Atlantic Coast Financial Corporation (NASDAQ: ACFC):
- Portfolio loans increased over $42
million in the first three months of 2017.
- Deposits increased over $57 million
in the first three months of 2017.
- Credit quality remained stable
during the first three months of 2017.
- Core earnings per diluted share
increased $0.03, or 43%, over first quarter last year.
Atlantic Coast Financial Corporation (Atlantic Coast or the
Company, NASDAQ: ACFC), the holding company for Atlantic Coast Bank
(the Bank), today reported earnings per diluted share of $0.10 for
the first quarter of 2017 compared with earnings of $0.10 per
diluted share in the same quarter last year.
Results for the three months ended March 31, 2016, included the
benefit of gains on the sale of investment securities totaling $0.5
million. Excluding the effects of these gains on the sale of
investment securities, core earnings per diluted share increased
43% to $0.10 for the three months ended March 31, 2017, from $0.07
for the three months ended March 31, 2016. Core earnings per
diluted share is a non-GAAP financial measure, and a reconciliation
of GAAP to non-GAAP financial measures is presented on page 5.
Commenting on the Company's results, John K. Stephens, Jr.,
President and Chief Executive Officer, said, "We are pleased that
Atlantic Coast has posted a solid start to 2017, highlighted by
continued growth in deposits, which increased nearly 25% year over
year. Our first quarter results not only demonstrate continued
momentum in growing our loan portfolio, with a net increase of over
$42 million during the quarter, they also highlight our success in
attracting core deposits, which grew over $57 million during the
quarter. This excess of core deposit growth over our loan growth
contributes to our strategy to reduce our overall reliance on
wholesale funding. Additionally, gains on sale of loans continue to
increase as part of our core strategies; however, the amount of
these gains may continue to vary significantly on a
quarter-over-quarter basis depending on their pace through our loan
pipeline, as well as other potential factors. Our first quarter
progress also is noteworthy because it underscores the diversity of
business, which has helped us maintain the momentum we achieved
last year, even as we prepare for the potential effects of possible
interest rate increases or other macroeconomic events that may
affect the industry nationwide, as well as the seasonally slow
nature of the first quarter. We remain focused on helping our
communities by providing extraordinary service to our customers,
including a wide range of borrowing opportunities for individuals
and commercial enterprises, including small businesses. Considering
our ongoing success and the opportunities we see across our
markets, I believe Atlantic Coast remains well positioned to
continue to build on the growth and expansion we have worked so
hard to achieve over the past few years."
Other significant highlights of the first quarter of 2017
included:
- Net interest income improved to $6.4
million for the three months ended March 31, 2017, from $6.1
million for the three months ended March 31, 2016. Net interest
margin was 3.20% for the three months ended March 31, 2017, up from
2.99% for the three months ended March 31, 2016.
- Total loans (including portfolio loans,
loans held-for-sale, and warehouse loans held-for-investment)
increased 2% to $741.8 million at March 31, 2017, from $727.0
million at December 31, 2016, and 3% from $721.5 million at March
31, 2016. The Company's loan growth since both March 31, 2016 and
December 31, 2016, reflected originations in all lines of business,
supplemented by selective loan acquisitions, partially offset by
loan sales, principal amortization, and prepayments.
- Nonperforming assets, as a percentage
of total assets, were 1.36% at March 31, 2017, compared with 1.44%
at December 31, 2016, and 0.86% at March 31, 2016. Because of the
Company's generally stable credit quality throughout 2016 and
continuing in the first quarter of 2017, reflecting an overall
slowing pace of loan reclassifications, the Company was able to
reduce its loan loss provision for the three months ended March 31,
2017, compared with the same period in 2016, while maintaining, in
management's view, an adequate ratio of allowance for portfolio
loan losses to total portfolio loans.
- Total assets increased to $923.8
million at March 31, 2017, from $907.5 million at December 31,
2016, and $893.0 million at March 31, 2016, primarily due to
increases in portfolio loans and investment securities, which were
partially offset by a decrease in cash and cash equivalents, as
well as in other loans (loans held-for-sale and warehouse loans
held-for-investment).
- The Bank's ratios of total risk-based
capital to risk-weighted assets and Tier 1 (core) capital to
adjusted total assets were 13.76% and 10.32%, respectively, at
March 31, 2017, and each continued to exceed the levels – 10% and
5%, respectively – currently required for the Bank to be considered
well-capitalized.
