N/A

Fees

        Directors of Home Federal are currently not compensated, but serve and are compensated by Home Federal Bank. Board members receive an annual retainer of $15,000 and $750 for each Board meeting attended and $250 for each committee meeting attended and $300 for the chair of each committee. It is not anticipated that separate directors' fees will be paid to directors of Home Federal until such time as these persons devote significant time to the separate management of Home Federal's affairs, which is not expected to occur until we become actively engaged in additional businesses other than holding the stock of Home Federal Bank. We may determine that such compensation is appropriate in the future.

Benefit Plans

        Home Federal Bank maintains a nonqualified deferred incentive plan for directors. All members of the Board of Directors participate in the plan. The plan provides an incentive award percentage determined by reference to Home Federal Bank's return on assets and return on equity for the year. Each year, the percentage is determined and multiplied by the participant's directors' fees for the year. The resulting amount is set aside in an unfunded deferral account for that participant. Participants may also elect to defer all or a part of their directors' fees into the deferral account under the plan. The deferral accounts are credited annually with an earnings percentage equal to Home Federal Bank's return on equity percentage for the year. Upon the participant's termination of service, the value of the participant's combined deferral accounts will begin to be paid. Hardship distributions are permitted. The plan also provides a death benefit equal to the greater of the value of the participant's deferral accounts, or a fixed death benefit ranging from $38,000 to $231,000, as set forth in the particular participant's agreement. All benefits are paid over 120 months, and during that period, the deferral account is adjusted for interest. For the year ended September 30, 2004, $66,000 was credited to the deferral accounts of all of the participants, with each participant being allocated the amount required under the plan.

        Home Federal Bank also maintains an unfunded nonqualified retirement plan for directors. All members of the Board of Directors participate in the plan. Each year under the plan, each director will be credited an amount equal to the difference between the actual cash surrender value of a life insurance policy and the value of a hypothetical account which is credited with an after-tax return based on an investment in one-year U.S. Treasury bonds, adjusted to reflect a pre-tax return. This is the primary benefit under the plan. Directors retiring on their normal retirement date or with more than ten years of service also receive a secondary benefit. The secondary benefit is an annual benefit, beginning upon the director's normal retirement age, which is generally equal to the difference between the earnings on the life insurance policy and the after-tax return on a hypothetical investment account, adjusted to reflect a pre-tax return. The primary benefit begins upon the director's normal retirement date (except in the case of early termination or disability, in which case the distribution begins upon the director's termination of service), and will be paid over 120 months without an interest adjustment. The secondary benefit, if payable, will be paid over the director's life (or ten years, if the director terminates service for reasons other than normal retirement).

        If the director's services are terminated within 24 months following a change in control, the primary and secondary benefit will be paid over 120 months beginning upon the director's termination of service. The plan defines the term "change in control" as having occurred when (1) any person, as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act (with the exception of Home Federal or certain persons acting on behalf of Home Federal), is or becomes the beneficial owner of 25% or more of the combined voting power of Home Federal's then outstanding securities; (2) individuals who are members of the Board cease for any reason to constitute at least a majority thereof (with certain exceptions); (3) the stockholders of Home Federal approve a merger of consolidation of Home Federal with any other corporation (other than certain mergers or consolidations where either there is continued

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ownership of at least 50% of the combined voting power of Home Federal stockholders, or no person (as defined above) acquires more than 25% of the combined voting power of Home Federal's then outstanding securities); or (4) the stockholders of Home Federal approve a plan of complete liquidation or the sale or disposition by Home Federal of all or substantially all of its assets (or any transaction having a similar effect). The plan also provides a lump sum death benefit. All plan benefits are fully vested. For the year ended September 30, 2004, $16,000 was credited to the accounts of all of the participants, with each participant being allocated the amount required under the plan.

        Home Federal Bank has also entered into life insurance split dollar agreements with each of the members of the Board of Directors, except for Director Malson, whereby their beneficiaries will receive certain death benefits if the director should die while a member of the Board. Home Federal Bank has purchased life insurance policies for each participant in order to provide the benefit, and it pays all premiums due on the policies. Home Federal Bank is entitled to an amount equal to the greater of the cash value of the insurance policies or the aggregate premiums paid by it less any outstanding indebtedness to the insurer.  

Summary Compensation Table

        The following table sets forth a summary of certain information concerning the compensation paid by Home Federal Bank, including amounts deferred to future periods by the officers, for services rendered in all capacities during the year ended September 30, 2004 to the President and Chief Executive Officer and the four other most highly compensated executive officers who received total annual salary and bonus in excess of $100,000, also known as "named executive officers." The long-term compensation columns have been omitted from the table because neither Home Federal nor Home Federal Bank made any restricted stock awards, granted any stock options or other stock appreciation rights, or made any long-term incentive plan payouts during the periods reported.

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________
⁽¹⁾     Incentive accrued for the fiscal year ended September 30 and paid November 2, 2004, November
         5, 2003 and November 8, 2002.
⁽²⁾     Does not include other personal benefits, such as personal use of company owned vehicles
         the value of which did not exceed $5,000 per year.
⁽³⁾     For the fiscal year ended September 30, 2004, includes the following amounts for Messrs.
         Stevens, Schoelkoph and Eisenbarth and Ms. Sander and Ms. Wardwell, respectively:
         compensation credited under deferred incentive agreement of $64,243, $20,626, $27,04, $7,879
         and $2,356; accruals under salary continuation agreements of $108,721, $26,379, $38,250, $16,559
         and $5,466; and employer matching contributions to 401(k) savings plan of $7,750, $5,369,
         $5,184, $5,177 and $4,445. For the fiscal year ended September 30, 2003, includes the following
         amounts for Messrs. Stevens, Schoelkoph and Eisenbarth and Ms. Sander and Ms. Wardwell,
         respectively: compensation credited under deferred incentive agreement of $84,660, $27,471,
         $35,159, $9,501 and $0; accruals under salary continuation agreements of $81,750, $22,610,
         $31,505, $8,782 and $0; and employer matching contributions to 401(k) savings plan of $5,750,
         $4,980, $4,800, $4,601 and $3,400. For the fiscal year ended September 30, 2002, includes the
         following amounts for Messrs. Stevens, Schoelkoph and Eisenbarth and Ms. Sander and Ms.
         Wardwell, respectively: compensation credited under deferred incentive agreement of $37,518,
         $12,381, $15,308, $1,577 and $0; accruals under salary continuation agreements of $57,234,
         $15,924, $23,266, $2,153 and $0; and employer matching contributions to 401(k) savings plan of
         $5,500, $4,451, $4,426, $3,699 and $0.

