SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) FOR THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-24100
HMN FINANCIAL, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 41-1777397
------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 North Broadway, Spring Valley, Minnesota 55975-0231
- -------------------------------------------- ----------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code:
(507) 346-7345
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's common
stock as of the latest practicable date.
Class Outstanding at August 5, 1997
- ----------------------------- -----------------------------
Common stock, $0.01 par value 4,211,836
This Form 10-Q consists of 55 pages.
The exhibit index is on page 22.
1
HMN FINANCIAL, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1: Financial Statements (unaudited) ----
Consolidated Balance Sheets at
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income for the
Three Months Ended and Six Months Ended
June 30, 1997 and 1996 4
Consolidated Statement of Stockholders' Equity
for the Six Month Period Ended June 30, 1997 5
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7-10
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-18
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 19
Item 2: Changes in Securities 19
Item 3: Defaults Upon Senior Securities 19
Item 4: Submission of Matters to a Vote of
Security Holders 19
Item 5: Other Information 20
Item 6: Exhibits and Reports on Form 8-K and Form 11-K 20
Signatures 21
2
PART I - FINANCIAL STATEMENTS
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
June 30, December 31,
Assets 1997 1996
----------- -----------
Cash and cash equivalents $ 11,569,823 10,583,717
Securities available for sale:
Mortgage-backed and related securities
(amortized cost $115,681,542
and $134,474,167) 115,016,213 133,355,278
Other marketable securities
(amortized cost $73,350,810
and $42,360,499) 73,860,262 42,474,810
----------- -----------
188,876,475 175,830,088
----------- -----------
Securities held to maturity:
Mortgage-backed and related securities
(fair value $0 and $1,904,993) 0 1,805,744
Other marketable securities
(fair value $0 and $1,000,550) 0 999,812
----------- -----------
0 2,805,556
----------- -----------
Loans held for sale 1,205,315 739,316
Loans receivable, net 345,516,286 349,022,236
Federal Home Loan Bank stock, at cost 5,939,500 5,434,000
Real estate, net 89,287 20,610
Premises and equipment, net 4,090,908 3,581,497
Accrued interest receivable 3,762,219 3,415,152
Prepaid expenses and other assets 5,815,165 3,299,427
----------- -----------
Total assets $ 566,864,978 554,731,599
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 365,385,386 362,476,944
Federal Home Loan Bank advances 114,364,305 106,078,589
Accrued interest payable 1,207,541 1,542,773
Advance payments by borrowers for
taxes and insurance 506,268 518,911
Accrued expenses and other liabilities 2,403,310 2,014,938
Due to brokers 1,200,000 0
----------- -----------
Total liabilities 485,066,810 472,632,155
----------- -----------
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 59,620,004 59,428,768
Retained earnings, subject to
certain restrictions 57,452,087 54,645,387
Net unrealized loss on securities
available for sale (92,998) (598,045)
Unearned employee stock ownership
plan shares (4,746,400) (4,938,520)
Unearned compensation restricted
stock awards (716,965) (793,289)
Treasury stock, shares at cost
1,873,939 and 1,651,615 shares (29,778,418) (25,705,715)
----------- -----------
Total stockholders' equity 81,798,168 82,099,444
----------- -----------
Total liabilities and stockholders'
equity $ 566,864,978 554,731,599
=========== ===========
See accompanying notes to consolidated financial statements.
3
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
-------------------- ----------------------
Interest Income:
Loans receivable $ 6,882,628 6,409,310 13,790,870 12,548,056
Securities available
for sale:
Mortgage-backed
and related 2,176,822 2,527,670 4,366,032 5,301,360
Other marketable 917,067 580,897 1,502,309 985,741
Securities held to maturity:
Mortgage-backed and related 0 256,754 33,400 523,777
Other marketable 0 32,405 10,032 75,853
Cash equivalents 87,434 62,086 169,594 165,804
Other 102,011 74,648 196,972 138,630
---------- ---------- ---------- ----------
Total interest income 10,165,962 9,943,770 20,069,209 19,739,221
---------- ---------- ---------- ----------
Interest expense:
Deposits 4,670,797 4,720,966 9,243,595 9,539,249
Federal Home Loan Bank
advances 1,626,510 1,227,662 3,077,910 2,289,523
---------- --------- ---------- ----------
Total interest expense 6,297,307 5,948,628 12,321,505 11,828,772
---------- --------- ---------- ----------
Net interest income 3,868,655 3,995,142 7,747,704 7,910,449
Provision for loan losses 75,000 75,000 150,000 150,000
---------- --------- ---------- ----------
Net interest income
after provision
for loan losses 3,793,655 3,920,142 7,597,704 7,760,449
---------- --------- ---------- ----------
Non-interest income:
Fees and service charges 100,445 81,855 196,857 159,371
Securities gains, net 113,695 268,487 384,612 769,037
Gain on sales of loans 63,614 1,135 217,064 7,084
Other 128,042 133,533 305,557 250,922
---------- --------- ---------- ----------
Total non-interest income 405,796 485,010 1,104,090 1,186,414
---------- --------- ---------- ----------
Non-interest expense:
Compensation and benefits 1,358,859 1,099,123 2,674,846 2,205,118
Occupancy 232,451 195,363 473,598 392,145
Federal deposit insurance
premiums 58,924 214,864 117,901 424,656
Advertising 73,658 79,354 151,795 152,039
Data processing 118,803 120,743 243,332 249,196
Provision for real
estate losses 1,000 0 3,000 0
Other 283,260 274,789 576,925 543,902
---------- --------- ---------- ----------
Total non-interest
expense 2,126,955 1,984,236 4,241,397 3,967,056
---------- --------- ---------- ----------
Income before income tax
expense 2,072,496 2,420,916 4,460,397 4,979,807
Income tax expense 740,276 887,832 1,653,697 1,860,032
