HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $763
million holding company for Home Federal Savings Bank (the Bank),
today reported net income of $2.1 million for the third quarter of
2019, a decrease of $0.6 million, compared to net income of $2.7
million for the third quarter of 2018. Diluted earnings per
share for the third quarter of 2019 was $0.45, a decrease of $0.14
per share, compared to diluted earnings per share of $0.59 for the
third quarter of 2018. The decrease in net income between the
periods was primarily because of a $0.5 million increase in
non-interest expenses primarily related to increased compensation
and professional services costs, a $0.3 million decrease in net
interest income due to an increase in the average rates paid on
deposits, and a $0.3 million increase in the loan loss
provision. These decreases in net income were partially
offset by a $0.4 million increase in the gain on sales of loans
between the periods. Income tax expense also decreased $0.1
million as a result of the decreased pre-tax income between the
periods.
President’s Statement“Maintaining net interest
margin in the current declining rate environment is becoming a
challenge for not only our bank but the financial industry as a
whole,” said Bradley Krehbiel, President and Chief Executive
Officer of HMN. “Despite the margin challenges, we are pleased to
report the increase in our mortgage loan activity and the related
gain on sale of loans that we experienced during the third quarter
of 2019. We continue to focus our efforts on improving the
financial performance of our core banking operations while
maintaining the credit quality of our loan portfolio.”
Third Quarter ResultsNet
Interest IncomeNet interest income was $7.1 million for the third
quarter of 2019, a decrease of $0.3 million, or 3.9%, from $7.4
million for the third quarter of 2018. Interest income was
$8.0 million for the third quarter of 2019, the same as for the
third quarter of 2018. Interest income remained flat despite
the increase in the average federal funds rate between the periods
as competitive pricing in our markets did not allow for increased
loan rates when the federal funds rate increased in the fourth
quarter of 2018. The average yield earned on interest-earning
assets was 4.47% for the third quarter of 2019, the same as for the
third quarter of 2018.
Interest expense was $0.9 million for the third
quarter of 2019, an increase of $0.3 million, or 54.3%, from $0.6
million for the third quarter of 2018. The average interest
rate paid on interest-bearing liabilities and non-interest-bearing
deposits was 0.56% for the third quarter of 2019, an increase of 20
basis points from 0.36% for the third quarter of 2018. The increase
in the interest paid on interest-bearing liabilities was primarily
because of the increase in the average federal funds rate between
the periods which increased the cost of deposits between the
periods. Net interest margin (net interest income divided by
average interest-earning assets) for the third quarter of 2019 was
3.97%, a decrease of 17 basis points, compared to 4.14% for the
third quarter of 2018. The decrease in the net interest
margin is primarily related to the increase in interest expense as
a result of an increase in the average federal funds rate between
the periods while rates on interest earning assets remained
flat.
A summary of the Company’s net interest margin
for the three and nine month periods ended September 30, 2019 and
2018 is as follows:
|
|
|
For the three-month period ended |
|
|
|
|
September 30, 2019 |
|
|
|
September 30, 2018 |
|
(Dollars in thousands) |
|
|
AverageOutstandingBalance |
|
InterestEarned/Paid |
|
Yield/Rate |
|
|
|
AverageOutstandingBalance |
|
InterestEarned/Paid |
|
Yield/Rate |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale |
|
$ |
80,286 |
|
365 |
|
1.80 |
% |
|
$ |
79,755 |
|
337 |
|
1.68 |
% |
Loans held for sale |
|
|
3,557 |
|
43 |
|
4.72 |
|
|
|
1,757 |
|
24 |
|
