HMN Financial, Inc. Announces Fourth Quarter Results

Share Name	Share Symbol	Market	Type
HMN Financial Inc	NASDAQ:HMNF	NASDAQ	Common Stock

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	-0.05	-0.19%	26.40	10.57	42.25	26.60	26.01	26.48	1,158	23:41:14

HMN Financial (NASDAQ:HMNF)
Historical Stock Chart

From Jul 2019 to Jul 2024

Click Here for more HMN Financial Charts.

HMN Financial, Inc. (NASDAQ:HMNF): Fourth Quarter Highlights Net income of $2.7 million, down $807,000, or 23.2%, from fourth quarter of 2005 Diluted earnings per share of $0.67, down $0.20, from fourth quarter of 2005 Net interest income up $438,000, or 4.7%, over fourth quarter of 2005 Net interest margin up 34 basis points over fourth quarter of 2005 Provision for loan losses up $1.2 million, or 658.1%, from fourth quarter of 2005 Annual Highlights Net income of $8.4 million, down $2.7 million, or 23.9%, from 2005 Diluted earnings per share of $2.10, down $0.67, or 24.2%, from 2005 Net interest income up $2.9 million, or 8.2%, over 2005 Net interest margin up 33 basis points over 2005 Provision for loan losses up $6.2 million, or 232.0%, over 2005 EARNINGS SUMMARY Three Months Ended Year Ended December 31, December 31, 2006� � 2005� 2006� � 2005� Net income $2,670,263� 3,476,971� $8,427,551� 11,067,889� Diluted earnings per share $0.67� 0.87� $2.10� 2.77� Return on average assets 1.11% 1.39� 0.86% 1.12� Return on average equity 11.18% 15.03� 8.85% 12.42� Book value per share $21.58� 20.59� $21.58� 20.59� HMN Financial, Inc. (HMN) (NASDAQ:HMNF), the $978 million holding company for Home Federal Savings Bank (the Bank), today reported net income of $2.7 million for the fourth quarter of 2006, down $807,000, or 23.2%, from net income of $3.5 million for the fourth quarter of 2005. Diluted earnings per common share for the fourth quarter of 2006 were $0.67, down $0.20, from $0.87 for the fourth quarter of 2005. The decrease in net income is due to a $1.2 million increase in the loan loss provision between the periods primarily as a result of an increase in the allowance reserve for a home equity loan. Fourth Quarter Results Net Interest Income Net interest income was $9.8 million for the fourth quarter of 2006, an increase of $438,000, or 4.7%, compared to $9.4 million for the fourth quarter of 2005. Interest income was $17.4 million for the fourth quarter of 2006, an increase of $1.3 million, or 8.0%, from $16.1 million for the same period in 2005. Interest income increased because of an increase in the average interest rates earned on loans and investments. Interest rates increased primarily because of the 100 basis point increase in the prime interest rate between the periods. Increases in the prime rate, which is the rate that banks charge their prime business customers, generally increase the rates on adjustable rate consumer and commercial loans in the portfolio and new loans originated. The increase in interest income due to increased rates was partially offset by a $47 million decrease in the average outstanding loan portfolio balance between the periods due to an increase in commercial and consumer loan prepayments and a decrease in loan originations. The average yield earned on interest-earning assets was 7.54% for the fourth quarter of 2006, an increase of 81 basis points from the 6.73% yield for the fourth quarter of 2005. Interest expense was $7.5 million for the fourth quarter of 2006, an increase of $846,000, or 12.7%, from $6.7 million for the fourth quarter of 2005. Interest expense increased primarily because of higher interest rates paid on deposits which were caused by the 100 basis point increase in the federal funds rate between the periods. Increases in the federal funds rate, which is the rate that banks charge other banks for short term loans, generally increase the rates banks pay for deposits. The average interest rate paid on interest-bearing liabilities was 3.48% for the fourth quarter of 2006, an increase of 52 basis points from the 2.96% paid for the fourth quarter of 2005. Net interest margin (net interest income divided by average interest earning assets) for the fourth quarter of 2006 was 4.28%, an increase of 34 basis points, compared to 3.94% for the fourth quarter of 2005. Provision for Loan Losses The provision for loan losses was $1.4 million for the