HMN Financial, Inc. (NASDAQ:HMNF):
Third Quarter Highlights
- Net loss of $2.1 million compared to
net loss of $9.4 million in third quarter of 2010
- Diluted loss per share of $0.65
compared to diluted loss per share of $2.60 in third quarter of
2010
- Provision for loan losses of $4.3
million, down $7.6 million from third quarter of 2010
- Nonperforming assets of $60.0
million, down $5.0 million from second quarter of 2011
- Net interest margin of 3.71%, up 34
basis points from third quarter of 2010
Year to Date Highlights
- Net loss of $3.9 million compared to
net loss of $19.0 million in first nine months of 2010
- Diluted loss per share of $1.38
compared to diluted loss per share of $5.43 in first nine months of
2010
- Provision for loan losses of $9.7
million, down $13.2 million from first nine months of 2010
- Nonperforming assets of $60.0
million, down $24.5 million from December 31, 2010
- Net interest margin of 3.60%, up 25
basis points from first nine months of 2010
- Total assets decreased $62 million
from December 31, 2010
Loss
Summary (unaudited)
Three Months Ended Nine Months Ended September
30, September 30, (dollars in thousands, except per
share amounts)
2011 2010 2011
2010 Net loss $ (2,055
) (9,367 ) $
(3,929 ) (19,046 ) Net
loss available to common shareholders (2,511 )
(9,814 ) (5,291 ) (20,381
) Diluted loss per share (0.65 )
(2.60 ) (1.38 ) (5.43 )
Loss on average assets (1.02 ) (3.89
) % (0.62 ) (2.55 )
% Loss on average equity (12.10 )
(42.01 ) % (7.62 ) (26.71
) % Book value per common share $
9.23 13.00 $ 9.23 13.00
HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $818
million holding company for Home Federal Savings Bank (the Bank),
today reported a net loss of $2.1 million for the third quarter of
2011, an improvement of $7.3 million, or 78.1%, compared to a net
loss of $9.4 million for the third quarter of 2010. Net loss
available to common shareholders was $2.5 million for the third
quarter of 2011, an improvement of $7.3 million, or 74.4%, from the
net loss available to common shareholders of $9.8 million for the
third quarter of 2010. Diluted loss per common share for the third
quarter of 2011 was $0.65, a decreased loss of $1.95, or 75.0%,
from the diluted loss per common share of $2.60 for the third
quarter of 2010. The decreased loss for the third quarter of 2011
is due primarily to a $7.6 million decrease in the provision for
loan losses between the periods. The provision for loan losses
decreased primarily because fewer loan loss reserves on commercial
real estate loans were needed due to the stabilization of values of
non-performing real estate in the third quarter of 2011 when
compared to the third quarter of 2010. The provision also decreased
because of the $117 million decrease in the loan portfolio between
the periods.
President’s Statement"Our core
business remains sound and we are encouraged by the increase in our
net interest margin and the declining trend in both our loan loss
provision and non-performing assets,” said Bradley Krehbiel,
President of HMN. “We will continue to focus our efforts on
reducing our non-performing assets, 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 despite the difficult economic environment that continues
to exist.”
Third Quarter Results
Net Interest IncomeNet interest
income was $7.1 million for the third quarter of 2011, a decrease
of $0.7 million, or 8.9%, compared to $7.8 million for the third
quarter of 2010. Interest income was $9.6 million for the third
quarter of 2011, a decrease of $2.4 million, or 20.0%, from $12.0
million for the same period in 2010. Interest income decreased
between the periods primarily because of a $156 million decrease in
the average interest-earning assets and also because of a decrease
in the 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
5.01% for the third quarter of 2011, a decrease of 18 basis points
from the 5.19% average yield for the third quarter of 2010. The
decrease in yield is the result of the lower interest rate
environment that existed during the third quarter of 2011.
