EX-99.1 2 hffc-20131231xex991xpressr.htm EXHIBIT HFFC-2013.12.31-Ex 99.1-Press Release



HF Financial Corp. Reports Earnings of $0.31 per share in Second Fiscal Quarter

An Expanding Margin and Expense Efficiencies Highlight Quarter Results
Declares Regular Quarterly Dividend of $0.1125 per Share

SIOUX FALLS, SD, January 27, 2014 -- HF Financial Corp. (Nasdaq: HFFC) today reported earnings of $2.2 million, or $0.31 per diluted share, for the second quarter of fiscal 2014, compared to $1.0 million, or $0.14 per diluted share, for the first quarter. The net interest margin increased 30 basis points to 2.62% and added $1.0 million to pre-tax earnings in the second quarter relative to the first quarter. Meanwhile, noninterest expenses declined $550,000 relative to the previous quarter.
“Our core operations continue to improve. Margin expansion resulted from higher loan balances over the past six months and a slight uptick in yields on our shorter-term investments,” said Stephen Bianchi, President and Chief Executive Officer. "Credit quality improvements and our investment in sales staffing and technology to enhance sales opportunities also contributed to stronger earnings."
Fiscal Second Quarter Financial Highlights: (at or for the periods ended December 31, 2013, compared to September 30, 2013 and/or December 31, 2012.)
•
Earnings per diluted share for the second fiscal quarter of 2014 were $0.31 compared to $0.14 the previous quarter and $0.15 one year earlier. The increase in earnings in the most recent quarter reflects a stronger net interest margin, net recoveries in loan provisions and lower overhead expenses.
•
The net interest margin expressed on a fully taxable equivalent basis (“NIM, TE”) was 2.66% for the second quarter of 2014 compared to 2.36% the first quarter. Prepayment activity in mortgage-backed securities led to a lower margin in the previous quarter.
•
Gross loans declined slightly to $745.8 million at December 31, 2013, from $760.4 million at September 30, 2013, due in part to seasonal decline in agricultural lending. Relative to the balance of loans at fiscal year-end 2013, loan balances are up by approximately $50.0 million.
•
Deposit balances continued to expand reaching $964.2 million in the second quarter versus $944.3 million in the previous quarter, while interest-bearing deposit costs decreased four basis points compared to the previous quarter.
•
Nonperforming assets remained flat at $21.4 million at December 31, 2013, or 1.71% of total assets.
•
Mortgage banking revenue totaled $1.4 million ($621,000 in gain on sale of loans and $809,000 for net loan servicing income) for the second quarter ended December 31, 2013. The most recent quarter reflects a mortgage servicing rights valuation recovery of approximately $500,000.
•
Total past due loans 30 days or greater declined 30.5% to $1.8 million at December 31, 2013 from $2.5 million at September 30, 2013.
•
Capital levels at December 31, 2013 continued to remain well above the regulatory “well-capitalized” minimum levels:
•
Total risk-based capital to risk-weighted assets was 15.30% versus 14.92% at September 30, 2013.
•
Tier 1 capital to risk-weighted assets was 14.05% versus 13.67% at September 30, 2013.
•
Tier 1 capital to total adjusted assets was 9.42% versus 9.32% at September 30, 2013.