5.45 |
|
Single family loans, net |
|
|
115,844 |
|
1,236 |
|
4.23 |
|
|
|
112,221 |
|
1,154 |
|
4.08 |
|
Commercial loans, net |
|
|
398,674 |
|
5,229 |
|
5.20 |
|
|
|
399,517 |
|
5,349 |
|
5.31 |
|
Consumer loans, net |
|
|
73,788 |
|
920 |
|
4.95 |
|
|
|
72,257 |
|
914 |
|
5.02 |
|
Other |
|
|
37,355 |
|
205 |
|
2.18 |
|
|
|
42,344 |
|
192 |
|
1.80 |
|
Total interest-earning
assets |
|
$ |
709,504 |
|
7,998 |
|
4.47 |
|
|
$ |
707,851 |
|
7,970 |
|
4.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities and
non-interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking accounts |
|
|
93,024 |
|
23 |
|
0.10 |
|
|
|
84,491 |
|
19 |
|
0.09 |
|
Savings accounts |
|
|
80,269 |
|
16 |
|
0.08 |
|
|
|
78,191 |
|
16 |
|
0.08 |
|
Money market accounts |
|
|
173,606 |
|
303 |
|
0.69 |
|
|
|
204,599 |
|
221 |
|
0.43 |
|
Certificates |
|
|
127,888 |
|
564 |
|
1.75 |
|
|
|
115,620 |
|
331 |
|
1.14 |
|
Total interest-bearing
liabilities |
|
$ |
474,787 |
|
|
|
|
|
|
$ |
482,901 |
|
|
|
|
|
Non-interest checking |
|
|
166,972 |
|
|
|
|
|
|
|
160,410 |
|
|
|
|
|
Other non-interest bearing deposits |
|
|
2,415 |
|
|
|
|
|
|
|
1,709 |
|
|
|
|
|
Total interest-bearing
liabilities and non-interest-bearing deposits |
|
$ |
644,174 |
|
906 |
|
0.56 |
|
|
$ |
645,020 |
|
587 |
|
0.36 |
|
Net interest income |
|
|
|
|
7,092 |
|
|
|
|
|
|
|
7,383 |
|
|
|
Net interest rate spread |
|
|
|
|
|
|
3.91 |
% |
|
|
|
|
|
|
4.11 |
% |
Net interest margin |
|
|
|
|
|
|
3.97 |
% |
|
|
|
|
|
|
4.14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine-month period ended |
|
|
|
|
September 30, 2019 |
|
|
|
September 30, 2018 |
|
(Dollars in thousands) |
|
|
AverageOutstandingBalance |
|
InterestEarned/Paid |
|
Yield/Rate |
|
|
|
AverageOutstandingBalance |
|
InterestEarned/Paid |
|
Yield/Rate |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale |
|
$ |
79,163 |
|
1,051 |
|
1.77 |
% |
|
$ |
79,436 |
|
990 |
|
1.67 |
% |
Loans held for sale |
|
|
2,417 |
|
82 |
|
4.51 |
|
|
|
1,739 |
|
62 |
|
4.80 |
|
Mortgage loans, net |
|
|
115,162 |
|
3,744 |
|
4.35 |
|
|
|
112,252 |
|
3,412 |
|
4.06 |
|
Commercial loans, net |
|
|
402,469 |
|
15,966 |
|
5.30 |
|
|
|
401,850 |
|
15,076 |
|
5.02 |
|
Consumer loans, net |
|
|
73,384 |
|
2,805 |
|
5.11 |
|
|
|
72,238 |
|
2,675 |
|
4.95 |
|
Other |
|
|
24,886 |
|
381 |
|
2.05 |
|
|
|
30,964 |
|
369 |
|
1.59 |
|
Total interest-earning
assets |
|
$ |
697,481 |
|
24,029 |
|
4.60 |
|
|
$ |
698,479 |
|
22,584 |
|
4.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities and
non-interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking accounts |
|
|
95,748 |
|
73 |
|
0.10 |
|
|
|
87,468 |
|
41 |
|
0.06 |
|
Savings accounts |
|
|
79,599 |
|
47 |
|
0.08 |
|
|
|
78,075 |
|
46 |
|
0.08 |
|
Money market accounts |
|
|
174,565 |
|
878 |
|
0.67 |
|
|
|
198,149 |
|
610 |
|
0.41 |
|
Certificates |
|
|
120,376 |
|
1,420 |
|
1.58 |
|
|
|
114,412 |
|
884 |
|
1.03 |
|
Advances and other borrowings |
|
|
384 |
|
7 |
|
2.54 |
|
|
|
188 |
|
2 |
|
1.71 |
|
Total interest-bearing
liabilities |
|
$ |
470,672 |
|
|
|
|
|
|
$ |
478,292 |
|
|
|
|
|
Non-interest checking |
|
|
159,820 |
|
|
|
|
|
|
|
156,026 |
|
|
|
|
|
Other non-interest bearing deposits |
|
|
2,030 |
|
|
|
|
|
|
|
1,567 |
|
|
|
|
|
Total interest-bearing
liabilities and non-interest-bearing deposits |
|
$ |
632,522 |
|
2,425 |
|
0.51 |
|
|
$ |
635,885 |
|
1,583 |
|
0.33 |
|
Net interest income |
|
|
|
|
21,604 |
|
|
|
|
|
|
|
21,001 |
|
|
|
Net interest rate spread |
|
|
|
|
|
|
4.09 |
% |
|
|
|
|
|
|
3.99 |
% |
Net interest margin |
|
|
|
|
|
|
4.14 |
% |
|
|
|
|
|
|
4.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan LossesThe provision for loan
losses was ($0.4) million for the third quarter of 2019, an
increase of $0.3 million from the ($0.7) million provision for loan
losses for the third quarter of 2018. The credit provision amount
for the period was primarily the result of certain adversely
classified commercial loans being paid off during the period.
