Business
Largest U.S. Black-Owned Bank Reports Loss of $39.5 million for FY 2011
The Company’s deferred tax asset at March 31, 2010 was $14.3 million. The components of the deferred tax asset are primarily related to the allowance for loan losses and new market tax credits recorded in prior periods. The deferred tax asset before valuation allowance increased $4.6 million during the fiscal year due primarily to loan write downs and additional provision for loan losses. Realization of the deferred tax asset is dependent upon the existence of, or generation of, sufficient taxable income to utilize the deferred tax asset. In assessing the need for a valuation allowance, management considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets. If, based on the weight of available evidence, it is “more likely than not” the deferred tax assets will not be realized, management records a valuation allowance. Based on the expected future taxable income of the Company and considering the uncertainties in the current market conditions, management concluded that it is more likely than not that the Company will not be able to fully realize the benefit of its deferred tax assets and thus a $18.9 million valuation allowance was recorded during the fiscal year ended March 31, 2011. This valuation allowance does not preclude the Company from utilizing the accumulated deferred tax asset to offset taxes on future earnings.
The Company divested its interest in several NMTC tax investments during the fiscal year. The divestiture resulted in an increase in stockholders’ equity of $6.7 million which is classified in stockholders’ equity as a non-controlling interest. The investments, if the Company had not sold them, would have generated $7.8 million in tax credits through the period ending March 31, 2014. The Company’s ability to utilize any deferred tax asset generated by these investments would have been dependent on its ability to generate sufficient taxable income from operations or from potential tax strategies to generate taxable income in the future, prior to expiration of the tax credits.
Total liabilities decreased $62.3 million, or 8.4%, to $681.5 million at March 31, 2011, compared to $743.8 million at March 31, 2010.
Deposits decreased $42.6 million, or 7.1%, to $560.7 million at March 31, 2011, compared to $603.2 million at March 31, 2010. Certificates of deposit and NOW balances have declined due to reductions in institutional deposits. These declines have been partially offset by increased core customer relationship account balances during the fiscal year.
Advances from the FHLB-NY and other borrowed money decreased $18.9 million, or 14.4%, to $112.6 million at March 31, 2011, compared to $131.6 million at March 31, 2010, as two fixed-rate borrowings matured during the fiscal year.
Total stockholders’ equity decreased $34.0 million, or 55.1%, to $27.7 million at March 31, 2011, compared to $61.7 million at March 31, 2010. Key components of this change include a $39.5 million loss recorded for the fiscal year ended March 31, 2011, partially offset by a $6.7 million increase from the transaction to sell certain of the Company’s NMTC investments. Of this $6.7 million increase, $4.0 million was reflected as a non-controlling interest and $2.7 million was an increase in Additional Paid-in Capital.
Asset Quality
At March 31, 2011, non-performing assets totaled $78.0 million, or 11.0% of total assets compared to $47.6 million or 5.9% of total assets at March 31, 2010. Non-performing assets at March 31, 2011 were comprised of $48.8 million of loans 90 days or more past due and non-accruing, $23.8 million of loans classified as a troubled debt restructuring and either not consistently performing in accordance with modified terms or not performing in accordance with modified terms for at least six months and $4.9 million of loans that are either performing or less than 90 days past due and have been deemed to be impaired and $0.6 million of Real Estate Owned (REO). Of the $4.9 million of impaired loans included in non-performing assets, approximately $0.9 million, while having experienced some payment difficulties in the past, are presently current with regard to their payments. These loans are considered impaired however due to other risk characteristics and therefore on non-accrual status, due primarily to declines in collateral values. The Company continues to proactively work with borrowers to address delinquent loans and their impact.
The allowance for loan losses was $23.1 million at March 31, 2011, which represents a ratio of the allowance for loan losses to non-performing loans of 29.9% compared to 25.2% at March 31, 2010. The ratio of the allowance for loan losses to total loans was 4.0% at March 31, 2011 up from 1.8% at March 31, 2010.
Source: Emerging Minds