Option Grants in Last Fiscal Year

        During the fiscal year ended September 30, 2004, Home Federal did not maintain a stock option plan. Therefore, no options were granted to the Chief Executive Officer and the named executive officers during this period.

Equity Compensation Plan Information

        The following table summarizes share and exercise price information about Home Federal's equity compensation plans as of September 30, 2004, excluding the number of shares under the proposed 2005 Stock Option and Incentive Plan and the 2005 Recognition and Retention Plan.

Option Exercise/Value Table

        During the fiscal year ended September 30, 2004, Home Federal did not maintain a stock option plan. Therefore, no options were exercised by the Chief Executive Officer and the named executive officers during this period.

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Employment Agreements and Other Compensatory Arrangements

      Employment Agreements for Chief Executive Officer. Home Federal and Home Federal Bank have entered into separate three-year employment agreements with Daniel L. Stevens. Under the employment agreements, the aggregate initial base salary level for Mr. Stevens is $205,000, which may be increased at the discretion of the Board of Directors or an authorized committee of the Board. On each anniversary of the initial date of the employment agreements, the term of the agreements will be extended for an additional year unless notice is given by the Board to Mr. Stevens at least 90 days prior to the anniversary date. The agreements may be terminated by Home Federal or Home Federal Bank, as appropriate, at any time, by Mr. Stevens if he is assigned duties inconsistent with his initial position, duties and responsibilities, or upon the occurrence of certain events. If Mr. Stevens's employment is terminated without cause or upon his voluntary termination following the occurrence of an event described in the preceding sentence, Home Federal or Home Federal Bank, as appropriate, would be required to honor the terms of the agreement through the expiration of the then current term, including payment of cash compensation and continuation of employee benefits.             

        The employment agreements also provide for a severance payment and other benefits if Mr. Stevens is involuntarily terminated within 12 months following a change in control of Home Federal. The agreements authorize severance payments on a similar basis if Mr. Stevens voluntarily terminates his employment following a change in control because he is assigned duties inconsistent with his position, duties and responsibilities immediately prior to the change in control. The agreements define the term "change in control" in the same manner as described above under "Directors' Compensation."

        The maximum value of the severance benefits under each employment agreement is 2.99 times Mr. Stevens's average annual compensation during the five-year period prior to the effective date of the change in control (known as the base amount). The employment agreements provide that the value of the maximum benefit be distributed in the form of a lump sum cash payment equal to 2.99 times Mr. Stevens's base amount, and continued coverage under the health, life and disability programs of Home Federal and Home Federal Bank for a 36-month period following the change in control, the total value of which does not exceed 2.99 times his base amount. Assuming that a change in control had occurred at September 30, 2004 and that Mr. Stevens elected to receive a lump sum cash payment, he would be entitled to a payment of approximately $497,000. Section 280G of the Internal Revenue Code provides that severance payments (either separately or in conjunction with other payments made on account of a change in control) that equal or exceed three times an individual's base amount will result in the individual receiving "excess parachute payments" if the payments are conditioned upon a change in control. Individuals receiving parachute payments in excess of 2.99 times of their base amount are subject to a 20% excise tax on the amount by which the value of the individual's change in control benefits exceed one times the individual's base amount (the excess parachute payment). If excess parachute payments are made, Home Federal and Home Federal Bank would not be entitled to deduct the amount of these excess payments. The employment agreements provide that severance and other payments that are subject to a change in control will be reduced as much as necessary to ensure that no amounts payable to Mr. Stevens will be considered excess parachute payments.

        Severance Agreements for Executive Officers. Home Federal Bank has entered into three-year change in control severance agreements with each of Robert A. Schoelkoph, Roger D. Eisenbarth, Lynn A. Sander and Karen Wardwell. On each anniversary of the initial date of the severance agreements, the term of each agreement may be extended for an additional year at the discretion of the Board or an authorized committee of the Board. The severance agreements also provide for a severance payment and other benefits if the executive is involuntarily terminated after a change in control of Home Federal. Each agreement also authorizes severance payments if the executive voluntarily terminates employment following a change in control because of being assigned duties inconsistent with the executive's position, duties, responsibilities and status immediately prior to the change in control. The agreement defines the term "change in control" in the same manner as described above under "Directors' Compensation." The severance benefit is equal to 2.99 times the executive's average annual compensation during the five-year period prior to the effective date of the change in control (known as the base amount). This amount will be paid to the executive in a cash lump sum within 25 days after the later of the date of the change in control or the date of the executive's termination. Home Federal Bank also will continue to pay, for the remaining term of the executive's agreement, the life, health and disability coverage of the executive and his/her eligible dependents. Assuming that a change in control had occurred at September 30, 2004

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and that each executive elected to receive a lump sum cash payment, Messrs. Schoelkoph and Eisenbarth and Ms. Sander and Ms. Wardwell would be entitled to payments of approximately $275,000, $268,000, $229,000 and $202,000, respectively. Plan benefits are reduced to the extent necessary to avoid the payment of an excise tax under Section 280G of the Internal Revenue Code.

        Deferred Incentive Plan for Executive Officers. Home Federal Bank maintains an unfunded nonqualified deferred incentive plan for designated executive employees. Participation in the plan is at the discretion of the Board of Directors. The plan provides an incentive award percentage determined by reference to Home Federal Bank's return on assets and return on equity for the year. The incentive award is conditioned on Home Federal Bank maintaining a stable-to-improving trend on return on assets and return on equity. Each year, the percentage is determined and multiplied by the participant's base salary for the year. The resulting amount is set aside in an unfunded deferral account for that participant. The deferral account is credited annually with an earnings percentage equal to the percentage increase in Home Federal Bank's net worth over the year. Upon the participant's termination of employment after the participant's normal retirement date or disability, or an involuntary termination within 24 months following a change in control of Home Federal, the value of the participant's deferred account will begin to be paid. The agreement defines the term "change in control" in the same manner as described above under "Directors' Compensation." Upon the participant's termination of employment after the participant's early retirement date, the value of the participant's deferral account, reduced to reflect the early commencement of benefits, and further reduced by ten percent for each year of service less than ten, will begin to be paid. Upon the participant's termination of employment prior to the participant's early retirement date, the value of the participant's deferral account, reduced by ten percent for each year of service less than ten, will be paid beginning on the participant's normal retirement date. Hardship distributions are permitted. A death benefit also is provided under the plan equal to the greater of the value of the participant's deferral account, or $683,000, $613,000, $490,000, $707,000 and $707,000 for Messrs. Stevens, Schoelkoph and Eisenbarth and Ms. Sander and Ms. Wardwell, respectively. All benefits are paid over 180 months, and during that period, the deferral account is adjusted for interest. Benefits are reduced to the extent necessary to avoid the payment of an excise tax under Section 280G of the Internal Revenue Code.

