HMN Financial, Inc. Announces Second Quarter Results

Core Viewpoint - HMN Financial, Inc. reported a decline in net income and earnings per share for the second quarter and the first six months of 2024 compared to the same periods in 2023, primarily due to increased expenses and a decrease in net interest income [4][21]. Financial Performance Summary Second Quarter Summary - Net income for Q2 2024 was $1.0 million, down from $1.4 million in Q2 2023 [4][21]. - Diluted earnings per share decreased to $0.22 from $0.32 year-over-year [4][21]. - Net interest income fell to $7.5 million, down from $7.7 million in Q2 2023 [4][21]. - Gain on sales of loans increased to $0.6 million, up from $0.3 million in Q2 2023 [4][21]. - Net interest margin decreased to 2.70%, down 20 basis points from 2.90% in Q2 2023 [4][21]. Year to Date Summary - Year-to-date net income was $2.3 million, down from $3.1 million for the first six months of 2023 [21]. - Diluted earnings per share for the first half of 2024 was $0.52, down from $0.70 in the same period of 2023 [21]. - Net interest income for the first six months was $14.7 million, down from $15.8 million in 2023 [22]. - Gain on sales of loans increased to $0.9 million, up from $0.6 million year-over-year [21]. - Net interest margin for the first half of 2024 was 2.67%, down 33 basis points from 3.00% in 2023 [22]. Non-Interest Income and Expense - Non-interest income for Q2 2024 was $2.2 million, an increase of 12.0% from $2.0 million in Q2 2023 [19]. - Non-interest expense increased to $8.7 million, up 16.2% from $7.5 million in Q2 2023, primarily due to goodwill impairment and merger-related expenses [19][20]. - Income tax expense for Q2 2024 was $0.4 million, down from $0.6 million in Q2 2023 [20]. Return on Assets and Equity - Return on average assets (annualized) for Q2 2024 was 0.34%, compared to 0.52% for Q2 2023 [20]. - Return on average equity (annualized) was 3.18% for Q2 2024, down from 4.81% in the same period of 2023 [20]. - Book value per common share at June 30, 2024, was $24.71, compared to $22.76 at June 30, 2023 [20]. Merger Activity - The company entered into a definitive Agreement and Plan of Merger with Alerus Financial Corporation, expected to close in Q4 2024, subject to regulatory and stockholder approvals [4][21]. - Merger-related expenses of $0.5 million were recorded in Q2 2024 [4][21]. Credit Losses - The provision for credit losses was ($0.3) million for Q2 2024, a decrease from $0.3 million in Q2 2023 [13][24]. - The allowance for credit losses was $11.292 million as of June 30, 2024, compared to $11.517 million at the same time in 2023 [15][30]. Non-Performing Assets - Total non-performing assets were $3.190 million as of June 30, 2024, compared to $2.800 million at the end of Q1 2024 [17][30]. - Delinquencies over 30 days increased to $3.198 million from $1.632 million in the previous quarter [18][31].