Exhibit 99.1
For Immediate Release – July 30, 2007
For Information Contact:
Curtis L. Hage, Chairman, President and CEO
Sioux Falls, South Dakota
Phone: (605) 333-7556
HF Financial Corp. Announces Fourth Quarter, Full Year Earnings and Quarterly Dividend
Q4 Earnings increase 22 percent year-over-year; YTD Earnings increase 19 percent year-over-year
SIOUX FALLS, SD, July 30 – HF Financial Corp. (the “Company”) (NASDAQ: HFFC), reported earnings for the fiscal fourth quarter ended June 30, 2007 of $1.1 million, or $0.27 for diluted earnings per share, compared to $936,000, or $0.23 for diluted earnings per share, in the comparable period in 2006, an increase of 21.9 percent. All earnings per share figures have been adjusted to reflect the 10% stock dividend paid on April 24, 2006.
Non interest income for the quarter totaled $2.8 million, up $417,000 or 17.4 percent, versus the comparable period in 2006, a result primarily attributable to increases of $230,000 in fees on deposits and $190,000 in loan servicing income.
Net interest income for the quarter, prior to the provision for loan and lease losses, totaled $6.8 million, an increase of $214,000 over the same period last year. The provision for loan and lease losses in the quarter, however, decreased by 46.4 percent, to $412,000 from $769,000 in the same period last year, resulting in recognized net interest income of $6.3 million versus $5.8 million in the comparable period in 2006. Net interest margin expressed on a fully taxable equivalent basis for the quarter was 3.00 percent compared to 3.02 percent for the same period in the prior fiscal year.
“This fourth quarter was a good one for us,” said Curt Hage, HF Financial’s Chairman, CEO, and President. “We are particularly pleased with the progress we’ve made in increasing our non-interest income, a key long-term strategic initiative for us. We’re also pleased with the contribution our new locations are making to our overall revenue growth, as well as their continued prospects for the future.”
Non interest expense for the quarter increased $826,000, or 12.3 percent, over the comparable period in 2006. The primary reason is due to increased healthcare costs in HF Financial’s self insured health care program of $311,000 over the same period in 2006. The Company has been self insured for thirteen years. During this period from time to time the Company has experienced volatility in the amount of healthcare claims.
“Overall, this has been a year in which asset and deposit growth, sound expense management and solid asset quality have combined to produce strong results,” Hage said. “The continuous improvement of these performance metrics will be the foundation for our financial performance in fiscal 2008 and beyond.”
Full Year Results
For the full year, earnings totaled $5.4 million, or $1.33 for diluted earnings per share, versus $4.5 million, or $1.13 for diluted earnings per share, an increase of 19.4 percent over earnings in fiscal 2006.
Full-year non interest income totaled $13.2 million, up 2.7 percent or $345,000 over fiscal 2006. The increase was primarily due to the net gain on sale of branches of $2.8 million, along with increases of $680,000 in loan servicing income and $595,000 in fees on deposits, offset by the net gain on sale of land of $3.6 million in fiscal 2006 and a decrease in other non interest income of $174,000. Adjusting non interest income for the branch sales in 2007 and the land sale in 2006, non interest income increased $1.1 million or 12.3 percent year over year.
Full-year net interest income totaled $25.6 million, essentially flat over the prior year with a decrease of $15,000, or 0.1 percent, from the $25.6 million reported in fiscal 2006. Net interest income after provision for loan and lease losses totaled $24.4 million, an increase of $4.1 million or 20.0 percent, from the $20.4 million reported in fiscal 2006.
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Provision for losses on loans and leases decreased $4.1 million, or 77.3 percent, for the fiscal year ended June 30, 2007 as compared to the prior fiscal year. Total nonperforming assets increased $114,000, or 2.9 percent, at June 30, 2007 compared to the prior fiscal year. The increase in nonperforming assets was primarily attributable to an increase of $1.2 million in nonaccruing loans and leases offset by a decrease of $1.0 million in accruing loans and leases delinquent more than 90 days.
Average earning assets increased 6.4 percent, yielding a rate of 6.75 percent for the fiscal year ended June 30, 2007 compared to the prior fiscal year, which yielded a rate of 6.20 percent. Average interest-bearing liabilities increased 6.8 percent, with a cost of funds rate of 4.39 percent for the fiscal year ended June 30, 2007 compared to the prior fiscal year with a cost of funds rate of 3.60 percent.
The company’s net interest margin expressed on a fully taxable equivalent basis was 2.85 percent for the fiscal year ended June 30, 2007 compared to 3.01 percent for the prior fiscal year.
