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NASB Financial, Inc. (NASDAQ: NASB) announced today a net loss for the quarter ended March 31, 2011, of $24,507,000 or $(3.11) per share. This compares to a net loss of $3,035,000 or $(0.39) per share for the quarter ended December 31, 2010, and compares to net income of $3,219,000 or $0.41 per share for the quarter ended March 31, 2010.
The net loss for the six months ended March 31, 2011, was $27,542,000 or $(3.50) per share, compared to net income of $4,548,000 or $0.58 per share for the six months ended March 31, 2010.
Most notable for the quarter is the provision for loan losses of $38.8 million and a provision for loss on foreclosed real estate of $9.7 million, which is included as a reduction to non-interest income.
During the quarter ended March 31, 2011, the Company early adopted Accounting Standards Update (“ASU”) No. 2011-02, “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.” This ASU, which was issued in April 2011, clarifies the guidance on how creditors evaluate whether a restructuring of debt qualifies as a Troubled Debt Restructuring (“TDR”) and, for public companies, is effective for the first interim or annual period beginning on or after June 15, 2011. However, the ASU permits entities to early adopt the guidance and the Company decided to do so in its second fiscal quarter ending March 31, 2011. With the adoption of ASU 2011-02, the Company’s TDRs increased $34.8 million and the related increase in the provision for loan losses associated with those loans was approximately $11.3 million.
Of the loans designated as TDRs at March 31, 2011, most are paying as agreed and have not been restructured by offering any concessions that discount the original terms; however, the original maturity dates have been extended.
In addition to the adoption of ASU 2011-02, and in connection with the determination of impairment, the Company adopted a change in methodology for the valuation of both the loans in its development real estate portfolio and its foreclosed real estate. The revised methodology applies downward “qualitative” adjustments to recent real estate appraised values for residential development assets that the Company has deemed impaired. The Company believes these qualitative appraisal adjustments better reflect the continued uncertainty in real estate values in light of adverse economic conditions that prevail. This change in methodology increased the provision for loan losses by approximately $18.3 million and increased the provision for loss on real estate owned by approximately $7.2 million during the quarter ended March 31, 2011.