SOURCE: Home Federal Bancorp, Inc.

April 19, 2006 16:00 ET

Home Federal Bancorp, Inc. Announces Second Quarter Earnings

NAMPA, ID -- (MARKET WIRE) -- April 19, 2006 -- Home Federal Bancorp, Inc. (the "Company") (NASDAQ: HOME), the parent company of Home Federal Bank (the "Bank"), today reported net income of $1.2 million, or $0.09 per diluted share, for the quarter ended March 31, 2006, compared to $1.7 million, or $0.11 per diluted share, for the same period a year ago. Results for the quarter ended March 31, 2005 included a $386,000 pre-tax gain on the sale of a former branch. Excluding the gain on the sale of the branch, the Company had net income of $1.4 million, or $0.10 per share for the quarter ended March 31, 2005.

Net income for the six months ended March 31, 2006 was $3.0 million, or $0.21 per diluted share, compared to $1.7 million, or $0.12 per diluted share for the same six-month period a year ago. Results for the six months ended March 31, 2005 included the $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 $2.6 million, or $0.18 per diluted share, for the six months ended March 31, 2005.

"We have continued to perform successfully despite a flattening yield curve," said Daniel L. Stevens, Chairman and CEO. "During the quarter ended March 31, 2006, we experienced a 14% increase in interest and dividend income, net loans increased 14% and deposits were up 16%, as compared to the same period a year ago."

The following table reconciles the Company's actual net income to pro forma net income for the three and six months ended March 31, 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):

                                   Three Months Ended    Six Months Ended
                                       March 31,            March 31,
                                   -------------------  -------------------
                                     2006      2005       2006      2005
                                   --------- --------   --------- --------
Pro forma disclosure                             (unaudited)
  Net income, as reported          $   1,233 $  1,674   $   2,993 $  1,748
  Sale of branch                           -     (386)          -     (386)
  Contribution to Foundation               -        -           -    1,825
  Federal and state income taxes           -      151           -     (561)
                                   --------- --------   --------- --------
  Pro forma net income             $   1,233 $  1,439   $   2,993 $  2,626
                                   ========= ========   ========= ========
Earnings per share
  Diluted as reported              $    0.09 $   0.11   $    0.21 $   0.12
  Pro forma diluted                $    0.09 $   0.10   $    0.21 $   0.18
Second Quarter Highlights (at or for the periods ended March 31, 2006 compared to March 31, 2005):
--  Interest and dividend income increased 14% to $9.6 million
--  Total assets increased 16% to $747.3 million
--  Net loans increased 14% to $476.2 million
--  Deposits increased 16% to $431.6 million
--  Non-performing assets decreased to $10,000 or 0.001% of total assets
    
Operating Results

Revenues for the quarter ended March 31, 2006, which consisted of net interest income before the provision for loan losses plus noninterest income, were unchanged at $8.1 million as compared to the quarter ended March 31, 2005. Results for the quarter ended March 31, 2005 included a $386,000 pre-tax gain on the sale of a former branch. Net interest income before the provision for loan losses increased 3% to $5.6 million for the quarter ended March 31, 2006, compared to $5.5 million for the same quarter of the prior year.

Revenues for the six months ended March 31, 2006 increased 10% to $16.9 million, compared to $15.3 million for the same period of last year. Net interest income before the provision for loan losses increased 11% to $11.6 million, compared to $10.5 million for the same period of last year. On December 6, 2004, the Bank completed its mutual holding company reorganization, at which time the Bank converted to stock form and the Company was organized. In connection with the reorganization, the Company received $53.6 million in net proceeds from a minority stock offering. The majority of the proceeds were invested in mortgage-backed securities. Revenues from mortgage-backed securities increased $1.4 million to $4.8 million for the six months ended March 31, 2006, compared to $3.4 million for the same period of the prior year.

For the quarter ended March 31, 2006, net interest income after provision for loan losses increased 5% to $5.5 million, compared to $5.3 million for the same quarter a year ago. For the quarter ended March 31, 2006, a provision for loan losses of $90,000 was established by management in connection with its analysis of the loan portfolio, compared to a provision for loan losses of $236,000 established for the same quarter of the prior year. The decrease in the provision reflects the Company's current credit quality and decrease in classified assets, nonperforming loans and net charge-offs. Net interest income after provision for loan losses for the six months ended March 31, 2006 increased 13% to $11.5 million, compared to $10.2 million for the same period of the prior year.

