Declares Regular Quarterly Dividend of $0.1125 per Share
Merger with Great Western Bancorp, Inc. Expected to Close in 4th Fiscal Quarter
SIOUX FALLS, S.D., April 25, 2016 (GLOBE NEWSWIRE) -- HF Financial Corp. (Nasdaq:HFFC) today reported fiscal third quarter 2016 earnings of $2.1 million, or $0.29 per diluted share compared to $0.10 per diluted share one year earlier and $0.21 per diluted share in the second quarter. Core earnings were $0.32 per diluted share compared to $0.23 per diluted share one year earlier. Most recent core earnings were adjusted for professional fees related to the pending acquisition by Great Western Bancorp, Inc. announced on November 30, 2015.
Total assets were $1.14 billion at March 31, 2016, which was slightly lower than the $1.17 billion for the previous quarter and the same one year earlier. Tangible book value per share was $14.93 per share versus $13.93 per share one year earlier. The net interest margin increased as non-accrued interest was collected on paid-off loans, as well as the collection of a prepayment fee on a large commercial real estate loan. Nonperforming assets as a percentage of total assets was 1.40% at March 31, 2016, compared to 0.95% one quarter earlier.
On November 30, 2015, HFFC announced its entry into a definitive merger agreement with Great Western Bancorp, Inc. (“Great Western”). Under the terms of the merger agreement, 75% of HFFC’s common stock will be converted into Great Western common stock and the remaining 25% will be exchanged for cash. HFFC stockholders will have the option to elect to receive either 0.6500 shares of Great Western common stock or $19.50 in cash for each HFFC common share, subject to proration to ensure that, in the aggregate, 75% of HFFC shares will be converted into stock. The merger has been unanimously approved by the Board of Directors of both Great Western and HFFC and is expected to close in the second quarter of calendar 2016, subject to certain conditions, including the approval by HFFC’s stockholders and customary regulatory approvals. The special meeting of HFFC's stockholders to consider approval of the merger agreement will be held on May 10, 2016, at 2:00 p.m., Central Time, at the Hilton Garden Inn, 201 East 8th Street, Sioux Falls, South Dakota 57103.
“Our core earnings remain strong as we progress toward our merger with Great Western Bank. Our staff has worked extremely hard over the past several years to improve our core operations, and I am proud of their efforts,” said Stephen Bianchi, President and Chief Executive Officer.
Fiscal 2016 Third Quarter Financial Highlights: (at or for the periods ended March 31, 2016, compared to December 31, 2015, and /or March 31, 2015.)
- Earnings were $0.29 per diluted share for the third fiscal quarter of 2016 versus $0.21 per diluted share the previous quarter and $0.10 per diluted share one year earlier.
- Core earnings increased 41% to $0.32 per diluted share for the third quarter of fiscal 2016 as compared to the third quarter of the prior year. For the nine months ended March 31, 2016, core earnings grew 19% to $0.88 per diluted share compared to $0.75 per diluted share for the comparable period one year earlier.
- The net interest margin expressed on a fully taxable equivalent basis (“NIM, TE”), a non-GAAP measure, was 3.64% for the fiscal third quarter 2016 compared to 3.51% the previous quarter and 3.33% one year ago. Fees received from prepayment of a loan amounted to $224,000 of income recognized and enhanced the net interest margin percentage by 8 basis points.
- Total loans decreased to $892.2 million at March 31, 2016, from $905.6 million at December 31, 2015, and were up from $871.6 million one year earlier.
- Nonperforming assets increased to $15.9 million, or 1.40% of total assets at quarter end compared to $11.1 million or 0.95% of total assets one quarter earlier. Nonperforming assets at March 31, 2016, include $8.9 million of non-accruing troubled debt restructured loans that are compliant with their restructured terms.
- Loan and lease losses allowance totaled 1.30% of total loans at March 31, 2016, compared to 1.27% one quarter earlier. The Company has no direct exposure to the oil & gas industry.
- Bank capital ratios as of March 31, 2016, continued to remain well above the newly implemented regulatory “well-capitalized” minimum levels and include the newly implemented common equity tier 1 capital to risk- weighted assets ratio:
- Total risk-based capital to risk-weighted assets was 13.90% versus 13.68% at December 31, 2015.
- Tier 1 capital to risk-weighted assets was 12.72% versus 12.52% at December 31, 2015.
- Tier 1 capital to total adjusted assets was 10.94% versus 10.69% at December 31, 2015.
- Common equity tier 1 capital to risk-weighted assets was 12.72% versus 12.52% at December 31, 2015.
- Total risk-based capital to risk-weighted assets was 13.90% versus 13.68% at December 31, 2015.
- The most recent dividend of $0.1125 per share represents a 2.42% current yield at recent market prices.
- Tangible book value was $14.93 per share at March 31, 2016, compared to $13.93 per share a year ago. This increase in tangible book value, combined with a total dividend of $0.45, results in an intrinsic return of 10.41% for the past twelve month period.
For a reconciliation of core earnings and core diluted earnings per share to accounting principles generally accepted in the United States ("GAAP") for net income and GAAP diluted earnings per share, please refer to the tables in the section titled "Reconciliation of GAAP Earnings and Core Earnings."
Balance Sheet and Asset Quality Review
HF Financial’s total asset base was $1.14 billion at March 31, 2016, compared to $1.17 billion at the end of the previous quarter and similar to one year earlier. Total loans decreased slightly to $892.2 million at March 31, 2016 due largely to a reduction in commercial construction loans and seasonal pay-down of agricultural loans. Despite the decline in total loans, multi-family loans increased to $126.1 million from $108.8 million, while commercial real estate loans increased to $338.2 million from $334.6 million. Agricultural loans decreased slightly over the quarter. At March 31, 2016, commercial real estate totaled 52.0% of the total loan portfolio, agricultural loans totaled 20.5%, commercial and residential construction were 6.3%, commercial business loans were 7.4%, consumer and residential loans totaled 7.3% and 6.5%, respectively.
