For the year ended December 31, 2012, net income improved by $8.7 million, or 137.1%, to $15.1 million compared to $6.4 million for the year ended December 31, 2011, primarily due to the lower level of provision for loan losses of $7.0 million, attributable to continued improvements in credit quality in 2012; the reversal of the remaining deferred tax asset valuation allowance, discussed below; and the reduction in interest expense of $5.3 million, mostly due to reductions in deposit rates and the early payoff of several Federal Home Loan Bank ("FHLB") borrowings in 2011. These improvements were partially offset by a reduction in interest income of $4.7 million, due to declines in average earning assets yields, an increase in noninterest expense of $1.6 million and a decrease in noninterest income of $0.4 million, primarily due to reductions in net gains on sales of securities. The increase in noninterest expense was due to the net increase in OREO expense of $2.8 million, mostly due to the write-down discussed above, and the impairment related to the closure of two branches of $2.8 million, offset by a decrease in intangible amortization of $1.0 million and the FHLB prepayment penalty of $2.7 million recorded in 2011.
The Company had a deferred tax asset valuation allowance of $6.6 million at December 31, 2011. During the second quarter 2012, the remaining deferred tax asset valuation allowance of $5.7 million was reversed based on the Company's determination that it was more likely than not that the entire deferred tax asset would be realized. Subsequent to the reversal of the deferred tax asset valuation allowance, the Company resumed recording income tax expense.
Key Financial Measures
Income Statement
Quarter Ended Year Ended ----------------------------- ------------------- December September December December December 31, 2012 30, 2012 31, 2011 31, 2012 31, 2011 --------- --------- --------- --------- --------- (Dollars in thousands, except per share amounts)Net income $ 3,120 $ 2,830 $ 2,276 $ 15,059 $ 6,352Net income (loss) to common stockholders $ 3,120 $ 2,830 $ 2,276 $ 15,059 $ (13,434)Earnings (loss) per common share $ 0.03 $ 0.02 $ 0.02 $ 0.14 $ (0.21)Return on average assets 0.67% 0.63% 0.54% 0.86% 0.36%Net interest margin 3.48% 3.46% 3.86% 3.67% 3.61%Efficiency ratio (tax equivalent) 88.16% 71.56% 74.84% 77.05% 77.75%
Balance Sheet
December September % December % 31, 2012 30, 2012 Change 31, 2011 Change ---------- ---------- ------ ---------- ------ (Dollars in thousands, except per share amounts)Cash and cash equivalents $ 121,217 $ 127,823 (5.2)% $ 109,225 11.0%Time deposits with banks 50,000 40,000 25.0% - 100.0%Total investments 458,927 436,386 5.2% 386,141 18.8%Total loans, net of unearned discount 1,158,749 1,118,968 3.6% 1,098,140 5.5%Allowance for loan losses (25,142) (28,597) (12.1)% (34,661) (27.5)%Total assets 1,886,938 1,834,978 2.8% 1,689,668 11.7%Average earning assets, quarter-to-date 1,740,273 1,670,300 4.2% 1,575,193 10.5%Total deposits 1,454,756 1,395,096 4.3% 1,313,786 10.7%Book value per common share 1.78 1.74 2.3% 1.62 9.9%Tangible book value per common share 1.69 1.65 2.4% 1.53 10.5%Equity ratio - GAAP 9.97% 10.09% (1.2)% 10.12% (1.5)%Tangible common equity ratio 9.53% 9.59% (0.6)% 9.59% (0.6)%Total risk-based capital ratio 16.27% 16.46% (1.2)% 16.33% (0.4)%