Interest expense was $2.5 million for the third quarter of 2011,
a decrease of $1.7 million, or 40.6%, compared to $4.2 million for
the third quarter of 2010. Interest expense decreased primarily
because of the $133 million decrease in the average
interest-bearing liabilities between the periods. The decrease in
the average interest-bearing liabilities is primarily the result of
a decrease in outstanding borrowings and brokered 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
deposits. Interest expense also decreased because of the lower
rates paid on retail money market accounts and certificates of
deposits. The decreased rates were the result of the lower interest
rate environment that existed during the third quarter of 2011. The
average interest rate paid on interest-bearing liabilities was
1.36% for the third quarter of 2011, a decrease of 57 basis points
from the 1.93% average interest rate paid in the third quarter of
2010. Net interest margin (net interest income divided by average
interest earning assets) for the third quarter of 2011 was 3.71%,
an increase of 34 basis points, compared to 3.37% for the third
quarter of 2010.
Provision for Loan LossesThe
provision for loan losses was $4.3 million for the third quarter of
2011, a decrease of $7.6 million, compared to $11.9 million for the
third quarter of 2010. The provision decreased primarily because
fewer loan loss reserves on commercial real estate loans were
needed due to the stabilization of values of non-performing real
estate in the third quarter of 2011 when compared to the third
quarter of 2010. The provision also decreased because of the $117
million decrease in the loan portfolio between the periods. Total
non-performing assets were $60.0 million at September 30, 2011, a
decrease of $5.0 million, or 7.6%, from $65.0 million at June 30,
2011. Non-performing loans decreased $4.2 million and foreclosed
and repossessed assets decreased $0.8 million during the third
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 June 30, 2011 $ 43,086 June
30, 2011 $ 21,871 Classified as non-performing 5,039 Transferred
from non-performing loans 312 Charge offs (6,436 ) Other
foreclosures/repossessions 111 Principal payments received (2,467 )
Real estate sold (910 ) Classified as accruing (52 ) Net gain on
sale of assets 159 Transferred to real estate owned (312 )
Write downs (399 ) September 30, 2011 $ 38,858
September 30, 2011 $ 21,144
The decrease in non-performing loans during the quarter relates
primarily to loans that were charged off during the period. Of the
$6.4 million in charge offs recorded during the third quarter of
2011, $3.8 million related to three residential development loans
and $2.2 million related to various commercial business loans. The
largest remaining non-performing loan at September 30, 2011 was for
$3.8 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 September 30, 2011 and 2010 is summarized as
follows:
(in thousands) 2011 2010
Balance at June 30, $ 27,764 $ 26,027 Provision 4,260 11,946 Charge
offs: One-to-four family (32 ) 0 Consumer (143 ) (406 ) Commercial
business (2,167 ) (1,061 ) Commercial real estate (4,094 ) (3,045 )
Recoveries 102 29 Balance at September
30, $ 25,690 $ 33,490 General allowance $
15,906 $ 16,292 Specific allowance 9,784
17,198 $ 25,690 $ 33,490
The following table summarizes the amounts and categories of
non-performing assets in the Bank’s portfolio and loan delinquency
information as of the two most recently completed quarters and
December 31, 2010.
September 30,
June 30,
December 31, (Dollars in thousands)
2011 2011 2010
Non-Accruing Loans: One-to-four family real estate $ 2,930 $ 2,039
$ 4,844 Commercial real estate 24,392 25,194 36,737 Consumer 460
555 224 Commercial business 11,076 15,298 26,269 Total 38,858
43,086 68,074 Foreclosed and Repossessed Assets: One-to-four
family real estate 1,003 2,468 972 Consumer 0 3 14 Commercial real
estate 20,141 19,400 15,409 Total non-performing assets $ 60,002 $
64,957 $ 84,469 Total as a percentage of total assets 7.33 % 8.05 %
9.59 % Total non-performing loans $ 38,858 $ 43,086 $ 68,074 Total
as a percentage of total loans receivable, net 6.57 % 7.16 % 10.25
% Allowance for loan loss to non-performing loans 66.11 % 64.44 %
62.91 % Delinquency Data: Delinquencies (1) 30+ days $ 7,763
$ 8,861 $ 4,021 90+ days 823 0 754 Delinquencies as a percentage of
loan and lease portfolio (1) 30+ days 1.27 % 1.43 % 0.59 % 90+ days
0.13 % 0.00 % 0.11 %
(1) Excludes non-accrual loans.
