Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended March 31, 2009
or
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the transition period from _____ to
_____
|
Commission
File Number: 001-33795
HOME FEDERAL
BANCORP, INC.
(Exact
name of registrant as specified in its charter)
|
|
|
|
|
|
Maryland |
|
68-0666697 |
|
|
(State or
other jurisdiction of incorporation |
|
(I.R.S.
Employer |
|
|
or
organization) |
|
I.D.
Number) |
|
|
|
|
|
|
|
500
12th Avenue
South, Nampa, Idaho |
|
83651 |
|
|
(Address of
principal executive offices) |
|
(Zip
Code) |
|
|
|
|
|
|
|
Registrant’s
telephone number, including area code: |
|
(208) 466-4634 |
|
|
|
|
|
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
[X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes
[ ] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
|
|
|
|
|
|
|
|
Large
accelerated filer |
[ ] |
|
Accelerated
filer |
[X] |
|
|
Non-accelerated
filer |
[ ] |
|
Smaller
reporting company |
[ ] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
[ ] No [X]
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: Common Stock, $.01 par
value per share, 16,698,168 shares outstanding as of May 1, 2009.
HOME
FEDERAL BANCORP, INC.
FORM
10-Q
TABLE
OF CONTENTS
|
|
PART 1 - FINANCIAL
INFORMATION |
|
|
|
Item 1 -
Financial Statements |
|
Page
Consolidated
Balance Sheets |
1 |
Consolidated
Statements of Income |
2 |
Consolidated Statements of Changes in Stockholders’ Equity
and |
|
Comprehensive
Income |
3 |
Consolidated
Statements of Cash Flows |
4 |
Selected Notes
to Interim Consolidated Financial Statements |
6 |
|
|
|
|
Item 2 -
Management’s Discussion and Analysis of Financial Condition |
|
and Results of Operations |
11 |
|
|
Item 3 -
Quantitative and Qualitative Disclosures About Market Risk |
27 |
|
|
Item 4 -
Controls and Procedures |
28 |
|
|
PART II - OTHER
INFORMATION |
|
|
|
Item 1 - Legal
Proceedings |
28 |
|
|
Item 1A - Risk
Factors |
29 |
|
|
Item 2 -
Unregistered Sales of Equity Securities and Use of Proceeds |
29 |
|
|
Item 3 -
Defaults Upon Senior Securities |
29 |
|
|
Item 4 -
Submission of Matters to a Vote of Security Holders |
29 |
|
|
Item 5 - Other
Information |
30 |
|
|
Item 6 -
Exhibits |
30 |
|
|
SIGNATURES |
32 |
Item
1. Financial Statements
HOME
FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS
(In
thousands, except share data) (Unaudited)
|
|
March
31,
2009
|
|
|
September
30, 2008
|
|
ASSETS
|
|
|
|
|
|
|
Cash
and amounts due from depository institutions
|
|
$ |
18,826 |
|
|
$ |
23,270 |
|
Certificate
of deposit in correspondent bank
|
|
|
- |
|
|
|
5,000 |
|
Mortgage-backed
securities available for sale, at fair value
|
|
|
181,532 |
|
|
|
188,787 |
|
Federal
Home Loan Bank of Seattle (“FHLB”) stock, at cost
|
|
|
9,591 |
|
|
|
9,591 |
|
Loans
receivable, net of allowance for loan losses
of $7,333
|
|
|
|
|
|
|
|
|
and
$4,579
|
|
|
439,170 |
|
|
|
459,813 |
|
Loans
held for sale
|
|
|
5,549 |
|
|
|
2,831 |
|
Accrued
interest receivable
|
|
|
2,418 |
|
|
|
2,681 |
|
Property
and equipment, net
|
|
|
16,327 |
|
|
|
15,246 |
|
Mortgage
servicing rights, net
|
|
|
- |
|
|
|
1,707 |
|
Bank
owned life insurance
|
|
|
11,800 |
|
|
|
11,590 |
|
Real
estate and other property owned
|
|
|
4,478 |
|
|
|
650 |
|
Deferred
tax asset
|
|
|
1,106 |
|
|
|
1,770 |
|
Other
assets
|
|
|
1,700 |
|
|
|
2,134 |
|
TOTAL
ASSETS
|
|
$ |
692,497 |
|
|
$ |
725,070 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Deposit
accounts:
|
|
|
|
|
|
|
|
|
Noninterest-bearing
demand deposits
|
|
$ |
37,323 |
|
|
$ |
41,398 |
|
Interest-bearing
demand deposits
|
|
|
134,047 |
|
|
|
127,714 |
|
Savings
deposits
|
|
|
33,704 |
|
|
|
26,409 |
|
Certificates
of deposit
|
|
|
171,494 |
|
|
|
177,404 |
|
Total
deposit accounts
|
|
|
376,568 |
|
|
|
372,925 |
|
Advances
by borrowers for taxes and insurance
|
|
|
1,309 |
|
|
|
1,386 |
|
Interest
payable
|
|
|
428 |
|
|
|
552 |
|
Deferred
compensation
|
|
|
5,225 |
|
|
|
5,191 |
|
FHLB
advances
|
|
|
103,909 |
|
|
|
136,972 |
|
Other
liabilities
|
|
|
4,409 |
|
|
|
2,857 |
|
Total
liabilities
|
|
|
491,848 |
|
|
|
519,883 |
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
Serial
preferred stock, $.01 par value; 10,000,000 authorized;
|
|
|
|
|
|
|
|
|
Issued
and outstanding, none
|
|
|
- |
|
|
|
- |
|
Common
stock, $.01 par value; 90,000,000 authorized;
|
|
|
|
|
|
|
|
|
Issued
and outstanding:
|
|
|
165 |
|
|
|
174 |
|
Mar.
31, 2009 – 17,445,311 issued, 16,515,168 outstanding
|
|
|
|
|
|
|
|
|
Sept.
30, 2008 – 17,412,449 issued, 17,374,161 outstanding
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
150,087 |
|
|
|
157,205 |
|
Retained
earnings
|
|
|
57,746 |
|
|
|
59,813 |
|
Unearned
shares issued to employee stock ownership plan (“ESOP”)
|
|
|
(10,152 |
) |
|
|
(10,605 |
) |
Accumulated
other comprehensive income (loss)
|
|
|
2,803 |
|
|
|
(1,400 |
) |
Total
stockholders’ equity
|
|
|
200,649 |
|
|
|
205,187 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$ |
692,497 |
|
|
$ |
725,070 |
|
|
|
|
|
|
|
|
|
|
See accompanying
notes.
1
HOME
FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF INCOME
(In
thousands, except share data) (Unaudited)
|
|
Three
Months Ended
March
31,
|
|
|
Six
Months Ended
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Interest
and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan
interest
|
|
$ |
6,806 |
|
|
$ |
7,770 |
|
|
$ |
13,919 |
|
|
$ |
15,846 |
|
Mortgage-backed
security interest
|
|
|
2,123 |
|
|
|
2,148 |
|
|
|
4,328 |
|
|
|
4,091 |
|
Other
interest and dividends
|
|
|
1 |
|
|
|
541 |
|
|
|
11 |
|
|
|
824 |
|
Total
interest and dividend income
|
|
|
8,930 |
|
|
|
10,459 |
|
|
|
18,258 |
|
|
|
20,761 |
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,742 |
|
|
|
2,872 |
|
|
|
3,760 |
|
|
|
6,086 |
|
FHLB
advances
|
|
|
1,228 |
|
|
|
1,810 |
|
|
|
2,793 |
|
|
|
3,842 |
|
Total
interest expense
|
|
|
2,970 |
|
|
|
4,682 |
|
|
|
6,553 |
|
|
|
9,928 |
|
Net
interest income
|
|
|
5,960 |
|
|
|
5,777 |
|
|
|
11,705 |
|
|
|
10,833 |
|
Provision
for loan losses
|
|
|
1,060 |
|
|
|
378 |
|
|
|
4,635 |
|
|
|
665 |
|
Net
interest income after provision for loan losses
|
|
|
4,900 |
|
|
|
5,399 |
|
|
|
7,070 |
|
|
|
10,168 |
|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
charges and fees
|
|
|
1,892 |
|
|
|
2,102 |
|
|
|
4,001 |
|
|
|
4,335 |
|
Gain
on sale of loans
|
|
|
407 |
|
|
|
162 |
|
|
|
597 |
|
|
|
347 |
|
Increase
in cash surrender value of bank owned life insurance
|
|
|
104 |
|
|
|
104 |
|
|
|
210 |
|
|
|
208 |
|
Loan
servicing fees
|
|
|
(15 |
) |
|
|
126 |
|
|
|
54 |
|
|
|
253 |
|
Mortgage
servicing rights, net
|
|
|
- |
|
|
|
(75 |
) |
|
|
(31 |
) |
|
|
(143 |
) |
Other
|
|
|
(43 |
) |
|
|
64 |
|
|
|
(25 |
) |
|
|
108 |
|
Total
noninterest income
|
|
|
2,345 |
|
|
|
2,483 |
|
|
|
4,806 |
|
|
|
5,108 |
|
Noninterest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
and benefits
|
|
|
3,779 |
|
|
|
4,053 |
|
|
|
7,354 |
|
|
|
7,752 |
|
Occupancy
and equipment
|
|
|
729 |
|
|
|
760 |
|
|
|
1,499 |
|
|
|
1,471 |
|
Data
processing
|
|
|
577 |
|
|
|
531 |
|
|
|
1,119 |
|
|
|
1,053 |
|
Advertising
|
|
|
197 |
|
|
|
258 |
|
|
|
445 |
|
|
|
546 |
|
Postage
and supplies
|
|
|
146 |
|
|
|
171 |
|
|
|
283 |
|
|
|
321 |
|
Professional
services
|
|
|
299 |
|
|
|
191 |
|
|
|
634 |
|
|
|
403 |
|
Insurance
and taxes
|
|
|
306 |
|
|
|
140 |
|
|
|
461 |
|
|
|
225 |
|
Other
|
|
|
538 |
|
|
|
320 |
|
|
|
810 |
|
|
|
536 |
|
Total
noninterest expense
|
|
|
6,571 |
|
|
|
6,424 |
|
|
|
12,605 |
|
|
|
12,307 |
|
Income
(loss) before income taxes
|
|
|
674 |
|
|
|
1,458 |
|
|
|
(729 |
) |
|
|
2,969 |
|
Income
tax expense (benefit)
|
|
|
198 |
|
|
|
513 |
|
|
|
(404 |
) |
|
|
1,077 |
|
NET
INCOME (LOSS)
|
|
$ |
476 |
|
|
$ |
945 |
|
|
$ |
(325 |
) |
|
$ |
1,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.03 |
|
|
$ |
0.06 |
|
|
$ |
(0.02 |
) |
|
$ |
0.12 |
(1) |
Diluted
|
|
|
0.03 |
|
|
|
0.06 |
|
|
|
(0.02 |
) |
|
|
0.12 |
(1) |
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,740,064 |
|
|
|
15,962,325 |
|
|
|
15,936,796 |
|
|
|
16,352,427 |
(1) |
Diluted
|
|
|
15,776,330 |
|
|
|
15,978,217 |
|
|
|
15,936,796 |
|
|
|
16,374,451 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared per share:
|
|
$ |
0.055 |
|
|
$ |
0.055 |
|
|
$ |
0.110 |
|
|
$ |
0.103 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Earnings per share, average shares outstanding, and dividends per share have
been adjusted to reflect the impact of the
second-step conversion and reorganization of Home Federal Bancorp, Inc., which
occurred on December 19, 2007.
See
accompanying notes.
2
HOME
FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE
INCOME
(In
thousands, except share data) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee |
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Other |
|
|
|
|
|
|
Common
|
|
|
Stock |
|
|
Additional
Paid- |
|
|
Retained |
|
|
Ownership |
|
|
Comprehensive |
|
|
|
|
|
|
|
|
|
|
|
|
In
Capital
|
|
|
Earnings
|
|
|
Plan
|
|
|
Loss
|
|
|
Total
|
|
Balance
at Sept. 30, 2007
|
|
|
15,232,243 |
|
|
$ |
152 |
|
|
$ |
59,613 |
|
|
$ |
58,795 |
|
|
$ |
(3,698 |
) |
|
$ |
(2,225 |
) |
|
$ |
112,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Step Conversion(1)
|
|
|
2,073,619 |
|
|
|
21 |
|
|
|
95,938 |
|
|
|
|
|
|
|
(8,160 |
) |
|
|
|
|
|
|
87,799 |
|
Dissolution
of Mutual Holding Company
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 |
|
Restricted
stock issued, net of forfeitures
|
|
|
13,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
ESOP
shares committed to be released
|
|
|
|
|
|
|
|
|
|
|
(23 |
) |
|
|
|
|
|
|
1,253 |
|
|
|
|
|
|
|
1,230 |
|
Exercise
of stock options
|
|
|
54,797 |
|
|
|
1 |
|
|
|
605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
606 |
|
Share-based
compensation
|
|
|
|
|
|
|
|
|
|
|
1,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,022 |
|
Dividends
paid
($0.213
per share) (2) (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,987 |
) |
|
|
|
|
|
|
|
|
|
|
(2,987 |
) |
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,005 |
|
|
|
|
|
|
|
|
|
|
|
4,005 |
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
unrealized
holding loss
on securities available
for sale, net
of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
825 |
|
|
|
825 |
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,830 |
|
Balance
at Sept. 30, 2008
|
|
|
17,374,161 |
|
|
|
174 |
|
|
|
157,205 |
|
|
|
59,813 |
|
|
|
(10,605 |
) |
|
|
(1,400 |
) |
|
|
205,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
stock issued, net of forfeitures
|
|
|
(23,885 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
ESOP
shares committed to be released
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
453 |
|
|
|
|
|
|
|
460 |
|
Exercise
of stock options
|
|
|
32,862 |
|
|
|
|
|
|
|
353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
353 |
|
Share-based
compensation
|
|
|
|
|
|
|
|
|
|
|
417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
417 |
|
Treasury
shares
purchased
|
|
|
(867,970 |
) |
|
|
(9 |
) |
|
|
(7,886 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,895 |
) |
Dividends
paid
($0.110
per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,742 |
) |
|
|
|
|
|
|
|
|
|
|
(1,742 |
) |
Tax
adjustment
|
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9 |
) |
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(325 |
) |
|
|
|
|
|
|
|
|
|
|
(325 |
) |
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized holding loss on securities available for sale, net
of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,203 |
|
|
|
4,203 |
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,878 |
|
Balance
at March 31, 2009
|
|
|
16,515,168 |
|
|
$ |
165 |
|
|
$ |
150,087 |
|
|
$ |
57,746 |
|
|
$ |
(10,152 |
) |
|
$ |
2,803 |
|
|
$ |
200,649 |
|
(1)
|
The
total effect on equity accounts from the second-step conversion has
changed from the December 31, 2007 reported numbers due to adjustments
such as the effect of fractional shares and payment of additional expenses
related to the second-step
conversion.
|
(2)
|
Home
Federal MHC waived its receipt of dividends on the 8,979,246 shares that
it owned.
|
(3)
|
Dividends
per share have been adjusted to reflect the impact of the second-step
conversion of Home Federal Bancorp, Inc., which occurred on December 19,
2007.
|
|
|
See
accompanying notes.
