Market Overview

HMN Financial, Inc. Announces Second Quarter Results

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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
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