Exhibit 99.1
For Immediate Release – July 28, 2008
For Information Contact:
Curtis L. Hage, Chairman, President and CEO
Sioux Falls, South Dakota
Phone: (605) 333-7556
HF Financial Corp. Quarterly Earnings Per Share Increase 48%; Announces Increased Quarterly
Dividend
SIOUX FALLS, SD, July 28 – HF Financial Corp. (NASDAQ: HFFC), reported earnings for the fiscal fourth quarter ended June 30, 2008 of $1.6 million, or $0.40 in diluted earnings per share, versus $1.1 million, or $0.27 in diluted earnings per share, in the comparable period in 2007, a 48 percent increase in diluted earnings per share.
Revenue inclusive of net interest income and non-interest income totaled $11.3 million for the quarter, an increase of $1.7 million, or 17.7 percent over the same period last year. Net interest income totaled $8.5 million for the quarter, an increase of $1.8 million, or 26.1 percent over the same period last year. Net interest margin expressed on a fully taxable equivalent basis for the quarter was 3.40 percent, compared to 3.02 percent in the fourth quarter last year. The net interest margin benefited from increased earning asset growth and lower costs on interest-bearing liabilities.
“The continued improvement in revenue growth has been an important driver of overall net income growth. Our balance sheet was structured to benefit from a positively sloped yield curve, and we have been pleased with the results in our net interest margin,” said Curt Hage, HF Financial’s Chairman, President and CEO. “We are also pleased with our longer term increase in our recurring non-interest revenue.”
For the quarter, non-interest income decreased $74,000, to $2.7 million, relative to the comparable period in fiscal year 2007. Non-interest expense grew $666,000, or 7.7 percent, over last year’s fourth quarter. Net healthcare costs decreased $99,000 over the prior year quarter, and year-to-date these costs decreased $694,000 from the prior year.
The ratio of non-performing loans and leases to total loans and leases at the end of the fourth quarter was 0.39%, compared to 0.45% at the end of the fourth quarter in the prior year period. Net loan charge offs totaled $460,000 for the quarter ended June 30, 2008 compared to $318,000 for the same period last year. Home Federal’s provision for loan losses totaled $823,000 versus $412,000 for the fourth quarter last year.
“Our loan portfolio continues to perform in line with the economic conditions in our marketplace,” said Darrel Posegate, President of Home Federal Bank. “Our asset quality continues to reflect the favorable conditions affecting our service area – low unemployment, a strong ag economy and continued development of the region’s business economic base. We will continue to monitor the portfolio and economic conditions closely.”
Full Year Results
For the full year, the company reported earnings of $5.8 million, or $1.45 in diluted earnings per share, versus $5.4 million, or $1.33 in diluted earnings per share, an increase of 8.5 percent over earnings in fiscal 2007. Fiscal year 2007 second quarter net income included a non-recurring after-tax gain on sale of branches of $1.7 million, or $0.42 diluted earnings per share.
Full year core revenue totaled $41.2 million. Without regard to a one-time sale of branches in fiscal 2007, this represents an increase of $5.1 million, or 14.3 percent on a year-over-year basis. Net interest income totaled $29.9 million, an increase of $4.2 million, or 16.6 percent, over the period last year. Total non-interest income of $11.3 million was $900 thousand or 8.6 percent higher than last year without the one time branch sales.
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Net interest margin on a fully taxable equivalent basis for fiscal 2008 was 3.16 percent compared to 2.85 percent in fiscal 2007. Lower interest rates and reduced expensing of unamortized debt issuance costs lessened interest expense by $563,000 on the company’s trust preferred securities compared to fiscal year 2007.
The company’s year-to-date provision for loan and lease losses totaled $2.0 million and compares to $1.2 million last fiscal year. Net loan charge-offs for the fiscal year totaled $1.9 million, compared to $983,000 for the prior fiscal year.
Non-interest expense increased $1.0 million, or 3.4 percent, for fiscal 2008. Compensation and employee benefits increased $1.2 million, primarily due to performance-related variable pay programs. Check and data processing expense increased $117,000, while marketing expense decreased $464,000.
Balance Sheet Performance
Total loans and leases receivable at June 30, 2008 totaled $783.7 million, an increase of $16.2 million from the balance at June 30, 2007. As previously announced, the company made a decision to cease origination of indirect automobile loans. During the fiscal year, consumer indirect loans decreased $38.8 million to $44.3 million, while other lines of business produced an increase of $55.0 million in loan and lease receivables from June 30, 2007.
Total non-performing assets decreased $258,000, or 6.4 percent, for the fiscal year ended June 30, 2008, as compared to the prior fiscal year. The decrease in non-performing assets was primarily attributable to a decrease of $527,000 in accruing loans and leases delinquent more than 90 days to $781,000 at June 30, 2008 from $1.3 million at June 30, 2007, offset by an increase in non-accruing loans and leases of $134,000, from $2.2 million at June 30, 2007 to $2.3 million at June 30, 2008 and an increase of $135,000 in foreclosed assets.
