American Bancorp N J (MM) (NASDAQ:ABNJ)
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American Bancorp of New Jersey, Inc. (NASDAQ: ABNJ) ("American")
announced today earnings of $329,000 for the quarter ended December 31,
2006. By comparison, net income for the quarter ended December 31, 2005
was $663,000. Basic and diluted earnings per share for the quarter ended
December 31, 2006 were $0.03 and $0.03, respectively. By comparison, for
the quarter ended December 31, 2005, basic and diluted earnings per
share were $0.05 and $0.05, respectively.
For the quarter ended December 31, 2006, loans receivable, net increased
$10.9 million or 2.7% to $409.5 million from $398.6 million at September
30, 2006. The growth was comprised of net increases in commercial loans
totaling $14.8 million. Such loans include multi-family, nonresidential
real estate, construction and business loans. The increase in loans
receivable net also included net increases in home equity loans and home
equity lines of credit totaling $1.1 million. Offsetting the growth in
these categories was a $5.0 million decrease in the balance of 1-4
family first mortgages and net increases to the allowance for loan
losses totaling $50,000.
For that same period, the balance of the Company’s
investment securities decreased $10.6 million as incoming cash flows
from that portfolio continued to be reinvested into commercial loans.
This decrease was offset by a net increase in cash and cash equivalents
of $4.5 million at the end the quarter. Additionally, the Bank reported
a $4.1 million increase in the cash surrender value of life insurance
which was acquired to offset the additional cost of recently enacted
additions to executive salary continuation agreements.
Total deposits increased by $26.4 million for the quarter ended December
31, 2006 attributable primarily to the opening of the Bank’s
newest deposit branch located in Verona, New Jersey. The Bank celebrated
the Verona branch grand opening on December 2, 2006 with balances at
that branch totaling $26.9 million at the quarter ended December 31,
2006. Offsetting this increase was a net decrease in borrowings totaling
$4.0 million primarily attributable to the repayment of maturing FHLB
advances totaling $2.0 million and the reduction of overnight borrowings
in the same amount. Additionally, the Company reported an increase of
$12.9 million in Treasury stock attributable primarily to the Company’s
current share repurchase program.
The continued growth in the Company’s
commercial lending activities contributed significantly to improved
yields on earning assets, which increased 63 basis points to 5.48% for
the quarter ended December 31, 2006 from 4.85% for quarter ended
December 31, 2005. However, these improved yields were more than offset
by increases in the cost of interest-bearing liabilities which grew by
94 basis points to 3.93% from 2.99% for the same comparative periods.
This increase in interest costs was largely attributable to higher costs
of interest-bearing deposits, which grew 106 basis points to 3.72% for
the quarter ended December 31, 2006 from 2.66% for the quarter ended
December 31, 2005. Contributing to this increase in the cost of
interest-bearing liabilities was the impact of higher promotional
interest rates paid on new deposit accounts at the Bank’s
Verona branch. However, a significant portion of this increase was
attributable to continued upward pressure on deposit interest rates in
the highly competitive markets serviced by the Bank. As a result, the
Company’s net interest spread shrank 32 basis
points from 1.86% to 1.54% for those same comparative periods.
The factors resulting in the compression of the Company’s
net interest spread also impacted the Company’s
net interest margin. However, the effects of that compression were
somewhat diminished by the significant level of capital held by the
Company. As a result, the Company’s net
interest margin decreased by 12 basis points from 2.71% to 2.59% during
those same comparative periods.
The effects of net interest margin compression contributed significantly
to a $209,000 or 6.2% decrease in net interest income to $3.2 million
for the quarter ended December 31, 2006 from $3.4 million for the
quarter ended December 31, 2005. This decrease was offset, in part, by a
comparatively lower net provision to the allowance for loan losses. For
those same comparative periods, the Company’s
net loan loss provision decreased $37,000 to $50,000 from $87,000. The
provision expense for the quarter ended December 31, 2006 reflected the
reversal of an $86,000 loss reserve against a previously impaired loan
participation. Management’s review of the
loan conducted as of December 31, 2006 concluded that, based upon the
loan’s consistent payment history and the
improved financial performance of the underlying commercial property,
the loan was no longer impaired resulting in the reversal of the prior
impairment reserve. The loan’s classification
was also upgraded from doubtful to substandard. Excluding this
adjustment, the Bank’s provision expense
totaled $136,000 for the quarter ended December 31, 2006.