        Salary Continuation Plan for Executive Officers. Home Federal Bank maintains an unfunded nonqualified deferred compensation plan for designated executive employees. Participation in the plan is at the discretion of the Board of Directors. Under the plan, if the participant makes the required contributions, then upon the participant's normal retirement date (age 65), the plan will pay a monthly benefit equal to 50% of the average of the participant's final 36 months of base salary (the final salary benefit), plus the participant's deferral account balance. The participant's deferral account balance is the sum of the participant's elective deferrals plus interest credited at prime minus one percent. The plan provides a reduced monthly benefit if the participant terminates employment as a result of early retirement (before age 65). The early retirement benefit is the participant's vested accrual balance plus the deferral account balance as defined above. Vesting occurs at a rate of ten percent per plan year. The plan also provides a disability benefit, which is the same as the early retirement benefit except that the benefit is fully vested. There is also a change in control benefit (if the participant is involuntarily terminated within 24 months following the change in control) equal to (1) the participant's accrual balance determined as of the end of the month preceding the change in control, (2) the participant's deferral account balance as defined above and (3) 2.99 times the participant's base annual salary as of the change in control. Plan benefits are reduced to the extent necessary to avoid the payment of an excise tax under Section 280G of the Internal Revenue Code. The agreement defines the term "change in control" in the same manner as described above under "Directors' Compensation." In the event of the participant's death, the participant's beneficiary would receive the sum of the participant's projected benefit and the participant's deferral account balance as defined above. The participant's projected account is the final salary benefit the participant would have received had the participant attained age 65, assuming a 4% annual increase in the participant's base salary. The final salary benefit paid in connection with a participant's normal retirement will be paid in monthly payments over 180 months and other payments based on accrual balances will be paid over 180 months, with interest credited on unpaid amounts at 7.5% per year. Final salary benefits begin upon the participant's termination of service after the participant's normal retirement date, death or disability. Final salary benefits paid on account of early retirement begin upon the participant's attainment of age 65. The participant's deferral account balance will be paid in a lump sum within 90 days of the participant's termination of employment. Under the agreements, Messrs. Stevens, Schoelkoph and Eisenbarth and Ms. Sander and Ms. Wardwell would receive

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monthly benefits of approximately $9,600, $7,200, $5,500, $6,900 and $7,000, respectively, upon retirement or after attaining the normal retirement age.

        The following Report of the Audit Committee of the Board of Directors shall not be deemed to be soliciting material or to be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or the Securities Exchange Act, except to the extent Home Federal specifically incorporates this report therein, and shall not otherwise be deemed filed under these Acts.

        The Audit Committee reports as follows with respect to Home Federal's audited financial statements for the fiscal year ended September 30, 2004:

•     The Audit Committee has completed its review and discussion with management of
      Home Federal's fiscal 2004 audited financial statements;



•     The Audit Committee has discussed with Moss Adams, LLP, Home Federal's
      independent auditors, the matters required to be discussed by Statement on Auditing
      Standards ("SAS") No. 61, Communication with Audit Committees, as amended by SAS
      No. 90, Audit Committee Communications, including matters related to the conduct of the
      audit of Home Federal's financial statements;



•     The Audit Committee has received written disclosures, as required by Independence
      Standards Board Standard No. 1, Independence Discussions with Audit Committee,
      indicating all relationships, if any, between the independent auditor and its related entities
      and Home Federal and its related entities which, in the auditors' professional judgment,
      reasonably may be thought to bear on the auditors' independence, and the letter from the
      independent auditors confirming that, in its professional judgment, it is independent from
      Home Federal and its related entities, and has discussed with the auditors the auditors'
      independence from Home Federal; and



•      The Audit Committee has, based on its review of Home Federal's 2004 audited financial 
      statements and discussions with management and the independent auditors,
      recommended to the Board of Directors that Home Federal's audited financial statements
      for the year ended September 30, 2004 be included in the Annual Report on Form 10-K.

Audit Committee:                   Robert A. Tinstman (Chairman)
                                                  N. Charles Hedemark
                                                  Richard J. Schrandt
                                                  James R. Stamey

 

        Notwithstanding anything to the contrary set forth in any of Home Federal's previous filings under the Securities Act or the Securities Exchange Act that might incorporate future filings, including this proxy statement, in whole or in part, the following Report of the Compensation Committee shall not be incorporated by reference into any such filings.

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Report of the Compensation Committee

        Under rules established by the SEC, Home Federal is required to provide certain data and information in regard to the compensation and benefits provided to the Chief Executive Officer and other executive officers of Home Federal and Home Federal Bank. The disclosure requirements for the Chief Executive Officer and other executive officers include the use of tables and a report explaining the rationale and considerations that led to the fundamental executive compensation decisions affecting those individuals.

        The Compensation Committee administers all policies that govern executive compensation for Home Federal, and is responsible for evaluating the performance of the Chief Executive Officer while the Chief Executive Officer evaluates the performance of other senior officers and makes recommendations to the Compensation Committee regarding their compensation levels. Home Federal's executive compensation policies are intended to retain and attract key executives who are vital to Home Federal's success by providing a compensation package that is competitive in the financial industry and motivational to each executive.

        In making its recommendations, the Compensation Committee considers numerous factors, including the past service of the employee, the present and potential contributions of the employee to Home Federal's success, and those other factors the Committee deems relevant, including the employee's years of service and position with Home Federal or Home Federal Bank. In addition the Committee, in its discretion, may review compensation reports prepared by third parties of companies and banks that are of a similar size and in a similar location in order to make its recommendations. The Committee does not apply a formula assigning specific weights to any of these factors when making its determination.

