Organic Loan and Deposit Growth Continues; Enhanced by Commercial and Mortgage Banking Expansion
Growth in all major categories of the balance sheet are reflective of the significant human capital and infrastructure investment the Company made in 2012. Expansion of the commercial lending division led to a $130 million, or 9%, increase in net loans for the year. The commercial division also meaningfully contributed to the 13% deposit growth during the year through demand deposit and municipal deposit acquisition. Expansion of the mortgage banking division resulted in a 113% increase in fourth quarter originations over the prior year and a 328% increase in purchase mortgages. The $90 million, or 60%, increase in the available for sale securities portfolio was attainable as a direct result of the expertise added in the Treasury department. Through these expansion efforts, total assets increased $248 million, or 14%, to $2.0 billion at December 31, 2012 from December 31, 2011.
The available for sale securities portfolio increased $90 million to $241 million at December 31, 2012 from $151 million at December 31, 2011, largely from purchases of AA or better rated municipal bonds. The municipal bonds represent a wide geographic diversification and consist of both general obligation and revenue bonds. As a result of the municipal bond purchases during the year, the Company's effective tax rate decreased to 29.6% in 2012 from 34.5% in 2011.
Net loans grew organically during the year by $130 million due to the aforementioned continued focus on commercial banking and expansion of that team in 2012. Specifically, the commercial real estate portfolio increased $103 million, or 17%, and the commercial business portfolio increased $28 million, or 20%. During the fourth quarter the commercial loan portfolio grew by $58 million, or 29% for the linked quarter on an annualized basis despite larger than normal payoffs of $25 million during the quarter resulting from the Company's disciplined approach to asset quality. The Company will not match extremely favorable pricing or underwriting and structure pressures of competitor banks if those considerations do not meet the Company's asset quality standards. The growth in commercial deposits is also reflective of the expansion of the commercial team, both from the perspective of increased commercial banking relationships as well as the increase in municipal deposits as a result of sales efforts by the cash management team. Municipal deposits increased by $57 million, or 184%, during 2012. The New Haven and Northern loan production teams actively take market share from large bank competitors and this organic growth strategy will be further enhanced with the introduction of a new commercial team in the West Hartford market in early 2013.
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