---------- --------- ---------- ----------
Net income $ 1,332,220 1,533,084 2,806,700 3,119,775
========== ========= ========== ==========
Primary earnings per
common share and common
share equivalents $ 0.34 0.34 0.72 0.67
========== ========= ========== ==========
Fully diluted earnings
per common share and
common share equivalents $ 0.34 0.33 0.71 0.66
========== ========= ========== ==========
See accompanying notes to consolidated financial statements
4
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the Six Month Period Ended June 30, 1997
(unaudited)
Net
unrealized
Additional (loss) on
Common Paid-in Retained securities
Stock Capital Earnings available for sale
-----------------------------------------------------
Balance,
December 31, 1996 $ 60,858 59,428,768 54,645,387 (598,045)
Net income 2,806,700
Change in fair value
on securities available
for sale 505,047
Treasury stock
purchases
Amortization of
restricted stock awards
Retirement and retention
awards granted 2,250
Employee stock option
exercised (46)
Restricted stock awards tax
benefit 61,092
Employee stock option
plan tax benefit 3,530
Earned employee stock
ownership plan shares 124,410
------- ---------- ---------- ----------
Balance,
June 30, 1997 $ 60,858 59,620,004 57,452,087 (92,998)
======= ========== ========== ==========
Unearned
shares
Employee Unearned
Stock Compensation Total
Ownership Restricted Treasury Stockholders'
Plan Stock Awards Stock Equity
--------------------------------------------------
Balance,
December 31, 1996 $ (4,938,520) (793,289) (25,705,715) 82,099,444
Net income 2,806,700
Change in fair value on
securities available
for sale 505,047
Treasury stock
purchases (4,109,637) (4,109,637)
Amortization of
restricted stock awards 115,324 115,324
Retirement and retention
awards granted (39,000) 36,750 0
Employee stock option
exercised 184 138
Restricted stock awards tax
benefit 61,092
Employee stock option
plan tax benefit 3,530
Earned employee stock
ownership plan shares 192,120 316,530
---------- --------- ---------- ----------
Balance,
June 30, 1997 $ (4,746,400) (716,965) (29,778,418) 81,798,168
========== ========= ========== ==========
See accompanying notes to consolidated financial statements.
5
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1997 1996
-------------------------
Cash flows from operating activities:
Net income $ 2,806,700 3,119,775
Adjustments to reconcile net income
to cash provided by operating activities:
Provision for loan losses 150,000 150,000
Provision for real estate losses 3,000 0
Depreciation 207,634 181,971
Amortization of (discounts) premiums, net (107,808) (16,163)
Amortization of deferred loan fees (183,614) (229,289)
Provision for deferred income taxes 258,698 147,562
Securities gains, net (384,612) (774,273)
Gain on sales of real estate (3,743) (39,100)
Gain on sales of loans (217,064) (7,084)
Proceeds from sale of loans originated
for sale 2,739,372 362,070
Amortization of restricted stock awards 115,324 116,700
Amortization of unearned ESOP shares 192,120 198,840
Earned employee stock ownership shares
priced above original cost 124,410 62,424
Increase in accrued interest receivable (347,067) (43,835)
(Decrease) increase in accrued
interest payable (335,232) 154,983
Equity earnings of limited partnership (112,487) 0
Increase in other assets (94,493) (124,031)
(Decrease) increase in other liabilities (149,358) 55,481
Other, net 20,768 (26,994)
---------- ----------
Net cash provided by operating
activities 4,682,548 3,289,037
---------- ----------
Cash flows from investing activities:
Proceeds from sales of securities available
for sale 33,311,951 49,480,583
Principal collected on securities
available for sale 6,657,798 6,740,657
Proceeds collected on maturity of
securities available for sale 15,868,412 5,500,000
Purchases of securities available for sale (60,433,633) (53,439,412)
Proceeds from sales of securities held to
maturity 348,871 0
Principal collected on securities held
to maturity 240,441 863,649
Proceeds collected on maturity of
securities held to maturity 1,000,000 2,000,000
Purchases of securities held to maturity 0 (709,765)
Proceeds from sales of loans receivable 25,341,959 154,612
Purchase interest in mortgage servicing
rights (370,008) 0
Purchase interest in limited partnership (1,938,750) 0
Purchase of Federal Home Loan Bank stock (505,500) (1,356,000)
Net increase in loans receivable (29,608,581) (27,035,570)
Proceeds from sale of real estate 35,627 361,010
Purchases of premises and equipment (717,045) (83,559)
---------- ----------
Net cash used by investing activities (10,768,458) (17,523,795)
---------- ----------
Cash flows from financing activities:
Increase (decrease) in deposits 2,908,442 (10,344,717)
Purchase of treasury stock (4,109,637) (5,955,302)
Stock options exercised 138 0
Proceeds from Federal Home Loan Bank
advances 74,800,000 45,700,000
Repayment of Federal Home Loan Bank advances(66,514,284) (13,523,925)
Decrease in advance payments by borrowers
for taxes and insurance (12,643) (33,488)
---------- ----------
Net cash provided by financing activities 7,072,016 15,842,568
---------- ----------
Increase in cash and cash equivalents 986,106 1,607,810
Cash and cash equivalents, beginning of period 10,583,717 4,334,694
---------- ----------
Cash and cash equivalents, end of period $ 11,569,823 5,942,504
========== ==========
Supplemental cash flow disclosures:
Cash paid for interest $ 12,656,737 11,673,789
Cash paid for income taxes 1,445,500 1,780,833
Supplemental noncash flow disclosures:
Loans securitized and transferred to
securities available for sale $ 4,781,034 9,694,418
Securities held to maturity transferred
to securities available for sale 1,295,147 0
Loans transferred to loans held for sale 25,277,122 0
Transfer of loans to real estate 188,776 168,187
Transfer of real estate to loans 84,772 0
Securities purchased with liability due
to broker 1,200,000 0
See accompanying notes to consolidated financial statements.
6
HMN FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1997 and 1996
(1) HMN FINANCIAL, INC.
