HMN Financial, Inc. Announces Fourth Quarter Results and Annual Meeting

Rochester, Minnesota, UNITED STATES


Fourth Quarter Highlights

  • Net income of $1.2 million, down $1.2 million from $2.4 million for fourth quarter of 2018
  • Diluted earnings per share of $0.27, down $0.24 from $0.51 for fourth quarter of 2018
  • Net interest margin of 3.76%, down 30 basis points from 4.06% for fourth quarter of 2018
  • Non-interest expense of $7.3 million, up $1.0 million from $6.3 million for fourth quarter of 2018
  • Gain on sale of loans of $1.1 million, up $0.6 million from $0.5 million for fourth quarter of 2018

Annual Highlights

  • Net income of $7.8 million, down $0.4 million from $8.2 million for 2018
  • Diluted earnings per share of $1.68, down $0.03 from $1.71 for 2018
  • Net interest margin of 4.04%, up 1 basis point from 4.03% for 2018
  • Non-interest expense of $27.1 million, up $1.7 million from $25.4 million for 2018
  • Gain on sale of loans of $2.9 million, up $0.8 million from $2.1 million for 2018
       
Net Income Summary Three Months Ended  Year Ended 
  December 31,  December 31, 
(Dollars in thousands, except per share amounts)   2019  2018  20192018 
Net income$1,2362,352 $7,7938,236 
Diluted earnings per share 0.270.51  1.681.71 
Return on average assets (annualized) 0.64%1.29% 1.05%1.14%
Return on average equity (annualized) 5.29%11.24% 8.74%9.88%
Book value per share$19.1317.19 $19.1317.19 
         

ROCHESTER, Minn., Jan. 28, 2020 (GLOBE NEWSWIRE) -- HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $778 million holding company for Home Federal Savings Bank (the Bank), today reported net income of $1.2 million for the fourth quarter of 2019, a decrease of $1.2 million compared to net income of $2.4 million for the fourth quarter of 2018.  Diluted earnings per share for the fourth quarter of 2019 was $0.27, a decrease of $0.24 from the diluted earnings per share of $0.51 for the fourth quarter of 2018.  The decrease in net income between the periods was because of a $1.0 million increase in non-interest expenses primarily related to increased compensation and professional services costs, a $0.2 million decrease in net interest income due to an increase in the average rates paid on deposits, and a $0.4 million increase in the loan loss provision.  These decreases in net income were partially offset by a $0.6 million increase in the gain on sales of loans between the periods.   

President’s Statement
“Maintaining net interest margin in the current rate environment continues to be a challenge for not only our bank but the financial industry as a whole,” said Bradley Krehbiel, President and Chief Executive Officer of HMN. “Despite the margin challenges, we are pleased to report the increase in our mortgage loan origination activity and the related gain on sale of loans that we experienced during the fourth quarter of 2019.  We continue to focus our efforts on improving the financial performance of our core banking operations while maintaining the credit quality of our loan portfolio.”

Fourth Quarter Results
Net Interest Income
Net interest income was $6.9 million for the fourth quarter of 2019, a decrease of $0.2 million, or 2.8%, from $7.1 million for the fourth quarter of 2018.  Interest income was $7.9 million for the fourth quarter of 2019, an increase of $0.1 million, or 0.82%, from $7.8 million for the fourth quarter of 2018.  Interest income increased primarily because of the $35.4 million increase in the average interest-earning assets between the periods.  The average yield earned on interest-earning assets was 4.25% for the fourth quarter of 2019, a decrease of 18 basis points from 4.43% for the fourth quarter of 2018.  The decrease in the average yield is primarily related to the decrease in the average prime rate between the periods.

