UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2009
OR
¨
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from___________________________ to___________________________
Commission
File Number 000-31957
FIRST
FEDERAL OF NORTHERN MICHIGAN BANCORP, INC.
(Exact name of registrant as
specified in its charter)
Maryland
|
32-0135202
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
100
S. Second Avenue, Alpena, Michigan 49707
(Address of principal executive offices) (Zip
Code)
Registrant’s
telephone number, including area code: (989) 356-9041
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. Yes x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes ¨ No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
(Do
not check if a smaller reporting company)
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x.
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.
Common
Stock, Par Value $0.01
|
|
Outstanding
at November 16, 2009
|
(Title
of Class)
|
|
2,884,249
shares
|
FIRST
FEDERAL OF NORTHERN MICHIGAN BANCORP, INC.
FORM
10-Q
Quarter
Ended September 30, 2009
INDEX
|
PAGE
|
PART
I – FINANCIAL INFORMATION
|
|
ITEM
1 - UNAUDITED FINANCIAL STATEMENTS
|
|
Consolidated
Balance Sheet at September 30, 2009 and December 31, 2008
|
3
|
Consolidated
Statements of Income for the Three and Nine Months
|
|
Ended
September 30, 2009 and September 30, 2008
|
4
|
Consolidated
Statement of Changes in Stockholders’ Equity
|
|
for
the Nine Months Ended September 30, 2009
|
5
|
Consolidated
Statements of Cash Flows for the Nine Months Ended
|
|
September
30, 2009 and September 30, 2008
|
6
|
Notes
to Unaudited Consolidated Financial Statements
|
7
|
|
|
ITEM
2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
16
|
|
|
ITEM
3 – QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET
RISK
|
23
|
|
|
ITEM
4T - CONTROLS AND PROCEDURES
|
23
|
|
|
Part
II - OTHER INFORMATION
|
|
ITEM
1 - LEGAL PROCEEDINGS
|
24
|
ITEM
1A - RISK FACTORS
|
24
|
ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
24
|
ITEM
3 - DEFAULTS UPON SENIOR SECURITIES
|
24
|
ITEM
4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
24
|
ITEM
5 - OTHER INFORMATION
|
24
|
ITEM 6 -
EXHIBITS
|
24
|
Section
302 Certifications
|
|
Section
906 Certifications
|
|
When used
in this Form 10-Q or future filings by First Federal of Northern Michigan
Bancorp, Inc. (the “Company”) with the Securities and Exchange Commission
("SEC"), in the Company's press releases or other public or stockholder
communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases "would be," "will allow," "intends to,"
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "project," or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995.
The
Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made, and to advise
readers that various factors, including regional and national economic
conditions, changes in levels of market interest rates, credit and other risks
of lending and investment activities and competitive and regulatory factors,
could affect the Company's financial performance and could cause the Company's
actual results for future periods to differ materially from those anticipated or
projected.
The
Company does not undertake, and specifically disclaims any obligation, to update
any forward-looking statements to reflect occurrences or unanticipated events or
circumstances after the date of such statements.
PART
I - FINANCIAL INFORMATION
ITEM
1 - FINANCIAL STATEMENTS
First
Federal of Northern Michigan Bancorp, Inc. and Subsidiaries
Consolidated
Balance Sheet
|
|
September
30, 2009
|
|
|
December
31, 2008
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents:
|
|
|
|
|
|
|
Cash
on hand and due from banks
|
|
$ |
2,212,553 |
|
|
$ |
3,097,788 |
|
Overnight
deposits with FHLB
|
|
|
64,036 |
|
|
|
372,523 |
|
Total
cash and cash equivalents
|
|
|
2,276,589 |
|
|
|
3,470,311 |
|
Securities
AFS
|
|
|
32,879,094 |
|
|
|
25,665,178 |
|
Securities
HTM
|
|
|
3,980,434 |
|
|
|
4,022,235 |
|
Loans
held for sale
|
|
|
50,000 |
|
|
|
107,000 |
|
Loans
receivable, net of allowance for loan losses of $4,309,341 and $5,647,055
as of September 30, 2009 and December 31, 2008,
respectively
|
|
|
178,737,529 |
|
|
|
192,270,714 |
|
Foreclosed
real estate and other repossessed assets
|
|
|
3,535,684 |
|
|
|
1,637,923 |
|
Federal
Home Loan Bank stock, at cost
|
|
|
4,196,900 |
|
|
|
4,196,900 |
|
Premises
and equipment
|
|
|
6,779,358 |
|
|
|
7,089,746 |
|
Accrued
interest receivable
|
|
|
1,368,598 |
|
|
|
1,469,176 |
|
Intangible
assets
|
|
|
992,869 |
|
|
|
1,192,853 |
|
Other
assets
|
|
|
4,613,876 |
|
|
|
4,939,523 |
|
Assets
of discontinued operation
|
|
|
- |
|
|
|
1,610,734 |
|
Total
assets
|
|
$ |
239,410,931 |
|
|
$ |
247,672,293 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Deposits
|
|
$ |
156,358,009 |
|
|
$ |
165,778,598 |
|
Advances
from borrowers for taxes and insurance
|
|
|
188,965 |
|
|
|
104,475 |
|
Federal
Home Loan Bank Advances
|
|
|
46,750,000 |
|
|
|
40,200,000 |
|
Note
Payable
|
|
|
630,927 |
|
|
|
768,651 |
|
REPO
sweep accounts
|
|
|
6,872,443 |
|
|
|
9,447,415 |
|
Accrued
expenses and other liabilities
|
|
|
2,651,190 |
|
|
|
1,877,600 |
|
Liabilities
of discontinued operations
|
|
|
- |
|
|
|
76,792 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
213,451,534 |
|
|
|
218,253,531 |
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Common
stock ($0.01 par value 20,000,000 shares authorized 3,191,999 shares
issued)
|
|
|
31,920 |
|
|
|
31,920 |
|
Additional
paid-in capital
|
|
|
24,299,147 |
|
|
|
24,302,102 |
|
Retained
earnings
|
|
|
5,087,238 |
|
|
|
8,762,412 |
|
Treasury
stock at cost (307,750 shares)
|
|
|
(2,963,918 |
) |
|
|
(2,963,918 |
) |
Unallocated
ESOP
|
|
|
(683,861 |
) |
|
|
(764,861 |
) |
Unearned
compensation
|
|
|
(192,839 |
) |
|
|
(286,324 |
) |
Accumulated
other comprehensive income
|
|
|
381,710 |
|
|
|
337,431 |
|
Total
stockholders' equity
|
|
|
25,959,397 |
|
|
|
29,418,762 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$ |
239,410,931 |
|
|
$ |
247,672,293 |
|
See
accompanying notes to consolidated financial statements.
First
Federal of Northern Michigan Bancorp, Inc. and Subsidiaries
Consolidated
Statement of Income
|
|
For the Three Months
|
|
|
For the Nine Months
|
|
|
|
Ended September 30,
|
|
|
Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and fees on loans
|
|
$ |
2,762,789 |
|
|
$ |
3,156,924 |
|
|
$ |
8,570,404 |
|
|
$ |
9,575,347 |
|
Interest
and dividends on investments
|
|
|
211,720 |
|
|
|
248,386 |
|
|
|
584,788 |
|
|
|
764,630 |
|
Interest
on mortgage-backed securities
|
|
|
136,177 |
|
|
|
119,501 |
|
|
|
430,928 |
|
|
|
265,793 |
|
Total
interest income
|
|
|
3,110,686 |
|
|
|
3,524,810 |
|
|
|
9,586,120 |
|
|
|
10,605,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on deposits
|
|
|
795,356 |
|
|
|
1,275,690 |
|
|
|
2,736,532 |
|
|
|
3,811,954 |
|
Interest
on borrowings
|
|
|
422,715 |
|
|
|
532,247 |
|
|
|
1,279,247 |
|
|
|
1,653,578 |
|
Total
interest expense
|
|
|
1,218,071 |
|
|
|
1,807,937 |
|
|
|
4,015,779 |
|
|
|
5,465,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
1,892,615 |
|
|
|
1,716,873 |
|
|
|
5,570,341 |
|
|
|
5,140,238 |
|
Provision
for loan losses
|
|
|
2,976,642 |
|
|
|
875,431 |
|
|
|
3,492,711 |
|
|
|
1,242,665 |
|
Net
interest (expense) income after provision for loan losses
|
|
|
(1,084,027 |
) |
|
|
841,442 |
|
|
|
2,077,630 |
|
|
|
3,897,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
charges and other fees
|
|
|
217,159 |
|
|
|
245,162 |
|
|
|
661,488 |
|
|
|
708,447 |
|
Mortgage
banking activities
|
|
|
244,550 |
|
|
|
85,665 |
|
|
|
1,167,626 |
|
|
|
316,382 |
|
Gain
on sale of available-for-sale investments
|
|
|
- |
|
|
|
- |
|
|
|
1,227 |
|
|
|
16,052 |
|
Net
gain (loss) on sale of premises and equipment, real estate owned and other
repossessed assets
|
|
|
(2,128 |
) |
|
|
5,403 |
|
|
|
25,350 |
|
|
|
28,497 |
|
Other
|
|
|
16,637 |
|
|
|
18,076 |
|
|
|
67,997 |
|
|
|
66,108 |
|
Insurance
& brokerage commissions
|
|
|
15,157 |
|
|
|
45,000 |
|
|
|
129,797 |
|
|
|
135,000 |
|
Total
non-interest income
|
|
|
491,375 |
|
|
|
399,307 |
|
|
|
2,053,486 |
|
|
|
1,270,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
and employee benefits
|
|
|
1,095,509 |
|
|
|
1,203,733 |
|
|
|
3,414,767 |
|
|
|
3,654,827 |
|
FDIC
insurance premiums
|
|
|
106,199 |
|
|
|
33,443 |
|
|
|
376,807 |
|
|
|
85,238 |
|
Advertising
|
|
|
31,784 |
|
|
|
40,118 |
|
|
|
93,655 |
|
|
|
98,914 |
|
Occupancy
|
|
|
294,567 |
|
|
|
299,616 |
|
|
|
897,054 |
|
|
|
950,952 |
|
Amortization
of intangible assets
|
|
|
73,113 |
|
|
|
77,122 |
|
|
|
199,983 |
|
|
|
231,367 |
|
Service
bureau charges
|
|
|
76,533 |
|
|
|
72,432 |
|
|
|
255,043 |
|
|
|
240,518 |
|
Professional
services
|
|
|
93,588 |
|
|
|
112,057 |
|
|
|
359,711 |
|
|
|
309,231 |
|
Other
|
|
|
305,341 |
|
|
|
319,303 |
|
|
|
962,826 |
|
|
|
889,820 |
|
Total
non-interest expenses
|
|
|
2,076,634 |
|
|
|
2,157,824 |
|
|
|
6,559,846 |
|
|
|
6,460,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations before income tax benefit
|
|
|
(2,669,286 |
) |
|
|
(917,075 |
) |
|
|
(2,428,731 |
) |
|
|
(1,292,808 |
) |
Income
tax expense (benefit) from continuing operations
|
|
|
1,148,845 |
|
|
|
(307,073 |
) |
|
|
1,200,585 |
|
|
|
(432,643 |
) |
Net
loss from continuing operations
|
|
|
(3,818,131 |
) |
|
|
(610,002 |
) |
|
|
(3,629,316 |
) |
|
|
(860,165 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations, net of income tax benefit of $0, $12,741,
$43,209, and $29,745, respectively
|
|
|
- |
|
|
|
(24,733 |
) |
|
|
(83,875 |
) |
|
|
(57,215 |
) |
Gain
on sale of discontinued operations, net of income tax expense of $0, $0,
$19,585 and $0, respectively
|
|
|
- |
|
|
|
- |
|
|
|
38,017 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(3,818,131 |
) |
|
$ |
(634,735 |
) |
|
$ |
(3,675,174 |
) |
|
$ |
(917,380 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
(1.32 |
) |
|
$ |
(0.21 |
) |
|
$ |
(1.26 |
) |
|
$ |
(0.30 |
) |
Diluted
|
|
$ |
(1.32 |
) |
|
$ |
(0.21 |
) |
|
$ |
(1.26 |
) |
|
$ |
(0.30 |
) |
Income
(loss) per share from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
- |
|
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
Diluted
|
|
$ |
- |
|
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
Net
loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
(1.32 |
) |
|
$ |
(0.22 |
) |
|
$ |
(1.27 |
) |
|
$ |
(0.32 |
) |
Diluted
|
|
$ |
(1.32 |
) |
|
$ |
(0.22 |
) |
|
$ |
(1.27 |
) |
|
$ |
(0.32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
per common share
|
|
$ |
- |
|
|
$ |
0.05 |
|
|
$ |
- |
|
|
$ |
0.15 |
|
See
accompanying notes to consolidated financial statements.
