HF Financial Corp. Reports Operating Results (10-Q)

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Feb 11, 2011
HF Financial Corp. (HFFC, Financial) filed Quarterly Report for the period ended 2010-12-31.

Hf Financial Corp. has a market cap of $78.1 million; its shares were traded at around $11.15 with a P/E ratio of 13.3 and P/S ratio of 1.1. The dividend yield of Hf Financial Corp. stocks is 4%. Hf Financial Corp. had an annual average earning growth of 1.7% over the past 10 years.

Highlight of Business Operations:

The allowance for loan and lease losses increased $3.5 million to $13.0 million at December 31, 2010, compared to June 30, 2010. The ratio of allowance for loan and lease losses to total loans and leases was 1.49% as of December 31, 2010 compared to 1.37% and 1.07% at September 30, 2010 and June 30, 2010, respectively. Total nonperforming assets at December 31, 2010 were $31.7 million as compared to $23.1 million and $9.2 million at September 30, 2010 and June 30, 2010, respectively. The ratio of nonperforming assets to total assets increased to 2.58% at December 31, 2010, compared to 1.84 % and 0.73% at September 30, 2010 and June 30, 2010, respectively. The overall increase in nonperforming assets was primarily attributed to the deterioration in certain dairy operations which caused seven of our dairy loan relationships to be moved to nonaccrual status in the first six months of fiscal 2011. The deterioration in the sector is related to continued low commodity prices for milk combined with increases in the cost of feed and operations. The specific valuation allowance on identified impaired loans increased to $3.9 million at December 31, 2010, compared to $2.9 million and $325,000 at September 30, 2010 and June 30, 2010, respectively. All identified impaired loans are reviewed to assess the borrowers inability to make payments under the terms of the loan and/or a shortfall in collateral value that would result in charging off the loan or the portion of the loan that was impaired.

Noninterest income was $7.6 million for the six months ended December 31, 2010, compared to $5.0 million for the same period in the prior fiscal year, an increase of $2.7 million. This increase is due primarily to net impairment credit losses recognized in earnings of $2.2 million for the first six months of fiscal 2010, compared to the current fiscal year for which no impairment credit losses were recorded. Net gain on sale of loans and fees on deposits increased $817,000 and $350,000, respectively, while net gain on sale of securities and trust income decreased $645,000 and $148,000, respectively.

The Bank is a member of the Deposit Insurance Fund (the DIF), which is administered by the Federal Deposit Insurance Corporation (FDIC). Deposits are insured up to the applicable limits by the FDIC and such insurance is backed by the full faith and credit of the United States Government. Under the Dodd-Frank Act, deposits of the Bank are permanently insured up to $250,000 per depositor for each account ownership category (prior to the legislation, the increased insurance coverage from $100,000 to $250,000 was temporary until December 31, 2013). As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions. On November 12, 2009, the FDIC Board approved a rule requiring prepayment of the quarterly assessments for the fourth quarter of calendar year 2009 and the entire calendar years of 2010, 2011, and 2012. On December 30, 2009, the Company paid $4.9 million, which was recorded as a prepaid asset and is being proportionally expensed as each quarter elapses. At December 31, 2010, the remaining balance recorded as a prepaid asset was $3.1 million. During the second quarter of fiscal 2011, the FDIC increased the regular assessment by 1.67 basis points, which would result in an increased annual cost of $156,000 when calculated using the December 31, 2010 deposits. The FDIC may impose additional special assessments, which would be recorded as they are incurred. The FDIC also instituted the Transaction Account Guarantee Program (TAGP). The TAGP extended the FDICs insurance to full coverage of non-interest bearing transaction accounts for participating institutions through December 31, 2010 at an annualized rate of 10 basis points on deposit balances in excess of the $250,000 insurance limit currently in place. On November 9, 2010, the FDIC approved a final rule to provide temporary unlimited coverage for non-interest bearing transaction accounts. This

At December 31, 2010, the Company had total assets of $1.2 billion, a decrease of $27.0 million from the level at June 30, 2010. The decrease in assets in the six months of fiscal 2011 was due primarily to a decrease in net loans and leases receivable and loans held for sale of $15.2 million and $8.3 million, respectively. Total liabilities decreased $26.9 million at December 31, 2010, as compared to June 30, 2010. This decrease was primarily due to a decrease in advances from the FHLB and other borrowings of $23.4 million. Stockholders equity decreased $35,000 to $94.4 million at December 31, 2010.

Deposits decreased $3.9 million at December 31, 2010 as compared to June 30, 2010. Certificates of deposits, money market, and noninterest bearing accounts decreased $11.5 million, $9.0 million and $8.3 million, respectively, since June 30, 2010. Interest-bearing checking and savings accounts increased $10.7 million and $14.1 million, respectively to partially offset the other account decreases during the six month period ended December 31, 2010. Public fund account balances, which are included in the various deposit categories, decreased $6.5 million to $208.4 million at December 31, 2010 in part as a result of seasonal fluctuations typical with these types of municipal deposits. Advances from the FHLB and other borrowings decreased $23.4 million at December 31, 2010 as compared to June 30, 2010, due to reductions in short-term borrowing as a result of decreases in loans and leases receivable, loans held for sale, and securities available for sale during the first six months of fiscal 2011.

Stockholders equity decreased $35,000 to $94.4 million at December 31, 2010, due in part to an increase in accumulated other comprehensive losses, net of deferred tax effect of $1.1 million during the first six months of fiscal 2011. Net income and stock issuances increased stockholders equity by $2.2 million and $421,000, respectively, while dividends related to the earnings reduced stockholders equity by $1.6 million during the period.

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