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processing costs declined as a result of renewing our contract at lower rates, while our foreclosure and real estate owned expense declined as a result of lower foreclosure related costs. Our compensation and benefits declined as a result of fewer employees and the reduction in advertising expense was part of a change in our marketing strategy. Those lower expenses were almost offset by the $603,000 increase in professional fees, primarily related to consultants who were engaged to help us review internal processes and procedures to identify opportunities to improve financial performance. 

INCOME TAXES. During 2011, we recorded income tax expense of $504,000, an effective tax rate of 10.1%, compared to an income tax benefit of $615,000 in 2010. The higher effective tax rate in 2011 was driven by an increase in taxable income compared to 2010, while tax-exempt investment income and bank owned life insurance income remained similar between the years. 

## QUARTERLY RESULTS OF OPERATIONS 

(Dollars in thousands, except per share amounts) 

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(1) All per share amounts have been adjusted to give effect to the 5% stock dividends paid during December 2012 and 2011. 

