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OmniAmerican Bancorp Inc. Reports Operating Results (10-Q)

November 04, 2010 | About:
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10qk

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OmniAmerican Bancorp Inc. (OABC) filed Quarterly Report for the period ended 2010-09-30.

Omniamerican Bancorp Inc. has a market cap of $141.5 million; its shares were traded at around $12 . OABC is in the portfolios of Michael Price of MFP Investors LLC, George Soros of Soros Fund Management LLC.

Highlight of Business Operations:

Loans. Loans, net of the allowance for loan losses and deferred fees and discounts, decreased $30.5 million, or 4.4%, to $667.6 million at September 30, 2010 from $698.1 million at December 31, 2009. Automobile loans (consisting of direct and indirect loans) decreased $19.6 million, or 9.6%, to $185.9 million at September 30, 2010 as weakened economic conditions have reduced the demand for automobile loans. Commercial real estate loans decreased $6.9 million, or 6.8%, to $94.1 million, primarily due to the economic downturn in our market area. The decrease included a reclassification of three loans with balances totaling $5.9 million to other real estate owned during the nine months ended September 30, 2010. Commercial business loans decreased $6.4 million, or 10.7%, to $53.0 million at September 30, 2010. The decrease in commercial business loans was primarily attributable to a $6.9 million decrease in participation interests in Shared National Credits, to $9.7 million at September 30, 2010 from $16.6 million at December 31, 2009 reflecting the Companys efforts to reduce its exposure to Shared National Credits and to focus our commercial business lending on small-to-medium size businesses in our local market area. Real estate construction loans decreased $5.6 million, or 15.1%, to $31.3 million at September 30, 2010, as weakened economic conditions have reduced the demand for new construction. One- to four-family residential mortgage loans increased $9.1 million, or 3.5%, to $266.4 million at September 30, 2010 from $257.3 million at December 31, 2009, as $94.7 million in originations and purchases of one- to four-family residential mortgage loans were offset by sales of $45.5 million, repayments of $37.2 million and a $2.9 million reclassification to other real estate owned.

Allowance for Loan Losses. The allowance for loan losses increased $978,000, or 11.8%, to $9.3 million at September 30, 2010 from $8.3 million at December 31, 2009, while total loans decreased $30.6 million, or 4.3%, to $677.2 million at September 30, 2010 from $707.8 million at December 31, 2009. The increase in the allowance for loan losses attributable to commercial business loans was partially offset by decreases in the allowance for loan losses related to automobile loans and real estate construction loans. At September 30, 2010, the allowance for loan losses represented 1.37% of total loans compared to 1.18% of total loans at December 31, 2009. Included in the allowance for loan losses at September 30, 2010 were specific allowances for loan losses of $2.9 million related to eleven impaired loans with balances totaling $11.5 million. In addition, impaired loans with balances totaling $18.0 million did not require specific allowances for loan losses at September 30, 2010. The allowance for loan losses at December 31, 2009 included a $687,000 specific allowance for loan losses on five impaired loans with balances totaling of $6.6 million. Impaired loans with balances totaling $10.6 million did not require a specific valuation allowance at December 31, 2009. The balance of unimpaired loans decreased $42.9 million, or 6.2%, to $647.7 million at September 30, 2010 from $690.6 million at December 31, 2009. The allowance for loan losses related to unimpaired loans decreased $1.2 million, or 15.8%, to $6.4 million at September 30, 2010 from $7.6 million from December 31, 2009.

The significant changes in the amount of the allowance for loan losses during the nine months ended September 30, 2010 related to: (i) a $1.2 million increase in the allowance for loan losses attributable to commercial business loans reflecting managements assessment of eleven impaired commercial business loans with balances totaling $3.5 million as to which specific allowance for loan losses of $1.3 million were established at September 30, 2010, as compared to two impaired loans with balances totaling $393,000 and related specific allowance for loan losses of $102,000 at December 31, 2009; (ii) a $386,000 decrease in the allowance for loan losses attributable to automobile loans, reflecting a $19.6 million decrease in the automobile portfolio; and (iii) a $283,000 decrease in the allowance for loan losses attributable to real estate construction loans due to a decrease in the special mention and substandard loans to seven real estate construction loans totaling $10.6 million with a general allowance of $369,000 at September 30, 2010 from twenty-five real estate construction loans totaling $15.2 million with a general allowance of $620,000 at December 31, 2009. Management considered the effects of current economic conditions, loan concentrations, our historical loss experience, the nature and volume of the loan portfolio, the financial strength of the borrower, and the estimated value of any underlying collateral, among other factors, when estimating the level of the allowance for loan losses required. To the best of our knowledge, we have provided for all losses that are both probable and reasonable to estimate at September 30, 2010 and December 31, 2009.

Deposits. Deposits decreased $110.1 million, or 12.1%, to $799.9 million at September 30, 2010 from $910.0 million at December 31, 2009. Our core deposits (consisting of interest-bearing and non-interest-bearing demand accounts, money market accounts and savings accounts) decreased $129.0 million, or 22.4%, to $447.2 million at September 30, 2010 from $576.2 million at December 31, 2009. The core deposit balance at December 31, 2009 included $159.5 million in subscriptions for the purchase of shares of common stock in our stock offering, which was completed on January 20, 2010. Certificates of deposit increased $18.9 million, or 5.7%, to $352.7 million at September 30, 2010 from $333.8 million at December 31, 2009.

Interest expense on certificates of deposit decreased $533,000, or 22.2%, to $1.9 million for the three months ended September 30, 2010 from $2.4 million for the three months ended September 30, 2009. The average rate paid on certificates of deposit decreased 76 basis points to 2.11% for the three months ended September 30, 2010 from 2.87% for the three months ended September 30, 2009, reflecting lower market interest rates. Partially offsetting the decrease in the average yield of certificates of deposit was an increase in the average balance of certificates of deposit of $19.8 million, to $357.5 million for the three months ended September 30, 2010 from $337.7 million for the three months ended September 30, 2009. The interest expense on our core deposits decreased $77,000, or 13.3%, to $504,000 for the three months ended September 30, 2010 from $581,000 for the prior year period, primarily due to a 13 basis point decrease in the average rate paid on core deposits, partially offset by a $24.4 million increase in the average balance of core deposits.

Provision for Loan Losses. We recorded a provision for loan losses of $2.8 million for the three months ended September 30, 2010 compared to a provision for loan losses of $1.9 million for the three months ended September 30, 2009. This increase in the provision is primarily due to the increase in substandard loans from September 30, 2009 to September 30, 2010. Substandard loans increased $17.1 million, or 71.8%, to $40.9 million at September 30, 2010 from $23.8 million at September 30, 2009. At September 30, 2010, we identified 89 impaired loans with balances totaling $29.5 million. Eleven of these impaired loans with balances totaling $11.5 million had specific allowance for loan losses totaling $2.9 million. Included in the substandard loan total at September 30, 2009 were impaired loans totaling $9.1 million with a specific allowance for loan losses of $452,000. In addition, twelve loans with balances totaling $5.5 million were reclassified to other real estate owned during the three months ended September 30, 2010. The increase in the provision for loan losses due to

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