Exhibit 99
HMN Financial, Inc. Announces First Quarter Results
ROCHESTER, Minn.--(BUSINESS WIRE)--April 21, 2005--HMN Financial,
Inc. (HMN) (NASDAQ:HMNF):
First Quarter Highlights
-- Net income of $2.8 million, up $695,000, or 32.8% over first
quarter of 2004
-- Diluted earnings per share up $0.18, or 34.6%, over first
quarter of 2004
-- Net interest income up $1.8 million, or 14.9%, over first
quarter of 2004
-- Net interest margin up 33 basis points over first quarter of
2004
-- Gain on sales of loans down $119,000, or 28.9%, from first
quarter of 2004
- -0-
*T
EARNINGS SUMMARY Three Months Ended
March 31,
2005 2004
------------------------
Net income $ 2,815,064 2,120,461
Diluted earnings per share 0.70 0.52
Return on average assets 1.18 % 0.96 %
Return on average equity 13.22 % 10.21 %
Book value per share $ 19.17 18.23
*T
HMN Financial, Inc. (HMN) (NASDAQ:HMNF), the $991 million holding
company for Home Federal Savings Bank (the Bank), today reported net
income of $2.8 million for the first quarter of 2005, up $695,000, or
32.8%, from net income of $2.1 million for the first quarter of 2004.
Diluted earnings per common share for the first quarter of 2005 were
$0.70, up $0.18, or 34.6%, from $0.52 for the first quarter of 2004.
First Quarter Results
Net Interest Income
Net interest income was $8.7 million for the first quarter of
2005, an increase of $1.4 million, or 19.8%, compared to $7.2 million
for the first quarter of 2004. Interest income was $14.2 million for
the first quarter of 2005, an increase of $1.8 million, or 14.9%, from
$12.4 million for the first quarter of 2004. Interest income increased
primarily because of an increase in the average 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 $109 million increase in the commercial loans between the
periods. The increase in interest income on commercial loans was
partially offset by lower interest income on the single-family loan
and investment portfolios due to a decrease in the outstanding
balances and lower interest rates of these portfolios in the first
quarter of 2005 when compared to the same period in 2004. The yield
earned on interest-earning assets was 6.21% for the first quarter of
2005, an increase of 30 basis points from the 5.91% yield for the
first quarter of 2004.
Interest expense was $5.5 million for the first quarter of 2005,
an increase of $406,000, or 7.9%, compared to $5.1 million for the
first quarter of 2004. Interest expense increased because of the $116
million in deposit growth that was experienced between the periods.
The increase in interest expense caused by the additional deposits was
partially offset by a decrease in the average interest rate paid on
deposits. The decrease in the average interest rate between the
periods was primarily the result of lower interest rates paid on
certificates of deposit. The average interest rate paid on
interest-bearing liabilities was 2.56% for the first quarter of 2005,
a decrease of 2 basis points from the 2.58% paid for the first quarter
of 2004. Net interest margin (net interest income divided by average
interest earning assets) for the first quarter of 2005 was 3.79%, an
increase of 33 basis points, compared to 3.46% for the first quarter
of 2004.
Provision for Loan Losses
The provision for loan losses was $636,000 for the first quarter
of 2005, a decrease of $183,000, compared to $819,000 for the first
quarter of 2004. The provision for loan losses for the first quarter
of 2005 decreased despite the $14 million of additional loan growth
experienced in the quarter when compared to the same period in 2004.
The increase in the provision related to the additional loan growth
was entirely offset by a decrease in the provision due to fewer
commercial loan risk rating downgrades in the first quarter of 2005
when compared to the same period of 2004. Total non-performing assets
were $4.9 million at March 31, 2005, an increase of $52,000, from $4.9
million at December 31, 2004.
Non-Interest Income and Expense
Non-interest income was $1.4 million for the first quarter of
2005, a decrease of $110,000, or 7.1%, from $1.5 million for the first
quarter of 2004. Non-interest income decreased $119,000 because of
lower gains on sales of loans due to the decreased mortgage loan
activity in the first quarter of 2005 when compared to the same period
in 2004. Mortgage loan activity slowed in the first quarter of 2005
due to the increase in mortgage interest rates from the first quarter
of 2004. Fees and service charges increased $34,000 between the
periods primarily due to increased business banking and debit card
activity. Other non-interest income decreased $29,000 primarily
because of decreased revenues from the sale of uninsured investment
products.
