HMN Financial, Inc. (NASDAQ:HMNF):
Second Quarter Summary
• Net loss of $2.3 million, an improvement of $5.5 million,
compared to net loss of $7.8 million in second quarter of
2010
• Diluted loss per common share of $0.72 compared to diluted
loss per common share of $2.20 in second quarter of
2010
• Provision for loan losses down $0.9 million from second
quarter of 2010
• Net interest margin of 3.48%, up 11 basis points from
second quarter of 2010
• Nonperforming assets of $65.0 million, down $5.6 million,
or 7.9%, from March 31, 2011
• Income tax expense down $7.0 million from second quarter of
2010 due to full valuation allowance on deferred tax assets
established in second quarter of 2010
Year to Date Summary
• Net loss of $1.9 million, an improvement of $7.8 million,
compared to net loss of $9.7 million in first six months of
2010
• Diluted loss per common share of $0.73 compared to diluted
loss per common share of $2.82 in first six months of
2010
• Provision for loan losses down $5.5 million from first six
months of 2010
• Net interest margin of 3.55%, up 21 basis points from first
six months of 2010
• Nonperforming assets of $65.0 million, down $19.5 million,
or 23.1%, from December 31, 2010
• Income tax expense down $5.7 million from first six months
of 2010 due to full valuation allowance on deferred tax
assets established in second quarter of 2010
Three months ended Six months
ended
Loss
Summary (unaudited)
June 30, June 30, (Dollars in thousands, except per
share amounts)
2011 2010 2011
2010 Net loss $ (2,291) (7,832)
$ (1,874) (9,679) Net loss available to
common stockholders (2,748) (8,280)
(2,780) (10,567) Diluted loss per common share
(0.72) (2.20) (0.73) (2.82) Loss on
average assets (1.08) % (3.12) %
(0.44) % (1.92) % Loss on average
equity (13.27) % (32.14) %
(5.42) % (19.75) % Book value per
common share $ 9.81 $ 15.27
$ 9.81 $ 15.27
HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $807
million holding company for Home Federal Savings Bank (the Bank),
today reported a net loss of $2.3 million for the second quarter of
2011, an improvement of $5.5 million, or 70.7%, compared to a net
loss of $7.8 million for the second quarter of 2010. Net loss
available to common shareholders was $2.7 million for the second
quarter of 2011, an improvement of $5.6 million, or 66.8%, from the
net loss available to common shareholders of $8.3 million for the
second quarter of 2010. Diluted loss per common share for the
second quarter of 2011 was $0.72, a decreased loss of $1.48, or
67.3%, from the diluted loss per common share of $2.20 for the
second quarter of 2010. The decrease in the net loss for the
quarter was primarily due to a $7.0 million decrease in the
provision for income taxes between the periods due primarily to a
deferred tax asset valuation reserve that was established during
the second quarter of 2010. The decrease in the net loss was also
due to a $0.9 million decrease in the loan loss provision between
the periods. These decreases in expense were partially offset by a
$1.0 million decrease in net interest income due primarily to the
decrease in interest earning assets between the periods and a $1.2
million increase in expenses related to other real estate
owned.
President’s Statement
"Our core business remains sound and we are encouraged by the
declining trend in our non-performing assets,” said Bradley
Krehbiel, President of HMN. “We will continue to focus our efforts
on reducing our non-performing assets and loan concentrations,
improving our liquidity and capital positions, increasing our core
deposit relationships and reducing expenses to reflect the decrease
in our interest earning assets. We believe that, over time, our
focus on these areas will be effective in generating improved
financial results.”
Second Quarter Results
Net Interest Income
Net interest income was $7.0 million for the second quarter of
2011, a decrease of $1.0 million, or 12.4%, compared to $8.0
million for the second quarter of 2010. Interest income was $10.0
million for the second quarter of 2011, a decrease of $2.6 million,
or 20.1%, from $12.6 million for the same period in 2010. Interest
income decreased between the periods primarily because of a $147
million decrease in the average interest-earning assets and also
because of a decrease in average yields between the periods.
