HMN Financial, Inc. (NASDAQ:HMNF):
Third Quarter
Highlights
- Net income of $881,000
compared to net loss of $7.1 million in third quarter of
2008
- Diluted earnings per share of
$0.12 compared to diluted loss per share of $1.93 in third quarter
of 2008
- Provision for loan losses
down $12.4 million from third quarter of 2008
- Net interest margin of 3.46%,
up 25 basis points from third quarter of 2008
- Nonperforming assets of $77.2
million, down $2.3 million from second quarter of 2009
Year to Date
Highlights
- Net loss of $10.9 million
compared to net loss of $7.6 million in the first nine months of
2008
- Diluted loss per share of
$3.32 compared to diluted loss per share of $2.08 in the first nine
months of 2008
- Provision for loan losses up
$4.8 million over first nine months of 2008
- Net interest margin of 3.35%,
up 14 basis points from first nine months of 2008
- Nonperforming assets of $77.2
million, up $2.4 million in the first nine months of 2009
- Total assets decreased $113
million in first nine months of 2009
Earnings (Loss) Summary Three Months Ended
Nine Months Ended September 30, September
30, (dollars in thousands, except per share amounts)
2009 2008 2009 2008
Net income (loss) $ 881 (7,051
) $ (10,945 ) (7,589
) Diluted earnings (loss) per share 0.12
(1.93 ) (3.32 ) (2.08 )
Return on average assets 0.34 (2.54 )
% (1.34 ) (0.92 ) %
Return on average equity 3.52 (29.14 )
% (13.79 ) (10.36 ) %
Book value per share $ 18.09 20.77
$ 18.09 20.77
HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $1.0
billion holding company for Home Federal Savings Bank (the Bank),
today reported net income of $881,000 for the third quarter of
2009, a $7.9 million change from a net loss of $7.1 million for the
third quarter of 2008. Net income available to common shareholders
for the third quarter of 2009 was $443,000, a change of $7.5
million, from a net loss available to common shareholders of $7.1
million for the third quarter of 2008. Diluted earnings per common
share for the third quarter of 2009 were $0.12, up $2.05 from the
diluted loss per share of $1.93 for the third quarter of 2008. The
increase in net income for the third quarter of 2009 is due
primarily to a $12.4 million decrease in the loan loss provision
between the periods. The provision decreased primarily because of
the $12.0 million provision and related charge-off recorded in the
third quarter of 2008 due to apparently fraudulent activity on a
commercial loan.
President’s Statement
"We are pleased to report positive earnings for the third
quarter of 2009” said Bradley Krehbiel, Principal Executive Officer
of HMN. “While the economic environment for commercial real estate
continues to be challenging, we are encouraged by some recent sales
and renewed interest in some of our non-performing real estate. We
continue to focus our efforts on reducing non-performing assets,
reducing industry loan concentrations, increasing our core retail
and commercial deposit relationships and reducing expenses. We
believe that, over time, our focus on these areas will be effective
in generating improved financial results. In the meantime, Home
Federal Savings Bank continues to have adequate available liquidity
and its capital position remains above the levels required for it
to be considered a well capitalized financial institution by
regulatory standards.”
Third Quarter Results
Net Interest Income
Net interest income was $8.6 million for the third quarter of
2009, the same as for the third quarter of 2008. Interest income
was $14.3 million for the third quarter of 2009, a decrease of $2.1
million, or 12.5%, from $16.4 million for the same period in 2008.
Interest income decreased primarily because of a decrease in the
average yields earned on loans and investments. The decreased
average yields were the result of the 175 basis point decrease in
the prime interest rate between the periods. Decreases in the prime
rate, which is the rate that banks charge their prime business
customers, generally decrease the rates on adjustable rate consumer
and commercial loans in the portfolio and on new loans originated.
