HF Financial Corp. Third Fiscal Quarter Earnings Increase 16% Over Prior Year

Strong Mortgage Originations and Expense Controls Contribute to Increased Profitability
Declares Regular Quarterly Dividend of $0.1125 per Share

PR Newswire

SIOUX FALLS, S.D., April 29, 2013 /PRNewswire/ -- HF Financial Corp. (HFFC) today reported earnings increased 16% to $1.4 million, or $0.20 per diluted share for the third fiscal quarter ended March 31, 2013, compared to $1.2 million, or $0.17 per diluted share for the third fiscal quarter one year ago, and relative to a 36% increase from $1.0 million, or $0.15 per diluted share for the preceding fiscal quarter. For the first nine months of fiscal 2013, earnings grew 34% to $4.5 million, or $0.64 per share compared to $3.4 million, or $0.48 per share one year earlier. Robust mortgage originations contributed to higher revenues and strong reserve levels reduced the need for loan loss provisions in the quarter.  Classified assets continued to decline and capital levels continued to increase. Tangible book value per share was $13.47 at quarter end.   

"Our local non-farm economy remains strong and the recent spring precipitation is improving drought conditions for agriculture throughout our South Dakota markets," said Stephen Bianchi, President and Chief Executive Officer. "New loan customers are beginning to come to Home Federal as we have expanded our agricultural and business lending teams throughout our footprint to support our communities and the opportunities that exist. Also, the integration of workflow efficiencies and efforts to strengthen our brand are gaining traction."

Fiscal Third Quarter Financial Highlights: (at or for the periods ended March 31, 2013, compared to December 31, 2012, and March 31, 2012.)

  • Earnings per diluted share for the fiscal third quarter increased 33% to $0.20 versus $0.15 in the second fiscal quarter.  Relative to one year earlier, earnings per share improved 18%. 
  • Mortgage banking related revenue totaled $1.6 million ($1.2 million in gains on sale and $406,000 for loan servicing income) for the third quarter ended March 31, 2013 versus $961,000 the previous quarter and $679,000 one year earlier. 
  • No loan loss provisions were booked during the third fiscal quarter while loan reserves remained at similar levels relative to total loans.  Loan loss reserves totaled 1.56% at March 31, 2013 compared to 1.59% at December 31, 2012 and 1.48% at March 31, 2012.
  • Classified assets totaled $39.7 million at March 31, 2013 compared to $43.4 million at December 31, 2012 and $48.8 million one year earlier.  Following the deterioration from one performing but classified loan into nonaccrual status, nonperforming assets ("NPAs") increased to $23.6 million, or 1.97%, of total assets compared to $17.1 million at December 31, 2012, or 1.40%, of total assets at the end of the preceding quarter.  Troubled debt restructurings totaled $10.1 million at March 31, 2013 versus $10.2 million at the end of the previous quarter and $16.5 million one year earlier.
  • The net interest margin, expressed on a fully taxable equivalent basis ("NIM, TE"), was stable at 2.64% versus 2.68% for the preceding quarter. 
  • Capital levels at March 31, 2013 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 16.42% versus 16.51% at December 31, 2012.
    • Tier 1 capital to risk-weighted assets was 15.18% versus 15.26% at December 31, 2012.
    • Tier 1 capital to adjusted total assets was 9.80% versus 9.54% at December 31, 2012.
  • The most recent dividend of $0.1125 per share represents the twentieth consecutive quarter at this level and provides a 3.26% current yield at recent market prices.
  • Tangible book value per share increased to $13.47 per share, compared to $13.10 per share at March 31, 2012.

Balance Sheet and Asset Quality Review

Total assets at March 31, 2013, decreased slightly to $1.20 billion from $1.22 billion at the end of the preceding quarter due primarily to decreased cash levels.  Total loans increased to $682.6 million from $677.6 million during the most recent quarter.  The Bank's loan portfolio remains well-diversified with commercial real estate loans accounting for 43.5% of the portfolio followed by agricultural loans totaling 24.6% of the portfolio.  Consumer loans totaled 13.9%, commercial business totaled 10.4% and residential loans totaled 7.6%. 

