The consolidated financial statements presented in this quarterly report include the accounts of Home Federal Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, Home Federal Bank (the "Bank"). The financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and are unaudited. All significant intercompany transactions and balances have been eliminated. In the opinion of the Company's management, all adjustments consisting of normal recurring accruals necessary for a fair presentation of the financial condition and results of operations for the interim periods included herein have been made.

Certain information and note disclosures normally included in the Company's annual consolidated financial statements have been condensed or omitted. Therefore, these consolidated financial statements and notes thereto should be read in conjunction with the Company's audited financial statements and notes included in the Annual Report on Form 10-K for the year ended September 30, 2005 ("2005 Form 10-K") filed with the Securities and Exchange Commission ("SEC") on December 9, 2005.

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements. Changes in these estimates and assumptions are considered reasonably possible and may have a material impact on the consolidated financial statements, and thus actual results could differ from the amounts reported and disclosed herein. The Company considers the allowance for loan losses, mortgage servicing rights, and deferred income taxes to be critical accounting estimates.

The accounting estimate related to the allowance for loan losses is a critical accounting estimate because it is highly susceptible to change from period to period requiring management to make assumptions about future losses on loans. The impact of a sudden large loss could deplete the allowance and potentially require increased provisions to replenish the allowance, which would negatively affect earnings.

The most critical accounting policy associated with mortgage servicing is the methodology used to determine the fair value of capitalized mortgage servicing rights, which requires the development of a number of estimates, the most critical of which is the mortgage loan prepayment speeds assumption. The Company performs a quarterly review of mortgage servicing rights for potential declines in value. This review may include an independent appraisal by an outside party of the fair value of the mortgage servicing rights.

Deferred income taxes are computed using the asset and liability approach as prescribed in Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. Under this method, a deferred tax asset or liability is determined based on the currently enacted tax rates applicable to the period in which the differences between the financial statement carrying amounts and tax basis of the existing assets and liabilities are expected to be reported in the Company's income tax returns.

At December 31, 2005, there were no material changes in the Company's significant accounting policies or critical accounting estimates from those disclosed in the Company's 2005 Form 10-K.

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On May 18, 2004, the Board of Directors of Home Federal Savings and Loan Association of Nampa (the "Association") unanimously adopted a Plan of Reorganization and Stock Issuance. At the special meeting of members of the Association held on September 20, 2004, members approved the Plan of Reorganization and Stock Issuance and the establishment of the Home Federal Foundation, Inc. (the "Foundation") by more than the required majority of the total votes entitled to be cast at the special meeting.

Pursuant to the Plan of Reorganization and Stock Issuance, the Association: (i) converted to a federal stock savings bank (Stock Savings Bank) as the successor to the Association in its current mutual form; (ii) organized a Stock Holding Company as a federally-chartered corporation that owns 100% of the common stock of the Stock Savings Bank; and (iii) organized a Mutual Holding Company as a federally-chartered mutual holding company that owns at least 51% of the common stock of the Stock Holding Company for as long as the Mutual Holding Company remains in existence. The Stock Savings Bank succeeded to the business and operations of the Association in its mutual form, and the Stock Holding Company sold 40.0% of its common stock in a public stock offering that was completed on December 6, 2004.

All depositors who had membership or liquidation rights with respect to the Association as of December 6, 2004 (the effective date of the reorganization) continue to have such rights solely with respect to the Mutual Holding Company for as long as they continue to hold deposit accounts with the Bank. In addition, all persons who become depositors of the Bank subsequent to the reorganization have membership and liquidation rights with respect to the Mutual Holding Company. Borrower members of the Association at the time of the reorganization have the same membership rights in the Mutual Holding Company that they had in the Association immediately prior to the reorganization for as long as their existing borrowings remain outstanding.

On December 6, 2004, the Bank completed the mutual holding company reorganization and minority stock offering. The Company sold 6,083,500 shares of its common stock, $0.01 par value, at a price of $10.00 per share. As part of the reorganization and minority stock offering, the Company also established and capitalized the Foundation with a $1.8 million one-time contribution, which consisted of 146,004 shares of its common stock and $365,010 in cash. In addition, the Company issued 8,979,246 additional shares, or 59.04% of its outstanding shares, to Home Federal MHC, a federally-chartered mutual holding company.

