Annual Report of an Employee Stock Purchase, Savings or Similar Plan — Form 11-K Filing Table of Contents
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11-K — Annual Report of an Employee Stock Purchase, Savings or Similar Plan
Report
of Independent Registered Public Accounting Firm………………………. 1
Financial Statements
Statements of net assets available for benefits………………………………… 2
Statement of changes in net assets available for benefits……………………… 3
Notes to financial statements………………………………………………...… 4 - 15
Supplementary Information
Schedule H, line 4i - schedule of assets held at end of year……………………. 16
Signatures……………………………………………………………………… 17
Exhibits
Exhibit 23 - Consent of Independent Registered Public Accounting Firm…… 18
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Plan Administrative Committee
HF Financial Corp. Retirement Savings Plan
Sioux Falls, South Dakota
We have audited the accompanying statements of net assets available for benefits of HF Financial Corp. Retirement Savings Plan (the Plan) as of June 30, 2014 and 2013, and the related statement of changes in net assets available for benefits for the year ended June 30, 2014. These financial statements are the responsibility of the Plan’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States.) Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of HF Financial Corp. Retirement Savings Plan as of June 30, 2014 and 2013, and the changes in net assets available for benefits for the year ended June 30, 2014 in conformity with accounting principles generally accepted in the United States of America.
Our
audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule H, Line 4i - Schedule of Assets Held at End of Year as of June 30, 2014 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Additions/(reductions) to net assets attributed to:
Investment income:
Net
appreciation in fair value of investments (Note 3)
$
1,750,326
Less investment expense
(86,639
)
Net investment income/(loss)
1,663,687
Interest
income on notes receivable from participants
3,808
Contributions:
Employer
354,151
Participants
1,083,119
Rollover
757,371
2,194,641
Total
additions
3,862,136
Deductions from net assets attributed to:
Benefits
paid to participants
1,771,989
Trustee and accounting fees
24,817
Total deductions
(1,796,806
)
Net
increase/(decrease)
2,065,330
Transfer in from HF Financial Corp. Employee Stock
Ownership
Plan for ESOP Diversification
14,804
Net increase/(decrease) after transfers
2,080,134
Net
assets available for benefits:
Beginning of year
10,937,990
End of year
$
13,018,124
See
Notes to Financial Statements.
3
HF Financial Corp. Retirement Savings Plan
Notes to Financial Statements
Note 1. Plan Description
and Amendments
The following description of the HF Financial Corp. Retirement Savings Plan (the Plan) provides only general information. Participants should refer to the Plan agreement for a complete description of the Plan’s provisions.
General and plan amendments: The Plan is a defined contribution plan established for the benefit of the employees of HF Financial Corp. (the Company). The Plan and the Trust of which it is a part are intended to satisfy all of the requirements for a qualified retirement plan under the appropriate provisions of the Internal Revenue Code (IRC). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Effective
July 1, 2007, a non-standardized prototype cash or deferred profit sharing plan sponsored by Home Federal Bank was adopted. Effective July 1, 2010, a non-standardized prototype cash or deferred profit sharing plan sponsored by Retirement Direct LLC was adopted.
The Plan is administered by the Plan Administrative Committee comprised of up to four persons appointed by the Company’s Board of Directors. The Plan Trustee is Home Federal Bank, Investment Management and Trust Department.
Effective February 17, 2010 Home Federal Bank, as Trustee, contracted with First
Mercantile to perform recordkeeping and custodial tasks for the Plan, and the Plan’s investment assets were transferred to investment options offered by First Mercantile Trust Company. Retirement Direct continues to be the third party administrator.
Eligibility: Employees of the Company and its participating subsidiaries are generally eligible to participate in the 401(k) portion of the Plan on the first day of the month after they have completed 30 consecutive calendar days of employment and attained age 21. Employees are eligible for other benefits of the Plan on the first day of the quarter
after completing 6 months of service and attaining age 21.
