Non-interest Expense Stable

Non-interest expense declined by $0.2 million and totaled $6.3 million for the current quarter, compared with $6.5 million for the fiscal 2013 first quarter. Non-interest expense was unchanged from the prior-year quarter. The Company continues to manage its expense level while investing in the infrastructure and personnel necessary to transform the organization, its risk profile and its balance sheet to a higher-performing, relationship-based community bank.

Pre-tax, Pre-credit Provision Income Improves Sequentially

One metric that management believes is useful in analyzing performance is pre-tax, pre-credit provision income, which adjusts earnings to exclude provision expense, credit-related charges involving the valuation and disposition of other real estate owned, and securities gains or losses. In addition, earnings are adjusted for items identified by management to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed to be infrequent or short-term in nature, which management believes may distort the Company's underlying performance trends. The pre-tax, pre-credit provision income was $4.0 million for the quarter ended December 31, 2012, compared with $2.8 million for the quarter ended September 30, 2012, and $1.3 million for the prior-year linked quarter.

A reconciliation of net earnings reported under generally accepted accounting principles ("GAAP") to pre-tax, pre-credit provision income (a non-GAAP metric) for the current and trailing four quarters ended December 31, 2012, is as follows (dollars in millions):
  Dec. 31, 2012 Sept. 30, 2012 Revised June 30, 2012 Revised March 31, 2012 Revised Dec. 31, 2011 Revised
Net income (loss)  $ 2.7  $ 1.4  $ 0.6  $ 0.2  $ (1.9)
Federal income tax provision (benefit) 0.0 0.0  (0.2) 0.0 0.0
Pre-tax income (loss)  2.7  1.4  0.4  0.2  (1.9)
Provision for loan losses  1.0  1.1  1.5  2.0  2.0
Loss/write-down (gain) on other real estate owned  0.3  0.3  0.7  0.6  1.2
Pre-tax, pre-credit provision income  $ 4.0  $ 2.8  $ 2.6  $ 2.8  $ 1.3

Pre-tax, pre-credit provision income improved by approximately $1.2 million compared with the September 30, 2012 period, as a result of higher non-interest income of $0.9 million, including increased mortgage banking revenue of $0.6 million and service charge income of $0.3 million, higher net interest income of $0.1 million and lower non-interest expense of $0.2 million.

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