American Bancorp N J (MM) (NASDAQ:ABNJ)
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American Bancorp of New Jersey, Inc. (NASDAQ: ABNJ) ("American")
announced today earnings of $150,000 for the quarter ended March 31,
2007. By comparison, net income for the quarter ended March 31, 2006 was
$688,000. Basic and diluted earnings per share for the quarter ended
March 31, 2007 were $0.01 and $0.01, respectively. By comparison, for
the quarter ended March 31, 2006, basic and diluted earnings per share
were $0.05 and $0.05, respectively.
The Company’s earnings for the six months
ended March 31, 2007 were $479,000 in comparison to $1.4 million for the
six months ended March 31, 2006. Basic and diluted earnings per share
for the six months ended March 31, 2007 were $0.04 and $0.04,
respectively. By comparison, for the six months ended March 31, 2006,
basic and diluted earnings per share were $0.10 and $0.10, respectively.
For the six months ended March 31, 2007, loans receivable, net increased
$24.3 million or 6.1% to $422.9 million from $398.6 million at September
30, 2006. The growth was comprised of net increases in commercial loans
totaling $30.5 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 $1.6 million. Offsetting the growth
in these categories was a $7.6 million decrease in the balance of 1-4
family first mortgages and net increases to the allowance for loan
losses totaling $243,000.
For that same period, the balance of the Company’s
investment securities decreased $18.1 million from September 30, 2006 as
most 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 $25.6 million.
The reported growth in cash and cash equivalents resulted largely from
the growth in the Bank’s deposits. For the six
months ended March 31, 2007, total deposits increased by $69.1 million
from $327.1 million at September 30, 2006 to $396.2 million. A
significant portion of this growth in deposits was attributable to the
Bank’s newest branch located in Verona, New
Jersey. Deposits at the Verona branch, which celebrated its grand
opening on December 2, 2006, grew to $55.8 million at March 31, 2007.
The remaining $13.3 million of deposit growth was shared between the Bank’s
other branches in Bloomfield and Cedar Grove, New Jersey.
Offsetting this increase was a net decrease in borrowings totaling $13.4
million, primarily attributable to the repayment of overnight FHLB
borrowings of $10.4 million coupled with the repayment of maturing fixed
rate, term advances of $3.0 million. Additionally, the Company reported
an increase of $17.1 million in treasury stock attributable to the
Company’s share repurchase program whose
completion was announced on March 28, 2007.
The continued growth in the Company’s
commercial lending activities contributed significantly to improved
yields on earning assets for the periods reported. For the three and six
month periods ended March 31, 2007, yield on earning assets increased 61
basis points and 62 basis points, respectively, from the same periods in
fiscal 2006. However, the improved yields were more than offset by
increases in the cost of interest-bearing liabilities. For the three and
six month periods ended March 31, 2007, cost of interest-bearing
liabilities increased 106 basis points and 101 basis points,
respectively, from the same comparative periods in fiscal 2006.
The increase in interest costs was largely attributable to higher costs
of interest-bearing deposits. Contributing to this increase in the cost
of interest-bearing deposits 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 also
attributable to continued upward pressure on deposit interest rates in
the highly competitive markets serviced by the Bank. As a result, for
the three and six month periods ended March 31, 2007, the Company’s
net interest spread shrank 46 basis points and 39 basis points,
respectively, to 1.44% and 1.49% compared with that reported for the
same periods in fiscal 2006. For those same comparative three and six
month periods, the Company’s net interest
margin shrank 38 basis points and 24 basis points, respectively, to
2.41% and 2.50%.
The effects of net interest margin compression contributed significantly
to decreases in net interest income. For the three and six month periods
ended March 31, 2007, net interest income decreased $409,000 and
$619,000, respectively, compared with that reported for the same periods
in fiscal 2006.
For the three month period ended March 31, 2007, the decrease in net
interest income was exacerbated by an increase of $34,000 in the net
provision to the allowance for loan losses compared with that reported
for the same period in fiscal 2006. By contrast, for the six month
period ended March 31, 2007, the net provision to the allowance for loan
loss decreased by $3,000 compared with the same period in the prior
fiscal year. The decrease in the comparative six month period reflected
the reversal of an $86,000 loss reserve against a previously impaired
loan participation during the quarter ended December 31, 2006. Excluding
this adjustment, the Bank’s provision expense
for the six month period ended March 31, 2007 increased $83,000. The
reported growth in the provision for loan losses reflects the Company’s
increased strategic emphasis in commercial lending and the comparatively
higher rate of growth in such loan balances in the current fiscal year.
