SOURCE: Home Federal Bancorp, Inc.

January 18, 2007 16:00 ET

Home Federal Bancorp, Inc. Announces First Quarter Earnings

NAMPA, ID -- (MARKET WIRE) -- January 18, 2007 -- Home Federal Bancorp, Inc. (the "Company") (NASDAQ: HOME), the parent company of Home Federal Bank (the "Bank"), today announced net income for the first quarter of its fiscal year ending September 30, 2007. For the quarter ended December 31, 2006, the Company reported net income of $1.3 million, or $0.09 per diluted share compared to $1.8 million, or $0.12 per diluted share, for the same period a year ago.

"During the past year, we have maintained solid loan growth and outstanding asset quality despite the challenges of the current interest rate environment," said Daniel L. Stevens, the Company's Chairman and CEO. As a result of a comprehensive and continuing review of the Company's strategic business plan, the Company has recognized an opportunity to increase its new commercial and small business banking programs. In support of those initiatives, the Bank announced in December 2006 the hiring of Steven D. Emerson as Senior Vice President and Chief Lending Officer of the Bank. "As Chief Lending Officer, Steve will be responsible for expanding the commercial and small business banking programs," said Len Williams, President of Home Federal Bank. "He is well established in the Treasure Valley marketplace and brings tremendous business banking and leadership skills to our management team."

First Quarter Highlights (at or for the periods ended December 31, 2006 compared to December 31, 2005):

--  Interest and dividend income increased 17% to $10.9 million
--  Total assets increased 10% to $767.6 million
--  Net loans increased 16% to $511.6 million
--  Non-performing assets decreased from $180,000 to zero
    
Operating Results

Revenues for the quarter ended December 31, 2006, which consisted of net interest income before the provision for loan losses plus noninterest income, decreased 5% to $8.4 million for the quarter, compared to $8.8 million for the quarter ended December 31, 2005. Net interest income before the provision for loan losses decreased 8% to $5.5 million for the quarter ended December 31, 2006 compared to $6.0 million for the same quarter of the prior year as the cost of deposits increased more rapidly than the yield on loans and investments.

A provision for loan losses of $71,000 was established by management in connection with its analysis of the loan portfolio for the current quarter, compared to a provision for loan losses of $55,000 established for the same quarter of the prior year. The $16,000 increase in the provision reflects the increase in loans receivable, partially offset by a reduction of classified assets, nonperforming loans and net charge-offs.

The Company's net interest margin decreased 61 basis points to 3.05% for the quarter ended December 31, 2006, from 3.66% for the same quarter last year. The decline in the net interest margin reflects competitive pricing pressures and the relatively flat yield curve that existed during the quarter, 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 loans and the emphasis on expanding the commercial and small business banking programs, including both loans and deposit products, 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 3% to $2.9 million for the quarter ended December 31, 2006, compared to $2.8 million for the same quarter a year ago. The increase was primarily attributable to a $28,000 increase in service charges and fees and a $52,000 increase in other noninterest income. As a result of the Company's conversion of its core processing system during the quarter ended December 31, 2005, the Company retired fixed assets and software related to the prior system, resulting in an $86,000 charge to other noninterest income.

Noninterest expense for the quarter ended December 31, 2006 increased $366,000, or 6%, to $6.2 million, from $5.9 million for the comparable period a year earlier. Compensation and benefit expenses increased $208,000, or 5%, to $4.0 million for the quarter ended December 31, 2006 as compared to $3.8 million for the same quarter a year ago. The majority of the increase is attributable to an increase in the number of full-time equivalent employees and annual merit increases. As of December 31, 2006, the Company employed 247 full-time equivalent employees, compared to 231 at December 31, 2005. In October 2006, the Company opened its fifth branch in Canyon County that added 7 full-time equivalent employees. Data processing expenses increased $167,000, or 49%, as a result of the outsourcing of the Company's check processing function during the conversion of its core processing system in November 2005. The outsourcing costs were offset by a corresponding reduction in compensation, equipment expense and other costs. The Company's efficiency ratio was 74.5% for the quarter ended December 31, 2006 compared to 66.9% 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.

Balance Sheet Growth

Total assets increased 10% to $767.6 million at December 31, 2006, compared to $695.7 million a year earlier. Net loans (excluding loans held for sale) at December 31, 2006 increased 16% to $511.6 million, compared to $439.2 million at December 31, 2005. One- to four-family residential loans represented 60% of the Bank's loan portfolio at December 31, 2006, compared to 62% at December 31, 2005. Commercial real estate loans accounted for 30% of the Bank's loan portfolio at December 31, 2006, compared to 28% at December 31, 2005. In the future, the Bank plans to increase its emphasis on commercial and small business banking products.

