Jacksonville Bancorp Announces Quarterly Earnings

JACKSONVILLE, Fla., Nov. 10, 2011 /PRNewswire/ --

Highlights

  • Net income of $1.3 million for the quarter
  • Net income of $2.8 million for the nine-month period ended September 30, 2011
  • 13.1% increase in noninterest bearing deposits
  • Net interest margin of 4.22% for the quarter

Jacksonville Bancorp, Inc. ("Bancorp") (NASDAQ: JAXB), holding company for The Jacksonville Bank ("Bank"), reported net income for the three months ended September 30, 2011 of $1.3 million, or $.22 per basic and diluted common share, compared to the third quarter 2010 net loss of $349 thousand, or ($.20) per basic and diluted common share.  Net income was $2.8 million, or $.47 per basic and diluted common share, for the nine months ended September 30, 2011, compared to a net loss of $2.3 million, or ($1.33) per basic and diluted common share, for the same period in 2010.  Book value and tangible book value per common share at September 30, 2011 were $9.52 and $6.76, respectively.

(Logo:  http://photos.prnewswire.com/prnh/20020410/JAXBLOGO )

On November 16, 2010, Bancorp acquired Atlantic BancGroup, Inc. ("ABI") pursuant to an agreement and plan of merger that provided for the merger of ABI with and into Bancorp.  The ABI merger increased our branch locations from five full-service branches to eight full-service branches, as well as expanded our geographic footprint into the Jacksonville Beaches market.  In addition, we acquired approximately $158.0 million in net loans and $231.3 million in deposits.

Total assets were $607.9 million at September 30, 2011, compared to $427.8 million at September 30, 2010.  Net loans increased by 25.7% to $465.9 million as of September 30, 2011, compared to $370.5 million as of September 30, 2010.  Total deposits increased 41.6% to $511.8 million as of September 30, 2011, compared to $361.4 million as of September 30, 2010.  When comparing deposits to December 31, 2010, there has been a reduction in total deposits of $50.4 million driven by run-off in more costly time deposits of $52.6 million, and MMDA, NOW and savings deposits of $7.3 million, offset by an increase in noninterest-bearing accounts of $9.5 million, or 13.1%.

On February 11, 2011, as a result of the Company's strategy to strengthen its balance sheet by lowering the amount of substandard assets, the Bank sold 40 substandard loans for $13.9 million through a bulk sale.  These loans were classified as held-for-sale on the Company's consolidated balance sheet as of December 31, 2010 and through the date of the sale at their fair value.

Price Schwenck, President and CEO of the Company, made these comments:  "September 30, 2011 marked the third full quarter since the merger with ABI. We continue to be pleased with the results of that transaction as well as our operating results overall. Our dedication to serving our customers and community is stronger than ever and we feel fortunate that our core earnings have positioned us well in this challenging economic environment.  We remain diligent in our efforts to work with our customers to remediate problem assets which will result in enhancing our operating performance in the future."

The Bank continued to exceed regulatory standards of being "well capitalized" with total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage capital at 11.1%, 9.8% and 8.2%, respectively, at September 30, 2011.

As of September 30, 2011, nonperforming assets were $56.0 million, or 9.2% of total assets, compared to $22.1 million, or 5.17% of total assets a year ago.  The increase in nonperforming assets from the third quarter of 2010 to the third quarter of 2011 is primarily a result of the challenging current economic environment and the real estate market in which the Company operates.  As of September 30, 2011, nonperforming assets acquired in the ABI merger were $13.2 million, or 23.7%, of total nonperforming assets as of September 30, 2011.

The following table presents information concerning nonperforming assets as of the last four quarters and includes unaudited pro forma information for the period ended September 30, 2010 as if the acquisition of ABI had occurred at the beginning of 2010.  The pro forma financial information is not necessarily indicative of the results that would have occurred for the period had the transaction been effected on the assumed date.


















