Beacon Federal Bancorp, Inc. (the "Company") (Nasdaq:BFED), the
holding company for Beacon Federal (the "Bank"), announced today
net income for the quarter ended June 30, 2012 of $666,000, or
$0.11 per diluted share, compared to $1.7 million, or $0.28 per
diluted share for the quarter ended June 30, 2011.
For the six months ended June 30, 2012, net income was $1.9
million, or $0.32 per diluted share, compared to $3.3 million, or
$0.52 per diluted share, for the same period in the prior year.
Ross J. Prossner, President and CEO of the Company said, "Due in
part to the continuing strained economic conditions in our markets
combined with the slowing of commercial lending opportunities,
earnings results were not as strong as projected. We continue to
improve our cost of funds and beginning in June a portion of our
high priced borrowings matured."
On May 31, 2012, Beacon Federal Bancorp, Inc. (the "Company" or
"Beacon Federal Bancorp") and Berkshire Hills Bancorp, Inc.
("Berkshire" or "Berkshire Hills Bancorp") jointly announced the
execution of a definitive agreement whereby Berkshire will acquire
Beacon Federal Bancorp in a 50% stock and 50% cash transaction. As
a result of the merger, Beacon Federal Bancorp's shareholders will
have the right to elect to receive $20.50 in cash or 0.9200 shares
of Berkshire Hills Bancorp common stock in exchange for each
outstanding share of Beacon Federal Bancorp, as outlined above. The
transaction is expected to be completed during the fourth quarter
of 2012, subject to the receipt of regulatory approvals and
approval by the shareholders of Beacon Federal Bancorp.
Prossner states, "Our team continues to work towards the
previously announced acquisition planned for the fourth quarter of
Beacon Federal by Berkshire Hills Bank and the value that the
transaction represents to our shareholders."
The financial highlights for the quarter ended June 30, 2012
were as follows:
- Net interest margin decreased to 2.62% for the quarter ended
June 30, 2012, compared to 3.19% for the same quarter last year.
- Cost of funds decreased 17 basis points to 1.96% for the second
quarter of 2012, compared to 2.13% for the same quarter last year.
- Total loans, including loans held for sale, decreased $39.8
million through the second quarter of 2012, the proceeds of which
were utilized to reinvest in securities and to repay borrowings
that matured in the second quarter of 2012.
- Net charge-offs increased to $1.8 million for the second
quarter, compared to $672,000 for the same quarter in 2011.
- Provision for loan losses decreased 24.1% to $986,000 for the
second quarter, compared to $1.3 million for the same quarter in
the prior year.
- Book value per share grew by 4.1% to $18.57 at June 30, 2012,
compared to $17.84 at June 30, 2011.
- On May 25, 2012, a quarterly cash dividend was paid of $0.07
per common share.
Financial Results
Net interest income totaled $6.4 million for the quarter ended
June 30, 2012, compared to $8.0 million for the second quarter of
2011. Net interest margin decreased 57 basis points in the
second quarter of 2012, compared to the same period in the prior
year due to a decrease in the average yield of interest-earning
assets, partially offset by a decrease in cost of funds and a
slight increase in the average balance of noninterest-bearing
deposits.
The average yield on interest-earning assets for the second
quarter of 2012 declined by 72 basis points to 4.32% and the
average balance of interest-earning assets decreased by $25.3
million to $984.8 million. Included in interest-earning assets
were nonaccrual loans, carrying a 0% yield, which increased from
$11.9 million or 1.46% of total loans at June 30, 2011 to $30.9
million or 4.17% of total loans at June 30, 2012. As high-yielding
assets mature, they are being replaced with new lower yielding
assets at current market interest rates leading to pressure on the
Company's net interest margin, which is expected to continue in the
near term.
The cost of funds decreased by 17 basis points to 1.96% for the
second quarter of 2012, compared to the prior year second quarter
as a result of the average interest rate paid on deposits for the
second quarter of 2012 decreasing 22 basis points to 1.09% as a
result of lower market rates for deposits.
Noninterest income for the second quarter of 2012 slightly
decreased when compared with the same period of 2011, resulting
primarily from an increase of $217,000 in other-than-temporary
credit impairment charges, a $114,000 decrease in other
non-interest income and a $12,000 decrease in commission and fee
income, which was partially offset by a $331,000 increase on the
gain of loans sold in the secondary market.
