A publicly owned Rochester bank is now under supervision of a federal regulator.
Home Federal Savings Bank, under its parent holding company HMN Financial, last week signed a supervisory agreement with the Office of Thrift Supervision, the federal agency that regulates savings banks.
Home Federal, which recently reported $29 million in losses for 2010, had been operating under what's called called a memorandum of understanding with the federal agency. The new agreement places the bank under closer scrutiny with more requirements.
The agreement requires that the bank submit a capital plan by May 31 to the Office of Thrift Supervision, not pay any dividends or make any purchases without federal approval, nor adjust the pay or bonuses of the bank's executives and board members. The agreement remains in place until ended by the OTS, it says.
Home Federal President Brad Krehbiel said Friday the bank's percentage of troubled loans rose this year to a level that triggered the requirement of a supervisory agreement. The irony, he says, is that it was the bank's own efforts to closely examine its loans and adjust its potential losses that partially drove the 2010 losses and triggered the supervisory agreement.
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The bank has been told it will be required to have a new Individual Minimum Capital Requirement, "to establish and maintain levels of capital greater than those generally required for a bank to be classified as 'well-capitalized.'"
However, according to the public bank's federal filing about the agreement, Home Federal has not been told when that new capitalization rate will kick in and it has not been told what the required rate will be.
In Home Federal's filing, it responded to that with this statement:
"The bank believes it continues at this time to maintain levels of capital in excess of those required to be 'well-capitalized' within the meaning of applicable capital regulations of the OTS. The proposed IMCR would not affect the Bank’s status as 'well-capitalized' within the meaning of these regulations."
Home Federal has 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.
Home Federal's stock, which is listed on NASDAQ, traded at mid-morning at $2.57, down from a 52-week high of $6.66 on April 26, 2010.
