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HMN Financial, Inc. Announces Second Quarter Results

HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF):

Second Quarter Summary

 

Net loss of $7.8 million compared to net loss of $9.2 million in second quarter of 2009

Diluted loss per common share of $2.20 compared to diluted loss per common share of $2.62 in second quarter of 2009

Deferred tax asset valuation reserve of $8.5 million recorded in second quarter of 2010

Income tax benefit of $1.2 million recorded in the second quarter of 2010 as a result of a favorable Minnesota Supreme Court tax ruling

Provision for loan losses down $8.9 million from second quarter of 2009

Net interest margin of 3.37%, up 8 basis points from second quarter of 2009

Nonperforming assets of $71.1 million, down $19.6 million, or 21.6%, from March 31, 2010

Year to Date Summary

 

Net loss of $9.7 million compared to net loss of $11.8 million in first six months of 2009

Diluted loss per common share of $2.82 compared to diluted loss per common share of $3.45 in first six months of 2009

Deferred tax asset valuation reserve of $8.5 million recorded in second quarter of 2010

Provision for loan losses down $9.0 million from first six months of 2009

Net interest margin of 3.34%, up 5 basis points from first six months of 2009

Nonperforming assets of $71.1 million, down $6.3 million, or 8.0%, from December 31, 2009

    Three months ended   Six months ended
Loss Summary June 30, June 30,
(Dollars in thousands, except per share amounts) 2010     2009   2010     2009  
Net loss $ (7,832 ) (9,204 ) $ (9,679 ) (11,826 )
Diluted loss per common share (2.20 ) (2.62 ) (2.82 ) (3.45 )
Return on average assets (3.12 ) % (3.37 ) % (1.92 ) % (2.14 ) %
Return on average equity (32.14 ) % (34.23 ) % (19.75 ) % (21.78 ) %
Book value per common share $ 15.26 $ 17.94 $ 15.26 $ 17.94
 

HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $975 million holding company for Home Federal Savings Bank (the Bank), today reported a net loss of $7.8 million for the second quarter of 2010, an improvement of $1.4 million, or 14.9%, compared to a net loss of $9.2 million for the second quarter of 2009. Net loss available to common shareholders was $8.3 million for the second quarter of 2010, an improvement of $1.3 million, or 14.1%, from the net loss available to common shareholders of $9.6 million for the second quarter of 2009. Diluted loss per common share for the second quarter of 2010 was $2.20, a decreased loss of $0.42, or 16.0%, from diluted loss per common share of $2.62 for the second quarter of 2009. The decrease in the net loss for the quarter was primarily due to an $8.9 million decrease in the provision for loan losses on commercial and commercial real estate loans, $3.0 million decrease in losses on other real estate owned, and $1.1 million decrease in other expenses when compared to the same period of 2009. These decreases in expenses were partially offset by a $10.8 million increase in the provision for income taxes between the periods due primarily to an $8.5 million deferred tax asset valuation reserve that was established during the second quarter of 2010. Excluding the deferred tax asset valuation reserve, adjusted earnings were $205,000, or $0.06 per diluted share for the second quarter of 2010 and the adjusted loss was $2.1 million, or ($0.56) for the first six months of 2010. The following table reconciles our determination of adjusted earnings (loss) to the net loss available to common shareholders as prepared in accordance with generally accepted accounting principles:

       
Three Months Ended Six Months Ended
June 30, 2010 June 30, 2010
    Diluted     Diluted
(dollars in thousands, except per share data) Amount per share Amount per share
Net loss available to common shareholders $ (8,280 ) (2.20 ) $ (10,567 ) (2.82 )
Deferred tax asset valuation reserve 8,485   2.26   8,485   2.26  
Adjusted earnings (loss) $ 205   0.06   $ (2,082 ) (0.56 )
 

The Company is providing adjusted earnings (loss) in addition to reported results prepared in accordance with generally accepted accounting principles in order to present financial information without the impact of the deferred tax asset valuation reserve, which was recognized in the second quarter of 2010 and was established primarily based on cumulative losses over a three-year period.

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