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California First National Bancorp (NASDAQ: CFNB)(“CalFirst Bancorp”) today announced net earnings of $3.1 million for the second quarter ended December 31, 2010, unchanged from net earnings of $3.1 million for the second quarter of fiscal 2010. For the six months ended December 31, 2010, net earnings decreased 27% to $4.8 million from $6.5 million for the first six months of fiscal 2010. Diluted earnings per share were $0.30 for both the second quarter of fiscal 2010 and fiscal 2011 while diluted earnings per share of $0.46 for the first six months of fiscal 2011 were down 28% from $0.64 per share for the same period of fiscal 2010.
Lower investment gains contributed to the decline in earnings for the first six months of fiscal 2011 and minimized the improvement in other areas during the second quarter. Excluding investment gains from both periods, gross profit during the second quarter was up 9% from the prior year, while the decline in gross profit for the first six months was 5%.
Gross profit of $8.0 million for the second quarter ended December 31, 2010 was unchanged from the second quarter of the prior year. Total direct finance, loan and interest income for the second quarter ended December 31, 2010 decreased 1% to $6.5 million from $6.6 million during the second quarter of the prior year. The decrease included a 10% decrease in direct finance income due to lower yields and a 31% decline in investment income largely due to lower investment balances. These declines offset a 75% increase in commercial loan income that reflected a 41% growth in average loan balances and 128 basis point improvement in average yield. Combined, the average yield on leases and loans held in the Company’s own portfolio decreased 63 basis points to 7.52% on an average investment that increased 13% to $307.7 million. The decline in average cash and investment balances to $118.5 million from $160.7 million, along with a 17 basis point drop in the average yield to 2.56%, produced the lower investment income during the second quarter of fiscal 2011. Interest expense paid on deposits and borrowings during the second quarter of fiscal 2011 decreased by $419,000, or 33%, reflecting a 4% decrease in average balances and a 64 basis point drop in average interest rates paid. For the second quarter of fiscal 2011, the Company recorded an allowance for credit losses of $500,000, compared to a $100,000 addition to the allowance during the second quarter of fiscal 2010. The higher provision in 2011 is consistent with the 11% growth in total risk assets during the quarter. All of these factors led to a $75,000, or 1%, decrease in net direct finance and interest income after provision for credit losses to $5.2 million.