SIOUX CITY, Iowa, Feb. 2 /PRNewswire-FirstCall/ -- First Federal Bankshares, Inc. (the "Company") , the parent company of Vantus Bank (the "Bank"), reported a net income for the three months ended December 31, 2008, of $2.9 million, or $0.87 per diluted share, compared to a net loss of $1.8 million, or $0.54 per diluted share, for the three months ended December 31, 2007. For the six months ended December 31, 2008, the Company had net income of $2.1 million, or $0.63 per diluted share, compared to a net loss of $1.3 million, or $0.41 per diluted share, for the six months ended December 31, 2007.
The Company's annualized return on average equity (ROE) for the most recent quarter was 38.53% compared to -10.23% for the same period a year ago. Annualized return on average assets (ROA) for the quarter was 2.10% compared to -1.12% twelve months prior. ROE and ROA for the six months ended December 31, 2008 were 13.25% and 0.75%, respectively. This compared to -3.88% and -0.43%, respectively, for the same period in the previous year.
Net interest income for the three-month period ended December 31, 2008, was $4.4 million compared to $4.2 million for the three-month period ended December 31, 2007. The net interest margin improved 63 basis points to 3.65% for the three months ended December 31, 2008, from 3.02% for the three months ended December 31, 2007. For the six-month period ended December 31, 2008, net interest income was $8.9 million compared to $8.3 million for the six- month period ended December 31, 2007. The net interest margin improved 68 basis points to 3.64% for the six months ended December 31, 2008, from 2.96% for the six months ended December 31, 2007. The increase in margin for both periods was due to a generally lower interest rate environment that decreased the cost of the Company's interest-bearing liabilities faster than the yields on interest-earning assets. The margin improvement was partially offset by a decrease in the Company's average interest-earning assets.
Non-interest income totaled $7.1 million for the three months ended December 31, 2008, compared to -$1.7 million for the three months ended December 31, 2007. For the six months ended December 31, 2008, non-interest income totaled $6.8 million compared to -$0.2 million for the six months ended December 31, 2007. The increase in non-interest income for both periods is primarily due to the gain on sale of branch offices and an increase in service charges on deposit accounts. On December 15, 2008, the Bank announced the completion of the sale of its Grinnell, Iowa, branch office to Lincoln Savings Bank. As a result of this transaction, the Bank recognized a gain on sale of $5.6 million. In addition, service charges on deposit accounts increased 23% to $1.0 million for the three months ended December 31, 2008, from $0.8 million for the three months ended December 31, 2007. For the six months ended December 31, 2008, service charges on deposit accounts increased to $2.1 million from $1.6 million for the same period last year. The improvement in service charges on deposit accounts is primarily attributable to the overall increase in the number of deposit accounts as compared to last year.
Non-interest expense for the three months ended December 31, 2008, increased $0.8 million to $5.8 million as compared to $5.0 million for the same period last year. Compensation and benefit expense increased to $3.1 million for the three months ended December 31, 2008 from $2.8 million for the three months ended December 31, 2007. The increase in compensation and benefit expense was partially attributed to one time costs associated with a reorganization plan that was implemented during the current quarter. Levon Mathews, President and Chief Executive Officer commented, "The bank will continue to evaluate its business model to optimize operating efficiency and effectiveness for shareholder value and customer satisfaction." Mathews added, "The reorganization reduced the full time equivalent employees by approximately 15% and management anticipates a savings of approximately $2.0 million a year." Professional, insurance, and regulatory expense increased $217,000 to $469,000 for the three months ended December 31, 2008, as compared to the three months ended December 31, 2007. Accounting and consulting costs have increased due to changes in the "mark-to-market" or "fair value" accounting rules.
The provision for loan losses for the three months ended December 31, 2008, was $1.3 million. This compared to $0.5 million for the quarter ended December 31, 2007. During the current quarter, the Company recognized a specific allowance of $785,000 on a loan for the development of residential properties in Minnesota. The project is behind schedule and a recent appraisal revealed a significant decrease in the value of the project. As a result, a specific allowance was warranted.
The level of non-performing assets increased to $19.8 million at December 31, 2008, from $6.6 million at December 31, 2007. However, non-performing assets have only increased $1.2 million when compared to non-performing assets at June 30, 2008. Non-performing assets have increased over the past year as a result of the well-publicized difficulties in the overall markets for commercial and residential real estate.
Total assets decreased by $100.7 million to $523.6 million at December 31, 2008, from $624.3 million at December 31, 2007. The decrease is partially due to the aforementioned sale of the Grinnell, Iowa, branch and planned run-off in the Bank's commercial real estate portfolio. Deposits totaled $369.7 million at December 31, 2008, as compared to $451.7 million at December 31, 2007. The decrease is primarily attributed to the aforementioned sale of the Bank's Grinnell, Iowa, branch.
