Exhibit 99
HMN Financial, Inc. Announces First Quarter Results
First Quarter Highlights
- Net loss of $2.6 million, down $4.1 million, or 276.2% compared to earnings of $1.5 million in the first quarter of 2008
- Diluted loss per common share of $0.83 compared to diluted earnings per common share of $0.39 in the first quarter of 2008
- Net interest margin up 2 basis points from first quarter of 2008
- Gain on sales of loans up $267,000, or 171.2%, from first quarter of 2008
- Provision for loan losses up $5.0 million, or 321.1%, over first quarter of 2008
ROCHESTER, Minn.--(BUSINESS WIRE)--April 21, 2009--HMN Financial, Inc. (NASDAQ:HMNF):
EARNINGS SUMMARY | Three Months Ended | ||||||
| (dollars in thousands, except per share amounts) | 2009 | 2008 | |||||
| Net income (loss) | $ | (2,622 | ) | 1,488 | |||
| Diluted earnings (loss) per common share | (0.83 | ) | 0.39 | ||||
| Return on average assets | (0.94 | ) | % | 0.54 | % | ||
| Return on average equity | (9.57 | ) | % | 6.06 | % | ||
| Book value per common share | $ | 20.64 | 23.85 | ||||
HMN Financial, Inc. (HMN) (NASDAQ:HMNF), the $1.1 billion holding company for Home Federal Savings Bank (the Bank), today reported a net loss of $2.6 million for the first quarter of 2009, down $4.1 million, or 276.2%, from net income of $1.5 million for the first quarter of 2008. Net loss available to common shareholders was $3.1 million for the first quarter of 2009, down $4.5 million, or 305.0%, from net income available to common shareholders of $1.5 million for the first quarter of 2008. Diluted loss per common share for the first quarter of 2009 was $0.83, down $1.22 from diluted earnings per common share of $0.39 for the first quarter of 2008. The decrease in net income was due primarily to a $5.0 million increase in the loan loss provision between the periods as a result of the increased charge offs on non-performing loans.
First Quarter Results
Net Interest Income
Net interest income was $8.8 million for the first quarter of 2009, an increase of $0.1 million, or 1.1%, compared to $8.7 million for the first quarter of 2008. Interest income was $15.4 million for the first quarter of 2009, a decrease of $2.4 million, or 13.7%, from $17.8 million for the first quarter of 2008. Interest income decreased primarily because of a decrease in the average interest rate earned on loans and investments. Interest rates decreased primarily because of the 200 basis point decrease in the prime interest rate between the periods. Decreases in the prime rate, which is the rate that banks charge their prime business customers, generally decrease the rates on adjustable rate consumer and commercial loans in the portfolio and on new loans originated. The decrease in interest income due to decreased interest rates was partially offset by the $16.0 million increase in the average interest earning assets between the periods. Interest income was also adversely affected by the increase in non-performing assets between the periods. The average yield earned on interest-earning assets was 5.76% for the first quarter of 2009, a decrease of 96 basis points from the 6.72% average yield for the first quarter of 2008.
Interest expense was $6.6 million for the first quarter of 2009, a decrease of $2.5 million, or 27.8%, compared to $9.1 million for the first quarter of 2008. Interest expense decreased primarily because of the lower interest rates paid on money market accounts and certificates of deposits. The decreased rates were the result of the 200 basis point decrease in the federal funds rate that occurred between the periods and the 200 basis point decrease that occurred in the first quarter of 2008. Decreases in the federal funds rate, which is the rate that banks charge other banks for short term loans, generally have a lagging effect and decrease the rates banks pay for deposits. The lagging effect of deposit rate changes is primarily due to the Bank’s deposits that are in the form of certificates of deposits which do not re-price immediately when the federal funds rate changes. The average interest rate paid on interest-bearing liabilities was 2.63% for the first quarter of 2009, a decrease of 107 basis points from the 3.70% average interest rate paid in the first quarter of 2008. Net interest margin (net interest income divided by average interest earning assets) for the first quarter of 2009 was 3.30%, an increase of 2 basis points, compared to 3.28% for the first quarter of 2008.
