HF FINANCIAL CORP. 
By SIOUX FALLS, S.D., Jan. 31, 2011 /PRNewswire/ -- HF Financial Corp. (Nasdaq: HFFC) today reported it earned $1.7 million, or $0.25 per diluted share in the second fiscal quarter ended December 31, 2010, up from $490,000, or $0.07 per diluted share in the first fiscal quarter of 2011. Net income for the fiscal second quarter a year ago was $2.0 million, or $0.38 per diluted share, when it had 1.8 million fewer diluted weighted average shares than it did at December 31, 2010. In the first six months of fiscal 2011, net income totaled $2.2 million, or $0.32 per diluted share, compared to $2.8 million, or $0.61 per diluted share in the first six months of fiscal 2010.
"With strong capital, stable Net Interest Margin, and solid core deposits, we continue to generate operating profits, pay dividends and build shareholder value," said Curt Hage, Chairman, President and Chief Executive Officer. "While we saw an increase in the level of nonperforming loans due to continuing stress in the dairy industry, our overall loan portfolio continues to perform better than many banks in the nation. Dairy farmers continue to feel the effect of increased feed and operational costs and lower dairy futures prices. Agricultural loans are a profitable business for us and that section of the loan portfolio is very well diversified, with only 5% of the total loan portfolio in dairy operations. Reserves were increased modestly in the second quarter to reflect the increase in nonperforming dairy loans."
Fiscal Second Quarter Financial Highlights (at or for the period ended December 31, 2010)
-- Capital levels well exceeded the regulatory required levels of 10%, 6%
and 5%, respectively, to meet the well-capitalized requirement
established by regulators:
-- Total risk-based capital to risk weighted assets was 12.22%
-- Tier 1 capital to risk-weighted assets was 11.31%
-- Tier 1 capital to total adjusted assets was 9.13%.
-- Cash dividends, paid for over 18 years, are an important part of
building shareholder value. The most recent dividend of $0.1125 per
share generates a current annualized yield of 4.2% at recent market
prices.
-- Total fiscal second quarter 2011 adjusted revenue, which excludes
other-than-temporary impairment credit loss and net gains on the sale of
securities, increased 13.0% to $13.4 million compared to $11.8 million
in the year ago quarter. A record quarter of mortgage loan closings
helped bolster growth in noninterest income revenue. Adjusted revenue
is a non-GAAP financial measure.
-- Nonperforming assets (NPAs) increased to $31.7 million, or 2.58% of
total assets in the second fiscal quarter, from $23.1 million, or 1.84%
of total assets in the previous quarter, with the majority of NPAs
linked to the dairy industry.
-- The net interest margin expressed on a fully taxable equivalent basis
("Net Interest Margin, TE") maintained its stability at 3.32% in the
second fiscal quarter compared to 3.33% in the previous quarter.
Relative to the same period in the prior year, the Net Interest Margin,
TE increased 2 basis points from 3.30%. Net Interest Margin, TE is a
non-GAAP financial measurement.
-- Total deposits increased to $910.3 million from $877.6 million while
borrowings decreased to $167.4 million from $230.4 million. Seasonal
pay down on commercial and agricultural lines of credit in the recent
quarter provided additional cash flow to reduce borrowings.
Economic Update
The Sioux Falls unemployment rate was 4.4% in November 2010. "Unemployment continues to be well below national levels in our region," said Hage. "Business leaders continue to be cautiously optimistic about the economic recovery in 2011, and we expect a steady recovery to continue to provide opportunities for our lending teams to cultivate and meet the needs of our clients and build market share."
"Growth opportunities lie in the Minneapolis area, and while we were unsuccessful in one FDIC assisted transaction bid, we are confident there will be more opportunities in that market," Hage added.
Asset Quality and Balance Sheet Review
Total assets decreased slightly during the second fiscal quarter to $1.23 billion from $1.26 billion at September 30, 2010 due primarily to the net pay down of activity in loan and leases receivable. Loans and leases receivable declined to $860.6 million at December 31, 2010 from $880.1 million in the preceding quarter. Relative to one year ago, the balance has increased 5.1% from $819.0 million. Liquidity continues to remain high, both on balance sheet and through off-balance sheet access to funds.
