Average interest-earning assets for the second quarter of 2012 decreased $64.4 million to $395.3 million from $459.7 million for the second quarter of 2011, which resulted in a $1.1 million reduction in interest income. The decline in average interest-earning assets, primarily loans receivable, reflects our strategy throughout 2011 and 2012 to maintain our capital ratios above the required regulatory thresholds, in part by shrinking total assets. Additionally, the annualized yield on our average interest-earning assets decreased 39 basis points to 5.25% for the second quarter of 2012, compared to the annualized yield of 5.64% for the same period a year ago. The 39 basis point decline in the annualized yield on our average interest-earning assets resulted in a decrease of $159 thousand in interest income. Continued higher levels of non-performing loans contributed to the decline in the annualized yield on our interest-earning assets.
Average interest-bearing liabilities for the second quarter of 2012 decreased $52.6 million to $376.7 million from $429.3 million for the second quarter of 2011. The decrease in average interest-bearing liabilities resulted in a $209 thousand reduction in interest expense. The annualized cost of our average interest-bearing liabilities decreased 11 basis points to 1.80% for the second quarter of 2012 from 1.91% for the same period a year ago, and resulted in a decrease of $144 thousand in interest expense.
The provision for loan losses for the second quarter of 2012 totaled $102 thousand, compared to $3.4 million for the same period a year ago. The provision for loan losses decreased as a result of our loan portfolio shrinking by $14.0 million during the second quarter of 2012 and by lower charge-offs. During the second quarter, we increased the general valuation allowance on our church loan portfolio to reflect continued elevated delinquencies and lower valuations on collateral dependent church loans.
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