First
Federal of Northern Michigan Bancorp Inc. and Subsidiaries
Consolidated
Statement of Changes in Stockholders' Equity (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Common
|
|
|
Treasury
|
|
|
Paid-in
|
|
|
Unearned
|
|
|
Retained
|
|
|
Unallocated
|
|
|
Comprehensive
|
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Compensation
|
|
|
Earnings
|
|
|
ESOP
|
|
|
Income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2008
|
|
$ |
31,920 |
|
|
$ |
(2,963,918 |
) |
|
$ |
24,302,102 |
|
|
$ |
(286,324 |
) |
|
$ |
8,762,412 |
|
|
$ |
(764,861 |
) |
|
$ |
337,431 |
|
|
$ |
29,418,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Options/Awards Expensed
|
|
|
- |
|
|
|
- |
|
|
|
64,924 |
|
|
|
93,485 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
158,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESOP
common stock committed to be released
|
|
|
- |
|
|
|
- |
|
|
|
(67,879 |
) |
|
|
- |
|
|
|
- |
|
|
|
81,000 |
|
|
|
- |
|
|
|
13,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,675,174 |
) |
|
|
- |
|
|
|
- |
|
|
|
(3,675,174 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in unrealized gain:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on
available-for-sale securities (net of tax of $22,810)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
44,279 |
|
|
|
44,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,630,895 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at September 30, 2009
|
|
$ |
31,920 |
|
|
$ |
(2,963,918 |
) |
|
$ |
24,299,147 |
|
|
$ |
(192,839 |
) |
|
$ |
5,087,238 |
|
|
$ |
(683,861 |
) |
|
$ |
381,710 |
|
|
$ |
25,959,397 |
|
See
accompanying notes to the consolidated financial statements.
First
Federal of Northern Michigan Bancorp, Inc. and Subsidiaries
Consolidated
Statement of Cash Flows
|
|
For Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(3,675,174 |
) |
|
$ |
(917,380 |
) |
Adjustments
to reconcile net loss to net cash from operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
624,223 |
|
|
|
769,562 |
|
Provision
for loan loss
|
|
|
3,492,711 |
|
|
|
1,242,665 |
|
Amortization
and accretion on securities - net
|
|
|
50,224 |
|
|
|
46,831 |
|
Gain
on sale of investment securities
|
|
|
(1,227 |
) |
|
|
(16,052 |
) |
ESOP
contribution
|
|
|
13,122 |
|
|
|
49,668 |
|
Stock
awards/options
|
|
|
158,409 |
|
|
|
172,611 |
|
Gain
on sale of loans held for sale
|
|
|
(492,288 |
) |
|
|
(86,166 |
) |
Originations
of loans held for sale
|
|
|
(42,604,156 |
) |
|
|
(8,800,236 |
) |
Proceeds
from sale of loans held for sale
|
|
|
43,153,444 |
|
|
|
8,518,680 |
|
Gain
on sale of fixed assets
|
|
|
(47,974 |
) |
|
|
(28,496 |
) |
Change
in accrued interest receivable
|
|
|
100,578 |
|
|
|
113,612 |
|
Change
in deferred tax assets
|
|
|
1,117,022 |
|
|
|
(612,860 |
) |
Change
in other assets
|
|
|
(814,186 |
) |
|
|
(872,642 |
) |
Change
in accrued expenses and other liabilities
|
|
|
773,590 |
|
|
|
(763,145 |
) |
Net
cash provided by (used for) operating activities
|
|
|
1,848,318 |
|
|
|
(1,183,348 |
) |
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Net
decrease in loans
|
|
|
6,694,579 |
|
|
|
5,595,432 |
|
Proceeds
from maturity and sale of available-for-sale securities
|
|
|
10,072,221 |
|
|
|
16,270,097 |
|
Proceeds
from sale of property and equipment and repossessed assets
|
|
|
1,501,066 |
|
|
|
1,522,688 |
|
Net
change in discontinued operations
|
|
|
1,533,942 |
|
|
|
294,537 |
|
Purchase
of securities
|
|
|
(17,226,243 |
) |
|
|
(21,186,165 |
) |
Purchase
of premises and equipment
|
|
|
(118,810 |
) |
|
|
(269,109 |
) |
Net
cash provided by investing activities
|
|
|
2,456,755 |
|
|
|
2,227,480 |
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in deposits
|
|
|
(9,420,589 |
) |
|
|
7,734,741 |
|
Dividend
paid on common stock
|
|
|
- |
|
|
|
(432,637 |
) |
Net
(decrease) increase in Repo Sweep accounts
|
|
|
(2,574,972 |
) |
|
|
4,145,540 |
|
Net
increase in advances from borrowers
|
|
|
84,490 |
|
|
|
165,364 |
|
Advances
from Federal Home Loan Bank
|
|
|
55,560,000 |
|
|
|
12,200,000 |
|
Repayments
of Federal Home Loan Bank advances and notes payable
|
|
|
(49,147,724 |
) |
|
|
(18,915,144 |
) |
Net
cash (used for) provided by financing activities
|
|
|
(5,498,795 |
) |
|
|
4,897,864 |
|
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(1,193,722 |
) |
|
|
5,941,996 |
|
Cash
and cash equivalents at beginning of period
|
|
|
3,470,311 |
|
|
|
5,340,857 |
|
Cash
and cash equivalents at end of period
|
|
$ |
2,276,589 |
|
|
$ |
11,282,853 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid during the period for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
Cash
paid during the period for interest
|
|
$ |
4,197,740 |
|
|
$ |
5,615,901 |
|
See
accompanying notes to the consolidated financial statements.
FIRST
FEDERAL OF NORTHERN MICHIGAN BANCORP, INC.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1—BASIS OF FINANCIAL STATEMENT PRESENTATION.
The
accompanying unaudited condensed consolidated interim financial statements have
been prepared in conformity with accounting principles generally accepted in the
United States of America and with the instructions to Form 10-Q. Accordingly,
certain information and disclosures required by accounting principles generally
accepted in the United States of America for complete financial statements are
not included herein. The interim financial statements should be read in
conjunction with the financial statements of First Federal of Northern Michigan
Bancorp, Inc. and Subsidiaries and the notes thereto included in the Company’s
annual report on Form 10-K for the year ended December 31,
2008.
All
adjustments, consisting only of normal recurring adjustments, which in the
opinion of management are necessary for a fair presentation of financial
position, results of operations and cash flows, have been made. The results of
operations for the three and nine months ended September 30, 2009 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2009.
In
accordance with FASB ASC 855, Subsequent Events, we have evaluated subsequent
events though the date of this filing. We do not believe there are any material
subsequent events which would require further disclosure.
Note
2— PRINCIPLES OF CONSOLIDATION AND DISCONTINUED OPERATIONS.
The
consolidated financial statements include the accounts of First Federal of
Northern Michigan Bancorp, Inc., First Federal of Northern Michigan (the
“Bank”), and the Bank’s wholly owned subsidiaries, Financial Services &
Mortgage Corporation (“FSMC”) and FFNM Agency. FSMC invests in real estate,
which includes leasing, selling, developing, and maintaining real estate
properties. The main activity of FFNM Agency is to collect the stream of income
associated with the sale of the Blue Cross/Blue Shield override business to the
Grotenhuis Group (as discussed further below). All significant
intercompany balances and transactions have been eliminated in the
consolidation.
On
February 27, 2009 First Federal of Northern Michigan Bancorp, Inc.
announced that it had sold the InsuranCenter of Alpena (“ICA”) for $1,635,000.
