SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- -------------
Commission File No. 0-20956
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HFB FINANCIAL CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 61-1228266
-------------------------------------------- --------------------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
1602 Cumberland Avenue, Middlesboro, Kentucky 40965
---------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (606) 248-1095
Securities registered pursuant to Section 12(b) of the Act: Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $1.00 per share)
----------------------------------------
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing 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-B 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-KSB or any amendment to
this Form 10-KSB. [ X ]
Registrant's revenues for the fiscal year ended June 30, 2000: $14,757,000
The registrant's voting stock is listed on the Nasdaq SmallCap Market. The
aggregate market value of the voting stock held by nonaffiliates of the
registrant, based on the $11.50 per share closing sales price of the
registrant's common stock as quoted on the Nasdaq SmallCap Market on September
12, 2000, was $12,204,042. For purposes of this calculation, it is assumed that
directors and officers of the registrant are affiliates. As of September 13,
2000, the registrant had 1,299,147 shares of common stock outstanding, of which
237,926 were held by affiliates.
Transitional Small Business Disclosure Format Yes [_] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Annual Report to Stockholders for the Fiscal Year
Ended June 30, 2000. (Parts I and II)
2. Portions of Proxy Statement for the 2000 Annual Meeting of
Stockholders. (Part III)
<PAGE>
PART I
Item 1. Business
General
HFB Financial Corporation (the "Company") is the sole stockholder
of, and acts as the holding company for, Home Federal Savings Bank ("Home
Federal" or the "Bank"). The Company has no significant assets other than
capital stock of the Bank and a portfolio of trading account equity securities.
The Company qualifies as a unitary savings and loan holding company and is
subject to regulation by the Office of Thrift Supervision ("OTS"). The Company's
principal business is the business of the Bank and its subsidiary. Therefore,
references to the "Company" in this Form 10-KSB are to both the Company and the
Bank. The Bank operates through three full service offices in the Southeastern
Kentucky communities of Middlesboro and Harlan and one full service office in
the East Tennessee community of New Tazewell. At June 30, 2000, the Company had
total assets of $205.2 million, deposits of $172.5 million, net loans receivable
of $131.4 million and stockholders' equity of $18.0 million.
The executive offices of the Company are located at 1602
Cumberland Avenue, Middlesboro, Kentucky 40965, and the telephone number is
(606) 248-1095.
The Company is engaged principally in the business of accepting
deposits from the general public and originating permanent loans that are
secured by one- to four-family residential properties located in its market
area. The Company also originates consumer loans and commercial real estate
loans, and maintains a substantial investment portfolio of mortgage-backed and
other investment securities.
Special Note Regarding Forward Looking Statements
Certain matters discussed in this document are "forward looking
statements," intended to qualify for the safe harbors from liability established
by the Private Securities Legislation Reform Act of 1995. These forward looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes," "anticipates,"
"expects," "estimates," or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are also forward
looking statements. Such forward looking statements are subject to certain risks
and uncertainties which are described in close proximity to such statements and
which could cause actual results to differ materially from those anticipated as
of the date of this report. Shareholders, potential investors, and other readers
are cautioned not to place undue reliance on such forward-looking statements.
The forward-looking statements included herein are only made as of the date of
this report and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
Lending Activities
General. The Company originates loans primarily through its main
office located in Middlesboro, Kentucky. The principal lending activity of the
Company is the origination of conventional mortgage loans for the purpose of
purchasing or refinancing owner-occupied, one- to four-family residential
properties in its primary market areas. Conventional mortgage loans are
primarily adjustable-rate mortgage loans with a small amount of fixed-rate
mortgage loans which are not insured or guaranteed by federal agencies. The
Company does not originate Federal Housing Administration-insured or Veterans
Administration-insured loans. The Company does originate consumer loans on a
direct basis. In addition, the Company also makes conventional mortgage loans
for the purpose of constructing one- to four-family residences and loans to
construct commercial and multi-family real estate.
The Company emphasizes the origination of adjustable-rate loans
and short-term loans in order to increase the interest rate sensitivity of its
loan portfolio. However, the Company also continues to offer long-term,
fixed-rate conventional mortgage loans (25 year terms or less), originated for
its portfolio.
2
<PAGE>
Analysis of Loan Portfolio
Set forth below is selected data relating to the composition of
the Company's loan portfolio at the dates indicated. As of June 30, 2000, the
Company had no concentrations of loans exceeding 10% of total loans other than
as disclosed below.
<TABLE>
<CAPTION>
At June 30,
--------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Amount Amount Amount Amount Amount
------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Real estate loans:
Single and multi-family mortgage loans ......... $111,157 $ 95,294 $ 94,153 $ 86,095 $ 79,022
Commercial real estate loans ................... 11,478 10,745 10,411 10,096 10,237
Real Estate construction loans ................... 6,690 12,996 8,636 5,091 3,397
-------- -------- -------- -------- --------
Total real estate loans ........................ 129,325 119,035 113,200 101,282 92,656
-------- -------- -------- -------- --------
Consumer loans:
Loans on deposits .............................. 2,012 1,795 1,995 1,964 2,001
Home improvement loans ......................... 578 828 1,176 1,306 836
Automobile loans ............................... 1,063 1,109 1,685 959 666
Other(1) ....................................... 1,633 2,180 1,617 1,493 2,130
-------- -------- -------- -------- --------
Total consumer loans ........................ 5,286 5,912 6,473 5,722 5,633
-------- -------- -------- -------- --------
Commercial loans ................................. 193 98 353 723 171
-------- -------- -------- -------- --------
Total gross loans ................................ 134,804 125,045 120,026 101,727 98,460
Less:
Undisbursed portion of mortgage loans .......... 2,529 2,931 2,757 2,019 1,797
Allowances for loan losses ..................... 645 1,212 973 710 671
Unamortized discount and deferred loan fees, net 236 160 125 14 18
-------- -------- -------- -------- --------
Total ............................................ $131,394 $120,742 $116,171 $104,984 $ 95,974
======== ======== ======== ======== ========
</TABLE>
(1) Includes home equity lines of credit.