fourth quarter of 2006, an increase of $1.2 million, or 658.1%, from $179,000 for the fourth quarter of 2005. The provision for loan losses increased primarily because an $825,000 specific loan loss reserve was established on a home equity loan that was classified as nonperforming in the fourth quarter of 2006. The reserved amount was based on an updated appraisal of the value of the property securing the loan and subsequent to year end the Bank foreclosed on the property. The provision also increased because of a $33 million increase in outstanding commercial loans during the fourth quarter of 2006. Total non-performing assets were $10.4 million at December 31, 2006, an increase of $130,000, or 1.3%, from $10.3 million at September 30, 2006. Non-performing loans decreased $909,000 and foreclosed and repossessed assets increased $1.0 million primarily due to an increase in single family home loan foreclosures. Non-Interest Income and Expense Non-interest income was $1.5 million for the fourth quarter of 2006, a decrease of $333,000, or 18.6%, from $1.8 million for the fourth quarter of 2005. Fees and service charges increased $55,000 between the periods primarily because of increased retail deposit account activity and fees. Gain on sales of loans decreased $386,000 between the periods due primarily to a decrease in the number of single family loans that were sold. Sold loans decreased because there were fewer single family loans originated and most of the loans that were originated were placed into the loan portfolio to replace prepaying loans. Non-interest expense was $5.5 million for the fourth quarter of 2006, an increase of $14,000, or 0.26%, from $5.4 million for the fourth quarter of 2005. Occupancy expense increased $99,000 primarily because of the additional costs associated with the new branch and loan origination offices opened in Rochester in the first quarter of 2006. Data processing costs increased $30,000 primarily because of the increased internet and other banking services provided by a third party processor between the periods. Advertising expense increased $36,000 primarily because of an increase in deposit related promotions in the fourth quarter of 2006. Mortgage servicing rights amortization decreased $66,000 between the periods because there are fewer mortgage loans being serviced. Other operating expenses decreased $62,000 primarily because of decreased mortgage and commercial loan foreclosure costs in the fourth quarter of 2006 when compared to the same period in 2005. Income tax expense decreased $280,000 between the periods primarily because of a decrease in taxable income. Return on Assets and Equity Return on average assets for the fourth quarter of 2006 was 1.11%, compared to 1.39% for the fourth quarter of 2005. Return on average equity was 11.18% for the fourth quarter of 2006, compared to 15.03% for the same period of 2005. Book value per common share at December 31, 2006 was $21.58, compared to $20.59 at December 31, 2005. Annual Results Net Income Net income was $8.4 million for the year ended December 31, 2006, a decrease of $2.7 million, or 23.9%, compared to $11.1 million for the year ended December 31, 2005. Diluted earnings per common share for the year ended December 31, 2006 were $2.10, down $0.67, or 24.2%, from $2.77 for the year ended December 31, 2005. Net Interest Income Net interest income was $38.7 million for the year ended December 31, 2006, an increase of $2.9 million, or 8.2%, from $35.8 million in 2005. Interest income was $67.5 million for the year ended December 31, 2006, an increase of $7.2 million, or 12.0%, from $60.3 million for the same period in 2005. Interest income increased primarily because of an increase in the average interest rates earned on loans and investments. Interest rates increased primarily because of the 100 basis point increase in the prime interest rate between the periods. The increase in interest income due to increased rates was partially offset by a $42 million decrease in the average outstanding loan portfolio balance between the periods due to an increase in commercial loan prepayments and a decrease in loan originations. The yield earned on interest-earning assets was 7.21% for the year ended December 31, 2006, an increase of 80 basis points from the 6.41% yield for the same