10-Q 1 a08-11797_110q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended March 31, 2008

Commission File Number: 0-19972

HF FINANCIAL CORP.

(Exact name of registrant as specified in its charter.)

Delaware		46-0418532
(State or other jurisdiction of		(I.R.S. Employer Identification Number)
incorporation or organization)

225 South Main Avenue,
Sioux Falls, SD		57104
(Address of principal executive office)		(ZIP Code)

(605) 333-7556
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May 12, 2008 there were 3,946,680 issued and outstanding shares of the Registrant’s Common Stock, with $.01 par value per share.

HF FINANCIAL CORP.

Form 10-Q

Table of Contents

		Page Number

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):

	Consolidated Statements of Financial Condition As of March 31, 2008 and June 30, 2007	1

	Consolidated Statements of Income for the Nine Months Ended March 31, 2008 and 2007	2

	Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2008 and 2007	3

	Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34

Item 4.	Controls and Procedures	36

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 6.	Exhibits	38

Form 10-Q	Signature Page	39

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

HF FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in Thousands)

	March 31, 2008			June 30, 2007
	(Unaudited)			(Audited)
ASSETS
Cash and cash equivalents	$	18,781		$	22,476
Securities available for sale	215,993			142,223
Federal Home Loan Bank stock	10,551			5,058
Loans held for sale	9,927			8,776
Loans and leases receivable	759,624			767,471
Allowance for loan and lease losses	(5,570		)	(5,872		)
Net loans and leases receivable	754,054			761,599

Accrued interest receivable	8,477			8,495
Office properties and equipment, net of accumulated depreciation	14,335			15,830
Foreclosed real estate and other properties	442			508
Cash value of life insurance	13,916			13,519
Servicing rights	11,249			10,871
Goodwill, net	4,951			4,951
Other assets	5,213			7,148
Total assets	$	1,067,889		$	1,001,454

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits	$	744,219		$	815,864
Advances from Federal Home Loan Bank and other borrowings	200,255			68,600
Subordinated debentures payable to trusts	27,837			27,837
Advances by borrowers for taxes and insurance	15,424			10,337
Accrued expenses and other liabilities	14,622			16,546
Total liabilities	1,002,357			939,184

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, 6,029,360 and 5,991,200 shares issued at March 31, 2008 and June 30, 2007, respectively	60			60
Common stock subscribed for but not issued, 5,146 shares at June 30, 2007	—			81
Additional paid-in capital	21,851			20,898
Retained earnings, substantially restricted	74,845			71,900
Accumulated other comprehensive income (loss), net of related deferred tax effect	(439		)	(1,502		)
Less cost of treasury stock, 2,071,928 and 1,977,836 shares at March 31, 2008 and June 30, 2007, respectively	(30,785		)	(29,167		)
Total stockholders’ equity	65,532			62,270
Total liabilities and stockholders’ equity	$	1,067,889		$	1,001,454

See accompanying notes to unaudited consolidated financial statements.

HF FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands, Except Per Share Data)

(Unaudited)

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2008		2007		2008		2007
Interest, dividend and loan fee income:
Loans and leases receivable	$	13,188	$	13,435	$	41,187	$	40,403
Investment securities and interest-earning deposits	2,354		1,925		6,425		5,698
	15,542		15,360		47,612		46,101
Interest expense:
Deposits	5,693		7,268		20,104		21,168
Advances from Federal Home Loan Bank and other borrowings	2,154		1,689		6,149		6,052
	7,847		8,957		26,253		27,220
Net interest income	7,695		6,403		21,359		18,881

Provision for losses on loans and leases	551		34		1,171		786

Net interest income after provision for losses on loans and leases	7,144		6,369		20,188		18,095

Noninterest income:
Gain on sale of branches, net	—		—		—		2,763
Fees on deposits	1,290		1,232		4,058		3,740
Loan servicing income	589		525		1,636		1,295
Gain on sale of loans, net	257		223		955		679
Trust income	229		238		727		684
Other	442		395		1,212		1,218
	2,807		2,613		8,588		10,379
Noninterest expense:
Compensation and employee benefits	4,987		4,768		14,218		13,402
Occupancy and equipment	941		962		2,859		2,858
Marketing	221		217		783		1,364
Check and data processing expense	594		578		1,815		1,697
Other	811		946		2,731		2,750
	7,554		7,471		22,406		22,071

Income before income taxes	2,397		1,511		6,370		6,403

Income tax expense	774		477		2,149		2,161
Net income	$	1,623	$	1,034	$	4,221	$	4,242

Comprehensive income	$	1,681	$	1,306	$	5,284	$	5,892
Cash dividends declared per share	$	0.1075	$	0.1050	$	0.3225	$	0.3125

Earnings per share:
Basic	$	0.41	$	0.26	$	1.06	$	1.07
Diluted	$	0.40	$	0.25	$	1.05	$	1.05

See accompanying notes to unaudited consolidated financial statements.

HF FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Nine Months Ended March 31,
	2008			2007
Cash flows from operating activities
Net income	$	4,221		$	4,242
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for losses on loans and leases	1,171			786
Depreciation	1,241			1,221
Amortization of discounts and premiums on securities and other	1,177			1,406
Stock based compensation	483			715
Deferred income taxes (credits)	—			(534		)
Net change in loans held for resale	(196		)	(5,164		)
(Gain) on sale of loans, net	(955		)	(679		)
Realized (gain) on sale of securities, net	(219		)	—
(Gain) on sale of branches	—			(2,763		)
Losses and provision for losses on sales of foreclosed real estate and other properties, net	31			48
(Gain) loss on disposal of office properties and equipment, net	—			(9		)
Change in other assets and liabilities	(1,504		)	6,072
Net cash provided by operating activities	5,450			5,341

Cash flows from investing activities
Loan participations purchased	(5,477		)	(19,329		)
Net change in loans outstanding	10,832			(10,859		)
Proceeds from sale of loans associated with branch sales	—			4,256
Securities available for sale:
Sales and maturities and repayments	52,206			27,781
Purchases	(123,419		)	(18,564		)
Purchase of Federal Home Loan Bank stock	(7,365		)	(3,844		)
Redemption of Federal Home Loan Bank stock	1,871			3,110
Proceeds from sale of office properties and equipment	1,274			9
Proceeds from sale of office properties and equipment associated with branch sales	—			341
Purchase of office properties and equipment	(1,020		)	(2,913		)
Purchase of servicing rights	(1,170		)	(5,858		)
Proceeds from sale of foreclosed real estate and other properties, net	449			703
Net cash (used in) investing activities	(71,819		)	(25,167		)

See accompanying notes to unaudited consolidated financial statements.

HF FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Dollars in Thousands)

(Unaudited)

	Nine Months Ended March 31,
	2008			2007

Cash flows from financing activities
Net increase (decrease) in deposit accounts	$	(71,645	)	$	51,675
Proceeds of advances from Federal Home Loan Bank and other borrowings	1,311,434			529,615
Payments on advances from Federal Home Loan Bank and other borrowings	(1,179,779		)	(530,735		)
Proceeds from issuance of subordinated debentures	5,000			10,000
Deposit account disbursements associated with branch sales	—			(33,563		)
Redemption of subordinated debentures	(5,000		)	(10,000		)
Increase (decrease) in advances by borrowers	5,087			7,165
Purchase of treasury stock	(1,618		)	—
Proceeds from issuance of common stock	470			337
Cash dividends paid	(1,275		)	(1,240		)
Net cash provided by financing activities	62,674			23,254

Increase (decrease) in cash and cash equivalents	(3,695		)	3,428

Cash and cash equivalents
Beginning	22,476			27,037
Ending	$	18,781		$	30,465

Supplemental Disclosures of Cash Flows Information
Cash payments for interest	$	25,999		$	26,085
Cash payments for income and franchise taxes, net	2,638			647

See accompanying notes to unaudited consolidated financial statements.

HF FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For The Nine Months Ended March 31, 2008 and 2007

(Unaudited)

NOTE 1. SELECTED ACCOUNTING POLICIES

Basis of presentation:

The consolidated financial information of HF Financial Corp. (the “Company”) and its wholly-owned subsidiaries included in this Quarterly Report on Form 10-Q is unaudited. However, in the opinion of management, adjustments (consisting of normal recurring adjustments) necessary for a fair presentation for the interim periods have been included. Results for any interim period are not necessarily indicative of results to be expected for the fiscal year. Interim consolidated financial statements and the notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007 (“Fiscal 2007”), filed with the Securities and Exchange Commission. The accounting and reporting policies of the Company and its subsidiaries conform to accounting principles generally accepted in the United States of America (“GAAP”) and to general practice within the industry.

The interim consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, Home Federal Bank (the “Bank”), HF Financial Group, Inc. (“HF Group”) and HomeFirst Mortgage Corp. (the “Mortgage Corp.”), and the Bank’s wholly-owned subsidiaries, Mid America Capital Services, Inc. (“Mid America Capital”), Hometown Insurors, Inc. (“Hometown”), Home Federal Securitization Corp. (“HFSC”), Mid-America Service Corporation and PMD, Inc. All intercompany balances and transactions have been eliminated in consolidation.

NOTE 2. REGULATORY CAPITAL

The following table sets forth the Bank’s compliance with its minimum capital requirements for a well-capitalized institution at March 31, 2008:

	Amount		Percent
	(Dollars in Thousands)
Tier I (core) capital (to adjusted total assets):
Required	$	53,066	5.00	%
Actual	85,295		8.04
Excess over required	32,229		3.04

Total risk-based capital (to risk-weighted assets):
Required	$	82,159	10.00	%
Actual	90,502		11.02
Excess over required	8,343		1.02

NOTE 3. EARNINGS PER SHARE

Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period they were outstanding. The weighted average number of basic common shares outstanding for the three months ended March 31, 2008 and 2007 was 3,960,315 and 3,982,096, respectively. The weighted average number of basic common shares outstanding for the nine months ended March 31, 2008 and 2007 was 3,976,414 and 3,970,119, respectively.

Dilutive earnings per share is similar to the computation of basic earnings per share except the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive options outstanding had been exercised. The weighted average number of common and dilutive potential common shares outstanding for the three months ended March 31, 2008 and 2007 was 4,014,770 and 4,065,310, respectively. The weighted average number of common and dilutive potential common shares outstanding for the nine months ended March 31, 2008 and 2007 was 4,035,416 and 4,048,119, respectively.

