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

Fourth Quarter Highlights

  • Net income of $18.1 million compared to net income of $1.5 million for fourth quarter of 2012
  • Diluted earnings per common share of $3.93 compared to diluted earnings per common share of $0.25 in the fourth quarter of 2012
  • Deferred tax valuation reserve eliminated, resulting in $14.7 million decrease in income tax expense from the fourth quarter of 2012
  • Provision for loan losses of ($3.0 million), down $3.0 million from fourth quarter of 2012
  • Net interest income of $4.8 million, down $0.8 million from fourth quarter of 2012
  • Non-performing assets of $24.4 million, down $6.9 million from September 30, 2013

Annual Highlights

  • Net income of $26.7 million compared to net income of $5.3 million for 2012
  • Diluted earnings per common share of $5.71 compared to diluted earnings per common share of $0.86 for 2012
  • Deferred tax valuation reserve eliminated, resulting in $14.5 million decrease in income tax expense from 2012
  • Provision for loan losses of ($7.9 million), down $10.4 million from 2012
  • Gains on real estate owned of $0.8 million, up $1.0 million from 2012
  • Net interest income of $19.7 million, down $4.0 million from 2012
  • Non-performing assets of $24.4 million, down $16.2 million from December 31, 2012
INCOME SUMMARY Three Months Ended Year Ended
  December 31, December 31,
(dollars in thousands, except per share amounts) 2013 2012 2013 2012
Net income $18,096 1,485 $26,670 5,321
Net income available to common stockholders 17,574 1,016 24,602 3,460
Diluted earnings per common share 3.93 0.25 5.71 0.86
Return on average assets 12.23% 0.93% 4.55%  0.79%
Return on average common equity 106.72% 9.77% 42.22% 8.94%
Book value per common share $13.49 8.02 $13.49 8.02

ROCHESTER, Minn., Jan. 28, 2014 (GLOBE NEWSWIRE) -- HMN Financial, Inc. (HMN or the Company) (Nasdaq:HMNF), the $649 million holding company for Home Federal Savings Bank (the Bank), today reported net income of $18.1 million for the fourth quarter of 2013, an improvement of $16.6 million compared to net income of $1.5 million for the fourth quarter of 2012. Net income available to common shareholders was $17.6 million for the fourth quarter of 2013, an improvement of $16.6 million from the net income available to common shareholders of $1.0 million for the fourth quarter of 2012. Diluted earnings per common share for the fourth quarter of 2013 was $3.93, an improvement of $3.68 from the diluted earnings per common share of $0.25 for the fourth quarter of 2012. The improvement in net income in the fourth quarter of 2013 is due primarily to a $14.7 million decrease in income tax expense as a result of eliminating the valuation reserve against the Company's deferred tax asset, a $3.0 million decrease in the provision for loan losses, and a $0.5 million increase on the gains recognized on the sale of real estate owned. These improvements to net income were partially offset by a $0.8 million decrease in net interest income due primarily to a decrease in interest earning assets between the periods and a $0.8 million decrease in the gain on sale of loans due to a decrease in mortgage loan originations and sales.     President's Statement "The elimination of the deferred tax asset valuation reserve in the fourth quarter is a direct result of our improved financial results," said Brad Krehbiel, President of HMN. "We are also encouraged by the results of our ongoing efforts to improve the credit quality in our commercial loan portfolio as evidenced by the continued positive trend of declining non-performing assets and the reduction in the required provision for loan losses. We intend to continue to focus our efforts on further reducing these non-performing assets while, at the same time, improving the financial performance of our core banking operations."

Fourth Quarter Results

Net Interest Income

Net interest income was $4.8 million for the fourth quarter of 2013, a decrease of $0.7 million, or 13.7%, compared to $5.5 million for the fourth quarter of 2012. Interest income was $5.1 million for the fourth quarter of 2013, a decrease of $1.9 million, or 26.9%, from $7.0 million for the same period in 2012. Interest income decreased between the periods primarily because of a $44 million decrease in the average interest-earning assets and also because of a decrease in the average yields between the periods. Average interest-earning assets decreased between the periods primarily because of a $61 million decrease in the commercial loan portfolio, which occurred because loan payoffs exceeded production primarily as a result of 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 3.64% for the fourth quarter of 2013, a decrease of 98 basis points from the 4.62% average yield for the fourth quarter of 2012. The decrease in the average yield is due to the continued low interest rate environment that existed during the fourth quarter of 2013 and also because of the $44 million increase in the average assets that were held in lower earning cash and investments in the fourth quarter of 2013 when compared to the same period of 2012. 

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