Market Overview

HMN Financial, Inc. Announces Second Quarter Results

Share:

Second Quarter Summary

  • Net income of $1.7 million, up $0.7 million, compared to $1.0 million in second quarter of 2017
  • Diluted earnings per share of $0.36, up $0.15, compared to $0.21 in second quarter of 2017
  • Net interest income of $6.9 million, up $0.4 million, compared to second quarter of 2017
  • Non-performing assets of $3.7 million, or 0.51% of total assets

Year to Date Summary

  • Net income of $3.2 million, up $1.0 million, compared to $2.2 million in first six months of 2017                     
  • Diluted earnings per share of $0.66, up $0.20, compared to $0.46 in first six months of 2017
  • Net interest income of $13.6 million, up $0.8 million, compared to first six months of 2017
  • Income tax expense down $0.3 million as a result of the decrease in the federal corporate tax rate

Net Income Summary

    Three months ended     Six months ended  
    June 30,     June 30,  
(Dollars in thousands, except per share amounts)   2018     2017     2018     2017  
Net income $ 1,727     1,024   $ 3,172     2,237  
Diluted earnings per share   0.36     0.21     0.66     0.46  
Return on average assets (annualized)   0.95 %   0.60 %   0.89 %   0.66 %
Return on average equity (annualized)   8.25 %   5.19 %   7.66 %   5.76 %
Book value per share $ 17.75   $ 17.50   $ 17.75   $ 17.50  
                         

ROCHESTER, Minn., July 19, 2018 (GLOBE NEWSWIRE) -- HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $726 million holding company for Home Federal Savings Bank (the Bank), today reported net income of $1.7 million for the second quarter of 2018, an increase of $0.7 million, compared to net income of $1.0 million for the second quarter of 2017.  Diluted earnings per share for the second quarter of 2018 was $0.36, an increase of $0.15 from the diluted earnings per share of $0.21 for the second quarter of 2017.  The increase in net income between the periods was primarily because of the $0.4 million increase in net interest income, a $0.2 million increase in the gain on sales of loans between the periods due primarily to an increase in single family loan sales, and a $0.1 million decrease in income tax expense as a result of the reduced federal corporate income tax rate for 2018.   

President's Statement
"We are pleased to report the continued increase in our average interest earning assets and the related increase in net interest income," said Bradley Krehbiel, President and Chief Executive Officer of HMN.  "The increases in our net interest income and the gains on our mortgage loan sales combined with the decrease in the federal corporate tax rate have had a positive impact on the financial performance of our core banking operations."

Second Quarter Results
Net Interest Income
Net interest income was $6.9 million for the second quarter of 2018, an increase of $0.4 million, or 6.0%, from $6.5 million for the second quarter of 2017.  Interest income was $7.5 million for the second quarter of 2018, an increase of $0.5 million, or 6.53%, from $7.0 million for the second quarter of 2017. Interest income increased between the periods primarily because of an increase in the average interest-earning assets, a change in the composition of the average interest-earning assets, and an increase in the federal funds rate between the periods which resulted in higher earnings on cash and investment balances.  While the average interest-earning assets increased $42.3 million between the periods, the average interest-earning assets held in higher yielding loans increased $17.0 million and the amount of average interest-earning assets held in lower yielding cash and investments increased $25.3 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 4.27% for the second quarter of 2018, an increase of 1 basis point from 4.26% for the second quarter of 2017.

Interest expense was $0.5 million for the second quarter of 2018, the same as the second quarter of 2017.  The average interest rate paid on non-interest and interest-bearing liabilities was 0.33% for the second quarter of 2018, an increase of 2 basis points from 0.31% for the second 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 $34.8 million between the periods, the average amount held in higher rate premium money market accounts increased $20.3 million, the average amount held in lower rate checking, savings, and money market accounts increased $13.9 million, and the average amount held in higher rate borrowings and certificates of deposit increased $0.6 million between the periods.  Net interest margin (net interest income divided by average interest-earning assets) for the second quarter of 2018 was 3.97%, a decrease of 1 basis point, compared to 3.98% for the second quarter of 2017.    

