NON-INTEREST INCOME

Non-interest income was $1.4 million for the fourth quarter 2011, up $583,000 from the fourth quarter 2010 and $498,000 from the third quarter 2011. On a year-to-date basis, non-interest income was $4.8 million, an increase of $2.6 million compared to 2010. This increase is primarily due to a $1.5 million penalty charged to income resulting from prepaying FHLB borrowings and partially offset by $834,000 in gains on the sale of securities that were both recorded in 2010. In addition, the increase was impacted by the First Ipswich acquisition. The change in non-interest income from the third quarter 2011 is due to additional losses from investments in low-income housing projects of $171,000, offset by an increase in related tax benefits of $106,000. The remaining change in other income was an increase of $169,000 primarily as a result of bankruptcy proceeds received on a defaulted bond.

NON-INTEREST EXPENSE

Non-interest expense was $16.5 million in the fourth quarter 2011, up $3.9 million compared to the fourth quarter 2010 and down $559,000 from the third quarter 2011. The change from the third quarter 2011 was primarily due to a write-down of $719,000 incurred in the third quarter of 2011 resulting from a property acquired through foreclosure that was under construction. There were no write-downs recorded in the fourth quarter 2011. Offsetting the write-down expense was an increase in professional service fees.

On a year-to-date basis, non-interest expense was $62.9 million, an increase of $14.7 million over the same period in 2010. The increase in the year-to-date comparison was primarily driven by the acquisition of First Ipswich and the merger-related expenses associated with the acquisition of Bancorp Rhode Island.

ASSET QUALITY

Non-performing assets at December 31, 2011 totaled $8.8 million or 0.27 percent of total assets. This represented a decrease from $10.5 million, or 0.33 percent of total assets, at September 30, 2011.

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