Form 10Q

10-Q 1 homf10q-122001.htm HOME FEDERAL SAVINGS BANK FORM 10Q Form 10Q

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, 2001

[ ] 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.)

501 Washington Street, Columbus, Indiana 47201
(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 February 4, 2002:

Common Stock, no par value - 4,451,461 shares outstanding

HOME FEDERAL BANCORP
FORM 10-Q

INDEX

Page No.

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

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,
2001 2001
------- -------

ASSETS:
Cash ............................................... $ 34,288 $ 25,814
Interest-bearing deposits .......................... 30,388 9,610
------- -------
Total cash and cash equivalents .................. 64,676 35,424
------- -------
Securities available for sale at fair value
(amortized cost $75,500 and $79,826) ............. 76,123 80,316
Securities held to maturity
(fair value $4,744 and $7,409) ................... 4,634 7,296
Loans held for sale
(fair value $17,079 and $12,518) ................. 16,903 12,383
Loans receivable, net of allowance
for loan losses of $6,144 and $5,690 ............ 645,434 674,552
Investments in joint ventures ...................... 8,582 10,075
Federal Home Loan Bank stock ....................... 9,965 9,866
Accrued interest receivable, net ................... 4,969 5,213
Premises and equipment, net ........................ 12,531 11,915
Real estate owned .................................. 2,473 1,298
Prepaid expenses and other assets .................. 4,894 4,386
Cash surrender value of life insurance ............. 9,531 9,274
Goodwill ........................................... 1,395 1,395
------- -------

TOTAL ASSETS .................................... $862,110 $863,393
======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits ........................................... $579,165 $576,543
Advances from Federal Home Loan Bank ............... 183,064 192,067
Senior debt ........................................ 11,200 11,200
Other borrowings ................................... 4,409 4,341
Advance payments by borrowers
for taxes and insurance .......................... 321 441
Accrued expenses and other liabilities ............. 7,828 6,757
------- -------
Total liabilities ............................... 785,987 791,349
------- -------
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: .......................... 8,319 8,033
4,451,461 shares at December 31, 2001
4,415,704 shares at June 30, 2001
Retained earnings, restricted ..................... 67,700 63,787
Accumulated other comprehensive income, net of taxes 104 224
------- -------
Total shareholders' equity ...................... 76,123 72,044
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...... $862,110 $863,393
======== =======

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,
----------------------- ----------------------
Interest income: 2001 2000 2001 2000
---------- ---------- ---------- ----------
Loans receivable .......................................... $ 13,014 $ 14,591 $ 26,697 $ 28,863
Securities available for sale and held to maturity ........ 1,242 1,877 2,527 3,649
Other interest income ..................................... 114 103 314 275
---------- ---------- ---------- ----------
Total interest income ...................................... 14,370 16,571 29,538 32,787
---------- ---------- ---------- ----------

Interest expense:
Deposits .................................................. 4,874 6,975 10,717 13,644
Advances and borrowings ................................... 3,005 3,336 6,130 6,472
---------- ---------- ---------- ----------
Total interest expense ..................................... 7,879 10,311 16,847 20,116
---------- ---------- ---------- ----------

Net interest income ........................................ 6,491 6,260 12,691 12,671
Provision for loan losses .................................. 415 355 721 570
---------- ---------- ---------- ----------
Net interest income after provision for loan losses ........ 6,076 5,905 11,970 12,101
---------- ---------- ---------- ----------

Other income:
Gain on sale of loans ..................................... 1,930 270 2,803 782
Gain(loss) on sale of securities .......................... -- 52 90 (342)
Income (loss) from joint ventures ......................... 190 275 105 553
Insurance, annuity income, other fees ..................... 293 278 616 553
Service fees on NOW accounts .............................. 559 587 1,157 1,176
Net gain (loss) on real estate owned and repossessed assets 49 78 22 102
Loan servicing income ..................................... 208 112 381 403
Miscellaneous ............................................. 521 504 1,023 965
---------- ---------- ---------- ----------
Total other income ......................................... 3,750 2,156 6,197 4,192
---------- ---------- ---------- ----------

