FIRST FEDERAL OF NORTHRN MCHGN BNCRP INC In the news release, First Federal of Northern Michigan Bancorp, Inc. Announces Third Quarter 2015 Results, issued 23-Oct-2015 by First Federal of Northern Michigan Bancorp, Inc. over PR Newswire, we are advised by the company that this press release corrects an inadvertent error regarding loan growth contained in the press release issued earlier today. The complete, corrected release follows:
First Federal of Northern Michigan Bancorp, Inc. Announces Third Quarter 2015 Results
ALPENA, Mich., Oct. 23, 2015 /PRNewswire/ -- First Federal of Northern Michigan Bancorp, Inc. (Nasdaq: FFNM) (the 'Company') reported consolidated net income of $1.9 million, or $0.51 per basic and diluted share, for the quarter ended September 30, 2015 compared to $1.6 million, or $0.48 per basic and diluted share, for the quarter ended September 30, 2014.
Consolidated net income for the nine months ended September 30, 2015 was $2.6 million, or $0.70 per basic and diluted share, compared to $1.9 million, or $0.63 per basic and diluted share for the nine months ended September 30, 2014. As discussed below, net income for these periods was significantly enhanced by a deferred tax asset reserve recovery.
Performance Highpoints:
Listed below are highlights related to the Company's results for the three and nine months ended September 30, 2015:
- Total assets increased $12.0 million while total loans increased $4.4 million, available-for-sale securities increased $11.0 million and deposits increased $8.6 million during the nine months ended September 30, 2015.
- Quarter over quarter increase of $273,000 to net income, with an increase of $693,000 for the nine month period year over year.
- An increase of $273,000 to interest income quarter over quarter and a year over year increase of $1.5 million.
- Provision for loan loss resulted in recoveries of $4,000 and $26,000 for the three and nine months ended September 30, 2015, respectively, as compared to provisions of $257,000 and $273,000 for the three and nine months ended September 30, 2014, respectively.
- A deferred tax asset valuation reserve recovery of $1.7 million was realized during the three months ended September 30, 2015, while the three months ended September 30, 2014 included the bargain purchase gain of $1.8 million related to our merger with Bank of Alpena.
- Net interest margin decreased to 2.97% for the quarter ended September 30, 2015 from 3.14% for the quarter ended September 30, 2014 due primarily to a 16 basis point decrease in the yield on interest-earning assets.
- Tangible book value per share at September 30, 2015 was $8.58 compared to $7.76 at September 30, 2014, primarily reflecting the Company's annual earnings.
- First Federal of Northern Michigan remains 'well-capitalized' for regulatory capital purposes.
Michael W. Mahler, Chief Executive Officer of the Company, commented, 'We are pleased with the $13.0 million, or 4%, growth in the balance sheet for the nine month period ended September 30, 2015. This increase reflects a $4.4 million, or 3%, growth in our loan portfolio, which is the result of our concerted business effort.'
Mahler continued, 'We are encouraged by the 14.6% reduction in non-performing assets (NPA) since the beginning of 2015. This has facilitated a decline in our Texas ratio from 17.1% at the start of the year to 13.8% as of September 30, 2015. Reducing the level of NPAs still remains our primary focus with a target Texas ratio of 10%. Subsequent to the quarter end we accepted an offer on our single largest piece of Bank-owned property which represents 50% of the balance of Bank-owned real estate. The sale is expected to close in mid-December. We believe that continued improvement in asset quality will translate into reduced expenses going forward in the form of lower collection and foreclosure costs along with declining carrying costs associated with bank owned properties.'
Craig A. Kus, President and Chief Operations Officer added, 'We are encouraged by an increase of 23% in our pre-provision pre-tax income and an increase of 36% to our net income over the 2014 nine month period. These results reflect an increase of $1.3 million to net interest income as our focus has been on core banking activities including the growth of loans during 2015.'
Financial Condition
Total assets of the Company at September 30, 2015 were $338.8 million, an increase of $12.9 million, from assets of $325.9 million at December 31, 2014. Net loans receivable increased $4.4 million to $168.1 million at September 30, 2015 and securities available for sale increased $10.9 million when compared to December 31, 2014.
Deposits increased $8.6 million to $279.3 million at September 30, 2015 from $270.7 million at December 31, 2014. In addition, FHLB advances increased $2.2 million to $25.1 million at September 30, 2015 from $22.9 million at December 31, 2014.
Stockholders' equity increased to $33.1 million at September 30, 2015 from $30.5 million at December 31, 2014. The increase in stockholders' equity was mainly attributable to net income reported for the nine months ended September 30, 2015 of $2.6 million and $179,000 in unrealized gains on available for sale securities net of tax. First Federal of Northern Michigan's regulatory capital remains at levels in excess of regulatory requirements, as shown in the table below.