The following table sets forth certain information as of June 30,
2000 regarding the dollar amount of principal repayments becoming due during the
periods indicated for loans. Demand loans, loans having no schedule of
repayments and no stated maturity, and overdrafts are reported as due in one
year or less. The table below does not include any estimate of prepayments which
significantly shorten the average life of all mortgage loans and may cause the
Company's actual repayment experience to differ from that shown below.
<TABLE>
<CAPTION>
Due After One Year
Due in One through Due after
Year or Less Five Years Five Years Total
------------ ------------ ----------------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Real estate mortgage loans ... $ 2,935 $ 14,444 $105,256 $122,635
Real estate construction loans 229 1,148 5,313 6,690
Consumer loans (1) ........... 2,584 2,539 163 5,286
Commercial loans ............. 140 53 -- 193
-------- -------- -------- --------
Total gross loans .......... $ 5,888 $ 18,184 $110,732 $134,804
======== ======== ======== ========
</TABLE>
(1) Includes second mortgages and home equity lines of credit.
3
<PAGE>
The following table sets forth as of June 30, 2000 the dollar
amount of all the loans due after one year ending June 30, 2000 and
distinguishes between those with predetermined (i.e., fixed) interest rates and
those with floating or adjustable interest rates.
Floating or
Predetermined Adjustable
Rate Rates Total
-------------- ----------- -----
(In thousands)
Real estate mortgage loans ... $ 18,458 $101,242 $119,700
Real estate construction loans 1,770 4,691 6,461
Consumer loans (1) ........... 2,702 -- 2,702
Commercial loans ............. 53 -- 53
-------- -------- --------
Total gross loans ......... $ 22,983 $105,933 $128,916
======== ======== ========
The primary emphasis of the Company's lending activity is the
origination of conventional loans secured by owner occupied, one-to-four family
residential properties. The Company's conventional mortgage loan originations
are generally for terms of 10 to 30 years, amortized on a monthly basis, with
principal and interest due each month. Borrowers may refinance or prepay loans
at their option without penalty. Conventional residential mortgage loans granted
by the Company customarily contain "due-on-sale" clauses which permit the
Company to accelerate the indebtedness of the loan upon transfer of ownership of
the mortgaged property.
The Company's lending policies generally limit the maximum
loan-to-value ratio on mortgage loans secured by owner-occupied properties to
81% and 95% of the lesser of the appraised value or purchase price. The maximum
loan-to-value ratio on mortgage loans secured by non-owner-occupied properties
and/or used for refinancing purposes is also 80%. The Company does originate
some 81%-95% loan-to-value ratio loans. The Company requires private mortgage
insurance on these loans and charges a higher effective interest rate on such
loans to account for the additional risk which 81%-95% loan-to-value ratio loans
carry.
The Company also originates conventional fixed-rate mortgage
loans on one-to-four family residential properties, the majority of which have a
maximum term to maturity of 15 years. The Company originates and holds its
fixed-rate mortgage loans in its portfolio as long-term investments.
In addition, the Company engages in a limited, but increasing
amount of construction lending, involving loans to qualified borrowers for
construction of one- to-four family residential properties. These properties are
primarily located in the Company's market area. All construction loans are
secured by a first lien on the property under construction.
Construction/permanent loans generally have adjustable interest rates and are
underwritten in accordance with the same terms and requirements as the Company's
permanent mortgages, except the loans generally provide for disbursement in
stages during a construction period of up to six months, during which period the
borrower is required to make monthly payments of accrued interest on the
outstanding loan balance. Interim construction loans generally have fixed
interest rates, terms of up to six months and a maximum loan-to-value ratio of
80%. Borrowers must satisfy all credit requirements which would apply to the
Company's permanent mortgage loan financing for the subject property.
The Company also originates consumer loans, primarily savings
account loans, automobile loans, home equity loans and lines of credit, second
mortgage loans and other consumer loans secured by mortgages on residences. The
Company also makes a limited amount of unsecured loans.
The Company has historically engaged in a limited amount of
commercial and multi-family real estate lending. The Company generally makes
commercial and multi-family real estate loans available on properties in its
market area, with terms of 20 years or less, loan-to-value ratios of 80% or less
and adjustable rates of interest. In addition, the Company, from time to time,
purchases whole loans or participation interests in loans on commercial and
multi-family real estate located in Kentucky and Eastern Tennessee.
Asset Classification and Allowance for Loan Losses. The Company
classifies its loan assets as a "substandard," "doubtful" or "loss," if
warranted. Assets classified as substandard or doubtful require a general
allowances for loan losses. If an asset or portion thereof is classified as
loss, specified allowances for loan losses in the amount of 100% of the portion
of the asset classified loss must be established, or else the loan must be
charged off. An asset which does not currently warrant classification but which
possesses weaknesses or deficiencies deserving close attention is required to be
designated as "special mention." Currently, general loss allowances established
4
<PAGE>
to cover possible losses related to assets classified substandard or doubtful
may be included in determining an institution's regulatory capital, while
specific valuation allowances for loan losses do not qualify as regulatory
capital. The Company has determined that at June 30, 2000 it had $1.9 million in
assets classified as substandard, $134,000 in assets classified as doubtful and
$655,000 in assets classified as loss. In addition, the Company had $106,000 in
assets designated as special mention. Depending on their future performance, it
is possible that these loans might be required to be classified in future
periods.
During the year ended June 30, 1999, Management estimated that
losses would be significant on a large commercial real estate loan the Company
had been struggling with for the past several years. The loan was secured by
property, which was single purpose thus limiting its marketability. Over fiscal
years 1998 and 1999, Management increased the provision for loan losses in
anticipation of loss on this loan. During the year ended June 30, 2000, the
borrower was able to find other financing and consequentially the Company had no
loss of principal on this loan. Due to the large amount of provision that had
been allocated to this loan, the provision for loan loss was reduced by
$494,000. The provision for loan losses was ($437,000) net of this adjustment
for the year ended June 30, 2000.