•
The most recent dividend of $0.1125 per share represents the twenty-third consecutive quarter at this level and provides a 3.40% current yield at recent market prices.
•
Tangible book value per share was $13.15 per share at December 31, 2013 compared to $12.92 per share the previous quarter.
“Margin expansion, combined with improved efficiencies, is the foundation of our strategic initiative. Our economic climate is strong in South Dakota with the second lowest unemployment rate in the nation through December 2013. The unemployment rate of our northern neighbor of North Dakota remains the lowest in the nation prompting our interest in opening a loan production office in Fargo, North Dakota in November 2013. We expect lending opportunities to remain stable and our company branding will provide us with a stronger reach into the communities we serve,” stated Bianchi.
Balance Sheet and Asset Quality Review
HF Financial’s total asset base was flat relative to the first quarter, though funding sources reflect more deposit growth. Total assets at December 31, 2013 and September 30, 2013 were $1.25 billion. The loan portfolio reflects a slight decline in residential, commercial, agricultural and consumer balances. Meanwhile, commercial real estate, multi-family and construction lending were up relative to the previous period. Commercial and multi-family real estate loans continue to represent the largest portion of the loan portfolio, totaling 43.6% of the loan portfolio at December 31, 2013.
Total deposits increased to $964.2 million at December 31, 2013 versus $944.3 million at September 30, 2013. Our deposit composition reflected an increase in interest-bearing checking accounts, money market accounts and savings accounts while noninterest-bearing deposits and certificates of deposit decreased. Certificates of deposit represent only 26.8% of total deposits at December 31, 2013.
Borrowings decreased during the second fiscal quarter and were replaced with core deposits. At December 31, 2013, advances from the Federal Home Loan Bank and other borrowings totaled $138.3 million compared to $151.9 million the preceding quarter.
Nonperforming assets ("NPAs"), which include $18.5 million of restructured loans that are in-compliance with their restructured terms and payments due, decreased to $21.4 million at December 31, 2013 from $21.5 million the preceding quarter. At December 31, 2013, NPAs represented 1.71% of total assets. Classified assets totaled $27.5 million at December 31, 2013, compared to $31.0 million at September 30, 2013 and $43.4 million at December 31, 2012. Troubled debt restructurings remained unchanged at $19.7 million at December 31, 2013.
The allowance for loan and lease losses at December 31, 2013, totaled $10.6 million and represented 1.42% of total loans, similar to the percentage at September 30, 2013. For the quarter ended December 31, 2013, recoveries exceeded charge-off activity which, when combined with a reduction in the amount of specific allowance attributed to impaired loans, resulted in a reversal in loan loss allowances and a credit to loan loss provisions. For the second quarter of fiscal 2014, loan charge-offs totaled $212,000 compared to $319,000 the previous quarter and $627,000 for the quarter ended one year earlier.
Tangible common shareholders' equity increased to 7.43% of tangible assets at December 31, 2013, compared to 7.32% at September 30, 2013. The increase was due largely to a higher level of retained earnings. Tangible book value per common share was $13.15 at December 31, 2013, up from $12.92 per share at the end of the previous quarter.
Capital ratios continued to remain well above regulatory requirements with Tier 1 capital to risk-weighted assets of 14.05% at December 31, 2013, while the ratio of Tier 1 capital to total adjusted assets was 9.42%. These regulatory ratios were higher than the required minimum levels of 6.00% and 5.00%, respectively.
Review of Operations
For the quarter ended December 31, 2013, HF Financial's earnings reflect an improved net interest margin, a reversal of mortgage servicing rights impairment and lower overhead expenses. “In the first quarter, our




margin reflected accelerated prepayments in our mortgage backed security investments which had a negative impact on our net interest margin. During the second quarter of fiscal 2014, our margin returned to a more normalized level, and we remained positioned for a rise in short-term interest rates,” said Brent Olthoff, Chief Financial Officer and Treasurer.
Net interest income totaled $7.8 million for the second fiscal quarter of 2014 compared to $6.8 million for the first quarter and $7.2 million in the second quarter of fiscal 2013. The NIM, TE was 2.66% for the second quarter compared to 2.36% for the first quarter.
Provisions for losses was a credit for the quarter ended December 31, 2013 of $257,000 compared to a provision of $276,000 for the first quarter and a provision of $128,000 one year earlier.
Gain on the sale of loans declined from previous periods as refinancing activity has shown signs of slowing due to a slight uptick in mortgage rates. Mortgage activity produced $621,000 in gains during the second fiscal quarter compared to $794,000 the preceding quarter and $1.4 million a year ago. Net loan servicing income totaled $809,000 for the quarter compared to $620,000 the first quarter. Fees on deposits totaled $1.6 million for the second quarter of fiscal 2014 versus $1.7 million the first quarter and $1.5 million the second quarter in fiscal 2013. Total noninterest income was $3.9 million for the second fiscal quarter of 2014 compared to $4.2 million in the first quarter, and $3.1 million a year ago.
Noninterest expense decreased to $8.8 million in the second fiscal quarter from $9.3 million the previous quarter. The second quarter reflects less professional fees associated with year-end audit and legal services.
These financial results are preliminary until the Form 10-Q is filed in February 2014.
Quarterly Dividend Declared
The board of directors declared a regular quarterly cash dividend of $0.1125 per common share for the second fiscal quarter 2014. The dividend is payable February 14, 2014 to stockholders of record February 7, 2014.
Use of Non-GAAP Financial Measures
This press release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). “Net Interest Margin, TE” is a non-GAAP financial measure. Information regarding the usefulness of Net Interest Margin, TE appears in the notes to the attached financial statements. The Company believes that the presentation of non-GAAP financial measures will permit investors to assess the Company's core operating results on the same basis as management. Non-GAAP financial measures should be considered supplemental to, not a substitute for or superior to, financial measures calculated in accordance with GAAP. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titled measures reported by other companies. Reconciliation of the non-GAAP measures to the most comparable GAAP measures are set forth in the notes to the attached financial statements.
About HF Financial Corp.
HF Financial Corp., based in Sioux Falls, SD, is the parent company for financial services companies, including Home Federal Bank, Mid America Capital Services, Inc., dba Mid America Leasing Company, Hometown Investment Services, Inc. and HF Financial Group, Inc. As the largest publicly traded savings association headquartered in South Dakota, HF Financial Corp. operates with 27 offices in 18 communities, throughout Eastern South Dakota and Minnesota. HF Financial Corp. recently added a loan production office in Fargo, North Dakota. The Company operates a branch in the Twin Cities market as Infinia Bank, a Division of Home Federal Bank of South Dakota. Internet banking is also available at www.homefederal.com and www.infiniabank.com.
This news release and other reports issued by the Company, including reports filed with the Securities and Exchange Commission, contain “forward-looking statements” that deal with future results, expectations, plans and performance. In addition, the Company's management may make forward-looking statements orally to the media, securities analysts, investors or others. These forward-looking statements might include one or more of the following:




