Exhibit 99.1
For Immediate Release – April 24, 2006
For Information Contact:
Curtis L. Hage, Chairman, President and CEO
Sioux Falls, South Dakota
Phone: (605) 333-7556
HF Financial Corp. Announces Quarter Earnings and Declares Quarterly Cash Dividend
• HF Financial Corp. (the “Company”) (NASDAQ: HFFC), Sioux Falls, SD, reported diluted earnings per share (“EPS”) of $0.31 for the three months ended March 31, 2006 compared to $0.34 for the same period in the prior fiscal year. The EPS figures have been adjusted to reflect the 10% stock dividend to be paid on April 24, 2006.
• For the nine months ended March 31, 2006, the Company reported EPS of $0.89 compared to $1.11 for the same period in the prior fiscal year.
• On March 24, 2006 the Company announced a 10% stock dividend payable April 24, 2006 to stockholders of record on April 10, 2006.
• Net interest margin decreased $516,000, or 2.6%, to $19.1 million for the nine months ended March 31, 2006 from $19.6 million for the same period in the prior fiscal year. This decrease was primarily due to an increase in the average rate paid on interest-bearing liabilities to 3.47% for the nine months ended March 31, 2006 from 2.51% for the same period in the prior fiscal year offset by an increase in the average yield on total interest-earning assets from 5.59% to 6.15% for the nine months ended March 31, 2005 and 2006, respectively.
• Asset quality indicators continue to improve since the Company’s fiscal year ended June 30, 2005. The ratio of nonperforming assets to total assets decreased to 0.51% at March 31, 2006 from 0.78% at June 30, 2005. In addition, the ratio of allowance for loan and lease losses to total loans and leases increased from 0.74% at June 30, 2005 to 0.76% at March 31, 2006.
• Net healthcare costs were $382,000 for the three months ended March 31, 2006, which is comparable to costs of $379,000 in the same period in the prior fiscal year. For the nine months ended March 31, 2006, net healthcare costs increased by $237,000, or 24.4%, as compared to the same period last year.
• Home Federal Bank, the banking subsidiary of the Company, has announced plans to develop an additional branch office in the South Dakota community of Yankton. This branch, which will be the Company’s 36th branch, is expected to open in late 2006.
• The Company approved a new stock buyback program to purchase 10% of the Company’s common stock beginning May 1, 2006 through April 30, 2007.
• The Company announced it will pay a quarterly cash dividend of 10.25 cents per share for the third quarter of the 2006 fiscal year. The dividend will be paid on May 17, 2006 to stockholders of record on May 10, 2006. This dividend payment represents an amount adjusted as a result of the 10% stock dividend to be paid on April 24, 2006.
HF Financial Corp., the parent company for financial service companies, including Home Federal Bank, Mid America Capital Services, Inc., Hometown Insurors, Inc. and HF Financial Group, Inc., announced earnings today of $3.6 million for the nine months ended March 31, 2006 compared to $4.5 million for the same period in the prior fiscal year. For the three months ended March 31, 2006, earnings were $1.3 million compared to $1.3 million for the same period in the prior fiscal year.
Curt Hage, Chairman, CEO and President stated, “We are pleased with our improvement in asset quality with a decrease of nonperforming assets of $2.3 million or 32.5% at March 31, 2006 compared to June 30, 2005. We note that at the same time we have increased our provision for loan and lease losses by $4.0 million over the same period last year. We remain committed to strong asset quality.”
Mr. Hage continued, “There are challenges to interest margins in this transition period from low interest rates to more normal interest rates and we believe we are well positioned to manage these opportunities. Asset production continues to be strong in a very competitive market with growth in earning assets of 8.0% and growth in assets of 7.8% over the same period a year ago. Deposit growth of 8.4% over the March 31, 2005 level indicates the strength of our branch expansions and emphasis on pricing strategies put in place over the past fiscal year. Growth in construction and development lending of 115.6% is indicative of the strong growth in the Sioux Falls area economy and our ability to capitalize on transitions in the market due to merger and acquisition activity among our competitors.”
1
Mr. Hage concluded, “The growth in loan production and deposit generation resulted in increases in noninterest income evidenced by an increase of $120,000 in deposit fee income for the nine months ended March 31, 2006 over the prior fiscal year. Trust and investment fee income increased $99,000 over that same period. We are confident our relationship management culture will continue to position us as a strong competitor in the Sioux Falls market expansion.”