The following table sets forth an analysis of the Company's
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Year Ended June 30,
------------- ------------ --------------- --------- ----------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Amount Amount Amount Amount Amount
------ ------ ------ ------ ------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Period ........................... $ 1,212 $ 973 $ 710 $ 671 $ 633
------- ------- ------- ------- -------
Loan charge-offs:
Real Estate:
Residential .......................................... 87 -- -- -- --
Commercial ........................................... -- -- -- 99 --
Consumer ............................................... 12 16 11 3 8
Commercial ............................................. 34 -- -- -- --
------- ------- ------- ------- -------
Total charge-offs ........................................ 133 16 11 102 8
Recoveries:
Real Estate:
Residential .......................................... -- -- -- 3 11
Consumer ............................................... 3 2 -- -- --
------- ------- ------- ------- -------
Total Recoveries ......................................... 3 2 -- 3 11
Net loan recoveries (charge-offs) ........................ (130) (14) (11) (99) 3
------- ------- ------- ------- -------
Provision (Adjustment) for Loan Losses ................... (437) 253 274 138 35
------- ------- ------- ------- -------
Balance at end of period ................................. $ 645 $ 1,212 $ 973 $ 710 $ 671
======= ======= ======= ======= =======
Ratio of allowance for losses to gross loans receivable .. 0.49% 0.97% 0.81% 0.67% 0.68%
======= ======= ======= ======= =======
Ratio of net loan charge-offs to average loans outstanding
during the period ........................................ 0.10% 0.01% 0.01% 0.10% 0.00%
====== ======= ======= ======= =======
</TABLE>
5
<PAGE>
The following table sets forth the breakdown of the allowance for
loan losses by loan category at the dates indicated. Management believes that
the allowance can be allocated by category only on an approximate basis. The
allocation of the allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses in
any category.
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------------------------------------------
2000 2000 1999 1999 1998 1998
---- ---- ---- ---- ---- ----
Amount % Amount % Amount %
------ - ------ - ------ -
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential and commercial
real estate loans . $ 618 95.94% $1,210 95.19% $ 970 94.31%
Consumer loans ............ 27 3.92% 2 4.72% 3 5.39%
Commercial loans .......... -- 0.14% -- 0.09% -- 0.30%
------ ------ ------ ------ ------ ------
Total allowance for
loan losses ....... $ 645 100.00% $1,212 100.00% $ 973 100.00%
------ ------ ------ ------ ------ ------
</TABLE>
Year Ended June 30,
------------------------------------------
1997 1997 1996 1996
---- ---- ---- ----
Amount % Amount %
------ - ------ -
(In thousands)
Residential and commercial
real estate loans . $707 94.02% $669 94.11%
Consumer loans ............ 3 5.31% 2 5.72%
Commercial loans .......... -- 0.67% -- 0.17%
---- ---- ----- ------
Total allowance for
loan losses ....... $710 100.00% $671 100.00%
---- ------ ----- ------
Non-Performing Loans and Other Problem Assets. Management reviews
the credit quality of the Company's loans on a regular basis. After residential
mortgage loans become past due more than 90 days, the Company generally
establishes an allowance for uncollectible interest for the amount by which the
principal balance and uncollected interest exceeds 90% of the appraised value of
the property. Commercial and multi-family real estate loans generally are placed
on non-accrual status if the borrower is placed in bankruptcy proceedings, or
management concludes that payment in full is not likely. Consumer and commercial
loans generally are charged off, or any expected loss is reserved for, after
they become more than 90 days past due. The Company accrues interest on
delinquent loans past due more than 90 days without establishing a reserve when
management concludes such action is warranted, such as in the event the loan is
exceptionally well collateralized or the borrower establishes the temporary
nature of the delinquency. Loans are charged off when management concludes that
they are uncollectible.
Real estate acquired by the Company as a result of foreclosure is
classified as real estate owned until such time as it is sold. When such
property is acquired, it is recorded at the lower of the unpaid principal
balance or its fair market value (less estimated selling cost at the date of
foreclosure). Any required write-down of the loan to its fair market value upon
foreclosure is charged against the allowance for loan losses.
6
<PAGE>
The following table sets forth information with respect to the Company's
nonperforming assets at the dates indicated. The Company has no restructured
loans
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Amount Amount Amount Amount Amount
------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual
basis (1) ...................................... $ 1,613 $ 1,416 $ -- $ -- $ --
------- --------- -------- --------- ---------
Accruing loans which are contractually
past due 90 days or more: (1)
Real estate..................................... $ 614 $ 521 $ 677 $ 365 $ 657
Consumer........................................ 15 5 40 3 3
Commercial...................................... -- -- -- -- --
-------- ---------- --------- ---------- ----------
Total of nonaccrual and 90 days
or more past due loans................................ $ 2,242 $ 1,942 $ 717 $ 368 $ 660
-------- ---------- --------- ---------- ----------
Real Estate owned....................................... 333 -- -- 58 --
-------- ---------- --------- ---------- ----------
Total nonperforming assets........................... $ 2,575 $ 1,942 $ 717 $ 426 $ 660
======== ========== ========= ========== ==========
Nonaccrual and 90 days or more past due
loans as a percentage of total loans, net............. 1.96% 1.96% 0.62% 0.41% 0.69%
======== ========== ========= ========== ==========
Nonaccrual and 90 days or more past due
loans as a percentage of total assets, net............ 1.10% 1.02% 0.41% 0.27% 0.45%
======== ========== ========= ========== ==========
Nonperforming assets as a percentage of
total assets.......................................... 1.25% 1.02% 0.41% 0.27% 0.45%
======== ========== ========= ========== ==========
</TABLE>
(1) Interest on delinquent loans is accrued to income to the extent considered
collectible.
As of June 30, 2000, the Company had a total of $776,000 in 13
single family loans classified as "substandard." As of June 30, 2000, the
Company had $5,000 in consumer loans classified and $441,000 in two single
family residential loans classified as "special mention."