•
Projections of income, loss, revenues, earnings or losses per share, dividends, capital expenditures, capital structure, adequacy of loan loss reserves, tax benefit or other financial items.
•
Descriptions of plans or objectives of management for future operations, products or services, transactions, investments and use of subordinated debentures payable to trusts.
•
Forecasts of future economic performance.
•
Use and descriptions of assumptions and estimates underlying or relating to such matters.
Forward-looking statements can be identified by the fact they do not relate strictly to historical or current facts. They often include words such as “optimism,” “look-forward,” “bright,” “pleased,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may”.
Forward-looking statements about the Company's expected financial results and other plans are subject to certain risks, uncertainties and assumptions. These include, but are not limited to the following: possible legislative changes and adverse economic, business and competitive conditions and developments (such as shrinking interest margins and continued short-term environments); deposit outflows, reduced demand for financial services and loan products; changes in accounting policies or guidelines, or in monetary and fiscal policies of the federal government; changes in credit and other risks posed by the Company's loan and lease portfolios; the ability or inability of the Company to manage interest rate and other risks; unexpected or continuing claims against the Company's self-insured health plan; the ability or inability of the Company to successfully enter into a definitive agreement for and close anticipated transactions; technological, computer-related or operational difficulties; adverse changes in securities markets; results of litigation; and the other risks detailed from time to time in the Company's SEC filings, including but not limited to, its annual report on Form 10-K for the fiscal year ending June 30, 2013, and its subsequent quarterly reports on Form 10-Q.
Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Although the Company believes its expectations are reasonable, it can give no assurance that such expectations will prove to be correct. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in any forward-looking statements.
CONTACT:     HF Financial Corp.
Stephen Bianchi, President and Chief Executive Officer (605) 333-7556



HF Financial Corp.
Selected Consolidated Operating Highlights
(Dollars in Thousands, except share data)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
 
December 31,
 
September 30,
 
December 31,
 
December 31,
 
 
2013
 
2013
 
2012
 
2013
 
2012
Interest, dividend and loan fee income:
 
 

 
 

 
 

 
 

 
 

Loans and leases receivable
 
$
8,657

 
$
8,302

 
$
8,804

 
$
16,959

 
$
17,810

Investment securities and interest-earning deposits
 
1,486

 
897

 
1,028

 
2,383

 
2,265

 
 
10,143

 
9,199

 
9,832

 
19,342

 
20,075

Interest expense:
 
 

 
 

 
 

 
 
 
 
Deposits
 
1,020

 
1,016

 
1,199

 
2,036

 
2,605

Advances from Federal Home Loan Bank and other borrowings
 
1,336

 
1,407

 
1,463

 
2,743

 
2,952

 
 
2,356

 
2,423

 
2,662

 
4,779

 
5,557

Net interest income
 
7,787

 
6,776

 
7,170

 
14,563

 
14,518

Provision for losses on loans and leases
 
(257
)
 
276

 
128

 
19

 
(172
)
Net interest income after provision for losses on loans and leases
 
8,044

 
6,500

 
7,042

 
14,544

 
14,690

Noninterest income:
 
 

 
 

 
 

 
 
 
 
Fees on deposits
 
1,587

 
1,668

 
1,464

 
3,255

 
3,560

Loan servicing income, net
 
809

 
620

 
(450
)
 
1,429

 
(490
)
Gain on sale of loans
 
621

 
794

 
1,411

 
1,415

 
2,433

Earnings on cash value of life insurance
 
207

 
205

 
206

 
412

 
411

Trust income
 
210

 
203

 
190

 
413

 
384

Commission and insurance income
 
308

 
323

 
125

 
631

 
319

Gain on sale of securities, net
 
85

 
273

 
—

 
358

 
1,822

Other
 
102

 
95

 
106

 
197

 
(1,261
)
 