        Currently, the compensation for executive officers consists principally of a base salary and cash incentive. In addition, Home Federal maintains a 401(k) savings plan for all qualifying employees and provides opportunities for employee ownership of Home Federal's common stock through participation in the ESOP. Home Federal and Home Federal Bank have also entered into employment agreements with the Chief Executive Officer and severance agreements with the executive officers, and maintain a deferred incentive plan and a salary continuation plan on their behalf.

        Base Salary. The Board of Directors approves an annual base salary for all senior officers and executive officers, based upon recommendations from the Compensation Committee. Annual base salaries are generally effective October 1^st of each year. Factors considered in setting base salaries include the executive's performance, the overall performance of Home Federal and Home Federal Bank, and compensation levels in the financial industry, among other factors.

        Annual Incentive. Home Federal Bank maintains a discretionary incentive plan for employees. The incentive award percentage is determined by reference to its return on assets and return on equity for the year. Each year, the percentage is determined and multiplied by the participant's base salary for the year. Awards are paid as soon as practicable following the end of the performance period. Under the plan and for the year ended September 30, 2004, Chief Executive Officer Daniel L. Stevens received $51,252, and the remaining employees received 9.8% of the Home Federal Bank's net income, distributed based on the ratio of each employee's salary to total employees' salaries.

        401(k) Savings Plan and Trust. The Company maintains a tax-qualified 401(k) savings plan for the benefit of employees with one year of service who have attained age 21. Home Federal's annual discretionary contribution historically has been 5% of the employee's first 10% contribution.

        Executive Officer Compensation. During the fiscal year ended September 30, 2004, the base salary of the Company's Chief Executive Officer, Daniel L. Stevens, was $205,008. In addition, he received an incentive bonus of $51,252 and was credited with $180,714 in other compensation as set forth in the Summary Compensation Table above. This resulted in total compensation of $436,974, which represents an 8.0% decrease from the previous year. The Board of Directors believes that Mr. Stevens's compensation is appropriate based on Home Federal's compensation policy, consideration of salaries for similar positions in the financial industry and Home Federal Bank's performance during the fiscal year.

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Compensation Committee:                    N. Charles Hedemark (Chair)
                                                                  Fred H. Helpenstell, M.D.
                                                                  Thomas W. Malson

        With the exception of Daniel L. Stevens, who serves as an ex-officio member of the Compensation Committee, no members of the Compensation Committee were officers or employees of the Company or any of its subsidiaries during the year ended September 30, 2004, were formerly Company officers or had any relationships otherwise requiring disclosure. 

General

        On April 19, 2005, the Board of Directors of Home Federal unanimously adopted the Home Federal Bancorp, Inc. 2005 Stock Option and Incentive Plan. The purpose of the stock option plan is to foster and promote the long-term success of Home Federal and its stockholders by providing a means of attracting and retaining directors, advisory directors, directors emeriti and employees of Home Federal and its affiliates, and aligning the interests of participants with stockholders. To promote these objectives, our Board of Directors has adopted the stock option plan, subject to your approval.

         A summary of the stock option plan is set forth below. This summary is, however, qualified by and subject to the more complete information set forth in the stock option plan, a copy of which is attached to this proxy statement as Appendix C.

          We believe the stock option plan complies with the requirements of the Office of Thrift Supervision. The Office of Thrift Supervision does not endorse or approve the stock option plan in any manner.

Summary

        Types of Awards. The stock option plan provides for awards in the form of (i) options to purchase shares of Home Federal common stock for cash and/or (ii) rights to receive the excess of the market value of the shares of Home Federal common stock on the date exercised over the exercise price, or "stock appreciation rights." Stock options and rights may also be collectively referred to in this proxy statement as "awards."

        Administration. The stock option plan will be administered by a committee consisting of two or more members of the Board, each of whom must be an "outside director" and a "non-employee director"as defined in the plan. The committee will:  

•     select persons to receive options or stock appreciation rights from among the eligible
      participants;
  
•     determine the types of awards and the number of shares to be awarded to participants;



•     set the terms, conditions and provisions of the awards consistent with the terms of the
      stock option plan; and
  
•     establish rules for the administration of the stock option plan.

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The committee has the power to interpret the stock option plan and to make all other determinations necessary or advisable for its administration.

        Participants. The committee may grant awards to any director, advisory director, director emeritus or employee of Home Federal or its affiliates. There are currently 236 individuals who are eligible to receive awards under the stock option plan.

        Number of Shares that May Be Awarded. Under the stock option plan, the committee may grant awards for an aggregate of 745,229 shares of Home Federal common stock, which may be adjusted in the event of certain corporate reorganizations, such as a stock split or stock dividend. This amount, excluding the shares issued to Home Federal MHC, represents 12.25% of the maximum amount of shares that could have been sold in our minority stock offering under federal regulations, based on the valuation of an independent appraiser. This amount also represents 4.90% of the total outstanding shares and 11.96% of the total shares held by minority stockholders. The stock option plan also provides that no person may be granted awards representing more than 200,000 shares during any fiscal year.

        The stock option plan provides for the use of authorized but unissued shares or treasury shares. Treasury shares are previously issued shares of Home Federal common stock which are no longer outstanding as a result of having been repurchased or otherwise reacquired by Home Federal. We intend to fund the exercise of stock options with treasury shares to the extent available. To the extent we use authorized but unissued shares, rather than treasury shares, to fund exercises of stock options under the plan, the exercises will have the effect of diluting the holdings of current minority stockholders. Assuming all options under the stock option plan are awarded and exercised through the use of authorized but unissued common stock, current stockholders would be diluted by approximately 4.63%.

        Exercise Price of Awards. Under the terms of the stock option plan, the committee may grant rights or options to purchase shares of Home Federal common stock at a price which may not be less than the fair market value of the common stock, which shall be the average of the highest and lowest selling price as quoted on the Nasdaq National Market on the date the option is granted.

        Exercisability of Stock Options and Other Terms and Conditions. Generally, stock options may not be exercised later than ten years after the grant date. Subject to the limitations imposed by the Internal Revenue Code, certain options granted may be designated as "incentive stock options." Incentive stock options may be granted only to employees of Home Federal or its affiliates. Options which are not designated and do not otherwise qualify as incentive stock options are "non-qualified stock options."

