Form 10Q

10-Q 1 homf10q-32002.htm THIRD QUARTER 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 March 31, 2002

[ ] 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 May 1, 2002:

Common Stock, no par value - 4,359,465 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
Critical Accounting Policies..................................... 8

Item 3. Quantitative and Qualitative Analysis of Financial
Condition and Results of Operations ........................ 13

PART II. OTHER INFORMATION

Item 1. Legal Proceedings .............................................. 14

Item 2. Changes in Securities and Uses of Proceeds ..................... 14

Item 3. Defaults Upon Senior Securities ................................ 14

Item 4. Submission of Matters to a Vote of Security Holders ............ 14

Item 5. Other Information .............................................. 14

Item 6. Exhibits and Reports on Form 8-K ............................... 14

Signatures .............................................................. 15

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HOME FEDERAL BANCORP
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

March 31, June 30,
2002 2001
ASSETS: --------- ---------
Cash ............................................... $ 22,389 $ 25,814
Interest-bearing deposits .......................... 32,875 9,610
--------- ---------
Total cash and cash equivalents .................. 55,264 35,424
--------- ---------
Securities available for sale at fair value
(amortized cost $111,092 and $79,826) ............ 111,203 80,316
Securities held to maturity
(fair value $3,924 and $7,409) ................... 3,825 7,296
Loans held for sale
(fair value $6,423 and $12,518) ................. 6,372 12,383
Loans receivable, net of allowance
for loan losses of $6,364 and $5,690 ............ 623,447 674,552
Investments in joint ventures ...................... 8,754 10,075
Federal Home Loan Bank stock ....................... 9,965 9,866
Accrued interest receivable, net ................... 4,312 5,213
Premises and equipment, net ........................ 12,251 11,915
Real estate owned .................................. 2,009 1,298
Prepaid expenses and other assets .................. 5,486 4,386
Cash surrender value of life insurance ............. 9,661 9,274
Goodwill ........................................... 1,395 1,395
--------- ---------

TOTAL ASSETS .................................... $ 853,944 $ 863,393
========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits ........................................... $ 572,742 $ 576,543
Advances from Federal Home Loan Bank ............... 182,145 192,067
Senior debt ........................................ 11,200 11,200
Other borrowings ................................... 4,324 4,341
Advance payments by borrowers
for taxes and insurance .......................... 672 441
Accrued expenses and other liabilities ............. 7,297 6,757
--------- ---------
Total liabilities ............................... 778,380 791,349
--------- ---------
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: .......................... 8,500 8,033
4,367,715 shares at March 31, 2002
4,415,704 shares at June 30, 2001
Retained earnings, restricted ..................... 67,185 63,787
Accumulated other comprehensive income, net of taxes (121) 224
--------- ---------
Total shareholders' equity ...................... 75,564 72,044
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...... $ 853,944 $ 863,393
========= =========

See notes to consolidated financial statements (unaudited)

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HOME FEDERAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
(unaudited) Three Months Ended Nine Months Ended
March 31, March 31,
--------------------- ---------------------
Interest income: 2002 2001 2002 2001
--------- --------- --------- ---------
Loans receivable .......................................... $ 11,726 $ 14,521 $ 38,423 $ 43,384
Securities available for sale and held to maturity ........ 1,409 1,584 3,936 5,233
Other interest income ..................................... 155 176 469 451
--------- --------- --------- ---------
Total interest income ...................................... 13,290 16,281 42,828 49,068
--------- --------- --------- ---------

Interest expense:
Deposits .................................................. 4,048 6,745 14,765 20,389
Advances and borrowings ................................... 2,898 3,227 9,028 9,699
--------- --------- --------- ---------
Total interest expense ..................................... 6,946 9,972 23,793 30,088
--------- --------- --------- ---------

Net interest income ........................................ 6,344 6,309 19,035 18,980
Provision for loan losses .................................. 509 409 1,230 979
--------- --------- --------- ---------
Net interest income after provision for loan losses ........ 5,835 5,900 17,805 18,001
--------- --------- --------- ---------

Other income:
Gain on sale of loans ..................................... 1,018 403 3,821 1,185
Gain(loss) on sale of securities .......................... 2 146 92 (196)
Income (loss) from joint ventures ......................... 509 181 614 734
Insurance, annuity income, other fees ..................... 378 294 994 847
Service fees on NOW accounts .............................. 489 533 1,646 1,709
Net gain (loss) on real estate owned and repossessed assets 193 (3) 215 99
Loan servicing income ..................................... 412 137 793 540
Miscellaneous ............................................. 511 484 1,534 1,449
--------- --------- --------- ---------
Total other income ......................................... 3,512 2,175 9,709 6,367
--------- --------- --------- ---------

