Second Quarter Summary
- Net income of $1.4 million, down $0.9 million, from $2.3 million for second quarter of 2022
- Diluted earnings per share of $0.32, down $0.20, from $0.52 for second quarter of 2022
- Net interest income of $7.7 million, down $0.1 million, from $7.8 million for second quarter of 2022
- Gain on sales of loans of $0.3 million, down $0.5 million, from $0.8 million for second quarter of 2022
- Net interest margin of 2.90%, down 20 basis points, from 3.10% for second quarter of 2022
- Loans receivable, net of $826.9 million, up $40.9 million, from $786.0 million at March 31, 2023
Year to Date Summary
Net income of $3.1 million, down $0.7 million, from $3.8 million for first six months of 2022Diluted earnings per share of $0.70, down $0.16, from $0.86 for first six months of 2022Net interest income of $15.8 million, up $0.8 million from $15.0 million for first six months of 2022Gain on sales of loans of $0.6 million, down $1.1 million, from $1.7 million for first six months of 2022Net interest margin of 3.00%, down 2 basis points, from 3.02% for first six months of 2022Loans receivable, net of $826.9 million, up $49.8 million, from $777.1 million at December 31, 2022Net Income Summary Three months ended Six months ended June 30, June 30, (Dollars in thousands, except per share amounts) 2023 2022 2023 2022 Net income$1,421 2,289 $3,055 3,776 Diluted earnings per share 0.32 0.52 0.70 0.86 Return on average assets (annualized) 0.52% 0.88% 0.56% 0.73%Return on average equity (annualized) 4.81% 8.09% 5.22% 6.73%Book value per share$22.76 21.25 $22.76 21.25ROCHESTER, Minn., July 20, 2023 (GLOBE NEWSWIRE) -- HMN Financial, Inc. (HMN or the Company) (HMNF, Financial), the $1.1 billion holding company for Home Federal Savings Bank (the Bank), today reported net income of $1.4 million for the second quarter of 2023, a decrease of $0.9 million compared to net income of $2.3 million for the second quarter of 2022. Diluted earnings per share for the second quarter of 2023 was $0.32, a decrease of $0.20 from diluted earnings per share of $0.52 for the second quarter of 2022. The decrease in net income between the periods was primarily because of a $0.5 million decrease in the gain on sales of loans due to a decrease in mortgage loan sales, a $0.3 million increase in compensation expense due to annual salary increases, a $0.2 million increase in the provision for credit losses, and a $0.2 million increase in other expenses primarily because of an increase in Federal Deposit Insurance Corporation (FDIC) insurance expense. These decreases in net income were partially offset by a reduction in income tax expense between the periods as a result of the reduced pretax income.
President’s Statement
“The gain on sales of mortgage loans decreased during the quarter as fewer loans were sold in the secondary market,” said Bradley Krehbiel, President and Chief Executive Officer of HMN. “In addition, deposit outflows increased our use of higher rate wholesale funding sources which increased our cost of funds during the quarter. Despite these challenges, we will continue to focus our effort on expanding our core customer deposit relationships.”
Second Quarter Results
Net Interest Income
Net interest income was $7.7 million for the second quarter of 2023, a decrease of $0.1 million, or 0.5%, compared to $7.8 million for the second quarter of 2022. Interest income was $10.5 million for the second quarter of 2023, an increase of $2.4 million, or 30.3%, from $8.1 million for the second quarter of 2022. Interest income increased because of the $62.1 million increase in the average interest-earning assets between the periods and also because of the increase in the average yield earned on interest-earning assets between the periods. The average yield earned on interest-earning assets was 3.94% for the second quarter of 2023, an increase of 72 basis points from 3.22% for the second quarter of 2022. The increase in the average yield is primarily related to the increase in market interest rates as a result of the 3.50% increase in the prime interest rate between the periods.