On November 7, 2005, the Company completed the conversion of its core processing system, including the conversion of its internal check processing system to an outside vendor. After the conversion, the Company experienced difficulties reconciling certain general ledger accounts related to the new check processing system. Going forward, the Company has established new procedures and controls for the reconciliation of the related general ledger accounts. The Company has also assembled a team dedicated to researching and resolving any discrepancies in reconciling the affected general ledger accounts. The research completed so far has not resulted in any material losses. However, at this time, the Company is unable to determine the total loss, if any, related to the discrepancies in reconciling the general ledger accounts, and therefore has not established a provision for losses related to this issue. 

On June 23, 2005, stockholders approved long-term stock-based benefit plans that enable the Company to grant stock options, stock appreciation rights and restricted stock awards to employees and directors. The Company has adopted SFAS 123(R), Share Based Payment, which requires the recognition of compensation costs relating to share based payment transactions in the financial statements. The Company has elected the modified prospective application method of reporting. Prior to the adoption of SFAS 123(R), the Company elected to account for its stock-based compensation plans using the intrinsic value-based method of recognizing compensation costs outlined in Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued to Employees, and adopted the disclosure-only provisions under SFAS 123, Accounting for Stock-Based Compensation.

Recognition and Retention Plan ("RRP"). The purpose of the RRP is to promote the long-term interests of the Company and its stockholders by providing restricted stock as a means for attracting and retaining directors and key employees. The maximum number of shares that may be awarded under the RRP is 298,092. Restricted stock awards vest over a five-year period, and therefore, the fair value of these awards will be accrued ratably over a five-

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year period as compensation expense. The Company granted restricted stock awards of 253,380 shares to its directors and certain employees on October 3, 2005. The fair market price of the restricted stock awards on the date of grant was $12.70. As of December 31, 2005, restricted stock awards of 241,456 shares of common stock are outstanding. The Company has an aggregate of 56,636 restricted shares available for future issuance under the RRP.

Stock Option and Incentive Plan ("SOP"). The Company implemented the SOP to promote the long-term interests of the Company and its stockholders by providing an incentive to directors and key employees who contribute to the operating success of the Company. The maximum number of stock options and stock appreciation rights that may be issued under the SOP is 745,229. On July 19, 2005, the Company granted stock options for 581,278 shares of common stock to certain employees and directors. The options were granted at the then fair market value of $12.20, vest over five years and expire 10 years from the date of grant. As of December 31, 2005, options for 558,921 shares of common stock are outstanding. The Company has an aggregate of 186,308 stock options available for future issuance under the SOP.

The Company has selected the Black-Scholes option pricing model with the following weighted average assumptions:

To estimate expected lives of options for this valuation, it was assumed options will be exercised at varying schedules after becoming fully vested. Fair value computations are highly sensitive to the volatility factor assumed; the greater the volatility, the higher the computed fair value of the options granted. The expected volatility was determined using the Company's daily stock price from the day the Company went public to the date the options were granted.

The total fair value of options granted was approximately $1.0 million. The fair value of the options granted is amortized ratably over the vesting period of the options. The effect of the change, from applying the original provisions of SFAS 123, to the adoption of SFAS 123(R), on the Company's results of operations for the three months ended December 31, 2005, was a compensation expense of $51,000 before income taxes. The effect of the adoption of SFAS 123(R) on basic and diluted earnings per share for the three months ended December 31, 2005 was less than $.01 per share.

For the three months ended December 31, 2004, no options had been granted by the Company.

Earnings per share ("EPS") is computed using the basic and diluted weighted average number of common shares outstanding during the period. Basic EPS is computed by dividing the Company's net income or loss by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income or loss by diluted weighted average shares outstanding, which include common stock equivalent shares outstanding using the treasury stock method, unless such shares are anti-dilutive. Common stock equivalents arise from assumed conversion of outstanding stock options and from assumed vesting of shares awarded but not released under the Company's RRP plan. There were no outstanding securities or contracts that could be exercised or converted into common stock as of December 31, 2004. Therefore, basic and diluted earnings per share are the same as of December 31, 2004. ESOP shares are not considered outstanding for earnings per share purposes until they are committed to be released.

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The following table presents the computation of basic and diluted earnings per share for the periods indicated:

In December 2005, FASB issued FSP No. SOP 94-6-1, Terms of Loan Products That May Give Rise to a Concentration of Credit Risk. This FSP addresses (1) the circumstances under which the terms of loan products give rise to a concentration of credit risk and (2) the disclosures or other accounting considerations that apply for entities that originate, hold, guarantee, service, or invest in loan products with terms that may give rise to a concentration of credit risk. The guidance applies to reporting periods ending after December 19, 2005 and did not have a significant impact on the Company's consolidated financial condition or results of operations.

