SOURCE: Home Federal Bancorp, Inc.

July 19, 2006 12:30 ET

Home Federal Bancorp, Inc. Announces Third Quarter Earnings

NAMPA, ID -- (MARKET WIRE) -- July 19, 2006 -- Home Federal Bancorp, Inc. (the "Company") (NASDAQ: HOME), the parent company of Home Federal Bank (the "Bank"), today reported net income of $1.6 million, or $0.11 per diluted share, for the quarter ended June 30, 2006, compared to $1.8 million, or $0.12 per diluted share, for the same period a year ago. Net income for the nine months ended June 30, 2006 was $4.6 million, or $0.31 per diluted share, compared to $3.5 million, or $0.24 per diluted share, for the same nine-month period a year ago. Results for the nine months ended June 30, 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 $4.4 million, or $0.30 per diluted share, for the nine months ended June 30, 2005.

"Our performance this quarter reflects steady loan and core deposit growth and continued quality of the loan portfolio despite a challenging interest rate environment as a result of the continued flat yield curve," said Daniel L. Stevens, Chairman and CEO. "During the quarter ended June 30, 2006, we experienced a 19% increase in interest and dividend income, net loans increased 14% and deposits were up 15%, 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 nine months ended June 30, 2006 and 2005 exclusive of the sale of the branch and the contribution to the Foundation, as adjusted for federal and state taxes (in thousands, except per share data):

                                Nine Months Ended
                                     June 30,
                                -----------------
                                  2006      2005
                                --------  -------
                                    (unaudited)
Pro forma disclosure
  Net income, as reported        $ 4,554  $ 3,546
  Sale of branch                       -     (386)
  Contribution to Foundation           -    1,825
  Federal and state income
   taxes                               -     (561)
                                 -------  -------
  Pro forma net income           $ 4,554  $ 4,424
                                 =======  =======
Earnings per share
  Diluted as reported            $  0.31  $  0.24
  Pro forma diluted              $  0.31  $  0.30

Third Quarter Highlights (at or for the periods ended June 30, 2006 compared to June 30, 2005):

--  Interest and dividend income increased 19% to $10.4 million
--  Noninterest income increased 13% to $3.1 million
--  Total assets increased 11% to $756.7 million
--  Net loans increased 14% to $494.0 million
--  Deposits increased 15% to $439.5 million
--  Non-performing assets decreased to $30,000 or 0.004% of total assets
    
Operating Results

Revenues for the quarter ended June 30, 2006, which consisted of net interest income before the provision for loan losses plus noninterest income, increased 7% to $8.8 million for the quarter, compared to $8.3 million for the quarter ended June 30, 2005. Net interest income before the provision for loan losses increased 3% to $5.8 million for the quarter ended June 30, 2006, compared to $5.6 million for the same quarter of the prior year.

Revenues for the nine months ended June 30, 2006 increased 9% to $25.8 million, compared to $23.6 million for the same period of last year. Net interest income before the provision for loan losses increased 8% to $17.4 million, compared to $16.1 million for the same period of last year.

For the quarter ended June 30, 2006, net interest income after provision for loan losses increased 3% to $5.6 million, compared to $5.5 million for the same quarter a year ago. A provision for loan losses of $175,000 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 $161,000 established for the same quarter of the prior year. Net interest income after provision for loan losses for the nine months ended June 30, 2006 increased 9% to $17.1 million, compared to $15.6 million for the same period of the prior year.

The Company's net interest margin decreased 39 basis points to 3.25% for the quarter ended June 30, 2006, from 3.64% for the same quarter last year. The net interest margin for the nine months ended June 30, 2006 decreased 20 basis points to 3.41% from 3.61% for the same period a year earlier. The decline in the 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 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 increased 13% to $3.1 million for the quarter ended June 30, 2006, compared to $2.7 million for the same quarter a year ago. The increase was primarily attributable to a $246,000, or an 11%, increase in service charges and fees and a $201,000 write-up of the value of the mortgage servicing rights. This compares to a $200,000 write-down of the value of the mortgage servicing rights for the quarter ended June 30, 2005. Other noninterest income for the quarter ended June 30, 2005 included a $456,000 gain from life insurance proceeds, which was not experienced in the quarter ended June 30, 2006. For the nine months ended June 30, 2006, noninterest income increased 11% to $8.3 million, compared to $7.6 million for the same period of the prior year. Increases in service charges and gain on sale of loans of $836,000 and $592,000 account for the majority of the increase. Other noninterest income for the nine months ended June 30, 2005 included a $386,000 gain on the sale of a former branch and a $456,000 gain from life insurance proceeds, which was not experienced in the quarter ended June 30, 2006.

