NAMPA, Idaho, Jan. 24, 2014 (GLOBE NEWSWIRE) -- Home Federal Bancorp, Inc. ("Company") (Nasdaq:HOME), the parent company of Home Federal Bank ("Bank"), today announced results for the quarter and year ended December 31, 2013. For the quarter ended December 31, 2013, the Company reported a net loss of $2.3 million, or $(0.17) per diluted share, compared to net income of $219,000, or $0.02 per diluted share, for the same period a year ago. For the year ended December 31, 2013, the Company reported net loss of $255,000, or $(0.02) per diluted share, compared to net income of $1.8 million, or $0.12 per diluted share, for the same period a year ago.
The Bank has entered into shared-loss agreements with the Federal Deposit Insurance Corporation ("FDIC") in connection with two acquisitions. The loans and foreclosed assets purchased in these acquisitions that are subject to the shared-loss agreements are referred to as "covered loans" or "covered assets." Loans and foreclosed and repossessed assets not subject to shared-loss agreements with the FDIC are referred to as "noncovered loans" or "noncovered assets."
The following items summarize key activities of the Company during the quarter ended December 31, 2013:
- On October 23, 2013, the Company announced the signing of a definitive merger agreement ("Cascade Agreement") with Cascade Bancorp ("Cascade"). Under the terms of the Cascade Agreement, Cascade will acquire the Company, subject to regulatory approval, approval by the stockholders of the Company and Cascade, and other customary conditions of closing. Previously, on September 24, 2013, the Company entered into a merger agreement ("Banner Agreement") with Banner Corporation ("Banner"). The Company terminated the Banner Agreement on October 23, 2013, and paid a termination fee of $3.0 million to Banner during the fourth quarter of 2013. The Banner Agreement was terminated pursuant to its terms because the Company's Board of Directors determined the Cascade offer was a Superior Proposal, as defined in the Banner Agreement;
- Net interest income increased $1.9 million compared to the linked quarter ended September 30, 2013, due primarily to an increase of accretable yield on purchased loans as a result of recoveries and payoffs of purchased loans;
- A reverse provision for loan losses of ($1.2 million) was recorded on noncovered originated loans, while we recognized a net provision of $241,000 on covered loans, during the quarter ended December 31, 2013, resulting in a net reverse provision of ($933,000);
- The ($436,000) of noninterest income during the quarter ended December 31, 2013, included impairment of the FDIC indemnification asset of $2.9 million, which was a result of a reduction in estimated future losses on covered loans and recoveries of previously charged-off loans. The impairment of the FDIC indemnification asset was $1.2 million in the linked quarter and $2.8 million in the year-ago quarter;
- The Company did not realize gains on the sale of investments during the quarter, consistent with the linked quarter, but $754,000 less than the year-ago quarter;
- Noninterest expense increased by $2.9 million during the quarter ended December 31, 2013, compared to the year-ago quarter, and by $4.0 million compared to the linked quarter. Noninterest expenses totaled $13.9 million during the fourth quarter of 2013, which included $3.4 million of merger-related expenses;
- Income tax provision was $576,000 as nearly all of the merger-related expenses incurred during the fourth quarter of 2013 were not deductible from taxable income;
- Total assets decreased $13.5 million during the quarter ended December 31, 2013, compared to September 30, 2013, and decreased $46.2 million since December 31, 2012;
- Net loans increased $5.6 million during the quarter ended December 31, 2013;
- Asset quality continued to improve as noncovered nonperforming assets declined $1.2 million to $5.2 million at December 31, 2013, compared to September 30, 2013. Total nonperforming assets decreased $4.3 million during the quarter to $11.2 million at December 31, 2013; and
- The Company declared and paid its regular quarterly dividend of $0.06 per share.
