HF Financial Corp. Reports Earnings of $0.15 per share in Second Fiscal Quarter Earnings Increase 44% From Prior Year Quarter

Core Deposit Growth and Strong Mortgage Production Highlight the Quarter

Declares Regular Quarterly Dividend of $0.1125 per Share

SIOUX FALLS, S.D., Jan. 28, 2013 /PRNewswire/ -- HF Financial Corp. (Nasdaq: HFFC) today reported its earnings increased 44% to $1.0 million, or $0.15 per diluted share for the second fiscal quarter ended December 31, 2012, compared to $715,000, or $0.10 per diluted share for the prior year's second fiscal quarter. Similar to the preceding quarter, improving asset quality produced low provisions for loan and lease losses, increased loan production and gains on the sale of mortgage loans along with a reduction in expenses helped to drive results for the quarter. HF Financial increased its deposits more than 4% since fiscal year end and foreclosed properties have declined 45%. Capital ratios continued to remain well above minimum regulatory requirements, and tangible book value per share was $13.42 at quarter end.

"Demand for residential mortgages remains robust. Mortgage originations continued at a record pace, with gains on loan sales contributing $1.4 million to our second quarter and $2.4 million to our first half revenues," said Stephen Bianchi, President and Chief Executive Officer. "Financial results for the first half of the fiscal year reflect our focus on delivering shareholder value through driving operational efficiencies and improving asset quality while building our brand in the communities we serve."

Fiscal Second Quarter Financial Highlights: (at or for the period ended December 31, 2012, compared to September 30, 2012, and December 31, 2011)

  • Earnings per diluted share ("EPS") for the fiscal second quarter increased 50% to $0.15 versus $0.10 in the second fiscal quarter a year ago.  For the first half of fiscal 2013, EPS increased 42% to $0.44 from $0.31.
  • The provision for loan loss was $128,000 for the second fiscal quarter versus a benefit of $300,000 the preceding quarter and a provision of $2.1 million one year earlier. Net loan charge-offs remained minimal. 
  • The allowance for loan losses was 1.59% of gross loans at December 31, 2012, versus 1.55% at September 30, 2012, and 1.45% a year ago.
  • Nonperforming assets ("NPAs") were $17.1 million, or 1.40% of total assets from $16.7 million, or 1.45%, of total assets at the end of the preceding quarter.  Of the $16.2 million of nonperforming loans included in NPAs, $14.9 million of these loans were current on their scheduled payments. Troubled debt restructuring balances declined to $10.2 million from $18.6 million in the second fiscal quarter a year ago and $12.4 million in the quarter ended September 30, 2012.
  • The net interest margin, expressed on a fully taxable equivalent basis ("NIM, TE"), was 2.68% versus 2.72% for the preceding quarter, and 3.16% a year ago. 
  • Strong mortgage lending activity led to gain on sale of loans of $1.4 million. The provision for impairment of mortgage servicing rights totaled $707,000 for the quarter and is included as a deduction within loan servicing income, net.
  • Capital levels at December 31, 2012 continued to remain well above the regulatory "well-capitalized" minimum levels of 10.00%, 6.00% and 5.00%, respectively:
    • Total risk-based capital to risk-weighted assets was 16.51% versus 16.32% at September 30, 2012.
    • Tier 1 capital to risk-weighted assets was 15.26% versus 15.07% at September 30, 2012.
    • Tier 1 capital to adjusted total assets was 9.54% versus 10.05% at September 30, 2012.
  • The most recent dividend of $0.1125 per share represents the nineteenth consecutive quarter at this level and provides a 3.36% current yield at recent market prices.
  • Tangible book value per share increased to $13.42 per share, compared to $13.03 per share at December 31, 2011.

Balance Sheet and Asset Quality Review

Total assets at December 31, 2012, increased to $1.22 billion from $1.15 billion at the end of the preceding quarter due primarily to increased cash and investment securities arising from an increase of deposit balances.  Meanwhile, due in part to seasonality, total loans decreased to $677.6 million from $695.6 million during the most recent quarter.  By design, the Bank's loan portfolio remains well-diversified as part of management's efforts to minimize risk.  Commercial real estate loans, the largest component of the loan portfolio, accounted for 43.0% of the total loans.  Agricultural loans remain an important lending focus accounting for 22.3% of the loan portfolio, followed by consumer loans at 14.7%, commercial business loans at 12.2% and residential loans at 7.8%.

