Third quarter net income was $6.4 million, $4.5 million more than the second quarter of 2012 and $4.3 million higher than the third quarter of 2011. Included in third quarter earnings is the reversal of the Company’s remaining deferred tax asset valuation reserve of $4.1 million.
Total deposits grew $21.1 million from the second quarter, of which $17.5 million was growth in non-interest bearing demand deposits. Total deposits grew $68.8 million or 11.6% from the fourth quarter of 2011.
Gross loans increased $14.7 million from the second quarter, marking the second consecutive quarter of loan growth for the Company.
Provision for loan losses was $1.3 million in the third quarter, down $1.8 million from the second quarter. The allowance for loan losses was 2.65% of total loans at September 30, 2012.
On September 27, 2012 the Company announced it entered into a definitive agreement to acquire the Morro Bay branch of Coast National Bank and approximately $30 million of related branch deposits. This transaction is expected to close by year-end 2012, pending regulatory approval.
In early October a $5.0 million pay-off was received against a loan that was included in classified and non-accrual loans as of September 30, 2012. This transaction will be reflected as a $3.9 million reduction in classified and non-accrual loans and a $1.1 million recovery to the allowance for loan losses in the fourth quarter of 2012.