On a linked-quarter basis, the provision for loan losses declined to $600,000 for the first quarter of 2011 from $3.4 million in the fourth quarter of 2010, but was up from $500,000 in the year-earlier quarter. At March 31, 2011, the allowance for loan losses represented 1.51% of total loans outstanding, excluding loans acquired in FDIC-assisted acquisitions, versus 2.04% at December 31, 2010. The decrease relates primarily to the charge-off of $2.0 million on a $3.9 million relationship during the first quarter of 2011. This relationship, secured primarily by residential rental property in Southwest Georgia, has been criticized for the last four quarters and is a troubled debt restructuring. The charge-off did not affect the provision for loan losses because it was fully reserved in previous quarters.
Noninterest income for the first quarter of 2011, excluding the aforementioned bargain purchase gain, increased 38% to $2.5 million from $1.8 million in the prior-year quarter. This increase reflected higher service charges, fees and commissions from an expanded branch network, as well as increased brokerage and mortgage origination fees. Noninterest expense for the first quarter of 2011 increased 78% to $8.4 million from $4.7 million in the first quarter of 2010, primarily because of higher salaries and employee benefits related to the acquisition or opening of 10 branches over the past 12 months as well as the expansion of the Company's mortgage lending operations. A swing to losses and write-downs on OREO, compared with gains in the same quarter a year-earlier, increased conversion and conversion-related consulting costs, and temporary inefficiencies associated with operating multiple core systems also contributed to the higher amount of noninterest expense in the first quarter of 2011. The Company's efficiency ratio was 77.2% for the first quarter ended March 31, 2011 (98.3% excluding the bargain purchase gain), versus 75.6% for the year-earlier period.
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