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| Avondale Financial Corp. Reports Second Quarter Earnings of $.65 Per Share, Up 156 Percent from Prior Year |
CHICAGO, July 25 /PRNewswire/ -- Avondale Financial Corp. (Nasdaq: AVND),
the holding company for Avondale Federal Savings Bank today reported record
net income of $2,285,000, or $.65 per share, for the second quarter of 1997.
Net income for the year-ago quarter was $937,000, or $.26 per share. Second
quarter earnings benefited from a pretax gain of $4.1 million from the sale of
loans connected with the Bank's second home equity loan securitization.
For the first half of 1997, The Company lost $5.3 million, or $1.51 per
share, compared with net income of $1.9 million, or $.49 per share for the
first six months of 1996. The loss was a result of a special $13 million loan
loss provision previously announced during the first quarter of 1997. The
provision is due to higher than expected delinquency rates and projected
losses in one of the Bank's private label credit card programs.
RESULTS OF OPERATIONS
Net income increased $1.4 million to $2.3 million for the three months
ended June 30, 1997 compared to $937,000 for the three months ended June 30,
1996. The Bank continues to make significant progress in net interest income,
the result of the growing home equity loan portfolio, and non-interest income,
primarily due to loan servicing fees. Earnings per share for the quarter were
$.65 compared to $.26 for the same quarter a year-ago.
NET INTEREST MARGIN
The following table represents a summary of Avondale's net interest
income, average earning assets and net interest margin:
Net Interest Income Analysis
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
Net Interest Income $7,518 $4,835 $14,345 $9,817
Average Earning Assets $610,056 $566,632 $599,111 $578,703
Net Interest Margin 4.93% 3.41% 4.79% 3.39%
The Bank's net interest income totaled $7.5 million for the quarter,
compared to $4.8 million for the year-ago quarter, an increase of 55%.
Average loan balances were $381 million with an average yield of 11.56% for
the quarter, compared to loan balances of $249 million and a yield of 9.00%
for the year-ago quarter. Investments and mortgage-backed securities average
balance decreased $89 million, with an average yield of 6.77% compared to
6.85% for the year-ago quarter. Average earning assets were $610 million for
the quarter ended June 30, 1996 compared to $567 million for the prior year's
quarter.
Average deposits were $373 million with an average cost of 5.00% compared
to $325 million and an average cost of 4.51% for the year-ago quarter.
Average interest-bearing liabilities were $562 million compared to
$524 million for the year-ago quarter. The net interest margin for the
quarter was 4.93%, compared to 3.41% for the year-ago quarter.
For the first half of 1997 net interest income increased 46%, to
$14.3 million. Average loan balances were $368 million with an average yield
of 11.28% for the first half of 1997, compared to $238 million and 8.90% for
the year-ago period. Average earnings assets were $599 million compared to
$579 for the year-ago period. The net interest margin for the first half was
4.79%, versus 3.39% for the year-ago period.
NON-INTEREST INCOME
Non-interest income was $6.1 million for the quarter, an increase of
$5.3 million from the year-ago quarter. This increase was primarily due to
securitization gains of $4.1 million and loan servicing fees, which increased
by $1.6 million over the year-ago period, to $1.7 million. Security gains
were $64,000, down from $500,000 a year-ago reflecting the decline in the size
of the investment portfolio, to provide funding for the increasing loan
business.
For the first half non-interest income was $7.7 million, an increase of
$6 million from the first six months of 1996. The increase was due to the
securitization gain of $4.1 million and loan servicing income, which increased
$2.8 million to $2.9 million. Security gains were $75,000, down from
$1.1 million in the year-ago period.
NON-INTEREST EXPENSE
Non-interest expenses were $6.6 million, an increase of $2.9 million from
the year-ago quarter. The increase is primarily due to additional personnel,
technology and occupancy costs needed to support the growth in the Bank's
lending activity. The Company had 214 full-time equivalent employees at
June 30, 1997, up from 129 at June 30, 1996. The occupancy expenses increased
$362,000, to $602,000 for the quarter due to the relocation of the loan
operations center to a larger office space. Legal and professional expenses
increased $403,000, to $559,000 due to outsourcing of certain loan collection
services. Data processing expenses also increased $352,000 to $720,000 for
the quarter, reflecting the higher number of loans outstanding.