No additions to the allowance for lease and loan losses were required
for nonperforming loans which decreased to 0.25% of total assets at
March 31, 2007 from 0.41% at September 30, 2006.
For the three month period ended March 31, 2007, noninterest income
decreased $17,000 compared with that reported for the same period in
fiscal 2006. The net decrease was primarily attributable to
comparatively lower collections of loan prepayment penalties offset by
increases in income from the cash surrender value of life insurance
attributable to a combination of higher average balances and improved
yields on those assets.
For the six months ended March 31, 2007, noninterest income increased
$245,000 compared with that reported for the same period in fiscal 2006.
The net increase was attributable, in large part, to a comparative
decrease in losses on the sale of investment securities totaling
$260,000. The losses reported in the 2006 period included a $271,000
loss on sale of an underperforming investment security. During the 2007
period, the Company also reported an 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 in noninterest income were comparative reductions in
deposit service fees and charges attributable to comparatively lower
receipts of uncollected and insufficient funds charges on transaction
accounts. Additionally, loan fees and charges decreased due primarily to
comparatively lower loan prepayment penalties.
For the three and six month periods ended March 31, 2007, noninterest
expense increased $458,000 and $1.1 million, respectively, compared with
that reported for the same periods in fiscal 2006. The comparative three
month period increase was primarily attributable to a $438,000 increase
in salaries and employee benefits expense. The increase for the
comparative quarters included increases to employee salaries and payroll
taxes. Such increases were primarily attributable to additions to retail
deposit staff associated with the Company’s
branching strategy and, to a lesser extent, additions to the Company’s
commercial lending support staff. Other noteworthy increases to salaries
and employee benefits resulted from the additional costs associated with
the Company’s 2006 Equity Incentive Plan
approved by shareholders in May, 2006. Finally, director compensation
costs increased due primarily to assumption changes utilized in
retirement benefit expense accruals.
The remaining increase in noninterest expense for the comparative three
month periods comprised increases in occupancy and equipment, data
processing and other noninterest expense primarily attributable to the
start up and ongoing operation of the Bank’s
newest branch in Verona, New Jersey. Offsetting these increases were
reductions in advertising and professional fees, including legal fees.
The 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 higher expense incurred in the earlier
quarter ended March 31, 2006 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 more recent quarter reflect the reduced
financial burden of maintaining and updating those controls as required
to ensure ongoing compliance with the Act.
In large part, the factors causing the increases to operating expenses
for the comparative three month periods described above similarly
affected the operating expenses reported for the comparative six month
periods. Specifically, the increase in noninterest expense of $1.1
million was primarily attributable to a $1.0 million increase in
salaries and employee benefits expense. As above, these increases were
attributable, in part, to increases in employee salaries and payroll
taxes. Such increases were primarily attributable to additions to retail
deposit staff associated with the Company’s
branching strategy and, to a lesser extent, additions to the Company’s
commercial lending support staff. Similarly, noteworthy increases to
salaries and employee benefits also resulted from the costs associated
with the implementation of the Company’s 2006
Equity Incentive Plan. As above, additional expenses were also recorded
for director compensation costs due primarily to assumption changes
utilized in retirement benefit expense accruals. By contrast, the
variance for the comparative six month periods also reflects the
reversal of $131,000 of profit sharing expense recorded in first quarter
of the earlier comparative period resulting from the discontinuation of
that benefit plan.
The remaining increase in noninterest expense for the comparative six
month periods comprised increases in occupancy and equipment, data
processing, advertising and other noninterest expense primarily
attributable to the start up and ongoing operation of the Bank’s
newest branch in Verona, New Jersey. Offsetting these increases were
reductions in professional fees, including legal fees. As above, these
reductions were primarily attributable to comparatively lower compliance
costs relating to Section 404 of the Sarbanes-Oxley Act of 2002.
The following tables present selected financial data as of March 31,
2007 and September 30, 2006 and selected operating data for the three
and six month periods ended March 31, 2007 and March 31, 2006.
