EXHIBIT 99
FOR IMMEDIATE RELEASE
November 7, 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 THIRD QUARTER 2006 EARNINGS
Alpena, Michigan - (November 7, 2006) First Federal of Northern Michigan
Bancorp, Inc. (Nasdaq: FFNM) (the "Company") reported consolidated net earnings
of $326,000, or $0.11 per basic and diluted share, for the quarter ended
September 30, 2006, compared to net earnings of $363,000, or $0.12 per basic and
diluted share, for the quarter ended September 30, 2005. Earnings-per-share was
calculated based on weighted average outstanding shares of 3,039,173 and
3,100,511 for the periods ended September 30, 2006 and 2005, respectively.
Consolidated net earnings for the nine months ended September 30, 2006 were
$636,000, or $0.21 basic earnings per share and $.022 diluted earnings per
share, compared to net earnings of $205,000, or $0.07 per basic and diluted
share, for the nine months ended September 30, 2005.
Financial Condition
Total assets of the Company at September 30, 2006 were $286.4 million, an
increase of $3.6 million, or 1.3%, 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 1.60% at September 30,
2006 compared to 1.57% at December 31, 2005.
Stockholders' equity was $35.5 million at September 30, 2006, a decrease of $1.1
million from December 31, 2005. Net earnings for the quarter of $326,000 were
partially offset by a dividend declaration of $151,750. During the quarter, the
Company repurchased an additional 41,833 shares of its common stock at an
average cost of $10.07 per share, which concluded the stock repurchase program
that was announced and commenced during the previous quarter.
Results of Operations
Interest income increased to $4.6 million for the three months ended September
30, 2006 from $3.9 million for the three months ended September 30, 2005.
Interest income for the nine months ended September 30, 2006 increased to $12.8
million from $11.1 million for the nine months ended September 30, 2005. The
increase in interest income was due primarily to the collection of a large
commercial non-accrual loan relationship which resulted in an additional
$279,000 in interest income for the quarter. In addition, the Company's average
balances of non-mortgage loans increased $15.2 million from September 30, 2005
to September 30, 2006, reflecting the Company's continued emphasis on commercial
lending, and an increase in yield on those loans from 7.17% to 7.81% over the
same period, reflecting higher market interest rates.
Interest expense increased to $2.3 million for the three months ended September
30, 2006 from $1.7 million for the three months ended September 30, 2005.
Interest expense for the nine months ended September 30, 2006 increased to $6.2
million from $4.9 million for the nine months ended September 30, 2005. The
average balance of interest bearing deposits decreased $4.0 million from
September 30, 2005 to September 30, 2006, while the average cost of those
deposits increased from 2.50% to 3.30% period over period, reflecting continued
upward market pressure on deposit rates. The average balance of FHLB advances
increased $15.4 million from the three months ended September 30, 2005 to the
same period ended September 30, 2006 while the cost of those advances increased
54 basis points to 5.08%.
The provision for loan losses for the three and nine month periods ended
September 30, 2006 were $216,000 and $419,000, respectively, as compared to
$4,000 and $266,000 for the prior year period. The increase in the provision was
the result of both an increase in the balance of commercial loans as well as an
increase in classified loans.
Non interest income decreased from $1.2 million for the three months ended
September 30, 2005 to $1.1 million for the three months ended September 30, 2006
and from $3.4 million for the nine months ended September 30, 2005 to $3.3
million for the nine months ended September 30, 2006. The decrease was primarily
in the area of mortgage banking activity income where we continue to experience
declining mortgage loan demand.
Non interest expense decreased from $2.8 million for the three months ended
September 30, 2005 to $2.7 million for the three months ended September 30,
2006. Non interest expense decreased from $9.0 million for the nine months ended
September 30, 2005 to $8.5 million for the nine months ended September 30, 2006.
The Company made a one-time charitable contribution of $680,000 to the First
Federal Community Foundation in the period ended September 30, 2005. The Company
was able to decrease overall non interest expense despite the acceleration of
the amortization of intangible assets associated with their insurance subsidiary
resulting in an additional $40,000 in amortization expense for the three month
period over three month period and $140,000 additional expense for the nine
month period over nine month period. In addition, as required by Statement of
Financial Accounting Standard (SFAS) No. 123 (Revised), the Company expensed
stock options and stock awards granted to employees and directors during the
nine months ended September 30, 2006, resulting in additional compensation
expense of approximately $55,000 for the three months ended September 30, 2006
compared to the year earlier period and $95,000 for the nine month period ended
September 30, 2006 compared to the year earlier period.
Following a management evaluation of the Company's operations from both a
financial and customer service perspective, the Board of Directors approved the
closure of the Company's branch office in Ossineke, Michigan. The branch
accounts for about 7% of the Company's deposits. Due to the close proximity of
this branch to the Company's two Alpena, Michigan branches, management believes
that most of the deposits will be retained by the Company.
