-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, USt7/aTuU/Oy5eQHZYnFv2tvzgzDjJJC4RZ8wdPhaIuzqc77ABp4rIoXni7iO36g kP4VyBrYjq4y6gtR0kZYoA== 0001157523-04-006802.txt : 20040727 0001157523-04-006802.hdr.sgml : 20040727 20040726091725 ACCESSION NUMBER: 0001157523-04-006802 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040723 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HMN FINANCIAL INC CENTRAL INDEX KEY: 0000921183 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 411777397 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24100 FILM NUMBER: 04930017 BUSINESS ADDRESS: STREET 1: 1016 CIVIC CENTER DRIVE NORTHWEST CITY: ROCHESTER STATE: MN ZIP: 55901 BUSINESS PHONE: 5075351200 8-K 1 a4687091.txt HMN FINANCIAL 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 23, 2004 HMN Financial, Inc. ------------------- (Exact name of registrant as specified in its chapter) Delaware 0-24100 41-1777397 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 1016 Civic Center Drive Northwest PO Box 6057 Rochester, Minnesota 55903-6057 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (507) 535-1200 ---------------------------------------------------------- (Former name or former address, if changed since last report) Item 7. Exhibits. (c) Exhibits (the following exhibits are furnished to the SEC) Exhibit Number Description -------------- ----------- 99 Press release dated July 22, 2004 Item 12. Results of Operations and Financial Condition. On July 22, 2004, HMN Financial, Inc. (the "Company") reported its financial results for its second fiscal quarter ended June 30, 2004. See the Company's press release dated July 22, 2004, which is furnished as Exhibit 99 and incorporated by reference in this Current Report on Form 8-K. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HMN Financial, Inc. (Registrant) Date: July 22, 2004 /s/ Jon Eberle Jon Eberle, SVP/CFO/Treasurer EX-99 3 a4687091ex99.txt PRESS RELEASE Exhibit 99 HMN Financial, Inc. Announces Second Quarter Results ROCHESTER, Minn.--(BUSINESS WIRE)--July 22, 2004--HMN Financial, Inc. (HMN) (Nasdaq:HMNF): Second Quarter Highlights -- Diluted earnings per share up $0.10, or 19.2%, over second quarter of 2003 -- Net interest income up $1.4 million, or 24.3%, over second quarter of 2003 -- Loan sale gains down $1.0 million, or 66.8%, from second quarter of 2003 -- Amortization of mortgage servicing rights down $806,000, or 72.7%, from second quarter of 2003 Year to Date Highlights -- Diluted earnings per share up $0.26, or 29.9%, over first six months of 2003 -- Net interest income up $3.2 million, or 27.6%, over first six months of 2003 -- Loan sale gains down $2.1 million, or 69.3%, from first six months of 2003 -- Amortization of mortgage servicing rights down $1.3 million, or 70.7%, over first six months of 2003 EARNINGS SUMMARY Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2004 2003 2004 2003 ----------- ---------- ----------- ---------- Net Income $2,497,160 2,030,228 $4,617,620 3,419,768 Diluted earnings per share 0.62 0.52 1.13 0.87 Return on average assets 1.12% 1.06% 1.04% 0.91% Return on average equity 12.06% 10.45% 11.14% 8.84% Book value per share $18.20 $17.44 $18.20 $17.44 HMN Financial, Inc. (HMN) (Nasdaq:HMNF), the $914 million holding company for Home Federal Savings Bank (the Bank), today reported net income of $2.5 million for the second quarter of 2004, up $467,000, or 23.0%, from net income of $2.0 million for the second quarter of 2003. Diluted earnings per common share for the second quarter of 2004 were $0.62, up $0.10, from $0.52 for the second quarter of 2003. Second Quarter Results Net Interest Income Net interest income was $7.3 million for the second quarter of 2004, an increase of $1.4 million, or 24.3%, compared to $5.9 million for the second quarter of 2003. Interest income was $12.4 million for the second quarter of 2004, an increase of $1.4 million, or 12.6%, from $11.0 million for the same period in 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 $120 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 second quarter of 2004 when compared to the same period of 2003. Interest expense was $5.1 million for the second quarter of 2004, a decrease of $48,000, or 0.9%, compared to $5.1 million for the second quarter of 2003. Interest expense on deposits and Federal Home Loan Bank advances decreased primarily because of a decrease in the interest rates paid. The decrease in the interest rates paid is primarily the result of the $84 million in growth that was experienced in checking and money market accounts, which generally have lower interest rates than other deposit accounts. Provision