Atlantic Coast Financial Corporation Announces Continued Profitability on Significant Loan Growth for First Quarter 2015

JACKSONVILLE, Fla.--(BUSINESS WIRE)--Atlantic Coast Financial Corporation ("Atlantic Coast" or the "Company")(NASDAQ: ACFC), the holding company for Atlantic Coast Bank (the "Bank"), today reported earnings per share of $0.03 for the first quarter ended March 31, 2015, up from $0.01 for first quarter last year.

Commenting on the first quarter of 2015, John K. Stephens, Jr., President and Chief Executive Officer, said, "We are extremely excited about all that we have accomplished at Atlantic Coast since our successful capital raise near the end of 2013. The hard work of our dedicated management and staff has laid the groundwork for an impressive start to 2015, one that has translated in a tangible way for Atlantic Coast's stockholders. We continued to grow our core business during the first quarter of 2015, resulting in 12% loan growth and improved operational results over the fourth quarter. Additionally, on March 26, 2015, the Bank's Consent Order with the Office of the Comptroller of the Currency was lifted, effective immediately, with no ongoing conditions. Now, with greater latitude in our business, we intend to explore broader options for expansion, including improved product offerings within our current lines of business, as well as entry into new lines of business and markets."

Significant highlights of the first quarter of 2015 include:

• Net income totaled $0.4 million, or $0.03 per diluted share, for the quarter ended March 31, 2015, compared to $0.2 million, or $0.01 per diluted share, for the quarter ended March 31, 2014.
• Interest spread and interest margin improved to 2.40% and 2.62%, respectively, for the quarter ended March 31, 2015, from 2.20% and 2.43%, respectively, for the same quarter last year.
• Total loans (including portfolio loans, loans held-for-sale, and warehouse loans held-for-investment) increased to $545.6 million at March 31, 2015, from $488.1 million at December 31, 2014, primarily due to increases in our warehouse loans.
• Nonperforming assets, as a percentage of total assets, decreased to 1.16% at March 31, 2015 from 1.20% at December 31, 2014 and 1.26% at March 31, 2014.
• Total assets increased to $743.7 million at March 31, 2015, compared with $706.5 million at December 31, 2014, primarily due to an increase in loans during the first quarter of 2015, which was primarily funded by FHLB advances.
• The Company's ratios of Tier 1 (core) capital to adjusted total assets and total risk-based capital to risk-weighted assets were 10.38% and 15.86%, respectively, and each continued to exceed the levels – 5% and 10%, respectively – required for the Bank to be well-capitalized.

James D. Hogan, Chief Financial Officer of the Company, added, "We are pleased with our financial results for the first quarter and we are optimistic that, because of the hard work of all of our employees, Atlantic Coast is positioned for ongoing financial improvements in 2015. In the face of an uncertain interest rate environment, proper balance sheet management will be critical to our long-term success. Additionally, we are exploring potential strategies that will likely result in interest spread and interest margin expansion in the near term and better prepare us for the times ahead."

On March 26, 2015, the Company was informed by The Office of the Comptroller of the Currency (the "OCC"), Department of the Treasury, that it had terminated the Consent Order against the Bank, which was originally issued on August 10, 2012. By lifting the Order, the OCC found that the Bank has attained compliance with the Order and, as a result, simultaneously reclassified the Bank as a "well-capitalized" institution and removed the "troubled-condition" designation.

The decrease in risk-weighted asset ratios as of March 31, 2015, compared with those at March 31, 2014 and December 31, 2014, was primarily due to an increase in assets, which resulted in an increase in risk-weighted assets. Additionally, risk-weighted assets increased as the Bank continued to shift its asset base to higher interest-earning loans with higher risk weighting.

Overall, the Company has seen steady credit quality as the pace of loans reclassified to nonperforming and other real estate owned ("OREO") has stabilized. Nonperforming assets declined at March 31, 2015, compared with March 31, 2014, as the disposition of OREO during the 12-month period exceeded net additions to nonperforming loans and net transfers to OREO during the same period. Nonperforming assets increased slightly at March 31, 2015 compared with December 31, 2014, as the transfers to OREO during the first quarter of 2015 slightly exceeded the net reduction to nonperforming loans and the disposition of OREO during the same period.

