Home Financial Bancorp Announces Third Quarter Results

Home Financial Bancorp Announces Third Quarter Results

    Business Editors

    SPENCER, Ind.--(BUSINESS WIRE)--May 10, 2005--Home Financial Bancorp ("Company") (Pink Sheets:HWEN), an Indiana corporation which is the holding company for Owen Community Bank, s.b., ("Bank") based in Spencer, Indiana, announces results for the third quarter and nine months ended March 31, 2005.

    Third Quarter Highlights:

--	Interest income increased 6% to $1.2 million;
--	Write-down of investments totaled $26,000;
--	Net income grew 31% to $63,000.

    Nine Month Highlights:

    -- Total assets expanded 10% to $70.0 million;

    -- Total deposits increased 15% to $44.7 million;

    -- Net interest income improved 8% to $2.4 million;

    -- Net income grew 21% to $314,000.

    For the quarter ended March 31, 2004, the Company reported a 31.3% increase in earnings compared to the same period in 2004. Net income for the fiscal third quarter was $63,000, or $.05 per share, including a $26,000 expense to recognize impairment of equity securities. For the same period last year, net income was $48,000, or $.04 per share, including a $178,000 expense to recognize impairment of equity securities.
    Excluding the charge for impaired assets, the Company earned $79,000 or $.06 per share from operations for the quarter-ended March 31, 2005. Likewise, excluding the charge for impaired assets and elimination of the $68,000 valuation reserve (all of which totaled $40,000 net of tax), the Company earned $88,000 or $.07 per share from operations for the quarter-ended March 31, 2004.
    Interest income increased $69,000 or 6.1% for the three months ended March 31, 2005, compared to the same period in 2004. Interest from loans increased $47,000 or 4.4% to $1.1 million. Interest income grew due to higher balances of loans outstanding and an increase in interest earned on cash balances.
    The increase in interest income was partially offset by higher interest expense. Interest expense for deposits and borrowings increased $48,000 or 13.3% to $408,000. An increase in market interest rates plus higher balances of interest-bearing deposits and borrowed funds led to the rise in interest expense. The Company's cost of funds moved up 9 basis points to 2.90% for the quarter ended March 2005 from 2.81% a year earlier.
    The Company's net interest margin for the quarter ended March 31, 2005 decreased to 5.1%, compared to 5.5% for the quarter ended March 31, 2004. However, net interest income before the provision for loan losses increased 2.8% to $782,000 for the three months ended March 31, 2005, compared to $761,000 a year earlier.
    Loan loss provisions for the third quarter were unchanged from the year-earlier period and totaled $60,000. A regular assessment of loan loss allowance adequacy indicated that these provisions were required to maintain an appropriate allowance level. The volume, composition and quality of the loan portfolio, as well as actual loan loss experience, will influence the need for future loss provisions.
    Based on guidance from the Financial Accounting Standards Board's ("FASB") Emerging Issues Task Force on accounting for impairment of debt and equity securities, management periodically reviews the Company's equity securities for evidence of relevant "impairment indicators" that might require current period recognition that investments are other-than-temporarily impaired. Based upon such reviews, charges to income were recorded during third quarter 2005 and 2004. The impairment recorded in the third quarter ended March 31, 2005 amounted to $26,000 compared to $178,000 for the year-earlier period.
    Impairment charges drove non-interest income negative in the amount of $132,000 for third quarter 2004. For the quarter ended March 31, 2005, non-interest income rebounded to $87,000. Excluding the charges for impaired assets in each period, non-interest income more than doubled to $112,000 from $47,000 for the year-earlier period.
    Gain on sale of real estate held for investment increased to $51,000 for the three months ended March 31, 2005, compared to a minimal loss reported for the year-earlier period. Non-interest income also improved due to higher ATM and debit card transaction volume which produced $8,000 more in fee income than during the same period a year earlier.
    Non-interest expense increased 16.5% to $749,000 for the quarter-ended March 31, 2005, from $643,000 for the year-earlier period. Foreclosure related expenses increased 28.8% to $94,000 for third quarter 2005, compared to $73,000 for the same three-month period a year earlier. In addition, salaries and employee benefits increased 12.3% or $40,000, and legal and professional fees surged 50.3% or $14,000 compared to the year-earlier period.
    Earned income tax credits generated from the Bank's investment in low-income housing exceeded tax expense for the quarter ended March 31, 2005; resulting in a tax benefit of $3,400. However, due to tax benefits of capital losses recognized during the quarter ended March 31, 2004, combined with tax benefits from the elimination of a valuation reserve, tax expense for third quarter 2005 was $119,000 higher than the year-earlier period.
    For the nine-month period ended March 31, 2005, net income increased 21.2% to $314,000, or $.24 earnings per share, including a $26,000 expense to reduce the carrying value of equity securities. For the year-earlier period, net income was $259,000 or $.20 diluted earnings per share. Net income for the nine months ending March 31, 2004 included a $178,000 charge to recognize the reduced value of equity securities.
    Excluding charges for impaired assets and the $68,000 valuation reserve reduction during the year-earlier period, the Company earned $330,000 or $.25 per share for the nine months ended March 31, 2005, compared to $299,000 or $.23 per share for the same period a year earlier.
    Interest income increased $146,000 or 4.2% to $3.6 million. Most of this increase was due to an expansion in loans outstanding compared to the same nine-month period a year earlier. Interest expense for deposits increased $18,000 or 2.6% while interest expense for borrowings decreased $40,000 or 7.9%. Consequently, net interest income before the provision for loan losses increased $168,000 or 7.5% to $2.4 million. Loan loss provisions were unchanged at $180,000 for the two nine-month periods ended March 31, 2005 and 2004. These loan loss provisions reflect management's assessment of various risk factors including, but not limited to, the level and trend of loan delinquencies, and the effectiveness of collection efforts.
    Non-interest income was $228,000 for the first three quarters of fiscal 2005, compared to $14,000 for the same period a year earlier. For the nine months ended March 31, 2005, gain on sale of real estate acquired for development doubled to $60,000 from $31,000 for the year-earlier period. Charges for impaired assets reduced year-to-date non-interest income for both periods. These charges totaled $26,000 and $178,000 for the nine-month periods ended March 31, 2005 and 2004, respectively. Activity fee income from ATM and debit card transactions increased $23,000 compared to the same period a year earlier.
    Non-interest expense increased $178,000 or 9.4% to $2.1 million for the nine-month period ended March 31, 2005. Foreclosure related expenses incurred to acquire, repair and dispose of repossessed loan collateral increased $30,000 or 18.8% to $188,000 compared to the same period a year earlier. Salaries and employee benefits increased $61,000 or 6.5%. Also, legal and professional fees increased $12,000 or 7.8% and computer processing fees increased $17,000 or 9.7%, compared to the same period a year earlier.
    For the nine months ended March 31, 2005, income tax expense was $70,000, but represented an increased of $148,000 compared to the year-earlier period. Capital losses recognized during the third quarter ended March 31, 2004, combined with the elimination of a valuation reserve to produce $79,000 in net tax benefits for that period.
    At March 31, 2005, total assets were $70.0 million. As a result of loan growth and higher cash balances, total assets increased $6.6 million or 10.4% since June 30, 2004. During that nine-month period, outstanding loans grew $3.9 million or 7.6% to $55.0 million from $51.1 million. During the same period, investments available for sale increased $172,000 or 7.0%. Cash and cash equivalents increased $2.5 million or 70.0% to $6.2 million compared to nine months earlier.
    Loans delinquent 90 days or more increased to $880,000 or 1.6% of total loans at March 31, 2005, compared to $636,000 or 1.2% of total loans at June 30, 2004. At March 31, 2005, non-performing assets were $1.9 million or 2.8% of total assets, compared to $1.6 million or 2.6% of assets at June 30, 2004. Non-performing assets included $1.0 million in Real Estate Owned ("REO") and other repossessed properties at March 31, 2005, compared to $990,000 nine months earlier.
    The allowance for loan losses was $395,000 at March 31, 2005, compared to $396,000 at June 30, 2004. Net loan losses for the three-quarter period ended March 31, 2005 were $181,000, compared to $111,000 for the year-earlier period. Periodic provisions to loan loss allowances reflect management's view of risk in the Company's entire loan portfolio due to a number of dynamic factors, including current economic conditions, quantity of outstanding loans and loan delinquency trends. Management considered the level of loan loss allowances at March 31, 2005 to be adequate to cover estimated losses inherent in the loan portfolio at that date.
    Deposits increased $5.8 million or 14.8% from levels reported nine months earlier. At March 31, 2005 deposits totaled $44.7 million compared to $38.9 million at June 30, 2004. Borrowings increased $500,000 to $17.5 million at March 31, 2005.
    Shareholders' equity was $7.2 million or 10.2% of total assets at March 31, 2005. The Company's book value per share was $5.29 based on 1,356,050 shares outstanding. Factors impacting shareholder equity during the first three quarters of fiscal 2005 included net income, three quarterly cash dividends totaling $.09 per share, a $30,000 net increase in unrealized gain on securities available for sale, $267,000 net increase in unamortized costs associated with stock-based employee benefit plans.
    Home Financial Bancorp and Owen Community Bank, s.b., an FDIC-insured, federal stock savings bank, operate from headquarters in Spencer, Indiana, and a branch office in Cloverdale, Indiana.

