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D&N ANNOUNCES PROFITABLE 1992 SECOND QUARTER, REPORTS POSITIVE CORE INCOME FOR THE QUARTER

 D&N ANNOUNCES PROFITABLE 1992 SECOND QUARTER,
 REPORTS POSITIVE CORE INCOME FOR THE QUARTER
 HANCOCK, Mich., July 28 /PRNewswire/ -- D&N Financial Corporation (NASDAQ-NMS: DNFC) today announced a profit for the 1992 second quarter of $1.1 million, or $0.30 per share, compared to $0.6 million, or $0.15 per share for the same period in 1991.
 Core income was $590,000 for the quarter, compared to a loss of $518,000 for the 1992 first quarter and breakeven for the 1991 second quarter. The improvement over the first quarter was primarily the result of improved net interest income as funding costs declined significantly.
 According to George Butvilas, president and CEO of the corporation, "Core earnings will play an increasingly important role in the company's profit profile. While earnings for the past several quarters have been strengthened by sales of mortgage loan servicing rights, operating income has been depressed by the impact of the banking subsidiary's interest rate exchange agreements. Because of the effect of these agreements, we expect core earnings and net income for the third and fourth quarters of 1992 to be relatively modest. As these interest rate exchange agreements begin to expire in early 1993, we expect to see improvements in core earnings."
 D&N's net interest income was $8.2 million for the second quarter of 1992, compared with $6.1 million for the first quarter of 1992 and $8.8 million for the 1991 second quarter. According to Butvilas, improved interest income on principal-only collateralized mortgage obligations and a lesser reliance on borrowed funds contributed to the improvement. Interest income from loans and interest expense on deposits each declined by approximately equivalent amounts as lower market interest rates affected each category.
 Noninterest income for the quarter included gains of $1.0 million on the sale of real estate owned and $2.4 million on the sale of mortgage loan servicing rights, offset partially by the addition of approximately $1.5 million to valuation allowances for certain mortgage derivative products. Declines in the general level of interest rates in 1992 have led to the establishment of allowances for a number of the bank's investments in interest-only collateralized mortgage obligations. These bonds were purchased between 1986 and 1989 and are held as hedges against rising interest rates. While the established valuation allowances reflect expected future cash flows from these investments, further declines in the level of interest rates may require that significant additional allowances be recognized in the future.
 Total noninterest expense (excluding losses on other real estate owned) was $8.5 million in the second quarter of 1992, compared to $7.7 million in the first quarter of 1992 and $8.9 million in the second quarter of 1991.
 In the second quarter of 1992, the bank added $1.5 million to its general valuation allowance for real estate owned. The bank's total reserves for loan and real estate losses were $20.5 million at June 30, 1992. Nonperforming assets at quarter-end were $65.2 million, compared to $75.4 million at the end of the first quarter and $67.0 million at year-end 1991. The reduction in nonperforming assets results from a reduction in other real estate owned, which declined to $37.3 million at quarter-end, compared to $40.4 million at March 31, 1992, and $42.8 million at year-end 1991, and from notable improvements in the performance of several of the bank's commercial real estate loans. "We are pleased with the progress we have made in reducing nonperforming assets," said Butvilas. "These efforts will continue to be a priority as we move forward."
 Mortgage loan production by D&N's community banking offices was $39.4 million during the 1992 second quarter, compared to $89.2 million generated by the bank and its since-closed mortgage banking subsidiary in the 1991 second quarter. Consumer loan volume was $21.7 million, up from $19.8 million for the year-ago period. For the first six months of 1992, the company had a profit of $2.0 million, or $0.53 per share, compared to $2.2 million, or $0.58 per share, for the first half of 1991. At June 30, 1992, D&N had total assets of $1.38 billion, net loans and mortgage-backed certificates of $999 million, and deposits of $939 million. Stockholders' equity was $95.0 million. The bank's current regulatory capital ratios at June 30, 1992, were: tangible, 3.87 percent; core, 4.87 percent; and risk-based, 9.63 percent, compared to ratios of 3.60 percent, 4.60 percent and 9.27 percent, respectively, at March 31, 1992.
 Butvilas also announced today that the company has concluded its agreement with the investment banking firm of Goldman, Sachs Company. Goldman, Sachs was retained by the company in early 1991 to assist with strategic planning, which included assessing the desirability of marketing D&N Financial Corp. According to Butvilas, the company's board of directors has determined that this assignment has been completed, and no further work by Goldman, Sachs is necessary at this time. He noted that these matters will continue to be addressed in the company's internal strategic planning process.
 In an unrelated matter, Butvilas also announced the resignation of Richard Nelson from the company's board of directors, with other business commitments cited as the reason for his departure.
 D&N Financial Corp., through its subsidiary, D&N Bank, fsb, has 39 financial services offices throughout Michigan's Upper Peninsula and mid-Michigan. D&N is the third largest savings bank in Michigan based on asset size. D&N Financial Corp. stock is traded over the counter and quoted on the NASDAQ National Market System under the symbol DNFC.
