M B T Financial Corp (MBTF, Financial) filed Quarterly Report for the period ended 2009-03-31.
MBT Financial Corporation operates as the bank holding company of Monroe Bank & Trust. M B T Financial Corp has a market cap of $44.3 million; its shares were traded at around $2.74 with a P/E ratio of 6 and P/S ratio of 0.4. The dividend yield of M B T Financial Corp stocks is 1.5%.
The amount of nonperforming assets (NPAs) increased $6.0 million or 8.2% since year end. NPAs include non performing loans, which increased 4.5% from $53.8 million to $56.2 million, and Other Real Estate Owned and Other Assets (OREO), which increased from $19.2 million to $22.8 million. Total problem assets, which includes all NPAs and performing loans that are internally classified as substandard, increased $17.2 million, or 12.6%. The Companys Allowance for Loan and Lease Losses (ALLL) increased $3.2 million since December 31, 2008, as the amount of specific allocations required by FAS 114 increased from $5.2 million to $8.7 million, mainly due to decreased values of real estate collateral. The FAS 5 portion of the allowance decreased slightly from $13.2 million to $12.9 million because the impact of the decrease in the size of the loan portfolio was greater than the impact of the increase in the loss factors. The loss factors, which include five year loss averages, and adjustments for various current factors, such as recent delinquency and charge off trends and national and local economic conditions, were increased due to the weak economic conditions and declining real estate values. The ALLL is now 2.35% of loans, compared to 1.97% at year end. The ALLL is 38.7% of NPLs, an increase from 34.4% at year end. We believe that at this level the ALLL adequately estimates the potential losses in the loan portfolio.
Net Interest Income A comparison of the income statements for the three months ended March 31, 2008 and 2009 shows a decrease of $240,000, or 2.3% in Net Interest Income. Interest income on loans decreased $2.8 million or 17.2% as the average loans outstanding decreased $63.3 million and the average yield on loans decreased from 6.62% to 5.90%. The interest income on investments, fed funds sold, and interest bearing balances due from banks decreased $380,000 even though the average amount of investments, fed funds sold, and interest bearing balances due from banks increased $24.6 million as the yield decreased from 5.21% to 4.65%. An improvement in the term structure of interest rates and a decrease in the overall level of interest rates allowed funding costs to decrease faster than asset yields. The interest expense on deposits decreased $2.0 million or 26.3% even though average deposits only decreased $8.7 million as the average cost of those deposits decreased from 2.72% to 2.03%. The cost of borrowed funds decreased $1.0 million as the average amount of borrowed funds decreased $13.6 million and the average cost of the borrowings decreased from 5.58% to 4.51%.
Other Expenses Total non interest expenses increased $2.3 million or 23.7% compared to the first quarter of 2008 primarily due to higher credit related expenses and an increase in our FDIC insurance assessment. Salaries and Employee Benefits decreased $148,000, or 2.7%, primarily due to a reduction in the incentive compensation accrual. Occupancy expense decreased $81,000 or 8.1% due to lower depreciation and maintenance costs. Costs were well contained in equipment, marketing, and professional fees, which as a group only increased $10,000, or 0.7%. Losses on OREO transactions increased $1.8 million compared to the first quarter last year as we wrote down the carrying values of numerous properties this year due to the continued decline in market values. This included a write down of $835,000 on a residential development property that the Bank agreed to sell after the end of the first quarter. The Bank had previously planned to liquidate the asset through individual lot sales, but opted to accept a discounted offer for the entire asset. While this increased the first quarter loss, it will result in a reduction of approximately $465,000 in OREO in the second quarter and a reduction in the future carrying costs that would have been incurred during a longer liquidation process. FDIC insurance premium expense increased $404,000 because the Bank utilized its remaining assessment credits in 2008. Other significant expense increases were $142,000 in OREO carrying costs, and $131,000 in collection expense.
As a result of the above activity, the Income Before Income Taxes decreased $6.2 million to a loss of $2.7 million. The income tax expense decreased $2.2 million from $0.9 million to a benefit of $1.3 million. The Net Loss of $1.4 million is a decrease of $4.0 million from the profit of $2.6 million in the first quarter of 2008.
Cash flows from operating activities decreased from $1.0 million in the first quarter of 2008 to minus $3.2 million in the first quarter of 2009 due to the decrease in net income and the increase in interest receivable and other assets. Cash flows provided by investing activities increased from $2.4 million in the first three months of 2008 to $45.2 million in the first three months of 2009 primarily due to a decrease in the amount of investment securities purchased, an increase in the amount of investment securities sold, and a decrease in loans in the first three months of 2009. A significant portion of the investment activity proceeds was used to fund the reduction in deposits. The amount of cash used for financing activities increased from $3.6 million in the first three months of 2008 to $70.6 million in the first three months of 2009 primarily due to a decrease in deposits in the first three months of 2009.
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MBT Financial Corporation operates as the bank holding company of Monroe Bank & Trust. M B T Financial Corp has a market cap of $44.3 million; its shares were traded at around $2.74 with a P/E ratio of 6 and P/S ratio of 0.4. The dividend yield of M B T Financial Corp stocks is 1.5%.
