Exhibit 99.1 |  |
PRESS RELEASE | |
April 24, 2007 | |
For Immediate Release | |
For Further Information Contact: | Michael W. Dosland President and Chief Executive Officer First Federal Bankshares, Inc. 329 Pierce Street, P.O. Box 897 Sioux City, IA 51102 712.277.0222 |
FIRST FEDERAL BANKSHARES, INC. ANNOUNCES EARNINGS AND
DECLARES DIVIDEND
Sioux City, Iowa. First Federal Bankshares, Inc. (the “Company”) (Nasdaq Global Market – “FFSX”), the parent company of First Federal Bank (the “Bank”) reported net income for the three months ended March 31, 2007, of $1.02 million or $0.30 per diluted share, compared to $766,000, or $0.23 per diluted share in the same quarter last year. For the nine months ended March 31, 2007, the company had net income of $2.4 million or $0.72 per diluted share, compared to $2.6 million or $0.75 per diluted share a year ago, a decrease of 7%.
Earnings in the current period include a $510,000 or $0.15 per diluted share after-tax gain related to the Company’s previously announced sale of substantially all the assets of its title search and abstract continuation business in northwest Iowa. The Company elected to sell this business because it is located in rural communities where the Bank has no other physical presence and because the business provided little prospect for significant future growth. In addition, the business provided no opportunity for vertical or horizontal integration with the Bank's core business-community banking. With this sale, the Company is no longer involved in the title search and abstract continuation business.
Net interest income for the three months and nine months ended March 31, 2007, totaled $3.8 million and $11.8 million, respectively, compared to $4.4 million and $12.9 million for the same periods ended March 31, 2006. The cost of interest-bearing liabilities continued to increase more rapidly than yields on interest-earning assets resulting in the Company’s year-to-date net interest margin declining 35 basis points to 2.93% at the end of the March quarter compared to the same quarter last year. In addition, loan growth has slowed dramatically relative to the previous year, which has had an adverse impact on net interest income. These developments were partially offset by the purchase of $50.0 million of floating-rate trust preferred securities. These purchases were funded by short-term brokered certificates of deposit at an after-tax annualized return on assets of approximately 1.0%.
Michael Dosland, president and chief executive officer commented, “The inverted yield curve continues to be a challenge for our Bank. We continue to believe that, in the long-run, short-term rates will fall and/or the yield curve will return to a more normal condition. As a result, we continue to position our liabilities in shorter maturities to take advantage of lower rates in the future.” Dosland added, “In the near term, however, we expect net interest margin to continue to contract, albeit at a slower pace. Although, there can be no assurances.”
The provision for loan losses for the quarter and nine months ended March 31, 2007, was $31,000 and $534,000, respectively, as compared to $320,000 and $1.07 million for the comparable periods ended March 31, 2006. Provision expense is higher in the previous fiscal year due to the Company experiencing significant loan growth in that period that warranted an increase in allowance for loan losses. In addition, the Company recognized significant losses in the prior period related to loans that are no longer recorded on the books of the Company.
Non-interest income totaled $1.3 million for the three months ended March 31, 2007, compared to $1.2 million for the three months ended March 31, 2006. The increase is primarily attributable to an increase on the gain on sale of loans as mortgage banking activity increased this quarter as compared to the same quarter last year. For the nine months ended March 31, 2007, non-interest income totaled $4.3 million as compared to $4.2 million for the same period last year. The Company recognized gains on a real estate development project of $75,000 for the nine month period ended March 31, 2007. During the same period in the previous year the Company’s real estate development subsidiary completed a previous project and recorded a loss of $242,000. In addition, service charges on deposits increased 2% or $45,000. Partially offsetting these increases was a $47,000 decrease in service charges on loans. The decrease is primarily due interest rates increasing over the prior year and as a result, slowing prepayments in commercial and consumer loans. In addition, the gain on the sale of investments decreased $203,000 due to gains recognized in the prior period from the sale of another financial institution’s stock that was held at the holding company.
Non-interest expense for the nine months ended March 31, 2007, increased $648,000 or 5% over the same period last year. For the three months ended March 31, 2007, non-interest expense increased $185,000 or 4% over the same period last year. The increase is primarily attributable to calendar year salary increases. In addition, the Company expensed in the current period the remainder of an employment and non-compete contract to a former manager of the Bank. The number of full-time equivalent employees of the Bank was 182 as of March 31, 2007, compared to 175 at the same time last year.