Tracy L. Keegan, Executive Vice President and Chief Financial
Officer, added, "We were pleased to see further improvements in key
financial metrics during the first quarter of 2017. Net interest
margin increased 21 basis points versus the prior-year period and
was down 10 basis points compared with the fourth quarter of 2016,
primarily due to a decrease in the yield earned on loans and an
increase in cost of deposits, which links with our strategies to
optimize the core funding of our loan growth. Additionally, better
credit quality for the first quarter reflected the second
consecutive quarterly improvement in the level of nonperforming
loans. Despite the reclassification of two particular loans in the
third quarter of 2016, comprising two legacy loans excluded from
our bulk sale in 2013, total nonperforming assets are only $5.3
million greater than those reported at the end of the first quarter
last year. Meanwhile the strength of our coverage for possible
portfolio loan losses, as measured by the allowance to total
portfolio loans, remains virtually level with the year-earlier
period."
Bank Regulatory Capital At
Key Capital
Measures
March 31,
2017
Dec. 31,
2016
March 31,
2016
Total risk-based capital ratio (to risk-weighted assets) 13.76%
14.83% 13.08%
Common equity tier 1 (core) risk-based
capital ratio (to risk-weighted assets)
12.56% 13.58% 11.91% Tier 1 (core) risk-based capital ratio (to
risk-weighted assets) 12.56% 13.58% 11.91% Tier 1 (core) capital
ratio (to adjusted total assets) 10.32% 9.44% 9.20%
The year-over-year increase in capital ratios at March 31, 2017,
primarily reflected an increase in investment securities, which
resulted in a decrease in risk-weighted assets and adjusted total
assets. Additionally, the increase in each of the Bank's capital
ratios at March 31, 2017, reflected an increase in capital related
to higher earnings over the past year. The sequential decrease in
risk-weighted capital ratios for the first quarter of 2017 compared
with the fourth quarter of 2016 reflected an increase in
risk-weighted assets, due to growth in portfolio loans and a
decrease in cash and cash equivalents, as well as an increase in
the risk weighting of certain portfolio loan categories, partially
offset by an increase in investment securities.
Credit Quality At
March 31, 2017
Dec. 31, 2016
March 31, 2016
(Dollars in millions) Nonperforming loans $ 9.8 $ 10.1 $ 4.5
Nonperforming loans to total portfolio loans 1.42 % 1.57 % 0.69 %
Other real estate owned $ 2.8 $ 2.9 $ 3.2 Nonperforming assets $
12.6 $ 13.0 $ 7.7 Nonperforming assets to total assets 1.36 % 1.44
% 0.86 %
Troubled debt restructurings performing
for less than 12 months under terms of modification (1)
$ 13.6 $ 14.6 $ 4.5
Troubled debt restructurings performing
for more than 12 months under terms of modification
$ 18.9 $ 20.3 $ 31.2
(1) Includes $7.6 million, $7.9 million,
$0.8 million of nonperforming loans at March 31, 2017, December 31,
2016, and March 31, 2016, respectively.
Although nonperforming assets were higher at March 31, 2017,
compared with March 31, 2016, the Company's overall credit quality
remains stable, as reflected by the decrease in nonperforming
assets at the end of the first quarter of 2017, compared with those
at the end of the last two sequential quarters. Aside from the
reclassification of two specific loans to nonperforming during the
third quarter of 2016, the general pace of loans reclassified to
nonperforming and OREO continued to slow during the last 12
months.
Provision / Allowance for Loan Losses
At and for the
Three Months Ended
March 31, 2017 Dec. 31, 2016
March 31, 2016 (Dollars in
millions) Provision for portfolio loan losses $ 0.1 $ 0.1 $ 0.2
Allowance for portfolio loan losses $ 8.3 $ 8.2 $ 7.8 Allowance for
portfolio loan losses to total portfolio loans 1.20 % 1.26 % 1.20 %
Allowance for portfolio loan losses to nonperforming loans 84.67 %
80.38 % 174.50 % Net charge-offs $ 0.0 $ 0.0 $ 0.1 Net charge-offs
to average outstanding portfolio loans (annualized) 0.00 % 0.02 %
0.08 %
The Company's provision for portfolio loan losses, which has
trended within a moderately narrow range over the past year, was
lower for the three months ended March 31, 2017, compared with that
for the three months ended March 31, 2016, but higher compared with
that for the three months ended December 31, 2016. This reflects a
trend of solid economic conditions in the Company's markets, which
has led to continued low levels of net charge-offs during the last
12 months. The increase in the allowance for portfolio loan losses
at March 31, 2017, compared with that at March 31, 2016 and
December 31, 2016, was primarily attributable to loan growth, which
reflected organic growth supplemented by strategic loan purchases
that were partially offset by loan sales, principal amortization,
and increased prepayments of one- to four-family residential
mortgages and home equity loans. Management believes the allowance
for portfolio loan losses at March 31, 2017, is sufficient to
absorb losses in portfolio loans as of the end of the period.