The decline in the provision for portfolio loan losses in the first quarter of 2015 compared with the first quarter of 2014 reflected improving economic conditions in the Company's markets, which have led to a decline in net charge-offs over the past 12 months. The slight increase in the allowance for portfolio loan losses at March 31, 2015, compared with the March 31, 2014, primarily reflected loan growth that was due to an approximately equal mix of organic growth and loan purchases, partially offset by principal amortization and increased prepayments of one- to four-family residential mortgages and home equity loans. Management believes the allowance for portfolio loan losses as of March 31, 2015, is sufficient to absorb losses in portfolio loans as of the end of the period. The decline in net charge-offs for the first quarter of 2015 compared with the first quarter of 2014 and the fourth quarter of 2014 reflected a decrease in charge-offs in a majority of the Company's loan categories.

The increase in net interest margin during the first quarter of 2015 compared with the first quarter of 2014 was primarily due to an increase in higher-margin interest-earning assets outstanding, as the Company redeployed excess liquidity to continue to grow its portfolio loans, loans held-for-sale, and warehouse loans held-for-investment. Additionally, the Company benefitted from an increase in noninterest-bearing deposits and the prepayment and restructuring of some of our high-cost FHLB advances during 2014, resulting in lower total cost of funds in the first quarter of 2015 compared with the first quarter of 2014. The decrease in net interest margin during the first quarter of 2015 compared with the fourth quarter of 2014 was primarily due to higher-rate loans prepaying and being replaced with loans at a current market rate, which was generally lower.

The increase in noninterest income during the first quarter of 2015 compared with the first quarter of 2014 and the fourth quarter of 2014 primarily reflected higher gains on loans held-for-sale. The increase in noninterest income during the first quarter of 2015 compared with the fourth quarter of 2014 was partially offset by a decrease in service charges and fees, and lower gains on sales of securities available-for-sale. The increase in noninterest expense during the first quarter of 2015 compared with the first quarter of 2014 primarily reflected the full salary impact of employees that were added in various areas of the Company throughout 2014, including branch operations and lending, to enhance customer service and promote loan and deposit growth. The Company believes it is now appropriately staffed for its current business needs, however, the Bank may continue to add production employees to support its overall growth strategies. The decrease in noninterest expense during the first quarter of 2015 compared with the fourth quarter of 2014 primarily reflected lower foreclosed asset expense.

About the Company

Atlantic Coast Financial Corporation is the holding company for Atlantic Coast Bank, a federally chartered and insured stock savings bank. It is a community-oriented financial institution serving Northeast Florida and Southeast Georgia markets. Investors may obtain additional information about Atlantic Coast Financial Corporation on the Internet at www.AtlanticCoastBank.net, under Investor Relations.

Forward-looking Statements

Statements in this press release that are not historical facts are forward-looking statements that reflect management's current expectations, assumptions and estimates of future performance and economic conditions, and involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. Such statements are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally are identifiable by the use of forward-looking terminology such as "believe," "expects," "may," " will," "should," "plan," "intend," "on condition," "target," "estimates," "preliminary," or "anticipates" or the negative thereof or comparable terminology, or by discussion of strategy or goals or other future events, circumstances or effects. Moreover, forward-looking statements in this release include, but are not limited to, those relating to: the exploration of options for expansion and method of doing so; the Company's position for financial improvement in 2015; potential strategies resulting in interest spread and interest margin expansion; the allowance for portfolio loan losses being sufficient to absorb losses in respect of portfolio loans; expectations regarding being adequately staffed for current business needs; and the ability to make further additions to current employee headcount as necessary. The Company's consolidated financial results and the forward-looking statements could be affected by many factors, including but not limited to: general economic trends and changes in interest rates; increased competition; changes in demand for financial services; the state of the banking industry generally; uncertainties associated with newly developed or acquired operations; and market disruptions. Further information relating to factors that may impact the Company's results and forward-looking statements are disclosed in the Company's filings with the Securities and Exchange Commission. The forward-looking statements contained in this release are made as of the date of this release, and the Company disclaims any intention or obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.