"New mortgage originations and refinancings continue to dominate our lending activities. Meanwhile, our team is working diligently to develop new relationships for commercial and agricultural lending," added Bianchi. 

Total deposits were $897.2 million at March 31, 2013, versus $933.1 million at December 31, 2012 and $892.8 one year earlier. Deposit balances decreased in the third fiscal quarter from the preceding quarter, due primarily to a decrease from typical seasonal public fund deposits. 

Nonperforming assets, which include performing loans that have been restructured and are current, increased to $23.6 million at March 31, 2013 from $17.1 million the preceding quarter and decreased from $24.5 million a year ago.  At March 31, 2013, NPAs represented 1.97% of total assets.  The increase in nonperforming assets primarily related to some continued difficulty in the dairy sector, specifically related to one borrower relationship.  Despite the increase in nonperforming assets, the Bank has less classified assets at March 31, 2013 compared to the preceding quarter and one year earlier.  Classified assets totaled $39.7 million at March 31, 2013 compared to $43.4 million at December 31, 2012 and $48.8 million at March 31, 2012.

Charge-off activity continues to slow.  For the third fiscal quarter, loan charge-offs totaled $189,000 compared to $1.3 million one year earlier.  For the nine months ended March 31, 2013, charge-offs totaled $1.2 million versus $7.4 million for the nine months ended March 31, 2012. 

The allowance for loan and lease losses at March 31, 2013, totaled $10.7 million, representing 1.56% of total loans outstanding.  These levels are similar to the preceding quarter period at $10.8 million and 1.59% of total loans. 

Tangible common shareholders' equity increased to 7.97% of tangible assets at March 31, 2013 compared to 7.79% at December 31, 2012.  Tangible book value per common share was $13.47 at March 31, 2013 up from $13.13 per share at the end of fiscal 2012.

Capital ratios continued to remain well above regulatory requirements for a well capitalized institution with Tier 1 capital to risk-weighted assets of 15.18% at March 31, 2013, while its Tier 1 capital to adjusted total assets was 9.80%.  These regulatory ratios were much higher than the well capitalized required minimum levels of 6.00% and 5.00%, respectively.

Review of Operations

For the quarter ended March 31, 2013, HF Financial's earnings reflect continued strong gains on the sale of mortgage loans from refinancing activities and expense controls.  "Our efforts to control expenses are supporting our improved profitability.  Despite paying higher mortgage commissions and incentives, our total non-interest expense levels have trended down," said Brent Olthoff, Chief Financial Officer and Treasurer. 

Net interest income totaled $7.1 million for the third fiscal quarter 2013 compared to $7.2 million for the previous fiscal quarter, and $7.7 million in the year ago quarter.  The NIM, TE was 2.64% for the third quarter compared to 2.68% the preceding quarter.

Gains on the sale of loans contributed to a strong level of noninterest income complemented by fees on deposits and loan servicing income. Continued high levels of mortgage activity produced $1.2 million in gains during the third fiscal quarter compared to $1.4 million the preceding quarter.  Fees on deposits totaled $1.4 million for the quarter ended March 31, 2013 versus $1.5 million the previous quarter and $1.4 million one year earlier.  Loan servicing income totaled $406,000 for the quarter compared to a net expense of $450,000 the preceding quarter due to an impairment allowance, as a reduction in prepayment speeds occurred.  During the third fiscal quarter, a sale of land originally purchased for branch expansion resulted in a one-time charge to other noninterest income for approximately $83,000.  Total noninterest income was $3.7 million for the quarter ended March 31, 2013 compared to $3.1 million the preceding quarter and $3.0 million a year ago.

