SECURITIES AND
EXCHANGE COMMISSION WASHINGTON, D.C.  20549 FORM 10-Q xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THESECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR  ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File
Number 0-19772 HF FINANCIAL CORP.(Exact name of registrant as specified in
  its charter)Delaware
  46-0418532(State or other jurisdiction of
  (I.R.S. Employerincorporation or organization)
  Identification No.)225 South Main Avenue, Sioux Falls, SD
  57104(Address of principal executive office)
  (ZIP Code)(605) 333-7556(Registrant's telephone number, including
  area code)Not Applicable(Former name, former address and former
  fiscal year, if changed since last report)
 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 filing requirements for the past 90
days.  YesxNo ̈ Indicate the number
of shares outstanding of each of the issuer's classes of common stock, as of
the latest practicable date. As of May 11, 2001 there were 3,680,796
issued and outstanding shares of the Registrants Common Stock, with $.01 par
value.


HF FINANCIAL CORP. FORM 10-Q INDEX PART I.
  Financial InformationItem 1.
  Financial Statements (Unaudited):Consolidated
  Statements of Financial ConditionAs of March 31, 2001 and June 30, 2000Consolidated Statements of Income for the
  Three and NineMonths Ended March 31, 2001 and 2000Consolidated Statement of Stockholders'
  Equityfor the Nine Months Ended March 31, 2001Consolidated Statements of Cash Flows for
  the NineMonths Ended March 31, 2001 and 2000Notes to Consolidated Financial StatementsItem 2.
  Management's Discussion and Analysis of Financial Condition and Results of
  OperationsItem 3.
  Quantitative and Qualitative Disclosures
  aboutMarket RiskPART II.
  Other InformationItem 1.
  Legal ProceedingsItem 2.
  Changes in SecuritiesItem 3.
  Defaults upon Senior SecuritiesItem 4.
  Submission of Matters to a Vote of Security HoldersItem 5.
  Other InformationItem 6.
  Exhibits and Reports on Form 8-KSignatures  Item 1.



HF FINANCIAL CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands)






ASSETSMarch 31, 2001
  June 30, 2000(Unaudited)Cash
  and cash equivalents
  $58,651
  $26,417Securities
  available for sale
  62,450
  60,445Mortgage-backed
  securities available for sale
  47,118
  53,001Loans
  receivable
  551,130
  542,494Loans
  held for sale
  10,553
  8,257Accrued
  interest receivable
  5,279
  5,346Office
  properties and equipment, at cost, net of accumulated depreciation
  13,765
  13,717Foreclosed
  real estate and other properties
  1,599
  1,594Prepaid
  expenses and other assets
  1,926
  2,290Mortgage
  servicing rights
  2,604
  2,171Deferred
  income taxes
  2,690
  4,235Cost
  in excess of net assets acquired
  5,888
  5,030$763,653
  $724,997LIABILITIES AND STOCKHOLDERS' EQUITYLiabilitiesDeposits
  $580,119
  $545,497Advances from Federal Home Loan Bank
  and other borrowings
  108,206
  113,020Advances by borrowers for taxes and
  insurance
  10,106
  6,543Accrued interest payable
  7,906
  6,844Other liabilities
  5,125
  6,150Total liabilities
  711,462
  678,054Stockholders'
  EquityPreferred stock, $.01 par value,
  500,000 shares authorized, none outstanding
  - - - -
  - - - -Series A Junior Participating Preferred
  Stock, $1.00 stated value, 50,000 shares authorized, none outstanding
  - - - -
  - - - -Common stock, $.01 par value,
  10,000,000 shares authorized, 4,786,005 and 4,769,314 shares issued at March
  31, 2001 and June 30, 2000
  48
  48Additional paid-in capital
  15,378
  15,260Retained earnings, substantially
  restricted
  52,363
  49,824Unearned compensation
  (113)
  (113)Accumulated other comprehensive income
  (loss)
  640
  (1,951)Less cost of treasury stock, 1,105,209
  shares
  (16,125)
  (16,125)52,191
  46,943$763,653
  $724,997



See Notes to Consolidated Financial Statements


HF
FINANCIAL CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Dollars in Thousands, Except Per
Share Data)
(Unaudited)






Three Months
  Ended March 31,
  Nine Months Ended March 31,2001
  2000
  2001
  2000Interest and dividend income:Loans receivable
  $12,741
  $11,616
  $38,714
  $33,875Mortgage-backed securities
  820
  950
  2,588
  2,458Investment securities and interest-bearing deposits
  1,415
  927
  3,541
  2,61214,976
  13,493
  44,843
  38,945Interest expense:Deposits
  7,387
  6,054
  21,666
  16,946Advances from Federal Home Loan Bank and other borrowings
  1,730
  1,574
  5,306
  4,5079,117
  7,628
  26,972
  21,453Net interest income
  5,859
  5,865
  17,871
  17,492Provision for losses on loans
  310
  874
  1,574
  4,412Net interest income after provision for losses
  on loans
  5,549
  4,991
  16,297
  13,080Noninterest income:Fees on deposits
  870
  643
  2,658
  1,982Credit card fee income
  471
  1,245
  2,142
  5,968Loan servicing income
  404
  347
  1,171
  1,015Commission and insurance income
  312
  270
  1,007
  786Loan fees and service charges
  202
  202
  694
  789Gain on sale of loans, net
  174
  127
  527
  523Other
  266
  342
  757
  7832,699
  3,176
  8,956
  11,846Noninterest expense:Compensation and employee benefits
  3,622
  3,320
  10,443
  9,446Other general and administrative expenses
  1,106
  1,183
  3,451
  3,425Occupancy and equipment
  920
  807
  2,596
  2,259Credit card processing expense
  560
  647
  2,008
  3,100Amortization of intangible assets
  120
  96
  345
  262Federal insurance premiums
  70
  31
  201
  196Other
  53
  50
  110
  1346,451
  6,134
  19,154
  18,822Income before income
  taxes
  1,797
  2,033
  6,099
  6,104Income tax expense
  709
  716
  2,401
  2,143Net income
  $1,088
  $1,317
  $3,698
  $3,961Earnings per share:Basic
  $0.30
  $0.35
  $1.01
  $1.01Diluted
  $0.29
  $0.34
  $1.00
  $1.00



See Notes to
Consolidated Financial Statements


HF
FINANCIAL CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
Nine Months Ended March 31, 2001
(Dollars In Thousands, Except Per Share Data)
(Unaudited)


