The provision for loan losses increased by $825,000, or 43.4 percent, to $2.8 million for the quarter ended September 30, 2010 from $1.9 million for the quarter ended September 30, 2009, primarily due to an increase in the specific allowances for loan losses on impaired loans. The increase in the specific allowances for loan losses on impaired loans reflects management's response to an increase in the balance of impaired loans and reductions in the appraised values of the collateral underlying the loans. Included in the allowance for loan losses at September 30, 2010 were specific allowances for loan losses of $2.9 million related to impaired loans with balances totaling $11.5 million, while $452,000 of specific allowances for loan losses related to impaired loans with balances totaling $2.5 million at September 30, 2009. In addition, $18.0 million and $6.6 million of impaired loans did not require specific allowances for loan losses at September 30, 2010 and September 30, 2009, respectively. Net charge-offs decreased $850,000, to $1.4 million for the three months ended September 30, 2010 from $2.3 million for the three months ended September 30, 2009. The allowance for loan losses was $9.3 million, or 1.37 percent of total loans receivable, at September 30, 2010, compared to $8.3 million, or 1.18 percent of total loans receivable, at December 31, 2009. 

Noninterest income decreased $1.0 million, or 22.2 percent, to $3.5 million for the quarter ended September 30, 2010 from $4.5 million for the quarter ended September 30, 2009, primarily due to a $1.1 million decrease in net gains on sales of securities available for sale, partially offset by a $158,000 increase in net gains on sales of loans.

Noninterest expense decreased $518,000, or 4.7 percent, to $10.5 million for the quarter ended September 30, 2010 from $11.0 million for the quarter ended September 30, 2009, primarily due to a $270,000 decrease in salaries and benefits expense, a $158,000 decrease in software and equipment maintenance, and a $130,000 decrease in depreciation of furniture, software and equipment, partially offset by a $198,000 increase in other operations expense. The decrease in salaries and benefits expense was due primarily to a reduction in incentive compensation expense. The decrease in software and equipment maintenance expense resulted from a reduction in maintenance expenses related to our ATMs as we renegotiated the contract with our vendor. The decrease in depreciation of furniture, software and equipment was primarily due to assets being fully depreciated. The increase in other operations expense was primarily due to a $303,000 increase in property tax, repairs and maintenance and other expenses related to other real estate owned properties.