Contributions: Each year, participants may make salary deferral contributions in any percentage from 1% to 50% of pretax annual compensation, as defined in the Plan. For each calendar quarter, the Company makes a fixed matching contribution of 50% of participants’ deferrals up to 6% of the participants’ compensation. The Company may also make discretionary profit sharing and/or matching contributions to the Plan.
There were no discretionary contributions
made to the plan for the year ended June 30, 2014. Participants may roll over amounts representing distributions from other qualified defined benefit or contribution plans.
Contributions are subject to certain limitations.
Participant accounts: Each participant’s account is credited with the participant’s contributions, allocations of the Company’s contributions, Plan earnings, and charged with payments of benefits and an allocation of administrative expenses. Plan earnings are allocated based on participant account balances, as defined.
4
HF
Financial Corp. Retirement Savings Plan
Notes to Financial Statements
Note 1. Plan Description and Amendments (continued)
Forfeitures: At June 30, 2014 and 2013, forfeited non-vested accounts totaled $5,484 and $0 respectively. Forfeited balances of terminated participants’ non-vested employer matching accounts are allocated first to restore benefits under the Plan, if applicable; second to pay qualifying Plan expenses, if any; third to
reduce employer contributions
for the year, if any; and fourth to provide an additional contribution to eligible participants for the year. During the year ended June 30, 2014, $7,019 in forfeited non-vested accounts was used to pay qualifying Plan expenses.
Participants’ investment options: Participants must direct their salary deferral, Roth Elective contributions, and rollover contributions to selected investments as made available and determined by the Plan Administrator. Participants may change their investment options daily.
Vesting: Participants are immediately vested in their Savings Plan 401(k) contributions plus actual earnings thereon. Vesting in the
Company’s matching contribution portion of participants’ accounts plus actual earnings thereon is based on years of continuous service. A participant is 100 percent vested after three years of credited service in the employer matching contribution.
Payment of benefits: No distributions from the Plan will be made until a participant retires, dies (in which case, payment shall be made to his or her beneficiary or, if none, to his or her legal representatives), or otherwise terminates employment with the Company. On termination of service due to death, disability or retirement, a participant may elect to receive benefits in either a lump-sum
amount equal to the value of the participant’s vested interest in his or her account, or annual installments not to exceed the participant’s life expectancy. A terminated participant with a vested balance of less than $1,000 may be automatically paid out by the Plan upon termination. Distributions may be made at the participant’s election prior to termination upon attainment of age 59 ˝, or hardship as defined in the Plan Document.
Notes Receivable from Participants: Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their vested account balance. The loans are secured by the balance in the participant’s
account and bear interest deemed reasonable by the Plan Administrator. Loan terms range from one to five years, or longer for the purchase of a principal residence. Principal and interest are paid no less than quarterly through payroll deductions. Interest rates as of June 30, 2014 were 4.25%.
Voting rights: Each participant owning HF Financial Corp common stock held in the unitized stock fund is entitled to exercise voting rights attributable to the shares allocated to his or her account and is notified by the Trustee prior to the
time that such rights are to be exercised. The Trustee is permitted to vote any allocated share for which instructions have not been given by a participant. The Trustee votes such shares in the same proportion as the participants who voted their shares.
5
HF Financial Corp. Retirement Savings Plan
Notes
to Financial Statements
Note 2. Significant Accounting Policies
Nature of business of Plan Sponsor: HF Financial Corp. and its subsidiaries, the sponsoring employer companies, offer banking, insurance and other financial services to customers in South Dakota and Minnesota.
Basis of accounting: The financial statements of the Plan are prepared under the accrual method of accounting.
Use of estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Investment valuation and income recognition: The Plan’s investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Investment contracts
held by a defined-contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. As required by the FSP, the Statement of Net Assets Available for Benefits presents the fair value of the investment contracts as well as the adjustment of the fully benefit-responsive
investment contracts from fair value to contract value. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.