In addition, the Company had 6 real estate development loans to
one borrower totaling $1.291 million, of which $68,000 had been classified as
special mention, $1.1 million had been classified as "substandard", $33,000 had
been classified as "doubtful" and $60,000 had been classified as "loss." The
property securing these loans is a single family residential development in
Clinton Tennessee. The borrower is actively working to obtain new financing.
Management believes that these loans have been adequately classified and
reserved for, but continues to monitor them as to their collectibility and as to
any possible losses the Company could incur, or additional reserves that may
need to be established
At June 30, 2000, $202,000 would have been recognized as interest
income had these loans been in a current status. Income recognized on these
loans during the period ended June 30, 2000 was $61,000.
As of June 30, 2000, the Company had a total of $333,000 in real
estate owned.
At June 30, 2000, the Company had no other loans of a material
amount which were not classified as non-accrual, past due 90 days or more or
restructured but where known information about possible credit problems of
borrowers caused management to have serious doubts as to the ability of the
borrowers to comply with present loan repayment terms and could result in future
disclosure as non-accrual, 90 days past due or restructured.
Investment Activities
The Company is required under federal regulations to maintain a
minimum amount of liquid assets, which can be invested in specified short-term
securities, and is also permitted to make certain other investments. Liquidity
levels may be increased or decreased depending upon the yields on investment
alternatives, management's judgment as to the attractiveness of the yields then
available in relation to other opportunities, its expectations of the level of
yield that will be available in the future and its projections as to the
short-term demand for funds to be used in the Company's loan origination and
other activities.
7
<PAGE>
The general objectives of the Company's investment policy are to
(i) protect the Company's depositor resources, (ii) maintain liquidity levels to
meet the operational needs of the Company and applicable regulatory
requirements, (iii) reduce credit risk by investing in high quality, diverse
investments, (iv) serve as a hedge against significant interest rate shifts, (v)
contribute to earnings in a stable and dependable manner without compromising
the goals of liquidity and safety, and (vi) provide collateral for pledging
needs. The Company's investment activities are conducted by the Investment
Committee and supervised by the Board of Directors. An investment policy has
been adopted by the Board which provides for maintenance of the investment
portfolio for the purpose of providing earnings and ensuring a minimum liquidity
reserve. In accordance with the investment policy, management has primarily
invested in U.S. Treasury securities backed by the full faith and credit of the
United States and government agency securities, mortgage-backed securities
issued by FHLMC, FNMA, or GNMA, federal funds sold, and federally insured
interest-bearing deposits in other financial institutions. General obligation
and bank qualified bonds of municipalities within the market areas served by the
Company and which are considered to possess acceptable credit and limited
default risk are also considered for investment.
The Board of Directors of the Company has authorized the
existence of a trading account in an amount not to exceed 8% of total assets for
the purpose of taking advantage of favorable short-term market conditions. The
Company's investment policy specifies that securities traded within this account
must be U.S. Treasury or agency obligations. Securities in the trading account
are marked to market on a monthly basis. During the year ended June 30, 2000
there was no trading activity. At June 30, 2000, there were no securities held
in the Company's trading account.
The Board of Directors of the Company has authorized a trading
account of up to $1.0 million for investing in common stocks of publicly traded
thrifts which are considered to be undervalued. The Company had $759,000
invested in common stock of publicly held thrift institutions at June 30, 2000.
The Company, in accordance with generally accepted accounting
principles, reports its investment securities, available for sale, at current
market value, with unrealized gains or losses, net of tax effect, adjusted
through equity and realized gains or losses in income when securities are sold.
Investment securities, held to maturity, are reported at cost as adjusted for
unaccredited discounts and unamortized premiums.
8
<PAGE>
The following table sets forth the carrying value of the
Company's investment securities at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
---------------------------------------
2000 1999 1998
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Investment securities, available for sale:
U.S. Treasury, Federal Agency obligations and municipal obligations............... $ 23,736 $ 25,241 $ 18,238
Investment securities, held to maturity:
U.S. Treasury and Federal Agency obligations...................................... 13,201 7,731 6,497
--------- ---------- ---------
Total investment securities, available for
sale and held to maturity......................................................... $ 36,937 $ 32,972 $ 24,735
========= ========== =========
</TABLE>
The following table sets forth the distributions of maturities of
securities at amortized cost at June 30, 2000.
<TABLE>
<CAPTION>
At June 30, 2000
-----------------------------------------------------------------------------
One Year One to Five to More than Total Investment
or Less Five Years Ten Years Ten Years Portfolio
----------- ----------- ----------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Investment securities, available for sale:
U.S. Treasury, Federal Agency
Obligations and Municipal Obligations $ 2,987 $ 3,061 $12,117 $ 5,571 $23,736
Total investment
securities, available for
sale .................................. 2987 3,061 12,117 5,571 23,736
------- ------- ------- ------- -------
Investment securities, held to maturity:
U.S. Treasury and
Federal Agency
obligations ........................... 500 4,150 6,476 2,075 13,201
------- ------- ------- ------- -------
Total investment securities,
held to maturity ...................... 500 4,150 6,476 2,075 13,201
------- ------- ------- ------- -------
Total investment securities,
available for sale and held to
maturity .............................. $ 3,487 $ 7,211 $18,593 $ 7,646 $36,937
======= ======= ======= ======= =======
Weighted average yield .................. 6.29% 6.22% 6.51% 6.81% 6.50%
======= ======= ======= ======= =======
</TABLE>
9
<PAGE>
Mortgage-Backed Securities Activities
In accordance with the Company's investment policy, management
invests in mortgage-backed securities issued by Freddie Mac, Fannie Mae, and
Ginnie Mae.