Interest income was also adversely affected by the increase in
non-performing loans between the periods. The average yield earned
on interest-earning assets was 5.77% for the third quarter of 2009,
a decrease of 37 basis points from the 6.14% average yield for the
third quarter of 2008.
Interest expense was $5.7 million for the third quarter of 2009,
a decrease of $2.1 million, or 26.5%, compared to $7.8 million for
the third quarter of 2008. Interest expense decreased primarily
because of the lower interest rates paid on money market accounts
and certificates of deposits. The decreased rates were the result
of the 175 basis point decrease in the federal funds rate that
occurred between the periods and the 225 basis point decrease that
occurred in the first nine months of 2008. Decreases in the federal
funds rate, which is the rate that banks charge other banks for
short term loans, generally have a lagging effect and decrease the
rates banks pay for deposits. The lagging effect of deposit rate
changes is primarily due to the Bank’s deposits that are in the
form of certificates of deposit which do not reprice immediately
when the federal funds rate changes. The average interest rate paid
on interest bearing liabilities was 2.43% for the third quarter of
2009, a decrease of 69 basis points from the 3.12% average rate
paid in the third quarter of 2008. Net interest margin (net
interest income divided by average interest earning assets) for the
third quarter of 2009 was 3.46%, an increase of 25 basis points,
compared to 3.21% for the third quarter of 2008.
Provision for Loan
Losses
The provision for loan losses was $3.4 million for the third
quarter of 2009, a decrease of $12.4 million, compared to $15.8
million for the third quarter of 2008. The provision decreased
primarily because of the $12.0 million provision and related
charge-off recorded in the third quarter of 2008 due to apparently
fraudulent activity on a commercial loan. The loan loss provision
for the third quarter of 2009 includes $3.2 million related to a
commercial loan that was charged off during the quarter because the
collateral supporting the loan was determined to be inadequate due
to the apparently fraudulent activity of the borrower. Total
non-performing assets were $77.2 million at September 30, 2009, a
decrease of $2.3 million, or 2.8%, from $79.5 million at June 30,
2009. Non-performing loans decreased $1.0 million and foreclosed
and repossessed assets decreased $1.3 million during the third
quarter. 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, 2009 $ 62,667
June 30, 2009 $ 16,796 Classified as non-performing 7,273
Transferred from non-performing loans 4,512 Charge offs (1,839 )
Other foreclosures/repossessions 987 Principal payments received
(1,762 ) Real estate sold (7,048 ) Classified as accruing (116 )
Net gain on sale of assets 1,406 Transferred to real estate owned
(4,512 ) Write downs (1,159 ) September 30, 2009 $
61,711 September 30, 2009 $ 15,494
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, 2008.
September 30, June 30, December 31,
(Dollars in thousands) 2009 2009
2008 Non-Accruing Loans: One-to-four family real
estate $ 1,857 $ 700 $ 7,251 Commercial real estate 38,731 42,393
46,953 Consumer 4,302 5,942 5,298 Commercial business 16,821 13,632
4,671 Total 61,711 62,667 64,173 Other assets 0 25 25
Foreclosed and Repossessed Assets: One-to-four family real estate
793 536 258 Commercial real estate 14,701 16,235 10,300 Total
non-performing assets $ 77,205 $ 79,463 $ 74,756 Total as a
percentage of total assets 7.48 % 7.54 % 6.53 % Total
non-performing loans $ 61,711 $ 62,667 $ 64,173 Total as a
percentage of total loans receivable, net 7.54 % 7.49 % 7.12 %
Allowance for loan loss to non-performing loans 43.82 % 40.54 %
33.12 % Delinquency Data: Delinquencies (1) 30+ days $ 3,769
$ 10,080 $ 11,488 90+ days 0 0 0 Delinquencies as a percentage of
loan and lease portfolio (1) 30+ days 0.45 % 1.18 % 1.26 % 90+ days
0.00 % 0.00 % 0.00 %
(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
two most recently completed quarters and December 31, 2008.
