American Bancorp N J (MM) (NASDAQ:ABNJ)
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American Bancorp of New Jersey, Inc. (NASDAQ: ABNJ) ("American" or the “Company”),
the holding company for American Bank of New Jersey (the “Bank”),
announced today net income of $431,000 for the quarter ended June 30,
2008. By comparison, net income for the quarter ended June 30, 2007 was
$150,000. Basic and diluted earnings per share for the quarter ended
June 30, 2008 were $0.04 and $0.04, respectively. By comparison, for the
quarter ended June 30, 2007, basic and diluted earnings per share were
$0.01 and $0.01, respectively.
The Company’s earnings for the nine months
ended June 30, 2008 were $512,000 in comparison to $628,000 for the nine
months ended June 30, 2007. Basic and diluted earnings per share for the
nine months ended June 30, 2008 were $0.05 and $0.05, respectively. By
comparison, for the nine months ended June 30, 2007, basic and diluted
earnings per share were $0.05 and $0.05, respectively.
For the nine months ended June 30, 2008, loans receivable, net increased
$33.3 million or 7.6% to $471.2 million from $437.9 million at September
30, 2007. The growth was comprised of net increases in commercial loans,
including multi-family, commercial real estate, construction and
business loans, totaling $32.5 million. The increase in loans
receivable, net also included net increases in home equity loans and
home equity lines of credit totaling $1.8 million and net increases in
consumer loans of $247,000. Offsetting the growth in these categories
was a $799,000 decrease in the balance of 1-4 family first mortgages and
a net increase to the allowance for loan losses totaling $397,000.
For that same period, the balance of the Company’s
investment securities increased by $27.2 million. This net growth in
securities was largely attributable to a wholesale growth transaction in
March 2008 through which the Company purchased approximately $50.0
million of mortgage-related investment securities funded by an
equivalent amount of borrowings from the FHLB and through reverse
repurchase agreements. The net interest income resulting from this
transaction is intended to augment the Company’s
earnings as it continues to incur the near term costs associated with
executing its business plan. The growth in securities associated with
this transaction was partially offset by the continued reinvestment of a
significant portion of the funds received from maturing debentures and
other mortgage-related security repayments into the loan portfolio. The
Company’s balance of cash and cash equivalents
decreased by $4.8 million which also provided a portion of the funding
for the Company’s reported net loan growth
and continued share repurchases during the current nine month period.
The balance of deposits increased $22.2 million for the nine months
ended June 30, 2008. This net growth reflected increases in certificates
of deposit and noninterest bearing checking accounts of $36.6 million
and $64,000, respectively. This growth was offset by reductions in
interest bearing checking and savings accounts of $13.7 million and
$819,000, respectively. For the same period, borrowings increased $44.0
million reflecting the additions to FHLB advances and reverse repurchase
agreements associated with the $50.0 million wholesale growth
transaction noted above offset by the net repayment of $6.0 million of
maturing FHLB term advances. Additionally, the Company reported a net
increase of $10.5 million in treasury stock attributable primarily to
the Company’s share repurchase programs. For
the nine months ended June 30, 2008, the Company has repurchased a total
of 1,002,070 shares at an average price of $10.44 per share.
The Company’s yield on earning assets
decreased 26 basis points to 5.43% for the quarter ended June 30, 2008
from 5.69% for the quarter ended June 30, 2007. This decrease reflected
the impact of overall reductions in market interest rates on the yields
of repricing assets which has more than offset the beneficial impact on
earning asset yields resulting from the Company’s
growth in higher yielding commercial loans.
The decrease in the yield on earning assets between the comparative
quarters was outpaced by a reduction in the Company’s
interest costs for the same periods. The Company’s
cost of interest-bearing liabilities decreased 86 basis points to 3.44%
for the quarter ended June 30, 2008 from 4.30% for the quarter ended
June 30, 2007. This decrease in interest cost was primarily attributable
to two related factors. First, the Company continued to reduce the
interest rates paid on deposits generated through the three full service
branches opened during fiscal 2007 on which promotional interest rates
had originally been paid. Second, reductions in market interest rates
enabled the Company to reduce rates paid on many interest-bearing
deposit types across all branches. In total, the Company’s
net interest spread widened 59 basis points to 1.99% from 1.40% for
those same comparative periods.
