Fourth Quarter Highlights

  • Net income of $2.4 million, up $2.0 million from $0.4 million for fourth quarter of 2017
  • Diluted earnings per share of $0.51, up $0.43 from $0.08 for fourth quarter of 2017
  • Income tax expense of $0.6 million, down $1.0 million from $1.6 million for fourth quarter of 2017
  • Net interest income of $7.1 million, up $0.8 million, from fourth quarter of 2017
  • Non-performing assets of $3.1 million, down $2.8 million from September 30, 2018

Annual Highlights

  • Net income of $8.2 million, up $3.8 million, or 87.0%, from $4.4 million for 2017
  • Diluted earnings per share of $1.72, up $0.82 from $0.90 for 2017
  • Income tax expense of $2.9 million, down $1.5 million from $4.4 million for 2017
  • Net interest income of $28.1 million, up $2.2 million from $25.9 million for 2017
  • Non-performing assets of $3.1 million, down $0.7 million from December 31, 2017
Net Income Summary Three Months Ended  Year Ended 
  December 31,  December 31, 
(Dollars in thousands, except per share amounts) 20182017  20182017 
Net income$2,352387 $8,2364,404 
Diluted earnings per share 0.510.08  1.720.90 
Return on average assets (annualized) 1.29%0.21% 1.14%0.63%
Return on average equity (annualized) 11.24%1.88% 9.88%5.52%
Book value per share$17.1917.97 $17.1917.97 
         

ROCHESTER, Minn., Jan. 28, 2019 (GLOBE NEWSWIRE) -- HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $712 million holding company for Home Federal Savings Bank (the Bank), today reported net income of $2.4 million for the fourth quarter of 2018, an increase of $2.0 million compared to net income of $0.4 million for the fourth quarter of 2017. Diluted earnings per share for the fourth quarter of 2018 was $0.51, an increase of $0.43 from the diluted earnings per share of $0.08 for the fourth quarter of 2017. The increase in net income for the fourth quarter of 2018 is due primarily to a $1.0 million decrease in income tax expense, a $0.8 million increase in net interest income, and a $0.3 million decrease in the provision for loan losses between the periods. The decrease in income tax expense is primarily because of the enactment of the Tax Cuts and Jobs Act on December 22, 2017 which required the Company to record $1.1 million in additional income tax expense in the fourth quarter of 2017 and reduced the Company’s federal income tax rate in 2018. Net interest income increased primarily because of the higher interest amounts earned on loans and cash balances as a result of the 100 basis point increase in the federal funds rate between the periods. The provision for loan losses decreased primarily because of the improved credit quality of the loan portfolio and the payoff of certain non-performing commercial loans which resulted in a decrease in the loan loss reserves required between the periods.

President’s Statement
“We are pleased to report the improved financial results for both the fourth quarter and the year and the continued improvement in the credit quality of our loan portfolio,” said Bradley Krehbiel, President and Chief Executive Officer of HMN. “While the lower federal tax rate had a positive impact on our earnings, we continue to focus our efforts on increasing net interest income through the origination of appropriately underwritten loans that are funded with core deposits. We believe that our continued focus on these areas along with the prudent management of non-interest expenses will result in improved financial results over the long term.” 

Fourth Quarter Results

Net Interest Income
Net interest income was $7.1 million for the fourth quarter of 2018, an increase of $0.8 million from the fourth quarter of 2017. Interest income was $7.8 million for the fourth quarter of 2018, an increase of $1.0 million, or 15.2%, from $6.8 million for the same period in 2017. Interest income increased primarily because of higher interest amounts earned on loans and cash balances as a result of the 100 basis point increase in the federal funds rate between the periods and an $8.4 million increase in the average interest-earning assets held between the periods. Interest income also increased $0.5 million because of a change in the amount of yield enhancements recognized on non-accruing loans between the periods. The average yield earned on interest-earning assets was 4.43% for the fourth quarter of 2018, an increase of 54 basis points from 3.89% for the fourth quarter of 2017. The average yield earned on the average interest-earning assets increased 29 basis points as a result of the change in yield adjustments recognized between the periods.