“HF Financial obviously has no control over the yield curve environment,” Hage said. “We are able to control our strategy during a time of such market aberrations. This is why we increased our focus on non interest income sources and also why we did not get caught up in booking the exotic type of mortgage lending which is currently causing market turbulence.”
Non interest expense increased $3.1 million, or 11.7 percent, for fiscal 2007, the result of increases in compensation and employee benefits of $1.7 million, advertising of $685,000, occupancy and equipment of $459,000, other non interest expense of $141,000, and check and data processing expenses of $134,000. Specific increases in compensation and employee benefits include $819,000 of variable pay related to performance incentives and $654,000 of healthcare costs.
“Just as we’ve focused on new sources of revenue growth, we’ve also worked very hard to keep our expenses in check,” said Darrel Posegate, President of Home Federal Bank, a wholly owned subsidiary of HF Financial Corp. “We believe we managed our costs effectively during the year, both on an absolute basis and as a percentage of revenue. Healthcare costs remain a challenge, but we recognize that this is a nationwide phenomenon. Nevertheless, we continue to focus on our wellness program and in maintaining a favorable claims experience.”
Quarterly Dividend Declared
The Company announced it will pay a quarterly cash dividend of 10.50 cents per share for the fourth quarter of the 2007 fiscal year. The dividend will be paid on August 15, 2007 to stockholders of record on August 9, 2007.
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 Insurors, Inc. and HF Financial Group, Inc. As of June 30, 2007, the company had total assets of $1.0 billion and stockholders’ equity of $62.5 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.
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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.
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HF Financial Corp.
Selected Consolidated Operating Highlights
(Dollars in Thousands, Except per Share Data)
(Unaudited)
| | Three Months Ended
June 30, | | Years Ended
June 30, | |
| | 2007 | | 2006 | | 2007 | | 2006 | |
| | | | | | | | | |
Interest, dividend and loan fee income: | | | | | | | | | |
Loans and leases receivable | | $ | 13,941 | | $ | 12,553 | | $ | 54,344 | | $ | 47,096 | |
Investment securities and interest-earning deposits | | 1,832 | | 1,777 | | 7,530 | | 6,315 | |
| | 15,773 | | 14,330 | | 61,874 | | 53,411 | |
Interest expense: | | | | | | | | | |
Deposits | | 7,337 | | 5,847 | | 28,505 | | 20,175 | |
Advances from Federal Home Loan Bank and other borrowings | | 1,683 | | 1,944 | | 7,735 | | 7,587 | |
| | 9,020 | | 7,791 | | 36,240 | | 27,762 | |
| | | | | | | | | |
Net interest income | | 6,753 | | 6,539 | | 25,634 | | 25,649 | |
| | | | | | | | | |
Provision for losses on loans and leases | | 412 | | 769 | | 1,198 | | 5,279 | |
| | | | | | | | | |
Net interest income after provision for losses on loans and leases | | 6,341 | | 5,770 | | 24,436 | | 20,370 | |
| | | | | | | | | |
Noninterest income: | | | | | | | | | |
Gain on sale of branches, net | | — | | — | | 2,763 | | — | |
Fees on deposits | | 1,393 | | 1,163 | | 5,133 | | 4,538 | |
Loan servicing income | | 508 | | 318 | | 1,803 | | 1,123 | |
Gain on sale of loans, net | | 244 | | 281 | | 923 | | 969 | |
Trust income | | 252 | | 240 | | 936 | | 849 | |
Gain on sale of securities, net | | — | | 1 | | — | | 3 | |
Gain on sale of land, net | | — | | — | | — | | 3,557 | |
Other | | 420 | | 397 | | 1,638 | | 1,812 | |
| | 2,817 | | 2,400 | | 13,196 | | 12,851 | |
Noninterest expense: | | | | | | | | | |
Compensation and employee benefits | | 4,977 | | 4,132 | | 18,379 | | 16,691 | |
Occupancy and equipment | | 939 | | 868 | | 3,797 | | 3,338 | |
Other | | 1,618 | | 1,708 | | 7,429 | | 6,470 | |
| | 7,534 | | 6,708 | | 29,605 | | 26,499 | |
| | | | | | | | | |
Income before income taxes | | 1,624 | | 1,462 | | 8,027 | | 6,722 | |
Income tax expense | | 483 | | 526 | | 2,644 | | 2,214 | |
Net income | | $ | 1,141 | | $ | 936 | | $ | 5,383 | | $ | 4,508 | |
| | | | | | | | | |
Earnings per share: | | | | | | | | | |
Basic | | $ | 0.28 | | $ | 0.24 | | $ | 1.35 | | $ | 1.15 | |
Diluted | | 0.27 | | 0.23 | | 1.33 | | 1.13 | |
| | | | | | | | | |
Weighted average shares: | | | | | | | | | |
Basic | | 4,003,208 | | 3,944,707 | | 3,978,571 | | 3,914,952 | |
Diluted | | 4,153,638 | | 4,026,666 | | 4,056,726 | | 4,000,078 | |
| | | | | | | | | |
Outstanding shares: (end of period) | | 4,013,364 | | 3,948,660 | | 4,013,364 | | 3,948,660 | |
Share data for all periods presented has been adjusted for the 10% stock dividend paid on April 24, 2006.