Principal
Principal Principal (Dollars in
thousands) Amount of Loan Amount of Loan Amount of Loan at
September 30, at June 30, at December 31, Property Type
# 2009 # 2009
# 2008 Residential developments 7 $ 13,995 8 $
18,891 6 $ 17,680 Single family homes 3 1,615 3 1,674 4 898
Condominiums 0 0 0 0 1 5,440 Hotels 1 4,999 1 4,999 1 4,999
Alternative fuel plants 2 12,789 2 12,676 2 12,493 Shopping
center/retail 3 2,349 2 1,182 2 1,237 Elderly care facilities 0 0 0
0 3 4,037 Restaurant/bars 4 2,984
3 2,971 1
169 20 $ 38,731
19 $ 42,393 20 $ 46,953
Non-Interest Income and
Expense
Non-interest income was $1.9 million for the third quarter of
2009, a decrease of $156,000, or 7.7%, from $2.0 million for the
same period in 2008. Securities gains decreased $479,000 as a
result of decreased investment sales. Fees and service charges
decreased $129,000 between the periods primarily because of
decreased service charges and overdraft fees. Gains on sales of
loans increased $435,000 due to an increase in the single-family
mortgage loans that were sold. Mortgage servicing fees increased
$22,000 because of an increase in the single-family mortgage loans
being serviced between the periods as more loans were sold with the
servicing rights retained.
Non-interest expense was $6.0 million for the third quarter of
2009, a decrease of $611,000, or 9.2%, from $6.6 million for the
same period of 2008. Losses (gains) on real estate owned changed
from $0 in the third quarter of 2008 to a gain of $357,000 in the
third quarter of 2009 primarily because the gains recognized on the
sale of two commercial real estate properties exceeded the loss
recognized on a residential development that was written down due
to a decrease in the estimated value. Data processing costs
decreased $187,000 primarily because of decreases in third party
vendor charges for internet and other banking services as a result
of the system conversion that occurred in the fourth quarter of
2008. Occupancy expense decreased $161,000 primarily because of a
decrease in depreciation expense and non-capitalized software and
equipment purchases. Other non-interest expenses decreased $61,000
primarily because the increased FDIC deposit insurance assessments
and other real estate expenses in the third quarter of 2009 were
less than the litigation settlement expense recorded in the third
quarter of 2008. Amortization of mortgage servicing rights
decreased $21,000 due to a decrease in the prepayments between the
periods of single-family mortgage loans being serviced.
Compensation expense increased $170,000 between the periods
primarily because of an increase in the number of employees in the
mortgage, commercial and computer operations areas of the Bank.
The effect of income taxes changed $5.0 million between the
periods from a benefit of $4.8 million in the third quarter of 2008
to an expense of $0.2 million in the third quarter of 2009. The
change was due to an increase in taxable income and an effective
tax rate that decreased from 40.4% in the third quarter of 2008 to
16.6% in the third quarter of 2009. In the third quarter of 2009,
the Company recorded a tax adjustment that reduced income tax
expense $264,000. This adjustment was related to an immaterial
correction of the previously recorded second quarter income tax
expense. Excluding this adjustment, the effective tax rate would
have been 41.6% for the third quarter of 2009.
Return on Assets and
Equity
Return on average assets for the third quarter of 2009 was
0.34%, compared to (2.54%) for the third quarter of 2008. Return on
average equity was 3.52% for the third quarter of 2009, compared to
(29.14%) for the same period of 2008. Book value per common share
at September 30, 2009 was $18.09, compared to $20.77 at September
30, 2008.
Nine Month Period Results
Net Income (Loss)
The net loss was $10.9 million for the nine-month period ended
September 30, 2009, an increased loss of $3.3 million, from the
$7.6 million loss for the nine month period ended September 30,
2008. The net loss available to common shareholders was $12.3
million for the nine month period ended September 30, 2009, an
increased loss of $4.7 million, from the net loss available to
common shareholders of $7.6 million for the same period of 2008.