Noninterest expense for the quarter ended June 30, 2006 increased 11% to $6.1 million, from $5.5 million for the comparable period a year earlier. Compensation and benefits increased $657,000 to $3.9 million for the quarter ended June 30, 2006 as compared to $3.2 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 ownership plan ("ESOP"), 2005 Recognition and Retention Plan ("RRP") and 2005 Stock Option and Incentive Plan. The efficiency ratio was 69.3% for the quarter ended June 30, 2006 compared to 66.8% 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 nine months ended June 30, 2006 increased 1% to $18.1 million, compared to $17.8 million for the nine months ended June 30, 2005. Noninterest expense for the nine months ended June 30, 2005 included the $1.8 million contribution to the Foundation. Compensation and benefits increased $2.1 million to $11.4 million for the nine months ended June 30, 2006 as compared to $9.3 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 70.1% for the nine months ended June 30, 2006 compared to 75.3% 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 68.7% for the nine months ended June 30, 2005.

Balance Sheet Growth

Total assets increased 11% to $756.7 million at June 30, 2006 compared to $679.2 million a year earlier. Net loans (excluding loans held for sale) at June 30, 2006 increased 14% to $494.0 million, compared to $433.9 million at June 30, 2005. Single family loans represented 63% of the Bank's loan portfolio at June 30, 2006, compared to 61% at June 30, 2005. Commercial real estate loans accounted for 27% of the Bank's loan portfolio at June 30, 2006, compared to 29% at June 30, 2005.

Credit quality remains exceptional, as non-performing assets were $30,000, or 0.004% of total assets, at June 30, 2006, compared to $1.1 million, or 0.15% of total assets, at June 30, 2005. The allowance for loan losses was $3.2 million, or 0.63% of gross loans, including loans held for sale, at June 30, 2006 compared to $2.9 million, or 0.66% of gross loans, including loans held for sale, at June 30, 2005.

Deposits increased 15% to $439.5 million at June 30, 2006 compared to $381.1 million at June 30, 2005. Noninterest-bearing demand deposits increased $7.8 million, or 19%, to $48.8 million at June 30, 2006, compared to $41.0 million at June 30, 2005. Interest-bearing demand deposits increased $6.0 million, or 5%, to $132.7 million at June 30, 2006, compared to $126.7 million at June 30, 2005. Certificates of deposit increased $45.5 million, or 24%, to $233.6 million at June 30, 2006, compared to $188.1 million at June 30, 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 9% to $197.7 million at June 30, 2006 compared to $181.7 million at June 30, 2005. The Company utilizes advances from the FHLB as an alternative funding source to retail deposits in order to manage funding costs, reduce interest rate risk and to leverage the Balance Sheet.

Stockholders' equity increased $2.3 million to $106.0 million at June 30, 2006, compared to $103.7 million at June 30, 2005. The increase was primarily the result of $6.3 million in net income for the period, $686,000 in earned ESOP shares and $623,000 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 June 30, 2006 was $7.00 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 Global Market under the symbol "HOME." The Company's stock is also included in the America's Community Bankers NASDAQ Index. For more information, visit the Company's web site at www.myhomefed.com.

