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BankAtlantic Bancorp Reports Profit of $23 Million For the Second Quarter, 2011

^{Published on 2011-07-27 13:26:09 - Market Wire}
 

FORT LAUDERDALE, Fla.--([ BUSINESS WIRE ])--BankAtlantic Bancorp, Inc. (NYSE: BBX) today reported net income of $23.4 million, or $0.35 per diluted share, for the quarter ended June 30, 2011, compared to a net loss of ($51.3) million, or ($1.02) per diluted share, for the quarter ended June 30, 2010. Its banking subsidiary, BankAtlantic, had net income of $31.0 million for the second quarter of 2011, compared to a net loss of ($39.9) million for the second quarter of 2010. Included in the results for the second quarter of 2011 was a gain of $38.7 million associated with the June 2011 sale of BankAtlantic?s Tampa branch network.

"BankAtlantic?s core and total deposits at June 30, 2011 were $2.6 billion and $3.4 billion, respectively."

BankAtlantic Bancorp?s Chairman and Chief Executive Officer, Alan B. Levan, commented, ?Our results this quarter reflect the strong operating metrics at BankAtlantic, the gain on the Tampa deposit and branch sale, and what we believe is the improved economic environment in Florida. During the second quarter of 2011, provisions and charge offs continued to decline, and fewer loans migrated to default status. Deposits continue to be strong, leverage is low, and nonperforming assets are down. And importantly, BankAtlantic?s regulatory capital ratios, which have been generally stable and in excess of all regulatory well-capitalized standards since the downturn began in 2006, improved significantly during the second quarter of 2011 to levels not only in excess of all regulatory requirements, but higher than the ratios were before the onset of the economic downturn .

?We believe our continued focus on the fundamentals of Capital, Credit and Core Earnings, combined with the growing optimism for the Florida economy, will continue to yield a brighter outlook for BankAtlantic.

Highlights of the BankAtlantic Operating Segment

• ?BankAtlantic exceeded all of its regulatory capital requirements at June 30, 2011, with a Tier 1/Core Capital Ratio of 8.24% and a Total Risk Based Capital Ratio of 14.52%.
• ?BankAtlantic completed the sale of its 19 Tampa branches and related deposits to PNC Bank, N.A., part of the PNC Financial Services Group Inc. (NYSE: PNC), in June 2011, and recorded a gain of $38.7 million.
• ?Credit metrics reflected overall improvement, with reductions in nonaccrual loans and nonperforming assets, improvement in early stage delinquencies to the lowest level in three years, lower net charge offs as compared to the last two quarters (and lower than eight of the last ten quarters), and a continued slowing pace of new nonaccrual loans and real estate valuation declines. Reflecting these improved credit metrics, the provision for loan losses for the second quarter of 2011 was $10.2 million, the lowest loan provision in over three years for BankAtlantic.
• ?Core operating earnings⁽¹⁾ have remained solid. For the second quarter of 2011, core operating earnings were $11.7 million, improved from both the prior quarter and the second quarter of 2010, and the net interest margin remained stable at 3.30%.

?BankAtlantic?s deposit funding sources, the foundation of its franchise, remain strong, with customer deposits representing 99% of BankAtlantic?s funding at June 30, 2011. Core⁽²⁾ and total deposits at June 30, 2011 totaled $2.6 billion and $3.4 billion, respectively, with a cost of core and total deposits of 0.22% and 0.41%, respectively, for the second quarter 2011, compared to the publicly traded Florida Bank and Thrift median cost of deposits of 1.08% as of March 31, 2011. Further, BankAtlantic had no outstanding borrowings from the FHLB at June 30, 2011. BankAtlantic?s total cost of funds for the second quarter of 2011 continued to decline to 0.57%, from 0.62% for the fourth quarter of 2010.

• ?Available liquidity, which includes cash, unpledged securities and unused FHLB borrowing capacity remained robust at June 30, 2011, at 35.0% of deposits.

?As we have previously disclosed, we believe that BankAtlantic?s loan losses peaked in 2009 and that the trends continue to support our optimism that we are on the path toward recovery. These trends, from the beginning of the recession through the current quarter, are reflected in the Supplemental Graphs which should be viewed in conjunction with the Supplemental Financials on our BankAtlantic Bancorp?s Investor Relations website.