Noninterest income increased $261,000 to $287,000 for the quarter ended
December 31, 2006 from $26,000 for the quarter ended December 31, 2005.
This increase in noninterest income was primarily attributable to a
$271,000 loss on sale of an underperforming investment security during
the first quarter of fiscal 2006 compared with no such losses in the
current quarter. The net increase in noninterest income also reflected
an $8,000 increase in income from the cash surrender value of life
insurance attributable to a combination of higher average balances and
improved yields on those assets. Offsetting these increases were
decreases in deposit service fees and charges of $23,000 attributable to
comparatively lower receipts of uncollected and insufficient funds
charges on transaction accounts.
Noninterest expense increased $645,000 to $2.9 million for the quarter
ended December 31, 2006 from $2.2 million for the quarter ended December
31, 2005. Significant components of this growth in operating costs
include comparative increases to salaries and employee benefits of
$567,000, increased occupancy and equipment costs of $18,000, increases
in advertising and marketing costs of $68,000 and increases to other non
interest expenses of $50,000. Offsetting these increases were decreases
of $42,000 in legal costs and $18,000 in professional and consulting
fees.
The $567,000 increase in salaries and employee benefits for the
comparative quarters includes increases of $140,000 to employee salaries
and payroll taxes. Such increases were primarily attributable to growth
in the Company’s commercial lending staff and
additions to retail deposit staff associated with the Company’s
branching strategy. Other noteworthy increases to salaries and employee
benefits resulted from the implementation of the Company’s
2006 Equity Incentive Plan approved by shareholders in May, 2006. Costs
relating to the Company’s restricted stock
and stock option plans increased a total of $269,000 from the quarter
ended December 31, 2005 to the quarter ended December 31, 2006.
Additionally, ESOP costs increased $28,000 due to an increase in share
value. Finally, the variance also reflects the reversal of $131,000 of
profit sharing expense recorded in the earlier comparative quarter ended
December 31, 2005 resulting from the discontinuation of that benefit
plan.
The remaining increases in noninterest expense, including the reported
increases in occupancy and equipment costs of $18,000, advertising and
marketing costs of $68,000 and other noninterest expense of $50,000 were
largely attributable to the operation of the Bank’s
newest branch in Verona, New Jersey. In particular, for the quarter
ended December 31, 2006, both advertising and marketing and other
noninterest expense included branch start up costs associated with the
promotion and operation of that branch.
Offsetting these increases in noninterest expense were reductions in
legal expense and professional and consulting fees of $42,000 and
$18,000, respectively. The higher legal costs incurred in the quarter
ended December 31, 2005 were largely attributable to matters resulting
from the completion of Company’s second step
conversion which closed October 5, 2005. Such matters included
significant modifications to the Company’s
ESOP for which no equivalent expense was incurred in the current period.
Comparative decreases in professional and consulting fees were the
result of lower internal and external audit costs associated with the
Sarbanes Oxley Act of 2002 (“the Act”)
during the current quarter. The expense incurred in the quarter ended
December 31, 2005 included a portion of the first year costs associated
with the development, implementation and audit of controls over
financial statement reporting in accordance with Section 404 of the Act.
The lower costs in the quarter ended December 31, 2006 reflect the
reduced financial burden of maintaining and updating those controls as
required to ensure ongoing compliance with the Act.
The following tables present selected financial data as of December 31,
2006 and September 30, 2006 and selected operating data for the quarters
ended December 31, 2006 and December 31, 2005.