Other expenses:
Compensation and employee benefits ........................ 2,624 2,304 5,075 4,518
Occupancy and equipment ................................... 740 616 1,441 1,229
Service bureau expense .................................... 319 206 584 411
Federal insurance premium ................................. 26 29 53 58
Marketing ................................................. 203 147 286 267
Goodwill amortization ..................................... -- 25 -- 50
Miscellaneous ............................................. 1,365 837 2,429 1,816
---------- ---------- ---------- ----------
Total other expenses ....................................... 5,277 4,164 9,868 8,349
---------- ---------- ---------- ----------

Income before income taxes ................................. 4,549 3,897 8,299 7,944
Income tax provision ....................................... 1,779 1,472 3,165 3,088
---------- ---------- ---------- ----------
Net Income ................................................. $ 2,770 $ 2,425 $ 5,134 $ 4,856
========== ========== ========== ==========

Basic earnings per common share ............................ $ 0.62 $ 0.54 $ 1.16 $ 1.07
Diluted earnings per common share .......................... $ 0.61 $ 0.53 $ 1.12 $ 1.04

Basic weighted average number of shares .................... 4,439,663 4,483,165 4,430,449 4,558,099
Dilutive weighted average number of shares ................. 4,591,654 4,600,507 4,599,474 4,683,838
Dividends per share ........................................ $ 0.138 $ 0.138 $ 0.275 $ 0.275

See notes to consolidated financial statements (unaudited)

HOME FEDERAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) SIX MONTHS ENDED
(unaudited) December 31,
-------------------

2001 2000
-------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 5,134 $ 4,856
Adjustments to reconcile net income to net cash
from operating activities:
Accretion of discounts, amortization and depreciation ... 401 6
Provision for loan losses ............................... 721 570
Net gain from sale of loans ............................. (2,803) (782)
Net (gain)/loss from sale of investment securities ...... (90) 342
Net (gain)/loss from joint ventures; real estate owned .. (127) (656)
Loan fees deferred (recognized), net .................... 31 (96)
Proceeds from sale of loans held for sale ............... 162,111 33,371
Origination of loans held for sale ...................... (163,828) (32,760)
Increase (decrease) in accrued interest and other assets (2,062) 1,090
Increase (decrease) in other liabilities ................ 752 738
-------- -------
Net cash from operating activities ........................ 240 6,679
-------- -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Net principal received (disbursed) on loans ............... 30,186 (13,654)
Proceeds from:
Maturities/Repayments of:
Securities held to maturity ....................... 668 436
Securities available for sale ..................... 12,855 4,047
Sales of:
Securities available for sale ..................... 17,700 32,552
Real estate owned and other asset sales ........... 956 1,048
Purchases of:
Loans ................................................ (1,820) (5,718)
Securities available for sale ........................ (24,157) (34,223)
Securities held to maturity .......................... -- (910)
Federal Home Loan Bank stock ......................... (99) (624)
Investment in joint ventures, net ......................... 1,598 --
Increase in cash surrender value of life insurance ........ (257) (171)
Acquisition of property and equipment, net ................ (1,370) (245)
-------- -------
Net cash from investing activities ........................ 36,260 (17,462)
-------- -------

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net ...................... 2,622 12,716
Proceeds from advances from FHLB .......................... 22,300 82,900
Repayment from advances of FHLB ........................... (31,303) (65,404)
Net proceeds from (net repayment of) overnight borrowings . 68 807
Common stock options exercised ............................ 286 46
Repurchase of common stock ................................ -- (6,075)
Payment of dividends on common stock ...................... (1,221) (1,225)
-------- -------
Net cash from financing activities ........................ (7,248) 23,765
-------- -------

NET INCREASE IN CASH AND CASH EQUIVALENTS ................. 29,252 12,982
Cash and cash equivalents, beginning of period ............ 35,424 21,196
-------- -------
Cash and cash equivalents, end of period .................. $ 64,676 $ 34,178
======== ========

Supplemental information:
Cash paid for interest $ 17,329 $ 19,655
Cash paid for income taxes $ 2,327 $ 3,673
Assets acquired through foreclosure $ 1,976 $ 436

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, 2001, and for the three and six month periods ended December 31, 2001, 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, 2001.