for Loan Losses The provision for loan losses was $447,000 for the second quarter of 2004, a decrease of $43,000, or 8.8%, from $490,000 for the second 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 second quarter of 2004 when compared to the second quarter of 2003. Total non-performing assets were $3.5 million at June 30, 2004, a decrease of $602,000, or 14.8%, from $4.1 million at March 31, 2004. The decrease in non-performing assets is primarily related to consumer loans that became accruing during the quarter. Non-Interest Income and Expense Non-interest income was $1.7 million for the second quarter of 2004, a decrease of $1.0 million, or 37.6%, from $2.7 million for the same period in 2003. Non-interest income decreased by $223,000 because of the lower gains recognized on the sale of securities during the second quarter of 2004 when compared to the same quarter in 2003. Gains on sales of loans decreased by $1.0 million due to the significant decrease in mortgage loan activity in the second quarter of 2004 when compared to the same period in 2003. These decreases in non-interest income were partially offset by an increase of $150,000 in fees and service charges between the periods due to an increase in the number of deposit accounts and the fees charged. Mortgage servicing fees increased by $52,000 because of the increased size of the servicing portfolio and other non-interest income increased by $68,000 primarily because of increased revenues from the sale of uninsured investment products. Non-interest expense was $5.0 million for the second quarter of 2004, a decrease of $184,000, or 3.5%, from $5.2 million for the same period of 2003. Amortization expense on mortgage servicing rights decreased by $806,000 between the quarters because of a decrease in the prepayments on the mortgage loans being serviced. Data processing costs decreased by $61,000 primarily because of the renegotiation of a third party service contract in the fourth quarter of 2003. Compensation expense increased by $554,000 primarily because of an increase in the number of employees and because of annual increases in payroll and employee benefit costs. Occupancy expense increased by $102,000 primarily because of increases in real estate taxes on existing facilities. Income tax expense increased by $188,000 between the periods primarily because of increased taxable income. Return on Assets and Equity Return on average assets for the second quarter of 2004 was 1.12%, compared to 1.06% for the second quarter of 2003. Return on average equity was 12.06% for the second quarter of 2004, compared to 10.45% for the same quarter in 2003. Book value per common share at June 30, 2004 was $18.20, compared to $17.44 at June 30, 2003. Six Month Period Results Net Income Net income was $4.6 million for the six month period ended June 30, 2004, an increase of $1.2 million, or 35.0%, compared to $3.4 million for the six month period ended June 30, 2003. Diluted earnings per share for the six month period in 2004 were $1.13, up $0.26, or 29.9%, from $0.87 for the same six month period in 2003. Net Interest Income Net interest income was $14.6 million for the first six months of 2004, an increase of $3.2 million, or 27.6%, from $11.4 million for the same period in 2003. Interest income was $24.8 million for the six month period ended June 30, 2004, an increase of $3.3 million, or 15.2%, from $21.5 million for the same six month period in 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 $120 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 in the first six months of 2004 when compared to the same period in 2003. Interest expense was $10.2 million for the six month period ended June 30, 2004, an increase of $121,000, or 1.2%, compared to $10.1 million for the same period of 2003. Interest expense on deposits and Federal Home Loan Bank advances decreased by $2.1 million due to a decline in the interest rates paid and increased by $2.2 million due to the $137 million increase in the average outstanding balance of deposits and advances between the periods. Provision for Loan Losses The provision for loan losses was $1.3 million for the six month period of 2004, a decrease of $89,000, from $1.4 million for the same six month period in 2003. The provision for loan losses decreased primarily because of the slower loan growth that was experienced in the commercial and consumer loan portfolios during the first six months of 2004 when compared to the same period of 2003. Total non-performing assets were $3.5 million at June 30, 2004, a decrease of $1.5 million, or 31.1%, from $5.0 million at December 31, 2003. The decrease