Diluted loss per common share for the nine month period in 2009 was
$3.32, an increased loss of $1.24, from the diluted loss per share
of $2.08 for the same period in 2008. The increase in net loss for
the first nine months of 2009 is primarily due to a $4.8 million
increase in the loan loss provision between the periods as a result
of increased commercial loan charge offs.
Net Interest Income
Net interest income was $25.9 million for the first nine months
of 2009, an increase of $0.5 million, or 1.7%, from $25.4 million
for the same period in 2008. Interest income was $44.5 million for
the nine-month period ended September 30, 2009, a decrease of $5.9
million, or 11.8%, from $50.4 million for the same period in 2008.
Interest income decreased primarily because of a decrease in the
average yields earned on loans and investments. The decreased
average yields were the result of the 175 basis point decrease in
the prime interest rate between the periods. Decreases in the prime
rate generally decrease the rates on adjustable rate consumer and
commercial loans in the portfolio and on new loans originated.
Interest income was also adversely affected by the increase in
non-performing loans between the periods. The average yield earned
on interest-earning assets was 5.75% for the first nine months of
2009, a decrease of 62 basis points from the 6.37% average yield
for the same period of 2008.
Interest expense was $18.6 million for the nine-month period
ended September 30, 2009, a decrease of $6.4 million, or 25.5%,
from $25.0 million for the same period in 2008. Interest expense
decreased primarily because of the lower interest rates paid on
money market accounts and certificates of deposits. The decreased
rates were the result of the 175 basis point decrease in the
federal funds rate that occurred between the periods and the 225
basis point decrease that occurred in the first nine months of
2008. Decreases in the federal funds rate generally have a lagging
effect and decrease the rates banks pay for deposits. The lagging
effect of deposit rate changes is because many of the Bank’s
deposits are in the form of certificates of deposit which do not
reprice immediately when the federal funds rate changes. The
average interest rate paid on interest bearing liabilities was
2.55% for the first nine months of 2009, a decrease of 83 basis
points from the 3.38% average rate paid in the same period of 2008.
Net interest margin (net interest income divided by average
interest earning assets) for the first nine months of 2009 was
3.35%, an increase of 14 basis points, compared to 3.21% for the
first nine months of 2008.
Provision for Loan
Losses
The provision for loan losses was $23.3 million for the first
nine-months of 2009, an increase of $4.8 million, from $18.5
million for the same nine-month period in 2008. The provision for
loan losses increased primarily as the result of an increase in the
loan loss allowance recorded for specific commercial real estate
loans due to decreases in the estimated value of the underlying
collateral supporting the loans. An additional provision for loan
losses of $2.9 million was recorded on two non-performing
residential development loans and a $3.0 million provision for loan
losses was established on two alternative fuel plants based on
updated appraised values during the first nine months of 2009. An
analysis of the loan portfolio during the first nine months of the
year resulted in a $2.7 million increase in the loan loss provision
for other risk rated loans. The loan loss provision for the first
nine months of 2009 also includes a $6.9 million increase related
to two unrelated commercial loans that were charged off after it
was determined that the collateral supporting the loans was
inadequate due to the apparently fraudulent actions of the
respective borrowers. The loan loss provision for the first nine
months of 2008 included a $12.0 million provision and related
charge off due to apparently fraudulent activity on a commercial
loan. Total non-performing assets were $77.2 million at September
30, 2009, an increase of $2.4 million, or 3.3%, from $74.8 million
at December 31, 2008. Non-performing loans decreased $2.5 million
and foreclosed and repossessed assets increased $4.9 million during
the nine month period. The non-performing loan and foreclosed and
repossessed asset activity for the first nine months of 2009 was as
follows:
(Dollars in thousands)
Non-performing loans