"The high volume of refinancing and purchase activity is contributing both gains from sale of loans in the short-term and future servicing income for the long-term," added Bianchi.  "Most of the residential mortgages we originate are sold in the secondary market, but we continue to service the loans for our customers providing long-term revenue opportunity.  With interest rates at historical lows, the expected life of our servicing portfolio is lengthening.   Also, the large volume of mortgage originations over the past year reflects our belief that borrowers are increasingly looking to Home Federal for their mortgage needs."

Total deposits were $933.1 million at December 31, 2012, versus $861.6 million at September 30, 2012. Deposit balances increased in the second fiscal quarter from the preceding quarter, due primarily to a $54.0 million increase from in-market deposits, exclusive of seasonal public fund deposits, which also increased by $18.0 million from the preceding quarter. 

Nonperforming assets, which include nonaccruing loans that have been restructured, increased minimally to $17.1 million at December 31, 2012, from $16.7 million the preceding quarter and decreased from $27.7 million a year ago.  Total NPAs decreased to 1.40% of total assets at the end of the quarter, compared to 2.26% one year earlier.  Borrowers who are in financial difficulty and who have been granted concessions that include term extensions or payment alterations are categorized as troubled debt restructured (TDR). Over 95% of the balances of the TDRs at December 31, 2012 are in-compliance with their restructured terms and payment structures. TDRs totaled $10.2 million at the end of December, compared to $12.4 million at the end of September and $18.6 million a year ago. 

Charge-off activity has slowed considerably over the past year, while recoveries have increased.  This improvement reflects stabilization in market values of collateral and the results of a restructuring of the lending department put in place over the past two years. "Though we may charge-off portions of loan principal, we will continue to seek recovery of our investment," said Bianchi. Charge-offs in the quarter totaled $627,000 while recoveries totaled $470,000.

The allowance for loan and lease losses at December 31, 2012, totaled $10.8 million, representing 1.59% of total loans outstanding. Relative to the preceding quarter, reserves decreased $29,000 while the ratio of reserves to total loans increased slightly due to the decrease in total loans.

Tangible common shareholders' equity decreased to 7.79% of tangible assets at December 31, 2012 compared to 8.23% at September 30, 2012, but remains higher than the amount reported in the second fiscal quarter of the prior year of 7.43%.  Tangible book value per common share was $13.42 at December 31, 2012, up from $13.03 per share a year ago. 

Capital ratios continued to remain strong and the Bank remained well-capitalized with Tier 1 capital to risk-weighted assets of 15.26% at December 31, 2012, while its Tier 1 capital to adjusted total assets was 9.54%.  These regulatory ratios were significantly higher than the required minimum levels of 6.00% and 5.00%, respectively.

Review of Operations

For the quarter ended December 31, 2012, HF Financial's earnings reflected continued control of overhead expenses and strong gains on the sale of loans from mortgage financing activities.  "At quarter end, we were servicing nearly $1.2 billion in mortgage loans sold into the secondary market.  The loan sales are offsetting pressure we are seeing on our net interest margin," said Brent Olthoff, Chief Financial Officer and Treasurer.  "The current low interest rate environment combined with lower volume of loans originated for our portfolio has resulted in thinner margins relative to earlier periods.  We are focused on adding quality loans to our portfolio while working hard to contain overhead expenses."

Net interest income totaled $7.2 million for the second fiscal quarter of 2013 compared to $7.3 million for the previous fiscal quarter, and $8.7 million in the year ago quarter.  The NIM, TE was 2.68% for the second quarter compared to 2.72% the previous quarter.

Gains on the sale of loans contributed to a stronger level of noninterest income. Continued high levels of mortgage activity produced $1.4 million in gains during the second fiscal quarter compared to $1.0 million the preceding quarter. Fees on deposits totaled $1.5 million for the quarter ended December 31, 2012 versus $2.1 million the previous quarter and $1.5 million one year earlier.  Deposit fees boosted first fiscal quarter income by approximately $600,000 from a nonrecurring vendor incentive related to debit cards. The provision for impairment of mortgage servicing rights totaled $707,000 for the quarter, which is an increase of $444,000 from the prior quarter. Total noninterest income was $3.1 million for the quarter ended December 31, 2012 compared to $4.1 million the previous quarter and $3.4 million one year earlier.