NOTE 4. INVESTMENTS IN SECURITIES

The amortized cost and fair values of investments in securities, all of which are classified as available for sale according to management’s intent, are as follows:

	March 31, 2008
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
	(Dollars in Thousands)

Debt securities:
U.S. government agencies	$	8,593	$	336	$	—		$	8,929
Federal Home Loan Bank	4,911		166		—			5,077
Municipal bonds	11,505		198		(44		)	11,659
Preferred Term Securities	12,371		—		(1,055		)	11,316
	37,380		700		(1,099		)	36,981

Equity securities:
FNMA	8		2		—			10
Federal Ag Mortgage	7		3		—			10
Other Investments	232		—		—			232
	247		5		—			252

Mortgage-backed securities	178,251		1,425		(916		)	178,760
	$	215,878	$	2,130	$	(2,015	)	$	215,993

	March 31, 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
	(Dollars in Thousands)

Debt securities:
U.S. government agencies	$	12,079	$	40	$	(57	)	$	12,062
Federal Home Loan Bank	13,474		34		(46		)	13,462
Municipal bonds	7,671		30		(72		)	7,629
Preferred Term Securities	11,018		28		(76		)	10,970
Other Investments	5,072		70		—			5,142
	49,314		202		(251		)	49,265

Common Stock:
FNMA	8		14		—			22
Federal Ag Mortgage	7		3		—			10
Other Investments	134		—		—			134
	149		17		—			166

Mortgage-backed securities	90,522		154		(1,432		)	89,244
	$	139,985	$	373	$	(1,683	)	$	138,675

The following table presents the fair value and age of gross unrealized losses by investment category at March 31, 2008 in accordance with FASB Staff Position (“FSP”) No. FAS 115-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Gross Unrealized (Losses)			Fair Value		Gross Unrealized (Losses)			Fair Value		Gross Unrealized (Losses)
	(Dollars in Thousands)

Municipal bonds	1,376		(24		)	1,293		(20		)	2,669		(44		)
Preferred term securities	9,423		(930		)	1,893		(125		)	11,316		(1,055		)
Mortgage-backed securities	62,876		(283		)	27,265		(633		)	90,141		(916		)
	$	73,675	$	(1,237	)	$	30,451	$	(778	)	$	104,126	$	(2,015	)

Management does not believe any individual unrealized losses as of March 31, 2008 represent an other-than-temporary impairment. The unrealized losses reported for mortgage-backed securities relate to securities issued primarily by the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”), and the Federal Home Loan Mortgage Corporation (“FHLMC”). These unrealized losses in total are primarily attributable to changes in interest rates and the contractual cashflows of those investments are primarily guaranteed by an agency of the U.S. government. As a group, the unrealized losses were less than 2.0% of their respective amortized cost basis at March 31, 2008. Because the decline in market value is attributable primarily to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be at maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2008.

NOTE 5. SEGMENT REPORTING

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and in assessing performance. The Company’s reportable segments are “banking” (including leasing activities) and “other.” The “banking” segment is conducted through the Bank and Mid America Capital and the “other” segment is composed of smaller nonreportable segments, the Company and inter-segment eliminations.

The management approach is used as the conceptual basis for identifying reportable segments and is based on the way that management organizes the segments within the enterprise for making operating decisions, allocating resources and monitoring performance, which is primarily based on products.

Three Months Ended March 31, 2008	Banking			Other			Total
	(Dollars in Thousands)

Net interest income	$	8,165		$	(470	)	$	7,695
Provision for losses on loans and leases	(551		)	—			(551		)
Noninterest income	2,717			90			2,807
Intersegment noninterest income	(28		)	(16		)	(44		)
Noninterest expense	(7,394		)	(160		)	(7,554		)
Intersegment noninterest expense	—			44			44
Income (loss) before income taxes	$	2,909		$	(512	)	$	2,397

Total assets at March 31, 2008	$	1,064,393		$	3,496		$	1,067,889

Three Months Ended March 31, 2007	Banking			Other			Total
	(Dollars in Thousands)

Net interest income	$	7,140		$	(737	)	$	6,403
Intersegment interest income	(211		)	211			—
Provision for losses on loans and leases	(34		)	—			(34		)
Noninterest income	2,665			(52		)	2,613
Intersegment noninterest income	(108		)	108			—
Noninterest expense	(7,266		)	(205		)	(7,471		)
Intersegment noninterest expense	3			(3		)	—
Income (loss) before income taxes	$	2,189		$	(678	)	$	1,511

Total assets at March 31, 2007	$	994,613		$	1,511		$	996,124

Nine Months Ended March 31, 2008	Banking			Other			Total
	(Dollars in Thousands)

Net interest income	$	22,962		$	(1,603	)	$	21,359
Provision for losses on loans and leases	(1,171		)	—			(1,171		)
Noninterest income	8,409			179			8,588
Intersegment noninterest income	(82		)	(50		)	(132		)
Noninterest expense	(21,707		)	(699		)	(22,406		)
Intersegment noninterest expense	—			132			132
Income (loss) before income taxes	$	8,411		$	(2,041	)	$	6,370

Total assets at March 31, 2008	$	1,064,393		$	3,496		$	1,067,889

Nine Months Ended March 31, 2007	Banking			Other			Total
	(Dollars in Thousands)

Net interest income	$	21,593		$	(2,712	)	$	18,881
Intersegment interest income	(688		)	688			—
Provision for losses on loans and leases	(786		)	—			(786		)
Noninterest income	10,566			(187		)	10,379
Intersegment noninterest income	(316		)	316			—
Noninterest expense	(21,445		)	(626		)	(22,071		)
Intersegment noninterest expense	7			(7		)	—
Income (loss) before income taxes	$	8,931		$	(2,528	)	$	6,403

Total assets at March 31, 2007	$	994,613		$	1,511		$	996,124

NOTE 6. DEFINED BENEFIT PLAN

The Company has a noncontributory (cash balance) defined benefit pension plan covering all employees of the Company and its wholly-owned subsidiaries who have attained the age of 21 and have completed 1,000 hours of service in a plan year. The benefits are based on 6% of each eligible participant’s annual compensation, plus income earned in the accounts at a rate determined annually based on 30-year treasury note rates. The Company’s funding policy is to make the minimum annual required contribution plus such amounts as the Company may determine to be appropriate from time to time. Participants are 100% vested after five years of service with a retirement age of the later of age 65 or five years of participation. Information relative to the components of net periodic benefit cost for the Company’s defined benefit plan is presented below:

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2008			2007			2008			2007

Service cost	$	111,830		$	116,521		$	335,490		$	349,563
Interest cost	109,260			97,748			$	327,780		$	293,244
Expected return on plan assets	(121,791		)	(109,101		)	$	(365,373	)	$	(327,303	)
Total costs recognized in expense	$	99,299		$	105,168		$	297,897		$	315,504

The Company previously disclosed in its consolidated financial statements for Fiscal 2007, which are included in Part II, Item 8 “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for Fiscal 2007, that it contributed $621,000 to fund its qualified pension plan. During the first quarter of the fiscal year ending June 30, 2008 (“Fiscal 2008”), the Company made contributions of $532,000 to fund its qualified pension plan. The Company anticipates no additional contributions for Fiscal 2008.

NOTE 7. SELF-INSURED HEALTHCARE PLAN

The Company has had a self-insured health plan for its employees, subject to certain limits, since January 1994. The Bank is named the plan administrator for this plan and has retained the services of an independent third party administrator to process claims and handle other duties for this plan. The third party administrator does not assume liability for benefits payable under this plan.

The Company assumes the responsibility for funding the plan benefits out of general assets; however, employees cover some of the costs of covered benefits through contributions, deductibles, co-pays and participation amounts. An employee is eligible for coverage upon completion of 30 calendar days of regular employment. The plan, which is on a calendar year basis, is intended to comply with, and be governed by, the Employee Retirement Income Security Act of 1974, as amended.

Total net healthcare costs are inclusive of health claims expenses and administration fees offset by stop loss and employee reimbursement. Reported below is a summary of net healthcare costs by quarter for the fiscal years ended June 30, 2008 and 2007:

	Fiscal Years Ended June 30,
	2008		2007
	(Dollars in Thousands)

Quarter ended September 30	$	221	$	436
Quarter ended December 31	409		357
Quarter ended March 31	328		760
Quarter ended June 30	—		596
Net healthcare costs	$	958	$	2,149

NOTE 8. STOCK-BASED COMPENSATION PLANS

The fair value of each incentive stock option grant and stock appreciation right is estimated at the grant date using the Black-Scholes option-pricing model. The following weighted average assumptions were used for grants in the nine months ended March 31, 2008 and 2007:

	For the Nine Months Ended
	March 31,
	2008		2007

Expected volatility	22.00	%	23.00	%
Expected dividend yield	2.61	%	2.63	%
Risk-free interest rate	4.10	%	4.61	%
Expected term (in years)	4		4

Stock option and stock appreciation right activity for the nine months ended March 31 follow:

	Stock Options
	2008							2007
					Weighted							Weighted
			Weighted		Average					Weighted		Average
			Average		Remaining	Aggregate				Average		Remaining	Aggregate
			Exercise		Contractual	Intrinsic				Exercise		Contractual	Intrinsic
	Shares		Price		Term	Value		Shares		Price		Term	Value

Beginning Balance	244,602		$	12.75				318,977		$	12.77
Granted	—		—					—		—
Forfeited	(5,608	)	17.27					(12,743	)	16.58
Exercised	(34,090	)	11.65					(32,968	)	12.90

Ending Balance	204,904		$	12.81	5.84	$	636	273,266		$	12.81	5.46	$	1,483

	Stock Appreciation Rights
	2008							2007
					Weighted							Weighted
			Weighted		Average					Weighted		Average
			Average		Remaining	Aggregate				Average		Remaining	Aggregate
			Exercise		Contractual	Intrinsic				Exercise		Contractual	Intrinsic
	SARs		Price		Term	Value		SARs		Price		Term	Value

Beginning Balance	19,899		$	12.75				—		$	—
Granted	29,204		16.10					20,953		16.00
Forfeited	(3,954	)	16.05					(1,054	)	16.00
Exercised	—		—					—		—

Ending Balance	45,149		$	14.63	3.08	$	103	19,899		$	16.00	3.50	$	112

The weighted-average grant date fair value of options and stock appreciation rights (SARs) granted during the nine months ended March 31, 2008 and 2007 was $2.89 and $3.11, respectively. The total intrinsic value of options exercised during the nine months ended March 31, 2008 and 2007 was $148,000 and $176,000, respectively. As of March 31, 2008, there was $1,600 of total unrecognized compensation cost related to nonvested stock option awards. The cost is expected to be recognized over the remaining period of three months for stock option awards and over a weighted average period of four years for SARs awards. Cash received from the exercise of options for the nine months ended March 31, 2008 and 2007 was $397,000 and $425,000, respectively. The tax benefit realized for the tax deductions from cashless option exercises totaled $5,500 and $42,000 for the nine months ended March 31, 2008 and 2007, respectively.

Restricted share activity for the nine months ended March 31 follows:

	2008				2007
			Weighted				Weighted
			Average				Average
			Grant Date				Grant Date
	Shares		Fair Value		Shares		Fair Value

Nonvested Balance, beginning	144,711		$	16.10	158,159		$	15.85
Granted	14,955		16.78		11,603		16.75
Vested	(31,236	)	14.50		(17,467	)	13.63
Forfeited	(10,894	)	16.46		(5,417	)	15.32

Nonvested Balance, ending	117,536		$	16.58	146,878		$	16.08

Pretax compensation expense recognized for restricted shares for the nine months ended March 31, 2008 and 2007 was $314,000 and $344,000, respectively. The tax benefit for the nine months ended March 31, 2008 and 2007 was $107,000 and $117,000, respectively. As of March 31 2008, there was $947,000 of total unrecognized compensation cost related to restricted shares granted under the Company’s 2002 Stock Option and Incentive Plan, as amended (“the Plan”). The cost is expected to be recognized over a weighted-average period of four years. The total fair value of shares vested during the nine months ended March 31, 2008 and 2007 was $453,000 and $238,000, respectively.

