Average total deposits were $2.075 billion for the third quarter of 2012, a decrease of $60.2 million, or 2.8%, from the second quarter of 2012 and higher by $42.5 million, or 2.1%, from the fourth quarter of 2011. The decrease in deposits when compared to the second quarter of 2012 resulted from lower public funds and certificates of deposit, partially offset by growth in noninterest bearing accounts, regular savings, and money market accounts. Compared to the fourth quarter of 2011, the increase was driven primarily by higher public fund balances, savings and noninterest bearing deposits. This was partially offset by a reduction of certificates of deposit. The seasonal low in public fund balances generally occurs in the fourth quarter, and these balances are anticipated to increase through the first quarter of 2013.
Our mix of deposits continues to improve as higher cost certificates of deposit are replaced with lower rate non-maturity deposits and noninterest bearing demand accounts. Prudent pricing discipline will continue to be the key to managing our mix of deposits. Therefore, we do not attempt to compete with higher rate paying competitors for deposits.
During the fourth quarter of 2012, we may realize some attrition in noninterest bearing deposit balances due to the unlimited government guarantee on noninterest bearing accounts, which if not extended, is set to expire at year-end. Our average noninterest bearing deposits represented 29.2% of our total deposits during the third quarter of 2012.
Borrowings decreased by $0.9 million when compared to the second quarter of 2012 as a result of lower balances in repurchase agreements, and were higher by $8.1 million when compared to the fourth quarter of 2011, as a result of higher balances in repurchase agreements.Discussion of Operating Results Tax equivalent net interest income for the third quarter of 2012 was $21.2 million, which is comparable to the second quarter of 2012, and down from $23.3 million for the third quarter of 2011. For the nine months ended September 30, 2012, tax equivalent net interest income totaled $64.2 million compared to $70.3 million for the same period of 2011. Factors affecting net interest income relative to the second quarter of 2012 include a reduction in loan income attributable to declining loan balances, primarily offset by one additional calendar day and interest recoveries. When compared to the three and nine month periods of 2011, the decrease was primarily driven by declines in loan income attributable to lower portfolio balances, which was partially offset by a reduction in interest expense. The lower interest expense is primarily attributable to certificates of deposit and reflects both lower balances and favorable repricing.