A summary of the Company's net interest margin for the three and six month periods ended June 30, 2018 and 2017 is as follows:

    For the three month period ended  
    June 30, 2018     June 30, 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 $ 80,263   339   1.69 % $ 76,515   288   1.51 %
Loans held for sale   2,389   27   4.51     2,014   25   5.01  
Mortgage loans, net   110,939   1,137   4.11     115,173   1,136   3.96  
Commercial loans, net   405,553   4,957   4.90     383,417   4,662   4.88  
Consumer loans, net   72,070   885   4.92     73,369   878   4.80  
Cash equivalents   28,486   106   1.49     6,740   5   0.28  
Federal Home Loan Bank stock   867   5   2.47     1,043   5   1.75  
Total interest-earning assets   700,567   7,456   4.27     658,271   6,999   4.26  
                             
Interest-bearing liabilities and
  non-interest bearing deposits:
                           
NOW accounts   88,327   11   0.05     87,219   22   0.10  
Savings accounts   78,850   16   0.08     78,679   16   0.08  
Money market accounts   199,279   203   0.41     168,610   125   0.30  
Certificates   115,871   296   1.02     102,841   166   0.65  
Advances and other borrowings   0   0   0.00     12,637   132   4.19  
Total interest-bearing liabilities   482,327             449,986          
Non-interest checking   154,323             152,159          
Other non-interest bearing deposits   1,448             1,199          
Total interest-bearing liabilities and non-interest
  bearing deposits


$
638,098   526   0.33  

$
603,344   461   0.31  
Net interest income     $ 6,930           $ 6,538      
Net interest rate spread           3.94 %           3.95 %
Net interest margin           3.97 %           3.98 %


 

 

                             
    For the six month period ended  
    June 30, 2018     June 30, 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 $ 79,274   653   1.66 % $ 76,357   563   1.49 %
Loans held for sale   1,730   38   4.47     1,836   43   4.76  
Mortgage loans, net   112,268   2,259   4.06     112,632   2,247   4.02  
Commercial loans, net   403,035   9,726   4.87     377,319   9,047   4.84  
Consumer loans, net   72,229   1,761   4.92     72,816   1,724   4.77  
Cash equivalents   24,324   167   1.39     11,859   28   0.47  
Federal Home Loan Bank stock   855   10   2.53     915   6   1.34  
Total interest-earning assets   693,715   14,614   4.25     653,734   13,658   4.21  
                             
Interest-bearing liabilities and
  non-interest bearing deposits:
                           
NOW accounts   88,982   21   0.05     89,627   42   0.09  
Savings accounts   78,017   31   0.08     76,986   31   0.08  
Money market accounts   194,871   388   0.40     165,592   231   0.28  
Certificates   113,798   554   0.98     102,398   318   0.63  
Advances and other borrowings   283   2   1.71     10,033   247   4.96  
Total interest-bearing liabilities   475,951             444,636          
Non-interest checking   153,796             153,277          
Other non-interest bearing deposits   1,494             1,268          
Total interest-bearing liabilities and non-interest
  bearing deposits


$
631,241   996   0.32  

$
599,181   869   0.29  
Net interest income     $ 13,618           $ 12,789      
Net interest rate spread           3.93 %           3.92 %
Net interest margin            3.96 %           3.94 %
                             


Provision for Loan Losses
The provision for loan losses was $0.3 million for the second quarter of 2018, the same as the second quarter of 2017. The provision amount for the period was primarily the result of an increase in the amount reserved on certain consumer loan categories and changes in the classification of certain commercial loans.   Total non-performing assets were $3.7 million at June 30, 2018, a decrease of $0.3 million, or 5.9%, from $4.0 million at March 31, 2018.  Non-performing loans decreased $0.3 million and foreclosed and repossessed assets remained the same during the second quarter of 2018. 
           
A reconciliation of the Company's allowance for loan losses for the quarters ended June 30, 2018 and 2017 is summarized as follows:

         
(Dollars in thousands)    2018
  2017
Balance at March 31, $ 9,129     9,590  
Provision   295     269  
Charge offs:        
Consumer   (56 )   (17 )
Commercial business   (255 )   0  
Recoveries   215     203  
Balance at June 30, $ 9,328     10,045  


Allocated to:
       
General allowance $ 8,534     9,304  
Specific allowance   794     741  
  $ 9,328     10,045  
         


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 three most recently completed quarters.

