American Bancorp of New Jersey, Inc. (NASDAQ: ABNJ) ("American")
announced today a loss of $13,000 for the quarter ended March 31,
2008. By comparison, net income for the quarter ended March 31,
2007 was $150,000. Both basic and diluted earnings per share for
the quarter ended March 31, 2008 were $0.00. By comparison, for the
quarter ended March 31, 2007, both basic and diluted earnings per
share were $0.01. The Company�s earnings for the six months ended
March 31, 2008 were $80,000 in comparison to $479,000 for the six
months ended March 31, 2007. Basic and diluted earnings per share
for the six months ended March 31, 2008 were $0.01 and $0.01,
respectively. By comparison, for the six months ended March 31,
2007, basic and diluted earnings per share were $0.04 and $0.04,
respectively. For the six months ended March 31, 2008, loans
receivable, net increased $21.8 million or 5.0% to $459.7 million
from $437.9 million at September 30, 2007. The growth was comprised
of net increases in commercial loans, including multi-family,
commercial real estate, construction and business loans, totaling
$22.2 million. The increase in loans receivable, net also included
net increases in home equity loans and home equity lines of credit
totaling $469,000 and net increases in consumer loans of $198,000.
Offsetting the growth in these categories was a $803,000 decrease
in the balance of 1-4 family first mortgages and a net increase to
the allowance for loan losses totaling $275,000. For that same
period, the balance of the Company�s investment securities
increased by $36.7 million. This net growth in securities was
largely attributable to a wholesale growth transaction in March
2008 through which the Company purchased approximately $50.0
million of mortgage-related investment securities funded by an
equivalent amount of borrowings from the FHLB and through reverse
repurchase agreements. The net interest income resulting from this
transaction is intended to augment the Company�s earnings as it
continues to incur the near term costs associated with executing
its business plan. Through this transaction, the Company took
advantage of the opportunity presented by recent turmoil in the
mortgage securities markets to acquire agency, AAA-rated
mortgage-related securities at historically wide interest rate
spreads in relation to the cost of wholesale funding sources. The
growth in securities associated with this transaction was partially
offset by the continued reinvestment of a significant portion of
the funds received from maturing debentures and other
mortgage-related security repayments into the loan portfolio. The
Company�s balance of cash and cash equivalents decreased by $9.2
million which also provided a portion of the funding for the
Company�s reported net loan growth and continued share repurchases
during the current six month period. The balance of deposits
increased $8.4 million for the six months ended March 31, 2008.
This net growth reflected increases in certificates of deposit and
noninterest bearing checking accounts of $23.1 million and
$673,000, respectively. This growth was offset by reductions in
interest bearing checking and savings accounts of $13.0 million and
$2.3 million, respectively. For the same period, borrowings grew
$49.0 million reflecting the additions to FHLB advances and reverse
repurchase agreements associated with the $50.0 million wholesale
growth transaction noted above offset by the repayment of a
maturing $1.0 million FHLB term advance. Additionally, the Company
reported an increase of $8.4 million in treasury stock attributable
to the Company�s share repurchase programs. The Company�s yield on
earning assets decreased one basis point to 5.63% for the quarter
ended March 31, 2008 from 5.64% for the quarter ended March 31,
2007. This decrease of one basis point reflected the impact of
overall reductions in market interest rates on the yields of
repricing assets which has been substantially offset by the overall
improved yields on earning assets resulting from the Company�s
growth in higher yielding commercial loans. The decrease in the
yield on earning assets between the comparative quarters was
outpaced by a reduction in the Company�s interest costs for the
same periods. The Company�s cost of interest-bearing liabilities
decreased 26 basis points to 3.93% for the quarter ended March 31,
2008 from 4.19% for the quarter ended March 31, 2007. This decrease
in interest cost was primarily attributable to two related factors.
First, the Company continued to reduce the interest rates paid on
deposits generated through the three full service branches opened
during fiscal 2007 on which promotional interest rates had
originally been paid. Second, reductions in market interest rates
enabled the Company to reduce rates paid on many interest-bearing
deposit types across all branches. In total, the Company�s net
interest spread widened 26 basis points to 1.70% from 1.44% for
those same comparative periods. The factors noted in the quarterly
discussion above have also effected the Company�s comparative net
interest spread for the six months ended March 31, 2008 and 2007.