As a result, the financial position and results of operations of ICA are removed
from the detail line items in the Company’s condensed consolidated financial
statements and presented separately as “discontinued operations.” For further
information, please refer to Note 15 of the consolidated financial statements
included in the Company’s Annual Report on Form 10-K for the year ended December
31, 2008.
As a
result of the transaction, the Company reduced its full-time employees by 14
positions, or 13% of the Company’s workforce. The Company expects
the sale will reduce its non-interest expense by approximately $1.2 million in
fiscal year 2009.
The
Company recorded a gain of approximately $38,000, net of tax benefit, upon the
closing of the sale. The Company retained the residual income stream associated
with the April 2008 sale of its wholesale Blue Cross/Blue Shield override
business to the Grotenhuis Group.
Note
3—LOANS.
The
following table sets forth the composition of our loan portfolio by loan type at
the dates indicated.
|
|
At September 30,
|
|
|
At December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(in thousands)
|
|
Real
estate loans:
|
|
|
|
|
|
|
Residential
mortgage
|
|
$ |
83,135 |
|
|
$ |
92,364 |
|
|
|
|
|
|
|
|
|
|
Commercial
loans:
|
|
|
|
|
|
|
|
|
Secured
by real estate
|
|
|
60,206 |
|
|
|
49,787 |
|
Other
|
|
|
17,391 |
|
|
|
30,173 |
|
Total
commercial loans
|
|
|
77,597 |
|
|
|
79,960 |
|
|
|
|
|
|
|
|
|
|
Consumer
loans:
|
|
|
|
|
|
|
|
|
Secured
by real estate
|
|
|
19,778 |
|
|
|
22,303 |
|
Other
|
|
|
2,833 |
|
|
|
3,564 |
|
Total
consumer loans
|
|
|
22,611 |
|
|
|
25,867 |
|
|
|
|
|
|
|
|
|
|
Total
gross loans
|
|
$ |
183,343 |
|
|
$ |
198,191 |
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Net
deferred loan fees
|
|
|
(296 |
) |
|
|
(274 |
) |
Allowance
for loan losses
|
|
|
(4,309 |
) |
|
|
(5,647 |
) |
|
|
|
|
|
|
|
|
|
Total
loans, net
|
|
$ |
178,738 |
|
|
$ |
192,270 |
|
Note
4—DIVIDENDS.
The
Company suspended its quarterly dividend effective for the quarter ended
December 31, 2008. The Company is dependent primarily upon the Bank for earnings
and funds to pay dividends on common stock. Any reinstatement of dividends in
the future will depend, in large part, on the Bank's earnings, capital
requirements, financial condition and other factors considered by the Board of
Directors of the Company. The payment of dividends also is subject to
legal and regulatory restrictions. Any reinstatement of dividends, or stock
repurchase, would require regulatory approval for a dividend from the Bank to
the Company to fund the liquidity necessary to reinstate dividends or initiate a
stock repurchase. We have made application for such a dividend but have
been unsuccessful in getting regulatory approval due to a conservative
regulatory posture regarding retaining capital at the Bank level in this
economic environment.
Note
5 – 1996 STOCK OPTION PLAN AND 2006 STOCK-BASED INCENTIVE PLAN.
Effective
January 1, 2006, the Company adopted FASB ASC 718-10, “Shareholder Based
Payments”, which requires that the grant-date fair value of awarded stock
options be expensed over the requisite service period. The Company’s 1996 Stock
Option Plan (the “1996 Plan”), which was approved by shareholders, permits the
grant of share options to its employees for up to 127,491 shares of common stock
(retroactively adjusted for the exchange ratio applied in the Company’s 2005
stock offering and related second-step conversion). The Company’s 2006
Stock-Based Incentive Plan (the “2006 Plan”), which was approved by the
shareholders , permits the award of up to 242,740 shares of common stock of
which the maximum number to be granted as Stock Options is 173,386 and the
maximum to be granted as Restricted Stock Awards is 69,354. Option awards are
granted with an exercise price equal to the market price of the Company’s stock
at the date of grant; those option awards generally vest based on five years of
continual service and have ten year contractual terms. Certain options provide
for accelerated vesting if there is a change in control (as defined in the
Plans).
During
the three and nine months ended September 30, 2009 the Company awarded no shares
under the 2006 Stock-Based Incentive Plan. Shares issued under the 2006
Plan and exercised pursuant to the exercise of stock options may be either
authorized but unissued shares or reacquired shares held by the Company as
treasury stock.
Stock Options - A summary of option activity under the
Plan during the nine months ended September 30, 2009 is presented
below:
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Contractual Term
|
|
|
Aggregate
|
|
Options
|
|
Shares
|
|
|
Exercise Price
|
|
|
(Years)
|
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at January 1, 2009
|
|
|
192,132 |
|
|
$ |
9.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
0 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
0 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
or expired
|
|
|
(3,850 |
) |
|
$ |
9.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oustanding
at September 30, 2009
|
|
|
188,282 |
|
|
$ |
9.47 |
|
|
|
6.51 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
Exercisable at September 30, 2009
|
|
|
114,806 |
|
|
$ |
9.44 |
|
|
|
6.67 |
|
|
$ |
0 |
|
A summary
of the status of the Company’s nonvested options as of September 30, 2009,
and changes during the nine months ended September 30, 2009, is presented
below:
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Grant-Date
|
|
Nonvested Shares
|
|
Shares
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
Nonvested
at January 1, 2009
|
|
|
111,774 |
|
|
$ |
2.11 |
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
0 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
(36,368 |
) |
|
$ |
2.50 |
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(1,930 |
) |
|
$ |
2.10 |
|
|
|
|
|
|
|
|
|
|
Nonvested
at September 30, 2009
|
|
|
73,476 |
|
|
$ |
2.12 |
|
As of
September 30, 2009 there was $140,000 of total unrecognized compensation cost,
net of expected forfeitures, related to nonvested options under the Plans. That
cost is expected to be recognized over a weighted-average period of 1.7 years.
The total fair value of shares vested during the nine months ended September 30,
2009 was $60,334.
Restricted Stock
Awards - As of September 30, 2009 there was $200,000 of unrecognized
compensation cost related to nonvested restricted stock awards under the 2006
Plan. That cost is expected to be recognized over a weighted-average period of
1.7 years.
Note
6 – COMMITMENTS TO EXTEND CREDIT
The
Company is a party to credit-related financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit,
standby letters of credit, and commercial lines of credit. Such commitments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amounts recognized in the consolidated balance sheet. The Company’s
exposure to credit loss is represented by the contracted amount of these
commitments. The Company follows the same credit policies in making commitments
as it does for on-balance sheet instruments.
At
September 30, 2009, the Company had outstanding commitments to originate loans
of $29.4 million. These commitments included $9.1 million for permanent
one-to-four family dwellings, $3.7 million for non-residential loans,
$400,000 of undisbursed loan proceeds for construction of one-to-four
family dwellings, $4.5 million of undisbursed lines of credit on home equity
loans, $1.2 million of unused credit card lines, $8.7 million of unused
commercial lines of credit, $770,000 of undisbursed commercial construction,
$5,000 of unused letters of credit and $1.1 million in unused bounce
protection.
Note
7 – SEGMENT REPORTING
The
Company’s principal activities include banking through its wholly owned
subsidiary, First Federal of Northern Michigan, and the sale of insurance
products through its indirect wholly owned subsidiary, ICA, purchased in
2003. The Bank provides financial products including retail and commercial
loans as well as retail and commercial deposits. ICA receives commissions
from the sale of various insurance products including health, life, and
property. The segments were determined based on the nature of the products
provided to customers.
The
financial information for each operating segment is reported on the basis used
internally to evaluate performance and allocate resources. The allocations have
been consistently applied for all periods presented. Revenues and expenses
between affiliates have been transacted at rates that unaffiliated parties would
pay. The only transaction between the segments thus far relates to a
deposit on behalf of ICA included in the Bank. The interest income and interest
expense for this transaction has been eliminated. All other transactions
are with external customers. The performance measurement of the operating
segments is based on the management structure of the Company and is not
necessarily comparable with similar information for any other financial
institution. The information presented is also not necessarily indicative
of the segment’s financial condition and results of operations if they were
independent entities.
As noted
above, the majority of the assets of the Company’s segment, ICA, were sold on
February 27, 2009; therefore no segment information is reported for the
three-month period ended September 30, 2009.
