Non-interest expense for the quarter ended September 30, 2011 totaled $5.1 million, compared to $4.6 million for the third quarter of 2010. Higher non-interest expense in the third quarter of 2011 was primarily due to higher provisions for losses on REO and loans held for sale. During the third quarter of 2011, provisions for losses on REO and loans held for sale totaled $2.0 million compared to $1.2 million for the same period a year ago and were reflective of declining real estate values.
The Company’s effective income tax rate was (23.20%) for the third quarter of 2011 compared to 16.58% for the third quarter of 2010. Income taxes for interim periods are computed by applying the projected annual effective income tax rate including adjustments for discrete items incurred year-to-date. The Company’s effective income tax rate for the quarter ended September 30, 2011 includes the impact of tax provision true-ups and an increase in the valuation allowance related to the utilization of its federal and state deferred tax assets. The increase in the valuation allowance against its federal and state deferred tax assets was due to the large net losses in the last two quarters and the Company’s inability to project sufficient future taxable income.
Balance Sheet Summary
Total assets were $422.2 million at September 30, 2011, which represented a decrease of $61.7 million, or 13%, from December 31, 2010. During the first nine months of 2011, net loans decreased by $43.1 million, loans held for sale decreased by $14.2 million, securities decreased by $3.6 million, and deferred tax assets decreased by $2.5 million, while REO increased by $2.4 million.Our gross loan portfolio decreased by $44.1 million to $358.5 million at September 30, 2011 from $402.6 million at December 31, 2010, as loan repayments, foreclosures and charge-offs exceeded loan originations during the nine months ended September 30, 2011. The decrease in our loan portfolio consisted of a $17.2 million decrease in our multi-family residential real estate loan portfolio, a $8.7 million decrease in our commercial real estate loan portfolio, a $5.5 million decrease in our church loan portfolio, a $4.9 million decrease in our one-to-four family residential real estate loan portfolio, a $4.3 million decrease in our commercial loan portfolio, a $2.3 million decrease in our consumer loan portfolio, and a $1.2 million decrease in our construction loan portfolio.
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