Total deposits decreased $24.9 million, or 5.2%, to $454.3 million at June 30, 2011 compared to $479.2 million at June 30, 2010 due to planned runoff of certificates of deposit through lower interest rates. Time deposits decreased $29.3 million, or 12.2%, to $210.9 million while transaction accounts increased $4.4 million to $243.4 million at June 30, 2011 compared to $239.0 million at June 30, 2010. The average cost of interest-bearing deposits for the three month period ended June 30, 2011 was 1.09% compared to 1.55% for the corresponding period in 2010. FHLB advances decreased $46.9 million to $37.9 million at June 30, 2011 compared to $84.8 million at June 30, 2010 as excess liquidity was used to repay advances. Although prepayment penalties totaling $775,000 for the fiscal year ended June 30, 2011 were incurred in connection with the repayment of the advances, management believes the future savings in interest expense will more than offset the prepayment penalties.
The Bank continues to be well-capitalized under regulatory requirements. The Bank’s total risk-based capital ratio was 13.36% at June 30, 2011, compared to 11.61% at June 30, 2010. At June 30, 2011, the Company had 6,634,523 common shares outstanding with a book value of $8.56 per common share.
Nonperforming assets totaled $18.2 million, or 3.24% of total assets, at June 30, 2011, compared to $26.4 million, or 4.18% of total assets, at June 30, 2010. Nonaccrual loans totaled $8.2 million at June 30, 2011 compared to $18.8 million at June 30, 2010. Foreclosed real estate amounted to $9.5 million at June 30, 2011 compared to $6.9 million at June 30, 2010. Net charge-offs for the fiscal year ended June 30, 2011 were $5.9 million, or 1.42% of average loans, compared to $3.9 million, or 0.83% of average loans, for the fiscal year ended June 30, 2010. Net charge-offs for the fiscal year ended June 30, 2011 were primarily attributable to write-downs on OREO as weaknesses in local real estate markets continue to adversely impact collateral values. The allowance for loan losses was $7.0 million, or 1.80% of total loans, at June 30, 2011 compared to $9.6 million, or 2.17% of total loans, at June 30, 2010. The provision for loan losses totaled $3.3 million for the fiscal year ended June 30, 2011, compared to $8.8 million for the fiscal year ended June 30, 2010. Although the Bank has experienced recent improvement in certain asset quality metrics, management expects asset quality trends will be affected by continued weakness in the economy. The adequacy of the allowance for loan losses is evaluated monthly and adjusted as necessary to maintain an appropriate reserve for probable losses in the loan portfolio. In addition, the Federal Deposit Insurance Corporation and Tennessee Department of Financial Institutions, as an integral part of their examination process, periodically review our allowance for loan losses and may require the Company to recognize adjustments to the allowance for loan losses based on their judgments about information available to them at the time of their examination.