881790--9/10/2010--HF_FINANCIAL

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{condition, economic, financial}

{stock, price, share}

{regulation, change, law}

{loss, insurance, financial}

{acquisition, growth, future}

{competitive, industry, competition}

{system, service, information}

{debt, indebtedness, cash}

{personnel, key, retain}

{provision, law, control}

{loan, real, estate}

{tax, income, asset}

{cost, regulation, environmental}

Risks Related to Our Industry and Business Difficult economic and market conditions have adversely affected our industry. The full impact of the recently enacted Dodd-Frank Act is currently unknown given that much of the details and substance of the new laws will be determined through agency rulemaking. The elimination of the OTS and transfer of the OTS's supervisory and rulemaking functions to various federal banking agencies will change the way that we are regulated. The new BCFP may reshape the consumer financial laws through rulemaking and enforcement of unfair, deceptive or abusive practices, which may directly impact the business operations of depository institutions offering consumer financial products or services including the Bank. Legislative and regulatory initiatives taken to date may not achieve their intended objectives; proposed and future initiatives may substantially increase compliance burdens and further impact our financial condition or results of operations. We recorded other-than-temporary impairment ("OTTI") charges in our trust preferred securities ("TRUPS") portfolio in the each of the last six consecutive quarters, and we could record additional losses in the future. As a result of current economic conditions, the Bank's allowance for loan losses may prove to be insufficient to absorb losses in its loan portfolios, which could adversely affect its operating results. Determination of the appropriate level of the allowance for loan losses involves a high degree of subjectivity and requires significant estimates, and actual losses may vary from current estimates. We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance. Our financial success is dependant on the prevailing economic, political and business conditions as well as the population growth in South Dakota. Our financial success is dependent on our ability to compete effectively in highly competitive markets. We are subject to extensive regulations that may limit or restrict our activities, and the cost of compliance is high. Liquidity risks could affect operations and jeopardize our financial condition. Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition. Our profitability may be affected by changes in market interest rates. A significant portion of our loan portfolio is secured by real estate; therefore, we have a high degree of risk from a downturn in our real estate markets and the local economy and face risks that are unique to holding foreclosed real estate. Our loan concentration presents a business risk if the agriculture industry suffers a downturn. The soundness of other financial institutions could adversely affect us. Negative developments in the financial industry and the credit markets may subject us to additional regulation. Future acquisitions and expansion activities may disrupt our business, dilute existing stockholders and adversely affect our operating results. Attractive acquisition opportunities may not be available to us in the future. Our ability to complete acquisitions and expansion activities, if any, may require us to raise additional capital that may not be available when it is needed or may not be available on terms acceptable to us. We are subject to security and operational risks relating to our use of technology that could damage our reputation and our business. The loss of one or more of our key personnel, or our failure to attract, assimilate and retain other highly qualified personnel in the future, could harm our business. Changes in or interpretations of accounting standards may materially impact our financial statements. The holders of our junior subordinated debentures have rights that are senior to those of our stockholders. Risks Relating to Our Common Stock The price of our common stock may fluctuate significantly, and this may make it difficult for you to resell shares of our common stock at times or at prices you find attractive. Our ability to pay dividends depends primarily on dividends from our banking subsidiary, the Bank, which is subject to regulatory limits. The trading volume in our common stock has been low, and the sale of a substantial number of shares of our common stock in the public market could depress the price of our common stock and make it difficult for you to sell your shares. We may raise additional capital, which could have a dilutive effect on the existing holders of our common stock and adversely affect the market price of our common stock. Certain provisions of our Certificate of Incorporation and Bylaws, as well as Delaware and federal law, may discourage, delay or prevent an acquisition of control of us.

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881790--9/10/2010--HF_FINANCIAL_CORP