Other expenses:
Compensation and employee benefits ........................ 2,858 2,306 7,933 6,824
Occupancy and equipment ................................... 704 636 2,145 1,865
Service bureau expense .................................... 205 264 789 675
Federal insurance premium ................................. 26 28 79 86
Marketing ................................................. 137 129 423 396
Goodwill amortization ..................................... - 26 - 76
Miscellaneous ............................................. 1,228 898 3,657 2,714
--------- --------- --------- ---------
Total other expenses ....................................... 5,158 4,287 15,026 12,636
--------- --------- --------- ---------

Income before income taxes ................................. 4,189 3,788 12,488 11,732
Income tax provision ....................................... 1,596 1,461 4,761 4,549
--------- --------- --------- ---------
Net Income ................................................. $ 2,593 $ 2,327 $ 7,727 $ 7,183
========= ========= ========= =========

Basic earnings per common share ............................ $ 0.59 $ 0.53 $ 1.74 $ 1.59
Diluted earnings per common share .......................... $ 0.56 $ 0.51 $ 1.68 $ 1.55

Basic weighted average number of shares .................... 4,431,575 4,409,022 4,430,819 4,509,132
Dilutive weighted average number of shares ................. 4,624,157 4,567,629 4,605,537 4,642,331
Dividends per share ........................................ $ 0.150 $ 0.138 $ 0.425 $ 0.413

See notes to consolidated financial statements (unaudited)

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HOME FEDERAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) NINE MONTHS ENDED
March 31,
---------------------
2002 2001
---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 7,727 $ 7,183
Adjustments to reconcile net income to net cash
from operating activities:
Accretion of discounts, amortization and depreciation ... 560 569
Provision for loan losses ............................... 1,230 979
Net gain from sale of loans ............................. (3,821) (1,185)
Net (gain)/loss from sale of investment securities ...... (92) 196
Net (gain)/loss from joint ventures; real estate owned .. (828) (833)
Loan fees deferred (recognized), net .................... 30 (73)
Proceeds from sale of loans held for sale ............... 220,558 73,246
Origination of loans held for sale ......................(210,726) (79,136)
Increase (decrease) in accrued interest and other assets (4,101) 516
Increase (decrease) in other liabilities ................ 647 2,113
--------- ---------
Net cash from operating activities ........................ 11,184 3,575
--------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Net principal received (disbursed) on loans ............... 53,449 (20,043)
Proceeds from:
Maturities/Repayments of:
Securities held to maturity ....................... 1,484 1,038
Securities available for sale ..................... 20,961 5,672
Sales of:
Securities available for sale ..................... 20,237 73,471
Real estate owned and other asset sales ........... 3,803 1,334
Purchases of:
Loans ................................................ (3,604) (7,621)
Securities available for sale ........................ (70,444) (60,794)
Securities held to maturity .......................... - (910)
Federal Home Loan Bank stock ......................... (99) (824)
Investment in joint ventures .............................. 1,935 -
Acquisition of property and equipment ..................... (1,464) (3,314)
--------- ---------
Net cash from investing activities ........................ 26,258 (11,991)
--------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (decrease) in deposits ....................... (3,801) 6,173
Proceeds from advances from FHLB .......................... 27,400 97,400
Repayment from advances of FHLB ........................... (37,322) (81,813)
Proceeds from senior debt.................................. - 5,500
Repayment of senior debt................................... - (505)
Net proceeds from (net repayment of) overnight borrowings . (17) 2,272
Common stock options exercised ............................ 654 125
Repurchase of common stock ................................ (2,639) (6,075)
Payment of dividends on common stock ...................... (1,877) (1,831)
--------- ---------
Net cash from financing activities ........................ (17,602) 21,246
--------- ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS ................. 19,840 12,830
Cash and cash equivalents, beginning of period ............ 35,424 21,196
--------- ---------
Cash and cash equivalents, end of period ..................$ 55,264 $ 34,026
========= =========

Supplemental information:
Cash paid for interest $ 24,248 $ 29,575
Cash paid for income taxes $ 4,153 $ 5,313
Assets acquired through foreclosure $ 3,508 $ 624

See notes to consolidated financial statements (unaudited)