    June 30,     March 31,     December 31,  
(Dollars in thousands)    2018     2018     2017  
Non‑Performing Loans:                  
Single family $ 960   $ 839   $ 949  
Commercial real estate   1,432     1,524     1,364  
Consumer   551     632     553  
Commercial business   73     269     278  
Total   3,016     3,264     3,144  
                   
Foreclosed and Repossessed Assets:                  
Single family   74     74     0  
Commercial real estate   627     627     627  
Consumer   15     0     0  
Total non‑performing assets $ 3,732   $ 3,965   $ 3,771  
Total as a percentage of total assets   0.51 %   0.55 %   0.52 %
Total non‑performing loans $ 3,016   $ 3,264   $ 3,144  
Total as a percentage of total loans receivable, net   0.51 %   0.55 %   0.54 %
Allowance for loan loss to non-performing loans   309.31 %   279.69 %   296.11 %
                   
Delinquency Data:                  
Delinquencies (1)                  
30+ days $ 1,585   $ 1,280   $ 1,789  
90+ days   0     0     0  
Delinquencies as a percentage of                  
loan portfolio (1)                  
30+ days   0.26 %   0.21 %   0.30 %
90+ days   0.00 %   0.00 %   0.00 %

(1) Excludes non-accrual loans.

Non-Interest Income and Expense
Non-interest income was $2.1 million for the second quarter of 2018, an increase of $0.2 million, or 7.8%, from $1.9 million for the same period of 2017.  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 slightly due to an increase in the sale of uninsured investment products between the periods.  These increases in non-interest income were partially offset by a $0.1 million decrease in fees and service charges earned between the periods due primarily to a decrease in overdraft fees.  Loan servicing income decreased slightly between the periods because of a decrease in commercial loan servicing fees.    

Non-interest expense was $6.3 million for the second quarter of 2018, a decrease of $0.1 million, or 2.0%, from $6.4 million for the second quarter of 2017. Professional services expense decreased $0.1 million due primarily to a decrease in legal expenses between the periods.  Compensation and benefits expense decreased $0.1 million primarily because of a decrease in employees between the periods.  Other non-interest expense decreased slightly due to a decrease in the losses incurred on deposit accounts between the periods. These decreases in non-interest expense were partially offset by a $0.1 million increase in data processing expense primarily related to an increase in mobile banking and on-line banking costs 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 $0.6 million for the second quarter of 2018, a decrease of $0.1 million from $0.7 million for the second quarter of 2017.  The decrease in income tax expense between the periods is primarily the result of a decrease in the federal corporate income tax rate due to the tax law changes that were enacted in the fourth quarter of 2017.  

Return on Assets and Equity
Return on average assets (annualized) for the second quarter of 2018 was 0.95%, compared to 0.60% for the second quarter of 2017.  Return on average equity (annualized) was 8.25% for the second quarter of 2018, compared to 5.19% for the same period in 2017.  Book value per common share at June 30, 2018 was $17.75, compared to $17.50 at June 30, 2017.

Six Month Period Results

Net Income                                                                                                                                           
Net income was $3.2 million for the six month period ended June 30, 2018, an increase of $1.0 million, or 41.8%, compared to net income of $2.2 million for the six month period ended June 30, 2017.  Diluted earnings per share for the six month period ended June 30, 2018 was $0.66, an increase of $0.20 per share compared to diluted earnings per share of $0.46 for the same period in 2017.  The increase in net income between the periods was primarily because of the $0.8 million increase in net interest income, a $0.3 million decrease in income tax expense as a result of the reduced federal corporate income tax rate for 2018, and a $0.1 million increase in the gain on sales of loans between the periods due primarily to an increase in single family loan sales.  These increases in net income were partially offset by a $0.2 million increase in the provision for loan losses between the periods due primarily to an increase in the amount reserved on certain consumer loan categories and changes in the classification of certain commercial loans.    