Deposits increased to $910.3 million at December 31, 2010, from $877.6 million at September 30, 2010, largely as a result of obtaining additional seasonal public funds. Noninterest-bearing demand deposits totaled $108.8 million at December 31, 2010, or 12.0% of the deposit portfolio. Total low-cost deposits (excluding all time deposits) were $497.9 million at December 31, 2010, or 54.7% of the deposit portfolio compared to $423.7 million or 49.1% of total deposits a year ago when certificates of deposits were a higher percentage of total deposits. "Our margins have improved slightly due to the number of customers who prefer the flexibility of unrestricted deposit accounts," said Hage.
Nonperforming assets (NPAs) increased to $31.7 million at December 31, 2010, from $23.1 million the previous quarter. Total NPAs were 2.58% of total assets at December 31, 2010, compared to 1.84% at September 30, 2010. As noted after the first quarter, the added problem credits are primarily related to the deterioration in dairy farming. Dairy loans totaled approximately $44.6 million at December 31, 2010, with $17.9 million in nonperforming status. "Though we have seen an increase in nonperforming dairy loans, our analysis did not produce materially increased reserves for the loan portfolio. We remain diligent in the review of all of our dairy loans and will continue to closely observe the performance of our dairy loans and industry developments," Hage said. Nonperforming assets consist of nonaccruing loans, accruing loans 90 days or more past due and foreclosed assets.
The allowance for loan losses at December 31, 2010 totaled $13.0 million, representing 1.49% of total loans outstanding and 41.4% of nonperforming loans, compared to $12.3 million, or 1.37% of total loans and 55.5% of nonperforming loans at September 30, 2010. Nonaccruing loans and leases totaled $26.9 million at December 31, 2010, compared to $18.0 million in the preceding quarter. Net charge-offs in the quarter totaled $538,000, or 0.24% of average loans outstanding, compared to $623,000, or 0.28% of average loans outstanding the fiscal first quarter. During the second quarter of fiscal 2011, three agricultural loans were restructured which had loan balances of $12.4 million. At December 31, 2010, the total amount of restructured loans in nonaccrual status is $15.2 million, while the amount of restructured loans that are accruing is $4.0 million. All loans that were restructured are agricultural loans.
At December 31, 2010, the investment securities portfolio held six trust preferred pools at an adjusted cost basis of $9.3 million and a fair value of $2.9 million. Home Federal did not record an other-than-temporary (OTTI) credit loss impairment on these investments for the quarter ended December 31, 2010, compared to $340,000 for the second quarter of the prior year. Year to date the OTTI credit loss impairment was $0 compared to $2.2 million in the first six months of fiscal 2010.
Tangible common shareholders' equity to tangible assets was 7.37% at December 31, 2010. Tangible book value per common share was $12.90 at December 31, 2010, compared to $12.97 a year ago. The company's tangible common equity ratio was 7.21% at June 30, 2010, compared to 7.46% at December 31, 2009.
The Company remains well-capitalized with Tier 1 Capital to Risk Weighted Assets of 11.31% at December 31, 2010, while its Tier 1 Capital to Adjusted Total Assets was 9.13%. These regulatory ratios were higher than the required minimum levels of 6.00% and 5.00%, respectively.
Review of Operations
The provision for loan losses decreased from the previous quarter by $2.1 million, gain on sale of loans increased by $356,000, gains on the sale of securities decreased $303,000, and noninterest expense increased $214,000. These were the primary factors which resulted in an increased net income before income taxes of $2.0 million when compared to the linked-quarter ended September 30, 2010.
Second quarter fiscal 2011 net interest income, before the provision for loan losses, increased by $16,000 on a linked-quarter basis and increased $783,000 from the year ago quarter. Net interest income totaled $9.6 million for the second quarter of fiscal 2011 compared to $9.6 million for the first quarter of fiscal 2011, and $8.9 million in the year ago quarter.
The Net Interest Margin, TE as a percentage of average earning assets was 3.32% for the second quarter of fiscal 2011 compared to 3.33% for the previous quarter. Year-to-date Net Interest Margin, TE increased 6 basis points to 3.33% from 3.27% in the first six months of fiscal 2010.
