SOURCE: Home Federal Bancorp, Inc.

April 18, 2008 14:00 ET

Home Federal Bancorp, Inc. Announces Second Quarter Earnings

NAMPA, ID--(Marketwire - April 18, 2008) - Home Federal Bancorp, Inc. (the "Company") (NASDAQ: HOME), the parent company of Home Federal Bank (the "Bank"), today announced second quarter earnings for the fiscal year ending September 30, 2008. For the quarter ended March 31, 2008, the Company reported net income of $945,000, or $0.06 per diluted share compared to $1.2 million, or $0.07 per diluted share, for the same period a year ago. Net income for the six months ended March 31, 2008 was $1.9 million, or $0.12 per diluted share, compared to $2.5 million, or $0.15 per diluted share, for the same six-month period a year ago. Earnings per share for the prior periods have been adjusted to reflect the impact of the second-step conversion and reorganization of the Company, which was completed on December 19, 2007.

"We continue to operate according to our growth plan which includes driving net interest margin by focusing on gathering low cost deposits, generating higher yielding commercial loans and maintaining our fee generation discipline. Our priority remains on quality organic growth," stated Home Federal Bancorp, Inc. President and CEO, Len E. Williams. "Our new Karcher branch was successfully opened in early March and we have completed the build of a highly talented credit support team and system. In addition, we are pleased with the improvement in our asset and liability mix along with our net interest margin progress," Williams continued.

Operating Results

Revenues for the quarter ended March 31, 2008, which consisted of net interest income before the provision for loan losses plus noninterest income, increased 2% to $8.3 million, compared to $8.1 million for the quarter ended March 31, 2007. Net interest income before the provision for loan losses increased 8% to $5.8 million for the quarter ended March 31, 2008 compared to $5.4 million for the same quarter of the prior year. The increase in net interest income is primarily attributable to a decrease in interest expense on Federal Home Loan Bank of Seattle ("FHLB") borrowings as maturing advances have been funded with excess liquidity.

Revenues for the six months ended March 31, 2008 decreased 4% to $15.9 million, compared to $16.5 million for the same period of last year. Net interest income before the provision for loan losses for the six months ending March 31, 2008 decreased less than one percent to $10.8 million compared to $10.9 million for the same period of the prior year.

A provision for loan losses of $378,000 was established by management in connection with its analysis of the loan portfolio for the quarter ended March 31, 2008, compared to no provision for loan losses for the same quarter of the prior year. The provision for loan losses was $665,000 for the six months ended March 31, 2008, compared to $71,000 for the six months ended March 31, 2007. The increase in the provision reflects a shift in the asset mix toward commercial loans, and an increase in total classified assets. The Company remains committed to increasing reserves as commercial assets are added or as conditions warrant.

The Company's net interest margin increased 15 basis points to 3.15% for the quarter ended March 31, 2008, from 3.00% for the same quarter last year. The net interest margin for the six months ended March 31, 2008 increased five basis points to 3.07% from 3.02% for the same period a year earlier. The improvement in the net interest margin is primarily attributable to the increase in interest income that resulted from the investment of the proceeds from the second step mutual to stock conversion and stock offering completed on December 19, 2007. In addition, decreases in interest expense during the quarter just ended also contributed to the increase in the net interest margin.

Noninterest income decreased $283,000, or 10%, to $2.5 million for the quarter ended March 31, 2008, compared to $2.8 million for the same quarter a year ago. The decrease was primarily attributable to a $217,000 decrease in gain on sale of one-to-four family residential loans in the secondary market, reflecting a slowdown in the local real estate market. For the six months ended March 31, 2008, noninterest income decreased 10% to $5.1 million, compared to $5.6 million for the same period of the prior year. The decrease was primarily attributable to gain on sale of loans, service charges and fees which were $330,000 and $327,000 lower than prior year, respectively.

Noninterest expense for the quarter ended March 31, 2008 increased $325,000, or 5%, to $6.4 million, from $6.1 million for the comparable period a year earlier. Compensation and benefit expenses increased $202,000, or 5%, to $4.1 million for the quarter ended March 31, 2008 as compared to $3.9 million for the same quarter a year ago. The majority of the increase is attributable to increased headcount in individuals supporting the Bank's ongoing emphasis on commercial banking. The Company's efficiency ratio was 77.8% for the quarter ended March 31, 2008 compared to 75.0% 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 both the six months ended March 31, 2008 and March 31, 2007 was $12.3 million. The efficiency ratio was 77.2% for the six months ended March 31, 2008 compared to 74.8% for the same period of the prior year. The increase in the efficiency ratio was primarily the result of a decrease in revenue during the six months ended March 31, 2008.

