Atlantic Coast Financial Corporation (the "Company,") (NASDAQ: ACFC), the holding company for Atlantic Coast Bank (the "Bank"), today reported financial results for the second quarter and six months ended June 30, 2012.
For the second quarter of 2012, the Company reported a net loss of $3.0 million or $1.20 per diluted share compared with a net loss of $1.5 million or $0.61 per diluted share in the year-earlier quarter and a net loss of $1.7 million or $0.69 per diluted share in the linked-quarter. For the first six months of 2012, the net loss totaled $4.7 million or $1.89 per diluted share compared with a net loss in the year-earlier period of $4.9 million or $1.98 per diluted share.
Notable highlights of the second quarter report included:
- The Company's increased net loss compared with the year-earlier quarter was due primarily to a higher provision for loan losses and reduced non-interest income related to gains on investment security sales recorded in 2011. The increased net loss compared with the linked quarter was due primarily to reduced non-interest income, a higher provision for loan losses and increased non-interest expenses.
- Non-performing assets decreased 11% to $40.8 million at June 30, 2012, from $46.1 million on a linked-quarter basis at March 31, 2012, and 22% from $52.4 million at December 31, 2011, with the improvements attributable primarily to a declining level of non-performing loans. Subsequent to the end of the quarter, the Company finalized the bulk sale of $4.0 million of non-performing loans, bringing the total reduction of non-performing assets in 2012 to $15.6 million or 29.8%. Losses attributable to this sale were recognized during the second quarter.
- Annualized net charge-offs to average loans decreased slightly to 3.69% for the second quarter of 2012 from 3.91% in the first quarter of 2012, but increased from 1.95% for the year-earlier second quarter. Net charge-offs included $1.2 million related to the bulk sale of non-performing assets discussed above, which settled in July 2012.
- Total assets were $778.5 million at June 30, 2012, compared with $789.0 million and $801.8 million at December 31, 2011, and June 30, 2011, respectively, as the Company has continued to manage asset size consistent with its overall capital management strategy.
- Subsequent to June 30, 2012, the Company modified its agreement with one of the counterparties to its reverse repurchase agreement debt. The changes to the agreement significantly reduce the Company's exposure to the risk of loss by removing the counterparty's option to terminate the debt at market value in the event the Bank becomes less than adequately capitalized or receives a cease and desist order from the Office of the Comptroller of the Currency ("OCC").
Commenting on the second quarter results, G. Thomas Frankland, President and Chief Executive Officer, said, "Following the improvements we cited in our first quarter report, we were pleased to see the Company continue to make headway in several key areas during the second quarter. Specifically, we witnessed further progress in reducing non-performing assets and lowering deposit costs. We also reduced non-interest expense compared with the year-earlier quarter and for the first half of the year versus the same period in 2011. Additionally, we are encouraged by the efforts of our retail banking team as it continues to show good progress in lower cost deposit production, as well as our warehouse and small business lending teams as they continue to build loan income. Lastly, our operations team has been successful in pursuing cost initiatives that will further reduce our non-interest expense.