The Company had specific reserves established against the above
non-accruing loans of $7.8 million, $10.2 million and $25.0
million, respectively, at September 30, 2011, June 30, 2011 and
December 31, 2010.
The following table summarizes the number of lending
relationships and types of commercial real estate loans that were
non-performing as of the end of the two most recently completed
quarters and December 31, 2010.
Principal Principal Principal (Dollars in thousands)
Amount of Loan Amount of Loan Amount of Loan September 30, June 30,
December 31, Property Type # 2011
# 2011 # 2010
Developments/land 8 $ 17,059 6 $ 17,946 9 $ 23,661 Single family
homes 0 0 0 0 3 2,673 Alternative fuel plants 1 2,266 1 2,266 1
4,994 Shopping centers/retail 2 1,347 3 1,378 3 1,099
Restaurants/bar 1 636 1 654 1 635 Office building 1 2,925 1 2,950 1
3,675 Other commercial building 1 159
0 0 0
0 14 $ 24,392 12 $
25,194 18 $ 36,737
The Company had specific reserves established against the above
commercial real estate loans of $4.2 million, $5.7 million and
$13.3 million, respectively, at September 30, 2011, June 30, 2011
and December 31, 2010.
The following table summarizes the number of lending
relationships and industry of commercial business loans that were
non-performing for the two most recent quarters and December 31,
2010.
Principal Principal Principal Amount (Dollars in
thousands) Amount of Loan Amount of Loan of Loan September 30, June
30, December 31, Industry Type # 2011
# 2011 # 2010
Construction/development/land 3 $ 2,678 4 $ 4,768 6 $ 9,148 Finance
1 177 1 181 1 248 Retail 4 1,550 4 3,061 1 2,504 Banking 2 1,824 2
1,974 2 8,223 Entertainment 1 235 1 239 1 315 Utilities 1 4,568 1
4,583 1 4,614 Restaurant 0 0 2 492 4 1,217 Transportation 1
44 0 0
0 0 13 $ 11,076
15 $ 15,298 16 $
26,269
The Company had specific reserves established against the above
commercial business loans of $2.8 million, $3.5 million and $10.7
million, respectively, at September 30, 2011, June 30, 2011 and
December 31, 2010.
Non-Interest Income and
ExpenseNon-interest income was $1.5 million for the third
quarter of 2011, a decrease of $0.4 million, or 19.7%, from $1.9
million for the same period in 2010. Gains on sales of loans
decreased $363,000 between the periods as a result of a decrease in
single family loan originations. Loan servicing fees decreased
$17,000 between the periods primarily because of a decrease in the
number of commercial loans that are being serviced for others.
Non-interest expense was $6.4 million for the third quarter of
2011, a decrease of $0.6 million, or 8.5%, from $7.0 million for
the same period of 2010. Loss on real estate owned decreased
$273,000 in the third quarter of 2011 when compared to the same
period in 2010. Deposit insurance expense decreased $268,000
between the periods primarily because of a change in the FDIC’s
insurance cost structure and also because of a decrease in brokered
deposits between the periods. Occupancy expense decreased $125,000
primarily because of a decrease in depreciation expense.
Compensation and benefits expense decreased $80,000 between the
periods primarily because of a decrease in the compensation paid as
a result of having fewer employees and fewer loan originations in
the third quarter of 2011 when compared to the same period in 2010.
Other non-interest expenses increased $120,000 primarily because of
an increase in the costs related to other real estate owned. Data
processing expense increased $34,000 due to increased software
maintenance costs.
