HF Financial Corp. : Earns $0.10 per Share for Fiscal 2012 Second Quarter

SIOUX FALLS, S.D., Jan. 30, 2012 /PRNewswire/ -- HF Financial Corp. (Nasdaq: HFFC) today reported it earned $715,000, or $0.10 per diluted share for the second fiscal quarter ended December 31, 2011, compared to $1.7 million, or $0.25 per diluted share for the prior year's second fiscal quarter. Lower operating expenses were offset by higher loan loss provisions despite improving asset quality in the quarter compared to the preceding quarter and the corresponding quarter one year earlier. Nonperforming assets declined $3.7 million to $27.7 million, or 2.26% of assets at December 31, 2011, from 2.64% at the end of the preceding quarter and from 2.58% for the second quarter of the prior fiscal year. Capital ratios continued to remain well above minimum regulatory requirements as a result of the addition of lower risk assets, controlled growth and retained earnings.

For the first six months of fiscal 2012, HF Financial earned $2.2 million, or $0.31 per diluted share, which closely compares to $2.2 million, or $0.32 per diluted share, earned in the first six months a year ago.

"We focused our efforts on improving operating efficiencies during the quarter. We merged one branch into other nearby branches, expect to do the same with an additional branch in the third quarter, and have reduced staffing levels within the organization," said Stephen Bianchi, President and Chief Executive Officer. "Additionally, we have cut overhead costs by revising our performance-based incentive programs and streamlining our management structure. We continue to actively work through the identified stresses in the dairy portion of our loan portfolio and continue to take appropriate provision for these loans as needed."

Fiscal Second Quarter Financial Highlights (at or for the period ended December 31, 2011, compared to September 30, 2011, and June 30, 2011.)

-- Earnings for the fiscal second quarter were $0.10 per diluted share
versus $0.21 per diluted share in the preceding quarter.
-- Non-recurring professional fee expenses of approximately $600,000 were
attributed to certain employment, regulatory and governance matters
during the second fiscal quarter.
-- Nonperforming assets ("NPAs") decreased to $27.7 million, or 2.26% of
total assets from $31.4 million, or 2.64%, of total assets at the end of
the preceding quarter. The majority of NPAs are related to the dairy
industry.
-- Capital levels continued to remain well above the regulatory
"well-capitalized" minimum levels of 10.00%, 6.00% and 5.00%,
respectively:
-- Total risk-based capital to risk weighted assets was 14.41% versus
13.79% at September 30, 2011.
-- Tier 1 capital to risk-weighted assets was 13.17% versus 12.57% at
September 30, 2011.
-- Tier 1 capital to total adjusted assets was 9.30% versus 9.63% at
September 30, 2011.
-- The most recent dividend of $0.1125 per share represents the fifteenth
consecutive quarter at this level and provides a 4.2% current yield at
recent market prices.
-- The net interest margin expressed on a fully taxable equivalent basis
("NIM, TE") decreased slightly to 3.16% in the second quarter of fiscal
2012 compared to 3.27% in the previous quarter.
-- Deposits continued to flow into transaction accounts as time
certificates of deposit decreased to 32.6% of total deposits from 40.9%
at June 30, 2011.
-- Tangible book value per share increased to $13.03 per share, compared to
$12.92 per share at June 30, 2011.

Balance Sheet and Asset Quality Review

Total assets at December 31, 2011, expanded slightly to $1.23 billion relative to $1.19 billion the previous quarter. The expanded asset base was supported by an increase in seasonal deposits invested in short term investments. The loan portfolio decreased during the quarter as agricultural and commercial business lending continued to retract, due partially to seasonal demands. "Though lending opportunities continue at a slower pace, we remain committed to servicing our community through building and maintaining deposit and service relationships," noted Bianchi. "The stable farming sector and the tax-friendly climate in South Dakota have enabled businesses to prosper. Farmers are utilizing cash proceeds to expand their operations."

Total loans decreased to $759.5 million from $817.3 million during the most recent quarter. Agricultural borrowers paid down seasonal balances, though agricultural loans still represent 26.4% of the total loan portfolio and are well diversified between livestock, grains, dairy and other commodities. Commercial real estate lending activity remains solid in our local markets and accounts for 39.1% of the loan portfolio. The remainder of the loan portfolio consists of consumer loans representing 15.2% of total loans, commercial business loans at 11.1%, and residential loans equaling 8.2% of the portfolio.

