(Source: Business Wire)
American Bancorp of New Jersey, Inc. (NASDAQ: ABNJ) ("American" or the "Company"), the holding company for American Bank of New Jersey (the "Bank"), announced today a net loss of $573,000 for the quarter ended March 31, 2009. By comparison, the Company reported a net loss of $13,000 for the quarter ended March 31, 2008. The increase in the net loss for the more recent comparative period was primarily attributable to increases in the provision for loan losses. Both basic and diluted earnings per share for the quarter ended March 31, 2009 were ($0.06). By comparison, for the quarter ended March 31, 2008, both basic and diluted earnings per share were $0.00.
Increases in the provision for loan losses similarly affected the Company's earnings during the comparative six month periods. For the six months ended March 31, 2009, the Company reported a net loss of $18,000 in comparison to net income of $80,000 for the six months ended March 31, 2008. Both basic and diluted earnings per share for the six months ended March 31, 2009 were $0.00. By comparison, for the six months ended March 31, 2008, both basic and diluted earnings per share were $0.01.
On December 15, 2008, American Bancorp of New Jersey, Inc. and Investors Bancorp, Inc. jointly announced the signing of a definitive agreement under which Investors Bancorp will acquire American Bancorp of New Jersey. Under the terms of the agreement, as amended on March 9, 2009, 65% of American Bancorp of New Jersey shares will be converted into Investors Bancorp common stock and the remaining 35% will be converted into cash. American Bancorp of New Jersey's stockholders will have the option to elect to receive either 0.9218 shares of Investors Bancorp common stock or $12.50 in cash for each American Bancorp of New Jersey common share, subject to proration to ensure that in the aggregate 65% of the American Bancorp of New Jersey shares will be converted into stock. The transaction is intended to qualify as a reorganization for federal income tax purposes. As a result, the shares of American Bancorp exchanged for Investors Bancorp stock will be transferred on a tax-free basis.
The transaction has been approved by the boards of directors of each company and is expected to close on or about May 29, 2009, subject to customary closing conditions including regulatory approvals and approval by American Bancorp of New Jersey's shareholders. All requisite regulatory approvals for the transaction have been received and shareholders are scheduled to vote on the merger proposal at the Company's annual meeting scheduled for May 19, 2009.
For the first six months of fiscal 2009, loans receivable, net increased by $12.1 million to $490.7 million at March 31, 2009 from $478.6 million at September 30, 2008. The growth included net increases in commercial loans totaling $4.8 million, comprising increases in multifamily, nonresidential real estate, land and business loans of $11.7 million, partially offset by net reductions in the outstanding balance of construction loans of $6.8 million. The increase in loans receivable, net also included net increases in one- to four-family first mortgages of $7.5 million, net increases in home equity loans and home equity lines of credit totaling $1.1 million and net increases in consumer loans of $259,000. Offsetting the growth in these categories during the first six months of fiscal 2009 was a net increase to the allowance for loan losses totaling $1.6 million primarily attributable to specific valuation allowances on certain impaired, nonperforming loans.
Specifically, the Bank has classified a total of 12 loans with outstanding principal balances of $12.3 million as nonperforming at March 31, 2009. Of these loans, $6.8 million is attributable to one fully disbursed construction loan. The loan, which includes personal guarantees for all indebtedness, is secured by a completed 13-unit residential condominium project located in Wildwood Crest, New Jersey. The Bank classified the loan as nonperforming and initiated foreclosure action during the quarter ended March 31, 2009. Based upon the loan's nonaccrual status and updated collateral value, the Bank established a $1,375,000 valuation allowance against the impaired loan during the most recent quarter ended March 31, 2009.
Nonperforming loans also include one additional construction loan with a disbursed balance of $3.0 million secured by two residential properties in process of construction in Alpine, New Jersey. No impairment allowance was required against this construction loan at March 31, 2009.