The factors noted in the quarterly discussion above have also effected
the Company’s comparative net interest spread
for the nine months ended June 30, 2008 and 2007. For these comparative
periods, the Company’s net interest spread
widened 28 basis points to 1.74% from 1.46%. The increase in net
interest spread resulted primarily from a 27 basis point decrease in the
Company’s cost of interest-bearing
liabilities to 3.88% from 4.15% while the Company’s
yield on earnings assets increased by 2 basis points to 5.63% from 5.61%.
The factors resulting in the widening of the Company’s
net interest spread also positively impacted the Company’s
net interest margin for both the three and nine month periods ended June
30, 2008. However, the impact of the Company’s
share repurchase plans on net interest margin for each period diminished
the benefits of the widening net interest spread. For the comparative
three and nine month periods ended June 30, 2008 and 2007, the average
balance of treasury stock increased $16.9 million and $19.1 million,
respectively, reflecting the Company’s share
repurchase activity. The foregone interest income on the earning assets
used to fund those share repurchases significantly impacted the Company’s
net interest margin reported for the comparative three and nine month
periods. For the three months ended June 30, 2008, the Company reported
a 21 basis point increase in net interest margin to 2.53% from 2.32% for
the same period in 2007. By contrast, for the nine months ended June 30,
2008, the Company reported a 3 basis point reduction in net interest
margin to 2.41% from 2.44% for the same period in 2007.
The Company reported an increase in net interest income of $649,000 or
21.2% to $3.7 million for the quarter ended June 30, 2008 from $3.1
million for the quarter ended June 30, 2007. This increase was partially
offset by a comparatively greater provision to the allowance for loan
losses. For those same comparative periods, the Company’s
loan loss provision increased $44,000 to $121,000 from $77,000. The
provision for loan losses for both comparative periods primarily
resulted from the application of historical and environmental loss
factors against the net growth in loans in accordance with the Bank’s
loan loss methodology.
For the nine months ended June 30, 2008, the Company reported an
increase in net interest income of $731,000 or 7.9% to $10.0 million
from $9.3 million for the nine months ended June 30, 2007. This increase
was partially offset by a comparatively greater provision for loan
losses. For those same comparative periods, the Company’s
loan loss provision increased $111,000 to $431,000 from $320,000. The
expense for the nine months ended June 30, 2008 reflected a provision of
$34,000 attributable to one impaired construction loan, that portion of
which was deemed uncollectible by management during its asset quality
review conducted at March 31, 2008 and therefore charged off. The
remaining balance of the impaired loan at June 30, 2008, after the
charge off, was approximately $146,000. By contrast, the expense in the
earlier comparative period reflected a reversal of an $86,000 impairment
reserve that was no longer required. Excluding these adjustments, the
provision for loan losses for both comparative periods primarily
resulted from the application of historical and environmental loss
factors against the net growth in loans in accordance with the Bank’s
loan loss methodology.
For the three month period ended June 30, 2008, noninterest income
increased $73,000 to $481,000 from $408,000 for the quarter ended June
30, 2007. The growth in noninterest income was largely attributable to
increases in deposit service fees and charges. A portion of the increase
was attributable to deposit service fees and charges at the Bank’s
de novo branches opened during fiscal 2007. However, the reported
increase was also due to growth in deposit-related fees and charges
within the Bank’s other branches.
Additionally, the Company reported 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. The Company
also reported an increase in other noninterest income attributable
primarily to growth in loan-related fees and charges including, but not
limited to, increases in prepayment penalties and late charges.
Offsetting a portion of these increases in noninterest income was the
absence of loan sale gains that had been reported during the earlier
comparative period when a portion of one-to four-family loans originated
were sold into the secondary market – a
strategy that was discontinued during fiscal 2008 in favor of adding all
loans originated to the Company’s portfolio.