Results of Operations
Net interest income. During the quarter ended December 31, 2013, net interest income increased $1.9 million and $573,000 compared to the linked quarter and the quarter ended December 31, 2012, respectively. Net interest margin increased to 4.98% during the quarter ended December 31, 2013, from 4.21% in the linked quarter and 4.55% during the quarter ended December 31, 2012. Similarly, the Company's yield on earning assets increased to 5.26% in the quarter ended December 31, 2013, from 4.51% in the linked quarter, and 4.89% during the quarter ended December 31, 2012. These increases during the quarter ended December 31, 2013, were primarily due to an increase in accretable income on loans purchased in the LibertyBank acquisition as the balance of purchased loan pools continued to decline significantly, thereby reducing expected losses, and increases in cash flows recovered from previously charged down loans. However, as the balance of purchased loan pools declines, the future impact of accretable yield on interest income and net interest margin will lessen significantly.
The cost of funds for the quarter ended December 31, 2013, was 0.40% compared to 0.42% in the quarter ended September 30, 2013, and 0.47% for the quarter ended December 31, 2012. The cost of deposits, which includes noninterest-bearing deposits, was 0.32% during the quarter ended December 31, 2013, compared to 0.34% during the quarter ended September 30, 2013 and 0.39% for the year-ago quarter.
Provision for loan losses. A net reverse provision for loan losses of ($933,000) was recorded during the quarter ended December 31, 2013, compared to a net reverse provision of ($970,000) for the quarter ended September 30, 2013, and a reverse provision of ($653,000) for the year-ago quarter. The net reverse provision for loan losses in the quarter ended December 31, 2013, was related to improving credit quality (including significantly lower nonperforming and classified loans), stabilizing and improving economic factors and recoveries on previously charged-off loans. The net reverse provision included a provision of $241,000 related to the covered loans purchased in the Community First Bank acquisition, driven primarily by net charge-offs of $294,000 in that portfolio. The estimated amount recoverable from or due to the FDIC under the loss sharing agreements as a result of the provision for loan losses on covered loans is reported as "FDIC indemnification provision" in noninterest income.
Noninterest income. Impairment of the FDIC indemnification asset recognizes the decreased amount the Company expects to collect from the FDIC under the terms of its loss sharing agreements due to lower expected losses on covered loans, which reduces noninterest income. The following table presents noninterest income excluding the impact of FDIC indemnification items on all covered loans:
|Three Months Ended||Years Ended|
|(in thousands)|| December 31, |
| September 30, |
| December 31, |
| December 31, |
|Total noninterest income, as reported||$ (436)||$ 755||$ 1,049||$ (655)|
|Less: FDIC indemnification recovery (impairment) related to current period provision for loan losses||231||(648)||(464)||(1,807)|
|Impairment of FDIC indemnification asset||(2,930)||(1,164)||(8,410)||(10,856)|
|Total noninterest income, excluding FDIC indemnification items||$ 2,263||$ 2,567||$ 9,923||$ 12,008|
Noninterest income, excluding FDIC indemnification items, declined $304,000 during the quarter ended December 31, 2013, compared to the linked quarter as the Company realized a gain on life insurance proceeds of $161,000 during the linked quarter and service charges and fees declined $128,000 during the quarter ended December 31, 2013. Pre-tax gains on sales of investments were $0, $0 and $753,000 during the quarters ended December 31, 2013, September 30, 2013 and December 31, 2012, respectively.
Noninterest expense. Noninterest expense for the quarter ended December 31, 2013, increased by $2.9 million compared to the quarter ended December 31, 2012, and by $4.0 million compared to the linked quarter. As previously mentioned, in the quarter ended December 31, 2013, the Company recognized a $3.0 million fee in relation to the termination of the Banner Agreement and $445,000 of other merger-related expenses during the quarter. Compensation expense increased during the quarter ended December 31, 2013, compared to the linked quarter by $719,000, primarily due to annual incentive and commission plan accruals. The provision for real estate owned was $150,000 during the current quarter compared to $1,000 during the linked quarter. Professional services increased during the quarter ended December 31, 2013, compared to the linked and year-ago quarters, due to merger-related expenses.
Noninterest expenses increased $815,000, or 1.9%, during the twelve months ended December 31, 2013, compared to the twelve months ended December 31, 2012. Noninterest expense for the year included $3.7 million of merger-related expenses.
