PROSPECTUS
116,800 Shares
FSF Financial Corp.
201 Main Street South
Hutchinson, Minnesota 55350-2573
Telephone: 320-234-4500
---------------------
Common Stock
---------------------
This prospectus relates to the offer and sale of up to 116,800 shares
of our common stock by selling shareholders listed under the caption "Selling
Shareholders" on page 5. We will not receive any proceeds from sales by the
selling shareholders. Our agreement with the selling shareholders is described
in more detail on page 5.
---------------------
Our common stock is quoted on the Nasdaq National Market under the
symbol "FFHH." On July 19, 1999, the last reported sale price of the common
stock on the Nasdaq National Market was $13.8125 per share. Our shares of common
stock will be offered as discussed under the caption "Plan of Distribution" on
page 6.
---------------------
You should carefully read the factors set forth in "Risk Factors" beginning on
page 3.
---------------------
The Securities offered hereby are not deposits or other obligations of a bank
and are not insured by the Federal Deposit Insurance Corporation or any other
insurer or governmental agency.
---------------------
The Securities and Exchange Commission and state regulators have not approved or
disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
---------------------
The date of this Prospectus is July 29, 1999.
<PAGE>
SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus (including information included or incorporated by
reference into this prospectus) contains forward-looking statements with respect
to our financial condition, results of operations, plans, objectives, future
performance and business. The words "believes," "expects," "anticipates" or
similar words are intended to identify forward-looking statements. The
forward-looking statements are based on our management's beliefs, assumptions
and expectations of our future economic performance, taking into account the
information currently available to them. Forward-looking statements involve
risks and uncertainties that may cause our actual results, performance or
financial condition to be materially different from the expectations of future
results, performance or financial condition we express or imply in any
forward-looking statements.
Factors that may cause our actual results to differ materially from our
expectations include the following possibilities in addition to those described
in "Risk Factors":
o a significant increase in competitive pressures among depository and other
financial institutions;
o changes in the interest rate environment resulting in reduced margins;
o general economic or business conditions, either nationally or in Minnesota,
being less favorable than expected, which would result in, among other
things, a deterioration in credit quality or a reduced demand for credit;
o legislative or regulatory changes adversely affecting the businesses in
which we and our subsidiaries engage;
o changes in the securities markets; and
o changes in the banking industry including the effects of consolidation
resulting from possible mergers of financial institutions.
2
<PAGE>
RISK FACTORS
In addition to the other information in this prospectus, you should
carefully consider the following risk factors in deciding whether to invest in
the common stock.
Future changes in interest rates may reduce our profits.
Our ability to make a profit largely depends on our net interest
income, which could be negatively affected by changes in interest rates. Net
interest income is the difference between:
o the interest income we earn on interest-earning assets, such as mortgage
loans and investment securities; and
o the interest expense we pay on our interest-bearing liabilities, such as
deposits and amounts we borrow.
Most of our mortgage loans have rates of interest which are fixed for
the life of the loan and are generally originated for periods of up to 30 years,
while our deposit accounts have significantly shorter periods to maturity.
Because our interest-earning assets generally have fixed rates of interest and
have longer effective maturities than our interest-bearing liabilities, the
yield on our interest-earning assets generally will adjust more slowly to
changes in interest rates than the cost of our interest-bearing liabilities,
which are primarily time deposits. As a result, our net interest income may be
reduced when interest rates increase significantly for long periods of time. In
addition, rising interest rates may reduce our earnings because there may be a
lack of customer demand for loans. Declining interest rates may also reduce our
net interest income if adjustable rate or fixed rate mortgage loans are
refinanced at reduced rates or paid off earlier than expected, and we reinvest
these funds in assets which earn us a lower rate of interest.
Fluctuations in interest rates are not predictable or controllable. We
have attempted to structure our asset and liability management strategies to
mitigate the impact of changes in market interest rates on our net interest
income. However, there can be no assurance that we will be able to manage
interest rate risk so as to avoid significant adverse effects in our net
interest income.
A downturn in the health of the economy or changes in the Federal
Reserve's monetary policy could affect our net interest income and reduce our
profitability.
A downturn in the economy could affect us in the following ways, among
others:
o the amount of funds available for deposit could be reduced;
o the ability of borrowers to repay their loans could be hurt; and
o the strength of credit demands by customers could decline.
In addition, the banking business is affected not only by general
economic conditions, but also by the monetary policies of the Federal Reserve.
These monetary policies have significant effects on the operating results of
banks. Changes in monetary policies may affect the ability of the banks to
attract deposits, make loans and manage interest rate risk.
3
<PAGE>
Changes in laws or regulations could hurt our profitability.
We operate in a highly regulated industry and are subject to the
supervision and examination by the Office of Thrift Supervision and the Federal
Deposit Insurance Corporation. The federal and state banking laws and
regulations limit the manner in which we and the banks may conduct business and
obtain financing. Changes in the laws and regulations that govern us could
restrict our operations or impose burdensome requirements upon us. This could
reduce our profitability.
