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The bank just released its proxy statement a few days ago.  The Annual Meeting will be on April 27, 2010 at the Downing Center on Russell Road.  I encourage all shareholders to attend and ask the board questions.  I will try to be htere.

A few weeks ago, the bank released its Year end results.  As expected, they were not good.  When I get a chance, hopefully in the next few days, I’ll analyze them.

A few key points:

  • The bank lost $8.8M. 
  • Net Interest Income (Interest from loans less Interest Expense) was $5.7M (decrease of 62%)
  • Non Interest Income (from bank fees, charges and investment and trust services) was $16.9M (increase of 25%)
  • Non Interest Expenses (mostly operating expenses) were $37.1M (increase of $7M or 24%)
  • $6M of the $7M increase in operating expense was due to three main items (ORE Expense increase, FDIC insurance increase and write off of goodwill).  ORE expense is expense associated with taking back foreclosed properties.  I suspect that ORE expense probably also includes houses that were sold at a loss.  FDIC insurance will probably be at this level or higher for the foreseeable future.  There will be no more goodwill writeoffs because there is no more goodwill.
  • The bank had loan loss expense of $25,770 and wrote of loans in the amount of $24,062.  This is well over the equity capital obtained from the TARP loan a few years ago.
  • Despite the $8.8M loss, Owners Equity actually increased.  This doesn’t  happen unless there is another source of equity funding.  Of course, the other source of equity funding was the US Government’s $20M cash infusion, lovingly referred to as TARP.

It’s clear that the bank can’t absorb losses like this for much longer.  Look for the bank to start planting seeds of needing additional capital during the annual meeting.  Also expect them to go searching for additional capital during the next year.  When this happens, the value of your investment will decrease unless you purchase an equal number of shares.

 Posted on : March 20, 2010
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