Quarterly Report for Home Federal Bancorp

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 December 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: O-18847 HOME FEDERAL BANCORP (Exact name of registrant as specified in its charter) Indiana 35-1807839 (State or other Jurisdiction (I.R.S. Employer of Incorporation or Origination) Identification No.) 222 West Second Street, Seymour, Indiana 47274-0648 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number including area code: (812) 522-1592 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 the number of shares outstanding of each of the issuer's classes of common stock, as of January 31, 2001: Common Stock, no par value - 4,407,729 shares outstanding HOME FEDERAL BANCORP FORM 10-Q INDEX Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets (unaudited) ............................................. 3 Consolidated Statements of Income (unaudited) ............................................. 4 Consolidated Statements of Cash Flows (unaudited) ............................................. 5 Notes to Consolidated Financial Statements (unaudited) ............................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .................................. 8 Forward looking statements ..................................... 8 Item 3. Quantitative and Qualitative Analysis of Financial Condition and Results of Operations ........................ 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings .............................................. 13 Item 2. Changes in Securities and Uses of Proceeds ..................... 13 Item 3. Defaults Upon Senior Securities ................................ 13 Item 4. Submission of Matters to a Vote of Security Holders ............ 13 Item 5. Other Information .............................................. 13 Item 6. Exhibits and Reports on Form 8-K ............................... 13 Signatures .............................................................. 14 HOME FEDERAL BANCORP CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) December 31, June 30, 2000 2000 -------- -------- ASSETS: Cash ...................................................... $ 23,044 $ 21,184 Interest-bearing deposits ................................. 11,134 12 -------- -------- Total cash and cash equivalents ......................... 34,178 21,196 -------- -------- Securities available for sale at fair value (amortized cost $98,412 and $101,198) ................... 98,283 99,364 Securities held to maturity (fair value $8,311 and $7,622) 8,254 7,776 Loans held for sale (fair value $2,580 and $2,409) ........ 2,547 2,376 Loans receivable, net of allowance for loan losses of $5,258 and $4,949 .................................... 670,905 652,007 Investments in joint ventures ............................. 9,800 10,333 Federal Home Loan Bank stock .............................. 9,661 9,037 Accrued interest receivable, net .......................... 5,882 5,750 Premises and equipment, net ............................... 8,714 9,084 Real estate owned ......................................... 708 1,235 Prepaid expenses and other assets ......................... 5,601 6,114 Cash surrender value of life insurance .................... 6,558 6,387 Goodwill .................................................. 1,445 1,495 -------- -------- TOTAL ASSETS ........................................... $862,536 $832,154 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: Deposits .................................................. $585,609 $572,893 Advances from Federal Home Loan Bank ...................... 187,982 175,486 Senior debt ............................................... 11,205 6,205 Other borrowings .......................................... 3,549 2,742 Advance payments by borrowers for taxes and insurance ..... 376 406 Accrued expenses and other liabilities .................... 5,704 4,936 -------- -------- Total liabilities ...................................... 794,425 762,668 -------- -------- Shareholders' equity: No par preferred stock; Authorized: 2,000,000 shares Issued and outstanding: None No par common stock; Authorized: 15,000,000 shares Issued and outstanding: ................................. 7,880 8,335 4,407,729 shares at December 31, 2000 4,734,585 shares at June 30, 2000 Retained earnings, restricted ............................ 60,308 62,251 Accumulated other comprehensive loss, net of taxes ........ (77) (1,100) -------- -------- Total shareholders' equity ............................. 68,111 69,486 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............. $862,536 $832,154 ======== ======== See notes to consolidated financial statements (unaudited) HOME FEDERAL BANCORP CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share data) (unaudited) Three Months Ended Six Months Ended December 31, December 31, ----------------------- ----------------------- 2000 1999 2000 1999 Interest income: ---------- ---------- ---------- ----------- Loans receivable ................................... $ 14,591 $ 12,391 $ 28,863 $ 24,487 Securities available for sale and held to maturity . 