Forward-Looking Statements:

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



HOME FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)           June 30,   Sep. 30,   June 30,
         (Unaudited)                          2006       2005       2005
                                           ---------  ---------  ---------
ASSETS

  Cash and amounts due from
   depository institutions                 $  14,358  $  19,033  $  21,577
  Mortgage-backed securities available
   for sale, at fair value                    12,678     14,830     17,910
  Mortgage-backed securities held to
   maturity, at cost                         190,273    180,974    164,337
  Federal Home Loan Bank stock, at cost        9,591      9,591      9,591
  Loan receivable, net of allowance for
   loan losses of $3,160, $2,882 and
   $2,903                                    494,016    430,944    433,892
  Loans held for sale                          5,065      5,549      3,521
  Accrued interest receivable                  2,984      2,458      2,337
  Property and equipment, net                 13,118     11,995     11,226
  Mortgage servicing rights, net               2,624      2,671      2,752
  Bank owned life insurance                   10,665     10,099     10,009
  Real estate and other property owned             -        534        604
  Other assets                                 1,306        899      1,467
                                           ---------  ---------  ---------
    TOTAL ASSETS                           $ 756,678  $ 689,577  $ 679,223
                                           =========  =========  =========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposit accounts
    Noninterest-bearing demand deposits    $  48,798  $  46,311  $  40,980
    Interest-bearing demand deposits         132,652    127,330    126,704
    Savings deposits                          24,398     25,219     25,375
    Certificates of deposit                  233,622    197,465    188,052
                                           ---------  ---------  ---------
      Total deposit accounts                 439,470    396,325    381,111

    Advances by borrowers for taxes
     and insurance                             1,096      3,898      2,053
    Interest payable                             978      1,670      1,648
    Deferred compensation                      3,634      3,049      2,867
    Federal Home Loan Bank advances          197,722    175,932    181,750
    Deferred income tax liability                782      1,205      1,548
    Other liabilities                          6,989      6,131      4,505
                                           ---------  ---------  ---------
      Total liabilities                      650,671    588,210    575,482

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:
      June 30, 2006 - 15,208,750 issued,
       15,154,114 outstanding                    152        149        152
      Sept. 30, 2005 - 15,208,750 issued,
       14,910,658 outstanding
      June 30, 2005 - 15,208,750 issued,
       15,208,750 outstanding
    Additional paid-in capital                56,923     56,115     59,909
    Retained earnings                         53,462     49,818     48,359
    Unearned shares issued to employee
     stock ownership plan                     (4,240)    (4,550)    (4,635)
    Accumulated other comprehensive loss        (290)      (165)       (44)
                                           ---------  ---------  ---------
      Total stockholders' equity             106,007    101,367    103,741
                                           ---------  ---------  ---------
      TOTAL LIABILITIES AND STOCKHOLDERS'
       EQUITY                              $ 756,678  $ 689,577  $ 679,223
                                           =========  =========  =========





HOME FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except          Three Months Ended      Nine Months Ended
 share data)(Unaudited)             June 30,               June 30,
                            ----------------------- ----------------------
                               2006        2005        2006        2005
                            ----------- ----------  ----------  ----------

Interest and dividend
 income:
    Loan interest           $     7,896 $    6,666  $   21,959  $   19,050
    Investment interest              43         11         114         271
    Mortgage-backed
     security interest            2,448      2,071       7,220       5,479
    Federal Home Loan Bank
     dividends                        -          -           -          30
                            ----------- ----------  ----------  ----------
      Total interest and
       dividend income           10,387      8,748      29,293      24,830
                            ----------- ----------  ----------  ----------

Interest expense:
    Deposits                      2,493      1,602       6,187       4,492
    Federal Home Loan Bank
     advances                     2,100      1,531       5,696       4,240
                            ----------- ----------  ----------  ----------
      Total interest expense      4,593      3,133      11,883       8,732
                            ----------- ----------  ----------  ----------
      Net interest income         5,794      5,615      17,410      16,098
Provision for loan losses           175        161         320         456
                            ----------- ----------  ----------  ----------
      Net interest income
       after provision for
       loan losses                5,619      5,454      17,090      15,642
                            ----------- ----------  ----------  ----------

Noninterest income:
    Service charges and
     fees                         2,392      2,146       6,893       6,057
    Gain on sale of loans           288         62         794         202
    Increase in cash
     surrender value of
     bank owned life
     insurance                       95         91         285         253
    Loan servicing fees             151        166         470         506
    Mortgage servicing
     rights, net                    113       (245)        (47)       (399)
    Other                            14        472         (52)        931
                            ----------- ----------  ----------  ----------
      Total noninterest
       income                     3,053      2,692       8,343       7,550
                            ----------- ----------  ----------  ----------