Net Interest Income
Net interest income was $13.6 million for the first six months of 2018, an increase of $0.8 million, or 6.5%, from $12.8 million for the same period in 2017.  Interest income was $14.6 million for the six month period ended June 30, 2018, an increase of $0.9 million, or 7.0%, from $13.7 million for the same six month period in 2017.  Interest income increased between the periods primarily because of an increase in the average interest-earning assets, a change in the composition of the average interest-earning assets, and an increase in the federal funds rate between the periods which resulted in higher earnings on cash and investment balances.  While the average interest-earning assets increased $40.0 million between the periods, the average interest-earning assets held in higher yielding loans increased $24.7 million and the amount of average interest-earning assets held in lower yielding cash and investments increased $15.3 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 4.25% for the first six months of 2018, an increase of 4 basis points from 4.21% for the first six months of 2017.

Interest expense was $1.0 million for the first six months of 2018, an increase of $0.1 million, or 14.6%, compared to $0.9 million in the first six months of 2017.  The average interest rate paid on non-interest and interest-bearing liabilities was 0.32% for the first six months of 2018, an increase of 3 basis points from 0.29% for the first six months 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 $32.1 million between the periods, the average amount held in higher rate premium money market accounts increased $20.5 million, the average amount held in lower rate checking, savings, and money market accounts increased $9.7 million, and the average amount held in higher rate borrowings and certificates of deposit increased $1.9 million between the periods.  Net interest margin (net interest income divided by average interest-earning assets) for the first six months of 2018 was 3.96%, an increase of 2 basis points, compared to 3.94% for the first six months of 2017.    
           
Provision for Loan Losses
The provision for loan losses was $0.2 million for the first six months of 2018, an increase of $0.2 million compared to the first six months of 2017. The provision amount for the period was primarily the result of an increase in the amount reserved on certain consumer loan categories and changes in the classification of certain commercial loans.  Total non-performing assets were $3.7 million at June 30, 2018, a decrease of $0.1 million, or 1.1%, from $3.8 million at December 31, 2017.  Non-performing loans decreased $0.2 million and foreclosed and repossessed assets increased $0.1 million during the first six months of 2018. 

A reconciliation of the Company's allowance for loan losses for the six month periods ended June 30, 2018 and June 30, 2017 is summarized as follows:

         
(Dollars in thousands)   2018
  2017
Balance at January 1, $ 9,311     9,903  
Provision   170     (1 )
Charge offs:        
Consumer   (125 )   (218 )
Commercial business   (255 )   0  
Single family   (23 )   0  
Recoveries   250     361  
Balance at June 30, $ 9,328     10,045  
         

Non-Interest Income and Expense
Non-interest income was $3.8 million for the first six months of 2018, the same as in the first six months of 2017.  Gain on sales of loans increased $0.1 million between the periods primarily because of an increase in single family loan sales.  Other non-interest income increased $0.1 million due to an increase in the sale of uninsured investment products between the periods.  These increases in non-interest income were partially offset by a $0.1 million decrease in fees and service charges earned between the periods due primarily to a decrease in overdraft fees.  Loan servicing income decreased slightly between the periods primarily because of a decrease in commercial loan servicing fees. 

Non-interest expense was $12.9 million for the first six months of 2018, an increase of $0.1 million, or 0.6%, from $12.8 million for the same period of 2017.  Other non-interest expense increased $0.3 million due primarily to increases in deposit insurance costs and the losses incurred on deposit accounts between the periods.  Occupancy and equipment costs increased $0.1 million between the periods due to an increase in depreciation and maintenance costs.  Data processing expense increased $0.1 million primarily related to an increase in mobile and on-line banking costs between the periods.  These increases in non-interest expense were partially offset by a $0.2 million decrease in compensation and benefits expense primarily because of a decrease in employees between the periods and a $0.1 million decrease in professional services expense due primarily to a decrease in legal expenses between the periods.     

Income tax expense was $1.2 million for the first six months of 2018, a decrease of $0.4 million from $1.6 million for the first six months of 2017.  The decrease in income tax expense between the periods is primarily the result of a decrease in the federal corporate income tax rate due to the tax law changes that were enacted in the fourth quarter of 2017.  

