Market Overview

HMN Financial, Inc. Announces Fourth Quarter Results

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Fourth Quarter Highlights

  • Net income of $1.7 million, up $0.6 million from $1.1 million for fourth quarter of 2015
  • Diluted earnings per share of $0.35, up $0.12 from $0.23 for fourth quarter of 2015
  • Net interest income of $6.3 million, up $0.6 million from $5.7 million for fourth quarter of 2015
  • Non-performing assets of $3.9 million, down $1.9 million, or 32.9%, from September 30, 2016

Annual Highlights

  • Net income of $6.4 million, up $3.4 million from $3.0 million for 2015
  • Diluted earnings per share of $1.34, up $0.73 from $0.61 for 2015
  • Net interest income of $25.8 million, up $5.9 million from $19.9 million for 2015
  • Non-performing assets of $3.9 million, down $2.3 million from December 31, 2015
  • Total assets of $682 million, up $39 million from December 31, 2015
                 
Net Income Summary     Three Months Ended       Year Ended  
      December 31,       December 31,  
(Dollars in thousands, except per share amounts)     2016    
  2015       2016     2015
 
Net income   $ 1,684       1,090     $ 6,350       2,956  
Net income available to common stockholders     1,684       1,090       6,350       2,848  
Diluted earnings per share     0.35       0.23       1.34       0.61  
Return on average assets (annualized)     0.99 %     0.69 %     0.96 %     0.50 %
Return on average equity (annualized)     8.93 %     6.19 %     8.71 %     4.27 %
Book value per share   $ 16.91       15.54     $ 16.91       15.54  
                                 

ROCHESTER, Minn., Jan. 25, 2017 (GLOBE NEWSWIRE) -- HMN Financial, Inc. (HMN or the Company) (NASDAQ: HMNF), the $682 million holding company for Home Federal Savings Bank (the Bank), today reported net income of $1.7 million for the fourth quarter of 2016, an increase of $0.6 million compared to net income of $1.1 million for the fourth quarter of 2015.  Diluted earnings per share for the fourth quarter of 2016 was $0.35, an increase of $0.12 from the diluted earnings per share of $0.23 for the fourth quarter of 2015.  The increase in net income for the fourth quarter of 2016 is due primarily to a $0.6 million increase in interest income as a result of an increase in the average interest-earning assets and a change in the composition of the average interest-earning assets held between the periods.  The provision for loan losses decreased $0.5 million between the periods due to improvements in the credit quality of the commercial loan portfolio.  These increases in income were partially offset by a $0.5 million increase in income tax expense due to the increase in pre-tax income in the fourth quarter of 2016 when compared to the same period of 2015.

President's Statement

"We are pleased to report the continued improvement in both the credit quality of our loan portfolio and net income in the fourth quarter of 2016 when compared to the same period of 2015," said Bradley Krehbiel, President and Chief Executive Officer of HMN.  "The increase in net income between the periods is the result of increasing interest income and managing expenses in order to improve our financial results.  We will continue to focus our efforts on prudently growing our core deposit and loan balances in order to further enhance the financial performance of our core banking operations." 

Fourth Quarter Results

Net Interest Income

Net interest income was $6.3 million for the fourth quarter of 2016, an increase of $0.6 million, or 10.1%, from $5.7 million for the fourth quarter of 2015.  Interest income was $6.7 million for the fourth quarter of 2016, an increase of $0.6 million, or 9.9%, from $6.1 million for the same period in 2015.  Interest income increased between the periods primarily because of an increase in the average interest-earning assets and a change in the composition of the average interest-earning assets held, which resulted in an increase in the average yields earned between the periods.  While the average interest-earning assets increased $47.5 million between the periods, the average interest-earning assets held in higher yielding loans increased $91.7 million and the amount of average interest-earning assets held in lower yielding cash and investments decreased $44.2 million between the periods.  The yield on average interest-earning assets was also enhanced $0.2 million, or 6 basis points, due to loan prepayment penalties, yield adjustments recognized on purchased loans, and interest payments received on non-accruing and previously charged off loans in the fourth quarter of 2016.  The increase in the average outstanding loans between the periods was primarily the result of an increase in the commercial loan portfolio, which occurred because of an increase in loan originations and a reduction in loan payoffs between the periods.  Average outstanding loans also increased $6.1 million between the periods as a result of an acquisition that occurred in the second quarter of 2016.  The average yield earned on interest-earning assets was 4.15% for the fourth quarter of 2016, an increase of 9 basis points from 4.06% for the fourth quarter of 2015.

Interest expense was $0.4 million for the fourth quarter of 2016, the same as the fourth quarter of 2015.  The average rate paid on interest-bearing liabilities also remained the same between the periods.  While the average interest-bearing liabilities increased $35.7 million between the periods, the average amount held in lower rate checking and money market accounts increased $35.3 million and the average amount held in higher rate certificates of deposits and other borrowings increased $0.4 million between the periods. The increase in the average outstanding deposits between the periods was primarily the result of organic deposit growth. The average outstanding deposits also increased $15.2 million as a result of an acquisition that occurred in the second quarter of 2016.  The average interest rate paid on interest-bearing liabilities was 0.28% for both the fourth quarter of 2016 and the fourth quarter of 2015.  Net interest margin (net interest income divided by average interest-earning assets) for the fourth quarter of 2016 was 3.89%, an increase of 9 basis points, compared to 3.80% for the fourth quarter of 2015. 

A summary of the Company's net interest margin for the three month periods ended December 31, 2016 and 2015 is as follows:

    For the three-month period ended  
    December 31, 2016     December 31, 2015  
(Dollars in thousands)   Average
Outstanding
Balance
  Interest
Earned/
Paid
  Yield/
Rate
    Average
Outstanding
Balance
  Interest
Earned/
Paid
  Yield/
Rate
 
Interest-earning assets:                            
  Securities available for sale $ 76,912   281   1.45 % $ 116,953   455   1.54 %
  Loans held for sale   2,783   27   3.86     2,574   27   4.14  
  Mortgage loans, net   108,133   1,072   3.94     91,170   955   4.16  
  Commercial loans, net   360,355   4,406   4.86     296,854   3,789   5.06  
  Consumer loans, net   73,969   900   4.84     62,933   866   5.46  
  Cash equivalents   20,908   23   0.44     25,115   16   0.25  
  Federal Home Loan Bank stock   806   2   0.86     734   1   0.56  
Total interest-earning assets $ 643,866   6,711   4.15   $ 596,333   6,109   4.06  
                             
Interest-bearing liabilities:                      
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