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,
2001 2000 2001 2000
---- ---- ---- ----
Basic EPS:
Weighted average common shares . 4,439,663 4,483,165 4,430,449 4,558,099
========= ========= ========= =========
Diluted EPS:
Weighted average common shares . 4,439,663 4,483,165 4,430,449 4,558,099
Dilutive effect of stock options 151,991 117,342 169,025 125,739
Weighted average common and
incremental shares ........... 4,591,654 4,600,507 4,599,474 4,683,838
========= ========= ========= =========

4. Comprehensive Income
The following is a summary of the Company's total comprehensive income for the
interim three and six month periods ended December 31, 2001 and 2000.

Three months ended Six months ended
December 31, December 31,
2001 2000 2001 2000
----------------- -----------------
Net Income ........................................... $2,770 $2,425 $5,124 $4,856
Other comprehensive income:
Unrealized holding gains (losses)
from securities available for sale .............. (833) 950 220 1,363
Reclassification adjustment for (gains)
losses realized in income ....................... - (52) (90) 342
Unrealized gains (losses) from cash flow hedge .... 125 - (330) -
----------------- -----------------
Net unrealized gains (losses) ........................ (708) 898 (200) 1,705
Tax effect ........................................... 283 (359) 90 (682)
----------------- -----------------
Other comprehensive income, net of tax .............. (425) 539 (120) 1,023
----------------- -----------------
Comprehensive Income ................................. $2,345 $2,964 $5,014 $5,879
================= =================

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 operates in one geographical area and does not have a
single external customer from which it derives 10 percent or more of its
revenue.

6. New Accounting Pronouncements
Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and
Other Intangible Assets," was issued in July 2001. Under SFAS 142, goodwill
amortization ceases when the new standard is adopted. The new rules also require
an initial goodwill impairment assessment in the year of adoption and at least
annual impairment tests thereafter. On July 1, 2001, the Company early adopted
SFAS 142, as permitted. As a result, annual goodwill amortization of
approximately $101,000 ceased. Management determined that there was no
impairment charge resulting from the adoption of SFAS 142.

Statement of Financial Accounting Standards No. 143 ("SFAS 143"), "Accounting
for Asset Retirement Obligations," was issued in June 2001 and is effective for
financial statements issued for fiscal years beginning after June 15, 2002. SFAS
143 addresses financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset retirement
costs. Management has not yet quantified the effect, if any, of this new
standard on the consolidated financial statements.

Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting
for the Impairment or Disposal of Long-Lived Assets," was issued in August 2001
and is effective for financial statements issued for fiscal years beginning
after December 15, 2001, and interim periods within those fiscal years. SFAS 144
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. 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 that
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,
unanticipated conversion expenses, increases in compensation and employee
expenses, or unanticipated results in pending legal proceedings.

Home Federal Bancorp (the "Company") is organized as a financial 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 and one commercial loan origination office in Indianapolis.

RESULTS OF OPERATIONS:
Quarter Ended December 31, 2001 Compared to Quarter Ended December 31, 2000

General
The Company reported net income of $2,770,000 for the quarter ended December 31,
2001, compared to $2,425,000 for the quarter ended December 31, 2000, an
increase of $345,000 or 14.2%. Basic earnings per common share for the current
quarter were $0.62 compared to $0.54 for the quarter ended December 31, 2000.
Diluted earnings per common share were $0.61 for the quarter ended December 31,
2001 compared to $0.53 for the quarter ended December 31, 2000.