Reflecting normal seasonality, total deposits decreased to $910.6 million at March 31, 2016, from $941.7 million one quarter earlier. Non-certificate accounts represented 74.1% of total deposits, while certificates of deposit represented 25.9% of total deposits at March 31, 2016. Non-interest bearing deposits represent 15.4% of total deposits.
FHLB advances and other borrowings decreased during the third fiscal quarter of 2016 to $65.4 million compared to $73.4 million in the previous quarter, primarily consisting of shorter-term borrowing. For the quarter ended March 31, 2016, the average cost of the FHLB and other borrowings portfolio was 0.63% compared to 0.53% the previous quarter.
Nonperforming assets ("NPAs"), which included $8.9 million of non-accruing troubled debt restructurings that are in compliance with their restructured terms, totaled $15.9 million at March 31, 2016 compared to $13.1 million one year earlier. At March 31, 2016, NPAs represented 1.40% of total assets and included only $99,000 in foreclosed assets.
The allowance for loan and lease losses at March 31, 2016, totaled $11.6 million and represented 1.30% of total loans and leases. Total allowance relative to total nonperforming loans was 73.2% at March 31, 2016 compared to 84.4% one year earlier.
Tangible common stockholders' equity was 9.28% of tangible assets at March 31, 2016 compared to 9.22% one year earlier. Tangible book value per common share was $14.93 at March 31, 2016, up from $13.93 one year earlier.
Capital ratios continued to remain well above regulatory requirements with Tier 1 capital to risk-weighted assets of 12.72% at March 31, 2016, while the ratio of Tier 1 capital to total adjusted assets was 10.94%. These regulatory ratios were higher than the required minimum levels of 6.00% and 4.00%, respectively.
Review of Operations
For the third fiscal quarter ending March 31, 2016, HF Financial's operations reflected improved earnings compared to one year earlier and the preceding quarter. Net interest income increased 8.5% to $9.6 million for the third fiscal quarter of fiscal 2016 compared to $8.8 million one year earlier, and $9.5 million in the preceding quarter. The NIM, TE was 3.64% for the fiscal third quarter compared to 3.51% the preceding quarter and 3.33% one year earlier.
Provision for loan losses reflect prudent reserves established for the loan portfolio, economic conditions and historical charge-off activity. Provisions totaled $162,000 for the third fiscal quarter of 2016 compared to $192,000 for the second fiscal quarter of 2016. Gross charge-offs were $61,000 for the third quarter versus $187,000 in the prior quarter. Recoveries totaled $32,000 in the third fiscal quarter of 2016 versus $198,000 the prior quarter.
Noninterest income totaled $2.5 million for the fiscal third quarter of 2016 compared to $3.4 million in the previous quarter. Mortgage activity produced $397,000 in servicing and gains on loan sales revenue in the third fiscal quarter of 2016 versus $999,000 the previous quarter.The current quarter reflects a $407,000 temporary impairment in servicing income related to lower market rates and less gains on the sale of loans. Fees on deposits totaled $1.2 million for the third quarter of fiscal 2016 versus $1.4 million the previous quarter. The lower deposit fees relate, in part, to the lower level of total deposits.
Total noninterest expense was $8.9 million compared to $10.5 million in the previous quarter. The current quarter reflects less full time employees and better health care claims experience. Compensation and employee benefits totaled $4.9 million versus $6.1 million in the previous quarter.
These financial results are preliminary until the Form 10-Q is filed in May 2016.
Quarterly Dividend Declared
The board of directors declared a regular quarterly cash dividend of $0.1125 per common share for the third fiscal quarter 2016. The dividend is payable May 12, 2016 to stockholders of record May 6, 2016.
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” and "Core Earnings" are non-GAAP financial measures. Information regarding the usefulness of Net Interest Margin, TE and Core Earnings appear 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, these presentations 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 Great Western Bancorp, Inc.
Great Western Bancorp, Inc. is the holding company for Great Western Bank, a full-service regional bank focused on relationship-based business and agribusiness banking. Great Western Bank offers small and mid-sized businesses a focused suite of financial products and a range of deposit and loan products to retail customers through several channels, including the branch network, online banking system, mobile banking applications and customer care centers. The bank services its customers through 158 branches in seven states: South Dakota, Iowa, Nebraska, Colorado, Arizona, Kansas and Missouri. To learn more about Great Western Bank visit www.greatwesternbank.com.
About HF Financial Corporation
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. As a publicly traded bank holding company headquartered in South Dakota, HF Financial Corp. operates with 23 offices in 17 communities, throughout Eastern South Dakota, Minnesota, and North Dakota. The Company operates a branch in the Twin Cities market as Infinia Bank, a Division of Home Federal Bank of South Dakota. To learn more about Home Federal Bank, visit www.homefederal.com.
No Offer or Solicitation
This communication is not a solicitation of a proxy from any stockholder of HF Financial Corp. This communication is for informational purposes only and is neither an offer to purchase, nor a solicitation of an offer to sell, any securities in any jurisdiction pursuant to the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of any applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933.
Important Additional Information and Where to Find It
In connection with the Agreement and Plan of Merger by and between Great Western Bancorp, Inc. (“Great Western”) and HF Financial Corp., Great Western filed with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4 that contained a proxy statement of HF Financial Corp. and a prospectus of Great Western, as well as other relevant documents concerning the proposed transaction. STOCKHOLDERS OF HF FINANCIAL CORP. ARE URGED TO READ THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT GREAT WESTERN, HF FINANCIALCORP. AND THE PROPOSED TRANSACTION. The Registration Statement, including the proxy statement/prospectus, and other relevant materials, and any other documents filed by Great Western and HF Financial Corp. with the SEC, may be obtained free of charge at the SEC’s website at www.sec.gov. Documents filed by Great Western with the SEC, including the Registration Statement, may also be obtained free of charge from Great Western’s website (www.greatwesternbank.com) under the “Investor Relations” heading and the “SEC Filings” sub-heading, or by directing a request to Great Western’s Investor Relations contact, David Hinderaker at David.Hinderaker@greatwesternbank.com. Documents filed by HF Financial Corp. with the SEC may also be obtained free of charge from HF Financial Corp. website (www.homefederal.com) under the “Investor Relations” heading and the “SEC Filings” sub-heading, or by directing a request to HF Financial Corp. Investor Relations contact, Pamela F. Russo at prusso@homefederal.com.