⁽¹⁾ Pre-tax core operating earnings is a non-GAAP measure that we use to refer to pre-tax earnings before gain on sale of Tampa branches, provision for loan losses, tax certificate provisions, debt redemption costs, gains/losses on sales of real estate, and impairments, restructuring and exit activities. A reconciliation of loss from bank operations before income taxes to pre-tax core operating earnings is included in BankAtlantic Bancorp?s Second Quarter, 2011 Supplemental Financials available at [ www.BankAtlanticBancorp.com ]. To view the financial data, access the ?Investor Relations? section and click on the ?Quarterly Financials or Supplemental Financials? navigation links.

⁽²⁾ Core deposits is a term that we use to refer to Demand, NOW and Savings accounts. A reconciliation of core deposits to total deposits is included in BankAtlantic Bancorp?s Second Quarter, 2011 Supplemental Financials available at [ www.BankAtlanticBancorp.com ].To view the financial data, access the ?Investor Relations? section and click on the ?Quarterly Financials or Supplemental Financials? navigation links.

Supplemental graphs for BankAtlantic (bank only) are provided as a means to illustrate many of the metrics described above.To view the supplemental graphs, please visit our website at [ www.BankAtlanticBancorp.com ], access the ?Investor Relations? section and click on the ?Supplemental Graphs? navigation link.

Additional detailed financial data for BankAtlantic (bank only), the Parent- BankAtlantic Bancorp, and consolidated BankAtlantic Bancorp are available at [ www.BankAtlanticBancorp.com ]. To view the financial data, access the ?Investor Relations? section and click on the ?Quarterly Financials or Supplemental Financials? navigation links.

BANKATLANTIC PERFORMANCE

CAPITAL:

BankAtlantic?s Chief Executive Officer, Jarett S. Levan, commented, ?As noted previously, BankAtlantic?s capital exceeded all regulatory capital requirements applicable to it at June 30, 2011 with a Tier 1/Core Capital Ratio of 8.24% and a Total Risk Based Capital Ratio of 14.52%, having increased from March 31, 2011 ratios of 5.97% and 11.76%, respectively. The increase in capital ratios in the second quarter of 2011 was the result of the impact of the Tampa branch sale (both the net gain and the related reduction in assets), a $20 million capital contribution from BankAtlantic Bancorp, improved operating performance and lower tangible asset balances at BankAtlantic. Throughout the last several difficult years for the U.S. and Florida economy, BankAtlantic?s capital ratios never fell below applicable regulatory requirements. Historical capital ratios at BankAtlantic were:

CREDIT:

?When we compare the current 2011 quarter with the past two years, we are encouraged by what we believe are improvements in recent credit trends, including improvements in our delinquencies, nonperforming loan trends and provisions for credit losses.

• ?Delinquencies excluding non-accrual loans and matured loans in the process of renewal were $27.8 million or 0.99% of total loans at June 30, 2011, as compared to $55.7 million or 1.86% of total loans at March 31, 2011, and $43.4 million or 1.23% of total loans at June 30, 2010. These early stage delinquency balances for total delinquencies excluding non-accrual loans at June 30, 2011 were the lowest levels in three years, the lowest levels in two years for the Consumer portfolio and the lowest level in eleven quarters for the Residential Real Estate portfolio. We are particularly encouraged by the delinquency trends in these homogenous portfolios.
• ?Total non-accrual loans were $316.6 million at June 30, 2011, reflecting a decrease of $46.0 million or 13% as compared to March 31, 2011, and a decrease of $45.5 million or 13% as compared to June 30, 2010. Total new non-accrual loans in the second quarter of 2011 totaled $33.1 million as compared to $44.7 million in the first quarter of 2011 and $100.7 million in the second quarter of 2010.

- ?The declines in non-accrual loans in the second quarter of 2011 were primarily due to a reduction of $48.9 million of commercial real estate non-accrual loans, reflecting two loan sales at book value (proceeds of $10.1 million), charge offs of $13.5 million, migration to real estate owned of $15.4 million, new non-accruals of $12.2 million, and loan paydowns including two totaling $5.5 million of non-accrual loans that were continuing to pay under the terms of their loan agreements.