Total assets decreased $46.2 million to $1.0 billion at December 31, 2013, compared to December 31, 2012, primarily due to a decrease in investments and cash of $38.4 million, which was used to fund a $32.4 million decline in deposits during the year. Balances of certificates of deposit declined $40.8 million during the year as core deposits increased to $650.0 million at December 31, 2013, compared to $641.6 million at December 31, 2012.
Cash and investments. Cash and amounts due from depository institutions at December 31, 2013, decreased by $8.5 million from December 31, 2012, to $107.0 million. Investments decreased $29.9 million from December 31, 2012, to $390.6 million at December 31, 2013. The reduction in investments resulted from regularly scheduled principal repayments and maturities and a decline in the fair value of investments due to continued rising market interest rates during the quarter ended December 31, 2013. During the quarter ended December 31, 2013, cash increased $4.7 million and investments declined $23.4 million.
Loans. Net loans increased by $5.6 million during the quarter ended December 31, 2013 compared to September 30, 2013, but declined $2.4 million compared to December 31, 2012. During the quarter ended December 31, 2013, construction loans increased by $6.9 million, commercial business loans increased by $6.0 million and multifamily residential loans increased by $3.3 million. Partially offsetting these increases were declines in commercial real estate and one-to-four family residential loans of $8.2 million and $3.3 million, respectively. All other loans, net, increased $930,000.
Asset Quality. The allowance for loan losses was $9.0 million at December 31, 2013, compared to $10.6 million and $12.5 million at September 30, 2013 and December 31, 2012, respectively. The allowance for loan losses allocated to the noncovered loan portfolio was $6.7 million, or 1.89% of noncovered loans at December 31, 2013, while the allowance for loan losses allocated to covered loans totaled $2.3 million, or 3.96% of covered loans, at December 31, 2013. The FDIC indemnification receivable declined $1.2 million during the quarter ended December 31, 2013, to $4.9 million, primarily due to the continued reduction in estimated losses on covered loans in the LibertyBank portfolio (which resulted in the impairment noted above in noninterest income) that was somewhat offset by an increase in estimated losses in the Community First Bank loan portfolio during the quarter ended December 31, 2013.
Loans delinquent 30 to 89 days and still accruing interest totaled $1.3 million at December 31, 2013, compared to $492,000 at September 30, 2013 and $809,000 at December 31, 2012. Nonperforming assets, which include nonaccrual loans and REO, totaled $11.2 million at December 31, 2013, compared to $15.5 million at September 30, 2013 and $24.8 million at December 31, 2012. Total nonperforming loans declined $2.6 million, while REO declined $1.8 million during the quarter ended December 31, 2013.
The following table summarizes nonperforming loans and REO at December 31, 2013 and September 30, 2013, and the quarterly change (in thousands):
|December 31, 2013||September 30, 2013||Quarter Change|
|(in thousands)|| Covered |
| Noncovered |
|Total|| Covered |
| Noncovered |
|Total|| Covered |
| Noncovered |
|Real estate construction||$ 219||$ 656||$ 875||$ 223||$ 781||$ 1,004||$ (4)||$ (125)|
|Commercial and multifamily real estate||1,941||875||2,816||3,369||894||4,263||(1,428)||(19)|
|One-to-four family residential||232||2,000||2,232||243||2,790||3,033||(11)||(790)|
|Total nonperforming loans||2,393||4,075||6,468||3,869||5,167||9,036||(1,476)||(1,092)|
|Real estate owned and other repossessed assets||3,597||1,159||4,756||5,205||1,308||6,513||(1,608)||(149)|
|Total nonperforming assets||$ 5,990||$ 5,234||$ 11,224||$ 9,074||$ 6,475||$ 15,549||$ (3,084)||$ (1,241)|
Deposits. Total deposits decreased $13.3 million during the quarter ended December 31, 2013, to $818.5 million and decreased $32.4 million compared to December 31, 2012. During the quarter ended December 31, 2013, end of period balances in core deposits (defined as checking, savings and money market accounts) decreased by $3.4 million to $650.0 million, while certificates of deposit declined by $9.9 million to $168.4 million. Certificates of deposit declined by $40.8 million during the year ended December 31, 2013. Average core deposits were $12.1 million higher during the fourth quarter of 2013 compared to the linked quarter. Core deposits comprised 79.4% of the deposit portfolio at December 31, 2013, compared to 75.4% at December 31, 2012.