The following table sets forth the composition of the Company's
mortgage-backed securities portfolio at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------------------------
2000 1999 1998
---------------------- -------------------- -------------------
Amount % Amount % Amount %
------ --- ------ --- ------ ---
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities, available for sale:
Freddie Mac ...................................... $ 3,311 13.55% $ 744 2.82% $ 1,375 6.05%
Fannie Mae ....................................... 3,678 15.05 4,786 18.18 3,912 17.22
Ginnie Mae ....................................... 5,947 24.34 6,528 24.80 3,380 14.88
------- ------ ------- ------ ------- ------
Total mortgage-backed securities available for sale 12,936 52.94 12,058 45.80 8,667 38.15
------- ------ ------- ------ ------- ------
Mortgage-backed securities, held to maturity:
Freddie Mac ...................................... 1,658 6.79 1,074 4.08 581 2.56
Fannie Mae ....................................... 6,727 27.54 9,921 37.69 9,957 43.83
Ginnie Mae ....................................... 3,111 12.73 3,272 12.43 3,512 15.46
------- ------ ------- ------ ------- ------
Total mortgage-backed securities, held to maturity . 11,496 47.06 14,267 54.20 14,050 61.85
------- ------ ------- ------ ------- ------
Total mortgage-backed securities, available
for sale and held to maturity ...................... $24,432 100.00% $26,325 100.00% $22,717 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
10
<PAGE>
Deposit Activity and Other Sources of Funds
General. Deposits are a significant source of the Company's funds for
lending and other investment purposes. In addition to deposits, the Company
derives funds from loan principal repayments and interest payments and maturing
investment securities. Loan repayments and interest payments are a relatively
stable source of funds, while deposit inflows and outflows are significantly
influenced by general interest rates and money market conditions. Borrowings may
be used on a short-term basis to compensate for reductions in the availability
of funds from other sources, or on a longer term basis for general business
purposes.
Deposits. Deposits are attracted principally from within the Company's
primary market area through the offering of a variety of deposit instruments,
including passbook and statement accounts and certificates of deposit. Deposit
account terms vary, principally on the basis of the minimum balance required,
the time periods the funds must remain on deposit and the interest rate. The
Company also offers individual retirement accounts ("IRAs") and Keogh Plans.
The Company's policies are designed primarily to attract deposits from
local residents through its branch network rather than to solicit deposits from
areas outside its primary market. The Company does not accept deposits from
brokers due to the volatility and rate sensitivity of such deposits. Interest
rates paid, maturity terms, service fees and withdrawal penalties are
established by the Company on a periodic basis. Determination of rates and terms
are predicated upon funds acquisition and liquidity requirements, rates paid by
competitors, growth goals and federal regulations.
The following table sets forth the average balances and interest
rates for the Company's deposit accounts by type of deposit for the periods
indicated.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
June 30,
------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
--------------------------- ------------------- ---------------------
Average Average Average Average Average Average
Amount Rate Amount Rate Amount Rate
------- ------- ------- ------- ------- -------
(Dollars in thousands)
NOW and money market
<S> <C> <C> <C> <C> <C> <C>
deposit accounts............................... $ 15,702 1.69% $ 13,423 1.95% $ 11,823 2.18%
Passbook accounts................................ 7,604 2.22 8,008 2.48 9,140 2.72
Certificates..................................... 140,019 5.08 127,857 5.29 116,570 5.32
------- ------ ------- ------ ------- --------
Total.......................................... $ 163,325 4.62% $ 149,288 4.83% $ 137,533 4.88%
========== ======= =========== ====== ========== ========
</TABLE>
The following table indicates the amount of the Company's
certificates of deposit of $100,000 or more by time remaining until maturity as
of June 30, 2000. Most of the Company's deposits of over $100,000 come from
individual depositors in the Company's market area.
Certificates
Maturity Period of Deposit
--------------- --------------
(In thousands)
Three months or less....................... $ 9,116
Over three through six months.............. 7,314
Over six through twelve months............. 13,906
Over twelve months 14,041
---------
Total............................. $ 44,377
=========
Management attributes the net increase in deposits for the year
ended June 30, 2000 to general economic conditions and competition in the local
market. The Company does not offer premiums for deposits, and in the past has
not offered interest rates on deposits which exceed the average rates paid by
other financial institutions in its market area. Due to aggressive competition,
the Company has recently instituted promotions offering higher rates on deposits
to maintain its market share. Management anticipates that this trend will
continue over the next twelve months.
11
<PAGE>
Borrowings. Savings deposits historically have been the primary
source of funds for the Company's lending and investment activities and for its
general business activities. The Company is authorized, however, to use advances
from the FHLB of Cincinnati to supplement its supply of lendable funds and to
meet deposit withdrawal requirements. All of the advances are collateralized by
FHLB stock and single family first mortgage loans with aggregate principal
balances totaling 150% of the outstanding amount of advances. The FHLB of
Cincinnati functions as a central reserve bank providing credit for savings
institutions and certain other member financial institutions. As a member, the
Company is required to own capital stock in the FHLB and is authorized to apply
for advances on the security of such stock and certain of its home mortgages and
other assets (principally, securities which are obligations of, or guaranteed
by, the United States) provided certain standards related to creditworthiness
have been met. The average balance of short term borrowings during the 12 months
ended June 30, 2000 was $2.0 million with a weighted average rate of 5.52%. The
maximum balance of short term borrowings during the 12 months ended June 30,
2000 was $9.0 million.
Subsidiary Activities
The Company's only subsidiary is Home Service Corporation in
which its investment was $2.7 million at June 30, 2000. Home Service
Corporation's principal activity is that of ownership and rental of the
Company's main office building and operations center in Middlesboro, Kentucky
and a branch office in New Tazewell, Tennessee. Home Service Corporation also
owns and rents other properties to unrelated parties. These properties are
contiguous to the Company's main office and being held for future expansion.
Competition
The Company experiences substantial competition both in
attracting and retaining savings deposits and in the making of mortgage and
other loans.
Direct competition for savings deposits comes from other savings
institutions, credit unions, regional bank holding companies and commercial
banks located in its primary market area. Significant competition for the
Company's other deposit products and services comes from money market mutual
funds, brokerage firms, insurance companies and retail stores. The primary
factors in competing for loans are interest rates and loan origination fees and
the range of services offered by various financial institutions. Competition for
origination of real estate loans normally comes from other savings institutions,
commercial banks, mortgage bankers, mortgage brokers and insurance companies.