Net Interest Income
Net interest income before provision for loan losses increased by $231,000 or
3.7% for the quarter ended December 31, 2001, compared to the quarter ended
December 31, 2000. This increase was due to a 12 basis point increase in the net
interest spread in the current quarter, as the interest rates paid on interest
bearing liabilities decreased 126 basis points which exceeded the decline in
interest rates earned on interest earning assets which decreased 114 basis
points.

The provision for loan losses increased $60,000 for the quarter ended December
31, 2001 compared to the quarter ended December 31, 2000. At December 31, 2001,
the loan loss allowance covered 63% of non-performing loans, real estate owned
and other repossessed assets. It is management's policy to maintain an allowance
for estimated losses on loans based on among other matters, the estimated net
realizable value of the underlying collateral, as applicable, economic
conditions, historical loan loss experience and other factors that are
particularly susceptible to changes that could result in a material adjustment
in the near term. While management endeavors to use the best information
available in making its evaluations, future allowance adjustments may be
necessary if economic conditions change substantially from the assumptions used
in making the evaluations. Based on management's analysis at December 31, 2001,
the allowance balance appears adequate.

Quarter ending December 31: (in thousands) 2001 2000
------------------------------------------ ---- ----
Allowance beginning balance ....................... $ 5,820 $ 5,070
Provision for loan losses ......................... 415 355
Charge-offs ....................................... (110) (190)
Recoveries ........................................ 19 23
--------------------------------------------------- ------- -------
Loan Loss Allowance ............................... $ 6,144 $ 5,258
======= =======

Allowance to Total Loans .......................... .92% .77%
Allowance to Nonperforming Assets ................. 63% 94%

Interest Income
Total interest income for the three-month period ended December 31, 2001,
decreased $2,201,000, or 13.3%, over the same period of the prior year. This
decrease is primarily the result of a 114 basis point decrease in the weighted
average interest rate earned on interest earning assets for the quarter ended
December 31, 2001 as compared to the quarter ended December 31, 2000. The
weighted average interest rate earned on interest earning assets declined
because market rates in general declined, causing adjustable rate assets to
automatically reprice to lower rates. Additionally, many fixed rate loans
refinanced into lower rate loans.

Interest Expense
Total interest expense for the three-month period ended December 31, 2001
decreased $2,432,000, or 23.6%, as compared to the same period a year ago. The
factors that caused the decrease in interest expense mirror the factor for the
decrease in interest income. The interest rate paid on interest bearing
liabilities declined 126 basis points in the quarter ended December 31, 2001 as
compared to the quarter ended December 31, 2000.

Other Income
Total other income for the three-month period ended December 31, 2001, increased
$1,594,000 or 73.9% over the same period a year ago. This increase was primarily
the result of an increase of $1,660,000 from the gain on sale of loans. The
lower loan rates experienced in the quarter ended December 31, 2001 resulted in
increased refinancing activity, causing the Bank's fifteen and thirty year fixed
rate loan originations to increase. The Bank typically sells most of its fifteen
year and thirty year fixed rate mortgages in the secondary market, resulting in
the increased gain on sale of loans.

Other Expenses
Total other expenses for the three-month period ended December 31, 2001,
increased $1,113,000 or 26.7% over the same period ended December 31, 2000. This
increase is partially due to increases in the Bank's miscellaneous expense of
$528,000. The Bank's increase in miscellaneous expenses reflects expenses
associated with the Bank's third party processor change of approximately
$248,000, as well as expenses of $60,000 related to the Bank's charter
conversion from a federal savings bank charter to a state commercial bank
charter. In addition to miscellaneous expense increases, the Bank recorded an
increase of $320,000 or 13.9% in personnel expense for the quarter ended
December 31, 2001 compared to the quarter ended December 31, 2000. The personnel
expense increases include increased health insurance costs, funding required for
the Bank's pension plan, increased commissions paid to loan officers, reflecting
the increased loan activity discussed above, and normal salary increases.
Additional increases of $124,000 occurred in occupancy expenses due to
depreciation charges related to new computer software and hardware upgrades, as
well as an $113,000 increase in service bureau expense as the Bank paid two
months expenses in one month.