- ?New non-accrual commercial real estate loans in the second quarter of 2011 totaled $12.2 million (of which $6.9 million continued to be current) as compared to $17.2 million in the first quarter of 2011 and $73.3 million in the second quarter of 2010.

- ?At June 30, 2011, approximately $91.4 million of commercial real estate and commercial business non-accrual loans (representing 44% of those categories? non-accrual loans and 28.9% of total non-accrual loans) were impaired but continued to be current and paying under the terms of their loan agreements.

• ?Net charge-offs were $26.6 million in the second quarter of 2011, compared to $27.8 million in the first quarter of 2011 and $32.5 million in the second quarter of 2010.
• ?BankAtlantic?s allowance for loan losses was $137.9 million at June 30, 2011. The allowance coverage to total loans was 4.92% at June 30, 2011, compared to 5.20% at March 31, 2011 and 5.08% at June 30, 2010.

- ?The provision for loan losses in the second quarter of 2011 was $10.2 million compared to $27.8 million in the first quarter of 2011 and $43.6 million in the second quarter of 2010. The lower provision in the second quarter of 2011 is reflective of the overall improvement in credit trends (particularly in the homogenous portfolios) and the net reversal of $12.6 million of specific reserves due to charge-offs, loan paydowns and sales, the net reduction of impairment charges on existing impaired loans, and fewer new loans impaired during the quarter.

CORE EARNINGS:

• Results of Operations ? ?BankAtlantic?s net income was $31.0 million for the second quarter of 2011, compared to a net loss of ($39.9) million for the second quarter of 2010.

- ?Pretax core operating earnings for the second quarter of 2011 were $11.7 million, compared to $9.1 million for the second quarter of 2010. Gain on sale of Tampa branches and deposits, loan loss and tax certificate provisions, debt redemption costs, loss on real estate sold and impairment, restructuring and exit activity expenses, which are not included in pre-tax core operating earnings, were $19.3 million for the second quarter of 2011 versus ($48.9) million for the second quarter of 2010. The individual components of earnings are described more fully below.

- ?BankAtlantic completed the sale of its 19 Tampa branches and related deposits to PNC Bank, N.A. (?PNC?) in June 2011. The transaction, which included the assumption by PNC of $324.3 million in deposits and resulted in a net reduction of assets for BankAtlantic of $285.1 million (no loans were sold in this transaction), resulted in a gain of $38.7 million. The impact of the net gain and the reduction of assets increased BankAtlantic?s Tier 1/Core capital ratio by approximately 152 basis points. We were pleased with the deposit premium associated with this transaction, and we believe that it reflects the high quality of the deposits not only in Tampa but throughout the BankAtlantic network.

DEPOSITS: ?BankAtlantic?s core and total deposits at June 30, 2011 were $2.6 billion and $3.4 billion, respectively.

• ?During the second quarter of 2011:

- Core deposits (excluding those associated with the Tampa branches) decreased slightly by $64.7 million from March 31, 2011, reflecting typical seasonality in BankAtlantic?s deposits.

- Total deposits (excluding those associated with the Tampa branches) decreased by $187.7 million from March 31, 2011, reflecting primarily a decline in higher-cost certificates of deposit.

?In addition, the average cost of core deposits and total deposits for the second quarter of 2011 was 0.22% and 0.41%, respectively; brokered deposit balances were minimal at $9.17 million, or 0.3% of total deposits; and non-CD balances represented approximately $3.0 billion, or 87% of total deposits.

Net Interest Income and Margin? ?Net interest income for the second quarter of 2011 was $33.0 million, compared to $37.0 million for the second quarter of 2010. The reduction in the current quarter net interest income versus the prior year quarter reflected the impact of decreases in earning assets and increases in cash and lower-yielding investments.

• ?Net interest margin during the second quarter of 2011 was 3.30% as compared to 3.49% during the second quarter of 2010.
• ?Net interest spread during the second quarter of 2011 was 3.16% as compared to 3.30% during the second quarter of 2010.