Income tax expense decreased $97,000 between the periods, from
an expense of $97,000 in the third quarter of 2010 to no expense in
the third quarter of 2011. In the second quarter of 2010, the
Company recorded a deferred tax asset valuation reserve against its
entire deferred tax asset balance and the Company continued to
maintain a valuation reserve against the entire deferred tax asset
balance at September 30, 2011. Since the valuation reserve is
established against the entire deferred tax asset balance, no
income tax expense was recorded for the third quarter of 2011.
Net Loss Available to Common
ShareholdersThe net loss available to common shareholders
was $2.5 million for the third quarter of 2011, a decreased loss of
$7.3 million from the $9.8 million net loss available to common
shareholders in the third 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, May 15, 2011, and August 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 the net loss for financial statement purposes to
arrive at the net loss available to common shareholders.
Loss on Assets and EquityLoss on
average assets for the third quarter of 2011 was 1.02%, compared to
a 3.89% loss on average assets for the third quarter of 2010. Loss
on average equity was 12.10% for the third quarter of 2011,
compared to a 42.01% loss on average equity for the same period of
2010. Book value per common share at September 30, 2011 was $9.23,
compared to $13.00 at September 30, 2010.
Nine Month Period Results
Net LossThe net loss was $3.9
million for the nine-month period ended September 30, 2011, an
improvement of $15.1 million, from the $19.0 million loss for the
nine-month period ended September 30, 2010. The net loss available
to common shareholders was $5.3 million for the nine-month period
ended September 30, 2011, an improvement of $15.1 million, from the
net loss available to common shareholders of $20.4 million for the
same period of 2010. Diluted loss per common share for the nine
month period in 2011 was $1.38, an improvement of $4.05, from the
diluted loss per common share of $5.43 for the same period in 2010.
The decreased loss for the first nine months of 2011 is due
primarily to a $13.2 million decrease in the provision for loan
losses between the periods and also because of a $5.8 million
decrease in the provision for income taxes between the periods due
to a deferred tax asset valuation reserve that was established
during the second quarter of 2010. The provision decreased
primarily because fewer loan loss reserves on commercial real
estate loans were needed due to the stabilization of values of
non-performing real estate in the first nine months of 2011 when
compared to the same nine-month period of 2010. The provision also
decreased because of the $117 million decrease in the loan
portfolio between the periods. These decreases in expense were
partially offset by a $2.2 million decrease in net interest income
due primarily to the decrease in interest-earning assets between
the periods and a $1.4 million increase in other expenses and
losses related to other real estate owned.
Net Interest IncomeNet interest
income was $21.5 million for the first nine months of 2011, a
decrease of $2.2 million, or 9.3%, from $23.7 million for the same
period in 2010. Interest income was $30.3 million for the
nine-month period ended September 30, 2011, a decrease of $7.1
million, or 19.0%, from $37.4 million for the same period in 2010.
Interest income decreased between the periods primarily because of
a $149 million decrease in the average interest-earning assets and
also because of a decrease in the 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 5.08% for the nine-month period of
2011, a decrease of 20 basis points from the 5.28% average yield
for the nine-month period of 2010. The decrease in yield is the
result of the lower interest rate environment that existed during
the first nine months of 2011.
Interest expense was $8.8 million for the nine-month period
ended September 30, 2011, a decrease of $4.9 million, or 35.8%,
from $13.7 million for the same period in 2010. Interest expense
decreased primarily because of a $129 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 average outstanding brokered deposits
between the periods. The average interest rate paid on
interest-bearing liabilities was 1.54% for the nine-month period of
2011, a decrease of 51 basis points from the 2.05% average rate
paid for the same nine-month period of 2010. Net interest margin
(net interest income divided by average interest earning assets)
was 3.60% for the nine-month period of 2011, an increase of 25
basis points from the 3.35% margin for the same nine-month period
of 2010.