-5-

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 March 31,
2002, and for the three and nine month periods ended March 31, 2002, 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
Certain 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 Nine months ended
March 31, March 31,
--------------------- ---------------------
2002 2001 2002 2001
---- ---- ---- ----
Basic EPS:
Weighted average common shares . 4,431,575 4,409,022 4,430,819 4,509,132
========= ========= ========= =========
Diluted EPS:
Weighted average common shares . 4,431,575 4,409,022 4,430,819 4,509,132
Dilutive effect of stock options 192,582 158,607 174,718 133,199
Weighted average common and
incremental shares ............. 4,624,157 4,567,629 4,605,537 4,642,331
========= ========= ========= =========

4. Comprehensive Income
The following is a summary of the Company's total comprehensive income for the
interim three and nine month periods ended March 31, 2002 and 2001.

Three months ended Nine months ended
March 31, March 31,
--------- --------
2002 2001 2002 2001
----------------- ----------------
Net Income ........................................... $ 2,593 $ 2,327 $ 7,727 $ 7,183
Other comprehensive income:
Unrealized holding gains (losses)
from securities available for sale .............. (497) 999 (277) 2,362
Reclassification adjustment for (gains)
losses realized in income ....................... (2) (146) (92) 196
Unrealized gains (losses) from cash flow hedge .... 124 (205) (206) (205)
----------------- ----------------
Net unrealized gains (losses) ........................ (375) 648 (575) 2,353
Tax effect ........................................... 150 (259) 230 (941)
----------------- ----------------
Other comprehensive income, net of tax .............. (225) 389 (345) 1,412
----------------- ----------------
Comprehensive Income ................................. $ 2,368 $ 2,716 $ 7,382 $ 8,595
================= ================

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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 reportable 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.

-7-

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
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.

CRITICAL ACCOUNTING POLICIES
The notes to the consolidated financial statements contain a summary of the
Company's significant accounting policies presented on pages 20 through 22 of
the annual report for fiscal year 2001. Certain of these policies are important
to the portrayal of the Company's financial condition, since they require
management to make difficult, complex or subjective judgments, some of which may
relate to matters that are inherently uncertain. Management believes that it's
critical accounting policies include determining the allowance for loan losses,
("ALL"), and the valuation of mortgage servicing rights, ("MSR's").

Allowance for loan losses
The ALL is a significant estimate that can and does change based on management's
assumptions about specific borrowers and applicable economic and environmental
conditions, among other factors. Management reviews the adequacy of the ALL on
at least a quarterly basis. This review is based on four components: specific
identified risks or anticipated losses in individual loans, a percentage factor
based on the type of loan and the risk rating assigned to the credit, growth or
shrinkage in the overall portfolio and managements' analysis of overall economic
conditions such as employment, bankruptcy trends, property value changes and
changes in delinquency levels.

Credits are evaluated individually based on degree of delinquency and/or
identified risk ratings of special mention or worse. Credits with delinquency
levels of less than 60 days and risk ratings of satisfactory/monitor or better,
are reviewed in aggregate. Percentage factors applied to individual credits are
based on risk rating, the type of credit and estimated potential losses in the
event liquidation becomes necessary. Percentage factors applied to loans
reviewed in aggregate are based solely on the type of credit. Anticipated losses
on other real estate owned are recognized immediately upon recording the asset.

The ALL also includes a component based on management's assumptions of changes
in risk in non-quantifiable areas such as market conditions, property values,
employment conditions and perceived changes in overall portfolio quality due to
changes in concentration, underwriting changes and both national and regional
trends.

External factors such as increases in unemployment, regional softness in
property values, increasing national numbers in bankruptcy, unsecured
delinquency and charge offs and internal factors such as the continuing increase
in the commercial loan portfolio may result in larger losses in current economic
conditions.

-8-

Changes in loan concentration, delinquency and portfolio are addressed through
the variation in percentages used in calculating the reserve for various types
of credit as well as individual review of "high risk" credits and large loans.