Provision for Loan Losses
The provision for loan losses was $6.6 million for the first quarter of 2009, an increase of $5.0 million, or 321.1%, compared to $1.6 million for the first quarter of 2008. The provision for loan losses increased primarily because of an increase in the charge offs of commercial real estate loans in the first quarter of 2009 when compared to the same period of 2008. The increase was due primarily to decreases in the estimated value of the real estate supporting classified commercial real estate loans. Total non-performing assets were $69.9 million at March 31, 2009, a decrease of $4.9 million, from $74.8 million at December 31, 2008. Non-performing loans decreased $14.1 million and foreclosed and repossessed assets increased $9.2 million during the first quarter of 2009. The non-performing loan activity for the quarter included $8.1 million in additional non-performing loans primarily related to five loans secured by leased equipment and two secured commercial lines of credit, $10.3 million in loan charge offs, $562,000 in loans that were reclassified as performing, $10.4 million in loans that were transferred into real estate owned and $933,000 in principal payments were received. The foreclosed and repossessed asset activity for the quarter included $10.4 million in additional foreclosed real estate primarily related to a residential development and a multi-family housing project, $1.1 million in additional losses due to a decrease in the estimated value of the underlying real estate and $132,000 of real estate was sold.
A rollforward of the Company’s allowance for loan losses for the quarters ended March 31, 2009 and 2008 is summarized as follows:
| (Dollars in thousands) | 2009 | 2008 | |||||||||
| Balance at January 1, | $ | 21,257 | $ | 12,438 | |||||||
| Provision | 6,569 | 1,560 | |||||||||
| Charge offs: | |||||||||||
| One-to-four family | 0 | (60 | ) | ||||||||
| Consumer | (694 | ) | (22 | ) | |||||||
| Commercial business | (184 | ) | (24 | ) | |||||||
| Commercial real estate | (9,461 | ) | 0 | ||||||||
| Recoveries | 7 | 21 | |||||||||
| Balance at March 31, | $ | 17,494 | $ | 13,913 | |||||||
The following table summarizes the amounts and categories of non-performing assets in the Bank’s portfolio and loan delinquency information as March 31, 2009 and December 31, 2008.
March 31, | December 31, | ||||||
| (Dollars in thousands) | 2009 | 2008 | |||||
| Non-Accruing Loans: | |||||||
| One-to-four family real estate | $ | 3,812 | $ | 7,251 | |||
| Commercial real estate | 29,829 | 46,953 | |||||
| Consumer | 5,052 | 5,298 | |||||
| Commercial business | 11,410 | 4,671 | |||||
| Total | 50,103 | 64,173 | |||||
| Other assets | 25 | 25 | |||||
| Foreclosed and Repossessed Assets: | |||||||
| One-to-four family real estate | 344 | 258 | |||||
| Commercial real estate | 19,409 | 10,300 | |||||
| Total non-performing assets | $ | 69,881 | $ | 74,756 | |||
| Total as a percentage of total assets | 6.28 | % | 6.53 | % | |||
| Total non-performing loans | $ | 50,103 | $ | 64,173 | |||
| Total as a percentage of total loans receivable, net | 5.71 | % | 7.12 | % | |||
| Allowance for loan loss to non-performing loans | 34.92 | % | 33.12 | % | |||
| Delinquency Data: | |||||||
| Delinquencies (1) | |||||||
| 30+ days | $ | 7,893 | $ | 11,488 | |||
| 90+ days | 515 | 0 | |||||
| Delinquencies as a percentage of | |||||||
| loan and lease portfolio (1) | |||||||
| 30+ days | 0.89 | % | 1.26 | % | |||
| 90+ days | 0.06 | % | 0.00 | % | |||
(1) Excludes non-accrual loans.
The decrease in the non-performing loans relates primarily to charge offs and transfers to real estate owned. The following table summarizes the number and types of commercial real estate loans that were non-performing at March 31, 2009 and December 31, 2008.