Interest expense was $0.7 million for the fourth quarter of 2018, an increase of $0.3 million, or 49.4%, from $0.4 million for the fourth quarter of 2017. The average interest rate paid on non-interest and interest-bearing liabilities was 0.41% for the fourth quarter of 2018, an increase of 14 basis points from the fourth quarter of 2017. The increase in the interest paid on non-interest and interest-bearing liabilities was primarily because of the 100 basis point increase in the federal funds rate between the periods which increased the cost of deposits and an $8.0 million increase in the average non-interest and interest-bearing liabilities held between the periods. Net interest margin (net interest income divided by average interest-earning assets) for the fourth quarter of 2018 was 4.06%, an increase of 42 basis points, compared to 3.64% for the fourth quarter of 2017. The increase in the net interest margin is primarily related to the increase in interest income as a result of the change in yield enhancements recognized between the periods.

A summary of the Company’s net interest margin for the three month periods ended December 31, 2018 and 2017 is as follows:

  For the three-month period ended 
  December 31, 2018  December 31, 2017 
(Dollars in thousands) Average
Outstanding
Balance
 Interest
Earned/
Paid
 Yield/
Rate
  Average
Outstanding
Balance
 Interest
Earned/
Paid
 Yield/
Rate
 
Interest-earning assets:              
Securities available for sale$79,204 345 1.72%$76,154 310 1.62%
Loans held for sale 1,840 27 5.70  2,030 25 4.89 
Mortgage loans, net 116,341 1,212 4.13  114,808 1,182 4.08 
Commercial loans, net 397,617 5,130 5.12  393,823 4,257 4.29 
Consumer loans, net 73,665 941 5.07  73,964 913 4.90 
Other 29,393 142 1.92  28,863 80 1.10 
Total interest-earning assets$698,060 7,797 4.43 $689,642 6,767 3.89 
               
Interest-bearing liabilities:              
NOW accounts$84,620 21 0.10 $86,327 11 0.05 
Savings accounts 76,309 15 0.08  75,335 15 0.08 
Money market accounts 202,325 255 0.50  192,399 171 0.35 
Certificates 113,740 359 1.25  110,884 238 0.85 
Total interest-bearing liabilities$476,994     $464,945     
Non-interest checking 157,838      162,275     
Other non-interest bearing deposits 1,435      1,037     
Total interest-bearing liabilities and non-interest bearing deposits$636,267 650 0.41 $628,257 435 0.27 
Net interest income   7,147      6,332   
Net interest rate spread     4.02%     3.62%
Net interest margin     4.06%     3.64%
               

Provision for Loan Losses
The provision for loan losses was ($0.2) million for the fourth quarter of 2018, a decrease of $0.3 million compared to $0.1 million for the fourth quarter of 2017. The provision for loan losses decreased between the periods primarily because of the improved credit quality of the loan portfolio and the payoff of certain non-performing commercial loans which resulted in a decrease in the reserves required between the periods. Total non-performing assets were $3.1 million at December 31, 2018, a decrease of $2.8 million from September 30, 2018. Non-performing loans decreased $2.8 million and foreclosed and repossessed assets did not change during the fourth quarter of 2018. The decrease in non-performing loans is primarily because a $2.2 million non-performing commercial real estate loan was paid off during the fourth quarter of 2018. 

A reconciliation of the allowance for loan losses for the fourth quarters of 2018 and 2017 is summarized as follows:

     
(Dollars in thousands)   2018  2017 
Balance at September 30,$8,832 $9,277 
Provision (167) 59 
Charge offs:    
Commercial 0  (10)
Commercial real estate 0  (50)
Consumer (85) (25)
Recoveries 106  60 
Balance at December 31,$8,686 $9,311 
     
Allocated to:    
General allowance$7,892 $8,238 
Specific allowance 794  1,073 
 $8,686 $9,311 
     

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, 2017.