3
HOME
FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
thousands) (Unaudited)
|
|
Six
Months Ended
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(325 |
) |
|
$ |
1,892 |
|
Adjustments
to reconcile net income (loss) to cash provided (used) by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
871 |
|
|
|
796 |
|
Net
amortization (accretion) of premiums and discounts on
investments
|
|
|
7 |
|
|
|
(17 |
) |
Loss
on sale of fixed assets and repossessed assets
|
|
|
51 |
|
|
|
95 |
|
ESOP
shares committed to be released
|
|
|
460 |
|
|
|
549 |
|
Equity
compensation expense
|
|
|
417 |
|
|
|
518 |
|
Provision
for loan losses
|
|
|
4,635 |
|
|
|
665 |
|
Valuation
allowance on other real estate owned
|
|
|
161 |
|
|
|
- |
|
Accrued
deferred compensation expense, net
|
|
|
34 |
|
|
|
373 |
|
Net
deferred loan fees
|
|
|
(2 |
) |
|
|
6 |
|
Deferred
income tax benefit
|
|
|
(2,137 |
) |
|
|
(229 |
) |
Net
gain on sale of loans
|
|
|
(597 |
) |
|
|
(347 |
) |
Proceeds
from sale of loans held for sale
|
|
|
32,950 |
|
|
|
25,406 |
|
Originations
of loans held for sale
|
|
|
(35,071 |
) |
|
|
(22,944 |
) |
Net
decrease in value of mortgage servicing rights
|
|
|
31 |
|
|
|
144 |
|
Net
increase in value of bank owned life insurance
|
|
|
(210 |
) |
|
|
(209 |
) |
Change
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Interest
receivable
|
|
|
263 |
|
|
|
(137 |
) |
Other
assets
|
|
|
429 |
|
|
|
(423 |
) |
Interest
payable
|
|
|
(124 |
) |
|
|
(112 |
) |
Other
liabilities
|
|
|
1,542 |
|
|
|
(1,359 |
) |
Net
cash provided by operating activities
|
|
|
3,385 |
|
|
|
4,667 |
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from maturities of mortgage-backed securities available for
sale
|
|
|
14,717 |
|
|
|
13,919 |
|
Purchases
of mortgage-backed securities available for sale
|
|
|
(465 |
) |
|
|
(56,257 |
) |
Maturity
of investment in certificate of deposit
|
|
|
5,000 |
|
|
|
- |
|
Sale
of mortgage servicing rights
|
|
|
1,676 |
|
|
|
- |
|
Purchases
of property and equipment
|
|
|
(1,941 |
) |
|
|
(2,031 |
) |
Net
decrease in loans
|
|
|
11,455 |
|
|
|
1,873 |
|
Proceeds
from sale of fixed assets and repossessed assets
|
|
|
510 |
|
|
|
452 |
|
Net
cash provided (used) by investing activities
|
|
|
30,952 |
|
|
|
(42,044 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
|
3,643 |
|
|
|
(8,503 |
) |
Net
decrease in advances by borrowers for taxes and insurance
|
|
|
(77 |
) |
|
|
(176 |
) |
Proceeds
from FHLB advances
|
|
|
18,000 |
|
|
|
4,000 |
|
Repayment
of FHLB advances
|
|
|
(51,063 |
) |
|
|
(29,177 |
) |
Net
proceeds from stock issuance and exchange pursuant to second step
conversion
|
|
|
- |
|
|
|
87,882 |
|
Proceeds
from exercise of stock options
|
|
|
353 |
|
|
|
328 |
|
Repurchases
of common stock
|
|
|
(7,895 |
) |
|
|
- |
|
Dividends
paid
|
|
|
(1,742 |
) |
|
|
(1,212 |
) |
Net
cash (used) provided by financing activities
|
|
|
(38,781 |
) |
|
|
53,142 |
|
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(4,444 |
) |
|
|
15,765 |
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
23,270 |
|
|
|
20,588 |
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$ |
18,826 |
|
|
$ |
36,353 |
|
|
|
|
|
|
|
|
|
|
(Continued)
HOME
FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
(In
thousands) (Unaudited)
|
|
Six
Months Ended
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
Interest
|
|
$ |
6,678 |
|
|
$ |
10,040 |
|
Income
taxes
|
|
|
2,285 |
|
|
|
1,760 |
|
|
|
|
|
|
|
|
|
|
NONCASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Acquisition
of real estate and other assets in settlement of loans
|
|
$ |
5,635 |
|
|
$ |
780 |
|
Fair
value adjustment to securities available for sale, net of
taxes
|
|
|
4,203 |
|
|
|
2,776 |
|
See accompanying
notes.
5
HOME
FEDERAL BANCORP, INC. AND SUBSIDIARY
SELECTED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1 - Basis of Presentation
The
consolidated financial statements presented in this quarterly report include the
accounts of Home Federal Bancorp, Inc., a Maryland corporation (the “Company”),
and its wholly-owned subsidiary, Home Federal Bank (the “Bank”). The
financial statements of the Company have been prepared in conformity with
accounting principles generally accepted in the United States of America for
interim financial information and are unaudited. All significant
intercompany transactions and balances have been eliminated. In the
opinion of the Company’s management, all adjustments consisting of normal
recurring adjustments necessary for a fair presentation of the financial
condition and results of operations for the interim periods included herein have
been made. Operating results for the three and six month periods ended March 31,
2009, are not necessarily indicative of the results that may be expected for the
year ending September 30, 2009.
The
Company was formed as the new stock holding company for the Bank in connection
with the Bank’s conversion from the mutual holding company structure to the
stock holding company structure, which was completed on December 19, 2007 (the
“Conversion”). Prior to the completion of the Conversion, the Bank
was the subsidiary of Home Federal Bancorp, Inc., a federally-chartered stock
mid-tier holding company (“Old Home Federal”), and Old Home Federal was a
subsidiary of Home Federal MHC, a federally-chartered mutual holding
company. The Bank formed the mutual holding company structure in
December 2004. As a result of the Conversion, Home Federal MHC and
Old Home Federal ceased to exist and were replaced by the Company as the
successor to Old Home Federal. See Note 3 below for additional
information regarding the Conversion.
Certain
information and note disclosures normally included in the Company’s annual
consolidated financial statements have been condensed or omitted. Therefore,
these consolidated financial statements and notes thereto should be read in
conjunction with the audited financial statements and notes included in the
Annual Report on Form 10-K for the year ended September 30, 2008 (“2008 Form
10-K”), filed with the Securities and Exchange Commission (“SEC”) on December
15, 2008.
Note
2 - Critical Accounting Estimates and Related Accounting Policies
The
preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect amounts
reported in the consolidated financial statements. Changes in these
estimates and assumptions are considered reasonably possible and may have a
material impact on the consolidated financial statements, and thus actual
results could differ from the amounts reported and disclosed
herein. The Company considers the allowance for loan losses, and
deferred income taxes to be critical accounting estimates.
Allowance for loan losses.
The procedures for assessing the adequacy of the allowance for loan losses
reflect evaluation of credit risk after careful consideration and interpretation
of relevant information. In developing this assessment, management must rely on
estimates and exercise judgment regarding matters where the ultimate outcome is
unknown, such as economic factors, developments affecting companies in specific
industries and issues with respect to single borrowers. The allowance for loan
losses is maintained at a level that management believes to be the best estimate
of probable incurred losses inherent in the loan portfolio at the balance sheet
dates presented. Depending on changes in circumstances, future assessments of
credit risk may yield materially different results, which may require an
increase or a decrease in the allowance for loan losses.
Deferred income taxes.
Deferred income taxes are computed using the asset and liability approach as
prescribed in Statement of Financial Accounting Standards (“SFAS”) No. 109,
Accounting for Income
Taxes. Under this method, a deferred tax asset or liability is
determined based on the currently enacted tax rates applicable to the period in
which the differences between the financial statement carrying amounts and tax
basis of the existing assets and liabilities are expected to be reported in the
Company’s income tax returns.
See accompanying
notes.
6
Note
3 –Conversion and Reorganization
The
Company is a Maryland corporation that was formed as the new stock holding
company for Home Federal Bank in connection with the Conversion. As part of the
Conversion, a total of 9,384,000 new shares of the Company were sold at $10.00
per share in subscription, community and syndicated community offerings through
which the Company received proceeds of approximately $87.8 million, net of
offering costs of approximately $5.9 million. The Company contributed $48.0
million, or approximately 50%, of the net proceeds of the offering to the Bank
in the form of a capital contribution. The Company loaned $8.2 million to the
Bank’s Employee Stock Ownership Plan (the “ESOP”) and the ESOP used those funds
to acquire 816,000 shares of the Company’s common stock at $10 per share. As
part of the Conversion, shares of outstanding common stock of Old Home Federal
were exchanged for 1.136 shares of the Company’s common stock. No fractional
shares were issued. Instead, cash was paid to stockholders at $10.00 per share
for any fractional shares that would otherwise be issued. The exchange resulted
in an additional 852,865 outstanding shares of the Company for a total of
17,325,901 outstanding shares as of the closing of the Conversion on December
19, 2007, after giving effect to the redemption of fractional
shares.
The
Conversion was accounted for as a reorganization in corporate form with no
change in the historical basis of the Company’s assets, liabilities and equity.
All references to the number of shares outstanding, with the exception of those
reported on the Consolidated Balance Sheets, are restated to give retroactive
recognition to the exchange ratio applied in the Conversion.
Note
4 - Earnings (Loss) Per Share
Earnings
(Loss) per share (“EPS”) is computed using the basic and diluted weighted
average number of common shares outstanding during the period as applicable.
Basic EPS is computed by dividing the Company’s net income or loss by the
weighted average number of common shares outstanding for the
period. Diluted EPS is computed by dividing net income by the diluted
weighted average shares outstanding, which include common stock equivalent
shares outstanding using the treasury stock method, unless such shares are
anti-dilutive. Common stock equivalents arise from assumed conversion of
outstanding stock options and vesting of restricted stock
awards. ESOP shares are not considered outstanding for earnings per
share purposes until they are committed to be released.
The
following table presents the computation of basic and diluted EPS for the
periods indicated:
|
|
Three
Months Ended
March
31,
|
|
|
Six
Months Ended
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(in
thousands, except share and per share data)
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
476 |
|
|
$ |
945 |
|
|
$ |
(325 |
) |
|
$ |
1,892 |
|
Weighted-average
common shares outstanding
|
|
|
15,740,064 |
|
|
|
15,962,325 |
|
|
|
15,936,796 |
|
|
|
16,352,427 |
|
Basic
EPS
|
|
$ |
0.03 |
|
|
$ |
0.06 |
|
|
$ |
(0.02 |
) |
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
476 |
|
|
$ |
945 |
|
|
$ |
(325 |
) |
|
$ |
1,892 |
|
Weighted-average
common shares outstanding
|
|
|
15,740,064 |
|
|
|
15,962,325 |
|
|
|
15,936,796 |
|
|
|
16,352,427 |
|
Net
effect of dilutive stock options
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
effect of dilutive restricted stock
|
|
|
36,266 |
|
|
|
15,892 |
|
|
|
- |
|
|
|
22,024 |
|
Weighted-average
common shares outstanding and common stock equivalents
|
|
|
15,776,330 |
|
|
|
15,978,217 |
|
|
|
15,936,796 |
|
|
|
16,374,451 |
|
Diluted
EPS
|
|
$ |
0.03 |
|
|
$ |
0.06 |
|
|
$ |
(0.02 |
) |
|
$ |
0.12 |
|
For the
three and six month periods ended March 31, 2009 and 2008, there were 547,942
and 638,308 options excluded from the calculation of EPS, respectively as their
effect was anti-dilutive. For the six months ended March
31, 2008,
earnings per share and average shares outstanding have been adjusted to reflect
the impact of the second-step conversion and reorganization of Home Federal
Bancorp, Inc., which occurred on December 19, 2007.
