Total interest income decreased from $2.3 million in the first quarter of 2012 to $2.0 million in the first quarter of 2013. This $354,000 decrease is largely due to the decrease in earning assets from period to period, and reflects both normal loan amortizations as well as a reduction in higher risk loans. Total interest expense declined $258,000 from $633,000 in the first quarter of 2012 to $375,000 in the first quarter of 2013.  This was due to the overall cost of funds decreasing by 40 basis points and due to a decrease in higher cost Federal Home Loan Bank advances. The combined effect of these changes in interest income and interest expense resulted in first quarter 2013 net interest income before the provision for loan losses decreasing $96,000 when compared to the same period in 2012. 

The net interest margin for the first quarter of 2013 increased 20 basis points to 3.55% compared to 3.35% for the same period in 2012. The improvement in the margin continues to be largely due to the decline in cost of funds as management continues to monitor cost of funds. 

Net interest income after the provision for loan losses decreased $68,000 for the three months ended March 31, 2013, compared to the same period in 2012. No provision for Allowance for Loan losses was required in the quarter ending March 31, 2013 compared to $28,000 for the same period a year ago. Non-performing assets totaled $3.7 million at the end of the first quarter of 2013, compared to $9.0 million at December 31, 2012, and $11.9 million at March 31, 2012. The Company recorded net charge offs of $390,000 for the quarter ended March 31, 2013 compared to a net charge off of $623,000 for the same period in 2012. 

Non-interest income for the quarter ended March 31, 2013 increased $378,000, or 45%, from $840,000 to $1.2 million compared to the same period a year ago. This increase is largely attributable to an increase in the gain on sale of loans which is a result of the additional loan origination offices and the low rate environment.