        The committee will determine the time or times at which a stock option may be exercised in whole or in part and the method or methods by which, and the form or forms in which, payment of the exercise price with respect to the stock option may be made. Unless otherwise determined by the committee and set forth in the written award agreement evidencing the grant of the stock option, upon termination of service of the participant for any reason other than for cause, all stock options then exercisable by the participant will remain exercisable for the lesser of (i) three years following the termination of service or (ii) until the expiration of the stock option by its terms. Upon termination of service for cause, all stock options not previously exercised will immediately be forfeited.

          Stock options granted will require an expense accrual by Home Federal each quarter based on the fair value of the options on the grant date.

           Exercisability of Rights and Other Terms and Conditions. The committee may grant stock appreciation rights at any time, whether or not the participant then holds stock options. A stock appreciation right gives the recipient of the award the right to receive the excess of the market value of the shares represented by the stock appreciation rights on the date exercised over the exercise price. Stock appreciation rights generally will be subject to the same terms and conditions and exercisable to the same extent as stock options, as described above. Upon the exercise of a stock appreciation right, the holder will receive the amount due in cash or shares, or a combination of both, as determined by the committee. However, the ability of the holder to receive cash may be limited if necessary to avoid the application of Internal Revenue Service deferred compensation rules. Stock appreciation rights may be related to stock options

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("tandem stock appreciation rights"), in which case the exercise of one will reduce to that extent the number of shares represented by the other.

          Stock appreciation rights will require an expense accrual by Home Federal each year for the appreciation on the stock appreciation rights which it anticipates will be exercised. The amount of the accrual is dependent upon whether and the extent to which the stock appreciation rights are granted and the amount, if any, by which the market value of the stock appreciation rights exceeds the exercise price.

        Transferability of Awards. An incentive stock option awarded under the stock option plan may be transferred only upon the death of the holder to whom it has been granted, by will or the laws of inheritance. An award other than an incentive stock option may be transferred during the lifetime of the holder to whom it was awarded pursuant to a qualified domestic relations order or by gift to any member of the holder's immediate family or to a trust for the benefit of any member of the holder's immediate family.

       Acceleration of Vesting Requirements. The stock option plan provides that upon the occurrence of a change in control of Home Federal, as defined in the plan, or a tender or exchange offer, a holder of any unexpired option will have the right to exercise the option in whole or in part without regard to the date the option would otherwise be first exercisable.

        Effect of Merger. Upon a merger or other business combination of Home Federal in which it is not the surviving entity, the stock option plan provides that each holder of an unexpired award will have the right to receive upon exercise of the award an amount equal to the excess of the fair market value on the date of exercise of the securities or other consideration receivable in the merger in respect of a share of common stock over the exercise price of the award, multiplied by the number of shares of common stock with respect to which the award is exercised. This amount may be payable fully in cash, fully in one or more of the kind or kinds of property payable in the merger, consolidation or combination, or partly in cash and partly in one or more of the kind or kinds of property, all in the discretion of the committee. However, payments on account of a merger or other business combination may be limited if necessary to avoid the application of Internal Revenue Service deferred compensation rules.

        Amendment and Termination. The stock option plan has a term of ten years from the date of its adoption by our stockholders, after which no further awards may be granted. Our Board of Directors may amend, suspend or terminate the stock option plan or any portion thereof, unless stockholder approval is necessary or required for purposes of any applicable law or regulation or the rules of any stock exchange or automated quotation system on which our common stock may then be listed or quoted, or the Board determines to seek stockholder approval. Stockholder approval will generally be required with respect to an amendment that will (i) increase the aggregate number of securities which may be issued under the plan, (ii) materially increase the benefits accruing to participants, (iii) materially change the requirements as to eligibility for participation in the plan or (iv) change the class of persons eligible to participate in the stock option plan. No amendment, suspension or termination of the stock option plan, however, will impair the rights of any participant, without his or her consent, in any award made previously under the plan.

Federal Income Tax Consequences

        Under current federal tax law, the non-qualified stock options granted under the stock option plan will not result in any taxable income to the option holder at the time of grant or any tax deduction to Home Federal. Upon the exercise of a non-qualified stock option, the excess of the market value of the shares acquired over their cost is taxable to the option holder as compensation income and is generally deductible by Home Federal. The option holder's tax basis for the shares received pursuant to a non-qualified stock option is the market value of the shares at the time of exercise.

        Neither the grant nor the exercise of an incentive stock option under the stock option plan will result in any federal tax consequences to either the option holder or Home Federal. Except as described below, at the time the option holder sells shares acquired pursuant to the exercise of an incentive stock option, the excess of the sale price over the exercise price will qualify as a long-term capital gain. If the option holder disposes of the shares within two years of the date of grant or within one year of the date of exercise, an amount equal to the lesser of (i) the difference between the

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fair market value of the shares on the date of exercise and the exercise price or (ii) the difference between the exercise price and the sale price will be taxed to the holder as ordinary income and Home Federal will be entitled to a deduction in the same amount. The excess, if any, of the sale price over the sum of the exercise price and the amount taxed as ordinary income will qualify as long-term capital gain if the applicable holding period is satisfied. If the option holder exercises an incentive stock option more than three months after his or her termination of employment, he or she generally is deemed to have exercised a non-qualified stock option. The time frame in which to exercise an incentive stock option is extended in the event of the death or disability of the option holder.

        The exercise of a stock appreciation right will result in the recognition of ordinary income by the recipient on the date of exercise in an amount of cash and/or the fair market value on that date of the shares acquired pursuant to the exercise. Home Federal will be entitled to a corresponding deduction.

Awards Under the Stock Option Plan

        Home Federal has not approved any awards under the stock option plan that are conditioned upon stockholder approval of the stock option plan and is not currently considering any specific awards or grants under the stock option plan.

        Prior to making any awards under the stock option plan, the committee will consider all information the committee deems necessary to enable it to make grants, including surveys detailing grants made by similarly situated companies. The committee considers comparative salaries paid by other financial institutions when establishing salaries and benefits for a given position and intends to consider similar data when considering awards. Under the structure of the stock option plan, the committee may consider, among other things, individual or company performance in making grants or as a condition of vesting for any grant. The stock option plan provides the committee with flexibility to structure awards in a manner that it believes will be in the best interest of Home Federal. The ten year term of the stock option plan, coupled with the flexibility for structuring awards for different individuals over that time, enables the committee to make grants over a period of time with such terms and conditions it deems appropriate in light of economic conditions, corporate changes, management restructuring and other factors.

