Exhibit 99.1
For Immediate Release –July 26, 2004
For Information Contact:
Curtis L. Hage, Chairman, President and CEO
Sioux Falls, South Dakota
Phone: (605) 333-7556
HF Financial Corp. Announces an Annual Earnings Per Share Increase of 6.7% and Declares Quarterly Cash Dividend
• HF Financial Corp. (the “Company”) (NASDAQ: HFFC), Sioux Falls, SD, reported diluted earnings per share from continuing operations (“EPS”) of $1.43 for the year ended June 30, 2004 compared to $1.34 for the same period in the prior fiscal year, a 6.7% increase. All EPS amounts have been adjusted to reflect the 10% stock dividend paid on December 31, 2003.
• For the three months ended June 30, 2004, the Company reported EPS of $0.46 compared to $0.12 for the same period in the prior fiscal year.
• The Company announced it will pay its regular quarterly cash dividend of 10.75 cents per share for the fourth quarter of the 2004 fiscal year. The dividend will be payable on August 18, 2004 to shareholders of record on August 4, 2004. This dividend payment represents an annualized dividend yield of 2.80% based on the closing stock price of $15.35 at June 30, 2004.
• The ratio of nonperforming assets to total assets declined to 0.27% at June 30, 2004 compared to 0.77% at June 30, 2003 and 0.48% at March 31, 2004.
HF Financial Corp., the parent company for financial service companies, including Home Federal Bank, Mid America Capital Services, Inc. (“Mid America Leasing”), Hometown Insurors, Inc. and HF Financial Group, Inc. announced earnings from continuing operations today of $5.2 million for the year ended June 30, 2004 compared to $4.9 million for the prior fiscal year. For the three months ended June 30, 2004, earnings from continuing operations were $1.7 million compared to $435,000 for the same period in the prior fiscal year.
Curtis L. Hage, Chairman, President and CEO stated, “We are pleased with the annual results for the Company. The growth in loans, deposits, assets and net income all reflect positive changes resulting from management’s focus on our core business. We are also pleased with the reduction in non-interest expense. The improvement in asset quality is the result of continued discipline in our underwriting practices. We consciously increased our risk-weighted capital to support the growth in business banking assets on our balance sheet. This growth is the result of the maturation of our sales culture. We are committed to achieving market leadership in each of our core markets through people, products, pricing and service.”
Mr. Hage continued, “Our mission is to be the leading financial services provider to businesses and individuals in the communities we serve. We are excited about the progress made this year in fulfilling this mission and we look forward to continuing this momentum in each of our markets throughout this next year.”
Net interest income decreased $1.2 million, or 4.5%, for the year ended June 30, 2004 as compared to the prior fiscal year. For the three months ended June 30, 2004, net interest income increased $113,000, or 1.8%, compared to the same period in the prior fiscal year. The Company’s net interest margin was 3.41% for the year ended June 30, 2004 as compared to 3.72% for the prior fiscal year.
Provision for losses on loans and leases decreased $1.2 million, or 36.3%, for the year ended June 30, 2004 as compared to the prior fiscal year. For the three months ended June 30, 2004, provision for losses on loans and leases decreased $957,000, or 73.7%, compared to the same period in the prior fiscal year.
The decrease in noninterest income of $657,000, or 6.3%, for the year ended June 30, 2004 as compared to the prior fiscal year was primarily due to decreases in gain on sale of securities of $309,000, net gain on sale of loans of $318,000 and fees on deposits of $68,000 offset by an increase in other noninterest income of $70,000. For the three months ended June 30, 2004, noninterest income decreased $298,000, or 11.4% as compared to the same period in the prior fiscal year primarily due to decreases in net gain on sale of loans of $120,000, loan servicing income of $43,000 and other noninterest income of $142,000.