First Federal’s third quarter annualized return on average equity (ROE) was 5.78% compared to 4.51% for the same period a year ago. Annualized return on average assets (ROA) for the quarter was 0.65% compared to 0.53% twelve months prior. Year-to-date, return on average equity was 4.57% compared to 4.89% a year ago, while return on average assets was 0.53% compared to 0.59% for the same period last year. At March 31, 2007, stock holders equity totaled $70.1 million or $20.64 per share.
Total assets increased by $47.0 million, or 8%, to $647.7 million at March 31, 2007, from $600.7 million at March 31, 2006. Deposits totaled $505.5 million, an increase of $74.5 million, or 17% over the previous year. The increase in assets and deposits is primarily due to the aforementioned purchase of trust preferred securities that were funded by short-term brokered certificates of deposit.
As previously announced, the Company completed the sale of $11.6 million of non-performing and classified loans during the current quarter. The loan sale was completed at terms and conditions substantially in line with original estimates. As a result, no additional significant gain or loss was recorded on the sale. The Company also has no continuing relationship and/or on-going obligation related to the loans beyond the usual representations and warranties associated with such loan sales.
Non-performing loans decreased by $1.5 million, or 33%, to $3.1 million at March 31, 2007, from $4.6 million at March 31, 2006. The decrease was due in part to the aforementioned loan sale. Over 70% of the Company’s non-performing loans at March 31, 2007, are related to two
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relationships. In 2005, the Bank purchased a $1.75 million participation in a $19.30 million loan for construction of a senior housing facility in Minnesota. At the time of closing a significant portion of the units in the project were pre-sold with valid purchase agreements and escrowed deposits. The loan was paying as agreed until December of 2006. At that time the borrower started accepting requests for cancellation of the original purchase agreements based on accusations of fraud on the part of an unrelated third party responsible for marketing the project. As a result, the bank group was forced to commence foreclosure proceedings against the borrower. Management believes the foreclosure will be completed in the fourth quarter of the fiscal year. In addition, management believes this loan is adequately secured and no loss is expected at this time. However, there can be no assurances.
In 2002, the Bank purchased a $0.5 million participation of a $3.2 million loan to a private golf and social club. The loan was paying as agreed until December 2006. At that time the borrower notified the bank group of a significant operating shortfall. The bank group continues to work with the borrower to resolve the situation. Management believes this loan is adequately secured by the underlying collateral, which consists primarily of real estate and to a lesser degree accounts receivable and equipment. No loss is expected at this time. However, there can be no assurances.
Dividend Declared
On April 19, 2007, the Board of Directors of First Federal Bankshares, Inc. declared a quarterly cash dividend of $0.105 per share for the third quarter of the 2007 fiscal year. The dividend is payable on May 31, 2007 to stockholders of record on May 17, 2007.
About First Federal Bank
The Company’s banking subsidiary, First Federal Bank, is headquartered in Sioux City, Iowa. Founded in 1923, First Federal is a community bank servicing business and consumers in seven full-service offices in northwest Iowa, a full-service office in South Sioux City, Nebraska, and five full-service offices in central Iowa, including two 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 “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “intends to,” or similar expressions. Similarly statements that describe First Federal’s future plans, objectives, or goals are forward-looking statements. First Federal 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 First Federal’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 First Federal’s loan and investment portfolios, (vi) demand for loan products, (vii) deposit flow, (viii) competition, (ix) demand for financial services in First Federal’s markets and (x) changes in accounting principles, policies, or guidelines.
