If we put the DTA adjustment aside, the loss before tax was 51,745,000. If we normalize to a 25% effective tax rate, considering they had exempt income, the loss would have been 38,808,750, not that bad.
The deferred tax asset was taken off the books because I guess they couldn't justify them under the FASB 109. However the asset is still there, off the books, and they will recognize it, because they will "use" the reserve they are provisioning, when they do the write offs. At this time they will be able to take the tax deduction and realize the benefit. I ask the company to explain this issue well in the 10Q, because it is sufficiently important to warrant more explanation as to how it is computed and why it had to be written off.
It is very possible that if the bank is able to reduce non performers (I think we saw the peak in charge offs and non performer increases in June), that the provision could possibly be in the 80 to 90 million and the charge offs in the 40 to 50 million range for next quarter. Under this scenario, this bank could potentially book a profit as soon as next quarter, if not first quarter of 2010. Of the $1,538 bill in non performing loans, 624 million are already booked at net realizable value, so the reserves of 471 million cover more than half of the remaining 914 million. All of these are real estate collateralized loans, and in Puerto Rico we have no seen the hits we have seen in Florida and other places in the mainland.