  December 31,  September 30,  December 31, 
(Dollars in thousands)   2018  2018  2017 
Non‑Performing Loans:         
Single family$730 $1,073 $949 
Commercial real estate 1,311  3,689  1,364 
Consumer 489  526  553 
Commercial 148  197  278 
Total 2,678  5,485  3,144 
          
Foreclosed and Repossessed Assets:         
Commercial real estate 414  414  627 
Total non‑performing assets$3,092 $5,899 $3,771 
Total as a percentage of total assets 0.43% 0.80% 0.52%
Total non‑performing loans$2,678 $5,485 $3,144 
Total as a percentage of total loans receivable, net 0.46% 0.94% 0.54%
Allowance for loan losses to non-performing loans 324.27% 161.02% 296.11%
          
Delinquency Data:         
Delinquencies (1)         
30+ days$1,453 $1,298 $1,789 
90+ days 0  0  0 
Delinquencies as a percentage of         
loan portfolio (1)         
30+ days 0.24% 0.22% 0.30%
90+ days 0.00% 0.00% 0.00%
          

(1) Excludes non-accrual loans.

Non-Interest Income and Expense

Non-interest income was $1.9 million for the fourth quarter of 2018, a decrease of $0.1 million, or 0.6%, from $2.0 million for the same period of 2017. The decrease in non-interest income is primarily related to the $0.1 million decrease in the gain on sales of loans due to a decrease in single family loan sales between the periods. Fees and service charges increased $0.1 million between the periods due primarily to an increase in late payment fees on commercial loans. Other non-interest income increased slightly because of an increase in the sales of uninsured investment products between the periods. Loan servicing fees increased slightly between the periods due to an increase in the single family loans being serviced.

Non-interest expense was $6.3 million for the fourth quarter of 2018, an increase of $0.1 million, or 1.56%, from $6.2 million for the fourth quarter of 2017. Occupancy and equipment expense increased $0.1 million because of an increase in the purchases of non-capitalized software between the periods. Data processing costs increased slightly because of an increase in the mobile and on-line banking costs between the periods. Compensation expense increased slightly between the periods due primarily to an increase in incentives earned. These increases in non-interest expense were partially offset by slight decrease in professional services expense between the periods primarily because of a decrease in legal expenses. Other non-interest expense decreased slightly primarily because of a decrease in deposit insurance expense as a result of a reduction in the rate charged between the periods.

Income tax expense was $0.6 million for the fourth quarter of 2018, a decrease of $1.0 million from $1.6 million for the fourth quarter of 2017. The decrease in income tax expense is primarily because of the enactment of the Tax Cuts and Jobs Act on December 22, 2017 which required the Company to record $1.1 million in additional income tax expense in the fourth quarter of 2017 and reduced the Company’s federal income tax rate in 2018.

Return on Assets and Equity
Return on average assets (annualized) for the fourth quarter of 2018 was 1.29%, compared to 0.21% for the fourth quarter of 2017. Return on average equity (annualized) was 11.24% for the fourth quarter of 2018, compared to 1.88% for the same period of 2017. Book value per share at December 31, 2018 was $17.19, compared to $17.97 at December 31, 2017.

Annual Results

Net Income
Net income was $8.2 million for 2018, an increase of $3.8 million, or 87.0%, compared to net income of $4.4 million for 2017. Diluted earnings per share for the year ended December 31, 2018 was $1.72, an increase of $0.82 per share compared to diluted earnings per share of $0.90 for the year ended December 31, 2017. The increase in net income for 2018 is due primarily to a $2.2 million increase in net interest income and a $1.5 million decrease in income tax expense between the periods. Net interest income increased primarily because of the higher interest amounts earned on loans and cash balances as a result of the 100 basis point increase in the federal funds rate between the periods. The decrease in income tax expense is primarily because of the enactment of the Tax Cuts and Jobs Act on December 22, 2017 which required the Company to record $1.1 million in additional income tax expense in the fourth quarter of 2017 and reduced the Company’s federal income tax rate in 2018. 

Net Interest Income
Net interest income was $28.1 million for 2018, an increase of $2.2 million, or 8.8%, from $25.9 million for the same period of 2017. Interest income was $30.4 million for 2018, an increase of $2.7 million, or 9.8%, from $27.7 million for the same period of 2017. Interest income increased primarily because of the higher interest amounts earned on loans and cash balances as a result of the 100 basis point increase in the federal funds rate between the periods and a $27.9 million increase in the average interest-earning assets held between the periods. Interest income also increased $0.5 million because of a change in the amount of yield enhancements recognized on non-accruing loans between the periods. The average yield earned on interest-earning assets was 4.35% for 2018, an increase of 22 basis points from 4.13% for 2017. The average yield earned on interest-earning assets increased 8 basis points as a result of the change in yield adjustments recognized between the periods.

