ALPENA, Mich., April 25 /PRNewswire-FirstCall/ -- First Federal of Northern Michigan Bancorp, Inc. (the "Company") reported a consolidated net loss of $32,000, or $0.01 per basic and diluted share, for the quarter ended March 31, 2008 compared to consolidated net earnings of $22,000, or $0.01 per basic and diluted share, for the quarter ended March 31, 2007. The major factor influencing the loss was our lower interest income, as explained below in the "Results of Operations" section.
Selected Financial Ratios For the Three Months Ended March 31 2008 2007 Performance Ratios: Net interest margin 2.98% 2.96% Average interest rate spread 2.53% 2.50% Return on average assets* -0.05% 0.03% Return on average equity* -0.39% 0.25% * Annualized As of March 31, 2008 December 31, 2007 Asset Quality Ratios Non-performing assets to total assets 4.43% 4.15% Non-performing loans to total loans 4.86% 4.54% Allowance for loan losses to non- performing assets 36.69% 38.58% Allowance for loan losses to total loans 1.99% 1.95% Financial Condition
Total assets of the Company at March 31, 2008 were $244.8 million, a decrease of $6.0 million, or 2.4%, over assets of $250.8 million at December 31, 2007. The ratio of total nonperforming assets to total assets was 4.43% at March 31, 2008 compared to 4.15% at December 31, 2007. Non-performing assets increased by $400,000 from December 31, 2007 to March 31, 2008 due primarily to management's identification during the quarter ended March 31, 2008 of a $500,000 impaired commercial loan relationship.
Stockholders' equity, which decreased slightly by $39,000, was $32.5 million at both March 31, 2008 and December 31, 2007. The net loss for the three-month period of $32,000 and dividends of $144,000 were partially offset by an improvement of $66,000 in the unrealized gain on available-for-sale securities, net of tax, which was $131,000 at March 31, 2008 compared to $65,000 at December 31, 2007.
Results of Operations
Interest income decreased to $3.6 million for the three months ended March 31, 2008 from $4.1 million for the three months ended March 31, 2007. The decrease in interest income was due primarily to three factors: a decrease in the average balance of our loan and investment portfolios, an increase in the average balance of non-performing loans, and decreases in the prime rate over the past several months which have lowered the yield on our variable rate loans and on recently originated loans.
Interest expense decreased to $1.9 million for the three months ended March 31, 2008 from $2.2 million for the same period in 2007. The decrease in expense was attributable to two main factors: a decrease in our cost of funds to 3.66% for the three-month period ended March 31, 2008 from 3.93% for the three-month period ended March 31, 2007, and a decrease in our average interest-bearing liabilities to $203.8 million for the three-month period ended March 31, 2008 from $229.6 million for the same period in 2007. The decrease in average interest-bearing liabilities was due to both the pay-down of FHLB advances from matured and/or called investment securities and loan pay-offs and from the decrease in deposits we experienced period over period, due to the competitive demand for deposits in our market.
The Company's interest rate spread increased to 2.53% for the three-month period ended March 31, 2008 from the same period in 2007. The average yield on interest-earnings assets decreased 24 basis points to 6.19% from 6.43%, while the cost of funds decreased 27 basis points to 3.66% from 3.93% period over period.
The provision for loan losses for the three-month period ended March 31, 2008 was $25,000, as compared to $86,000 for the prior year period. The provision is 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 slightly from $988,000 for the three months ended March 31, 2007 to $977,000 for the three months ended March 31, 2008. The primary factor was a decrease of $83,000 in insurance and brokerage commissions period over period, offset by increases of $29,000 in service charges and other fees, $17,000 in mortgage banking activities income and $16,000 in gain from called investment securities.
Non-interest expense decreased slightly from $2.8 million for the three months ended March 31, 2007 to $2.7 million for the three months ended March 31, 2008. The decrease was due largely to a decrease of $91,000 in compensation and employee benefits related to branch closings and other permanent reductions in staffing.