Average interest earning assets decreased between the periods
primarily because of a decrease in the commercial loan portfolio,
which occurred because of declining loan demand and the Company’s
focus on improving credit quality, managing net interest margin and
improving capital ratios. The average yield earned on
interest-earning assets was 5.00% for the second quarter of 2011, a
decrease of 29 basis points from the 5.29% average yield for the
second quarter of 2010 due to the continued low interest rate
environment that existed during the second quarter of 2011.
Interest expense was $3.0 million for the second quarter of
2011, a decrease of $1.6 million, or 33.5%, compared to $4.6
million for the second quarter of 2010. Interest expense decreased
primarily because of the $130 million decrease in the average
interest-bearing liabilities between the periods. The decrease in
average interest-bearing liabilities is primarily the result of a
decrease in the outstanding borrowings and brokered certificates of
deposits between the periods. The decrease in borrowings and
brokered deposits between the periods was the result of using the
proceeds from loan principal payments to fund maturing borrowings
and brokered certificates of deposits. Interest expense also
decreased because of the lower interest rates paid on money market
accounts and certificates of deposits. The decreased rates were the
result of the low interest rate environment that continued to exist
during the second quarter of 2011. The average interest rate paid
on interest-bearing liabilities was 1.58% for the second quarter of
2011, a decrease of 45 basis points from the 2.03% average interest
rate paid in the second quarter of 2010. Net interest margin (net
interest income divided by average interest earning assets) for the
second quarter of 2011 was 3.48%, an increase of 11 basis points,
compared to 3.37% for the second quarter of 2010.
Provision for Loan Losses
The provision for loan losses was $3.5 million for the second
quarter of 2011, a decrease of $0.9 million, or 20.6%, from $4.4
million for the second quarter of 2010. The decrease in the loan
loss provision was primarily the result of stabilizing values of
the real estate collateral supporting commercial real estate loans
classified as non-performing, which resulted in fewer write downs
in the second quarter of 2011 compared to the same period in 2010.
Total non-performing assets were $65.0 million at June 30, 2011, a
decrease of $5.6 million, or 7.9%, from $70.6 million at March 31,
2011. Non-performing loans decreased $6.0 million and foreclosed
and repossessed assets increased $0.4 million during the second
quarter of 2011. The non-performing loan and foreclosed and
repossessed asset activity for the quarter was as follows:
(Dollars in thousands)
Non-performing loans
Foreclosed and repossessed assets
March 31, 2011 $49,082 March 31, 2011 $21,483
Classified as non-performing 9,168 Transferred from non-performing
loans 2,000 Charge offs (10,932) Other foreclosures/repossessions
27 Principal payments received (1,207) Real estate sold (1,417)
Classified as accruing (1,025) Net loss on sale of assets (87)
Transferred to real estate owned (2,000) Write downs (135) June 30,
2011 $43,086 June 30, 2011 $21,871
The decrease in non-performing loans during the quarter relates
primarily to loans that were charged off during the period. Of the
$10.9 million in charge offs recorded during the second quarter of
2011, $6.2 million related to two bank stock loans, $2.7 million
was on an alternative fuel plant and $1.9 million related to two
development loans. The largest remaining non-performing loan at
June 30, 2011 was for $3.7 million and is secured by a residential
development located in the Bank’s primary market.
A reconciliation of the Company’s allowance for loan losses for
the quarters ended June 30, 2011 and 2010 is summarized as
follows:
(Dollars in thousands) 2011 2010 Balance at
March 31, $34,953 $29,284 Provision 3,463 4,360 Charge offs:
One-to-four family (16) (117) Consumer (34) (84) Commercial
business (6,249) (4,681) Commercial real estate (4,633) (2,818)
Recoveries 280 83 Balance at June 30, $27,764 $26,027
General allowance 15,644 11,104 Specific allowance 12,120 14,923
$27,764 $26,027
The following table summarizes the amounts and categories of
non-performing assets in the Bank’s portfolio and loan delinquency
information as of the end of the three most recently completed
quarters.