The Company's tangible book value per share was $7.83 at December 31, 2008, compared to $9.68 at June 30, 2008. The decline in tangible book value per share was attributable to an increase in accumulated other comprehensive loss, which is a component of stockholders' equity. This increase was caused by a decline in the fair value of the Company's available-for-sale securities, most notably its portfolio of trust-preferred pooled securities.
About Vantus Bank
The Company's banking subsidiary, Vantus Bank, is headquartered in Sioux City, Iowa. Founded in 1923, Vantus Bank is a community bank serving businesses and consumers in seven full-service offices in northwest Iowa, a full-service office in South Sioux City, Nebraska, and six full-service offices in central Iowa, including four in the Des Moines market area.
Certain matters in the press release are "forward-looking statements" intended to qualify for the safe harbor from liability as established by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include words and phrases such as "believes" "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends to," or similar expressions. Similarly statements that describe the Company's future plans, objectives, or goals are forward-looking statements. The Company wishes to caution the readers not to place undue reliance on any such forward-looking statements, which speak only as of the date of the press release, and to advise readers that various factors could affect the Company's financial performance and could cause results for future periods to differ materially from those anticipated or projected. Such factors include, but are not limited to: (i) general market interest rates, (ii) general economic conditions, (iii) legislative/regulatory changes, (iv) monetary and fiscal policies of the U.S. Treasury and Federal Reserve, (v) changes in the quality or composition of Company's loan and investment portfolios, (vi) demand for loan products, (vii) deposit flow, (viii) competition, (ix) demand for financial services in Company's markets and (x) changes in accounting principles, policies, or guidelines.
FIRST FEDERAL BANKSHARES, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Dollars in thousands, except per December 31 June 30 December 31 share amounts) 2008 2008 2007 ASSETS Cash and cash equivalents $24,001 $12,491 $20,780 Securities available-for-sale, at fair value 66,153 84,229 107,014 Securities held-to-maturity, at cost 6,211 7,000 8,960 Mortgage loans held for sale 1,032 1,102 1,663 Loans receivable, net 363,343 407,819 420,260 Office property and equipment, net 16,534 18,762 18,478 Federal Home Loan Bank stock, at cost 5,879 4,283 5,240 Accrued interest receivable 2,464 2,535 3,035 Goodwill - - 18,417 Foreclosed and repossessed assets 8,628 873 3,611 Deferred tax asset 14,639 9,870 1,534 Other assets 14,727 16,042 15,261 Total assets $523,611 $565,006 $624,253 LIABILITIES Deposits $369,746 $446,568 $451,655 Advances from FHLB and other borrowings 122,244 81,637 102,659 Advance payments by borrowers for taxes and insurance 761 884 888 Accrued interest payable 1,495 1,801 2,478 Accrued expenses and other liabilities 3,493 2,124 1,862 Total liabilities 497,739 533,014 559,542 STOCKHOLDERS' EQUITY Common stock, $.01 par value 51 51 51 Additional paid-in capital 39,555 39,505 39,388 Retained earnings, substantially restricted 33,950 32,581 56,943 Treasury stock, at cost (28,536) (28,536) (28,536) Accumulated other comprehensive loss (18,656) (11,062) (2,529) Unearned ESOP (492) (549) (606) Total stockholders' equity 25,872 31,990 64,711 Total liabilities and stockholders' equity $523,611 $565,004 $624,253 Actual number of shares outstanding at end of period, net of treasury stock 3,304,471 3,304,471 3,302,971 Average shares outstanding used to compute: Basic earnings (loss) per share 3,304,471 3,244,570 3,248,309 Diluted earnings (loss) per share 3,304,471 3,244,570 3,248,309 Shareholders' equity to total assets 4.94% 5.66% 10.37% Book value per share $7.83 $9.68 $19.59 Tangible book value per share $7.83 $9.68 $14.02 FIRST FEDERAL BANKSHARES, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three months ended Six months ended (Dollars in thousands, except per December 31 December 31 share amounts) 2008 2007 2008 2007 Interest on loans $5,844 $7,403 $12,057 $14,834 Interest on investment securities 1,488 1,994 2,958 4,019 Interest on cash and cash equivalents 1 8 1 58 Total interest income 7,333 9,405 15,016 18,911 Interest on deposit liabilities 2,395 3,915 4,934 8,477 Interest on borrowings 542 1,289 1,181 2,153 Total interest expense 2,937 5,204 6,115 