|
|
For the Three Months Ended
|
|
|
|
September 30, 2008
|
|
|
|
(Dollars in Thousands)
|
|
|
|
Bank
|
|
|
ICA
|
|
|
Eliminations
|
|
|
Total
|
|
Interest
Income
|
|
$ |
3,525 |
|
|
$ |
9 |
|
|
$ |
(9 |
) |
|
$ |
3,525 |
|
Interest
Expense
|
|
|
1,817 |
|
|
|
- |
|
|
|
(9 |
) |
|
|
1,808 |
|
Net Interest Income -
Before provision for loan losses
|
|
|
1,708 |
|
|
|
9 |
|
|
|
- |
|
|
|
1,717 |
|
Provision
for Loan Losses
|
|
|
875 |
|
|
|
- |
|
|
|
- |
|
|
|
875 |
|
Net Interest Income -
After provision for loan losses
|
|
|
833 |
|
|
|
9 |
|
|
|
- |
|
|
|
842 |
|
Other
Income
|
|
|
352 |
|
|
|
300 |
|
|
|
- |
|
|
|
652 |
|
Operating
Expenses
|
|
|
2,118 |
|
|
|
330 |
|
|
|
- |
|
|
|
2,448 |
|
Loss - Before
federal income tax benefit
|
|
|
(933 |
) |
|
|
(21 |
) |
|
|
- |
|
|
|
(954 |
) |
Federal
Income Tax expense (benefit)
|
|
|
(313 |
) |
|
|
(7 |
) |
|
|
- |
|
|
|
(319 |
) |
Net
loss
|
|
$ |
(620 |
) |
|
$ |
(14 |
) |
|
$ |
- |
|
|
$ |
(635 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
$ |
186 |
|
|
$ |
86 |
|
|
$ |
- |
|
|
$ |
272 |
|
Assets
|
|
$ |
250,044 |
|
|
$ |
5,350 |
|
|
$ |
(1,152 |
) |
|
$ |
254,242 |
|
Expenditures
related to long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Intangible
assets
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Property
and equipment
|
|
|
141 |
|
|
|
- |
|
|
|
- |
|
|
|
141 |
|
Total
|
|
$ |
141 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
141 |
|
|
|
For the Nine Months Ended
|
|
|
|
September 30, 2009
|
|
|
|
(Dollars in Thousands)
|
|
|
|
Bank
|
|
|
ICA
|
|
|
Eliminations
|
|
|
Total
|
|
Interest
Income
|
|
$ |
9,586 |
|
|
$ |
4 |
|
|
$ |
(4 |
) |
|
$ |
9,586 |
|
Interest
Expense
|
|
|
4,016 |
|
|
|
4 |
|
|
|
(4 |
) |
|
|
4,016 |
|
Net Interest Income -
Before provision for loan losses
|
|
|
5,570 |
|
|
|
- |
|
|
|
- |
|
|
|
5,570 |
|
Provision
for Loan Losses
|
|
|
3,493 |
|
|
|
- |
|
|
|
- |
|
|
|
3,493 |
|
Net Interest Income -
After provision for loan losses
|
|
|
2,078 |
|
|
|
- |
|
|
|
- |
|
|
|
2,078 |
|
Other
Income
|
|
|
2,073 |
|
|
|
191 |
|
|
|
- |
|
|
|
2,264 |
|
Operating
Expenses
|
|
|
6,548 |
|
|
|
292 |
|
|
|
- |
|
|
|
6,840 |
|
Loss - Before
federal income tax benefit
|
|
|
(2,397 |
) |
|
|
(101 |
) |
|
|
- |
|
|
|
(2,498 |
) |
Federal
Income Tax expense (benefit)
|
|
|
1,212 |
|
|
|
(34 |
) |
|
|
- |
|
|
|
1,178 |
|
Net
loss
|
|
$ |
(3,609 |
) |
|
$ |
(67 |
) |
|
$ |
- |
|
|
$ |
(3,676 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
$ |
577 |
|
|
$ |
47 |
|
|
$ |
- |
|
|
$ |
624 |
|
Assets
|
|
$ |
239,411 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
239,411 |
|
Expenditures
related to long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Intangible
assets
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Property
and equipment
|
|
|
119 |
|
|
|
- |
|
|
|
- |
|
|
|
119 |
|
Total
|
|
$ |
119 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
119 |
|
|
|
For the Nine Months Ended
|
|
|
|
September 30, 2008
|
|
|
|
(Dollars in Thousands)
|
|
|
|
Bank
|
|
|
ICA
|
|
|
Eliminations
|
|
|
Total
|
|
Interest
Income
|
|
$ |
10,606 |
|
|
$ |
31 |
|
|
$ |
(31 |
) |
|
$ |
10,606 |
|
Interest
Expense
|
|
|
5,497 |
|
|
|
- |
|
|
|
(31 |
) |
|
|
5,466 |
|
Net Interest Income -
Before provision for loan losses
|
|
|
5,109 |
|
|
|
31 |
|
|
|
- |
|
|
|
5,140 |
|
Provision
for Loan Losses
|
|
|
1,242 |
|
|
|
- |
|
|
|
- |
|
|
|
1,242 |
|
Net Interest Income -
After provision for loan losses
|
|
|
3,867 |
|
|
|
31 |
|
|
|
- |
|
|
|
3,898 |
|
Other
Income
|
|
|
1,131 |
|
|
|
1,321 |
|
|
|
- |
|
|
|
2,452 |
|
Operating
Expenses
|
|
|
6,335 |
|
|
|
1,394 |
|
|
|
- |
|
|
|
7,729 |
|
Loss - Before
federal income tax benefit
|
|
|
(1,337 |
) |
|
|
(42 |
) |
|
|
- |
|
|
|
(1,379 |
) |
Federal
Income Tax expense (benefit)
|
|
|
(448 |
) |
|
|
(14 |
) |
|
|
- |
|
|
|
(462 |
) |
Net
loss
|
|
$ |
(889 |
) |
|
$ |
(28 |
) |
|
$ |
- |
|
|
$ |
(917 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
$ |
561 |
|
|
$ |
186 |
|
|
$ |
- |
|
|
$ |
747 |
|
Assets
|
|
$ |
250,044 |
|
|
$ |
5,350 |
|
|
$ |
(1,152 |
) |
|
$ |
254,242 |
|
Expenditures
related to long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Intangible
assets
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Property
and equipment
|
|
|
268 |
|
|
|
- |
|
|
|
- |
|
|
|
268 |
|
Total
|
|
$ |
268 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
268 |
|
Note
8 - FAIR VALUE MEASUREMENTS.
FASB ASC
820-10 – Fair Value
Measurements. The following tables present information about the Company’s
assets and liabilities measured at fair value on a recurring basis at September
30, 2009, and the valuation techniques used by the Company to determine those
fair values.
In
general, fair values determined by Level 1 inputs use quoted prices in active
markets for identical assets or liabilities that the Company has the ability to
access.
Fair
values determined by Level 2 inputs use other inputs that are observable, either
directly or indirectly. These Level 2 inputs include quoted prices for
similar assets and liabilities in active markets, and other inputs such as
interest rates and yield curves that are observable at commonly quoted
intervals.
Level 3
inputs are unobservable inputs, including inputs that are available in
situations where there is little, if any, market activity for the related asset
or liability.
In
instances where inputs used to measure fair value fall into different levels in
the above fair value hierarchy, fair value measurements in their entirety are
categorized based on the lowest level input that is significant to the
valuation. The Company’s assessment of the significance of particular inputs to
these fair value measurements requires judgment and considers factors specific
to each asset or liability.
Disclosures
concerning assets and liabilities measured at fair value are as
follows:
Assets
and Liabilities Measured at Fair Value on a Recurring Basis at September 30,
2009
(Dollars
in thousands)
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
|
Balance at
September 30,
2009
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities- available-for-sale
|
|
$ |
- |
|
|
$ |
32,879 |
|
|
$ |
- |
|
|
$ |
32,879 |
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company also has assets that under certain conditions are subject to measurement
at fair value on a non-recurring basis. These assets include non-homogenous
loans that are considered impaired and real estate owned. For impaired loans
accounted for under FASB ASC 310-10, the Company has estimated the fair value
using Level 3 inputs using discounted cash flow projections. Other Real Estate
Owned consists of property received in full or partial satisfaction of a
receivable. The Company utilizes independent appraisals or broker price opinions
to estimate the fair value of these properties.
Assets
Measured at Fair Value on a Nonrecurring Basis
(Dollars
in thousands)
|
|
Balance at
September 30,
2009
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level
1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
|
Change in fair
value for the three-
month period
ended September
30, 2009
|
|
|
Change in fair
value for the
nine-month
period ended
September 30,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans accounted for under FASB ASC 310-10
|
|
$ |
7,155 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
7,155 |
|
|
$ |
911 |
|
|
$ |
2,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
real estate owned -residential mortgages
|
|
$ |
512 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
512 |
|
|
$ |
22 |
|
|
$ |
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Real estate owned - commercial
|
|
$ |
3,023 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,023 |
|
|
$ |
592 |
|
|
$ |
622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
servicing rights
|
|
$ |
703 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
703 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
loans held for sale
|
|
$ |
50 |
|
|
$ |
- |
|
|
$ |
50 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Mortgage Servicing
Rights: Mortgage servicing rights
represent the value associated with servicing residential mortgage loans. The
value is determined through a discounted cash flow analysis which uses
prepayment speed, interest rate, delinquency level and other assumptions as
inputs. All of these assumptions require a significant degree of management
judgment. Adjustments are only made when the discounted cash flows are less than
the carrying value. As such, the Company classifies mortgage servicing rights as
nonrecurring Level 3.
Mortgage Loans Held
For Sale: Mortgage loans held for
sale are recorded at the lower of carrying value or fair value. The fair value
of mortgage loans held for sale is determined through forward commitments which
the Company enters to sell these loans to secondary market counterparties.
As such, the Company classifies mortgage loans held for sale as nonrecurring
Level 2.
Impaired
Loans: The
Company does not record loans at fair value on a recurring basis. However, on
occasion, a loan is considered impaired and an allowance for loan loss is
established. A loan is considered impaired when it is probable that all of
the principal and interest due under the original terms of the loan may not be
collected. Once a loan is identified as individually impaired, management
measures impairment in accordance with FASB ASC 310-10, Accounting by Creditors
for Impairment of a Loan. The fair value of impaired loans is estimated using
one of several methods, including collateral value, market value of similar
debt, enterprise value, liquidation value and discounted cash flows. Those
impaired loans not requiring an allowance represent loans for which the fair
value of the expected repayments or collateral exceed the recorded investments
in such loans. In accordance with FASB ASC 820-10, impaired loans where an
allowance is established based on the fair value of collateral require
classification in the fair value hierarchy. When the fair value of the
collateral is based on an observable market price or a current appraised value,
the Company records the impaired loan as nonrecurring Level 2. When an appraised
value is not available or management determines the fair value of the collateral
is further impaired below the appraised value and there is no observable market
price, the Company records the impaired loan as nonrecurring Level
3.
Other Real Estate
Owned: At the time
of acquisition, other real estate owned is recorded at fair value, less
estimated costs to sell, which becomes the property's new basis. Subsequent
write-downs to reflect declines in value since the time of acquisition may occur
from time to time and are recorded in other expense in the consolidated
statements of operations. The fair value of the property used at and subsequent
to the time of acquisition is typically determined by a third party appraisal of
the property (nonrecurring Level 3).
