Home Federal Bancorp Will Sell Servicing Rights

Home Federal Bancorp here plans to restructure part of its balance sheet by selling "substantially all" of its mortgage servicing portfolio.

The company also said it will sell a portion of its investment portfolio and issue trust-preferred securities as part of the rebalancing.

The company has retained Sandler O'Neill Mortgage Finance as its exclusive agent to facilitate the sale of its $537 million mortgage servicing portfolio. The company said in late August that the portfolio had a carrying value of $2.7 million.

Home Federal, parent of HomeFederal Bank of Columbus, said it intends to complete the sale during the fourth quarter. Last week, CEO John Keach told MSN that the timing of the sale will depend on market conditions, but that the company still hopes to make the sale "sooner rather than later."

The company also plans to sell approximately $66 million in investment securities with a weighted average yield of 3.60% and predicted that the sale will result in a pretax loss of about $2.4 million. Home Federal said some of the proceeds will be used to pay down approximately $25 million in short-term variable rate Federal Home Loan Bank advances. The weighted average rate on the advances is 5.50%.

The company also plans to sell $15 million of trust-preferred securities, using the proceeds to pay down the current balance on the company's existing line of credit. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

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