The Corporation’s provision for loan losses increased substantially throughout 2009 starting at $2.0 million for the quarter ended March 31, 2009 and reaching its highest quarterly level of $3.0 million for the quarter ended December 31, 2009, as the continued weakness in the overall economy and in the real estate markets negatively impacted our borrowers and their property values, causing an increase in problem loans. Mr. Kissel noted “the provision for loan losses for the first quarter of 2010 was lower than the level for the fourth quarter of 2009 and it still contributed to an overall increase in the allowance for loan losses from $13.2 million or 1.34 percent of loans at December 31, 2009 to $13.7 million or 1.41 percent of loans at March 31, 2010”.
Mr. Kissel continued “We have not seen the same significant deterioration in our loan portfolio as many other institutions have because of our conservative underwriting at the time of origination and our continued diligence in managing our loan portfolio. Further, we are pleased with the progress we have made over the past several quarters in resolving certain problem assets.”
Net Interest Income and Margin
In the first quarter of 2010, net interest income, on a fully tax-equivalent basis, was $12.7 million, reflecting an increase from $12.4 million for the fourth quarter of 2009, as well as an increase from the $12.1 million for the first quarter of 2009. On a fully tax-equivalent basis, the net interest margin was 3.67 percent for the March 2010 quarter, 3.44 percent for the December 2009 quarter and 3.70 percent for the March 2009 quarter.The intentional run-off of higher cost certificates of deposit and the growth of core deposits, coupled with a reduction in cash balances contributed to the increased margin in the first quarter of 2010 when compared to the fourth quarter of 2009.