Non-Interest Income and ExpenseNon-interest income was $1.5 million for the third quarter of 2011, a decrease of $0.4 million, or 19.7%, from $1.9 million for the same period in 2010. Gains on sales of loans decreased $363,000 between the periods as a result of a decrease in single family loan originations. Loan servicing fees decreased $17,000 between the periods primarily because of a decrease in the number of commercial loans that are being serviced for others.
Non-interest expense was $6.4 million for the third quarter of 2011, a decrease of $0.6 million, or 8.5%, from $7.0 million for the same period of 2010. Loss on real estate owned decreased $273,000 in the third quarter of 2011 when compared to the same period in 2010. Deposit insurance expense decreased $268,000 between the periods primarily because of a change in the FDIC’s insurance cost structure and also because of a decrease in brokered deposits between the periods. Occupancy expense decreased $125,000 primarily because of a decrease in depreciation expense. Compensation and benefits expense decreased $80,000 between the periods primarily because of a decrease in the compensation paid as a result of having fewer employees and fewer loan originations in the third quarter of 2011 when compared to the same period in 2010. Other non-interest expenses increased $120,000 primarily because of an increase in the costs related to other real estate owned. Data processing expense increased $34,000 due to increased software maintenance costs.
Income tax expense decreased $97,000 between the periods, from an expense of $97,000 in the third quarter of 2010 to no expense in the third quarter of 2011. In the second quarter of 2010, the Company recorded a deferred tax asset valuation reserve against its entire deferred tax asset balance and the Company continued to maintain a valuation reserve against the entire deferred tax asset balance at September 30, 2011. Since the valuation reserve is established against the entire deferred tax asset balance, no income tax expense was recorded for the third quarter of 2011.
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