- ?The cost of interest bearing liabilities during the second quarter of 2011 was 0.57%, an improvement from 0.78% in the second quarter of 2010.

- ?The yield on total loans (including nonperforming loans) during the second quarter of 2011 was 4.51%, increased from 4.44% in the second quarter of 2010.

• ?Investments averaged $1.1 billion during the second quarter of 2011 with a yield of 1.54%, as compared to an average of $648.8 million during the second quarter of 2010 with a yield of 2.12%. The yield was impacted negatively due to average invested excess cash of $551.8 million during the second quarter of 2011 earning an average yield of 30 basis points. This compares to $254.7 million in average invested excess cash during the second quarter of 2010 earning an average yield of 22 basis points. The June 2011 sale of the Tampa branches was funded entirely by cash, decreasing the excess cash balances at June 30, 2011 to $297.9 million. Even after completion of the Tampa branch sale, available liquidity at June 30, 2011 remained significant at 35.0% of deposits.
• ?Other average balance sheet activity impacting net interest income included:

- ?Average earning assets of $3.99 billion for the second quarter of 2011 were $251.9 million less than average earning assets for the second quarter of 2010, reflecting a decline in average loans of $649.5 million due primarily to routine paydowns and net charge-offs, offset by the increase in average investments discussed above primarily from cash inflows.

- ?Nonperforming assets decreased by $20.1 million from June 30, 2010 to June 30, 2011.

Non-interest income ? ?Total non-interest income for the second quarter of 2011 was $60.1 million, or $21.4 million excluding the $38.7 million gain on the sale of the Tampa branches. This was down from non-interest income of $26.3 million in the second quarter of 2010, primarily reflecting declines in service charges relating to lower levels of customer non-sufficient funds activity.

Non-interest expense ? ?Total non-interest expenses were $51.9 million in the second quarter of 2011 compared to $59.5 million in the second quarter of 2010. Core expenses ⁽³⁾ were $42.7 million in the second quarter of 2011, compared to core expenses of $54.2 million in the second quarter of 2010, reflecting a $5 million decrease in employee compensation and benefits due to lower staffing levels, a $3.7 million decrease in professional fees due to a refund of $3.3 million in legal costs from insurers in the second quarter of 2011 as compared to a $1.4 million reimbursement in the second quarter of 2010, and a $2.3 million decrease in occupancy and equipment expense. The core operating efficiency ratio in the second quarter of 2011 was 78.6%, improved from 85.7% in the second quarter of 2010.

?Expenses not included in ?core expenses? consisted of the following:

• ?Impairment, restructuring and exit activities of $7.4 million in the second quarter of 2011, versus charges of $2.2 million in the second quarter of 2010. The charges in the second quarter of 2011 included:
  • Charges totaling $6.2 million related to write-downs of real estate owned.
  • Net recovery of ($0.3) million of restructuring charges, primarily related to favorable lease terminations on unused leased property sites.
  • Lower of cost or market adjustments on loans held for sale of $1.5 million.

⁽³⁾ Core expense is a non-GAAP measure that we use to refer to total non-interest expenses excluding tax certificate provisions, debt redemption costs, gains/losses on sales of real estate, impairments, restructuring and exit activities. A reconciliation of total expense to core expense is included in BankAtlantic Bancorp?s Second Quarter, 2011 Supplemental Financials available at [ www.BankAtlanticBancorp.com ]. To view the financial data, access the ?Investor Relations? section and click on the ?Quarterly Financials or Supplemental Financials? navigation links.

• ?Tax certificate provision of $1.0 million in the second quarter of 2011, versus $2.1 million in the second quarter of 2010.
• ?Gain on sale of real estate of $0.4 million in the second quarter of 2011, versus a loss of ($0.9) million in the second quarter of 2010.
• ?Costs associated with debt redemption of $1.1 million in the second quarter of 2011.