Participants in the Solicitation
Great Western, HF Financial Corp., and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of HF Financial Corp., in connection with the proposed merger transaction. Information about the directors and executive officers of Great Western is available in Great Western’s definitive proxy statement for its 2016 annual meeting of stockholders as previously filed with the SEC on January 4, 2016, and other documents subsequently filed by Great Western with the SEC. Information about the directors and executive officers of HF Financial Corp., is available in HF Financial Corp.’s, definitive proxy statement, for its 2015 annual meeting of stockholders as previously filed with the SEC on October 16, 2015 and on its definitive proxy statement for its 2016 Special Meeting of Stockholders as previously filed with the SEC on April 7, 2016. Other information regarding the participants and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the Registration Statement and including the proxy statement/prospectus, and other relevant documents regarding the transaction filed with the SEC when they become available.
Forward-Looking Statements
This document contains forward-looking statements. You can generally identify forward-looking statements by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “explore,” “evaluate,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” or “will,” or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond GWB’s and HF Financial Corp’s control.
Statements in this document regarding Great Western, HF Financial Corp., and the proposed merger that are forward-looking, including projections as to the anticipated benefits of the proposed transaction, the impact of the proposed transaction on anticipated financial results, the synergies from the proposed transaction, and the closing date for the proposed transaction, are based on management’s estimates, assumptions and projections, and are subject to significant uncertainties and other factors, many of which are beyond the control of Great Western and HF Financial Corp. In particular, projected financial information for the combined company is based on management’s estimates, assumptions and projections and has not been prepared in conformance with the applicable accounting requirements of Regulation S-X relating to pro forma financial information, and the required pro forma adjustments have not been applied and are not reflected therein. None of this information should be considered in isolation from, or as a substitute for, the historical financial statements of Great Western or HF Financial Corp. Important risk factors could cause actual future results and other future events to differ materially from those currently estimated by management, including, but not limited to: the timing to consummate the proposed transaction; the risk that a condition to closing of the proposed transaction may not be satisfied and the transaction may not close; the risk that a regulatory approval that may be required for the proposed transaction is not obtained, is rescinded or becomes subject to conditions that are not anticipated; the combined company’s ability to achieve the synergies and value creation contemplated by the proposed transaction; management’s ability to promptly and effectively integrate the businesses of the two companies; the diversion of management time on transaction-related issues; change in national and regional economic conditions; the effects of governmental regulation of the financial services industry; industry consolidation; technological developments and major world news events.
For more discussion of important risk factors that may materially affect Great Western and HF Financial Corp., please see the risk factors contained in Great Western’s Annual Report on Form 10-K for its fiscal year ended September 30, 2015 and HF Financial Corp's Annual Report on Form 10-K for its fiscal year ended June 30, 2015 and Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2015, all of which are on file with the SEC and available through the SEC’s website at www.sec.gov.
No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, what impact they will have on the results of operations, financial condition or cash flows of Great Western, HF Financial Corp. or the combined company. None of Great Western nor HF Financial Corp. assumes any duty to update or revise forward-looking statements, whether as a result of new information, future events or otherwise, as of any future date.
| HF Financial Corp. | |||||||||||||||||||||
| Selected Consolidated Operating Highlights | |||||||||||||||||||||
| (Dollars in Thousands, except share data) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | March 31, | ||||||||||||||||||
| 2016 | 2015 | 2015 | 2016 | 2015 | |||||||||||||||||
| Interest, dividend and loan fee income: | |||||||||||||||||||||
| Loans and leases receivable | $ | 10,131 | $ | 9,978 | $ | 9,197 | $ | 30,194 | $ | 28,549 | |||||||||||
| Investment securities and interest-earning deposits | 807 | 807 | 863 | 2,360 | 3,128 | ||||||||||||||||
