The repurchase of $1.40 million of outstanding preferred shares primarily accounted for a decrease in shareholders' equity to $24.94 million at Dec. 31, 2012, from $26.98 million at Sept. 30, 2012. Even with the bank's repurchase of preferred shares, Carolina Trust Bank continues to maintain strong capital levels that exceed regulatory requirements for being "well-capitalized." At Dec. 31, 2012, the bank reported Tier 1 Leverage Ratio of 8.61%, Tier 1 Risk-based Capital Ratio of 10.60%, and Total Risk-based Capital Ratio of 11.86%.
Review of Income Statement
Net interest margin continued to improve throughout 2012, benefitting from lower funding costs and disciplined pricing. Interest expense was $648,000 for the quarter ended Dec. 31, 2012, declining $47,000 from the quarter ended Sept. 30, 2012, and $207,000 from the quarter ended Dec. 31, 2011. The ongoing management of interest expense, which has trended favorably 12 straight quarters, boosted net interest margin by 0.13% to 4.27% in the fourth quarter of 2012, and 0.48% from the 3.79% reported at Dec. 31, 2011.
Net interest income was $2.68 million in the fourth quarter of 2012, essentially flat compared to the previous quarter, but up $293,000 from the quarter ended Dec. 31, 2011. Non-interest income of $348,000 for the fourth quarter of 2012 realized a modest increase of $16,000 from the previous quarter, and an increase of $53,000 from the quarter ended Dec. 31, 2011.Non-interest expense was $2.59 million in the fourth quarter of 2012, representing an increase of $82,000 from the quarter ended Sept. 30, 2012, and a decrease of $627,000 from the quarter ended Dec. 31, 2011. Provision for loan loss was $1.10 million for the quarter ended Dec. 31, 2012, an increase of $528,000 from the quarter ended Sept. 30, 2012. Review of Credit Quality Total nonperforming assets, which include foreclosed property and non-accrual loans, were $12.66 million at Dec. 31, 2012, an increase of $2.58 million from Sept. 30, 2012, reflecting a rise in non-accrual commercial loans, primarily related to one loan that was classified doubtful at the end of December. Allowance for loan losses to nonperforming assets declined to 37.69% at Dec. 31, 2012, compared to 43.46% at Sept. 30, 2012, and 41.30% at Dec. 31, 2011.
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