SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
July 18, 1997
HMN FINANCIAL, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 0-24100 41-1777397
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification
incorporation) Number)
101 NORTH BROADWAY, SPRING VALLEY, MINNESOTA 55975
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (507) 346-7345
N/A
------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
On July 18, 1997 the Registrant issued the press release attached as
Exhibit 99 announcing its second quarter earnings.
Item 7. Financial Statements and Exhibits
(a) Exhibits
99. Press release, dated July 18, 1997.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
HMN FINANCIAL, INC.
Date: July 18, 1997 By: /s/ Roger P. Weise
Roger P. Weise, Chairman
and Chief Executive Officer
<PAGE>
[graphic of open-winged eagle]
HMN FINANCIAL, INC.
101 NORTH BROADWAY
SPRING VALLEY, MINNESOTA
PHONE 507-346-7345
FAX 507-346-1111
NEWS RELEASE CONTACT: James B. Gardner,
Executive Vice President
HMN Financial, Inc. (507) 346-7345
FOR IMMEDIATE RELEASE
HMN FINANCIAL, INC. ANNOUNCES QUARTERLY RESULTS
- -----------------------------------------------
<TABLE>
<CAPTION>
EARNINGS SUMMARY Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 1,332,220 1,533,084 $ 2,806,700 3,119,775
Primary earnings per
common share and
common share
equivalent 0.34 0.34 0.72 0.67
Return on average assets 0.95% 1.13% 1.02% 1.15%
Return on average
common equity 6.58% 6.77% 7.00% 6.84%
Book value per share $ 19.42 17.73 $ 19.42 17.73
</TABLE>
SPRING VALLEY, MINNESOTA, July 18, 1997. . . HMN Financial, Inc. (HMN)
(NASDAQ:HMNF), the $567 million holding company for Home Federal Savings Bank
(the Bank), today reported net income of $1.3 million for the second quarter of
1997, down 13.1% from $1.5 million for the second quarter of 1996. Primary
earnings per share were $0.34 for both the second quarter of 1997 and 1996.
Return on average assets was 0.95% and return on average equity was 6.58% for
the second quarter of 1997, a decrease of 15.9% and 2.8%, respectively, from
the second quarter of 1996. Book value per share was $19.42, up 9.53%, from
$17.73 for the second quarter of 1996. Primary earnings per share were $0.72
for the six months ended June 30, 1997, up 7.46% from $0.67 per share for the
same period in 1996. Return on average assets was 1.02% for the six months
ended June 30, 1997, a decrease of 11.3% from 1.15% for the same period of
1996. Return on average equity was 7.0% for the six months ended June 30,
1997, an increase of 2.3% from the same period of 1996.
Net income for the second quarter of 1997 decreased by $201,000, or 13.1%
compared to the second quarter of 1996. The decrease in net income was
principally due to a decrease of $126,000 of net interest income, a decrease of
$79,000 in non-interest income and an increase of $142,000 in non-interest
expense. Net income for the six-month period ended June 30, 1997 decreased by
$313,000, or 10.0%, compared to the same period of 1996. The decrease was
principally due to a decrease of $163,000 in net interest income, a decrease of
$82,000 in non-interest income and an increase of $274,000 in non-interest
expense.
more . . .
<PAGE>
Net interest income for the second quarter of 1997 was $3.9 million, a
decrease of $126,000, or 3.2%, compared to $4.0 million for the same quarter of
1996 because average interest-earning assets increased by $8.8 million, while
average interest-bearing liabilities increased by $23.9 million. The
additional interest expense caused a decrease in net interest income. HMN's
stock repurchase programs conducted during 1996 and 1997 have been funded by
increasing interest-bearing liabilities. Net interest income for the six
months ended June 30, 1997 was $7.7 million, a decrease of $163,000, or 2.1%,
from $7.9 million for the same period of 1996. Average interest-earning assets
increased $8.0 million, while average interest-earning liabilities increased
$23.1 million which had the net impact of reducing net interest income for the
six months ended in 1997 compared to the same period in 1996.