Noninterest expenses decreased to $8.5 million in the second fiscal quarter from $8.8 million in the preceding quarter, reflecting the streamlining of the branch footprint completed in the prior fiscal year. In the fiscal second quarter a year ago, noninterest expenses totaled $9.0 million. Total compensation and employee benefit expenses totaled $4.8 million for the quarter ended December 31, 2012, which is a $147,000 decrease from the preceding quarter. One year earlier, the second quarter's compensation and employee benefit expenses totaled $4.9 million. Professional fees for the second fiscal quarter decreased by $532,000 from the same quarter of the prior year due to costs related to governance issues incurred in fiscal 2012. Primarily due to the consolidation of six branches to other nearby branches during the past five quarters, occupancy and equipment expense decreased $67,000 from the second quarter a year ago to $1.0 million in the second quarter of fiscal 2013. Generally, total noninterest expenses reflect lower compensation, occupancy and professional fees relative to the same time period one year ago. 

These financial results are preliminary until the Form 10-Q is filed in February 2013.

Quarterly Dividend Declared

The board of directors declared a regular quarterly cash dividend of $0.1125 per common share for the second fiscal quarter 2013. The dividend is payable February 15, 2013 to stockholders of record February 8, 2013.

Use of Non-GAAP Financial Measures

This press release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). "Net Interest Margin, TE" is a non-GAAP financial measure. Information regarding the usefulness of Net Interest Margin, TE appears in the notes to the attached financial statements.  The Company believes that the presentation of non-GAAP financial measures will permit investors to assess the Company's core operating results on the same basis as management. Non-GAAP financial measures should be considered supplemental to, not a substitute for or superior to, financial measures calculated in accordance with GAAP. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titled measures reported by other companies. Reconciliation of the non-GAAP measures to the most comparable GAAP measures are set forth in the notes to the attached financial statements.

About HF Financial Corp.

HF Financial Corp., based in Sioux Falls, SD, is the parent company for financial services companies, including Home Federal Bank, Mid America Capital Services, Inc., dba Mid America Leasing Company, Hometown Investment Services, Inc. and HF Financial Group, Inc.  As the largest publicly traded savings association headquartered in South Dakota, HF Financial Corp. operates with 28 offices in 19 communities, throughout Eastern South Dakota and one location in Marshall, Minnesota.  The Company operates a branch in the Twin Cities market as Infinia Bank, a Division of Home Federal Bank of South Dakota.  Internet banking is also available at www.homefederal.com and www.infiniabank.com.

This news release and other reports issued by the Company, including reports filed with the Securities and Exchange Commission, contain "forward-looking statements" that deal with future results, expectations, plans and performance.  In addition, the Company's management may make forward-looking statements orally to the media, securities analysts, investors or others.  These forward-looking statements might include one or more of the following:

  • Projections of income, loss, revenues, earnings or losses per share, dividends, capital expenditures, capital structure, adequacy of loan loss reserves, tax benefit or other financial items.
  • Descriptions of plans or objectives of management for future operations, products or services, transactions, investments and use of subordinated debentures payable to trusts.
  • Forecasts of future economic performance.
  • Use and descriptions of assumptions and estimates underlying or relating to such matters.

Forward-looking statements can be identified by the fact they do not relate strictly to historical or current facts.  They often include words such as "optimism," "look-forward," "bright," "pleased," "believe," "expect," "anticipate," "intend," "plan," "estimate" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may".

Forward-looking statements about the Company's expected financial results and other plans are subject to certain risks, uncertainties and assumptions.  These include, but are not limited to the following: possible legislative changes and adverse economic, business and competitive conditions and developments (such as shrinking interest margins and continued short-term environments); deposit outflows, reduced demand for financial services and loan products; changes in accounting policies or guidelines, or in monetary and fiscal policies of the federal government; changes in credit and other risks posed by the Company's loan and lease portfolios; the ability or inability of the Company to manage interest rate and other risks; unexpected or continuing claims against the Company's self-insured health plan; the ability or inability of the Company to successfully enter into a definitive agreement for and close anticipated transactions; technological, computer-related or operational difficulties; adverse changes in securities markets; results of litigation; and the other risks detailed from time to time in the Company's SEC filings, including but not limited to, its annual report on Form 10-K for the fiscal year ending June 30, 2012, and its subsequent quarterly reports on Form 10-Q.

