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CST: 16/11/2019 17:28:09   

HMN Financial, Inc. Announces Second Quarter Results

120 Days ago

Second Quarter Summary
• Net income of $2.9 million, up $1.2 million, compared to $1.7 million in second quarter of 2018
• Diluted earnings per share of $0.62, up $0.26, compared to $0.36 in second quarter of 2018
• Net interest income of $7.5 million, up $0.6 million, compared to $6.9 million in second quarter of 2018
• Non-performing assets of $3.1 million, or 0.43% of total assets

Year to Date Summary
• Net income of $4.5 million, up $1.3 million, compared to $3.2 million in first six months of 2018
• Diluted earnings per share of $0.97, up $0.31, compared to $0.66 in first six months of 2018
• Net interest income of $14.5 million, up $0.9 million, compared to $13.6 million in first six months of 2018

Net Income Summary

    Three months ended     Six months ended  
    June 30,     June 30,  
(Dollars in thousands, except per share amounts)   2019     2018     2019     2018  
Net income $ 2,862   $ 1,727   $ 4,481   $ 3,172  
Diluted earnings per share   0.62     0.36     0.97     0.66  
Return on average assets (annualized)   1.60 %   0.95 %   1.25 %   0.89 %
Return on average equity (annualized)   13.10 %   8.25 %   10.43 %   7.66 %
Book value per share $ 18.33   $ 17.75   $ 18.33   $ 17.75  

ROCHESTER, Minn., July 18, 2019 (GLOBE NEWSWIRE) -- HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $723 million holding company for Home Federal Savings Bank (the Bank), today reported net income of $2.9 million for the second quarter of 2019, an increase of $1.2 million, compared to net income of $1.7 million for the second quarter of 2018.  Diluted earnings per share for the second quarter of 2019 was $0.62, an increase of $0.26 from the diluted earnings per share of $0.36 for the second quarter of 2018.  The increase in net income between the periods was primarily because of the $1.4 million decrease in the provision for loan losses and a $0.5 million increase in net interest income.  These increases were partially offset by an increase in other non-interest expenses of $0.3 million and a $0.5 million increase in income tax expense as a result of the increased pre-tax income between the periods.   

President’s Statement
“We are pleased with our improving net interest margin 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 combined with the net recoveries received on previously charged off loans had a positive impact on our net income for the quarter.  We will continue to focus our efforts on improving the Bank’s core operating results by managing our net interest margin while prudently growing the asset size of the Bank.” 

Second Quarter Results

Net Interest Income
Net interest income was $7.5 million for the second quarter of 2019, an increase of $0.6 million, or 7.8%, from $6.9 million for the second quarter of 2018.  Interest income increased primarily because of the higher interest amounts earned on interest-earning assets as a result of the increase in the federal funds rate between the periods.  Interest income also increased $0.4 million between the periods because of an increase in the amount of yield enhancements recognized on non-accruing loans that were paid off.  The average yield earned on interest-earning assets was 4.83% for the second quarter of 2019, an increase of 56 basis points from 4.27% for the second quarter of 2018.  The average yield earned on average interest-earning assets increased 30 basis points as a result of the change in yield enhancements recognized between the periods.   

Interest expense was $0.8 million for the second quarter of 2019, an increase of $0.3 million, or 57.4%, from $0.5 million for the second quarter of 2018.  The average interest rate paid on non-interest and interest-bearing liabilities was 0.53% for the second quarter of 2019, an increase of 20 basis points from 0.33% for the second quarter of 2018.  The increase in the interest paid on non-interest and interest-bearing liabilities was primarily because of the increase in the federal funds rate between the periods which increased the cost of deposits.  Net interest margin (net interest income divided by average interest-earning assets) for the second quarter of 2019 was 4.35%, an increase of 38 basis points, compared to 3.97% for the second quarter of 2018.  The increase in the net interest margin is primarily related to the increase in interest income between the periods as a result of the change in the yield enhancements recognized and an increase in the federal funds rate.  

