Exhibit 99.1
First Quarter Statement
March 31, 2007
To Our Shareholders:
Notwithstanding the continued weak Michigan economy, Pavilion Bancorp continues to move forward in creating positive results for its shareholders. Highlighting the first quarter was the opening of our new branch in Hillsdale, Michigan, where we continue to experience steady growth in both deposits and loans. Likewise, our new Tecumseh, Michigan branch is moving quickly toward completion, and we anticipate a ribbon cutting event to take place sometime late in June. This growth reflects our desire to expand and strengthen our franchise, providing additional sources for loan and deposit growth.
During the first quarter of 2007 we introduced our new “Online Express Deposit” product. This product allows business customers to scan the checks they receive through a small “scanning device” conveniently located in their own office. The scanner captures the image of the checks, transmits the image to the bank, and provides availability of those funds. This allows our customers to collect their funds in a shorter time frame, and saves them a trip to the bank. We were the first community bank in our market to introduce this product, which has been very favorably received by our business customers.
In the area of financial performance, the first quarter of 2007 yielded a net income of $479,000, a 19.75% increase over the same period last year. This resulted in non-diluted earnings per share of $0.66, up 22.2% when compared to the first quarter results of 2006. While we are pleased with the increase over the prior year, our continued emphasis on expense reduction remains a key priority.
Total bank assets at March 31, 2007 were $293.0MM an increase of 3.01% when compared to the same three-month period in 2006. Net loans and leases grew to $236.4MM as of the end of the first quarter in 2007, representing a 1.9% increase over the same period in 2006. While we are pleased with our progress, we, like most banks in Michigan, are feeling the effects of the economic downturn. Mortgage origination activity was significantly reduced in the first quarter, reflecting the slow housing market, overall loan demand remains soft, and we anticipate continued downward pressure on margins. Thus, we continue to place emphasis on our business development activities in order to generate a higher volume of new business.
During the quarter the Pavilion Bancorp Board of Directors approved a $0.25 per share cash dividend for shareholders of record as of April 16, 2007, payable on April 30, 2007. This dividend reflects our continued confidence in the bank’s performance and is enclosed with this statement.
On behalf of the Board of Directors, Management, and Staff, we express our gratitude for your investment and your continued support.
/s/ Douglas L. Kapnick
Douglas L. Kapnick
Chairman of the Board | | /s/ Richard J. DeVries
Richard J. DeVries
President and CEO |
This letter contains certain forward-looking statements that involve risks and uncertainties. When used in this letter, the words “believe,” “expect,” or “anticipate” and similar expressions identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including but not limited to, economic, competitive, governmental and technological factors affecting the company’s operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements.
Consolidated Balance Sheets
| (000's omitted) | (Unaudited)
March 31, |
|---|
| 2007 | | 2006 |
|---|
|
| |
| |
| Assets | | | | | | | | |
| Cash and due from banks | | | $ | 9,466 | | $ | 11,509 | |
| Federal funds sold | | | | 12,420 | | | - | |
|
| |
| |
| Total cash and cash equivalents | | | | 21,886 | | | 11,509 | |