Purchases and sales of securities are recorded on a trade date basis. Interest income is recorded on the accrual basis. Dividend income is accrued on the ex-dividend date. Net appreciation (depreciation) includes the plan’s gains and losses on investments bought and sold as well as those held during the year.
Notes Receivable from Participants:
Notes Receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent Notes Receivables are reclassified as distributions based upon the terms of the plan document.
Payment of benefits: Benefits are recorded when paid.
Administrative expenses: Certain administrative functions are performed by officers or employees of the Company. No such officer or employee receives compensation from the Plan for service provided. Administrative expenses incurred relative to the Plan are primarily paid by the Plan. Legal fees
incurred by the Plan for the year ended June 30, 2014 have been paid by the Plan. All administrative expenses not paid by the Company are the responsibility of the Plan.
Fair Value Measurement: Topic ASC 820, “Fair Value Measurements and Disclosures”, establishes a consistent framework for measuring fair value under GAAP and expands disclosure requirements for fair value measurements. Fair values represent the estimated price that would be received from selling an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The standard describes three levels of inputs that may be used to measure fair value:
Level 1:
Inputs
to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
Level 2:
Inputs to the valuation methodology include:
-Quoted prices for similar assets or liabilities in active markets;
-Quoted prices for identical or similar assets or liabilities in inactive markets;
-Inputs, other than quoted prices, observable for the asset or liability; and
-Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If
the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3:
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The following is a description of the valuation methodologies used for assets measured at fair value. There
have been no changes in the methodologies used at June 30, 2014 and 2013.
Collective investment funds: Valued at fair value based on the net asset value (NAV) of the observable market prices of the underlying assets held in the fund managed.
Unitized stock fund: Valued at closing price of the underlying securities reported on the active market on which the individual securities are traded.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies
or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
7
HF Financial Corp. Retirement Savings Plan
Notes to Financial Statements
Note 3. Investments
The following presents the fair value of investments that are 5% or more of the Plan’s net assets as of June 30:
2014
2013
Unitized
stock fund
HF Financial Corp. Stock Fund
$
1,005,378
$
710,127
Collective investment funds
LifeStyle
Moderately Aggressive Growth
2,748,895
2,885,231
LifeStyle Aggressive Growth
2,290,691
1,968,767
FFTW Income Plus (Stable Value)
1,571,225
1,334,178
LifeStyle
Moderately Conservative Growth
1,048,268
794,915
Vanguard Midcap Index Fund
656,372
—
Funds individually less than 5% of Plan net assets
3,531,724
3,102,838
Total
Investments
$
12,852,553
$
10,796,056
Participant directed investment in HF Financial Corp. common stock results from market purchase. Effective February 18, 2010, the common stock is held in a unitized stock fund held by First Mercantile Trust Company.
During
the year ended June 30, 2014, the Plan’s investments (including investments bought, sold and held during the year) appreciated in fair value by $1,750,326 as follows:
Collective investment funds
$
1,703,011
Unitized stock
fund
47,315
$
1,750,326
The classifications of investment earnings reported above and on the statement of changes in net assets may differ from the classifications of earnings on Form 5500 due to different reporting requirements on Form 5500.
