Important Announcements
The following announcements are shown chronologically starting with the most recent. BANCORP refers to the consolidated BANK holding company whereas the BANK refers to the holding company's primary asset, Allied First BANK, SB.
January 2011. BANCORP continued to make progress in the fourth (calendar) quarter by posting a profit of $92,000. This is the fourth consecutive quarter that the BANK has been profitable despite incurring significant loan losses that have characterized the banking industry. Continued strong mortgage loan origination volume and an improving net interest margin (NIM) in the BANK were the primary factors in this performance. The NIM for BANCORP improved from 2.43% in the third quarter to 2.62% in the fourth quarter and net interest income improved from $928,000 to $1,035,000. Although the mortgage loan origination volume will decline in 2011 due to higher interest rates, further margin improvement is expected by the repricing of high-cost CDs to lower rates. Delinquent loans unexpectedly increased and management is working diligently to resolve this problem.
November 2010. In the third (calendar) quarter BANCORP made progress in returning to profitability with net income of $254,000. Strong mortgage loan origination volume, gains on the sale of securities, improvement in the net interest income, and lower provision expense for loan losses by the BANK were the main contributors to this performance. Although economic growth remains anemic and collateral values continue to show weakness, management expects delinquencies and loan losses to continue to show improvement in 2011. Despite significant provision expense for loan losses, the BANK has been profitable over the past three quarters. From October 2010 through December 2011 the BANK has $40 million in high-cost CDs maturing along with $3 million in high-cost debt. Repricing these funds at lower rates will result in a reduction in the BANK’s cost of funds and improve its net interest income in the fourth quarter of 2010 and 2011.
August 2010. The BANK has been profitable over the past two quarters despite high loan loss provision expense, Some of this expense was offset by strong mortgage loan origination volume and gains on the sale of securities by the BANK..The BANCORP showed a loss of $310,000 for the quarter ended 6/30/10. This was primarily a result of other-than-temporary-impairment (OTTI) expense of $375,000 for its call center subsidiary due to lower recent call volume. Although BANCORP’s net interest margin (NIM) was unchanged at 2.51% from the prior quarter due to a lack of significant deposit repricing during the second quarter, the net interest income increased from $942,000 to $965,000 because of an increase in earning assets. Management expects the NIM to improve in the fourth quarter of 2010 and throughout 2011 as a large volume of high-cost debt and CDs mature and are replaced with lower cost funding. Management also expects the loan loss provision expense to stabilize at a lower level over the next fiscal year. (Note: The significant increase in Other Assets on the Financial Statement is an account receivable of $10.7 million resulting from the sale of securities.)
April 2010. Many of the dismal economic indicators that have characterized the
Assets increased to $172 million from $165.3 million with increases in both commercial loans and investments. The increase was funded mainly by an increase in deposits. As a result, the BANK continues to increase its market penetration of the local marketplace and increase its core deposit base.
February 2010. The income problems confronting BANCORP and the banking industry continued in the fourth quarter of 2009 with a loss of $343,000. This is an improvement over the prior quarter’s loss of $604,000. Again, the primary reason was the high level of Provision for Loan Losses expense of $675,000. However, delinquencies appear to be stabilizing and management feels that the Allowance for Loan Losses at 2.25% of Loans is adequate to handle potential, identified losses.
The Net Interest Margin (NIM) showed significant improvement increasing to 2.08% from 1.75% in the prior quarter. This resulted in the Net Interest Income increasing to $788,000 from $590,000 in the prior quarter. Management expects further improvement in the NIM in 2010 as high-cost CDs and FHLB term borrowings continue to mature and are replaced with lower cost funding. The BANK’s penetration of its local market for commercial loans and deposits continues to meet expectations and goals. Assets increased to $165.3 million from $146.8 million in the prior quarter primarily due to increases in mortgage loans held for sale, commercial loans and investments.
November 2009. The income problems characterizing the BANK's recent performance continued in the quarter ended September 30, 2009. The Provision for Loan Losses, $704,000, continues to be the primary culprit coupled with margin pressure. Loans delinquent over 60 days, virtually all of which are secured, were 6.77% of loans at quarter-end. The margin pressure is evidenced by the net interest margin (NIM) of 1.75%, down slightly from 1.79% in the prior quarter. This pressure is primarily a result of the Fed's zero interest rate policy of holding the overnight rate within a range of zero to .25%, an increase in the BANK's non-performing loans, and a decline in loans of $6.5M since year-end 2008. The Fed's policy has caused the BANK's prime-based loans and ARMs to reprice to historically low levels.
On the positive side, management has been working aggressively to dispose of repossessed collateral, and developing new loan programs that are showing encouraging signs of generating high-quality loans. Furthermore, management expects the NIM to increase in future quarters due to significant savings resulting from the repricing of high-cost FHLB term debt and CDs that are maturing.