Vote Required for Approval

        The affirmative vote of a majority of the outstanding shares present in person or by proxy at the annual meeting, excluding votes eligible to be cast by Home Federal MHC, is required to approve the stock option plan.

        Your Board of Directors recommends that you vote "FOR" the approval of the Home Federal Bancorp, Inc. 2005 Stock Option and Incentive Plan.
 

General

        On April 19, 2005, the Board of Directors of Home Federal unanimously adopted the Home Federal Bancorp, Inc. 2005 Recognition and Retention Plan. The purpose of the recognition plan is to promote the long-term interests of Home Federal and its stockholders by providing a means for attracting and retaining directors, advisory directors, directors emeriti and employees of Home Federal and its affiliates. To promote this objective, our Board of Directors has adopted the recognition plan, subject to your approval.

        A summary of the recognition plan is set forth below. This summary is, however, qualified by and subject to the more complete information set forth in the recognition plan, a copy of which is attached to this proxy statement as Appendix D.

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      We believe the recognition plan complies with the requirements of the Office of Thrift Supervision. The Office of Thrift Supervision does not endorse or approve the recognition plan in any manner.

Summary

      Type of Awards. The recognition plan provides for the grant of Home Federal common stock in the form of restricted stock awards which are subject to the restrictions specified in the plan or as determined by the Compensation Committee of the Board of Directors.

     Administration. The recognition plan will be administered by the Compensation Committee of Home Federal, consisting of two or more members of the Board, each of whom must be an "outside director" and a "non-employee director," as those terms are defined in the plan. The Compensation Committee will:

•     select persons to receive stock awards from among the eligible participants;
  
•     determine the number of shares to be awarded to participants;
  
•     set the terms, conditions and provisions of the awards consistent with the terms of the
      recognition plan; and
  
•     establish rules for the administration of the recognition plan.

The Compensation Committee has the power to interpret the recognition plan and to make all other determinations necessary or advisable for its administration.

        Participants. The Compensation Committee may grant awards to any director, advisory director, emeritus director or employee of Home Federal or its affiliates. There are currently 236 individuals who are eligible to receive awards under the recognition plan.

        Number of Shares that May Be Awarded. Under the recognition plan, the Compensation Committee may grant awards for an aggregate of 298,092 shares of Home Federal common stock, which may be adjusted in the event of certain corporate reorganizations, such as a stock split or stock dividend. This amount, excluding the shares issued to Home Federal MHC, represents 4.9% of the maximum amount of shares that could have been sold in our minority stock offering under federal regulations, based on the valuation of an independent appraiser. This amount also represents 1.96% of the total outstanding shares and 4.79% of the total shares issued to minority stockholders. Recognition plan awards which are forfeited by a recipient will again be available for issuance under the plan.

        The recognition plan provides for the use of authorized but unissued shares or treasury shares. We intend to fund the issuance of stock under the recognition plan with treasury shares to the extent available. To the extent we use authorized but unissued shares of Home Federal, rather than treasury shares, to fund these awards, the interests of current minority stockholders will be diluted. Assuming all recognition and retention plan shares are awarded through the use of authorized but unissued shares of common stock, current stockholders would be diluted by approximately 1.94%.

        Terms and Conditions of Awards. The Compensation Committee is authorized to grant awards of common stock to plan participants with the following terms and conditions and with additional terms and conditions not inconsistent with the provisions of the recognition plan:

•     The Compensation Committee will establish for each participant a restricted period
      during which, or at the expiration of which, the shares of common stock awarded as
      restricted stock shall no longer be subject to restriction (that is, will become vested).
      Awards will not vest earlier than one year from the date the recognition plan is approved
      by the stockholders, and will not vest at a rate in excess of 20% per year beginning from
      the date of grant. Vesting will not be accelerated except in the event of the participant's
      death or disability, or in connection with a change of control or tender or exchange offer.

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•     Except for restrictions set out in the recognition plan, the recipient of the shares, as
      owner, will have all the rights of a stockholder, including the power to vote and the right to
      receive dividends with respect to the restricted stock.




•     The Compensation Committee has the right to determine any other terms and
      conditions, not inconsistent with the recognition plan, upon which a restricted stock
      award shall be granted.





•     Subject to compliance with Office of Thrift Supervision regulations, the Compensation
      Committee also has the authority to accelerate the time at which any or all of the
      restrictions will lapse with respect to any restricted stock awards, or to remove any or all of
      the restrictions, whenever it may determine that this action is appropriate by reason of
      changes in applicable tax or other laws or other changes in circumstances occurring after
      the commencement of the restricted period.

        Forfeiture of Restricted Stock. If a Participant incurs a termination of service for any reason other than death, disability or in connection with a change in control, all nonvested restricted stock awarded to such participant will be forfeited. If a participant incurs a termination of service by reason of death or disability, the nonvested restricted stock will become vested.

        Transferability of Awards. Awards under the recognition plan generally may not be sold, assigned, transferred, pledged or otherwise encumbered by the holder during the restricted period other than by will, the laws of descent and distribution or pursuant to a domestic relations order.

        Acceleration of Vesting Requirements. The recognition plan provides that upon the occurrence of a change of control of Home Federal, as defined in the plan, any restrictions remaining with respect to the shares of stock granted will lapse without regard to the date that these restrictions would otherwise lapse and that the shares will no longer be subject to forfeiture by the recipient.

        Amendment and Termination. The recognition plan has a term of ten years from the date of its adoption by our stockholders, after which no further awards may be granted. Our Board of Directors may at any time amend, suspend or terminate the recognition plan or any portion thereof, unless stockholder approval is necessary or required for purposes of any applicable law or regulation or the rules of any stock exchange or automated quotation system on which our common stock may then be listed or quoted, or the Board determines to seek stockholder approval. Stockholder approval will generally be required with respect to an amendment that will (i) increase the aggregate number of securities which may be issued under the plan, (ii) materially increase the benefits accruing to participants, (iii) materially change the requirements as to eligibility for participation in the plan or (iv) change the class of persons eligible to participate in the plan. No amendment, suspension or termination of the recognition plan, however, will impair the rights of any participant, without his or her consent, in any award made previously under to the plan.

