The following table summarizes the number of lending relationships and industry of commercial business loans that were non-performing for the two most recent quarters and December 31, 2011.

(Dollars in thousands)         Principal Amount         Principal Amount         Principal Amount
of Loans of Loans of Loans
December 31, September 30, December 31,
Industry Type     #     2012     #     2012     #     2011
Construction/development 6 $ 1,074 6 $ 1,650 6 $ 2,061
Retail 2 239 2 247 1 82
Banking 0 0 0 0 2 1,199
Entertainment 0 0 1 16 1 23
Utilities 0 0 2 1,379 1 2,792
Restaurant 1 129 1 135 0 0
Other 3       198     3       139     1       44
12     $ 1,640     15     $ 3,566     12     $ 6,201
 

Non-Interest Income and ExpenseNon-interest income was $2.4 million for the fourth quarter of 2012, an increase of $0.4 million, or 20.2%, from $2.0 million for the same period in 2011. Gain on sales of loans increased $0.4 million between the periods primarily because of an increase in single family loan originations and sales. Other income increased $26,000 between the periods primarily due to an increase in rental income on other real estate. Fees and service charges decreased $0.1 million primarily because of a decrease in overdraft fees between the periods.

Non-interest expense was $6.3 million for the fourth quarter of 2012, a decrease of $2.6 million, or 29.2%, from $8.9 million for the same period of 2011. Losses on real estate owned decreased $2.1 million from the fourth quarter of 2011 primarily because there were fewer losses realized on the sale of real estate and there were fewer write downs in the value of the real estate owned in the fourth quarter of 2012 when compared to the same period in 2011. Compensation and benefits expense decreased $0.3 million between the periods primarily as a result of having fewer employees and also because of a decrease in pension benefit costs. Occupancy expense decreased $0.1 million primarily because of a decrease in depreciation and other expenses as a result of having fewer branch facilities. Deposit insurance expense increased $0.1 million because of an increase in the insurance rates between the periods. Other non-interest expenses decreased $0.1 million between the periods primarily because of a decrease in advertising expenses.

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