Balance Sheet Growth

Total assets increased 3% to $768.1 million at March 31, 2008, compared to $745.9 million a year earlier. The increase in total assets was primarily attributable to $88.4 million in net proceeds raised from the Company's second-step conversion and stock offering completed on December 19, 2007. Net loans (excluding loans held for sale) at March 31, 2008 decreased 5% to $477.1 million, compared to $503.7 million at March 31, 2007. One- to four-family residential loans represented 48% of the Bank's loan portfolio at March 31, 2008, compared to 56% at March 31, 2007. Commercial loans, including commercial real estate loans, accounted for 42% of the Bank's loan portfolio at March 31, 2008, compared to 37% at March 31, 2007. In the future, subject to market conditions, the Bank plans to continue its increased emphasis on commercial and small business banking products. Mortgage-backed securities increased $24.6 million to $209.2 million at March 31, 2008, compared to $184.7 million at March 31, 2007. The increase is attributable to purchases made with proceeds from the second step conversion. All purchases were agency backed, Fannie Mae and Freddie Mac mortgage-backed securities.

Non-performing assets were $2.3 million or 0.30% of total assets at March 31, 2008 compared to $273,000 or 0.04% at March 31, 2007. The increase in non-performing assets is consistent with national trends in residential real estate. While our credit quality remains solid, Management continues to keep a watchful eye on the local market closely monitoring and managing credit quality, specifically acquisition and development and real estate construction loans. The Bank has recognized and identified the risk of acquisition and development lending and has limited its exposure in this area. The allowance for loan losses was $3.3 million, or 0.69% of gross loans, at March 31, 2008 compared to $2.8 million, or 0.56% of gross loans, at March 31, 2007.

Deposits decreased 6% to $396.1 million at March 31, 2008 compared to $422.2 million at March 31, 2007. Demand deposits and savings accounts increased $9.3 million, or 5% to $204.7 million at March 31, 2008. The increase was a result of growth in money market and non-interest bearing commercial demand deposit accounts. Certificates of deposit decreased $35.4 million, or 16%, to $191.4 million at March 31, 2008, compared to $226.9 million at March 31, 2007. The decrease in certificates of deposit was primarily the result of the Bank choosing not to match rates offered by local competitors that in some instances exceeded the Bank's cost of alternative funding sources. Advances from the FHLB decreased 22% to $155.5 million at March 31, 2008 compared to $199.5 million at March 31, 2007. The decrease resulted from maturing advances being funded from excess liquidity.

Stockholders' equity increased $94.3 million, or 85%, to $205.4 million at March 31, 2008, compared to $111.0 million at March 31, 2007. The increase was primarily a result of the $88.4 million in net proceeds received from the second-step reorganization and conversion stock offering. The Company sold approximately 9.4 million shares of stock in its subscription, community and syndicated community offerings and issued approximately 7.1 million shares of its stock in exchange for the previously outstanding shares of the Bank's former mid-tier holding company, Home Federal Bancorp, Inc. A portion of the offering proceeds were used to make a loan to our employee stock ownership plan ("ESOP"), which purchased approximately 816,000 shares of the Company's common stock for an aggregate of $8.2 million.

Other significant activity among equity accounts over the past twelve months included $4.7 million in net income, the allocation of earned employee stock ownership plan shares, equity compensation and the exercise of stock options totaling $2.5 million, and a $624,000 increase in unrealized gains on securities available for sale, offset by $1.9 million in cash dividends paid to stockholders. The Company's book value per share as of March 31, 2008 was $11.84 per share based upon 17,343,229 outstanding shares of common stock.

