The Company's net interest margin was 3.12% for the year ended December 31, 2012, compared to 3.21% for the same period last year. This 9 basis point decline in net interest margin is primarily due to a decrease in the yield on earning assets, partially offset by a decline in the cost of interest bearing deposits and borrowings and the interest income recognized as a part of the pay-off of a non-accrual loan. As discussed above, the decrease in yield on earning assets is primarily attributable to a decline in interest rates earned on these assets during the year ended December 31, 2012, as compared to the same period last year, and was caused by a general decline in interest rates, as well as competitive loan pricing conditions in our market, which have continued to compress loan yields. In addition, the decline in our cost of interest bearing deposits and borrowings is primarily attributable to a decrease in interest rates paid on these accounts. The average cost of interest bearing deposits and borrowings was 0.38% during the year ended December 31, 2012 compared to 0.46% for the same period last year.
Non-interest income was $726,000 and $2.0 million for the quarter and year ended December 31, 2012, respectively, compared to $316,000 and $934,000 for the same periods last year. The increase in non-interest income during the quarter and year ended December 31, 2012, compared to the same period last year is primarily attributable to an increase in loan arrangement fees earned in connection with our college loan funding program. The increase during the year ended December 31, 2012, compared to the same period last year was due to the loan arrangement fees, as well as, other income recognized on interest rate swap transactions entered into during the year ended December 31, 2012. During the first quarter of 2013, the Company terminated its college loan funding program. During the year ended December 31, 2012, net earnings in connection with this program was approximately $550,000, consisting of non-interest income and non-interest expense of $1.5 million and $911,000, respectively. Refer to "Subsequent Events" discussion below for further details regarding the termination of the college loan funding program.
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