 D&N FINANCIAL CORPORATION
 FINANCIAL HIGHLIGHTS
 (Dollars in thousands, except per-share data)
 FOR THE QUARTER ENDED: 6/30/92 3/31/92 6/30/91(2)
 Net interest income $8,196 $6,103 $8,762
 Net noninterest expense 6,082 4,457 7,680
 Net income 1,124 869 570
 Net income per share 0.30 0.23 0.15
 Operations:
 New loans originated 61,080 39,258 108,973
 Increase (decrease) in
 deposits (20,756) (20,188) (52,237)
 Increase (decrease) in
 borrowings (36,187) (51,086) (46,767)
 Earning assets yield 9.30 pct 8.96 pct 9.80 pct
 Cost of funds 6.96 pct 7.38 pct 7.76 pct
 Net interest margin(1) 2.54 pct 1.77 pct 2.22 pct
 AT QUARTER END:
 Total assets 1,382,917 1,455,288 1,679,219
 Cash, interest-bearing
 deposits and investment
 securities 201,165 228,910 107,576
 Net loans receivable 750,003 761,686 990,671
 Mortgage-backed
 certificates 249,367 273,043 333,238
 Mortgage derivative products 51,212 64,050 113,169
 Deposits 938,639 959,395 1,014,430
 Borrowings 286,578 322,765 493,318
 Stockholders' equity(3) 94,990 93,866 91,587
 Stockholders' equity as a
 percent of total assets 6.87 pct 6.45 pct 5.45 pct
 Per-share data:
 Closing price 6 1/4 6 3/4 3 3/8
 Price range 5 3/4 - 7 1/4 4 3/4 - 7 3/4 3 3/8 - 5
 Stockholders'
 equity - GAAP 25.62 25.31 24.70
 Stockholders' equity -
 tangible 16.39 16.03 15.30
 Loans serviced for
 others 1,081,402 874,104 1,227,381
 Nonperforming assets 65,210 75,370 67,878
 Loan loss reserves:
 Amount 17,875 18,110 21,138
 As a percent of nonperforming
 loans 70.76 pct 54.65 pct 81.32 pct
 As a percent of total loans 2.33 pct 2.32 pct 2.09 pct
 Regulatory capital ratios:
 Tangible capital 3.87 pct 3.60 pct 2.97 pct
 Core capital 4.87 pct 4.60 pct 4.47 pct
 Risk-based capital 9.63 pct 9.27 pct 8.69 pct
 (1) -- Net interest income divided by average earning assets.
 (2) -- Certain amounts have been reclassified to conform with the current period presentation.
 (3) -- The number of common shares outstanding was 3,708,418 in all periods.
 D&N FINANCIAL CORPORATION
 CONSOLIDATED STATEMENTS OF INCOME
 Three Months Ended Six Months Ended
 June 30 June 30
 1992 1991(1) 1992 1991(1)
 (in thousands, except per share)
 Interest income:
 Loans $18,112 $26,149 $37,414 $54,025
 Mortgage-backed certificates 5,163 7,688 11,217 15,669
 Mortgage derivative products 3,338 2,890 5,382 6,840
 Investments and deposits 3,261 1,970 6,608 3,764
 Total interest income 29,874 38,697 60,621 80,298
 Interest expense:
 Deposits 11,724 16,818 24,754 35,128
 Securities sold under
 agreements to repurchase 76 1,729 113 5,006
 FHLB advances and other
 borrowed money 5,342 8,400 12,446 17,085
 Interest rate instruments 4,536 2,988 9,009 5,743
 Total interest expense 21,678 29,935 46,322 62,962
 Net interest income 8,196 8,762 14,299 17,336
 Provision for loan losses --- 1,400 --- 8,650
 Net interest income after
 provision for loan losses 8,196 7,362 14,299 8,686
 Noninterest income:
 Loan servicing and
 administrative fees 960 1,176 1,962 2,583
 Deposit related fees 845 802 1,653 1,570
 Gain (loss) on loan inventory --- 267 (49) 693
 Other income 169 76 291 181
 1,974 2,321 3,857 5,027
 Realized and unrealized
 gain (loss) on investment
 securities --- 191 --- 135
 Realized and unrealized gain
 (loss) on loans, mortgage-
 backed certificates and
 mortgage derivative
 products (1,466) 867 (1,884) 6,017
 Gain on sale of other real
 estate owned (OREO) 1,004 --- 1,014 39
 Gain on sale of loan
 servicing rights 2,420 --- 5,460 1,829
 Total noninterest income 3,932 3,379 8,447 13,047
 Noninterest expense:
 Compensation and benefits 3,716 4,579 7,092 8,900
 Occupancy 500 606 1,014 1,244
 Other expense 3,278 2,547 6,074 5,315
 General and administrative
 expense 7,494 7,732 14,180 15,459
 Provision and losses on OREO 1,473 808 2,705 2,208
 Amortization of intangibles 486 495 978 987
 Federal deposit insurance
 premiums 561 624 1,123 1,249
 Total noninterest expense 10,014 9,659 18,986 19,903
 Gain on termination of
 interest rate exchange
 agreements --- --- --- 1,722
 Income before income tax
 expense 2,114 1,082 3,760 3,552
 Federal income tax expense 990 512 1,767 1,389
 Net income $1,124 $570 $1,993 $2,163
 Net income per share $.30 $.15 $.53 $.58
 (1) -- Certain amounts have been reclassified to conform with the current period presentation.
 -0- 7/28/92
 /CONTACT: Joann Cadwell of D&N Financial Corp., 906-487-6225/
 (DNFC) CO: D&N Financial Corporation ST: Michigan IN: FIN SU: ERN


SB-SM -- DE007 -- 3959 07/28/92 10:14 EDT
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