A summary of the Company’s net interest margin for the three and six month periods ended June 30, 2019 and 2018 is as follows:

    For the three month period ended  
    June 30, 2019     June 30, 2018  
(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 $ 78,393   347   1.78 % $ 80,263   339   1.69 %
  Loans held for sale   2,482   27   4.36     2,389   27   4.51  
  Mortgage loans, net   113,786   1,248   4.40     110,939   1,137   4.11  
  Commercial loans, net   407,854   5,678   5.58     405,553   4,957   4.90  
  Consumer loans, net   73,777   950   5.16     72,070   885   4.92  
  Other   12,161   49   1.62     29,353   111   1.52  
Total interest-earning assets   688,453   8,299   4.83     700,567   7,456   4.27  
                             
Interest-bearing liabilities and
  non-interest bearing deposits:
                           
  NOW accounts   96,579   25   0.10     88,327   11   0.05  
  Savings accounts   80,013   16   0.08     78,850   16   0.08  
  Money market accounts   168,605   306   0.73     199,279   203   0.41  
  Certificates   118,893   475   1.60     115,871   296   1.02  
  Advances and other borrowings   1,152   7   2.54     0   0   0.00  
  Total interest-bearing liabilities   465,242             482,327          
  Non-interest checking   155,921             154,323          
  Other non-interest bearing deposits   1,610             1,448          
Total interest-bearing liabilities and non-interest
  bearing deposits
 
$
622,773   829   0.53    
$
638,098   526   0.33  
Net interest income     $ 7,470           $ 6,930      
Net interest rate spread           4.30 %           3.94 %
Net interest margin           4.35 %           3.97 %
                             


    For the six month period ended  
    June 30, 2019     June 30, 2018  
(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 $ 78,592   686   1.76 % $ 79,274   653   1.66 %
  Loans held for sale   1,838   39   4.30     1,730   38   4.47  
  Mortgage loans, net   114,814   2,508   4.41     112,268   2,259   4.06  
  Commercial loans, net   404,399   10,737   5.35     403,035   9,726   4.87  
  Consumer loans, net   73,178   1,885   5.19     72,229   1,761   4.92  
  Other   18,549   176   1.91     25,179   177   1.42  
Total interest-earning assets   691,370   16,031   4.68     693,715   14,614   4.25  
                             
Interest-bearing liabilities and
  non-interest bearing deposits:
                           
  NOW accounts   97,132   49   0.10     88,982   21   0.05  
  Savings accounts   79,259   31   0.08     78,017   31   0.08  
  Money market accounts   175,052   576   0.66     194,871   388   0.40  
  Certificates   116,558   856   1.48     113,798   554   0.98  
  Advances and other borrowings   579   7   2.54     283   2   1.71  
  Total interest-bearing liabilities   468,580             475,951          
  Non-interest checking   156,185             153,796          
  Other non-interest bearing deposits    1,835             1,494          
Total interest-bearing liabilities and non-interest
  bearing deposits
 
$
626,600   1,519   0.49  
$
631,241   996   0.32  
Net interest income     $ 14,512           $ 13,618      
Net interest rate spread           4.19 %           3.93 %
Net interest margin            4.23 %           3.96 %
                             

Provision for Loan Losses
The provision for loan losses was ($1.1 million) for the second quarter of 2019, a decrease of $1.4 million compared to $0.3 million for the second quarter of 2018.  The credit provision amount for the period was primarily the result of the increase in the net recoveries received on previously charged off commercial loans during the second quarter of 2019 compared to the same period of 2018.  The net recoveries combined with the continued improvement in the credit quality of the loan portfolio resulted in a reduction of the overall allowance for loan losses required between the periods.  Total non-performing assets were $3.1 million at June 30, 2019, an increase of $0.1 million, or 5.3%, from $3.0 million at March 31, 2019.  Non-performing loans increased $0.1 million and foreclosed and repossessed assets remained the same during the second quarter of 2019. 