10,630 Net interest income 4,396 4,201 8,901 8,281 Provision for loan losses 1,305 492 2,018 513 Net interest income after provision 3,091 3,709 6,883 7,768 Service charges on deposit accounts 1,031 835 2,063 1,618 Service charges on commercial and consumer loans 42 123 80 221 Gain on sale of bank branch offices 5,570 - 5,570 - Gain on sale of real estate held for investment - 47 - 47 Loss on sale of office property and equipment (81) - (81) - Other-than-temporary impairment of investment securities - (3,271) (1,800) (3,271) Mortgage banking revenue 166 177 247 371 Earnings from bank owned life insurance 147 138 293 275 Other income 236 265 455 562 Total non-interest income 7,111 (1,686) 6,827 (177) Compensation and benefits 3,141 2,825 5,790 5,631 Office property and equipment 692 701 1,402 1,402 Data processing, ATM and debit card transaction costs, and other item processing expense 449 417 931 787 Professional, insurance, and regulatory expense 469 252 819 507 Advertising, donations, and public relations 347 303 570 766 Communications, postage, and office supplies 199 225 401 435 Losses on other real estate owned 266 14 340 69 Other expense 229 211 440 389 Total non-interest expense 5,792 4,948 10,693 9,986 Income (loss) before income taxes 4,410 (2,925) 3,017 (2,395) Income tax expense (benefit) 1,533 (1,172) 938 (1,057) Net income (loss) $2,877 ($1,753) $2,079 ($1,338) Per share information: Basic earnings (loss) per share $0.87 ($0.54) $0.63 ($0.41) Diluted earnings (loss) per share $0.87 ($0.54) $0.63 ($0.41) Cash dividends declared per share - $0.105 - $0.210 FIRST FEDERAL BANKSHARES, INC and SUBSIDIARIES SELECTED FINANCIAL DATA (unaudited) At or for the three At or for the six months ended months ended (Dollars in thousands, except per December 31 December 31 share amounts) 2008 2007 2008 2007 Average total assets $547,901 $627,507 $551,867 $629,536 Average interest-earning assets 485,996 563,207 493,781 566,179 Average interest-bearing liabilities 471,185 510,941 471,923 512,934 Average interest-earning assets to average interest-bearing liabilities 103.14% 110.23% 104.63% 110.38% Activity in the allowance for loan losses during the period: Balance at beginning of period $5,487 $1,743 $5,894 $1,797 Provision for loan losses 1,305 492 2,018 513 Charge-offs: Single-family mortgage loans - - - - Commercial real estate loans - (182) (221) (182) Commercial business loans - (15) (860) (71) Consumer loans (158) (33) (220) (79) Total loans charged-off (158) (230) (1,301) (332) Recoveries 20 51 43 78 Charge-offs net of recoveries (138) (179) (1,258) (254) Balance at end of period $6,654 $2,056 $6,654 $2,056 Non-performing loans receivable $11,217 $2,988 $11,217 $2,988 Other non-performing assets 8,628 3,611 8,628 3,611 Total non-performing assets $19,845 $6,599 $19,845 $6,599 Non-performing loans as a percentage of total loans receivable 3.03% 0.70% 3.03% 0.70% Total non-performing assets as a percentage of total assets 3.79% 1.06% 3.79% 1.06% Allowance for loan losses to non- performing loans 59.32% 68.81% 59.32% 68.81% Ratio of allowance for loan losses to total loans held for investment at end of period 1.80% 0.47% 1.80% 0.47% Selected operating data: (1) Return on average assets 2.10% -1.12% 0.75% -0.43% Return on average equity 38.53% -10.23% 13.25% -3.88% Net interest rate spread 3.55% 2.62% 3.49% 2.55% Net yield on average interest- earning assets (2) 3.65% 3.02% 3.64% 2.96% Efficiency ratio (3) 96.24% 85.52% 88.82% 87.82% (1) Annualized except for efficiency ratio. (2) Net interest income, tax-effected, divided by average interest- earning assets. (3) Non-interest expense divided by net interest income plus non-interest income, less gain (loss) on sale of other real estate owned, investments, and fixed assets. FIRST FEDERAL BANKSHARES, INC and SUBSIDIARIES SELECTED FINANCIAL DATA (unaudited) Weighted December 31 Average (Dollars in thousands, except per share amounts) 2008 Rate Time deposits maturing within... Three months $62,763 3.68% Four to six months 27,410 3.07% Seven to twelve months 45,333 3.63% More than twelve months 64,876 3.87% Total time deposits $200,382 3.65% FHLB advances and all other borrowings maturing within... Three months $79,494 1.50% Four to six months 500 5.28% Seven to twelve months 38,000 3.13% More than twelve months 4,250 4.91% Total FHLB advances and all other borrowings $122,244 2.14% Three months ended Six months ended December 31 December 31 2008 2007 2008 2007 Market price per share: High for the period $5.16 $17.50 $7.95 $19.00 Low for the period $1.55 $12.80 $1.55 $12.80 Close at end of period $1.85 $14.05 $1.85 $14.05