Six-months Ended December 31, 2001 Compared to Six-months Ended December 31,
2000:

General
The Company reported net income of $5,134,000, or $1.12 per dilutive common
share, for the six-months ended December 31, 2001, compared to $4,856,000, or
$1.04 per dilutive common share, for the same period a year ago, an increase of
$278,000 or a 7.7% increase in earnings per dilutive common share.

Net Interest Income
Net interest income before provision for loan losses remained relatively
constant increasing $20,000 for the six-month period ended December 31, 2001,
compared to the same period ended December 31, 2000.

The change to the loan loss allowance for the six-month period ended December
31, 2001 is as follows:

Six months ending December 31: (in thousands) 2001 2000
--------------------------------------------- ---- ----
Allowance beginning balance .................. $ 5,690 $ 4,949
Provision for loan losses ................... 721 570
Charge-offs ................................. (299) (301)
Recoveries .................................. 32 40
------- -------
Loan Loss Allowance ......................... $ 6,144 $ 5,258
======= =======

Allowance to Total Loans ................... .92% .77%
Allowance to Nonperforming Assets........... 63% 94%

Interest Income
Total interest income for the six-month period ended December 31, 2001 decreased
$3,249,000, compared to the six-month period ended December 31, 2000. The six
month period decrease was due to a decrease of 92 basis points on the interest
rate earned on interest earning assets.

Interest Expense
Total interest expense for the six-month period ended December 31, 2001
decreased $3,269,000, compared to the six-month period ended December 31, 2000.
Similar to the decrease in interest income, the decrease in interest expense was
due to a 90 basis point decrease in the weighted average cost of funds for the
six-month period ended December 31, 2001 as compared to the same period ended
December 31, 2000.

Other Income
Total other income for the six-month period ended December 31, 2001 increased
$2,005,000 or 47.8% as compared to the same period one year ago. This increase
was primarily the result of an increase in gain on sale of loans of $2,021,000
as discussed in the second quarter results above. An additional increase in
other income for the six months ended December 31, 2001 was a $432,000 increase
in the gain on sale of securities, which was the result of a $342,000 loss
incurred in the six months ended December 31, 2000 due to restructuring the
portfolio, compared with a $90,000 gain realized in the six months ended
December 31, 2001.

A factor, which reduced other income, was a $448,000 decrease in income from
joint ventures. This decrease was due to various factors including an impairment
charge against one of the properties of $171,000, as well as a slow down in
sales for other joint venture projects over the two comparative six month
periods.

Other Expenses
Total other expenses for the six-month period ended December 31, 2001 increased
$1,519,000 or 18.2%. This increase is a result of the same four factors
presented in the second quarter discussion, including a $613,000 increase in
miscellaneous expenses, a $557,000 increase in compensation and employee
benefits, a $212,000 increase in occupancy expenses and a $173,000 increase in
service bureau expenses.

FINANCIAL CONDITION:
Total assets decreased $1,283,000 from June 30, 2001, to December 31, 2001. Cash
and cash equivalents increased $29,252,000, while loans receivable, decreased
$29,118,000. These changes were the result of increased refinancing activity
that resulted in the Bank selling $104,967,000 of loans in the secondary market.
Additionally, cash from the sale of loans in the secondary market was used to
pay back advances from the Federal Home Loan Bank resulting in decreases of
$9,003,000 for the sixth month period ended December 31, 2001.

Shareholders' equity increased $4,079,000 during the same period. Retained
earnings increased $5,134,000 from net income and decreased $1,221,000 for
dividends paid. Common stock increased $286,000 due to exercises of common stock
options. The Company had accumulated other comprehensive income from unrealized
gains in its securities available for sale portfolio of $79,000 for the six
months ended December 31, 2001. Additionally the Company had an accumulated
other comprehensive loss, net of tax from the change in fair value of a cash
flow hedge of $199,000 for the same six month period.