Other-than-temporary credit impairment charges resulted from
three securities; one trust preferred security and two private
label collateralized mortgage obligations ("CMOs"). The amount of
impairment recognized was based on the current and projected
performance of the issuing banks and their ability to repay their
obligation as it relates to the trust preferred security and with
regards to the CMOs, the current and projected delinquencies along
with reduced credit support in the underlying mortgages.
The other-than-temporary credit impairment charge for
the current quarter of $322,000 was less than 1% of the fair value
of our securities portfolio at June 30, 2012.
The decrease in other non-interest income was primarily the
result of a $109,000 decrease in income related to carrying loans
held for sale at fair value.
Noninterest expense was $5.9 million for the second quarter of
2012, an increase of $331,000 or 6.0%, compared to the same period
of 2011. The increase in noninterest expense was due primarily
to an increase of $393,000 in other noninterest expense, merger
expenses of $337,000 and an increase of $78,000 in audit and
examination fees, partially offset by a decrease of $339,000 in
salaries and benefits expense and a $92,000 decrease in FDIC
premium expense.
Other noninterest expense increased 42.6% to $1.3 million for
the quarter ended June 30, 2012 due to higher loan collection
costs.
Audit and examination expense increased 42.2% to $263,000 for
the quarter ended June 30, 2012 due primarily to work performed by
the Company's independent registered public accounting firm and
work performed by an independent loan review firm.
Salaries and benefits expense decreased 10.9% to $2.8 million
for the quarter ended June 30, 2012 as a result of a decrease in
the Company's incentive bonus accrual and lower stock option and
stock award expense due to the full vesting of certain options and
awards granted in 2008.
FDIC expense decreased 30.7% to $208,000 for the quarter ended
June 30, 2012 due primarily to a lower deposit insurance assessment
rate.
Financial Position
Total assets decreased by $28.9 million, or 2.8%, to $998.0
million at June 30, 2012. The decrease was primarily the
result of a $41.3 million decrease in net loans and a $9.9 million
decrease in cash and cash equivalents, partially offset by a $21.2
million increase in securities. Cash and cash equivalents
decreased due to the repayment of certain FHLB advances that
matured in the second quarter of 2012 and the purchase of
securities.
Net loans decreased by $41.3 million to $732.1 million due to
weak loan demand primarily in our commercial loan portfolio, an
exceptionally competitive lending environment, a higher than normal
level of prepayments in our residential and commercial loan
portfolios and an increased amount of commercial loan charge-offs
taken during the first six months of 2012. The Company's
residential portfolio decreased as a result of normal loan
amortizations and prepayments due to the availability of low
interest rates and a continued demand for mortgage refinances.
Originations of commercial loans totaled $15.8 million in the
second quarter of 2012, compared to $5.3 million in the first
quarter of 2012 and $23.6 million in the year-ago quarter. The
increase in the 2012 second quarter's originations was primarily
due to two large loan closings in the second quarter of 2012
coupled with the deferment of several loan closings from the first
quarter of 2012 to the second quarter of 2012.
Originations of residential real estate loans totaled $29.9
million in the second quarter of 2012, compared to $19.8 million in
the first quarter of 2012 and $16.4 million in the year-ago
quarter.
Originations have increased when compared to the first quarter
of 2012 due to mortgage interest rates remaining low and the demand
for refinances remaining strong, while the purchase market began
its seasonal rise in the second quarter of 2012.
Originations of consumer loans totaled $25.3 million in the
second quarter of 2012, compared to $19.0 million in the first
quarter of 2012 and $20.6 million in the year-ago
quarter. Originations have primarily increased in the
Company's auto-indirect and direct lending areas due primarily to
the overall increase in the auto market.
