The average balance of borrowings, which consisted of FHLB – San Francisco advances, decreased $59.2 million, or 32 percent, to $126.5 million and the average cost of advances decreased 18 basis points to 3.57 percent in the second quarter of fiscal 2013, compared to an average balance of $185.7 million and an average cost of 3.75 percent in the same quarter of fiscal 2012. The decrease in borrowings was primarily attributable to scheduled maturities.
The net interest margin during the second quarter of fiscal 2013 decreased 12 basis points to 2.90 percent from 3.02 percent in the same quarter last year. The decrease was primarily due to the decline in the average yield of interest-earning assets outpacing the declining cost of liabilities. The declining yield of interest-earning assets was attributable to the downward repricing of loans and investment securities and a higher level of excess liquidity invested at a nominal yield. The decline in the average cost of liabilities was primarily due to the downward repricing of deposits to current market interest rates and the decline in the average cost of borrowings as higher costing FHLB advances matured as discussed above.
During the second quarter of fiscal 2013, the Company recorded a provision for loan losses of $23,000, compared to the $1.13 million provision for loan losses during the same period of fiscal 2012 and the $533,000 provision recorded in the first quarter of fiscal 2013 (sequential quarter).
Non-performing assets, with underlying collateral primarily located in Southern California, decreased to $26.8 million, or 2.15 percent of total assets, at December 31, 2012, compared to $40.0 million, or 3.17 percent of total assets, at June 30, 2012. Non-performing loans at December 31, 2012 decreased $10.1 million or 29 percent since June 30, 2012 to $24.4 million and were primarily comprised of 63 single-family loans ($18.4 million); seven commercial real estate loans ($4.2 million); five multi-family loans ($1.6 million); five commercial business loans ($175,000); and one other mortgage loan (fully reserved). Real estate owned acquired in the settlement of loans at December 31, 2012 was primarily comprised of seven single-family properties ($2.0 million), four undeveloped lots ($385,000) and one commercial real estate property (fully reserved). Net charge-offs for the quarter ended December 31, 2012 were $1.6 million or 0.62 percent (annualized) of average loans receivable, compared to $2.9 million or 1.02 percent (annualized) of average loans receivable for the quarter ended December 31, 2011 and $1.90 million or 0.72 percent (annualized) of average loans receivable for the quarter ended September 30, 2012 (sequential quarter).