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HMN Financial, Inc. Announces Fourth Quarter Results And Annual Meeting

Stocks in this article: HMNF

Provision for Loan LossesThe provision for loan losses was $2.5 million for the year ended December 31, 2012, a decrease of $14.8 million, from $17.3 million for the year ended December 31, 2011. The provision decreased between the periods primarily because there were fewer decreases in the estimated value of the underlying collateral supporting commercial real estate loans that required additional allowances or charge offs in 2012 when compared to 2011. The provision also decreased because of the $106 million decrease in the loan portfolio between the periods. Total non-performing assets were $40.6 million at December 31, 2012, a decrease of $10.0 million, or 19.8%, from $50.6 million at December 31, 2011. Non-performing loans decreased $4.0 million and foreclosed and repossessed assets decreased $6.0 million during 2012. The non-performing loan and foreclosed and repossessed asset activity for 2012 was as follows:

(Dollars in thousands)

Non-performing loans   Foreclosed and repossessed asset activity  
December 31, 2011 $33,993 December 31, 2011 $16,616
Classified as non-performing 23,785 Transferred from non-performing loans 2,242
Charge offs (9,317 ) Other foreclosures/repossessions 117
Principal payments received (13,823 ) Real estate sold (7,558 )
Classified as accruing (2,421 ) Net loss on sale of assets (752 )
Transferred to real estate owned (2,242 ) Write downs (70 )
December 31, 2012 $29,975   December 31, 2012 $10,595  

A reconciliation of the allowance for loan losses for 2012 and 2011 is summarized as follows:

(in thousands)   2012   2011
Balance at January 1, $23,888 $42,828
Provision 2,544 17,278
Charge offs:
Commercial (2,464 ) (15,512 )
Commercial real estate (5,719 ) (23,012 )
Consumer (1,071 ) (270 )
Single family mortgage (63 ) (508 )
Recoveries 4,493   3,084  
Balance at December 31, $21,608   $23,888  
General allowance $16,795 $17,255
Specific allowance 4,813   6,633  
$21,608   $23,888  

Non-Interest Income and ExpenseNon-interest income was $9.0 million for the year ended December 31, 2012, an increase of $2.1 million, or 30.9%, from $6.9 million for the year ended December 31, 2011. Gains on sales of loans increased $1.9 million, or 115.8%, between the periods primarily because of an increase in single family loan originations and sales. Gain on sale of branch office increased $0.6 million as a result of the sale of the Toledo, Iowa branch in the first quarter of 2012. Fees and service charges decreased $0.4 million primarily because of a decrease in overdraft charges between the periods.

Non-interest expense was $24.7 million for the year ended December 31, 2012, a decrease of $4.9 million, or 16.5%, from $29.6 million for the same period in 2011. Losses on real estate owned decreased $2.5 million between the periods primarily because there were fewer losses realized on the sale of real estate and there were fewer write downs in the value of the real estate owned in 2012 when compared to 2011. Compensation and benefits expense decreased $1.1 million between the periods primarily as a result of having fewer employees and also because of a decrease in pension benefit costs. Other non-interest expenses decreased $1.0 million between the periods primarily because of a decrease in real estate taxes and legal fees related to other real estate owned. Occupancy expense decreased $0.4 million primarily because of a decrease in depreciation and other expenses as a result of having fewer branch facilities.

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