Fiscal second quarter noninterest income was $3.8 million, or a $59,000 increase from the previous quarter. The gain on the sale of loans increased by $356,000 due to higher volume of mortgage activity. The gain on the sale of securities decreased $303,000 from the previous quarter due to reduced gains recorded.
Noninterest, or operating, expenses increased to $9.6 million in the second quarter from $9.4 million in the first quarter of fiscal 2011, primarily reflecting higher insurance premiums and costs related to resolving REO properties.
Quarterly Dividend Declared
The Company announced that its board of directors has declared another regular quarterly cash dividend of $0.1125 per common share for the second quarter of fiscal 2011. The dividend will be paid February 18, 2011 to stockholders of record February 11, 2011.
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). "Adjusted Revenue," which excludes other-than-temporary impairment charges and net gain on the sale of securities, and "Net Interest Margin, TE" are non-GAAP financial measures. The Company believes Adjusted Revenue is useful to investors because it allows for greater transparency, facilitates comparison to prior periods and peer results and assists in forecasting performance for future periods. Further 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 measure to the most comparable GAAP measure is 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. The largest publicly traded savings association headquartered in South Dakota, HF Financial Corp. operates with 33 offices in 19 communities, throughout Eastern South Dakota and one location in Marshall, Minnesota. Internet banking is also available at www.homefederal.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); additional other-than-temporary impairment credit loss incurred in the Company's trust preferred securities portfolio; 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, 2010, and its subsequent quarterly reports on Form 10-Q.
Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Although the Company believes its expectations are reasonable, it can give no assurance that such expectations will prove to be correct. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in any forward-looking statements.
HF Financial Corp.
Selected Consolidated Operating Highlights
(Dollars in Thousands, except share data)
(Unaudited)
Three Months Ended
------------------
December September December
31, 30, 31,
2010 2010 2009
---- ---- ----
Interest, dividend
and loan fee
income:
Loans and leases
receivable $12,540 $12,708 $12,352
Investment
securities and
interest-earning
deposits 1,471 1,483 1,995
14,011 14,191 14,347
------ ------ ------
Interest expense:
Deposits 2,428 2,612 3,332
Advances from
Federal Home Loan
Bank
and other
borrowings 1,942 1,954 2,157
4,370 4,566 5,489
----- ----- -----
Net interest income 9,641 9,625 8,858
Provision for
losses on loans
and leases 1,268 3,367 424
----- ----- ---
Net interest income
after provision
for losses on loans
and leases 8,373 6,258 8,434
----- ----- -----
Noninterest income:
Fees on deposits 1,590 1,609 1,403
Loan servicing
income 417 502 488
Gain on sale of
loans, net 1,103 747 537
Earnings on cash
value of life
insurance 168 166 164
Trust income 162 154 207
Gain on sale of
securities, net 94 397 603
Total other-than-
temporary
impairment losses - - - - - - - - (1,663)
Portion of loss
recognized in
other
comprehensive
income - - - - - - - - 1,323
------- ------- -----
Net impairment
losses recognized
in earnings - - - - - - - - (340)
------- ------- ----
Other 307 207 191
3,841 3,782 3,253
----- ----- -----
Noninterest
expense:
Compensation and
employee benefits 5,532 5,547 5,139
Occupancy and
equipment 1,138 1,139 1,100
FDIC insurance 407 344 335
Check and data
processing expense 660 706 677
Professional fees 573 591 337
Marketing and
community
investment 469 406 494
Foreclosed real
estate and other
