SOURCE: Home Federal Bancorp, Inc.
Home Federal Bancorp, Inc. Announces Fourth Quarter and Annual Earnings
NAMPA, ID--(Marketwire - October 31, 2008) - Home Federal Bancorp, Inc. (the "Company")
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Operating Results
Revenues for the quarter ended September 30, 2008, which consisted of net interest income before the provision for loan losses plus noninterest income, increased 11% to $8.6 million, compared to $7.7 million for the quarter ended September 30, 2007. Net interest income before the provision for loan losses increased 15% to $5.9 million for the quarter ended September 30, 2008 compared to $5.1 million for the same quarter of the prior year. The increase in net interest income is primarily attributable to a decrease in interest expense. Balances of Federal Home Loan Bank borrowings were lower for the quarter ended September 30, 2008 than in the same period of the prior year as maturing advances were repaid with excess liquidity.
Revenues for the fiscal year ended September 30, 2008, increased 2% to $33.1 million, compared to $32.6 million for the same period of last year. Net interest income before the provision for loan losses increased 6% to $22.6 million, compared to $21.3 million for the same period of the prior year.
The Company's net interest margin increased 37 basis points to 3.41% for the quarter ended September 30, 2008, from 3.04% for the same quarter last year. The net interest margin for the fiscal year ended September 30, 2008 increased 18 basis points to 3.21% from 3.03% for the same period a year earlier. The improvement in the net interest margin is primarily attributable to the increase in interest-earning assets during fiscal 2008 that resulted from the proceeds of the Company's second-step conversion and stock offering completed on December 19, 2007. In addition, decreases in interest expense and a shift in the loan portfolio toward higher yielding commercial real estate loans from residential mortgage loans also contributed to the increase in the margin in 2008.
A provision for loan losses of $1.1 million was established by management in connection with its analysis of the loan portfolio for the quarter ended September 30, 2008, compared to $338,000 for the same quarter of the prior year. The provision for loan losses was $2.4 million for the fiscal year ended September 30, 2008, compared to $409,000 for the prior fiscal year. Asset quality performance is discussed further below in this release.
Noninterest income was basically flat year over year at $2.6 million for both the quarters ended September 30, 2008 and 2007. Fee income from deposit accounts increased $51,000 during the fourth quarter of 2008 compared to the fourth quarter of 2007. For the fiscal year ended September 30, 2008, noninterest income decreased 7% to $10.5 million, compared to $11.3 million for the prior fiscal year. A decrease in gain on sale of loans of $655,000 was the primary reason for the decline.
Noninterest expense for the quarter ended September 30, 2008, increased $515,000, or 9%, to $6.0 million, from $5.4 million for the comparable period a year earlier. The Company's efficiency ratio was 69.7% for the quarter ended September 30, 2008, compared to 70.5% for the same quarter a year ago. Compensation and benefit expenses increased $733,000, or 25%, to $3.6 million for the quarter ended September 30, 2008, compared to $2.9 million for the same quarter a year ago. The majority of the increase in compensation expense in 2008 is attributable to higher costs associated with the Bank's employee stock ownership plan, the reversal of incentive accruals in the prior year, and an upward adjustment in accrued vacation in 2008. The efficiency ratio was 73.8% for the fiscal year ended September 30, 2008, compared to 72.5% for the prior fiscal year.
Balance Sheet
Total assets increased 2% to $725.1 million at September 30, 2008, compared to $710.0 million a year earlier. The $15.1 million increase in total assets was primarily attributable to $88.3 million in net proceeds raised from the Company's second-step conversion and stock offering completed on December 19, 2007. This increase was partially offset by decreases in deposits and borrowings during this same period of $31.7 million and $43.8 million, respectively.
Securities. Mortgage-backed securities increased $26.5 million to $188.8 million at September 30, 2008, compared to $162.3 million at September 30, 2007. The increase is attributable to purchases made with proceeds from the Company's second-step conversion and stock offering. Approximately 98% of the Company's mortgage-backed securities were issued by U.S. government sponsored enterprises. The Company does not own subordinated debt or preferred or common equity securities issued by Freddie Mac or Fannie Mae. At September 30, 2008, the Company held $9.6 million of stock in the Federal Home Loan Bank of Seattle.