The Company's net interest margin decreased 34 basis points to 3.33% for the quarter ended March 31, 2006, from 3.67% for the same quarter last year. The net interest margin for the six months ended March 31, 2006 decreased 9 basis points to 3.50% from 3.59% for the same period a year earlier. The cost of deposits was 2.04% for the six months ended March 31, 2006 compared to 1.65% for the same period of the prior year. During the current fiscal year, the Company revised its estimate of accrued interest on an escalator certificate of deposit product. The revision resulted in a one-time $310,000 reduction in interest expense for the six months ended March 31, 2006. Excluding the revision, the net interest margin and cost of deposits for the six months ended March 31, 2006 were 3.37% and 2.21%, respectively. The decline in net interest margin reflects 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. Although the Company believes the repricing of existing and new loans over time will help counter the trend in net interest margin, pressure will likely continue in the near term as a result of the flat yield curve environment.

Noninterest income decreased 6% to $2.5 million for the quarter ended March 31, 2006, compared to $2.6 million for the same quarter a year ago. The decrease in noninterest income is primarily attributable to a $386,000 gain on the sale of a former branch in the prior quarter a year ago. The prior year gain is partially offset by an 8% increase in service charges and fees and a 171% increase in gains on loan sales in the quarter ended March 31, 2006. For the six months ended March 31, 2006, noninterest income increased 9% to $5.3 million, compared to $4.9 million for the same period of the prior year. Increases in service charges and gains on loans sales of $590,000 and $366,000 account for the increase, offset by the $386,000 gain on the sale of the former branch.

Noninterest expense for the quarter ended March 31, 2006 increased 17% to $6.1 million, from $5.2 million for the comparable period a year earlier. Compensation and benefits increased $674,000 to $3.8 million for the quarter ended March 31, 2006 as compared to $3.1 million for the same quarter 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 equity compensation plans include the Company's employee stock option plan, 2005 Recognition and Retention Plan ("RRP") and 2005 Stock Option and Incentive Plan. The efficiency ratio was 74.5% for the quarter ended March 31, 2006 compared to 63.8% for the same quarter a year ago. Excluding the non-recurring gain on sale of a former branch, the efficiency ratio was 67.0% for the same period of the prior year. The efficiency ratio indicates how much is spent on non-interest expenses as a percentage of total revenue.

Noninterest expense for the six months ended March 31, 2006 decreased 3% to $11.9 million, compared to $12.2 million for the six months ended March 31, 2005. The decrease was primarily a result of the $1.8 million contribution to the Foundation during the quarter ended December 31, 2004. Compensation and benefits increased $1.4 million to $7.6 million for the six months ended March 31, 2006 as compared to $6.1 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 increases in employee commissions and incentive plans. The efficiency ratio was 70.6% for the six months ended March 31, 2006 compared to 79.9% 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 69.7% for the six months ended March 31, 2005.

Balance Sheet Growth

Total assets increased 16% to $747.3 million at March 31, 2006 compared to $643.4 million a year earlier. Net loans (excluding loans held for sale) at March 31, 2006 increased 14% to $476.2 million, compared to $419.1 million at March 31, 2005. Single family loans represented 64% of the Bank's loan portfolio at March 31, 2006, compared to 62% at March 31, 2005. Commercial real estate loans accounted for 27% of the Bank's loan portfolio at March 31, 2006, compared to 28% at March 31, 2005.

Credit quality remains exceptional, as non-performing assets were $10,000, or 0.001% of total assets, at March 31, 2006, compared to $803,000, or 0.125% of total assets, at March 31, 2005. The allowance for loan losses was $3.0 million, or 0.62% of gross loans, including loans held for sale, at March 31, 2006 compared to $2.8 million, or 0.67% of gross loans, at March 31, 2005.

Deposits increased 16% to $431.6 million at March 31, 2006 compared to $373.1 million at March 31, 2005. Noninterest-bearing demand deposits increased $14.7 million, or 43%, to $49.1 million at March 31, 2006, compared to $34.4 million at March 31, 2005. Interest-bearing demand deposits were unchanged at $132.3 million at March 31, 2006 and 2005. Certificates of deposit increased $44.0 million to $224.6 million at March 31, 2006, compared to $180.6 million at March 31, 2005. The majority of the increase in certificates of deposits was in 12 to 23 month terms. Advances from the Federal Home Loan Bank ("FHLB") increased 27% to $196.5 million at March 31, 2006 compared to $154.7 million at March 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 $2.5 million to $104.4 million at March 31, 2006, compared to $101.9 million at March 31, 2005. The increase was primarily the result of $6.5 million in net income for the period, $678,000 in earned ESOP shares and $412,000 equity compensation, offset by $1.2 million of cash dividends paid to stockholders and $3.9 million for the repurchase of 298,092 shares of common stock for the RRP plan. The Company's book value per share as of March 31, 2006 was $6.89 per share based upon 15,154,114 outstanding shares of common stock.