Federal Income Tax Consequences

        Recipients of shares granted under the recognition plan will recognize ordinary income on the date that the shares are no longer subject to a substantial risk of forfeiture, in an amount equal to the fair market value of the shares on that date. In certain circumstances, a holder may elect to recognize ordinary income and determine the fair market value on the date of the grant of the restricted stock. Recipients of shares granted under the recognition plan will also recognize ordinary income equal to their dividend or dividend equivalent payments when these payments are received.

Awards Under the Recognition and Retention Plan

        Home Federal has not approved any awards under the recognition plan that are conditioned upon stockholder approval of the recognition plan and is not currently considering any specific awards or grants under the recognition plan.

        Prior to making any awards under the recognition plan, the Compensation Committee will consider all information it deems necessary to enable it to make grants, including surveys detailing grants made by similarly situated

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companies. The Committee considers comparative salaries paid by other financial institutions when establishing salaries and benefits for a given position and intends to consider similar data when considering awards. Under the structure of the recognition plan, the Committee may consider, among other things, individual or company performance in making grants or as a condition of vesting for any grant. The recognition plan provides the Committee with flexibility to structure awards in a manner that it believes will be in the best interest of Home Federal. The ten year term of the recognition plan, coupled with the flexibility for structuring awards for different individuals over that time, enables the Committee to make grants over a period of time with such terms and conditions it deems appropriate in light of economic conditions, corporate changes, management restructuring and other factors.

Vote Required for Approval

        The affirmative vote of a majority of the outstanding shares present in person or by proxy at the annual meeting, excluding votes eligible to be cast by Home Federal MHC, is required to approve the recognition plan.

        Your Board of Directors recommends that you vote "FOR" the approval of the Home Federal Bancorp, Inc. 2005 Recognition and Retention Plan.

Appointment of Independent Auditors

        The Audit Committee of the Board of Directors has appointed Moss Adams, LLP as the independent public accounting firm to audit Home Federal's financial statements for the fiscal year ending September 30, 2005. Moss Adams served as Home Federal's independent auditors for the fiscal year ended September 30. 2004. In making its determination to appoint Moss Adams as the independent auditors for the 2005 fiscal year, the Audit Committee considered whether the providing of services (and the aggregate fees billed for those services) by Moss Adams, other than audit services, is compatible with maintaining the independence of the independent auditors. You are asked to ratify this appointment at the annual meeting. If the appointment of Moss Adams is not ratified by our stockholders, the Audit Committee may appoint other independent auditors or may decide to maintain its appointment of Moss Adams.

        The Audit Committee operates under a written charter adopted by the Board of Directors. In fulfilling its oversight responsibility of reviewing the services performed by Home Federal's independent auditors, the Committee carefully reviews the policies and procedures for the engagement of the independent auditors. The Audit Committee also discussed with Moss Adams the overall scope and plans for the audit, and the results of its audit. The Committee also reviewed and discussed with Moss Adams the fees paid, as described below.

        A representative of Moss Adams is expected to attend the meeting to respond to appropriate questions and will have an opportunity to make a statement if he or she so desires.

        The Board of Directors of the Company unanimously recommends that you vote "FOR" the ratification of the appointment of Moss Adams, LLP as independent auditors for the Company for the fiscal year ending September 30, 2005.

Audit Fees

        The following table sets forth the aggregate fees billed to Home Federal and Home Federal Bank by Moss Adams for professional services rendered for the fiscal years ended September 30, 2004 and 2003.

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Pre-approval Policy

        The Audit Committee pre-approves all audit and permissible non-audit services to be provided by the independent auditors and the estimated fees for these services. All of the services provided by Moss Adams after the date of Home Federal's registration with the SEC described above were approved by the Audit Committee. Services provided prior to the date of registration did not require pre-approval.
 

        Section 16(a) of the Securities Exchange Act requires our directors and executive officers, and persons who own more than 10% of Home Federal's common stock to report their initial ownership of the common stock and any subsequent changes in that ownership to the SEC. Specific due dates for these reports have been established by the SEC and we are required to disclose in this proxy statement any late filings or failures to file.

        Home Federal did not become a public company until December 6, 2004, upon completion of its minority stock offering in connection with the mutual holding company reorganization of Home Federal Bank. Prior to that time, none of our executive officers, directors and greater than 10% beneficial owners were subject to the reporting requirements of Section 16(a) of the Securities Exchange Act.

        We have followed a policy of granting loans to our officers and directors, which fully complies with all applicable federal regulations. Loans to directors and executive officers are made in the ordinary course of business and on the same terms and conditions as those of comparable transactions with non-insider employees prevailing at the time, in accordance with our underwriting guidelines, and do not involve more than the normal risk of collectibility or present other unfavorable features. However, employees, directors and officers receive a preferred rate on six-month and one-year adjustable rate mortgages, and on certain types of consumer loans.

        All loans we make to our directors and executive officers are subject to federal regulations restricting loans and other transactions with affiliated persons of Home Federal. Loans and available lines of credit to all directors and executive officers and their associates totaled approximately $930,000 at September 30, 2004, which was 2.1% of our equity at that date. All loans to directors and executive officers were performing in accordance with their terms at September 30, 2004. Total deposits of directors and executive officers were approximately $1.5 million at September 30, 2004.

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        In order to be eligible for inclusion in the proxy materials for next year's annual meeting of stockholders, any stockholder proposal to take action at such meeting must be received at the executive office at 500 12^th Avenue South, Nampa, Idaho 83651, no later than August 12, 2005. Any such proposals shall be subject to the requirements of the proxy rules adopted under the Securities Exchange Act, and as with any stockholder proposal (regardless of whether included in our proxy materials), our charter and bylaws.

        To be considered for presentation at next year's annual meeting, although not included in the proxy materials for that meeting, any stockholder proposal must be stated in writing and received at our executive office at least five days prior to next year's annual meeting of stockholders. All business so stated, proposed and filed shall be considered at the annual meeting, but no other proposal shall be acted upon at the annual meeting. Any stockholder may make any other proposal at the annual meeting and the same may be discussed and considered, but unless stated in writing and filed with the secretary at least 60 days before the meeting, the proposal will be laid over for action at an adjourned, special or annual meeting of the stockholders taking place 30 days or more thereafter.

