maintaining our balances. Our higher cost certificate of deposit balances declined during 2011 as we priced our offering  rates on new or maturing certificates of deposit to reflect the continued reduction in market rates. Average certificate of  deposit balances declined from $187.2 million in 2010 to $178.4 million in 2011. During 2011, interest expense on  borrowings decreased $620,000, or 24.6%, due to lower rates and average outstanding borrowings. Our cost of borrowing  declined from 3.24% in 2010 to 2.76% in 2011, while our average outstanding borrowings declined from $77.6 million  during 2010 to $68.9 million during 2011. NET INTEREST INCOME. Net interest income for 2011 decreased $119,000, to $17.9 million, while our net  interest income, on a tax equivalent basis, decreased $95,000 over the same periods. Our net interest margin decreased  from 3.78% for 2010 to 3.77% for 2011. The decrease in net interest income and net interest margin was primarily a result  of our interest-earning assets and interest-bearing liabilities repricing lower in the current rate environment. During 2011,  we experienced a decline in the yields on our investment securities and loan portfolio which was not completely offset by  lower rates on our deposits and borrowings. In addition, we maintained higher average balances of investment securities  and lower average balances of loans during 2011. PROVISION FOR LOAN LOSSES.   Our provision for loan losses declined from $5.9 million during 2010 to  $2.0 million during 2011. The provision for loan losses declined due to improvements in our asset quality, as evidenced by  our lower levels of non-performing loans and decreased loan charge-offs. During 2011, we had net loan charge-offs of $2.3  million compared to $6.4 million during 2010. The increased net loan charge-offs in 2010 were primarily related to a  previously identified and impaired construction loan totaling $4.3 million, which experienced a significant decline in the  appraised value of the collateral securing the loan. During 2010, we charged the loan down $3.3 million due to the decline  in value of the collateral. Also during 2010, we charged-off the remaining $2.3 million balance on a commercial agriculture  loan after exhausting our collection attempts. The remaining loan charge-offs during 2011 were principally associated with  a previously identified and impaired commercial relationship consisting of $2.0 million in real estate and operating loans,  which was charged down to estimated fair value after we acquired ownership of the property securing the loans during 2011. The commercial real estate property was sold during 2011 without incurring any further losses. For further discussion of the  allowance for loan losses, refer to the “Asset Quality and Distribution” section. NON-INTEREST INCOME. Non-interest income decreased $239,000, or 2.6%, for 2011, to $8.9 million, as  compared to $9.1 million in 2010. The decline in non-interest income was the result of a $671,000 decline in gains on sales  of loans as our volume of residential real estate loans that were sold in the secondary market was lower in 2011 as compared  to 2010. In addition, we had a higher mortgage repurchase reserve provision recorded in 2011 than 2010. Partially offsetting  the lower gains on sales of loans were increases of $180,000 in fees and service charges, $164,000 in other non-interest  income and $88,000 in bank owned life insurance income. Our fees and service charges increased as a result of a higher  volume of fees and service charges received on our deposit accounts and increased servicing fee income. During 2010, we  introduced a rewards program for our deposit customers that promoted debit card usage and other customer activity which  generated additional non-interest income. Other non-interest income increased primarily as a result of gains on sales of  other real estate while our bank owned life insurance income increased as a result of purchasing $2.5 million in additional  life insurance policies in January 2011.  INVESTMENT SECURITIES GAINS (LOSSES). During 2011, we recognized $186,000 in gains on sales of  investment securities as a result of selling approximately $4.7 million of short-term, tax-exempt municipal investment  securities and reinvesting the proceeds in longer-term, tax-exempt municipal investment securities as we capitalized on the  steepness of the municipal yield curve. Partially offsetting the gains was $72,000 of other-than-temporary impairment  losses that we recorded on common stock investment securities during 2011. During 2010, we realized $563,000 of gains  on sales of investment securities resulting from the sale of $10.1 million of high-quality mortgage-backed investment  securities, as we capitalized on what we believed to be premium pricing that existed in the markets for these types of  securities at the time. Also during 2010, we recorded a credit-related, other-than-temporary impairment loss of $242,000  for the remaining cost basis of one of our three investments in pooled trust preferred investment securities in addition to a  $9,000 other-than-temporary impairment loss on a common stock investment. NON-INTEREST EXPENSE. Non-interest expense decreased $76,000, or 0.4%, to $20.0 million during 2011. The decrease in non-interest expense was primarily driven by a $258,000 decline in federal deposit insurance premiums due to  lower assessment rates beginning in the second quarter of 2011, as well as decreases of $126,000 in data processing, $111,000 in  foreclosure and real estate owned expenses, $82,000 in compensation and benefits and $63,000 in advertising. Our data  52 