Total other operating income (loss), which includes the changes in the valuation of financial instruments, was a net gain of $11.7 million in the third quarter of 2012 compared to a net loss of $9.1 million in the second quarter of 2012 and a net gain of $10.3 million in the third quarter a year ago. In the first nine months of 2012, total other operating income was a net gain of $13.6 million compared to a net gain of $26.8 million in the first nine months of 2011. Other operating income from core operations* (total other operating income, excluding fair value and OTTI adjustments) for the current quarter was $11.6 million, compared to $10.0 million for the preceding quarter and $8.4 million for the third quarter a year ago, reflecting strong growth in deposit fees and other service charges and mortgage banking revenues.
As a result of continued account growth over recent periods and increased customer activity, deposit fees and other service charges were $6.7 million in the third quarter of 2012, compared to $6.3 million in the preceding quarter and a 10% increase compared to $6.1 million in the third quarter a year ago. Significant homeowner refinance activity contributed to strong revenues from mortgage banking activities, which increased 19% to $3.4 million in the third quarter of 2012, compared to $2.9 million in the immediately preceding quarter. Income from mortgage banking operations was $1.4 million in the third quarter a year ago.
“Operating expenses continued to decline in the third quarter compared to the preceding quarter and the third quarter a year ago, largely due to lower costs associated with loan collections and the real estate owned portfolio, with the current quarter reflecting a net gain on the sale of real estate owned, and a reduction in our deposit insurance premiums,” said Grescovich. “While we do not anticipate regularly recurring net gains on the disposition of real estate owned, we do believe credit costs will continue to decline as we resolve remaining problem assets.”