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HMN FINANCIAL, INC.
101 North Broadway
P.O. Box 231
Spring Valley, MN 55975-0231
Phone (507) 346-7345
Fax (507) 346-1111
NEWS RELEASE CONTACT: James B. Gardner, Executive Vice President
HMN Financial, Inc. (507) 346-7345
FOR IMMEDIATE RELEASE
HMN FINANCIAL, INC. ANNOUNCES THIRD QUARTER RESULTS
- ---------------------------------------------------
EARNINGS SUMMARY Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ---------------------
1996 1995 1996 1995
------------------ ---------------------
Before special
SAIF assessment:
Income $1,329,806 1,414,094 $4,449,581 4,182,991
Earnings per share
and common share
equivalent 0.31 0.28 0.98 0.79
Net income (loss) (144,527) 1,414,094 2,975,248 4,182,991
Earnings (loss) per share
and common share equivalent (0.03) 0.28 0.66 0.79
Return on average assets before
SAIF assessment 0.95 % 1.05 % 1.08 % 1.07 %
Return on average assets (0.10)% 1.05 % 0.72 % 1.07 %
Return on average common equity
before SAIF assessment 6.13 % 5.87 % 6.61 % 5.76 %
Return on average common equity (0.67)% 5.87 % 4.42 % 5.76 %
Book value per share (1) $ 17.90 16.80 $ 17.90 16.80
(1) After special SAIF assessment
SPRING VALLEY, MINNESOTA, October 17, 1996 . . . HMN Financial, Inc. (HMN)
(NASDAQ:HMNF), the $565 million holding company for Home Federal Savings Bank
(the Bank), today reported a net loss of $145,000 for the third quarter of
1996, down 110% from $1.4 million for the third quarter of 1995. Earnings
(loss) per share was ($0.03) for the third quarter of 1996, down 111% from
$0.28 per share for the third quarter of 1995. The loss for the quarter was
due to the passage of the Savings Association Insurance Fund (SAIF)
legislation which assessed a one time charge of $2.4 million to the Bank in
order to recapitalize the SAIF. The total SAIF assessment was charged to
earnings in the third quarter of 1996 and reduced the quarterly earnings by
$1.5 million after tax or $0.34 per share. Book value per share was $17.90,
up 6.5%, from $16.80 for the third quarter of 1995.
more . . .
Net income for the nine months ended September 30, 1996 was $3.0 million,
down 29% from $4.2 million for the nine months ended September 30, 1995.
Earnings per share were $0.66 for the nine months ended September 30, 1996,
down 16% from $0.79 per share for the same period in 1995. The SAIF assessment
reduced earnings for the nine months ended September 30, 1996 by $1.5 million
after tax or $0.32 per share. Return on average assets was 0.72% and return on
average equity was 4.42% for the nine months ended September 30, 1996, a
decrease of 33% and 23%, respectively, from the same period in 1995.
HMN Financial, Inc.'s Chairman, Roger P. Weise, said that he was glad to
see that the SAIF legislation had been finalized and the related assessment is
now behind HMN. The Bank's SAIF insurance costs during 1997 will be reduced
from $0.23 per $100 of deposits to an estimated range of $0.06 to $0.09 per
$100 of deposits. During 1997, the SAIF insurance rate will be much closer
to the Bank Insurance Fund (BIF) rate and therefore will reduce an advantage
which BIF members have enjoyed during the past.
Net income for the third quarter of 1996 compared to the third quarter of
1995 decreased by $1.6 million, or 110%, principally due to the $2.4 million
($1.5 million after tax) SAIF assessment which was enacted on September 30,
1996. Net income for the nine month period ended September 30, 1996 compared
to the same period of 1995 decreased by $1.2 million or 28.9%, principally due
to the $2.4 million ($1.5 million after tax) SAIF assessment, a $165,000
decrease in net interest income, and a $335,000 increase in compensation and
benefit expense which was partially offset by a $1.0 million increase in total
non-interest income.
Net interest income was $3.8 million for the third quarter of 1996, a
decrease of $109,000, or 2.8% compared to $3.9 million for the third quarter of
1995. Net interest income for the nine months ended September 30, 1996 was
$11.7 million, a decrease of $165,000, or 1.4%, from $11.9 million for the nine
months ended September 30, 1995. HMN has been purchasing its own stock in the
open market at an average price that is less than its current book value. The
balance sheet impact of the stock repurchase program has been to reduce equity
and replace it with additional advances or deposit growth. As HMN has
increased in total assets, its average interest-earning assets have increased
at a slower pace than its average outstanding interest-bearing liabilities.
Therefore, interest expense has increased at a more rapid pace than interest
income. The more rapid increase in liabilities coupled with changing interest
rates caused net interest income for the third quarter of 1996 to be lower than
the third quarter of 1995. It was also the principal cause for the decrease in
net interest income when comparing the nine months ended September 30, 1996 to
the same period of 1995.