Interest expense was $2.8 million for the second quarter of 2023, an increase of $2.5 million, or 848.3%, compared to $0.3 million for the second quarter of 2022. Interest expense increased primarily because of the increase in the average interest rate paid on interest-bearing liabilities between the periods. Interest expense also increased because of the $52.2 million increase in the average interest-bearing liabilities and non-interest bearing deposits between the periods. The average interest rate paid on interest-bearing liabilities and non-interest bearing deposits was 1.13% for the second quarter of 2023, an increase of 100 basis points from 0.13% for the second quarter of 2022. The increase in the average rate paid is primarily related to the change in the types of funding sources as more brokered deposits, certificates of deposit, and Federal Home Loan Bank (FHLB) advances were used in the second quarter of 2023 than in the second quarter of 2022. These funding sources generally have higher interest rates than traditional checking and money market accounts. The increase in market interest rates as a result of the 3.50% increase in the federal funds rate between the periods also contributed to higher funding costs in the second quarter of 2023 when compared to the same period in 2022. Net interest margin (net interest income divided by average interest-earning assets) for the second quarter of 2023 was 2.90%, a decrease of 20 basis points, compared to 3.10% for the second quarter of 2022. The decrease in the net interest margin is primarily because the increase in the average rate paid on interest-bearing liabilities and non-interest bearing deposits exceeded the increase in the average yield earned on interest-earning assets between the periods.
A summary of the Company’s net interest margin for the three and six-month periods ended June 30, 2023 and 2022 is as follows:
For the three-month period ended June 30, 2023 June 30, 2022 (Dollars in thousands) AverageOutstanding
Balance Interest
Earned/
Paid Yield/
Rate Average
Outstanding
Balance Interest
Earned/
Paid Yield/
Rate Interest-earning assets: Securities available for sale$259,187 800 1.24%$299,138 816 1.09%Loans held for sale 1,872 29 6.24 2,710 30 4.53 Single family loans, net 225,065 2,195 3.91 175,948 1,511 3.44 Commercial loans, net 527,900 6,663 5.06 459,406 5,151 4.50 Consumer loans, net 47,518 732 6.18 41,869 473 4.53 Other 6,661 78 4.70 27,012 76 1.13 Total interest-earning assets 1,068,203 10,497 3.94 1,006,083 8,057 3.22 Interest-bearing liabilities: Checking accounts 169,870 253 0.60 155,832 38 0.10 Savings accounts 115,658 28 0.10 124,170 18 0.06 Money market accounts 267,075 1,049 1.58 267,024 158 0.24 Certificate accounts 152,414 1,219 3.21 78,956 73 0.37 Customer escrows 4,737 23 2.00 0 0 0.00 Advances and other borrowings 14,419 197 5.48 1,968 5 1.04 Total interest-bearing liabilities 724,173 627,950 Non-interest checking 252,008 296,715 Other non-interest bearing liabilities 3,043 2,350 Total interest-bearing liabilities and
non-interest bearing deposits
$979,224 2,769 1.13
$927,015 292 0.13 Net interest income $7,728 $7,765 Net interest rate spread 2.81% 3.09%Net interest margin 2.90% 3.10%
Outstanding
Balance Interest
Earned/
Paid Yield/
Rate Average
Outstanding
Balance Interest
Earned/
Paid Yield/
Rate Interest-earning assets: Securities available for sale$263,909 1,595 1.22%$297,264 1,604 1.09%Loans held for sale 1,546 47 6.16 3,335 65 3.93 Single family loans, net 216,643 4,146 3.86 173,014 2,947 3.43 Commercial loans, net 525,425 13,036 5.00 454,371 9,959 4.42 Consumer loans, net 46,655 1,393 6.02 41,301 945 4.61 Other 8,726 193 4.46 35,256 102 0.58 Total interest-earning assets 1,062,904 20,410 3.87 1,004,541 15,622 3.14 Interest-bearing liabilities: Checking accounts 165,811 441 0.54 158,061 79 0.10 Savings accounts 118,185 54 0.09 122,610 36 0.06 Money market accounts 262,944 1,704 1.31 258,929 290 0.23 Certificate accounts 144,743 2,153 3.00 81,635 165 0.41 Customer escrows 5,560 55 2.00 0 0 0.00 Advances and other borrowings 7,856 212 5.44 990 5 1.04 Total interest-bearing liabilities 705,099 622,225 Non-interest checking 266,989 300,187 Other non-interest bearing liabilities 2,735 2,492 Total interest-bearing liabilities and
non-interest bearing deposits
$974,823 4,619 0.96
$924,904 575 0.13 Net interest income $15,791 $15,047 Net interest rate spread 2.91% 3.01%Net interest margin 3.00% 3.02%
Provision for Credit Losses
The provision for credit losses was $0.3 million for the second quarter of 2023, an increase of $0.2 million compared to $0.1 million for the second quarter of 2022. The provision for credit losses increased primarily because of the additional loan growth that was experienced in the second quarter of 2023 when compared to the same period in 2022.