| Principal Amount | Principal Amount | |||||||||
| (Dollars in thousands) | of Loan at | of Loan at | ||||||||
| March 31, |
| December 31, | |||||||
| Property Type | # of relationships | 2009 | # of relationships | 2008 | ||||||
| Residential developments | 5 | $ | 9,180 | 6 | $ | 17,680 | ||||
| Single family homes | 3 | 944 | 4 | 898 | ||||||
| Condominiums | 0 | 0 | 1 | 5,440 | ||||||
| Hotel | 1 | 4,999 | 1 | 4,999 | ||||||
| Alternative fuel plants | 2 | 12,528 | 2 | 12,493 | ||||||
| Shopping centers | 2 | 1,205 | 2 | 1,237 | ||||||
| Elderly care facilities | 1 | 40 | 3 | 4,037 | ||||||
| Commercial buildings | 1 | 158 | 1 | 169 | ||||||
| Restaurant/bar | 1 | 775 | 0 | 0 | ||||||
| 16 | $ | 29,829 | 20 | $ | 46,953 |
Non-Interest Income and Expense
Non-interest income was $0.6 million for the first quarter of 2009, a decrease of $0.9 million, or 57.6%, from $1.5 million for the first quarter of 2008. Other non-interest income decreased $1.3 million primarily because of a $1.1 million increase in the valuation reserves required on other real estate owned due to decreases in the estimated value of the real estate. Gain on sales of loans increased $267,000 between the periods due to an increase in the gains recognized on the sale of single family loans because of increased loan originations. Fees and service charges increased $148,000 between the periods primarily because of increased retail deposit account activity and fees. Loan servicing fees increased $10,000 primarily because of an increase in the number of commercial loans that are being serviced for others. Non-interest expense was $7.2 million for the first quarter of 2009, an increase of $1.0 million, or 15.8%, from $6.2 million for the first quarter of 2008. Other non-interest expense increased $681,000 primarily because of a $366,000 increase in legal and other fees related to foreclosed assets and an ongoing state tax assessment challenge and because of a $222,000 increase in FDIC insurance expense. Compensation expense increased $489,000 primarily because of costs associated with the employment agreement of a former executive officer. Data processing costs decreased $149,000 primarily because of reduced fees paid to third party vendors as a result of the core system conversion that occurred in the fourth quarter of 2008. Occupancy expense decreased $40,000 due primarily to decreased depreciation expense on furniture and equipment.
Income tax expense decreased $2.7 million between the periods due to a decrease in taxable income and an effective tax rate that increased from 37.7% for the first quarter of 2008 to 40.2% for the first quarter of 2009. The increase in the effective tax rate was primarily due to the impact of tax exempt income.
Return on Assets and Equity
Return on average assets for the first quarter of 2009 was (0.94%), compared to 0.54% for the first quarter of 2008. Return on average equity was (9.57%) for the first quarter of 2009, compared to 6.06% for the same quarter in 2008. Book value per common share at March 31, 2009 was $20.64, compared to $23.85 at March 31, 2008.
President’s Statement
"Our financial results in the first quarter reflect the challenging economic environment that continues to have a negative effect on real estate values and our loan loss provision.” said Home Federal Savings Bank President, Brad Krehbiel. “However, we are encouraged by the decrease in long term mortgage interest rates, which have increased single family loan originations and the gains recognized on the sale of loans.”
General Information