period of 2005. Interest expense was $28.8 million for the year ended December 31, 2006, an increase of $4.3 million, or 17.7%, from the $24.5 million for the same period in 2005. Interest expense increased primarily because of higher interest rates paid on deposits which were caused by the 100 basis point increase in the federal funds rate between the periods. The increase in deposit rates was partially offset by a change in the mix of funding sources between the periods. The average outstanding balances of $57 million in brokered deposits and Federal Home Loan Bank advances were replaced with other less expensive deposits which lowered the Bank�s overall cost of funds. The average interest rate paid on interest-bearing liabilities was 3.28% for the year ended December 31, 2006, an increase of 52 basis points from the 2.76% paid for the same period of 2005. Net interest margin for the year ended December 31, 2006 was 4.13%, an increase of 33 basis points, compared to 3.80% for the same period of 2005. Provision for Loan Losses The provision for loan losses was $8.9 million for the year ended December 31, 2006, an increase of $6.2 million, or 232.0%, from $2.7 million in 2005. The provision for loan losses increased primarily because $7.4 million in commercial loans relating to a real estate and golf course development were charged off during the year. The increase in the provision related to loan charge offs was partially offset by a $12 million decrease in outstanding commercial loans between the periods. Total non-performing assets were $10.4 million at December 31, 2006, an increase of $6.5 million, or 168.4%, from $3.9 million at December 31, 2005. Non-performing loans increased $6.0 million, foreclosed and repossessed assets increased $696,000, and non-performing other assets decreased $134,000 between the periods. A reconciliation of the Company�s allowance for loan losses for the years ended December 31, 2006 and 2005 are summarized as follows: � � � � (in thousands) 2006� 2005� Balance at January 1, $8,778� $8,996� Provision 8,878� 2,674� Charge offs: Commercial loans (7,430) (2,615) Consumer loans (269) (228) Single family mortgage loans (150) (234) Recoveries 66� 185� Balance at December 31, $9,873� $8,778� � � � � Non-Interest Income and Expense Non-interest income was $6.4 million for the year ended December 31, 2006, a decrease of $68,000, or 1.0%, from $6.5 million for the same period in 2005. Fees and service charges increased $392,000 between the periods primarily because of increased retail deposit account activity and fees. Security gains increased $69,000 due to increased security sales. Gain on sale of loans decreased $598,000 due to a decrease in the number of single-family mortgage loans sold and a decrease in the profit margins realized on the loans that were sold. Competition in the single-family loan origination market remained strong and profit margins were lowered in order to remain competitive. Other income increased $109,000 primarily because of a decrease in the losses recognized on repossessed assets in 2006 when compared to 2005. Non-interest expense was $22.6 million for the year ended December 31, 2006, an increase of $795,000, or 3.6%, from $21.8 million for the same period in 2005. Compensation and benefits expense increased $729,000 primarily because of annual pay and pension cost increases. Occupancy expense increased $355,000 primarily because of additional costs associated with the new branch and loan origination offices opened in Rochester in the first quarter of 2006. Data processing costs increased $151,000 primarily because of increased internet and other banking services provided by a third party processor between the periods. Other non-interest expense decreased $331,000 primarily because of a decrease in mortgage loan expenses and professional fees. Mortgage servicing rights amortization decreased $171,000 between the periods because there are fewer mortgage loans being serviced. Income tax expense was $5.2 million in 2006, a decrease of $1.5 million, or 22.4%, compared to $6.7 million for the same period of 2005. Income tax expense decreased primarily because of a decrease in taxable income. Return on Assets and Equity Return on average assets for the year ended December 31, 2006 was 0.86%, compared to 1.12% for the same period in 2005. Return on average equity was 8.85% for the year ended December 31, 2006, compared to 12.42% for the same period in 2005. President's Statement �The 2006 financial results were negatively impacted by an increase in the loan loss provision,� said HMN President Michael McNeil. �While we are disappointed in the negative effect that this had on net income, we are encouraged by the increase in net interest income and the 33 basis point increase in the net interest margin.