Loans. Net loans (excluding loans held for sale) at September 30, 2008, decreased 4% to $459.8 million, compared to $480.1 million at September 30, 2007. One- to four-family residential loans represented 45% of the Bank's loan portfolio at September 30, 2008, compared to 52% at September 30, 2007. The Company currently originates conventional one- to four-family residential loans for sale in the secondary market. As a result, the residential loan portfolio will likely continue to decline as new loans are not added to the portfolio. The Company plans to continue its increased emphasis on commercial and small business banking products. Commercial loans, including commercial real estate, multi-family, construction and acquisition and development loans, totaled $198.6 million at September 30, 2008, compared to $187.7 million at September 30, 2007.
Asset Quality. Loans delinquent 30 to 89 days totaled $6.5 million at September 30, 2008, compared to $2.0 million at June 30, 2008, and $2.8 million at September 30, 2007. Non-performing assets and impaired loans totaled $10.6 million or 2% of gross loans at September 30, 2008, compared to $3.5 million at June 30, 2008, and $2.1 million at September 30, 2007. The allowance for loan losses was $4.6 million, or 0.98% of gross loans, at September 30, 2008, compared to $3.0 million, or 0.62% of gross loans, at September 30, 2007. The increase in non-performing and impaired loans is a result of the rapid deterioration of the residential construction market in the Treasure Valley.
The following table summarizes the change in nonperforming and impaired loans from June 30, 2008:
September 30, 2008 June 30, 2008
Loss Loss
(in thousands) Balance Reserve Balance Reserve
--------- --------- ------- -------
Land acquisition and development $ 3,975 $ 916 $ 906 $ 277
One- to four-family construction 4,239 596 458 55
One- to four-family residential 1,701 219 1,381 324
Other 30 2 10 --
--------- --------- ------- -------
Total nonperforming and impaired
loans $ 9,945 $ 1,733 $ 2,755 $ 656
========= ========= ======= =======
Commenting on asset quality, President and Chief Executive Officer Len E. Williams stated, "Clearly we are disappointed with the deterioration in our construction and land development loan portfolios. However, we recognized last year that these portfolios were about to undergo stress, so we increased the monitoring of the performance of all of our construction and land development loans. At September 30, 2008, construction and land development loans comprised 7% of our loan portfolio."
Deposits. Deposits decreased 8% to $372.9 million at September 30, 2008, compared to $404.6 million at September 30, 2007. Demand deposits and savings accounts increased $6.1 million, or 3%, to $195.5 million at September 30, 2008. The increase was a result of growth in money market and non-interest bearing commercial demand deposit accounts. Certificates of deposit decreased $37.8 million, or 18%, to $177.4 million at September 30, 2008, compared to $215.2 million at September 30, 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 Federal Home Loan Bank of Seattle decreased 24% to $137.0 million at September 30, 2008, compared to $180.7 million at September 30, 2007. The decrease resulted from maturing advances being repaid with excess liquidity.
Equity. Stockholders' equity increased $92.6 million, or 82%, to $205.2 million at September 30, 2008, compared to $112.6 million at September 30, 2007. The increase was primarily a result of the $88.3 million in net proceeds received from the second-step conversion and stock offering. The Company sold approximately 9.4 million shares of common stock in its subscription, community and syndicated community offerings and issued approximately 7.1 million shares of common stock in exchange for the previously outstanding shares of the Bank's former mid-tier holding company. A portion of the offering proceeds was used to fund a loan to the Company's 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 $4.0 million in net income, the allocation of earned ESOP shares, equity compensation and the exercise of stock options totaling $2.4 million, and an $826,000 decrease in unrealized losses on securities available for sale, offset by $3.0 million in cash dividends paid to stockholders. The Company's book value per share as of September 30, 2008 was $11.81 per share based upon 17,374,161 outstanding shares of common stock.