Forward-looking statements speak only as of the date they are made.  The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.  Although the Company believes its expectations are reasonable, it can give no assurance that such expectations will prove to be correct.  Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in any forward-looking statements.

 

HF Financial Corp.

Selected Consolidated Operating Highlight

(Dollars in Thousands, except share data)

(Unaudited)










Three Months Ended


Six Months Ended

December 31,



December 31,


September 30,


December 31,




2012


2012


2011


2012


2011












Interest, dividend and loan fee income:











     Loans and leases receivable


$  8,804


$  9,006


$  11,114


$ 17,810


$ 22,680

     Investment securities and interest-earning deposits


1,028


1,237


1,104


2,265


2,407



9,832


10,243


12,218


20,075


25,087

Interest expense:











     Deposits


1,199


1,406


1,871


2,605


4,028

    Advances from Federal Home Loan Bank and other borrowings


1,463


1,489


1,602


2,952


3,216



2,662


2,895


3,473


5,557


7,244

                 Net interest income


7,170


7,348


8,745


14,518


17,843












Provision for losses on loans and leases


128


(300)


2,120


(172)


2,642












             Net interest income after provision for losses on loans and leases


7,042


7,648


6,625


14,690


15,201












Noninterest income:











     Fees on deposits


1,464


2,096


1,539


3,560


3,168

     Loan servicing income, net


(450)


(40)


394


(490)


865

     Gain on sale of loans


1,411


1,022


837


2,433


1,213

     Earnings on cash value of life insurance


206


205


173


411


344

     Trust income


190


194


188


384


354

     Commission and insurance income


125


194


181


319


333

     Gain on sale of securities, net


-


1,822


34


1,822


335

     Other


106


(1,367)


86


(1,261)


185



3,052


4,126


3,432


7,178


6,797












Noninterest expense:











     Compensation and employee benefits


4,784


4,931


4,904


9,715


10,622

     Occupancy and equipment


1,002


1,069


1,069


2,071


2,193

     FDIC insurance


201


210


263


411


535

     Check and data processing expense


762


817


726


1,579


1,441

     Professional fees


536


643


1,015


1,179


1,904

     Marketing and community investment


304


368


370


672


764

     Foreclosed real estate and other properties, net


206


103


42


309


85

     Other


661


680


654


1,341


1,288



8,456


8,821


9,043


17,277


18,832












                Income before income taxes


1,638


2,953


1,014


4,591


3,166

Income tax expense


605


876


299


1,481


1,010












                Net income


$  1,033


$  2,077


$  715


$   3,110


$  2,156












     Basic earnings per common share:


$  0.15


$   0.29


$  0.10


$  0.44


$  0.31

     Diluted earnings per common share:


$   0.15


$  0.29


$  0.10


$  0.44


$  0.31

     Basic weighted average shares:


7,055,591


7,051,169


6,972,762


7,053,380


6,973,414

     Diluted weighted average shares:


7,057,261


7,052,994


6,972,762


7,055,133


6,973,414

     Outstanding shares (end of period):


7,054,875


7,056,283


6,972,709


7,054,875


6,972,709

Number of full-service offices


28


28


33



























 

HF Financial Corp.

Consolidated Statements of Financial Condition

(Dollars in Thousands, except share data)










December 31, 2012


June 30, 2012




(Unaudited)


(Audited)

ASSETS





Cash and cash equivalents


$   104,958


$   50,334

Securities available for sale


354,512


373,246

Correspondent Bank Stock


7,354


7,843

Loans held for sale 


18,139


16,207







Loans and leases receivable


677,593


683,704

Allowance for loan and lease losses


(10,780)


(10,566)


Net loans and leases receivable


666,813


673,138







Accrued interest receivable 


5,548


5,431

Office properties and equipment, net of accumulated depreciation


14,542


14,760

Foreclosed real estate and other properties


890


1,627

Cash value of life insurance


19,626


19,276

Servicing rights, net


10,791


11,932

Goodwill, net


4,366


4,366

Other assets


12,884


14,431


Total assets


$   1,220,423


$  1,192,591







LIABILITIES AND STOCKHOLDERS' EQUITY











Liabilities





  Deposits 


$   933,091


$  893,859

  Advances from Federal Home Loan Bank and other borrowings


131,416


142,394

  Subordinated debentures payable to trusts


27,837


27,837

  Advances by borrowers for taxes and insurance


14,935


12,708

  Accrued expenses and other liabilities


14,094


18,977


Total liabilities


1,121,373


1,095,775







Stockholders' Equity





Preferred stock, $.01 par value, 500,000 shares authorized,






none outstanding


- - - -


- - - -


Series A Junior Participating Preferred Stock, $1.00 stated value, 50,000 shares authorized, none outstanding


