Quarterly operating expenses of $49.4 million were $6.1 million or 14.1% above the first quarter of 2011, reflective of additional operating costs associated with the Wilber and CAI acquisitions completed last year. The first quarter effective income tax rate of 28.5% was 2.0 percentage points above the rate for the first quarter of 2011, a result of a higher proportion of income being generated from fully taxable sources.
Average earning assets for the first quarter of $5.89 billion were $966.5 million above the first quarter of 2011, and $114.5 million higher than the fourth quarter of 2011. Ending loans increased $460.3 million from March 2011, reflective of the Wilber acquisition and modest organic growth. Total net loans were down $10.3 million from the end of December, comprised of $9.1 million of net organic loan growth offset by $19.4 million of net contractual and other principal reductions in the acquired Wilber portfolio. Organic growth in consumer mortgages during the quarter was offset by continued soft, but improving demand in business lending, and seasonal declines in consumer installment products. Average investment securities including cash equivalents were up $133.6 million from the fourth quarter of 2011. The Company actively redeployed maturing loan and investment cash flows and excess funding supplied by deposit growth, and began its planned investment of a portion of the liquidity expected from the pending branch acquisition. Quarterly average deposits were $874.0 million higher than the first quarter of 2011, a majority of which is attributable to the Wilber acquisition, with organic growth in core accounts contributing as well. Average deposits increased $40.8 million from the fourth 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 $859.8 million were up slightly from both the fourth and first quarters of last year. The increase in quarter-end borrowings of $182.1 million, from year-end 2011 related to the above mentioned, pre-investing initiative. Quarter-end shareholders’ equity of $840.7 million was $216.6 million higher than March 31, 2011, driven by the issuance of 3.4 million additional shares in conjunction with the Wilber acquisition, the January 2012 issuance of 2.1 million additional shares in advance of the pending branch acquisition, appreciation of the available-for-sale investment portfolio’s fair value, and solid growth in retained earnings due to robust net income generation. The continued strengthening of the Company’s capital position was evidenced by the net tangible equity to net tangible assets ratio increasing 134 basis points over the last 12 months to end the quarter at 7.70%.