SALEM, Ore. -- The Oregon Department of Consumer and Business Services late Friday ordered the closure of LibertyBank and appointed the Federal Deposit Insurance Corporation as receiver. Home Federal Bank of Idaho acquired LibertyBank deposits, assets, and a portion of its loans from the FDIC.

LibertyBank is headquartered in Eugene, and it has 15 branches in Eugene/Springfield, Central Oregon (four in Bend, one in Redmond, and Southern Oregon, and a loan office in Portland.

All deposit accounts of LibertyBank are being transferred to Home Federal Bank, and will be available immediately. All branches will reopen Monday as Home Federal Bank.

In the meantime, depositors of LibertyBank will see no disruption; they can continue to access their accounts through automated teller machine transactions, checks, and debit transactions. All loan customers should make their payments as usual.

In Friday evening's announcement, state regulators said "LibertyBank was significantly undercapitalized, primarily due to nonperforming residential construction loans."

"Without an infusion of capital, the bank was unable to recover given the prolonged downturn in real estate markets, particularly in Central and Southern Oregon, where it had lent to a number of developers. As those loans continued to deteriorate, the bank was no longer able to meet its financial obligations and became insolvent."

“This has been a sobering period in Oregon’s banking history,” said Cory Streisinger, director of the Department of Consumer and Business Services. “Any time a bank closes, it’s a real loss for the community, but we are pleased that Home Federal Bank is expanding its presence in Oregon by acquiring LibertyBank.”

LibertyBank began in 1979 as Central Oregon Savings & Loan Association in Bend. It moved to Eugene in 1987. As of March 31, LibertyBank had total assets of approximately $794 million and total deposits of $718 million.

Based in Nampa, Idaho, Home Federal Bank has $822 million in total assets and $522 million in total deposits. Home Federal Bank was founded in 1920 and has 16 branches in southwestern Idaho and eight branches in Central Oregon. Home Federal expanded into Oregon in August 2009 when it acquired Community First Bank of Prineville.

Because Home Federal Bank is acquiring all of LibertyBank’s deposits, there will not be any losses for former LibertyBank depositors, including those who have deposits exceeding the FDIC Deposit Insurance amount. The FDIC is retaining $300 million of LibertyBank’s loans, but Home Federal will service all loans. The acquisition will ensure a seamless transition for Liberty’s customers.

“LibertyBank management made many attempts to raise capital and worked hard to improve its financial condition,” said David Tatman, administrator of the department’s Division of Finance and Corporate Securities. “Closing LibertyBank was a difficult but necessary step to protect depositors.”

Declining real estate values and general economic weakness continue to pose problems for banks in Oregon and across the country.

There were 140 bank closures nationwide in 2009, including three in Oregon, and more than 100 banks have closed in 2010. LibertyBank is the third Oregon bank to close in 2010, and the second this month.

Each time a bank has closed in Oregon, another bank has taken over the deposits of the failed bank. No Oregon depositor has lost money as the result of a bank closure.

Oregon banks with a heavy concentration of real estate loans continue to struggle, as developers are unable to make payments. Several banks have raised capital to help them weather the economic downturn, which is a good sign and a vote of confidence in Oregon community banks, according to Streisinger.

“Although no other Oregon banks are in immediate danger of closing, we expect that some banks will continue to have challenges until the economy fully recovers,” Streisinger said.

The FDIC has established a website and a toll-free phone number to answer questions from depositors, creditors, and other interested parties regarding the receivership of LibertyBank. The website is http://www.fdic.gov/bank/individual/failed/libertyor.html, and the toll-free phone number is 1-800-523-8159.

The phone number will be operational Friday evening until 9 p.m., Pacific Daylight Time (PDT); on Saturday from 9 a.m. to 6 p.m., PDT; on Sunday from noon to 6 p.m., PDT; and thereafter from 8 a.m. to 8 p.m., PDT.

Deposits of all banks are now insured by the FDIC up to $250,000; this extended insurance coverage was made permanent by the federal financial reform bill signed recently by President Obama. Special rules are in place for accounts held in trust status, joint accounts, and non-interest bearing transaction accounts that may further expand deposit insurance coverage.

