Atlantic Coast Financial Corporation (the "Company," which
includes Atlantic Coast Federal Corporation prior to February 3,
2011) (temporary NASDAQ symbol: ACFCD), the holding company for
Atlantic Coast Bank (the "Bank"), today reported financial results
for the fourth quarter and year ended December 31, 2010.
In line with the preliminary release regarding fourth quarter
results for 2010, which was issued on January 10, 2011, the Company
reported a net loss for the fourth quarter of 2010 totaling $5.2
million or $0.40 per diluted share compared with a net loss in the
year-earlier quarter of $9.5 million or $0.72 per diluted share.
The Company's net loss for the fourth quarter of 2010 reflected an
increase in its provision for loan losses to $6.9 million compared
with $6.2 million in the year-earlier quarter, including a
$1.6 million specific reserve on a $7.5 million commercial
lending relationship and $2.1 million of additional reserves for
the Company's one-to-four family residential loan portfolio. For
the year ended December 31, 2010, the Company's net loss totaled
$14.2 million or $1.08 per diluted share compared with a net loss
of $29.3 million or $2.24 per diluted share for 2009.
Other notable aspects of the Company's fourth quarter report
included:
- As part of its capital preservation
strategy, the Company continued to manage its balance sheet
effectively in the fourth quarter in advance of completing its
second-step offering; total assets were reduced to $827.4 million
at December 31, 2010, from $905.6 million at December 31,
2009.
- The Bank remained well capitalized in
the fourth quarter of 2010, with a Tier 1 (core) capital ratio of
5.5% and a total risk-based capital ratio of 10.1% at December 31,
2010.
- Non-performing assets at December 31,
2010, increased to $38.1 million on a linked-quarter basis from
$30.2 million at September 30, 2010, primarily due to the addition
of the $7.5 million commercial lending relationship, but declined
from $40.2 million in the year-earlier period.
On February 3, 2011, the Company, as successor to Atlantic Coast
Federal Corporation, completed the conversion from a mutual holding
company structure and the related public stock offering and is now
a stock holding company that is 100% owned by public stockholders.
The Company sold a total of 1,710,857 shares of common stock in the
subscription and community offerings, including 68,434 shares to
the Atlantic Coast Financial Corporation employee stock ownership
plan, raising gross proceeds of approximately $17.1 million. All
outstanding shares of Atlantic Coast Federal Corporation, other
than those owned by Atlantic Coast Federal, MHC that were sold as
part of the conversion, have been converted into the right to
receive 0.1960 shares of the Company's common stock, with
fractional shares paid at a rate of $10.00 per share. As a result
of the conversion, offering and exchange, the Company will have
approximately 2,629,442 shares outstanding.
Commenting on the fourth quarter results, G. Thomas Frankland,
President and Chief Executive Officer, said, "While the economic
climate continues to be challenging, we are pleased with the
strides made recently by the Company in several areas. Most
important was the completion of our second-step offering and
conversion earlier this month, which strengthens our capital
position, supports our growth initiatives and allows us to better
serve our customers. A growing mortgage banking division, including
an expanded loan warehouse program, and an increasing presence in
small business lending also contributed to our quarterly results.
As previously announced, we have applied for funding from the Small
Business Lending Fund, a federal program created under the Small
Business Jobs Act of 2010 to enhance lending to America's small
businesses by providing Tier 1 capital to community banks. If
approved, this funding will further enhance our ability to expand
our small business lending program and could add up to an
additional $15 million in capital.
"Clearly, the level of non-performing assets and associated
credit costs remain high, presenting us with an ongoing challenge
until such time as the economy strengthens and there is meaningful
and sustained improvements in employment levels and greater
stability in real estate values in our market areas," Frankland
added. "However, as evidenced by our actions related to the $7.5
million loan relationship and the reserves provided for
non-performing loans affected by delays in the foreclosure process
in Florida, we continued to decisively address problems in our loan
portfolio during the fourth quarter."
Capital Position
The Bank's Tier 1 leverage ratio, Tier 1 risk-based capital
ratio and Total risk-based capital ratio were 5.5%, 8.8%, and
10.1%, respectively, at December 31, 2010, and continued to exceed
the required minimums of 5%, 6%, and 10%, respectively, necessary
to be deemed a well-capitalized institution. In addition,
stockholders' equity represented 5.4% of total assets at that
date.
As previously noted, the Company successfully completed its
second-step conversion on February 3, raising $17.1 million of
gross proceeds. After conversion costs and the repayment of a $5.0
million borrowing, the Company will contribute the majority of the
remaining proceeds to the Bank, significantly increasing its
capital ratios in the first quarter of 2011.
