HOMF Home Federal Bancorp (MM)

COLUMBUS, Ind., July 24 /PRNewswire-FirstCall/ -- Home Federal Bancorp (the "Company") (NASDAQ:HOMF), the holding company of HomeFederal Bank of Columbus, Indiana (the "Bank"), today announced quarterly earnings of $1,691,000 or $0.47 diluted earnings per common share, for the quarter. This compared to earnings of $1,540,000 or $0.40 diluted earnings per share, a year earlier. Net income increased 9.8% for the quarter and diluted earnings per share increased 17.5% for the quarter. Year-to-date net income was $2,780,000 or $0.77 diluted earnings per common share, compared to $3,064,000, or $0.80 diluted earnings per common share, a year earlier. Year-to-date earnings included a pre-tax charge of $788,000 related to a separation agreement with a former executive vice president of the Bank and the Company, which was recorded in the first quarter. Excluding the impact of the charge related to the separation agreement, year-to-date earnings would have been $3,256,000 or $0.90 diluted earnings per common share. Total loans increased $19.2 million for the quarter and $32.7 million year-to-date driven by commercial loan and commercial mortgage loan growth of $27.7 million for the quarter and $50.4 million year-to-date. The growth in commercial loans had a positive impact on net interest margin, which increased to 3.46% for the quarter and 3.45% year- to-date. Chairman and CEO John Keach, Jr. stated, "We are happy to report another quarter of strong commercial loan growth. Our Indianapolis commercial lending team continues to deliver a strong pipeline of new commercial customers to the Bank." Executive Vice President and CFO Mark Gorski added, "The commercial loan growth that our team has delivered over the last five quarters has been the key driver to our balance sheet restructuring strategy." Balance Sheet Total assets were $877.4 million as of June 30, 2007, a decrease of $27.1 million from December 31, 2006. Total loans increased $19.2 million for the quarter and $32.7 million year-to-date. The growth in the loan portfolio was primarily the result of an increase in commercial loans of $39.7 million year- to-date and an increase in commercial mortgage loans of $10.7 million year-to- date. The increase in commercial loans has been partially offset by a decrease in residential mortgage loans and other consumer loans. Residential mortgage loans have decreased $11.5 million year-to-date as substantially all new mortgage loan originations are being sold in the secondary market. Other consumer loans have decreased $3.9 million year-to-date due primarily to a reduction in indirect automobile loans as the Bank discontinued the origination of indirect automobile loans during 2006. Total retail deposits decreased $1.2 million for the quarter and $28.4 million year-to-date. Retail deposit balances at year end included several unusually large public fund account balances. During 2007, public fund transaction account balances decreased $45.4 million to more consistent levels. All other retail deposit categories in total increased $17.0 million year-to-date including growth of $14.3 million year-to-date in certificates of deposit. Total FHLB borrowings increased $15.0 million year-to-date. The increase in FHLB borrowings was used to offset an $8.2 million decrease in brokered deposits and to partially offset the decrease in retail deposits. As of June 30, 2007, shareholders' equity was $67.4 million. The decrease in shareholders' equity of $3.8 million year-to-date was primarily the result of stock repurchases of 197,083 shares for $5.8 million. The return on average assets year-to-date was 0.64% annualized while the return on average equity year-to-date was 8.00%. Excluding the impact of the charges associated with the separation agreement, the return on average assets year-to-date would have been 0.75% annualized while the return on average equity would have been 9.36%. Asset Quality Provision for loan losses was $223,000 for the second quarter and $503,000 year-to-date. Net charge offs were $402,000 for the second quarter and $577,000 year-to-date. The annualized net charge off ratio for the first half of 2007 was 0.16% compared to an annualized net charge off ratio of 0.12% for the first half of 2006. Non-performing assets to total assets increased to 0.85% at June 30, 2007 from 0.46% at December 31, 2006. Non-performing loans to total gross loans increased to 1.00% at June 30, 2007 from 0.54% at December 31, 2006. The increase in the non-performing loan and non-performing asset ratios during the second quarter were primarily the result of one commercial loan relationship totaling approximately $3.1 million that was placed on non-accrual status during the second quarter. The ratio of the allowance for loan losses to total loans was 0.91% at June 30, 2007. In addition, the allowance for loan losses to non-performing loans was 87% as of June 30, 2007 compared to 176% at December 31, 2006. Net Interest Income Net interest income increased $606,000 or 9.7% to $6.9 million for the second quarter while year-to-date net interest income increased $1.1 million or 8.6% to $13.7 million. Net interest margin for the second quarter of 2007 was 3.46%, which represented an increase of 2 basis points compared to the first quarter of 2007. Year-to-date