Interest expense was $2.2 million for 2018, an increase of $0.4 million, or 24.3%, from $1.8 million for 2017. The average interest rate paid on non-interest and interest-bearing liabilities was 0.35% for 2018, an increase of 6 basis points from 0.29% paid in 2017. The increase in the interest paid on non-interest and interest-bearing liabilities was primarily because of the 100 basis point increase in the federal funds rate which increased the cost of deposits between the periods and a $22.5 million increase in the average non-interest and interest-bearing liabilities held between the periods. Net interest margin (net interest income divided by average interest-earning assets) for 2018 was 4.03%, an increase of 17 basis points, compared to 3.86% for 2017. The increase in the net interest margin is primarily related to the increase in interest income which is primarily related to the increase in the average yields earned on the average interest-earning assets held between the periods. 

A summary of the Company’s net interest margin for 2018 and 2017 is as follows:

  For the twelve-month period ended 
  December 31, 2018  December 31, 2017 
(Dollars in thousands) Average
Outstanding
Balance
 Interest
Earned/
Paid
 Yield/
Rate
  Average
Outstanding
Balance
 Interest
Earned/
Paid
 Yield/
Rate
 
Interest-earning assets:              
Securities available for sale$79,377 1,335 1.68%$76,559 1,160 1.52%
Loans held for sale 1,765 89 5.04  1,905 94 4.93 
Mortgage loans, net 113,283 4,624 4.08  113,733 4,592 4.04 
Commercial loans, net 400,783 20,206 5.04  386,716 18,142 4.69 
Consumer loans, net 72,598 3,616 4.98  73,445 3,540 4.82 
Other 30,567 511 1.67  18,088 152 0.84 
Total interest-earning assets$698,373 30,381 4.35 $670,446 27,680 4.13 
               
Interest-bearing liabilities:              
NOW accounts$86,750 62 0.07 $87,416 77 0.09 
Savings accounts 77,630 61 0.08  76,592 63 0.08 
Money market accounts 199,202 865 0.43  179,675 560 0.31 
Certificates 114,243 1,243 1.09  106,006 770 0.73 
Advances and other borrowings 140 2 1.71  6,335 327 5.16 
Total interest-bearing liabilities$477,965     $456,024     
Non-interest checking 156,482      156,149     
Other non-interest bearing deposits 1,534      1,279     
Total interest-bearing liabilities and non-interest bearing deposits.$635,981 2,233 0.35 $613,452 1,797 0.29 
Net interest income   28,148      25,883   
Net interest rate spread     4.00%     3.84%
Net interest margin     4.03%     3.86%
               

Provision for Loan Losses
The provision for loan losses was ($0.6) million for the year ended December 31, 2018, a decrease of $0.1 million, from ($0.5) million for the year ended December 31, 2017. The provision for loan losses decreased between the periods primarily because of the improved credit quality of the loan portfolio and the payoff of certain non-performing commercial loans which resulted in a decrease in the reserves required between the periods. Total non-performing assets were $3.1 million at December 31, 2018, a decrease of $0.7 million, or 18.0%, from $3.8 million at December 31, 2017. Non-performing loans decreased $0.5 million and foreclosed and repossessed assets decreased $0.2 million between the periods.

A reconciliation of the allowance for loan losses for 2018 and 2017 is summarized as follows:

     
(in thousands)   2018 2017
Balance beginning of period$9,311 $9,903 
Provision (649) (523)
Charge offs:    
Commercial (270) (311)
Commercial real estate 0  (50)
Consumer (226) (288)
Single family mortgage (24) (6)
Recoveries 544  586 
Balance at December 31,$8,686 $9,311 
     

Non-Interest Income and Expense
Non-interest income was $7.7 million for the year ended December 31, 2018, the same as for the year ended December 31, 2017. Other non-interest income increased $0.1 million primarily because of an increase in the revenue earned on the sale of uninsured investment products between the periods. Loan servicing fees increased $0.1 million between the periods due to an increase in the single family loans being serviced. These increases in non-interest income were entirely offset by a decrease in the gain on sales of loans due to a decrease in single family loan originations and sales between the periods. Fees and service charges decreased slightly between the periods primarily because of a decrease in overdraft fees.

