$98,000 increasein forother theexpenses, six$22,000 monthsin endedoccupancy Decemberand 31,equipment, 2025.$14,000 in deposit insurance premium, $8,000 in loan and collection, and $5,000 in franchise and bank shares tax.

The aggregate compensation expense recognized by the Company for its Stockstock Options,options, Shareshare Awardsawards and employee stock ownership plan, amounted to $170,000$57,000 and $217,000$92,000 for the three months ended DecemberMarch 31, 2025 2026 and December March 31, 2024,2025, respectively. The aggregate compensation expense recognized by the Company for its Stockstock Options,options, Shareshare Awardsawards and employee stock ownership plan, amounted to $233,000$231,000 and $310,000$348,000 for the sixnine months ended December March 31, 20252026 and DecemberMarch 31, 2024, 2025, respectively.

The Louisiana bank shares tax is assessed on the Bank’s equity and earnings. For the three months ended DecemberMarch 31, 2025,2026, the Company recognized franchise and bank shares tax expense of $54,000$120,000 compared to $135,000, $1,000, for the same period in 2024.2025. For the sixnine months ended DecemberMarch 31, 2025,2026, the Company recognized franchise and bank shares tax expense of $189,000$309,000 compared to $169,000,$304,000, for the same period in 2024.2025.

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.

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, 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 $7.105$13.255 million at DecemberMarch 31, 2025.2026.

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 DecemberMarch 31, 2025,2026, Thethe Bank had no$2.000 million in advances from the Federal Home Loan Bank of Dallas and had $132.590$133.653 million in borrowing capacity. Additionally, at DecemberMarch 31, 2025,2026, 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 $19.900 million. There were no amounts purchased under this agreement as of DecemberMarch 31, 2025.2026. At DecemberMarch 31, 2025, 2026, Home Federal Bancorp had a $4.000$3.556 million outstanding loan with First National Bankers Bank, which matures on February 5, 2034.

At DecemberMarch 31, 2025,2026, the Bank had outstanding loan commitments of $56.086$63.339 million to originate loans and commitments under unused lines of credit of $12.432$13.989 million. At DecemberMarch 31, 2025,2026, certificates of deposit scheduled to mature in less than one year totaled $137.396$136.253 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. 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 DecemberMarch 31, 2025,2026, Home Federal Bank exceeded each of its capital requirements with common equity tier 1, tier 1 capital, total capital, leverage, and tangible capital ratios of 13.39%,13.05%, 13.39%,13.05%, 14.42%, 9.36%,14.1%, 9.44%, and 9.36%, 9.44%, respectively.

At DecemberMarch 31, 2025,2026, the Company did not have any off-balance sheet arrangements as defined by Securities and Exchange Commission rules.