“Extension of our stock repurchase program provides a continuing option for us to provide the strongest returns for our shareholders. Since our first quarterly report on June 30, 1992, we are pleased to pay our 56th consecutive quarterly cash dividend to our shareholders.”
Net interest income decreased $516,000, or 2.6%, for the nine months ended March 31, 2006 as compared to the same period in the prior fiscal year. For the three months ended March 31, 2006, net interest income increased $100,000, or 1.6%, compared to the same period in the prior fiscal year. The Company’s net interest margin was 3.01% for the nine months ended March 31, 2006 compared to 3.33% for the same period in the prior fiscal year. For the three months ended March 31, 2006, net interest margin was 3.03% compared to 3.28% for the same period in the prior fiscal year. Average earning assets increased 8.0%, yielding a rate of 6.15% for the nine months ended March 31, 2006 compared to the same period in the prior fiscal year, which yielded a rate of 5.59%. Average interest-bearing liabilities increased 8.6%, with a cost of funds rate of 3.47% for the nine months ended March 31, 2006 compared to the same period in the prior fiscal year with a cost of funds rate of 2.51%.
Provision for losses on loans and leases increased $4.0 million for the nine months ended March 31, 2006 as compared to the same period in the prior fiscal year. For the three months ended March 31, 2006 provision for losses on loans and leases increased $289,000 as compared to the same period in the prior fiscal year. Total nonperforming assets increased $2.0 million, or 75.2%, at March 31, 2006 compared to the same period in the prior fiscal year. The increase in nonperforming assets was primarily attributable to an increase of $1.8 million in loans and leases past due 90 days and still accruing from $995,000 at March 31, 2005 to $2.8 million at March 31, 2006.
The increase in noninterest income of $3.8 million, or 56.9%, for the nine months ended March 31, 2006 as compared to the same period in the prior fiscal year was primarily due to the net gain on sale of land of $3.6 million along with increases in fees on deposits of $120,000 and trust income of $99,000 offset by a decrease in loan servicing income of $158,000. The decrease in noninterest income of $49,000, or 2.3% for the three months ended March 31, 2006 as compared to the same period in the prior fiscal year was primarily due to increases in gain on sale of loans of $73,000, trust income of $35,000 and fees on deposits of $21,000 offset by a decrease in loan servicing income of $190,000.
Noninterest expense increased $718,000, or 3.8%, for the nine months ended March 31, 2006 as compared to the same period in the prior fiscal year primarily due to increases in compensation and employee benefits of $508,000, occupancy and equipment of $155,000 and other noninterest expense of $55,000. Net healthcare costs, inclusive of health claims and administration fees offset by stop loss and employee reimbursement under the Company’s self-insured health plan were $1.2 million for the nine months ended March 31, 2006, an increase of $237,000 compared to the same period in the prior fiscal year. For the three months ended March 31, 2006, noninterest expense increased $122,000, or 1.9% as compared to the prior fiscal year primarily due to increases in compensation and employee benefits of $120,000 and occupancy and equipment of $95,000 offset by a decrease in other noninterest expense of $93,000. Net healthcare costs, inclusive of health claims and administration fees offset by stop loss and employee reimbursement under the Company’s self-insured health plan were $382,000 for the three months ended March 31, 2006, an increase of $3,000 compared to the same period in the prior fiscal year.
The Company had total assets of $921.2 million and stockholders’ equity of $55.7 million at March 31, 2006. The Company is the largest publicly traded savings association headquartered in South Dakota, with 35 offices, which includes a location in Marshall, Minnesota. Internet banking is also available at www.homefederal.com.
2
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 and use of subordinated debentures payable to trusts.
* 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 the following: 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; unexpected 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; 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.
3
HF Financial Corp.