Regulatory | Minimum to be | |||||||
Actual | Minimum | Well Capitalized | ||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||
Dollars in Thousands | ||||||||
Tier 1 (Core) capital ( to adjusted assets) | $ 31,046 | 9.20% | $ 15,193 | 4.50% | $ 21,946 | 6.50% | ||
Total risk-based capital ( to risk-weighted assets) | $ 32,560 | 18.32% | $ 14,216 | 8.00% | $ 17,770 | 10.00% | ||
Tier 1 risk-based capital ( to risk weighted assets) | $ 31,046 | 17.47% | $ 10,662 | 6.00% | $ 14,216 | 8.00% | ||
Tangible Capital ( to tangible assets) | $ 31,046 | 9.20% | $ 6,753 | 2.00% | $ 6,753 | 2.00% | ||
Asset Quality
The ratio of total nonperforming assets to total assets was 1.25% at September 30, 2015 compared to 1.52% at December 31, 2014 and 1.74% at September 30, 2014. Non-performing assets decreased $726,000 at September 30, 2015 from December 31, 2014, mainly as a result of a valuation reserve that was established on a large commercial bank owned property. The Company continues to closely monitor non-performing assets and has taken a variety of steps to reduce the level thereof, such as:
- Timely pursuit of foreclosure and/or repossession options coupled with quick and aggressive marketing efforts of repossessed assets;
- Restructuring loans, where feasible, to assist borrowers in working through this financially challenging time;
- Allowing borrowers to structure short-sales of properties, where appropriate and feasible; and
- Working with borrowers to find a means of reducing outstanding debt (such as through sales of collateral).
As of | |||||
September 30, 2015 | December 31, 2014 | September 30, 2014 | |||
Asset Quality Ratios: | |||||
Non-performing assets to total assets | 1.25% | 1.52% | 1.74% | ||
Non-performing loans to total loans | 1.03% | 1.30% | 1.55% | ||
Allowance for loan losses and credit mark to non-performing loans | 172.51% | 148.24% | 135.81% | ||
Allowance for loan losses and credit mark to total loans | 1.77% | 1.92% | 2.10% | ||
'Texas' ratio (Bank) (1) | 13.77% | 17.06% | 18.97% | ||
Classified asset ratio (2) | 37.08% | 22.98% | 25.53% | ||
Total non-performing loans ($000 omitted) | $1,742 | $2,139 | $2,553 | ||
Total non-performing assets ($000 omitted) | $4,237 | $4,963 | $5,439 | ||
(1) 'Texas' ratio is calculated by dividing total non-performing loans plus real estate owned by tangible capital plus | |||||
(2) Classified asset ratio is calculated by dividing classified assets (substandard assets plus real estate owned and | |||||
Results of Operations
Interest income increased to $2.7 million for the three months ended September 30, 2015 from $2.4 million for the comparable period in 2014 and increased to $7.9 million for the nine months ended September 30, 2015, compared to $6.5 million for the comparable period in 2014. The nine month period increase was due in large part to an increase of $90.3 million in the average balance of interest-earning assets, as a result of our merger with Alpena Banking Corporation in August 2014. While average balances increased, the average yield on interest-earning assets decreased 49 basis points to 3.39% for the nine months ended September 30, 2015 as compared to 3.88% for the same period in 2014.
Interest expense was $317,000 and $926,000 for the three- and nine-month periods ended September 30, 2015, respectively compared to $270,000 and $778,000 for the prior year period. The increase in interest expense was due primarily to a period over period increase of $60.2 million in the average balance of interest-bearing deposits. The cost of funds on these deposits decreased 6 basis points to 0.46% for the nine-month period ending September 30, 2015 from 0.56% for the same period in 2014. During the same period, we experienced a $951,000 decrease in the average balance of FHLB advances when compared to the nine month period ended September 30, 2014, while the average rate on those borrowings increased 18 basis points to 1.27% for the nine-month period ended September 30, 2015 as compared to the year-earlier period and to 1.34% for the three-month period ended September 30, 2015 from 1.12% for the three-month period in 2014.
The Company's net interest margin decreased to 2.97% for the three months ended September 30, 2015 from 3.14% for the year earlier period and decreased to 2.99% for the nine months ended September 30, 2015 from 3.41% for the same period in 2014 as a result of the factors mentioned above.