        We will pay the cost of soliciting proxies. In addition to this mailing, our directors, officers and employees may also solicit proxies personally, electronically or by telephone. We will also reimburse brokers and other nominees for their expenses in sending these materials to you and obtaining your voting instructions. We have engaged Regan & Associates, Inc. to assist in distributing proxy materials and contacting record and beneficial owners of Home Federal common stock, and have agreed to pay a fee of $8,000, including out-of-pocket expenses, for its services to be rendered on behalf of Home Federal.

Annual Reports and Financial Statements

        Our annual report to stockholders, including financial statements, has been mailed to all stockholders of record as of the close of business on the record date. Any stockholder who has not received a copy of the annual report may obtain a copy by writing to the Secretary, Home Federal Bancorp, Inc., 500 12^th Avenue South, Nampa, Idaho 83651. The annual report is not to be treated as part of the proxy solicitation material or as having been incorporated herein by reference.

        In addition, a copy our Annual Report on Form 10-K for the fiscal year ended September 30, 2004 is available to each record and beneficial owner of Home Federal's common stock without charge upon written request to the Secretary at the address given above.

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        We are not aware of any business to come before the annual meeting other than those matters described in this proxy statement. However, if any other matter should properly come before the meeting, it is intended that holders of the proxies will act in accordance with their best judgment.

                                                                                      BY ORDER OF THE BOARD OF DIRECTORS

                                                                                      /s/Roger D. Eisenbarth
                                                                                      Roger D. Eisenbarth
                                                                                      Secretary

Nampa, Idaho
May 23, 2005

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APPENDIX A

HOME FEDERAL BANCORP, INC.

AUDIT COMMITTEE CHARTER

The objective of the Audit Committee is to assist the Board of Directors of Home Federal Bancorp, Inc. (the Company) in fulfilling its fiduciary and oversight responsibilities for the internal and external audit functions; administrative, operating and internal accounting controls; financial reporting process; and process for monitoring compliance with laws, regulations, policies and procedures. The Audit Committee shall give reasonable assurance regarding the quality and integrity of financial and other data provided by the Company.

Authority

The Audit Committee has authority to conduct or authorize investigations into any matters within its scope of responsibility. It is empowered to:

  *  Retain outside counsel, accountants, or others to advise the Committee or assist in the
                conduct of an  investigation.
  *  Seek any information it requires from employees - all of whom are directed to cooperate
                with the Committee's requests - or external parties.
     * Meet with company officers, external auditors, or outside counsel, as necessary.

 Members of the Audit Committee will be considered independent if they have no relationship to the Company or the Company's subsidiary, Home Federal Bank (the "Bank"), that may interfere with the exercise of their independent judgment. Examples of such relationships include, but are not limited to:
  *  Being employed by the Company or the Bank for the current year or any of the past five
                years.
  * Accepting any compensation from the Company or the Bank other than compensation
                for services as a  Board member.
  * Serving or having served in any of the past five years as a consultant, advisor, promoter,
                or legal counsel  of or to the Company or the Bank.
  * Being an immediate family member of an individual who is, or has been in any of the past
                five years, employed as an officer of the Company or the Bank.

Meetings

The Audit Committee shall meet at least four times per year, with authority to convene additional meetings as circumstances require. All Committee members are expected to attend each meeting, in person or via tele-conference. The Committee will invite members of the Board, management, auditors, or others to attend meetings and provide pertinent information, as necessary. As part of its job to foster open communication, the Committee should meet at least annually with management, the Director of Internal Audit, and the external auditors in separate executive sessions to discuss any matters that the Committee or any of these parties believes should be discussed privately. In addition, the Committee or at least its Chair should meet with the external auditors and management quarterly to review the Company's

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quarterly and annual financial statements. Meeting agendas will be prepared and provided in advance to members, along with appropriate briefing materials. Minutes will be prepared.

Responsibilities

The Audit Committee will carry out the following responsibilities:

  * Review significant accounting and reporting issues, including complex or unusual
                transactions and highly judgmental areas, and recent professional and regulatory
                pronouncements, and understand their impact on  the financial statements.
  * Review with management and the external auditors the results of the audit, including any
                difficulties encountered.
  * Review the Company's annual financial statements and any financial statements submitted
                to the public,   including any certification, report, opinion, or review rendered by the
                external  auditor.
  * Review with management and the external auditors all matters required to be communicated
                to the Committee  under generally accepted auditing standards
  * Understand how management develops interim financial information and the nature and
                extent of internal and external auditor involvement.
  * Review with financial management and the external auditors the financial statements,
                including disclosures made in Management's Discussion and Analysis of Financial
                Condition and Results of Operations, in the Company's reports on Forms 10-Q and 10-K
                and annual report to stockholders prior to the filing of the report or prior to the release of
                earnings. The Committee shall recommend to the Board whether or not the audited
                financial statements should be included in the Company's Form 10-K.
  * Review disclosures made by the Company's chief executive officer and chief financial
                officer regarding compliance with their certification obligations as required under the
                Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder, including the
                Company's  disclosure controls and procedures and internal control over financial reporting
                and  evaluations thereof.

Internal Control

         * Ensure that management has established and maintains an adequate system of internal
                controls and performs  risk assessments of each significant function.

  * Consider the effectiveness of the company's internal control over annual and interim
                financial reporting, including information technology security and control

  * Evaluate security for computer systems, facilities, and back-up systems.

  * Understand the scope of internal and external auditors' reviews of internal control over
                financial reporting, and obtain reports on significant findings and recommendations,
                together with management's responses.

Internal Audit

  * Review with management and the Director of Internal Audit the charter, Audit Policy, risk
                assessment, audit plan, audit schedule, activities, staffing, and organizational structure of
                the internal audit function at least annually.

  * Review Audit Reports submitted by the Director of Internal Audit at least quarterly,
                evaluate management's response to audit findings, and ascertain that appropriate
                implementation of significant recommendations is undertaken.

  * As necessary, meet separately with the Director of Internal Audit to discuss any matters
                that the Committee or internal audit believes should be discussed privately.

  * Ensure there are no unjustified restrictions or limitations, and review and concur in the
                appointment, replacement, or dismissal of the Director of Internal Audit, who is ultimately
                accountable to the Committee and the Board.

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       * Review the effectiveness of the internal audit function, including compliance with The
               Institute of Internal Auditors' Standards for the Professional Practice of Internal Auditing.

External Audit