?We were very pleased with the response from customers relating to our recently launched products, services and initiatives including seamless mobility using BankAtlantic?s Mobile Banking Application for the Android, our iPhone, iPad and iPod Touch app, Mobile Web and Text Message Banking. Further, we were pleased to announce that BankAtlantic is the most active community bank lender in the South Florida District of the Small Business Administration (the ?SBA?) based on loan units approved. Additionally, BankAtlantic is the fourth most active SBA overall lender (as of May 31, 2011)in the?SBA's South Florida District based on loan units approved, and has occupied that position for the entire fiscal year.?

BANKATLANTIC BANCORP (Parent Company only):

Alan B. Levan further commented, ?BankAtlantic Bancorp?s (Parent Company only) net loss was ($7.6) million for the second quarter of 2011, compared to a net loss of ($11.4) million for the second quarter of 2010. The second quarter of 2011 included loan provisions of $0.5 million as compared to loan provisions of $4.9 million in the second quarter of 2010. Additionally, the net loss in the second quarter of 2011 included a $1.5 million impairment charge relating to an investment held by BankAtlantic Bancorp.

?During the second quarter of 2011, BankAtlantic Bancorp completed a rights offering for Class A Common Stock, receiving approximately $11.3 million in proceeds, and issuing an aggregate of approximately 15.1 million shares of its Class A Common Stock to participating shareholders, increasing total outstanding Class A and Class B Common Shares of BankAtlantic Bancorp to 78,133,720 shares as of June 30, 2011. BankAtlantic Bancorp used the funds from the offering as part of its $20 million capital contribution to BankAtlantic in June 2011.

?In the fourth quarter of 2008, BankAtlantic Bancorp and BankAtlantic recorded a full valuation allowance against its net deferred tax asset, and have continued to maintain a full valuation allowance against this asset on the balance sheet and in its capital calculations. Accordingly, although we recorded net income for the second quarter of 2011, the net tax provision for the quarter is zero. At June 30, 2011, the total Federal and State deferred tax asset balance, before netting the full valuation allowance, was $195.1 million, with $145.1 million related to BankAtlantic and $50.0 million related to BankAtlantic Bancorp (Parent only). The deferred tax asset valuation allowance will remain in place until it is determined that the asset would more likely than not be realized as a result of future income. In other words, at such time as we are able to demonstrate sustainable future income, part or all of the valuation allowances at BankAtlantic and BankAtlantic Bancorp would be reversed through the tax provision into net income and book value.

?Additionally, as first announced in the first quarter of 2009, we continue to defer the regularly scheduled interest payments on the outstanding junior subordinated debentures relating to all of our trust preferred securities, which is permitted under the terms of the securities for up to another 10 consecutive quarterly periods. Total deferred interest amounted to $35.4 million at June 30, 2011.

Asset Workout Subsidiary ? ?The loans and real estate owned held by BankAtlantic Bancorp?s workout subsidiary at June 30, 2011 included real estate owned of $8.6 million, performing loans of $2.6 million and non-accrual loans of $9.4 million. Charge-offs of $21.0 million have previously been taken on these non-accrual loans, and no reserves are currently maintained related to these loans.

REGULATORY AND LEGAL MATTERS:

?As previously disclosed, on February 23, 2011, BankAtlantic Bancorp and BankAtlantic each entered into agreements (?Orders?) with the Office of Thrift Supervision (the ?OTS?), agreeing to continue to take actions to strengthen their financial condition and operations, including requiring BankAtlantic to meet by June 30, 2011 and maintain a Tier 1/Core capital ratio of 8% and a Total Risk Based capital ratio of 14%. As reported herein, BankAtlantic exceeded these capital requirements at June 30, 2011, and both BankAtlantic and BankAtlantic Bancorp are in full compliance with the Orders.

?Additionally, as previously disclosed, BankAtlantic Bancorp recently received positive resolutions in two shareholder suits. In re BankAtlantic Bancorp, Inc. Securities Litigation, on April 25, 2011, the United States District Court for the Southern District of Florida granted defendants? post-trial motion for judgment as a matter of law and vacated the prior jury verdict, resulting in a judgment in favor of all defendants and claims. The plaintiffs are appealing the Court?s order setting aside the jury verdict. In D.W. Hugo vs. BankAtlantic Bancorp, etal, on July 13, 2011, the United States District Court for the Southern District of Florida granted final approval of the settlement, whereby the parties have exchanged releases and neither the individual defendants nor the Company will make any monetary payments.?