The provision for loan losses for the three- and nine-month periods ended September 30, 2015 were a recovery of $4,000 and $26,000, respectively as compared to a provision of $257,000 and 273,000 for the prior year period. Our provision for loan losses is based on a twelve-quarter rolling average of actual net charge-offs adjusted for various environmental factors for each pool of loans in our portfolio. During the quarter ended September 30, 2014, we took a $225,000 charge on a large non-performing out of state participation loan that was transferred to real estate owned as a result of foreclosure action. This charge-off was based upon an appraisal that was completed during the quarter, and created the need for a loan loss provision, and accounts for most of the expense recorded for the entire nine month period ending September 30, 2014. During the nine-month period ended September 30, 2015, we experienced net recoveries of approximately $97,000 among all loan portfolios. As a result of the decline in net-charges offs, we have seen a decline in our loss adjustment factors that are applied to the residential and consumer loan portfolios, which has resulted in net recovery of provision for loan losses. The provision was based on management's review of the components of the overall loan portfolio, the status of non-performing loans and various subjective factors.
Non-interest income decreased to $468,000 for the three months ended September 30, 2015 from $2.2 million for the three months ended September 30, 2014. The main factor for the decrease is the bargain purchase gain of $1.8 million that was recorded during the three-month period ended September 30, 2014 as a result of our merger with the Alpena Banking Corporation. Partially offsetting this item was an increase $36,000 in service charges on deposit accounts when compared to the same period in 2014. The following increases were recognized during the nine months ended September 30, 2015: $27,000 in mortgage banking activities, $120,000 to service charges and other fees and $109,000 to gain on sale of bank owned properties.
Non-interest expense increased to $2.6 million for the three months ended September 30, 2015 compared to $2.5 million for the same period in 2014 and increased to $7.5 million for the nine months ended September 30, 2015 from $6.4 million for the nine months ended September 30, 2014. For both the three- and nine-month periods ended September 30, 2015 we experienced an increase in compensation and employee benefits of $14,000 and $721,000, respectively, mainly related to adding employees as a result of the merger. In addition, during the three- and nine- months ended September 30, 2015 we experienced increases of $91,000 and $168,000 in professional services attributable to legal and audit services, respectively. Partially offsetting these increases were decreases of $140,000 and $264,000 in merger related expenses for the three- and nine-month periods ended September 30, 2015, respectively.
For the three- and nine-month period ended September 30, 2015, we recorded an income tax benefit of $1.7 million. This income tax benefit is the result of an evaluation of our deferred tax asset as of September 30, 2015. Our analysis indicated that it is more likely that we will be able to utilize $2.7 million of our deferred tax asset; therefore we recovered $1.7 million of our previously established valuation reserve.
For the Three Months Ended September 30 | For the Nine Months Ended September 30 | ||||
2015 | 2014 | 2015 | 2014 | ||
Performance Ratios: | |||||
Net interest margin | 2.97% | 3.14% | 2.99% | 3.41% | |
Average interest rate spread | 2.83% | 2.99% | 2.86% | 3.28% | |
Return on average assets* | 2.26% | 2.24% | 1.05% | 0.89% | |
Return on average equity* | 24.17% | 22.80% | 11.21% | 9.52% | |
* Annualized | |||||
Safe Harbor Statement
This news release and other releases and reports issued by the Company, including reports to the Securities and Exchange Commission, may contain 'forward-looking statements.' The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company is including this statement for purposes of taking advantage of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries | ||
Consolidated Balance Sheet (in thousands) | ||
September 30, 2015 | December 31, 2014 | |
(Unaudited) | ||
ASSETS | ||
Cash and cash equivalents: | ||
Cash on hand and due from banks | $ 8,040 | $ 11,205 |
Overnight deposits with FHLB | 478 | 267 |
Total cash and cash equivalents | 8,518 | 11,472 |
Deposits held in other financial institutions | 8,924 | 8,429 |
Securities available for sale | 130,923 | 119,968 |
Securities held to maturity | 745 | 790 |
Loans held for sale | 132 | 88 |
Loans receivable, net of allowance for loan losses of $1,514 and | ||
