Interest expense declined 24.1% to $1.6 million in the fourth quarter of 2011, compared with $2.2 million in the fourth quarter of 2010. The decline in interest expense was due primarily to lower average rates paid on interest bearing deposits.
Net interest income was up 1.7% to $9.0 million in the fourth quarter of 2011, compared with $8.8 million in the fourth quarter of the prior year. The increase in net interest income resulted from a lower cost of funds compared with 2010, as was reflected in the improvement in the net interest margin rising to 6.13% in the fourth quarter of 2011, compared to 5.83% in the fourth quarter of 2010.
Provision for loan losses was $13.6 million in the fourth quarter of 2011 compared with $12.3 million in the fourth quarter of 2010. Net charge-offs totaled $6.6 million in the fourth quarter of 2011, compared with $1.2 million in the fourth quarter of 2010.
Total non-interest income was $3.7 million in the fourth quarter of 2011, compared with $2.2 million in the fourth quarter of 2010. The growth in non-interest income was primarily due to the $2.1 million gain on sale of investment securities recognized in the fourth quarter of 2011.Non-interest expense increased to $14.1 million in the fourth quarter of 2011, compared with $9.4 million in the fourth quarter of 2010. The increase was due primarily to a higher level of impairment of OREO and the $4.1 million non-cash goodwill impairment charge. “Our entire team is focused on improving future earnings while maintaining our high level of customer service,” continued Mr. House. “Our near-term outlook remains cautious, since new loan demand is weak due to the soft real estate market. In the interim, our goal is to reduce the higher than normal level of non-performing loans and OREO as key drivers to improving future profitability. We believe that these strategies will be an important part in our success in building long-term shareholder value,” concluded Mr. House.
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