Non-interest income for the second quarter of 1997 was $406,000, a
decrease of $79,000, or 16.3%, from $485,000 for the same quarter of 1996. The
decrease in non-interest income was principally due to a decrease of $155,000
in gain on the sale of securities and was partially offset by increased fee
income of $19,000 and an increase in gain on the sale of loans of $62,000.
Economic conditions and certain market conditions reduced the ability to sell
securities at a gain during the second quarter of 1997 compared to the same
period in 1996. Non-interest income for the six months ended June 30, 1997 was
$1.1 million, a decrease of $82,000, or 6.9%, from $1.2 million for the same
period of 1996. The decrease was principally due to a $384,000 decrease in
gain on the sale of securities and was partially offset by a $37,000 increase
in fee income, a $210,000 increase in gain on sale of loans, and a $55,000
increase in other income. The increased income recognized on the sale of loans
is the direct result of increased mortgage banking activity. The increase in
other income for the six months ended June 30, 1997 compared to the same period
in 1996 was principally due to an increase in commissions earned by Osterud
Insurance Agency, which is a subsidiary of the Bank.
Non-interest expense was $2.1 million for the second quarter of 1997, an
increase of $143,000, or 7.2%, from $2.0 million for the second quarter of
1996. The majority of the increase in non-interest expense between the two
quarters was due to a $260,000, or 23.6%, increase in compensation and benefits
and was the result of adding new employees, plus normal merit and salary
increases. Besides the increase in compensation, occupancy also increased
$37,000 between the two quarters. These increases were partially offset by a
$156,000 decrease in federal deposit insurance premiums for the second quarter
of 1997 compared to the second quarter of 1996. The decrease in premium
expense is the result of the Savings Association Insurance Fund (SAIF) now
being fully funded. Non-interest expense for the six months ended June 30,
1997 was $4.2 million, an increase of $274,000, or 6.9%, from $4.0 million for
the six months ended June 30, 1996. The principal cause for the increase in
non-interest expense between the two periods was due to a $470,000, or 21.3%,
increase in compensation and benefits expense and was the result of adding new
employees and normal merit and salary increases. Occupancy also increased
$81,000 for the six-month period ended June 30, 1997 compared to the same
period ended June 30, 1996 partially because of continued remodeling of
offices. These increases were partially offset by a $307,000 decrease in
federal deposit insurance premiums between the two periods because the SAIF
insurance fund is now fully funded.
more . . .
<PAGE>
As previously reported through a press release dated July 1, 1997, HMN
Financial, Inc. and Marshalltown Financial Corporation (NASDAQ:MFCX), the
thrift holding company for Marshalltown Savings Bank, FSB, have entered into a
definitive agreement to merge. Under the agreement, HMN Financial will acquire
in a cash transaction valued at $25.9 million, or $17.51 per share, all
outstanding shares of Marshalltown Financial's common stock. The agreement is
subject to regulatory approvals, as well as approval of Marshalltown
Financial's shareholders, a process that is expected to be completed by the end
of the year. Marshalltown Savings Bank, FSB is expected to be operated as a
division of Home Federal.
HMN Financial, Inc. and Home Federal Savings Bank are headquartered in
Spring Valley, MN. The Bank operates seven offices in southern Minnesota and a
mortgage banking office in Eden Prairie, Minnesota.
(Three pages of selected consolidated financial information are included
with this release.)