Interest expense was $0.9 million for the fourth quarter of 2019, an increase of $0.2 million, or 40.6%, from $0.7 million for the fourth quarter of 2018.  The average interest rate paid on interest-bearing liabilities and non-interest-bearing deposits was 0.54% for the fourth quarter of 2019, an increase of 13 basis points from 0.41% for the fourth quarter of 2018. The increase in the interest paid on interest-bearing liabilities was primarily because of the lag in the market’s response in lowering deposit pricing when the federal funds rate decreased in the second half of 2019.  Net interest margin (net interest income divided by average interest-earning assets) for the fourth quarter of 2019 was 3.76%, a decrease of 30 basis points, compared to 4.06% for the fourth quarter of 2018.  The decrease in the net interest margin is primarily related to the increase in interest expense as a result of the lag in the markets response in lowering deposit pricing when the federal funds rate decreased in the second half of 2019 coupled with a decrease in the average yield earned on interest-earning assets between the periods.       

A summary of the Company’s net interest margin for the three month periods ended December 31, 2019 and 2018 is as follows:

    
  For the three month period ended 
  December 31, 2019  December 31, 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$91,940 449 1.94%$79,204 345 1.72%
  Loans held for sale 4,567 43 3.76  1,840 27 5.70 
  Mortgage loans, net 120,117 1,248 4.12  116,341 1,212 4.13 
  Commercial loans, net 394,667 5,003 5.03  397,617 5,130 5.12 
  Consumer loans, net 70,302 896 5.06  73,665 941 5.07 
  Other 51,838 222 1.70  29,393 142 1.92 
Total interest-earning assets$733,431 7,861 4.25 $698,060 7,797 4.43 
               
Interest-bearing liabilities:              
  Checking accounts$98,280 30 0.12 $84,620 21 0.10 
  Savings accounts 79,550 15 0.07  76,309 15 0.08 
  Money market accounts 186,557 294 0.63  202,325 255 0.50 
  Certificates 126,479 575 1.80  113,740 359 1.25 
Total interest-bearing liabilities$490,866     $476,994     
  Non-interest checking 174,100      157,838     
  Other non-interest bearing deposits 2,137      1,435     
Total interest-bearing liabilities and non-interest
  bearing deposits
 

$
667,103 914 0.54  

$
636,267 650 0.41 
Net interest income   6,947      7,147   
Net interest rate spread     3.71%     4.02%
Net interest margin     3.76%     4.06%
               

Provision for Loan Losses
The provision for loan losses was $0.2 million for the fourth quarter of 2019, an increase of $0.4 million from the ($0.2) million provision for loan losses for the fourth quarter of 2018. The provision for loan losses increased between the periods primarily because of an increase in the risk rating downgrades on certain commercial real estate loans between the periods.  Total non-performing assets were $2.7 million at December 31, 2019, an increase of $0.6 million, or 29.3%, from $2.1 million at September 30, 2019. Non-performing loans increased $0.6 million and foreclosed and repossessed assets did not change during the fourth quarter of 2019. The increase in non-performing loans was primarily related to a single commercial loan in the trucking industry that was classified as a non-accrual loan during the fourth quarter of 2019.  

A reconciliation of the allowance for loan losses for the fourth quarters of 2019 and 2018 is summarized as follows:

     
     
(Dollars in thousands)   2019  2018 
Balance at September 30,$8,195 $8,832 
Provision 236  (167)
Charge offs:    
  Consumer (14) (85)
  Commercial business (10) 0 
Recoveries 157  106 
Balance at December 31,$8,564 $8,686 
     
Allocated to:    
General allowance$7,839 $7,892 
Specific allowance 725  794 
 $8,564 $8,686 
     
     

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 two most recently completed quarters and December 31, 2018.

          
  December 31,  September 30,  December 31, 
(Dollars in thousands)   2019  2019  2018 
Non‑Performing Loans:         
  Single family$617 $574 $730 
  Commercial real estate 184  293  1,311 
  Consumer 659  513  489 
  Commercial 621  99  148 
  Total 2,081  1,479  2,678 
          
Foreclosed and Repossessed Assets:         
  Single family 166  166  0 
  Commercial real estate 414  414  414 
Total non‑performing assets$2,661 $2,059 $3,092 
Total as a percentage of total assets 0.34% 0.27% 0.43%
Total non‑performing loans$2,081 $1,479 $2,678 
Total as a percentage of total loans receivable, net 0.35% 0.25% 0.46%
Allowance for loan losses to non-performing loans 411.45% 554.16% 324.27%
          
Delinquency Data:         
Delinquencies (1)         
  30+ days$1,167 $2,541 $1,453 
  90+ days  0  0  0 
Delinquencies as a percentage of         
 loan portfolio (1)         
  30+ days 0.34% 0.42% 0.24%
  90+ days 0.00% 0.00% 0.00%
          
(1) Excludes non-accrual loans.         
          

