Exhibit 99.1
HMN Financial, Inc. Announces First Quarter Results
ROCHESTER, Minn.--(BUSINESS WIRE)--April 22, 2004--HMN Financial,
Inc. (HMN) (Nasdaq:HMNF):
First Quarter Highlights
-- Net income of $2.1 million, up $731,000 over first quarter of
2003
-- Diluted earnings per share up $0.16, or 44.4%, over first
quarter of 2003
-- Net interest income up $1.7 million, or 31.1%, over first
quarter of 2003
-- Net interest margin up 26 basis points over first quarter of
2003
-- Gain on sales of loans down $1.1 million, or 71.9%, from first
quarter of 2003
-- Amortization of mortgage servicing rights down $537,000 from
first quarter of 2003
EARNINGS SUMMARY Three Months Ended
March 31,
2004 2003
-----------------------------
Net income $ 2,120,461 1,389,540
Diluted earnings per share 0.52 0.36
Return on average assets 0.96 % 0.76 %
Return on average equity 10.21 % 7.21 %
Book value per share $ 18.23 17.24
ROCHESTER, Minnesota
HMN Financial, Inc. (HMN) (Nasdaq:HMNF), the $900 million holding
company for Home Federal Savings Bank (the Bank), today reported net
income of $2.1 million for the first quarter of 2004, up $731,000, or
52.6%, from net income of $1.4 million for the first quarter of 2003.
Diluted earnings per common share for the first quarter of 2004 were
$0.52, up $0.16, from $0.36 for the first quarter of 2003.
First Quarter Results
Net Interest Income
Net interest income was $7.2 million for the first quarter of
2004, an increase of $1.7 million, or 31.1%, compared to $5.5 million
for the first quarter of 2003. Interest income was $12.4 million for
the first quarter of 2004, an increase of $1.9 million, or 18.0%, from
$10.5 million for the first quarter of 2003. Interest income increased
primarily because of an increase in interest-earning assets and
because of a change in the mix of assets between the periods. The
increase in interest-earning assets was caused primarily by the $131
million increase in commercial and consumer loans between the periods.
The increase in interest income on commercial and consumer loans was
partially offset by lower income on the single-family loan portfolio
due to a decrease in the outstanding balance and lower interest rates
of this portfolio in the first quarter of 2004 when compared to the
same period in 2003. Interest expense was $5.1 million for the first
quarter of 2004, an increase of $169,000, or 3.4%, compared to $4.9
million for the first quarter of 2003. Interest expense on deposits
and Federal Home Loan Bank advances decreased by $1.0 million due to a
decrease in the interest rates paid and increased by $1.2 million due
to the $144 million increase in the average outstanding balance of
deposits and advances between the periods.
Provision for Loan Losses
The provision for loan losses was $819,000 for the first quarter
of 2004, a decrease of $46,000, from $865,000 for the first quarter of
2003. The provision for loan losses decreased primarily because of the
slower loan growth that was experienced in the consumer and commercial
loan portfolios in the first quarter of 2004 when compared to the
first quarter of 2003. Total non-performing assets were $4.1 million
at March 31, 2004, a decrease of $962,000, from $5.0 million at
December 31, 2003. The decrease in non-performing assets is primarily
related to the payoff of a commercial real estate loan in the first
quarter of 2004 that had previously been classified as non-performing.
Non-Interest Income and Expense
Non-interest income was $1.5 million for the first quarter of
2004, a decrease of $1.1 million, or 40.3%, from $2.6 million for the
first quarter of 2003. Non-interest income decreased by $591,000
because of lower gains on sales of securities. Gain on sale of loans
decreased by $1.1 million due to the significant decrease in mortgage
loan activity in the first quarter of 2004 when compared to the same
period in 2003. These decreases in non-interest income were partially
offset by a $348,000 decrease in limited partnership losses because
HMN's investment in a limited partnership that invested in mortgage
servicing rights was dissolved in the second quarter of 2003. Fees and
service charges increased by $136,000 between the periods due to an
overdraft protection program that was implemented during the second
quarter of 2003 and because of increases in the number of deposit
accounts and the fees charged. Mortgage servicing fees increased by
$71,000 due to the increased size of the servicing portfolio between
the periods.
Non-interest expense was $4.9 million for the first quarter of
2004, a decrease of $287,000, or 5.5%, from $5.2 million for the first
quarter of 2003. Amortization expense on mortgage servicing rights
decreased by $537,000 because of a decrease in the prepayments on the
mortgage loans being serviced. Compensation expense increased by
$249,000 because of annual payroll cost increases and an increase in
the number of employees. Data processing costs decreased by $81,000
primarily due to the renegotiation of a third party service contract
in the fourth quarter of 2003. Income tax expense increased by
$286,000 between the periods primarily because of increased taxable
income.
