The average balance of investment securities decreased by $3.0 million, or 12 percent, to $21.7 million in the second quarter of fiscal 2013 from $24.7 million in the same quarter of fiscal 2012. The decrease was attributable to principal payments received on mortgage-backed securities during the last 12 months. The average yield on investment securities decreased 15 basis points to 2.02 percent in the second quarter of fiscal 2013 from 2.17 percent for the same quarter of fiscal 2012. The decline in the average yield was primarily attributable to the downward repricing of adjustable rate mortgage-backed securities.

In November 2012, the Federal Home Loan Bank ("FHLB") – San Francisco announced a partial redemption of excess capital stock held by member banks and a cash dividend. As a result, a total of $2.0 million of excess capital stock was redeemed at par and a $137,000 cash dividend was received by the Bank in the second quarter of fiscal 2013. This is comparable to the same quarter last year when the Bank received a $1.2 million stock redemption and a $20,000 cash dividend.

The average balance of the Company's interest-earning deposits, primarily cash with the Federal Reserve Bank of San Francisco, increased $75.2 million, or 131 percent, to $132.4 million in the second quarter of fiscal 2013 from $57.2 million in the same quarter of fiscal 2012. The Bank maintains high levels of cash and cash equivalents in response to the uncertain operating environment and to fund its mortgage banking operations. The average yield earned on interest-earning deposits was 0.25 percent in the second quarter of fiscal 2013, unchanged from the same period in fiscal 2012 and lower than the yield that could have been earned if the excess liquidity was deployed in loans or investment securities.

Average deposits decreased $5.7 million to $949.4 million in the second quarter of fiscal 2013 from $955.1 million in the same quarter of fiscal 2012. The average cost of deposits decreased by 20 basis points to 0.71 percent in the second quarter of fiscal 2013 from 0.91 percent in the same quarter last year, primarily due to higher costing time deposits repricing to lower current market interest rates and a reduction in rates paid on transaction account balances ("core deposits"). Core deposits increased by $13.6 million, or three percent, to $509.2 million at December 31, 2012 from $495.6 million at December 31, 2011, consistent with the Bank's strategy to decrease the percentage of time deposits in its deposit base and to increase the percentage of lower cost checking and savings accounts. Time deposits decreased $32.3 million, or seven percent, to $426.0 million at December 31, 2012 from $458.3 million at December 31, 2011. 

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