SOURCE: Home Federal Bancorp, Inc.

October 31, 2006 16:00 ET

Home Federal Bancorp, Inc. Announces Fourth Quarter and Annual Earnings

NAMPA, ID -- (MARKET WIRE) -- October 31, 2006 -- Home Federal Bancorp, Inc. (the "Company") (NASDAQ: HOME), the parent company of Home Federal Bank (the "Bank"), today reported net income of $1.7 million, or $0.11 per diluted share, for the quarter ended September 30, 2006, compared to $1.7 million, or $0.12 per diluted share, for the same period a year ago. Net income for the fiscal year ended September 30, 2006 was $6.2 million, or $0.43 per diluted share, compared to $5.3 million, or $0.36 per diluted share, for the fiscal year ended September 30, 2005. Results for the fiscal year ended September 30, 2005 included a $386,000 pre-tax gain on the sale of a former branch and a $1.8 million pre-tax expense for establishing the Home Federal Foundation, Inc. (the "Foundation"). Excluding the gain on the sale of the branch and the expense for establishing the Foundation, the Company had net income of $6.2 million, or $0.42 per diluted share, for the fiscal year ended September 30, 2005.

"We have experienced continued growth this fiscal year, despite the challenges of the current interest rate environment," said Daniel L. Stevens, Chairman and CEO. "During the quarter ended September 30, 2006, we experienced a 17% increase in interest and dividend income, net loans increased 17% and deposits were up 9%, as compared to the same period a year ago. During October 2006, we also opened our fifth branch in the fast-growing Canyon County, bringing our branch network to 15 locations."

"I am also very excited to have Len Williams on board as President of the Bank," continued Mr. Stevens. "The business banking and strategic planning skills he brings to the table will be extremely valuable as we continue our model of building strong customer relationships." Mr. Williams, age 47, joined the company in September 2006 as part of the company's succession plan for Mr. Stevens. He previously served as Senior Vice President and Head of Business Banking with Fifth Third Bank and has more than 28 years of banking experience. From 1987 to 2005, he held several management positions with Key Bank, including President of Business Banking from 2003 to 2005.

The following table reconciles the Company's actual net income to pro forma net income for the fiscal years ended September 30, 2006 and 2005 exclusive of the sale of the branch and the contribution to the Foundation, as adjusted for federal and state taxes (in thousands, except per share data):

                                                       Fiscal Year Ended
                                                         September 30,
                                                      ---------------------
                                                        2006       2005
                                                      ---------- ---------
                                                          (unaudited)
Pro forma disclosure
   Net income, as reported                            $    6,212 $   5,283
   Sale of branch                                              -      (386)
   Contribution to Foundation                                  -     1,825
   Federal and state income taxes                              -      (561)
                                                      ---------- ---------
   Pro forma net income                               $    6,212 $   6,161
                                                      ========== =========
Earnings per share
   Diluted as reported                                $     0.43 $    0.36
   Pro forma diluted                                  $     0.43 $    0.42
Fourth Quarter Highlights (at or for the periods ended September 30, 2006 compared to September 30, 2005):
--  Interest and dividend income increased 17% to $10.6 million
--  Noninterest income increased 7% to $2.8 million
--  Total assets increased 10% to $761.3 million
--  Net loans increased 17% to $503.1 million
--  Deposits increased 9% to $430.3 million
--  Non-performing assets decreased 62% to $388,000, or 0.05% of total
    assets
    
Operating Results

Revenues for the quarter ended September 30, 2006, which consisted of net interest income before the provision for loan losses plus noninterest income, increased 2% to $8.4 million for the quarter, compared to $8.2 million for the quarter ended September 30, 2005. Net interest income before the provision for loan losses remained unchanged at $5.6 million for the quarters ended September 30, 2006 and 2005 as the cost of deposits increased more rapidly than the yield on loans and investments.

Revenues for the fiscal year ended September 30, 2006 increased 7% to $34.1 million, compared to $31.8 million for the same period of last year. Net interest income before the provision for loan losses increased 6% to $23.0 million, compared to $21.7 million for the same period of last year.