Note
5 - Mortgage-Backed Securities
Mortgage-backed
securities available for sale consisted of the following:
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
by U.S. Government sponsored enterprises
|
|
$ |
173,507 |
|
|
$ |
5,326 |
|
|
$ |
(9 |
) |
|
$ |
178,824 |
|
Other
|
|
|
3,353 |
|
|
|
- |
|
|
|
(645 |
) |
|
|
2,708 |
|
Total
|
|
$ |
176,860 |
|
|
$ |
5,326 |
|
|
$ |
(654 |
) |
|
$ |
181,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008
|
|
|
|
Issued
by U.S. Government sponsored enterprises
|
|
$ |
187,730 |
|
|
$ |
669 |
|
|
$ |
(2,669 |
) |
|
$ |
185,730 |
|
Other
|
|
|
3,390 |
|
|
|
- |
|
|
|
(333 |
) |
|
|
3,057 |
|
Total
|
|
$ |
191,120 |
|
|
$ |
669 |
|
|
$ |
(3,002 |
) |
|
$ |
188,787 |
|
The fair
value of temporarily impaired securities, the amount of unrealized losses and
the length of time these unrealized losses existed as of March 31, 2009 were as
follows:
|
Less
than 12 months
|
|
12
months or longer
|
|
Total
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
(in
thousands)
|
Mortgage-backed
|
|
|
|
|
|
|
|
|
|
|
|
securities,
available
|
|
|
|
|
|
|
|
|
|
|
|
for
sale
|
$2,854
|
|
$(9)
|
|
$2,708
|
|
$(645)
|
|
$5,562
|
|
$(654)
|
Management
has evaluated these securities and has determined that the decline in the value
is temporary and not related to the underlying credit quality of the
issuers. The declines in value are on securities that have
contractual maturity dates and, at March 31, 2009, management believes it is
reasonably probable that principal and interest balances on those securities
will be collected based on the performance, underwriting and vintage of the
loans underlying the temporarily-impaired securities. However, continued
deteriorating economic conditions may result in degradation in the performance
of the loans underlying those securities in the future. The Company has the
ability and intent to hold the temporarily-impaired securities for a reasonable
period of time for a forecasted recovery of the amortized cost.
As of
March 31, 2009, the Bank had pledged mortgage-backed securities with an
amortized cost of $75.0 million and a fair value of $77.4 million as collateral
for FHLB advances. Mortgage-backed securities with an amortized cost
of $5.2 million and a fair value of $5.4 million at March 31, 2009, were pledged
to the Federal Reserve Bank as collateral for treasury tax and loan funds held
by the Bank and for borrowings from the discount window. As of March
31, 2009, and September 30, 2008, there was no balance owed by the Bank through
the Federal Reserve Bank discount window.
Note
6 - Loans Receivable
Loans
receivable are summarized as follows:
|
|
March
31, 2009
|
|
|
September
30, 2008
|
|
|
|
Balance
|
|
|
Percent
of
Total
|
|
|
Balance
|
|
|
Percent
of
Total
|
|
|
|
(dollars
in thousands)
|
|
Real
Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential
|
|
$ |
185,911 |
|
|
|
41.58 |
% |
|
$ |
210,302 |
|
|
|
45.22 |
% |
Multi-family
residential
|
|
|
10,121 |
|
|
|
2.26 |
|
|
|
8,477 |
|
|
|
1.82 |
|
Commercial
|
|
|
159,867 |
|
|
|
35.73 |
|
|
|
151,733 |
|
|
|
32.62 |
|
Total
real estate
|
|
|
355,899 |
|
|
|
79.57 |
|
|
|
370,512 |
|
|
|
79.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate Construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential
|
|
|
10,869 |
|
|
|
2.43 |
|
|
|
13,448 |
|
|
|
2.89 |
|
Multi-family
residential
|
|
|
- |
|
|
|
- |
|
|
|
920 |
|
|
|
0.20 |
|
Commercial
and land development
|
|
|
22,055 |
|
|
|
4.93 |
|
|
|
18,674 |
|
|
|
4.01 |
|
Total
real estate construction
|
|
|
32,924 |
|
|
|
7.36 |
|
|
|
33,042 |
|
|
|
7.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity
|
|
|
50,644 |
|
|
|
11.32 |
|
|
|
52,954 |
|
|
|
11.38 |
|
Automobile
|
|
|
1,562 |
|
|
|
0.35 |
|
|
|
1,903 |
|
|
|
0.41 |
|
Other
consumer
|
|
|
1,161 |
|
|
|
0.26 |
|
|
|
1,370 |
|
|
|
0.29 |
|
Total
consumer
|
|
|
53,367 |
|
|
|
11.93 |
|
|
|
56,227 |
|
|
|
12.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
business
|
|
|
5,096 |
|
|
|
1.14 |
|
|
|
5,385 |
|
|
|
1.16 |
|
|
|
|
447,286 |
|
|
|
100.00 |
% |
|
|
465,166 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium
on purchased loans
|
|
|
188 |
|
|
|
|
|
|
|
199 |
|
|
|
|
|
Deferred
loan fees
|
|
|
(971 |
) |
|
|
|
|
|
|
(973 |
) |
|
|
|
|
Allowance
for loan losses
|
|
|
(7,333 |
) |
|
|
|
|
|
|
(4,579 |
) |
|
|
|
|
Loans
receivable, net
|
|
$ |
439,170 |
|
|
|
|
|
|
$ |
459,813 |
|
|
|
|
|
Note
7 – Allowance for Loan Losses
Activity
in the allowance for loan losses for the three and six month periods ended March
31, 2009 and 2008, was as follows:
|
|
Three
months ended
March
31,
|
|
|
Six
months ended
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$ |
8,027 |
|
|
$ |
3,015 |
|
|
$ |
4,579 |
|
|
$ |
2,988 |
|
Provision
for loan losses
|
|
|
1,060 |
|
|
|
378 |
|
|
|
4,635 |
|
|
|
665 |
|
Losses
on loans charged-off
|
|
|
(1,778 |
) |
|
|
(96 |
) |
|
|
(1,908 |
) |
|
|
(360 |
) |
Recoveries
on loans charged-off
|
|
|
24 |
|
|
|
10 |
|
|
|
27 |
|
|
|
14 |
|
Ending
balance
|
|
$ |
7,333 |
|
|
$ |
3,307 |
|
|
$ |
7,333 |
|
|
$ |
3,307 |
|
Note
8 – Fair Value Measurement
SFAS No.
157 defines fair value, establishes a consistent framework for measuring fair
value and expands disclosure requirements about fair value
measurements. SFAS No. 157, among other things, requires the Company
to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. Observable inputs reflect market
data obtained from independent sources, while unobservable inputs reflect the
Company’s market assumptions. These two types of inputs create the
following fair value hierarchy:
·
|
Level
1 – Quoted prices for identical instruments in active
markets.
|
·
|
Level
2 – Quoted prices for similar instruments in active markets; quoted prices
for identical or similar instruments in markets that are not active; and
model-derived valuations whose inputs are observable or whose significant
value drivers are observable.
|
·
|
Level
3 – Instruments whose significant value drivers are
unobservable.
|
The
following table summarized the Company’s financial instruments that were
measured at fair value on a recurring basis at March 31, 2009:
|
March
31, 2009
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale
|
|
$181,532
|
|
|
-
|
|
|
$181,532
|
|
|
-
|
Additionally,
certain assets are measured at fair value on a non-recurring
basis. These adjustments to fair value generally result from the
application of lower-of-cost-or-market accounting or write-downs of individual
assets due to impairment. The following table summarizes the
Company’s financial instruments that were measured at fair value on a
non-recurring basis at March 31, 2009:
|
March
31, 2009
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans
|
|
$9,864
|
|
|
-
|
|
|
-
|
|
|
$9,864
|
Impaired
loans, which are measured for impairment using the fair value of the collateral
at March 31, 2009, had a carrying amount of $9.9 million, net of valuation
allowances totaling $1.6 million, resulting in an additional provision for loan
losses of $207,000 during the second quarter of fiscal 2009.
The
Company used the following methods and significant assumptions to estimate fair
value:
Securities: The
Company’s securities available for sale primarily consist of mortgage-backed
securities issued by U.S. Government sponsored enterprises and trade in active
markets. These securities are included under Level 2 because there
may or may not be daily trades in each of the individual securities and because
the valuation of these securities may be based on instruments that are not
exactly identical to those owned by the Company.
Impaired
loans: A loan is considered impaired when, based upon
currently known information, it is deemed probable that the Company will be
unable to collect all amounts due as scheduled according to the original terms
of the agreement. Impaired loans are measured based on the present
value of expected future cash flows discounted at the loan’s effective interest
rate or, as a practical expedient, based on the loan’s observable market price
or the fair value of collateral, if the loan is collateral
dependent. Impaired loans, which are collateral dependent, are
included in the table above.
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking
Statements
This
report contains forward-looking statements, which can be identified by the use
of words such as “believes,” “intends,” “expects,” “anticipates,” “estimates” or
similar expressions. Forward-looking statements include, but are not
limited to:
·
|
statements
of our goals, intentions and
expectations;
|
·
|
statements
regarding our business plan, prospects, growth and operating
strategies;
|
·
|
statements
regarding the quality of our loan and investment portfolios;
and,
|
·
|
estimates
of our risks and future costs and
benefits.
|
These
forward-looking statements are subject to significant risks and
uncertainties. Actual results may differ materially from those
contemplated by the forward-looking statements as a result of, among others, the
following factors:
·
|
general
economic conditions, including real estate values, either nationally or in
the Company’s market area, that are worse than
expected;
|
·
|
changes
in the interest rate environment that reduce the Company’s interest
margins or reduce the fair value of financial
instruments;
|
·
|
the
credit risk of lending activities, including risks related to construction
and land development lending and commercial and small business
banking;
|
·
|
changes
in the level and trend of loan delinquencies and
write-offs;
|
·
|
results
of examinations by banking
regulators;
|
·
|
increased
competitive pressures among financial services
companies;
|
·
|
changes
in consumer spending, borrowing and savings
habits;
|
·
|
our
ability to successfully manage our
growth;
|
·
|
legislative
or regulatory changes that adversely affect the Company’s
business;
|
·
|
adverse
changes in the securities markets;
and
|
·
|
changes
in accounting policies and practices, as may be adopted by the bank
regulatory agencies, the Public Company Accounting Oversight Board or the
Financial Accounting Standards
Board.
|
These
factors should be considered in evaluating the forward-looking statements, and
undue reliance should not be placed on such statements. The Company
undertakes no obligation to publish revised forward-looking statements to
reflect the occurrence of unanticipated events or circumstances after the date
hereof.
Background
and Overview
Home
Federal Bank (the “Bank”) was founded in 1920 as a building and loan association
and reorganized as a federal mutual savings and loan association in
1936. On December 6, 2004, the Bank converted to stock form and
reorganized into the two-tiered mutual holding company form of organization and
formed Home Federal MHC and Home Federal Bancorp, Inc. (“Old Home Federal”). In
connection with that transaction, Old Home Federal sold 40.00% of its
outstanding shares of common stock (6,083,500 shares) to the public and issued
59.04% of its outstanding shares of common stock (8,979,246 shares) to Home
Federal MHC, the mutual holding company parent of Old Home
Federal. In connection with that transaction, Old Home Federal also
established and capitalized the Home Federal Foundation (“Foundation”) for the
purpose of supporting charitable organizations and activities that enhance the
quality of life for residents within the Bank’s market area. The Foundation was
capitalized with a $1.8 million one-time contribution, which consisted of
146,004 shares of its common stock and $365,010 in cash.
On May
11, 2007, the Boards of Directors of Old Home Federal, Home Federal MHC and the
Bank adopted a Plan of Conversion and Reorganization (the “Plan”) pursuant to
which the Bank reorganized from the mutual holding company structure to the
stock holding company structure. As a result of that transaction, Home Federal
Bank formed a new stock holding company, Home Federal Bancorp, Inc. (“we”, “us”,
the “Company”), that serves as the
holding
company for Home Federal Bank. Home Federal Bancorp, Inc., is a Maryland
corporation. The Conversion was completed on December 19, 2007.
Pursuant
to the terms of the Plan, shares of outstanding common stock of Old Home Federal
were exchanged for 1.136 shares of the Company’s common stock. Cash was paid in
lieu of fractional shares. The Conversion was approved by the Bank’s
members, the Company’s stockholders (including the approval of a majority of the
shares held by persons other than Home Federal MHC) and regulatory
agencies. The Company’s common stock is traded on the NASDAQ Global
Select Market under the symbol “HOME” and is included in the U.S. Russell 2000®
Index.
The Bank
is a community-oriented financial institution dedicated to serving the financial
service needs of consumers and businesses within its market area. The
Bank’s primary business is attracting deposits from the general public and using
these funds to originate loans. The Bank emphasizes the origination
of commercial business loans, commercial real estate loans, construction and
residential development loans, consumer loans and loans secured by first
mortgages on owner-occupied residential real estate. As a result of a
comprehensive and continuing review of its strategic business plan, the Company
continues to expand its commercial and small business banking programs,
including a variety of loan and deposit products.
The Bank
serves the Treasure Valley region of southwestern Idaho, which includes Ada,
Canyon, Elmore and Gem counties, through its 15 full-service banking offices and
one loan center. Nearly 40% of the state’s population lives and works
in the four counties served by Home Federal Bank. Ada County has the
largest population and includes the city of Boise, the state
capital. Home Federal Bank maintains its largest branch presence in
Ada County with eight locations, followed by Canyon County with five branches,
including the Company’s corporate headquarters in Nampa. The two
remaining branches are located in Elmore and Gem Counties.
The
following items summarize the key factors affecting performance of the Company
and the key strategic initiatives undertaken by management during the Company’s
second quarter of fiscal year 2009:
§
|
Economic
conditions in the Treasure Valley continued to deteriorate as a result of
rising unemployment, bankruptcies and foreclosures and declining real
estate values, which resulted in rising levels of delinquent loans and
nonperforming assets and the need for an additional provision for loan
losses;
|
§
|
Costs
associated with foreclosed real estate and FDIC insurance premiums caused
an increase in the efficiency ratio as noninterest expense increases
outpaced higher revenue;
|
§
|
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;
|
§
|
The
slowdown in consumer spending reduced fee
income;
|
§
|
The
Bank’s newly-formed Small Business Banking Group had a successful second
quarter by generating new deposit balance
relationships;
|
§
|
Net
interest margin expanded due to declining funding costs and continued
deleveraging of low-spread assets and liabilities;
and
|
§
|
The
Bank maintained its strong capital position with a total risk-based
capital ratio of 32.9% at
|
The
current economic and interest rate environments continue to challenge
management’s growth plans. Total assets continued to decline during the second
quarter of fiscal year 2009 as a lack of demand for loans, or more importantly a
diminished supply of creditworthy lending opportunities, and residential loan
refinancing runoff, limited the Company’s ability to increase outstanding loan
balances. Alternative investments are also unattractive as investment
securities offer very low yields within management’s credit and interest rate
risk tolerances. As competitor financial institutions continue to struggle with
liquidity, some are offering deposit rates that exceed the Company’s wholesale
borrowing costs. Therefore, certificate of deposit balances have declined as
some customers chose to move their maturing certificate of deposit balances to
competitors in search of higher returns.