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluations. The collective reserve amount is assessed based on size and risk characteristics of the various portfolio segments, past loss history and other adjustments determined to have a potential impact on future credit losses. The collective reserve amount increased from March 31, 2023 primarily because of the loan growth that was experienced during the quarter. The Company’s qualitative reserve adjustments did not materially change during the quarter due to management’s perception that economic conditions had not materially changed, including those related to the elevated inflation rate, and enacted and expected increases in the federal funds rate. Total non-performing assets were $1.8 million at June 30, 2023 compared to $1.9 million at March 31, 2023.
A reconciliation of the Company’s allowance for credit losses for the second quarters of 2023 and 2022 is summarized as follows:
(Dollars in thousands) 2023 2022 (1)Balance at March 31,$11,342 9,584 Provision 200 66 Charge offs: Consumer (27) (15)Recoveries 2 9 Balance at June 30,$11,517 9,644Allocated to: Collective allowance$11,345 9,240 Individual allowance 172 404 $11,517 9,644
(1) The 2022 amounts presented are calculated under prior accounting standard.
The following table summarizes the amounts and categories of non-performing assets in the Bank’s portfolio and loan delinquency information as of the end of the two most recently completed quarters.
Non-Interest Income and Expense
Non-interest income was $2.0 million for the second quarter of 2023, a decrease of $0.5 million, or 21.5%, from $2.5 million for the second quarter of 2022. Gain on sales of loans decreased $0.5 million between the periods because of a decrease in single family loan sales due primarily to an increase in the amount of originated mortgage loans that were placed into the loan portfolio. The increase in mortgage loans that were placed into the portfolio was the result of a targeted effort to originate loans to our executive banking clients. Other non-interest income decreased $0.1 million due primarily to a decrease in the gains realized on the sale of real estate owned between the periods. Fees and service charges increased slightly between the periods due primarily to an increase in the commitment fees earned on unused commercial lines of credit. Loan servicing fees decreased slightly between the periods due to a decrease in the aggregate balances of single family loans that were being serviced for others as more serviced loans were paid off than were added to the servicing portfolio during the period.
Non-interest expense was $7.5 million for the second quarter of 2023, an increase of $0.5 million, or 6.8%, from $7.0 million for the second quarter of 2022. Compensation and benefits expense increased $0.3 million primarily because of annual salary increases and also because of a decrease in the direct loan origination compensation costs that were deferred as a result of the reduced commercial loan production between the periods. Other non-interest expense increased $0.2 million between the periods primarily because of an increase in FDIC insurance expense due to an increase in assessment rates. Occupancy and equipment expense increased slightly due primarily to an increase in building expenses between the periods. Professional services increased slightly between the periods primarily because of an increase in legal expenses. These increases in non-interest expense were partially offset by a slight decrease in data processing expenses due to a decrease in system processing charges between the periods.
Income tax expense was $0.6 million for the second quarter of 2023, a decrease of $0.3 million from $0.9 million for the second quarter of 2022. The decrease in income tax expense between the periods is primarily the result of a decrease in pre-tax income.
Return on Assets and Equity
Return on average assets (annualized) for the second quarter of 2023 was 0.52%, compared to 0.88% for the second quarter of 2022. Return on average equity (annualized) was 4.81% for the second quarter of 2023, compared to 8.09% for the same period in 2022. Book value per common share at June 30, 2023 was $22.76, compared to $21.25 at June 30, 2022.
