"While other real estate and foreclosed asset expenses increased, primarily relating to one legacy relationship, our asset quality trends continue to improve, as evidenced by the decrease in provision expense," Fountain continued. "Future increases in mortgage revenue will be based on our ability to increase production, and while the refinance business decreased significantly with recent increases in rates, we are encouraged by our current loan pipeline and our recent success in recruiting originators focused on the purchase market."

The $676,000 decline in reported quarterly earnings for the third quarter of 2013 compared with the year-earlier quarter primarily resulted from the following items:
  • Increased non-interest expense of $2.9 million;
  • Reduced non-interest income of $927,000; offset by
  • Decreased provision expense of $1.6 million; and
  • Improved net interest income of $845,000.

Net interest income for the third quarter of 2013 increased 7% to $13.6 million from $12.7 million in the year-earlier quarter, primarily reflecting an increase in interest-earning assets related to both acquisitions and organic growth and a reduction in the cost of interest-bearing liabilities, offset in part by a reduction in FDIC-acquired loan discount accretion. The Company's net interest margin was 4.73% for the third quarter of 2013, a decline of 104 basis points from 5.77% for the year-earlier period. The reduction in net interest margin for the third quarter of 2013 compared with the year-earlier quarter was driven by a decline in the yield on loans and investment securities, offset in part with reductions in the cost of interest-bearing liabilities as rates continue to reset to lower levels and the Company takes advantage of historically low interest rates on non-deposit funding. Excluding FDIC-acquired loan discount adjustments from the net interest margin, the core net interest margin was 3.23% for the third quarter of 2013, a decrease of eight basis points from 3.31% for the year-earlier quarter.

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