EX-99.1 2 a50739533_ex991.htm EXHIBIT 99.1

Exhibit 99.1

Atlantic Coast Financial Corporation Reports Third Quarter 2013 Results

JACKSONVILLE, Fla.--(BUSINESS WIRE)--October 29, 2013--Atlantic Coast Financial Corporation (the "Company") (NASDAQ: ACFC), the holding company for Atlantic Coast Bank (the "Bank"), today reported financial results for the quarter and nine months ended September 30, 2013.

For the third quarter of 2013, the Company reported a net loss of $0.9 million or $0.38 per diluted share compared with a net loss of $1.7 million or $0.66 per diluted share in the year-earlier quarter and a net loss of $1.6 million or $0.62 per diluted share in the second quarter of 2013. For the first nine months of 2013, the net loss totaled $4.5 million or $1.81 per diluted share compared with a net loss in the year-earlier period of $6.4 million or $2.55 per diluted share.

The Company's results through September 30, 2013, included costs associated with the previously announced merger with Bond Street Holdings, Inc., which stockholders rejected at a special meeting held on June 11, 2013. In order to more clearly assess the fundamental operations of the Company, management believes it is appropriate to adjust the reported net losses for the first nine months of 2013 to exclude these merger-related costs. On this as-adjusted basis, the adjusted net loss for the nine months ended September 30, 2013, was $3.2 million or $1.29 per diluted share. Adjusted net loss is a non-GAAP measurement; see reconciliation of GAAP and non-GAAP measures at page 7 of this release.

Significant developments in the third quarter included:

  • The net loss decreased 44% to $0.9 million for the third quarter of 2013 from $1.7 million for the same quarter in 2012 and decreased 40% from $1.6 million for the second quarter of 2013. The adjusted net loss decreased 49% to $3.2 million for the nine months ended September 30, 2013, from $6.4 million for the nine months ended September 30, 2012.
  • Non-performing assets decreased 27% to $25.1 million or 3.51% of total assets at September 30, 2013, from $34.2 million or 4.35% of total assets at September 30, 2012, and decreased 1% from $25.2 million or 3.40% of total assets at June 30, 2013.
  • Annualized net charge-offs to average loans decreased to 1.87% for the third quarter of 2013 from 2.78% for the year-earlier third quarter and increased from 1.79% in the second quarter of 2013.
  • Total assets were $714.1 million at September 30, 2013, compared with $772.6 million at December 31, 2012, as the Company has continued to manage asset size consistent with its overall capital management strategy.
  • On September 10, 2013, the Company named John K. Stephens, Jr. as the new Chief Executive Officer of the Company and the Bank; Stephens, who brings with him over 25 years of banking experience, also will serve as a director of the Company and the Bank. Stephens' appointment is contingent upon receipt of regulatory non-objection. Additionally, the Boards of Directors of the Company and the Bank each has four new members, all with extensive management experience and three of whom have served as executives of large community or national banks. The appointment of James D. Hogan, one of the new directors, is contingent upon receipt of regulatory non-objection.

Regulatory Capital

The Company has experienced steady erosion of its capital due to significant net losses over the past five consecutive years. Effective August 10, 2012, the Bank's Board of Directors agreed to the issuance of a Consent Order (the "Order") by the Office of the Comptroller of the Currency. Among other things, the Order called for the Bank to achieve and maintain a Tier 1 capital ratio of 9% of adjusted total assets and a total risk-based capital ratio of 13% of risk-weighted assets by December 31, 2012. The Bank was not in compliance with the capital levels required by the Order at December 31, 2012, and remained non-compliant at September 30, 2013.

Following the rejection of a proposed merger of the Company with Bond Street Holdings, Inc. by stockholders in June 2013, the Company's Board of Directors began evaluating various strategic alternatives to raise capital. Currently, the Company plans to pursue additional equity capital through a public offering or private placement.

