Net interest income for the fourth quarter of 2012 decreased $173,000 to $7.0 million, compared to the third quarter of 2012, and decreased $585,000, as compared to the same period in 2011. Net interest income for the twelve months ended December 31, 2012 decreased $3.4 million, or 10.3%, to $29.2 million, as compared to $32.6 million for the year ended December 31, 2011.
Interest income for the fourth quarter of 2012 decreased $1.9 million to $9.7 million, compared to the same quarter in 2011, primarily due to the $66.9 million or 9.3% decrease in our average loan portfolio. The decline in our loan portfolio was the result of loan payoffs, short sales, charge-offs and transfers of nonperforming loans to OREO, exceeding loan originations during the year. Interest income for the fourth quarter of 2012 decreased $409,000 to $9.7 million, compared to the third quarter of 2012. Interest income for the year ended December 31, 2012 was $41.5 million, a decrease of $9.6 million, or 18.8%, from December 31, 2011. This decrease reflects the continuing low interest rate environment and was primarily due to a $104.3 million decline in the average balance of loans during the year.
Interest expense decreased $1.3 million to $2.7 million for the quarter ended December 31, 2012, as compared to the same period a year ago. The primary reason for this decline in interest expense was related to our certificates of deposit. The average balance of our certificates of deposit decreased $116.6 million during the fourth quarter of 2012 compared to the same quarter in 2011, accounting for $648,000 of the decrease with the remaining $611,000 of the decline attributable to certificates of deposit repricing at lower market rates. We have priced our certificate of deposit accounts to reflect the lower interest rate environment, which has contributed to the decrease in the average balance as some of our customers have elected to invest in higher yielding investment products. Interest expense for the year ended December 31, 2012 decreased $6.3 million to $12.2 million, compared to $18.5 million for the twelve months ended December 31, 2011.
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