Does Breaking the Jinx of Losses Make BankAtlantic a Foolish Buy?

BankAtlantic Bancorp (NYSE: BBX  ) has finally broken the loss-making spell, returning to profitability after 15 straight quarters of net losses. This was largely due to the sale of its 19 Tampa branches to PNC (NYSE: PNC  ) . But does that mean that the Fort Lauderdale-based bank is back on track? Before answering this question, let’s take a look at its performance during the quarter.

The quarter in detail
The regional bank’s net income rose to $23.4 million in the quarter from a net loss of $22.9 million in the prior quarter and $51.3 million in the second quarter of 2010. The Tampa branch sale boosted its earnings by $38.7 million. The bank strengthened its capital position by achieving a Tier 1 Capital ratio of 8.24, and also witnessed some significant improvements in credit trends.

On a year-over-year basis, BankAtlantic’s provision for loan losses declined to $10.2 million from $43.6 million. Net charge-offs and delinquencies fell considerably. Rivals such as BancorpSouth (NYSE: BXS  ) and Synovus Financial (NYSE: SNV  ) have also reported better results on the back of shrinking loan-loss provisions and improved credit quality.

The bank’s net interest income declined to $33 million from $37 million a year ago, primarily due to the decrease in yield on earning assets and increase in cash and lower-yielding investments. A decline in service charges also resulted in non-interest income dropping to $21.4 million from $26.3 million.

The Foolish bottom line
As I see it, the turnaround in BankAtlantic’s earnings wasn’t due to many noticeable improvements in its core operations, but instead to the gains from the sale of its branches. The dip in both interest and non-interest income has continued.

The divestment looks like a smart move that will allow it to focus on core earnings from its branches in Southeast Florida. But at the moment, BankAtlantic still doesn’t look like a very attractive investment to me.

Fool contributor Zeeshan Siddique does not own any of the stocks mentioned in the article. The Motley Fool owns shares of PNC Financial Services Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 31, 2011, at 12:05 PM, weiwentg wrote:

    I think BankAtlantic is going to die, and this sale merely postpones the inevitable. If it doesn't go under, returns will be depressed for years. A foolish, not a Foolish, buy.

  • Report this Comment On September 02, 2011, at 6:12 PM, oneupper wrote:

    Extreme dilution is probably the best case scenario for BBX shareholders, since the holding company has to deal with subordinated debt which is currently not being serviced.

    There's no upside here. And plenty of downside.

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