The efficiency ratio for the second quarter of 2013 was 59.74%, compared to 58.51% for the second quarter of 2012, and 61.49% for the first quarter of 2013. The increase in the efficiency ratio in the second quarter of 2013 compared to a year ago was primarily due to higher salary, benefits and loan expenses associated with higher loan demand.

Balance Sheet Review, Capital Management and Credit Quality

The Company's total assets increased 15.3% to $409.6 million at June 30, 2013, from $355.1 million a year ago, and increased 7.5% from $381.0 million at December 31, 2012. This increase was primarily a result of higher loan balances which increased $52.6 million from a year ago and $32.0 million from the end of 2012, primarily due to a $15.5 million increase in commercial and multifamily loans in 2013. In addition, construction and land loans increased $13.0 million year over year reflecting the improvement in the housing market in the communities we serve.

The investment securities available-for-sale portfolio totaled $17.0 million at June 30, 2013, compared to $9.0 million at June 30, 2012, and $22.9 million at December 31, 2012. At June 30, 2013, the securities available-for-sale portfolio was comprised of $14.3 million agency mortgage-backed securities (all issued by U.S. Government sponsored entities) and $2.7 million in private-label mortgage-backed securities.

Loans, excluding loans held-for-sale, totaled $358.7 million at June 30, 2013, an increase of 17.1% from $306.4 million at June 30, 2012, and an increase of 9.8% from $326.7 million at December 31, 2012. The loan portfolio remains well-diversified with commercial real estate loans accounting for 41.5% of the portfolio, of which 25.4% were owner-occupied. Residential real estate loans accounted for 28.2% of the portfolio. Home equity, manufactured and other consumer loans accounted for 16.4% of the portfolio. Construction and land accounted for 10.7% of the portfolio and commercial and industrial loans accounted for the remaining 3.3% of total loans at June 30, 2013.

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