EXHIBIT 99
FOR IMMEDIATE RELEASE
August 1, 2006
Contact: Martin A. Thomson
Chief Executive Officer
First Federal of Northern Michigan Bancorp, Inc.
(989) 356-9041
FIRST FEDERAL OF NORTHERN MICHIGAN BANCORP, INC.
ANNOUNCES SECOND QUARTER 2006 EARNINGS
Alpena, Michigan - (August 1, 2006) First Federal of Northern Michigan Bancorp,
Inc. (Nasdaq: FFNM) (the "Company") reported consolidated net earnings of
$98,510, or $0.03 per share, for the quarter ended June 30, 2006, compared to a
net loss of $300,306, or $0.09 per share, for the quarter ended June 30, 2005.
Earnings-per-share was calculated based on weighted average outstanding shares
of 3,136,545 and 3,100,021 for the periods ended June 30, 2006 and 2005,
respectively.
Consolidated net earnings for the six months ended June 30, 2006 were $310,718,
or $0.10 per share, compared to a net loss of $158,295, or $0.06 per share, for
the six months ended June 30, 2005.
Interest income increased to $4.2 million for the three months ended June 30,
2006 from $3.7 million for the year earlier period ended June 30, 2005. Interest
income for the six months ended June 30, 2006 increased to $8.2 million from
$7.2 million for the six months ended June 30, 2005. The increase in interest
income was due primarily to an increase in average balances of non-mortgage
loans of $11.6 million from June 30, 2005 to June 30, 2006, reflecting the
Company's continued emphasis on commercial lending, and an increase in yield on
those loans from 6.67% to 7.62% over the same period, reflecting higher market
interest rates. Also contributing to higher interest income was the increase in
the average balance of available-for-sale securities of $10.9 million from June
30, 2005 to June 30, 2006, while the yield on those securities increased 47
basis points period over period.
Interest expense increased to $2.0 million for the three months ended June 30,
2006 from $1.6 million for the three months ended June 30, 2005. Interest
expense for the six months ended June 30, 2006 increased to $4.0 million from
$3.2 million for the six months ended June 30, 2005. The increase in interest
expense was due primarily to an increase in average interest-bearing deposits of
$4.1 million from the quarter ended June 30, 2005 to the quarter ended June 30,
2006, as well as an increase of 58 basis points in the cost of those funds,
reflecting continued upward market pressure on deposit rates. In addition, the
average balance of FHLB advances increased $8.8 million from the quarter ended
June 30, 2005 to the quarter ended June 30, 2006 while the cost of those
advances increased 20 basis points.
During the quarter ended June 30, 2006, the Company sold $7.0 million in
low-yielding investment securities and realized a loss of approximately $43,000.
The proceeds from the sale of the investment securities were used to pay off
high cost FHLB advances and the Company expects that by the end of calendar
2006, this strategy will result in approximately $45,000 in pre-tax earnings.
Also, during the quarter ended June 30, 2006, as required by Statement of
Financial Accounting Standard (SFAS) No. 123 (Revised), the Company began
expensing stock options and stock awards granted to employees and directors
during the quarter, resulting in additional compensation expense of
approximately $40,000 for the quarter.
Stockholders' equity was $35.4 million at June 30, 2006, a decrease of $1.2
million from December 31, 2005. Net earnings for the quarter of $98,500 were
offset by a dividend declaration of $156,000 and loss in value of
available-for-sale securities of $179,000. The loss in value of these securities
was due to changes in interest rates and was not considered by management to be
other than temporary. In addition, the Company repurchased 109,267 shares of its
common stock in the current quarter and, granted 63,250 restricted shares to key
managers under the 2006 Stock-Based Compensation Plan approved by the
shareholders at the Company's annual meeting on May 17, 2006.
Total assets of the Company at June 30, 2006 were $284.3 million, an increase of
$1.5 million, or 0.5%, over assets of $282.8 million at December 31, 2005. The
asset quality of the Company remained strong, with reserves allocated in an
amount the Company believes to be adequate to absorb probable losses. The ratio
of total nonperforming assets to total assets was 1.55% at June 30, 2006
compared to 1.57% at December 31, 2005.
Safe Harbor Statement
This news release and other releases and reports issued by the Company,
including reports to the Securities and Exchange Commission, may contain
"forward-looking statements." The Company cautions readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. The Company is including this statement for purposes of taking advantage
of the safe-harbor provisions of the Private Securities Litigation Reform Act of
1995.
First Federal of Northern Michigan Bancorp, Inc.