HMN Financial, Inc. and Home Federal are headquartered in Rochester, Minnesota. Home Federal operates eleven full service offices in Minnesota located in Albert Lea, Austin, Eagan, LaCrescent, Rochester, Spring Valley and Winona, Minnesota and two full service offices located in Marshalltown and Toledo, Iowa. Home Federal Private Banking operates branches in Edina and Rochester, Minnesota. Home Federal also operates loan origination offices in Sartell 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 are often identified by such forward-looking terminology as “expect,” “intent,” “look,” “believe,” “anticipate,” “estimate,” “project,” “seek,” “may,” “will,” “would,” “could,” “should,” “trend,” “target,” and “goal” or similar statements or variations of such terms. 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 securing loans to borrowers, possible legislative and regulatory 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; international economic developments, 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; the Company’s use of the proceeds from the sale of securities to the U.S. Treasury Department 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 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 | ||||||
March 31, | December 31, | |||||
| (Dollars in thousands) | 2009 | 2008 | ||||
| (unaudited) | ||||||
| Assets | ||||||
| Cash and cash equivalents | $ | 12,541 | 15,729 | |||
| Securities available for sale: | ||||||
| Mortgage-backed and related securities | ||||||
| (amortized cost $71,138 and $76,166) | 72,702 | 77,327 | ||||
| Other marketable securities | ||||||
| (amortized cost $85,503 and $95,445) | 87,167 | 97,818 | ||||
| 159,869 | 175,145 | |||||
| Loans held for sale | 3,880 | 2,548 | ||||
| Loans receivable, net | 877,309 | 900,889 | ||||
| Accrued interest receivable | 4,758 | 5,568 | ||||
| Real estate, net | 19,753 | 10,558 | ||||
| Federal Home Loan Bank stock, at cost | 7,286 | 7,286 | ||||
| Mortgage servicing rights, net | 765 | 728 | ||||
| Premises and equipment, net | 13,759 | 13,972 | ||||
| Prepaid expenses and other assets | 4,627 | 4,408 | ||||
| Deferred tax asset, net | 8,812 | 8,649 | ||||
| Total assets | $ | 1,113,359 | 1,145,480 | |||
| Liabilities and Stockholders’ Equity | ||||||
| Deposits | $ | 798,369 | 880,505 | |||
| Federal Home Loan Bank advances and Federal Reserve borrowings | 192,500 | 142,500 | ||||
| Accrued interest payable | 4,643 | 6,307 | ||||
| Customer escrows | 1,949 | 639 | ||||
| Accrued expenses and other liabilities | 6,517 | 3,316 | ||||
| Total liabilities | 1,003,978 | 1,033,267 | ||||
| Commitments and contingencies | ||||||
| Stockholders’ equity: | ||||||
| Serial preferred stock ($.01 par value): | ||||||
| Authorized 500,000 shares; issued shares 26,000 | 23,448 | 23,384 | ||||
| Common stock ($.01 par value): | ||||||
| Authorized 11,000,000; issued shares 9,128,662 | 91 | 91 | ||||
| Additional paid-in capital | 60,816 | 60,687 | ||||
| Retained earnings, subject to certain restrictions | 95,264 | 98,067 | ||||
| Accumulated other comprehensive income, net of tax | 1,947 | 2,091 | ||||
| Unearned employee stock ownership plan shares | (3,722 | ) | (3,771 | ) | ||
| Treasury stock, at cost 4,965,766 and 4,953,045 shares | (68,463 | ) | (68,336 | ) | ||
| Total stockholders’ equity | 109,381 | 112,213 | ||||
| Total liabilities and stockholders’ equity | $ | 1,113,359 | 1,145,480 | |||
| ||||||
| HMN FINANCIAL, INC. AND SUBSIDIARIES | ||||||
| Consolidated Statements of Income (Loss) | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| March 31, | ||||||
| (Dollars in thousands) | 2009 | 2008 | ||||
| Interest income: | ||||||
| Loans receivable | $ | 13,628 | 15,520 | |||
| Securities available for sale: | ||||||
| Mortgage-backed and related | 802 | 224 | ||||
| Other marketable | 946 | 1,910 | ||||
| Cash equivalents | 0 | 57 | ||||
| Other | (23 | ) | 80 | |||
| Total interest income | 15,353 | 17,791 | ||||
| Interest expense: | ||||||
| Deposits | 4,975 | 7,870 | ||||
Federal Home Loan Bank advances and Federal Reserve borrowings | 1,596 | 1,237 | ||||
| Total interest expense | 6,571 | 9,107 | ||||
| Net interest income | 8,782 | 8,684 | ||||
| Provision for loan losses | 6,569 | 1,560 | ||||
| Net interest income after provision for loan losses | 2,213 | 7,124 | ||||
| Non-interest income: | ||||||
| Fees and service charges | 941 | 793 | ||||
| Loan servicing fees | 252 | 242 | ||||
| Gain on sales of loans | 423 | 156 | ||||
| Other | (972 | ) | 327 | |||
| Total non-interest income | 644 | 1,518 | ||||