The consolidated financial statements included herein are for HMN Financial
Inc. (HMN), Security Finance Corporation (SFC), HMN Mortgage Services, Inc.,
Home Federal Savings Bank (the Bank) and the Bank's wholly owned subsidiary,
Osterud Insurance Agency, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(2) BASIS OF PREPARATION
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and therefore, do not include all
disclosures necessary for a complete presentation of the consolidated balance
sheets, consolidated statements of income, consolidated statements of
stockholders' equity and consolidated statements of cash flows in conformity
with generally accepted accounting principles. However, all adjustments
consisting of only normal recurring adjustments which are, in the opinion of
management, necessary for the fair presentation of the interim financial
statements have been included. The statements of income for the three month
period and six month period ended June 30, 1997 are not necessarily
indicative of the results which may be expected for the entire year.
Certain amounts in the consolidated financial statements for prior periods
have been reclassified to conform with the current period presentation.
(3) NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE. SFAS
No. 128 establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. The Statement simplifies the standards for computing earnings
per share previously found in APB Opinion No. 15, EARNINGS PER SHARE, and
makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to fully diluted EPS pursuant to APB Opinion No. 15. The
Statement is effective for financial statements issued for periods ending
after December 15, 1997. Management is currently studying the impact of
adopting SFAS No. 128.
In July 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME
which establishes standards of disclosure and financial statement display for
reporting total comprehensive income and the individual
7
components thereof. Comprehensive income is defined as the change in equity
(net assets) of a business enterprise during a period from transactions and
other events and circumstances from nonowner sources. It includes all
changes in equity during a period except those resulting from investments by
owners and distributions to owners. As used in SFAS No. 130, the term
comprehensive income thus encompasses net income. The term OTHER
COMPREHENSIVE INCOME refers to components of comprehensive income that are
excluded from net income under generally accepted accounting principles.
Comprehensive income may be presented in any of the following financial
statements: in a separate statement of comprehensive income; in a statement
of changes in equity; or below the total of net income or loss in the income
statement. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997, with earlier application permitted. Comparative
statements for previous years must be reclassified, although reclassification
adjustments are not required to be shown for such earlier periods.
Management is currently studying the impact of adopting SFAS No. 130.
In July 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION which establishes new standards for
determining a reportable segment and for disclosing information regarding
each such segment. The amount of each segment item reported should be the
measure reported to the chief operating decision maker for purposes of making
decisions about allocating resources to the segment and assessing its
performance. Adjustments and eliminations made in preparing an enterprise's
general-purpose financial statements and allocations of revenues, expenses ,
and gains or losses should be included in determining reported segment profit
or loss only if they are included in the measure of the segments's profit or
loss that is used by the chief operating decision maker. Similarly, only
those assets that are included in the measure of the segment's assets that is
used by the chief operating decision maker should be reported for that
segment. SFAS No. 131 is effective for fiscal years beginning after December
15, 1997, with earlier application encouraged. Management is currently
studying the impact of adopting SFAS No. 131.
(4) SECURITIES HELD TO MATURITY
During the first quarter of 1997, HMN determined that it no longer had the
intent to hold its securities classified as held to maturity to the actual
maturity date of the securities. Therefore it sold one security and on March
31, 1997 it transferred all the remaining securities in the held to maturity
portfolio to the available for sale portfolio. The following information
summarizes the sale and transfer of the securities held to maturity during
1997.
Unrealized
Holding
Unrealized Gain,
Amortized Fair Realized Holding Net of Tax,
Cost Value Gain Gain in Equity
--------- ------- --------- --------- -----------
Security sold $ 344,139 348,871 4,732
Securities transferred
to available for sale $1,223,753 1,295,147 71,394 42,641
(5) EARNINGS PER SHARE
Primary earnings per common share and common share equivalents for the three
month periods ended June 30, 1997 and 1996 were computed by dividing net
income for each period ($1,332,220 and $1,533,084, respectively) by the
weighted average common shares and common share equivalents outstanding
(3,915,302 and 4,580,792, respectively) during each period. Fully diluted
earnings per common share and common share equivalents for the three months
ended June 30, 1997 and 1996 were computed by dividing net income for the
period ($1,332,220 and $1,533,084, respectively) by the weighted average
common shares and fully diluted common share equivalents outstanding
(3,943,053 and 4,600,976, respectively) during each period.
Primary earnings per common share and common share equivalents for the six
month periods ended June 30, 1997 and 1996 were computed by dividing net
income for each period ($2,806,700 and $3,119,775, respectively) by the
weighted average common shares and common share equivalents outstanding
(3,921,455 and 4,673,506, respectively) during each period. Fully diluted
earnings per common share and common share equivalents for the six months
ended June 30, 1997 and 1996 were computed by dividing net income for the
period ($2,806,700 and $3,119,775,
8
respectively) by the weighted average common shares and fully diluted common
share equivalents outstanding (3,956,422 and 4,697,742, respectively) during
each period.
(6) REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on HMN's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Bank must meet specific capital guidelines that involve quantitative measures
of the Bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Bank's capital amounts
and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulations to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table on the following page) of Tangible, Core, and Risk-based capital (as
defined in the regulations) to total assets (as defined). At June 30, 1997
Management is of the opinion that the Bank meets all capital adequacy
requirements to which it is subject.
Management believes that based upon the Bank's capital calculations at June
30, 1997 and other conditions consistent with the Prompt Corrective Actions
Provisions of the OTS regulations, the Bank would be categorized as well
capitalized.
At June 30, 1997 the Bank's capital amounts and ratios are presented for
actual capital, required capital, and excess capital including amounts and
ratios in order to qualify as being well capitalized under the Prompt
Corrective Actions regulations:
- ---------------------------------------------------------------------------
Actual Required
------------------- -------------------
Percent of Percent of
(in thousands) Amount Assets<F1> Amount Assets<F1>
-------- ---------- -------- -----------
Bank stockholder's equity $ 60,965
Less:
Net unrealized gain on
certain securities
available for sale 977
Excess mortgage servicing
rights 533
-------
Tangible capital 59,455 10.95% $ 8,146 1.50%
-------
Tangible capital to
adjusted total assets 10.95%
Core capital (Tier I) 59,455 10.95% 16,291 3.00%
Tier I capital to risk-
weighted assets 24.44%
Plus:
Allowable allowance for
loan losses 2,479
Risk-based capital $ 61,934 25.46% $ 19,463 8.00%
<FN>
<1> Based upon the Bank's adjusted total assets for the purpose of the
tangible and core capital ratios and risk-weighted assets for the purpose of
the risk-based capital ratio.