Non-interest income was $412,000 for the third quarter of 1996, an
increase of $120,000, or 41%, compared to $292,000 for the third quarter of
1995. The increase was principally due to a $45,000 increase in gain on the
sale of securities, an $82,000 increase in other income and was partially
offset by a $12,000 decrease in gain on sale of loans. Non-interest income for
the nine months ended September 30, 1996 was $1.6 million, an increase
more . . .
of $1.0 million, or 177%, compared to $577,000 for the nine months ended
September 30, 1995. The increase was principally due to a $826,000 increase in
gain on the sale of securities, a $266,000 increase in other income and was
partially offset by an $82,000 decrease in gain on sale of loans.
Non-interest expense was $4.4 million for the third quarter of 1996, an
increase of $2.5 million, or 130%, from $1.9 million for the third quarter of
1995. The majority of the increase in non-interest expense between the two
quarters was due to the $2.4 million SAIF assessment and a $67,000 increase in
compensation and benefits and was the result of adding new employees, normal
merit and salary increases. Non-interest expense for the nine months ended
September 30, 1996 was $8.4 million, an increase of $2.8 million, or 51%, from
$5.6 million for the nine months ended September 30, 1995. The principal
causes for the increase in non-interest expense between the two nine month
periods was due to the $2.4 million SAIF assessment, a $335,000, or 11%,
increase in compensation and benefits expense and was the result of adding new
employees, normal merit and salary increases and the impact of the Recognition
and Retention Plan adopted in June of 1995.
HMN Financial, Inc. and Home Federal Savings Bank are headquartered in
Spring Valley, MN. The Bank operates seven offices in southern Minnesota.
(Three pages of selected consolidated financial information are included
with this release.)
***END***
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
ASSETS September 30, December 31,
1996 1995
-------------------------------
Cash and cash equivalents $ 17,396,371 4,334,694
Securities available for sale:
Mortgage-backed and related securities
(amortized cost $137,847,323
and $158,517,548) 135,191,304 158,416,201
Other marketable securities
(amortized cost $53,015,288
and $32,247,959) 52,515,628 31,903,566
----------- -----------
187,706,932 190,319,767
----------- -----------
Securities held to maturity:
Mortgage-backed and related securities
(estimated market value $2,461,365
and $13,931,879) 2,337,548 13,744,063
Other marketable securities
(estimated market value $999,250
and $3,224,263) 999,530 3,227,729
----------- -----------
3,337,078 16,971,792
----------- -----------
Loans receivable, net 343,735,917 314,850,684
Federal Home Loan Bank stock, at cost 5,198,800 3,801,900
Real estate, net 0 279,851
Premises and equipment, net 3,544,053 3,645,536
Accrued interest receivable 3,284,857 3,381,507
Deferred income taxes 352,667 0
Prepaid expenses and other assets 828,617 362,928
----------- -----------
Total assets $ 565,385,292 537,948,659
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 363,963,098 373,539,468
Federal Home Loan Bank advances 101,832,555 68,876,978
Accrued interest payable 1,520,976 1,562,347
Advance payments by borrowers for
taxes and insurance 745,028 550,990
Accrued expenses and other liabilities 13,655,034 1,732,193
----------- -----------
Total liabilities 481,716,691 446,261,976
----------- -----------
Commitments and contingencies
Stockholders' equity:
Serial preferred stock: authorized
500,000 shares; issued and
outstanding none 0 0
Common stock ($.01 par value):
authorized 7,000,000 shares;
issued 6,085,775 shares 60,858 60,858
Additional paid-in capital 59,392,608 59,285,581
Retained earnings, subject to
certain restrictions 53,346,286 50,371,038
Net unrealized loss on securities
available for sale (1,878,639) (265,358)
Unearned employee stock ownership plan shares (5,037,910) (5,336,150)
Unearned compensation restricted stock awards (850,463) (1,050,305)
Treasury stock, at cost 1,412,085 and
783,850 shares (21,364,139) (11,378,981)
----------- -----------
Total stockholders' equity 83,668,601 91,686,683
----------- -----------
Total liabilities and stockholders'
equity $ 565,385,292 537,948,659
=========== ===========
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------------------------ ----------------------
Interest Income:
Loans receivable $ 6,461,279 6,009,885 19,009,335 17,192,535
Securities available for sale:
Mortgage-backed and related 2,429,330 2,489,073 7,730,690 7,744,628
Other marketable 669,964 875,861 1,655,705 2,253,239
Securities held to maturity:
Mortgage-backed and related 196,050 204,919 719,827 497,746