1,877 1,627 3,649 2,834 Other interest income .............................. 103 103 275 254 ---------- ---------- --------- ---------- Total interest income ............................... 16,571 14,121 32,787 27,575 ---------- ---------- --------- ---------- Interest expense: Deposits ........................................... 6,975 5,855 13,644 11,708 Advances and borrowings ............................ 3,336 1,957 6,472 3,320 ---------- ---------- --------- ---------- Total interest expense .............................. 10,311 7,812 20,116 15,028 ---------- ---------- --------- ---------- Net interest income ................................. 6,260 6,309 12,671 12,547 Provision for loan losses ........................... 355 441 570 633 ---------- ---------- --------- ---------- Net interest income after provision for loan losses . 5,905 5,868 12,101 11,914 ---------- ---------- --------- ---------- Other income: Gain on sale of loans .............................. 270 223 782 449 Gain (loss) on sale of securities ................. 52 -- (342) 2 Income from joint ventures ......................... 275 145 553 307 Insurance, annuity income, other fees .............. 278 273 553 521 Service fees on NOW accounts ....................... 587 563 1,176 1,109 Net gain on real estate owned and repossessed assets 78 13 102 26 Loan servicing income .............................. 112 236 403 528 Miscellaneous ...................................... 504 417 965 789 ---------- ---------- --------- ---------- Total other income .................................. 2,156 1,870 4,192 3,731 ---------- ---------- --------- ---------- Other expenses: Compensation and employee benefits ................. 2,304 2,167 4,518 4,281 Occupancy and equipment ............................ 616 632 1,229 1,250 Service bureau expense ............................. 206 207 411 412 Federal insurance premium .......................... 29 84 58 165 Marketing .......................................... 147 134 267 207 Goodwill amortization .............................. 25 25 50 50 Miscellaneous ...................................... 837 891 1,816 1,710 ---------- ---------- --------- ---------- Total other expenses ................................ 4,164 4,140 8,349 8,075 ---------- ---------- --------- ---------- Income before income taxes .......................... 3,897 3,598 7,944 7,570 Income tax provision ................................ 1,472 1,471 3,088 3,050 ---------- ---------- --------- ---------- Net Income .......................................... $ 2,425 $ 2,127 $ 4,856 $ 4,520 ========== =========== ========== ========== Basic earnings per common share ..................... $ 0.54 $ 0.44 $ 1.07 $ 0.93 Dilutive earnings per common share .................. $ 0.53 $ 0.42 $ 1.04 $ 0.88 Basic weighted average number of shares ............. 4,483,165 4,799,167 4,558,099 4,876,100 Dilutive weighted average number of shares .......... 4,600,507 5,038,624 4,683,838 5,141,914 Dividends per share ................................. $ 0.138 $ 0.138 $ 0.275 $ 0.263 See notes to consolidated financial statements (unaudited) HOME FEDERAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended December 31, ------------------- 2000 1999 ------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ................................................ $ 4,856 $ 4,520 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Accretion of discounts, amortization and depreciation ... 6 998 Provision for loan losses ............................... 570 633 Net gain from sale of loans ............................. (782) (449) Net (gain)/loss from sale of investment securities ...... 342 (2) Net gain from joint ventures; real estate owned ......... (656) (332) Loan fees deferred (recognized), net .................... (96) 73 Proceeds from sale of loans held for sale ............... 33,371 30,575 Origination of loans held for sale ...................... (32,760) (25,918) Increase (decrease) in accrued interest and other assets 1,090 (2,895) Increase in other liabilities ........................... 738 533 -------- -------- Net cash provided by operating activities ................. 6,679 7,736 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net principal disbursed on loans .......................... (13,654) (16,161) Proceeds from: Maturities/Repayments of: Securities held to maturity .......................... 436 341 Securities available for sale ........................ 4,047 1,250 Sales of: Securities available for sale ........................ 32,552 9,197 Real estate owned and other asset sales .............. 