Noninterest expenses remained stable at $8.5 million in the third fiscal quarter, a level similar to the preceding quarter. In the fiscal third quarter a year ago, noninterest expenses totaled $8.7 million. For the nine months ended March 31, 2013, noninterest expenses decreased 6.2% to $25.8 million compared to $27.5 million for the same period one year earlier.  Reflecting the higher mortgage commissions and incentive compensation programs relative to prior quarters, total compensation and employee benefit expenses increased to $5.3 million for the quarter ended March 31, 2013 compared to $4.8 million one quarter earlier. 

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

Quarterly Dividend Declared

The board of directors declared a regular quarterly cash dividend of $0.1125 per common share for the third fiscal quarter 2013.  The dividend is payable May 17, 2013 to stockholders of record May 10, 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


Nine Months Ended



March 31,


December 31,


March 31,


March 31,



2013


2012


2012


2013


2012

Interest, dividend and loan fee income:











Loans and leases receivable


$

8,082



$

8,804



$

9,833



$

25,892



$

32,513


Investment securities and interest-earning deposits


1,561



1,028



1,184



3,826



3,591




9,643



9,832



11,017



29,718



36,104


Interest expense:











Deposits


1,111



1,199



1,664



3,716



5,692


Advances from Federal Home Loan Bank and other borrowings


1,432



1,463



1,608



4,384



4,824




2,543



2,662



3,272



8,100



10,516


Net interest income


7,100



7,170



7,745



21,618



25,588


Provision for losses on loans and leases




128



264



(172)



2,906


Net interest income after provision for losses on loans and leases


7,100



7,042



7,481



21,790



22,682


Noninterest income:











Fees on deposits


1,361



1,464



1,360



4,921



4,528


Loan servicing income, net


406



(450)



8



(84)



873


Gain on sale of loans


1,151



1,411



671



3,584



1,884


Earnings on cash value of life insurance


200



206



168



611



512


Trust income


209



190



206



593



560


Commission and insurance income


177



125



173



496



492


Gain on sale of securities, net


146





539



1,968



874


Loss on disposal of closed-branch fixed assets






(233)





(245)


Other


5



106



115



(1,256)



326




3,655



3,052



3,007



10,833



9,804


Noninterest expense:











Compensation and employee benefits


5,258



4,784



4,910



14,973



15,532


Occupancy and equipment


1,096



1,002



1,076



3,167



3,269


FDIC insurance


195



201



261



606



796


Check and data processing expense


677



762



728



2,256



2,169


Professional fees


484



536



560



1,663



2,464


Marketing and community investment


106



304



323



778



1,087


Foreclosed real estate and other properties, net


16



206



137



325



222


Other


716



661



701



2,057



1,989




8,548



8,456



8,696



25,825



27,528


Income before income taxes


2,207



1,638



1,792



6,798



4,958


Income tax expense


802



605



580



2,283



1,590


Net income


$

1,405



$

1,033



$

1,212



$

4,515



$

3,368













Basic earnings per common share:


$

0.20



$

0.15



$

0.17



$

0.64



$

0.48


Diluted earnings per common share:


$

0.20



$

0.15



$

0.17



$

0.64



$

0.48


Basic weighted average shares:


7,054,902



7,055,591



6,992,886



7,053,880



6,979,858


Diluted weighted average shares:


7,056,986



7,057,261



6,996,215



7,056,367



6,980,280


Outstanding shares (end of period):


7,055,020



7,054,875



7,038,537



7,055,020



7,038,537


Number of full-service offices


28



28



32






 

 

 


HF Financial Corp.