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Mortgage-backed securities available for sale consisted of the following:

The contractual maturities of mortgage-backed securities available for sale are shown below. Expected maturities may differ from contractual maturities because borrowers have the right to prepay obligations without prepayment penalties.

Management has evaluated these securities and has determined that the decline in the value is temporary and not related to any company or industry specific event. The Company has the ability and intent to hold the securities for a reasonable period of time for a forecasted recovery of the amortized cost.

As of December 31, 2005, the Bank had pledged mortgage-backed securities with an amortized cost of $116.7 million and a fair value of $113.7 million as collateral for advances at the Federal Home Loan Bank of Seattle ("FHLB"). The Company has also pledged a mortgage-backed security with an amortized cost of $3.4 million and a fair value of $3.3 million as collateral for a $750,000 extension of credit from the Bank.

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Loans receivable are summarized as follows:

This report contains forward-looking statements, which can be identified by the use of words such as "believes", "intends," "expects," "anticipates," "estimates" or similar expressions. Forward-looking statements include, but are not limited to:

• statements of our goals, intentions and expectations;
• statements regarding our business plans, prospects, growth and operating strategies;
• statements regarding the quality of our loan and investment portfolios; and
• estimates of our risks and future costs and benefits.

These forward-looking statements are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors:

• general economic conditions, either nationally or in our market area, that are worse than expected;
• changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments;
• increased competitive pressures among financial services companies;
• changes in consumer spending, borrowing and savings habits;
• legislative or regulatory changes that adversely affect our business;

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• adverse changes in the securities markets; and
• changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Public Company Accounting Oversight Board or the FASB.

These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. The Company undertakes no obligation to publish revised forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof.

The Company was organized as a federally-chartered stock corporation at the direction of the Association in connection with its mutual holding company reorganization. The reorganization was completed on December 6, 2004. In connection with the reorganization, the Association converted to a federally-chartered stock savings bank and changed its corporate title to "Home Federal Bank." In the reorganization, the Company sold 40.00% of its outstanding shares of common stock (6,083,500 shares) to the public and issued 59.04% of its outstanding shares of common stock (8,979,246 shares) to Home Federal MHC, the mutual holding company parent of the Company. In connection with the reorganization, the Company also established and capitalized the Foundation with a $1.8 million one-time contribution, which consisted of 146,004 shares of its common stock and $365,010 in cash. The Company's common stock is traded on the NASDAQ Stock Market under the symbol "HOME."

The Bank was founded in 1920 as a building and loan association and reorganized as a federal mutual savings and loan association in 1936. The Bank is a community-oriented financial institution dedicated to serving the financial service needs of consumers and businesses within our market area. The Bank's primary business is attracting deposits from the general public and using these funds to originate loans. We emphasize the origination of loans secured by first mortgages on owner-occupied, residential real estate, residential development and construction, and commercial real estate. To a lesser extent, we originate other types of real estate loans, commercial business loans and consumer loans.

The Bank serves the Treasure Valley region of southwestern Idaho, which includes Ada, Canyon, Elmore and Gem Counties, through our 14 full-service banking offices and two loan centers. Nearly 40% of the state's population lives and works in the four counties served by Home Federal Bank. Ada County has the largest population and includes the city of Boise, the state capitol. Home Federal Bank maintains its largest branch presence in Ada County with eight locations, followed by Canyon County with four branches, including the Company's corporate headquarters in Nampa. The two remaining branches are located in Elmore and Gem Counties.

The local economy is primarily urban with the city of Boise being the most populous of the markets that we serve, followed by Nampa, the state's second largest city. The regional economy is well diversified with government, healthcare, manufacturing, high technology, call centers and construction providing sources of employment. In addition, agriculture and related industries continue to be key components of the economy in southwestern Idaho. Generally, sources of employment are concentrated in Ada and Canyon Counties and include the headquarters of Micron Technology, Albertsons, Washington Group International, J.R. Simplot Company and Boise Cascade, LLC. Other major employers include Hewlett-Packard, two regional medical centers and Idaho state government agencies. The city of Boise is also home to Boise State University, the state's largest and fastest growing university.

Allowance for Loan Losses. Management believes that the accounting estimate related to the allowance for loan losses is a critical accounting estimate because it is highly susceptible to change from period to period. This requires management to make assumptions about future losses on loans as the impact of a sudden large loss could deplete the allowance and potentially require increased provisions to replenish it, which would negatively affect earnings.