June 30, March 31,
December 31, (Dollars in thousands) 2011
2011 2010 Non-Accruing Loans:
One-to-four family real estate $ 2,039 $ 3,399 $ 4,844 Commercial
real estate 25,194 21,609 36,737 Consumer 555 245 224 Commercial
business 15,298 23,829 26,269 Total 43,086 49,082 68,074
Other assets Foreclosed and Repossessed Assets: One-to-four family
real estate 2,468 1,640 972 Consumer 3 14 14 Commercial real estate
19,400 19,829 15,409 Total non-performing assets $ 64,957 $ 70,565
$ 84,469 Total as a percentage of total assets 8.05 % 8.03 % 9.59 %
Total non-performing loans $ 43,086 $ 49,082 $ 68,074 Total as a
percentage of total loans receivable, net 7.16 % 7.74 % 10.25 %
Allowance for loan loss to non-performing loans 64.44 % 71.21 %
62.91 % Delinquency Data: Delinquencies (1) 30+ days $ 8,861
$ 4,940 $ 4,021 90+ days 0 178 754
Delinquencies as a percentage of loan and
lease portfolio (1)
30+ days 1.43 % 0.76 % 0.59 % 90+ days 0.00 % 0.03 % 0.11 %
(1) Excludes non-accrual loans.
The following table summarizes the number and types of
commercial real estate loans (the largest category of
non-performing loans) that were non-performing as of the end of the
three most recently completed quarters.
Principal
Principal Principal
(Dollars in thousands)
Amount of Amount of Amount of
Loans Loans Loans
Property Type
#
June 30,
#
March 31,
#
December 31,
2011
2011
2010 Developments/land 6 $ 17,946 4 $ 10,732 9 $
23,661 Single family homes 0 0 2 296 3 2,673 Alternative fuel
plants 1 2,266 1 4,994 1 4,994 Shopping centers/retail 3 1,378 2
1,036 3 1,099 Restaurants/bar 1 654 1 614 1 635 Office building
1 2,950 2
3,937 1 3,675
12 $ 25,194 12 $
21,609 18 $ 36,737
The Company had specific reserves established against the above
commercial real estate loans of $5.7 million, $6.9 million and
$13.3 million at June 30, 2011, March 31, 2011 and December 31,
2010, respectively. The increase in the non-performing commercial
real estate loans from March 31, 2011 is due primarily to two
residential development loans totaling $3.7 million and a $4.3
million land loan that were classified as non-performing during the
quarter, that were partially offset by charge offs recorded in the
second quarter of 2011.
The following table summarizes the number of lending
relationships and industry of commercial business loans that were
non-performing as of the end of the three most recently completed
quarters.
Principal
Principal Principal
(Dollars in thousands)
Amount of Amount of Amount of
Loans Loans Loans
Industry Type
#
June 30,
#
March 31,
#
December 31,
2011
2011
2010 Construction/development/land 4 $ 4,768 5 $
6,205 6 $ 9,148 Finance 1 181 1 244 1 248 Retail 4 3,061 3 3,129 1
2,504 Banking 2 1,974 2 8,223 2 8,223 Entertainment 1 239 1 309 1
315 Utilities 1 4,583 1 4,598 1 4,614 Restaurant
2 492 3 1,121
4 1,217 15
$ 15,298 16 $ 23,829
16 $ 26,269
The Company had specific reserves established against the above
commercial business loans of $3.5 million, $9.3 million and $10.7
million at June 30, 2011, March 31, 2011 and December 31, 2010,
respectively. The decrease in non-performing commercial business
loans from March 31, 2011 is primarily related to the charge off of
$6.2 million in non-performing commercial business loans against
previously established reserves.
