Beacon Federal Bancorp, Inc. Announces 2nd Quarter 2011 Earnings


EAST SYRACUSE, N.Y., July 25, 2011 (GLOBE NEWSWIRE) -- Beacon Federal Bancorp, Inc. (the "Company") (Nasdaq:BFED), the holding company for Beacon Federal (the "Bank"), announced today net income for the quarter ended June 30, 2011 increased 17.0% to $1.7 million, or $0.28 per diluted share, from $1.5 million, or $0.24 per diluted share for the quarter ended June 30, 2010.

For the six months ended June 30, 2011, net income increased 17.2% to $3.3 million, or $0.52 per diluted share, from $2.8 million, or $0.45 per diluted share, for the same period in the prior year.

Ross J. Prossner, President and CEO of the Company said, "We are pleased to report positive earnings growth quarter over quarter as a direct result of our team's diligent efforts in lowering the cost of funds and improving the Bank's net interest margin while maintaining strong asset quality. We also continued to build value for our shareholders by repurchasing below book value 55,154 shares of our common stock during the quarter."

Prossner added, "We are proud of our accomplishments and have recently been ranked by SNL Financial at 27th on their list of 100 largest public thrifts for financial performance for the twelve-month period ended March 31, 2011 and we have again earned the five-star rating from Bauer Financial. In addition, BFED was recently added to the Russell 3,000 Microcap Index."

The financial highlights for the quarter ended June 30, 2011 were as follows:

  • Net interest margin increased to 3.19%, compared to 2.99% for the quarter ended June 30, 2010.
     
  • Cost of funds decreased 39 basis points to 2.13%, compared to 2.52% for the same period a year ago.
     
  • Loans grew $3.2 million during the quarter and $11.9 million for the first six months of 2011.
     
  • Provision for loan losses decreased 13.4% to $1.3 million for the quarter compared to $1.5 million for the same period in the prior year.
     
  • Book value per share grew by 9.4% to $17.84 at June 30, 2011, compared to $16.31 at June 30, 2010.
     
  • 55,154 shares of common stock were repurchased at an average cost of $14.00 per share under the Company's previously announced fourth stock repurchase program.
     
  • On June 24, 2011, a quarterly cash dividend was paid of $0.05 per common share.

Financial Results

Net interest income totaled $8.0 million for the quarter ended June 30, 2011, compared to $7.7 million for the second quarter of 2010. Net interest margin increased 20 basis points in the second quarter compared to the same quarter in the prior year driven by a decrease in the cost of funds and an increase in the average balance of noninterest-bearing deposits, partially offset by a decrease in the average balance of interest-earning assets and a decrease in the yield on interest-earning assets.

The cost of funds decreased by 39 basis points compared to the prior year second quarter as a result of the average interest rate paid on deposits decreasing 46 basis points to 1.31% and average noninterest-bearing deposits increasing $7.7 million to $46.1 million (6.7% of average total deposits), as compared to $38.3 million (5.6% of total deposits) for the quarter ended June 30, 2010.

The yield on interest-earning assets for the quarter declined by 19 basis points to 5.04%, while the average balance of interest-earning assets decreased by 2.5%. As high-yielding assets mature, they are being replaced with current market rate assets which are at persistently lower yields leading to pressure on the Company's net interest margin.

Noninterest income increased by $231,000, or 18.0%, to $1.5 million for the quarter ended June 30, 2011 from $1.3 million for the quarter ended June 30, 2010. Noninterest income increased primarily due to a $229,000 increase in service charge income. 

The 28.4% increase in service charge income related primarily to an increase in debit card fees. The Bank is actively promoting debit card usage and core deposits that require debit card transactions in order to obtain an attractive rate of interest for depositors. The resulting increased debit card usage is leading to the increase in the debit card fee income. Our management team is closely monitoring a final rule by the Board of Governors of the Federal Reserve System which in part implements the debit card interchange and processing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. While the permissible cap on interchange fees applies only directly to financial debit card issuers with assets greater than $10 billion in assets, it will remain to be seen what impact the new rule may have on the Bank as the processing networks have acknowledged that over time, market pressures may alter the fees paid to exempt banks.