The following tabular presentations
highlight other key aspects of the Company's performance:
Asset Quality Three Months Ended
Dec. 31,
2010
Sept. 30,2010
Dec. 31,
2009
($ in millions)
Non-performing loans
$
28.1
$ 21.6 $ 35.2 Non-performing loans to total loans 4.99 % 3.67 %
5.64 % Non-performing assets $ 38.1 $ 30.2 $ 40.2 Non-performing
assets to total assets 4.60 % 3.38 % 4.44 % Net charge-offs $ 4.5 $
2.4 $ 7.2 Net charge-offs to average outstanding loans 2.84 % 1.54
% 4.36 %
- The increase in non-performing loans
and assets on a linked-quarter basis was primarily due to the
addition of the $7.5 million commercial lending relationship
described earlier.
- The increase in net charge-offs on a
linked-quarter basis was due principally to higher charge-offs of
one-to-four-family residential loans.
- Net charge-offs declined $2.7 million
in the fourth quarter of 2010 compared with the fourth quarter of
2009 due to a $2.7 million charge-off in 2009 related to
foreclosure on a non-residential real estate loan.
Provision / Allowance for Loan
Losses
Three Months Ended Year Ended
Dec. 31,2010
Sept. 30,2010
Dec. 31,2009
Dec. 31,2010
Dec. 31,2009
($ in millions) Provision for loan losses
$
6.9
$ 3.1 $ 6.2 $ 21.2 $ 24.9
Allowance for loan losses $ 13.3 $ 11.0 $ 13.8
$ 13.3 $ 13.8 Allowance for loan losses to total
loans 2.37 % 1.87 % 2.22 % 2.37 %
2.22 %
Allowance for loan losses to
non-performing loans
47.44 % 50.83 % 39.29 % 47.44 %
39.29 %
- The linked-quarter increase in
provision for loan losses included a $1.6 million specific
reserve against a $7.5 million commercial loan relationship, and
$2.1 million in additional reserves to address expected
deterioration in collateral valuations in the Company's residential
mortgage loan portfolio caused by a slowdown in the foreclosure
process.
- The Company remains conservative in its
methodology for identifying problem loans early in the cycle and
aggressive in charging down residential and home equity loans on
the date such loans become non-performing.
Net Interest Income Three
Months Ended Year Ended
Dec. 31,2010
Sept. 30,2010
Dec. 31,2009
Dec. 31,
2010
Dec. 31,2009
($ in millions) Net interest income
$
5.9
$ 5.9 $ 5.4 $ 23.7 $ 21.8 Net
interest margin 2.84 % 2.78 % 2.44 %
2.79 % 2.37 %
- The year-over-year increase in net
interest margin primarily reflected a reduction in the Company's
funding costs due to the run-off of higher-rate certificates of
deposit, as well as the positive impact of the Company's expanded
loan warehouse program; net interest margin continued to improve on
a linked-quarter and year-over-year basis.
Non-Interest Income /
Non-Interest Expense
Three Months Ended Year Ended
Dec. 31,2010
Sept. 30,2010
Dec. 31,2009
Dec. 31,
2010
Dec. 31,2009
($ in millions) Non-interest income
$
2.7
$ 1.6 $ (0.4 ) $ 8.3 $ 4.2 Non-interest
expense $ 6.8 $ 6.5 $ 2.4 $ 24.9 $ 24.3
Efficiency ratio 79.93 % 87.42 % 48.86
% 77.97 % 93.65 %
- Non-interest income for the fourth
quarter of 2010 was higher on a linked-quarter basis primarily due
to a $1.2 million loss on the sale of private-label collateralized
mortgage obligations recorded in the third quarter of 2010.
- Non-interest income for the year 2010
increased compared with 2009 primarily because other-than-temporary
impairment charges on investments were approximately $4.0 million
higher in 2009.
- Non-interest expense in the fourth
quarter of 2010 was higher than the same quarter in 2009 primarily
due to the reversal of SERP accruals of $2.7 million in the fourth
quarter of 2009.
- Non-interest expense for the year 2010
was up over full-year 2009 primarily due to a $600,000 increase in
collection related expenses. Non-interest expense in 2009 included
the aforementioned reversal of SERP accruals, offsetting a $2.8
million goodwill impairment charge in the third quarter of
2009.
Income Tax Expense
Three Months Ended Year Ended
Dec. 31,2010
Sept. 30,2010
Dec. 31,2009
Dec. 31,
2010
Dec. 31,2009
($ in millions) Income tax expense $ -- $ -- $ 5.8 $ -- $ 6.1
- The Company established a valuation
reserve for the full amount of its deferred tax asset during 2009.
Accordingly, the Company no longer records the income tax benefit
of net losses until such time it determines that realization of the
deferred tax asset is more likely than not.