For the Period Ended
































Pro forma




September
30,



June
30,



March
31,



December
31,



September
30,




2011 (1)



2011 (1)



2011 (1)



2010 (1)



2010

Nonperforming Assets
















Nonperforming loans (2)


$

51,639


$

39,542


$

37,101


$

35,017


$

20,541

Loans past due over 90 days still on
















 accrual



--



--



--



--



510

Total nonperforming loans (2)



51,639



39,542



37,101



35,017



21,051

Foreclosed assets, net



4,314



3,172



3,543



5,733



9,429

Total nonperforming assets



55,953



42,714



40,644



40,750



30,480

















Nonperforming loans and foreclosed
















 assets as a percent of total assets (2)



9.20%



6.94%



6.51%



6.25%



4.17%

Nonperforming loans as a percent of
















 gross loans (2)



10.78%



8.15%



7.36%



6.83%



3.83%

















Loans past due 30-89 days, still
















 accruing


$

9,270


$

12,883


$

14,365


$

12,527


$

8,719



















_______________________________

(1) Amounts include merger with ABI

(2) Nonperforming loans and total loans exclude amounts classified as loans held-for-sale as of December 31, 2010

The decrease in loans past due 30-89 days in the current quarter, still accruing interest, is largely due to a migration of loans to nonperforming loans.  Nonperforming loans increased $12.1 million from $39.5 million for the three months ended June 30, 2011 to $51.6 million for the three months ended September 30, 2011.  

The allowance for loan losses was 2.75% of total loans at September 30, 2011, compared to 2.35% for the comparable period in 2010 and 2.55% at December 31, 2010.  Provision for loan loss expense was $1.7 million and $4.8 million for the three- and nine-month periods ended September 30, 2011, respectively, compared to $799,000 and $5.1 million for the same periods in 2010.  The Company has recorded net charge-offs of $533 thousand and $4.6 million for the three- and nine-month periods ended September 30, 2011, respectively, compared to $125 thousand and $3.0 million for the comparable periods in 2010.  The increased level of charge-offs for the nine months ended September 30, 2011 is due to ongoing deterioration of collateral values as a result of the current economic environment and the Company's strategy to strengthen its balance sheet by lowering the amount of substandard assets through such avenues as short sales.

Net income for the three- and nine-month periods ended September 30, 2011 increased to $1.3 million and $2.8 million, respectively, compared to a net loss of $349,000 and $2.3 million during the comparable periods in 2010.  The increase in net income is primarily driven by the acquisition of ABI that resulted in the net accretion of purchase accounting adjustments.  Net income also increased due to a decrease in the average cost of interest-bearing liabilities.  Pre-provision, pre-OREO, pre-M&A and pre-tax earnings were $2.2 million for the third quarter ended September 30, 2011, compared to $1.2 million for the same period a year ago.  The increase in pre-provision, pre-OREO, pre-M&A, and pre-tax earnings from the previous year is due to the acquisition of ABI.

Interest income increased by $2.1 million and $6.4 million during the three- and nine-month periods ended September 30, 2011, respectively, when compared to the same periods in the prior year.  This was due to an increase in average earning assets of $153.3 million and $149.1 million during the three- and nine-month periods ended September 30, 2011, respectively, when compared to the same periods in the prior year.  The yield on these assets increased to 5.45% and 5.51% for the three- and nine-month periods ended September 30, 2011, respectively, compared to 5.46% and 5.43% for the same periods in the prior year.  The increase in average earning assets was due to the merger with ABI.  Further, loans acquired in the merger with ABI had a yield that was higher than the contractual rate of interest as a result of purchase accounting adjustments.  This resulted in additional interest income of approximately $961 thousand and $2.6 million for the three- and nine-month periods ended September 30, 2011.  This was offset by the increase in loans on nonaccrual for which the Company does not recognize interest income.

Interest expense decreased by $185 thousand and $943 thousand during the three- and nine-month periods ended September 30, 2011, respectively, when compared to the same periods in the prior year.  This was partially due to a decrease in the average cost of interest-bearing liabilities to 1.46% and 1.49% for the three- and nine- month periods ended September 30, 2011, respectively, compared to 2.08% and 2.26% for the same periods in the prior year.  This decrease reflects the ongoing reduction in interest rates paid on deposits as a result of the re-pricing of deposits in the current market environment. Additionally, the Company has adopted a strategy to allow our more expensive national CD's to run-off as they mature as well as our local CD's to run-off or reprice at our current local rates as they mature.  This decrease is offset by the increase in our volume of interest-bearing deposits as a result of the deposits acquired in the merger with ABI for the three- and nine-month periods ended September 30, 2011, respectively, when compared to the same periods in the prior year.