Other-than-temporary impairment credit charges for the quarter resulted from one trust preferred security and two private label collateralized mortgage obligations ("CMOs"). The extent of impairment recognized was based on the current and projected performance of the issuing banks and their ability to repay their obligation as it relates to the trust preferred security, and the current and projected delinquencies along with reduced credit support in the underlying mortgages for the CMOs. The other-than-temporary credit impairment for the quarter of $105,000 was less than 1% of the fair value of our securities portfolio at June 30, 2011.

Noninterest expense increased $435,000 or 8.5%, to $5.6 million for the quarter ended June 30, 2011 from $5.1 million for the quarter ended June 30, 2010. The increase was due primarily to increases in salaries and employee benefits along with occupancy and equipment expenses.

Financial Position

Total assets increased $8.8 million, or 1.0%, from December 31, 2010 to $1.04 billion at June 30, 2011. The increase was primarily the result of an $8.3 million increase in net loans, including loans held for sale. 

Commercial loans and mortgages increased $9.6 million in the second quarter, totaling $313.5 million at June 30, 2011. Originations of commercial loans and mortgages totaled $23.6 million in the second quarter, compared to $26.9 million in the first quarter of 2011 and $25.9 million in the year-ago quarter.

Residential real estate loans decreased $6.6 million in the second quarter to $329.0 million at June 30, 2011. Originations of residential real estate loans totaled $16.4 million in the second quarter, compared to $17.4 million in the first quarter of 2011 and $18.9 million in the year-ago quarter. The Bank retained additional residential loan originations compared to the first quarter primarily as a result of originations of 20-year bi-weekly mortgages which are not available for purchase by the government-sponsored entities with which the Company transacts in the secondary market.

Consumer loans increased $261,000 in the second quarter to $172.6 million at June 30, 2011. Originations of consumer loans totaled $20.6 million in the second quarter, compared to $20.3 million in the first quarter of 2011 and $20.7 million in the year-ago quarter.

Deposits decreased $6.0 million, or 1.0%, in the second quarter to $675.1 million at June 30, 2011. The Company continues to pursue the lower-cost non-maturity deposits, increasing those funds $336.6 million, or 12.3%, since June 30, 2010.

Stockholders' equity increased $3.7 million to $113.4 million at June 30, 2011 from $109.7 million at December 31, 2010. The increase was primarily the result of $3.3 million of net income for the six months ended June 30, 2011.

The Bank's Tier 1 leverage ratio was 9.87% and its total risk-based capital ratio was 13.76% at June 30, 2011, both of which exceeded the regulatory thresholds required to be classified as a well-capitalized bank, which are 5.0% and 10.0%, respectively.

Asset Quality and Provision for Loan Losses

Total nonperforming assets were $16.0 million, or 1.53% of total assets at June 30, 2011, compared to $16.6 million or 1.61% of total assets at March 31, 2011 and $16.1 million or 1.50% of total assets at June 30, 2010. Nonperforming assets as both a percentage of total assets and as a percentage of loans remains well below our peers and within our historical levels. 

Net charge-offs for the second quarter of 2011 were $672,000, or an annualized 0.33% of average loans, compared to $323,000, or an annualized 0.16% of average loans, for the first quarter 2011 and $580,000, or an annualized 0.28% of average loans, for the second quarter of 2010. Two charge-offs during the quarter totaling $433,000 had been fully reserved for in prior periods.

The current quarter's provision for loan losses was $1.3 million, an increase of $320,000 compared to the first quarter of 2011 and a decrease of $201,000 compared to the second quarter of 2010. The allowance for loan losses was $16.5 million at June 30, 2011, compared to $15.9 million at March 31, 2011 and $18.1 million at June 30, 2010. The ratio of the allowance for loan losses to total loans was 2.03% at June 30, 2011, compared with 1.96% at March 31, 2011 and 2.18% at June 30, 2010. The ratio of the allowance for loan losses to nonperforming loans was 103.98% at June 30, 2011, compared with 96.07% at March 31, 2011 and 117.88% at June 30, 2010.

Beacon Federal Bancorp, Inc., through its subsidiary, Beacon Federal, offers banking and related financial services to both individual and commercial customers. The Bank is headquartered with a full-service branch in East Syracuse, New York, along with seven other full-service branches in East Syracuse, Marcy and Rome, New York, Smartt and Smyrna, Tennessee, Tyler, Texas and Chelmsford, Massachusetts.