Consolidated Balance Sheet
- ----------------------------------------------------------------------------------------------------------------------------
June 30, 2006 December 31, 2005
- -------------- - ------------------
(Unaudited)
ASSETS Cash and cash equivalents:
Cash on hand and due from banks ....................................... $ 4,653,707 $ 4,497,629
Overnight deposits with FHLB .......................................... 217,403 281,565
-------------------- ----------------------
Total cash and cash equivalents ....................................... 4,871,110 4,779,194
Securities AFS ....................................................... 46,467,162 53,411,609
Securities HTM ........................................................ 1,775,000 1,775,000
Loans held for sale ................................................... 355,500 -
Loans receivable, net of allowance for loan losses of $1,523,138 and
$1,415,764 as of June 30, 2006 and December 31, 2005, respectively .. 209,527,136 201,183,076
Foreclosed real estate and other repossessed assets ................... 667,142 434,823
Real estate held for investment ....................................... 135,543 352,136
Federal Home Loan Bank stock, at cost ................................. 4,765,000 4,765,000
Premises and equipment ................................................ 7,888,294 7,392,207
Accrued interest receivable ........................................... 1,262,096 1,601,691
Intangible assets ..................................................... 2,839,224 3,088,986
Goodwill .............................................................. 1,349,854 1,349,854
Other assets .......................................................... 2,366,900 2,641,195
-------------------- ----------------------
Total assets .......................................................... $ 284,269,961 $ 282,774,771
==================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits .............................................................. $ 186,441,637 $ 188,734,743
Advances from borrowers for taxes and insurance ....................... 373,105 27,709
Federal Home Loan Bank advances & Note Payable ........................ 59,916,334 54,403,622
Accrued expenses and other liabilities ................................ 2,128,952 2,959,111
-------------------- ----------------------
Total liabilities ..................................................... 248,860,028 246,125,185
-------------------- ----------------------
Commitments and contingencies ......................................... - -
Stockholders' equity:
Common stock ($0.01 par value 20,000,000 shares authorized,
3,190,999 and 3,115,510 shares issued, respectively)................. 31,909 31,155
Treasury Stock at Cost (109,267 shares)................................ (1,144,199) -
Additional paid-in capital ............................................ 24,223,616 23,560,462
Unearned Compensation ................................................. (590,018) -
Retained earnings, restricted ......................................... - -
Retained earnings .................................................... 14,703,744 14,703,130
Unallocated ESOP ...................................................... (1,138,232) (1,186,940)
Accumulated other comprehensive loss................................... (676,887) (458,221)
-------------------- ----------------------
Total stockholders' equity ............................................ 35,409,933 36,649,586
-------------------- ----------------------
Total liabilities and stockholders' equity ............................ $ 284,269,961 $ 282,774,771
==================== ======================
First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries
Consolidated Statement of Income
- -----------------------------------------------------------------------------------------------------------------------------------
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------ ----------------------
2006 2005 2006 2005
---- ----- ----- -----
(Unaudited) (Unaudited)
Interest income:
Interest and fees on loans ................................... $ 3,607,804 3,255,421 $ 7,024,417 $ 6,352,148
Interest and dividends on investments ........................ 547,520 404,016 1,109,331 745,660
Interest on mortgage-backed securities ....................... 43,014 63,386 107,989 130,103
----------- ---------- ----------- -----------
Total interest income ........................................ 4,208,338 3,722,823 8,241,737 7,227,911
----------- ---------- ----------- -----------
Interest expense:
Interest on deposits ......................................... 1,326,612 1,026,234 2,566,522 2,007,172
Interest on borrowings ....................................... 757,110 617,737 1,426,457 1,235,713
----------- ---------- ----------- -----------
Total interest expense ....................................... 2,083,722 1,643,971 3,992,979 3,242,885
----------- ---------- ----------- -----------
Net interest income .......................................... 2,124,617 2,078,852 4,248,758 3,985,026
Provision for loan losses .................................... 133,000 183,000 202,500 262,258
----------- ---------- ----------- -----------
Net interest income after provision for loan losses ......... 1,991,617 1,895,852 4,046,258 3,722,768
----------- ---------- ----------- -----------
Non Interest income:
Service charges and other fees ............................... 283,984 253,903 521,130 485,324
Mortgage banking activities .................................. 93,950 108,999 166,393 227,687
Gain (loss) on sale of available-for-sale investments ....... (43,565) - (43,565) 13,127
Net gain on sale of premises and equipment,
real estate owned and other repossessed assets ............. 1,750 (13,958) 4,006 (18,865)
Other ........................................................ 1,708 (11,910) 46,928 10,157
Insurance & Brokerage Commissions ........................... 738,417 748,477 1,507,071 1,480,531
----------- ---------- ----------- -----------
Total other income ........................................... 1,076,244 1,085,511 2,201,963 2,197,961
----------- ---------- ----------- -----------
Non interest expenses:
Compensation and employee benefits ............................ 1,614,006 1,569,472 3,158,906 3,133,756
SAIF Insurance Premiums ...................................... 6,045 6,408 12,453 12,897
Advertising .................................................. 81,623 34,927 132,712 74,784
Occupancy .................................................... 332,806 311,651 702,087 626,651
Amortization of intangible assets ............................ 124,880 80,305 249,761 150,886
Service Bureau Charges ....................................... 91,591 84,753 177,872 174,716
Insurance & Brokerage Commission Expense ..................... 279,133 317,704 547,240 598,203
Professional Services ........................................ 75,083 81,260 160,418 139,916
Donation to First Federal Community Foundation ............... - 679,940 - 679,940
Other ....................................................... 314,513 280,295 639,373 567,148
----------- ---------- ----------- -----------
Other expenses ............................................... 2,919,681 3,446,715 5,780,823 6,158,897
----------- ----------- ----------- -----------
Income before income tax expense ............................. 147,820 (452,225) 467,398 (238,168)
Income tax expense ........................................... 49,310 (151,919) 156,680 (79,873)
----------- ---------- ----------- -----------
Net income ................................................... $ 98,510 $ (300,306) $ 310,718 $ (158,295)
=========== ========== =========== ============
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Per share data:
Basic earnings per share ..................................... $ 0.03 $ (0.09) $ 0.10 $ (0.06)
Weighted average number of shares outstanding ............. 3,136,545 3,100,021 3,126,700 2,379,751
Diluted earnings per share ................................... $ 0.03 $ (0.09) $ 0.10 $ (0.06)
Weighted average number of shares outstanding,
including dilutive stock options ............................ 3,137,591 3,114,215 3,127,667 2,407,168
Dividends per common share ................................... $ 0.050 $ 0.050 $ 0.100 $ 0.104