For the nine months ended June 30, 2008, noninterest income increased
$263,000 to $1.3 million from $1.1 million for the same period in 2007.
The growth in noninterest income for the comparative nine month periods
was largely attributable to the same factors as those impacting the
comparative three month periods discussed above.
For the three months ended June 30, 2008, noninterest expense increased
$214,000 to $3.4 million from $3.2 million for the three months ended
June 30, 2007. This growth in noninterest expense was primarily
attributable to increases in occupancy and equipment, data processing,
legal, professional and consulting and other noninterest expenses. These
increases in noninterest expense were partially offset by reductions in
salaries and employee benefits and advertising expenses.
The reported increase of $224,000 in occupancy and equipment expense is
attributable, in part, to the costs of the two additional branches
opened in the latter half of fiscal 2007. However, the comparative
increase also reflects the ongoing operating costs associated with the
Bank’s relocated Bloomfield branch which
opened in April, 2008. Additionally, the increase includes the cost
associated with outsourcing a significant portion of the Company’s
information technology infrastructure support services that had been
provided by in-house resources during the earlier comparative period.
The reported increase of $16,000 in data processing charges was also
largely attributable to the associated costs of the two additional
branches opened in the latter half of fiscal 2007 including both core
processing and item processing expenses.
The reported increase in legal expense was primarily attributable to
recently completed revisions to benefit plan agreements as required by
newly-implemented Internal Revenue Service regulations while the
increase in professional and consulting expenses resulted from
additional costs associated with disaster recovery and physical security
planning and review services utilized during the more recent comparative
quarter.
Finally, the growth in other noninterest expense includes increases in
FDIC insurance expense resulting from both growth in the balance of
FDIC-insured deposits plus the expiration of FDIC insurance credits
which had reduced the Bank’s net cost of FDIC
deposit insurance over several prior quarters. Increases in noninterest
expense also included increases in corporate insurance and regulatory
assessment expenses.
The reported net decrease in compensation expense reflects, in part, the
absence in the current period of the changes in director retirement plan
benefit accrual assumptions that had increased the related expenses
during the earlier comparative period. The remaining portion of the
decrease is largely attributable to accrued compensation expense
reductions based on current year bonus projections.
Notwithstanding these factors, other increases in compensation expense
attributable to the two additional branches opened in the latter half of
fiscal 2007 have been largely offset by the Company’s
other compensation expense control efforts which have resulted in a
nearly 10% reduction in the number of full time equivalent employees
during fiscal 2008. Similarly, the absence of denovo branch grand
opening costs resulted in the reduction in advertising costs reported
for the more recent comparative quarter.
For the nine months ended June 30, 2008, noninterest expense increased
$1.1 million to $10.3 million from $9.1 million for the same period in
2007. The growth in noninterest expense for the comparative nine month
periods was generally attributable to the same factors as those
impacting the comparative three month periods discussed above.
Additionally, the reported increase in compensation expense for the nine
month period included a charge resulting from the death of a director
emeritus of the Company during the second fiscal quarter ended March 31,
2008. Under the terms of the Company’s
restricted stock and stock option plans, the vesting of the remaining
unearned benefits accruing to the former director through these plans
was automatically accelerated. As such, the Company incurred an
acceleration of the remaining pre-tax expenses associated with these
benefits totaling approximately $254,000 during that quarter.
The following tables present selected balance sheet data as of June 30,
2008 and September 30, 2007 and selected operating data for the three
months and nine months ended June 30, 2008 and June 30, 2007.