AccumulatedAdditional
  
  
  OtherCommon
  Paid-In
  Retained
  Unearned
  Comprehensive
  TreasuryStock
  Capital
  Earnings
  Compensation
  Income (Loss)
  Stock
  TotalBalance,
  June 30, 2000
  $48
  $15,260
  $49,824
  $(113)
  $(1,951)
  $(16,125)
  $46,943Comprehensive
  income:Net income
  - - - -
  - - - -
  3,698
  - - - -
  - - - -
  - - - -
  3,698Net change in unrealized gain/loss on
  securities available for sale, net of deferred taxes
  - - - -
  - - - -
  - - - -
  - - - -
  2,591
  - - - -
  2,591Comprehensive income
  - - - -
  - - - -
  3,698
  - - - -
  2,591
  - - - -
  6,28911,249 shares issued under Director
  Restricted Stock Plan
  - - - -
  100
  - - - -
  - - - -
  - - - -
  - - - -
  100Exercise
  of stock options for 5,442 shares
  - - - -
  18
  - - - -
  - - - -
  - - - -
  - - - -
  18Cash dividends paid ($0.315 per share)
  on common stock
  - - - -
  - - - -
  (1,159)
  - - - -
  - - - -
  - - - -
  (1,159)Balance,
  March 31, 2001
  $48
  $15,378
  $52,363
  $(113)
  $640
  $(16,125)
  $52,191


See Notes to Consolidated Financial Statements


HF FINANCIAL CORP. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)

Nine Months Ended March 31,2001
  2000CASH FLOWS FROM OPERATING ACTIVITIESNet income
  $3,698
  $3,961Adjustments to reconcile net income to net cash provided by operating
  activities:Provision for losses on loans and leases
  1,574
  4,412Depreciation
  1,446
  1,199Amortization of premiums and discounts on securities available for
  sale, net
  (54)
  (13)Amortization of intangible assets
  345
  262Amortization of mortgage servicing rights
  200
  231Noncash issuance of common stock
  100
  98(Decrease) in deferred loan fees
  (220)
  (767)Loans originated for resale
  (51,131)
  (51,289)Proceeds from the sale of loans
  49,362
  60,244(Gain) on sale of loans, net
  (527)
  (523)Mortgage servicing rights capitalized
  (131)
  (112)Realized (gain) on sale of securities, net
  - - - -
  (90)Losses and provision for losses on sales of foreclosed real estate and
  other properties, net
  7
  41(Gain) loss on disposal of office properties and equipment, net
  (11)
  7Decrease (increase) in accrued interest receivable
  67
  (113)Decrease in prepaid expenses and other assets
  364
  351(Increase) decrease in deferred income taxes
  (43)
  999Increase (decrease) in accrued interest payable and other liabilities
  37
  (541)Net cash provided by operating activities
  $5,083
  $18,357CASH FLOWS FROM INVESTING ACTIVITIESLoans and leases purchased
  (12,081)
  (19,931)Loans originated and held
  (123,436)
  (173,478)Principal collected on loans and leases
  124,874
  142,555Sale of participation interests in loans
  - - - -
  8,650Mortgage-backed securities available for sale:Sales
  - - - -
  3,202Purchases
  - - - -
  (23,157)Repayments
  8,194
  6,333Securities available for sale:Sales and maturities
  16,910
  15,141Purchases
  (16,993)
  (15,080)Proceeds from sale of office properties and equipment
  17
  4Purchase of office properties and equipment
  (1,500)
  (653)Purchase of mortgage servicing rights
  (502)
  (416)Purchase of intangible assets
  (1,203)
  (443)Proceeds from sale of foreclosed real estate and other properties, net
  641
  800Net cash (used in)
  investing activities
  $(5,079)
  $(56,473)CASH FLOWS FROM FINANCING ACTIVITIESNet increase in deposit accounts
  $34,622
  $13,532Proceeds of advances from Federal Home LoanBank and other borrowings
  227,081
  195,500Payments on advances from Federal Home LoanBank and other borrowings
  (231,895)
  (163,388)Increase in advances by borrowers for taxes and insurance
  3,563
  3,202Purchase of treasury stock
  - - - -
  (4,869)Proceeds from issuance of common stock
  18
  35Cash dividends paid
  (1,159)
  (1,188)Net cash provided by financing activities
  $32,230
  $42,824Increase in cash and cash equivalents
  $32,234
  $4,708Cash and Cash EquivalentsBeginning
  26,417
  16,671Ending
  $58,651
  $21,379



See Notes to
Consolidated Financial Statements


HF FINANCIAL CORP. AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTSFor The Three and Nine Months Ended March 31, 2001 and 2000
(Dollars in Thousands)
(Unaudited)



NOTE 1.            SELECTED ACCOUNTING POLICIES



Basis of presentation:



The foregoing consolidated financial statements are
unaudited.  However, in the opinion of
management, all adjustments (which consist of normal recurring accruals)
necessary for a fair presentation of the consolidated financial statements have
been included.  Results for any interim
period are not necessarily indicative of results to be expected for the
year.  The interim consolidated financial
statements include the accounts of HF Financial Corp. (the
"Company"), its subsidiaries, HomeFirst Mortgage Corp. (the Mortgage
Corp.), and the Mortgage Corp.s subsidiary, HF Card Services L.L.C. (HF Card
Services) and Home Federal Savings Bank, (the "Bank") and the Banks
subsidiaries.



NOTE 2.            REGULATORY CAPITAL



The following table sets
forth the Banks compliance with its capital requirements at March 31, 2001:


Amount
  PercentTier I (core) capital:Required
  $22,449
  3.00%Actual
  45,212
  6.04Excess
  22,763
  3.04Risk-based capital:Required.
  $40,802
  8.00%Actual
  51,591
  10.12Excess
  10,789
  2.12




NOTE 3.            EARNINGS PER SHARE



Basic earnings per share is computed by dividing income
available to common stockholders (the numerator) by the weighted-average number
of common shares outstanding  (the
denominator) during the period.  Shares
issued during the period and shares reacquired during the period are weighted
for the portion of the period that they were outstanding. The weighted average
number of common shares outstanding for the three month period ended March 31,
2001 and 2000 was 3,680,733 and 3,773,687, respectively.  The weighted average number of common shares
outstanding for the nine month period ended March 31, 2001 and 2000 was
3,678,314 and 3,905,150, respectively.



Dilutive earnings per share is similar to the
computation of basic earnings per share except that the denominator is
increased to include the number of additional common shares that would have
been outstanding if the dilutive options outstanding had been exercised. The
weighted average number of common and dilutive potential common shares
outstanding for the three month period ended March 31, 2001 and 2000 was
3,715,749 and 3,824,280, respectively. The weighted average number of common
and dilutive potential common shares outstanding for the nine month period
ended March 31, 2001 and 2000 was 3,708,124 and 3,973,915, respectively.


NOTE 4.            SEGMENT INFORMATION



The management approach is used as the conceptual basis
for identifying reportable segments and is based on the way that management
organizes the segments within the Company for making operating decisions,
allocating resources and monitoring performance.