Awards to directors of restricted shares of the Company’s common stock are made to outside directors from the Company’s 2002 Stock Option and Incentive Plan (2002 Option Plan). This plan was effective for directors as of January 1, 2007, when the prior plan, the “Director Restricted Stock Plan” expired on December 31, 2006. The Director Restricted Stock Plan provided awards of restricted shares of the Company’s common stock and was in effect for a period of ten years.

These stock option and incentive plans are described more fully in Part II, Item 8 “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for Fiscal 2007, under Note 16 of “Notes to Consolidated Financial Statements.”

NOTE 9. SUBORDINATED DEBENTURES PAYABLE TO TRUSTS

On July 5, 2007, the Company issued 5,000 shares totaling $5.0 million of Company Obligated Mandatorily Redeemable Preferred Securities of Trust VI. Trust VI was established and exists for the sole purpose of issuing trust preferred securities and investing the proceeds in subordinated debentures of the Company. These subordinated debentures constitute the sole asset of Trust VI. The securities provide for cumulative cash distributions calculated at a rate based on three-month LIBOR plus 1.65%, adjusted quarterly. Refer to Note 11 in regards to the interest rate swap agreement, which converted the variable-rate Trust Preferred VI security into a fixed-rate security for a term of five years. The Company may, at one or more times, defer interest payments on the capital securities for up to 20 consecutive quarterly periods, but not beyond October 1, 2037. At the end of the deferral period, all accumulated and unpaid distributions must be paid. The capital securities must be redeemed on October 1, 2037; however, the Company has the option to shorten the maturity date to a date not earlier than October 1, 2012. Holders of the capital securities have no voting rights, are unsecured, and rank junior in priority of the payment to all of the Company’s indebtedness and senior to the Company’s capital stock.

On July 5, 2007, the Company exercised its option to redeem $5.0 million of Company Obligated Mandatorily Redeemable Preferred Securities of Trust II.

NOTE 10. SALE OF BRANCHES

During the second quarter of Fiscal 2007, the Bank closed on the sale of three branches and their associated book of business, along with one physical location. The Bank recognized a gain on sale of $2.8 million that resulted in the sale of $4.2 million in loans and $33.6 million in deposits.

NOTE 11. INTEREST RATE CONTRACTS

During the first quarter of Fiscal 2008, the Company entered into an interest rate swap agreement with a $5.0 million notional amount to convert the variable-rate Trust Preferred VI security into a fixed-rate security for a term of five years at a fixed rate of 6.69%. This rate swap is designated as a cash flow hedge. For the nine months ended March 31, 2008, the Company recognized net interest income of $4,700 and this was used to offset the interest expense for the subordinated debentures.

The Company is exposed to losses if the counterparty fails to make its payments under a contract in which the Company is in a receiving status. The Company minimizes its risk by monitoring the credit standing of the counterparty. The Company anticipates the counterparty will be able to fully satisfy its obligations under the remaining agreement.

NOTE 12. COMPREHENSIVE INCOME

Comprehensive income consists of two components, net income and other comprehensive income. Other comprehensive income refers to revenues, expenses and gains and losses under accounting principles generally accepted in the United States of America (“GAAP”) which are recorded as an element of shareholders’ equity but are excluded from net income. The components of total comprehensive income follow:

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2008			2007		2008			2007
	(Dollars in Thousands)

Net Income	$	1,623		$	1,034	$	4,221		$	4,242
Other comprehensive income:
Net change in unrealized gain (loss) on securities available for sale, net of deferred taxes	295			272		1,476			1,650
Net change in interest rate swap fair value	(237		)	—		(413		)	—
Total other comprehensive income	58			272		1,063			1,650

Total comprehensive income	$	1,681		$	1,306	$	5,284		$	5,892

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q 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, 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 risks discussed in Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for Fiscal 2007 and the following: possible legislative changes and adverse economic, business and competitive conditions and developments (such as shrinking interest margins and continued short-term rate 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, continuing or excessive claims against the Company’s self-insured health plan; the Company’s use of trust preferred securities; 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; or other significant uncertainties.

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.

Executive Summary

The Company’s net income for the third quarter of Fiscal 2008 was $1.6 million, or $0.40 in diluted earnings per share, compared to $1.0 million, or $0.25 in diluted earnings per share, for the third quarter of Fiscal 2007. For the first nine months of Fiscal 2008, net income was $4.2 million, or $1.05 in diluted earnings per share, compared to $4.2 million, or $1.05 in diluted earnings per share, for the first nine months of Fiscal 2007. Fiscal year 2007 second quarter net income included a non-recurring after-tax gain on sale of branches of $1.7 million, which represented $0.42 of diluted earnings per share. Return on average equity was 8.80% at March 31, 2008 compared to 9.59% at March 31, 2007.

The net interest margin on a fully taxable equivalent basis for the nine months ended March 31, 2008 was 3.08%, compared to 2.80% for the same period a year ago, an increase of 28 basis points. The increase over the same period last year is primarily attributable to a higher volume of earning assets and lower costs on liabilities. During the first quarter of Fiscal 2008, there was $125,000 expense of unamortized debt issue costs related to the early redemption of the Trust II Trust Preferred Securities. This caused a decrease of two basis points to the net interest margin on a fully taxable equivalent basis for the nine months ended March 31, 2008. During the second quarter of Fiscal 2007, the Company expensed $290,000 of unamortized debt issuance costs relating to the redemption of the Trust I Trust Preferred Securities. This caused a decrease of four basis points to the net interest margin on a fully taxable equivalent basis for the nine months ended March 31, 2007.

Net interest income for the first nine months of Fiscal 2008 was $21.4 million, an increase of $2.5 million, or 13.1%, over the same period a year ago. Net interest income increased $1.3 million, or 20.2%, to $7.7 million for the three months ended March 31, 2008 from $6.4 million for the same period in the prior fiscal year. For the nine months ended March 31, 2008, average interest-earning assets and average interest-bearing liabilities increased 2.6% and 1.9%, respectively, compared to the same period a year ago. Yields on earning assets increased to 6.74% in the first nine months of Fiscal 2008, compared to 6.70% a year ago, an increase of four basis points. For the same period, cost of funds decreased to 4.16%, compared to 4.40%, a decrease of 24 basis points.

Net interest margin ratio may vary due to many factors, including Federal Reserve policies for short-term interest rates, competitive and economic factors and customer preferences for various products and services. On September 18, 2007 the Federal Reserve decreased the Fed Funds Target Rate by 50 basis points, the first decrease in short-term interest rates since June 25, 2003. This action was followed by further Fed Funds rate cuts of 250 basis points through the second and third quarters of the fiscal year.

The Company had previously issued trust preferred securities primarily to provide funding for stock repurchases and to repay other borrowings. Interest expense on the $27.8 million of trust preferred securities outstanding decreased to $1.7 million for the nine months ended March 31, 2008, compared to $2.1 million for the same period a year ago, a decrease of $421,000 or 19.9%. The average rate paid on these securities decreased 203 basis points, from 10.12% at March 31, 2007 to 8.09% at March 31, 2008. In July 2007, the Company refinanced $5.0 million of trust preferred securities, originally issued in July 2002. This new funding was calculated at a rate based on three-month LIBOR plus 1.65%. This compares to the original issuance which was based on three-month LIBOR plus 3.65%. In December 2006, the Company refinanced $10.0 million of trust preferred securities, originally issued in November 2001. The new funding was calculated at a rate based on three-month LIBOR plus 1.83%, fixed for five years and adjusted quarterly thereafter, compared to the original issuance of six-month LIBOR plus 3.75%. The Company will evaluate the suitability to refinance additional trust preferred securities outstanding over the next year depending upon yield curve spreads which exist at the time of refinancing.

The allowance for loan and lease losses decreased to $5.6 million at March 31, 2008, compared to $5.8 million at March 31, 2007, a decrease of $208,000 or 3.6%. The ratio of allowance for loan and lease losses to total loans and leases was 0.72% as of March 31, 2008 compared to 0.76% at March 31, 2007. Total nonperforming assets at March 31, 2008 were $4.3 million as compared to $4.1 million a year ago, an increase of $195,000 or 4.7%. The ratio of nonperforming assets to total assets decreased to 0.40% at March 31, 2008, compared to 0.41% at March 31, 2007. The allowance for loan and lease losses is calculated based on loan and lease levels, loan and lease loss history, credit quality of the loan and lease portfolio, and environmental factors such as economic health of the region and management experience. This risk rating analysis is designed to give the Company a consistent and systematic methodology to determine proper levels for the allowance at a given time.

The Company made a strategic decision during the first quarter of Fiscal 2008 to stop originating indirect automobile loans, and will continue to service the existing portfolio. As of March 31, 2008, the Consumer Indirect loan portfolio balance was $52.8 million, a decrease of $30.3 million from June 30, 2007. The Company entered this line of business in the 1990’s as part of an interest rate risk reduction strategy, as well as for further diversification of the balance sheet.

The Company added to its investment portfolio, increasing to $216.0 million from $142.2 million since June 30, 2007. A widening of spreads over the treasury market in the third quarter provided an opportunity to add AAA-rated Agency mortgage-backed securities, and an occasion to leverage capital from the discontinued origination and reduction of indirect auto portfolio balances. The increase in securities available for sale was primarily funded by advances from the FHLB.

Total deposits at March 31, 2008 were $744.2 million, a decrease of $71.6 million, or 8.8%, from June 30, 2007. In-market deposits decreased from $744.3 million at June 30, 2007 to $733.2 million at March 31, 2008, a decrease of $11.2 million, or 1.5%. For the same period, out-of-market deposits decreased from $71.5 million to $11.0 million, respectively. Public funds have decreased, from $167.4 million at June 30, 2007 to $135.5 million at March 31, 2008. Interest expense on deposits was $20.1 million for the nine months ended March 31, 2008, a decrease of $1.1 million, or 5.0%, over the same period a year ago. The primary factors affecting interest expense on deposits was the decrease in the average rate paid on checking and money market deposits, from 3.77% at March 31, 2007 to 3.02% at March 31, 2008, offset by an increase in the average rate paid on certificates of deposits, from 4.57% at March 31, 2007 to 4.82% at March 31, 2008.

In October 2007, the Company announced an increase in its quarterly cash dividend, from 10.50 cents per share to 10.75 cents per share, resulting in an annualized increase of 2.4%.

The total risk-based capital ratio of 11.02% at March 31, 2008 is slightly below the 11.05% at June 30, 2007, with a decrease of three basis points. This continues to place the Bank in the “well capitalized” category within OTS regulation at March 31, 2008 and is consistent with the “well capitalized” OTS category in which the Company plans to operate. The Company historically has been able to manage the size of its assets through secondary market loan sales of single-family mortgages and student loans.