 
3,929

 
4,181

 
3,052

 
8,110

 
7,178

Noninterest expense:
 
 

 
 

 
 

 
 
 
 
Compensation and employee benefits
 
5,237

 
5,490

 
4,784

 
10,727

 
9,715

Occupancy and equipment
 
1,040

 
1,042

 
1,002

 
2,082

 
2,071

FDIC insurance
 
234

 
207

 
201

 
441

 
411

Check and data processing expense
 
778

 
735

 
762

 
1,513

 
1,579

Professional fees
 
405

 
726

 
536

 
1,131

 
1,179

Marketing and community investment
 
306

 
314

 
304

 
620

 
672

Foreclosed real estate and other properties, net
 
121

 
135

 
206

 
256

 
309

Other
 
657

 
679

 
661

 
1,336

 
1,341

 
 
8,778

 
9,328

 
8,456

 
18,106

 
17,277

Income before income taxes
 
3,195

 
1,353

 
1,638

 
4,548

 
4,591

Income tax expense
 
1,025

 
374

 
605

 
1,399

 
1,481

Net income
 
$
2,170

 
$
979

 
$
1,033

 
$
3,149

 
$
3,110

 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share:
 
$
0.31

 
$
0.14

 
$
0.15

 
$
0.45

 
$
0.44

Diluted earnings per common share:
 
$
0.31

 
$
0.14

 
$
0.15

 
$
0.45

 
$
0.44

Basic weighted average shares:
 
7,055,312

 
7,055,020

 
7,055,591

 
7,055,166

 
7,053,380

Diluted weighted average shares:
 
7,057,233

 
7,057,438

 
7,057,261

 
7,057,211

 
7,055,133

Outstanding shares (end of period):
 
7,055,440

 
7,055,020

 
7,054,875

 
7,055,440

 
7,054,875

Number of full-service offices
 
27

 
27

 
28

 
 

 
 


HF Financial Corp.
Consolidated Statements of Financial Condition
(Dollars in Thousands, except share data)
 
December 31, 2013
 
June 30, 2013
 
(Unaudited)
 
(Audited)
ASSETS
 
 
 
Cash and cash equivalents
$
26,188

 
$
21,352

Investment securities available for sale
396,468

 
424,481

Investment securities held to maturity
15,593

 
—

Correspondent bank stock
7,031

 
8,936

Loans held for sale
3,969

 
9,169

 
 
 
 
Loans and leases receivable
745,795

 
695,771

Allowance for loan and lease losses
(10,605
)
 
(10,743
)
Loans and leases receivable, net
735,190

 
685,028

 
 
 
 
Accrued interest receivable
6,446

 
5,301

Office properties and equipment, net of accumulated depreciation
13,568

 
13,853

Foreclosed real estate and other properties
320

 
564

Cash value of life insurance
20,309

 
19,965

Servicing rights, net
11,365

 
10,987

Goodwill and intangible assets, net
4,883

 
4,938

Other assets
13,028

 
12,938

Total assets
$
1,254,358

 
$
1,217,512

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Liabilities
 
 
 
Deposits
$
964,186

 
$
898,761

Advances from Federal Home Loan Bank and other borrowings
138,323

 
167,163

Subordinated debentures payable to trusts
24,837

 
24,837

Advances by borrowers for taxes and insurance
15,022

 
12,595

Accrued expenses and other liabilities
14,293

 
16,885

Total liabilities
1,156,661

 
1,120,241

Stockholders' equity
 
 
 
Preferred stock, $.01 par value, 500,000 shares authorized, none outstanding
—

 
—

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

 
—

Common stock, $.01 par value, 10,000,000 shares authorized, 9,138,895 and 9,138,475 shares issued at December 31, 2013 and June 30, 2013, respectively
91

 
91

Additional paid-in capital
46,135

 
46,096

Retained earnings, substantially restricted
87,828

 
86,266

Accumulated other comprehensive (loss), net of related deferred tax effect
(5,460
)
 
(4,285
)
Less cost of treasury stock, 2,083,455 shares at December 31, 2013 and June 30, 2013
(30,897
)
 
(30,897
)
Total stockholders' equity
97,697

 
97,271

Total liabilities and stockholders' equity
$
1,254,358

 
$
1,217,512





HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)
Allowance for Loan and Lease Loss Activity
 
Three Months Ended
 
Six Months Ended
December 31, 2013
 
September 30, 2013
 
December 31, 2012
 
December 31, 2013
 
December 31, 2012
Balance, beginning
 
$
10,763

 
$
10,743

 
$
10,809

 
$
10,743

 
$
10,566

Provision charged to income
 
(257
)
 
276

 
128

 
19

 
(172
)
Charge-offs
 
(212
)
 
(319
)
 
