Net interest margin improved slightly to 3.53% from the sequential quarter, as the earning asset yield stabilized while the cost of interest-bearing liabilities continued to drop. Reflective of the factors noted above, net interest margin for the year 2012 declined 0.46% to 3.56% as the earning asset yield dropped from 4.81% to 4.15%, while the cost of interest-bearing liabilities declined 0.16% to 0.61%. "Asset yields are still under significant pressure as market conditions, governmental actions, and heavy mortgage refinancing continue to drive effective yields down," said Chief Financial Officer Doug Wright. "We've been able to offset some of this impact in recent quarters by redeploying cash into loans that have higher relative yields, while simultaneously lowering our liability interest costs. However, investing in the current market remains challenging, and the Company continues to approach investment opportunities cautiously to mitigate higher credit or interest rate risk exposure."
Intermountain recorded a $619,000 provision for loan losses in the fourth quarter, down from the $1.2 million expense recorded in the third quarter of 2012, and $706,000 million provision recorded in the comparable period last year. Net chargeoffs totaled $1.8 million during the quarter, compared to $2.3 million in the sequential quarter and $2.4 million in the fourth quarter of 2011. Net chargeoffs for the year totaled $9.1 million, compared to $7.1 million in 2011, as the company accelerated efforts to reduce problem assets further. "During 2012 we worked aggressively to resolve a significant portion of our remaining classified loans. While this resulted in a higher level of chargeoffs, we now hold a substantially lower level of problem assets than our industry peers," Hecker said.
The tables below provide information on other income for the current three-month and twelve-month period in comparison to prior periods.
|Three Months Ended||12/31/2012||% of Total||9/30/2012||% of Total||12/31/2011||% of Total|
|(Dollars in thousands)|
|Fees and service charges||$ 1,716||56%||$ 1,702||66%||$ 1,810||66%|
|Loan related fee income||807||26%||686||27%||559||20%|
|Net gain on sale of securities||208||7%||—||—||119||4%|
|Net gain (loss) on sale of other assets||4||—||(7)||—||4||—|
|Other-than-temporary credit impairment on investment securities||—||—||(34)||(1)%||(64)||(2)%|
|Hedge Fair Value Adjustment||(26)||(1)%||(6)||—||—||—|
|Unexercised Warrant Liability Fair Value||71||2%||(49)||(2)%||—||—|
|Total||$ 3,070||100%||$ 2,552||100%||$ 2,745||100.0%|
|Twelve Months Ended||12/31/2012||% of Total||12/31/2011||% of Total|
|(Dollars in thousands)|
|Fees and service charges||$ 6,662||62%||$ 7,036||66%|
|Loan related fee income||2,734||25%||2,202||21%|
|Net gain on sale of securities||794||7%||131||1%|
|Net gain (loss) on sale of other assets||19||—||(40)||—|
|Other-than-temporary credit impairment on investment securities||(357)||(3)%||(145)||(1)%|
|Hedge Fair Value Adjustment||(326)||(3)%||—||—|
|Unexercised Warrant Liability Fair Value||180||2%||—||—|
|Total||$ 10,826||100%||$ 10,625||100%|
Other income in the third quarter was $3.1 million, up from $2.6 million in the third quarter of 2012 and $2.7 million in the same period last year, respectively. Higher mortgage origination income and gains on the sale of securities produced the quarterly increases as fee and service charge income was relatively stable. For the year, other income totaled $10.8 million compared to $10.6 million in 2011, as higher mortgage fee income and gains on the sale of securities offset reductions in fees and service charges, secured savings contract income and fair value adjustments.