Deposit balances remained strong with an inflow of deposits in the second quarter due in part to an increase in municipal deposits, while growth was also seen from business and agricultural customers. Total deposits increased to $929.6 million from $884.2 million at September 30, 2011. Deposit accounts, excluding time certificate of deposits, have increased to 67.4% of total deposits at December 31, 2011, from 61.3% a quarter earlier.

"We continue to implement our long-term plan to build low cost transaction accounts with businesses and local customers and to reduce dependence upon certificates of deposit," said Brent Olthoff, Chief Financial Officer and Treasurer. Time certificates declined to $303.3 million at December 31, 2011, from $341.8 million a quarter earlier. Interest-bearing checking balances grew 5.1%, money market accounts grew 25.3% and savings accounts increased 20.2% over the past quarter.

Nonperforming assets decreased to $27.7 million at December 31, 2011, from $31.4 million the previous quarter. Total NPAs were 2.26% of total assets at the end of the second quarter of fiscal 2012, compared to 2.64% at September 30, 2011. The problem credits remain related to stress in the dairy sector. Nonperforming dairy loans totaled $13.5 million at December 31, 2011, or 48.6% of total nonperforming assets. "The dairy sector remains affected by high production costs (corn) and ongoing leverage and liquidity challenges that influence overall profitability. Currently, cash flows for dairy operators have stabilized," Bianchi said.

The allowance for loan and lease losses at December 31, 2011, totaled $11.0 million, representing 1.45% of total loans outstanding, up from 1.35% the previous quarter. Net charge-offs in the quarter totaled $2.1 million. Although overall loan balances declined from the prior quarter, the general reserve increased in part due to the effects of historical charge-off activity and management's assessment of environmental factors. This analysis contributed to a net increase to the provision for loan and lease losses of $2.1 million for the quarter.

Tangible common shareholders' equity to tangible assets decreased to 7.43% at December 31, 2011 compared to 7.62% at September 30, 2011. Tangible book value per common share was $13.03 at December 31, 2011.

Capital ratios continued to remain strong and HF Financial Corp. remains well-capitalized with Tier 1 capital to risk weighted assets of 13.17% at December 31, 2011, while its Tier 1 capital to adjusted total assets was 9.30%. These regulatory ratios were much higher than the required minimum levels of 6.00% and 5.00%, respectively.

Review of Operations

HF Financial's earnings reflect lower overhead expenses, higher provisions for loan losses and larger gains on the sale of loans compared to the prior quarter.

Net interest income totaled $8.7 million for the second fiscal quarter 2012 compared to $9.1 million for the first fiscal quarter, and $9.6 million in the year ago quarter, as the margins were slightly lower and interest earning assets declined compared to earlier quarters.

The net interest margin on a tax-equivalent basis ("NIM, TE") as a percentage of average earning assets decreased eleven basis points to 3.16% for the second quarter of fiscal 2012 compared to 3.27% for the previous quarter. For the six months ended December 31, 2011, the NIM, TE was 3.21% versus 3.33% for the same period one year earlier.

Fiscal second quarter noninterest income was $3.4 million, which was on par with the level earned the previous quarter. Relative to one year earlier, noninterest income declined by $409,000, which primarily reflects less gains on the sale of loans and securities, as well as lower loan servicing income.

Noninterest expenses decreased to $9.0 million in the second fiscal quarter from $9.8 million in the previous quarter, primarily reflecting lower compensation expenses. Relative to one year earlier, noninterest expense has decreased by $598,000. Management has made a concerted effort to seek operational efficiencies resulting in considerable cost savings. In addition to closing one branch, management has realigned senior management positions and consolidated many management roles.

These financial results are preliminary until the Form 10-Q is filed in February 2012.

Quarterly Dividend Declared

The board of directors declared a regular quarterly cash dividend of $0.1125 per common share for the second fiscal quarter 2012. The dividend is payable February 17, 2012 to stockholders of record February 10, 2012.