Highlight of Business Operations:
Since December 31, 2008, total loans decreased $17.8 million (1.9%) due to the weak loan demand. Total cash and investments decreased $62.3 million (12.4%), and total assets decreased $76.5 million (4.9%). Residential real estate secured loans decreased $16.1 million (3.7%) due to a decrease in residential development activity. Deposits decreased $69.2 million, or 6.1%, due to continued reduction in the amount of brokered certificates of deposit and a less competitive pricing strategy which is designed to reduce the amount of deposits and the average cost of deposits while managing our interest rate risk. Total capital decreased $4.9 million or 4.0% because of the net loss of $1.6 million, and the $3.5 million decrease in accumulated other comprehensive income (AOCI). AOCI decreased due to the decrease in the value of securities available for sale. Even though total capital decreased, the decrease in total assets caused the capital to assets ratio to increase from 7.74% at December 31, 2008 to 7.81% at March 31, 2009.The amount of nonperforming assets (NPAs) increased $6.0 million or 8.2% since year end. NPAs include non performing loans, which increased 4.5% from $53.8 million to $56.2 million, and Other Real Estate Owned and Other Assets (OREO), which increased from $19.2 million to $22.8 million. Total problem assets, which includes all NPAs and performing loans that are internally classified as substandard, increased $17.2 million, or 12.6%. The Companys Allowance for Loan and Lease Losses (ALLL) increased $3.2 million since December 31, 2008, as the amount of specific allocations required by FAS 114 increased from $5.2 million to $8.7 million, mainly due to decreased values of real estate collateral. The FAS 5 portion of the allowance decreased slightly from $13.2 million to $12.9 million because the impact of the decrease in the size of the loan portfolio was greater than the impact of the increase in the loss factors. The loss factors, which include five year loss averages, and adjustments for various current factors, such as recent delinquency and charge off trends and national and local economic conditions, were increased due to the weak economic conditions and declining real estate values. The ALLL is now 2.35% of loans, compared to 1.97% at year end. The ALLL is 38.7% of NPLs, an increase from 34.4% at year end. We believe that at this level the ALLL adequately estimates the potential losses in the loan portfolio.
Net Interest Income A comparison of the income statements for the three months ended March 31, 2008 and 2009 shows a decrease of $240,000, or 2.3% in Net Interest Income. Interest income on loans decreased $2.8 million or 17.2% as the average loans outstanding decreased $63.3 million and the average yield on loans decreased from 6.62% to 5.90%. The interest income on investments, fed funds sold, and interest bearing balances due from banks decreased $380,000 even though the average amount of investments, fed funds sold, and interest bearing balances due from banks increased $24.6 million as the yield decreased from 5.21% to 4.65%. An improvement in the term structure of interest rates and a decrease in the overall level of interest rates allowed funding costs to decrease faster than asset yields. The interest expense on deposits decreased $2.0 million or 26.3% even though average deposits only decreased $8.7 million as the average cost of those deposits decreased from 2.72% to 2.03%. The cost of borrowed funds decreased $1.0 million as the average amount of borrowed funds decreased $13.6 million and the average cost of the borrowings decreased from 5.58% to 4.51%.
Other Expenses Total non interest expenses increased $2.3 million or 23.7% compared to the first quarter of 2008 primarily due to higher credit related expenses and an increase in our FDIC insurance assessment. Salaries and Employee Benefits decreased $148,000, or 2.7%, primarily due to a reduction in the incentive compensation accrual. Occupancy expense decreased $81,000 or 8.1% due to lower depreciation and maintenance costs. Costs were well contained in equipment, marketing, and professional fees, which as a group only increased $10,000, or 0.7%. Losses on OREO transactions increased $1.8 million compared to the first quarter last year as we wrote down the carrying values of numerous properties this year due to the continued decline in market values. This included a write down of $835,000 on a residential development property that the Bank agreed to sell after the end of the first quarter. The Bank had previously planned to liquidate the asset through individual lot sales, but opted to accept a discounted offer for the entire asset. While this increased the first quarter loss, it will result in a reduction of approximately $465,000 in OREO in the second quarter and a reduction in the future carrying costs that would have been incurred during a longer liquidation process. FDIC insurance premium expense increased $404,000 because the Bank utilized its remaining assessment credits in 2008. Other significant expense increases were $142,000 in OREO carrying costs, and $131,000 in collection expense.
As a result of the above activity, the Income Before Income Taxes decreased $6.2 million to a loss of $2.7 million. The income tax expense decreased $2.2 million from $0.9 million to a benefit of $1.3 million. The Net Loss of $1.4 million is a decrease of $4.0 million from the profit of $2.6 million in the first quarter of 2008.
Cash flows from operating activities decreased from $1.0 million in the first quarter of 2008 to minus $3.2 million in the first quarter of 2009 due to the decrease in net income and the increase in interest receivable and other assets. Cash flows provided by investing activities increased from $2.4 million in the first three months of 2008 to $45.2 million in the first three months of 2009 primarily due to a decrease in the amount of investment securities purchased, an increase in the amount of investment securities sold, and a decrease in loans in the first three months of 2009. A significant portion of the investment activity proceeds was used to fund the reduction in deposits. The amount of cash used for financing activities increased from $3.6 million in the first three months of 2008 to $70.6 million in the first three months of 2009 primarily due to a decrease in deposits in the first three months of 2009.
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