Net charge-offs remained at a low level during the three months
ended March 31, 2017, similar to the same period in 2016 and during
the three months ended December 31, 2016.
Net Interest Income Three
Months Ended March 31, 2017 Dec.
31, 2016 March 31, 2016 (Dollars
in millions) Net interest income $ 6.4 $ 7.1 $ 6.1 Net interest
margin 3.20% 3.30% 2.99% Yield on investment securities 2.42% 2.29%
2.04% Yield on loans 4.26% 4.40% 4.46% Total cost of funds 0.80%
0.78% 1.08% Average cost of deposits 0.67% 0.66% 0.58% Rates paid
on borrowed funds 1.77% 1.14% 2.37%
The increase in net interest margin during the three months
ended March 31, 2017, compared with net interest margin for the
three months ended March 31, 2016, primarily reflected a decrease
in rates paid on borrowed funds. Also contributing to the increase
in net interest margin was an increase in higher-margin
interest-earning assets outstanding, reflecting the Company's
ongoing redeployment of excess liquidity to grow its portfolio
loans, loans held-for-sale, and warehouse loans
held-for-investment. The decrease in net interest margin during the
three months ended March 31, 2017, compared with net interest
margin for the three months ended December 31, 2016, reflected an
increase in rates paid on borrowed funds and a decrease in the
yield earned on loans.
Noninterest Income /
Noninterest Expense / Income Tax Expense Three Months
Ended March 31, 2017 Dec. 31,
2016 March 31, 2016 (Dollars in
millions) Noninterest income $ 2.6 $ 1.9 $ 2.6 Noninterest
expense $ 6.6 $ 6.0 $ 6.1 Income tax expense $ 0.8 $ 1.0 $ 0.9
Noninterest income for the three months ended March 31, 2017,
was virtually flat compared with that of the three months ended
March 31, 2016, primarily due to higher gains on the sale of loans
held-for-sale, offset by lower gains on the sale of investment
securities and a decrease in service charges and fees. The increase
in noninterest income for the three months ended March 31, 2017,
compared with that of the three months ended December 31, 2016,
primarily reflected higher gains on the sale of loans
held-for-sale, partially offset by lower gains from the
extinguishment of FHLB advances (the FHLB Gain) and a decrease in
service charges and fees.
The increase in noninterest expense during the three months
ended March 31, 2017, compared with that of the three months ended
March 31, 2016, primarily reflected increased foreclosed asset data
processing expenses, as well as increased interchange expense and
other miscellaneous operating expenses. The increase in noninterest
expense during the three months ended March 31, 2017, compared with
that of the three months ended December 31, 2016, primarily
reflected increased incentive compensation costs associated with
management's successful execution of the Company's continuing
growth strategies, as well as increased occupancy and equipment
expense and other miscellaneous operating expenses.
The decrease in income tax expense for the three months ended
March 31, 2017, compared with that of the three months ended March
31, 2016 and December 31, 2016, reflected the decrease in income
before income tax expense.
Use of Non-GAAP Financial Measures
This press release includes a discussion of "non-GAAP financial
measures:" core earnings and core earnings per diluted share. A
non-GAAP financial measure is generally defined as a numerical
measure of a company's historical or future financial performance,
financial position, or cash flows that either excludes or includes
amounts, or is subject to adjustments, so as to be different from
the most directly comparable measure calculated and presented in
accordance with generally accepted accounting principles (GAAP).
Core earnings and core earnings per diluted share exclude the
effects of certain transactions that occurred during the period, as
detailed in the following reconciliation of these measures.
Three Months Ended March 31,
2017 Dec. 31, 2016
March 31, 2016 (Dollars in thousands) Net
income, as reported $ 1,477 $ 2,002 $ 1,524 Less the gain on the
sale of investment securities (1) -- -- (521 ) Less the FHLB Gain
(2) -- (255 ) -- Adjusted net income
(core earnings) $ 1,477 $ 1,747 $ 1,003 Income
per diluted share, as reported $ 0.10 $ 0.13 $ 0.10 Less the gain
on the sale of investment securities -- -- (0.03 ) Less the FHLB
Gain -- (0.02 ) --
Adjusted income per diluted share (core
earnings per diluted share) (3)
$ 0.10 $ 0.11 $ 0.07
(1) The gain on the sale of investment
securities, which is included in noninterest income, totaled
$828,000, and is shown above net of a tax expense adjustment of
$307,000.