For the quarter ended September 30, 2006, net interest income after provision for loan losses increased 3% to $5.8 million, compared to $5.6 million for the same quarter a year ago. As a result of an analysis of the Company's historical loan loss rates, $182,000 of the current fiscal year provision for loan losses was recaptured in the current quarter. For the quarter ended September 30, 2005, there was no provision for loan losses. As a result of the recapture, the allowance for loan losses was $3.0 million, or 0.58% of gross loans, including loans held for sale, at September 30, 2006 compared to $3.2 million, or 0.63% of gross loans, including loans held for sale, at June 30, 2006. Net interest income after provision for loan losses for the fiscal year ended September 30, 2006 increased 8% to $22.9 million, compared to $21.2 million for the same period of the prior year.

The Company's net interest margin decreased 36 basis points to 3.12% for the quarter ended September 30, 2006, from 3.48% for the same quarter last year. The net interest margin for the fiscal year ended September 30, 2006 decreased 24 basis points to 3.33% from 3.57% for the same period a year earlier. The decline in the net interest margin reflects competitive pricing pressures and the relatively flat yield curve that currently exists, as the cost of shorter-term deposits and borrowed funds increased more rapidly than the yield on longer-term assets. The Company believes the repricing of existing and new loans will help counter the trend in net interest margin, however, pressure will likely continue in the near term as a result of competitive pricing pressures and the flat yield curve environment.

Noninterest income increased 7% to $2.8 million for the quarter ended September 30, 2006, compared to $2.6 million for the same quarter a year ago. The increase was primarily attributable to a $182,000, or an 8%, increase in service charges and fees. For the current quarter, the Company also wrote-down the value of the mortgage servicing rights by $64,000. For the fiscal year ended September 30, 2006, noninterest income increased 10% to $11.1 million, compared to $10.1 million for the same period of the prior year. Increases in service charges and gain on sale of loans of $1.0 million and $674,000, respectively, account for the majority of the increase. Other noninterest income for the fiscal year ended September 30, 2005 included a $386,000 gain on the sale of a former branch and a $456,000 gain from life insurance proceeds, which were not experienced in the current fiscal year.

Noninterest expense for the quarter ended September 30, 2006 increased 10% to $5.9 million, from $5.4 million for the comparable period a year earlier. Compensation and benefits increased $361,000, or 11%, to $3.7 million for the quarter ended September 30, 2006 as compared to $3.3 million for the same quarter a year ago. The majority of the increase is attributable to the establishment of the equity compensation plans, annual merit increases, and an increase in employee commissions. The equity compensation plans include the Company's 2005 Recognition and Retention Plan and 2005 Stock Option and Incentive Plan. The efficiency ratio was 70.4% for the quarter ended September 30, 2006 compared to 65.7% for the same quarter a year ago. The efficiency ratio indicates how much is spent on non-interest expenses as a percentage of total revenue.

Noninterest expense for the fiscal year ended September 30, 2006 increased 3% to $23.9 million, compared to $23.2 million for the fiscal year ended September 30, 2005. Noninterest expense for the fiscal year ended September 30, 2005 included the $1.8 million contribution to the Foundation. Compensation and benefits increased $2.4 million, or 19%, to $15.1 million for the fiscal year ended September 30, 2006 as compared to $12.6 million for the same period a year ago. The majority of the increase is attributable to the establishment of the equity compensation plans during the prior fiscal year, annual merit increases, and an increase in employee commissions. The efficiency ratio was 70.2% for the fiscal year ended September 30, 2006 compared to 72.8% for the same period of the prior year. Excluding the non-recurring contribution to the Foundation and the gain on sale of the former branch, the efficiency ratio was 67.9% for the fiscal year ended September 30, 2005.

Balance Sheet Growth

Total assets increased 10% to $761.3 million at September 30, 2006, compared to $689.6 million a year earlier. Net loans (excluding loans held for sale) at September 30, 2006 increased 17% to $503.1 million, compared to $430.9 million at September 30, 2005. One- to four-family residential loans represented 63% of the Bank's loan portfolio at September 30, 2006, compared to 61% at September 30, 2005. Commercial real estate loans accounted for 28% of the Bank's loan portfolio at September 30, 2006 and 2005.

