133 Accounting for Derivative Instruments and Hedging Activities on derivatives that do not qualifyfor hedge treatment as well as on derivatives that
133, "Accounting for Derivative Instruments and Hedging Activities," on derivatives that do not qualifyfor "hedge treatment," as well as on derivatives that do qualify but are in part ineffective because they are not perfect hedges, we focus on the long-term economic effectiveness of those instruments relative to the underlying hedged itemand isolate the effects of interest rate volatility and changing credit spreads onthe fair value of such instruments during the period. The allowance for loan losses as apercentage of total loans was 1.00% at March 31, 2009, compared with 1.02%at December 31, 2008.Results of OperationsNet income for the three months ended March 31, 2009 totaled $413,000,equal to $0.02 per diluted common share, including the $1.1 millionprovision for loan losses, as well as non-core, integration-related costsof approximately $473,000. In the first quarter, the company made adividend payment of $194,000 on the Series B Preferred Stock related tothe U.S Treasury Department's Capital Purchase Program. This resulted inincome available to common shareholders of $219,000 for the first quarterof 2009.
For the 2008 fourth quarter, the company reported net income of$1.1 million, or $0.10 per diluted common share, which included $200,000in provision for loan losses. In the 2008 first quarter, the companyreported net income of $2.2 million, or $0.19 per diluted common share,including a provision for loan losses of $450,000. The company did notincur any comparable integration-related costs or Series B PreferredStock dividend payments in the first and fourth quarters of 2008.Loans at March 31, 2009 rose to $899.4 million, compared with $787.9million at December 31, 2008, primarily reflecting the addition ofselected 1st Centennial loans. Loans held for sale amounted to $31.3million at the close of the 2009 first quarter, versus $31.4 million atyear-end 2008.
Deposits increased sharply to $1.10 billion as of March31, 2009 from $817.6 million as of December 31, 2008, which ispredominantly attributed to the addition and retention of approximately$270 million in non-brokered deposits from 1st Centennial. Total assetsat March 31, 2009 increased to $1.47 billion from $1.18 billion atDecember 31, 2008.Reflecting the full impact of reductions in the Federal Funds Ratetotaling 175 basis points during the 2008 fourth quarter, the company'snet interest margin compressed to 3.68% in the first quarter from 3.90%in the immediately preceding quarter. The 2009 first quarter margin wasalso impacted by a higher percentage of earning assets in lower-yieldingFederal Funds sold.The efficiency ratio for the first quarter of 2009 was 87.30%, comparedwith 83.63% in the fourth quarter of 2008 and 64.85% in the year-ago firstquarter. The company attributed the higher efficiency ratio for the 2009first quarter primarily to expenses associated with the 1st CentennialBank transaction and a higher percentage of earning assets inlower-yielding Federal Funds sold.Liquidity and Capital ResourcesFirst California's primary source of funds continues to be core deposits.The bank also has access to alternate funding sources that are availableto the company typically at a lower cost than current market prices ontime deposits. Accordingly, First California continued to utilize limitedlevels of brokered deposits, FHLB borrowings and State of California timedeposits during the first quarter.