Non-Interest Income and Expense
Non-interest income was $2.5 million for the fourth quarter of 2019, an increase of $0.6 million, or 29.1%, from $1.9 million for the fourth quarter of 2018.  Gain on sales of loans increased $0.6 million between the periods primarily because of an increase in single family loan originations and sales.  Other non-interest income increased $0.1 million due to an increase in the gains realized on equity investments between the periods.  Loan servicing fees increased slightly between the periods due to an increase in the single family loans being serviced.  These increases were partially offset by a $0.1 million decrease in fees and service charges due primarily to a decrease in late charges and overdraft fees.

Non-interest expense was $7.3 million for the fourth quarter of 2019, an increase of $1.0 million, or 16.4%, from $6.3 million for the fourth quarter of 2018.  Compensation and benefits expense increased $0.5 million primarily because of annual salary increases, the opening of a new branch location, and an increase in the compensation and incentives paid as a result of the increased mortgage loan production between the periods.  Professional services expense increased $0.2 million between the periods primarily because of an increase in legal expenses relating to a bankruptcy litigation claim.  Other non-interest expense increased $0.2 million due primarily to an increase in mortgage loan servicing expenses because of an increase in serviced loans that were refinanced between the periods and an increase in advertising expenses.  Occupancy and equipment costs increased $0.1 million between the periods due to an increase in depreciation and non-capitalized repair and maintenance costs.

Income tax expense was $0.6 million for the fourth quarter of 2019, the same as for the fourth quarter of 2018.  Income tax expense remained the same despite the decrease in pre-tax income between the periods because of an increase in the effective tax rate.  The effective tax rate increased primarily because of a change in the tax deductibility of certain expenses between the periods.       
                       
Return on Assets and Equity
Return on average assets (annualized) for the fourth quarter of 2019 was 0.64%, compared to 1.29% for the fourth quarter of 2018.  Return on average equity (annualized) was 5.29% for the fourth quarter of 2019, compared to 11.24% for the same period of 2018.  Book value per share at December 31, 2019 was $19.13, compared to $17.19 at December 31, 2018.

Annual Results
Net Income
Net income was $7.8 million for 2019, a decrease of $0.4 million, or 5.4%, compared to net income of $8.2 million for 2018.  Diluted earnings per share for the year ended December 31, 2019 was $1.68, a decrease of $0.03 per share compared to diluted earnings per share of $1.71 for the year ended December 31, 2018.  The decrease in net income between the periods was because of a $1.7 million increase in non-interest expenses primarily related to increased compensation and professional services costs and a $0.4 million increase in income tax expense.  These decreases in net income were partially offset by $0.8 million increase in the gain on sales of loans, a $0.6 million decrease in the loan loss provision, and a $0.4 million increase in net interest income due to an increase in the average interest earning assets between the periods.

Net Interest Income
Net interest income was $28.6 million for 2019, an increase of $0.5 million, or 1.4%, from $28.1 million for the same period of 2018.  Interest income was $31.9 million for 2019, an increase of $1.5 million, or 5.0%, from $30.4 million for the same period of 2018.  Interest income increased primarily because of the increase in the average yield earned on interest-earning assets between the periods.  The average yield earned on interest-earning assets was 4.51% for 2019, an increase of 16 basis points from 4.35% for 2018. The increase in the average yield is primarily related to the increase in the average prime rate between the periods. 

Interest expense was $3.3 million for 2019, an increase of $1.1 million, or 49.5%, compared to $2.2 million in 2018.  The average interest rate paid on interest-bearing liabilities and non-interest-bearing deposits was 0.52% for 2019, an increase of 17 basis points from 0.35% for 2018. The increase in the interest paid on interest-bearing liabilities was primarily because of the lag in the timing of the market’s response in lowering deposit pricing when the federal funds rate decreased in the second half of 2019 and an increase in the average federal funds rate between the periods.  Net interest margin (net interest income divided by average interest-earning assets) for 2019 was 4.04%, an increase of 1 basis point compared to 4.03% for 2018.  The increase in the net interest margin is primarily related to the increase in interest income as a result of the increase in the average yield earned on the interest-earning assets between the periods.     