The Company's investment securities portfolio totaled $173.1
million at June 30, 2012, compared with $151.9 million at December
31, 2011. The Company's investment portfolio is primarily
comprised of investment grade securities, the majority of which are
rated "AAA" by one or more of the nationally recognized rating
agencies. The Company's securities' portfolio at June 30, 2012
consisted of 44% of mortgage-backed securities issued or
guaranteed by the United States Government or United States
Government-sponsored enterprises, 44% of United States Government
Agency collateralized mortgage obligations, 7% of "private
label" collateralized mortgage obligations, 3% of pooled trust
preferred securities and 2% of debt securities issued by the United
States Government, agencies of the United States Government or
United States Government-sponsored enterprises. United States
Government Agency mortgage-backed securities, which totaled $77.1
million and collateralized mortgage obligations, which totaled
$76.0 million at June 30, 2012, are backed by single family
mortgage loans and guaranteed by Fannie Mae, Freddie Mac or Ginnie
Mae, which are backed by the United States government.
Deposits decreased by $2.6 million in the second quarter to
$678.2 million at June 30, 2012. The Company continues
to pursue lower cost non-maturity deposits, increasing those funds
$37.1 million during the first six months of 2012.
Stockholders' equity increased by $3.1 million to $115.2 million
at June 30, 2012 from $112.1 million at December 31, 2011. The
increase was primarily the result of $1.9 million of net income for
the six months ended June 30, 2012, $1.1 million of other
comprehensive income, $157,000 of amortization of stock-based
compensation and $513,000 of allocated ESOP shares, partially
offset by cash dividends paid of $822,000.
On July 12, 2012, the Bank entered into a formal agreement (the
"Agreement") with the Office of the Comptroller of the Currency
("OCC") for the Bank to take various actions with respect to the
operation of the Bank.
Ross Prossner states, "Management and the board of directors are
committed to taking all necessary actions to promptly address the
requirements of the Agreement. Our team has been diligently
working on the matters requiring attention since the beginning of
the year and has made substantial progress."
The Bank's Tier 1 leverage ratio was 10.99% and its total
risk-based capital ratio was 15.60% at June 30, 2012 both of which
exceeded the regulatory thresholds required to be classified as a
well-capitalized bank, which are 5.0% and 10.0%,
respectively. The OCC imposed on the Bank certain individual
minimum capital ratio amounts ("IMCRs"), requiring Tier 1 Capital
equal to at least 9.00% of adjusted total assets and Total Risk
Based Capital equal to at least 12.50% of risk-weighted assets. The
Bank has met all IMCRs at June 30, 2012.
Asset Quality and Provision for Loan Losses
Total nonperforming assets were $38.7 million or 3.88% of total
assets at June 30, 2012, compared to $41.1 million, or 4.01% of
total assets, at March 31, 2012 and $16.0 million, or 1.53% of
total assets, at June 30, 2011. Included in nonperforming
assets at June 30, 2012 were nonperforming loans of $35.9 million,
of which $5.0 million were on accrual status, compared to
nonperforming loans of $38.2 million, of which $12.2 million were
on accrual status, at March 31, 2012 and nonperforming loans of
$15.9 million, of which $871,000 were on accrual status, at June
30, 2011. Nonperforming assets decreased from March 31, 2012
due to a higher than normal amount of prepayments in our commercial
loan portfolio and an increased amount of loan charge-offs taken in
the second quarter, partially offset by additions of nonperforming
assets.
Net charge-offs for the second quarter of 2012 were $1.8
million, or an annualized 0.95% of average loans, compared to $5.9
million, or an annualized 3.03% of average loans, for the first
quarter of 2012 and $672,000, or an annualized 0.33% of average
loans, for the second quarter of 2011. Net charge-offs for
the second quarter of 2012 were higher than the second quarter of
2011 due to improvements in credit administration instituted by the
Company's new Chief Credit Risk officer, hired in February
2012.
The allowance for loan losses on loans held in the portfolio was
$13.0 million at June 30, 2012, compared to $13.8 million at March
31, 2012 and $16.5 million at June 30, 2011. The ratio of the
allowance for loan losses to total loans was 1.76% at June 30,
2012, compared with 1.83% at March 31, 2012 and 2.03% at June 30,
2011. The ratio of the allowance for loan losses to
nonperforming loans was 36.34% at June 30, 2012, compared with
36.17% at March 31, 2012 and 103.98% at June 30, 2011. The
ratio of the allowance for loan losses to nonperforming loans
decreased when compared to June 30, 2011, due to charge-offs taken
during the first six months of 2012.