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HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands, Except per Share Data)
(Unaudited)
| | 6/30/2007 | | 6/30/2006 | |
| | | | | |
Balance Sheet Data | | | | | |
Total assets | | $ | 1,001,650 | | $ | 961,294 | |
Cash and cash equivalents | | 22,476 | | 27,037 | |
Securities available for sale | | 142,223 | | 145,518 | |
Loans and leases receivable, net | | 761,599 | | 721,603 | |
Loans held for sale | | 8,776 | | 7,623 | |
Deposits | | 815,864 | | 769,002 | |
Advances from Federal Home Loan Bank and other borrowings | | 68,600 | | 91,620 | |
Subordinated debentures payable to trusts | | 27,837 | | 27,837 | |
Stockholders’ equity | | 62,466 | | 56,058 | |
| | | | | |
Equity to total assets (end of period) | | 6.24 | % | 5.83 | % |
Book value per share (1) | | $ | 15.56 | | $ | 14.20 | |
| | | | | |
Tier I (core) capital (2) | | 8.31 | % | 8.10 | % |
Risk-based capital (2) | | 11.06 | % | 10.65 | % |
| | | | | |
Number of full-service offices | | 33 | | 35 | |
| | | | | |
Asset Quality | | | | | |
Nonaccruing loans and leases | | $ | 2,190 | | $ | 1,035 | |
Accruing loans and leases delinquent more than 90 days | | 1,308 | | 2,330 | |
Foreclosed assets | | 508 | | 527 | |
Total nonperforming assets | | $ | 4,006 | | $ | 3,892 | |
| | | | | |
FASB Statement No. 5 Allowance for loan and lease losses | | $ | 5,487 | | $ | 5,657 | |
FASB Statement No. 114 Impaired loan valuation allowance | | 385 | | — | |
Total allowance for loans and lease losses | | $ | 5,872 | | $ | 5,657 | |
| | | | | |
Ratio of nonperforming assets to total assets (end of period) | | 0.40 | % | 0.40 | % |
Ratio of nonperforming loan and leases to total loans and leases (end of period) (3) | | 0.45 | % | 0.46 | % |
Ratio of allowance for loan and lease losses to total loans and leases (end of period) | | 0.76 | % | 0.77 | % |
Ratio of allowance for loan and lease losses to nonperforming loans and leases (end of period) (3) | | 167.87 | % | 168.11 | % |
(1) Equity divided by number of shares of outstanding common stock. Retroactively adjusted for the 10% stock dividend 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.
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Loan and Lease Portfolio Composition
| | At June 30, 2007 | | At June 30, 2006 | |
| | Amount | | Percent | | Amount | | Percent | |
| | (Dollars in Thousands) | |
| | | | | | | | | |
One-to four-family (1) | | $ | 116,544 | | 15.18 | % | $ | 100,585 | | 13.83 | % |
Commercial business and real estate (2) (3) | | 275,646 | | 35.92 | % | 247,643 | | 34.05 | % |
Multi-family real estate | | 34,047 | | 4.44 | % | 34,066 | | 4.69 | % |
Equipment finance leases | | 22,307 | | 2.91 | % | 29,406 | | 4.04 | % |
Consumer Direct (4) | | 104,647 | | 13.63 | % | 110,493 | | 15.19 | % |
Consumer Indirect | | 83,094 | | 10.83 | % | 91,601 | | 12.60 | % |
Agricultural | | 116,710 | | 15.21 | % | 89,437 | | 12.30 | % |
Construction and development | | 14,476 | | 1.88 | % | 24,029 | | 3.30 | % |
Total Loans and Leases Receivable (5) | | $ | 767,471 | | 100.00 | % | $ | 727,260 | | 100.00 | % |
(1) Excludes $8,290 and $6,980 loans held for sale at June 30, 2007 and June 30, 2006, respectively.