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)
Dec. 31,
2010
Sept. 30,
2010
Dec. 31,
2009
Total assets $ 827,442 $ 892,612 $ 905,561 Cash and cash
equivalents 8,550 21,643 37,144 Securities available for sale
149,090 176,528 177,938 Loans held for sale 49,318 49,597
8,990 Loans receivable, gross 563,096 586,736 628,181 Allowance for
loan losses 13,344 10,955 13,810
Loans receivable, net 549,752 575,781
614,371 Total deposits 528,497 570,363
555,444 Federal Home Loan Bank Advances 150,000 167,765 182,694
Securities sold under agreements to purchase 92,800 92,800 92,800
Stockholders' equity 44,791 51,405 56,541
Three Months Ended Year Ended Dec. 31,
2010
Dec. 31,
2009
Dec. 31,
2010
Dec. 31,
2009
Interest income $ 10,762 $ 11,548 $ 44,855 $ 48,718 Interest
expense 4,881 6,149 21,192
26,935 Net interest income 5,881 5,399 23,663
21,783 Provision for loan losses 6,924 6,216
21,230 24,873
Net interest income (loss) after provision
for loan losses
(1,043 ) (817 ) 2,433 (3,090 ) Non-interest income (loss) 2,678
(395 ) 8,262 4,168 Non-interest expense 6,841
2,445 24,891 24,303 Loss before
income taxes (5,206 ) (3,657 ) (14,196 ) (23,225 ) Income tax
expense -- 5,828 --
6,110 Net loss $ (5,206 ) $ (9,485 ) $ (14,196 ) $
(29,335 ) Net loss per basic and diluted share $ (0.40 ) $
(0.72 ) $ (1.08 ) $ (2.24 ) Basic and diluted weighted
average shares outstanding 13,167 13,118
13,155 13,105
On February 3, 2011, the Company completed
its conversion from a mutual holding company structure to a stock
holding company form of organization, in which it issued 0.1960
shares 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 1,710,857 new shares of common stock. As a
result, the Company now has approximately 2,629,442 common shares
outstanding. The following table sets forth, on a pro forma
unaudited basis for the periods presented, the Company's basic and
diluted net loss per share.
Net loss per basic and diluted share $ (1.98 ) $ (3.61 ) $
(5.40 ) $ (11.16 ) Basic and diluted weighted average shares
outstanding 2,629 2,629 2,629
2,629
ATLANTIC COAST FINANCIAL
CORPORATION
Selected Consolidated Financial Ratios
and Other Data (Unaudited)
(Dollars in Thousands)
At and for the
Three Months Ended
At and for the
Year Ended
Dec. 31,
2010
Dec. 31,
2009
Dec. 31,
2010
Dec. 31,
2009
Interest rate information Net interest spread 2.71 % 2.23 %
2.66 % 2.14 % Net interest margin 2.84 % 2.44 % 2.79 % 2.37 %
Average balances Loans receivable $ 638,541 $
658,713 $ 625,947 $ 695,805 Total interest-earning assets $ 828,597
$ 885,996 $ 846,693 $ 919,669 Total assets $ 880,219 $ 931,821 $
898,106 $ 975,143 Deposits $ 551,001 $ 590,728 $ 569,353 $ 615,846
Total interest-bearing liabilities $ 786,109 $ 824,349 $ 801,926 $
852,179 Total liabilities $ 828,704 $ 865,869 $ 843,188 $ 898,756
Stockholders' equity $ 51,515 $ 65,952 $ 54,918 $ 76,387
Performance ratios (annualized) Return on
average total assets -2.37 % -4.07 % -1.58 % -3.01 % Return on
average stockholders' equity -40.42 % -57.53 % -25.85 % -38.40 %
Ratio of operating expenses to average
total assets
3.11 % 1.05 % 2.77 % 2.49 % Efficiency ratio 79.93 % 48.86 % 77.97
% 93.65 % Ratio of average interest-earning assets to average
interest-bearing liabilities 105.40 % 107.48 % 105.58 % 107.92 %
Asset quality ratios Non-performing loans $ 28,126 $
35,150 $ 28,126 $ 35,150 Foreclosed assets $ 9,940 $ 5,028 $ 9,940
$ 5,028 Impaired loans $ 48,486 $ 44,392 $ 48,486 $ 44,392
Non-performing assets to total assets 4.60 % 4.44 % 4.60 % 4.44 %
Non-performing loans to total assets 3.40 % 3.88 % 3.40 % 3.88 %
Non-performing loans to total loans 4.99 % 5.64 % 4.99 % 5.64 %
Allowance for loan losses to
non-performing loans
47.44 % 39.29 % 47.44 % 39.29 % Allowance for loan losses to total
loans 2.37 % 2.22 % 2.37 % 2.22 %
Net charge-offs to average outstanding
loans (annualized)
2.84 % 4.36 % 3.47 % 3.11 %
Capital ratios
Stockholders' equity to total assets 5.41 % 6.24 % 5.41 % 6.24 %
Average stockholders' equity to average
total assets
5.85 % 7.08 % 6.11 % 7.83 %
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