net interest margin for 2007 was 3.45% compared to 3.30% for 2006 - a 15 basis point increase. The increase in net interest margin was primarily the result of a shift in composition of the balance sheet. Commercial and commercial real estate loans continue to replace lower yielding residential mortgage loans and investment securities while retail deposits have replaced generally higher costing wholesale funding sources. Non Interest Income Non interest income decreased $59,000 or 1.8% to $3.2 million for the second quarter while year-to-date non interest income increased $83,000 or 1.4% to $6.1 million. Service fees on deposits accounts increased $411,000 or 14.9% year-to-date; however, the increase was a more modest $70,000 or 4.3% for the second quarter. The Bank implemented an enhanced overdraft privilege product during the second quarter of 2006. Investment advisory services increased $87,000 or 24.1% for the second quarter and increased $169,000 or 23.6% year-to-date due to increased assets under management and the addition of two additional brokers during 2006. These increases were offset by the decrease in loan servicing income, which decreased $188,000 for the second quarter and $480,000 year-to-date. The Bank sold its mortgage servicing portfolio during the fourth quarter of 2006. Non Interest Expenses Non interest expenses increased $251,000 or 3.6% to $7.3 million for the second quarter while year-to-date non interest expenses increased $1.3 million or 9.8% to $15.1 million. Included in miscellaneous expenses for the second quarter was a $200,000 write-down of the Bank's former operations building, which was classified as held for sale. The write-down represented the entire remaining book value of the building. Excluding the impact of the write-down of the building, all other expenses increased by $51,000 or less than 1% for the second quarter. Year-to-date expenses include the building write-down along with the expenses incurred pursuant to the separation agreement. Excluding the impact of these charges, non interest expenses increased $359,000 or 2.6% compared to the first half of 2006. Compensation and employee benefits expense decreased slightly for the second quarter of 2007 compared to 2006 in spite of additional salary and incentive compensation expense for the new commercial lending and commercial credit staff in Indianapolis, additional brokerage commission costs resulting from increased revenue and normal annual salary increases. The Bank was able to accomplish this decrease through strategic staffing reductions during 2007. Year-to-date compensation and benefits expense increased $194,000 or 2.5% due to the factors noted above. Marketing expense decreased $151,000 compared to the first half of 2006. We expect our marketing expense for 2007 to be approximately equal to 2006; however, the timing of when these amounts will be spent as compared to the prior year will fluctuate. Year-to-date miscellaneous expenses, excluding the charges associated with the building write-down and the separation agreement, increased $189,000 compared to the first half of 2006. The increase was primarily due to an increase of $100,000 in professional fees as additional legal and accounting expenses were incurred to address new proxy disclosure requirements and new accounting pronouncements. Stock Repurchase Programs In April 2007, the Board of Directors approved the twelfth 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 175,628 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 134,181 shares under the eleventh repurchase plan and 62,902 shares under the twelfth repurchase plan for a total of 197,083 shares repurchased year to date. The Company had 112,726 shares remaining to be repurchased under this plan at June 30, 2007. 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. HomeFederal Bank, its principal subsidiary, is an FDIC insured state chartered commercial bank. HomeFederal Bank 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 (unaudited) (in thousands, except share data) June 30, December 31, 2007 2006 ------- ----------- Assets: Cash and due from banks $47,192 $106,063 Securities available for sale at fair value (amortized cost $60,499 and $57,421) 59,249 56,887 Securities held to maturity (fair value $1,604 and $1,628) 1,628 1,635 Loans held for sale (fair value $5,701 and $7,055) 5,599 6,925 Portfolio loans and leases: Commercial loans 191,458 151,781 Commercial mortgage loans 238,113 227,433 Residential mortgage loans 154,511 166,003 Second & home equity loans 100,712 102,713 Other consumer loans 30,602 34,483 Unearned income (387) (153) ------- ------- Total portfolio loans 715,009 682,260 Allowance for loan and lease losses (6,524) (6,598) ------- ------- Portfolio loans, net 708,485 675,662 Bank premises and equipment 17,051 17,232 Accrued interest receivable 4,480 4,679 Goodwill 1,875 1,695 Other assets 31,801 33,689 ------- ------- TOTAL ASSETS $877,360 $904,467 ======= ======= Liabilities: Deposits: Demand $73,048 $72,804 Interest checking 84,171 129,025 Savings 41,954 41,710 Money market 167,324 165,605 Certificates 308,198 293,914 ------- ------- Retail deposits 674,695 703,058 ------- ------- Brokered deposits 14,178 22,357 Public fund certificates 2,444 1,744 ------- ------- Wholesale deposits 16,622 