Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

For the fiscal year ended June 30, 2000

OR

For the transition period from                to                

Commission file number 0-19972

HF FINANCIAL CORP.
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (605) 333-7556

Securities Registered Pursuant to Section 12(b) of the Act:
None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, par value $.01 per share

(Title of class)

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days. YES /x/  NO / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /

    As of September 22, 2000 there were 3,677,606 issued and outstanding shares of the Registrant's Common Stock.

    The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the average of the bid and asked price of such stock as of September 22, 2000 was $36.7 million (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the Registrant.)

DOCUMENTS INCORPORATED BY REFERENCE

    Part III of Form 10-K—Portions of the Proxy Statement for 2000 Annual Meeting of Stockholders.

PART I

Item 1. Business

The Company

    HF Financial Corp. (the "Company") was formed in November 1991, for the purpose of owning all of the outstanding stock of Home Federal Savings Bank ("Home Federal" or the "Bank") issued in the mutual to stock conversion of Home Federal (the "Conversion"). The Company acquired all of the outstanding stock of the Bank on April 8, 1992. In October 1994, the Company acquired and began operating a mortgage subsidiary as HomeFirst Mortgage Corp. ("Mortgage Corp."). This subsidiary ceased operations in fiscal year 1998. In May, 1996, the Company formed a Limited Liability Company named HF Card Services L.L.C. ("HF Card Services") and became the owner of 51% of this entity. The Company became the owner of 100% of HF Card Services effective as of July 1998. At June 30, 2000, the Company had total assets of $725.0 million and consolidated stockholders' equity of $46.9 million (or 6.47% of assets).

    The Company is incorporated under the laws of the State of Delaware and generally is authorized to engage in any activity that is permitted by the Delaware General Corporation Law. The activities of the Company itself have no significant impact on the results of operations on a consolidated basis. Unless otherwise indicated, all matters discussed herein relate to the Company, and its direct and indirect subsidiaries, including without limitation, the Bank, Mortgage Corp. and HF Card Services.

    The executive offices of the Company, the Bank, the Mortgage Corp. and HF Card Services are located at 225 South Main Avenue, Sioux Falls, South Dakota 57104. The Company's telephone number at that address is (605) 333-7556.

The Bank

    Home Federal is a federally chartered stock savings bank headquartered in Sioux Falls, South Dakota. Its deposits are insured up to applicable limits by the Savings Association Insurance Fund ("SAIF"), administered by the Federal Deposit Insurance Corporation ("FDIC"). Originally chartered in 1929, Home Federal serves 20 cities in eastern South Dakota through its network of 27 retail banking offices located throughout eastern South Dakota and one internet branch which is located at www.homefederal.com. In August 2000, the Bank opened an additional branch in Marshall, Minnesota.

    The Bank attracts deposits from the general public and uses such deposits, together with borrowings and other funds, to originate one- to four-family residential, consumer, multi-family, commercial real estate, construction, agricultural and commercial business loans. The Bank's consumer loan portfolio includes, among other things, mobile home loans, automobile loans, home equity loans, credit card loans, loans secured by deposit accounts and student loans.

    The Bank also purchases mortgage-backed securities and invests in U.S. Government and agency obligations and other permissible investments. Home Federal does not rely on any brokered deposits and does not hold any non-investment grade bonds (i.e., "junk bonds"). The Bank also receives loan servicing income on loans serviced for others and commission income from credit-life. The Bank, through its wholly-owned subsidiaries, offers annuities, health, life, hazard and other insurance products and appraisal services.

    At June 30, 2000, the Bank's loan portfolio totalled $577.0 million, which consisted of $134.0 million of one- to four-family residential mortgage loans, $44.8 million of multi-family real estate loans, $68.6 million of commercial real estate loans, $35.5 million of construction and development loans, $173.7 million of consumer loans, $33.3 million of agricultural loans and $87.1 million of commercial business loans. On such date, the Bank had $53.0 million of mortgage-backed securities and $60.1 million of investment securities.

Mortgage Corp.