***END***
<PAGE>
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
ASSETS June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 11,569,823 10,583,717
Securities available for sale:
Mortgage-backed and related
securities
(amortized cost $115,681,542
and $134,474,167) 115,016,213 133,355,278
Other marketable securities
(amortized cost $73,350,810
and $42,360,499) 73,860,262 42,474,810
------------ ------------
188,876,475 175,830,088
------------ ------------
Securities held to maturity:
Mortgage-backed and related
securities
(fair value $0 and
$1,904,993) 0 1,805,744
Other marketable securities
(fair value $0 and
$1,000,550) 0 999,812
------------ ------------
0 2,805,556
------------ ------------
Loans held for sale 1,205,315 739,316
Loans receivable, net 345,516,286 349,022,236
Federal Home Loan Bank stock,
at cost 5,939,500 5,434,000
Real estate, net 89,287 20,610
Premises and equipment, net 4,090,908 3,581,497
Accrued interest receivable 3,762,219 3,415,152
Prepaid expenses and other assets 5,815,165 3,299,427
------------ ------------
Total assets $566,864,978 554,731,599
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $365,385,386 362,476,944
Federal Home Loan Bank advances 114,364,305 106,078,589
Accrued interest payable 1,207,541 1,542,773
Advance payments by borrowers
for taxes and insurance 506,268 518,911
Accrued expenses and other
liabilities 2,403,310 2,014,938
Due to brokers 1,200,000 0
----------- ------------
Total liabilities 485,066,810 472,632,155
----------- ------------
Commitments and contingencies
Stockholders' equity:
Serial preferred stock:
authorized 500,000 shares;
issued and outstanding none 0 0
Common stock ($.01 par value):
authorized 7,000,000
shares; issued 6,085,775
shares 60,858 60,858
Additional paid-in capital 59,620,004 59,428,768
Retained earnings, subject
to certain restrictions 57,452,087 54,645,387
Net unrealized loss on
securities available for sale (92,998) (598,045)
Unearned employee stock
ownership plan shares (4,746,400) (4,938,520)
Unearned compensation
restricted stock awards (716,965) (793,289)
Treasury stock, shares at cost
1,873,939 and 1,651,615 shares (29,778,418) (25,705,715)
------------ ------------
Total stockholders' equity 81,798,168 82,099,444
------------ ------------
Total liabilities and
stockholders' equity $ 566,864,978 554,731,599
============ ============
</TABLE>
<PAGE>
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
----------------------- -----------------------
<S> <C> <C> <C> <C>
Interest Income:
Loans receivable $ 6,882,628 6,409,310 13,790,870 12,548,056
Securities available
for sale:
Mortgage-backed
and related 2,176,822 2,527,670 4,366,032 5,301,360
Other marketable 917,067 580,897 1,502,309 985,741
Securities held to
maturity:
Mortgage-backed
and related 0 256,754 33,400 523,777
Other marketable 0 32,405 10,032 75,853
Cash equivalents 87,434 62,086 169,594 165,804
Other 102,011 74,648 196,972 138,630
---------- ---------- ---------- ----------
Total interest
income 10,165,962 9,943,770 20,069,209 19,739,221
---------- ---------- ---------- ----------
Interest expense:
Deposits 4,670,797 4,720,966 9,243,595 9,539,249
Federal Home Loan
Bank advances 1,626,510 1,227,662 3,077,910 2,289,523
---------- ---------- ---------- ----------
Total interest
expense 6,297,307 5,948,628 12,321,505 11,828,772
---------- ---------- ---------- ----------
Net interest
income 3,868,655 3,995,142 7,747,704 7,910,449
Provision for loan
losses 75,000 75,000 150,000 150,000
---------- ---------- ---------- ----------
Net interest
income after
provision
for loan losses 3,793,655 3,920,142 7,597,704 7,760,449
---------- ---------- ----------- ----------
Non-interest income:
Fees and service
charges 100,445 81,855 196,857 159,371
Securities gains,
net 113,695 268,487 384,612 769,037
Gain on sales of
loans 63,614 1,135 217,064 7,084
Other 128,042 133,533 305,557 250,922
---------- ---------- ---------- ----------
Total non-interest
