(Source: PrimeNewswire)NAMPA, Idaho, July 24, 2009 (GLOBE NEWSWIRE) -- Home Federal Bancorp, Inc. (the "Company") (Nasdaq:HOME), the parent company of Home Federal Bank (the "Bank"), today announced third quarter results for the fiscal year ending September 30, 2009. For the quarter ended June 30, 2009, the Company reported a net loss of $1.2 million, or $0.08 per diluted share, compared to net income of $1.1 million, or $0.07 per diluted share, for the same period a year ago. For the nine months ended June 30, 2009, the Company reported a net loss of $1.6 million, or $0.10 per diluted share, compared to net income of $3.0 million, or $0.19 per diluted share, for the same period last year.

The following summarizes key activities of the Company during the quarter ended June 30, 2009:

    * Nonperforming assets increased as the Idaho economy continued to    decline and unemployment increased;  * The Company's total assets declined and maturing borrowings were    repaid with excess cash;  * Total loans declined reflecting a decrease in lending opportunities    to good credit customers in Southwestern Idaho;  * Core deposits increased and certificates of deposit decreased as    management continued to focus on low-cost relationship accounts;  * The Bank launched a new checking account product that is expected    to increase core deposit balances and generate interchange income;  * While nonperforming loans increased during the quarter, loans    delinquent less than 90 days declined compared to March 31, 2009;  * Deteriorating asset quality and foreclosed asset valuations    resulted in increased operating expenses through additional    valuation allowances and maintenance and property tax expense; and,  * The Bank accrued $250,000 related to a special assessment levied by    the Federal Deposit Insurance Corporation ("FDIC") to be paid in    September 2009. 

Operating Results

Total revenue for the quarter ended June 30, 2009, which consisted of net interest income before the provision for loan losses plus noninterest income, decreased $323,000, or 4% to $8.3 million compared to $8.6 million for the same period of 2008. Total revenue for the third quarter of fiscal 2009 was unchanged at $8.3 million compared to the linked second quarter of fiscal 2009. Net interest income before the provision for loan losses decreased $199,000, or 3%, to $5.7 million for the quarter ended June 30, 2009, compared to $5.9 million for the same quarter of the prior year as interest reversed on loans in nonaccrual status during the fiscal third quarter of 2009 totaled approximately $307,000.

Total revenue for the nine months ended June 30, 2009 increased $247,000, or 1% to $24.8 million, compared to $24.6 million for the same period of last year. Net interest income before provision for loan losses for the nine months ended June 30, 2009 increased $673,000, or 4% to $17.4 million from $16.7 million for the same period of the prior year. This improvement was attributable to the existing low interest rate environment and the lower level of Federal Home Loan Bank of Seattle ("FHLB") borrowings, which significantly reduced interest expense.

The Company's net interest margin increased by 24 basis points to 3.53% for the quarter ended June 30, 2009, from 3.29% for the same quarter last year, but decreased seven basis points from 3.60% reported in the linked quarter. The improvement in the net interest margin from the prior year 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 FHLB advances 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 $3.5 million was established by management in connection with its analysis of the loan portfolio for the quarter ended June 30, 2009. The provision for loan losses was $652,000 for the same period of the prior year. The provision for loan losses was $8.1 million for the nine months ended June 30, 2009, compared to $1.3 million for the nine months ended June 30, 2008. The provision reflects the increase in delinquent loans in fiscal 2009 compared to 2008.

Noninterest income decreased $124,000, or 5%, to $2.6 million for the quarter ended June 30, 2009, compared to $2.7 million for the same quarter a year ago. Mortgage rates were at historically low levels during the third quarter of fiscal 2009, which led to higher levels of mortgage loan refinancing. This higher volume of mortgage loan activity caused the gain on loan sales during the third quarter of 2009 to exceed gains during the same quarter of 2008 by $203,000. This increase in loan sale gains partially offset a decline in deposit service charges and fees of $388,000 during the third quarter of 2009 compared to the year-ago period. However, noninterest income increased $266,000, or 11%, from the linked quarter as checking account fees and interchange income increased and net losses on overdrafts declined from the second fiscal quarter of 2009.

Noninterest income for the nine months ended June 30, 2009 decreased $426,000, or 5%, to $7.4 million, from $7.8 million for the same period a year ago. The decrease is primarily attributable to decreases in deposit service charges and fees. Loan servicing fees are also lower than year ago numbers due to the sale of mortgage servicing rights completed in December 2008. However, gain on sale of loans for the nine months ended June 30, 2009 exceeded the year ago numbers due to the significant increase in refinancings in the current year.

Noninterest expense for the quarter ended June 30, 2009, increased $840,000, or 14% to $7.0 million from $6.2 million for the comparable period a year earlier. Compensation and benefits declined $246,000 from the year ago period as annual incentive accruals were reduced or eliminated during the third fiscal quarter of 2009 due to financial performance. Insurance and taxes increased $625,000, or 396%, from the year ago similar period as a result of increases in the regular quarterly FDIC deposit insurance assessment as well as a special assessment of approximately $250,000. In addition, $219,000 of expense was incurred on past due property taxes paid on foreclosed properties during the third fiscal quarter of 2009. Other expenses also increased $334,000 during the third quarter of fiscal 2009 compared to 2008 primarily as a result of a $367,000 provision for the decline in the value of foreclosed properties.

Noninterest expense for the nine months ended June 30, 2009, increased $1.1 million, or 6% to $19.6 million from $18.5 million for the comparable period a year earlier. This increase was primarily attributable to the current economic conditions including expenses incurred on overdue property taxes paid on foreclosed properties, increased assessments from the FDIC, and charges related to the write-down in value of real estate owned. These increases were partially offset by a decrease in compensation and benefits as incentive accruals have been reduced or eliminated in the current year based on results to date.

Balance Sheet

Total assets decreased $69.2 million, or 9%, to $672.7 million at June 30, 2009, compared to $741.9 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 $25.0 million, or 13%, to $169.7 million at June 30, 2009, compared to $194.8 million at June 30, 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. Additionally, the Company held $9.6 million of stock in the FHLB at June 30, 2009.

Loans. Net loans (excluding loans held for sale) at June 30, 2009, decreased $50.1 million or 11% to $418.2 million, compared to $468.3 million at June 30, 2008, as one- to four-family residential loans declined $41.3 million. One- to four-family residential loans represented 41% of the Bank's loan portfolio at June 30, 2009, compared to 46% at June 30, 2008. Commercial loan balances, including commercial real estate, builder finance, and commercial business lending, were unchanged from a year ago at $200.2 million. Consumer loans decreased $4.4 million or 8% to $51.0 million, compared to $55.4 million at June 30, 2008.

Asset Quality. Loans delinquent 30 to 89 days totaled $3.8 million at June 30, 2009, compared to $11.6 million at March 31, 2009, and $2.0 million at June 30, 2008. Nonperforming assets, which include impaired loans and real estate owned, totaled $25.1 million at June 30, 2009, compared to $19.1 million at March 31, 2009, and $4.2 million at June 30, 2008.