Non-interest expense was $25.4 million for the year ended December 31, 2018, an increase of $0.1 million, or 0.5%, from $25.3 million for the year ended December 31, 2017. Occupancy and equipment expense increased $0.2 million because of increases in depreciation and real estate tax expenses. Data processing costs increased $0.2 million primarily because of an increase in mobile and on-line banking costs between the periods. Other non-interest expense increased $0.2 million between the periods due to an increase in the fraud losses incurred on deposit accounts and an increase in deposit insurance costs due to an increase in insurance rates. These increases in non-interest expense were partially offset by a $0.3 million decrease in compensation and benefits expense primarily because of a decrease in employees between the periods. Professional services expense decreased $0.2 million between the periods primarily because of a decrease in legal expenses.

Income tax expense was $2.9 million for the year ended December 31, 2018, a decrease of $1.5 million, from $4.4 million for the year ended December 31, 2017. The decrease in income tax expense is due primarily to the enactment of the Tax Cuts and Jobs Act on December 22, 2017 which required the Company to record $1.1 million in additional income tax expense in the fourth quarter of 2017 and reduced the Company’s federal income tax rate in 2018. 

Return on Assets and Equity
Return on average assets (annualized) for 2018 was 1.14%, compared to 0.63% for 2017. Return on average equity (annualized) was 9.88% for 2018, compared to 5.52% for 2017. Book value per share at December 31, 2018 was $17.19, compared to $17.97 at December 31, 2017.

General Information
HMN Financial, Inc. and the Bank are headquartered in Rochester, Minnesota. Home Federal Savings Bank operates thirteen full service offices in Minnesota located in Albert Lea, Austin, Eagan, Kasson (2), 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 Delafield, Wisconsin.

Safe Harbor Statement
This press release may contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are often identified by such forward-looking terminology as “expect,” “intend,” “look,” “believe,” “anticipate,” “estimate,” “project,” “seek,” “may,” “will,” “would,” “could,” “should,” “trend,” “target,” and “goal” or similar statements or variations of such terms and include, but are not limited to, those relating to growing our core deposit relationships and loan balances, enhancing the financial performance of our core banking operations, maintaining credit quality, reducing non-performing assets, and generating improved financial results (including profitability); the adequacy and amount of available liquidity and capital resources to the Bank; the Company’s liquidity and capital requirements; our expectations for core capital and our strategies and potential strategies for maintenance thereof; improvements in loan production; changes in the size of the Bank’s loan portfolio; the amount of the Bank’s non-performing assets and the appropriateness of the allowance therefor; anticipated future levels of the provision for loan losses; future losses on non-performing assets; the amount and composition of interest-earning assets; the amount of yield enhancements relating to non-accruing and purchased loans; the amount and composition of non-interest and interest-bearing liabilities; the availability of alternate funding sources; the payment of dividends by HMN; the future outlook for the Company; the amount of deposits that will be withdrawn from checking and money market accounts and how the withdrawn deposits will be replaced; the projected changes in net interest income based on rate shocks; the range that interest rates may fluctuate over the next twelve months; the net market risk of interest rate shocks; the future outlook for the issuer of the trust preferred securities held by the Bank; the ability of the Bank to pay dividends to HMN; the ability to remain well capitalized; the impact of new accounting pronouncements; and compliance by the Bank with regulatory standards generally (including the Bank’s status as “well-capitalized”) and other supervisory directives or requirements to which the Company or the Bank are or may become expressly subject, specifically, and possible responses of the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (FRB), the Bank, and the Company to any failure to comply with any such regulatory standard, directive or requirement.

