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)
October 17, 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>
<PAGE>
Item 5. Other Events
On October 17, 1997 the Registrant issued the attached press
release announcing its third quarter earnings.
Item 7. Financial Statements and Exhibits
(a) Exhibits
99. Press release, dated October 17, 1997.
<PAGE>
<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: October 17, 1997 By: /s/ Roger. P. Weise
Roger P. Weise, Chairman
and Chief Executive Officer
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 Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
--------------------- ----------------------
<S> <C> <C> <C> <C>
Net income (loss) $1,524,111 (144,527) $4,330,812 2,975,248
Primary earnings (loss)
per common share and
common share equivalent 0.38 (0.03) 1.10 0.66
Before special SAIF assessment:
Income 1,524,111 1,329,806 4,330,812 4,449,581
Primary earnings per share
and common share equivalent 0.38 0.31 1.10 0.98
Return on average assets 1.06% (0.10)% 1.03% 0.72%
Return on average assets before
SAIF assessment 1.06% 0.95 % 1.03% 1.08%
Return on average common equity 7.29% (0.67)% 7.10% 4.42%
Return on average common equity
before SAIF assessment 7.29% 6.13 % 7.10% 6.61%
Book value per share $20.09 17.90 $20.09 17.90
</TABLE>
SPRING VALLEY, MINNESOTA, October 17, 1997. . . HMN Financial, Inc.
(HMN) (NASDAQ:HMNF), the $569 million holding company for Home Federal
Savings Bank (the Bank), today reported net income of $1.5 million for the
third quarter of 1997, up $1.67 million, from a loss of $145,000 for the
third quarter of 1996. Primary earnings per share were $0.38 for the third
quarter of 1997, up $0.41 per share from a loss of $0.03 per share for the
third quarter of 1996. In September of 1996, Congress enacted the Savings
Association Insurance Fund (SAIF) legislation which assessed a one time
charge of $2.4 million to the Bank in order to recapitalize the SAIF. The
total SAIF assessment was charged directly to earnings and reduced quarterly
earnings by $1.5 million after tax, or $0.34 per share. If the SAIF
legislation had not passed, net income for the third quarter of 1996 would
have been $1.3 million, or $0.31 per share. Return on average assets for the
third quarter of 1997 was 1.06% compared to -0.10% for the same quarter of
1996. Return on average equity was 7.29% for the third quarter of 1997
compared to -0.67% for the same quarter of 1996. Book value per share was
$20.09 at September 30, 1997, up 12.2% from $17.90 for September 30, 1996.
more . . .
<PAGE>
Net income for the nine months ended September 30, 1997 was $4.33
million, an increase of $1.36 million, or 45.6%, from $2.97 million for the
nine months ended September 30, 1996. Primary earnings per share were $1.10
for the nine months ended September 30, 1997, an increase of $0.44 per share,
or 66.7%, from $0.66 per share for the nine months ended September 30, 1996.
The SAIF assessment reduced earnings for the nine months ended September 30,
1996 by $1.5 million after tax, or $0.32 per share. If the SAIF legislation
had not passed, net income for the nine months ended September 30, 1996 would
have been $4.4 million, or $0.98 per share. Return on average assets for the
nine month period ended September 30, 1997 was 1.03% compared to 0.72% for
the same period of 1996. Return on average equity was 7.10% for the nine
month period ended September 30, 1997 compared to 4.42% for the same period
of 1996.
Net interest income for the third quarter of 1997 was $3.85 million, an
increase of $27,000, or 0.7%, compared to $3.82 million for the third quarter
of 1996. Interest income increased by $186,000 due to increasing yields on
interest-earning assets and $114,000 due to an increase in interest-earning
assets. Interest expense increased by $233,000 due to an increase in
interest-bearing liabilities and $40,000 due to an increase in the interest
rates paid on interest-bearing liabilities. Net interest income for the nine
months ended September 30, 1997 was $11.6 million, a decrease of $136,000, or
1.2%, from $11.73 million for the same nine month period ended in 1996.
Interest income for the nine month period ended September 30, 1997 increased
by $384,000 due to an increase in interest-earning assets and $246,000 due to
increasing yields on interest-earning assets. The increase in interest
income was totally offset by an increase in interest expense of $766,000,
primarily due to additional borrowing from the Federal Home Loan Bank of Des
Moines.
