HMN Financial, Inc. (NASDAQ:HMNF): Fourth Quarter Highlights Net
income of $2.7 million, down $807,000, or 23.2%, from fourth
quarter of 2005 Diluted earnings per share of $0.67, down $0.20,
from fourth quarter of 2005 Net interest income up $438,000, or
4.7%, over fourth quarter of 2005 Net interest margin up 34 basis
points over fourth quarter of 2005 Provision for loan losses up
$1.2 million, or 658.1%, from fourth quarter of 2005 Annual
Highlights Net income of $8.4 million, down $2.7 million, or 23.9%,
from 2005 Diluted earnings per share of $2.10, down $0.67, or
24.2%, from 2005 Net interest income up $2.9 million, or 8.2%, over
2005 Net interest margin up 33 basis points over 2005 Provision for
loan losses up $6.2 million, or 232.0%, over 2005 EARNINGS SUMMARY
Three Months Ended Year Ended December 31, December 31, 2006� �
2005� 2006� � 2005� Net income $2,670,263� 3,476,971� $8,427,551�
11,067,889� Diluted earnings per share $0.67� 0.87� $2.10� 2.77�
Return on average assets 1.11% 1.39� 0.86% 1.12� Return on average
equity 11.18% 15.03� 8.85% 12.42� Book value per share $21.58�
20.59� $21.58� 20.59� HMN Financial, Inc. (HMN) (NASDAQ:HMNF), the
$978 million holding company for Home Federal Savings Bank (the
Bank), today reported net income of $2.7 million for the fourth
quarter of 2006, down $807,000, or 23.2%, from net income of $3.5
million for the fourth quarter of 2005. Diluted earnings per common
share for the fourth quarter of 2006 were $0.67, down $0.20, from
$0.87 for the fourth quarter of 2005. The decrease in net income is
due to a $1.2 million increase in the loan loss provision between
the periods primarily as a result of an increase in the allowance
reserve for a home equity loan. Fourth Quarter Results Net Interest
Income Net interest income was $9.8 million for the fourth quarter
of 2006, an increase of $438,000, or 4.7%, compared to $9.4 million
for the fourth quarter of 2005. Interest income was $17.4 million
for the fourth quarter of 2006, an increase of $1.3 million, or
8.0%, from $16.1 million for the same period in 2005. Interest
income increased because of an increase in the average interest
rates earned on loans and investments. Interest rates increased
primarily because of the 100 basis point increase in the prime
interest rate between the periods. Increases in the prime rate,
which is the rate that banks charge their prime business customers,
generally increase the rates on adjustable rate consumer and
commercial loans in the portfolio and new loans originated. The
increase in interest income due to increased rates was partially
offset by a $47 million decrease in the average outstanding loan
portfolio balance between the periods due to an increase in
commercial and consumer loan prepayments and a decrease in loan
originations. The average yield earned on interest-earning assets
was 7.54% for the fourth quarter of 2006, an increase of 81 basis
points from the 6.73% yield for the fourth quarter of 2005.
Interest expense was $7.5 million for the fourth quarter of 2006,
an increase of $846,000, or 12.7%, from $6.7 million for the fourth
quarter of 2005. Interest expense increased primarily because of
higher interest rates paid on deposits which were caused by the 100
basis point increase in the federal funds rate between the periods.
Increases in the federal funds rate, which is the rate that banks
charge other banks for short term loans, generally increase the
rates banks pay for deposits. The average interest rate paid on
interest-bearing liabilities was 3.48% for the fourth quarter of
2006, an increase of 52 basis points from the 2.96% paid for the
fourth quarter of 2005. Net interest margin (net interest income
divided by average interest earning assets) for the fourth quarter
of 2006 was 4.28%, an increase of 34 basis points, compared to
3.94% for the fourth quarter of 2005. Provision for Loan Losses The
provision for loan losses was $1.4 million for the fourth quarter
of 2006, an increase of $1.2 million, or 658.1%, from $179,000 for
the fourth quarter of 2005. The provision for loan losses increased
primarily because an $825,000 specific loan loss reserve was
established on a home equity loan that was classified as
nonperforming in the fourth quarter of 2006. The reserved amount
was based on an updated appraisal of the value of the property
securing the loan and subsequent to year end the Bank foreclosed on
the property. The provision also increased because of a $33 million
increase in outstanding commercial loans during the fourth quarter
of 2006. Total non-performing assets were $10.4 million at December
31, 2006, an increase of $130,000, or 1.3%, from $10.3 million at
September 30, 2006. Non-performing loans decreased $909,000 and
foreclosed and repossessed assets increased $1.0 million primarily
due to an increase in single family home loan foreclosures.