1,048 1,215 Purchases of: Loans ................................................... (5,718) -- Securities available for sale ........................... (34,223) (38,530) Securities held to maturity ............................. (910) (3,017) Federal Home Loan Bank stock ............................ (624) (1,843) Increase in cash surrender value of life insurance ........ (171) (145) Acquisition of property and equipment, net ................ (245) (387) -------- -------- Net cash used in investing activities ..................... (17,462) (48,080) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in deposits, net ...................... 12,716 (10,914) Proceeds from borrowings .................................. 82,900 75,345 Repayment of borrowings ................................... (65,404) (14,003) Net proceeds from (net repayment of) overnight borrowings . 807 (275) Common stock options exercised ............................ 46 75 Repurchase of common stock ................................ (6,075) (6,744) Payment of dividends on common stock ...................... (1,225) (1,257) -------- -------- Net cash provided by financing activities ................. 23,765 42,227 -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS ................. 12,982 1,883 Cash and cash equivalents, beginning of period ............ 21,196 32,906 -------- -------- Cash and cash equivalents, end of period .................. $ 34,178 $ 34,789 ======== ======== Supplemental information: Cash paid for interest .................................... $ 19,655 $ 14,835 Cash paid for income taxes ................................ $ 3,673 $ 2,305 Assets acquired through foreclosure ....................... $ 436 $ 1,023 See notes to consolidated financial statements (unaudited) Notes to Consolidated Financial Statements (unaudited) 1. Basis of Presentation The consolidated financial statements include the accounts of Home Federal Bancorp (the "Company") and its wholly-owned subsidiary, Home Federal Savings Bank (the "Bank"). These consolidated interim financial statements at December 31, 2000, and for the three and six month periods ended December 31, 2000, have not been audited by independent auditors, but reflect, in the opinion of the Company's management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations for such periods, including elimination of all significant intercompany balances and transactions. These statements should be read in conjunction with the consolidated financial statements and related notes, which are incorporated by reference in the Company's Annual Report on Form 10-K for the year ended June 30, 2000. 2. Reclassifications Some items in the financial statements of previous periods have been reclassified to conform to the current period presentation. 3. Earnings Per Share The following is a reconciliation of the weighted average common shares for the basic and diluted earnings per share computations: Three months ended Six months ended December 31, December 31, --------------------- --------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Basic EPS: Weighted average common shares . 4,483,165 4,799,167 4,558,099 4,876,100 ========= ========= ========= ========= Diluted EPS: Weighted average common shares . 4,483,165 4,799,167 4,558,099 4,876,100 Dilutive effect of stock options 117,342 239,457 125,739 265,814 --------- --------- --------- --------- Weighted average common and incremental shares ............ 4,600,507 5,038,624 4,683,838 5,141,914 ========= ========= ========= ========= 4. Comprehensive Income The following is a summary of the Corporation's total comprehensive income for the interim three and six month periods ended December 31, 2000 and 1999. Three months ended Six months ended December 31, December 31, ---------------- --------------- 2000 1999 2000 1999 ------ ------ ------ ------ Net Income .................................. $2,425 $2,127 $4,856 $4,520 Other comprehensive income, net of tax: Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during period ............. 591 (225) 681 (438) Reclassification adjustment for (gains) losses included in net income ..... (52) -- 342 (2) ------ ------ ------ ------ Other comprehensive income .................. 539 (225) 1,023 (440) ------ ------ ------ ------ Comprehensive Income ........................ $2,964 $1,902 $5,879 $4,080 ====== ====== ====== ====== 5. Segment Reporting Management has concluded that the Company is comprised of a single operating segment, community banking activities, and has disclosed all required information relating to its one operating segment. Management considers parent company activity to represent an overhead function rather than an operating segment. The Company does not have a single external customer from which it derives 10 percent or more of its revenue and operates in one geographical area. 6. New Accounting Pronouncements Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," was issued in June 1998 and amended by Statement of Financial Standard No. 137 ("SFAS 137"), "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of SFAS 133" and Statement of Financial Accounting Standards No. 138 ("SFAS 138"), "Accounting for Certain Derivative Instruments and Certain Hedging Activities". SFAS 133, as amended, is effective July 1, 2000, for the Company. The Company designates its interest rate swaps as fair value hedge instruments, which are recorded as assets or liabilities on the balance sheet and measured at fair value. The effect of this new standard resulted in a hedging asset of $271,000 being recorded on July 1, 2000 and an offsetting contra asset for the same amount being applied as a reduction to commercial real estate loans. As of December 31, 2000, the fair value of the hedging asset and the contra asset were adjusted to ($82,000) and $82,000, respectively. There was no income statement impact as the fair value hedges were determined by management to be highly effective in accordance with SFAS 133. Statement of Financial Accounting Standards No. 140 ("SFAS 140"), "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," was issued September 2000 and provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. SFAS 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities after March 31, 2001. Also, it is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. Management has not yet quantified the effect, if any, of this new standard on the consolidated financial statements. Part I, Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations FORWARD LOOKING STATEMENTS This Quarterly Report on Form 10-Q ("Form 10-Q") contains statements which constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this Form 10-Q and include statements regarding the intent, belief, outlook, estimate or expectations of the Company (as defined below), its directors or its officers primarily with respect to future events and the future financial performance of the Company. Readers of this Form 10-Q are cautioned that any such forward looking statements are not guarantees of future events or performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward looking statements as a result of various factors. The accompanying information contained in this Form 10-Q identifies important factors that could cause such differences. These factors include changes in interest rates, loss of deposits and loan demand to other savings and financial institutions, substantial changes in financial markets; changes in real estate values and the real estate market; regulatory changes, or unanticipated results in pending legal proceedings. Home Federal Bancorp (the "Company") is organized as a unitary savings and loan holding company and owns all the outstanding capital stock of Home Federal Savings Bank (the "Bank"). The business of the Bank and therefore, the Company, is to provide consumer and business banking services to certain markets in the south-central portions of the State of Indiana. The Bank does business through 17 full service banking branches. RESULTS OF OPERATIONS: Quarter Ended December 31, 2000 Compared to Quarter Ended December 31, 1999 General The Company reported net income of $2,425,000 for the quarter ended December 31, 2000, compared to $2,127,000 for the quarter ended December 31, 1999, an increase of $298,000 or 14.0%. Basic earnings per common share for the current quarter were $0.54 compared to $0.44 for the quarter ended December 31, 1999. Dilutive earnings per common share were $0.53 compared to $0.42 for the quarter ended December 31, 1999, or a 24.9% increase. Net Interest Income Net interest income before provision for loan losses remained relatively stable decreasing by $49,000 or .8% for the quarter ended December 31, 2000, compared to the quarter ended December 31, 1999. This decrease was due to a 34 basis points decline in the net interest spread, as the cost of interest bearing liabilities increased 83 basis points outpacing the slower growth of the interest rate earned on interest bearing assets of 49 basis points. The provision for loan losses decreased $86,000 for the quarter ended December 31, 2000 compared to the quarter ended December 31, 1999. At December 31, 2000, the loan loss allowance covered 72% of non-performing loans, real estate owned and other repossessed assets. Based on management's analysis of classified assets, loss histories and economic conditions, the allowance balance appears adequate at December 31, 2000. Quarter ending December 31: (in thousands) 2000 1999 - ------------------------------------------ ---- ---- Allowance beginning balance ......................... $ 5,070 $ 4,433 Provision for loan losses ........................... 355 441 Charge-offs ......................................... (190) (423) Recoveries .......................................... 23 27 - ----------------------------------------------------- ------- ------- Loan Loss Allowance ................................. $ 5,258 $ 4,478 ======= ======= Allowance to Total Loans ............................ .77% .74% Allowance to Nonperforming Assets ................... 94% 84% Interest Income Total interest income for the three-month period ended December 31, 2000, increased $2,450,000, or 17.4%, over the same period of the prior year. This increase is the result of two factors: 1) the average balances of interest earning assets increasing $74,855,000 for the second quarter of fiscal 2001 as compared to the second quarter of fiscal 2000; and 2) a 49 basis point increase in the weighted average interest rate earned on interest bearing assets for the quarter ended December 31, 2000 as compared to the quarter ended December 31, 1999. Interest Expense Total interest expense for the three-month period ended December 31, 2000 increased $2,499,000, or 32.0%, as compared to the same period a year ago. The factors that caused the increase in interest expense mirror the factors for the increase in interest income. Average balances of interest bearing liabilities increased $76,492,000, while the interest rate paid on interest bearing liabilities rose 83 basis points in the quarter ended December 31, 2000 as compared to the quarter ended December 31, 1999. Other Income Total other income for the three-month period ended December 31, 2000, increased $286,000 or 15.3% over the same period a year ago. This increase was the net result of several factors including joint venture income, which increased $130,000. Several joint venture real estate projects matured from the development stage to an income producing stage resulting in an increase of $80,000. An increase of $50,000 was added to joint venture income due to the growth in the annual dividend received from an insurance company of which the Bank is a part owner. The dividend received is primarily based on the percentage of insurance sales made by Bank personnel in relationship to the total insurance sales made by all owners of the insurance company. Additionally, a dividend is also paid based on the percentage ownership of the insurance company. The second largest increase in other income for the quarter came from the $87,000 increase in miscellaneous income that was primarily due to the $65,000 increase in the dividend received on the Federal Home Loan Bank stock. The dividend increase was due to increases in the outstanding balance of the stock as well as an increase in the dividend rate paid in the quarter ended December 31, 2000 as compared to the same quarter for the previous year. Small increases for the second quarter ended December 31, 2000, were also recognized from the sale of loans, investments and real estate owned. A factor, which reduced other income, was a $124,000 decrease in loan servicing income resulting from a second quarter charge in fiscal 2001 for the impairment of mortgage servicing rights of $145,000 as compared to the second quarter fiscal 1999 charge for impairment of mortgage servicing rights of $18,000. Statement of Financial Accounting Standards No. 122 ("SFAS 122") "Accounting for mortgage servicing rights" requires that originated mortgage servicing rights ("OMSR") be reviewed for impairment. Generally as rates decline, OMSR rights tied to higher rate loans will become impaired. Other Expenses Total other expenses for the three-month period ended December 31, 2000, remained relatively stable increasing $24,000 or .6% over the same period ended December 31, 1999. This increase is due primarily to a $137,000 increase in compensation and employee benefits resulting from normal salary increases, increased health insurance costs and funding required for the Bank's pension plan. Offsetting the increase in compensation and employee benefits was a decrease in the federal insurance premium of $55,000 due to a rate decrease, as well as a decrease in miscellaneous expenses of $54,000, which resulted from the net decrease of various expense categories. Six-months Ended December 31, 2000 Compared to Six-months Ended December 31, 1999: General The Company reported net income of $4,856,000, or $1.04 per dilutive common share, for the six-months ended December 31, 2000, compared to $4,520,000, or $.88 per dilutive common share, for the same period a year ago, an increase of $336,000 or a 17.9% increase in earnings per dilutive common share. Net Interest Income Net interest income before provision for loan losses increased $124,000 for the six-month period ended December 31, 2000, compared to the same period ended December 31, 1999. The increase is due to the growth in average interest earning assets and interest bearing liabilities during the six month period ended December 31, 2000, which compensated for the offsetting effect of a 31 basis point drop in the interest rate spread over the same period. The change to the loan loss allowance for the six-month period ended December 31, 2000 is as follows: Six months ending December 31: (in thousands) 2000 1999 - --------------------------------------------- ---- ---- Allowance beginning balance ......................... $ 4,949 $ 4,349 Provision for loan losses ........................... 