1
Noninterest expense decreased $1.3 million, or 4.9%, for the year ended June 30, 2004 as compared to the prior fiscal year primarily due to decreases in occupancy and equipment of $338,000, compensation and employee benefits of $333,000 and other noninterest expense of $603,000. Employee health claims expense, net of stop loss reimbursement under the Company’s self-insured health plan was $1.7 million for the year ended June 30, 2004, an increase of $87,000, or 5.5% compared to the prior fiscal year. For the three months ended June 30, 2004, noninterest expense decreased $1.1 million, or 16.3%, as compared to the same period in the prior fiscal year primarily due to decreases in compensation and employee benefits of $718,000, occupancy and equipment of $74,000 and other noninterest expense of $338,000. The primary factor for the decrease in compensation and employee benefits was a decrease of $436,000 in employee health claims expense, net of stop loss reimbursement under the Company’s self-insured health plan for the three months ended June 30, 2004.
The Company had total assets of $847.1 million and stockholders’ equity of $51.6 million at June 30, 2004. The Company is the largest publicly traded financial institution based in South Dakota, with 34 offices, which includes a location in Marshall, Minnesota. Internet banking is also available at www.homefederal.com.
Forward-Looking Statements
This news release and other releases and 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 and transactions.
• Forecasts of future economic performance.
• Descriptions of assumptions underlying or relating to such matters.
Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “optimism”, “look forward”, “bright”, “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, possible legislative changes and adverse economic, business and competitive developments, such as shrinking interest margins; 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 portfolios; the ability or inability 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.
2
HF Financial Corp.
Selected Consolidated Operating Highlights
(Dollars in Thousands, Except per Share Data)
(Unaudited)
|
| Three Months Ended |
| Years Ended |
| ||||||||
|
| 2004 |
| 2003 |
| 2004 |
| 2003 |
| ||||
Continuing operations: |
|
|
|
|
|
|
|
|
| ||||
Interest and dividend income: |
|
|
|
|
|
|
|
|
| ||||
Loans and leases receivable |
| $ | 9,290 |
| $ | 9,575 |
| $ | 36,935 |
| $ | 40,240 |
|
Investment securities and interest-earning deposits |
| 1,005 |
| 833 |
| 3,325 |
| 4,022 |
| ||||
|
| 10,295 |
| 10,408 |
| 40,260 |
| 44,262 |
| ||||
Interest expense: |
|
|
|
|
|
|
|
|
| ||||
Deposits |
| 2,629 |
| 2,745 |
| 10,205 |
| 12,511 |
| ||||
Advances from Federal Home Loan Bank and other borrowings |
| 1,254 |
| 1,364 |
| 4,983 |
| 5,486 |
| ||||
|
| 3,883 |
| 4,109 |
| 15,188 |
| 17,997 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net interest income |
| 6,412 |
| 6,299 |
| 25,072 |
| 26,265 |
| ||||
Provision for losses on loans and leases |
| 342 |
| 1,299 |
| 2,020 |
| 3,173 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net interest income after provision for losses on loans and leases |
| 6,070 |
| 5,000 |
| 23,052 |
| 23,092 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Noninterest income: |
|
|
|
|
|
|
|
|
| ||||
Fees on deposits |
| 1,116 |
| 1,109 |
| 4,226 |
| 4,294 |
| ||||
Gain on sale of loans, net |
| 232 |
| 352 |
| 1,311 |
| 1,629 |
| ||||
Loan servicing income |
| 357 |
| 400 |
| 1,578 |
| 1,610 |
| ||||
Gain on sale of securities, net |
| 1 |
| 1 |
| 43 |
| 352 |
| ||||
Other |
| 607 |
| 749 |
| 2,670 |
| 2,600 |
| ||||
|
| 2,313 |
| 2,611 |
| 9,828 |
| 10,485 |
| ||||
Noninterest expense: |
|
|
|
|
|
|
|
|
| ||||
Compensation and employee benefits |
| 3,662 |
| 4,380 |
| 15,542 |
| 15,875 |
| ||||
Occupancy and equipment |
| 778 |
| 852 |
| 3,209 |
| 3,547 |
| ||||
Other |
| 1,383 |
| 1,721 |
| 6,022 |
| 6,625 |
| ||||
|
| 5,823 |
| 6,953 |
| 24,773 |
| 26,047 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income from continuing operations before income taxes |
| 2,560 |
| 658 |
| 8,107 |
| 7,530 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax expense |
| 908 |
| 223 |
| 2,891 |
| 2,584 |
| ||||
Income from continuing operations |
| 1,652 |
| 435 |
| 5,216 |
| 4,946 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Discontinued operations: |
|
|
|
|
|
|
|
|
| ||||
Income (loss) from operations of discontinued segment, net of income taxes of $(2) and $131 |
| — |
| (5 | ) | — |
| 253 |
| ||||
(Loss) on discontinued segment, |
| — |
| — |
| — |
| (224 | ) | ||||
Income (loss) from discontinued operations |
| — |
| (5 | ) | — |
| 29 |
| ||||
Net income |
| $ | 1,652 |
| $ | 430 |
| $ | 5,216 |
| $ | 4,975 |
|
3
HF Financial Corp.