Our operations may be adversely affected if we, or certain persons with
whom we do business, fail to resolve Year 2000 issues.
Rapid and accurate data processing is essential to our operations. Many
computer programs that can only distinguish the final two digits of the year
entered are expected to read entries for the year 2000 as the year 1900 and
compute payment, interest or delinquency based on the wrong date or are expected
to be unable to compute payment, interest, or delinquency.
Failure to resolve year 2000 issues presents the following risks to us:
o we could lose customers to other financial institutions, resulting in a
loss of revenue, if our data processing operation is unable to process
properly customer transactions;
o the Federal Home Loan Bank, the Federal Reserve System, and
correspondent banks could fail to provide funds to the banks which
could materially impair their liquidity and affect their ability to
fund loans and deposit withdrawals;
o concern on the part of depositors that year 2000 issues could impair
access to their deposit account balances could result in the banks
experiencing deposit outflows prior to December 31, 1999;
o the failure of our commercial and industrial borrowers to adequately
resolve their own year 2000 issues could render them unable to continue
to make timely loan payments; and
o we could incur increased personnel costs if additional staff is
required to perform functions that inoperative systems would have
otherwise performed.
Most of our material data processing that could be affected by this
problem is provided by a third party service bureau. If our third party service
bureau does not resolve this problem, we would likely experience significant
data processing delays, mistakes or failures. These delays, mistakes, or
failures could have a significant adverse impact on our financial condition or
profitability.
The amount of stock held by our executive officers and directors and
stock benefit plans could make it difficult for stockholders to adopt proposals
or approve takeover attempts not supported by management.
The amount of ownership and control of our stock by directors and
executive officers could make it difficult for stockholders to make successful
stockholder proposals if they are opposed by management and the Board of
Directors. In addition, directors and executive officers could use their voting
power to block the approval of transactions, such as business combinations and
amendments to FSF's articles of incorporation or bylaws. As of June 30, 1999,
our directors and executive officers beneficially owned approximately 564,000
shares of our stock or 17%. In addition, approximately 12% of our common stock
4
<PAGE>
is owned by our employee stock ownership plan. Shares owned by our employee
stock ownership plan but not yet allocated to the accounts of our employees will
be voted by a committee of our non-employee directors.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares
being offered by the selling shareholders.
SELLING SHAREHOLDERS
Each of the shareholders named in the following table was either
formerly a stockholder of Homeowners Mortgage Corp. or of Insurance Planners of
Hutchinson, Inc. Each selling shareholder acquired shares of our common stock in
the transaction under which we acquired all of the issued and outstanding shares
of Homeowners Mortgage Corp. on November 17, 1998 or the transaction under which
we acquired all of the issued and outstanding shares of Insurance Planners of
Hutchinson, Inc. on June 1, 1998. Both Homeowners and Insurance Planners are now
wholly owned subsidiaries of FSF Financial. Except for certain positions as
officers of the subsidiaries, no selling shareholder has had any position,
office or other material relationship with us, other than in connection with the
acquisition of the companies, within the past three years.
The shares issued in connection with the acquisitions of Homeowners and
Insurance Planners were not registered and are therefor restricted as to resale.
As part of each acquisition agreement, we agreed to register at our expense, the
shares of FSF Financial common stock issued to the selling shareholders.
The following table assumes that each selling shareholder sells in this
offering all of the shares he or she holds. However, we are unable to determine
the exact number of shares that will actually be sold or when or if these sales
will occur. The percentage of ownership stated in the table is based on
2,841,487 shares, the number of issued and outstanding shares of our common
stock as of June 30, 1999.
5
<PAGE>
Name Shares Beneficially Owned Before Offering
- --------------------- -----------------------------------------
Number Percent
------ -------
Dennis W. Potter 12,987 *
Murray Swenson 12,987 *
Robb Torushek 12,987 *
Elmer Nygaard 7,784 *
Sherry Nygaard 7,784 *
Tracy Nygaard 4,281 *
Brian Nygaard 4,281 *
Peter Fisher 19,071 *
Karen Magill 25,688 *
Nicole Magill 1,362 *
Travis Magill 3,113 *
Stephanie Magill 3,113 *
Tyler Magill 1,362 *
--------- --------------
TOTAL 116,800 4.1
========= ==============
- -------------------------------
*Less than 1% of the common stock outstanding
PLAN OF DISTRIBUTION
The selling shareholders may from time to time sell all or a portion of
the shares. The shares may be sold in one or more transactions:
o in the over-the-counter market;
o on the Nasdaq National Market;
o on any exchange on which our common stock may then be listed; or
o a combination of such methods of sale.
The sales of the shares may take place in negotiated transactions. The
shares will be sold at market prices prevailing at the time of sale, at prices
related to the prevailing market prices, or at negotiated prices. The selling
shareholders may effect the sales of the shares by selling the shares to or
through broker-dealers. The broker-dealers may receive compensation in the form
of underwriting discounts, concessions or commissions. The compensation will be
received from the selling shareholders and/or purchasers of the shares for whom
the broker-dealers act as agent. The compensation may be in excess of customary
commissions.