Use of Non-GAAP Financial Measures

This press release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). "Net Interest Margin, TE" is a non-GAAP financial measure. Information regarding the usefulness of Net Interest Margin, TE appears in the notes to the attached financial statements. The Company believes that the presentation of non-GAAP financial measures will permit investors to assess the Company's core operating results on the same basis as management. Non-GAAP financial measures should be considered supplemental to, not a substitute for or superior to, financial measures calculated in accordance with GAAP. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titled measures reported by other companies. Reconciliation of the non-GAAP measures to the most comparable GAAP measures are set forth in the notes to the attached financial statements.

About HF Financial Corp.

HF Financial Corp., based in Sioux Falls, SD, is the parent company for financial services companies, including Home Federal Bank, Mid America Capital Services, Inc., dba Mid America Leasing Company, Hometown Investment Services, Inc. and HF Financial Group, Inc. The largest publicly traded savings association headquartered in South Dakota, HF Financial Corp. operates with 33 offices in 19 communities, throughout Eastern South Dakota and one location in Marshall, Minnesota. The Company operates a branch in the Twin Cities market as Infinia Bank, a Division of Home Federal Bank of South Dakota. Internet banking is also available at www.homefederal.com.

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, adequacy of loan
loss reserves, 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 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 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; and the other risks detailed from time to time in the Company's SEC filings, including but not limited to, its annual report on Form 10-K for the fiscal year ending June 30, 2011, and its subsequent quarterly reports on Form 10-Q.

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.

HF Financial Corp.
Selected Consolidated Operating Highlights
(Dollars in Thousands, except share data)
(Unaudited)




Three Months Ended
------------------
December September December
31, 30, 31,
2011 2011 2010
---- ---- ----

Interest,
dividend and
loan fee
income:
Loans and
leases
receivable $11,114 $11,566 $12,540
Investment
securities
and
interest-
earning
deposits 1,104 1,303 1,471
12,218 12,869 14,011
------ ------ ------
Interest
expense:
Deposits 1,871 2,157 2,428
Advances from
Federal Home
Loan Bank
and other
borrowings 1,602 1,614 1,942
3,473 3,771 4,370
----- ----- -----
Net interest
income 8,745 9,098 9,641

Provision for
losses on
loans and
leases 2,120 522 1,268
----- --- -----

Net interest
income after
provision
for losses on
loans and
leases 6,625 8,576 8,373
----- ----- -----

Noninterest
income:
Fees on
deposits 1,539 1,629 1,590
Loan
servicing
income 394 471 417
Gain on sale
of loans,
net 837 376 1,103
Earnings on
cash value
of life
insurance 173 171 168
Trust income 188 166 162
Gain on sale
of
securities,
net 34 301 94
Other 267 251 307
3,432 3,365 3,841
----- ----- -----

Noninterest
expense:
Compensation
and employee
benefits 4,904 5,718 5,532
Occupancy and
equipment 1,069 1,124 1,138
FDIC
insurance 263 272 407
Check and
data
processing
expense 726 715 660
Professional
fees 1,015 836 573
Marketing and
community
investment 370 394 469
Foreclosed
real estate
and other
properties,
net 42 43 110
Other 654 687 752
9,043 9,789 9,641
----- ----- -----

Income before
income taxes 1,014 2,152 2,573
Income tax
expense 299 711 830
--- --- ---

Net income $715 $1,441 $1,743
==== ====== ======

Basic
earnings per
common
share: $0.10 $0.21 $0.25
Diluted
earnings per
common
share: $0.10 $0.21 $0.25
Basic
weighted
average
shares: 6,972,762 6,974,066 6,970,787
Diluted
weighted
average
shares: 6,972,762 6,974,066 6,973,214
Outstanding
shares (end
of period): 6,972,709 6,974,323 6,978,561

Number of
full-
service
offices 33 34 34

Six Months Ended
December 31,
------------
2011 2010
---- ----

Interest, dividend and loan
fee income:
Loans and leases receivable $22,680 $25,248
Investment securities and
interest-earning deposits 2,407 2,954
25,087 28,202
------ ------
Interest expense:
Deposits 4,028 5,040
Advances from Federal Home
Loan Bank
and other borrowings 3,216 3,896
7,244 8,936
----- -----
Net interest income 17,843 19,266

Provision for losses on
loans and leases 2,642 4,635
----- -----

Net interest income after
provision
for losses on loans and
leases 15,201 14,631
------ ------