570 633 Charge-offs ......................................... (301) (550) Recoveries .......................................... 40 46 - ----------------------------------------------------- ------- ------- Loan Loss Allowance ................................. $ 5,258 $ 4,478 ======= ======= Allowance to Total Loans ............................ .77% .74% Allowance to Nonperforming Assets ................... 94% 84% Interest Income Total interest income for the six-month period ended December 31, 2000 increased $5,212,000, compared to the six-month period ended December 31, 1999. The six month period increase, like the second quarter increase was due to an increase in average balances of $81,345,000 and an increase of 51 basis points on the interest rate earned on interest bearing assets. Interest Expense Total interest expense for the six-months ended December 31, 2000 increased $5,088,000, compared to the six-month period ended December 31, 1999. Similarly to the increase in interest income, the increase in interest expense was due to increases in average balances of deposits and borrowings outstanding of $85,283,000 as well as an 82 basis point increase in the weighted average cost of funds for the six-month period ended December 31, 2000 as compared to the same period ended December 31, 1999. Other Income Total other income for the six-month period ended December 31, 2000 increased $461,000 or 12.4% as compared to the same period one year ago. This increase was the net result of several factors including an increase of $333,000 in the gain on sale of loans, which included $222,000 that resulted from the sale of the Bank's credit card portfolio in the first quarter of fiscal 2001. Additional increases in other income for the six months ended December 31, 2000 were joint venture income and miscellaneous income increases of $246,000, and $176,000, respectively, for the reasons previously stated in the quarterly discussion. Two factors, which reduced other income, were; 1) a $125,000 decrease in loan servicing income resulting from a second quarter charge in fiscal 2001 for the impairment of mortgage servicing rights of $145,000, as required by SFAS 122 and 2) a $342,000 loss on sale of securities incurred in restructuring the investment portfolio to higher yielding investments. Other Expenses Total other expenses for the six-month period ended December 31, 2000 increased $274,000 or 3.4%. This increase is primarily the net result of three factors. The increase in compensation and employee benefits of $237,000 offset by the decrease in federal insurance premiums of $107,000 as discussed in the quarterly comparisons, as well as $106,000 increase in miscellaneous expenses due to a one-time charge of $100,000 incurred in the first quarter of fiscal 2001. FINANCIAL CONDITION: Total assets showed an increase of $30,382,000 from June 30, 2000, to December 31, 2000. Cash and cash equivalents increased $12,982,000, while loans receivable, increased $18,898,000. These increases were funded with deposits and Federal Home Loan Bank advances which increased $12,716,000 and 12,496,000, respectively. Additionally, senior debt increased $5,000,000 to fund the repurchase of the company's stock. Shareholders' equity decreased $1,375,000 during the same period. Retained earnings increased $4,856,000 million from net income and decreased $1,225,000 million for dividends paid and decreased $5,574,000 from the repurchase of the Company's common stock. Common stock decreased $501,000 due to stock repurchases during the period. This decrease in common stock was offset by exercises of common stock options totaling $46,000. The Company had an accumulated other comprehensive loss from unrealized losses in its available for sale portfolio of $77,000, or a $1,023,000 increase in shareholders' equity from the June 30, 2000 loss position of $1,100,000. At December 31, 2000, the Bank exceeded all current OTS regulatory capital requirements as follows: To Be Categorized As "Well Capitalized" Under Prompt For Capital Corrective Action (dollars in thousands) Actual Adequacy Purposes Provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 2000 Tangible capital (to total assets) $67,101 7.88% $12,772 1.50% N/A N/A Core capital (to total assets) $67,101 7.88% $34,060 4.00% N/A N/A Total risk-based capital (to risk-weighted assets) $70,653 11.13% $50,787 8.00% $63,484 10.00% Tier 1 risk-based capital (to risk-weighted assets) $67,101 10.57% N/A N/A $38,090 6.00% Tier 1 leverage capital (to average assets) $67,101 7.92% N/A N/A $42,342 5.00% To Be Categorized Liquidity and Capital Resources The minimum liquidity allowed by law is 4%. At December 31, 2000, the Bank's average liquidity ratio was 18.8%. Historically, the Bank has