July 2009. The economic recession, rising unemployment, and on-going stress in the housing market continued to take a toll on the BANK's financial results in the quarter ended June 30, 2009. Primarily due to a Provision for Loan Losses Expense of $1,040,000 and deterioration in the Net Interest Margin (NIM), BANCORP showed an after-tax loss of $657,000 for the quarter. Loans delinquent over 60 days increased from 2.96% of loans to 4.42% and annualized charge-offs increased from 2.47% to 2.96%. The Allowance for Loan Losses increased from 1.65% of loans to 1.82%.
The NIM decreased from 2.02% to 1.79% primarily due to three factors. First, in late April BANCORP received $3.6 million from the Treasury Department's Capital Purchase Program (CPP) at an overall annual cost of 6.45%. Initially, the funds were used to retire low-cost short-term debt. Until these funds are loaned out under new programs developed by the BANK, these funds will have a negative impact on the margin by increasing the cost of funds without a commensurate increase in the yield on earning assets. Second, over the past year economic conditions have adversely affected loan demand as evidenced by a decline in loans of $5.7 million since June 30, 2008. Finally, an increase in non-performing loans further depressed the margin. Management is working aggressively to resolve these problems.
April 2009. The stresses characterizing the financial and housing markets over the past two years continued in the first quarter of 2009. Accordingly, BANCORP showed an after-tax loss of $539,000 for the quarter. The primary reason for this loss was the allocation of $920,000 to the Provision for Loan Losses. As a result, the Allowance for Loan Losses/Loans increased from 1.50% to 1.65%. Delinquent Loans/Loans increased from 1.44% to 2.96%. Operating Expenses stabilized but the Fees & Other Income increased primarily due to increased mortgage loan production. The Net Interest Margin declined 16 basis points due to asset returns falling faster than the COF.
On April 24th BANCORP completed a transaction under the US Treasury's Capital Purchase Program (CPP) in which Treasury purchased $3.6 million of Class A 5% preferred stock with warrants to buy another $183,000 of Class B 9% preferred stock. The warrants were immediately exercised resulting in an overall annual cost of 6.45% over the next five years. This transaction represents no dilution to the existing shareholders.
February 2009. Conditions in the financial and housing markets continued to deteriorate in the fourth quarter of 2008. As a result BANCORP showed an after-tax loss of $448,000 in this quarter. The primary reason for this loss was a significant increase in the Provision for Loan Losses. As a result of this expense, the Allowance for Loan Losses was 1.50% at year-end, up from .97% at the end of the prior quarter. The Delinquent Loans/Loans ratio was .72% and the annualized Net Chargeoffs/Average Loans ratio was .10%. Management continued to reduce operating expenses as evidenced by the 58 basis point decline in the Operating Expense Ratio from 3.52% to 2.93%. The Net Interest Income improved to $788,000 from $731,000 despite a reduction in the prime rate from 5% to 3.25% during the quarter. Although the Yield on Average Earning Assets declined 25 basis points to 5.50% primarily due to the lower prime rate, management continued its efforts to reduce its cost of funds. The COF declined 32 basis points to 3.24% from 3.56%. Accordingly, the Net Interest Margin improved 9 basis points to 2.18% from 2.09%.
October 2008. The stressful conditions characterizing the financial markets over the past year continued in the third calendar quarter. Accordingly, BANCORP had an after-tax loss of $285,000 in the quarter ended 9/30/08. This was a significant improvement over the prior quarter's loss of $636,000. The primary reasons for the loss are the Provision for Loan Losses expense related to the real estate market coupled with a decline in mortgage loan originations due to the housing market. The Allowance for Loan Losses Account is .97% of loans and the delinquency ratio is .40% of loans. The net interest income increased to $731,000 from $674,000 resulting in a net interest margin (NIM) of 2.09%, up from 1.95% in the prior quarter. Further improvement in the NIM is expected in the fourth quarter. Despite a number of one-time, non-recurring items, operating expenses decreased $107,000 in the quarter. Additional operating expense reductions are expected to be reflected in the fourth quarter.
July 2008. Reflecting continued stress in the real estate market and the banking sector in general, BANCORP had a loss of $636,000 in the quarter ended 6/30/08. The primary reason for the loss is the significant increase of $725,000 in the BANK's Provision for Loan Losses. The Allowance for Loan Losses Account has been increased to1.23% of loans. The interest income declined due to a reduction in loans, a one-time adjustment in the amortization of interest income, and a lower volume of mortgage loans held for sale and the related funding spread. These factors caused the net interest margin (NIM) to decline from 2.35% to 1.95%. The NIM is expected to show improvement in the second half of 2008. Expenses increased due to a fiscal year-end, one-time adjustment for employee vacations and sick leave. Assets decreased $16.3 million due to a lower volume of loans and corresponding debt reduction. However, core deposits continue to show growth from the Oswego market.