         

Key Capital Measures

Sept. 30,

2013

June 30,

2013

March 31,

2013

Dec. 31,

2012

Sept. 30,

2012

Tier 1 (core) capital ratio

(to adjusted total assets)

4.88% 4.83% 5.03% 5.13% 5.11%
Total risk-based capital ratio

(to risk-weighted assets)

10.30% 9.55% 9.81% 9.78% 10.50%
Tier 1 (core) risk-based capital ratio 9.04% 8.29% 8.54% 8.52% 9.23%
 
  • The increase in the key capital measures as of September 30, 2013, was primarily due to the continued decrease in the Company's asset balance, partially offset by the impact of the Company's 2013 third quarter net loss on equity.
 
Credit Quality At

Sept. 30,
2013

 

June 30,
2013

 

March 31,
2013

 

Dec. 31,
2012

 

Sept. 30,
2012

(Dollars in millions)
Non-performing loans $ 13.6 $ 12.4 $ 19.2 $ 24.9 $ 26.3
Non-performing loans to total portfolio loans 3.49 % 3.12 % 4.58 % 5.76 % 5.81 %
Other real estate owned $ 11.5 $ 12.8 $ 10.1 $ 8.1 $ 7.9
Non-performing assets $ 25.1 $ 25.2 $ 29.3 $ 33.0 $ 34.2
Non-performing assets to total assets 3.51 % 3.40 % 3.92 % 4.26 % 4.35 %

Troubled debt restructurings performing for less than 12 months under terms of modification

$ 22.3 $ 21.4 $ 17.8 $ 20.0 $ 18.5

Total non-performing assets and troubled debt restructurings performing for less than 12 months under terms of modification

$ 47.4   $ 46.6   $ 47.1   $ 53.0   $ 52.7  

Troubled debt restructurings performing for more than 12 months under terms of modification

$ 12.3   $ 14.6   $ 13.4   $ 12.5   $ 12.5  
 
  • Non-performing loans increased in the third quarter of 2013 compared with the second quarter of 2013, which we also refer to as the linked quarter, primarily due to a $1.5 million real estate secured commercial loan that is now classified as non-performing, partially offset by transfers of $0.9 million into other real estate owned ("OREO"). OREO decreased over the linked quarter due to $2.2 million of sales of OREO, partially offset by the aforementioned transfers from non-performing loans.
  • Overall, the Company continues to see a slowing in the pace of loans being reclassified as non-performing, particularly in categories such as one-to-four family residential and home equity loans.

  • The increase in troubled debt restructurings in the third quarter of 2013 compared with the prior-year quarter primarily reflected the renewal of a $5.5 million land loan that was previously reported as impaired but performing.
   

Provision / Allowance for Loan Losses

At and for the

Three Months Ended

At and for the

Nine Months Ended

Sept. 30,
2013

 

June 30,
2013

 

Sept. 30,
2012

Sept. 30,
2013

 

Sept. 30,
2012

(Dollars in millions)
Provision for loan losses $ 1.3   $ 1.2   $ 3.5   $ 3.7   $ 10.7  
Allowance for loan losses $ 9.5   $ 10.0   $ 12.7   $ 9.5   $ 12.7  
Allowance for loan losses to total portfolio loans   2.44 %   2.53 %   2.82 %   2.44 %   2.82 %

Allowance for loan losses to non-performing loans

  70.00 %   81.09 %   48.45 %   70.00 %   48.45 %
Net charge-offs $ 1.8   $ 1.8   $ 3.1   $ 5.0   $ 13.5  
Net charge-offs to average outstanding portfolio loans   1.87 %   1.79 %   2.78 %   1.65 %   3.81 %
 
  • The decline in the provision for loan losses in the third quarter and for the first nine months of 2013 compared with the year-earlier quarter and nine-month period reflected reduced non-performing loans and a decline in early-stage delinquencies of one-to-four family residential and home equity loans. The decline during the first nine months of 2013 compared to first nine months of 2012 also reflected provisioning in the 2012 period for certain residential loans charged-off in the second quarter of 2012 and disposed of through a bulk sale, and two commercial loans that were charged-off in the first quarter of 2012 and disposed of through sales.
  • The decrease in net charge-offs in the third quarter of 2013 compared with the third quarter of 2012 primarily reflected $0.4 million less in charge-offs in the third quarter of 2013 related to one-to-four family residential loans and home equity loans, and $0.6 million less in charge-offs related to construction loans in the third quarter of 2013.
  • The decrease in net charge-offs in the first nine months of 2013 compared with the first nine months of 2012 primarily reflected $4.7 million less in charge-offs in 2013 related to one-to-four family residential loans and home equity loans, $1.2 million less in charge-offs in 2013 for collateral-dependent commercial real estate loans, $0.6 million less in charge-offs related to construction loans in the first nine months of 2013, $0.6 million less in charge-offs related to residential land loans in 2013, and $1.0 million less in charge-offs in the first nine months of 2013 related to collateral-dependent commercial land loans.
   