About the Company

Home Federal Bancorp, Inc. is a 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 14 full-service banking offices and two mortgage loan centers. The Company's common stock is traded on the NASDAQ National Market System 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 report 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, 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 data)          March 31,  Sept. 30,  March 31,
 (Unaudited)                                 2006       2005       2005
                                           ---------  ---------  ---------
ASSETS
  Cash and amounts due from depository
   institutions                            $  19,326  $  19,033  $  11,875
  Mortgage-backed securities available
   For sale, at fair value                    13,600     14,830     19,120
  Mortgage-backed securities held to
   maturity, at cost                         193,402    180,974    155,030
  Federal Home Loan Bank stock, at cost        9,591      9,591      8,112
  Loan receivable, net of allowance for
   loan losses of $2,984, $2,882 and
   $2,827                                    476,227    430,944    419,146
  Loans held for sale                          5,139      5,549      1,566
  Accrued interest receivable                  2,777      2,458      2,261
  Property and equipment, net                 13,296     11,995     10,992
  Mortgage servicing rights, net               2,511      2,671      2,998
  Bank owned life insurance                   10,289     10,099     10,214
  Real estate and other property owned             -        534        567
  Other assets                                 1,138        899      1,549
                                           ---------  ---------  ---------
    TOTAL ASSETS                           $ 747,296  $ 689,577  $ 643,430
                                           =========  =========  =========

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
  Deposit accounts
    Noninterest-bearing demand deposits    $  49,068  $  46,311  $  34,351
    Interest-bearing demand deposits         132,342    127,330    132,288
    Savings deposits                          25,583     25,219     25,917
    Certificates of deposit                  224,642    197,465    180,594
                                           ---------  ---------  ---------
      Total deposit accounts                 431,635    396,325    373,150

  Advances by borrowers for taxes and
   insurance                                   1,951      3,898      3,710
  Interest payable                             1,170      1,670      1,607
  Deferred compensation                        3,452      3,049      2,796
  Federal Home Loan Bank advances            196,542    175,932    154,717
  Deferred income tax liability                  913      1,205      1,317
  Other liabilities                            7,245      6,131      4,191
                                           ---------  ---------  ---------
    Total liabilities                        642,908    588,210    541,488

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:
    Mar. 31, 2006 - 15,208,750 issued,
     15,154,114 outstanding                      152        149        152
    Sept. 30, 2005 - 15,208,750 issued,
     14,910,658 outstanding
    Mar. 31, 2005 - 15,208,750 issued,
     15,208,750 outstanding
  Additional paid-in capital                  56,632     56,115     59,884
  Retained earnings                           52,216     49,818     46,847
  Unearned shares issued to employee stock
   ownership plan                             (4,344)    (4,550)    (4,784)
  Accumulated other comprehensive loss          (268)      (165)      (157)
                                           ---------  ---------  ---------
    Total stockholders’ equity               104,388    101,367    101,942
                                           ---------  ---------  ---------
    TOTAL LIABILITIES AND STOCKHOLDERS’
     EQUITY                                $ 747,296  $ 689,577  $ 643,430
                                           =========  =========  =========