A number of factors could cause actual results to differ materially from the Company’s assumptions and expectations. These include but are not limited to the adequacy and marketability of real estate and other collateral securing loans to borrowers; federal and state regulation and enforcement; possible legislative and regulatory changes, including changes to regulatory capital rules; the ability of the Bank to comply with other applicable regulatory capital requirements; enforcement activity of the OCC and FRB in the event of our non-compliance with any applicable regulatory standard or requirement; adverse economic, business and competitive developments such as shrinking interest margins, reduced collateral values, deposit outflows, changes in credit or other risks posed by the Company’s loan and investment portfolios; changes in costs associated with traditional and alternate funding sources, including changes in collateral advance rates and policies of the Federal Home Loan Bank (FHLB); technological, computer-related or operational difficulties; results of litigation; reduced demand for financial services and loan products; changes in accounting policies and guidelines, or monetary and fiscal policies of the federal government or tax laws; international economic developments; the Company’s access to and adverse changes in securities markets; the market for credit related assets; the future operating results, financial condition, cash flow requirements and capital spending priorities of the Company and the Bank; the availability of internal and, as required, external sources of funding; our ability to attract and retain employees; or other significant uncertainties. Additional factors that may cause actual results to differ from the Company’s assumptions and expectations include those set forth in the Company’s most recent filing on Forms 10-K and 10-Q with the Securities and Exchange Commission. All forward-looking statements are qualified by, and should be considered in conjunction with, such cautionary statements. For additional discussion of the risks and uncertainties applicable to the Company, see the “Risk Factors” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and Part II, Item 1A of its subsequently filed quarterly reports on Form 10-Q.

All statements in this press release, including forward-looking statements, speak only as of the date they are made, and we undertake no duty to update any of the forward-looking statements after the date of this press release.

 (Three pages of selected consolidated financial information are included with this release.)

 
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
      
  December 31, December 31, 
(Dollars in thousands) 2018  2017 
  (unaudited)   
Assets     
Cash and cash equivalents$20,709  37,564  
Securities available for sale:     
Mortgage-backed and related securities     
(amortized cost $8,159 and $5,148) 8,023  5,068  
Other marketable securities     
(amortized cost $73,343 and $73,653) 71,957  72,404  
  79,980  77,472  
      
Loans held for sale 3,444  1,837  
Loans receivable, net 586,688  585,931  
Accrued interest receivable 2,356  2,344  
Real estate, net 414  627  
Federal Home Loan Bank stock, at cost 867  817  
Mortgage servicing rights, net 1,855  1,724  
Premises and equipment, net 9,635  8,226  
Goodwill 802  802  
Core deposit intangible 255  355  
Prepaid expenses and other assets 2,668  1,314  
Deferred tax asset, net 2,642  3,672  
Total assets$712,315  722,685  
      
      
Liabilities and Stockholders’ Equity     
Deposits$623,352  635,601  
Accrued interest payable 346  146  
Customer escrows 1,448  1,147  
Accrued expenses and other liabilities 4,022  4,973  
Total liabilities 629,168  641,867  
Commitments and contingencies     
Stockholders’ equity:     
Serial-preferred stock: ($.01 par value)     
authorized 500,000 shares; issued shares 0  0  
Common stock ($.01 par value):     
authorized 16,000,000; issued shares 9,128,662 91  91  
Additional paid-in capital 40,090  50,623  
Retained earnings, subject to certain restrictions 99,754  91,448  
Accumulated other comprehensive loss (1,096) (957) 
Unearned employee stock ownership plan shares (1,836) (2,030) 
Treasury stock, at cost 4,292,838 and 4,631,124 shares (53,856) (58,357) 
Total stockholders’ equity 83,147  80,818  
Total liabilities and stockholders’ equity$712,315  722,685  
      


 

HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
 
  Three Months Ended
December 31,
Year Ended
December 31,
  
 (Dollars in thousands, except per share data) 2018 2017 2018 2017 
  (unaudited) (unaudited) (unaudited)  
Interest income:        
Loans receivable$7,310  6,377  28,535  26,368 
Securities available for sale:        
Mortgage-backed and related 49  28  197  57 
Other marketable 296  282  1,138  1,103 
Other 142  80  511  152 
Total interest income 7,797  6,767  30,381  27,680 
         
Interest expense:        
Deposits 650  435  2,231  1,470 
Advances and other borrowings 0  0  2  327 
Total interest expense 650  435  2,233  1,797 
Net interest income 7,147  6,332  28,148  25,883 
Provision for loan losses (167) 59  (649) (523)
Net interest income after provision for loan losses 7,314  6,273  28,797  26,406 
         