in non-performing assets was primarily due to the payoff of a commercial real estate loan and a reduction in non-performing consumer loans during the first six month of 2004. Non-Interest Income and Expense Non-interest income was $3.2 million for the first six months of 2004, a decrease of $2.1 million, or 38.9%, from $5.3 million for the same period in 2003. Non-interest income decreased by $814,000 because of lower gains on the sales of securities. Gains on sales of loans decreased by $2.1 million due to the significant decrease in mortgage loan activity in the first six months of 2004 when compared to the same period of 2003. These decreases in non-interest income were partially offset by the $310,000 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. Interest rates on mortgage loans decreased during the first six months of 2003 which caused the value of HMN's investment in a limited partnership that owned mortgage loan servicing assets to decrease in value during the first six months of 2003. The value of servicing rights generally decreases when mortgage rates decrease because of the anticipated increase in prepayments expected to be received on the mortgage servicing assets. Fees and service charges increased by $286,000 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 $122,000 due to the increased size of the servicing portfolio between the periods. Other non-interest income increased by $122,000 primarily because of increased revenues from the sale of uninsured investment products. Non-interest expense was $9.9 million for the first six months of 2004, a decrease of $471,000, or 4.5%, from $10.4 million for the same period in 2003. Amortization expense on mortgage servicing rights decreased by $1.3 million because of a decrease in the prepayments on the mortgage loans being serviced. Data processing costs decreased by $141,000 primarily because of the renegotiation of a third party service contract in the fourth quarter of 2003. Compensation expense increased by $803,000 because of an increase in the number of employees and because of annual payroll and benefit cost increases. Occupancy expense increased by $162,000 primarily because of increases in real estate taxes on existing facilities. Income tax expense increased by $474,000 between the periods primarily because of increased taxable income. Return on Assets and Equity Return on average assets for the six month period ended June 30, 2004 was 1.04%, compared to 0.91% for the same period in 2003. Return on average equity was 11.14% for the six-month period ended in 2004, compared to 8.84% for the same period in 2003. President's Statement "I am pleased to report the continued improved financial results during the first six months of 2004 despite the significant decrease in the gains recognized on the sales of mortgage loans", said HMN President Michael McNeil "HMN continues to grow and change the mix of both its assets and liabilities. These changes have improved the profitability of HMN's core business which resulted in quarterly and six month diluted earnings per share increases over the prior year of $0.10 and $0.26, respectively." General Information HMN Financial, Inc. and Home Federal Savings Bank are headquartered in Rochester, Minnesota. The Bank operates nine full service offices in southern Minnesota located in Albert Lea, Austin, LaCrescent, Rochester, Spring Valley and Winona and two full service offices in Iowa located in Marshalltown and Toledo. Home Federal Savings Bank also operates loan origination offices located in Stewartville, Lake City and St. Cloud, Minnesota and West Des Moines, Iowa. Eagle Crest Capital Bank, a division of Home Federal Savings Bank, operates branch offices in Edina and Rochester, Minnesota. Safe Harbor Statement This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to those relating to HMN's financial expectations for earnings and revenues. A number of factors could cause actual results to differ materially from HMN's assumptions and expectations. These factors include possible legislative changes and adverse economic, business and competitive developments such as shrinking interest margins; deposit outflows; reduced demand for financial services and loan products; changes in accounting policies and guidelines. Additional factors that may cause actual results to differ from HMN's assumptions and expectations include those set forth in HMN's most recent filings with the Securities and Exchange Commission. All forward-looking statements are qualified by, and should be considered in conjunction with, such cautionary statements. HMN FINANCIAL, INC. AND SUBSIDIARIES Consolidated Balance Sheets (unaudited) - ---------------------------------------------------------------------- June 30, December 31, 2004 2003 - ---------------------------------------------------------------------- Assets Cash and cash equivalents...................