On March 31, 2008, the Company had in effect a stock buyback program in which up to 10% of the common stock of the Company outstanding on May 1, 2007 could be acquired through April 30, 2008. The Company utilized its stock buyback program during the third quarter, repurchasing 23,092 shares. For fiscal year 2008, the Company has repurchased a total of 99,092 shares. Under the current program, the Company is authorized to repurchase up to 300,049 additional shares of common stock through April 30, 2008. In addition, the Company approved a new stock buyback program in which up to 10% of the common stock of the Company outstanding on May 1, 2008 may be acquired through April 30, 2009. See Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for more details.

Non-interest income was $2.8 million for the quarter ended March 31, 2008 compared to $2.6 million at March 31, 2007, an increase of $194,000 or 7.4%. The primary factors affecting non-interest income were increases of $64,000 in loan servicing income and $58,000 in fees on deposits. Non-interest income for the nine months ended March 31, 2008 was $8.6 million compared to $10.4 million at March 31, 2007, a decrease of $1.8 million or 17.3%. The primary factors affecting non-interest income were a one-time gain on sale of branches of $2.8 million in Fiscal 2007. In addition, there were increases in loan servicing income of $341,000, fees on deposits of $318,000 and net gain on sale of loans of $276,000 for the nine months ended March 31, 2008 as compared to the same period in the prior fiscal year.

A component of other non-interest income includes tax-free earnings from general account BOLI, “Bank-Owned Life Insurance,” which stem from growth in policy values from various carriers. The Company has purchased general account BOLI through insurance companies with “Excellent” or “Very Strong” ratings from Moody’s, S&P, A.M. Best or Fitch.

Non-interest expense was $7.6 million for the quarter ended March 31, 2008 compared to $7.5 million at March 31, 2007, an increase of $83,000 or 1.1%. Compensation and employee benefit expense increased $219,000, offset by a decrease in other non-interest expense of $135,000. The increase in compensation and employee benefit expense was primarily due to increases in regular employee compensation of $499,000 and variable pay relating to employee incentives of $45,000, offset by a decrease in net healthcare costs of $432,000. The decrease in other non-interest expense was primarily due to a decrease in legal expenses of $85,000. Non-interest expense for the nine months ended March 31, 2008 was $22.4 million compared to $22.1 million at March 31, 2007, an increase of $335,000 or 1.5%. Compensation and employee benefits increased $816,000, primarily due to increases in regular employee compensation of $1.0 million, variable pay relating to employee incentives of $171,000 and recruiting costs of $109,000, offset by a decrease in net healthcare costs of $595,000. Check and data processing expenses increased $118,000, offset by a decrease in marketing of $581,000.

General

The Company is a financial services provider and, as such, has inherent risks that must be managed in order to achieve net income. Primary risks that affect net income include credit risk, liquidity risk, operational risk, regulatory compliance risk and reputation risk. The Company’s net income is derived by managing net interest margin, the ability to collect fees from services provided, by controlling the costs of delivering services and the management of loan and lease losses. The primary source of revenues comes from the net interest margin, which represents the difference between income on interest-earning assets (i.e. loans and investment securities) and expense on interest-bearing liabilities (i.e. deposits and borrowed funding). The net interest margin is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. Fees earned include charges for deposit services, trust services and loan services. Personnel costs are the primary expenses required to deliver the services to customers. Other costs include occupancy and equipment and general and administrative expenses.

Financial Condition Data

At March 31, 2008, the Company had total assets of $1.1 billion, an increase of $66.4 million from the level at June 30, 2007. The increase in assets was due primarily to increases in securities available for sale of $73.8 million, and FHLB stock of $5.5 million, offset by decreases in loans and leases receivable of $7.8 million and cash and cash equivalents of $3.7 million. The increase in liabilities of $63.2 million from June 30, 2007 to March 31, 2008 was primarily due to increases in advances from the FHLB and other borrowings of $131.7 million, offset by a decrease in out-of-market deposits of $60.5 million. In addition, stockholders’ equity increased $3.3 million to $65.5 million at March 31, 2008 from $62.3 million at June 30, 2007, primarily due to net income of $4.2 million.

The increase in securities available for sale of $73.8 million was primarily the result of purchases of $123.4 million exceeding sales, maturities and repayments of $52.2 million. The $123.4 million of purchases included fixed-rate, mortgage-backed securities of $87.4 million. The increase in FHLB stock of $5.5 million was the result of higher outstanding balances of advances.

The decrease in net loans and leases receivable of $7.8 million was due primarily to the previous announcement on the decision to stop indirect automobile loan origination. The balances on consumer indirect loans decreased $30.3 million from June 30, 2007 to March 31, 2008. This was offset by the increase in other loan and lease receivables of $22.4 million for the same period. In addition, net deferred costs decreased $605,000 from the levels at June 30, 2007, moving to a net deferred fees position of $23,000 at March 31, 2008.

Advances from the FHLB and other borrowings increased $131.7 million. The overall increase in FHLB borrowings was primarily the result of a decrease in out-of-market certificates of deposit of $60.5 million and increased purchases of securities available for sale of $123.4 million.

The $71.6 million decrease in deposits was due to decreases in out-of-market certificates of deposit of $60.5 million, money market accounts of $39.6 million, savings accounts of $5.3 million and non-interest bearing checking accounts of $3.4 million. The decrease in out-of-market certificates of deposit is attributed to a decision to pursue other sources of lower cost wholesale funds in the period. These decreases were offset by increases within in-market certificates of deposit of $35.4 million and interest-bearing checking accounts of $1.6 million. Public fund deposits decreased $31.9 million during the first nine months of Fiscal 2008 due to seasonal fluctuations typical for these accounts, primarily affecting the certificate of deposit and checking account balances.

During the period of fiscal years 2002 through 2004, the Company issued a total of $27.8 million in subordinated debentures payable to trusts at various times through its trust subsidiaries. Each of the issuances included an option to shorten the maturity date at a specific time as stated in the contract. The issuance of $5.0 million of Company Obligated Mandatorily Redeemable Preferred Securities of Trust II on July 11, 2002 included an option to shorten the maturity date to July 5, 2007. The Company exercised this option to redeem $5.0 million of trust preferred securities. Also during the first quarter of Fiscal 2008, the Company issued $5.0 million of Company Obligated Mandatorily Redeemable Preferred Securities of Trust VI. The new funding is calculated at a rate based on three-month LIBOR plus 1.65%, compared to the original issuance which was based on three-month LIBOR plus 3.65%. The unamortized amount of $125,000 deferred debt issuance costs related to the original issuance was expensed.

The following tables show the composition of the Company’s loan and lease portfolio and deposit accounts:

Loan and Lease Portfolio Composition

	At March 31, 2008				At June 30, 2007
	Amount		Percent		Amount		Percent
	(Dollars in Thousands)

One-to four-family (1)	$	102,274	13.46	%	$	116,544	15.18	%
Commercial business and real estate (2) (3)	300,728		39.59	%	275,646		35.92	%
Multi-family real estate	42,057		5.54	%	34,047		4.44	%
Equipment finance leases	20,914		2.75	%	22,307		2.91	%
Consumer Direct (4)	101,001		13.30	%	104,647		13.63	%
Consumer Indirect (5)	52,832		6.96	%	83,094		10.83	%
Agricultural	133,944		17.63	%	116,710		15.21	%
Construction and development	5,874		0.77	%	14,476		1.88	%
Total Loans and Leases Receivable (6)	$	759,624	100.00	%	$	767,471	100.00	%

(1) Excludes $7,060 and $8,290 loans held for sale at March 31, 2008 and June 30, 2007, respectively.

(2) Includes $3,109 and $3,297 tax exempt leases at March 31, 2008 and June 30, 2007, respectively.

(3) Excludes $223 commercial loans held for sale at March 31, 2008 and June 30, 2007.

(4) Excludes $2,644 and $263 student loans held for sale at March 31, 2008 and June 30, 2007, respectively.

(5) The Company announced Consumer Indirect originations ceased during the first quarter of Fiscal 2008.

(6) Includes deferred loan fees and discounts and undisbursed portion of loans in process.

Deposit Composition

	At March 31, 2008				At June 30, 2007
	Amount		Percent		Amount		Percent
	(Dollars in Thousands)

Noninterest bearing checking accounts	$	83,316	11.20	%	$	86,679	10.62	%
Interest bearing checking accounts	88,655		11.91	%	87,030		10.67	%
Money market accounts	172,970		23.24	%	212,546		26.05	%
Savings accounts	60,930		8.19	%	66,235		8.12	%
In-Market Certificates of deposit	327,299		43.98	%	291,858		35.77	%
Out-of-Market Certificates of deposit	11,049		1.48	%	71,516		8.77	%
Total Deposits	$	744,219	100.00	%	$	815,864	100.00	%

Analysis of Net Interest Income

Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them.

Average Balances, Interest Rates and Yields. The following table presents for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. The table does not reflect any effect of income taxes, except where noted. Average balances consist of daily average balances for the Bank with simple average balances for all other subsidiaries of the Company. The average balances include nonaccruing loans and leases. The yields on loans and leases include origination fees, net of costs, which are considered adjustments to yield.

	Three Months Ended March 31,
	2008						2007
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Balance		Paid		Rate		Balance		Paid		Rate
	(Dollars in Thousands)
Interest-earning assets:
Loans and leases receivable (1) (3)	$	766,960	$	13,188	6.92	%	$	758,370	$	13,435	7.18	%
Investment securities (2) (3)	173,835		2,253		5.21	%	156,671		1,869		4.84	%
FHLB stock	8,889		101		4.56	%	5,768		56		3.94	%

Total interest-earning assets	949,684		$	15,542	6.58	%	920,809		$	15,360	6.77	%
Noninterest-earning assets	70,917						70,682
Total assets	$	1,020,601					$	991,491

Interest-bearing liabilities:
Deposits:
Checking and money market	$	262,518	$	1,495	2.29	%	$	286,371	$	2,639	3.74	%
Savings	54,391		256		1.89	%	48,029		344		2.90	%
Certificates of deposit	343,517		3,942		4.61	%	367,374		4,285		4.73	%
Total interest-bearing deposits	660,426		5,693		3.47	%	701,774		7,268		4.20	%
FHLB advances and other borrowings	159,773		1,660		4.18	%	99,139		1,132		4.63	%
Subordinated debentures payable to trusts	27,837		494		7.14	%	27,837		557		8.11	%

Total interest-bearing liabilities	848,036		7,847		3.72	%	828,750		8,957		4.38	%
Noninterest-bearing deposits	79,186						74,017
Other liabilities	28,217						27,685
Total liabilities	955,439						930,452
Equity	65,162						61,039
Total liabilities and equity	$	1,020,601					$	991,491

Net interest income; interest rate spread (4)			$	7,695	2.86	%			$	6,403	2.39	%

Net interest margin (4) (5)					3.26	%					2.82	%

Net interest margin, TE (6)					3.32	%					2.87	%

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

(2) Includes federal funds sold.

(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, 2008 and March 31, 2007 have been annualized.

(5) Net interest margin is net interest income divided by average interest-earning assets.

(6) Net interest margin expressed on a fully taxable equivalent basis.