Non-Interest Income and Expense
Non-interest income was $1.6 million for the second quarter of
2011, a decrease of $0.2 million, or 10.8%, from $1.8 million for
the same period in 2010. Gains on sales of loans decreased $166,000
between the periods as a result of decreased single family loan
originations. Loan servicing fees decreased $24,000 between the
periods primarily because of a decrease in the number of commercial
loans that are being serviced for others.
Non-interest expense was $7.5 million for the second quarter of
2011, an increase of $1.2 million, or 18.4%, from $6.3 million for
the same period of 2010. Other non-interest expense increased $1.2
million primarily because of increased real estate taxes and legal
fees related to other real estate owned and $110,000 because of an
increase in the losses recognized on the sale of real estate owned
between the periods. Compensation and benefits increased $101,000
between the periods primarily because of increased personnel in the
commercial loan recovery area. Occupancy expense decreased $119,000
between the periods primarily because of a decrease in depreciation
expense. Deposit insurance costs decreased $112,000 primarily
because of a decrease in brokered deposits between the periods.
The effect of income taxes changed $7.0 million between the
periods, from an expense of $6.9 million in the second quarter of
2010 to a benefit of $0.1 million in the second quarter of 2011. In
the second quarter of 2010, income taxes were increased $8.5
million as a result of recording a deferred tax asset valuation
reserve, which was partially offset by a $1.2 million tax benefit
recorded as a result of a favorable Minnesota Supreme Court tax
ruling during that quarter. The Company continues to maintain a
valuation reserve against the entire deferred tax asset balance at
June 30, 2011. Since the valuation reserve is established against
the entire deferred tax asset balance, the only amount included as
income tax benefit for the second quarter of 2011 relates to the
reversal of taxes on the change in the fair market value of the
available for sale investment portfolio that was recorded in the
first quarter of 2011.
Net Loss Available to Common
Shareholders
The net loss available to common shareholders was $2.7 million
for the second quarter of 2011, a decreased loss of $5.6 million
from the $8.3 million net loss available to common shareholders in
the second quarter of 2010. The net loss available to common
shareholders decreased primarily because of the change in the net
loss between the periods. The Company deferred the February 15,
2011 and May 15, 2011 cash dividend payments on its Fixed Rate
Cumulative Perpetual Preferred Stock, Series A issued to the United
States Treasury Department as part of the TARP Capital Purchase
Program. The deferred dividend payments have been accrued for
payment in the future and are being reported for the deferral
period as a preferred dividend requirement that is deducted from
income (loss) available to common shareholders for financial
statement purposes.
Loss on Assets and Equity
Loss on average assets for the second quarter of 2011 was 1.08%,
compared to 3.12% for the second quarter of 2010. Loss on average
equity was 13.27% for the second quarter of 2011, compared to
32.14% loss for the same period in 2010. Book value per common
share at June 30, 2011 was $9.81, compared to $15.27 at June 30,
2010.
Six Month Period Results
Net Loss
Net loss was $1.9 million for the six month period ended June
30, 2011, an improvement of $7.8 million, or 80.6%, compared to the
net loss of $9.7 million for the six month period ended June 30,
2010. The net loss available to common shareholders was $2.8
million for the six month period ended June 30, 2011, an
improvement of $7.8 million, or 73.7%, compared to the net loss
available to common shareholders of $10.6 million for the same
period of 2010. Diluted loss per share for the six month period in
2011 was $0.73, an improvement of $2.09 compared to the diluted
loss per share of $2.82 for the same period in 2010. The decrease
in the net loss for the six month period in 2011 was due to a $5.7
million decrease in the provision for income taxes between the
periods due primarily to a deferred tax asset valuation reserve
that was established during the second quarter of 2010 and also
because of a $5.5 million decrease in the loan loss provision
between the periods. These decreases in expense were partially
offset by a $1.6 million decrease in net interest income due
primarily to the decrease in interest earning assets between the
periods and a $2.2 million increase in other expenses and losses
related to other real estate owned.