Of the $35.9 million of nonperforming loans at June 30, 2012,
$34.8 million were impaired. The amount of impaired loans
decreased $2.4 million when compared to March 31, 2012, due to an
increased amount of prepayments in our commercial loan portfolio
and loan charge-offs taken in the second quarter of 2012. The
amount of impaired loans increased $24.9 million when compared to
June 30, 2011. We evaluate impaired loans for specific
credit loss and although impaired loans increased 250.6%, the
amount of the allowance for loan losses on impaired loans decreased
22.0% to $2.9 million at June 30, 2012, when compared to June 30,
2011, primarily due to the increased amount of net charge-offs
taken during the first six months of 2012.
Beacon Federal Bancorp, Inc., through its subsidiary, Beacon
Federal, offers banking and related financial services to both
individual and commercial customers. The Bank is headquartered
with a full-service branch in East Syracuse, New York, along with
six other full-service branches in East Syracuse, Marcy and Rome,
New York, Smartt and Smyrna, Tennessee, and Chelmsford,
Massachusetts.
Forward-Looking Statement
This press release contains statements that are forward-looking,
as that term is defined by the Private Securities Litigation Reform
Act of 1995. The Bank and Company intend that such
forward-looking statements be subject to the safe harbors created
thereby. The following factors, among others, could cause the
actual results of the Company's operations to differ materially
from the Company's expectations: competition; changes in economic
conditions, interest rates and financial markets; and changes in
legislation or regulatory requirements. The making of such
forward-looking statements should not be regarded as a
representation by the Bank or Company or any other person that
results expressed therein will be achieved. Forward-looking
statements speak only as of the date they are made, and the Company
undertakes no obligation to update them in light of new information
of future events.
|
At June 30,
2012 |
At December 31,
2011 |
|
(Unaudited) |
|
(In
thousands) |
Selected Financial Condition
Data: |
|
|
|
|
|
Total assets |
$ 997,972 |
$ 1,026,829 |
Cash and cash equivalents |
33,816 |
43,724 |
Securities available for sale |
166,806 |
144,896 |
Securities held to maturity |
6,283 |
6,975 |
Loans, net and loans held for sale |
734,919 |
774,691 |
Federal Home Loan Bank of New York stock and
other restricted stock |
12,218 |
12,605 |
Deposits |
678,240 |
680,856 |
FHLB advances |
118,427 |
148,427 |
Securities sold under agreement to repurchase
and other short-term borrowings |
73,000 |
73,000 |
Stockholders' equity |
115,174 |
112,070 |
|
|
|
|
Three Months
Ended June 30, |
Six Months Ended
June 30, |
|
2012 |
2011 |
2012 |
2011 |
|
(Unaudited) |
(Unaudited) |
|
(In thousands, except
per share data) |
Selected Operating
Data: |
|
|
|
|
|
|
|
|
|
Interest income |
$ 10,575 |
$ 12,690 |
$ 21,866 |
$ 25,208 |
Interest expense |
4,151 |
4,661 |
8,479 |
9,397 |
Net interest income |
6,424 |
8,029 |
13,387 |
15,811 |
Provision for loan losses |
986 |
1,299 |
1,590 |
2,278 |
Net interest income after
provision for loan losses |
5,438 |
6,730 |
11,797 |
13,533 |
Noninterest income |
1,501 |
1,515 |
3,347 |
3,017 |
Noninterest expense |
5,893 |
