Net Interest Income

Net interest income for the 2012 fourth quarter was $147.1 million, up $21.9 million, or 17.5 percent, when compared with the same period last year, primarily due to growth in average interest-earning assets. Average interest-earning assets of $16.58 billion for the 2012 fourth quarter represent an increase of $2.56 billion, or 18.3 percent, from the 2011 fourth quarter. Yield on interest-earning assets for the 2012 fourth quarter decreased 22 basis points, to 4.16 percent, versus the fourth quarter of last year. This decrease was primarily attributable to the continued effect of the prolonged low interest rate environment.

Average cost of deposits and average cost of funds for the 2012 fourth quarter decreased by 18 and 22 basis points to 0.58 percent and 0.69 percent, respectively, versus the comparable period a year ago. These decreases were predominantly due to the continued effect of the prolonged low interest rate environment.

Net interest margin for the 2012 fourth quarter was 3.53 percent versus 3.55 percent reported in the 2011 fourth quarter. On a linked quarter basis, net interest margin decreased three basis points. The linked quarter decrease was primarily due to the continued effect of the prolonged low interest rate environment. Excluding loan prepayment penalty income in both quarters, linked quarter core margin declined nine basis points to 3.32 percent.

Provision for Loan Losses

The Bank’s provision for loan losses for the fourth quarter of 2012 was $10.4 million, a decrease of $4.2 million, or 28.8 percent, versus the 2011 fourth quarter. The decrease was due to a decrease in net charge-offs of $6.1 million.

Net charge-offs for the fourth quarter of 2012 were $5.9 million, or 0.25 percent of average loans on an annualized basis, versus $4.6 million, or 0.22 percent, for the 2012 third quarter and $11.9 million, or 0.71 percent, for the 2011 fourth quarter.

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