Selected Consolidated Operating Highlights
(Dollars in Thousands, Except per Share Data)
(Unaudited)
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| 2006 |
| 2005 |
| 2006 |
| 2005 |
| ||||
Interest, dividend and loan fee income: |
|
|
|
|
|
|
|
|
| ||||
Loans and leases receivable |
| $ | 11,829 |
| $ | 9,882 |
| $ | 34,543 |
| $ | 29,820 |
|
Investment securities and interest-earning deposits |
| 1,637 |
| 1,108 |
| 4,538 |
| 3,109 |
| ||||
|
| 13,466 |
| 10,990 |
| 39,081 |
| 32,929 |
| ||||
Interest expense: |
|
|
|
|
|
|
|
|
| ||||
Deposits |
| 5,239 |
| 3,259 |
| 14,328 |
| 8,971 |
| ||||
Advances from Federal Home Loan Bank and other borrowings |
| 1,845 |
| 1,449 |
| 5,643 |
| 4,332 |
| ||||
|
| 7,084 |
| 4,708 |
| 19,971 |
| 13,303 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net interest income |
| 6,382 |
| 6,282 |
| 19,110 |
| 19,626 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Provision for losses on loans and leases |
| 418 |
| 129 |
| 4,510 |
| 504 |
| ||||
Net interest income after provision for losses on loans and leases |
| 5,964 |
| 6,153 |
| 14,600 |
| 19,122 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Noninterest income: |
|
|
|
|
|
|
|
|
| ||||
Gain on sale of land, net |
| — |
| — |
| 3,557 |
| — |
| ||||
Fees on deposits |
| 1,029 |
| 1,008 |
| 3,375 |
| 3,255 |
| ||||
Loan servicing income |
| 118 |
| 308 |
| 805 |
| 963 |
| ||||
Gain on sale of loans, net |
| 280 |
| 207 |
| 688 |
| 669 |
| ||||
Trust income |
| 214 |
| 179 |
| 609 |
| 510 |
| ||||
Gain on sale of securities, net |
| 2 |
| — |
| 2 |
| 13 |
| ||||
Other |
| 434 |
| 424 |
| 1,415 |
| 1,253 |
| ||||
|
| 2,077 |
| 2,126 |
| 10,451 |
| 6,663 |
| ||||
Noninterest expense: |
|
|
|
|
|
|
|
|
| ||||
Compensation and employee benefits |
| 4,044 |
| 3,924 |
| 12,559 |
| 12,051 |
| ||||
Occupancy and equipment |
| 861 |
| 766 |
| 2,470 |
| 2,315 |
| ||||
Other |
| 1,520 |
| 1,613 |
| 4,762 |
| 4,707 |
| ||||
|
| 6,425 |
| 6,303 |
| 19,791 |
| 19,073 |
| ||||
Income before income taxes |
| 1,616 |
| 1,976 |
| 5,260 |
| 6,712 |
| ||||
Income tax expense |
| 366 |
| 632 |
| 1,688 |
| 2,260 |
| ||||
Net income |
| $ | 1,250 |
| $ | 1,344 |
| $ | 3,572 |
| $ | 4,452 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.32 |
| $ | 0.35 |
| $ | 0.91 |
| $ | 1.15 |
|
Diluted |
| 0.31 |
| 0.34 |
| 0.89 |
| 1.11 |
| ||||
Weighted average shares: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| 3,937,344 |
| 3,921,732 |
| 3,905,120 |
| 3,924,941 |
| ||||
Diluted |
| 4,027,037 |
| 4,044,698 |
| 3,992,671 |
| 4,043,873 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Outstanding shares: (end of period) |
| 3,940,528 |
| 3,869,869 |
| 3,940,528 |
| 3,869,869 |
| ||||
Share data for all periods presented has been adjusted for the 10% stock dividend to be paid on April 24, 2006.
4
HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands, Except per Share Data)
(Unaudited)
|
| 3/31/2006 |
| 6/30/2005 |
| 3/31/2005 |
| |||
|
|
|
|
|
|
|
| |||
Balance Sheet Data |
|
|
|
|
|
|
| |||
Total assets |
| $ | 921,249 |
| $ | 897,874 |
| $ | 854,010 |
|
Cash and cash equivalents |
| 17,426 |
| 18,248 |
| 22,912 |
| |||
Securities available for sale |
| 143,226 |
| 142,429 |
| 127,703 |
| |||
Loans and leases receivable, net |
| 693,469 |
| 670,581 |
| 642,600 |
| |||
Loans held for sale |
| 9,243 |
| 10,238 |
| 7,773 |
| |||
Deposits |
| 705,265 |
| 681,216 |
| 650,728 |
| |||