| 10,938 | 10,785 | 10,060 | 32,554 | 31,677 | |||||||||||||||||
| Interest expense: | |||||||||||||||||||||
| Deposits | 947 | 928 | 846 | 2,720 | 2,661 | ||||||||||||||||
| Advances from Federal Home Loan Bank and other borrowings | 389 | 371 | 365 | 1,139 | 2,517 | ||||||||||||||||
| 1,336 | 1,299 | 1,211 | 3,859 | 5,178 | |||||||||||||||||
| Net interest income | 9,602 | 9,486 | 8,849 | 28,695 | 26,499 | ||||||||||||||||
| Provision for losses on loans and leases | 162 | 192 | 282 | 532 | 1,201 | ||||||||||||||||
| Net interest income after provision for losses on loans and leases | 9,440 | 9,294 | 8,567 | 28,163 | 25,298 | ||||||||||||||||
| Noninterest income: | |||||||||||||||||||||
| Fees on deposits | 1,210 | 1,366 | 1,375 | 4,037 | 4,524 | ||||||||||||||||
| Loan servicing income, net | (100 | ) | 329 | 319 | 564 | 1,034 | |||||||||||||||
| Gain on sale of loans | 497 | 670 | 457 | 1,940 | 1,476 | ||||||||||||||||
| Earnings on cash value of life insurance | 210 | 212 | 204 | 632 | 619 | ||||||||||||||||
| Trust income | 231 | 235 | 234 | 680 | 682 | ||||||||||||||||
| Commission and insurance income | 358 | 432 | 438 | 1,281 | 1,224 | ||||||||||||||||
| Gain (loss) on sale of securities, net | — | 15 | (1,076 | ) | 20 | (1,117 | ) | ||||||||||||||
| Gain on sale of bank branch | — | — | — | 2,847 | — | ||||||||||||||||
| Loss on disposal of closed-branch fixed assets | — | — | (298 | ) | — | (461 | ) | ||||||||||||||
| Other | 96 | 93 | 402 | 298 | 540 | ||||||||||||||||
| 2,502 | 3,352 | 2,055 | 12,299 | 8,521 | |||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||
| Compensation and employee benefits | 4,914 | 6,119 | 5,675 | 17,092 | 16,434 | ||||||||||||||||
| Occupancy and equipment | 1,087 | 1,083 | 1,330 | 3,216 | 3,381 | ||||||||||||||||
| FDIC insurance | 147 | 148 | 221 | 485 | 627 | ||||||||||||||||
| Check and data processing expense | 938 | 865 | 815 | 2,668 | 2,463 | ||||||||||||||||
| Professional fees | 644 | 909 | 447 | 2,228 | 1,512 | ||||||||||||||||
| Marketing and community investment | 222 | 345 | 444 | 841 | 1,192 | ||||||||||||||||
| Loss on early extinguishment of debt | — | — | — | — | 4,065 | ||||||||||||||||
| Other | 918 | 1,006 | 848 | 2,747 | 2,276 | ||||||||||||||||
| 8,870 | 10,475 | 9,780 | 29,277 | 31,950 | |||||||||||||||||
| Income before income taxes | 3,072 | 2,171 | 842 | 11,185 | 1,869 | ||||||||||||||||
| Income tax expense | 1,003 | 693 | 123 | 3,786 | 206 | ||||||||||||||||
| Net income | $ | 2,069 | $ | 1,478 | $ | 719 | $ | 7,399 | $ | 1,663 | |||||||||||
| Basic earnings per common share: | $ | 0.29 | $ | 0.21 | $ | 0.10 | $ | 1.05 | $ | 0.24 | |||||||||||
| Diluted earnings per common share: | $ | 0.29 | $ | 0.21 | $ | 0.10 | $ | 1.05 | $ | 0.24 | |||||||||||
| Basic weighted average shares: | 7,057,191 | 7,055,058 | 7,054,197 | 7,056,236 | 7,054,662 | ||||||||||||||||
| Diluted weighted average shares: | 7,068,564 | 7,069,954 | 7,061,035 | 7,068,546 | 7,059,805 | ||||||||||||||||
| Outstanding shares (end of period): | 7,066,348 | 7,056,492 | 7,054,451 | 7,066,348 | 7,054,451 | ||||||||||||||||
| Number of full-service offices | 23 | 23 | 23 | ||||||||||||||||||
| HF Financial Corp. | ||||||||
| Consolidated Statements of Financial Condition | ||||||||
| (Dollars in Thousands, except share data) | ||||||||
| March 31, 2016 | June 30, 2015 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 19,320 | $ | 21,476 | ||||
| Investment securities available for sale | 148,353 | 158,806 | ||||||
| Investment securities held to maturity | 19,918 | 20,156 | ||||||
| Correspondent bank stock | 4,062 | 4,177 | ||||||
| Loans held for sale | 2,586 | 9,038 | ||||||
| Loans and leases receivable | 892,227 | 914,419 | ||||||
| Allowance for loan and lease losses | (11,592 | ) | (11,230 | ) | ||||
| Loans and leases receivable, net | 880,635 | 903,189 | ||||||
| Accrued interest receivable | 5,192 | 5,414 | ||||||
| Office properties and equipment, net of accumulated depreciation | 16,114 | 15,493 | ||||||
| Foreclosed real estate and other properties | 99 | 157 | ||||||
| Cash value of life insurance | 21,830 | 21,320 | ||||||
| Servicing rights, net | 9,723 | 10,584 | ||||||
| Goodwill and intangible assets, net | 4,915 | 4,737 | ||||||
| Other assets | 9,130 | 10,648 | ||||||
| Total assets | $ | 1,141,877 | $ | 1,185,195 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Liabilities | ||||||||
| Deposits | $ | 910,552 | $ | 963,229 | ||||
| Advances from Federal Home Loan Bank and other borrowings | 65,367 | 65,558 | ||||||
| Subordinated debentures payable to trusts, net of unamortized debt issuance costs | 24,662 | 24,655 | ||||||
| Advances by borrowers for taxes and insurance | 17,564 | 14,197 | ||||||
| Accrued expenses and other liabilities | 13,339 | 13,579 | ||||||
| Total liabilities | 1,031,484 | 1,081,218 | ||||||
| Stockholders' equity | ||||||||
| Preferred stock, $.01 par value, 500,000 shares authorized, none outstanding | — | — | ||||||
| Series A Junior Participating Preferred Stock, $1.00 stated value, 50,000 shares authorized, none outstanding | — | — | ||||||
