Despite the lingering effects of the current economic environment, actual losses on loans paid-off remain low. For the quarter ended March 31, 2010, loan payoffs totaled $29.7 million on which Bancorp incurred approximately $189,000 or 0.64% in actual realized losses as compared to the loan loss allowance coverage ratio of 2.35% to total loans at March 31, 2010. The Bank’s conservative underwriting standards and low loan-to-value ratios at loan origination have mitigated loan losses at the time the loans are paid off.
Net interest income increased to $6.0 million for the three months ended March 31, 2010 as compared to $4.7 million for the three months ended December 31, 2009 and $5.5 million for the three months ended March 31, 2009. The improvement in net interest income is primarily the result of an improvement in the overall cost of funds; interest expense on deposits declined 29% when compared to the fourth quarter of 2009 and declined 50% when compared to the same period last year. The net interest margin for the first quarter of 2010 was 3.10%; however, after adjusting for the recovery in the first quarter of delinquent interest on a nonaccrual loan, the net interest margin would have been 2.79% representing a 61 basis point increase when compared to the fourth quarter of 2009, and a 34 basis point improvement when compared to the same period last year.
The provision for loan losses of $727,000 recorded for the first quarter of 2010 represents a decrease of $3.3 million when compared to the fourth quarter of 2009 and a decrease of $873,000 as compared to the same period last year. Loans, net decreased $160.2 million or 20% as compared to March 31, 2009. This decrease in the loan portfolio combined with the downward trend in nonperforming assets contributed to the improvement in the provision. Loan charge-offs, net of recoveries for the first quarter of 2010 were $1.5 million as compared to $5.9 million for the fourth quarter of 2009 and $1.2 million for the first quarter of 2009.