Business
Largest U.S. Black-Owned Bank Reports Loss of $39.5 million for FY 2011
Net Interest Income
Interest income decreased $1.2 million in the fourth quarter, compared to the prior year quarter, as the average balance of interest earning assets decreased $67.5 million, primarily due to a $78.0 million decrease in the average balance of loans, offset by a $10.5 million net increase in the average balance of mortgage-backed securities, investment securities and other investments. The decline in average loans was the result of management’s efforts to reduce the Company’s concentration of real estate assets in its loan portfolio. The reduction in real estate assets will continue over the next several quarters until the Company’s level of real estate assets are within regulatory guidelines. The current low interest rate environment combined with elevated levels of non-performing assets and a reduction in interest earning assets continues to constrain net interest income.
Interest expense decreased by $0.5 million, or 18.5%, to $2.1 million for the fourth quarter, compared to $2.6 million for the prior year quarter. The decrease was primarily due to a decline in deposit interest expense of $0.3 million. The decrease in interest expense reflects a 10 basis point decrease in the average cost of interest-bearing liabilities to 1.41% for the fourth quarter, compared to an average cost of 1.49% for the prior year period. The decrease in the average cost of interest bearing liabilities was primarily due to the continued downward re-pricing of certificates of deposits.
Provision for Loan Losses
The Company recorded a $6.8 million provision for loan losses for the fourth quarter compared to $4.6 million for the prior year quarter. For the three months ended March 31, 2011, net charge-offs were $5.0 million compared to net charge-offs of $1.5 million for the prior year period. The increase in provision reflects the Company’s continued high levels of delinquencies and non-performing loans, the overall inherent risk in the portfolio and the uncertainty caused by the uneven economic recovery in local real estate markets and the New York City economy.