These payoffs, combined with the continued improvement in the
credit quality of the loan portfolio, resulted in a reduction of
the overall allowance for loan losses required between the
periods. Total non-performing assets were $2.1 million at
September 30, 2019, a decrease of $1.0 million, or 34.1%, from $3.1
million at June 30, 2019. Non-performing loans decreased $1.2
million and foreclosed and repossessed assets increased $0.2
million during the third quarter of 2019. The decrease in the
non-performing loans was primarily related to a $1.3 million
non-performing loan relationship that was reclassified as an
accruing loan during the third quarter of 2019.
A reconciliation of the Company’s allowance for
loan losses for the quarters ended September 30, 2019 and 2018 is
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
2019 |
|
|
|
2018 |
|
|
|
Balance at June 30, |
|
$ |
8,624 |
|
|
$ |
9,328 |
|
|
|
Provision |
|
|
(420 |
) |
|
|
(652 |
) |
|
|
Charge offs: |
|
|
|
|
|
|
|
|
|
|
Single family |
|
|
(2 |
) |
|
|
0 |
|
|
|
Consumer |
|
|
(46 |
) |
|
|
(16 |
) |
|
|
Commercial business |
|
|
0 |
|
|
|
(15 |
) |
|
|
Recoveries |
|
|
39 |
|
|
|
187 |
|
|
|
Balance at September 30, |
|
$ |
8,195 |
|
|
$ |
8,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated to: |
|
|
|
|
|
|
|
|
|
|
General allowance |
|
$ |
7,528 |
|
|
$ |
7,771 |
|
|
|
Specific allowance |
|
|
667 |
|
|
|
1,061 |
|
|
|
|
|
$ |
8,195 |
|
|
$ |
8,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 two most recently
completed quarters and December 31, 2018.
|
|
|
September 30, |
|
|
June 30, |
|
|
December 31, |
|
(Dollars in thousands) |
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
Non‑Performing Loans: |
|
|
|
|
|
|
|
|
|
|
Single family |
|
$ |
574 |
|
$ |
854 |
|
$ |
730 |
|
Commercial real
estate |
|
|
293 |
|
|
1,212 |
|
|
1,311 |
|
Consumer |
|
|
513 |
|
|
458 |
|
|
489 |
|
Commercial
business |
|
|
99 |
|
|
144 |
|
|
148 |
|
Total |
|
|
1,479 |
|
|
2,668 |
|
|
2,678 |
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed and Repossessed
Assets: |
|
|
|
|
|
|
|
|
|
|
Single family |
|
|
166 |
|
|
30 |
|
|
0 |
|
Commercial real
estate |
|
|
414 |
|
|
414 |
|
|
414 |
|
Consumer |
|
|
0 |
|
|
12 |
|
|
0 |
|
Total non‑performing
assets |
|
$ |
2,059 |
|
$ |
3,124 |
|
$ |
3,092 |
|
Total as a percentage of total
assets |
|
|
0.27 |
% |
|
0.43 |
% |
|
0.43 |
% |
Total non‑performing
loans |
|
$ |
1,479 |
|
$ |
2,668 |
|
$ |
2,678 |
|
Total as a percentage of total
loans receivable, net |
|
|
0.25 |
% |
|
0.45 |
% |
|
0.46 |
% |
Allowance for loan losses to
non-performing loans |
|
|
554.16 |
% |
|
323.18 |
% |
|
324.27 |
% |
|
|
|
|
|
|
|
|
|
|
|
Delinquency Data: |
|
|
|
|
|
|
|
|
|
|
Delinquencies (1) |
|
|
|
|
|
|
|
|
|
|
30+ days |
|
$ |
2,541 |
|
$ |
1,991 |
|
$ |
1,453 |
|
90+ days |
|
|
0 |
|
|
0 |
|
|
0 |
|
Delinquencies as a percentage
of loan portfolio (1) |
|
|
|
|
|
|
|
|
|
|
30+ days |
|
|
0.42 |
% |
|
0.33 |
% |
|
0.24 |
% |
90+ days |
|
|
0.00 |
% |
|
0.00 |
% |
|
0.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes
non-accrual loans.
Non-Interest Income and ExpenseNon-interest
income was $2.2 million for the third quarter of 2019, an increase
of $0.3 million, or 15.0%, from $1.9 million for the third quarter
of 2018. Gain on sales of loans increased $0.4 million
between the periods primarily because of an increase in single
family loan sales. Fees and service charges decreased $0.1
million due to a decrease in the loan commitment fees earned
between the periods. Loan servicing fees decreased slightly
between the periods due to a decrease in the commercial loans
servicing fees earned.