Credit quality remains exceptional, as non-performing assets were $388,000, or 0.05% of total assets, at September 30, 2006, compared to $1.0 million, or 0.15% of total assets, at September 30, 2005. The allowance for loan losses was $3.0 million, or 0.58% of gross loans, including loans held for sale, at September 30, 2006 compared to $2.9 million, or 0.66% of gross loans, including loans held for sale, at September 30, 2005.

Deposits increased 9% to $430.3 million at September 30, 2006 compared to $396.3 million at September 30, 2005. Demand deposits and savings accounts decreased $2.3 million, or 1%, as customers migrated towards higher rate deposit products during the fiscal year. Noninterest-bearing demand deposits decreased $1.7 million, or 4%, to $44.6 million at September 30, 2006, compared to $46.3 million at September 30, 2005. Interest-bearing demand deposits increased $946,000, or less than 1%, to $128.3 million at September 30, 2006, compared to $127.3 million at September 30, 2005. Certificates of deposit increased $36.2 million, or 18%, to $233.7 million at September 30, 2006, compared to $197.5 million at September 30, 2005. The majority of the increase in certificates of deposits was in shorter-term deposits of six to 23-month terms. Advances from the Federal Home Loan Bank ("FHLB") increased 20% to $210.8 million at September 30, 2006 compared to $175.9 million at September 30, 2005. The Company utilizes advances from the FHLB as an alternative funding source to retail deposits in order to manage funding costs, reduce interest rate risk and to leverage the Balance Sheet.

Stockholders' equity increased $6.5 million, or 6%, to $107.9 million at September 30, 2006, compared to $101.4 million at September 30, 2005. The increase was primarily the result of $6.2 million in net income for the period, $681,000 in earned employee stock ownership ("ESOP") shares and $844,000 in equity compensation, offset by $1.2 million of cash dividends paid to stockholders. The Company's book value per share as of September 30, 2006 was $7.11 per share based upon 15,169,114 outstanding shares of common stock.

About the Company

Home Federal Bancorp, Inc. is a federally chartered savings and loan holding company headquartered in Nampa, Idaho. It is the subsidiary of Home Federal MHC, a federally chartered mutual holding company, and the parent company of Home Federal Bank, a federal savings bank that was originally organized as a building and loan association in 1920. The Company serves the Treasure Valley region of southwestern Idaho, that includes Ada, Canyon, Elmore and Gem Counties, through 15 full-service banking offices and two mortgage loan centers. The Company's common stock is traded on the NASDAQ Global Market under the symbol "HOME." The Company's stock is also included in the America's Community Bankers NASDAQ Index. For more information, visit the Company's web site at www.myhomefed.com.

Forward-Looking Statements:

Statements in this news release regarding future events, performance or results are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA") and are made pursuant to the safe harbors of the PSLRA. Actual results could be materially different from those expressed or implied by the forward-looking statements. Factors that could cause results to differ include but are not limited to: general economic and banking business conditions, competitive conditions between banks and non-bank financial service providers, interest rate fluctuations, regulatory and accounting changes, the value of mortgage servicing rights, risks related to construction and development, commercial real estate and consumer lending and other risks. Additional factors that could cause actual results to differ materially are disclosed in Home Federal Bancorp, Inc.'s recent filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K for the year ended September 30, 2005, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Forward-looking statements are accurate only as of the date released, and we do not undertake any responsibility to update or revise any forward-looking statements to reflect subsequent events or circumstances.




HOME FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS                     September 30, September 30,
(In thousands, except share data) (Unaudited)        2006         2005
                                                  -----------  -----------
ASSETS
    Cash and amounts due from depository
     institutions                                 $    18,385  $    19,033
    Mortgage-backed securities available for
     sale, at fair value                               12,182       14,830
    Mortgage-backed securities held to
     maturity, at cost                                183,279      180,974
    FHLB stock, at cost                                 9,591        9,591
    Loan receivable, net of allowance for loan
      losses of  $2,974 and $2,882                    503,065      430,944
    Loans held for sale                                 4,119        5,549
    Accrued interest receivable                         3,025        2,458
    Property and equipment, net                        12,849       11,995
    Mortgage servicing rights, net                      2,492        2,671
    Bank owned life insurance                          10,763       10,099
    Real estate and other property owned                    -          534
    Other assets                                        1,542          899
                                                  -----------  -----------
        TOTAL ASSETS                              $   761,292  $   689,577
                                                  ===========  ===========