Our methodology for analyzing the allowance for loan losses consists of three components: formula, specific and general allowances. The formula allowance is determined by applying an estimated loss percentage to various groups of loans based on historical measures such as the amount and type of classified loans, past due ratios and loss experience, which could affect the collectibility of the respective loan types. The specific allowance component is created when management believes that the collectibility of a specific large loan has been impaired and a loss is probable. The general allowance element relates to assets with no well-defined deficiency or weakness and takes into consideration loss that is inherent within the portfolio but has not been realized.

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Mortgage Servicing Rights. Mortgage servicing rights represent the present value of the future loan servicing fees from the right to service loans for others. The most critical accounting policy associated with mortgage servicing is the methodology used to determine the fair value of capitalized mortgage servicing rights, which requires the development of a number of estimates, the most critical of which is the mortgage loan prepayment speeds assumption. The Company performs a quarterly review of mortgage servicing rights for potential declines in value. This review may include an independent appraisal by an outside party of the fair value of the mortgage servicing rights.

Deferred Income Taxes. Deferred income taxes are reported for temporary differences between items of income or expense reported in the financial statements and those reported for income tax purposes. Deferred taxes are computed using the asset and liability approach as prescribed in SFAS No. 109, Accounting for Income Taxes. Under this method, a deferred tax asset or liability is determined based on the currently enacted tax rates applicable to the period in which the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in the Company's income tax returns. The deferred tax provision for the year is equal to the net change in the net deferred tax asset from the beginning to the end of the year, less amounts applicable to the change in value related to investments available for sale. The effect on deferred taxes of a change in tax rates is recognized as income in the period that includes the enactment date. The primary differences between financial statement income and taxable income result from depreciation expense, mortgage servicing rights, loan loss reserves and dividends received from the FHLB. Deferred income taxes do not include a liability for pre-1988 bad debt deductions allowed to thrift institutions that may be recaptured if the institution fails to qualify as a thrift for income tax purposes in the future.

General. Total assets increased $6.1 million, or less than 1.0%, to $695.7 million at December 31, 2005 compared to $689.6 million at September 30, 2005. Loans receivable increased $8.3 million, or 1.9% to $439.2 million to lead the overall asset growth. Cash and amounts due from depository institutions decreased $8.0 million as a result of normal fluctuations of amounts due from other financial institutions and the Company's recent conversion to a new core processing system this quarter, including a conversion to a "Check 21" check processing system. The demand for loans was funded with increased deposits of $13.9 million to $410.2 million at December 31, 2005 compared to $396.3 million at September 30, 2005.

Assets. For the three months ended December 31, 2005 total assets increased $6.1 million. The increases and decreases were primarily concentrated in the following asset categories:

Cash and amounts due from depository institutions decreased $8.0 million as a result of normal fluctuations of amounts due from other financial institutions and the Company's recent conversion to a new core processing system this quarter, including a conversion to a "Check 21" check processing system.

Mortgage-backed securities increased $5.7 million to $201.5 million at December 31, 2005, compared to $195.8 million at September 30, 2005. For the three months ended December 31, 2005, the Company purchased $14.0 million of mortgage-backed securities that consisted primarily of hybrid adjustable and fixed rate securities with terms of 15 years or less. The Company purchases mortgage-backed securities to supplement loan originations during periods when the Company is not able to originate the desired type or volume of portfolio loans and to manage interest rate sensitivity.

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Loans receivable, net, increased $8.3 million to $439.2 million at December 31, 2005, compared to $430.9 million at September 30, 2005. Single-family residential loans and commercial real estate loans increased $9.7 million and $235,000, respectively, during the quarter ended December 31, 2005. During the current quarter, the Company purchased $7.7 million of variable rate, one-to four-family mortgage loans. Purchased mortgage loans allow the Company to increase interest-earning assets, manage interest rate risk, and geographically diversify our mortgage loan portfolio at a relatively low overhead cost. As of December 31, 2005, over 90% of the Company's loan portfolio is secured by real estate, either as primary or secondary collateral, located in its primary market areas.

Property and equipment, net increased $1.4 million to $13.4 million at December 31, 2005, from $12.0 million at September 30, 2005. During the quarter, the Company completed the conversion of its core processing system. The majority of the increase in property and equipment is for software and hardware related to the conversion.

Deposits. Deposits increased $13.9 million, or 3.5%, to $410.2 million at December 31, 2005, from $396.3 million at September 30, 2005. Certificates of deposit accounted for the majority of the increase in total deposits with certificates of 12 to 23 month terms having the largest increase in balances. The following table details the changes in deposit accounts.