The Companys reportable segments are banking, credit
card and other.  The banking segment
is conducted through the subsidiary, Home Federal Savings Bank, and the credit
card segment is conducted through the subsidiary, HF Card Services, L.L.C.  The other segment is composed of smaller
nonreportable segments, the parent company and inter-segment eliminations.




Three Months Ended March 31, 2001CreditBanking
  Card
  Other
  Total(Dollars in Thousands)Net
  interest income
  $5,570
  $(12)
  $301
  $5,859Provision
  (recoveries) for losses on loans
  (347)
  90
  (53)
  (310)Noninterest
  income
  1,891
  467
  341
  2,699Noninterest
  expense
  (5,301)
  (605)
  (545)
  (6,451)Income (loss) before income taxes
  $1,813
  $(60)
  $44
  $1,797Total
  assets
  $748,402
  $6,069
  $9,182
  $763,653Three Months Ended March 31, 2000CreditBanking
  Card
  Other
  Total(Dollars in Thousands)Net
  interest income
  $5,645
  $76
  $144
  $5,865Provision
  for losses on loans
  (366)
  (508)
  - - - -
  (874)Noninterest
  income
  1,624
  1,241
  311
  3,176Noninterest
  expense
  (5,039)
  (720)
  (375)
  (6,134)Income (loss) before income taxes
  $1,864
  $89
  $80
  $2,033Total
  assets
  $693,949
  $7,757
  $2,174
  $703,880Nine Months Ended March 31, 2001CreditBanking
  Card
  Other
  Total(Dollars in Thousands)Net
  interest income
  $16,890
  $159
  $822
  $17,871Provision
  for losses on loans
  (1,041)
  (437)
  (96)
  (1,574)Noninterest
  income
  5,800
  2,132
  1,024
  8,956Noninterest
  expense
  (15,382)
  (2,162)
  (1,610)
  (19,154)Income (loss) before income taxes
  $6,267
  $(308)
  $140
  $6,099Total
  assets
  $748,402
  $6,069
  $9,182
  $763,653Nine Months Ended March 31, 2000CreditBanking
  Card
  Other
  Total(Dollars in Thousands)Net
  interest income
  $16,771
  $304
  $417
  $17,492Provision
  for losses on loans
  (1,033)
  (3,379)
  - - - -
  (4,412)Noninterest
  income
  5,144
  5,956
  746
  11,846Noninterest
  expense
  (14,449)
  (3,352)
  (1,021)
  (18,822)Income (loss) before income taxes
  $6,433
  $(471)
  $142
  $6,104Total
  assets
  $693,949
  $7,757
  $2,174
  $703,880

Item
2.



MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIALCONDITION
AND RESULTS OF OPERATIONS



General



The Company was incorporated under the laws of the State
of Delaware in November 1991 for the purpose of owning all of the outstanding
stock of the Bank issued in the mutual to stock conversion of the Bank.  The Company acquired all of the outstanding
stock of the Bank on April 8, 1992.  In
May 1996, the Company formed  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.  The activities of the Company itself have no
significant impact on the results of operations on a consolidated basis.  Unless otherwise indicated, all activities
discussed herein relate to the Company, and its direct and indirect
subsidiaries, including without limitation, the Bank, HF Card Services and the
Mortgage Corp.



HF Card Services was established to provide secured,
partially-secured and unsecured credit cards nationwide.  The target market for HF Card Services was
subprime 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 card issuers.  The Company
ceased credit card applications in March 1999.



The Company's net income is primarily dependent upon the
difference (or "spread") between the average yield earned on loans,
mortgage-backed securities and investments and the average rate paid on
deposits and borrowings, as well as the relative amounts of such assets and
liabilities.  The interest rate spread
is affected by regulatory, economic and competitive factors that influence
interest rates, loan demand and deposit flows. 
The Company, like other financial institutions, is subject to interest
rate risk to the degree that its interest-bearing liabilities mature or reprice
at different times, or on a different basis, than its interest-earning
assets.  To better insulate itself from
such risk, the Company has, over the last few years, attempted to increase both
numerically and on a percentage basis its holding of consumer and commercial
loans.  The Company has also decreased
its ratio of fixed-rate to adjustable-rate loans. The Companys net income is
also affected by, among other things, gains and losses on sales of foreclosed
property, loans, mortgage-backed securities and securities available for sale,
provisions for losses on loans, service charge fees, subsidiary activities,
operating expenses and income taxes.



Forward-Looking
Statements



This Form 10-Q and other reports
issued by the Company, including reports filed with the Securities and Exchange
Commission, may contain "forward-looking" statements that deal with
future results, expectations, plans or performance.  In addition, the Company's management may make such statements
orally to the media, securities analysts, investors or others. Forward-looking
statements deal with matters that do not relate strictly to historical
facts.  These forward-looking statements
might include one or more of the following:



  Projections
  of income, revenues, earnings per share, dividends, capital expenditures,
  capital structure or other financial items.
  Descriptions
  of plans or objectives of management for future operations, products or
  services.
  Forecasts
  of future economic performance.
  Descriptions
  of assumptions underlying or relating to such matters.Forward-looking statements can be identified by the fact
that they do not relate strictly to historical or current facts.  They often include words such as
"believe," "expect," "anticipate,"
"intend," "plan," "estimate," or words of similar
meaning, or future or conditional verbs such as "will,"
"would," "should," "could" or "may."



The Company's future results may differ materially from
historical performance, and forward-looking statements about the Company's
expected financial results or other plans are subject to a number of risks and
uncertainties.  These include but are
not limited to possible legislative changes and adverse economic, business and
competitive developments such as shrinking interest margins; deposit outflows;
reduced demand for financial services and loan products; changes in accounting
policies or guidelines, or in monetary and fiscal policies of the federal
government; changes in credit and other risks posed by the Company's loan
portfolios; technological, computer-related or operational difficulties;
adverse changes in securities markets; results of litigation; or other
significant uncertainties.


Forward-looking
statements speak only as of the date they are made.  The Company does not undertake to update forward-looking
statements to reflect circumstances or events that occur after the date the
forward-looking statements are made.



Financial
Condition Data



At March 31, 2001, the Company had total assets of
$763.7 million, an increase of $38.7 million from the level at June 30,
2000.  The increase in assets was due
primarily to an increase in cash and cash equivalents of $32.2 million, an
increase in loans receivable of $8.6 million, and an increase of $2.3 million
in loans held for sale, offset by a decrease in mortgage-backed securities of
$5.9 million. Deposits increased $34.6 million from the levels at June 30,
2000.  In addition, stockholders equity
increased from $46.9 million at June 30, 2000 to $52.2 million at March 31,
2001, primarily due to net income of $3.7 million which was partially offset by
the payment of cash dividends of $1.2 million.