Six-Month Period Results
Net Income
Net income was $3.1 million for the six-month period ended June 30, 2023, a decrease of $0.7 million, or 19.1%, compared to net income of $3.8 million for the six-month period ended June 30, 2022. Diluted earnings per share for the six-month period ended June 30, 2023 was $0.70, a decrease of $0.16 per share compared to diluted earnings per share of $0.86 for the same period in 2022. The decrease in net income between the periods was because of a $1.1 million decrease in the gain on sales of loans because of a decrease in mortgage loan sales, a $0.8 million increase in compensation expense due to annual salary increases, and a $0.3 million increase in other expenses primarily because of an increase in FDIC insurance expense. These decreases in net income were partially offset by a $0.8 million increase in net interest income due to an increase in interest rates and the amount of average interest earning assets outstanding, a $0.4 million reduction in income tax expense as a result of the reduced pretax income between the periods, and a $0.3 million decrease in professional expenses due to a decrease in legal fees.
Net Interest Income
Net interest income was $15.8 million for the first six months of 2023, an increase of $0.8 million, or 4.9%, compared to $15.0 million for the same period of 2022. Interest income was $20.4 million for the first six months of 2023, an increase of $4.8 million, or 30.6%, from $15.6 million for the first six months of 2022. Interest income increased because of the $58.4 million increase in the average interest-earning assets between the periods and also because of the increase in the average yield earned on interest-earning assets between the periods. The average yield earned on interest-earning assets was 3.87% for the first six months of 2023, an increase of 73 basis points from 3.14% for the first six months of 2022. The increase in the average yield is primarily related to the increase in market interest rates as a result of the 3.50% increase in the prime interest rate between the periods.
Interest expense was $4.6 million for the first six months of 2023, an increase of $4.0 million, or 703.3%, compared to $0.6 million for the same period of 2022. Interest expense increased primarily because of the increase in the average interest rate paid on interest-bearing liabilities between the periods. Interest expense also increased because of the $49.9 million increase in the average interest-bearing liabilities and non-interest bearing deposits between the periods. The average interest rate paid on interest-bearing liabilities and non-interest bearing deposits was 0.96% for the first six months of 2023, an increase of 83 basis points from 0.13% for the first six months of 2022. The increase in the average rate paid is primarily related to the change in the types of funding sources used between the periods as more brokered deposits, certificates of deposits, and FHLB advances were used in the first six months of 2023 than in the first six months of 2022. These funding sources generally have interest rates that are higher than traditional checking and money market accounts. The increase in market interest rates as a result of the 3.50% increase in the federal funds rate between the periods also contributed to the higher funding costs in the first six months of 2023 when compared to the same period in 2022. Net interest margin (net interest income divided by average interest-earning assets) for the first six months of 2023 was 3.00%, a decrease of 2 basis points, compared to 3.02% for the first six months of 2022. The decrease in the net interest margin is primarily because the increase in the average rate paid on interest-bearing liabilities and non-interest bearing deposits exceeded the increase in the average yield earned on interest-earning assets as a result of the increase in the prime rate between the periods.
Provision for Credit Losses
The provision for credit losses was $0.2 million in the first six months of 2023, a decrease of $0.2 million compared to $0.4 million for the first six months of 2022. The provision for credit losses decreased between the periods primarily because the impact on the provision of the additional loan growth that was experienced in the first six months of 2023 was less than it was for the same period in 2022 under the prior accounting standard.
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluations. The collective reserve amount is assessed based on size and risk characteristics of the various portfolio segments, past loss history and other adjustments determined to have a potential impact on future credit losses. The collective reserve amount increased from December 31, 2022 primarily because of the adoption of Accounting Standard Update (ASU) 2016-13 on January 1, 2023 and also because of the loan growth that was experienced during the first six months of 2023. The Company’s qualitative reserve adjustments did not materially change during the first six months of 2023 due to management’s perception that economic conditions had not materially changed, including those related to the elevated inflation rate, and enacted and expected increases in the federal funds rate. Total non-performing assets were $1.8 million at June 30, 2023 compared to $1.9 million at December 31, 2022.
