"The operating results for the third quarter of 2010 reflect the challenging economic environment that continues to have a negative effect on real estate values, our loan loss provision and the amount of non-performing assets in our portfolio,” said Bradley Krehbiel, President of HMN. “While the economic environment for commercial real estate continues to be challenging, we are encouraged by the performance of our single family and consumer loan portfolios. We will continue to focus our efforts on reducing non-performing assets, increasing our core retail and commercial deposit relationships and reducing expenses. We believe that, over time, our focus on these areas will be effective in generating improved financial results. In the meantime, Home Federal Savings Bank continues to have adequate liquidity and its capital position remains above the levels required to be considered a well capitalized financial institution by current regulatory standards.”
Third Quarter Results
Net Interest IncomeNet 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 Company’s 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.