Deposits at June 30, 2008 totaled $784.2 million, a decrease of $31.6 million, or 3.9 percent from the balance at June 30, 2007. During the fiscal year, out-of-market certificates of deposit decreased from $71.5 million to $27.3 million, money market accounts decreased from $212.5 million to $171.7 million, offset by an increase in savings accounts from $66.2 million to $78.6 million, and an increase of in-market certificates of deposit from $291.9 million to $326.0 million. Non-interest bearing checking and interest bearing checking increased $3.9 million and $3.1 million, respectively. The decrease in out-of-market certificates of deposit is attributed to a decision to pursue other sources of lower cost wholesale funds.
Quarterly Dividend Declared
The company announced it will pay a quarterly cash dividend of 11.25 cents per share for the fourth quarter of the 2008 fiscal year. This is an increase from 10.75 cents per share paid in the previous quarter. The dividend will be paid on August 15, 2008 to stockholders of record on August 8, 2008.
HF Financial Corp. Joins Russell Microcap Index
The Company was added to the Russell Microcap Index when Russell Investments reconstituted its comprehensive family of U.S. indexes on June 27, 2008. Russell Indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for both passive and active investment strategies.
“We are pleased with our inclusion in this index,” said Curt Hage. “Our inclusion will help generate greater interest in our stock.”
Full Year Fiscal 2008 Conference Call and Webcast
The company will host its quarterly conference call and webcast to discuss its quarterly financial and operational results. The conference call and webcast is scheduled for Tuesday, July 29, 2008 at 9:00 am CT (10:00 am ET) at which the company will discuss its fourth quarter and fiscal 2008 earnings results.
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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 and fiscal 2008.
When: Tuesday, July 29, 2008
Conference call: 9:00 am CT / 10:00 am ET
Dial-in Number: 1-800-762-8795
Call ID: HF Financial Fourth Quarter and Fiscal 2008 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 29, 2008, until 6:00 pm CT, Tuesday, August 26, 2008. 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 1-800-406-7325 using Access Code 3903030. The audio replay will be available beginning at 12 pm CT on Tuesday, July 29, 2008, through 11:59 pm CT on Tuesday, August 26, 2008.
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, 2008, the company had total assets of $1.1 billion and stockholders’ equity of $64.2 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.
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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.
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HF Financial Corp.
Selected Consolidated Operating Highlights
(Dollars in Thousands, Except per Share Data)
(Unaudited)
| | Three Months Ended | | Years Ended | |
| | June 30, | | June 30, | |
| | 2008 | | 2007 | | 2008 | | 2007 | |
| | | | | | | | | |
Interest, dividend and loan fee income: | | | | | | | | | |
Loans and leases receivable | | $ | 12,785 | | $ | 13,941 | | $ | 53,972 | | $ | 54,344 | |
Investment securities and interest-earning deposits | | 2,777 | | 1,832 | | 9,202 | | 7,530 | |
| | 15,562 | | 15,773 | | 63,174 | | 61,874 | |
Interest expense: | | | | | | | | | |
Deposits | | 4,589 | | 7,337 | | 24,692 | | 28,505 | |
Advances from Federal Home Loan Bank and other borrowings | | 2,456 | | 1,683 | | 8,605 | | 7,735 | |
| | 7,045 | | 9,020 | | 33,297 | | 36,240 | |
| | | | | | | | | |
Net interest income | | 8,517 | | 6,753 | | 29,877 | | 25,634 | |
Provision for losses on loans and leases | | 823 | | 412 | | 1,994 | | 1,198 | |
| | | | | | | | | |
Net interest income after provision for losses on loans and leases | | 7,694 | | 6,341 | | 27,883 | | 24,436 | |
| | | | | | | | | |
Noninterest income: | | | | | | | | | |
Gain on sale of branches, net | | — | | — | | — | | 2,763 | |
Fees on deposits | | 1,331 | | 1,393 | | 5,389 | | 5,133 | |
Loan servicing income | | 575 | | 508 | | 2,211 | | 1,803 | |
Gain on sale of loans, net | | 242 | | 244 | | 1,197 | | 923 | |
Gain on sale of securities, net | | 3 | | — | | 3 | | — | |
Trust income | | 239 | | 252 | | 966 | | 936 | |
Other | | 353 | | 420 | | 1,567 | | 1,638 | |