The Company's primary competition comprises the commercial banks
near each of the Company's branch offices. In Middlesboro, where the Company's
main office is located, primary competition consists of three banks and one
savings bank. In Harlan, Kentucky where a branch office is located, the
Company's primary competition is two banks. In New Tazewell, Tennessee, where a
branch office is located, the Bank's primary competition is three banks.
The Company is able to compete effectively in its primary market
area by offering competitive interest rates and loan fees, and a wide variety of
deposit products, and by emphasizing personal customer service. Management
believes that, as a result of the Company's commitment to competitive pricing,
varied products and personal service, the Company has developed a solid base of
core deposits and the loan origination quality and volume are among the leaders
in the Company's market area.
Employees
As of June 30, 2000, the Company and its subsidiary had 59
full-time employees, none of whom was represented by a collective bargaining
agreement. The Company believes that it enjoys excellent relations with its
personnel.
12
<PAGE>
REGULATION
General
As a federal savings bank, Home Federal is subject to regulation,
supervision and regular examination by the OTS. Federal banking laws and
regulations control, among other things, the Bank's required reserves,
investments, loans, mergers and consolidations, payment of dividends and other
aspects of Home Federal's operations. The deposits of the Bank are insured by
the Savings Association Insurance Fund ("SAIF") administered by the FDIC to the
maximum extent provided by law ($100,000 for each depositor). In addition, the
FDIC has certain regulatory and examination authority over OTS-regulated savings
institutions and may recommend enforcement actions against savings institutions
to the OTS. The supervision and regulation of the Bank is intended primarily for
the protection of the deposit insurance fund and depositors.
As a savings institution holding company, the Company is subject
to OTS regulation, examination, supervision and reporting requirements. The
Company also is required to file certain reports with, and otherwise comply with
the rules and regulations of, the SEC under the federal securities laws.
The following discussion summarizes certain of the statutes,
rules and regulations affecting Home Federal and the Company. A number of other
statutes and regulations have an impact on their operations. The following
summary of applicable statutes and regulations does not purport to be complete
and is qualified in its entirety by reference to such statutes and regulations.
Regulation of Home Federal
Regulatory Capital. The OTS's capital adequacy regulations
require savings institutions such as the Bank to meet three minimum capital
standards: a "core" capital requirement of between 3% and 5% of adjusted total
assets, a "tangible" capital requirement of 1.5% of adjusted total assets, and a
"risk-based" capital requirement of 8% of total risk-based capital to total
risk-weighted assets. In addition, the OTS has adopted regulations imposing
certain restrictions on savings institutions that have a total risk-based
capital ratio of less than 8%, a ratio of Tier 1 capital to risk-weighted assets
of less than 4% or a ratio of Tier 1 capital to total assets of less than 4% (or
3% if the institution is rated composite 1 under the CAMELS examination rating
system). See "--Prompt Corrective Regulatory Action."
At June 30, 2000, Home Federal exceeded its tangible, core and
risk-based regulatory capital requirements. For more information, see "Selected
Consolidated Financial and Other Data - Regulatory Capital Ratios" in the Annual
Report filed as Exhibit 13 to this report.
Prompt Corrective Regulatory Action. The Federal Deposit
Insurance Act ("FDI Act") requires the federal banking regulators to take prompt
corrective action in respect of depository institutions that do not meet certain
minimum capital requirements, including a leverage limit and a risk-based
capital requirement. The joint regulations of the federal banking agencies,
including the OTS, classify insured depository institutions by capital levels
and provide that the applicable agency will take various prompt corrective
actions to resolve the problems of any institution that fails to satisfy the
capital standards. Under the joint prompt corrective action regulations, a
"well-capitalized" institution is one that is not subject to any regulatory
order or directive to meet any specific capital level and that has or exceeds
the following capital levels: a total risk-based capital ratio of 10%, a Tier 1
risk-based capital ratio of 6%, and a ratio of Tier 1 capital to total assets
("leverage ratio") of 5%. An "adequately capitalized" institution is one that
does not qualify as "well capitalized" but meets or exceeds the following
capital requirements: a total risk-based capital of 8%, a Tier 1 risk-based
capital ratio of 4%, and a leverage ratio of either (i) 4% or (ii) 3% if the
institution has the highest composite examination rating. An institution not
meeting these criteria is treated as "undercapitalized," "significantly
undercapitalized," or "critically undercapitalized" depending on the extent to
which its capital levels are below these standards. An institution that falls
within any of the three "undercapitalized" categories will be subject to certain
severe regulatory sanctions required by the FDI Act and the implementing
regulations. As of June 30, 2000, Home Federal was "well-capitalized" as defined
by the regulations.
Qualified Thrift Lender Test. The Home Owners' Loan Act ("HOLA")
and OTS regulations require all savings institutions to satisfy one of two
Qualified Thrift Lender ("QTL") tests or to suffer a number of sanctions,
including restrictions on activities. A savings institution must maintain its
status as a QTL on a monthly basis in at least nine out of every 12 months. An
initial failure to qualify as a QTL results in a number of sanctions, including
13
<PAGE>
the imposition of certain operating restrictions and a restriction on obtaining
additional advances from its Federal Home Loan Bank. If a savings institution
does not requalify under the QTL test within the three-year period after it
fails the QTL test, it would be required to terminate any activity not
permissible for a national bank and repay as promptly as possible any
outstanding advances from its Federal Home Loan Bank. In addition, the holding
company of such an institution would similarly be required to register as a bank
holding company with the Federal Reserve Board. At June 30, 2000, Home Federal
qualified as a QTL.