Borrowings. Advances from the FHLB decreased $4.1 million, or 2.3%, to $171.8 million at December 31, 2005, from $175.9 million at September 30, 2005. The Company uses advances from the FHLB as an alternative funding source to deposits in order to manage funding costs, reduce interest rate risk, and to leverage the balance sheet.

Equity. Stockholders' equity increased $1.8 million, or 1.8%, to $103.2 million at December 31, 2005, from $101.4 million at September 30, 2005. The increase was primarily a result of the $1.8 million in net income and the allocation of ESOP shares and equity compensation totaling $362,000, offset by $287,000 of cash dividends paid to stockholders. On December 15, 2005, the Company paid $0.05 per share in cash dividends to stockholders of record, excluding shares held by Home Federal MHC.

General. Net income for the three months ended December 31, 2005 was $1.8 million, or $0.12 per diluted share, compared to net income of $74,000, or less than $0.01 per diluted share, for the three months ended December 31, 2004. The results for the quarter ended December 31, 2004 include a $1.8 million pre-tax expense for establishing the Foundation. Excluding the expense for establishing the Foundation, the Company had net income of $1.2 million, or $0.08 per diluted share, for the quarter ended December 31, 2004.

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The following table reconciles the Company's actual net income to pro forma net income for the quarter ended December 31, 2004, exclusive of the contribution to the Foundation, as adjusted for federal and state taxes:

Net Interest Income. Net interest income increased $1.0 million, or 20.0%, to $6.0 million for the three months ended December 31, 2005, from $5.0 million for the three months ended December 31, 2004. Average total interest-earning assets increased $84.6 million, or 14.9% to $653.2 million for the three months ended December 31, 2005 from $568.6 million for the same quarter last year. The increase in interest-earning assets was primarily a result of the purchase of mortgage-backed securities with the net proceeds of the minority stock offering in December 2004 and additional purchases throughout the past 12 months to achieve a desired level of interest-earning assets.

The Company's net interest margin increased 15 basis points to 3.66% for the quarter ended December 31, 2005, from 3.51% for the same quarter last year. The cost of deposits was 1.80% for the first quarter of fiscal 2006 compared to 1.56% for the first quarter of the prior year. During the current quarter, the Company revised its estimate of accrued interest on an escalator certificate of deposit product. The revision resulted in a $310,000 reduction in interest expense for the quarter ended December 31, 2005. Excluding the revision, the net interest margin and cost of deposits for the first quarter were 3.47% and 2.15%, respectively. The decline in net interest margin to 3.47% reflects the relatively flat yield curve that currently exists, as the cost of shorter-term deposits and borrowed funds increased more rapidly than the yield on longer-term assets. Although the Company believes the repricing of existing and new loans over time will help counter the trend in net interest margin, pressure will likely continue in the near term as a result of the flat yield curve environment.

Interest and Dividend Income. Total interest and dividend income for the three months ended December 31, 2005 increased $1.6 million, or 20.8%, to $9.3 million, from $7.7 million for the three months ended December 31, 2004. The increase during the quarter was primarily attributable to the $84.6 million increase in the average balance of interest-earning assets and an increase in the yield on interest-earning assets to 5.71% as a result of the general increase in interest rates.

On May 18, 2005, the FHLB indefinitely suspended dividends on all classes of its stock as part of its recapitalization plans. The suspension of FHLB dividends has not had a significant effect on our results of operations or financial condition.

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The following table compares detailed average earning asset balances, associated yields, and resulting changes in interest and dividend income for the three months ended December 31, 2005 and 2004:

Interest Expense. Interest expense increased $663,000, or 24.7%, to $3.3 million for the three months ended December 31, 2005 from $2.7 million for the three months ended December 31, 2004. The average balance of total interest-bearing liabilities was $528.6 million, an increase of $33.4 million, for the three months ended December 31, 2005 from $495.2 million for the three months ended December 31, 2004. The increase was primarily a result of additional advances from the FHLB to leverage the balance sheet and achieve the desired level of interest-earning assets. As a result of general market rate increases following Federal Reserve rate hikes during the past several quarters, the average cost of funds for total interest-bearing liabilities increased 36 basis points to 2.53% for the three months ended December 31, 2005 compared to 2.17% for the three months ended December 31, 2004.