The additional interest income from loans acquired from ABI is also driving the increase in the net interest margin to 4.22% and 4.24% for the three- and nine-month periods ended September 30, 2011, respectively, compared to 3.61% and 3.42% for the same periods in the prior year.  The impact of the additional income related to the accretion of purchase accounting adjustments adds approximately 67 basis points to the net interest margin for the three months ended September 30, 2011 and 60 basis points for the nine months ended September 30, 2011.  

Noninterest income for the three- and nine-month periods ended September 30, 2011 increased to $376 thousand and $1.2 million, respectively, when compared to $299 thousand and $833 thousand in the comparable periods in the prior year.   The increase is driven largely by the increased volume of transactions as a result of the merger with ABI.  In addition, there was a small gain on the sale of municipal securities in the second quarter of 2011.

Noninterest expense increased to $13.5 million for the nine months ended September 30, 2011, compared to $10.4 million during the same period in 2010.  The 29.8% increase in expense is attributable to additional costs absorbed as a result of the merger with ABI as our branch locations increased from five locations as of September 30, 2010 to eight locations as of September 30, 2011 as well as increases in additional credit related costs, specifically legal and loan expenses.

The income tax benefit for the nine months ended September 30, 2011 was $1.7 million, compared to an income tax benefit of $1.5 million for the nine months ended September 30, 2010.  The tax benefit for the nine months ended September 30, 2011 is partially the result of benefits derived from tax-free municipal bonds and tax-free income earned on the bank-owned life insurance policies.  In addition, as a result of the merger with ABI, there is a significant limitation on the amount of net operating losses and net unrealized built-in losses that can be utilized by the Company.  As a result, the Company had a valuation allowance of $9.2 million at September 30, 2011 and $10.5 million at December 31, 2010.  This was substantially due to the deferred tax assets related to the merger with ABI as they are not "more likely than not" to be realized due to Section 382 of the Internal Revenue Code.  During the nine-month period ending September 30, 2011, a portion of the valuation allowance attributable to the deferred tax assets related to the merger with ABI has been reduced.  This reduction is attributable to the portion of the deferred tax assets that the Company deemed "more likely than not" to be realized.

Jacksonville Bancorp, Inc., a bank holding company, is the parent of The Jacksonville Bank, a Florida state-chartered bank focusing on the Northeast Florida market with approximately $608 million in assets and eight full-service branches in Jacksonville, Duval County, Florida, as well as our virtual branch.  The Jacksonville Bank opened for business on May 28, 1999 and provides a variety of community banking services to businesses and individuals in Jacksonville, Florida.  More information is available at its website at www.jaxbank.com.

This press release contains non-GAAP financial disclosures for pre-provision, pre-OREO, pre-M&A, and pre-tax earnings.  The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance.  As analysts and investors view pre-provision, pre-OREO, pre-M&A, and pre-tax earnings as an indicator of the Company's ability to absorb credit losses, we disclose this amount in addition to net earnings.  Please refer to the table at the end of this release for a reconciliation of the non-GAAP financial measures to the GAAP financial measures.

The statements contained in this press release, other than historical information, are forward-looking statements, which involve risks, assumptions and uncertainties.  The risks, uncertainties and factors affecting actual results include but are not limited to: economic and political conditions, especially in North Florida; competitive circumstances; bank regulation, legislation, accounting principles and monetary policies; the interest rate environment; success in minimizing credit risk and nonperforming assets; and technological changes.  The Company's actual results may differ significantly from the results discussed in forward-looking statements.  Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof.  The Company does not undertake, and specifically disclaims, any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.  Additional information regarding risk factors can be found in the Company's filings with the Securities and Exchange Commission.

JACKSONVILLE BANCORP, INC.

