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Atlantic Coast Financial Corporation Reports First Quarter 2011 Results

As previously announced, the Company submitted an application to the Treasury Department and the Office of Thrift Supervision in February 2011 for funding from the Small Business Lending Fund, a federal program created under the Small Business Jobs Act of 2010 to encourage lending to America's small businesses by providing Tier 1 capital to community banks. If approved, this funding will further enhance the Company's ability to expand its small business lending program and could add up to an additional $15 million in capital.

The following tabular presentations highlight other key aspects of the Company's performance.

Asset Quality   At and for the Three Months Ended
March 31,

2011

 

Dec. 31,

2010

  March 31,

2010

($ in millions)
Non-performing loans

$

30.5

$ 28.1 $ 34.4
Non-performing loans to total loans 5.54 % 4.99 % 5.61 %
Non-performing assets $ 39.7 $ 38.1 $ 39.4
Non-performing assets to total assets 4.91 % 4.60 % 4.31 %
Net charge-offs $ 2.6 $ 4.5 $ 4.2
Net charge-offs to average outstanding loans 1.75 % 2.84 % 2.69 %
 

  • Non-performing loans and non-performing assets increased in the first quarter of 2011 on a linked-quarter basis primarily due to continued weakness in the Company's one-to-four family residential loan portfolio.
  • Non-performing loans declined in the first quarter of 2011 compared with the year-earlier quarter primarily due to the sale of $6.3 million in non-performing loans in June 2010.
  • Overall, the pace of loans migrating to non-performing status generally has begun to level out.
  • Net charge-offs declined in the first quarter of 2011 on a sequential and year-over-year basis primarily due to lower charge-offs on one-to-four family residential loans.
Provision / Allowance for Loan Losses   At and for the Three Months Ended

March 31,

2011

 

Dec. 31,

2010

 

March 31,

2010

($ in millions)
Provision for loan losses

$

2.8

  $ 6.9   $ 3.7  
Allowance for loan losses $ 13.6   $ 13.3   $ 13.3  
Allowance for loan losses to total loans   2.46 %   2.37 %   2.17 %
Allowance for loan losses to non-performing loans   44.43 %   47.44 %   38.70 %
 
  • The provision for loan losses declined in the first quarter of 2011 compared with the fourth quarter of 2010 due to a combination of lower charge-offs, a $2.1 million general reserve established in the fourth quarter for deterioration of collateral valuations in the Company's residential mortgage portfolio caused by a slowdown in the foreclosure process, and a $1.6 million specific reserve established on a $7.5 million commercial loan relationship.
  • The allowance for loan losses, both in total amount and relative to total loans, has increased over the past year and also has increased relative to non-performing loans compared with the year-earlier quarter.
  • The Company remains conservative in its methodology for identifying problem loans early in the cycle and aggressive in charging down residential and home equity loans on the date such loans become non-performing.
Net Interest Income   Three Months Ended

March 31,

2011

 

Dec. 31,

2010

 

March 31,

2010

($ in millions)
Net interest income

$

5.3

  $ 5.9   $ 5.6  
Net interest margin   2.77 %   2.84 %   2.64 %
 
  • Total net interest income declined in the first quarter of 2011 primarily due to a decrease in average interest-earning assets compared with both the linked and year-earlier quarters.
  • Net interest margin declined modestly in the first quarter of 2011 on a linked-quarter basis because of the write-off of unamortized debt issuance costs associated with a $5.0 million loan from another financial institution that was satisfied with the proceeds of the second-step conversion and offering.
  • The year-over-year increase in net interest margin primarily reflected a reduction in the Company's funding costs; total deposits declined $20.8 million pursuant to the capital preservation plan, led by a $27.3 million decrease in certificates of deposit, of which $17.4 million were brokered deposits. This decrease was partially offset by growth in core deposits of $6.5 million primarily due to the continued success of the Bank's Kasasa™ deposit program.
Non-Interest Income / Non-Interest Expense   Three Months Ended

March 31,

2011

 

Dec. 31,

2010

 

March 31,

2010

($ in millions)
Non-interest income

$

1.9

  $ 2.7   $ 1.1  
Non-interest expense $ 7.8   $ 6.8   $ 5.8  
Efficiency ratio   108.7 %   79.93 %   85.68 %
 
  • The decline in non-interest income for the first quarter of 2011 compared with the fourth quarter of 2010 reflected gains in the fourth quarter on sales of investment securities of approximately $820,000 compared with $132,000 in the first quarter of 2011.
  • Non-interest expense for the first quarter of 2011 increased compared with the linked and year-earlier quarters, primarily due to higher compensation expenses and increased costs of loan collections. First quarter 2011 compensation expense reflected $783,000 related to the restoration of supplemental executive retirement plans that partially vested as a result of the completion of the Company's recent second-step conversion. Also, the Company had higher compensation expenses in the first quarter of 2011 compared with the same quarter of 2010 due to the expansion of the mortgage banking and small business lending areas.