Four nonresidential mortgage loans and one land loan with combined outstanding principal balances of approximately $1.6 million, net of charge offs, were classified as nonperforming at March 31, 2009. Based upon their respective nonaccrual statuses and collateral values, impairment allowances totaling $135,000 were established against two of these five nonperforming loans during the most recent quarter ended March 31, 2009.
The remaining five nonperforming loans include three one- to-four family mortgage loans, one multifamily mortgage loan and one consumer loan with total outstanding balances of $925,000. No impairment allowance was required against these loans at March 31, 2009.
For the first six months of fiscal 2009, total deposits increased by $51.3 million to $498.9 million at March 31, 2009 from $447.7 million at September 30, 2008. This net growth reflected increases in certificates of deposit, savings accounts and interest-bearing checking accounts, including money market checking accounts, of $42.2 million, $3.7 million and $5.6 million, respectively. This growth in deposits was partially offset by reductions in the balance of noninterest-bearing checking accounts of $241,000.
The noteworthy growth in the Bank's deposits during the past six months has coincided with a significant reduction in deposit interest rates as offered by the Bank as well as those offered in the marketplace as a whole. The Bank attributes a portion of its deposit gathering success to the continued marketing efforts focused on achieving or growing the profitability of its branches. However, the Bank acknowledges that the recent volatility within the financial markets and the resulting economic uncertainty has caused many consumers to seek the safety of FDIC-insured accounts to protect the value of their financial assets.
As a result of these factors, the Bank has experienced significant growth in deposits that outpaced its near term ability to deploy such incoming cash flows into creditworthy loans. Consequently, the Bank has experienced significant net growth in short term interest-earning assets and shorter duration investment securities whose current yields reflect the recent reductions in short term market interest rates to historical lows. Specifically, the balance of cash and cash equivalents increased by $20.8 million to $41.2 million at March 31, 2009 from $20.4 million at September 30, 2008. Additionally, securities classified as available-for-sale increased $13.1 million to $94.3 million at March 31, 2009 from $81.2 million at September 30, 2008 while securities held-to-maturity decreased approximately $705,000 to $6.8 million from $7.5 million for those same comparative periods.
A portion of the incoming cash flows from deposit growth was also used to repay other interest-bearing liabilities. Specifically, borrowings decreased $8.0 million to $67.5 million at March 31, 2009 from $75.5 million at September 30, 2008. The reduction in borrowings was attributable to net repayment of maturing and amortizing fixed rate FHLB term advances of which $5.0 million had originally been drawn in connection with a $50 million wholesale growth strategy executed in fiscal 2008.
The Bank expects to deploy the accumulated balances of lower yielding cash and investments into higher yielding assets over time which is expected to enhance earnings in future periods. In doing so, however, the Bank will be cognizant of the potential risk of deposit outflows when and if the financial markets and economic conditions improve and consumers elect to reinvest their insured deposits into alternative, noninsured investments.
The factors noted above contributed to the Company's yield on earning assets decreasing 58 basis points to 5.05% for the quarter ended March 31, 2009 from 5.63% for the quarter ended March 31, 2008. This decrease also reflected the impact of overall reductions in market interest rates on the yields of repricing assets including, but not limited to, cash and cash equivalents and adjustable rate loans, as well as the overall reinvestment of incoming cash flows from loan and investment security maturities and repayments at comparatively lower yields.
However, the decrease in the yield on interest-earning assets between the comparative quarters was outpaced by a reduction in the Company's interest costs for those same periods. The Company's cost of interest-bearing liabilities decreased 90 basis points to 3.03% for the quarter ended March 31, 2009 from 3.93% for the quarter ended March 31, 2008. The decrease in the cost of interest-bearing deposits was primarily attributable to two related factors. First, the Company has reduced the interest rates paid on deposits generated through the three full service branches opened during fiscal 2007 on which promotional interest rates had continued to be paid during a portion of fiscal 2008. Deposits acquired through those de novo branches no longer reflect the effects of promotional pricing.