8
HF
Financial Corp. Retirement Savings Plan
Notes to Financial Statements
The following sets forth by level, within fair value hierarchy, the Plan’s assets at fair value as of June 30, 2014:
Quoted
Prices
Significant Other
Significant
In Active
Observable
Unobservable
Markets
Inputs
Inputs
Total
at
(Level 1)
(Level 2)
(Level 3)
Fair Value
Unitized Stock fund
HF
Financial Corp. Stock Fund
—
$
1,005,378
—
$
1,005,378
Collective
Investment funds
Domestic Equity funds
—
2,801,279
—
2,801,279
Fixed
income funds
—
509,616
—
509,616
International equity funds
—
591,044
—
591,044
Asset
Allocation funds
—
6,374,011
—
6,374,011
Stable value fund
—
1,571,225
—
1,571,225
Total
Assets
—
$
12,852,553
—
$
12,852,553
The
following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of June 30, 2013:
Quoted Prices
Significant Other
Significant
In
Active
Observable
Unobservable
Markets
Inputs
Inputs
Total
at
(Level 1)
(Level 2)
(Level 3)
Fair Value
Unitized Stock fund
HF
Financial Corp. Stock Fund
—
$
710,127
—
$
710,127
Collective
Investment funds
Domestic Equity funds
—
1,790,224
—
1,790,224
Fixed
income funds
—
518,672
—
518,672
International equity funds
—
422,003
—
422,003
Asset
Allocation funds
—
6,020,852
—
6,020,852
Stable value fund
—
1,334,178
—
1,334,178
Total
Assets
—
$
10,796,056
—
$
10,796,056
9
HF
Financial Corp. Retirement Savings Plan
Notes to Financial Statements
Financial Accounting Standards Board Update 2009-12, Fair Value Measurement and Disclosure (Topic 820): Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent) requires disclosures of certain attributes in entities that calculate a net asset value per share (or its equivalent) and do not have a readily determinable fair value. The following tables set forth the disclosure of the attributes as of June 30:
2014
Unfunded
Redemption
Redemption
Fair
Value
Commitments
Frequency
Notice Period
Collective funds:
American
Funds Amcap
$
306,873
—
Daily
Daily
Pimco Total Return Instl
354,983
—
Daily
Daily
Dodge
& Cox International Stock Fund
449,168
—
Daily
Daily
iShares MSCI EAFE Index ETF
141,876
—
Daily
Daily
Vanguard
500 Index Fund
400,410
—
Daily
Daily
Vanguard GNMA
36,652
—
Daily
Daily
Vanguard
Midcap Index
656,372
—
Daily
Daily
Vanguard Growth Index
236,824
—
Daily
Daily
Vanguard
Total Bond Market Index
117,981
—
Daily
Daily
Vanguard Value Index
224,944
—
Daily
Daily
Vanguard
Small Cap Stock Index
606,721
—
Daily
Daily
T. Rowe Price Value Fund
369,135
—
Daily
Daily
LifeStyle
Income & Conservative
286,157
—
Daily
Daily
LifeStyle Moderately Conservative
1,048,268
—
Daily
Daily
LifeStyle
Moderately Aggressive
2,748,895
—
Daily
Daily
LifeStyle Aggressive Growth Strategy
2,290,691
—
Daily
Daily
FFTW
Income Plus (Stable Value)
1,571,225
—
Daily
Daily
Unitized stock funds:
HF
Financial Corp. Stock Fund
1,005,378
—
Daily
Daily
10
HF
Financial Corp. Retirement Savings Plan
Notes to Financial Statements
2013
Unfunded
Redemption
Redemption
Fair
Value
Commitments
Frequency
Notice Period
Collective funds:
American
Funds Amcap
$
182,877
—
Daily
Daily
Pimco Total Return Instl
367,490
—
Daily
Daily
Dodge
& Cox International Stock Fund
313,978
—
Daily
Daily
iShares MSCI EAFE Index ETF
108,025
—
Daily
Daily
Vanguard
500 Index Fund
276,287
—
Daily
Daily
Vanguard GNMA
42,438
—
Daily
Daily
Vanguard
Midcap Index
396,014
—
Daily
Daily
Vanguard Growth Index
151,887
—
Daily
Daily
Vanguard
Total Bond Market Index
108,744
—
Daily
Daily
Vanguard Value Index
156,095
—
Daily
Daily
Vanguard
Small Cap Stock Index
375,980
—
Daily
Daily
T. Rowe Price Value Fund
251,084
—
Daily
Daily
LifeStyle
Income & Conservative
371,939
—
Daily
Daily
LifeStyle Moderately Conservative
794,915
—
Daily
Daily
LifeStyle
Moderately Aggressive
2,885,231
—
Daily
Daily
LifeStyle Aggressive Growth Strategy
1,968,767
—
Daily
Daily
FFTW
Income Plus (Stable Value)
1,334,178
—
Daily
Daily
Unitized stock funds:
HF
Financial Corp. Stock Fund
710,127
—
Daily
Daily
The AMCAP Fund (American Funds) seeks to provide long-term capital appreciation. The fund invests primarily in common stocks of U.S. companies that have solid long-term
growth records and the potential for good future growth. The investment adviser uses a system of multiple portfolio counselors in managing the fund’s assets. Under this approach, the portfolio of the fund is divided into segments managed by individual counselors who decide how their respective segments will be invested.