Investment
Securities Held to Maturity: The Company does not
record investment securities held to maturity at fair value on a recurring
basis. Therefore, when certain securities held to maturity were measured
at fair value as discussed below, the Company’s municipal bonds classified as
held to maturity are fair valued using a discount rate adjustment technique
utilizing an imputed discount rate between current market interest rate spreads
and market interest rate spreads at the approximate last date an active market
existed for the these securities. Relevant inputs to the model include
market spread data in consideration of credit characteristics, collateral type,
credit rating and other relevant features. Where quoted prices are not
available, fair values are measured using independent matrix pricing models, or
other model-based valuation techniques such as the present value of future cash
flows, requiring adjustments for factors such as prepayment speeds, liquidity
risk, default rates, credit loss and the security’s credit rating. In
instances where market action is inactive or inputs to the valuation are more
opaque, securities are classified as nonrecurring Level 3 within the valuation
hierarchy. Therefore, when management determines the fair value of an
impaired held to maturity security through utilization of this type of model,
the Company records the impaired security as nonrecurring Level 3
The fair
value of a financial instrument is the current amount that would be exchanged
between willing parties, other than in a forced liquidation. Fair value is
best determined based on quoted market prices. However, in many instances,
there are no quoted market prices for the Company’s various financial
instruments. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows.
Accordingly, the fair value estimates may not be realized in an immediate
settlement of the instrument. FASB ASC 825-10 excludes certain financial
instruments and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented may
not necessarily represent the underlying fair value of the Company.
The
following methods and assumptions were used by the Company in estimating fair
value disclosures for financial instruments:
Cash and Cash
Equivalents: The carrying amounts of
cash and short-term instruments approximate fair values.
Securities: Fair values for
securities, excluding Federal Home Loan Bank stock, are based on quoted market
prices. The carrying value of Federal Home Loan Bank stock approximates
fair value based on the redemption provisions of the Federal Home Loan
Bank.
Loans Held for
Sale: Fair values of mortgage loans held for sale are based on
commitments on hand from investors or prevailing market prices.
Loans Receivable: For variable-rate loans that reprice
frequently and with no significant change in credit risk, fair values are based
on carrying values. Fair values for certain mortgage loans (e.g., one- to
four-family residential), credit card loans, and other consumer loans are based
on quoted market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics. Fair
values for other loans (e.g., commercial real estate and investment property
mortgage loans, commercial, and industrial loans) are estimated using discounted
cash flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. Fair values for
nonperforming loans are estimated using discounted cash flow analyses or
underlying collateral values, where applicable.
Deposit Liabilities: The fair values disclosed for demand
deposits (e.g., interest and noninterest checking, passbook savings, and certain
types of money market accounts) are, by definition, equal to the amount payable
on demand at the reporting date (i.e., their carrying amounts). The
carrying amounts of variable-rate, fixed-term money market accounts and
certificates of deposit approximate their fair values at the reporting
date. Fair values for fixed-rate certificates of deposit are estimated
using a discounted cash flow calculation that applies interest rates currently
being offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.
REPO Sweep
Accounts: The
fair values disclosed for REPO Sweeps are equal to the amount payable on demand
at the reporting date (i.e., their carrying amounts).
Long-term Borrowings: The fair values of the Company’s
long-term borrowings are estimated using discounted cash flow analyses based on
the Company’s current incremental borrowing rates for similar types of borrowing
arrangements.
Accrued Interest: The carrying amounts of accrued
interest approximate fair value.
The
estimated fair values and related carrying or notional amounts of the Company’s
financial instruments are as follows:
|
|
September 30, 2009
|
|
|
December 31, 2008
|
|
|
|
Carrying
Amounts
|
|
|
Estimated
Fair Value
|
|
|
Carrying
Amounts
|
|
|
Estimated
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
2,277 |
|
|
$ |
2,277 |
|
|
$ |
3,471 |
|
|
$ |
3,471 |
|
Securities
available for sale
|
|
|
32,879 |
|
|
$ |
32,879 |
|
|
$ |
25,665 |
|
|
$ |
25,665 |
|
Securities
held to maturity
|
|
|
3,980 |
|
|
|
4,127 |
|
|
|
4,022 |
|
|
|
3,949 |
|
Loans
and loans held for sale - Net
|
|
|
179,184 |
|
|
|
179,823 |
|
|
|
192,377 |
|
|
|
197,804 |
|
Federal
Home Loan Bank stock
|
|
|
4,197 |
|
|
|
4,197 |
|
|
|
4,197 |
|
|
|
4,197 |
|
Accrued
interest receivable
|
|
|
1,369 |
|
|
|
1,369 |
|
|
|
1,469 |
|
|
|
1,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
deposits
|
|
|
156,358 |
|
|
|
157,083 |
|
|
|
165,778 |
|
|
|
166,931 |
|
Federal
Home Loan Bank advances
|
|
|
46,750 |
|
|
|
47,436 |
|
|
|
40,200 |
|
|
|
41,688 |
|
Note
payable
|
|
|
631 |
|
|
|
634 |
|
|
|
769 |
|
|
|
773 |
|
REPO
sweep accounts
|
|
|
6,872 |
|
|
|
6,657 |
|
|
|
9,447 |
|
|
|
9,447 |
|
Accrued
interest payable
|
|
|
340 |
|
|
|
340 |
|
|
|
518 |
|
|
|
518 |
|
Note
9 – RECENT ACCOUNTING PRONOUNCEMENTS.
In June
2009, the Financial Accounting Standards Board (FASB) issued SFAS No. 168, The FASB
Accounting Standards Codification™ and the Hierarchy of Generally Accepted
Accounting Principles — a replacement of FASB Statement No. 162. SFAS No.
168 establishes the FASB Accounting Standard Codification™ (Codification) as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with generally accepted accounting principles in the United States
(U.S. GAAP). All guidance contained in the Codification carries an equal level
of authority. The Codification does not change current U.S. GAAP, but is
intended to simplify user access to all authoritative U.S. GAAP by providing all
the authoritative literature related to a particular topic in one place. On the
effective date of SFAS No. 168, the Codification will supersede all
then-existing non-SEC accounting and reporting standards. All other
non-grandfathered non-SEC accounting literature not included in the Codification
will become non-authoritative. The Codification is effective for financial
statements issued for interim and annual periods ending after September 15,
2009. The implementation of the Codification during the quarter ended September
30, 2009 had no impact on the Company’s results of operations or financial
position. However, as a result of implementation of the Codification, previous
references to new accounting standards and literature are no longer applicable.
All future references to authoritative accounting literature in our consolidated
financial statements will be referenced in accordance with the
Codification.
In April,
2009, the FASB finalized three FASB Staff Positions (“FSPs”) regarding the
accounting treatment for investments including mortgage-backed securities. These
FSPs changed the method for determining if an other-than-temporary impairment
(“OTTI”) exists and the amount of OTTI to be recorded through an entity’s income
statement. The changes brought about by the FSPs provide greater clarity and
reflect a more accurate representation of the credit and noncredit components of
an OTTI event. The three FSPs are as follows:
|
·
|
FASB
ASC 820-10-65-4, Fair Value
Measurements and Disclosures provides guidelines for making fair
value measurements that determine fair value when the volume and activity
for assets or liabilities have significantly decreased and identify
transactions that are not orderly.
|
|
·
|
FASB
ASC 320-10-65, Investments
– Debt and Equity Securities provides additional guidance designed
to create greater clarity and consistency in accounting for and presenting
impairment losses on securities.
|
|
·
|
FASB
ASC 825-10-65, Financial
Instruments enhances consistency in financial reporting by
increasing the frequency of fair value
disclosures.
|
The
adoption of these FSPs did not have a material effect on the Company’s results
of operations or financial position.
In May
2009, FASB issued FASB ASC 855, Subsequent
Events, which establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before the
financial statements are issued or are available to be issued. It requires the
disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date. FASB ASC 855 is effective for interim or annual
financial periods ending after June 15, 2009. The adoption of this standard did
not have any impact on the Company’s results of operations or financial
position.
FIRST
FEDERAL OF NORTHERN MICHIGAN BANCORP, INC.
AND
SUBSIDIARIES
PART
Ι - FINANCIAL INFORMATION
ITEM
2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
following discussion compares the consolidated financial condition of the
Company at September 30, 2009 and December 31, 2008, and the results of
operations for the three- and nine-month periods ended September 30, 2009 and
2008. This discussion should be read in conjunction with the interim
financial statements and footnotes included herein.
OVERVIEW
The
Company currently operates as a community-oriented financial institution that
accepts deposits from the general public in the communities surrounding its 8
full-service banking centers. The deposited funds, together with funds generated
from operations and borrowings, are used by the Company to originate loans. The
Company’s principal lending activity is the origination of mortgage loans for
the purchase or refinancing of one-to-four family residential properties. The
Company also originates commercial and multi-family real estate loans,
construction loans, commercial loans, automobile loans, home equity loans and
lines of credit, and a variety of other consumer loans.
For the
quarter ended September 30, 2009, the Company reported a net loss from
continuing operations of $1.5 million compared to a net loss of $610,000 for the
year earlier period, a decrease in earnings of $886,000. For the nine
months ended September 30, 2009, the net loss from continuing operations was
$1.3 million compared to a net loss of $860,000 for the nine months ended
September 30, 2008.
Total
assets decreased by $8.3 million, or 3.3%, to $239.4 million from December 31,
2008 to September 30, 2009. Investment securities available for sale increased
by $7.2 million from December 31, 2008 to September 30, 2009. Net loans
receivable decreased $13.5 million or 7.0% during that same time period. Total
deposits decreased $9.4 million, or 5.7% from December 31, 2008 to September 30,
2009 and REPO Sweep accounts decreased by $2.6 million, or 27.3% during that
same time period.. Federal Home Loan Bank advances decreased by $6.6 million
from December 31, 2008 to September 30, 2009. Equity decreased by $3.5 million,
or 11.8% during the nine-month period ended September 30, 2009.
CRITICAL
ACCOUNTING POLICIES
As of
September 30, 2009, except for the addition of the valuation of deferred tax
assets as a critical accounting policy (discussed below), there have been no
changes in the critical accounting policies as disclosed in the Company’s Form
10-K for the year ended December 31, 2008. The Company’s critical accounting
policies are described in the Management’s Discussion and Analysis and financial
sections of its 2008 Annual Report. Management believes its critical accounting
policies relate to the Company’s securities, allowance for loan losses, mortgage
servicing rights and intangibles.