Consolidated Statements of Financial Condition

(Dollars in Thousands, except share data)






March 31, 2013


June 30, 2012


(Unaudited)


(Audited)

ASSETS




Cash and cash equivalents

$

22,974



$

50,334


Securities available for sale

419,195



373,246


Correspondent bank stock

7,519



7,843


Loans held for sale

8,510



16,207






Loans and leases receivable

682,614



683,704


Allowance for loan and lease losses

(10,664)



(10,566)


Loans and leases receivable, net

671,950



673,138






Accrued interest receivable

4,906



5,431


Office properties and equipment, net of accumulated depreciation

14,062



14,760


Foreclosed real estate and other properties

901



1,627


Cash value of life insurance

19,794



19,276


Servicing rights, net

10,799



11,932


Goodwill, net

4,366



4,366


Other assets

12,196



14,431


Total assets

$

1,197,172



$

1,192,591


LIABILITIES AND STOCKHOLDERS' EQUITY




Liabilities




Deposits

$

897,215



$

893,859


Advances from Federal Home Loan Bank and other borrowings

135,125



142,394


Subordinated debentures payable to trusts

27,837



27,837


Advances by borrowers for taxes and insurance

18,269



12,708


Accrued expenses and other liabilities

19,308



18,977


Total liabilities

1,097,754



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, 9,138,475 and 9,125,751 shares issued at March 31, 2013 and June 30, 2012, respectively

91



91


Additional paid-in capital

46,028



45,673


Retained earnings, substantially restricted

85,705



83,571


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

(1,509)



(1,622)


Less cost of treasury stock, 2,083,455 shares at March 31, 2013 and June 30, 2012

(30,897)



(30,897)


Total stockholders' equity

99,418



96,816


Total liabilities and stockholders' equity

$

1,197,172



$

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

Nine Months Ended

3/31/2013


3/31/2012


3/31/2013


3/31/2012

Balance, beginning


$                10,780


$                  11,021


$                10,566


$                  14,315

  Provision charged to income



264


(172)


2,906

  Charge-offs


(189)


(1,291)


(1,219)


(7,421)

  Recoveries


73


546


1,489


740

Balance, ending


$                10,664


$                  10,540


$                10,664


$                  10,540














































Asset Quality




3/31/2013


12/31/2012


3/31/2012

Nonaccruing loans and leases




$                22,541


$                  15,980


$                  20,770

Accruing loans and leases delinquent more than 90 days




166


209


1,136

Foreclosed assets




901


890


2,611

Total nonperforming assets




$                23,608


$                  17,079


$                  24,517










General allowance for loan and lease losses




$                  7,957


$                    8,064


$                    8,213

Specific impaired loan valuation allowance




2,707


2,716


2,327

Total allowance for loans and lease losses




$                10,664


$                  10,780


$                  10,540










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




1.97 %


1.40 %


2.05 %

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




3.33 %


2.39 %


3.08 %

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




(0.05)%


(0.11)%


1.12 %

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




1.56 %


1.59 %


1.48 %

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




46.96 %


66.59 %


48.11 %

_____________________________________________







(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 nine months ended March 31, 2013 and March 31, 2012, and the six months ended December 31, 2012 have been annualized.










Troubled Debt Restructuring Summary




3/31/2013


12/31/2012


3/31/2012

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




$                      287


$                       223


$                    4,758

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




8,728


8,643


10,295

Accruing troubled debt restructurings (3)




1,037


1,300


1,458

Total troubled debt restucturings




$                10,052


$                   10,166


$                  16,511










______________________________________________

(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)



3/31/2013


12/31/2012


6/30/2012

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

8.45 %


8.25 %


8.29 %

OCI components to consolidated assets:






Net changes in unrealized gain on securities available for sale

0.13 %


0.16 %


0.22 %

Net unrealized losses on defined benefit plan

(0.11)%


(0.11)%


(0.11)%

Net unrealized losses on derivatives and hedging activities

(0.14)%


(0.15)%


(0.25)%

Goodwill to consolidated assets

(0.36)%


(0.36)%


(0.37)%

Tangible common equity to tangible assets

7.97 %


7.79 %


7.78 %













Tangible book value per common share (2)

