Boston Bancorp has revised its financial results from fiscal year 1994, reducing net income by $2.2 million for the fourth quarter and taking further unrealized securities losses of $3.7 million.
The company's new report shows income for the fourth quarter ended Oct. 31 was $4.4 million, down 51% from the fourth quarter of 1993. For the fiscal year, net income dropped to $24.6 million.
The decline in income stemmed from issues raised during a routine examination by regulators from the Federal Deposit Insurance Corp., a company press release stated.
The revision could create skepticism among investors, said Gerard Cassidy, bank analyst for Tucker Anthony's Hancock Institutional Equity Services.
"There will be a veil of suspicion," he said. "It's not to the point where it's debilitating, but they've lost some credibility and it's going to take many quarters to rebuild that credibility."
The $3.7 million hit on Boston Bancorp's available-for-sale portfolio reduces the company's equity further to $117.6 million. It had earlier reported net losses of $22.1 million on securities for the year. Equity has dropped 41% from the end of fiscal 1993.
The unrealized loss also caused a drop in book value of 71 cents.
The $2 billion-asset company's Tier 1 capital ratio was 6.53%, still qualifying it for the regulatory classification "well capitalized."
As a result of the exam, Boston Bancorp is deferring $1.3 million of after-tax interest income from fiscal 1991 through 1993. The company is also deferring about $400,000 in profits from real estate sales and payments on renegotiated loans previously recognized in 1994.
The balance of the affected loans represents only 1% of all assets.
In addition, $800,000 in loan chargeoffs were recorded as of Oct. 31, 1994 and one-third of the $1.5 million loan-loss provision for the fourth quarter was reclassified as a real estate reserve. That reduced the loan- loss reserve to $9.5 million.
Independent of the exam, the company also recorded a $540,000 after-tax expense to adjust the carrying value of life insurance to its cash surrender value.