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FIRST FEDERAL BANKSHARES, INC. and SUBSIDIARIES | ||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | ||||||||||||
| March 31, | June 30, | March 31, | ||||||||||
(Dollars in thousands, except per share amounts) | 2007 | 2006 | 2006 | |||||||||
ASSETS | ||||||||||||
| Cash and cash equivalents | $ | 22,472 | $ | 39,905 | $ | 29,688 | ||||||
| Securities available-for-sale, at fair value | 131,376 | 47,320 | 39,114 | |||||||||
| Securities held-to-maturity, at cost | 11,576 | 13,077 | 14,408 | |||||||||
| Loans receivable, net | 427,318 | 457,029 | 462,876 | |||||||||
| Office property and equipment, net | 14,627 | 12,545 | 12,566 | |||||||||
| Federal Home Loan Bank stock, at cost | 3,827 | 5,162 | 5,384 | |||||||||
| Accrued interest receivable | 2,966 | 2,628 | 2,723 | |||||||||
| Goodwill | 18,417 | 18,417 | 18,417 | |||||||||
| Other assets | 15,127 | 16,452 | 15,552 | |||||||||
| Total assets | $ | 647,706 | $ | 612,535 | $ | 600,728 | ||||||
LIABILITIES | ||||||||||||
| Deposits | $ | 505,530 | $ | 446,056 | $ | 431,009 | ||||||
| Advances from FHLB and other borrowings | 67,155 | 92,753 | 97,361 | |||||||||
| Advance payments by borrowers for taxes and insurance | 380 | 977 | 402 | |||||||||
| Accrued interest payable | 2,885 | 2,038 | 1,902 | |||||||||
| Accrued expenses and other liabilities | 1,664 | 2,387 | 2,129 | |||||||||
| Total liabilities | 577,614 | 544,211 | 532,803 | |||||||||
STOCKHOLDERS' EQUITY | ||||||||||||
| Common stock, $.01 par value | 50 | 50 | 50 | |||||||||
| Additional paid-in capital | 39,144 | 38,293 | 38,191 | |||||||||
| Retained earnings, substantially restricted | 58,384 | �� | 57,014 | 56,600 | ||||||||
| Treasury stock, at cost | (26,765 | ) | (25,921 | ) | (25,921 | ) | ||||||
| Accumulated other comprehensive income (loss) | (26 | ) | (326 | ) | (177 | ) | ||||||
| Unearned ESOP | (695 | ) | (786 | ) | (818 | ) | ||||||
| Total stockholders' equity | 70,092 | 68,324 | 67,925 | |||||||||
| Total liabilities and stockholders' equity | $ | 647,706 | $ | 612,535 | $ | 600,728 | ||||||
| Actual number of shares outstanding at end | ||||||||||||
| of period, net of treasury stock | 3,395,371 | 3,380,109 | 3,375,609 | |||||||||
| Average shares outstanding used to compute: | ||||||||||||
| Basic earnings per share | 3,316,039 | 3,366,086 | 3,389,694 | |||||||||
| Diluted earnings per share | 3,346,111 | 3,417,367 | 3,440,973 | |||||||||
| Shareholders' equity to total assets | 10.82 | % | 11.15 | % | 11.31 | % | ||||||
| Book value per share | $ | 20.64 | $ | 20.21 | $ | 20.12 | ||||||
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FIRST FEDERAL BANKSHARES, INC. and SUBSIDIARIES | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
(Dollars in thousands, except per share amounts) | 2007 | 2006 | 2007 | 2006 | ||||||||||||
| Interest on loans | $ | 7,341 | $ | 7,498 | $ | 22,512 | $ | 21,629 | ||||||||
| Interest on investment securities | 1,530 | 680 | 3,329 | 2,009 | ||||||||||||
| Interest on deposits | 74 | 75 | 318 | 169 | ||||||||||||
| Total interest income | 8,945 | 8,253 | 26,159 | 23,807 | ||||||||||||
| Interest on deposit liabilities | 4,183 | 2,748 | 11,390 | 7,537 | ||||||||||||
| Interest on borrowings | 919 | 1,144 | 2,958 | 3,419 | ||||||||||||
| Total interest expense | 5,102 | 3,892 | 14,348 | 10,956 | ||||||||||||
| Net interest income | 3,843 | 4,361 | 11,811 | 12,851 | ||||||||||||
| Provision for loan losses | 31 | 320 | 534 | 1,070 | ||||||||||||
| Net interest income after provision | 3,812 | 4,041 | 11,277 | 11,781 | ||||||||||||
| Service charges on deposit accounts | 706 | 697 | 2,363 | 2,318 | ||||||||||||