Selected Consolidated Operating Highlights
(Dollars in Thousands, Except per Share Data)
(Unaudited)
|
| Three Months Ended |
| Years Ended |
| ||||||||
|
| 2004 |
| 2003 |
| 2004 |
| 2003 |
| ||||
Basic earnings per share: |
|
|
|
|
|
|
|
|
| ||||
Income from continuing operations |
| $ | 0.47 |
| $ | 0.12 |
| $ | 1.47 |
| $ | 1.36 |
|
Income from discontinued operations |
| — |
| — |
| — |
| 0.01 |
| ||||
Net income |
| 0.47 |
| 0.12 |
| 1.47 |
| 1.37 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Diluted earnings per share: |
|
|
|
|
|
|
|
|
| ||||
Income from continuing operations |
| 0.46 |
| 0.12 |
| 1.43 |
| 1.34 |
| ||||
Income from discontinued operations |
| — |
| — |
| — |
| 0.01 |
| ||||
Net income |
| 0.46 |
| 0.12 |
| 1.43 |
| 1.35 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| 3,526,831 |
| 3,571,843 |
| 3,557,860 |
| 3,631,431 |
| ||||
Diluted |
| 3,603,654 |
| 3,687,575 |
| 3,656,152 |
| 3,699,304 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Outstanding shares: (end of period) |
| 3,532,650 |
| 3,543,589 |
| 3,532,650 |
| 3,543,589 |
| ||||
Share data for all periods presented has been adjusted for the 10% stock dividend paid on December 31, 2003
4
HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands, Except per Share Data)
(Unaudited)
|
| 6/30/2004 |
| 6/30/2003 |
| ||
|
|
|
|
|
| ||
Balance Sheet Data |
|
|
|
|
| ||
Total assets |
| $ | 847,070 |
| $ | 801,103 |
|
Cash and cash equivalents |
| 20,474 |
| 44,214 |
| ||
Securities available for sale |
| 122,715 |
| 88,527 |
| ||
Loans and leases receivable, net |
| 640,946 |
| 595,417 |
| ||
Loans held for sale |
| 10,351 |
| 15,984 |
| ||
Deposits |
| 658,719 |
| 621,381 |
| ||
Advances from Federal Home Loan Bank and other borrowings |
| 93,750 |
| 89,819 |
| ||
Subordinated debentures payable to trusts |
| 27,837 |
| 20,620 |
| ||
Stockholders’ equity |
| 51,649 |
| 49,358 |
| ||
|
|
|
|
|
| ||
Equity to total assets (end of period) |
| 6.10 | % | 6.16 | % | ||
Book value per share (1) |
| $ | 14.62 |
| $ | 13.93 |
|
|
|
|
|
|
| ||
Tier I (core) capital (2) |
| 8.28 | % | 8.25 | % | ||
Risk-based capital (2) |
| 10.54 | % | 10.20 | % | ||
|
|
|
|
|
| ||
Number of full-service offices |
| 34 |
| 34 |
| ||
|
|
|
|
|
| ||
Asset Quality |
|
|
|
|
| ||
Nonaccruing loans and leases |
| $ | 1,561 |
| $ | 4,365 |
|
Accruing loans and leases delinquent more than 90 days |
| 502 |
| 1,466 |
| ||
Foreclosed assets (3) |
| 212 |
| 335 |
| ||
Total nonperforming assets |
| $ | 2,275 |
| $ | 6,166 |
|
|
|
|
|
|
| ||
FASB Statement No. 5 Allowance for loan and lease losses |
| $ | 3,601 |
| $ | 2,996 |
|
FASB Statement No. 114 Impaired loan valuation allowance |
| 4 |
| 846 |
| ||
Total Allowance for loans and lease losses |
| $ | 3,605 |
| $ | 3,842 |
|
|
|
|
|
|
| ||
Ratio of nonperforming assets to total assets (end of period) |
| 0.27 | % | 0.77 | % | ||
Ratio of allowance for loan and lease losses to total loans and leases (end of period) |
| 0.55 | % | 0.62 | % | ||
Ratio of allowance for loan and lease losses |
| 174.75 | % | 65.89 | % | ||
(1) Equity divided by number of shares of outstanding common stock.