5,562 |
12,071 |
11,404 |
Income before income taxes |
1,046 |
2,683 |
3,073 |
5,146 |
Income tax expense |
380 |
947 |
1,142 |
1,891 |
Net income |
$ 666 |
$ 1,736 |
$ 1,931 |
$ 3,255 |
Basic earnings per share |
$ 0.11 |
$ 0.29 |
$ 0.32 |
$ 0.53 |
Diluted earnings per share |
$ 0.11 |
$ 0.28 |
$ 0.32 |
$ 0.52 |
|
|
|
|
|
Asset Quality Ratios: |
|
|
|
|
Nonperforming loans to total loans |
4.84% |
1.95% |
4.84% |
1.95% |
Nonperforming assets to total assets |
3.88% |
1.53% |
3.88% |
1.53% |
Annualized net charge-offs to average loans
outstanding |
0.95% |
0.33% |
2.01% |
0.25% |
Allowance for loan losses to non-performing
loans at end of period |
36.34% |
103.98% |
36.34% |
103.98% |
Allowance for loan losses to total loans at
end of period |
1.76% |
2.03% |
1.76% |
2.03% |
|
|
|
For the Three Months
Ended June 30, |
|
|
|
|
2012 |
2011 |
|
Average Outstanding
Balance |
Interest
Earned/Paid |
Yield / Rate
(1) |
Average Outstanding
Balance |
Interest
Earned/Paid |
Yield / Rate
(1) |
|
(Dollars in thousands) |
Interest-earning
assets: |
|
|
|
|
|
|
Loans (2) |
$ 755,427 |
$ 9,164 |
4.88 % |
$ 819,550 |
$ 10,912 |
534 % |
Securities |
178,352 |
1,280 |
2.89 |
176,519 |
1,664 |
3.78 |
FHLB stock |
10,286 |
109 |
4.26 |
9,989 |
111 |
4.46 |
Interest-earning deposits |
40,744 |
22 |
0.22 |
4,027 |
3 |
0.30 |
Total interest-earning
assets |
984,809 |
10,575 |
4.32 |
1,010,085 |
12,690 |
5.04 |
Noninterest-earning assets |
33,117 |
|
|
30,986 |
|
|
Total assets |
$ 1,017,926 |
|
|
$ 1,041,071 |
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities: |
|
|
|
|
|
|
Savings |
$ 109,876 |
$ 137 |
0.50 |
$ 116,697 |
$ 149 |
0.51 |
Money market accounts |
214,109 |
467 |
0.88 |
146,993 |
289 |
0.79 |
Checking accounts |
71,956 |
182 |
1.02 |
61,637 |
138 |
0.90 |
Time accounts |
232,310 |
918 |
1.59 |
315,269 |
1,511 |
1.92 |
Total deposits |
628,251 |
1,704 |
1.09 |
640,596 |
2,087 |
1.31 |
FHLB advances |
143,537 |
1,571 |
4.40 |
160,115 |
1,703 |
4.27 |
Reverse repurchase
agreements |
73,000 |
680 |
3.75 |
70,001 |
675 |
3.87 |
Lease obligation |
7,744 |
196 |
10.18 |
7,740 |
196 |
10.16 |
Total interest-bearing
liabilities |
852,532 |
4,151 |
1.96 |
878,452 |
4,661 |
2.13 |
|
|
|
|
|
|
|
Noninterest-bearing
deposits |
46,310 |
|
|
46,066 |
|
|
Other noninterest-bearing
liabilities |
4,779 |
|
|
3,568 |
|
|
Total liabilities |
903,621 |
|
|
928,086 |
|
|
Stockholders' equity |
114,305 |
|
|
112,985 |
|
|
Total liabilities and
equity |
$ 1,017,926 |
|
|
$ 1,041,071 |
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ 6,424 |
|
|
$ 8,029 |
|
|
|
|
|
|
|
|
Net interest rate spread
(3) |
|
|
2.36 % |
|
|
291 % |
|
|
|
|
|
|
|
Net interest-earning assets
(4) |
$ 132,277 |
|
|
$ 131,633 |
|
|
|
|
|
|
|
|
|
Net interest margin (5) |
|
|
2.62 % |
|
|
319 % |
|
|
|
|
|
|
|
Average of interest-earning
assets to interest-bearing liabilities |
|
|
115.52 % |
|
|
114.98 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Yields and rates for the
three months ended June 30, 2012 and 2011 are annualized. |
|
|
|
|
|
|
(2) Includes loans held for sale
and nonaccrual loans. |
|
|
|
|
|
|
(3) Net interest rate spread
represents the difference between the yield on total average
interest-earning assets and the cost of total average
interest-bearing liabilities for the three months ended June 30,