Non-interest expense was $6.7 million for the
third quarter of 2019, an increase of $0.5 million, or 8.6%, from
$6.2 million for the third quarter of 2018. Compensation and
benefits expense increased $0.3 million primarily because of annual
salary increases and an increase in the compensation paid as a
result of the increased mortgage loan production between the
periods. Professional services expense increased $0.1 million
due primarily to an increase in legal expenses between the periods.
Other non-interest expense increased $0.1 million due primarily to
an increase in mortgage loan servicing expenses caused by the
increase in serviced loans that were refinanced between the
periods. Occupancy and equipment costs increased $0.1 million
between the periods due to an increase in depreciation and
maintenance costs.
Income tax expense was $0.9 million for the
third quarter of 2019, a decrease of $0.1 million from $1.0 million
for the third quarter of 2018. The decrease in income tax
expense between the periods is primarily the result of a decrease
in pre-tax income.
Return on Assets and EquityReturn on average
assets (annualized) for the third quarter of 2019 was 1.11%,
compared to 1.47% for the third quarter of 2018. Return on average
equity (annualized) was 9.10% for the third quarter of 2019,
compared to 12.90% for the same period in 2018. Book value
per common share at September 30, 2019 was $18.83, compared to
$17.35 at September 30, 2018.
Nine Month Period
ResultsNet IncomeNet income was $6.6 million for
the nine month period ended September 30, 2019, an increase of $0.7
million, or 11.4%, compared to net income of $5.9 million for the
nine month period ended September 30, 2018. Diluted earnings
per share for the nine month period ended September 30, 2019 was
$1.41, an increase of $0.17 per share, compared to diluted earnings
per share of $1.24 for the same period in 2018. The increase in net
income between the periods was primarily because of a $1.0 million
decrease in the provision for loan losses, a $0.6 million increase
in net interest income, and a $0.2 million increase in the gain on
sales of loans. These increases in net income were partially
offset by a $0.4 million increase in compensation expense related
to the increased mortgage loan production and annual salary
increases, a $0.4 million increase in income tax expense as a
result of the increased pre-tax income, and a $0.2 million increase
in professional services expenses between the periods.
Net Interest IncomeNet interest income was $21.6
million for the first nine months of 2019, an increase of $0.6
million, or 2.9%, from $21.0 million for the same period in
2018. Interest income was $24.0 million for the nine month
period ended September 30, 2019, an increase of $1.4 million, or
6.4%, from $22.6 million for the same nine month period in 2018.
Interest income increased primarily because of the higher
interest amounts earned on interest-earning assets as a result of
the increase in the average federal funds rate between the
periods. Interest income also increased $0.3 million because
of an increase in the amount of yield enhancements recognized
between the periods on non-accruing loans that were paid off.
The average yield earned on interest-earning assets was 4.60% for
the nine month period ended September 30, 2019, an increase of 28
basis points from 4.32% for the same nine month period in
2018. The average yield earned on the average
interest-earning assets increased 5 basis points as a result of the
change in yield enhancements recognized between the periods.
Interest expense was $2.4 million for the first
nine months of 2019, an increase of $0.8 million, or 53.2%,
compared to $1.6 million in the first nine months of 2018.
The average interest rate paid on interest-bearing liabilities and
non-interest-bearing deposits was 0.51% for the first nine months
of 2019, an increase of 18 basis points from 0.33% for the first
nine months of 2018. The increase in the interest paid on
non-interest and interest-bearing liabilities was primarily because
of the increase in the average federal funds rate between the
periods which increased the cost of deposits. Net interest
margin (net interest income divided by average interest-earning
assets) for the first nine months of 2019 was 4.14%, an increase of
12 basis points, compared to 4.02% for the first nine months of
2018. The increase in the net interest margin is primarily
related to the increase in interest income between the periods as a
result of the increase in the average federal funds rate.
Provision for Loan LossesThe provision for loan
losses was ($1.5) million for the first nine months of 2019, a
decrease of $1.0 million compared to the ($0.5) million provision
for loan losses for the first nine months of 2018. The credit
provision amount for the period was primarily the result of the
increase in net recoveries received during the nine month period
ended September 30, 2019 when compared to the same period of
2018. The net recoveries, combined with the continued
improvement in the credit quality of the loan portfolio, resulted
in a reduction of the overall allowance for loan losses required
between the periods. Total non-performing assets were $2.1
million at September 30, 2019, a decrease of $1.0 million, or
33.4%, from $3.1 million at December 31, 2018. Non-performing
loans decreased $1.2 million and foreclosed and repossessed assets
increased $0.2 million during the first nine months of 2019. The
decrease in the non-performing loans was primarily related to a
$1.3 million non-performing loan relationship that was reclassified
as an accruing loan during the third quarter of 2019.