income 405,796 485,010 1,104,090 1,186,414
---------- ---------- ---------- ----------
Non-interest expense:
Compensation and
benefits 1,358,859 1,099,123 2,674,846 2,205,118
Occupancy 232,451 195,363 473,598 392,145
Federal deposit
insurance premiums 58,924 214,864 117,901 424,656
Advertising 73,658 79,354 151,795 152,039
Data processing 118,803 120,743 243,332 249,196
Provision for real
estate losses 1,000 0 3,000 0
Other 283,260 274,789 576,925 543,902
---------- ---------- ---------- ----------
Total non-interest
expense 2,126,955 1,984,236 4,241,397 3,967,056
---------- ---------- ---------- ----------
Income before
income tax expense 2,072,496 2,420,916 4,460,397 4,979,807
Income tax expense 740,276 887,832 1,653,697 1,860,032
---------- ---------- ---------- ----------
Net income $ 1,332,220 1,533,084 2,806,700 3,119,775
========== ========== ========== ==========
Primary earnings per
common share and
common share
equivalents $ 0.34 0.34 0.72 0.67
========== ========== ========== ==========
Fully diluted earnings
per common share and
common share equivalents 0.34 0.33 0.71 0.66
========== ========== ========== ==========
</TABLE>
<PAGE>
HMN FINANCIAL, INC. AND SUBSIDIARIES
Selected Consolidated Financial Information
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Selected Financial Data: June 30, June 30, June 30, June 30,
(dollars in thousands, 1997 1996 1997 1996
except per share data) ------------------- --------------------
<S> <C> <C> <C> <C>
I. OPERATING DATA:
Interest income $ 10,166 9,944 20,069 19,739
Interest expense 6,297 5,949 12,321 11,829
Net interest income 3,869 3,995 7,748 7,910
II. AVERAGE BALANCES:
Assets <1> 561,583 547,513 555,687 543,787
Loans receivable, net 344,345 320,832 344,633 315,979
Mortgage-backed and
related securities <1> 126,450 166,897 129,009 170,292
Interest earnings assets<1> 547,734 538,911 542,859 534,822
Interest bearing
liabilities 474,562 450,704 469,204 446,148
Equity <1><2> 81,149 91,082 80,843 91,697
III.PERFORMANCE RATIOS: <1>
Return on average assets
(annualized) 0.95% 1.13% 1.02% 1.15%
Interest rate spread
information:
Average during period 2.12 2.11 2.16 2.09
End of period 2.21 2.23 2.21 2.23
Net interest margin 2.83 2.98 2.88 2.97
Ratio of operating expense
to average total assets
(annualized) 1.52 1.46 1.54 1.47
Return on average equity
(annualized) 6.58 6.77 7.00 6.84
Efficiency 49.76 44.29 47.92 43.61
June 30, Dec 31, June 30,
1997 1996 1996
---------------------------------
IV.ASSET QUALITY:
Total non-performing assets $ 466 361 523
Non-performing assets to
total assets 0.08% 0.07% 0.09%
Non-performing loans to
total loans receivable, net 0.11 0.10 0.11
Allowance for loan losses $ 2,479 2,341 2,339
Allowance for loan losses
to total assets 0.44% 0.42% 0.42%
Allowance for loan losses
to total loans receivable,
net 0.72 0.67 0.71
Allowance for loan losses
to non-performing loans 663.67 691.84 668.75
V. BOOK VALUE PER SHARE:
Book value per share
excluding net unrealized
loss on securities
available for sale $ 19.44 18.65 18.19
Book value per share 19.42 18.52 17.73
Six Six
Months Year Months
Ended Ended Ended
June 30, Dec 31, June 30,
1997 1996 1996
-------------------------------------
VI. CAPITAL RATIOS
Stockholders' equity to
total assets, at end
of period 14.43% 14.80% 15.72%
Average stockholders'
equity to average
assets <1><2> 14.55 16.12 16.86
Ratio of average interest
-earning assets to
average interest-bearing
liabilities<1> 119.88 118.87 119.69
VII. EMPLOYEE DATA: June 30, Dec 31, June 30,
1997 1996 1996
----------------------------------
Number of employees 116 110 100
<FN>
<FN1> Average balances were calculated based upon amortized cost without the
market value impact of SFAS 115.
<FN2> Average equity and average equity/average asset ratio decreasing due in
part by a repurchase of 489,060 shares of common stock in the second half of
1996 and and additional repurchase of 224,334 shares of common stock in the
first half of 1997.
</FN>
</TABLE>