Consistent
with its business strategy, the Company reduced fixed-term borrowing balances
with the Federal Home Loan Bank of Seattle (“FHLB”) and management of the Bank
continued to focus on growing core deposits, which are defined as non-maturity
deposits such as checking, savings and money market accounts. Some success
during the quarter, particularly in the Bank’s new Small Business Banking Group,
resulted in higher core deposit balances, which management believes will
increase the franchise value of the Company and improve profitability by
reducing
interest
rate sensitivity and high-cost borrowing balances. Core deposit relationships
should also increase revenue through service and interchange fee
income.
While
interchange income fell slightly in fiscal year 2009 compared to fiscal year
2008, fee income from nonsufficient funds (“NSF”) transactions has fallen
significantly from the Bank’s historical levels. The reason for this is twofold:
(1) management is focusing on higher-balance relationship deposit accounts
rather than low-balance, high fee accounts and (2) the economic slowdown has
reduced consumer spending and management believes depositors are more closely
monitoring their account balances. Nonetheless, management is concerned that
continued declines in NSF revenue will limit future non interest revenue growth
and cause the Company to be more dependent on net interest income. In response
to this and to execute the strategy of increasing core deposit balances, the
Bank will launch a new checking account that management believes will result in
higher checking account balances and provide an incentive for customers to use
their check cards more frequently, which should result in higher interchange
income.
Nonperforming
assets and delinquent loans increased during the second quarter of fiscal 2009.
Loans to finance construction and land acquisition and development projects have
been the source of the Company’s nonperforming loan balance increases.
Commercial real estate loans are now being pressured as property vacancies
continue to climb in the Treasure Valley and the previously mentioned slow down
in consumer spending is causing many independent and national retailers to close
stores or reduce inventory. The Bank’s Credit Administration Department is also
spending considerable time reviewing home equity lines of credit and, in some
cases, suspending lines at their current balances in order to mitigate future
loan losses.
Micron
Technology, Inc., one of the larger employers headquartered in our market area,
recently announced a plan to eliminate 2,000 jobs in the Treasure Valley during
calendar 2009. The unemployment rate in the Treasure Valley has increased to
8.4% in February 2009 from 4.5% in March 2008 as total employment fell 6.5%
during that time period to a level in February 2009 that has not been seen in
the Boise-Nampa market since February 2005.
Nonetheless,
management is optimistic about the long-term outlook for the Company as capital
levels remain very high compared to peers and the level of liquidity in the
balance sheet provides flexibility to execute several strategies to weather this
economic storm and emerge as one of the strongest financial institutions in the
Pacific Northwest.
Critical
Accounting Estimates and Related Accounting Policies
Allowance for Loan Losses.
Management recognizes that losses may occur over the life of a loan and
that the allowance for loan losses must be maintained at a level necessary to
absorb specific losses on impaired loans and probable losses inherent in the
loan portfolio. Management assesses the allowance for loan losses on a quarterly
basis by analyzing several factors including delinquency rates, charge-off rates
and the changing risk profile of the Bank’s loan portfolio, as well as local
economic conditions such as unemployment rates, bankruptcies and vacancy rates
of business and residential properties.
The
Company believes that the accounting estimate related to the allowance for loan
losses is a critical accounting estimate because it is highly susceptible to
change from period to period, requiring management to make assumptions about
probable incurred losses inherent in the loan portfolio at the balance sheet
date. The impact of a sudden large loss could deplete the allowance and require
increased provisions to replenish the allowance, which would negatively impact
earnings.
The
Company’s methodology for analyzing the allowance for loan losses consists of
specific allocations on significant individual credits and a general allowance
amount, including a range of losses. The specific allowance component is
determined when management believes that the collectibility of an individually
reviewed loan has been impaired and a loss is probable. The general allowance
component relates to assets with no well-defined deficiency or weakness and
takes into consideration losses that are inherent within the portfolio but have
not been identified. The general allowance is determined by applying a
historical loss percentage to various types of loans with similar
characteristics and classified loans that are not analyzed specifically.
Adjustments are made to historical loss percentages to reflect current economic
and internal environmental factors, such as changes in underwriting standards
and management turnover, which may increase or decrease those loss factors. As a
result of the
imprecision
in calculating inherent and potential losses, a range is added to the general
allowance to provide an allowance for loan losses that is adequate to cover
losses that may arise as a result of changing economic conditions and other
qualitative factors that may alter historical loss experience. Additionally,
future events may evidence additional losses that were unknown at the time
management estimated the allowance, which may require an increase in the
allowance for loan losses in future periods.
The
allowance is increased by the provision for loan losses, which is charged
against current period operating results and decreased by the amount of actual
loan charge-offs, net of recoveries.
The
Company also estimates a reserve related to unfunded loan commitments. In
assessing the adequacy of the reserve, the Company uses a similar approach used
in the development of the allowance for loan losses. The reserve for unfunded
loan commitments is included in other liabilities on the Consolidated Balance
Sheets. The provision for unfunded commitments is charged to noninterest
expense.
Deferred Income Taxes.
Deferred income taxes are reported for temporary differences between
items of income or expense reported in the financial statements and those
reported for income tax purposes. Deferred taxes are computed using the asset
and liability approach as prescribed in SFAS No. 109, Accounting for Income
Taxes. Under this method, a deferred tax asset or liability is determined based
on the enacted tax rates that will be in effect when the differences between the
financial statement carrying amounts and tax basis of existing assets and
liabilities are expected to be reported in an institution’s income tax returns.
The deferred tax provision for the year is equal to the net change in the net
deferred tax asset from the beginning to the end of the year, less amounts
applicable to the change in value related to investments available for sale. The
effect on deferred taxes of a change in tax rates is recognized as income in the
period that includes the enactment date. The primary differences between
financial statement income and taxable income result from depreciation expense,
mortgage servicing rights, loan loss reserves, deferred compensation, mark to
market adjustments on our available for sale securities, and dividends received
from the Federal Home Loan Bank of Seattle. Deferred income taxes do not include
a liability for pre-1988 bad debt deductions allowed to thrift institutions that
may be recaptured if the institution fails to qualify as a bank for income tax
purposes in the future.
Comparison
of Financial Condition at March 31, 2009 and September 30, 2008
For the
six months ended March 31, 2009, total assets decreased $32.6
million. The changes in total assets were primarily concentrated in
the following asset categories:
|
|
|
|
|
(decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31,
2009
|
|
|
Balance
at September 30, 2008
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(dollars
in thousands)
|
|
|
|
|
|
Cash
and amounts due from depository institutions
|
|
$ |
18,826 |
|
|
$ |
23,270 |
|
|
$ |
(4,444 |
) |
|
|
(19.1 |
)% |
Mortgage-backed
securities, at fair value
|
|
|
181,532 |
|
|
|
188,787 |
|
|
|
(7,255 |
) |
|
|
(3.8 |
) |
Loans
receivable, net
|
|
|
439,170 |
|
|
|
459,813 |
|
|
|
(20,643 |
) |
|
|
(4.5 |
) |
Cash. Cash and amounts due
from depository institutions decreased $4.4 million to $18.8 million at March
31, 2009, from $23.3 million at September 30, 2008. The decrease was
primarily attributable to excess cash being used to pay off maturing borrowings
from the Federal Home Loan Bank of Seattle (the “FHLB”).
Securities. The fair value of
mortgage-backed securities decreased $7.3 million to $181.5 million at March 31,
2009, from $188.8 million at September 30, 2008. The decrease was the
net of principal repayments and the increase in the value of the mortgage backed
securities portfolio during the six months ended March 31, 2009. At
March 31, 2009, the unrealized gain on the portfolio was $4.7 million compared
to an unrealized loss of $2.3 million at September 30.
2008. Principal reduction totaled $14.7 million for the six months
ended March 31, 2009 and are occurring at an accelerating rate due to the
historically low rates available on residential mortgages, which is increasing
refinancing activity.
Nearly
all of the Company’s mortgage-backed securities are issued by U.S. Government
sponsored enterprises, primarily Fannie Mae and Freddie Mac. While
the U.S. Government has recently affirmed its support for government sponsored
enterprises and the mortgage-backed securities they issued, significant
deterioration in the financial strength of Fannie Mae, Freddie Mac or
mortgage-backed security insurers may have a material effect on the valuation
and performance of the Company’s mortgage-backed securities portfolio in future
periods.
Non-agency,
also referred to as “private label,” mortgage-backed securities had a fair value
of $2.7 million at
March 31,
2009, compared to their amortized cost of $3.4 million. The securities carried a
rating of ‘AAA’ by Moody’s and Standard & Poor’s at that date. The value of
private label mortgage-backed securities have fallen and have been more volatile
than securities issued by government-sponsored enterprises due to the
deterioration of the national residential loan market. Management has reviewed
the delinquency status, credit support and collateral coverage of the loans
pooled in the private label securities portfolio and has concluded the
securities were not other than temporarily impaired at March 31, 2009. However,
continued deterioration in the economy and rapid increases in unemployment may
result in a change in the performance expectation for these securities in the
future, which may negatively impact the Company’s earnings. At March 31, 2009,
the Company did not own collateralized debt obligations or trust preferred
securities.
FHLB Stock. At March 31, 2009,
the Bank held $9.6 million of common stock in the FHLB. This security is
reported at par value, which represents the Bank’s cost. The FHLB recently
announced that it would report a risk-based capital deficiency under the
regulations of the Federal Housing Finance Agency (the “FHFA”), its primary
regulator, as of December 31, 2008. As a result, the FHLB stopped paying a
dividend and stated that it would suspend the repurchase and redemption of
outstanding common stock until its retained earnings deficiency was
reclaimed.
The FHLB
has communicated to the Company that it believes the calculation of risk-based
capital under the current rules of the FHFA significantly overstates the market
and credit risk of the FHLB’s private-label mortgage-backed securities in the
current market environment and that they have enough capital to cover the risks
reflected in the FHLB’s balance sheet. As a result, the Company has not recorded
an "other than temporary impairment" on its investment in FHLB stock. However,
continued deterioration in the FHLB’s financial position may result in
impairment in the value of those securities, the requirement that the Bank
contribute additional funds to recapitalize the FHLB, or reduce the Bank’s
ability to borrow funds from the FHLB, impairing the Bank’s ability to meet
liquidity demands.
Loans. Net loans receivable
decreased $20.6 million to $439.2 million at March 31, 2009, from $459.8 million
at September 30, 2008. One- to four-family residential mortgage loans
decreased $24.4 million as mortgage rates fell during the second quarter of
fiscal 2009, which led to significantly higher levels of mortgage loan
refinancing. Additionally, the Bank 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. Consumer loans decreased $2.9 million to $53.4 million as of March
31, 2009. Commercial real estate, multifamily and acquisition and
development loans increased $9.4 million to $208.0 million at March 31, 2009
from $198.6 million at September 30, 2008. However, commercial,
multifamily and acquisition and development loans declined $6.9 million during
the second quarter of fiscal 2009 primarily as a result of a $7.3 million
reduction in the real estate construction loan portfolio associated with the
repayment of a large loan during the period. The Company plans to continue its
emphasis on commercial and small business banking products.
Asset Quality. Loans
delinquent 30 to 89 days, which included $1.2 million of loans on nonaccrual
status, totaled $11.6 million at March 31, 2009, compared to $6.5 million at
September 30, 2008, and $4.0 million at March 31, 2008. Nonperforming assets,
which includes all loans on nonaccrual status, impaired loans and real estate
owned, totaled $19.1 million at March 31, 2009, compared to $10.6 million at
September 30, 2008, and $2.3 million at March 31, 2008. The allowance for loan
losses was $7.3 million, or 1.64%, of gross loans at March 31, 2009, compared to
$4.6 million, or 0.98% of gross loans at September 30, 2008, and $3.3 million,
or 0.69% of gross loans at March 31, 2008.
The
largest increase in delinquent loans during the second quarter of fiscal 2009
occurred in the commercial real estate portfolio with balances delinquent more
than 30 days increasing by $3.9 million to $8.4 million at March 31, 2009. Net
charge-offs totaled $1.8 million during the quarter ended March 31, 2009. Real
estate owned increased
$3.1
million during the second quarter of fiscal 2009 to $4.5 million at March 31,
2009. Real estate owned was comprised of $2.9 million of land development and
speculative one- to four-family construction projects, $1.0 million of
commercial real estate and $610,000 of one- to four-family residential
properties.
The
following table summarizes loans delinquent 30 to 89 days at March 31, 2009, and
September 30, 2008:
|
|
March
31,
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(in
thousands)
|
|
Land
acquisition and development
|
|
$ |
133 |
|
|
$ |
1,150 |
|
One-
to four-family construction
|
|
|
760 |
|
|
|
241 |
|
Commercial
real estate
|
|
|
5,313 |
|
|
|
3,094 |
|
One-
to four-family residential
|
|
|
5,242 |
|
|
|
1,836 |
|
Other
|
|
|
193 |
|
|
|
190 |
|
Total loans delinquent 30 to 89
days
|
|
$ |
11,641 |
|
|
$ |
6,511 |
|
When a
loan becomes 90 days delinquent, the Bank places the loan on nonaccrual status.