$1,429 as of September 30, 2015 and December 31, 2014, respectively | 168,063 | 163,647 |
Foreclosed real estate and other repossessed assets | 2,495 | 2,823 |
Federal Home Loan Bank stock, at cost | 1,636 | 2,591 |
Premises and equipment | 6,295 | 6,336 |
Assets held for sale | 271 | 478 |
Accrued interest receivable | 1,065 | 986 |
Intangible assets | 1,105 | 1,286 |
Deferred tax asset | 2,394 | 851 |
Originated mortgage servicing rights | 602 | 710 |
Bank owned life insurance | 4,824 | 4,727 |
Other assets | 831 | 685 |
Total assets | $ 338,823 | $ 325,867 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Liabilities: | ||
Deposits | $ 279,297 | $ 270,734 |
Advances from borrowers for taxes and insurance | 270 | 203 |
Advances from Federal Home Loan Bank | 25,072 | 22,885 |
Accrued expenses and other liabilities | 1,107 | 1,509 |
Total liabilities | 305,746 | 295,331 |
Stockholders' equity: | ||
Common stock ($0.01 par value 20,000,000 shares authorized | ||
4,034,764 shares issued) | 40 | 40 |
Additional paid-in capital | 28,264 | 28,264 |
Retained earnings | 7,127 | 4,765 |
Treasury stock at cost (307,750 shares) | (2,964) | (2,964) |
Accumulated other comprehensive income | 610 | 431 |
Total stockholders' equity | 33,077 | 30,536 |
Total liabilities and stockholders' equity | $ 338,823 | $ 325,867 |
First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries | |||||||
Consolidated Statement of Income and Comprehensive Income (in thousands) | |||||||
For the Three Months | For the Nine Months | ||||||
Ended September 30, | Ended September 30, | ||||||
2015 | 2014 | 2015 | 2014 | ||||
(Unaudited) | (Unaudited) | ||||||
Interest income: | |||||||
Interest and fees on loans | $ 2,056 | $ 1,934 | $ 6,094 | $ 5,335 | |||
Interest and dividends on investments | |||||||
Taxable | 317 | 217 | 938 | 518 | |||
Tax-exempt | 28 | 44 | 89 | 127 | |||
Interest on mortgage-backed securities | 259 | 192 | 811 | 477 | |||
Total interest income | 2,660 | 2,387 | 7,932 | 6,457 | |||
Interest expense: | |||||||
Interest on deposits | 234 | 205 | 709 | 583 | |||
Interest on borrowings | 83 | 65 | 217 | 195 | |||
Total interest expense | 317 | 270 | 926 | 778 | |||
Net interest income | 2,343 | 2,117 | 7,006 | 5,679 | |||
(Recovery of) Provision for loan losses | (4) | 257 | (26) | 273 | |||
Net interest income after provision for loan losses | 2,347 | 1,860 | 7,032 | 5,406 | |||
Non-interest income: | |||||||
Service charges and other fees | 242 | 206 | 696 | 576 | |||
Mortgage banking activities | 128 | 127 | 378 | 351 | |||
Net gain (loss) on sale of securities | 2 | 1 | 4 | 1 | |||
Net income (loss) on sale of premises and equipment,real estate owned and other repossessed assets | |||||||
(8) | (1) | 82 | (27) | ||||
Bargain purchase gain | - | 1,816 | - | 1,816 | |||
Other | 104 | 76 | 289 | 188 | |||
Total non-interest income | 468 | 2,225 | 1,449 | 2,905 | |||
Non-interest expense: | |||||||
Compensation and employee benefits | 1,345 | 1,331 | 4,271 | 3,550 | |||
FDIC Insurance Premiums | 62 | 56 | 181 | 147 | |||
Advertising | 43 | 54 | 136 | 125 | |||
Occupancy | 286 | 274 | 833 | 730 | |||
Amortization of intangible assets | 61 | 42 | 182 | 82 | |||
Service bureau charges | 114 | 92 | 319 | 238 | |||
Professional services | 141 | 50 | 388 | 220 | |||
Collection activity | 25 | 5 | 82 | 34 | |||
Real estate owned & other repossessed assets | 251 | 91 | 297 | 120 | |||
Merger related expense | - | 140 | - | 264 | |||
Other | 250 | 336 | 819 | 871 | |||
Total non-interest expense | 2,578 | 2,471 | 7,508 | 6,381 | |||
Income before income tax benefit | 237 | 1,614 | 973 | 1,930 | |||
Income tax benefit | (1,650) | - | (1,650) | - | |||
Net Income | $ 1,887 | $ 1,614 | $ 2,623 | $ 1,930 | |||
Other Comprehensive Income: | |||||||
Unrealized (loss) gain on investment securities - available for sale securities - net of tax | 127 | (161) | 179 | 272 | |||
Reclassification adjustment for gains realized in earnings - net of tax | 2 | 0 | 2 | 0 | |||
Comprehensive Income | $ 2,016 | $ 1,453 | $ 2,804 | $ 2,202 | |||
Per share data: | |||||||
Net Income per share | |||||||
Basic | $ 0.51 | $ 0.48 | $ 0.70 | $ 0.63 | |||
Diluted | $ 0.51 | $ 0.48 | $ 0.70 | $ 0.63 | |||
Weighted average number of shares outstanding | |||||||
Basic | 3,727,014 | 3,369,670 | 3,727,014 | 3,047,702 | |||
Including dilutive stock options | 3,727,014 | 3,369,670 | 3,727,014 | 3,047,702 | |||
Dividends per common share | $ 0.03 | $ 0.02 | $ 0.07 | $ 0.06 | |||
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/first-federal-of-northern-michigan-bancorp-inc-announces-third-quarter-2015-results-300165481.html
SOURCE First Federal of Northern Michigan Bancorp, Inc.
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