� General Information HMN Financial, Inc. and Home Federal Savings Bank are headquartered in Rochester, Minnesota. The Bank operates ten full service offices in southern Minnesota located in Albert Lea, Austin, LaCrescent, Rochester, Spring Valley and Winona and two full service offices in Iowa located in Marshalltown and Toledo. Home Federal Savings Bank also operates loan origination offices located in Sartell and Rochester, Minnesota. Eagle Crest Capital Bank, a division of Home Federal Savings Bank, operates branches in Edina and Rochester, Minnesota. Safe Harbor Statement This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to those relating to the Company�s financial expectations for earnings and revenues. 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 possible legislative changes and adverse economic, business and competitive developments such as shrinking interest margins; reduced collateral values; deposit outflows; 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; changes in credit or other risks posed by the Company�s loan and investment portfolios; technological, computer-related or operational difficulties; adverse changes in securities markets; results of litigation 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 filings on form 10-K and Form 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. HMN FINANCIAL, INC. AND SUBSIDIARIES Consolidated Balance Sheets (unaudited) � � � � December 31, December 31, � 2006� � 2005� � Assets Cash and cash equivalents $43,775,988� 47,268,795� Securities available for sale: Mortgage-backed and related securities (amortized cost $6,671,042 and $7,428,504) 6,177,829� 6,879,756� Other marketable securities (amortized cost $119,940,282 and $113,749,841) 119,962,274� 112,778,813� 126,140,103� 119,658,569� � Loans held for sale 1,493,011� 1,435,141� Loans receivable, net 768,231,579� 785,678,461� Accrued interest receivable 5,060,839� 4,460,014� Real estate, net 2,072,032� 1,214,621� Federal Home Loan Bank stock, at cost 7,956,300� 8,364,600� Mortgage servicing rights, net 1,957,699� 2,653,635� Premises and equipment, net 11,372,103� 11,941,863� Investment in limited partnerships 112,489� 141,048� Goodwill 3,800,938� 3,800,938� Core deposit intangible, net 105,903� 219,760� Prepaid expenses and other assets 2,830,548� 1,854,948� Deferred tax asset 2,879,000� 2,544,400� Total assets $977,788,532� 991,236,793� � � Liabilities and Stockholders� Equity Deposits $725,958,830� 731,536,560� Federal Home Loan Bank advances 150,900,000� 160,900,000� Accrued interest payable 1,176,024� 2,085,573� Customer escrows 720,732� 1,038,575� Accrued expenses and other liabilities 5,890,605� 4,947,816� Total liabilities 884,646,191� 900,508,524� Commitments and contingencies Stockholders� equity: Serial preferred stock: ($.01 par value) Authorized 500,000 shares; issued and outstanding shares none 0� 0� Common stock ($.01 par value): Authorized 11,000,000; issued shares 9,128,662 91,287� 91,287� Additional paid-in capital 57,913,743� 58,011,099� Retained earnings, subject to certain restrictions 103,642,975� 98,951,777� Accumulated other comprehensive loss (284,421) (917,577) Unearned employee stock ownership plan shares (4,157,698) (4,350,999) Unearned compensation restricted stock awards 0� (182,521) Treasury stock, at cost 4,813,232 and 4,721,402 (64,063,545) (60,874,797) Total stockholders� equity 93,142,341� 90,728,269� Total liabilities and stockholders� equity $977,788,532� 991,236,793� � � � � � HMN FINANCIAL, INC. AND SUBSIDIARIES Consolidated Statements of Income (unaudited) � � � � � Three Months EndedDecember 31, 2006 ��2005 � Year EndedDecember 31, 2006 ��2005 Interest income: Loans receivable $15,434,391� 14,889,241� 60,180,932� 56,376,920� Securities available for sale: Mortgage-backed and related 65,221� 73,239� 271,060� 