2012 and 2011. |
|
|
|
|
|
|
(4) Net interest-earning assets
represents total interest-earning assets less interest-bearing
liabilities. |
|
|
|
|
|
|
(5) Net interest margin
represents annualized net interest income divided by average total
interest-earning assets. |
|
|
|
|
|
|
|
|
|
For the Six Months
Ended June 30, |
|
|
|
|
2012 |
2011 |
|
Average Outstanding
Balance |
Interest
Earned/Paid |
Yield / Rate
(1) |
Average Outstanding
Balance |
Interest
Earned/Paid |
Yield / Rate
(1) |
|
(Dollars in thousands) |
Interest-earning
assets: |
|
|
|
|
|
|
Loans (2) |
$ 769,781 |
$ 19,065 |
4.98 % |
$ 817,110 |
$ 21,799 |
5.38 % |
Securities |
169,414 |
2,538 |
3.01 |
174,640 |
3,142 |
3.63 |
FHLB stock |
9,997 |
229 |
4.61 |
10,120 |
261 |
5.20 |
Interest-earning deposits |
38,926 |
34 |
0.18 |
2,135 |
6 |
0.57 |
Total interest-earning
assets |
988,118 |
21,866 |
4.45 |
1,004,005 |
25,208 |
5.06 |
Noninterest-earning assets |
31,096 |
|
|
32,482 |
|
|
Total assets |
$ 1,019,214 |
|
|
$ 1,036,487 |
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities: |
|
|
|
|
|
|
Savings |
$ 106,227 |
$ 201 |
0.38 |
$ 113,373 |
$ 284 |
0.51 |
Money market accounts |
213,321 |
976 |
0.92 |
145,102 |
550 |
0.76 |
Checking accounts |
67,593 |
354 |
1.05 |
61,285 |
270 |
0.89 |
Time accounts |
241,793 |
2,019 |
1.68 |
318,237 |
3,145 |
1.99 |
Total deposits |
628,934 |
3,550 |
1.14 |
637,997 |
4,249 |
1.34 |
FHLB advances |
145,982 |
3,182 |
4.38 |
161,968 |
3,413 |
4.25 |
Reverse repurchase
agreements |
72,028 |
1,355 |
3.78 |
70,001 |
1,343 |
3.87 |
Lease obligation |
7,744 |
392 |
10.18 |
7,740 |
392 |
10.21 |
Total interest-bearing
liabilities |
854,688 |
8,479 |
2.00 |
877,706 |
9,397 |
2.16 |
|
|
|
|
|
|
|
Noninterest-bearing
deposits |
46,251 |
|
|
43,689 |
|
|
Other noninterest-bearing
liabilities |
5,301 |
|
|
3,684 |
|
|
Total liabilities |
906,240 |
|
|
925,079 |
|
|
Stockholders' equity |
112,974 |
|
|
111,408 |
|
|
Total liabilities and
equity |
$ 1,019,214 |
|
|
$ 1,036,487 |
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ 13,387 |
|
|
$ 15,811 |
|
|
|
|
|
|
|
|
Net interest rate spread
(3) |
|
|
2.45 % |
|
|
2.90 % |
|
|
|
|
|
|
|
Net interest-earning assets
(4) |
$ 133,430 |
|
|
$ 126,299 |
|
|
|
|
|
|
|
|
|
Net interest margin (5) |
|
|
2.72 % |
|
|
3.18 % |
|
|
|
|
|
|
|
Average of
interest-earning assets to interest-bearing liabilities |
|
115.61 % |
|
|
114.39 % |
|
|
|
|
|
|
|
(1) Yields and rates for the six
months ended June 30, 2012 and 2011 are annualized. |
|
|
|
(2) Includes loans held for sale
and nonaccrual loans. |
|
|
|
|
|
(3) Net interest rate spread
represents the difference between the yield on total average
interest-earning assets and the cost of total average
interest-bearing liabilities for the six months ended June 30, 2012
and 2011. |
(4) Net interest-earning assets
represents total interest-earning assets less interest-bearing
liabilities. |
|
|
(5) Net interest margin
represents annualized net interest income divided by average total
interest-earning assets. |
|
CONTACT: Lisa M. Jones
Senior Vice President and Chief Financial Officer
Beacon Federal Bancorp, Inc.
6611 Manlius Center Road
East Syracuse, NY 13057
(315) 433-0111 x 1582
Beacon Federal Bancorp, Inc. (MM) (NASDAQ:BFED)
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