Noninterest income:
Fees on deposits 3,168 3,199
Loan servicing income 865 919
Gain on sale of loans, net 1,213 1,850
Earnings on cash value of
life insurance 344 334
Trust income 354 316
Gain on sale of securities,
net 335 491
Other 518 514
6,797 7,623
----- -----

Noninterest expense:
Compensation and employee
benefits 10,622 11,079
Occupancy and equipment 2,193 2,277
FDIC insurance 535 751
Check and data processing
expense 1,441 1,366
Professional fees 1,904 1,164
Marketing and community
investment 764 875
Foreclosed real estate and
other properties, net 85 135
Other 1,288 1,421
18,832 19,068
------ ------

Income before income taxes 3,166 3,186
Income tax expense 1,010 953
----- ---

Net income $2,156 $2,233
====== ======

Basic earnings per common
share: $0.31 $0.32
Diluted earnings per common
share: $0.31 $0.32
Basic weighted average
shares: 6,973,414 6,958,545
Diluted weighted average
shares: 6,973,414 6,959,652
Outstanding shares (end of
period): 6,972,709 6,978,561

Number of full-service
offices

HF Financial Corp.
Consolidated Statements of Financial Condition
(Dollars in Thousands, except share data)



December 31, 2011
-----------------
(Unaudited)
ASSETS
Cash and cash equivalents $71,306
Securities available for sale 316,330
Correspondent bank stock 8,115
Loans held for sale 10,688

Loans and leases receivable 759,480
Allowance for loan and lease losses (11,021)
-------
Net loans and leases receivable 748,459

Accrued interest receivable 8,609
Office properties and equipment, net of
accumulated depreciation 15,454
Foreclosed real estate and other
properties 1,394
Cash value of life insurance 15,993
Servicing rights 13,128
Goodwill, net 4,366
Other assets 13,149
------
Total assets $1,226,991
==========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deposits $929,616
Advances from Federal Home Loan Bank and
other borrowings 147,403
Subordinated debentures payable to trusts 27,837
Advances by borrowers for taxes and
insurance 13,439
Accrued expenses and other liabilities 13,509
------
Total liabilities 1,131,804
---------

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000
shares authorized,
none outstanding - - - -
Common stock, $.01 par value, 10,000,000
shares authorized,
9,056,164 and 9,057,727 shares issued
at December 31, 2011 and June 30, 2011,
respectively 91
Additional paid-in capital 45,276
Retained earnings, substantially
restricted 82,141
Accumulated other comprehensive (loss),
net
of related deferred tax effect (1,424)
Less cost of treasury stock, 2,083,455
and 2,083,455 shares
at December 31, 2011 and June 30, 2011,
respectively (30,897)
-------
Total stockholders' equity 95,187
------
Total liabilities and stockholders'
equity $1,226,991
==========

June 30, 2011
-------------
(Audited)
ASSETS
Cash and cash equivalents $55,617
Securities available for sale 234,860
Correspondent bank stock 8,065
Loans held for sale 11,991

Loans and leases receivable 825,493
Allowance for loan and lease losses (14,315)
-------
Net loans and leases receivable 811,178

Accrued interest receivable 7,607
Office properties and equipment, net of
accumulated depreciation 14,969
Foreclosed real estate and other
properties 712
Cash value of life insurance 15,704
Servicing rights 12,952
Goodwill, net 4,366
Other assets 13,300
------
Total assets $1,191,321
==========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deposits $893,157
Advances from Federal Home Loan Bank and
other borrowings 147,395
Subordinated debentures payable to trusts 27,837
Advances by borrowers for taxes and
insurance 11,587
Accrued expenses and other liabilities 16,899
------
Total liabilities 1,096,875
---------

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000
shares authorized,
none outstanding - - - -
Common stock, $.01 par value, 10,000,000
shares authorized,
9,056,164 and 9,057,727 shares issued
at December 31, 2011 and June 30, 2011,
respectively 91
Additional paid-in capital 45,116
Retained earnings, substantially
restricted 81,554
Accumulated other comprehensive (loss),
net
of related deferred tax effect (1,418)
Less cost of treasury stock, 2,083,455
and 2,083,455 shares
at December 31, 2011 and June 30, 2011,
respectively (30,897)
-------
Total stockholders' equity 94,446
------
Total liabilities and stockholders'
equity $1,191,321
==========

HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)




Allowance for Loan
and Lease Loss
Activity
Three Months Ended Six Months Ended
------------------ ----------------
12/31/2011 12/31/2010 12/31/2011 12/31/2010
---------- ---------- ---------- ----------
Balance,
beginning $11,031 $12,319 $14,315 $9,575
Provision
charged
to
income 2,120 1,268 2,642 4,635
Charge-
offs (2,242) (569) (6,130) (1,287)
Recoveries 112 31 194 126
Balance,
ending $11,021 $13,049 $11,021 $13,049
======= ======= ======= =======


12/31/2011 9/30/2011 12/31/2010
---------- --------- ----------

Asset Quality
Nonaccruing loans
and leases $24,156 $26,225 $26,859
Accruing loans and
leases delinquent
more than 90 days 2,160 3,833 4,638
Foreclosed assets 1,394 1,326 164
Total
nonperforming
assets $27,710 $31,384 $31,661
======= ======= =======

General allowance
for loan and
lease losses $8,278 $7,355 $9,101
Specific impaired
loan valuation
allowance 2,743 3,676 3,948
Total allowance
for loans and
lease losses $11,021 $11,031 $13,049
======= ======= =======

Ratio of
nonperforming
assets to total
assets at end of
period (1) 2.26% 2.64% 2.58%
Ratio of
nonperforming loans
and leases to total
loans and
leases at end of
period (2) 3.47% 3.68% 3.66%
Ratio of net charge
offs to average
loans and leases
for
the year-to-date
period (3) 1.45% 1.82% 0.26%
Ratio of allowance
for loan and lease
losses to total
loans and
leases at end of
period 1.45% 1.35% 1.52%
Ratio of allowance
for loan and lease
losses to
nonperforming
loans and leases
at end of period
(2) 41.88% 36.70% 41.43%



(1) Nonperforming assets include nonaccruing loans and leases,
accruing loans and leases delinquent more than 90 days and
foreclosed assets.
(2) Nonperforming loans and leases include both nonaccruing and
accruing loans and leases delinquent more than 90 days.
(3) Percentages for the six months ended December 31, 2011 and
December 31, 2010, and the three month period ended September 30,
2011 have been annualized.

HF Financial Corp.
Selected Capital Composition Highlights
(Unaudited)




12/31/2011 9/30/2011
---------- ---------

Common stockholder's equity before OCI (1)
to consolidated assets 7.91% 8.15%
OCI components to consolidated assets:
Net changes in unrealized gain (loss) on
securities available
for sale 0.18 0.16
Net unrealized losses on defined benefit
plan (0.05) (0.05)
Net unrealized losses on derivatives and
hedging activities (0.25) (0.27)
Goodwill to consolidated assets (0.36) (0.37)
----- -----
Tangible common equity to tangible assets 7.43% 7.62%


Tangible book value per common share (2) $13.03 $12.96

Tier I capital (to adjusted total assets)
(3) 9.30% 9.63%
Tier I capital (to risk weighted assets)
(3) 13.17% 12.57%
Total risk-based capital (to risk-
weighted assets) (3) 14.41% 13.79%

6/30/2011
---------

Common stockholder's equity before OCI (1)
to consolidated assets 8.08%
OCI components to consolidated assets:
Net changes in unrealized gain (loss) on
securities available
for sale 0.14
Net unrealized losses on defined benefit
plan (0.05)
Net unrealized losses on derivatives and
hedging activities (0.21)
Goodwill to consolidated assets (0.37)
-----
Tangible common equity to tangible assets 7.59%


Tangible book value per common share (2) $12.92

Tier I capital (to adjusted total assets)
(3) 9.44%
Tier I capital (to risk weighted assets)
(3) 12.43%
Total risk-based capital (to risk-
weighted assets) (3) 13.28%



(1) Accumulated other comprehensive income (loss).
(2) Common equity reduced by goodwill and divided by number of
shares of outstanding common stock.
(3) Capital ratios for Home Federal Bank.

HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)




Loan and Lease
Portfolio
Composition
December June 30,
31, 2011 2011
--------- ---------
Amount Percent Amount Percent
------ ------- ------ -------

Residential:
One-to four-
family $59,915 7.9% $57,766 7.0%
Construction 2,656 0.3% 4,186 0.5%
Commercial:
Commercial
business (1) 79,516 10.5% 104,227 12.6%
Equipment finance
leases 4,401 0.6% 6,279 0.8%
Commercial real
estate:
Commercial real
estate 238,237 31.4% 219,800 26.6%
Multi-family real
estate 47,847 6.3% 49,307 6.0%
Construction 11,052 1.5% 13,584 1.7%
Agricultural:
Agricultural real
estate 96,080 12.6% 111,808 13.5%
Agricultural
business 104,169 13.7% 138,818 16.8%
Consumer:
Consumer direct 20,376 2.7% 20,120 2.4%
Consumer home
equity 91,098 12.0% 94,037 11.4%
Consumer overdraft
& reserve 3,358 0.4% 3,426 0.4%
Consumer indirect 775 0.1% 2,135 0.3%
--- --- ----- ---

Total loans and
leases receivable
(2) $759,480 100.0% $825,493 100.0%
======== ===== ======== =====


(1) Includes $2,377 and $2,377 tax exempt leases at December 31, 2011
and June 30, 2011, respectively.
(2) Net of undisbursed portion of loans in process and deferred loan
fees and discounts.


Deposit
Composition
December June 30,
31, 2011 2011
--------- ---------
Amount Percent Amount Percent
------ ------- ------ -------

Noninterest
bearing checking
accounts $122,053 13.13% $132,389 14.82%
Interest bearing
checking accounts 130,696 14.06% 113,367 12.69%
Money market
accounts 246,176 26.48% 197,624 22.13%
Savings accounts 127,404 13.71% 84,449 9.46%
In-market
certificates of
deposit 289,796 31.17% 349,606 39.14%
Out-of-market
certificates of
deposit 13,491 1.45% 15,722 1.76%
Total deposits $929,616 100.00% $893,157 100.00%
======== ====== ======== ======

HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)




Average Balances, Interest Yields and
Rates
Three Months Ended
------------------
December 31, 2011
-----------------
Yield/
Average Rate
------- ------
Interest-earning assets:
Loans and leases receivable (1) (3) $800,869 5.52%
Investment securities (2) (3) 311,192 1.41%
------- ----
Total interest-earning assets 1,112,061 4.37%
----
Noninterest-earning assets 87,377
Total assets $1,199,438
==========

Interest-bearing liabilities:
Deposits:
Checking and money market $330,229 0.64%
Savings 125,328 0.25%
Certificates of deposit 322,279 1.56%
------- ----
Total interest-bearing deposits 777,836 0.96%
FHLB advances and other borrowings 147,413 3.03%
Subordinated debentures payable to
trusts 27,837 6.86%
------ ----
Total interest-bearing liabilities 953,086 1.45%
----
Noninterest-bearing deposits 120,945
Other liabilities 30,407
------
Total liabilities 1,104,438
Equity 95,000
------
Total liabilities and equity $1,199,438
==========

Net interest spread (4) 2.92%
====
Net interest margin (4) (5) 3.13%
====
Net interest margin, TE (6) 3.16%
====
Return on average assets (7) 0.24%
====
Return on average equity (8) 2.99%
====

Average Balances, Interest Yields and
Rates
Three Months Ended
------------------
September 30, 2011
------------------
Average Yield/Rate
------- ----------
Interest-earning assets:
Loans and leases receivable (1) (3) $832,298 5.53%
Investment securities (2) (3) 288,853 1.79%
------- ----
Total interest-earning assets 1,121,151 4.57%
----
Noninterest-earning assets 77,972
Total assets $1,199,123
==========

Interest-bearing liabilities:
Deposits:
Checking and money market $311,203 0.68%
Savings 113,693 0.28%
Certificates of deposit 350,521 1.75%
------- ----
Total interest-bearing deposits 775,417 1.11%
FHLB advances and other borrowings 148,936 3.10%
Subordinated debentures payable to
trusts 27,837 6.50%
------ ----
Total interest-bearing liabilities 952,190 1.58%
----
Noninterest-bearing deposits 119,758
Other liabilities 32,835
------
Total liabilities 1,104,783
Equity 94,340
------
Total liabilities and equity $1,199,123
==========