325,940� Other marketable 1,471,062� 802,393� 5,194,856� 2,744,202� Cash equivalents 300,527� 237,688� 1,554,937� 580,500� Other 86,894� 71,326� 325,036� 253,611� Total interest income 17,358,095� 16,073,887� 67,526,821� 60,281,173� � Interest expense: Deposits 5,848,333� 4,874,673� 22,045,858� 17,233,400� Federal Home Loan Bank advances 1,664,757� 1,792,589� 6,794,964� 7,278,050� Total interest expense 7,513,090� 6,667,262� 28,840,822� 24,511,450� Net interest income 9,845,005� 9,406,625� 38,685,999� 35,769,723� Provision for loan losses 1,357,000� 179,000� 8,878,000� 2,674,000� Net interest income after provision for loan losses 8,488,005� 9,227,625� 29,807,999� 33,095,723� � Non-interest income: Fees and service charges 780,202� 724,713� 3,110,863� 2,719,004� Mortgage servicing fees 276,075� 308,432� 1,172,166� 1,210,192� Securities gains (losses), net 0� (21,000) 48,122� (21,000) Gain on sales of loans 224,913� 610,504� 1,254,707� 1,852,940� Losses in limited partnerships (6,500) (6,500) (28,559) (27,210) Other 179,031� 170,583� 884,137� 775,294� Total non-interest income 1,453,721� 1,786,732� 6,441,436� 6,509,220� � Non-interest expense: Compensation and benefits 2,785,875� 2,800,281� 11,868,879� 11,140,329� Occupancy 1,101,029� 1,001,749� 4,435,468� 4,080,880� Deposit insurance premiums 22,808� 32,479� 102,145� 129,683� Advertising 129,085� 92,736� 475,257� 384,184� Data processing 300,238� 269,911� 1,182,538� 1,031,630� Amortization of mortgage servicing rights, net 187,054� 252,881� 848,347� 1,019,766� Other 927,474� 989,449� 3,683,750� 4,014,482� Total non-interest expense 5,453,563� 5,439,486� 22,596,384� 21,800,954� Income before income tax expense 4,488,163� 5,574,871� 13,653,051� 17,803,989� Income tax expense 1,817,900� 2,097,900� 5,225,500� 6,736,100� Net income $2,670,263� 3,476,971� 8,427,551� 11,067,889� Basic earnings per share $0.71� 0.91� 2.20� 2.89� Diluted earnings per share $0.67� 0.87� 2.10� 2.77� � HMN FINANCIAL, INC. AND SUBSIDIARIES Selected Consolidated Financial Information (unaudited) SELECTED FINANCIAL DATA: Three Months Ended December 31, 2006 �� 2005 Year Ended December 31, 2006 ��2005 (dollars in thousand, except per share data) � I. OPERATING DATA: Interest income $17,358� 16,074� 67,527� 60,281� Interest expense 7,513� 6,667� 28,841� 24,511� Net interest income 9,845� 9,407� 38,686� 35,770� � II. AVERAGE BALANCES: Assets (1) 957,113� 992,869� 981,180� 984,084� Loans receivable, net 751,106� 796,855� 760,991� 802,637� Mortgage-backed and related securities (1) 6,751� 7,677� 7,045� 8,509� Interest-earning assets (1) 912,927� 948,056� 937,204� 940,321� Interest-bearing liabilities 855,438� 892,773� 878,598� 887,464� Equity (1) 94,758� 91,755� 95,192� 89,100� � III. PERFORMANCE RATIOS: (1) Return on average assets (annualized) 1.11% 1.39% 0.86% 1.12% Interest rate spread information: Average during period 4.06� 3.76� 3.92� 3.65� End of period 3.71� 3.50� 3.71� 3.50� Net interest margin 4.28� 3.94� 4.13� 3.80� Ratio of operating expense to average total assets (annualized) 2.26� 2.17� 2.30� 2.22� Return on average equity (annualized) 11.18� 15.03� 8.85� 12.42� Efficiency 48.27� � 48.60� 50.07� 51.56� Dec 31, Dec 31, 2006 � 2005 IV. ASSET QUALITY : Total non-performing assets $10,424� 3,883� Non-performing assets to total assets 1.07% 0.39% Non-performing loans to total loans receivable, net 1.08% 0.30% Allowance for loan losses $9,873� 8,778� Allowance for loan losses to total assets 1.01% 0.89% Allowance for loan losses to total loans receivable, net 1.29� 1.11� Allowance for loan losses to non-performing loans 118.84� 376.88� � V. BOOK VALUE PER SHARE: Book value per share $21.58� � 20.59� � Year Ended Year� Ended Dec 31, 2006 � Dec 31, 2005 VI. CAPITAL RATIOS : � Stockholders� equity to total assets, at end of period 9.53% 9.15% Average stockholders� equity to average assets (1) 9.70� 9.05� Ratio of average interest-earning assets to average interest-bearing liabilities (1) 106.67� � 105.96� Dec 31, Dec 31, 2006 � 2005 VII. EMPLOYEE DATA: Number of full time equivalent employees 203� � 208� � � � � (1) Average balances were calculated based upon amortized cost without the market value impact of SFAS 115.

Market Data

News

Trading Tools

Markets

Discover

Hot Features

Follow Feed

Options Flow

Monitor

HMNF HMN Financial Inc