Quarterly operating expenses of $47.8 million were $3.7 million or 8.4% above the fourth quarter of 2010, reflective of additional operating costs associated with the Wilber acquisition completed in early April, partially offset by lower FDIC costs and acquisition expenses. Full year 2011 core operating expenses of $185.5 million (excluding acquisition expenses of $4.8 million) were $10.0 million or 5.7% higher than the prior year due primarily to the acquisition of Wilber, with a portion of that increase offset by reduced FDIC insurance, core system processing costs and lower intangible amortization. The fourth quarter effective income tax rate of 32.4% was 5.1 percentage points above the rate for the fourth quarter of 2010, and the full year 2011 effective income tax rate of 29.4% was 2.7 percentage points higher than the rate for the twelve months ended December 31, 2010. The increase in the effective tax rate for 2011 was principally a result of a higher proportion of income being generated from fully taxable sources.
Average earning assets for the fourth quarter of $5.77 billion were $891.3 million above the fourth quarter of 2010, and $31.4 million higher than the third quarter of 2011. Ending loans increased $444.7 million from December 2010, reflective of the Wilber acquisition and modest organic growth. Total net loans were down $5.4 million from the end of September, comprised of $19.5 million of net organic loan growth offset by $24.9 million of net contractual and other principal reductions in the acquired Wilber portfolio, including the disposition of certain impaired loans in the quarter. Strong organic growth in consumer mortgage balances during the quarter more than offset continued soft demand in business lending and seasonal declines in consumer installment products. Average investment securities were up $45.2 million from the third quarter of 2011, while cash equivalents of $234.0 million decreased $6.1 million as the Company actively redeployed maturing loan and investment cash flows and excess funding supplied by deposit growth. Quarterly average deposits were $857.7 million higher than the fourth quarter of 2010, a majority of which is attributable to the Wilber acquisition, with organic growth in core accounts contributing as well. Average deposits increased $13.8 million from the third quarter of 2011, with the longer-term trend of strong organic core deposit growth more than offsetting declines in time deposit balances. Average borrowings for the quarter of $830.3 million were down slightly from both the third quarter of 2011 and the fourth quarter of last year. Year-end shareholders’ equity of $774.6 million was $167.3 million higher than December 31, 2010, driven by the issuance of 3.4 million additional shares in conjunction with the Wilber acquisition, appreciation of the available-for-sale investment portfolio’s market valuation, and solid growth in retained earnings due to robust net income generation and retention. The continued strengthening of the Company’s capital position was evidenced by the net tangible equity to net tangible assets ratio increasing 98 basis points over the last 12 months to end the year at 7.12%.
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