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.
    The conditions to each of the above exchanges include requirements that the holder of our outstanding Series C Noncumulative Perpetual Convertible Preferred Stock concurrently exchange such preferred stock for our common stock on similar terms and that we concurrently complete private placements or other sales of our common stock aggregating $5 million or more in gross proceeds. Based on the agreements in principle that we have reached, we anticipate that these transactions will result in the issuance of approximately 7.0 million new shares of our common stock, which would constitute approximately 80% of the pro forma outstanding shares of our common stock.
  • 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.

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