    HomeFirst Mortgage Corp. was a mortgage banking operation that originated one- to four-family residential loans which were sold into the secondary market and to the Bank. The Mortgage Corp. had no activity during fiscal year 2000.

    The Mortgage Corp. resumed activity in August 2000 through the acquisition of Mid America Capital Services, Inc., a company specializing in equipment leasing. This acquisition expands the Company's servicing options for commercial and municipal customers.

HF Card Services

    HF Card Services was established to provide secured, partially-secured and unsecured credit cards nationwide to sub-prime credit customers who have either an insufficient credit history or a negative credit history and are unable to obtain a credit card from more traditional credit card issuers. The Company ceased processing subprime credit card applications in March 1999.

Other Subsidiaries

    Home Federal, through its wholly-owned subsidiaries, Hometown Insurors, Inc. and Mid-America Service Corporation, offers mortgage life, hazard and other insurance products and appraisal services. See "Subsidiary Activities." In addition, Home Federal's subsidiary, PMD, Inc., engages in the business of buying, selling and managing repossessed real estate properties of Home Federal. PMD, Inc. had no activity during fiscal year 2000.

Segments

    The Company's reportable segments are banking, credit card and other. The "banking" segment is conducted through the Bank and the "credit card" segment is conducted through HF Card Services. The "other" segment is composed of smaller nonreportable segments, the Company and inter-segment eliminations. See Note 15 of the "Notes to Consolidated Financial Statements".

Market Area

    Based on total assets at June 30, 2000, Home Federal is the largest thrift institution headquartered in South Dakota. During its 71-year existence, among its other lending activities, Home Federal served its customers located in eastern and central South Dakota, including the cities of Sioux Falls, Brandon, Pierre, Winner, Freeman, Dell Rapids, Hartford, Canton, Parker, Lennox, Aberdeen, Mobridge, Brookings, Redfield, Dakota Dunes, Colman, Crooks, Chester, Wentworth and Watertown, and the communities surrounding such communities through its network of 27 full service offices and one internet branch. During August 2000, the Bank expanded its market area to include a branch in Marshall, Minnesota. The Bank's immediate market area features a variety of agri-business, banking, financial services, health care and light manufacturing firms.

    HF Card Services provides services to customers nationwide.

Lending Activities

    General.  Historically, the Bank has originated fixed-rate one- to four-family mortgage loans. Since 1984, however, the Bank has emphasized the origination of adjustable-rate mortgage ("ARM") loans and short-term loans for retention in its portfolio in order to increase the percentage of loans in its portfolio with more frequent repricing or shorter maturities, and in some cases higher yields, than fixed-rate mortgage loans. The Bank has continued to originate fixed-rate mortgage loans in response to customer demand. While the Bank sold fixed-rate loans with maturities of 15 years or greater and

conventional ARM loans into the secondary market, during fiscal 2000 the Bank sold the majority of the loans with servicing released.

    While the Bank primarily focuses its lending activities on the origination of loans secured by first mortgages on owner-occupied one- to four-family residences as well as consumer loans, the Bank also originates multi-family residential and commercial real estate, construction, agricultural and commercial business loans in its primary market area. The Bank originates residential and non-owner occupied construction loans that are presold to borrowers or held for sale by local builders and, on few occasions, makes land acquisition and development loans. The Bank's one- to four-family loans are primarily secured by homes located in its market area in South Dakota. At June 30, 2000, the Bank's net loan portfolio totalled $550.8 million.

    Loan Portfolio Composition.  The following table sets forth information concerning the composition of the Bank's loan portfolio in dollar amounts and in percentages (before deductions for loans in process, deferred fees and discounts and allowance for losses) as of the dates indicated.

(1)

Includes primarily second mortgage loans.

    The following table shows the composition of the Bank's loan portfolio by fixed- and adjustable-rate loans at the dates indicated.

    The following schedule illustrates the scheduled principal contractual repayments of the Bank's loan portfolio at June 30, 2000. Mortgages which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due. The schedule does not reflect the effects of possible prepayments or enforcement of due-on-sale clauses.