| Non-interest expense: | ||||||
| Compensation and benefits | 3,849 | 3,360 | ||||
| Occupancy | 1,092 | 1,132 | ||||
| Advertising | 135 | 124 | ||||
| Data processing | 193 | 342 | ||||
| Amortization of mortgage servicing rights, net | 155 | 160 | ||||
| Other | 1,815 | 1,134 | ||||
| Total non-interest expense | 7,239 | 6,252 | ||||
| Income (loss) before income tax expense (benefit) | (4,382 | ) | 2,390 | |||
| Income tax expense (benefit) | (1,760 | ) | 902 | |||
| Net income (loss) | (2,622 | ) | 1,488 | |||
| Preferred stock dividends and discount | (429 | ) | 0 | |||
| Net income (loss) available to common shareholders | (3,051 | ) | 1,488 | |||
| Basic earnings (loss) per common share | $ | (0.83 | ) | 0.41 | ||
| Diluted earnings (loss) per common share | $ | (0.83 | ) | 0.39 | ||
| HMN FINANCIAL, INC. AND SUBSIDIARIES | |||||||||||||
| Selected Consolidated Financial Information | |||||||||||||
| (unaudited) | |||||||||||||
| Three Months Ended | ||||||||||||
SELECTED FINANCIAL DATA: | |||||||||||||
(Dollars in thousands, except per share data) | 2009 | 2008 | |||||||||||
| I. OPERATING DATA: | |||||||||||||
| Interest income | $ | 15,353 | 17,791 | ||||||||||
| Interest expense | 6,571 | 9,107 | |||||||||||
| Net interest income | 8,782 | 8,684 | |||||||||||
| II. AVERAGE BALANCES: | |||||||||||||
| Assets (1) | 1,133,058 | 1,106,527 | |||||||||||
| Loans receivable, net | 894,379 | 872,287 | |||||||||||
| Securities available for sale (1) | 165,387 | 169,570 | |||||||||||
| Interest-earning assets (1) | 1,080,825 | 1,064,816 | |||||||||||
| Interest-bearing liabilities | 1,012,552 | 991,251 | |||||||||||
| Equity (1) | 111,144 | 98,816 | |||||||||||
| III. PERFORMANCE RATIOS: (1) | |||||||||||||
| Return on average assets (annualized) | (0.94 | ) | % | 0.54 | % | ||||||||
| Interest rate spread information: | |||||||||||||
| Average during period | 3.13 | 3.02 | |||||||||||
| End of period | 3.27 | 2.99 | |||||||||||
| Net interest margin | 3.30 | 3.28 | |||||||||||
| Ratio of operating expense to average | |||||||||||||
| total assets (annualized) | 2.59 | 2.27 | |||||||||||
| Return on average equity (annualized) | (9.57 | ) | 6.06 | ||||||||||
| Efficiency | 76.79 | 61.28 | |||||||||||
| March 31, | December 31, | March 31, | |||||||||||
| 2009 | 2008 | 2008 | |||||||||||
| IV. ASSET QUALITY: | |||||||||||||
| Total non-performing assets | $ | 69,881 | 74,756 | 28,232 | |||||||||
| Non-performing assets to total assets | 6.28 | % | 6.53 | % | 2.56 | % | |||||||
| Non-performing loans to total loans | |||||||||||||
| receivable, net | 5.71 | 7.12 | 2.73 | ||||||||||
| Allowance for loan losses | $ | 17,494 | 21,257 | 13,913 | |||||||||
| Allowance for loan losses to total assets | 1.57 | % | 1.86 | % | 1.26 | % | |||||||
| Allowance for loan losses to total loans | |||||||||||||
| receivable, net | 1.99 | 2.36 | 1.59 | ||||||||||
| Allowance for loan losses to | |||||||||||||
| non-performing loans | 34.92 | 33.12 | 57.98 | ||||||||||
| V. BOOK VALUE PER COMMON SHARE: | |||||||||||||
| Book value per common share | $ | 20.64 | 21.31 | 23.85 | |||||||||
| Three Months | Three Months | ||||||||||||
| Ended | Year Ended | Ended | |||||||||||
| Mar 31, 2009 | Dec 31, 2008 | Mar 31, 2008 | |||||||||||
| VI. CAPITAL RATIOS: | |||||||||||||
| Stockholders’ equity to total assets, | |||||||||||||
| at end of period | 9.82 | % | 9.80 | % | 9.00 | % | |||||||
| Average stockholders’ equity to | |||||||||||||
average assets (1) | 9.81 | 8.58 | 8.93 | ||||||||||
| Ratio of average interest-earning assets to | |||||||||||||
| average interest-bearing liabilities (1) | 106.74 | 106.50 | 107.42 | ||||||||||
| March 31, | December 31, | March 31, | |||||||||||
| 2009 | 2008 | 2008 | |||||||||||
| VII. EMPLOYEE DATA: | |||||||||||||
| Number of full time equivalent employees | 206 | 204 | 207 | ||||||||||
(1) Average balances were calculated based upon amortized cost without the market value impact of SFAS 115.
CONTACT:
HMN Financial, Inc.
Brad Krehbiel, 507-252-7169
Principal Executive Officer