	Nine Months Ended March 31,
	2008						2007
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Balance		Paid		Rate		Balance		Paid		Rate
	(Dollars in Thousands)
Interest-earning assets:
Loans and leases receivable (1) (3)	$	772,732	$	41,187	7.09	%	$	755,079	$	40,403	7.13	%
Investment securities (2) (3)	160,577		6,176		5.12	%	155,158		5,488		4.71	%
FHLB stock	7,403		249		4.47	%	6,466		210		4.33	%

Total interest-earning assets	940,712		$	47,612	6.74	%	916,703		$	46,101	6.70	%
Noninterest-earning assets	70,653						68,177
Total assets	$	1,011,365					$	984,880

Interest-bearing liabilities:
Deposits:
Checking and money market	$	271,388	$	6,153	3.02	%	$	281,144	$	7,953	3.77	%
Savings	52,195		940		2.40	%	43,302		812		2.50	%
Certificates of deposit	359,620		13,011		4.82	%	361,828		12,403		4.57	%
Total interest-bearing deposits	683,203		20,104		3.92	%	686,274		21,168		4.11	%
FHLB advances and other borrowings	129,295		4,456		4.59	%	110,696		3,938		4.74	%
Subordinated debentures payable to trusts (4)	27,837		1,693		8.09	%	27,837		2,114		10.12	%

Total interest-bearing liabilities	840,335		26,253		4.16	%	824,807		27,220		4.40	%
Noninterest-bearing deposits	79,544						77,069
Other liabilities	27,650						23,998
Total liabilities	947,529						925,874
Equity	63,836						59,006
Total liabilities and equity	$	1,011,365					$	984,880

Net interest income; interest rate spread (5)			$	21,359	2.58	%			$	18,881	2.30	%

Net interest margin (5) (6)					3.02	%					2.74	%

Net interest margin, TE (7)					3.08	%					2.80	%

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

(2) Includes federal funds sold.

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

(4) Includes $125 and $290 expense in July 2007 and December 2006, respectively, for unamortized debt issuance costs.

(5) Percentages for the nine months ended March 31, 2008 and March 31, 2007 have been annualized.

(6) Net interest margin is net interest income divided by average interest-earning assets.

(7) Net interest margin expressed on a fully taxable equivalent basis.

Rate/Volume Analysis of Net Interest Income

The following schedule presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the increases and decreases due to fluctuating outstanding balances due to the levels and volatility of interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

	Three Months Ended March 31,									Nine Months Ended March 31,
	2008 vs 2007									2008 vs 2007
	Increase			Increase						Increase			Increase
	(Decrease)			(Decrease)			Total			(Decrease)			(Decrease)			Total
	Due to			Due to			Increase			Due to			Due to			Increase
	Volume			Rate			(Decrease)			Volume			Rate			(Decrease)
	(Dollars in Thousands)
Interest-earning assets:
Loans and leases receivable (1)	$	209		$	(456	)	$	(247	)	$	964		$	(180	)	$	784
Investment securities (2)	214			170			384			195			493			688
FHLB stock	31			14			45			31			8			39

Total interest-earning assets	$	454		$	(272	)	$	182		$	1,190		$	321		$	1,511

Interest-bearing liabilities:
Deposits:
Checking and money market	$	(211	)	$	(933	)	$	(1,144	)	$	(273	)	$	(1,527	)	$	(1,800	)
Savings	48			(136		)	(88		)	168			(40		)	128
Certificates of deposit	(262		)	(81		)	(343		)	(70		)	678			608
Total interest-bearing deposits	(425		)	(1,150		)	(1,575		)	(175		)	(889		)	(1,064		)
FHLB advances and other borrowings	703			(175		)	528			664			(146		)	518
Subordinated debentures payable to trusts	—			(63		)	(63		)	—			(421		)	(421		)

Total interest-bearing liabilities	$	278		$	(1,388	)	$	(1,110	)	$	489		$	(1,456	)	$	(967	)

Net interest income increase							$	1,292								$	2,478

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

(2) Includes federal funds sold.

Application of Critical Accounting Policies

GAAP requires management to utilize estimates when reporting financial results. The Company has identified the policies discussed below as Critical Accounting Policies because the accounting estimates require management to make certain assumptions about matters which may be uncertain at the time the estimate was made and a different method of estimating could have been reasonably made which could have a material impact on the presentation of the Company’s financial condition, changes in financial condition or results of operations.

Allowance for Loan and Lease Losses – GAAP requires the Company to set aside reserves or maintain an allowance against probable loan and lease losses in the loan and lease portfolio. Management must develop a consistent and systematic approach to estimate the appropriate balances to cover the probable losses. Due to the uncertainty of future events, the approach includes a process that may differ significantly from other methodologies and still produce an estimate in accordance with GAAP.

The allowance is compiled by utilizing the Company’s loan and lease risk rating system, which is structured to identify weaknesses in the loan and lease portfolio. The risk rating system has evolved to a process whereby management believes the system will properly identify the credit risk associated with the loan and lease portfolio. Due to the stratification of loans and leases for the allowance calculation, the estimate of the allowance for loan and lease losses could change materially if the loan and lease risk rating system would not properly identify the strength of a large or a few large loan and lease customers. Although management believes it uses the best information available to determine the allowance, unforeseen market or borrower conditions could result in adjustments and net earnings being significantly affected if circumstances differ substantially from the assumptions used in making the final determinations.

Mortgage Servicing Rights (“MSR”) – The Company records a servicing asset for contractually separated servicing from the underlying mortgage loans. The asset is initially recorded at fair value and represents an intangible asset backed by an income stream from the serviced assets. The asset is amortized in proportion to and over the period of estimated net servicing income.

At each balance sheet date, the MSRs are analyzed for impairment, which occurs when the fair value of the MSRs is lower than the amortized book value. The Company’s MSRs are primarily servicing rights acquired on South Dakota Housing Development Authority first time homebuyers program. Due to the lack of quoted markets for the Company’s servicing portfolio, the Company estimates the fair value of the MSRs using present value of future cash flow analysis. If the analysis produces a fair value greater than or equal to the amortized book value of the MSRs, no impairment is recognized. If the fair value is less than the book value, an expense for the difference is charged to earnings by initiating a MSR valuation account. If the Company determines this impairment is temporary, any future changes in fair value are recorded as a change in earnings and the valuation. If the Company determines the impairment to be permanent, the valuation is written off against the MSRs, which results in a new amortized balance.

The Company has included MSRs as a critical accounting policy because the use of estimates for determining fair value using present value concepts may produce results which may significantly differ from other fair value analysis perhaps even to the point of recording impairment. The risk to earnings is when the underlying mortgages pay off significantly faster than the assumptions used in the previously recorded amortization. Estimating future cash flows on the underlying mortgages is a difficult analysis and requires judgment based on the best information available. The Company looks at alternative assumptions and projections when preparing a reasonable and supportable analysis. Based on the Company’s quarterly analysis of MSRs, there was no impairment to the MSRs at March 31, 2008.

Self-Insurance - The Company has a self-insured healthcare plan for its employees up to certain limits. To mitigate a portion of these risks, the Company has a stop-loss insurance policy through a commercial insurance carrier for coverage in excess of $65,000 per individual occurrence with a maximum aggregate limitation of $2.0 million. The estimate of self-insurance liability is based upon known claims and an estimate of incurred, but not reported (“IBNR”) claims. IBNR claims are estimated using historical claims lag information received by a third party claims administrator. Due to the uncertainty of health claims, the approach includes a process which may differ significantly from other methodologies and still produce an estimate in accordance with GAAP. Although management believes it uses the best information available to determine the accrual, unforeseen health claims could result in adjustments to the accrual. These adjustments could significantly affect net earnings if circumstances differ substantially from the assumptions used in estimating the accrual.

Asset Quality and Potential Problem Loans and Leases

Nonperforming assets (nonaccrual loans and leases, accruing loans and leases delinquent more than 90 days and foreclosed assets) increased to $4.3 million at March 31, 2008 from $4.0 million at June 30, 2007, an increase of $299,000, or 7.5%. Accruing loans and leases delinquent more than 90 days increased $549,000 to $1.9 million at March 31, 2008 from $1.3 million at June 30, 2007. Nonaccruing loans and leases decreased $184,000 to $2.0 million at March 31, 2008 from $2.2 million at June 30, 2007. In addition, the ratio of nonperforming assets to total assets, which is one indicator of credit risk exposure, was 0.40% at March 31, 2008, remaining the same as the 0.40% reported at June 30, 2007.

Nonaccruing loans and leases decreased 8.4%, or $184,000, to $2.0 million at March 31, 2008 compared to $2.2 million at June 30, 2007. Included in nonaccruing loans and leases at March 31, 2008 were eight loans totaling $335,000 secured by one- to four-family real estate, one loan totaling $153,000 secured by commercial real estate, 11 loans totaling $555,000 secured by commercial business, four loans totaling $260,000 secured by agriculture, four leases totaling $134,000 and 38 consumer loans totaling $569,000.

The risk rating system in place is designed to identify and manage the nonperforming loans and leases. Commercial and agricultural loans and equipment finance leases will have specific reserve allocations based on collateral values or based on the present value of expected cash flows if the loans and leases are deemed impaired. Loans and leases that are not performing do not necessarily result in a loss.

As of March 31, 2008, the Company had $442,000 of foreclosed assets. The balance of foreclosed assets at March 31, 2008 consisted of $234,000 of single-family collateral owned, $28,000 of equipment finance leases and $180,000 of consumer collateral owned.

At March 31, 2008, the Company had designated $12.6 million of its assets as special mention and classified $8.2 million of its assets that management has determined need to be closely monitored because of possible credit problems of the borrowers or the cash flows of the secured properties. At March 31, 2008 the Company had $22.3 million in multi-family, commercial business, commercial real estate and agricultural participation loans purchased, of which $243,000 were classified as of March 31, 2008. These loans and leases were considered in determining the adequacy of the allowance for loan and lease losses. The allowance for loan and lease losses is established based on management’s evaluation of the risks probable in the loan and lease portfolio and changes in the nature and volume of loan and lease activity. Such evaluation, which includes a review of all loans and leases for which full collectability may not be reasonably assured, considers the estimated fair market value of the underlying collateral, present value of expected principal and interest payments, economic conditions, historical loss experience and other factors that warrant recognition in providing for an adequate loan and lease loss allowance.

Although the Company’s management believes the March 31, 2008 recorded allowance for loan and lease losses was adequate to provide for probable losses on the related loans and leases, there can be no assurance the allowance existing at March 31, 2008 will be adequate in the future.

In accordance with the Company’s internal classification of assets policy, management evaluates the loan and lease portfolio on a monthly basis to identify loss potential and determine the adequacy of the allowance for loan and lease losses quarterly. Loans and leases are placed on nonaccrual status when the collection of principal and/or interest becomes doubtful. Foreclosed assets include assets acquired in settlement of loans and leases. The following table sets forth the amounts and categories of the Company’s nonperforming assets for the periods indicated.

