(Source: PrimeNewswire)NAMPA, Idaho, Oct. 30, 2009 (GLOBE NEWSWIRE) -- Home Federal Bancorp, Inc. (the "Company") (Nasdaq:HOME), the parent company of Home Federal Bank (the "Bank"), today announced earnings for the fourth quarter and fiscal year ended September 30, 2009. For the quarter ended September 30, 2009, the Company reported net income of $9.7 million, or $0.63 per diluted share, compared to net income of $994,000, or $0.06 per diluted share, for the same period a year ago. Net income for the fiscal year ended September 30, 2009, was $8.1 million, or $0.52 per diluted share, compared to net income of $4.0 million, or $0.25 per diluted share, for the fiscal year ended September 30, 2008. Net income for the fourth quarter and fiscal year ended September 30, 2009 included a $15.3 million after-tax extraordinary gain related to our Federal Deposit Insurance Corporation ("FDIC") assisted acquisition of the former Community First Bank headquartered in Prineville, Oregon (the "Acquisition").

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

 * On August 7, 2009, the Bank purchased and assumed certain assets
   and liabilities of Community First Bank, which resulted in a
   $15.3 million after-tax extraordinary gain to the Company. Under
   the purchase and assumption agreement with the FDIC, the Bank
   received deposits, cash, marketable securities, loans and real
   estate and other repossessed assets ("REO") as well as deposits
   and borrowings of Community First Bank.  The loans and REO are
   covered by a loss share agreement between the FDIC and the Bank
   under which the FDIC will reimburse the Bank for 80% of losses
   and certain expenses up to $34.0 million, and 95% of losses and
   certain expenses that exceed that amount.  The Company filed a
   Form 8-K/A with the Securities and Exchange Commission on
   October 23, 2009, that provides significant detail on the
   transaction and the related impact on the Company's balance
   sheet.

 * A provision of $8.0 million was recorded during the quarter to
   reflect increases in charge-offs and concerns regarding the
   performance of home equity lines of credit and commercial real
   estate loans in the Bank's pre-acquisition loan portfolio. No
   provision expense was recorded related to loans acquired from
   the FDIC as certain troubled loans were booked at fair value,
   net of credit loss estimates, and a general valuation allowance
   was recorded for other acquired loans. These reductions in value
   resulted in a lower extraordinary gain.

 * The early retirement of FHLB borrowings acquired from the FDIC
   resulted in a pretax loss of $498,000, after fair value
   adjustments.

 * Losses on the sale of securities totaled $254,000.

 * Provision for the decline in the value of real estate owned
   totaled $601,000. Foreclosed real estate acquired from the FDIC
   was recorded at fair value, less estimated selling costs, and
   declines in value from the acquisition value reduced the
   extraordinary gain.

 * The Bank announced the closure of two WalMart branches, which
   resulted in the accrual of $305,000 of exit costs. The Bank will
   launch two new, full-service branch offices in October and
   November 2009.

Len E. Williams, the Company's President and CEO, commented, "While there are a number of items that affected the fourth quarter's earnings as a result of the FDIC-assisted acquisition of Community First Bank in Central Oregon, we believe we are well positioned for future growth opportunities. Also, the increased capital resulting from the acquisition gain lessened the impact of the additional loan loss provision recorded this quarter, which we believe was warranted given the economic volatility and uncertainty in both Central Oregon and Southwest Idaho."

Operating Results

Total revenue for the quarter ended September 30, 2009, which consisted of net interest income before the provision for loan losses plus noninterest income, decreased $267,000, or 3%, to $8.3 million compared to $8.6 million for the same period of 2008 and was unchanged at $8.3 million compared to the linked third quarter of fiscal 2009. Total revenue for the fiscal year ended September 30, 2009 decreased $169,000, or 1% to $33.1 million, compared to $33.3 million in fiscal year 2008, as a result of the decline in noninterest income.

Net interest income before the provision for loan losses increased $529,000, or 9%, to $6.4 million for the quarter ended September 30, 2009, compared to $5.9 million for the same quarter of the prior year. Net interest income before provision for loan losses for the twelve months ended September 30, 2009 increased $1.2 million, or 5% to $23.9 million from $22.6 million for the same period of the prior year. The Company's net interest margin increased by 12 basis points to 3.53% for the quarter ended September 30, 2009, from 3.41% for the same quarter last year, and was virtually unchanged at 3.53% from 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 as most of the advances that matured during fiscal year 2009 were repaid with excess liquidity.