HOME FINANCIAL BANCORP Consolidated Financial Highlights (Unaudited) (Dollars in thousands, except per share and book value amounts)

FOR THREE MONTHS ENDED MARCH 31: 2005 2004 ---- ---- Net Interest Income $782 $761 Provision for Loan Losses 60 60 Non-interest Income 87 (132) Non-interest Expense 749 643 Income Tax (3) (122) Net Income 63 48

Basic and Diluted Earnings Per Share: $ .05 $ .04 Average Shares Outstanding - Basic 1,280,620 1,313,433 Average Shares Outstanding - Diluted 1,300,404 1,338,160

FOR NINE MONTHS ENDED MARCH 31: 2005 2004 ---- ---- Net Interest Income $2,418 $2,250 Provision for Loan Losses 180 180 Non-interest Income 228 14 Non-interest Expense 2,082 1,904 Income Tax 70 (79) Net Income 314 259

Basic Earnings Per Share: $ .24 $ .20 Diluted Earnings Per Share: $ .24 $ .20 Average Shares Outstanding - Basic 1,302,482 1,307,500 Average Shares Outstanding - Diluted 1,323,375 1,329,595

March 31, June 30, 2005 2004 ---- ---- Total Assets $70,038 $63,426 Total Loans 55,046 51,117 Allowance for Loan Losses 395 396 Total Deposits 44,656 38,896 Borrowings 17,500 17,000 Shareholders' Equity 7,169 7,126

Non-Performing Assets 1,924 1,626 Non-Performing Loans 880 636

Non-Performing Assets to Total Assets 2.75% 2.56% Non-Performing Loans to Total Loans 1.60 1.24

Book Value Per Share(a) $5.29 $5.25

(a) Based on 1,356,050 shares at March 31, 2005 and June 30, 2004.

--30--SLB/cl*

CONTACT: Home Financial Bancorp Kurt D. Rosenberger, 812-829-2095

KEYWORD: INDIANA INDUSTRY KEYWORD: BANKING EARNINGS SOURCE: Home Financial Bancorp

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