Highlights for 2010
- Net interest income before provision for loan losses increased $1.9 million or 10.1% to $20.6 million from $18.7 million in 2009.
- Total provisions for losses were $6.8 million in 2010, compared to total provisions for losses of $20.4 million in 2009. The total provisions included provision for loan losses of $4.5 million in 2010 and $19.6 million in 2009.
- All requirements imposed by the Cease and Desist Order, effective September 9, 2010, have been met, including:
- Exceeded target Core Capital ratio of 8.00% and target Total Risk Based Capital ratio of 12.00% - the Bank’s Core Capital ratio was 8.82% and Total Risk Based Capital was 13.05% at December 31, 2010, compared to 6.69% and 10.19%, respectively, at December 31, 2009;
- Increased liquidity by $10.1 million, and increased liquid assets to 179% of brokered deposits;
- Substantially reduced brokered deposits by $82.8 million, to $18.2 million at year end;
- Completed a comprehensive review of our loan portfolio - Over 76% of the dollar amount of the gross loan portfolio was reviewed by an independent third party in the fourth quarter, including 100% of our church loan portfolio;
- Developed and are implementing a capital plan, which will increase our common equity base.
- As previously disclosed, we are pursuing our comprehensive Recapitalization Plan. To date, we have obtained (subject to documentation and certain terms and conditions):
- The consent of the U.S. Treasury to exchange our Series D and E Fixed Rate Cumulative Perpetual Preferred Stock for common stock at a discount of 50% of the liquidation amount, plus an undiscounted exchange of the accumulated but unpaid dividends on such preferred stock for common stock;
- An agreement in principle with the holders of both the Series A and Series B Perpetual Preferred Stock to exchange their holdings for common stock at a discount of 50% of the liquidation amount;
- An agreement in principle with our senior bank lender to exchange a portion of our senior loan for common stock at 100% of the face amount to be exchanged and to forgive the accrued interest on the loan to the date of the Recapitalization.
- Received $1.3 million in grants in 2010 from the U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund, compared to $696 thousand in grants in 2009.
Fourth Quarter 2010 Earnings Summary
For the fourth quarter ended December 31, 2010, our net interest income before provision for loan losses was $4.8 million, which represented a decrease of $186 thousand, or 4%, from the fourth quarter of 2009. The decrease was primarily attributable to a decrease of $11.3 million in average interest-earning assets, combined with a 6 basis point decrease in net interest margin from 3.93% in the fourth quarter of 2009 to 3.87% in the fourth quarter of 2010. The decline in our net interest margin was due to a 21 basis point reduction in the yield on our interest-earning assets, primarily resulting from elevated levels of non-performing loans and higher average balances in lower yielding liquid assets.