A provision for loan losses of $8.0 million was recorded in connection with management's analysis of the loan portfolio for the quarter ended September 30, 2009. The provision for loan losses was $1.1 million for the same period of the prior year. The provision for loan losses was $16.1 million for the twelve months ended September 30, 2009, compared to $2.4 million for the twelve months ended September 30, 2008, reflecting the increase in delinquent loans and charge-offs in fiscal 2009 compared to 2008.

Noninterest income decreased $796,000, or 30%, to $1.9 million for the quarter ended September 30, 2009, compared to $2.7 million for the same quarter a year ago. The most significant contributing factor in the decrease in noninterest income was a $498,000 prepayment penalty incurred on the repayment of $18.0 million in FHLB borrowings assumed in the Community First Bank acquisition. In addition, a $254,000 loss on the sale of securities was incurred during the quarter, which included a $184,000 loss on the sale of a private label collateralized mortgage obligation which was sold in order to reduce credit risk exposure. A portion of the securities sold included securities obtained via the Acquisition that were not consistent with the Bank's investment policy. Noninterest income decreased $737,000, or 28%, from the linked quarter primarily due to the Acquisition related items noted above.

Noninterest income for the fiscal year ended September 30, 2009 decreased $1.4 million, or 13%, to $9.3 million, from $10.7 million for the same period a year ago. In addition to the items mentioned above, fees and service charges were $775,000 lower in the fiscal year just ended than in the prior year as NSF fee income continued to decline by $913,000, or 15% in fiscal year 2009 compared to 2008. Lastly, gain on sale of loans for the twelve months ended September 30, 2009 exceeded the year ago numbers due to the significant increase in mortgage loan refinancings in 2009.

Noninterest expense for the quarter ended September 30, 2009, increased $3.4 million, or 56% to $9.4 million from $6.0 million for the comparable period a year earlier. Compensation and benefits increased $1.4 million from the year ago period primarily due to personnel assumed in the Acquisition and related incentive compensation. The Company will continue to operate separate back offices between the Idaho and Oregon regions until a full conversion and integration to a new core application platform is completed in the third calendar quarter of 2010. Additional efforts have been put in place to improve personnel efficiency and branch productivity including the closure of two WalMart branches and the consolidation of some branch manager positions.

Professional services expense increased mainly due to legal expenses associated with the Acquisition as well as legal expenses incurred in addressing troubled assets. Provision for REO increased $578,000 during the fourth quarter of fiscal 2009 from the same period of the prior year due to quarterly valuation assessments performed on the significantly increased REO balances that existed as of September 30, 2009. Other expenses increased $618,000 from the prior year primarily due to the expenses incurred to close two branches and a $217,000 reserve for losses on unfunded commitments which are not included in the allowance for loan losses.

Noninterest expense for the twelve months ended September 30, 2009, increased $4.4 million, or 18% to $29.0 million from $24.6 million for the comparable period a year earlier. This increase was primarily attributable to costs associated with the Community First Bank acquisition (including the compensation, bonus and legal expenses noted earlier), approximately $300,000 of expenses incurred on overdue property taxes and insurance paid on foreclosed properties, a $651,000 increase in deposit insurance assessments from the FDIC, and charges related to the write-down in value of real estate owned totaling $1.1 million.

Balance Sheet

Total assets increased $102.8 million, or 14%, to $827.9 million at September 30, 2009, compared to $725.1 million a year earlier. The increase is the acquisition of $189.8 million of assets from Community First Bank, partially offset by the repayment of FHLB advances using excess liquidity.

Investments. Investments decreased $24.5 million, or 13%, to $169.3 million at September 30, 2009, compared to $193.8 million at September 30, 2008. The decrease is primarily attributable to the net of regular principal repayments and new investments purchased as well as investments acquired through the Acquisition. In addition, $10.4 million in securities were sold during the quarter ended September 30, 2009.

Loans. Net loans (excluding loans held for sale) at September 30, 2009, increased $50.8 million or 11% to $510.6 million, compared to $459.8 million at September 30, 2008. The fair value of loans acquired through the Acquisition was $112.4 million. This increase was offset by lower balances in all loan categories when compared to the year ago period for the organic loan portfolio. One- to four-family residential loans experienced the majority of this decrease with a $54.7 million decline in balances from the prior year, which is consistent with management's strategy to reduce exposure to residential real estate by selling nearly all residential real estate loans upon origination since 2006.