For the first half non-interest expenses were $12.3 million compared to
$7.5 million in the same period last year. Compensation expenses increased
$1.3 million to $5.1 million. Occupancy expenses increased $633,000, to
$1.1 million for the first half of 1997. Data processing expenses increased
$882,000 to $1.5 million. Legal and professional expenses increased $491,000
to $762,000 in the first half of 1997. All these increases were to support
the Bank's increasing lending business. The Bank's operating efficiency ratio
was 55.88% compared with 65.32% in the year-ago period.
BALANCE SHEET
Total assets were $607 million as of June 30, 1997, compared to
$592 million a year-ago and $596 million as of December 31, 1996. Total loans
outstanding were $348 million, compared to $266 million a year-ago and
$325 million as of December 31, 1996. The loan growth was concentrated in the
areas of adjustable-rate home equity lines of credit, $31 million (net of
$155 million in loan securitizations) and $72 million growth in the private
label credit card portfolio.
Securities decreased by $85 million to $217 million, as the Company
continues to liquidate the portfolio to support loan growth. Total deposits
were $382 million as June 30, 1997, a $51 million increase from December 31,
1996.
Avondale continues to maintain a strong capital position. The core
capital ratio of 8.9% and risk-based capital ratio of 16.27% at June 30, 1997,
significantly exceed the regulatory minimums of 4.00% and 8.00%, respectively.
As of June 30, 1997, Avondale's book value per share was $15.85, a decline
of $1.42 from the December 31, 1996 book value of $17.27.
ASSET QUALITY
The following table presents a summary of nonperforming assets in the
Bank's portfolio:
NON-PERFORMING ASSETS
(In thousands)
At At At
June 30, December 31, June 30,
1997 1996 1996
Non-accruing loans:
Equity lines of credit $3,229 $2,150 $1,517
One to four family loans 783 1,523 951
Multi-family 251 365 117
Consumer loans 13,511 1,256 48
Total non-performing loans 17,774 5,294 2,633
Total non-performing loans to
total loans 5.11% 1.63% 1.63%
Other real estate owned $1,516 $270 $1,839
Total non-performing loans and
Real estate owned to total assets 3.18% 0.93% 0.77%
Non-performing loans at June 30, 1997 were $17.8 million, increasing from
$5.3 million at December 31, 1996 and $2.6 million at June 30, 1996. The
increase is due to the Bank's private label credit card portfolio which had
non-performing balances at June 30, 1997 of $12.7 million compared to $651,000
at December 31, 1996. The Bank took a special $13 million provision in the
first quarter to cover estimated probable losses for this portfolio. The
delinquency on the rest of the Bank's loan portfolio is in line with
expectations and is priced accordingly in each time horizon.
With the exception of the one private label credit card portfolio, the
non-performing loans were 1.70% of total loans at June 30, 1997 compared to
1.43% at December 31, 1996 and .99% at June 30, 1996. The sixty-day and
thirty-day delinquency as of June 30, 1997 were 1.12% and 3.03%, compared to
1.40% and 5.00% as of December 31, 1996.
The non-performing loans on the private label portfolio were 25.4% of the
portfolio as of June 30, 1997. The sixty-day and thirty-day delinquency for
this portfolio as of June 30, 1997 was 6.2% and 7.1%, respectively.
Management believes the special loan loss provision expensed in the first
quarter and the regular accrual attributable to this program is adequate.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(In Thousands)
A reconciliation of the activity in Avondale's allowance for possible loan
losses is as follows:
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
Balance at January 1 $20,501 $4,043 $7,208 $3,460
Provision for possible
loan losses 3,545 475 18,059 1,125
Charge-offs (5,523) (192) (6,795) (259)
Total 32 -- 82 --
Balance at June 30 $18,555 $4,326 $18,555 $4,326
Loans at June 30 $347,925 $266,122 $347,925 $266,122
Ratio of allowance of loans 5.33% 1.63% 5.33% 1.63%
Net charge-offs for the second quarter totaled $5.5 million, of which
$4.8 million was related to the private label credit card portfolio. For the
first half of 1997, net charge-offs were $6.7 million, of which $5.1 million
was related to the private credit card portfolio.