Net Interest Income Three Months Ended Nine Months Ended

Sept. 30,
2013

 

June 30,
2013

 

Sept. 30,
2012

Sept. 30,
2013

 

Sept. 30,
2012

(Dollars in millions)
Net interest income $ 3.8   $ 4.2   $ 4.7   $ 12.3   $ 14.8  
Net interest margin   2.22 %   2.35 %   2.55 %   2.33 %   2.65 %
Yield on investment securities   1.54 %   1.46 %   1.89 %   1.43 %   2.22 %
Yield on loans   5.88 %   5.85 %   5.73 %   5.83 %   5.71 %
Total cost of funds   1.82 %   1.80 %   2.00 %   1.84 %   1.92 %
Average cost of deposits   0.69 %   0.69 %   0.90 %   0.67 %   0.76 %
Rates paid on borrowed funds   4.67 %   4.62 %   4.48 %   4.61 %   4.44 %
 
  • The decline in net interest income for the third quarter of 2013 compared with the linked quarter and year-earlier quarter, as well as the decline in net interest income for the first nine months of 2013 compared with the same period in 2012, primarily reflected a reduction in portfolio and other loans outstanding, as the Company continues to attempt to preserve capital, and the impact of lower interest rates on funds reinvested in investment securities, partially offset by decreased interest expense for deposits and Federal Home Loan Bank of Atlanta ("FHLB") debt.

  • Net interest margin for the third quarter and first nine months of 2013 declined compared with the same periods in 2012 due to the impact of lower interest rates on funds reinvested in investment securities, partially offset by reductions in the cost of deposits and lower interest expense for FHLB advances following prepayment of debt in the first quarter of 2013 totaling $25.0 million that had scheduled maturities in the third and fourth quarters of 2013. Net interest margin for the third quarter of 2013 declined compared to the linked quarter due to the impact of lower interest rates on funds reinvested in investment securities.
  • The increase in yield on investment securities for the third quarter of 2013 compared with the second quarter of 2013 was primarily due to the purchase of $19.5 million of investment securities with a yield greater than the average yield of our portfolio. The decline in yield on investment securities for the third quarter and first nine months of 2013 compared with the year-earlier periods was due to lower yields on reinvested securities and increased amortization of purchase premiums due to higher prepayments.
  • The cost of deposits for the third quarter and first nine months of 2013 declined compared with the same periods in 2012 due to planned re-pricing of deposit products consistent with prevailing rates in the Bank's market during the second half of 2012. On a linked-quarter basis, the cost of deposits was unchanged as deposit pricing has stabilized.
   
Non-Interest Income /

Non-Interest Expense

Three Months Ended Nine Months Ended

Sept. 30,
2013

 

June 30,
2013

 

Sept. 30,
2012

Sept. 30,
2013

 

Sept. 30,
2012

(Dollars in millions)
Non-interest income $ 1.6   $ 1.7   $ 2.7   $ 5.0   $ 6.7  
Non-interest expense $ 5.0   $ 6.2   $ 5.6   $ 18.1   $ 17.0  
Adjusted non-interest expense* $ 5.0   $ 5.1   $ 5.6   $ 16.8   $ 17.0  
Efficiency ratio   93.37 %   105.67 %   75.03 %   104.51 %   78.96 %
Adjusted efficiency ratio*   93.37 %   86.43 %   75.03 %   97.05 %   78.96 %

_________________________

* See reconciliation of GAAP and non-GAAP measures later in this release.