The selling shareholders and any broker-dealers or agents participating
in the sales may be deemed to be underwriters as that term is defined under the
Securities Act of 1933, as amended. Any discount or commission received by them
and any profit on the resale of shares as principals would be deemed to be
underwriting discounts or commissions under the Securities Act. As of the date
of this prospectus, the
6
<PAGE>
selling shareholders cannot estimate and we cannot estimate the amount of
commissions or discounts that will be paid by the selling shareholders on
account of their sales of the shares from time to time.
We will pay all costs, expenses and fees in connection with the
registration of the shares. Commissions and discounts, if any, attributable to
the sale of shares will be borne by the selling shareholders. We estimate our
expenses to be as follows:
o Registration Fees $ 450
o Legal Services 4,000
o Printing Costs 0
o Miscellaneous 1,000
-----
o TOTAL $5,450
=====
EXPERTS
The consolidated financial statements from our Annual Report on Form
10-K for the fiscal year ended September 30, 1998, have been incorporated by
reference into this prospectus and the registration statement in reliance upon
the report of Bertram Cooper & Co., LLP, independent auditors, which is
incorporated by reference into this prospectus, and in reliance upon the
authority of Bertram Cooper as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be
passed upon for FSF by Malizia Spidi & Fisch, PC, Washington, D.C., counsel to
FSF Financial Corp.
WHERE TO FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. Accordingly, we file periodic reports, proxy
statements and other information with the Securities and Exchange Commission.
You may inspect or copy these materials at the Public Reference Room at the SEC
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the SEC located at 7 World Trade Center, 13th Floor, Suite 1300, New
York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West
Madison Street, Chicago, Illinois 60661. For a fee, you may also obtain copies
of these materials by writing to the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on
the operationof the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Our filings are also available to the public on the SEC's website on the
Internet at http://www.sec.gov.
We have filed with the SEC a registration statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") with respect to the shares of common stock offered by this
prospectus. This prospectus does not contain all of the information included in
the registration statement. Please refer to the registration statement and its
exhibits, and to the documents incorporated by reference into the registration
statement, for further information about us and the shares of common stock
offered by this prospectus. You may obtain a copy of the registration statement
through the public reference facilities of the SEC described above. You may also
access a copy of the registration statement by means of the SEC's website at
http://www.sec.gov.
7
<PAGE>
Our common stock is traded on the Nasdaq National Market under the
symbol "FFHH." Documents that we have filed with the SEC can also be inspected
at the offices of the National Association of Securities Dealers, Inc., at 1735
K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference documents that we have
filed with the SEC. This means that we can disclose important information to you
by referring to those documents, and the information in those documents is
considered to be part of this prospectus. Documents that we file later with the
SEC will automatically update and supersede this information.
We incorporate by reference the documents listed below:
(1) FSF Financial Corp.'s Annual Report on Form 10-K for the year
ended September 30, 1998;
(2) FSF Financial Corp.'s Quarterly Reports on Form 10-Q for the
quarters ended December 31, 1989 and March 31, 1999;
(3) FSF Financial Corp.'s Current Report on Form 8-K filed with
the Commission on March 12, 1999;
(4) FSF Financial Corp.'s Registration Statement on Form 8A
declared effective by the SEC in 1994 and any amendment or
report filed for the purpose of updating such description; and
(5) All reports and other documents FSF Financial Corp. files with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, after the date of
this prospectus and prior to the termination of this offering.
You may request from the Secretary of FSF Financial Corp. a copy of any
document incorporated by reference, excluding exhibits unless they are
specifically incorporated into this prospectus, at no cost, by writing or
calling us at:
FSF Financial Corp.
201 Main Street South
Hutchinson, Minnesota 55350-2573
Telephone: (320) 234-4500.
8
<PAGE>
<TABLE>
<CAPTION>
=================================================== ===============================================
<S> <C>
You should rely only on the information 116,800 Shares
contained in this prospectus. We have not
authorized anyone to provide you with
information that is different. This prospectus
does not constitute an offer to sell, or the
solicitation of an offer to buy, any of the
securities offered hereby to any person in any
jurisdiction in which the offer or solicitation FSF FINANCIAL CORP.
would be unlawful. You should not assume that
the information provided by this prospectus is
accurate as of any date after the date of this Common Stock
prospectus.
--------------------
---------------
TABLE OF CONTENTS
PROSPECTUS
Page ---------------
Special Note of Caution Regarding
Forward-Looking Statements.........................2
Risk Factors.........................................3
Use of Proceeds......................................5 July 29, 1999
Selling Shareholders.................................5
Plan of Distribution.................................6
Experts..............................................7
Legal Matters........................................7
Where To Find More Information.......................7
Incorporation of Certain Documents by
Reference..........................................8
========================================================= ===============================================
</TABLE>