The PIMCO Total Return Fund seeks to maximize total return consistent with prudent investment risk and preservation of capital. The fund normally invests at least 65% of its total assets in a diversified portfolio of Fixed Income Instruments of varying maturities. These may be represented by forwards or derivatives such as options, futures contracts, or swap agreements. It invests
primarily in investment-grade debt securities, but may invest up to 10% of total assets in high-yield securities. The fund may invest up to 15% of its total assets in securities and instruments that are economically tied to emerging market countries.
11
HF Financial Corp. Retirement Savings Plan
Notes
to Financial Statements
Note 3. Investments (continued)
The Dodge & Cox International Stock Fund seeks long-term capital appreciation. The fund invests primarily in a diversified portfolio of equity securities issued by non-U.S. companies from at least three different foreign countries, including emerging markets. It may invest at least 80% of total assets in common stocks, preferred stocks, securities convertible into common stocks, and securities that carry the right to buy common stocks of non-U.S. companies. The fund invests primarily in medium-to-large well established companies based on standards of the applicable
market.
The iShares MSCI EAFE Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI EAFE Index. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. The index has been developed by MSCI as an equity benchmark for its international stock performance. It is non-diversified.
The Vanguard 500 Index Fund seeks investment results that correspond generally to the performance, before fees and expenses, of the S&P 500 Index. The fund employs a passive management or
indexing investment approach designed to track the performance of the Standard & Poor‘s 500 Index, which is a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies. It attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.
The Vanguard GNMA Fund seeks current income while minimizing fluctuations in price volatility. The fund normally invests at least 80% of assets in Government National Mortgage Association pass-through certificates, which are fixed income securities representing part ownership in a pool of mortgage loans supported by the full faith and credit of the U.S. government. It may invest in other
types of securities such as U.S. Treasury or other U.S. government agency securities, as well as in repurchase agreements collateralized by such securities. The fund’s dollar-weighted average maturity depends on homeowner prepayments of the underlying mortgages which normally fall within an intermediate-term range of (3-10 yrs).
The Vanguard Mid Capitalization Index Fund seeks to track the performance, before fees and expenses, of the MSCI US Mid Cap 450 Index. The fund employs a passive management or indexing investment approach designed to track the performance of the MSCI US Mid Cap 450 Index, a broadly diversified index of stocks of medium-size U.S. companies. It attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately
the same proportion as its weighting in the index.
The Vanguard Growth Index Fund seeks to match the performance, before fees and expenses, of the MSCI US Prime Market Growth Index. The fund invests all, or substantially all, of its assets in the stocks that make up the index. The index measures the investment return of large-capitalization growth stocks.
12
HF Financial Corp. Retirement Savings Plan
Notes
to Financial Statements
Note 3. Investments (continued)
The Vanguard Total Bond Market Index Fund seeks to achieve a total rate of return consistent with prudent investment risk and preservation of capital. The fund employs a “passive management” or indexing investment approach designed to track the performance of the Barclays Capital U.S. Aggregate Float Adjusted Index. It invests in a broadly diversified collection of securities that, in the aggregate, approximates the full index in terms of key risk factors and other characteristics. The fund invests at least 80% of assets in bonds held in the index. It maintains a dollar-weighted average maturity consistent
with that of the index, ranging (5-10 yrs).
The Vanguard Value Index Fund seeks investment results that correspond generally to performance, before fees and expenses, of the MSCI US Prime Market Value Index. The fund generally invests all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. The index measures the investment return of large capitalization value stocks.