Commentary on the Troubled Asset Relief Program (TARP)
On October 24, 2008, the Company's Board of Directors passed a resolution that stated the Company will not participate in the U.S. Treasury Department's Capital Purchase Program under the TARP. Mr. Williams commented, "In December 2007, we raised $88.3 million of common stock for Home Federal Bancorp, Inc., through our second-step conversion. At September 30, 2008, Home Federal Bank's risk based capital ratio was 32.8%. We do not intend to apply for government assistance through the TARP Capital Purchase Program. We believe our high capital level and liquid balance sheet provides us flexibility in today's environment to execute our organic growth and acquisition plans without TARP capital."
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 15 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. These forward-looking statements relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding the Company's mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. 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, the credit risk of lending activities, including changes in the level and trend of loan delinquencies and write-offs; results of examinations by our banking regulators, 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) September September
(Unaudited) 30, 2008 30, 2007
----------- -----------
ASSETS
Cash and amounts due from depository
institutions $ 23,270 $ 20,588
Certificates of deposit in correspondent bank 5,000 -
Mortgage-backed securities available for
sale, at fair value 188,787 162,258
Federal Home Loan Bank ("FHLB") stock, at cost 9,591 9,591
Loans receivable, net of allowance for loan
losses of $4,579 and $2,988 459,813 480,118
Loans held for sale 2,831 4,904
Accrued interest receivable 2,681 2,804
Property and equipment, net 15,246 12,364
Mortgage servicing rights, net 1,707 2,047
Bank owned life insurance 11,590 11,168
Real estate and other property owned 650 549
Deferred income tax asset 1,770 1,245
Other assets 2,134 2,318
----------- -----------
TOTAL ASSETS $ 725,070 $ 709,954
=========== ===========
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposit accounts:
Noninterest-bearing demand deposits $ 41,398 $ 38,643
Interest-bearing demand deposits 127,714 127,659
Savings deposits 26,409 23,116
Certificates of deposit 177,404 215,191
----------- -----------
Total deposit accounts 372,925 404,609
Advances by borrowers for taxes and insurance 1,386 1,605
Interest payable 552 731
Deferred compensation 5,191 4,515
FHLB advances 136,972 180,730
Other liabilities 2,857 5,127
----------- -----------
Total liabilities 519,883 597,317
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:
Sept. 30, 2008 - 17,412,449 issued,
17,374,161 outstanding 174 152
Sept. 30, 2007 - 15,278,803 issued,
15,232,243 outstanding
Additional paid-in capital 157,205 59,613
Retained earnings 59,814 58,795
Unearned shares issued to ESOP (10,606) (3,698)
Accumulated other comprehensive loss (1,400) (2,225)
----------- -----------
Total stockholders’ equity 205,187 112,637
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 725,070 $ 709,954
=========== ===========
HOME FEDERAL BANCORP, INC. AND
SUBSIDIARY CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except
share data) Three Months Ended
(Unaudited) September 30, Year Ended September 30,
----------------------- -------------------------
2008 2007 2008 2007
---------- ----------- ----------- -----------
Interest and
dividend income:
Loan interest $ 7,296 $ 8,222 $ 30,686 $ 33,553
Investment
interest 121 122 1,012 345
Mortgage-backed
security
interest 2,279 2,019 8,742 8,692
FHLB dividends 33 15 143 48
---------- ----------- ----------- -----------
Total interest
and dividend
income 9,729 10,378 40,583 42,638
---------- ----------- ----------- -----------
Interest expense:
Deposits 2,170 3,133 10,685 12,279
FHLB advances 1,656 2,115 7,250 9,057
---------- ----------- ----------- -----------