(Unaudited)

(Dollars in thousands except per share data)



For the Three Months Ended



September
30,


June
30,


March
31,


December
31,


September
30,




2011 (1)


2011 (1)


2011 (1)


2010 (1)


2010



















Earnings Summary


































Total interest income


$

7,754


$

8,105


$

7,740


$

6,752


$

5,666


Total interest expense



1,741



1,820



1,864



1,914



1,926


Net interest income



6,013



6,285



5,876



4,838



3,740


Provision for loan losses



1,737



1,109



1,929



11,894



799


Net interest income (loss) after

















 provision for loan losses



4,276



5,176



3,947



(7,056)



2,941


Noninterest income



376



404



396



341



299


Noninterest expense



4,574



4,651



4,250



6,730



3,865


Income (loss) before income tax



78



929



93



(13,445)



(625)


Income tax benefit



(1,219)



(119)



(346)



(4,331)



(276)


Net income (loss)


$

1,297


$

1,048


$

439


$

(9,114)


$

(349)



















Summary Average Balance Sheet

















Loans, gross


$

484,122


$

494,217


$

516,477


$

453,057


$

381,282


Securities



66,400



66,778



65,048



46,600



27,925


Other earning assets



14,157



5,518



5,342



8,958



2,208


Total earning assets



564,679



566,513



586,867



508,615



411,415


Other assets



45,931



46,731



45,951



44,078



23,922


Total assets


$

610,610


$

613,244


$

632,818


$

552,693


$

435,337


Interest-bearing liabilities


$

473,524


$

479,491


$

505,160


$

441,106


$

367,957


Other liabilities



82,305



80,543



75,363



68,444



42,177


Shareholders' equity



54,781



53,210



52,295



43,143



25,203


Total liabilities and shareholders'

















 equity


$

610,610


$

613,244


$

632,818


$

552,693


$

435,337



















Per Share Data

















Basic earnings (loss) per share


$

.22


$

0.18


$

0.07


$

(2.42)


$

(0.20)


Diluted earnings (loss) per share


$

.22


$

0.18


$

0.07


$

(2.42)


$

(0.20)


Basic weighted average shares

















 outstanding



5,889,822



5,889,288



5,888,809



3,761,970



1,750,197


Diluted weighted average shares

















 outstanding



5,890,553



5,891,030



5,890,306



3,761,970



1,750,197


Book value per basic share at end of

















 period


$

9.52


$

9.27


$

8.96


$

8.81


$

14.07


Tangible book value per basic share at

















 end of period


$

6.76


$

6.50


$

6.27


$

6.28


$

14.07


Total shares outstanding at end of

















 period



5,889,822



5,889,822



5,888,809



5,888,809



1,750,437


Closing market price per share


$

4.89


$

6.59


$

6.99


$

7.38


$

7.77




































Selected Ratios

















Return on average assets



.84%



0.69%



0.28%



(6.54)%



(0.32)%


Return on average equity



9.39%



7.90%



3.40%



(83.81)%



(5.49)%


Average equity to average assets



8.97%



8.68%



8.26%



7.81%



5.79%


Tangible common equity to tangible

















 assets



6.73%



6.39%



6.07%



5.81%



5.76%


Interest rate spread



3.99%



4.22%



3.85%



3.55%



3.38%


Net interest margin



4.22%



4.45%



4.06%



3.77%



3.61%


Allowance for loan losses as a

















 percentage of total loans (2)



2.75%



2.47%



2.25%



2.55%



2.35%


Allowance for loan losses as a

















 percentage of NPL's (2)



25.56%



30.33%



30.54%



37.32%



56.45%


Ratio of net charge-offs as a

















 percentage of average loans



0.44%



0.36%



2.88%



6.78%



0.13%


Efficiency ratio



71.59%



69.53%



67.76%



129.95%



95.69%




(1) Amounts include merger with ABI
(2) Nonperforming loans and total loans exclude amounts classified as loans held-for-sale as of December 31, 2010


JACKSONVILLE BANCORP, INC.

