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.  (Dollars in thousands, except per share amounts) (1) All per share amounts have been adjusted to give effect to the 5% stock dividends paid during December 2012 and 2011.  QUARTERLY RESULTS OF OPERATIONS  March 31 June 30 September 30 December 31 Interest income 5,531 $ 5,729 $ 5,489 $ 5,303 $ Interest expense 1,039 1,015 964 892 Net interest income 4,492 4,714 4,525 4,411 Provision for loan losses 300 300 1,000 300 Net interest income after provision for loan losses 4,192 4,414 3,525 4,111 Non-interest income 2,672 3,028 3,215 3,105 Investment securities gains (losses), net 164 132 - 127 Non-interest expense 4,729 5,130 5,268 5,377 Earnings before income taxes 2,299 2,444 1,472 1,966 Income tax expense 572 626 267 349 Net earnings 1,727 $ 1,818 $ 1,205 $ 1,617 $ Earnings per share (1): Basic 0.59 $ 0.62 $ 0.41 $ 0.56 $ Diluted 0.59 $ 0.61 $ 0.41 $ 0.55 $ 2012 Quarters Ended March 31 June 30 September 30 December 31 Interest income 5,561 $ 5,707 $ 5,691 $ 5,627 $ Interest expense 1,247 1,172 1,140 1,100 Net interest income 4,314 4,535 4,551 4,527 Provision for loan losses 400 700 500 400 Net interest income after provision for loan losses 3,914 3,835 4,051 4,127 Non-interest income 2,037 2,108 2,381 2,375 Investment securities gains (losses), net - - 167 (53) Non-interest expense 4,831 5,227 4,673 5,223 Earnings (loss) before income taxes 1,120 716 1,926 1,226 Income tax expense (benefit) 142 (6) 437 (69) Net earnings (loss) 978 $ 722 $ 1,489 $ 1,295 $ Earnings (loss) per share (1): Basic 0.34 $ 0.25 $ 0.51 $ 0.44 $ Diluted 0.34 $ 0.25 $ 0.51 $ 0.44 $ 2011 Quarters Ended 53 