Return on Assets and Equity
Return on average assets for the first quarter of 2004 was 0.96%,
compared to 0.76% for the first quarter of 2003. Return on average
equity was 10.21% for the first quarter of 2004, compared to 7.21% for
the same quarter in 2003. Book value per common share at March 31,
2004 was $18.23, compared to $17.24 at March 31, 2003.
Presidents' Statement
"We are pleased to report increased net income for the quarter
despite the significant decrease in the gains recognized on the sale
of mortgage loans between the periods," said HMN President, Michael
McNeil. "We believe that our strategy of becoming a diversified full
service provider of financial products and services will continue to
have a positive effect on our core earnings."
General Information
HMN Financial, Inc. and Home Federal Savings Bank are
headquartered in Rochester, Minnesota. The Bank operates nine full
service offices in southern Minnesota located in Albert Lea, Austin,
LaCrescent, Rochester, Spring Valley and Winona and two full service
offices in Iowa located in Marshalltown and Toledo. Home Federal
Savings Bank also operates loan origination offices located in
Stewartville, Lake City and St. Cloud, Minnesota and West Des Moines,
Iowa. Eagle Crest Capital Bank, a division of Home Federal Savings
Bank, operates branches in Edina 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 include, but are not limited to those relating to
HMN's financial expectations for earnings and revenues. A number of
factors could cause actual results to differ materially from HMN's
assumptions and expectations. These factors include possible
legislative changes and adverse economic, business and competitive
developments such as shrinking interest margins; deposit outflows;
reduced demand for financial services and loan products; changes in
accounting policies and guidelines. Additional factors that may cause
actual results to differ from HMN's assumptions and expectations
include those set forth in HMN's most recent filings 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
(unaudited)
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March 31, December 31,
2004 2003
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Assets
Cash and cash equivalents...................$ 33,502,104 30,496,823
Securities available for sale:
Mortgage-backed and related securities
(amortized cost $12,289,007 and
$13,707,005)............................ 11,936,841 13,048,718
Other marketable securities (amortized
cost $96,038,784 and $91,035,285)...... 97,065,773 91,615,047
------------ ------------
109,002,614 104,663,765
------------ ------------
Loans held for sale......................... 4,954,795 6,542,824
Loans receivable, net....................... 717,020,602 688,951,119
Accrued interest receivable................. 3,816,944 3,462,221
Real estate, net............................ 339,011 73,271
Federal Home Loan Bank stock, at cost....... 9,938,100 10,004,400
Mortgage servicing rights, net.............. 3,411,229 3,447,843
Premises and equipment, net................. 12,387,533 12,110,151
Investment in limited partnerships.......... 187,951 617,042
Goodwill.................................... 3,800,938 3,800,938
Core deposit intangible..................... 419,010 447,474
Prepaid expenses and other assets........... 943,937 1,818,156
------------ ------------
Total assets............................$899,724,768 866,436,027
============ ============
Liabilities and Stockholders' Equity
Deposits....................................$611,656,186 551,687,995
Federal Home Loan Bank advances............. 198,900,000 203,900,000
Accrued interest payable.................... 895,541 766,837
Customer escrows............................ 1,079,512 22,457,671
Accrued expenses and other liabilities...... 5,177,864 6,952,600
Deferred tax liabilities.................... 138,600 26,300
------------ ------------
Total liabilities....................... 817,847,703 785,791,403
------------ ------------
Commitments and contingencies
Minority interest........................... (271,018) (286,433)
Stockholders' equity:
Serial preferred stock: ($.01 par value)
Authorized 500,000 shares; issued and
outstanding none...................... 0 0
Common stock ($.01 par value):
Authorized 11,000,000; issued shares
9,128,662............................. 91,287 91,287
Additional paid-in capital.................. 57,715,080 57,863,726
Retained earnings, subject to certain
restrictions............................... 86,697,978 85,364,657
Accumulated other comprehensive income
(loss)..................................... 436,623 (50,725)
Unearned employee stock ownership plan
shares..................................... (4,689,628) (4,738,084)
Treasury stock, at cost 4,621,382 and
4,616,010 shares........................... (58,103,257) (57,599,804)
------------ ------------
Total stockholders' equity.............. 82,148,083 80,931,057
------------ ------------
Total liabilities and stockholders' equity..$899,724,768 866,436,027
============ ============
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HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
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Three Months Ended
March 31,
2004 2003
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Interest income:
Loans receivable...........................$11,491,264 9,639,924
Securities available for sale:
Mortgage-backed and related............ 118,864 142,213