Advances from Federal Home Loan Bank and other borrowings |
| 114,515 |
| 119,664 |
| 104,210 |
| |||
Subordinated debentures payable to trusts |
| 27,837 |
| 27,837 |
| 27,837 |
| |||
Stockholders’ equity |
| 55,690 |
| 53,635 |
| 53,902 |
| |||
|
|
|
|
|
|
|
| |||
Equity to total assets (end of period) |
| 6.05 | % | 5.97 | % | 6.31 | % | |||
Book value per share (1) |
| $ | 14.13 |
| $ | 13.99 |
| $ | 13.93 |
|
|
|
|
|
|
|
|
| |||
Tier I (core) capital (2) |
| 8.24 | % | 8.28 | % | 8.60 | % | |||
Risk-based capital (2) |
| 10.81 | % | 10.66 | % | 11.02 | % | |||
|
|
|
|
|
|
|
| |||
Number of full-service offices |
| 35 |
| 34 |
| 34 |
| |||
|
|
|
|
|
|
|
| |||
Asset Quality |
|
|
|
|
|
|
| |||
Nonaccruing loans and leases |
| $ | 1,849 |
| $ | 5,322 |
| $ | 1,436 |
|
Accruing loans and leases delinquent more than 90 days |
| 2,762 |
| 1,609 |
| 995 |
| |||
Foreclosed assets |
| 126 |
| 89 |
| 272 |
| |||
Total nonperforming assets |
| $ | 4,737 |
| $ | 7,020 |
| $ | 2,703 |
|
|
|
|
|
|
|
|
| |||
FASB Statement No. 5 Allowance for loan and lease losses |
| $ | 5,369 |
| $ | 3,326 |
| $ | 3,339 |
|
FASB Statement No. 114 Impaired loan valuation allowance |
| — |
| 1,750 |
| — |
| |||
Total allowance for loans and lease losses |
| $ | 5,369 |
| $ | 5,076 |
| $ | 3,339 |
|
|
|
|
|
|
|
|
| |||
Ratio of nonperforming assets to total assets (end of period) |
| 0.51 | % | 0.78 | % | 0.32 | % | |||
Ratio of nonperforming loan and leases to total loans and leases (end of period) (3) |
| 0.65 | % | 1.01 | % | 0.37 | % | |||
Ratio of allowance for loan and lease losses to total loans and leases (end of period) |
| 0.76 | % | 0.74 | % | 0.51 | % | |||
Ratio of allowance for loan and lease losses to nonperforming loans and leases (end of period) (3) |
| 116.44 | % | 73.24 | % | 137.35 | % | |||
(1) Equity divided by number of shares of outstanding common stock. Retroactively adjusted for the 10% stock dividend to be paid on April 24, 2006.
(2) Capital ratios for Home Federal Bank.
(3) 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 March 31, 2006 |
| At June 30, 2005 |
| ||||||
|
| Amount |
| Percent of |
| Amount |
| Percent of |
| ||
|
| (Dollars in Thousands) |
| ||||||||
|
|
|
|
|
|
|
|
|
| ||
One-to four-family (1) |
| $ | 96,264 |
| 13.78 | % | $ | 96,496 |
| 14.28 | % |
Commercial business and real estate (2) (3) |
| 233,215 |
| 33.37 | % | 223,638 |
| 33.10 | % | ||
Multi-family real estate |
| 33,175 |
| 4.75 | % | 34,123 |
| 5.05 | % | ||
Equipment finance leases |
| 31,983 |
| 4.58 | % | 33,170 |
| 4.91 | % | ||
Consumer Direct (4) (5) |
| 110,796 |
| 15.85 | % | 111,210 |
| 16.46 | % | ||
Consumer Indirect |
| 91,458 |
| 13.09 | % | 93,984 |
| 13.91 | % | ||
Agricultural |
| 82,486 |
| 11.80 | % | 74,010 |
| 10.95 | % | ||
Construction and development |
| 19,461 |
| 2.78 | % | 9,026 |
| 1.34 | % | ||
Total Loans and Leases Receivable (6) |
| $ | 698,838 |
| 100.00 | % | $ | 675,657 |
| 100.00 | % |
(1) Excludes $5,294 and $9,838 loans held for sale at March 31, 2006 and June 30, 2005, respectively.
(2) Includes $3,477 and $3,563 tax exempt leases at March 31, 2006 and June 30, 2005, respectively.
(3) Excludes $659 commercial loans held for sale at March 31, 2006.
(4) Includes mobile home loans.
(5) Excludes $3,290 and $400 student loans held for sale at March 31, 2006 and June 30, 2005, respectively.
(6) Includes deferred loan fees and discounts and undisbursed portion of loans in process.
