BankAtlantic Bancorp Inc. (NYSE:BBX) filed Quarterly Report for the period ended 2010-06-30.
Bankatlantic Bancorp Inc. has a market cap of $65.98 million; its shares were traded at around $1.33 with and P/S ratio of 0.19. BBX is in the portfolios of Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:The increase in BankAtlantics net loss during the 2010 second quarter compared to the same 2009 quarter primarily resulted from a $7.7 million increase in the provision for loan losses, $3.8 million of lower revenues from service charges on deposits, $1.8 million of lower securities gains and a $3.1 million decline in net interest income. The increase in BankAtlantics net loss was partially offset by lower non-interest expenses. The substantial increase in the provision for loan losses primarily related to our commercial real estate loan portfolios as declining real estate values and higher non-performing loans increased charge-offs and loan loss reserves. The higher commercial real estate loan loss provision was partially offset by a lower residential loan loss provision as a result of favorable delinquency and loss migration trends during the three months ended June 30, 2010. The lower revenues from service charges reflect a decline in the total number of accounts which incurred overdraft fees and a decrease in the frequency of overdrafts per deposit account. We believe that the decline in the number of accounts incurring overdraft fees is the result of both our focus on targeting customers who maintain deposit accounts with higher balances and the result of a change in customer behavior. During the three months ended June 30, 2009, BankAtlantic sold agency securities for a $2.1 million gain. There were no agency securities sold during the three months ended June 30, 2010. The decline in BankAtlantics net interest income primarily resulted from lower earning asset balances, higher non-performing asset balances, an increase in liquidity resulting in additional cash balances invested in low yielding investments and a $1.4 million reversal of interest income in our tax certificate portfolio associated with out-of-state tax certificate activities. The decline in earning assets was the result of lower loan originations and purchases, reduced acquisitions of tax certificates and sales of agency securities since the second quarter of 2009. The improvement in BankAtlantics non-interest expenses during the second quarter of 2010 compared to the same 2009 period reflects lower compensation and occupancy expenses associated with efforts to increase operating efficiencies and non-recurrence of $1.4 million of higher costs associated with debt redemptions in the 2009 quarter as well as a $2.4 million FDIC special assessment during the three months ended June 30, 2009. The above improvements in non-interest expenses were partially offset by $1.7 million in impairments associated with properties acquired for branch expansion as well as higher professional fees associated with class-action securities lawsuits, litigation related to the tax certificate line of business, and higher non-performing asset balances.
The decrease in the Parent Companys loss for the 2010 quarter compared to the same 2009 quarter resulted from a $2.6 million decline in the provision for loan losses and a $1.4 million improvement in securities activities partially offset by losses on sale of and impairments on real estate owned. The $2.6 million improvement in the provision for loan losses reflects lower charge-offs associated with the loans transferred from BankAtlantic to an asset work-out subsidiary of the Parent Company in March 2008. The securities activities loss during the three months ended June 30, 2009 resulted from a $1.3 million other than temporary impairment of an equity security. There were no impairments on equity securities recognized during the three months ended June 30, 2010. During the three months ended June 30, 2010, the Parent Company sold certain real estate owned property for a $0.6 million loss and recorded $0.7 million of write-downs on real estate owned due to declining property values subsequent to foreclosure.
The decrease in BankAtlantics net loss during the 2010 period compared to the same 2009 period primarily resulted from a $20.5 million reduction in non-interest expenses partially offset by a decline in net interest income of $5.4 million, $7.5 million of lower revenues from service charges on deposits and a $2.9 million decline in securities activities, net. The improvement in non-interest expense reflects a $9.2 million goodwill impairment charge during the 2009 period with no goodwill impairment charges during the 2010 period. [Additionally, the improvement in non-interest expenses since the 2009 period reflects reduced operating expenses associated with operating expense initiatives, which included a $4.4 million improvement in employee compensation and benefits expense and consolidation of certain back-office facilities.
The net interest spread and margin improved due to a change in our interest bearing liability funding mix. BankAtlantic used the funds from the reduction in assets and deposit growth to repay FHLB advances and short term wholesale borrowings. As a result, BankAtlantics funding mix changed from higher rate FHLB advances to lower rate deposits which resulted in a substantial reduction in BankAtlantics cost of funds. While the average FHLB advances were $1.3 million for the three months ended June 30, 2010, the outstanding balance of FHLB advances was $115 million at June 30, 2010. The FHLB advances outstanding at June 30, 2010 were repaid in July 2010.
Also contributing to the reduction in BankAtlantics cost of funds was runoff of higher cost certificate of deposit balances and substantial declines in deposit interest rates in the industry. This improvement in the cost of funds was partially offset by interest earning asset yield declines and significantly increased balances in low yielding investments. The decline in average yields on loans reflects lower interest rates during 2010 compared to 2009 and higher non-performing loan balances. Investments primarily consisted of agency mortgage-backed securities, interest bearing deposits at the Federal Reserve Bank and tax certificates. The significant decline in investment yields during the 2010 second quarter compared to the 2009 second quarter resulted from the reversal of $1.4 million of accrued interest income on tax certificates primarily relating to unfavorable court rulings reducing statutory interest rates on certain out-of-state tax certificates and an increase of approximately $200 million in cash balances invested in accounts yielding approximately 25 basis points. The net interest spread and margin were favorably impacted by a significant increase in transaction accounts with a corresponding reduction in certificate of deposit accounts. A portion of maturing certificates of deposit accounts either transferred to transaction accounts or renewed at substantially lower interest rates. The higher transaction account balances reflect the migration of retail certificate of deposit accounts to transaction accounts and new customer accounts. Transaction account growth was also favorably impacted by a shift in our sales and marketing strategy to target potential customers who maintain higher deposit balances.
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