Foreclosed and repossessed asset activity December 31, 2008
$
64,173
December 31, 2008 $
10,583
Classified as non-performing 35,557 Transferred from non-performing
loans 15,103 Charge offs (18,144 ) Other foreclosures/repossessions
1,073
Principal payments received
(3,939
) Real estate sold (8,368 ) Classified as accruing (833 ) Net gain
on sale of assets 1,379 Transferred to real estate owned
(15,103 ) Write downs (4,276 ) September 30, 2009 $ 61,711
September 30, 2009 $ 15,494
A rollforward of the Company’s allowance for loan losses for the
nine-month periods ended September 30, 2009 and 2008 follows:
(in thousands) 2009
2008 Balance at January 1, $ 21,257 $ 12,438 Provision
23,254 18,480 Charge offs: Commercial loans (5,352 ) (12,034 )
Commercial real estate loans (11,017 ) (2,727 ) Consumer loans
(1,774 ) (633 ) Recoveries 676 47
Balance at September 30, $ 27,044 $ 15,571
Non-Interest Income and
Expense
Non-interest income was $6.0 million for the first nine months
of 2009, an increase of $529,000, or 9.7%, from $5.5 million for
the same period in 2008. Gains on sales of loans increased $1.4
million between the periods primarily because of an increase in
sales of single family mortgages between the periods. Mortgage
servicing fees increased $48,000 between the periods due to an
increase in the single-family mortgage loans being serviced.
Security gains decreased $474,000 due to decreased investment
sales. Other income decreased $418,000 primarily as a result of
decreased commissions on the sale of uninsured investment products.
Fees and service charges decreased $43,000 between the periods
primarily because of decreased service charges and overdraft
fees.
Non-interest expense was $25.1 million for the first nine months
of 2009, an increase of $2.2 million, or 9.7%, from $22.9 million
for the same period in 2008. Losses on real estate owned increased
$3.8 million between the periods primarily because the losses
recognized on three residential developments caused by a decrease
in their estimated value exceeded the gains recognized on the sale
of two commercial real estate properties. Other non-interest
expenses increased $2.1 million primarily because of a $1.0 million
increase in Federal Deposit Insurance Corporation (FDIC) insurance
premiums, $557,000 increase in costs related to other real estate,
$461,000 increase for interest expense on a pending state tax
assessment as a result of an unfavorable tax court ruling and
$155,000 increase in legal fees primarily related to the ongoing
state tax assessment challenge. Compensation expense increased
$907,000 between the periods primarily because of additional
staffing in the mortgage, commercial and computer operations areas
and costs associated with the employment agreement of a former
executive officer. These increases were offset by a $3.8 million
decrease in goodwill impairment charges between the periods. Data
processing costs decreased $435,000 primarily because of decreases
in third party vendor charges for internet and other banking
services as a result of the system conversion that occurred in the
fourth quarter of 2008. Occupancy expense decreased $353,000
primarily because of a decrease in depreciation expense and
non-capitalized software and equipment purchases. Amortization of
mortgage servicing rights decreased $25,000 due to a decrease in
the prepayments between the periods of single-family mortgage loans
being serviced.
The effect of income taxes changed $2.6 million between the
periods from a benefit of $2.9 million for the nine month period
ended September 30, 2008 to a benefit of $5.5 million for the nine
month period ended September 30, 2009. The change was due to an
increase in taxable loss and an effective tax rate that decreased
from 42.9% in the first nine months of 2008, excluding the goodwill
impairment charge, to 33.5% for the first nine months of 2009. The
goodwill impairment charge recorded in the first nine months of
2008 was not tax deductible and therefore no tax benefit was
realized related to the impairment charge. In the first nine months
of 2009, the Company recorded additional income tax expense of $1.0
million, which was a reduction of the overall tax benefit, as a
result of an unfavorable tax court ruling related to the tax
treatment of the inter-company dividends paid to the Bank by a
former subsidiary in prior tax years. Excluding this adjustment,
the effective tax rate would have been 39.6% for the first nine
months of 2009.
