SOURCE: Home Federal Bancorp, Inc.

April 18, 2007 13:00 ET

Home Federal Bancorp, Inc. Announces Second Quarter Earnings

NAMPA, ID -- (MARKET WIRE) -- April 18, 2007 -- 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 $0.08 per diluted share, for the quarter ended March 31, 2007, compared to $1.2 million, or $0.09 per diluted share, for the same period a year ago. Net income for the six months ended March 31, 2007 was $2.5 million, or $0.17 per diluted share, compared to $3.0 million, or $0.21 per diluted share, for the same six-month period a year ago.

"We have maintained solid loan growth and outstanding asset quality while focusing on long-term business opportunities for the Company," said Daniel L. Stevens, the Company's Chairman and CEO. "We have made significant progress in building the Bank's commercial banking division and expect to see considerable growth opportunities there," said Stevens. Last December, the Bank announced the hiring of industry veteran Steven D. Emerson as Senior Vice President and Chief Lending Officer of the Bank and just last month announced the hiring of Cindy Bateman as Senior Vice President and Commercial Banking Team Lead. "Cindy is one of Southwest Idaho's leading banking executives," said Len E. Williams, President of Home Federal Bank. "Having her and Steve aboard affirms our dedication to developing a team of proven executives to lead Home Federal Bank as we build what we envision to be the Treasure Valley's premier bank."

Operating Results

Revenues for the quarter ended March 31, 2007, which consisted of net interest income before the provision for loan losses plus noninterest income, were unchanged at $8.1 million from the comparable quarter ended March 31, 2006. Net interest income before the provision for loan losses decreased 5% to $5.4 million for the quarter ended March 31, 2007 compared to $5.6 million for the same quarter of the prior year as the cost of deposits increased more rapidly than the yield on loans and investments.

Revenues for the six months ended March 31, 2007 decreased 2% to $16.5 million, compared to $16.9 million for the same period of last year. Net interest income before the provision for loan losses decreased 7% to $10.9 million, compared to $11.6 million for the same period of last year as interest expense increased 47% while interest income increased 14%.

A provision for loan losses was not required in connection with the analysis of the loan portfolio for the current quarter, compared to a provision for loan losses of $90,000 established for the same quarter of the prior year. The decrease in the provision reflects a reduction in loans receivable and classified assets during the current quarter. The provision for loan losses was $71,000 for the six months ended March 31, 2007, compared to $145,000 for the six months ended March 31, 2006. The $74,000, or 29% decrease in the provision reflects the increase in loans receivable, offset by a reduction of classified assets, net charge-offs and historical loan loss rates.

The Company's net interest margin decreased 33 basis points to 3.00% for the quarter ended March 31, 2007, from 3.33% for the same quarter last year. The net interest margin for the six months ended March 31, 2007 decreased 48 basis points to 3.02% from 3.50% 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 exists, as the cost of shorter-term deposits and borrowed funds have 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 loan 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 11% to $2.8 million for the quarter ended March 31, 2007, compared to $2.5 million for the same quarter a year ago. The increase was primarily attributable to a $184,000 increase in gains on the sale of residential loans and a $107,000 increase in service charges and fees. For the six months ended March 31, 2007, noninterest income increased 7% to $5.6 million, compared to $5.3 million for the same period of the prior year. Increases in gains on the sale of residential loans and service charges of $171,000 and $135,000, respectively, account for the majority of the increase. The Company currently sells the majority of the one- to four-family residential mortgage loans that it originates. For the three and six months ended March 31, 2006, a larger percentage of the residential mortgage loans originated were held in the loan portfolio.