Net Interest Income
Net interest income was $14.4 million for the first six months
of 2011, a decrease of $1.6 million, or 9.4%, from $16.0 million
for the same period in 2010. Interest income was $20.8 million for
the six month period ended June 30, 2011, a decrease of $4.7
million, or 18.5%, from $25.5 million for the same six month period
in 2010. Interest income decreased between the periods primarily
because of a $145 million decrease in the average interest-earning
assets and also because of a decrease in average yields between the
periods. Average interest-earning assets decreased between the
periods primarily because of a decrease in the commercial loan
portfolio, which occurred because of declining loan demand and the
Company’s focus on improving credit quality, managing net interest
margin and improving capital ratios. The average yield earned on
interest-earning assets was 5.11% for the first six months of 2011,
a decrease of 22 basis points from the 5.33% average yield for the
first six months of 2010 due to the continued low interest rate
environment that existed during the first six months of 2011.
Interest expense was $6.3 million for the first six months of
2011, a decrease of $3.2 million, or 33.7%, compared to $9.5
million for the first six months of 2010. Interest expense
decreased primarily because of the $127 million decrease in the
average interest-bearing liabilities between the periods. The
decrease in average interest-bearing liabilities is primarily the
result of a decrease in the outstanding borrowings and brokered
certificates of deposits between the periods. The decrease in
borrowings and brokered deposits between the periods was the result
of using the proceeds from loan principal payments to fund maturing
borrowings and brokered certificates of deposits. Interest expense
also decreased because of the lower interest rates paid on money
market accounts and certificates of deposits. The decreased rates
were the result of the low interest rate environment that continued
to exist during the first six months of 2011. The average interest
rate paid on interest-bearing liabilities was 1.62% for the first
six months of 2011, a decrease of 48 basis points from the 2.10%
average interest rate paid in the first six months of 2010. Net
interest margin (net interest income divided by average interest
earning assets) for the first six months of 2011 was 3.55%, an
increase of 21 basis points, compared to 3.34% for the first six
months of 2010.
Provision for Loan Losses
The provision for loan losses was $5.4 million for the first six
months of 2011, a decrease of $5.5 million, or 50.3%, from $10.9
million for the same six month period in 2010. The decrease was
primarily the result of the stabilizing values of the real estate
collateral supporting commercial real estate loans, which resulted
in fewer write downs on loans classified as non-performing in the
first six months of 2011 compared to the same period in 2010. Total
non-performing assets were $65.0 million at June 30, 2011, a
decrease of $19.5 million, or 23.1%, from $84.5 million at December
31, 2010. Non-performing loans decreased $25.0 million and
foreclosed and repossessed assets increased $5.5 million during the
first six months of 2011. The non-performing loan and foreclosed
and repossessed asset activity for the first six months of 2011 was
as follows:
(Dollars in thousands)
Non-performing loans
Foreclosed and repossessed asset activity
December 31, 2010 $68,074 December 31, 2010 $16,395
Classified as non-performing 11,613 Transferred from non-performing
loans 8,231 Charge offs (21,271) Other foreclosures/repossessions
28 Principal payments received (2,146) Write downs (305) Classified
as accruing (4,953) Real estate sold (2,472) Transferred to real
estate owned (8,231) Net loss on sale of assets (6) June 30, 2011
$43,086 June 30, 2011 $21,871
The decrease in non-performing loans during the first six months
of 2011 relates primarily to loans that were charged off. Of the
$21.3 million in charge offs recorded during the first six months
of 2011, $6.2 million related to two bank stock loans, $2.7 million
was on an alternative fuel plant and $11.2 million related to six
development loans.