| | 2,743 | | 2,817 | | 11,333 | | 13,196 | |
Noninterest expense: | | | | | | | | | |
Compensation and employee benefits | | 5,398 | | 4,977 | | 19,616 | | 18,379 | |
Occupancy and equipment | | 973 | | 939 | | 3,832 | | 3,797 | |
Other | | 1,828 | | 1,617 | | 7,158 | | 7,428 | |
| | 8,199 | | 7,533 | | 30,606 | | 29,604 | |
| | | | | | | | | |
Income before income taxes | | 2,238 | | 1,625 | | 8,609 | | 8,028 | |
Income tax expense | | 617 | | 483 | | 2,766 | | 2,644 | |
Net income | | $ | 1,621 | | $ | 1,142 | | $ | 5,843 | | $ | 5,384 | |
| | | | | | | | | |
Earnings per share: | | | | | | | | | |
Basic | | $ | 0.41 | | $ | 0.28 | | $ | 1.47 | | $ | 1.35 | |
Diluted | | 0.40 | | 0.27 | | 1.45 | | 1.33 | |
| | | | | | | | | |
Weighted average shares: | | | | | | | | | |
Basic | | 3,950,317 | | 4,003,208 | | 3,969,925 | | 3,978,571 | |
Diluted | | 4,015,675 | | 4,153,638 | | 4,030,741 | | 4,056,726 | |
| | | | | | | | | |
Outstanding shares: (end of period) | | 3,951,992 | | 4,013,364 | | 3,951,992 | | 4,013,364 | |
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HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands, Except per Share Data)
(Unaudited)
| | 6/30/2008 | | 06/30/2007 | |
| | | | | |
Balance Sheet Data | | | | | |
Total assets | | $ | 1,103,453 | | $ | 1,001,454 | |
Cash and cash equivalents | | 21,170 | | 22,476 | |
Securities available for sale | | 225,004 | | 142,223 | |
Loans and leases receivable, net | | 777,777 | | 761,599 | |
Loans held for sale | | 8,796 | | 8,776 | |
In-Market Deposits | | 756,982 | | 744,348 | |
Out-of-Market Deposits | | 27,255 | | 71,516 | |
Advances from Federal Home Loan Bank and other borrowings | | 198,453 | | 68,600 | |
Subordinated debentures payable to trusts | | 27,837 | | 27,837 | |
Stockholders’ equity | | 64,162 | | 62,270 | |
| | | | | |
Equity to total assets (end of period) | | 5.81 | % | 6.22 | % |
Book value per share (1) | | $ | 16.24 | | $ | 15.52 | |
| | | | | |
Tier I (core) capital (2) | | 7.78 | % | 8.31 | % |
Risk-based capital (2) | | 10.83 | % | 11.05 | % |
| | | | | |
Number of full-service offices | | 33 | | 33 | |
| | | | | |
Asset Quality | | | | | |
Nonaccruing loans and leases | | $ | 2,324 | | $ | 2,190 | |
Accruing loans and leases delinquent more than 90 days | | 781 | | 1,308 | |
Foreclosed assets | | 643 | | 508 | |
Total nonperforming assets | | $ | 3,748 | | $ | 4,006 | |
| | | | | |
FAS Statement No. 5 Allowance for loan and lease losses | | $ | 5,803 | | $ | 5,487 | |
FAS Statement No. 114 Impaired loan valuation allowance | | 130 | | 385 | |
Total allowance for loans and lease losses | | $ | 5,933 | | $ | 5,872 | |
| | | | | |
Ratio of nonperforming assets to total assets (end of period) | | 0.34 | % | 0.40 | % |
Ratio of nonperforming loan and leases to total loans and leases (end of period) (3) (4) | | 0.39 | % | 0.45 | % |
Ratio of allowance for loan and lease losses to total loans and leases (end of period) (4) | | 0.75 | % | 0.76 | % |
Ratio of allowance for loan and lease losses to nonperforming loans and leases (end of period) (3) | | 191.08 | % | 167.87 | % |
(1) Equity divided by number of shares of outstanding common stock.
(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.
(4) Total loans and leases include loans held for sale.
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HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands, Except per Share Data)
(Unaudited)
Loan and Lease Portfolio Composition
| | At June 30, 2008 | | At June 30, 2007 | |
| | Amount | | Percent | | Amount | | Percent | |
| | (Dollars in Thousands) | |
| | | | | | | | | |
One-to four-family (1) | | $ | 99,989 | | 12.76 | % | $ | 116,544 | | 15.18 | % |
Commercial business and real estate (2) (3) | | 303,415 | | 38.72 | % | 275,646 | | 35.92 | % |
Multi-family real estate | | 45,093 | | 5.75 | % | 34,047 | | 4.44 | % |
Equipment finance leases | | 19,288 | | 2.46 | % | 22,307 | | 2.91 | % |
Consumer Direct (4) | | 105,719 | | 13.49 | % | 104,647 | | 13.63 | % |
Consumer Indirect (5) | | 44,294 | | 5.65 | % | 83,094 | | 10.83 | % |
Agricultural | | 160,267 | | 20.45 | % | 116,710 | | 15.21 | % |
Construction and development | | 5,645 | | 0.72 | % | 14,476 | | 1.88 | % |
Total Loans and Leases Receivable (6) | | $ | 783,710 | | 100.00 | % | $ | 767,471 | | 100.00 | % |
(1) Excludes $7,958 and $8,290 loans held for sale at June 30, 2008 and June 30, 2007, respectively.