Other marketable....................... 683,407 561,219
Cash equivalents........................... 26,298 28,917
Other...................................... 36,422 98,651
----------- -----------
Total interest income.................. 12,356,255 10,470,924
----------- -----------
Interest expense:
Deposits................................... 2,930,034 2,471,263
Federal Home Loan Bank advances............ 2,188,955 2,478,672
----------- -----------
Total interest expense.................. 5,118,989 4,949,935
----------- -----------
Net interest income..................... 7,237,266 5,520,989
Provision for loan losses..................... 819,000 865,000
----------- -----------
Net interest income after provision for
loan losses............................ 6,418,266 4,655,989
----------- -----------
Non-interest income:
Fees and service charges................... 568,550 432,140
Mortgage servicing fees.................... 287,232 216,576
Securities gains, net...................... 0 591,035
Gain on sales of loans..................... 412,369 1,465,232
Earnings (losses) in limited partnerships.. (6,617) (354,842)
Other...................................... 274,749 221,100
----------- -----------
Total non-interest income............... 1,536,283 2,571,241
----------- -----------
Non-interest expense:
Compensation and benefits.................. 2,528,478 2,279,502
Occupancy.................................. 884,602 823,799
Federal deposit insurance premiums......... 18,705 18,936
Advertising................................ 87,546 84,864
Data processing............................ 190,565 271,108
Amortization of mortgage servicing rights,
net of valuation adjustments and servicing
costs..................................... 253,449 790,530
Other...................................... 962,574 944,551
----------- -----------
Total non-interest expense.............. 4,925,919 5,213,290
----------- -----------
Income before income tax expense........ 3,028,630 2,013,940
Income tax expense............................ 910,500 624,400
----------- -----------
Income before minority interest......... 2,118,130 1,389,540
Minority interest............................. (2,331) 0
----------- -----------
Net income..............................$ 2,120,461 1,389,540
=========== ===========
Basic earnings per share......................$ 0.54 0.37
=========== ===========
Diluted earnings per share....................$ 0.52 0.36
=========== ===========
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HMN FINANCIAL, INC. AND SUBSIDIARIES
Selected Consolidated Financial Information
(unaudited)
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SELECTED FINANCIAL DATA: 3 Months Ended
(dollars in thousands, except per share March 31,
data) 2004 2003
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I. OPERATING DATA:
Interest income....................$ 12,356 10,471
Interest expense................... 5,119 4,950
Net interest income................ 7,237 5,521
II. AVERAGE BALANCES:
Assets(1).......................... 886,623 737,705
Loans receivable, net.............. 703,126 538,909
Mortgage-backed and related
securities(1)..................... 13,140 39,897
Interest-earning assets(1)......... 841,282 700,076
Interest-bearing liabilities....... 798,366 651,481
Equity(1).......................... 83,526 78,123
III. PERFORMANCE RATIOS:(1)
Return on average assets
(annualized)...................... 0.96% 0.76%
Interest rate spread information:..
Average during period........... 3.33 2.98
End of period................... 3.29 3.09
Net interest margin................ 3.46 3.20
Ratio of non-interest expense to
average total assets (annualized). 2.23 2.87
Return on average equity
(annualized)...................... 10.21 7.21
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March 31, Dec 31, March 31,
2004 2003 2003
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IV. ASSET QUALITY :
Total non-performing assets........$ 4,073 5,035 6,169
Non-performing assets to total
assets............................ 0.45% 0.58% 0.81%
Non-performing loans to total loans
receivable, net................... 0.47% 0.68% 0.82
Allowance for loan losses..........$ 7,557 6,940 5,658
Allowance for loan losses to total
assets............................ 0.84% 0.80% 0.74%
Allowance for loan losses to total
loans receivable, net............. 1.05 1.01 0.98
Allowance for loan losses to non-
performing loans.................. 222.20 147.99 120.08
V. BOOK VALUE PER SHARE:
Book value per share...............$ 18.23 17.93 17.24
------------------------------
3 Months Year 3 Months
Ended Ended Ended
Mar 31, Dec 31, Mar 31,
2004 2003 2003
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VI. CAPITAL RATIOS :
Stockholders' equity to total
assets, at end of period.......... 9.13% 9.34% 9.84%
Average stockholders' equity to
average assets(1)................. 9.42 10.15 10.59
Ratio of average interest-earning
assets to average interest-bearing
liabilities(1).................... 105.38 106.65 107.46
------------------------------
March 31, Dec 31, March 31,
2004 2003 2003
------------------------------
VII. EMPLOYEE DATA:
Number of full time equivalent
employees......................... 200 203 189
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(1) Average balances were calculated based upon amortized cost without
the market value impact of SFAS 115.
CONTACT: HMN Financial, Inc., Rochester
Michael McNeil, 507-535-1202