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 March 31, 2008 December 31, 2007 (Unaudited) ASSETS Cash and cash equivalents: Cash on hand and due from banks $2,683,164 $3,567,858 Overnight deposits with FHLB 2,690,261 1,772,999 Total cash and cash equivalents 5,373,425 5,340,857 Securities AFS 20,178,351 20,680,913 Securities HTM 3,074,788 2,770,000 Loans held for sale 501,719 - Loans receivable, net of allowance for loan losses of $3,974,892 and - $4,013,454 as of March 31, 2008 and December 31, 2007, respectively 195,558,269 201,333,427 Foreclosed real estate and other repossessed assets 1,130,671 1,279,543 Real estate held for investment 89,140 105,543 Federal Home Loan Bank stock, at cost 4,196,900 4,196,900 Premises and equipment 7,369,632 7,619,016 Accrued interest receivable 1,641,106 1,699,706 Intangible assets 1,968,733 2,093,735 Goodwill 1,408,604 1,396,854 Other assets 2,263,160 2,314,797 Total assets $244,754,498 $250,831,292 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $163,146,423 $164,469,673 Advances from borrowers for taxes and insurance 173,757 729 Federal Home Loan Bank advances and Note Payable 48,099,195 52,683,795 Accrued expenses and other liabilities 871,009 1,173,550 Total liabilities 212,290,384 218,327,747 Stockholders' equity: Common stock ($0.01 par value 20,000,000 shares authorized 3,191,999 shares issued) 31,920 31,920 Additional paid-in capital 24,339,439 24,327,466 Retained earnings 12,240,496 12,416,364 Treasury stock at cost (307,750 shares) (2,963,918) (2,963,918) Unallocated ESOP (933,541) (958,651) Unearned compensation (381,598) (414,549) Accumulated other comprehensive income 131,316 64,913 Total stockholders' equity 32,464,114 32,503,545 Total liabilities and stockholders' equity $244,754,498 $250,831,292 First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries Consolidated Statement of Income For the Three Months Ended March 31, 2008 2007 (Unaudited) Interest income: Interest and fees on loans 3,274,547 3,585,927 Interest and dividends on investments 276,577 499,352 Interest on mortgage-backed securities 38,400 44,969 Total interest income 3,589,524 4,130,248 Interest expense: Interest on deposits 1,294,452 1,431,910 Interest on borrowings 572,919 802,086 Total interest expense 1,867,371 2,233,996 Net interest income 1,722,153 1,896,251 Provision for loan losses 24,970 85,629 Net interest income after provision for loan losses 1,697,183 1,810,622 Non Interest income: Service charges and other fees 226,175 197,015 Mortgage banking activities 104,806 87,884 Gain on sale of available-for-sale investments 16,052 - Net gain (loss) on sale of premises and equipment, real estate owned and other repossessed assets (2,801) (1,833) Other 23,030 11,929 Insurance & Brokerage Commissions 610,031 692,819 Total non-interest income 977,293 987,814 Non interest expenses: Compensation and employee benefits 1,477,437 1,568,828 SAIF Insurance Premiums 19,188 5,500 Advertising 39,646 40,519 Occupancy 345,377 367,617 Amortization of intangible assets 125,002 124,881 Service Bureau Charges 82,369 75,945 Insurance & Brokerage Commission Expense 223,876 240,800 Professional Services 92,347 80,279 Other 316,813 285,331 Total non-interest expenses 2,722,055 2,789,699 Income (loss) before income tax (benefit) expense (47,579) 8,737 Income tax benefit (15,923) (13,023) Net income (loss) $(31,656) $21,760 Per share data: Basic earnings (loss) per share $(0.01) $0.01 Weighted average number of shares outstanding 2,884,249 3,033,303 Diluted earnings (loss) per share $(0.01) $0.01 Weighted average number of shares outstanding, including dilutive stock options 2,884,249 3,034,309 Dividends per common share $0.050 $0.050
