HOMF Home Federal Bancorp (MM)

COLUMBUS, Ind., April 22 /PRNewswire-FirstCall/ -- Home Federal Bancorp (the "Company") (NASDAQ:HOMF), the holding company of Indiana Bank and Trust Company of Columbus, Indiana (the "Bank"), today announced quarterly earnings of $1,419,000 or $0.42 diluted earnings per common share compared to $1,089,000 or $0.30 diluted earnings per common share a year earlier. Net income for the prior year included a pre-tax charge of $788,000 related to a previously disclosed employee termination which was recorded in miscellaneous expense. Excluding the impact of this one-time charge, net income for the prior year would have been $1,565,000 or $0.43 diluted earnings per share. The decrease in net income compared to the prior year was primarily due to a 20 basis point decrease in net interest margin as well as additional expenses associated with the Bank's name change during the first quarter. The Company incurred approximately $100,000 in one time costs associated with the change of the Bank's name to Indiana Bank and Trust Company - primarily office supplies and expensing costs of signage. Total loans increased $2.9 million for the quarter. The growth in the loan portfolio was primarily the result of an increase in commercial and commercial mortgage loans to new and existing customers in our central Indiana markets which increased $14.2 million for the quarter. Chairman and CEO John Keach, Jr. stated, "While market conditions continue to present us with new challenges, we continue to focus on executing our plan to enhance shareholder value." Executive Vice President and CFO Mark Gorski added, "The current interest rate environment is tough on net interest margin, but commercial loan growth continues to be strong." Balance Sheet Total assets were $920.1 million as of March 31, 2008, an increase of $11.3 million from December 31, 2007. Total loans increased $2.9 million for the quarter. The growth in the loan portfolio was primarily the result of an increase in commercial and commercial mortgage loans which totaled $14.2 million for the quarter. The increase in commercial loans has been partially offset by a decrease in residential mortgage loans and consumer loans. Residential mortgage loans decreased $5.9 million for the quarter as substantially all new mortgage loan originations are being sold in the secondary market. Consumer loans decreased $5.5 million for the quarter due primarily to a reduction in home equity and second mortgage loans and a continued run off of indirect automobile loans as the Bank discontinued the origination of indirect automobile loans during 2006. Total retail deposits decreased $2.3 million for the quarter. During the quarter, public fund interest checking account balances decreased $15.0 million while all other retail deposit categories in total increased $12.7 million including growth of $11.4 million in certificates of deposit and growth of $8.7 million in non-interest checking accounts. Total FHLB borrowings increased $12.4 million for the quarter. The increase in FHLB borrowings during the quarter was done in anticipation of future funding needs within the commercial loan business. As of March 31, 2008, shareholders' equity was $68.5 million. The return on average assets for the quarter was 0.62% while the return on average equity for the year was 8.33%. Asset Quality Provision for loan losses increased $80,000 to $360,000 for the quarter. The increase in provision for loan losses was primarily due to increases in commercial loans as well as increases in non-performing loans. Net charge offs were $289,000 for the first quarter representing an annualized net charge off ratio of 0.15% compared to net charge offs of $175,000 representing an annualized net charge off ratio of 0.10% for the first quarter of 2007. Non- performing assets to total assets increased to 1.38% at March 31, 2008 from 1.29% at December 31, 2007. Non-performing loans to total gross loans increased to 1.61% at March 31, 2008 from 1.51% at December 31, 2007. The ratio of the allowance for loan losses to total loans was 0.93% at March 31, 2008 compared to 0.92% at December 31, 2007. Net Interest Income Net interest income increased $87,000 or 1.3% to $6.9 million for the quarter. Net interest margin for the quarter was 3.24%, which represented a decrease of 20 basis points compared to the first quarter of 2007 and a 14 basis point decrease compared to the fourth quarter of 2007. The decrease in net interest margin for the quarter was primarily the result of a significant reduction in interest rates during the first quarter. The decline in interest