Limitations on Capital Distributions. OTS regulations impose
limitations upon capital distributions by savings institutions, such as cash
dividends, payments to repurchase or otherwise acquire its shares, payments to
stockholders of another institution in a cash-out merger and other distributions
charged against capital. Under the OTS capital distribution regulations, a
savings institution that qualifies for expedited treatment of applications by
maintaining specified supervisory examination ratings and that is not otherwise
restricted in making capital distributions may, without prior approval by the
OTS, make capital distributions during a calendar year equal to its net income
for such year plus its retained net income for the preceding two years. Capital
distributions in excess of such amount are subject to prior OTS approval. In
addition, even if a proposed capital distribution is less than the above limit,
a savings institution must give notice to the OTS at least 30 days before
declaration of a capital distribution to its holding company.
Under the OTS's prompt corrective action regulations, Home
Federal would be prohibited from paying dividends if Home Federal were
classified as "undercapitalized" under such rules. See "--Prompt Corrective
Regulatory Action." Further, earnings of Home Federal appropriated to bad debt
reserves and deducted for federal income tax purposes are not available for
payment of dividends or other distributions to Home Federal without payment of
taxes at the then current tax rate by Home Federal on the amount of earnings
removed from the reserves for such distributions.
Transactions with Affiliates and Insiders. Generally,
transactions between a savings association or its subsidiaries and its
affiliates are required to be on terms as favorable to the association as
transactions with non-affiliates. In addition, certain of these transactions,
such as loans to an affiliate, are restricted to a percentage of the
association's capital. Affiliates of Home Federal include the Company and any
company that is under common control with the Bank. In addition, a savings
association may not lend to any affiliate engaged in activities not permissible
for a bank holding company or acquire the securities of most affiliates. The OTS
has the discretion to treat subsidiaries of savings associations as affiliates
on a case by case basis.
Certain transactions with directors, officers or controlling
persons are also subject to conflict of interest regulations enforced by the
OTS. These conflict of interest regulations and other statutes also impose
restrictions on loans to such persons and their related interests. Among other
things, such loans must generally be made on terms that are substantially the
same as for loans to unaffiliated individuals.
Reserve Requirements. The Federal Reserve Board requires all
depository institutions to maintain noninterest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts). At June 30, 2000, Home Federal was in compliance with these
reserve requirements. The balances maintained to meet the reserve requirements
imposed by the Federal Reserve Board may be used to satisfy liquidity
requirements that may be imposed by the OTS.
Liquidity Requirements. Home Federal is required by OTS
regulations to maintain an average daily balance of liquid assets (cash, certain
time deposits, bankers' acceptances, highly rated corporate debt and commercial
paper, qualifying mortgage-related securities and mortgage loans, securities of
certain mutual funds, and specified United States government, state or federal
agency obligations) equal to the monthly average of not less than a specified
percentage of its net withdrawable short-term savings deposits plus short-term
borrowings. The current minimum liquid asset ratio required by the OTS is 4%.
For the month ended June 30, 2000, Home Federal was in compliance with the
requirement, with an average daily liquidity ratio of 40.12%.
Federal Home Loan Bank System. The Federal Home Loan Bank System
consists of 12 district Federal Home Loan Banks subject to supervision and
regulation by the Federal Housing Finance Board ("FHFB"). The Federal Home Loan
Banks provide a central credit facility primarily for member institutions. As a
member of the FHLB of Cincinnati, Home Federal is required to acquire and hold
shares of capital stock in the FHLB in an amount at least equal to 1% of the
aggregate unpaid principal of its home mortgage loans, home purchase contracts,
and similar obligations at the beginning of each year, or 1/20 of its advances
14
<PAGE>
(borrowings) from the FHLB, whichever is greater. Home Federal was in compliance
with this requirement, with an investment in FHLB stock at June 30, 2000 of $1.4
million. Long-term FHLB advances may only be made for the purpose of providing
funds for residential housing finance.
Regulation of the Company
The Company is a unitary savings and loan holding company subject
to regulatory oversight by the OTS. As such, the Company is required to register
and file reports with the OTS and is subject to regulation and examination by
the OTS. In addition, the OTS has enforcement authority over the Company and its
non-savings association subsidiaries, which permits the OTS to restrict or
prohibit activities that are determined to be a serious risk to the subsidiary
savings association.
As a unitary savings and loan holding company, the Company
generally is not subject to activity restrictions. If the Company were to
acquire control of another savings association as a separate subsidiary, it
would become a multiple savings and loan holding company, and the activities of
the Company and any of its subsidiaries (other than Home Federal or any other
SAIF-insured savings association) would become subject to restrictions on its
activities under the HOLA unless such other association qualifies as a QTL and
is acquired in a supervisory acquisition.
If Home Federal fails the QTL test, the Company must obtain the
approval of the OTS prior to continuing after such failure, directly or through
its other subsidiaries, any business activity other than those approved for
multiple savings and loan holding companies or their subsidiaries. In addition,
within one year of such failure the Company would be required to register as,
and would become subject to, the restrictions applicable to bank holding
companies. The activities authorized for a bank holding company are more limited
than are the activities authorized for a unitary or multiple savings and loan
holding company. See "--Qualified Thrift Lender Test."
The Company must obtain approval from the OTS before acquiring
control of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan holding company
controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in a supervisory acquisition of a failing savings institution.
15
<PAGE>
Item 2. Properties
The following table sets forth the location and certain
additional information regarding the Company's offices at June 30, 2000. The
Company owns its main office and New Tazewell Branch, and leases its Harlan
Branch.
Year Square
Opened Footage Net Book Value
------ ------- --------------
Main Office:
1602 Cumberland Avenue (1)
Middlesboro, Kentucky 1980 9,500 $ 631,070
Operations building
1608 Cumberland Avenue (1)
Middlesboro, Kentucky 2000 8,500 992,097
Branch Offices:
Village Center (2) 1975 3,300 143,071
Harlan, Kentucky
102 Cumberland Avenue 2000 3,300
Harlan, Kentucky
600 Fifth Avenue (1)
New Tazewell, Tennessee 1995 5,000 556,888
Total $ 2,323,126
===========
(1) Owned by Home Service Corporation, the Company's wholly-owned subsidiary,
and leased to the Company.
(2) In November 1990, the lease on this property was renegotiated for a
seven-year term with three five-year options. The annual rent is $49,752.
