 of $1.2 million in the year-ago period. This improvement was due to the change in the impairment reserve (a $2.7 million recovery in the fourth quarter of 2010 compared to a $0.9 million recovery in the year-ago quarter) that was partially offset by a $0.6 million increase in the amortization of capitalized mortgage loan servicing rights. The recovery of previously recorded impairment charges in the last quarter of 2010 primarily reflects higher mortgage loan interest rates at the end of the fourth quarter of 2010, resulting in lower estimated future prepayment rates. For all of 2010, mortgage loan servicing generated a loss of $0.5 million as compared to income of $2.3 million in 2009. The full year comparative variance is primarily due to changes in the impairment reserve ($0.9 million charge in 2010 versus a $2.3 million recovery in 2009). Capitalized mortgage loan servicing rights totaled $14.7 million at Dec. 31, 2010 compared to $15.3 million at Dec. 31, 2009. As of Dec. 31, 2010, the Company serviced approximately $1.76 billion in mortgage loans for others on which servicing rights have been capitalized.
Non-interest expenses totaled $40.4 million in the fourth quarter of 2010, compared to $71.5 million in the year-ago period. The decline in non-interest expenses was primarily due to decreases in vehicle service contract payment plan counterparty contingencies (down $15.1 million) and goodwill impairment charges (down $16.7 million). The 2009 goodwill impairment charge relates to the Company's vehicle service contract payment plan business. Several other categories of non-interest expense (including compensation and employee benefits, occupancy, furniture, fixtures and equipment and advertising) declined in 2010 as compared to 2009 principally reflecting the Company's cost reduction initiatives. For all of 2010, non-interest expenses totaled $155.0 million versus $188.4 million in 2009. The changes in the full year comparative period were generally commensurate with the quarterly comparative changes.
Fourth quarter and full year 2010 non-interest expenses included a $4.4 million and $18.6 million charge, respectively, (compared to $19.5 million and $31.2 million in the comparable respective periods in 2009) related to Mepco Finance Corporation's ("Mepco") business of purchasing and servicing payment plans for vehicle service contracts. These payment plans (which are classified as payment plan receivables in the Company's Consolidated Statements of Financial Condition) permit a consumer to purchase coverage under a vehicle service contract by making monthly payments, generally for a term of 12 to 24 months, to the sellers of those contracts (referred to as Mepco's "counterparties"). Mepco purchases these payment plans from these counterparties. When consumers stop making payments or exercise their right to voluntarily cancel the contract, the remaining unpaid balance of the payment plan is normally recouped by Mepco from the counterparties that sold the vehicle service contract and provided the coverage. When counterparties do not honor their contractual obligations to Mepco to repay advanced funds, Mepco recognizes estimated probable incurred losses. Mepco pursues collection (including commencing legal action) of funds due to it under its various contracts with counterparties. At Dec. 31, 2010 the Company had $37.3 million of vehicle service contract counterparty receivables that it believes are collectible. During 2010, payment plan receivables declined by $205.1 million (or 50.5%) to $201.3 million at Dec. 31, 2010, due primarily to a reduction in payment plan balances associated with one counterparty that has gone out of business.
The decline in the Company's pre-tax, pre-provision core operating earnings for the fourth quarter and full year of 2010 as compared to the comparable periods in 2009 is principally due to a decrease in net interest income as described above.
Commenting on asset quality, CEO Magee noted: "We are pleased to report significant improvements in asset quality metrics in 2010 compared to 2009. Our provision for loan losses decreased by $56.6 million, or 54.7%, primarily reflecting a reduction in non-performing loans, as well as an overall decline in total loan balances. Non-performing loans and loan net charge-offs declined by 38.5% and by 23.8%, respectively. Further, our 2010 year end thirty to eighty-nine day delinquency rates declined from prior year levels for all loan categories. Our team remains focused on managing our commercial and retail loan portfolios to achieve further positive progress on asset quality in 2011."
(2) The Dec. 31, 2010 balance includes $3.1 million of commercial loans on which the payments are current but they are classified as non-accrual because full repayment of principal and interest is not expected.