A reconciliation of the Company’s allowance for loan losses for
the nine month periods ended September 30, 2019 and 2018 is
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
2019 |
|
|
2018 |
|
|
|
Balance at January 1, |
|
$ |
8,686 |
|
$ |
9,311 |
|
|
|
Provision |
|
|
(1,452 |
) |
|
(482 |
) |
|
|
Charge offs: |
|
|
|
|
|
|
|
|
|
Single family |
|
|
(2 |
) |
|
(24 |
) |
|
|
Consumer |
|
|
(92 |
) |
|
(141 |
) |
|
|
Commercial business |
|
|
(869 |
) |
|
(270 |
) |
|
|
Recoveries |
|
|
1,924 |
|
|
438 |
|
|
|
Balance at September 30, |
|
$ |
8,195 |
|
$ |
8,832 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest Income and ExpenseNon-interest
income was $5.9 million for the first nine months of 2019, an
increase of $0.1 million, or 3.0%, from $5.8 million for the same
period of 2018. Gain on sales of loans increased $0.2 million
between the periods primarily because of an increase in single
family loan sales. Other non-interest income increased $0.1
million due primarily to an increase in the gains recognized on
equity securities between the periods. Fees and service
charges decreased $0.1 million due to a decrease in the loan
commitment fees earned between the periods. Loan servicing
fees increased slightly due to an increase in single family loan
servicing fees earned between the periods.
Non-interest expense was $19.8 million for the
first nine months of 2019, an increase of $0.7 million, or 3.6%,
from $19.1 million for the same period of 2018. Compensation
and benefits expense increased $0.4 million primarily because of
annual salary increases and an increase in the compensation paid as
a result of the increased mortgage loan production between the
periods. Professional services expense increased $0.2 million
due primarily to an increase in legal expenses between the periods.
Other non-interest expense increased slightly due to an increase in
mortgage loan servicing expenses caused by the increase in serviced
loans that were refinanced between the periods. Occupancy and
equipment costs increased slightly between the periods due to an
increase in depreciation and maintenance costs.
Income tax expense was $2.7 million for the
first nine months of 2019, an increase of $0.4 million from $2.3
million for the first nine months of 2018. The increase in
income tax expense between the periods is primarily the result of
an increase in pre-tax income.
Return on Assets and EquityReturn on average
assets (annualized) for the nine month period ended September 30,
2019 was 1.20%, compared to 1.09% for the same period in 2018.
Return on average equity (annualized) was 9.97% for the nine month
period ended September 30, 2019, compared to 9.43% for the same
period in 2018.
General InformationHMN Financial, Inc. and the
Bank are headquartered in Rochester, Minnesota. Home Federal
Savings Bank operates twelve full service offices in Minnesota
located in Albert Lea, Austin, Eagan, Kasson, La Crescent,
Owatonna, Rochester (4), Spring Valley and Winona, one full service
office in Marshalltown, Iowa, and one full service office in
Pewaukee, Wisconsin. The Bank also operates a loan origination
office located in Sartell, Minnesota.
Safe Harbor Statement This press release may
contain forward-looking statements within the meaning of the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. These statements are often identified by such
forward-looking terminology as “expect,” “intend,” “look,”
“believe,” “anticipate,” “estimate,” “project,” “seek,” “may,”
“will,” “would,” “could,” “should,” “trend,” “target,” and “goal”
or similar statements or variations of such terms and include, but
are not limited to, those relating to growing our core deposit
relationships and loan balances, enhancing the financial
performance of our core banking operations, maintaining credit
quality, maintaining net interest margins, reducing non-performing
assets, and generating improved financial results (including
profitability); the adequacy and amount of available liquidity and
capital resources to the Bank; the Company’s liquidity and capital
requirements; our expectations for core capital and our strategies
and potential strategies for maintenance thereof; improvements in
loan production; changes in the size of the Bank’s loan portfolio;
the amount of the Bank’s non-performing assets and the
appropriateness of the allowance therefor; anticipated future
levels of the provision for loan losses; future losses on
non-performing assets; the amount and composition of
interest-earning assets; the amount of yield enhancements relating
to non-accruing and purchased loans; the amount and composition of
non-interest and interest-bearing liabilities; the availability of
alternate funding sources; the payment of dividends by HMN; the
future outlook for the Company; the amount of deposits that will be
withdrawn from checking and money market accounts and how the
withdrawn deposits will be replaced; the projected changes in net
interest income based on rate shocks; the range that interest rates
may fluctuate over the next twelve months; the net market risk of
interest rate shocks; the future outlook for the issuer of the
trust preferred securities held by the Bank; the anticipated
results of litigation and our assessment of the impact on our
financial statements; the ability of the Bank to pay dividends to
HMN; the ability to remain well capitalized; the impact of new
accounting pronouncements; and compliance by the Bank with
regulatory standards generally (including the Bank’s status as
“well-capitalized”) and other supervisory directives or
requirements to which the Company or the Bank are or may become
expressly subject, specifically, and possible responses of the
Office of the Comptroller of the Currency (OCC), Board of Governors
of the Federal Reserve System (FRB), the Bank, and the Company to
any failure to comply with any such regulatory standard, directive
or requirement.