Valuation of Mortgage Servicing Rights

The Company recognizes the rights to service mortgage loans as separate assets,
which are included in other assets in the consolidated balance sheet. The total
cost of loans when sold is allocated between loans and mortgage servicing
rights based on the relative fair values of each. MSR's are
subsequently carried at the lower of the initial carrying value, adjusted for
amortization, or fair value. MSR's are evaluated for impairment based on the
fair value of those rights. The Company uses a present value cash flow valuation
model to establish the fair value of the MSR's. Factors included in the
calculation of fair value of the MSR's include, estimating the present value of
future net cash flows, market loan prepayment speeds for similar loans, discount
rates, servicing costs, and other economic factors. Servicing rights are
amortized over the estimated period of net servicing revenue. It is likely that
these economic factors will change over the life of the MSR's, resulting in
different valuations of the MSR's. The differing valuations will affect the
carrying value of the MSR's on the balance sheet as well as the income recorded
from loan servicing in the income statement. As of March 31, 2002 and June 30,
2001, MSR's had carrying values of $2,517,000 and $1,617,000, respectively.

RESULTS OF OPERATIONS:
Quarter Ended March 31, 2002 Compared to Quarter Ended March 31, 2001:

General
The Company reported net income of $2,593,000 for the quarter ended March 31,
2002, compared to $2,327,000 for the quarter ended March 31, 2001, an increase
of $266,000 or 11.4%. Basic earnings per common share for the current quarter
were $0.59 compared to $0.53 for the quarter ended March 31, 2001. Diluted
earnings per common share were $0.56 for the quarter ended March 31, 2002
compared to $0.51 for the quarter ended March 31, 2001.

Net Interest Income
Net interest income before provision for loan losses increased by $35,000 or
0.6% for the quarter ended March 31, 2002, compared to the quarter ended March
31, 2001. This increase was due to a combination of factors, including a 7 basis
point increase in the net interest margin to average interest earning assets.
Additionally, the ratio of interest earning assets to interest bearing
liabilities increased slightly, due to the decrease in average balances for
interest bearing liabilities of $12,337,000 exceeding the decrease of
$12,127,000 in average balances of interest earning assets.

The provision for loan losses increased $100,000 for the quarter ended March 31,
2002, compared to the quarter ended March 31, 2001. At March 31, 2002, the loan
loss allowance covered 79% 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, specific identified
risks or anticipated losses in individual loans, 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.

-9-

Quarter ending March 31: (in thousands) 2002 2001
--------------------------------------- ---- ----
Allowance beginning balance ........................ $ 6,144 $ 5,258
Provision for loan losses .......................... 509 409
Charge-offs ........................................ (310) (141)
Recoveries ......................................... 21 15
---------------------------------------------------- ------- -------
Loan Loss Allowance ................................ $ 6,364 $ 5,541
======= =======

Allowance to Total Loans ........................... .94% .78%
Allowance to Nonperforming Assets .................. 79% 75%

Interest Income
Total interest income for the three-month period ended March 31, 2002, decreased
$2,991,000, or 18.4%, over the same period of the prior year. This decrease is
primarily the result of a 141 basis point decrease in the weighted average
interest rate earned on interest earning assets for the quarter ended March 31,
2002 as compared to the quarter ended March 31, 2001. The weighted average
interest rate earned on interest earning assets declined because market rates in
general declined. This decline is reflected in the quarterly average of the
one-year constant maturity treasury rate, which fell 50.0% from 4.6%, for the
quarter ended March 31, 2001, to 2.3%, for the quarter ended March 31, 2002.
This decrease in rates caused adjustable rate assets to automatically reprice to
lower rates. Additionally, fixed rate loans refinanced into lower rate loans.

Interest Expense
Total interest expense for the three-month period ended March 31, 2002 decreased
$3,026,000, or 30.3%, as compared to the same period a year ago. The factor that
caused the decrease in interest expense mirrors the factor for the decrease in
interest income. The interest rate paid on interest bearing liabilities declined
152 basis points in the quarter ended March 31, 2002, as compared to the quarter
ended March 31, 2001.

Other Income
Total other income for the three-month period ended March 31, 2002, increased
$1,337,000 or 61.5% over the same period a year ago. This increase was primarily
the result of an increase of $615,000 from the gain on sale of loans. The Bank's
average rate on sold loans for the quarters ended March 31, 2002 and March 31,
2001 were 6.8% and 7.4%, respectively. The lower loan rates experienced in the
quarter ended March 31, 2002 as compared to the quarter ended March 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.

Another factor increasing other income is a $275,000 increase in servicing
income for the quarter ended March 31, 2002, as compared to the quarter ended
March 31, 2001. In the quarter ended March 31, 2001 the average rate on sold
loans declined to 7.41% from an average rate on sold loans of 8.24% for the
previous quarter ended December 31, 2000. This declining rate scenario as well
as other factors discussed earlier, increasing prepayment speeds, etc. resulted
in a $160,000 impairment charge.