Non-Interest Income and Expense Non-interest income was $1.5
million for the fourth quarter of 2006, a decrease of $333,000, or
18.6%, from $1.8 million for the fourth quarter of 2005. Fees and
service charges increased $55,000 between the periods primarily
because of increased retail deposit account activity and fees. Gain
on sales of loans decreased $386,000 between the periods due
primarily to a decrease in the number of single family loans that
were sold. Sold loans decreased because there were fewer single
family loans originated and most of the loans that were originated
were placed into the loan portfolio to replace prepaying loans.
Non-interest expense was $5.5 million for the fourth quarter of
2006, an increase of $14,000, or 0.26%, from $5.4 million for the
fourth quarter of 2005. Occupancy expense increased $99,000
primarily because of the additional costs associated with the new
branch and loan origination offices opened in Rochester in the
first quarter of 2006. Data processing costs increased $30,000
primarily because of the increased internet and other banking
services provided by a third party processor between the periods.
Advertising expense increased $36,000 primarily because of an
increase in deposit related promotions in the fourth quarter of
2006. Mortgage servicing rights amortization decreased $66,000
between the periods because there are fewer mortgage loans being
serviced. Other operating expenses decreased $62,000 primarily
because of decreased mortgage and commercial loan foreclosure costs
in the fourth quarter of 2006 when compared to the same period in
2005. Income tax expense decreased $280,000 between the periods
primarily because of a decrease in taxable income. Return on Assets
and Equity Return on average assets for the fourth quarter of 2006
was 1.11%, compared to 1.39% for the fourth quarter of 2005. Return
on average equity was 11.18% for the fourth quarter of 2006,
compared to 15.03% for the same period of 2005. Book value per
common share at December 31, 2006 was $21.58, compared to $20.59 at
December 31, 2005. Annual Results Net Income Net income was $8.4
million for the year ended December 31, 2006, a decrease of $2.7
million, or 23.9%, compared to $11.1 million for the year ended
December 31, 2005. Diluted earnings per common share for the year
ended December 31, 2006 were $2.10, down $0.67, or 24.2%, from
$2.77 for the year ended December 31, 2005. Net Interest Income Net
interest income was $38.7 million for the year ended December 31,
2006, an increase of $2.9 million, or 8.2%, from $35.8 million in
2005. Interest income was $67.5 million for the year ended December
31, 2006, an increase of $7.2 million, or 12.0%, from $60.3 million
for the same period in 2005. Interest income increased primarily
because of an increase in the average interest rates earned on
loans and investments. Interest rates increased primarily because
of the 100 basis point increase in the prime interest rate between
the periods. The increase in interest income due to increased rates
was partially offset by a $42 million decrease in the average
outstanding loan portfolio balance between the periods due to an
increase in commercial loan prepayments and a decrease in loan
originations. The yield earned on interest-earning assets was 7.21%
for the year ended December 31, 2006, an increase of 80 basis
points from the 6.41% yield for the same period of 2005. Interest
expense was $28.8 million for the year ended December 31, 2006, an
increase of $4.3 million, or 17.7%, from the $24.5 million for the
same period in 2005. Interest expense increased primarily because
of higher interest rates paid on deposits which were caused by the
100 basis point increase in the federal funds rate between the
periods. The increase in deposit rates was partially offset by a
change in the mix of funding sources between the periods. The
average outstanding balances of $57 million in brokered deposits
and Federal Home Loan Bank advances were replaced with other less
expensive deposits which lowered the Bank�s overall cost of funds.
