The prior year quarterly period contained non-cash other than temporary impairment ("OTTI") write-downs of $1.7 million taken on FHLMC Preferred Shares and in the bank's investment in the Shay Ultrashort Mortgage Fund as well as specific reserves established of $280,000 on four real estate owned properties. The current three months earnings equates to an annualized return on average assets (ROA) of 0.82% and a return on average equity (ROE) of 9.20%.
Net interest income increased sharply by $341,000 or 19.4% to $2.1 million for the quarter ended September 30, 2009 when compared to $1.8 million for the quarter ended September 30, 2008. The Company's net interest margin increased significantly by sixty-five basis points to 3.53% for the current quarter compared to 2.88% in the year earlier quarter. On a linked quarter basis, the Company's 3.53% net interest margin was ten basis points higher during the current quarter ended September 30, 2009 compared to 3.43% during the quarter ended June 30, 2009.
The Company made a $350,000 provision for loan loss during the quarter ended September 30, 2009 compared to a $100,000 provision for loan loss for the quarter ended September 30, 2008. Management continues to feel it is prudent to increase the allowance for loan losses by setting aside provisions for loan losses at higher levels during these uncertain economic conditions. The Company experienced net charge-offs of $89,000 for the quarter ended September 30, 2009 compared to net charge-offs of $1.4 million for the quarter ended September 30, 2008.
Noninterest income increased to $669,000 for the third quarter ended September 30, 2009 compared to ($1.2 million) during the quarter ended September 30, 2008. The significant increase is mostly due to the OTTI write-downs discussed above on FHLMC preferred shares and the Shay fund during the prior quarterly period. Net gain on the sale of loans also increased $177,000 or 316.4% to $233,000 during the quarter ended September 30, 2009 due to increased sales volumes to FHLMC and the SBA.
Noninterest expense decreased $68,000 from $1.7 million for the quarter ended September 30, 2008 to $1.6 million for the quarter ended September 30, 2009. The decrease was mostly due to no valuation allowances on repossessed assets for the current quarterly period compared to $280,000 during the three months ended September 30, 2008.
This sharp reduction was partially offset by increases in occupancy, wages, professional fees and FDIC insurance premiums between quarterly periods. Wages and occupancy increases were related to the opening of the bank's fifth full service branch in
Net income for the nine months ended September 30, 2009 increased to $1.5 million ($1.24 per diluted common share) compared to a net loss of ($200,000) ($0.16 per diluted common share) for the nine months ended September 30, 2008. This increase is mostly due to the non-cash OTTI charges taken during the quarter ended September 30, 2008 as discussed above. Net interest income increased $1.2 million or 25.5% to $6.1 million for the nine months ended September 30, 2009 compared to $4.9 million for the prior year nine month period. Noninterest income increased sharply due to the OTTI charges in the prior year period but net gain on sale of loans also increased $552,000 or 500% between periods. Noninterest expense was higher for the nine months ended September 30, 2009 primarily due to the sharp increase of $256,000 or 366% in FDIC insurance premiums between nine month periods. Most noninterest expense increases were partially offset by a reduction in valuation allowances on repossessed assets of $360,000 during the prior year nine month period.
Total assets decreased $12.7 million or 4.9% to $247.5 million at September 30, 2009 compared to December 31, 2008 assets of $260.2 million. The asset decline is primarily due to large noninterest bearing funds on hand at year end 2008 clearing early in first quarter 2009 as well as a reduction in single family portfolio mortgage balances due to most fixed rate originations being sold servicing retained to FHLMC. Net loans decreased $7.1 million to $197.1 million at September 30, 2009 compared to $204.2 million at December 31, 2008. Total deposits increased $2.4 million to $158.1 million at September 30, 2009 from $155.7 million at December 31, 2008. Borrowed funds decreased $15.7 million to $64.3 million at September 30, 2009 compared to $80.0 million at December 31, 2008. Proceeds from the sale of fixed rate mortgages to FHLMC were used to pay down borrowed funds.
Shareholders' equity at September 30, 2009 was $22.9 million compared to $21.8 million at December 31, 2008. The book value of NEIB's stock was $18.60 per common share as of September 30, 2009. The number of outstanding common shares was 1,230,670. The last reported trade of the stock on October 12, 2009 was $9.25 per common share.
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