As of September 30, 2012 the Bank had loans in the amount of $947,000 that were past due over 30 days and still accruing interest, while as of December 31, 2011 the Bank had no loans in that category.
Non-performing assets consist of loans on nonaccrual status and other real estate owned (OREO) which in aggregate were $16.8 million, or 4.8% of total assets, as of September 30, 2012 and are down $2.2 million when compared to the $19.0 million as of December 31, 2011, or down $7.6 million when compared to the $24.4 million, or 6.7% of assets, as of September 30, 2011. Nonaccrual loans of $9.4 million at September 30, 2012 consisted of seven relationships ranging in size from $169,000 to $3.7 million. OREO as of September 30, 2012 was $7.4 million and consisted of nine properties ranging in net realizable values from $31,000 to $4.6 million.
Total deposits at $237.9 million as of September 30, 2012 were down $1.2 million or 0.5% for the first nine months of 2012 and were down $13.0 million, or 5.2% when compared to the $250.9 million in total deposits this time a year ago. Bob Ekblad, the Company's Chief Financial Officer, states, "While overall deposits are down, the mix between core local deposits and other deposits continues to improve significantly as brokered and other nontraditional out-of-area deposits are down $22.2 million over the past 12 months, which means core local deposit growth increased over $9.2 million since this time last year." The Bank has retired $10.7 million in brokered deposits since September 30, 2011, or $5.6 million for the first nine months of 2012. Of the $9.4 million in brokered deposits outstanding as of September 30, 2012, shortly after the end of the third quarter $4.3 million matured and were not replaced while another $100,000 will pay down later this quarter; this will leave approximately $5.0 million in brokered deposits outstanding at December 31, 2012.
Interest income from loans and other earning assets at $11.1 million for the first nine months of 2012 is down $900,000 or 7.9% when compared to the $12.0 million for the same nine months of 2011. "There are a variety of factors that are contributing to the reduced interest income this year which include lower loan volumes in early 2012, higher levels of excess low-yielding liquidity, and an overall reduction in loan yields due to scheduled repricings and other competitive pressures," states Mr. Roby; and he continues, "And while we don't have control of the competitive nature of our market, we have been successful at increasing loan volumes and using the Bank's excess liquidity to pay-down high cost deposits and other obligations as they mature which has substantially reduced interest expense." Interest expense for the 9 months ending September 2012 was $3.9 million, which is a reduction of $1.2 million, or 22.5%, when compared to the $5.1 million of interest expense for the same period in 2011. And as a result, net interest income of $7.2 million for the first nine months of 2012 was $200,000 or 2.6% higher than the $7.0 million for the same nine month period of 2011.
For 2012, the Bank has not taken any loan loss provision expense compared to last year when it took loan loss provision expenses of $250,000 for the first quarter of 2011 and $1.1 million during the second quarter of 2011. There was no loan loss provision expense for the third or fourth quarters of 2011, and therefore the Bank has not had a loan loss provision expense for the past five quarters.
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