2012 was a solid year for First Shore Federal. The association achieved excellent growth in capital and good earnings while continuing to serve the financial needs of our members and our community. Despite a still-tepid local economic recovery, the association's credit quality remained good and in fact improved over the course of the year.
As displayed in the graph accompanying this report (click to view the graph), First Shore ended 2012 with total capital of more than $38 million and a net worth ratio of 12.1%. Both the capital and net worth ratio are at historically high levels for the association and are significant improvements for the year.
President, Martin T. Neat
Unfortunately, the extremely low interest rates that have dominated our economic climate for more than four years are not conducive to growth for an institution such as First Shore that makes loans and holds them in its portfolio rather than selling them into the secondary market. We recognize that challenge, have planned for it, and, as a result, our total assets declined modestly by 1.9% in 2012 with total loans down by 4.1%. Deposits also declined by 2.8%
All of these factors have, however, made First Shore more profitable while protecting the association to some degree from interest rate risk. This no-growth strategy is one, however, that we neither enjoy nor desire for an extended period. Quite frankly, growth is good. It funds new products and services to our customers, enables us to continue to pay attractive interest rates and to afford other operating expenses to fulfill our mission, and it allows us to support the communities that are so good to First Shore Federal in return.
But we can only grow if we make good, high quality loans that do not also disproportionately carry a long term fixed rate at the ultra low rate category that we’re seeing today. We can’t afford to have a loan portfolio that is filled with those ultra-low rate loans. In the long term, the interest rate risk inherent with such a scenario would be very bad for the association.
The association also saw progress during 2012 in its traditionally strong reputation with the communities we serve. First Shore Federal has been recognized as a responsible community citizen for many years and again received a rating of “outstanding” for community reinvestment from our federal regulator during 2012. The association has now held that rating for more than 15 years.
The association also completed its first full year under a new federal regulator, the Office of the Comptroller of the Currency (the OCC). We are hopeful that the relationship between the association and the OCC will continue to progress in the year (and years) ahead and we will work diligently to make that happen. Regulation and the burden associated with the vast number of changes in the industry will undoubtedly continue to be a significant challenge.
As we go forward in 2013, we’re going to be working hard and thinking harder about how we can grow – and do so prudently. We will continue to search for niches and lending strategies and to invest in technology and services that will meet our customers’ needs while being safe and profitable for the association.
We enter 2013 with very good operating margins, the strongest capital position in our history, a strong reserve for any loan problems that we experience, an excellent reputation in the communities we serve, a dedicated and experienced staff, and a continued commitment to customer service and making First Shore Federal the best it can be.
We thank our employees for their dedication and commitment, our outstanding board of directors for its wisdom, oversight and direction, and our valued customers for their confidence and support in First Shore Federal.