(2) Capital ratios for Home Federal Bank.
(3) Total foreclosed assets do not include land or other real estate owned held for sale.
(4) Nonperforming loans and leases include both nonaccruing and accruing loans and leases delinquent more than 90 days.
5
HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)
Loan and Lease Portfolio Composition
|
| At June 30, 2004 |
| At June 30, 2003 |
| ||||||
|
| Amount |
| Percent of |
| Amount |
| Percent of |
| ||
|
| (Dollars in Thousands) |
| ||||||||
|
|
|
|
|
|
|
|
|
| ||
One-to four-family (1) |
| $ | 93,721 |
| 14.54 | % | $ | 83,722 |
| 13.97 | % |
Commercial real estate |
| 89,356 |
| 13.86 | % | 93,192 |
| 15.55 | % | ||
Multi-family real estate |
| 42,572 |
| 6.61 | % | 49,171 |
| 8.21 | % | ||
Commercial business |
| 124,033 |
| 19.24 | % | 113,406 |
| 18.93 | % | ||
Equipment finance leases |
| 27,019 |
| 4.19 | % | 23,070 |
| 3.85 | % | ||
Consumer (2) (3) |
| 196,594 |
| 30.50 | % | 173,246 |
| 28.91 | % | ||
Agricultural |
| 63,370 |
| 9.83 | % | 58,095 |
| 9.69 | % | ||
Construction and development |
| 7,886 |
| 1.23 | % | 5,357 |
| 0.89 | % | ||
Total Loans and Leases Receivable |
| $ | 644,551 |
| 100.00 | % | $ | 599,259 |
| 100.00 | % |
(1) Excludes $10,027 and $15,984 loans held for sale at June 30, 2004 and June 30, 2003, respectively.
(2) Includes mobile home loans.
(3) Excludes $324 and $0 student loans held for sale at June 30, 2004 and June 30, 2003, respectively.
During the second quarter of fiscal 2004, the Company began classifying its student loan portfolio as held for sale.
Deposit Composition
|
| At June 30, 2004 |
| At June 30, 2003 |
| |||||||
|
| Amount |
| Percent of |
| Amount |
| Percent of |
| |||
|
| (Dollars in Thousands) |
| |||||||||
|
|
|
|
|
|
|
|
|
| |||
Noninterest bearing checking accounts |
| $ | 75,251 |
| 11.42 | % | $ | 77,004 |
| 12.39 | % | |
Interest bearing accounts |
| 45,738 |
| 6.94 | % | 43,699 |
| 7.03 | % | |||
Money market accounts |
| 211,928 |
| 32.17 | % | 178,113 |
| 28.66 | % | |||
Savings accounts |
| 63,670 |
| 9.67 | % | 54,462 |
| 8.77 | % | |||
Certificates of deposit |
| 262,132 |
| 39.80 | % | 268,103 |
| 43.15 | % | |||
Total Deposits |
| $ | 658,719 |
| 100.00 | % | $ | 621,381 |
| 100.00 | % | |
6
HF Financial Corp.