A loan is considered impaired when, based on current information and events, it
is probable that the Bank will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting scheduled
principal and interest payments when due. Generally, an impaired loan is also
placed on nonaccrual status, regardless of delinquency. As a result, some loans
that are not 90 days or more past due may be in nonaccrual status if it is
considered impaired. The delinquency table above includes $1.2 million of loans
that have been placed on nonaccrual status at March 31, 2009, which are also
included in the table below that summarizes total nonperforming loans (including
nonaccrual and impaired loans) as well as real estate owned at March 31, 2009,
and September 30, 2008:
|
|
March
31, 2009
|
|
|
September
30, 2008
|
|
|
|
Balance
|
|
|
Loss Reserve
|
|
|
Balance
|
|
|
Loss Reserve
|
|
|
|
(in
thousands)
|
|
Land
acquisition and development
|
|
$ |
5,266 |
|
|
$ |
1,029 |
|
|
$ |
3,975 |
|
|
$ |
916 |
|
One-
to four-family construction
|
|
|
2,307 |
|
|
|
286 |
|
|
|
4,239 |
|
|
|
596 |
|
Commercial
real estate
|
|
|
3,074 |
|
|
|
220 |
|
|
|
- |
|
|
|
- |
|
One-
to four-family residential
|
|
|
3,943 |
|
|
|
441 |
|
|
|
1,701 |
|
|
|
219 |
|
Other
|
|
|
- |
|
|
|
- |
|
|
|
30 |
|
|
|
2 |
|
Total nonperforming and impaired
loans
|
|
$ |
14,590 |
|
|
|
1,976 |
|
|
$ |
9,945 |
|
|
|
1,733 |
|
General
loss reserve
|
|
|
|
|
|
|
5,357 |
|
|
|
|
|
|
|
2,846 |
|
Total
allowance for loan losses
|
|
|
|
|
|
$ |
7,333 |
|
|
|
|
|
|
$ |
4,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate owned, net
|
|
$ |
4,478 |
|
|
|
|
|
|
$ |
650 |
|
|
|
|
|
Troubled
debt restructurings that are not included in the delinquency or nonperforming
asset tables above totaled $654,000 at March 31, 2009.
Nearly
all of the Company’s loans are secured by collateral located in the Treasure
Valley or southern Idaho. Approximately 60% and 20% of the Bank’s commercial
real estate and construction and land development loans are secured by
properties in Ada and Canyon counties in Idaho, respectively. Approximately 6%
of that portfolio is secured by properties located in eastern Idaho, 5% is
located in Valley County in Idaho, and 4% is located in the Twin Falls and
Ketchum areas.
In 2005,
the Bank purchased approximately $38.8 million of residential real estate loans
from Countrywide Financial, now Bank of America, who continues to service the
loans. Balances on the portfolio totaled $23.0 million at March 31, 2009.
Approximately 92.1% of the portfolio balance is secured by properties outside of
the state of Idaho and delinquencies and foreclosures are rising quickly in that
portfolio. At March 31, 2009, loans in this portfolio that were delinquent over
30 days totaled $3.1 million, or 12.8%, of the portfolio, including $2.2 million
of
nonperforming
loans that are reported in the table above. The total reserve allocated to loans
in this loan portfolio was $1.0 million at March 31, 2009, or 4.1% of the
balance of loans outstanding on that date.
At March
31, 2009, nearly all of the Company’s home equity lines of credit (“HELOC”) were
directly originated through the Bank’s branch network. However, approximately
$1.5 million of HELOCs, or 4.2% of the HELOC portfolio at March 31, 2009, were
originated through broker relationships. While nearly all of these loans are
secured by properties in southern Idaho, management ceased indirect origination
of HELOCs in fiscal 2008. The average credit score of borrowers in the Bank’s
total HELOC portfolio was 748 at loan origination, and the average combined loan
to value was 72%.
The
Treasure Valley economy continues to deteriorate as unemployment rose quickly
from 4.80% in September 2008 to an estimated 8.40% in February 2009. New home
and commercial real estate construction has nearly come to a standstill as
excess inventory in the residential and commercial real estate markets continues
to reduce property values. The pending closure of retail locations as a result
of reduced consumer spending will exacerbate the problem.
Management
believes the Treasure Valley is at the beginning of a downturn in the commercial
real estate market. As a result of this uncertainty, management recorded a
significant provision for loan losses during the six months ended March 31,
2009, in order to increase the general reserve component of the allowance for
loan losses. While the $2.4 million provision for loan losses for the full
fiscal year of 2008 and the $4.6 million provision recorded for the first six
months of fiscal 2009 exceeds the level of net charge-offs during those periods,
management believes such an increase in the allowance for loan losses is
prudent and appropriate and that the allowance for loan losses reflects
management’s best estimate of probable, known and estimable losses inherent in
the loan portfolio at March 31, 2009. However, additional information may later
come to management’s attention, evidencing losses in excess of the amounts
estimated, which may negatively affect earnings in the future.
Last
year, management realigned the Credit Administration Department and appointed a
Chief Credit Officer, reporting directly to the Chief Executive Officer, in
anticipation of this environment. The Bank also recently hired a senior workout
professional to increase the Credit Administration Department’s
resources.
Deposits. Deposits
increased $3.6 million, or 1.0%, to $376.6 million at March 31, 2009, from
$372.9 million at September 30, 2008, primarily as a result of savings
accounts. Savings account balances have been increasing each month in
the current fiscal year with the most significant increase in balances occurring
during the quarter ended March 31, 2009. The decrease in certificates
of deposit was due to choosing not to match rates offered by local competitors
that in many cases exceeded the Bank’s cost of alternative funding sources. The
Bank had no brokered deposits at March 31, 2009, or September 30, 2008. The
following table details the composition of the deposit portfolio and changes in
deposit balances:
|
|
|
|
|
Increase
(decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31,
2009
|
|
|
Balance
at September 30, 2008
|
|
|
Amount
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
demand deposits
|
|
$ |
37,323 |
|
|
$ |
41,398 |
|
|
$ |
(4,075 |
) |
|
|
(9.8 |
)% |
Interest-bearing
demand deposits
|
|
|
134,047 |
|
|
|
127,714 |
|
|
|
6,333 |
|
|
|
5.0 |
|
Savings
deposits
|
|
|
33,704 |
|
|
|
26,409 |
|
|
|
7,295 |
|
|
|
27.6 |
|
Certificates
of deposit
|
|
|
171,494 |
|
|
|
177,404 |
|
|
|
(5,910 |
) |
|
|
(3.3 |
) |
Total
deposit accounts
|
|
$ |
376,568 |
|
|
$ |
372,925 |
|
|
$ |
3,643 |
|
|
|
1.0 |
% |
Approximately
72% of the certificates of deposit portfolio at March 31, 2009, is scheduled to
mature within 12 months. While this presents an opportunity to reduce the cost
of interest bearing deposits in the current low interest rate environment, the
significant level of maturities of certificates also places a burden on the
Company’s liquidity if management is unable to retain the maturing
balances.
Borrowings. FHLB
advances decreased $33.1 million, or 24.1%, to $103.9 million at March 31, 2009,
from $137.0 million at September 30, 2008. Excess cash and principal
payment proceeds from mortgage-backed securities and
residential
loan portfolios were used to repay FHLB advances as they matured. The
Bank uses FHLB advances as an alternative funding source to deposits, manage
funding costs, reduce interest rate risk, and to leverage the balance
sheet.
Deferred Income Tax
Asset/Liability. The Company had a deferred tax asset of $1.1
million at March 31, 2009 versus a deferred tax asset of $1.8 million at
September 30, 2008. There are three major components to the
change. There was a $2.8 million shift from an unrealized loss on the
Company’s mortgage-backed securities’ portfolio as of September 30, 2008 to an
unrealized gain as of March 31, 2009, as interest rates fell and spreads
narrowed, increasing the value of the securities portfolio during the quarter.
There was a $1.4 million increase in deferred tax assets due to a $4.6 million
provision for loan loss recorded during the six month period. Lastly,
deferred tax liability decreased $710,000 due to the sale of mortgage servicing
rights completed in December 2008.
Equity. Stockholders’ equity
decreased $4.5 million, or 2.2%, to $200.6 million at March 31, 2009, compared
to $205.2 million at September 30, 2008. The funds used to complete
the repurchase of the remaining shares pursuant to our share repurchase program
during the quarter ended March 31, 2009 was the primary cause for the decrease
in stockholders’ equity. Dividends and a year-to-date loss from
operations in fiscal 2009 reduced retained earnings while a lower interest rate
environment at March 31, 2009 increased the unrealized gain on securities by
$4.2 million, net of tax, compared to September 30, 2008. The
Company’s book value per share as of March 31, 2009 was $12.15 per share based
upon 16,515,168 outstanding shares of common stock, a 2.9% increase from
September 30, 2008.
Comparison
of Operating Results for the Three Months Ended March 31, 2009 and March 31,
2008
Net
income for the three months ended March 31, 2009 was $476,000, or $0.03 per
diluted share, compared to net income of $945,000, or $0.06 per diluted share,
for the three months ended March 31, 2008. 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
for both the quarter ended March 31, 2009 and the same period of the prior
year. However, total revenue for the second quarter of fiscal 2009
increased $99,000, or 1.2%, from the linked first quarter of fiscal 2009. The
Company’s efficiency ratio increased to 79.12% for the quarter ended March 31,
2009, compared to 77.77% for the same quarter a year ago.
Net Interest
Income. Net interest income increased $183,000, or 3.2%, to
$6.0 million for the three months ended March 31, 2009, from $5.8 million for
the three months ended March 31, 2008. The increase in net interest
income is primarily attributable to a decrease in interest
expense. Current rates paid on deposits are significantly lower
than in the prior year. In addition, Federal Home Loan Bank borrowing
balances are lower than in the same period of the prior year as some maturing
advances have been repaid with excess liquidity.
The
Company’s net interest margin increased 45 basis points to 3.60% for the quarter
ended March 31, 2009, from 3.15% for the same quarter last year. The
improvement in the net interest margin is primarily attributable to the decrease
in interest expense between the two periods.
The
following table sets forth the impacts to the Company’s net interest income from
changes in balances of interest earning assets and interest bearing liabilities
as well as changes in interest rates. The rate column shows the
effects attributable to changes in rate (changes in rate multiplied by prior
volume). The volume column shows the effects attributable to changes in volume
(changes in volume multiplied by prior rate). Changes attributable to
both rate and volume, which cannot be segregated, are allocated proportionately
to the changes in rate and volume.
|
|
Three
Months Ended March 31, 2009
Compared
to Three Months Ended March 31, 2008
|
|
|
|
Increase
(Decrease) Due to
|
|
|
|
|
|
|
Rate
|
|
|
Volume
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
Loans
receivable, net
|
|
$ |
(646 |
) |
|
$ |
(340 |
) |
|
$ |
(986 |
) |
Loans
held for sale
|
|
|
(6 |
) |
|
|
28 |
|
|
|
22 |
|
Interest-bearing
deposits in other banks
|
|
|
(263 |
) |
|
|
(246 |
) |
|
|
(509 |
) |
Mortgage-backed
securities
|
|
|
(44 |
) |
|
|
19 |
|
|
|
(25 |
) |
FHLB
stock
|
|
|
(31 |
) |
|
|
- |
|
|
|
(31 |
) |
Total
net change in income on interest-earning assets
|
|
$ |
(990 |
) |
|
$ |
(539 |
) |
|
$ |
(1,529 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
deposits
|
|
$ |
2 |
|
|
$ |
14 |
|
|
$ |
16 |
|
Interest-bearing
demand deposits
|
|
|
(26 |
) |
|
|
3 |
|
|
|
(23 |
) |
Money
market accounts
|
|
|
(209 |
) |
|
|
(45 |
) |
|
|
(254 |
) |
Certificates
of deposit
|
|
|
(579 |
) |
|
|
(290 |
) |
|
|
(869 |
) |
Total
deposits
|
|
|
(812 |
) |
|
|
(318 |
) |
|
|
(1,130 |
) |
FHLB
advances
|
|
|
(104 |
) |
|
|
(478 |
) |
|
|
(582 |
) |
Total
net change in expense on interest-bearing liabilities
|
|
$ |
(916 |
) |
|
$ |
(796 |
) |
|
$ |
(1,712 |
) |
Total
increase in net interest income
|
|
|
|
|
|
|
|
|
|
$ |
183 |
|
Interest and Dividend
Income. Total interest and dividend income for the three
months ended March 31, 2009, decreased $1.5 million, or 14.6%, to $8.9 million,
from $10.5 million for the three months ended March 31, 2008. The
decrease during the quarter was attributable to both a decrease on yields earned
on interest earning assets as well as a decrease in interest earning
assets.
The
following table compares detailed average earning asset balances, associated
yields, and resulting changes in interest and dividend income:
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Increase/
|
|
|
|
Average
Balance
|
|
|
Yield
|
|
|
Average
Balance
|
|
|
Yield
|
|
|
(Decrease)
in Interest and Dividend Income from 2008
|
|
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits in other banks
|
|
$ |
4,855 |
|
|
|
0.08 |
% |
|
$ |
57,900 |
|
|
|
3.52 |
% |
|
$ |
(509 |
) |
Mortgage-backed
securities
|
|
|
184,491 |
|
|
|
4.60 |
|
|
|
182,865 |
|
|
|
4.70 |
|
|
|
(25 |
) |
Loans
receivable, net
|
|
|
458,105 |
|
|
|
5.89 |
|
|
|
479,822 |
|
|
|
6.45 |
|
|
|
(986 |
) |
Loans
held for sale
|
|
|
4,386 |
|
|
|
5.13 |
|
|
|
2,266 |
|
|
|
6.09 |
|
|
|
22 |
|
FHLB
stock
|
|
|
9,591 |
|
|
|
- |
|
|
|
9,591 |
|
|
|
1.29 |
|
|
|
(31 |
) |
Total
interest-earning assets
|
|
$ |
661,428 |
|
|
|
5.40 |
% |
|
$ |
732,444 |
|
|
|
5.71 |
% |
|
$ |
(1,529 |
) |
The
decline in the yield on interest-bearing deposits in other banks reflects the
significantly lower short-term interest rate environment in the second quarter
of fiscal 2009 compared to the second quarter of fiscal 2008. The significantly
higher balance of interest-bearing deposits in other banks in the prior year is
due to proceeds received from the Conversion.