The increase in loans receivable of $8.6 million was due
primarily to purchases and originations of principal exceeding amortization and
prepayments of principal.



The increase in loans held for sale of $2.3 million was
due to an increase in loans originated for sale into the secondary market at
March 31, 2001.



The decrease in mortgage-backed securities of $5.9
million was primarily the result of amortization and prepayments of
principal.  Mortgage-backed securities
were allowed to paydown without reinvestment during the first three quarters of
fiscal 2001.



The $34.6 million increase in deposits was primarily due
to an increase in demand accounts of $3.7 million, money market accounts of
$23.8 million and certificates of deposit of $25.8 million offset by a decrease
in savings accounts of $18.7 million. 
As of March 31, 2001, the Bank had total deposits from one local
governmental entity of $25.8 million compared to $45.2 million at June 30,
2000.  This decrease is seasonal and is
comparable to the last two years.



Analysis
of Net Interest Income



Net interest income represents the difference between
income on interest-earning assets and expense on interest-bearing
liabilities.  Net interest income
depends upon the volume of interest-earning assets and interest-bearing
liabilities and the interest rates earned or paid on them.



Average Balances, Interest Rates and Yields.  The following table presents for the periods
indicated the total dollar amount of interest income from average
interest-earning assets and the resulting yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars and
rates, and the net interest margin.  The
table does not reflect any effect of income taxes.  All average balances are monthly average balances and include the
balances of nonaccruing loans.  The
yields and costs for the three and nine months ended March 31, 2001 and 2000
include fees which are considered adjustments to yield.




THREE MONTHS ENDED MARCH 31,2001
  2000Average
  Interest
  Average
  InterestOutstanding
  Earned/
  Yield/
  Outstanding
  Earned/
  Yield/Balance
  Paid
  Rate
  Balance
  Paid
  Rate(Dollars in Thousands)Interest-earning
  assets:Loans receivable (1)
  $568,526
  $12,741
  9.09%
  $532,996
  $11,616
  8.77%Mortgage-backed securities
  48,652
  820
  6.84%
  56,919
  950
  6.71%Other investment securities (2)
  93,698
  1,302
  5.64%
  57,550
  826
  5.77%FHLB stock
  6,332
  113
  7.24%
  6,130
  101
  6.63%Total
  interest-earning assets
  $717,208
  $14,976
  8.47%
  $653,595
  $13,493
  8.30%Noninterest-earning assets
  39,693
  
  
  37,722Total
  assets
  $756,901
  
  
  $691,317Interest-bearing
  liabilities:Deposits:Checking and money market
  $208,568
  $1,965
  3.82%
  $167,243
  $1,438
  3.46%Savings
  40,953
  378
  3.74%
  45,681
  412
  3.63%Certificates of deposit
  324,096
  5,044
  6.31%
  299,224
  4,204
  5.65%Total deposits
  $573,617
  $7,387
  5.22%
  $512,148
  $6,054
  4.75%FHLB advances and other borrowings
  108,948
  1,730
  6.44%
  111,801
  1,574
  5.66%Total
  interest-bearing liabilities
  $682,565
  $9,117
  5.42%
  $623,949
  $7,628
  4.92%Other liabilities
  22,965
  
  
  21,786Total
  liabilities
  $705,530
  
  
  $645,735Equity
  51,371
  
  
  45,582Total
  liabilities and equity
  $756,901
  
  
  $691,317Net
  interest income; interest rate spread
  
  $5,859
  3.05%
  
  $5,865
  3.38%Net
  interest margin (3)
  
  
  3.31%
  
  
  3.61%






(1)  Includes
interest on accruing loans past due 90 days or more.



(2)  Includes
primarily U.S. government and agency securities and also includes FHLB time.



(3)  Net interest
margin is net interest income divided by average interest-earning assets.








NINE MONTHS ENDED MARCH 31,2001
  2000Average
  Interest
  
  Average
  InterestOutstanding
  Earned/
  Yield/
  Outstanding
  Earned/
  Yield/Balance
  Paid
  Rate
  Balance
  Paid
  Rate(Dollars in Thousands)Interest-earning
  assets:Loans receivable (1)
  $566,181
  $38,714
  9.11%
  $523,416
  $33,875
  8.61%Mortgage-backed securities
  51,353
  2,588
  6.71%
  50,655
  2,458
  6.46%Other investment securities (2)
  73,674
  3,262
  5.90%
  54,995
  2,330
  5.64%FHLB stock
  6,261
  279
  5.94%
  5,821
  282
  6.45%Total
  interest-earning assets
  $697,469
  $44,843
  8.56%
  $634,887
  $38,945
  8.16%Noninterest-earning assets
  38,042
  
  
  38,620Total
  assets
  $735,511
  
  
  $673,507Interest-bearing
  liabilities:Deposits:Checking and money market
  $195,112
  $5,806
  3.96%
  $156,894
  $3,635
  3.08%Savings
  40,643
  1,192
  3.91%
  44,972
  1,096
  3.24%Certificates of deposit
  314,636
  14,668
  6.21%
  295,676
  12,215
  5.50%Total deposits
  $550,391
  $21,666
  5.24%
  $497,542
  $16,946
  4.53%FHLB advances and other borrowings
  113,528
  5,306
  6.23%
  107,757
  4,507
  5.57%Total
  interest-bearing liabilities
  $663,919
  $26,972
  5.41%
  $605,299
  $21,453
  4.72%Other liabilities
  21,975
  
  
  21,197Total
  liabilities
  $685,894
  
  
  $626,496Equity
  49,617
  
  
  47,011Total
  liabilities and equity
  $735,511
  
  
  $673,507Net
  interest income; interest rate spread
  
  $17,871
  3.15%
  
  $17,492
  3.44%Net
  interest margin (3)
  
  
  3.41%
  
  
  3.67%(1)  Includes
interest on accruing loans past due 90 days or more.
(2)  Includes primarily U.S. Government
and agency securities and also includes FHLB time.
(3)  Net interest margin is net interest
income divided by average interest-earning assets.




Rate/Volume Analysis of Net Interest Income



The following schedule presents the dollar amount of
changes in interest income and interest expense for major components of
interest-earning assets and interest-bearing liabilities.  It distinguishes between the increases and
decreases due to fluctuating outstanding balances that are due to the levels
and volatility of interest rates.  For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by old rate) and (ii) changes in rate (i.e.,
changes in rate multiplied by old volume). 
For purposes of this table, changes attributable to both rate and
volume, which cannot be segregated, have been allocated proportionately to the
change due to volume and the change due to rate.




