Non-interest income for the three and nine months ended September 30, 2010 totaled $606,000 and $1.5 million, respectively compared to $561,000 and $1.5 million for the three and nine months ended September 30, 2009, respectively. The $45,000, or 8.0%, increase in non-interest income for the third quarter of 2010 from the third quarter of 2009 is attributable to a $39,000 increase in fees earned on checking accounts and a $6,000 gain on securities available for sale. The $8,000, or 0.5%, increase in non-interest income for the first nine months of 2010 compared to the same period in 2009 is primarily due to the $136,000 increase in fees earned on checking accounts and no impairment charge recorded on the Bank’s mutual fund holdings in 2010, compared to a $76,000 impairment charge recorded in 2009, partially offset by a $198,000 increase in net realized loss on sales of securities available for sale in the first nine months of 2010, compared to the first nine months of 2009. The loss on sales of securities available for sale in the first nine months of 2010 is due to the sale of the Bank’s entire holdings in one mutual fund, which resulted in a $267,000 realized loss, partially offset by gains on sales of securities available for sale.

Total non-interest expenses decreased to $3.4 million for the quarter ended September 30, 2010 from $3.5 million for the quarter ended September 30, 2009, a decrease of 1.4%. Total non-interest expenses totaled $10.4 million for the nine months ended September 30, 2010 and September 30, 2009. The decrease in non-interest expense for the 2010 quarter is attributable to decreases in salaries and employee benefits, professional fees and FDIC insurance, offset by increases in occupancy and equipment expense, data processing fees, marketing costs and foreclosed real estate costs. The decrease in salaries and benefits is primarily due to the reduction in the stock-based compensation expense associated with option grants and restricted stock awards. The accelerated method of expense recognition was adopted at the inception of the equity incentive plan on October 1, 2007, resulting in a lower stock-based compensation expense in the first nine months of 2010 when compared to the same period of 2009. The decrease in FDIC insurance is due to the FDIC special assessment of $205,000 incurred in 2009.