	Nonperforming Assets As Of
	March 31,			June 30,
	2008			2007
	(Dollars in Thousands)
Nonaccruing loans and leases:
One- to four-family	$	335		$	228
Commercial real estate	153			25
Commercial business	555			1,441
Equipment finance leases	134			118
Consumer	569			378
Agricultural	260			—
Total	2,006			2,190

Accruing loans and leases delinquent more than 90 days:
One- to four-family	306			470
Commercial real estate	262			178
Commercial business	790			213
Equipment finance leases	309			88
Consumer	23			1
Agricultural	167			358
Total	1,857			1,308

Foreclosed assets: (1)
One- to four-family	234			158
Equipment finance leases	28			180
Consumer	180			170
Total	442			508

Total nonperforming assets	$	4,305		$	4,006

Ratio of nonperforming assets to total assets	0.40		%	0.40		%

Ratio of nonperforming loans and leases to total loans and leases (2) (3)	0.50		%	0.45		%

(1) Total foreclosed assets do not include land or other real estate owned held for sale.

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

(3) Total loans and leases include loans held for sale.

The following table sets forth information with respect to activity in the Company’s allowance for loan and lease losses during the periods indicated.

	Nine Months Ended March 31,
	2008			2007
	(Dollars in Thousands)

Balance at beginning of period	$	5,872		$	5,657
Charge-offs:
One- to four-family	(3		)	(12		)
Commercial business	(873		)	(216		)
Equipment finance leases	(198		)	(133		)
Consumer	(626		)	(527		)
Agricultural	—			(31		)
Total charge-offs	(1,700		)	(919		)

Recoveries:
One- to four-family	2			3
Commercial business	9			—
Equipment finance leases	18			—
Consumer	193			171
Agricultural	5			80
Total recoveries	227			254

Net (charge-offs)	(1,473		)	(665		)

Additions charged to operations	1,171			786

Balance at end of period	$	5,570		$	5,778

Ratio of net (charge-offs) during the period to average loans and leases outstanding during the period	(0.19		)%	(0.09		)%

Ratio of allowance for loan and lease losses to total loans and leases at end of period (1)	0.72		%	0.76		%

Ratio of allowance for loan and lease losses to nonperforming loans and leases at end of period (2)	144.19		%	163.22		%

(1) Total loans and leases include loans held for sale.

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

The distribution of the Company’s allowance for loan and lease losses and impaired loss summary as required by FASB Statement No. 114, “Accounting by Creditors for Impairment of a Loan” are summarized in the following tables. The combination of FASB Statement No. 5 “Accounting for Contingencies” and FASB Statement No. 114 calculations comprise the Company’s allowance for loan and lease losses.

	Allowance		Impaired Loan		Allowance		Impaired Loan
	for Loan and		Valuation		for Loan and		Valuation
	Lease Losses		Allowance		Lease Losses		Allowance
Loan and Lease Type	At March 31, 2008				At June 30, 2007
	(Dollars in Thousands)

One- to four-family	$	318	$	—	$	342	$	—
Commercial real estate	738		—		524		—
Multi-family real estate	129		—		123		—
Commercial business	1,355		90		1,974		335
Equipment finance leases	542		—		486		—
Consumer	1,234		—		1,178		—
Agricultural	1,034		130		860		50
Total	$	5,350	220		$	5,487	385

Impaired Loan Summary

				Impaired				Impaired
	Number			Loan	Number			Loan
	of Loan	Loan		Valuation	of Loan	Loan		Valuation
	Customers	Balance		Allowance	Customers	Balance		Allowance
Loan and Lease Type	At March 31, 2008				At June 30, 2007
	(Dollars in Thousands)

Commercial business	4	$	390	90	7	$	1,360	335
Agricultural	2	341		130	1	121		50
Total	6	$	731	220	8	$	1,481	385

The allowance for loan and lease losses was $5.6 million at March 31, 2008 as compared to $5.8 million at March 31, 2007. The ratio of the allowance for loan and lease losses to total loans and leases was 0.72% at March 31, 2008 compared to 0.76% at March 31, 2007. The Company’s management has considered nonperforming loans and leases and potential problem loans and leases in establishing the allowance for loan and lease losses. The Company continues to monitor its allowance for probable loan and lease losses and make future additions or reductions in light of the level of loans and leases in its portfolio and as economic conditions dictate. The current level of the allowance for loan and lease losses is a result of management’s assessment of the risks within the portfolio based on the information revealed in credit reporting processes. The Company utilizes a risk-rating system on all commercial business, agricultural, construction and multi-family and commercial real estate loans, including purchased loans and leases. A periodic credit review is performed on all types of loans and leases to establish the necessary reserve based on the estimated risk within the portfolio. This assessment of risk takes into account the composition of the loan and lease portfolio, historical loss experience for each loan and lease category, previous loan and lease experience, concentrations of credit, current economic conditions and other factors that in management’s judgment deserve recognition.

Real estate properties acquired through foreclosure are recorded at the lower of cost or fair value (less a deduction for disposition costs). Valuations are periodically updated by management and a specific provision for losses on such properties is established by a charge to operations if the carrying values of the properties exceed their estimated net realizable values.

Although management believes it uses the best information available to determine the allowances, unforeseen market conditions could result in adjustments and net earnings being significantly affected if circumstances differ substantially from the assumptions used in making the final determinations. Future additions to the Company’s allowances may result from periodic loan, property or collateral reviews which cannot be predicted at this time.

Comparison of the Three Months Ended March 31, 2008 and March 31, 2007

General. The Company’s net income was $1.6 million, or $0.41 in basic and $0.40 in diluted earnings per share for the three months ended March 31, 2008, a $589,000 increase in earnings compared to $1.0 million, or $0.26 in basic and $0.25 in diluted earnings per share for the same period in the prior fiscal year. For the three months ended March 31, 2008, the return on average equity was 10.02% compared to 6.78% for the same period in the prior fiscal year. For the three months ended March 31, 2008, the return on average assets was 0.64% compared to 0.42% for the same period in the prior fiscal year. As discussed in more detail below, the increases were due to a variety of key factors, including increases in interest income of $182,000 and non-interest income of $194,000 and a decrease in interest expense of $1.1 million offset by an increase in provision for losses on loans and leases of $517,000 and an increase in non-interest expense of $83,000.

Interest, Dividend and Loan Fee Income. Interest, dividend and loan fee income was $15.5 million for the three months ended March 31, 2008 as compared to $15.4 million for the same period in the prior fiscal year, an increase of $182,000 or 1.2%. A $209,000 increase in interest, dividend and loan fee income was due to a 1.1% increase in the average volume of loans and leases receivable, a $214,000 increase in interest, dividend and loan fee income was the result of an 11.0% increase in the average volume of investment securities and a $170,000 increase in interest, dividend and loan fee income was due to an increase in the average yield on investment securities from 4.84% for the three months ended March 31, 2007 to 5.21% for the three months ended March 31, 2008. This was offset by a $456,000 decrease in the average yield on loans and leases receivable from 7.18% at March 31, 2007 to 6.92% at March 31, 2008. The average yield on total interest-earning assets was 6.58% for the three months ended March 31, 2008 as compared to 6.77% for the same period in the prior fiscal year.

Interest Expense. Interest expense was $7.8 million for the three months ended March 31, 2008 as compared to $9.0 million for the same period in the prior fiscal year, a decrease of $1.1 million or 12.4%. A $1.2 million decrease in interest expense was the result of a decrease in the average rate paid on interest-bearing deposits from 4.20% for the three months ended March 31, 2007 to 3.47% for the three months ended March 31, 2008. A $425,000 interest expense decrease was due to a 5.9% decrease in the average volume on interest-bearing deposits. An interest expense increase of $703,000 was due to a 61.2% increase in the average volume of FHLB advances and other borrowings. The average rate paid on total interest-bearing liabilities was 3.72% for the three months ended March 31, 2008 as compared to 4.38% for the same period in the prior fiscal year.

Net Interest Income. The Company’s net interest income for the three months ended March 31, 2008 increased $1.3 million, or 20.2%, to $7.7 million compared to $6.4 million for the same period in the prior fiscal year. The increase in net interest income was due primarily to decreases in the average rate paid on interest-bearing liabilities and increases in the average volume of interest-earning assets for the three months ended March 31, 2008 compared to the same period in the prior fiscal year. The Company’s net interest margin on a fully taxable equivalent basis was 3.32% for the three months ended March 31, 2008 as compared to 2.87% for the same period in the prior fiscal year.

Provision for Losses on Loans and Leases. The allowance for loan and lease losses is maintained at a level which is considered by management to be adequate to absorb probable losses on existing loans and leases that may become uncollectible, based on an evaluation of the collectability of loans and leases and prior loan and lease loss experience. The evaluation takes into consideration such factors as changes in the nature and volume of the loan and lease portfolio, overall portfolio quality, review of specific problem loans and leases, and current economic conditions that may affect the borrower’s ability to pay. The allowance for loan and lease losses is established through a provision for losses on loans and leases charged to expense.

During the three months ended March 31, 2008, the Company recorded a provision for losses on loans and leases of $551,000 compared to $34,000 for the three months ended March 31, 2007, an increase of $517,000. See “Asset Quality” for further discussion.

Non-interest Income. Non-interest income was $2.8 million for the three months ended March 31, 2008 as compared to $2.6 million for the same period in the prior fiscal year, an increase of $194,000, or 7.4%. The increase in non-interest income was attributable to increases of $64,000 in loan servicing income, $58,000 in fees on deposits and $47,000 in other non-interest income for the three months ended March 31, 2008 as compared to the same period in the prior fiscal year.

Loan servicing income increased $64,000 from $525,000 for the three months ended March 31, 2007 to $589,000 for the three months ended March 31, 2008 primarily due to an increase of $64.4 million in the balances of loans serviced by the Bank from $962.7 million at March 31, 2007 to $1.027 billion at March 31, 2008.

Fees on deposits increased $58,000, for the three months ended March 31, 2008 as compared to the same period in the prior fiscal year, primarily due to increased point-of-sale interchange revenue.

Other non-interest income increased $47,000 for the three months ended March 31, 2008 as compared to the same period in the prior fiscal year, primarily due to a gain of $77,000 due to the mandatory partial redemption of VISA Inc. class B common stock.

Non-interest Expense. Non-interest expense was $7.6 million for the three months ended March 31, 2008 as compared to $7.5 million for the three months ended March 31, 2007, an increase of $83,000, or 1.1%. The increase in non-interest expense was primarily due to increases in compensation and employee benefits of $219,000 offset by a decrease in other non-interest expense of $135,000.

Compensation and employee benefits increased $219,000, or 4.6%, from $4.8 million for the three months ended March 31, 2007 to $5.0 million for the three months ended March 31, 2008. Regular employee compensation increased $499,000 and variable pay related to employee incentives increased $45,000, offset by a decrease in net healthcare costs of $432,000.

Other non-interest expense decreased $135,000, or 14.3%, from $946,000 for the three months ended March 31, 2007 to $811,000 for the three months ended March 31, 2008, primarily due to a decrease in legal expenses of $85,000.

Income tax expense. The Company’s income tax expense for the three months ended March 31, 2008 increased $297,000 or 62.3% to $774,000 compared to $477,000 for the same period in the prior fiscal year. The effective tax rate was 32.29% and 31.57% for the three months ended March 31, 2008 and 2007, respectively.