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
     Deposit accounts
         Noninterest-bearing demand deposits      $    44,626  $    46,311
         Interest-bearing demand deposits             128,276      127,330
         Savings deposits                              23,655       25,219
         Certificates of deposit                      233,724      197,465
                                                  -----------  -----------
           Total deposit accounts                     430,281      396,325
     Advances by borrowers for taxes and
      insurance                                         2,133        3,898
     Interest payable                                     971        1,670
     Deferred compensation                              3,875        3,049
     FHLB advances                                    210,759      175,932
     Deferred income tax liability                        800        1,205
     Other liabilities                                  4,604        6,131
                                                  -----------  -----------
         Total liabilities                            653,423      588,210
STOCKHOLDERS’ EQUITY
     Serial preferred stock, $.01 par value;
      5,000,000 authorized issued and outstanding,
      none                                                  -            -
       Common stock, $.01 par value; 50,000,000
        authorized, issued and outstanding:
        Sept. 30, 2006 - 15,208,750 issued,
        15,169,114 outstanding                            152          149
       Sept. 30, 2005 - 15,208,750 issued,
        14,910,658 outstanding
     Additional paid-in capital                        57,222       56,115
     Retained earnings                                 54,805       49,818
     Unearned shares issued to ESOP                    (4,134)      (4,550)
     Accumulated other comprehensive loss                (176)        (165)
                                                  -----------  -----------
         Total stockholders’ equity                   107,869      101,367
                                                  -----------  -----------
         TOTAL LIABILITIES AND STOCKHOLDERS’
          EQUITY                                  $   761,292  $   689,577
                                                  ===========  ===========




HOME FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except
 share data)                 Three Months Ended           Year Ended
(Unaudited)                    September 30,             September 30,
                            ----------------------  ----------------------
                               2006        2005        2006        2005
                            ----------  ----------  ----------  ----------

Interest and dividend
 income:
  Loan interest             $    8,216  $    6,884  $   30,175  $   25,934
  Investment interest               26          42         140         313
  Mortgage-backed
   security interest             2,378       2,154       9,598       7,633
  FHLB dividends                     -           -           -          30
                            ----------  ----------  ----------  ----------
     Total interest and
      dividend income           10,620       9,080      39,913      33,910
                            ----------  ----------  ----------  ----------
Interest expense:
    Deposits                     2,727       1,796       8,914       6,288
    FHLB advances                2,307       1,703       8,003       5,943
                            ----------  ----------  ----------  ----------
     Total interest expense      5,034       3,499      16,917      12,231
                            ----------  ----------  ----------  ----------
     Net interest income         5,586       5,581      22,996      21,679
Provision for loan losses         (182)          -         138         456
                            ----------  ----------  ----------  ----------
     Net interest income
     after provision for
     loan losses                 5,768       5,581      22,858      21,223
                            ----------  ----------  ----------  ----------
Noninterest income:
  Service charges and
   fees                          2,399       2,217       9,292       8,274
  Gain on sale of loans            262         180       1,056         382
  Increase in cash
   surrender value of bank
   owned life insurance             98          90         383         343
  Loan servicing fees              150         166         620         672
  Mortgage servicing
   rights, net                    (132)        (81)       (179)       (480)
  Other                           (11)          6         (63)        937
                            ----------  ----------  ----------  ----------
   Total noninterest income      2,766       2,578      11,109      10,128
                            ----------  ----------  ----------  ----------
Noninterest expense:
  Compensation and
   benefits                      3,653       3,292      15,081      12,636
  Occupancy and equipment          686         674       2,759       2,765
  Data processing                  438         370       1,802       1,616
  Advertising                      285         258       1,025       1,147
  Postage and supplies             195         201         811         785
  Professional services            276         207         917         905
  Insurance and taxes              111         100         431         341
  Charitable contribution
   to Foundation                     -           -           -       1,825
  Other                            239         260       1,119       1,138
                            ----------  ----------  ----------  ----------
   Total noninterest
    expense                      5,883       5,362      23,945      23,158
                            ----------  ----------  ----------  ----------
Income before income taxes       2,651       2,797      10,022       8,193

