First Federal of Northern Michigan Bancorp, Inc. Announces First Quarter 2016 Results

ALPENA, Mich., April 22, 2016 /PRNewswire/ -- First Federal of Northern Michigan Bancorp, Inc. (OTCQX: FFNM) (the "Company") reported consolidated net earnings of $261,000, or $0.07 per basic and diluted share, for the quarter ended March 31, 2016 compared to consolidated net earnings of $356,000, or $0.10 per basic and diluted share, for the quarter ended March 31, 2015. Annualized return on average assets was 0.31% and return on average equity was 3.07% for the first quarter of 2016 compared to 0.42% and 4.58%, respectively for the prior year period.

The Company's results for the quarter ended March 31, 2016 include:

  • Quarter over quarter increase of $23,000 to interest income partially offset by an increase of $17,000 to interest expense.
  • Provision for loan losses of $32,000 as compared to $23,000 for the prior year period.
  • Quarter over quarter increase in the Company's non-interest expense of $83,000, primarily resulting from employment costs related to healthcare and the frozen pension plan and increased occupancy expenses related to technology upgrades late in 2015 and in the first quarter of 2016 when compared to the same period in 2015.
  • Tangible book value per share at March 31, 2016 was $8.86 compared to $8.36 at March 31, 2015, primarily reflecting the Company's improvement to earnings following the merger.

When comparing our results for the three months ended March 31, 2016 to the three months ended March 31, 2015, net interest income remained unchanged at $2.3 million. Non-interest income decreased $9,000 to $485,000 for the quarter ended March 31, 2016 from $494,000 for the quarter ended March 31, 2015. Our non-interest expenses increased $83,000 to $2.5 million for the three months ended March 31, 2016 from $2.4 million for the three months ended March 31, 2015.

Michael W. Mahler, Chief Executive Officer of the Company, commented, "We are pleased with our commercial loan pipeline as we continue to focus our efforts on growing our commercial loan portfolio, which is evidenced by the recent addition of three commercial lenders to our lending team. We believe our increased presence, market and product expansion along with higher commercial loan demand accounts for the growth in our commercial pipeline. We remain confident that our long term strategy will result in quality loan growth and provide the earnings growth needed to enhance value for our shareholders." 

Mahler continued "While provision expense increased quarter over quarter, asset quality remains strong as demonstrated by a 10.9% Texas ratio as of March 31, 2016. This is also evident with a $1.0 million reduction to our non-performing assets and net recoveries on charged off loans as compared to the same period one year earlier. We are disappointed to report that late in the quarter we did place a commercial loan into non-accrual status. This well-seasoned loan is supported with a government guarantee so we do not expect the default to have a significant impact on the Bank as we look ahead. The action though did negatively impact earnings for the quarter by more than $20,000. We view this as an isolated situation within the portfolio as demonstrated by the strong asset quality metrics cited above."

Financial Condition

Total assets of the Company at March 31, 2016 were $330.6 million, a decrease of $5.4 million, or 1.6%, from $336.0 million at December 31, 2015. Cash and cash equivalents increased $4.0 million, or 52.8%, while securities available for sale decreased $5.1 million, or 4.0%, to $123.3 million and deposits held in other financial institutions decreased $744,000, or 7.9%, as we had certificates of deposits mature during the first three months of 2016. In addition, net loans receivable decreased $1.6 million, or 1.0%, to $166.4 million at March 31, 2016. 



March 31,


December 31,



2016


2015






Mortgage Loans


$        74,726


$           75,806

Consumer Real Estate


8,608


8,726

Consumer Other


1,551


1,504

Commercial Real Estate


58,877


60,077

Commercial Other


24,242


23,430






Total gross loans


$       168,004


$          169,543






Loan Loss Reserve


(1,600)


(1,559)






Net Loans Receivable


$       166,404


$          167,984






 

Deposits increased $2.2 million, or less than 1.0%, to $270.7 million at March 31, 2016 from December 31, 2015. FHLB advances decreased $8.4 million, or 25.7%, as proceeds from loan payments and matured securities were used to pay off maturing advances.

