HF Financial Corp. in Sioux Falls, S.D., has struck two deals with Great Western Bank of Watertown, S.D., that would ultimately leave the parent of Home Federal Bank with fewer branches but a fatter mortgage servicing portfolio.
The $961 million HF Financial announced late Tuesday that it would buy the servicing rights from Great Western on mortgages held by the South Dakota Housing Development Authority and Fannie Mae. HF Financial did not disclose the price of the deal or the value of the servicing rights but said the additional servicing rights would bring its assets under management to $1.9 billion.
Great Western has sold servicing rights to HF Financial in the past. HF Financial is the largest servicer of loans made by the Housing Development Authority, servicing 72% of the authority's outstanding loans.
In the other deal, also announced Tuesday, HF Financial agreed to sell four branches to Great Western. The price was not disclosed. Three are stand-alone branches and one is in a Wal-Mart store in Sioux Falls.
Curtis L. Hage, HF Financial's chairman, president, and chief executive officer, said in an interview that mortgage servicing is a core business for his company and that it is certified by the South Dakota Housing Finance Authority to service its loans. In February, when Great Western bought the $139 million-asset Security Bank of Madison, S.D., a certified mortgage servicer, Great Western decided it did not want to be in the mortgage servicing business, Mr. Hage said.
"They looked for a buyer of that business and they approached us and asked if we would be interested in buying that business, and of course we were," he said.
The idea of a branch deal came up as the two companies were discussing the mortgage servicing deal, Mr. Hage said.
"They happen to be close in proximity in time, but they are two separate contracts," he said.
He said he expected the servicing rights would be transferred by Oct. 1.
Selling the Redfield, Morbridge, and Winner branches would let HF Financial focus more on areas where it has a "greater competitive advantage," Mr. Hage said.
He said that HF Financial is selling only the physical lease in the Wal-Mart branch and that it is keeping the book of business. Those customers would be handled by other branches in the Sioux Falls area, he said.
The sale of the lease is contingent on Wal-Mart's approval. Mr. Hage said he expects the branch sales to be completed in December.
The $1.4 billion-asset Great Western is a subsidiary of the $3.1 billion-asset Great Western Bancorp. Inc. of Omaha. The company has branches in Iowa, Kansas, Missouri, Nebraska, and South Dakota. After completing the HF Financial deal it would have 89 branches in 55 communities.
Ken Karels, the regional president for South Dakota at Great Western, said the branch deal would take his company into new markets in the state and fill in holes in its branch network.