</FN>
- -----------------------------------------------------------------------------
To Be Well Capitalized
Under Prompt
Corrective Actions
Excess Capital Provisions
------------------- --------------------
Percent of Percent of
(in thousands) Amount Assets<F1> Amount Assets<F1>
-------- ---------- ------- -----------
Bank stockholder's equity
Less:
Net unrealized gain on
certain securities
available for sale
Excess mortgage servicing
rights
Tangible capital $ 51,309 9.45%
Tangible capital to
adjusted total assets $ 27,152 5.00%
Core capital (Tier I) 43,164 7.95%
Tier I capital to risk-
weighted assets 14,598 6.00%
Plus:
Allowable allowance for
loan losses
Risk-based capital $ 42,471 17.46% $ 24,329 10.00%
<FN>
<1> Based upon the Bank's adjusted total assets for the purpose of the
tangible and core capital ratios and risk-weighted assets for the purpose of
the risk-based capital ratio.
</FN>
- -----------------------------------------------------------------------------
9
(7) STOCKHOLDERS' EQUITY
During January of 1997, with Board authorization and approval from the Office
of Thrift Supervision (OTS), HMN purchased a total of 224,334 shares of its
own common stock from the open market for $4.1 million. All shares were
placed in treasury stock.
On June 30, 1997, HMN announced its intention to purchase up to 300,000
shares of its own common stock in the open market over the next twelve month
period.
(8) PENDING ACQUISITION
On July 1, 1997, HMN Financial, Inc. and Marshalltown Financial Corporation
(MFC), the thrift holding company for Marshalltown Savings Bank, FSB, entered
into a definitive agreement to merge. Under the agreement, HMN will acquire
in a cash transaction valued at $25.9 million, or $17.51 per share, all
outstanding shares of MFC's common stock. The agreement is subject to
regulatory approvals, as well as approval of MFC's shareholders, a process
that is expected to be completed by the end of the year. At June 30, 1997,
MFC's consolidated balance sheet had total assets of $127.5 million of which
$63.4 million were in loans receivable, net and $56.1 million were investment
securities or mortgage-backed securities. MFC's deposits totaled $106.4
million and stockholders' equity totaled $20.1 million.
10
HMN FINANCIAL, INC.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
HMN's net income is dependent primarily on its net interest income, which is
the difference between interest earned on its loans and investments and the
interest paid on interest-bearing liabilities. Net interest income is
determined by (i) the difference between the yield earned on interest-earning
assets and rates paid on interest-bearing liabilities (interest rate spread)
and (ii) the relative amounts of interest-earning assets and interest-bearing
liabilities. HMN's interest rate spread is affected by regulatory, economic
and competitive factors that influence interest rates, loan demand and
deposit flows. Net interest margin is calculated by dividing net interest
income by the average interest-earning assets and is normally expressed as a
percentage. Net interest income and net interest margin are affected by
changes in interest rates, the volume and the mix of interest-earning assets
and interest-bearing liabilities, and the level of non-performing assets.
HMN's net income is also affected by the generation of non-interest income,
which primarily consists of gains from the sale of securities, gains from
sale of loans, service charges, fees and other income. In addition, net
income is affected by the level of operating expenses and establishment of a
provision for loan losses.
The operations of financial institutions, including the Bank, are
significantly affected by prevailing economic conditions, competition and the
monetary and fiscal policies of governmental agencies. Lending activities
are influenced by the demand for and supply of housing, competition among
lenders, the level of interest rates and the availability of funds. Deposit
flows and costs of funds are influenced by prevailing market rates of
interest primarily on competing investments, account maturities and the
levels of personal income and savings in the market area of the Bank.
NET INCOME
HMN's net income for the second quarter of 1997 was $1.3 million, or $0.34
primary earnings per share, a decrease of $201,000, or 13.1% compared to net
income of $1.5 million, or $0.34 primary earnings per share for the second
quarter of 1996. The decrease in net income was principally due to a
decrease of $126,000 in net interest income, a decrease of $79,000 in non-
interest income and an increase of $143,000 in non-interest expense. Primary
earnings per share for the second quarter of 1997 remained the same as the
second quarter of 1996 despite a decrease in net income because HMN purchased
972,404 shares of its own common stock in the open market from April 1, 1996
through January 31, 1997.
Net income for the six-month period ended June 30, 1997 was $2.8 million, or
$0.72 primary earnings per share, a decrease of $313,000, or 10.0%, compared
to $3.1 million, or $0.67 primary earnings per share, for the same six month
period of 1996. The decrease in net income was principally due to a decrease
of $163,000 in net interest income, a decrease of $82,000 in non-interest
income and an increase of $274,000 in non-interest expense. Primary earnings
per share for the six month period ended June 30, 1997 increased by $0.05
compared to the same period in 1996 despite a decrease in net income between
the periods because HMN purchased 1,094,119 shares of its own common stock in
the open market from January 1, 1996 through January 31, 1997.
NET INTEREST INCOME
Net interest income for the second quarter of 1997 was $3.9 million, a
decrease of $126,000, or 3.2%, compared to $4.0 million for the same quarter
of 1996. Interest income for the second quarter of 1997 was $10.2 million,
an increase of $222,000, or 2.2%, compared to $9.9 million for the same
quarter of 1996. The increase in interest income was primarily due to the
purchase of loans that were partially funded by the sale of lower yielding
investment securities. Average interest-earning assets were $547.7 million
for the
11
second quarter of 1997, an increase of $8.8 million compared to average
interest-earning assets of $538.9 million for the same quarter of 1996.
Interest expense for the second quarter of 1997 was $6.3 million an increase
of $349,000, or 5.9%, compared to $5.9 million for the same quarter of 1996.
The increase in interest expense was caused primarily by an increase in
average interest-bearing liabilities. Average interest-bearing liabilities
for the second quarter of 1997 were $474.6 million, an increase of $23.9
million, or 5.3%, compared to $450.7 million for the second quarter of 1996.