The following table details average balances, cost of funds and the change in interest expense for the three months ended December 31, 2005 and 2004:

Provision for Loan Losses. The Company's Asset Liability Committee (the "Committee") assesses the adequacy of the allowance for loan losses on a quarterly basis. The quarterly assessment may include several factors, including delinquency, charge-off rates, the changing risk profile of the loan portfolio, as well as local economic conditions including unemployment rates, bankruptcies and vacancy rates of business and residential properties. The Committee's methodology for analyzing the allowance for loan losses consists of three components: formula, specific and general allowances. The formula allowance is determined by applying an estimated loss percentage to

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various groups of loans. The loss percentages are based on various historical measures such as the amount and type of classified loans, past due ratios and loss experience, which could affect the collectibility of the respective loan types. The specific allowance component is determined when management believes that the collectibility of a specific large loan has been impaired and a loss is probable. The general allowance component relates to assets with no well-defined deficiency or weakness (i.e., assets classified pass or watch) and takes into consideration loss that is inherent within the portfolio but has not been realized. General allowances for each major loan type are determined by applying to the associated loan balance loss factors that take into consideration past loss experience, asset duration, economic conditions and overall portfolio quality.

The provision for loan losses was relatively unchanged at $55,000 for the three months ended December 31, 2005, compared to $59,000 for the three months ended December 31, 2004. The following table details selected activity associated with the allowance for loan losses for the three months ended December 31, 2005 and 2004:

Despite a surge in bankruptcy filings prior to the October 17, 2005 effective date of the new bankruptcy laws, the Company does not anticipate material increases in the provision for loan losses as a result of charge-offs related to these additional filings. Management considers the allowance for loan losses at December 31, 2005 to be adequate to cover probable losses inherent in the loan portfolio based on the assessment of the above-mentioned factors affecting the loan portfolio.

Noninterest Income. Noninterest income increased $584,000, or 26.3%, to $2.8 million for the three months ended December 31, 2005 from $2.2 million for the three months ended December 31, 2004. The increase in noninterest income is primarily attributable to a $427,000 increase in service charges as a result of enhancements to the retail checking program related to the core processing conversion in the current quarter. Gains on sale of loans increased $243,000 to $311,000 for current quarter as loans sold to investors increased to $23.5 million for the three months ended December 31, 2005 from $14.5 million for the three months ended December 31, 2004. As a result of the Company's conversion of its core processing system during the quarter ended December 31, 2005, the Company retired fixed assets and software related to the prior system, resulting in an $86,000 charge to gains and losses on fixed assets, included in other noninterest income.

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The following table provides a detailed analysis of the changes in components of noninterest income:

The Company performs a quarterly review of mortgage servicing rights for potential declines in value. For the three months ended December 31, 2005, the Company determined there was no impairment of the mortgage servicing rights. For the current quarter, amortization of the servicing rights exceeded the servicing rights capitalized as the majority of loans were sold with the servicing rights released. The mortgage servicing right was 1.10% of mortgage loans serviced for others at December 31, 2005, compared to 1.19% at December 31, 2004. Mortgage servicing rights is an accounting estimate of the present value of the future servicing fees from the right to service mortgage loans for others. This estimate is affected by prepayment speeds of the underlying mortgages and interest rates. In general, during periods of falling interest rates, mortgage loans prepay faster and the value of the mortgage-servicing asset declines.

Noninterest Expense. Noninterest expense decreased $1.2 million, or 16.7%, to $5.9 million for the three months ended December 31, 2005 compared to $7.1 million for the three months ended December 31, 2004.

The following table provides a detailed analysis of the changes in components of noninterest expense:

For the three months ended December 31, 2004, the Company established the Foundation by contributing $1.8 million, consisting of 146,000 shares of its common stock and $365,000 in cash. The Foundation was formed for the purpose of supporting charitable organizations and activities that enhance the quality of life for residents within the Company's market area.

Excluding the contribution to the Foundation, noninterest expense increased $648,000 for the three months ended December 31, 2005 compared to the three months ended December 31, 2004. Compensation and benefits increased $753,000 to $3.8 million for the quarter ended December 31, 2005 as compared to $3.1 million for the same quarter a year ago. The majority of the increase is attributable to the establishment of the equity compensation plans during various times of the prior fiscal year, annual merit increases, and an increase in employee commissions and incentive plans. The equity compensation plans include the Company's employee stock ownership plan ("ESOP"), 2005 Recognition and Retention Plan ("RRP") and 2005 Stock Option and Incentive Plan. See Note 5 of the Notes to Consolidated Financial Statements contained herein for further information. The efficiency ratio, which is the percentage of noninterest expense to net interest income plus noninterest income, improved to 66.95% for the three months ended December 31, 2005 compared to 97.93% for the three months ended December 31, 2004. Excluding

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the non-recurring contribution to the Foundation, the efficiency ratio was 72.61% for the three months ended December 31, 2004. By definition, a lower efficiency ratio is an indication that the Company is more efficiently utilizing resources to generate net interest income and other fee income.