Noninterest expense:
    Compensation and
     benefits                     3,852      3,195      11,428       9,344
    Occupancy and equipment         651        690       2,073       2,091
    Data processing                 503        427       1,364       1,246
    Advertising                     269        239         740         889
    Postage and supplies            196        186         616         584
    Professional services           278        276         641         698
    Insurance and taxes             106         91         320         241
    Charitable contribution
     to Foundation                    -          -           -       1,825
    Other                           276        442         880         878
                            ----------- ----------  ----------  ----------
      Total noninterest
       expense                    6,131      5,546      18,062      17,796
                            ----------- ----------  ----------  ----------
Income before income taxes        2,541      2,600       7,371       5,396
Income tax expense                  980        802       2,817       1,850
                            ----------- ----------  ----------  ----------
      NET INCOME            $     1,561 $    1,798  $    4,554  $    3,546
                            =========== ==========  ==========  ==========

Earnings per common share:
      Basic                 $      0.11 $     0.12  $     0.31  $     0.24
      Diluted               $      0.11 $     0.12  $     0.31  $     0.24

Weighted average number of
 shares outstanding:
      Basic                  14,491,205 14,735,474  14,478,701  14,725,923
      Diluted                14,563,609 14,735,474  14,503,587  14,725,923

Dividends declared per
 share:                     $     0.055 $    0.050  $    0.160  $    0.050







HOME FEDERAL BANCORP, INC. AND SUBSIDIARY
ADDITIONAL FINANCIAL INFORMATION             At Or For The    At Or For
(Dollars in thousands, except share data)  Nine Months Ended The Year Ended
(Unaudited)                                 June 30, 2006    Sept. 30, 2005
                                            -------------     -------------

FINANCIAL CONDITION DATA
 Average interest-earning assets              $   680,894      $   606,690
 Average interest-bearing liabilities             554,216          501,124
 Net average earning assets                       126,678          105,566
 Average interest-earning assets to average
  interest-bearing liabilities                     122.86%          121.07%
 Stockholders' equity to assets                     14.01%           14.70%

ASSET QUALITY
 Allowance for loan losses                    $      3,160     $     2,882
 Non-performing loans                                   30             478
 Non-performing assets                                  30           1,012
 Allowance for loan losses to non-
  performing loans                               10,533.33%         602.93%
 Allowance for loan losses to gross
  loans and loans held for sale                       0.63%           0.66%
 Non-performing loans to gross loans and
  loans held for sale                                0.006%           0.11%
 Non-performing assets to total assets               0.004%           0.15%




                      At Or For The Three Months  At Or For The Nine Months
                           Ended June 30,                  Ended June 30,
                      --------------------------  -------------------------
                                 2006       2005          2006        2005
                                 ----       ----          ----        ----

SELECTED PERFORMANCE RATIOS
  Return on average assets (1)   0.83%      1.10%         0.85%       0.75%
  Return on average equity (1)   5.89%      6.92%         5.81%       5.30%
  Net interest margin (1)        3.25%      3.64%         3.41%       3.61%
  Efficiency ratio (2)          69.30%     66.76%        70.14%      75.25%
  Efficiency ratio, excluding
   non-recurring items (2)      69.30%     66.76%        70.14%      68.66%

PER SHARE DATA
  Basic earnings per share      $0.11       $0.12        $0.31       $0.24
  Diluted earnings per share     0.11        0.12         0.31        0.24
  Book value per share           7.00        6.82         7.00        6.82
  Cash dividends declared per
   share                        0.055       0.050        0.160       0.050
  Average number of shares
   outstanding:
    Basic (3)              14,491,205  14,735,474   14,478,701  14,725,923
    Diluted (3)            14,563,609  14,735,474   14,503,587  14,725,923

(1)   Amounts are annualized.
(2)   Noninterest expense divided by net interest income plus noninterest
      income. The pro forma efficiency ratio for the nine months ended June
      30, 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