(Unaudited)

(Dollars in thousands except per share data)


September
30,

June
30,

March
31,

December
31,

September
30,

Summary Balance Sheet

2011(1)

2011(1)

2011(1)

2010(1)

2010

Cash and cash equivalents

22,972

24,313

12,601

20,297

4,542

Securities

63,892

63,796

65,189

66,262

25,978

Loans held for sale

--

--

--

13,910

--

Loans, gross

479,083

485,442

503,919

512,765

379,420

Allowance for loan losses

(13,197)

(11,993)

(11,331)

(13,069)

(8,922)

Loans, net

465,886

473,449

492,588

499,696

370,498

Goodwill

14,326

14,210

13,621

12,498

--

Other intangible assets, net

1,916

2,069

2,223

2,376

--

All other assets

38,952

37,427

38,421

36,794

26,812

Total assets

607,944

615,264

624,643

651,833

427,830

Deposit accounts

511,754

521,233

529,783

562,187

361,436

All other liabilities

40,126

39,456

42,076

37,787

41,762

Shareholders' equity

56,064

54,575

52,784

51,859

24,632

Total liabilities and shareholders' equity

607,944

615,264

624,643

651,833

427,830





Nine Months Ended


September 30,

September 30,


2011(1)

2010

Earnings Summary



Total interest income

$              23,599

$              17,210

Total interest expense

5,425

6,368

  Net interest income

18,174

10,842

Provision for loan losses

4,775

5,094

  Net interest income after provision for loan losses

13,399

5,748

Noninterest income .

1,176

833

Noninterest expense

13,476

10,394

  Income (loss) before income tax .

1,099

(3,813)

Income tax benefit

(1,684)

(1,484)

  Net income (loss).

$                2,783

$               (2,329)

Summary Average Balance Sheet



Loans, gross

$            498,154

$            386,736

Securities

66,080

26,874

Other earning assets

8,371

9,847

  Total earning assets

572,605

423,457

Other assets

46,669

22,008

  Total assets

$            619,274

$            445,465

Interest-bearing liabilities

$            485,942

$            376,675

Other liabilities

79,894

42,551

Shareholders' equity

53,438

26,239

  Total liabilities and shareholders' equity

$            619,274

$            445,465




Per Share Data



Basic earnings (loss) per share

$                  0.47

$                (1.33)

Diluted earnings (loss) per share

$                  0.47

$                (1.33)

Basic weighted average shares outstanding

5,889,310

1,749,496

Diluted weighted average shares outstanding

5,890,170

1,749,496

Book value per basic share at end of period

$                  9.52

$                14.07

Tangible book value per basic share at end of period

$                  6.76

$                14.07

Total shares outstanding at end of period

5,889,822

1,750,437

Closing market price per share

$                  4.89

$                  7.77




Selected Ratios



Return on average assets

0.60%

(0.70%)

Return on average equity

6.96%

(11.87%)

Average equity to average assets

8.63%

5.89%

Tangible common equity to tangible assets

6.73%

5.76%

Interest rate spread 4.02%

4.02%

3.17%

Net interest margin

4.24%

3.42%

Allowance for loan losses as a percentage of total loans (2)

2.75%

2.35%

Allowance for loan losses as a percentage of NPL's (2)

25.56%

56.45%

Ratio of net charge offs as a percentage of average loans

1.25%

1.05%

Efficiency ratio

69.64%

89.03%




Summary Balance Sheet



Cash and cash equivalents

$              22,972

$                4,542

Securities

63,892

25,978




Loans, net

465,886

370,498

Goodwill

14,326

--

Other intangible assets, net

1,916

--

All other assets

38,952

26,812

Total assets

$            607,944

$            427,830




Deposit accounts

$            511,754

$            361,436

All other liabilities

40,126

41,762

Shareholders' equity

56,064

24,632




Total liabilities and shareholders' equity

$            607,944

$            427,830







(1)Amounts include merger with ABI

(2) Nonperforming loans and total loans exclude amounts classified as loans held-for-sale as of December 31, 2010




GAAP to Non-GAAP Reconciliation



September 30,
2011(1)

June 30,
2011(1)

March 31,
2011(1)

December 31,
2010(1)

September 30,
2010







Net income (loss)

$1,297

$1,048

$   439

($9,114)

(349)

Plus:  Total provision for
 loan losses

1,737

1,109

1,929

11,894

799

 OREO (net of income)

392

350

243

2,236

298

 M&A

1

105

25

917

760

 Income tax benefit

(1,219)

(119)

(346)

(4,331)

(276)

Pre-provision, pre-OREO,
 pre-M&A and pre-tax
 earnings

$2,208

$2,493

$2,290

$1,602

$1,232







(1) Amounts include merger with ABI



SOURCE Jacksonville Bancorp, Inc.



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