Income Tax Expense. Income tax expense increased $1.1 million to $1.1 million for the three months ended December 31, 2005 from $16,000 for the same period a year ago. Income before income taxes was $2.8 million for the three months ended December 31, 2005 compared to $90,000 for the three months ended December 31, 2004. The Company's combined federal and state effective income tax rate for the current quarter was 38.2% compared to 17.8% for the same quarter of the prior fiscal year. For the three months ended December 31, 2004, the effective tax rate was significantly lower as a result of the contribution to the Foundation that reduced net income before taxes and the receipt of tax-exempt income.

Liquidity. The Company actively analyzes and manages the Bank's liquidity with the objectives of maintaining an adequate level of liquidity and to ensure the availability of sufficient cash flows to support loan growth, fund deposit withdrawals, fund operations and satisfy other financial commitments. See the "Consolidated Statements of Cash Flows" contained in Item 1 - Financial Statements, included herein.

The primary sources of funds are customer deposits, loan repayments, loan sales, maturing investment securities, and advances from the FHLB. These sources of funds, together with retained earnings and equity, are used to make loans, acquire investment securities and other assets, and fund continuing operations. While maturities and the scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by the level of interest rates, economic conditions and competition. Management believes that our current liquidity position and our forecasted operating results are sufficient to fund all of our existing commitments.

At December 31, 2005, the Bank maintained a line of credit with the FHLB equal to 40% of total assets to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock. At December 31, 2005, the Bank was in compliance with the collateral requirements and $98.3 million of the line of credit was available. In addition, the Company holds readily saleable loans and mortgage-backed securities available for sale for liquidity purposes.

At December 31, 2005, certificates of deposits amounted to $208.1 million, or 50.7% of total deposits, including $127.8 million that are scheduled to mature by December 31, 2006. Historically, we have been able to retain a significant amount of our deposits as they mature. Management believes the Company has adequate resources to fund all loan commitments through deposits, advances from the FHLB, loan repayments, maturing investment securities, and the sale of mortgage loans in the secondary markets.

Contractual Obligations. On March 31, 2005, the Company selected Open Solutions Inc. ("OSI") for the conversion of the Company's core data processing systems to OSI's technology platform for financial institutions. The Company's contract with its current vendor expired November 30, 2005. The contract with OSI is for a term of 60 months with options to renew for additional successive 24 month terms. The Company completed the conversion to the OSI platform in November 2005. The majority of the costs related to the conversion, including software license fees, hardware and conversion costs, are capitalized and amortized using the straight-line method over their estimated useful life.

Off-Balance Sheet Arrangements. The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments generally include commitments to originate mortgage, commercial and consumer loans, and involve to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. Our maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments. Since some commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments. Collateral is not required to support commitments.

Undisbursed balances of loans closed include funds not disbursed but committed for construction projects. Unused lines of credit include funds not disbursed, but committed to, home equity, commercial and consumer lines of credit. Commercial letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

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The following is a summary of commitments and contingent liabilities with off-balance sheet risks as of December 31, 2005:

Capital. Consistent with our objective to operate a sound and profitable financial institution, the Company has maintained and will continue to focus on maintaining a "well capitalized" rating from regulatory authorities. In addition, the Company is subject to certain capital requirements set by our regulatory agencies. At December 31, 2005, the Company exceeded all regulatory capital requirements. Total equity of the Company was $103.2 million at December 31, 2005, or 14.8% of total assets on that date.

The Bank's regulatory capital ratios at December 31, 2005 were as follows: Tier 1 capital of 12.06%; Tier 1 risk-based capital of 19.82%; and total risk-based capital of 20.52%. The regulatory capital requirements to be considered well capitalized are 5%, 6%, and 10%, respectively.

Our Board of Directors has established an asset and liability management policy to guide management in maximizing net interest spread by managing the differences in terms between interest-earning assets and interest-bearing liabilities while maintaining acceptable levels of liquidity, capital adequacy, interest rate sensitivity, credit risk and profitability. The Asset Liability Management Committee, consisting of certain members of senior management, communicate, coordinate and manage our asset/liability positions consistent with our business plan and Board-approved policies, as well as to price savings and lending products, and to develop new products.

