Fourth quarter net income increased $4 million to $102 million, while non-interest income increased $1.3 million. Including $1 million from Bancorp Life Insurance and performance payments and service contracts. Total revenue increased to $5 million was matched by similar increase in non-interest expense, including some non-recurring items. Leaving pretax, pre-provision income modestly higher than that of the third quarter of $52 million. We again had net loan recoveries during the quarter which reduced our provisioning requirements despite having strong loan growth. ROE gains were $1.1 million and we also reported a $1.4 million gain from the valuation of our trust preferred issued, resulting in pretax income of $54.5 million and net income of $40.4 million. Diluted shares increased to $88 million, primarily reflecting the issuance of 432,000 new shares during the quarter from our at-the-money offering, with an EPS of $0.46 cents.
For the year, our net interest income was up 15% to $385 million. This attract the organic growth of the balance sheet. Non-interest revenue increased 14%, while total revenue was up 15%. The increase in operating expense was held only 2/3 of that growth rate. This improved our operating leverage and drove a 21% increase in our Pre Pre income, to $195.6 million. The credit loss provision, was $4.7 million for the year as the company had net loan recoveries of $5.4 million. ORE gains were $5.4 million and net of other items pretax income was $197 million. Income taxes climb to $48 million as of 2013 tax rate reflected a non-reocurring bargain purchase gain in the acquisition of Centennial Bank below tangible book value, resulting in net income of $148 million up 29% from 2013 and $1.67 per share. I will turn you over to Dale now.
Dale Gibbons, Chief Financial Officer, Western Alliance Bancorporation
Thank you. The interest margin increase 1 basis point during the quarter as there were several upsetting items. Cash balances declined $95 million from September 30 to year-end, and fell $16 million on an average balance basis during the quarter. While the securities portfolio yield slip 5 basis points, the long yield increase by 2. Our interest bearing deposit cost edged down 1 basis point to 32 basis points and our total cost of deposits which include our $2.3 billion in non-interest bearing came down the same amount to 24 basis points. 1 basis point increase in the margin during the quarter to 4.44% on a 33-60 basis included the benefit of an additional day during the fourth quarter. On the bottom graph, disposition accretion on purchase, credit impaired loans fell from $2.5 million in the third quarter to $1.2 million in the fourth. However, this $1.3 million reduction and interest income was more than offset from margin benefits from $1.8 million in prepayment penalties in our own organic loan portfolio.
Operating expense increased $5 million for the quarter and includes a $1 million contribution to establish Western Alliance Charitable Foundation from which future donations will be made. A $1 million catch-up accrual was also incurred for long term incentive compensation. These charges will not repeat in the first quarter. During the fourth quarter, we opened an office in Chandler, Arizona bringing our total to 40. Staffing facility contributed to the increase in FTE employees during the quarter of ’11. While slipping from 3Q, we remained at our Pre Pre ROA target of 2% during the quarter. Net income again exceeded $40 million in the fourth quarter while our return on assets was above 1.5%. The investment portfolio and cash position declined during the quarter, making up a substantial portion of the difference between the faster growth of loans over deposits during the fourth quarter. As a result of our strong loan growth and credit recovery position, the allowance for credit losses is up 10% in the past year to $110 million. Total shareholders’ equity was flat at $1 billion for the quarter as the increase from retained earnings and evaluation of securities, security fair value was offset by the voluntary payoff of $70.5 million over 1/2 of our Small Business Lending Fund preferred stock.