(2) Includes $3,012 and $3,297 tax exempt leases at June 30, 2008 and June 30, 2007, respectively.
(3) Excludes $223 commercial loans held for sale at June 30, 2008 and June 30, 2007.
(4) Excludes $614 and $263 student loans held for sale at June 30, 2008 and June 30, 2007, 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
| | At June 30, 2008 | | At June 30, 2007 | |
| | Amount | | Percent | | Amount | | Percent | |
| | (Dollars in Thousands) | |
| | | | | | | | | |
Noninterest bearing checking accounts | | $ | 90,598 | | 11.55 | % | $ | 86,679 | | 10.62 | % |
Interest bearing checking accounts | | 90,125 | | 11.49 | % | 87,030 | | 10.67 | % |
Money market accounts | | 171,689 | | 21.89 | % | 212,546 | | 26.05 | % |
Savings accounts | | 78,575 | | 10.02 | % | 66,235 | | 8.12 | % |
In-Market Certificates of deposit | | 325,995 | | 41.57 | % | 291,858 | | 35.77 | % |
Out-of-Market Certificates of deposit | | 27,255 | | 3.48 | % | 71,516 | | 8.77 | % |
Total Deposits | | $ | 784,237 | | 100.00 | % | $ | 815,864 | | 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 | |
| | 6/30/2008 | | 6/30/2007 | | 6/30/2008 | | 6/30/2007 | |
Balance, beginning | | $ | 5,570 | | $ | 5,778 | | $ | 5,872 | | $ | 5,657 | |
Provision charged to income | | 823 | | 412 | | 1,994 | | 1,198 | |
Charge-offs | | (545 | ) | (373 | ) | (2,245 | ) | (1,292 | ) |
Recoveries | | 85 | | 55 | | 312 | | 309 | |
Balance, ending | | $ | 5,933 | | $ | 5,872 | | $ | 5,933 | | $ | 5,872 | |
Average Balances, Interest Yields and Rates
| | Years Ended | |
| | 6/30/2008 | | 6/30/2007 | |
| | Average | | Yield/Rate | | Average | | Yield/Rate | |
Interest-earning assets: | | | | | | | | | |
Loans and leases receivable (1) (3) | | $ | 775,558 | | 6.96 | % | $ | 758,455 | | 7.17 | % |
Investment securities (2) (3) | | 185,163 | | 4.97 | % | 158,538 | | 4.75 | % |
Total interest-earning assets | | 960,721 | | 6.58 | % | 916,993 | | 6.75 | % |
Noninterest-earning assets | | 70,371 | | | | 68,832 | | | |
Total assets | | $ | 1,031,092 | | | | $ | 985,825 | | | |
| | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | |
Deposits: | | | | | | | | | |
Checking and money market | | $ | 268,264 | | 2.60 | % | $ | 282,312 | | 3.70 | % |
Savings | | 56,005 | | 2.06 | % | 46,207 | | 2.68 | % |
Certificates of deposit | | 355,401 | | 4.66 | % | 362,321 | | 4.64 | % |
Total interest-bearing deposits | | 679,670 | | 3.63 | % | 690,840 | | 4.13 | % |
FHLB advances and other borrowings | | 152,289 | | 4.26 | % | 106,151 | | 4.77 | % |
Subordinated debentures payable to trusts (4) | | 27,837 | | 7.58 | % | 27,837 | | 9.61 | % |
| | | | | | | | | |
Total interest-bearing liabilities | | 859,796 | | 3.87 | % | 824,828 | | 4.39 | % |
Noninterest-bearing deposits | | 79,313 | | | | 76,698 | | | |
Other liabilities | | 27,914 | | | | 24,558 | | | |
Total liabilities | | 967,023 | | | | 926,084 | | | |
Equity | | 64,069 | | | | 59,741 | | | |
Total liabilities and equity | | $ | 1,031,092 | | | | $ | 985,825 | | | |
| | | | | | | | | |
Net interest spread | | | | 2.70 | % | | | 2.36 | % |
Net interest margin (5) (6) | | | | 3.11 | % | | | 2.80 | % |
Net interest margin, TE (6) | | | | 3.16 | % | | | 2.85 | % |
Return on average assets (7) | | | | 0.57 | % | | | 0.55 | % |
Return on average equity (8) | | | | 9.12 | % | | | 9.01 | % |
(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 and $290 expense in July 2007 and December 2006, respectively, 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.
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