Equity. Stockholders' equity decreased $10.8 million during 2013 to $169.0 million at December 31, 2013. Dividends paid during 2013 totaled $3.3 million. Additionally, the Company experienced a decrease of $13.3 million in accumulated other comprehensive income, which includes the unrealized loss on investments available-for-sale, net of taxes, and was $5.1 million at December 31, 2013. A year earlier, we had an unrealized gain, net of taxes, of $8.2 million. The decline in the fair value of investments was due to the significant increase in market interest rates during fiscal year 2013.
Use of Non-GAAP Financial Measures
This document contains non-GAAP financial measures as management believes it to be helpful in understanding the Company's results of operations and financial position. "Total noninterest income, excluding FDIC indemnification items" is used by management to assess core noninterest income as the impact of accounting for the FDIC indemnification asset is highly volatile. A reconciliation to the comparable GAAP financial measure "Total noninterest income" has been provided above. "Tangible book value per share" is another non-GAAP financial measure that is included in the table below to facilitate the comparison of the Company with its peers. Tangible book value is equal to "Total shareholders' equity" less "Core deposit intangible." Tangible book value is then divided by the number of outstanding shares at the end of each period to calculate tangible book value per share.
About the Company
Home Federal Bancorp, Inc., is headquartered in Nampa, Idaho, and is the parent company of Home Federal Bank, a community bank originally organized in 1920. The Company primarily serves southwestern Idaho and Central and Western Oregon through 24 full-service branches and three commercial loan production offices. The Company's common stock is traded on the NASDAQ Global Select Market under the symbol "HOME" and is included in the Russell 2000 Index. For more information, visit the Company's web site at www.myhomefed.com/ir.
Participants in the Solicitation
Cascade, Company and their respective directors and executive officers may be soliciting proxies from Cascade and Company shareholders in favor of the proposed merger and related matters. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of Cascade and Company shareholders in connection with the proposed merger and a description of their direct and indirect interests, by security holdings or otherwise will be set forth in the joint proxy statement/prospectus. Additional information about Cascade's directors and executive officers and Company's directors and executive officers can also be found in the Registration Statement on Form S-4, which Cascade filed with the SEC on December 16, 2013, as amended thereafter. Investors and Company stockholders should read the joint proxy statement/prospectus carefully before making any voting or investment decisions. You may obtain copies of all documents filed with the SEC, free of charge, at the SEC's website (www.sec.gov). You may also obtain these documents, free of charge, from: (i) Cascade's website (www.botc.com) under the heading "About Us" and then under the heading "Investor Relations" and then under the heading "Investor Information" and then under the tab "SEC Filings;" (ii) Cascade upon written request to Cascade Bancorp, Attn: Investor Relations, 1100 North West Wall Street, P.O. Box 369, Bend, Oregon 97701; (iii) Company's website (www.myhomefed.com/ir) under the under the heading "SEC Filings, Ownership and Forms;" or (iv) Company upon written request to Company Bancorp, Inc., Attn: Eric Nadeau, 500 12th Avenue South, Nampa, Idaho 83651.
Statements in this news release regarding future events, performance or results are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA") and are made pursuant to the safe harbors of the PSLRA. These forward-looking statements relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market, potential future credit experience, the Company's ability to achieve projected cost savings, the ability to consummate the merger with Cascade, and statements regarding the Company's mission and vision. These forward-looking statements speak only as of the date they are made and are based upon management's current expectations and projections and therefore, involve risks and uncertainties. Such projections are based upon many estimates and are inherently subject to significant economic and competitive uncertainties and contingencies, many of which are beyond the control of management of the Company. The inclusion of such projections herein should not be regarded as a representation by the Company that the projections will prove to be correct. Actual results could be materially different from those expressed or implied by the forward-looking statements and you should not rely on such statements. Factors that could cause results to differ include but are not limited to: general economic and banking business conditions; competitive conditions between banks and non-bank financial service providers; interest rate fluctuations; the credit risk of lending activities, including changes in the level and trend of loan delinquencies and write-offs; results of examinations by our banking regulators;regulatory and accounting changes, including as a result of Basel III; risks related to construction and development lending; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames; and other risks. Additional factors that could cause actual results to differ materially are disclosed in Home Federal Bancorp, Inc.'s recent filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K for the year ended December 31, 2012, Quarterly Reports on Forms 10-Q and Current Reports on Form 8-K. Forward-looking statements are accurate only as of the date released, and the Company's management does not undertake any responsibility to update or revise any forward-looking statements to reflect subsequent events or circumstances.