The Company's credit quality remains exceptional, as there were no non-performing assets at December 31, 2006, compared to $180,000, or 0.03% of total assets, at December 31, 2005. The allowance for loan losses was $3.0 million, or 0.59% of gross loans, at December 31, 2006 compared to $2.9 million, or 0.66% of gross loans, at December 31, 2005.

Deposits increased 4% to $425.1 million at December 31, 2006 compared to $410.2 million at December 31, 2005. Demand deposits and savings accounts decreased $10.9 million, or 5%, as customers migrated towards higher rate deposit products the past year. Noninterest-bearing demand deposits decreased $9.5 million, or 20%, to $37.9 million at December 31, 2006, compared to $47.4 million at December 31, 2005. The majority of the decrease in noninterest-bearing demand deposits was the result of a single commercial relationship that reduced their outstanding balances by approximately $8.1 million. Interest-bearing demand deposits increased $692,000, or less than 1%, to $130.3 million at December 31, 2006, compared to $129.6 million at December 31, 2005. Certificates of deposit increased $25.8 million, or 12%, to $233.9 million at December 31, 2006, compared to $208.1 million at December 31, 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 29% to $221.2 million at December 31, 2006 compared to $171.8 million at December 31, 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 $6.3 million, or 6%, to $109.5 million at December 31, 2006, compared to $103.2 million at December 31, 2005. The increase was primarily the result of $5.7 million in net income for the period, $738,000 in earned employee stock ownership plan ("ESOP") shares and $903,000 in equity compensation, offset by $1.3 million of cash dividends paid to stockholders. The Company's book value per share as of December 31, 2006 was $7.21 per share based upon 15,189,019 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 lending, commercial and small business banking 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, 2006, 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
(In thousands, except share        December 31,  September 30, December 31,
 data) (Unaudited)                    2006          2006          2005
                                   ------------  ------------  ------------
ASSETS

  Cash and amounts due from
   depository institutions        $     20,723  $     18,385  $     11,051
  Mortgage-backed securities
   available for sale, at fair
   value                                13,733        12,182        13,957
  Mortgage-backed securities
   held to maturity, at cost           177,340       183,279       187,498
  FHLB stock, at cost                    9,591         9,591         9,591
  Loan receivable, net of
   allowance for loan losses of
   $3,045, $2,974 and $2,924           511,561       503,065       439,241
  Loans held for sale                    3,667         4,119         3,567
  Accrued interest receivable            3,127         3,025         2,683
  Property and equipment, net           12,721        12,849        13,375
  Mortgage servicing rights,
   net                                   2,409         2,492         2,576
  Bank owned life insurance             10,863        10,763        10,181
  Real estate and other
   property owned                            -             -           175
  Other assets                           1,849         1,542         1,823
                                  ------------  ------------  ------------
     TOTAL ASSETS                 $    767,584  $    761,292  $    695,718
                                  ============  ============  ============

LIABILITIES AND STOCKHOLDERS'
 EQUITY

LIABILITIES
  Deposit accounts:
     Noninterest-bearing demand
      deposits                    $     37,939  $     44,626  $     47,437
     Interest-bearing demand
      deposits                         130,273       128,276       129,581
     Savings deposits                   23,023        23,655        25,128
     Certificates of deposit           233,888       233,724       208,078
                                  ------------  ------------  ------------
       Total deposit accounts          425,123       430,281       410,224
  Advances by borrowers for
   taxes and insurance                     950         2,133           926
  Interest payable                         950           971         1,275
  Deferred compensation                  4,037         3,875         3,234
  FHLB advances                        221,156       210,759       171,788
  Deferred income tax liability            842           800         1,175
  Other liabilities                      4,984         4,604         3,939
                                  ------------  ------------  ------------
     Total liabilities                 658,042       653,423       592,561

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:
     Dec. 31, 2006 - 15,208,750
      issued, 15,189,019
      outstanding                          152           152           152
     Sept. 30, 2006 - 15,208,750
      issued, 15,169,114
      outstanding
     Dec. 31, 2005 - 15,208,750
      issued, 15,152,114
      outstanding
  Additional paid-in capital            57,774        57,222        56,373
  Retained earnings                     55,756        54,805        51,291
  Unearned shares issued to
   ESOP                                 (4,027)       (4,134)       (4,449)
  Accumulated other
   comprehensive loss                     (113)         (176)         (210)
                                  ------------  ------------  ------------
     Total stockholders' equity        109,542       107,869       103,157
                                  ------------  ------------  ------------
     TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY        $    767,584  $    761,292  $    695,718
                                  ============  ============  ============