About the Company

Home Federal Bancorp, Inc. is a Maryland corporation headquartered in Nampa, Idaho, and is the savings and loan holding 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 16 full-service banking offices and one loan center. The Company's common stock is traded on the NASDAQ Global Select 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, 2007, 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) (Unaudited)

                                        March 31,  September 30, March 31,
                                          2008         2007        2007
                                        ---------  ------------  ---------
ASSETS

 Cash and amounts due from depository
  institutions                          $  36,353  $     20,588  $  12,558
 Mortgage-backed securities available
  for sale, at fair value                 209,239       162,258     13,001
 Mortgage-backed securities held to
  maturity, at cost                             -             -    171,668
 FHLB stock, at cost                        9,591         9,591      9,591
 Loan receivable, net of allowance for
  loan losses of $3,307, $2,988
  and $2,849                              477,155       480,118    503,688
 Loans held for sale                        2,751         4,904      4,489
 Accrued interest receivable                2,941         2,804      2,941
 Property and equipment, net               13,613        12,364     12,630
 Mortgage servicing rights, net             1,903         2,047      2,317
 Bank owned life insurance                 11,377        11,168     10,963
 Real estate and other property owned         452           549          -
 Deferred income tax asset                      -         1,245          -
 Other assets                               2,736         2,318      2,108
                                        ---------  ------------  ---------
   TOTAL ASSETS                         $ 768,111  $    709,954  $ 745,954
                                        =========  ============  =========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
 Deposit accounts:
   Noninterest-bearing demand deposits  $  37,323  $     38,643  $  36,006
   Interest-bearing demand deposits       142,820       127,659    135,835
   Savings deposits                        24,524        23,116     23,486
   Certificates of deposit                191,439       215,191    226,891
                                        ---------  ------------  ---------
     Total deposit accounts               396,106       404,609    422,218

   Advances by borrowers for taxes and
    insurance                               1,429         1,605      1,772
   Interest payable                           619           731        855
   Deferred compensation                    4,889         4,515      4,242
   FHLB advances                          155,553       180,730    199,495
   Deferred income tax liability              377             -        604
   Other liabilities                        3,768         5,127      5,745
                                        ---------  ------------  ---------
    Total liabilities                     562,741       597,317    634,931

STOCKHOLDERS' EQUITY
   Serial preferred stock, $.01 par value;
    10,000,000 authorized, issued and
    outstanding, none                           -             -          -
   Common stock, $.01 par value;
    90,000,000 authorized, issued and
    outstanding:
     Mar. 31, 2008 - 17,386,517 issued,
      17,343,229 outstanding                  173           152        152
     Sept. 30, 2007 - 15,278,803 issued,
      15,232,243 outstanding
     Mar. 31, 2007 - 15,208,750 issued,
      15,189,019 outstanding
   Additional paid-in capital             156,805        59,613     58,186
   Retained earnings                       59,475        58,795     56,677
   Unearned shares issued to ESOP         (11,634)       (3,698)    (3,918)
   Accumulated other comprehensive loss       551        (2,225)       (74)
                                        ---------  ------------  ---------
    Total stockholders' equity            205,370       112,637    111,023
                                        ---------  ------------  ---------
    TOTAL LIABILITIES AND STOCKHOLDERS'
     EQUITY                             $ 768,111  $    709,954  $ 745,954
                                        =========  ============  =========




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,
                    -------------------------  ---------------------------
                       2008         2007           2008          2007
                    ----------  -------------  ------------  -------------

Interest and dividend income:
 Loan interest      $    7,770  $       8,470  $     15,846  $      16,997
 Investment interest       510             15           774             44
 Mortgage-backed
  security interest      2,148          2,244         4,091          4,550
 FHLB dividends             31              9            50             19
                    ----------  -------------  ------------  -------------
  Total interest and
   dividend income      10,459         10,738        20,761         21,610
                    ----------  -------------  ------------  -------------
Interest expense:
 Deposits                2,872          3,005         6,086          6,015
 FHLB advances           1,810          2,372         3,842          4,735
                    ----------  -------------  ------------  -------------
  Total interest
   expense               4,682          5,377         9,928         10,750
                    ----------  -------------  ------------  -------------
  Net interest income    5,777          5,361        10,833         10,860
Provision for loan
 losses                    378              -           665             71
                    ----------  -------------  ------------  -------------
  Net interest income
   after provision
   for loan losses       5,399          5,361        10,168         10,789
                    ----------  -------------  ------------  -------------
Noninterest income:
 Service charges and
  fees                   2,098          2,222         4,309          4,636
 Gain on sale of loans     162            379           347            677
 Increase in cash
  surrender value of
  bank owned life
  insurance                104             99           208            199
 Loan servicing fees       126            142           253            286
 Mortgage servicing
  rights, net              (75)           (92)         (143)          (175)
 Other                      63             11           108             21
                    ----------  -------------  ------------  -------------
  Total noninterest
   income                2,478          2,761         5,082          5,644
                    ----------  -------------  ------------  -------------
Noninterest expense:
 Compensation and
  benefits               4,053          3,851         7,752          7,865
 Occupancy and
  equipment                760            727         1,471          1,429
 Data processing           531            493         1,053          1,001
 Advertising               271            300           571            596
 Postage and supplies      171            174           321            320
 Professional services     191            215           403            411
 Insurance and taxes       140            106           225            209
 Other                     302            228           485            509
                    ----------  -------------  ------------  -------------
  Total noninterest
   expense               6,419          6,094        12,281         12,340
                    ----------  -------------  ------------  -------------
Income before income
 taxes                   1,458          2,028         2,969          4,093
Income tax expense         513            787         1,077          1,583
                    ----------  -------------  ------------  -------------
  NET INCOME        $      945  $       1,241  $      1,892  $       2,510
                    ==========  =============  ============  =============

