Kiger's Notebook

A.M. Espresso is @ Home Fed. Bank on SUPERIOR DRIVE N.W.

Whoops. I have been listing the location of tomorrow's A.M. Espresso incorrectly in the business calendar.

It is being hosted at Home Federal Bank. I just listed the wrong one. It is NOT at Civic Center.

The event in the morning is at the newish Superior Drive Northwest branch by C.O. Brown.

Here's the listing with the correct details:

• A.M. Espresso, a morning business networking event, is scheduled from 7:30 a.m. to 9 a.m. at Home Federal Bank, 2048 Superior Drive N.W., next to C.O. Brown.

It is sponsored by Rochester Area Chamber of Commerce. For more information, call the chamber at 288-1122 or by e-mail to chamber@rochestermnchamber.com.

Home Federal Bank appoints Krehbiel to board

Almost a year after he took over as the president of Home Federal Savings Bank, Bradley C. Krehbiel was added to the board of the bank’s holding company.

“His experience and skills will enhance our abilities … to successfully deal with the challenges facing our industry and improve Home Federal’s performance,”  stated Timothy Geisler, chairman of Rochester-based HMN Financial Inc.

This move, according to insiders, signals the board’s approval of the job that Krehbiel has been doing this year.

The move follows the bank’s positive third quarter earnings report this fall, with a net income of $881,000.

As with most financial institutions, 2008 and the start of 2009 were bumpy for Home Federal.

In 2008, it reported a $2 million loss in the second quarter due to a $3.8 goodwill write-down, and a $7.1 million loss in the third quarter from its involvement in a bad $12 million loan to Minnesota businessman Tom Petters, who is on trial for fraud.

The bank also accepted a $26 million loan from the Federal Troubled Asset Relief Fund in December.

Krehbiel, 50, had worked at Home Federal for about 10 years before being named president.

He had served as the executive vice president of Home Federal since 2004. Prior to Home Federal, he held several positions in the financial services industry, including six years as a private banking consultant.

Almost 250 people work for the bank, which has $1 billion in assets. Home Federal operates ten full service offices in southern Minnesota, two in Iowa and loan origination offices in Rochester and Sartell, Minn.

Home Federal Private Banking has branches in Rochester and Edina, Minn.

Home Fed Bank sells building, keeps branch

Home Federal Bank sold its building at 3900 55th St. N.W., which houses one of its branches.

Les Nelson of Clear Lake, Iowa, who owns many commercial buildings in the Med City, bought it for more than $2 million in mid-October.Home Federal built the 9,800-square-foot building in 2002.

The bank branch will remain open and will lease 700-square-feet of space from Nelson.

A U.S Veterans Administration clinic leases the rest of the building.

“We’re looking for efficiencies, and it had become more challenging to find tenants,” says bank president Brad Krehbiel. “This was a timely opportunity. We were made a fair offer.”A staff of about five work in the 55th Street branch.

Think Bank + Ex-Pump and Munch

Here's the follow-up to the earlier bank and c-store tease:

Think Mutual Bank hopes to move its southwest branch to the site of a former convenience store with good access to U.S. 52 and Salem Road.

The Rochester-based bank last week bought the BP Pump N Munch convenience store at 1509 Greenview Drive S.W., which closed earlier this year. It paid $785,895, according to Olmsted County records.

The long-term strategy is to move the bank’s current southwest branch at 1698 Greenview Drive S.W. to a yet-to-be-built building on the Pump N Munch site, says Kirk Muhlenbruck, Think’s senior vice president of community banking.

“This is about being more efficient. The current Greenview location is much larger than we need,” he says.

That branch was constructed before Think, then a credit union, built its headquarters at 5200 Members Parkway N.W., off West Circle Drive.

Once that was built, it took over some of the work that originally was done at the Greenview site, Muhlenbruck said.The branch along Salem Road near U.S. 52 also will be more convenient for customers, he said.

Staffing will remain about the same. The southwest branch has a staff of about 20 that provides retail banking, home finance, investment banking and insurance services.

While a new structure eventually will be built there, don’t expect any construction on the ex-BP site soon.

“It could be a couple years or longer,” says Muhlenbruck.

The bank is working on a transition strategy to minimize the impact on customers, and it’s working on plans for the existing branch.Think Mutual Bank is a $1.4 billion full-service banking institution with eight branches in Rochester and the Twin Cities.

Ex-Pump and Munch to become bank branch

 The buzz is that one of the former BP Pump and Munch stations in Rochester has been sold and will eventually become a bank branch.

This is part of a larger strategy by the local bank to replace a current facility. Don't expect construction any time soon.

I'll have more detail on this soon.

Home Federal Bank 3Q 2009 earnings - back in the black

Back in black.

That's the song Home Federal Bank is singing this morning. It released its third quarter earnings report last night and the numbers were on the positive side of the ledger for the first time since 2007.

The big number that jumps out is the net income of $881,000. In the third quarter of 2008, the bank holding company posted $7.1 million loss.

