HMN Financial (HMNF)

The current valuation and set up in HMN Financial provides an attractive entry point to allocate to a well-capitalized, conservatively-managed community bank that should benefit from the following drivers:

  1. Rising Interest Rates:
    • Healthy deposit base will allow bank to capture benefit of rising interest rate environment as its cost of deposit funding totals 35bps (3/31/2018).
    • Allocation to investment securities (just 11% of assets) will be an additional lift as AOCI impact on Equity and TBV growth will be muted relative to peers running larger investment portfolio allocations.
  2. Attractive P/TBV valuation
    • Provides a comfortable margin of safety at current valuation.
  3. Tax and Regulatory easements
    • Should move ROA/ROE profiles back to the ~1% and ~8-9% range, respectively.
  4. M&A Upside Scenario
    • Capital/Equity, low P/TBV, and low-cost Deposit positions look very appetizing to larger bank suitors. Higher efficiency ratio implies decent potential for cost-savings. Drivers should bring an M&A premium 50% higher than current valuation.

Bank Description

HMN Financial is a stock savings bank holding company and operates retail branches and loan production facilities as Home Federal Savings Bank in Minnesota, Iowa, and Wisconsin.

Home Federal Savings Bank, originally chartered in 1934, converted from a mutual savings bank to a public stock institution in 1994. Products and services offered by Home Federal Savings Bank today include a full range of retail deposits and loan services, business banking/commercial services, savings, certificates of deposit, checking, retirement savings and IRAs.


Home Federal Savings Bank operates 14 brick & mortar branch locations (13 in MN and 1 in IA) as well as two loan production offices (1 in MN and 1 in WI).


Financial Results

hmnf update

Notable Ownership

  • HMNF ESOP – 13.60%
  • EJF Capital – 7.36%
  • Maltese Capital Management – 7.44%
  • Dimensional Fund Advisors – 6.73%
  • Arbiter Partners QP – 5.81%
  • Directors and Executives – 8.67%

Prospective Buyers

  • Bremer Financial ($11.8B Assets)
  • Associated Banc-Corp ($32.3B Assets / ASB)
  • Merchants Financial Group ($1.7B Assets / MFGI)
  • Minnwest Corp ($1.7B Assets)
  • Old National ($16.6B / ONB)



Welcome! My goal for Golden Belt Investments is to find and profile investment opportunities, with primary focus in community banks, small/midcap companies, and specialty finance companies.

I will do my best to maintain a tracking portfolio of companies profiled and other tracking companies where I either own shares or currently monitor on a prospective basis. Individual posts will be utilized to profile single-names for actionable investment ideas.