(2) The FHLB Gain, which is included in
noninterest income, totaled $412,000, and is shown above net of a
tax expense adjustment of $157,000.
(3) May not foot due to rounding.
Core earnings and core earnings per diluted share should be
viewed in addition to, and not as a substitute for or superior to,
net income and income per diluted share on a GAAP basis. Atlantic
Coast's management believes that the non-GAAP financial measures,
when considered together with GAAP financial measures, provide
information that is useful to investors in understanding
period-over-period operating results separate and apart from items
that may, or could, have a disproportionately positive or negative
impact on results in any particular period. Atlantic Coast's
management also believes that the non-GAAP financial measures aid
investors in analyzing the Company's business trends and in
understanding the Company's performance. In addition, the Company
may utilize non-GAAP financial measures as guides in forecasting,
budgeting and long-term planning processes and to measure operating
performance for some management compensation purposes.
About the Company
Atlantic Coast Financial Corporation is the holding company for
Atlantic Coast Bank, a Florida state-chartered commercial bank. It
is a community-oriented financial institution serving the Northeast
Florida, Central Florida and Southeast Georgia markets. Investors
may obtain additional information about Atlantic Coast Financial
Corporation on the Internet at www.AtlanticCoastBank.net, under
Investor Relations.
Forward-looking Statements
Statements in this press release that are not historical facts
are forward-looking statements that reflect management's current
expectations, assumptions and estimates of future performance and
economic conditions, and involve risks and uncertainties that could
cause actual results to differ materially from those anticipated by
the statements made herein. Such statements are made in reliance
upon the safe harbor provisions of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements generally are identifiable by the use of
forward-looking terminology such as "believes," "expects," "may,"
"will," "should," "plans," "intends," "projects," "targets,"
"estimates," "preliminary," or "anticipates" or the negative
thereof or comparable terminology, or by discussion of strategy or
goals or other future events, circumstances or effects. Moreover,
forward-looking statements in this release include, but are not
limited to, those relating to: our ability to continue attracting
core deposits and lower our reliance on wholesale funding; our
ability to fund loan growth with core deposits; our ability to
achieve growth in the face of possible interest rate increases and
other macroeconomic events; our ability to provide extraordinary
service to our customers; the strength of our ratio of allowance
for portfolio loan losses to total portfolio loans; and the
allowance for portfolio loan losses being sufficient to absorb
losses in respect of portfolio loans. The Company's consolidated
financial results and the forward-looking statements could be
affected by many factors, including but not limited to: general
economic trends and changes in interest rates; increased
competition; changes in demand for financial services; the state of
the banking industry generally; uncertainties associated with newly
developed or acquired operations; market disruptions; and
cyber-security risks. Further information relating to factors that
may impact the Company's results and forward-looking statements are
disclosed in the Company's filings with the Securities and Exchange
Commission. In particular, please refer to "Item 1A. Risk Factors"
beginning on page 38 of the Company's Annual Report on Form 10-K
for the year ended December 31, 2016. The forward-looking
statements contained in this release are made as of the date of
this release, and the Company disclaims any intention or
obligation, other than imposed by law, to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
ATLANTIC COAST FINANCIAL
CORPORATION
Statements of Operations
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended March 31, 2017
Dec. 31, 2016 March
31, 2016 Interest and dividend income: Loans, including fees $
7,469 $ 8,282 $ 7,500 Securities and interest-earning deposits in
other financial institutions 419 423 696 Total
interest and dividend income 7,888 8,705 8,196 Interest
expense: Deposits 1,088 1,001 797 Securities sold under agreements
to repurchase -- -- 1 Federal Home Loan Bank advances 428
588 1,308 Total interest expense 1,516 1,589 2,106
Net interest income 6,372 7,116 6,090 Provision for
portfolio loan losses 100 50 150
Net interest income after provision for
portfolio loan losses