At December 31, 2001, the Bank exceeded all current applicable 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, 2001

Tangible capital (to total assets) $81,143 9.41% $12,936 1.50% N/A N/A
Core capital (to total assets) $81,143 9.41% $34,496 4.00% N/A N/A
Total risk-based capital
(to risk-weighted assets) $87,287 13.29% $52,531 8.00% $65,665 10.00%
Tier 1 risk-based capital
(to risk-weighted assets) $81,143 12.36% N/A N/A $39,399 6.00%
Tier 1 leverage capital
(to average assets) $81,143 10.95% N/A N/A $37,054 5.00%

Liquidity and Capital Resources
Historically, the Bank has maintained its liquid assets 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, 2001,
the Bank had $183,064,000 in such borrowings. Also at December 31, 2001, the
Bank had commitments to fund loan originations of $74,322,000, unused home
equity lines of credit of $78,615,000 and unused commercial lines of credit of
$26,168,000. 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, 2001
will not be materially different from the results presented on page 13 of the
annual report for fiscal year 2001.

Supplemental Data: Three Months Ended Year to Date
December 31, December 31,
--------------------------------
2001 2000 2001 2000
----- ----- ---- ----
Weighted average interest rate earned
on total interest-earning assets ........... 7.28% 8.42% 7.48% 8.40%
Weighted average cost of total
interest-bearing liabilities ............... 4.04% 5.29% 4.31% 5.21%
Interest rate spread during period ............. 3.25% 3.13% 3.17% 3.19%

Net yield on interest-earning assets
(net interest income divided by average
interest-earning assets on annualized basis) 3.29% 3.18% 3.21% 3.25%
Total interest income divided by average
total assets (on annualized basis) ......... 6.63% 7.78% 6.82% 7.77%
Total interest expense divided by
average total assets (on annualized basis) . 3.61% 4.80% 3.86% 4.73%
Net interest income divided by average
total assets (on annualized basis) ......... 2.99% 2.94% 2.93% 3.00%

Return on assets (net income divided by
average total assets on annualized basis) .. 1.30% 1.11% 1.21% 1.16%
Return on equity (net income divided by
average total equity on annualized basis) ..15.04% 13.89% 14.07% 14.33%

At December 31,
----------------
2001 2000
---- ----

Book value per share outstanding ........... $17.10 $15.45

Nonperforming Assets:
Loans: Non-accrual ........................ $6,623 $4,201
Past due 90 days or more ................ - -
Restructured ............................ 697 705
------ ------
Total nonperforming loans .................. 7,320 4,906
Real estate owned, net ..................... 2,411 646
Other repossessed assets, net .............. 62 62
------ ------
Total Nonperforming Assets ................. $9,793 $5,614
====== ======

Nonperforming assets divided by total assets 1.14% 0.65%
Nonperforming loans divided by total loans . 1.09% 0.72%

Balance in Allowance for Loan Losses ....... $6,144 $5,258

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

1. Election of the following director nominees: For Votes Withheld
--- --------------
John T. Beatty ............................... 3,826,791 86,108
(three year term)
Harold Force ................................. 3,826,791 86,108
(three year term)
Gregory J. Pence.............................. 3,825,731 87,169
(three year term)

For Against Abstain
--- ------- -------
2. Approval and ratification of
Home Federal Bancorp 2001
Stock Option Plan......................... 2,320,846 757,669 34,283

Item 5. Other information

Effective December 31, 2001 Home Federal Savings Bank of Seymour Indiana became
an Indiana State Chartered Commercial Bank. Home Federal Bancorp became a
financial holding company regulated by the Federal Reserve Board. The Bank also
moved its home office designation to Columbus, Indiana and became a member of
the Chicago Federal Reserve Bank.

Item 6. Exhibits and Reports on Form 8-K

N/A

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: February 12, 2002 /S/ Lawrence E. Welker
Lawrence E. Welker, Executive Vice President,
Treasurer, and Chief Financial Officer