Home Federal Bancorp Inc. in Nampa, Idaho, is shuttering six branches, streamlining its management, refinancing its debt and shifting mortgage loan originations to a third party as part of a broad restructuring that it says will reduce overhead by $3.6 million over the next 12 months.
In a news release late Wednesday, President and Chief Executive Officer Len E. Williams said that with the integration of two failed-bank acquisitions now substantially completed, management is now focused on improving efficiency and positioning the $1.3 billion-asset company for "acquisitive growth."
Home Federal's performance has suffered of late, due largely to weak economic conditions in several of its key markets, including Boise, Idaho, and Bend, Ore. The company lost $4.1 million in its fiscal year that ended Sept. 30, 2010, compared to a profit of $8.1 million in the previous fiscal year, and lost $2.6 million in the first nine months of its current fiscal year.
In an effort to return to profitability, the company said it intends to close six of its 34 branches by Jan. 5, including four in Oregon it inherited in its acquisitions of Liberty Bank in Eugene and Community First Bank in Prineville. (Liberty failed in July 2010 and Community First failed a year earlier.) Home Federal also plans to close its last Walmart in-store branch in Garden City, Idaho. The expects to take an impairment charge of $1.4 million this quarter as a result of the branch closings, but said that it will save $1.1 million a year on rent and other occupancy costs.
The company is also eliminating some commercial and residential team leader positions and shifting oversight to regional presidents, which it says will improve efficiency and reduce noninterest expense. It did not disclose how many jobs would be eliminated, but said that branch closings and the restructuring would save the company roughly $300,000 a year in salary and benefits costs.
On the debt side, the company has merged its 401 (k) and employee stock ownership plans and refinanced its ESOP loans, which it says will save it $700,000 a year; and paid off the $48.3 it owes to Federal Home Loan Bank of Seattle, which it says will reduce its interest payments by more than $2 million over the next two years.
Finally, Home Federal said that beginning in November that it will refer nearly all of its residential loan applications to third party that will underwrite, close and ultimately sell the mortgages on the secondary market. The company said that it will lose income from gains on loan sales but that it expects the losses to be more than offset by overall expense cuts.