(627
)
 
(531
)
 
(1,030
)
Recoveries
 
311

 
63

 
470

 
374

 
1,416

Balance, ending
 
$
10,605

 
$
10,763

 
$
10,780

 
$
10,605

 
$
10,780


Asset Quality
 
December 31, 2013
 
September 30, 2013
 
December 31, 2012
Nonaccruing loans and leases
 
$
21,110

 
$
21,258

 
$
15,980

Accruing loans and leases delinquent more than 90 days
 
—

 
40

 
209

Foreclosed assets
 
320

 
226

 
890

Total nonperforming assets
 
$
21,430

 
$
21,524

 
$
17,079

 
 
 
 
 
 
 
General allowance for loan and lease losses
 
$
9,112

 
$
8,806

 
$
8,064

Specific impaired loan valuation allowance
 
1,493

 
1,977

 
2,716

Total allowance for loans and lease losses
 
$
10,605

 
$
10,783

 
$
10,780

 
 
 
 
 
 
 
Ratio of nonperforming assets to total assets at end of period (1)
 
1.71
%
 
1.72
%
 
1.40
 %
Ratio of nonperforming loans and leases to total loans and leases at end of period (2)
 
2.83
%
 
2.80
%
 
2.39
 %
Ratio of net charge-offs (recoveries) to average loans and leases for the year-to-date period (3)
 
0.04
%
 
0.14
%
 
(0.11
)%
Ratio of allowance for loan and lease losses to total loans and leases at end of period
 
1.42
%
 
1.42
%
 
1.59
 %
Ratio of allowance for loan and lease losses to nonperforming loans and leases at end of period (2)
 
50.24
%
 
50.54
%
 
66.59
 %
_____________________________________________
(1) Nonperforming assets include nonaccruing loans and leases, accruing loans and leases delinquent more than 90 days and foreclosed assets.
(2) Nonperforming loans and leases include both nonaccruing and accruing loans and leases delinquent more than 90 days.
(3) Percentages for the six months ended December 31, 2013 and December 31, 2012 and the three months ended September 30, 2013 have been annualized.
Troubled Debt Restructuring Summary
 
December 31, 2013
 
September 30, 2013
 
December 31, 2012
Nonaccruing troubled debt restructurings-non-compliant (1)(2)
 
$
4

 
$
140

 
$
223

Nonaccruing troubled debt restructurings-compliant (1)(2)(3)
 
18,481

 
18,307

 
8,643

Accruing troubled debt restructurings (4)
 
1,245

 
1,266

 
1,300

Total troubled debt restucturings
 
$
19,730

 
$
19,713

 
$
10,166

______________________________________________
(1) Non-compliant and compliant refer to the terms of the restructuring agreement.
(2) Balances are included in nonaccruing loans as part of nonperforming loans.
(3) Interest received but applied to the principal balance was $349, $198, and $110, for the respective quarters.
(4) None of the loans included are 90 days past due and are not included in the nonperforming loans.



HF Financial Corp.
Selected Capital Composition Highlights
(Unaudited)
 
December 31, 2013
 
September 30, 2013
 
June 30, 2013
Common stockholder's equity before OCI (1) to consolidated assets
8.26
 %
 
8.17
 %
 
8.37
 %
OCI components to consolidated assets:
 
 
 
 
 
Net changes in unrealized (losses) gains on securities available for sale
(0.22
)
 
(0.23
)
 
(0.11
)
Net unrealized losses on defined benefit plan
(0.16
)
 
(0.16
)
 
(0.16
)
Net unrealized losses on derivatives and hedging activities
(0.06
)
 
(0.07
)
 
(0.08
)
Goodwill and intangible assets, net to consolidated assets
(0.39
)
 
(0.39
)
 
(0.41
)
Tangible common equity to tangible assets
7.43
 %
 
7.32
 %
 
7.61
 %

Tangible book value per common share (2)
$
13.15

 
$
12.92

 
$
13.09


Tier I capital (to adjusted total assets) (3)
9.42
%
 
9.32
%
 
9.56
%
Tier I capital (to risk-weighted assets) (3)
14.05

 
13.67

 
14.58

Total risk-based capital (to risk-weighted assets) (3)
15.30

 
14.92

 
15.83

______________________________________________
(1) Accumulated other comprehensive income (loss).
(2) Common equity reduced by goodwill and intangible assets, net and divided by number of shares of outstanding common stock.
(3) Capital ratios for Home Federal Bank.



HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)
Loan and Lease Portfolio Composition
 
 
 
 
 
 
 
 
December 31, 2013
 
June 30, 2013
 
Amount
 
Percent
 
Amount
 
Percent
Residential:
 
 
 
 
 
 
 
One-to four-family
$
47,063

 
6.3
%
 
$
46,738

 
6.7
%
Construction
3,255

 
0.4

 
2,360

 
0.4

Commercial:
 
 
 
 
 
 
 
Commercial business (1)
65,802

 
8.8

 
75,555

 
10.9

Equipment finance leases
1,061

 
0.2

 
1,633

 
0.2

Commercial real estate:
 
 
 
 
 
 
 
Commercial real estate
261,569

 
35.1

 
239,057

 
34.4

Multi-family real estate
63,632

 
8.5

 
49,217

 
7.1

Construction
32,731

 
4.4

 
12,879

 
1.8

Agricultural:
 
 
 
 
 
 
 
Agricultural real estate
82,321

 
11.0

 
77,334

 
11.1

Agricultural business
105,580

 
14.2

 
100,398

 
14.4

Consumer:
 
 
 
 
 
 
 
Consumer direct
19,401

 
2.6

 
21,219

 
3.1

Consumer home equity
60,066

 
8.1

 
66,381

 
9.5

Consumer overdraft & reserve
3,312

 
0.4

 
2,995

 
0.4

Consumer indirect
2

 
—

 
5

 
—

Total (2)
$
745,795

 
100.0
%
 
$
695,771

 
100.0
%
_________________________________________________
(1) Includes $1,774 and $2,024 tax exempt leases at December 31, 2013 and June 30, 2013, respectively.
(2) Exclusive of undisbursed portion of loans in process and net of deferred loan fees and discounts.


Deposit Composition
 
 
 
 
 
 
 
 
December 31, 2013
 
June 30, 2013
 
Amount
 
Percent
 
Amount
 
Percent
Noninterest-bearing checking accounts
$
156,339

 
16.2
%
 
156,896

 
17.5
%
Interest-bearing checking accounts
147,743

 
15.3

 
151,359

 
16.8

Money market accounts
232,073

 
24.1

 
212,817

 
23.7

Savings accounts
169,994

 
17.6

 
115,573

 
12.9

In-market certificates of deposit
230,987

 
24.0

 
239,521

 
26.6

Out-of-market certificates of deposit
27,050

 
2.8

 
22,595

 
2.5

Total deposits
$
964,186

 
100.0
%
 
$
898,761

 
100.0
%



HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)
Average Balance, Interest Yields and Rates
Three Months Ended
 
December 31, 2013
 
September 30, 2013
 
Average
Outstanding
Balance
 
Yield/
Rate
 
Average
Outstanding
Balance
 
Yield/
Rate
Interest-earning assets:
 
 
 
 
 
 
 
Loans and leases receivable(1)(3)
$
761,491

 
4.51
%
 
$
726,345

 
4.53
%
Investment securities(2)(3)
419,335

 
1.41

 
434,369

 
0.82

Total interest-earning assets
1,180,826

 
3.41
%
 
1,160,714

 
3.14
%
Noninterest-earning assets
74,250

 
 

 
72,158

 
 

Total assets
$
1,255,076

 
 

 
$
1,232,872

 
 

Interest-bearing liabilities:
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
Checking and money market
$
363,665

 
0.26
%
 
$
347,036

 
0.27
%
Savings
153,448

 
0.25

 
110,970

 
0.20

Certificates of deposit
269,476

 
1.01

 
271,864

 
1.06

Total interest-bearing deposits
786,589

 
0.51

 
729,870

 
0.55

FHLB advances and other borrowings
155,341

 
2.51

 
188,067

 
2.22

Subordinated debentures payable to trusts
24,837

 
5.64

 
24,837

 
5.64

Total interest-bearing liabilities
966,767

 
0.97
%
 
942,774

 
1.02
%
Noninterest-bearing deposits
164,215

 
 

 
163,785

 
 

Other liabilities
27,350

 
 

 
30,359

 
 

Total liabilities
1,158,332

 
 

 
1,136,918

 
 

Equity
96,744

 
 

 
95,954

 
 

Total liabilities and equity
$
1,255,076

 
 

 
$
1,232,872

 
 

Net interest spread(4)
 

 
2.44
%
 
 

 
2.12
%
Net interest margin(4)(5)
 

 
2.62
%
 
 

 
2.32
%
Net interest margin, TE(6)
 

 
2.66
%
 
 

 
2.36
%
Return on average assets(7)
 
 
0.69
%
 
 
 
0.32
%
Return on average equity(8)
 
 
8.90
%
 
 
 