Non-interest income:        
Fees and service charges 909  837  3,330  3,354 
Loan servicing fees 314  296  1,255  1,202 
Gain on sales of loans 483  610  2,095  2,138 
Other 242  216  1,034  960 
Total non-interest income 1,948  1,959  7,714  7,654 
         
Non-interest expense:        
Compensation and benefits 3,652  3,641  14,728  15,007 
Occupancy and equipment 1,062  953  4,304  4,068 
Data processing 331  311  1,270  1,106 
Professional services 264  302  1,137  1,285 
Other 997  1,002  3,948  3,788 
Total non-interest expense 6,306  6,209  25,387  25,254 
Income before income tax expense 2,956  2,023  11,124  8,806 
Income tax expense 604  1,636  2,888  4,402 
Net income 2,352  387  8,236  4,404 
Other comprehensive income (loss), net of tax 601  (494) (69) (137)
Comprehensive income (loss) available to common shareholders$2,953  (107) 8,167  4,267 
Basic earnings per share$0.52  0.09  1.89  1.04 
Diluted earnings per share$0.51  0.08  1.72  0.90 
         


  
HMN FINANCIAL, INC. AND SUBSIDIARIES
Selected Consolidated Financial Information
(unaudited)
SELECTED FINANCIAL DATA: Three Months Ended
December 31,
 Year Ended
December 31,
(Dollars in thousands, except per share data) 20182017 20182017
I. OPERATING DATA:         
Interest income$7,797 6,767  30,381 27,680 
Interest expense 650 435  2,233 1,797 
Net interest income 7,147 6,332  28,148 25,883 
           
II. AVERAGE BALANCES:          
Assets (1) 723,988 716,465  723,514 697,589 
Loans receivable, net 587,623 582,595  586,664 573,894 
Mortgage-backed and related securities (1) 79,204 76,154  79,377 76,559 
Interest-earning assets (1) 698,060 689,642  698,373 670,446 
Interest-bearing liabilities 636,267 628,257  635,981 613,452 
Equity (1) 83,005 81,936  83,331 79,767 
           
III.  PERFORMANCE RATIOS: (1)          
Return on average assets (annualized) 1.29%0.21% 1.14%0.63%
Interest rate spread information:          
Average during period 4.02 3.62  4.00 3.84 
End of period 4.02 3.97  4.02 3.97 
Net interest margin 4.06 3.64  4.03 3.86 
Ratio of operating expense to average          
total assets (annualized) 3.46 3.44  3.51 3.62 
Return on average common equity (annualized) 11.24 1.88  9.88 5.52 
Efficiency 69.34 74.88  70.79 75.30 
 December 31,December 31,            
 20182017            
IV. EMPLOYEE DATA:                 
Number of full time equivalent employees 182 187             
                  
V. ASSET QUALITY:                 
Total non-performing assets$3,092 3,771             
Non-performing assets to total assets 0.43%0.52%            
Non-performing loans to total loans                 
receivable, net 0.46%0.54%            
Allowance for loan losses$8,686 9,311             
Allowance for loan losses to total assets 1.22%1.29%            
Allowance for loan losses to total loans receivable, net 1.48%1.59%            
Allowance for loan losses to non-performing loans 324.27 296.11             
                  
VI. BOOK VALUE PER COMMON SHARE:                 
Book value per common share$17.19 17.97             
  Year Ended Year Ended            
  Dec 31, 2018 Dec 31, 2017            
VII.  CAPITAL RATIOS:                 
Stockholders’ equity to total assets, at end of period 11.67%11.18%            
Average stockholders’ equity to average assets (1) 11.52 11.43             
Ratio of average interest-earning assets to                 
average interest-bearing liabilities (1) 109.81 109.29             
Home Federal Savings Bank regulatory capital ratios:                 
Common equity tier 1 capital ratio 13.26 12.45             
Tier 1 capital leverage ratio 11.00 10.68             
Tier 1 capital ratio 13.26 12.45             
Risk-based capital 14.52 13.71             
                  
                  

(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