Stockholders' equity increased $661,000, or 2.0%, to $34.0 million at March 31, 2016 from December 31, 2015.  The increase was due primarily to net earnings for the three-month period of $261,000 and an increase of $549,000 in the unrealized gain on available-for-sale investment securities, offset by a dividend payment of $149,000. At March 31, 2016 First Federal of Northern Michigan remains "well-capitalized" for regulatory purposes, 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 Leverage Capital (tier 1 to quarterly average assets):

$          30,146

9.00%


$            13,411

4.00%


$          16,764

5.00%










Common Equity Tier 1 Risk-based Capital ( core capital to risk-weighted assets):

$          30,146

17.46%


$              7,768

4.50%


$          11,220

6.50%










Tier 1 Risk-based Capital (tier 1 to risk-weighted assets):

$          30,146

17.46%


$            10,357

6.00%


$          13,809

8.00%










Total Risk-based Capital ( risk-based capital to risk weighted assets):

$          31,746

18.39%


$            13,809

8.00%


$          17,262

10.00%










Tangible Capital (tangible capital to tangible assets):

$          30,146

8.93%


$              6,748

1.50%


$          16,871

N/A










*The minimum required regulatory ratios do not include the conservation buffer that began on January 1, 2016, which will be fully phased in by January 1, 2019.

 

Results of Operations

Interest income remained steady at $2.6 million for the three months ended March 31, 2016 and 2015. During the three months ended March 31, 2016 our yield on interest-earning assets remained unchanged at 3.34% when compared to the same period in 2015.

Interest expense increased to $318,000 for the three months ended March 31, 2016 from $301,000 for the three months ended March 31, 2015. The increase in interest expense was due primarily to an 11 basis point increase in the cost of FHLB advances to 1.31% from 1.20% partially offset by a decrease of $2.7 million in the average balance of our interest-bearing deposit accounts during the three months ended March 31, 2016 as compared to the prior year period.

The Company's net interest margin decreased to 2.93% for the three-month period ended March 31, 2016 from 2.96% for the same period in 2015 as a result of the factors mentioned above.

The provision for loan losses for the three-month period ended March 31, 2016 was $32,000, as compared to $23,000 for the prior year period. The increase in provision expense quarter over quarter is primarily related to an increase in delinquencies in our loan portfolio offset by fewer loans requiring specific reserves along with a net recovery position on previously charged off loans. The provision was based on management's review of the components of the overall loan portfolio, the status of non-performing loans and other subjective factors.

Non-interest income decreased to $485,000 for the quarter ended March 31, 2016 from $494,000 for the 2015 period. Income related to insurance and brokerage commissions decreased $18,000, while we recorded a $5,000 loss on sale of bank owned properties as compared to a gain of $91,000 for the year earlier period. Partially offsetting these decreases was the collection of $100,000 in life insurance proceeds during the three months ended March 31, 2016.

Non-interest expense increased $83,000 to $2.5 million for the 2016 period from $2.4 million for the three months ended March 31, 2015, as we saw increases in the following areas:

  • $44,000 in compensation and employee benefits, as a result of  increased health care costs associated with increased premiums and claims activity along with increase funding expenses related to our frozen pension plan,
  • $50,000 in occupancy related to technology upgrades made late in 2015 and early 2016,
  • $21,000 in service bureau (bank operating system) fees,
  • Partially offsetting these increases was a decrease of $40,000 in collection and real estate owned expenses.

During the quarters ended March 31, 2016 and March 31, 2015 the Company recorded no tax expense.

 

 

Select Performance and Financial Statistics (unaudited):










For the Three Months Ended March 31,



2016


2015












Net interest margin

2.93%


2.96%


Average interest rate spread

2.79%


2.83%


Non-performing assets to total assets

1.05%


1.32%


Non-performing loans to total loans

1.39%


0.84%


Allowance for loan losses to total loans

0.95%


0.88%


Return on average assets*

0.31%


0.42%


Return on average equity*

3.07%


4.58%


Efficiency ratio (1)

89.66%


86.23%


Dividend payout ratio (basic)

57.19%


20.96%


Tangible book value per share

$                        8.86


$                        8.36


Earnings per share

$                        0.07


$                        0.10


Total shares outstanding

3,727,014


3,727,014







* Annualized





(1) Non-interest expense divided by net interest income plus non-interest income, excluding 


      any gains or losses.