A reconciliation of the Company’s allowance for credit losses for the six-month periods ending June 30, 2023 and 2022 is summarized as follows:
(Dollars in thousands) 2023 2022 Balance at January 1,$10,277 9,279 Adoption of Accounting Standard Update (ASU) 2016-13 1,070 0 Provision 168 362 Charge offs: Consumer (27) (16)Recoveries 29 19 Balance at June 30,$11,517 9,644On January 1, 2023, the Company adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The transition to this ASU resulted in a cumulative-effect adjustment to the allowance for credit losses of $1.1 million, an increase in deferred tax assets of $0.3 million, and a decrease to retained earnings of $0.8 million as of the adoption date. In addition, a liability of $0.1 million was established for projected future losses on unfunded commitments on outstanding lines of credit upon adoption. The projected liability for unfunded commitments increased $0.1 million during the first six months of 2023 and the provision for credit losses was increased to reflect the change.
The following table summarizes the amounts and categories of non-performing assets in the Bank’s portfolio and loan delinquency information as of the end of the most recently completed quarter and December 31, 2022.
June 30, December 31, (Dollars in thousands) 2023 2022 Non-performing loans: Single family$653 $908 Consumer 407 441 Commercial business 471 529 Foreclosed and repossessed assets: Single family 220 0 Total non-performing assets$1,751 $1,878 Total as a percentage of total assets 0.16% 0.17%Total as a percentage of total loans receivable 0.18% 0.24%Allowance for credit losses to non-performing loans 752.44% 547.24% Delinquency data: Delinquencies (1) 30+ days$1,480 $1,405 90+ days 0 0 Delinquencies as a percentage of loan portfolio (1) 30+ days 0.18% 0.18%90+ days 0.00% 0.00%(1) Excludes non-accrual loans.Non-Interest Income and Expense
Non-interest income was $3.9 million for the first six months of 2023, a decrease of $1.0 million, or 20.2%, from $4.9 million for the first six months of 2022. Gain on sales of loans decreased $1.1 million between the periods because of a decrease in single family loan sales due primarily to an increase in the amount of originated mortgage loans that were placed into the loan portfolio. The increase in mortgage loans that were placed into the portfolio was the result of a targeted effort to originate loans to our executive banking clients. Other non-interest income decreased slightly between the periods due primarily to a decrease in the gains realized on the sale of real estate owned. These decreases were partially offset by a $0.1 million increase in fees and service charges between the periods due primarily to an increase in the commitment fees earned on unused commercial lines of credit. Loan servicing fees increased slightly between the periods due to an increase in the aggregate balances of commercial loans that were being serviced for others.
Non-interest expense was $15.2 million for the first six months of 2023, an increase of $1.0 million, or 6.4%, from $14.2 million for the first six months of 2022. Compensation and benefits expense increased $0.8 million primarily because of annual salary increases and also because of a decrease in the direct loan origination compensation costs that were deferred as a result of the reduced commercial loan production between the periods. Other non-interest expense increased $0.3 million primarily because of an increase in advertising costs and an increase in FDIC insurance expense due to an increase in assessment rates between the periods. Data processing expenses increased $0.1 million between the periods primarily because of the change to an outsourced data processing relationship at the end of the first quarter of 2022. These increases in non-interest expense were partially offset by a $0.3 million decrease in professional services expense between the periods primarily because of a decrease in legal expenses relating to a bankruptcy litigation claim that was settled in the first quarter of 2022. Occupancy and equipment expense decreased $0.1 million due primarily to a decrease in noncapitalized software costs between the periods.
Income tax expense was $1.2 million for the first six months of 2023, a decrease of $0.4 million from $1.6 million for the first six months of 2022. The decrease in income tax expense between the periods is primarily the result of a decrease in pre-tax income.
Return on Assets and Equity
Return on average assets (annualized) for the first six months of 2023 was 0.56%, compared to 0.73% for the first six months of 2022. Return on average equity (annualized) was 5.22% for the first six months of 2023, compared to 6.73% for the same period in 2022. Book value per common share at June 30, 2023 was $22.76, compared to $21.25 at June 30, 2022.