Noninterest expense for the quarter ended March 31, 2007 was unchanged at $6.1 million from the comparable quarter ended March 31, 2006. Compensation and benefit expenses increased $81,000, or 2%, to $3.9 million for the quarter ended March 31, 2007 as compared to $3.8 million for the same quarter a year ago. As of March 31, 2007, the Company employed 211 full-time equivalent employees, compared to 231 at March 31, 2006. The Company's efficiency ratio was 75.0% for the quarter ended March 31, 2007, relatively unchanged from 74.5% 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 six months ended March 31, 2007 increased 3% to $12.3 million, compared to $11.9 million for the six months ended March 31, 2006. Compensation and benefits increased $289,000, or 4%, to $7.9 million for the six months ended March 31, 2007 as compared to $7.6 million for the same period a year ago. The majority of the increase was primarily attributable to increased costs related to equity compensation plans and annual merit increases, offset by decreases in training and recruiting costs. The efficiency ratio was 74.8% for the six months ended March 31, 2007 compared to 70.6% for the same period of the prior year. In addition to the increase in noninterest expense, the reduction in the Company's net interest income also contributed to the overall increase in the efficiency ratio.

Balance Sheet Growth

Total assets decreased less than 1% to $746.0 million at March 31, 2007, compared to $747.3 million a year earlier. Net loans (excluding loans held for sale) at March 31, 2007 increased 6% to $503.7 million, compared to $476.2 million at March 31, 2006. One- to four-family residential loans represented 59% of the Bank's loan portfolio at March 31, 2007, compared to 64% at March 31, 2006 as the Bank continues to sell the majority of the residential mortgage loans that it originates. Commercial real estate loans accounted for 30% of the Bank's loan portfolio at March 31, 2007, compared to 27% at March 31, 2006. In the future, the Bank plans to increase its emphasis on commercial and small business banking products.

The Company's credit quality remains excellent, as non-performing assets were $273,000, or 0.04% of total assets, at March 31, 2007, compared to $10,000, or 0.001% of total assets, at March 31, 2006. Non-performing one- to four-family residential loans were $27,000, or 0.004% of total assets at March 31, 2007, compared to none at March 31, 2006. The Company does not originate or purchase subprime one- to four-family residential loans. The allowance for loan losses was $2.8 million, or 0.56% of gross loans, at March 31, 2007 compared to $3.0 million, or 0.62% of gross loans, at March 31, 2006. Prior to March 31, 2007, the allowance for loan losses included the estimated loss from unfunded loan commitments. The preferred accounting method is to separate the unfunded loan commitments from the disbursed loan amounts and record the unfunded loan commitment portion as a liability. At March 31, 2007, the reserve for unfunded loan commitments was $192,000, which was reclassed to other liabilities on the Consolidated Balance Sheet.

Deposits decreased 2% to $422.2 million at March 31, 2007 compared to $431.6 million at March 31, 2006. Demand deposits and savings accounts decreased $11.7 million, or 6%, as customers migrated towards higher rate deposit products the past year. Noninterest-bearing demand deposits decreased $13.1 million, or 27%, to $36.0 million at March 31, 2007, compared to $49.1 million at March 31, 2006. A significant portion of the decrease in noninterest-bearing demand deposits was the result of a single commercial relationship that reduced outstanding balances by approximately $6.4 million. Interest-bearing demand deposits increased $3.5 million, or 3%, to $135.8 million at March 31, 2007, compared to $132.3 million at March 31, 2006. Certificates of deposit increased $2.2 million, or 1%, to $226.9 million at March 31, 2007, compared to $224.6 million at March 31, 2006. 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 $3.0 million, or 2%, to $199.5 million at March 31, 2007 compared to $196.5 million at March 31, 2006. The Company utilizes advances from the FHLB as an alternative funding source to retail deposits in order to manage funding costs, manage interest rate risk and to leverage the Balance Sheet.