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 and other collateral securing loans to
borrowers; federal and state regulation and enforcement; possible
legislative and regulatory changes, including changes to regulatory
capital rules; the ability of the Bank to comply with other
applicable regulatory capital requirements; enforcement activity of
the OCC and FRB in the event of our non-compliance with any
applicable regulatory standard or requirement; adverse economic,
business and competitive developments such as continued shrinking
interest margins, reduced collateral values, deposit outflows,
changes in credit or other risks posed by the Company’s loan and
investment portfolios; changes in costs associated with traditional
and alternate funding sources, including changes in collateral
advance rates and policies of the Federal Home Loan Bank (FHLB);
technological, computer-related or operational difficulties;
results of litigation; 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;
domestic and international economic developments; the Company’s
access to and adverse changes in securities markets; the market for
credit related assets; the future operating results, financial
condition, cash flow requirements and capital spending priorities
of the Company and the Bank; the availability of internal and, as
required, external sources of funding; our ability to attract and
retain employees; 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 Forms 10-K and 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. For additional discussion of the risks
and uncertainties applicable to the Company, see the “Risk Factors”
sections of the Company’s Annual Report on Form 10-K for the year
ended December 31, 2018 and Part II, Item 1A of its subsequently
filed quarterly reports on Form 10-Q.
All statements in this press release, including
forward-looking statements, speak only as of the date they are
made, and we undertake no duty to update any of the forward-looking
statements after the date of this press release.
(Three pages of selected consolidated
financial information are included with this release.)
|
|
|
|
|
|
|
|
|
HMN FINANCIAL, INC. AND SUBSIDIARIES |
Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
(Dollars in thousands) |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
(unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
62,507 |
|
|
20,709 |
|
Securities available for
sale: |
|
|
|
|
|
|
|
|
Mortgage-backed and related securities (amortized cost $22,126
and $8,159) |
|
|
|
22,187 |
|
|
8,023 |
|
Other marketable securities (amortized cost $62,757 and
$73,222) |
|
|
|
62,665 |
|
|
71,836 |
|
|
|
|
|
84,852 |
|
|
79,859 |
|
|
|
|
|
|
|
|
|
|
Equity Securities |
|
|
|
163 |
|
|
121 |
|
Loans held for sale |
|
|
|
7,819 |
|
|
3,444 |
|
Loans receivable, net |
|
|
|
583,102 |
|
|
586,688 |
|
Accrued interest
receivable |
|
|
|
2,217 |
|
|
2,356 |
|
Real estate, net |
|
|
|
580 |
|
|
414 |
|
Federal Home Loan Bank stock,
at cost |
|
|
|
853 |
|
|
867 |
|
Mortgage servicing rights,
net |
|
|
|
1,994 |
|
|
1,855 |
|
Premises and equipment,
net |
|
|
|
10,325 |
|
|
9,635 |
|
Goodwill |
|
|
|
802 |
|
|
802 |
|
Core deposit intangible |
|
|
|
181 |
|
|
255 |
|
Prepaid expenses and other
assets |
|
|
|
5,608 |
|
|
2,668 |
|
Deferred tax asset, net |
|
|
|
2,225 |
|
|
2,642 |
|
Total assets |
|
$ |
|
763,228 |
|
|
712,315 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
Deposits |
|
$ |
|
659,608 |
|
|
623,352 |
|
Accrued interest payable |
|
|
|
377 |
|
|
346 |
|
Customer escrows |
|
|
|
2,924 |
|
|
1,448 |
|
Accrued expenses and other
liabilities |
|
|
|
9,129 |
|
|
4,022 |
|
Total liabilities |
|
|
|
672,038 |
|
|
629,168 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Serial preferred stock ($.01 par value): |
