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HMN Financial, Inc. Announces Fourth Quarter Results, Deferral Of Dividends On Preferred Stock And Annual Meeting

HMN Financial, Inc. (NASDAQ:HMNF):

EARNINGS (LOSS) SUMMARY   Three Months Ended   Year Ended
December 31, December 31,
(dollars in thousands, except per share amounts) 2010     2009 2010     2009
(unaudited)   (unaudited) (unaudited)  
Net income (loss) $ (9,932 ) 149 $ (28,978 ) (10,796 )
Net loss available to

common stockholders

(10,381

)

(292

)

(30,762

)

(12,543

)

Diluted loss per common share (2.73 ) (0.08 ) (8.17 ) (3.39 )
Return (loss) on average assets (4.41 )

%

0.06 % (2.98 )

%

(1.00 ) %
Return (loss) on average common equity (49.64 )

%

0.59 % (31.73 )

%

(10.33 ) %
Book value per common share $ 10.51 17.94 $ 10.51 17.94
 

HMN Financial, Inc. (HMN or the Company) (NASDAQ:HMNF), the $881 million holding company for Home Federal Savings Bank (the Bank), today reported a net loss of $9.9 million for the fourth quarter of 2010, a $10.0 million decrease from net income of $0.1 million for the fourth quarter of 2009. Net loss available to common shareholders for the fourth quarter of 2010 was $10.4 million, an increased loss of $10.1 million, from the net loss available to common shareholders of $0.3 million for the fourth quarter of 2009. Diluted loss per common share for the fourth quarter of 2010 was $2.73, an increased loss of $2.65 from the diluted loss per common share of $0.08 for the fourth quarter of 2009. The decrease in income in the fourth quarter of 2010 is due primarily to a $7.1 million increase in the provision for loan losses between the periods. The increased provision is primarily the result of additional reserves established on commercial loans as a result of decreases in the estimated value of the underlying collateral supporting the loans. The net loss was also adversely affected by the $4.4 million impact of establishing an additional deferred tax valuation allowance during the fourth quarter of 2010 due to the tax treatment of the net operating loss incurred during the quarter. Because of the valuation allowance on the deferred tax asset, the Company was not able to record an income tax benefit during the fourth quarter of 2010 related to the pre-tax loss. This is due to the fact that any current income tax benefit that would normally result from a pre-tax loss is offset by additional deferred tax expense due to an increase in the required valuation allowance. Excluding the deferred tax valuation allowance, the adjusted loss was $6.0 million, or ($1.58) per diluted common share, for the fourth quarter of 2010 and the adjusted loss was $14.2 million, or ($3.76) per diluted common share for the year ended December 31, 2010. The following table reconciles our determination of adjusted loss to the net loss available to common shareholders as prepared in accordance with generally accepted accounting principles:

  Three Months Ended   Year Ended
December 31, 2010 December 31, 2010
(dollars in thousands, except per share data) Amount  

Dilutedper share

Amount  

Dilutedper share

Net loss available to common shareholders $ (10,381 ) (2.73 ) $ (30,762 ) (8.17 )
Deferred tax asset valuation allowance 4,364   1.15   16,597   4.41  
Adjusted loss $ (6,017 ) (1.58 ) $ (14,165 ) (3.76 )
 

The Company is providing adjusted loss information, in addition to reported results prepared in accordance with generally accepted accounting principles, in order to present financial information without the non-cash impact of the deferred tax asset valuation reserve recognized during the quarter and year ended December 31, 2010 and required based on cumulative losses over the previous three-year period and other factors.

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