Provision for Loan LossesThe
provision for loan losses was $9.7 million for the first nine
months of 2011, a decrease of $13.2 million, from $22.8 million for
the same nine-month period in 2010. The provision decreased
primarily because fewer loan loss reserves on commercial real
estate loans were needed due to the stabilization of values of
non-performing real estate in the first nine months of 2011 when
compared to the same nine-month period of 2010. The provision also
decreased because of the $117 million decrease in the loan
portfolio between the periods. Total non-performing assets were
$60.0 million at September 30, 2011, a decrease of $24.5 million,
or 29.0%, from $84.5 million at December 31, 2010. Non-performing
loans decreased $29.2 million and foreclosed and repossessed assets
increased $4.7 million during the nine-month period ended September
30, 2011. The non-performing loan and foreclosed and repossessed
asset activity for the first nine 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
16,651 Transferred from non-performing loans 8,543 Charge offs
(27,707 ) Other foreclosures/repossessions 139 Principal payments
received (4,613 ) Real estate sold (3,382 ) Classified as accruing
(5,004 ) Net gain on sale of assets 153 Transferred to real estate
owned (8,543 ) Write downs (704 ) September 30, 2011
$ 38,858 September 30, 2011 $ 21,144
A reconciliation of the Company’s allowance for loan losses for
the nine-month periods ended September 30, 2011 and 2010 is
summarized as follows:
(in thousands) 2011 2010 Balance at
January 1, $ 42,828 $ 23,811 Provision 9,669 22,839 Charge offs:
One-to-four family (450 ) (168 ) Consumer (230 ) (795 ) Commercial
business (10,724 ) (5,803 ) Commercial real estate (16,303 ) (6,524
) Recoveries 900 130 Balance at
September 30, $ 25,690 $ 33,490 General
allowance $ 15,906 $ 16,292 Specific allowance 9,784
17,198 $ 25,690 $ 33,490
Non-Interest Income and
ExpenseNon-interest income was $4.9 million for the first
nine months of 2011, a decrease of $353,000, or 6.7%, from $5.2
million for the same period in 2010. Gains on sales of loans
decreased $348,000 between the periods as a result of a decrease in
single family loan originations. Loan servicing fees decreased
$59,000 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 $39,000 due primarily to a
decrease in rental income on other real estate owned due to the
sale of some properties that were being rented. Fees and service
charges increased $93,000 between the periods primarily because of
increases in debit card income and service charges.
Non-interest expense was $20.7 million for the first nine months
of 2011, an increase of $1.4 million, or 7.0%, from $19.3 million
for the same period in 2010. Other non-interest expense increased
$1.4 million, because of increased real estate taxes and legal fees
related to other real estate owned. Non-interest expense also
increased $645,000 between the periods because of a $301,000 loss
recognized on real estate owned in the first nine months of 2011
compared to a $344,000 gain recognized on real estate owned in the
first nine months of 2010. Compensation and benefits expense
increased $132,000 between the periods primarily because of an
increase in health insurance costs between the periods. Deposit
insurance expense decreased $493,000 between the periods primarily
because of a change in the FDIC’s insurance cost structure and also
because of a decrease in brokered deposits between the periods.
Occupancy expense decreased $335,000 primarily because of a
decrease in depreciation expense. Data processing expense increased
$18,000 due to increased software maintenance costs.
Income tax expense decreased $5.8 million between the periods,
from an expense of $5.8 million in the first nine months of 2010 to
no expense in the first nine months of 2011. In the second quarter
of 2010, the Company recorded a deferred tax asset valuation
reserve against its entire deferred tax asset balance and the
Company continued to maintain a valuation reserve against the
entire deferred tax asset balance at September 30, 2011. Since the
valuation reserve is established against the entire deferred tax
asset balance, no income tax expense was recorded for the first
nine months of 2011.
Net Loss Available to Common
ShareholdersThe net loss available to common shareholders
was $5.3 million for the first nine months of 2011, a decreased
loss of $15.1 million from the $20.4 million net loss available to
common shareholders in the first nine 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, May 15, 2011, and August 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 the net loss for financial
statement purposes to arrive at the net loss available to common
shareholders.