|CONSOLIDATED BALANCE SHEETS||December 31,||September 30,||December 31,|
|(In thousands, except share data) (Unaudited)||2013||2013||2012|
|Cash and cash equivalents||$ 107,000||$ 102,269||$ 115,529|
|Investments available-for-sale, at fair value||390,648||414,026||420,505|
|FHLB stock, at cost||16,771||16,929||17,401|
|Loans receivable, net of allowance for loan losses of $9,046, $10,583 and $12,528, respectively||407,451||401,842||409,846|
|Accrued interest receivable||2,764||2,852||2,776|
|Property and equipment, net||25,943||26,592||29,057|
|Bank owned life insurance||15,751||15,635||15,938|
|Real estate owned and other repossessed assets||4,756||6,513||10,386|
|FDIC indemnification receivable, net||4,914||6,129||10,846|
|Core deposit intangible||2,062||2,168||2,523|
|Deferred tax assets, net||17,175||15,853||9,022|
|TOTAL ASSETS||$ 1,002,374||$ 1,015,830||$ 1,048,620|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Noninterest-bearing demand||$ 160,602||$ 161,335||$ 142,207|
|Total deposit accounts||818,451||831,776||850,888|
|Advances by borrowers for taxes and insurance||383||1,334||490|
|Accrued interest payable||122||127||167|
|Serial preferred stock, $.01 par value; 10,000,000 authorized; issued and outstanding: none||--||--||--|
|Common stock, $.01 par value; 90,000,000 authorized; issued||148||145||145|
|Dec. 31, 2013 - 17,852,778 issued; 14,832,757 outstanding|
|Sep. 30, 2013 - 17,542,217 issued; 14,522,196 outstanding|
|Dec. 31, 2012 - 17,512,197 issued; 14,453,399 outstanding|
|Additional paid-in capital||137,252||133,354||131,934|
|Unearned shares issued to employee stock ownership plan||(6,065)||(6,254)||(6,823)|
|Accumulated other comprehensive income (loss)||(5,089)||(3,017)||8,192|
|Total stockholders' equity||168,998||170,170||179,785|
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY||$ 1,002,374||$ 1,015,830||$ 1,048,620|
|HOME FEDERAL BANCORP, INC. AND SUBSIDIARY|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|(In thousands, except share and per share data) (Unaudited)|
| Three Months Ended |
| Year Ended |
|Loans||$ 9,681||$ 9,658||$ 34,432||$ 40,058|
|Other interest income||65||51||232||230|
|Total interest income||12,304||11,908||45,063||49,149|
|Total interest expense||667||844||2,939||3,882|
|Net interest income||11,637||11,064||42,124||45,267|
|Provision for loan losses||(933)||(653)||(2,486)||(1,765)|
|Net interest income after provision for loan losses||12,570||11,717||44,610||47,032|
|Service charges and fees||1,992||2,162||8,226||8,653|
|Gain on sales of securities||--||754||485||1,971|
|FDIC indemnification (provision) recovery||231||(627)||(464)||(1,807)|
|Impairment of FDIC indemnification asset, net||(2,930)||(2,814)||(8,410)||(10,856)|
|Total noninterest income||(436)||(333)||1,049||(655)|
|Compensation and benefits||6,541||6,025||24,032||24,054|
|Occupancy and equipment||1,290||1,633||5,386||6,176|
|Postage and supplies||187||224||803||987|
|Insurance and taxes||411||573||1,642||2,158|
|Amortization of intangibles||107||131||461||564|
|Provision for REO||151||282||795||736|
|Merger termination fee||2,954||--||2,954||--|
|Total noninterest expense||13,902||10,962||44,329||43,514|
