HF Financial Corp. in Sioux Falls, S.D., is shutting down its three-year-old credit card business after delinquencies forced the thrift company to charge off millions of dollars in fiscal 1999.

The company charged off $6.5 million in loans in the year that ended June 30, 75% of which were related to its subprime credit card business. That was a ninefold increase from the $727,000 charged off in fiscal 1998, according to a recent filing with the Securities and Exchange Commission. HF Financial, which stopped processing credit card applications last March, said chargeoffs in the second half of calendar 1999 could be as high as $7.6 million.

"We tried this and it didn't work," chairman and chief executive officer Curtis L. Hage said in an interview Thursday. "That doesn't mean we won't continue to try new things and add new products in the future."

HF Financial, the $659 million-asset parent of Home Federal Savings Bank, entered the credit card business in May 1996 and has expanded the portfolio to $18 million. In its SEC filing, the company said credit card loans delinquent for more than 90 days tripled to $1.6 million by June 30, from $530,000 a year earlier.

The division's weak performance caused the thrift's net earnings to plunge to $1.1 million, or 24 cents a share, from $6.5 million, or $1.42 a share, a year earlier.

"They thought they could find a niche in the credit card market and turn it into a profitable business," said Bradley Ness, an analyst with Howe Barnes Investments Inc. in Chicago. "A couple years into it, that's turning out not to be the case." Still, Mr. Ness said he expects the company to rebound in fiscal 2000 with earnings of about $1.35 per share.

Mr. Hage agreed that competition -- especially from nonbanks -- has made it difficult to make money in the credit card business.

"The nonbanking companies that are moving into products that have traditionally been offered by banks," he said, "have made it more competitive for bank companies that have to deal with the added costs and burden and regulation that these nonbank companies don't have to."

More small banks and thrifts could follow suit and stop running their own credit card operations. The systems required have become more expensive and complex, and competition from larger lenders has intensified, said Lee Spirer, principal at Booz-Allen & Hamilton in New York.

"People can get cards anywhere," Mr. Spirer said.

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