|
|
|
|
|
|
|
|
authorized 500,000 shares; issued 0 |
|
|
|
0 |
|
|
0 |
|
Common stock ($.01 par value): |
|
|
|
|
|
|
|
|
authorized 16,000,000 shares; issued 9,128,662 |
|
|
|
91 |
|
|
91 |
|
Additional paid-in
capital |
|
|
|
40,259 |
|
|
40,090 |
|
Retained earnings, subject to
certain restrictions |
|
|
|
106,311 |
|
|
99,754 |
|
Accumulated other
comprehensive loss |
|
|
|
(21 |
) |
|
(1,096 |
) |
Unearned employee stock
ownership plan shares |
|
|
|
(1,692 |
) |
|
(1,836 |
) |
Treasury stock, at cost
4,284,840 and 4,292,838 shares |
|
|
|
(53,758 |
) |
|
(53,856 |
) |
Total stockholders’ equity |
|
|
|
91,190 |
|
|
83,147 |
|
Total liabilities and
stockholders’ equity |
|
$ |
|
763,228 |
|
|
712,315 |
|
|
|
|
|
|
|
|
|
|
HMN FINANCIAL, INC. AND SUBSIDIARIES |
Consolidated Statements of Comprehensive
Income |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
(Dollars in thousands, except
per share data) |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable |
|
|
$ |
7,428 |
|
|
7,441 |
|
|
22,597 |
|
|
21,225 |
|
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed and related |
|
|
|
56 |
|
|
52 |
|
|
146 |
|
|
148 |
|
Other marketable |
|
|
|
309 |
|
|
285 |
|
|
905 |
|
|
842 |
|
Other |
|
|
|
205 |
|
|
192 |
|
|
381 |
|
|
369 |
|
Total interest income |
|
|
|
7,998 |
|
|
7,970 |
|
|
24,029 |
|
|
22,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
906 |
|
|
587 |
|
|
2,418 |
|
|
1,581 |
|
Federal Home Loan Bank advances and other borrowings |
|
|
|
0 |
|
|
0 |
|
|
7 |
|
|
2 |
|
Total interest expense |
|
|
|
906 |
|
|
587 |
|
|
2,425 |
|
|
1,583 |
|
Net interest income |
|
|
|
7,092 |
|
|
7,383 |
|
|
21,604 |
|
|
21,001 |
|
Provision for loan losses |
|
|
|
(420 |
) |
|
(652 |
) |
|
(1,452 |
) |
|
(482 |
) |
Net interest income after provision for loan losses |
|
|
|
7,512 |
|
|
8,035 |
|
|
23,056 |
|
|
21,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees and service charges |
|
|
|
820 |
|
|
870 |
|
|
2,305 |
|
|
2,421 |
|
Loan servicing fees |
|
|
|
324 |
|
|
343 |
|
|
957 |
|
|
941 |
|
Gain on sales of loans |
|
|
|
845 |
|
|
489 |
|
|
1,835 |
|
|
1,612 |
|
Other |
|
|
|
238 |
|
|
234 |
|
|
842 |
|
|
792 |
|
Total non-interest income |
|
|
|
2,227 |
|
|
1,936 |
|
|
5,939 |
|
|
5,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
|
|
3,849 |
|
|
3,574 |
|
|
11,496 |
|
|
11,076 |
|
Occupancy and equipment |
|
|
|
1,142 |
|
|
1,073 |
|
|
3,284 |
|
|
3,242 |
|
Data processing |
|
|
|
319 |
|
|
310 |
|
|
925 |
|
|
939 |
|
Professional services |
|
|
|
428 |
|
|
326 |
|
|
1,081 |
|
|
873 |
|
Other |
|
|
|
1,009 |
|
|
931 |
|
|
2,975 |
|
|
2,951 |
|
Total non-interest expense |
|
|
|
6,747 |
|
|
6,214 |
|
|
19,761 |
|
|
19,081 |
|
Income before income tax expense |
|
|
|
2,992 |
|
|
3,757 |
|
|
9,234 |
|
|
8,168 |
|
Income tax expense |
|
|
|
916 |
|
|
1,045 |
|
|
2,677 |
|
|
2,284 |
|
Net income |
|
|
|
2,076 |
|
|
2,712 |
|
|
6,557 |
|
|
5,884 |
|
Other comprehensive income
(loss), net of tax |
|
|
|
149 |
|
|
(218 |
) |
|
1,075 |
|
|
(670 |
) |
Comprehensive income available
to common shareholders |
|
$ |
|
2,225 |
|
|
2,494 |
|
|
7,632 |
|
|
5,214 |
|
Basic earnings per share |
|
$ |
|
0.45 |
|
|
0.62 |
|
|
1.42 |
|
|
1.37 |
|
Diluted earnings per
share |
|
$ |
|
0.45 |
|
|
0.59 |
|
|
1.41 |
|
|
1.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HMN FINANCIAL, INC. AND
SUBSIDIARIESSelected Consolidated Financial
Information(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
SELECTED FINANCIAL DATA: |
|
|
September 30, |
|
|
September 30, |
|
(Dollars in thousands, except per share data) |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
I. OPERATING DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
7,998 |
|
|
7,970 |
|
|
24,029 |
|
|
22,584 |
|
Interest expense |
|
|
906 |
|
|
587 |