A reconciliation of the Company’s allowance for loan losses for the quarters ended June 30, 2019 and 2018 is summarized as follows:

         
(Dollars in thousands)    2019     2018  

Balance at March 31

$

8,673
     
9,129
 
Provision   (1,059 )   295  
Charge offs:        
  Consumer   (7 )   (56 )
  Commercial business   (826 )   (255 )
Recoveries   1,843     215  
Balance at June 30 $ 8,624     9,328  
 

Allocated to:
       
  General allowance $ 7,856     8,534  
  Specific allowance   768     794  
  $ 8,624     9,328  
         

The decrease in the allowance for loan losses reflects the improvement in the credit quality of the loan portfolio between the periods.  The $0.8 million of commercial business loan charge offs relates primarily to two commercial business loans that were charged off due to the bankruptcy filing of the borrowers.  The $1.8 million in recoveries relates primarily to the repayment of a commercial real estate loan of which $1.7 million had previously been charged off.   

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)    2019     2019     2018  

Non‑Performing Loans:
                 
  Single family $ 854   $ 751   $ 730  
  Commercial real estate   1,212     1,275     1,311  
  Consumer   458     283     489  
  Commercial business   144     212     148  
  Total   2,668     2,521     2,678  
                   
Foreclosed and Repossessed Assets:                  
  Single family   30     30     0  
  Commercial real estate   414     414     414  
  Consumer   12     0     0  
Total non‑performing assets $ 3,124   $ 2,965   $ 3,092  
Total as a percentage of total assets   0.43 %   0.41 %   0.43 %
Total non‑performing loans $ 2,668   $ 2,521   $ 2,678  
Total as a percentage of total loans receivable, net   0.45 %   0.42 %   0.46 %
Allowance for loan loss to non-performing loans   323.18 %   343.90 %   324.27 %
                   
Delinquency Data:                  
Delinquencies (1)                  
  30+ days $ 1,991   $ 1,554   $ 1,453  
  90+ days   0     0     0  
Delinquencies as a percentage of                  
 loan portfolio (1)                  
  30+ days   0.33 %   0.25 %   0.24 %
  90+ days   0.00 %   0.00 %   0.00 %

                (1) Excludes non-accrual loans.

Non-Interest Income and Expense
Non-interest income was $2.0 million for the second quarter of 2019, a decrease of $0.1 million, or 1.6%, from $2.1 million for the same period of 2018.  Gain on sales of loans decreased $0.1 million between the periods primarily because of a decrease in commercial government guaranteed loan sales.  Loan servicing income increased slightly due to an increase in the single family loan servicing fees earned.  Other non-interest income increased slightly due to an increase in the fees earned on the sales of uninsured investment products between the periods. 

Non-interest expense was $6.6 million for the second quarter of 2019, an increase of $0.3 million, or 4.0%, from $6.3 million for the second quarter of 2018.  Other non-interest expense increased $0.1 million due primarily to an increase in loan related expenses.  Professional services expense increased $0.1 million due primarily to an increase in legal expenses between the periods.  Compensation and benefits expense increased $0.1 million primarily because of an increase in pension costs between the periods.  Occupancy and equipment costs increased slightly between the periods due to an increase in depreciation and maintenance costs.  These increases in non-interest expense were partially offset by a slight decrease in data processing expense primarily because of a decrease in phone and internet costs between the periods due to a change in vendors. 

Income tax expense was $1.1 million for the second quarter of 2019, an increase of $0.5 million from $0.6 million for the second quarter of 2018.  The increase in income tax expense between the periods is primarily the result of an increase in pre-tax income.

Return on Assets and Equity
Return on average assets (annualized) for the second quarter of 2019 was 1.60%, compared to 0.95% for the second quarter of 2018.  Return on average equity (annualized) was 13.10% for the second quarter of 2019, compared to 8.25% for the same period in 2018.  Book value per common share at June 30, 2019 was $18.33, compared to $17.75 at June 30, 2018.

