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Atlantic Coast Financial Corporation Reports Significantly Higher Earnings for the First Quarter of 2016

JACKSONVILLE, Fla., Apr 27, 2016 (BUSINESS WIRE) -- Atlantic Coast Financial Corporation (Atlantic Coast or the Company) ACFC, -0.16% the holding company for Atlantic Coast Bank (the Bank), today reported that earnings per diluted share increased to $0.10 for the first quarter ended March 31, 2016, from $0.03 for the first quarter last year.

The Company's results for the first quarter of 2016 included a gain on the sale of investment securities in February 2016 totaling $0.8 million. The investment securities transaction added approximately $0.5 million to net income, or $0.03 per diluted share for the first quarter of 2016. Excluding the transaction, core earnings per diluted share of $0.07 for the first quarter of 2016 more than doubled from $0.03 per diluted share for the first quarter last year. Core earnings per diluted share is a non-GAAP financial measure, and a reconciliation of GAAP to non-GAAP financial measures is presented on page 4.

Commenting on the Company's results, John K. Stephens, Jr., President and Chief Executive Officer, said, "The strength of our first quarter results reflected a number of factors, including an increase in total loans over the course of the quarter, due to solid production in all of our lines of business. Also contributing to our earnings momentum was a significant gain on the sale of investment securities and ongoing, across-the-board improvements in key credit quality metrics. Our employees have continued to focus on building strong relationships across our markets, laying the groundwork for new business opportunities for Atlantic Coast everyday. Considering our earnings growth, credit quality and strong capital position, as well as the dedication of our team to continually enhance the role we play in banking for the communities we serve, we believe Atlantic Coast is well-positioned for success throughout the remainder of 2016, which will further benefit both our customers and stockholders."

Other significant highlights of the first quarter of 2016 include:

  • Net interest income improved to $6.1 million for the three months ended March 31, 2016, from $4.4 million for the three months ended March 31, 2015. Additionally, net interest spread and net interest margin improved to 2.88% and 2.99%, respectively, for the three months ended March 31, 2016, from 2.40% and 2.62%, respectively, for the same quarter last year.
  • Total loans (including portfolio loans, loans held-for-sale, and warehouse loans held-for-investment) increased 10% to $721.5 million at March 31, 2016, from $654.2 million at December 31, 2015, primarily reflecting originations in all lines of business and supplemented by selective loan acquisitions.
  • Nonperforming assets, as a percentage of total assets, decreased to 0.86% at March 31, 2016, from 0.87% at December 31, 2015, and 1.16% at March 31, 2015.
  • Total assets increased to $893.0 million at March 31, 2016, from $857.2 million at December 31, 2015, primarily due to an increase in loans during the quarter, which was partially offset by a decrease in investment securities.
  • The Bank's ratios of total risk-based capital to risk-weighted assets and Tier 1 (core) capital to adjusted total assets were 13.08% and 9.20%, respectively, at March 31, 2016, and each continued to exceed the levels – 10% and 5%, respectively – currently required for the Bank to be considered well-capitalized.

Tracy L. Keegan, Executive Vice President and Chief Financial Officer, added, "The first quarter of 2016 was the ninth consecutive profitable quarter for Atlantic Coast. During the quarter, we continued to strengthen our balance sheet and expand net interest spread and net interest margin, which were up 48 and 37 basis points, respectively, compared with that of the same period in 2015. As a result, our net interest income increased 38% compared with the first quarter of 2015, while earnings per diluted share grew 233% on a comparable basis. Additionally, during the quarter, the market provided us with an opportunity to sell certain investment securities with low fixed-rate yields, which we expect will improve our long-term interest rate risk position. As our growth and earnings strategies pay off, we continue to gain momentum across our market footprint and create greater value for our stockholders."

Bank Regulatory Capital At

Key Capital Measures

March 31,

2016

Dec. 31,

2015

Sept. 30,

2015

June 30,

2015

March 31,

2015

Total risk-based capital ratio (to risk-weighted assets)

13.08 % 13.91 % 14.73 % 14.74 % 15.86 %

Common equity tier 1 (core) risk-based capital ratio (to risk-weighted assets)

11.91 % 12.66 % 13.47 % 13.48 % 14.61 %

Tier 1 (core) risk-based capital ratio (to risk-weighted assets)

11.91 % 12.66 % 13.47 % 13.48 % 14.61 %

Tier 1 (core) capital ratio (to adjusted total assets)

9.20 % 9.49 % 9.55 % 9.69 % 10.38 %

The gradual decrease in capital ratios over the past year primarily reflected growth in the Bank's balance sheet, especially with respect to portfolio loans, which resulted in an increase in risk-weighted assets and adjusted total assets, partially offset by an increase in capital.

Credit Quality At
March 31, 2016 Dec. 31, 2015 Sept. 30, 2015 June 30, 2015 March 31, 2015
(Dollars in millions)
Nonperforming loans $ 4.5 $ 4.2 $ 4.0 $ 3.9 $ 4.4

Nonperforming loans to total portfolio loans

0.69 % 0.69 % 0.74 % 0.82 % 0.94 %
Other real estate owned $ 3.2 $ 3.2 $ 3.5 $ 3.9 $ 4.2
Nonperforming assets $ 7.7 $ 7.4 $ 7.5 $ 7.8 $ 8.6
Nonperforming assets to total assets 0.86 % 0.87 % 0.92 % 0.97 % 1.16 %

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

$ 4.5 $ 4.5 $ 5.2 $ 6.0 $ 14.1

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

$ 12.2 $ 11.9 $ 12.7 $ 13.8 $ 22.7

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

$ 31.2 $ 30.5 $ 29.7 $ 28.9 $ 22.1

Overall, the Company's credit quality remains strong, as the number and balance of loans reclassified to nonperforming and other real estate owned (OREO) have stabilized. Nonperforming assets at March 31, 2016, were slightly higher than those at December 31, 2015, due to additional loans being reclassified to nonperforming, where were partially offset by principal reductions and loan payoffs of existing nonperforming loans. Nonperforming assets at March 31, 2016, were lower than those at March 31, 2015, primarily due to net reductions of OREO, partially offset by a slight increase in nonperforming loans.

Provision / Allowance for Loan Losses

At and for the

Three Months Ended

March 31,

2016

Dec. 31,

2015

March 31,

2015

(Dollars in millions)
Provision for portfolio loan losses $ 0.2 $ 0.2 $ 0.2
Allowance for portfolio loan losses $ 7.8 $ 7.7 $ 7.2
Allowance for portfolio loan losses to total portfolio loans 1.20 % 1.27 % 1.53 %
Allowance for portfolio loan losses to nonperforming loans 174.50 % 183.31 % 162.98 %
Net charge-offs $ 0.1 $ 0.1 $ 0.2
Net charge-offs to average outstanding portfolio loans 0.08 % 0.08...

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