The yield
on loans fell to 5.89% in the second quarter of fiscal 2009 also as a result of
the decrease in short-term interest rates. For example, the Wall Street Journal
Prime rate was 3.25% for the second fiscal quarter of 2009 compared to an
average of 6.24% during the same quarter last year. Loans on nonaccrual status
during the second quarter of 2009 reduced interest income by approximately
$255,000.
Interest
Expense. Interest expense decreased $1.7 million, or 36.6%, to
$3.0 million for the three months ended March 31, 2009 from $4.7 million for the
three months ended March 31, 2008. The average balance of total
interest-bearing liabilities decreased $69.3 million, or 13.4%, to $449.2
million for the three months ended March 31, 2009 from $518.5 million for the
three months ended March 31, 2008. The decrease in interest expense
in 2009 was mainly due to a reduction in the outstanding balance of FHLB
advances and a lower rate paid on certificates of deposit.
The
following table details average balances, cost of funds and the change in
interest expense:
|
|
Three
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Increase/
|
|
|
|
Average
Balance
|
|
|
Cost
|
|
|
Average
Balance
|
|
|
Cost
|
|
|
(Decrease)
in Interest Expense from 2008
|
|
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
deposits
|
|
$ |
30,642 |
|
|
|
0.73 |
% |
|
$ |
22,776 |
|
|
|
0.70 |
% |
|
$ |
16 |
|
Interest-bearing
demand deposits
|
|
|
80,404 |
|
|
|
0.50 |
|
|
|
78,726 |
|
|
|
0.62 |
|
|
|
(23 |
) |
Money
market deposits
|
|
|
52,567 |
|
|
|
1.20 |
|
|
|
59,902 |
|
|
|
2.75 |
|
|
|
(254 |
) |
Certificates
of deposit
|
|
|
171,870 |
|
|
|
3.32 |
|
|
|
199,652 |
|
|
|
4.60 |
|
|
|
(869 |
) |
FHLB
advances
|
|
|
113,692 |
|
|
|
4.32 |
|
|
|
157,444 |
|
|
|
4.60 |
|
|
|
(582 |
) |
Total
interest-bearing liabilities
|
|
$ |
449,175 |
|
|
|
2.64 |
% |
|
$ |
518,500 |
|
|
|
3.61 |
% |
|
$ |
(1,712 |
) |
The
slight increase in the cost of savings deposits was due to product
disintermediation during the second quarter of 2009 as customers shifted their
balances to a higher-yielding savings product. The decline in the cost of all
other interest-bearing deposits reflects the significantly lower interest rate
environment in the second quarter of fiscal 2009 compared to the second quarter
of fiscal 2008.
Provision for Loan
Losses. A provision for loan losses of $1.1 million was
recorded as a result of our analysis of the loan portfolio for the quarter ended
March 31, 2009, compared to a provision for loan losses of $378,000 for the same
quarter of the prior year. 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. Additionally, the estimated loss
rates and the range of losses were increased during the quarter ended December
31, 2008, as the Treasure Valley and national economies continued to deteriorate
rapidly.
While
management believes the estimates and assumptions used in its determination of
the adequacy of the allowance are reasonable, there can be no assurance that
such estimates and assumptions will not be proven incorrect in the future, or
that the actual amount of future provisions will not exceed the amount of past
provisions or that any increased provision that may be required will not
adversely impact the Company’s financial condition and results of
operations. In addition, the determination of the amount of the
allowance for loan losses is subject to review by bank regulators, as part of
the routine examination process, which may result in the establishment of
additional reserves based upon their judgment of information available to them
at the time of their examination.
Standard
provisions for loan losses are established based upon the type of loan and the
risk factors associated with that loan type. As the Bank increases
its commercial loan portfolio, the Bank anticipates it will increase its
allowance for loan losses based upon the higher risk characteristics associated
with commercial loans compared with one- to four- family residential loans,
which have historically comprised the majority of the Bank’s loan
portfolio.
The
following table details selected activity associated with the allowance for loan
losses:
|
|
At
or For the Three Months
Ended
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(dollars
in thousands)
|
|
Provision
for loan losses
|
|
$ |
1,060 |
|
|
$ |
378 |
|
Net
charge-offs
|
|
|
1,754 |
|
|
|
87 |
|
Allowance
for loan losses
|
|
|
7,333 |
|
|
|
3,307 |
|
Allowance
for loan losses as a percentage of gross loans receivable
|
|
|
1.64 |
% |
|
|
0.69 |
% |
Nonperforming loans
(nonaccrual and 90 days or more past due)
|
|
$ |
14,590 |
|
|
$ |
1,852 |
|
Allowance
for loan losses as a percentage of nonperforming loans
|
|
|
50.26 |
% |
|
|
178.56 |
% |
Nonperforming
loans as a percentage of gross loans receivable
|
|
|
3.26 |
|
|
|
0.39 |
|
Loans
receivable, net
|
|
$ |
439,170 |
|
|
$ |
477,155 |
|
Noninterest
Income. Noninterest income decreased $138,000, or 5.6%, to
$2.3 million for the three months ended March 31, 2009 from $2.5 million for the
three months ended March 31, 2008. The decrease was primarily attributable to
decreases of $210,000 and $141,000 in service charges and fees and loan
servicing fees, respectively, offset somewhat by an increase in gain on sale of
loans of $245,000. The decreases in service charges and fees reflect
the continuing slowdown in consumer spending, which has reduced nonsufficient
fund fees. The decrease in loan servicing fees is due to the sale of loan
servicing rights completed in the first quarter of fiscal 2009. The
increase in gain on sale of loans is attributed to the historically low rates
available on residential mortgages during the second quarter of fiscal
2009.
The
following table provides a detailed analysis of the changes in components of
noninterest income:
|
|
Three
Months Ended
March
31,
|
|
|
Increase
(decrease)
|
|
|
|
2009
|
|
|
2008
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(dollars
in thousands)
|
|
Service
fees and charges
|
|
$ |
1,892 |
|
|
$ |
2,102 |
|
|
$ |
(210 |
) |
|
|
(10.0 |
)% |
Gain
on sale of loans
|
|
|
407 |
|
|
|
162 |
|
|
|
245 |
|
|
|
151.2 |
|
Increase
in cash surrender value of bank owned life insurance
|
|
|
104 |
|
|
|
104 |
|
|
|
- |
|
|
|
- |
|
Loan
servicing fees
|
|
|
(15 |
) |
|
|
126 |
|
|
|
(141 |
) |
|
|
(111.9 |
) |
Mortgage
servicing rights, net
|
|
|
- |
|
|
|
(75 |
) |
|
|
75 |
|
|
|
(100.0 |
) |
Other
|
|
|
(43 |
) |
|
|
64 |
|
|
|
(107 |
) |
|
|
(167.2 |
) |
Total
noninterest income
|
|
$ |
2,345 |
|
|
$ |
2,483 |
|
|
$ |
(138 |
) |
|
|
(5.6 |
)% |
Other
income includes a $66,000 reduction of noninterest income related to the
settlement of the purchase price proceeds for the sale of the Bank’s mortgage
servicing rights.
Noninterest
Expense. Noninterest expense increased $147,000, or 2.3%, to
$6.6 million for the three months ended March 31, 2009 from $6.4 million for the
three months ended March 31, 2008. The following table provides a detailed
analysis of the changes in components of noninterest expense:
|
|
Three
Months Ended
March
31,
|
|
|
Increase
(decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(dollars
in thousands)
|
|
Compensation
and benefits
|
|
$ |
3,779 |
|
|
$ |
4,053 |
|
|
$ |
(274 |
) |
|
|
(6.8 |
)% |
Occupancy
and equipment
|
|
|
729 |
|
|
|
760 |
|
|
|
(31 |
) |
|
|
(4.1 |
) |
Data
processing
|
|
|
577 |
|
|
|
531 |
|
|
|
46 |
|
|
|
8.7 |
|
Advertising
|
|
|
197 |
|
|
|
258 |
|
|
|
(61 |
) |
|
|
(23.6 |
) |
Insurance
and taxes
|
|
|
306 |
|
|
|
140 |
|
|
|
166 |
|
|
|
118.6 |
|
Other
|
|
|
983 |
|
|
|
682 |
|
|
|
301 |
|
|
|
44.1 |
|
Total
noninterest expense
|
|
$ |
6,571 |
|
|
$ |
6,424 |
|
|
$ |
147 |
|
|
|
2.3 |
% |
Compensation
and benefits, which included severance accruals of $98,000, declined $274,000 or
6.8% 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 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.
Income Tax
Expense. The Company recorded an income tax expense of
$198,000 for the three months ended March 31, 2009. Net income before
income taxes was $674,000 for the three months ended March 31, 2009 compared to
net income before taxes of $1.5 million for the three months ended March 31,
2008.
Comparison
of Operating Results for the Six Months ended March 31, 2009 and March 31,
2008
Net loss
for the six months ended March 31, 2009 was $325,000, or $0.02 per diluted
share, compared to net income of $1.9 million, or $0.12 per diluted share, for
the six months ended March 31, 2008. Earnings per share for the prior
period have been adjusted to reflect the impact of the second-step conversion
and reorganization of the Company, which occurred on December 19,
2007. Total revenue for the six months ended March 31, 2009, which
consisted of net interest income before the provision for loan losses plus
noninterest income, increased $570,000 or 3.6% to $16.5 million compared to
$15.9 million for the same period of the prior year. The Company’s
efficiency ratio decreased to 76.3% for the six months ended March 31, 2009,
compared to 77.2% for the same period of the prior year.
Net Interest
Income. Net interest income increased $872,000, or 8.1%, to
$11.7 million for the six months ended March 31, 2009, from $10.8 million for
the six months ended March 31, 2008. The increase was mainly
attributable to a decrease in interest expense. Lower interest rates
as well as lower outstanding borrowings in the current year than in the year ago
period were the main drivers in the decrease.
The
Company’s net interest margin increased 41 basis points to 3.48% for the six
months ended March 31, 2009, from 3.07% for the same period last
year. The improvement in the net interest margin is primarily
attributable to the decrease in interest expense between the two
periods.
The
following table sets forth the impacts to the Company’s net interest income from
changes in balances of interest earning assets and interest bearing liabilities
as well as changes in interest rates. The rate column shows the
effects attributable to changes in rate (changes in rate multiplied by prior
volume). The volume column shows the effects attributable to changes in volume
(changes in volume multiplied by prior rate). Changes attributable to
both rate and volume, which cannot be segregated, are allocated proportionately
to the changes in rate and volume.
|
|
Six
Months Ended March 31, 2009
Compared
to Six Months Ended March 31, 2008
|
|
|
|
Increase
(Decrease) Due to
|
|
|
|
|
|
|
Rate
|
|
|
Volume
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
Loans
receivable, net
|
|
$ |
(1,419 |
) |
|
$ |
(519 |
) |
|
$ |
(1,938 |
) |
Loans
held for sale
|
|
|
(3 |
) |
|
|
14 |
|
|
|
11 |
|
Interest-bearing
deposits in other banks
|
|
|
(371 |
) |
|
|
(359 |
) |
|
|
(730 |
) |
Mortgage-backed
securities
|
|
|
(16 |
) |
|
|
253 |
|
|
|
237 |
|
FHLB
stock
|
|
|
(83 |
) |
|
|
- |
|
|
|
(83 |
) |
Total
net change in income on interest-earning assets
|
|
$ |
(1,892 |
) |
|
$ |
(611 |
) |
|
$ |
(2,503 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
deposits
|
|
$ |
13 |
|
|
$ |
23 |
|
|
$ |
36 |
|
Interest-bearing
demand deposits
|
|
|
(65 |
) |
|
|
- |
|
|
|
(65 |
) |
Money
market accounts
|
|
|
(487 |
) |
|
|
(27 |
) |
|
|
(514 |
) |
Certificates
of deposit
|
|
|
(1,098 |
) |
|
|
(685 |
) |
|
|
(1,783 |
) |
Total
deposits
|
|
|
(1,637 |
) |
|
|
(689 |
) |
|
|
(2,326 |
) |
FHLB
advances
|
|
|
(57 |
) |
|
|
(992 |
) |
|
|
(1,049 |
) |
Total
net change in expense on interest-bearing liabilities
|
|
$ |
(1,694 |
) |
|
$ |
(1,681 |
) |
|
$ |
(3,375 |
) |
Total
increase in net interest income
|
|
|
|
|
|
|
|
|
|
$ |
872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and Dividend
Income. Total interest and dividend income for the six months
ended March 31, 2009 decreased $2.5 million, or 12.1%, to $18.3 million, from
$20.8 million for the six months ended March 31, 2008. The decrease
during the period was attributable to both a decrease in the average balance of
interest-earning assets of $32.9 million and a drop in yields earned on
interest-earning assets of 46 basis points.