FINANCIAL HIGHLIGHTS
(unaudited)
At March 31,
At September 30,
2007
2006
Balance
% Total Assets
Balance
% Total Assets
SELECTED FINANCIAL DATA:
Assets
Cash and cash equivalents
$
32,781
5.91%
$
7,165
1.39%
Securities available-for-sale
57,340
10.34
74,523
14.49
Securities held-to-maturity
9,632
1.74
10,547
2.05
Loans held for sale
417
0.08
-
-
Loans receivable, net
422,889
76.29
398,624
77.51
Premises and equipment
9,192
1.66
6,523
1.27
Federal Home Loan Bank stock
2,752
0.50
3,356
0.65
Cash surrender value of life insurance
12,957
2.34
8,747
1.70
Accrued interest receivable
2,113
0.38
1,979
0.38
Other assets
4,230
0.76
2,855
0.56
Total Assets
$
554,303
100.00
$
514,319
100.00
Liabilities and equity
Deposits
$
396,172
71.47%
$
327,147
63.61%
Advances for taxes and insurance
2,758
0.50
2,466
0.48
Borrowings
42,644
7.69
56,075
10.90
Other liabilities
3,874
0.70
3,770
0.73
Equity
108,855
19.64
124,861
24.28
Total liabilities and equity
$
554,303
100.00%
$
514,319
100.00%
Loan Data
Balance
% Total Loans
Balance
% Total Loans
1-4 family mortgage loans
$
264,762
62.61%
$
272,318
68.32%
Home equity loans
13,321
3.15
12,294
3.08
Home equity lines of credit
19,743
4.67
19,194
4.82
Multifamily mortgage loans
33,017
7.81
35,059
8.80
Nonresidential mortgage loans
58,549
13.84
38,395
9.63
Land and property acquisition loans
4,222
1.00
534
0.13
Construction loans
23,931
5.66
16,155
4.05
Business loans
7,015
1.66
6,078
1.52
Consumer loans
695
0.16
720
0.18
Allowance for loans losses
(2,366)
(0.56)
(2,123)
(0.53)
Loans receivable, net
$
422,889
100.00%
$
398,624
100.00%
Deposit Data
Balance
% Total Deposits
Balance
% Total Deposits
Noninterest-bearing deposits
31,783
8.02
23,545
7.20
Interest-bearing checking
88,666
22.38
31,429
9.61
Savings
99,726
25.17
107,008
32.71
Certificates of deposit
175,997
44.43
165,165
50.48
Deposits
$
396,172
100.00
$
327,147
100.00
FINANCIAL HIGHLIGHTS (continued)
(unaudited)
At March 31,
At September 30,
2007
2006
Capital Ratios
Equity to total assets
19.64%
24.28%
Asset Quality Ratios:
Non-performing loans to total loans
0.33%
0.52%
Non-performing assets to total assets
0.25
0.41
Net charge offs to average loans outstanding
0.00
0.00
Allowance for loan losses to non-performing loans
168.13
101.64
Allowance for loan losses to total loans
0.56
0.53
For the six months ended March 31,
For the three months ended March 31,
2007
2006
2007
2006
SELECTED OPERATING DATA:
Total interest income
$ 13,867
$
12,319
$ 7,159
$
6,239
Total interest expense
7,641
5,474
4,102
2,773
Net interest income
6,226
6,845
3,057
3,466
Provision for loan losses
243
246
193
159
Net interest income after provision for loan losses
5,983
6,599
2,864
3,307
Noninterest income
643
398
355
372
Noninterest expense
5,913
4,809
3,022
2,564
Income before income taxes
713
2,188
197
1,115
Income tax provision
234
837
47
427
Net income
$ 479
$
1,351
$ 150
$
688
Performance Ratios:
Return on average assets
0.18%
0.53%
0.11%
0.54%
Return on average equity
0.83
2.13
0.54
2.14
Net interest rate spread
1.49
1.88
1.44
1.90
Net interest margin
2.50
2.74
2.41
2.79
Noninterest income to average total assets
0.25
0.15
0.26
0.29
Noninterest expense to average total assets
2.26
1.87
2.25
2.00
Efficiency Ratio
86.08
66.39
88.58
66.81
PER SHARE DATA:
Earnings per share
Basic
0.04
0.10
0.01
0.05
Diluted
0.04
0.10
0.01
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.