| Common stock, $.01 par value, 10,000,000 shares authorized, 9,149,803 and 9,137,906 shares issued at March 31, 2016 and June 30, 2015, respectively | 91 | 91 | ||||||
| Additional paid-in capital | 46,590 | 46,320 | ||||||
| Retained earnings, substantially restricted | 95,163 | 90,145 | ||||||
| Accumulated other comprehensive (loss), net of related deferred tax effect | (554 | ) | (1,682 | ) | ||||
| Less cost of treasury stock, 2,083,455 shares at March 31, 2016 and June 30, 2015 | (30,897 | ) | (30,897 | ) | ||||
| Total stockholders' equity | 110,393 | 103,977 | ||||||
| Total liabilities and stockholders' equity | $ | 1,141,877 | $ | 1,185,195 | ||||
| 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 | ||||||||||||||||||
| March 31, | December 31, | March 31, | March 31, | |||||||||||||||||
| 2016 | 2015 | 2015 | 2016 | 2015 | ||||||||||||||||
| Balance, beginning | $ | 11,459 | $ | 11,256 | $ | 10,933 | $ | 11,230 | $ | 10,502 | ||||||||||
| Provision charged to income | 162 | 192 | 282 | 532 | 1,201 | |||||||||||||||
| Charge-offs | (61 | ) | (187 | ) | (268 | ) | (441 | ) | (842 | ) | ||||||||||
| Recoveries | 32 | 198 | 65 | 271 | 151 | |||||||||||||||
| Balance, ending | $ | 11,592 | $ | 11,459 | $ | 11,012 | $ | 11,592 | $ | 11,012 | ||||||||||
| Asset Quality | March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||
| Nonaccruing loans and leases | $ | 15,820 | $ | 10,888 | $ | 13,043 | ||||||
| Accruing loans and leases delinquent more than 90 days | 15 | — | — | |||||||||
| Foreclosed assets | 99 | 229 | 27 | |||||||||
| Total nonperforming assets (1) | $ | 15,934 | $ | 11,117 | $ | 13,070 | ||||||
| General allowance for loan and lease losses | $ | 10,874 | $ | 11,215 | $ | 10,491 | ||||||
| Specific impaired loan valuation allowance | 718 | 244 | 521 | |||||||||
| Total allowance for loans and lease losses | $ | 11,592 | $ | 11,459 | $ | 11,012 | ||||||
| Ratio of nonperforming assets to total assets at end of period (1) | 1.40 | % | 0.95 | % | 1.15 | % | ||||||
| Ratio of nonperforming loans and leases to total loans and leases at end of period (2) | 1.77 | % | 1.20 | % | 1.50 | % | ||||||
| Ratio of net charge-offs to average loans and leases for the year-to-date period (3) | 0.02 | % | 0.03 | % | 0.11 | % | ||||||
| Ratio of allowance for loan and lease losses to total loans and leases at end of period | 1.30 | % | 1.27 | % | 1.26 | % | ||||||
| Ratio of allowance for loan and lease losses to nonperforming loans and leases at end of period (2) | 73.2 | % | 105.2 | % | 84.4 | % | ||||||
_____________________________________________
(1) Nonperforming assets include nonaccruing loans and leases, accruing loans and leases delinquent more than 90 days and foreclosed assets. Includes nonaccruing troubled debt restructured loans compliant with their restructured terms of $8.9 million, $9.6 million, and $8.7 million, for the respective quarters.
(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, 2015 and the nine months ended March 31, 2016 and March 31, 2015 have been annualized.
| Troubled Debt Restructuring Summary | March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||
| Nonaccruing troubled debt restructurings-non-compliant (1)(2) | $ | 107 | $ | 108 | $ | 52 | ||||||
| Nonaccruing troubled debt restructurings-compliant (1)(2)(3) | 8,937 | 9,560 | 8,664 | |||||||||
| Accruing troubled debt restructurings (4) | 795 | 2,035 | 2,788 | |||||||||
| Total troubled debt restructurings | $ | 9,839 | $ | 11,703 | $ | 11,504 | ||||||
______________________________________________
(1) Non-compliant and compliant refer to the terms of the restructuring agreement.
(2) Balances are included in nonaccruing loans as part of nonperforming loans.
(3) Interest received but applied to the principal balance was $125, $166, and $189, for the respective quarters.
(4) None of the loans included are 90 days past due and are not included in the nonperforming loans.
| HF Financial Corp. | ||||||||||||
| Selected Capital Composition Highlights | ||||||||||||
| (Unaudited) | ||||||||||||
| March 31, 2016 | December 31, 2015 | June 30, 2015 | ||||||||||
| Common stockholder's equity before OCI (1) to consolidated assets | 9.76 | % | 9.38 | % | 8.95 | % | ||||||
| OCI components to consolidated assets: | ||||||||||||
| Net changes in unrealized gains and losses: | ||||||||||||
| Investment securities available for sale | 0.06 | (0.05 | ) | (0.02 | ) | |||||||
| Defined benefit plan | (0.10 | ) | (0.09 | ) | (0.09 | ) | ||||||
| Derivatives and hedging activities | (0.01 | ) | (0.02 | ) | (0.03 | ) | ||||||
| Goodwill and intangible assets, net to consolidated assets | (0.43 | ) | (0.42 | ) | (0.40 | ) | ||||||
| Tangible common equity to tangible assets | 9.28 | % | 8.80 | % | 8.41 | % | ||||||
| Tangible book value per common share (2) | $ | 14.93 | $ | 14.55 | $ | 14.07 | ||||||
______________________________________________
(1) Accumulated other comprehensive income (loss).
(2) Common equity reduced by goodwill and intangible assets, net and divided by number of shares of outstanding common stock.