Selected Consolidated Financial Condition Data From Continuing Operations
(Dollars in Thousands)
(Unaudited)
Allowance for Loan and Lease Loss Activity
|
| Three Months Ended |
| Years Ended |
| ||||||||
|
| 6/30/2004 |
| 6/30/2003 |
| 6/30/2004 |
| 6/30/2003 |
| ||||
Balance, beginning |
| $ | 3,608 |
| $ | 4,376 |
| $ | 3,842 |
| $ | 4,461 |
|
Provision charged to income |
| 342 |
| 1,299 |
| 2,020 |
| 3,173 |
| ||||
Charge-offs |
| (398 | ) | (1,918 | ) | (2,564 | ) | (4,001 | ) | ||||
Recoveries |
| 53 |
| 85 |
| 307 |
| 473 |
| ||||
Allowance related to assets sold, net |
| — |
| — |
| — |
| (264 | ) | ||||
Balance, ending |
| $ | 3,605 |
| $ | 3,842 |
| $ | 3,605 |
| $ | 3,842 |
|
Average Balances, Interest Yields and Rates
|
| Years Ended |
| ||||||||
|
| 6/30/2004 |
| 6/30/2003 |
| ||||||
|
| Average |
| Yield/Rate |
| Average |
| Yield/Rate |
| ||
Interest-earning assets: |
|
|
|
|
|
|
|
|
| ||
Loans and leases receivable (1) |
| $ | 621,548 |
| 5.94 | % | $ | 594,873 |
| 6.76 | % |
Investment securities (2) (3) |
| 112,668 |
| 2.95 | % | 110,756 |
| 3.63 | % | ||
Total interest-earning assets |
| 734,216 |
| 5.49 | % | 705,629 |
| 6.27 | % | ||
Noninterest-earning assets |
| 61,381 |
|
|
| 55,921 |
|
|
| ||
Total assets |
| $ | 795,597 |
|
|
| $ | 761,550 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
| ||
Deposits: |
|
|
|
|
|
|
|
|
| ||
Checking and money market |
| $ | 238,774 |
| 1.13 | % | $ | 195,394 |
| 1.35 | % |
Savings |
| 50,791 |
| 0.60 | % | 39,998 |
| 0.75 | % | ||
Certificates of deposit |
| 261,982 |
| 2.75 | % | 278,397 |
| 3.44 | % | ||
Total interest-bearing deposits |
| 551,547 |
| 1.85 | % | 513,789 |
| 2.44 | % | ||
FHLB advances and other borrowings |
| 80,869 |
| 4.64 | % | 100,200 |
| 4.56 | % | ||
Subordinated debentures payable to trusts |
| 26,172 |
| 4.70 | % | 17,844 |
| 5.16 | % | ||
|
|
|
|
|
|
|
|
|
| ||
Total interest-bearing liabilities |
| 658,588 |
| 2.31 | % | 631,833 |
| 2.85 | % | ||
Noninterest-bearing deposits |
| 66,807 |
|
|
| 60,201 |
|
|
| ||
Other liabilities |
| 19,586 |
|
|
| 19,869 |
|
|
| ||
Total liabilities |
| 744,981 |
|
|
| 711,903 |
|
|
| ||
Equity |
| 50,616 |
|
|
| 49,647 |
|
|
| ||
Total liabilities and equity |
| $ | 795,597 |
|
|
| $ | 761,550 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net interest spread |
|
|
| 3.18 | % |
|
| 3.42 | % | ||
Net interest margin (4) |
|
|
| 3.41 | % |
|
| 3.72 | % | ||
Return on average assets (5) |
|
|
| 0.66 | % |
|
| 0.65 | % | ||
Return on average equity (6) |
|
|
| 10.30 | % |
|
| 9.96 | % | ||
(1) Includes interest on accruing loans and leases past due 90 days or more.
(2) Includes federal funds sold.
(3) Yields do not reflect the tax exempt nature of municipal securities.
(4) Net interest margin is net interest income divided by average interest-earning assets.
(5) Ratio of income from continuing operations to average total assets.
(6) Ratio of income from continuing operations to average equity.
7
