SIOUX FALLS, S.D., July 27 /PRNewswire-FirstCall/ -- HF Financial Corp. (Nasdaq: HFFC), reported earnings of $1.8 million for the fiscal fourth quarter ended June 30, 2009 versus $1.6 million in the comparable period in fiscal 2008. Net income available to common shareholders totaled $848,000 or $0.21 in diluted earnings per common share inclusive of preferred share dividends, amortization and warrant repayment.
As previously announced on June 3, 2009, HFFC completed its repurchase of the Fixed Rate Cumulative Perpetual Preferred Stock from the U.S. Department of Treasury. Subsequently, on June 30, 2009, the Company completed its repurchase of the warrant related to those preferred shares. Accordingly, these items impacting net income available to common shareholders in the current period will not recur in future periods.
Revenue totaled $12.1 million for the quarter, an increase of $841,000 or 7.5 percent over the comparable period last year.
"Our core revenue strategies continue to provide strong support to earnings against the backdrop of a downturn in the national economy," stated Curtis L. Hage, Chairman, President and CEO of HFFC. "We continue to focus on providing traditional community banking services to our customers. The growth in revenues this year continued to be the result of meeting the needs of our communities. With the diversification of our lines of business, we believe our franchise continues to be poised to look at growth opportunities to increase value for our stakeholders."
Net interest income totaled $8.5 million for the quarter, a decrease of $34,000 or 0.4 percent over the same period last year. Net interest margin expressed on a fully taxable equivalent basis for the three month period was 3.14 percent, compared to 3.40 percent in the comparable period last year. A non-accrual loan interest reversal of $470,000 accounted for 17 basis points of the decrease in the net interest margin percentage for the quarter. Overall, net interest margin benefitted primarily from lower costs on interest-bearing liabilities and earning asset growth.
Non-interest income totaled $3.6 million, up $875,000 or 31.9 percent relative to the comparable period in fiscal year 2008. Gain on sale of loans and gain on the sale of securities increased $585,000 and $389,000, respectively, while trust income decreased $96,000, when compared to the same quarter of the prior fiscal year. Net impairment losses on investment securities recognized in earnings were $44,000 for the fourth quarter of fiscal year 2009, which partially offset some of the increase in non-interest income.
The ratio of non-performing loans and leases to total loans and leases at the end of the fiscal 2009 fourth quarter was 1.32 percent, compared to 0.39 percent at the end of the fourth quarter in the prior year. The increase in non-performing loans and leases to $9.4 million at June 30, 2009 was primarily attributable to an increase of $7.1 million in non-accruing loans and leases primarily from one credit relationship. Accruing loans and leases delinquent more than 90 days also contributed to the ratio increase by increasing $1.3 million, to $2.1 million at June 30, 2009. Net loan and lease charge offs in the amount of $548,000 were recorded for the quarter ended June 30, 2009, compared to $460,000 for the comparable period last year. The company incurred a provision for losses on loans and leases of $878,000 for the fourth quarter of fiscal year 2009 compared to $823,000 in the fourth quarter of fiscal year 2008.
"We continue to be prudent with the funding of our loan loss reserves," said Darrel L. Posegate, President of Home Federal Bank. "We believe the credit performance of the loan portfolio has held up well during 2009. The funding of our allowance for loan losses reflects a conservative positioning at June 30, 2009. If we see any deterioration in loan quality, we will continue to increase the reserves as appropriate."
Non-interest expense grew $379,000 or 4.6 percent, over last year's fourth quarter. Federal deposit insurance premiums increased $819,000 over the prior year quarter, including a special FDIC assessment of $535,000 to strengthen the Deposit Insurance Fund. The increase was partially offset by a reduction in employee compensation and benefits of $637,000 compared to the prior year period.