properties, net 110 25 48
Other 752 669 649
9,641 9,427 8,779
----- ----- -----
Income before
income taxes 2,573 613 2,908
Income tax expense 830 123 947
--- --- ---
Net income $1,743 $490 $1,961
====== ==== ======
Basic earnings per
common share: $0.25 $0.07 $0.38
Diluted earnings
per common share: $0.25 $0.07 $0.38
Basic weighted
average shares: 6,970,787 6,946,303 5,201,869
Diluted weighted
average shares: 6,973,214 6,946,547 5,204,102
Outstanding shares
(end of period): 6,978,561 6,963,039 6,938,538
Six Months Ended
December 31,
------------
2010 2009
---- ----
Interest, dividend and
loan fee income:
Loans and leases
receivable $25,248 $24,695
Investment securities
and interest-earning
deposits 2,954 4,285
28,202 28,980
------ ------
Interest expense:
Deposits 5,040 6,856
Advances from Federal
Home Loan Bank
and other borrowings 3,896 4,515
8,936 11,371
----- ------
Net interest income 19,266 17,609
Provision for losses on
loans and leases 4,635 767
----- ---
Net interest income
after provision
for losses on loans and
leases 14,631 16,842
------ ------
Noninterest income:
Fees on deposits 3,199 2,849
Loan servicing income 919 979
Gain on sale of loans,
net 1,850 1,033
Earnings on cash value
of life insurance 334 328
Trust income 316 464
Gain on sale of
securities, net 491 1,136
Total other-than-
temporary impairment
losses - - - - (2,081)
Portion of loss
recognized in other
comprehensive income - - - - (117)
------- ----
Net impairment losses
recognized in earnings - - - - (2,198)
------- ------
Other 514 360
7,623 4,951
----- -----
Noninterest expense:
Compensation and
employee benefits 11,079 10,302
Occupancy and equipment 2,277 2,184
FDIC insurance 751 660
Check and data
processing expense 1,366 1,375
Professional fees 1,164 937
Marketing and community
investment 875 965
Foreclosed real estate
and other properties,
net 135 67
Other 1,421 1,238
19,068 17,728
------ ------
Income before income
taxes 3,186 4,065
Income tax expense 953 1,249
--- -----
Net income $2,233 $2,816
====== ======
Basic earnings per
common share: $0.32 $0.61
Diluted earnings per
common share: $0.32 $0.61
Basic weighted average
shares: 6,958,545 4,616,130
Diluted weighted
average shares: 6,959,652 4,622,984
Outstanding shares (end
of period): 6,978,561 6,938,538
HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands, except share data)
(Unaudited)
12/31/2010 9/30/2010 6/30/2010
---------- --------- ---------
Balance Sheet Data
Total assets $1,226,033 $1,260,484 $1,253,015
Cash and cash equivalents 18,995 21,838 20,805
Securities available for
sale 260,664 268,716 264,442
Loans and leases receivable,
net 847,530 867,748 862,704
Loans held for sale 17,013 18,120 25,287
In-Market Deposits 890,913 848,207 891,360
Out-of-Market Deposits 19,403 29,411 22,904
Advances from Federal Home
Loan Bank and other
borrowings 167,362 230,366 190,719
Subordinated debentures
payable to trusts 27,837 27,837 27,837
Stockholders' equity 94,400 93,373 94,435
Common stockholder's equity
before OCI (1) to
consolidated assets 8.09% 7.78% 7.83%
OCI components to
consolidated assets:
Net changes in unrealized
gain (loss) on securities
available
for sale (0.13) (0.05) (0.05)
Net unrealized losses on
defined benefit plan (0.06) (0.06) (0.06)
Net unrealized losses on
derivatives and hedging
activities (0.17) (0.23) (0.16)
Goodwill to consolidated
assets (0.36) (0.35) (0.35)
----- ----- -----
Tangible common equity to
tangible assets 7.37% 7.09% 7.21%
Tangible book value per
common share (2) $12.90 $12.78 $12.97
Tier I capital (to adjusted
total assets) (3) 9.13% 8.73% 8.69%
Tier I capital (to risk
weighted assets) (3) 11.31% 10.80% 10.79%
Total risk-based capital
(to risk-weighted assets)
(3) 12.22% 11.71% 11.68%
Number of full-service
offices 33 33 33
(1) Accumulated other comprehensive income (loss).
(2) Common equity reduced by goodwill and divided by number of
shares of outstanding common stock.
(3) Capital ratios for Home Federal Bank.
HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands, Except per Share Data)
(Unaudited)
Loan and Lease Portfolio
Composition
December 31, 2010 June 30, 2010
----------------- -------------
Amount Percent Amount Percent
------ ------- ------ -------
One-to four-family (1) $66,140 7.69% $72,392 8.30%
Commercial real estate 222,071 25.80% 216,479 24.82%
Commercial business (2) 93,578 10.87% 99,892 11.45%
Multi-family real estate 48,773 5.67% 50,064 5.74%
Equipment finance leases 8,249 0.96% 10,642 1.22%
Consumer direct (3) 123,428 14.34% 122,832 14.08%
Consumer indirect (4) 4,403 0.51% 8,186 0.94%
Agricultural 270,140 31.39% 270,568 31.02%
Construction 23,797 2.77% 21,225 2.43%
------ ---- ------ ----
Total loans and leases
receivable (5) $860,579 100.00% $872,280 100.00%
======== ====== ======== ======
(1) Excludes $15,958 and $20,394 loans held for sale at December 31,
2010 and June 30, 2010, respectively.
(2) Includes $2,489 and $2,599 tax exempt leases at December 31,
2010 and June 30, 2010, respectively.
(3) Excludes $1,055 and $4,893 student loans held for sale at
December 31, 2010 and June 30, 2010, respectively.
(4) The Company announced Consumer Indirect originations ceased
during the first quarter of Fiscal 2008.
(5) Includes deferred loan fees and discounts.
Deposit Composition
December 31, 2010 June 30, 2010
----------------- -------------
Amount Percent Amount Percent
------ ------- ------ -------
Noninterest bearing
checking accounts $108,800 11.95% $117,139 12.81%
Interest bearing checking
accounts 110,961 12.19% 100,231 10.96%
Money market accounts 180,849 19.87% 189,821 20.76%
Savings accounts 97,265 10.68% 83,136 9.09%
In-market certificates of
deposit 393,038 43.18% 401,033 43.86%
Out-of-market
certificates of deposit 19,403 2.13% 22,904 2.51%
Total deposits $910,316 100.00% $914,264 100.00%
======== ====== ======== ======
HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)
Allowance for Loan
and Lease Loss
Activity
Three Months Ended Six Months Ended
------------------ ----------------
12/31/2010 12/31/2009 12/31/2010 12/31/2009
---------- ---------- ---------- ----------
Balance,
beginning $12,319 $8,503 $9,575 $8,470
Provision
charged to
income 1,268 424 4,635 767
Charge-
offs (569) (459) (1,287) (814)
Recoveries 31 44 126 89
Balance,
ending $13,049 $8,512 $13,049 $8,512
======= ====== ======= ======
12/31/2010 9/30/2010 12/31/2009
---------- --------- ----------
Asset Quality
Nonaccruing loans and
leases $26,859 $17,956 $9,666
Accruing loans and
leases delinquent
more than 90 days 4,638 4,235 5,407
Foreclosed assets 164 942 1,133
Total nonperforming
assets $31,661 $23,133 $16,206
======= ======= =======
FAS Statement No. 5
Allowance for loan
and lease losses $9,101 $9,405 $8,370
FAS Statement No. 114
Impaired loan
valuation allowance 3,948 2,914 142
----- ----- ---
Total allowance for
loans and lease
losses $13,049 $12,319 $8,512
======= ======= ======
Ratio of
nonperforming assets
to total assets at
end of period (1) 2.58% 1.84% 1.38%
Ratio of
nonperforming loans
and leases to total
loans and
leases at end of
period (2) 3.59% 2.47% 1.79%
Ratio of net charge
offs to average
loans and leases for
the year-to-date
period 0.26% 0.28% 0.17%
Ratio of allowance
for loan and lease
losses to total
loans and
leases at end of
period 1.49% 1.37% 1.01%
Ratio of allowance
for loan and lease
losses to
nonperforming
loans and leases at
end of period (2) 41.43% 55.51% 56.47%
(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.
HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)
Average Balances, Interest
Yields and Rates
Three Months Ended
------------------
December 31, 2010
-----------------
Yield/
Average Rate
------- ------
Interest-earning assets:
Loans and leases receivable
(1) (3) $885,970 5.62%
Investment securities (2) (3) 279,694 2.09%
------- ----
Total interest-earning assets 1,165,664 4.77%
----
Noninterest-earning assets 80,328
Total assets $1,245,992
==========
Interest-bearing liabilities:
Deposits:
Checking and money market $270,665 0.51%
Savings 79,883 0.33%
Certificates of deposit 429,799 1.86%
------- ----
Total interest-bearing
deposits 780,347 1.23%
FHLB advances and other
borrowings 204,532 2.87%
Subordinated debentures
payable to trusts 27,837 6.56%
------ ----
Total interest-bearing
liabilities 1,012,716 1.71%
----
Noninterest-bearing deposits 104,485
Other liabilities 34,810
------
Total liabilities 1,152,011
Equity 93,981
------
Total liabilities and equity $1,245,992
==========
Net interest spread (4) 3.06%
====
Net interest margin (4) (5) 3.28%
====
Net interest margin, TE (6) 3.32%
====
Return on average assets (7) 0.55%
====
Return on average equity (8) 7.36%
====
Average Balances, Interest
Yields and Rates
Three Months Ended
------------------
September 30, 2010
------------------
Yield/
Average Rate
------- ------
Interest-earning assets:
Loans and leases receivable
(1) (3) $892,630 5.65%
Investment securities (2) (3) 268,988 2.19%
------- ----
Total interest-earning assets 1,161,618 4.85%
----
Noninterest-earning assets 79,949
Total assets $1,241,567
==========
Interest-bearing liabilities:
Deposits:
Checking and money market $269,008 0.56%
Savings 76,507 0.34%
Certificates of deposit 436,885 1.97%
------- ----
Total interest-bearing
deposits 782,400 1.32%
FHLB advances and other
borrowings 195,220 3.03%
Subordinated debentures
payable to trusts 27,837 6.57%
------ ----
Total interest-bearing
liabilities 1,005,457 1.80%
----
Noninterest-bearing deposits 104,727
Other liabilities 37,184
------
Total liabilities 1,147,368
Equity 94,199
------
Total liabilities and equity $1,241,567
==========
Net interest spread (4) 3.05%
====
Net interest margin (4) (5) 3.29%
====
Net interest margin, TE (6) 3.33%
====
Return on average assets (7) 0.16%
====
Return on average equity (8) 2.06%
====
(1) Includes loan fees and interest on accruing loans and leases
past due 90 days or more.
(2) Includes federal funds sold and Federal Home Loan Bank stock.
(3) Yields do not reflect the tax exempt nature of loans, equipment
leases and municipal securities.
(4) Percentages for the three months ended December 31, 2010 and
September 30, 2010 have been annualized.
(5) Net interest income divided by average interest-earning assets.
(6) Net interest margin expressed on a fully taxable equivalent
basis ("Net Interest Margin, TE") is a non-GAAP financial measure.
The tax-equivalent adjustment to net interest income recognizes the
income tax savings when comparing taxable and tax-exempt assets and
adjusting for federal and state exemption of interest income and
certain other permanent income tax differences. We believe that it
is a standard practice in the banking industry to present net
interest margin expressed on a fully taxable equivalent basis, and
accordingly believe the presentation of this non-GAAP financial
measure may be useful for peer comparison purposes. As a non-GAAP
financial measure, Net Interest Margin, TE should be considered
supplemental to and not a substitute for or superior to, financial
measures calculated in accordance with GAAP. As other companies may
use different calculations for Net Interest Margin, TE, this
presentation may not be comparable to similarly titled measures
reported by other companies.
(7) Ratio of net income to average total assets.
(8) Ratio of net income to average equity.
HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)
Average Balances, Interest Yields
and Rates
Six Months Ended
----------------
December 31, 2010
-----------------
Yield/
Average Rate
------- ------
Interest-earning assets:
Loans and leases receivable (1)
(3) $889,319 5.63%
Investment securities (2) (3) 274,341 2.14%
------- ----
Total interest-earning assets 1,163,660 4.81%
----
Noninterest-earning assets 80,225
Total assets $1,243,885
==========
Interest-bearing liabilities:
Deposits:
Checking and money market $269,811 0.53%
Savings 78,195 0.33%
Certificates of deposit 433,342 1.91%
------- ----
Total interest-bearing deposits 781,348 1.28%
FHLB advances and other
borrowings 199,876 2.95%
Subordinated debentures payable
to trusts 27,837 6.56%
------ ----
Total interest-bearing
liabilities 1,009,061 1.76%
----
Noninterest-bearing deposits 104,635
Other liabilities 36,053
------
Total liabilities 1,149,749
Equity 94,136
------
Total liabilities and equity $1,243,885
==========
Net interest spread (4) 3.05%
====
Net interest margin (4) (5) 3.28%
====
Net interest margin, TE (6) 3.33%
====
Return on average assets (7) 0.36%
====
Return on average equity (8) 4.71%
====
Average Balances, Interest Yields
and Rates
Six Months Ended
----------------
December 31, 2009
-----------------
Yield/
Average Rate
------- ------
Interest-earning assets:
Loans and leases receivable (1)
(3) $850,238 5.76%
Investment securities (2) (3) 235,577 3.61%
------- ----
Total interest-earning assets 1,085,815 5.29%
----
Noninterest-earning assets 76,074
Total assets $1,161,889
==========
Interest-bearing liabilities:
Deposits:
Checking and money market $222,467 0.55%
Savings 67,796 0.37%
Certificates of deposit 440,276 2.76%
------- ----
Total interest-bearing deposits 730,539 1.86%
FHLB advances and other
borrowings 199,959 3.57%
Subordinated debentures payable
to trusts 27,837 6.55%
------ ----
Total interest-bearing
liabilities 958,335 2.35%
----
Noninterest-bearing deposits 95,846
Other liabilities 31,381
------
Total liabilities 1,085,562
Equity 76,327
------
Total liabilities and equity $1,161,889
==========
Net interest spread (4) 2.94%
====
Net interest margin (4) (5) 3.22%
====
Net interest margin, TE (6) 3.27%
====
Return on average assets (7) 0.48%
====
Return on average equity (8) 7.32%
====
(1) Includes loan fees and interest on accruing loans and leases
past due 90 days or more.
(2) Includes federal funds sold and Federal Home Loan Bank stock.
(3) Yields do not reflect the tax exempt nature of loans, equipment
leases and municipal securities.
(4) Percentages for the six months ended December 31, 2010 and
December 31, 2009 have been annualized.
(5) Net interest income divided by average interest-earning assets.
(6) Net interest margin expressed on a fully taxable equivalent
basis ("Net Interest Margin, TE") is a non-GAAP financial measure.
The tax-equivalent adjustment to net interest income recognizes the
income tax savings when comparing taxable and tax-exempt assets and
adjusting for federal and state exemption of interest income and
certain other permanent income tax differences. We believe that it
is a standard practice in the banking industry to present net
interest margin expressed on a fully taxable equivalent basis, and
accordingly believe the presentation of this non-GAAP financial
measure may be useful for peer comparison purposes. As a non-GAAP
financial measure, Net Interest Margin, TE should be considered
supplemental to and not a substitute for or superior to, financial
measures calculated in accordance with GAAP. As other companies may
use different calculations for Net Interest Margin, TE, this
presentation may not be comparable to similarly titled measures
reported by other companies.
(7) Ratio of net income to average total assets.
(8) Ratio of net income to average equity.
HF Financial Corp.
Non-GAAP Disclosure Reconciliation
Net Interest Margin to Net Interest Margin-Tax Effective Yield
(Dollars in Thousands, except for share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------
September
December 31, 30, December 31,
------------
2010 2010 2010 2009
---- ---- ---- ----
Net interest income $9,641 $9,625 $19,266 $17,609
Taxable equivalent
adjustment 117 129 246 289
--- --- --- ---
Adjusted net interest
income 9,758 9,754 19,512 17,898
Average interest-
earning assets 1,165,664 1,161,618 1,163,660 1,085,815
--------- --------- --------- ---------
Net interest margin,
TE 3.32% 3.33% 3.33% 3.27%
HF Financial Corp.
Non-GAAP Disclosure Reconciliation
Revenue to Adjusted Revenue
(Dollars in Thousands)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------ ------------
2010 2009 2010 2009
---- ---- ---- ----
Net interest income $9,641 $8,858 $19,266 $17,609
Noninterest income 3,841 3,253 7,623 4,951
----- ----- ----- -----
Total revenue 13,482 12,111 26,889 22,560
Gain on sale of
securities, net (94) (603) (491) (1,136)
Net impairment
losses recognized
in earnings - - - - 340 - - - - 2,198
------- --- ------- -----
Adjusted revenue $13,388 $11,848 $26,398 $23,622
======= ======= ======= =======
SOURCE HF Financial Corp.
