Like much of the country, our markets have witnessed a steadily declining unemployment rate, improved residential home values, and a pickup in residential single-family and multi-family construction. On the flip side, seven years of record low interest rates continue to pose a challenge to the bank as we aggressively compete with the many new entrants into our region’s already competitive financial services landscape. Against this backdrop, we have worked diligently to position the bank for sustained profitability when the Federal Reserve inevitably begins raising interest rates.
The commercial loan portfolio decreased 1.9% to $148.0 million in fiscal 2015 as customers strengthened their balance sheets by paying down debt. We also had a couple of large payoffs attributed to the unexpected sales of businesses. At the same time we’ve fostered many new client relationships that will be mutually beneficial in the years ahead. In addition, we’ve expanded our product line, enhanced our hands-on customer service, and initiated a new calling program to attract even more quality commercial loan clients in the Evansville, Petersburg, and Washington regions.
Because the low rate environment has persisted for so many years, mortgage refinancing has tapered off considerably. This is reflected in the bank’s Easy Refi product whose volume in fiscal 2015 was less than half of the previous year’s total. Although traditionally-underwritten single-family mortgage originations decreased slightly in fiscal 2015 due, in part, to a harsh winter, the $7.9 million originated during the fourth fiscal quarter was more than twice the same quarter a year ago. Also, the portfolio of home equity loans and lines of credit grew from $16.8 million to $17.0 million as borrowers utilized the equity in their homes for property improvements and credit consolidation. The bank recently consolidated the Mortgage and Consumer lending departments into a single Retail Lending unit for cost efficiency and improved customer service while still providing the same broad array of consumer and mortgage products to attract our region’s diversified customer base.
To manage our risk to rising interest rates, the bank often sells 15- and 30-year mortgage loans into the secondary market to either the Federal National Mortgage Association (FNMA) or the Federal Home Loan Bank of Indianapolis (FHLBI) while retaining the servicing of these loans. FNMA and FHLBI loan sales decreased to $11.0 million from $16.6 million in fiscal 2014.
On the liability side of the balance sheet we offer a lineup of checking and savings products to appeal to any household or business. Checking and savings accounts, key components of the retail deposit base, grew $6.3 million in fiscal 2015 and comprised 75.8% of total deposits at June 30, 2015.
Overall, the credit quality of our loan portfolio has steadily improved since the dark days of the financial crisis. As of June 30, 2015, nonperforming loans and foreclosed real estate represented 1.0% of total assets compared to 1.5% a year earlier. Also, the Company is committed to maintaining prudent loan loss reserves in the event of unforeseen future loan portfolio problems. At $2.4 million, the allowance for loan and lease losses was only $255,000 less than the previous year despite the more favorable loan quality profile
We continue to face head-on the many economic uncertainties that have stayed the Federal Reserve from raising interest rates. Thanks to the efforts of our dedicated staff, the Company generated respectable earnings again in fiscal 2015. At $1,517,000 or $0.87 per share, earnings for fiscal 2015 were up from the prior year’s $1,419,000 or $0.81 per share. As it has each of the eight years since the beginning of the financial crisis, the Company paid very competitive quarterly dividends totaling 62 cents per share annually while maintaining a strong capital base.
At June 30, 2015, First Federal’s Tier 1 capital and total risk-based capital ratios were 8.56% and 13.11%, respectively, compared to 8.74% and 13.38% a year earlier. Asset growth was responsible for the modest dilution of these ratios. First Federal’s capital ratios continue to comfortably exceed the Tier 1 capital requirement of 5% and the total risk-based minimum of 10% to qualify as well-capitalized under current federal regulations.
Management and the board of directors continually evaluate operations in search of efficiencies to improve profitability and customer satisfaction. We are also determined to provide a safe, pleasant, and productive work environment for our employees. We welcome you to stop by any of our nine convenient banking locations and, as always, I thank you for your investment in First Bancorp of Indiana, Inc.