The provision for loan losses decreased by $1.3 million, or 39.6 percent, to $1.9 million for the year ended December 31, 2012 from $3.2 million for the year ended December 31, 2011. The provision for loan losses is charged to operations to bring the allowance for loan losses to a level that reflects management's best estimate of the losses inherent in the loan portfolio. The decrease in the provision for loan losses for the year ended December 31, 2012 is primarily attributable to improvements in asset quality and to a $1.3 million decrease in net charge-offs, to $3.0 million, or 0.40 percent of average loans outstanding, for the year ended December 31, 2012 from $4.3 million, or 0.63 percent of average loans outstanding, for the year ended December 31, 2011.

Noninterest income increased by $2.6 million, or 20.0 percent, to $15.8 million for the year ended December 31, 2012 from $13.2 million for the year ended December 31, 2011, primarily due to increases in gains on sales of loans of $2.0 million, commissions income of $501,000, and a decrease in net losses on sales of repossessed assets of $346,000, partially offset by a decrease in service charges and other fees income of $428,000. The increase in gains on sales of loans resulted primarily from improvements in the pricing of one- to four-family residential real estate loans sold in the secondary market, our efforts to sell more of our one- to four-family residential real estate loans, and the sale of a substandard commercial business loan in the year ended December 31, 2011 at a loss of $212,000. The increase in commissions income resulted primarily from an increase in the sales of investment products. The decrease in net losses on sales of repossessed assets resulted primarily from fewer foreclosures and sales of repossessed assets and the stabilization of asset values in 2012. The decrease in service charges and other fees income was primarily attributable to a decrease in non-sufficient funds fee income and a decrease in debit card interchange income.

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