Management
has determined that the valuation of deferred tax assets represented a critical
accounting policy at September 30, 2009. Deferred tax assets and liabilities
represent differences between when a tax benefit or expense is recognized for
financial reporting purposes and on our tax return. Deferred tax assets are
periodically assessed for recoverability. The Company records a valuation
allowance if it believes, based on available evidence, that it is “more likely
than not” that the future tax assets recognized will not be realized before
their expiration. The amount of the deferred tax asset recognized and considered
realizable could be reduced if projected taxable income is not achieved due to
various factors such as unfavorable business conditions. If projected taxable
income is not expected to be achieved, the Company records a valuation allowance
to reduce its deferred tax assets to the amount that it believes can be realized
in its future tax returns. At September 30, 2009 the Company recorded a
valuation allowance of $2.0 million related to its deferred tax
assets.
COMPARISON
OF FINANCIAL CONDITION AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
ASSETS: Total
assets decreased $8.3 million, or 3.4%, to $239.4 million at September 30, 2009
from $247.7 million at December 31, 2008. During that nine-month time
period the following changes occurred: investment securities available for sale
increased $7.2 million, or 28.1%, to $32.9 million; other real estate owned
increased $1.9 million, or 115.9%, to $3.5 million; and net loans receivable
decreased $13.5 million, or 7.0%, to $178.7 million. Total mortgage loans
decreased by $9.2 million, consumer loans decreased by $3.3 million and total
commercial loans decreased by $2.4 million as loan originations declined due to
weaker economic conditions in our primary lending markets.
LIABILITIES: Deposits
decreased $9.4 million, or 5.7%, to $156.4 million at September 30, 2009 from
$165.8 million at December 31, 2008, a time period during which we were not a
market-leader in deposit rates except in some longer-term maturities. Most of
the decrease was in our certificates of deposit, as some of which were set to
renew at lower rates and left the Bank. During this same time period,
Repo sweep accounts decreased $2.6 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. FHLB advances increased
$6.6 million, or 16.3%, to $46.8 million at September 30, 2009 from $40.2
million at December 31, 2008 as we replaced lost deposits with
borrowings.
EQUITY: Stockholders’
equity decreased to $26.0 million at September 30, 2009 from $29.4 million at
December 31, 2008, a decline of $3.5 million. The decrease in stockholders’
equity was mainly attributable to our net loss for the nine-month period of $3.7
million primarily as a result of a $3.0 million Provision for Loan Losses
and a $2.0 million valuation allowance on our deferred tax assets for the
nine-month period The unrealized gain on available for sale
securities, net of tax, was $382,000 at September 30, 2009 as compared to
$337,000 at December 31, 2008, an increase of $44,000.
RESULTS
OF OPERATIONS
Three
Months Ended September 30, 2009 Compared to Three Months Ended September 30,
2008
General: Net income from continuing
operations decreased by $3.2 million to a net loss of $3.8 million for the three
months ended September 30, 2009 from a net loss of $610,000 for the same period
ended September 30, 2008. This decrease was attributable to two main
factors: an increase in provision for loan losses of $2.1 million to $3.0
million for the three months ended September 30, 2009 as compared to $875,000
for the same period in 2008 and a valuation allowance of $2.0 million on our
deferred tax assets. Partially offsetting these negative factors period over
period were an increase in net interest income of $176,000, an increase in
non-interest income of $92,000 and a reduction in our non-interest expense of
$81,000 period over period. These factors are all discussed in
greater detail below.
Interest
Income: Interest income was $3.1
million for the three months ended September 30, 2009, compared to $3.5 million
for the comparable period in 2008. The decrease in interest income was due
primarily to two factors: a decrease in the average balance of our
interest-earning assets due to a reduction in the size of our loan portfolio and
a decrease in the yield on interest-earning assets due in part to lower market
interest rates. The average balances of AFS investment
securities increased $3.9 million. The average balance of mortgage loans
decreased $9.9 million period over period and the average balance of
non-mortgage loans decreased $4.0 million quarter over quarter, as we continued
to experience a decline in loan originations due to economic conditions in our
market areas.
Interest
Expense: Interest expense was $1.2
million for the three month period ended September 30, 2009, compared to $1.8
million for the same period in 2008. The decrease in interest expense
for the three-month period was due primarily to a $12.1 million decrease in the
average balances of certificates of deposits period over period and a 121 basis
point decline in average rate on those deposit due mainly to higher-costing
certificates which matured and re-priced lower in the lower market interest rate
environment. We experienced a $6.2 million decrease in the average balance of
FHLB advances for the three months ended September 30, 2009 when compared to the
same period in 2008 and the average rate on those advances decreased 45 basis
point to 3.95% for the three-month period ended September 30, 2009 as compared
to the year-earlier period.
The
following table sets forth information regarding the changes in interest income
and interest expense of the Bank during the periods indicated.
|
|
Quarter ended September 30, 2009
|
|
|
|
Compared to
|
|
|
|
Quarter ended September 30, 2008
|
|
|
|
Increase (Decrease) Due to:
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
Loans
receivable
|
|
$ |
(211 |
) |
|
$ |
(183 |
) |
|
$ |
(394 |
) |
Mortgage-backed
securities
|
|
|
1 |
|
|
|
15 |
|
|
|
17 |
|
Investment
securities
|
|
|
(15 |
) |
|
|
13 |
|
|
$ |
(2 |
) |
Other
investments
|
|
|
(50 |
) |
|
|
16 |
|
|
$ |
(34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-earning assets
|
|
|
(275 |
) |
|
|
(139 |
) |
|
|
(414 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
- |
|
Savings
Deposits
|
|
|
- |
|
|
|
(2 |
) |
|
|
(2 |
) |
Money
Market/NOW accounts
|
|
|
73 |
|
|
|
(93 |
) |
|
|
(21 |
) |
Certificates
of Deposit
|
|
|
(154 |
) |
|
|
(269 |
) |
|
|
(423 |
) |
Deposits
|
|
|
(81 |
) |
|
|
(364 |
) |
|
|
(446 |
) |
Borrowed
funds
|
|
|
(43 |
) |
|
|
(101 |
) |
|
|
(144 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-bearing liabilities
|
|
|
(124 |
) |
|
|
(465 |
) |
|
|
(590 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in net interest income
|
|
$ |
(151 |
) |
|
$ |
326 |
|
|
$ |
176 |
|
Net Interest
Income: Net
interest income increased to $1.9 million for the three month period ended
September 30, 2009 compared to $1.7 million for the same period in
2008. For the three months ended September 30, 2009, average
interest-earning assets decreased $15.1 million, or 6.4%, to $222.3 million when
compared to the same period in 2008. Average interest-bearing liabilities
decreased $11.1 million, or 5.3%, to $197.9 million for the quarter ended
September 30, 2009 from $209.0 million for the quarter ended September 30,
2008. The yield on average interest-earning assets decreased to 5.58%
for the three month period ended September 30, 2009 from 5.92% for the same
period ended in 2008 due mainly to decreases in the yields on our non-mortgage
loans, partially as a result of loans placed on non-accrual status, and due to
lower yields on the securities in our investment portfolio due to lower market
interest rates. The cost of average interest-bearing liabilities decreased to
2.43% from 3.42% for the three month periods ended September 30, 2009 and
September 30, 2008, respectively. The decrease in asset yields on
interest earning assets, offset by a greater decrease in our cost of funds
resulted in a increase in our net interest margin of 50 basis points to 3.41%
for the three month period ended September 30, 2009 from 2.91% for same period
in 2008.
Provision for Loan
Losses: The
allowance for loan losses is established through a provision for loan losses
charged to earnings. Loan losses are charged against the allowance
when management believes the uncollectibility of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the
allowance.
The
allowance for loan losses is evaluated on a regular basis by management and is
based upon management’s periodic review of the collectability of the loans in
light of historical experience, the nature and volume of the loan portfolio,
adverse situations that may affect the borrower’s ability to repay, estimated
value of any underlying collateral and prevailing economic
conditions. This evaluation is inherently subjective, as it requires
estimates that are susceptible to significant revision as more information
becomes available. The provision for loan losses amounted to
$3.0 million for the three month period ended September 30, 2009 and $875,000
for the comparable period in 2008. During the quarter ended September
30, 2009, the Company increased its reserves on certain commercial and mortgage
loans based on deterioration of those credits during the quarter. In particular,
reserves on two large commercial real-estate relationships accounted in large
part for the higher provision in the quarter ended September 30, 2009 as
compared to the quarter ended September 30, 2008. In addition, due to our recent
charge-off history, the loss factor applied to our portfolio of performing loans
has increased causing an increase in the overall loan loss reserve.
The
following table sets forth the details of our loan portfolio at the dates
indicated:
|
|
|
|
|
Delinquent
|
|
|
|
|
|
|
Portfolio
|
|
|
Loans
|
|
|
Non-Accrual
|
|
|
|
Balance
|
|
|
Over 90 Days
|
|
|
Loans
|
|
|
|
(Dollars in thousands)
|
|
At September 30, 2009
|
|
|
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
Construction
|
|
$ |
14,327 |
|
|
$ |
- |
|
|
$ |
4,818 |
|
One
- to four – family
|
|
|
82,990 |
|
|
|
782 |
|
|
|
2,642 |
|
Commercial
Mortgages
|
|
|
46,024 |
|
|
|
- |
|
|
|
2,131 |
|
Home
equity lines of credit/ Junior liens
|
|
|
19,778 |
|
|
|
17 |
|
|
|
145 |
|
Commercial
loans
|
|
|
17,391 |
|
|
|
12 |
|
|
|
206 |
|
Consumer
loans
|
|
|
2,833 |
|
|
|
29 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
gross loans
|
|
$ |
183,343 |
|
|
$ |
840 |
|
|
$ |
9,942 |
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred loan fees
|
|
|
(296 |
) |
|
|
(33 |
) |
|
|
(1 |
) |
Allowance
for loan losses
|
|
|
(4,309 |
) |
|
|
(5 |
) |
|
|
(1,751 |
) |
Total
loans, net
|
|
$ |
178,738 |
|
|
$ |
802 |
|
|
$ |
8,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
$ |
19,128 |
|
|
$ |
- |
|
|
$ |
5,449 |
|
One
- to four - family
|
|
|
91,339 |
|
|
|
128 |
|
|
|
1,877 |
|
Commercial
Mortgages
|
|
|
47,541 |
|
|
|
72 |
|
|
|
4,442 |
|
Home
equity lines of credit/Junior liens
|
|
|
22,303 |
|
|
|
- |
|
|
|
86 |
|
Commercial
loans
|
|
|
14,316 |
|
|
|
- |
|
|
|
95 |
|
Consumer
loans
|
|
|
3,564 |
|
|
|
17 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
gross loans
|
|
$ |
198,191 |
|
|
$ |
217 |
|
|
$ |
11,952 |
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred loan fees
|
|
|
(274 |
) |
|
|
(29 |
) |
|
|
(1 |
) |
Allowance
for loan losses
|
|
|
(5,647 |
) |
|
|
(1 |
) |
|
|
(3,565 |
) |
Total
loans, net
|
|
$ |
192,270 |
|
|
$ |
187 |
|
|
$ |
8,386 |
|
Non Interest
Income: Non interest income was $491,000 for the three
month period ended September 30, 2009, an increase of $92,000 or 23.1% from the
same period in 2008. This was primarily attributable to an increase in mortgage
banking activities income of $159,000 period over period. Although mortgage
refinances slowed steadily throughout the third quarter of 2009, the levels of
activity were still significantly higher than during the third quarter of 2008.
