HMN reports $9.2 million loss

Jul 22, 2009 (Post-Bulletin - McClatchy-Tribune Information Services via COMTEX) -- HMNF | Quote | Chart | News | PowerRating -- HMN Financial of Rochester reported a $9.2 million loss in the second quarter of 2009, up from a $2 million loss in the second quarter 2008.

HMN Financial is a $1.1 billion holding company for Home Federal Savings Bank, which has 16 branches in Minnesota and Iowa.

The net loss increase was primarily due to the $12.2 million increase in the provision for loan losses on commercial and commercial real estate loans, according to a news release from HMN. In addition, HMN had a $3.1 million increase in losses on other real estate owned when compared to the same period of 2008.

HMN Financial stock, traded on the NASDAQ exchange, was at $4 at mid-morning, down 92 cents.

The provision for loan losses was $13.3 million for the second quarter of 2009, up from $1.1 million for the second quarter of 2008.

The bank had to increase its loan loss allowance on certain commercial real estate loans because the value of the collateral fell when appraisals were updated, according to the release. In particular, two non-performing residential development loans needed an extra $2.9 million provision, and two alternative fuel plants needed an extra $3 million provision.

The loan loss provision also includes a $3.7 million increase related to a commercial loan that was charged off after it was determined that the collateral supporting the loan was inadequate.

"The apparently fraudulent actions by the borrower resulted in the same equipment being used as collateral on a number of different loans to various lenders," HMN said in a press release. "The borrower currently has a limited capacity to pay back the loan and there is substantial doubt that there will be any recovery related to the loan, therefore, the entire amount was charged off during the quarter."

In spite of the significant loan loss provision for the quarter, HMN's management remains confident.

"Home Federal Savings Bank has adequate available liquidity and its capital position remains above the levels required for it to be considered a well-capitalized financial institution by regulatory standards," said Bradley Krehbiel, HMN's principal executive officer. "While we are extremely disappointed with the increased loan loss provision, we believe we have valued our non-performing assets appropriately and the fundamentals of our business remain sound."

The company hopes to reduce its non-performing assets while increasing core retail and commercial deposits, Krehbiel said. It has also strengthened its commercial loan underwriting guidelines to address the difficult economic climate.

HMN had non-performing assets of $79.5 million, up $9.6 million from the first quarter of 2009. The increase was mostly caused by three residential development loans totaling $12.4 million and one commercial lending relationship of $7 million secured by a single family residence that were classified due to lack of performance.

The largest non-performing loan was for $8.2 million and is secured by a residential development located in Minnesota, HMN said.

To see more of the Post-Bulletin, or to subscribe to the newspaper, go to
http://www.postbulletin.com. Copyright (c) 2009, Post-Bulletin, Rochester, Minn.
Distributed by McClatchy-Tribune Information Services. For reprints, email
tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax
to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave.,
Suite 303, Glenview, IL 60025, USA.

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index