(Information regarding Beacon Federal's peers was drawn from SNL reports as of the most recent quarter and most recent year for banks and thrifts having assets between $1 billion and $5 billion.)

Forward-Looking Statement

This press release contains statements that are forward-looking, as that term is defined by the Private Securities Litigation Reform Act of 1995. The Bank and Company intend that such forward-looking statements be subject to the safe harbors created thereby. The following factors, among others, could cause the actual results of the Company's operations to differ materially from the Company's expectations: competition; changes in economic conditions, interest rates and financial markets; and changes in legislation or regulatory requirements. The making of such forward-looking statements should not be regarded as a representation by the Bank or Company or any other person that results expressed therein will be achieved. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update them in light of new information of future events.

  At
June 30,
2011
At
December 31,
2010
  (Unaudited)
  (In thousands)
Selected Financial Condition Data:    
Total assets  $ 1,041,255  $ 1,032,478
Cash and cash equivalents 10,098 12,439
Securities available for sale 168,815 162,405
Securities held to maturity 8,431 10,321
Loans, net 803,121 792,553
Federal Home Loan Bank of New York stock 10,433 9,954
Deposits 675,094 677,384
FHLB advances 170,927 163,427
Securities sold under agreement to repurchase 70,000 70,000
Stockholders' equity 113,448 109,710
     
     
  Three Months Ended
June 30,
Six Months Ended
June 30,
  2011 2010 2011 2010
  (Unaudited) (Unaudited)
  (In thousands, except per share data)
Selected Operating Data:        
         
Interest income  $ 12,690  $ 13,504  $ 25,208  $ 27,255
Interest expense 4,661 5,771 9,397 11,789
Net interest income 8,029 7,733 15,811 15,466
Provision for loan losses 1,299 1,500 2,278 3,280
Net interest income after
provision for loan losses
6,730 6,233 13,533 12,186
Noninterest income 1,515 1,284 3,017 2,401
Noninterest expense 5,562 5,127 11,404 10,140
Income before income taxes  2,683 2,390 5,146 4,447
Income tax expense  947 906 1,891 1,669
Net income  $ 1,736  $ 1,484  $ 3,255  $ 2,778
Basic earnings per share  $ 0.29  $ 0.24  $ 0.53  $ 0.45
Diluted earnings per share  $ 0.28  $ 0.24  $ 0.52  $ 0.45
         
Asset Quality Ratios:        
Nonperforming loans to total loans 1.95% 1.85% 1.95% 1.85%
Nonperforming assets to total assets 1.53% 1.50% 1.53% 1.50%
Annualized net charge-offs to average loans
outstanding 
0.33% 0.28% 0.25% 0.20%
Allowance for loan losses to non-
performing loans at end of period
103.98% 117.88% 103.98% 117.88%
Allowance for loan losses to total loans
at end of period
2.03% 2.18% 2.03% 2.18%
         
         
Analysis of Net Interest Margin (Unaudited):            
             
  For the Three Months Ended June 30,
  2011 2010
  Average Outstanding
Balance
Interest
Earned/Paid
Yield /
Rate (1)
Average Outstanding
Balance
Interest
Earned/Paid
Yield /
Rate (1)
  (Dollars in thousands)
Interest-earning assets:            
Loans (2)  $ 819,550  $ 10,912  5.34%  $ 829,723  $ 11,451  5.54%
Securities  176,519 1,664  3.78  183,225  1,928  4.22
FHLB stock  9,989  111  4.46  11,367  120  4.23
Interest-earning deposits  4,027  3  0.30  12,168  5  0.16
Total interest-earning assets  1,010,085  12,690  5.04  1,036,483  13,504  5.23
Noninterest-earning assets  30,986      29,626    
Total assets  $ 1,041,071      $ 1,066,109    
             
Interest-bearing liabilities:            
Savings  $ 116,697  $ 149  0.51  $ 70,716  $ 74  0.42
Money market accounts  146,993  289  0.79  177,770  546  1.23
Checking accounts  61,637  138  0.90  47,506  77  0.65
Time accounts  315,269  1,511  1.92  356,176  2,180  2.45
Total deposits  640,596  2,087  1.31  652,168  2,877  1.77
FHLB advances  160,115  1,703  4.27  189,148  2,023  4.29
Reverse repurchase agreements  70,001  675  3.87  70,003  675  3.87
Lease obligation  7,740  196  10.16  7,737  196  10.16
Total interest-bearing liabilities  878,452  4,661  2.13  919,056  5,771  2.52
             
