The net interest margin increased to 3.69% for the six months ended June 30, 2011, from 3.34% for the six months ended June 30, 2010, and was 3.73% versus 3.32% for the second quarter of 2011 and 2010, respectively. Over the past twelve months, rates paid to fund earning assets have fallen at a substantially faster pace than the yield received on earning assets, resulting in improved net interest income and net interest margin during 2011.

Interest income increased less than 1% for both the six and three months ended June 30, 2011 compared to the same periods of 2010, as total loans outstanding increased by $6,788,000 since June 30, 2010 while the yield on loans and securities decreased by 15 basis points during the same time period.

Interest expense decreased 23% and 26% for the six and three months ended June 30, 2011, respectively, compared to the same periods of 2010, as deposits have increased by $853,000 in the past twelve months while the cost of deposits has fallen by 50 basis points in the same time period.

Provision for loan losses was $1,382,000 for the first six months of 2011 compared to $772,000 in the first six months of 2010. Provision for loan losses was $709,000 in the second quarter of 2011 compared to $509,000 in the second quarter of 2010. The increases in 2011 are due to an increase in net loan chargeoffs as the Company aggressively addresses problem credits in the loan portfolio.

Noninterest income increased $148,000 or 11% for the six months ended June 30, 2011 compared to the same period of 2010. Noninterest income increased $96,000 or 12% for the three months ended June 30, 2011 compared to the same period of 2010. The increases from 2010 were due to a $190,000 and $139,000 increase in commissions on investment product sales in the first six months and second quarter of 2011, respectively, compared to the same periods in 2010.