Stockholders' equity increased $6.6 million, or 6%, to $111.0 million at March 31, 2007, compared to $104.4 million at March 31, 2006. The increase was primarily the result of $5.7 million in net income for the period, $782,000 in earned employee stock ownership plan ("ESOP") shares and $970,000 in equity compensation, offset by $1.3 million of cash dividends paid to stockholders. The Company's book value per share as of March 31, 2007 was $7.31 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 federally chartered 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    March    September    March
CONSOLIDATED BALANCE SHEET                  31, 2007   30, 2006   31, 2006
(In thousands, except share data)          ---------  ---------  ---------
(Unaudited)

ASSETS
 Cash and amounts due from depository
  institutions                             $  12,558  $  18,385  $  19,326
    Mortgage-backed securities available
     for sale, at fair value                  13,001     12,182     13,600
    Mortgage-backed securities held to
     maturity, at cost                       171,668    183,279    193,402
    FHLB stock, at cost                        9,591      9,591      9,591
  Loan receivable, net of allowance for
   loan losses of  $2,849, $2,974 and
   $2,984                                    503,688    503,065    476,227
    Loans held for sale                        4,489      4,119      5,139
    Accrued interest receivable                2,941      3,025      2,777
    Property and equipment, net               12,630     12,849     13,296
    Mortgage servicing rights, net             2,317      2,492      2,511
    Bank owned life insurance                 10,963     10,763     10,289
    Real estate and other property owned           -          -          -
    Other assets                               2,108      1,542      1,138
                                           ---------  ---------  ---------
       TOTAL ASSETS                        $ 745,954  $ 761,292  $ 747,296
                                           =========  =========  =========

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
  Deposit accounts:
    Noninterest-bearing demand deposits    $  36,006  $  44,626  $  49,068
    Interest-bearing demand deposits         135,835    128,276    132,342
    Savings deposits                          23,486     23,655     25,583
    Certificates of deposit                  226,891    233,724    224,642
                                           ---------  ---------  ---------
      Total deposit accounts                 422,218    430,281    431,635

    Advances by borrowers for taxes and
     insurance                                 1,772      2,133      1,951
    Interest payable                             855        971      1,170
    Deferred compensation                      4,242      3,875      3,452
    FHLB advances                            199,495    210,759    196,542
    Deferred income tax liability                604        800        913
    Other liabilities                          5,745      4,604      7,245
                                           ---------  ---------  ---------
      Total liabilities                      634,931    653,423    642,908

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, 2007 - 15,208,750 issued,
     15,189,019 outstanding                      152        152        152
    Sept. 30, 2006 - 15,208,750 issued,
     15,169,114 outstanding
    Mar. 31, 2006 - 15,208,750 issued,
     15,154,114 outstanding
  Additional paid-in capital                  58,186     57,222     56,632
  Retained earnings                           56,677     54,805     52,216
  Unearned shares issued to ESOP              (3,918)    (4,134)    (4,344)
  Accumulated other comprehensive loss           (74)      (176)      (268)
                                           ---------  ---------  ---------
    Total stockholders’ equity               111,023    107,869    104,388
                                           ---------  ---------  ---------
    TOTAL LIABILITIES AND STOCKHOLDERS’
     EQUITY                                $ 745,954  $ 761,292  $ 747,296
                                           =========  =========  =========


HOME FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except share data) (Unaudited)


                              Three Months Ended       Six Months Ended
                                  March 31,               March 31,
                            ----------------------  ----------------------
                               2007        2006        2007        2006
                            ----------  ----------  ----------  ----------
Interest and dividend
 income:
    Loan interest           $    8,470  $    7,129  $   16,997  $   14,063
    Investment interest             15          60          44          71
    Mortgage-backed
     security interest           2,244       2,386       4,550       4,772
    FHLB dividends                   9           -          19           -
                            ----------  ----------  ----------  ----------
     Total interest and
      dividend income           10,738       9,575      21,610      18,906
                            ----------  ----------  ----------  ----------
Interest expense:
    Deposits                     3,005       2,097       6,015       3,694
    FHLB advances                2,372       1,844       4,735       3,596
                            ----------  ----------  ----------  ----------
     Total interest expense      5,377       3,941      10,750       7,290
                            ----------  ----------  ----------  ----------
     Net interest income         5,361       5,634      10,860      11,616

