While total deposits decreased compared to a year ago, non-interest bearing accounts increased 6.0%, representing Patriot’s planned strategy to reduce higher cost certificates of deposit and replace them with lower cost deposits. Deposits totaled $539.6 million at March 31, 2012, compared to $544.9 million at December 31, 2011, and $581.3 million a year ago. Non-interest bearing accounts increased to $59.0 million at March 31, 2012 compared to $55.7 million a year earlier.
Total assets were $671.1 million at March 31,2012 compared to $709.7 million at March 31, 2011 primarily as a result of the reduction in high cost deposits.
Income Statement Review
Patriot’s first quarter net interest income increased 5.3% to $5.2 million, compared to $4.9 million in the first quarter a year ago. Interest income decreased 2.4% compared to the first quarter a year ago as a result of lower average outstanding loan balances and the lower interest rate environment. Interest expense decreased 16.6% compared to the first quarter a year ago due to the reduction in certificates of deposit and the increase in non-interest bearing deposits. As a result, Patriot’s first quarter net interest margin increased 39 basis points to 3.25%, compared to 2.86% in the first quarter a year ago.First quarter non-interest income increased 28.6% to $750,000 compared to $583,000 in the first quarter a year ago. The increase was primarily due to a gain on sale of residential loans of $264,000, and was partially offset by lower fees and service charges on deposit accounts of $53,000. “We made a concerted effort to reduce our operating costs and as a result operating expenses, including the $368,000 impact of a restructuring charge recorded in the first quarter of 2012, declined 17.4% compared to the first quarter a year ago,” Mr. Maher continued. Excluding the restructuring charge, total non-interest expenses declined 22.3% compared to the first quarter a year ago. Non-interest expenses declined $1.3 million to $6.2 million in the first quarter compared to $7.5 million in the first quarter a year ago. Salary and employee benefits were down $323,000, or 10.0%, and occupancy and equipment expenses were down $231,000, or 17.0%, compared to the first quarter a year ago. In addition, OREO expenses were $421,000 lower due to $200,000 in gains recognized on the sale of two properties and lower operating costs relating to fewer properties being managed.