Non-interest income for the third quarter of 1997 was $879,000, an
increase of $467,000, or 113%, from $412,000 for the same quarter in 1996.
The increase in quarterly income was primarily due to a $295,000 increase in
gains recognized on the sale of securities and a $107,000 increase in gain on
the sale of loans. Interest rates, in general, decreased during the third
quarter of 1997, creating a favorable environment for HMN to sell securities
and loans. During 1997, HMN increased its mortgage banking activities and is
selling more loans in the secondary market than it did in 1996. Non-interest
income for the nine months ended September 30, 1997 was $2.0 million, an
increase of $384,000, or 24%, from $1.6 million for the same nine month
period in 1996. The increase in non-interest income was primarily due to a
$317,000 gain on the sale of loans and a $64,000 increase in fee income.
Both of the increases were due to HMN's mortgage banking activities and
increased loan sales in the secondary market. Other income for the nine
month period ended September 30, 1997, increased by $92,000, but was offset
by a decrease of $90,000 in gains recognized on the sale of securities.
Non-interest expense for the third quarter of 1997 was $2.2 million, a
decrease of $2.2 million, or 49.3%, from $4.4 million for the same quarter in
1996. In September of 1996, a one time assessment of $2.4 million was made
by Congress to recapitalize the SAIF. As a result of the SAIF being fully
funded, the FDIC insurance premium expense decreased by $155,000 for the
third quarter of 1997 from the same quarter in 1996. Compensation and
benefits expense increased by $256,000 due to new employees, plus normal
merit and salary
more . . .
<PAGE>
increases. Non-interest expense for the nine months ended September 30, 1997
was $6.5 million, a decrease of $1.9 million, or 22.6%, from $8.4 million for
the nine months ended September 30, 1996. The majority of the $1.9 million
decrease in non-interest expense was due to the one time SAIF assessment of
$2.4 million not repeating itself in 1997. As a result of the SAIF
assessment the FDIC insurance premium expense decreased by $461,000. The
decrease in non-interest expense was partially offset by a $726,000 increase
in compensation and benefits, an increase in occupancy of $124,000 and an
increase in other expense of $80,000. Compensation and benefits expense
increased as a result of adding new employees and normal merit and salary
increases. Occupancy increased for the nine month period ended September 30,
1997 compared to the same period in 1996 because of continued remodeling and
updating of offices for new technological advances.
As previously reported through a press release dated July 1, 1997, HMN
Financial, Inc. and Marshalltown Financial Corporation (MFC)(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. At June 30, 1997, MFC had total assets of
$127.5 million, deposits of $106.4 million and shareholders' equity of $20.1
million. Marshalltown Savings Bank, FSB operates full service retail banking
facilities in Marshalltown and Toledo, Iowa.
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>
<PAGE>
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
------------ -------------
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . . . $ 9,635,956 10,583,717
Securities available for sale:
Mortgage-backed and related securities
(amortized cost $111,030,951
and $134,474,167) . . . . . . . . . . . . . . 111,117,282 133,355,278
Other marketable securities
(amortized cost $71,405,849
and $42,360,499). . . . . . . . . . . . . . . 72,815,033 42,474,810
----------- -----------
183,932,315 175,830,088
----------- -----------
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. . . . . . . . . . . . . . . 2,089,733 739,316
Loans receivable, net. . . . . . . . . . . . . . 352,925,376 349,022,236
Federal Home Loan Bank stock, at cost. . . . . . 6,236,700 5,434,000
Real estate, net . . . . . . . . . . . . . . . . 89,334 20,610
Premises and equipment, net. . . . . . . . . . . 4,230,723 3,581,497