The Bank maintains its allowance for loan losses at a level that is
considered by management to be adequate to absorb probable loan losses on
existing loans. The provision for loan losses for the three months ended
June 30, 1997 was $3.5 million an increase of $3.1 million from $475,000 for
the three months ended June 30, 1996. The allowance for loan losses was
$18.6 million at June 30, 1997, compared with $7.2 million at December 31,
1996 and $4.3 million at June 30, 1996.
PRIVATE LABEL CREDIT CARD SERVICES
As a result of the growth and potential opportunities in the Bank's home
equity lending business, and in recognition of the amount of time it will take
for the private label credit card services ("PLCS") business to achieve
acceptable levels of profitability, the Bank has decided to refocus its
resources entirely in home equity and other types of mortgage-related lending.
During the quarter the Company decided to exit the PLCS business. There have
been no new credit card clients added to the portfolio during the past quarter
and all PLCS marketing activities have ceased. We anticipate that it will
take several quarters to discontinue the operation. The Bank will not record
a restructuring charge as a result of this decision. The Bank continues to
explore the possible sale of all or parts of the credit card portfolio, but
has nothing to report at this time.
Avondale Financial Corp. is the holding company for Avondale Federal
Savings Bank. The Bank operates five offices in the Chicago area. Avondale
Financial Corp.'s shares trade on Nasdaq under the symbol AVND.
AVONDALE FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
For the For the
Three Months Ended Six Months Ended
(UNAUDITED) June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
INTEREST INCOME
Loans $11,003 $5,597 $20,744 $10,607
Securities 580 936 1,180 2,506
Mortgage-backed
securities 3,084 4,388 6,212 9,146
Other 216 126 431 253
Total interest income 14,883 11,047 28,567 22,512
INTEREST EXPENSE:
Deposits 4,593 3,576 8,706 7,335
Advances from the Federal
Home Loan Bank 1,326 1,345 2,637 2,543
Securities sold under
agreements to repurchase 1,144 899 2,132 2,006
Other borrowings 302 392 747 810
Total interest expense 7,365 6,212 14,222 12,694
NET INTEREST INCOME 7,518 4,835 14,345 9,817
Provision for loan losses 3,545 475 18,059 1,125
Net interest income
after provision for
loan losses 3,973 4,360 (3,714) 8,692
NONINTEREST INCOME:
Net security gains
(losses) 64 500 75 1,096
Net gains on sales of
loans 4,122 -- 4,122 7
Loan servicing income 1,661 56 2,875 116
Fees for other customer
services 103 83 381 172
Other operating income 153 208 268 329
Total noninterest income
(expense) 6,103 847 7,721 1,720
NONINTEREST EXPENSE:
Salaries and employee
benefits 2,938 1,891 5,121 3,855
Occupancy and equipment
expenses, net 602 240 1,106 473
Federal deposit insurance
premiums 56 193 123 389
Advertising and
public relations 124 187 318 422
Data processing 721 369 1,489 607
Real estate owned expense,
net 42 (109) 47 (79)
Legal and professional 559 156 762 271
Other operating expenses 1,511 799 3,364 1,598
Total noninterest expense 6,553 3,726 12,330 7,536
Income before income
taxes 3,523 1,481 (8,323) 2,876
Provision (benefit)
for income taxes 1,238 544 (3,029) 999
NET INCOME (LOSS) $2,285 $937 $(5,294) $1,877
PER COMMON SHARE:
Earnings per common share 0.65 0.26 (1.51) 0.49
Weighted average
common shares
outstanding 3,503,734 3,667,000 3,516,438 3,846,000
AVONDALE FINANCIAL CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) June 30, Dec. 31, June 30,
1997 1996 1996
(in thousands except per share data)