Additional detailed financial data for BankAtlantic (bank only), the Parent- BankAtlantic Bancorp, and consolidated BankAtlantic Bancorp are available at [ www.BankAtlanticBancorp.com ]

To view the financial data, access the ?Investor Relations? section and click on the ?Quarterly Financials or Supplemental Financials? navigation links. Additionally, BankAtlantic?s financial information is provided quarterly to the OCC through Thrift Financial Reports, available to the public through the OCC and FDIC websites.

Additionally, copies of BankAtlantic Bancorp?s second quarter, 2011 financial results press release and financial data are available upon request via fax, email, or postal service mail. To request a copy, contact BankAtlantic Bancorp's Investor Relations department using the contact information listed below.

About BankAtlantic Bancorp:

BankAtlantic Bancorp (NYSE: BBX) is a bank holding company and the parent company of BankAtlantic.

About BankAtlantic:

BankAtlantic, Florida?s Most Convenient Bank, is one of the largest financial institutions headquartered in Florida. Via its broad network of community branches and conveniently located ATMs, BankAtlantic provides a full line of personal, small business and commercial banking products and services. BankAtlantic is open 7 days a week and offers extended weekday hours, Online Banking & Bill Pay, a 7-Day Customer Service Center, Change Exchange coin counters, as well as retail and business checking accounts. Member FDIC.

For further information, please visit our websites:

[ www.BankAtlanticBancorp.com ]

[ www.BankAtlantic.com ]

To receive future BankAtlantic Bancorp news releases or announcements directly via Email, please click on the Email Broadcast Sign Up button on our website: [ www.BankAtlanticBancorp.com ].

Except for historical information contained herein, the matters discussed in this press release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the ?Securities Act?), and Section 21E of the Securities Exchange Act of 1934, as amended (the ?Exchange Act?), that involve substantial risks and uncertainties. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements contained herein.These forward-looking statements are based largely on the expectations of BankAtlantic Bancorp, Inc. (?the Company?) and are subject to a number of risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company?s control.These include, but are not limited to, risks and uncertainties associated with: the impact of economic, competitive and other factors affecting the Company and its operations, markets, products and services, including the impact of the changing regulatory environment, a continued or deepening recession, continued decreases in real estate values, and increased unemployment or sustained high unemployment rates on our business generally, BankAtlantic?s regulatory capital ratios, the ability of our borrowers to service their obligations and of our customers to maintain account balances and the value of collateral securing our loans; credit risks and loan losses, and the related sufficiency of the allowance for loan losses, including the impact of the economy and real estate market values on the credit quality of our loans (including those held in the asset workout subsidiary of the Company); the risk that loan losses have not peaked and risks of additional charge-offs, impairments and required increases in our allowance for loan losses; the impact of regulatory proceedings and litigation including but not limited to proceedings and litigation relating to overdraft fees and tax certificates; risks associated with maintaining compliance with the Cease and Desist Orders entered into by the Company and BankAtlantic with the Office of Thrift Supervision, including risks that BankAtlantic will not maintain required capital levels, that compliance will adversely impact operations, and that failing to comply with regulatory mandates will result in the imposition of additional regulatory requirements and/or fines; changes in interest rates and the effects of, and changes in, trade, monetary and fiscal policies and laws including their impact on the bank?s net interest margin; adverse conditions in the stock market, the public debt market and other financial and credit markets and the impact of such conditions on our activities and our ability to raise capital; we may raise additional capital and such capital may be highly dilutive to BankAtlantic Bancorp?s shareholders or may not be available; and the risks associated with the impact of periodic valuation testing of goodwill, deferred tax assets and other assets.Past performance and perceived trends may not be indicative of future results.In addition to the risks and factors identified above, reference is also made to other risks and factors detailed in reports filed by the Company with the Securities and Exchange Commission, including the Company?s Annual Report on Form 10-K for the year ended December 31, 2010, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2011. The Company cautions that the foregoing factors are not exclusive.