A reconciliation of the Company’s allowance for loan losses for
the six month periods ended June 30, 2011 and June 30, 2010 is
summarized as follows:
(Dollars in
thousands) 2011 2010 Balance at January 1,
$42,828 $23,811 Provision 5,409 10,893 Charge offs: One-to-four
family (419) (168) Consumer (86) (390) Commercial business (8,557)
(4,742) Commercial real estate (12,209) (3,478) Recoveries 798 101
Balance at June 30, $27,764 $26,027
Non-Interest Income and Expense
Non-interest income was $3.4 million for the first six months of
2010, the same as for the first six months of 2010. Fees and
service charges increased $87,000 between the periods primarily
because of an increase in debit card income and overdraft fees.
Gains on sales of loans increased $15,000 between the periods due
to an increase in the gains recognized on the sale of commercial
government guaranteed loans that was partially offset by a decrease
in the gain recognized on the sale of single family loans due to a
decrease in single family loan originations between the periods.
Loan servicing fees decreased $42,000 between the periods primarily
because of a decrease in the number of commercial loans that are
being serviced for others. Other non-interest income decreased
$40,000 primarily because of a decrease in rental income on real
estate owned.
Non-interest expense was $14.3 million for the first six months
of 2011, an increase of $2.0 million, or 15.7%, from $12.3 million
for the same period of 2010. Non-interest expense increased
$918,000 because of a $190,000 loss recognized on real estate owned
in the first six months of 2011 compared to a $728,000 gain
recognized on real estate owned in the first six months of 2010.
Other non-interest expense increased $1.3 million because of
increased real estate taxes and legal fees related to other real
estate owned. Compensation and benefits increased $212,000 between
the periods primarily because of increased personnel in the
commercial loan recovery area. Deposit insurance costs decreased
$225,000 between the periods primarily because of a decrease in
brokered deposits. Occupancy expense decreased $210,000 between the
periods primarily because of a decrease in depreciation
expense.
Income tax expense was $0 for the first six months of 2011, a
decrease of $5.7 million from $5.7 million for the same period of
2010. In the second quarter of 2010, income taxes were increased
$8.5 million as a result of recording a deferred tax asset
valuation reserve, which was partially offset by a $1.2 million tax
benefit recorded as a result of a favorable Minnesota Supreme Court
tax ruling during that quarter. The Company continues to maintain a
valuation reserve against the entire deferred tax asset balance at
June 30, 2011. Since the valuation reserve is established against
the entire deferred tax asset balance, no income tax expense or
benefit was recorded for the first six months of 2011 and the taxes
on the change in the fair market value of the available for sale
investment portfolio are recorded as an adjustment to other
comprehensive income.
Net Loss Available to Common
Shareholders
The net loss available to common shareholders was $2.8 million
for the first six months of 2011, a decreased loss of $7.8 million
from the $10.6 million net loss available to common shareholders in
the first six months of 2010. The net loss available to common
shareholders decreased primarily because of the change in the net
loss between the periods. The Company deferred the February 15,
2011 and May 15, 2011 cash dividend payments on its Fixed Rate
Cumulative Perpetual Preferred Stock, Series A issued to the United
States Treasury Department as part of the TARP Capital Purchase
Program. The deferred dividend payments were accrued for payment in
the future and are being reported for the deferral period as a
preferred dividend requirement that is deducted from income (loss)
available to common shareholders for financial statement
purposes.
Loss on Assets and Equity
Loss on average assets for the six month period ended June 30,
2011 was 0.44%, compared to 1.92% loss for the same period in 2010.
Loss on average equity was 5.42% for the six month period ended in
2011, compared to 19.75% loss for the same period in 2010.
General Information
HMN Financial, Inc. and Home Federal Savings Bank are
headquartered in Rochester, Minnesota. Home Federal Savings Bank
operates eleven full service offices in Minnesota located in Albert
Lea, Austin, Eagan, Edina, La Crescent, Rochester, Spring Valley
and Winona, Minnesota and two full service offices located in
Marshalltown and Toledo, Iowa. Home Federal Private Banking
operates branches in Rochester, Minnesota. Home Federal Savings
Bank also operates a loan origination office in Sartell,
Minnesota.
