The decrease in net interest income for both the three and nine month periods was due primarily to the reversal of interest earned on loans that were placed on non-accrual. The increase in the provision for loan losses was due to the Bank’s write-down of non-performing loans. In addition, specific reserves were established for several loan relationships.
Net interest margin for the nine months ended September 30, 2012 was 3.64%, a decrease of 0.22% from 3.86% for the nine months ended September 30, 2011. The margin decrease was mainly the result of a 0.37% lower yield from interest-earning assets partially offset by a 0.16% reduction in the rate paid for interest-bearing deposits.
Total assets at September 30, 2012 were $184.7 million, representing an increase of $11.8 million from December 31, 2011. The increase was due primarily to an increase in cash and cash equivalents which increased $11.6 million while investments increased $7.7 million. Gross loans, totaled $125.1 million at September 30, 2012, a decrease of $8.1 million from $133.2 million at December 31, 2011. The allowance for loan losses at September 30, 2012 was $1.9 million, an increase of $567,000 from $1.3 million at December 31, 2011. Other real estate owned at September 30, 2012 was $6.0 million, an increase of $1.5 million from $4.5 million at December 31, 2011.
Total deposits increased $14.1 million to $164.7 million at September 30, 2012 from $150.6 million at December 31, 2011. The increase was primarily due to an $8.2 million increase in non-interest bearing demand accounts and a $5.9 million increase in interest bearing accounts. The increase in interest bearing accounts was primarily money market deposit accounts which increased $12.3 million from $26.6 million at December 31, 2011 to $38.9 million at September 30, 2012. Certificates of deposit and brokered deposits, our highest cost deposits, decreased $6.2 million and $1.2 million, respectively, from December 31, 2011 to September 30, 2012.
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