Full Year Results
For the full year, the Company reported earnings of $7.8 million versus $5.8 million for the comparable period in fiscal year 2008. Net income available to common shareholders was $6.5 million, or $1.61 in diluted earnings per common share, versus $5.8 million, or $1.45 in diluted earnings per common share, for fiscal 2008, an 11.0 percent increase in diluted earnings per common share. The costs associated with preferred share dividends, amortization and warrant repurchase related to the Fixed Rate Cumulative Perpetual Preferred Stock issued to the U.S. Department of Treasury under the TARP CPP accounted for the $1.3 million, or $0.33 per diluted share, difference between reported net income and net income available to common shareholders.
Net interest income for the 2009 fiscal year totaled $35.3 million, up $5.5 million, or 18.3 percent over the prior year. Net interest margin on a fully taxable equivalent basis was 3.32 percent compared to 3.16 percent for the prior fiscal year. The net interest margin benefitted primarily from growth in earning assets, as well as lower costs on interest-bearing liabilities compared to the prior fiscal year.
Non-interest income for the year ended June 30, 2009, totaled $12.6 million, an increase of $1.3 million or 11.2 percent on a year-over-year basis. Non-interest income growth was driven by an increase in gain on sale of loans and gain on sale of securities of $709,000 and $901,000, respectively. Fees on deposits also increased $372,000 which contributed to the overall increase. These increases were partially offset by a decrease in trust income of $290,000 and net impairment losses recognized in earnings of $405,000.
Non-interest expense increased $4.0 million, or 12.9 percent over the prior year. Increased healthcare costs of $1.1 million and compensation and performance-based incentives of $281,000 contributed to the rise in expense. Audit, regulatory and federal deposit insurance premiums expense increased $1.5 million, while other non-interest expenses increased $1.1 million.
The year-to-date provision for loan and lease losses totaled $1.7 million compared to $2.0 million in the prior fiscal year. The company ended the year in a net recovery position of $858,000 to the allowance for loan and lease losses, compared to net charge-offs of $1.9 million last year. The ratio of allowance for loan and lease losses to total loans and leases increased to 0.98 percent compared to 0.75 percent at June 30, 2008.
Balance Sheet Performance
Loans and leases receivable at June 30, 2009 totaled $851.3 million, an increase of $67.6 million from the balance at June 30, 2008. During the fiscal year 2009, consumer indirect loans decreased $22.9 million, to $21.4 million; while agriculture loans increased $71.0 million, to $231.3 million. Other lines of business increased a total of $19.5 million since June 30, 2008.
The company holds $11.9 million of pooled trust preferred securities in its investment portfolio at June 30, 2009 that are currently impaired under applicable accounting rules. The Financial Accounting Standards Board (FASB) issued additional guidance as to how to account for impaired investments as well as determining the fair value of these securities in an inactive market. In accordance with this guidance, the company has attempted to determine fair value of these securities were they sold at the end of the quarter in an orderly transaction that was not a forced liquidation or a distressed sale.
The company's $11.9 million of pooled trust preferred securities have been downgraded below investment grade by Moody's. The company has performed an analysis to determine if any of the securities have a credit loss by estimating if any of the cash flows are not expected to be received as contracted. Based upon the fourth quarter analysis, one pool of $2.0 million (of the $11.9 million total) incurred an additional other-than-temporary impairment credit loss totaling $36,000, which was recorded as a net impairment loss recognized in earnings during the fourth quarter. This charge brings the total other-than-temporary impairment losses taken against the pooled trust preferred securities during fiscal year 2009 to $3.8 million, of which $3.4 million was recognized on the balance sheet in other comprehensive income with $397 thousand of credit loss recognized through earnings. Additionally, the company recorded a net impairment loss of $8,000 attributed to Fannie Mae common stock held in the investment securities portfolio during the fourth quarter of fiscal 2009.
Deposits at June 30, 2009 totaled $837.9 million, an increase of $53.6 million, or 6.8 percent, from the balance at June 30, 2008. During fiscal year 2009, public fund account balances increased $26.2 million. In-market certificates of deposit increased a total of $75.3 million from $326.0 million to $401.3 million for the fiscal year. Money market accounts decreased $26.5 million, which partially offset the other increases in deposits. Out of market deposits decreased $6.2 million to $21.0 million at June 30, 2009.