The Vanguard Small Capitalization Stock Index Fund seeks to track the performance of the MSCI US Small Cap 1750 Index that measures the investment return of small-capitalization stocks. The fund employs a passive management
or indexing investment approach designed to track the performance of the MSCI US Small Cap 1750 Index, a broadly diversified index of stocks of smaller U.S. companies. It attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.
The T. Rowe Price Value Fund seeks long-term capital appreciation. The fund invests at least 65% of assets in common stocks the fund manager regards as undervalued. Holdings are expected to consist primarily of large-cap stocks, but may also include mid-cap and small-cap companies. The fund invests most assets in U.S. common stocks, but may also purchase other securities, including foreign stocks, futures, and options, in keeping with fund objectives.
LifeStyle
Income & Conservative Growth (formerly LifeStyle Income and Conservative Growth Strategy) seeks to achieve as high a total rate of return on an annual basis as is considered consistent with prudent investment risk and the preservation of capital. The fund is a risk based asset allocation fund investing in a combination of CITFs offered by First Mercantile. The fund is a highly diversified investment option combining multiple investment styles and strategies. The fund is designed for investors seeking actively managed conservative growth & income based on strategic long-term time horizon implemented through a flexible risk-managed approach. The portfolio typically consists of 25% equity funds, 60% fixed income funds & 15% cash.
13
HF
Financial Corp. Retirement Savings Plan
Notes to Financial Statements
Note 3. Investments (continued)
LifeStyle Moderately Conservative Growth (formerly LifeStyle Conservative Growth Strategy) seeks to achieve as high a total rate of return on an annual basis as is considered consistent with prudent investment risk and the preservation of capital. This Fund is a risk based asset allocation fund investing in a combination of CITFs offered by First Mercantile. The fund is a highly diversified investment option combining multiple investment styles and strategies. The fund is designed for investors
seeking actively managed conservative growth based on a strategic long-term time horizon implemented through a flexible risk-managed approach. The portfolio typically consists of 45% in equity funds, 50% fixed income funds and 5% cash.
LifeStyle Moderately Aggressive Growth (formerly LifeStyle Moderate Growth Strategy) seeks to achieve as high a total rate of return on an annual basis as is considered consistent with prudent investment risk and preservation of capital. This fund is a risk based asset allocation fund investing in a combination of CITFs offered by First Mercantile. The fund is a highly diversified investment option combining multiple investment styles and strategies, and is designed for investors seeking actively managed moderate growth based on a strategic long-term time horizon implemented through a flexible risk-managed approach. The portfolio
typically consists of 75% in equity funds and 25% in fixed income funds.
LifeStyle Aggressive Growth (formerly LifeStyle Aggressive Growth Strategy) seeks to achieve as high a total rate of return on an annual basis as is considered consistent with prudent investment risk and the preservation of capital. The investment is a risk based asset allocation fund investing in a combination of CITFs offered by First Mercantile. The fund is a highly diversified investment option combining multiple investment styles and strategies. The fund is designed for investors seeking actively managed aggressive growth based on a strategic long-term time horizon implemented through a flexible risk-managed approach. The portfolio typically consists of 92% in equity funds and 8% fixed income funds.
The
FFTW Income Plus Fund seeks to preserve principal value while providing current income. The investment strategy is implemented though a research process, which includes a combination of top-down and relative value analysis, contract analysis and committee oversight. The committee focuses on maintaining high credit quality through fundamental credit analysis and individual contract evaluation. The committee adjusts the average duration to maximize the interest return over a business cycle with the average duration generally ranging between (0-3 yrs).
The HF Financial Corp. Stock Fund seeks to emphasize investing
for long term growth and to allow employees to invest in their company. The fund invests in shares of the common stock of HF Financial Corp (Ticker: HFFC), which operates as a Regional Community Bank. This fund holds shares of HF stock as well as money market instruments to accommodate daily liquidity needs.