 
  • The decrease in non-interest income for the third quarter and first nine months of 2013 compared with the year-earlier periods primarily reflected a decrease in gains on the sale of securities, as well as a decrease in gains on the sale of loans held-for-sale from mortgage origination activity following a reorganization of this business in the second half of 2012 in order to reduce non-interest expense.
  • The decrease in adjusted non-interest expense in the third quarter of 2013 compared with the year-earlier quarter primarily reflected lower compensation costs, outside professional services, and collection and credit expense, which were partially offset by increased foreclosure costs.
  • The decrease in adjusted non-interest expense in the first nine months of 2013 compared with the same period in 2012 primarily reflected decreased compensation costs, partially offset by the FHLB prepayment penalty, increased collection and credit expense, and higher FDIC insurance expense.

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. Investors may obtain additional information about Atlantic Coast Financial Corporation on the Internet at www.AtlanticCoastBank.net, under Investor Information.


         
ATLANTIC COAST FINANCIAL CORPORATION
Unaudited Financial Highlights

(In thousands, except per share amounts)

 

 

Sept. 30,
2013

June 30,
2013

March 31,
2013

Dec. 31,
2012

Sept. 30,
2012

Total assets $ 714,114 $ 742,194 $ 747,578 $ 772,619 $ 784,810
Cash and cash equivalents 82,584 77,959 77,486 67,828 63,840
Securities available-for-sale 158,070 160,856 154,371 159,746 155,368
Securities held-to-maturity 19,498 -- -- -- --
 
Portfolio loans receivable, gross 389,590 396,314 417,939 432,090 452,120
Allowance for loan losses   9,522     10,029     10,466     10,889     12,729  
Portfolio loans receivable, net   380,068     386,285     407,473     421,201     439,391  
 
Other loans:
Held-for-sale loans 1,083 2,217 2,770 4,089 2,454
Warehouse loans   21,165     60,653     54,055     68,479     71,859  
Total other loans   22,248     62,870     56,825     72,568     74,313  
 
Total deposits 476,043 502,144 502,354 499,760 507,906

Securities sold under agreements to purchase

92,800 92,800 92,800 92,800 92,800
Federal Home Loan Bank advances 110,000 110,000 110,000 135,000 135,000
 

Common stock, retained earnings and other equity

35,089 36,006 37,546 39,574 39,852
Accumulated other comprehensive income (loss)   (5,214 )   (4,841 )   (200 )   686     3,228  
Total stockholders' equity   29,875     31,165     37,346     40,260     43,080  
 
For the Three Months Ended

Sept. 30,
2013

June 30,
2013

March 31,
2013

Dec. 31,
2012

Sept. 30,
2012

Interest income $ 7,015 $ 7,386 $ 7,535 $ 7,919 $ 8,213
Interest expense   3,191     3,207     3,198     3,487     3,497  
Net interest income 3,824 4,179 4,337 4,432 4,716
Provision for loan losses   1,286     1,219     1,234     1,746     3,529  

Net interest income after provision for loan losses

2,538 2,960 3,103 2,686 1,187
Non-interest income 1,559 1,733 1,715 3,408 2,734
Non-interest expense   5,026     6,247     6,857     6,387     5,590  
Loss before income taxes (929 ) (1,554 ) (2,039 ) (293 ) (1,669 )
Income tax (expense) benefit   --     --     --     --     --  
Net loss $ (929 ) $ (1,554 ) $ (2,039 ) $ (293 ) $ (1,669 )
 
Net loss per basic and diluted share $ (0.38 ) $ (0.62 ) $ (0.81 ) $ (0.12 ) $ (0.66 )
 
Basic and diluted weighted average shares outstanding   2,505     2,504     2,504     2,499     2,498  
 

   
ATLANTIC COAST FINANCIAL CORPORATION
Selected Consolidated Financial Ratios and Other Data (Unaudited)

(Dollars in thousands)

 

At and for the

Three Months Ended

Sept. 30,

At and for the

Nine Months Ended

Sept. 30,

2013   2012 2013   2012
Interest rate
Net interest spread 2.12 % 2.40 % 2.20 % 2.49 %
Net interest margin 2.22 % 2.55 % 2.33 % 2.65 %
 
Average balances
Portfolio loans receivable, net $ 383,439 $ 451,020 $ 402,099 $ 473,924
Total interest-earning assets 689,509 739,646 705,141 744,341
Total assets 728,576 776,794 742,989 779,517
Deposits 489,914 498,483 499,802 500,131
Total interest-bearing liabilities 651,624 685,649 659,176 688,839
Total liabilities 698,518 732,485 707,734 733,724
Stockholders' equity 30,058 44,309 35,255 45,793
 