Income tax expense                 993       1,060       3,810       2,910
                            ----------  ----------  ----------  ----------
   NET INCOME               $    1,658  $    1,737  $    6,212  $    5,283
                            ==========  ==========  ==========  ==========

Earnings per common share:
   Basic                    $     0.11  $     0.12  $     0.43  $     0.36
   Diluted                  $     0.11  $     0.12  $     0.43  $     0.36
Weighted average number of
 shares outstanding:
   Basic                    14,503,619  14,629,608  14,484,982  14,696,071
   Diluted                  14,589,904  14,667,755  14,519,778  14,702,084

Dividends declared per
 share:                     $    0.055  $    0.050  $    0.215  $    0.100



HOME FEDERAL BANCORP, INC. AND SUBSIDIARY
ADDITIONAL FINANCIAL INFORMATION              At Or For The  At Or For The
(Dollars in thousands, except share data)       Year Ended     Year Ended
(Unaudited)                                   Sept, 30, 2006 Sept. 30, 2005
                                                ------------  ------------
FINANCIAL CONDITION DATA
    Average interest-earning assets             $    689,688  $    606,690
    Average interest-bearing liabilities             563,834       501,124
    Net average earning assets                       125,854       105,566
   Average interest-earning assets to
    average interest-bearing liabilities              122.32%       121.07%
    Stockholders’ equity to assets                     14.17%        14.70%
ASSET QUALITY
    Allowance for loan losses                   $      2,974  $      2,882
    Non-performing loans                                 388           478
    Non-performing assets                                388         1,012
    Allowance for loan losses to non-performing
     loans                                            766.49%       602.93%
    Allowance for loan losses to gross
     loans and loans held for sale                      0.58%         0.66%
    Non-performing loans to gross loans
     and loans held for sale                            0.08%         0.11%
    Non-performing assets to total assets               0.05%         0.15%




                             At Or For The Three        At Or For The
                            Months Ended Sept. 30,   Year Ended Sept. 30,
                            ----------------------  ----------------------
                               2006        2005        2006        2005
                            ----------  ----------  ----------  ----------
SELECTED PERFORMANCE RATIOS
    Return on average
     assets (1)                   0.88%       1.02%       0.85%       0.82%
    Return on average
     equity (1)                   6.16%       6.68%       5.90%       5.69%
    Net interest margin (1)       3.12%       3.48%       3.33%       3.57%
    Efficiency ratio (2)         70.44%      65.72%      70.21%      72.81%
    Efficiency ratio,
     excluding
     non-recurring items (2)     70.44%      65.72%      70.21%      67.89%
PER SHARE DATA
    Basic earnings per
     share                  $     0.11  $     0.12  $     0.43  $     0.36
    Diluted earnings per
     share                        0.11        0.12        0.43        0.36
    Book value per share          7.11        6.80        7.11        6.80
    Cash dividends declared
     per share                   0.055       0.050       0.215       0.100
    Average number of
     shares outstanding:
      Basic (3)             14,503,619  14,629,608  14,484,982  14,696,071
      Diluted (3)           14,589,904  14,667,755  14,519,778  14,702,084


(1)  Amounts are annualized.
(2)  Noninterest expense divided by net interest income plus noninterest
        income.  The pro forma efficiency ratio for the year ended
        September 30, 2005 excludes the effect of the $386,000 gain on the
        sale of a former branch and the $1.8 million contribution to the
        Foundation.
(3)  Amounts calculated exclude ESOP shares not committed to be released
        and unvested restricted shares granted under the 2005 Recognition
        and Retention Plan.

Contact Information

  • Contact:
    Home Federal Bancorp, Inc.

    Daniel L. Stevens
    Chairman
    President & CEO

    Robert A. Schoelkoph
    SVP
    Treasurer & CFO

    208-466-4634
    www.myhomefed.com