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HMN Financial, Inc. Announces Fourth Quarter Results

Stocks in this article: HMNF

Previously, when a collateral-dependent loan was characterized as a loss, the Company typically established an SVA based on the estimated fair value of the underlying collateral, less any related selling costs and the actual charge off of the loan was not recorded until the foreclosure process was complete. The gross loan balance for these non-performing loans was reported as an outstanding loan with any associated SVAs included in the financial statements as part of the allowance for loan losses. Under the modified policy, which is also acceptable under Generally Accepted Accounting Principles, SVAs are no longer recognized and any losses on loans secured by real estate are charged off in the period the loans, or portion thereof, are deemed uncollectible. The change in policy resulted in additional charge offs in the fourth quarter of 2011 of $9.6 million. All of these charge offs were previously included in the Company’s loss history as part of the evaluation of the allowance for loan losses. Therefore, the additional charge offs did not affect the Company’s provision for loan losses or net income for the period.

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 and December 31, 2010.

    December 31,     September 30,     December 31,
(Dollars in thousands)       2011         2011         2010
Non-Accruing Loans:
One-to-four family real estate $ 4,435 $ 2,930 $ 4,844
Commercial real estate 22,658 24,392 36,737
Consumer 699 460 224
Commercial business 6,201 11,076 26,269
Total 33,993 38,858 68,074
Other assets
Foreclosed and Repossessed Assets:
One-to-four family real estate 352 1,003 972
Consumer 0 0 14
Commercial real estate 16,264 20,141 15,409
Total non-performing assets $ 50,609 $ 60,002 $ 84,469
Total as a percentage of total assets 6.40 % 7.33 % 9.59 %
Total non-performing loans $ 33,993 $ 38,858 $ 68,074
Total as a percentage of total loans receivable, net 6.10 % 6.57 % 10.25 %
Allowance for loan loss to non-performing loans 70.27 % 66.11 % 62.91 %
Delinquency Data:
Delinquencies (1)
30+ days $ 3,226 $ 7,763 $ 4,021
90+ days 0 823 754
Delinquencies as a percentage of
loan and lease portfolio (1)
30+ days 0.55 % 1.27 % 0.59 %
90+ days 0.00 % 0.13 % 0.11 %

(1) Excludes non-accrual loans.

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