Provision for loan losses            -          90          71         145
                            ----------  ----------  ----------  ----------
   Net interest income
    after provision for
    loan losses                  5,361       5,544      10,789      11,471
                            ----------  ----------  ----------  ----------
Noninterest income:
    Service charges and
     fees                        2,222       2,115       4,636       4,501
    Gain on sale of loans          379         195         677         506
    Increase in cash
     surrender value of bank
     owned life insurance           99         108         199         190
    Loan servicing fees            142         159         286         319
    Mortgage servicing
     rights, net                   (92)        (64)       (175)       (160)
    Other                           11         (24)         21         (66)
                            ----------  ----------  ----------  ----------
      Total noninterest
       income                    2,761       2,489       5,644       5,290
                            ----------  ----------  ----------  ----------

Noninterest expense:
    Compensation and
     benefits                    3,851       3,770       7,865       7,576
    Occupancy and equipment        727         694       1,429       1,422
    Data processing                493         520       1,001         861
    Advertising                    300         257         596         471
    Postage and supplies           174         189         320         420
    Professional services          215         176         411         363
    Insurance and taxes            106         111         209         214
    Other                          228         334         509         604
                            ----------  ----------  ----------  ----------
      Total noninterest
       expense                   6,094       6,051      12,340      11,931
                            ----------  ----------  ----------  ----------
Income before income taxes       2,028       1,982       4,093       4,830
Income tax expense                 787         749       1,583       1,837
                            ----------  ----------  ----------  ----------
   NET INCOME               $    1,241  $    1,233  $    2,510  $    2,993
                            ==========  ==========  ==========  ==========

Earnings per common share:
   Basic                    $     0.09  $     0.09  $     0.17  $     0.21
   Diluted                  $     0.08  $     0.09  $     0.17  $     0.21

Weighted average number of
 shares outstanding:
   Basic                    14,591,936  14,478,746  14,579,440  14,472,449
   Diluted                  14,692,424  14,497,350  14,685,143  14,483,991

Dividends declared per
 share:                     $    0.055  $    0.055  $    0.110  $    0.105


HOME FEDERAL BANCORP, INC. AND SUBSIDIARY
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands, except share data) (Unaudited)

                                                      At Or For
                                                       The Six    At Or For
                                                       Months     The Year
                                                        Ended       Ended
                                                       Mar. 31,   Sept. 30,
                                                        2007        2006
                                                      ---------  ---------
FINANCIAL CONDITION DATA
   Average interest-earning assets                    $ 718,826  $ 689,688
   Average interest-bearing liabilities                 597,588    563,834
   Net average earning assets                           121,238    125,854
   Average interest-earning assets to
    average interest-bearing liabilities                 120.29%    122.32%
   Stockholders’ equity to assets                         14.88      14.17

ASSET QUALITY
   Allowance for loan losses                          $   2,849  $   2,974
   Non-performing loans                                     273        388
   Non-performing assets                                    273        388
   Allowance for loan losses to
    non-performing loans                               1,043.59%    766.49%
   Allowance for loan losses to gross loans                0.56       0.59
   Non-performing loans to gross loans                     0.05       0.08
   Non-performing assets to total assets                   0.04       0.05


                              At Or For The Three     At Or For The Six
                            Months Ended Mar. 31,   Months Ended Mar. 31,
                            ----------------------  ----------------------
                               2007        2006        2007        2006
                            ----------  ----------  ----------  ----------
SELECTED PERFORMANCE RATIOS
 Return on average
  assets (1)                   0.66%       0.69%       0.66%       0.85%
 Return on average
  equity (1)                   4.47        4.72        4.55        5.77
 Net interest margin (1)       3.00        3.33        3.02        3.50
 Efficiency ratio (2)         75.03       74.49       74.77       70.57

PER SHARE DATA
 Basic earnings per
  share                  $     0.09  $     0.09  $     0.17  $     0.21
 Diluted earnings per
  share                        0.08        0.09        0.17        0.21
 Book value per share          7.31        6.89        7.31        6.89
 Cash dividends declared
  per share                   0.055       0.055       0.110       0.105
 Average number of
  shares outstanding:
   Basic (3)             14,591,936  14,478,746  14,579,440  14,472,449
   Diluted (3)           14,692,424  14,497,350  14,685,143  14,483,991


(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