Quarterly Dividend Declared
The company announced it will pay a quarterly cash dividend of 11.25 cents per common share for the fourth quarter of the 2009 fiscal year. The dividend will be paid on August 14, 2009 to stockholders of record on August 7, 2009.
Fourth Quarter Fiscal 2009 Conference Call and Webcast
The company will host its quarterly conference calls and webcasts to discuss its quarterly financial and operational results. The conference call and webcast is scheduled for Tuesday, July 28, 2009 at 9:00 am CT (10:00 am ET) during which the company will discuss its fourth quarter and full year fiscal 2009 earnings results.
Curtis L. Hage, Chairman of the Board, President and Chief Executive Officer, and Darrel L. Posegate, Executive Vice President, Chief Financial Officer and Treasurer, will recap the company's fourth quarter for fiscal 2009.
When: Tuesday, July 28, 2009
Conference call: 9:00 am CT / 10:00 am ET
Dial-in Number: 1-877-407-9205
Call ID: HF Financial Fourth Quarter Fiscal 2009 Earnings Conference Call
Webcast: To listen to a live Webcast of the presentations, go to the Investor Relations page of the HF Financial website site, www.homefederal.com, and then the Webcast icon. The Webcast replay will be available from 12 pm CT, Tuesday, July 28, 2009, until 6:00 pm CT, Friday, August 28. Listening to the Webcast requires speakers and Windows Media Player. If you do not have Media Player, download the free software at www.windowsmedia.com.
Replay: If you do not have Internet access and want to listen to an audio replay, call 1-877-660-6853 using Account #: 286, Conference ID #: 327923. The audio replay will be available beginning at 12 pm CT on Tuesday, July 28, 2009, through 11:59 pm CT on Tuesday, August 25.
About HF Financial
HF Financial Corp., based in Sioux Falls, SD, is the parent company for financial service 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 of June 30, 2009, the company had total assets of $1.2 billion and stockholders' equity of $69.8 million. The company is the largest publicly traded savings association headquartered in South Dakota, with 33 offices in 19 communities, which includes a location in Marshall, Minnesota. Internet banking is also available at www.homefederal.com.
Forward-Looking Statements
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, 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 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 or continuing 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.
HF Financial Corp.
Selected Consolidated Operating Highlights
(Dollars in Thousands, except share data)
(Unaudited)
Three Months Ended Twelve Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Interest, dividend and loan fee
income:
Loans and leases
receivable $11,751 $12,785 $49,460 $53,972
Investment securities
and interest-earning
deposits 2,532 2,777 11,228 9,202
----- ----- ------ -----
14,283 15,562 60,688 63,174
------ ------ ------ ------
Interest expense:
Deposits 3,455 4,589 15,679 24,693
Advances from Federal Home
Loan Bank and other
borrowings 2,345 2,456 9,680 8,605
----- ----- ----- -----
5,800 7,045 25,359 33,298
----- ----- ------ ------
Net interest income 8,483 8,517 35,329 29,876
Provision for losses on
loans and leases 878 823 1,679 1,994
--- --- ----- -----
Net interest income
after provision
for losses on loans
and leases 7,605 7,694 33,650 27,882
----- ----- ------ ------
Noninterest income:
Fees on deposits 1,388 1,331 5,761 5,389
Loan servicing income 593 575 2,301 2,211
Gain on sale of loans,
net 827 242 1,906 1,197
Trust income 143 239 676 966
Gain on sale of securities,
net 392 3 904 3