HOME FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)                Three Months Ended
(Unaudited)                                         December 31,
                                              --------------------------
                                                  2006          2005
                                              ------------  ------------

Interest and dividend income:
    Loan interest                             $      8,527  $      6,934
    Investment interest                                 29            11
    Mortgage-backed security interest                2,306         2,386
    FHLB dividends                                      10             -
                                              ------------  ------------
     Total interest and dividend income             10,872         9,331
                                              ------------  ------------
Interest expense:
    Deposits                                         3,010         1,597
    FHLB advances                                    2,363         1,752
                                              ------------  ------------
      Total interest expense                         5,373         3,349
                                              ------------  ------------
      Net interest income                            5,499         5,982

Provision for loan losses                               71            55
                                              ------------  ------------
      Net interest income after provision
       for loan losses                               5,428         5,927
                                              ------------  ------------
Noninterest income:
    Service charges and fees                         2,414         2,386
    Gain on sale of loans                              298           311
    Increase in cash surrender value of bank
     owned life insurance                              100            82
    Loan servicing fees                                144           160
    Mortgage servicing rights, net                     (83)          (96)
    Other                                               10           (42)
                                              ------------  ------------
      Total noninterest income                       2,883         2,801
                                              ------------  ------------
Noninterest expense:
    Compensation and benefits                        4,014         3,806
    Occupancy and equipment                            702           728
    Data processing                                    508           341
    Advertising                                        296           214
    Postage and supplies                               146           231
    Professional services                              196           187
    Insurance and taxes                                103           103
    Other                                              281           270
                                              ------------  ------------
      Total noninterest expense                      6,246         5,880
                                              ------------  ------------
Income before income taxes                           2,065         2,848

Income tax expense                                     796         1,088
                                              ------------  ------------
      NET INCOME                              $      1,269  $      1,760
                                              ============  ============

Earnings per common share:
   Basic                                      $       0.09  $       0.12
   Diluted                                    $       0.09  $       0.12

Weighted average number of shares
 outstanding:
   Basic                                        14,567,261    14,466,288
   Diluted                                      14,723,947    14,469,663

Dividends declared per share:                 $      0.055  $      0.050




HOME FEDERAL BANCORP, INC. AND SUBSIDIARY
ADDITIONAL FINANCIAL INFORMATION          At Or For The
(Dollars in thousands, except per         Three Months   At Or For The
 share data) (Unaudited)                     Ended       Year Ended
                                          Dec. 31, 2006  Sept. 30, 2006
                                         --------------  --------------
FINANCIAL CONDITION DATA
  Average interest-earning assets        $      722,025  $      689,688
  Average interest-bearing liabilities          600,663         563,834
  Net average earning assets                    121,362         125,854
  Average interest-earning assets to
   average interest-bearing liabilities          120.20%         122.32%
  Stockholders' equity to assets                  14.27           14.17

ASSET QUALITY
  Allowance for loan losses              $        3,045  $        2,974
  Non-performing loans                                -             388
  Non-performing assets                               -             388
  Allowance for loan losses to
   non-performing loans                             n/a          766.49%
  Allowance for loan losses to gross
   loans                                           0.59%           0.59
  Non-performing loans to gross loans               n/a            0.08
  Non-performing assets to total
   assets                                           n/a            0.05


                                            At Or For The Three Months
                                                 Ended Dec. 31,
                                          ----------------------------
                                              2006            2005
                                          -------------   -------------
SELECTED PERFORMANCE RATIOS
  Return on average assets (1)                     0.66%           1.02%
  Return on average equity (1)                     4.63            6.82
  Net interest margin (1)                          3.05            3.66
  Efficiency ratio (2)                            74.52           66.95

PER SHARE DATA
  Basic earnings per share                $        0.09   $        0.12
  Diluted earnings per share                       0.09            0.12
  Book value per share                             7.21            6.81
  Cash dividends declared per share               0.055           0.050
  Average number of shares outstanding:
    Basic (3)                                14,567,261      14,466,288
    Diluted (3)                              14,723,947      14,469,663

    (1) Amounts are annualized.

    (2) Noninterest expense divided by net interest income plus
        noninterest income.

    (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