rates resulted in a reduction of 2.0% in the Bank's prime rate. As the Bank has more interest earning assets tied to indices that reprice immediately than it does interest bearing liabilities, the impact of the sharp reduction in interest rates caused a decrease in net interest margin. Non Interest Income Non interest income increased $177,000 or 6.1% for the quarter. Gain on sale of loans increased $93,000 for the quarter and service fees on deposits accounts increased $40,000 or 2.8% for the first quarter. The increase in the gain on sale of loans resulted primarily from increased origination volumes from our Indianapolis market which were sold in the secondary market. Non Interest Expenses Non interest expenses decreased $383,000 to $7.4 million for the first quarter. Excluding the one-time employee related expense incurred in the first quarter of 2007, non interest expenses increased $405,000 or 5.8% for the quarter. Compensation and employee benefits expense increased $151,000 or 3.7% for the year due to additional salary and incentive compensation expense for the new commercial lending and commercial credit staff in Indianapolis, an increase in the Company match on the 401(k) and normal annual salary increases. Effective January 1, 2008, the Company increased the maximum 401(k) match to 50% of an employee's 401(k) contribution, up to a maximum contribution of 3.0% of salary. This change is expected to increase expense by approximately $30,000 per quarter compared to the prior year. In addition, the Company has chosen to freeze its defined benefit pension plan effective April 1, 2008 which is expected to decrease expense by approximately $100,000 in the second quarter of 2008 and approximately $150,000 in the third and fourth quarters of 2008 compared to the expense recorded in the first quarter. Marketing expense increased $149,000 for the quarter compared to the first quarter of 2007 due to the timing of advertising associated with the name change. The Company anticipates total marketing cost for 2008 to approximate the average marketing expense over the previous 2 years. Stock Repurchase Programs In January 2008, the Board of Directors approved the thirteenth repurchase, from time to time, on the open market of up to 5% of the Company's outstanding shares of common stock, without par value ("Common Stock"), or 168,498 such shares. Such purchases will be made subject to market conditions in open market or block transactions. Management believes that the purchase of these shares will help increase long term shareholder value by increasing earnings per share and return on equity. The Company repurchased 11,886 shares under this plan during the first quarter. Home Federal Bancorp is a bank holding company registered with the Board of Governors of the Federal Reserve System (the "Federal Reserve"), which has been authorized by the Federal Reserve to engage in activities permissible for a financial holding company. Indiana Bank and Trust Company, its principal subsidiary, is an FDIC insured state chartered commercial bank. Indiana Bank and Trust Company was founded in 1908 and offers a wide range of consumer and commercial financial services through 19 branch offices in central and southeastern Indiana. Forward-Looking Statement This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward- looking statements include expressions such as "expects," "intends," "believes," and "should," which are necessarily statements of belief as to the expected outcomes of future events. Actual results could materially differ from those presented. Home Federal Bancorp undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release. The Company's ability to predict future results involves a number of risks and uncertainties, some of which have been set forth in the Company's most recent annual report on Form 10-K, which disclosures are incorporated by reference herein. HOME FEDERAL BANCORP CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (unaudited) March 31, December 31, 2008 2007 Assets: Cash and due from banks $49,742 $40,552 Securities available for sale at fair value (amortized cost $63,055 and $62,551) 63,697 62,306 Securities held to maturity at amortized cost (fair value $1,567 and $1,558) 1,554 1,557 Loans held for sale (fair value $6,373 and $7,250) 6,251 7,112 Portfolio loans: Commercial loans 209,392 207,590 Commercial mortgage loans 281,431 269,035 Residential mortgage loans 136,601 142,481 Second and home equity loans 100,206 103,560 Other consumer loans 25,191 27,345 Unearned income (106) (165) Total portfolio loans 752,715 749,846 Allowance for loan losses (7,043) (6,972) Portfolio loans, net 745,672 742,874 Premises and equipment 15,425 15,599 Accrued interest receivable 4,111 4,670 Goodwill 1,875 1,875 Other assets 31,794 32,261 TOTAL ASSETS $920,121 $908,806 Liabilities and Shareholders' Equity: Liabilities: Deposits: Demand $78,408 $69,728 Interest checking 92,330 103,624 Savings 41,135 37,513 Money market 171,099 185,803 Certificates of deposits 312,560 301,146 Retail deposits 695,532 697,814 Brokered deposits 9,179 9,174 Public fund certificates 2,632 563 Wholesale deposits 11,811 9,737 Total deposits 707,343 707,551 FHLB borrowings 111,791 99,349 Short term borrowings 30 20 Junior subordinated debt 15,464 15,464 Accrued taxes, interest and expense 2,506 2,981 Other liabilities 14,472 15,987 Total liabilities 851,606 841,352 Commitments and Contingencies Shareholders' equity: No par preferred stock; Authorized: 2,000,000 shares Issued and outstanding: None No par common stock; Authorized: 15,000,000 shares Issued and outstanding: 3,358,079 and 3,369,965 20,301 20,305 Retained earnings, restricted 48,568 48,089 Accumulated other comprehensive loss, net (354) (940) Total shareholders' equity 68,515 67,454 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $920,121 $908,806 **** MORE **** HOME FEDERAL BANCORP CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share data) (unaudited) Three Months Ended March 31, 2008 2007 Interest Income: Short term investments $301 $433 Securities 684 644 Commercial loans 3,421 3,312 Commercial mortgage loans 4,501 3,880 Residential mortgage loans 2,350 2,713 Second and home equity loans 1,681 1,871 Other consumer loans 507 588 Total interest income 13,445 13,441 Interest Expense: Checking and savings accounts 362 517 Money market accounts 1,077 1,313 Certificates of deposit 3,475 3,439 Total interest on retail deposits 4,914 5,269 Brokered deposits 111 252 Public funds 23 7 Total interest on wholesale deposits 134 259 Total interest on deposits 5,048 5,528 FHLB borrowings 1,262 837 Other borrowings - 2 Junior subordinated debt 245 271 Total interest expense 6,555 6,638 Net interest income 6,890 6,803 Provision for loan losses 360 280 Net interest income after provision for loan losses 6,530 6,523 Non Interest Income: Gain on sale of loans 403 310 Investment advisory services 471 437 Service fees on deposit accounts 1,495 1,455 Loan servicing income, net of impairment 125 143 Miscellaneous 590 562 Total non interest income 3,084 2,907 Non Interest Expenses: Compensation and employee benefits 4,269 4,118 Occupancy and equipment 1,056 978 Service bureau expense 456 391 Marketing 355 206 Miscellaneous 1,279 2,105 Total non interest expenses 7,415 7,798 Income before income taxes 2,199 1,632 Income tax provision 780 543 Net Income $1,419 $1,089 Basic earnings per common share $0.42 $0.30 Diluted earnings per common share $0.42 $0.30 Basic weighted average number of shares 3,364,463 3,583,844 Dilutive weighted average number of shares 3,375,275 3,681,854 Dividends per share $0.200 $0.200 **** MORE ***** Supplemental Data: Three Months Ended March 31, (unaudited) 2008 2007 Weighted average interest rate earned on total interest-earning assets 6.31% 6.80% Weighted average cost of total interest-bearing liabilities 3.16% 3.49% Interest rate spread during period 3.15% 3.31% Net interest margin (net interest income divided by average interest-earning assets on annualized basis) 3.24% 3.44% Total interest income divided by average total assets (on annualized basis) 5.84% 6.20% Total interest expense divided by average total assets (on annualized basis) 2.86% 3.11% Net interest income divided by average total assets (on annualized basis) 2.99% 3.14% Return on assets (net income divided by average total assets on annualized basis) 0.62% 0.50% Return on equity (net income divided by average total equity on annualized basis) 8.33% 6.17% March 31, December 31, 2008 2007 Book value per share outstanding $20.40 $20.02 Nonperforming Assets: Loans: Non-accrual $10,399 $10,516 Past due 90 days or more 238 64 Restructured 1,615 874 Total nonperforming loans 12,252 11,454 Real estate owned, net 402 286 Other repossessed assets, net 7 25 Total Nonperforming Assets $12,661 $11,765 Nonperforming assets divided by total assets 1.38% 1.29% Nonperforming loans divided by total loans 1.61% 1.51% Balance in Allowance for Loan Losses $7,043 $6,972 DATASOURCE: Home Federal Bancorp CONTACT: John K. Keach, Jr., Chairman, Chief Executive Officer, +1-812-373-7816; or Mark T. Gorski, Executive Vice President, +1-812-373-7379 Web site: http://www.homf.com/

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