(2) Includes $3,297 tax exempt leases at June 30, 2007 and June 30, 2006.
(3) Excludes $223 commercial loans held for sale at June 30, 2007 and June 30, 2006.
(4) Excludes $263 and $420 student loans held for sale at June 30, 2007 and June 30, 2006, respectively.
(5) Includes deferred loan fees and discounts and undisbursed portion of loans in process.
Deposit Composition
| | At June 30, 2007 | | At June 30, 2006 | |
| | Amount | | Percent | | Amount | | Percent | |
| | (Dollars in Thousands) | |
| | | | | | | | | |
Noninterest bearing checking accounts | | $ | 86,679 | | 10.62 | % | $ | 84,757 | | 11.02 | % |
Interest bearing checking accounts | | 87,030 | | 10.67 | % | 54,862 | | 7.14 | % |
Money market accounts | | 212,546 | | 26.05 | % | 232,471 | | 30.23 | % |
Savings accounts | | 66,235 | | 8.12 | % | 76,695 | | 9.97 | % |
Certificates of deposit | | 363,374 | | 44.54 | % | 320,217 | | 41.64 | % |
Total Deposits | | $ | 815,864 | | 100.00 | % | $ | 769,002 | | 100.00 | % |
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HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)
Allowance for Loan and Lease Loss Activity
| | Three Months Ended | | Years Ended | |
| | 6/30/2007 | | 6/30/2006 | | 6/30/2007 | | 6/30/2006 | |
Balance, beginning | | $ | 5,778 | | $ | 5,369 | | $ | 5,657 | | $ | 5,076 | |
Provision charged to income | | 412 | | 769 | | 1,198 | | 5,279 | |
Charge-offs | | (373 | ) | (674 | ) | (1,292 | ) | (5,123 | ) |
Recoveries | | 55 | | 193 | | 309 | | 425 | |
Balance, ending | | $ | 5,872 | | $ | 5,657 | | $ | 5,872 | | $ | 5,657 | |
Average Balances, Interest Yields and Rates
| | Years Ended | |
| | 6/30/2007 | | 6/30/2006 | |
| | Average | | Yield/Rate | | Average | | Yield/Rate | |
Interest-earning assets: | | | | | | | | | |
Loans and leases receivable (1) (3) | | $ | 758,455 | | 7.17 | % | $ | 703,787 | | 6.69 | % |
Investment securities (2) (3) | | 158,538 | | 4.75 | % | 158,010 | | 4.00 | % |
Total interest-earning assets | | 916,993 | | 6.75 | % | 861,797 | | 6.20 | % |
Noninterest-earning assets | | 68,832 | | | | 61,491 | | | |
Total assets | | $ | 985,825 | | | | $ | 923,288 | | | |
| | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | |
Deposits: | | | | | | | | | |
Checking and money market | | $ | 282,312 | | 3.70 | % | $ | 274,093 | | 3.02 | % |
Savings | | 46,207 | | 2.68 | % | 51,356 | | 2.24 | % |
Certificates of deposit | | 362,321 | | 4.64 | % | 298,940 | | 3.59 | % |
Total interest-bearing deposits | | 690,840 | | 4.13 | % | 624,389 | | 3.23 | % |
FHLB advances and other borrowings | | 106,151 | | 4.77 | % | 119,727 | | 4.47 | % |
Subordinated debentures payable to trusts (4) | | 27,837 | | 9.61 | % | 27,837 | | 8.01 | % |
| | | | | | | | | |
Total interest-bearing liabilities | | 824,828 | | 4.39 | % | 771,953 | | 3.60 | % |
Noninterest-bearing deposits | | 76,698 | | | | 77,419 | | | |
Other liabilities | | 24,558 | | | | 19,109 | | | |
Total liabilities | | 926,084 | | | | 868,481 | | | |
Equity | | 59,741 | | | | 54,807 | | | |
Total liabilities and equity | | $ | 985,825 | | | | $ | 923,288 | | | |
| | | | | | | | | |
Net interest spread | | | | 2.36 | % | | | 2.60 | % |
Net interest margin (5) | | | | 2.80 | % | | | 2.98 | % |
Net interest margin, TE (6) | | | | 2.85 | % | | | 3.01 | % |
Return on average assets (7) | | | | 0.55 | % | | | 0.49 | % |
Return on average equity (8) | | | | 9.01 | % | | | 8.23 | % |
(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 $290 expense in December 2006 for unamoritized 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.
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