| Service charges on loans | 80 | 68 | 220 | 267 | ||||||||||||
| Gain (loss) on sale of real estate held for development | 15 | - | 75 | (242 | ) | |||||||||||
| Gain on sale of investments | - | - | - | 203 | ||||||||||||
| Gain on sale of loans | 135 | 91 | 481 | 489 | ||||||||||||
| Other income | 363 | 389 | 1,182 | 1,191 | ||||||||||||
| Total non-interest income | 1,299 | 1,245 | 4,321 | 4,226 | ||||||||||||
| Compensation and benefits | 2,521 | 2,473 | 7,535 | 7,266 | ||||||||||||
| Office property and equipment | 751 | 723 | 2,116 | 2,115 | ||||||||||||
| Data processing, ATM and debit card transaction | ||||||||||||||||
| costs and other item processing expense | 244 | 244 | 741 | 741 | ||||||||||||
| Professional, insurance and regulatory expense | 252 | 313 | 810 | 779 | ||||||||||||
| Advertising, donations and public relations | 160 | 160 | 544 | 536 | ||||||||||||
| Communications, postage and office supplies | 212 | 202 | 614 | 596 | ||||||||||||
| Other expense | 345 | 185 | 867 | 546 | ||||||||||||
| Total non-interest expense | 4,485 | 4,300 | 13,227 | 12,579 | ||||||||||||
| Income from continuing operations before income | ||||||||||||||||
| taxes | 626 | 986 | 2,371 | 3,428 | ||||||||||||
| Income tax expense | 120 | 248 | 561 | 936 | ||||||||||||
| Income from continuing operations | 506 | 738 | 1,810 | 2,492 | ||||||||||||
| Income from discontinued operations, net of tax | ||||||||||||||||
| (including gain on disposal of $510, net of tax, in 2007) | 514 | 28 | 589 | 97 | ||||||||||||
| Net income | $ | 1,020 | $ | 766 | $ | 2,399 | $ | 2,589 | ||||||||
| Per share information: | ||||||||||||||||
| Basic earnings per share: | ||||||||||||||||
| Income from continuing operations | $ | 0.15 | $ | 0.22 | $ | 0.54 | $ | 0.73 | ||||||||
| Income from discontinued operations | 0.16 | 0.01 | 0.18 | 0.03 | ||||||||||||
| Net income per share | $ | 0.31 | $ | 0.23 | $ | 0.72 | $ | 0.76 | ||||||||
| Diluted earnings per share: | ||||||||||||||||
| Income from continuing operations | $ | 0.15 | $ | 0.22 | $ | 0.54 | $ | 0.72 | ||||||||
| Income from discontinued operations | 0.15 | 0.01 | 0.18 | 0.03 | ||||||||||||
| Net income per share | $ | 0.30 | $ | 0.23 | $ | 0.72 | $ | 0.75 | ||||||||
| Cash dividends declared per share | $ | 0.105 | $ | 0.100 | $ | 0.310 | $ | 0.300 | ||||||||
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FIRST FEDERAL BANKSHARES, INC and SUBSIDIARIES | ||||||||||||||||
SELECTED FINANCIAL DATA (unaudited) | ||||||||||||||||
| At or for the three months | At or for the nine months | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
(Dollars in thousands, except per share amounts) | 2007 | 2006 | 2007 | 2006 | ||||||||||||
| Average interest-earning assets | $ | 560,102 | $ | 537,744 | $ | 545,670 | $ | 530,482 | ||||||||
| Average interest-bearing liabilities | 500,187 | 476,433 | 484,689 | 467,141 | ||||||||||||
| Average interest-earning assets to average | ||||||||||||||||
| interest-bearing liabilities | 111.98 | % | 112.87 | % | 112.58 | % | 113.56 | % | ||||||||
| Activity in the allowance for loan losses | ||||||||||||||||
| during the period: | ||||||||||||||||
| Balance at beginning of period | $ | 2,044 | $ | 5,572 | $ | 5,466 | $ | 6,718 | ||||||||
| Provision for loan losses (1) | 31 | 320 | 534 | 1,070 | ||||||||||||
| Charge-offs: | ||||||||||||||||
| Single-family mortgage loans | (4 | ) | - | (24 | ) | (29 | ) | |||||||||
| Commercial real estate loans | - | (16 | ) | - | (58 | ) | ||||||||||
| Commercial business loans | (3 | ) | (273 | ) | (2,620 | ) | (1,867 | ) | ||||||||
| Consumer loans | (63 | ) | (85 | ) | (190 | ) | (367 | ) | ||||||||