You can find additional information on FDIC deposit insurance and other protections for your financial accounts at .http://egov.oregon.gov/DCBS/safe_money.shtml.

The Department of Consumer and Business Services is Oregon’s largest business regulatory and consumer protection agency. The department’s Division of Finance and Corporate Securities regulates Oregon financial institutions. For more information on Oregon banks as well as frequently asked questions about Friday’s transaction, visit www.dfcs.oregon.gov.

In its own announcement, Home Federal said that based on preliminary financial information, the acquisition includes approximately $387 million of assets, including $94 million of cash and securities and $264 million of loans.

Deposits assumed in the acquisition total approximately $689 million, which includes all insured and uninsured deposits. Other real estate owned acquired in the transaction totaled approximately $21 million. The transaction also includes the purchase of other assets and liabilities.

The bank anticipates an additional cash settlement of approximately $300 million due to the assumption of net liabilities by Home Federal Bank. All balances above are subject to final closing and pro forma adjustments to the balance sheet accounts of LibertyBank as of July 30, 2010, and are subject to change.

Home Federal Bank acquired the assets of LibertyBank at a discount of $29.9 million and the deposit liabilities at a deposit premium of 1.0%.

The purchased loans, excluding consumer and deposit secured loans, and real estate owned are covered by a loss share agreement between the FDIC and Home Federal Bank. Under the loss share agreement, the FDIC has agreed to cover 80% of the losses on the disposition of the loans and real estate owned.

The bank also acquired the operations of Commercial Equipment Lease Corporation, a commercial leasing subsidiary of LibertyBank. The leases of the subsidiary are included as covered assets under the loss share agreement.

In addition to deepening its presence in Central Oregon, Home Federal Bank will now operate in Lane, Josephine, Jackson, and Multnomah counties in Oregon, including the communities of Eugene, Grants Pass and Medford. The bank will also have a branch and commercial loan production office in Portland.

Banking offices previously operated by LibertyBank will reopen as branches of Home Federal Bank on Monday, according to their prior normal operating hours. Home Federal Bank has an option to purchase all or some of the banking facilities and assume any leases within 90 days from July 30. The purchase of any of the branches is not included in the discount above.

"We are excited to welcome LibertyBank customers and employees to the Home Federal Bank family," said Len E. Williams, chief executive officer of Home Federal Bank. "We want to assure all of LibertyBank's customers that their deposits are safe and fully accessible using their existing account numbers, checks and debit and ATM cards. These accounts will be converted into Home Federal Bank deposit accounts in an orderly manner."

"Home Federal Bank prides itself in having a liquid balance sheet and a strong capital position. At June 30, 2010, the Bank's total risk-based capital ratio was 35%, which is over three times greater than the level of capital that banking regulators require for a financial institution to be well-capitalized. We offer a full range of personal and business banking products and services. We look forward to deepening relationships with all current LibertyBank customers and building new relationships with future customers of Home Federal Bank in Central and Western Oregon."

Commenting on the strategic impact of the acquisition, Williams continued, "This acquisition is consistent with our growth strategy. We have been prudent and selective in our acquisition pursuits by focusing on the intermountain region. While this will extend our markets west of the Cascade Mountains, we are excited about the opportunity to diversify our market concentration and serve new communities."

Home Federal Bancorp, Inc., is headquartered in Nampa, Idaho, and is the parent company of Home Federal Bank, a community bank originally organized in 1920. The ompany's common stock is traded on the NASDAQ Global Select Market under the symbol "HOME." The company's stock is also included in the Russell 2000 Index.

After giving effect to the acquisition, the bank now serves approximately $1.3 billion in deposits in the Boise-Nampa metropolitan statistical area in Southwestern Idaho and the Bend, Eugene-Springfield, Grants Pass, Medford and Portland MSAs in Central and Western Oregon through 37 banking offices. Assets will total approximately $1.5 billion after the acquisition, before purchase accounting adjustments.