Home Federal Bancorp, Inc. of Louisiana (HFBL) stock intrinsic value fair value estimate & owner earnings analysis

What the business is. This is a small community savings bank holding company with a home office and ten full-service branches in Caddo, Bossier and Webster Parishes in northwest Louisiana (the Shreveport-Bossier City-Minden area). It earns money mostly on the spread between loan and securities yields and deposit costs, plus fees and gains from selling mortgage loans. In fiscal 2025 (year ended June 30, 2025) net interest income was $18.8 million versus $19.0 million a year earlier, even though the average interest rate spread widened from 2.38% to 2.55%. Non-performing assets were $3.3 million at June 30, 2025. How we measure earnings. We start from operating cash flow and remove the swings in working capital, then deduct stock-based pay (employee stock ownership plan, option and share-award expense) as a real cost, and deduct only the part of capital spending needed to maintain the business. For a bank, the buying and selling of mortgage loans held for sale moves cash flow by tens of millions of dollars from year to year without changing earning power, so we strip out the change in the loans-held-for-sale balance but keep the gain on sale as earnings. On this basis owner earnings per share over the last ten fiscal years were roughly $0.30, $0.99, $1.31, $0.93, $1.47, $1.36, $0.89, $1.95, $0.60 and $1.48 (fiscal 2016 to 2025, share counts adjusted for the 2-for-1 split). The swings largely reflect lumpy branch and premises spending (for example $2.7 million in fiscal 2024 versus $46 thousand in fiscal 2025) and changing mortgage-sale income. We used fiscal 2017 to 2025 as the window, dropping fiscal 2016 because we lacked the prior-year revenue to size growth spending. The median is $1.31. We set the base level at $1.35, slightly above the median, because nine-month net income for fiscal 2026 was $4.7 million (diluted EPS $1.55) versus $2.7 million ($0.88) a year earlier, so recent results are running above the long-run level. That is not enough by itself to move the level further. Amortisation of the core deposit intangible is small ($284 thousand in fiscal 2025) and we did not adjust for it. Growth check. Owner earnings per share grew from $0.60 to $1.48 in fiscal 2025, but that rebound is largely the drop in capital spending. Our base case assumes no growth at all from the $1.35 level. Loan or branch growth is not credited: we found no contracted or steadily repeated expansion pattern in the filings strong enough to count on it, and the ten-year record shows no upward trend in owner earnings per share. The three cases. Each assumes the bank keeps earning for a defined period and then stops adding value; we credit nothing beyond it. Bear (about $8.6 per share): owner earnings settle at about $0.75 per share, close to the weaker years in the record ($0.60 in fiscal 2024, $0.30 in fiscal 2016, $0.89 in fiscal 2022), for 20 years. Thin spreads and the volatility of mortgage-sale income are the named pressures. Base (about $18.6 per share): owner earnings of $1.35 per share held flat for 30 years, supported by a ten-year record of positive owner earnings, including during the 2020 disruption. Bull (about $24.8 per share): owner earnings of $1.80 per share, close to the $1.95 achieved in fiscal 2023 and the pace suggested by the first nine months of fiscal 2026, held for 30 years. All cases are discounted at a flat 6%. The bank's balance-sheet cash and debt are not added to or subtracted from these values, because owner earnings are already measured after interest costs. Value comes only from the earnings stream described above; no separate value is assigned to surplus cash. What would make this estimate wrong. The base case would be too high if net interest income keeps slipping (it dipped $280 thousand in fiscal 2025) or if mortgage-sale income stays subdued; it would be too low if the higher earnings seen in the first nine months of fiscal 2026 hold for a full year and beyond. Working-capital lines for a bank are hard to separate cleanly, so the yearly figures carry some judgement; our cash-flow reconciliation for fiscal 2025 tied exactly to net income plus itemised non-cash adjustments. Margin-of-safety price. The margin-of-safety price is about $11 per share, roughly 40% below our base value, because this is a small, single-region bank with earnings that vary widely year to year and a weak downside case.