4.05
%
_____________________________________
(1) 
Includes loan fees and interest on accruing loans and leases past due 90 days or more.
(2) 
Includes federal funds sold and interest earning reserve balances at the Federal Reserve Bank.
(3) 
Yields do not reflect the tax-exempt nature of loans, equipment leases and municipal securities.
(4) 
Percentages for the three months ended December 31, 2013 and September 30, 2013 have been annualized.
(5) 
Net interest income divided by average interest-earning assets.
(6) 
Net interest margin expressed on a fully taxable equivalent basis ("Net Interest Margin, TE") is a non-GAAP financial measure. See the following Non-GAAP Disclosure Reconciliation of Net Interest Income (GAAP) to Net Interest Margin, TE (Non-GAAP). The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income and certain other permanent income tax differences. We believe that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis, and accordingly believe the presentation of this non-GAAP financial measure may be useful for peer comparison purposes. As a non-GAAP financial measure, Net Interest Margin, TE should be considered supplemental to and not a substitute for or superior to, financial measures calculated in accordance with GAAP. As other companies may use different calculations for Net Interest Margin, TE, this presentation may not be comparable to similarly titled measures reported by other companies.
(7) 
Ratio of net income to average total assets.
(8) 
Ratio of net income to average equity.


HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)
Average Balance, Interest Yields and Rates
Six Months Ended
 
December 31, 2013
 
December 31, 2012
 
Average
Outstanding
Balance
 
Yield/
Rate
 
Average
Outstanding
Balance
 
Yield/
Rate
Interest-earning assets:
 
 
 
 
 
 
 
Loans and leases receivable(1)(3)
$
743,919

 
4.52
%
 
$
701,287

 
5.04
%
Investment securities(2)(3)
426,852

 
1.11

 
379,809

 
1.18

Total interest-earning assets
1,170,771

 
3.28
%
 
1,081,096

 
3.68
%
Noninterest-earning assets
73,331

 
 

 
81,119

 
 

Total assets
$
1,244,102

 
 

 
$
1,162,215

 
 

Interest-bearing liabilities:
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
Checking and money market
$
355,357

 
0.26
%
 
$
346,982

 
0.37
%
Savings
132,209

 
0.23

 
111,366

 
0.26

Certificates of deposit
270,665

 
1.03

 
275,963

 
1.30

Total interest-bearing deposits
758,231

 
0.53

 
734,311

 
0.70

FHLB advances and other borrowings
171,706

 
2.35

 
139,328

 
2.99

Subordinated debentures payable to trusts
24,837

 
5.64

 
27,837

 
6.08

Total interest-bearing liabilities
954,774

 
0.99
%
 
901,476

 
1.22
%
Noninterest-bearing deposits
163,989

 
 

 
132,053

 
 

Other liabilities
28,948

 
 

 
30,370

 
 

Total liabilities
1,147,711

 
 

 
1,063,899

 
 

Equity
96,391

 
 

 
98,316

 
 

Total liabilities and equity
$
1,244,102

 
 

 
$
1,162,215

 
 

Net interest spread(4)
 

 
2.29
%
 
 

 
2.46
%
Net interest margin(4)(5)
 

 
2.47
%
 
 

 
2.66
%
Net interest margin, TE(6)
 

 
2.51
%
 
 

 
2.70
%
Return on average assets(7)
 
 
0.50
%
 
 
 
0.53
%
Return on average equity(8)
 
 
6.48
%
 
 
 
6.27
%
_____________________________________
(1) 
Includes loan fees and interest on accruing loans and leases past due 90 days or more.
(2) 
Includes federal funds sold and interest earning reserve balances at the Federal Reserve Bank.
(3) 
Yields do not reflect the tax-exempt nature of loans, equipment leases and municipal securities.
(4) 
Percentages for the six months ended December 31, 2013 and December 31, 2012 have been annualized.
(5) 
Net interest income divided by average interest-earning assets.
(6) 
Net interest margin expressed on a fully taxable equivalent basis ("Net Interest Margin, TE") is a non-GAAP financial measure. See the following Non-GAAP Disclosure Reconciliation of Net Interest Income (GAAP) to Net Interest Margin, TE (Non-GAAP). The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and adjusting for federal and state exemption of interest income and certain other permanent income tax differences. We believe that it is a standard practice in the banking industry to present net interest margin expressed on a fully taxable equivalent basis, and accordingly believe the presentation of this non-GAAP financial measure may be useful for peer comparison purposes. As a non-GAAP financial measure, Net Interest Margin, TE should be considered supplemental to and not a substitute for or superior to, financial measures calculated in accordance with GAAP. As other companies may use different calculations for Net Interest Margin, TE, this presentation may not be comparable to similarly titled measures reported by other companies.
(7) 
Ratio of net income to average total assets.
(8) 
Ratio of net income to average equity.