We sold the majority of those refinanced mortgage loans into the secondary
market. The increase in mortgage banking activities income was partially offset
by a decrease of $28,000 in service charges and other fees. Insurance and
brokerage commission income decreased period over period as a result of the
timing of receipt of the commissions.
Non Interest
Expense: Non
interest expense was $2.1 million for the three month period ended September 30,
2009, an $81,000 or 3.8%, decrease from the same period in 2008. The decrease
was due mainly to a decrease of $108,000 in compensation and employee benefits
as we actively sought to contain costs in this area and a decrease of $18,000 in
professional services fees. These decreases were partially offset by an increase
of $73,000 in our FDIC premiums period over period due to an increase in our
general FDIC assessment rate.
Income
Taxes: The Company
had a federal income tax expense of $1.1 million for the three-month period
ended September 30, 2009 compared to a benefit of $307,000 for the same period
in 2008. Federal income tax expense for the three-month period ended September
30, 2009 was impacted by the valuation allowance on our deferred tax assets of
$2.0 million. The Company recorded this valuation allowance because it
concluded, based on currently available evidence, that it is “more likely than
not” that the future tax assets recognized will be not be realized before their
expiration.
Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30,
2008
General: Net income from continuing
operations decreased $2.8 million to a net loss of $3.6 million for the nine
months ended September 30, 2009 from net loss of $860,000 for the same period
ended September 30, 2008. The decrease in earnings period over period
was primarily attributable to the same two main factors as were discussed for
the three-month period comparison: an increase in provision for loan losses of
$2.3 million to $3.5 million for the nine months ended September 30, 2009 as
compared to $1.2 million for the same period in 2008 and a valuation allowance
of $2.0 million on our deferred tax assets. In addition, non-interest
expenses increased $99,000 period over period. Partially offsetting these
negative factors were an increase in net interest income of $430,000 and an
increase in our non-interest income of $783,000 nine-month period over
nine-month period.
Interest
Income: Interest
income was $9.6 million for the nine months ended September 30, 2009, compared
to $10.6 million for the comparable period in 2008. This decrease of $1.0
million, or 9.6%, in interest income was due in large part to a decrease of $8.0
million in average balances of mortgage loans and a 73 basis point decrease to
5.69% period over period in the yield on our non-mortgage loan portfolio, which
carried an average balance of $105.0 million for the nine month period ended
September 30, 2008. The yield decrease on non-mortgage loans was in large part
due to loans placed on non-accrual status during the nine-month
period.
Interest
Expense: Interest expense was $4.0 million for
the nine month period ended September 30, 2009 compared to $5.5 million for the
same period in 2008. The decrease in interest expense was due primarily to
decreases in the average balance of and interest rates on our Federal Home Loan
Bank (“FHLB”) advances period over period. We experienced a $7.1 million
decrease in the average balance of FHLB advances for the nine months ended
September 30, 2009 when compared to the same period in 2008 and the average rate
on those advances decreased 47 basis points to 4.03% for the nine-month period
ended September 30, 2009 as compared to the year-earlier period. In addition,
our cost of funds relating to our certificates of deposit decreased 101 basis
points to 3.22% nine-month period over nine-month period, due mainly to
higher-costing certificates which matured and re-priced
lower.
The
following table sets forth information regarding the changes in interest income
and interest expense of the Bank during the periods indicated.
|
|
Year to Date September 30, 2009
|
|
|
|
Compared to
|
|
|
|
Year to Date September 30, 2008
|
|
|
|
Increase (Decrease) Due to:
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
Loans
receivable
|
|
$ |
(363 |
) |
|
$ |
(642 |
) |
|
$ |
(1,005 |
) |
Mortgage-backed
securities
|
|
|
147 |
|
|
|
18 |
|
|
|
165 |
|
Investment
securities
|
|
|
17 |
|
|
|
(61 |
) |
|
$ |
(44 |
) |
Other
investments
|
|
|
(65 |
) |
|
|
(72 |
) |
|
$ |
(137 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-earning assets
|
|
|
(264 |
) |
|
|
(757 |
) |
|
|
(1,020 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
- |
|
Savings
Deposits
|
|
|
- |
|
|
|
(4 |
) |
|
|
(4 |
) |
Money
Market/NOW accounts
|
|
|
45 |
|
|
|
(27 |
) |
|
|
18 |
|
Certificates
of Deposit
|
|
|
(237 |
) |
|
|
(748 |
) |
|
|
(985 |
) |
Deposits
|
|
|
(192 |
) |
|
|
(779 |
) |
|
|
(971 |
) |
Borrowed
funds
|
|
|
(175 |
) |
|
|
(304 |
) |
|
|
(479 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-bearing liabilities
|
|
|
(368 |
) |
|
|
(1,082 |
) |
|
|
(1,450 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in net interest income
|
|
$ |
104 |
|
|
$ |
326 |
|
|
$ |
430 |
|
Net Interest
Income: Net
interest income increased by $430,000 for the nine month period ended September
30, 2009 compared to the same period in 2008. For the nine months
ended September 30, 2009, average interest-earning assets decreased $6.5
million, or 2.8%, when compared to the same period in 2008. Average
interest-bearing liabilities decreased $4.9 million, or 2.4% for the same
period. The yield on average interest-earning assets decreased to
5.63% for the nine month period ended September 30, 2009 from 6.03% for the same
period ended in 2008. The cost of average interest-bearing liabilities decreased
to 2.70% from 3.53% for the nine month periods ended September 30, 2009 and
September 30, 2008, respectively. The net result of the 41
basis point decrease in asset yields and 87 basis point decrease in the cost of
funds was a net interest rate margin increase of 34 basis points to 3.28% for
the nine month period ended September 30, 2009, from 2.94% for the same period
in 2008.
Delinquent Loans and
Nonperforming Assets: The following table sets
forth information regarding loans delinquent 90 days or more and real estate
owned/other repossessed assets of the Bank at the dates indicated. As
of the dates indicated, the Bank did not have any material restructured loans
within the context of SFAS 15.
Non-accrual
loans decreased by $2.0 million from December 31, 2008 to September 30, 2009.
The majority of this decrease was one large commercial loan relationship
totaling approximately $4.3 million which was repossessed, charged-off and
recorded as commercial real estate owned at net realizable value during the nine
months ended September 30, 2009. That same commercial relationship accounts for
the majority of the $2.1 million increase from December 31, 2008 to September
30, 2009 in commercial real-estate owned. In addition, we also recorded partial
charge-offs totaling $4.5 million on several commercial relationships and placed
three large commercial relationships in non-accrual status during the nine
months ended September 30, 2009.
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
Total
non-accrual loans
|
|
$ |
9,942 |
|
|
$ |
11,952 |
|
|
|
|
|
|
|
|
|
|
Accrual
loans delinquent 90 days or more:
|
|
|
|
|
|
|
|
|
One-
to four-family residential
|
|
|
782 |
|
|
|
128 |
|
Other
real estate loans
|
|
|
- |
|
|
|
72 |
|
Consumer/Commercial
|
|
|
58 |
|
|
|
17 |
|
Total
accrual loans delinquent 90 days or more
|
|
$ |
840 |
|
|
$ |
217 |
|
|
|
|
|
|
|
|
|
|
Total
nonperforming loans (1)
|
|
|
10,782 |
|
|
|
12,169 |
|
Total
real estate owned-residential mortgages (2)
|
|
|
512 |
|
|
|
686 |
|
Total
real estate owned-Commercial (2)
|
|
|
3,022 |
|
|
|
882 |
|
Total
real estate owned-Consumer & other repossessed assets
(2)
|
|
|
2 |
|
|
|
70 |
|
Total
nonperforming assets
|
|
$ |
14,317 |
|
|
$ |
13,807 |
|
|
|
|
|
|
|
|
|
|
Total
nonperforming loans to loans receivable
|
|
|
5.88 |
% |
|
|
6.14 |
% |
Total
nonperforming assets to total assets
|
|
|
5.98 |
% |
|
|
5.57 |
% |
|
(1)
|
All
of the Bank's loans delinquent more than 90 days are classified as
nonperforming.
|
|
(2)
|
Represents
the net book value of property acquired by the Bank through foreclosure or
deed in lieu of foreclosure. Upon acquisition, this property is recorded
at the lower of its fair market value or the principal balance of the
related loan.
|
We have
taken a variety of steps over the past two years to address the credit issues
identified above (elevated levels of non-performing loans and other real estate
and repossessed assets), including the following:
|
·
|
An
enhanced quarterly watch credit review process to proactively manage
higher risk loans;
|
|
·
|
The
addition of a Chief Credit Officer to oversee loan underwriting and
collection processes;
|
|
·
|
The
creation of a Senior Loan Committee to review all commercial loans above
individual lender authority;
|
|
·
|
Annual
third-party commercial loan review function which provides overall
portfolio and individual loan
feedback;
|
|
·
|
Quarterly
review of Criticized Asset Reports for each credit over
$50,000;
|
|
·
|
Developed
quarterly targets for reducing levels of non-performing assets including
an action plan for each non-performing asset;
and
|
|
·
|
Expanded
our Collection Department to enhance our call program for delinquent
loans.
|
Provision for Loan
Losses: The provision for loan losses amounted
to $3.5 million for the nine-month period ended September 30, 2009 and $1.2
million for the comparable period in 2008. The ratio of nonperforming
loans to total loans was 5.88% at September 30, 2009 and 6.14% at December 31,
2008. As a percent of total assets, nonperforming loans increased to
5.98% at September 30, 2009 from 5.57% at December 31, 2008. Total
nonperforming assets increased by $510,000 from December 31, 2008 to September
30, 2009.
