After taking a $29 million net loss in 2010, Rochester's Home Federal Savings Bank has decided to postpone its next payment on a $26 million TARP loan.
The $325,000 interest payment to the U.S. Treasury, scheduled for Feb. 15, is for the loan the bank accepted in 2008 from the Troubled Asset Relief Program, which aimed to help ailing banks.
Home Federal President Brad Krehbiel says the delay will help Home Federal, owned by holding company HMN Financial, maintain its level of capitalization.
"We are well-capitalized now," said Krehbiel. "We're going to let the bank get healthier, and then we'll pay (the TARP interest) again."
The net loss, announced last week, outstrips the $10.1 million loss in 2008 and $10.8 million loss in 2009. Home Federal's total assets fell by $156 million in 2010, from $1.036 billion on Dec. 31, 2009, to $880.6 million on Dec. 31, 2010. At the end of 2010, it had $84.5 million in nonperforming assets on its books, up from $81.6 million in September.
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When the real estate market slowed down, Home Federal took possession of a lot of commercial property from developers who couldn't make payments, Krehbiel said. The assets haven't been easy to sell in this economy, he said. But "we're starting to see an increase in interest in some of the properties."
Home Federal is dealing with losses compounded by an increase in the required deferred tax valuation allowance. That added $4.4 million to the bank's $10.4 million net loss in the fourth quarter.
Excluding the deferred tax valuation allowance, the bank says its annual loss would be reduced to $14.2 million.
Home Federal operates 10 full-service offices in southern Minnesota and two in Iowa, as well as two private banking branches in Edina and Rochester and a loan origination office in Sartell.