Other marketable 14,250 82,975 90,103 333,938
Cash equivalents 149,819 76,124 315,623 348,635
Other 93,823 65,702 232,453 178,070
---------- ---------- ---------- ----------
Total interest income 10,014,515 9,804,539 29,753,736 28,548,791
---------- ---------- ---------- ----------
Interest expense:
Deposits 4,741,907 4,786,359 14,281,156 13,703,586
Federal Home Loan Bank
advances 1,449,492 1,086,272 3,739,015 2,947,048
---------- ---------- ---------- ----------
Total interest expense 6,191,399 5,872,631 18,020,171 16,650,634
---------- ---------- ---------- ----------
Net interest income 3,823,116 3,931,908 11,733,565 11,898,157
Provision for loan losses 75,000 75,000 225,000 225,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 3,748,116 3,856,908 11,508,565 11,673,157
---------- ---------- ---------- ----------
Non-interest income:
Fees and service charges 94,817 89,192 254,188 242,325
Securities gains (losses), net 192,761 148,152 961,798 136,284
Gain on sales of loans 9,896 22,391 16,980 99,341
Other 114,957 32,528 365,879 99,394
---------- ---------- ---------- ----------
Total non-interest income 412,431 292,263 1,598,845 577,344
---------- ---------- ---------- ----------
Non-interest expense:
Compensation and benefits 1,175,725 1,108,509 3,380,843 3,046,330
Occupancy 203,071 191,718 595,216 557,575
Federal deposit insurance
premiums 212,020 205,806 636,676 602,753
SAIF assessment 2,351,563 --- 2,351,563 ---
Advertising 77,696 74,408 229,735 212,546
Data processing 118,949 115,520 368,145 359,202
Other 255,808 210,736 799,710 776,956
---------- ---------- ---------- ----------
Total non-interest expense 4,394,832 1,906,697 8,361,888 5,555,362
---------- ---------- ---------- ----------
Income (loss) before
income taxes (234,285) 2,242,474 4,745,522 6,695,139
Income tax (benefit) expense (89,758) 828,380 1,770,274 2,512,148
---------- ---------- ---------- ----------
Net income (loss) $ (144,527) 1,414,094 2,975,248 4,182,991
========== ========== ========== ==========
Earnings (loss) per common
share and common share
equivalents $ (0.03) 0.28 0.66 0.79
========== ========== ========== ==========
HMN FINANCIAL, INC. AND SUBSIDIARIES
Selected Consolidated Financial Information
(unaudited)
Selected Financial Data:
(dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1996 1995 1996 1995
------------------------ ----------------------
I. OPERATING DATA:
Interest income $ 10,014 9,805 29,754 28,549
Interest expense 6,191 5,873 18,020 16,651
Net interest income 3,823 3,932 11,734 11,898
II. AVERAGE BALANCES:
Assets (1) 557,091 532,896 548,254 524,207
Loans receivable, net 331,331 296,622 321,134 284,310
Mortgage-backed and
related securities (1) 153,760 157,563 164,679 162,763
Interest earnings
assets (1) 548,702 523,761 539,483 516,627
Interest bearing
liabilities 464,467 431,794 452,299 421,965
Equity (1)(2) 86,262 95,557 89,872 97,158
III.PERFORMANCE RATIOS: (1)
Return on average assets
(annualized) (0.10)% 1.05% 0.72% 1.07%
Interest rate spread information:
Average during period 1.96 2.03 2.05 2.11
End of period 2.09 2.02 2.09 2.02
Net interest margin 2.77 2.98 2.91 3.08
Ratio of operating expense
to average total assets 3.14 1.42 2.04 1.42
Return on average equity
(annualized) (0.67) 5.87 4.42 5.76
Sept 30, Dec 31, Sept 30,
1996 1995 1995
------------------------------------
IV.ASSET QUALITY:
Total non-performing assets $ 426 850 871
Non-performing assets to
total assets 0.08% 0.16% 0.16%
Non-performing loans to total
loans receivable, net 0.12 0.17 0.16
Allowance for loan losses $ 2,266 2,191 2,116
Allowance for loan losses to
total assets . 0.40% 0.41% 0.40%
Allowance for loan losses to
total loans receivable, net 0.66 0.70 0.70
Allowance for loan losses to
nonperforming loans 531.84 409.13 449.80
V. BOOK VALUE PER SHARE:
Book value per share excluding
net unrealized loss on
securities available for sale $ 18.30 17.34 17.00
Book value per share 17.90 17.29 16.80
Nine Twelve Nine
Months Months Months
Ended Ended Ended
Sept 30, Dec 31, Sept 30,
1996 1995 1995
-----------------------------------
VI. CAPITAL RATIOS
Stockholders' equity or retained
earnings to total assets, at
end of period 14.80% 17.04% 17.39%
Average stockholders' equity or
average retained earnings to
average assets (1)(2) 16.39 18.24 18.53
Ratio of average interest-earning
assets to average interest-
bearing liabilities(1) 119.28 121.95 122.43
<FN>
(1) Average balances were calculated based upon amortized cost without the
market value impact of SFAS 115.
(2) Average equity and average equity/average asset ratio decreasing due in
part by a repurchase of 568,336 shares of common stock in the second half
of 1995, an additional repurchase of 626,785 shares of common stock during
1996.
</FN>