Comparison of the Nine Months Ended March 31, 2008 and March 31, 2007

General. The Company’s net income was $4.2 million, or $1.06 in basic and $1.05 in diluted earnings per share for the nine months ended March 31, 2008, a $21,000 decrease in earnings compared to $4.2 million, or $1.07 in basic and $1.05 in diluted earnings per share for the same period in the prior fiscal year. For the nine months ended March 31, 2008, the return on average equity was 8.80% compared to 9.59% for the same period in the prior fiscal year. For the nine months ended March 31, 2008, the return on average assets was 0.56% compared to 0.57% for the same period in the prior fiscal year. As discussed in more detail below, the decrease was due to a variety of key factors, including an increase in interest income of $1.5 million and a decrease in interest expense of $967,000 offset by a decrease in non-interest income of $1.8 million, an increase in provision for losses on loans and leases of $385,000 and an increase in non-interest expense of $335,000.

Interest, Dividend and Loan Fee Income. Interest, dividend and loan fee income was $47.6 million for the nine months ended March 31, 2008 as compared to $46.1 million for the same period in the prior fiscal year, an increase of $1.5 million or 3.3%. A $964,000 increase in interest, dividend and loan fee income was due to a 2.3% increase in the average volume of loans and leases receivable. A $493,000 increase in interest, dividend and loan fee income was the result of an increase in the average yield on investment securities from 4.71% for the nine months ended March 31, 2007 to 5.12% for the nine months ended March 31, 2008. The average yield on total interest-earning assets was 6.74% for the nine months ended March 31, 2008 as compared to 6.70% for the same period in the prior fiscal year.

Interest Expense. Interest expense was $26.3 million for the nine months ended March 31, 2008 as compared to $27.2 million for the same period in the prior fiscal year, a decrease of $967,000 or 3.6%. An $889,000 decrease in interest expense was the result of a decrease in the average rate paid on interest-bearing deposits from 4.11% for the nine months ended March 31, 2007 to 3.92% for the nine months ended March 31, 2008, and a $664,000 increase in interest expense was the result of an increase in the average volume of FHLB advances and other borrowings of 16.8%. A net interest expense decrease of $165,000 was due to the unamortized debt issuance costs relating to the early redemption of two Trust Preferred Securities and $256,000 in interest expense was the result of a decrease in the average rate paid on subordinated debentures payable to trusts moving from 10.12% for the nine months ended March 31, 2007 to 8.09% for the nine months ended March 31, 2008, The average rate paid on total interest-bearing liabilities was 4.16% for the nine months ended March 31, 2008 as compared to 4.40% for the same period in the prior fiscal year.

Net Interest Income. The Company’s net interest income for the nine months ended March 31, 2008 increased $2.5 million, or 13.1%, to $21.4 million compared to $18.9 million for the same period in the prior fiscal year. The increase in net interest income was due primarily to increases in the average volume of interest-earning assets and average yield on interest-earning assets and by decreases in the average rate paid on interest-bearing deposits and subordinated debentures payable to trusts offset by an increase in the average volume of FHLB advances and other borrowings for the nine months ended March 31, 2008 compared to the same period in the prior fiscal year. The Company’s net interest margin on a fully taxable equivalent basis was 3.08% for the nine months ended March 31, 2008 as compared to 2.80% for the same period in the prior fiscal year.

During the nine months ended March 31, 2008, the Company recorded a provision for losses on loans and leases of $1.2 million compared to $786,000 for the nine months ended March 31, 2007, an increase of $385,000. See “Asset Quality” for further discussion.

Non-interest Income. Non-interest income was $8.6 million for the nine months ended March 31, 2008 as compared to $10.4 million for the same period in the prior fiscal year, a decrease of $1.8 million, or 17.3%. The decrease in non-interest income was primarily attributable to a one-time gain on sale of branches of $2.8 million in Fiscal 2007. In addition, there were increases in loan servicing income of $341,000, fees on deposits of $318,000 and net gain on sale of loans of $276,000 for the nine months ended March 31, 2008 as compared to the same period in the prior fiscal year.

Loan servicing income increased $341,000 from $1.3 million for the nine months ended March 31, 2007 to $1.6 million for the nine months ended March 31, 2008 primarily due to an increase of $64.4 million in the balances of loans serviced by the Bank from $962.7 million at March 31, 2007 to $1.027 billion at March 31, 2008.

Fees on deposits increased $318,000 to $4.1 million for the nine months ended March 31, 2008 from $3.7 million the same period in the prior fiscal year primarily due to an increase in higher activity and increased service pricing.

Net gain on sale of loans increased $276,000 from $679,000 for the nine months ended March 31, 2007 to $955,000 for the nine months ended March 31, 2008 primarily due to an increase in the amount of loans sold.

Non-interest Expense. Non-interest expense was $22.4 million for the nine months ended March 31, 2008 as compared to $22.1 million for the nine months ended March 31, 2007, an increase of $335,000, or 1.5%. The increase in non-interest expense was primarily due to increases in compensation and employee benefits of $816,000 and check and data processing expenses of $118,000 offset by a decrease in marketing of $581,000.

Compensation and employee benefits increased $816,000, or 6.1%, from $13.4 million for the nine months ended March 31, 2007 to $14.2 million for the nine months ended March 31, 2008.

Check and data processing expenses increased $118,000 for the nine months ended March 31, 2008 compared to the same period in the prior fiscal year, primarily due to increases in data processing expenses of $126,000 for the nine months ended March 31, 2008 compared to the nine months ended March 31, 2007.

Marketing expense decreased $581,000, or 42.6%, from $1.4 million for the nine months ended March 31, 2007 to $783,000 for the nine months ended March 31, 2008 primarily due to several deposit packages introduced during Fiscal 2007.

Income tax expense. The Company’s income tax expense for the nine months ended March 31, 2008 decreased $12,000, or 0.6%, to $2.1 million compared to $2.2 million for the same period in the prior fiscal year. The effective tax rate was 33.74% and 33.75% for the nine months ended March 31, 2008 and 2007, respectively.

Liquidity and Capital Resources

The Bank’s primary sources of funds are earnings, in-market deposits, FHLB advances and other borrowings, repayments of loan principal, mortgage-backed securities and callable agency securities and, to a lesser extent, sales of mortgage loans, sales and maturities of securities, out-of-market deposits and short-term investments. While scheduled loan payments and maturing securities are relatively predictable, deposit flows and loan and security prepayments are more influenced by interest rates, general economic conditions and competition. The Bank attempts to price its deposits to meet its asset/liability objectives consistent with local market conditions. Excess balances are invested in overnight funds.

Liquidity management is both a daily and long-term responsibility of management. The Bank adjusts its investments in liquid assets based upon management’s assessment of (i) expected loan demand, (ii) projected loan sales, (iii) expected deposit flows, (iv) yields available on interest-bearing deposits, and (v) the objectives of its asset/liability management program. Excess liquidity is invested generally in interest-bearing overnight deposits and other short-term government and agency obligations.

The Bank anticipates it will have sufficient funds available to meet current loan commitments. At March 31, 2008, the Bank had outstanding commitments to originate mortgage loans of $22.2 million and non-mortgage loans of $15.6 million. In addition, the Bank had outstanding commitments to sell residential mortgage loans of $13.6 million, commercial business loans of $223,000 and consumer student loans of $2.6 million. Commitments by the Bank to originate loans are not necessarily executed by the customer. The Bank monitors the ratio of commitments to funding for use in liquidity management. At March 31, 2008, the Bank had commitments to purchase securities available for sale of $10.8 million and no commitments to sell securities available for sale.

Although in-market deposits are the Bank’s primary source of funds, the Bank’s policy has been to utilize borrowings where the funds can be invested in either loans or securities at a positive rate of return or to use the funds for short-term liquidity purposes. The Bank has unsecured federal funds accommodations totaling $25.0 million with correspondent banks. In addition, the Company has a revolving line of credit totaling $6.0 million with a correspondent bank. There were no funds drawn on either line of credit at March 31, 2008. Additionally, as of March 31, 2008, the Bank had $11.0 million in out-of-market certificates of deposit. The Bank may also seek other sources of contingent liquidity including additional federal funds purchased lines with correspondent banks and lines of credit with the Federal Reserve Bank.

The Company uses its capital resources to pay dividends to its stockholders, to repurchase Company stock pursuant to Board of Directors approved plans, to support organic growth, to make acquisitions, to service its debt obligations and to provide funding for investment into the Bank of Tier 1 (core) capital.

On March 31, 2008, the Company had in effect a stock buyback program in which up to 10% of the common stock of the Company outstanding on May 1, 2007 could be acquired through April 30, 2008. As of March 31, 2008, 99,092 shares of common stock had been purchased pursuant to the program. In addition, the Company approved a new stock buyback program in which up to 10% of the common stock of the Company outstanding on May 1, 2008 may be acquired through April 30, 2009. See Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q.

Savings institutions insured by the Federal Deposit Insurance Corporation are required by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 to meet three regulatory capital requirements. If a requirement is not met, regulatory authorities may take legal or administrative actions, including restrictions on growth or operations or, in extreme cases, seizure. Institutions not in compliance may apply for an exemption from the requirements and submit a recapitalization plan. At March 31, 2008, the Bank met all current regulatory capital requirements.

The minimum OTS Tier 1 (core) capital requirement for well-capitalized institutions is 5.00% of total adjusted assets for thrifts. The Bank had Tier 1 (core) capital of 8.04% at March 31, 2008. The minimum OTS total risk-based capital requirement for well-capitalized institutions is 10.00% of risk-weighted assets. The Bank had total risk-based capital of 11.02% at March 31, 2008.

Impact of Inflation and Changing Prices

The unaudited consolidated financial statements and notes thereto presented in this Quarterly Report on Form 10-Q have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Bank’s operations. Unlike most industrial companies, nearly all the assets and liabilities of the Bank are monetary in nature. As a result, interest rates have a greater impact on the Bank’s performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Recent Accounting Pronouncements

In March 2006, FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets,” which amends SFAS No. 140. SFAS No. 156 requires the recognition of all separately recognized servicing assets and servicing liabilities to be initially measured at fair value utilizing the amortization method or fair market value method. SFAS 156 is effective the beginning of the first fiscal year that begins after September 15, 2006. The Company adopted this new accounting standard effective July 1, 2007. Under the amortization method, an entity shall amortize the value of servicing assets or liabilities in proportion to and over the period of estimated net servicing income or net servicing loss and assess servicing assets or liabilities for impairment or increased obligation based on fair value at each reporting date. Under the fair value method, an entity shall measure servicing assets or liabilities at fair value at each reporting date and report changes in fair value in earnings in the period in which the changes occur. The adoption of SFAS No. 156 has not had a material affect on the Company’s financial statements.

In June 2006, FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies that a tax position must be more likely than not of being sustained before being recognized in the financial statements. As required, the Company adopted FIN 48 effective July 1, 2007. The adoption of FIN 48 did not have a material impact on the Company’s financial statements.