| | | |
| Market value of securities available for sale | | | | 19,503 | | | 27,836 | |
| | | |
| Loans held for sale | | | | 920 | | | 1,158 | |
| Total loans | | | | 239,237 | | | 234,541 | |
| Allowance for loan and lease losses | | | | (2,852 | ) | | (2,596 | ) |
|
| |
| |
| Net loans | | | | 236,385 | | | 231,945 | |
| | | |
| Premises and equipment, net | | | | 8,918 | | | 6,454 | |
| Accrued interest receivable | | | | 1,981 | | | 1,808 | |
| Mortgage servicing assets | | | | 2,426 | | | 2,814 | |
| Other assets | | | | 987 | | | 930 | |
|
| |
| |
| Total assets | | | $ | 293,006 | | $ | 284,454 | |
|
| |
| |
| | | |
| Liabilities and shareholders' equity | | |
| Liabilities | | |
| Deposits: | | |
| Noninterest - bearing | | | | 43,944 | | | 46,524 | |
| Interest - bearing | | | | 203,819 | | | 176,776 | |
|
| |
| |
| Total deposits | | | | 247,763 | | | 223,300 | |
| Federal funds purchased | | | | - | | | 590 | |
| Repurchase agreements-customers | | | | 3,598 | | | 3,818 | |
| Repurchase agreements-financial institutions | | | | 5,000 | | | 10,000 | |
| Federal Home Loan Bank advances | | | | 1,885 | | | 8,901 | |
| Subordinated debentures | | | | - | | | 5,000 | |
| Accrued interest payable | | | | 1,121 | | | 989 | |
| Other liabilities | | | | 2,534 | | | 2,213 | |
| Common stock subject to repurchase obligation in ESOP | | | | 2,765 | | | 2,989 | |
|
| |
| |
| Total liabilities | | | | 264,666 | | | 257,800 | |
| | | |
| Shareholders' equity | | |
| | | |
| Common stock and paid-in capital, No par value: | | |
| 3,000,000 shares authorized; shares issued and | | |
| outstanding 736,765 - 2006; 858,981 - 2005 | | | | 10,695 | | | 10,768 | |
| Retained earnings | | | | 17,705 | | | 16,187 | |
| Unrealized gain (loss) on securities available for sale | | | | (60 | ) | | (301 | ) |
|
| |
| |
| Total shareholders' equity | | | | 28,340 | | | 26,654 | |
|
| |
| |
| | | |
| Total liabilities and shareholders' equity | | | $ | 293,006 | | $ | 284,454 | |
|
| |
| |
Consolidated Statements of Income
| (000's omitted except for earnings per share) | (Unaudited)
Three Months Ended March 31, |
|---|
| 2007 | | 2006 |
|---|
|
| |
| |
| Interest Income | | | | | | | | |
| Loans, including fees | | | $ | 4,558 | | $ | 4,144 | |
| Securities | | | | 198 | | | 251 | |
| Federal funds sold and other | | | | 164 | | | 85 | |
|
| |
| |
| Total interest income | | | | 4,920 | | | 4,480 | |
| | | |
| Interest expense | | |
| Deposits | | | | 1,749 | | | 1,143 | |
| Subordinated debentures | | | | - | | | 105 | |
| Other borrowed funds | | | | 191 | | | 308 | |
|
| |
| |
| Total interest expense | | | | 1,940 | | | 1,556 | |
| | | |
| Net interest income | | | | 2,980 | | | 2,924 | |
| Provision for loan losses | | | | 150 | | | - | |
|
| |
| |
| | | |
| Net interest income after provision for loan losses | | | | 2,830 | | | 2,924 | |
| | | |
| Noninterest income | | |
| Service charges on deposit accounts | | |
| Gains on sales of loans | | | | 342 | | | 316 | |
| Loan servicing fees, net of amortization | | | | 20 | | | 241 | |
| Other | | | | 154 | | | 34 | |
| Total other income | | | | 170 | | | 116 | |
|
| |
| |
| | | | | 686 | | | 707 | |
| | | |
| Noninterest expense | | |
| Compensation and employee benefits | | | | 1,602 | | | 1,884 | |
| Premises and equipment | | | | 501 | | | 411 | |
| Other | | | | 687 | | | 767 | |
|
| |
| |
| Total other expenses | | | | 2,790 | | | 3,062 | |
|
| |
| |
| Income before income taxes | | | | 726 | | | 569 | |
| Federal income tax expense | | | | 247 | | | 169 | |
|
| |
| |
| | | |
| Net income | | | $ | 479 | | $ | 400 | |
|
| |
| |
| | | |
| Earnings per common share: | | | $ | 0.66 | | $ | 0.54 | |
