Total liabilities increased $26.8 million to $671.3 million at December 31, 2012, an increase of 4.2% as compared to $644.5 million at June 30, 2012.  This growth was primarily the result of an increase in deposit accounts and securities sold under agreements to repurchase.    

Deposits increased $21.6 million, or 3.7%, to $606.4 million at December 31, 2012, as compared to $584.8 million at June 30, 2012.  Of the increase, $7.8 million was attributable to public unit funds, and was somewhat seasonal in nature.  Increased balances were noted in interest-bearing checking, noninterest checking, and certificate of deposit balances, partially offset by a decline in savings accounts.  The average loan-to-deposit ratio for the second quarter of fiscal 2013 was 105.8%, as compared to 94.6% for the same period of the prior fiscal year. 

FHLB advances were $24.5 million at December 31, 2012, unchanged in comparison to June 30, 2012; however, overnight FHLB advances were utilized during the first six months of fiscal 2013 (the average amount of overnight borrowings was $11.5 million).  Securities sold under agreements to repurchase totaled $30.9 million at December 31, 2012, as compared to $25.6 million at June 30, 2012, an increase of 20.7%, attributable mostly to seasonal inflows from public units.  At both dates, the full balance of repurchase agreements was held by local small business and government counterparties. 

The Company's stockholders' equity increased $4.2 million, or 4.4%, to $98.9 million at December 31, 2012, from $94.7 million at June 30, 2012.  The increase was due primarily to retention of net income, partially offset by cash dividends paid on common and preferred stock.

Income Statement Summary:

The Company's net interest income for the three-month period ended December 31, 2012, was $7.3 million, an increase of $9,000, or 0.1%, as compared to the same period of the prior fiscal year.  For the six-month period ended December 31, 2012, net interest income was $14.8 million, a decrease of $49,000, or 0.3%, as compared to the same period of the prior fiscal year.  For the three-month period, the increase, as compared to the prior fiscal year, was attributable to an increase in net interest margin, from 4.12% to 4.17%, partially offset by a 1.1% decline in the average balance of interest-earning assets.  For the six-month period, the decrease, as compared to the prior fiscal year, was attributable to a decline in the net interest margin, from 4.27% to 4.23%, partially offset by a 0.4% increase in average interest-earning assets.  In December 2010, the Company acquired from the FDIC, as receiver, most of the assets and substantially all of the liabilities of the former First Southern Bank (the Acquisition).  Accretion of fair value discount on loans and amortization of fair value premiums on time deposits related to the Acquisition declined from $1.0 million in the second quarter of fiscal 2012 to $366,000 in the second quarter of fiscal 2013.  The change in this component reduced net interest income by $637,000 and net interest margin by 36 basis points for the current quarter as compared to the year ago period.  Accretion of fair value discount on loans and amortization of fair value premiums on time deposits related to the Acquisition declined from $2.2 million in the first six months of fiscal 2012 to $895,000 in the first six months of fiscal 2013.  The change in this component reduced net interest income by $1.3 million and net interest margin by 36 basis points for the current fiscal year to date as compared to the year ago period.  The Company expects the impact of the fair value discount accretion to continue to decline, over time, as the assets acquired at a discount continue to mature or prepay.

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