Interest expense declined 29.7% to $1.8 million in the second quarter of 2011, compared with $2.5 million in the second quarter of 2010. The decrease resulted primarily from a decline in interest rates paid compared with the second quarter of 2010.
Provision for loan losses declined to $1.6 million in the second quarter of 2011, or 1.6% of annualized average loans, compared with $3.7 million, or 3.5% of annualized average loans, in the second quarter of 2010. Net charge-offs declined to $2.6 million in the second quarter of 2011, compared with $4.3 million in the second quarter of 2010. The decline in the provision for loan losses was due primarily to lower net charge-offs for the period and additions to the allowance for loan losses in previous periods.
The Bank remains focused on reducing the level of non-performing loans and other real estate (ORE) owned as key drivers to improving future profitability. ORE declined to $25.3 million at the end of the second quarter 2011 due to real estate sales and write-downs that more than offset new additions to ORE, and loans 90-days past due declined to $3.4 million. These improvements in loan quality metrics were offset partially by non-accrual loans increasing to $28.9 million at the end of the second quarter, up from $21.6 million at the end of the first quarter of 2011. The Company remains focused on moving non-performing loans through the collection or foreclosure process to minimize potential losses and to protect USBI’s capital base.
Total non-interest income rose 52.2% to $2.2 million in the second quarter of 2011, compared with $1.4 million in the second quarter of 2010. The increase in non-interest income was due primarily to growth in credit life insurance income and other income. Other income for the second quarter of 2011 included a $402,000 gain on security sales and a $258,000 reimbursement of attorney fees from a previous fidelity bond claim.