| Home Federal Bank Capital Ratios: | March 31, 2016 | December 31, 2015 | June 30, 2015 | |||||
| Tier I capital (to adjusted total assets) | 10.94 | % | 10.69 | % | 10.39 | % | ||
| Tier I capital (to risk-weighted assets) | 12.72 | 12.52 | 12.16 | |||||
| Common equity tier I capital (to risk-weighted assets) | 12.72 | 12.52 | 12.16 | |||||
| Total risk-based capital (to risk-weighted assets) | 13.90 | 13.68 | 13.29 | |||||
| HF Financial Corp. Capital Ratios: | ||||||||
| Tier I capital (to adjusted total assets) | 11.37 | % | 11.05 | % | 10.73 | % | ||
| Tier I capital (to risk-weighted assets) | 13.23 | 12.95 | 12.58 | |||||
| Common equity tier I capital (to risk-weighted assets) | 10.80 | 10.54 | 10.17 | |||||
| Total risk-based capital (to risk-weighted assets) | 14.41 | 14.10 | 13.70 | |||||
| HF Financial Corp. | |||||||||||||
| Selected Consolidated Financial Condition Data | |||||||||||||
| (Dollars in Thousands) | |||||||||||||
| (Unaudited) | |||||||||||||
| Loan and Lease Portfolio Composition | |||||||||||||
| March 31, 2016 | June 30, 2015 | ||||||||||||
| Amount | Percent | Amount | Percent | ||||||||||
| Residential: | |||||||||||||
| One-to four-family | $ | 57,873 | 6.5 | % | $ | 55,572 | 6.1 | % | |||||
| Construction | 7,485 | 0.8 | 6,308 | 0.7 | |||||||||
| Commercial: | |||||||||||||
| Commercial business (1) | 65,910 | 7.4 | 78,493 | 8.6 | |||||||||
| Equipment finance leases | 88 | — | 158 | — | |||||||||
| Commercial real estate: | |||||||||||||
| Commercial real estate | 338,151 | 37.9 | 325,453 | 35.6 | |||||||||
| Multi-family real estate | 126,090 | 14.1 | 111,354 | 12.2 | |||||||||
| Construction | 49,293 | 5.5 | 48,224 | 5.3 | |||||||||
| Agricultural: | |||||||||||||
| Agricultural real estate | 81,642 | 9.2 | 96,952 | 10.6 | |||||||||
| Agricultural business | 100,855 | 11.3 | 123,988 | 13.5 | |||||||||
| Consumer: | |||||||||||||
| Consumer direct | 13,735 | 1.5 | 14,837 | 1.6 | |||||||||
| Consumer home equity | 48,871 | 5.5 | 50,377 | 5.5 | |||||||||
| Consumer overdraft & reserve | 2,234 | 0.3 | 2,703 | 0.3 | |||||||||
| Total (2) | $ | 892,227 | 100.0 | % | $ | 914,419 | 100.0 | % | |||||
_________________________________________________
(1) Includes $1,238 and $1,377 tax exempt leases at March 31, 2016 and June 30, 2015, respectively.
(2) Exclusive of undisbursed portion of loans in process and net of deferred loan fees and discounts.
| Deposit Composition | ||||||||||||||
| March 31, 2016 | June 30, 2015 | |||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||
| Noninterest-bearing checking accounts | $ | 140,007 | 15.4 | % | $ | 171,064 | 17.8 | % | ||||||
| Interest-bearing checking accounts | 229,396 | 25.2 | 185,075 | 19.2 | ||||||||||
| Money market accounts | 199,935 | 22.0 | 198,000 | 20.5 | ||||||||||
| Savings accounts | 105,097 | 11.5 | 93,053 | 9.7 | ||||||||||
| In-market certificates of deposit | 194,265 | 21.3 | 242,036 | 25.1 | ||||||||||
| Out-of-market certificates of deposit | 41,852 | 4.6 | 74,001 | 7.7 | ||||||||||
| Total deposits | $ | 910,552 | 100.0 | % | $ | 963,229 | 100.0 | % | ||||||
| HF Financial Corp. | |||||||||||||||||
| Selected Consolidated Financial Condition Data | |||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Average Balance, Interest Yields and Rates | Three Months Ended | ||||||||||||||||
| March 31, 2016 | December 31, 2015 | ||||||||||||||||
| Average Outstanding Balance | Yield/ Rate | Average Outstanding Balance | Yield/ Rate | ||||||||||||||
| Interest-earning assets: | |||||||||||||||||
| Loans and leases receivable(1)(3) | $ | 903,698 | 4.51 | % | $ | 916,495 | 4.33 | % | |||||||||
| Investment securities(2)(3) | 175,187 | 1.85 | 178,635 | 1.80 | |||||||||||||
| Total interest-earning assets | 1,078,885 | 4.08 | % | 1,095,130 | 3.92 | % | |||||||||||
| Noninterest-earning assets | 74,301 | 77,470 | |||||||||||||||
| Total assets | $ | 1,153,186 | $ | 1,172,600 | |||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||
| Deposits: | |||||||||||||||||
| Checking and money market | $ | 415,108 | 0.29 | % | $ | 395,012 | 0.26 | % | |||||||||
| Savings | 115,298 | 0.21 | 109,930 | 0.16 | |||||||||||||
| Certificates of deposit | 249,763 | 0.95 | 281,826 | 0.88 | |||||||||||||
| Total interest-bearing deposits | 780,169 | 0.49 | 786,768 | 0.47 | |||||||||||||
| FHLB advances and other borrowings | 70,406 | 0.63 | 74,214 | 0.53 | |||||||||||||
| Subordinated debentures payable to trusts | 24,661 | 4.55 | 24,658 | 4.39 | |||||||||||||
| Total interest-bearing liabilities | 875,236 | 0.61 | % | 885,640 | 0.58 | % | |||||||||||
| Noninterest-bearing deposits | 136,876 | 150,422 | |||||||||||||||
| Other liabilities | 32,125 | 28,921 | |||||||||||||||
| Total liabilities | 1,044,237 | 1,064,983 | |||||||||||||||
| Equity | 108,949 | 107,617 | |||||||||||||||
| Total liabilities and equity | $ | 1,153,186 | $ | 1,172,600 | |||||||||||||
| Net interest spread(4) | 3.47 | % | 3.34 | % | |||||||||||||
| Net interest margin(4)(5) | 3.58 | % | 3.45 | % | |||||||||||||
| Net interest margin, TE(6) | 3.64 | % | 3.51 | % | |||||||||||||
| Return on average assets(7) | 0.72 | % | 0.50 | % | |||||||||||||
| Return on average equity(8) | 7.64 | % | 5.46 | % | |||||||||||||
_____________________________________
(1) Includes loan fees and interest on accruing loans and leases past due 90 days or more.
(2) Includes federal funds sold and interest earning reserve balances at the Federal Reserve Bank.
(3) Yields do not reflect the tax-exempt nature of loans, equipment leases and municipal securities.