The rate scenario was reversed in the quarter ended March 31, 2002. In the
quarter ended March 31, 2002 the average rate on sold loans increased to 6.8%
from an average rate on sold loans of 6.6% for the quarter ended December 31,
2001. The increasing rate scenario of the current quarter, as well as other
factors, resulted in a reduction of the required impairment allowance,
increasing the Bank's loan servicing income by $156,000 for the quarter ended
March 31, 2002.

Additionally, income from joint ventures increased $328,000 for the three months
ended March 31, 2002, as compared to the three months ended March 2001. This
increase was possible due primarily to a favorable rezoning of the property, to
a planned unit development, which increased the value of the property associated
with the joint venture, which in turn increased the income derived from sales
associated with this joint venture.

Net gain on real estate owned and repossessed assets increased $196,000 for the
third quarter of fiscal 2002 as compared to fiscal 2001. This increase resulted
from sales of real estate owned and repossessed assets increasing to $2,847,000
for the quarter ended March 31, 2002, as compared to sales of $286,000 for the
quarter ended March 31, 2001.

-10-

A factor reducing other income for the three months ended March 31, 2002, was a
$144,000 decrease in the gain on sale of securities, which was the result of a
$146,000 gains incurred in the three months ended March 31, 2001, due to
restructuring the portfolio, compared with a $2,000 gain realized in the three
months ended March 31, 2002.

Other Expenses
Total other expenses for the three-month period ended March 31, 2002, increased
$871,000 or 20.3% over the same period ended March 31, 2001. This increase is
primarily due to increases in two categories, compensation and employee benefits
and miscellaneous expenses. An increase of $552,000 in compensation and employee
benefits for the two comparative quarters was the result of several factors.
These factors included increased health insurance costs, increased 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. The increases in miscellaneous expense of $330,000 was due
primarily to $227,000 of expenses associated with taxes, repairs, maintenance
and improvement of various real estate owned properties to place them in a
condition for sale. Various other categories resulted in small increases to
miscellaneous expenses including communication expense, postage expense and
office supplies.

Nine-months Ended March 31, 2002 Compared to Nine-months Ended March 31, 2001:

General
The Company reported net income of $7,727,000, or $1.68 per dilutive common
share, for the nine-months ended March 31, 2002, compared to $7,183,000, or
$1.55 per dilutive common share, for the same period a year ago, an increase of
$544,000 or a 8.4% increase in earnings per dilutive common share.

Net Interest Income
Net interest income before provision for loan losses remained relatively
constant increasing $55,000 for the nine-month period ended March 31, 2002,
compared to the same period ended March 31, 2001.

The change to the loan loss allowance for the nine-month period ended March 31,
is as follows:

Nine-months ending March 31: (in thousands) 2002 2001
------------------------------------------- ---- ----
Allowance beginning balance ............... $ 5,690 $ 4,949
Provision for loan losses ................. 1,230 979
Charge-offs ............................... (609) (443)
Recoveries ................................ 53 56
------- -------
Loan Loss Allowance ....................... $ 6,364 $ 5,541
======= =======

Allowance to Total Loans .................. .94% .78%
Allowance to Nonperforming Assets.......... 79% 75%

Interest Income
Total interest income for the nine-month period ended March 31, 2002, decreased
$6,240,000, compared to the nine-month period ended March 31, 2001. The decrease
was due to a decrease of 108 basis points on the interest rate earned on
interest earning assets, as well as a $2,266,000 decline in the average balances
of interest earning assets.

Interest Expense
Total interest expense for the nine-month period ended March 31, 2002, decreased
$6,295,000, compared to the nine-month period ended March 31, 2001. Similar to
the decrease in interest income, the decrease in interest expense was due to a
110 basis point decrease in the weighted average cost of funds for the
nine-month period ended March 31, 2002, as compared to the same period ended
March 31, 2001, as well as a $2,706,000 decline in the average balances of
interest bearing liabilities.

Other Income
Total other income for the nine-month period ended March 31, 2002, increased
$3,342,000 or 52.5% 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 $2,636,000
as discussed in the third quarter results above. Other increases, which mirrored
the quarterly results, included an increase of $253,000 in loan servicing income
and an $116,000 increase in the net gain on real estate owned and repossessed
assets.