24,101 ------- ------- Total deposits 691,317 727,159 ------- ------- FHLB Borrowings 83,705 68,667 Short term borrowings 91 - Junior subordinated debt 15,464 15,464 Accrued taxes, interest and expense 2,571 4,462 Other liabilities 16,764 17,434 ------- ------- Total liabilities 809,912 833,186 ------- ------- 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: 3,465,439 and 3,610,218 19,957 17,081 Retained earnings, restricted 48,898 55,137 Accumulated other comprehensive income/(loss), net of taxes (1,407) (937) ------- ------- Total shareholders' equity 67,448 71,281 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $877,360 $904,467 ======= ======= HOME FEDERAL BANCORP CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands, except share data) Three Months Ended Year to Date June 30, June 30, ----------------- ----------------- Interest income: 2007 2006 2007 2006 ---- ---- ---- ---- Short term investments $322 $101 $755 $350 Securities 665 1,177 1,309 2,341 Commercial loans 3,578 2,226 6,890 4,200 Commercial mortgage loans 4,042 3,416 7,922 6,728 Residential mortgages 2,679 2,820 5,392 5,504 Second and home equity loans 1,783 1,666 3,654 3,260 Other consumer loans 584 608 1,172 1,260 ------ ------ ------ ------ Total interest income 13,653 12,014 27,094 23,643 ------ ------ ------ ------ Interest expense: Checking and savings accounts 414 233 931 442 Money market accounts 1,373 1,178 2,686 2,128 Certificates of deposit 3,621 2,662 7,060 5,114 ------ ------ ------ ------ Total interest on retail deposits 5,408 4,073 10,677 7,684 ------ ------ ------ ------ Brokered deposits 177 278 429 555 Public funds 5 70 12 171 ------ ------ ------ ------ Total interest on wholesale deposits 182 348 441 726 ------ ------ ------ ------ Total interest on deposits 5,590 4,421 11,118 8,410 ------ ------ ------ ------ FHLB borrowings 928 1,112 1,765 2,204 Other borrowings 5 3 7 3 Long term debt - 228 - 449 Junior subordinated debt 274 - 545 - ------ ------ ------ ------ Total interest expense 6,797 5,764 13,435 11,066 ------ ------ ------ ------ Net interest income 6,856 6,250 13,659 12,577 Provision for loan losses 223 220 503 337 ------ ------ ------ ------ Net interest income after provision for loan losses 6,633 6,030 13,156 12,240 ------ ------ ------ ------ Non interest income: Gain on sale of loans 378 354 688 709 Investment advisory services 448 361 885 716 Service fees on deposit accounts 1,708 1,638 3,163 2,752 Loan servicing income, net of impairments 153 341 296 776 Miscellaneous 529 581 1,091 1,087 ------ ------ ------ ------ Total non interest income 3,216 3,275 6,123 6,040 ------ ------ ------ ------ Non interest expenses: Compensation and employee benefits 4,010 4,029 8,128 7,934 Occupancy and equipment 1,006 951 1,984 1,901 Service bureau expense 400 368 791 747 Marketing 355 374 561 712 Miscellaneous 1,532 1,330 3,637 2,460 ------ ------ ------ ------ Total non interest expenses 7,303 7,052 15,101 13,754 ------ ------ ------ ------ Income before income taxes 2,546 2,253 4,178 4,526 Income tax provision 855 713 1,398 1,462 ------ ------ ------ ------ Net Income $1,691 $1,540 $2,780 $3,064 ====== ====== ====== ====== Basic earnings per common share $ 0.48 $ 0.42 $ 0.79 $ 0.82 Diluted earnings per common share $ 0.47 $ 0.40 $ 0.77 $ 0.80 Basic weighted average number of shares 3,497,378 3,705,844 3,540,372 3,754,082 Dilutive weighted average number of shares 3,581,548 3,811,774 3,631,479 3,847,458 Dividends per share $0.200 $0.200 $0.400 $0.388 Supplemental Data: Three Months Ended Year to Date (unaudited) June 30, June 30, ----------------- ----------------- 2007 2006 2007 2006 ---- ---- ---- ---- Weighted average interest rate earned on total interest-earning assets 6.89% 6.31% 6.85% 6.21% Weighted average cost of total interest-bearing liabilities 3.52% 3.08% 3.51% 2.98% Interest rate spread during period 3.37% 3.23% 3.34% 3.23% Net interest margin (net interest income divided by average interest-earning assets on annualized basis) 3.46% 3.28% 3.45% 3.30% Total interest income divided by average total assets (on annualized basis) 6.29% 5.68% 6.24% 5.60% Total interest expense divided by average total assets (on annualized basis) 3.14% 2.73% 3.12% 2.64% Net interest income divided by average total assets (on annualized basis) 3.16% 2.96% 3.15% 2.98% Return on assets (net income divided by average total assets on annualized basis) 0.78% 0.73% 0.64% 0.73% Return on equity (net income divided by average total equity on annualized basis) 9.92% 8.67% 8.00% 8.51% June 30, Dec 31, 2007 2006 ---- ---- Book value per share outstanding $19.46 $19.74 Nonperforming Assets: Loans: Non-accrual $6,613 $2,852 Past due 90 days or more 66 459 Restructured 496 440 ----- ----- Total nonperforming loans 7,175 3,751 Real estate owned, net 309 416 Other repossessed assets, net 2 20 ----- ----- Total Nonperforming Assets $7,486 $4,187 Nonperforming assets divided by total assets 0.85% 0.46% Nonperforming loans divided by total loans 1.00% 0.54% Balance in Allowance for Loan Losses $6,524 $6,598 DATASOURCE: Home Federal Bancorp CONTACT: John K. Keach, Jr., Chairman, Chief Executive Officer, +1-812-373-7816, or Mark T. Gorski, Executive Vice President, Chief Financial Officer, +1-812-373-7379, both of Home Federal Bancorp Web site: http://www.homf.com/

Copyright