Accrued interest receivable. . . . . . . . . . . 3,180,525 3,415,152
Prepaid expenses and other assets. . . . . . . . 6,526,233 3,299,427
----------- -----------
Total assets . . . . . . . . . . . . . . $ 568,846,895 554,731,599
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits . . . . . . . . . . . . . . . . . . . $ 366,682,349 362,476,944
Federal Home Loan Bank advances. . . . . . . . . 112,007,163 106,078,589
Accrued interest payable . . . . . . . . . . . . 1,147,269 1,542,773
Advance payments by borrowers for taxes
and insurance. . . . . . . . . . . . . . . . . 758,067 518,911
Accrued expenses and other liabilities . . . . . 3,632,564 2,014,938
----------- -----------
Total liabilities. . . . . . . . . . . . . 484,227,412 472,632,155
----------- -----------
Commitments and contingencies
Stockholders' equity:
Serial preferred stock: authorized 500,000
shares; issued and outstanding none. . . . . . 0 0
Common stock ($.01 par value): authorized
shares 7,000,000; issued shares 6,085,775. . . 60,858 60,858
Additional paid-in capital. . . . . . . . . . . 59,702,833 59,428,768
Retained earnings, subject to certain
restrictions . . . . . . . . . . . . . . . . . 58,976,197 54,645,387
Net unrealized gain (loss) on securities
available for sale . . . . . . . . . . . . . . 967,170 (598,045)
Unearned employee stock ownership
plan shares. . . . . . . . . . . . . . . . . . (4,650,340) (4,938,520)
Unearned compensation restricted stock awards . (658,817) (793,289)
Treasury stock, shares at cost 1,873,939
and 1,651,615. . . . . . . . . . . . . . . . . (29,778,418) (25,705,715)
----------- -----------
Total stockholders' equity . . . . . . . . 84,619,483 82,099,444
----------- -----------
Total liabilities and stockholders' equity $ 568,846,895 554,731,599
=========== ===========
</TABLE>
<PAGE>
<PAGE>
HMN FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
----------------------- -----------------------
<S> <C> <C> <C> <C>
Interest Income:
Loans receivable. . . . . . $ 6,939,224 6,461,279 20,730,094 19,009,335
Securities available for sale:
Mortgage-backed and
related . . . . . . . . . 2,092,964 2,429,330 6,458,996 7,730,690
Other marketable. . . . . . 1,119,452 669,964 2,621,762 1,655,705
Securities held to maturity:
Mortgage-backed and
related . . . . . . . . . 0 196,050 33,400 719,827
Other marketable. . . . . . 0 14,250 10,032 90,103
Cash equivalents. . . . . . . 55,643 149,819 225,237 315,623
Other . . . . . . . . . . . . 107,187 93,823 304,159 232,453
---------- ---------- ---------- ----------
Total interest income. . . 10,314,470 10,014,515 30,383,680 29,753,736
---------- ---------- ---------- ----------
Interest expense:
Deposits. . . . . . . . . . . 4,749,737 4,741,907 13,993,332 14,281,156
Federal Home Loan Bank
advances. . . . . . . . . . 1,714,642 1,449,492 4,792,552 3,739,015
---------- ---------- ---------- ----------
Total interest expense . . 6,464,379 6,191,399 18,785,884 18,020,171
---------- ---------- ---------- ----------
Net interest income . . 3,850,091 3,823,116 11,597,796 11,733,565
Provision for loan losses. . . 75,000 75,000 225,000 225,000
---------- ---------- ---------- ----------
Net interest income
after provision
for loan losses . . . 3,775,091 3,748,116 11,372,796 11,508,565
---------- ---------- ---------- ----------
Non-interest income:
Fees and service charges. . . 121,489 94,817 318,346 254,188
Securities gains, net . . . . 487,547 192,761 872,159 961,798
Gain on sales of loans. . . . 117,302 9,896 334,367 16,980
Other . . . . . . . . . . . . 152,230 114,957 457,786 365,879
---------- ---------- ---------- ----------
Total non-interest income. 878,568 412,431 1,982,658 1,598,845
---------- ---------- ---------- ----------
Non-interest expense:
Compensation and benefits . . 1,431,853 1,175,725 4,106,699 3,380,843
Occupancy . . . . . . . . . . 245,202 203,071 718,801 595,216
Federal deposit insurance
premiums . . . . . . . . . . 57,478 212,020 175,379 636,676
SAIF assessment . . . . . . . 0 2,351,563 0 2,351,563