Six Month Period Results

Net Income                                                                                                                                           
Net income was $4.5 million for the six month period ended June 30, 2019, an increase of $1.3 million, or 41.3%, compared to net income of $3.2 million for the six month period ended June 30, 2018.  Diluted earnings per share for the six month period ended June 30, 2019 was $0.97, an increase of $0.31 per share compared to diluted earnings per share of $0.66 for the same period in 2018.  The increase in net income between the periods was primarily because of the $1.2 million decrease in the provision for loan losses and a $0.9 million increase in net interest income.  These increases were partially offset by a $0.5 million increase in income tax expense as a result of the increased pre-tax income between the periods.   

Net Interest Income
Net interest income was $14.5 million for the first six months of 2019, an increase of $0.9 million, or 6.6%, from $13.6 million for the same period in 2018.  Interest income increased primarily because of the higher interest amounts earned on interest-earning assets as a result of the increase in the federal funds rate between the periods.  Interest income also increased $0.5 million because of an increase in the amount of yield enhancements recognized between the periods on non-accruing loans that were paid off.  The average yield earned on interest-earning assets was 4.68% for the six month period ended June 30, 2019, an increase of 43 basis points from 4.25% for the same six month period in 2018.  The average yield earned on the average interest-earning assets increased 19 basis points as a result of the change in yield enhancements recognized between the periods.    

Interest expense was $1.5 million for the first six months of 2019, an increase of $0.5 million, or 52.5%, compared to $1.0 million for the first six months of 2018.  The average interest rate paid on non-interest and interest-bearing liabilities was 0.49% for the first six months of 2019, an increase of 17 basis points from 0.32% for the first six months of 2018. The increase in the interest paid on non-interest and interest-bearing liabilities was primarily because of the increase in the federal funds rate between the periods which increased the cost of deposits.  Net interest margin (net interest income divided by average interest-earning assets) for the first six months of 2019 was 4.23%, an increase of 27 basis points, compared to 3.96% for the first six months of 2018.  The increase in the net interest margin is primarily related to the increase in interest income between the periods as a result of the increase in the federal funds rate and the change in the yield enhancements recognized.   

Provision for Loan Losses
The provision for loan losses was ($1.0 million) for the first six months of 2019, a decrease of $1.2 million compared to $0.2 million the first six months of 2018. The credit provision amount for the period was primarily the result of the increase in net recoveries received during the six month period ended June 30, 2019 when compared to the same period of 2018.  The net recoveries combined with the continued improvement in the credit quality of the loan portfolio resulted in a reduction of the overall allowance for loan losses required between the periods.  Total non-performing assets were $3.1 million at June 30, 2019, the same as they were at December 31, 2018.   

A reconciliation of the Company’s allowance for loan losses for the six month periods ended June 30, 2019 and June 30, 2018 is summarized as follows:

         
(Dollars in thousands)   2019     2018  

Balance at January 1

$

8,686
   
9,311
 
Provision   (1,032 )   170  
Charge offs:        
  Consumer   (46 )   (125 )
  Commercial business   (869 )   (255 )
  Single family   0     (23 )
Recoveries   1,885     250  
Balance at June 30 $ 8,624     9,328  
         

The decrease in the allowance for loan losses reflects the improvement in the credit quality of the loan portfolio between the periods.  The $0.9 million of commercial business loan charge offs relates primarily to two commercial business loans that were charged off due to the bankruptcy filing of the borrowers.  The $1.9 million in recoveries relates primarily to the repayment of a commercial real estate loan of which $1.7 million had previously been charged off.  

Non-Interest Income and Expense
Non-interest income was $3.7 million for the first six months of 2019, a decrease of $0.1 million, or 3.1%, from $3.8 million for the same six month period of 2018.  Gain on sales of loans decreased $0.1 million between the periods primarily because of a decrease in commercial government guaranteed loan sales. Fees and service charges decreased $0.1 million between the periods due primarily to a decrease in overdraft fees.  These decreases in non-interest income were partially offset by a slight increase in other non-interest income due to an increase in the sale of uninsured investment products and a slight increase in loan servicing income earned on single family loans between the periods.