ASSETS
Cash and due from banks $7,739 $8,334 $3,115
Interest-bearing deposits 11,179 740 2,383
Total cash and cash equivalents 18,918 9,074 5,498
Securities available for sale-
At fair value 33,544 35,901 47,783
(amortized cost June 30, 1997 -
$33,670; Dec 31, 1996 - $36,037
and June 30, 1996 - $47,952)
Securities held-to-maturity-
At amortized cost 1,000 6,498 6,890
(fair value June 30, 1997 - $995;
Dec 31, 1996 - $6,488 and
June 30, 1996 - $6,802)
Mortgage-backed securities
available-for-sale-At fair value 124,840 136,418 183,695
(amortized cost June 30, 1997-
$124,202; Dec 31, 1996 - $136,214
and June 30, 1996 - $184,941)
Mortgage-backed securities
held-to-maturity-
At amortized cost 57,952 61,438 63,684
(fair value June 30, 1997-
$57,657 ;Dec 31, 1996 - $61,387
and June 30, 1996 - $63,062)
Loans 347,925 324,508 266,122
Less: Allowance for loan loss 18,555 7,208 4,326
Loans, net 329,370 317,300 261,796
Federal Home Loan Bank stock
- at cost 4,540 4,790 4,790
Office buildings and equipment, net 4,453 3,875 4,159
Other real estate owned, net 1,516 270 1,839
Accrued interest receivable 6,350 6,896 5,132
Prepaid expenses and other assets 17,500 10,410 4,109
Deferred income tax 7,290 2,701 3,396
Total assets $607,273 $595,571 $592,771
Deposits $382,119 $330,655 $324,318
Advances from Federal Home
Loan Bank 90,803 90,803 90,803
Securities sold under agreements
to repurchase 61,873 69,146 70,777
Other borrowings -- 32,000 37,500
Advance payments by borrowers for
taxes and insurance 724 931 923
Accrued interest payable 2,339 2,212 1,238
Income taxes payable 2,021 452 418
Other liabilities 11,996 8,483 7,952
Total liabilities 551,875 534,682 533,929
Common stock ($.01 par: 10,000,000
shares authorized, 3,494,545,
3,525,288 and
3,599,868 issued and outstanding,
at June 30, 1997, Dec. 31, 1996
and June 30, 1996, respectively) 44 44 44
Capital surplus 43,108 43,199 43,018
Retained earnings 25,737 31,031 28,692
Treasury stock (11,045) (10,496) (8,463)
Unrealized net gain (loss) on
securities available-for-sale,
net of tax of $198
at June 30, 1997, $21 at Dec. 31,
1996 and ($473) at June 30, 1996 304 33 (708)
Common Stock acquired by ESOP (1,693) (1,693) (2,116)
Unearned portion of restricted
stock awards (1,057) (1,229) (1,625)
Total stockholders' equity 55,398 60,889 58,842
Total liabilities and
stockholders' equity $607,273 $595,571 $592,771
SELECTED FINANCIAL RATIOS
(UNAUDITED)
At or For the At or For the
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
Performance Ratios:
Return on average assets 1.44% 0.64% (1.69)% 0.63%
Return on average equity 16.65 6.29 (18.11) 6.02
Net interest rate spread 4.52 2.88 4.36 2.85
Net interest margin 4.93 3.41 4.79 3.39
Efficiency ratio 48.11 65.58 55.89 65.32
Other expense to
average assets 4.12 2.56 3.93 2.54
Average interest-earning
assets to average
interest-bearing
liabilities 108.51 112.22 109.02 112.46
Net interest income to
other expense 114.73 129.76 116.34 130.27
Asset Quality Ratios:
Non-performing loans to
total loans 5.11% 0.99% 5.11% 0.99%
Non-performing assets to
total assets 3.18 0.75 3.18 0.75
Allowance for loan loss
to total loans 5.33 1.63 5.33 1.63
Allowance for loan losses
to non-performing loans 104.39 164.30 104.39 164.30
Capital Ratios:
Average equity to average
assets 8.62% 10.75% 9.33% 10.49%
Equity to total assets 9.12 9.93 9.12 9.93
Tangible and core capital 8.90 9.86 8.90 9.86
Risk-based capital 16.27 23.82 16.27 23.82
SOURCE Avondale Financial Corp.
back to topCONTACT:
Howard A. Jaffe, Vice President and CFO, of
Avondale Financial Corp., 312-782-6200, or E-Mail,
hjaffe@mail.avondalefinancial.com