However, the effects of the significant reductions in market
interest rates during the second quarter ended March 31, 2008, as
discussed above, are somewhat muted by the first quarter�s results
included in the six month calculation. As such, for the comparative
six month periods, the Company�s yield on earning assets increased
17 basis points to 5.73% from 5.56% in comparison to the one basis
point reduction in that measure discussed above. Moreover, for
those same comparative periods, the Company�s cost of
interest-bearing liabilities increased six basis points to 4.13%
from 4.07% compared with the 26 basis point reduction discussed
above. The directional contrast between the three and six month
comparative periods for both interest yields and costs indicates an
inflection point, or reversal, for both measures during the quarter
ended March 31, 2008. In total, the Company�s net interest spread
widened 11 basis points to 1.60% for the six months ended March 31,
2008 from 1.49% for the same period in 2007. The factors resulting
in the widening of the Company�s net interest spread also
positively impacted the Company�s net interest margin for both the
three and six month periods ended March 31, 2008. However, the
impact of the Company�s share repurchase plans on net interest
margin for each period more than offset the benefits of the
widening net interest spread. For the comparative three and six
month periods ended March 31, 2008 and 2007, the average balance of
treasury stock increased $18.0 million and $20.2 million,
respectively, reflecting the Company�s share repurchase activity.
The foregone interest income on the earning assets used to fund
those share repurchases contributed significantly to the reduction
in the Company�s net interest margin reported for the comparative
three and six month periods. For the three months ended March 31,
2008, the Company reported a three basis point reduction in net
interest margin to 2.38% from 2.41% for the same period in 2007.
Similarly, for the six months ended March 31, 2008, the Company
reported a 16 basis point reduction in net interest margin to 2.34%
from 2.50% for the same period in 2007. Notwithstanding the margin
compression noted above, the Company reported an increase in net
interest income of $149,000 or 4.9% to $3.2 million for the quarter
ended March 31, 2008 from $3.1 million for the quarter ended March
31, 2007. This increase was complemented by a comparatively lower
provision to the allowance for loan losses. For those same
comparative periods, the Company�s loan loss provision decreased
$22,000 to $171,000 from $193,000. The expense for the quarter
ended March 31, 2008 reflected a provision of $34,000 attributable
to one impaired construction loan, that portion of which was deemed
uncollectible by management during its asset quality review
conducted at March 31, 2008 and therefore charged off. The
remaining balance of the impaired loan at March 31, 2008, after the
charge off, was approximately $146,000. Excluding this adjustment,
the provision for loan losses for both comparative periods resulted
from the application of historical and environmental loss factors
against the net growth in loans in accordance with the Bank�s loan
loss methodology. For the six months ended March 31, 2008, the
Company reported an increase in net interest income of $81,000 or
1.30% to $6.3 million from $6.2 million for the six months ended
March 31, 2007. This increase was partially offset by a
comparatively greater provision for loan losses. For those same
comparative periods, the Company�s loan loss provision increased
$66,000 to $309,000 from $243,000. As noted above, the expense in
the current six month period included a $34,000 provision against a
specific impaired loan. By contrast, the expense in the earlier
comparative period reflected a reversal of an $86,000 impairment
reserve that was no longer required. Excluding these adjustments,
the provision for loan losses for both comparative periods resulted
from the application of historical and environmental loss factors
against the net growth in loans in accordance with the Bank�s loan
loss methodology. For the three month period ended March 31, 2008,
noninterest income increased $83,000 to $438,000 from $355,000 for
the quarter ended March 31, 2007. The growth in noninterest income
was partly attributable to increases in deposit service fees and
charges. A portion of the increase was attributable to deposit
service fees and charges at the Bank�s de novo branches opened
during fiscal 2007. However, the reported increase was primarily
due to growth in deposit-related fees and charges within the Bank�s
other branches. Additionally, the Company reported increases in
income from the cash surrender value of life insurance attributable
to a combination of higher average balances and improved yields on
those assets. The Company also reported an increase in other
noninterest income attributable primarily to growth in loan-related
fees and charges including, but not limited to, increases in
prepayment penalties and late charges. For the six months ended
March 31, 2008, noninterest income increased $190,000 to $833,000
from $643,000 for the same period in 2007. The growth in
noninterest income for the comparative six month periods was
largely attributable to the same factors as those impacting the
comparative three month periods discussed above. For the three
months ended March 31, 2008, noninterest expense increased $546,000
to $3.6 million from $3.0 million for the three months ended March
31, 2007. This growth in noninterest expense was primarily
attributable to increases in salaries and employee benefits,
occupancy and equipment, data processing and legal expenses.