Loss on Assets and EquityLoss on
average assets for the nine-month period ended September 30, 2011
was 0.62%, compared to a loss on average assets of 2.55% for the
same period in 2010. Loss on average equity was 7.62% for the
nine-month period ended September 30, 2011, compared to a loss on
average equity of 26.71% for the same period in 2010.
General InformationHMN 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, Eagan, La Crescent,
Rochester, Spring Valley and Winona and two full service offices in
Iowa located in Marshalltown and Toledo. Home Federal Private
Banking operates branches in Edina and Rochester, Minnesota. Home
Federal Savings Bank also operates a loan origination office in
Sartell, Minnesota.
Safe Harbor StatementThis 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, 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 the
Comptroller of the Currency, 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
September 30,
December 31, (dollars in thousands)
2011 2010 (unaudited)
Assets Cash and cash
equivalents $ 38,311 20,981 Securities available for sale:
Mortgage-backed and related securities (amortized cost $22,426 and
$32,036) 23,681 33,506 Other marketable securities (amortized cost
$120,616 and $118,631) 120,452 118,058 144,133
151,564 Loans held for sale 4,031 2,728 Loans
receivable, net 591,265 664,241 Accrued interest receivable 2,576
3,311 Real estate, net 21,144 16,382 Federal Home Loan Bank stock,
at cost 4,222 6,743 Mortgage servicing rights, net 1,447 1,586
Premises and equipment, net 8,678 9,450 Prepaid expenses and other
assets 2,577 3,632 Deferred tax asset, net 0 0 Total
assets $ 818,384 880,618
Liabilities
and Stockholders’ Equity Deposits $ 676,444 683,230 Federal
Home Loan Bank advances 70,000 122,500 Accrued interest payable 715
1,092 Customer escrows 1,450 818 Accrued expenses and other
liabilities 4,606 3,431 Total liabilities 753,215
811,071 Commitments and contingencies Stockholders’
equity: Serial preferred stock: ($.01 par value) authorized 500,000
shares; issued shares 26,000 24,648 24,264 Common stock ($.01 par
value): authorized 11,000,000; issued shares 9,128,662 91 91
Additional paid-in capital 53,535 56,420 Retained earnings, subject
to certain restrictions 50,934 55,838 Accumulated other
comprehensive income 735 541 Unearned employee stock ownership plan
shares (3,239 ) (3,384 ) Treasury stock, at cost 4,740,711 and
4,818,263 shares (61,535 ) (64,223 ) Total stockholders’ equity
65,169 69,547 Total liabilities and stockholders’
equity $ 818,384 880,618
HMN FINANCIAL, INC. AND
SUBSIDIARIES
Consolidated Statements of Loss
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
(dollars in thousands, except per share
data)
2011
2010
2011
2010
Interest income: Loans receivable $
8,967
11,023
28,171 34,243 Securities available for sale: Mortgage-backed and
related 259 430 873 1,444 Other marketable 308 473 1,132 1,636 Cash
equivalents 4 2 7 4 Other 34 35 148 109
Total interest income 9,572 11,963 30,331
37,436 Interest expense: Deposits 1,623 2,668 5,369
9,127 Federal Home Loan Bank advances 865 1,521 3,434
4,585 Total interest expense 2,488 4,189
8,803 13,712 Net interest income 7,084 7,774
21,528 23,724 Provision for loan losses 4,260 11,946
9,669 22,839 Net interest income (loss) after
provision for loan losses 2,824 (4,172 ) 11,859 885
Non-interest income: Fees and service charges 978 972