Non-interest expense was $13.0 million for the first six months of 2019, an increase of $0.1 million, or 1.1%, from $12.9 million for the same six month period of 2018.  Compensation and benefits expense increased $0.1 million primarily because of an increase in pension costs between the periods.  Professional services expense increased $0.1 million due primarily to an increase in legal expenses between the periods. These increases in non-interest expense were partially offset by a $0.1 million decrease in other non-interest expense between the periods due primarily to decreases in the losses incurred on deposit accounts.   Occupancy and equipment costs decreased slightly between the periods due to a decrease in non-capitalized equipment and software costs. Data processing costs decreased slightly because of a decrease in phone and internet costs between the periods due to a change in vendors. 

Income tax expense was $1.8 million for the first six months of 2019, an increase of $0.6 million from $1.2 million for the first six months of 2018.  The increase in income tax expense between the periods is primarily the result of an increase in pre-tax income.

Return on Assets and Equity
Return on average assets (annualized) for the six month period ended June 30, 2019 was 1.25%, compared to 0.89% for the same six month period in 2018.  Return on average equity (annualized) was 10.43% for the six month period ended June 30, 2019, compared to 7.66% for the same six month period in 2018.

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), La Crescent, 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 Pewaukee, 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 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 anticipated results of litigation and our assessment of the impact on our financial statements; 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, 2018 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)   2019     2018    
    (unaudited)      
Assets          
Cash and cash equivalents $ 16,357     20,709    
Securities available for sale:          
 Mortgage-backed and related securities (amortized cost $7,351 and $8,159)   7,435     8,023    
 Other marketable securities (amortized cost $72,935 and $73,343)   72,614     71,957    
    80,049     79,980    
           
Loans held for sale   5,912     3,444    
Loans receivable, net   595,757     586,688    
Accrued interest receivable   2,522     2,356    
Real estate, net   444     414    
Federal Home Loan Bank stock, at cost   853     867    
Mortgage servicing rights, net   1,870     1,855    
Premises and equipment, net   9,623     9,635    
Goodwill   802     802    
Core deposit intangible   206     255    
Prepaid expenses and other assets   6,090     2,668    
Deferred tax asset, net   2,282     2,642    
 Total assets $ 722,767     712,315    
           
           
Liabilities and Stockholders’ Equity          
Deposits $ 623,510     623,352    
Accrued interest payable   305     346    
Customer escrows   1,487     1,448    
Accrued expenses and other liabilities   8,654     4,022    
 Total liabilities   633,956     629,168    
Commitments and contingencies          
Stockholders’ equity:          
 Serial-preferred stock: ($.01 par value)          
  authorized 500,000 shares; issued 0   0     0    
 Common stock ($.01 par value):          
  Authorized 16,000,000 shares; issued 9,128,662   91     91    
Additional paid-in capital   40,153     40,090    
Retained earnings, subject to certain restrictions   104,235     99,754    
Accumulated other comprehensive loss   (170 )   (1,096 )  
Unearned employee stock ownership plan shares   (1,740 )   (1,836 )  
Treasury stock, at cost 4,284,840 and 4,292,838 shares   (53,758 )   (53,856 )  
 Total stockholders’ equity   88,811     83,147    
Total liabilities and stockholders’ equity $ 722,767     712,315    
           


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)   2019     2018     2019     2018  
Interest income:                
  Loans receivable  $ 7,901     7,006     15,169     13,784  
  Securities available for sale:                
  Mortgage-backed and related   44     54     90     96  
  Other marketable   304     285     596     557  
  Other   50     111     176     177  
  Total interest income   8,299     7,456     16,031     14,614  
                 
Interest expense:                
  Deposits   822     526     1,512     994  
  Federal Home Loan Bank advances and other borrowings   7     0     7     2  
  Total interest expense   829     526     1,519     996  
  Net interest income   7,470     6,930     14,512     13,618  
Provision for loan losses   (1,059 )   295     (1,032 )   170  
  Net interest income after provision for loan losses   8,529     6,635     15,544     13,448  
                 
Non-interest income:                
  Fees and service charges   785     785     1,485     1,551  
  Loan servicing fees   318     297     633     598  
  Gain on sales of loans   611     679     990     1,123  
  Other   307     293     604     558  
  Total non-interest income   2,021     2,054     3,712     3,830  
                 