(4) Percentages for the three months ended March 31, 2016 and December 31, 2015 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. See the following Non-GAAP Disclosure Reconciliation of Net Interest Income (GAAP) to Net Interest Margin, TE (Non-GAAP). 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 Balance, Interest Yields and Rates | Nine Months Ended | ||||||||||||||||
| March 31, 2016 | March 31, 2015 | ||||||||||||||||
| Average Outstanding Balance | Yield/ Rate | Average Outstanding Balance | Yield/ Rate | ||||||||||||||
| Interest-earning assets: | |||||||||||||||||
| Loans and leases receivable(1)(3) | $ | 911,184 | 4.41 | % | $ | 842,062 | 4.52 | % | |||||||||
| Investment securities(2)(3) | 179,070 | 1.75 | 316,305 | 1.32 | |||||||||||||
| Total interest-earning assets | 1,090,254 | 3.97 | % | 1,158,367 | 3.64 | % | |||||||||||
| Noninterest-earning assets | 75,612 | 76,064 | |||||||||||||||
| Total assets | $ | 1,165,866 | $ | 1,234,431 | |||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||
| Deposits: | |||||||||||||||||
| Checking and money market | $ | 394,784 | 0.26 | % | $ | 395,476 | 0.24 | % | |||||||||
| Savings | 107,045 | 0.20 | 118,616 | 0.20 | |||||||||||||
| Certificates of deposit | 277,135 | 0.86 | 280,474 | 0.85 | |||||||||||||
| Total interest-bearing deposits | 778,964 | 0.46 | 794,566 | 0.45 | |||||||||||||
| FHLB advances and other borrowings | 75,542 | 0.52 | 131,175 | 1.66 | |||||||||||||
| Subordinated debentures payable to trusts | 24,658 | 4.56 | 24,837 | 4.75 | |||||||||||||
| Total interest-bearing liabilities | 879,164 | 0.58 | % | 950,578 | 0.73 | % | |||||||||||
| Noninterest-bearing deposits | 147,821 | 148,988 | |||||||||||||||
| Other liabilities | 31,340 | 32,262 | |||||||||||||||
| Total liabilities | 1,058,325 | 1,131,828 | |||||||||||||||
| Equity | 107,541 | 102,603 | |||||||||||||||
| Total liabilities and equity | $ | 1,165,866 | $ | 1,234,431 | |||||||||||||
| Net interest spread(4) | 3.39 | % | 2.91 | % | |||||||||||||
| Net interest margin(4)(5) | 3.50 | % | 3.05 | % | |||||||||||||
| Net interest margin, TE(6) | 3.56 | % | 3.11 | % | |||||||||||||
| Return on average assets(7) | 0.84 | % | 0.18 | % | |||||||||||||
| Return on average equity(8) | 9.16 | % | 2.16 | % | |||||||||||||
_____________________________________
(1) Includes loan fees and interest on accruing loans and leases past due 90 days or more.
(2) Includes federal funds sold and interest earning reserve balances at the Federal Reserve Bank.
(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, 2016 and March 31, 2015 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. See the following Non-GAAP Disclosure Reconciliation of Net Interest Income (GAAP) to Net Interest Margin, TE (Non-GAAP). 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 Loans and Leases Receivables | ||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||
| March 31, 2016 | Accruing and Nonaccruing Loans | Nonperforming Loans | ||||||||||||||||||||||||||||||
| 30 - 59 Days Past Due | 60 - 89 Days Past Due | Greater Than 89 Days | Total Past Due | Current | Recorded Investment > 90 Days and Accruing (1) | Nonaccrual Balance | Total | |||||||||||||||||||||||||
| Residential: | ||||||||||||||||||||||||||||||||
| One-to four-family | $ | — | $ | — | $ | 15 | $ | 15 | $ | 57,858 | $ | 15 | $ | 107 | $ | 122 | ||||||||||||||||
| Construction | — | — | — | — | 7,485 | — | — | — | ||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||||||
| Commercial business | — | — | 3 | 3 | 65,907 | — | 1,277 | 1,277 | ||||||||||||||||||||||||
| Equipment finance leases | — | — | — | — | 88 | — | — | — | ||||||||||||||||||||||||
| Commercial real estate: | ||||||||||||||||||||||||||||||||
| Commercial real estate | — | — | 247 | 247 | 337,904 | — | 481 | 481 | ||||||||||||||||||||||||
| Multi-family real estate | — | — | — | — | 126,090 | — | 5,207 | 5,207 | ||||||||||||||||||||||||
| Construction | — | — | — | — | 49,293 | — | — | — | ||||||||||||||||||||||||
| Agricultural: | ||||||||||||||||||||||||||||||||
| Agricultural real estate | 454 | — | — | 454 | 81,188 | — | 3,153 | 3,153 | ||||||||||||||||||||||||
| Agricultural business | 190 | 400 | 334 | 924 | 99,931 | — | 5,461 | 5,461 | ||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||||||||
| Consumer direct | 24 | — | 2 | 26 | 13,709 | — | 26 | 26 | ||||||||||||||||||||||||
| Consumer home equity | 15 | 60 | 79 | 154 | 48,717 | — | 108 | 108 | ||||||||||||||||||||||||
| Consumer OD & reserve | — | — | — | — | 2,234 | — | — | — | ||||||||||||||||||||||||
| Total | $ | 683 | $ | 460 | $ | 680 | $ | 1,823 | $ | 890,404 | $ | 15 | $ | 15,820 | $ | 15,835 | ||||||||||||||||
| December 31, 2015 | Accruing and Nonaccruing Loans | Nonperforming Loans | ||||||||||||||||||||||||||||||
| 30 - 59 Days Past Due | 60 - 89 Days Past Due | Greater Than 89 Days | Total Past Due | Current | Recorded Investment > 90 Days and Accruing (1) | Nonaccrual Balance | Total | |||||||||||||||||||||||||
| Residential: | ||||||||||||||||||||||||||||||||
| One-to four-family | $ | — | $ | — | $ | — | $ | — | $ | 59,911 | $ | — | $ | 108 | $ | 108 | ||||||||||||||||
| Construction | — | — | — | — | 7,336 | — | — | — | ||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||||||
| Commercial business | — | 476 | 3 | 479 | 69,068 | — | 1,495 | 1,495 | ||||||||||||||||||||||||
| Equipment finance leases | — | — | — | — | 101 | — | — | — | ||||||||||||||||||||||||
| Commercial real estate: | ||||||||||||||||||||||||||||||||
| Commercial real estate | — | — | 247 | 247 | 334,353 | — | 522 | 522 | ||||||||||||||||||||||||
| Multi-family real estate | — | — | — | — | 108,816 | — | — | — | ||||||||||||||||||||||||
| Construction | — | — | — | — | 71,629 | — | — | — | ||||||||||||||||||||||||
| Agricultural: | ||||||||||||||||||||||||||||||||
| Agricultural real estate | — | — | 767 | 767 | 84,684 | — | 3,900 | 3,900 | ||||||||||||||||||||||||
| Agricultural business | — | — | 772 | 772 | 99,662 | — | 4,626 | 4,626 | ||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||||||||
| Consumer direct | 37 | 40 | 156 | 233 | 14,244 | — | 30 | 30 | ||||||||||||||||||||||||
| Consumer home equity | — | — | — | — | 50,734 | — | 207 | 207 | ||||||||||||||||||||||||
| Consumer OD & reserve | 4 | — | — | 4 | 2,530 | — | — | — | ||||||||||||||||||||||||
| Total | $ | 41 | $ | 516 | $ | 1,945 | $ | 2,502 | $ | 903,068 | $ | — | $ | 10,888 | $ | 10,888 | ||||||||||||||||
____________________________________
(1) Loans accruing and delinquent greater than 90 days have government guarantees or acceptable loan-to-value ratios.
