Income Statement Highlights
Net Interest Income
For the second quarter of 2012, net interest income increased by $12.1 million to $125.0 million, from $112.9 million for the second quarter of 2011. This increase in net interest income was attributable to an increase in interest income of $8.5 million, combined with a decrease in interest expense of $3.6 million. Our net interest margin decreased to 3.86% for the second quarter of 2012, from 4.22% for the second quarter of 2011. The primary driver of the decrease in net interest margin was a reduction in accretion income partially offset by a reduction in deposit and borrowing interest expense.
Noninterest income for the second quarter of 2012 increased by $21.2 million, or 40%, to $74.1 million compared to the same period in 2011. This increase was driven by production revenues and gain on sale of loans which increased by $68.7 million to $79.8 million. The increase in noninterest income was partially offset by net loan servicing loss, which decreased by $47.1 million to $(21.8) million. Net loan servicing loss includes a non-cash mortgage servicing rights impairment of $30.1 million, as well as increased amortization expense of $34.1 million, compared to $21.4 million in the second quarter of 2011. These changes were primarily related to the historic low interest rate environment resulting in strong residential lending volume of $2.3 billion and elevated servicing pay-off activity.
Noninterest expense for the second quarter of 2012 increased by $54.1 million, or 44%, to $175.8 million from $121.7 million in the second quarter of 2011. The increase in noninterest expense was attributable to an increase in salaries, commissions and employee benefits, as well as professional and other fees and advertising expenses. Salaries, commissions and employee benefits increased by $20.0 million, or 35%, in the second quarter of 2012 compared to the second quarter 2011, due primarily to increased staffing and higher variable commission expenses in our Mortgage Banking segment. Professional fees increased by $6.1 million, or 47%, to $19.3 million due to acquisition-related costs, as well as continued regulatory-related expenses. Advertising and marketing expense increased by $4.9 million, or 133%, to $8.6 million as we reinitiated our deposit generation campaign. Credit related general and administrative expenses were $20.8 million in the second quarter of 2012, which remain at elevated levels, compared to $18.3 million in the second quarter of 2011.