|Income (loss) before income taxes||(1,768)||422||1,330||2,863|
|Income tax provision||576||203||1,585||1,061|
|Net income (loss)||$ (2,344)||$ 219||$ (255)||$ 1,802|
|Earnings (loss) per common share:|
|Basic||$ (0.17)||$ 0.02||$ (0.02)||$ 0.12|
|Weighted average number of shares outstanding:|
|Dividends declared per share:||$ 0.06||$ 0.18||$ 0.24||$ 0.35|
|HOME FEDERAL BANCORP, INC. AND SUBSIDIARY|
|ADDITIONAL FINANCIAL INFORMATION|
|(Dollars in thousands, except share and per share data) (Unaudited)|
|At or For the Three Months Ended|
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| December 31, |
|SELECTED PERFORMANCE RATIOS|
|Return on average assets (1)||(0.92) %||0.42 %||0.22 %||0.18 %||0.08 %|
|Return on average equity (1)||(5.46)||2.48||1.29||1.03||0.48|
|Net interest margin (1)||4.98||4.21||4.47||4.16||4.55|
|PER SHARE DATA|
|Diluted earnings per share||$ (0.17)||$ 0.08||$ 0.04||$ 0.03||$ 0.02|
|Tangible book value per outstanding share||11.25||11.57||11.60||12.16||12.26|
|Cash dividends declared per share||0.06||0.06||0.06||0.06||0.18|
|Average number of diluted shares outstanding (2) for earnings per share||13,946,256||13,836,734||13,763,806||13,714,084||13,689,742|
|ASSET QUALITY- NONCOVERED (3)|
|Allowance for loan losses||$ 6,750||$ 7,795||$ 8,025||$ 8,412||$ 8,611|
|Provision for loan losses||(1,175)||(281)||(364)||(225)||--|
|Allowance for loan losses to gross loans||1.89 %||2.27 %||2.48 %||2.58 %||2.59 %|
|Nonperforming loans to gross loans||1.14||1.51||1.68||2.79||2.87|
|Nonperforming assets to total assets||0.56||0.69||0.87||1.22||1.46|
|TOTAL COVERED ASSETS (4)||$ 63,925||$ 75,745||$ 82,929||$ 88,425||$ 95,556|
|FINANCIAL CONDITION DATA|
|Average interest-earning assets||$ 935,063||$ 928,765||$ 954,852||$ 966,269||$ 973,113|
|Average interest-bearing liabilities||668,966||668,556||686,598||706,561||717,519|
|Net average earning assets||266,097||260,209||268,254||259,708||255,594|
|Average interest-earning assets to average interest-bearing liabilities||139.78 %||138.92 %||139.07 %||136.76 %||135.62 %|
|Stockholders' equity to total assets||16.86||16.75||16.90||17.00||17.14|
|STATEMENT OF OPERATIONS DATA|
|Interest income||$ 12,304||$ 10,474||$ 11,418||$ 10,867||$ 11,908|
|Net interest income||11,637||9,767||10,665||10,055||11,064|
|Provision for loan losses (5)||(933)||(970)||(356)||(227)||(653)|
|Income (loss) before taxes||(1,768)||1,559||856||683||422|
|Income (loss) tax provision||576||506||281||222||203|
|Net income (loss)||$ (2,344)||$ 1,053||$ 575||$ 461||$ 219|
|(1) Amounts are annualized.|
|(2) Amounts calculated exclude ESOP shares not committed to be released and unvested restricted shares.|
|(3) Excludes loans and REO covered by a loss sharing agreement with the FDIC.|
|(4) Loans and REO covered by loss share agreements with the FDIC.|
|(5) Provision for loan losses does not consider impact of indemnification for losses on covered loans under the loss sharing agreements with the FDIC, which is reported in noninterest income as "FDIC indemnification recovery."|
CONTACT: Home Federal Bancorp, Inc. Len E. Williams, President & CEO Eric S. Nadeau, EVP, Treasurer & CFO 208-466-4634 www.myhomefed.com/irSource:Home Federal Bancorp, Inc.