February 2008. The BANCORP’s sequential net income for the quarter ended 12/31/07 was a loss of $853,000 versus a loss of $125,000 for the prior quarter. A number of factors contributed to this performance. First, the deteriorating housing market resulted in increased chargeoffs in the real estate portfolio. In anticipation of possible future charge-offs, the BANK significantly increased its Provision for Loan Losses in order to increase its Allowance for Loan Losses. This account increased from $885,000 at 9/30/07 to $1,397,000 at 12/31/07. The results were also adversely affected by a slowdown in mortgage loan originations due to the turmoil in the housing and financial markets. Finally, the second half of 2007 was adversely affected by the increase in operating and occupancy expenses related to the new Oswego facility. In the fourth quarter of 2007 management implemented numerous cost-cutting strategies that are expected to improve the BANK’s efficiency ratio and profitability in 2008.
Net interest income improved to $902,000 from $841,000 in the prior quarter. Accordingly, the net interest margin (NIM) improved to 2.48% from 2.28%. The NIM is expected to improve further in the second half of 2008 when a portfolio of prime, 5/1 ARMs reprices in the July-September quarter. The extent of this margin improvement will depend on market conditions at that time, especially the level of the 1-year CMT index.
November 2007. The BANCORP's sequential net income for the quarter ended 9/30/07 declined from a profit of $38,000 in the prior quarter to a loss of $125,000. The primary reasons for the decline were: 1) the continued margin pressure resulting from the new Oswego facility; 2) the related increase in staffing, marketing, and occupancy expenses; and 3) lower mortgage loan origination income due to conditions in the housing market. The net interest margin (NIM) of 2.28% declined 3 basis points from the prior quarter but the NIM is expected to stabilize in the fourth quarter and improve in early 2008. Recent cost-reducing strategies implemented by management are expected to lower operational expenses and the elimination of duplicate occupancy expenses due to closing the Naperville office are expected to improve the efficiency ratio beginning in the fourth quarter and extending into 2008.
Since its grand opening in late July, the BANK has been successfully pursuing both consumer-related core deposits and commercial loan and deposit relationships. These strategies are also expected to contribute to the improvement in the BANK's net interest income and profitability in 2008.
August 2007. The BANCORP's net income for the quarter ended 6/30/07 was $38,000, up slightly from the prior quarter's net income of $35,000. (Net income reflects a tax credit of $1,000 resulting from an overpayment of estimated taxes due. Results from the prior quarter reflected a corresponding tax credit of $5,000.) Net Interest Income declined from $950,000 to $864,000 primarily due to the increase in non-earning, fixed assets related to the new Oswego facility. The Net Interest Margin (NIM) was 2.31%, a decline of 15BPs from the prior quarter. Going forward, management expects income to remain under pressure in the third calendar quarter of 2007 due to continued margin pressure plus higher occupancy, staffing, and marketing expenses associated with the new facility. Both the NIM and net income are expected to stabilize in the fourth quarter of 2007 and begin recovering in 2008.
The recovery in 2008 is due to the expected growth in core deposits and commercial relationships in the Oswego market and the repricing of $15.8 million of traditional, 5/1 ARM loans primarily in the July-September quarter. Once completed, the repricing of these loans, all of which are prime, is expected to add 2 percentage points to the contract rates and about $316,000 to the net interest income on an annualized basis. This will also add approximately 22BPs to the NIM.
July 2007. The BANK moved into its new, 18,000 square foot facility in Oswego, Illinois, and held its grand opening on July 28th. Oswego is located west of Chicago in Kendall County, the third fastest growing county in the United States, according to a recent US Census Bureau Report.
June 2007. The BANCORP completed a $2 million Trust Preferred transaction with LaSalle BANK. The purpose of this transaction was to provide additional capital to support anticipated growth of the BANK in the Oswego market.
May 2007. The BANCORP's sequential net income for the quarter ended 3/31/07 declined from $97,000 to $35,000 due to the continued carrying cost of additional nonearning assets related to the Oswego project and a decline in mortgage loan origination income due to a slowdown in the housing market. The Oswego facility is on target for the completion and occupancy in late June 2007.
February 2007. The BANKCORP's sequential net income for the quarter ended 12/31/06 declined from $154,000 to $97,000 due to the carrying cost of additional non-earning assets related to the Oswego project and a decline in mortgage loan origination income due to seasonal factors and a slowdown in the housing market. The Oswego facility is expected to be completed and occupied in June 2007.