The majority of the funds received from the increase in interest-bearing
liabilities were used to purchase the net increase in average interest-
bearing assets, facilitate the HMN stock repurchases, and purchase loan
servicing assets.
Net interest income for the six months ended June 30, 1997 was $7.7 million,
a decrease of $163,000, or 2.1%, from $7.9 million for the same period of
1996. Interest income for the six month period ended June 30, 1997 was
$20.1 million, an increase of $330,000, or 1.7%, compared to $19.7 million
for the same period of 1996. The increase in interest income was primarily
due to the purchase of loans that were partially funded by the sale of lower
yielding investment securities. Average interest-earning assets were $542.9
million for the six months ended June 30, 1997, an increase of $8.1 million
compared to average interest-earning assets of $534.8 million for the same
period of 1996. Interest expense for the six month period ended June 30,
1997 was $12.3 million, an increase of $493,000, or 4.2%, compared to $11.8
million for the same period of 1996. The increase in interest expense was
caused primarily by an increase in average interest-bearing liabilities.
Average interest-bearing liabilities for the six month period ended June 30,
1997 were $469.2 million, an increase of $23.1 million, or 5.2%, compared to
$446.1 million for the same period of 1996. The majority of the funds
received from the increase in interest-bearing liabilities were used to
purchase the net increase in average interest-bearing assets, facilitate the
HMN stock repurchases, and purchase loan servicing assets.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the second quarters ended June 30, 1997 and
1996 were both $75,000. The provision for loan losses for the six months
ended June 30, 1997 and 1996 were both $150,000. The provision is the result
of management's evaluation of the loan portfolio, a historically low level of
non-performing loans, minimal loan charge-off experience, and its assessment
of the general economic conditions in the geographic area where properties
securing the loan portfolio are located. Management's evaluation did not
reveal conditions that would cause it to increase the provision for loan
losses during 1997 compared to 1996. Future economic conditions and other
unknown factors will impact the need for future provisions for loan losses.
As a result, no assurances can be given that increases in the allowance for
loan losses will not be required during future periods.
A reconciliation of HMN's allowance for loan losses is summarized as follows:
1997 1996
--------- ---------
Balance at January 1, $ 2,340,585 2,190,664
Provision 150,000 150,000
Charge-offs (19,009) (1,216)
Recoveries 7,250 23
--------- ---------
Balance at June 30, $ 2,478,826 2,339,471
========= =========
NON-INTEREST INCOME
Non-interest income for the second quarter of 1997 was $406,000, a decrease
of $79,000, or 16.3%, from $485,000 for the same quarter of 1996. The
decrease in non-interest income was principally due to a decrease of $155,000
in gain on the sale of securities and was partially offset by increased fee
income of $19,000 and an increase in gain on the sale of loans of $62,000.
Economic conditions and certain market conditions reduced the ability to sell
securities at a gain during the second quarter of 1997 compared to the same
period in 1996.
12
Non-interest income for the six months ended June 30, 1997 was $1.1 million,
a decrease of $82,000, or 6.9%, from $1.2 million for the same period of
1996. The decrease was principally due to a $384,000 decrease in gain on the
sale of securities and was partially offset by a $37,000 increase in fee
income, a $210,000 increase in gain on sale of loans, and a $55,000 increase
in other income. The increased income recognized on the sale of loans is the
direct result of increased mortgage banking activity. The increase in other
income for the six months ended June 30, 1997 compared to the same period in
1996 was principally due to an increase in commissions earned by Osterud
Insurance Agency, which is a subsidiary of the Bank.
NON-INTEREST EXPENSE
Non-interest expense was $2.1 million for the second quarter of 1997, an
increase of $143,000, or 7.2%, from $2.0 million for the second quarter of
1996. The majority of the increase in non-interest expense between the two
quarters was due to a $260,000, or 23.6%, increase in compensation and
benefits and was the result of adding new employees, plus normal merit and
salary increases. Besides the increase in compensation, occupancy also
increased $37,000 between the two quarters. These increases were partially
offset by a $156,000 decrease in federal deposit insurance premiums for the
second quarter of 1997 compared to the second quarter of 1996. The decrease
in premium expense is the result of the Savings Association Insurance Fund
(SAIF) now being fully funded.
Non-interest expense for the six months ended June 30, 1997 was $4.2 million,
an increase of $274,000, or 6.9%, from $4.0 million for the six months ended
June 30, 1996. The principal cause for the increase in non-interest expense
between the two periods was due to a $470,000, or 21.3%, increase in
compensation and benefits expense and was the result of adding new employees
and normal merit and salary increases. Occupancy also increased $81,000 for
the six-month period ended June 30, 1997 compared to the same period ended
June 30, 1996 partially because of continued remodeling of offices. These
increases were partially offset by a $307,000 decrease in federal deposit
insurance premiums between the two periods because the SAIF insurance fund is
now fully funded.
INCOME TAX EXPENSE
Income tax expense was $740,000 for the second quarter of 1997, a decrease of
$148,000, or 16.6%, from $888,000 for the second quarter of 1996. The
decrease is primarily due to a decrease in taxable income between the two
quarters. Income tax expense was $1.7 million for the six month period ended
June 30, 1997, a decrease of $206,000, or 11.1%, from $1.9 million for the
same period in 1996.
LIQUIDITY
For the six months ended June 30, 1997, the net cash provided from operating
activities was $4.7 million and net cash used for investing activities was
$10.8 million. For the same period, HMN had $33.7 million in proceeds from
the sale of securities and it collected another $23.8 million from principal
payments and the maturity of securities. HMN purchased $60.4 million of
securities during the first six months of 1997. HMN also received proceeds
from the sale of loans of $25.3 million and purchased or originated
additional net loans of $29.6 million. During the first six month period of
1997, the Bank also purchased an additional interest in a mortgage servicing
partnership for $1.9 million. During the first six months of 1997, deposits
increased by $2.9 million and Federal Home Loan Bank advances showed a net
increase $8.29 million. During January 1997, HMN also repurchased 224,334
shares of its own common stock for $4.1 million.