$ 41,638,817 30,496,823 Securities available for sale: Mortgage-backed and related securities (amortized cost $10,668,580 and $13,707,005)............................ 9,882,177 13,048,718 Other marketable securities (amortized cost $100,739,558 and $91,035,285)..... 99,947,189 91,615,047 ------------ ------------ 109,829,366 104,663,765 ------------ ------------ Loans held for sale......................... 3,766,543 6,542,824 Loans receivable, net....................... 722,800,277 688,951,119 Accrued interest receivable................. 3,530,635 3,462,221 Real estate, net............................ 254,869 73,271 Federal Home Loan Bank stock, at cost....... 9,938,200 10,004,400 Mortgage servicing rights, net.............. 3,335,516 3,447,843 Premises and equipment, net................. 12,454,962 12,110,151 Investment in limited partnerships.......... 181,258 617,042 Goodwill.................................... 3,800,938 3,800,938 Core deposit intangible..................... 390,546 447,474 Prepaid expenses and other assets........... 1,519,082 2,108,575 Deferred tax assets......................... 656,800 0 ------------ ------------ Total assets............................$914,097,809 866,726,446 ============ ============ Liabilities and Stockholders' Equity Deposits....................................$627,304,925 551,687,995 Federal Home Loan Bank advances............. 198,900,000 203,900,000 Accrued interest payable.................... 857,492 766,837 Advance payments by borrowers for taxes and insurance.................................. 878,094 22,457,671 Accrued expenses and other liabilities...... 5,028,548 6,952,600 Deferred tax liabilities.................... 0 26,300 ------------ ------------ Total liabilities....................... 832,969,059 785,791,403 ------------ ------------ Commitments and contingencies............... Minority interest........................... 1,698 3,986 Stockholders' equity: Serial preferred stock ($.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.................. 57,673,514 57,863,726 Retained earnings, subject to certain restrictions............................... 88,424,074 85,364,657 Accumulated other comprehensive loss........ (1,021,573) (50,725) Unearned employee stock ownership plan shares..................................... (4,641,172) (4,738,084) Treasury stock, at cost 4,671,798 and 4,616,010 shares........................... (59,399,078) (57,599,804) ------------ ------------ Total stockholders' equity.............. 81,127,052 80,931,057 ------------ ------------ Total liabilities and stockholders' equity..$914,097,809 866,726,446 ============ ============ - ---------------------------------------------------------------------- HMN FINANCIAL, INC. AND SUBSIDIARIES Consolidated Statements of Income (unaudited) Three Months Ended Six Months Ended June 30, June 30, ----------------------- ------------------------- 2004 2003 2004 2003 ----------- ----------- ------------ ------------ Interest income: Loans receivable.$11,486,417 10,243,717 22,977,681 19,883,641 Securities available for sale: Mortgage- backed and related...... 92,428 (39,454) 211,292 102,759 Other marketable... 766,391 690,848 1,449,798 1,252,067 Cash equivalents. 40,042 56,980 66,340 85,897 Other............ 41,398 84,033 77,820 182,684 ----------- ----------- ------------ ------------ Total interest income....... 12,426,676 11,036,124 24,782,931 21,507,048 ----------- ----------- ------------ ------------ Interest expense: Deposits......... 2,894,319 2,492,554 5,824,353 4,963,817 Federal Home Loan Bank advances... 2,165,680 2,615,630 4,354,635 5,094,302 ----------- ----------- ------------ ------------ Total interest expense...... 5,059,999 5,108,184 10,178,988 10,058,119 ----------- ----------- ------------ ------------ Net interest income....... 7,366,677 5,927,940 14,603,943 11,448,929 Provision for loan losses............. 447,000 490,000 1,266,000 1,355,000 ----------- ----------- ------------ ------------ Net interest income after provision For loan losses..... 6,919,677 5,437,940 13,337,943 10,093,929 ----------- ----------- ------------ ------------ Non-interest income: Fees and service charges......... 704,651 555,036 1,273,201 987,176 Mortgage servicing fees.. 290,849 238,729 578,080 455,305 Securities gains, net............. 1,361 224,751 1,361 815,786 Gains on sales of loans........... 