2,827 2,734 Mortgage servicing fees 247 264 747 806 Gain on sales
of loans 188 551 984 1,332 Other 106 105 336
375 Total non-interest income 1,519 1,892
4,894 5,247 Non-interest expense: Compensation
and benefits 3,276 3,356 10,348 10,216 Loss (gain) on real estate
owned 111 384 301 (344 ) Occupancy 930 1,055 2,786 3,121 Deposit
insurance 190 458 1,001 1,494 Data processing 326 292 884 866 Other
1,565 1,445 5,362 3,984 Total
non-interest expense 6,398 6,990 20,682 19,337
Loss before income tax expense (2,055 ) (9,270 ) (3,929 )
(13,205 ) Income tax expense 0 97 0 5,841
Net loss $ (2,055 ) (9,367 ) (3,929 ) (19,046 ) Preferred
stock dividends and discount 456 447 1,362
1,335 Net loss available to common shareholders (2,511 )
(9,814 ) (5,291 ) (20,381 ) Basic loss per common share $ (0.65 )
(2.60 ) (1.38 ) (5.43 ) Diluted loss per common share $ (0.65 )
(2.60 ) (1.38 ) (5.43 )
HMN FINANCIAL, INC. AND
SUBSIDIARIES Selected Consolidated Financial Information
(unaudited)
Three Months Ended Nine
Months Ended SELECTED FINANCIAL DATA: September 30, September 30,
(dollars in thousands, except per share data)
2011 2010 2011
2010 I. OPERATING DATA:
Interest income $ 9,572 11,963 30,331 37,436 Interest
expense 2,488 4,189 8,803 13,712 Net interest income 7,084 7,774
21,528 23,724 II. AVERAGE BALANCES: Assets (1) 802,140
954,799 840,787 997,196 Loans receivable, net 597,602 731,795
620,227 758,961 Securities available for sale (1) 121,286 151,537
141,500 159,031 Interest-earning assets (1) 758,610 914,717 798,912
947,554 Interest-bearing liabilities 727,413 860,451 766,759
895,697 Equity (1) 67,336 88,473 68,956 95,341 III.
PERFORMANCE RATIOS: (1) Return on average assets (annualized) (1.02
) % (3.89 ) % (0.62 ) % (2.55 ) % Interest rate spread information:
Average during period 3.65 3.26 3.54 3.24 End of period 3.77 3.48
3.77 3.48 Net interest margin 3.71 3.37 3.60 3.35 Ratio of
operating expense to average total assets (annualized) 3.16 2.90
3.29 2.59 Return on average equity (annualized) (12.10 ) (42.01 )
(7.62 ) (26.71 ) Efficiency 74.36
72.32 78.28
66.75 September 30, December 31, September 30, 2011
2010 2010 IV.
ASSET QUALITY: Total non-performing assets $ 60,002 84,469 81,579
Non-performing assets to total assets 7.33 % 9.59 % 8.99 %
Non-performing loans to total loans receivable, net 6.57 10.25 9.00
Allowance for loan losses $ 25,690 42,828 33,490 Allowance for loan
losses to total assets 3.14 % 4.86 % 3.69 % Allowance for loan
losses to total loans receivable, net 4.34 6.45 4.79 Allowance for
loan losses to non-performing loans 66.11 62.91 53.15 V.
BOOK VALUE PER SHARE: Book value per share $ 9.23 10.51 13.00 Nine
Months
Year
Nine Months Ended Ended Ended Sept 30, 2011
Dec 31, 2010 Sept 30, 2010
VI. CAPITAL RATIOS: Stockholders’ equity to total assets, at
end of period 7.96 % 7.90 % 8.83 % Average stockholders’ equity to
average assets (1) 8.20 9.40 9.56 Ratio of average interest-earning
assets to average interest-bearing liabilities (1) 104.19 105.67
105.79 Tier I or core capital 7.79 7.60 8.40 Risk-based capital to
risk-weighted assets 11.62 10.97
11.84 September
30, December 31, September 30, 2011
2010 2010 VII. EMPLOYEE DATA:
Number of full time equivalent employees 206
212
213
(1) Average balances were calculated based upon amortized cost
without the market value impact of ASC 320.
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