Non-interest expense was $5.3 million for the first quarter of
2005, an increase of $364,000, or 7.4%, from $4.9 million for the
first quarter of 2004. Compensation expense increased $246,000
primarily because of increases in health insurance costs and because
of annual payroll cost increases. Occupancy expense increased $111,000
due to the additional corporate office facilities occupied in the
first quarter of 2005 and because of an increase in amortization
expense as a result of various software upgrades between the periods.
Data processing costs increased $47,000 due to increases in the
services provided by the Bank's third party processor between the
periods. Income tax expense increased $446,000 between the periods due
to increased taxable income and an increased effective tax rate. The
effective tax rate increased primarily because of changes in state tax
allocations and a decrease in tax exempt income as a percentage of
income.
Return on Assets and Equity
Return on average assets for the first quarter of 2005 was 1.18%,
compared to 0.96% for the first quarter of 2004. Return on average
equity was 13.22% for the first quarter of 2005, compared to 10.21%
for the same quarter in 2004. Book value per common share at March 31,
2005 was $19.17, compared to $18.23 at March 31, 2004.
President's Statement
"Earnings continue to improve as a result of our asset growth and
the change in the mix of our loans and deposits," 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 St.
Cloud and Rochester, 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, changes in monetary and fiscal
policies of the federal government, and changes in tax laws.
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.
(Three pages of selected consolidated financial information are
included with this release.)
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
- ----------------------------------------------------------------------
March 31, December 31,
2005 2004
- ----------------------------------------------------------------------
(unaudited)
Assets
Cash and cash equivalents...................$ 39,340,351 34,298,394
Securities available for sale:
Mortgage-backed and related securities
(amortized cost $9,058,730 and
$9,509,377)............................ 8,470,270 9,150,871
Other marketable securities
(amortized cost $92,084,357 and
$95,097,051).......................... 90,979,999 94,521,512
------------ ------------
99,450,269 103,672,383
------------ ------------
Loans held for sale......................... 1,510,373 2,711,760
Loans receivable, net....................... 813,244,220 783,213,262
Accrued interest receivable................. 4,482,087 3,694,133
Real estate, net............................ 1,058,859 140,608
Federal Home Loan Bank stock, at cost....... 8,697,600 9,292,800
Mortgage servicing rights, net.............. 3,137,081 3,231,242
Premises and equipment, net................. 12,486,865 12,464,265
Investment in limited partnerships.......... 160,548 168,258
Goodwill.................................... 3,800,938 3,800,938
Core deposit intangible, net................ 305,153 333,617
Prepaid expenses and other assets........... 2,371,321 2,638,681
Deferred tax asset.......................... 1,280,600 1,012,700
------------ ------------
Total assets............................$991,326,265 960,673,041
============ ============
Liabilities and Stockholders' Equity
Deposits....................................$727,814,985 698,902,185
Federal Home Loan Bank advances............. 170,900,000 170,900,000
Accrued interest payable.................... 1,943,401 1,314,356
Customer escrows............................ 980,756 762,737
Accrued expenses and other liabilities...... 5,198,659 5,022,927
------------ ------------
Total liabilities....................... 906,837,801 876,902,205
------------ ------------
Commitments and contingencies
Stockholders' equity:
Serial preferred stock ($.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.................. 57,779,389 57,875,595
Retained earnings, subject to certain
restrictions............................... 93,380,666 91,408,028
Accumulated other comprehensive income
(loss)..................................... (1,095,317) (604,446)
Unearned employee stock ownership plan
shares..................................... (4,495,943) (4,544,300)
Unearned compensation restricted stock
awards..................................... (302,408) 0
Treasury stock, at cost 4,721,168 and
4,708,798 shares........................... (60,869,210) (60,455,328)
------------ ------------
Total stockholders' equity.............. 84,488,464 83,770,836
------------ ------------
Total liabilities and stockholders' equity..$991,326,265 960,673,041
============ ============
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
- ----------------------------------------------------------------------
Three Months Ended
March 31,
2005 2004
- ----------------------------------------------------------------------
Interest income:
Loans receivable............................$13,333,019 11,491,264
Securities available for sale:
Mortgage-backed and related............. 89,768 118,864