$             13.47


$               13.42


$               13.13













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

9.80 %


9.54 %


9.66 %

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

15.18 %


15.26 %


14.62 %

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

16.42 %


16.51 %


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









March 31, 2013



June 30, 2012



Amount


Percent


Amount


Percent

Residential:








One-to four-family

$

49,669



7.3

%


52,626



7.7

%

Construction

1,981



0.3



2,808



0.4


Commercial:








Commercial business (1)

68,669



10.1



79,069



11.6


Equipment finance leases

2,105



0.3



3,297



0.5


Commercial real estate:








Commercial real estate

240,101



35.2



225,341



33.0


Multi-family real estate

47,313



6.9



47,121



6.9


Construction

9,804



1.4



12,172



1.8


Agricultural:








Agricultural real estate

76,528



11.2



70,796



10.4


Agricultural business

91,275



13.4



84,314



12.3


Consumer:








Consumer direct

21,002



3.1



21,345



3.1


Consumer home equity

71,307



10.4



81,545



11.9


Consumer overdraft & reserve

2,831



0.4



3,038



0.4


Consumer indirect

29





232




Total (2)

$

682,614



100.0

%


$

683,704



100.0

%















_________________________________________________

(1) 

Includes $2,024 and $2,262 tax exempt leases at March 31, 2013 and June 30, 2012, respectively.

(2) 

Exclusive of undisbursed portion of loans in process and net of deferred loan fees and discounts.

 


Deposit Composition









March 31, 2013



June 30, 2012



Amount


Percent


Amount


Percent

Noninterest-bearing checking accounts

$

137,293



15.3

%


146,963



16.4

%

Interest-bearing checking accounts

166,999



18.6



138,075



15.5


Money market accounts

217,560



24.3



210,298



23.5


Savings accounts

111,180



12.4



121,092



13.6


In-market certificates of deposit

252,418



28.1



265,009



29.6


Out-of-market certificates of deposit

11,765



1.3



12,422



1.4


Total deposits

$

897,215



100.0

%


$

893,859



100.0

%















 

 

 


HF Financial Corp.

Selected Consolidated Financial Condition Data

(Dollars in Thousands)

(Unaudited)




Average Balance, Interest Yields and Rates

Three Months Ended



March 31, 2013



December 31, 2012



Average

Outstanding

Balance


Yield/

Rate


Average

Outstanding

Balance


Yield/

Rate

Interest-earning assets:








Loans and leases receivable(1)(3)

$

687,223



4.77

%


$

699,105



5.00

%

Investment securities(2)(3)

423,353



1.50



379,790



1.07


Total interest-earning assets

1,110,576



3.52

%


1,078,895



3.62

%

Noninterest-earning assets

79,912





81,910




Total assets

$

1,190,488





$

1,160,805




Interest-bearing liabilities:








Deposits:








Checking and money market

$

380,004



0.26

%


$

357,509



0.28

%

Savings

118,408



0.24



110,363



0.26


Certificates of deposit

268,814



1.21



273,635



1.27


Total interest-bearing deposits

767,226



0.59



741,507



0.64


FHLB advances and other borrowings

132,781



3.14



131,414



3.13


Subordinated debentures payable to trusts

27,837



5.87



27,837



6.06


Total interest-bearing liabilities

927,844



1.11

%


900,758



1.17

%

Noninterest-bearing deposits

130,687





132,231




Other liabilities

32,987





28,897




Total liabilities

1,091,518





1,061,886




Equity

98,970





98,919




Total liabilities and equity

$

1,190,488





$

1,160,805




Net interest spread(4)



2.41

%




2.45

%

Net interest margin(4)(5)



2.59

%




2.64

%

Net interest margin, TE(6)



2.64

%




2.68

%

Return on average assets(7)



0.48

%




0.35

%

Return on average equity(8)



5.76

%




4.14

%

_____________________________________

(1) 

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

(2)  

Includes federal funds sold and interest earning reserve balances at the Federal Reserve Bank.