A summary of the Company’s net interest margin for 2019 and 2018 is as follows:

    
  For the twelve month period ended 
  December 31, 2019  December 31, 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$82,383 1,500 1.82%$79,377 1,335 1.68%
  Loans held for sale 2,959 125 4.22  1,765 89 5.04 
  Mortgage loans, net 116,411 4,992 4.29  113,283 4,624 4.08 
  Commercial loans, net 400,503 20,969 5.24  400,783 20,206 5.04 
  Consumer loans, net 72,607 3,701 5.10  72,598 3,616 4.98 
  Other 31,679 603 1.90  30,567 511 1.67 
Total interest-earning assets$706,542 31,890 4.51 $698,373 30,381 4.35 
               
Interest-bearing liabilities:              
  Checking accounts$96,387 103 0.11 $86,750 62 0.07 
  Savings accounts 79,587 63 0.08  77,630 61 0.08 
  Money market accounts 177,587 1,171 0.66  199,202 865 0.43 
  Certificates 121,914 1,995 1.64  114,243 1,243 1.09 
  Advances and other borrowings 287 7 2.54  140 2 1.71 
Total interest-bearing liabilities$475,762     $477,965     
   Non-interest checking 163,420      156,482     
   Other non-interest bearing deposits 2,057      1,534     
Total interest-bearing liabilities and non-interest
  bearing deposits
 

$
641,239 3,339 0.52  

$
635,981 2,233 0.35 
Net interest income   28,551      28,148   
Net interest rate spread     3.99%     4.00%
Net interest margin     4.04%     4.03%
               
               

Provision for Loan Losses
The provision for loan losses was ($1.2) million for 2019, a decrease of $0.6 million compared to the ($0.6) million provision for loan losses for 2018. The credit provision amount for the period was primarily the result of the increase in net recoveries received during 2019 when compared to the same period of 2018.  The net recoveries, combined with the changes in the credit reserve amounts required on the existing portfolio, resulted in a reduction of the overall provision for loan losses between the periods.  Total non-performing assets were $2.7 million at December 31, 2019, a decrease of $0.4 million, or 13.9%, from $3.1 million at December 31, 2018.  Non-performing loans decreased $0.6 million and foreclosed and repossessed assets increased $0.2 million during 2019. The decrease in the non-performing loans was primarily related to a $1.3 million non-performing loan relationship in the manufacturing industry that was reclassified as an accruing loan and a $0.6 million loan in the trucking industry that was reclassified as non-accruing during the year. 

A reconciliation of the allowance for loan losses for 2019 and 2018 is summarized as follows:

     
     
(in thousands)   2019  2018 
Balance beginning of period$8,686 $9,311 
Provision (1,216) (649)
Charge offs:    
  Commercial (880) (270)
  Consumer (107) (226)
  Single family (1) (24)
Recoveries 2,082  544 
Balance at December 31,$8,564 $8,686 
     
     

Non-Interest Income and Expense

Non-interest income was $8.5 million for the year ended December 31, 2019, an increase of $0.8 million, or 9.6%, from $7.7 million for the year ended December 31, 2018.  Gain on sales of loans increased $0.8 million between the periods primarily because of an increase in single family loan sales.  Other non-interest income increased $0.1 million due primarily to an increase in the gains recognized on equity securities between the periods.  Loan servicing fees increased slightly due to an increase in single family loan servicing fees earned between the periods.  These increases were partially offset by a decrease of $0.2 million in fees and service charges due to a decrease in commitment fees and late charges earned on loans between the periods.

