Interest bearing checking accounts increased from $12.2 million at December 31, 2011 to $17.5 million at December 31, 2012. The Bank introduced a significantly enhanced online banking platform during 2012 that has been well received by many of the Bank's checking account clients, as it offers easy customization, fully integrated ACH origination, and client-defined activity and balance alerts via text and / or email.
Money market deposits increased from $44.0 million at December 31, 2011 to $60.1 million at December 31, 2012. Money market deposits during 2012 benefited from:
•low (often, near zero) interest rates being paid on brokerage accounts and money market mutual funds, thereby encouraging clients to transfer their funds to higher yielding and FDIC insured accounts;
•the conversion of certain deposits from certificates of deposit to money market accounts given the limited yield differential between the products in the current interest rate environment; and
•the Bank's offering tiered pricing on money market accounts, whereby clients receive a higher interest rate on their entire account balance as each successively higher balance tier level is attained.
Savings deposits increased from $38.6 million at December 31, 2011 to $62.4 million at December 31, 2012 in large part due to the success of the Bank's Premier Savings product. This account offers tiered interest rates for liquid funds and has been attractive to many clients in the current historically low interest rate environment.
Time deposits decreased from $42.5 million at December 31, 2011 to $31.3 million at December 31, 2012. Factors contributing to this decline included transfers from some maturing time deposits into transaction accounts and the Bank's moderating its time deposit pricing in response to its favorable liquidity position and the availability of alternative low cost funding.
The ratio of net loans to deposits rose from 77.2% at December 31, 2011 to 81.1% at December 31, 2012. In the current interest rate environment, the Bank is targeting this ratio at 85% to 90% in light of the comparatively low yields available on cash equivalents and high credit quality, low duration securities.
Commenting on the Bank's deposit performance, Marilyn Goode, the Bank's Chief Administrative Officer, stated: "We are very pleased to report record total deposits of $294.7 million at December 31, 2012, with a corresponding weighted average cost of funds of just 0.19%." Ms. Goode then continued: "We began 2013 with a strong momentum in new deposit account openings, supported by our high caliber cash management services. We plan to implement additional cash management technology during 2013 in order for the Bank to remain strongly positioned versus competitor offerings."
Shareholders' equity rose from $31.8 million at December 31, 2011 to $34.0 million at December 31, 2012. This increase was due to:
•the 2012 net income of $1.8 million;
•$303 thousand in capital generated through the Equity Compensation Plan; and
•a $78 thousand increase in accumulated other comprehensive income associated with the unrealized gain on securities classified as available for sale.
Nominal and tangible book values were $10.27 per share at December 31, 2012, versus $9.81 per share at December 31, 2011. The Bank's Board of Directors recently decided that all 2013 director compensation would be exclusively in the form of restricted share awards. This will support the Bank's regulatory capital ratios and capacity for growth; while at the same time emphasizing the directors' commitment to enhancing shareholder value. Similarly, the compensation package for the Interim President and Chief Executive Officer is comprised of a significant percentage of restricted stock (that vests over time), rather than being exclusively composed of cash compensation.
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