General Information
HMN Financial, Inc. and the Bank are headquartered in Rochester, Minnesota. Home Federal Savings Bank operates twelve full service offices in Minnesota located in Albert Lea, Austin, Eagan, Kasson, La Crescent, Owatonna, Rochester (4), Spring Valley and Winona, one full service office in Marshalltown, Iowa, and one full service office in Pewaukee, Wisconsin. The Bank also operates two loan origination offices located in Sartell, Minnesota and La Crosse, Wisconsin.
Safe Harbor Statement
This press release may contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are often identified by such forward-looking terminology as “anticipate,” “continue,” “could,” “expect,” “future,” “may,” “project” and “will,” or similar statements or variations of such terms and include, but are not limited to, those relating to: enacted and expected changes to the federal funds rate and the resulting impacts on consumer deposits, loan originations, and related aspects of the Bank’s business; the anticipated impacts of inflation and rising interest rates on the general economy, the Bank’s clients, and the allowance for credit losses; anticipated future levels of the provision for credit losses; anticipated level of future asset growth; and the payment of dividends by HMN.
A number of factors, many of which may be amplified by the deterioration in economic conditions, could cause actual results to differ materially from the Company’s assumptions and expectations. These include but are not limited to the adequacy and marketability of real estate and other collateral securing loans to borrowers; federal and state regulation and enforcement; possible legislative and regulatory changes, including changes to regulatory capital rules; the ability of the Bank to comply with other applicable regulatory capital requirements; enforcement activity of the Office of the Comptroller of the Currency and the Federal Reserve Bank of Minneapolis in the event of non-compliance with any applicable regulatory standard or requirement; adverse economic, business and competitive developments such as shrinking interest margins, reduced collateral values, deposit outflows, changes in credit or other risks posed by the Company’s loan and investment portfolios; changes in costs associated with traditional and alternate funding sources, including changes in collateral advance rates and policies of the Federal Home Loan Bank and the Federal Reserve Bank; technological, computer-related or operational difficulties including those from any third party cyberattack; reduced demand for financial services and loan products; adverse developments affecting the financial services industry, such as recent bank failures or concerns involving liquidity; changes in accounting policies and guidelines, or monetary and fiscal policies of the federal government or tax laws; domestic and international economic developments; the Company’s access to and adverse changes in securities markets; the market for credit related assets; the future operating results, financial condition, cash flow requirements and capital spending priorities of the Company and the Bank; the availability of internal and, as required, external sources of funding; the Company’s ability to attract and retain employees; or other significant uncertainties. Additional factors that may cause actual results to differ from the Company’s assumptions and expectations include those set forth in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and Part II, Item 1A of its subsequently filed quarterly reports on Form 10-Q. All forward-looking statements are qualified by, and should be considered in conjunction with, such cautionary statements. All statements in this press release, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no duty to update any of the forward-looking statements after the date of this press release.
(Three pages of selected consolidated financial information are included with this release.)
HMN FINANCIAL, INC. AND SUBSIDIARIESConsolidated Balance Sheets June 30, December 31, (Dollars in thousands) 2023 2022 (unaudited) Assets Cash and cash equivalents$13,234 36,259 Securities available for sale: Mortgage-backed and related securities(amortized cost $197,666 and $216,621) 176,027 192,688 Other marketable securities
(amortized cost $55,709 and $55,698) 54,000 53,331 Total securities available for sale 230,027 246,019 Loans held for sale 1,916 1,314 Loans receivable, net 826,932 777,078 Accrued interest receivable 3,395 3,003 Mortgage servicing rights, net 2,789 2,986 Premises and equipment, net 16,282 16,492 Goodwill 802 802 Prepaid expenses and other assets 5,317 3,902 Deferred tax asset, net 8,673 8,347 Total assets$1,109,367 1,096,202 Liabilities and Stockholders’ Equity Deposits$970,712 981,926 Federal Home Loan Bank advances and Federal Reserve borrowings 24,700 0 Accrued interest payable 1,115 298 Customer escrows 5,861 10,122 Accrued expenses and other liabilities 4,827 6,520 Total liabilities 1,007,215 998,866 Commitments and contingencies Stockholders’ equity: Serial-preferred stock ($.01 par value): authorized 500,000 shares; issued 0 0 0 Common stock ($.01 par value): authorized 16,000,000 shares; issued 9,128,662 outstanding 4,487,362 and 4,480,976 91 91 Additional paid-in capital 41,019 41,013 Retained earnings, subject to certain restrictions 140,025 138,409 Accumulated other comprehensive loss (16,810) (19,761) Unearned employee stock ownership plan shares (966) (1,063) Treasury stock, at cost 4,641,300 and 4,647,686 shares (61,207) (61,353) Total stockholders’ equity 102,152 97,336 Total liabilities and stockholders’ equity$1,109,367 1,096,202
(1) The Company adopted ASU 2016-13 as of January 1, 2023. The 2022 amounts presented are calculated under the prior accounting standard.