Non-interest expense was $27.1 million for the year ended December 31, 2019, an increase of $1.7 million, or 6.8%, from $25.4 million for the year ended December 31, 2018.   Compensation and benefits expense increased $0.9 million primarily because of annual salary increases, the opening of a new branch location, and an increase in the compensation paid as a result of the increased mortgage loan production between the periods. Professional services expense increased $0.4 million between the periods due primarily to an increase in legal expenses relating to a bankruptcy litigation claim. Other non-interest expense increased $0.2 million due to an increase in mortgage loan servicing expenses because of the increase in serviced loans that were refinanced between the periods.  Occupancy and equipment costs increased $0.1 million between the periods due to an increase in depreciation and maintenance costs.

Income tax expense was $3.3 million for the year ended December 31, 2019, an increase of $0.4 million from $2.9 million for the year ended December 31, 2018.  Income tax expense increased between the periods because of an increase in the effective tax rate.  The effective tax rate increased primarily because of a change in the tax deductibility of certain expenses between the periods.       

Return on Assets and Equity
Return on average assets (annualized) for 2019 was 1.05%, compared to 1.14% for 2018.  Return on average equity (annualized) was 8.74% for 2019, compared to 9.88% for 2018.  Book value per share at December 31, 2019 was $19.13, compared to $17.19 at December 31, 2018. 

Annual Meeting
HMN announced that its 2020 annual meeting of shareholders will be held at the Rochester Golf and Country Club in Rochester, Minnesota on Tuesday, April 28, 2020 at 10:00 a.m. CDT.

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

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, maintaining net interest margins, 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 continued 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; domestic and 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 filings 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
     
  December 31, December 31,
(Dollars in thousands) 2019  2018 
  (unaudited)  
Assets    
Cash and cash equivalents$44,399  20,709 
Securities available for sale:    
 Mortgage-backed and related securities    
 (amortized cost $54,777 and $8,159) 54,851  8,023 
 Other marketable securities    
 (amortized cost $52,751 and $73,222) 52,741  71,836 
  107,592  79,859 
     
Equity securities 167  121 
Loans held for sale 3,606  3,444 
Loans receivable, net 596,392  586,688 
Accrued interest receivable 2,251  2,356 
Real estate, net 580  414 
Federal Home Loan Bank stock, at cost 854  867 
Mortgage servicing rights, net 2,172  1,855 
Premises and equipment, net  10,515  9,635 
Goodwill  802  802 
Core deposit intangible 156  255 
Prepaid expenses and other assets 6,451  2,668 
Deferred tax asset, net 1,702  2,642 
 Total assets$777,639  712,315 
     
     
Liabilities and Stockholders’ Equity    
Deposits$673,870  623,352 
Accrued interest payable 420  346 
Customer escrows 2,413  1,448 
Accrued expenses and other liabilities 8,288  4,022 
 Total liabilities 684,991  629,168 
Commitments and contingencies    
Stockholders’ equity:    
 Serial-preferred stock: ($.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 40,365  40,090 
Retained earnings, subject to certain restrictions 107,547  99,754 
Accumulated other comprehensive loss 46  (1,096)
Unearned employee stock ownership plan shares (1,643) (1,836)
Treasury stock, at cost 4,284,840 and 4,292,838 shares (53,758) (53,856)
 Total stockholders’ equity 92,648  83,147 
Total liabilities and stockholders’ equity$777,639  712,315 
     
     





HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
 
  Three Months Ended 
   Year Ended 
  December 31,      December 31,
 (Dollars in thousands, except per share data) 2019  2018 2019  2018
   (unaudited) (unaudited) (unaudited)  
Interest income:        
 Loans receivable$7,190 7,310  29,787  28,535 
 Securities available for sale:        
 Mortgage-backed and related 197 49  343  197 
 Other marketable 252 296  1,157  1,138 
 Other 222 142  603  511 
 Total interest income 7,861 7,797  31,890  30,381 
         
Interest expense:        
 Deposits 914 650  3,332  2,231 
 Advances and other borrowings 0 0  7  2 
 Total interest expense 914 650  3,339  2,233 
 Net interest income 6,947 7,147  28,551  28,148 
Provision for loan losses 236 (167) (1,216) (649)
 Net interest income after provision for loan losses 6,711 7,314  29,767  28,797 
         