FINANCIAL HIGHLIGHTS
(unaudited)
At June 30,
At September 30,
2008
2007
Balance
% Total Assets
Balance
% Total Assets
SELECTED FINANCIAL DATA(in thousands):
Assets
Cash and cash equivalents
$
32,643
5.18
%
$
37,421
6.52
%
Securities available-for-sale
85,136
13.50
58,093
10.13
Securities held-to-maturity
6,856
1.09
6,730
1.17
Loans held for sale
-
-
1,243
0.22
Loans receivable, net
471,220
74.70
437,883
76.32
Premises and equipment
12,038
1.91
10,856
1.89
Federal Home Loan Bank stock
3,014
0.48
2,553
0.45
Cash surrender value of life insurance
13,619
2.16
13,214
2.30
Accrued interest receivable
2,365
0.37
2,212
0.39
Other assets
3,832
0.61
3,533
0.61
Total assets
$
630,723
100.00
%
$
573,738
100.00
%
Liabilities and equity
Deposits
$
450,760
71.47
%
$
428,600
74.70
%
Advances for taxes and insurance
2,925
0.46
2,702
0.47
Borrowings
81,564
12.93
37,612
6.56
Other liabilities
4,581
0.73
4,231
0.74
Equity
90,893
14.41
100,593
17.53
Total liabilities and equity
$
630,723
100.00
%
$
573,738
100.00
%
Loan Data
Balance
% Total Loans
Balance
% Total Loans
1-4 family mortgage loans
$
262,648
55.74
%
$
263,448
60.16
%
Home equity loans
14,446
3.07
14,625
3.34
Home equity lines of credit
21,795
4.63
19,829
4.53
Multifamily mortgage loans
33,326
7.07
30,552
6.98
Nonresidential mortgage loans
85,520
18.15
68,431
15.63
Land and property acquisition loans
5,241
1.11
3,340
0.76
Construction loans
41,849
8.88
32,542
7.43
Business loans
8,458
1.79
7,029
1.61
Consumer loans
902
0.19
655
0.15
Allowance for loans losses
(2,965
)
(0.63
)
(2,568
)
(0.59
)
Loans receivable, net
$
471,220
100.00
%
$
437,883
100.00
%
Deposit Data
Balance
% Total Deposits
Balance
% Total Deposits
Noninterest-bearing deposits
30,558
6.78
%
30,494
7.11
%
Interest-bearing checking
98,128
21.77
111,795
26.08
Savings
91,959
20.40
92,778
21.65
Certificates of deposit
230,115
51.05
193,533
45.16
Deposits
$
450,760
100.00
%
$
428,600
100.00
%
FINANCIAL HIGHLIGHTS (continued)
(unaudited)
At June 30,
At September 30,
2008
2007
Capital Ratios
Equity to total assets (%)
14.41
17.53
Outstanding shares (#)
10,948,286
11,946,190
Asset Quality Ratios:
Non-performing loans to total loans (%)
0.19
0.28
Non-performing assets to total assets (%)
0.14
0.22
Allowance for loan losses to non-performing
loans (%)
332.16
205.56
Allowance for loan losses to total loans (%)
0.63
0.58
For thenine months endedJune 30,
For thethree months endedJune 30,
2008
2007
2008
2007
SELECTED OPERATING DATA(in thousands):
Total interest income
$
23,387
$
21,375
$
7,963
$
7,508
Total interest expense
13,366
12,085
4,250
4,444
Net interest income
10,021
9,290
3,713
3,064
Provision for loan losses
431
320
121
77
Net interest income after provision for loan
losses
9,590
8,970
3,592
2,987
Noninterest income
1,314
1,051
481
408
Noninterest expense
10,263
9,117
3,420
3,204
Income (loss) before income taxes
641
904
653
191
Provision (benefit) for income taxes
129
276
222
41
Net income (loss)
$
512
$
628
$
431
$
150
Performance Ratios:
Return on average assets
0.12
%
0.16
%
0.28
%
0.11
%
Return on average equity
0.72
0.75
1.89
0.56
Net interest rate spread
1.74
1.46
1.99
1.40
Net interest margin
2.41
2.44
2.53
2.32
Noninterest income to average total assets
0.30
0.26
0.31
0.29
Noninterest expense to average total assets
2.32
2.27
2.20
2.30
Efficiency Ratio
90.55
88.16
81.52
92.29
PER SHARE DATA:
Earnings per share
Basic
0.05
0.05
0.04
0.01
Diluted
0.05
0.05
0.04
0.01
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.