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First Federal of Northern Michigan Banco Reports Operating Results (10-Q)

August 14, 2009 | About:

First Federal of Northern Michigan Banco (FFNM) filed Quarterly Report for the period ended 2009-06-30.

Alpena Bancshares is the parent corporation for First Federal of Northern Michigan a federally-chartered savings bank headquartered in Alpena Michigan. Their deposits are insured by the Federal Deposit Insurance Corporation. They operate nine full-service offices in their market area of Northern Michigan. First Federal of Northern Michigan Banco has a market cap of $6 million; its shares were traded at around $2.0799 with and P/S ratio of 0.3.

Highlight of Business Operations:

For the quarter ended June 30, 2009, the Company reported net income from continuing operations of $42,000, or $0.01 per basic and diluted share, compared to a net loss of $236,000, or $0.08 per basic and diluted share, for the year earlier period, an increase of $278,000. Net income from continuing operations increased by $439,000 to net income of $189,000 for the six months ended June 30, 2009 from a net loss of $250,000 for the same period ended June 30, 2008.

Total assets decreased by $7.2 million, or 2.9%, from $247.7 million as of December 31, 2008 to $240.5 million as of June 30, 2009. Investment securities available for sale increased by $1.9 million and net loans receivable decreased $10.0 million during this time period. Total deposits decreased $3.5 million from December 31, 2008 to June 30, 2009 and Federal Home Loan Bank advances decreased by $250,000 while equity increased by $145,000.

ASSETS: Total assets decreased $7.2 million, or 2.9%, to $240.5 million at June 30, 2009 from $247.7 million at December 31, 2008. Investment securities available for sale increased $1.9 million, or 7.6% from December 31, 2008 to June 30, 2009. Net loans receivable decreased $10.0 million, or 5.2% to $182.3 million at June 30, 2009 from $192.3 million at December 31, 2008. The decrease in net loans was attributable primarily to shrinkage of the residential mortgage loan portfolio due to portfolio mortgage refinances which were sold into the secondary market wherever possible due to continued historically low market interest rates. We also experienced some decrease in our consumer loan portfolio due to slowed origination activity related to declining property values and also in our commercial portfolio due in part to loan pay-offs and loan charge-offs.

LIABILITIES: Deposits decreased $3.5 million, or 2.1%, to $162.3 million at June 30, 2009 from $165.8 million at December 31, 2008. The decrease in deposits was largely attributable to shrinkage of our traditional certificate of deposit product as we were not the market leader in rates on these products during this time period. The decrease in our certificate of deposit products was partially offset by modest increases of $649,000 in savings accounts, $576,000 in demand deposit accounts and $754,000 in non-interest bearing demand deposit accounts. We also experienced a $3.1 million shift from liquid certificate of deposit products into our money market deposit accounts. Repo sweep accounts decreased $4.0 million as several of our commercial customers reduced the amount on deposit with us due to timing of their expenses, but did not close accounts. Total FHLB advances decreased $250,000 to $40.0 million at June 30, 2009 from December 31, 2008 as we paid down advances with funds from loan payments and payoffs.

Interest Income: Interest income decreased by $606,000 million to $6.5 million for the six month period ended June 30, 2009 from $7.1 million for the same six month period in 2008. This decrease was primarily attributed to a decline in the average balance of interest earning assets of $2.1 million to $230.6 million for the six month period ended June 30, 2009 from $232.7 million for the six month period ended June 30, 2008. In addition, we experienced a decrease in the yield on those interest earning assets of 45 basis points to 5.65% period over period. Notably, the yield on non-mortgage loans decreased 83 basis points period over period to 5.64% over an average balance of $107.2 million due in part to declining interest rates and in part to an increase in the amount of non-performing mortgage loans period over period.

The Company intends to retain for its portfolio certain originated residential mortgage loans (primarily adjustable rate and shorter term fixed rate mortgage loans) and to generally sell the remainder in the secondary market. The Bank will from time to time participate in or originate commercial real estate loans, including real estate development loans. During the six month period ended June 30, 2009, the Company originated $39.0 million in residential mortgage loans, of which $4.4 million were retained in portfolio while the remainder were sold in the secondary market or are being held for sale. This compares to $15.4 million in originations during the first six months of 2008 of which $8.3 million were retained in portfolio. The Company also originated $13.7 million of commercial loans and $2.2 million of consumer loans in the first six months of 2009 compared to $17.1 million of commercial loans and $3.0 million of consumer loans for the same period in 2008. Of total loans receivable, excluding loans held for sale, mortgage loans comprised 45.5% and 47.2%, commercial loans 41.9% and 39.3% and consumer loans 12.6% and 13.5% at June 30, 2009 and June 30, 2008, respectively.

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