HMN Financial Participates in U.S. Treasury’s Capital Purchase Program
December 23 2008 - 1:44PM
Business Wire
HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the holding
company for Home Federal Savings Bank (the Bank), announced today
it has successfully completed the sale of $26.0 million in
preferred stock and related warrant to the United States Treasury
Department. This transaction is part of Treasury�s capital purchase
program under the Emergency Economic Stabilization Act of 2008.
Under the terms of the transaction, the Company issued 26,000
shares of cumulative perpetual preferred stock and a warrant to
purchase 833,333 shares of HMN common stock at an exercise price of
$4.68 per share. The preferred shares are entitled to a 5% annual
cumulative dividend for each of the first five years of the
investment, increasing to 9% thereafter, unless HMN redeems the
shares. The preferred stock can�t be redeemed for a period of three
years from the date of the Treasury investment, except with the
proceeds of certain qualifying offerings of Tier 1 capital. After
three years, the preferred stock may be redeemed in whole or in
part, at par plus accrued and unpaid dividends. The preferred stock
is non-voting, other than certain class voting rights. The warrant
may be exercised at any time over its ten-year term. Treasury has
agreed not to vote any shares of common stock acquired upon
exercise of the warrant. Without the consent of Treasury, for three
years following issuance of the preferred stock, HMN cannot (i)
increase the rate at which it pays dividends on its common stock in
excess of the rate at which it last declared a quarterly common
stock dividend, or $0.25 per share, or (ii) subject to certain
exceptions, repurchase any shares of HMN common stock outstanding.
Both the preferred securities and the warrant will be accounted for
as Tier 1 capital. The Bank�s risk-based capital ratio (the ratio
of risk-based capital to risk-weighted assets) was 10.54% at
September 30, 2008, which is above the regulatory capital
requirements of 10.0% for a �well capitalized� bank. If this
additional capital had been included in the Bank�s capital
calculation at September 30, 2008, the Bank�s risk based capital
ratio would have increased to 13.5% as risk-based capital would
have increased by $26.0 million from $91.5 million to $117.5
million and risk-weighted assets would have remained at $867.8
million. �This investment will further enhance our already
well-capitalized position,� said Michael McNeil, President and CEO.
�Our ability to meet the needs of our customers and the communities
we serve will be further strengthened by these funds. Additional
capital should also benefit shareholders by providing funding that
should enable us to expand our market share and build shareholder
value.� General Information HMN Financial, Inc. and Home Federal
Savings Bank are headquartered in Rochester, Minnesota. The Bank
operates eleven full service offices in southern Minnesota located
in Albert Lea, Austin, Eagan, LaCrescent, Rochester, Spring Valley
and Winona and two full service offices in Iowa located in
Marshalltown and Toledo. Home Federal Savings Bank also operates
loan origination offices in Rochester and Sartell, Minnesota. Home
Federal Private Banking operates branches in Edina and Rochester,
Minnesota. Safe Harbor Statement This press release may contain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements deal with matters that do not relate strictly to
historical facts. Words such as �anticipate�, �believe�, �expect�,
�intend�, �would�, �could�, �should�, �estimate�, �project� and
similar expressions, as they relate to the Company, are intended to
identify such forward-looking statements. These statements include,
but are not limited to those relating to the continuation of the
Bank�s well-capitalized position, the Company�s ability to serve
the needs of its customers, expand its market share and build
shareholder value with the proceeds of the preferred stock
investment by the United States Treasury, the adequacy of available
liquidity to the Bank, the future outlook for the Company, the
result of actions being taken by national and world leaders
stabilizing the global economy and assuring consumer and business
access to credit, any future dividends, and the Company�s financial
expectations for earnings and interest income. 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, 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.
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