6,272 7,066 5,940 Noninterest income: Service charges and
fees 434 532 633 Gain on sale of securities available-for-sale --
-- 828 Gain on sale of portfolio loans -- 87 -- Gain on sale of
loans held-for-sale 1,542 368 414 Bank owned life insurance
earnings 117 116 117 Interchange fees 329 323 358 Other 139
514 211 Total noninterest income 2,561 1,940 2,561
Noninterest expense: Compensation and benefits 3,487 3,171
3,458 Occupancy and equipment 555 432 602 FDIC insurance premiums
135 134 172 Foreclosed assets, net 80 81 -- Data processing 611 653
456 Outside professional services 537 488 471 Collection expense
and repossessed asset losses 139 140 145 Other 1,006
877 774 Total noninterest expense 6,550 5,976
6,078 Income before income tax expense 2,283 3,030
2,423 Income tax expense 806 1,028 899 Net
income $ 1,477 $ 2,002 $ 1,524 Net income per basic and
diluted share $ 0.10 $ 0.13 $ 0.10 Basic and diluted
weighted average shares outstanding 15,442 15,417
15,415
ATLANTIC COAST FINANCIAL
CORPORATION
Balance Sheets (Unaudited)
(Dollars in thousands)
March 31, 2017 Dec. 31, 2016 March 31, 2016
ASSETS Cash and due from financial institutions $ 4,041 $
3,744 $ 5,220 Short-term interest-earning deposits 23,713
56,149 23,873 Total cash and
cash equivalents 27,754 59,893 29,093 Securities available-for-sale
101,069 65,293 81,447 Portfolio loans, net of allowance of $8,272,
8,162 and $7,774, respectively 681,576 639,245 640,250 Other loans:
Loans held-for-sale 2,126 7,147 5,978 Warehouse loans
held-for-investment 58,118 80,577
75,230 Total other loans 60,244 87,724 81,208
Federal Home Loan Bank stock, at cost 6,941 8,792 11,683 Land,
premises and equipment, net 14,734 14,945 15,339 Bank owned life
insurance 17,652 17,535 17,187 Other real estate owned 2,806 2,886
3,207 Accrued interest receivable 1,741 1,979 2,057 Deferred tax
assets, net 6,409 6,752 8,787 Other assets 2,908
2,415 2,704 Total assets $ 923,834
$ 907,459 $ 892,962
LIABILITIES AND
STOCKHOLDERS'
EQUITY Deposits: Noninterest-bearing
demand $ 67,926 $ 59,696 $ 52,125 Interest-bearing demand 127,297
106,004 108,613 Savings and money markets 249,279 224,987 174,594
Time 241,336 237,726 215,294
Total deposits 685,838 628,413 550,626 Federal Home Loan
Bank advances 144,092 188,758 256,120 Accrued expenses and other
liabilities 4,692 3,270 3,384
Total liabilities 834,622 820,441 810,130 Common
stock, additional paid-in capital, retained deficit, and other
equity 90,480 88,644 83,627 Accumulated other comprehensive loss
(1,268 ) (1,626 ) (795 ) Total stockholders'
equity 89,212 87,018 82,832
Total liabilities and stockholders' equity $ 923,834
$ 907,459 $ 892,962
ATLANTIC COAST FINANCIAL
CORPORATION
Selected Consolidated Financial Ratios
and Other Data (Unaudited)
(Dollars in thousands)
At and for the
Three Months Ended March 31,
2017 2016
Interest rate Net interest spread 3.08 % 2.88 % Net
interest margin 3.20 % 2.99 %
Average balances
Portfolio loans receivable, net $ 652,875 $ 623,855 Total
interest-earning assets 796,609 813,465 Total assets 839,725
860,244 Deposits 651,868 553,978 Total interest-bearing liabilities
685,043 724,649 Total liabilities 751,532 777,646 Stockholders'
equity 88,193 82,598
Performance ratios (annualized)
Return on average total assets 0.70 % 0.71 % Return on average
stockholders' equity 6.70 % 7.38 % Ratio of operating expenses to
average total assets 3.12 % 2.83 %
Credit and liquidity
ratios Nonperforming loans $ 9,770 $ 4,455 Foreclosed assets
2,806 3,207 Impaired loans 34,669 36,441 Nonperforming assets to
total assets 1.36 % 0.86 % Nonperforming loans to total portfolio
loans 1.42 % 0.69 % Allowance for loan losses to nonperforming
loans 84.67 % 174.50 % Allowance for loan losses to total portfolio
loans 1.20 % 1.20 % Net charge-offs to average outstanding
portfolio loans (annualized) 0.00 % 0.08 % Ratio of gross portfolio
loans to total deposits 100.58 % 117.69 %
Capital
ratios Tangible stockholders' equity to tangible assets (1)
9.66 % 9.28 % Average stockholders' equity to average total assets
10.50 % 9.60 %
Other Data Tangible book value per
share (1) $ 5.74 $ 5.34 Stock price per share 7.62 6.04 Stock price
per share to tangible book value per share (1) 132.85 % 113.09 %
(1) Non-GAAP financial measure.
Because the Company does not currently have any intangible assets,
tangible stockholders' equity is equal to stockholders' equity,
tangible assets is equal to assets, and tangible book value is
equal to book value. Accordingly, no reconciliations are required
for these measures.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170425006491/en/
Atlantic Coast Financial CorporationTracy L. Keegan,
904-998-5501Executive Vice President andChief Financial Officer
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