(3)  

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

(4)   

Percentages for the three months ended March 31, 2013 and December 31, 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. See the following Non-GAAP Disclosure Reconciliation of Net Interest Income (GAAP) to Net Interest Margin, TE (Non-GAAP). 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 Balance, Interest Yields and Rates

Nine Months Ended



March 31, 2013



March 31, 2012



Average

Outstanding

Balance


Yield/

Rate


Average

Outstanding

Balance


Yield/

Rate

Interest-earning assets:








Loans and leases receivable(1)(3)

$

696,667



4.95

%


$

792,551



5.46

%

Investment securities(2)(3)

394,111



1.29



321,360



1.49


Total interest-earning assets

1,090,778



3.63

%


1,113,911



4.31

%

Noninterest-earning assets

81,219





83,472




Total assets

$

1,171,997





$

1,197,383




Interest-bearing liabilities:








Deposits:








Checking and money market

$

357,910



0.33

%


$

323,823



0.63

%

Savings

113,678



0.25



125,585



0.26


Certificates of deposit

273,610



1.27



323,466



1.61


Total interest-bearing deposits

745,198



0.66



772,874



0.98


FHLB advances and other borrowings

137,177



3.04



147,918



3.05


Subordinated debentures payable to trusts

27,837



6.01



27,837



6.86


Total interest-bearing liabilities

910,212



1.19

%


948,629



1.48

%

Noninterest-bearing deposits

131,603





122,153




Other liabilities

31,677





31,644




Total liabilities

1,073,492





1,102,426




Equity

98,505





94,957




Total liabilities and equity

$

1,171,997





$

1,197,383




Net interest spread(4)



2.44

%




2.83

%

Net interest margin(4)(5)



2.64

%




3.06

%

Net interest margin, TE(6)



2.68

%




3.09

%

Return on average assets(7)



0.51

%




0.37

%

Return on average equity(8)



6.11

%




4.72

%

_____________________________________


(1) 

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

(2) 

  Includes federal funds sold and interest earning reserve balances at the Federal Reserve Bank.

(3) 

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

(4) 

  Percentages for the nine months ended March 31, 2013 and March 31, 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. See the following Non-GAAP Disclosure Reconciliation of Net Interest Income (GAAP) to Net Interest Margin, TE (Non-GAAP). 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)





March 31, 2013

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

$



$



$

401



$

401



$

49,268



$

165



$

448



$

613


Construction









1,981








Commercial:
















Commercial business

407



3,109





3,516



65,153





4,225



4,225


Equipment finance leases









2,105








Commercial real estate:
















Commercial real estate

76







76



240,025





1,202



1,202


Multi-family real estate





27



27



47,286





27



27


Construction









9,804








Agricultural:
















Agricultural real estate









76,528





11,193



11,193


Agricultural business

40







40



91,235





4,648



4,648


Consumer:
















Consumer direct

21







21



20,981





10



10


Consumer home equity

328







328



70,979





788



788


Consumer OD & reserve

4





1



5



2,826



1





1


Consumer indirect









29








Total

$

876



$

3,109



$

429



$

4,414



$

678,200



$

166



$

22,541



$

22,707


 


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


____________________________________

(1) 

  Loans accruing and delinquent greater than 90 days have 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


Nine Months Ended


March 31,


December 31,


March 31,


March 31,


2013


2012


2012


2013


2012

Net interest income

$

7,100



$

7,170



$

7,745



$

21,618



$

25,588


Taxable equivalent adjustment

118



109



83



312



285


Adjusted net interest income

7,218



7,279



7,828



21,930



25,873


Average interest-earning assets

1,110,576



1,078,895



1,108,481



1,090,778



1,113,911


Net interest margin, TE

2.64

%


2.68

%


2.84

%


2.68

%


3.09

%

 

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