*HMN has certificates of deposit with outstanding balances of $169.9 million
maturing during the next 12 months. Based upon past experience, management
anticipates that the majority of the deposits will renew for the same or
similar terms. Any funds lost from deposits which do not renew will be
replaced with deposits
* This paragraph contains a forward-looking statement(s). Refer to
information regarding Forward-looking Information on page 17 of this
discussion.
13
from other customers, advances from the FHLB, or the sale of securities.
Management does not anticipate that it will have a liquidity problem
resulting from maturing deposits.
*HMN has entered into an agreement to purchase all of the outstanding stock
of Marshalltown Financial Corporation, a unitary thrift holding company, for
$25.9 million in cash. The transaction is subject to the approval of the
stockholders of Marshalltown Financial Corporation and the Office of Thrift
Supervision. The approval is anticipated to be received by December 31,
1997. HMN expects to fund the purchase of the Marshalltown stock from the
proceeds of the sale of securities available for sale.
*HMN is in the process of building two new retail banking facilities in
Spring Valley and Winona, Minnesota, at an estimated aggregate cost of $3.2
million. Occupancy is scheduled for the second or third quarter of 1998 and
construction funding will come from normal cash flows or the sale of
securities.
NON-PERFORMING ASSETS
The following table sets forth the amounts and categories of non-performing
assets in the Bank's portfolio at June 30, 1997 and December 31, 1996.
June 30, December 31,
(Dollars in Thousands) 1997 1996
---------- ----------
Non-Accruing Loans
One-to-four family real estate $ 240 235
Nonresidential real estate 82 83
Commercial business 39 13
Consumer 13 7
--- ---
Total 374 338
--- ---
Foreclosed Assets
Real estate:
One-to-four family 92 23
--- ---
Total non-performing assets $466 $ 361
=== ===
Total as a percentage of
total assets 0.08% 0.07%
==== ====
Total non-performing loans $ 374 $ 338
==== ====
Total as a percentage of total
loans receivable, net 0.11% 0.10%
==== ====
Total non-performing assets at June 30, 1997 were $466,000, an increase of
$105,000, or 29.1%, from $361,000 at December 31, 1996. The net increase of
$105,000 was the result of an increase of non-accruing loans and an increase
in one-to-four family foreclosed residential homes.
ASSET/LIABILITY MANAGEMENT
*HMN's management reviews the impact that changing interest rates will have
on its net interest income projected for the twelve months following June 30,
1997 to determine if its current level of interest rate risk is acceptable.
The following table projects the estimated impact on net interest income of
immediate interest rate changes called rate shocks.
Rate Shock Net Interest Percentage Board
in Basis Points Income Change Limit
+200 14,265 -8.88% -30.00%
+100 15,021 -4.06% -15.00%
0 15,656 0.00% 0.00%
-100 15,943 1.83% -15.00%
-200 16,240 3.73% -30.00%
* This paragraph contains a forward-looking statement(s). Refer to
information regarding Forward-looking Information on page 17 of this
discussion.
14
The table above is forward-looking and is only an estimate of the potential
impact that changing rates will have on net interest income. The actual new
loan activity originated or purchased and securities purchases along with
actual deposit and borrowing activity could cause the actual net interest
income for the twelve month period to be materially different from the net
interest income projected above.
HMN continues to focus its fixed-rate one-to-four family residential loan
program on loans with contractual terms of 20 years or less. HMN also
originates and purchases adjustable rate mortgages which have initial fixed
rate terms of one to five years and then adjust annually each year
thereafter.
Refer to page 16 for table.
15
The following table sets forth the interest rate sensitivity of HMN's assets
and liabilities at June 30, 1997, using certain assumptions that are
described in more detail below:
- -----------------------------------------------------------------------------
Maturing or Repricing
---------------------------------------------------
Over 6
6 Months Months to Over 1-3 Over 3-5
(Dollars in thousands) or Less One Year Years Years
- -----------------------------------------------------------------------------
Cash equivalents $ 10,570 0 0 0
Securities available for
sale:
Mortgage-backed and
related securities<F1> 24,923 5,325 26,611 25,757
Other marketable
securities 18,045 1,905 10,561 30,324
Loans held for sale 1,205 0 0 0
Loans receivable, net:<F1><F2>
Fixed rate one-to-four
family<F3> 18,627 17,176 58,860 43,535
Adjustable rate
one-to-four family<F3> 26,946 21,658 12,283 12,570
Fixed rate commercial
real estate 143 126 405 260
Adjustable rate commercial
real estate 4,600 2,277 0 0
Commercial business 1,421 352 1,030 236
Consumer loans 18,372 1,163 2,431 1,057
Federal Home Loan Bank stock 0 0 0 0
------- ------- ------- -------
Total interest-earning
assets 124,852 49,982 112,181 113,739
------- ------- ------- -------
Non-interest checking 2,822 0 0 0
NOW accounts 16,459 0 0 0
Passbooks 3,113 2,784 8,492 5,435
Money market accounts 1,669 1,494 4,554 2,914
Certificates 103,434 66,491 110,904 19,977
Federal Home Loan Bank
advances 64,000 9,000 15,964 15,000
------- ------- ------- -------
Total interest-bearing
liabilities 191,497 79,769 139,914 43,326
------- ------- ------- -------
Interest-earning assets
less interest-bearing
liabilities $ (66,645) (29,787) (27,733) 70,413
======= ======= ======= =======
Cumulative interest-rate
sensitivity gap $ (66,645) (96,432) (124,165) (53,752)
======= ======= ======= =======
Cumulative interest-rate
gap as a percentage of
total assets at
June 30, 1997 (11.76)% (17.01)% (21.90)% (9.48)%
======= ======= ======= =======
Cumulative interest-rate gap
as a percentage of total
assets at December 31, 1996 (4.61) (10.66)
======= =======
Cumulative interest-rate gap as a
percentage of total assets
at December 31, 1995 (1.06) (7.42)
======= =======
Cumulative interest-rate gap as a
percentage of total
assets at December 31, 1994 (2.47) (2.26)
======= =======
<FN>
<1> Schedule prepared based upon the earlier of contractual maturity or
repricing date, if applicable, adjusted for scheduled repayments of
principal and projected prepayments of principal based upon experience.
