Market Overview

Atlantic Coast Financial Corporation Reports First Quarter 2018 Earnings of $0.09 Per Diluted Share

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Merger with Ameris Bancorp Has Received Stockholder and Regulatory
Approval

Atlantic Coast Financial Corporation (Atlantic Coast or the Company)
(NASDAQ:ACFC), the holding company for Atlantic Coast Bank (the Bank),
today reported earnings per diluted share of $0.09 for the first quarter
of 2018 compared with earnings of $0.10 per diluted share in the same
quarter last year.

Commenting on the Company's results, John K. Stephens, Jr., President
and Chief Executive Officer, said, "During the first quarter, we
continued to work as a team to ready our company for its pending merger
with Ameris Bancorp. I am proud of our performance and the concerted
effort of our employees to ensure this transition will be as smooth as
possible for our customers. We are looking forward to closing our
transaction, which has now received both regulatory and stockholder
approvals, and joining the team at Ameris."

Other significant aspects of the first quarter of 2018 included:

  • Net interest income increased 12% to $7.1 million for the three months
    ended March 31, 2018, from $6.4 million for the three months ended
    March 31, 2017.
  • Total loans (including portfolio loans, loans held-for-sale, and
    warehouse loans held-for-investment) increased 7% to $792.5 million at
    March 31, 2018, from $741.8 million at March 31, 2017, but declined 6%
    from $842.8 million at December 31, 2017.
  • Deposits decreased 7% to $640.7 million at March 31, 2018, from $685.8
    million at March 31, 2017, and 5% from $675.8 million at December 31,
    2017.
  • Total assets was virtually flat at $928.1 million at March 31, 2018,
    compared with $923.5 million at March 31, 2017, and declined 6% from
    $983.3 million at December 31, 2017.
  • Nonperforming assets, as a percentage of total assets, declined to
    1.07% at March 31, 2018, compared with 1.36% at March 31, 2017, but
    increased from 0.97% at December 31, 2017.
  • The Bank's ratios of total risk-based capital to risk-weighted assets
    and Tier 1 (core) capital to adjusted total assets were 13.54% and
    9.91%, respectively, at March 31, 2018, and each continued to exceed
    the levels required by regulation, currently 10% and 5%, respectively,
    for a bank to be considered well-capitalized.

Tracy L. Keegan, Executive Vice President and Chief Financial Officer,
added, "Due to the efforts of our team to continue executing our
strategic plan, despite our pending merger, net interest margin was
3.22% for the first quarter of 2018, consistent with both the first and
fourth quarters of 2017."

 

Bank Regulatory Capital

      At

Key Capital Measures

March 31,
2018

   

Dec. 31,
2017

   

March 31,
2017

Total risk-based capital ratio (to risk-weighted assets) 13.54 % 12.53 % 13.76 %

Common equity tier 1 (core) risk-based capital ratio (to
risk-weighted assets)

12.38 % 11.43 % 12.56 %
Tier 1 (core) risk-based capital ratio (to risk-weighted assets) 12.38 % 11.43 % 12.56 %
Tier 1 (core) capital ratio (to adjusted total assets) 9.91 % 9.67 % 10.32 %
 

The increase in risk-weighted capital ratios at March 31, 2018, compared
with December 31, 2017, reflected a decrease in risk-weighted assets due
to the decrease in total loans and an increase in equity due to
accumulated earnings, partially offset by a decrease in cash and cash
equivalents and investment securities. The decrease in risk-weighted
capital ratios at March 31, 2018, compared with March 31, 2017,
reflected an increase in risk-weighted assets, due to growth in
portfolio loans and a decrease in investment securities, as well as an
increase in the risk weighting of certain portfolio loan categories,
partially offset by an increase in cash and cash equivalents and an
increase in equity due to accumulated earnings.

             

Credit Quality

At

March 31,
2018

Dec. 31,
2017

March 31,
2017

(Dollars in millions)
Nonperforming loans $ 8.2 $ 7.8 $ 9.8
Nonperforming loans to total portfolio loans 1.07 % 1.02 % 1.42 %
Other real estate owned $ 1.7 $ 1.7 $ 2.8
Nonperforming assets $ 9.9 $ 9.5 $ 12.6
Nonperforming assets to total assets 1.07 % 0.97 % 1.36 %

Troubled debt restructurings performing for less than 12 months
under terms of modification (1)

$ 14.9 $ 15.2 $ 13.6

Troubled debt restructurings performing for more than 12 months
under terms of modification

$ 16.1 $ 15.7 $ 18.9

_________________________

(1) Includes $6.4 million, $5.9 million and $7.6 million of
nonperforming loans at March 31, 2018, December 31, 2017 and March 31,
2017, respectively.