Noninterest-bearing deposits  46,066      38,331    
Other noninterest-bearing liabilities  3,568      3,054    
Total liabilities  928,086      960,441    
Stockholders' equity  112,985      105,668    
Total liabilities and equity  $ 1,041,071      $ 1,066,109    
             
Net interest income    $ 8,029      $ 7,733  
             
Net interest rate spread (3)      2.91%      2.71%
             
Net interest-earning assets (4) $ 131,633     $ 117,427    
             
Net interest margin (5)      3.19%      2.99%
             
Average of interest-earning assets to
interest-bearing liabilities
     114.98%      112.78%
             
             
(1) Yields and rates for the three months ended June 30, 2011 and 2010 are annualized.
(2) Includes loans held for sale and nonaccrual loans.
(3) Net interest rate spread represents the difference between the yield on total average interest-bearing assets and the cost of total average interest-earning assets and the cost of total average interest-bearing liabilities for the three months ended June 30, 2011 and 2010.
(4) Net interest-earning assets represents total interest-earning assets less interest-bearing liabilities.
(5) Net interest margin represents annualized net interest income divided by average total interest-earning assets.
 
 
Analysis of Net Interest Margin (Unaudited):
             
  For the Six Months Ended June 30,
  2011 2010
  Average Outstanding
Balance
Interest
Earned/Paid
Yield /
Rate (1)
Average Outstanding
Balance
Interest
Earned/Paid
Yield /
Rate (1)
  (Dollars in thousands)
Interest-earning assets:            
Loans (2)  $ 817,110  $ 21,799  5.38%  $ 832,822  $ 23,063  5.58%
Securities  174,640 3,142  3.63  182,089  3,895  4.31
FHLB stock  10,120  261  5.20  11,461  287  5.05
Interest-earning deposits  2,135  6  0.57  10,305  10  0.20
Total interest-earning assets  1,004,005  25,208  5.06  1,036,677  27,255  5.30
Noninterest-earning assets  32,482      30,650    
Total assets  $ 1,036,487      $ 1,067,327    
             
Interest-bearing liabilities:            
Savings  $ 113,373  $ 284  0.51  $ 65,464  $ 120  0.37
Money market accounts  145,102  550  0.76  172,153  1,104  1.29
Checking accounts  61,285  270  0.89  48,193  150  0.63
Time accounts  318,237  3,145  1.99  370,500  4,681  2.55
Total deposits  637,997  4,249  1.34  656,310  6,055  1.86
FHLB advances  161,968  3,413  4.25  189,803  3,999  4.25
Reverse repurchase agreements  70,001  1,343  3.87  70,001  1,343  3.87
Lease obligation  7,740  392  10.21  7,737  392  10.22
Total interest-bearing liabilities  877,706  9,397  2.16  923,851  11,789  2.57
             
Noninterest-bearing deposits  43,689      35,882    
Other noninterest-bearing liabilities  3,684      3,135    
Total liabilities  925,079      962,868    
Stockholders' equity  111,408      104,459    
Total liabilities and equity  $ 1,036,487      $ 1,067,327    
             
Net interest income    $ 15,811      $ 15,466  
             
Net interest rate spread (3)      2.90%      2.73%
             
Net interest-earning assets (4)  $ 126,299      $ 112,826    
             
Net interest margin (5)      3.18%      3.01%
             
Average of interest-earning assets to
interest-bearing liabilities
   114.39%      112.21%
             
             
(1) Yields and rates for the six months ended June 30, 2011 and 2010 are annualized.
(2) Includes loans held for sale and nonaccrual loans.
(3) Net interest rate spread represents the difference between the yield on total average interest-bearing assets and the cost of total average interest-earning assets and the cost of total average interest-bearing liabilities for the six months ended June 30, 2011 and 2010.
(4) Net interest-earning assets represents total interest-earning assets less interest-bearing liabilities.
(5) Net interest margin represents annualized net interest income divided by average total interest-earning assets.

            

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