Total other-than-temporary
impairment losses (653) ---- (3,811) ----
Portion of loss recognized
in other comprehensive
income 609 ---- 3,406 ----
--- ---- ----- ----
Net impairment losses
recognized in earnings (44) ---- (405) ----
--- ---- ---- ----
Other 321 355 1,459 1,567
--- --- ----- -----
3,620 2,745 12,602 11,333
----- ----- ------ ------
Noninterest expense:
Compensation and employee
benefits 4,761 5,398 20,942 19,616
Occupancy and equipment 958 973 3,981 3,832
FDIC insurance 841 22 1,376 92
Foreclosed real estate and
other properties, net 73 68 292 181
Other 1,946 1,739 7,975 6,885
----- ----- ----- -----
8,579 8,200 34,566 30,606
----- ----- ------ ------
Income before income
taxes 2,646 2,239 11,686 8,609
Income tax expense 822 617 3,870 2,766
--- --- ----- -----
Net income 1,824 1,622 7,816 5,843
Preferred stock dividend and
accretion 976 ---- 1,316 ----
--- ---- ----- ----
Net income available to
common shareholders $848 $1,622 $6,500 $5,843
==== ====== ====== ======
Basic earnings per common
share: $0.21 $0.41 $1.62 $1.47
Diluted earnings per common
share: $0.21 $0.40 $1.61 $1.45
Basic weighted average
shares: 4,025,982 3,950,317 4,006,820 3,969,988
Diluted weighted average
shares: 4,035,446 4,017,014 4,026,937 4,023,474
Outstanding shares (end
of period): 4,025,982 3,951,992 4,025,982 3,951,992
HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands, except share data)
(Unaudited)
6/30/2009 6/30/2008
--------- ---------
Balance Sheet Data
Total assets $1,177,885 $1,103,494
Cash and cash equivalents 18,511 21,170
Securities available for sale 224,667 225,004
Loans and leases receivable, net 842,812 777,777
Loans held for sale 14,881 8,796
In-Market Deposits 816,835 756,982
Out-of-Market Deposits 21,033 27,255
Advances from Federal Home Loan Bank
and other borrowings 207,369 198,454
Subordinated debentures payable to
trusts 33,337 27,837
Stockholders' equity 69,764 64,203
Stockholder's equity before OCI (1)
to consolidated assets 6.22% 6.11%
OCI components to consolidated assets:
Net changes in unrealized gain (loss)
on securities available for sale (0.06) (0.19)
Net unrealized losses on defined
benefit plan (0.16) (0.08)
Net unrealized losses on derivatives
and hedging activities (0.05) (0.01)
Goodwill to consolidated assets (0.42) (0.45)
----- -----
Tangible capital to consolidated
assets 5.53% 5.39%
Book value per common share (2) $17.33 $16.25
Tier I (core) capital (3) 8.45% 7.78%
Risk-based capital (3) 11.06% 10.83%
Number of full-service offices 33 33
--------------------------------------
(1) Accumulated other comprehensive income (loss)
(2) Common equity 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
June 30, 2009 June 30, 2008
------------- -------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
One-to four-family (1) $84,849 9.97% $99,989 12.76%
Commercial business and real
estate (2) (3) 322,416 37.87% 303,415 38.72%
Multi-family real estate 48,342 5.68% 45,093 5.75%
Equipment finance leases 16,010 1.88% 19,288 2.46%
Consumer direct (4) 116,777 13.72% 105,719 13.49%
Consumer indirect (5) 21,394 2.51% 44,294 5.65%
Agricultural 231,315 27.17% 160,267 20.45%
Construction and development 10,179 1.20% 5,645 0.72%
------ ---- ----- ----
Total Loans and Leases
Receivable (6) $851,282 100.00% $783,710 100.00%
======== ====== ======== ======
------------------------------
(1) Excludes $8,888 and $7,958 loans held for sale at June 30, 2009 and
June 30, 2008, respectively.
(2) Includes $2,810 and $3,012 tax exempt leases at June 30, 2009 and
June 30, 2008, respectively.
(3) Excludes $0 and $223 commercial loans held for sale at June 30, 2009
and June 30, 2008, respectively.