Other marketable........................ 641,756 683,407
Cash equivalents............................ 52,269 26,298
Other....................................... 79,528 36,422
----------- -----------
Total interest income................... 14,196,340 12,356,255
----------- -----------
Interest expense:
Deposits.................................... 3,702,631 2,930,034
Federal Home Loan Bank advances............. 1,822,691 2,188,955
----------- -----------
Total interest expense................... 5,525,322 5,118,989
----------- -----------
Net interest income...................... 8,671,018 7,237,266
Provision for loan losses..................... 636,000 819,000
----------- -----------
Net interest income after provision for
loan losses............................. 8,035,018 6,418,266
----------- -----------
Non-interest income:
Fees and service charges.................... 602,597 568,550
Mortgage servicing fees..................... 292,980 287,232
Gain on sales of loans...................... 293,316 412,369
Earnings (losses) in limited partnerships... (7,710) (6,617)
Other....................................... 245,548 274,749
----------- -----------
Total non-interest income................ 1,426,731 1,536,283
----------- -----------
Non-interest expense:
Compensation and benefits................... 2,774,104 2,528,478
Occupancy................................... 995,254 884,602
Deposit insurance premiums.................. 27,906 18,705
Advertising................................. 83,908 87,546
Data processing............................. 237,488 190,565
Amortization of mortgage servicing rights,
net of valuation adjustments............... 239,033 253,449
Other....................................... 932,692 962,574
----------- -----------
Total non-interest expense............... 5,290,385 4,925,919
----------- -----------
Income before income tax expense......... 4,171,364 3,028,630
Income tax expense............................ 1,356,300 910,500
----------- -----------
Income before minority interest.......... 2,815,064 2,118,130
Minority interest............................. 0 (2,331)
----------- -----------
Net income...............................$ 2,815,064 2,120,461
=========== ===========
Basic earnings per share......................$ 0.74 0.54
=========== ===========
Diluted earnings per share....................$ 0.70 0.52
=========== ===========
HMN FINANCIAL, INC. AND SUBSIDIARIES
Selected Consolidated Financial Information
(unaudited)
- ----------------------------------------------------------------------
SELECTED FINANCIAL DATA: Three Months Ended
(dollars in thousands, except per share March 31,
data) 2005 2004
- ----------------------------------------------------------------------
I. OPERATING DATA:
Interest income......................$ 14,196 12,356
Interest expense..................... 5,525 5,119
Net interest income.................. 8,671 7,237
II. AVERAGE BALANCES:
Assets (1).......................... 968,508 886,623
Loans receivable, net............... 800,369 703,126
Mortgage-backed and related
securities (1)..................... 9,292 13,140
Interest-earning assets (1)......... 927,330 841,282
Interest-bearing liabilities........ 876,576 798,366
Equity (1).......................... 86,345 83,526
III. PERFORMANCE RATIOS: (1)
Return on average assets
(annualized)....................... 1.18 % 0.96 %
Interest rate spread information:
Average during period............ 3.65 3.33
End of period.................... 3.53 3.29
Net interest margin................. 3.79 3.46
Ratio of non-interest expense to
average total assets (annualized).. 2.22 2.23
Return on average equity
(annualized)....................... 13.22 10.21
Efficiency.......................... 52.44 56.15
-----------------------------
March 31, Dec 31, March 31,
2005 2004 2004
-----------------------------
IV. ASSET QUALITY :
Total non-performing assets.........$ 4,934 4,882 4,073
Non-performing assets to total
assets............................. 0.50% 0.51% 0.45%
Non-performing loans to total loans
receivable, net.................... 0.43 0.55 0.47
Allowance for loan losses...........$ 9,394 8,996 7,557
Allowance for loan losses to total
loans receivable, net.............. 1.16% 1.15% 1.05%
Allowance for loan losses to non-
performing loans................... 267.99 207.30 222.20
V. BOOK VALUE PER SHARE:
Book value per share................$ 19.17 18.95 18.23
-----------------------------
3 Months Year 3 Months
Ended Ended Ended
Mar 31, Dec 31, Mar 31,
2005 2004 2004
-----------------------------
VI. CAPITAL RATIOS :
Stockholders' equity to total
assets, at end of period........... 8.52% 8.72% 9.13%
Average stockholders' equity to
average assets (1)................. 8.92 9.17 9.42
Ratio of average interest-earning
assets to average interest-bearing
liabilities (1).................... 105.79 105.38 105.38
-----------------------------
March 31, Dec 31, March 31,
2005 2004 2004
-----------------------------
VII. EMPLOYEE DATA:
Number of full time equivalent
employees.......................... 202 208 200
(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