Net interest spread (4) 2.99%
====
Net interest margin (4) (5) 3.23%
====
Net interest margin, TE (6) 3.27%
====
Return on average assets (7) 4.80%
====
Return on average equity (8) 6.08%
====



(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 three months ended December 31, 2011 and
September 30, 2011 have been annualized.
(5) Net interest income divided by average interest-earning assets.
(6) Net interest margin expressed on a fully taxable equivalent
basis ("Net Interest Margin, TE") is a non-GAAP
financial measure. The tax-equivalent adjustment to net interest
income recognizes the income tax savings
when comparing taxable and tax-exempt assets and adjusting for
federal and state exemption of interest income
and certain other permanent income tax differences. We believe that
it is a standard practice in the banking
industry to present net interest margin expressed on a fully taxable
equivalent basis, and accordingly believe
the presentation of this non-GAAP financial measure may be useful
for peer comparison purposes. As a
non-GAAP financial measure, Net Interest Margin, TE should be
considered supplemental to and not a
substitute for or superior to, financial measures calculated in
accordance with GAAP. As other companies may
use different calculations for Net Interest Margin, TE, this
presentation may not be comparable to similarly
titled measures reported by other companies.
(7) Ratio of net income to average total assets.
(8) Ratio of net income to average equity.

HF Financial Corp.
Selected Consolidated Financial Condition Data
(Dollars in Thousands)
(Unaudited)




Average Balances, Interest Yields
and Rates
Six Months Ended
----------------
December 31, 2011 December 31, 2010
----------------- -----------------
Yield/
Average Rate Average Yield/Rate
------- ------ ------- ----------
Interest-earning assets:
Loans and leases
receivable (1) (3) $816,584 5.52% $889,319 5.63%
Investment securities
(2) (3) 300,022 1.60% 274,341 2.14%
------- ---- ------- ----
Total interest-earning
assets 1,116,606 4.47% 1,163,660 4.81%

Noninterest-earning
assets 82,615 80,225
Total assets $1,199,221 $1,243,885
========== ==========

Interest-bearing liabilities:
Deposits:
Checking and money
market $318,450 0.66% $269,811 0.53%
Savings 121,669 0.26% 78,195 0.33%
Certificates of deposit 336,401 1.66% 433,342 1.91%
------- ---- ------- ----
Total interest-bearing
deposits 776,520 1.03% 781,348 1.28%
FHLB advances and other
borrowings 148,175 3.06% 199,876 2.95%
Subordinated debentures
payable to trusts 27,837 6.68% 27,837 6.56%
------ ---- ------ ----
Total interest-bearing
liabilities 952,532 1.51% 1,009,061 1.76%

Noninterest-bearing
deposits 120,364 104,635
Other liabilities 31,662 36,053
------ ------
Total liabilities 1,104,558 1,149,749
Equity 94,663 94,136
------ ------
Total liabilities and
equity $1,199,221 $1,243,885
========== ==========

Net interest spread (4) 2.96% 3.05%
==== ====
Net interest margin (4) (5) 3.18% 3.28%
==== ====
Net interest margin, TE (6) 3.21% 3.33%
==== ====
Return on average assets (7) 0.36% 0.36%
==== ====
Return on average equity (8) 4.53% 4.71%
==== ====


(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 six months ended December 31, 2011 and December
31, 2010 have been annualized.
(5) Net interest income divided by average interest-earning assets.
(6) Net interest margin expressed on a fully taxable equivalent basis
("Net Interest Margin, TE") is a non-GAAP
financial measure. The tax-equivalent adjustment to net interest
income recognizes the income tax savings
when comparing taxable and tax-exempt assets and adjusting for federal
and state exemption of interest income
and certain other permanent income tax differences. We believe that it
is a standard practice in the banking
industry to present net interest margin expressed on a fully taxable
equivalent basis, and accordingly believe
the presentation of this non-GAAP financial measure may be useful for
peer comparison purposes. As a
non-GAAP financial measure, Net Interest Margin, TE should be
considered supplemental to and not a
substitute for or superior to, financial measures calculated in
accordance with GAAP. As other companies may
use different calculations for Net Interest Margin, TE, this
presentation may not be comparable to similarly
titled measures reported by other companies.
(7) Ratio of net income to average total assets.
(8) Ratio of net income to average equity.