The
following table compares detailed average earning asset balances, associated
yields, and resulting changes in interest and dividend income:
|
|
Six
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Increase/
|
|
|
|
Average
Balance
|
|
|
Yield
|
|
|
Average
Balance
|
|
|
Yield
|
|
|
(Decrease)
in Interest and Dividend Income from 2008
|
|
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits in other banks
|
|
$ |
10,320 |
|
|
|
0.85 |
% |
|
$ |
41,073 |
|
|
|
3.77 |
% |
|
$ |
(730 |
) |
Mortgage-backed
securities
|
|
|
185,085 |
|
|
|
4.68 |
|
|
|
171,724 |
|
|
|
4.76 |
|
|
|
237 |
|
Loans
receivable, net
|
|
|
465,072 |
|
|
|
5.95 |
|
|
|
481,309 |
|
|
|
6.55 |
|
|
|
(1,938 |
) |
Loans
held for sale
|
|
|
3,191 |
|
|
|
5.51 |
|
|
|
2,472 |
|
|
|
6.24 |
|
|
|
11 |
|
FHLB
stock
|
|
|
9,591 |
|
|
|
(0.69 |
) |
|
|
9,591 |
|
|
|
1.04 |
|
|
|
(83 |
) |
Total
interest-earning assets
|
|
$ |
673,259 |
|
|
|
5.42 |
% |
|
$ |
706,169 |
|
|
|
5.88 |
% |
|
$ |
(2,503 |
) |
Interest
Expense. Interest expense decreased $3.4 million, or 34.0%, to
$6.6 million for the six months ended March 31, 2009 from $9.9 million for the
six months ended March 31, 2008. The average balance of total
interest-bearing liabilities decreased $70.9 million, or 13.4%, to $459.9
million for the six months ended March 31, 2009 from $530.7 million for the six
months ended March 31, 2008. Decreases in certificates of deposit and
FHLB advances of $32.3 million and $43.8 million respectively were primarily
responsible for the decrease in interest bearing liabilities.
The
following table details average balances, cost of funds and the change in
interest expense:
|
|
Six
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Increase/
|
|
|
|
Average
Balance
|
|
|
Cost
|
|
|
Average
Balance
|
|
|
Cost
|
|
|
(Decrease)
in Interest Expense from 2008
|
|
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
deposits
|
|
$ |
28,950 |
|
|
|
0.78 |
% |
|
$ |
22,691 |
|
|
|
0.68 |
% |
|
$ |
36 |
|
Interest-bearing
demand
deposits
|
|
|
78,991 |
|
|
|
0.52 |
|
|
|
78,284 |
|
|
|
0.69 |
|
|
|
(65 |
) |
Money
market deposits
|
|
|
53,932 |
|
|
|
1.33 |
|
|
|
55,749 |
|
|
|
3.13 |
|
|
|
(514 |
) |
Certificates
of deposit
|
|
|
174,574 |
|
|
|
3.53 |
|
|
|
206,830 |
|
|
|
4.70 |
|
|
|
(1,783 |
) |
FHLB
advances
|
|
|
123,416 |
|
|
|
4.53 |
|
|
|
167,172 |
|
|
|
4.60 |
|
|
|
(1,049 |
) |
Total
interest-bearing liabilities
|
|
$ |
459,863 |
|
|
|
2.85 |
% |
|
$ |
530,726 |
|
|
|
3.74 |
% |
|
$ |
(3,375 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan
Losses. A provision for loan losses of $4.6 million was
recorded as a result of our analysis of the loan portfolio for the six months
ended March 31, 2009, compared to a provision for loan losses of $665,000 for
the same period of the prior year.
The
following table details selected activity associated with the allowance for loan
losses:
|
|
At
or For the Six Months
Ended
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(dollars
in thousands)
|
|
Provision
for loan losses
|
|
$ |
4,635 |
|
|
$ |
665 |
|
Net
charge-offs
|
|
|
1,881 |
|
|
|
347 |
|
Allowance
for loan losses
|
|
|
7,333 |
|
|
|
3,307 |
|
Allowance
for loan losses as a percentage of gross loans receivable
|
|
|
1.64 |
% |
|
|
0.69 |
% |
Nonperforming loans
(nonaccrual and 90 days or more past due)
|
|
$ |
14,590 |
|
|
$ |
1,852 |
|
Allowance
for loan losses as a percentage of nonperforming loans
|
|
|
50.26 |
% |
|
|
178.56 |
% |
Nonperforming
loans as a percentage of gross loans receivable
|
|
|
3.26 |
|
|
|
0.39 |
|
Loans
receivable, net
|
|
$ |
439,170 |
|
|
$ |
477,155 |
|
Noninterest
Income. Noninterest income decreased $302,000, or 5.9%, to
$4.8 million for the six months ended March 31, 2009 from $5.1 million for the
six months ended March 31, 2008. The decrease was primarily
attributable to decreases of $334,000 and $199,000 in service fees and charges
and loan servicing fees offset by an increase in gain on sale of loans of
$250,000. The decreases in service charges and fees reflect the
continuing slowdown in consumer spending and the decrease in loan servicing fees
is due to the sale of loan servicing rights completed in the first quarter of
fiscal 2009. The increase in gain on sale of loans is attributed to
the historically low rates available on residential mortgages during the first
six months of fiscal 2009.
The
following table provides a detailed analysis of the changes in components of
noninterest income:
|
|
Six
Months Ended
March
31,
|
|
|
Increase
(decrease)
|
|
|
|
2009
|
|
|
2008
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(dollars
in thousands)
|
|
Service
fees and charges
|
|
$ |
4,001 |
|
|
$ |
4,335 |
|
|
$ |
(334 |
) |
|
|
(7.7 |
)% |
Gain
on sale of loans
|
|
|
597 |
|
|
|
347 |
|
|
|
250 |
|
|
|
72.1 |
|
Increase
in cash surrender value of bank owned life insurance
|
|
|
210 |
|
|
|
208 |
|
|
|
2 |
|
|
|
1.0 |
|
Loan
servicing fees
|
|
|
54 |
|
|
|
253 |
|
|
|
(199 |
) |
|
|
(78.7 |
) |
Mortgage
servicing rights, net
|
|
|
(31 |
) |
|
|
(143 |
) |
|
|
112 |
|
|
|
78.3 |
|
Other
|
|
|
(25 |
) |
|
|
108 |
|
|
|
(133 |
) |
|
|
(123.2 |
) |
Total
noninterest income
|
|
$ |
4,806 |
|
|
$ |
5,108 |
|
|
$ |
(302 |
) |
|
|
(5.9 |
)% |
Noninterest
Expense. Noninterest expense increased $298,000, or 2.4%, to
$12.6 million for the six months ended March 31, 2009 from $12.3 million for the
six months ended March 31, 2008. Compensation and benefits declined $398,000 or
5.1% from the year ago period. This reduction is mainly attributable
to the absence of accruals in the current year for incentive awards due to the
Company’s financial results to date. The increase in other expense is
mainly attributable to costs associated with troubled loans and real estate
owned. The following table provides a detailed analysis of the
changes in components of noninterest expense:
|
|
Six
Months Ended
March
31,
|
|
|
Increase
(decrease)
|
|
|
|
2009
|
|
|
2008
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
and benefits
|
|
$ |
7,354 |
|
|
$ |
7,752 |
|
|
$ |
(398 |
) |
|
|
(5.1 |
)% |
Occupancy
and equipment
|
|
|
1,499 |
|
|
|
1,471 |
|
|
|
28 |
|
|
|
1.9 |
|
Data
processing
|
|
|
1,119 |
|
|
|
1,053 |
|
|
|
66 |
|
|
|
6.3 |
|
Advertising
|
|
|
445 |
|
|
|
546 |
|
|
|
(101 |
) |
|
|
(18.5 |
) |
Insurance
and taxes
|
|
|
461 |
|
|
|
225 |
|
|
|
236 |
|
|
|
104.9 |
|
Other
|
|
|
1,727 |
|
|
|
1,260 |
|
|
|
467 |
|
|
|
37.1 |
|
Total
noninterest expense
|
|
$ |
12,605 |
|
|
$ |
12,307 |
|
|
$ |
298 |
|
|
|
2.4 |
% |
Income Tax Expense
(Benefit). The Company recorded an income tax benefit of
404,000 for the six months ended March 31, 2009. Net loss before
income taxes was $729,000 for the six months ended March 31, 2009 compared to
net income of $3.0 million for the six months ended March 31, 2008.
Liquidity,
Commitments and Capital Resources
Liquidity. The
Company actively analyzes and manages the Bank’s liquidity with the objectives
of maintaining an adequate level of liquidity and to ensure the availability of
sufficient cash flows to support loan growth, fund deposit withdrawals, fund
operations and satisfy other financial commitments. See the
"Consolidated Statements of Cash Flows" contained in Item 1 - Financial
Statements, included herein.
The
primary sources of funds are customer deposits, loan repayments, loan sales,
maturing investment securities, and FHLB advances. These sources of
funds are used to make loans, acquire investment securities and other assets,
and fund continuing operations. While maturities and the scheduled
amortization of loans are a predictable source of funds, deposit flows and
mortgage prepayments are greatly influenced by the level of interest rates,
economic conditions and competition. Management believes the
Company’s current liquidity position and anticipated operating results are
sufficient to fund the Bank’s known existing commitments and activity
levels.
Liquidity
is essential to the Company’s business. An inability to raise funds through
deposits, borrowings, the sale of loans and other sources could have a
substantial negative effect on liquidity. The Company’s access to funding
sources in amounts adequate to finance the Bank’s activities on acceptable terms
could be impaired by factors that affect the Company and the Bank specifically
or within the financial services industry or economy in general. Factors that
could detrimentally impact the Company’s access to liquidity sources include
adverse regulatory action against us, a disruption in the financial markets or
negative views and expectations about the prospects for the financial services
industry in light of the recent turmoil faced by banking organizations and the
continued deterioration in credit markets.
At March
31, 2009, certificates of deposit were $171.5 million, or 45.5% of total
deposits, including $123.3 million that are scheduled to mature by March 31,
2009. Historically, the Bank has been able to retain a significant
amount of deposits as they mature. However, recent disruptions in the credit
markets have resulted in a highly price-competitive market for certificates of
deposit. These rates currently exceed alternative costs of borrowings and are
high compared to historical spreads to U.S. Treasury note rates. Additionally,
since loan demand continues to slow, management has been reluctant to offer
rates in excess of wholesale borrowing costs. This has resulted in some deposit
runoff as customers are moving their maturing balances to competitors at a
higher pace than the Bank has historically experienced.
At March
31, 2009, the Bank maintained a line of credit with the FHLB of Seattle equal to
40% of total assets to the extent the Bank provides qualifying collateral and
holds sufficient FHLB stock. At March 31, 2009, the Bank was in
compliance with the collateral requirements and $160.1 million of the line of
credit was available. The Bank is highly dependent on the FHLB of Seattle to
provide the primary source of wholesale funding for immediate liquidity and
borrowing needs. The failure of the FHLB of Seattle or the FHLB
system in general, may materially impair the Company’s ability to meet our
growth plans or to meet short and long-term liquidity
demands. However, the Company’s mortgage backed securities are
marketable and could be sold to obtain cash to meet liquidity demands should
access to FHLB funding be impaired. Additionally, the Bank could access funding
from the Discount Window at the Federal Reserve Bank of San Francisco or through
the origination of out of market brokered deposits.
During
the second quarter of fiscal year 2009, the Bank was notified by a correspondent
bank that the Bank’s $10.0 million unsecured federal funds purchased line was
suspended due to the increase in the Bank’s nonperforming assets. This line was
available on a secured-borrowing basis at March 31, 2009. The Bank had no
balances drawn on the line of credit and management does not believe this has a
material impact on the Bank’s liquidity position or on the ability of management
to execute the Company’s strategic growth plan.
Off-Balance Sheet
Arrangements. The Bank is party to financial instruments with
off-balance sheet risk in the normal course of business in order to meet the
financing needs of the Bank’s customers. These financial instruments
generally include commitments to originate mortgage, commercial and consumer
loans, and involve to varying degrees, elements of credit and interest rate risk
in excess of amounts recognized in the consolidated balance
sheets. The Bank’s maximum exposure to credit loss in the event of
nonperformance by the borrower is represented by the contractual amount of those
instruments. Because some commitments may expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. The same credit policies are used in making commitments
as are used for on-balance sheet instruments. Collateral is required
in instances where deemed necessary.
Undisbursed
balances of loans closed include funds not disbursed but committed for
construction projects. Unused lines of credit include funds not
disbursed, but committed for, home equity, commercial and consumer lines of
credit.
Commercial
letters of credit are conditional commitments issued to guarantee the
performance of a customer to a third party. Those guarantees are
primarily used to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit
is essentially the same as that involved in extending loan facilities to
customers.
The
following is a summary of commitments and contingent liabilities with
off-balance sheet risks as of March 31,
2009:
|
|
Contract
or
Notional
Amount
|
|
|
|
(in
thousands)
|
|
Commitments
to originate loans:
|
|
|
|
Fixed
rate
|
|
$ |
12,780 |
|
Adjustable
rate
|
|
|
127 |
|
Undisbursed
balance of loans closed
|
|
|
9,676 |
|
Unused
lines of credit
|
|
|
36,192 |
|
Commercial
letters of credit
|
|
|
346 |
|
Total
|
|
$ |
59,121 |
|
Capital. Consistent with the Bank’s
goal to operate a sound and profitable financial organization, efforts are
ongoing to actively seek to maintain a “well capitalized” institution in
accordance with regulatory standards. The Bank’s total regulatory capital was
$141.2 million at March 31, 2009, or 21.5%, of total assets on that date. As of
March 31, 2009, the Bank exceeded all regulatory capital requirements. The
Bank’s regulatory capital ratios at March 31, 2009 were as follows: Tier 1
capital 21.5%; Tier 1 (core) risk-based capital 31.6%; and total risk-based
capital 32.9%. The applicable regulatory capital requirements to be considered
well capitalized are 5%, 6% and 10%, respectively.
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
The
Company’s Board of Directors has established an asset and liability management
policy to guide management in maximizing net interest spread by managing the
differences in terms between interest-earning assets and interest-bearing
liabilities while maintaining acceptable levels of liquidity, capital adequacy,
interest rate sensitivity, credit risk and profitability. The
Asset/Liability Management Committee, consisting of certain members of senior
management, communicate, coordinate and manage asset/liability positions
consistent with the business plan and Board-approved policies, as well as to
price savings and lending products, and to develop new products.
One of
the Bank’s primary financial objectives is to generate ongoing
profitability. The Bank’s profitability depends primarily on its net
interest income, which is the difference between the income it receives on its
loan and investment portfolio and its cost of funds, which consists of interest
paid on deposits and borrowings. The rates the Company earns on
assets and pays on liabilities generally are established contractually for a
period of time. Market interest rates change over
time. The Bank’s loans generally have longer maturities than the
deposits. Accordingly, the Company’s results of operations, like
those of other financial institutions, are affected by changes in interest rates
and the interest rate sensitivity of assets and liabilities. The Bank
measures its interest rate sensitivity on a quarterly basis using an internal
model.