Safe Harbor Statement
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding reducing non-performing
assets, reducing loan concentrations, increasing core deposit
relationships, reducing expenses, and generating improved financial
results. These statements are often identified by such
forward-looking terminology as “expect,” “intent,” “look,”
“believe,” “anticipate,” “estimate,” “project,” “seek,” “may,”
“will,” “would,” “could,” “should,” “trend,” “target,” and “goal”
or similar statements or variations of such terms. 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 the adequacy and marketability of real estate securing
loans to borrowers, federal and state regulation and enforcement,
including restrictions set forth in the supervisory agreements
between each of the Company and Bank and the Office of Thrift
Supervision, possible legislative and regulatory 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;
international economic developments, 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
June 30, December 31, (Dollars in thousands)
2011 2010 (unaudited)
Assets Cash and cash
equivalents $ 26,724 20,981 Securities available for sale:
Mortgage-backed and related securities (amortized cost $25,410 and
$32,036) 26,780 33,506 Other marketable securities
(amortized cost $107,616 and $118,631)
107,467 118,058 134,247 151,564
Loans held for sale 1,075 2,728 Loans receivable, net 601,787
664,241 Accrued interest receivable 2,932 3,311 Real estate, net
21,868 16,382 Federal Home Loan Bank stock, at cost 5,574 6,743
Mortgage servicing rights, net 1,520 1,586 Premises and equipment,
net 8,925 9,450 Prepaid expenses and other assets 2,722 3,632
Deferred tax asset, net 0 0 Total assets $ 807,374
880,618
Liabilities and
Stockholders’ Equity Deposits $ 647,115 683,230 Federal Home
Loan Bank advances and Federal Reserve borrowings 85,000 122,500
Accrued interest payable 898 1,092 Customer escrows 730 818 Accrued
expenses and other liabilities 6,060 3,431 Total
liabilities 739,803 811,071 Commitments and
contingencies Stockholders’ equity: Serial preferred stock ($.01
par value): authorized 500,000 shares; issued shares 26,000 24,517
24,264 Common stock ($.01 par value): authorized 11,000,000; issued
shares 9,128,662 91 91 Additional paid-in capital 53,607 56,420
Retained earnings, subject to certain restrictions 53,313 55,838
Accumulated other comprehensive income 865 541 Unearned employee
stock ownership plan shares (3,287 ) (3,384 ) Treasury stock, at
cost 4,740,711 and 4,818,263 shares (61,535 ) (64,223 ) Total
stockholders’ equity 67,571 69,547 Total liabilities
and stockholders’ equity $ 807,374 880,618
HMN FINANCIAL, INC. AND
SUBSIDIARIES
Consolidated Statements of Loss
(unaudited) Three Months Ended
Six Months Ended June 30, June 30,
(Dollars in thousands, except per share
data)
2011 2010 2011 2010
Interest income: Loans receivable $ 9,301 11,461
19,204 23,220 Securities available for sale: Mortgage-backed and
related 290 479 614 1,014 Other marketable 407 591 824 1,163 Cash
equivalents 2 1 3 2 Other 45 37 114 74
Total interest income 10,045 12,569 20,759
25,473 Interest expense: Deposits 1,806 3,038 3,746
6,459 Federal Home Loan Bank advances 1,240 1,542
2,569 3,064 Total interest expense 3,046 4,580
6,315 9,523 Net interest income 6,999 7,989
14,444 15,950 Provision for loan losses 3,463 4,360
5,409 10,893 Net interest income after provision for
loan losses 3,536 3,629 9,035 5,057