Advertising . . . . . . . . . 62,763 77,696 214,557 229,735
Data processing . . . . . . . 129,100 118,949 372,432 368,145
Provision for real estate
losses. . . . . . . . . . . 0 0 3,000 0
Other . . . . . . . . . . . . 302,449 255,808 879,374 799,710
---------- ---------- ---------- ----------
Total non-interest expense 2,228,845 4,394,832 6,470,242 8,361,888
---------- ---------- ---------- ----------
Income (loss) before
income tax expense. . . . 2,424,814 (234,285) 6,885,212 4,745,522
Income tax (benefit) expense . 900,703 (89,758) 2,554,400 1,770,274
---------- ---------- ---------- ----------
Net income (loss). . . . $ 1,524,111 (144,527) 4,330,812 2,975,248
========== ========== ========== ==========
Primary earnings (loss) per
common share and common
share equivalents. . . . . .$ 0.38 (0.03) 1.10 0.66
==== ==== ==== ====
Fully diluted earnings (loss)
per common share and
common share equivalents. . .$ 0.38 (0.03) 1.09 0.66
==== ==== ==== ====
</TABLE>
<PAGE>
<PAGE>
HMN FINANCIAL, INC. AND SUBSIDIARIES
Selected Consolidated Financial Information
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Selected Financial Data: Sept 30, Sept 30, Sept 30, Sept 30,
(dollars in thousands, 1997 1996 1997 1996
except per share data) --------------------- ---------------------
<S> <C> <C> <C> <C>
I. OPERATING DATA:
Interest income. . . . . .$ 10,314 10,014 30,384 29,754
Interest expense . . . . . 6,464 6,191 18,786 18,020
Net interest income. . . . 3,850 3,823 11,598 11,734
II. AVERAGE BALANCES:
Assets <F1>. . . . . . . . 569,479 557,091 560,335 548,254
Loans receivable, net. . . 344,669 331,331 344,645 321,134
Mortgage-backed and related
securities <F1> . . . . . 121,235 153,760 125,883 164,679
Interest earnings
assets <F1>. . . . . . . 554,314 548,702 546,719 539,483
Interest bearing liabilities 480,707 464,467 473,080 452,299
Equity <F1><F2>. . . . . . 82,910 86,262 81,540 89,872
III.PERFORMANCE RATIOS: <F1>
Return on average assets
(annualized) . . . . . . . 1.06% (0.10) % 1.03% 0.72 %
Interest rate spread information:
Average during period. . 2.05 1.96 2.12 2.05
End of period. . . . . . 2.26 2.09 2.26 2.09
Net interest margin. . . . 2.76 2.77 2.84 2.91
Ratio of operating expense to
average total assets
(annualized) . . . . . . 1.55 3.14 1.54 2.04
Return on average equity
(annualized) . . . . . . 7.29 (0.67) 7.10 4.42
Efficiency . . . . . . . . 47.14 103.76 47.64 62.72
<CAPTION>
Sept 30, Dec 31, Sept 30,
1997 1996 1996
--------------------------------
IV.ASSET QUALITY:
<S> <C> <C> <C>
Total non-performing assets. .$ 549 361 426
Non-performing assets to
total assets. . . . . . . . . 0.10% 0.07 % 0.08%
Non-performing loans to total
loans receivable, net . . . . 0.13 0.10 0.12
Allowance for loan losses. . .$ 2,554 2,341 2,266
Allowance for loan losses to
total assets. . . . . . . . . 0.45% 0.42 % 0.40%
Allowance for loan losses to
total loans receivable, net . 0.72 0.67 0.66
Allowance for loan losses to
non-performing loans. . . . . 561.52 691.84 531.84
V. BOOK VALUE PER SHARE:
Book value per share excluding
net unrealized gain (loss)
on securities available
for sale . . . . . . . . . . $19.86 18.65 18.30
Book value per share . . . . . 20.09 18.52 17.90
<CAPTION>
Nine Nine
Months Year Months
Ended Ended Ended
Sept 30, Dec 31, Sept 30,
1997 1996 1996
--------------------------------
VI. CAPITAL RATIOS
<S> <C> <C> <C>
Stockholders' equity to total
assets, at end of period. . . 14.88% 14.80 % 14.80%
Average stockholders' equity
to average assets <F1><F2>. . 14.55 16.12 16.39
Ratio of average interest-earning
assets to average interest-
bearing liabilities<F1> . . . 115.57 118.87 119.28
<CAPTION>
VII. EMPLOYEE DATA: Sept 30, Dec 31, Sept 30,
1997 1996 1996
-------------------------------
<S> <C> <C> <C>
Number of employees. . . . . . 123 110 102
</TABLE>
[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 decreased due in
part to a repurchase of 243,088 shares of common stock in the fourth quarter
of 1996 and an additional repurchase of 224,334 shares of common stock in
1997.
</FN>