About the Company

Atlantic Coast Financial Corporation is the holding company for Atlantic Coast Bank, a federally chartered and insured stock savings bank. It is a community-oriented financial institution serving northeastern Florida and southeastern Georgia markets through 12 locations, with a focus on the Jacksonville metropolitan area. Investors may obtain additional information about Atlantic Coast Financial Corporation on the Internet at www.AtlanticCoastBank.net, under Investor Information.

Forward-looking Statements

This news release contains forward-looking statements within the meaning of the federal securities laws. Statements in this release that are not strictly historical are forward-looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements, identified by words such as "will," "expected," "believe," and "prospects," involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. These risks and uncertainties involve general economic trends and changes in interest rates, increased competition, changes in consumer demand for financial services, the possibility of unforeseen events affecting the industry generally, the uncertainties associated with newly developed or acquired operations, and market disruptions and other effects of terrorist activities. The Company undertakes no obligation to release revisions to these forward-looking statements publicly to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.

ATLANTIC COAST FINANCIAL CORPORATION
Unaudited Financial Highlights

(In thousands, except per share amounts)

 

 

  March 31,

2011

  Dec. 31,

2010

  March 31,

2010

Total assets $ 810,101 $ 827,442 $ 914,021
Cash and cash equivalents 11,818 8,550 37,961
Securities available for sale 156,995 149,090 204,217
 
Loans held for sale 35,011 49,318 5,253
Loans receivable, gross 551,297 563,096 613,166
Allowance for loan losses   13,563   13,344     13,308  
Loans receivable, net   537,734   549,752     599,858  
 
Total deposits 507,706 528,497 584,692
Federal Home Loan Bank advances 145,000 150,000 172,718
Securities sold under agreements to purchase 92,800 92,800 92,800
Stockholders' equity 54,867 44,791 56,371
 
Three Months Ended
March 31,

2011

March 31,

2010

Interest income $ 9,794 $ 11,202
Interest expense   4,489     5,567  
Net interest income 5,305 5,635
Provision for loan losses   2,797     3,722  
Net interest income after provision for loan losses 2,508 1,913
Non-interest income 1,889 1,089
Non-interest expense   7,820     5,761  
Loss before income taxes (3,423 ) (2,759 )
Income tax expense   --     --  
Net loss $ (3,423 ) $ (2,759 )
 
Net loss per basic and diluted share $ (1.36 ) $ (1.07 )
 
Basic and diluted weighted average shares outstanding   2,512     2,577  
 

Net loss per basic and diluted shares, as well as the number of basic and diluted shares outstanding have been restated to give effect to the Company's conversion from a mutual holding company structure to a stock holding company form of organization, which was completed on February 3, 2011. In the conversion and offering, the Company issued 0.1960 share of Atlantic Coast Financial Corporation common stock for each share of Atlantic Coast Federal Corporation common stock previously outstanding (other than those owned by Atlantic Coast Federal, MHC) and sold 1,711,000 new shares of common stock. The net loss per basic and diluted share for the first quarter ended March 31, 2010, as originally reported, was $0.21, and the number of basic and diluted weighted average shares outstanding for that quarter, as reported, was 13,147,000.

ATLANTIC COAST FINANCIAL CORPORATION
Selected Consolidated Financial Ratios and Other Data (Unaudited)

(Dollars in thousands)

 
 

At and for the

Three Months Ended

March 31,

2011

  March 31,

2010

Interest rate information
Net interest spread 2.64 % 2.50 %
Net interest margin 2.77 % 2.64 %
 
 
Average balances
Loans receivable $ 588,985 $ 628,458
Total interest-earning assets $ 765,771 $ 852,635
Total assets $ 815,873 $ 906,626
Deposits $ 516,249 $ 573,999
Total interest-bearing liabilities $ 719,644 $ 808,287
Total liabilities $ 762,490 $ 848,950
Stockholders' equity $ 53,383 $ 57,676
 
 
 
Performance ratios (annualized)
Return on average total assets -1.68 % -1.22 %
Return on average stockholders' equity -25.65 % -19.13 %
Ratio of operating expenses to average total assets 3.83 % 2.54 %
Efficiency ratio 108.70 % 85.68 %
Ratio of average interest-earning assets to average interest-bearing liabilities 106.41 % 105.49 %
 
Asset quality ratios
Non-performing loans $ 30,530 $ 34,390
Foreclosed assets $ 9,213 $ 5,035
Impaired loans $ 41,880 $ 38,697
Non-performing assets to total assets 4.91 % 4.31 %
Non-performing loans to total assets 3.77 % 3.76 %
Non-performing loans to total loans 5.54 % 5.61 %
Allowance for loan losses to non-performing loans 44.43 % 38.70 %
Allowance for loan losses to total loans 2.46 % 2.17 %
Net charge-offs to average outstanding loans (annualized) 1.75 % 2.69 %
 
Capital ratios
Stockholders' equity to total assets 6.77 % 6.17 %
Average stockholders' equity to average total assets 6.54 % 6.36 %




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