Earnings per common
 share:

  Basic             $    0.06   $      0.08(1) $     0.12(1) $      0.15(1)
  Diluted                0.06          0.07(1)       0.12(1)        0.15(1)

Weighted average
 number of shares
 outstanding:

  Basic            15,962,325    16,576,439(1) 16,352,427(1)  16,562,244(1)
  Diluted          15,978,217    16,690,594(1) 16,374,451(1)  16,682,322(1)

Dividends declared
 per share:         $   0.055   $     0.048(1) $    0.103(1) $     0.096(1)


(1) Earnings per share, dividends per share and average common shares
    outstanding have been adjusted to reflect the impact of the second-step
    conversion and reorganization of the Company, which occurred on
    December 19, 2007.




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

                                             At Or For The
                                               Six Months    At Or For The
                                                 Ended         Year Ended
                                             March 31, 2008  Sept. 30, 2007
                                             --------------  -------------
FINANCIAL CONDITION DATA
    Average interest-earning assets          $      706,169  $     703,675
    Average interest-bearing liabilities            530,726        582,936
    Net average earning assets                      175,443        120,739
    Average interest-earning assets to
     average interest-bearing liabilities            133.06%        120.71%
    Stockholders' equity to assets                    26.74          15.87

ASSET QUALITY
    Allowance for loan losses                $        3,307  $       2,988
    Non-performing loans                              1,852          1,531
    Non-performing assets                             2,304          2,080
    Allowance for loan losses to
     non-performing loans                            178.56%        195.17%
    Allowance for loan losses to gross loans           0.69           0.62
    Non-performing loans to gross loans                0.39           0.32
    Non-performing assets to total assets              0.30           0.30


                   At Or For The Three Months  At Or For The Six Months
                         Ended Mar. 31,              Ended Mar. 31,
                   -------------------------  ----------------------------
                      2008         2007           2008           2007
                   ----------  -------------  -------------  -------------
SELECTED PERFORMANCE RATIOS
 Return on average
  assets (1)             0.49%        0.66%          0.51%          0.66%
 Return on average
  equity (1)             1.83         4.47           2.28           4.55
 Net interest
  margin (1)             3.15         3.00           3.07           3.02
 Efficiency
  ratio (2)             77.76        75.03          77.17          74.77

PER SHARE DATA
 Basic earnings
  per share        $     0.06  $      0.08(4) $      0.12(4) $      0.15(4)
 Diluted earnings
  per share              0.06         0.07(4)        0.12(4)        0.15(4)
 Book value per share   11.84         6.43(4)       11.84           6.43(4)
 Cash dividends
  declared per share    0.055        0.048(4)       0.103(4)       0.096(4)
 Average number of
  shares outstanding:
   Basic (3)       15,962,325   16,576,439(4)  16,352,427(4)  16,562,244(4)
   Diluted (3)     15,978,217   16,690,594(4)  16,374,451(4)  16,682,322(4)

(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.
(4) Earnings per share, book value per share, dividends per share and
    average common shares outstanding have been adjusted to reflect the
    impact of the second-step conversion and reorganization of the Company,
    which occurred on December 19, 2007.

Contact Information

  • Contact:
    Home Federal Bancorp, Inc.
    Len E. Williams
    President & CEO
    Robert A. Schoelkoph
    SVP, Treasurer & CFO
    208-466-4634
    www.myhomefed.com