Due to the Company's generally stable credit quality during 2017 and
continuing into 2018, which reflected an overall slowing pace of loan
reclassifications to nonperforming, the Company's loan loss provision
remained at a low level for the three months ended March 31, 2018, while
maintaining, in management's view, a stable and adequate ratio of
allowance for portfolio loan losses to total portfolio loans (see table
below).

     

Provision / Allowance for Loan Losses

At and for the
Three Months Ended

March 31,
2018

   

Dec. 31,
2017

   

March 31,
2017

(Dollars in millions)
Provision for portfolio loan losses $ 0.2 $ 0.2 $ 0.1
Allowance for portfolio loan losses $ 8.6 $ 8.6 $ 8.3
Allowance for portfolio loan losses to total portfolio loans 1.12 % 1.12 % 1.20 %
Allowance for portfolio loan losses to nonperforming loans 104.97 % 110.43 % 84.67 %
Net charge-offs (recoveries) $ 0.2 $ 0.0 $ 0.0

Net charge-offs (recoveries) to average outstanding portfolio
loans (annualized)

0.09 % 0.02 % 0.00 %
 

Net charge-offs totaled $168,000 and $39,000 for the three months ended
March 31, 2018 and December 31, 2017, respectively, while net recoveries
totaled $8,000 for the three months ended March 31, 2017. This reflects
a trend of solid economic conditions across the Company's markets, which
has led to continued low levels of net charge-offs during the last 12
months; however, the increase in net charge-offs during the first
quarter of 2018 primarily reflected increased charge-offs in commercial
real estate loans, manufactured home loans, and home equity loans.

The Company's provision for portfolio loan losses has remained within a
relatively narrow range over the past year. The increase in the
allowance for portfolio loan losses at March 31, 2018, compared with
that at March 31, 2017, was attributable primarily to loan growth, which
reflected organic growth supplemented by strategic loan purchases that
were offset partially by loan sales, principal amortization, and
increased prepayments of one- to four-family residential mortgages and
home equity loans. Management believes the allowance for portfolio loan
losses at March 31, 2018, is sufficient to absorb losses in portfolio
loans as of the end of the period.

     
Net Interest Income Three Months Ended

March 31,
2018

   

Dec. 31,
2017

   

March 31,
2017

(Dollars in millions)
Net interest income $ 7.1 $ 7.2 $ 6.4
Net interest margin 3.22 % 3.24 % 3.20 %
Yield on investment securities 2.13 % 2.09 % 2.42 %
Yield on loans 4.38 % 4.47 % 4.26 %
Total cost of funds 1.03 % 1.03 % 0.80 %
Average cost of deposits 0.86 % 0.85 % 0.67 %
Rates paid on borrowed funds 1.74 % 1.83 % 1.77 %
 

Net interest margin was relatively flat during the three months ended
March 31, 2018, compared with net interest margin for the three months
ended December 31, 2017 and March 31, 2017. The slight changes were
primarily due to varying levels of interest-earning assets outstanding.
Additionally, the increase in interest-earning assets during the three
months ended March 31, 2018, compared with March 31, 2017, was partially
offset by an increase in interest expense in the first quarter of 2018.

 
Noninterest Income / Noninterest Expense / Income Tax Expense       Three Months Ended

March 31,
2018

   

Dec. 31,
2017

   

March 31,
2017

(Dollars in millions)
Noninterest income $ 1.2 $ 1.3 $ 2.6
Noninterest expense $ 6.4 $ 6.4 $ 6.6
Income tax expense $ 0.4 $ 2.5 $ 0.8
 

The decrease in noninterest income for the three months ended March 31,
2018, compared with that of the three months ended March 31, 2017,
primarily reflected lower gains on the sale of loans held-for-sale. The
decrease in noninterest expense during the three months ended March 31,
2018, compared with that of the three months ended March 31, 2017,
primarily reflected a decrease in foreclosed asset expenses, interchange
expenses, and other miscellaneous operating expenses, partially offset
by an increase in compensation and benefits, as well as costs associated
with the merger with Ameris Bancorp.