In September 2006, FASB issued Statement of Financial Accounting Standards No. 157 (SFAS 157), “Fair Value Measurements” and is effective for financial statements issued for fiscal years beginning after November 15, 2007. SFAS 157 provides a common definition of fair value and a framework for measuring assets and liabilities at fair values when a particular standard prescribes it. In addition, the Statement expands disclosures about fair value measurements. As required by SFAS 157, the Company will adopt this new accounting standard effective July 1, 2008. Management is currently reviewing the impact of SFAS 157 on the Company’s financial statements.

In September 2006, FASB issued Statement of Financial Accounting Standards No. 158 (SFAS 158), “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132R.” SFAS 158 requires recognition of the overfunded or underfunded status of pension and other postretirement benefit plans on the balance sheet. Under SFAS 158, gains and losses, prior service costs and credits and any remaining transition amounts under SFAS 87 and SFAS 106 that have not yet been recognized through net periodic benefit cost will be recognized in accumulated other comprehensive income, net of tax effects, until they are amortized as a component of net periodic cost. Also, the measurement date – the date at which the benefit obligation and plan assets are measured – is required to be the company’s fiscal year-end. As required by SFAS 158, the Company adopted the balance sheet recognition provisions at June 30, 2007 and will adopt the year-end measurement date in 2009.

In February 2007, FASB issued Statement of Financial Accounting Standards No. 159 (SFAS 159), “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115.” SFAS 159 is effective as of the beginning of an entity’s first fiscal year after November 15, 2007. SFAS 159 allows companies the choice to measure many financial instruments and certain other items at fair value. This gives a company the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The Company will adopt this new accounting standard effective July 1, 2008. Management is currently reviewing the impact of SFAS 159 on the Company’s financial statements.

In December 2007, FASB issued Statement of Financial Accounting Standards No. 141R (SFAS 141R), “Business Combinations.” SFAS 141R is effective for fiscal years beginning after December 15, 2008. SFAS 141R improves reporting by creating greater consistency in the accounting and financial reporting of business combinations, resulting in more complete, comparable, and relevant information for investors and other users of financial statements. Management has reviewed SFAS 141R and does not expect the adoption of this statement to have a material impact on the Company’s consolidated financial condition, results of operations or cash flow.

In December 2007, FASB issued Statement of Financial Accounting Standards No. 160 (SFAS 160), “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.” SFAS 160 is effective for fiscal years beginning after December 15, 2008. SFAS 160 improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interest in subsidiaries in the same way – as equity in the consolidated financial statements. The Company does not currently have any noncontrolling interest in the consolidated financial statements.

In March 2008, FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), “Disclosures about Derivative Instruments and Hedging Activities.” SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. Management is currently reviewing the impact of SFAS 161 on the Company’s financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s net income is largely dependent on its net interest income. Net interest income is susceptible to interest rate risk to the degree that interest-bearing liabilities with short- and medium-term maturities mature or reprice more rapidly than its interest-earning assets. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a given period, a significant increase in market rates of interest could adversely affect net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could result in a decrease in net income.

In an attempt to manage its exposure to change in interest rates, management monitors the Company’s interest rate risk. The Company’s Asset/Liability Committee meets periodically to review the Company’s interest rate risk position and profitability, and to recommend adjustments for consideration by executive management. Management also reviews the Bank’s securities portfolio, formulates investment strategies, and oversees the timing and implementation of transactions to assure attainment of the Board’s objectives in the most effective manner. In managing market risk and the asset/liability mix, the Bank has placed its emphasis on developing a portfolio in which, to the extent practicable, assets and liabilities reprice within similar periods. Notwithstanding the Company’s interest rate risk management activities, the potential for changing interest rates is an uncertainty which may have an adverse effect on net income.

The Company adjusts its asset/liability position to mitigate the Company’s interest rate risk. At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, management may increase the Company’s interest rate risk position in order to increase its net interest margin. The Company’s results of operations and net portfolio values remain vulnerable to increases in interest rates and to fluctuations in the difference between long- and short-term interest rates.

As set forth below, the volatility of a rate change, the change in asset or liability mix of the Company or other factors may produce a decrease in net interest margin in an upward moving rate environment even as the net portfolio value (“NPV”) estimate indicates an increase in net value. The inverse situation may also occur. One approach used by the Company to quantify interest rate risk is an NPV analysis. This analysis calculates the difference between the present value of the liabilities and the present value of expected cash flows from assets and off-balance sheet contracts. The following tables set forth, at December 31, 2007 (the most recent report available) and March 31, 2007, an analysis of the Company’s interest rate risk as measured by the estimated changes in NPV resulting from instantaneous and sustained parallel shifts in the yield curve (+300 or –200 basis points, measured in 100 basis point increments). Management does not believe that the Company has experienced any material changes in its market risk position from that disclosed in the Company’s Annual Report on Form 10-K for Fiscal 2007 or that the Company’s primary market risk exposures and how those exposures were managed during the nine months ended March 31, 2008 changed significantly when compared to June 30, 2007.

The data in the following tables is based on assumptions utilized by the OTS in assessing interest rate risk of thrift institutions and published in “Selected Asset and Liability Price Tables as of December 31, 2007” and “Selected Asset and Liability Price Tables as of March 31, 2007.” Even if interest rates change in the designated amounts, there can be no assurance that the Company’s assets and liabilities would perform as set forth below.

December 31, 2007

	Estimated		Estimated Increase
Change in	NPV		(Decrease) in NPV
Interest Rates	Amount		Amount			Percent
Basis Points	(Dollars in Thousands)

+300	$	102,405	$	(18,334	)	(15	)%
+200	110,505		(10,234		)	(8	)
+100	116,905		(3,833		)	(3	)
—	120,739		—			—
-100	121,147		409			—
-200	118,967		(1,772		)	(1	)

March 31, 2007

	Estimated		Estimated Increase
Change in	NPV		(Decrease) in NPV
Interest Rates	Amount		Amount			Percent
Basis Points	(Dollars in Thousands)

+300	$	99,108	$	(24,523	)	(20	)%
+200	107,335		(16,295		)	(13	)
+100	115,942		(7,688		)	(6	)
—	123,630		—			—
-100	124,127		496			—
-200	122,411		(1,220		)	(1	)

In managing market risk and the asset/liability mix, the Bank has placed an emphasis on developing a portfolio in which, to the extent practicable, assets and liabilities reprice within similar periods. The goal of this policy is to provide a relatively consistent level of net interest income in varying interest rate cycles and to minimize the potential for significant fluctuations from period to period.

Item 4. Controls and Procedures

The Company’s management has evaluated, under the supervision and with the participation of the Company’s Chairman, President and Chief Executive Officer and the Company’s Executive Vice President, Chief Financial Officer and Treasurer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e), and have concluded that, as of the end of the period covered by this Quarterly Report, the Company’s disclosure controls and procedures are effective for gathering, analyzing and disclosing information the Company is required to disclose in its periodic reports filed under the Exchange Act. There were no significant changes in the Company’s internal control over financial reporting during the period covered by the Quarterly Report that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On June 26, 2006, the Company filed a $3.8 million lawsuit against MetaBank and two individuals, J. Tyler Haahr and Daniel A. Nelson, for their role in a participation loan, alleging fraud, breach of fiduciary duty, conspiracy and negligent misrepresentation. These damages were the result of a failure by the lead bank to make disclosures regarding an investigation of the commercial customer by the Iowa Attorney General at the time the Bank agreed to an extension of loan participation agreements. Legal proceedings are currently pending in the Second Judicial Circuit Court, Minnehaha County, South Dakota.

In addition, the Company, the Bank and each of their subsidiaries are, from time to time, involved as plaintiff or defendant in various legal actions arising in the normal course of their businesses. While the ultimate outcome of any such proceedings cannot be predicted with certainty, it is generally the opinion of management, after consultation with counsel representing the Bank and the Company in any such proceedings, the resolution of any such proceedings should not have a material effect on the Company’s consolidated financial position or results of operations. The Company, the Bank and each of their subsidiaries are not aware of any legal actions or other proceedings contemplated by governmental authorities outside of the normal course of business.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in Part 1, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for Fiscal 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth the purchases by the Company of its common stock during the quarterly period ended March 31, 2008:

	Total			Total Number	Maximum Number of
	Number	Average		of Shares Purchased	Shares that May Yet
	of Shares	Price Paid		as Part of Publicly	Be Purchased Under
Period	Purchased	per Share		Announced Programs	the Current Program
January 1 - 31, 2008	—	$	0.00	—	323,141
February 1 - 29, 2008	11,600	$	16.15	11,600	311,541
March 1 - 31, 2008	11,492	$	16.33	11,492	300,049
3rd Quarter Total	23,092	$	16.24	23,092

The Company currently has in effect a stock buyback program, which was publicly announced on April 30, 2007 and pursuant to which up to 10% of the common stock of the Company that was outstanding on May 1, 2007, which equals 399,141 shares, may be acquired through April 30, 2008. As of March 31, 2008, 99,092 shares of common stock have been purchased pursuant to this program.

The Company approved a new stock buyback program effective as of May 1, 2008, which was publicly announced on April 28, 2008, in which up to 10% of the common stock of the Company outstanding on May 1, 2008, which equals 395,321 shares, may be acquired through April 30, 2009.

Item 6. Exhibits

Regulation S-K Exhibit Number		Document
10.25		Form of Employment Agreement by and between Home Federal Bank and Jon M. Gadberry (incorporated herein by reference to Exhibit 10.2 from the Company’s Current Report on Form 8-K dated July 2, 2007 and filed with the SEC on July 9, 2007)
10.26		Form of Change-in-Control Agreement by and between Home Federal Bank and Jon M. Gadberry (incorporated herein by reference to Exhibit 10.4 from the Company’s Current Report on Form 8-K dated July 2, 2007 and filed with the SEC on July 9, 2007)
31.1		Certification of Chairman, President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Executive Vice President, Chief Financial Officer and Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chairman, President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Executive Vice President, Chief Financial Officer and Treasurer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

HF FINANCIAL CORP.

FORM 10-Q

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			HF Financial Corp.
			(Registrant)


Date:	May 15, 2008	By:	/s/ Curtis L. Hage
			Curtis L. Hage, Chairman, President
			And Chief Executive Officer
			(Principal Executive Officer)

Date:	May 15, 2008	By:	/s/ Darrel L. Posegate
			Darrel L. Posegate, Executive Vice President,
			Chief Financial Officer and Treasurer
			(Principal Financial and Accounting Officer)

Index to Exhibits

Exhibit Number

10.25		Form of Employment Agreement by and between Home Federal Bank and Jon M. Gadberry (incorporated herein by reference to Exhibit 10.2 from the Company’s Current Report on Form 8-K dated July 2, 2007 and filed with the SEC on July 9, 2007)
10.26		Form of Change-in-Control Agreement by and between Home Federal Bank and Jon M. Gadberry (incorporated herein by reference to Exhibit 10.4 from the Company’s Current Report on Form 8-K dated July 2, 2007 and filed with the SEC on July 9, 2007)
31.1		Certification of Chairman, President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Executive Vice President, Chief Financial Officer and Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chairman, President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Executive Vice President, Chief Financial Officer and Treasurer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002