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HMN Financial, Inc. Announces Third Quarter Results

Provision for Loan LossesThe provision for loan losses was $4.3 million for the third quarter of 2011, a decrease of $7.6 million, compared to $11.9 million for the third quarter of 2010. The provision decreased primarily because fewer loan loss reserves on commercial real estate loans were needed due to the stabilization of values of non-performing real estate in the third quarter of 2011 when compared to the third quarter of 2010. The provision also decreased because of the $117 million decrease in the loan portfolio between the periods. Total non-performing assets were $60.0 million at September 30, 2011, a decrease of $5.0 million, or 7.6%, from $65.0 million at June 30, 2011. Non-performing loans decreased $4.2 million and foreclosed and repossessed assets decreased $0.8 million during the third quarter of 2011. The non-performing loan and foreclosed and repossessed asset activity for the quarter was as follows:


(Dollars in thousands)
Non-performing loans     Foreclosed and repossessed assets    
June 30, 2011 $ 43,086 June 30, 2011 $ 21,871
Classified as non-performing 5,039 Transferred from non-performing loans 312
Charge offs (6,436 ) Other foreclosures/repossessions 111
Principal payments received (2,467 ) Real estate sold (910 )
Classified as accruing (52 ) Net gain on sale of assets 159
Transferred to real estate owned   (312 ) Write downs   (399 )
September 30, 2011 $ 38,858   September 30, 2011 $ 21,144  

The decrease in non-performing loans during the quarter relates primarily to loans that were charged off during the period. Of the $6.4 million in charge offs recorded during the third quarter of 2011, $3.8 million related to three residential development loans and $2.2 million related to various commercial business loans. The largest remaining non-performing loan at September 30, 2011 was for $3.8 million and is secured by a residential development located in the Bank’s primary market.

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