Market Overview

HMN Financial, Inc. Announces First Quarter Results

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First Quarter Highlights 

  • Net income of $1.4 million, up $0.2 million, compared to net income of $1.2 million for first quarter of 2017
  • Diluted earnings per share of $0.29, up $0.04, from $0.25 for first quarter of 2017
  • Net interest income of $6.7 million, up $0.4 million, from $6.3 million for first quarter of 2017
  • Income tax expense down $0.2 million as a result of decrease in federal corporate tax rate
  • Non-performing assets of $4.0 million, or 0.55% of total assets 

Net Income Summary 

      Three Months Ended  
      March 31,  
(Dollars in thousands, except per share amounts)     2018     2017  
Net income   $ 1,445     1,216  
Diluted earnings per share     0.29     0.25  
Return on average assets (annualized)     0.82 %   0.73 %
Return on average equity (annualized)     7.07 %   6.35 %
Book value per share   $ 18.22     17.22  

ROCHESTER, Minn., April 19, 2018 (GLOBE NEWSWIRE) -- HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $722 million holding company for Home Federal Savings Bank (the Bank), today reported net income of $1.4 million for the first quarter of 2018, an increase of $0.2 million compared to net income of $1.2 million for the first quarter of 2017. Diluted earnings per share for the first quarter of 2018 was $0.29, an increase of $0.04 from diluted earnings per share of $0.25 for the first quarter of 2017. The increase in net income between the periods was due primarily to the $0.4 million increase in net interest income and a $0.2 million decrease in income tax expense as a result of the reduced federal corporate income tax rate for 2018. These increases in net income were partially offset by a $0.2 million increase in the provision for loan losses between the periods due to loan growth, a $0.3 million increase in other non-interest expenses due primarily to an increase in the losses incurred on deposit accounts and an increase in charitable contributions, and a $0.1 million decrease on the gain on sale of loans due to a decrease in single family loan sales between the periods. 

President's Statement 

"We continue to be encouraged by the growth in our loan portfolio and the related increase in net interest income," said Home Federal Savings Bank President and Chief Executive Officer, Bradley Krehbiel. "We intend to continue to focus our efforts on improving the Bank's core operating results by prudently growing the asset size of the Bank while maintaining the credit quality of our loan portfolio." 

First Quarter Results 

Net Interest Income 

Net interest income was $6.7 million for the first quarter of 2018, an increase of $0.4 million, or 7.0%, compared to $6.3 million for the first quarter of 2017. Interest income was $7.2 million for the first quarter of 2018, an increase of $0.5 million, or 7.5%, from $6.7 million for the first quarter of 2017. 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 $37.6 million between the periods, the average interest-earning assets held in higher yielding loans increased $32.4 million and the amount of average interest-earning assets held in lower yielding cash and investments increased $5.2 million between the periods. 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 a reduction in loan payoffs between the periods. The average yield earned on interest-earning assets was 4.23% for the first quarter of 2018, an increase of 7 basis points from 4.16% for the first quarter of 2017. 

Interest expense was $0.5 million for the first quarter of 2018, an increase of $0.1 million, or 15.5%, compared to $0.4 million in the first quarter of 2017. The average interest rate paid on non-interest and interest-bearing liabilities was 0.31% for the first quarter of 2018, an increase of 3 basis points from 0.28% for the first quarter of 2017. The average interest rate paid increased between the periods due to an increase in the rates paid on certain money market accounts and certificates of deposit that was partially offset by a change in the composition of the average non-interest and interest-bearing liabilities held between the periods. While the average non-interest and interest-bearing liabilities increased $29.3 million between the periods, the average amount held in lower rate checking, savings, and money market accounts decreased $10.4 million, while the average amount held in higher rate premium money market accounts increased $36.6 million and the average amount held in higher rate borrowings and certificates of deposit increased $3.1 million between the periods. Net interest margin (net interest income divided by average interest-earning assets) for the first quarter of 2018 was 3.95%, an increase of 4 basis points, compared to 3.91% for the first quarter of 2017. 

A summary of the Company's net interest margin for the three-month periods ended March 31, 2018 and 2017 is as follows: 

      For the three-month period ended  
      March 31, 2018       March 31, 2017  
(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   $ 78,274     314   1.63 %   $ 76,197     275   1.46 %
Loans held for sale     1,063     11   4.20       1,656     18   4.41  
Mortgage loans, net     113,612     1,122   4.01       110,064     1,111   4.09  
Commercial loans, net     400,488     4,768   4.83       371,153     4,385   4.79  
Consumer loans, net     72,390     877   4.91       72,255     846   4.75  
Cash equivalents     20,116     61   1.23       17,036     23   0.55  
Federal Home Loan Bank stock     842     5   2.41       786     2   1.03  
Total interest-earning assets     686,785     7,158   4.23       649,147     6,660   4.16  
                                     
Interest-bearing liabilities and                                    
non-interest bearing deposits:                                    
Checking     89,644     10   0.05       92,063     20   0.09  
Savings     77,174     15   0.08       75,273     15   0.08  
Money market     190,413     186
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