First quarter net interest income of $53.9 million increased 18.4% from the first quarter of 2011, the result of a $967 million increase in average interest-earning assets. Late in the first quarter, the Company invested approximately $600 million of its existing and expected (from the pending branch acquisition) liquidity into US Treasury securities at a blended yield of 2.3%, consistent with its intentions when it announced the transaction. Low market interest rates and diligence in managing deposit pricing resulted in the first quarter cost of funds declining 29-basis points in comparison to the same quarter last year. The benefit derived from the lower cost of funds was offset by a 41-basis point decline in earning-asset yields, driven by lower yields on both investment securities (including cash equivalents) and loans.
First quarter non-interest income of $23.5 million was up 12.6% versus the same quarter of last year. The Company’s employee benefits administration and consulting businesses grew revenues by 9.7% over first quarter 2011, a result of the CAI Benefits (CAI) acquisition completed in December. While not immediately additive to operating results, the acquisition added approximately $0.8 million in revenue in the strategically important metropolitan New York marketplace. The Company’s wealth management group generated a $1.0 million revenue increase, or 43.6%, over the first quarter of 2011, driven by incremental revenue produced from the acquired Wilber trust operations as well as solid organic growth generated by more favorable market conditions. Mortgage banking revenues of $0.3 million for the quarter were almost entirely from servicing fees, reflective of the decision to hold a majority of secondary market eligible mortgages in portfolio in the first quarter of 2012. Deposit service fees of $10.4 million were up $0.7 million from the first quarter of 2011, as the addition of the Wilber branches and solid growth in debit card-related revenue more than offset generally lower utilization of overdraft protection programs.