Non-interest expenses for 2012 were of $20.9 million, a decrease of 3.5 percent from the $21.6 million reported for 2011. The decrease from 2011 relates primarily to a reduction in FDIC insurance premiums of $703,000, which is a result of the termination of our formal agreement with the banking regulators. We also saw a reduction of $416,000 in OREO related expenses and $115,000 in legal expenses, related primarily to asset quality. These savings were offset by an increase of $157,000 in employment related costs, primarily for commissions on brokerage and mortgage fees, along with increases in occupancy costs associated with our increase real estate taxes on our branch network, processing costs associated with our expanding business in H.S.A. accounts, and marketing/business development expenses.
Income tax expense decreased $479,000 from the third quarter and increased from the fourth quarter of 2011 by $2.6 million. The decrease in the fourth quarter of 2012 from the prior quarter was the result of reversing the federal and state valuation allowances on the impairment previously recorded on one other-than-temporarily-impaired security. This security was sold during the fourth quarter of 2012 resulting in the reversal of the valuation allowance of approximately $375,000. In the fourth quarter of 2011, we reversed the valuation allowance on our state deferred tax asset due to the liquidation our real estate investment trust that had previously created a state net operating loss. The reversal of the state valuation allowance in 2011 created a tax benefit of $2.5 million in the fourth quarter of 2011 compared to the tax expense of $138,000 recorded in the fourth quarter of 2012.
ABOUT THE COMPANY
Headquartered in Fort Wayne, Indiana, Tower Financial Corporation is a financial services holding company with one subsidiary; Tower Bank & Trust Company (Tower Bank), a community bank headquartered in Fort Wayne. Tower Bank provides a wide variety of financial services to businesses and consumers through its six full-service financial centers in Fort Wayne, and one in Warsaw, Indiana. Tower Bank has a wholly-owned subsidiary, Tower Trust Company, which is a state-chartered wealth services firm doing business as Tower Private Advisors. Tower Bank also markets under the HSA Authority brand, which provides Health Savings Accounts to clients in 50 states. Tower Financial Corporation's common stock is listed on the NASDAQ Global Market under the symbol "TOFC." For further information, visit Tower's web site at www.towerbank.net .FORWARD-LOOKING STATEMENTS This news release contains forward-looking statements that, by their nature, are predictive and are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about our company.