Salaries and employee benefits increased $287,000 for the three
months ended March 31, 2008 from the same period in 2007. The
increase in compensation expense was largely the result of the
previously announced death of a director emeritus of the Company,
during the quarter ended March 31, 2008. Under the terms of the
Company�s restricted stock and stock option plans, the vesting of
the remaining unearned benefits accruing to the former director
through these plans was automatically accelerated. As such, the
Company incurred an acceleration of the remaining pre-tax expenses
associated with these benefits totaling approximately $254,000
during the quarter ended March 31, 2008. The remaining increase in
compensation expense was largely attributable to the increase in
staffing costs associated with the two branches opened in the
latter half of fiscal 2007 plus overall increases in the costs of
employee health benefits. However, such increases have been
substantially offset by cost reductions associated with previously
enacted workforce reduction efforts which reduced the Company�s
number of full time equivalent employees by over eight percent
during fiscal 2008. Additionally, director compensation costs have
decreased compared with the earlier three month period due largely
to the absence in the current period of the changes in retirement
plan benefit accrual assumptions that had increased the related
expenses during the earlier comparative period. Like compensation
expense above, the reported increase of $208,000 in occupancy and
equipment expense is also attributable, in part, to the costs of
the two additional branches opened in the latter half of fiscal
2007. However, the comparative increase also reflects the land
lease costs associated with the relocation of the Bank�s Bloomfield
branch which opened in April, 2008. Additionally, the increase
includes the cost associated with outsourcing a significant portion
of the Company�s information technology infrastructure support
services that had been provided by in-house resources during the
earlier comparative period. The reported increase of $21,000 in
data processing charges was also partly attributable to the
associated costs of the two additional branches opened in the
latter half of fiscal 2007 including both core processing and item
processing expenses. However, the increase also included �one time�
expenses associated with converting the Bank�s official check
processing to an in-house system during the quarter and
implementing additional commercial deposit services on its core
processing system. Finally, the reported increase in legal expense
was attributable to several matters including, but not limited to,
services associated with expanded SEC disclosure requirements
regarding the Company�s annual meeting proxy material and
forthcoming revisions to benefit plan agreements as required by the
Internal Revenue Service. For the six months ended March 31, 2008,
noninterest expense increased $931,000 to $6.8 million from $5.9
million for the same period in 2007. The growth in noninterest
expense for the comparative six month periods was generally
attributable to the same factors as those impacting the comparative
three month periods discussed above. Additionally, the Company
reported a reduction in advertising and marketing expense for the
more recent six month period reflecting the absence of the higher
expenses recorded in the earlier comparative period associated with
the Verona branch grand opening in December 2006. The following
tables present selected balance sheet data as of March 31, 2008 and
September 30, 2007 and selected operating data for the three months
and six months ended March 31, 2008 and March 31, 2007. FINANCIAL
HIGHLIGHTS (unaudited) At March 31, � At September 30, 2008 2007 �
Balance � % TotalAssets Balance � % TotalAssets SELECTED FINANCIAL
DATA (in thousands): Assets Cash and cash equivalents $ 28,238 4.52
% $ 37,421 6.52 % Securities available-for-sale 94,312 15.10 58,093