HF Financial Corp.
Age Analysis of Past Due Financing Receivables
At December 31, 2011
(Dollars in Thousands)
(Unaudited)






Accruing and Nonaccruing Loans
------------------------------

30-59 60-89
Days Days Greater
Past Past Than 89
Due Due Days
------ ------ --------
Residential:
One-to four-family $- - - - $- - - - $1,470
Construction - - - - - - - - - - - -
Commercial:
Commercial business 196 27 499
Equipment finance
leases 27 11 - - - -
Commercial real
estate:
Commercial real
estate - - - - - - - - - - - -
Multi-family real
estate - - - - - - - - 32
Construction - - - - - - - - - - - -
Agricultural:
Agricultural real
estate 1,169 762 407
Agricultural business - - - - 86 3,071
Consumer:
Consumer direct 12 13 - - - -
Consumer home equity 422 68 - - - -
Consumer OD & reserve 1 - - - - - - - -
Consumer indirect 13 - - - - - - - -
--- ------- -------
Total $1,840 $967 $5,479
====== ==== ======

Accruing and Nonaccruing Loans
------------------------------

Total
Past
Due Current
------ -------
Residential:
One-to four-family $1,470 $58,445
---
Construction - 2,656
Commercial:
Commercial business 722 78,794
Equipment finance
leases 38 4,363
Commercial real
estate:
Commercial real ---
estate - 238,237
Multi-family real
estate 32 47,815
---
Construction - 11,052
Agricultural:
Agricultural real
estate 2,338 93,742
Agricultural business 3,157 101,012
Consumer:
Consumer direct 25 20,351
Consumer home equity 490 90,608
Consumer OD & reserve 1 3,357
Consumer indirect 13 762
--- ---
Total $8,286 $751,194
====== ========

Nonperforming Loans
-------------------
Recorded
Investment
> 90 Days
and
Accruing
(1)
---------
Residential:
One-to four-family $256
Construction - - - -
Commercial:
Commercial business 95
Equipment finance
leases - - - -
Commercial real
estate:
Commercial real
estate - - - -
Multi-family real
estate - - - -
Construction - - - -
Agricultural:
Agricultural real
estate 670
Agricultural business 1,139
Consumer:
Consumer direct - - - -
Consumer home equity - - - -
Consumer OD & reserve - - - -
Consumer indirect - - - -
-------
Total $2,160
======

Nonperforming Loans
-------------------




Nonaccrual
Balance Total
----------- -----
Residential:
One-to four-family $1,411 $1,667
---
Construction - - - - -
Commercial:
Commercial business 433 528
Equipment finance
leases 46 46
Commercial real
estate:
Commercial real
estate 315 315
Multi-family real
estate 32 32
---
Construction - - - - -
Agricultural:
Agricultural real
estate 12,803 13,473
Agricultural business 8,835 9,974
Consumer:
Consumer direct 28 28
Consumer home equity 248 248
---
Consumer OD & reserve - - - - -
Consumer indirect 5 5
--- ---
Total $24,156 $26,316
======= =======



(1) Loans accruing which are delinquent greater than 90 days have
either government guarantees or acceptable loan-to-value ratios

HF Financial Corp.
Non-GAAP Disclosure Reconciliation
Net Interest Margin to Net Interest Margin-Tax Effective Yield
(Dollars in Thousands)
(Unaudited)




Three Months Ended Six Months Ended
------------------
December September December
31, 30, 31, December 31,
------------
2011 2011 2010 2011 2010
---- ---- ---- ---- ----

Net
interest
income $8,745 $9,098 $9,641 $17,843 $19,266
Taxable
equivalent
adjustment 97 105 117 202 246
--- --- --- --- ---
Adjusted
net
interest
income 8,842 9,203 9,758 18,045 19,512
Average
interest-
earning
assets 1,112,061 1,121,151 1,165,664 1,116,606 1,163,660
--------- --------- --------- --------- ---------
Net
interest
margin,
TE 3.16% 3.27% 3.32% 3.21% 3.33%
==== ==== ==== ==== ====

SOURCE HF Financial Corp.