<2> Loans receivable are presented net of loans in process and deferred loan
fees.
<3> Construction and development loans are all one-to-four family loans and
therefore have been included in the fixed rate one-to-four
family and adjustable rate one-to-four family lines.
</FN>
- -----------------------------------------------------------------------------
Maturing or Repricing
------------------------------------------------
Over 5 No Stated
(Dollars in thousands) Years Maturity Total
- -----------------------------------------------------------------------------
Cash equivalents $ 0 0 10,570
Securities available for sale:
Mortgage-backed and
related securities<F1> 33,066 0 115,682
Other marketable securities 136 12,380 73,351
Loans held for sale 0 0 1,205
Loans receivable, net:<F1><F2>
Fixed rate one-to-four family<F3> 100,747 0 238,945
Adjustable rate
one-to-four family<F3> 930 0 74,387
Fixed rate commercial real estate 504 0 1,438
Adjustable rate commercial
real estate 0 0 6,877
Commercial business 56 0 3,095
Consumer loans 230 0 23,253
Federal Home Loan Bank stock 0 5,940 5,940
------- ------- -------
Total interest-earning assets 135,669 18,320 554,743
------- ------- -------
Non-interest checking 0 0 2,822
NOW accounts 0 0 16,459
Passbooks 9,662 0 29,486
Money market accounts 5,181 0 15,812
Certificates 0 0 300,806
Federal Home Loan Bank advances 10,400 0 114,364
------- ------- -------
Total interest-bearing liabilities 25,243 0 479,749
------- ------- -------
Interest-earning assets less
interest-bearing liabilities $ 110,426 18,320 74,994
======= ======= =======
Cumulative interest-rate
sensitivity gap $ 56,674 74,994 74,994
======= ======= =======
Cumulative interest-rate gap as a
percentage of total assets at
June 30, 1997 10.00% 13.23% 13.23%
======= ======= =======
Cumulative interest-rate gap as a
percentage of total assets
at December 31, 1996
Cumulative interest-rate gap as a
percentage of total assets
at December 31, 1995
Cumulative interest-rate gap as a
percentage of total
assets at December 31, 1994
<FN>
<1> Schedule prepared based upon the earlier of contractual maturity or
repricing date, if applicable, adjusted for scheduled repayments of
principal and projected prepayments of principal based upon experience.
<2> Loans receivable are presented net of loans in process and deferred loan
fees.
<3> Construction and development loans are all one-to-four family loans and
therefore have been included in the fixed rate one-to-four
family and adjustable rate one-to-four family lines.
</FN>
16
The preceding table was prepared utilizing the following assumptions
regarding prepayment and decay ratios which were determined by management
based upon their review of historical prepayment speeds and future prepayment
projections. Fixed rate loans were assumed to prepay at annual rates of
between 5% to 24%, depending on the coupon and period to maturity.
Adjustable Rate Mortgages (ARMs) were assumed to prepay at annual rates of
between 3% and 12%, depending on coupon and the period to maturity. Growing
Equity Mortgage (GEM) loans were assumed to prepay at annual rates of between
8% and 27% depending on the coupon and the period to maturity. Mortgage-
backed securities and Collateralized Mortgage Obligations (CMOs) were
projected to have prepayments based upon the underlying collateral securing
the instrument. Certificate accounts were assumed not to be withdrawn until
maturity. Passbook and money market accounts were assumed to decay at an
annual rate of 20%.
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. Although certain assets and liabilities may have similar
maturities and periods of repricing, they may react in different degrees to
changes in market interest rates. The interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types of assets and liabilities may lag
behind changes in market interest rates. Certain assets, such as ARMs, have
features which restrict changes in interest rates on a short-term basis and
over the life of the asset. In the event of a change in interest rates,
prepayment and early withdrawal levels would likely deviate significantly
from those assumed in calculating the foregoing table. The ability of many
borrowers to service their debt may decrease in the event of an interest rate
increase.
FORWARD-LOOKING INFORMATION
The following statements within Management's Discussion and Analysis of
Financial Condition and Results of Operations contain forward-looking
statements and actual future results may differ materially from the
expectations disclosed within this discussion and analysis. The following
are forward-looking statements followed by comments of events which may
prevent the forward-looking statements from occurring:
LIQUIDITY
HMN has certificates of deposit with outstanding balances of $169.9
million maturing during the next 12 months. Based upon past experience,
management anticipates that the majority of the deposits will renew for
the same or similar terms. Any funds lost from deposits which do not
renew will be replaced with deposits from other customers, advances from
the FHLB, or the sale of securities. Management does not anticipate
that it will have a liquidity problem resulting from maturing deposits.
Competitive pricing by other institutions, the desire of a competitor to
pay interest rates on deposits that are above the current rates paid by
HMN, or a desire by customers to put more of their funds into
nontraditional bank products such as stocks and bonds could be
circumstances that would cause the $169.9 million of certificates that
mature to become a liquidity problem.
HMN has entered into an agreement to purchase all of the outstanding
stock of Marshalltown Financial Corporation, a unitary thrift holding
company, for $25.9 million in cash. The transaction is subject to the
approval of the stockholders of Marshalltown Financial Corporation and
the Office of Thrift Supervision (OTS). The approval is anticipated to
be received by December 31, 1997. HMN expects to fund the purchase of
the Marshalltown stock from the proceeds of the sale of securities
available for sale.
The approval may not be received by December 31, 1997 if Marshalltown's
shareholders do not approve the transaction or if the OTS is not able to
timely review or approve the transaction due to some unforeseen
regulatory issue.
17
The funding for the purchase of Marshalltown may not come from the sale
of securities if the market value of the securities decrease drastically
from the current market value at June 30, 1997. Changes in economic
conditions could cause interest rates to rise rapidly which could cause
a drastic decrease in the market value of the security portfolio.
HMN is in the process of building two new retail banking facilities in
Spring Valley and Winona, Minnesota, at an estimated aggregate cost of
$3.2 million. Occupancy is scheduled for the second or third quarter of
1998 and construction funding will come from normal cash flows or the
sale of securities.