Note 4. Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become 100 percent vested in their entire account.
14
HF
Financial Corp. Retirement Savings Plan
Notes to Financial Statements
Note 5. Tax Status
Effective July 1, 2010, the Plan adopted a prototype plan document sponsored by Retirement Direct, LLC. Retirement Direct, LLC received an opinion letter from the IRS, dated March 31, 2008, which states that the prototype document satisfies the applicable provisions of the IRC. The Plan itself has not received a determination letter from the IRS, and the prototype document has been amended since receiving the opinion letter. However, the
Plan’s management believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC. Therefore, no provision for income tax has been included in the Plan’s financial statements.
Accounting principles generally accepted in the United States of American require plan management to evaluate tax positions taken by the plan and recognize a tax liability (tax asset) if the plan has taken an uncertain tax position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The plan is subject to routine audits by taxing jurisdictions; however there are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examinations for years prior to 2011.
Note
6. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.
Note 7. Related Party and Party-in-Interest Transactions
The Trustee of the Plan
is Home Federal Bank, Investment Management and Trust Department (the Trustee), a related party to the Plan. During the year ended June 30, 2014, the Plan paid administrative and investment management fees to the Trustee of $44,096.
The stock appreciation from the HF Financial Corp. Stock fund totaled $47,315 in fiscal year 2014. Refer to Note 3 for detailed information pertaining to HF Financial Corp. Stock Fund. Certain Plan investments are units of collective investment funds managed by First Mercantile Trust Company. First Mercantile Trust Company is the custodian as defined by the Plan and, therefore, these transactions qualify as exempt party-in-interest transactions. Fees paid by the Plan for investment management and administrative services to First Mercantile were $52,261 in fiscal year 2014. Other fees paid by the
Plan for audit fees and miscellaneous administrative fees totaled $15,098 for the year ended June 30, 2014.
Note 8. Subsequent Events
The plan has evaluated subsequent events through December 19, 2014 the date which the financial statements were issued.
15
HF Financial Corp. Retirement Savings Plan
Schedule
H, Line 4i - Schedule of Assets Held at End of Year
Identity of issuer, borrower, lessor or similar party
Description of investment including maturity date, rate of interest, collateral, par, or maturity value
Cost
Current
Value
* HF Financial Corp.
HF Financial Corp. Stock Fund
N/A
$
1,005,378
*
First Mercantile
American Funds Amcap
N/A
306,873
* First Mercantile
Pimco Total Return Instl
N/A
354,983
*
First Mercantile
Dodge & Cox International Stock Fund
N/A
449,168
* First Mercantile
iShares MSCI EAFE Index ETF
N/A
141,876
*
First Mercantile
Vanguard 500 Index
N/A
400,410
* First Mercantile
Vanguard GNMA
N/A
36,652
*
First Mercantile
Vanguard Midcap Index
N/A
656,372
* First Mercantile
Vanguard Growth Index
N/A
236,824
*
First Mercantile
Vanguard Total Bond Market Index
N/A
117,981
* First Mercantile
Vanguard Value Index
N/A
224,944
*
First Mercantile
Vanguard Small Cap Stock Index
N/A
606,721
* First Mercantile
T. Rowe Price Value
N/A
369,135
*
First Mercantile
LifeStyle Income & Conservative
N/A
286,157
* First Mercantile
LifeStyle Moderately Conservative
N/A
1,048,268
*
First Mercantile
LifeStyle Moderately Aggressive
N/A
2,748,895
* First Mercantile
LifeStyle Aggressive Growth
N/A
2,290,691
*
First Mercantile
FFTW Income Plus (Stable Value)
N/A
1,568,456
* Participant Loans
Participant Note Receivable
rates(4.25%)
& maturities(2014-2019)
—
92,089
Total Investments
—
$
12,941,873
*
Known to be a party-in-interest to the Plan.
N/A – Not applicable for participant directed accounts.
16
SIGNATURES
The
Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
