NAMPA, Idaho, April 24, 2009 (GLOBE NEWSWIRE) -- Home Federal Bancorp, Inc. (the "Company") (Nasdaq:HOME), the parent company of Home Federal Bank (the "Bank"), today announced second quarter results for the fiscal year ending September 30, 2009. For the quarter ended March 31, 2009, the Company reported net income of $476,000, or $0.03 per diluted share compared to $945,000, or $0.06 per diluted share, for the same period a year ago. For the six months ended March 31, 2009, a $4.6 million provision for loan losses ($3.6 million of which was taken in the quarter ended December 31, 2008), contributed to a net loss of ($325,000), or ($0.02) per diluted share, compared to net income of $1.9 million, or $0.12 per diluted share, for the same period last year. For the six months ended March 31, 2009, pre-tax, pre-provision earnings(1) increased 7% to $3.9 million from $3.6 million for the same period of the prior year.
President and Chief Executive Officer Len E. Williams commented, "While the economy continues to provide stress to the loan portfolio, we are pleased with several facets of our second quarter earnings. Core deposits increased, asset and liability composition continues to improve and net interest margin improvement continues to position us for future growth."
The following summarizes key activities of the Company during the quarter ended March 31, 2009:
* The previously announced 5% share repurchase program was completed.
A total of 867,970 shares were purchased at an average purchase
price of $9.04 per share during the quarter;
* Delinquent loans continued to increase as a result of unemployment
and real estate related pressures in the Boise metropolitan area
while some nonperforming loans were transferred to real estate
owned;
* The slowdown in consumer spending reduced fee income;
* The Bank's newly-formed Small Business Banking Group had a
successful first quarter by generating new deposit balance
relationships; and
* Net interest margin continued to expand due to declining funding
costs and continued deleveraging of low-spread assets and
liabilities.
Operating Results
Total revenue for the quarter ended March 31, 2009, which consisted of net interest income before the provision for loan losses plus noninterest income, was unchanged at $8.3 million compared to the same period of 2008. Total revenue for the second quarter of fiscal 2009 increased $99,000, or 1%, from the linked first quarter of fiscal 2009. Net interest income before the provision for loan losses increased 3% to $6.0 million for the quarter ended March 31, 2009, compared to $5.8 million for the same quarter of the prior year.
Total revenue for the six months ended March 31, 2009 increased $570,000 or 4% to $16.5 million, compared to $15.9 million for the same period of last year. Net interest income before provision for loan losses for the six months ended March 31, 2009 increased $872,000 or 8% to $11.7 million from $10.8 million from the same period of the prior year. Net interest margin improvement and an increase in gain on loans sold offset declines in fee income, which resulted in the increase in revenue in fiscal year 2009.
The Company's net interest margin increased by 45 basis points to 3.60% for the quarter ended March 31, 2009, from 3.15% for the same quarter last year, and by 23 basis points from 3.37% reported in the linked quarter. The improvement in the net interest margin from both prior periods is primarily attributable to a decrease in interest expense as current rates paid on deposits are lower than in the prior periods as management has cautiously priced deposits. In addition, balances of high-cost certificates of deposit and borrowings from the Federal Home Loan Bank of Seattle ("FHLB") were lower in fiscal 2009 and most of the advances that have matured this fiscal year have been repaid with excess liquidity.
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 March 31, 2009. The provision for loan losses was $378,000 for the same period of the prior year. The provision for loan losses was $4.6 million for the six months ended March 31, 2009, compared to $665,000 for the six months ended March 31, 2008. The provision reflects the increase in delinquent loans in fiscal 2009 and adjusted valuations on nonperforming loans as well as losses on loans charged-off during the second quarter of fiscal 2009 that exceeded the losses previously estimated.
Noninterest income decreased $138,000, or 6%, to $2.3 million for the quarter ended March 31, 2009, compared to $2.5 million for the same quarter a year ago and $2.5 million in the linked quarter. Mortgage rates fell during the second quarter of fiscal 2009, which led to significantly higher levels of mortgage loan refinancing. This higher volume of mortgage loan activity caused the gain on loan sales during the second quarter of 2009 to exceed gains during the same quarter of 2008 by $245,000. This increase in loan sale gains offset a decline in deposit service charges and fees of $210,000 during the second quarter of 2009 compared to the year-ago period. Management anticipates that deposit service charges and NSF fees will continue to decline while consumer spending remains weak. As a result, a new deposit product is scheduled to be launched in the third quarter of fiscal 2009 that management believes will prompt more frequent debit card usage, which is expected to generate interchange income. Loan servicing fees declined during the second quarter of fiscal 2009 as the Bank completed the sale of its mortgage servicing rights in December 2008.
Noninterest expense for the quarter ended March 31, 2009, increased $147,000, or 2% to $6.6 million from $6.4 million for the comparable period a year earlier. Compensation and benefits, which included severance accruals of $98,000, declined $274,000 or 7% in the second quarter of 2009 compared to the year-ago period. Insurance and taxes increased as Federal Deposit Insurance Corporation premiums were $109,000 higher in the second quarter of 2009 compared to the same period of 2008. Additionally, property taxes were $49,000 higher in the second quarter of fiscal 2009 compared to the second quarter of fiscal 2008 as a result of the payment of taxes on foreclosed properties. Other expenses increased $218,000 during the second quarter of fiscal 2009 compared to 2008 primarily as a result of a $161,000 provision for the decline in the value of foreclosed properties.
Balance Sheet
Total assets decreased 10% to $692.5 million at March 31, 2009, compared to $768.1 million a year earlier. The majority of the decrease is the result of management's strategy to reduce reliance on fixed-rate assets and liabilities by using the liquidity generated by prepayments of mortgage-backed securities and one- to four-family residential loans to repay FHLB advances as they matured and to fund declining balances in certificates of deposit.
Securities. Mortgage-backed securities decreased $27.7 million or 13% to $181.5 million at March 31, 2009, compared to $209.2 million at March 31, 2008. The decrease is primarily attributable to regular principal repayments. Approximately 98% of the Company's mortgage-backed securities were issued by U.S. government sponsored enterprises. The Company does not own any trust preferred securities or collateralized debt obligations. At March 31, 2009, the Company held $9.6 million of stock in the FHLB.
Loans. Net loans (excluding loans held for sale) at March 31, 2009, decreased $38.0 million or 8% to $439.2 million, compared to $477.2 million at March 31, 2008, as one- to four-family residential loans declined $43.9 million. One- to four-family residential loans represented 42% of the Bank's loan portfolio at March 31, 2009, compared to 48% at March 31, 2008. The Bank 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. In contrast, commercial and consumer loans increased $8.8 million and $1.1 million, respectively, between March 31, 2008 and March 31, 2009. Commercial, multifamily and acquisition and development loans represented 46% of the Bank's loan portfolio at March 31, 2009, compared to 43% at March 31, 2008. However, commercial, multifamily and acquisition and development loans declined $6.9 million during the second quarter of fiscal 2009 as the repayment of a large loan was the primary cause for a $7.3 million reduction in the acquisition and development loan portfolio. The Company plans to continue its emphasis on commercial and small business banking products.
Asset Quality. Loans delinquent 30 to 89 days totaled $11.6 million at March 31, 2009, compared to $10.9 million at December 31, 2008, and $4.0 million at March 31, 2008. Nonperforming assets, which include impaired loans and real estate owned, totaled $19.1 million at March 31, 2009, compared to $18.4 million at December 31, 2008, and $2.3 million at March 31, 2008.