| HF Financial Corp. | |||||||||||||||||||
| Non-GAAP Disclosure Reconciliations | |||||||||||||||||||
| (Dollars in Thousands, except share data) | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Reconciliation of Net Interest Margin to Net Interest Margin-Tax Equivalent Yield | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| March 31, | December 31, | March 31, | March 31, | ||||||||||||||||
| 2016 | 2015 | 2015 | 2016 | 2015 | |||||||||||||||
| Net interest income | $ | 9,602 | $ | 9,486 | $ | 8,849 | $ | 28,695 | $ | 26,499 | |||||||||
| Taxable equivalent adjustment | 162 | 172 | 183 | 504 | 561 | ||||||||||||||
| Adjusted net interest income | 9,764 | 9,658 | 9,032 | 29,199 | 27,060 | ||||||||||||||
| Average interest-earning assets | 1,078,885 | 1,095,130 | 1,100,841 | 1,090,254 | 1,158,367 | ||||||||||||||
| Net interest margin, TE | 3.64 | % | 3.51 | % | 3.33 | % | 3.56 | % | 3.11 | % | |||||||||
Reconciliation of GAAP Earnings and Core Earnings
Although core earnings are not a measure of performance calculated in accordance with GAAP, the Company believes that its core earnings are an important indication of performance through ongoing operations. The Company believes that core earnings are useful to management and investors in evaluating its ongoing operating performance, and in comparing its performance with other companies in the banking industry. Core earnings should not be considered in isolation or as a substitute for GAAP earnings. During the periods presented, the Company calculated core earnings by adding back or subtracting, net of tax, net gain or loss on the sale of securities, charges incurred from prepayment of borrowings, gain on sale of bank branch, merger related costs, and costs incurred for branch closures.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| March 31, | December 31, | March 31, | March 31, | ||||||||||||||||
| 2016 | 2015 | 2015 | 2016 | 2015 | |||||||||||||||
| GAAP earnings before income taxes | $ | 3,072 | $ | 2,171 | $ | 842 | $ | 11,185 | $ | 1,869 | |||||||||
| Net (gain) loss on sale of securities | — | (15 | ) | 1,076 | (20 | ) | 1,117 | ||||||||||||
| Charges incurred from prepayment of borrowings (1) | — | — | — | — | 4,065 | ||||||||||||||
| Gain on sale of bank branch | — | — | — | (2,847 | ) | — | |||||||||||||
| Net (gain) on sale of property | — | — | (313 | ) | — | (249 | ) | ||||||||||||
| Merger related costs (2) | 350 | 712 | — | 1,062 | — | ||||||||||||||
| Costs incurred for branch closures (3) | — | — | 695 | — | 896 | ||||||||||||||
| Core earnings before income taxes | 3,422 | 2,868 | 2,300 | 9,380 | 7,698 | ||||||||||||||
| Provision for income tax on core earnings | 1,136 | 958 | 677 | 3,100 | 2,421 | ||||||||||||||
| Core earnings | $ | 2,286 | $ | 1,910 | $ | 1,623 | $ | 6,280 | $ | 5,277 | |||||||||
| GAAP diluted earnings per share | $ | 0.29 | $ | 0.21 | $ | 0.10 | $ | 1.05 | $ | 0.24 | |||||||||
| Net (gain) loss on sale of securities, net of tax | — | — | 0.10 | — | 0.10 | ||||||||||||||
| Charges incurred from prepayment of borrowings, net of tax | — | — | — | — | 0.36 | ||||||||||||||
| Gain on sale of bank branch, net of tax | — | — | — | (0.25 | ) | — | |||||||||||||
| Net (gain) on sale of property, net of tax | — | — | (0.03 | ) | — | (0.02 | ) | ||||||||||||
| Merger related costs, net of tax | 0.03 | 0.06 | — | 0.08 | — | ||||||||||||||
| Costs incurred for branch closures, net of tax | — | — | 0.06 | — | 0.07 | ||||||||||||||
| Core diluted earnings per share | $ | 0.32 | $ | 0.27 | $ | 0.23 | $ | 0.88 | $ | 0.75 | |||||||||
(1) Charges incurred from prepayment of borrowings is included as Other noninterest expense on the income statement.
(2) Costs incurred are included as professional fees, compensation and employee benefits and other noninterest expense on the income statement.
(3) Branch closure costs include loss on disposal of closed branch fixed assets in noninterest income and other costs
associated with the closure and are included in the respective categories within noninterest expenses.