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

Interest and dividend income:
  Loan interest              $    7,129  $    6,315  $   14,063  $   12,384
  Investment interest                60          17          71         260
  Mortgage-backed security
   interest                       2,386       2,045       4,772       3,408
  Federal Home Loan Bank
   dividends                          -          30           -          30
                             ----------  ----------  ----------  ----------
   Total interest and
    dividend income               9,575       8,407      18,906      16,082
                             ----------  ----------  ----------  ----------
Interest expense:
 Deposits                         2,097       1,465       3,694       2,890
 Federal Home Loan Bank
  advances                        1,844       1,448       3,596       2,709
                             ----------  ----------  ----------  ----------
  Total interest expense          3,941       2,913       7,290       5,599
                             ----------  ----------  ----------  ----------
  Net interest income             5,634       5,494      11,616      10,483
Provision for loan losses            90         236         145         295
                             ----------  ----------  ----------  ----------
  Net interest income after
   provision for loan losses      5,544       5,258      11,471      10,188
                             ----------  ----------  ----------  ----------
Noninterest income:
 Service charges and fees         2,115       1,952       4,501       3,911
 Gain on sale of loans              195          72         506         140
 Increase in cash surrender
  value of bank owned life
  insurance                         108          87         190         162
 Loan servicing fees                159         168         319         340
 Mortgage servicing rights,
  net                               (64)        (58)       (160)       (154)
 Other                              (24)        420         (66)        459
                             ----------  ----------  ----------  ----------
  Total noninterest income        2,489       2,641       5,290       4,858
                             ----------  ----------  ----------  ----------
Noninterest expense:
 Compensation and benefits        3,770       3,096       7,576       6,149
 Occupancy and equipment            694         682       1,422       1,401
 Data processing                    520         376         861         819
 Advertising                        257         310         471         650
 Postage and supplies               189         188         420         398
 Professional services              176         203         363         422
 Insurance and taxes                111          84         214         150
 Charitable contribution to
  Foundation                          -           -           -       1,825
 Other                              334         254         604         436
                             ----------  ----------  ----------  ----------
  Total noninterest expense       6,051       5,193      11,931      12,250
                             ----------  ----------  ----------  ----------
Income before income taxes        1,982       2,706       4,830       2,796
Income tax expense                  749       1,032       1,837       1,048
                             ----------  ----------  ----------  ----------
  NET INCOME                 $    1,233  $    1,674  $    2,993  $    1,748
                             ==========  ==========  ==========  ==========

Earnings per common share:
  Basic                      $     0.09  $     0.11  $     0.21  $     0.12
  Diluted                    $     0.09  $     0.11  $     0.21  $     0.12

Weighted average number of
 shares outstanding:
  Basic                      14,478,746  14,720,524  14,472,449  14,718,364
  Diluted                    14,497,350  14,720,524  14,483,991  14,718,364



HOME FEDERAL BANCORP, INC. AND SUBSIDIARY
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands, except share data)
(Unaudited)                                        At Or For The    At Or
                                                    Six Months     For The
                                                      Ended      Year Ended
                                                     March 31,    Sept. 30,
                                                      2006          2005
                                                    ----------  ----------
FINANCIAL CONDITION DATA
  Average interest-earning assets                   $  664,390  $  606,690
  Average interest-bearing liabilities                 539,513     501,124
  Net average earning assets                           124,877     105,566
  Average interest-earning assets to
   average interest-bearing liabilities                 123.15%     121.07%
  Stockholders' equity to assets                         13.97%      14.70%

ASSET QUALITY
  Allowance for loan losses                         $    2,984  $    2,882
  Non-performing loans                                      10         478
  Non-performing assets                                     10       1,012
  Allowance for loan losses to
   non-performing loans                              29,840.00%     602.93%
  Allowance for loan losses to gross
   loans and loans held for sale                          0.62%       0.66%
  Non-performing loans to gross loans and
   loans held for sale                                    0.00%       0.11%
  Non-performing assets to total assets                   0.00%       0.15%


                                 At Or For The            At For The
                                  Three Months            Six Months
                                 Ended March 31,         Ended March 31,
                             ----------  ----------  ----------  ----------
                                2006        2005        2006        2005
                             ----------  ----------  ----------  ----------

SELECTED PERFORMANCE RATIOS
  Return on average assets (1)     0.69%       1.05%       0.85%       0.56%
  Return on average equity (1)     4.72%       6.56%       5.77%       4.28%
  Net interest margin (1)          3.33%       3.67%       3.50%       3.59%
  Efficiency ratio                74.49%      63.83%      70.57%      79.85%
  Efficiency ratio,
   excluding non-recurring
   items (2)                      74.49%      67.01%      70.57%      69.71%

PER SHARE DATA
  Basic earnings per share   $     0.09  $     0.11  $     0.21  $     0.12
  Diluted earnings per share       0.09        0.11        0.21        0.12
  Book value per share             6.89        6.70        6.89        6.70
  Cash dividends declared
   per share                      0.055           -       0.105           -
  Average number of shares outstanding:
    Basic (3)                14,478,746  14,720,524  14,472,449  14,718,364
    Diluted (3)              14,497,350  14,720,524  14,483,991  14,718,364

(1) Amounts are annualized.

(2) Noninterest expense divided by net interest income plus noninterest
    income.  The pro forma efficiency ratio for the three months ended
    March 31, 2005 excludes the effect of the $386,000 gain on sale of
    a former branch.  The pro forma efficiency ratio for the six months
    ended March 31, 2005 excludes the effect of the $386,000 gain on 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 RRP.

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