The decrease in income tax expense for the three months ended March 31,
2018, compared with that of the three months ended December 31, 2017,
primarily reflected a reduction in the valuation of the Company's net
deferred tax assets at December 31, 2017, as a result of the recently
enacted tax legislation. The decrease in income tax expense for the
three months ended March 31, 2018, compared with that of the three
months ended March 31, 2017, primarily reflected the decrease in
effective tax rate as a result of the newly enacted tax legislation,
which decreased the maximum federal income tax rate by 14%, as well as a
decline in income before income tax expense.

Use of Non-GAAP Financial Measures

A non-GAAP financial measure is generally defined as a numerical measure
of a company's historical or future financial performance, financial
position, or cash flows that either excludes or includes amounts, or is
subject to adjustments, so as to be different from the most directly
comparable measure calculated and presented in accordance with generally
accepted accounting principles (GAAP). Core earnings and core earnings
per diluted share exclude the effects of certain transactions that
occurred during the period, as detailed in the following reconciliation
of these measures.

 
      Three Months Ended

March 31,
2018

   

Dec. 31,
2017

   

March 31,
2017

(Dollars in thousands)
Net income, as reported $ 1,416 $ (616 ) $ 1,477
Plus merger-related costs (1) 232 400 --
Plus impact of newly enacted tax laws on deferred tax assets (2)   --   1,641     --
Adjusted net income (core earnings) $ 1,648 $ 1,425   $ 1,477
 
Income per diluted share, as reported $ 0.09 $ (0.04 ) $ 0.10
Plus merger-related costs 0.02 0.03 --
Plus impact of newly enacted tax laws on deferred tax assets (2)   --   0.11     --
Adjusted income per diluted share (core earnings per diluted share)
(3)
$ 0.11 $ 0.09   $ 0.10

_________________________

(1) The merger-related costs, which are included in noninterest expense,
totaled $233,000 and is shown above net of a tax expense adjustment of
$1,000 for the three months ended March 31, 2018. The merger-related
costs totaled $443,000 and is shown above net of a tax expense
adjustment of $43,000 for the three months ended December 31, 2017.

(2) The impact of newly enacted tax laws on deferred tax assets is
included in income tax expense.

(3) May not foot due to rounding.

Core earnings and core earnings per diluted share should be viewed in
addition to, and not as a substitute for or superior to, net income and
income per diluted share on a GAAP basis. Atlantic Coast's management
believes that the non-GAAP financial measures, when considered together
with GAAP financial measures, provide information that is useful to
investors in understanding period-over-period operating results separate
and apart from items that may, or could, have a disproportionately
positive or negative impact on results in any particular period.
Atlantic Coast's management also believes that the non-GAAP financial
measures aid investors in analyzing the Company's business trends and in
understanding the Company's performance. In addition, the Company may
utilize non-GAAP financial measures as guides in forecasting, budgeting
and long-term planning processes and to measure operating performance
for some management compensation purposes.

About the Company

Atlantic Coast Financial Corporation is the holding company for Atlantic
Coast Bank, a Florida state-chartered commercial bank. It is a
community-oriented financial institution serving the Northeast Florida,
Central 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 "believes," "expects," "may," "will," "should,"
"plans," "intends," "projects," "targets," "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 expected merger
with Ameris Bancorp; the strength of our ratio of allowance for
portfolio loan losses to total portfolio loans; and the allowance for
portfolio loan losses being sufficient to absorb losses in respect of
portfolio loans. 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; market disruptions; and
cyber-security risks. 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. In particular, please refer to "Item 1A. Risk Factors"
beginning on page 37 of the Company's Annual Report on Form 10-K for the
year ended December 31, 2017. 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.

Additional Information and Where to Find It

Ameris Bancorp has filed a registration statement on Form S-4
(Registration Number 333-222563) with the Securities and Exchange
Commission to register the shares of Ameris Bancorp's common stock that
will be issued to Atlantic Coast's stockholders in connection with the
transaction. The registration statement includes a joint proxy
statement/prospectus and other relevant materials in connection with the
proposed merger transaction. BEFORE MAKING ANY INVESTMENT DECISION,
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS REGARDING THE MERGER AND ANY OTHER RELEVANT
DOCUMENTS CAREFULLY IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE MERGER. Investors and security holders
may obtain free copies of these documents and other documents filed with
the Securities and Exchange Commission on its website at http://www.sec.gov.
Investors and security holders may also obtain free copies of the
documents filed with the Securities and Exchange Commission by Ameris
Bancorp on its website at http://www.AmerisBank.com
and by Atlantic Coast on its website at https://www.AtlanticCoastBank.net/.

