Atlantic Coast Financial Corporation (the "Company") (NASDAQ: ACFC), the holding company for Atlantic Coast Bank (the "Bank"), today reported financial results for the first quarter ended March 31, 2011.

For the first quarter of 2011, the Company reported a net loss of $3.4 million compared with a net loss in the year-earlier quarter of $2.8 million. The net loss was equal to $1.36 per diluted share versus $1.07 per diluted share in the first quarter of 2010 (as adjusted for the completion of the second-step conversion).

The Company's higher net loss for the first quarter of 2011 primarily reflected increased compensation costs related to the expansion of its mortgage banking and small business lending areas as well as higher credit related costs. The Company also recognized higher non-interest expenses due to certain benefit plans previously revised for the benefit of the Company and subject to restoration upon the completion of the Company's second-step conversion. These expenses were offset partially by a lower provision for loan losses and an increase in non-interest income.

Other notable aspects of the Company's first quarter report included:
  • As previously reported, the Company completed its second-step conversion and offering in February, raising $14.4 million in new capital, net of expenses.
  • The Bank remained well capitalized in the first quarter of 2011, with a Tier 1 (core) capital ratio of 6.3% and a total risk-based capital ratio of 11.4% at March 31, 2011.
  • Non-performing assets at March 31, 2011, increased to $39.7 million on a linked-quarter basis from $38.1 million at December 31, 2010, but was largely unchanged from $39.4 million at March 31, 2010.
  • Annualized net charge-offs to average loans declined to 1.75% for the first quarter of 2011 from 2.84% for the fourth quarter of 2010 and 2.69% for the year-earlier first quarter.
  • As part of its capital management strategy, the Company continued to shrink its balance sheet in the first quarter, as total assets declined to $810.1 million at March 31, 2011, from $827.4 million at December 31, 2010, and $914.0 million at March 31, 2010.

Commenting on the first quarter results, G. Thomas Frankland, President and Chief Executive Officer, said, "We have continued to deal aggressively with our credit quality issues. Our main focus continues to be on reducing delinquent and non-performing loans, and our efforts this quarter yielded positive, although modest improvements. While non-performing assets did increase slightly on a linked-quarter basis, the trend in new non-performing loans has flattened over the last several quarters. This led to lower net charge-offs for the first quarter of 2011 and a reduction in the provision for loan loss expense compared with both the fourth and first quarters of 2010.

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