Three Months Ended March 31,
  Nine Months Ended March 31,2001 vs 2000
  2001 vs 2000Increase
  Increase
  
  Increase
  Increase(Decrease)
  (Decrease)
  Total
  (Decrease)
  (Decrease)
  TotalDue to
  Due to
  Increase
  Due to
  Due to
  IncreaseVolume
  Rate
  (Decrease)
  Volume
  Rate
  (Decrease)(Dollars in Thousands)Interest-earning
  assets:Loans receivable (1)
  $734
  $391
  $1,125
  $2,829
  $2,010
  $4,839Mortgage-backed securities
  (142)
  12
  (130)
  33
  97
  130Other investment securities (2)
  505
  (29)
  476
  808
  124
  932FHLB stock
  3
  9
  12
  20
  (23)
  (3)Total
  interest-earning assets
  $1,100
  $383
  $1,483
  $3,690
  $2,208
  $5,898Interest-bearing
  liabilities:Deposits:Checking and money market
  $364
  $163
  $527
  $1,010
  $1,162
  $2,172Savings
  (45)
  11
  (34)
  (117)
  213
  96Certificates of deposit
  350
  490
  840
  828
  1,624
  2,452Total deposits
  669
  664
  1,333
  1,721
  2,999
  4,720FHLB
  advances and other borrowings
  (49)
  205
  156
  253
  546
  799Total
  interest-bearing liabilities
  $620
  $869
  $1,489
  $1,974
  $3,545
  $5,519Net
  interest income increase (decrease)
  
  
  $(6)
  
  
  $379





(1)  Includes
interest on accruing loans past due 90 days or more.
(2)  Includes primarily U. S. Government
and agency securities and also includes FHLB time.


Asset
Quality



In accordance with the Companys internal classification
of assets policy, management evaluates the loan portfolio on a monthly basis to
identify loss potential and determine the adequacy of the allowance for loan
losses.  The following table sets forth
the amounts and categories of the Companys nonperforming assets for the
periods indicated.


Nonperforming Assets As OfMarch 31,
  June 30,2001
  2000(Dollars in Thousands)Nonaccruing
  loans:One- to four-family
  $427
  $551Commercial
  386
  165Multi-family
  - - - -
  - - - -Commercial business
  1,914
  971Consumer
  679
  317Agriculture
  8
  31Credit cards
  - - - -
  - - - -Mobile homes
  45
  43Total
  $3,459
  $2,078Accruing
  loans delinquent more than 90 days:One- to four-family
  $1
  $-
  - - -Commercial
  - -
  - -
  - -
  - -Multi-family
  - - - -
  - - - -Commercial business
  - - - -
  - - - -Consumer
  - - - -
  - - - -Agriculture
  23
  - - - -Credit cards
  349
  514Mobile homes
  - - - -
  - - - -Total
  $373
  $514Foreclosed
  assets: (2)One- to four-family
  $147
  $214Commercial
  - -
  - -
  - -
  - -Multi-family
  - - - -
  - - - -Commercial business
  - - - -
  - - - -Consumer
  136
  67Agriculture
  - - - -
  - - - -Credit cards
  - - - -
  - - - -Mobile homes
  17
  15Total
  $300
  $296Total
  nonperforming assets
  $4,132
  $2,888Ratio
  of nonperforming assets to total assets
  0.54%
  0.40%Ratio
  of nonperforming loans to total loans 
  (1)
  0.67%
  0.46%(1) 
Nonperforming loans include nonaccruing loans and loans delinquent more
than 90 days.
(2)  Total foreclosed assets does not
include land held for development.


Loans are generally
classified as non-accrual when there are reasonable doubts as to the
collectibility of principal and/or interest or when payment becomes 90 days
past due, except loans which are well secured and in the process of
collection.  Interest collections on
non-accrual loans, for which the ultimate collectability of principal is
uncertain, are applied as principal reductions.  Otherwise, such collections are applied to interest income when
received.  Credit card loans remain in
accrual status until 120 days, when accrued interest income on the loan is
taken out of income.



Nonperforming assets increased to $4.1 million at March
31, 2001 from $2.9 million at June 30, 2000, an increase of $1.2 million.  In addition, the ratio of nonperforming
assets to total assets, which is one indicator of credit risk exposure,
increased slightly to 0.54% at March 31, 2001 as compared to 0.40% at June 30,
2000.



Nonaccruing loans increased to $3.5 million at March 31,
2001 from $2.1 million at June 30, 2000, an increase of $1.4 million.  Included in nonaccruing loans at March 31,
2001 were nine loans totaling $427,000 secured by one- to four-family real
estate, three loans in the amount of $386,000 secured by commercial real
estate, twenty-one loans totaling $1.9 million secured by commercial business,
two mobile home loans totaling $45,000, forty-three consumer loans totaling
$679,000 and one agriculture loan totaling $8,000.  For the three and nine months ended March 31, 2001, an additional
$51,000 and $128,000 of interest income, respectively, would have been
recognized on loans accounted for on a nonaccrual basis had such loans been
current in accordance with their original terms.



Accruing credit card loans delinquent more than 90 days
decreased to $349,000 at March 31, 2001 from $514,000 at June 30, 2000.  A total of $921,000 of credit card loans
were delinquent 30 days at March 31, 2001 as compared to $1.7 million at June
30, 2000.  Net credit card loan
charge-offs for the nine months ended March 31, 2001 were $2.4 million as
compared to $7.5 million for the same period in fiscal 2000.  Using historical stratification data on the
current product, management expects credit card loan write-offs not to exceed
$1.3 million in the next six months.  Of
this amount about 62% will be a charge-off against allowance for credit card
loan losses, of which the Company currently maintains an allowance for credit
card loan losses equal to 15% of the outstanding credit card loan balance, or
about $974,000.  The remaining 38% will
be charged against interest income and credit card fee income in future
periods.



Foreclosed assets increased from $296,000 at June 30,
2000 to $300,000 at March 31, 2001, an increase of $4,000.



At March 31, 2001, the Bank had approximately $23.3
million of other loans of concern that management has determined need to be
closely monitored because of possible credit problems of the borrowers or the
cash flows of the secured properties. 
These loans were considered in determining the adequacy of the allowance
for possible loan losses.  The allowance
for possible loan losses is established based on management's evaluation of the
risks inherent in the loan portfolio and changes in the nature and volume of
loan activity.  Such evaluation, which
includes a review of all loans for which full collectability may not be
reasonably assured, considers the estimated fair market value of the underlying
collateral, economic conditions, historical loan loss experience and other
factors that warrant recognition in providing for an adequate loan loss
allowance.  Although the Company's
management believes that the March 31, 2001 recorded allowance for loan losses
was adequate to provide for potential losses on the related loans, there can be
no assurance that the allowance existing at March 31, 2001 will be adequate in
the future.