- - - -


- - - -


Common stock, $.01 par value, 10,000,000 shares authorized, 9,138,330 and 9,125,751 shares issued at December 31, 2012 and June 30, 2012, respectively


91


91

Additional paid-in capital


45,961


45,673

Retained earnings, substantially restricted


85,093


83,571


Accumulated other comprehensive (loss), net of related deferred tax effect


(1,198)


(1,622)


Less cost of treasury stock, 2,083,455 shares at December 31, 2012 and June 30, 2012


(30,897)


(30,897)


     Total stockholders' equity


99,050


96,816


          Total liabilities and stockholders' equity


$  1,220,423


$  1,192,591

 

HF Financial Corp.


Selected Consolidated Financial Condition Data


(Dollars in Thousands)


(Unaudited)




















Allowance for Loan and Lease Loss Activity

Three Months Ended


Six Months Ended



12/31/2012


12/31/2011


12/31/2012


12/31/2011











Balance, beginning

$  10,809


$  11,031


$  10,566


$  14,315


    Provision charged to income

128


2,120


(172)


2,642


    Charge-offs

(627)


(2,242)


(1,030)


(6,130)


    Recoveries

470


112


1,416


194


Balance, ending

$   10,780


$  11,021


$  10,780


$  11,021






































Asset Quality



12/31/2012


9/30/2012


12/31/2011











Nonaccruing loans and leases



$  15,980


$  14,914


$  24,156


Accruing loans and leases delinquent more than 90 days


209


717


2,160


Foreclosed assets



890


1,055


1,394


  Total nonperforming assets



$  17,079


$  16,686


$  27,710











General allowance for loan and lease losses



$   8,064


$  8,667


$  8,278


Specific impaired loan valuation allowance



2,716


2,142


2,743


  Total allowance for loans and lease losses



$  10,780


$  10,809


$  11,021











Ratio of nonperforming assets to total assets at end of period (1)


1.40

%

1.45

%

2.26

%

Ratio of nonperforming loans and leases to total loans and leases at end of period (2)


2.39

%

2.25

%

3.47

%

Ratio of net charge offs to average loans and leases for the year-to-date period (3)


(0.11)

%

(0.31)

%

1.45

%

Ratio of allowance for loan and lease losses to total loans and leases at end of period


1.59

%

1.55

%

1.45

%

Ratio of allowance for loan and lease losses to nonperforming loans and leases at end of period (2)


66.59

%

69.15

%

41.88

%





















(1) Nonperforming assets include nonaccruing loans and leases, accruing loans and leases delinquent more than 90 days and foreclosed assets.

(2) Nonperforming loans and leases include both nonaccruing and accruing loans and leases delinquent more than 90 days.

(3) Percentages for the six months ended December 31, 2012 and 2011, and the three months ended September 30, 2012 have been annualized.



Troubled Debt Restructuring Summary


12/31/2012


9/30/2012


12/31/2011










Nonaccruing troubled debt restructurings-non-compliant (1) (2)

$ 223


$ 95


$ 4,771


Nonaccruing troubled debt restructurings-compliant (1) (2)

8,643


11,134


11,221


Accruing troubled debt restructurings (3)

1,300


1,195


2,623


Total troubled debt restructurings

$ 10,166


$ 12,424


$ 18,615




(1) Non-compliant and compliant refer to the terms of the restructuring agreement.

(2) Balances are included in nonaccruing loans as part of nonperforming loans.

(3) None of the loans included are 90 days past due and are not included in the nonperforming loans.

 


HF Financial Corp.