Management
employs various strategies to manage the Company’s interest rate sensitivity
including: (1) selling long-term fixed-rate mortgage loans in the secondary
market; (2) borrowing intermediate to long-term funds at fixed rates from the
FHLB; (3) originating commercial and consumer loans at shorter maturities or at
variable rates; (4) originating adjustable rate mortgage loans; (5)
appropriately modifying loan and deposit pricing to capitalize on the then
current market opportunities; and (6) increasing lower cost core deposits, such
as savings and checking accounts. At March 31, 2009, the Company had no
off-balance sheet derivative financial instruments, and the Bank did not
maintain a trading account for any class of financial instruments or engage in
hedging activities or purchase high risk derivative
instruments. Furthermore, the Company is not subject to foreign
currency exchange rate risk or commodity price risk.
There has
not been any material change in the market risk disclosures contained in the
Company’s 2008 Form 10-K.
Item 4. Controls
and Procedures
(a)
Evaluation of Disclosure Controls and Procedures.
An
evaluation of the Company’s disclosure controls and procedures (as defined in
Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was
carried out under the supervision and with the participation of the Company’s
Chief Executive Officer, Chief Financial Officer, and other members of the
Company’s management team as of the end of the period covered by this quarterly
report. The Company’s Chief Executive Officer and Chief Financial
Officer concluded that as of March 31, 2009, the Company’s disclosure controls
and procedures were effective in ensuring that the information required to be
disclosed by the Company in the reports it files or submits under the Act is (i)
accumulated and communicated to the Company’s management (including the Chief
Executive Officer and Chief Financial Officer) in a timely manner, and (ii)
recorded, processed, summarized, and reported within the time periods specified
in the SEC’s rules and forms.
(b)
Changes in Internal Controls.
There
have been no changes in the Company’s internal control over financial reporting
(as defined in 13a-15(f) of the Exchange Act) that occurred during the quarter
ended March 31, 2009, that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting. A number of internal control procedures were, however,
modified during the quarter in conjunction with the Bank's internal control
testing. The Company also continued to implement suggestions from its
internal auditor and independent auditors to strengthen existing
controls.
The
Company intends to continually review and evaluate the design and effectiveness
of its disclosure controls and procedures and to improve its controls and
procedures over time and to correct any deficiencies that it may discover in the
future. The goal is to ensure that senior management has timely access to all
material financial and non-financial information concerning the Company's
business. While the Company believes the present design of its
disclosure controls and procedures is effective to achieve its goal, future
events affecting its business may cause the Company to modify its disclosure
controls and procedures. The Company does not expect that its
disclosure controls and procedures and internal control over financial reporting
will prevent every error or instance of fraud. A control procedure,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control procedure are
met. Because of the inherent limitations in all control procedures,
no evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns in controls or
procedures can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any control procedure is based
in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions; over time, controls become
inadequate because of changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate. Because of the inherent
limitations in a cost-effective control procedure, misstatements due to error or
fraud may occur and not be detected.
PART II - OTHER
INFORMATION
Item 1. Legal
Proceedings
From time
to time, the Company is engaged in legal proceedings in the ordinary course of
business, none of which are currently considered to have a material impact on
the Company’s financial position or results of operations.
Item 1A. Risk
Factors
Economic
conditions in the Treasure Valley continue to weaken and declines in housing
prices and real estate values may result in additional loan losses.
The
United States, including our primary banking market, has experienced weakening
economic conditions and declines in housing prices and real estate values in
general. Our loan portfolio contains significant amounts of loans secured by
residential and commercial real estate. We have experienced increases
in non-performing assets, net charge-offs and provisions for credit losses as a
result of continuing deterioration of the housing markets, increasing financial
stress on consumers and weakening economic conditions. We expect
continued economic weakness for most of calendar years 2009 and
2010. This environment could lead to increased levels of
non-performing assets, net charge-offs and provision for credit losses compared
to previous periods.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
(c)
|
The
following table shows the total number of shares repurchased during the
quarter.
|
Issuer Purchases of Equity
Securities
|
|
Period of
Repurchase
|
|
Total
Number of
Shares Purchased
|
|
|
Average
Price
Paid Per Share
|
|
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
|
|
Maximum
Number of Shares that May Yet Be Purchased Under the Program
|
|
January
1 – January 31, 2009
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
|
867,970 |
|
February
1 – February 28, 2009
|
|
|
842,404 |
|
|
|
9.08 |
|
|
|
842,404 |
|
|
|
25,566 |
|
March
1 – March 31, 2009
|
|
|
25,566 |
|
|
|
7.73 |
|
|
|
867,970 |
|
|
|
- |
|
All
purchases of shares during the quarter related to the 5% stock repurchase
program announced December 23, 2008.
Item 3. Defaults
Upon Senior Securities
Not
applicable.
Item
4. Submission of Matters to a Vote of Security
Holders
The
Company’s Annual Meeting of the Shareholders (“the Annual Meeting”) was held on
January 16, 2009. The following matters were submitted to a vote of the
shareholders of the Company at the Annual Meeting and received the required vote
for election or approval as follows:
Proposal
1. Election of Directors
Shareholders
elected the following Directors:
Nominee
|
For
|
Withheld
|
Daniel
L. Stevens
|
15,763,088
|
521,870
|
Richard
J. Navarro
|
15,821,404
|
463,554
|
Brad
J. Little
|
15,832,618
|
452,340
|
Each of
the following directors who were not up for re-election at the annual meeting of
stockholders will continue in office: James R. Stamey, Robert A.
Tinstman, Len E. Williams, and N. Charles Hedemark.
Proposal
2. Ratifying the appointment of independent auditor
Shareholders
ratified the appointment of Moss Adams LLP as the Company’s independent
registered public accounting firm for the year ending September 30, 2009, by the
following vote:
For
|
Against
|
Abstaining
|
16,187,423
|
93,110
|
4,425
|
Proposal
3. Adoption of the Company’s 2008 Equity Incentive Plan
Shareholders
approved the adoption of the Company’s 2008 Equity Incentive Plan by the
following vote:
For
|
Against
|
Abstaining
|
Broker
non-vote
|
10,136,858
|
3,781,474
|
144,354
|
2,222,272
|
Item 5. Other
Information
Not
applicable.
Item
6. Exhibits
2.1
|
Plan
of Conversion and Reorganization (1)
|
3.1
|
Articles
of Incorporation of the Registrant (2)
|
3.2
|
Bylaws
of the Registrant (2)
|
10.1
|
Amended
Employment Agreement entered into by Home Federal Bancorp, Inc. with Len
E. Williams*
|
10.2
|
Amended
Severance Agreement with Eric S. Nadeau*
|
10.3
|
Amended
Severance Agreement with Steven D. Emerson*
|
10.4
|
Amended
Severance Agreement with Steven K. Eyre*
|
10.5
|
Form
of Home Federal Bank Employee Severance Compensation Plan
(3)
|
10.6
|
Form
of Director Indexed Retirement Agreement entered into by Home Federal
Savings and Loan Association of Nampa with each of its Directors
(2)
|
10.7
|
Form
of Director Deferred Incentive Agreement entered into by Home Federal
Savings and Loan Association of Nampa with each of its Directors
(2)
|
10.8
|
Form
of Executive Deferred Incentive Agreement, and amendment thereto, entered
into by Home Federal Savings and Loan Association of Nampa with Daniel L.
Stevens, Robert A. Schoelkoph, and Lynn A. Sander (2)
|
10.9
|
Form
of Amended and Restated Salary Continuation Agreement entered into by Home
Federal Savings and Loan Association of Nampa with Daniel L. Stevens
(2)
|
10.10
|
Amended
and Restated Salary Continuation Agreement entered into by Home Federal
Savings and Loan Association of Nampa with Len E.
Williams*
|
10.11
|
Amended
and Restated Salary Continuation Agreement entered into by Home Federal
Savings and Loan Association of Nampa with Eric S.
Nadeau*
|
10.12
|
Amended
and Restated Salary Continuation Agreement entered into by Home Federal
Savings and Loan Association of Nampa with Steven D.
Emerson*
|
10.13
|
Amended
and Restated Salary Continuation Agreement entered into by Home Federal
Savings and Loan Association of Nampa with Steven K.
Eyre*
|
10.14
|
2005
Stock Option and Incentive Plan approved by stockholders on June 23, 2005
and Form of Incentive Stock Option Agreement and Non-Qualified Stock
Option Agreement (4)
|
10.15
|
2005
Recognition and Retention Plan approved by stockholders on June 23, 2005
and Form of Award Agreement (4)
|
10.15
|
Form
of new Director Retirement Plan entered into by Home Federal Bank with
each of its Directors (5)
|
10.16
|
Transition
Agreement with Daniel L. Stevens (6)
|
10.17
|
2008
Equity Incentive Plan (7)
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act *
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act *
|
32
|
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act
*
|
___________
(1)
|
Filed
as an exhibit to the Registrant’s Current Report on Form 8-K dated May 11,
2007
|
(2)
|
Filed
as an exhibit to the Registrant's Registration Statement on Form S-1
(333-146289)
|
(3)
|
Filed
as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2008
|
(4)
|
Filed
as an exhibit to the Registrant’s Registration Statement on Form S-8
(333-127858)
|
(5)
|
Filed
as an exhibit to the Registrant’s Current Report on Form 8-K dated October
21, 2005
|
(6)
|
Filed
as an exhibit to the Registrant’s Current Report on Form 8-K dated August
21, 2006
|
(7)
|
Filed
as an exhibit to the Registrant’s Registration Statement on Form S-8
(333-157540)
|
* Filed
herewith
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
|
|
|
Home
Federal Bancorp, Inc. |
|
|
|
|
|
|
|
|
|
Date: May 8,
2009 |
|
/s/
Len E.
Williams
|
|
|
|
Len E.
Williams |
|
|
|
President
and |
|
|
|
Chief
Executive Officer |
|
|
|
(Principal
Executive Officer) |
|
|
|
|
|
|
|
|
|
Date: May 8,
2009 |
|
/s/ Eric S.
Nadeau
|
|
|
|
Eric S.
Nadeau |
|
|
|
Executive Vice
President and |
|
|
|
Chief
Financial Officer |
|
|
|
(Principal
Financial and Accounting Officer) |
|
EXHIBIT
INDEX
10.1
|
Amended
Employment Agreement entered into by Home Federal Bancorp, Inc. with Len
E. Williams
|
10.2
|
Amended
Severance Agreement with Eric S. Nadeau
|
10.3
|
Amended
Severance Agreement with Steven D. Emerson
|
10.4
|
Amended
Severance Agreement with Steven K. Eyre
|
10.10
|
Amended
and Restated Salary Continuation Agreement entered into by Home Federal
Savings and Loan Association of Nampa with Len E.
Williams
|
10.11
|
Amended
and Restated Salary Continuation Agreement entered into by Home Federal
Savings and Loan Association of Nampa with Eric S.
Nadeau
|
10.12
|
Amended
and Restated Salary Continuation Agreement entered into by Home Federal
Savings and Loan Association of Nampa with Steven D.
Emerson
|
10.13
|
Amended
and Restated Salary Continuation Agreement entered into by Home Federal
Savings and Loan Association of Nampa with Steven K.
Eyre
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act
|
32
|
Certification
Pursuant to Section 906 of the Sarbanes-Oxley
Act
|
EXHIBIT
31.1
Certification
of Chief Executive Officer Pursuant to
Section
302 of the Sarbanes-Oxley Act of 2002
I, Len E.
Williams, President and Chief Executive Officer of Home Federal Bancorp, Inc.,
certify that:
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of Home Federal Bancorp,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fiscal fourth quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of registrant’s board
of directors (or persons performing the equivalent
functions):
|
(a)
|
All
significant deficiencies and material weakness in the design or operation
of internal control over financial reporting which are reasonably likely
to adversely affect the registrant’s ability to record, process, summarize
and report financial data information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
|
|
|
|
|
Date: |
May 8, 2009 |
|
/s/
Len E.
Williams |
|
|
|
|
Len E.
Williams |
|
|
|
|
President and
|
|
|
|
|
Chief
Executive Officer |
|
|
|
|
|
|
EXHIBIT
31.2
Certification
of Chief Financial Officer Pursuant to
Section
302 of the Sarbanes-Oxley Act of 2002
I, Eric
S. Nadeau, Chief Financial Officer of Home Federal Bancorp, Inc., certify
that:
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of Home Federal Bancorp,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fiscal fourth quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of registrant’s board
of directors (or persons performing the equivalent
functions):
|
(a)
|
All
significant deficiencies and material weakness in the design or operation
of internal control over financial reporting which are reasonably likely
to adversely affect the registrant’s ability to record, process, summarize
and report financial data information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
|
|
|
|
|
Date: |
May 8, 2009 |
|
/s/
Eric S.
Nadeau |
|
|
|
|
Eric S.
Nadeau |
|
|
|
|
Executive Vice
President and |
|
|
|
|
Chief Financial
Officer |
|
|
|
|
|
|
EXHIBIT
32
Certification
of Chief Executive Officer and Chief Financial Officer of Home Federal Bancorp,
Inc.
Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
The
undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 and in connection with this Quarterly Report on Form 10-Q,
that:
1.
|
the
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended;
and
|
2.
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company
as of the dates and for the periods presented in the financial statements
included in the Report.
|
/s/
Len E. Williams |
|
/s/
Eric S. Nadeau |
|
Len E.
Williams |
|
Eric S.
Nadeau |
|
President and
|
|
Executive Vice
President and |
|
Chief
Executive Officer |
|
Chief
Financial Officer |
|
|
|
|
|
|
|
|
|
Dated: May 8, 2009 |
|
|
|
|
|
|
|