506,862 1,526,558 919,231 2,991,790 Earnings (losses) in limited partnerships.... (6,500) 31,528 (13,117) (323,314) Other............ 183,048 114,694 457,797 335,794 ----------- ----------- ------------ ------------ Total non- interest income....... 1,680,271 2,691,296 3,216,553 5,262,537 ----------- ----------- ------------ ------------ Non-interest expense: Compensation and benefits........ 2,581,764 2,027,572 5,110,242 4,307,074 Occupancy........ 871,170 769,518 1,755,772 1,593,317 Federal deposit insurance premiums........ 27,794 17,855 46,499 36,791 Advertising...... 87,850 100,988 175,396 185,852 Data processing.. 228,721 289,938 419,286 561,046 Amortization of mortgage servicing rights, net of valuation adjustments and servicing costs. 302,184 1,108,101 555,633 1,898,631 Other............ 897,762 867,136 1,860,336 1,811,687 ----------- ----------- ------------ ------------ Total non- interest expense...... 4,997,245 5,181,108 9,923,164 10,394,398 ----------- ----------- ------------ ------------ Income before income tax expense...... 3,602,703 2,948,128 6,631,332 4,962,068 Income tax expense.. 1,105,500 917,900 2,016,000 1,542,300 ----------- ----------- ------------ ------------ Income before minority interest..... 2,497,203 2,030,228 4,615,332 3,419,768 Minority interest... 43 0 (2,288) 0 ----------- ----------- ------------ ------------ Net income....$ 2,497,160 2,030,228 4,617,620 3,419,768 =========== =========== ============ ============ Basic earnings per share..............$ 0.65 0.54 1.19 0.91 =========== =========== ============ ============ Diluted earnings per share..............$ 0.62 0.52 1.13 0.87 =========== =========== ============ ============ HMN FINANCIAL, INC. AND SUBSIDIARIES Selected Consolidated Financial Information (unaudited) - ---------------------------------------------------------------------- SELECTED FINANCIAL DATA: Three Months Six Months (dollars in thousands, except per Ended June 30, Ended June 30, share data) 2004 2003 2004 2003 - ---------------------------------------------------------------------- I. OPERATING DATA: Interest income.............$ 12,427 11,036 24,783 21,507 Interest expense............ 5,060 5,108 10,179 10,058 Net interest income......... 7,367 5,928 14,604 11,449 II. AVERAGE BALANCES: Assets(1).................. 899,640 771,117 893,131 754,504 Loans receivable, net...... 706,754 587,879 704,940 563,528 Mortgage-backed and related securities(1)............. 11,520 13,291 12,330 26,521 Interest-earning assets(1). 858,116 734,320 849,699 717,292 Interest-bearing liabilities............... 812,544 684,973 805,455 668,320 Equity(1).................. 83,252 77,957 83,389 78,040 III. PERFORMANCE RATIOS:(1) Return on average assets (annualized) 1.12% 1.06% 1.04% 0.91% Interest rate spread information: Average during period... 3.32 3.04 3.32 3.01 End of period........... 3.20 3.04 3.20 3.04 Net interest margin........ 3.45 3.24 3.46 3.22 Ratio of operating expense to average total assets (annualized).............. 2.23 2.69 2.23 2.78 Return on average equity (annualized).............. 12.06 10.45 11.14 8.84 Efficiency................. 55.24 60.11 55.68 62.20 --------------------------- June 30, Dec. 31, June 30, 2004 2003 2003 --------------------------- IV. ASSET QUALITY: Total non-performing assets.$ 3,471 5,035 6,968 Non-performing assets to total assets............... 0.38% 0.58% 0.89% Non-performing loans to total loans receivable, net 0.40% 0.68% 0.92% Allowance for loan losses...$ 7,793 6,940 6,088 Allowance for loan losses to total assets............... 0.85% 0.80% 0.77% Allowance for loan losses to total loans receivable, net 1.08 1.01 1.00 Allowance for loan losses to non-performing loans....... 272.98 147.99 108.97 V. BOOK VALUE PER SHARE: Book value per share........$ 18.20 17.93 17.44 --------------------------- Six Six Months Year Months Ended Ended Ended June 30, Dec 31, June 30, 2004 2003 2003 --------------------------- VI. CAPITAL RATIOS: Stockholders' equity to total assets, at end of period..................... 8.88% 9.34 % 9.86% Average stockholders' equity to average assets(1)....... 9.34 10.15 10.34 Ratio of average interest- earning assets to average interest-bearing liabilities(1)............. 105.49 106.65 107.33 -------------------------- June 30, Dec. 31, June 30, 2004 2003 2003 --------------------------- VII. EMPLOYEE DATA: Number of full time equivalent employees....... 198 203 190 - -------------------------------------------------------------- - ---------------------------------------------------------------------- (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 -----END PRIVACY-ENHANCED MESSAGE-----