The Company is liable to reimburse the lessor for its proportionate share
of any increase in real estate taxes and insurance paid by lessor. The
rent expense for years 2000 and 1999 was $49,752 and $48,964,
respectively.
(3) At June 30, 2000, the Bank was renting this office from an unaffiliated
party on a month-to-month basis for $3,600 per month. Home Service
Corporation, the Company's wholly-owned subsidiary, purchased this office
on September 13, 2000 for $437,000.
DHI Computing, Inc. Provo, Utah, performs data processing and
record keeping for the Company. The Company's fixtures and equipment include a
network of teller terminals, several computers, Frame Relay communications
equipment, ATMs and a check processing machine.
At June 30, 2000, the net book value of the Company's premises,
furniture, fixtures, equipment and land for future development was $3.9 million.
It is management's opinion that all of the Company's properties are adequately
covered by insurance. See "Premises and Equipment" included in the Notes to
Consolidated Financial Statements in the Annual Report.
Item 3. Legal Proceedings.
From time to time, the Company is a party to various routine
legal proceedings incident to its business, including loan foreclosure actions.
There are currently no material legal proceedings to which the Company, the
Company or its subsidiary is a party or to which any of their property is
subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during
the fourth quarter of the fiscal year ended June 30, 2000.
16
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The information contained under the section captioned "Market
Information" in the Company's Annual Report to Stockholders for the Fiscal Year
Ended June 30, 2000 (the "Annual Report") is incorporated herein by reference.
For information regarding restrictions on the payment of dividends see Item 1.
"Business -- Regulation -- Regulation of Home Federal - Limitations on Capital
Distributions."
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.
Item 7. Financial Statements
The Consolidated Financial Statements and Related Notes contained
in the Annual Report are incorporated herein by reference.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
For information regarding delinquent filers and the disclosure
required pursuant to Item 405 of Regulation S-KSB, reference is made to the
section captioned "Section 16(a) Beneficial Ownership Reporting Compliance" in
the Proxy Statement which information is incorporated herein by reference.
Item 10. Executive Compensation
The information contained under the section captioned "Proposal I
-- Election of Directors -- Executive Compensation" in the Proxy Statement is
incorporated herein by reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) and (b) The information required by this item is incorporated herein
by reference to the sections captioned "Proposal I - Election
of Directors" and "Voting Securities and Principal Holders
Thereof" of the Proxy Statement.
(c) Management knows of no arrangements, including any pledge by any
person of securities of the Company, the operation of which may
at a subsequent date result in a change in control of the
registrant.
Item 12. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by
reference to the section captioned "Proposal I -- Election of Directors" of the
Proxy Statement.
17
<PAGE>
Item 13. Exhibits, Lists and Reports on Form 8-K.
(a) List of Documents Filed as Part of this Report
The following exhibits are either attached to or
incorporated by reference in this Annual Report on Form 10-KSB.
Description
3.1 Articles of Incorporation of HFB Financial Corporation *
3.2 Bylaws of HFB Financial Corporation *
4 Common Stock Certificate of HFB Financial Corporation *
10.1 HFB Financial Corporation Stock Option Plan *
10.2 Home Federal Bank, Federal Savings Bank Management *
Recognition Plan
10.3 Home Federal Bank, Federal Savings Bank Supplemental *
Executive Retirement Plan
10.4 Employment Agreement between the Bank and David B. Cook
10.5 Employment Agreement between the Bank and Stanley Alexander, Jr.
10.6 Employment Agreement between the Bank and Kenneth Jones.
10.7 2000 Long-Term Incentive Compensation Plan
13 Portions of the Annual Report to Stockholders for the Fiscal
Year Ended June 30, 2000
21 Subsidiaries of the Registrant
27 Financial Data Schedule
------------
* Incorporated by reference to the Corporation's Registration Statement
on Form S-1 (33-52308) filed with the Securities and Exchange
Commission on September 23, 1992.
(b) Reports on Form 8-K.
None.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
HFB FINANCIAL CORPORATION
September 21, 2000 By: /s/ David B. Cook
--------------------
David B. Cook
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
/s/ David B. Cook September 21, 2000
-------------------
David B. Cook
President and Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ Stanley Alexander, Jr. September 21, 2000
----------------------------
Stanley Alexander, Jr.
Chief Financial Officer
(Principal Financial and Accounting Officer)
s/ Kenneth Jones. September 21, 2000
-------------------
Kenneth Jones
Chief Operating Officer
/s/ E. W. Nagle September 21, 2000
----------------
E. W. Nagle
Director
/s/ Frank W. Lee September 21, 2000
-----------------
Frank W. Lee
Secretary-Treasurer and Director
/s/ Frances Coffey Rasnic September 21, 2000
--------------------------
Frances Coffey Rasnic
Director
/s/ Charles Harris September 21, 2000
-------------------
Charles Harris
Director
/s/ Earl Burchfield September 21, 2000
--------------------
Earl Burchfield
Director
/s/ Robert V. Costanzo September 21, 2000
-----------------------
Robert V. Costanzo
Director
19
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation of HFB Financial Corporation *
3.2 Bylaws of HFB Financial *
4 Common Stock Certificate of HFB Financial Corporation *
10.1 HFB Financial Corporation Stock Option Plan *
10.2 Home Federal Bank, Federal Savings Bank Management
Recognition Plan *
10.3 Home Federal Bank, Federal Savings Bank Supplemental
Executive Retirement Plan *
10.4 Employment Agreement between the Bank and David B. Cook
10.5 Employment Agreement between the Bank and Stanley
Alexander, Jr.
10.6 Employment Agreement between the Bank and Kenneth V. Jones
10.7 2000 Long-Term Incentive Compensation Plan
13 Portions of the Annual Report to Stockholders for the Fiscal
Year Ended June 30, 2000
21 Subsidiaries of the Registrant
27 Financial Data Schedule
* Incorporated by reference to the Corporation's Registration
Statement on Form S-1 (33-52308) filed with the Securities and
Exchange Commission on September 23, 1992.