maintained its liquid assets which qualify for purposes of the OTS liquidity regulations above the minimum requirements imposed by such regulations and at a level believed adequate to meet requirements of normal daily activities, repayment of maturing debt and potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained. Cash for these purposes is generated through the sale or maturity of investment securities and loan sales and repayments, and may be generated through increases in deposits. Loan payments are a relatively stable source of funds, while deposit flows are influenced significantly by the level of interest rates and general money market conditions. Borrowings may be used to compensate for reductions in other sources of funds such as deposits. As a member of the FHLB system, the Bank may borrow from the FHLB of Indianapolis. At December 31, 2000, the Bank had $187,982,000 in such borrowings. As of that date, the Bank had commitments to fund loan originations and purchases of approximately $40,274,000 and commitments to sell loans of $17,404,000 million. In the opinion of management, the Bank has sufficient cash flow and borrowing capacity to meet current and anticipated funding commitments. Item 3. Quantitative and Qualitative Analysis of Financial Condition and Results of Operations. In the opinion of management the results for the quarter ended December 31, 2000 will not be materially different from the results presented on page 13 of the annual report for fiscal year 2000. Supplemental Data: Three Months Ended Year to Date December 31, December 31, --------------------------------- 2000 1999 2000 1999 ----- ----- ----- ----- Weighted average interest rate earned on total interest-earning assets ........... 8.42% 7.93% 8.40% 7.88% Weighted average cost of total interest-bearing liabilities ............... 5.29% 4.46% 5.21% 4.39% Interest rate spread during period ............. 3.12% 3.46% 3.18% 3.49% Net yield on interest-earning assets (net interest income divided by average interest-earning assets on annualized basis) 3.18% 3.54% 3.24% 3.59% Total interest income divided by average total assets (on annualized basis) ......... 7.78% 7.31% 7.77% 7.25% Total interest expense divided by average total assets (on annualized basis) . 4.80% 4.02% 4.73% 3.93% Net interest income divided by average total assets (on annualized basis) ......... 2.94% 3.26% 3.00% 3.30% Return on assets (net income divided by average total assets on annualized basis) .. 1.11% 1.10% 1.16% 1.19% Return on equity (net income divided by average total equity on annualized basis) .. 13.89% 12.67% 14.33% 13.20% Net interest margin to average earning assets ............................... 3.18% 3.54% 3.24% 3.59% Net interest margin to average assets .......... 2.94% 3.26% 3.00% 3.30% At December 31, ---------------- 2000 1999 ----- ----- Book value per share outstanding ............ $15.45 $13.99 Interest rate spread ........................ 3.17% 3.38% Nonperforming Assets: Loans:Non-accrual ......................... $4,201 $3,106 Past due 90 days or more ............... -- -- Restructured ........................... 705 117 ------ ------ Total nonperforming loans ................. 4,906 3,223 Real estate owned, net .................... 646 2,044 Other repossessed assets, net ............. 62 65 ------ ------ Total Nonperforming Assets ................ $5,614 $5,332 ====== ====== Nonperforming assets divided by total assets. 0.65% 0.67% Nonperforming loans divided by total loans .. 0.72% 0.53% Balance in Allowance for Loan Losses ........ $5,258 $4,478 PART II. OTHER INFORMATION Item 1. Legal Proceedings N/A Item 2. Changes in Securities and Use of Proceeds N/A Item 3. Defaults Upon Senior Securities N/A Item 4. Submission of Matters to a Vote of Security Holders. N/A Item 5. Other information N/A Item 6. Exhibits and Reports on Form 8-K Home Federal Bancorp issued one report on Form 8-K in the quarter ended December 31, 2000. On November 29, 2000, Home Federal Bancorp filed a Form 8-K announcing the approval of the board of directors to pursue a stock buy back of up to 5%, (225,209 shares), of the Company's common stock. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on behalf of the undersigned thereto duly authorized. Home Federal Bancorp DATE: January 30, 2001 /S/ Lawrence E. Welker Lawrence E. Welker, Executive Vice President, Treasurer, and Chief Financial Officer

9 This schedule contains summary financial information extracted from the registrant's unaudited consolidated financial statements and is qualified in its entirety by reference to such financial statements. 0000867493 Home Federal Bancorp 1,000 6-MOS JUN-30-2001 JUL-01-2000 DEC-31-2000 23,044 11,134 0 0 98,283 8,254 8,311 670,905 5,258 862,536 585,609 0 5,704 0 0 0 7,880 60,308 862,536 28,863 3,649 275 32,787 13,644 20,116 12,671 570 (342) 1,816 7,944 7,944 0 0 4,856 1.07 1.04 8.40 4,201 0 705 0 4,949 301 40 5,258 0 0 0