This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities.

 

ATLANTIC COAST FINANCIAL CORPORATION

Statements of Operations (Unaudited)

(In thousands, except per share amounts)

     
Three Months Ended

March 31,
2018

   

Dec. 31,
2017

   

March 31,
2017

Interest and dividend income:
Loans, including fees $ 8,846 $ 8,951 $ 7,469
Securities and interest-earning deposits in other financial
institutions
  408     401     419
Total interest and dividend income 9,254 9,352 7,888
 
Interest expense:
Deposits 1,438 1,458 1,088
Federal Home Loan Bank advances   688     676     428
Total interest expense 2,126 2,134 1,516
 
Net interest income 7,128 7,218 6,372
Provision for portfolio loan losses   168     235     100

Net interest income after provision for portfolio loan losses

6,960 6,983 6,272
 
Noninterest income:
Service charges and fees 405 433 434
Gain on sale of portfolio loans -- 38 --
Gain (loss) on sale of loans held-for-sale (52 ) 109 1,542
Bank owned life insurance earnings 115 118 117
Interchange fees 341 328 329
Other   427     244     139
Total noninterest income 1,236 1,270 2,561
 
Noninterest expense:
Compensation and benefits 3,600 3,309 3,487
Occupancy and equipment 585 654 555
FDIC insurance premiums 83 94 135
Foreclosed assets, net (48 ) (13 ) 80
Data processing 582 542 611
Outside professional services 513 478 537
Collection expense and repossessed asset losses 57 83 139
Merger-related costs 233 443 --
Other   745     778     1,006
Total noninterest expense   6,350     6,368     6,550
 
Income before income tax expense 1,846 1,885 2,283
Income tax expense   430     2,501     806
Net income (loss) $ 1,416   $ (616 ) $ 1,477
 
Net income (loss) per basic share $ 0.09   $ (0.04 ) $ 0.10
Net income (loss) per diluted share $ 0.09   $ (0.04 ) $ 0.10
 
Basic weighted average shares outstanding   15,438     15,429     15,442
Diluted weighted average shares outstanding   15,449     15,429     15,442
 
 
ATLANTIC COAST FINANCIAL CORPORATION
Balance Sheets (Unaudited)

(Dollars in thousands)

             

March 31,
2018

Dec. 31,
2017

March 31,
2017

ASSETS
Cash and due from financial institutions $ 4,434 $ 3,432 $ 4,041
Short-term interest-earning deposits   44,082   46,977   23,713
Total cash and cash equivalents 48,516 50,409 27,754
Securities available-for-sale 36,182 37,683 101,069

Portfolio loans, net of allowance of $8,600, $8,600 and $8,272,
respectively

757,361 757,506 681,576
Other loans:
Loans held-for-sale 6,062 3,623 2,126
Warehouse loans held-for-investment   29,071   81,687   58,118
Total other loans 35,133 85,310 60,244
 
Federal Home Loan Bank stock, at cost 9,062 9,892 6,941
Land, premises and equipment, net 13,948 14,172 14,734
Bank owned life insurance 18,120 18,005 17,652
Other real estate owned 1,699 1,739 2,806
Accrued interest receivable 2,131 2,267 1,741
Deferred tax assets, net 4,257 4,108 6,409
Other assets   1,730   2,165   2,908
Total assets $ 928,139 $ 983,256 $ 923,834
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 70,038 $ 63,852 $ 67,926
Interest-bearing demand 100,565 97,350 127,297
Savings and money markets 265,411 294,674 249,279
Time   204,681   219,927   241,336
Total deposits 640,695 675,803 685,838
Federal Home Loan Bank advances 192,375 213,525 144,092
Accrued expenses and other liabilities   3,284   3,268   4,692
Total liabilities 836,354 892,596 834,622
 