Return on Assets and Equity
Return on average assets (annualized) for the six month period ended June 30, 2018 was 0.89%, compared to 0.66% for the same period in 2017.  Return on average equity (annualized) was 7.66% for the six month period ended June 30, 2018, compared to 5.76% for the same period in 2017.

General Information
HMN Financial, Inc. and the Bank are headquartered in Rochester, Minnesota. Home Federal Savings Bank operates thirteen full service offices in Minnesota located in Albert Lea, Austin, Eagan, Kasson (2), LaCrescent, Owatonna, Rochester (4), Spring Valley and Winona and one full service office in Marshalltown, Iowa.  The Bank also operates two loan origination offices located in Sartell, Minnesota and Delafield, Wisconsin.

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, reducing non-performing assets, and generating improved financial results (including profitability); the extent of the positive impact of the lower federal tax rates on future earnings; 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 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 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; 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 filing 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, 2017 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
           
    June 30,   December 31,  
(Dollars in thousands)   2018
  2017
 
    (unaudited)      
Assets          
Cash and cash equivalents $ 31,710     37,564    
Securities available for sale:          
Mortgage-backed and related securities (amortized cost $9,145 and $5,148)   8,895     5,068    
Other marketable securities (amortized cost $73,433 and $73,653)   71,630     72,404    
    80,525     77,472    
           
Loans held for sale   3,624     1,837    
Loans receivable, net   589,855     585,931    
Accrued interest receivable   2,330     2,344    
Real estate, net   701     627    
Federal Home Loan Bank stock, at cost   867     817    
Mortgage servicing rights, net   1,813     1,724    
Premises and equipment, net   8,446     8,226    
Goodwill   802     802    
Core deposit intangible   305     355    
Prepaid expenses and other assets   1,432     1,314    
Deferred tax asset, net   3,875     3,672    
Total assets $ 726,285     722,685    
           
           
Liabilities and Stockholders' Equity          
Deposits $ 639,535     635,601    
Accrued interest payable   264     146    
Customer escrows   1,268     1,147    
Accrued expenses and other liabilities ..   3,393     4,973    
Total liabilities   644,460     641,867    
Commitments and contingencies          
Stockholders' equity:          
Serial-preferred stock: ($.01 par value)          
  authorized shares 500,000; issued shares 0   0     0    
Common stock ($.01 par value):          
  authorized shares 16,000,000; issued shares 9,128,662   91     91    
Additional paid-in capital   46,950     50,623    
Retained earnings, subject to certain restrictions   94,690     91,448    
Accumulated other comprehensive loss   (1,479 )   (957 )  
Unearned employee stock ownership plan shares   (1,933 )   (2,030 )  
Treasury stock, at cost 4,519,222 and 4,631,124 shares   (56,494 )   (58,357 )  
Total stockholders' equity   81,825     80,818    
Total liabilities and stockholders' equity $ 726,285     722,685    
           



HMN FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income
(unaudited)
 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
(Dollars in thousands, except per share data)   2018   2017   2018   2017  
Interest income:                
Loans receivable $ 7,006     6,701   13,784     13,061  
Securities available for sale:                
Mortgage-backed and related   54     5   96     12  
Other marketable   285     283   557     551  
Other   111     10   177     34  
Total interest income   7,456     6,999   14,614     13,658  
                 
Interest expense:                
Deposits   526     329   994     622  
Federal Home Loan Bank advances and other borrowings...   0     132   2     247  
Total interest expense   526     461   996     869  
Net interest income   6,930     6,538   13,618     12,789  
Provision for loan losses   295     269   170     (1 )
Net interest income after provision for loan losses   6,635     6,269   13,448     12,790  
                 
Non-interest income:                
Fees and service charges   785     845   1,551     1,669  
Loan servicing fees   297     306   598     607  
Gain on sales of loans   679     488   1,123     1,007  
Other   293     267   558     503  
Total non-interest income   2,054     1,906   3,830     3,786  
                 