Non-Interest
Income: Non-interest income was
$2.1 million for the nine month period ended September 30, 2009, an increase of
$783,000 or 61.6%, from the same period in 2008. The primary reason for the
increase was an increase of $851,000 in mortgage banking activities for the 2009
period. As a result of lower mortgage interest rates in 2009 as compared to
2008, the levels of activity for mortgage loan refinances was significantly
higher in 2009. We sold the majority of those refinanced mortgage loans into the
secondary market.
Non-Interest
Expense: Non-interest expense was
$6.6 million for the nine-month period ended September 30, 2009 as compared to
$6.5 million for the nine month period ended September 30, 2008. The
main reason for the increase period over period was an increase of $292,000 in
Federal Deposit Insurance Corporation (FDIC) premiums. The FDIC premium increase
was due to a one time special assessment paid to the fund in 2009 and also to an
increase in our general assessment rate in 2009 as compared to 2008. Offsetting
the FDIC premium increases were reductions of $240,000 in compensation and
employee benefits expenses as made pro-active moves to reduce costs in this
area, $54,000 in our occupancy expenses, and $31,000 in our amortization of
intangible assets expense.
Income
Taxes: The Company had a federal income tax expense
related to continuing operations of $1.2 million for the nine-month period ended
September 30, 2009 compared to a tax benefit of $433,000 for the same period in
2008. Federal income tax expense for the nine-month period ended September 30,
2009 was impacted by the valuation allowance on our deferred tax assets of $2.0
million. The Company recorded this valuation allowance because it concluded,
based on currently available evidence, that it is “more likely than not” that
the future tax assets recognized will be not be realized before their
expiration.
LIQUIDITY
The
Company’s current liquidity position is more than adequate to fund expected
asset growth. The Company’s primary sources of funds are deposits, FHLB
advances, proceeds from principal and interest payments, prepayments on loans
and mortgage-backed and investment securities and sale of long-term fixed-rate
mortgages into the secondary market. While maturities and scheduled
amortization of loans and mortgage-backed securities are a predictable source of
funds, deposit flows, mortgage prepayments and sale of mortgage loans into the
secondary market are greatly influenced by general interest rates, economic
conditions and competition.
Liquidity
represents the amount of an institution’s assets that can be quickly and easily
converted into cash without significant loss. The most liquid assets
are cash, short-term U.S. Government securities, U.S. Government agency
securities and certificates of deposit. The Company is required to
maintain sufficient levels of liquidity as defined by OTS
regulations. This requirement may be varied at the direction of the
OTS. Regulations currently in effect require that the Bank must maintain
sufficient liquidity to ensure its safe and sound operation. The
Company’s objective for liquidity is to be above 20%. Liquidity as of
September 30, 2009 was $28.8 million, or 21.0%, compared to $32.1 million, or
26.8%, at December 31, 2008. The levels of these assets are dependent
on the Company’s operating, financing, lending and investing activities during
any given period. The liquidity calculated by the Company includes additional
borrowing capacity available with the FHLB. This borrowing capacity is based on
pledged collateral. As of September 30, 2009, the Bank had unused
borrowing capacity totaling $12.8 million at the FHLB based on the pledged
collateral.
The
Company intends to retain for its portfolio certain originated residential
mortgage loans (primarily adjustable rate, balloon 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 nine month period ended September 30, 2009 the
Company originated $50.2 million in residential mortgage loans, of which $7.7
million were retained in portfolio while the remainder were sold in the
secondary market or are being held for sale. This compares to $24.3
million in originations during the first nine months of 2008 of which $15.4
million were retained in portfolio. The Company also originated $14.8
million of commercial loans and $3.2 million of consumer loans in the first nine
months of 2009 compared to $22.6 million of commercial loans and $4.7 million of
consumer loans for the same period in 2008. Of total loans
receivable, excluding loans held for sale, mortgage loans comprised 45.3% and
47.7%, commercial loans 42.3% and 39.1% and consumer loans 12.3% and 13.2% at
September 30, 2009 and December 31, 2008, respectively.
Deposits
are a primary source of funds for use in lending and for other general business
purposes. At September 30, 2009 deposits funded 64.9% of the
Company’s total assets compared to 66.9% at December 31,
2008. Certificates of deposit scheduled to mature in less than one
year at September 30, 2009 totaled $66.6 million. Management believes
that a significant portion of such deposits will remain with the
Bank. The Bank monitors the deposit rates offered by competition in
the area and sets rates that take into account the prevailing market conditions
along with the Bank’s liquidity position. Moreover, management
believes that the growth in assets is not expected to require significant
in-flows of liquidity. As such, the Bank does not expect to be a
significant market leader in rates paid for liabilities.
Borrowings
may be used to compensate for seasonal or other reductions in normal sources of
funds or for deposit outflows at more than projected
levels. Borrowings may also be used on a longer-term basis to support
increased lending or investment activities. At September 30, 2009 the
Company had $46.8 million in FHLB advances. FHLB borrowings as a percentage of
total assets were 19.4% at September 30, 2009 as compared to 16.2% at December
31, 2008. The Company has sufficient available collateral to obtain
additional advances of $12.8 million as of September 30, 2009.
CAPITAL
RESOURCES
Stockholders’
equity at September 30, 2009 was $26.0 million, or 10.8% of total assets,
compared to $29.4 million, or 11.9% of total assets, at December 31, 2008 (See
“Consolidated Statement of Changes in Stockholders’ Equity”). The
Bank is subject to certain capital-to-assets requirements in accordance with OTS
regulations. The Bank exceeded all regulatory capital requirements at
September 30, 2009. The following table summarizes the Bank’s actual
capital with the regulatory capital requirements and with requirements to be
“Well Capitalized” under prompt corrective action provisions, as of September
30, 2009:
|
|
|
|
|
|
|
|
Regulatory
|
|
Minimum to be
|
|
|
|
Actual
|
|
|
Minimum
|
|
Well Capitalized
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
Dollars in Thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
1 (Core) capital ( to adjusted assets)
|
|
$ |
22,996 |
|
|
|
9.71 |
% |
|
$ |
9,472 |
|
|
|
4.00 |
% |
|
$ |
11,840 |
|
|
|
5.00 |
% |
Total
risk-based capital ( to risk-weighted assets)
|
|
$ |
25,142 |
|
|
|
14.69 |
% |
|
$ |
13,692 |
|
|
|
8.00 |
% |
|
$ |
17,115 |
|
|
|
10.00 |
% |
Tier
1 risk-based capital ( to risk weighted assets)
|
|
$ |
22,996 |
|
|
|
13.44 |
% |
|
$ |
6,846 |
|
|
|
4.00 |
% |
|
$ |
10,269 |
|
|
|
6.00 |
% |
Tangible
Capital ( to tangible assets)
|
|
$ |
22,996 |
|
|
|
9.71 |
% |
|
$ |
3,552 |
|
|
|
1.50 |
% |
|
$ |
4,736 |
|
|
|
2.00 |
% |
ITEM
3. QUANTITATIVE AND QUALITITIVE DISCLOSURES ABOUT MARKET
RISK
Not
applicable to smaller reporting companies.
ITEM
4T - CONTROLS AND PROCEDURES
Under the
supervision and with the participation of our management, including the
Company’s Chief Executive Officer and Chief Financial Officer, the Company
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d–15(e) under the
Securities Exchange Act of 1934) as of the end of the period covered by this
report. Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that, as of the end of the period covered by
this report, the Company’s disclosure controls and procedures were effective to
ensure that information required to be disclosed in the reports the Company
files or submits under the Securities Exchange Act of 1934, is recorded,
processed, summarized and reported, within the time periods specified by the
SEC’s rules and forms and in timely alerting them to material information
relating to the Company (or its consolidated subsidiaries) required to be
included in its periodic SEC filings.
There
were no significant changes made in the Company’s internal control over
financial reporting or in other factors that could significantly affect the
Company’s internal controls over financial reporting during the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
FIRST
FEDERAL OF NORTHERN MICHIGAN BANCORP, INC.
FORM
10-Q
Quarter
Ended September30, 2009
PART
II – OTHER INFORMATION
Item 1 -
|
Legal
Proceedings:
|
There are
no material legal proceedings to which the Company is a party or of which any of
its property is subject. From time to time the Company is a party to various
legal proceedings incident to its business.
Not
applicable to smaller reporting companies
Item 2 -
|
Unregistered
Sales of Equity Securities and Use of
Proceeds:
|
Item 3 -
|
Defaults
upon Senior Securities:
|
Item 4 -
|
Submission
of Matters to a Vote of Security
Holders: NONE
|
Item 5 -
|
Other
Information:
|
|
(b)
|
There
was no material change to the procedures by which security holders may
recommend nominees to the Company’s Board of Directors during the period
covered by the Form 10-Q.
|
Exhibit
31.1 Certification by Chief Executive Officer pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit
31.2 Certification by Chief Financial Officer pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit
32.1 Statement of Chief Executive Officer furnished pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
Exhibit
32.2 Statement of Chief Financial Officer furnished pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
FIRST
FEDERAL OF NORTHERN MICHIGAN BANCORP, INC.
FORM
10-Q
Quarter
Ended September 30, 2009
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
FIRST FEDERAL OF NORTHERN MICHIGAN BANCORP, INC. |
|
|
|
|
|
|
By:
|
/s/Michael W. Mahler
|
|
|
|
Michael
W. Mahler
|
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
Date: November
16, 2009
|
|
|
|
|
|
|
By:
|
/s/Amy E. Essex
|
|
|
|
Amy
E. Essex, Chief Financial Officer
|
|
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
Date: November
16,
2009
|