10.13 Securities held-to-maturity 7,200 1.15 6,730 1.17 Loans held
for sale - - 1,243 0.22 Loans receivable, net 459,659 73.62 437,883
76.32 Premises and equipment 12,093 1.94 10,856 1.89 Federal Home
Loan Bank stock 3,182 0.51 2,553 0.45 Cash surrender value of life
insurance 13,480 2.16 13,214 2.30 Accrued interest receivable 2,473
0.40 2,212 0.39 Other assets � 3,769 � 0.60 � � 3,533 � 0.61 �
Total assets $ 624,406 � 100.00 % $ 573,738 � 100.00 % Liabilities
and equity Deposits $ 437,030 69.99 % $ 428,600 74.70 % Advances
for taxes and insurance 2,812 0.45 2,702 0.47 Borrowings 86,580
13.87 37,612 6.56 Other liabilities 4,571 0.73 4,231 0.74 Equity �
93,413 � 14.96 � � 100,593 � 17.53 � Total liabilities and equity $
624,406 � 100.00 % $ 573,738 � 100.00 % � Loan Data � Balance %
TotalLoans � Balance % TotalLoans 1-4 family mortgage loans $
262,645 57.13 % $ 263,448 60.16 % Home equity loans 14,399 3.13
14,625 3.34 Home equity lines of credit 20,524 4.47 19,829 4.53
Multifamily mortgage loans 31,767 6.91 30,552 6.98 Nonresidential
mortgage loans 79,997 17.40 68,431 15.63 Land and property
acquisition loans 5,871 1.28 3,340 0.76 Construction loans 38,737
8.43 32,542 7.43 Business loans 7,709 1.68 7,029 1.61 Consumer
loans 853 0.19 655 0.15 Allowance for loans losses � (2,843 ) (0.62
) � (2,568 ) (0.59 ) Loans receivable, net $ 459,659 � 100.00 % $
437,883 � 100.00 % � Deposit Data � Balance % TotalDeposits �
Balance % TotalDeposits Noninterest-bearing deposits 31,167 7.13 %
30,494 7.11 % Interest-bearing checking 98,817 22.61 111,795 26.08
Savings 90,448 20.70 92,778 21.65 Certificates of deposit � 216,598
� 49.56 � � 193,533 � 45.16 � Deposits $ 437,030 � 100.00 % $
428,600 � 100.00 % FINANCIAL HIGHLIGHTS (continued) (unaudited) At
March 31, � At September 30, 2008 2007 Capital Ratios Equity to
total assets (%) 14.96 17.53 Outstanding shares (#) 11,142,501
11,946,190 Asset Quality Ratios: Non-performing loans to total
loans (%) 0.21 0.28 Non-performing assets to total assets (%) 0.16
0.22 Allowance for loan losses to non-performing loans (%) 289.53
205.56 Allowance for loan losses to total loans (%) 0.61 0.58 � For
the six months ended March 31, For the three months ended March 31,
2008 � 2007 2008 � 2007 SELECTED OPERATING DATA (in thousands):
Total interest income $ 15,424 $ 13,867 $ 7,590 $ 7,159 Total
interest expense � 9,117 � � 7,641 � � 4,384 � � 4,102 � Net
interest income 6,307 6,226 3,206 3,057 Provision for loan losses �
309 � � 243 � � 171 � � 193 � Net interest income after provision
for loan losses 5,998 5,983 3,035 2,864 Noninterest income 833 643
438 355 Noninterest expense � 6,844 � � 5,913 � � 3,568 � � 3,022 �
Income (loss) before income taxes (13 ) 713 (95 ) 197 Provision
(benefit) for income taxes � (93 ) � 234 � � (82 ) � 47 � Net
income (loss) $ 80 � $ 479 � $ (13 ) $ 150 � Performance Ratios:
Return on average assets 0.03 % 0.18 % (0.01 )% 0.11 % Return on
average equity 0.17 0.83 (0.05 ) 0.54 Net interest rate spread 1.60
1.49 1.70 1.44 Net interest margin 2.34 2.50 2.38 2.41 Noninterest
income to average total assets 0.29 0.25 0.31 0.26 Noninterest
expense to average total assets 2.39 2.26 2.49 2.25 Efficiency
Ratio 95.85 86.08 97.93 88.58 PER SHARE DATA: Earnings per share
Basic 0.01 0.04 0.00 0.01 Diluted 0.01 0.04 0.00 0.01 The foregoing
material contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 concerning our
financial condition, results of operations and business. We caution
that such statements are subject to a number of uncertainties and
actual results could differ materially, and, therefore, readers
should not place undue reliance on any forward-looking statements.
We do not undertake, and specifically disclaim, any obligation to
publicly release the results of any revisions that may be made to
any forward-looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date
of such statements.
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