Non-interest income: Fees and service charges 925 920 1,849
1,762 Mortgage servicing fees 250 274 500 542 Gains on sales of
loans 301 467 796 781 Other 113 120 230 270
Total non-interest income 1,589 1,781 3,375
3,355 Non-interest expense: Compensation and
benefits 3,512 3,411 7,072 6,860 Loss (gain) on real estate owned
143 33 190 (728 ) Occupancy 916 1,035 1,856 2,066 Deposit insurance
407 519 811 1,036 Data processing 305 298 558 574 Other 2,209
1,034 3,797 2,539 Total non-interest
expense 7,492 6,330 14,284 12,347 Loss
before income tax expense (benefit) (2,367 ) (920 ) (1,874 ) (3,935
) Income tax expense (benefit) (76 ) 6,912 0 5,744
Net loss (2,291 ) (7,832 ) (1,874 ) (9,679 ) Preferred stock
dividends and discount 457 448 906 888
Net loss available to common shareholders $ (2,748 ) (8,280 )
(2,780 ) (10,567 ) Basic loss per common share $ (0.72 ) (2.20 )
(0.73 ) (2.82 ) Diluted loss per common share $ (0.72 ) (2.20 )
(0.73 ) (2.82 )
HMN FINANCIAL, INC. AND SUBSIDIARIES
Selected Consolidated Financial
Information
(unaudited)
Three Months Ended
Six Months Ended
SELECTED FINANCIAL DATA:
June 30,
June 30,
(Dollars in thousands, except per share
data)
2011
2010
2011
2010
I. OPERATING DATA: Interest income $ 10,045 12,569 20,759 25,473
Interest expense 3,046 4,580 6,315 9,523 Net interest income 6,999
7,989 14,444 15,950 II. AVERAGE BALANCES: Assets (1) 847,847
1,007,860 860,431 1,018,747 Loans receivable, net 612,995 756,736
631,727 772,769 Securities available for sale (1) 153,600 165,887
151,774 162,840 Interest-earning assets (1) 805,678 952,222 819,397
964,245 Interest-bearing liabilities 774,159 903,719 786,758
913,612 Equity (1) 69,288 97,751 69,779 98,832 III.
PERFORMANCE RATIOS: (1) Return on average assets (annualized)
(1.08)
%
(3.12) % (0.44) % (1.92) % Interest rate spread information:
Average during period 3.42 3.26 3.49 3.23 End of period 3.71 3.16
3.71 3.16 Net interest margin 3.48 3.37 3.55 3.34
Ratio of operating expense to average
total assets (annualized)
3.54 2.52 3.35 2.44 Return on average equity (annualized) (13.27)
(32.14) (5.42) (19.75) Efficiency 87.25 64.78 80.17 63.96
June 30,
December 31,
June 30,
2011
2010 2010 IV. ASSET QUALITY:
Total non-performing assets
64,957
84,469
71,144 Non-performing assets to total assets
8.05
%
9.59
% 7.30 % Non-performing loans to total loans receivable, net
7.16
%
10.25
% 7.99 % Allowance for loan losses
27,764
42,828
26,027 Allowance for loan losses to total assets
3.44
%
4.86
% 2.67 %
Allowance for loan losses to total loans
receivable, net
4.61
6.45
3.50 Allowance for loan losses to non-performing loans
64.44
62.91
43.73 V. BOOK VALUE PER SHARE: Book value per share
9.81
10.51
15.27
Six MonthsEndedJune 30, 2011
Year EndedDec 31,2010
Six MonthsEndedJune 30, 2010
VI. CAPITAL RATIOS:
Stockholders’ equity to total assets, at
end of period
8.37
%
7.90
% 9.21 %
Average stockholders’ equity to average
assets (1)
8.11
9.40
9.70
Ratio of average interest-earning assets
to average interest-bearing liabilities (1)
104.15
105.67
105.54 Tier 1 or core capital
8.13
7.60
8.76 Risk-based capital to risk-weighted assets
11.78
10.97
12.43
June 30,
December 31,
June 30,
2011
2010
2010 VII. EMPLOYEE DATA: Number of full time
equivalent employees
217
212
214
(1) Average balances were calculated based upon amortized cost
without the market value impact of ASC 320 (formerly SFAS 115)
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