Deposit Composition
|
| At March 31, 2006 |
| At June 30, 2005 |
| ||||||
|
| Amount |
| Percent of |
| Amount |
| Percent of |
| ||
|
| (Dollars in Thousands) |
| ||||||||
|
|
|
|
|
|
|
|
|
| ||
Noninterest bearing checking accounts |
| $ | 75,291 |
| 10.68 | % | $ | 85,705 |
| 12.58 | % |
Interest bearing accounts |
| 54,191 |
| 7.68 | % | 50,120 |
| 7.36 | % | ||
Money market accounts |
| 227,302 |
| 32.23 | % | 209,116 |
| 30.70 | % | ||
Savings accounts |
| 44,175 |
| 6.26 | % | 63,235 |
| 9.28 | % | ||
Certificates of deposit |
| 304,306 |
| 43.15 | % | 273,040 |
| 40.08 | % | ||
Total Deposits |
| $ | 705,265 |
| 100.00 | % | $ | 681,216 |
| 100.00 | % |
6
HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)
Allowance for Loan and Lease Loss Activity
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| 3/31/2006 |
| 3/31/2005 |
| 3/31/2006 |
| 3/31/2005 |
| ||||
Balance, beginning |
| $ | 5,174 |
| $ | 3,514 |
| $ | 5,076 |
| $ | 3,605 |
|
Provision charged to income |
| 418 |
| 129 |
| 4,510 |
| 504 |
| ||||
Charge-offs |
| (297 | ) | (366 | ) | (4,449 | ) | (1,057 | ) | ||||
Recoveries |
| 74 |
| 62 |
| 232 |
| 287 |
| ||||
Balance, ending |
| $ | 5,369 |
| $ | 3,339 |
| $ | 5,369 |
| $ | 3,339 |
|
Average Balances, Interest Yields and Rates
|
| Nine Months Ended |
| ||||||||
|
| 3/31/2006 |
| 3/31/2005 |
| ||||||
|
| Average |
| Yield/Rate |
| Average |
| Yield/Rate |
| ||
Interest-earning assets: |
|
|
|
|
|
|
|
|
| ||
Loans and leases receivable (1) (3) |
| $ | 692,707 |
| 6.64 | % | $ | 662,446 |
| 6.00 | % |
Investment securities (2) (3) |
| 154,408 |
| 3.92 | % | 122,166 |
| 3.39 | % | ||
Total interest-earning assets |
| 847,115 |
| 6.15 | % | 784,612 |
| 5.59 | % | ||
Noninterest-earning assets |
| 69,433 |
|
|
| 64,808 |
|
|
| ||
Total assets |
| $ | 916,548 |
|
|
| $ | 849,420 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
| ||
Deposits: |
|
|
|
|
|
|
|
|
| ||
Checking and money market |
| $ | 271,898 |
| 2.88 | % | $ | 262,884 |
| 1.67 | % |
Savings |
| 51,325 |
| 2.12 | % | 49,095 |
| 1.06 | % | ||
Certificates of deposit |
| 293,528 |
| 3.46 | % | 259,397 |
| 2.71 | % | ||
Total interest-bearing deposits |
| 616,751 |
| 3.09 | % | 571,376 |
| 2.09 | % | ||
FHLB advances and other borrowings |
| 121,392 |
| 4.41 | % | 106,422 |
| 3.91 | % | ||
Subordinated debentures payable to trusts |
| 27,837 |
| 7.78 | % | 27,837 |
| 5.78 | % | ||
|
|
|
|
|
|
|
|
|
| ||
Total interest-bearing liabilities |
| 765,980 |
| 3.47 | % | 705,635 |
| 2.51 | % | ||
Noninterest-bearing deposits |
| 76,791 |
|
|
| 73,145 |
|
|
| ||
Other liabilities |
| 19,278 |
|
|
| 17,272 |
|
|
| ||
Total liabilities |
| 862,019 |
|
|
| 796,052 |
|
|
| ||
Equity |
| 54,499 |
|
|
| 53,368 |
|
|
| ||
Total liabilities and equity |
| $ | 916,548 |
|
|
| $ | 849,420 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net interest spread (4) |
|
|
| 2.68 | % |
|
| 3.08 | % | ||
Net interest margin (4) (5) |
|
|
| 3.01 | % |
|
| 3.33 | % | ||
Net interest margin, TE (6) |
|
|
| 3.04 | % |
|
| 3.36 | % | ||
Return on average assets (7) |
|
|
| 0.52 | % |
|
| 0.70 | % | ||
Return on average equity (8) |
|
|
| 8.74 | % |
|
| 11.12 | % | ||
(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) Percentages for the nine months ended March 31, 2006 and March 31, 2005 have been annualized.
(5) Net interest margin is net interest income divided by average interest-earning assets.
(6) Net interest margin expressed on a fully taxable equivalent basis.
(7) Ratio of net income to average total assets.
(8) Ratio of net income to average equity
7