| Total loans charged-off | (70 | ) | (374 | ) | (2,834 | ) | (2,321 | ) | ||||||||
| Loans transferred to held for sale (2) | - | (1,300 | ) | - | ||||||||||||
| Recoveries | 26 | 12 | 165 | 63 | ||||||||||||
| Charge-offs net of recoveries | (44 | ) | (362 | ) | (3,969 | ) | (2,258 | ) | ||||||||
| Balance at end of period | $ | 2,031 | $ | 5,530 | $ | 2,031 | $ | 5,530 | ||||||||
| Non-performing loans receivable | $ | 3,094 | $ | 4,618 | $ | 3,094 | $ | 4,618 | ||||||||
| Non-performing loans to total loans receivable | 0.72 | % | 0.99 | % | 0.72 | % | 0.99 | % | ||||||||
| Allowance for loan losses to non-performing loans | 65.64 | % | 119.75 | % | 65.64 | % | 119.75 | % | ||||||||
| Ratio of allowance for loan losses to total loans | ||||||||||||||||
| held for investment at end of period | 0.47 | % | 1.18 | % | 0.47 | % | 1.18 | % | ||||||||
| Selected operating data: (3) | ||||||||||||||||
| Return on average assets | 0.65 | % | 0.53 | % | 0.53 | % | 0.59 | % | ||||||||
| Return on average equity | 5.78 | % | 4.51 | % | 4.57 | % | 4.89 | % | ||||||||
| Net interest rate spread | 2.38 | % | 2.96 | % | 2.49 | % | 2.91 | % | ||||||||
| Net yield on average interest-earning assets (4) | 2.79 | % | 3.29 | % | 2.93 | % | 3.28 | % | ||||||||
| Efficiency ratio (5) | 87.01 | % | 76.72 | % | 81.90 | % | 74.68 | % | ||||||||
| (1) | Data for the nine months ended March 31, 2007 includes a $1.3 million loss on transfer of $11.6 million of non-performing and classified loans to held for sale, and $0.6 million on other commercial business loans. These amounts are net of a $1.5 million reduction in the allowance for loan losses due to the significant decline in non-performing and classified assets resulting from the aforementioned transfer to loans held for sale. |
(2) | Data for the nine months ended March 31, 2007, consists of $2.0 million relating to commercial real estate loans and, $0.1 milion relating to single-family mortgage loans, offset by $0.8 million recovery in commercial business loans. |
| (3) | Annualized except for efficiency ratio. |
(4) | Net interest income, tax-effected, divided by average interest-earning assets. |
(5) | Noninterest expense divided by net interest income plus noninterest income, less gain (loss) on sale of other real estate owned, investments and fixed assets. |
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FIRST FEDERAL BANKSHARES, INC and SUBSIDIARIES | ||||||||||
SELECTED FINANCIAL DATA (unaudited) | ||||||||||
| Weighted | ||||||||||
| March 31, | Average | |||||||||
(Dollars in thousands, except per share amounts) | 2007 | Rate | ||||||||
| Time deposits maturing within … | ||||||||||
| Three months | $ | 93,975 | 4.84 | % | ||||||
| Four to six months | 55,259 | 4.82 | % | |||||||
| Seven to twelve months | 98,401 | 4.88 | % | |||||||
| More than twelve months | 43,262 | 4.45 | % | |||||||
| Total time deposits | $ | 290,897 | 4.80 | % | ||||||
| FHLB advances and all other borrowings maturing within... | ||||||||||
| Three months | $ | 5,655 | 5.19 | % | ||||||
| Four to six months | 8,000 | 3.69 | % | |||||||
| Seven to twelve months | 10,000 | 5.41 | % | |||||||
| More than twelve months | 43,500 | 5.25 | % | |||||||
| Total FHLB advances and all other borrowings | $ | 67,155 | 5.08 | % | ||||||
| Three months ended | Nine months ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| Market price per share: | ||||||||||||||||
| High for the period | $ | 22.22 | $ | 22.90 | $ | 22.51 | $ | 22.90 | ||||||||
| Low for the period | $ | 21.31 | $ | 19.11 | $ | 21.31 | $ | 17.30 | ||||||||
| Close at end of period | $ | 21.31 | $ | 22.60 | $ | 21.31 | $ | 22.60 | ||||||||
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