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An additional increase in other income for the nine months ended March 31, 2002,
was a $288,000 increase in the gain on sale of securities, which was the result
of a $196,000 loss incurred in the nine months ended March 31, 2001, due to
restructuring the portfolio, compared with a $92,000 gain realized in the nine
months ended March 31, 2002. Another factor increasing other income for the nine
months ended March 31, 2002 compared to the nine months ended March 31, 2001, is
the $147,000 gain in insurance, annuity income, and other fees. This increase in
income came primarily from the commissions earned on brokerage sales which
increased $150,000 over the previous nine month period.

A factor, which reduced other income, was a $120,000 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, recorded in the first quarter,
as well as a slow down in sales for 4 of the 5 active real estate development
joint venture projects over the two comparative nine month periods.

Other Expenses
Total other expenses for the nine-month period ended March 31, 2002, increased
$2,390,000 or 18.9%. This increase includes a $1,109,000 increase in
compensation and employee benefits that is the result of the same factors
presented in the third quarter discussion. Additional categories that increased
other expenses include occupancy and equipment, service bureau expense and
miscellaneous expenses. These three categories increases are due primarily to
the Bank's change of its third party data processor. Occupancy and equipment
expenses increased $280,000 or 15.0% for the ninth month period ended March 31,
2002, as compared to the nine-month period ended March 31, 2001. These increases
reflect increased expenses connected with rising depreciation costs associated
with equipment and software purchases for the third party data processing
change. The increase in service bureau expense of $114,000 or 16.9% is also
attributable to the third party data processing change. Miscellaneous increases
of $943,000 or 34.8% include $226,000 of expenses related to real estate owned,
iterated in the quarterly discussion. Additional increases to miscellaneous
expenses include $197,000 of one time charges related to the data processing
conversion as well as $311,000 of expenses associated with increases in postage,
office supplies and communications charges, resulting from process changes
associated with the data processing conversion. An increase of $60,000 to
miscellaneous expenses is related to the Bank's charter conversion from a
federal savings bank charter to a state commercial bank charter.

FINANCIAL CONDITION:
Total assets decreased $9,449,000 from June 30, 2001, to March 31, 2002. Cash
and cash equivalents increased $19,840,000. Securities available for sale
increased $30,887,000, while loans receivable, decreased $51,105,000. These
changes were the result of increased refinancing activity that resulted in the
Bank selling $200,553,000 of loans in the secondary market during the first nine
months of fiscal 2002. 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 $9,922,000 for the nine month period ended March 31,
2002.

Shareholders' equity increased $3,520,000 during the same period. Retained
earnings increased $7,727,000 from net income and decreased $1,877,000 for
dividends paid and $2,452,000 from the repurchase of 125,000 shares of the
company's stock. Common stock increased $654,000 due to exercises of common
stock options and decreased $187,000 from the repurchase of Company stock. The
Company had accumulated other comprehensive income from unrealized gains in its
securities available for sale portfolio of $73,000 for the nine months ended
March 31, 2002. Additionally, the Company had an accumulated other comprehensive
loss, net of tax, from the change in fair value of a cash flow hedge of $194,000
for the same nine month period.

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At March 31, 2002, 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 March 31, 2002

Tangible capital (to total assets) $82,562 9.67% $12,811 1.50% N/A N/A
Core capital (to total assets) $82,562 9.67% $34,163 4.00% N/A N/A
Total risk-based capital
(to risk-weighted assets) $88,926 13.78% $51,611 8.00% $64,513 10.00%
Tier 1 risk-based capital
(to risk-weighted assets) $82,562 12.80% N/A N/A $38,708 6.00%
Tier 1 leverage capital
(to average assets) $82,562 9.31% N/A N/A $44,347 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 March 31, 2002,
the Bank had $182,145,000 in such borrowings. Also at March 31, 2002, the Bank
had commitments to fund loan originations of $25,596,000, unused home equity
lines of credit of $79,700,000 and unused commercial lines of credit of
$23,712,000. 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 March 31, 2002
will not be materially different from the results presented on page 13 of the
annual report for fiscal year 2001.

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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

On March 27, 2002, Home Federal Bancorp of Columbus, Indiana filed form 8K,
relating to a press release issued on the same date, concerning the approval by
the Board of Directors to pursue a stock buy back of up to 5% of its stock
traded on NASDAQ under the symbol HOMF.

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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: May 14, 2002 /S/ Lawrence E. Welker
Lawrence E. Welker, Executive Vice President,
Treasurer, and Chief Financial Officer

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