FINANCIAL HIGHLIGHTS
(unaudited)
At December 31,
At September 30,
2006
2006
Balance
% TotalAssets
Balance
% TotalAssets
SELECTED FINANCIAL DATA:
Assets
Cash and cash equivalents
$
11,653
2.22%
$
7,165
1.39%
Securities available-for-sale
64,348
12.27
74,523
14.49
Securities held-to-maturity
10,088
1.92
10,547
2.05
Loans held for sale
668
0.13
-
-
Loans receivable, net
409,524
78.11
398,624
77.51
Premises and equipment
7,268
1.39
6,523
1.27
Federal Home Loan Bank stock
3,175
0.61
3,356
0.65
Cash surrender value of life insurance
12,830
2.45
8,747
1.70
Accrued interest receivable
1,983
0.38
1,979
0.38
Other assets
2,783
0.52
2,855
0.56
Total Assets
$
524,320
100.00
$
514,319
100.00
Liabilities and equity
Deposits
$
353,543
67.43%
$
327,147
63.61%
Advances for taxes and insurance
2,369
0.45
2,466
0.48
Borrowings
52,059
9.93
56,075
10.90
Other liabilities
3,777
0.72
3,770
0.73
Amount reclassified on ESOP shares
-
-
-
-
Equity
112,572
21.47
124,861
24.28
Total liabilities and equity
$
524,320
100.00%
$
514,319
100.00%
Loan Data
Balance
% TotalLoans
Balance
% TotalLoans
1-4 family mortgage loans
$
267,358
65.29%
$
272,318
68.32%
Home equity loans
13,141
3.21
12,294
3.08
Home equity lines of credit
19,446
4.75
19,194
4.82
Multifamily mortgage loans
34,320
8.38
35,059
8.80
Nonresidential mortgage loans
46,047
11.24
38,395
9.63
Land and property acquisition loans
4,647
1.13
534
0.13
Construction loans
18,333
4.48
16,155
4.05
Commercial loans
7,662
1.87
6,078
1.52
Consumer loans
743
0.18
720
0.18
Allowance for loans losses
(2,173)
(0.53)
(2,123)
(0.53)
Loans receivable, net
$
409,524
100.00%
$
398,624
100.00%
Deposit Data
Balance
% TotalDeposits
Balance
% TotalDeposits
Noninterest-bearing deposits
26,223
7.42
23,545
7.20
Interest-bearing checking
51,130
14.46
31,429
9.61
Savings
105,601
29.87
107,008
32.71
Certificates of deposit
170,589
48.25
165,165
50.48
Deposits
$
353,543
100.00
$
327,147
100.00
FINANCIAL HIGHLIGHTS (continued)
(unaudited)
At December 31,
At September 30,
2006
2006
Capital Ratios
Equity to total assets
21.47%
24.28%
Asset Quality Ratios:
Non-performing loans to total loans
0.41%
0.52%
Non-performing assets to total assets
0.32
0.41
Net charge offs to average loans outstanding
0.00
0.00
Allowance for loan losses to non-performing loans
129.26
101.64
Allowance for loan losses to total loans
0.53
0.53
For the 3 months ended
December 31,
December 31,
2006
2005
SELECTED OPERATING DATA:
Total interest income
$
6,708
$
6,091
Total interest expense
3,538
2,712
Net interest income
3,170
3,379
Provision for loan losses
50
86
Net interest income after provision for loan losses
3,120
3,293
Noninterest income
287
26
Noninterest expense
2,890
2,245
Income before income taxes
517
1,074
Income tax provision
188
411
Net income
$
329
$
663
Performance Ratios:
Return on average assets
0.26%
0.51%
Return on average equity
1.10
2.12
Net interest rate spread
1.54
1.86
Net interest margin
2.59
2.71
Noninterest income to average total assets
0.22
0.02
Noninterest expense to average total assets
2.26
1.74
Efficiency Ratio
83.60
65.92
PER SHARE DATA:
Earnings per share
Basic
$
0.03
$
0.05
Diluted
$
0.03
$
0.05
The foregoing material contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995
concerning our financial condition, results of operations and business.
We caution that such statements are subject to a number of
uncertainties and actual results could differ materially, and,
therefore, readers should not place undue reliance on any
forward-looking statements. We do not undertake, and specifically
disclaim, any obligation to publicly release the results of any
revisions that may be made to any forward-looking statements to reflect
the occurrence of anticipated or unanticipated events or circumstances
after the date of such statements.