Non-interest income:        
 Fees and service charges 795 909  3,100  3,330 
 Loan servicing fees 321 314  1,278  1,255 
 Gain on sales of loans 1,106 483  2,941  2,095 
 Other 294 242  1,136  1,034 
 Total non-interest income 2,516 1,948  8,455  7,714 
         
Non-interest expense:        
 Compensation and benefits 4,163 3,652  15,659  14,728 
 Occupancy and equipment 1,158 1,062  4,442  4,304 
 Data processing 338 331  1,263  1,270 
 Professional services 492 264  1,573  1,137 
 Other 1,193 997  4,168  3,948 
 Total non-interest expense 7,344 6,306  27,105  25,387 
 Income before income tax expense 1,883 2,956  11,117  11,124 
Income tax expense  647 604  3,324  2,888 
 Net income  1,236 2,352  7,793  8,236 
Other comprehensive income (loss), net of tax 67 601  1,142  (69)
Comprehensive income available to common 
  shareholders
$ 

1,303
  

2,953
   

8,935
   

8,167
 
Basic earnings per share$0.27 0.51  1.69  1.89 
Diluted earnings per share$0.27 0.51  1.68  1.71 
         
         



HMN FINANCIAL, INC. AND SUBSIDIARIES 
Selected Consolidated Financial Information 
(unaudited) 
         
  Three Months EndedYear Ended
SELECTED FINANCIAL DATA:   December 31,December 31,
(Dollars in thousands, except per share data) 2019  2018 2019  2018 
I. OPERATING DATA:         
 Interest income$7,861 7,797 31,890 30,381 
 Interest expense 914 650 3,339 2,233 
 Net interest income 6,947 7,147 28,551 28,148 
          
II. AVERAGE BALANCES:         
 Assets (1) 768,860 723,988 738,908 723,514 
 Loans receivable, net 585,086 587,623 589,520 586,664 
 Mortgage-backed and related securities (1) 91,940 79,204 82,383 79,377 
 Interest-earning assets (1) 733,431 698,060 706,542 698,373 
 Interest-bearing liabilities 667,103 636,267 641,239 635,981 
 Equity (1) 92,631 83,005 89,122 83,331 
          
III.  PERFORMANCE RATIOS: (1)         
   Return on average assets (annualized) 0.64%1.29%1.05%1.14%
 Interest rate spread information:         
 Average during period 3.71 4.02 3.99 4.00 
 End of period 3.66 4.02 3.66 4.02 
 Net interest margin 3.76 4.06 4.04 4.03 
 Ratio of operating expense to average         
 total assets (annualized) 3.79 3.46 3.67 3.51 
 Return on average common equity (annualized) 5.29 11.24 8.74 9.88 
 Efficiency 77.61 69.34 73.25 70.79 
 December 31,December 31,     
 20192018     
IV. EMPLOYEE DATA:       
 Number of full time equivalent employees   181   182     
         
V. ASSET QUALITY:        
 Total non-performing assets$2,661 3,092     
 Non-performing assets to total assets 0.34%0.43%    
 Non-performing loans to total loans        
  receivable, net 0.35%0.46%    
 Allowance for loan losses$8,564 8,686     
 Allowance for loan losses to total assets 1.10%1.22%    
  Allowance for loan losses to total loans
  receivable, net
 1.44 

%
1.48 

%
    
 Allowance for loan losses to non-performing loans 411.45%324.27%    
         
VI. BOOK VALUE PER COMMON SHARE:        
 Book value per common share$19.13 17.19     
 Year EndedYear Ended     
 Dec 31, 2019Dec 31, 2018     
VII.  CAPITAL RATIOS:        
 Stockholders’ equity to total assets, at end of period 11.91%11.67%    
 Average stockholders’ equity to average assets (1)  12.06 11.52     
 Ratio of average interest-earning assets to        
 average interest-bearing liabilities (1) 110.18 109.81     
  Home Federal Savings Bank regulatory capital ratios:        
  Common equity tier 1 capital ratio 13.21 13.26     
  Tier 1 capital leverage ratio 10.89 11.00     
  Tier 1 capital ratio 13.21 13.26     
  Risk-based capital 14.46 14.52     
         
         
(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