Non-interest expense:                
Compensation and benefits   3,678     3,780   7,502     7,724  
Occupancy and equipment   1,072     1,026   2,169     2,065  
Data processing   334     260   629     552  
Professional services   298     417   547     676  
Other   931     956   2,020     1,769  
Total non-interest expense   6,313     6,439   12,867     12,786  
Income before income tax expense   2,376     1,736   4,411     3,790  
Income tax expense   649     712   1,239     1,553  
Net income   1,727     1,024   3,172     2,237  
Other comprehensive (loss) income, net of tax   (105 )   173   (451 )   361  
Comprehensive income available  to common 
  shareholders
$ 1,622     1,197   2,721     2,598  
Basic earnings per share $ 0.40     0.24   0.74     0.53  
Diluted earnings per share $ 0.36     0.21   0.66     0.46  
                 


HMN FINANCIAL, INC. AND SUBSIDIARIES
Selected Consolidated Financial Information
(unaudited)
                   
Selected Financial Data:   Three Months Ended June 30,   Six Months Ended June 30,  
(Dollars in thousands, except per share data)   2018   2017   2018   2017  
I.  OPERATING DATA:                  
Interest income $ 7,456   6,999   14,614   13,658  
Interest expense   526   461   996   869  
Net interest income   6,930   6,538   13,618   12,789  
                   
II.  AVERAGE BALANCES:                  
Assets (1)   725,471   685,287   718,662   680,881  
Loans receivable, net   588,563   571,959   587,532   562,766  
Securities available for sale (1)   80,263   76,515   79,274   76,357  
Interest-earning assets (1)   700,568   658,271   693,715   653,734  
Interest-bearing and non-interest bearing deposits
  and borrowings
  638,097   603,344   631,241   599,181  
Equity (1)   83,964   79,044   83,463   78,376  
                   
III. PERFORMANCE RATIOS: (1)                  
Return on average assets (annualized)   0.95 % 0.60 % 0.89 % 0.66 %
Interest rate spread information:                  
Average during period   3.94   3.96   3.93   3.92  
End of period   4.02   3.90   4.02   3.90  
Net interest margin   3.97   3.98   3.96   3.94  
Ratio of operating expense to average                  
total assets (annualized)   3.49   3.77   3.61   3.79  
Return on average equity (annualized)   8.25   5.19   7.66   5.76  
Efficiency   70.27   76.27   73.75   77.14  
    June 30,   December 31,   June 30,      
    2018   2017   2017      
IV. EMPLOYEE DATA:                  
Number of full time equivalent employees   187   187   196      
                   
V. ASSET QUALITY:                  
Total non-performing assets $ 3,732   3,771   4,023      
Non-performing assets to total assets   0.51 % 0.52 % 0.55 %    
Non-performing loans to total loans receivable, net   0.51 % 0.54 % 0.57 %    
Allowance for loan losses $ 9,328   9,311   10,045      
Allowance for loan losses to total assets   1.28 % 1.29 % 1.39 %    
Allowance for loan losses to total loans receivable, net   1.58   1.59   1.70      
Allowance for loan losses to non-performing loans   309.31   296.11   296.45      
                   
VI. BOOK VALUE PER SHARE:                  
Book value per share common share $ 17.75   17.97   17.50      
    Six Months Ended
June 30, 2018
  Year Ended
December 31,
2017
  Six Months Ended
June 30, 2017
     
VII. CAPITAL RATIOS:                  
Stockholders' equity to total assets, at end of period   11.27 % 11.18 % 10.86 %    
Average stockholders' equity to average assets (1)   11.61   11.43   11.51      
Ratio of average interest-earning assets to                  
  average interest-bearing liabilities (1)   109.90   109.29   109.10      
Home Federal Savings Bank regulatory capital ratios:                  
Common equity tier 1 capital ratio   12.86   12.45   12.99      
Tier 1 capital leverage ratio   11.02   10.68   11.77      
Tier 1 capital ratio   12.86   12.45   12.99      
Risk-based capital   14.12   13.71   14.25      
                   

(1)  Average balances were calculated based upon amortized cost without the market value impact of ASC 320.yeah


CONTACT: 
Bradley Krehbiel
Chief Executive Officer, President
HMN Financial, Inc. (507) 252-7169

Primary Logo

View Comments and Join the Discussion!