The following table sets forth information with respect
to activity in the Companys allowance for loan losses during the periods
indicated.


Nine Months Ended3/31/2001
  3/31/2000(Dollars
  in Thousands)Balance
  at beginning of period
  $8,475
  $11,991Charge-offs:One- to four-family
  (21)
  (31)Commercial
  - -
  - -
  - -
  - -Multi-family
  - - - -
  - - - -Commercial business
  (328)
  (20)Consumer
  (787)
  (644)Agriculture
  - - - -
  (11)Credit cards
  (2,678)
  (8,412)Mobile homes
  (31)
  (30)Total charge-offs
  $(3,845)
  $(9,148)Recoveries:One- to four-family
  $-
  - - -
  $11Commercial
  - -
  - -
  6Multi-family
  - - - -
  - - - -Commercial business
  - - - -
  - - - -Consumer
  211
  219Agriculture
  - - - -
  - - - -Credit cards
  239
  935Mobile homes
  12
  29Total recoveries
  $462
  $1,200Net (charge-offs)
  $(3,383)
  $(7,948)Additions
  charged to operations
  1,574
  4,412Additions
  from acquisition
  97
  - - - -Balance
  at end of period
  $6,763
  $8,455Ratio
  of net (charge-offs) during the period to average loans outstanding during
  the period
  (0.60)%
  (1.52)%Ratio
  of allowance for loan losses to total loans at end of period
  1.19%
  1.56%Ratio
  of allowance for loan losses to nonperforming loans at end of period (1)
  176.49%
  374.45%(1) Nonperforming loans include nonaccruing loans and
accruing loans delinquent more than 90 days.


The distribution of the
Companys allowance for loan losses at the dates indicated is summarized as
follows:




At March 31, 2001
  At June 30, 2000Percent of
  
  Percent ofLoans in
  
  Loans inEach
  
  EachCategory to
  
  Category toAmount
  Total Loans
  Amount
  Total Loans(Dollars
  in Thousands)One-
  to four-family
  $1,329
  22.69%
  $1,299
  23.23%Commercial
  and multi-family real estate (1)
  1,396
  23.83%
  1,442
  25.79%Commercial  business
  1,058
  18.07%
  844
  15.10%Consumer
  (2)
  1,640
  28.00%
  1,536
  27.47%Agricultural
  321
  5.48%
  323
  5.77%Credit
  cards
  974
  1.16%
  2,976
  1.66%Mobile
  homes
  45
  0.77%
  55
  0.98%Total
  $6,763
  100.00%
  $8,475
  100.00%(1) Includes construction loans.
(2) Excludes allowance for loan losses relating to mobile home loans and credit
card loans.



The allowance for loan losses was $6.8 million at March
31, 2001 as compared to $8.5 million at June 30, 2000.    The ratio of the allowance for loan losses
to total loans was 1.19% at March 31, 2001 and 1.52% at June 30, 2000.  The Companys management has considered
nonperforming assets and other assets of concern in establishing the allowance
for loan losses.  The Company continues
to monitor its allowance for possible loan losses and make future additions or
reductions in light of the level of loans in its portfolio and as economic
conditions dictate.



The current level of the allowance
for loan losses is a result of management's assessment of the risks within the
portfolio based on the information revealed in credit reporting processes. The
Company utilizes a risk-rating system on all commercial business, agricultural,
construction and multi-family and commercial real estate loans, including
purchased loans, that exceed $250,000. 
A monthly credit review is performed on all types of loans to establish
the necessary reserve based on the estimated risk within the portfolio. This
assessment of risk takes into account the composition of the loan portfolio,
historical loss experience for each loan category, previous loan experience,
concentrations of credit, current economic conditions and other factors that in
managements judgment deserve recognition. As of March 31, 2001, $974,000 of
the $6.8 million allowance for loan losses was reserved for the credit card
loan portfolio. Regulators have reviewed the Company's methodology for
determining allowance requirements on the Companys loan portfolio and have
made no recommendations for increases in the allowances during the nine month
period ended March 31, 2001 and year ended June 30, 2000.


Comparison of the Nine Months Ended March 31, 2001 and March
31, 2000



General.The Company's net income decreased $263,000 for the
nine months ended March 31, 2001 as compared to the nine months ended March 31,
2000. As discussed in more detail below, this decrease was due primarily to a
decrease in noninterest income of $2.9 million, an increase in noninterest
expense of $332,000 and an increase in income tax expense of $258,000 which
were partially offset by an increase in net interest income of $379,000 and a
decrease in the provision for losses on loans of $2.8 million.



Interest Income.  Interest income increased $5.9 million from $38.9 million for the
nine months ended March 31, 2000 to $44.8 million for the nine months ended
March 31, 2001.  The $62.6 million
increase of average earning assets resulted in a $3.7 million increase in interest
income.  The average yield on
interest-earning assets increased from 8.16% to 8.56% for the nine months ended
March 31, 2000 and March 31, 2001, respectively.



Interest Expense.  Interest expense increased $5.5 million from
$21.5 million for the nine months ended March 31, 2000 to $27.0 million for the
nine months ended March 31, 2001.  A
$3.5 million increase in interest expense was the result of the increase in the
average rate paid on interest-bearing liabilities from 4.72% to 5.41% for the
nine months ended March 31, 2000 and March 31, 2001, respectively.  In addition, the average balance of
interest-bearing liabilities increased $58.6 million at March 31, 2001 as
compared to the same period in the prior fiscal year.



Net Interest Income. The Company's net
interest income for the nine months ended March 31, 2001 increased $379,000 to
$17.9 million compared to $17.5 million for the same period in fiscal
2000.  The increase in net interest
income reflects an overall increase in net earning assets offset by a reduction
in the net interest spread on average earning assets to 3.15% for the nine
months ended March 31, 2001 from 3.44% for the same period in fiscal 2000.



During the nine months ended March 31, 2001, the Company
increased its average balances of commercial and consumer loans. The Company
anticipates activity in this type of lending to continue in future years,
subject to market demand.  In addition,
the Company sells the majority of conventional single-family residential real
estate loan originations into the secondary market.  Net interest income is expected to trend upward as a result of
this lending activity as interest rate yields are generally higher on these
types of loans compared to the yield provided by conventional single-family
residential real estate loans.  This
lending activity is considered to carry a higher level of risk due to the
nature of the collateral and the size of the individual loans.  As such, the Company anticipates continued
increases in its allowance for loan losses.



Provision for Losses on Loans.During the
nine months ended March 31, 2001, the Company recorded a provision for losses
on loans of $1.6 million as compared to $4.4 million for the nine months ended
March 31, 2000, a decrease of $2.8 million. A majority of the decrease is
related to reduction of the subprime credit card loan portfolio from $10.5
million at March 31, 2000 to $6.6 million at March 31, 2001.  See "Asset Quality" for further
discussion.