Here are a few other highlights. I should have more soon on this

• Diluted earnings per share of $0.12 compared to diluted loss per share of $1.93 in third quarter of 2008
• Provision for loan losses down $12.4 million from third quarter of 2008
• Net interest margin of 3.46%, up 25 basis points from third quarter of 2008
• Nonperforming assets of $77.2 million, down $2.3 million from second quarter of 2009

Year to Date Highlights

• Net loss of $10.9 million compared to net loss of $7.6 million in the first nine months of 2008
• Diluted loss per share of $3.32 compared to diluted loss per share of $2.08 in the first nine months of 2008
• Provision for loan losses up $4.8 million over first nine months of 2008
• Net interest margin of 3.35%, up 14 basis points from first nine months of 2008
• Nonperforming assets of $77.2 million, up $2.4 million in the first nine months of 2009

President’s Statement

"We are pleased to report positive earnings for the third quarter of 2009” said Bradley Krehbiel, Principal Executive Officer of HMN. “While the economic environment for commercial real estate continues to be challenging, we are encouraged by some recent sales and renewed interest in some of our non-performing real estate. We continue to focus our efforts on reducing non-performing assets, reducing industry loan concentrations, increasing our core retail and commercial deposit relationships and reducing expenses. We believe that, over time, our focus on these areas will be effective in generating improved financial results. In the meantime, Home Federal Savings Bank continues to have 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.”

FDIC tweaks Security State Bank

In what has become a dreaded Friday tradition, the FDIC issued is list of banks that it has sent letters asking for improvement (or more serious things).

 On this Friday's list was Security State Bank of Lewiston, which has branches in Spring Valley, Lewiston, Hokah, Wykoff and Ostander.

I chatted with Bank President Mike Bue, who is well-known in Rochester for leading many banks gpoing back to the Marquette Bank days. He explained that the core of the issue a number of loans from outside of this area that the bank bought as an investment.

In the current market, those loans have become problematic and the FDIC is demanding that the bank take care of that. A plan has been put in place and approved by FDIC.

Security State, which has assets totaling $74 million, remains open and active. Bue says none of the loan problems are local. The bank is still well capitalized, is still opening accounts and is still issuing loans.

I'll have more in print very (very) soon.

Home Federal Bank closing Roch. airport branch

After five years in business, Home Federal Savings Bank is closing the doors of its branch near Rochester International Airport.

In a letter to customers, the bank stated that the addition of other branches and improved efficiency reduced the traffic to the branch at 7389 Airport View Drive S.W. to the point that it was no longer cost-effective to continue operations.

While the activity in the airport area is growing with additional development, Home Federal is seeing its customers who live south of Rochester stopping at other branches rather than doing business as they come into or leave the city, says Al Mannino, vice president of corporate affairs.

The branch, which employed two full-time and two part-time staffers, is slated to close in 90 days, on Aug. 14. The bank will absorb the employees into its five other Rochester branches and others in the region.

Customers who have accounts with the branch do not need to do anything in connection to the change, Maninno said. Those accounts will remain within the Home Federal system.

Rochester developer Andy Chafoulias created the airport business park that houses the branch, and Chafoulias owns the bank branch building.

About 235 people work for the bank, which operates 11 full service offices in southern Minnesota and two in Iowa and loan origination offices in Rochester and Sartell, Minn. Home Federal Private Banking operates branches in Edina and Rochester.

Home Fed Bank posts loss for 1Q

While its daily operations are showing signs of strengthening, Home Federal Savings Bank’s first quarter earnings report today was overshadowed by a 276 percent drop in net income.

The Rochester bank reported a loss of $2.6 million for the first three months of 2009 compared to net income of $1.5 million for this period in 2008.

Home Federal President Brad Krehbiel explains that loss as primarily due to the bank increasing by $5 million its provision to cover loan loses to $6.6 million, up from $1.6 million in 2008. That was needed, he said, because of a drop in the estimated value of collateral covering loans.

“We needed to take these steps. We are very transparent about what we are doing,” he said.

Krehbiel, who took over as president at the end of January, pointed out positive signs also in the report.

“People need to look at us as a going concern. We are seeing an income gain on sales of mortgage loans as well as a modest increase of our net increase margin.,” he says. “Our basic business model is continuing to work.”

Gain on sales of loans increased $267,000. Fees and service charges increased $148,000 because of increased retail deposit account activity and fees

Net interest income was $8.8 million for the first quarter of 2009, an increase of $0.1 million, or 1.1 percent, compared to $8.7 million for the first quarter of 2008.

Diluted loss per common share for the first quarter of 2009 was $0.83, down $1.22 from diluted earnings per common share of $0.39 for the first quarter of 2008.

What does Kreihbiel tell customers  about this earnings report?

“We have a higher liquidity ratio as well as higher capital levels than we’ve had in recent history,” he said. “Can we survive a loss in the first quarter? The answer is yes.”

Mayo Clinic debt downgraded

In the Sunday Wall Street Journal, an article broke down how the recession is hurting the health care industry.

Toward the end of the article, the story's focus shifted the economic pain that Mayo Clinic is now feeling. Here's some of what was included:

As manufacturing employment has declined, many cities have come to see health care as the employer of last resort. Rochester, Minn., home to the Mayo Clinic, is one illustration of the industry's power to turn around regional fortunes and revitalize downtowns. Forty years ago, Mayo employed 4,000 workers; today, the international destination for top-tier health care employs some 35,000, more than a third of the city's total work force.

But Mayo, like the rest of the industry, is now struggling to meet it its capital and payroll obligations. Last month, the ratings agency Standard & Poor's downgraded Mayo's debt, citing the hospital system's large unfunded pension liability and break-even operating margins.

Mayo is freezing salaries for doctors and senior administrators, reducing travel and overtime expenses, and cutting capital spending this year by $150 million, says Chief Financial Officer Jeff Bolton. There have been no layoffs, though temporary staff are being pared back and only essential positions are being filled. Mayo is delaying occupying one floor of a new outpatient exam building on the Rochester campus, since finishing the interior of each floor costs $12 million.