Southland-based bank SBS says that the cost of bad debts means it has posted a smaller annual profit.
SBS posted a profit of $11.8 million in the year to the end of March, a decrease of 7% compared with the previous year.
Community-owned, the bank acknowledges competition from the major Australian-owned banks has curbed growth, along with a subdued housing market.
In a mixed bag for the bank, net interest income rose by 10% to $70 million boosted by a fall in expenses.
But the amount set aside to cover potentially bad loans rose 29% to $22 million.
Loans fell 6% to $2.3 billion while deposits rose 3% to $2.6 million.
SBS strengthened its financial position, with its members' equity rising to $208 million.
Total assets edged up to $2.8 billion and its capital adequacy ratio stands at more than 14%.
SBS merged with Hawke's Bay-based HBS Building Society in 2010, and the bank has signalled that it is interested in acquisitions or tie-ups to boost its presence.
