BankAtlantic is a fed.-chartered,fed.-insured savings bank, which provides traditional retail banking services & a full range of commercial banking products & related financial services.The principal business of BankAtlantic is attracting checking & savings deposits from the public & general business customers & using these deposits to originate commercial real estate & business loans,res. real estate loans & consumer loans,to purchase wholesale res. loans from 3rd parties & to make other permitted investments. Bankatlantic Bancorp Inc. has a market cap of $18 million; its shares were traded at around $1.6 . Bankatlantic Bancorp Inc. had an annual average earning growth of 1.4% over the past 5 years.
Highlight of Business Operations:The increase in BankAtlantics net loss during the 2009 quarter compared to the same 2008 quarter primarily resulted from a $29.3 million increase in its provision for loan losses and a $9.7 million decline in net interest income. The increase in BankAtlantics net loss was partially offset by $6.8 million of lower non-interest expenses related primarily to managements expense reduction initiatives and an increase in non-interest income of $1.6 million primarily related to $4.8 million of gains on the sale of securities. The substantial increase in the provision for loan losses resulted primarily from a significant increase in charge-offs and loan loss reserves in our consumer, residential and commercial real estate loan portfolios. These portfolios continued to be negatively affected by the current adverse economic environment, especially declining collateral values and rising unemployment. The substantial decline in net interest income reflects managements decision to reduce asset balances and wholesale borrowings as well as the impact of increased levels of nonperforming assets in order to improve BankAtlantics liquidity position and regulatory capital ratios... As a consequence, BankAtlantics average earnings assets declined by $1.1 billion for the three months ended September 30, 2009 compared to the September 30, 2008 period. The increase in non-interest income associated with gains on sale of agency securities was partially offset by declines in revenues from service charges on deposit accounts mainly due to lower customer overdraft fees recognized during the 2009 quarter compared to the 2008 quarter. This overdraft fee income decline reflects, in part, managements focus on targeting retail customers and businesses that maintain higher average deposit balances than our existing customers which results in fewer overdrafts per account. BankAtlantic incurred significantly lower non-interest expenses during the 2009 quarter compared to the same 2008 quarter. In response to adverse economic conditions, BankAtlantic, during 2008 and the nine months ended September 30, 2009, reduced expenses with a view toward increasing operating efficiencies. These operating expense initiatives included workforce reductions, consolidation of certain back-office facilities, sale of five central Florida stores, renegotiation of vendor contracts, outsourcing of certain back-office functions, reduction in marketing expenses and other targeted expense reductions these expense reductions were partially offset by higher FDIC insurance premiums, including a $2.4 million FDIC special assessment in June 2009. Also during the 2008 quarter, BankAtlantic recognized income tax benefits associated with its net loss while during the 2009 quarter, a deferred tax valuation allowance continued to be recognized, fully offsetting the income tax benefits associated with the net loss in the 2009 quarter.
The increase in the Parent Companys net loss during the 2009 quarter compared to the same 2008 quarter primarily resulted from a $3.1 million increase in the provision for loan loss, a $4.7 million reduction in income tax benefits and $1.1 million of lower securities gains. These items were partially offset by a $1.1 million reduction in net interest expense. The increased provision for loan losses reflects higher loan loss reserves established on non-performing loans transferred from BankAtlantic to an asset work-out subsidiary of the Parent Company in March 2008. The additional reserves were required due to declining collateral values. The lower revenues from securities activities, net reflect a $1.1 million gain on the sale of Stifel warrants during the 2008 quarter with no gains recognized on the sale of securities during the 2009 quarter. The Parent Company recognized a $4.7 million income tax benefit in the 2008 quarter while no income tax benefit was recognized during the 2009 quarter due to the increase in the deferred tax valuation allowance. The lower net interest expense reflects a decline in interest expense on junior subordinated debentures associated with a significant decrease in the three-month LIBOR interest rate from September 2008 to September 2009.
The increase in BankAtlantics net loss during the 2009 nine month period compared to the same 2008 period primarily resulted from a $30.0 million increase in the provision for loan losses, a $25.8 million decline in net interest income, $14.6 million of lower revenues from service charges on deposits and the recognition of $22.9 million of income tax benefits in the 2008 period associated with the net loss during that period and no tax benefits recognized in the 2009 period as a result of the deferred tax valuation allowance. The increase in BankAtlantics net loss was partially offset by higher securities gains and lower non-interest expenses.
The increase in the Parent Companys net loss primarily resulted from an increase in the provision for loan losses of $1.9 million, lower revenues from securities activities of $4.3 million and the reduction in the income tax benefit of $11.6 million partially offset by a $3.0 million reduction in net interest expense.
The net interest margin increased as rates on average interest bearing liabilities declined faster than yields on average interest-earning assets. The decline in interest rates on interest bearing liabilities reflects the lower interest rate environment generally during 2009 compared to 2008 and a change in BankAtlantics funding mix from higher rate FHLB advances to lower rate deposits. BankAtlantic repaid $760 million of FHLB advances during the nine months ended September 30, 2009. These FHLB advances had an average interest rate of 3.37% and were repaid to improve BankAtlantics net interest margin. The interest earning asset yield declines were primarily due to lower interest rates during the current period and changes in the earning asset portfolio mix from higher yielding residential loans and residential mortgage backed securities to lower yielding commercial and consumer loans. During the nine months ended September 30, 2009, interest rates on residential mortgage loans were at historical lows which resulted in increased residential loan refinancings and the associated early repayment of existing residential loans during the period. Additionally, BankAtlantic sold $283.9 million of mortgage backed securities during the nine months ended September 30, 2009. The lower interest rate environment during the 2009 quarter had a significant impact on commercial, small business and consumer loan yields, as a majority of these loans have adjustable interest rates indexed to prime or LIBOR. The prime interest rate declined from 5.00% at June 30, 2008 to 3.25% at September 30, 2009, and the average three-month LIBOR rate declined from 3.07% at September 30, 2008 to 0.30% at September 30, 2009. Yields on earning assets were also adversely affected by lower FHLB stock dividends. BankAtlantic received $0.6 million of FHLB stock dividends during the three months ended September 30, 2008 compared to $0.1 million during the same 2009 period.
The decline in interest bearing deposit rates reflects the lower interest rate environment and an increase in NOW low cost deposit accounts. The increase in certificate accounts reflects higher average brokered deposit account balances during the 2009 quarter compared to the 2008 quarter. Deposits which BankAtlantic receives in connection with its participation in the CDARS program from other participating CDARS institutions are included in BankAtlantics financial statements as brokered deposits. Average brokered deposits increased from $126.0 million for the three months ended September 30, 2008 to $190.4 million during the same 2009 period, representing 3.90% of total deposits as of September 30, 2009. However, average brokered deposits for the 2009 third quarter declined compared to average brokered deposits of $232.5 million for the 2009 second quarter.
Read the The complete ReportBBX is in the portfolios of Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, Charles Brandes of Brandes Investment.