Selected Capital Composition Highlights

(Unaudited)









12/31/2012


9/30/2012


6/30/2012










Common stockholder's equity before OCI (1) to consolidated assets


8.25

%

8.69

%

8.29

%

  OCI components to consolidated assets:








       Net changes in unrealized gain (loss) on securities available for sale


0.16


0.21


0.22


     Net unrealized losses on defined benefit plan


(0.11)


(0.12)


(0.11)


     Net unrealized losses on derivatives and hedging activities


(0.15)


(0.17)


(0.25)


  Goodwill to consolidated assets


(0.36)


(0.38)


(0.37)


Tangible common equity to tangible assets


7.79

%

8.23

%

7.78

%

















Tangible book value per common share (2)


$  13.42


$  13.40


$  13.13










Tier I capital (to adjusted total assets) (3)


9.54

%

10.05

%

9.66

%

Tier I capital (to risk weighted assets) (3)


15.26


15.07


14.62


Total risk-based capital (to risk-weighted assets) (3)


16.51


16.32


15.87





(1) Accumulated other comprehensive income (loss).







(2) Common equity reduced by goodwill and divided by number of shares of outstanding common stock.

(3) Capital ratios for Home Federal Bank.

 



HF Financial Corp


Selected Consolidated Financial Condition Data


(Dollars in Thousands)


(Unaudited)









Loan and Lease Portfolio Composition







December 31, 2012


June 30, 2012




Amount


Percent


Amount


Percent











Residential:










One-to four-family


$  50,059


7.4%


$  52,626


7.7%


Construction


2,588


0.4


2,808


0.4

Commercial:










Commercial business (1)


80,134


11.8


79,069


11.6


Equipment finance leases


2,457


0.3


3,297


0.5

Commercial real estate:










Commercial real estate


235,082


34.7


225,341


33.0


Multi-family real estate


42,641


6.3


47,121


6.9


Construction


13,365


2.0


12,172


1.8

Agricultural:










Agricultural real estate


69,024


10.2


70,796


10.4


Agricultural business


82,447


12.2


84,314


12.3

Consumer:










Consumer direct


21,328


3.1


21,345


3.1


Consumer home equity


75,234


11.1


81,545


11.9


Consumer overdraft & reserve


3,152


0.5


3,038


0.4


Consumer indirect


82


--


232


--












     Total (2)


$  677,593


100.0%


$  683,704


100.0%











(1) Includes $2,024 and $2,262 tax exempt leases at December 31, 2012 and June 30, 2012, respectively

(2) Exclusive of undisbursed portion of loans in process and net of deferred loan fees and discounts









Deposit Composition







December 31, 2012


June 30, 2012




Amount


Percent


Amount


Percent











Noninterest bearing checking accounts


$ 150,461


16.1%


$ 146,963


16.4%

Interest bearing checking accounts


155,574


16.7


138,075


15.5

Money market accounts


240,244


25.7


210,298


23.5

Savings accounts


114,049


12.2


121,092


13.6

In-market certificates of deposit


261,004


28.0


265,009


29.6

Out-of-market certificates of deposit


11,759


1.3


12,422


1.4

Total deposits


$ 933,091


100.0%


$ 893,859


100.0%

 

HF Financial Corp.

Selected Consolidated Financial Condition Data

(Dollars in Thousands)

(Unaudited)









Average Balances, Interest Yields and Rates









Three Months Ended


December 31, 2012


September 30, 2012


 Average

Outstanding

Balance


 Yield/Rate 


 

Average

Outstanding

Balance


 Yield/Rate 

Interest-earning assets:








     Loans and leases receivable (1) (3)

$  699,105


5.00%


$  703,470


5.08%

     Investment securities (2) (3)

379,790


1.07


379,698


1.29

Total interest-earning assets

1,078,895


3.62%


1,083,168


3.75%

     Noninterest-earning assets 

81,910




83,133



Total assets 

$  1,160,805




$  1,166,301











Interest-bearing liabilities:








Deposits:








     Checking and money market 

$  357,509


0.28%


$  336,643


0.47%

     Savings 

110,363


0.26


112,365


0.26

     Certificates of deposit 

273,635


1.27


278,278


1.33

          Total interest-bearing deposits

741,507


0.64


727,286


0.77

FHLB advances and other borrowings 

131,414


3.13


147,241


2.86

Subordinated debentures payable to trusts

27,837


6.06


27,837


6.10

Total interest-bearing liabilities

900,758


1.17%


902,364


1.27%

     Noninterest-bearing deposits 

132,231




131,901



     Other liabilities 

28,897




34,163



Total liabilities 

1,061,886




1,068,428



     Equity 

98,919




97,873



Total liabilities and equity 

$  1,160,805




$  1,166,301











Net interest spread (4)



2.45%




2.48%

Net interest margin (4) (5)



2.64%




2.69%

Net interest margin, TE (6) 



2.68%




2.72%

Return on average assets (7)



0.35%




0.71%

Return on average equity (8)



4.14%




8.42%



















(1)

Includes loan fees and interest on accruing loans and leases past due 90 days or more.