Non-interest expense:                
  Compensation and benefits   3,737     3,678     7,647     7,502  
  Occupancy and equipment   1,081     1,072     2,142     2,169  
  Data processing   305     334     606     629  
  Professional services   381     298     653     547  
  Other   1,063     931     1,966     2,020  
  Total non-interest expense   6,567     6,313     13,014     12,867  
  Income before income tax expense   3,983     2,376     6,242     4,411  
Income tax expense   1,121     649     1,761     1,239  
  Net income   2,862     1,727     4,481     3,172  
Other comprehensive income (loss), net of tax   442     (105 )   926     (452 )
Comprehensive income available to common 
  shareholders
$ 3,304     1,622      
5,407
     
2,720
 
Basic earnings per share $ 0.62     0.40     0.97     0.74  
Diluted earnings per share $ 0.62     0.36     0.97     0.66  
                 


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)   2019   2018   2019   2018  
I. OPERATING DATA:                  
 Interest income $ 8,299   7,456   16,031   14,614  
 Interest expense   829   526   1,519   996  
 Net interest income   7,470   6,930   14,512   13,618  
                   
II. AVERAGE BALANCES:                  
 Assets (1)   717,942   725,471   721,118   718,662  
 Loans receivable, net   595,417   588,563   592,391   587,532  
 Securities available for sale (1)   78,393   80,263   78,592   79,274  
 Interest-earning assets (1)   688,453   700,567   691,370   693,715  
 Interest-bearing and non-interest bearing deposits
  and borrowings
  622,773   638,098   626,600   631,241  
 Equity (1)   87,628   83,964   86,631   83,463  
                   
III. PERFORMANCE RATIOS: (1)                  
   Return on average assets (annualized)   1.60 % 0.95 % 1.25 % 0.89 %
 Interest rate spread information:                  
  Average during period   4.30   3.94   4.19   3.93  
  End of period   4.01   4.02   4.01   4.02  
 Net interest margin   4.35   3.97   4.23   3.96  
 Ratio of operating expense to average                  
 total assets (annualized)   3.67   3.49   3.64   3.61  
 Return on average equity (annualized)   13.10   8.25   10.43   7.66  
 Efficiency   69.19   70.27   71.41   73.75  
    June 30,   December 31,     June 30,      
    2019   2018   2018      
IV. EMPLOYEE DATA:                  
 Number of full time equivalent employees   178   182   187      
                   
V. ASSET QUALITY:                  
 Total non-performing assets $ 3,124   3,092   3,732      
 Non-performing assets to total assets   0.43 % 0.43 % 0.51 %    
 Non-performing loans to total loans receivable, net   0.45 % 0.46 % 0.51 %    
  Allowance for loan losses $ 8,624   8,686   9,328      
  Allowance for loan losses to total assets   1.19 % 1.22 % 1.28 %    
   Allowance for loan losses to total loans receivable, net   1.45   1.48   1.58      
  Allowance for loan losses to non-performing loans   323.18   324.27   309.31      
                   
VI. BOOK VALUE PER SHARE:                  
 Book value per share common share $ 18.33   17.19   17.75      
    Six Months
Ended
June 30, 2019
  Year Ended
December 31,
2018
  Six Months
Ended
June 30, 2018
     
VII. CAPITAL RATIOS:                  
 Stockholders’ equity to total assets, at end of period   12.29 % 11.67 % 11.27 %    
 Average stockholders’ equity to average assets (1)   12.01   11.52   11.61      
 Ratio of average interest-earning assets to                  
   average interest-bearing liabilities (1)   110.34   109.81   109.90      
  Home Federal Savings Bank regulatory capital ratios:                  
  Common equity tier 1 capital ratio   13.56   13.26   12.86      
  Tier 1 capital leverage ratio   11.79   11.00   11.02      
  Tier 1 capital ratio   13.56   13.26   12.86      
  Risk-based capital   14.81   14.52   14.12      
                   
  1. Average balances were calculated based upon amortized cost without the market value impact of ASC 320.

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

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