Mr. Kennedy noted, "The wealth management business adds significant value to our Company. As part of our Strategic Plan, conversations with clients and potential clients across all lines of business will include a wealth discussion."
Other Noninterest Income
In the March 2013 quarter, other noninterest income, exclusive of Trust fees and securities gains, totaled $1.95 million, reflecting an increase of $790 thousand or 68.3 percent when compared to the same quarter a year ago. The first quarter of 2013 included $470 thousand of income from the sale of newly originated longer duration residential mortgage loans, compared to $188 thousand in the same 2012 quarter. The increase was due to a balance sheet management decision to retain less longer duration loans in the portfolio, as well as a decision to target a higher sale price. The first quarter of 2013 also included a $522 thousand gain from the March sale of the Company's classified loans which were transferred to loans held for sale at year end 2012.
The Company's total operating expenses were $12.29 million for the first quarter of 2013 quarter compared to $11.08 million in the same 2012 quarter. Salary and benefits expense rose due to: additions to staff as we begin to implement the Strategic Plan; increased commissions related to residential loan originations; normal salary increases; and increased bonus/incentive and profit sharing accruals. The 2013 expense levels also included various professional and other fees associated with the Delaware subsidiary; the Amended Stock Incentive Plan; the "Shelf Registration" (defined later); and various training and consulting, some of which was associated with the Strategic Plan.
Mr. Kennedy noted, "We expected higher operating expenses this first quarter of 2013, and we expect that trend will continue as we move forward with the implementation of our Strategic Plan. Further, we expect revenue and related profitability associated with the Plan to generally lag expenses by several quarters."
Provision for Loan Losses / Asset Quality
For the quarter ended March 31, 2013, the Company's provision for loan losses was $850 thousand compared to $4.5 million recorded in the immediately preceding December 2012 quarter and $1.5 million provision recorded in the first quarter of 2012. Charge-offs, net of recoveries, for the first quarter of 2013 were $306 thousand compared to $5.7 million for the immediately preceding December 2012 quarter and $1.2 million for the March 2012 quarter.
The higher provisioning and net charge-off levels in the December 2012 quarter were due to a fourth quarter strategic initiative - moving approximately $19 million of classified loans to loans held for sale, which resulted in an additional provision for loan losses of $4.0 million and charge-offs of $5.4 million.
Nonperforming assets totaled $15.4 million or 0.94 percent of total assets at March 31, 2013 compared to $22.0 million or 1.39 percent of assets at March 31, 2012.
Capital / Dividends
As noted in prior quarters, the preferred stock issued in January 2009 under Treasury's Capital Purchase Program (CPP) was fully redeemed early in the first quarter of 2012. At March 31, 2013, the Company's leverage ratio, tier 1 and total risk based capital ratios were 7.37 percent, 12.16 percent and 13.41 percent, respectively. The Company's ratios are all above the levels necessary to be considered well-capitalized under regulatory guidelines applicable to banks. Additionally, the Company's common equity ratio (common equity to total assets) at March 31, 2013 was 7.62 percent of total assets, reflecting growth from 7.32 percent at December 31, 2012 and from 7.04 percent of total assets at March 31, 2012.
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