(2)

Includes federal funds sold and Federal Home Loan Bank stock.

(3)

Yields do not reflect the tax exempt nature of loans, equipment leases and municipal securities.

(4)

Percentages for the three months ended December 31, 2012 and September 30, 2012 have been annualized.

(5)

Net interest income divided by average interest-earning assets.

(6)

Net interest margin expressed on a fully taxable equivalent basis ("Net Interest Margin, TE") is a non-GAAP financial measure. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income and certain other permanent income tax differences. We believe that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis, and accordingly believe the presentation of this non-GAAP financial measure may be useful for peer comparison purposes. As a non-GAAP financial measure, Net Interest Margin, TE should be considered supplemental to and not a substitute for or superior to, financial measures calculated in accordance with GAAP. As other companies may use different calculations for Net Interest Margin, TE, this presentation may not be comparable to similarly titled measures reported by other companies.

(7)

Ratio of net income to average total assets.

(8)

Ratio of net income to average equity.



 


HF Financial Corp.

Selected Consolidated Financial Condition Data

(Dollars in Thousands)

(Unaudited)









Average Balances, Interest Yields and Rates









Six Months Ended


December 31, 2012


December 31, 2011


Average

Outstanding

Balance


 Yield/Rate 


Average

Outstanding

Balance 


 Yield/Rate 

Interest-earning assets:








     Loans and leases receivable (1) (3)

$  701,287


5.04%


$  816,584


5.52%

     Investment securities (2) (3)

379,809


1.18


300,022


1.60

Total interest-earning assets

1,081,096


3.68%


1,116,606


4.47%

     Noninterest-earning assets 

81,119




82,615



Total assets 

$  1,162,215




$  1,199,221











Interest-bearing liabilities:








Deposits:








     Checking and money market 

$  346,982


0.37%


$  318,450


0.66%

     Savings 

111,366


0.26


121,669


0.26

     Certificates of deposit 

275,963


1.30


336,401


1.66

          Total interest-bearing deposits

734,311


0.70


776,520


1.03

FHLB advances and other borrowings 

139,328


2.99


148,175


3.06

Subordinated debentures payable to trusts

27,837


6.08


27,837


6.68

Total interest-bearing liabilities

901,476


1.22%


952,532


1.51%

     Noninterest-bearing deposits 

132,053




120,364



     Other liabilities 

30,370




31,662



Total liabilities 

1,063,899




1,104,558



     Equity 

98,316




94,663



Total liabilities and equity 

$  1,162,215




$  1,199,221











Net interest spread (4)



2.46%




2.96%

Net interest margin (4) (5)



2.66%




3.18%

Net interest margin, TE (6) 



2.70%




3.21%

Return on average assets (7)



0.53%




0.36%

Return on average equity (8)



6.27%




4.53%























(1)

Includes loan fees and interest on accruing loans and leases past due 90 days or more.

(2)

Includes federal funds sold and Federal Home Loan Bank stock.

(3)

Yields do not reflect the tax exempt nature of loans, equipment leases and municipal securities.

(4)

Percentages for the six months ended December 31, 2012 and December 31, 2011 have been annualized.

(5)

Net interest income divided by average interest-earning assets.

(6)

Net interest margin expressed on a fully taxable equivalent basis ("Net Interest Margin, TE") is a non-GAAP

financial measure. The tax-equivalent adjustment to net interest income recognizes the income tax savings

when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income and certain other permanent income tax differences. We believe that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis, and accordingly believe the presentation of this non-GAAP financial measure may be useful for peer comparison purposes. As a non-GAAP financial measure, Net Interest Margin, TE should be considered supplemental to and not a substitute for or superior to, financial measures calculated in accordance with GAAP. As other companies may use different calculations for Net Interest Margin, TE, this presentation may not be comparable to similarly titled measures reported by other companies.

(7)

Ratio of net income to average total assets.

(8)

Ratio of net income to average equity.



 


HF Financial Corp.