Noninterest Income.  Noninterest income was $9.0 million for the
nine months ended March 31, 2001 as compared to $11.8 million for the nine
months ended March 31, 2000, a decrease of $2.9 million.



The decrease in credit card fee income of $3.8 million
for the nine months ended March 31, 2001 as compared to the same period in
fiscal 2000 is primarily due to a decrease in fees received on unsecured credit
cards. This is a result of the credit card portfolio decreasing from $10.5
million at March 31, 2000 as compared to $6.6 million at March 31, 2001. The
fee income represents interchange fees, annual/monthly fees, late fees and
other miscellaneous fees. This credit card program was initiated in fiscal
1997. The Company ceased credit card applications in March 1999.  This decreased the level of these fees.  Interest income on credit card loans is
included in interest income on loans.



Fees on deposits increased $676,000 due to an increase
in volume from deposits acquired in new branch acquisitions/openings during the
last half of fiscal 2000 and the first three quarters of fiscal 2001.



Commission and insurance income from the sale of
financial and insurance products increased $221,000 primarily due to a greater
emphasis on the production of noninterest income revenue.



Noninterest Expense.  Noninterest expense increased $332,000 as
compared to the same period in the prior fiscal year primarily due to increases
in compensation and employee benefits of $997,000, occupancy and equipment of
$337,000 and amortization of intangible assets of $83,000 (increases primarily
related to seven new bank branches opened and two non-bank operations acquired
since September of 1999) offset by a decrease in credit card processing
expenses of $1.1 million. This expense represents costs for collecting loans
and servicing credit cards for the unsecured credit card program.


Income tax expense.The Company's income tax expense for the
nine months ended March 31, 2001 was $2.4 million as compared to $2.1 million
for the nine months ended March 31, 2000, an increase of $258,000. This increase
was primarily due to the increase in the Companys effective tax rate from
35.11% for the nine months ended March 31, 2000 to 39.37% for the nine months
ended March 31, 2001.



Comparison of the Three Months Ended March 31, 2001 and March
31, 2000



General.The
Company's net income decreased $229,000 to $1.1 million for the three months
ended March 31, 2001 as compared to $1.3 million for the three months ended
March 31, 2000.  As discussed in more
detail below, this decrease was due primarily to a decrease in net interest
income of $6,000, a decrease in noninterest income of $477,000, an increase in
noninterest expense of $317,000 offset by a decrease in provision for losses on
loans of $564,000 and a decrease in income tax expense of $7,000.



Interest Income.  Interest income increased $1.5 million from $13.5 million for the
three months ended March 31, 2000 to $15.0 million for the three months ended
March 31, 2001.  The $63.6 million
increase of average earning assets resulted in a $1.1 million increase in
interest income.  The average yield on
interest-earning assets increased from 8.30% to 8.47% for the three months
ended March 31, 2000 and March 31, 2001, respectively.



Interest Expense.  Interest expense increased $1.5 million from
$7.6 million for the three months ended March 31, 2000 to $9.1 million for the
three months ended March 31, 2001.  An
$869,000 increase in interest expense was the result of the increase in the
average rate paid on interest-bearing liabilities from 4.92% to 5.42% for the
three months ended March 31, 2000 and March 31, 2001, respectively.  In addition, the average balance of
interest-bearing liabilities increased $58.6 million at March 31, 2001 as
compared to the same period in the prior fiscal year.



Net Interest Income. The Company's net
interest income for the three months ended March 31, 2001 decreased $6,000 as
compared to the same period in fiscal 2000. 
The decrease in net interest income reflects a reduction in the net
interest spread on average earning assets to 3.05% for the three months ended
March 31, 2001 from 3.38% offset by an overall increase in net earning assets
for the same period in fiscal 2000.



During the three months ended March 31, 2001, the
Company increased its average balances of commercial loans. The Company
anticipates activity in this type of lending to continue in future years,
subject to market demand.  In addition,
the Company sells the majority of conventional single-family residential real
estate loan originations into the secondary market.  Net interest income is expected to trend upward as a result of
this lending activity as interest rate yields are generally higher on these
types of loans compared to the yield provided by conventional single-family
residential real estate loans.  This
lending activity is considered to carry a higher level of risk due to the
nature of the collateral and the size of the individual loans.  As such, the Company anticipates continued
increases in its allowance for loan losses.



Provision for Losses on Loans.During the
three months ended March 31, 2001, the Company recorded a provision for losses
on loans of $310,000 as compared to $874,000 for the three months ended March
31, 2000, a decrease of $564,000. A majority of the decrease is related to
reduction of the subprime credit card loan portfolio from $10.5 million at
March 31, 2000 to $6.6 million at March 31, 2001.  See "Asset Quality" for further discussion.



Noninterest Income.  Noninterest income was $2.7 million for the
three months ended March 31, 2001 as compared to $3.2 million for the three
months ended March 31, 2000, a decrease of $477,000.



The decrease in credit card fee income of $774,000 for
the three months ended March 31, 2001 as compared to the same period in fiscal
2000 is primarily due to a decrease in fees received on unsecured credit cards.
This is a result of the credit card portfolio decreasing from $10.5 million at
March 31, 2000 as compared to $6.6 million at March 31, 2001. The fee income
represents interchange fees, annual/monthly fees, late fees and other
miscellaneous fees. This credit card program was initiated in fiscal 1997. The
Company ceased credit card applications in March 1999.  This decreased the level of these fees.  Interest income on credit card loans is
included in interest income on loans.



Fees on deposits increased $227,000 due to an increase
in volume from deposits acquired in new branch acquisitions/openings during the
last half of fiscal 2000 and the first three quarters of fiscal 2001.



Commission and insurance income from the sale of
financial and insurance products increased $42,000 primarily due to a greater
emphasis on the production of noninterest income revenue.


Noninterest Expense.  Noninterest expense increased $317,000 as
compared to the same period in the prior fiscal year primarily due to increases
in compensation and employee benefits of $302,000 and occupancy and equipment
of $113,000 offset by a decrease in credit card processing expenses of $87,000.



Income tax expense.  The Company's income tax expense for the
three months ended March 31, 2001 was $709,000 as compared to $716,000 for the
three months ended March 31, 2000, a decrease of $7,000. This decrease was
primarily due to the decrease of $236,000 in the Companys income before income
taxes to $1.8 million as compared to the same period in the prior fiscal year.