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. and Subsidiaries
Consolidated Balance Sheet
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September 30, 2006 December 31, 2005
-------------------- -------------------
(Unaudited)
ASSETS
Cash and cash equivalents:
Cash on hand and due from banks ........................................... $ 4,709,368 $ 4,497,629
Overnight deposits with FHLB .............................................. 180,555 281,565
---------------- -------------
Total cash and cash equivalents ........................................... 4,889,923 4,779,194
Securities AFS ........................................................... 46,581,044 53,411,609
Securities HTM ............................................................ 1,775,000 1,775,000
Loans held for sale ....................................................... 391,000 -
Loans receivable, net of allowance for loan losses of $1,688,563 and
$1,415,764 as of September 30, 2006 and December 31, 2005,
respectively ........................................................... 211,564,574 201,183,076
Foreclosed real estate and other repossessed assets ....................... 406,505 434,823
Real estate held for investment ........................................... 135,543 352,136
Federal Home Loan Bank stock, at cost ..................................... 4,361,500 4,765,000
Premises and equipment .................................................... 8,090,543 7,392,207
Accrued interest receivable ............................................... 2,040,808 1,601,691
Intangible assets ......................................................... 2,714,344 3,088,986
Goodwill .................................................................. 1,349,854 1,349,854
Other assets .............................................................. 2,068,118 2,641,195
------------------ -------------
Total assets .............................................................. $ 286,368,756 $ 282,774,771
================== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits .................................................................. $ 181,182,119 $ 188,734,743
Advances from borrowers for taxes and insurance ........................... 194,098 27,709
Federal Home Loan Bank advances and Note Payable .......................... 67,026,334 54,403,622
Accrued expenses and other liabilites...................................... 2,426,917 2,959,111
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Total liabilities ......................................................... 250,829,468 246,125,185
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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)..................... 31,910 31,155
Additional paid-in capital ................................................ 24,261,081 23,560,462
Retained earnings ........................................................ 14,877,649 14,703,130
Treasury stock at cost (156,000 shares).................................... (1,565,359) -
Unallocated ESOP .......................................................... (1,116,293) (1,186,940)
Unearned compensation ..................................................... (559,503) -
Accumulated other comprehensive loss....................................... (390,197) (458,221)
------------------ -------------
Total stockholders' equity ............................................... 35,539,288 36,649,586
------------------ -------------
Total liabilities and stockholders' equity ................................ $ 286,368,756 $ 282,774,771
================== = =============
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First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries
Consolidated Statement of Income
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For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------- ------------------------
2006 2005 2006 2005
--------- ----------- --------- --------
(Unaudited) (Unaudited)
Interest income:
Interest and fees on loans ................................. $ 4,045,724 3,395,050 $ 11,070,141 $ 9,747,198
Interest and dividends on investments ...................... 508,482 444,203 1,617,813 1,189,863
Interest on mortgage-backed securities ..................... 48,621 59,803 156,610 189,906
------------- ----------- -------------- -------------
Total interest income ...................................... 4,602,827 3,899,056 12,844,564 11,126,967
------------- ----------- -------------- -------------
Interest expense:
Interest on deposits ....................................... 1,426,972 1,127,496 3,993,494 3,134,668
Interest on borrowings ..................................... 826,375 555,162 2,252,832 1,790,875
------------- ----------- -------------- -------------
Total interest expense ..................................... 2,253,347 1,682,658 6,246,326 4,925,543
------------- ----------- -------------- -------------
Net interest income ........................................ 2,349,480 2,216,398 6,598,238 6,201,424
Provision for loan losses .................................. 216,357 3,800 418,857 266,058
------------- ----------- -------------- -------------
Net interest income after provision for loan losses ....... 2,221,123 2,212,598 6,179,381 5,935,366
------------- ----------- -------------- -------------
Non Interest income:
Service charges and other fees ............................. 280,096 262,239 801,226 747,563
Mortgage banking activities ................................ 72,779 155,811 239,172 383,498
Gain (loss) on sale of available-for-sale securities ...... - - (43,565) 13,128
Net gain (loss) on sale of premises and equipment,
real estate owned and other repossessed assets ........... (6,971) (7,746) (2,965) (26,611)
Other ...................................................... 32,863 20,555 79,791 30,712
Insurance and brokerage commissions ...................... 712,119 724,993 2,219,190 2,205,524
------------- ----------- -------------- -------------
Total other income ......................................... 1,090,886 1,155,852 3,292,849 3,353,813
------------- ----------- -------------- -------------
Non interest expenses:
Compensation and employee benefits ......................... 1,518,219 1,571,682 4,677,125 4,705,438
SAIF Insurance Premiums .................................... 5,877 5,913 18,330 18,810
Advertising ................................................ 64,924 58,635 197,636 133,419
Occupancy .................................................. 326,637 340,841 1,028,724 967,492
Amortization of intangible assets .......................... 124,881 85,149 374,642 236,035
Service bureau charges ..................................... 93,970 87,348 271,842 262,064
Insurance and brokerage commission expense ................. 252,757 290,261 799,997 888,464
Professional services ...................................... 38,134 40,845 198,552 180,761
Donation to First Federal Community Foundation ............. - - - 679,940
Other ..................................................... 309,680 341,708 949,054 908,856
------------- ----------- -------------- -------------
Other expenses ............................................. 2,735,079 2,822,382 8,515,902 8,981,279
------------- ----------- -------------- -------------
Income before income tax expense ........................... 488,930 546,068 956,328 307,900
Income tax expense ......................................... 163,275 182,723 319,955 102,850
------------- ----------- -------------- -------------
Net income ................................................. $ 325,655 $ 363,345 $ 636,373 $ 205,050
============= =========== ============== =============
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Per share data:
Basic earnings per share ................................... $ 0.11 $ 0.12 $ 0.21 $ 0.07
Weighted average number of shares outstanding .......... 3,039,173 3,100,511 3,097,204 3,088,961
Diluted earnings per share ................................. $ 0.11 $ 0.12 $ 0.22 $ 0.07
Weighted average number of shares outstanding,
including dilutive stock options ......................... 3,040,130 3,110,617 3,098,168 3,106,686
Dividends per common share ................................. $ 0.050 $ 0.050 $ 0.150 $ 0.154
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