October 2006. The BANCORP's sequential net income for the quarter ended 9/30/06 improved slightly due to a lower effective tax rate (32% vs 37%) relative to the prior quarter. The Net Interest Margin (NIM) was 2.56%, a decline of 10BPs from the prior quarter. This decline is primarily due to the flat yield curve and the carrying cost of the non-earning assets related to the Oswego project.
July 2006. The BANCORP's sequential net income for the quarter ended 6/30/06 increased primarily due to expense reduction and an increase in mortgage loan origination income. The Net Interest Margin (NIM) was 2.66%, a decline of 3BPs from the prior quarter. This decline was primarily due to the carrying cost of the land acquisition in late May for the new Oswego facility. Margin pressure is expected to continue over the near term due to the flat yield curve and as construction payouts commence on the Oswego project.
May 2006. The BANK acquired a 5-acre parcel of land in Oswego, Illinois for a new 18,000 square foot main office facility, with construction to begin in the summer of 2006. Oswego, located west of Chicago in Kendall County, is one of the most rapidly growing communities in the Midwest. The new facility is scheduled to open in late spring/early summer 2007.
April 2006. The BANCORP had a decline in net income for the quarter ended 3/31/06, primarily attributable to an increase in operating expense resulting from severance payments and a staffing realignment. It is expected that this realignment will result in future efficiencies and increased productivity.
September 2005. The BANCORP completed a $2 million Trust Preferred transaction with Keefe, Bruyette & Woods, Inc. The purpose of this transaction was to provide additional capital to finance the growth of the BANK.
July 2005. Due to the extraordinary cost of reporting and the regulatory burden imposed by the Sarbanes-Oxley Act, the BANCORP filed a Form 15 with the Securities and Exchange Commission in order to terminate the company's common stock registration under the Securities Exchange Act of 1934. The stock now trades on the OTC Bulletin Board under the symbol AFBA.OB.
December 2004. The BANK began to restructure its loan portfolio by reducing its unsecured consumer loan portfolio and increasing secured commercial loans, HELOCs, and secured consumer loans. This resulted in a lower net interest margin throughout 2005 than would have otherwise occurred.
October 2004. The BANK acquired the retail mortgage operation of Burling BANK to provide both retail mortgage services to members and wholesale services to other depository institutions. September 2004. The BANCORP announced its second stock buyback program, which resulted in the repurchase of 47,032 shares. This buyback reduced the number of shares from 558,350 to 511,318, a reduction of 8.4%.
April 2004. The BANCORP announced the acquisition of Eagles Nest Marketing Inc., a 24/7 lending call center, the name of which was subsequently changed to AnyHour Lending, Inc. This call center handles both consumer and mortgage loan applications via telephone and the internet for the BANK and other depository institutions.
May 2003. The BANCORP announced a stock buyback that resulted in the repurchase of 50,000 shares. This buyback reduced the number of shares from 608,350 to 558,350, a reduction of 8.2%.
April 2003. The BANK sold its $5.5M credit card portfolio, resulting in an after-tax gain of approximately $636,000. A portion of this gain was used to finance a stock buyback shortly after the sale.
January 2002. The BANK formed a partnership with Smith Barney (a division of Citigroup Global Markets, Inc.) for the purposes of offering non-deposit investment and insurance products. Under the terms of the agreement, Smith Barney is able to offer these products and services to BANK customers and members of the general public through registered Smith Barney representatives at a designated Investment Center within the BANK's office.
December 2001. The BANK changed its mutual structure by becoming a stock savings BANK. The conversion to stock form included offering common stock to the BANK's members and the general public in order to raise capital for the support and expansion of future operations. Stock was issued in the name of the holding company, Allied First BANCORP, Inc. Keefe, Bruyette & Woods, Inc. assisted in the sale of the stock.
September 2001. The BANK converted from a federal credit union to an Illinois chartered mutual savings BANK. As a credit union, the institution was limited to attracting deposits from and making loans to members of the Allied Pilots Association. As a mutual savings BANK, the BANK gained the ability to serve any member of the general public.
Credit Union Background. The financial institution currently known as Allied First BANK was initially organized in 1994 as Allied Pilots Association Federal Credit Union. Originally established to serve the BANKing needs of current and former American Airlines pilots and their families, the credit union's primary business consisted of attracting deposits from its membership group and investing those funds in vehicle loans, unsecured consumer loans, recreational boat and airplane loans, consumer credit cards, and home equity loans.
This release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Such statements are subject to risks and uncertainties, including but not limited to changes in economic conditions in our market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in our market area, and competition, all or some of which could cause actual results to differ materially from historical earnings and those presently anticipated or projected. These risks and uncertainties should be considered in evaluating forward-looking statements and you should not rely on these statements.