Return on Assets and
Equity
Return on average assets for the nine-month period ended
September 30, 2009 was (1.34%), compared to (0.92%) for the same
period in 2008. Return on average equity was (13.79%) for the
nine-month period ended September 30, 2009, compared to (10.36%)
for the same period in 2008.
General Information
HMN Financial, Inc. and Home Federal Savings Bank are
headquartered in Rochester, Minnesota. The Bank operates ten full
service offices in southern Minnesota located in Albert Lea,
Austin, Eagan, LaCrescent, 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 loan
origination offices located in Rochester, Minnesota and 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 adequate available liquidity,
reducing non-performing assets, reducing industry loan
concentrations, increasing core retail and commercial 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, 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; the
Company’s use of the proceeds from the sale of securities to the
U.S. Treasury Department 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)
2009 2008 (unaudited)
Assets Cash and cash
equivalents $ 20,469 15,729 Securities available for sale:
Mortgage-backed and related securities (amortized cost $56,776 and
$76,166) 58,737 77,327 Other marketable securities (amortized cost
$75,976 and $95,445) 76,847 97,818 135,584
175,145 Loans held for sale 3,279 2,548 Loans
receivable, net 818,897 900,889 Accrued interest receivable 3,952
5,568 Real estate, net 15,494 10,558 Federal Home Loan Bank stock,
at cost 7,286 7,286 Mortgage servicing rights, net 1,266 728
Premises and equipment, net 13,097 13,972 Prepaid expenses and
other assets 4,634 4,408 Deferred tax asset, net 8,759 8,649
Total assets $ 1,032,717 1,145,480
Liabilities and Stockholders’ Equity Deposits $
781,574 880,505 Federal Home Loan Bank advances and Federal Reserve
borrowings 142,500 142,500 Accrued interest payable 1,700 6,307
Customer escrows 1,605 639 Accrued expenses and other liabilities
4,892 3,316 Total liabilities 932,271
1,033,267 Commitments and contingencies Stockholders’
equity: Serial preferred stock: ($.01 par value) authorized 500,000
shares; issued shares 26,000 23,670 23,384 Common stock ($.01 par
value): authorized 11,000,000; issued shares 9,128,662 91 91
Additional paid-in capital 58,593 60,687 Retained earnings, subject
to certain restrictions 86,291 98,067 Accumulated other
comprehensive income 1,709 2,091 Unearned employee stock ownership
plan shares (3,626 ) (3,771 ) Treasury stock, at cost 4,883,378 and
4,961,032 shares (66,282 ) (68,336 ) Total stockholders’ equity
100,446 112,213 Total liabilities and stockholders’
equity $ 1,032,717 1,145,480
HMN FINANCIAL, INC. AND
SUBSIDIARIES
Consolidated Statements of Income (unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
(dollars in thousands, except per
share data)
2009
2008
2009
2008
Interest income: Loans receivable $ 12,928
14,634
39,764 44,573 Securities available for sale: Mortgage-backed and
related 649 360 2,177 797 Other marketable 693 1,224 2,475 4,641
Cash equivalents 0 78 1 196 Other 55 78 50 211
Total interest income 14,325 16,374 44,467
50,418 Interest expense: Deposits 4,172 6,235
13,876 20,944 Federal Home Loan Bank advances and Federal Reserve
borrowings 1,563 1,571 4,732 4,047
Total interest expense 5,735 7,806 18,608
24,991 Net interest income 8,590 8,568 25,859 25,427
Provision for loan losses 3,381 15,790 23,254