(3) Represents payment plans for which no payments have been received for 90 days or more and for which Mepco has not yet completed the process to charge the applicable counterparty for the balance due. These amounts are to be distinguished from receivables due to Mepco from its counterparties related to cancelled payment plans for which Mepco has completed the process to charge the applicable counterparty for the balance due, which totaled $37.3 million, $33.5 million and $5.4 million (each net of reserves), at Dec. 31, 2010, Sept. 30, 2010 and Dec. 31, 2009 respectively.
Non-performing loans have declined by $42.3 million, or 38.5%, since year-end 2009. The decrease in non-performing loans since year-end 2009 is due principally to declines in non-performing commercial loans and residential mortgage loans. These declines primarily reflect loan net charge-offs, pay-offs, negotiated transactions, and the migration of loans into ORE. Non-performing commercial loans relate largely to delinquencies caused by cash-flow difficulties encountered by real estate developers (due to a decline in sales of real estate) as well as owners of income-producing properties (due to higher vacancy rates and/or lower rental rates). The elevated level of non-performing residential mortgage loans is primarily due to delinquencies reflecting both weak economic conditions and soft residential real estate values in many parts of Michigan. However, retail non-performing loans have declined for six consecutive quarters and are at their lowest level since the first quarter of 2008. ORE and repossessed assets totaled $39.4 million at Dec. 31, 2010, compared to $45.0 million at Sept. 30, 2010 and $31.5 million at Dec. 31, 2009.
The provision for loan losses was $7.5 million and $25.1 million in the fourth quarters of 2010 and 2009, respectively. For all of 2010, the provision for loan losses totaled $46.8 million versus $103.3 million in 2009. The level of the provision for loan losses in each period reflects the Company's overall assessment of the allowance for loan losses, taking into consideration factors such as loan mix, levels of non-performing and classified loans, and loan net charge-offs. Loan net charge-offs were $11.4 million (2.42% annualized of average loans) in the fourth quarter of 2010, compared to $17.1 million (2.89% annualized of average loans) in the fourth quarter of 2009. Loan net charge-offs were $60.6 million (2.97% of average loans) and $79.5 million (3.28% of average loans) for all of 2010 and 2009, respectively. The decline in 2010 loan net charge-offs compared to 2009 levels is primarily due to a decline in commercial loan net charge-offs. At Dec. 31, 2010, the allowance for loan losses totaled $67.9 million, or 3.75% of portfolio loans, compared to $81.7 million, or 3.55% of portfolio loans, at Dec. 31, 2009.
Total assets were $2.54 billion at Dec. 31, 2010, a decrease of $430.1 million, or 14.5%, from Dec. 31, 2009. Loans, excluding loans held for sale, were $1.81 billion at Dec. 31, 2010, compared to $2.30 billion at Dec. 31, 2009. Deposits totaled $2.25 billion at Dec. 31, 2010, a decrease of $313.9 million from Dec. 31, 2009. The decline in deposits is primarily due to a planned reduction of brokered CDs that was partially offset by increases in the balance of non-interest bearing deposits.
Cash and cash equivalents totaled $385.4 million at Dec. 31, 2010, versus $288.7 million at Dec. 31, 2009. This increase reflects the Company's efforts to augment liquidity.
As previously announced, the Company adopted a capital restoration plan (the "Capital Plan") in Jan. 2010. The primary objective of this Capital Plan is to achieve and thereafter maintain certain minimum capital ratios for Independent Bank as established by its Board of Directors. These minimum capital ratios are 8% for Tier 1 Capital to Average Total Assets and 11% for Total Capital to Risk-Weighted Assets. As noted above, as of Dec. 31, 2010, the Bank's Total Capital to Risk-Weighted Assets ratio exceeded the target of 11%.
(3) a public offering of the Company's common stock for cash.
During the second quarter of 2010, the Company completed transactions designed to accomplish the first two initiatives. On June 23, 2010, the Company completed its offer to exchange shares of its common stock for its outstanding trust preferred securities, which resulted in the issuance of common stock in exchange for the surrender of outstanding trust preferred securities