Performance ratios (annualized)
Return on average total assets -0.51 % -0.86 % -0.81 % -1.09 %
Return on average stockholders' equity -12.36 % -15.07 % -17.10 % -18.56 %
Ratio of operating expenses to average total assets 2.76 % 2.88 % 3.25 % 2.90 %
Efficiency ratio 93.37 % 75.03 % 104.51 % 78.96 %
Ratio of average interest-earning assets to average interest-bearing liabilities 105.81 % 107.88 % 106.97 % 108.06 %
 
Credit quality ratios
Non-performing loans $ 13,603 $ 26,272 $ 13,603 $ 26,272
Foreclosed assets 11,472 7,903 11,472 7,903
Impaired loans 26,190 40,201 26,190 40,201
Non-performing assets to total assets 3.51 % 4.35 % 3.51 % 4.35 %
Non-performing loans to total portfolio loans 3.49 % 5.81 % 3.49 % 5.81 %
Allowance for loan losses to non-performing loans 70.00 % 48.45 % 70.00 % 48.45 %
Allowance for loan losses to total portfolio loans 2.44 % 2.82 % 2.44 % 2.82 %
Net charge-offs to average outstanding portfolio loans (annualized) 1.87 % 2.78 % 1.65 % 3.81 %
 
Capital ratios (1)
Tangible stockholders' equity to tangible assets 4.18 % 5.48 % 4.18 % 5.48 %
Average stockholders' equity to average total assets 4.13 % 5.70 % 4.75 % 5.87 %
 

(1)

2013 capital ratios reflect a negative change in the fair value of investment securities in 2013 (primarily in the second quarter of 2013), affecting other comprehensive income, but not regulatory capital.

 

   
ATLANTIC COAST FINANCIAL CORPORATION
Reconciliation of GAAP and Non-GAAP Measures

(In thousands, except per share amounts)

 

The following table provides a reconciliation of net loss and loss per diluted share in accordance with GAAP to adjusted net loss and adjusted loss per diluted share, both non-GAAP measures, in accordance with applicable regulatory requirements. The Company provides non-GAAP earnings information to improve the comparability of its results, provide additional insight into the Company's results, and to allow readers to more clearly assess the fundamental operations of the Company.

 
Three Months Ended Nine Months Ended

Sept. 30,
2013

 

June 30,
2013

 

Sept. 30,
2012

Sept. 30,
2013

 

Sept. 30,
2012

Non-interest expense as reported $ 5,026 $ 6,247 $ 5,590 $ 18,130 $ 16,970
Less merger-related costs   --     1,137     --     1,294     --  
Adjusted non-interest expense $ 5,026   $ 5,110   $ 5,590   $ 16,836   $ 16,970  
 
Net loss as reported $ (929 ) $ (1,554 ) $ (1,669 ) $ (4,522 ) $ (6,374 )
Less merger-related costs   --     1,137     --     1,294     --  
Adjusted net loss $ (929 ) $ (417 ) $ (1,669 ) $ (3,228 ) $ (6,374 )
 
Loss per diluted share as reported $ (0.38 ) $ (0.62 ) $ (0.66 ) $ (1.81 ) $ (2.55 )
Less merger-related costs   --     0.45     --     0.52     --  
Adjusted loss per diluted share $ (0.38 ) $ (0.17 ) $ (0.66 ) $ (1.29 ) $ (2.55 )
 
Efficiency ratio as reported 93.37 % 105.67 % 75.03 % 104.51 % 78.96 %
Effect of merger-related costs   --     19.23 %   --     7.46 %   --  
Adjusted efficiency ratio   93.37 %   86.44 %   75.03 %   97.05 %   78.96 %
 

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 demand for financial services, the state of the banking industry generally, the uncertainties associated with newly developed or acquired operations, and market disruptions. The Company undertakes no obligation to publicly release revisions to these forward-looking statements 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.

CONTACT:
Corporate Communications, Inc.
Patrick Watson, 615-324-7309
pat.watson@cci-ir.com