GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

HMN Financial Inc. Reports Operating Results (10-Q)

November 02, 2010 | About:
10qk

10qk

18 followers
HMN Financial Inc. (HMNF) filed Quarterly Report for the period ended 2010-09-30.

Hmn Financial Inc. has a market cap of $13.2 million; its shares were traded at around $3.03 with and P/S ratio of 0.2. HMNF is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

The net loss was $9.4 million for the third quarter of 2010, a $10.3 million change from net income of $0.9 million for the third quarter of 2009. Net loss available to common shareholders for the third quarter of 2010 was $9.8 million, a change of $10.3 million, from net income available to common shareholders of $443,000 for the third quarter of 2009. Diluted loss per common share for the third quarter of 2010 was $2.60, down $2.72 from the diluted income per common share of $0.12 for the third quarter of 2009. The decrease in net income for the third quarter of 2010 compared to the third quarter of 2009 is due primarily to an $8.6 million increase in the provision for loan losses between the periods. The increased provision is primarily the result of additional reserves established on commercial real estate loans as a result of decreases in the estimated value of the underlying collateral supporting the loans and an increase in the general reserves required for

The net loss was $19.0 million for the nine-month period ended September 30, 2010, an increased loss of $8.1 million, from the $10.9 million loss for the nine month period ended September 30, 2009. The net loss available to common shareholders was $20.4 million for the nine month period ended September 30, 2010, an increased loss of $8.1 million, from the net loss available to common shareholders of $12.3 million for the same period of 2009. Diluted loss per common share for the nine-month period in 2010 was $5.43, an increased loss of $2.11, from the diluted loss per share of $3.32 for the same period in 2009. The increase in net loss for the first nine months of 2010 is primarily due to an $11.4 million increase in the provision for income taxes between the periods, which was primarily the result of recording a $12.2 million deferred tax asset valuation reserve during the first nine months of 2010. The increase in net loss was partially offset by a $4.2 million decrease in the losses recognized on real estate owned between the periods.

Net interest income was $7.8 million for the third quarter of 2010, a decrease of $0.8 million, or 9.5%, compared to $8.6 million for the third quarter of 2009. Interest income was $12.0 million for the third quarter of 2010, a decrease of $2.3 million, or 16.5%, from $14.3 million for the same period in 2009. Interest income decreased between the periods primarily because of a $70 million decrease in the average interest-earning assets and a decrease in the average yields between the periods. Average interest earning assets decreased between the periods primarily because of a decrease in the commercial loan portfolio, which occurred because of declining loan demand and the Companys focus on improving credit quality, managing net interest margin and improving capital ratios. The average yield earned on interest-earning assets was 5.19% for the third quarter of 2010, a decrease of 58 basis points from the 5.77% average yield for the third quarter of 2009.

Net interest income was $23.7 million for the first nine months of 2010, a decrease of $2.2 million, or 8.3%, from $25.9 million for the same period in 2009. Interest income was $37.4 million for the nine-month period ended September 30, 2010, a decrease of $7.1 million, or 15.8%, from $44.5 million for the same period in 2009. Interest income decreased between the periods primarily because of an $86 million decrease in the average interest-earning assets and a decrease in the average yields between the periods. Average interest earning assets decreased between the periods primarily because of a decrease in the commercial loan portfolio, which occurred because of declining loan demand and the Companys focus on improving credit quality, managing net interest margin and improving capital ratios. The average yield earned on interest-earning assets was 5.28% for the nine-month period of 2010, a decrease of 47 basis points from the 5.75% average yield for the third quarter of 2009.

Interest expense was $13.7 million for the nine-month period ended September 30, 2010, a decrease of $4.9 million, or 26.3%, from $18.6 million for the same period in 2009. Interest expense decreased primarily because of the lower interest rates paid on money market accounts and certificates of deposit. The decreased rates were the result of the 400 basis point decrease in the federal funds rate that occurred in 2008. Decreases in the federal funds rate generally have a lagging effect and decrease the rates banks pay for deposits. The lagging effect of deposit rate changes is primarily due to the Banks deposits that are in the form of certificates of deposit, which do not re-price immediately when the federal funds rate changes. Interest expense also decreased because of a $79 million decrease in the average interest-bearing liabilities between the periods. The decrease in average interest-bearing liabilities is primarily the result of a decrease in the average outstanding brokered certificates of deposit between the periods. The average interest rate paid on interest-bearing liabilities was 2.05% for the nine month period of 2010, a decrease of 50 basis points from the 2.55% average rate paid for the same nine-month period of 2009.

The provision for loan losses was $22.8 million for the first nine-months of 2010, a decrease of $0.4 million, from $23.2 million for the same nine-month period in 2009. The provision for loan losses remained elevated in the first nine months of 2010 primarily because of the $15.4 million in additional reserves established on commercial real estate and commercial business loans primarily as a result of decreases in the estimated value of the underlying collateral supporting the loans, $1.5 million in additional reserves established on other loans due to risk rating changes, $1.6 million in additional reserves established on a commercial loan due to the borrower filing bankruptcy and a $4.3 million increase in the reserves required for other risk rated commercial loans as a result of an internal loan portfolio analysis.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 4.7/5 (3 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Email Hide