Results of Operations
Comparison of Operating Results for the Three Months Ended December 31, 2012 and 2011
Net income was $3.2 million and $3.8 million for the quarters ended December 31, 2012 and 2011, respectively. Significant variances from the comparable prior year period are as follows: a $231,000 increase in net interest income, a $5.6 million decrease in the provision for loan losses, a $3.8 million decrease in non-interest income, a $320,000 increase in non-interest expense, and a $2.3 million increase in income tax expense.
Net interest income for the quarter ended December 31, 2012 increased $231,000, or 1.3%, as the $36.3 million increase in our net interest-earning assets more than offset the 18 basis point decrease in our net interest margin to 2.96%. The increase in average interest-earning assets was due primarily to increases in average loans outstanding of $130.3 million and in mortgage-backed securities of $79.2 million, partially offset by a decrease in other securities of $41.6 million. The December 31, 2012 quarter included loan prepayment income of $559,000 compared to $317,000 for the quarter ended December 31, 2011. Rates paid on interest-bearing liabilities decreased 24 basis points to 1.09% for the current quarter as compared to 1.33% for the prior year comparable period. This was offset by a 38 basis point decrease in yields earned on interest earning assets to 3.85% for the current quarter ended December 31, 2012 as compared to 4.23% for the comparable quarter in 2011.The provision for loan losses decreased $5.6 million, or 74.9%, to $1.9 million for the quarter ended December 31, 2012 from $7.5 million for the quarter ended December 31, 2011. The decrease in the provision for loan losses was due primarily to a decrease in charge-offs, a shift in the composition of our loan portfolio to multifamily loans, which generally require lower general reserves than our other commercial real estate loans, and a decrease in non-performing loans and other asset quality indicators during the quarter ended December 31, 2012. During the quarter ended December 31, 2012, the Company recorded net charge-offs of $2.5 million (including $1.2 million related to loans transferred to held-for-sale) compared to net charge-offs of $6.1 million (including $4.0 million related to loans transferred to held-for-sale) for the quarter ended December 31, 2011.