One of our primary financial objectives is to generate ongoing profitability. The Company's profitability depends primarily on its net interest income, which is the difference between the income it receives on its loan and investment portfolio and its cost of funds, which consists of interest paid on deposits and borrowings. The rates we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Our loans generally have longer maturities than our deposits. Accordingly, our results of operations, like those of other financial institutions, are affected by changes in interest rates and the interest rate sensitivity of our assets and liabilities. We measure our interest rate sensitivity on a monthly basis using an internal model.

Management employs various strategies to manage our interest rate sensitivity including: (1) selling long-term fixed-rate mortgage loans in the secondary market to Fannie Mae, Freddie Mac and other financial institutions; (2) borrowing intermediate to long-term funds at fixed rates from the FHLB; (3) originating consumer loans at shorter maturities or at variable rates; (4) originating adjustable rate mortgage loans; (5) appropriately modifying loan and deposit pricing to capitalize on the then current market opportunities; and (6) increasing lower cost core deposits, such as savings and checking accounts. At December 31, 2005, the Company had no off-balance sheet derivative financial instruments, and the Bank did not maintain a trading account for any class of financial instruments or engage in hedging activities or purchase high risk derivative instruments. Furthermore, the Company is not subject to foreign currency exchange rate risk or commodity price risk.

There has not been any material change in the market risk disclosures contained in the Company's 2005 Form 10-K.

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(a) Evaluation of Disclosure Controls and Procedures.

An evaluation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")) was carried out under the supervision and with the participation of the Company's Chief Executive Officer, Chief Financial Officer, and other members of the Company's management team as of the end of the period covered by this quarterly report. The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.

(b) Changes in Internal Controls.

There have been no changes in our internal control over financial reporting (as defined in 13a-15(f) of the Act) that occurred during the quarter ended December 31, 2005, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. A number of internal control procedures were, however, modified during the quarter in conjunction with the Bank's internal control testing and conversion to a new core processing system. The Company also continued to implement suggestions from its internal auditor and independent auditors on ways to strengthen existing controls.

The Company intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material non-financial information concerning the Company's business. While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures. The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all error and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

From time to time, the Company is engaged in legal proceedings in the ordinary course of business, none of which are currently considered to have a material impact on the Company's financial position or results of operations.

Not applicable.

Stock Repurchases. The Company did not repurchase any shares of its outstanding common stock during the three months ended December 31, 2005. In addition, the Company has no publicly announced plans to repurchase any shares of its common stock.

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Not applicable.

Not applicable.

Not applicable.

Date: February 14, 2006                                                   /s/ Robert A. Schoelkoph
                                                                                            Robert A. Schoelkoph
                                                                                            Senior Vice President and
                                                                                            Chief Financial Officer
                                                                                            (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

I, Daniel L. Stevens, President and Chief Executive Officer of Home Federal Bancorp, Inc., certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Home Federal Bancorp, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
       fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
       misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
       all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
       periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
        procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

       (a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
                designed under our supervision, to ensure that material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
                which this quarterly report is being prepared;

       (b)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
                conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
                by this report based on such evaluation; and

       (c)     Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
                 the registrant's most recent fiscal quarter (the registrant's fiscal fourth quarter in the case of an annual report) that
                 has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
                 reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
       over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
       performing the equivalent functions):

       (b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the
                registrant's internal control over financial reporting

Date: February 14, 2006                                                                    /s/ Daniel L. Stevens
                                                                                                             Daniel L. Stevens
                                                                                                             Chairman, President and
                                                                                                             Chief Executive Officer

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.

I, Robert A. Schoelkoph, Chief Financial Officer of Home Federal Bancorp, Inc., certify that:

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
       fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
       misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
       all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
       periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
        procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

       (a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
                designed under our supervision, to ensure that material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
                which this quarterly report is being prepared;

       (b)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
                conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
                by this report based on such evaluation; and

       (c)     Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
                 the registrant's most recent fiscal quarter (the registrant's fiscal fourth quarter in the case of an annual report) that
                 has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
                 reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
       over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
       performing the equivalent functions):

       (b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the
                registrant's internal control over financial reporting

Date: February 14, 2006                                                                            /s/ Robert A. Schoelkoph
                                                                                                                     Robert A. Schoelkoph
                                                                                                                     Senior Vice President and
                                                                                                                     Chief Financial Officer

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The undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this Quarterly Report on Form 10-Q, that:

1.    the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
       1934, as amended; and

2.    the information contained in the Report fairly presents, in all material respects, the financial condition and
       results of operations of the Company.