The average interest rate paid on interest-bearing liabilities was
3.28% for the year ended December 31, 2006, an increase of 52 basis
points from the 2.76% paid for the same period of 2005. Net
interest margin for the year ended December 31, 2006 was 4.13%, an
increase of 33 basis points, compared to 3.80% for the same period
of 2005. Provision for Loan Losses The provision for loan losses
was $8.9 million for the year ended December 31, 2006, an increase
of $6.2 million, or 232.0%, from $2.7 million in 2005. The
provision for loan losses increased primarily because $7.4 million
in commercial loans relating to a real estate and golf course
development were charged off during the year. The increase in the
provision related to loan charge offs was partially offset by a $12
million decrease in outstanding commercial loans between the
periods. Total non-performing assets were $10.4 million at December
31, 2006, an increase of $6.5 million, or 168.4%, from $3.9 million
at December 31, 2005. Non-performing loans increased $6.0 million,
foreclosed and repossessed assets increased $696,000, and
non-performing other assets decreased $134,000 between the periods.
A reconciliation of the Company�s allowance for loan losses for the
years ended December 31, 2006 and 2005 are summarized as follows: �
� � � (in thousands) 2006� 2005� Balance at January 1, $8,778�
$8,996� Provision 8,878� 2,674� Charge offs: Commercial loans
(7,430) (2,615) Consumer loans (269) (228) Single family mortgage
loans (150) (234) Recoveries 66� 185� Balance at December 31,
$9,873� $8,778� � � � � Non-Interest Income and Expense
Non-interest income was $6.4 million for the year ended December
31, 2006, a decrease of $68,000, or 1.0%, from $6.5 million for the
same period in 2005. Fees and service charges increased $392,000
between the periods primarily because of increased retail deposit
account activity and fees. Security gains increased $69,000 due to
increased security sales. Gain on sale of loans decreased $598,000
due to a decrease in the number of single-family mortgage loans
sold and a decrease in the profit margins realized on the loans
that were sold. Competition in the single-family loan origination
market remained strong and profit margins were lowered in order to
remain competitive. Other income increased $109,000 primarily
because of a decrease in the losses recognized on repossessed
assets in 2006 when compared to 2005. Non-interest expense was
$22.6 million for the year ended December 31, 2006, an increase of
$795,000, or 3.6%, from $21.8 million for the same period in 2005.
Compensation and benefits expense increased $729,000 primarily
because of annual pay and pension cost increases. Occupancy expense
increased $355,000 primarily because of additional costs associated
with the new branch and loan origination offices opened in
Rochester in the first quarter of 2006. Data processing costs
increased $151,000 primarily because of increased internet and
other banking services provided by a third party processor between
the periods. Other non-interest expense decreased $331,000
primarily because of a decrease in mortgage loan expenses and
professional fees. Mortgage servicing rights amortization decreased
$171,000 between the periods because there are fewer mortgage loans
being serviced. Income tax expense was $5.2 million in 2006, a
decrease of $1.5 million, or 22.4%, compared to $6.7 million for
the same period of 2005. Income tax expense decreased primarily
because of a decrease in taxable income. Return on Assets and
Equity Return on average assets for the year ended December 31,
2006 was 0.86%, compared to 1.12% for the same period in 2005.
Return on average equity was 8.85% for the year ended December 31,
2006, compared to 12.42% for the same period in 2005. President's
Statement �The 2006 financial results were negatively impacted by
an increase in the loan loss provision,� said HMN President Michael
McNeil. �While we are disappointed in the negative effect that this
had on net income, we are encouraged by the increase in net
interest income and the 33 basis point increase in the net interest
margin.� General Information HMN Financial, Inc. and Home Federal
Savings Bank are headquartered in Rochester, Minnesota. The Bank