The anticipated occupancy date could change based upon delays related to
the acquisition of the land for the Winona building site. Delays
experienced by the contractors for the delivery of construction
materials or weather related issues could also cause the occupancy date
for Spring Valley and Winona to be later in 1998.
ASSET/LIABILITY MANAGEMENT
HMN's management reviews the impact that changing interest rates will
have on its net interest income projected for the twelve months
following June 30, 1997 to determine if its current level of interest
rate risk is acceptable. The following table projects the estimated
impact on net interest income of immediate interest rate changes called
rate shocks.
Rate Shock Net Interest Percentage Board
in Basis Points Income Change Limit
+200 14,265 -8.88% -30.00%
+100 15,021 -4.06% -15.00%
0 15,656 0.00% 0.00%
-100 15,943 1.83% -15.00%
-200 16,240 3.73% -30.00%
The table above is forward-looking and is only an estimate of the
potential impact that changing rates will have on net interest income.
The actual new loan activity originated or purchased and securities
purchases along with actual deposit and borrowing activity could cause
the actual net interest income for the twelve month period to be
materially different from the net interest income projected above.
18
HMN FINANCIAL, INC.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
Not applicable
ITEM 3. Defaults Upon Senior Securities.
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders.
The Third Annual Meeting of Stockholders of the Company was held on
April 22, 1997 at 10:00 a.m..
The following is a record of the votes cast in the election of
directors of the Company:
BROKER
FOR VOTE WITHHELD NON-VOTES
---------- ------------- ---------
Duane D. Benson 3,104,694 6,375 --
Irma R. Rathbun 3,107,744 3,325 --
Accordingly, the individuals named above were declared to be duly
elected directors of the Company for terms to expire in 2000,
respectively.
The following is a record of the votes cast in respect of the proposal
to ratify the appointment of KPMG Peat Marwick, LLP as the Company's
auditors for the fiscal year ending December 31, 1997.
NUMBER PERCENTAGE OF VOTES
OF VOTES ACTUALLY CAST
---------- --------------------
FOR 3,106,813 99.86%
AGAINST 325 .01%
ABSTAIN 3,931 .13%
BROKER
NON-VOTES -- --%
19
ITEM 5. Other Information.
(a) Amendment to the Home Federal Savings Bank Employees' Savings
& Profit Sharing Plan dated January 28, 1997. Refer to Exhibit
5(a).
(b) Amendment to the Adoption Agreement for Home Federal Savings
Bank Employees' Savings & Profit Sharing Plan and Trust
effective June 17, 1997. Refer to Exhibit 5(b).
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. See Index to Exhibits on page 21 of this report.
(b) Reports on Form 11-K. An annual report on Form 11-K was filed
on June 25, 1997, for the fiscal year ended December 31, 1996.
(c) Reports on Form 8-K. A current report on Form 8-K was filed
on June 30, 1997, to report the intent to repurchase 300,000
shares of HMN's common stock.
(d) Reports on Form 8-K. A current report on Form 8-K was filed
on July 10, 1997, related to the press release dated July 1,
1997, to report a proposed merger of HMN and Marshalltown
Financial Corporation.
(e) Reports on Form 8-K. A current report on Form 8-K was filed
on July 18, 1997, reporting second quarter, semi-annual
earnings.
20
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HMN FINANCIAL, INC.
Registrant
Date: 8/13/97 /s/ Roger P. Weise
----------- ------------------------
Roger P. Weise,
Chairman, President and
Chief Executive Officer
(Duly Authorized Officer)
Date: 8/13/97 /s/ James B. Gardner
----------- -----------------------
James B. Gardner,
Executive Vice President
(Principal Financial Officer)
21
HMN FINANCIAL, INC.
INDEX TO EXHIBITS
FOR FORM 10-Q
Reference Sequential
to Prior Page Numbering
Regulation Filing or Where Attached
S-K Exhibit Exhibits Are
Exhibit Number Located in This
Number Document Attached Hereto Form 10-Q Report
- ----------- -------- --------------- ----------------
2 Plan of acquisition, reorganization, N/A N/A
arrangement, liquidation or succession.
3(a) Articles of Incorporation * N/A
3(b) By-laws * N/A
4 Instruments defining the rights of * N/A
security holders, Including indentures
5(a) Amendment to the Home Federal Savings 5(a) Filed
Bank Employees' Savings & Profit electronically
Sharing Plan dated January 28, 1997.
5(b) Amendment to the Adoption Agreement for 5(b) Filed
Home Federal Savings Bank Employees' electronically
Savings & Profit Sharing Plan and Trust
effective June 17, 1997.
10.1(a)Employment agreement for Mr. Weise ** N/A
dated June 29, 1994
10.1(b)Extension of employment agreement to 10.1(b) Filed
May 20, 2000 electronically
10.2(a)Employment agreement for Mr. Gardner ** N/A
dated June 29, 1994
10.2(b)Extension of employment agreement to 10.2(b) Filed
May 20, 2000 electronically
10.3 Trust Agreement between Home Federal 10.3 Filed
Savings Bank and the Bank of New York electronically
11 Computation of Earnings Per Common Share 11 Filed
electronically
27 Financial Data Schedule 27 Filed
electronically
* Filed April 1, 1994, as exhibits to the Registrant's Form S-1
registration statement (Registration No. 33-77212) pursuant to the
Securities Act of 1933. All of such previously filed documents are
hereby incorporated herein by reference in accordance with Item 601
of Regulation S-K.
** Filed as an exhibit to the Registrant's Form 10-K for 1994 (file
No. 0-24100). All previously filed documents are hereby
incorporated by reference in accordance with Item 601 of Regulation
S-K.
*** Filed as an exhibit to the Registrant's Form 10-K for 1995 (file
no. 0-24100). All previously filed documents are hereby
incorporated by reference in accordance with Item 601 of Regulation
S-K.
**** Filed as an exhibit to Registration's Form 10-K for 1996 (file no.
0-24100). All previously filed documents are hereby incorporated
by reference in accordance with Item 601 of Regulation S-K.
22