18,480 Net interest income (loss) after provision for loan
losses 5,209 (7,222 ) 2,605 6,947
Non-interest income: Fees and service charges 1,034 1,163 3,071
3,114 Mortgage servicing fees 262 240 770 722 Securities gains, net
0 479 5 479 Gain on sales of loans 493 58 1,858 442 Other 94
99 298 716 Total non-interest income 1,883
2,039 6,002 5,473 Non-interest
expense: Compensation and benefits 3,180 3,010 10,313 9,406
Occupancy 970 1,131 3,071 3,424 Advertising 101 95 311 311 Data
processing 298 485 888 1,323 Amortization of mortgage servicing
rights, net 121 142 431 456 Goodwill impairment charge 0 0 0 3,801
Loss (gain) on real estate owned (357 ) 0 3,812 0 Other 1,723
1,784 6,241 4,139 Total non-interest
expense 6,036 6,647 25,067 22,860
Income (loss) before income tax expense (benefit) 1,056 (11,830 )
(16,460 ) (10,440 ) Income tax expense (benefit) 175 (4,779
) (5,515 ) (2,851 ) Net income (loss) $ 881 (7,051 ) (10,945 )
(7,589 ) Preferred stock dividends and discount 438 0
1,306 0 Net income (loss) available to common
shareholders 443 (7,051 ) (12,251 ) (7,589 ) Basic earnings
(loss) per common share $ 0.12 (1.93 ) (3.32 ) (2.08 )
Diluted earnings (loss) per common share $ 0.12 (1.93 )
(3.32 ) (2.08 )
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)
2009 2008 2009 2008
I. OPERATING DATA: Interest income $ 14,325
16,374 44,467 50,418 Interest expense 5,735 7,806 18,608 24,991 Net
interest income 8,590 8,568 25,859 25,427 II. AVERAGE
BALANCES: Assets (1) 1,042,921 1,103,824 1,090,096 1,099,419 Loans
receivable, net 827,609 897,311 861,295 884,239 Securities
available for sale (1) 134,463 131,053 149,977 145,713
Interest-earning assets (1) 984,439 1,061,578 1,033,336 1,057,124
Interest-bearing liabilities 935,480 996,011 974,410 987,458 Equity
(1) 99,387 96,255 106,082 97,851 III. PERFORMANCE RATIOS:
(1) Return on average assets (annualized) 0.34 % (2.54 ) % (1.34 )
% (0.92 ) % Interest rate spread information: Average during period
3.34 3.02 3.20 2.99 End of period 3.46 2.83 3.46 2.83 Net interest
margin 3.46 3.21 3.35 3.21 Ratio of operating expense to average
total assets (annualized) 2.30 2.40 3.07 2.78 Return on average
equity (annualized) 3.52 (29.14 ) (13.79 ) (10.36 ) Efficiency
57.63 62.66 78.68
73.98 September 30, December 31, September 30, 2009
2008 2008 IV. ASSET QUALITY:
Total non-performing assets $ 77,205 74,756 45,248 Non-performing
assets to total assets 7.48 % 6.53 % 4.01 % Non-performing loans to
total loans receivable, net 7.54 7.12 4.17 Allowance for loan
losses $ 27,044 21,257 15,571 Allowance for loan losses to total
assets 2.62 % 1.86 % 1.38 % Allowance for loan losses to total
loans receivable, net 3.30 2.36 1.78 Allowance for loan losses to
non-performing loans 43.82 33.12 42.75 V. BOOK VALUE PER
SHARE: Book value per share $ 18.09 21.31 20.77 Nine Months
Year
Nine Months Ended Ended Ended Sept 30, 2009
Dec 31, 2008 Sept 30, 2008 VI. CAPITAL RATIOS:
Stockholders’ equity to total assets, at end of period 9.73 % 9.80
% 7.67 % Average stockholders’ equity to average assets (1) 9.73
8.58 8.90 Ratio of average interest-earning assets to average
interest-bearing liabilities (1) 106.05 106.50
107.06 September 30, December
31, September 30, 2009 2008 2008
VII. EMPLOYEE DATA: Number of full time equivalent employees
212 204 202
(1) Average balances were calculated based upon amortized cost
without the market value impact of SFAS 115.
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