Total stockholders' equity   91,785   90,660   89,212
Total liabilities and stockholders' equity $ 928,139 $ 983,256 $ 923,834
 
 
ATLANTIC COAST FINANCIAL CORPORATION
Selected Consolidated Financial Ratios and Other Data (Unaudited)

(Dollars in thousands)

         

At and for the
Three Months Ended
March
31,

2018 2017
Interest rate
Net interest spread 3.06 % 3.08 %
Net interest margin 3.22 % 3.20 %

 

Average balances
Portfolio loans receivable, net $ 763,264 $ 652,875
Warehouse loans held-for-investment 34,783 35,728
Total interest-earning assets 885,948 796,609
Total assets 923,277 839,725
Deposits 670,228 651,868
Total interest-bearing liabilities 762,832 685,043
Total liabilities 831,478 751,532
Stockholders' equity 91,799 88,193

 

Performance ratios (annualized)
Return on average total assets 0.61 % 0.70 %
Return on average stockholders' equity 6.17 % 6.70 %
Ratio of operating expenses to average total assets 2.75 % 3.12 %

 

Credit and liquidity ratios
Nonperforming loans $ 8,193 $ 9,770
Foreclosed assets 1,699 2,806
Impaired loans 32,990 34,669
Nonperforming assets to total assets 1.07 % 1.36 %
Nonperforming loans to total portfolio loans 1.07 % 1.42 %
Allowance for loan losses to nonperforming loans 104.97 % 84.67 %
Allowance for loan losses to total portfolio loans 1.12 % 1.20 %
Net charge-offs (recoveries) to average outstanding portfolio loans
(annualized)
0.09 % 0.00 %
Ratio of gross portfolio loans to total deposits 119.55 % 100.58 %

 

Capital ratios
Tangible stockholders' equity to tangible assets (1) 9.89 % 9.62 %
Average stockholders' equity to average total assets 9.94 % 10.50 %

 

Other Data
Tangible book value per share (1) $ 5.90 $ 5.71
Stock price per share 10.30 7.62
Stock price per share to tangible book value per share (1) 174.53 % 133.37 %

_________________________

(1) Non-GAAP financial measure. Because the Company does not currently
have any intangible assets, tangible stockholders' equity is equal to
stockholders' equity, tangible assets is equal to assets, and tangible
book value is equal to book value. Accordingly, no reconciliations are
required for these measures.

 
ATLANTIC COAST FINANCIAL CORPORATION
Average Balances, Net Interest Income, Yields Earned and Rates
Paid (Unaudited)

(Dollars in thousands)

 
      Three Months Ended March 31,
2018     2017

Average
Balance

    Interest    

Average
Yield /
Cost

Average
Balance

    Interest    

Average
Yield /
Cost

Interest-earning assets:
Loans $ 807,923 $ 8,846 4.38 % $ 701,142 $ 7,469 4.26 %
Investment securities 37,029 198 2.13 % 46,516 282 2.42 %
Other interest-earning assets   40,996   210   2.05 %   48,951   137   1.12 %
Total interest-earning assets 885,948   9,254   4.18 % 796,609   7,888   3.96 %
Noninterest-earning assets   37,329   43,116
Total assets $ 923,277 $ 839,725
 
Interest-bearing liabilities:
Interest-bearing demand accounts $ 105,501 $ 132 0.50 % $ 115,754 $ 134 0.46 %
Savings deposits 56,547 16 0.12 % 58,551 17 0.12 %

Money market accounts

228,494 562 0.98 % 176,631 342 0.77 %
Time deposits 213,992 728 1.36 % 237,337 595 1.00 %
Federal Home Loan Bank advances 158,298 688 1.74 % 96,769 428 1.77 %
Other borrowings   --   --   -- %   1   --   1.25 %
Total interest-bearing liabilities 762,832   2,126   1.12 % 685,043   1,516   0.88 %
Noninterest-bearing liabilities   68,646   66,489
Total liabilities 831,478 751,532
Total stockholders' equity   91,799   88,193

Total liabilities and stockholders' equity

$ 923,277 $ 839,725
 
Net interest income $ 7,128   $ 6,372  
Net interest spread 3.06 % 3.08 %
Net interest-earning assets $ 123,116 $ 111,566
Net interest margin 3.22 % 3.20 %

Average interest-earning assets to average interest-bearing
liabilities

  116.14 %   116.29 %

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