Whitney's acquired loan portfolio continued to perform better than expected during the fourth quarter. As a result, re-projections of expected cash flows from both the acquired and covered portfolios led to approximately $4 million of additional loan accretion during the fourth quarter of 2012. The increase favorably impacted both net interest income and the net interest margin. Changes in activity related to prepayments and payoffs in the acquired portfolio can cause quarterly accretion levels to be volatile.
As earning assets continue to reprice at lower rates, and with little opportunity to further lower funding costs, management expects continued compression in the core margin in the near term. All else equal, compression in the reported margin in the near term is also anticipated.
Non-interest income totaled $64.9 million for the fourth quarter of 2012, up from $63.8 million in the third quarter of 2012. Included in the fourth and third quarters of 2012, respectively, were $.6 million and $.9 million of securities transaction gains.Service charges on deposits totaled $20.2 million for the fourth quarter of 2012, slightly down from $20.8 million in the third quarter of 2012. Fees from secondary mortgage operations totaled $5.2 million for the fourth quarter of 2012, up $.8 million, or 20%, linked-quarter. The increase reflects a higher volume of mortgage production during the fourth quarter mainly related to refinancing activity. The linked-quarter changes related to trust, insurance, and investment and annuity lines of business all reflect the volatility and seasonality of those lines of business. Non-interest Expense & Taxes Operating expense for the fourth quarter of 2012 totaled $157.9 million, down $6.5 million, or 4%, from the third quarter of 2012. Operating expense excludes merger-related costs and, for the third quarter of 2012, $5.3 million of sub debt repurchase expenses. There were essentially no merger-related costs in the fourth or third quarters of 2012.