HF Financial Corp.
Age Analysis of Past Due Loans and Leases Receivables
(Dollars in Thousands)
(Unaudited)
December 31, 2013
Accruing and Nonaccruing Loans
 
Nonperforming Loans
 
30 - 59 Days
Past Due
 
60 - 89 Days
Past Due
 
Greater Than
89 Days
 
Total Past Due
 
Current
 
Recorded
Investment >
90 Days and
Accruing (1)
 
Nonaccrual
Balance
 
Total
Residential:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
One-to four-family
$
—

 
$
—

 
$
162

 
$
162

 
$
46,901

 
$
—

 
$
162

 
$
162

Construction
—

 
—

 
—

 
—

 
3,255

 
—

 
—

 
—

Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial business
254

 
—

 
51

 
305

 
65,497

 
—

 
3,919

 
3,919

Equipment finance leases
—

 
—

 
—

 
—

 
1,061

 
—

 
—

 
—

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
102

 
199

 
55

 
356

 
261,213

 
—

 
1,051

 
1,051

Multi-family real estate
—

 
—

 
27

 
27

 
63,605

 
—

 
27

 
27

Construction
—

 
—

 
—

 
—

 
32,731

 
—

 
—

 
—

Agricultural:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agricultural real estate
217

 
—

 
—

 
217

 
82,104

 
—

 
11,208

 
11,208

Agricultural business
6

 
—

 
—

 
6

 
105,574

 
—

 
3,634

 
3,634

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer direct
42

 
1

 
5

 
48

 
19,353

 
—

 
5

 
5

Consumer home equity
116

 
27

 
495

 
638

 
59,428

 
—

 
1,104

 
1,104

Consumer OD & reserve
4

 
—

 
—

 
4

 
3,308

 
—

 
—

 
—

Consumer indirect
—

 
—

 
—

 
—

 
2

 
—

 
—

 
—

Total
$
741

 
$
227

 
$
795

 
$
1,763

 
$
744,032

 
$
—

 
$
21,110

 
$
21,110

September 30, 2013
Accruing and Nonaccruing Loans
 
Nonperforming Loans
 
30 - 59 Days
Past Due
 
60 - 89 Days
Past Due
 
Greater Than
89 Days
 
Total Past Due
 
Current
 
Recorded
Investment >
90 Days and
Accruing (1)
 
Nonaccrual
Balance
 
Total
Residential:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
One-to four-family
$
56

 
$
—

 
$
280

 
$
336

 
$
49,233

 
$
—

 
$
280

 
$
280

Construction
—

 
—

 
—

 
—

 
4,897

 
—

 
—

 
—

Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial business
202

 
292

 
120

 
614

 
75,644

 
—

 
4,246

 
4,246

Equipment finance leases
—

 
—

 
—

 
—

 
1,328

 
—

 
—

 
—

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
181

 
230

 
44

 
455

 
267,560

 
—

 
866

 
866

Multi-family real estate
—

 
—

 
27

 
27

 
59,755

 
—

 
27

 
27

Construction
—

 
—

 
—

 
—

 
23,531

 
—

 
—

 
—

Agricultural:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agricultural real estate
37

 
—

 
40

 
77

 
82,015

 
40

 
11,108

 
11,148

Agricultural business
6

 
8

 
—

 
14

 
108,346

 
—

 
3,639

 
3,639

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer direct
26

 
—

 
5

 
31

 
20,727

 
—

 
5

 
5

Consumer home equity
255

 
156

 
570

 
981

 
61,724

 
—

 
1,087

 
1,087

Consumer OD & reserve
2

 
1

 
—

 
3

 
3,077

 
—

 
—

 
—

Consumer indirect
—

 
—

 
—

 
—

 
4

 
—

 
—

 
—

Total
$
765

 
$
687

 
$
1,086

 
$
2,538

 
$
757,841

 
$
40

 
$
21,258

 
$
21,298

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




HF Financial Corp.
Non-GAAP Disclosure Reconciliation
Net Interest Margin to Net Interest Margin-Tax Equivalent Yield
(Dollars in Thousands)
(Unaudited)

 
Three Months Ended
 
Six Months Ended
 
December 31,
 
September 30,
 
December 31,
 
December 31,
 
2013
 
2013
 
2012
 
2013
 
2012
Net interest income
$
7,787

 
$
6,776

 
$
7,170

 
$
14,563

 
$
14,518

Taxable equivalent adjustment
142

 
118

 
109

 
259

 
194

Adjusted net interest income
7,929

 
6,894

 
7,279

 
14,822

 
14,712

Average interest-earning assets
1,180,826

 
1,160,714

 
1,078,895

 
1,170,771

 
1,081,096

Net interest margin, TE
2.66
%
 
2.36
%
 
2.68
%
 
2.51
%
 
2.70
%