Age Analysis of Past Due Loans and Leases Receivables

(Dollars in Thousands)

(Unaudited)




















December 31, 2012

Accruing and Nonaccruing Loans


Nonperforming Loans






















30-59 Days

Past Due


60-89 Days

Past Due


Greater Than

89 Days


Total

Past Due


Current


Recorded

Investment

> 90 Days

and Accruing (1)


Nonaccrual

Balance


Total

Residential:


















One-to four-family


$  24


$  152


$  291


$  467


$  49,592


$  201


$  242


$  443


Construction


- - - -


- - - -


- - - -


- - - -


2,588


- - - -


- - - -


- - - -

Commercial:


















Commercial business


- - - -


- - - -


80


80


80,054


- - - -


4,482


4,482


Equipment finance leases

- - - -


- - - -


8


8


2,449


8


- - - -


8

Commercial real estate:


















Commercial real estate


539


173


- - - -


712


234,370


- - - -


1,221


1,221


Multi-family real estate


- - - -


- - - -


27


27


42,614


- - - -


27


27


Construction


- - - -


- - - -


- - - -


- - - -


13,365


- - - -


- - - -


- - - -

Agricultural:


















Agricultural real estate


40


- - - -


- - - -


40


68,984


- - - -


8,481


8,481


Agricultural business


330


- - - -


119


449


81,998


- - - -


670


670

Consumer:


















Consumer direct


33


3


- - - -


36


21,292


- - - -


15


15


Consumer home equity

250


220


- - - -


470


74,764


- - - -


842


842


Consumer OD & reserve

2


- - - -


- - - -


2


3,150


- - - -


- - - -


- - - -


Consumer indirect


5


- - - -


- - - -


5


77


- - - -


- - - -


- - - -


Total


$  1,223


$   548


$   525


$  2,296


$  675,297


$   209


$  15,980


$  16,189




















September 30, 2012

Accruing and Nonaccruing Loans


Nonperforming Loans






















30-59 Days

Past Due


60-89 Days

Past Due


Greater Than

89 Days


Total

Past Due


Current


Recorded

Investment

> 90 Days

and

Accruing (1)


Nonaccrual

Balance


Total

Residential:


















One-to four-family


$  36


$  - - - -


$  195


$  231


$  56,716


$  164


$          31


$        195


Construction


- - - -


- - - -


- - - -


- - - -


3,944


- - - -


- - - -


- - - -

Commercial:


















Commercial business


35


8


1,262


1,305


78,186


553


1,383


1,936


Equipment finance leases

41


- - - -


- - - -


41


2,800


- - - -


- - - -


- - - -

Commercial real estate:


















Commercial real estate


115


- - - -


246


361


234,954


- - - -


1,065


1,065


Multi-family real estate


- - - -


- - - -


32


32


47,201


- - - -


32


32


Construction


- - - -


- - - -


- - - -


- - - -


13,389


- - - -


- - - -


- - - -

Agricultural:


















Agricultural real estate


94


- - - -


45


139


64,044


- - - -


10,745


10,745


Agricultural business


16


- - - -


31


47


87,388


- - - -


1,102


1,102

Consumer:


















Consumer direct


46


14


- - - -


60


21,461


- - - -


13


13


Consumer home equity

475


24


375


874


79,120


- - - -


539


539


Consumer OD & reserve

6


- - - -


- - - -


6


3,127


- - - -


- - - -


- - - -


Consumer indirect


2


- - - -


4


6


131


- - - -


4


4


Total


$  866


$  46


$  2,190


$  3,102


$  692,461


$  717


$   14,914


$   15,631



(1) Loans accruing and delinquent greater than 90 days have either government guarantees or acceptable loan-to-value ratios

 

HF Financial Corp.

Non-GAAP Disclosure Reconciliation

Net Interest Margin to Net Interest Margin-Tax Equivalent Yield

(Dollars in Thousands)

(Unaudited)












Three Months Ended


Six Months Ended

December 31,


December 31,


September 30,


December 31,



2012


2012


2011


2012


2011











Net interest income

$ 7,170


$ 7,348


$ 8,745


$ 14,518


$ 17,843

Taxable equivalent adjustment

109


85


97


194


202

Adjusted net interest income

7,279


7,433


8,842


14,712


18,045

Average interest-earning assets

1,078,895


1,083,168


1,112,061


1,081,096


1,116,606

Net interest margin, TE

2.68%


2.72%


3.16%


2.70%


3.21%

 

SOURCE HF Financial Corp.



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