|
|
2,425 |
|
|
1,583 |
|
Net interest income |
|
|
7,092 |
|
|
7,383 |
|
|
21,604 |
|
|
21,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
II. AVERAGE BALANCES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets (1) |
|
|
743,954 |
|
|
732,586 |
|
|
728,814 |
|
|
723,354 |
|
Loans receivable, net |
|
|
588,306 |
|
|
583,995 |
|
|
591,015 |
|
|
586,340 |
|
Securities available for sale (1) |
|
|
80,286 |
|
|
79,755 |
|
|
79,163 |
|
|
79,436 |
|
Interest-earning assets (1) |
|
|
709,504 |
|
|
707,851 |
|
|
697,481 |
|
|
698,479 |
|
Interest-bearing liabilities and non-interest-bearing deposits |
|
|
644,174 |
|
|
645,020 |
|
|
632,522 |
|
|
635,885 |
|
Equity (1) |
|
|
90,512 |
|
|
83,398 |
|
|
87,939 |
|
|
83,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
III. PERFORMANCE RATIOS:
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (annualized) |
|
|
1.11 |
% |
|
1.47 |
% |
|
1.20 |
% |
|
1.09 |
% |
Interest rate spread information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average during period |
|
|
3.91 |
|
|
4.11 |
|
|
4.09 |
|
|
3.99 |
|
End of period |
|
|
3.88 |
|
|
3.89 |
|
|
3.88 |
|
|
3.89 |
|
Net interest margin |
|
|
3.97 |
|
|
4.14 |
|
|
4.14 |
|
|
4.02 |
|
Ratio of operating expense to average total assets
(annualized) |
|
|
3.60 |
|
|
3.36 |
|
|
3.63 |
|
|
3.53 |
|
Return on average equity (annualized) |
|
|
9.10 |
|
|
12.90 |
|
|
9.97 |
|
|
9.43 |
|
Efficiency |
|
|
72.41 |
|
|
66.67 |
|
|
71.75 |
|
|
71.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
|
|
|
|
|
|
2019 |
|
|
2018 |
|
|
2018 |
|
|
|
|
IV. EMPLOYEE DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of full time equivalent employees |
|
|
179 |
|
|
182 |
|
|
182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
V. ASSET QUALITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-performing assets |
|
$ |
2,059 |
|
|
3,092 |
|
|
5,899 |
|
|
|
|
Non-performing assets to total assets |
|
|
0.27 |
% |
|
0.43 |
% |
|
0.80 |
% |
|
|
|
Non-performing loans to total loans receivable, net |
|
|
0.25 |
|
|
0.46 |
|
|
0.94 |
|
|
|
|
Allowance for loan losses |
|
$ |
8,195 |
|
|
8,686 |
|
|
8,832 |
|
|
|
|
Allowance for loan losses to total assets |
|
|
1.07 |
% |
|
1.22 |
% |
|
1.20 |
% |
|
|
|
Allowance for loan losses to total loans receivable, net |
|
|
1.41 |
|
|
1.48 |
|
|
1.51 |
|
|
|
|
Allowance for loan losses to non-performing loans |
|
|
554.16 |
|
|
324.27 |
|
|
161.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VI. BOOK VALUE PER
SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per common share |
|
$ |
18.83 |
|
|
17.19 |
|
|
17.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine MonthsEndedSept 30, 2019 |
|
|
Year EndedDec 31, 2018 |
|
|
Nine MonthsEndedSept 30, 2018 |
|
|
|
|
VII. CAPITAL RATIOS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity to total assets, at end of period |
|
|
11.95 |
% |
|
11.67 |
% |
|
10.85 |
% |
|
|
|
Average stockholders’ equity to average assets (1) |
|
|
12.07 |
|
|
11.52 |
|
|
11.54 |
|
|
|
|
Ratio of average interest-earning assets to average
interest-bearing liabilities (1) |
|
|
110.27 |
|
|
109.81 |
|
|
109.84 |
|
|
|
|
Home Federal Savings Bank regulatory capital ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital ratio |
|
|
13.31 |
|
|
13.26 |
|
|
12.65 |
|
|
|
|
Tier 1 capital leverage ratio |
|
|
11.00 |
|
|
11.00 |
|
|
10.49 |
|
|
|
|
Tier 1 capital ratio |
|
|
13.31 |
|
|
13.26 |
|
|
12.65 |
|
|
|
|
Risk-based capital |
|
|
14.56 |
|
|
14.52 |
|
|
13.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Average balances were
calculated based upon amortized cost without the market value
impact of ASC 320.
CONTACT:Bradley KrehbielChief Executive
Officer, PresidentHMN Financial, Inc. (507)
252-7169
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