operates ten full service offices in southern Minnesota located in
Albert Lea, Austin, LaCrescent, Rochester, Spring Valley and Winona
and two full service offices in Iowa located in Marshalltown and
Toledo. Home Federal Savings Bank also operates loan origination
offices located in Sartell and Rochester, Minnesota. Eagle Crest
Capital Bank, a division of Home Federal Savings Bank, operates
branches in Edina and Rochester, Minnesota. Safe Harbor Statement
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements include, but are not limited to those
relating to the Company�s financial expectations for earnings and
revenues. A number of factors could cause actual results to differ
materially from the Company�s assumptions and expectations. These
include but are not limited to possible legislative changes and
adverse economic, business and competitive developments such as
shrinking interest margins; reduced collateral values; deposit
outflows; reduced demand for financial services and loan products;
changes in accounting policies and guidelines, or monetary and
fiscal policies of the federal government or tax laws; changes in
credit or other risks posed by the Company�s loan and investment
portfolios; technological, computer-related or operational
difficulties; adverse changes in securities markets; results of
litigation or other significant uncertainties. Additional factors
that may cause actual results to differ from the Company�s
assumptions and expectations include those set forth in the
Company�s most recent filings on form 10-K and Form 10-Q with the
Securities and Exchange Commission. All forward-looking statements
are qualified by, and should be considered in conjunction with,
such cautionary statements. HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited) � � � � December 31,
December 31, � 2006� � 2005� � Assets Cash and cash equivalents
$43,775,988� 47,268,795� Securities available for sale:
Mortgage-backed and related securities (amortized cost $6,671,042
and $7,428,504) 6,177,829� 6,879,756� Other marketable securities
(amortized cost $119,940,282 and $113,749,841) 119,962,274�
112,778,813� 126,140,103� 119,658,569� � Loans held for sale
1,493,011� 1,435,141� Loans receivable, net 768,231,579�
785,678,461� Accrued interest receivable 5,060,839� 4,460,014� Real
estate, net 2,072,032� 1,214,621� Federal Home Loan Bank stock, at
cost 7,956,300� 8,364,600� Mortgage servicing rights, net
1,957,699� 2,653,635� Premises and equipment, net 11,372,103�
11,941,863� Investment in limited partnerships 112,489� 141,048�
Goodwill 3,800,938� 3,800,938� Core deposit intangible, net
105,903� 219,760� Prepaid expenses and other assets 2,830,548�
1,854,948� Deferred tax asset 2,879,000� 2,544,400� Total assets
$977,788,532� 991,236,793� � � Liabilities and Stockholders� Equity
Deposits $725,958,830� 731,536,560� Federal Home Loan Bank advances
150,900,000� 160,900,000� Accrued interest payable 1,176,024�
2,085,573� Customer escrows 720,732� 1,038,575� Accrued expenses
and other liabilities 5,890,605� 4,947,816� Total liabilities
884,646,191� 900,508,524� Commitments and contingencies
Stockholders� equity: Serial preferred stock: ($.01 par value)
Authorized 500,000 shares; issued and outstanding shares none 0� 0�
Common stock ($.01 par value): Authorized 11,000,000; issued shares
9,128,662 91,287� 91,287� Additional paid-in capital 57,913,743�
58,011,099� Retained earnings, subject to certain restrictions
103,642,975� 98,951,777� Accumulated other comprehensive loss
(284,421) (917,577) Unearned employee stock ownership plan shares
(4,157,698) (4,350,999) Unearned compensation restricted stock
awards 0� (182,521) Treasury stock, at cost 4,813,232 and 4,721,402
(64,063,545) (60,874,797) Total stockholders� equity 93,142,341�
90,728,269� Total liabilities and stockholders� equity
$977,788,532� 991,236,793� � � � � � HMN FINANCIAL, INC. AND
SUBSIDIARIES Consolidated Statements of Income (unaudited) � � � �
� Three Months EndedDecember 31, 2006 ����������2005 � Year
EndedDecember 31, 2006 �����������2005 Interest income: Loans
receivable $15,434,391� 14,889,241� 60,180,932� 56,376,920�
Securities available for sale: Mortgage-backed and related 65,221�
73,239� 271,060� 325,940� Other marketable 1,471,062� 802,393�
5,194,856� 2,744,202� Cash equivalents 300,527� 237,688� 1,554,937�
580,500� Other 86,894� 71,326� 325,036� 253,611� Total interest
income 17,358,095� 16,073,887� 67,526,821� 60,281,173� � Interest
expense: Deposits 5,848,333� 4,874,673� 22,045,858� 17,233,400�
Federal Home Loan Bank advances 1,664,757� 1,792,589� 6,794,964�
7,278,050� Total interest expense 7,513,090� 6,667,262� 28,840,822�
24,511,450� Net interest income 9,845,005� 9,406,625� 38,685,999�
35,769,723� Provision for loan losses 1,357,000� 179,000�
8,878,000� 2,674,000� Net interest income after provision for loan
losses 8,488,005� 9,227,625� 29,807,999� 33,095,723� � Non-interest
income: Fees and service charges 780,202� 724,713� 3,110,863�
2,719,004� Mortgage servicing fees 276,075� 308,432� 1,172,166�
1,210,192� Securities gains (losses), net 0� (21,000) 48,122�
(21,000) Gain on sales of loans 224,913� 610,504� 1,254,707�
1,852,940� Losses in limited partnerships (6,500) (6,500) (28,559)
(27,210) Other 179,031� 170,583� 884,137� 775,294� Total
non-interest income 1,453,721� 1,786,732� 6,441,436� 6,509,220� �
Non-interest expense: Compensation and benefits 2,785,875�
2,800,281� 11,868,879� 11,140,329� Occupancy 1,101,029� 1,001,749�
4,435,468� 4,080,880� Deposit insurance premiums 22,808� 32,479�
102,145� 129,683� Advertising 129,085� 92,736� 475,257� 384,184�
Data processing 300,238� 269,911� 1,182,538� 1,031,630�
Amortization of mortgage servicing rights, net 187,054� 252,881�
848,347� 1,019,766� Other 927,474� 989,449� 3,683,750� 4,014,482�
Total non-interest expense 5,453,563� 5,439,486� 22,596,384�
21,800,954� Income before income tax expense 4,488,163� 5,574,871�
13,653,051� 17,803,989� Income tax expense 1,817,900� 2,097,900�
5,225,500� 6,736,100� Net income $2,670,263� 3,476,971� 8,427,551�
11,067,889� Basic earnings per share $0.71� 0.91� 2.20� 2.89�
Diluted earnings per share $0.67� 0.87� 2.10� 2.77� � HMN
FINANCIAL, INC. AND SUBSIDIARIES Selected Consolidated Financial
Information (unaudited) SELECTED FINANCIAL DATA: Three Months Ended
December 31, 2006 ��� ���2005 Year Ended December 31, 2006
�����2005 (dollars in thousand, except per share data) � I.
OPERATING DATA: Interest income $17,358� 16,074� 67,527� 60,281�
Interest expense 7,513� 6,667� 28,841� 24,511� Net interest income
9,845� 9,407� 38,686� 35,770� � II. AVERAGE BALANCES: Assets (1)
957,113� 992,869� 981,180� 984,084� Loans receivable, net 751,106�
796,855� 760,991� 802,637� Mortgage-backed and related securities
(1) 6,751� 7,677� 7,045� 8,509� Interest-earning assets (1)
912,927� 948,056� 937,204� 940,321� Interest-bearing liabilities
855,438� 892,773� 878,598� 887,464� Equity (1) 94,758� 91,755�
95,192� 89,100� � III. PERFORMANCE RATIOS: (1) Return on average
assets (annualized) 1.11% 1.39% 0.86% 1.12% Interest rate spread
information: Average during period 4.06� 3.76� 3.92� 3.65� End of
period 3.71� 3.50� 3.71� 3.50� Net interest margin 4.28� 3.94�
4.13� 3.80� Ratio of operating expense to average total assets
(annualized) 2.26� 2.17� 2.30� 2.22� Return on average equity
(annualized) 11.18� 15.03� 8.85� 12.42� Efficiency 48.27� � 48.60�
50.07� 51.56� Dec 31, Dec 31, 2006 � 2005 IV. ASSET QUALITY : Total
non-performing assets $10,424� 3,883� Non-performing assets to
total assets 1.07% 0.39% Non-performing loans to total loans
receivable, net 1.08% 0.30% Allowance for loan losses $9,873�
8,778� Allowance for loan losses to total assets 1.01% 0.89%
Allowance for loan losses to total loans receivable, net 1.29�
1.11� Allowance for loan losses to non-performing loans 118.84�
376.88� � V. BOOK VALUE PER SHARE: Book value per share $21.58� �
20.59� � Year Ended Year� Ended Dec 31, 2006 � Dec 31, 2005 VI.
CAPITAL RATIOS : � Stockholders� equity to total assets, at end of
period 9.53% 9.15% Average stockholders� equity to average assets
(1) 9.70� 9.05� Ratio of average interest-earning assets to average
interest-bearing liabilities (1) 106.67� � 105.96� Dec 31, Dec 31,
2006 � 2005 VII. EMPLOYEE DATA: Number of full time equivalent
employees 203� � 208� � � � � (1) Average balances were calculated
based upon amortized cost without the market value impact of SFAS
115.
HMN Financial (NASDAQ:HMNF)
Historical Stock Chart
From Jun 2024 to Jul 2024
HMN Financial (NASDAQ:HMNF)
Historical Stock Chart
From Jul 2023 to Jul 2024