HMN FINANCIAL, INC. AND SUBSIDIARIES Selected Consolidated Financial Information (unaudited) SELECTED FINANCIAL DATA: Three Months Ended
June 30,
Six Months Ended
June 30,
(Dollars in thousands, except per share data) 2023 2022 2023 2022 I. OPERATING DATA: Interest income$10,497 8,057 20,410 15,622 Interest expense 2,769 292 4,619 575 Net interest income 7,728 7,765 15,791 15,047 II. AVERAGE BALANCES: Assets (1) 1,105,130 1,044,524 1,099,675 1,042,629 Loans receivable, net 800,483 677,223 788,723 668,686 Securities available for sale (1) 259,187 299,138 263,909 297,264 Interest-earning assets (1) 1,068,203 1,006,083 1,062,904 1,004,541 Interest-bearing liabilities and non-interest bearing deposits 979,224 927,015 974,823 924,904 Equity (1) 118,568 113,541 118,021 113,072 III. PERFORMANCE RATIOS: (1) Return on average assets (annualized) 0.52%0.88%0.56%0.73%Interest rate spread information: Average during period 2.81 3.09 2.91 3.01 End of period 2.78 2.98 2.78 2.98 Net interest margin 2.90 3.10 3.00 3.02 Ratio of operating expense to average total assets (annualized) 2.71 2.68 2.78 2.75 Return on average common equity (annualized) 4.81 8.09 5.22 6.73 Efficiency 76.86 67.92 76.93 71.39 June 30, December 31, June 30, 2023 2022 2022 IV. EMPLOYEE DATA: Number of full time equivalent employees 167 165 169 V. ASSET QUALITY: Total non-performing assets$1,751 1,878 4,294 Non-performing assets to total assets 0.16%0.17%0.40% Non-performing loans to total loans receivable 0.18 0.24 0.62 Allowance for credit losses (2)$11,517 10,277 9,644 Allowance for credit losses to total assets (2) 1.04%0.94%0.89% Allowance for credit losses to total loans receivable (2) 1.37 1.30 1.40 Allowance for credit losses to non-performing loans (2) 752.44 547.24 224.61 VI. BOOK VALUE PER COMMON SHARE: Book value per common share$22.76 21.72 21.25 Six Months Ended
June 31,
2023 Year Ended
December 31,
2022 Six Months Ended
June 30,
2022 VII. CAPITAL RATIOS: Stockholders’ equity to total assets, at end of period 9.21%8.88%8.86% Average stockholders’ equity to average assets (1) 10.73 10.73 10.84 Ratio of average interest-earning assets to average interest-
bearing liabilities and non-interest bearing deposits (1)
109.04
108.65 108.61 Home Federal Savings Bank regulatory capital ratios: Common equity tier 1 capital ratio 11.36 11.48 12.85 Tier 1 capital leverage ratio 9.25 9.14 9.71 Tier 1 capital ratio 11.36 11.48 12.85 Risk-based capital 12.61 12.65 14.06
(1) Average balances were calculated based upon amortized cost without the market value impact of ASC 320.
(2) The Company adopted ASU 2016-13 as of January 1, 2023. The 2022 amounts presented are calculated under the prior accounting standard.
Chief Executive Officer, President
HMN Financial, Inc. (507) 252-7169