(4) Excludes $5,993 and $614 student loans held for sale at June 30, 2009
and June 30, 2008, 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
June 30, 2009 June 30, 2008
------------- -------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Noninterest bearing checking
accounts $94,067 11.23% $90,598 11.55%
Interest bearing checking
accounts 94,846 11.32% 90,125 11.49%
Money market accounts 145,214 17.33% 171,689 21.89%
Savings accounts 81,417 9.72% 78,575 10.02%
In-market certificates of
deposit 401,291 47.89% 325,995 41.57%
Out-of-market certificates of
deposit 21,033 2.51% 27,255 3.48%
------ ---- ------ ----
Total Deposits $837,868 100.00% $784,237 100.00%
======== ====== ======== ======
HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)
Allowance for Loan and Lease Loss
Activity
Three Months Ended Twelve Months Ended
------------------ -------------------
6/30/2009 6/30/2008 6/30/2009 6/30/2008
--------- --------- --------- ---------
Balance, beginning $8,140 $5,570 $5,933 $5,872
Provision charged to
income 878 823 1,679 1,994
Charge-offs (587) (545) (1,569) (2,245)
Recoveries 39 85 2,427 312
-- -- ----- ---
Balance, ending $8,470 $5,933 $8,470 $5,933
====== ====== ====== ======
6/30/2009 6/30/2008
--------- ---------
Asset Quality
Nonaccruing loans
and leases $9,381 $2,324
Accruing loans and
leases delinquent
more than 90 days 2,092 781
Foreclosed assets 1,085 643
----- ---
Total
nonperforming
assets $12,558 $3,748
======= ======
FAS Statement No. 5
Allowance for loan
and lease losses $8,185 $5,803
FAS Statement No. 114
Impaired loan
valuation allowance 285 130
--- ---
Total allowance
for loans and
lease losses $8,470 $5,933
====== ======
Ratio of nonperforming
assets to total assets
at end of period (1) 1.07% 0.34%
Ratio of
nonperforming loans
and leases to total
loans and
leases at end of
period (2) 1.32% 0.39%
Ratio of allowance for
loan and lease losses
to total loans and
leases at end
of period 0.98% 0.75%
Ratio of allowance for
loan and lease losses
to nonperforming
loans and leases at end
of period (2) 73.83% 191.08%
-----------------------------
(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
Twelve Months Ended
-------------------
06/30/2009 06/30/2008
---------- ----------
Yield/ Yield/
Average Rate Average Rate
--------- ------- --------- -------
Interest-earning assets:
Loans and leases
receivable (1) (3) $829,486 5.96% $775,558 6.96%
Investment
securities (2) (3) 253,569 4.43% 185,163 4.97%
------- ---- ------- ----
Total interest-
earning assets 1,083,055 5.60% 960,721 6.58%
---- ----
Noninterest-
earning assets 67,537 70,371
------ ------
Total assets $1,150,592 $1,031,092
========== ==========
Interest-bearing
liabilities:
Deposits:
Checking and
money market $231,362 0.85% $268,264 2.60%
Savings 71,004 0.76% 56,005 2.06%
Certificates of
deposit 392,775 3.36% 355,401 4.66%
------- ---- ------- ----
Total interest-
bearing deposits 695,141 2.26% 679,670 3.63%
FHLB advances and
other borrowings 231,783 3.38% 152,289 4.26%
Subordinated debentures
payable to trusts (4) 28,260 6.51% 27,837 7.58%
------ ---- ------ ----
Total interest-bearing
liabilities 955,184 2.65% 859,796 3.87%
---- ----
Noninterest-
bearing deposits 76,838 79,313
Other liabilities 38,152 27,914
------ ------
Total liabilities 1,070,174 967,023
Equity 80,418 64,069
------ ------
Total liabilities
and equity $1,150,592 $1,031,092
========== ==========
Net interest spread 2.95% 2.71%
==== ====
Net interest margin (5) 3.26% 3.11%
==== ====
Net interest margin, TE (6) 3.32% 3.16%
==== ====
Return on average assets (7) 0.68% 0.57%
==== ====
Return on average equity (8) 9.72% 9.12%
==== ====
------------------------------
(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) Includes $125 expense in July 2007 for unamortized debt issuance
costs.
(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.
(7) Ratio of net income to average total assets.
(8) Ratio of net income to average equity.
