Third quarter non-interest income, excluding gains and losses on investment security sales, increased $2.3 million to $25.6 million, compared with third quarter 2011, reflecting increased benefits administration and consulting fees, higher deposit services fees, and increased wealth management revenues, offset somewhat by lower mortgage banking revenues. Employee benefits administration and consulting revenues were up 16.0% compared to third quarter 2011, principally from the December 2011 acquisition of Metro-New York based, CAI Benefits (CAI). Wealth management fees were up $0.3 million, or 10.0% over third quarter 2011, driven by solid gains in trust services and asset management. Net mortgage banking revenues of $0.1 million for the quarter were from servicing fees, reflective of the decision to continue to hold a large majority of the Company’s mortgage originations in portfolio. Deposit service fees of $12.1 million were up $0.9 million, or 8.3% from third quarter of 2011, and included the activities of the recently acquired branches.
Third quarter core operating expenses (excluding acquisition expenses) of $51.3 million, increased $3.6 million over the third quarter of 2011, and included the recurring operating expenses of the newly acquired branches as well as CAI. Year-to-date core operating expenses (excluding acquisition expenses) of $149.6 million were 8.6% higher than the first nine months of 2011, and reflect the aforementioned branch and CAI transactions, as well as the acquisition of the Wilber Corporation in April 2011.
The third quarter and year-to-date 2012 effective income tax rate was 29.1% compared to a 28.2 % rate for the first nine months of 2011, the result of a higher proportion of income being generated from fully taxable sources.
Financial PositionAverage earning assets for the third quarter were $6.6 billion, an increase of $322.3 million compared to second quarter of 2012, and up $889.7 million over the third quarter of 2011. Ending loans increased $250.8 million on a linked basis reflecting strong organic growth primarily from consumer mortgage and installment products and loans from the acquired branches. Average investment securities of $2.78 billion for the third quarter were consistent with the second quarter of 2012. Invested (overnight) cash equivalents increased $128.2 million from second quarter of 2012, reflective of the Company’s acquired net liquidity. Average deposits increased $566.1 million, or 11.5%, compared to the second quarter of 2012, primarily from the branch transactions. Quarter-end borrowings were $830.2 million, and reflected the extinguishment of all overnight obligations upon the completion of the branch acquisitions.