 

 

First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheet

(in thousands)


March 31, 2016

December 31, 2015


     (Unaudited)


ASSETS



Cash and cash equivalents:



Cash on hand and due from banks

$                     11,115

$                       7,574

Overnight deposits with FHLB

500

29

Total cash and cash equivalents

11,615

7,603




Deposits held in other financial institutions

8,646

9,390

Securities available for sale

123,328

128,418

Securities held to maturity

745

745

Loans held for sale

-

563

Loans receivable, net of allowance for loan losses of $1,599,569 and



  $1,559,231 as of March 31, 2016 and December 31, 2015, respectively

166,404

167,984

Foreclosed real estate and other repossessed assets

1,127

1,171

Federal Home Loan Bank stock, at cost

1,636

1,636

Premises and equipment

6,219

6,329

Assets held for sale

271

271

Accrued interest receivable

1,044

1,039

Intangible assets

990

1,044

Deferred tax asset

2,369

2,615

Originated mortgage servicing rights

540

578

Bank owned life insurance

4,632

4,857

Other assets

1,018

1,766




Total assets

$                   330,584

$                   336,009




LIABILITIES AND STOCKHOLDERS' EQUITY



Liabilities:



Deposits

$                   270,717

$                   268,527

Advances from Federal Home Loan Bank

24,480

32,928

Accrued expenses and other liabilities

1,385

1,213




Total liabilities

296,582

302,668




Stockholders' equity:



Common stock ($0.01 par value 20,000,000 shares authorized



 4,034,675 shares issued)

40

40

Additional paid-in capital

28,264

28,264

Retained earnings

7,932

7,820

Treasury stock at cost (307,750 shares)

(2,964)

(2,964)

Accumulated other comprehensive income

730

181




Total stockholders' equity

34,002

33,341




Total liabilities and stockholders' equity

$                   330,584

$                   336,009




 

 

First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries

Consolidated Statement of Income and Comprehensive Income

(in thousands)


 For the Three Months



 Ended March 31,



2016


2015



 (Unaudited)

Interest income:





Interest and fees on loans


$                1,988


$                2,004

Interest and dividends on investments





   Taxable


337


294

   Tax-exempt


24


31

Interest on mortgage-backed securities


291


288

Total interest income


2,640


2,617






Interest expense:





Interest on deposits


229


235

Interest on borrowings


89


66

Total interest expense


318


301






Net interest income


2,322


2,316

Provision for loan losses


32


23

Net interest income after provision for loan losses


2,290


2,293






Non-interest income:





Service charges and other fees


230


218

Mortgage banking activities


99


101

Net (loss) gain on sale of premises and equipment,





  real estate owned and other repossessed assets


(5)


91

Other


161


84

Total non-interest income


485


494






Non-interest expense:





Compensation and employee benefits


1,463


1,419

FDIC Insurance Premiums


58


64

Advertising


35


44

Occupancy


330


280

Amortization of intangible assets


54


61

Service bureau charges


124


103

Professional services


109


110

Collection activity


22


63

Real estate owned & other repossessed assets


19


18

Other


300


269

Total non-interest expense


2,514


2,431






Income before income tax expense


261


356

Income tax expense


-


-






Net Income


$                   261


$                   356






Other Comprehensive Income:





Unrealized gain on investment securities - available for sale securities - net of tax


$                   730


$                   345

Reclassification adjustment for gains realized in earnings - net of tax


-


-






Comprehensive Income


$                   991


$                   701

 

 

Safe Harbor Statement

This news release and other releases and reports issued by the Company 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. logo (PRNewsFoto/First Federal of Northern Michi)

 

Logo - http://photos.prnewswire.com/prnh/20160205/330264LOGO

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/first-federal-of-northern-michigan-bancorp-inc-announces-first-quarter-2016-results-300256169.html

SOURCE First Federal of Northern Michigan Bancorp, Inc.

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.