Total interest
expense 3,826 5,248 17,935 21,336
---------- ----------- ----------- -----------
Net interest
income 5,903 5,130 22,648 21,302
Provision for loan
losses 1,114 338 2,431 409
---------- ----------- ----------- -----------
Net interest
income after
provision for
loan losses 4,789 4,792 20,217 20,893
---------- ----------- ----------- -----------
Noninterest
income:
Service charges
and fees 2,346 2,329 9,077 9,308
Gain on sale
of loans 204 251 764 1,419
Increase in cash
surrender value
of bank owned
life insurance 107 104 421 405
Loan servicing
fees 115 129 484 549
Mortgage
servicing
rights, net (134) (222) (340) (445)
Other 9 5 84 45
---------- ----------- ----------- -----------
Total
noninterest
income 2,647 2,596 10,490 11,281
---------- ----------- ----------- -----------
Noninterest
expense:
Compensation
and benefits 3,619 2,886 15,211 14,249
Occupancy and
equipment 765 726 3,007 2,871
Data
processing 530 548 2,198 2,097
Advertising 257 487 1,043 1,427
Postage and
supplies 149 163 617 650
Professional
services 255 236 788 856
Insurance and
taxes 150 106 533 429
Other 233 291 1,042 1,057
---------- ----------- ----------- -----------
Total
noninterest
expense 5,958 5,443 24,439 23,636
---------- ----------- ----------- -----------
Income before
income taxes 1,478 1,945 6,268 8,538
Income tax expense 484 750 2,263 3,267
---------- ----------- ----------- -----------
NET INCOME $ 994 $ 1,195 $ 4,005 $ 5,271
========== =========== =========== ===========
Earnings per
common share:
Basic $ 0.06 $ 0.07(1) $ 0.25(1) $ 0.32(1)
Diluted 0.06 0.07(1) 0.25(1) 0.31(1)
Weighted average
number of shares
outstanding:
Basic 16,042,720 16,665,710(1) 16,233,200(1) 16,602,082(1)
Diluted 16,078,302 16,737,825(1) 16,252,747(1) 16,767,219(1)
Dividends declared
per share: $ 0.055 $ 0.048(1) $ 0.213(1)$ 0.194(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.
At Or For At Or For
HOME FEDERAL BANCORP, INC. AND SUBSIDIARY The Year The Year
ADDITIONAL FINANCIAL INFORMATION (Dollars in Ended Sept. Ended Sept.
thousands, except share data) (Unaudited) 30, 2008 30, 2007
----------- -----------
FINANCIAL CONDITION DATA
Average interest-earning assets $ 705,794 $ 703,675
Average interest-bearing liabilities 512,061 582,936
Net average earning assets 193,733 120,739
Average interest-earning assets to
average interest-bearing liabilities 137.83% 120.71%
Stockholders’ equity to assets 28.30 15.87
ASSET QUALITY
Allowance for loan losses $ 4,579 $ 2,988
Non-performing loans 9,945 1,531
Non-performing assets 10,596 2,080
Allowance for loan losses to non-performing
loans 46.04% 195.17%
Allowance for loan losses to gross loans 0.98 0.62
Non-performing loans to gross loans 2.14 0.32
Non-performing assets to total assets 1.46 0.29
At Or For The Three At Or For The Year
Months Ended Sept. 30, Ended Sept. 30,
----------------------- --------------------------
2008 2007 2008 2007
---------- ----------- ----------- -----------
SELECTED PERFORMANCE
RATIOS
Return on average
assets (1) 0.54% 0.67% 0.54% 0.71%
Return on average
equity (1) 1.94 4.27 2.16 4.75
Pre-tax,
pre-provision
return on
average assets(5) 1.42 1.28 1.17 1.21
Net interest
margin (1) 3.41 3.04 3.21 3.03
Efficiency
ratio (2) 69.68 70.46 73.75 72.54
PER SHARE DATA
Basic earnings
per share $ 0.06 $ 0.07(4) $ 0.25(4) $ 0.32(4)
Diluted earnings
per share 0.06 0.07(4) 0.25(4) 0.31(4)
Book value per
share 11.81 6.51(4) 11.81 6.51(4)
Cash dividends
declared per
share 0.055 0.048(4) 0.213(4) 0.194(4)
Average number
of shares
outstanding:
Basic (3) 16,042,720 16,665,710(4) 16,233,200(4) 16,602,082(4)
Diluted (3) 16,078,302 16,737,825(4) 16,252,747(4) 16,767,219(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.
(5) Income before income taxes plus provision for loan losses divided
by average assets for the period presented.
Home Federal Bancorp, Inc.
Len E. Williams
President & CEO
Eric S. Nadeau
EVP, Treasurer & CFO
208-466-4634
www.myhomefed.com