Total operating expenses decreased by $304 thousand or 0.9% to $32.7 million in 2010, primarily due to a $1.0 million charge recorded in the third quarter of 2009 to write-down the carrying value of loans held for sale to their estimated fair value and a $918 thousand decrease in FDIC and NYS assessment expenses in 2010 resulting primarily from a $730 thousand FDIC special assessment recorded in the second quarter of 2009. These decreases were offset by a $1.3 million increase in salaries and other employee benefits expenses resulting from increases in performance-based compensation accruals. In addition, marketing and advertising expenses increased by $533 thousand in 2010 to $1.3 million due to an expanded corporate advertising and branding campaign.

The Company recorded a $4.7 million income tax expense in the first nine months of 2010 versus a $914 thousand income tax benefit in the comparable 2009 period.

Asset Quality

Non-accrual loans totaled $9 million or 0.8% of total loans outstanding at September 30, 2010 versus $35 million or 3.1% of total loans outstanding at September 30, 2009 and $7 million or 0.7% of total loans outstanding at June 30, 2010. The decrease in non-accrual loans at September 30, 2010 compared to September 30, 2009 resulted primarily from loan sales and charge-offs during the fourth quarter of 2009. The $2 million increase in non-accrual loans at September 30, 2010 compared with June 30, 2010 was primarily due to the addition to non-accrual status of one secured classified relationship which is in bankruptcy. The allowance for loan losses as a percentage of total non-accrual loans amounted to 357% at September 30, 2010 versus 116% at September 30, 2009 and 444% at June 30, 2010.

At September 30, 2010, the Company had $7.2 million in troubled debt restructurings, primarily consisting of a classified $6.5 million secured, performing land loan in Roslyn, New York, compared to $437 thousand at September 30, 2009 and $6.9 million at June 30, 2010. The borrower requested and was granted an interest rate concession. This credit has been on the Company's watch list since 2008 and is fully advanced.