Liquidity and Capital Resources



The Banks primary sources of funds are deposits, FHLB
advances, amortization and prepayments of loan principal (including
mortgage-backed securities) and, to a lesser extent, sales of mortgage loans,
sales and/or maturities of securities, mortgage-backed securities, and
short-term investments.  While scheduled
loan payments and maturing securities are relatively predictable, deposit flows
and loan prepayments are more influenced by interest rates, general economic
conditions, and competition. The Bank attempts to price its deposits to meet
its asset/liability objectives consistent with local market conditions.  Excess balances are invested in overnight
funds.



Federal regulations have historically required the Bank
to maintain minimum levels of liquid assets. 
The required percentage has varied from time to time based upon economic
conditions and savings flows and is currently 4% of net withdrawable savings
deposits and current borrowings.  Liquid
assets for purposes of this ratio include cash, certain time deposits, U.S.
government and corporate securities and other obligations generally having
remaining maturities of less than five years. 
The Bank has historically maintained its liquidity ratio at a level in
excess of that required by these regulations. 
At March 31, 2001, the Bank's liquidity ratio was 11.78%.



Liquidity management is both a daily and long-term
responsibility of management.  The Bank
adjusts its investments in liquid assets based upon management's assessment of
(i) expected loan demand, (ii) projected loan sales, (iii) expected deposit
flows, (iv) yields available on interest-bearing deposits, and (v) the
objectives of its asset/liability management program. Excess liquidity is
invested generally in interest-bearing overnight deposits and other short-term
government and agency obligations. 
During the nine months ended March 31, 2001, the Bank generated funds
internally that allowed it to pay down FHLB advances and decrease borrowings
with the FHLB by $10.5 million.  See
Financial Condition Data for further discussion.



The Bank anticipates that it will have sufficient funds
available to meet current loan commitments. 
At March 31, 2001, the Bank had outstanding commitments to originate or
purchase loans of $30.7 million and to sell loans of $20.9 million.  At March 31, 2001, the Bank had no
commitments to purchase or sell securities.



Although deposits are the Banks primary source of
funds, the Banks policy has been to utilize borrowings where the funds can be
invested in either loans or securities at a positive rate of return or to use
the funds for short term liquidity purposes. 
See Financial Condition Data for further analysis.



The Company currently has in effect a stock buy back
program in which up to 10% of the common stock of the Company outstanding on
April 22, 2001 may be acquired through April 30, 2002.  No shares of common stock have been purchased
pursuant to this current program. 
Pursuant to a series of stock buy back programs initiated by the Company
since 1996, the Company has purchased an aggregate of 1,105,209 shares of
common stock through March 31, 2001.



Savings institutions insured by the Federal Deposit
Insurance Corporation are required by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") to meet three
regulatory capital requirements.  If a
requirement is not met, regulatory authorities may take legal or administrative
actions, including restrictions on growth or operations or, in extreme cases,
seizure.  Institutions not in compliance
may apply for an exemption from the requirements and submit a recapitalization
plan.  Under these capital requirements,
at March 31, 2001, the Bank met all current capital requirements.



The Office of Thrift Supervision (OTS) has adopted a
core capital requirement for savings institutions comparable to the requirement
for national banks.  The OTS core
capital requirement is 3% of total adjusted assets for thrifts that receive the
highest supervisory rating for safety and soundness.  The Bank had core capital of 6.04% at March 31, 2001.


Pursuant to the Federal Deposit Insurance Corporation
Insurance Act (FDICIA), the federal banking agencies, including the OTS, have
also proposed regulations authorizing the agencies to require a depository
institution to maintain additional total capital to account for concentration
of credit risk and the risk of non-traditional activities.  No assurance can be given as to the final
form of any such regulation.



Impact
of Inflation and Changing Prices



The Consolidated Financial Statements and Notes thereto
presented herein have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars without considering the change
in the relative purchasing power of money over time due to inflation.  The impact of inflation is reflected in the
increased cost of the Bank's operations. Unlike most industrial companies,
nearly all the assets and liabilities of the Bank are monetary in nature.  As a result, interest rates have a greater
impact on the Bank's performance than do the effects of general levels of
inflation.  Interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services.



Item
3.



Quantitative and Qualitative
Disclosures about Market Risk



Interest rate risk is the most significant market risk
affecting the Company.  Other types of
market risk, such as foreign exchange rate risk and commodity price risk, do
not arise in the normal course of the Companys business activities.



The composition of the Banks balance sheet results in
maturity mismatches between interest-earning assets and interest-bearing
liabilities.  The scheduled maturities
of the Banks fixed rate interest-earning assets are longer than the scheduled
maturities of its fixed rate interest-bearing liabilities.  This mismatch exposes the Bank to interest
rate risk.  In a rising rate scenario,
as measured by the OTS interest rate risk exposure simulation model, the
estimated market or portfolio value (PV) of the Banks assets would decline
in value to a greater degree than the change in the PV of the Banks
liabilities, thereby reducing net portfolio value (NPV), the estimated market
value of its shareholders equity.



As of September 30, 2000, under a rate shock scenario of
plus 200 basis points (bp), the Banks pre-shock NPV ratio (NPV as a % of PV
of assets) was estimated in the OTS model to be 9.25%.  The post-shock NPV ratio was estimated to be
8.88%, a decline of 37bp.  As of
December 31, 2000, the most recent report available, the post-shock ratio for a
200 bp increase in market interest rates was estimated to be 8.00%, a decrease
of 44bp from the pre-shock NPV ratio estimate of 8.43%.



In managing market risk and the asset/liability mix, the
Bank has placed its emphasis on developing a portfolio in which, to the extent
practicable, assets and liabilities reprice within similar periods. The effect
of this policy will generally be to reduce the Banks sensitivity to interest
rate changes.  The goal of this policy
is to provide a relatively consistent level of net interest income in varying interest
rate cycles and to minimize the potential for significant fluctuations from
period to period.


HF FINANCIAL CORP.



FORM 10-Q


PART
II.  OTHER INFORMATION



Item 1.            Legal Proceedings

None

Item 2.            Changes in Securities

NoneItem
3.            Defaults upon Senior
Securities

None

Item
4.            Submission of Matters to
a Vote of Security Holders

NoneItem 5.            Other Information

None

Item
6.            Exhibits and Reports on
Form 8-K

None





No other information is
required to be filed under Part II of the form.


HF FINANCIAL CORP.



FORM
10-Q
SIGNATURES



Pursuant to the requirements 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.




HF Financial Corp.(Registrant)Date:
  May
  14, 2001
  
  by     /s/ Curtis L. HageCurtis L. Hage, Chairman,
  PresidentAnd Chief Executive Officer(Duly Authorized Officer)Date:
  May
  14, 2001
  
  by     /s/ Brent E. JohnsonBrent E. Johnson, Senior Vice
  President,Chief Financial Officer And
  Treasurer(Principal Financial and
  Accounting Officer)